ANNUAL REPORT - 31 DECEMBER 2014

Transcription

1 Annual Report 2014

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3 ANNUAL REPORT - 31 DECEMBER 2014

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6 CONTENTS DIRECTORS AND ADVISORS 7 CHAIRMAN S REPORT 9 EXECUTIVE REPORT 11 DIRECTOR S REPORT FOR THE YEAR INDEPENDENT AUDITOR S REPORT 21 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 22 CONSOLIDATED INSURANCE REVENUE ACCOUNT 23 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 24 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 25 CONSOLIDATED STATEMENT OF CASH FLOWS 26 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER Corporate information Summary of significant accounting policies Basis of preparation Basis of consolidation Changes in accounting policies and disclosures Standards, Interpretations and Amendments to published standards that are issued but not yet effective Business combinations and goodwill Investments in associates Fair value measurement Classification of insurance products Underwriting results Reinsurance Foreign currency translation Property and equipment Intangible assets Properties held for trading Investment property Financial assets Cash and cash equivalents Premiums receivable and other debtors Income tax Financial liabilities Revenue recognition Impairment of non-financial assets Share capital Provisions 40 4 Nest Investments (Holdings) Ltd - Annual Report 2014

7 3. Significant judgments and estimates Restatement of prior year financial statements and reclassifications Life and non-life insurance business Net earned premiums Net benefits and claims Other operating and administrative expenses Net interest income - banking operations Net fee and commission income - banking operations Net income and gains from investments Other income Credit loss provisions - banking operations Other net finance income Income tax expense Property and equipment Intangible assets Properties held for trading Investment properties Investment in associates Financial assets Accounts receivable Deferred acquisition cost Other assets Due from banks - banking operations Bank and cash balances Share capital and reserves Bank loans Banking customer deposits Insurance contract liabilities Trade creditors and other liabilities Risk management Capital management Group companies Related party transactions Contingent liabilities Operating lease commitments 93 Nest Investments (Holdings) Ltd - Annual Report

8 directors and advisors Ι magination is more important than knowledge. Plato

9 DIRECTORS AND ADVISORS Board of Directors: Ghazi Kamel Abu Nahl - Chairman and CEO Hind Ali Tabaja Abu Nahl Reem Abu Nahl Kamel Abu Nahl Fadi Abu Nahl Amal Abu Nahl Mehran Eftekhar Board Secretary Company Secretary Mehran Eftekhar 2nd floor Ariadne House 333, 28 October Street 3103 Limassol, Cyprus Independent Auditors Ernst & Young Cyprus Limited Jean Nouvel Tower 6 Stasinou Avenue P.O Box Nicosia, Cyprus Registered Office: 43/45 La Motte Street St. Helier JE4 8SD Jersey, Channel Islands Bankers Bank of Scotland Ahli Bank QSC Ahli United Bank BSC Middle East and Africa Blom Bank Qatar Islamic Bank Qatar International Islamic Bank Registration number Nest Investments (Holdings) Ltd - Annual Report

10 chairman and chief executive s report C hoose to be optimistic, it feels better. Dalai Lama 8 Nest Investments (Holdings) Ltd - Annual Report 2014

11 CHAIRMAN S REPORT I am very pleased to report to you the results of Nest Group of companies for the year The year 2014 proved to be another challenging year for us in the MENA region due to continued political upheavals in a number of locations with consequences on businesses, and people s livelihood. Despite of these challenges, we have managed to mitigate the impact, through strong risk and local management. We have major or significant interests in 8 (Eight) insurance companies spanning Algeria, Libya, Cyprus, Lebanon, Palestine, Syria, Iraq and Yemen. Our insurance businesses offer a wide range of personal lines (life, travel, medical, etc.) and non-personal lines (motor, cargo, commercial, etc.). Our knowledgeable and professional management teams work with local partners to provide a unique blend of service excellence and locally adapted products / services but always packaged under the brand of Trust Insurance, recognized to be the best in its class. Direct insurance businesses in Syria, and Libya, while still operational have been affected by the local political events, but all are financially sound and continuing their operations. With Solvency II looming and due to become applicable on 1 January 2016 we have embarked on a plan of making sure our local insurance in Cyprus carries assets that achieves highest solvency ratios under the new regulatory regime. Our Reinsurance Operations led from Bahrain, continued their consistent growth with additional capital injection, which we have achieved in various ways: highly capitalised, and also to the prudent underwriting and investment management of the Lloyds syndicates. Apart from insurance, our investment interests cover banking, real estate development and manufacturing in Algeria. Trust Bank Algeria, with a paid up capital of US$160 million, is a very profitable business with 16 branches carrying out mainly retail banking and providing trade finance facilities. Through Trust Real Estate (a subsidiary of Trust Algeria Investment), the real estate project is due to deliver a major commercial site by middle of The site consists of: 1. 5 Star Hotels 2. Executive apartments 3. Residence Inn 4. Courtyard Hotel 5. Office complex 6. Shopping mall 7. Associated car parking The project is built on just over 40,000 sq. meters of land with just under 290,000 sq. meters usable space. All hotels and residences will be managed by a top international hotel chain. Injection of US$30 million additional capital in 2014 Waiving of dividends for the years Acquisition of capital Intensive assets by injecting more than US$30m cash in 2014 In previous years we also acquired more than US$100 million of similar assets from our subsidiary. We have also committed that a further US$30 million will be injected as additional capital over the next two years. The Company s A-rating was reaffirmed in the latest process in Our Lloyds Insurance Broking operations based in the UK continue to make losses due to compliance and front loading recruitment costs. The Group subsidiary in the UK, however, provides added value service within the London insurance market. In order to be closer to our clients we have now formed a wholly owned subsidiary in Jordan that will handle the Group s business as well as regional third party risks. The investment in Lloyds syndicates through our UK corporate capital entity continues to provide profits and cash distributions matching or exceeding than the average market return. This can be partly attributed to Lloyds, who is We also enjoy ownership of real estate in Libya, Syria, Bahrain, Yemen, Palestine, Lebanon, Cyprus, UK, Spain, Saudi Arabia and other GCC countries. Our World Trade Center operations in Cyprus, Lebanon, as well as Algeria, continued providing a variety of professional services for promotion of trade as well as business centres, consultancy, mystery shopping and hospitality training under our Signature license. We intend to expand these in Jordan and North Africa, particularly in Tunis and Casablanca. Our core businesses will continue to be Reinsurance, Insurance, Real Estate, World Trade Center Services and Banking. Nest Investments (Holdings) Ltd - Annual Report

12 CHAIRMAN S REPORT The following is a summary of the financial results for different sectors of the Group: CONSOLIDATED NET PROFIT BY LINE OF BUSINESS: US$ 000 US$ 000 Investment holding 92, ,820 Insurance 11,467 3,052 Reinsurance 12,133 18,854 Services including broking (2,146) (1,801) Real Estate 36,574 (151,353) Investment 18,003 3,188 Banking 30,588 29,913 Manufacturing 844 (667) Our vision continues: To Be the Best in Everything We Do 199, ,006 To successfully continue with the implementation of this vision, some of our strategies are stated as follows: Continue building on our core businesses ensuring they are profitable, value adding and provide the best service to external and internal clients Manage our investments through sound risk based and business planning approach Maintain our high liquidity position. Our cash balances increased from US$611 million in 2013 to US$709 million in 2014 Maintain a minimum A- rating for our Reinsurance business and aim for future upgrade Introduce efficient internal processes and mechanisms designed to improve our effectiveness through: a. Implement more advanced IT systems and platforms in line with the growth and future strategies of the group companies b. Further enhance ERM processes in the Group c. Further improve Corporate Governance and compliance processes d. Monitor and apply controls for further cost saving e. Continue development and enhancement of Human Resources processes Continuing with last year s theme, our priorities are to achieve: Long-term viability, integrity and reputation of the business and our brand name Prudent, accurate and timely financial management Implementation of effective organisation structure Improvement and enhancement of Corporate Governance and Compliance processes Application and further strengthening of Enterprise Risk Management throughout the Group More than ever, we are aware of the importance for active leadership driven by clear strategies. We place emphasis on strong and appropriate human capital, strong and timely financial controls and reporting methods, effective processes such as risk management, efficient and integrated IT systems, and adherence to best practices in corporate governance. To this end, we are reviewing our corporate governance material including charters of the various entities, enhancing them to ensure they deal with new challenges and adhere to international as well as local standards. We also plan to make our guidelines accessible to all of our operations in an immediate and up-to-date manner through a secured website. We had a very receptive appetite with the financial institutions we approached for outside funding. Our gearing approximates 15% of our equity. This proves our financial flexibility in the financial markets when raising external funds. In conclusion, I am confident in our team s ability to meet our future challenges as we continue our journey of sustainable and managed growth. My warm thanks go out to all of our staff throughout the Group for their dedication and hard work. I am also grateful for the excellent contribution by our various boards of directors for their wise counsel and leadership. I sincerely thank our business partners and associates for their valued contribution to our success. Last, and by no means least, my deep gratitude goes to all our customers for their loyalty and continued support. I assure you all of our best personal attention and service, always. Ghazi Abu Nahl Group Chairman 5 June 2015 I am very optimistic that even with all the challenges around the world, we will go from strength to strength maintaining our focus, dedication, professionalism and most importantly, the understanding of our markets that we operate in either alone or with business partners. 10 Nest Investments (Holdings) Ltd - Annual Report 2014

13 EXECUTIVE REPORT 1. Reinsurance segment The Reinsurance operations led by the Group subsidiary Trust International Insurance & Reinsurance Company B.S.C. (c)- Trust Re ( Trust Re ) have once again produced excellent results both on technical and on net basis. Trust Re is regulated by the Central Bank of Bahrain, Trust Re s Cyprus branch is regulated by the Insurance Companies Control Services of The Republic of Cyprus, which operates in accordance with the EU directives and regulations, while the Labuan branch is regulated by LOFSA in Malaysia. The Morocco representative office is now fully operational and an application has also been made for a representative office in Quanzhou China. Trust Re carries an A- stable credit rating by both Standard and Poor s as well as AM Best rating agencies with further prospects for improved rating. With all the political upheavals, conditions remained challenging for the business environment in Economic conditions such as exchange rates between major currencies, reduction of oil prices and slow-down in economic growth created challenges to deal with. Despite a challenging market backdrop, Trust Re delivered a solid set of results for the year ended 31 December It continued to adhere to disciplined underwriting and to provide excellent service and support to its partners through increased product offering and financial security. Trust Re remains a highly regarded core asset within the portfolio of the Group. Trust Re s sound underwriting performance continues to be supported by reserve strengthening. They are in a solid position to achieve the targets set out in their business plan over the coming three years. The UK Lloyd s Corporate Capital subsidiary performance continues to provide results well above the market. Trust Re has produced excellent profits continuing the trend over the last decade. The company for the last 10 years has produced US$55 million of profit of which US$51 million has been distributed as cash to the Group. This represents an average return of 15% on funds at Lloyds compared to 14% market return. The prospects so far for 2015 and 2016 look promising, continuing the same trend as previously experienced. The above achievements are due to many years of astute planning, conservative underwriting, disciplined management, proper risk management, dedicated customer service and adherence to core business activities and markets we are familiar with. We are confident that the Company s performance will go from strength to strength and play a major role in the Group s overall profitability. The growth of Trust Re requires additional capital. For this purpose, we have subscribed an additional US$30 million capital, during 2014, while we expect to subscribe the same amount in We have also waived the rights to receive any dividends for the years , which represent savings in Trust Re s capital base of approximately US$30 - US$40 million. Finally, in 2014 we acquired more than US$30 million of capital-intensive assets by injecting cash into Trust Re. With the strong capital we are providing, we are confident of the company s sustained growth and profitably. Trust Re s vision continues to be: The Reinsurer of Choice 2. Trust Holding operations including direct insurance companies The year 2014 proved to be another politically challenging year for some of the direct entities even though the overall results were slight improvement to Our interests in direct operations consists of 8 (eight) insurance companies spanning Algeria, Libya, Cyprus, Lebanon, Palestine, Syria, Iraq and Yemen. Our insurance businesses offer wide range of personal lines (life, travel, medical, etc.) and non-personal lines (motor, cargo, commercial, etc.). We work with local partners to provide a unique blend of service excellence and locally adapted products / services, but always with the unique brand of Trust Insurance recognized to be the best in its class. Looking ahead, we expect to continue to have challenges due to political unrests but with our dedicated local management, knowledge and risk processes we will overcome any difficulties that may arise. We have a coordinated strategy and approach to our businesses in order to bring economies of scale to our efforts, cross fertilize between the companies, whilst at the same time, allow the local identity of each Group company to flourish further. We continue with our implementation of a comprehensive programme of change and growth. This programme will continue to clearly define our long-term strategies; coordinated business plans; the launch of the Trust Franchise concept; integrated information and communication technology (ICT) platform; and a more effective organisation structure that will allow for business growth, secure business continuity and succession planning. We take pride in the management of our human capital, risk and actuarial processes, as well as compliance with best practice of Corporate Governance processes. Enhancement of these principles will continue to be one of our main aims in the future. Nest Investments (Holdings) Ltd - Annual Report

14 EXECUTIVE REPORT The contribution to the growth of the Group s assets from the direct operations increased substantially. All direct insurance operations have made acceptable profits on both technical and on net basis, bearing in mind some of the conditions they have and are facing. However, we expect better returns in the future. The necessary technical corporate support is provided through the Amman Regional Office (ARO) covering areas of product development, technical processing, training and technical operational procedures. The Holding Company of the Direct Insurance Companies vision is: Guide and support our subsidiaries to maximise their economic value 3. Broking operations The Group subsidiary company Market Insurance Brokers Ltd ( MIB ), which is based in London UK, is an FCA and Lloyds regulated entity. MIB s main aim is to provide wholesale broking services in order to meet the Group requirements, as well as those of third parties. This type of business is becoming very competitive, with organic growth becoming more difficult and expensive due to regulatory and compliance requirements. The support for Group s risk placements remains a key objective for MIB, but we have employed new brokers in order to target third party business as a second strand of our strategy. The entity is loss making hence we created a wholly owned subsidiary in Jordan to provide broking services closer to our clients. We have also appointed a very experienced CEO to lead the operations and implement the Board strategies. 4. Licensed business operations World Trade Center Services These are very effective and well-known brands for development of real estate projects, providing consulting services covering traditional trading services, and hospitality productivity. Real estate remains the backbone of the World Trade Center brand. We have also integrated the Signature licensed operation as part of the World Trade Center operations, with the Cyprus Head Offices providing support services. I and another Director of this Company are elected Board members on the main Board of the World Trade Center Association in New York with me having the honour of serving as the Chairman of the Board. 5. Real estate operations We continue to substantially own either residential or commercial properties in Cyprus, Algeria, Bahrain, Lebanon, Libya, Palestine, Spain, Syria, United Kingdom and Yemen. Our main project consisting of hotel, residential and commercial properties, close to the international airport of the Algerian capital Algiers, is well underway and expected to be completed by middle of Other projects are planned in Cyprus, Qatar, Lebanon, Tunisia, Morocco Yemen and Algeria. The financial crisis has had little impact on our real estate operations as they are selective and retained as long-term investments with steady income. We also own selected land in different territories, which we plan to develop when the local commercial circumstances justify the development. This approach will continue and real estate will represent a major portion of our overall assets in the future. 6. Manufacturing operations Trust Industries based in Algeria produces bricks for the growing local property development market. We have acquired new production machinery and drying kilns, which have entered full production levels since Banking operations Trust Bank, based in Algeria with 16 branches, provides mainly Trade finance facilities. The Bank is highly profitable in a continually growing market. The profitability of the Bank remained stable during the year 2014, in comparison to 2013, at $30 million. Although the banking sector in Algeria is dominated by State owned banks, during the year 2014 the Bank has obtained further market share and increased its loan portfolio by 10%. In addition, Trust Bank has managed to reduce its non-performing loans by 11% and past due loans by 69%, thus improving the credit quality of its loan portfolio. 8. Strategy planning All our operations are based on a three-year rolling business plan, which is reviewed and extended annually. 12 Nest Investments (Holdings) Ltd - Annual Report 2014

15 EXECUTIVE REPORT 9. Corporate governance We have had a comprehensive and internationally compliant code of corporate governance, which we systematically embedded in the various operating companies throughout the Group. In addition, we ensured that for each country of operation, our corporate governance guidelines were sufficiently flexible to accommodate local commercial laws, thus ensuring compliance both to the letter and spirit of corporate governance. In 2015 we intend to revise the guidelines in order to bring them up to date with the international standards and make sure they remain relevant and effective in each of our operating companies within their respective jurisdiction. Further, we intend to make them available to all parts of the Group via our intranet IntraNest. As a minimum, we continue to press for the creation of board committees that focus on Audit, Risk, Corporate Governance and meritocracy-based remuneration of staff. We encouraged and campaigned for the convening of at least 4 full board and board committee meetings within a given fiscal year. We encouraged and campaigned for the inclusion of at least 33% totally independent non-executive directors with appropriate and value adding expertise and experience. 10. Actuarial and risk management (a) The Governance framework The Group s risk management policies are approved by the Board of Directors and they define the Group s identification of risk and its interpretation. Within its risk management framework, the Group maintains a varied limit structure to ensure the appropriate quality and diversification of assets and to align underwriting and reinsurance strategy to the corporate goals in a consistent manner to its risk appetite. The Group has placed a greater emphasis on the assessment and documentation of risks and controls, including the development of an articulation of its risk appetite. The following illustrate the Group s commitment to enhancing and improving risk management: i. The Group Risk Management and Actuarial Department continues with the implementation of formalized ERM processes throughout the Group and the process is progressing well. Our ultimate objective is to implement ERM into as many areas of the Group as possible and reasonably feasible, but emphasis is always placed on areas of agreed priority considering the principle of proportionality. ii. The Group has an active Board Risk Committee at Group level and in a number of subsidiaries. Risk committees abide by board approved charters, meet regularly along with risk specialists from within the companies and the Group and take an active role in the implementation and embedding of risk management. iii. We are continually enhancing our internally developed Risk Registers and have significantly enhanced the scope and level of depth of our Risk Reviews, providing greater insight to the various Board Risk Committees. iv. We are progressing well with the rollout plan of our Business Intelligence platform. Trust Palestine went live in early 2014 and we have achieved significant progress with Trust Algeria Insurance. Furthermore, we have enhanced the breadth and scope of the existing implementations. v. During 2014 we went through a rigorous selection process for the selection of a group risk management system and a decision was taken towards the end of the year. The implementation of the system will start in the second half of vi. There have been further significant improvements and enhancements to our multi-line financial projections model for the direct operations. viii. We have developed a Generic Risk Management Framework Manual, which defines and articulates the risk management strategy, the risk management framework, the risk appetite framework and the monitoring and reporting framework. ix. We have developed Generic Underwriting Risk Manuals, for Non-Life, Health and Life insurance which define and articulate the underwriting risk framework, the underwriting risk appetite and the monitoring and reporting framework. x. We have developed Generic Underwriting Guidelines Manuals for Non-Life, Health and Life insurance which define and articulate generic guidelines for the risk categorization process, the premium to be charged for each risk and the generic information requirements to be gathered from the relevant application form and other sources to be used in the underwriting process. xi. We have developed various models to perform a riskbased analysis of the reinsurance needs of the various direct operations. (b) Capital management objectives, policies and approach The Group s approach to managing capital involves managing assets, liabilities and risks in a coordinated way, assessing shortfalls between available and required capital levels (by each regulated entity) on a regular basis and taking appropriate actions to enhance the capital position of the Group in the light of changes in economic conditions and risk characteristics. Nest Investments (Holdings) Ltd - Annual Report

16 EXECUTIVE REPORT In managing the risks that affect the Group s capital position we have established a number of capital management objectives, policies and approaches, including the following: Setting target risk adjusted rates of return, which are aligned to performance objectives and ensure that the Group is focused on the creation of value for shareholders To maintain the required level of stability of the Group thereby providing a degree of security to policyholders To retain financial flexibility by maintaining strong liquidity and access to a range of capital markets To align the profile of assets and liabilities taking account of risks inherent in the business To maintain financial strength to support new business growth and to satisfy the requirements of the policyholders, regulators and stakeholders (c) Regulatory framework Regulators are primarily interested in protecting the rights of policyholders and monitor them closely to ensure that the Group is satisfactorily managing affairs for their benefit. At the same time, regulators are also interested in ensuring that the Group maintains an appropriate solvency position to meet unforeseen liabilities arising from economic shocks or natural disasters. The operations of the Group are subject to regulatory requirements within the jurisdictions in which it operates and such regulations prescribe approval and monitoring of activities and also impose certain restrictive provisions to minimise the risk of default and insolvency on the part of the insurance companies. All regulated entities within the Group act in accordance with their regulatory requirements throughout the financial year. (d) Asset Liability Management (ALM) framework Financial risks arise from open positions in interest rate, currency and equity products, all of which are exposed to general and specific market movements. We have been following a few simple premises under our practicing ALM: Match assets to the liabilities arising from insurance contracts by reference to the type of benefits payable to policy holders Ensure in each period sufficient cash flow is available to meet liabilities arising from insurance contracts and any other sources 11. Internal audit The Group internal audit department continued to implement a risk-based approach on the audits performed across the Group through a risk based internal audit platform, TeamMate. This software has enabled us to have paperless offices. Our main goal as Group Internal Audit Department was to introduce the correct concept of the risk based Internal Audit to all managers and employees of the Group, in order to apply our value added services with competence and professionalism. The department continued to provide support, training, reviewing, and advisory/ consultancy services to the Group s internal audit departments, management and to the Audit Committees. The Audit Committee(s) have Board approved charter(s), which are being reviewed and updated every year, meet frequently to discuss the internal audit reports and report to the Board major findings at every board meeting. The Group internal auditors report functionally to the Audit Committee. All the internal audit perceived risks of the companies/ processes derived from our experiences and from the risk registers (where applicable, as prepared by the risk departments), have all been included in the risk matrix of the software; this enabled us to produce more realistic risk based annual audit plans. All final internal audit reports, as soon as they have been approved by the Audit committees, are forwarded to the Risk department so that they can update their risk registers accordingly and based on these new risks, the audit plans can be further adjusted so that the higher risks are given priority in our audit cycles. AuditTimes, a quarterly internally generated, internal audit newsletter continues to be published. The aim of this newsletter is to give a clear understanding of modern Internal Audit processes, and enhance communication between the auditors and their clients. 12. Information and Communication Technology (ICT) To date, our ICT initiatives have been primarily aimed at providing operational capabilities and infrastructure support. Our long-term vision is to have a new totally integrated ICT environment that affords us a sophisticated operational platform capable of providing management and executive information systems. A number of initiatives are underway to develop the necessary architectural design to facilitate this vision by employing a new ICT strategist. A new head of group corporate ICT was appointed in July 2012 with the main objective to develop a new ICT Strategy that is aligned with the Group Businesses Plan and support the group operational model, as well as develop a Work Plan to achieve this strategy. The new ICT strategy addresses the three pillars: People, Technology and Process. We have now fully developed business continuity plans and site that meet both avoidance as well as disaster recovery capabilities. We have also installed a state of the art ICT technology that will meet our future demands in this area. 14 Nest Investments (Holdings) Ltd - Annual Report 2014

17 EXECUTIVE REPORT This Work Plan specifically addresses the following major area: NEW ICT Organization Structure Up to date ICT infrastructure (hardware, software, communications and maintenance) Stabilize and document the in-house developed insurance platform Implement change management and software life cycle development processes Introduced quality control and quality assurance processes Streamline all software changes and enhancement and centralize it in the corporate ICT Vendor management. Leveraging the group purchasing power to obtain better services and prices The Cloud initiative. Moving some non-core operations to the Cloud resulting in significant savings to the Group Disaster Recovery plan aligned with the group Business Continuity Strategy Personnel development and training Support the Business Intelligence platform (FRAME) implementations across the Group Introduce group wide initiatives: Document Management Systems, CRM, Oracle DB security, unified communications, ICT Infrastructure and DR support for the operating companies 13. Human resources and training We increased expertise and capability within the existing team in order to change direction and focus - to provide proactive HR Service delivered through systems and process aligned to objectives. We created management development programmes in order to deliver new training modules and increase training hours. We offered a variety of training and development opportunities for the employees as well as annual conference for all staff. Our investment in training for the future will be a result of the gap analysis for each individual through his or her performance monitoring and management. The department is also enhancing the processes including succession plans, retention of human capital and recruiting the best candidates for the respective roles. We participated in several salaries and benefit benchmark surveys to be informed and remain up to date with issues relating to employee benefits. 14. Legal services The Group Legal Department is based in Beirut, Lebanon; and it initially operates from its offices located in Badaro - Beirut, Lebanon. The department is composed of a group of 3 qualified lawyers having extensive expertise and experience in various legal domains. The department (i) provides its legal services and advice to the Group including the Group numerous subsidiaries, associates and affiliates that are spread worldwide and (ii) supports the Chairman s and CEO s legal requirements and offers advice to the Board of the Holding company, as well as the Boards and other corporate entities of the Group s subsidiaries and/or affiliates, on various legal requirements. Notwithstanding the above, the department focuses as well on: (i) Integrating the Group s businesses legal requirements; (ii) Providing direct support to the Group through coordinating all legal matters; (iii) Coordinating with local legal advisors where the jurisdiction deems it necessary and whenever needed; and, in general, (iv) Providing any legal assistance and/or advice and/or service that is requested or is deemed necessary for the continuity, success and fulfilment of the Group s business and legal needs. 15. Finance In 2014 the Finance Department achieved the bronze position of SAP Quality Awards for their successful implementation of Business Planning and Consolidation platform. The Department also acquired the SAP All-in- One Accounting software which has been implemented and went live on 1 January The two software, including the Business Intelligence platform, which has been implemented in some of the Group subsidiaries, will have direct communication and the aim is to strengthen the Group reporting by providing timely, efficient and quality information to the management and the Board of Directors. In September 2014, the Finance team successfully held the 1st Annual Finance Managers Conference for the entire Group. The aim of the Conference was to transfer the knowledge of the BPC platform to all the subsidiaries and enhance their knowledge on the major International Financial Reporting Standards ( IFRS ) was the first year which half yearly Consolidations were prepared at 3 different consolidation levels. The Finance Department also provides a variety of Services to the Group companies including: Bookkeeping and accounting Review, analysis and provision of financial reports Support on Business planning processes Assistance to the investment department with cash flow reports Nest Investments (Holdings) Ltd - Annual Report

