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Registered number: 09899667









DREOF II EUROPE HOLDINGS LIMITED









ANNUAL REPORT AND FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

 
DREOF II EUROPE HOLDINGS LIMITED
 
 
COMPANY INFORMATION


Directors
S Kakar 
J Isoda 
J Krulick 
J E Posner 




Registered number
09899667



Registered office
C/O Siguler Guff UK LLP
17 Albemarle Steet

4th Floor

London

W1S 4HP




Independent auditor
Hillier Hopkins LLP
Chartered Accountants & Statutory Auditor

45 Pall Mall

St James's

London

SW1Y 5JG





 
DREOF II EUROPE HOLDINGS LIMITED
 

CONTENTS



Page
Strategic Report
 
 
1
Directors' Report
 
 
2 - 3
Independent Auditor's Report
 
 
4 - 7
Statement of Comprehensive Income
 
 
8
Statement of Financial Position
 
 
9
Statement of Changes in Equity
 
 
10
Statement of Cash Flows
 
 
11 - 12
Analysis of Net Debt
 
 
13
Notes to the Financial Statements
 
 
14 - 25


 
DREOF II EUROPE HOLDINGS LIMITED
 
 
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023

Business review
 
The Company invests in pooled investment vehicles (the “Portfolio Funds”) managed by investment managers (“Portfolio Managers”) and Direct Investments (together with Portfolio Funds, “Portfolio Investments”). Portfolio Investments typically involve direct or indirect equity interests in commercial properties and may also include interests in commercial mortgages and commercial mortgage-backed securities, as well as debt and equity securities of real estate operating companies and real estate investment trusts.
The Company earned distributions from investments of $1.3m (2022 - $5.1m).

Principal risks and uncertainties
 
The Company’s Portfolio Investments are subject to the market and credit risk of those financial instruments held. At 31 December 2023, the Company’s risk of loss related to any one Portfolio Investment is limited to its investment in or commitment to such Portfolio Investment.
The Company invests in real estate, which, in addition to having exposure to the general market risk factors is also subject to risks incident to the ownership and operation of real estate. Such risks include, but are not limited to: local real estate conditions; the financial condition of tenants and buyers; fluctuations in rental rates, operating expenses, vacancies, and construction costs; the effect of leverage associated with project-level financing; and changes in the tax, real estate, environmental, and zoning laws and regulations.

Financial key performance indicators
 
Financial key performance indicators consist of internal rate of return, expense and net investment loss ratios.
Net internal rate of return from inception through December 31, 2023: 11.28% (2022: 11.47%)
Expense ratio for the year ended December 31, 2023: (13.16%) (2022: (4.80%))
Net investment loss ratio for the year ended December 31, 2023: (13.17%) (2022: 4.80%)


This report was approved by the board and signed on its behalf.







J Isoda
Director

Date: 1 October 2024

Page 1

 
DREOF II EUROPE HOLDINGS LIMITED
 
 
 
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023

The directors present their report and the financial statements for the year ended 31 December 2023.

Directors' responsibilities statement

The directors are responsible for preparing the Strategic Report, the Directors' Report and the financial statements in accordance with applicable law and regulations.
 
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

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


select suitable accounting policies for the Company's financial statements and then apply them consistently;

make judgments and accounting estimates that are reasonable and prudent;

prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Reporting currency
The financial information in these financial statements is denominated in US Dollars.
The equivalent sterling conversion rates were:
- At 31 December 2023 £1:$1.274, average for the period £1:$1.244
- At 31 December 2022 £1:$1.210, average for the period £1:$1.237

Results and dividends

The loss for the year, after taxation, amounted to $15,177,212 (2022 - loss $32,130,339).

During the year no dividends were declared (2022 - $nil)

Directors

The directors who served during the year were:

S Kakar 
J Isoda 
J Krulick 
J E Posner 

Page 2

 
DREOF II EUROPE HOLDINGS LIMITED
 
 
 
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023

Future developments

The directors aim to maintain the management policies currently in place. No significant changes are anticipated.

