TIDMOTM
RNS Number : 5502O
Ottoman Fund Limited (The)
29 May 2015
29 May 2015
THE OTTOMAN FUND LIMITED (the "Company")
Interim results for the 28 February 2015
The Company is pleased to announce its interim results for the
six months ended 28 February 2015, 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,
We have entered into agreements to sell our remaining units in
Alanya for EUR 630,000 + VAT. We expect the transactions to close
in early June. Once that transaction closes, the Company's only
substantial asset will be cash. We will then take the necessary
steps to transfer those funds to Jersey for distribution. The
timing and amount of any distribution are uncertain because of
various legal and tax issues, though I can assure you that the
expeditious distribution of the Company's net assets is a high
priority for the Company.
As previously announced, our former Chief Financial Officer
embezzled Company assets in the net amount of $1.35 million. We
continue our efforts to recover the stolen money. We are preparing
a criminal case against the former CFO and will ensure that the
case receives wide publicity in Turkey.
I look forward to updating you on our progress when we release
our annual report for the year ended 31 August 2015.
John D. Chapman
Consolidated Statement of Comprehensive Income
(unaudited) (unaudited) (audited)
Six months Six months Year ended
ended ended
28 February 28 February 31 August
2015 2014 2014
note GBP GBP GBP
Revenue
Finance income 573,546 160,970 598,820
Profit on sale of
inventory - 2,656,688 6,892,599
(Impairment)/write
back of inventory 7 - (2,685,000) 6,151,756
Foreign exchange
loss on sale of
inventory 7 - - (23,075,220)
Total revenue 573,546 132,658 (9,432,045)
------------ ------------- -------------
Operating Expenses
Management/advisory
fee 3 (100,000) (186,401) (1,105,409)
Other operating
expenses (526,060) (280,701) (574,124)
Total operating
expenses (626,060) (467,102) (1,679,533)
------------ ------------- -------------
Foreign exchange
gains 1,509,694 1,497,077 192,263
Gain/(loss) before
tax 1,457,180 1,162,633 (10,919,315)
Taxation 1(g) (1,740,399) (307,832) (301,276)
(Loss)/gain for
the period (283,219) 854,801 (11,220,591)
------------ ------------- -------------
Other comprehensive
loss
Foreign exchange
on subsidiary translation (244,681) (1,140,729) (1,055,578)
Foreign exchange - (11,855,443) -
loss on sale of inventory
Other comprehensive
loss for the period (244,681) (12,996,172) (1,055,578)
------------ ------------- -------------
Total comprehensive
loss for the period (527,900) (12,141,371) (12,276,169)
------------ ------------- -------------
(Loss)/gain attributable
to:
Equity shareholders
of the Company (283,219) 854,801 (11,220,591)
Minority interests - - -
------------ ------------- -------------
(283,219) 854,801 (11,220,591)
------------ ------------- -------------
Total comprehensive
loss attributable
to:
Equity shareholders
of the Company (527,900) (12,141,365) (12,276,158)
Minority interests - (6) (11)
------------ ------------- -------------
(527,900) (12,141,371) (12,276,169)
------------ ------------- -------------
Basic and diluted
(loss)/earnings per
share (pence) 4 (0.21) 0.63 (8.33)
The accompanying notes on pages 6 to 16 are an integral part of
the financial statements.
Consolidated Statement of Financial Position
(unaudited) (unaudited) (audited)
Six months Six months Year ended
ended ended
28 February 28 February 31 August
2015 2014 2014
note GBP GBP GBP
Assets
Non-current assets
Intangible assets 5 - - -
Plant and equipment 6 - - -
Inventories 7 - 33,918,775 -
Loans and receivables 8 967,411 2,014,709 1,933,733
967,411 35,933,484 1,933,733
Current assets
Other receivables 588,251 341,003 1,227,634
Cash and cash
equivalents 7,742,008 37,536,437 37,902,728
------------- ------------- -------------
8,330,259 37,877,440 39,130,362
Total assets 9,297,670 73,810,924 41,064,095
Current liabilities
Other payables (606,242) (5,670,007) (88,003)
------------- ------------- -------------
(606,242) (5,670,007) (88,003)
Net assets 8,691,428 68,140,917 40,976,092
------------- ------------- -------------
Equity
Share capital 9 52,636,216 111,423,007 84,392,980
Retained earnings (41,907,944) (29,549,333) (41,624,725)
Translation reserve (2,036,844) (13,732,762) (1,792,163)
------------- ------------- -------------
Equity attributable
to owners of
the parent 8,691,428 68,140,912 40,976,092
Minority interest
equity - 5 -
------------- ------------- -------------
Total Equity 8,691,428 68,140,917 40,976,092
------------- ------------- -------------
Net asset value
per Ordinary
share (pence) 10 6.4 50.6 30.4
The accompanying notes on pages 6 to 16 are an integral part of
the financial statements.
