TIDMLCSR
Lewis Charles Romania Property Fund Reports its Financial Results For 2008
London, United Kingdom - Lewis Charles Romania Property Fund ('Lewis Charles' or
'the Company' or 'the Fund') today reports its financial results for the period
ended December 31, 2008.
Overview of 2008
· NAV of EUR 0.62 per share
· The Evergreen Residences residential project in Mogosoaia has made solid
progress throughout 2008 having been de-risked following a detailed review of
the design and phasing:
o First phase redesigned so that the three individual blocks can be
constructed independently of each other - block 1 will now comprise of 64 units,
block 2 of 68 and block 3 of 178
o Underground parking redesigned so it can be phased concurrent with building
of each apartment block as has the landscaping strategy
o Utilities secured for water, electricity, gas and sewage
· Previous buildings have been demolished and cleared ready for building
preparation
Since Year End 2008
· Transfer of ownership of the Ploiesti retail shopping centre project to
Blackpearl Property deemed best value and option for shareholders
· Notice of termination given to the Fund's existing managers
About Lewis Charles Romania Property Fund
The Fund's objective is to generate capital gains by investing in both
residential and commercial property in Romania, primarily, although not
exclusively, in and around Bucharest and other large Romanian cities.
For more information about the Fund, please visit our website
(http://www.romaniapropertyfund.com) or contact:
Ed Portman, Leesa Peters,
Conduit PR
+ 44 (0) 207 429 6607 / + 44 (0) 7733 363 501
Loraine Pinel, Mark Anderson,
Lewis Charles Securities Limited
+ 44 (0) 207 456 9100 / + 44 (0) 7876 560 787
Robert Finlay, Travis Inlow
Canaccord Adams
+44 (0) 20 7050 6500
Chairman's statement
I am pleased to present the second Annual Report for the Lewis Charles Romania
Property Fund Limited ("LCSR, "the Fund", or "the Company") for the year ended
31 December 2008.
This period covered the global financial crisis which, as one would expect,
directly impacted the Romanian economy and in particular the local property
sector. Consequently, the Company's consolidated loss for the year ended 31st
December 2008 increased to Eur 21,282,862 (2007: Eur 3,243,216). The full loss
of value was realized in the (post year end) disposal of the retail site in
Ploesti as announced on 13 March 2009.
In March 2009, the Investment Managers, Lewis Charles Securities Limited,
recommended to the Board that the Ploesti project be transferred to Blackpearl
Property Limited ("Blackpearl") at a nominal value. This transfer was on the
basis that the Company was no longer responsible for any actual contingent
liabilities of SC Retail Park Magnolia SRL, the Romanian company which owns the
Ploesti project. In return, LCSR entered into a profit sharing agreement with
Blackpearl where it will receive 50% of any future net profits from this
project. At the same time as this announcement, the development management
contract with Westhill SRL, the previous developer, was terminated.
Blackpearl has a strong and experienced team of property and development
professionals who have all the necessary expertise to manage the Ploesti retail
project and we look forward to announcing details of the plans for the site
during 2009. Blackpearl is also well known to the Fund, as they are our joint
venture partners on the Mogosoaia project now known as Evergreen Residences.
This project has made steady progress and has been rephased to deal with current
market conditions with prudent phasing and sensible sales price assumptions. The
key to the short term success of this project will be to achieve a significant
amount of pre sales on Phase 1A.
The investments in these projects have been valued in accordance with IAS 2 "
Inventories" and are stated at the lower of cost and net realisable value. Full
details of these projects are set out in the Investment Managers report which
follows and the financial statements. At the balance sheet date the published
NAV was Eur 0.62 (GBP 0.59) in comparison to the accounting NAV of Eur 0.66 (GBP
0.63) per share at a year end exchange rate of EUR/GBP 1.045
The Company and the Directors are reviewing all expenditures to ensure they can
be minimised as much as possible whilst preserving an effective management
structure for the Fund going forward. In order to maximise flexibility of the
board as they decide on the best way forward for the Fund, the Directors have
given notice to terminate the existing management contract with Lewis Charles
Securities Limited ("the Investment Manager"). The contract with the Investment
Manager provides for a six month notice period from 2nd August 2009 during which
time the board will be able to negotiate a new contract with a suitable partner.
The Company has dealt with exceptionally challenging market conditions in
Romania during 2008 and has made difficult decisions in order to safeguard the
long term interests of shareholders. The restructuring of the Ploesti project
should preserve the opportunity to share potential future gains and in addition
the phasing of the Mogosoaia project should allow the Fund to benefit over the
longer term as the Romanian economy recovers.
Richard Prickett FCA (Chairman)
29 June 2009
Investment manager's report
THE ROMANIAN ECONOMY
Flash estimates for Q1 GDP highlight the depth of the recession Romania is now
in, with two quarters of seasonally adjusted falls leaving GDP 6.4% down on a
year earlier. GDP for 2009 is now expected to contract by 4% before recovering
by +0.8% in 2010 and 4.7% in 2011 (source: Oxford Economics). As a result, the
Q1 current account deficit fell to just 4.25% of GDP with the gap more than
covered by inflows. The Euro 20 billion IMF led package agreed back in March
2009 has increased confidence that a systemic financial crisis can be avoided.
Conditions to the IMF package include cutting the budget deficit to 3% of GDP by
2011. However, the very weak global economic backdrop makes it difficult to
make the necessary reforms needed to keep the current account deficit low,
tackle corruption and push ahead business friendly reforms. Interest rates of
10% continue to remain high due to worries about exchange rate volatility
compounded by inflation having only dropped to 6.5% by April. The central bank
has so far only reduced rates by 0.25% this year but once they are confident
that the currency has stabilised (Leu), and that inflation has fallen further
(and is likely to stay low), rates could be reduced substantially (Oxford
Economics).
PROPERTY MARKET
Retail
Q1 2009 has seen investment in Romania's real estate market effectively stall
and there remains a high degree of uncertainty regarding when transactions might
restart. The general consensus is that the market is unlikely to see any changes
within the next three to six months in terms of an improvement, with net initial
yields expected to continue to move out. A lack of liquidity, combined with
restrictions on cross-border capital movements has clearly had an impact on
market conditions in Romania and access to debt has become extremely difficult.
Furthermore, cash rich investors and speculators appear to be biding their time,
hopeful that they can acquire property cheaply, where it is believed a
freeholder may be under financial pressure. Yet landlords remain fearful of how
much they could lose by selling too cheaply. This situation is being exacerbated
by potential vendors and developers apparently unable to accept that Romania is
neither isolated nor immune to a substantial yield shift, resulting in little
investment activity at present.
Current modern retail stock in Bucharest is estimated to be in the region of
850,000m², with approximately 180,000m² scheduled to be added this year. The
biggest projects scheduled for completion in 2009 are: AFI Cotroceni Park
(75,000m²), Sun Plaza (76,000m²), phase I of Mega Designer Outlet and the first
shopping centre for luxury brands, Cocor Luxury Store (10,000m²).
The worsening economic environment has made many investors rethink their
strategies and adapt to the current market conditions with a number of companies
announcing the postponement of their projects.
Residential
The number of completed residential property transactions fell sharply toward
the end of 2008 as a consequence of the international financial crisis.
Financing became more difficult to acquire for individuals and institutions. The
effects of the economic turmoil continue to be felt and it is likely that the
number of completed units in 2009 will be lower than in 2007 and 2008. This is
also borne out by the number of construction permits that have been issued
during the first four months of 2009 and which have dropped by 13.7% versus the
first four months of 2008. Sales also fell sharply in 2008 as a result of
consumer anxiety and a lack of mortgage finance. Prices fell by up to 30% during
2008, depending on location and facilities. The managers anticipate that the
market should stabilise by early 2010.
Pent-up structural demand remains strong. However, the residential housing stock
in Romania is estimated at 381 units per 1,000 inhabitants as compared to the
Central and Eastern European average of 413 and the EU average of 472. The
averages in neighbouring Hungary and Bulgaria are 424 and 486 respectively.
More positively, the government has recently introduced measures under the
"First Home" programme in order to help first time buyers. At the end of May
2009, the government announced a reduction in the VAT from 19% to 5% for first
time buyers on apartments below (approximately) RON (Leu) 380,000. More
recently, the government has announced that it will offer guarantees to first
time home buyers up to a certain amount (also expected to be EUR 60,000).
Officials from the government and the banks are meeting to reach an agreement
regarding the lending conditions for these kinds of loans.
MOGOSOAIA RESIDENTIAL PROJECT (EVERGREEN RESIDENCES)
The Scheme is a mixed use development consisting of:
· 1,250 apartments (125,000 sq m)
· Associated retail/commercial (7,250 sq m)
· Outline planning has been obtained on the 57,766 sq m site.
A number of steps have been implemented on the project to significantly de-risk
the construction phase. The first phase has been redesigned so that the three
individual blocks can be constructed independently of each other. This has
required the separation of the boilers and mechanical and electrical plant and
equipment which was initially going to operate on a centralised system. Block 1
now comprises of 64 units, Block 2 of 68 units and Block 3 of 178 units.
The underground car parking has been redesigned so that it too can be phased and
constructed simultaneously with each of the three blocks. A landscaping strategy
has been created that enables it to be phased in accordance with each of the
above blocks.
Detailed design work was undertaken prior to tendering so that the scheme could
be carefully value engineered. This produced further substantial savings. The
quality of the development has been maintained and the apartments will each have
air conditioning in the living rooms and bedrooms, built in wardrobes in the
bedrooms and standard kitchens complete with white goods. This is above the
level of finish provided by the closest competitors. Utilities (and the
necessary avizes) have been secured for water, electricity, gas and sewage. A
water connection with the local network has not been possible as capacity is
insufficient. Therefore it has been decided, in conjunction with the City Hall
and M&E engineers, to drill a well to supply Phase 1.
The previous buildings have now been demolished and the site has now been
cleared in preparation for enabling work which is expected to commence in July
2009. Tenders have been received from a number of construction contractors.
Subject to the completion of due diligence by Gardiner & Theobald., SC Gold
Developments SPV SRL, ("Gold") our joint venture partner which owns 50% of the
Evergreen Residences and the Company expect to announce the identity of the
successful contractor in July 2009.
The area is going through major regeneration and end users will be attracted by
the edge of city location, combined with the life-style option of being close to
Mogosoaia Palace, forests, lakes and open spaces. A new metro line is under
construction from Bucharest which although not fully funded is estimated to be
completed within the next two years. The official launch of the project is now
expected in September 2009, representing a minor delay from the previously
envisaged date as a result of decisions made aimed at de-risking the project and
improving its profitability in light of current market conditions.
The project has been given the name `Evergreen Residences' following extensive
market and brand research, and the project website address is
www.evergreenresidences.ro. Sales brochures, reservation and pre-sales contracts
have been prepared and a dedicated office has been opened in preparation for the
marketing and sales activities. Regatta Real Estate, one of Romania's leading
residential real estate agencies, has appointed a full time experienced sales
manager who is resident in the office. Together with Blackpearl support staff
Gold believes the product offering will be welcomed by the local market in terms
of price pointing, build quality and facilities.
PLOESTI RETAIL PROJECT
The proposed Zenith shopping centre project was adversely affected by the
international financial crisis at the end of 2008. The bank with which S.C.
Retail Park Magnolia SRL ("Magnolia"), the Fund's Romanian-registered subsidiary
that owned the project, had expected to agree binding terms, discontinued
discussions. Following an intensive review of options open to the Fund, the
Board decided to sell the shares of Magnolia to Blackpearl Property Limited for
a nominal consideration.