18 EXECUTIVE REPORT Continued monitoring and application of the reporting standards Budgetary controls Cash Flow Management Assistance with ERM processes Preparation of Consolidation using the Business Consolidation Platform Monitoring Receivables Assistance with Ratings Liaise with External and Internal Auditors Apart from the above tasks, the future priorities are: Further enhancement of the Management Reporting Financial planning and fund management with the Investment department Ensuring Capital adequacy with the assistance of the Actuarial department 16. Review of the 2014 Group financial results 5-year financial summary US$ millions Investments 2,336 2,158 2, Cash at bank Total assets 4,507 4,181 3,836 2,138 1,588 Shareholders equity 2,397 2,266 2, Net Profit for the year , The Group s Net profit for the year was US$199 million compared to US$197 million in Stability in profitability was noted. Group turnover was US$681 million compared to US$599 million in 2013 (14% increase). Cash Balances increased from US$666 million to US$729 million enhancing the liquidity position. The shareholder s equity was US$2,397 million compared to US$2,266 million in The above results are legacy of our success in one of the most economically challenging times the economic world has faced. 17. Future outlook and strategy The outlook for the Group continues to be a combination of consolidation, diversification and risk managed growth. This entails consolidation of capabilities by evolvement of existing units to reflect the overall vision of the Group in order to maximize profitability and effectiveness. Consolidation also includes streamlining and improvement of processes in order to manage and control costs, as well as to enhance the overall effectiveness of these processes. Growth will be three-directional: we intend to grow existing businesses in terms of market share and penetration; we also intend to grow existing business types into new geographies. Finally, we intend to grow the Group in terms of attempting to develop entirely new business segments without losing focus and priority in our core businesses. In both consolidation and growth, our intention is to always work from a firm base of stability and certainty of direction in order to minimise and manage risk as far as possible. This includes addressing the question of affordability and only borrow when it is the most prudent course of action. Our aim will continue to be management of: Capital: generate capital at competitive rates Profit: achieve sustainable profitability by all business sectors Equity: growth in equity at a minimum 10% per annum Investment: seek new investment opportunities 18. Board of Directors a. The ultimate holding company s directors and officers are disclosed in the directors report. b. The directors and officers of the operating subsidiary providing Group corporate services are: Ghazi Abu Nahl Sheikh Nasser Al Thani Jamal Abu Nahl Walid Saadi Reem Abu Nahl Kamel Abu Nahl Fadi Abu Nahl Mehran Eftekhar Ibrahim Barraj Board Committees a. Audit Committee Chairman and Chief Executive Officer Non Executive Non Executive Non Executive Non Executive Non Executive Non Executive Executive Walid Saadi - Chairman Reem Abu Nahl Fadi Abu Nahl Josiane Semaan Jabbour Secretary Board Secretary 16 Nest Investments (Holdings) Ltd - Annual Report 2014

19 EXECUTIVE REPORT b. Risk Committee Reem Abu Nahl - Chairperson Walid Saadi Fadi Abu Nahl Christos Patsalides - Secretary c. Nomination and Remuneration Committee Sheikh Nasser Al Thani - Chairman Jamal Abu Nahl Kamel Abu Nahl (Member and Secretary) Officers and management team Acknowledgements We would like to thank all of our associates and business partners for the trust extended to us. We would also like to thank all our management and staff for their hard work, dedication, loyalty and vision, without which we would not have been able to achieve such excellent results. On Behalf of the Board of Directors Ghazi Abu Nahl Chairman and Chief Executive Officer 5 June 2015 Chairman and Chief Executive Officer Ghazi Abu Nahl Group Finance and Corporate Services Director Mehran Eftekhar Group Chief Strategy Officer Mufid Sukkar Group Legal Counsel Ibrahim Barraj Group Internal Audit Manager Josiane Semaan Jabbour Group Chief Actuary and Risk Manager Christos Patsalides Senior Actuary and Risk Manager Andreas Stylianou Group Chief Technology and Information Officer Marwan Bataineh Group IT Manager Ali Safa Business System Analyst George Georghiou Human Resources Manager Biljana Kocevska Adam For further information on the Group refer to: Independent auditors Recommendation will be made to the Annual General meeting of the Company in order to appoint Ernst and Young Cyprus Ltd as independent auditors for the year Nest Investments (Holdings) Ltd - Annual Report

20 DIRECTOR S REPORT DIRECTOR S REPORT FOR THE YEAR 2014 The Board of Directors presents its report and audited consolidated financial statements of Nest Investments (Holdings) Limited (the Company ) and its subsidiaries (together referred to as the Group ) for the year ended 31 December The financial statements for the Company for the year ended 31 December 2014 have been issued separately. Principal activities The principal activities of the Group are the provision of investment holding, insurance and reinsurance, real estate, banking services broking services and licenced operations. Review of current position, future developments and significant risks a resolution to giving authority to the Board of Directors to fix their remuneration will be proposed at the Annual General Meeting. Events after the reporting date There were no material events after the reporting date, which have a bearing on the understanding of the financial statements. By order of the Board of Directors Mehran Eftekhar Company Secretary Limassol, 5 June 2015 The Group s development to date, financial results and position as presented in the financial statements are considered very satisfactory and outlined in the Chairman and Chief Executive s reports. The main risks and uncertainties faced by the Group and the steps taken to manage these risks are disclosed in note 32 of the financial statements. Results The profit of the Group for the year ended 31 December 2014 was US$199,469 thousand (2013: US$197,006 thousand). Dividends The Board of Directors does not recommend the payment of a dividend. Share capital There were no changes in the share capital of the Company during the year. Board of Directors The members of the Company s Board of Director s as at 31 December 2014 and at the date of this report are presented on page 1. In accordance with the Company s Articles of Association, all directors hold office until the next following Annual General Meeting and they shall then be eligible for re-election. There were no significant changes in the assignment of responsibilities and remuneration of the Board of Directors. Independent auditors The independent auditors, Ernst & Young Cyprus Limited, have expressed their willingness to continue in office and 18 Nest Investments (Holdings) Ltd - Annual Report 2014

21 to be the best in EVERYTHING WE DO Nest Investments (Holdings) Ltd - Annual Report

22 consolidated financial statements 2014 T he only way to do great work is to love what you do. Steve Jobs

23 INDEPENDENT AUDITOR S REPORT Ernst & Young Cyprus Ltd Jean Nouvel Tower 6 Stasinou Avenue P.O.Box Nicosia, Cyprus Tel: Fax: ey.com/cy To the Members of Nest Investments (Holdings) Ltd. Report on the Consolidated Financial Statements We have audited the consolidated financial statements of Nest Investments (Holdings) Limited (the Company ) and its subsidiaries (together with the Company, the Group ) on pages 22 to 93, which comprise the consolidated statement of financial position as at 31 December 2014, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Board of Directors Responsibility for the Consolidated Financial Statements The Company s Board of Directors is responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union, and for such internal control as the Board of Directors determines is necessary to enable the preparation of consolidated 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 consolidated 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 whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation of consolidated 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 entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements of Nest Investments (Holdings) Ltd give a true and fair view of the financial position of the Group as at 31 December 2014, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union. Ernst & Young Cyprus Limited Certified Public Accountants and Registered Auditors Nicosia 5th June 2015 Nest Investments (Holdings) Ltd - Annual Report

24 NEST INVESTMENTS (HOLDINGS) LIMITED NEST INVESTMENTS (HOLDINGS) LIMITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2014 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME CONSOLIDATED FOR THE YEAR ENDED STATEMENT 31 DECEMBER OF COMPREHENSIVE 2014 INCOME FOR THE YEAR ENDED 31 DECEMBER (Restated) 2013 (Restated) Notes Notes US$ '000 US$ (Restated) '000 US$ '000 US$ '000 Notes US$ '000 US$ '000 Transfer from consolidated insurance revenue account 23,954 23,95426,105 26,105 Transfer Interest income from consolidated - banking operations insurance revenue account 9 923,954 27,890 27,89026,105 24,976 24,976 Interest income expense -- banking operations 9 927,890 (967) (967) 24,976 (771) (771) Interest expense - banking operations 9 (967) (771) Fee and commission income - banking operations ,627 14,62722,373 22,373 Fee and commission income expense -- banking operations ,627 (1) (1) 22,373 (579) (579) Fee and commission expense - banking operations 10 (1) (579) Net income and gains from investments ,932 4,93211,512 11,512 Net Fair income value gains and / gains (losses) from on investments properties ,355 4,932 83,355 (165,425) 11,512 (165,425) Fair Other value income gains / (losses) on investment properties ,355 16,191 16,191 (165,425) 14,787 14,787 Other Net release income of credit loss provision - banking operations ,191 9,179 9,17914,787 5,933 5,933 Net Impairment release of losses credit on loss investments provision in - banking associates operations ,179 (4,378) 5,933 (4,378) Impairment Administrative losses expenses on investments in associates 20 8 (41,779) 8 (41,779) (38,021) (4,378) (38,021) Administrative Net finance income expenses (41,779) (2,307) (2,307) (38,021) Net Profit finance / (loss) income from operations ,119 (2,307) 111,119 (128,623) 971 (128,623) Profit Reclassification / (loss) from to AFS operations revaluation reserve ,119 (128,623) 123, ,421 Reclassification Share of profit of to associate AFS revaluation reserve ,908 76, , , ,793 Share Profit of for profit the year of associate before tax ,982 76, , , , ,696 Profit Income for tax the expense year before tax (12,513) 211,982 (12,513) 190,696 6,310 6,310 Income Net profit tax for expense the year 15 (12,513) 199, , ,006 6, ,006 Net profit for the year 199, ,006 Other comprehensive income Other To be reclassified comprehensive to profit income or loss in subsequent periods: To Change be reclassified in fair value to of profit available or loss for in sale subsequent financial periods: assets (2,058) 7,483 Change Impairment in fair of value available of available for sale for financial sale financial assets assets (2,058) (755) (2,058) 7,483 2,572 7,483 Impairment Disposal of available of available for for sale sale financial financial assets assets (755) (755) (5,144) 2,572 2,572 Disposal Reclassification of available to profit for sale or loss financial assets (123,421) (5,144) (5,144) Reclassification Exchange difference to profit on translation or loss of foreign operations (36,142) (123,421) (8,149) (123,421) Exchange Net other difference comprehensive on translation income to of be foreign reclassified operations to profit or (36,142) (36,142) (8,149) (8,149) (38,955) (126,659) Net loss other in subsequent comprehensive periods income to be reclassified to profit or (38,955) (38,955) (126,659) (126,659) loss Not to in subsequent be reclassified periods to profit or loss in subsequent periods: Not Revaluation to be reclassified of property, to profit net or tax loss in subsequent periods: 14,599 (740) Revaluation Net other comprehensive of property, net income of tax not to be reclassified to profit 14,599 14,599 (740) (740) 14,599 (740) Net or loss other in subsequent comprehensive periods income not to be reclassified to profit 14,599 14,599 (740) (740) or Other loss comprehensive in subsequent periods income (24,356) (127,399) Other Total comprehensive income for the year (24,356) 175,114 (24,356) (127,399) 69,607 (127,399) Total comprehensive income for the year 175, ,11469,607 69,607 Total comprehensive income for the year attributable to: Total Equity comprehensive holders of the parent income for the year attributable to: 146, ,320 Equity Non-controlling holders Equity of interests the holders parent of the parent 146,451 28, ,451 (53,713) 123, ,320 Non-controlling Non-controlling interests interests 175,114 28,662 28,662 (53,713) 69,607 (53,713) 175, ,11469,607 69,607 Nest Investments (Holdings) Ltd Annual Report Nest Investments (Holdings) Ltd Annual Report Nest Investments (Holdings) Ltd - Annual Report 2014

25 CONSOLIDATED INSURANCE REVENUE ACCOUNT FOR THE YEAR ENDED 31 DECEMBER Notes US$ '000 US$ '000 Gross written premium Outward reinsurance premium Retained premium Change in unearned premiums Net earned premium Gross claims paid Claims recovered from reinsurers Change in provision for outstanding claims - gross Change in provision for outstanding claims - reinsurance Change in IBNR Claims and related expenses Commissions and taxes paid Commissions and taxes received from reinsurers Interest on premium reserve Interest on premium reserve - reinsurance Change in deferred acquisition cost gross Change in deferred acquisition cost reinsurance Change in unexpired risk reserves Acquisition costs, commissions and taxes Gross underwriting profit Operating expenses Technical Income Transfer to consolidated statement of comprehensive income 681, ,390 (293,487) (248,536) 387, ,854 (15,469) (9,527) 6 372, ,328 7(a) (306,419) (260,523) 7(b) 105, ,002 (24,754) (45,775) (12,205) (12,622) (2,001) (10,661) 7(d) (239,386) (212,579) (123,345) (114,062) 51,931 44, (42) (19) 23 5,418 2, (3,290) (646) 37 (93) 23 (69,125) (67,580) 63,634 61,169 8 (42,695) (37,416) 3,014 2,353 23,954 26,105 Nest Investments (Holdings) Ltd - Annual Report

26 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2014 AS AT 31 DECEMBER 2014 Assets Goodwill Intangible assets Property and equipment Properties held for trading Investment properties Investment in associates Loans and advances to banking customers Other financial assets Reinsurance assets Insurance receivables Gross deferred acquisition cost Other assets Accounts receivable Due from banks - banking operations Bank and cash balances Total assets (Restated) (Restated) Notes US$ '000 US$ '000 US$ '000 17(b) 20,907 26,817 26,817 17(a) 6,400 7,227 7, , , , ,399 9,229 8, ,709,521 1,629,887 1,718, , ,005 24,186 21(a) 362, , ,746 21(b) 115, , , , , , ,930 38,126 30, ,574 47,748 45, , , , , , , ,835 53,899 80, , , ,302 4,506,666 4,181,424 3,835,529 Equity Share capital Reserves Contribution from shareholder Equity Equity attributable to equity to equity holders holders of the of parent the parent Non-controlling interests interests Total Total equity equity 27(a) 27(b) 17 1,667,697 75,000 1,742, ,505 2,397, ,520, ,175 1,632, ,196 2,265, ,394,928 28,968 1,423, ,607 2,132,519 Liabilities Liabilities Bank Bank loan loan Banking Banking customer customer deposits deposits Due to Due banks to banks Insurance Insurance contract contract liabilities liabilities Reinsurance balances balances payable payable Trade Trade creditors creditors and other and other liabilities liabilities Bank Bank overdraft overdraft Income Income received received in advance in advance Reinsurers' Reinsurers' share share of deferred of deferred acquisition acquisition costs costs Total Total Liabilities Liabilities , ,133 2, ,197 51, ,786 11,078 2,301 17,954 2,109, , ,898 2, ,712 61, , ,951 14,664 1,915, , , ,620 47, , ,691 14,018 1,703,009 Total Total equity equity and liabilities and liabilities 4,506,666 4,181,424 3,835,529 Ghazi Abu Nahl Ghazi Abu Nahl Chairman and CEO Chairman and CEO 5 June June 2015 Mehran Eftekhar Mehran FCA Eftekhar, FCA Group Finance & Corporate Director Services Director 24 Nest Investments (Holdings) Ltd - Annual Report 2014

27 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2014 Equity attributable to equity holders of the parent Share capital Contribution from Shareholder Statutory reserve Optional reserve General banking risks reserve Property revaluation reserve Available for sale reserve Exchange difference reserve Retained earnings Total Noncontrolling interests US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 Total equity At 1 January ,968 36,039 2,796 3,749 91, ,255 (26,854) 1,226,782 1,473, ,932 2,219,323 Prior year adjustments (Note 4) (49,478) (49,478) (37,325) (86,803) Revised opening balance 1 January ,968 36,039 2,796 3,749 91, ,255 (26,854) 1,177,304 1,423, ,607 2,132,519 Profit for the year 240, ,526 (43,521) 197,006 Other comprehensive income (719) (111,901) (4,586) (117,206) (10,192) (127,398) Total comprehensive income 17 28,968 36,039 2,796 3,749 90,919 (1,647) (31,439) 1,417,831 1,547, ,893 2,202,126 Funds contributed by shareholder 83,207 83,207 83,207 Dividends paid to non-controlling interests (18,466) (18,466) Transfer to statutory and optional reserve 2, (3,332) Transfer to general banking risks reserve (1,630) 4,011 2,381 (2,381) Acquisition of share in subsidiary (170) (170) (851) (1,021) At 31 December ,175 38,960 3,207 2,119 90,919 (1,647) (31,439) 1,418,340 1,632, ,196 2,265,848 At 1 January ,175 38,960 3,207 2,119 90,919 (1,647) (31,439) 1,418,340 1,632, ,196 2,265,848 Prior year adjustments (Note 4) (7,073) (1,878) (1,975) (4,343) 3,961 12, (1,543) (756) Revised opening balance 1 January ,175 31,888 1,328 2,119 88,944 (5,990) (27,479) 1,430,436 1,633, ,653 2,265,091 Profit for the year 160, ,072 39, ,469 Other comprehensive income / (loss) 10,501 (2,087) (22,035) (13,621) (10,734) (24,356) Total comprehensive income ,175 31,888 1,328 2,119 99,445 (8,077) (49,514) 1,590,508 1,779, ,315 2,440,205 Increase in subsidiary's share capital 1,371 1,371 Repayment of funds contributed by shareholder (37,175) (37,175) (37,175) Dividends paid to non-controlling interests (7,170) (7,170) Transfer to statutory and optional reserve 699 1,649 (2,348) Transfer to general banking risks reserve 354 (354) Acquisition of share in subsidiary (11) (11) At 31 December ,000 32,587 2,977 2,473 99,445 (8,077) (49,514) 1,587,806 1,742, ,505 2,397,219 Nest Investments (Holdings) Ltd - Annual Report

28 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2014 FOR THE YEAR ENDED 31 DECEMBER Cash flows from operating activities: Notes US$ '000 US$ '000 Net profit before taxation 211, ,696 Adjustments for: Amortisation of Intangibles 17(a) Depreciation of Property and equipment 16 9,587 5,969 Net share in associates results 20 (76,908) (169,793) Impairment of Goodwill 17(b) 5,909 Impairment of investments in associates 18 4,378 Recycling of AFS revaluation reserve to Investment in Associates 20 (123,421) Impairment of AFS investments 21(c) 755 2,572 Fair value (gains) / losses on investment property 19 (83,355) 165,425 Credit loss income 13 (9,179) (5,933) 59,227 70,378 Increase / (decrease) in operating assets and liabilities: Accounts receivable and prepayments (21,735) 27,833 Properties held for trading (16,170) (283) Loans and advances to banking customers (19,594) (92,505) Insurance receivables 5,195 (7,508) Gross deferred acquisition cost (4,825) (2,259) Reinsurers' share of insurance contract liabilities (14,690) 7,071 Other assets (10,205) 63,819 Due from banks 34,064 26,179 Trade creditors and other liabilities 17,298 7,282 Reinsurers' balances payable (9,316) 13,472 Reinsurers' share of deferred acquisition costs 3, Insurance contract liabilities 53,484 64,093 Banking customer deposits 4,235 56,978 Due to banks (199) 2,367 Income received in advance 350 (740) Cash from operations 80, ,821 Income tax (8,296) (8,225) Net cash flows from operating activities 72, ,596 Cash flows from investing activities Acquisition of property and equipment 16 (40,397) (12,275) Proceeds from sale of property and equipment 12,298 4,276 Acquisition of intangibles 17 (336) (627) Proceeds from sale of intangibles Acquisition of securities 21 (67,586) (34,192) Proceeds from disposal of securities 56,234 31,977 Acquisition of investment properties 19 (42,460) (86,204) Proceeds from sale of investment properties 16,810 Decrease / (increase) in long-term deposits 29,329 (104,596) Acquisition of additional share in associates 20 (12,923) (3,650) Proceeds from disposal of share in associates 3,852 Net cash used in investing activities (44,881) (205,215) Cash flows from financing activities Proceeds from Bank loan 109,878 84,437 Dividends paid to non-controlling interests (7,170) (18,466) Net (decrease) / increase in contribution from shareholder (37,175) 83,207 Net cash from / (used in) financing activities 65, ,178 Foreign exchange gains / (losses) 23,031 (9,488) Net increase in cash and cash equivalents 115, ,072 Cash and cash equivalents at beginning of year 475, ,817 Cash and cash equivalents at end of year , , Nest Investments (Holdings) Ltd - Annual Report 2014

29 1. Corporate information The consolidated financial statements of Nest Investments (Holdings) Limited (the Company ) and its subsidiaries (together referred to as the Group ) for the year ended 2014 were authorised for issue by the Directors on 5 June The Company was incorporated in Jersey, Channel Islands, on 21 October 1985 as a limited liability company. The ultimate shareholder of the Group is Mr. Ghazi Abu Nahl. The principal activities of the Group are the provisions of investment holding, insurance and reinsurance services, real estate investment, banking services, broking services and licensed operations. 2. Summary of significant accounting policies A summary of significant accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all years presented in these consolidated financial statements unless otherwise stated. 2.1 Basis of preparation The consolidated financial statements have been prepared on a historical cost basis except for investment properties, own use properties and those available for sale financial assets that have been measured at fair value. Statement of Compliance The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU). Presentation Currency of Financial Statements The consolidated financial statements are presented in United States Dollars (US$) and all amounts are rounded to the nearest thousands, except where otherwise indicated. 2.2 Basis of consolidation The consolidated financial statements comprise of the financial statements of the Group as at 31 December each year. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date when such control ceases. The financial statements of the subsidiaries are prepared for the same reporting year as the parent company, using consistent accounting policies. All intra-group balances, transactions, income and expenses and profits and losses resulting from intra-group transactions and dividends, are eliminated in full. Losses within a subsidiary are attributed to any noncontrolling interests, even if these results in the noncontrolling interests have a deficit balance. An investor might have control over an investee even when it has less than a majority of the voting rights of that investee (sometimes referred to as de facto control). In assessing whether de facto control exists, factors such as the size of the investor s holding of voting rights relative to voting rights of other shareholders and any arrangements between shareholders s are required to be considered. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary it: Derecognises the assets (including goodwill) and liabilities of the subsidiary Derecognises the carrying amount of any noncontrolling interest Derecognises the cumulative translation differences recorded in equity Recognises the fair value of the consideration received Recognises the fair value of any investment retained Recognises any surplus or deficit in profit or loss Reclassifies the parent s share of components previously recognised in other comprehensive income to profit or loss or retained earnings, as appropriate. 2.3 Changes in accounting policies and disclosures The accounting policies adopted are consistent with those of the previous financial year except for the following amended IFRSs which have been adopted by the Group as of 1 January 2014: IAS 28 Investments in Associates and Joint Ventures (Revised) IFRS 10 Consolidated Financial Statements and IAS 27 Separate Financial Statements (Revised) IFRS 11 Joint Arrangements IFRS 12 Disclosures of Involvement with Other Entities Transition Guidance (Amendments to IFRS 10, IFRS 11 and IFRS 12) Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27) IAS 32 Financial Instruments: Presentation (Amended) - Offsetting Financial Assets and Financial Liabilities IAS 39 Financial Instruments (Amended): Recognition and Measurement - Novation of Derivatives and Continuation of Hedge Accounting IAS 36 Impairment of Assets (Amended) Recoverable Amount Disclosures for Non-Financial Assets The adoption of the above new standards and amendments did not have a material effect on the consolidated financial statements. Nest Investments (Holdings) Ltd - Annual Report

30 2.4 Standards, Interpretations and Amendments to published standards that are issued but not yet effective Up to the date of approval of the consolidated financial statements, certain new Standards, Interpretations and Amendments to existing standards have been published that are not yet effective for the current reporting period and which the Group has not early adopted, as follows: i. Issued by the IASB and adopted by the European Union The IASB has issued the Annual Improvements to IFRSs Cycle, which is a collection of amendments to IFRSs. The amendments are effective for annual periods beginning on or after 1 February Group management is in the process of assessing the impact of the below amendments on its results and financial position. IFRS 2 Share-based Payment: This improvement amends the definitions of vesting condition and market condition and adds definitions for performance condition and service condition (which were previously part of the definition of vesting condition ). IFRS 3 Business combinations: This improvement clarifies that contingent consideration in a business acquisition that is not classified as equity is subsequently measured at fair value through profit or loss whether or not it falls within the scope of IFRS 9 Financial Instruments. IFRS 8 Operating Segments: This improvement requires an entity to disclose the judgments made by management in applying the aggregation criteria to operating segments and clarifies that an entity shall only provide reconciliations of the total of the reportable segments assets to the entity s assets if the segment assets are reported regularly. IFRS 13 Fair Value Measurement: This improvement in the Basis of Conclusion of IFRS 13 clarifies that issuing IFRS 13 and amending IFRS 9 and IAS 39 did not remove the ability to measure short-term receivables and payables with no stated interest rate at their invoice amounts without discounting if the effect of not discounting is immaterial. IAS 16 Property Plant & Equipment: The amendment clarifies that when an item of property, plant and equipment is revalued, the gross carrying amount is adjusted in a manner that is consistent with the revaluation of the carrying amount. IAS 24 Related Party Disclosures: The amendment clarifies that an entity providing key management personnel services to the reporting entity or to the parent of the reporting entity is a related party of the reporting entity. IAS 38 Intangible Assets: The amendment clarifies that when an intangible asset is revalued the gross carrying amount is adjusted in a manner that is consistent with the revaluation of the carrying amount. The IASB has issued the Annual Improvements to IFRSs Cycle, which is a collection of amendments to IFRSs. The amendments are effective for annual periods beginning on or after 1 January Group management is in the process of assessing the impact of the below amendments on its results and financial position. IFRS 3 Business combinations: This improvement clarifies that IFRS 3 excludes from its scope the accounting for the formation of a joint arrangement in the financial statements of the joint arrangement itself. IFRS 13 Fair value measurement: This improvement clarifies that the scope of the portfolio exception defined in paragraph 52 of IFRS 13 includes all contracts accounted for within the scope of IAS 39 Financial Instruments: Recognition and Measurement or IFRS 9 Financial Instruments, regardless of whether they meet the definition of financial assets or financial liabilities as defined in IAS 32 Financial Instruments: Presentation. IAS 40 Investment properties: This improvement clarifies that determining whether a specific transaction meets the definition of both a business combination as defined in IFRS 3 Business Combinations and investment property as defined in IAS 40 Investment Property requires the separate application of both standards independently of each other. IAS 19 Employee benefits (Amended): Employee contributions (effective for annual periods beginning on or after 1 February 2015) The amendment applies to contributions from employees or third parties to defined benefit plans. The objective of the amendment is to simplify the accounting for contributions that are independent of the number of years of employee service, for example, employee contributions that are calculated according 28 Nest Investments (Holdings) Ltd - Annual Report 2014