These financial statements were approved by the Board of
Directors on 28 May 2015.
Antony R. Gardner-Hillman Andrew I. Wignall
Consolidated Statement of Changes in Equity
Share Retained Translation Minority
capital earnings reserve interest Total
GBP GBP GBP GBP GBP
For the six months
ended 28 February
2015 (unaudited)
As at 1 September
2014 84,392,980 (41,624,725) (1,792,163) - 40,976,092
Return of capital (31,756,764) - - - (31,756,764)
Loss for the period - (283,219) - - (283,219)
Foreign exchange
on subsidiary translation - - (244,681) - (244,681)
--------------- ------------- ------------- ------------ -------------
At 28 February
2015 52,636,216 (41,907,944) (2,036,844) - 8,691,428
--------------- ------------- ------------- ------------ -------------
For the six months
ended 28 February
2014 (unaudited)
As at 1 September
2013 120,003,007 (30,404,134) (736,596) 11 88,862,288
Return of capital (8,580,000) (8,580,000)
Gain for the period - 854,801 - - 854,801
Foreign exchange
on subsidiary translation - - (12,996,166) (6) (12,996,172)
--------------- ------------- ------------- ------------ -------------
At 28 February
2014 111,423,007 (29,549,333) (13,732,762) 5 68,140,917
--------------- ------------- ------------- ------------ -------------
For the year ended
31 August 2014
(audited)
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
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
--------------- ------------- ------------- ------------ -------------
The accompanying notes on pages 6 to 16 are an integral part of
the financial statements.
Consolidated Statement of Cash Flows
(unaudited) (unaudited) (audited)
Six months Six months Year ended
ended ended
28 February 28 February 31 August
2015 2014 2014
Cash flow from operating GBP GBP GBP
activities
Net gain/(loss) for
the period (283,219) 854,801 (11,220,591)
Adjustments for:
Interest (573,546) (160,970) (598,820)
Tax 1,740,399 307,832 301,276
Depreciation - 3,462 3,462
Amortisation - 774 774
Impairment/(write
back) of inventory - 2,685,000 (6,151,756)
Profit on sale of
inventory - (2,656,688) (6,892,599)
883,634 1,034,211 (24,558,254)
Net foreign exchange
losses/(gains) (163,813) 1,598,768 22,183,405
Decrease/(increase)
in other receivables 639,383 335,718 (550,913)
Increase/(decrease)
in other payables 518,239 5,571,530 (10,474)
------------- ------------ -------------
Net cash inflow/(outflow)
from operating activities
before interest, depreciation,
amortisation and tax 1,877,443 8,540,227 (2,936,236)
Interest received 573,546 160,970 598,820
Taxation (1,740,399) (307,832) (301,276)
Net cash inflow/(outflow)
from operating activities 710,590 8,393,365 (2,638,692)
Cash flow from investing
activities
Purchase of inventories - (39,389) (39,389)
Proceeds on sale of
inventories - 34,169,267 72,597,621
Repayment of loan 885,414 826,220 826,220
------------- ------------ -------------
Net cash inflow from
investing activities 885,414 34,956,099 73,384,452
Cash flow from financing
activities
Return of Capital (31,756,764) (8,580,000) (35,610,027)
------------- ------------ -------------
Net cash outflow from
financing activities (31,756,764) (8,580,000) (35,610,027)
Net increase/(decrease)
in cash and cash equivalents (30,160,764) 34,769,463 35,135,733
Cash and cash equivalents
at start of period 37,902,728 2,766,951 2,766,951
Effect of foreign exchange
rates 40 23 44
------------- ------------ -------------
Cash and cash equivalents
at end of period 7,742,008 37,536,437 37,902,728
------------- ------------ -------------
The accompanying notes on pages 6 to 16 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
2014 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 interim financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries) (together "the Group") made up to 28 February
2015. The accounting policies adopted in the preparation of the
condensed consolidated interim financial statements (the "interim
financial statements") are consistent with those followed in the
preparation of the Group's annual financial statements for the year
ended 31 August 2014.
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.
The interim financial statements should be read in conjunction
with the annual financial statements for the year ended 31 August
2014, which have been prepared in accordance with IFRS.
(a) Basis of preparation
The interim financial statements have been prepared on a
historical cost basis, except for certain financial instruments as
detailed in this note.
The Group has cash and cash equivalents in excess of GBP7.74m at
the period end and liabilities of only GBP606k. 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. The
Directors intend to recommend to shareholders to extend the life of
the Company to enable the conclusion of the ongoing litigation
issues. Based on this, the financial statements have been prepared
on a going concern basis.