Under the arrangement the Fund is entitled to receive 50% of the profits of the
project until the Fund's original loan to Magnolia of EUR 13.792 million has
been repaid. The Fund has an option to repurchase 50% of Magnolia for a nominal
consideration following repayment of the loan. The Fund retains no liabilities
in connection with Magnolia, nor does it have any future funding obligations
with regard to the project. Magnolia also concluded that it would be fruitless
to continue trying to obtain finance for an expensive shopping centre in the new
economic climate.
The Fund has an existing relationship with Blackpearl as partners in the
Mogosoaia residential project. Blackpearl's sister company, Alchemy Development
Management, has an established office in Bucharest with experienced
architectural, legal development and project management and finance teams.
Blackpearl has links with a number of financial institutions in Romania and as
noted above successfully secured bridging funding for the initial works on the
Mogosoaia residential project during very difficult market conditions.
It has been determined that due to the changing market environment, it is not
possible to develop the original Zenith scheme and, therefore, Blackpearl is
considering an alternative. It is the intention that Magnolia will appoint King
Sturge Romania to act as sole letting agent on a revised project with a view to
agreeing heads of terms quickly with a range of big box operators and
traditional shopping centre retailers for a more modest centre with a reduced
total development area. As part of the design process to create the new
development, Magnolia also intend to reappoint a number of the previous design
team (where it is economically viable) as they have already indicated a desire
to be involved in the development of a suitable design for the current market.
The brief to the team will be in part as follows:
· Design of a three phased development based on a traditional UK out of town
concept with part brick and tin façade Surface parking solution
· Phase 1 - Comprising of big box retail space to meet the demand from
discount food, furniture and DIY
· Phase 2 - A traditional shopping mall of circa 20,000 sqm to cater for the
limited demand from retailers
· Phase 3 - A leisure box to cater for the under provision of food and
entertainment in the Ploesti area.
It is not Blackpearl's intention to introduce any bank debt to the site until
tenants have been signed the interests of the shareholders will therefore be
protected.
It is envisaged that the agents will be appointed formally during the week
commencing 29th June, although they are already working on the project
informally. The rest of the design team will be appointed shortly afterwards.
An initial workshop to bring together the team is expected to take place in July
2009 to discuss and agree the brief going forward.
Investing policy
The Fund's initial focus will be on residential and commercial properties in the
Bucharest region. The Fund will however consider investing in residential and
commercial property located elsewhere in Romania if suitable opportunities
arise. Given the significant resources required, project size and time of
development, the Fund anticipates that it will invest in a limited number of
projects and its investments are restricted to residential or commercial
property in Romania.
The Fund may also invest in land which it has no intention at the time of
acquisition to develop in order to build up a strategic land bank in areas where
the Investment Manager believes that profitable developments could be undertaken
at some time in the future, whether by the Fund or a third party.
The Fund's preferred method of investment will be through partnerships with
developers. The Fund expects that such partnerships will usually take the form
of a development management agreement or a joint venture with a developer.
The Fund will consider taking advantage of bank borrowings. Borrowings are not
expected to exceed 70% of land valuation and development costs in respect of a
particular project, save in exceptional circumstances.
The proceeds of transactions in the Property Portfolio and any rental income
derived from such portfolio (net of any performance fee due) may be reinvested
into further property investments by the Group.
After the first three years of the Fund's life the Directors will consider, in
consultation with the Investment Manager, and in the light of market conditions
prevailing at the time, whether it is appropriate to distribute any profits
available for distribution to holders of Ordinary Shares. Following the end of
the sixth year (or seventh year if the life is extended) of the Fund's life, the
proceeds of sale of the Property Portfolio will be distributed to Shareholders
in such manner as is determined by the Directors to be appropriate at the time.
Lewis Charles Securities Limited
Investment Manager
29 June 2009.
Board of Directors
Richard Prickett FCA (Non-executive Chairman)
Richard was appointed a member of the Board on 29 June 2007. Richard is chief
executive and finance director of Landore Resources Limited, an AIM listed
mineral exploration company which is currently focusing its activities on nickel
projects in Ontario, Canada. Richard was the managing director and finance
director of London Securities Plc, a listed property investment group, during
the period 1982 to 1994. In the early 1990's he was finance director of gold
exploration company Brancote Holdings Plc, becoming Chairman in 1996. In 2002,
Brancote was acquired by Meridian Gold Inc for US$368 million.
Richard is also a non-executive director of the following companies: Asian
Growth Properties Limited; City Natural Resources High Yield Trust Plc; The
Capital Pub Company Plc; and Patagonia Gold Plc. Richard is a chartered
accountant and qualified with Coopers and Lybrand in 1973. Richard is a UK
resident.
George Inge FRICS
George was appointed a member of the Board on 29 June 2007. George trained as a
chartered surveyor and spent his early days at Savills as a land agent,
eventually becoming a partner. He was responsible for the change of Savills from
a partnership to public company status. George became the first Chairman of
Savills plc in 1985 and retired as Chairman in 1995. He has held numerous
directorships and was a non-executive director of Westbury plc from 1995 to
2003.
George was non-executive chairman of Severn Trent Property Plc from 1995 to
2006. George is a UK resident.
Dr Flavius Baias
Flavius was appointed a member of the Board on 29 June 2007. Flavius is an
associate professor of the Law Faculty (University of Bucharest). Appointed to
his current Chair in 1991, Flavius teaches land law and general theory of
contracts. He was appointed Deputy Minister of Justice in 1998, a position he
held until December 2000. Flavius was one of the founding partners of David and
Baias, a top 10 law firm in Romania established in association with
PricewaterhouseCoopers in 2002. He headed up the real estate and litigation
department, but retired from the firm in 2006. Flavius is the Editorial Director
of C.H. Beck Publishing House, the largest legal publishers in Romania. Flavius
is resident in Romania.
Clive Simon
Clive was appointed a member of the Board on 29 June 2007. Clive is the chairman
of Bachmann Fund Administration Limited and a director of The Bachmann Group
Limited. Before joining the Bachmann group of companies in 1998, he was a
partner with Coopers and Lybrand (now PricewaterhouseCoopers CI LLP), working in
London, Africa and the Channel Islands. He is also a director of Lewis Charles
Sofia Property Fund Limited. His business background is predominantly in the
financial services sector. Clive is a Guernsey resident.
Paul Duquemin
Paul was appointed a member of the Board on 29 June 2007. Paul is the Managing
Director of Bachmann Fund Administration Limited. Prior to joining Bachmann in
2005, Paul had been a director of BISYS Fund Services (Guernsey) Limited. He has
over 19 years' experience in offshore finance, mostly in fund administration
with Rothschild Asset Management between 1990 and 1999 and BISYS Fund Services
between 1999 and 2004. He also holds a number of directorships of offshore
equity funds, property funds and management companies. Paul is a Guernsey
resident.
Directors' report
The Directors present their annual report and audited financial statements of
the Lewis Charles Romania Property Fund Limited ("the Company") which is
incorporated in Guernsey, Channel Islands, and its subsidiary companies
(together referred to as "the Group"), for the year ended 31 December 2008.
Incorporation
The Company was incorporated in Guernsey on 23 May 2005 with company
registration number 43190. From this date until 29 June 2007 the company was
dormant.
Principal activity
The Company invests in the Romanian residential and commercial property market.
Its objective is to provide shareholders with a high level of long-term capital
appreciation. The activities of the company have remained the same with the
exception of the post year end disposal of Ploesti Project to Blackpearl
Properties Limited. Please refer to note 29 of the financial statements for
further details.
Results and dividends
The Group's results for the year are set out in the consolidated Income
Statement on page 15.
The Directors did not declare a dividend for the year.
Quotation requirements
Throughout the year the Company complied with the conditions set out in the AIM
Rules for Companies.
Directors
The Directors during the year and to date are as shown on page 2.
Directors shall be subject to retirement by rotation in accordance with the
articles. No person shall be or become incapable of being appointed as a
Director by reason of having attained the age of 70 or any other age, and no
Director will be required to vacate his office at any time by reason of the fact
that he has attained the age of 70 or any other age.
As at the date of approval of these financial statements the Directors have the
following beneficial interests in the ordinary share capital of the Company.
Number of Percentage
Ordinary shares %
_______________ _______________
Clive Simon - -
Paul Duquemin - -
Richard Prickett 7,143 0.036
George Inge 7,143 0.036
Dr Flavius Baias - -
During the year the directors received the following remuneration in the form of fees:
Euro
George Inge 18,183
Dr Flavius Baias 18,183
Clive Simon 21,821
Paul Duquemin 18,183
A consultancy agreement, dated 9 July 2007 for a period of 12 months commencing
29 June 2007, exists between the Company and European Sales Company Limited and
has been further extended for one year. The Company pays a fee of GBP20,000 (Eur
24,249 at current year's exchange rate) per year, payable quarterly in arrears,
to European Sales Company Limited, of which Mr Richard Prickett is a director.
Clive Simon and Paul Duquemin are Directors of the Company and the
Administrator. The fee paid to Bachmann Fund Administration Limited is disclosed
on the face of the Income Statement and in note 4. No other Directors have any
interest in contracts with the Company.
Substantial interests in Company shares
At 31 December 2008 the following holdings representing more than 3 per cent of
the Company's issued shares had been notified to the Company.
Ordinary shares Interest in
voting capital
Euroclear Nominees Limited - EOC01 9,012,901 46.04%
Vidacos Nominees Limited - SBINC 5,214,286 26.64%
The Bank of New York (Nominees) Limited BIL 1,852,143 9.46%
Lewis Charles Nominess Limited LCSCLNT 955,386 4.88%
HSBC Global Custody Nominee (UK) Limited - 811809 814,286 4.16%
BBHISL Nominees Limited - 120281 590,000 3.01%
Employees
The Company has no employees.
Corporate governance
The Directors are committed to high standards of corporate governance and have
made it Company policy to comply with best practice in this area, insofar as the
Directors believe it is relevant and appropriate to the Company. However, as a
Guernsey registered Company, it is not obliged to comply with the `Combined
Code', or the Code of Best Practice published by the Committee on the Financial
Aspects of Corporate Governance.
The Board has made arrangements in respect of corporate governance which it
believes are appropriate for the Company.
The Board consists solely of non-executive Directors of which Richard Prickett
is non-executive Chairman. Since all the Directors are considered by the Board
to be independent non-executive directors the provisions of the Code in respect
of Directors' remuneration are not relevant to the Company except in so far as
they relate to non-executive Directors.
In view of its non-executive nature and the requirement of the Articles of
Association that all Directors retire in rotation at least every three years,
the Board considers that it is not appropriate for the Directors to be appointed
for a specified term as recommended by the Code.
A Management Agreement between the Company and the Investment Manager sets out
the matters over which the Investment Managers have authority. All other
matters, including strategy, investment and dividend policies, gearing and
corporate governance procedures, are reserved for the approval of the Board of
Directors. The Board currently meets at least quarterly and receives full
information on the Company's investment performance, assets, liabilities and
other relevant information in advance of Board meetings.
Individual Directors may, at the expense of the Company, seek independent
professional advice on any matters that concern them in the furtherance of their
duties. The Company maintains appropriate Directors' and Officers' liability
insurance.
After making enquiries, and bearing in mind the nature of the Company's business
and assets, the Directors consider that the Company has adequate resources to
continue in operational existence for the foreseeable future. For this reason,
they continue to adopt the going concern basis in preparing the financial
statements. This is supported by the fact that, post year end, the Romanian
subsidiary, SC Retail Park Magnolia SRL, was sold to Blackpearl Properties
Limited. As a result of this sale all the associated loans and liabilities have
been transferred to the buyer.
Internal controls
The Board is responsible for the Company's system of internal control and for
reviewing its effectiveness. The Board has documented an ongoing process by
which the needs of the Company in managing the risks to which it is exposed can
be met.