31 to a fixed percentage of salary. Group management is in the process of assessing the impact of this amendment on its results and financial position. IFRIC Interpretation 21 levies (effective for annual periods beginning on or after 17 June 2014) The Interpretations Committee was asked to consider how an entity should account for liabilities to pay levies imposed by governments, other than income taxes, in its financial statements. This Interpretation is an interpretation of IAS 37 Provisions, Contingent Liabilities and Contingent Assets. IAS 37 sets out criteria for the recognition of a liability, one of which is the requirement for the entity to have a present obligation as a result of a past event (known as an obligating event). The Interpretation clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment of the levy. Group management is in the process of assessing the impact of this amendment on its results and financial position. ii. Issued by the IASB but not yet adopted by the European Union IAS 16 Property, plant & equipment and IAS 38 Intangible assets (amendment): clarification of acceptable methods of depreciation and amortization The amendment is effective for annual periods beginning on or after 1 January This amendment clarifies the principle in IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets that revenue reflects a pattern of economic benefits that are generated from operating a business (of which the asset is part) rather than the economic benefits that are consumed through use of the asset. As a result, the ratio of revenue generated to total revenue expected to be generated cannot be used to depreciate property, plant and equipment and may only be used in very limited circumstances to amortise intangible assets. The amendment has not yet been endorsed by the EU. Group management is in the process of assessing the impact of this amendment on its results and financial position. IFRS 9 Financial instruments classification and measurement The standard is applied for annual periods beginning on or after 1 January 2018 with early adoption permitted. The final phase of IFRS 9 reflects all phases of the financial instruments project and replaces IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. The standard introduces new requirements for classification and measurement, impairment, and hedge accounting. The standard has not yet been endorsed by the EU. Group management is in the process of assessing the impact of this amendment on its results and financial position. IFRS 11 Joint arrangements (amendment): accounting for acquisitions of interests in joint operations The amendment is effective for annual periods beginning on or after 1 January IFRS 11 addresses the accounting for interests in joint ventures and joint operations. The amendment adds new guidance on how to account for the acquisition of an interest in a joint operation that constitutes a business in accordance with IFRS and specifies the appropriate accounting treatment for such acquisitions. The amendment has not yet been endorsed by the EU. Group management is in the process of assessing the impact of this amendment on its results and financial position. IFRS 14 Regulatory deferral accounts The standard is effective for annual periods beginning on or after 1 January The IASB has a project to consider the broad issues of rate regulation and plans to publish a Discussion Paper on this subject in Pending the outcome of this comprehensive Rate-regulated Activities project, the IASB decided to develop IFRS 14 as an interim measure. IFRS 14 permits first-time adopters to continue to recognise amounts related to rate regulation in accordance with their previous GAAP requirements when they adopt IFRS. However, to enhance comparability with entities that already apply IFRS and do not recognise such amounts, the standard requires that the effect of rate regulation must be presented separately from other items. An entity that already presents IFRS financial statements is not eligible to apply the standard. This standard has not yet been endorsed by the EU. Group management is in the process of assessing the impact of this amendment on its results and financial position. IFRS 15 Revenue from contracts with customers The standard is effective for annual periods beginning on or after 1 January IFRS 15 establishes a fivestep model that will apply to revenue earned from a contract with a customer (with limited exceptions), regardless of the type of revenue transaction or the industry. The standard s requirements will also apply to the recognition and measurement of gains and losses on the sale of some non-financial assets that are not an output of the entity s ordinary activities (e.g., sales of property, plant and equipment or intangibles). Extensive disclosures will be required, including disaggregation of total revenue; information about performance obligations; changes in contract asset Nest Investments (Holdings) Ltd - Annual Report

32 and liability account balances between periods and key judgments and estimates. The standard has not been yet endorsed by the EU. Group management is in the process of assessing the impact of this amendment on its results and financial position. IAS 27 Separate financial statements (amended) The amendment is effective from 1 January This amendment will allow entities to use the equity method to account for investments in subsidiaries, joint ventures and associates in their separate financial statements and will help some jurisdictions move to IFRS for separate financial statements, reducing compliance costs without reducing the information available to investors. This amendment has not yet been endorsed by the EU. Group management is in the process of assessing the impact of this amendment on its results and financial position. Amendments to IFRS 10 and IAS 28: Sale or contribution of assets between an investor and its Associate or Joint Venture (effective for annual periods beginning on or after 1 January 2016) The amendments address an acknowledged inconsistency between the requirements in IFRS 10 and those in IAS 28, in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The main consequence of the amendments is that a full gain or loss is recognized when a transaction involves a business (whether it is housed in a subsidiary or not). A partial gain or loss is recognized when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary. The amendments will be effective from annual periods commencing on or after 1 January The amendments have not yet been endorsed by the EU. Group management is in the process of assessing the impact of this amendment on its results and financial position. Annual Improvements to IFRSs cycle (effective for annual periods beginning on or after 1 January 2016) which is a collection of amendments to IFRSs. The amendments are effective for annual periods beginning on or after 1 January These annual improvements have not yet been endorsed by the EU. Group management is in the process of assessing the impact of the below amendments on its results and financial position. IFRS 5 Non-current assets held for sale and Discontinued operations: The amendment clarifies that changing from one of the disposal methods to the other (through sale or through distribution to the owners) should not be considered to be a new plan of disposal, rather it is a continuation of the original plan. There is therefore no interruption of the application of the requirements in IFRS 5. The amendment also clarifies that changing the disposal method does not change the date of classification. IFRS 7 Financial instruments: disclosures: The amendment clarifies that a servicing contract that includes a fee can constitute continuing involvement in a financial asset. Also, the amendment clarifies that the IFRS 7 disclosures relating to the offsetting of financial assets and financial liabilities are not required in the condensed interim financial report. IAS 19 Employee benefits: The amendment clarifies that market depth of high quality corporate bonds is assessed based on the currency in which the obligation is denominated, rather than the country where the obligation is located. When there is no deep market for high quality corporate bonds in that currency, government bond rates must be used. IAS 34 Interim financial reporting: The amendment clarifies that the required interim disclosures must either be in the interim financial statements or incorporated by cross-reference between the interim financial statements and wherever they are included within the greater interim financial report (e.g. in the management commentary or risk report). The Board specified that the other information within the interim financial report must be available to users on the same terms as the interim financial statements and at the same time. If users do not have access to the other information in this manner, then the interim financial report is incomplete. Amendments to IFRS 10, IFRS 12 and IAS 28: Investment Entities: applying the consolidation exception (effective for annual periods beginning on or after 1 January 2016) The amendments address three issues arising in practice in the application of the investment entities consolidation exception. The amendments are effective for annual periods beginning on or after 1 January The amendments clarify that the exemption from presenting consolidated financial statements applies to a parent entity that is a subsidiary of an investment entity, when the investment entity measures all of its subsidiaries at fair value. Also, the amendments clarify that only a subsidiary that is not an investment entity itself and provides support services to the investment entity is consolidated. All other subsidiaries of an investment entity are measured at fair value. Finally, the amendments to IAS 28 Investments in Associates and Joint Ventures allow the investor, when applying the equity 30 Nest Investments (Holdings) Ltd - Annual Report 2014

33 method, to retain the fair value measurement applied by the investment entity associate or joint venture to its interests in subsidiaries. These amendments have not yet been endorsed by the EU. Group management is in the process of assessing the impact of these amendments on its results and financial position. Amendments to IAS 1: Disclosure initiative The amendments to IAS 1 Presentation of Financial Statements further encourage companies to apply professional judgment in determining what information to disclose and how to structure it in their financial statements. The amendments are effective for annual periods beginning on or after 1 January The narrowfocus amendments to IAS clarify, rather than significantly change, existing IAS 1 requirements. The amendments relate to materiality, order of the notes, subtotals and disaggregation, accounting policies and presentation of items of other comprehensive income (OCI) arising from equity accounted Investments. These amendments have not yet been endorsed by the EU. Group management is in the process of assessing the impact of these amendments on its results and financial position. 2.5 Business combinations and goodwill Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any noncontrolling interest in the acquiree. For each business combination, the Group elects whether it measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree s identifiable net assets. Acquisition costs incurred are expensed and included in administrative expenses. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. If the business combination is achieved in stages, the acquisition date fair value of the acquirer s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability will be recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. If the contingent consideration is classified as equity, it will not be remeasured. Subsequent settlement is accounted for within equity. In instances where the contingent consideration does not fall within the scope of IAS 39, it is measured in accordance with the appropriate IFRS. Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. 2.6 Investments in associates The Group s investment in its associate is accounted for using the equity method. An associate is an entity in which the Group has significant influence. Under the equity method, the investment in the associate is carried on the statement of financial position at cost plus post acquisition changes in the Group s share of net assets of the associate. Goodwill relating to the associate is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment. The statement of comprehensive income reflects the Group s share of the results of operations of the associate. When there has been a change recognised directly in the equity of the associate, the Group recognises its share of any changes and discloses this, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate. The Group s share of profit of an associate is shown on the face of the statement of comprehensive income. This is the profit attributable to equity holders of the associate and, therefore, is profit after tax and non-controlling interests in the subsidiaries of the associate. The financial statements of the associate are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group. After application of the equity method, the Group determines whether it is necessary to recognise an Nest Investments (Holdings) Ltd - Annual Report

34 additional impairment loss on its investment in its associate. The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount in the share of profit of associates in the statement of comprehensive income. Upon loss of significant influence over the associate, the Group measures and recognises any retaining investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss. 2.7 Fair value measurement The Group measures financial instruments such as available for sale financial assets, and non-financial assets such as investment properties, at fair value at each reporting date. Fair value related disclosures for financial instruments and non-financial assets that are measured at fair value or where fair values are disclosed are summarised in the following notes: Disclosures for valuation methods, significant estimates and assumptions: Notes 3, 15, 18, and 20 Quantitative disclosures of fair value measurement hierarchy Notes 15, 18, and 20 Investment in unquoted equity shares Note 20 Property, plant and equipment under revaluation model Note 15 Investment properties Note 18 Financial instruments (including those carried at amortised cost) Note 20 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. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: In the principal market for the asset or liability Or In the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: Level 1 Quoted (unadjusted) market prices in active markets for identical assets or liabilities Level 2 Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable Level 3 Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. The Group s management determines the policies and procedures for both recurring fair value measurement, such as investment properties and unquoted AFS financial assets, and for non-recurring measurement, such as assets held for distribution in discontinued operations. External valuers are involved for valuation of significant assets, such as properties and AFS financial assets, and significant liabilities, such as contingent consideration. Involvement of external valuers is decided upon annually by the Group s management after discussion with and approval by the Group s Audit Committee. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained. Valuers are normally rotated every three years. The Group s management decides, after discussions with the Group s external valuers, which valuation techniques and inputs to use for each case. At each reporting date, the Group s management analyses the movements in the values of assets and liabilities which are required to be remeasured or re-assessed as per the Group s accounting policies. For this analysis, the Group s management verifies the major inputs applied in the latest 32 Nest Investments (Holdings) Ltd - Annual Report 2014

35 valuation by agreeing the information in the valuation computation to contracts and other relevant documents. The Group s management, in conjunction with the Group s external valuers, also compares the change in the fair value of each asset and liability with relevant external sources to determine whether the change is reasonable. On an interim basis, the Group s management and the Group s external valuers present the valuation results to the Audit Committee and the Group s independent auditors. This includes a discussion of the major assumptions used in the valuations. For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above. 2.8 Classification of insurance products One part of the Group operations is the issuance of insurance contracts. An insurance contract is a contract under which one party (the insurer) accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder. Once a contract has been classified as an insurance contract, it remains an insurance contract until the fulfilment or expiration of all the rights and obligations arising from the contract, even if the insurance risk reduces significantly during the period of the insurance contract. 2.9 Underwriting results Premiums from insurance contracts issued by the Group are recognised when they become due in accordance with the conditions set out in the insurance contracts. Reinsurance premiums are recognised in relation to the respective insurance premiums and in accordance with the conditions set out in the relevant reinsurance contracts held by the Group. Underwriting results are determined after taking into account provisions for outstanding claims, unearned premiums, deferred acquisition costs and unexpired risks, as follows: Outstanding claims Full provision is made for the estimated cost of all claims arising from valid insurance contracts that were in force when the insured incident occurred that affected the policyholder negatively. The provision is estimated separately for each reported claim. Provision is also made for claims incurred but not enough reported (IBNER) and claims incurred but not reported (IBNR) by the reporting date. The past experience as to the number and amount of claims reported after the reporting date is not yet adequate, therefore the Ultimate Loss Ratio methodology is used in estimating the IBNER and IBNR provisions. Claims settlement costs are included in the estimation of the provision for outstanding claims Recoverable amounts arising out of the acquisition of the rights of policyholders with respect to third parties (subrogation) or of the legal ownership of insured property (salvage) are deducted from the provision. Unearned premiums The provision for unearned premiums represents the amount of premium income and reinsurance premiums attributable to the period of risk after the reporting date. The provision for direct business is computed using the method of 365th, according to which the earned and unearned premiums are calculated on a daily period apportionment basis. The provision for reinsurance business is computed using the method of 24th. One insurance subsidiary takes 25% on marine policies and uses the 1/24 method for the other classes except for life where a mathematical provision is prepared by management and approved by an actuary. Another subsidiary takes 25% on cargo business and uses the 1/365 method for other classes. The other two subsidiaries take 40% of the net premiums. Finally, another subsidiary uses the 1/365 method for its facultative premium. The provision is maintained in order to take account of any element of unearned premium in relation to such policies. Acquisition costs are written off in the year in which they are incurred. Deferred acquisition costs Deferred acquisition costs represent commissions and other expenses for insurance contracts written during the financial year but relating to a subsequent financial year and are calculated on a basis compatible with that used to determine unearned premiums. Liability adequacy test (unexpired risks) At each reporting date, a liability adequacy test is performed, to ensure the adequacy of unearned premiums net of related deferred acquisition cost assets, using current estimates of future contractual cash flows. Any inadequacy is charged to the statement of comprehensive income by establishing an unexpired risk provision. The unexpired risk reserve is calculated based on claims and administration expenses that may arise after the reporting date and relates to premiums that concluded after that date, to the extent that the likely amount exceeds the reserve for unearned premiums, net of any deferred acquisition costs. Nest Investments (Holdings) Ltd - Annual Report

36 Fee and commission income Policyholders are charged for policy administration services. The fee is recognised in the statement of comprehensive income on the same basis as the relevant insurance premiums. Commissions receivable from reinsurers are recognised on an accruals basis Reinsurance The reinsurance programme consists of proportional and non-proportional treaties. The accounting for premiums due and claim recoveries is carried out periodically for proportional treaties. The premium due for non-proportional cover is booked on the due date, while claims recovery is accounted as and when the priority is exceeded, taking outstanding claims reserve, if any, into account. Reinsurance premiums ceded and reinsurance recoveries on claims incurred are deducted from the gross premiums written and claims costs respectively. The Group enters into contracts with other reinsurers for minimizing its financial exposure from large claims. This arrangement results in reinsurance assets and liabilities which include amounts recoverable from reinsurance companies for paid and unpaid losses, ceded unearned premiums and reinsurance balances payable. Amounts due to reinsurers are calculated in a manner consistent to the relative reinsurance contract. Amounts recoverable from reinsurers are calculated with reference to the claims liabilities associated with the reinsured risk. Ceded premiums are recognised in the revenue account over the period that coverage is provided Foreign currency translation The financial statements are presented in United States Dollars (US$), which is the functional and presentation currency of the Company. Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated to United States Dollars (US$) at the rate of exchange ruling at the reporting date. All differences arising on settlement or translation of monetary items are taken to the statement of comprehensive income, with the exception of differences on foreign currency liabilities that provide a hedge against a net investment in a foreign entity. These are taken directly to the foreign exchange differences reserve until the disposal of the net investment, at which time they are transferred to the statement of comprehensive income Property and equipment Owner-occupied property is property held by the Group for use in the supply of services or for administrative purposes. Owner-occupied property is initially measured at cost and subsequently measured at fair value. Valuations are carried out annually by independent qualified valuers. On disposal of freehold land and buildings, the relevant revaluation reserve balance is transferred to retained earnings. Equipment is measured at cost less accumulated depreciation and any impairment in value. Depreciation is calculated on cost or revalued carrying amount on a straight line basis over its estimated useful life, using the following annual rates: Buildings 2% Furniture and office equipment 10% / 20% Computer equipment 20% Motor vehicles 15% The carrying values of property and equipment are reviewed for impairment when events or changes in circumstances indicate that an asset may be impaired. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units are written down to their recoverable amount. The recoverable amount of property and equipment is the greater of net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs Intangible assets Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is reflected in the statement of comprehensive income in the year in which the expenditure is incurred. The useful lives of intangible assets are assessed to be either finite or indefinite. 34 Nest Investments (Holdings) Ltd - Annual Report 2014

37 Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement of comprehensive income in the expense category consistent with the function of the intangible asset. Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash generating unit level. Such intangibles are not amortised. The useful life of an intangible asset with an indefinite life is reviewed annually to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is made on a prospective basis. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of comprehensive income when the asset is derecognised. The Groups intangible assets consist of intellectual property rights, which are amortised over 12 years and membership rights in World Trade Center Association ( WTCA ) at several locations, which have an indefinite life Properties held for trading Properties held for trading consist of properties held for sale and are valued at the lower of cost and net realisable value Investment property Investment property is property held by the Group to earn rentals and/or for capital appreciation. If a property of the Group includes a portion that is owner-occupied and another portion that is held to earn rentals and/or for capital appreciation, the classification is based on whether or not these portions can be sold separately. Otherwise, the whole property is classified as owner-occupied property unless the owner-occupied portion is insignificant. The classification of property is reviewed on a regular basis to account for major changes in its use. Investment property is initially recognised at cost, which includes transaction costs and is measured at fair value at the reporting date. Gains or losses arising from changes in fair value are included in the statement of comprehensive income. The valuations are carried out by independent qualified valuers. Transfers are made to (or from) investment property only when there is a change in use. For a transfer from investment property to owner-occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. If owner-occupied property becomes an investment property, the Group accounts for such property in accordance with the policy stated under property, plant and equipment up to the date of change in use Financial assets i. Initial recognition and measurement Financial assets within the scope of IAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables, held to maturity investments, available-for-sale financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial assets at initial recognition. Financial assets are recognised initially at fair value plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. The classification depends on the purpose for which the investments were acquired or originated. The availablefor-sale and held to maturity categories are used when the relevant liability (including shareholders funds) is passively managed and/or carried at amortised cost. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the marketplace (regular way trades) are recognised on the trade date, i.e. the date that the Group commits to purchase or sell the assets. The Group s financial assets include cash and cash equivalents, trade and other receivables, loan and other receivables, quoted and unquoted financial instruments. ii. Subsequent measurement The subsequent measurement of financial assets depends on their classification as follows: Available-for-sale financial assets Available-for-sale ( AFS ) financial investments include equity and debt securities. Equity investments classified as available-for-sale are those that are neither classified as held for trading nor designated at fair value through profit or loss. Debt securities in this category are those that are intended to be held for an indefinite period of time and which may be sold in response to needs for liquidity or in response to changes in the market conditions. After initial measurement, AFS financial assets are subsequently measured at fair value with unrealised gains or losses recognised in other comprehensive income in the AFS reserve, until the investment is Nest Investments (Holdings) Ltd - Annual Report

38 derecognised. Where the insurer holds more than one investment in the same security then they are deemed to be disposed of on a first-in first-out basis. Interest earned whilst holding AFS financial assets is reported as interest income using the EIR. Dividends earned whilst holding AFS financial assets are recognised in the statement of comprehensive income as Investment income, when the right of the payment has been established. When the asset is derecognized, the cumulative gain or loss is recognised in other operating income. When the asset is determined to be impaired the cumulative loss is reclassified from the AFS reserve in the profit or loss. The Group evaluates its available-for-sale financial assets to determine whether the ability and intention to sell them in the near term would still be appropriate. In the case where the Group is unable to trade these financial assets due to inactive markets and management s intention significantly changes to do so in the foreseeable future, the Group may elect to reclassify these financial assets. Reclassification to loans and receivables is permitted when the financial asset meets the definition of loans and receivables and management has the intention and ability to hold these assets for the foreseeable future or until maturity. The reclassification to held-to-maturity is permitted only when the entity has the ability and intention to hold the financial asset until maturity. For a financial asset reclassified out of the available-forsale category, any previous gain or loss on that asset that has been recognised in equity is amortised to profit or loss over the remaining life of the investment using the EIR. Any difference between the new amortised cost and the expected cash flows is also amortised over the remaining life of the asset using the EIR. If the asset is subsequently determined to be impaired, then the amount recorded in equity is reclassified to the profit or loss. Loans and other receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. These investments are initially recognised at cost, being the fair value of the consideration paid for the acquisition of the investment. All transaction costs directly attributable to the acquisition are also included in the cost of the investment. After initial measurement, loans and receivables are measured at amortised cost, using the EIR, less allowance for impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fee or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the statement of comprehensive income. Gains and losses are recognised in the statement of comprehensive income when the investments are derecognised or impaired, as well as through the amortisation process. Held to maturity financial assets Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as held to maturity when the Group has the intention and ability to hold until maturity. After initial measurement, held to maturity financial assets are measured at amortised cost, using the EIR, less impairment. The EIR amortisation is included in investment income in the statement of comprehensive income. Gains and losses are recognised in the statement of comprehensive income when the investments are derecognised or impaired, as well as through the amortisation process. iii. Derecognition of financial assets A financial asset (or, when applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when: i. The rights to receive cash flows from the asset have expired Or ii. The Group retains the right to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a pass-through arrangement And either: i. The Group has transferred substantially all the risks and rewards of the asset Or ii. The Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. When the Group has transferred its right to receive cash flows from an asset or has entered into a pass-through arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained. iv. Impairment of financial assets The Group assesses at each reporting date whether there is any objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, 36 Nest Investments (Holdings) Ltd - Annual Report 2014

39 and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred loss event ) and that loss event has an impact on the estimated future cash flows of the financial asset or the 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. Financial assets carried at amortised cost For financial assets carried at amortised cost, the Group first assesses individually whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment. If there is objective evidence that an impairment loss on assets carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the carrying amount of the asset and the present value of estimated future cash flows (excluding future expected credit losses that have not been incurred) discounted at the financial asset s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the statement of comprehensive income. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of investment income in the statement of comprehensive income. Available-for-sale financial investments For available-for-sale financial investments, the Group assesses at each reporting date whether there is objective evidence that an investment or a group of investments is impaired. In the case of equity investments classified as availablefor-sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. Significant is to be evaluated against the original cost of the investment and prolonged against the period in which the fair value has been below its original cost. The Group treats significant generally as 20% and prolonged generally as greater than six months. Where there is evidence of impairment, the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in the statement of comprehensive income is removed from other comprehensive income and recognised in the profit or loss. Impairment losses on equity investments are not reversed through the statement of comprehensive income; increases in their fair value after impairment are recognised directly in profit or loss. In the case of debt instruments classified as availablefor-sale, impairment is assessed based on the same criteria as financial assets carried at amortised cost. However, the amount recorded for impairment is the cumulative loss measured as the difference between the amortised cost and the current fair value, less any impairment loss on that investment previously recognised in the profit or loss. Future interest income continues to be accrued based on the reduced carrying amount of the asset and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income. If, in a subsequent year, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in the statement of comprehensive income, the impairment loss is reversed through the statement of comprehensive income. v. Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously. Income and expense will not be offset in the consolidated statement of comprehensive income unless required or permitted by any accounting standard or interpretation, as specifically disclosed in the accounting policies of the Group Cash and cash equivalents For the purposes of the statement of cash flow, cash and cash equivalents consist of cash at banks and on hand Nest Investments (Holdings) Ltd - Annual Report

40 and short term deposits with an original maturity of three months from the date of acquisition, which are subject to an insignificant risk of changes in value. For the purpose of consolidated statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, net of outstanding bank overdrafts Premiums receivable and other debtors Premiums receivable and other debtors are presented in the statement of financial position net of specific provisions for doubtful debts which may arise in the ordinary course of business. A specific provision is made where there is objective evidence that the Group will not be able to collect all amounts due. The amount of the provision is estimated as the difference between the carrying amount and its estimated recoverable amount, being the present value of expected future cash flows, including amounts recoverable from guarantees and collateral, discounted at the original effective interest rate Income tax Current income tax Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date in the countries where the Group operates and generates taxable income. Current income tax relating to items recognised directly in equity is recognised in equity and not in the statement of comprehensive income. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate. Deferred tax Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax liabilities are recognised for all taxable temporary differences, except: When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss. In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except: When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss. In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity. Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at that date, are recognised subsequently if new information about facts and circumstances change. The adjustment is either treated as a reduction in goodwill (as long as it does not exceed goodwill) if it was incurred during the measurement period or recognised in profit or loss. 38 Nest Investments (Holdings) Ltd - Annual Report 2014

41 2.20 Financial liabilities Initial recognition and measurement All financial liabilities are recognised initially at fair value and in the case of loans and borrowings, net of directly attributable transaction costs. The Group s financial liabilities include investment contracts without Discretionary Participation Features ( DPF ), net asset value attributable to unit holders, trade and other payables, loans and borrowings and insurance payables. Subsequent measurement The subsequent measurement of financial liabilities depends on their classification, as follows: Interest bearing loans and borrowings: After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Gains and losses are recognised in the statement of comprehensive income when the liabilities are derecognised as well as through the effective interest rate method (EIR) amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fee or costs that are an integral part of the EIR. The EIR amortisation is included in finance cost in the statement of comprehensive income. Derecognition of financial liabilities A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified. Such an exchange or modification is treated as derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the statement of comprehensive income Revenue recognition Gross premiums Gross recurring premiums on life and investment contracts with DPF are recognised as revenue when payable by the policyholder. For single premium business, revenue is recognised on the date on which the policy is effective. Gross general insurance written premiums comprise the total premiums receivable for the whole period of cover provided by contracts entered into during the accounting period. They are recognised on the date on which the policy commences. Premiums include any adjustments arising in the accounting period for premiums receivable in respect of business written in prior accounting periods. Rebates that form part of the premium rate, such as no-claim rebates, are deducted from the gross premium; others are recognised as an expense. Premiums collected by intermediaries, but not yet received, are assessed based on estimates from underwriting or past experience and are included in premiums written. Unearned premiums are those proportions of premiums written in a year that relate to periods of risk after the reporting date. Unearned premiums are calculated on a daily pro rata basis. The proportion attributable to subsequent periods is deferred as a provision for unearned premiums. Reinsurance premiums Gross reinsurance premiums on life and investment contracts are recognised as an expense on the earlier of the date when premiums are payable or when the policy becomes effective. Gross general reinsurance premiums written comprise the total premiums payable for the whole cover provided by contracts entered into the period and are recognised on the date on which the policy incepts. Premiums include any adjustments arising in the accounting period in respect of reinsurance contracts incepting in prior accounting periods. Unearned reinsurance premiums are those proportions of premiums written in a year that relate to periods of risk after the reporting date. Unearned reinsurance premiums are deferred over the term of the underlying direct insurance policies for risks-attaching contracts and over the term of the reinsurance contract for losses occurring contracts. Fees and commission income Insurance and investment contract policyholders are charged for policy administration services, investment management services, surrenders and other contract fees. These fees are recognised as revenue over the period in which the related services are performed. If the fees are for services provided in future periods, then they are deferred and recognised over those future periods. Interest income Interest income is recognised in the statement of comprehensive income as it accrues and is calculated by using the effective interest rate method. Fees and commissions that are an integral part of the effective yield of the financial asset or liability are recognised as an adjustment to the effective interest rate of the instrument. Investment income also includes dividends when the right to receive payment is established. For listed securities, this is the date the security is listed as ex-dividend. Realised gains and losses Realised gains and losses recorded in the statement of comprehensive income on investments include gains and losses on financial assets and investment properties. Gains and losses on the sale of investments are calculated as the difference between net sales proceeds and the original or amortised cost and are recorded on occurrence of the sale transaction. Nest Investments (Holdings) Ltd - Annual Report

