TIDMOTM
RNS Number : 2265H
Ottoman Fund Limited (The)
25 May 2011
THE OTTOMAN FUND LIMITED
Interim Financial Statements for the period ending 28 February
2011
The Company is pleased to announce as follows its interim
results for the 6 months ended 28 February 2011, a full copy of
which is also available on the Company's website:
www.theottomanfund.com.
Chairman's Statement
Dear Shareholders:
Our net asset value per share as at 28 February 2011 was 80.9
pence as compared with 81.6 pence as at 31 August, 2010. As I have
explained previously, for each valuation period we retain two
appraisers, Savills and TSKB, to each independently appraise the
value of our properties. We use the Savills valuations for the
disclosure in our financial statements and the TSKB valuation as a
check on the Savills one. Historically both valuation companies
have tended to reach similar conclusions. The average appraised
value of our property portfolio is about five per cent higher than
it was last August:
Savills TSKB Average Average
28 February 28 February 28 February
2011 2011 2011 31 August 2010
($) ($) ($) ($)
--------- --------------- --------------- ---------------- ---------------
Riva 106,634,639 116,519,000 111,576,820 102,833,500
--------- --------------- --------------- ---------------- ---------------
Bodrum 32,918,862 40,294,000 36,606,431 36,460,371
--------- --------------- --------------- ---------------- ---------------
Kazikli 8,727,245 10,073,000 9,400,123 9,360,708
--------- --------------- --------------- ---------------- ---------------
Alanya 10,223,255 9,711,772 9,967,514 10,523,464
--------- --------------- --------------- ---------------- ---------------
TOTAL 158,504,001 176,597,772 167,550,887 159,178,043
========= =============== =============== ================ ===============
The major development over the last six months has been the
agreement in April to sell our interest in Kazikli for $9.5 million
in cash to our partner. Twenty-five per cent of that amount has now
been received with the remainder due upon our completion of
corporate restructuring intended to eliminate VAT. It appears that
this transaction should close by the end of June, though the buyer
will have the right to rescind the transaction if we fail to
complete the conditions precedent by 1 August 2011. In accordance
with Company policy, any excess cash will be returned to
shareholders.
We have received and rejected a substantial offer for our
interest in Riva. Our objective is to aim for the appraised value
of our assets and this offer, the Board decided, was at an
unwarranted discount. We have also had serious expressions of
interest regarding our Bodrum property. Given our disappointment
with sales at Alanya, we have restructured the marketing
arrangements and are now using a number of local brokers with
connections in Russia. We are also endeavouring to cement brokerage
relationships with brokers active in other European countries.
These efforts are beginning to bear fruit and we have made six
sales this year. We are hopeful that enlarging the broker network
and boosting commissions will lead to increased sales as we now
enter the prime holiday season.
I look forward to writing again when we release our annual
report for the year ended 31 August 2011.
Respectfully yours,
John D. Chapman
Chairman
24 May 2011
INDEPENDENT REVIEW REPORT TO THE OTTOMAN FUND LIMITED
Introduction
We have been engaged by the company to review the condensed
interim financial statements in the half-yearly financial report
for the six months ended 28 February 2011, which comprises the
consolidated statement of comprehensive income, consolidated
balance sheet, consolidated statement of changes in equity,
consolidated statement of cash flows and related notes. We have
read the other information contained in the half-yearly financial
report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the AIM Rules for Companies which require that the financial
information must be presented and prepared in a form consistent
with that which will be adopted in the company's annual financial
statements.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with International Financial
Reporting Standards (IFRS) issued by the International Accounting
Standards Board. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting".
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review. This report, including the
conclusion, has been prepared for and only for the company for the
purpose of the AIM Rules for Companies and for no other purpose. We
do not, in producing this report, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing and consequently does not enable us to obtain assurance
that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 28
February 2011 is not prepared, in all material respects, in
accordance with International Accounting Standard 34 and the AIM
Rules for Companies.
