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ITACARÉ CAPITAL INVESTMENTS LTD

ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2014


YEAR ENDED 31 DECEMBER 2014

CONTENTS

Page

Company Information 2

Chairman's Report 4

Directors' Report 9

Statement of Directors' Responsibilities 11

Report of the Independent Auditors 12

Consolidated Statement of Comprehensive Income 14

Consolidated Statement of Financial Position 15

Consolidated Statement of Changes in Equity 16

Consolidated Cash Flow Statement 17

Notes to the Financial Statements 18



2

COMPANY INFORMATION

Directors

Michael St Aldwyn (Non-Executive Chairman)

Raymond Smith (Non-Executive Director)

Samsão Woiler (Non-Executive Director)

Ricardo Reisen de Pinho (Non-Executive Director)

Frederick Dubignon (Non-Executive Director)

Registered Office

3rd Floor, Geneva Place

Waterfront Drive

Road Town

Tortola

British Virgin Islands

Local Management Team

Real Estate Development Company

R. Leopoldo Couto de Magalhães Jr. 110 - CJ 101/102

Sao Paulo

Brazil

CEP 04542-000

Group Accountant

David Mattey

R. Leopoldo Couto de Magalhães Jr. 110 - CJ 101/102

Sao Paulo

Brazil

CEP 04542-000

Administrator & Company Secretary

EFG Wealth Solutions (Jersey) Limited

No 1 Seaton Place

St Helier

Jersey JE4 8YJ

Channel Islands



3

COMPANY INFORMATION (continued)

Custodian

EFG Bank

24 Quai de Seujet

1211 Geneva 2

Switzerland

Auditors

Grant Thornton UK LLP

Grant Thornton House

Melton Street

Euston Square

London

NW1 2EP

United Kingdom

Valuer

Cushman & Wakefield Negocios Imobiliarios

Alameda Araguaia, No 2.044

Bloco 1, Salas 1.311/12

Empreendimento CEA

06455-000, Barueri

Sao Paulo

Brazil

Registrar

Capita Registrars (Guernsey) Limited

2nd Floor, No 1 Le Truchot

St. Peter Port

Guernsey GY1 4AE

Channel Islands

Website

www.itacareinvestments.com



4

CHAIRMAN'S STATEMENT

Dear Shareholder

While you have received various communications during the course of the last 12 months, I am taking this

opportunity to give you as full an update as possible regarding the activities of your company during 2014

and Q1 2015. In summary, we have undergone a significant number of changes which we believe will now

put the Company on a path to realistically achieve values closer to those indicated in our most recent

valuation. This is still not an easy task, given the significant fall in the $/R$ exchange rate in the first quarter

of 2015, but we believe that we have a much simpler structure now which will make it easier for the

management team to focus on the two remaining core assets.

2014 started with the Board’s decision to delist the Company from the AIM market. You will have received

correspondence regarding the reasons for doing so and I am pleased to say that over 75% of shareholders

voted in favour. This has reduced our running costs and created a situation where we are able to operate with

greater flexibility while continuing to maintain a level of corporate governance commensurate with our

approach when listed.

During Q4, the Board came to the conclusion that the cost structure of the Company was untenable, but the

issue was not addressed at that time, because the Company received an offer to acquire the Trancoso and

Três Praias assets which the Board was minded to accept. However, in January 2015 the offer was withdrawn

leaving us to refocus on the ongoing situation.

The Company had depleted its cash reserves and the only basis on which further funds could be raised was

by the issuance of $3 million of Convertible loan notes, which was initiated towards the end of March 2015,

and supported by 10 of our shareholders or members of the management team. At the same time, the

Company terminated the management agreement without cause in an amicable transaction that was mutually

beneficial to ICP and the Company.

Consequently this report comprises not only the Chairman’s statement but also much that historically was in

the Investment Manager’s report.

Our next major event in 2014 was the disposal of the Company’s 50% share of the Duas Barras project to our

partner. The transaction was concluded on a NAV for NAV basis, using the June 30th

2014 valuation which

was NAV accretive for the remaining shareholders.

The Company is now being managed by Real Estate Development Company ("Redco"), on a short-term

contract, at a cost which is significantly lower than the former management contract. The 5 members of the

Redco team, operating from Sao Paulo and headed up by Frederico Schiliró, had all previously worked for

Itacaré Capital Partners. At the same time David Mattey, who had served as Investment Adviser to the

Company has stepped up to take the role of Group Accountant.



5

CHAIRMAN'S STATEMENT (continued)

Results

Project Valuation $m

Três Praias Trancoso

Entry Price 16.7 16.0

37.2 22.1

41.5 34.4

38.7 32.4

34.1 24.2

Following the issuance of the Convertible Loan Notes, the Company will have at May 1 2015 approximately

$2.2 million of cash, a loan from BGO, its largest shareholder of $3.1 million and land assets valued at $58

million, comprising two active projects, Três Praias and Trancoso. A further parcel of land, Havaizinho, has

been earmarked as a property which the Company wishes to sell.

Valuation Dec-2011

Valuation Dec-2012

Valuation Dec-2013

Valuation Dec-2014

At a corporate level we take this opportunity to bid farewell to two of our Directors, Ricardo Reisen de Pinho

and Samsão Woiler, and to express our sincere thanks for their contribution over many years. We are pleased

to announce the imminent appointment of two new directors; Pierre Charalambides, who represents Dolphin

Capital Partners, the Company’s second largest shareholder; and Frederico Schiliró representing the

management team. These appointments are to be made soon after the board meeting to approve the signing of

these accounts. These two appointees together with Fred Dubignon provide their services as directors at no

cost to the Company. Raymond Smith and I will continue to be compensated but with 50% of our

remuneration being deferred until the Company has realised sufficient cash to pay off its obligations.

We have prepared a budget, which is driven by keeping the costs of the operation as low as possible. We are

very cognisant that our shareholders have had to wait a long time to see a return and that our mandate is to

put into motion transactions which will give visibility to the realisation of our assets within the next 12

months. We are also extremely conscious that we should no longer assume we can rely on the existing

shareholders to provide any further financing, such that the future costs of the Company should now be

funded by the realisation of assets.

The results for the year ended 31 December 2014 show a loss of $14.9 million driven by the material 14%

exchange movement in the Brazilian Real (R$) against the US Dollar ($), as well as an increased discount

rate used by the independent valuation expert to reflect the softening of the Brazilian real estate market,

despite the planning gains achieved. The combination gave rise to an unrealised net valuation loss of $12.9

million for the period. This compares to a loss of $11.3 million for the period to 31 December 2013, which

included unrealised valuation losses of $7.6 million on assets not disposed of during the year - also

attributable to a 15% exchange movement during 2013. The Company reported a Basic Loss per share of

$0.16 compared to a Basic Loss per share of $0.14 for the year to 31 December 2013. The delisting in May

2014 gave rise to savings in administrative overhead; the main benefits of which will be seen in the current

year, along with the further savings achieved as a consequence of the amicable early termination of the

Management contract with Itacaré Capital Partners.



6


Project Valuation R$m

Três Praias Trancoso

Entry Price 29.7 27.4

69.3 41.2

85.0 70.4

91.0 76.0

91.3 64.9

Três Pralas

Trancoso

The Três Praias residential project is situated in the state of Espirito Santo. The state is the leading

producer of iron ore and steel slabs in the country; being home to the world's largest steel plant,

Arcelor Mittal Brasil. Vitoria, the capital city, is the largest steel-producing city in the world. The city has

an important port for exporting iron ore and steel. In addition, Espirito Santo is an important oil and gas

driller; a major granite producer, exporting the product worldwide, and the second largest producer of coffee

and cellulose in the country. Like many other states in Brazil, the tourism industry is also a prominent

industry of Espirito Santo and its beaches are the nearest for residents of Minas Gerais and its capital Belo

Horizonte, Brazil’s third largest city.