The procedures, as documented, have been in place throughout both the financial
period and to the date of approval of this annual report and financial
statements. The Board is satisfied with the effectiveness of the procedures. By
their nature these procedures are able to provide reasonable, but not absolute,
assurance against material misstatement or loss. During each Board meeting the
Board monitors the investment performance of the Company in comparison to its
objectives. The Board also reviews the Company's activities since the last Board
meeting and ensures that the Investment Manager has followed the agreed
investment policy. Also, at each meeting, the Board receives reports from the
Administrator in respect of compliance matters and duties performed on behalf of
the Company.
The Board has decided that the systems and procedures employed by the Investment
Manager and Administrator, provide assurance that a sound system of internal
control, which safeguards shareholders' investments and the Company's assets, is
maintained. An internal audit function specific to the Company is therefore
considered unnecessary.
Audit committee
The audit committee of the Lewis Charles Romania Fund Limited, comprising Clive
Simon and George Inge, will be chaired by Clive Simon and will meet at least
twice a year and otherwise as required by the Chairman of the Committee. The
audit committee is responsible for ensuring that the Group's financial
performance is properly monitored, controlled and reported. It will also meet
the auditors and review their findings, including discussing accounting and
audit judgements. The audit committee will meet at least once a year with the
auditors.
Relations with shareholders
The Company welcomes the views of shareholders and places great importance on
communications with them. The Chairman and the other Directors are available to
meet shareholders if required. The Annual General Meeting of the Company
provides a forum, both formal and informal, for shareholders to meet and discuss
issues with the Directors and Investment Managers of the Company.
Independent auditors
Our auditors, PricewaterhouseCoopers CI LLP, have indicated their willingness to
continue in office and a resolution to reappoint them will be proposed at the
forthcoming Annual General Meeting.
By order of the board
P Duquemin C Simon
Director Director
29 June 2009
Statement of Directors' responsibilities in respect of the financial statements
Guernsey company law requires the Directors to prepare financial statements for
each financial period which give a true and fair view of the state of affairs of
the Company and the Group and of the profit or loss of the Company and the Group
for that period. In preparing those financial statements, the Directors are
required to:
· select suitable accounting policies and then apply them consistently;
· make judgements and estimates that are reasonable and prudent;
· state whether applicable accounting standards have been followed, subject
to any material departures disclosed and explained in the financial statements;
and
· prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The directors confirm that they have complied with the above requirements in the
preparation of the financial statements.
The Directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
Company and the Group and which enable them to ensure that the financial
statements have been properly prepared in accordance with The Companies
(Guernsey) Law, 1994. They are also responsible for safeguarding the assets of
the Company and the Group and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The maintenance and integrity of the Lewis Charles Romania Property 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 Guernsey governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Independent Auditors' Report to the members of Lewis Charles Romania Property
Fund Limited
Report on the financial statements
We have audited the accompanying financial statements of Lewis Charles Romania
Property Fund Limited which comprise the company and consolidated balance sheets
as of 31 December 2008 and the company and consolidated income statements,
statements of changes in equity and cash flow statements for the year then
ended and a summary of significant accounting policies and other explanatory
notes.
Directors' responsibility for the financial statements
The Directors are responsible for the preparation and fair presentation of these
financial statements in accordance with International Financial Reporting
Standards and with the requirements of Guernsey law. This responsibility
includes: designing, implementing and maintaining internal control relevant to
the preparation and fair presentation of financial statements that are free from
material misstatement, whether due to fraud or error; selecting and applying
appropriate accounting policies; and making accounting estimates that are
reasonable in the circumstances.
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 Company and the Group as of 31 December 2008, and of
the financial performance and cash flows of the Company and 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 (Guernsey) Law, 1994.
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 the Officers and professional advisers, the Company summary, the
Chairman's statement, the Investment manager's report, the Board of directors,
the Directors' report, the Statement of Directors' responsibilities in respect
of the financial statements and the Appendices.
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 Section 64 of The Companies
(Guernsey) Law, 1994 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.
PricewaterhouseCoopers CI LLP
Chartered Accountants
Guernsey, Channel Islands
29 June 2009.
Consolidated income statement
for the year ended 31 December 2008
31 December 31 December
2008 2007
Restated
Notes EUR EUR
Investment income 186,010 123,923
_____________ _____________
Operating income 186,010 123,923
_____________ _____________
Expenditure
Administration fees 4 220,778 101,679
Management fees 6 678,626 306,283
Formation expenses 5 - 1,655,929
Directors' fees and expenses 8 123,203 44,287
Other expenses 9 624,579 637,004
Loss on foreign currency exchange 2.9 776,503 667,460
Impairment of inventory 13 18,469,062 -
_____________ _____________
Total expenditure 20,892,751 3,412,642
_____________ _____________
Net operating loss (20,706,741) (3,288,719)
Interest receivable 14,050 45,403
Interest payable 19 (590,171) -
_____________ _____________
Net finance (expenditure) / income (576,121) 45,403
Loss before tax (21,282,862) (3,243,316)
Taxation 2.8 - -
_____________ _____________
Loss for the year / period (21,282,862) (3,243,316)
_____________ _____________
_____________ _____________
Loss per share - basis and diluted
(cents per share) 12 (108.72) (16.57)
The accompanying notes 1 to 29 form an integral part of these financial statements
Company income statement
for the year ended 31 December 2008
31 December 31 December
2008 2007
Notes EUR EUR
Investment income 114,973 123,923
_____________ _____________
Operating income 114,973 123,923
_____________ _____________
Expenditure
Administration fees 4 137,660 83,679
Management fees 6 678,626 306,283
Formation expenses 5 - 1,483,081
Directors' fees and expenses 8 100,619 44,287
Other expenses 9 374,858 173,180
Loss on foreign currency exchange 2.9 18,783 582,268
Impairment on loan and investments
in subsidiary companies 14/15 23,810,692 -
_____________ _____________
Total expenditure 25,121,238 2,672,778
_____________ _____________
Net operating loss (25,006,265) (2,548,855)
Interest receivable 710,937 220,375
_____________ _____________
Net finance income 710,937 220,375
_____________ _____________
Loss for the year / period (24,295,328) (2,328,480)
_____________ _____________
_____________ _____________
The accompanying notes 1 to 29 form an integral part of these financial statements
Consolidated balance sheet
as at 31 December 2008
31 December 31 December
2008 2007
Restated
Notes EUR EUR
Assets
Non current assets
Inventory 13 17,600,000 28,007,787
_______________ _______________
Total non current assets 17,600,000 28,007,787
_______________ _______________
Current assets
Trade and other receivables 17 1,102,184 580,902
Cash and cash equivalents 18 2,112,752 7,257,035
_______________ _______________
Total current assets 3,214,936 7,837,937
_______________ _______________
Total assets 20,814,936 35,845,724
_______________ _______________
_______________ _______________
Equity
Capital and reserves attributable
to equity holders of the group
Issued capital and reserves 12,853,943 35,462,009
_______________ _______________
Total equity 12,853,943 35,462,009
_______________ _______________
Liabilities
Current liabilities
Short term loans payable 19 4,830,466 -
Trade and other payables 21 169,506 383,712
_______________ _______________
Total current liabilities 4,999,972 383,712
_______________ _______________
Provision for other liabilities and charges 20 2,961,018 -
Non current liabilities
Founder shares 3 3
_______________ _______________
Total liabilities 7,960,993 383,715
_______________ _______________
Total equity and liabilities 20,814,936 35,845,724
_______________ _______________
_______________ _______________
NAV per ordinary share (Euro per share) 23 0.6566 1.8115
NAV per ordinary share at launch (Euro per share) 1.9352 1.9352
These financial statements were approved by the Board of directors on 29 June 2009.
Signed on behalf of the Board
P Duquemin C Simon
Director Director
The accompanying notes 1 to 29 form an integral part of these financial
statements.
Company balance sheet
as at 31 December 2008
31 December 31 December
2008 2007
Notes EUR EUR
Assets
Non current assets
Investment in subsidiaries 14 4,020,911 9,293,000
Loans receivable from
subsidiary companies 15 7,085,427 21,120,434
______________ ______________
Total non current assets 11,106,338 30,413,434
______________ ______________
Current assets
Trade and other receivables 17 148,593 18,706
Cash and cash equivalents 18 1,699,945 6,862,670
______________ ______________
Total current assets 1,848,538 6,881,376
______________ ______________
Total assets 12,954,876 37,294,810
______________ ______________
______________ ______________
Equity
Capital and reserves attributable to
equity holders of the company
Issued capital and reserves 12,893,525 37,188,853
______________ ______________
Total equity 12,893,525 37,188,853
______________ ______________
Liabilities
Current liabilities
Trade and other payables 21 61,348 105,954
Non current liabilities
Founder shares 3 3
______________ ______________
Total liabilities 61,351 105,957
______________ ______________
Total equity and liabilities 12,954,876 37,294,810
______________ ______________
______________ ______________
These financial statements were approved by the Board of directors on 2009.
Signed on behalf of the Board
P Duquemin Clive Simon
Director Director
The accompanying notes 1 to 29 form an integral part of these financial statements.
Statements of changes in equity
for the year to 31 December 2008
Consolidated 2008 Foreign 31 Dec
Share exchange Share Revenue 2007
capital reserve premium reserve Total Restated
EUR EUR EUR EUR EUR EUR
As at 31 December 2007 - - 198,709 39,517,333 (4,254,033) 35,462,009 -as previously
reported
Change in accounting - (1,010,717) - 1,010,717 - -
policy - Foreign exchange
on loans
_____________________________________________________________________________
As restated - (812,008) 39,517,333 (3,243,316) 35,462,009 -
Issue of ordinary shares - - - - - 40,727,575
Commissions payable on - - - - - (1,210,242)
issue of ordinary shares
Foreign exchange - (1,325,204) - - (1,325,204) (812,008)
adjustments arising on
consolidation
Loss for the year / - - - (21,282,862) (21,282,862) (3,243,316)
period
_____________________________________________________________________________
As at 31 December 2008 - (2,137,212) 39,517,333 (24,526,178) 12,853,943 35,462,009
_____________________________________________________________________________
_____________________________________________________________________________
Company 2008 Foreign 31 Dec
Share exchange Share Revenue 2007
capital reserve premium reserve Total Restated
EUR EUR EUR EUR EUR EUR
As at 31 December 2007 - - 39,517,333 (2,328,480) 37,188,853 -
Issue of ordinary shares - - - - - 37,188,853
Commissions payable on - - - - - (1,210,242)
issue of ordinary shares
Loss for the year / - - - (24,295,328) (24,295,328) (2,328,480)
period
_____________________________________________________________________________
As at 31 December 2008 - - 39,517,333 (26,623,808) 12,893,525 37,188,853
_____________________________________________________________________________
_____________________________________________________________________________
The accompanying notes 1 to 29 form an integral part of these financial statements
Consolidated cash flow statement
For the year ended 31 December 2008
31 December 31 December
2008 2007
Restated
EUR EUR
Loss for the year / period (21,282,862) (3,243,316)
Adjustment for:
Impairment of inventory 18,469,062 -
Net finance expense / (income) 576,121 (45,403)
_______________ _______________
Operating cash flows before movements (2,273,679) (3,288,719)
in working capital
Increase in trade and other receivables (521,282) (580,899)
(Decrease) / increase in trade and other payables (214,206) 383,712
_______________ _______________
_______________ _______________
Cash used in operations (2,973,167) (3,485,906)
Interest received 14,050 45,403
Interest paid (590,171) -
_______________ _______________
Net cash outflow from operating activities (3,549,288) (3,440,503)
_______________ _______________
Investing activities
Investment in inventory (5,100,257) (28,007,787)
_______________ _______________
Net cash outflow from investing activities (5,100,257) (28,007,787)
_______________ _______________
Financing activities
Proceeds on issue of shares - 40,727,575
Costs incurred on issue of shares - (1,210,242)
Proceeds from loans 4,830,466 -
_______________ _______________
Net cash inflow from financing activities 4,830,466 39,517,333
_______________ _______________
(Decrease) / increase in cash and cash equivalents (3,819,079) 8,069,043
for the year / period
Opening cash and cash equivalents 7,257,035 -
Effect of foreign exchange rates (1,325,204) (812,008)
_______________ _______________
Closing cash and cash equivalents 2,112,752 7,257,035
_______________ _______________
_______________ _______________
The accompanying notes 1 to 29 form an integral part of these financial statements.