42 Rental income Rental income arising from operating leases on investment properties is accounted for on a straight-line basis over the lease terms and is included in revenue in the statement of comprehensive income due to its operating nature Impairment of non-financial assets The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset s recoverable amount. An asset s recoverable amount is the higher of an asset s or cash-generating unit s (CGU) fair value less costs of disposal and its value in use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators. The Group bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Group s CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover different periods of time depending on the CGU under review. A growth rate is calculated and applied to project future cash flows when appropriate. Impairment losses of continuing operations, are recognised in the statement of comprehensive income in expense categories consistent with the function of the impaired asset, except for properties previously revalued with the revaluation taken to OCI. For such properties, the impairment is recognised in OCI up to the amount of any previous revaluation. For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously recognised impairment losses no longer exist or have decreased. If such indication exists, the Group estimates the asset s or CGU s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the statement of comprehensive income unless the asset is carried at a revalued amount, in which case, the reversal is treated as a revaluation increase. Goodwill impairment testing Goodwill is tested for impairment annually as at 31 December and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs) to which the goodwill relates. When the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods Share capital Ordinary shares Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects. Repurchase, disposal and reissue of share capital (treasury shares) Own equity instruments that are reacquired (treasury shares) are recognised at cost and deducted from equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Group s own equity instruments. Any difference between the carrying amount and consideration, if reissued, is recognised in share premium. Share options exercised during the reporting period are satisfied with treasury shares Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Group expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the statement of comprehensive income net of any reimbursement. 3. Significant judgments and estimates The preparation of the financial statements in accordance with IFRSs requires management to make estimates and assumptions that affect the reported amounts of assets 40 Nest Investments (Holdings) Ltd - Annual Report 2014

43 and liabilities and disclosure of contingent assets and liabilities at the reporting date. Actual results may vary from these current estimates. These estimates are reviewed periodically, and, as adjustments become necessary, they are reported in the statement of comprehensive income in the periods in which they become known. The main assumptions and estimates concerning the future on the reporting date that poses a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next year relates to: Revaluation of property, plant and equipment and investment properties The Group carries its investment properties at fair value, with changes in fair value being recognised in the statement of comprehensive income. In addition, it measures land and buildings at revalued amounts with changes in fair value being recognised in other comprehensive income. The Group engaged independent valuation specialists in the various countries it operates to assess the fair value of its properties as at 31 December For the investment property in Algeria, the residual method of valuation was used. The application of the residual method of valuation is based on the principle that the price to be paid for a property that is suitable for development is equal to the difference between (i) the completed value of the permitted development and (ii) the total cost of carrying out that development. Other properties were valued by reference to market-based evidence, using comparable prices adjusted for specific market factors such as nature, location and condition of the property. For additional information on the assumptions used, refer to Note 17 Investment Properties. Going concern The Group s management has assessed the ability of the Company and the Group to continue as a going concern and is satisfied that the Company and the Group have the financial resources to continue its business in the foreseeable future. Additionally, management is not aware of the existence of material uncertainties, which are related to events or circumstances that may give rise to serious doubts as to whether the Company and the Group can continue as a going concern, therefore the going concern principle is appropriate. Income taxes The Group operates and is therefore subject to taxation in a number of countries in the Middle East, Africa and Europe. Estimates are required in determining the provision for taxes at the reporting date, and therefore the tax determination is uncertain. Where the final tax is different from the amounts that were initially recorded, such differences will impact the income tax expense, the tax liabilities and deferred tax liabilities of the period in which the final tax is agreed with the tax authorities. Allocation of overheads The majority of the direct insurance subsidiaries allocate their overheads using the ratio 90% to operating expenses included in the Consolidated Insurance Revenue Account and 10% to administrative expenses included in the Consolidated Statement of Comprehensive Income. Impairment losses on loans and advances (Banking operations) The Group reviews its individually significant loans and advances at each statement-of-financial-position date to assess whether an impairment loss should be recorded in the income statement. In particular, management s judgement is required in the estimation of the amount and timing of future cash flows when determining the impairment loss. These estimates are based on assumptions about a number of factors and actual results may differ, resulting in future changes to the allowance. Loans and advances that have been assessed individually (and found not to be impaired) are assessed together with all individually insignificant loans and advances in groups of assets with similar risk characteristics. This is to determine whether provision should be made due to incurred loss events for which there is objective evidence, but the effects of which are not yet evident. The collective assessment takes account of data from the loan portfolio, and judgements on the effect of concentrations of risks and economic data. Consolidation of entities in which the Group holds less than majority of voting rights The Group considers that it controls Trust International Insurance Co. Plc. (Palestine) and Trust House Insurance Co. even though it owns less than 50% of the voting rights. This is because the Group has the power to exercise control over the company by virtue of an agreement with its shareholder who controls directly such % to bring the total ownership over the 50% level. Insurance business contracts For the insurance business contracts, estimates are made for the expected ultimate cost of claims reported and for the expected ultimate cost of claims incurred but not yet reported (IBNR) at the reporting date. The estimation of the liabilities is based on past experience and market trends. Nest Investments (Holdings) Ltd - Annual Report

44 4. Restatement of prior year financial statements and reclassifications The 2014 consolidated financial statements have been restated to reflect the correction of prior year errors and reclassifications. Further information and the effect of these corrections and reclassifications are as follows: i. Reclassifications and adjustments between reserves opening balances The opening balances of 2014 in reserves were restated as a result of classification errors in the records of subsidiary companies. The following adjustments were made to reserves: US$ 000 Increase in Retained earnings 12,096 Decrease in Available for sale reserve (4,343) Decrease in Property revaluation reserve (1,975) Decrease in Statutory reserve (7,073) Increase in Exchange difference reserve 3,961 Decrease in Optional reserve (1,878) Decrease in Non-controlling interest (1,543) ii. Prior year restatement of Investment property balance The opening balances of 2014 and 2013 have been restated as a result of an adjustment relating to a prior years revaluation. The following adjustments were made to the below accounts: US$ 000 Decrease in Retained earnings (49,478) Decrease in Non-controlling interest (37,325) Decrease in Investment Properties (86,803) 42 Nest Investments (Holdings) Ltd - Annual Report 2014

45 5. Life and non-life insurance business An analysis of the consolidated insurance revenue account by line of business is presented below: 2014 Motor Life Marine Fire Engineer -ing Medical Travel Other Decenial Liability Natural catastro -phe Workmen Compensation & Third Party Liability Facultative Treaty Energy US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 Gross written premium 61,131 4,862 9,272 41,584 39,206 28, , , , ,378 22, ,102 Outward reinsurance premium (9,613) (3,137) (7,924) (36,125) (37,504) (6,970) (75) (4,884) (425) (258) (4,915) (103,39 (55,542) (22,719) (293,487 Retained premium 51,517 1,725 1,348 5,459 1,701 21, , , , , ,615 Change in unearned premiums 2,946 (118) (96) (1,765) 1 61 (272) (7) (236) (11,353) (4,832) (15,469) Net earned premium 54,463 1,607 1,362 5,649 1,606 20, , , , , ,146 Gross claims paid (36,047) (985) (2,311) (14,371) (4,937) (19,443) (2) (1,640) (5) (2,738) (103,64 (120,294 (306,419 Claims recovered from reinsurers 4, ,884 12,737 4,395 4, ,354 37, ,993 Change in provision for outstanding claims - gross 1,057 (57) 363 1,460 (480) (5,162) (146) (13,502) (8,541) (24,754) Change in provision for outstanding claims - reinsurance (208) 35 (245) (1,662) 582 3,592 (121) (5) (234) (3,765) (10,174) (12,205) Net IBNR (Pure) (378) (4) (24) (680) (45) 173 (2,241) 1,373 (1,635) Net IBNER (323) (3) (121) 20 (366) Change in IBNR (701) (4) (13) (679) (41) (121) 192 (2,241) 1,373 (2,001) Claims and related expenses (31,819) (146) (239) (1,672) (453) (17,655) (2) (876) (2) (121) (2,614) (83,798) (99,988) (239,386 Commissions and taxes paid (10,181) (276) (1,584) (8,091) (4,156) (1,787) (10) (1,349) (133) (22) (1,281) (43,156) (50,990) (328) (123,345 Commissions and taxes received from reinsurers ,133 8,567 5, ,657 12, ,931 Interest on premium reserve (31) Interest on premium reserve - reinsurance (8) (24) (8) (1) (1) (42) Change in deferred acquisition cost gross (29) (10) (4) (1) (180) (14) 33 3,348 2,276 5,418 Change in deferred acquisition cost reinsurance (2,768) (522) (3,290) Change in unexpired risk reserves (58) Acquisition costs, commissions and (10,256) (250) ,167 (1,764) 29 (383) (63) 1 (780) (21,950) (36,186) 331 (69,125) Gross underwriting profit 12,388 1,211 1,656 4,425 2, , ,723 30,705 4, ,634 Operating expenses (10,868) (643) (686) (2,108) (1,438) (3,453) (16) (533) (174) (29) (1,509) (9,621) (11,176) (442) (42,695) Technical Income 1, (69) 21 3,014 Net underwriting profit / (loss) 3, , (2,704) (65) 4 2,402 21,679 (6,416) 45 23,954 Total Line of Business Nest Investments (Holdings) Ltd - Annual Report

46 5. Life and non-life insurance business (continued) 2013 Motor Life Marine Fire Engineer -ing Medical Travel Other Decenial Liability Natural catastro -phe Workmen Compensation & Third Party Liability Facultative Treaty Energy US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 Gross written premium 63,332 3,158 9,839 34,744 40,109 21, , , , ,800 12, ,390 Outward reinsurance premium (7,953) (1,771) (8,252) (29,528) (38,550) (4,113) (66) (4,147) (475) (219) (1,994) (86,953) (51,615) (12,900) (248,536 Retained premium 55,379 1,387 1,588 5,215 1,559 17, , , , , ,854 Change in unearned premiums (2,520) 31 (51) (174) (36) (1,755) (3) 17 (211) 2 (233) (8,049) 3,455 (9,527) Net earned premium 52,859 1,418 1,536 5,042 1,523 15, , , , , ,328 Gross claims paid (31,036) (800) (5,276) (16,412) (5,697) (14,782) (3) (1,705) (3) (3,221) (69,579) (110,931 (1,079) (260,523 Claims recovered from reinsurers 3, ,808 14,772 5,215 5, ,493 56,748 1, ,002 Change in provision for outstanding claims - gross (5,571) (97) 1,547 1,058 (563) 77 (264) (909) (48,721) 7,667 (45,775) Change in provision for outstanding claims - reinsurance (1,113) (1,342) 574 (794) ,077 (27,362) (12,622) Net IBNR (Pure) (260) (8) (59) (13) (1,093) (46) (589) (732) (7,544) (10,345) Net IBNER (194) 17 (13) 6 15 (109) (38) (316) Change in IBNR (454) 8 (71) (7) (1,079) (46) (109) (626) (732) (7,544) (10,661) Claims and related expenses (33,322) (255) (25) (1,995) (479) (10,644) (3) (1,327) 4 (109) (3,539) (79,462) (81,422) (212,579 Commissions and taxes paid (10,058) (305) (1,845) (6,264) (4,240) (1,887) (10) (1,158) (140) (21) (801) (38,543) (48,535) (254) (114,062 Commissions and taxes received from reinsurers ,090 6,099 5,661 (19) ,896 11, ,863 Interest on premium reserve (79) Interest on premium reserve - reinsurance (3) (10) (5) (1) (1) (19) Change in deferred acquisition cost gross (5) 243 (68) 9 2,519 (705) 2,308 Change in deferred acquisition cost reinsurance (776) 131 (646) Change in unexpired risk reserves (92) (93) Acquisition costs, commissions and (9,839) (238) 245 (59) 1,410 (1,663) 27 (411) (61) (2) (568) (18,983) (37,609) 172 (67,580) Gross underwriting profit 9, ,757 2,987 2,454 2, ,051 21,784 15, ,169 Operating expenses (10,219) (457) (846) (2,245) (2,112) (3,053) (13) (607) (109) (27) (1,099) (6,976) (9,034) (619) (37,416) Technical Income 1, ,353 Net underwriting profit / (loss) 1, (24) 33 (48) (20) 3 1,064 15,174 6,628 (366) 26,105 Total Line of Business 44 Nest Investments (Holdings) Ltd - Annual Report 2014

47 NEST INVESTMENTS (HOLDINGS) LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER Net earned premiums 6. Net earned premiums Gross premiums on insurance contracts US$ ' US$ ' Life insurance 4,862 US$ '000 3,158 US$ '000 Life Non-life insurance insurance 676,240 4, ,233 3,158 Non-life Gross written insurance premium 681, , , ,233 Gross Change written in unearned premium premiums provision (47,115) 681, ,102 (18,016) 599, ,390 Change Total gross in unearned premiums premiums provision (47,115) 633,988 (47,115) (18,016) 581,374 (18,016) Total gross premiums 633, , , ,374 Premiums ceded to reinsurers on insurance contracts Premiums ceded to reinsurers on insurance contracts Premiums ceded to reinsurers on insurance contracts US$ 2014 '000 US$ 2013 '000 Life insurance US$ (3,137) '000 US$ (1,771) '000 Life Non-life insurance insurance (290,351) (3,137) 2014 (246,765) (1,771) 2013 Non-life Outward reinsurance premium (290,351) (293,487) US$ '000 (246,765) (248,536) US$ '000 Life Outward Change insurance in reinsurance unearned premiums provision (293,487) 31,645 (3,137) (248,536) 8,490 (1,771) Non-life Change Total premiums in insurance unearned ceded premiums to reinsurers provision (261,842) 31,645 (290,351) (240,046) 8,490 (246,765) Outward Total premiums reinsurance ceded premium to reinsurers (261,842) (293,487) (240,046) (248,536) Change Total net in premiums unearned premiums provision 372,146 31, ,328 8,490 Total premiums net premiums ceded to reinsurers 372,146 (261,842) 341,328 (240,046) Total net premiums 372, ,328 Nest Investments (Holdings) Ltd Annual Report Nest Investments (Holdings) Ltd - Annual Report

48 NEST INVESTMENTS NEST INVESTMENTS (HOLDINGS) (HOLDINGS) LIMITED LIMITED NEST INVESTMENTS (HOLDINGS) LIMITED NOTES TO NOTES THE CONSOLIDATED TO THE CONSOLIDATED FINANCIAL FINANCIAL STATEMENTS STATEMENTS 31 DECEMBER 31 DECEMBER Net NEST 7. Net NOTES INVESTMENTS and (HOLDINGS) LIMITED benefits 7. Net TO THE and benefits CONSOLIDATED claims and claims FINANCIAL STATEMENTS 31 DECEMBER 2014 NEST NOTES INVESTMENTS (HOLDINGS) LIMITED 7. Net TO THE benefits CONSOLIDATED and claims FINANCIAL STATEMENTS 31 DECEMBER 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2014 (a) Gross benefits (a) Gross 7. Net and benefits benefits claims and paid and claims claims paid (a) Gross 7. Net benefits benefits and and claims claims paid (a) Gross benefits and claims paid US$ '000 US$ 2014 '000 US$ '000 US$ 2013 '000 (a) Gross benefits and claims paid US$ 2014 '000 US$ 2013 '000 Life insurance Life insurance (985) US$ (985) 2014 '000 (800) US$ (800) 2013 '000 Non-life insurance Life Non-life insurance insurance (305,434) (305,434) US$ (985) '000 (259,723) (259,723) US$ (800) '000 Total gross Life Non-life Total benefits insurance gross insurance and benefits claims and paid claims paid (306,419) (306,419) (305,434) (985) (260,523) (260,523) (259,723) (800) Life Non-life Total insurance gross insurance benefits and claims paid (306,419) (305,434) (985) (260,523) (259,723) (800) (b) Gross ceded Non-life Total (b) Gross gross to insurance reinsurers ceded benefits to reinsurers and claims paid (306,419) (305,434) (260,523) (259,723) (b) Gross ceded Total (b) Gross gross to reinsurers ceded benefits to reinsurers and claims paid 2014 (306,419) (260,523) 2013 (b) Gross ceded to reinsurers (b) Gross ceded to reinsurers US$ 2014 '000 US$ 2014 '000 US$ 2013 '000 US$ 2013 '000 US$ '000 US$ 2014 '000 US$ '000 US$ 2013 '000 Life insurance Life insurance 866 US$ 2014 ' US$ 2013 ' Life Non-life insurance insurance Life Non-life insurance insurance 105, US$ 105,127 ' , US$ 116,440 ' Non-life Total claims insurance Life Non-life Total ceded insurance claims insurance to reinsurers ceded to reinsurers 105, , , , , , , , Total claims Life Non-life Total ceded insurance claims insurance to reinsurers ceded to reinsurers 105, , , , , , (c) Gross change Non-life Total (c) Gross claims in insurance change contract ceded in liabilities to contract reinsurers liabilities 105, , , ,002 (c) Gross change Total (c) Gross claims in change contract ceded in liabilities to contract reinsurers liabilities , , (c) Gross change (c) Gross in change contract in liabilities contract liabilities (c) Gross change in contract liabilities US$ 2014 '000 US$ 2014 '000 US$ 2013 '000 US$ 2013 '000 US$ '000 US$ 2014 '000 US$ '000 US$ 2013 '000 Life insurance Life insurance (57) US$ 2014 '000 (57) (97) US$ 2013 '000 (97) Life Non-life insurance insurance Life Non-life insurance insurance (24,697) (57) US$ (24,697) '000 (57) (45,679) (97) US$ (45,679) '000 (97) Life Non-life Change insurance insurance Life Non-life Change provision insurance insurance for provision outstanding for outstanding claims-gross claims-gross (24,697) (24,754) (24,697) (24,754) (57) (45,679) (45,775) (45,679) (45,775) (97) Non-life Change IBNR insurance Life Non-life Change IBNR provision insurance insurance for provision outstanding for outstanding claims-gross claims-gross (24,754) (5,187) (24,697) (24,754) (5,187) (57) (45,775) (9,717) (45,679) (45,775) (9,717) (97) Change IBNR Total gross in Non-life Change IBNR Total provision change gross insurance for provision change contract outstanding for liabilities contract outstanding claims-gross liabilities claims-gross (29,941) (5,187) (29,941) (24,697) (24,754) (5,187) (55,492) (9,717) (55,492) (45,679) (45,775) (9,717) IBNR Total gross Change IBNR Total change gross in in provision change contract in for liabilities contract outstanding liabilities claims-gross (29,941) (29,941) (24,754) (5,187) (55,492) (55,492) (45,775) (9,717) Total (d) Change gross IBNR Total (d) in change Change contract gross in in change contract liabilities contract in contract ceded liabilities to liabilities reinsurers ceded to reinsurers (29,941) (5,187) (55,492) (9,717) (d) Change Total (d) in Change contract gross in change liabilities contract in contract ceded liabilities to liabilities reinsurers ceded to reinsurers 2014 (29,941) (55,492) 2013 (d) Change in contract liabilities ceded to reinsurers (d) Change (d) in Change contract in liabilities contract ceded liabilities to reinsurers ceded to reinsurers US$ 2014 '000 US$ 2014 '000 US$ 2013 '000 US$ 2013 '000 US$ '000 US$ 2014 '000 US$ '000 US$ 2013 '000 Life insurance Life insurance 35 US$ 2014 ' US$ 2013 ' Life Non-life insurance insurance Life Non-life insurance insurance (12,240) 35 US$ (12,240) ' (12,701) 79 US$ (12,701) ' Non-life Change insurance Life Non-life Change provision insurance insurance for provision outstanding for outstanding claims-reinsurance claims-reinsurance (12,240) (12,205) (12,240) (12,205) 35 (12,701) (12,622) (12,701) (12,622) 79 Life Change IBNR insurance Life Non-life Change IBNR provision insurance insurance for provision outstanding for outstanding claims-reinsurance claims-reinsurance (12,205) 3,186 (12,240) (12,205) 3, (12,622) (944) (12,701) (12,622) (944) 79 Non-life IBNR Total change insurance Non-life Change IBNR Total change contract insurance provision liabilities contract for outstanding ceded liabilities to reinsurers ceded claims-reinsurance to reinsurers (9,020) 3,186 (12,240) (12,205) (9,020) 3,186 (13,566) (944) (13,566) (12,701) (12,622) (944) Change Total change in Change IBNR Total provision in change contract in for provision outstanding liabilities contract for outstanding ceded liabilities claims-reinsurance to reinsurers ceded claims-reinsurance to reinsurers (9,020) (12,205) (9,020) 3,186 (13,566) (13,566) (12,622) (944) IBNR Net benefits IBNR Total Net and benefits change claims and in contract claims liabilities ceded to reinsurers Total Net benefits change Total Net and in benefits change contract claims and in liabilities contract claims ceded liabilities to reinsurers ceded to reinsurers (239,386) (239,386) (9,020) 3,186 (212,579) (212,579) (13,566) (944) (239,386) (239,386) (9,020) (212,579) (212,579) (13,566) Net benefits and claims (239,386) (212,579) Net benefits Net and benefits claims and claims (239,386) (212,579) 46 Nest Investments (Holdings) Ltd - Annual Report 2014 Nest Investments Nest Investments (Holdings) Ltd (Holdings) Annual Ltd Report Annual 2014 Report Nest Investments (Holdings) Ltd Annual Report Nest Investments (Holdings) Ltd Annual Report Nest Investments (Holdings) Ltd Annual Report

49 8. Other operating and administrative expenses Apportionment of overheads Administra Administra Administra Operating Operating -tive -tive T Total Operating -tive Total US$ '000 US$ '000 US$ '000 US$ US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 Staff cost 25,884 25,884 22,696 22, ,580 23,037 18,103 41,141 Occupancy cost 1,876 1,8765,073 5, ,949 1,780 4,570 6,350 Marketing cost 2,202 2,2021,314 1, ,516 1, ,184 General business expenses 10,635 10,6357,259 7, ,894 9,664 13,947 23,611 Administrative cost 1,602 1, ,681 1, ,408 Financial expenses ,359 5, , Total expenses 42,695 42,695 41,779 41, ,474 37,416 38,021 75,437 The general business expenses include the following expenses: US$ '000 US$ '000 Legal & professional fees Audit fees 3,484 4, Nest Investments (Holdings) Ltd - Annual Report

50 NEST INVESTMENTS (HOLDINGS) LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2014 NEST INVESTMENTS NEST NOTES TO INVESTMENTS THE CONSOLIDATED (HOLDINGS) (HOLDINGS) FINANCIAL LIMITED STATEMENTS LIMITED 31 DECEMBER 2014 NOTES TO NOTES THE CONSOLIDATED TO THE CONSOLIDATED FINANCIAL FINANCIAL STATEMENTS STATEMENTS 31 DECEMBER 31 DECEMBER Net interest income - banking operations Net Net interest 9. Net income interest - - banking income - operations banking operations US$ 2014 ' US$ 2013 '000 US$ '000 US$ '000 US$ '000 US$ '000 Loans and advances to customers 27,713 24,761 Loans and Loans Due advances from and banks to advances customers and central customers banks 27,713 27, ,761 24, Due from banks Due Interest from and income banks central and - banks banking central operations banks , , Interest income Interest - banking income operations - banking operations 27,890 27,89024,976 24,976 Customer deposits (796) (671) Customer Customer deposits Due banks deposits (796) (796) (171) (671) (671) (100) Due to banks Due Interest to banks expense - banking operations (171) (171) (967) (100) (100) (771) Interest expense Interest Net interest - expense banking income operations - banking - banking operations operations (967) 26,923 (967) (771) 24,205 (771) Net interest Net income interest - banking income operations - banking operations 26,923 26,92324,205 24, Net fee and commission income - banking operations 10. Net fee 10. and Net commission fee and commission income - banking income - operations banking operations 10. Net fee and commission income - banking operations US$ 2014 ' US$ 2013 '000 Fee and commission income - trade finance US$ '000 US$ 14, '000 US$ '000 US$ 22, '000 Fee and commission Fee and commission income - trade income expense finance -- trade banking finance operations 14,627 US$ 14,627 '000 (1) 22,373 US$ 22,373 (579) '000 Fee and commission Fee Net and fee and commission income expense commission - - trade banking expense income finance operations - banking operations (1) 14,627 14,626 (1) (579) 22,373 21,793 (579) Fee Net and fee and commission Net commission fee and expense commission income - banking income operations 14,626 14,626 (1) 21,793 21,793 (579) Net fee and commission income 14,626 21, Net income and gains from investments Net Net income 11. Net and and income gains and from gains investments from investments US$ 2014 ' US$ 2013 '000 US$ '000 US$ '000 US$ '000 US$ '000 Dividend income Dividend income Other Dividend investment income Dividend Other investment income income Interest Other investment income Other Interest on investment income bonds on income bonds 3,604 2,618 3,604 3,604 2,618 5,284 2, ,070 5,284 5,284 4,070 4, Profit Interest on income sale Interest Profit investments on income bonds sale of on investments bonds Impairment Profit on sale Profit Impairment charge investments on sale on available charge of investments on for available sale investment for sale investment 807 2,423 2, ,423 (755) (2,572) 552 Impairment Impairment of charge goodwill on charge of available goodwill on for available sale investment for sale investment (5,909) (755) (5,909) (755)(2,572) (2,572) Rental Impairment income Impairment Rental of goodwill income of goodwill (5,909) 2,143 (5,909) 2,143 3,546 3,546 Net Rental income income Rental Net and income gains income from and gains investments from investments 4,932 2,143 2,143 4,93211,512 3,546 11,512 3,546 Net income Net and income gains from and gains investments from investments 4,932 4,93211,512 11,512 Nest Investments (Holdings) Ltd Annual Report Nest Investments Nest Investments (Holdings) Ltd (Holdings) Annual Ltd Report Annual 2014 Report Nest Investments (Holdings) Ltd - Annual Report 2014

51 NEST INVESTMENTS NEST INVESTMENTS (HOLDINGS) (HOLDINGS) LIMITED LIMITED NOTES TO NOTES THE CONSOLIDATED TO THE CONSOLIDATED FINANCIAL FINANCIAL STATEMENTS STATEMENTS 31 DECEMBER 31 DECEMBER Other Other 12. income Other income US$ '000 US$ '000 US$ '000 US$ '000 Management Management and consultancy and consultancy fee fee 3,488 3,488 7,653 7,653 Rental income Rental from income World from Trade World Center Trade ( WTC ) Center operations ( WTC ) operations 2,727 2,727 2,255 2,255 Other income Other from income WTC from Operations WTC Operations Profit / (loss) Profit on / disposal (loss) on of disposal property of and property equipment and equipment 1,182 1,182 (2) (2) Sundry income Sundry income 7,957 7,957 4,882 4,882 16,191 16,19114,787 14, Credit 13. loss Credit provisions loss provisions - banking - operations banking operations 13. Credit loss provisions - banking operations US$ '000 US$ 2014 '000 US$ '000 US$ 2013 '000 US$ '000 US$ '000 As at 1 January As at 1 January 23,311 23,31129,167 29,167 Movement As at 1 January Movement As for at the 1 January year for the year 23,311 29,167 Charge Movement for Charge Movement the for the year for year the for the year year Recoveries Charge for Recoveries Charge the year for the year (9,179) (9,179) (5,933) (5,933) Credit Recoveries loss Credit Recoveries income loss - banking income operations - banking operations for the year for the year (9,179) (9,179) (5,933) (5,933) Exchange Credit loss difference Exchange Credit income loss - difference banking income operations - banking operations for the year for the year (2,739) (2,739) (9,179) 77 (5,933) 77 As Exchange at 31 December difference As Exchange at 31 December (Note difference 21) (Note 21) 11,393 (2,739) 11,39323,311 23, As at 31 December As at 31 December (Note 21) (Note 21) 11,393 23, Other 14. net Other finance net income finance income 14. Other net finance income 14. Other net finance income US$ '000 US$ '000 US$ '000 US$ '000 US$ US$ '000 '000 US$ US$ '000 '000 Interest income Interest income 10,137 10,137 7,061 7,061 Interest expense income Interest expense income (720) 10,137 10,137 (720)(6,310) (6,310) 7,061 7,061 Foreign Interest exchange expense Foreign Interest (losses) exchange expense / gains (losses) / gains (11,724) (11,724) (720) (720) 221 (6,310) (6,310) 221 Other Foreign net exchange Other Foreign finance net (losses) exchange income finance / gains (losses) income / gains (2,307) (11,724) (11,724) (2,307) Other net Other finance net income finance income (2,307) (2,307) Nest Investments Nest Investments (Holdings) Ltd (Holdings) Annual Ltd Report Annual 2014 Report Nest Investments (Holdings) Ltd - Annual Report

