TIDMOTM
RNS Number : 1237G
Ottoman Fund Limited (The)
27 February 2015
27 February 2015
THE OTTOMAN FUND LIMITED (the "Company")
Final results for the year ended 31 August 2014
The Company is pleased to announce as follows its final results
for the year ended 31 August 2014, a full copy of which will
shortly be available on the Company's website:
www.theottomanfund.com.
Enquiries:
N+1 Singer
James Maxwell / Ben Griffiths 0207 496 3000
Vistra Fund Services
Limited
Company Secretary 01534 504 700
Chairman's Statement
Dear Shareholders,
Over the last financial year, we have sold the remainder of our
Riva asset and our Bodrum asset, both for approximately book value,
as well as nineteen Alanya units. Net of broker commissions our
Turkish subsidiaries received a total of $94.33m for Riva
(approximately GBP58.44m), $27.93m for Bodrum (approximately
GBP17.31m), and EUR1.95m for the Alanya units (approximately
GBP1.54m). Of the approximately GBP58.44m received for Riva,
GBP8.58m was distributed on 7 February 2014, GBP27m was distributed
on 27 May 2014, GBP12.84m was distributed on 26 September 2014 and
GBP18.92m was distributed on 16 January, 2015. The January
distribution comprised proceeds from both the Riva and Bodrum
sales.
As of mid-December, 2014, one of our Turkish subsidiaries
continued to hold eleven Alanya holiday units with an appraised
value of approximately GBP950k. We are exploring various ways of
monetizing the remaining Alanya units so we can close the Turkish
subsidiary that owns those units. Given various constraints
affecting the sale of those units, shareholders should consider
that the Company may not receive the appraised value of those
units. In calculating the amounts ultimately distributable,
shareholder should also take into consideration that the Company
will likely incur costs, that may include legal and accounting
fees, taxes and legal claims, which are not now quantifiable.
In addition to the Alanya assets, the Company and its Turkish
subsidiaries hold cash currently worth approximately GBP8.4m. In
calculating the amounts ultimately distributable, shareholders
should take into consideration that the Company will incur costs
and that shareholders may only receive a portion of the Company's
net asset value. These costs will include legal and accounting
fees, and taxes. The costs may also include currency translation
losses and payments for legal claims. The net amount that
shareholders may receive is not now quantifiable.
The process of up streaming sale proceeds from our Turkish
subsidiaries to their corporate parent also involves legal and
accounting complexities and pursuant to Turkish law takes time. We
are conscious that our shareholders look forward to receiving sale
proceeds expeditiously in accordance with the Company's stated
policy of returning excess capital to shareholders. I can assure
you we will continue to return excess cash to our shareholders as
quickly as practicable in accordance with governing law.
Very truly yours,
John D. Chapman
Chairman
The Ottoman Fund Limited
27 February 2015
Directors' Report
The Directors submit their Report and the audited consolidated
financial statements (the "Financial Statements") of The Ottoman
Fund Limited (the "Company") and its subsidiaries (together, the
"Group") for the year ended 31 August 2014. The Company was formed
on 9 December 2005 and commenced trading on its admission to the
AIM market on 28 December 2005. The Company is quoted on the AIM
market of the London Stock Exchange.
Principal Activity
The Company is a closed-ended, Jersey registered, investment
company formed to access the Turkish property market and in
particular new build residential developments in major cities and
coastal destinations.
Investment Policy
Upon Admission, the Company's strategy was to develop new-build
residential developments in major cities and coastal locations in
Turkey, aimed at both the local and tourist markets with an
emphasis on off-plan sales. The Company now intends to make no new
investments, to make additional investments in existing assets only
if those investments are accretive to shareholder value, and to
opportunistically dispose of assets at appropriate times as and
when market conditions permit.
Results and Dividends
It is not intended in normal circumstances that the Company will
pay dividends on the shares.
The Directors do not recommend the payment of a dividend for the
year ended 31 August 2014 (2013: nil). The consolidated statement
of comprehensive income is set out on page 8 of this Annual Report
and consolidated Financial Statements.
During the period a lawsuit was lodged against the Group in
relation to a claim for commission payable relating to the sale of
the Riva land. The Directors have made an appropriate assessment of
this claim and believe that the Group will be successful in
defending this litigation and therefore no provision has been made
in these consolidated Financial Statements. Please refer to note 23
for further details.
Subsequent to the year end the Directors became aware that funds
had been removed from the Group's Turkish entities (and entities
affiliated with the Group) without authorisation. The Directors
have provided information to the market in relation to this matter
via various RNS announcements since 24 December 2014. The
Directors, in consultation with their legal advisors, are still in
the process of assessing this matter from a legal perspective and
the next steps that may or may not be taken in respect of any legal
proceedings. The Directors have assessed this matter and its
implications for the financial statements and the Directors are
content that the financial statements can be approved for release
to shareholders. As a result of this financial assessment, no
adjustments have been made to these consolidated Financial
Statements as it would not be appropriate to book any contingent
asset or associated liabilities when no final decisions have as yet
been taken on any course of legal proceedings. The Directors will
continue to update the shareholders once a decision has been taken
in consultation with their lawyers and advisors. Please refer to
note 24 for further details.
Life
The Company has a life of 10 years from the date of its
admission to trading on the AIM market on 28 December 2005, plus up
to 2 further years for the planned realisation of the portfolio.
The life may be extended by special resolution of shareholders
(requiring a two-thirds majority of those voting). The Directors
intend to recommend to shareholders to extend the life of the
Company to enable the conclusion of the ongoing matters discussed
in note 24.
Manager & Custodian
Subsequent to the removal of Development Capital Management
(Jersey) Limited as manager of the Company in 2010, management has
been internalised at the Board level and the Board relies on
Civitas Property Partners S.A. to manage and sell the Company's
Turkish assets.