Company cash flow statement
for the year ended 31 December 2008
31 December 31 December
2008 2007
EUR EUR
Loss for the year / period (24,295,328) (2,328,480)
Adjustment for:
Net finance income (710,937) (220,375)
Impairment of loans and investments in subsidiary companies 23,810,692 -
_______________ _______________
Operating cash flows before movements (1,195,573) (2,548,855)
in working capital
Increase in trade and other receivables (129,887) (18,703)
(Decrease) / increase in trade and other payables (44,606) 105,954
_______________ _______________
Cash used in operations (1,370,066) (2,461,604)
Interest received 710,937 220,375
_______________ _______________
Net cash outflow from operating activities (659,129) (2,241,229)Investing activities
_______________ _______________
Investment in subsidiaries - (9,293,000)
Issue of loans to subsidiary companies (4,503,596) (21,120,434)
_______________ _______________
Net cash outflow from investing activities (4,503,596) (30,413,434)
_______________ _______________
Financing activities
Proceeds on issue of shares - 40,727,575
Costs incurred on issue of shares - (1,210,242)
_______________ _______________
Net cash inflow from financing activities - 39,517,333
_______________ _______________
(Decrease) / increase in cash and cash equivalents (5,162,725) 6,862,670
for the year / period
Opening cash and cash equivalents 6,862,670 -
_______________ _______________
Closing cash and cash equivalents 1,699,945 6,862,670
_______________ _______________
_______________ _______________
The accompanying notes 1 to 29 form an integral part of these financial statements
Notes to the financial statements
as at 31 December 2008
1. CORPORATE INFORMATION
Lewis Charles Romania Property Fund Limited (the "Company") and its subsidiaries
(together the "Group") is an investment fund with an investment portfolio in
Romania. The aim of the Company is to generate capital gains by investing in
both residential and commercial property in Romania, primarily, although not
exclusively, around Bucharest.
The Company is a limited Company incorporated in Guernsey. The address of the
registered office is shown on page 2. The life of the Company is fixed by the
Articles for the duration of the Company and ends on the sixth anniversary of
Admission. The directors have the right to extend to the seventh anniversary of
Admission. Thereafter the duration of the Company may be extended at an
extraordinary general meeting convened for the purpose.
On 2 August 2007 the Company quoted on the Alternative Investment Market (AIM)
of the London Stock Exchange PLC. Prior to this date the Company had been a
dormant company which elected to be an unaudited company under The Companies
(Guernsey) Law, 1994.
These financial statements were authorised by the Board for publication on 29
June 2009.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these financial
statements are set out below. These policies have been consistently applied,
unless otherwise stated.
(2.1) Basis of preparation
The financial statements of the Company and the Group have been prepared in
accordance with International Financial Reporting Standards ("IFRS") which
comprise standards and interpretations issued by the International Accounting
Standards Board ("IASB"), and International Accounting Standards and Standing
Interpretations approved by the International Accounting Standards Committee
that remain in effect.
The financial statements have been prepared on the historical cost basis.
The preparation of financial statements in conformity with IFRS requires the use
of certain critical accounting estimates. It also requires the Board of
Directors to exercise its judgement in the process of applying the Company's
accounting policies.
The estimates and associated assumptions are based on historical experience and
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making judgements about
the carrying value of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates and underlying
assumptions are reviewed on an ongoing basis.
Judgements made by management in the application of IFRS that have a significant
effect on the financial statements and estimates with a significant risk of
material adjustment in the next year are disclosed in notes 13, 14, 15 and 29.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision only affects that period or in the period of
the revision and future periods if the revision affects both current and future
periods.
Standards, amendments and interpretations effective in 2008
IFRIC 11, IFRS1 - Group and treasury share transactions. This interpretation
does not have any effect on the Group's consolidated financial statements.
Standards, amendments and interpretations effective in 2008 but not relevant
IFRIC 12, Service concession arrangements, IFRIC13, Customer loyalty programmes,
IFRIC 14 and IAS 19 - The limit on a defined benefit asset, minimum funding
requirements and their interaction.
Standards, amendments and interpretations early adopted
IAS 32 (amendment), Financial instrument: Presentation, and IAS 1 (amendment),
Presentation of financial statements - Puttable financial instruments and
obligations arising on liquidation (effective from 1 January 2009).
Standards, amendments and interpretations to existing standards that are not yet
effective and have not been early adopted
IAS 1, Presentation of Financial Statements (Revised 2007, 2008 and April 2009)
- for accounting periods commencing on or after 1 January 2009 and 1 January
2010.
IFRS 8, Operating Segments - for accounting periods commencing on or after 1
January 2009.
IFRIC 13, Customer Loyalty Programmes - for accounting periods commencing on or
after 1 July 2008.
IFRIC 15, Agreements for the Construction of Real Estate - for accounting
periods beginning on or after 1 January 2009.
IFRIC 14, IAS 19, The limit on defined benefit asset, minimum funding
requirement and their interaction effective 1 January 2009.
IAS 27 (revised), Consolidated and separate financial statements, effective from
1 July 2009.
IAS 36 (amendment), Impairment of assets - for accounting periods commencing on
or after 1 January 2009.
IFRS 3 (revised) Business Combinations and IAS 27 (Revised) Consolidated and
Separate Financial Statements - for accounting periods beginning on or after 1
July 2009.
IAS 40, Investment Property - for accounting periods beginning on or after 1
January 2009.
IAS 23 (revised) Borrowing Costs - for accounting periods beginning on or after
1 January 2009.
Amendments to IAS 39 Financial Instruments: Recognition and Measurement that
will become mandatory for the Group's 2010 consolidated financial statements.
(2.2) Consolidation
The consolidated financial statements incorporate the financial statements of
the Company, the entities controlled by the Company (its subsidiaries) and the
Company's' joint ventures, made up to 31 December 2008. Control is achieved
where the Company has the power to govern the financial and operating activities
of an investee entity so as to obtain benefits from its activities.
The results of subsidiaries and joint ventures acquired during the period are
included in the consolidated statements from the date control passes.
All intra-group transactions, balances, income and expenses are eliminated on
consolidation.
The Group's interests in jointly controlled entities are accounted for by
proportional consolidation. The Group combines its share of the joint ventures'
individual income and expenses, assets and liabilities and cashflows on a line-
by-line basis with similar items in the Group's financial statements. The Group
recognises the portion of gains or losses on the sale of assets by the Group to
the joint venture that is attributable to the other venturers. The Group does
not recognise its share of profits or losses from joint ventures that result
from the Group's purchase of assets from the joint venture until it resells the
asset to an independent party. However, a loss on the transaction is recognised
immediately if the loss provides evidence of a reduction in the net realisable
value of current assets, or as an impairment loss.
(2.3) Income
Investment income is recognised on a time apportioned basis using the effective
interest method.
Interest income on debt securities and bank balances is accrued for on a day-to-
day basis. Interest accrued on the purchase and sale of debt securities is
excluded from the cost / proceeds and is included as investment income.
Revenue from the sale of property or property units is recognised when the risks
and rewards of ownership have been transferred to the buyer and provided that
the Group has no further substantial acts to complete under the contract.
(2.4) Expenses
Expenses are measured at the fair value of the consideration paid or payable and
are recognised in the income statement on an accruals basis.
(2.5) Cash and cash equivalents
Cash and cash equivalents are defined as cash on hand and short term deposits,
and other short-term highly liquid investments that are readily convertible to a
known amount of cash and are subject to an insignificant risk of changes in
value.
Any cash held by the Group may be held in Euro-denominated government bonds with
maximum maturities of the lesser of two years or the remaining life of the Group
and/or invested in AAA rated liquid funds. Such investments will be fair valued
to closing bid price, with movements in fair value being taken to the income
statement.
(2.6) Inventories
Land held for development potential with the intention for future sale is
accounted for under International Accounting Standard No 2 "Inventories". These
projects are included within Inventories and are stated at the lower of cost and
net realisable value. Cost comprises direct materials, direct labour costs and
those overheads that have been incurred in bringing the properties to their
present location and condition. Net realisable value represents the estimated
selling price, less all estimated costs of completion and costs to be incurred
in marketing and selling the inventories. Where net realisable value is lower
than cost, the difference is provided for as an impairment in the income
statement.
The Group has appointed Regatta Real Estate Company and REAG - Real Estate
Advisory Group S.R.L as property valuers to prepare valuations on an annual
basis. Valuations will be undertaken in accordance with the Royal Institute of
Chartered Surveyors Appraisal and Valuation Standards.
(2.7) Segmental reporting
The Directors are of the opinion that the Group is engaged in a single segment
of business, being property investment business, and in one geographical area,
Romania.
(2.8) Taxation
Up to 31 December 2007 the Company was exempt from taxation under provision of
The Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989. With effect from 1
January 2008, Guernsey restructured its tax regime and the standard rate of
income tax for companies has moved to 0%. The Company was therefore taxed at the
standard rate of 0% in Guernsey from the 1 January 2008.
Current tax arises in jurisdictions other than Guernsey, it is based on taxable
profit for the year and is calculated using tax rates that have been enacted or
substantially enacted. Taxable profit differs from net profit as reported in the
income statement because it excludes items of income or expense that are taxable
or deductible in other years temporary differences and items that are never
taxable or deductible permanent differences. Temporary differences principally
arise from using different balance sheet values for assets and liabilities than
their respective tax base values. Deferred tax is provided in respect of all
these taxable temporary differences at the balance sheet date.
Deferred tax liabilities are generally recognised for all taxable temporary
differences. Deferred tax assets are regarded as recoverable and therefore
recognised only when, on the basis of all available evidence, it is probable
that suitable taxable profits will be available against which the future
reversal of the underlying temporary differences can be deducted.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised.
(2.9) Foreign currency translation
(a) Functional and presentation currency
The functional currency of the Company is Euros as substantially all expenses
and activities relating to the investments are made in Euros.
The presentation currency of the Company and the Group for accounting purposes
is also the Euro. The financial statements are converted into Sterling on pages
42 to 48 for information purposes only.
(b) Transactions and balances
Foreign currency balances are translated into Euro at the rate of exchange
ruling on the last day of the financial period. Foreign currency transactions
are translated at the rate of exchange ruling on the date of transaction. Gains
and losses arising on currency translation are included in the Income Statement
for the period.
Items included in the financial statements of each of the Group's entities are
measured using the currency of the primary economic environment in which the
entity operates (the "functional currency").
(c) Group companies
The results and financial position of all the Group entities (none of which has
the currency of a hyperinflationary economy) that have a functional currency
different from the presentation currency are translated into the presentation
currency as follows:
(i) assets and liabilities for each balance sheet presented are translated at
the closing rate at the date of that balance sheet;
(ii) income and expenses for each income statement are translated at average
exchange rates (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 date of the
transactions); and
(iii) all resulting exchange differences are recognised as a separate component
of equity.