Valuation Dec-2012

Valuation Dec-2013

Valuation Dec-2014

The Trancoso project is situated on a 293-hectare site with approximately 600 metres of beachfront. It is less

than two kilometres from the village of Trancoso, Bahia and 47 km south of Porto Seguro International

Airport, which is served by domestic and international charter flights. There is also a 1,500-metre paved

landing strip located within a 15-minute drive to the project. The project will see the phased development of

177 residential units, a small 40-bungalow luxury hotel, a beach club, a spa and other amenities on the site.

Total sales value is projected at R$730 million resulting in R$365 million ($120 million) attributable to the

Company based on its 50% shareholding.

The Cushman and Wakefield (“C&W”) valuation in local currency has increased from R$91.0 million ($39.7

million) in December 2013 to R$91.3 million ($34.1 million) in December 2014.

Valuation Dec-2011

Três Praias is expected to benefit from a significant increase in the level of investment into the state, as

more foreigners and locals move there to work in the oil and steel industries.

As announced in July 2009, the Company and its project partner, Brookfield lncorporações SA (BOVESPA:

BISA3), one of Brazil's largest real estate developers ("Brookfield"), agreed new terms to the original

investment agreement signed in December 2007. Brookfield acquired approximately nine hectares, or 10% of

the entire site, for a cash consideration of R$6.5 million ($3.2 million), all received by the Company by

July 2011. Under the amended agreement with Brookfield, in addition to the sale of 10% of the site,

Brookfield is responsible for the master planning and preliminary licensing of the entire site and all related

costs.

The planning approval process has taken much longer than anticipated and each of our Company reports has

indicated that the approvals are imminent. This year we can report that the preliminary licence has been

received, with a number of conditions that need to be satisfied. Resolution of the conditions is well advanced

and as a consequence we are starting to seek interest from potential development partners.



7


Brazilian Economy

In December 2010, ltacare Capital signed a Hotel Operating Agreement with Hotel Marco Internacional S.A.,

the operator of Fasano Hotels, a premium luxury brand in Brazil, and JHSF Participaltoes S.A, the

controlling shareholder of Fasano Hotels, for the development of Fasano Trancoso. The project team

also comprises Hart Howerton, a London-based firm of master-planners, and lsay Weinfeld, the award

winning Brazilian architect.

Subsequent to the year end, on 24 April 2015, the preliminary licence on the plateau was finally granted

approving the build of 154 villas, a beach club, spa and tennis club. As soon as the funding is complete, the

management team will commence drawing up detailed architectural plans for the plateau area.

The C&W valuation in local currency decreased from R$76.0 million ($32.4 million) in December 2013 to

R$64.9 million ($24.2 million) in December 2014, which because of the exchange movement gave rise to a

more material movement in the Dollar equivalent. The decrease was mainly attributable to C & W’s revised

assumptions on the value of the hotel component which came down from a positive value in their December

2013 valuation to a negative value as at December 2014, mainly arising from lower occupancy rates due to

their data on Brazilian economic conditions. Their valuation was also impacted by higher estimated

construction costs due to their latest cost inflation numbers, and a higher discount factor applied to their

valuation model which also reflects project delays and the current Brazilian economic environment.

On December 31 2012, the Company signed with Banco do Nordeste do Brasil ("BNB") a 13-year R$40.1

million construction loan facility, with an annual interest rate of 2.5%, to cover the hotel and its infrastructure

related cost.

Over the past two years the Company and our Swedish partners have sought to identify potential partners to

provide the additional funding that is required to initiate sales and construction, having obtained full

planning consent and overcome our various legal challenges. We believe that we are close to finding such a

partner and will report accordingly.

2014 was a disappointing year for Brazil’s economy with momentum slipping and barely positive GDP

growth. The Real Estate sector suffered considerably and the level of uncertainty in the market did not

improve as a result of the re-election of President Rousseff, after a closely fought campaign.

In fact, since year-end the currency has become extremely volatile declining at one point to R$3.29 in March

vs R$2.68 on December 31 2014, though market analysts expects the rate to continue to fluctuate around

current levels until the end of 2015. The expectation is that the economy will regain some momentum in the

second half of the year after monetary and fiscal adjustments being implemented start to show their positive

effects over inflation and trade balances. Many of the large construction companies have been identified as

participants in a large corruption scandal which has paralysed much of the sector.

In November 2011, the project received approval by the Municipality of Porto Seguro for the issuance of the

Installation License and the Construction License for Phase 1 of the Project. Phase 1 comprises a 40-room

Fasano hotel, restaurant, spa and 23 Fasano residential villas for sale, all located in the beachfront part of the

site.

However, the current levels are beginning to attract buyers both locally and internationally and while there is

currently little liquidity in the Real Estate market, it is hoped that the current bottom-picking will result in

some new activity over the coming months which will hopefully increase the level of international demand

for our Trancoso project.



8


Conclusion

Michael St Aldwyn

Chairman 28th April 2015

I believe that your company is in a better position to realise some value than it was 12 months ago. That

value is going to be less than that to which we all aspired but for the first time there are signs that it can start

to happen.

I would like to thank my fellow Directors, our Investment Advisor, now Group Accountant, and all the team

in Brazil for their hard work over the past 12 months. It has been a testing period but one which has pointed

the Company in the right direction.



9

DIRECTOR'S REPORT

Principal activity and incorporation

Results and dividends

The Directors do not recommend the payment of a dividend.

Financial Performance

Consolidated loss per share

2014 2013

$ $

Basic and diluted loss per share (0.16) (0.14)

Basic and diluted loss per share excluding Deferred tax (0.18) (0.15)

The Group's results for the financial period ending 31 December 2014 are set out in the Consolidated

Statement of Comprehensive Income on page 14. A review of the Group's activities is set out in the

Chairman's Statement on pages 4 to 8.

The Directors take pleasure in presenting their report and financial statements of the Group for the year

ended 31 December 2014.

These consolidated financial statements comprise the results of the Company and its subsidiaries (together

referred to as the “Group”), together with prior year comparatives.

The Company is a limited liability closed-end real estate investment company, incorporated on 27 April

2006 in the British Virgin Islands (BVI). It was admitted to the Alternative Investment Market (AIM) of the

London Stock Exchange on 30 May 2007, and delisted from the exchange on 16 May 2014.

The Company owns two prime beachfront real estate assets in the northeast region of Brazil on which it has

obtained planning consents to build a hotel and luxury villas on each. These projects will be developed with

the assistance of professional developers.



10

DIRECTOR'S REPORT (continued)

Net asset value per share

Net asset value per share attributable

2014

$

Basic 0.75

Diluted 0.75

Diluted excluding Deferred Tax 0.77

Company Secretary

Auditors

By Order of the Board

Michael St Aldwyn

Chairman 28th April 2015

The auditors, Grant Thornton UK LLP, have indicated their willingness to continue in office and a

resolution concerning their re-appointment will be proposed by the Board.

The secretary of the Company during the period from incorporation and to the date of this report was EFG

Wealth Solutions (Jersey) Limited.



11

STATEMENT OF DIRECTORS' RESPONSIBILITIES

In preparing these financial statements, the directors are required to:

- select suitable accounting policies and then apply them consistently

- make judgments and estimates that are reasonable and prudent

In so far as each of the Directors is aware:

The Directors are responsible for keeping adequate accounting records that disclose with reasonable

accuracy at any time the financial position of the Group and enable them to ensure that the financial

statements comply with the BVI Business Companies Act 2004. They are also responsible for safeguarding

the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and

other irregularities.

- There is no relevant audit information of which the Group's auditors are unaware; and

- The Directors have taken all steps that they ought to have taken to make themselves aware of

any relevant audit information and to establish that the auditors are aware of that information

The Directors are responsible for preparing the Annual Report and the financial statements in accordance

with applicable law and regulations.

The Group is subject to legislation that requires the Directors to prepare financial statements for each

financial year. Under that legislation the Directors have elected to prepare financial statements in

accordance with International Financial Reporting Standards as adopted by the European Union (“IFRSs”).

The financial statements are required by law to give a true and fair view of the state of affairs of the Group

and of the profit or loss of the Group for that period.

