Annual Report - Blocked - Pomegranate

POMEGRANATE INVESTMENT AB (PUBL) – ANNUAL REPORT FOR THE PERIOD JANUARY 1, 2017 – APRIL 30, 2018

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Pomegranate Investment AB (publ) – Corporate ID number 556967-7247

Annual Reportfor the period January 1, 2017 – April 30, 2018

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Important Information

NOT FOR DISTRIBUTION IN THE UNITED STATES OR TO ANY U.S. PERSON

This report does not constitute an offer of any securities of Pomegranate Investment. This report may not be distributed in the United States or to any “U.S. person”, including any U.S. citizen or permanent resident (‘green card holder’) or any entity organised in the United States, whether located inside or outside the United States. Pomegranate shares represent an investment in Iran that is not suitable for U.S. persons.

This report contains forward-looking statements. All statements other than statements of historical facts included in this presentation, including without limitation, those regarding the Company’s financial position, business strategy, plans, objectives, goals, strategies and future operations and performance and the assumptions underlying these statements are forward-looking statements. Such forward-looking statements involve known and unknown risks and uncertainties and other factors which are or may be beyond the Company’s control, which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements ex-pressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Company’s present and future business strat-egies and the environment in which the Company will operate in the future. Some numerical figures included in this Presentation have been subject to rounding adjustments. Accordingly, numerical figures shown as totals in certain graphs or tables may not be an exact arithmetic aggregation of the figures that preceded them.


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OVERVIEWPomegranate Investment in Brief 5Reporting period in Brief 6Key Drivers 7Portfolio Overview 8Letter from the Managing Director 9-11Summary of the EU Blocking Regulation 2018 12Market Overview 13-15

INVESTMENT PORTFOLIOPomegranate invests in market leaders 17Sarava (and Sarava Holdings) 18 Digikala 19 Café Bazaar 20 Alibaba 20 Alopeyk 21 PPG 21 Avatech 21Sheypoor 22Griffon Capital 23-24Navaar 25Bahamta 26

CORPORATE GOVERNANCECompany and Share Information 28Board of Directors 29Group Management and Auditors 30Auditor 31Risks and uncertainty factors 32-34

FINANCIAL INFORMATIONAdministration Report 36Income Statements – Group 37Balance Sheets – Group 38Statement of changes in Equity – Group 39Cash Flow Statements – Group 40Alternative Performance measures – Group 41Income Statements – Parent 42Balance Sheets – Parent 43Statement of changes in Equity – Parent 44Notes to the Financial Statements 45-57Independent auditors Report 58-59

INFORMATION Annual General Meeting 60Contact 60

Table of contents

The company’s accounting currency is EUR.All amounts are reported in EUR, unless otherwise specified.This report is a translation from the Swedish original.In case of any discrepancies, the Swedish versionshall prevail.

Corporate websitewww.pomegranateinvestment.com


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Overview


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Pomegranate Investment in briefWhat we doThe Pomegranate Investment MissionPomegranate together with its local partners helps to develop high growth companies in the Middle Eastern (including the Iranian) markets, in the consumer technology, e-commerce and from time to time in the offline consumer space. Pomegranate’s founders and senior management are all personally invested in the company and have also committed to transfer their management experience and knowledge to the local businesses. Pomegranate Investment aims to achieve mutual growth for all its stakeholders and hold a truly long term perspective on its investments. Read more about our drivers for success on page 7.

Business Idea

Vision

Strategies

Net asset value per share Total NAV

NAV per share Total Net Asset Value

How we do itPomegranate Investment has used its unique competence in emerging market development and investment management and identified, analyzed, invested and developed early stage and high potential business opportunities in e-com-merce and close by consumer sectors in the Iranian market.

A strong set of possibilitiesPomegranate is focused on well defined Business Activities• Sector scope: Consumer technology, e-commerce and offline

retail companies.

• Geographical scope: The growing Iranian market and close by geographical markets.

Pomegranate has applied Growth Oriented Investment Criterias• Business activities with a leading position (1-3 market leading

position).

• Business activities with a significant customer base and large network.

• Business activities that are easily scalable.

Significant holdings in Portfolio Companies• Minority Holdings but with active board participation.

Well developed Specialist Competencies• Emerging markets competence in the management group.

• Presence and network of business contacts in Iran and close by markets.

• A first mover potential through an early entrance into the Iranian market.

• Strong business understanding in e-commerce and close by consumer sectors.

• An organisation professionally set up for transactions and financing with a strong financial base.

Where we want to bePomegranate Investment is already an established name, which shall continue to offer a unique exposure to the unparalleled investment- and growth opportunities in the region in which it operates.

A strong portfolio

of companiesEUR

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EUR million

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100120140160180

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Geographical distribution of Pomegranate shareholders

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10%

25%

12%3%

SwedenUKCEESwitzerland/AustriaOthers


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Reporting period in BriefJanuary 1, 2017 – April 30, 2018

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

Carvanro follow up round

CFO recruited

30 MEURPomegranate fundraising

At the AGM in May the financial year was changed to May 1 – April 30

Submitted formal listing application to NGM Equity

Follow up invest-ment in Sheypoor

First investment in Bahamta, peer to peer monetary transfers

Pomegranate formally became a group and started to apply IFRS

First investment in Navaar, leading audio book provider

Start of negotiations for Sarava follow up round

Signed MOI for Sarava new funding round

IPO preparations

Safi negotiations

Strengthening Pomegranate’s local brand and network

Legal Counsel recruited


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Pomegranate has applied Growth Oriented Investment Criterias

First mover advantagePomegranate was established in 2014 by emerging market specialists with a strong track record in emerging and frontier markets. Since 2014, Pome-

granate’s investment portfolio has grown significantly. Pomegranate believes

that by having entered Iran earlier than most, it has established a critical head-start in

the country and is well-positioned to continue expanding in Iran’s rapidly evolving consumer technology end e-commerce sectors.

A diversified economy enabling growthDespite being an energy-rich country with the world’s second larg-est reserves of natural gas and the fourth largest reserves of crude oil, the Iranian economy is highly diversified with the oil and gas sector accounting for only 23 percent of Gross Value Added (GVA) in 2014, compared to 30 percent in the United Arab Emirates and 50 percent in Kuwait. Other significant sectors include retail, trade, real estate, construction and professional services, which together make up a larger share of the economy apart from oil and gas.

A diversified economy has enabled a growing consumer market – over 55 percent of the Iranian population has an annual purchas-ing power parity adjusted income above USD 20,000, twice as high as in China or India, and second only to Russia among the BRIC-economies. Additionally, retail sales per capita in Iran is larger than in Turkey, Malaysia or Mexico, adjusted for purchas-ing power parity.

Unique demographicsIran’s population of approx-imately 82 million is one of the largest demographics

in the region, equivalent to the size of Germany. The

population is young, with more than 65 percent of the population

currently under the age of 35, in the beginning or in the middle of their careers. Furthermore, the Iranian labor force is highly educated with the highest literacy rate in the MENA region, secondary school participation is almost 80 percent and tertiary education participation is among the highest in the world, ahead of the UK, France and Germany. Iran’s urbanisation rate of 73 percent is twice that of India (33 percent), well ahead of Italy (69 percent) and close to the levels of Germany (75 percent) and France (80 percent) – a good starting point for roll-ing out new infrastructure.

The unique demographics of Iran with a large, young, well-educated and central and urbanised population supports Pomegranate’s investments in the chosen sectors of consumer technology, e-commerce and offline retail.

Strong growth in internet and smartphone penetrationIranian internet penetration represents 52 percent (from 16 percent) and is still relatively low but outperforming countries like India (26 percent) and Egypt (36 percent). The growth rate in this sector is rather significant with an an-nual growth rate of 11 percent over the last two-year period. The 3G/4G availability was 60 percent at the end of 2015, a thirty-fold increase compared to 2013, which can be seen as an indicator of Iran advancing into modern ICT infrastructure. As opposed to internet penetration, mobile penetration is well developed with 142 phones per 100 people. Smartphone penetration in Iran has been growing at significant rates from 50.4 percent in Q1 of 2016 to 56.4 percent in Q3, an increase of 12 percent in just nine months.

With growing internet and smartphone penetration and a developing domestic regulatory environment for the space it is reasonable to assume an accelerated online consumption behavior.

Strategic location, already strong exportsIran’s central location in the Middle East, bordering countries with a

total population in excess of 400 million, including almost 40 million consuming households who are projected to grow at 5.2 percent

annually until 2025, provides the opportunity for the country to become a regional trading hub.

Despite the effects of sanctions and constrained stock and flow of foreign direct investments, Iran today exports more than Egypt, Pakistan and Morocco combined.

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Investment PortfolioPortfolio Overview, EUR

Fair Value, April 30, 2018

Percentage weight

Fair Value, December 31,

2016

Change in value

in EUR

Companies

Sarava 90,229,346 66.3% 97,414,031 -7.4%Sheypoor 17,547,681 12.9% 15,105,074 16.2%Sheypoor call option 804,723 0.6% n/a n/aGriffon Capital (Equity) 542,682 0.4% 2,772,647 -80.4%Carvanro - 0.0% 650,000 -100.0%Navaar 587,235 0.4% n/a n/aBahamta 377,592 0.3% n/a n/aTotal portfolio companies 110,089,259 80.9% 115,941,752

Other financial assets

Griffon Flagship Fund 1,426,415 1.0% 2,021,786 -29.4%Griffon Managed Account 1,153,701 0.8% n/a n/aTotal other financial assets 2,580,116 1.9% 2,021,786

Cash and bank 23,420,585 17.0% 29,009,273Total investment portfolio 136,089,959 100.0% 146,972,811

Other net liabilities -4,660,526 -14,355,877Total Net Asset value 131,429,434 132,616,934

NAV per share, EUR 24.3 31.9 -23.8%

Griffon Capital (Equity), 0.4%

Sheypoor call option, 0.6%

Navaar, 0.4%

Cash and bank, 17.0%

Sarava, 66.3%

Sheypoor, 12.9%

Bahamta, 0.3%Griffon Flagship Fund, 1.0%

Sarava is a technology investment company and a pioneer in Internet and E-commerce

investments in Iran. Read more on page 18.

Sheypoor is Iran’s second largest online classifieds company,

offering a platform for users to buy and sell their products

quickly and easily free of charge. Read more on page 22.

Griffon is the largest cross border M&A adviser in terms of number and value of mandates, as well as

provider of Iran-focused Asset Management services. Read more on page 23.

Navaar is Iran’s leading digital audio book production and

distribution platform. Read more on page 25.

Griffon Managed Account, 0.8%

Bahamta offers mobile based peer-to-peer monetary

transfers, as a better alternative to traditional card-to-card or account-to-account transfers.

Read more on page 26.


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Dear fellow share owners, In the first half of 2018, we have seen a period of trade and economic chang-es in Iran caused by the US announcing its unilateral withdrawal from the JCPOA in May and declaring its intention to reimpose sanctions on Iran. The first round of these sanctions, in the financial and non-petrochemical sectors (automobile and metals) were reintroduced in August, with the second round, affecting oil and gas, set to follow in November. Whilst they have no direct bearing on Pomegranate’s business, due to the lack of any US nexus or dependency on the US financial systems, we are not immune to the severe macro disruption the Iranian economy is facing as a result. The EU’s response to all of this has been relatively strong and clear – along with the other JCPOA signatories the EU has declared its firm commitment to the preservation of the JCPOA accord. In an effort to mit-igate the effect of the reimposed US sanctions, the EU has implemented a Blocking Regulation aimed at protecting the interest of European com-panies doing business with Iran. The force in this blocking statute is that once EU companies decide to do business with Iran, they are prohibited from complying with US extraterritorial sanctions. This grandfathering mechanism encourages predominantly small and medium size companies to increase their trade and business activities with and inside Iran. From what we can tell so far, this provides an even stronger protection for companies like Pomegranate. Further details are set out in the section below ‘Summary of the EU Blocking Regulation 2018.’ As a company we have gone from a period of sanctions lifting and fund raising in 2016-17, that allowed us to deploy capital into new and existing investments to strengthen our ownership and boost growth in our portfo-lio companies, to a more uncertain climate in 2018 against the backdrop outlined above. Given this sea change, we have had to make some prudent interim adjustments and we continue to work steadfastly to protect capital and cut costs. The good news is that our portfolio companies are doing very well despite the challenging external environment and our strategic foresight to raise capital in early 2017 has given us an even stronger foundation in regards to securing our market position, growth potential and avoiding being diluted. If necessary, we can steer the company to last beyond 2025, which marks the termination of the JCPOA.

The purpose of this report is to satisfy our annual report which has moved to the summer period as the company’s financial year was amended last year to comprise 1 May to 30 April. This move was devised to maximise our alignment with our Iranian business partners and portfolio companies. This report therefore covers the period between 1 January 2017 to 30 April 2018. The financial period is the same as last reporting period (January – April 2018). A new report will follow on 20th September 2018 and this report is effectively closing the “transition period of reporting” requirements. From the beginning of 2018, all of our attention has been focused to remain as liquid and well financed as possible during stormy days ahead. We are well equipped and prepared for capital protection and OPEX cuts. We have risk adjusted our NAV taking into account the changed macro envi-ronment which we accounted for in our previous report adjusted from EUR 29.4 to EUR 24.3 per share which is roughly where we started this reporting window in January 2017. Since this is an annual report, I would like to take the opportunity to highlight some key achievements. Corporate and organisational changesThe EUR 30 million fund raising which was carried out in the spring of 2017, assisted in securing funding for the company’s investments for a few years ahead and also contributed to diversifying our shareholder base to over 400 shareholders. The largest shareholder has just under 10% own-ership making our shareholder based balanced, including predominantly Nordic (approx. 50%) followed by Russia/CEE (approx. 33%). We still have a total sum of cash and short term investments of EUR 26 million at the end of the reporting period. Our efforts further consisted by strengthening the core team with em-ployment of our CFO and Legal Counsel in addition to the second Invest-ment Manager that came on board just before the start of this reporting period. Our core team was completed which was one of our preconditions before our own IPO, followed by IFRS implementation and first reporting in accordance with those standards, another IPO precondition. It was also our goal that our portfolio companies would eventually follow-on track in accordance with IFRS standards (for example Digikala is now 95% IFRS compliant).

Letter from the Managing Director


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We proceeded to change our financial calendar to the Iranian financial calendar to be able to communicate more efficiently with our portfolio companies and their KPI’s in a timely and strategic manner and as a result increase transparency substantially.

Investment portfolio activities We have completed our target of 3-5 investments comprising 2 new invest-ments, 3 follow-on investments and 1 investment closed. We decided to discontinue the Hard Discount venture for partnership reasons and project Safi for compliance reasons. There was some M&A activity on the Iranian start up scene as well as some activity in Sarava that firmed up their strong position in the digital economy. There were follow on offerings to increase stakes in Café Bazaar, Alibaba and above all secure funding for Digikala, all motivated by strong growth and new market opportunities. We are particularly pleased with the increased indirect exposure to Café Bazaar, Iran’s largest app store, which we firmly believe is going to be a significant value driver, as many inter-national competitors cannot operate in Iran. Sheypoor secured additional funding at the end of 2017 with prominent new investors coming on board. Digikala continued to grow significantly, with 60% GMW growth year-on-year. Sheypoor continued to grow in excess of 100%. Digikala’s Market Place segment has really taken off, Café Bazaar is broadening its offering of digital services, and consumer behaviour in travel continues to move online. The local stock market is warming up to the new tech scene and consequent-ly so are IPO discussions and preparations among the local companies. We were pleased to report our first Fintech investment in Bahamta aswell as our first digital content/streaming investment in the audio book company Navaar. As a direct consequence of the recent events, we have performed renewed sanctions compliance checks of all our investment structures and sharehold-ers in target companies that have been re-approved by internal and external legal counsels. This was a compliance exercise we felt was necessary in relation to all our direct and indirect portfolio companies to make sure that no stakeholders were listed as Specially Designated Nationals on US or European sanctions lists. Q4 2017 was a key period for Pomegranate as we continued to report on a number of investments and significant developments to underpin our presence in Iran’s most exciting tech growth sectors. To round up the year, we solidified our strategy of exposure to market leadership, directly as well

as indirectly, across the E-Commerce, Classified/Mobile, Sharing Economy, Digital Content & Marketing as well as Payment/Financial Services sectors.

NAVIn general the year concluded by an upward effect in the Sarava portfolio driven by strong underlying growth, a financing round in Sheypoor at a higher valuation driven by underlying growth, and for the rest of the port-folio we had fairly recent transactions. However, due to the reimplementa-tion of US secondary sanctions and the effect the anticipation of the same had already had on the economy and currency, we performed a broad risk adjusted valuation update of all recent transaction valuations in portfolio companies. As a result, the company’s net asset value per share in EUR decreased by 24% over the period January 1, 2017– April 30, 2018. This is not the development we had wished for but we continue to strongly believe in and support the long term potential of our portfolio companies, and as experienced investors in emerging markets we have seen the volatility and swings before in many other markets and luck favours the bold and prepared in the end. At present, Pomegranate might look like a different company (compared to last year) in a different environment. We had not anticipated make adjustments so shortly after the implementation of the JCPOA. Needless to say, the company is currently too big for what the market is – we will need to be flexible around that but equally make sure the team (and portfolio teams) remain motivated.

IPOLast year we submitted our formal listing application to the regulated exchange NGM Equity. Whilst the timing of the IPO has not been right, we have completed all the formal corporate preparations for a listing in the near future. The external environment is not IPO friendly at the present time. We are technically ready to proceed with an IPO and will further explore what it would all mean together with the EU’s blocking mechanism to use to our advantage. In the interim, it is very exciting that we expect local listings of one or two companies from our portfolio within the next 6-8 months. We are confident that our local portfolio companies and their teams will come out stronger from this process given the lack of foreign competition and capital scarcity to a strong shift in online economy. Interestingly, we have observed unusually high growth rates during Q1 of the Iranian year

Completed target of 3-5 investments. 2 new investments, 3 follow investments, 1 investment closed.


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which is now tailing off somewhat. It remains to be seen how these growth rates evolve over time. We are going to report more operational data again in our next report in September 2018.

Concluding remarks It has been an incredible reporting period to say the least. It started with the full impact of sanctions being rolled back, to raising EUR 30 million for con-tinued growth and offline consumer business diversification and ended with the US unilateral withdrawal from the JCPOA just after the period closed. It is worth a reminder that as a company we are not directly effected by the restoration of these sanctions and we navigated the company in 2014 before the JCPOA was born. This message is even stronger in a context where the EU actively encourages EU companies to do business with Iran and putting in place measures to facilitate that and to protect them from reimposed US sanctions. However our strategic fund raising at the beginning of 2017 is to our distinct advantage now. Protecting our existing growth investments is key, as well as, allowing ourselves to cut OPEX to last beyond 2025. Last but not least, we have provided the legal and technical summary of the current EU Blocking Regulation similarly to what we have done in our previous report. The compliance work is a day-to-day aspect of our business, which is carried out internally by our General Counsel who works alongside external legal advisors to make sure that we are compliant with the remaining Eu-ropean and UN sanctions. This work is of outmost important to us to make sure that we understand the current sanctions regime before committing to any transactions and to protect the interest of our share owners, stake holders as well as counterparties.