Disclosure of information to auditor

Each of the persons who are directors at the time when this Directors' Report is approved has confirmed that:
 
so far as the director is aware, there is no relevant audit information of which the Company's auditor is unaware, and

the director has taken all the steps that ought to have been taken as a director in order to be aware of any relevant audit information and to establish that the Company's auditor is aware of that information.

Post balance sheet events

There are no post balance sheet events. 

Auditor

The auditor, Hillier Hopkins LLPwill be proposed for reappointment in accordance with section 485 of the Companies Act 2006.

This report was approved by the board and signed on its behalf.
 







J Isoda
Director

Date: 1 October 2024

Page 3

 
DREOF II EUROPE HOLDINGS LIMITED
 
 
 
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF DREOF II EUROPE HOLDINGS LIMITED
 

Opinion


We have audited the financial statements of DREOF II Europe Holdings Limited (the 'Company') for the year ended 31 December 2023, which comprise the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Cash Flows, the Statement of Changes in Equity and the related notes, including a summary of significant accounting policiesThe financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).


In our opinion the financial statements:


give a true and fair view of the state of the Company's affairs as at 31 December 2023 and of its loss for the year then ended;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006.


Basis for opinion


We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom, including the Financial Reporting Council's Ethical Standard and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.


Conclusions relating to going concern


In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.


Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.


Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.


Page 4

 
DREOF II EUROPE HOLDINGS LIMITED
 
 
 
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF DREOF II EUROPE HOLDINGS LIMITED (CONTINUED)


Other information


The other information comprises the information included in the Annual Report other than the financial statements and our Auditor's Report thereon. The directors are responsible for the other information contained within the Annual ReportOur opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.


We have nothing to report in this regard.


Opinion on other matters prescribed by the Companies Act 2006
 

In our opinion, based on the work undertaken in the course of the audit:


the information given in the Strategic Report and the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the Strategic Report and the Directors' Report have been prepared in accordance with applicable legal requirements.


Matters on which we are required to report by exception
 

In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors' Report.


We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:


adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.


Responsibilities of directors
 

As explained more fully in the Directors' Responsibilities Statement set out on page 2, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.


In preparing the financial statements, the directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.


Page 5

 
DREOF II EUROPE HOLDINGS LIMITED
 
 
 
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF DREOF II EUROPE HOLDINGS LIMITED (CONTINUED)


Auditor's responsibilities for the audit of the financial statements
 

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an Auditor's Report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.


Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

assess the nature of the industry and sector, control environment and business performance including the remuneration incentives and pressures of key management;

the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and management. We consider the results of our enquiries of management, about their own identification and assessment of the risks of irregularities;

any matters we identified having obtained and reviewed the Company’s documentation of their policies and procedures relating to:
°identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;
°detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud;
°the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;

the matters discussed among the audit engagement team regarding how and where fraud might occur in the financial statements and any potential indicators of fraud.

As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified the greatest potential for fraud. In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override, including testing journals and evaluating whether there was evidence of bias by the directors that represented a risk of material misstatement due to fraud. 
 
Page 6

 
DREOF II EUROPE HOLDINGS LIMITED
 
 
 
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF DREOF II EUROPE HOLDINGS LIMITED (CONTINUED)



We also obtained an understanding of the legal and regulatory frameworks that the Company operates in, focusing on provisions of those laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. We focused on laws and regulations that could give rise to a material misstatement in the financial statements, including, but not limited to, the Companies Act 2006, and relevant tax legislation.


Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.


A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditor's Report.


Use of our report
 

This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006Our 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.





Jonathan Franks FCA (Senior Statutory Auditor)
  
for and on behalf of
Hillier Hopkins LLP
 
Chartered Accountants
Statutory Auditor
  
45 Pall Mall
St James's
London
SW1Y 5JG

2 October 2024
Page 7

 
DREOF II EUROPE HOLDINGS LIMITED
 
 
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023

2023
2022
Note
$
$

  

Administrative expenses
  
(2,092,223)
(599,342)

Operating loss
 4 
(2,092,223)
(599,342)

Income from fixed asset investments
  
1,321,590
5,102,234

Interest receivable and similar income
 8 
242
446

Interest payable and similar expenses
 9 
(6,412,326)
(6,517,309)

Fair value movements
  
(7,903,520)
(30,116,368)

Loss before tax
  
(15,086,237)
(32,130,339)

Tax on loss
 10 
(90,975)
-

Loss for the financial year
  
(15,177,212)
(32,130,339)

There was no other comprehensive income for 2023 (2022:$NIL).