- state whether applicable IFRS’s have been followed, subject to any material departures

disclosed and explained in the financial statements

- prepare the financial statements on the going concern basis unless it is inappropriate to presume

that the Group will continue in business.



12

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF ITACARE

CAPITAL INVESTMENTS LTD

Respective responsibilities of directors and auditors

Scope of the audit of the financial statements

We have audited the group financial statements of Itacaré Capital Investments Ltd. for the year ended 31

December 2014, which comprise the consolidated statement of comprehensive income, the consolidated

statement of financial position, the consolidated statement of changes in equity, the consolidated cash flow

statement, and related notes. The financial reporting framework that has been applied in their preparation is

applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

This report is made solely to the Company's members, as a body, in accordance with the terms of our

engagement letter. Our audit work has been undertaken so that we might state to the Company's members

those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest

extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and

the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

As explained more fully in the Statement of directors’ responsibilities, the directors are responsible for the

preparation of the group financial statements which give a true and fair view. Our responsibility is to audit

and express an opinion on the group financial statements in accordance with applicable law and International

Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices

Board’s Ethical Standards for Auditors.

An audit involves obtaining evidence about the amounts and disclosures in the group financial statements

sufficient to give reasonable assurance that the group financial statements are free from material

misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting

policies are appropriate to the Group’s circumstances and have been consistently applied and adequately

disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall

presentation of the group financial statements.

In addition, we read all the financial and non-financial information in the Annual Report to identify material

inconsistencies with the audited group financial statements and to identify any information that is apparently

materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of

performing the audit. If we become aware of any apparent material misstatements or inconsistencies we

consider the implications for our report.



13

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF ITACARE

CAPITAL INVESTMENTS LTD (continued)

Opinion on financial statements

In our opinion the group financial statements:

GRANT THORNTON UK LLP

GRANT THORNTON UK LLP

STATUTORY AUDITOR

28th April 2015

give a true and fair view of the state of the group's affairs as at 31 December 2014 and of its loss for

the year then ended in accordance with IFRS's as adopted by the European Union



14

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Notes 2014 2013

$ $

Valuation loss on investment properties 8 (13,553,055) (8,137,454)

Valuation gain on investment properties 8 616,170 -

Valuation loss on assets held for sale 9 (120,300) (2,233,300)

Valuation gain on assets held for sale 9 396,580 -

Management fees 2.11 (1,740,000) (1,740,000)

Other administration fees and expenses 4 (1,883,791) (1,844,410)

Realised loss on sale of asset 9 - (500,000)

Total operating loss (16,284,396) (14,455,164)

Interest received 2.6 15,284 42,323

Other income - 30,000

Loss for the year before tax (16,269,112) (14,382,841)

Deferred tax 5 1,899,091 1,555,613

(14,370,021) (12,827,228)

Other comprehensive income

Items that will be reclassified subsequently to profit or loss

(517,296) 1,542,777

(14,887,317) (11,284,451)

Basic and diluted loss per share 6 (0.16) (0.14)

The accompanying notes are an integral part of the statements

Loss for the year attributable to owners of the

parent

Exchange differences on translating foreign

operations

Total comprehensive loss attributable to

owners of the parent



15

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

2014 2013

ASSETS Notes $ $

Non-current assets

Investment properties 8 58,265,500 89,867,000

58,265,500 89,867,000

Current Assets

Trade and other receivables 13 103,708 1,744,659

Cash and cash equivalents 15 207,232 525,869

Total current assets 310,940 2,270,528

Assets held for sale 9 3,000,000 3,000,000

Total assets 61,576,440 95,137,528

EQUITY

Capital and reserves attributable to equity holders

Ordinary Shares 10 736,961 935,251

Share premium account 10 70,366,696 89,997,406

Retained earnings (20,104,446) (5,734,425)

Foreign exchange reserve 3,966,347 4,483,643

Total equity 54,965,558 89,681,875

LIABILITIES

Non Current Liabilities

Deferred tax liability 5 2,196,901 4,095,992

2,196,901 4,095,992

Current Liabilities

Third party loan payable 14 2,646,315 -

Trade and other payables 14 1,767,666 1,359,661

4,413,981 1,359,661

Total liabilities 6,610,882 5,455,653

Total equity and liabilities 61,576,440 95,137,528

Basic NAV per Share 11 $0.74 $0.96

Michael St Aldwyn


These financial statements were approved by the Board on 28th April 2015 and signed on their behalf by:



16

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Share Share Retained Foreign

Capital Premium Earnings Exchange Total

$ $ $ $ $

Balance at 1 January 2013 891,415 88,159,322 7,092,803 2,940,866 99,084,406

Treasury shares issued 69,550 2,712,370 - - 2,781,920

Treasury shares returned (25,714) (874,286) - - (900,000)

Issuance costs - (103,200) - - (103,200)

Transaction with owners 43,836 1,734,884 - - 1,778,720

- 103,200 (12,827,228) - (12,724,028)

- - - 1,542,777 1,542,777

Balance at 31 December 2013 935,251 89,997,406 (5,734,425) 4,483,643 89,681,875

Balance at 1 January 2014 935,251 89,997,406 (5,734,425) 4,483,643 89,681,875

Issued shares swapped to Treasury

shares (198,290) (19,630,710) - - (19,829,000)

Transaction with owners (198,290) (19,630,710) - - (19,829,000)

- - (14,370,021) - (14,370,021)

-

- - - (517,296) (517,296)

Balance at 31 December 2014 736,961 70,366,696 (20,104,446) 3,966,347 54,965,558

Loss for the year

Loss for the year


Foreign exchange movement on

investments in foreign operations

Foreign exchange movement on

investments in foreign operations





17

CONSOLIDATED CASH FLOW STATEMENT

Note 2014 2013

$ $

Net loss for the year (14,370,021) (12,827,228)

Revaluation of investment properties 8 12,936,885 8,137,454

Revaluation of assets held for resale 9 (276,280) 2,233,300

Realised loss on sale of assets - 500,000

Decrease/(increase) in receivables 1,640,951 (1,284,341)

Increase/(decrease) in payables (20,681) (521,376)

Decrease in deferred taxation 5 (1,899,091) (1,555,613)

Net cash used in operating activities (1,988,236) (5,317,804)

Cashflows from investing activities

Increase in investment properties (888,105) (730,254)

Sale of investment properties - 150,000

Net cash outflow from investing activities (888,105) (580,254)

Cash flows from financing activities

Decrease of treasury shares - 2,781,920

Issue of working capital 2,500,000 -

Issue of loan notes 575,000 -

Net cash inflow from financing activities 3,075,000 2,781,920

Net decrease in cash and cash equivalents 198,659 (3,116,138)

Cash and cash equivalents at the start of the period 525,869 1,649,230

(517,296) 1,992,777

Cash and cash equivalents at the end of the period 15 207,232 525,869


Exchange differences on translating foreign operations



18

NOTES TO THE FINANCIAL STATEMENTS

1. General information

2. Accounting policies

2.1 Basis of preparation

2.2 Basis of measurement

The Company is a limited liability closed-end real estate investment company, incorporated on 27 April

2006 in the British Virgin Islands (BVI). The Company is focused on master planned residential resorts in

Brazil.

The shares of the Company were admitted to the Alternative Investment Market (“AIM”) of the London

Stock Exchange on 30 May 2007. The consolidated financial statements for the year to 31 December 2014

comprise the Company and its subsidiaries (together referred to as the “Group”). The Company delisted

from AIM on 16 May 2014.

The consolidated financial statements have been prepared using the measurement bases specified

by IFRS for each type of asset, liability, income and expense. The measurement bases are more

fully described in the accounting policies below.

The preparation of financial statements in conformity with IFRS requires the use of certain critical

accounting estimates and exercise of judgment by the Directors while applying the Group’s

accounting policies. These estimates are based on the Directors’ best knowledge of the events that

existed at the balance sheet date; however, the actual results may differ from these estimates. The

areas involving a higher degree of judgment or complexity, or areas where assumptions and

estimates are significant to the consolidated financial statements are disclosed in subsequent

notes.