PricewaterhouseCoopers CI LLP
Chartered Accountants
Jersey, Channel Islands
24 May 2011
Consolidated Statement of Comprehensive Income
(unaudited) (unaudited) (audited)
Six months Six months
ended ended Year ended
28 February 28 February 31 August
2011 2010 2010
notes GBP GBP GBP
Revenue
Bank Interest 59,375 68,329 152,141
------------ ------------- -------------
Total income 59,375 68,329 152,141
------------ ------------- -------------
Operating Expenses
Management fee 3 (178,904) (413,993) (600,621)
Other operating expenses (462,209) (444,856) (1,734,182)
Total operating expenses (641,113) (858,849) (2,334,803)
------------ ------------- -------------
Foreign exchange
gains/(losses) 432,273 174,201 (682,998)
Loss before taxation (149,465) (616,319) (2,865,660)
------------ ------------- -------------
Taxation - - -
Loss for the period (149,465) (616,319) (2,865,660)
------------ ------------- -------------
Other comprehensive
income
Foreign exchange on
subsidiary translation (722,605) 235,375 258,424
Other comprehensive income
for the year (722,605) 235,375 258,424
------------ ------------- -------------
Total comprehensive loss
for the year (872,070) (380,944) (2,607,236)
------------ ------------- -------------
Loss attributable to:
Equity shareholders of
the Company (149,456) (616,314) (2,865,651)
Minority interests (9) (5) (9)
------------ ------------- -------------
(149,465) (616,319) (2,865,660)
------------ ------------- -------------
Total comprehensive loss
attributable to:
Equity shareholders of
the Company (872,003) (380,958) (2,607,248)
Minority interests (67) 14 12
------------ ------------- -------------
(872,070) (380,944) (2,607,236)
------------ ------------- -------------
Basic and diluted earnings
per share (pence) 4 (0.11) (0.46) (2.13)
The accompanying notes are an integral part of the financial
statements.
Consolidated Balance Sheet as at 28 February 2011
(unaudited) (unaudited) (audited)
Six months Six months
ended ended Year ended
28 February 28 February 31 August
2011 2010 2010
notes GBP GBP GBP
Non-current assets
Intangible assets 5 2,267 2,117 2,687
Plant and Equipment 6 5,575 13,624 7,548
Inventories 7 94,777,112 92,631,946 92,474,333
Loans and receivables 8 7,257,481 8,515,984 7,470,112
------------- ------------- -------------
102,042,435 101,163,671 99,954,680
------------- ------------- -------------
Current assets
Other receivables 1,032,698 1,071,485 1,055,067
Cash and cash
equivalents 6,228,521 10,173,221 9,249,402
------------- ------------- -------------
7,261,219 11,244,706 10,304,469
Total assets 109,303,654 112,408,377 110,259,149
Current liabilities
Other payables (251,627) (257,969) (335,052)
------------- ------------- -------------
Net assets 109,052,027 112,150,408 109,924,097
------------- ------------- -------------
Equity
Share capital 9 127,483,015 127,483,015 127,483,015
Retained earnings (17,924,927) (15,526,134) (17,775,471)
Translation reserve (506,039) 193,480 216,508
------------- ------------- -------------
Equity attributable
to owners of the
parent 109,052,049 112,150,361 109,924,052
Minority interest
equity (22) 47 45
------------- ------------- -------------
Total Equity 109,052,027 112,150,408 109,924,097
------------- ------------- -------------
Net asset value per
Ordinary share (pence) 10 80.9 83.2 81.6
These financial statements were approved by the Board of
Directors on 24 May 2011.