The notes on pages 14 to 25 form part of these financial statements.

Page 8

 
DREOF II EUROPE HOLDINGS LIMITED
REGISTERED NUMBER: 09899667

STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2023

2023
2022
Note
$
$

Fixed assets
  

Investments
 11 
37,797,048
44,969,813

  
37,797,048
44,969,813

Current assets
  

Debtors: amounts falling due within one year
 12 
33,864,400
41,790,337

Cash at bank and in hand
 13 
1,190
431

  
33,865,590
41,790,768

Creditors: amounts falling due within one year
 14 
(116,140)
(36,871)

Net current assets
  
 
 
33,749,450
 
 
41,753,897

Total assets less current liabilities
  
71,546,498
86,723,710

  

Net assets
  
71,546,498
86,723,710


Capital and reserves
  

Called up share capital 
 16 
119,889,040
119,889,040

Profit and loss account
 17 
(48,342,542)
(33,165,330)

  
71,546,498
86,723,710


The financial statements were approved and authorised for issue by the board and were signed on its behalf by: 






J Isoda
Director

Date: 1 October 2024

The notes on pages 14 to 25 form part of these financial statements.

Page 9

 
DREOF II EUROPE HOLDINGS LIMITED
 

STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023


Called up share capital
Profit and loss account
Total equity

$
$
$


At 1 January 2022
119,889,040
(1,034,991)
118,854,049


Comprehensive income for the year

Loss for the year
-
(32,130,339)
(32,130,339)
Total comprehensive income for the year
-
(32,130,339)
(32,130,339)



At 1 January 2023
119,889,040
(33,165,330)
86,723,710


Comprehensive income for the year

Loss for the year
-
(15,177,212)
(15,177,212)
Total comprehensive income for the year
-
(15,177,212)
(15,177,212)


At 31 December 2023
119,889,040
(48,342,542)
71,546,498


The notes on pages 14 to 25 form part of these financial statements.

Page 10

 
DREOF II EUROPE HOLDINGS LIMITED
 

STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023

2023
2022
$
$

Cash flows from operating activities

Loss for the financial year
(15,177,212)
(32,130,339)

Adjustments for:

Interest paid
6,412,326
6,517,309

Income from investments
(1,321,832)
(5,102,680)

Taxation charge
90,975
-

(Increase)/decrease in debtors
(12,632)
(18,178)

(Increase)/decrease in amounts owed by group companies
(814,809)
-

(Increase)/decrease in amounts owed by participating interests
5,838,376
(11,368,740)

(Decrease)/increase in creditors
(21,920)
178

Net fair value movements
7,903,520
30,116,368

Unrealised foreign exchange movements
2,056,446
559,444

Net cash generated from operating activities

4,953,238
(11,426,638)


Cash flows from investing activities

Sale of unlisted and other investments
9,384
4,130,779

Sale of subsidiary investments
128,631
2,392,794

Interest received
242
446

Income from investments
1,321,590
5,102,234

Net cash from investing activities

1,459,847
11,626,253
Page 11

 
DREOF II EUROPE HOLDINGS LIMITED
 

STATEMENT OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023


2023
2022

$
$



Cash flows from financing activities

Interest paid
(6,412,326)
(6,517,309)

Net cash used in financing activities
(6,412,326)
(6,517,309)

Net increase/(decrease) in cash and cash equivalents
759
(6,317,694)

Cash and cash equivalents at beginning of year
431
6,318,125

Cash and cash equivalents at the end of year
1,190
431


Cash and cash equivalents at the end of year comprise:

Cash at bank and in hand
1,190
431

1,190
431


The notes on pages 14 to 25 form part of these financial statements.