Greeting from Stockholm,Florian Hellmich

We are confident that our companies, and their teams will come out stronger from this process.

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Summary of the EU Blocking Regulation 2018US withdrawal from the JCPOAThe US announced on 8 May 2018 that it would reinstate all previ-ously lifted sanctions removed under the JCPOA and the re-impo-sition would come into effect after a “wind-down” period of 90 days (ending 6 August 2018) and 180 days (ending 4 November 2018).

EU and E3 commitment to the JCPOAIn response to this, the European Commission initiated several steps to preserve the interest of European businesses and persons investing or doing business with Iran. On 6 June 2018, the Commis-sion adopted updates to the Council Regulation from 1996, a statute which, provided protection against the effects of extra-territorial application of US sanctions laws affecting Cuba, Libya and Iran (“the Blocking Regulation”). The updated statute entered into force on 7 August 2018. This is the first time the Blocking Regulation has been extended and it applies more broadly to US extra-territorial sanctions against Iran as specified in its annex. The basic principle of the statute is that the EU does not rec-ognise the applicability of US extra-territorial sanctions and in connection with this decisions of any nature by foreign courts and bodies will be challenged and nullified. The Blocking Regulation acts to prohibit EU Operators (as defined below) from complying with US secondary sanctions against Iran as its application will have legal repercussions including sanctions determined by each member state. Those protected under the Blocking Regulation are referred to as the ‘EU Operators’ and include, inter alia, natural persons being a resident in the European Union and a national of a member state as well as legal persons incorporated within the European Union. EU Operators are free to choose whether to start working, continue or cease business operations in Iran. The purpose of the Blocking Reg-ulation, however, is to ensure that such business decisions remain free, i.e., are not forced upon EU Operators by the US secondary sanctions. There is also a procedure for seeking authorisation from the European Commission to comply with specific US legislation on the basis that not doing so would seriously damage the EU Opera-tors’ interests, or those of the EU. One aspect of the Blocking Regulation, which is less certain, is the extent to which damages may be claimed as a result of the actions and effects of US secondary sanctions and authorities. The

Guidance Note published alongside the statute states that the scope of the damages and the defendant that the EU Operators can claim against is very broad, but ultimately leaves it to competent courts of the member states of the EU to determine the kind of damage caused and the procedure for recovery. This is an important step by the EU in demonstrating its com-mitment to the continued implementation of the JCPOA. However, it is uncertain how this legislation will be enforced and applied in practice given that this is the responsibility of each member state.

JCPOA developmentsOn 6 August 2018, Iran, China, Russia, France, Germany, the United Kingdom, and the EU High Representative reaffirmed their commitment to full and effective JCPOA implementation, and recognized that the lifting of sanctions in exchange for Iran’s imple-mentation of its nuclear-related commitments remains an essential part of it. Also on 6 August 2018, the EU High Representative and the Foreign Ministers of France, Germany and the United Kingdom issued a statement expressing their deep regret regarding the re-im-position of the US sanctions against Iran. The statement confirms that EU efforts to engage with third countries to ensure JCPOA support and to maintain economic relations with Iran will intensify in the coming weeks.

Practical use of the Blocking Regulation since 1996The praxis of the Blocking Regulation previously applied mostly to extra territorial sanctions against Cuba. There are further only few examples of Blocking regulation enforcements in the member states. According to the Commission’s Guidance Note, the benefit of the statute resulted in that in 1998 the EU and the US entered into a Memorandum of Understanding subject to which the US suspended the application of certain sanctions in return for the EU and other countries continuing their efforts to promote democracy in Cuba. The use of the statute was more limited to Iran because firstly, it applied to one US extra-territorial sanctions against Iran and Libya, and secondly, those sanctions applied for a period of 12 months.

What this means for the banking sectorOne of the restrictive effects of the US secondary sanctions return-ing is sanctions on transactions with foreign financial institutions

with the Central Bank of Iran and designated Iranian financial institutions. This also includes state owned banks. Under the Blocking Regulation, there is no requirement for EU Operators and EU banks to comply with this extra-territorial sanction. However, it is noteworthy that even before the restoration of the US secondary sanctions, money transfer to and from Iran was limited as larger banks were still reluctant to do business with Iran. This situation is likely to worsen, even with the EU Blocking Regulation, as the restoration of US sanctions have removed corresponding banking relationships between US banks and foreign banks with an existing correspondent relationships with Iranian institutions. Since the US announced its withdrawal from the JCPOA, certain banks that previously processed Iran-related payments in the past have announced that they will discontinue those facilities in the future. It remains to be seen how the EU and the Member States will continue their efforts to remove banking obstacles. On 7 August 2018, the European Commission published a decision adding Iran to the list of countries eligible for European Investment Bank (EIB) financing under EU guarantee. This means that EIB loans, loan guarantees and debt capital market instruments for the benefit of investment projects in Iran are eligible for such EU guarantee, sub-ject to a signed agreement and further conditions and ceilings. The banks will however take their own views on risk and compliance, especially when having international banking structure, notwith-standing the protection afforded to EU banks under the Blocking Regulation.

Our external sanctions counsel Freshfields Bruckhaus Deringer has contributed to this section.


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A brief look at digital economy in emerging markets, MENA and IranMany countries including China and South Korea have forward-looking plans to be realized by 2020. Among these plan, South Korean Yonhap news agency reported the launch of the Ministry of SMEs and Startups (MSS) in July 2017, a government body recognizing the increased importance of startups and small businesses and their impact on the entire business ecosystem. Some of the Ministry’s objectives comprise promoting business growth, strengthening startups and supporting Small and Medium-sized Enterprises (SMEs) and Micro Enterprises (MEs). In addition, the gov-ernment of South Korea intends to launch 1,200 incubators by 2020 and allocate 4.3 billion dollars to support 100 firms, calling them “global star ventures.” Like South Korea, China is developing its technological infrastructure. It is projected that Internet penetration rate in this country will reach 70 percent and nearly half of its rural region will have access to broadband In-ternet coverage (50 Mbs) by 2020. Russia also plans to grow the technology share of its GDP from 1.1% to 8-10%. This quick glance around the world reveals that plenty of countries have serious intentions and plans to develop their digital economies. What these countries all seem to have in common is a strong focus on facilitating and preparing the essentials of the digital economy in order to enhance the startup ecosystem. In what follows, five important digital industries will be reviewed; (i) e-commerce, (ii) mobile applications, (iii) online travel, (iv) sharing econo-my, and (v) digital advertising. These factors play crucial roles in the growth of the digital economy. Subsequent to looking at these factors, we will also explore and discuss the future trends of these industries in the world, in the Middle East and in Iran.

Continuous growth of e-commerce turnover in the world and a faster growth rate forecast for developing countriesOnline shopping is among the most popular e-commerce activities in the world. Based on Ecommerce Foundation’s 2016 report, there are 5.6 billion people in the world who are over 15 and 45% of them use internet. In MENA

Market Overview

region this percentage is 38%. Globally 26% of those above the age of 15 shop online, and in the Middle East that figure is 21%. Global Ecommerce turnover growth rate has been increasing steadily since 2011. China, the United States, England, Japan, France, Germany, South Korea, Canada, India and Russia are the top ten countries with highest ecommerce turnover. China tops the list with its 33.8% share in global e-commerce sales, followed by the U.S with 26.2%. This means that around 60% of the world’s e-commerce activity in 2015 was represented by these two countries. In 2015 World’s e-commerce sales value was $2,273 bn showing 19.9% growth compared with the year before. E-commerce turnover also shows growth in the Middle East during the past few years and based on Forbes this number will continue to grow. Therefore, by all indications this region is considered a great opportunity for investors and entrepreneurs. In 2015, e-commerce accounted for 3.1% of the world’s GDP. eGDP (e-commerce GDP) has increased since 2011. With 4.5% eGDP, Asia-Pacific has had the highest e-commerce share of GDP in 2015. Based on Statista, it is expected that the world’s eGDP will continue to grow. According to Ecommerce Foundation 2016, eGDP in MENA was 0.7% in 2015. Although this number is smaller than for other regions, Mckinsey predicts a higher growth of e-commerce sales in MENA countries in the coming years due to its digital potential and significant opportunities of digitization initiatives. United States showed a growth rate of 12% in e-com-merce turnover during 2015-2016 while this was 129% and 66% for India and Indonesia respectively.

Region 2014, $ bn 2015, $ bn Growth

World 1,895.3 2,272.7 +19.9%

Asia-Pacific 822.8 1,056.8 +28.4%

North America 527.5 644.0 +12.5%

Europe 466.0 505.1 +13.3%

Latin America 25.8 33.0 +28.0%

MENA 21.7 25.8 +18.6%

E-commerce sales in the world by continent

Source: Ecommerce Foundation, 2016.


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Based on a McKinsey paper that was published in 2016, the retail sector ac-counted for 8% of Iran’s GDP in 2014 and ranked fourth after oil, gas, public sector and agriculture. It is expected that in the next fifteen years, after oil and gas, e-commerce will have the largest impact on GDP growth and job creation in Iran. The United Nations Conference on Trade and Development (UNCTAD) listed Iran among the 10 most susceptible countries for e-commerce in Asia- Pacific. The other countries on the list are: Korea, Hong Kong, Singapore, Malaysia, China, Thailand, Vietnam, Philippines and India. Digikala is the largest e-commerce platform in Iran which has been showing high growth rate in the past few years and is well expected to continue its positive trend into the future.

Mobile App IndustryThere were two app downloads per person per month in the world in 2017With 175 billion app downloads in 2017, users downloaded 60% more apps in 2017 than in 2015. Total consumer spend on Google Play, iOS app store and other third party Android stores has more than doubled over the past two years (over $86 bn).

Global app downloads will reach 258 billion by 2022It is anticipated that global app download will grow at a compound annual growth rate (CAGR) of 7.7% by 2022 and global consumer spend in the app industry will grow at a CAGR of 13.95%. During 2017-2022 EMEA region is expected to reach 3.3% CAGR in the number of app downloads and a 14.3% CAGR in consumer spending. Ukraine and Netherlands are among the markets that experienced high growth rates in this region. Russia is also a large market that has already witnessed a large increase in the number of app downloads. It is predicted that China, the United states, Japan, Korea and England, will have 24%, 19%, 9%, 10% and 15% CAGR respectively while the rest of the world will witness a 6% CAGR until 2021. Given the unlimited access to high speed internet(4G), India has grown significantly in the number of app downloads up to a point that it has sur-passed United States and become the world’s second largest country. India stands first by Android apps download frequency. An interesting point is that games generate higher revenues compared to other mobile applications. Large companies like Google and Apple face restrictions to operate in Iran due to the sanctions. Therefore, there is a dire need for the Iranian companies’ presence in the industry to meet the demand. Cafe Bazaar is the most reputable Android mobile app company in Iran with robust annual

growth over the past few years. Iranian application developers have made high incomes through Café Bazaar. Number of active developers in Café Bazaar has been on the increase since its inception reaching over 21,000 at the end of 1396. Compared to the previous years, app users have also started downloading paid apps. The main source of revenue for app stores is user transactions, transactions for app purchases, and in-app purchase transactions. Accord-ing to Café Bazaar, in Iranian year 1396, transactions hit its highest point whereby more than 14 million transactions were made. The number of transactions has increased by a CAGR of 38% over the last five years.

Online travelThe market size globally of online travel agency is estimated to be $855 bn in 2021. Increasing Internet penetration rate and fast embrace of social media by growing number of individuals are seen to be the main factors of this industry’s growth. Online travel sales witnessed a noteworthy rate of growth in the past few years and it is predicted that it will continue to grow in the future. In 2017 global online travel sales was $613 billion and is expected to reach $855 billion dollars by 2021. Based on eMarketer, online travel sales in MENA region was $26 billion in 2017 and is expected to reach $41 billion by 2020. In Iran, Alibaba is one of the leading companies in this industry. Alibaba started its business by selling offline airplane tickets. As it spotted potential opportunities in online travel industry, Alibaba expanded its business and in a short period could gain a significant market share.

Digital Advertising50% of the world’s advertising expenditure is expected to be on digital advertising in 2019. Revenues from Offline advertising is decreasing every day in favour of online advertising. Digital advertising has five different categories i.e. display or banner advertising, video advertising, search advertising, social media advertising, and classified advertising. In 2014, the world’s total spending on digital advertising experienced an 11.2% growth rate which accounted for 46.2% of the total advertising spend. On the other hand, offline advertising had 1% growth in 2014. High growth rate in digital advertising spend is expected by McKinsey for the next few years to be at a point that in 2019, half of the total ad spend would be in digital advertising. Based on Statista, in recent years, search advertising category has accounted for the highest revenue in digital advertising while display adver-tising and social media advertising came in second place.

Game

Game

2018

Apps

Apps

2022

Worldwide app download broken down by Games and other Apps

Worldwide consumer spend broken down by Games and other Apps

Digital advertising revenue in the world by category ($ bn)

%

0

20

40

60

80

100

20182017

36.1 35.0 33.9

63.9 65.0 66.1

2022

%

0

20

40

60

80

100

20182017

78.8 76.7 72.5

21.2 23.3 27.5

2022

Source: Market prediction report, 2016-2022, App Annie

Source: Statista, 2018

$ billion

0

40

80

120

160

200

Displayadvertising

Videoadvertising

Searchadvertising

Social mediaadvertising

Classifiedadvertising

5170

3151

127

174

51

77

20 27


15

82m

Although TV advertising is still the most popular type in the MENA region, digital advertising has shown a growth rate of 30% in 2016 compared with 2015. Based on Techrasa, digital advertising spend will continue to grow in MENA in the coming years. In 2015 only 10% of advertising spend was in the digital field, but Statista predicts that it will soar to 22% in 2018. The United States and China are the leading countries with high reve-nues from digital advertising in recent years. However, in comparison to the developed countries like the United States and Japan, digital advertis-ing revenue has shown a higher growth rate even in developing countries in recent years. In Iran, up until 2007, newspapers and television were the main advertising channels. However, like in many other developing countries, the emergence of internet, telecommunication infrastructure and most importantly the boom of online e-commerce businesses like Digikala in Iran, have shifted advertisement into the digital domain. Companies like Adro and Anetwork are among the leading Iranian startups in this field with persistent growth in the number of customers. According to Techrasa, $1.6 billion was spent on advertising in Iran in 2015, thereof, 2.1% on digital advertising. In 2016, the Iranian digital advertising showed 62% growth and claimed 3.5% of total ad spending. There are some estimates that by 2020, Iran’s digital ad spend will reach $0.5 bn which includes 20% of the country’s total advertising spend.

FintechThere has been a lot of financial sector disruption, innovation and evo-lution in recent years. These global trends are mostly seen in developed markets especially when looking at the amount of capital invested in these sectors. However, many developing countries do show very attractive traits such as scalable markets with sizeable populations, a growing middle class and often fast adoption of new business models. Iran is no exception, with a lot of potential for innovative solutions to general and sometimes quite specific local market factors.

Drivers of Iran’s digital economyBesides the Iranian E-commerce champion Digikala, Iran’s digital econ-omy has already spawned other prominent companies like Café Bazaar (Android applications marketplace), Divar and Sheypoor (classified ad-vertising), Snapp (Online taxi hailing), Aparat (Video streaming service), and Alibaba (Online travel). To have a better view of the landscape of the Iranian digital economy, it is helpful to review the major drivers behind its growth. These drivers are as follows: The young internet savvy population of Iran together with the urban-ization growth are other driving factors of Iran’s digital economy. More than 65 percent of Iran’s 80-million population are under the age of 35.

The majority of them come from the middle class and their age class make them reach their highest purchasing-power period in their lifetime. Online shopping is popular among these young shoppers since they prefer to experiment with new ways of shopping instead of the traditional ones. Moreover, high urbanization rate in Iran has resulted in a dense popula-tion in the cities and, hence, triggered a need in modern lifestyle require-ments. The challenges with mobility and heavy traffic on the streets have been partly a reason Iranians are increasingly opting for online shopping. Saving time and ease of shopping are motivators in this regard. On the other hand, the benefit of online shopping for the residents of small cities is that it gives them access to various brands that might not be accessible in traditional retail stores. Increasing usage of the Internet and smartphones by Iranians: Access to the Internet is an underlying factor for digital businesses to thrive. Although Iran is still nowhere near developed countries in this respect, it has been witnessing an accelerated growth during recent years. From 2010 to 2016, the number of Iranians with access to the Internet has quadrupled and Internet penetration rate has reached 70% (from 16%). It is noteworthy that in addition to growing more ubiquitous, the Internet service quality and bandwidth too have increased and the price of Internet has dropped significantly, all leading to an exponential growth in users’ Internet consumption. To look at another key factor, high smartphone penetration rate played a decisive role in online shopping growth. In fact, online shopping was used to serve a niche market before, but after the emergence of smart-phones more Iranians have been able to purchase products more easily online. Based on Euromonitor, it is expected that in the future online mobile shopping will witness a rapid growth in Iran. Rapid changes in purchasing behavior and habits of Iranian customers: Looking at the high level of popularity and sales volume of online stores -websites, telegram channel, Instagram page or other applications- it is obvious that the demand for online shopping is on the growth. A market research conducted by Digikala in Tehran and six other large provinces of the country, reveals that more than 90 percent of smartphone owners are familiar with Iranian online stores and over 80 percent of them have pur-chased at least once from them. Based on Euromonitor, Internet shopping is growing with a two-digit rate. Despite the restrictions in Iran, the nation was the second in the Middle East to gain access to the Internet (in 1993). Based on Techrasa’s report, Iran is always recognized as an early adopter of the new technology in the Middle East. Network expansion and necessary infrastructures and installations for high-speed Internet with appropriate price were the policies that were followed and realized by the government to serve as the backbone of the e-commerce business.

Large and growing1

~82m population (size of Germany)1.2% population growth, 2017E

Young & climbing7

>65% under age 35Beginning/middle of career

Well educated2

Among the highest education rates in region98% literacy rate for ages 15-24~80% secondary school participation+200,000 engineering graduates per year3

Urban & modern8

74% of population urbanized2% annual growth in urban population

Connected70% internet penetration4 2017 (52% 2016)>100% cell phone penetration5

~48 million smartphones6

Can pay online9

5.2 bank cards per person40% of population shops online~100% bank account penetration

Source: (1) IMF; (2) UNICEF; (3) McKinsey; (4) Internet World Stats; (5) McKinsey; (6) TechRasa; (7) UN; (8) World Bank; (9) TechRasa


16

InvestmentPortfolio


17

Pomegranate invests in market leaders

SectorsTop companies in selected markets

Leading companies in Iran

Pomegranate invested directly or indirectly2

E-commerce; General merchandise Amazon; JD.com Digikala

E-commerce; Marketplace Alibaba; Rakuten Digikala4

E-commerce; Fashion Zalando; Asos Digistyle

Appstore Apple App Store; Google Play Cafe Bazaar

Online Classifieds Blocket; Avito Divar; Sheypoor

Digital advertising WPP, Axel Springer PPG5

Online travel Booking, Hotels Alibaba

On-demand delivery GO-JEK, Deliveroo Alopeyk

Fintech – peer to peer Swish Bahamta

Emerging-/Frontier markets financial services (M&A, research, AM, Brokerage)

Avior, Renessaince Capital Griffon Capital

Pomegranate invested (direct or indirectly)

18


Sarava is a consumer technology investment company and a pioneer in Internet and

e-commerce investments in Iran. The Company has established a unique track record in supporting local entrepre-neurs to build some of the most suc-cessful consumer technology compa-nies in the country and region.