52 15. Income tax expense Tax rates differ in each country the Group operates in; hence the subsidiaries are subject to tax on different tax rates. The group tax charge for the year relates to the annual results of group companies operating in the following jurisdictions: Country Tax Cyprus 12.5% UK 15% Lebanon 15% Palestine 15% Yemen 35% Iraq 25% Algeria 25% The numerical reconciliation between the tax expense and the product of the accounting profit multiplied by the applicable tax rates is set out below: multiplied by the applicable tax rates is set out below: Profit for the year before tax Tax at the rate of 0% Tax effect of expenses not deductible for tax purposes Tax effect of income not subject to tax Tax effect of temporary differences Differences between local and foreign tax rates US$ '000 US$ ' , , ,020 (224) 10,409 4,216 (15,017) 7,860 (2,722) 12,513 (6,310) 50 Nest Investments (Holdings) Ltd - Annual Report 2014

53 16. Property and equipment Cost At 1 January 2013 Additions Disposal Revaluation Transfers to investment property Transfers from investment Exchange difference At 31 December 2013 At 1 January 2014 Additions Disposal Write off Revaluation Transfers to investment property Exchange difference At 31 December 2014 Land & buildings Motor vehicles Computer equipment Furniture fittings and equipment Total US$ '000 US$ '000 US$ '000 US$ '000 US$ ' ,510 5,434 9,466 29, , ,153 8,863 12,275 (3,631) (1,308) (352) (578) (5,868) (740) (740) (7,253) (7,253) 15,318 15,318 (1,422) (20) (30) (287) (1,758) 179,482 4,663 11,237 37, , ,482 4,663 11,237 37, ,359 29, ,600 8,124 40,397 (6,020) (327) (410) (6,933) (13,690) (425) (1,374) (1,799) 14,599 14,599 (4,210) (4,210) (15,476) (226) (623) (3,079) (19,404) 198,308 4,853 11,379 34, ,253 Depreciation At 1 January 2013 Disposal Revaluation Charge for the year Exchange difference At 31 December 2013 Land & buildings Motor vehicles Computer equipment Furniture fittings and equipment Total US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 4,850 2,950 6,462 13,809 28,071 (135) (542) (345) (570) (1,592) (180) (180) ,185 3,517 5,969 (14) (9) 518 (82) 412 5,209 2,976 7,820 16,674 32,679 At 1 January ,209 2,976 7,820 16,674 32,679 Disposal Write off Disposal Write off (234) (453) (425) (707) (1,373) (1,394) (1,797) Revaluation Revaluation Charge for the Charge year for the year Exchange difference Exchange difference At 31 December At December 2014 (4,209) 3,094 (330) 3,765 (32) 604 (141) 3,173 (2) 1,288 (343) 7, ,601 (984) 18,251 (4,204) 9,587 (1,798) 33,075 Net book value Net book value At 31 December At December ,543 1,680 3,493 16, ,179 At 31 December At December ,273 1,687 3,418 21, ,680 Nest Investments (Holdings) Ltd - Annual Report

54 The table below presents the valuation techniques and key inputs used in the valuation of land and buildings: Class of Property Land and Buildings in North Africa Lands in North Africa Land and Buildings in North Africa Land and Buildings in North Africa Land and Buildings in North Africa Land and Buildings in Middle East Land and Buildings in Middle East Land and Buildings in Middle East Land and Buildings in Middle East Land and Buildings in Middle East Land and Buildings in Europe Fair value Hierarchy Carrying amount/ fair value 31 Dec 31 Dec $'000 $' Nest Investments (Holdings) Ltd - Annual Report 2014 Valuation technique Level 3 5,165 11,068 Market comparable approach Level 3 7,052 8,497 Market comparable approach Level 3 101,197 98,530 Market comparable approach Level 3 17,867 6,549 Market comparable approach Level 3 3,434 3,462 Market comparable approach Level Market comparable approach Level 3 10,042 10,192 Market comparable approach Level 3 19,394 16,314 Market comparable approach Level 3 1, Market comparable approach Level 3 6,846 7,190 Market comparable approach Level 3 6,496 Acquisition price Buildings in Europe Level Market comparable approach Land and Buildings in Europe Land and Buildings in Europe Land and Buildings in Europe Land and Buildings in Middle East Level 3 1, Market comparable approach Level Market comparable approach Level 3 1,743 1,974 Market comparable approach Level 3 11,249 10,073 Market comparable approach Unobservable and observable inputs used in the determination of fair values Range weighted Input average 2014 Adjusted price per square meter based on actual sales of similar properties Adjusted price per square meter based on actual sales of similar properties Adjusted price per square meter based on actual sales of similar properties Adjusted price per square meter based on actual sales of similar properties Adjusted price per square meter based on actual sales of similar properties Adjusted price per square meter based on actual sales of similar properties Adjusted price per square meter based on actual sales of similar properties Adjusted price per square meter based on actual sales of similar properties Adjusted price per square meter based on actual sales of similar properties Adjusted price per square meter based on actual sales of similar properties a) Price per square meter based on actual sales of similar properties b) % discount for less prominent position a) Price per square meter based on actual sales of similar properties b) % discount for less prominent position a) Price per square meter based on actual sales of similar properties b) % discount for less prominent position Price per square meter based on actual sales of similar properties Price per square meter based on actual sales of similar properties $3,069 per square meter $70 per square meter $6,585 per square meter $174 per square meter $1,454 per square meter No change in estimated price per square meter from prior year. $347 - $948 per square meter $1,686 - $13,761 per square meter N/A Land: $1,690 per sqm Buildings: $1,055 per sqm $5,026 ($4,886 - $5,236) per sqm 1% $4,650 ($4,487 - $5,055) per sqm 3% $4,647 ($4,487 - $5,055) per sqm 3% No valuation in 2014 No valuation in 2014 Sensitivity analysis: The fair values of the properties were determined by using the Market comparable approach and were based on valuations performed by independent accredited valuers. Significant increases / (decreases) in the estimated price per square meter in isolation would result in a significantly higher / (lower) fair value of the properties.

55 NEST INVESTMENTS (HOLDINGS) LIMITED NEST INVESTMENTS (HOLDINGS) LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2014 NOTES 17. Intangible TO THE CONSOLIDATED assets FINANCIAL STATEMENTS 31 DECEMBER Intangible assets 17. Intangible assets A. Other intangibles A. Other intangibles A. Other intangibles Intellectual Purchase of Other Signing Property Intellectual at Purchase capacity of at Licenses Other at payments Signing Property cost at capacity cost at Licenses cost at to payments Agents at Total cost cost cost to Agents cost at Total US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 cost Cost Cost US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 At 1 January Cost At 1 January ,016 2,093 4,147 1,166 10,422 Additions At Additions 1 January , ,093 4, , , Disposal Additions Disposal 93 (142) (142) 627 Exchange Disposal Exchange difference difference (40) (11) (142) 8 49 (142) 7 At 31 Exchange At December 31 December difference ,069 (40) 2,082 (11) 4,1698 1, ,9137 At 31 December ,069 2,082 4,169 1,593 10,913 At 1 January At 1 January ,069 2,082 4,169 1,593 10,913 Additions At Additions 1 January ,069 2,082 4, , , Disposal Additions Disposal (88) (210) (298) 336 Exchange Disposal Exchange difference difference (325) (88) (120) (210) (39) (186) (298) (671) At 31 Exchange At December 31 December difference ,655 (325) 1,962 (120) 4,109 (39) 1,554 (186) 10,280 (671) At 31 December ,655 1,962 4,109 1,554 10,280 Intellectual Purchase of Other Signing Property Intellectual at Purchase capacity of at Licenses Other at payments Signing Property cost at capacity cost at Licenses cost at to payments Agents at Total cost cost cost to Agents cost at Total US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 cost Amortisation US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 Amortisation Amortisation At 1 January , ,246 At 1 January At Disposal 1 January ,896 (66) ,246 (66) Disposal Disposal Charge for the year 111 (66) (66) 484 Charge Charge Exchange for the for year difference the year (10) Exchange Exchange At 31 difference December difference 2013 At 31 At December 31 December ,997 (10) 1, , ,686 At 1 January , ,686 At 1 January At Charge 1 January for 2014 the 2014 year 605 1, , Charge Charge Exchange for the for year difference the year 53 (117) (5) (121) (243) 436 Exchange Exchange At 31 difference December difference (117) 1,932 (117) (5) 321 (5) (121) 1,021 (121) (243) 3,880 (243) At 31 At December 31 December ,932 1, ,021 1,021 3,880 3,880 Net book value Net book Net At 31 book value December value , , ,400 At 31 At December 31 December ,051 2,051 2, ,788 3,788 3, ,400 6,400 7,227 At 31 At December 31 December ,464 2, ,896 3, ,227 7,227 Nest Investments (Holdings) Ltd Annual Report Nest Investments (Holdings) Ltd Annual Report Nest Investments (Holdings) Ltd - Annual Report

56 B. Goodwill 19. Investment properties US$ 000 US$ 000 At 1 January 26,817 26,817 Impairment (5,909) At 31 December 20,907 26,817 Of the total goodwill, $258 thousand arose in 2010 on the acquisition of an additional participation in Trust International Insurance Co. Plc. Palestine. Goodwill has been tested for impairment as at 31 December 2014 and 31 December 2013 respectively and no indications have been identified in this respect. The remaining goodwill of $26,559 thousand arose on the acquisition of a controlling stake in Ventura Del Mar, a Group s subsidiary engaged in property development. The goodwill is annually tested for impairment by reference to the fair value of the underlying properties. As of 31 December 2014 an impairment was recognised as a result of the decline in the fair value of properties of that subsidiary. 18. Properties held for trading Properties held for trading mainly comprise of residential properties in Spain held by the subsidiary company Ventura Del Mar S.A. Ltd. During 2014, the Group has transferred to the Properties held for trading category properties previously classified as investment properties. These properties represent properties repossessed from banking customers, in debt satisfaction, who have pledged those as a debt collateral. The movement in properties held for sale is as follows: US$ 000 US$ 000 At 1 January 9,229 8,945 Transfer from investment 18,181 properties (Note 19) Exchange difference (2,011) 283 At 31 December 25,399 9,229 The Group reviewed the carrying value of the properties held for trading, to ensure that the net realisable value (NRV) as of 31 December 2014 is above cost. The NRV has been determined based on valuations performed by independent real estate valuation experts (Restated) US$ 000 US$ 000 At 1 January 1,629,887 1,718,718 Additions 42,460 86,204 Disposals (16,810) Fair value gains / (losses) recorded 83,355 (165,425) in the statement of compr. income Transfer from property and equipment 7,253 Transfer to properties held for (18,181) trading (Note 18) Transfer from / (to) property and 4,210 (15,318) equipment (Note 16) Exchange difference (15,401) (1,545) At 31 December 1,709,521 1,629,887 Investment properties are stated at fair value. All valuations are performed as at 31 December 2014 and 2013 respectively. The Independent valuers used are specialists in valuing these types of investment properties and have recent experience in the location and category of the investment properties being valued. The fair value is supported by market evidence and represents 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 standards issued by the International Valuation Standards Committee. Valuations are performed on an annual basis and the fair value gains and losses are recorded within the statement of comprehensive income. The most significant investment property of the Group is a project in Algeria, which is currently under construction. The development is expected to be completed by the middle of 2016 and consists of: 5 Star Hotel Executive Apartments Residence Inn Courtyard Hotel Office complexes Shopping Mall Associated car parking Classes of Investment property: In determining the appropriate classes of investment property the Group has considered the nature, characteristics 54 Nest Investments (Holdings) Ltd - Annual Report 2014

57 and risks of its properties as well as the level of the fair value hierarchy within which the fair value measurements are categorised. The following factors have been applied to determine the appropriate classes: IRR: This is the internal rate of return (IRR) i.e. the yield generated by the project s cash flows. a) The real estate segment b) The geographical location c) The construction status d) The level of fair value hierarchy The resulted classes are shown in a table on page 56. Fair value measurement, valuation techniques, changes in valuation techniques, inputs and other key information: The table on page 57 presents the following for each class of investment property: The fair value measurement at the end of the reporting period The level of the fair value hierarchy within which the fair value measurements are categorised in their entirety A description of the valuation techniques applied The inputs used in the fair value measurement For Level 3 fair value measurements, quantitative information about the significant unobservable inputs used in the fair value measurement In addition, management has provided, for each class of property, other assumptions made in the determination of fair values and other key information on the properties. Management believes that this information is beneficial in evaluating the fair values of the investment properties. Below are the descriptions and definitions relating to valuation techniques, unobservable inputs and other assumptions made in determining the fair values: Market comparable method (or market comparable approach): The market approach uses prices and other relevant information generated by market transactions involving identical or comparable (i.e. similar) assets, liabilities or a group of assets and liabilities, such as a business. Income approach: The income approach converts future amounts (e.g. cash flows or income and expenses) to a single current (i.e. discounted) amount. When the income approach is used, the fair value measurement reflects current market expectations about those future amounts. Discount rate: Rate used to discount the net cash flows generated from rental and operating activities during the period of analysis. Nest Investments (Holdings) Ltd - Annual Report

58 Class of Property Fair value Hierarchy Lands in North Africa Level 3 (note b) Carrying amount / fair value 31 Dec 2014 $' Dec 2013 $'000 Valuation technique 23,911 Market comparable approach Unobservable and observable inputs used in the determination of fair values Input Adjusted price per square meter based on actual sales of similar properties Range weighted average 2014 Other Key information N/A Age of the building: Estimated useful economic life: Range weighted average 2014 N/A N/A Residential Building in North Africa Level 2 14,818 Market comparable approach Actual acquisition price N/A Age of the building: Estimated useful economic life: 20 years 20 years Lands in North Africa Level 3 (note b) Plot of land under development in Middle East Level 3 (note b) Shops in Middle East Level 3 (note b) 4,729 4,451 Market comparable approach 25,639 14,093 Market comparable approach 1,400 1,124 Market comparable approach Adjusted price per square meter based on actual sales of similar properties Adjusted price per square feet based on actual sales of similar properties Adjusted price per square meter based on actual sales of similar properties $26 per square meters $872 per square feet $1,539- $1,844 per square meter Age of the building: Estimated useful economic life: Age of the building: Estimated useful economic life: Age of the building: Estimated useful economic life: N/A N/A Under Construction 30 years 20 years 15 years Lands in Middle East Level 3 (note b) 5,940 5,431 Market comparable approach Adjusted price per square meter based on actual sales of similar properties $240- $950 per square meter Age of the building: Estimated useful economic life: N/A N/A Project under development in North Africa Level 3 (note a) 1,540,000 1,490,000 Income approach Average daily rate (ADR): Hotel occupancy rate: Project Debt / Equity ratio: IRR: Office and retail rental: $350 per night 60% for 2015, 65% for 2016 and 75% for /40 8.5% $60 and $65 sqm Project sqm: Remaining construction period: 283, months 56 Nest Investments (Holdings) Ltd - Annual Report 2014

59 Class of Property Land in Middle East - project under development Fair value Hierarchy Level 3 (note b) Carrying amount / fair value 31 Dec 2014 $' Dec 2013 $'000 Valuation technique 57,157 31,417 Market comparable approach Unobservable and observable inputs used in the determination of fair values Input Adjusted price per square feet based on actual sales of similar properties Range weighted average 2014 $872 per square feet Other Key information Age of the building: Estimated useful economic life: Range weighted average 2014 Under Construction 30 years Residential property in Europe Level 3 (note b) Market comparison approach Adjusted price per square meter based on actual sales of similar properties $564 per sqm No change in value in 2014 Age of the building: Remaining useful economic life: 25 years 25 years Land in Middle East Level 3 (note b) 4,763 2,850 Market comparison approach Adjusted price per square meter based on actual sales of similar properties Square meters: 1,160 sqmts $91 per sqm Square meters: 52,142 sqmts Commercial offices in Middle East Level 3 (note c) 39,491 39,395 Income approach Annual rental income Lease term Maximum occupancy Yield Lands in Europe Level 2 2,717 Acquisition cost Adjusted price per square meter based on actual sales of similar properties Land in Middle East Level 2 8,798 Acquisition cost Adjusted price per square meter based on actual sales of similar properties $36 per month per sqm 7 years with 2 years extension 90% Age of the building: Remaining useful economic life: 7 years 25 years 10.75% Square meters: 16,273 sqmts $29 per sqm Square meters: 93,305 sqmts $1,344 per sqm Square meters: 6,545 sqmts Nest Investments (Holdings) Ltd - Annual Report

60 Class of Property Commercial offices in Europe Commercial offices in Europe Fair value Hierarchy Level 3 (note b) Level 3 (note b) Carrying amount / fair value 31 Dec 2014 $' Dec 2013 $'000 Valuation technique 1, Market comparable approach 1, Market comparable approach Unobservable and observable inputs used in the determination of fair values Input Adjusted price per square meter based on actual sales of similar properties % discount for less prominent position Adjusted price per square meter based on actual sales of similar properties % discount for less prominent position Commercial offices in Level Market Adjusted price per square Europe (note b) comparable meter based on actual sales of approach similar properties % discount for less prominent position Lands in Europe Level Acquisition cost Price per square meter based on actual acquisition price Commercial property in Europe Residential properties in Europe Residential properties in Europe Level 3 (note c) Level 3 (note c) Level 3 (note c) Range weighted average 2014 $4,650($4,487 - $5,055) per sqm 3% $4,650($4,487 - $5,055) per sqm 3% $4,647($4,487 - $5,055) per sqm 3% Other Key information Age of the building: Remaining useful economic life: Square meters: Age of the building: Remaining useful economic life: Square meters: Age of the building: Remaining useful economic life: Square meters: Range weighted average years 30 years 240 sqmts 30 years 30 years 240 sqmts 30 years 30 years 195 sqmts $16 Square meters: 26,088 smts 6,757 7,815 Income approach Rental income $691,908 p.a. Age of the building: Remaining useful economic life: 1,206 1,237 Income approach Ground Rent Service Charge Income approach Ground Rent Service Charge $593 p.a. $3,906- $4,687 p.a. $78 p.a. $3,333 p.a. Age of the building: Remaining useful economic life: Age of the building: Remaining useful economic life: 30 years 30 years 50 years 45 years 50 years 45 years 58 Nest Investments (Holdings) Ltd - Annual Report 2014

61 Sensitivity information The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair value hierarchy of the entity s portfolios of investment properties are: Average daily rate (ADR) Hotel occupancy rate Office and retail rental IRR Price per square meter Note (a): Significant increases / (decreases) in the ADR in isolation would result in a significantly higher / (lower) fair value measurement. Significant increases / (decreases) in the hotel occupancy rates in isolation would result in a significantly higher / (lower) fair value measurement. Significant increases / (decreases) in the office and retail rental in isolation would result in a significantly higher / (lower) fair value measurement. Significant increases / (decreases) in the IRR in isolation would result in a significantly (lower) / higher fair value measurement. Below is presented a quantitative analysis for the impact on fair value from possible changes in the significant unobservable inputs of the Project under development in North Africa: Fair value Project IRR% US$ ,323, ,442, ,571, ,713,797 Office and Retail Fair value rental charge US$ % 1,617,999-5% 1,558,134 Fair value Base ADR US$ % 1,459,113-5% 1,528,048 +5% 1,665, % 1,734,853 Note (b): Significant increases / (decreases) in the estimated price per square meter in isolation would result in a significantly higher / (lower) fair value measurement. Note (c): Significant increases / (decreases) in the annual rental income in isolation would result in a significantly higher / (lower) fair value measurement. Significant increases / (decreases) in the hotel occupancy levels in isolation would result in a significantly higher / (lower) fair value measurement. Significant increases / (decreases) in the IRR in isolation would result in a significantly (lower) / higher fair value measurement. Highest and best use For all the investment properties that are measured at fair value, the current use of the properties is considered to be their highest and best use. 20. Investment in associates The Group has investments in the following associates: Country of Business Holding incorporation/ activity % registration Qatar General Insurance Qatar Insurance, 16% and Reinsurance Reinsurance Company S.A.Q. Jordanian Expatriates Jordan Investment 40% Investment Holding Holding Trust Insurance Co. Libya Libya Insurance 39% Trust Syria Insurance Syria Insurance 32% Company (S.A.S.C) Oman Reinsurance Oman Insurance 30% Company SAOC (2013:25%) Oncology Center - Cyprus Real Estate 0% Real Estate Co. Holding (2013:30%) The reporting date and reporting year of the associates are the same as those of the Group and they all use uniform accounting policies. The insurance entities are required to maintain a minimum solvency margin based on local directives. Such restrictions can affect the ability of these associates to transfer funds to the Group in the form of cash dividends. There is no unrecognised share of losses in the associates. During the year 2014, the Group has disposed its share in Oncology Center Real Estate Co. In the year 2013, two of the above associates were reclassified from the Available for sale investments category, since it was determined that the Group has the ability to exercise significant influence on them. As a result, the balance of the accumulated available for sale reserve relating to the investments reclassified, amounting to US$123,421 thousand, was reclassified to profit or loss. The Group s share of the associates total assets, current liabilities, revenue and profits as well as dividends paid by them are presented in the following pages: Nest Investments (Holdings) Ltd - Annual Report

62 NEST INVESTMENTS (HOLDINGS) LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER Qatar General Trust Jordanian Libya Trust Libya Syria Trust Oman Syria Re Oman Oncology Re Oncology Total Total Expatriates Center Center US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 Qatar General Jordanian Expatriates US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 As at 1 January As at 1 January 375, ,082 10,721 10,721 3,710 3,710 2,026 14,527 2,026 14,527 1, ,005 1, ,005 Additions Additions 3,271 3,271 7,740 7,740 1,912 12,923 1,912 12,923 Disposals Disposals (3,852) (3,852) (3,852) Share of profit Share / (loss) of for profit the / year (loss) for the year 74,006 74,006 1,382 1,382 3,275 3, (1,887) 132 (1,887) 76,908 76,908 Dividend received Dividend during received the year during the year (6,927) (6,927) (6,927) (6,927) Exchange difference Exchange difference (949) (949) (949) (949) As at 31 December As at 31 December 445, ,432 11,153 11,153 6,985 6,985 2,158 20,381 2,158 20, , , Qatar General Qatar General Jordanian Trust Jordanian Libya Trust Libya Syria Trust Oman Syria 2013 Re Oman Oncology Re Oncology Total Total Qatar General Expatriates Jordanian Expatriates Trust Libya Trust Syria Oman Center Re Oncology Center Total US$ '000 US$ US$ '000 '000 Expatriates US$ '000 US$ '000 US$ US$ '000 '000 US$ US$ '000 '000 Center US$ '000 US$ '000 As at 1 January As at 1 January US$ '000 US$ '000 3,135 US$ '000 3,135 6,552 US$ '000 6,552 12,559 US$ 12,559 '000 1,940 US$ 24,186 '000 1,940 US$ 24,186 '000 As Additions at 1 January Additions ,135 6,552 2,841 12,559 2,841 1,940 3,650 24,186 3,650 Additions Reclassification Reclassification from available from for available 204,678 for 204, ,172 10,172 2, , ,850 3,650 Reclassification sale investments sale from (Note investments available 21c) for (Note 21c) 204,678 10, ,850 sale Share investments of profit Share / (Note (loss) of 21c) for profit the / year (loss) for the year 169, , (53) (53) (873) (873) 169, ,793 Share Impairment of profit / Impairment (loss) for the year 169, (4,378) 575 (4,378) (53) (873) (4,378) 169,793 (4,378) Impairment Exchange difference Exchange difference (95) (4,378) (95) (95) (4,378) (95) Exchange As at 31 difference December As at 31 December 375, ,082 10,721 10,721 3,710 3,710 2,026 2,026 (95) 14,527 14,527 1, ,005 1, ,005 (95) As at 31 December 375,082 10,721 3,710 2,026 14,527 1, ,005 Nest Investments (Holdings) Ltd Annual Report Nest Investments (Holdings) Ltd - Annual Report 2014

63 2014 Qatar General Jordanian Expatriates Trust Libya Trust Syria Oman Re Oncology Center Total US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 Current assets 271,146 25, ,990 20,059 72, ,179 Non-current assets 2,078,782 7,260 10,165 1,907 40,238 2,138,35 Current liabilities (135,210) (783) (156,407) (16,519) (51,936) (360,856) Non-current liabilities (654,851) (78) (654,930) Equity 1,559,867 31,713 18,747 5,447 60,971 1,676,74 Proportion of the Group's ownership Group's share of net assets for the year 16% 40% 39% 32% 30% 456,729 12,685 7,312 1,743 18, ,760 Revenue 332,967 4,610 5, , ,680 Technical expenses (39,637) (2,801) (936) (21,372) (64,746) Other income 5, , ,317 14,749 Administrative expenses (45,765) (987) (1,195) (2,902) (50,848) Profit before tax 252,754 3,633 8, (8,518) 256,835 Income tax expense (186) (157) (343) Profit for the year 252,754 3,446 8, (8,518) 256,492 Group's share of profit for the year 74,006 1,382 3, (1,887) 76, Qatar General Jordanian Expatriates Trust Libya Trust Syria Oman Re Oncology Center Total US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 Current assets 126,962 22,741 81,476 27,682 79, ,740 Non-current assets 1,826,855 6,714 7,769 2,370 16,951 6,467 1,867,126 Current liabilities (89,646) (571) (81,010) (23,249) (42,157) (236,634) Non-current liabilities (551,140) (173) (551,313) Equity 1,313,030 28,885 8,234 6,803 54,500 6,467 1,417,919 Proportion of the Group's ownership Group's share of net assets for the year 16% 40% 39% 32% 25% 30% 384,455 11,554 3,211 2,177 13,625 1, ,963 Revenue 649,862 2,170 4, , ,789 Technical expenses (38,774) (4,119) (1,617) (17,230) (61,739) Other income 6, ,922 1,509 10,942 Administrative expenses (32,424) (730) (828) (2,657) (36,640) Profit before tax 585,435 1,466 1, (3,173) 585,352 Income tax expense (89) (311) (401) Profit for the year 585,435 1,377 1,477 (164) (3,173) 584,952 Group's share of profit for the year 169, (53) (873) 169,792 Nest Investments (Holdings) Ltd - Annual Report