Page 12

 
DREOF II EUROPE HOLDINGS LIMITED
 

ANALYSIS OF NET DEBT
FOR THE YEAR ENDED 31 DECEMBER 2023




At 1 January 2023
Cash flows
At 31 December 2023
$

$

$

Cash at bank and in hand

431

759

1,190


431
759
1,190

The notes on pages 14 to 25 form part of these financial statements.

Page 13

 
DREOF II EUROPE HOLDINGS LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

1.


General information

DREOF II Europe Holdings Limited is a company incorporated and domiciled in the UK, registered in England and Wales. 
Its registered office can be found on the Company Information page. 
The principal activity of the company is to hold European real estate investments on behalf of the Siguler Guff Distressed Real Estate Opportunities Fund Group. 

2.Accounting policies

 
2.1

Basis of preparation of financial statements

The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.

The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgment in applying the Company's accounting policies (see note 3).

The following principal accounting policies have been applied:

 
2.2

Exemption from preparing consolidated financial statements

The Company is exempt from the requirement to prepare consolidated financial statements as all of its subsidiaries are required to be excluded from consolidation by section 402 of the Companies Act 2006 as the interest of the parent company is held exclusively with a view to subsequent disposal in accordance with Section 405(3)(c).

 
2.3

Going concern

The financial statements have been prepared on a going concern basis which assumes the company's ability to continue trading (and thus pay its debts as they fall due) for the foreseeable future. The Company’s activities comprise investing in an investment portfolio on behalf of the participating funds which hold equity and loan capital in the company. The losses reported in the financial statements, which nevertheless show positive net assets at the balance sheet date, arise mainly through fair value movements. As such, those losses have no direct cash flow implication, and do not therefore affect the liquidity of the company. Where fair value movements reflect losses in investment assets, such that further calls might be made on capital, the company is supported either by commitments to contribute further capital by participating funds, or by the option not to provide further calls on capital. In either case, therefore, the liability of the company to contribute to any losses in value in its investment portfolio is limited by the amounts actually contributed. On this basis, the directors consider that the going concern basis is appropriate for the preparation of the financial statements.

Page 14

 
DREOF II EUROPE HOLDINGS LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

2.Accounting policies (continued)

 
2.4

Foreign currency translation

Functional and presentation currency

The Company's functional and presentational currency is US dollars ("USD").

Transactions and balances

Foreign currency transactions are translated into the functional currency using the spot exchange rates at the dates of the transactions.

At each period end foreign currency monetary items are translated using the closing rate. Non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined.

Foreign exchange gains and losses resulting from the settlement of transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss except when deferred in other comprehensive income as qualifying cash flow hedges.

Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the Statement of Comprehensive Income within 'finance income or costs'. All other foreign exchange gains and losses are presented in profit or loss within 'other operating income'.

 
2.5

Interest income

Interest income is recognised in the Statement of Income and Retained Earnings in the period in which it is incurred.

 
2.6

Finance costs

Finance costs are charged to the Statement of Income and Retained Earnings in the period in which it is due. Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument.

 
2.7

Taxation

Tax is recognised in profit or loss except that a charge attributable to an item of income and expense recognised as other comprehensive income or to an item recognised directly in equity is also recognised in other comprehensive income or directly in equity respectively.

The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date in the countries where the Company operates and generates income.

Page 15

 
DREOF II EUROPE HOLDINGS LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

2.Accounting policies (continued)

 
2.8

Valuation of investments

Investments in Company shares, are remeasured to fair value at each balance sheet date. Gains and losses on remeasurement are recognised in profit and loss for the period.
The Company records its portfolio fund investments at fair value in accordance with FRS 102. Such values generally represent the Company's share in the net assets of the portfolio funds as reported by the respective portfolio manager. The directors use the valuations provided by the portfolio managers as a basis for the Company’s valuations, but are not bound by such valuations.
Direct investments where market quotations for securities of the same issue are readily available on an exchange are marked-to-market at the closing price on the financial statement date. Direct investments of debt, equity and other instruments that are not traded on an exchange are generally valued using three midmarket quotations that are provided by third party broker-dealers, when available. Should three midmarket quotations not be available, a third party market pricing aggregation service may be used to value the Direct Investment. The third party market pricing aggregation service averages a collection of quotations provided by third party broker-dealers. Direct investments for which market quotations are not available per the methods stated above are valued at such estimated fair value as the directors determine in good faith. Such securities are typically valued initially at cost, which approximates fair value, with subsequent adjustments determined by the directors based on the best available information.