(2.10) Impairment
The carrying amount of the Company and the Group's assets are reviewed at each
balance sheet date to determine whether there is any indication of impairment.
If any such indication exists, the asset's recoverable amount is estimated. An
impairment loss is recognised whenever the carrying amount of an asset exceeds
its recoverable amount. Impairment losses are recognised in the income
statement.
(2.11) Financial instruments
Financial assets and financial liabilities are recognised on the Group's balance
sheet when the Group becomes a party to the contractual provisions of the
instrument. The Group shall offset financial assets and financial liabilities if
the Group has a legally enforceable right to set off the recognised amounts and
interests and intends to settle on a net basis.
(a) Financial assets
The Group's financial assets fall into the category of loans and receivables.
The Group has not classified any of its financial assets as held at fair value
through profit or loss, held to maturity or as available for sale.
(a)(i) Loans and receivables
These assets are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. They arise principally through
trade receivables and cash and cash equivalents, but also incorporate other
types of contractual monetary assets. They are initially recognised at fair
value plus transaction costs that are directly attributable to the acquisition
or issue and subsequently carried at amortised cost using the effective interest
rate method, less provision for impairment.
Impairment provisions are recognised when there is objective evidence (such as
significant financial difficulties on the part of the counterparty or default or
significant delay in payment) that the Group will be unable to collect all of
the amounts due under the terms receivable, the amount of such a provision being
the difference between the net carrying amount and the present value of the
future expected cash flows associated with the impaired receivable. For trade
receivables, such impairments directly reduce the carrying amount of the
impaired asset and are recognised against the relevant income category in the
income statement.
Cash in banks and short term deposits are carried at cost and consist of cash in
hand and short term deposits in banks with an original maturity of three months
or less.
(a) (ii) De-recognition of financial assets
A financial asset (in whole or in part) is derecognised either:
· when the Group has transferred substantially all the risks and rewards of
ownership; or
· when it has transferred and not retained substantially all the risks and
rewards and when it no longer has control over the asset or a portion of the
asset; or
· when the contractual right to receive a cash flow has expired.
(b) Financial liabilities
The Group classifies its financial liabilities as other financial liabilities at
amortised cost.
(b)(i) Financial liabilities measured at amortised cost
Other financial liabilities include trade payables and other short-term monetary
liabilities, which are initially recognised at fair value and subsequently
carried at amortised cost using the effective interest method.
(b) (ii) De-recognition of financial liabilities
A financial liability (in whole or in part) is derecognised when the Group has
extinguished its contractual obligations or it expires or is cancelled. Any gain
or loss on de-recognition is taken to the income statement.
(2.13) Trade and other payables
Trade payables are non interest bearing and are stated at their nominal value.
(2.14) Trade and other receivables
Trade and other receivables are recognised initially at fair value and
subsequently at amortised cost using the effective interest method. A provision
for impairment of trade receivables is established where there is objective
evidence that the Group will not be able to collect all amounts due according to
the original terms of the receivables. The amount of the provision is the
difference between the carrying amount of the asset and the present value of the
estimated future cashflows, discounted at the original effective interest rate.
(2.15) Investment in subsidiary undertakings
Investment in subsidiary undertakings are stated at cost less, where
appropriate, provisions for impairment.
(2.16) Borrowing costs
Borrowing costs are expensed out in the year they are incurred and are not
capitalised.
3. CHANGE IN ACCOUNTING POLICY
During the current year the Group changed the accounting policy regarding the
loans to finance the subsidiary undertaking to comply with IAS 21, The Effect of
Change in Foreign Exchange Rates. These loans are now classified as part of net
investment in subsidiary undertakings under the said IAS. Accordingly, any
foreign exchange effects on these loans are now treated as part of the equity
until the subsidiary undertakings are disposed of. Previously this foreign
exchange effect was included in the income statement for the year.
The Group believes that this change in policy will provide more reliable
financial reporting and would comply with the requirement of IAS 21, The Effect
of Change in Foreign Exchange Rates which permits such loans to be treated as
part of equity financing of such subsidiary undertakings. The prior year
comparatives have been restated to reflect this change in accounting policy. The
impact of the prior year adjustment is as illustrated below:
a) Effect on retained earnings and loss for the period as at 31 December 2007 EUR
_____________
As at 31 December 2007 as previously stated (4,254,033)
Prior period adjustment regarding revaluation of foreign exchange 1,010,717
_____________
As at 31 December 2007 as restated (3,243,316)
_____________
_____________
As previously stated Restated
b) Effect on earnings per share (cents per share) (21.73) (16.57)
c) Effect on NAV per share (Euro per share) 1.8115 1.8115
4. ADMINISTRATION FEES
Under the Administration Agreement the Administrator is entitled to receive an
annual administration fee at a rate as may be agreed in writing from time to
time between the Company and the Administrator. The present fee is 0.09% per
annum of the Net Asset Value of the Company up to GBP100 million and 0.07% of
the Net Asset Value of the Company above GBP100 million, subject to a minimum
fee during the period of GBP104,900 per annum plus disbursements.
Other administration fees are paid by the underlying subsidiaries at a rate as
may be agreed in writing from time to time between those companies and their
separately appointed administrators.
5. FORMATION EXPENSES
All expenses incurred in the formation of the Company, its subsidiaries and
joint ventures have been included as expenses in the period in which they were
incurred. The Company's principal documents require these expenses to be
written off over the life of the Company, however accounting standards do not
allow such treatment in the financial statements.
6. MANAGEMENT FEES
The Company will pay the Investment Manager a management fee of 2% per annum of
the net proceeds of the placing calculated and payable quarterly in advance. The
Investment Manager is also entitled to a management fee of 2% of any realised
but undistributed capital gains on the sale of properties, calculated and
payable quarterly in arrears.
7. PERFORMANCE FEES
The Investment Manager will receive a performance fee calculated and payable in
Sterling from the Company based on 20% of the excess of the net cash proceeds
from the sale of property over the 10% property hurdle. 50% of the performance
fees calculated will be payable to the Investment Manager within 30 days of the
receipt of the proceeds of the sale of a property. The balance will be paid at
the same time into a reserve account and be invested in Sterling money market
deposits, unless otherwise agreed between the Investment Manager and the
Company, and held pending the calculation of the overall returns on the property
portfolio at the end of the life of the Company. No performance fee is shown
within these financial statements as any provision is based on the uplift shown
in the fair value adjustment of the investment properties and no such uplift is
provided in these financial statements. If the properties were to be reflected
at fair market value a performance fee provision of EUR Nil (2007: EUR953,990)
would be provided for.
8. DIRECTORS' FEES AND EXPENSES
George Inge, Dr Flavius Baias and Paul Duquemin each receive a fee of GBP15,000
(2007: GBP15,000) per annum, Clive Simon receives a fee of GBP18,000 (2007:
GBP18,000) with the Chairman, Richard Prickett, receiving GBP20,000 (2007:
GBP20,000). The Euro equivalent of these amounts are shown in the directors'
report The Chairman and Directors are reimbursed other expenses properly
incurred by them in attending meetings and other business of the Company.
9. OTHER EXPENSES
Consolidated Company Consolidated Company
2008 Total 2008 Total 2007 Total 2007 Total
EUR EUR EUR EUR
__________ __________ __________ __________
Agents' fee - - 380,000 -
Registrar's fees (see note 10) 5,788 5,788 4,600 4,600
Audit fees 64,273 35,961 92,478 38,074
Legal and professional fees 243,209 230,727 55,849 34,336
Consultancy fees 72,215 - 68,343 67,353
Insurance costs 20,075 18,456 11,664 8,829
Statutory fees 15,444 15,444 1,477 1,477
Bank charges 45,542 4,021 3,854 2,660
Other fees and expenses 158,033 64,461 18,739 15,851
__________ __________ __________ __________
624,579 374,858 637,004 173,180
__________ __________ __________ __________
__________ __________ __________ __________
10. REGISTRAR'S FEES
Under the Registrar's Agreement the Registrar is entitled to receive an annual
fee at the rate of whichever shall be the greater of the amount of the minimum
Annual Basic Fee, currently GBP4,000 per annum, or the amount per shareholder,
currently GBP2.00, on the Register of Shareholders at the commencement of the
fee year. The Company's fee year commenced on the date of admission to AIM and
on each anniversary of that date.
11. COMMISSION PAID
In return for their services as distributors, Canacord Adams Limited and Lewis
Charles Securities Limited received a commission of 3% in 2007 of the Placing
Price of Shares placed by them pursuant to the Placing. These amounts are a
direct expense of issuing the equity of the Company and have been deducted from
the proceeds received on the share issue.
12. LOSS PER SHARE - BASIC AND DILUTED
The consolidated basic and diluted loss per Ordinary Share of 108.72 (2007
restated: 16.57) cents is based on the net loss of EUR21,282,862 (2007 restated:
EUR3,423,316) and on 19,576,405 (2007: 19,576,405) ordinary shares in issue,
being the weighted average number of shares in issue during the year.
13. INVENTORY
Ploesti Mogosoaia Total 2007
EUR EUR EUR EUR
__________ __________ __________ __________
As at 1 January 2008 15,053,592 12,954,195 28,007,787 -
Additions during the year 7,463,445 597,830 8,061,275 28,007,787
Writedowns (15,317,037) (3,152,025) (18,469,062) -
__________ __________ __________ __________
As at 31 December 2008 7,200,000 10,400,000 17,600,000 28,007,787
__________ __________ __________ __________
Net realisable value 7,200,000 10,400,000 17,600,000 35,738,491
__________ __________ __________ __________
The Group's main activity is the development and sale of residential and
commercial property. The process of obtaining zoning and permits may in itself
take some time. This period is then added to by the time taken to construct the
properties. In this time the costs of the land and the construction are recorded
in Inventories. The Group continually reviews the net realisable value of the
inventory against the cumulative costs that are held on its balance sheet. To
enable this review, management have appointed appropriately qualified personnel
to monitor and control the costs of construction.
The costs that have been incurred and are projected to be incurred are
benchmarked against those available in the market to ensure that best value is
achieved. A strict tendering process is adhered to when procuring construction
services and the costs are controlled locally on a monthly basis. In addition to
this, the Group retains Regatta Real Estate Company and REAG - Real Estate
Advisory Group S.R.L to assist them to undertake an independent assessment of
the net realisable value of its developments.
REAG - Real Estate Advisory Group S.R.L have calculated the net realisable value
of the Ploesti Project to be EUR7,200,000. However, subsequent to the year end
the equity interest in the Ploesti project was disposed of by the Group for a
nominal value. Further details on this transaction are included in note 29.
Regatta Real Estate Company in their valuation report as of 31 December 2008
have calculated the net realisable value of the Mogosoaia Project to be
EUR13,010,062 after deducting 1.5% transaction costs from the market value. The
net realisable value has been calculated by deducted selling costs from market
value as defined by the Royal Institute of Chartered Surveyors (RICS). The
approved RICS definition of market value is the "estimated amount for which a
property should exchange on the date of valuation between a willing buyer and a
willing seller in an arms length transaction after proper marketing wherein the
parties had each acted knowledgeably, prudently and without compulsion." However
following further investigation and advice, having regard to available property
price data, the value of the Project has been determined by the directors to be
EUR10,400,000.
14. INVESTMENT IN SUBSIDIARIES
Company Company
2008 2007
EUR EUR
_____________ _____________
Opening balance 9,293,000 -
Additions in the year / period
Romholdings SA - 31,000
Roproperties SARL - 6,931,000
Rominvestments SA - 2,331,000
_____________ _____________
9,293,000 9,293,000
Impairment (5,272,089) -
_____________ _____________
Closing balance 4,020,911 9,293,000
_____________ _____________
_____________ _____________
On 9 July 2007 the Company acquired Romholdings SA through the acquisition of
its entire share capital. Romholdings SA is an investment property holding
company registered and incorporated in Luxembourg, funded mainly in cash.