64 NEST NEST INVESTMENTS (HOLDINGS) LIMITED LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2014 NEST INVESTMENTS (HOLDINGS) LIMITED NOTES NOTES TO THE TO CONSOLIDATED THE FINANCIAL FINANCIAL STATEMENTS STATEMENTS 31 DECEMBER 31 DECEMBER NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER Financial 21. Financial assets assets 21. Financial 21. Financial assets assets a. a. a. Loans Loans Loans a. and Loans and and advances advances and advances to to to banking banking to banking customers customers customers a. Loans and advances to banking customers US$ ' US$ US$ '000 '000 US$ US$ '000 '000 US$ '000 US$ '000 US$ '000 Loans Loans Loans and and advances advances and advances to to customers, customers, customers, gross gross gross 374, , , , , ,494 Loans and advances to customers, gross 374, ,494 Provisions Provisions Provisions for for impairment impairment for impairment of of loans loans of and and loans advances advances and advances to to customers customers customers (11,393) (11,393) (11,393) (23,311) (23,311) (23,311) Provisions for impairment of loans and advances to customers (11,393) 362,957 (23,311) 362, , , , ,183 A reconciliation of the provision of loans and advances customers is presented 362,957 in note ,183 A reconciliation reconciliation of of the the provision provision of of loans loans and and advances advances to to customers customers is is presented presented in in note note A reconciliation of the provision of loans and advances to customers is presented in note 13. b. b. Summary Summary b. Summary of of other other of financial financial other financial assets assets assets b. b. Summary of of other financial assets (Restated) (Restated) (Restated) (Restated) (Restated) US$ US$ '000 '000 US$ '000 US$ US$ '000 '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 Held Held to to Held maturity maturity to maturity financial financial financial assets assets assets 13,787 13,787 13,787 9,198 9,198 9,198 Held to Held maturity to maturity 13,787 13,787 9,198 9,198 Available Available Available for for sale sale for financial financial sale financial assets assets assets 101, , , , , ,588 Available Available for sale for financial sale financial assets assets 101, , , , , , , , , , , , , ,786 c. c. Movement Movement c. Movement in in other other in financial financial other financial assets assets assets c. Movement c. Movement in other in other financial financial assets assets Held Held to to Held to Available Available Available c. Movement in other financial assets Held to Held to Available Available maturity maturity maturity Loans and for sale Loans Loans and and for for sale sale maturity maturity Held to Loans Loans and and for Available sale for sale financial financial financial receivables financial receivables receivables financial financial Total Total Total financial maturity financial receivables receivables Loans and financial financial for sale Total Total assets assets assets assets assets assets US$ US$ assets '000 '000 financial US$ assets '000 US$ US$ receivables '000 '000 US$ '000 US$ US$ assets '000 '000 financial US$ assets '000 US$ US$ '000 '000 US$ Total '000 US$ '000 US$ assets '000 US$ '000 US$ '000 US$ '000 US$ assets '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 At At 1 January January At 1 January ,742 13,742 13,742 3,652 3,652 3, , , , , , ,293 At 1 January At 1 January ,742 13,742 3,652 3,652300, ,899318, ,293 Additions Additions Additions 10,239 10,239 10,239 23,953 23,953 23,953 34,192 34,192 34,192 At Additions 1 January Additions ,239 13,742 10,239 3,652 23, ,899 23,953 34, ,293 34,192 Disposal Disposal Disposal (3,629) (3,629) (3,629) (13,708) (13,708) (13,708) (17,337) (17,337) (17,337) Additions Disposal Disposal 10,239 (3,629) (3,629) (13,708) (13,708) 23,953 (17,337) (17,337) 34,192 Amortisation Amortisation Amortisation Disposal Amortisation Amortisation (3,629) (13,708) (17,337) Maturities Maturities Maturities (14,640) (14,640) (14,640) (14,640) (14,640) (14,640) Amortisation Maturities Maturities (14,640) (14,640) 10 (14,640) (14,640) 10 Fair Fair value value Fair gain gain value gain 7,483 7,483 7,483 7,483 7,483 7,483 Maturities Fair value Fair gain value gain (14,640) 7,483 7,483 7,483 (14,640) 7,483 Movement Movement Movement in impairment impairment impairment allowance allowance allowance (2,572) (2,572) (2,572) (2,572) (2,572) (2,572) Fair Movement value Movement gain impairment impairment allowance allowance (2,572) (2,572) 7,483 (2,572) (2,572) 7,483 Transfer Transfer Transfer to to investments investments to investments in associates associates in associates (Note (Note 20) 20) (Note 20) (214,850) (214,850) (214,850) (214,850) (214,850) (214,850) Movement Transfer Transfer to investments impairment to investments allowance associates in associates (Note (Note 20) 20) (214,850) (214,850) (2,572) (214,850) (214,850) (2,572) Exchange Exchange Exchange difference difference difference (143) (143) (143) (23) (23) (23) Transfer Exchange Exchange to difference investments difference in associates (Note 20) (143) (143) (23) (23) (214,850) (214,850) At At December December At 31 December ,198 9,198 9, , , , , , ,786 Exchange At 31 December At 31 difference December ,198 (143) 9,198 (23) 101, , , , December At 1 January , ,588 At At 1 January January ,198 9, , , , , ,786 At 1 January Additions At 1 January ,19818, , ,588 49,319110, ,786 Additions Additions 18,268 18,268 49,319 49,319 67,586 67,586 67,586 At Additions 1 January Disposal Additions ,268 18,268 9,198 49, ,588 (43,796) 49,319 67, ,786 (43,796) 67,586 Disposal Disposal (43,796) (43,796) (43,796) (43,796) Additions Disposal Amortisation Disposal 18,268 (43,796) (43,796) 49, (43,796) (43,796) 67,586 Amortisation Amortisation Disposal Amortisation Maturities Amortisation (12,438) 290 (43,796) (43,796) (12,438) 290 Maturities Maturities (12,438) (12,438) (12,438) (12,438) Amortisation Maturities Fair Maturities value loss (12,438) (12,438) (2,058) 290 (12,438) (12,438) (2,058) 290 Fair Fair value value loss loss (2,058) (2,058) (2,058) (2,058) Maturities Fair value Movement Fair loss value loss in impairment allowance (12,438) (2,058) (2,058) (755) (2,058) (12,438) (2,058) Movement Movement in in impairment impairment allowance allowance (755) (755) (755) (755) (755) Fair Movement value Exchange Movement loss in impairment difference in impairment allowance allowance (1,241) (755) (2,058) (3,087) (755) (755) (2,058) (4,328) (755) Exchange Exchange difference difference (1,241) (1,241) (3,087) (3,087) (4,328) (4,328) Movement Exchange At Exchange 31 difference in December impairment difference 2014 allowance (1,241) (1,241) 13,787 (3,087) 101,501 (3,087) (755) (4,328) 115,288 (4,328) (755) At At December December ,787 13, , , , ,288 Exchange At 31 December At 31 difference December ,787 (1,241) 13, ,501 (3,087) 101,501115,288 (4,328) 115,288 At 31 December , , ,288 Nest Investments Nest Investments (Holdings) (Holdings) Ltd Annual Ltd Report Annual 2014 Report Nest Investments (Holdings) Ltd Annual Report Nest Investments (Holdings) Ltd Annual Report Nest Investments (Holdings) Ltd - Annual Report 2014

65 d. Fair value measurement hierarchy for Available-For-Sale financial assets 2014 Equity instruments (i) Listed Qatar stock exchange Palestine stock exchange Algeria stock exchange Bahrain stock exchange Muscat stock exchange Cyprus stock exchange Saudi Arabia stock exchange Dubai stock exchange Abu Dhabi stock exchange London stock exchange New York stock exchange (ii) Unlisted Jordan Lebanon Algeria Bahrain Debt instruments (i) Listed Middle East Europe China New York Singapore (i) Unlisted Middle East Quoted prices in active markets (Level 1) Significant observable inputs (Level 2) Significant unobservable inputs (Level 3) At cost Total US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 18,111 18,111 11,361 11, ,038 1,038 7,579 7, ,894 1,894 1,162 1, ,783 3, ,090 2, ,517 2,517 46,422 5,515 51, ,876 28,876 4,289 4,289 13,569 13, ,092 1,092 48,472 1,092 49,564 94,894 6, ,501 Nest Investments (Holdings) Ltd - Annual Report

66 2013 Equity instruments (i) Listed Qatar stock exchange Palestine stock exchange Algeria stock exchange Bahrain stock exchange Muscat stock exchange New York stock exchange (ii) Unlisted Palestine Jordan Lebanon Algeria Bahrain Muscat Cyprus Debt instruments (i) Listed Middle East Europe China New York (ii) Unlisted Middle East Quoted prices in active markets (Level 1) Significant observable inputs (Level 2) Significant unobservable inputs (Level 3) At cost Total US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 37,093 37,093 8,479 8, ,374 9,374 1,910 1, ,877 1, ,280 9,280 2,490 2,490 3,194 3, ,043 17,818 75,861 1,006 1,006 21,209 21,209 1,963 1, ,058 1,058 24,670 1,058 25,727 82,712 18, , Nest Investments (Holdings) Ltd - Annual Report 2014

67 22. Accounts receivable US$ '000 US$ '000 Trade accounts and premiums receivable, gross Less: provision for doubtful debts Trade accounts and premiums receivable, net Inward pipeline premium provision Inward treaty premium and loss deposit 130, ,702 (14,866) (10,640) 115, , ,935 94,778 20,458 26, , ,883 Inward pipeline premium provision represents premiums written but not booked as at the reporting date. Pipeline premiums are recorded as accrued insurance premiums. Inward treaty premium and loss deposit are maintained by other insurance / reinsurers on Group s behalf throughout the life of a policy. Accounts receivable are repayable on demand and do not carry any interest. Movement in provision of doubtful debts: US$ '000 US$ '000 At 1 January At 1 January Charge for Charge the year for the year Write off Write off Exchange difference Exchange difference At 31 December At 31 December 10,640 3,112 1,438 (325) 14,866 9, (44) 10,640 The Accounts The receivable Accounts receivable ageing analysis ageing is analysis analysed is as analysed follows: as follows: 2014 US$ '000 Neither past Neither due nor past impaired due nor impaired 71,964 Past due but Past not due impaired but not impaired Not more than Not more thirty than days[ thirty < 30 days[ days] < 30 days] 9,368 More than More one month than one but month less than but two less months than two [ months days] [ days] 4,475 More than More two months than two but months less than but three less than months three [61-90 months days] [61-90 days] 3,277 More than More three than months three but months less than but six less months than six [ months days] [ days] 7,472 More than More six months than six [> 6 months] [> 6 months] 18, ,225 Nest Investments (Holdings) Ltd - Annual Report

68 The Insurance receivables ageing analysis is analysed as follows: 2014 US$ '000 Neither past due nor impaired Past due but not impaired Not more than thirty days[ < 30 days] More than one month but less than two months [ days] More than two months but less than three months [61-90 days] More than three months but less than six months [ days] More than six months [> 6 months] 3,728 4,872 6,319 7,473 6,178 4,361 32, Deferred acquisition cost Asset Liability Asset Liability Reinsurers Gross Reinsurers' share of deferred deferred share of acquisition acquisition deferred cost acquisition costs costs US$ '000 US$ '000 At 1 January At January 2013 Deferred costs Deferred costs Amortisation Amortisation of deferred of costs deferred costs Exchange difference Exchange difference At 31 December At 31 December ,489 87,573 (85,264) (49) 47,748 14,018 29,250 (28,604) 14,664 At 1 January At January 2014 Deferred costs Deferred costs Amortisation Amortisation of deferred of costs deferred costs Exchange difference Exchange difference At 31 December At 31 December ,748 98,368 (93,350) (192) 52,574 14,664 33,510 (30,220) 17,954 The net movement The net movement of deferred of deferred acquisition acquisition costs of costs US$5,018 of US$5,018 (being (being US$98,368 minus US$93,350 thousand) and the net and movement the net movement of reinsurers of reinsurers' share of deferred share of deferred acquisition acquisition costs of costs US$3,290 of US$3,290 (being US$33,510 (being US$33,510 minus US$30,220 minus thousand) US$30,220 is shown thousand) in Change is shown in in deferred Change acquisition in deferred cost acquisition gross cost and gross Change and in Change deferred in acquisition deferred cost reinsurance acquisition cost of insurance reinsurance revenue of insurance account, revenue respectively. account, respectively. 66 Nest Investments (Holdings) Ltd - Annual Report 2014

69 NEST INVESTMENTS NEST INVESTMENTS (HOLDINGS) (HOLDINGS) LIMITED LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2014 NOTES TO NOTES THE CONSOLIDATED TO THE CONSOLIDATED FINANCIAL FINANCIAL STATEMENTS STATEMENTS 31 DECEMBER 31 DECEMBER Other 24. Other assets 24. assets Other assets US$ '000 US$ '000 US$ '000 US$ '000 Advances and Advances prepayments and prepayments 114, , , ,791 Current income Current tax income receivable tax receivable 2,473 2,4732,541 2,541 Deferred tax Deferred asset tax asset 2,565 2,5652,816 2,816 Total Total 119, , , , Due from banks - banking operations 25. Due from 25. Due banks from - banking banks - operations banking operations US$ '000 US$ '000 Balances with central banks US$ '000 19,835 US$ '000 US$ '000 53,899 US$ '000 19,835 53,899 Balances with Balances central with banks central banks 19,835 19,83553,899 53,899 19,835 19,83553,899 53,899 Deposits with central bank relate to deposits with Central Bank of Algeria and represent mandatory reserve deposits which are not available for use in the Group s day-to-day operations. Deposits with Deposits central with bank central relate bank to deposits relate to with deposits Central with Bank Central of Algeria Bank and of Algeria represent and represent mandatory mandatory reserve reserve deposits which deposits are which not available are not for available use in the for use Group s in the day-to-day Group s day-to-day operations. operations. 26. Bank and cash balances 26. Bank 26. and Bank cash and balances cash balances US$ '000 US$ '000 Cash in hand , , Cash at bank US$ '000654,660 US$ '000 US$ '000589,124 US$ '000 Statutory deposits 45,347 18,243 Bank Cash and in cash hand Cash balances in hand 8,80708,814 8,807 4,347611,713 4,347 Cash at bank Cash at bank 654, , , ,124 Bank Statutory overdraft deposits Statutory deposits 45,347 (11,078) 45,34718,243 (445) 18,243 Deposits Bank and with cash Bank original balances and cash maturity balances of more than three months 708,814 (106,050) 708, ,713 (135,379) 611,713 Cash and cash equivalent as per statement of cash flows 591, ,889 Bank overdraft Bank overdraft (11,078) (11,078) (445) (445) Deposits with Deposits an original with an maturity original of maturity more than of more three than months three months (106,050) (106,050) (135,379) (135,379) Cash and cash Cash equivalent and cash equivalent as per statement as per statement of cash flows of cash flows 591, , , ,889 Nest Investments Nest Investments (Holdings) Ltd (Holdings) Annual Ltd Report Annual 2014 Report Nest Investments (Holdings) Ltd - Annual Report

70 The applicable interest rates on bank balances, across the countries that the Group operates are as follows: Country Currency Interest rate range (per annum) Lebanon USD 3% - 6% Lebanese Pounds 7% USD 1% % Palestine JOD 4% - 4.5% NIS 0.75% Yemen USD 1% YR 15% Iraq USD 4% ID 5% Algeria USD 1% - 1.4% DZD 7% Cyprus EURO 2% - 3.4% Qatar USD 1% 27. Share capital and reserves a) Share capital Authorised Ordinary shares of STG 1 each Number of US$ '000 Number of Shares '000 Shares '000 US$ ' Issued and fully paid Ordinary shares of STG 1 each Balance 31 December Nest Investments (Holdings) Ltd - Annual Report 2014

71 b) Reserves Retained earnings Statutory reserve Available for sale reserves Property revaluation reserve Exchange difference reserve Optional reserve General banking risks reserve US$ '000 US$ '000 Notes 1,587,806 1,418, ,587 38,960 2 (8,077) (1,647) 3 99,445 90,919 (49,514) (31,439) 4 2,977 3, ,473 2,119 1,667,697 1,520,460 Notes: 1. Statutory reserves are required by local regulatory authorities in Lebanon, Palestine, Yemen, Iraq and Algeria of Group companies. Generally, 10% of the net profit for the year of the relevant entity is transferred to the statutory reserve. This continues until the reserve reaches the 25% of the capital. The statutory reserve is not available for distribution to shareholders. 2. The available for sale reserve arises on the revaluation of available-for-sale investments. Where a revalued financial asset is sold, the portion of the reserve that relates to that financial asset is recognised in the profit or loss. Where a financial asset which was previously revalued is impaired, then the portion of the accumulated revaluation reserve that relates to the respective financial asset is recycled in the profit or loss. 3. The property revaluation reserve arises on the revaluation of land and buildings. When revalued land and buildings are sold, the portion of the property revaluation reserve that relates to that asset is transferred directly to the retained earnings. 4. The optional reserve represents the accumulation of a voluntary profit transferred at a percentage not exceeding 20% of annual profits. This reserve may be used for such purposes as deemed appropriate by the Board of Directors and is available for distribution to shareholders. 5. The general banking risk reserve represents a statutory reserve for the Banking operations of the Group which is calculated as a percentage of the neither past due nor impaired loans. Further information on the movement of the above reserves is disclosed in the statement of comprehensive income and changes in equity. 28. Bank loans Maturity analysis: Within 1 year 2-5 years More than 5 years Total loans US$ '000 US$ ' , ,314 45,056 99,756 45, , ,070 Nest Investments (Holdings) Ltd - Annual Report

72 US$ '000 US$ '000 Loan from Bank 1 Loan from Bank 2 Loan 1 from Bank 3 Loan 2 from Bank 3 Loan 1 from Bank 4 Loan 2 from Bank 4 Loan from Bank 5 Loan from Bank 6 Loan from Bank 7 Loan from Bank 8 Loan from Bank 9 Loan from Bank 10 Total loans 40,000 40,000 30,096 30,000 50,000 50,000 30,000 85,000 85,000 90,000 50, ,069 8, , , ,070 The loan from Bank 1 amounting to US$40 million bears interest at 3 month US dollar LIBOR plus 3% per annum and is secured by the pledge of shares in three listed companies (one classified as an associate and two classified as available for sale investments). The loan is repayable in one tranche by April Loan from Bank 2 amounting to US$30 million relates to a Bank overdraft and is repayable on demand. Loan 1 from Bank 3 amounting to US$50 million bears interest at the fixed rate of 1.45% per annum and is secured through cash collaterals provided by the Group s ultimate shareholder. The loan is repayable within Loan 2 from Bank 3 amounting to US$30 million, was obtained during This loan, carries interest at the fixed rate of 1.45% per annum and is secured through cash collaterals provided by the Group s ultimate shareholder. The loan is repayable within Loan 1 from Bank 4 amounting to US$85 million consists of two loan facilities of US$35 million and US$50 million each, bearing interest at 0.6% and 0.48% above deposit rate per annum, respectively. The applicable effective interest rates during the year were 2.2% and 1.83% per annum, respectively. Both loans are secured through cash collaterals provided by the Group s ultimate shareholder and they are repayable within Loan 2 from Bank 4 amounting to US$90 million, was obtained during 2014 and consists of three loan facilities of $30 million each and carry interest 1.83% per annum. The maturity date is in The loan from Bank 5 amounting to US$50 million bears interest at US$ deposit rate plus 0.45% per annum. The applicable effective interest rate during the year was 1.45% per annum. The loan was secured through cash collaterals provided by the Group s ultimate shareholder. The loan was repaid during Loan from Bank 8 amounting to US$4 million relates to a short term loan repayable within one year, which was obtained for the purpose of financing working capital. The loan from Bank 10 amounting to US$45m relates to a syndicated loan obtained for the construction of a real estate project. The loan bears interest of 4% per annum during construction phase and 2.5% per annum post construction. The loan is repayable by Nest Investments (Holdings) Ltd - Annual Report 2014

73 29. Banking customer deposits By Category: Demand Savings Time or notice US$ '000 US$ ' ,316 71,643 5,728 8,969 29, , , ,898 The majority of banking customer deposits are current accounts or accounts with a maturity of less than 3 months which usually do not earn any interest and are pledged against trade finance facilities. Nest Investments (Holdings) Ltd - Annual Report

74 30. Insurance contract liabilities Provision for reported claims by policyholders (OCR) Provision for claims IBNR Provision for claims IBNER Outstanding claims provision Provision for unearned premiums Provision for unexpired risk reserve Total life and non-life insurance contract liabilities Life insurance contracts Non-life insurance contracts Total insurance contract liabilities Insurance contract liabilities Reinsurance of liabilities Net Insurance contract liabilities Reinsurance of liabilities Net US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ ' , , , , , , ,264 27,863 83, ,457 24,673 81,784 2,241 2,241 2,000 2, , , , , , , , , , , , , , , , , , ,619 Insurance contract liabilities Reinsurance of liabilities Net Insurance contract liabilities Reinsurance of liabilities Net US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 2,350 1,038 1,312 1, , , , , , , , , , , , , , Nest Investments (Holdings) Ltd - Annual Report 2014

75 Insurance contract liabilities - Gross Insurance contract liabilities - Reinsurers' share Insurance contract liabilities - Net 2014 Provision for claims IBNR Provision for claims IBNER Provision for reported claims by policyholders Outstanding claims provision Provision for unearned premiums Provision for unexpired risk reserve Provision for claims IBNR Provision for reported claims by policyholders Outstanding claims provision US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 Provision for unearned premiums Provision for unexpired risk reserve Provision for claims IBNR Provision for claims IBNER Provision for reported claims by policyholders Outstanding claims provision Provision for unearned premiums Provision for unexpired risk reserve Motor 34,644 3,411 1,310 39,365 22, , ,940 4, ,708 3,406 1,310 28,424 17, Life , ,217 Marine 1, ,444 3, , ,196 3, Fire 6, ,458 19,666 4, ,793 17,582 1, ,665 2,083 Engineering 11, ,635 26, , ,282 26, Medical 8,304 1, ,291 9,052 4, ,829 2,695 3,503 1, ,461 6,357 Travel Other 2, ,862 3,400 2, ,288 2, Decennial Liability 5 5 2, , ,080 Natural catastrophe Workmen Compensation & Third Party Liability 5, ,621 4,273 1, ,318 1,913 4, ,302 2,360 Facultative 262,906 52, , , ,829 15, ,284 63, ,076 37, ,473 93,906 Treaty 129,440 51, ,696 69,969 43,478 11,579 55,058 19,929 85,962 39, ,639 50,040 Energy , ,955 Total Line of Business 463, ,264 2, , , ,000 27, , , ,151 83,402 2, , , Nest Investments (Holdings) Ltd - Annual Report

76 Insurance contract liabilities - Gross Insurance contract liabilities - Reinsurers' share Insurance contract liabilities - Net 2013 Provision for claims IBNR Provision for claims IBNER Provision for reported claims by policyholders Outstanding claims provision Provision for unearned premiums Provision for unexpired risk reserve Provision for claims IBNR Provision for reported claims by policyholders Outstanding claims provision US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 Provision for unearned premiums Provision for unexpired risk reserve Provision for claims IBNR Provision for claims IBNER Provision for reported claims by policyholders Outstanding claims provision Provision for unearned premiums Provision for unexpired risk reserve Motor 36,598 3,047 1,027 40,673 25,358 11, ,154 4,414 25,448 3,044 1,027 29,519 20,945 Life , ,082 Marine 1, ,945 3, , ,482 3, Fire 7, ,196 15,503 6, ,509 13,167 1, ,687 2,337 Engineering 11, ,196 24, , ,729 24, Medical 3,022 1, ,338 5,957 1, ,129 1,422 1,920 1, ,209 4,534 Travel Other 2, ,043 3, , ,392 2, , Decennial Liability 9 9 2, , Natural catastrophe Workmen Compensation & Third 5, ,705 2,050 1, , , ,121 1,995 Party Liability Facultative 265,891 46, , , ,799 11, ,873 52, ,093 35, ,249 84,249 Treaty 120,899 53, ,703 62,677 53,652 12,755 66,407 17,469 67,247 41, ,296 45,208 Energy , ,196 Total Line of Business 455, ,457 2, , , ,429 24, , , ,436 81,784 2, , , Nest Investments (Holdings) Ltd - Annual Report 2014

77 Outstanding claims provision Insurance Insurance contract Reinsurance contract Reinsurance liabilities of liabilities Net liabilities of liabilities Net US$ 000 US$ 000 US$ 000 US$ 000 US$ 000 US$ 000 At 1 January 441, , , , , ,369 Provision for the year (295,217) (119,098) (176,119) (228,583) (134,288) (94,295) Claims paid during the year 319, , , , , ,693 Exchange difference (3,089) (454) (2,635) (417) (87) (330) At 31 December 463, , , , , ,436 Provision for unearned premiums Insurance Insurance contract Reinsurance contract Reinsurance liabilities of liabilities Net liabilities of liabilities Net US$ 000 US$ 000 US$ 000 US$ 000 US$ 000 US$ 000 At 1 January 286, , , , , ,024 Premiums written in year 704, , , , , ,572 Premiums earned during the year (657,876) (268,654) (389,222) (607,540) (250,494) (357,046) Exchange difference (2,710) (1,344) (1,366) (664) (403) (262) At 31 December 330, , , , , , Trade creditors and other liabilities US$ 000 US$ 000 Trade payables 50,381 44,627 Outward pipeline premium provision 51,535 39,159 Outward treaty premium and loss deposit 21,518 14,312 Other creditors and accrued expenses 223, ,886 Current income tax payable 126, ,288 Trade creditors and other liabilities 473, ,271 Trade payables are repayable on demand and do not carry any interest. Nest Investments (Holdings) Ltd - Annual Report