Sarava’s investment focus is on companies operating in the universe

of internet, mobile, e-commerce, games, cloud computing and software as a service

(“SaaS”). The company is one of the very few technology investment companies in the region and

particularly the only one of its size in Iran. Sarava currently has invested in more than 35 companies, among others – Iran’s leading E-commerce company Digikala, the largest Persian Android marketplace – Café Bazaar, including the online classifieds company Divar, the first digital marketing holding in Iran– PPG (which includes A-Network, ADRO, and ADAD and Digital marketing Agencies)), Online Travel Agency (“OTA)” Alibaba and technology accelerators such as Avatech and many more. Sarava is an active investor in its portfolio companies and a sig-nificant part of Sarava’s operations is focused on providing support and knowledge-sharing within the company’s network. In Q4 2017 Sarava was involved in two larger transactions connected to Café Bazaar and OTA Alibaba, which included merger of Zoraq. In February 2018 Sarava initiated a funding round in which Pomegranate committed to invest EUR 12.7 million, out of which EUR 8.9 million had already been transferred as per 30 April 2018 and another EUR 3.8 is committed through signed Memorandum of Investment. Pomegranate’s stake in Sarava amounts to 15.7% as per 30 April 2018. As per April 30, 2018 Pomegranate’s holding in Sarava is valued based on the local currency/IRR NAV of Sarava, which in turn is established based on a combination of valuation models and last transaction of its portfolio companies. Lastly Pomegranate trans-lates the IRR NAV of Sarava into EUR based on the Central Bank of

Sarava

66.3%

For more information, please visit the company’s website: www.saravapars.com/en

% of investment portfolio

Sector Internet & E-commerceCompany founded 2011First investment 2014Board representation 1 out of 7Investment Board representation 1 out of 5

Key Investment Data

90.2 mEURFair value in portfolio, April 30, 2018

-8.3 %Change in company fair value,January – April, 2018

15.7 %Pomegranate’s ownership

-7.4 %Change in company fair value, since December 31, 2016

Valuation breakdown, % Sector breakdown, %

Valuation modelLast transaction

78

75

16

3112 322

E-commerceMobile apps & classifiedsOnline travelOnline logisticsDigital/online mediaAccelerator, innovation factoryOther

Iran EUR/IRR spot rate of 50,930 on 30 April 2018, Pomegranate also applies a 30% risk adjustment to the valuation. Following the conclusion of annual performance of portfolio companies in the Iranian financial year 1397 which ended 20 March

2018, Sarava performed updated NAV review of its portfolio. All the model valuations and last transactions were determined in local currency – Iranian rial and total NAV was established at IRR 38,063 billion. The main component and driver of value in Sarava is its holding in Digikala Group.

NAV Sensivity analysis – EUR value at different risk premium adjustments (millions)

IRR bn CBI spot + 15% CBI spot + 20% CBI spot + 25% CBI spot + 30% CBI spot + 35% CBI spot + 40%Sarava NAV 38,063 650 623 598 575 554 534Pomegranate stake 5,974 102 98 94 90 87 84

19


Sarava Holdings

For more information, please visit the company’s website: www.digikala.com

thousands

Q1 Q2Q3Q4 Q1 Q2 Q1 Q2Q3Q4Q3Q4139613951394

0

9,000

18,000

27,000

36,000

45,000thousands

139613951394139313920

500

1,000

1,500

2,000

2,500

1395/1396139413930123456789

10111213

#3

#7

#13#12#11#10#9#8#7#6#5#4#3#2#1

#13#12#11#10#9#8

#6#5#4#3#2#1

#7

#13#12#11#10#9#8

#6#5#4

#2#1

thousands

1395 13961394139313920

3,000

6,000

9,000

12,000

15,000

Traffic1)4)Number of active customers3)4)

Sales volume/Items Sold2)4) (after rejections) Alexa web traffic rank in Iran4)

1) Unique visitors: Standard definition – unique customers identified in the reporting period (Unique visitors refers to the number of distinct individuals requesting pages from the website during a given period, regardless of how often they visit).2) Sales volume: Items dispatched to customers (non-GAAP sales) after rejections made. 3) Number of active customers: Total customers having recorded a purchase in the TT12M.

4)Iranian year Starts Ends1392 mar 2013 mar 20141393 mar 2014 mar 20151394 mar 2015 mar 20161395 mar 2016 mar 20171396 mar 2017 mar 2018

SECTOR: E-COMMERCE

Digikala is a general e-commerce com-pany with an estimated market share of

over 90%. It is also Iran’s largest internet company. Today, Digikala ranks as the second and third most visited web-site in Iran according to Alexa and SimilarWeb, respectively. Digikala has a fully vertically integrated, wholly-owned logistics setup, delivering next day in the majority of the provinces in Iran, offering the best e-commerce customer experience in the country. Digikala continues strategic focus with c-level management with international experience, marketplace expansion which is now already at 32% of GMV, category expansion such as FMCG products which together with marketplace has led to the increase in the num-ber of SKUs in excess of 300 thousand and 70% of transactions are now conducted on mobile. In the current environment working capital, imports and inven-tory management are of special importance to manage but technolo-gy as well as Digikala’s scale enables them to manage this quite well.

Market placeEspecially the new market place platform has shown very strong results in terms of client acceptability with a growing selection of products, and now represents about 32% of GMV, with about 2,300 active sellers and more than 140 thousand SKUs offered on market-place. The amount of monthly items sold on market place has grown from a marginal number in beginning of 1396 to more than 735 thousand in the last month of 1396.

DigistyleIn the fall of 2016 Digikala launched Digistyle, an online fashion store. Digistyle is offering a large variety of international and local brands and has exclusive partnerships with a number of large global brands. Digikala's fulfilment centre is providing for storing, packag-ing and shipping Digistyle orders. Digistyle continues to add brands to its product portfolio and has managed to get several exclusive partnerships with well-known international brands.

The traffic to Digikala.com and number of customers have increased continuously and in the last quarter of the year 1396, spanning from March 2017 – March 2018, the number of unique visitors amounted to 41.3 million, compared with 26.8 million in the end of the third quarter 1396 and by end of year 1396 the number of active custom-ers in the last twelve months amounted to 1.5 million, with over 100 thousand new customers added in the last few months of the year. GMV grew with just below 60% in local currency in 1396 and similar growth is expected in 1397. The valuation of Digikala in local currency IRR in the NAV of Sarava is based on an average of a combination of valuation meth-ods, publicly listed peers, private transactions of peer companies, DCF and exit valuation. Public and private peer group multiples have been applied to both Last Twelve Months (1396) and Next Twelve Months (1397), GMV, NMV and Gross Profit. Generally we

IRR million Mar 16–Mar 17 1395 Mar 17–Mar 18 1396

GMV (incl VAT) 13,995,566 21,912,692

EUR/IRR 40,380 49,639

EUR millionGMV 347 441

y-on-y growth in IRRGMV 100% 57%

observe a big shift towards online vis a vis off-line retail which is DK’s biggest competition. The enormous challenges for off-line re-tail in combination with automatic repricing strategies and product offering is very favourable for the company which is gaining market share from already very elevated levels.

20


0 20 40 60 80

Domestic flights

International flights 12.0%

Hotel 5.5%

Walking o�ce 2.5%

Train 12.5%

67.5%

Sarava HoldingsSECTOR: ONLINE TRAVEL

In the 4th quarter of 2017, the largest online travel business in Iran (Aliba-

ba Travel) and one of the pioneers in that space (Zoraq) merged to form the largest Online Travel Agency (“OTA”) in the country. The merged company has about 45% market share of online travel in Iran, with a dominant position in online domestic travel. Alibaba GMV grew by 158% in Iranian year 1396 compared with 1395 and triple digit growth is expected in 1397 as well. This merger between the leaders of Iran’s online travel, “Alibaba” and “Zoraq”, and integration with Alibaba’s other businesses such as “Jabama”, a hotel booking website, will further lead to growth and expansion in the field of online travel booking in the Country. The merged entities will be consolidated under a holding company called “Tousha”. The valuation of Tousha online travel holding is approx-imately EUR 82 million after investment of EUR 18.5 million into the holding. Pomegranate is holding an indirect see-through stake of 3.3% in this business post the merger. The merger between Alibaba Travel and Zoraq was facilitated by Griffon Capital, another of Pomegranate’s portfolio companies, which had exclusive fundraising mandate with the online travel booking site Alibaba. The valuation of Alibaba/ Tousha in local currency IRR in the NAV of Sarava is based on underlying IRR valuation in last transac-tion from Dec 2017.

SECTOR: CLASSIFIEDS & MOBILE

Café Bazaar is a leading consumer internet company in Iran that runs the largest local Android application

marketplace for Persian speaking countries. It owns 100 percent of Iran’s largest online classifieds company, Divar. Café Bazaar was established in 2010/2011 and was the first com-pany to enter the mobile application distribution business in Iran. The Company’s service is now installed on more than 35 million Android phones and has over 26 million monthly active users. Café Bazaar has started monetizing its appstore and the company main-tains its market share at about 85 percent, with 190 K published apps and over 77 K monetising apps. Café Bazaar is also focusing on micro-payments and Instant messaging, a “WeChat” type ecosys-tem. Pomegranate has increased its indirect see-through economic interest in Café Bazaar group, from 3% to 4.5%, following a fund-raising deal in Q4 2017. The deal included EUR 38 million for a 10 per cent increase in shareholding in Café Bazaar group for investors, with a corresponding 1.5% increase in indirect shareholding for Pomegranate. The deal was made in order to raise capital for expan-sion into new areas such as micro payments and new urban services as well as strengthening of their current businesses. Café Bazaar and Divar continue to develop their well-known online services. The valuation of Café Bazaar in local currency IRR in the NAV of Sarava is based on underlying IRR valuation in the last transaction from Dec 2017.

For more information, please visit the company’s website: www.cafebazaar.ir/en

For more information, please visit the company’s website: www.alibaba.ir

Sector breakdown of sales, %

21


Sarava Holdings

SECTOR: DIGITAL ADVERTISEMENT & MEDIA

Company DescriptionPishgaman Pejvak Pardis group

(PPG) is a digital advertisement and media holding company, that has consolidated several online advertising brands. PPG has now consolidated a number of prominent Iranian Adtech companies, including ADRO, A-Network, and ADAD and a host of other successful content and digital brand agencies including Final Target. PPG has undergone substantial restructuring and is now run by high profile marketeers and is re-focusing on their core client busi-ness. We are following with high interest how Alibaba and now also Amazon have become substantial online-ad businesses. There is an opportunity here in our point of view. The valuation of PPG in local currency IRR in the NAV of Sarava is based on underlying IRR valuation in last transaction from May 2018.

For more information, please visit the company’s website: http://ppg.media

For more information, please visit the company’s website: https://alopeyk.com

SECTOR: ONLINE LOGISTICS

Alopeyk Iran’s leading online courier and motorbike taxi, targeting to execute the GoJek model in Iran.

Having launched about a year ago with just motor bike couriers, it has already grown to over 50,000 filled orders per day and expand-ed its fleet from motorbikes only into vans and motorbike taxis as well. The valuation of Alopeyk in local currency IRR in the NAV of Sarava is based on underlying IRR valuation in the last transaction from Dec 2017.

For more information, please visit the company’s website: www.avatech.ir

SECTOR: ACCELERATION & INNOVATION

Ashena GroupAshena Group is being formed as a

consolidation of the following companies into a group;

Avatech & Avagames – Iran’s most successful start-up accelerator program. Mentorship, entrepreneurial training, seed funding, a creative workspace, and investor demo days are a few of the services provided by Avatech.

Avatech’s network is one of the main channels for sourcing early stage start-ups in Iran for Sarava VC fund. As the start-ups mature, Sarava might do follow-on investments in the companies. Over the last two years, more than 50 start-ups have graduated from Avatech.

Avagames – is a start up incubator focused on mobiles game devel-opment.

Also included in Ashena group is Shezan –a NBIC accelerator, Noua-va – which performs consultancy services to the start-up community and Hamava – which operates the new innovation factory. The valuation of Ashena in local currency IRR in the NAV of Sara-va is based on model valuation of the groups entities.

22


SheypoorSheypoor offers a general classifieds plat-

form, with a focus on certain key classifieds verticals while also targeting general

brand building. Monetization testing through selling value added services have started with encouraging results and naturally an extra emphasis on cost reductions with

the new environment are now under way, while the near term focus will

remain on traffic growth and increasing liquidity on the platform. For the broad

population the services remain free of charge, a particual important feature in these economic

times. In Q4 2017, Sheypoor successfully closed a funding round of EUR 7 million led by Pomegranate, which invested another EUR 3.7 million, including conversion of the previously extended short-term loan facility of EUR 2.0 million. Pomegranate was also joined in the funding round by two prominent external investors, including one Iranian listed VC. Pre-money valuation was EUR 42.3 million. After the transaction Pomegranate’s shareholding in Sheypoor amounts to 44.6% with a post-money valuation of EUR 49.3 million. Sheypoor has continued to grow during the first 5 months of 2018 (1 Jan 2018 – 31 May 2018) and the total number of Unique Monthly Users has been steadily above 7 million in the period, with as high as 8.5 million in January 2018 following as very succesful

marketing campaign. The average of monthly new listings in the first 5 months of 2018 was 1.5 million. As per April 30, 2017 the valuation of Pomegranate’s holding in Sheypoor is based on the post-money valuation of the company following the funding transaction on December 31, 2017. The EUR based transaction value from December 2017 is first restated to underlying IRR valuation at the time of the transaction, subsequent-ly Pomegranate translates the IRR transaction value back into EUR based on the updated Central Bank of Iran EUR/IRR spot rate of 50,930 as per 30 April 2018, with an added risk adjustment of 30%. This results in an implied EUR value of Sheypoor as per 30 April 2018 of EUR 39.3 million. The exchange rate for EUR/IRR set by the Central Bank of Iran is the only allowed exchange rate in Iran, however, below follows a sensitivity analysis based on different risk premium additions to arrive at an updated implied EUR valuation as per 30 April 2018. As stated above, since the last transaction the underlying business of Sheypoor has been growing and after the end of the reporting period, on May 31, 2018, Pomegranate gave notice about exercise of the first tranche of call options in Sheypoor. The call options exercised correspond to 3.03% of the capital in the company for a total consideration of EUR 534 thousand. After completion of the exercise of options Pomegranate’s ownership will amount to 46.2%. The remaing part of the options has expiry date one year later on 31 May 2019. As a result the company is very well funded with monetisation kicking in as well.

Last transaction valuation (Dec 2017) Sensivity analysis – EUR value at different risk premium adjustments (million)

EUR million IRR bn CBI spot + 15% CBI spot + 20% CBI spot + 25% CBI spot + 30% CBI spot + 35% CBI spot + 40%Sheypoor valuation 49,3 2,603 44 43 41 39 38 37Pomegranate stake 22,0 1,162 20 19 18 18 17 16

0123456789

2015 2016 2017 May2018

Sector Online classifiedsCompany founded 2012First investment 2014Board representation 2 out of 4

Key Investment Data


-20.0 %Change in company fair value,January – April, 2018

45 %Pomegranate’s ownership


14.8 %Change in company fair value, since December 31, 2016

Source: Alexa.

12.9%

Oct2016

Mar2017

Feb2018

0123456789

10111213141516171819

2021222324252627282930313233

#51

#61#59#57#55#53#51#49#47#45#43#41#39#37#35#33#31

#30#29

#61#59#57#55#53

#49#47#45#43#41#39#37#35#33#31#29

#51

#61#59#57#55#53

#49#47#45#43#41#39#37#35#33#31

Monthly Unique Users (millions) Alexa web traffic rank in Iran

For more information, please visit the company’s website: www.sheypoor.com

23


Griffon CapitalGriffon Capital ("Griffon") is an Iran-focused group

providing Asset Management (Capital Markets & Private Eqity) as well as Investment Banking

Advisory. Among Griffon’s primary objectives is to enable institutional investors the ability to seamlessly access and maximise opportu-nities in Iran through purpose-built vehicles and investment products spanning traditional

and alternative assets. The Group’s strength is rooted in a robust operating platform developed

with the expressed aim of serving institutional in-vestors. Griffon’s platform consists of a high calibre

team with deep local market expertise and internation-al financial pedigree blended at the board, management

and execution levels. Griffon is also distinguished by unmatched local research and primary thinking and a governance culture defined by global best practices in risk management, compliance and reporting. During the recents months of increased uncertainty and volatility in local markets in Iran, Griffon has proven to be an especially effective and useful partner for analysis and information for Pomegranate. Griffon has been the largest cross border M&A adviser in terms of num-ber and value of mandates. In 2017 Griffon has sucessfully been strengthening its local asset man-agement offering, catering to the avalaible pools of money in Iran, which are less susceptible to international headlines.

While cross border M&A activities will certainly suffer in the current envi-ronment, post US withdrawal from the JCPOA, the strategy for the last year or so to focus more on local asset management has proven to be the right decision. In 2018 Griffon will be launching various local commodity funds and ETF’s to cater to local clients. In February 2018, there was a transaction among shareholders in Griffon whereby a shareholder owning 5% increased its ownership to 14.5% through a combination of new subscription, secondary and treasury share purchase at a valuation of the company of USD 5 million. As per April 30, 2017, Pomegranate values its investment into Griffon Capital on the basis of the recent transaction in February, first restated to underlying IRR valuation at the time of the transaction, subsequently Pome-granate translates the IRR transaction value back into EUR based on the updated Central Bank of Iran EUR/IRR spot rate of 50,930 as per 30 April 2018, with an added risk adjustment of 30%. This results in an implied EUR value of Griffon Capital as per April 30, 2018 of EUR 3.7 million, and the value of Pomegranate’s stake at EUR 542 thousand. While given the current climate we are taking a conservative approach and revising our valuations downwards based on the most recent transac-tion, it is likely that growth in local asset management business will make up for the shortfall in cross-border activity and the valuations could be revised upwards before end of the year. Also further certainty with regards to macro economic environment would allow us to move on to a DCF model again for future valuations.