Subsequent to the termination of the custody agreement with BNP
Paribas (Jersey branch) in 2010, the Company has not appointed a
replacement.
Board of Directors
The Directors of the Company are listed on page 29. John D
Chapman (Executive Chairman), Antony Gardner-Hillman, Andrew
Wignall and Eitan Milgram all served as Directors throughout the
year.
Shareholders' Interests (as at 31 August 2014)
Size of shareholding (in shares) No. of shareholders
1 - 9,999 33
10,000 - 99,999 14
100,000 - 999,999 5
1,000,000 - 9,999,999 9
10m+ 4
At 31 August 2014 the Company was aware of the following
interests of 3% or more in the ordinary share capital of the
Company:
Number % held
QVT Financial LP 43,335,000 32.16%
Weiss Asset Management LLC 40,132,000 29.78%
Toscafund Asset Management LLP 22,551,098 16.73%
Lars Bader 7,940,000 5.89%
JPMorgan GT Corporation 7,140,675 5.30%
The Directors are not aware of interests of 3% or more in the
Company's issued share capital.
Directors' Interests
The maximum aggregate amount of ordinary remuneration payable to
the Directors permitted under the Articles is GBP150,000 per annum.
The Directors received in aggregate GBP150,000 for the year ended
31 August 2014 (2013:GBP150,000). Commencing 13 March 2009 John D.
Chapman has been employed under an executive service contract that
provides for an annual fee of GBP75,000 and a discretionary
performance fee.
None of the directors have any interests in the Company's share
capital. Eitan Milgram is an Executive Vice President of Weiss
Asset Management LLC, which owns a shareholding of 29.78% in the
Company at the end of this financial period.
Andrew Wignall
Director
The Ottoman Fund Limited
27 February 2015
Statement of Directors' Responsibilities
The Directors are responsible for preparing the consolidated
financial statements in accordance with applicable law and
International Financial Reporting Standards.
The Companies (Jersey) Law 1991 requires the Directors to
prepare financial statements for each financial year which give a
true and fair view of the state of affairs of the Group and of the
gain or loss of the Group for that year. In preparing those
financial statements, the Directors are required to:
-- select suitable accounting policies and apply them consistently;
-- make judgments and estimates that are reasonable and prudent;
-- prepare the financial statements on a going concern basis
unless it is inappropriate to presume that the Group will continue
in business; and
-- state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements.
The Directors confirm that they have complied with the above
requirements in preparing the financial statements.
The Directors are responsible for keeping proper accounting
records that disclose with reasonable accuracy, at any time, the
financial position of the Group and to enable them to ensure that
the financial statements comply with the Companies (Jersey) Law
1991. They have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Group and
hence for taking reasonable steps to prevent and detect fraud and
other irregularities.
So far as the Directors are aware, there is no relevant audit
information of which the Group's auditors are unaware, and each
Director has taken all the steps that he ought to have taken as a
director in order to make himself aware of any relevant audit
information and to establish that the Group's auditors are aware of
that information.
By Order of the Board
Vistra Secretaries Limited
Secretary
27 February 2015
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF THE OTTOMAN FUND
LIMITED
Report on the financial statements
We have audited the accompanying consolidated financial
statements (the "financial statements") of The Ottoman Fund Limited
(the "Group") which comprise the consolidated statement of
financial position as of 31 August 2014 and the consolidated
statement of comprehensive income, the consolidated statement of
changes in equity and the consolidated statement of cash flows for
the year then ended and a summary of significant accounting
policies and other explanatory information.
Directors' responsibility for the financial statements
The directors are responsible for the preparation of financial
statements that give a true and fair view in accordance with
International Financial Reporting Standards and with the
requirements of Jersey law. The Directors are also responsible for
such internal control as they determine is necessary to enable the
preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
Auditors' responsibility
Our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit in accordance
with International Standards on Auditing. Those Standards require
that we comply with ethical requirements and plan and perform the
audit to obtain reasonable assurance whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditors' judgement, including
the assessment of the risks of material misstatement of the
financial statements, whether due to fraud or error. In making
those risk assessments, the auditor considers internal control
relevant to the entity's preparation and fair presentation of the
financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity's internal
control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting
estimates made by the directors, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our audit
opinion.
Opinion
In our opinion, the financial statements give a true and fair
view of the financial position of the Group as of 31 August 2014,
and of the financial performance and cash flows of the Group for
the year then ended in accordance with International Financial
Reporting Standards and have been properly prepared in accordance
with the requirements of the Companies (Jersey) Law 1991.
Report on other legal and regulatory requirements
We read the other information contained in the Annual Report and
consider the implications for our report if we become aware of any
apparent misstatements or material inconsistencies with the
financial statements. The other information comprises only the
directory, the chairman's statement, the directors' report, the
statement of directors' responsibilities and corporate
information.
In our opinion the information given in the directors' report is
consistent with the financial statements.
This report, including the opinion, has been prepared for and
only for the Company's members as a body in accordance with Article
113A of the Companies (Jersey) Law 1991 and for no other purpose.
We do not, in giving this opinion, 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.
Lisa McClure
For and on behalf of PricewaterhouseCoopers CI LLP
Chartered Accountants
Jersey, Channel Islands
27 February 2015
Notes
The maintenance and integrity of The Ottoman Fund Limited
website is the responsibility of the Directors; the work carried
out by the auditors does not involve consideration of these matters
and, accordingly, the auditors accept no responsibility for any
changes that may have occurred to the financial statements since
they were initially presented on the website.