78 32. Risk management The risk management framework of the Group ensures that the Group understands the risks it is exposed to and implements policies and risk management techniques appropriate for the nature of its business, the risks it undertakes and local market conditions. A high level overview of the risk management policies implemented by the Group for the management of key risks is explained below: A. Insurance risks The main risk the Group faces under insurance and reinsurance contracts is that the actual claims and benefit payments or their timing, will end up deviating from expectations. Claim payments and their timing is influenced by the frequency of claims, the severity of claims, actual benefits paid and subsequent development of long term claims. Therefore, the Group s objective is to ensure that sufficient reserves are available to cover these liabilities. At a Group level, the insurance and reinsurance risk exposure is mitigated through diversification across a large portfolio of contracts and geographical areas. The variability of risks is also improved by careful risk selection and implementation of underwriting strategy guidelines as well as the use of reinsurance arrangements. The Group purchases reinsurance as part of its risk mitigation strategy. Reinsurance is placed on both a proportional and non proportional basis. The majority of proportional reinsurance is quota share reinsurance which is taken out to reduce the overall exposure of the Group to certain classes of business. Non proportional reinsurance is primarily excess of loss reinsurance designed to mitigate the Group s net exposure to large and catastrophe losses. Retention limits for the excess of loss reinsurance vary by product line and territory. The amounts recoverable from reinsurers are estimated in a manner consistent with the outstanding claims provisions and are in accordance with the reinsurance contracts. Having in place reinsurance arrangements does not relieve the Group or any of its companies of its direct obligations to its policyholders and thus a credit exposure exists with respect to ceded insurance, to the extent that any reinsurer is unable to meet its obligations assumed under such reinsurance agreements. The reinsurance placement strategy is one of achieving sufficient risk diversification across a number of reputable reinsurance counterparties such that the Group neither dependent on a single reinsurer nor are the operations of the Group are substantially dependent upon any single reinsurance contract. i. Non-life insurance The Group principally issues the following types of general insurance contracts: Motor Fire Energy Engineering Liability Medical Healthcare contracts provide medical expense coverage to policyholders and are not guaranteed as renewable. Risks under non life insurance policies usually cover a duration of twelve months with the exception of some Energy and Engineering policies that run for longer periods. For general insurance contracts, the most significant risks arise from climate changes, natural disasters and terrorist activities. For longer tail claims that take some years to settle, there is also inflation risk. For healthcare contracts, the most significant risks arise from lifestyle changes, epidemics and medical science and technological improvements. These risks vary in relation to the location of the risk insured by the Group, type of risk insured and by industry. The above risk exposure is mitigated through diversification across a large portfolio of insurance contracts and geographical areas. The variability of risks is improved by careful selection and implementation of underwriting strategies, which are designed to ensure that risks are diversified in terms of type of risk and level of insured benefits. This is largely achieved through diversification across industry sectors and geography. Furthermore, strict claim review policies to assess all new and outstanding claims, regular detailed review of claims handling procedures and frequent investigation of possible fraudulent claims are all policies and procedures put in place to reduce the risk exposure of the Group. The Group further enforces a policy of actively managing and promptly pursuing claims, in order to reduce its exposure to unpredictable future developments that can negatively impact the business. Inflation risk is mitigated by taking expected inflation into account when estimating insurance contract liabilities. The Group has also limited its exposure by imposing maximum claim amounts on certain contracts as well as the use of reinsurance arrangements in order to limit exposure to large claims and catastrophic events (e.g. hurricanes, earthquakes and flood damage). The purpose of these underwriting and reinsurance strategies is to limit exposure to large claims and catastrophes based on the Group s risk appetite as decided by management. Key assumptions affecting technical provisions The principal assumption underlying the liability estimates is that the Group s future claims development will follow a similar pattern to past claims development experience. This includes assumptions in respect of average claim costs, claim handling costs, claim inflation factors and claim numbers for each accident year. Additional qualitative judgments 76 Nest Investments (Holdings) Ltd - Annual Report 2014

79 are used to assess the extent to which past trends may not apply in the future, for example: Changes in claim settlement speed Changes in economic conditions Changing portfolio mix Once off occurrence Changes in policy conditions Changes in claims handling procedures Judgment is further used to assess the extent to which external factors such as judicial decisions and government legislation affect the estimates. The non life insurance liabilities are sensitive to a varying extent to the various assumptions that are used. In general, the Group companies do not face long claims development periods with some exceptions for Motor Bodily Injury in some jurisdictions. At least 95% of all claims cases are settled in less than 3 years and more than 99% in less than 5 years. ii. Life insurance Life insurance contracts offered by the Group include primarily: Term assurance Group life Accidental death The Group s life insurance portfolio is not as varied as our non-life insurance portfolio primarily because of market conditions and preferences in the markets in which the Group operate. There is a very small portfolio of contracts that have a surrender value. The main risks that the Group is exposed to are as follows: Mortality risk risk of loss arising due to a larger than expected number of policyholder deaths Investment return risk risk of loss arising from achieving returns lower than expected Expense risk risk of loss arising from expense experience being different than expected The above risks vary according to the location of the risk insured by the Group, type of risk insured or by industry. The Group s underwriting strategy is designed to ensure that risks are well diversified in terms of type of risk and level of insured benefits. This is largely achieved through diversification across industry sectors and geographical location, the use of medical screening in order to ensure that pricing takes account of current health conditions and family medical history, regular review of actual claims experience and product pricing, as well as detailed claims handling procedures. Underwriting limits are in place to enforce appropriate risk selection criteria. Significant judgment is required in determining the liabilities and in the choice of assumptions. Assumptions in use are based on past experience, current internal data, external market indices and benchmarks which reflect current observable market prices and other published information. The key assumptions to which the estimation of the Group s life insurance liabilities is particularly sensitive are as follows: Mortality rates Assumptions are based on standard industry and national tables, according to the type of contract written and the territory in which the insured person resides. Mortality assumptions are differentiated by sex and age. An increase in mortality rates will lead to a larger number of claims (and claims could occur sooner than anticipated), which will increase the expenditure and reduce profits. Expenses Operating expenses assumptions reflect the projected costs of maintaining and servicing in force policies and associated overhead expenses. The current level of expenses is taken as an appropriate expense base and adjusted for expected expense inflation if appropriate. An increase in the level of expenses would result in an increase in expenditure, thereby reduce profits. Discount rate Life insurance liabilities are determined as the sum of the discounted value of the expected benefits and future administration expenses directly related to the contract, less the discounted value of the expected theoretical premiums that would be required to meet these future cash outflows. A decrease in the discount rate will increase the value of the insurance liability and therefore reduce profits. B. Reinsurance risk In order to control financial exposure arising from large claims and catastrophes, each Group company in its normal course of business enters into agreements with other parties for reinsurance purposes. Liabilities ceded to reinsurance counterparties do not relieve the Group s companies from their obligations to clients and consequently each Group company remains liable for the portion of outstanding claims reinsured to the extent that the reinsurer counterparty fails to meet the obligations under the reinsurance agreement. In order to limit its exposure to significant losses that might arise from insolvent reinsurers each Group company enters into reinsurance agreements with reinsurance counterparties that carry a rating falling within the risk tolerance levels for reinsurance counterparties set by the Company, which basically means that the reinsurance counterparty must be Nest Investments (Holdings) Ltd - Annual Report

80 highly rated. Over and above this, each Group company and the Group as a whole continuously monitor the reinsurers financial condition to ensure that they remain within the risk tolerance levels at all times. C. Syndicate risk The syndicate s activities expose one subsidiary to a variety of financial and non-financial risks. The Managing Agent is responsible for managing the syndicate s exposure to these risks and, where possible, introducing controls and procedures that mitigate the effects of the exposure to risk. Each year, the Managing Agent prepares an Individual Capital Assessment (ICA) for the syndicate, the purpose of which is to agree capital requirements with those of Lloyd s, based on an agreed assessment of the risks from a quantitative and qualitative perspective. The risks described below are typically reflected in the ICA; and typically the majority of the total assessed value of the risks concerned is attributable to Insurance Risk. The insurance risks faced by a syndicate include the occurrence of catastrophic events, downward pressure on pricing of risks, reductions in business volumes and the risk of inadequate reserving. Reinsurance risks arise from the risk that a reinsurer fails to meet its share of claims. The syndicate s funds are exposed to risks of investment, liquidity, currency and interest rates leading to financial loss. The syndicate is also exposed to regulatory and operational risks including its ability to continue to trade. However, supervision by Lloyds and the Prudential Regulatory Authority (PRA) provide additional controls over the syndicate s management of risks. The Group manages the risks faced by the syndicates in which it participates by monitoring the performance of the syndicates it supports. This commences in advance of committing to support a syndicate for the following year, through a review of the business plan prepared for each syndicate by its Managing Agent. In addition, quarterly reports and annual accounts together with any other information made available by the Managing Agent are monitored and reviewed. If the Group considers that the risks being run by the syndicate are excessive it will seek confirmation from the Managing Agent that adequate management of the risk is in place and if considered appropriate will withdraw its support from the next underwriting year. Financial assets of the Group include loans and advances to banking customers, cash and cash equivalents, deposits, other financial assets and accounts receivables. Financial liabilities of the Group include bank loans, banking customer deposits, payables to insurance and reinsurance companies and other creditors. 1) Currency risk Currency risk is the risk of loss due to changes in foreign exchange rates. Currency risk arises when future commercial transactions and recognized financial assets and liabilities are denominated in a currency that is not the Group s functional currency. The Group is exposed to foreign exchange risk arising from various currency exposures primarily with respect to the Euro, the Sterling Pound and the Algerian Dinar. Currency risk exposure across the Group arises solely from commercial transactions as the Group and its subsidiaries have zero appetite for currency risk exposures stemming from currency speculation. The Group s financial assets are primarily denominated in the same currencies as its insurance and investment contract liabilities. This mitigates the foreign currency exchange rate risk for the overseas operations. Thus, the main foreign exchange risk arises from recognised assets and liabilities denominated in currencies other than those in which insurance and investment contract liabilities are expected to be settled. Currency exposures are managed partly by ensuring that liabilities denominated in a foreign currency are matched by assets in that same currency. The Group s management monitors the exchange rate fluctuations on a continuous basis and acts accordingly. The maximum exposure of the Group is strictly limited to the absolute value of the funds at Lloyds. D. Financial risks Financial instruments consist of financial assets and financial liabilities. Financial assets and financial liabilities are recognised on the Group s Statement of Financial Position when the Group becomes a party to the contractual provisions of the instrument. 78 Nest Investments (Holdings) Ltd - Annual Report 2014

81 NEST NEST INVESTMENTS NEST INVESTMENTS (HOLDINGS) (HOLDINGS) LIMITED LIMITED LIMITED NOTES NOTES TO NOTES THE TO TO CONSOLIDATED THE TO THE TO THE CONSOLIDATED THE FINANCIAL FINANCIAL FINANCIAL STATEMENTS STATEMENTS 31 DECEMBER DECEMBER DECEMBER The The table The table The table The below table below The table below summarises table below below summarises below summarises the the Group s the the Group s the financial the Group s financial assets financial assets and assets assets liabilities and assets and liabilities and by and by liabilities major by by major currencies by major by major currencies major (equivalent currencies amount in (equivalent US (equivalent Dollars): (equivalent amount amount in US amount Dollars): in US in US in Dollars): US in US Dollars): US US US Sterling US US Sterling Sterling Euro Euro Euro Algerian Euro Euro Algerian Algerian Other Other Other Other Total Other Other Total Total Total Total Total Dollars Dollars Dollars Dinars Dinars Dinars Dinars Dinars US$ '000 US$ US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 '000 US$ '000 Financial Financial Assets Financial Assets Assets Assets Assets Loans Loans and Loans advances Loans and Loans and advances Loans and and to advances and to advances to to to to 362, , , , , , , ,957 banking Other banking Other financial customers Other banking Other financial Other customers assets banking Other financial customers assets financial assets customers assets assets assets 56,366 56,366 56,366 56,366 41,604 56,366 56,366 41,604 41,604 41,604 41,604 41,604 14,255 14,255 14,255 14,255 3,063 14,255 14,255 3,063 3, ,288 3,063 3, ,288 3, , ,288 Insurance Insurance receivables Insurance receivables Insurance receivables receivables 30,763 30,763 30,763 30,763 30,763 30,763 1,565 1,565 1,565 1, ,565 1, , , ,930 32,930 32,930 32,930 Accounts Accounts receivable Accounts receivable Accounts receivable receivable 59,613 59,613 59,613 59,613 29,140 59,613 59,613 29,140 29,140 29,140 29, , , , ,932 12,485 13,932 13,932 12,485 12, ,225 12,485 12, ,225 12, , ,225 Due from Due Due banks from Due from Due banks from - Due banking banks from banks from - banking banks - banks - banking - - banking 19,835 19,835 19,835 19,835 19,835 19,835 19,835 19,835 19,835 19,835 19,835 19,835 19,835 operations Bank and operations Bank Bank cash and operations Bank and Bank balances cash and operations Bank cash and balances cash and cash balances cash balances 615, , ,027 9, ,027 9,257 9,257 9, ,257 9, , , ,146 35,198 49,146 49,146 35,198 35, ,814 35,198 35, ,814 35, , ,814 Total Total assets Total Total assets Total assets Total assets assets assets 761, , ,770 80, ,770 80,000 80,000 80,000 80, , , , ,690 51, ,690 51,349 1,355,049 51,349 51,349 1,355,049 51,349 51,349 1,355,049 1,355,049 Financial Financial Liabilities Financial Liabilities Financial Liabilities Liabilities Bank loans Bank Bank loans Bank loans Bank loans Bank loans loans 325, , , , , , ,406 49,406 49, , , , ,948 Banking Banking customer Banking customer Banking deposits customer deposits customer deposits deposits 267, , , , , , , ,133 Due to Due banks Due to Due banks to Due banks to Due banks to banks to banks 2,177 2,177 2,177 2,177 2,177 2,177 2,177 2,177 2,177 2,177 2,177 2,177 2,177 Reinsurance Reinsurance Reinsurance balances Reinsurance balances balances balances 42,581 42,581 42,581 42,581 42,581 42,581 8,496 8,496 8,496 8, ,496 8, , , ,873 51,873 51,873 51,873 payable Trade Trade payables Trade Trade payables Trade Trade payables payables 20,489 20,489 20,489 20,489 21,050 20,489 20,489 21,050 21,050 21,050 21,050 21, , , ,103 50,381 8,103 8,103 50,381 8,103 50,381 50,381 50,381 50,381 50,381 Bank overdraft Bank Bank overdraft Bank Bank overdraft Bank overdraft ,662 8,662 8,662 8,662 1,847 8,662 8,662 1,847 1,847 11,078 1,847 1,847 11,078 1,847 11,078 11,078 11,078 11,078 11,078 Total Total Liabilities Total Total Liabilities Total Total Liabilities Liabilities 388, , ,935 21, ,935 21,610 21,610 21,610 21, , , , ,613 10, ,613 10,746 10, ,591 10,746 10, ,591 10, , ,591 Net Exposure Net Net Exposure Net Net Exposure Net Exposure 372, , ,835 58, ,835 58,390 58,390 58,390 (446) 58,390 58,390 (446) (446) 125,077 (446) (446) 125,077 (446) 125,077 40, ,077 40,603 40, ,458 40,603 40, ,458 40, , , US US Sterling US US Sterling US US Sterling Euro Sterling Euro Algerian Euro Euro Algerian Euro Euro Algerian Other Algerian Other Other Other Total Other Other Total Total Total Total Total Total Dollars Dollars Dollars Dollars Dinars Dinars Dinars Dinars Dinars Dinars US$ '000 US$ US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 '000 Financial Financial Assets Financial Assets Financial Assets Assets Assets Assets Loans Loans and Loans advances Loans and Loans and advances Loans and and to advances and to advances to to to to 334, , , , , , , ,183 banking Other banking Other financial customers Other banking Other financial Other customers assets banking Other financial customers assets financial assets customers assets assets assets 45,053 45,053 45,053 45,053 44,280 45,053 45,053 44,280 44,280 44,280 44,280 44,280 18,758 18,758 18,758 18,758 2,695 18,758 18,758 2,695 2, ,786 2,695 2, ,786 2, , ,786 Insurance Insurance receivables Insurance receivables Insurance receivables receivables 28,086 28,086 28,086 28,086 6,533 28,086 28,086 6,533 6,533 6,533 6,533 6,533 3,507 3,507 3,507 3,507 3,507 3,507 38,126 38,126 38,126 38,126 38,126 38,126 38,126 Accounts Accounts receivable Accounts receivable Accounts receivable receivable 68,077 68,077 68,077 68,077 21,403 68,077 68,077 21,403 21,403 21,403 21,403 21,403 18,478 18,478 18,478 18,478 14,104 18,478 18,478 14,104 14, ,062 14,104 14, ,062 14, , ,062 Due from Due Due banks from Due from Due banks from - Due banking banks from banks from - banking banks - banks - banking - - banking 53,899 53,899 53,899 53,899 53,899 53,899 53,899 53,899 53,899 53,899 53,899 53,899 53,899 operations Bank and operations Bank Bank cash and operations Bank and Bank balances cash and operations Bank cash and balances cash and cash balances cash balances 551, , ,961 10, ,961 10,327 10,327 10,327 10, , , , ,284 24,020 25,284 25,284 24,020 24, ,713 24,020 24, ,713 24, , ,713 Total Total assets Total Total assets Total assets Total assets assets assets 693, , ,178 82, ,178 82,544 82,544 82,544 82, , , , ,107 40, ,107 40,820 1,270,769 40,820 40,820 1,270,769 40,820 40,820 1,270,769 1,270,769 Financial Financial Liabilities Financial Liabilities Financial Liabilities Liabilities Bank loans Bank Bank loans Bank loans Bank loans Bank loans loans 255, , , , , , ,807 8,807 8,807 8, , , , ,070 Banking Banking customer Banking customer Banking deposits customer deposits customer deposits deposits 262, , , , , , , ,898 Due to Due banks Due to Due banks to Due banks to Due banks to banks to banks 2,262 2,262 2,262 2, ,262 2, , , ,376 2,376 2,376 2,376 2,376 Reinsurance Reinsurance Reinsurance balances Reinsurance balances balances balances 38,015 38,015 38,015 38,015 4,068 38,015 38,015 4,068 4,068 4,068 4,068 4,068 11,369 11,369 11,369 11,369 7,737 11,369 11,369 7,737 7,737 61,189 7,737 7,737 61,189 7,737 61,189 61,189 61,189 61,189 61,189 payable Trade Trade payables Trade Trade payables Trade Trade payables payables 18,612 18,612 18,612 18,612 13,254 18,612 18,612 13,254 13,254 13,254 13,254 13,254 12,761 12,761 12,761 12,761 44,627 12,761 12,761 44,627 44,627 44,627 44,627 44,627 44,627 Bank overdraft Bank Bank overdraft Bank Bank overdraft Bank overdraft Total Total Liabilities Total Total Liabilities Total Total Liabilities Liabilities 312, , ,014 18, ,014 18,216 18,216 18, , , , ,336 21, ,336 21,057 21, ,605 21,057 21, ,605 21, , ,605 Net Exposure Net Net Exposure Net Net Exposure Net Exposure 381, , ,164 64, ,164 64,327 64,327 64,327 (861) 64,327 64,327 (861) (861) 168,771 (861) (861) 168,771 (861) 168,771 19, ,771 19,762 19, ,164 19,762 19, ,164 19, , ,164 Nest Investments Nest Nest Investments Nest Nest (Holdings) Investments (Holdings) Ltd (Holdings) Annual Ltd Ltd Annual Report Ltd Annual Ltd Annual Report 2014 Annual Report Report Report Nest Investments (Holdings) Ltd - Annual Report

82 The following tables demonstrate the sensitivity of profit before tax and equity to reasonably possible changes to individual exchange rates, with all other variables held constant Currency Change in Impact on Impact on Impact on Impact on variables Profit Equity Profit Equity before tax before tax US$ 000 US$ 000 US$ 000 US$ 000 Sterling 10% 1,679 4,160 2,005 4,428 Euro 10% (45) (86) Algerian Dinars 10% 11,082 1,425 15,001 1,876 Other 10% 3, , Currency Change in Impact on Impact on Impact on Impact on variables Profit Equity Profit Equity before tax before tax US$ 000 US$ 000 US$ 000 US$ 000 Sterling (10)% (1,679) (4,160) (2,005) (4,428) Euro (10)% Algerian Dinars (10)% (11,082) (1,425) (15,001) (1,876) Other (10)% (3,754) (306) (1,707) (270) 2) Market risk Market risk, other than interest rate risk and currency risk addressed separately, is the risk that the fair value of a financial instrument will fluctuate because of changes in market prices. Financial instruments affected by market risk consist of available-for-sale financial assets (equities). The Group manages market risk by continuously monitoring the trading as well as the outlook of equities to which it is exposed and by taking the necessary steps to mitigate potential losses from equity risk. Similarly property risk is monitored continuously, but additional factors are taken into consideration such as future prospects and income generation in order to mitigate potential adverse effects. The analysis below is performed for reasonably possible movements in key variables with all other variables held constant, showing the impact on equity (that reflects adjustments to profit before tax and changes in fair value of available-for-sale financial assets). The correlation of variables will have a significant effect in determining the ultimate impact on price risk, but to demonstrate the impact due to changes in variables, variables had to be changed on an individual basis. It should be noted that the relationship between these variables is non linear. 80 Nest Investments (Holdings) Ltd - Annual Report 2014

83 Changes Effect on equity to the Exchange index % US$ 000 US$ 000 Qatar stock exchange 10% 1,811 3,709 Palestine stock exchange 10% 1, Algeria stock exchange 20% Muscat stock exchange 10% Cyprus stock exchange 30% 73 Saudi Arabia stock exchange 20% 379 Dubai stock exchange 10% 116 Abu Dhabi stock exchange 10% 35 London stock exchange 10% 378 New York stock exchange 10% Changes Effect on equity to the Exchange index % US$ 000 US$ 000 Qatar stock exchange (10)% (1,811) (3,709) Palestine stock exchange (10)% (1,136) (848) Algeria stock exchange (20)% (59) (56) Muscat stock exchange (10)% (758) (937) Cyprus stock exchange (30)% (73) Saudi Arabia stock exchange (20)% (379) Dubai stock exchange (10)% (116) Abu Dhabi stock exchange (10)% (35) London stock exchange (10)% (378) New York stock exchange (10)% (61) (191) 3) Interest rate risk Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The Group s management monitors the interest rate fluctuations on a continuous basis and acts accordingly. Nest Investments (Holdings) Ltd - Annual Report

84 4) Credit risk Credit risk arises when a counterparty fails to meet its financial obligations to the Group under a financial instrument and this could negatively affect the value as well as the future cash inflows from financial assets on hand at the reporting date. The Group has no significant concentration of credit risk. The following policies and procedures are in place to mitigate the Group s exposure to credit risk: The Group has policies in place to ensure that sales of products and services are made to customers with an appropriate credit history and monitors on a continuous basis the ageing profile of its receivables. Cash balances are held with high credit quality financial institutions and the Group has policies to limit the amount of credit exposure to any financial institution. Net exposure limits are set for each counterparty or group of counterparties, geographical and industry segment (i.e. limits are set for investments and cash deposits, foreign exchange trade exposures and minimum credit ratings for investments that may be held). Reinsurance is placed with counterparties that have a good credit rating and concentration of risk is avoided by following policy guidelines in respect of counterparties limits that are set each year by the board of directors and are subject to regular reviews. At each reporting date, management performs an assessment of creditworthiness of reinsurers and updates the reinsurance purchase strategy, ascertaining suitable allowance for impairment. The credit risk in respect of customer balances incurred on non payment of premiums or contributions will only persist during the grace period specified in the policy document or trust deed until expiry, when the policy is either paid up or terminated. Commission paid to intermediaries is netted off against amounts receivable from them to reduce the risk of doubtful debts. Maximum credit exposure The table below presents the maximum exposure to credit risk arising from the various financial assets: US$ '000 US$ '000 Financial instruments Held to Maturity financial assets Available-for-sale financial assets Loans and advances to banking customers Insurance receivables Accounts receivable Due from banks - banking operations Bank and cash balances 13,787 9, , , , , , ,183 32,930 38, , ,883 19,835 53, , ,713 1,504,442 1,391, Nest Investments (Holdings) Ltd - Annual Report 2014

85 Loans and advances to customers (Trust Bank Algeria or the Bank ) The management of the bank determines the amount and type of collateral and other credit enhancements required. The main types of collateral obtained by the bank include cash collateral / blocked deposits, real estate mortgages on properties, and personal and corporate guarantees. The bank s management regularly monitors changes in the market value of the collateral and, where necessary, requests the pledging of additional collateral in accordance with the relevant agreement. The table below presents the loans and advances to customers by economic activity and economic sector: By economic activity: Trade finance Housing loans Agriculture Industry Services By customer sector: Corporate Retail US$ '000 US$ ' , , , ,863 11,415 12,037 49,444 24,466 14,535 14, , , , ,458 11,397 7, , ,183 Credit quality of loans and advances-banking operations US$ '000 US$ '000 Neither past due nor impaired Past due nor impaired Impaired Gross loans 321, ,270 9,579 30,999 42,882 48, , ,494 Neither past due nor impaired: are all loans which do not ot fall within the categories of Past due not Neither past due nor impaired: are all loans which do not fall within the categories of Past due not impaired and/or Impaired Loans. Past Due but not impaired: are the loans for which an installment is missed and classified as unpaid Loans, as they have still not been provided for (less than 90 days past due). Impaired Loans: are all loans which are past due over 90 consecutive days. A provision is posted for these, based on the number of days that the installments were outstanding. Nest Investments (Holdings) Ltd - Annual Report

86 NEST INVESTMENTS NEST INVESTMENTS (HOLDINGS) LIMITED (HOLDINGS) LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2014 NOTES TO THE CONSOLIDATED NOTES TO THE FINANCIAL CONSOLIDATED STATEMENTS FINANCIAL 31 DECEMBER STATEMENTS DECEMBER 2014 Loans and advances to customers that are past due but not impaired: Loans and advances Loans to customers and advances that are to customers past due but that not are impaired: past due but not impaired: US$ '000 US$ US$ '000 '000 US$ '000 Past due: Past due: 1-30 days 1-30 days 5,943 21,676 5,943 21, days days 1,527 3,448 1,527 3, days days 421 2, , days days 508 1, ,272 Over 180 days Over 180 days 1,180 2,593 1,180 2,593 9,579 30,999 9,579 30,999 Impaired loans and Impaired advances: loans and advances: Impaired loans and advances: US$ '000 US$ US$ '000 '000 US$ ' Loans and advances Loans and advances 42,882 48,225 US$ 42,882 '000 US$ 48,225 '000 Loans and advances Rescheduled loans Rescheduled and advances: loans and advances: Rescheduled loans and advances: 42,882 48, US$ '000 US$ US$ '000 '000 US$ '000 1 January 1 January 49,384 21,575 49, , New loans and advances New loans rescheduled and advances during rescheduled the year during the year US$ '000 US$ '000 US$ 1,154 '000 US$ 27,923 '000 1,154 27,923 Assets no longer rescheduled Assets no longer (including rescheduled repayments) (including repayments) (16,958) (16,958) Interest 49,384 21,575 1 January accrued on Interest rescheduled accrued loans on and rescheduled advances loans and advances 49,384 1,781 21, , Exchange 1,154 27,923 New loans differences and advances Exchange rescheduled differences during the year (5,058) 1,154 27,923 (268) (5,058) (268) Total (16,958) Assets no longer rescheduled Total (including repayments) (16,958) 30,303 49,385 30,303 49,385 1, Interest accrued on rescheduled loans and advances 1, (5,058) (268) Exchange differences (5,058) (268) Rescheduled loans Rescheduled are the loans loans for which are the the loans Bank for has which modified the Bank the repayment has modified programme the 30,303 repayment programme 49,385 Total 30,303 49,385 (extension of repayment (extension period, of repayment suspension period, of the obligation suspension to of repay the obligation one or more to repay instalments, one or more instalments, reduction in instalment reduction amount in instalment etc.). They amount also included etc.). They current also accounts included / current overdrafts accounts as well / for overdrafts as well for which Rescheduled the credit loans limit which are has the the been loans credit increased for limit which has with been the sole increased Bank purpose has with modified of the covering sole the purpose an repayment excess. of covering programme an excess. Rescheduled loans are the loans for which the Bank has modified the repayment programme (extension of repayment (extension of repayment period, suspension of the obligation to repay one or more instalments, period, suspension of the obligation to repay one or more instalments, reduction in instalment amount etc.). They also reduction included current in instalment accounts amount / overdrafts etc.). They as well also for included which the current credit accounts limit has / been overdrafts increased as well with for the sole purpose of which covering the an credit excess. limit has been increased with the sole purpose of covering an excess. Nest Investments (Holdings) Nest Investments Ltd Annual (Holdings) Report 2014 Ltd Annual 99 Report Nest Investments (Holdings) Ltd - Annual Report 2014