Consolidated Statement of Changes in Equity
Group Share Retained Translation Minority
capital earnings reserve interest Total
GBP GBP GBP GBP GBP
For the six
months ended
28 February
2011
(unaudited)
As at 1
September
2010 127,483,015 (17,775,471) 216,508 45 109,924,097
Loss for the
period - (149,456) - (9) (149,465)
Foreign
exchange on
subsidiary
translation - - (722,547) (58) (722,605)
------------ ------------- ------------ --------- ------------
At 28
February
2011 127,483,015 (17,924,927) (506,039) 22 109,052,027
------------ ------------- ------------ --------- ------------
For the six
months ended
28 February
2010
(unaudited)
As at 1
September
2009 135,483,052 (14,909,820) (41,895) 33 120,531,370
Return of
capital (8,000,037) - - - (8,000,037)
Loss for the
period - (616,314) - (5) (616,319)
Foreign
exchange on
subsidiary
translation - 235,375 19 235,394
------------ ------------- ------------ --------- ------------
At 28
February
2010 127,483,015 (15,526,134) 193,480 47 112,150,408
------------ ------------- ------------ --------- ------------
For the year
ended 31
August 2010
(audited)
As at 1
September
2009 135,483,052 (14,909,820) (41,895) 33 120,531,370
Return of
capital (8,000,037) - - - (8,000,037)
Loss for the
year - (2,865,651) - (9) (2,865,660)
Foreign
exchange on
subsidiary
translation - - 258,403 21 258,424
------------ ------------- ------------ --------- ------------
At 31 August
2010 127,483,015 (17,775,471) 216,508 45 109,924,097
------------ ------------- ------------ --------- ------------
Consolidated Statement of Cash Flows
Group (unaudited) (unaudited) (audited)
Six months ended Six months ended Year ended
28 February
2011 28 February 2010 31 August 2010
GBP GBP GBP
Cash flow from
operating activities
Net Loss for the
period (149,465) (616,319) (2,865,660)
Adjustments for:
Interest (59,375) (68,329) (152,141)
Depreciation 1,833 6,811 7,274
Amortisation 420 1,109 1,455
Previously capitalised
expenses written off - - 342,134
----------------- ----------------- ---------------
(206,587) (676,728) (2,666,938)
Net foreign exchange
(gains)/losses (903,776) 174,201 941,395
(Increase)/decrease in
other receivables 22,369 (85,410) (68,992)
Increase/(decrease) in
other payables (83,425) (95,371) (18,288)
----------------- ----------------- ---------------
Net cash outflow from
operating activities
before interest and
tax (1,171,419) (683,308) (1,812,823)
Interest received 59,375 68,329 152,141
Net cash outflow from
operating activities (1,112,044) (614,979) (1,660,682)
Cash flow from
investing activities
Purchase of
inventories (2,302,779) (136,974) (321,495)
Purchase of plant and
equipment - (414) (412)
Sale of plant and
equipment 139 - 5,638
Purchase of intangible
assets - - (916)
New loans issued (20,383) - -
Loan to developer 414,186 657,370 834,294
----------------- ----------------- ---------------
Net cash outflow from
investing activities (1,908,837) 519,982 517,109
Cash flow from
financing activities
Capital distribution - (8,000,037) (8,000,037)
----------------- ----------------- ---------------
Net cash outflow from
financing activities - (8,000,037) (8,000,037)
----------------- ----------------- ---------------
Net decrease in cash
and cash equivalents (3,020,881) (8,095,034) (9,143,610)
Cash and cash
equivalents at start
of period 9,249,402 18,366,304 18,366,304
Effect of foreign
exchange rates - (98,049) 26,708
----------------- ----------------- ---------------
Cash and cash
equivalents at end of
period 6,228,521 10,173,221 9,249,402
----------------- ----------------- ---------------
The accompanying notes are an integral part of the financial
statements.
Notes to the financial statements
1. Accounting policies
The annual financial statements for the year ended 31 August
2010 were prepared in accordance with International Financial
Reporting Standards ("IFRS") issued by the International Accounting
Standards Board (IASB) and interpretations issued by the
International Financial Reporting Committee of the IASB (IFRIC).