For more information, please visit the company’s website: www.griffoncapital.com

Sector Asset management & advisoryCompany founded 2014First investment 2014Board representation 1 out of 6

Key Investment Data


-50.7 %Change in company fair value, January – April, 2018

2.6 mEUR, 1.9 % of investment portfolio



-80.4 %Change in company fair value, since December 31, 2016

0.4%

GIF Fund & PMALast transaction valuation (Feb 2018) Sensivity analysis – EUR value at different risk premium adjustments (million)

EUR million IRR bn CBI spot + 15% CBI spot + 20% CBI spot + 25% CBI spot + 30% CBI spot + 35% CBI spot + 40%Griffon Capital 4,1 236,7 4,0 3,9 3,7 3,6 3,4 3,3Pomegranate stake 0,6 35,9 0,6 0,6 0,6 0,5 0,5 0,5

24


GIF FUNDThe GIF Fund launched in April 2016 to unlock value from Iran’s public equity market. It is a Cayman domiciled open ended fund, primarily investing in the equity securities of companies listed on the TSE and the IFB. The GIF fund has outperformed local peers since its inception. Q4 2017 was generally a strong period for the Fund in terms of local currency returns with the TEDPIX reaching consistently new all time highs in November and December 2017, however, in the first months of 2018 the local stock market declined and given the recent waekness of the rial especially against the EUR, the Fund’s euro-denominated Initial Series NAV decreased by 14.8% January 1, 2018 until the last reported NAV on March 31, 2018. As per notifica-tion to shareholders of the fund in May 2018, EUR NAV determina-tion, redemption and subscription has been temporarily suspended due to uncertainty about the exchange rate. As per April 30, 2018 the investment in the GIF Fund is valued at the Fund's last reported EUR NAV as per March 31, 2018 also adjusted for the updated risk adjusted CBI EUR/IRR spot rate as per April 30, 2018. Traditionaly, due to high concentration of exporters and comod-ity based companies in the index, the local equity markets have rallied post CBI currency devaluation on April 10, 2018, albeit with a lag. Since April 30th the TEDPIX has rallied from ca 93k to 108k as of the day of sending this report. Therefore we anticipate that above NAV calculations will be revised upwards in future reports.

GRIFFON PMAThe Portfolio Managed Account ("PMA") is a local currency denominated managed account. The placing of funds in the PMA was mainly as a short term investment in the attractive Iranian yield levels at 15-20% YTM. Pomegranate has recently decided to unwind most of the fixed income positions. As per April 30, 2018 the investment is valued at the accountsreported IRR NAV as per the end April 30, 2018 translated into EUR at the updated risk adjusted CBI EUR/IRR spot rate as per April 30, 2018.

25


NavaarNavaar is Iran's leading digital audio book production

and distribution platform. Their web and mobile apps offer audio books (for both adults and child-

ren) in an easy-to-navigate catalog, the biggest of its kind in Iran. Navaar is also preparing for Storytel/Netflix type subscription based revenue model. In Q3 2017 Pomegranate concluded an investment of EUR 830,000 EUR in Navaar

and holds a stake of 29.09% in the company. All the committed funds were transferred in Oc-

tober 2017. Pomegranate’s investment will help Navaar to grow the number of available titles, hire

additional talent and continue product development. Navaar continues to develop very well and over the

last 6 months leading up to May 2018, total number of customers has increased by 39% and the number of available titles has increased by 26%. As per April 30, 2018 the valuation of Pomegranate’s holding in Navaar is based on the post-money valuation of the company following the in-vestment agreements concluded on September 24, 2017. The EUR based transaction value from September 2017 is first restated to underlying IRR valuation at the time of the transaction, subsequently Pomegranate translates the IRR transaction value back into EUR based on the updated Central Bank of Iran EUR/IRR spot rate of 50,930 as per 30 April 2018, with an added risk adjustment of 30%. This results in an implied EUR value of Navaar as per 30 April 2018 of EUR 2.0 million, with a value of Pomegranate’s stake of EUR 587 thousand. As explained above this is a technical adjustment of the old transaction valuation from September 2017, and considering the fact that the monthly revenue run rate in May 2018 was 140% higher than May 2017, Pomegranate is looking to perform an updated valuation shortly based on the strong growth and expected continued performance of the company.

For more information, please visit the company’s website: www.navaar.ir

Sector AudiobooksCompany founded 2014First investment 2017Board representation 1 out of 5

Key Investment Data


-29 %Change in company fair value, January – April, 2018



n/aChange in company fair value, since December 31, 2016

0.4%

number

Q3 Q4Q1 Q2 Q1 Q22017 2018

0

200,000

400,000

600,000

800,000number

Q3 Q4Q1 Q22017

Q1 Q22018

0

300

600

900

1,200

1,500

No. of users (accumulative) Available titles

Last transaction valuation (Sep 2017) Sensivity analysis – EUR value at different risk premium adjustments (million)

EUR million IRR bn CBI spot + 15% CBI spot + 20% CBI spot + 25% CBI spot + 30% CBI spot + 35% CBI spot + 40%Navaar 2,8 133,6 2,3 2,2 2,1 2,0 1,9 1,9 Pomegranate stake 0,8 38,9 0,7 0,6 0,6 0,6 0,6 0,5

26


BahamtaIn Q4 2017, Pomegranate concluded the

agreement for an investment of EUR 500 thousand into the Iranian fintech

start-up - Bahamta, active in the field of mobile based peer-to-peer monetary transfers. The investment is payable in two tranches for a total sharehold-ing of 14.3% upon completion of both

tranches, as per April 30, 2018 the first tranche has been completed. The

investment will help Bahamta to recruit more talent and grow as a company and

continue to develop its offering in the now emerging fintech industry in Iran. Bahamta has

previously received funding from one of the most successful local VC companies.

Bahamta offers a better alternative to traditional card-to-card or account-to-account P2P transfers through a user friendly mobile based solution. As per April 30, 2018, the valuation of Pomegranate’s holding in Bahamta is based on the post-money valuation of the company fol-lowing the investment agreement concluded on December 18, 2017. The EUR based transaction valuation from December 2017 is first restated to underlying IRR valuation at the time of the transaction, subsequently Pomegranate translates the IRR transaction valuation back into EUR based on the updated Central Bank of Iran EUR/IRR spot rate of 50,930 as per April 30, 2018, with an added risk adjust-ment of 30%. This results in an implied EUR value of Bahamta as per April 30, 2018 of EUR 2.6 million, with a value of Pomegran-ate’s stake of EUR 378 thousand.

For more information, please visit the company’s website: www.bahamta.com

Sector FintechCompany founded 2015First investment 2017Board representation 1 out of 5

Key Investment Data


-24 %Change in company fair value, January – April, 2018

14.3 %Pomegranate’s ownership


n/aChange in company fair value, since December 31, 2016

0.3%


EUR million IRR bn CBI spot + 15% CBI spot + 20% CBI spot + 25% CBI spot + 30% CBI spot + 35% CBI spot + 40%Bahamta 3,5 175,0 3,0 2,9 2,7 2,6 2,5 2,5 Pomegranate stake 0,5 25,0 0,4 0,4 0,4 0,4 0,4 0,4


27

Corporate Governance

28


Company and Share information

Company and Group informationPomegranate Investment AB (publ), the parent company of the Group was incorporated and registered on April 7, 2014. As of April 30, 2018, the Pomegranate Investment Group consists of the Swedish parent company Pomegranate Investment AB (publ) and one wholly-owned Swedish subsidiary, Pomegranate Holding AB. The parent company’s business is to act as the holding company of the Group and therefore own, manage and finance the holding of all portfolio companies. The subsidiary company currently has no activity.

Share informationAs per April 30, 2018 a total of 5,404,601 shares in Pomegranate were issued and outstanding. All the shares carry one vote each. The shares are traded Over The Counter “OTC” through Pareto Securi-ties AB in Stockholm. ISIN code is SE0006117511. A total of 192,500 warrants were outstanding as per April 30, 2018. Representing a fully diluted amount of shares of 5,597,101 or dilution of 3.4%, in case of full exercise.

TradingDuring the period January 1, 2017 and April 30, 2018 total volume of trading in Pomegranate shares OTC amounted to 494,201 shares. The maximum and minimum price for the 16 month period was 27 EUR/share and 16 EUR/share respectively. The last closing price as per April 30, 2018 was 17 EUR/share.

DividendsNo dividend has been proposed for the year.

Jan Feb Mar Apr Jan Feb Mar AprMay Jun Jul Aug Sep Oct Nov Dec

2017

Volume

Volume Prices

Low price High price

2018

0

20,000

40,000

60,000

80,000

100,000

120,000

0

5

10

15

20

25

30

Pomegranate OTC prices & volume Pomegranate Legal Structure

Geographical distribution of Pomegranate shareholders

50%

10%

25%

12%3%

SwedenUKCEESwitzerland/AustriaOthers

Pomegranate Investment AB (publ)

(Sweden)

Pomegranate Holding AB

(Sweden)

Portfolio Investments

15-45%

100%


29

PER BRILIOTH Chairman of the Board of Directors

Key Founder of Pomegranate

Board of Directors

MOHSEN ENAYATOLLAH Member of the Board of Directors

NADJA BORISOVA Member of the Board of Directors

ANDERS F. BÖRJESSON Member of the Board of Directors

Member of the Board of Directors since 2014. Education: Degree in Business Administration from Stockholm Universi-ty and a Master of Finance from London Business School.

Between 1994 and 2000, Per Brilioth was head of the Emerging Markets section at Hagströmer & Qviberg. He is the Chair-man of the board of directors and CEO of Vostok New Ventures Ltd. Vostok New Ventures is an investment company with the business concept of using experience, expertise and a widespread network to identify and invest in assets with consid-erable potential for value appreciation, with a focus on companies with network effects. It has a successful history as investment company in the Swedish stock market since 1996.

Member of the Board of Directors since 2014. Education: Stockholm University and an LL.M. from NYU School of Law.

Anders F. Börjesson is a member of the Board of Directors and is also the Gen-eral Counsel of Vostok New Ventures Ltd. He has also served as acting General Counsel of Pomegranate Investment AB and Vostok Emerging Finance Ltd and as CEO of RusForest AB (publ). Previously, Anders worked as an associate at Mann-heimer Swartling’s offices in St Petersburg and Moscow and headed their group on mergers, acquisitions and corporate law in Moscow in 2006-2008. He is a member of the New York Bar.

Member of the Board or Directors since 2016. Education: Master of Science degree in Middle East Politics from SOAS, Univer-sity of London.

Mohsen Enayatollah has held a number of senior positions, predominantly for major global financial institutions within capital markets, gaining extensive experience across developed and emerging markets over the past 20+ years. He recently grad-uated from SOAS, University of London, where he completed an MSc in Middle East Politics with a focus on Iran. Mohsen Enayatollah has since concentrated on Iran’s economy with a particular emphasis on trade and investment opportunities.

Member of the Board of Directors since 2016. Education: St. Petersburg Institute of Mechanics and a Certified Accountant Degree from ACCA in England.

Nadja Borisova is a member of the Board of Directors and is CFO of Vostok New Ventures. Nadja has previously held a number of positions including acting CFO of Pomegranate Investment AB and Vostok Emerging Finance Ltd, CFO for Varyag Resources, a Russia-focused private equity company, and finance positions at Cloetta-Fazer, The Coca-Cola Company and Coca-Cola Bottlers both in Sweden and in Russia.


30

Group Management

FLORIAN HELLMICHCEO

GUSTAV WETTERLINGCFO

MAHGOL SHARILIGeneral Counsel

RICKARD STRÖMGRENInvestment Manager

LEO KIAInvestment Manager

CEO of the Company since 2015.Education: Economics and Busi-ness Administration from Vienna University.

Florian Hellmich is the CEO of Pomegranate Investment AB. Between 2004 and 2015 he acted as Managing Director and Glob-al Head of Equity Distribution of Renaissance Capital Ltd. based in Moscow, London and African offices. His previous employment was with Creditanstalt in Central Eastern Europe in Equity Research and Equity Sales (1994 to 2004).

CFO of the Company since 2017.Education: M.Sc. in Economics and Business from the Stockholm School of Economics.

Gustav Wetterling is employed as CFO of Pomegranate Investment AB since February 2017. Gustav Wetterling joined Pomegranate from RusForest AB where he had been working as Group CFO since 2014. Before that he held positions as Director of Procurement and Head of Investor Relations at Black Earth Farming Ltd in Moscow. He has also worked for Vostok New Ventures Ltd (then named Nafta Investment Ltd). and Svenska Han-delsbanken.

General Counsel of the Company since 2018. Education: European Legal Studies, LLB with honors from Kent University in England; Legal Practice Course, 2011, and Professional Skills Course, 2014 from The University of Law in London.

Mahgol Sharili (Farsi speaking) is the General Counsel of Pomegran-ate Investment AB and advises in relation to various projects in the investment portfolio and steers the company into Iran with continuous legal and sanctions compliance as the company grows. Prior to join-ing the Company, Mahgol was an associate at Vinge KB’s Iran Desk in Stockholm and a solicitor at Ronald Fletcher Baker LLP in London working with general corporate and commercial matters as well as being head of the Iran Desk. She is a solicitor in the Senior Courts of England and Wales.

Investment Manager at Pomegran-ate since 2016. Education: M.Sc. Mechanical Engineering from Lund Institute of Technology and B.Sc. Business Administration from Stockholm University

Rickard Strömgren is employed as investment manager at Pomegran-ate Investment AB. Rickard has previous experience from inter-national environments for the last 9 years, including Nigeria, South Korea, Brazil and the US, as well as co-founder and growth manag-er at Groupon Sweden (and later Norway) within Rocket Internet, and turn-around manager at a Kin-nevik-owned Nigerian e-commerce company and work as manage-ment consultant.

Investment Manager at Pomegran-ate since 2016. Education: M.Sc. Computer Science from Uppsala University, School of Entrepreneur-ship at Uppsala University as well as various courses within Business Administration, Marketing, Market Analysis, Immaterial Rights and Business Law.

Leo Kia is employed as investment manager at Pomegranate Invest-ment AB. Leo has over 12 years of experience from fast growing companies in an international en-vironment. During the latter half of his career, he has successfully led several B2C companies in various industries through hyper-growth phases. Prior positions include co-founder and growth manager at Groupon Sweden (and later Norway) within Rocket Internet, and turn-around manager at a Kin-nevik-owned Nigerian e-commerce company.


31

AuditorPricewaterhouseCoopers AB, with Nicklas Kullberg as the auditor in charge has been the Company’s auditor since 2014.

Organisation of activitiesThe Board of Directors meets in person at least twice a year and more frequently if needed. In addition to this, meetings are conducted by telephone conference when necessary. Between meetings, the Mana-ging Director has regular contact with the Chairman of the Board and the other Board members. The Board of Directors adopts decisions on overall issues affecting the Group. The Managing Director manages the Group’s day-to-day activi-ties and prepares investment recommendations in cooperation with management of the Group. Recommendations on investments are made by the Board of Di-rectors of the parent company.

Compliance mattersPomegranate’s investments in Iran are subject to economic and financial sanctions imposed by the European Union, Sweden and the United States that could subject Pomegranate to legal and regulatory risks. On February 22, 2016, in connection with the capital raising that year, the Company adopted an extensive Trade Controls Policy to replace the original Sanctions Compliance Strategy previously in force. The new policy outlines the Board of Directors’ and the employ-ees’ roles and responsibilities in terms of compliance and contains provisions on transaction analysis and due diligence, continuous monitoring, compliance work at the Company’s portfolio companies, documentation, reporting, penalties for non-compliance and training.


32

Risks and uncertainty factors

Commercial risksAt the time of the preparation of this annual report, the Company’s total portfolio consisted of eight investments, with two investments, Sarava and Sheypoor representing 80% of the value of the investment portfolio. Overall, this means that the Company has a large individual exposure to each of the portfolio companies. Furthermore, it means that changes in individual port-folio companies could have a major impact on the Company’s results.

Financial risks and risks associated with changes in valueThe value of the portfolio companies is dependent on a number of underly-ing, external factors and can both increase and decrease. Factors that may be considered likely to have a decisive influence on the value of the portfolio companies include but are not limited to the operational management’s ability to develop and grow the companies within their respective business areas, interest in investment in the sectors in which the companies operate, market demand for the portfolio companies’ products and services, macro factors such as underlying economic growth in the geographical markets in which the portfolio companies operate and fluctuations in exchange rates.

Valuation and transaction riskPomegranate carries out valuations of its portfolio companies on a continu-ous basis, as described in more detail in note 2. The Company has also per-formed a sensitivity analysis for the valuation of its largest holding – Sarava, in note 2. In the case of external transactions, there is thus always a risk that the Company’s valuation of the portfolio companies may differ from the external value at the time of the transactions.

Foreign exchange riskForeign exchange risk refers to the risk that exchange rate fluctuations will have a material adverse effect on the Company’s income statement, balance sheet or cash flow. Exposures of foreign exchange risk are the result of the international operations, as well as translation of balance sheets and income statements in foreign currencies into EUR. The Company is mainly exposed to fluctuations in IRR against the EUR. Exchange rate fluctuations could therefore have a material adverse effect on the Company’s business, pros-pects, results of operation and financial condition.

Credit riskThe Company is exposed to credit risk through cash and cash equivalents and deposits at banks and credit institutions. The company monitors the credit situation on a continuous basis.

Liquidity riskLiquidity risk refers to the risk that liquidity will not be available to meet payments commitments due to the fact that the Company cannot divest its holdings quickly or without considerable extra costs. Should this risk ma-terialise, it could have a material adverse effect on the Company’s business, results of operations and financial condition.

Tax risksThe handling of tax issues within Pomegranate is based on the Company’s interpretations of current tax legislation, tax agreements and other tax regulations and standpoints from relevant tax authorities. If Pomegranate’s interpretation of laws or administrative practice is incorrect, if tax laws or interpretations of these or the administrative practice in relation to these changes, including with a retroactive effect, or if tax authorities successfully make tax adjustments that deteriorate Pomegranate’s past or current tax positions this could have a negative impact on the Company’s business, result of operations, financial condition and future prospects.

Regulatory and legal risksPomegranate invests mainly in relatively young companies operating in markets that cannot yet be regarded as mature. These markets are often characterised by rapid changes in legislation and regulations. In general, the portfolio companies are active in the online segment, which entails an increased vulnerability to potential regulations or other restrictions on use of the internet and/or other communications channels that are of key importance for operations at Pomegranate’s portfolio companies.

Political risksPomegranate’s portfolio companies operate mainly in markets that cannot yet be regarded as mature and in which the State may have interests in commerce and industry in a manner that may not be obvious. Even though


33

the Company does not consider that there is a risk of the government taking an interest in the sectors in which the Company has invested, the possibility of this occurring in the future cannot be disregarded.