On 11 July 2007 the Company acquired 100% of the share capital of Roproperties
SARL an investment property holding company registered and incorporated in
Luxembourg, funded mainly in cash. Roproperties SARL has a 100% owned
subsidiary, SC Retail Park Magnolia SRL, a property development company
registered and incorporated in Romania.
On 12 July 2007 the Company acquired 100% of the share capital of Rominvestments
SA, an investment property holding company registered and incorporated in
Luxembourg, funded mainly in cash. Rominvestments SA has a 50% interest of SC
Gold Development SPV SRL, a property development company registered and
incorporated in Romania.
During the year an impairment was recognised on the investment in Roproperties
SARL as a result of the decrease in the net asset value of the subsidiary
company. These impairment losses have been recognised in the income statement
for the year. Refer to note 13 for details of the impairment on the inventory.
15. LOANS RECEIVABLE FROM SUBSIDIARY COMPANIES
Company Company
2008 2007
EUR EUR
___________ ___________
Roproperties SARL 13,898,203 9,775,816
Romholdings SA 15,197 -
Rominvestments SA 11,710,630 11,344,618
___________ ___________
25,624,030 21,120,434
___________ ___________
Impairment on loan to Roproperties SARL
and Rominvestments SA (18,538,603) -
___________ ___________
7,085,427 21,120,434
___________ ___________
___________ ___________
The loan to Rominvestments SA has been provided under the terms of an agreement
effective 8 August 2007 and is due to expire on 8 August 2013. The facility is
split into three tranches. The initial advance of EUR2,500,000 accrues interest
at a rate of 5.5% per annum. The second advance of EUR8,790,000 is interest
free. The third advance of EUR190,000 was made in the current year. The whole
facility is unsecured.
The loan to Roproperties SARL has been provided under the terms of an agreement
effective 8 August 2007 and is due to expire on 8 August 2013. The facility is
split into three tranches. The initial advances totalling EUR9,327,595 accrues
interest at a rate of 4.75% per annum. An additional advance of EUR307,405 is
interest free. There was a third advance during the current year amounting to
EUR3,554,163 accruing interest at a rate of 4.75% per annum. The whole facility
is unsecured.
An impairment has been recognised on the loan capital investment in Roproperties
SARL based on the property valuation of SC Retail Park Magnolia SRL, the
property development company which manages the Ploesti Project. An impairment
has also been recognised on loan capital investment in Rominvest SA as a result
of decrease in value of property owned by SC Gold Developments SPV SRL. These
impairment losses have been recognised in the income statement for the year.
Further details are included in notes 13 and 29 to these financial statements.
While the loan agreements regarding the above loans state that they are
repayable on demand it is the Groups' intention that they will not request
repayment of these loans until the specified loan expiry dates. As such it is
felt to be appropriate to disclose these loans as non current assets and that
these loans be treated as effective equity investments in the subsidiary
undertakings.
16. JOINT VENTURE
On 12 July 2007 the Group acquired, through the acquisition of Rominvestments
SA, 50% of the equity of SC Gold Developments SPV SRL, which holds the
development Project Mogosoaia.
The Group is entitled to a proportionate share of the income generated and a
proportionate share of the outgoings. The following amounts are included in the
Group's financial statements as a result of the proportionate consolidation of
SC Gold Developments SPV SRL.
SC Gold Developments SPV SRL 2008 2007
EUR EUR
_____________ _____________
As at 31 December 2008:
Non-current assets 2,662,053 2,064,223
Current assets 429,685 101,794
Non-current liabilities (1,153,430) (1,292,179)
Current liabilities (259,431) (356)
For the year ended 31 December 2008:
Income 46,176 420
Expense 594,782 449,222
17. TRADE AND OTHER RECEIVABLES
Consolidated Company Consolidated Company
2008 2008 2007 2007
EUR EUR EUR EUR
_____________ _____________ _____________ _____________
Debtors 906,975 - 491,002 4,939
Prepayments 195,209 148,593 89,900 13,767
_____________ _____________ _____________ _____________
1,102,184 148,593 580,902 18,706
_____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________
The ageing of these receivables is
as follows:
Less than three months 1,090,189 136,897 5,064 4,937
3 to 6 months 11,995 11,996 537,696 -
Over 6 months - - 38,142 13,769
_____________ _____________ _____________ _____________
1,102,184 148,893 580,902 18,706
_____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________
It was assessed that all of the receivables (other than those mentioned in note
15) are expected to be recovered. There is no difference between the carrying
value of trade and other receivables and their fair value.
The allocation of the carrying amount of the Group's trade and other receivables
by foreign currency is presented in note 24.
18. CASH AND CASH EQUIVALENTS
Consolidated Company Consolidated Company
2008 2008 2007 2007
EUR EUR EUR EUR
_____________ _____________ _____________ _____________
Lehman Euro Liquidity Fund - - 4,869,431 4,869,431
Blackrock Institutional Euro Fund 1,690,706 1,690,706 1,239,557 1,239,557
Cash at bank 422,046 9,239 1,148,047 753,682
_____________ _____________ _____________ _____________
2,112,752 1,699,945 7,257,035 6,862,670
_____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________
The cash equivalent investments are considered to be highly liquid, so that book
cost is considered equivalent to fair value. The weighted average interest rate
on cash balances at 31 December 2008 was 3.59% (2007: 4.14%).
19. LOANS PAYABLE
Consolidated Company Consolidated Company
2008 2008 2007 2007
EUR EUR EUR EUR
_____________ _____________ _____________ _____________
Bonhay loan 3,429,809 - - -
Unicredit loan 1,400,657 - - -
_____________ _____________ _____________ _____________
4,830,466 - - -
_____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________
A loan facility was granted by Bonhay Investments Limited to SC Retail Park
Magnolia SRL on 20 June 2008, in a maximum aggregate principle loan amount not
exceeding EUR3,000,000 for a term commencing at the drawdown date and ending on
the date falling twelve months thereafter. The rate of interest applicable to
the loan is 2.5% per month and is unsecured. The amount disclosed above includes
interest on the loan. This loan has been sold post year end, refer to note 29
for details.
Another loan facility with a maximum aggregate of EUR10,000,000 was obtained
from Unicredit Tiriac Bank S.A by SC Gold Developments SPV SRL. The applicable
rate of interest on this loan is EURIBOR plus 3.5% per annum and this loan is
repayable within 1 year. Unicredit have a first rank charge on the land and
shares of the SC Gold Developments SPV SRL.
20. PROVISIONS FOR OTHER LIABILITIES AND CHARGES
This represents a provision of amounts which are expected to be payable for
services already provided by certain property development contractors involved
in the planning and design of the Ploesti Project. Since the Group has sold the
Ploesti Project to Blackpearl Property Limited post year end, this expected
liability in respect of these creditors has been transferred to Blackpearl
Property Limited as part of the transaction. Ultimate settlement being reached
and the timing of ultimate settlement, whether or not this may entail
litigation, with these property development contractors is an issue for
Blackpearl Property Limited to address and will not impact the Group.
21. TRADE AND OTHER PAYABLES
Consolidated Company Consolidated Company
2008 2008 2007 2007
EUR EUR EUR EUR
_____________ _____________ _____________ _____________
Directors' fees 21,667 21,667 21,417 21,417
Audit fees payable 69,379 20,379 92,834 38,074
Legal fees payable 11,885 11,885 223,173 33,173
Management fees payable - - 12,358 12,358
Administration fees payable 177 - 18,000 -
Sundry creditors 66,398 7,417 15,930 932
_____________ _____________ _____________ _____________
169,506 61,348 383,712 105,954
_____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________
22. SHARE CAPITAL
2008 2007
GBP GBP
Authorised _______ _______
10,000 founder shares of GBP1 par value 10,000 10,000
_______ _______
Unlimited number of ordinary shares of no par value - -
_______ _______
Treatment of ordinary shares as equity
As the Company has a fixed life, at the end of which its assets will be
liquidated and distributed to its shareholders, under IFRS the amounts due to
the shareholders of the Company should be shown as a financial liability of the
Company. This was not the intention of the Company at the time of its
formation.
Issued and fully paid 2008 2008 2007 2007
Shares EUR Shares EUR
_____________ _____________ _____________ _____________
Founder shares
Opening balance 2 3 - -
Shares issued during the year / period - - 2 3
_____________ _____________ _____________ _____________
Closing balance 2 3 2 3
_____________ _____________ _____________ _____________
Ordinary shares
Opening balance 19,576,405 - - -
Shares issued during the year / period - - 19,576,405 -
_____________ _____________ _____________ _____________
Closing balance 19,576,405 - 19,576,405 -
_____________ _____________ _____________ _____________
The Founder shares may only be issued at par and only to the Investment Manager
or nominee of the Investment Manager. The rights attached to the Founder are as
follows:
a) The Founder shares carry voting rights only when there are no ordinary
shares in issue;
b) The Founder shares do not carry any right to dividends or distributions;
and
c) The Founder shares are subject to requisition by the Company when they
are not held by the Investment Manager.
Ordinary shares of nil par value carry no right to fixed income.
23. NAV PER SHARE
Consolidated Consolidated
2008 2007
EUR EUR
________________ ________________
Net Asset Value attributable to ordinary shareholders 12,853,943 35,462,009
Number of shares in issue 19,576,405 19,576,405
Net asset value per share 0.6566 1.8115
The Net Asset Value per Ordinary Share is based on the Net Asset Value at the
balance sheet date and on 19,576,405 (2007: 19,576,405) Ordinary Shares, being
the number of shares in issue at the balance sheet date.
24. FINANCIAL RISK MANAGEMENT
Financial risk factors
The Group's principal financial instruments comprise intercompany trading
balances with subsidiaries and joint ventures, trade receivables, trade
payables, cash and cash equivalents and any loans.
The Group's activities expose it to a variety of risks from its use of financial
instruments which include:
- market risk (including interest rate risk, price risk and currency risk)
- credit risk
- liquidity risk
The accounting policy with respect to these financial instruments is disclosed
in note 2.
The Board of Directors has overall responsibility for the establishment and
oversight of the Group's risk management framework. This note presents
information about the Group's exposure to each of the above risks and the Board
of Directors objectives, policies and processes for measuring and managing these
risks.
Price risk
The Group is exposed to price risk as a result in any change in the underlying
inventory held, however inventory is not a financial instrument.
Interest rate risk
The majority of the Group's financial assets are interest bearing. With the
exception of loans within the Group, interest-bearing financials assets and
interest-bearing financial liabilities mature or reprice in the short-term, no
longer than twelve months. Trade and other receivables and payables are
interest free.
As a result the Group is subject to exposure to fair value interest rate risk
due to fluctuations in the prevailing levels of market interest rates.
In respect of income-earning financial assets and interest-bearing financial
liabilities, the following table indicates their effective interest rates at the
balance sheet date and the periods in which they re-price.
Interest rate Total 6 months 6 -12 Greater than
2008 Group % EUR or less months 1 year
EUR EUR EUR
_______________ _______________ _______________ _______________ _______________
Cash and cash
equivalents 3.59 2,112,752 2,112,752 - -
Bonhay loan 30.00 3,429,809 - 3,429,809 -
EURIBOR
Unicredit loan +3.5% 1,400,657 - 1,400,657 -
Interest rate Total 6 months 6 -12 Greater than
2008 Company % EUR or less months 1 year
EUR EUR EUR
_______________ _______________ _______________ _______________ _______________
Cash and cash
equivalents 4.46 1,699,945 1,699,945 - -
Loans receivable from
subsidiary companies:
Rominvestments SA 5.50 2,500,000 - - 2,500,000
A 100 basis points change in interest rate would increase/decrease the net
interest expense/income by EUR26,797 for the Group and EUR61,462 for the
Company.