Legislation in Jersey governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
Consolidated Statement of Comprehensive Income
For the year ended 31 August 2014
Year ended Year ended
31 August 31 August
2014 2013
notes GBP GBP
Revenue
Proceeds from sale of inventory 75,749,146 -
Less cost of inventory sold (68,856,547) -
----------- ----------
2(c) 6,892,599 -
Write back of inventory impairment 10 6,151,756 3,809,755
Foreign exchange loss on sale of inventory 10 (23,075,220) -
----------- ----------
(10,030,865) 3,809,755
Finance income 2(c) 598,820 247,518
Total revenue (9,432,045) 4,057,273
Operating expenses
Management/advisory fee 4 (1,105,409) (197,930)
Other operating expenses 5 (574,124) (837,794)
Loan impairment 11 - (425,000)
Total operating expenses (1,679,533) (1,460,724)
Foreign exchange gains 12 192,263 846,703
(Loss)/gain before tax (10,919,315) 3,443,252
Tax charge 6 (301,276) (8,087)
(Loss)/gain for the year (11,220,591) 3,435,165
----------- ----------
Other comprehensive income:
Foreign exchange loss on subsidiary translation (1,055,578) (725,056)
Other comprehensive loss for the year (1,055,578) (725,056)
----------- ----------
Total comprehensive (loss)/gain for the year (12,276,169) 2,710,109
----------- ----------
(Loss)/gain attributable to:
Equity shareholders of the Company (11,220,591) 3,435,166
Minority interests - (1)
----------- ----------
(11,220,591) 3,435,165
----------- ----------
Total comprehensive (loss)/gain attributable to:
Equity shareholders of the Company (12,276,158) 2,710,109
Minority interests (11) -
----------- ----------
(12,276,169) 2,710,109
----------- ----------
Basic and diluted (loss)/earnings per share (pence) 7(b) (8.33) 2.55
All items in the above statement derive from continuing
operations.
The accompanying notes on pages 12 to 28 are an integral part of
the financial statements.
Consolidated Statement of Financial Position
As at 31 August 2014
As at 31 As at 31 August 2013
August 2014
notes GBP GBP
Assets
Non-current assets
Intangible assets 8 - 774
Plant and equipment 9 - 3,462
Inventories 10 - 82,589,097
Loans and receivables 11 1,933,733 2,923,760
------------ --------------------
1,933,733 85,517,093
Current assets
Trade and other receivables 14 1,227,634 676,721
Cash and cash equivalents 18 37,902,728 2,766,951
------------ --------------------
39,130,362 3,443,672
Total assets 41,064,095 88,960,765
------------ --------------------
Liabilities
Current liabilities
Trade and other payables 15 (88,003) (98,477)
(88,003) (98,477)
Net assets 40,976,092 88,862,288
------------ --------------------
Equity
Share capital 16 84,392,980 120,003,007
Retained earnings 17 (41,624,725) (30,404,134)
Translation reserve (1,792,163) (736,596)
------------ --------------------
Equity attributable to shareholders of the parent 40,976,092 88,862,277
Minority interests' equity - 11
------------ --------------------
Total equity 40,976,092 88,862,288
------------ --------------------
Net asset value per ordinary share (pence) 18 30.4 65.9
The accompanying notes on pages 12 to 28 are an integral part of
the financial statements.
These financial statements were approved by the Board on 27
February 2015.
Antony Gardner-Hillman Andrew Wignall
Director Director
Consolidated Statement of
Changes in Equity
Share Retained Translation Minority
capital earnings reserve interest Total
GBP GBP GBP GBP GBP
For the year ended
31 August 2014
As at 1 September
2013 120,003,007 (30,404,134) (736,596) 11 88,862,288
Return of capital (35,610,027) - - - (35,610,027)
Loss for the year - (11,220,591) - - (11,220,591)
Foreign exchange
loss on
subsidiary translation - - (1,055,567) (11) (1,055,578)
At 31 August 2014 84,392,980 (41,624,725) (1,792,163) - 40,976,092
-------------- ----------- ----------- -------- -----------
For the year ended
31 August 2013
As at 1 September
2012 120,003,007 (33,839,300) (11,540) 12 86,152,179
Gain/(loss) for
the year - 3,435,166 - (1) 3,435,165
Foreign exchange
loss on
subsidiary translation - - (725,056) - (725,056)
At 31 August 2013 120,003,007 (30,404,134) (736,596) 11 88,862,288
-------------- ----------- ----------- -------- -----------
The accompanying notes on pages 12 to 28 are an integral part of
the financial statements.
Consolidated Statement of Cash Flows
notes Year ended Year ended
31 August 31 August
2014 2013
GBP GBP
Cash flow from operating activities
(Loss)/gain (11,220,591) 3,435,165
Adjustments for:
Finance income (598,820) (247,518)
Tax 301,276 8,087
Depreciation 9 3,462 496
Amortisation 8 774 664
Write back of inventory 10 (6,151,756) (3,809,755)
Impairment of loan 11 - 425,000
Profit on sale of inventory (6,892,599) -
(24,558,254) (187,861)
Net foreign exchange losses/(gains) 22,183,405 (1,001,639)
Increase in trade and other receivables (550,913) (27,163)
(Decrease)/increase in trade and other payables (10,474) 21,084
Net cash outflow from operating activities before interest,
depreciation, amortisation and
tax (2,936,236) (1,195,579 )
Finance income received 598,820 247,518
Tax paid (301,276) (8,087)
Net cash outflow from operating activities (2,638,692) (956,148)
Cash flow from investing activities
Purchase of inventories 10 (39,389) (143,360)
Proceeds on sale of inventories 72,597,621 -
Purchase of plant and equipment - (1,095)
Repayment of loan 11 826,220 798,465
----------- ---------- ---
Net cash inflow from investing activities 73,384,452 654,010
Cash flow from financing activities
Return of Capital 16 (35,610,027) -
----------- ---------- ---
Net cash outflow from financing activities (35,610,027) -
Net increase/(decrease) in cash and cash equivalents 35,135,733 (302,138)
Cash and cash equivalents at start of the year 2,766,951 3,069,128
Effect of foreign exchange rates 12 44 (39)
----------- ----------
Cash and cash equivalents at end of the year 37,902,728 2,766,951
----------- ---------- ---
The accompanying notes on pages 12 to 28 are an integral part of
the financial statements.