Sanction risksSince last year’s report, there have been significant changes in the US sanc-tions regime against Iran as administered by OFAC. From 6 August 2018, US secondary sanctions previously lifted under the JCPOA have returned in the financial and non-petrochemical sectors. The second wave of US second-ary sanctions in relation to oil and gas, energy and petrochemicals are due to return on 4 November 2018. Pomegranate’s investments in Iran have been and continue to be subject to compliance with economic and financial sanctions imposed by the EU, the US and the UN under the JCPOA, as well as, Swedish economic sanctions and export controls. From inception, the Company adopted a “Sanctions Compliance Strategy” dated 26 June 2014 setting out the obli-gations of the Company and its Board of Directors to operate the strictest compliance processes to ensure that it would meet the legal and regulatory requirements of all jurisdictions in which it operates as applicable for its investments in Iran. On 22 February 2016, in connection with the March 2016 equity increase, the Company adopted an extended and comprehen-sive “Trade Controls Policy”, replacing the previous Sanctions Compliance Strategy. The existing Trade Controls Policy sets out the compliance roles and responsibilities of the Board of Directors and Pomegranate’s employ-ees, and includes provisions for transaction screening and due diligence, continuous monitoring, compliance by Pomegranate’s portfolio companies, record keeping, violations and disciplinary action, reporting of violations and training. The Board of Directors administers the Company’s Trade Con-trols Policy, and General Counsel Mahgol Sharili, is the individual chiefly responsible for ensuring the Company’s compliance with sanctions overseen by external legal advisors. What is important to note is that OFAC has continued to sanction Iranian persons and entities during the course of the JCPOA. The extent of the secondary sanctions rolled back pursuant to the JCPOA has been limited from the start. Whilst the US has indicated that by November 4, 2018, all

previous US secondary sanctions will return, it is likely that extra-territorial sanctions will further be extended beyond the pre-JCPOA level. The sub-stance and application of sanctions continuously change and Pomegranate cannot predict whether the sanctions landscape will remain to the letter of the existing legal texts or how the US laws will impact doing business with Iran in the long-term. The Company has never had any US nexus but has however, observed US sanctions laws in relation to its investment targets and counterparties in Iran. The EU in support of the JCPOA and in order to preserve the interest of European companies investing in Iran, adopted a Blocking Regulation, which entered into effect on 7 August 2018. The Regulation applies imme-diately to economic operators and shall be implemented an applied directly by national authorities and courts. The statute protects against the listed extra-territorial US sanctions in its Annex but there is a risk other US or legislative measures by existing signatories to the JCPOA will subsequently come into effect, which are not protected by the Regulation. Whilst the Company believes it has taken reasonable steps to verify that its investments do not involve dealing with, or making funds or econom-ic resources available to, sanctioned persons and entities and has put in place appropriate safeguards to prevent such activities and flow of finance, there are inherent difficulties in establishing and verifying identities and corporate ownership chains in Iran (amongst other obstacles), and there is a risk that such persons and entities historically have been, presently are, or in the future will be, associated with the companies in which Pomegranate maintains a direct or indirect equity interest. From 7 August 2018, it will be mandatory for an EU Operator to comply with the EU Blocking Regulation. Non-compliance with the Regulation could result in civil or criminal liability for individuals and entities within the Company, the imposition of signifi-cant fines, the sanctioning of the Company itself, or other penalties, as well as negative publicity or reputational damage. There is still a risk that the Company’s investments may become pro-hibited by EU economic sanctions relating to missile technology, nucle-ar-related activities or human rights abuses. By 2024, the remaining EU sanctions against Iran will be lifted, the ‘Transition Day’ under the JCPOA; this will signal the dropping of remaining sanctions against Iran and will


34

be triggered when the IAEA confirms that Iranian nuclear activity is fully compliant. Until then, screening against European sanctions databases is a legal requirement for the Company. Pomegranate cannot predict with confidence US, EU or Swedish en-forcement policy with respect to economic sanctions, and there is a risk that the relevant authorities will take a different view regarding of the status of the Company or the compliance measures it has taken. Furthermore, laws, regulations or licensing policies on economic sanctions could change in a way that could affect the Company’s investments in Iran or could result in restrictions, penalties or fines. In particular, such changes could occur rap-idly as a result of shifting political attitudes within the governments of Iran, the EU Member States or the UN. The decision of the United States under the administration of President Trump to withdraw from the 2015 JCPOA, has increased the risk of war and a nuclear arms race in the Middle East and beyond. President Trump has vocally expressed wishes that he would like to see regime change in Iran and openly supports Israel and Saudi Arabia over Iran and its regional partners. The economic pressure on Iran and the political instability in the region could threaten the success of the JCPOA. Changes to EU, Swedish or US regulations could result in the expansion of sanctions applicable to Iran in a manner that would restrict the Com-pany’s ability to continue with existing investments or restrict its ability to make new investments in Iran. Any of the foregoing could result in a materi-al adverse effect on the Company’s business, financial condition and results of operations.

Uncertainty factorsThe most prominent uncertainty factors affecting business activities which, at the same time, introduce an element of uncertainty into assessments of future progress, consist mainly of how the currency and price situation for unlisted companies and the various industries in which the portfolio compa-nies operate actually progresses.


35

Financial Information


36

Business activitiesPomegranate Investment AB (publ), corporate ID number 556967-7247, (”Pomegranate” or the ”Company”) is a public limited liability company, with its registered office in Stockholm, Sweden. Pomegranate is an investment company whose main business concept is direct or indi-rect investment in movable and immovable assets mainly in the Middle East and conduct other business compati-ble therewith. This Annual Report relates to the financial year,which corresponds to the period January 1, 2017through April 30, 2018.

Important events during the yearIn January 1, 2017 through April 30, 2018, the Compa-ny carried out a further capital issue by way of which the Company was provided with an additional EUR 30 million through a new issue of a total of 1,250,000 shares at a subscription price of EUR 24 per share.

WarrantsThere were no issues of new warrants in the period January 1, 2017 through April 30, 2018. All warrants were previously allocated to the Company CEO and Board Members and other key persons, except for 3,000 warrants which were allocated to the new CFO inFebruary 2017.

Net resultThe net result after tax amounted to EUR -29.2 million,including a result from fair value on EUR -25.3 million.

Administration Report

Cash and cash equivalents The Company’s cash and cash equivalents amounted toEUR 23.4 million at the balance sheet date.

Equity/Net Asset ValueThe Company’s equity amounted to EUR 131.4 millionas at the balance sheet date, which was equivalent toEUR 24.3 per share. The number of shares at the balance sheet dateamounted to 5,404,601.

Proposal (and reasons for) the appropriation of profitsThe following profits are at the disposal of the AnnualGeneral Meeting (amounts in EUR):

Profit brought forward 54,379,121

Loss for the year -29,156,140

Warrants 795,180

Share premium reserve 99,948,173

125,966,333

The Board of Directors proposes that the resulting EUR 125,966,333 for the financial year January 1, 2017 through April 30, be brought forward.


37

Expressed in EUR thousandsJanuary 1, 2017-

April 30, 2018January 1, 2016-

December 31, 2016

Result from financial assets at fair value through profit or loss 1 -25,295 38,221Total operating income -25,295 38,221

Operating expenses -3,811 -2,893Operating result -29,106 35,328

Financial income and expenses

Exchange gains/losses, net -49 -133Interest income - 8

Interest expense -2 -

Net financial items -50 -125

Result before tax -29,156 35,203

Income tax - 40Net result for the financial period -29,156 35,244

Earnings per share (in EUR) -5.7 9.8Diluted earnings per share (in EUR) -5.7 9.6

Statement of comprehensive income



December 31, 2016

Net result for the financial period -29,156 35,244

Other comprehensive income for the period:

Items that may be classified subsequently to profit or loss: - - Currency translation differences - - Disposals - - Total other comprehensive income for the period - -Total comprehensive income for the period -29,156 35,244

Total comprehensive income for the periods above is entirely attributable to the equity holders of the parent company.

Income statementsGroup


38

Expressed in EUR thousands Apr 30 -18 Dec 31 -16

NON CURRENT ASSETS

Tangible fixed assetsOffice equipment and Furniture & Fittings 31 -Total tangible fixed assets 31 -

Financial non current assetsFinancial assets at fair value through profit or loss 111,865 117,964Total financial non current assets 111,865 117,964

Total non current assets 111,896 117,964

CURRENT ASSETS

Cash and cash equivalents 23,421 29,009

Derivative Financial instrument 805 - Tax receivables 83 84Other current receivables 92 36Total current assets 24,401 29,129

TOTAL ASSETS 136,297 147,093

SHAREHOLDERS’ EQUITY(including net result for the financial period) 131,429 132,617

CURRENT LIABILITIES

Non-interest bearing current liabilitiesTrade payables 22 22Other current liabilities 4,110 13,860Accrued expenses 735 543Tax liability - 51Total current liabilities 4,867 14,476

TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES 136,297 147,093

Balance sheetsGroup


39

Expressed in EUR thousandsShare

capitalOther paid

in capitalOther

reservesRetained earnings Total

Balance at January 1, 2016 1,655 18,729 145 19,135 39,664

Net result for the period – – – 35,244 35,244January 1, 2016 to September 30, 2016Other comprehensive income for the periodCurrency translation differences – – – – –Total comprehensive income for the period – – – 35,244 35,244January 1, 2016 to December 31, 2016Transaction with ownersProceeds from rights issue 2,500 57,500 – – 60,000Transaction costs – -2,937 – – -2,937Share based compensation – – 646 – 646Balance at December 31, 2016 4,155 73,292 791 54,379 132,617

Expressed in EUR thousandsShare

capitalOther paid

in capitalOther

reservesRetained earnings Total

Balance at January 1, 2017 4,155 73,292 791 54,379 132,617

Net result for the period – – – -29,156 -29,156January 1, 2017 to April 30, 2018Other comprehensive income for the periodCurrency translation differences – – – – –Total comprehensive income for the period – – – -29,156 -29,156January 1, 2017 to April 30, 2018Transaction with ownersProceeds from rights issue 1,250 28,750 – – 30,000Transactions costs rights issue – -2,036 – – -2,036Employee stock option program – – 4 – 4Balance at April 30, 2018 5,405 100,007 795 25,223 131,429

Statement of changes in equityGroup


40

Cash flow statementGroup



December 31, 2016

Operating activities


Adjustment for non-cash itemsInterest income and expense, net 2 Currency exchange gains/-losses 49 128

Warrants 4 646 Result from financial assets at fair value through profit or loss 25,295 -38,221

Change in operating receivables 20

Change in operating liabilities -196 567

Net cash used in operating activities -3,983 -1,680

Investment activities

Investment in financial assets -29,494 -38,558

Investment in subsidiaries 6

Investments in Office equipment and Furniture & Fittings -31

Interest received - -

Interest paid -2 -0

Cash flow used in investing activities -29,521 -38,558

Financing activities

Proceeds from rights issue, net of transaction costs 27,964 57,063 Cash flow from financing activities 27,964 57,063

Cash flow during the period -5,540 16,825

Cash and cash equivalents at beginning of the period 29,009 12,317 Exchange losses/gains on cash and cash equivalents -49 -133 Cash and cash equivalents at the end of period 23,421 29,009


41

1. Equity ratio is defined as shareholders’ equity in relation to total assets.2. Net asset value/share is defined as shareholders’ equity divided by total number of shares.3. Earnings/share is defined as result for the period divided by average weighted number of shares for the period.4. Diluted earnings/share is defined as result for the period divided by average weighted number of shares for the period calculated on a fully diluted

basis, based on weighted average number of allocated warrants. However, this adjustment is not made when the result is negative.

Jan 1, 2017 – Apr 30, 2018 Jan 1, 2016 – Dec 31, 2016

Equity ratio, %1 96.4% 90.2%Net asset value EUR 131,429,435 132,616,934Net asset value/share, EUR2 24.3 31.9Earnings/share, EUR3 -5.7 9.8Diluted earnings/share, EUR4 -5.7 9.6Weighted average number of shares for the financial period 5,141,714 3,580,831Weighted average number of shares for the financial period, including weighted average of outstanding warrants at balance sheet date 5,336,366 3,671,412Number of shares at balance sheet date 5,404,601 4,154,601Number of shares at balance sheet date including outstanding warrants at balance sheet date 5,597,101 4,349,101

Alternative performance measuresGroup

As of July 3, 2016 new guidelines on APMs (Alternative Performance Mea-sures) are issued by ESMA (the European Securities and Markets Authority). APMs are financial measures other than financial measures defined or spec-ified by International Financial Reporting Standards (IFRS). Pomegranate Investment AB (publ) regularly uses alternative performance measures to enhance comparability from period to period and to give deeper information and provide meaningful supplemental information to analysts, investors

and other parties. It is important to know that not all companies calculate alternative performance measures identically, therefore these measurements have limitations and should not be used as a substitute for measures of performance in accordance with IFRS. Below you find our presentation of the APMs and how we calculate these measures. The definitions and thereby calculations have been somewhat adjusted in this annual report compared to previous interim reports.


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(Expressed in EUR thousands)January 1, 2017-


December 31, 2016

Result from financial assets at fair value through profit or loss -25,295 38,221Operating expenses -3,811 -2,893Operating result -29,106 35,328

Financial income and expenses

Exchange gains/losses, net -49 -133Interest income - 8

Interest expense -2 0,0

Net financial items -50 -125


Income tax – –


Statement of comprehensive income

(Expressed in EUR thousands)January 1, 2017-


December 31, 2016


Other comprehensive income for the period:

Items that may be classified subsequently to profit or loss:Currency translation differences – –Total other comprehensive income for the period – –Total comprehensive income for the period -29,156 35,203

Income statementsParent Company


43

(Expressed in EUR thousands) April 30, 2018 December 31, 2016

NON CURRENT ASSETS

Tangible fixed assetsOffice equipment and Furniture & Fittings 31 - Total tangible fixed assets 31 -

Financial non current assetsShares in subsidiaries 6 - Financial assets at fair value through profit or loss 111,865 117,964Total financial non current assets 111,870 117,964

Total non current assets 111,901 117,964

CURRENT ASSETS

Cash and cash equivalents 23,415 29,009

Derivative financial instrument 805Loan receivables - -

Tax receivables 83 84 Other current receivables 92 36Total current assets 24,396 29,129

TOTAL ASSETS 136,297 147,093

SHAREHOLDERS’ EQUITY(including net result for the financial period) 131,429 132,617

CURRENT LIABILITIES

Non-interest bearing current liabilitiesTrade payables 22 22Other current liabilities 4,110 13,860Accrued expenses 735 543Tax liability - 51Total current liabilities 4,867 14,476

TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES 136,297 147,093

Balance SheetsParent Company


44

Statement of changes in equityParent Company

Parent Company January 1, 2016 – December 31, 2016

Restricted equity Non-restricted equity

(Expressed in EUR thousands) Share capitalOther paid

in capitalRetained earnings

Total non-restricted equity Total

Opening shareholder's equity 1,655 18,729 19,280 38,010 39,664

Net result for the period – – 35,244 35,244 35,244Total comprehensive income for the period – – 35,244 35,244 35,244Proceeds from rights issue 2,500 57,500 – 57,500 60,000Transaction costs – -2,937 – -2,937 -2,937Share based compensation – – 646 646 646Balance at September 30, 2016 4,155 73,292 55,170 128,462 132,617

Parent Company January 1, 2017 – April 30, 2018

Restricted equity Non-restricted equity

(Expressed in EUR thousands) Share capitalOther paid

in capitalRetained earnings

Total non-restricted equity Total

Opening shareholder's equity 4,155 73,292 55,170 128,462 132,617

Net result for the period – – -29,156 -29,156 -29,156Total comprehensive income for the period – – -29,156 -29,156 -29,156Proceeds from rights issue 1,250 28,750 – 28,750 30,000Transactions costs rights issue - -2,036 - -2,036 -2,036Employee stock option program – - 4 4 4Balance at April 30, 2018 5,405 100,007 26,018 126,025 131,429

45


Note 1 – General informationPomegranate Investment AB (publ) (Pomegranate) is an investment company as defined in IFRS 10 p.27, where the participations in the portfolio companies are recorded at fair value in the Financial Reports. Pomegranate’s business is to own and manage shares and participations in portfolio companies. Pomegranate is a limited liability company registered in Sweden and based in Stockholm. The address of the company’s office is Mäster Samuelsgatan 1, 111 44 Stockholm. Pomegranate’s annual report for the period January 1, 2017 - April 30, 2018 has been approved for publication by decision of the Board on the day of August 16, 2018. Unless otherwise specified, all amounts are reported in thousands of EUR.

Note 2 – Summary of important accounting principlesThe most important accounting principles applied when preparing this consolidated financial statements are set out below. These prin-ciples have been applied consistently for all years presented, unless otherwise stated.

2.1 Accounting basisFinancial reports for Pomegranate Investment AB (publ) have been prepared in accordance with the Annual Accounts Act, RFR 1 Supplementary Accounting Rules for Groups, and International Financial Reporting Standards (IFRS) and interpretations of the IFRS Interpretations Committee (IFRS IC) as adopted by the EU. It has been prepared in accordance with the acquisition method, except for financial assets measured at fair value through profit or loss. This consolidated financial statement is Pomegranate’s first one, which is prepared in accordance with IFRS. Historical financial infor-mation has been recalculated from 7 April 2014, which is the date of transition to IFRS accounting. Explanations of the transition from previously applied accounting principles to IFRS and the effects of the transition on the income statement and shareholders’ equity are disclosed in Note 3. Items included in the financial statements of the various entities in the Group are valued in the currency used in the economic environ-ment in which each company is primarily active (functional currency). The financial reports use euro (EUR), which is the Group’s presenta-tion currency. The preparation of reports in accordance with IFRS requires the use of some important estimates for accounting purposes. Further-more, the management is required to make certain assessments when applying the Group’s accounting policies. The areas include a high degree of assessment, which are complex or such Areas where assumptions and estimates are of fundamental importance to the Financial Reports are set out in Note 4.

2.1.1 New standards and interpretations not yet applied by the GroupA number of new standards and interpretations will come into force for fiscal years beginning January 1, 2018 or later, and have not been applied in the preparation of this financial report. Below is a prelimi-nary assessment of effects from the standards deemed to be relevant to the Group: IFRS 9 “Financial Instruments” deals with the classification, val-uation and accounting of financial assets and liabilities. It replaces those parts of IAS 39 that deal with the classification and valuation of financial instruments. IFRS 9 retains a mixed valuation approach, but simplifies this approach in some respects. There will be three valuation categories for financial assets, accrued acquisition value, fair value through other comprehensive income and fair value through profit or loss. How an instrument is to be classified depends on the company’s business model and the instrument’s characteris-tics. Investments in equity instruments shall be reported at fair value through profit or loss but there is also an opportunity to report the instrument at fair value through comprehensive income at the first reporting date. No reclassification to the income statement will then occur upon disposal of the instrument. For financial liabilities, the classification and valuation are not changed except in cases where a liability is recognized at fair value through profit or loss based on the fair value option. The standard is to be applied for fiscal years beginning January 1, 2018. Prior application is allowed. The Group has not yet evaluated the effects of the introduction of IFRS 9. No other IFRS or IFRIC interpretations that have not yet entered into force are expected to have a significant impact on the Group.

2.2 Consolidated accounts

2.2.1 Basic accounting principlesInvestment CompaniesPomegranate is an investment company as defined in IFRS10 p. 27 Consolidated Financial Statements. An investment company shall nei-ther consolidate its subsidiaries nor apply IFRS 3 Business Combina-tions when it receives a controlling influence over another company. Instead, the investment company shall value holdings in a subsidiary at its fair value through profit or loss in accordance with IFRS 39 Financial Instruments: Accounting and Valuation. Pomegranate has a subsidiary that is not itself an investment company or is part of the portfolio companies, and therefore the subsidiary is consolidated according to the acquisition method. Acquisition-related costs are expensed when incurred.

SubsidiarySubsidiaries are all companies over which the Group has controlling influence. The Group controls a company when it is exposed to or is entitled to variable returns from its holding in the company and is able to influence the return through its influence in the company. Subsidiaries are included in the Financial reports as of the date when the controlling influence is transferred to the Group. They are exclud-ed from the Financial Reports from the date on which the controlling influence ceases.