Interest rate Total 6 months 6 -12 Greater than
2007 Group % EUR or less months 1 year
EUR EUR EUR
_______________ _______________ _______________ _______________ _______________
Cash and cash 3.91 7,257,035 7,257,035 - -
equivalents
Interest rate Total 6 months 6 -12 Greater than
2007 Company % EUR or less months 1 year
EUR EUR EUR
_______________ _______________ _______________ _______________ _______________
Cash and cash 4.14 6,862,670 6,862,670 - -
equivalents
Loans receivable
from subsidiary companies
Rominvestments SA 5.50 2,500,000 - - 2,500,000
Roproperties SARL 4.75 9,327,595 - - 9,327,595
The Group may invest in Euro denominated government bonds with maximum
maturities of the lesser of two years or the remaining life of the Company
and/or invest in AAA rated liquidity funds. Any change to interest rates
relevant for a particular security may result in income either increasing or
decreasing. The Group has chosen to invest in high liquidity, floating rate
instruments to mitigate the risk that similar returns would be unavailable
on the expiry of contracts.
The overall interest rate risks are monitored by the Board of Directors.
The cash and cash equivalent instruments subject to interest rate movements
are disclosed in note 18 and are all at variable rates.
Currency risk
Currency risk is the risk that the income statement and balance sheet can be
affected by currency translation movements where the fair value or the
future cash flows of a financial instrument will fluctuate because of
changes in foreign exchange rates. The Board consider that the Group's
exposure to currency risk is minimal, with the exception of book gains and
losses in the underlying subsidiaries, as the majority of the Group's
transactions are made in Euros and the books and records are kept in Euros.
Although approximately 30% of the net assets are in foreign currency at the
balance sheet date, the Group has sold EUR2.96 million of the liabilities
post year end through sale of its subsidiary and thereby minimising its
foreign currency exposure.
The Romanian Leu is expected to be replaced by the Euro in 2014.
The tables below summarise the Group and Company exposures to foreign
currency risk at 31 December 2008 and 2007 in respect of its financial
instruments. The assets and liabilities are included in the table below, in
Euro's, categorised by the currency at their carrying amount.
2008
Group CHF GBP RON Total
__________ __________ __________ __________
Trade and other receivables - - 907,991 907,991
Cash and cash equivalents (386) 939 2,762 3,315
__________ __________ __________ __________
Total assets (386) 939 910,753 911,306
__________ __________ __________ __________
Trade and other payables (24,117) (98,463) (40,924) (163,504)
Provision for other liabilities - - (2,961,018) (2,961,018)
and charges
Loans - - (1,400,657) (1,400,657)
__________ __________ __________ __________
Total liabilities (24,117) (98,463) (4,402,599) (4,525,179)
__________ __________ __________ __________
Net assets (24,503) (97,524) (3,491,846) (3,613,873)
__________ __________ __________ __________
__________ __________ __________ __________
2007
Group CHF GBP RON Total
__________ __________ __________ __________
Trade and other receivables - 13,766 562,067 575,833
Cash and cash equivalents - 514,567 16,390 530,957
__________ __________ __________ __________
Total assets - 528,333 578,457 1,106,790
__________ __________ __________ __________
Trade and other payables (23,400) (55,995) (15,354) (94,749)
Loans - - (699,926) (699,926)
__________ __________ __________ __________
Total liabilities (23,400) (55,995) (715,280) (794,675)
__________ __________ __________ __________
Net assets (23,400) 472,338 (136,823) 312,115
__________ __________ __________ __________
__________ __________ __________ __________
2008 2007
Company GBP GBP
________ _____________ _____________
Trade and other receivables (1,069) 13,767
Cash and cash equivalents 939 514,567
_____________ _____________
Total assets (130) 528,334
_____________ _____________
Trade and other payables (98,463) (67,770)
_____________ _____________
Total liabilities (98,463) (67,770)
_____________ _____________
Net assets (98,593) 460,564
_____________ _____________
_____________ _____________
The following significant exchange rates were applied during the year:
Euro Average rate Reporting date Average rate Reporting date
spot rate spot rate
______________ ______________ ______________ ______________
2008 2008 2007 2007
RON 1 3.7014 4.0299 3.3357 3.5753
GBP 1 0.8019 0.9595 1.4614 1.3598
CHF 1 1.5790 1.4911 1.6432 1.6564
A 10 percent strengthening / weakening of the Euro against the above currencies
at 31 December 2008 would have increased / decreased net current assets by the
amounts shown below. This analysis assumes that all other variables, in
particular interest rates, remain constant.
Group Company Group Company
2008 2008 2007 2007
EUR EUR EUR EUR
______________ ______________ ______________ ______________
RON 1 (349,185) - (13,682) -
GBP 1 (9,752) (9,859) 47,234 46,056
CHF 1 (2,450) - (2,340) -
Liquidity risk
Liquidity risk is the risk that arises when the maturity of assets and
liabilities does not match. An unmatched position potentially enhances
profitability, but can also increase the risk of losses. The Group has
procedures with the object of minimising such losses such as maintaining
sufficient cash and other highly liquid current assets and will negotiate
additional credit facilities as and when required in order to ensure that
the Group can meet its liabilities as and when these fall due. Cash and cash
equivalents are placed with financial institutions on a short term basis
reflecting the Group's desire to maintain a high level of liquidity to
enable timely completion of investment transactions.
The ability of the Group to complete on purchases is dependent on the amount
of equity available at the time, which may not be the same as are currently
available. A combination of higher interest rates, a deteriorating economy
(with higher unemployment) and prolonged deflationary conditions, may result
in falling capital values combined with falling rents and / or void periods.
A summary table with the maturity of financial assets and financial
liabilities is presented below:
Less than 6 to 12 months Greater than
2008 Group 6 months 12 Months
EUR EUR EUR
__________ _____________ _____________ _____________
Financial assets
Trade and other receivables 906,975 - -
Cash and cash equivalents 2,112,752 - -
_____________ _____________ _____________
3,019,727 - -
_____________ _____________ _____________
Financial liabilities
Loan payable - 4,830,466 -
Provision for other liabilities and charges 2,961,018 - -
Trade and other payables 169,506 - -
_____________ _____________ _____________
3,130,524 4,830,466 -
_____________ _____________ _____________
_____________ _____________ _____________
Less than 6 to 12 months Greater than
2008 Compnay 6 months 12 Months
EUR EUR EUR
__________ _____________ _____________ _____________
Financial assets
Trade and other receivables - - -
Cash and cash equivalents 1,699,945 - -
_____________ _____________ _____________
1,699,945 - -
_____________ _____________ _____________
_____________ _____________ _____________
Financial liabilities
Trade and other payables 61,348 - -
_____________ _____________ _____________
61,348 - -
_____________ _____________ _____________
Less than 6 to 12 months Greater than
2007 Group 6 months 12 Months
EUR EUR EUR
__________ _____________ _____________ _____________
Financial assets
Trade and other receivables 542,760 - 38,142
Cash and cash equivalents 7,257,035 - -
_____________ _____________ _____________
7,799,795 - 38,142
_____________ _____________ _____________
_____________ _____________ _____________
Financial liabilities
Trade and other payables 383,712 - -
_____________ _____________ _____________
383,712 - -
_____________ _____________ _____________
_____________ _____________ _____________
Less than 6 to 12 months Greater than
2007 Group 6 months 12 Months
EUR EUR EUR
__________ _____________ _____________ _____________
Financial assets
Trade and other receivables 4,937 - 13,769
Cash and cash equivalents 6,862,670 - -
_____________ _____________ _____________
6,867,607 - 13,769
_____________ _____________ _____________
_____________ _____________ _____________
Financial liabilities
Trade and other payables 105,954 - -
_____________ _____________ _____________
105,954 - -
_____________ _____________ _____________
_____________ _____________ _____________
Credit risk
Credit risk is the risk that a counterparty will be unwilling or unable to meet
a commitment that it has entered into with the Group. The Group's exposure to
credit risk relates primarily to cash and cash equivalents. The
Group has tried to mitigate this risk by investing in high liquidity, AAA rated
instruments.
The Group holds cash and liquid resources as well as having receivables and
payables that arise directly from its operations. The Group's investment
activities expose it to various types of risk associated with the property
market and development of real estate projects. Such risks include the risk
that the developer of a site may become insolvent and unable to complete a
project.
Fair Values
Estimate of fair values
Management deems that there is no significant difference between the fair values
of financial assets and liabilities and their carrying value in the financial
statements unless otherwise stated in these financial statements.
25. RELATED PARTY DISCLOSURES
Transactions with, and amounts due at year end to Directors, the Investment
Manager, the Administrators, the subsidiaries and joint ventures are as
disclosed in the Directors' report and throughout the financial statements.
26. CONTROLLING PARTY
In the opinion of the Directors there is no immediate or ultimate controlling
party as no one party has the ability to direct the financial and operating
policies of the Company with a view to gaining economic benefits from their
direction.
27. RECONCILIATION OF NAV PER THE CONSOLIDATED FINANCIAL STATEMENTS TO PUBLISHED
NAV
2008 2008 2007 2007
EUR Per share EUR Per share
____________ ____________ ____________ ____________
Net Asset Value per financial statements 12,853,943 0.657 35,462,009 1.811
Add back:
Adjustment to value of properties (1,615,469) (0.083) 6,003,168 0.307
Adjustment to performance fee - - (953,990) (0.049)
Preliminary expenses 872,613 0.045 1,384,209 0.071
____________ ____________ ____________ ____________
Published Net Asset Value 12,111,087 0.619 41,895,397 2.140
____________ ____________ ____________ ____________
____________ ____________ ____________ ____________
An adjustment is required within the financial statements to record the value of
the inventory / property assets from fair value, as used for the published Net
Asset Value, to the lower of cost and net realisable value as required under
International Accounting Standard 2 "Inventories".
The Company's principal documents require the dealing valuation of the Company's
net assets to include preliminary expenses incurred in the establishment of the
Company, such expenses to be amortised over the expected life of the Company.
However, this accounting treatment is not permitted for financial reporting
purposes and has been adjusted accordingly within these financial statements.
Directors have taken a prudent view and have valued the Ploesti Project at nil
value, which is different from the valuation carried out under note 13 to these
financial statements. This is in accordance with the admission document which
allows directors to use their judgement in these circumstances.
28. CAPITAL COMMITMENTS
The Group has no outstanding commitments at 31 December 2008 (2007: Nil).
29. EVENTS AFTER THE BALANCE SHEET DATE
SALE OF PLOESTI PROJECT
At a Board Meeting on the 11 March 2009 the directors decided to sell SC Retail
Park Magnolia SRL (Magnolia), a wholly owned Romanian based property development
company, which owns the Ploesti Project, to Blackpearl Properties Limited
(Blackpearl).
At 31 December 2008 this development project at Ploesti was held on the Group's
balance sheet at a net realisable value of EUR7,200,000 on the basis of a
valuation carried out by REAG - Real Estate Advisory Group S.R.L, and adopted by
the directors as being the IFRS accounting valuation of this development
property.
In preparing these financial statements, having regard to the post year end sale
of Magnolia and the ongoing economic uncertainties, the directors were of the
view that the Ploesti Project should be written down in full.
However, the disposal of Magnolia has been treated as a non adjusting post
balance sheet event to accord with International Financial Reporting Standards.