The financial statements of the Group have been prepared in accordance with International

Financial Reporting Standards as adopted by the EU (“IFRS”), and the BVI Business Companies

Act 2004. The financial statements have been prepared under the historical cost convention as

modified by the revaluation of investment properties held at fair value.



19


2. Accounting policies (continued)

2.3 Standards and amendments to existing standards effective 1 January 2014

The following standards and amendments to existing standards have been published and are

mandatory for the Group’s accounting periods beginning on or after 1 January 2014 or later

periods. Certain other new standards and interpretations have been issued but are not expected to

have a material impact on the Group’s financial statements:

IFRS 11 Joint Arrangements (effective 1 January 2014)

IFRS 11 Joint Operations

IFRS 10 Consolidated Financial Statements

IFRS 10 replaces the portion of IAS 27 ‘Consolidated and Separate Financial Statements’ that

addresses the accounting for consolidated financial statements. It also includes the issues raised in

SIC-12 ‘Consolidation — Special Purpose Entities’. IFRS 10 establishes a single control model

that applies to all entities including special purpose entities. The changes introduced by IFRS 10

will require management to exercise significant judgement to determine which entities are

controlled, and therefore, are required to be consolidated by a parent, compared with the

requirements that were in IAS 27. The new standard has been adopted and have been applied

retrospectively, in accordance with their transitional and has had had no impact on the Group’s

consolidated financial statements.

IFRS 9 ‘Financial instruments: Classification and measurement’

The standard requires an entity to classify its financial assets on the basis of the entity’s business

model for managing the financial assets and the contractual cash flow characteristics of the

financial asset, and subsequently measures the financial assets as either at amortised cost or fair

value. The new standard is mandatory for annual periods beginning on or after 1 January 2018.

The Group’s management has yet to assess the impact of this new standard on the Group’s

consolidated financial statements.

IFRS 9 Financial Instruments (IASB effective date 1 January 2018 - not yet adopted by the EU)

IFRS 10 Consolidated Financial Statements (effective 1 January 2014)

IFRS 11 supersedes IAS 31 Interests in Joint Ventures (IAS 31). It aligns more closely the

accounting by the investors with their rights and obligations relating to the joint arrangement. In

addition, IAS 31’s option of using proportionate consolidation for joint ventures has been

eliminated. IFRS 11 now requires the use of the equity accounting method, which is currently

used for investments in associates. The Group’s management have revisited the classification their

Joint Venture in Trancoso and, as this meets the definition of a Joint Operation, this has had

limited impact on the Group’s consolidated financial statements.



20


2.4 Basis of Consolidation

(a) Consolidation

(b) Business combinations

2.5 Segment reporting

The results of subsidiaries acquired or disposed of during the year are included in the consolidated

Statement of Comprehensive Income from the effective date of acquisition or up to the effective

date of disposal, as appropriate. Where necessary, adjustments are made to the financial

statements of subsidiaries to bring the accounting policies used into line with those used by the

Group. All intra-Group transactions, balances, income and expenses are eliminated on

consolidation.

All of the group's assets and liabilities arise in relation to the Group's investment property

portfolio on the coast of Brazil.

The consolidated financial statements incorporate the financial statements of the Company and

entities controlled by the Group (its subsidiaries and subsidiary undertakings). Control is achieved

where the Group has the power to govern the financial and operating policies of a Group company

so as to obtain benefits from its activities.

Operating segments are reported in a manner consistent with the internal reporting provided to the

chief operating decision maker. The chief operating decision maker is the person or group that

allocates resources to and assesses the performance of the operating segments of an entity. The

Group has determined that its chief operating decision maker is the board of Directors of the

Group.

The acquisition of subsidiaries is accounted for using the acquisition method. The cost of the

acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given,

liabilities incurred or assumed, and equity instruments issued by the Group in exchange for

control of the portfolio Group. The portfolio Group’s identifiable assets, liabilities and contingent

liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair value

at the acquisition date, except for non-current assets (or disposal groups) that are classified as held

for resale in accordance with IFRS 5 Non Current Assets Held for Sale and Discontinued

Operations, which are recognised and measured at fair value less costs to sell.

The board considers the business based on the performance of the Investment Properties and

considers these to be the Group's operating segments. The segmental information provided to the

Board can be found in Note 8 Investment Properties.



21



2.6 Interest Receivable

2.7 Foreign currency transactions

(a) Functional and presentation currency

(b) Transactions and balances

(c) Group companies

Items included in the Group’s financial statements are measured using the currency of the primary

economic environment in which it operates. This is the US Dollar, which is most reflective of the

Group’s cash flows.

(i) assets and liabilities for each statement of financial position presented are translated at the

closing rate at the date of that statement of financial position.

Foreign currency transactions are translated into the functional currency of the parent company

using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and

losses resulting from the settlement of such transactions and from the translation at year-end

exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised

in the profit or loss. Non-monetary assets and liabilities denominated in foreign currencies that are

measuered at fair value are retranslated to the functional currency at the exchange rate at the date

that the fair value was determined.

The results and financial position of all the Group entities (none of which has the Currency of a

hyperinflationary economy) that have a functional Currency different from the presentation

Currency are translated into the presentation Currency as follows:

(ii) income and expenses for each income statement are translated at average exchange rates

(unless this average is not a reasonable approximation of the cumulative effect of the rates

prevailing on the transaction dates, in which case income and expenses are translated at the rate

on the dates of the transactions); and

Interest receivable on cash held in deposit accounts is recognised on an accruals basis.

(iii) all resulting exchange differences are recognised in other comprehensive income and

accumulated in a separate component of equity.



22



2.8 Investment properties

2.9 Assets held for sale

2.10 Financial Liabilities

Investment properties are those which are held either to earn rental income or for capital

appreciation or both. Investment properties are stated at fair value. An external, independent

valuation company, having an appropriate recognised professional qualification and recent

experience in the location and category of property being valued, values the portfolio every year.

The fair values are based on market values, being the estimated amount for which a property

could be exchanged on the date of valuation between a willing buyer and a willing seller in an

arm’s length transaction after proper marketing wherein the parties had each acted

knowledgeably, prudently and without compulsion. As no properties have been completed as yet

no rental income has been recognised as yet.

Financial liabilities are obligations to pay cash or other financial assets and are recognised when

the group becomes a party to the contractual provisions of the instrument. Financial liabilities

categorised as at fair value through profit or loss are recorded initially at fair value, all transaction

costs are recognised immediately in the profit or loss. All other financial liabilities are recorded

initially at fair value, net of direct issue costs, where applicable.

Any gain or loss arising from a change in fair value is recognised in profit or loss.

Any gain or loss resulting from the sale of an investment property is immediately recognised in

profit or loss.

Assets classified as held for sale are measured at the lower of their carrying amounts immediately

prior to their classification as held for sale and their fair value less costs to sell. However, some

held for sale assets such as financial assets or deferred tax assets, continue to be measured in

accordance with the Group’s relevant accounting policy for those assets. Once classified as held

for sale, the assets are not subject to depreciation or amortisation. Any profit or loss arising from

the sale or remeasurement of discontinued operations is presented as part of a single line item,

profit or loss from discontinued operations (see note 9).

When the Group intends to sell a non-current asset or a group of assets (a disposal group), and if

sale within 12 months is highly probable, the asset or disposal group is classified as held for sale

and presented separately in the statement of financial position. Liabilities are classified as held for

sale and presented as such in the statement of financial position if they are directly associated

with a disposal group.



23



2.10 Financial Liabilities (continued)

2.11 Investment Manager and Performance Fee

2.12 Cash and cash equivalents

2.13 Share capital and premium

Share capital represents the issued amount of shares outstanding at their par value. Any excess

amount of capital raised is included in share premium. External costs directly attributable to the

issue of new shares are shown as a deduction, net of tax, in share premium from the proceeds.