Associated companiesAn associated company is a company over which the investment firm exercises a significant influence through the opportunity to partici-pate in decisions relating to the business’s economic and operation-al strategies. This relationship usually prevails in cases where the Investment Company holds, directly or indirectly, shares representing 20-50 percent of the votes, or by agreement having a significant influence. When Pomegranate is an Investment Company, holdings in associated companies are also reported at fair value with changes in value through profit or loss in accordance with IAS 39 Financial Instruments: Accounting and Valuation. The accounting principle for financial assets valued at fair value through profit or loss is described in the section below for financial instruments.

2.3 Segment reportingOperating segments are reported in a manner consistent with the internal reporting submitted to the highest executive decision maker. The board of directors of an investment company is by necessity deeply involved in investment decisions and monitoring portfolio companies’ performance. The Board has therefore been identied as the highest executive decision maker of the Company for purposes of internal reporting. In the internal reporting of the Company, there is only one operating segment.

2.4 Translation of foreign currencyFunctional currency and reporting currencyAll companies in the Group have euro (EUR) as functional currency, since the currency has been defined as the currency used in the primary economic environment in which the companies operate. Euro (EUR) is used in the financial statements as the Group’s presentation currency.

Transactions and balance sheet itemsTransactions in foreign currency are translated to the functional currency at the exchange rates prevailing on the transaction date. Exchange gains and losses arising from the payment of such transac-tions and the translation of monetary assets and liabilities in foreign currencies at the closing date are recognized in the operating profit in the income statement. Exchange rate gains and losses relating to loans and cash equiv-alents are reported in the income statement as financial income or expenses. All other exchange gains and losses are reported in the item “Other operating expenses” and “Other operating income” in the income statement.

2.5 Income statement

2.5.3 Interest incomeInterest income is recognized as income using the effective interest rate method.

Notes to the Financial Statements

46


2.5.4 Dividend incomeDividend income is recognized when the right to receive payment has been determined.

2.6 LeasingLeases where a significant part of the risks and benefits of ownership are retained by the lessor is classified as operational leasing. Pay-ments made during the lease term (after deduction of any incentives from the lessor) are charged to the profit and loss account on a straight-line basis over the lease period.

2.7 Employee benefits

2.7.1 Short-term benefitsLiabilities and salaries, including non-monetary benefits and paid absence, which are expected to be settled within 12 months after the end of the financial year, are reported as current liabilities to the undiscounted amount that is expected to be paid when the liabilities are settled. The cost is reported as the services are performed by the employees. The liability is reported as a liability for employee benefits in the balance sheet.

2.7.2 Compensation after termination of employmentThe Group companies have only defined contribution pension plans. A defined contribution plan is a pension plan according to which the group pays fixed fees to a separate legal entity. The Group has no legal or informal obligations to pay additional fees if this legal entity does not have sufficient assets to pay all employee benefits related to the employment of employees during current or previous periods. The fees are reported as staff costs when they expire.

2.7.3 Share-based paymentsThe company has issued employee stock options programs to em-ployees and the board. The program enables them to acquire shares in the company. The fair value of the warrants as well as all applicable taxes is reported as a personnel expense and expensed on the date of allocation. A corresponding increase in equity of the fair value of the options is recorded. Fair value is determined at the time of issue by a third party financial advisor using the Black & Scholes valuation model. Acquired emission allowances, net of directly attributable trans-action costs, increase the share capital corresponding to the nominal value and the higher part increases the share premium when the warrants are exercised.

2.8 Current and deferred income taxThe tax expense for the period comprises current and deferred taxes. Tax is reported in the income statement, except when the tax refers to items recognized in other comprehensive income or directly in equity. In such cases, tax is also reported in other comprehensive income and equity. Current tax is calculated on the taxable income for the period according to the applicable tax rate. The current tax expense is calculated on the basis of the tax rules that were decided on, or applied in practice in the countries where the parent company and its subsidiaries are active and generate taxable income. The Board regularly evaluates the claims made in self-declarations regarding

situations where applicable tax rules are subject to interpretation. It, when deemed appropriate, makes provisions for amounts likely to be paid to the tax authorities. Deferred tax is recognized on all temporary differences that arise between the taxable value of assets and liabilities and their reported values in the Financial Reports. Deferred tax liability, however, is not recognized if it arises as a result of the initial recognition of goodwill. Deferred tax is also not recognized if it arises as a result of a transac-tion that constitutes the first recognition of an asset or liability that is not a business combination and which, at the time of the transaction, does not affect reported or taxable income. Deferred income taxes are calculated using tax rates (and laws) that have been decided or announced at the balance sheet date and are expected to apply when the relevant Deferred tax assets are realized or the deferred tax liability is settled. Deferred tax assets are reported to the extent that future tax sur-pluses will be available, against which the temporary differences can be utilized. Deferred tax assets and liabilities are settled when there is a legal right to settle for current tax assets and liabilities and when deferred tax assets and tax liabilities relate to taxes debited by a single tax authority and concern either the same taxpayer or different taxpayer, where there is an intention to settle Balances through net payments.

2.9 Financial instruments – generallyFinancial instruments are available in many different balance sheet items and are described below.

2.9.1 ClassificationThe Group classifies its financial assets and liabilities in the following categories: financial assets measured at fair value through profit or loss, loan receivables and accounts receivable, as well as other finan-cial liabilities. The classification depends on the purpose for which the financial asset or liability was acquired.

Financial assets at fair value through profit or lossFinancial assets measured at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if it is acquired mainly for the purpose of being sold within a short term. Derivatives are classified as held for trading unless they are identified as hedges. Portfolio companies, whether they are sub-sidiaries, associated companies or financial investments, are valued at fair value via the income statement as above. Assets in this category are classified as current assets if they are expected to be regulated within twelve months, otherwise they are classified as non-current assets.

Loans and receivablesLoans and receivables are non-derivative financial assets that have fixed or determinable payments and are not quoted on an active market. They are included in current assets with the exception of expiration dates more than 12 months after the balance sheet date, which are classified as non-current assets. The Group’s “loan receiv-ables and accounts receivable” consist of other short-term receiv-ables, accrued income and liquid funds.

Other financial liabilitiesTrade payables, as well as other short-term liabilities and accrued expenses, are financial instruments classified as other financial liabil-ities.

2.9.2 Reporting and valuationFinancial instruments are initially recognized at fair value plus trans-action costs, which applies to all financial assets not recognized at fair value through profit or loss. Financial assets measured at fair value through profit or loss are recognized initially at fair value, while attributable transaction costs are reported in the income statement. Financial assets are derecognised when the right to receive cash flows from the instrument has expired or transferred and the Group has transferred virtually all risks and benefits associated with owner-ship. Financial liabilities are derecognised when the obligation in the agreement has been completed or otherwise extinguished. Financial assets valued at fair value through profit or loss are recognized after the acquisition date at fair value. Loans and accounts receivable and other financial liabilities are reported after acquisition at amortized cost using the effective interest rate method. Gains and losses resulting from changes in fair value relating to the category of financial assets valued at fair value through profit or loss, are reported in the period in which they arise and are included in the income statement item Other gains / losses - net. Dividend income from securities in the category of financial assets valued at fair value through profit or loss is reported in the income statement as part of Other income when the Group’s right to receive payment has been determined.

2.9.3 Settlement of financial instrumentsFinancial assets and liabilities are offset and reported with a net amount in the balance sheet only when there is a legal right to settle the reported amounts and an intention to settle them with a net amount or to simultaneously realize the asset and settle the liability.

2.9.4 Impairment of financial instrumentsAssets recognized at amortized costThe Group assesses at the end of each reporting period if there is objective proof that there is a need for impairment for a financial asset or group of financial assets. A financial asset or group of finan-cial assets has a write-down requirement and is written down only if there is objective evidence of a write-down requirement, due to one or more events occurring after the asset has been recognized for the first time and that this event has an effect on the estimated future cash flows For the financial asset or group of financial assets that can be estimated reliably. The write-down is calculated as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted to that Financial asset’s original effective interest rate. The carrying amount of the asset is written down and the write-down amount is reported in the consolidated income statement under the item Other external costs. If the impairment loss decreases in a subsequent period and the decrease can be objectively attributable to an event that occurred after the impairment loss was recognized, the reversal of the previously reported impairment loss is recognized in the consolidated income statement under the item Other external expenses.

2.10 Cash and cash equivalentsCash and cash equivalents include bank balances in both the balance sheet and the cash flow statement.

2.11 Share capitalOrdinary shares are classified as equity. Transaction costs directly attributable to the issue of new common

Note 2 – cont’d

47


shares are reported, net of tax, in equity as a deduction from the emission allowance. When any group company buys the parent company’s shares (repurchase of own shares), the paid purchase price, including any directly attributable transaction costs (net after tax), reduces equity until the shares are canceled or disposed of. If these ordinary shares are subsequently divested, the amounts received (net of any directly attributable transaction costs and tax effects) are reported in equity.

2.12 DividendsDividends to the parent company’s shareholders are reported as lia-bilities in the Group’s financial statements during the period when the dividend is approved by the parent company’s shareholders.

2.13 Earnings per shareEarnings per share before dilutionEarnings per share before dilution are calculated by dividing:• Profit attributable to the parent company’s shareholders, excluding

dividends attributable to preference shares• with a weighted average number of outstanding ordinary shares

during the period, adjusted for the bonus issue element in ordinary shares issued during the year and excluding repurchased shares held as own shares of the Parent Company.

Earnings per share after dilutionFor the calculation of earnings per share after dilution, the amounts used to calculate earnings per share before dilution are adjusted by taking into account:• the effect, after tax, of dividends and interest expenses on poten-

tial common shares, and • the weighted average of the additional common shares that would

have been outstanding in the conversion of all potential common shares.

2.18 Trade payablesTrade payables are financial instruments and relate to obligations to pay for goods and services acquired in the ongoing operations of suppliers. Trade payables are classified as current liabilities if they ex-pire within one year. If not, they are reported as long-term liabilities.

2.19 Cash flow statementThe cash flow statement is prepared according to indirect method. The reported cash flow includes only transactions that have resulted in payments or payments.

PARENT COMPANY’S ACCOUNTING PRINCIPLES

Accounting basis of reportsThe annual report of the Parent Company, Pomegranate Investment AB (publ) has been prepared in accordance with the Annual Ac-counts Act and RFR 2 Accounting for Legal Entities. RFR 2 indicates that, in its annual report, the Parent Company shall apply Internation-al Financial Reporting Standards (IFRS) as adopted by the EU, as far as this is possible within the framework of the Annual Accounts Act, and with regard to the relationship between accounting and taxation. The recommendation specifies the exceptions and additions required in relation to IFRS. The parent company therefore applies the principles presented in Note 2 of the Financial reports, with the exceptions set out below.

In connection with the transition to IFRS financial reporting, the Par-ent Company has transferred to RFR 2 Accounting for Legal Entities. The transition from previously applied accounting principles to RFR 2 has not had any effect on the income statement, balance sheet, equity or cash flow other than the previously recorded other financial asset and provision of EUR 384 thousand related to Carvanro being reclassified as a derivative, with an attributed value of 0.

FormatsThe income statement and balance sheet are in accordance with the Swedish Annual Accounts Act. The statement of changes in equity also follows the Group’s form of presentation but shall contain the columns listed in ÅRL. Furthermore, there are differences in terms, compared to the Financial reports, primarily regarding financial income and expenses and equity.

Shares in subsidiariesShares in subsidiaries are reported at cost less any impairment losses. Acquisition-related costs are included in the acquisition value. When there is an indication that participations in subsidiaries de-crease in value, an estimate of the recoverable amount is calculated. If this is lower than the carrying amount, an impairment loss is made. Impairment losses are reported in the item “Profit from participations in Group companies”.

Note 3 – Effects on income statement and balance sheet of the transition to IFRS and RFR2Pomegranate has already under previous Swedish accounting princi-ples of K3 been recording financial assets at fair value through profit or loss. As such the change to IFRS for the Group reporting and RFR2 for parent company does not represent a significant change in the treatment of the Company’s main financial assets, business or financial result, and only a difference in presentation of the same. However, for 2016 comparable period the previously recorded “Tax allocation reserve” of EUR 183 thousand is not recognised under IFRS and as such the Comparable group result for full year 2016 have been restated to reflect this change in the Income statement, Balance Sheet and Equity of the 2016 comparable periods.

Note 4 – Critical accounting estimates and assumptionsThe management of Pomegranate has to make estimates and judge-ments when preparing the Financial Statements of the Group. Uncer-tainties in the estimates and judgements could have an impact on the carrying amount of assets and liabilities and the Group’s result. The most important estimates and judgements in relation thereto are:

Fair value of unlisted financial assetsThe estimates and judgements when assessing the fair value of unlisted financial assets at fair value through profit or loss are con-tinually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. For more information about fair value estimation see note 7.

Note 2 – cont’d Note 5 – Financial risk managementThe Group’s activities expose it to a variety of financial risks: market risks (including foreign exchange risk, price risk and interest rate risk), credit risk, liquidity risk and cash flow interest-rate risk. Risk management is carried out by management under policies approved by the Board of Directors.

MARKET RELATED RISKSEmerging and frontier markets risksPomegranate Investment is subject to risks associated with owner-ship and management of investments and in particular to risks of ownership and management in emerging and frontier markets. As these countries are still, from an economic point of view, in a phase of development, investments are affected by unusually large fluctua-tions in profit and loss and other factors outside the Group’s control that may have an adverse impact on the value of Pomegranate’s adjusted equity. Investing in emerging and frontier markets entails a high level of risk and requires special consideration of factors, in-cluding those mentioned here, which are usually not associated with investment in shares in more developed countries. Unstable state administration could have an adverse impact on investments. Emerging or frontier markets typically do not have a fully developed legal system comparable to that in more developed coun-tries. Existing laws and regulations are sometimes applied inconsis-tently and both the independence and efficiency of the court system constitute a significant risk. Statutory changes have taken place and will probably continue to take place at a rapid pace, and it remains difficult to predict the effect of legislative changes and legislative de-cisions for companies. It could be more difficult to obtain redress or exercise one’s rights in emerging and frontier markets than in more mature legal systems. Pomegranate continuously monitors these risk areas through various channels including third party research reports and through knowledge and expertise within the Group’s network. The Group evaluates any significant findings from above mentioned monitoring and if needed takes action in order to mitigate identified risk areas.

Exposure to financial services companies in emerging and frontier marketsPomegranate is subject to risks associated with ownership and man-agement of investments in financial services companies in emerging and frontier markets. Therefore, the Group’s business, operating results, financial condition and prospects may be affected by the materialization of such risks, which include, but may not be limited to, the following:• Regulatory risks – most financial services companies in emerging

and frontier markets are subject to extensive regulatory require-ments. Such requirements, or the interpretation by competent authorities of such, may change rapidly. Failure to adapt to the relevant requirements may lead to sanctions or loss of business opportunities, which in turn could have a material adverse effect on the business, results of operations, financial condition and pros-pects of the Group’s investments.

• Operational risk – financial services companies in emerging and frontier markets are exposed to operational risk, including the risk of fraud by employees, customers or outsiders, mismanagement, unauthorized transactions by employees and operational errors. Any failure to properly mitigate operational risks could have a ma-

48


terial adverse effect on the business, results of operations, financial condition and prospects of the Group’s investments.

• Reputational risk – consumer behaviour may be negatively impact-ed by negative publicity in traditional media as well as in social media. Any loss of reputation could have a material adverse effect on the business, results of operations, financial condition and pros-pects of the Group’s investments.

• IT risk – financial services companies are likely to be dependent on IT systems and any disruption that affects the operations of critical systems could have a material adverse effect on the business, results of operations, financial condition and prospects of the Group’s investments.

Pomegranate works, primarily through board representation, to ensure that each portfolio company has appropriate internal control processes to handle these business-related risks.

Exposure to IranCurrently the Group’s investments all constitute companies active in Iran which has been undergoing deep political and social change in recent years. The value of these investments may be affected by uncertainties such as political and diplomatic developments, social or religious instability, changes in government policy, tax and interest rates, restrictions on the political and economic development of laws and regulations in Iran, major policy changes or lack of internal consensus between leaders, executive and decision-making bodies and strong economic groups. These risks entail in particular expropri-ation, nationalisation, confiscation of assets and legislative changes relating to the level of foreign ownership. In addition, political chang-es may be less predictable in a growth country such as Iran than in other more developed countries. Such instability may in some cases have an adverse impact on both the operations and share price of the Company. The Iranian economy has, from time to time, shown• significant decline in GDP

• weak banking system with limited supply of liquidity of foreign exchange

• growing black and grey economic markets

• high flight of capital

• hyperinflation

• significant rise in unemployment

• economic sanction restrictions

The Iranian economy is largely dependent on the production and ex-port of oil and natural gas, which makes it vulnerable to fluctuations in the oil and gas market. A downturn in the oil and gas market may have a significant adverse impact on the Iranian economy. Pomegran-ate continuously monitors the macroeconomic and socioeconomic development in Iran through various channels including third party research reports and through knowledge and expertise within the Group’s network. The Group evaluates any significant findings in order to mitigate any adverse impact on the Group’s operations.

BUSINESS RELATED RISKSAcquisition and disposal riskAcquisitions and disposals are by definition a natural element in Pomegranate’s activities. All acquisitions and disposals are subject to

uncertainty. The Company’s explicit exit strategy is to sell its holdings to strategic investors or via the market. There are no guarantees that the Company will succeed in selling its participations and portfolio investments at the price the shares are being traded at on the market at the time of the disposal or valued at the balance sheet. Pome-granate may therefore fail to sell its holdings in a portfolio company or be forced to do so at less than its maximum value or at a loss. If Pomegranate disposes of the whole or parts of an investment in a portfolio company, the Company may receive less than the poten-tial value of the participations, and the Company may receive less than the sum invested. Pomegranate operates in a market that may be subject to competition with regard to investment opportunities. Other investors may thus compete with Pomegranate in the future for the type of investments the Company intends to make. There is no guarantee that Pomegranate will not in the future be subject to competition which might have a detrimental impact on the Compa-ny’s return from investments. The Company can partially counter this risk by being an active financial owner in the portfolio companies. Pomegranate invests in and consequently supply added value in the form of expertise and networks. Despite the Company considering that there will be opportunities for beneficial acquisitions for Pome-granate in the future, there is no guarantee that such opportunities for acquisition will arise or that the Company, in the event that such opportunities for acquisition arise, will have sufficient resources to complete such acquisitions.

Accounting practice and other informationPractice in accounting, financial reporting and auditing in emerging and frontier markets cannot be compared with the corresponding practices that exist in the Western World. Access to external analysis, reliable statistics and historical data is inadequate. The effects of inflation can, moreover, be difficult for external observers to analyse. Although special expanded accounts are prepared and auditing is un-dertaken in accordance with international standards, no guarantees can be given with regard to the completeness or dependability of the information that relates to the Company’s investments and potential investments. Inadequate information and weak accounting standards may adversely affect Pomegranate in future investment decisions.