The accounting policies adopted in the preparation of the half
yearly financial report are consistent with those followed in the
preparation of the Group's annual financial statements for the year
ended 31 August 2010.
The condensed consolidated interim financial information should
be read in conjunction with the annual financial statements for the
year ended 31 August 2010, which have been prepared in accordance
with IFRS. This condensed consolidated interim financial
information has been reviewed, not audited.
(a) Basis of preparation
The interim financial statements have been prepared on a
historical cost basis, except for certain financial instruments
detailed below.
The interim financial statements have been prepared in
accordance with IAS 34 Interim Financial Reporting.
(b) Basis of consolidation
Subsidiaries
The interim financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries) made up to 28 February 2011. The consolidated
financial statements are prepared using uniform accounting policies
for like transactions. Control exists when the Company has the
power, directly or indirectly, to govern the financial and
operating policies of an entity so as to obtain benefits from its
activities. The financial statements of the subsidiaries are
included in the consolidated financial statements from the date
that control commences up to the date that control ceases.
Intercompany transactions, balances and unrealised gains on
transactions between group companies are eliminated. Unrealised
losses are also eliminated unless the transaction provides evidence
of an impairment of the asset transferred.
The Group applies a policy of treating transactions with
minority interests as transactions with parties external to the
Group. Minority interests represent the portion of profit and net
assets not held by the Group. They are presented separately in the
consolidated statement of comprehensive income and in the
consolidated statement of financial position separately from the
amounts attributable to the owners of the parent.
Joint ventures
A joint venture is a contractual arrangement whereby the Group
and another party undertake an economic activity that is subject to
joint control; that is, when the strategic financial and operating
policy decisions relating to the activities require the unanimous
consent of the parties sharing control.
The Group reports its interests in jointly controlled entities
using proportionate consolidation. The Group's share of the assets,
liabilities, income, expenses and cash flows of jointly controlled
entities are combined with the equivalent items in the results on a
line-by-line basis.
(c) Revenue recognition
Interest receivable on fixed interest securities is recognised
using the effective interest method. Interest on short term
deposits, expenses and interest payable are treated on an accruals
basis. Revenue from sales of inventory is accounted for on a cash
receipts basis when the significant risks and rewards of an asset
have been transferred.
(d) Expenses
All expenses are charged through the income statement in the
period in which the services or goods are provided to the Group
except for expenses which are incidental to the disposal of an
investment which are deducted from the disposal proceeds of the
investment.
(e) Non current assets
Intangible assets
Intangible assets are stated at cost less any provisions for
amortisation and impairments. They are amortised over their useful
life of 6 years. The amortisation is based on the straight-line
basis. At each balance sheet date, the Group reviews the carrying
amount of its intangible assets to determine whether there is any
indication that those assets have suffered an impairment loss.
General
Assets are recognised and derecognised at the trade date on
acquisition and disposal respectively. Proceeds will be measured at
fair value which will be regarded as the proceeds of sale less any
transaction costs.
Plant and equipment is stated at cost less accumulated
depreciation and any recognised impairment loss. Depreciation is
charged so as to write off the cost of assets, other than land or
properties under construction, over their estimated useful lives,
using the straight line method on the following basis:
Leasehold improvements 3 years
Furniture and fittings 5 years
Computer hardware 4 years
Computer software 3 years
The gain or loss on the disposal or retirement of an asset is
determined as the difference between the sales proceeds and the
carrying amount of the asset and is recognised in the income
statement.
Inventories
Inventories are stated at the lower of cost and net realisable
value. Land inventory is recognised at the time a liability is
recognised - generally after the exchange of unconditional
contracts.
Net realisable value will be determined by the Board as the
estimated selling price in the ordinary course of business less
costs to complete and selling costs.
In determining the net realisable value, the directors take into
account the valuations received from the independent appraisers,
market conditions at and (where relevant and appropriate) after the
balance sheet date, and offers received from third parties by the
Group.