Financial liabilities categorised as at fair value through profit or loss are re measured at each

reporting date at fair value, with changes in fair value being recognised in the income statement.

All other financial liabilities are recorded at amortised cost using the effective interest method,

with interest-related charges recognised as an expense in the finance cost in the income statement.

Finance charges, including premiums payable on settlement or redemption and direct issue costs,

are charged to profit or loss on an accruals basis using the effective interest method and are added

to the carrying amount of the instrument to the extent that they are not settled in the period in

which they arise.

A financial liability is derecognised only when the obligation is extinguished, that is, when the

obligation is discharged or cancelled or expires.

Cash and cash equivalents comprise of cash deposited with banks and bank overdrafts repayable

on demand. Cash equivalents are short-term, highly liquid investments that are readily convertible

to known amounts of the cash and which are subject to an insignificant risk of changes in value.

Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash

management are included as a component of cash and cash equivalents for the purpose of the cash

flow statement.

The Investment Manager received an annual management fee payable quarterly in advance

equivalent to 2% per annum of “equity funds” being the combination of (i) $87 million plus (ii)

the gross proceeds of any further subsequent equity Group raisings, plus (iii) realised net profits

from investments, less (iv) distributions to Shareholders.

In addition, in relation to any investment made by the Group the Investment Manager is

potentially entitled to a performance fee based on the net realised cash profits made by the Group

subject to the Group receiving the “Relevant Investment Amount”, which is an amount equal to

the aggregate of all cost instalments for an investment: each instalment being multiplied by a

compounded annualized percentage return of 13% from the quarter date when such cost

instalment is paid less the sum of all accumulated cash distributions received by the Group in

relation to that investment.



24



2.14 Income tax

2.15 Joint Ventures and Joint Operations

2.16 Treasury Shares

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits

will be available against which the asset can be utilised. Deferred tax assets are reduced to the

extent that it is no longer probable that the related tax benefit will be realised.

The taxation charge included in the current year income statement comprises deferred tax only.

Deferred tax is provided using the balance sheet liability method, providing for temporary

differences between the carrying amounts of assets and liabilities for financial reporting purposes

and the amounts used for taxation purposes. The amount of deferred tax provided is based on the

expected manner of realisation or settlement of the carrying amount of assets and liabilities, using

tax rates enacted or substantially enacted at the reporting date.

Where any Group company purchases the Group’s equity share capital (treasury shares), the

consideration paid, including any directly attributable incremental costs, is deducted from equity

attributable to the Group’s equity holders until the shares are cancelled, reissued or disposed of.

Where such shares are subsequently sold or reissued, any consideration received, net of any

directly attributable incremental transaction costs and the related income tax effects, is included in

equity attributable to the Group’s shareholders.

The Group’s interests in jointly controlled entities are accounted for by proportionate

consolidation where the arrangement meets the definition of a Joint Operation. The Group

combines its share of the joint ventures’ individual income and expenses, assets and liabilities and

cash flows on a line-by-line basis with similar items in the Group’s financial statements. The

Group recognises the portion of gains or losses on the sale of assets by the Group to the joint

venture to which it is attributable to the other venturers. The Group does not recognise its share of

profits or losses from the joint venture that result from the Group’s purchase of assets from the

joint venture until it resells the assets to an independent party. However, a loss on the transaction

is recognised immediately if the loss provides evidence of a reduction in the net realisable value

of a current asset, or an impairment loss.

Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is

recognised in the profit or loss except to the extent that it relates to items recognised directly in

equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted

or substantially enacted at the reporting date, and any adjustment to tax payable in respect of

previous years.

Investments in Joint Ventures that do not meet the criteria of a Joint Operation are accounted for

using the equity method.



25



2.17 Financial Assets

2.18 Going concern

On 31st

December 2014 the Company held $0.2 million of cash reserves (2013: $0.5 million), and

debt amounting to $2.7 million including accrued interest. Subsequent to the year end, the BGO

working capital loan facility was increased to $3.1 million plus interest and the repayment date

was extended to 30th March 2016.

On 31st

March 2015, the Company invited all shareholders to participate in a $3 million

convertible loan note. Under the terms of the loan note, interest will accrue at the rate of 6% per

annum, and the loan notes may be converted into ordinary shares at a strike price of 15 cents. The

Company holds sufficient shares in Treasury to cover the total loan note conversion. As of the

date of this report, the Company has successfully received $2.975 million in subscriptions.

Loans and receivables are non-derivative financial assets with fixed or determinable payments

that are not quoted in an active market. Trade receivables, sundry receivables and interest

receivable are classified as loans and receivables. Loans and receivables are measured subsequent

to initial recognition at amortised cost using the effective interest method, less provision for

impairment. Any change in their value through impairment or reversal of impairment is

recognised in profit or loss.

The Company intends to prepare revised plans for its Tres Praias project and either sell it, or seek

new investment to facilitate the commencement of the build program. The Board believes that all

efforts to progress the scheme will serve to increase the asset’s liquidity, which has been inhibited

to date due to the ongoing state of the Brazilian real estate market for development land.

The Directors believe that the Company is more than able to manage its business risk

successfully. The Company expects to gain additional equity investment into its Trancoso joint

venture project to facilitate the drawdown of the development loan from Banco de Nordeste and

commence the project build in 2015.

On 31st

March 2015, the Company terminated the management agreement with Itacare Capital

Partners (“ICP”) without cause in an amicable transaction that was mutually beneficial to ICP and

the Company, which gives rise to further operating cost savings for the future.

The Board has the intention to sell Havaizinho, categorised as an asset held for resale, in order to

increase cash headroom.



26



2.18 Going concern (continued)

3. Critical accounting estimates and assumptions

(a) Estimate of fair value of investment properties

(b) Estimated performance fee (carried interest) on investments

(c) Classification of Investment Properties

(d) Classification of Trancoso as a Joint Operation

The Group has classified its joint venture in BB Trancoso Ltd. as a joint operation, as defined by

IFRS11, as such the Group has consolidated its share of any assets, liabilities, revenues and expenses.

The Group has classified property in development as investment property, as defined by IAS40, as these

are being held by the Group for the purposes of either earning capital appreciation or rental income or

both.

After making reasonable enquiries and preparing detailed cash flow forecasts and budgets, the

Directors have a reasonable expectation that the Company has adequate resources to continue in

operational existence for the foreseeable future, there being sufficient cash balances anticipated,

and incurring expenses predominantly in accordance with budget. Thus they continue to adopt the

going concern basis of accounting in preparing the annual financial statements.

The Directors make estimates and assumptions concerning the future. The resulting accounting estimates

will, by definition, seldom equal the related actual results. The estimates and assumptions that have a

significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within

the next financial year are outlined below.

No provision has yet been established for performance fees on the revaluation of investments, however a

provision has been made for the performance fee attributable to the part disposal of land at Tres Praias.

This is based on the fair value gains recognised to date and a current estimate of the ultimate Internal

Rate of Return of each investment. The performance fee has been discounted back to present value at a

rate of 8.75%. The performance fee is only deemed to become a financial liability on the disposal of

investment properties.

The Group holds full or partial ownership interests in a number of investment properties. Cushman &

Wakefield conducted an independent valuation of the investment properties owned by these companies as

at 31 December 2014 (see note 8).

Estimates and judgments are continually evaluated and are based on historical experience as adjusted for

current market conditions and other factors.



27


4. Other administration fees and expenses

2014 2013

$ $

NOMAD fee 75,000 150,000

Secretarial and administration fee 168,291 190,019

Directors' fees 212,500 212,500

Legal and Professional fees - corporate 979,272 895,748

Travelling expenses 142,105 211,017

Taxation (1) 2,737 18,091

Insurance 31,100 31,100

Regulatory fees 11,834 11,705

Audit fees (2) 43,047 39,570

General administration and sundry expenses 53,845 84,660

Loan interest payable 164,060 -

1,883,791 1,844,410

(1) Taxation represents amounts paid by the Brazilian subsidiaries.