Notes to the consolidated financial statements
1. General information
The Ottoman Fund Limited had invested in Turkish land and
new-build residential property in Riva, Bodrum and Alanya. The
Group has sold its investments in Turkish land and now only holds a
loan receivable related to new-build residential property in
Alanya. The Company is a limited liability company incorporated and
domiciled in Jersey, Channel Islands since 9 December 2005. The
Company is quoted on the AIM market of the London Stock Exchange
plc. These consolidated financial statements have been approved by
the Board on 27 February 2015.
2. Accounting policies
The consolidated financial statements of the Group for the year
ended 31 August 2014 comprise the Company and its subsidiaries,
listed in note 13, (together, the "Group") and have been 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").
These policies have been consistently applied in all years
presented, unless otherwise stated.
No new standards or amendments to standards were issued which
were relevant to the Group and applicable for the year under
review.
(a) Basis of preparation
The Group has cash and cash equivalents in excess of GBP37.9m at
the statement of financial position date and around GBP88k of
liabilities. The Directors have reviewed this information and are
comfortable that the Company will continue as a financially viable
entity for the foreseeable future until such time the Group may
have realised all of its assets, the timing of which is difficult
to estimate at this time. Based on that the financial statements
have been prepared on a going concern basis.
The consolidated financial statements have been prepared on a
historical cost basis.
(b) Basis of consolidation
Subsidiaries
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries) made up to 31 August each year. The consolidated
financial statements are prepared using uniform accounting policies
for like transactions. Control exists when the Company is exposed
to, or has the right to, variable returns from its involvement with
the entity. 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.
(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 recognised when the
significant risks and rewards of an asset have been transferred.
The gains or losses from sale of inventory are recognised at the
book gain or loss amount with any foreign exchange gains or losses
being reflected separately in the statement of comprehensive
income.
(d) Expenses
All expenses are charged through the statement of comprehensive
income 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
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.
Intangible assets
Intangible assets are stated at historical 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.
Plant & equipment
Plant and equipment is stated at historical cost less
accumulated depreciation and any recognised impairment loss.
Depreciation is charged so as to write off the cost of assets over
their estimated useful lives, using the straight line method on the
following basis:
Leasehold improvements 3 years
Furniture and fittings 5 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 statement of
comprehensive income.
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 the sale 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 estimates and subjective judgements that
may vary from the actual values and sales prices realised by the
Group upon ultimate disposal.
Impairment is recognised through the statement of comprehensive
income at the time that the Board believes the net realisable value
is lower than cost and will remain so for the foreseeable future.
Write backs on impairment are recognised through the statement of
comprehensive income when the Board believes the foreseeable net
realisable value of the inventory is greater than the impairment
value. Write backs on impairment are also recorded at the time of
sale when the net realised value of the disposal is greater than
the previously impaired recorded value of the inventory.
At the time of disposal, the profit on sale is recognised in the
statement of comprehensive income along with any recognised foreign
exchange gains or losses on 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. Any
foreign exchange difference is recognised through the statement of
comprehensive income.
Loans are reviewed for impairment by the Board on a semi-annual
basis; any impairment is recognised through the statement of
comprehensive income.
(f) Cash and cash equivalents
Cash and cash equivalents are classified as loans and
receivables and comprise deposits held at call with banks and other
short-term highly liquid investments with original maturities of
three months or less.
(g) Taxation
Profits arising in the Company for the 2014 year of assessment
and future periods will be subject to tax at the rate of 0% (2013:
0%). However, withholding tax may be payable on repatriation of
assets and income to the Company in Jersey. The Company pays an
International Services Entity fee and neither charges nor pays
Goods and Services Tax. This fee is currently GBP200 (2013: GBP200)
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 fee 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 Pound Sterling, which is the
Group's presentational currency. The functional currency of the
Company and Jersey subsidiaries is Pound Sterling; the functional
currency for the Turkish subsidiaries is Turkish Lira.
The results and financial position of the entities based in
Jersey are recorded in Pound 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) and non-monetary balances 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 presentation currency
(Pounds Sterling):
- non-monetary assets (including inventory) are translated at
the rates of exchange prevailing on the dates of the transactions
("historical translated cost");
- monetary balances (including loans) are translated at the
rates prevailing on the balance sheet date; and
- items to be included in the statement of comprehensive income
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
statement of comprehensive income or in the statement of changes in
equity depending on their nature and how they have been derived.
Exchange gains/losses on the translation of subsidiaries are
accounted for in the translation reserve.
(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
statement of comprehensive income.
(j) Critical accounting estimates and assumptions
The Board makes estimates and assumptions concerning the future
in the preparation of the financial statements. 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.
Consistent with previous years the Company has obtained two
independent valuations which have been reviewed by the Board.
Following discussions with the Investment Advisor and the valuers,
the Directors believe that an average of the two valuations taking
into account other management assumptions represents the most
appropriate estimate of the assets value. As such this average
valuation has been used in the Directors' assessment of the
recoverability of the loan receivable from Mandalina (note 11).
In addition to the above, the Directors have made assessments
with regard to contingent liabilities and an assessment of the
matter discovered post year end in relation to the financial impact
of the amount of funds that have been removed from the Group's
Turkish entities (and entities affiliated with the Group) without
authorisation. Please refer to notes 23 and 24.
(k) Changes in accounting policy and disclosures
New and amended standards adopted by the group
There are no IFRSs or IFRIC interpretations that are effective
for the first time for this financial year that would be expected
to have a material impact on the Group.