 
2.9

Debtors

Short-term debtors are measured at transaction price, less any impairment. Loans receivable are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method, less any impairment.

 
2.10

Cash and cash equivalents

Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash equivalents are highly liquid investments that mature in no more than three months from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value.

In the Statement of Cash Flows, cash and cash equivalents are shown net of bank overdrafts that are repayable on demand and form an integral part of the Company's cash management.

 
2.11

Creditors

Short-term creditors are measured at the transaction price. Other financial liabilities, including bank loans, are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method.

 
2.12

Financial instruments

The Company has elected to apply the provisions of Section 11 “Basic Financial Instruments” of FRS 102 to all of its financial instruments.

The Company has elected to apply the recognition and measurement provisions of IFRS 9 Financial Instruments (as adopted by the UK Endorsement Board) with the disclosure requirements of Sections 11 and 12 and the other presentation requirements of FRS 102.

Page 16

 
DREOF II EUROPE HOLDINGS LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

2.Accounting policies (continued)


2.12
Financial instruments (continued)

Financial instruments are recognised in the Company's Statement of Financial Position when the Company becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets

Basic financial assets, which include trade and other receivables, cash and bank balances, are initially measured at their transaction price including transaction costs and are subsequently carried at their amortised cost using the effective interest method, less any provision for impairment, unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest.

Discounting is omitted where the effect of discounting is immaterial. The Company's cash and cash equivalents, trade and most other receivables due with the operating cycle fall into this category of financial instruments.

Other financial assets

Other financial assets, which includes investments in equity instruments which are not classified as subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the recognised transaction price. Such assets are subsequently measured at fair value with the changes in fair value being recognised in the profit or loss. Where other financial assets are not publicly traded, hence their fair value cannot be measured reliably, they are measured at cost less impairment.

Impairment of financial assets

Financial assets are assessed for indicators of impairment at each reporting date. 

Financial assets are impaired when events, subsequent to their initial recognition, indicate the estimated future cash flows derived from the financial asset(s) have been adversely impacted. The impairment loss will be the difference between the current carrying amount and the present value of the future cash flows at the asset(s) original effective interest rate.

If there is a favourable change in relation to the events surrounding the impairment loss then the impairment can be reviewed for possible reversal. The reversal will not cause the current carrying amount to exceed the original carrying amount had the impairment not been recognised. The impairment reversal is recognised in the profit or loss.

Financial liabilities

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instruments any contract that evidences a residual interest in the assets of the Company after the deduction of all its liabilities.

Basic financial liabilities, which include trade and other payables, bank loans and other loans are initially measured at their transaction price after transaction costs. When this constitutes a financing transaction, whereby the debt instrument is measured at the present value of the future payments
Page 17

 
DREOF II EUROPE HOLDINGS LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

2.Accounting policies (continued)


2.12
Financial instruments (continued)

discounted at a market rate of interest. Discounting is omitted where the effect of discounting is immaterial.

Debt instruments are subsequently carried at their amortised cost using the effective interest rate method.

Trade payables are obligations to pay for goods and services that have been acquired in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if the payment is due within one year. If not, they represent non-current liabilities. Trade payables are initially recognised at their transaction price and subsequently are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial.

Derecognition of financial instruments

Derecognition of financial assets

Financial assets are derecognised when their contractual right to future cash flow expire, or are settled, or when the Company transfers the asset and substantially all the risks and rewards of ownership to another party. If significant risks and rewards of ownership are retained after the transfer to another party, then the Company will continue to recognise the value of the portion of the risks and rewards retained.

Derecognition of financial liabilities

Financial liabilities are derecognised when the Company's contractual obligations expire or are discharged or cancelled.