The valuations of the properties performed by the independent
appraisers are based on estimate and subjective judgements that may
vary from the actual values and sales prices that may be realised
by the Group upon ultimate disposal.
Loans and receivables
Loans and receivables are recognised on an amortised cost basis.
Where they are denominated in a foreign currency they are
translated at the prevailing balance sheet exchange rate.
Loans are reviewed for impairment by the Board on a semi-annual
basis; any impairment is recognised through the income
statement.
(f) Cash and cash equivalents
Cash and cash equivalents comprise current deposits with
banks.
(g) Taxation
Profits arising in the Group for the 2010 year of assessment and
future periods will be subject to Jersey tax at the rate of 0%.
However, withholding tax may be payable on repatriation of assets
and income to the Company in Jersey. The Group pays an
International Services Entity fee and neither charges or pays Goods
and Services Tax, this fee is currently GBP100 per annum for each
Jersey registered company within the Group.
The subsidiaries will be liable for Turkish corporation tax at a
rate of 20%. Additionally, a land sale and purchase tax may arise
when land is sold or purchased.
Deferred tax is recognised in respect of all temporary
differences that have originated but not reversed at the balance
sheet date, where transactions or events that result in an
obligation to pay more tax in the future or right to pay less tax
in the future have occurred at the balance sheet date. This is
subject to deferred tax assets only being recognised if it is
considered more likely than not that there will be suitable profits
from which the future reversal of the temporary differences can be
deducted.
(h) Foreign currency
In these financial statements, the results and financial
position of the Group are expressed in Pounds Sterling, which is
the Group's presentational currency.
The results and financial position of the entities based in
Jersey are recorded in Pounds Sterling, which is the functional
currency of these entities. In these entities, transactions in
currencies other than sterling are recorded at the rates of
exchange prevailing on the dates of the transactions. Monetary
balances (including loans) that are denominated in foreign
currencies are retranslated at the rates prevailing on the balance
sheet date.
The results and financial position of the entities based in
Turkey are recorded in Turkish Lira, which is the functional
currency of these entities. In order to translate the results and
financial position of these entities into the presentational
currency (Pounds Sterling):
- non-monetary assets (including inventory) are translated at
the rates of exchange prevailing on the dates of the
transactions
- monetary balances (including loans) are translated at the
rates prevailing on the balance sheet date and
- items to be included in the income statement are translated at
the average exchange rates for the year unless the average is not a
reasonable approximation of the cumulative effect of the rates
prevailing on the transaction dates, in which case income and
expenses are translated at the rate on the dates of the
transactions.
Foreign exchange gains or losses are recorded in either the
income statement or in equity depending on their nature.
(i) Share capital
Ordinary shares are classified as equity. External costs
directly attributable to the issue of new shares are shown as a
deduction to reserves. Any redemption in shares is deducted from
ordinary share capital with any transaction costs taken to the
Income Statement.
(j) Critical accounting estimates and assumptions
The Board makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition, seldom
equal the related actual results. The estimates, assumptions and
judgements that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within
the next financial year are outlined below.
Principal assumptions underlying management's estimation of net
realisable value
Due to the low level of property transactions completed on an
arms length basis which are comparable to those assets held by the
Group, it is difficult to derive a true market value for the
Group's assets.
The Board is focussed on obtaining appropriate realisation
amounts for all of the Group's assets and is consequently prepared
to wait for offers it deems acceptable.
Critical judgements in applying the Group's accounting
policies
The Group did not make any critical accounting judgements during
the current financial year.
2. Segment reporting
The chief operating decision maker (the "CODM") in relation to
the Group is deemed to be the Board itself. The factor used to
identify the Group's reportable segments is geographical area.
Based on the above and a review of information provided to the
Board, it has been concluded that the Group is currently organised
into one reportable segment: Turkey.
There are two types of real estate projects within the above
segment; development land and new build residential property. There
are three individual projects held within the development land
category. The CODM considers, on a quarterly basis, the status of
the overall position of both property types as part of an ongoing
performance review.