5. Deferred Taxation

The deferred tax provision for the Brazilian subsidiaries is based on the capital gains tax rate, which is

15%. Such tax liability is likely to be avoided if on realising the investments the Company sells the BVI

special purpose holding companies established specifically to hold its interests in Brazilian investment

companies.

As a Company incorporated under the BVI International Business Companies Act (Cap. 291), the

Company is exempt from taxes on profit, income or dividends. Each Company incorporated in BVI is

required to pay an annual government fee, which is determined by reference to the amount of the

Company’s authorised share capital.

(2) Audit fees represent auditor’s remuneration for work undertaken in connection with the statutory audit of the Group, these fees were payable to

the Company’s auditor for the audit of the Group accounts.

In accordance with IAS 12 Income Taxes, full provision has been made for the 15% liability that would

arise if the Company were to sell its interest in the Brazilian property directly instead. Details of the

Company’s net asset value and earnings per share that reflect the impact of avoiding such deferred tax

have been included in notes 6 and 11 respectively.



28


5. Deferred Taxation (continued)

Deferred tax

liability

$

Balance at 1 January 2013 5,651,605

(Credit) in the income statement (1,555,613)

Balance as at 31 December 2013 4,095,992

Balance at 1 January 2014 4,095,992

(Credit) in the income statement (1,899,091)

Balance as at 31 December 2014 2,196,901

Deferred tax liability is attributable to the following:

Revaluation of investment property 2,196,901

Total 2,196,901

6. Consolidated loss per share

2014 Basic and Basic and

Diluted Diluted

EPS EPS

(excluding

deferred

tax)

$ $

Net loss (14,370,021) (14,370,021)

Deferred tax - (1,899,091)

Adjusted net loss (14,370,021) (16,269,112)

Weighted average number of

shares in issue (see below) 88,201,120 88,201,120

Loss per share (0.16) (0.18)



29


6. Consolidated loss per share (continued)

2013 Basic and Basic and

Diluted Diluted

EPS EPS

(excluding

deferred

tax)

$ $

Net loss (12,827,228) (12,827,228)

Deferred tax - (1,555,613)

Adjusted net loss (12,827,228) (14,382,841)

Weighted average number of

shares in issue (see below) 94,066,158 94,066,158

Loss per share (0.14) (0.15)

Weighted average shares in issue calculation

Basic and diluted- 2013

Days in

Ongoing Cumulative Issue Weighted

Shares in issue at 1 January 2013 89,141,500 89,141,500 365 89,141,500

Treasury shares issued 1 April 2013 6,955,000 96,096,500 245 4,668,425

(2,571,429) 93,525,071 1 256,233

93,525,071 94,066,158

Basic and diluted- 2014

Days in

Ongoing Cumulative Issue Weighted

Shares in issue at 1 January 2014 93,525,071 93,525,071 365 93,525,071

Share swap on sale of Duas Barras (19,829,000) 73,696,071 98 (5,323,951)

73,696,071 88,201,120

Number of shares

Treasury shares returned 30 December

Number of shares



30


7. Investments in subsidiaries and joint ventures

Subsidiaries

Itacaré Capital Investments II, LLC (1) 100%

Itacap Three, LLC (2) 100%

Itacap Três Incorporações e Participações Ltda(2) 100%

Itacap MP, LLC (3) 100%

Itacap Seven Ltd. (4) 100%

W Villa Holding Ltd. (5) 100%

Goveport International Ltd. (5) 100%

Goveport International, LLC (5) 100%

100%

Joint Ventures

BB Trancoso Ltd. (4) 50%

Trancoso Investment One, LLC(4) 50%

Bahia Beach Empreendimentos Imobiliários e Hotelaria S/A. (4) 50%

Bahia Beach Participagoes Ltda. (4) 50%Brazil

Proportion

of

Ownership

Interest

Proportion

of

Ownership

Interest

The following amounts represent the Group's 50% share of the assets and liabilities, and results of the joint

ventures. They are included in the consolidated statement of financial position and consolidated statement of

comprehensive income.

Villas do Havaizinho Hotelaria e Empreendimentos Imobiliários Ltda.

The subsidiaries of the Company are recorded at cost in the accounts of the Company and are all included in the

consolidated financial statements. Joint Ventures are accounted for by proportionate consolidation where the

arrangement meets the definition of a Joint Operation.

Brazil

Delaware USA

Delaware USA

Delaware USA

Delaware USA

Delaware USA

Country

of Incorporation

BVI

Brazil

Country

of incorporation

Brazil

BVI

BVI

BVI



31


7. Investments in subsidiaries and joint ventures (continued)

2014 2013 2014 2013

$ $ $ $

Assets

Long-term assets - 18,771,500 24,224,216 32,354,763

Current assets - 229,624 126,759 169,054

- 19,001,124 24,350,975 32,523,817

Liabilities

Long-term liabilities - - 1,530,837 1,034,611

Current liabilities - 19,184 22,949 13,398

- 19,184 1,553,786 1,048,009

Net assets - 18,981,940 22,797,189 31,475,808

Income - 1,784 2,167 1,810

Expenses - (102,764) (318,992) (188,268)

Loss after tax - (100,980) (316,825) (186,458)

Interest in joint ventures

Duas Barras Ltd

The Group sold its 50% interest in a joint venture Duas Barras Ltd., who own Itacap Um Empreendimentos e

Participações Ltda through Itacap One, LLC, on 14 September 2014.

BB Trancoso Ltd

There are no contingent liabilities relating to the Group’s interest in the joint ventures (Dec 2013:nil), and no

contingent liabilities of the ventures themselves (Dec 2013:nil).

The Group has a 50% interest in a joint venture BB Trancoso Ltd, who own Bahia Beach Empreendimentos

Imobiliários Ltda through Trancoso Investment One LLC.



32


7. Investments in subsidiaries and joint ventures (continued)

(1)

(2)

(3)

(4)

(5)

As Brazilian corporate law requires Brazilian companies to have at least two quotaholders (or shareholders in

the case of a corporation), Itacap MP, LLC was formed to hold one quota, or share, of each of the Project

Companies, when necessary. Itacap MP, LLC owns 0.01% of Itacap Três Incorporações e Participações Ltda.

and Villas do Havaizinho Hotelaria e Empreendimentos Imobiliários Ltda. No fair value gain has been included

in the consolidated financial statements in relation to Itacap MP, LLC.

W Villa Holdings Ltd. owns 100% of Goveport International Ltd., which in turn owns 100% of Goveport

International, LLC. Goveport International, LLC owns 99.99% of Villas do Havaizinho Hotelaria e

Empreendimentos Imobiliários Ltda., which owns Havaizinho property.

Itacap Three, LLC owns 99.99% of Itacap Três Incorporações e Participações Ltda, which has been established

to facilitate the Company’s purchase of the property Três Praias.

Itacare Capital Investments II LLC owns 100% of, Itacap Three LLC, and Itacap MP, LLC.

Itacap Seven Ltd. owns 50% of BB Trancoso Ltd., which in turn owns 100% of Trancoso Investment One

LLC, which in turn owns 99.9% of Bahia Beach Participações Ltda., which in turn owns 100% of Bahia Beach

Empreendimentos Imobiliários e Hotelaria S/A, which owns the Bahia Beach Property.



33


8. Investment properties

Tres Bahia Duas

Praias Beach Barras Total

$ $ $ $

At 1 January 2013 41,533,000 34,389,500 21,460,000 97,382,500

Additions in year - 581,704 40,250 621,954

41,533,000 34,971,204 21,500,250 98,004,454

Fair value adjustment (2,788,000) (2,620,704) (2,728,750) (8,137,454)

At 31 December 2013 38,745,000 32,350,500 18,771,500 89,867,000

At 1 January 2014 38,745,000 32,350,500 18,771,500 89,867,000

Additions in year - 723,055 44,750 767,805

38,745,000 33,073,555 18,816,250 90,634,805

Fair value adjustment (4,700,000) (8,853,055) 616,170 (12,936,885)

Transfer to assets held for resale - - (19,432,420) (19,432,420)

At 31 December 2014 34,045,000 24,220,500 - 58,265,500

The Directors appointed Cushman & Wakefield, an internationally recognised firm of surveyors to conduct a

valuation of the Group’s acquired sites to determine their fair asset value as at 31 December 2014. These

valuations were prepared in accordance with generally accepted appraisal standards, as set out by the American

Society of Appraisers (the “ASA”), and in conformity with the Uniform Standards of Professional Appraisal

Practice of the Appraisal Foundation and the Principles of Appraisal Practice and Code of Ethics of the ASA and

RICS (the “Royal Institute of Chartered Surveyors”).