3.


Judgments in applying accounting policies and key sources of estimation uncertainty

The preparation of the financial statements in conformity with generally accepted accounting principles requires the Directors to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results in the future could differ from those estimates. In this regard, the Directors believe that the critical accounting policies where judgments or estimations are necessarily applied are summarised below.
Valuation of Investments
The Company recognises its portfolio fund investments at fair value in accordance with FRS 102. Such values generally represent the Company's share in the net assets of the Portfolio Funds as reported by the respective portfolio manager. The directors use the valuations provided by the portfolio managers as a basis for the Company’s valuations, but are not bound by such valuations. The directors have reviewed information provided by the portfolio managers as of 31 December 2023 for each respective portfolio fund. After reviewing such information, the Company has valued its investment in each portfolio fund using the respective portfolio funds’ net asset value without any adjustment.

Page 18

 
DREOF II EUROPE HOLDINGS LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

4.


Operating loss

The operating loss is stated after charging:

2023
2022
$
$

Fees payable to the Company's auditor and its associates for the audit of the Company's annual financial statements
12,658
9,747

Exchange differences
2,056,446
559,444


5.


Auditor's remuneration

During the year, the Company obtained the following services from the Company's auditor:


2023
2022
$
$

Fees payable to the Company's auditor for the audit of the Company's financial statements

12,658
9,747


6.


Employees

The Company has no employees other than directors, who did not receive any remuneration (2022 - $nil).


7.


Income from investments

2023
2022
$
$

Income from fixed asset investments
1,321,590
5,102,234

1,321,590
5,102,234







8.


Interest receivable

2023
2022
$
$


Other interest receivable
242
446

242
446

Page 19

 
DREOF II EUROPE HOLDINGS LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

9.


Interest payable and similar expenses

2023
2022
$
$


Other loan interest payable
6,410,612
6,517,309

Other interest payable
1,714
-

6,412,326
6,517,309


10.


Taxation


2023
2022
$
$

Corporation tax


Adjustments in respect of previous periods
90,975
-


Total current tax
90,975
-

Factors affecting tax charge for the year

The tax assessed for the year is higher than (2022 - higher than) the standard rate of corporation tax in the UK of 19% (2022 - 19%). The differences are explained below:

2023
2022
$
$


Loss on ordinary activities before tax
(15,086,237)
(32,130,339)


Loss on ordinary activities multiplied by standard rate of corporation tax in the UK of 19% (2022 - 19%)
(2,866,385)
(6,104,764)

Effects of:


Adjustments to tax charge in respect of prior periods
90,975
-

Unrelieved tax losses carried forward
2,866,385
6,104,764

Total tax charge for the year
90,975
-

Page 20

 
DREOF II EUROPE HOLDINGS LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

11.


Fixed asset investments





Investments in subsidiary companies
Unlisted equity investments
Total

$
$
$



Cost or valuation


At 1 January 2023
38,019,701
6,950,112
44,969,813


Return of capital
(128,631)
(9,384)
(138,015)


Foreign exchange movement
1,554,559
(685,801)
868,758


Revaluations
(6,858,464)
(1,045,044)
(7,903,508)



At 31 December 2023
32,587,165
5,209,883
37,797,048





Subsidiary undertakings


The following were subsidiary undertakings of the Company:

Name

Country

Holding

DREOF II UK Meridia Holdings I Limited
United Kingdom
58%
DREOF II UK Meridia Holdings II Limited
United Kingdom
100%
DREOF II UK Meridia Holdings III Limited
United Kingdom
100%
SG-Praxis Real Estate Venture, LP
Cayman Islands
95%
Union Real Estate, LP
United Kingdom
85%
Union Real Estate B, LP
United Kingdom
100%

Page 21

 
DREOF II EUROPE HOLDINGS LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023


12.