Corporate governance riskMisuse of corporate governance may be a problem in emerging and frontier markets. Minority shareholders may be badly treated in various ways, for instance in the sale of assets, transfer pricing, dilution, limited access to Annual General Meetings and restrictions on seats on boards of directors for external investors. In addition, sale of assets and transactions with related parties are common. Transfer pricing is generally applied by companies for transfer of value from subsidiaries and external investors to various types of holding companies. It happens that companies neglect to comply with the rules that govern share issues such as prior notification in sufficient time for the exercise of right of pre-emption. Prevention of registration of shares is also widespread. Despite the fact that independent authorised registrars have to keep most share registers, some are still in the hands of the company managers, which may thus lead to register manipulation. A company management would be able to take extensive strategic measures without proper consent from the shareholders. The possibility of shareholders exercising their right to express views and take decisions is made considerably more difficult. Inadequate accounting rules and standards have hindered the development of an effective system for uncovering fraud and increasing insight.

Note 5 – cont’d Shareholders can conceal their ownership by acquiring shares through shell company structures based abroad which are not de-monstrably connected to the beneficiary, which leads to self-serving transactions, insider deals and conflicts of interest. Deficiencies in legislation on corporate governance, judicial enforcement and cor-porate legislation may lead to hostile takeovers, where the rights of minority shareholders are disregarded or abused, which could affect Pomegranate in a detrimental manner. To minimise this risk, due diligence is carried out on management and fellow shareholders and Pomegranate looks to attain board representation. Both internal and external counsel is engaged with respect to legal due diligence to help ensure our rights are upheld in the majority of investments.

Dependence on key individualsPomegranate is dependent on its senior executives and Board mem-bers. It cannot be ruled out that Pomegranate might be seriously affected if any of the senior executives left the Company or if the Company is not able to recruit relevant people in the future.

FINANCIAL RELATED RISKSInvestments in growth marketsInvestments in growth markets entail a number of legal, econom-ic and political risks. Many of these risks cannot be quantified or predicted, neither are they usually associated with investments in developed economies.

International capital flowsEconomic unrest in a growth market tends also to have an adverse impact on the equity market in other growth countries or the share price of companies operating in such countries, as investors opt to re-allocate their investment flows to more stable and developed markets. The share price may be adversely affected during such pe-riods. Financial problems or an increase in perceived risk related to a growth market may inhibit foreign investments in these markets and have a negative impact on the country’s economy. The Company’s operations, turnover and profit development may also be adversely affected in the event of such an economic downturn.

Foreign exchange riskThe Group’s accounting currency is EUR. The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, mainly with respect to the Iranian Rial. The Group’s management monitors the exchange rate fluctuations on a continuous basis and per today no currency derivate and hedging are made.

Liquidity riskLiquidity risk refers to the risk that liquidity will not be available to meet payments commitments due to the fact that the Company can-not divest its holdings quickly or without considerable extra costs. Although, this risk may be relatively low as long as the Company has significant cash balance The table below shows the Company’s con-tracted significant financial cash flows for the coming periods.

Significant Contracted cash flowsApr 30, 2018 1–3 monthsInvestment Payables - EUR 4.1 million

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Credit riskCredit risk is the risk that one party to a financial instrument will cause a loss for the other party by failing to pay for its obligation.The Company is exposed to counterparty credit risk on cash and cash equivalents and liquidity portfolio with banks and financial institutions. Per April 30, 2018 the cash is placed in bank accounts, within financial institutions. The majority of the Company’s cash was placed in financial institutions with a credit quality step 1. Therefore, the Company considers the credit risk to be limited.

Credit Quality Step Moody’s

1 A1 - Aa32 A1- A33 Baa1 - Baa34 Ba1 - Ba35 B1-B36 Worse than B3

Lending to financial institution (EUR thousand) Apr 30, 2018

Credit Quality 1 23,100 No rating 315Total 23,415

Capital risk managementThe Company is exposed to listed equity securities price risk because of investments held by the Company and classified on the balance sheet as financial assets at fair value through profit or loss. The Group’s objectives when managing capital are to -safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakehold-ers, and -maintain an optimal capital structure to reduce the cost of capital. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No dividend has been proposed for the year.

Note 5 – cont’d Note 6 – Segment informationFor management purposes, the Group is organised into one main operating segment, which invests in equity securities. All of the Group’s activities are interrelated, and each activity is dependent on the others. Accordingly, all significant operating decisions are based upon analysis of the Group as one segment. The financial results from this segment are equivalent to the financial statements of the Group as a whole. As an investment company, the board is deeply involved in investment decisions and follow-up of portfolio companies’ de-velopment. The Board has been identified as the Company’s highest operational decision maker in the field of internal reporting. Internal reporting contains only one segment.

Note 7 – Fair value estimation and results from financial assets through profit and lossThe management of Pomegranate has to make estimates and judge-ments when preparing the Financial Statements of the Group. Uncer-tainties in the estimates and judgements could have an impact on the carrying amount of assets and liabilities and the Group’s result. The most important estimates and judgements in relation thereto are:

Fair value of unlisted financial assetsThe estimates and judgements when assessing the fair value of unlisted financial assets at fair value through profit or loss are con-tinually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Estimates of fair valueThe table below shows securities that are reported at fair value, cate-gorised as per the valuation method. The different levels are defined as follows:

Level 1:Unadjusted, quoted prices on active markets for identical assets or liabilities.

Level 2:Observable data for the asset or liability other than quoted prices included in level 1. Either directly (i.e. as quoted prices) or indirectly (i.e. derived from quoted prices).

Level 3:Data for the asset or liability that is not based on observable market data (i.e. non-observable data).

2018-04-30 Level 1 Level 2 Level 3 Total

Financial assets at fair value through profit or lossTotal assets (EUR thousand) - 2,580 110,089 112,669

EUR thousands Level 3

Opening Balance January 1, 2017 97,414Transfers to level 3 19,860Change in fair value during the year -7,185Closing balance April 30, 2018 110,089





The company's assets measured at fair value as at April 30, 2018:

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Different valuation techniques are used to establish the fair value of financial instruments that are not traded in an active market. Where it is available, market information is used in this respect as far as possi-ble, while company-specific information is used as little as possible. If all essential data required to establish the fair value of an instrument is observable, the instrument is placed at level 2. In cases where one or more items of essential input data are not based on observable market information, the instrument concerned is placed at level 3. The following table presents the group’s changes of financial assets in level 3. During the period January 1, 2017 – April 30, 2018 four transfers between level 2 and 3 have been done in the period January 1, 2018 – April 30, 2018, connected with the fact that all recent transactions

Note 7 – cont’d in Sheypoor, Navaar, Bahamta and Griffon Capital have been first restated to implied IRR valuation using the EUR/IRR market rate at the time of transaction and then translated back into EUR based on a updated EUR/IRR rate and a risk adjustment. Fair value of financial investments that are not traded in an active market is established through the price of recently conducted market transactions or using various valuation techniques depending on the characteristics of the company and the nature of and risks associated with the investment. These valuation techniques include valuation of discounted cash flows (DCF), valuation based on a disposal multiple (also called LBO valuation), asset-based valuation and valuation according to future-oriented multiples based on comparable listed companies. Transaction-based valuations are normally used over a period of 12 months, provided that no significant reason for revalua-tion has arisen. After 12 months, one of the models described above is normally used to value unlisted holdings.

The validity of valuations based on previous transactions may un-avoidably be eroded over time because the price when the invest-ment was made reflects the prevailing conditions on the transaction date. On each reporting date, an assessment is carried out as to whether changes or events after the relevant transaction would mean any change in the fair value of the investment and, if such is the case, the valuation is adjusted accordingly. Transaction-based valuations of unlisted holdings are continuously assessed against company-spe-cific data and external factors that could affect the fair value of the holding. The Company has eight investments as at April 30, 2018 of which two are classified as belonging to level 2, six investments in level 3. The Company values the total of investment holdings at EUR 112,669,375 as at April 30, 2018.

Change in financial assets at fair value through profit and loss, EUR

Opening balance 2017-01-01

Investments/ (disposals), net EUR

Change in fair value

Closing balance 2018-04-30

Percentage of portfolio, %

Sarava 97,414,031 12,733,446 -19,918,132 90,229,346 80.1%Sheypoor 15,105,074 3,670,828 -1,228,222 17,547,681 15.6%Sheypoor option - - 804,723 804,723 0.7%Griffon Capital 2,772,647 - -2,229,965 542,682 0.5%Griffon Iran Flagship Fund 2,021,786 - -595,371 1,426,415 1.3%Griffon Managed Account - 1,497,954 -344,253 1,153,701 1.0%Carvanro 650,000 768,300 -1,418,300 0 0.0%Navaar - 830,000 -242,765 587,235 0.5%Bahamta - 500,000 -122,408 377,592 0.3%

Total financial assets held for trading 117,963,538 20,000,528 -25,294,692 112,669,375 100%

SaravaPomegranate’s total investment in Sarava as at April 30, 2018 amounted to EUR 49.8 million, which corresponds to 15.7 percent of the shares. During the first quarter of 2016, Sarava closed its last funding round in which they raised a total of EUR 169 million in primary capital. In this transaction, Sarava was valued at a total of EUR 426.6 million post-money. In February 2018 Sarava initiated a funding round in which Pomegranate committed to invest EUR 12.7 million, out of which EUR 8.9 million had already been transferred as per 30 April 2018 and another EUR 3.8 is committed through signed Memorandum of Investment. Pomegranate’s stake in Sarava amounts to 15.7% as per April 30, 2018. In June 2018, Sarava performed an updated underlying local currency NAV for its portfolio based on Iranian year 1396 financial performance of portfolio companies and recent transactions in portfolio companies, with March 20, 2018 as the measurement date. As per April 30, 2018 the valuation of Sarava in the portfolio of Pomegranate is based on the recently established updated IRR based NAV, translated into EUR using the CBI rate as per April 30, 2018 and a 30% risk adjustment. The Company’s holding in Sarava is classified as level 3.

DigikalaDigikala, Sarava’s largest asset, valued using a combination of different approaches (peer multiples, DCF, exit valuation etc) and the resulting valuation in local currency IRR for example implies a forward looking (1397 year) multiple in local currency GMV of 1.28, which is quite reasonable given the past and expected growth as well as market dominance. The peer group used to value Digikala includes both listed E-commerce and online fashion peers including Amazon, Zalando, JD.com, Koogan, Yoox and Asos. The private peer group includes multiples based on transactions in Flipkart, Lazado and Souq. The average multiple of the public peer group for is 1.9x and the median multiple is 2.1x. The peer choice also accounts for the Digistyle online fashion business. Pomegranate considers the multiple to be conservative given that Digikala has much higher growth rate than peer group companies.

Café BazaarAmong Sarava’s other portfolio companies, most notably Café Bazaar, the company is valued based on post-money valuation following a binding investment term sheet signed in Q4 2017.

SheypoorIn 2016, Pomegranate invested EUR 6.4 million in connection with two capital raisings by the company, in 2017 Pomegranate invested an-other EUR 3.7 million into the company in a capital raise which valued the company pre-money at EUR 42.3 million. As per December 31, 2017, Pomegranate is the largest minority shareholder in the company with 44.6 percent of the outstanding shares. As per April 30, 2018, Pomegranate values its ownership in Sheypoor at EUR 17.5 million, Pomegranate values its investment into Sheypoor on the basis of the risk and currency adjusted post-money valuation of the company mil-lion following the latest fundraising in December 2017. The Company’s holding in Sheypoor is classified as level 3.

Sheypoor optionOn August 7, 2017 Pomegranate finalised a call option agreement with the other shareholders in Sheypoor to reflect Pomegranates past and present firm funding commitment to Sheypoor’s devel-opment. The options in the agreement are divided into two series, the first series representing 77% of the options has a strike price valuation for Sheypoor of EUR 17,636,684 and are exercisable from the date of the agreement and until May 2018 and the other series

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representing 23% of the options has a strike price valuation for Shey-poor of EUR 26,455,026.55 and are exercisable from the date of the agreement and until May 2019. As per April 30, 2018 the value of the options is based on exercise value of the options based on the valua-tion of Sheypoor of EUR 39.3 million as of April 30, 2018 correspond-ing to the risk and currency adjusted post-money valuation in the fundraising in December 2017. The Company’s holding in Sheypoor options is classified as level 3.

Griffon CapitalPomegranate invested EUR 1.3 million in Griffon Capital during 2015. As per December 31, 2017 Pomegranate owns 15,2 percent of the outstanding shares in the company. During the first quarter 2016, a new investor acquired 5 percent of the shares in the company at a valuation of EUR 18.3 million. The same investor, acquired anoth-er 9.5% in the company in February 2018, the valuation of Griffon Capital is based on the risk and currency adjusted transaction value in the February transaction, which translates into EUR 3.6 million for the whole company and is deemed the best fair value estimate of the holding. The holding in Griffon Capital is classified as level 3.

GIF FundPomegranate invested EUR 2 million into Griffon Capital’s flagship fund during 2016 as part of the company’s liquidity management operations. As per April 30, 2018 the fund investment is valued at the fund’s NAV as per March 31, 2018. The last formerly reported NAV, but also risk and currency adjusted as per April 30, 2018. The holding in Griffon Iran Flagship Fund is classified as level 2.

Griffon Portfolio Managed AccountIn February 2017, Pomegranate placed EUR 0.5 million into a discretionary managed account with Griffon Capital as part of the company’s liquidity management operations. The account is focused on Iran’s high interest fixed income environment, with YTM levels of 15-20%. In August 2017 Pomegranate placed another EUR 1.0 million in discretionary management with Griffon Capital. As per April 30m 2018 the investment is valued at the account’s IRR based NAV as per April 30, 2018 translated into EUR at the risk adjusted CBI EUR/IRR rate as per April 30, 2018. The holding in Griffon Portfolio Managed Account is classified as level 2.

CarvanroIn 4M 2018 Pomegranate together with the founders and other shareholder in Carvanro decided to discontinue the project, due to insufficient traction of the company’s product in the market, relative to the expected future funding need to continue the project. As per April 30, 2018 the Pomegranate has recognised a full write-off of the previous company value of EUR 1.4 million.

Note 7 – cont’d NavaarIn August and September 2017 Pomegranate concluded agreements for an investment of EUR 830 thousand n Navaar, including a second-ary and primary part as well as conversion of the previously extended loan of EUR 131 thousand into equity and holds a stake of 29.09% in the company. As per April 30, 2018 Pomegranate’s investment in Navaar is valued based on risk and currency adjusted post-money valuation of the company following the fundraising in September 2017. The holding in Navaar is classified as level 3.

BahamtaIn Q4 2017, Pomegranate concluded the agreement for an investment of EUR 500 thousand into the Iranian fintech start-up – Bahamta, active in the field of mobile based peer-to-peer monetary transfers. The investment is payable in two tranches for a total shareholding of 14.3% upon completion. The first tranche was transferred in January 2018. As per April 30. 2018 Pomegranate’s holding in Bahamta is valued based on risk and currency adjusted post-money valuation of the company following the investment. The holding in Bahamta is classified as level 3.

Loan receivablesThe Company has no outstanding loan receivables as per April 30, 2018.

Current liabilitiesThe book value for interest-bearing loans, accounts payable and other financial liabilities are deemed to correspond to the fair values.

Sensitivity analysis

NAV per March 20, 2018 Sensivity analysis – EUR value at different risk premium adjustments (million)

IRR bn CBI spot + 15% CBI spot + 20% CBI spot + 25% CBI spot + 30% CBI spot + 35% CBI spot + 40%Sarava NAV 38,063 650 623 598 575 554 534 Pomegranate stake 5,974 102 98 94 90 87 84


EUR million IRR bn CBI spot + 15% CBI spot + 20% CBI spot + 25% CBI spot + 30% CBI spot + 35% CBI spot + 40%Sheypoor 49,3 2,603 44 43 41 39 38 37 Pomegranate stake 22,0 1,162 20 19 18 18 17 16

Last transaction valuation (Feb 2018) Sensivity analysis – EUR value at different risk premium adjustments (million)

EUR million IRR bn CBI spot + 15% CBI spot + 20% CBI spot + 25% CBI spot + 30% CBI spot + 35% CBI spot + 40%Griffon Capital 4,1 236,7 4,0 3,9 3,7 3,6 3,4 3,3 Pomegranate stake 0,6 35,9 0,6 0,6 0,6 0,5 0,5 0,5

Last transaction valuation (Sep 2017) Sensivity analysis – EUR value at different risk premium adjustments (million)

EUR million IRR bn CBI spot + 15% CBI spot + 20% CBI spot + 25% CBI spot + 30% CBI spot + 35% CBI spot + 40%Navaar 2,8 133,6 2,3 2,2 2,1 2,0 1,9 1,9 Pomegranate stake 0,8 38,9 0,7 0,6 0,6 0,6 0,6 0,5


EUR million IRR bn CBI spot + 15% CBI spot + 20% CBI spot + 25% CBI spot + 30% CBI spot + 35% CBI spot + 40%Bahamta 3,5 175,0 3,0 2,9 2,7 2,6 2,5 2,5 Pomegranate stake 0,5 25,0 0,4 0,4 0,4 0,4 0,4 0,4

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Note 8 – Operating expenses by nature

Observe that the current financial reporting period is 16 months versus the 12 month comparable period in 2016.

Note 9 – Employee benefit expense

*Observe that the period 1 Jan 2017 - 30 Apr 2018 constitute a 16 month period compared with comparable 12 month period for 2016.

Group Parent

Employee benefitsJan 1, 2017 –

Apr 30, 2018* 2016Jan 1, 2017 –Apr 30, 2018 2016

Wages and salaries 975 427 975 427Social costs 252 260 252 260Pension cost 196 14 196 14Other employee benefits 253 1,173 253 1,173Total employee benefit expenses 1,676 1,876 1,676 1,876

Group Parent

Jan 1, 2017 –Apr 30, 2018* 2016

Jan 1, 2017 –Apr 30, 2018 2016

Salaries and remuneration to the Board of Directors and management 965 413 965 413Salaries and remuneration to other employees 68 39 68 39Total salaries 1,033 453 1,033 453

Group Parent

Operating expen-ses by category

Jan 1, 2017 –Apr 30, 2018 2016

Jan 1, 2017 –Apr 30, 2018 2016

Employee benefit expense (see note 9) 1,676 1,876 1,676 1,876 Legal expenses 1,013 392 1,013 392 Other expenes 1,122 626 1,122 626 Total operating expenses 3,811 2,893 3,811 2,893

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Group Jan 1, 2017 - Apr 30, 2018

Base salaries/Board fees

Variale compensation

Pension expenses

Share based compensation*** Total

Per BriliothChariman of the Board 18 – – – 18

Nadja Borisova*Board Member 9 – – – 9

Anders F Börjesson*Board member 21 – – – 21

Mohsen EnayatollahBoard member 9 – – – 9

Igor Gorin**Board member 3 – – – 3

Florian HellmichCEO 502 100 89 – 691

Key management personnel 404 100 93 5 603

Total 965 200 182 5 1,353

Group Jan 1, 2016 - Dec 31, 2016



Pension expenses

Share based compensation*** Total

Per BriliothChariman of the Board 11 – – 42 53

Nadja Borisova*Board Member 1 – – 73 73

Anders F Börjesson*Board member 6 – – 26 32

Mohsen EnayatollahBoard member 4 – – 21 25

Igor Gorin**Board member 3 – – 21 23

Florian HellmichCEO 331 106 – 131 568


Total 413 167 9 816 1,404

*Nadja Borisova was employed as CFO of Pomegranate until 30 June 2017. Anders Börjesson was employed as Legal Counsel of Pomegranate until 30 June 2017. In the reporting period Anders has performed extended Legal Counsel duties as agreed between parties and therefore received additional remuneration.