The analysis of market value of the properties is based on all the pertinent factors that relate both to the real estate

market and, more specifically, to the subject properties. The valuation analysis of the properties used two

approaches: the comparison approach, the residual value approach. The comparison approach is based on the

premise that persons in the marketplace buy by comparison. It involves acquiring market sales/offerings data on

properties similar to the subject property. The prices of the comparables are then adjusted for any dissimilar

characteristics as compared to the subject’s characteristics. Once the sales prices are adjusted, they can be

reconciled to estimate the market value of the subject property. The residual value approach is an assessment of

the value of a scheme as completed and deduction of the costs of development (including developer's profit) to

arrive at the underlying land value. These valuations are deemed to be the fair value of the investment property.

Cushman & Wakefield's determination of fair value was supported by market evidence, and no adjustments have

been made to such valuations.

Each of the above-mentioned techniques results in a separate valuation indication for the subject property. A

reconciliation process is performed to weigh the merits and limiting conditions of the first two approaches. Once

this is accomplished, a value conclusion is reached by placing primary weight on the technique, or techniques, that

are considered to be the most reliable, given all factors.

During the year the Group had no major customers.

All investment properties are held in Brazil.

The Group has no contractual obligations to build any properties on the land currently under development.



34


8. Investment properties (continued)

All additions relate to expenditure on existing assets, in both the current and prior year.

9. Assets held for sale Duas

Warapuru Havaizinho Barras Total

$ $ $ $

At 1 January 2013 - - - -

Additions in year 2,000,000 5,233,300 - 7,233,300

Disposals in year (2,000,000) - - (2,000,000)

- 5,233,300 - 5,233,300

Fair value adjustment - (2,233,300) - (2,233,300)

At 31 December 2013 - 3,000,000 - 3,000,000

At 1 January 2014 - 3,000,000 - 3,000,000

Additions in year - 120,300 - 120,300

Transfers in the year - - 19,432,420 19,432,420

- 3,120,300 19,432,420 22,552,720

Fair value adjustment - (120,300) 396,580 276,280

Disposals in year - - (19,829,000) (19,829,000)

At 31 December 2014 - 3,000,000 - 3,000,000

Havaizinho

. Havaizinho is available for immediate sale and can be sold to a potential buyer in its current condition

Duas Barras

On 24 September 2014 the Group’s 50 per cent interest in Duas Barras was sold to a group of investors led by

our former joint venture partner on a share for share basis.

. The Board had a plan to sell Havaizinho and has signed a 36- month option agreement to 30 December 2016,

with Dominic Redfern (“the Buyer” of Warapuru), with a strike price of $3 million. During the option period

the Group may elect to sell the Havaizinho property subject to a right of first refusal from the Buyer. In the

event that the Group receives an offer for the property at a higher price than the Strike Price and the Buyer does

not exercise its right of first refusal, the Buyer will be entitled to a break fee equivalent to 40% of the excess

(net of any transfer costs or expenses) between the purchase price and the Strike price.

Real estate valuations are complex, derived from data which is not widely publicly available and involve a degree

of judgement. For these reasons, and consistent with EPRA’s guidance, management have classified the valuations

of our property portfolio as Level 3 as defined by IFRS 13. Inputs to the valuations, some of which are

‘unobservable’ as defined by IFRS 13, include the Brazilian National Index of Construction Cost (INCC) price

index. All other factors remaining constant, an increase in future sales proceeds would increase valuations, whilst

increases in discount rate would result in a fall in values and vice versa. However, there are interrelationships

between unobservable inputs as they are determined by market conditions. The existence of an increase of more

than one unobservable input would augment the impact on valuation.

On 30 December 2013, the Board of Directors announced its decision to dispose of Havaizinho and, therefore,

classified it as a disposal group held for sale. The Board considered the investment property met the criteria to

be classified as held for sale at that date for the following reasons:



35


9. Assets held for sale (continued)

Warapuru

.Warapuru was sold in 2013 for $ 1,500,000 realising a loss of $ 500,000.

10. Share Capital

2014 2013

Authorised share capital Number of shares Number of shares

Ordinary shares of $0.01 each 500,000,000 500,000,000

Movement in share capital and premium

Number of shares Share Capital Share Premium

No. $ $

89,141,500 891,415 88,159,322

Treasury shares issued 1 April 2013 6,955,000 69,550 2,712,370

(2,571,429) (25,714) (874,286)

93,525,071 935,251 89,997,406

Number of shares Share Capital Share Premium

No. $ $

93,525,071 935,251 89,997,406

Issued shares swapped to Treasury shares (19,829,000) (198,290) (19,630,710)

73,696,071 736,961 70,366,696

2,571,429

Treasury shares swapped from Issued shares 19,829,000

22,400,429

Treasury shares

Shares held on 1 January 2014

Shares held on 31 December 2014

Shares in issue on 1 January 2014

Shares in issue on 1 January 2013

Shares in issue on 31 December 2014

Treasury shares returned 30 December

2013

Shares in issue on 31 December 2013



36


11. Net asset value per share

NAV

Calculation

2014 2013 2014 2013 2014 2013

Number Number$ $ $ $'000 $'000

Basic 73,696,071 93,525,071 0.75 0.96 54,966 89,682

Diluted 73,696,071 93,525,071 0.75 0.91 54,966 85,163

73,696,071 93,525,071 0.77 1.00 57,059 93,778

12. Directors' interests

27,291,071 Ordinary Shares

Michael St Aldwyn 995,000 Ordinary Shares

Raymond Smith 20,000 Ordinary Shares

Samsão Woiler 20,000 Ordinary Shares

Ricardo Reisen de Pinho 100,000 Ordinary Shares

13 Trade and other receivables

2014 2013

$ $

Trade receivables 619 871

Sundry receivables 103,089 1,743,788

103,708 1,744,659

Basic net asset value per share is based on net assets at the year end, and on 73,696,071 (2013: 93,525,071)

ordinary shares, being the respective number of shares in issue at the year end.

The net asset value per share and the net asset values attributable to ordinary shares at the year end are calculated

in accordance with their entitlements in the Articles of Association and were:

Diluted excluding deferred

tax liability

Net asset value

attributableNet asset value per share

attributable

Number of ordinary shares

The Directors interests in the shares of the Group at 31 December 2014 are stated below.

BGO Fund (1)

(1) Frederick Dubignon is a board member as a representative of BGO Fund, their holding representing 37.03% of

the issued share capital.



37


14 Trade and other payables

2014 2013

Current liabilities $ $

Payables/Commitments to developers 938,093 1,034,611

Loan notes 592,745 -

Trade payables - 164,487

Sundry payables 236,829 160,562

1,767,666 1,359,660

2,646,315 -

15 Cash and cash equivalents

2014 2013

$ $

Cash at bank 207,232 525,869

207,232 525,869

16. Related party transactions

2014 2013

Directors' Directors'

Fees Fees

$ $

Michael St Aldwyn 62,500 62,500

Raymond Smith 50,000 50,000

Samsão Woiler 50,000 50,000

Ricardo Reisen de Pinho 50,000 50,000

Frederick Dubignon - -

Total 212,500 212,500

In April 2014 the Company raised $2.5 million of working capital loan facility from the BGO Fund

(“BGO”). The loan facility carries interest at 11% and has been extended to 30th March 2016.