Debtors

2023
2022
$
$


Amounts owed by group undertakings
814,809
-

Amounts owed by participating interests
33,011,080
41,766,172

Other debtors
38,511
24,165

33,864,400
41,790,337


The company has issued loan notes amounting to €49,218,879 with an interest rate of 12%, which are due for redemption on 3 February 2026. As at the balance sheet date, accrued interest on these loan notes totals $46,251,879. The principal and accrued interest, amounting to a total liability of $100,661,430, remain outstanding at the balance sheet date.
This liability is included under "Amounts owed by participating interests" within debtors, as it is offset against a corresponding debtor due from participating interests, which totals $133,672,510.


13.


Cash and cash equivalents

2023
2022
$
$

Cash at bank and in hand
1,190
431

1,190
431



14.


Creditors: Amounts falling due within one year

2023
2022
$
$

Corporation tax
92,689
-

Accruals and deferred income
23,451
36,871

116,140
36,871


Page 22

 
DREOF II EUROPE HOLDINGS LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

15.


Financial instruments

2023
2022
$
$

Financial assets


Financial assets measured at fair value through profit or loss
37,797,048
44,969,815




Financial assets measured at fair value through profit or loss comprise investments in subsidiaries and unlisted investments.

Page 23

 
DREOF II EUROPE HOLDINGS LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

16.


Share capital

2023
2022
$
$
Allotted, called up and fully paid



1 (2022 - 1) A1 share of 1.00
1
1
2 (2022 - 2) A2 shares of 1.00 each
2
2
2,665,451 (2022 - 2,665,451) B shares of 1.00 each
2,874,745
2,874,745
3 (2022 - 3) C shares of £1.00 each
5
5
26,389,842 (2022 - 26,389,842) D shares of 1.00 each
29,263,147
29,263,147
699,722 (2022 - 699,722) E shares of 1.00 each
741,970
741,970
127,304,402 (2022 - 127,304,402) F1 shares of NOK1.00 each
15,154,279
15,154,279
90,931,721 (2022 - 90,931,721) F2 shares of NOK1.00 each
10,824,486
10,824,486
3,584,385 (2022 - 3,584,385) G shares of NOK1.00 each
423,972
423,972
26,405,726 (2022 - 26,405,726) H shares of £1.00 each
35,376,186
35,376,186
12,385,083 (2022 - 12,385,083) I shares of £1.00 each
16,605,717
16,605,717
62,127,120 (2022 - 62,127,120) K shares of NOK1.00 each
7,371,196
7,371,196
1,071,394 (2022 - 1,071,394) L shares of 1.00 each
1,253,334
1,253,334

119,889,040

119,889,040

All shares have equal voting rights and rank equally with other shares of the same class. 



17.


Reserves

Profit and loss account

The profit and loss account includes all current period retained profits. Of the retained profits and losses, an amount of $nil (2022 - $nil) relates to unrealised profits which are not generally available for distribution.


18.


Capital commitments


At 31 December 2023 the Company had capital commitments as follows:

2023
2022
$
$


Contracted for but not provided in these financial statements
11,699,786
11,664,780

11,699,786
11,664,780

Page 24

 
DREOF II EUROPE HOLDINGS LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

19.


Related party transactions

During the period, the company was charged interest totalling $6,410,612 (2022 - $6,517,309) on debt instruments issued to its controlling party. The company has also made payments to its controlling party in respect of distributions from investments. At the balance sheet date, the net balance due from controlling parties was $33,011,080 (2022 - $41,766,172). 
 
During the period, income of $589,318 (2022 - $3,378,726) was received through distributions made by subsidiary entities in which the company has significant control. At the balance sheet date $nil (2022 - $nil) was owed to the company in respect of these distributions.
 
During the period, income of $6,950,113 (2022 - $1,726,508) was received through distributions made by entities in which the company has an investment but does not have significant control. At the balance sheet date $nil (2022 - $nil) was owed to the company in respect of these distributions.
 
During the period, no key management personnel received remuneration from the company.


20.


Controlling party

The company is jointly controlled by Siguler Gulf Distressed Real Estate Opportunities Fund II LLP, Siguler Gulf Distressed Real Estate Opportunities Fund II (E) LP and Siguler Gulf Distressed Real Estate Opportunities Fund II (T) LP. All entities were incorporated in the United States of America.

The directors believe that there is no ultimate controlling party.

 
Page 25