As a result of the sale of Magnolia the Group retains no equity interest in this
company, and also disposed of all assets and liabilities in connection with the
development project at Ploesti, including those in respect of the EUR3,429,809
Bonhay loan (see note 19) and provisions made in respect of amounts expected to
be settled with certain property development contractors of EUR2,961,018. Under
this disposal arrangement, Magnolia has been sold for a nominal consideration of
200 RON for share capital and a consideration for the inter company loan being
deferred consideration at the present value of the loan equal to EUR12,538,610
arrived at by discounting the loan receivable of EUR14,723,513 at an assumed
market rate of 10% over a period of 3 years. The loan has been treated as
deferred consideration for the purposes of the accounting for this sale
transaction. Based on these assumptions a potential gain of EUR10,923,143 is
generated, however there can be no certainty over future cashflows for the
receipt of the deferred consideration as this is dependent on any future cash
generation by Blackpearl in being able to repay the loan receivable. The
assumptions used to calculate this potential gain would be reassessed on a
regular basis to confirm their continued appropriateness. Any cash repayments,
if and when received, will be applied by Roproperties against the deferred
consideration receivable from Blackpearl.
In addition Roproperties also has the option to acquire 50% of the share capital
of Magnolia, for a nominal consideration, this option can be exercised at any
time within 3 years from the pre-sale and purchase agreement dated 12 March
2009, while the loan from Magnolia remains outstanding. Should this loan be
repaid by Magnolia within a 3 year period, then the option is exercisable at any
time within 6 months from the date when the above mentioned loan has been repaid
in full. Two of the Group's managers from Lewis Charles Securities Ltd have
joined the Board of Magnolia, as non-voting directors, to represent the Group's
interests.
TERMINATION OF MANAGEMENT AGREEMENT
On 31 March 2009, the Group announced the termination of the management
agreement dated 27 July 2007 with Lewis Charles Securities Limited. The notice
period will start from 2 August 2009 and, accordingly, termination will take
effect on 2 February 2010. As at the date of publication of these financial
statements the Board has not announced the appointment of new investment
manager.
THE FOLLOWING PAGES DO NOT FORM PART OF THE
AUDITED FIANCIAL STATEMENTS OF THE COMPANY
AND ARE PRESENTED FOR INFORMATION PURPOSES ONLY
Consolidated income statement
Restated into Pounds Sterling for information purposes only
for the year ended 31 December 2008
31 December 31 December
2008 2007
Restated
GBP GBP
_________________ _________________
Investment income 149,161 84,797
_________________ _________________
Operating income 149,161 84,797
_________________ _________________
Expenditure
Administration fees 177,042 69,576
Management fees 544,190 209,582
Formation expenses - 1,133,112
Directors' fees and expenses 98,796 30,305
Other expenses 500,850 435,886
Loss on foreign currency exchange 622,678 1,148,335
Impairment of inventory 14,810,341 -
_________________ _________________
Total expenditure 16,753,897 3,026,796
_________________ _________________
Net operating loss (16,604,736) (2,941,999)
Interest receivable 11,267 31,068
Interest payable (473,258) -
_________________ _________________
Net finance (expenditure) / income (461,991) 31,068
Loss before tax (17,066,727) (2,910,931)
Taxation - -
_________________ _________________
Loss for the year/ period (17,066,727) (2,910,931)
_________________ _________________
_________________ _________________
Loss per share - basic and
diluted (pence per share) (87.18) (14.87)
Company income statement
Restated into Pounds Sterling for information purposes only
for the year ended 31 December 2008
31 December 31 December
2008 2007
GBP GBP
_________________ _________________
Investment income 92,197 84,797
_________________ _________________
Operating income 92,197 84,797
_________________ _________________
Expenditure
Administration fees 110,390 57,259
Management fees 544,190 209,582
Formation expenses - 1,014,836
Directors' fees and expenses 80,686 30,305
Other expenses 300,599 118,503
Loss on foreign currency exchange 15,062 398,431
Impairment on loan to subsidiary companies 19,093,794 -
_________________ _________________
Total expenditure 20,144,721 1,828,916
_________________ _________________
Net operating loss (20,052,524) (1,744,119)
Interest receivable 570,100 150,797
Net finance income 570,100 150,797
_________________ _________________
Loss for the year / period (19,482,424) (1,593,322)
_________________ _________________
_________________ _________________
Loss per share - basic and
diluted (pence per share) (99.52) (8.14)
Consolidated balance sheet
Restated into Pounds Sterling for information purposes only
as at 31 December 2008
31 December 31 December
2008 2007
Restated
GBP GBP
_________________ _________________
Assets
Non current assets
Inventory 16,843,904 20,596,990
_________________ _________________
Total non current assets 16,843,904 20,596,990
_________________ _________________
Current assets
Trade and other receivables 1,054,834 427,197
Cash and cash equivalents 2,021,988 5,336,840
_________________ _________________
Total current assets 3,076,822 5,764,037
_________________ _________________
Total assets 19,920,726 26,361,027
_________________ _________________
_________________ _________________
Equity
Capital and reserves attributable to
equity holders of the group
Issued capital and reserves 12,301,738 26,078,842
_________________ _________________
Total equity 12,301,738 26,078,842
_________________ _________________
Liabilities
Short term loans payable
Short term loans payable 4,622,949 -
Trade and other payables 162,224 282,183
_________________ _________________
Total current liabilities 4,785,173 282,183
_________________ _________________
_________________ _________________
Provision for other liabilities and charges 2,833,813 -
Non current liabilities
Founder shares 2 2
_________________ _________________
Total liabilities 7,618,988 282,185
_________________ _________________
Total equity and liabilities 19,920,726 26,361,027
_________________ _________________
_________________ _________________
NAV per ordinary share (pence per share) 62.84 133.22
NAV per ordinary share at launch (pence per share) 140.00 140.00
Company balance sheet
Restated into Pounds Sterling for information purposes only
as at 31 December 2008
31 December 31 December
2008 2007
GBP GBP
_________________ _________________
Assets
Non current assets
Investment in subsidiaries 3,848,173 6,834,093
Loans receivable from subsidiary companies 6,781,037 15,532,015
_________________ _________________
Total non current assets 10,629,210 22,366,108
_________________ _________________
Current assets
Trade and other receivables 142,209 13,756
Cash and cash equivalents 1,626,915 5,046,823
_________________ _________________
Total current assets 1,769,124 5,060,579
_________________ _________________
Total assets 12,398,334 27,426,687
_________________ _________________
_________________ _________________
Equity
Capital and reserves attributable to
equity holders of the company
Issued capital and reserves 12,339,620 27,348,766
_________________ _________________
Total equity 12,339,620 27,348,766
_________________ _________________
_________________ _________________
Liabilities
Current liabilities
Trade and other payables 58,712 77,919
Non current liabilities
Founder shares 2 2
_________________ _________________
Total liabilities 58,714 77,921
_________________ _________________
Total equity and liabilities 12,398,334 27,426,687
_________________ _________________
_________________ _________________
Statements of changes in equity
for the year ended 31 December 2008
Restated into Pounds Sterling for information purposes only
Consolidated 2008 Share Foreign Share Revenue Total 31
Capital exchange premium Reserve December 2007
reserve Restated
GBP GBP GBP GBP GBP GBP
As at 31 December 2007 - 2,405,015 26,584,758 (2,910,931) 26,078,842 -
Issue of ordinary shares - - - - - 27,406,967
Commissions payable on - - - - - (822,209)
issue of ordinary shares
Loss for the year / - - - (17,066,727) (17,066,727) (2,910,931)
period
Foreign exchange - - - 3,289,623 3,289,623 2,405,015
adjustment arising on
translation to Sterling
_______________________________________________________________________________
As at 31 December 2008 - 2,405,015 26,584,758 (16,688,035) 12,301,738 26,078,842
_______________________________________________________________________________
_______________________________________________________________________________
Company 2008 Share Foreign Share Revenue Total 31
Capital exchange premium Reserve December 2007
reserve
GBP GBP GBP GBP GBP GBP
As at 31 December 2007 - - 26,584,758 764,008 27,348,766 -
Issue of ordinary shares - - - - - 27,406,967
Commissions payable on - - - - - (822,209)
issue of ordinary shares
Loss for the year / - - - (19,482,424) (19,482,424) (1,593,322)
period
Foreign exchange - - - 4,473,278 4,473,278 2,357,330
adjustment arising on
translation to Sterling
_______________________________________________________________________________
As at 31 December 2008 - - 26,584,758 (14,245,138) 12,339,620 27,348,766
_______________________________________________________________________________
_______________________________________________________________________________
Consolidated cash flow statement
Restated into Pounds Sterling for information purposes only
for the year ended 31 December 2008
31 December 31 December
2008 2007
Restated
GBP GBP
Loss for the year / period (17,066,727) (2,910,931)
Adjustment for:
Impairment of inventory 14,810,341 -
Net finance expense / (income) 461,991 (31,068)
_______________ _______________
Operating cash flows before movements in working capital (1,794,395) (2,941,999)
Increase in trade and other receivables (627,637) (427,197)
(Decrease) / increase in trade and other payables (119,959) 282,185
_______________ _______________
Cash used in operations 2,541,991 (3,087,011)
Interest received 11,267 31,068
Interest paid (473,258) -
_______________ _______________
Net cash outflow from operating activities (3,003,982) 31,068
_______________ _______________
Investing activities
Investment in inventory (8,223,442) (20,596,990)
_______________ _______________
Net cash outflow from investing activities (8,223,442) (20,596,990)
_______________ _______________
Financing activities
Proceeds on issue of shares - 27,406,967
Costs incurred on issue of shares - (822,209)
Proceeds from loans 4,622,949 -
_______________ _______________
Net cash inflow from financing activities 4,622,949 26,584,758
_______________ _______________
(Decrease) / increase in cash and cash equivalents (6,604,475) 2,931,824
for the year / period
Opening cash and cash equivalents 5,336,840 -
Effect of foreign exchange rates 3,289,623 2,405,016
_______________ _______________
Closing cash and cash equivalents 2,021,988 5,336,840
_______________ _______________
_______________ _______________
Company cash flow statement
Restated into Pounds Sterling for information purposes only
for the year ended 31 December 2008
31 December 31 December
2008 2007
GBP GBP
Loss for the year / period (19,482,424) (1,593,322)
Adjustment for:
Net finance income (570,100) (150,797)
Impairment of loan to subsidiary company 19,093,794
Operating cash flows before movements (958,730) (1,744,119)
in working capital
Increase in trade and other receivables (128,453) (13,756)
(Decrease) / increase in trade and other payables (19,207) 77,921
_______________ _______________
Cash used in operations (1,106,390) (1,679,954)
Interest received 570,100 150,797
_______________ _______________
Net cash outflow from operating activities (536,290) (1,529,157)
Investing activities
Investment in subsidiaries 2,985,920 (6,834,093)
Issue of loans to subsidiary companies (10,342,816) (15,532,015)
_______________ _______________
Net cash outflow from investing activities (7,893,186) (22,366,108)
_______________ _______________
Financing activities
Proceeds on issue of shares - 27,406,967
Cost of issuing ordinary shares - (822,209)
_______________ _______________
Net cash inflow from financing activities - 26,584,758
_______________ _______________
(Decrease) / increase in cash and cash (7,893,186) 2,689,493
equivalents for the year / period
Exchange differences arising on translation to Sterling 4,473,278 2,357,330
Opening cash and cash equivalents 5,046,823 -
_______________ _______________
Closing cash and cash equivalents 1,626,915 5,046,823
_______________ _______________
_______________ _______________
Grafico Azioni Lewis Char. (See LSE:RPF) (LSE:LCSR)
Storico
Da Mag 2024 a Giu 2024
Grafico Azioni Lewis Char. (See LSE:RPF) (LSE:LCSR)
Storico
Da Giu 2023 a Giu 2024