The CODM receives regular reports on the Group's assets by the
Investment Advisors, Civitas Property Partners S.A. During this
financial year Civitas have provided detailed reviews each quarter
of the Turkish economy and real estate market and also their
strategic advice regarding the individual properties listed in the
table on page 1. In addition the year end valuations provided by
Savills and TSKB are reviewed and reported on by the investment
advisor to the Board of Directors.
Other than cash and cash equivalent assets and related interest
and charges, the results of the Group are deemed to be generated in
Turkey.
3. Management fee
Six months ended Six months ended Year ended
28 February 2011 28 February 2010 31 August 2010
GBP GBP GBP
Management fee 178,904 413,993 600,621
----------------- ----------------- ---------------
Civitas Property Partners S.A. were appointed as Investment
Advisors to the Group on 2 December 2009. The advisory fee
structure is heavily incentive-based with an annual fixed component
of EUR425,000 (renegotiated to EUR212,500 from 1 January 2011) and
an incentive component based on a percentage of realisation
value.
4. Earnings per share
Earnings per share are calculated by dividing the profit
attributable to equity holders of the group by the weighted average
number of ordinary shares in issue during the year.
Six months ended Six months ended Year ended
28 February 2011 28 February 2010 31 August 2010
Loss attributable
to equity holders
of the group (GBP149,456) (GBP616,314) (GBP2,865,651)
------------------ ------------------- ----------------
Weighted average
number of
ordinary shares
in issue 134,764,709 134,764,709 134,764,709
------------------ ------------------- ----------------
Due to the options lapsed without exercise in December 2010,
there is no dilution to the earnings per share. The earnings per
share are calculated as (0.11) pence (28 February 2010:(0.46)
pence; 31 August 2010:(2.13) pence).
5. Intangible assets
Six months ended Six months ended Year ended
28 February 2011 28 February 2010 31 August 2010
GBP GBP GBP
Opening net book
value 2,687 3,226 3,226
Additions - - 916
Amortisation and
impairment charge (420) (1,109) (1,455)
------------------ ------------------ ----------------
Closing net book
value 2,267 2,117 2,687
------------------ ------------------ ----------------
The intangible asset relates to a CRM program, with a useful
life of 6 years. There has been no impairment during the year.
6. Plant and equipment
Six months ended
28 February Six months ended Year ended
2011 28 February 2010 31 August 2010
GBP GBP GBP
Opening net book
value 7,548 20,021 20,021
Additions - 414 412
Disposals (139) - (5,638)
Depreciation (1,834) (6,811) (7,247)
Closing net book
value 5,575 13,624 7,548
----------------- ------------------ ----------------
7. Inventories
Six months ended Six months ended Year ended
28 February 2011 28 February 2010 31 August 2010
GBP GBP GBP
Opening book cost 92,474,333 92,494,972 92,494,972
Purchases at cost
(1) 2,302,779 136,974 321,495
Previously
capitalised
expenses written
off - - (342,134)
Closing book cost 94,777,112 92,631,946 92,474,333
------------------ ------------------ ----------------
(1) This represents the purchase of 149,550 square metres of
development land on the Bodrum peninsula, 931,739 square metres on
the Riva coastline and 209,853 square metres, of which the Group
has a 50% share, in the Kazikli village, in the district of
Milas.
8. Loans and receivables
Six months ended Six months ended Year ended
28 February 2011 28 February 2010 31 August 2010
GBP GBP GBP
Opening Balance 7,470,112 9,014,112 9,014,112
New loans 20,383 - -
Repayment of loan (414,186) (657,370) (834,294)
Exchange gain
revaluation of
loan 181,172 159,242 (709,706)
Closing Balance 7,257,481 8,515,984 7,470,112
------------------ ------------------ ----------------
Previously, the third party loan in respect of the investment in
the Riverside Resort in Alanya had been made to the developer,
Okyap1 In aat ve Muhendislik ve Ozel E itim Hizmetleri Sanayi ve
Ticaret Limited irketi ("Okyap1").