The interim financial statements have been prepared in
accordance with IAS 34 Interim Financial Reporting.
(b) Basis of consolidation
Subsidiaries
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.
Notes to the financial statements (continued)
1. Accounting policies (continued)
(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.
Notes to the financial statements (continued)
1. Accounting policies (continued)
(e) Non current assets (continued)
Inventories (continued)
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 2015 year of assessment
and future periods will be subject to tax at the rate of 0% (2014:
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 (2014: 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.
Notes to the financial statements (continued)
1. Accounting policies (continued)
(h) Foreign currency (continued)
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.
In previous years the Company obtained two independent
valuations which were reviewed by the Board. Having held
discussions with the Investment Advisor and the valuers, the
Directors believed that an average of the two valuations taking
into account other management assumptions represented the most
appropriate estimate of the assets value. As such this average
valuation was used in the Directors' assessment of the
recoverability of the loan receivable from Mandalina (note 8). For
the current period, the Directors have taken into account amounts
receivable from Mandalina and offers received for the remaining
Alanya apartments for their assessment of the recoverability of the
loan receivable. The Directors have changed their method of
assessing the recoverability as they believe the revised method
provides a more accurate reflection of what is recoverable.
In addition to the above, the Directors have made assessments
with regard to contingent liabilities and an assessment of the
matter discovered in December 2014 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 12 and 15.
Notes to the financial statements (continued)
2. 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.
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 Six months
ended ended Year ended
28 February 28 February 31 August
2015 2014 2013
GBP GBP GBP
Management fee 100,000 186,401 1,105,409
------------ ------------ -----------------------
Civitas Property Partners S.A. ("Civitas") were 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. There was no incentive fee paid for the period
to 28 February 2015 (28 February 2014: GBP18,217; 31 August 2014:
GBP925,692).
4. Earnings per share
Basic earnings per share is calculated by dividing the
gain/(loss) attributable to equity holders of the Company by the
weighted average number of ordinary shares in issue during the
period.
Six months ended 28 February Six months ended 28 February Year ended
2015 2014 31 August 2014
(Loss)/gain attributable to (GBP283,219) GBP854,801 (GBP11,220,591)
equity holders of the group
-------------------------------- -------------------------------- ----------------
Weighted average number of
ordinary shares in issue 134,764,709 134,764,709 134,764,709
-------------------------------- -------------------------------- ----------------
Due to the options lapsing without exercise in December 2010,
there is no dilution to the earnings per share.
The earnings per share are calculated as (0.21) pence (28
February 2014: 0.63 pence; 31 August 2014: (8.33) pence).
Notes to the financial statements (continued)
5. Intangible assets
Six months
ended Six months Year ended
28 February ended 28 February 31 August
2014 2014 2013
GBP GBP GBP
Opening net book
value - 774 774
Amortisation
charge - (774) (774)
-------------- ------------------- -----------
Closing net book - - -
value
-------------- ------------------- -----------
The intangible asset related to computer software, with a useful
life of 6 years.
6. Plant and equipment
Six months Six months
ended ended Year ended
28 February 28 February 31 August
2015 2014 2014
GBP GBP GBP
Opening net book
value - 3,462 3,462
Additions - - -
Depreciation - (3,462) (3,462)
Closing net book - - -
value
-------------- ------------- -----------
7. Inventories
Six months Six months
ended ended Year ended
28 February 28 February 31 August
2015 2014 2014
GBP GBP GBP
Opening net realisable
value - 82,589,097 82,589,097
Purchases at cost - 39,389 39,389
Sale during the
period - (48,681,399) (72,597,621)
Historical profit
on sale - 2,656,688 6,892,599
Foreign exchange
loss on sale - - (23,075,220)
(Impairment)/write
back of inventory - (2,685,000) 6,151,756
Closing net realisable - 33,918,775 -
value
-------------- ------------- -------------
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.
Notes to the financial statements (continued)
8. Loans and receivables
Six months Six months
ended ended
28 February 28 February Year ended
2015 2014 31 August 2014
GBP GBP GBP
Opening Balance 1,933,733 2,923,760 2,923,760
Repayment of
loan (885,414) (826,220) (826,220)
Impairment of - - -
loan
Exchange loss
on revaluation
of loan (80,908) (82,831) (163,807)
Closing Balance 967,411 2,014,709 1,933,733
------------- ------------- ----------------
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.
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 52,636,216
----------
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; to invest in the
Group's current assets when the Board feels it will give rise to
capital appreciation; and to return capital to shareholders where
possible.
10. Net asset value per share
The net asset value per ordinary share is based on the net
assets attributable to equity shareholders of GBP8,691,428 on
134,764,709 shares (28 February 2014: GBP68,140,917 on 134,764,709
shares; 31 August 2014: GBP40,976,092 on 134,764,709 shares).