New standards, amendments and interpretations issued but not
effective and not early adopted
At the date of the authorisation of these consolidated financial
statements, the following statements, standards and interpretations
were in issue but not yet effective for periods commencing on or
after 1 January 2014 and have not been early adopted:
IFRS 9, 'Financial instruments' - classification and
measurement' (effective 1 January 2015)
The full impact of the adoption of these standards and
interpretations in future periods on the financial statements of
the Group is still being assessed by the Directors.
3. Segment reporting
The chief operating decision maker (the "CODM") in relation to
the Group is considered 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.
Within the above segment, the remaining ongoing project relates
to new build residential property. The CODM considers on a
quarterly basis the results of the position of the project as part
of their ongoing performance review.
The CODM receives regular reports on the Company's assets by the
Investment Advisors, Civitas Property Partners S.A. ("Civitas").
During this financial year Civitas has provided detailed reviews,
as requested, of the Turkish economy and real estate market and
also their strategic advice regarding the new build residential
property project. In addition the year end valuations provided by
BNP Paribas (through an alliance member, Kuzeybati) 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.
4. Management/advisory fee
2014 2013
GBP GBP
Management fee 1,105,409 197,930
--------- -------
Civitas was appointed as Investment Advisors to the Group on 2
December 2009. The advisory fee structure is incentive-based with
an annual fixed component of EUR212,500, and an incentive component
based on a percentage of realisation value. Civitas was paid
GBP179,717 (2013: GBP179,632) during the year. The incentive fee
paid for the year was GBP925,692 (2013: GBP18,298) which includes
commissions received on the sale of inventory being either 1% or 2%
depending on the asset sold.
5. Other operating expenses
2014 2013
GBP GBP
Legal and professional fees 59,440 196,449
Advisory and consultancy fees 97,038 108,413
Marketing 5,336 6,744
Travel and subsistence 7,513 12,886
Directors' remuneration 150,000 150,000
Directors' bonus - 62,657
Administration fees 70,000 70,000
Audit services 60,734 78,080
Depreciation 3,462 496
Amortisation 774 664
Other operating expenses 119,827 151,405
------- -------
574,124 837,794
------- -------
The Group has no employees.
6. Tax 2014 2013
GBP GBP
Overseas tax 301,276 8,087
------- -----
This tax represents taxation on taxable profits earned by the
Turkish subsidiaries. The increase in tax compared to the prior
year due to the increased profit made in relation to the sales of
inventory.
7. Earnings per share
(a) Basic
Basic earnings per share is calculated by dividing the gain
attributable to equity holders of the Company by the weighted
average number of ordinary shares in issue during the year.
2014 2013
(Loss)/gain attributable to equity holders of the Company (GBP11,220,591) GBP3,435,165
---------------- -------------
Weighted average number of ordinary shares in issue 134,764,709 134,764,709
---------------- -------------
(b) Diluted
The diluted earnings per share is calculated by adjusting the
weighted average number of ordinary shares outstanding to assume
conversion of all dilutive potential ordinary shares. As the
options expired without exercise, the basic and diluted earnings
per share are the same.
Both the basic and diluted loss per share are calculated as 8.33
pence (2013: 2.55 pence gain).
8. Intangible assets
Cost GBP
At 1 September 2013 and 31 August 2014 10,132
Amortisation
At 1 September 2013 (9,358)
Charge for the year (774)
-------
At 31 August 2014 (10,132)
-------
Net book value at 31 August 2014 -
-------
Net book value at 31 August 2013 774
-------
The intangible asset relates to computer software, with a useful
life of 6 years. There has been no impairment during the year.
9. Plant and equipment
Furniture and Leasehold
fittings improvements Total
Cost GBP GBP GBP
At 1 September 2013 20,347 46,501 66,848
Additions - - -
At 31 August 2014 20,347 46,501 66,848
------------- ------------ -------
Depreciation
At 1 September 2013 (17,583) (45,803) (63,386)
Charge for the year (2,764) (698) (3,462)
------------- ------------ -------
At 31 August 2014 (20,347) (46,501) (66,848)
------------- ------------ -------
Net book value at 31 August 2014 - - -
------------- ------------ -------
Net book value at 31 August 2013 2,764 698 3,462
------------- ------------ -------
10. Inventories 2014 2013
GBP GBP
Opening net realisable value 82,589,097 78,635,982
Purchases at cost 39,389 143,360
Sale during the year (72,597,621) -
Historical profit on sale 6,892,599 -
Foreign exchange loss on sale (23,075,220) -
Write back of inventory 6,151,756 3,809,755
------------- -----------
Closing net realisable value - 82,589,097
------------- -----------
In the prior year, the above represented 149,550 square metres
of development land on the Bodrum peninsula and 931,739 square
metres on the Riva coastline.
In accordance with the accounting policy in note 2, inventories
were stated at the lower of cost and net realisable value.
The historical profit on sale of inventory is the difference
between the cost in the Turkish subsidiary records and the sale
proceeds using an average FX rate for the year to 31 August 2014.
The foreign exchange loss on sale arises as a result of the
difference between the cost of land translated at historical FX
rate and the cost translated at the 2014 average FX rate. The
exchange rate between Pound Sterling and Turkish Lira moved
significantly from the original purchase date and 2014.
The amount above relates to the write back of all previous
impairments to Riva and Bodrum upon sale of the assets, this is
included in the Statement of Comprehensive Income. The prior year
write back/impairment relates to Riva (write back of GBP5,199,755)
and Bodrum (impairment of GBP1,390,000).