87 5) Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivery of cash or other financial asset. The following policies and procedures are in place to mitigate the Group s exposure to liquidity risk: The Group s liquidity risk policy which sets out the assessment and determination of what constitutes liquidity risk for the Group. Compliance with the policy is monitored and exposures and breaches are reported to the Group Risk Committee. The policy is regularly reviewed for pertinence and for changes in the risk environment. Guidelines are set for asset allocations, portfolio limit structures and maturity profiles of assets, in order to ensure sufficient funding available to meet insurance and investment contracts obligations. Contingency funding plans are in place, which specify minimum proportions of funds to meet emergency calls as well as specifying events that would trigger such plans. The Group s catastrophe excess of loss reinsurance contracts contain clauses permitting the immediate draw down of funds to meet claim payments should claim events exceed a certain size. The Group maintains a portfolio of highly marketable and diverse assets that can be easily liquidated in the event of an unforeseen interruption of cash inflows. The Group also has in place committed lines of credit that it can access to meet liquidity needs. The Group has procedures aiming to mitigate both the impact and the likelihood of such losses such as maintaining sufficient cash and other highly liquid current assets and by having available an adequate amount of committed credit facilities. Furthermore, the reinsurance subsidiary as well as the insurance subsidiaries can obtain emergency liquidity funding in the event of a catastrophe by drawing cash early under their reinsurance policies. The table that follows summarises the maturity profile of the non-derivative financial assets and liabilities of the Group based on the remaining contractual discounted cash flows: Nest Investments (Holdings) Ltd - Annual Report

88 NEST INVESTMENTS (HOLDINGS) LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2014 NEST INVESTMENTS (HOLDINGS) LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 On DECEMBER 2014 Demand and up On to Less than 3-12 Over 5 Total Demand 1 month 3 months months 1-5 years years US$ '000 and US$ up '000 to Less US$ than '000 US$ 3-12 '000 US$ '000 US$ Over '000 5 Total 1 month 3 months months 1-5 years years 2014 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 Loans and Loans advances and advances to banking to banking customers customers 362,957 46, ,127 7, ,159 42,439 Other financial Other financial assets assets Held to Loans Held Maturity to and Maturity advances financial financial to assets banking assets customers 362,957 13,787 46, ,127 7, ,159 13,787 42,439 Other financial assets Available Available for sale for financial sale financial assets assets 101, ,501 Held to Maturity financial assets 13,787 13,787 Insurance Insurance receivables receivables 32,930 32,930 Trade receivables, Trade Available receivables, for net sale financial net assets 101, , , ,501 Due from Insurance Due banks from - banks receivables banking - banking operations operations 32,930 19,835 32,930 19,835 Bank and Trade Bank cash and receivables, balances cash balances net 115, , , , ,050 Due from banks - banking operations 19,835 19,835 Total financial Total financial assets assets 1,355,049 1,355, , , , , , , , , , ,727 Bank and cash balances 708, , ,050 Total financial assets Bank loans Bank loans 1,355, , , , , , , , , ,555 45,056 45,056 45,337 45,337 Banking Banking customer customer deposits deposits 267, , , ,0275,191 5,1918,797 8,797 10,118 10,118 Bank loans 375, ,555 45,056 45,337 Due to Due banks to banks 2,177 2,177 2,177 2,177 Banking customer deposits 267, ,027 5,191 8,797 10,118 Reinsurance Reinsurance balances balances payable payable 51,873 51,873 51,873 51,873 Due to banks 2,177 2,177 Trade payables Trade payables 50,381 50,381 50,381 50,381 Reinsurance balances payable 51,873 51,873 Bank overdraft Bank overdraft 11,078 11,078 11,078 11,078 Trade payables 50,381 50,381 Total financial Total financial liabilities liabilities 758, , , ,663 57,065 57, , ,352 55,174 55,174 45,337 45,337 Bank overdraft 11,078 11,078 Total financial liabilities 758, ,663 57, ,352 55,174 45,337 On On Demand Demand and up and to up Less On to than Less than Over 5 Over Total Total 1 month Demand 1 month 3 months 3 months months months 1-5 years 1-5 years years years US$ '000 US$ '000 US$ '000 and US$ up '000 US$ to '000 Less US$ than '000 US$ '000 US$ 3-12 '000 US$ '000 US$ '000 US$ '000 US$ Over ' Total 1 month 3 months months 1-5 years years US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 Loans and Loans advances and advances to banking to banking customers customers 334, , , , , ,978 15,825 15,825 61,731 61,731 35,430 35,430 Other financial Other financial assets assets Loans and Loans advances and advances to banking to banking customers customers 334, , ,978 15,825 61,731 35,430 Held to Held Maturity to Maturity financial financial assets assets 9,198 9,198 9,198 9,198 Other financial Other financial assets assets Available Available for sale for financial sale financial assets assets 101, , , ,588 Held to Held Maturity to Maturity financial financial assets assets 9,198 9,198 Insurance Insurance receivables receivables 38,126 38,126 38,126 38,126 Available Available for sale for financial sale financial assets assets 101, ,588 Trade receivables, Trade receivables, net net 122, , , ,062 Insurance Insurance receivables receivables 38,126 38,126 Due from Due banks from - banks banking - banking operations operations 53,899 53,899 53,899 53,899 Trade receivables, Trade receivables, net net 122, ,062 Bank and Bank cash and balances cash balances 611, , , ,470 18,243 18,243 Due from Due banks from - banks banking - banking operations operations 53,899 53,899 Total financial Total financial assets assets 1,270,769 1,270, , , , ,978 34,068 34,068 61,731 61, , ,216 Bank and Bank cash and balances cash balances 611, ,470 18,243 Total financial Total financial assets assets Bank loans Bank loans 1,270, , , , ,978 34,068 61, , ,314 99,756 99, ,216 Banking Banking customer customer deposits deposits 262, , , ,6635,853 5,853 14,246 14,246 10,136 10,136 Bank loans Bank loans 266, ,314 99,756 Due to Due banks to banks 2,376 2,376 2,376 2,376 Banking Banking customer customer deposits deposits 262, ,663 5,853 14,246 10,136 Reinsurance Reinsurance balances balances payable payable 61,189 61,189 61,189 61,189 Due to Due banks to banks 2,376 2,376 Trade payables Trade payables 44,627 44,627 44,627 44,627 Reinsurance Reinsurance balances balances payable payable 61,189 61,189 Bank overdraft Bank overdraft Trade payables Trade payables 44,627 44,627 Total financial Total financial liabilities liabilities 637, , , ,111 67,042 67, , , , ,892 Bank overdraft Bank overdraft Total financial Total financial liabilities liabilities 637, ,111 67, , ,892 Nest Investments (Holdings) Ltd Annual Report Nest Investments (Holdings) Ltd Annual Report Nest Investments (Holdings) Ltd - Annual Report 2014

89 E. Concentration risk Concentration risk includes market risk concentrations regarding financial investments in terms of the risk regarding the accumulation of exposures with the same counterparty. It also includes the risk of overexposing ourselves to certain asset classes, sectors of the economy, geographical territory and other concentrations. Efforts are made through our ERM Framework in order to minimize such risk by instituting and monitoring risk tolerances and risk limits consistent with our risk appetite in the form of limits regarding exposure to a single counterparty, exposure to specific asset categories as well as exposure to certain territories. F. Operational risks Operational risk is the risk of loss arising from systems and control failures, fraud and human intervention which can result in financial and reputation loss, and legal and regulatory consequences. The Group is taking operational risk management seriously as evidenced by a number or operational risk policies, the conducting of risk workshops aiming to embed and strengthen a risk aware culture, carrying periodic risk review sessions and monitoring the risk registers as well as all planned actions for improving the overall risk profile. The Group manages operational risk through appropriate controls, instituting segregation of duties and performing checks, including internal audit and compliance G. Political risk The Group operates through the group s subsidiaries in countries some of which face political unrest. The directors of the group monitor developments in these countries and they are confident that no material financial loss to the company will result out of the political unrest in these geographical areas. 33. Capital management A. Capital management objectives The Group s overall objectives, policies and processes remain unchanged from last year. The Group is developing its own Internal Economic Capital Model that will be gradually introduced in the key direct operations and will serve as a benchmarking tool for better and more advanced capital management. This will be over and above the regulatory capital requirements and corresponding exercises required in some jurisdictions. B. Compliance of Group subsidiaries with regulatory requirements Banking subsidiary - Trust Bank Algeria The Group s overseas banking subsidiary in Algeria complies with the regulatory capital requirements of the local regulator. Insurance and reinsurance subsidiaries Capital requirements are set and regulated at a local level for each of the Group s insurance and reinsurance subsidiaries. All insurance and reinsurance subsidiaries fully complied with externally imposed capital requirements. One subsidiary is subject to continuing assessment by Lloyds and the Prudential Regulatory Authority in order to remain an approved member of Lloyds. The risk of this approval being removed is mitigated through monitoring and fully complying with all requirements in relation to Lloyds membership. The capital requirements to support the proposed amount of syndicate capacity for future years are subject to the requirements of Lloyds. A variety of factors are taken into account by Lloyds in setting these requirements including market conditions and syndicate performance and although the process is intended to be fair and reasonable, the requirements can vary from one year to the next, which may constrain the volume of underwriting the Group is able to support. The future objectives set by the Group in respect of the banking, insurance and reinsurance subsidiaries are to maintain strong credit ratings and healthy capital ratios in order to support their business objectives and maximise shareholders value. For the purpose of the Group s capital management, capital includes issued capital and other equity reserves attributable to the equity holders of the parent. The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions, in order to ensure that it will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders or return capital to shareholders. Nest Investments (Holdings) Ltd - Annual Report

90 34. Group companies The consolidated financial statements include the financial statements of Nest Investments (Holdings) Limited and the subsidiaries listed in the following table: Notes Country of Incorporation/ Business Activity Holding Registration 2014 % Nest Investments Holdings (Cyprus) Ltd Cyprus Services % Nest Investment Property Ltd United Kingdom Investment Properties Holding % Rigata Investments Ltd Cyprus Investment Properties Holding % Foundation for Insurance & Finance Education Cyprus Education % Trust International Insurance & Reinsurance Company B.S.C. (c) Trust Re Bahrain Reinsurance 99.10% Trust Underwriting Ltd United Kingdom Corporate member of Lloyds % Texas International Underwriters Inc. United States of America Insurance % Aegean Properties Ltd Guernsey Investment Holding 88.33% Ventura Del Mar S.A. Spain Real estate 88.33% Ventura Del Mar S.A. Ltd United Kingdom Property ownership % Ribera De Marbella S.L. Spain Service company % Afro Asian Assistance B.S.C. Bahrain Travel assistance % Trust International Insurance Company (Cyprus) Ltd Cyprus Insurance % Market Insurance Services (Cyprus) Ltd Cyprus Insurance consultancy % and related services Market Insurance & Reinsurance Services Ltd United Kingdom Insurance consultancy % and related services Euroarab Management Ltd Cyprus Insurance consultancy % and related services Market Insurance Brokers Holdings Ltd Cyprus Investment Holding 96.14% Market Insurance Brokers Ltd United Kingdom Reinsurance Broker % Market Insurance Brokers Ltd PSC Jordan Reinsurance Broker % World Trade Centers Holdings (Cyprus) Ltd Cyprus Services % World Trade Center (Cyprus) Ltd Cyprus Development and marketing % of the WTC name in Cyprus Word Trade Center Beirut Ltd Lebanon Development and marketing % of the WTC name in Lebanon World Trade Centers Saudi Co Ltd Saudi Arabia Development and marketing % of the WTC name in Saudi World Trade Center Algeria Ltd Algeria Development and marketing % of the WTC name in Algeria World Trade Center Perth Ltd Australia Development and marketing % of the WTC name in Australia Signature Holding (Cyprus) Ltd Cyprus Provision of Training services % Trust Holdings Ltd Cyprus Investment Holding % Compass Insurance S.A.L. Lebanon Insurance 90.00% Trust Algeria Investment Company Algeria Holding Investment 66.95% Trust Algeria Assurances Reassurances Algeria Ins. & Reins % Trust Real Estate Algeria Real Estate 57.00% Trust Industry Algeria Manufacturing 64.00% Eurl Briqueterie Sbtm Algeria Manufacturing 64.00% Eurl Sprh Hadjout Briqueterie Algeria Manufacturing 64.00% Trust Bank Algeria (ii) Algeria Banking 40.63% Trust Yemen Insurance & Reinsurance Co. (Y.S.C) Yemen Insurance 75.00% Trust International Insurance Co. Plc. (Palestine) (i) Palestine Insurance 44.62% Trust House Insurance Co. (ii) Iraq Insurance 49.00% 88 Nest Investments (Holdings) Ltd - Annual Report 2014

91 Note: (i) The Group does not own more than 50% of the equity shares of Trust International Insurance Co. Plc. Palestine and consequently does not control more than 50% of the voting power of those shares. However, it has the power to exercise control over the company via its shareholder who controls directly such % to bring the total over the 50% level. The remaining shareholding % is held by non-related parties. (ii) Although the Group does not own more than 50% of the equity shares of Trust House Insurance Co. and Trust Bank Algeria, it has the power to exercise control over the company via other shareholdings and therefore it is consolidated as a subsidiary. The remaining percentage of shareholding relates to non-controlling interest which is held partially by third parties and partially by an associated company of the Group. Material partly-owned subsidiaries: Financial information of subsidiaries that have material non-controlling interests are provided below: Accumulated balances of material non-controlling Trust International Insurance Co. PJSC (Palestine) Trust House Insurance Co. Trust Real Estate Trust Bank Algeria Profit / (loss) allocated to material non-controlling Trust International Insurance Co. PJSC (Palestine) Trust House Insurance Co. Trust Real Estate Trust Bank Algeria US$ '000 US$ '000 22,475 17,919 2,993 1, , , , ,817 1,308 1, ,664 (38,580) 17,986 17,759 Nest Investments (Holdings) Ltd - Annual Report

92 NEST INVESTMENTS (HOLDINGS) LIMITED NEST INVESTMENTS (HOLDINGS) LIMITED The summarized NOTES TO financial THE CONSOLIDATED information of FINANCIAL these subsidiaries STATEMENTS are provided 31 DECEMBER below. This 2014 information is based on amounts NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2014 before inter-company eliminations: Trust Trust House Trust Trust House Summarised Summarised statement statement of of comprehensive income income International Insurance Trust Real Trust Bank Summarised statement of comprehensive income International Insurance Trust Real Trust Bank for 2014: for 2014: Insurance Co. Co. Estate Algeria for 2014: Insurance Co. PJSC Co. Estate Algeria PJSC (Palestine) US$ '000 US$ '000 US$ '000 US$ '000 (Palestine) US$ '000 US$ '000 US$ '000 US$ '000 Net underwriting Net underwriting profit profit 4, Net Interest Net Net underwriting Interest income income profit 4, ,216 Net fee Net Net and Interest fee commission and commission income income income 27,216 14,626 Net Income Net Net fee Income and and gains and commission / gains (losses) / (losses) income from investments from investments 2,263 14,626 Fair value Net Fair Income value gains on gains and investment on gains investment / (losses) properties properties from investments 2, ,102 Other Fair Other income value income gains on investment properties 101, ,149 Credit Other Credit loss expense income loss expense - banking - banking operations operations 293 1,149 9,179 Impairment Credit Impairment losses loss expense losses on financial on - banking financial investments operations investments 9,179 Impairment Administrative expenses losses expenses on financial investments (1,359) (16,153) Net finance Administrative Net finance (expenses) (expenses) expenses / income / income (1,359) (1,295) 337 (306) (16,153) Net finance (expenses) / income (1,295) 337 (306) Profit Profit from operations from operations 3,872 1, ,089 36,017 Income Profit Income tax expenses from tax expenses operations (1,509) 3,872 1,045 (157) 101,089 (8,846) (6,347) 36,017 Income tax expenses (1,509) (157) (8,846) (6,347) Net profit Net profit for the for year the year 2, ,243 29,670 Net profit for the year 2, ,243 29,670 Attributable Attributable to to non-controlling interests interests 1, ,664 17,986 Dividends Attributable Dividends paid to paid to to non-controlling non-controlling interests interests interests 1, ,664 17,986 6,147 Dividends paid to non-controlling interests ,147 Trust Trust International International Summarised statement of comprehensive income Insurance Co. Trust House Trust Real Trust Bank Summarised Summarised statement statement of of comprehensive income income Insurance Co. Trust House Trust Real Trust Bank for 2013: PJSC Insurance Co. Estate Algeria for 2013: for 2013: PJSC (Palestine) Insurance Co. Estate Algeria (Palestine) US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 Net underwriting profit 3, Net underwriting Net underwriting profit profit 3, Net Interest income 24,674 Net Interest Net Interest income income 24,674 Net fee and commission income 21,793 Net fee Net and fee commission and commission income income 21,793 Net Income and gains / (losses) from investments 1,224 Net Income Net Income and gains and / gains (losses) / (losses) from investments from investments 1,224 Fair value gains on investment properties (166,110) Fair value Fair value gains on gains investment on investment properties properties (166,110) Other income Other Other income income Credit loss expense - banking operations 5,933 Credit Credit loss expense loss expense - banking - banking operations operations 5,933 Impairment losses on financial investments Impairment Impairment losses losses on financial on financial investments investments Administrative expenses (1,315) 1,787 (16,451) Administrative expenses expenses (1,315) 1,787 (16,451) Net finance (expenses) / income (1,799) 20 Net finance Net finance (expenses) (expenses) / income / income (1,799) 20 Profit from operations 3,970 1,196 (166,121) 35,969 Profit Profit Income from operations from tax expenses operations (1,033) 3,970 1,196 (179) (166,121) 14,535 (6,057) 35,969 Income Income tax expenses tax expenses (1,033) (179) 14,535 (6,057) Net profit for the year 2,937 1,017 (151,586) 29,913 Net profit Net profit for the for year the year 2,937 1,017 (151,586) 29,913 Attributable to non-controlling interests 1, (38,580) 17,759 Attributable Attributable Dividends to paid to to non-controlling non-controlling interests interests interests 1, (38,580) 17,759 13,964 Dividends Dividends paid to paid to non-controlling interests interests , Nest Investments (Holdings) Ltd - Annual Report 2014 Nest Investments (Holdings) Ltd Annual Report Nest Investments (Holdings) Ltd Annual Report

93 NEST INVESTMENTS (HOLDINGS) LIMITED NEST INVESTMENTS NEST INVESTMENTS (HOLDINGS) (HOLDINGS) LIMITED LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2014 NOTES TO NOTES THE CONSOLIDATED TO THE CONSOLIDATED FINANCIAL FINANCIAL STATEMENTS STATEMENTS 31 DECEMBER 31 DECEMBER Trust Trust Trust Summarised Summarised statement statement of financial of financial position position for for International Trust House Trust Real Trust Bank Summarised Summarised statement statement of financial of position financial for position International for International Trust House Trust House Trust Real Trust Trust Real Bank Trust Bank 2014: 2014: Insurance Co. Insurance Co. Estate Algeria 2014: 2014: Insurance Insurance Co. Insurance Co. Insurance Co. Co. Estate Estate Algeria Algeria PJSC PJSC (Palestine) US$ '000 PJSC US$ '000 US$ '000 US$ '000 (Palestine) US$ '000(Palestine) US$ US$ '000 US$ US$ '000 '000 US$ US$ '000 '000 US$ '000 Non-current Non-current assets assets 46,870 1,271 1,600, ,662 Non-current Non-current assets assets 46,870 46,8701,271 1,600,210 1,271 1,600, , ,662 Current Current assets assets 47,385 27,477 35,787 81,627 Current assets Current assets 47,385 47,385 27,477 27,477 35,787 35,787 81,627 81,627 Non-current Non-current liabilities liabilities (59,059) (267,133) Non-current Non-current liabilities liabilities (59,059) (59,059) (267,133) (267,133) Current Current liabilities liabilities (58,379) (23,714) (57,090) (30,893) Current liabilities Current liabilities (58,379) (58,379) (23,714) (23,714) (57,090) (57,090) (30,893) (30,893) Total equity Total equity 35,876 5,034 1,519, ,263 Total equity Total equity 35,876 35,8765,034 1,519,848 5,034 1,519, , ,263 Attributable Attributable to equity to equity holders holders of parent of parent 13,401 2,041 1,045, ,850 Attributable Non-controlling Attributable to equity interest interest holders to equity of holders parent of parent 13,401 22,475 13,4012,041 2,993 1,045,762 2, ,087 1,045, , , ,850 Non-controlling Non-controlling interest interest 22,475 22,4752,993 2, , , , ,413 Trust Trust Trust Trust Summarised statement of financial position for International Trust House Trust Real Trust Bank Summarised Summarised Summarised statement statement statement of financial of financial of position financial position for position for International for International International Trust Trust House Trust House House Trust Trust Real Trust Real Trust Real Trust Bank Trust Bank Bank 2013: Insurance Co. Insurance Co. Estate Algeria 2013: 2013: 2013: Insurance Insurance Insurance Co. Insurance Co. Co. Insurance Insurance Co. Co. Co. Estate Estate Estate Algeria Algeria Algeria PJSC PJSC (Palestine) US$ PJSC '000 PJSC US$ '000 US$ '000 US$ '000 (Palestine) US$ '000 (Palestine) US$ (Palestine) '000 US$ '000 US$ '000 US$ '000 US$ US$ '000 '000 US$ '000 US$ US$ '000 '000 US$ '000 US$ '000 Non-current assets 40, ,490, ,420 Non-current Non-current Non-current Current assets assets assets assets 40,947 40,947 40, ,799 20, ,490, ,490,282 1,490, ,420 28, , ,420 88,605 Current Current Non-current assets Current assets assets 43,799 liabilities 43,799 43,799 20,460 20,460 20,460 28,328 (15,288) 28,328 28,328 88,605 (262,898) 88,605 88,605 Non-current Non-current Non-current Current liabilities liabilities liabilities liabilities (57,131) (17,344) (15,288) (15,288) (15,288) (262,898) (84,580) (262,898) (262,898) (23,983) Current Current Total liabilities Current equity liabilities liabilities (57,131) (57,131) (57,131) (17,344) 27,615 (17,344) (17,344) (84,580) 3,298 1,418,742 (84,580) (84,580) (23,983) (23,983) (23,983) 245,145 Total Total equity Total equity equity 27,615 27,615 27,6153,2983,298 3,2981,418,742 1,418, , , ,145 Attributable to equity holders of parent 9,696 1, , ,328 Attributable Attributable Attributable Non-controlling to equity to equity interest holders to equity holders of holders parent of parent of parent 9,696 17,919 9,696 9,6961,6181,6181, ,860 1, , , , , , , ,817 Non-controlling Non-controlling Non-controlling interest interest interest 17,919 17,919 17,9191,6801,6801, , , , , , , Related party transactions 35. Related 35. Related 35. party Related party transactions party transactions transactions 35. Related party transactions The amounts due from / to related companies represent balances from associate companies, The amounts The The amounts due amounts from due due from / to from / related to / related to companies related companies companies represent represent represent balances balances from balances from associate from associate associate companies, companies, companies, The amounts companies due from related / to related to the companies ultimate holding represent company balances and from associate other entities companies, in which companies the Group related has an to the companies companies companies related related to related the to ultimate the to ultimate the holding ultimate holding company holding interest as well as reconciling items between company and company from and other companies. from and from other entities other entities in entities which in which the in which Group the Group the has Group an has an has an ultimate holding company and from other entities which the Group has interest as well as reconciling items between the Group interest companies. interest as interest well as as well reconciling as well as reconciling as reconciling items items between items between the between Group the Group the companies. Group companies. companies. a) Balances with related parties included in the consolidated statement of financial position: a) Balances a) Balances a) with Balances related with with related parties related parties included parties included included the consolidated the in consolidated the consolidated statement statement statement of financial of financial of position: financial position: position: US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 (Payable) / receivable to / from Jordanian Expatriates Financial (518) 8 (Payable) (Payable) /(Payable) receivable Brokerage Receivable / / receivable / receivable to / from (payable) to from / Jordanian from to / from / to Jordanian Expatriates Jordanian Qatar General Expatriates Expatriates Financial Insurance Financial Financial (518) and 1,157 (518) (518) 8 (3,165) 8 8 Brokerage Receivable Brokerage Receivable Brokerage Receivable / (payable) Reinsurance / Company (payable) / from (payable) / from to Qatar from / to Qatar / General to Qatar General Insurance General Insurance and Insurance and and 1,157 1,157 1,157 (3,165) 639 (3,165) (3,165) 3,157 Reinsurance Reinsurance Reinsurance Company Company Company ,157 3,157 3,157 Nest Investments (Holdings) Ltd Annual Report Nest Investments Nest Investments (Holdings) Ltd (Holdings) Annual Ltd Report Annual 2014 Report Nest Investments (Holdings) Ltd - Annual Report

94 b) Compensation of key management personnel US$ '000 US$ '000 Salaries Other short-term employment benefits The key management personnel comprise of the Board of Directors. 36. Contingent liabilities Commitments which arise from the banking operations of the Group are as follows: Commitments US$ '000 US$ '000 Funding commitments to customers Guarantees of order of financial institutions Commitments to ensure customer order Other commitments given 119, ,182 26,439 1,368 79,427 46, , , ,148 Commitments received Guarantees received from financial institutions Other commitments received 7,258 8,351 11,212 18,660 18,470 27, Nest Investments (Holdings) Ltd - Annual Report 2014

95 37. Operating lease commitments a) Group as a lessor The Group has entered into commercial property leases on its investment property portfolio consisting of the Group s surplus office and buildings. These non-cancellable leases have remaining maturity between 1 to 9 years. Future minimum rentals payable under non-cancellable operating leases as at 31 December are, as follows: US$ '000 US$ '000 Within one year After one year but not more than five years More than five years ,035 1, ,192 3,054 b) Group as a lessee The Group has entered into commercial leases on certain properties, which all are cancellable at the discretion of the Group. Nest Investments (Holdings) Ltd - Annual Report

96 holding companies B y failing to prepare, you are preparing to fail. Benjamin Franklin 94 Nest Investments (Holdings) Ltd - Annual Report 2014

97 CORPORATE SERVICES Nest Investments (Holdings) Ltd. Tel.: Fax: Website: INSURANCE & REINSURANCE Trust International Insurance and Reinsurance Company B.S.C. (c) Trust Re Tel.: Fax: Website: INSURANCE BROKING Market Insurance Brokers (Holdings) Ltd. Tel.: Fax: Website: BANKING Trust Bank Algeria Tel: Fax: Website: Nest Investments (Holdings) Ltd - Annual Report

98 INVESTMENT HOLDING Trust Algeria Investment Company Tel.: Trust Holding Ltd. Tel.: Fax: Website: WORLD TRADE CENTERS World Trade Centers Holdings (Cyprus) Ltd. Tel.: Fax: Website: 96 Nest Investments (Holdings) Ltd - Annual Report 2014

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