Each Director received compensation based on an annual fee of $50,000, except the Chairman who

received $62,500 and Frederick Dubignon who received nil. Total fees and expenses paid to the

Directors for the year to 31 December 2014 were as follows:

Working capital loan

The Group issued US$1,150,000 of 8% Unsecured Subordinated Convertible PIK Notes of US$1 each.

The Notes shall rank pari passu equally and rateably without discrimination or preference and as an

unsecured obligation of the Issuer. The notes are issued via BB Trancosos Limited of which the

Company owns a 50% stake.



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16. Related party transactions (continued)

17. Financial Risk Management

17. Financial Risk Management (continued)

The key risks identified by the board are as follows:

(a) Market price risk

Cost Fair Value

$ $

68,029,404 61,265,500

(b) Interest rate risk

In September 2014 the Company sold its 50% stake in the Duas Barras project to a group of investors led

by Harald Orneberg, the joint venture partner, in a share for share exchange. Harald Orneberg, and the

group of investors, were all beneficial holders of Ordinary Shares in the Company. The group of

investors also included BGO, and Fred Dubignon abstained from voting on the Board’s decision to enter

into the sale and share swap.

2014

In April 2014 the Company raised $2.5 million of working capital loan facility from the BGO Fund

(“BGO”) to allow the Company more time to make asset disposals and/or place shares to fund future

requirements. The loan facility carries interest at 11% and has been extended to 30th

March 2016. BGO

are the Company’s largest shareholder and Frederick Dubignon represents their interest on the Board.

The loan terms were negotiated at arms length, and Fred Dubignon abstained from voting on the Board’s

decision to enter into the loan arrangement.

Investment properties and assets held for resale measured at

fair value under IAS40

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate

because of changes in market interest rates.

The market price is exposed to the real estate market fluctuation that depends intrinsically on the market

demand. Therefore prices may increase and or decrease following demand thus affecting positively or

negatively the fair value of the assets. Recognition of such variation is included in the Statement of

Income and Expenditure.

The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, fair

value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The

Group’s overall risk management programme focuses on the unpredictability of financial markets and

seeks to minimise potential adverse effects on the Group’s financial performance. There will always be

some risk when undertaking property investments but the control process is aimed at mitigating and

minimising these risks where possible.



39



(c) Liquidity risk

(d) Environmental risk

(e) Credit risk

The Group is exposed to risks associated with the effects of fluctuations in the prevailing levels of

market interest rates on its financial position and cash.

During 2014 if interest rates on overnight deposits had been 0.2% higher/lower, given the Group has no

borrowings, post tax profit for the year would have been $4,145 higher/lower.

The Group is not susceptible to high credit risk as its cash transactions are limited to high-credit-quality

financial institutions and no credit limits were exceeded during the reporting period. Furthermore, the

Group enters into investment transactions, which attract both off-balance sheet market risks and off-

balance sheet credit risks

The liquidity risk is that the Group cannot meet its financial obligations when they fall due. Liquidity

risk may arise from the potential inability to sell a financial instrument without undue delay at a price

close to its fair value. Prudent liquidity risk management implies maintaining sufficient cash and

marketable securities, the availability of funding and ability to close out market positions. Of the

liabilities all are due within one year.

The Group continuously monitors defaults of customers and other counterparties, identified either

individually or by group, and incorporates this information into its credit risk controls. Where available

at reasonable cost, external credit ratings and/or reports on customers and other counterparties are

obtained and used. The Group's policy is to deal only with creditworthy counterparties. The Group's

management considers that all the above financial assets that are not impaired or past due for each of the

reporting dates under review are of good credit quality.

Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents, deposits with

banks and financial institutions, including outstanding receivables and committed transactions.

Additional contractual warranties and/or financial credit instruments provided by sellers, where

applicable, mitigate credit risks arising from investment property purchase deals.

A further risk factor identified by the Board encompasses environmental risks. In addition to the need to

act as a responsible landlord there may, in some circumstances, be occasions when the Group buys a site

with pollution or deforestation. Each acquisition undertaken by the Group includes an environmental

report from a specialist consultancy. These reports may indicate the need for further investigation and in

some cases remediation. The Group’s policy is then to either undertake such investigations or

remediation or potentially reject the purchase as no longer viable.



40



(f) Currency risk

2014

$ R$ Total

ASSETS

Current assets

Trade and other receivables - 103,708 103,708

Cash and cash equivalents 141,694 65,538 207,232

Total Current Assets 141,694 169,246 310,940

EQUITY

Capital and reserves

Ordinary shares 736,961 - 736,961

Share premium 70,366,696 - 70,366,696

Retained earnings (20,207,464) - (20,207,464)

Foreign exchange reserve 3,966,347 - 3,966,347

LIABILITIES

Current liabilities

Trade and other payables - 4,413,981 4,413,981

Total financial liabilities and equity 54,862,540 4,413,981 59,276,521

$ amount per accounts

Currency risks arise where instruments, investments and material costs are denominated in a currency

different from the Functional Currency. As some financial assets of the Group are denominated in

currencies other than the Functional Currency, the effect is that the Balance Sheet and Income Statement

can be affected by currency movements. The Group has no outstanding currency hedging transactions.

The Functional Currency of the Group’s investments in Brazilian subsidiaries is the Brazilian Real and

the majority of its costs and expenditures are denominated in local currency.

For Brazilian subsidiaries’ projects the currency exchange rate at 31 December 2014 was Brazilian Real

R$2.68038 to $ 1.00.



41



(f) Currency risk (continued)

2013

$ R$ Total

ASSETS

Current assets

Trade and other receivables - 1,744,659 1,744,659

Cash and cash equivalents 233,998 291,871 525,869

Total Current Assets 233,998 2,036,530 2,270,528

EQUITY

Capital and reserves

Ordinary shares 935,251 - 935,251

Share premium 89,997,406 - 89,997,406

Retained earnings (5,734,425) - (5,734,425)

Foreign exchange reserve 4,483,643 - 4,483,643

LIABILITIES

Current liabilities

Trade and other payables - 1,359,661 1,359,661

Total financial liabilities and equity 112,115,322 1,881,037 113,996,359

(g) Capital management

The Group's capital management objectives are:

- To ensure the Group's ability to continue as a going concern;

- To increase the value of the assets of the business; and

For Brazilian subsidiaries’ projects the currency exchange rate at 31 December 2013 was Brazilian Real

R$2.3484 to $1.00.

The Group’s exposure varies in an average 3% increase/decrease in the $ against Brazilian Real and may

potentially impact in cash flows for investments. As of 31 December 2014, the impact of such currency

exchange rate fluctuation would have led to a decrease/increase in NAV of $1,646,060 (2013:

$2,894,270). The Group's loss would also have led to an increase/decrease of $449,526 (2013:

$331,411).

The Group monitors capital on the basis of the carrying amount of equity less cash and cash equivalents

as presented on the face of the consolidated statement of financial position. Capital for the reporting

periods under review is summarised in the consolidated statement of changes in equity.

$ amount per accounts

These objectives will be achieved by developing the Group's investment property portfolio, adding value

to these projects and ultimately taking them through to sale and cash flow, either with partners or by

their own means.

- To provide an adequate return to shareholders in the future



42



(g) Capital management (continued)

18. Events After The Balance Sheet Date

In April 2015 the Trancoso project was granted the preliminary licence on the plateau area, which sits

above the beachfront area, approving the build of a further 154 villas, a beach club, spa and tennis club.

In April 2015 the Company raised a further $2.975 million by way of a Convertible Loan Note offering

to all shareholders.

The Group sets the amount of capital in proportion to its overall financing structure, i.e. equity and

financial liabilities. The Group manages the capital structure and makes adjustments to it in the light of

changes in economic conditions and the risk characteristics of the underlying assets.

In March 2015 the Company terminated the management agreement with Itacaré Capital Partners

without cause in an amicable transaction that was mutually beneficial to ICP and the Company, which

gives rise to further operating cost savings for the future.

Details of events that have occurred after the balance sheet date are as follows:

In January 2015 the Company increased its working capital facility with BGO to $3.1 million plus

interest.

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