11. Loans and receivables 2014 2013
GBP GBP
Opening balance 2,923,760 3,870,603
Repayment of loan (826,220) (798,465)
Impairment of loan - (425,000)
Exchange (loss)/gain on revaluation of loan (163,807) 276,622
Closing balance 1,933,733 2,923,760
--------- ---------
The Alanya loan was impaired in the prior year to reflect the
anticipated amount to be received based on the value of the Alanya
apartments and future running costs of Mandalina which are deducted
from the sales proceeds of the Alanya apartments before being
remitted to the Group.
The valuation of the Alanya apartments used by the Directors in
the assessment of the recoverability of the loan is based on
valuation estimates and subjective judgements, which may vary from
the actual values and sales prices realised upon ultimate
disposal.
12. Foreign currency losses 2014 2013
GBP GBP
Translation of cash balances 44 (39)
Other foreign currency gain 192,219 846,742
Net currency gains 192,263 846,703
------- -------
Foreign currency gains or losses on transactions and balances in
the Turkish subsidiaries are recognised in the translation reserve,
not in the amounts above. The Company has no accounts in any
currency other than Pound Sterling. The translation of cash
balances relates to the Jersey group entities, with the balances of
the Turkish entities being recognised as subsidiary translation
foreign exchange as part of other foreign exchange losses. The
translation of cash balances noted above relates to the translation
of cash held in Euros held by Ottoman Finance Company 1
Limited.
13. Investment in subsidiaries - Company
Country of Authorised Issued Ownership
Name incorporation share capital share capital %
Ottoman Finance Company I Limited Jersey GBP10,000 GBP1 100
Ottoman Finance Company II Limited Jersey GBP10,000 GBP1 100
Osmanli Yapi 1 Turkey YTL 57,395,416 YTL 57,395,416 99.99
Osmanli Yapi 2 Turkey YTL 193,534,525 YTL 42,545,000 99.99
All of the above companies have been incorporated into the Group
accounts.
14. Trade and other receivables
2014 2013
GBP GBP
Prepayments and accrued income 1,139,616 33,367
VAT receivable 731 508,008
Other receivables 87,287 135,346
1,227,634 676,721
--------- -------
The Directors consider that the carrying amount of the above
receivables approximates to their fair value. Prepayments include
advances to suppliers.
15. Trade and other payables
2014 2013
GBP GBP
Accruals 68,840 71,536
Other payables 19,163 26,941
88,003 98,477
------ ------
The Directors consider that the carrying amount of the above
payables approximates to their fair value.
16. 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 (2013: 134,764,709) 84,392,980
----------
The 2 founder shares of no par value are held by Vistra Nominees
I Limited. These shares are not eligible for participation in the
Company's investments and carry no voting rights at general
meetings of the Company.
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 and to invest in the
Group's current assets when the Board feels it will give rise to
capital appreciation. As the Group has sold assets during the year,
the Board decided to return excess capital to shareholders. As part
of the process, the Board review cash flow forecasts to ensure that
sufficient cash is retained to support the operations of the
Group.
Movements in ordinary share capital during the year Number GBP
Ordinary shares in issue at 1 September 2013 134,764,709 120,003,007
Movement during the year - (35,610,027)
----------- -----------
Ordinary shares in issue at 31 August 2014 134,764,709 84,392,980
----------- -----------
17. Retained earnings
2014 2013
GBP GBP
At start of year (30,404,134) (33,839,300)
Bank and deposit interest earned 598,820 247,518
Profit on sale of inventory 6,892,599 -
Disposal of inventory (16,923,464)
Operating expenses (1,679,533) 2,349,031
(11,111,578) 2,596,549
Net movement on foreign exchange 192,263 846,703
Tax (301,276) (8,087)
----------- -----------
Gain for the year (11,220,591) 3,435,165
Minority interests - 1
----------- -----------
At end of year (41,624,725) (30,404,134)
----------- -----------
18. Net asset value per share
The net asset value per ordinary share is based on the net
assets attributable to equity shareholders of GBP40,976,092 (2013:
GBP88,862,288) and on 134,764,709 ordinary shares
(2013: 134,764,709), being the number of ordinary shares in
issue at the year end. The net asset value per share for the year
ended 31 August 2014 was 30.4 pence (2013: 65.9 pence).
19. Cash and cash equivalents
2014 2013
GBP GBP
Bank balances 37,902,728 2,766,951
---------- ---------
20. Financial instruments
The disclosures below assume that the land held in the prior
year by the Group is in US Dollars as this is the currency in which
they were valued by Kuzeybati (an alliance member of BNP
Paribas).
The Group's financial instruments comprise loans, cash balances,
receivables and payables that arise directly from its operations,
for example, in respect of sales and purchases awaiting settlement,
and receivables for accrued income.
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. As required by IFRS 7: Disclosure and Presentation, an
analysis of financial assets and liabilities, which identifies the
risk 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.
Consistent with the prior year, the Group has no such exposures to
market price risk.
(ii) Credit risk
Credit risk is the risk that counterparties will be unable to
deliver on assets due to the Group. The Group's third party loan in
respect of the investment in the Riverside Resort in Alanya is
potentially at risk from the failure of the third party. On 3
December 2010, the third party loan was assigned to a related
entity. In order to protect the Group's interest in the Alanya
apartments, the Group holds signed share transfer letters from the
shareholders of Mandalina which may be executed at any time at the
discretion of the Directors and would transfer ownership of the
shares in the Mandalina from the existing shareholders to the
Group.
The largest counterparty risk is with the Group's bankers.
Bankruptcy or insolvency of Deutsche Bank International Limited 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, due to the likelihood of
it occurring being deemed to be minimal.
The Board does not monitor the credit quality of receivables on
an ongoing basis. Cash balances have been placed with Deutsche Bank
International Limited due to its Moody's credit rating of A3.
The Group's principal financial assets are other receivables and
cash and cash equivalents. The maximum exposure of the Group to
credit risk is the carrying amount of each class of financial
assets. Loans and receivables are represented by loans to and
receivables from third parties. Other receivables are represented
mainly by prepayments and other receivables where no significant
credit risk is recognised.