On 3 December 2010, a fiduciary agreement and a settlement
agreement were signed by all relevant parties which resulted in the
loan due to the Group (EUR8,193,091 at the time of signing the
agreement) and the titles of the apartments being assigned to
Mandalina Yap1 Turizm Sanayi ve Ticaret A. . ("Mandalina") for the
ultimate benefit of the Group.
As at the period end, the amount due was GBP7,237,098
(2010:GBP7,470,112). No loan interest is accruing and repayments
are based upon sales of the development.
9. Called up share capital
Authorised:
Founder shares of no par value 10
Ordinary shares of no par value Unlimited
Issued and fully paid: GBP
2 founder shares of no par value -
134,764,709 ordinary shares of no par value 127,483,015
-----------
The 2 founder shares of no par value are owned by Herald
Charitable Trust. These shares are not eligible for participation
in the Company's investments and carry no voting rights at general
meetings of the Company. The Company's former broker, Numis
Securities Limited, held an option to purchase 1.25% of the issued
share capital of the Company at a price of GBP1 per share. This
option lapsed without being exercised on the 5th anniversary of
admission, being 28 December 2010.
Capital Management
As a result of the Group being closed-ended, capital management
is wholly subject to the discretion of the Board and is not
influenced by subscriptions or redemptions. The Group's objectives
for managing capital are to maintain sufficient liquidity to meet
the expenses of the Group as they fall due; to invest in the
Group's current assets when the Board feels it will give rise to
capital appreciation; and to return excess capital to
shareholders.
10. Net asset value per share
The net asset value per ordinary share is based on the net
assets attributable to equity shareholders of GBP109,052,027 and
134,764,709 shares (28 February 2010 GBP112,150,408 and 134,764,709
shares; 31 August 2010 GBP109,924,097 on 134,764,709 shares).
11. Financial instruments
The disclosure of the Fund's financial instruments has been
limited to the consolidated financial position. This approach has
been adopted as this covers all of the principle risks associated
with the Group.
The disclosures below assume that the properties held by the
Group are in US Dollars as this is the currency in which they are
valued by Savills. In the opinion of the directors this is also the
currency that any future disposals would occur in.
The principal risks the Group faces from its financial
instruments are:
(i) Market risk
(ii) Credit risk
(iii) Foreign currency risk
(iv) Interest rate risk
(v) Liquidity risk
As part of regular Board functions, the Board reviews each of
these risks. An analysis of financial assets and liabilities which
identifies the risks to the Group of holding such items is given
below.
(i) Market price risk
Market price risk arises mainly from uncertainty about future
prices of financial instruments used in the Group's operations. It
represents the potential loss the Group might suffer through
holding market positions as a consequence of price movements. The
Group has no such exposures to market price risk.
(ii) Credit risk
The Group places loans with third parties and is therefore
potentially at risk from the failure of any such third parties of
which it is a debtor. Recovery of the loans at 28 February 2011 is
dependent on successful completion and sale of properties by third
party developers. Further details of loans made to developers can
be found in note 8. The largest counterparty risk other than the
loans with third parties is with the Group's bankers. Bankruptcy or
insolvency of Deutsche Bank International Limited, Credit Europe
Bank (Suisse) SA or Garanti Bank may cause the Group's rights with
respect to cash held to be delayed or limited. There is no policy
in place to mitigate this risk as the Board believes there is no
need to do so.
The Board do not monitor the credit quality of receivables on an
ongoing basis. Cash balances have been placed with Deutsche Bank
International Limited, Credit Europe Bank (Suisse) SA and Garanti
Bank due to their Moody's credit ratings of Aa3, Ba2 and Baa1
respectively.
Loans and receivables are represented by loans to and
receivables from third parties.