Notes to the financial statements (continued)
11. Financial risk management
The disclosure on the financial risk management has been limited
to the consolidated financial position. This approach has been
adopted as this covers all of the principal risks associated with
the Group.
The disclosures below assume, for the prior periods, that the
properties held by the Group are in US Dollars as this is the
currency in which they were valued by BNP Paribas and TSKB. In the
opinion of the directors this is also the currency that disposals
occurred in.
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. 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, Mandalina Yapi Insaat Sanayi Ve Ticaret A.S. 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.
Notes to the financial statements (continued)
11. Financial risk management (continued)
(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 is detailed
below:
Net Net
Non-current monetary Non-current monetary
assets assets Liabilities Assets assets Liabilities
28 February 28 February 28 February 28 February 28 February 28 February
Currency 2015 2015 2015 2014 2014 2014
GBP GBP GBP GBP GBP GBP
Sterling - 2,538,041 (495,168) - 1,148,543 (33,034)
Euro 967,411 445 - 2,014,709 659 -
US Dollar - 5,104,450 - 33,918,775 36,391,075 -
Turkish
Lira - 440,582 (111,074) - (5,332,844) (5,636,973)
------------ ------------ ------------ ------------ ------------ ------------
967,411 8,083,518 (606,242) 35,933,484 32,207,433 (5,670,007)
------------ ------------ ------------ ------------ ------------ ------------
31 August 31 August 31 August
2014 2014 2014
GBP GBP GBP
Sterling - 13,053,770 (56,133)
Euro 1,933,733 567 -
US Dollar - 24,818,749 -
Turkish
Lira - 1,169,272 (31,870)
------------ ------------ ------------
85,517,093 39,042,358 (88,003)
------------ ------------ ------------
Notes to the financial statements (continued)
11. Financial risk management (continued)
(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:
Non- Non- Non-
Floating interest Floating interest Floating interest
rate bearing rate bearing rate bearing
28 February 28 February 28 February 28 February 31 August 31 August
2015 2015 2014 2014 2014 2014
GBP GBP GBP GBP GBP GBP
Sterling 2,636,120 172 1,143,941 219 13,082,567 219
Euro - 967,856 - 2,015,368 - 1,934,300
US Dollar 4,436,356 668,094 70,309,821 29 24,818,749 -
Turkish
Lira - 822 - 543 - 625
------------ ------------ ------------ ------------ ----------- ----------
7,072,476 1,636,944 71,453,762 2,016,159 37,901,316 1,935,144
------------ ------------ ------------ ------------ ----------- ----------
(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 2015 the Group
does not have any significant liabilities due.
The Group has sufficient cash reserves to meet liabilities
due.
12. 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 prior year, a case against the Group was 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 prior
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.
Please refer to note 15 for further information.
Notes to the financial statements (continued)
13. Related party transactions
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
14.
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 3.
Sinan Kalpakcioglu was a Turkish resident consultant to The
Ottoman Fund Limited. Mr Kalpakcioglu is a director and shareholder
of the Turkish subsidiaries due to Turkish law requirements. Mr
Kalpakcioglu receives no additional benefit from being a
shareholder of the Turkish subsidiaries. Fees paid to Mr
Kalpakcioglu during the period amounted to GBP3,933 (28 February
2014: GBP23,600; 31 August 2014: GBP55,200); no amounts remained
outstanding at the period end (28 February 2014: GBP7,867; 31
August 2014: GBP7,867).
Vistra Nominees I Limited is a related party being the holder of
the 2 founder shares of The Ottoman Fund Limited.
Sinan Kalpakcioglu and Ali Pamir are shareholders in Mandalina,
which holds the title to the Alanya apartments.
The Directors do not consider there to be an ultimate
controlling party.
14. Directors' interests
Total compensation (excluding performance fees) paid to the
Directors during the period was GBP75,000 (28 February 2014:
GBP75,000; 31 August 2014: GBP150,000).
During the period 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.
Eitan Milgram is an Executive Vice President of Weiss Asset
Management LLC which is a substantial investor in the Company.
15. Subsequent Events
On 19 March 2015, the lawyers acting on behalf of the Group in
relation to the case against the Group for US$1m by a party who
claimed to have acted as an intermediary on one of the land sales
advised that the case had been heard in court and that the
presiding judge, after hearing from both parties, accepted the
Group's lawyer's motion to immediately dismiss the lawsuit that had
been filed against the Group. The counterparty to the lawsuit has
appealed the decision and the case is therefore yet to be
concluded.
Other than the above, the Directors are satisfied that there
were no material events subsequent to the period 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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