Credit risk exposure
In summary, compared to the amounts in the consolidated
statement of financial position, the maximum exposure to credit
risk at 31 August 2014 was as follows:
Balance Maximum Balance Maximum
sheet exposure sheet exposure
at 31 August at 31 August at 31 August at 31 August
2014 2014 2013 2013
Non-current assets GBP GBP GBP GBP
Loans and receivables 1,933,733 1,933,733 2,923,760 2,923,760
Current assets
Cash and cash equivalents 37,902,728 37,902,728 2,766,951 2,766,951
Other receivables 1,227,634 1,227,634 676,721 676,721
------------ ------------ ------------ ------------
41,064,095 41,064,095 6,367,432 6,367,432
------------ ------------ ------------ ------------
Fair value of financial assets and liabilities
The book values of the cash at bank and loans and receivables
included in these financial statements approximate to their fair
values.
(iii) Foreign currency risk
The Group operates Pound Sterling, Euro, US Dollar and Turkish
Lira bank accounts. Exchange gains or losses arise as a result of
movements in the exchange rates between the date of a 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 such a policy would not be cost effective given the
Group's exposure.
Currency rate exposure
An analysis of the Group's currency exposure in Pound Sterling
is detailed below:
Currency Non-current Net monetary Liabilities at Non-current Net monetary Liabilities at
assets at 31 assets at 31 31 August 2014 assets at 31 assets at 31 31 August 2013
August 2014 August 2014 August 2013 August 2013
GBP GBP GBP GBP GBP
Pounds Sterling - 13,053,770 (56,133) - 1,879,325 (71,536)
Euro 1,933,733 567 - 2,923,760 548 -
US Dollar - 24,818,749 - 82,589,097 844,608 -
Turkish Lira - 1,169,272 (31,870) 4,236 620,714 (26,941)
--------------- -------------- --------------- --------------- -------------- ---------------
1,933,733 39,042,358 (88,003) 85,517,093 3,345,195 (98,477)
--------------- -------------- --------------- --------------- -------------- ---------------
Foreign currency sensitivity
The table below details the Group's sensitivity to a 5% increase
in the value of Sterling against the relevant currencies. This
percentage is considered reasonable due to volatility in current
and historic exchange rate movements. With all other variables held
constant, net assets attributable to shareholders and the change in
net assets attributable to shareholders per the consolidated income
statement would have decreased by the amounts shown below. The
analysis has been performed on the same basis as for 2013.
Currency Profit & Loss at Equity at Profit & Loss at Equity at
31 August 31 August 31 August 31 August
2014 2014 2013 2013
GBP GBP GBP GBP
Euro 96,715 - 146,215 -
US Dollar 1,240,937 - 42,230 4,129,455
Turkish Lira 56,870 - 29,689 212
---------------- ---------- ---------------- ----------
1,394,522 - 218,134 4,129,667
---------------- ---------- ---------------- ----------
A 5% weakening of Sterling against the relevant currency would
have resulted in an equal but opposite effect on the amounts in the
financial statements to the amounts shown above, on the basis that
all other variables remain constant.
(iv) Interest rate risk
Interest rate movements may affect the level of income
receivable on cash deposits. There is no policy in place to
mitigate this risk as the Board believes such a policy would not be
cost effective, given the Group's exposure.
The Group holds only cash deposits.
The interest rate profile of the Group excluding short term
receivables and payables was as follows:
Currency Floating Non interest Floating Non interest
rate bearing rate bearing
at 31 August at 31 August at 31 August at 31 August
2014 2014 2013 2013
GBP GBP GBP GBP
Pounds Sterling 13,082,567 219 1,917,248 246
Euro - 1,934,300 - 2,924,308
US Dollar 24,818,749 - 844,608 82,589,097
Turkish Lira - 625 - 8,537
------------ ------------ ------------ ------------
37,901,316 1,935,144 2,761,856 85,522,188
------------ ------------ ------------ ------------
Maturity profile
The following table sets out the carrying amount, by maturity,
of the Group's financial instruments:
2014
0 to 3 3 to 6 6 to 12 More than
months months months 1 year Total
GBP GBP GBP GBP GBP
Floating rate
Cash 37,901,316 - - - 37,901,316
---------- ------ ------- --------- ----------
37,901,316 - - - 37,901,316
---------- ------ ------- --------- ----------
Non-interest bearing
Cash 1,411 --- 1,411
Trade and other receivables 1,227,634 ---1,227,634
Trade and other payables (88,003) --- (88,003)
1,141,042 ---1,141,042
--------- ---------
2013
0 to 3 3 to 6 6 to 12 More than
months months months 1 year Total
GBP GBP GBP GBP GBP
Floating rate
Cash 2,761,856 - - - 2,761,856
--------- ------ ------- --------- ---------
2,761,856 - - - 2,761,856
--------- ------ ------- --------- ---------
Non-interest bearing
Cash 5,095 - - - 5,095
Trade and other receivables 168,713 -508,008 -676,721
Trade and other payables (98,477) - - -(98,477)
------- ------- -------
75,331 -508,008 -583,339
------- ------- -------
Interest rate sensitivity
An increase of 10 basis points in interest rates during the
period would have increased the net assets attributable to
shareholders and changes in net assets attributable to shareholders
by GBP37,901 (2013:GBP2,762). A decrease of 10 basis points would
have had an equal but opposite effect.
(v) Liquidity risk
The Group's assets mainly comprise cash balances and loans
receivable, which can be sold to meet funding commitments if
necessary. The Board monitors the cash situation of the Group on an
ongoing basis and reviews cash flow forecasts at the time of making
capital distributions to shareholders to ensure that sufficient
cash is retained to support the operations of the Group. As at 31
August 2014 the Group does not have any significant liabilities
due.