Other receivables are represented mainly by prepayments and
other debtors where no significant credit risk is recognised.
(iii) Foreign currency risk
The Group operates Sterling, Euro, US Dollar and Turkish Lira
bank accounts. Exchange gains or losses arise as a result of the
movement in the exchange rate between the date of the transaction
denominated in a currency other than Sterling and its settlement.
There is no policy in place to mitigate this risk as the Board
believes it is not cost effective.
Currency rate exposure
An analysis of the Group's currency exposure is detailed
below:
Net Net Net
Non-current monetary Non-current monetary Non-current monetary
assets assets assets assets assets assets
28 28
28 February February 28 February February 31 August 31 August
2011 2011 2010 2010 2010 2010
GBP GBP GBP GBP GBP GBP
Sterling - 2,328,668 - 6,032,724 - 5,116,217
Euro 7,237,098 1,687,227 8,515,984 1,682,416 7,470,112 1,369,837
US Dollar 94,777,112 2,188,968 92,631,946 2,406,015 92,474,333 2,699,103
Turkish
Lira 28,225 804,729 15,741 865,582 10,235 784,260
------------ ---------- ------------ ----------- ------------ ----------
102,042,435 7,009,592 101,163,671 10,986,737 99,954,680 9,969,417
------------ ---------- ------------ ----------- ------------ ----------
(iv) Interest rate risk
Interest rate movements may affect: (i) the fair value of the
investments in fixed interest rate securities, (ii) the level of
income receivable on cash deposits, (iii) interest payable on the
company's variable rate borrowings. There is no policy in place to
mitigate this risk as the Board believes it is not cost
effective.
The Company holds only cash deposits.
The interest rate profile of the Group excluding short term
receivables and payables was as follows:
Non- Non- Non-
Floating interest Floating interest Floating interest
rate bearing rate bearing rate bearing
28 28
February 28 February February 28 February 31 August 31 August
2011 2011 2010 2010 2010 2010
GBP GBP GBP GBP GBP GBP
Sterling 2,350,877 - 6,083,192 - 13,993,334 -
Euro 1,687,227 7,237,098 1,682,416 8,515,984 1,231,512 7,470,112
US Dollar 2,188,968 94,777,112 2,406,017 92,631,946 3,140,563 92,474,333
Tukish
Lira 1,449 28,225 1,596 15,741 895 10,235
---------- ------------ ----------- ------------ ----------- -----------
6,228,521 102,042,435 10,173,221 101,163,671 18,366,304 99,954,680
---------- ------------ ----------- ------------ ----------- -----------
(v) Liquidity risk
The Group's assets mainly comprise cash balances, loans
receivable and development property, which can be sold to meet
funding commitments if necessary. As at 28 February 2011, the Group
does not have any other significant liabilities due.
The Group has sufficient cash reserves to meet any liabilities
due.
12. Subsequent Events
On 1 April 2011 the Company entered into a conditional agreement
to sell its entire interest in the Kazikli joint venture for a
total consideration of $9.5 million in cash. The sale price is in
excess of the Savills' valuation ($8,663,415) as published in the
Company's 2010 Annual Report and Financial Statements. Under the
terms of the sale agreement, the buyer is obliged to pay the
Company twenty-five percent of the purchase price on signing with
the remainder due upon the Company's fulfilment of certain
conditions. The buyer has the right to rescind the transaction if
the Company fails to fulfil these conditions within four months
from the signing of the agreement.
In accordance with the Company's policy, all excess cash,
including sale proceeds, will be returned to shareholders.
As at the date of approval of these financial statements, a
deposit of $2,375,000 has been received. The remaining $7,125,000
will fall due when the asset is transferred to the buyer.
Enquiries:
Singer Capital Markets 0203 205 7500
James Maxwell/Matt Thomas
Company Secretary
Herald Fund Services Limited 01534 610 610
This information is provided by RNS
The company news service from the London Stock Exchange
END
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