**In July 2017, Igor Gorin resigned as board member due to new commitments within the banking industry which don’t allow him any board positions in public companies. His awarded warrants have been relinquished.

*** Warrants to a corresponding compensation of EUR 163 thousand were also issued to key advisors in 2016, bringing the total share based compensation in 2017 to EUR 979 thousand.

Note 9 – cont’d

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Parent Jan 1, 2017 - Apr 30, 2018



Pension expenses

Share based compensation Total

Per BriliothChariman of the Board 18 – – – 18

Nadja Borisova*Board Member 9 – – – 9

Anders F Börjesson*Board member 21 – – – 21

Mohsen EnayatollahBoard member 9 – – – 9

Igor Gorin**Board member 3 – – – 3

Florian HellmichCEO 502 100 89 – 691


Total 965 200 182 5 1,353

Parent 2016



Pension expenses

Share based compensation Total

Per BriliothChariman of the Board 11 0 0 42 53

Nadja Borisova*Board Member 1 – – 73 73

Anders F Börjesson*Board member 6 – – 26 32

Mohsen EnayatollahBoard member 4 – – 21 25

Igor Gorin**Board member 3 – – 21 23

Florian HellmichCEO 331 106 – 131 568


Total 413 167 9 816 1,404

Note 9 – cont’dWarrantsTwo resolutions to issue up to 35,000 and 112,500 warrants, respecti-vely, were adopted at Extraordinary General Meetings held on 18 Fe-bruary 2016 and 28 November 2016, respectively, as a result of which the Company’s share capital may be increased by up to EUR 35,000 and 112,500, respectively. All warrants were allocated to the Company CEO and Board Members and other key persons, except for 3,000 warrants which were issued in February 2017 to the new CFO.

The February warrants confer the right to subscribe for new shares in the Company in accordance with the following conditions: • The warrants are issued free of charge.

• The warrants may be exercised through subscription of shares with payment no later than 31 December 2018. The Board of Directors has a right to extend the subscription period.

• The subscription price shall be EUR 20 per share and each warrant confers on its holder the right to subscribe for one (1) share.

The fair value of the February warrants was established using the Black & Scholes option pricing model at EUR 5.44 per warrant on the date of issue. The November warrants confer the right to subscribe for new shares in the Company in accordance with the following conditions: • The warrants are issued free of charge.

• The warrants may be exercised through subscription of shares with payment no later than 31 December 2019. The Board of Directors has a right to extend the subscription period.

• The subscription price shall be EUR 24 per share and each warrant confers on its holder the right to subscribe for one (1) share.

The fair value of the November warrants has been established using the Black & Scholes option pricing model at EUR 4.16 per warrant on the date of issue.

*Nadja Borisova was employed as CFO of Pomegranate until 30 June 2017. Anders Börjesson was employed as Legal Counsel of Pomegranate until 30 June 2017. In the reporting period Anders has performed extended Legal Counsel duties as agreed between parties and therefore received additional remuneration.

**In July 2017, Igor Gorin resigned as board member due to new commitments within the banking industry which don’t allow him any board positions in public companies. His awarded warrants have been relinquished.

*** Warrants to a corresponding compensation of EUR 163 thousand were also issued to key advisors in 2016, bringing the total share based compensation in 2017 to EUR 979 thousand.

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For employees resident in Sweden, the Board of Directors has re-solved that employees may elect to acquire their warrants by either of the following alternatives: a) No premium shall be paid for the warrants and the warrants may only be exercised if the holder is still employed within the Company at the time of exercise; or

b) The warrants shall be offered to the employee at a purchase price corresponding to the market value of the warrants at the time of the offer. The warrants are fully transferable and will thereby be consid-ered as securities. This also means that warrants granted under this option (b) are not contingent upon employment and will not lapse should the employee leave his or her position within the Company, which has implications on the tax treatment of the warrants.

In order to stimulate the participation in the scheme by employees resident in Sweden electing option (b) above, the Company intends to subsidise participation by way of a bonus payment which after tax corresponds to the warrant premium. Half of the bonus will be paid in connection with the purchase of the warrants and the remaining half at exercise of the warrants, or, if the warrants are not exercised, at maturity. In order to emulate the vesting mechanism offered by the employment requirement under option (a) above, the second bonus payment is subject to the requirement that the holder is still an employee of the Company at the time of exercise or maturity, as the case may be. Thus, for employees in Sweden who choose option (b), the participation in the warrant program includes an element of risk. All six grantees who were Swedish resident employees opted to pur-chase their warrants (a total of 59,500 warrants) from the Company at fair value as per option (b) above.

Pursuant to the Swedish Income Tax Act, the Parent Company, Pome-granate Investment AB (publ), is classified as an investment compa-ny, for which special tax rules apply. To be defined as an investment company for tax purposes, the requirements are that the company is engaged exclusively or almost exclusively in the management of securities, that the company’s stock is spread among a large number of shareholders, and that the portfolio of securities is well distributed.

IntermediariesInvestment companies, along with mutual funds, are usually classified as intermediaries. The principles of legislation in this area are:• that neutrality between direct and indirect ownership requires that

the intermediary shall not be subject to taxation,• that indirect ownership shall not be more advantageous than

direct ownership, and• that taxation shall enable reinvestment of the intermediary’s share-

holdings.

Main principles of taxationThe main principles concerning taxation of investment companies are that dividends received and interest income, as well as foreign exchange gains are taxable, while dividends paid, interest expenses and management costs and foreign exchange losses are tax deduct-ible. In addition, capital gains on sales of stocks are tax exempt, but in return, a standardized level of income, which amounts to 1.5% of the market value of the equities portfolio at the start of the fiscal year, is taxed. However, the basis for calculating the standardized level of income does not include business-related shares, by which is meant unlisted shares as well as listed shares in which the holding corresponds to at least 10% of the number of votes. In order for listed business-related shares to be excluded from the standardized income calculation, they must have been held for at least one year.

During the period January 1, 2017 – April 30, 2018, the Swedish sub-sidiary’s profits would be subject to Swedish income tax at the rate of 22%. However, no economic activity took place in the subsidiary Pomegranate Holding AB.

Jan 1, 2016 - Dec 31, 2016

Changes in the number of outstanding warrants

Average exercise price per warrant

Number of warrants

Opening balance 20,00 50,000

Allocated, February 2016 20,00 35,000Allocated, November 2016 24,00 109,500Forfeited 0Exercised 0Fallen due 0Closing balance 22,25 194,500

Tax on the year’s resultJan 1, 2017 -

Apr 30, 2018Jan 1, 2016 - Dec 31, 2016

Current tax

Tax expense for the year 0 0Deferred tax 0

Deferred taxes 0 0Total tax reported 0 0

Note 9 – cont’d Note 10 – TaxJan 1, 2017 - Apr 30, 2018

Changes in the number of outstanding warrants

Average exercise price per warrant

Number of warrants

Opening balance 22,25 194,500

Allocated, February 2017 24,00 3,000Forfeited 24,00 -5,000Exercised 0Fallen due 0Closing balance 22,23 192,500

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Changes in the number of outstanding warrants1 Jan 2017 -

30 Apr 20181 Jan 2016 - 31 Dec 2016

Profit loss attributable to the equity holders of the parent company -29,156 35,244 Weighted number of ordinary shares 5,141,714 3,580,831 Earnings per share basic -5.7 9.8 Adjustment from dilution of warrants n/a 90,581 Weighted number of shares fully diluted 5,141,714 3,671,412 Earnings per share diluted -5,7 9.6

Note 11 – Earnings per shareBasic earnings per share have been calculated by dividing the net result for the financial year by the weighted average number of shares in issue during the year.

Diluted earnings per share have been calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive ordinary shares on a weighted average basis.

Note 12 – Cash and cash equivalentsCash, cash equivalents and bank overdrafts include the following for the purposes of the cash flow statement:

Note 13 – Share capital and additional paid in capital

Capital provided

Number of shares held

Share capital

Additional paid in capital

At January 2017 4,154,601 4,154,601 76,170,922 Rights issue 30,000,000 1,250,000 1,250,000 28,750,000 At April 30, 2018 5,404,601 5,404,601 104,920,922

Rights issueOn March 21, 2017, the Company invited its shareholders to subscribe to a rights issue of 1,250,000 shares at an issue price of EUR 24 per share. The issue was fully subscribed. No additional share issues have been made after. Costs for the issue amounted to EUR 2,035,622.

Employee share option schemeThere are currently 192,500 ordinary shares available under the employee warrant scheme. Each option entitles the holder to one new share in Pomegranate. For more information on the options, see note 9.

Share capitalThe authorised share capital of the Company is EUR 5,404,601 divided into 5,404,601 shares of EUR 1.0 par value, each carrying one vote. All issued redeemable shares are fully paid. The Company does not possess any own shares.

Additional paid in capitalAdditional paid in capital consist of share premiums regarding new shares issued and share based compensation.

Note 14 – Pledged assets and contingent liabilitiesThe Company had no contingent liabilities or pledged assets as per April 30, 2018.

Group Apr 30, 2018

Group Dec 31, 2016

Cash and cash equivalents 23,421 29,009 of which short term investments equivalent to cash - - Total 23,421 29,009

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Note 15 – Shares in subsidiaries

Note 16 – Related party transactions

Note 17 – Events after the balance sheet dateThe Company has given notice of exercise of the first tranche of Sheypoor stock options held by Pomegranate as per May 31, 2018. In accordance with the option agreement, the options to be exercised correspond to 3.03% in the capital Sheypoor for the total consider-ation of EUR 534,688. This exercise provides Sheypoor with some extra immediate funding to continue marketing and other initiatives at a favourable valuation for Pomegranate.

In operating expenses in the reporting period Jan 1, 2017 - Apr 30, 2018, EUR 9,907 relates to share based compensa-tion in connection with issue of warrants to CFO. In operating expenses in the reporting period Jan 1, 2017 - Apr 30, 2018, a total of EUR 979,227 of share based com-pensation was recognised in operating expenses in connection with issue of warrants to CEO and senior advisors.

Note 18 – Adoption of annual reportThe annual report has been submitted by the Board of Directors on August 16, 2018. The balance sheet and profit and loss accounts are to be adopted by the Company’s sharehold-ers at the annual general meeting on September 6, 2018.

Parent Company CountryNumber

of sharesShare of capital

and votes (%)Book value

Apr 30, 2018Pomegranate Holding AB Sweden 100 100% 5,500 Total 5,500

Stockholm, August 16, 2018

Per Brilioth Anders F. Börjesson Nadja Borisova Chairman

Mohsen Enayatollah Florian Hellmich CEO

Our auditor’s report was submitted on August 16, 2018

PriceWaterhouseCoopers AB

Nicklas KullbergCertified public accountant

During the period Pomegranate has recognised the following related party transactions:

Operating expenses Receivables

EUR thousandJan 1, 2017 -

April, 30 2018Jan 1, 2016 - Dec 31, 2016 April, 30 2018 Dec 31, 2016

Key management and board of directors 1 1,245 1,546 3 1

1. Compensation paid or payable includes salary and bonuses to the management and key employees as well as remuneration to the Board members.

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Auditor’s ReportTo the general meeting of the shareholders of Pomegranate Investment AB (publ), corporate identity number 556967-7247

Report on the annual accounts and consolidated accountsOpinionsWe have audited the annual accounts and consolidated accounts of Pomegranate Investment AB (publ) for the year 2017-01-01 – 2018-04-30. In our opinion, the annual accounts and consolidated accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of parent company and the group as of 30 april 2018 and their finan-cial performance and cash flow for the year then ended in accor-dance with the Annual Accounts Act. The statutory administration report is consistent with the other parts of the annual accounts and consolidated accounts. We therefore recommend that the general meeting of sharehold-ers adopts the income statement and balance sheet for the parent company and the group.

Basis for OpinionsWe conducted our audit in accordance with International Stan-dards on Auditing (ISA) and generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor’s Responsibilities section. We are inde-pendent of the parent company and the group in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these re-quirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions

Responsibilities of the Board of DirectorsThe Board of Directors is responsible for the preparation of the annual accounts and consolidated accounts and that they give a fair presentation in accordance with the Annual Accounts Act.

The Board of is also responsible for such internal control as they determine is necessary to enable the preparation of annual accounts and consolidated accounts that are free from material misstatement, whether due to fraud or error. In preparing the annual accounts and consolidated accounts, The Board of Directors is responsible for the assessment of the compa-ny’s and the group’s ability to continue as a going concern. They disclose, as applicable, matters related to going concern and using the going concern basis of accounting. The going concern basis of accounting is however not applied if the Board of Directors intend to liquidate the company, to cease operations, or has no realistic alternative but to do so.

Auditor’s responsibilityOur objectives are to obtain reasonable assurance about whether the annual accounts and consolidated accounts as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assur-ance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and generally accepted auditing standards in Sweden 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 annual accounts and consolidated accounts. As part of an audit in accordance with ISAs, we exercise profes-sional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the

annual accounts and consolidated accounts, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinions. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the overri-de of internal control.

• Obtain an understanding of the company’s internal control relevant to our audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Directors.

• Conclude on the appropriateness of the Board of Directors use of the going concern basis of accounting in preparing the annual accounts and consolidated accounts. We also draw a conclusion, based on the audit evidence obtained, as to whether any material uncertainty exists related to events or conditions that may cast significant doubt on the company’s and the group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the annual accounts and consolidated accounts or, if such disclosures are inadequate, to modify our opinion about the annual accounts and consolida-ted accounts. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause a company and a group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the annual accounts and consolidated accounts, including the disclosures, and whether the annual accounts and consolidated accounts represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient and appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated accounts. We are responsible for the direction, supervision and perfor-mance of the group audit. We remain solely responsible for our opinions.

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We must inform the Board of Directors of, among other matters, the planned scope and timing of the audit. We must also inform of significant audit findings during our audit, including any significant deficiencies in internal control that we identified.

Report on other legal and regulatory requirementsOpinionsIn addition to our audit of the annual accounts and consolidated accounts, we have also audited the administration of the Board of Directors of Pomegranate Investment AB (publ) for the year 2017-01-01 – 2018-04-30 and the proposed appropriations of the company’s profit or loss. We recommend to the general meeting of shareholders that the profit be appropriated in accordance with the proposal in the stat-utory administration report and that the members of the Board of Directors be discharged from liability for the financial year.

Basis for OpinionsWe conducted the audit in accordance with generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor’s Responsibilities section. We are independent of the parent company and the group in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accor-dance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.

Responsibilities of the Board of DirectorsThe Board of Directors is responsible for the proposal for appropri-ations of the company’s profit or loss. At the proposal of a dividend, this includes an assessment of whether the dividend is justifiable considering the requirements which the company’s and the group’s type of operations, size and risks place on the size of the parent com-pany’s and the group’s equity, consolidation requirements, liquidity and position in general. The Board of Directors is responsible for the company’s organiza-tion and the administration of the company’s affairs. This includes among other things continuous assessment of the company’s and the group’s financial situation and ensuring that the company’s organization is designed so that the accounting, management of assets and the company’s financial affairs otherwise are controlled in a reassuring manner.

Auditor’s responsibilityOur objective concerning the audit of the administration, and thereby our opinion about discharge from liability, is to obtain audit evidence to assess with a reasonable degree of assurance whether any member of the Board of Directors in any material respect:• has undertaken any action or been guilty of any omission which

can give rise to liability to the company, or

• in any other way has acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association.

Our objective concerning the audit of the proposed appropriations of the company’s profit or loss, and thereby our opinion about this, is to assess with reasonable degree of assurance whether the propos-al is in accordance with the Companies Act. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with generally accepted auditing standards in Sweden will always detect actions or omissions that can give rise to liability to the company, or that the proposed appropriations of the company’s profit or loss are not in accordance with the Companies Act. As part of an audit in accordance with generally accepted auditing standards in Sweden, we exercise professional judgment and maintain professional skepticism throughout the audit. The examination of the administration and the proposed appropriations of the company’s profit or loss is based primarily on the audit of the accounts. Additional audit procedures performed are based on our professional judgment with starting point in risk and materiality. This means that we focus the examination on such actions, areas and relationships that are material for the operations and where deviations and violations would have particular importance for the company’s situation. We examine and test decisions undertaken, support for decisions, actions taken and other circumstances that are relevant to our opinion concerning discharge from liability. As a basis for our opinion on the Board of Directors’ proposed appro-priations of the company’s profit or loss we examined whether the proposal is in accordance with the Companies Act.

Stockholm 16/8 - 2018PricewaterhouseCoopers AB

Nicklas KullbergAuthorized Public Accountant


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Annual General Meeting 2018The Annual General Meeting of shareholders in Pomegranate Investment AB (publ) will be held at 3 p.m. on September 6, 2018 at the offices of Advokatfirman Vinge KB, Smålandsgatan 20, Stockholm.

ParticipationTo be entitled to participate at the Annual General Meeting, shareholders must be registered in the share register maintained by Euroclear Sweden AB no later than August 31, 2018 and notify the Company of their intention to attend the Annual General Meeting by August 31, 2018.

NotificationNotification of participation may be made:

By post to Pomegranate Investment AB (publ)Mäster Samuelsgatan 1, 1st floorSE-111 44 Stockholm

By e-mail to [email protected]

By telephone to +46 (0)8 545 015 50

Notification should include name, personal identification number (corporate identity number), address and daytime telephone number.

Nominee-registered sharesShareholders whose shares are held in the name of a nominee must tempo-rarily re-register the shares in their own name to be entitled to participate in and exercise their voting rights at the Meeting. Such registration must be completed with Euroclear no later than August 31, 2018. This means that the shareholder must request such registration prior to this date.

Information and Contact

Financial informationInterim report May – July 2018 September 20, 2018

Investor relationsGustav Wetterling, CFO+46 (0)8 545 [email protected]

AddressPomegranate Investment AB (publ)Mäster Samuelsgatan 1, 1st floorSE-111 44 StockholmSwedenTel. +46 (0)8 545 015 [email protected] www.pomegranateinvestment.com


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The pomegranate, botanical name Punica granatum, is a fruit-bearing deciduous shrub or small tree in the family Lythraceae that grows between 5 and 8 metres tall. As intact arils

or juice, pomegranates are used in baking, cooking, juice blends and meal garnishes. The pomegranate originated in the region of modern-day Iran, and has been cultivated since ancient times throughout the Mediterranean region and northern India.

It was after an initial visit to Iran that the investment team summarised impressions from the trip at the airport. The friendly people, the opportunities, the culture and food. Pomegranate in various forms had been omnipresent during the stay, hence the name – Pomegranate Investment.

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