The Group has sufficient cash reserves to meet liabilities due
for the foreseeable future.
21. Related party transactions
Information regarding subsidiaries can be found in note 13.
John D. Chapman is a shareholder in the Turkish subsidiaries due
to Turkish law requirements. Mr Chapman receives no additional
benefit from being a shareholder of the Turkish subsidiaries.
Information regarding Directors' interests can be found in note
22.
Ali Pamir is a director of the Investment Advisor, Civitas
Property Partners S.A. and is a director and shareholder of the
Turkish subsidiaries due to Turkish law requirements. Mr Pamir
receives no additional benefit from being a shareholder of the
Turkish subsidiaries. Information regarding amounts paid to the
Investment Advisor can be found in note 4.
Sinan Kalpakcioglu was engaged during the period as a Turkish
resident consultant to the Group. Mr Kalpakcioglu is a director and
shareholder of the Turkish subsidiaries due to Turkish law
requirements. Mr Kalpakcioglu is not entitled to any additional
benefit from being a director or shareholder of the Turkish
subsidiaries. Consultancy fees paid to Mr Kalpakcioglu amounted to
GBP55,200 (2013: GBP48,400); GBP7,867 remained outstanding at the
year end (2013: GBP7,867).
Vistra Nominees I Limited is a related party being the holder of
the 2 founder shares of The Ottoman Fund Limited (see Note 16).
Sinan Kalpakcioglu and Ali Pamir are shareholders in Mandalina,
which holds the title to the Alanya apartments (see Note 11).
The Directors do not consider there to be an ultimate
controlling party.
22. Directors' interests
Total compensation (excluding performance fees) paid to the
Directors of the Company over the year was GBP150,000 (2013:
GBP150,000).
During the year John D. Chapman as Executive Chairman has been
employed under an executive service contract that provides for an
annual fee of GBP75,000 pro-rated monthly and a discretionary
performance fee. A performance fee of US$100,000 has been paid
during the year. Antony Gardner-Hillman, Andrew Wignall and Eitan
Milgram were remunerated GBP25,000 per director for their services
during the year (2013: GBP25,000 per director).
Eitan Milgram is an Executive Vice President of Weiss Asset
Management LLC which is a substantial investor in the Company.
23. Contingent liability
The Directors have been informed that an intermediate Turkish
court has upheld an administrative order disallowing certain tax
benefits from a restructuring transaction that may have had
similarities to the restructuring of Osmanli Yapi 2. This
intermediate court decision is now under appeal to the Turkish
Supreme Court. The Group is monitoring the appeal, but at present
this development does not meet the recognition criteria under IAS
37, and the Directors have consequently made no provision in the
financial statements.
During the year, a case against the Group has been lodged in
Turkey for US$1m by a party who claims to have acted as an
intermediary on one of the land sale transactions during the year.
The Directors have obtained legal advice as to the likely outcome
of the case and are of the understanding that it is probable that
the Group will successfully defend this action. The Directors are
therefore of the opinion, taking this advice into consideration,
that it is not appropriate to provide for this legal claim as it
does not meet the recognition criteria under IAS 37.
24. Post balance sheet events
On 2 September 2014, the Group announced a return of capital of
approximately GBP 12.84 million, or 9.5277 pence per share, payable
to shareholders of record as of 12 September 2014. The shares
traded ex-entitlement on 10 September 2014 and payment was made on
26 September 2014. This return of capital primarily comprised the
remaining proceeds from the sale of Riva land as announced on 15
May 2014.
On 24 December 2014, the Group announced a return of capital of
approximately GBP 18.92 million, or 14.0369 pence per share,
payable to shareholders of record as of 9 January 2015. The shares
traded ex-entitlement on 8 January 2015 with payment being made on
or about 16 January 2015. This return of capital primarily
comprised proceeds from asset sales that had been announced
previously.
In December 2014 the Directors became aware that funds had been
removed from the Group's Turkish entities (and entities affiliated
with the Group) without authorisation. BDO LLP was engaged to
review the books and records of the Turkish entities to determine
how much had been removed.
BDO LLP completed its forensic review of the books and records
of the Group's Turkish entities in February 2015. From these
findings, the Directors determined that the Group's former Chief
Financial Officer in Turkey had removed from the Group's Turkish
entities the net amount in Turkish Lira equivalent to US$1.35
million as of 10 February 2015 exchange rates. The amounts removed
from 2010 until the beginning of the current financial year were
approximately US$610,000 (GBP 400,000), during the current
financial year were approximately US$463,000 (GBP 303,000) and
subsequent to the financial year end were approximately US$279,000
(GBP 183,000). The Group has retained White & Case's affiliated
local law firm in Istanbul as well as a Turkish criminal attorney
to obtain civil and criminal redress against the former Chief
Financial Officer. The Group has also brought suit against him in
the Royal Court of Jersey and has obtained a worldwide freezing
order and a default judgment. The Directors will make further
announcements in due course. The Directors are, in consultation
with their lawyers and advisors, in the process of assessing the
course of the potential legal action to be taken. The Directors
have assessed this matter and its implications for the consolidated
Financial Statements and the Directors are content that the
consolidated Financial Statements can be approved for release to
shareholders. As a result of this financial assessment, no
adjustments have been made to these consolidated Financial
Statements as it would not be appropriate to book any contingent
assets when no final decisions have as yet been taken on any course
of legal proceedings.
The Directors have been made aware that there may be additional
Turkish tax liabilities due as a consequence of decisions on future
legal proceedings. However at this stage it is not appropriate to
provide for this situation as it is only deemed to be a
possibility.
Other than the above, the Directors are satisfied that there
were no material events subsequent to the year end that would have
an effect on these financial statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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