TIDMOTM
RNS Number : 7374Y
Ottoman Fund Limited (The)
27 February 2013
THE OTTOMAN FUND LIMITED (the "Company")
Final results for the year ended 31 August 2012
The Company is pleased to announce as follows its final results
for the year ended 31 August 2012, a full copy of which is
available on the Company's website: www.theottomanfund.com.
Enquiries:
N+1 Singer
James Maxwell 020 7496 3000
Vistra Secretaries Limited 01534 504 700
Company Secretary
Chairman's Statement
Dear Shareholders:
Our net asset value per share as at 31 August 2012 was 63.9
pence as compared with 70.6 pence as at 29 February 2012. The
primary reason for the reduction in NAV is the distribution of
GBP7.48 million over the period, primarily the proceeds of the
Kazikli sale. The 31 August net asset value also reflects
write-downs in the carrying values of Riva and Bodrum. As I have
explained previously, for each valuation period we retain two
appraisers, BNP Paribas (formerly Savills) and TSKB, to each
independently appraise the value of our properties. We have
historically relied on the Savills valuations for the disclosure in
our financial statements and the TSKB valuation as a check on the
Savills one. Historically both valuation companies have tended to
reach similar conclusions. Over the last two valuation periods,
however, the valuations have diverged substantially so we have used
an average of the two. We and our local advisors believe that the
average of the two valuations most closely approximates what we
would expect to realize upon sale or development.
BNP Paribas TSKB Average Average
31 August 2012 31 August 2012 31 August 2012 31 August 2011
($) ($) ($) ($)
---------- ---------------- ---------------- ---------------- ----------------
Riva 77,500,000 111,050,000 94,275,000 110,675,000
---------- ---------------- ---------------- ---------------- ----------------
Bodrum 28,800,000 34,640,000 31,720,000 34,536,000
---------- ---------------- ---------------- ---------------- ----------------
Alanya 6,032,000 6,553,000 6,292,500 9,189,500
---------- ---------------- ---------------- ---------------- ----------------
TOTAL 112,332,000 152,243,000 132,287,500 154,400,500
========== ================ ================ ================ ================
An issue we have faced in valuing Riva and Bodrum has been a
lack of comparable transactions. For example, until recently the
last sale of a substantial plot of Riva land was the Ottoman
purchase in 2006. Following the balance sheet date, we have
received information that a single buyer purchased several plots
totalling 60,000 m(2) of land approximately 2.5 km from our
southern parcel. The transactions were completed at different
prices but averaged $275 m(2). By contrast, we value our Riva land
at $101 m(2). Although this land is not entirely comparable with
our Riva asset the observable differences do not seem to explain
the wide variance. We will see how the valuers take this
transaction into account when they complete our February 2013
valuation.
We are well along in negotiations with one of the leading
Turkish developers to develop the Riva asset and share in the
revenues. Because of language and other issues, the contract
negotiation has taken longer than expected. We continue to have
serious expressions of interest for the Bodrum asset. Reputable
developers and investors in the region have put resources into
evaluating the asset but have ultimately backed away for various
reasons. Since I wrote you last, we have closed the sale of our
interest in Kazikli and received the $9.5 million we were promised.
We also continue to sell units at Alanya, and during calendar year
2012 have sold eleven units with thirty-nine available for sale.
Alanya sales were slower this year than last primarily because of
issues regarding Turkish legislation, which have now been
rectified, and market conditions in Russia.
Demand in Turkey for property assets remains robust. I expect
that we will eventually receive fair value for our assets. I look
forward to writing again when we release our semi-annual report for
the period ended 28 February 2013.
Respectfully yours,
John D. Chapman
Chairman
25 February 2013
Consolidated Statement of Comprehensive Income
For the year ended 31 August 2012
Year ended Year ended
31 August 31 August
2012 2011
notes GBP GBP
Revenue
Finance income 194,446 153,089
Profit on sale of inventory 10 274,426 -
Profit on sale of joint venture 14 386,897 -
Total revenue 855,769 153,089
Operating expenses
Management/advisory fee 4 (217,635) (311,890)
Other operating expenses 5 (755,211) (904,768)
Inventory impairment 10 (5,817,026) (4,144,485)
Loan impairment 11 (426,055) (2,481,093)
Total operating expenses (7,215,927) (7,842,236)
Foreign exchange losses 12 (551,657) (1,318,641)
Loss before tax (6,911,815) (9,007,788)
Tax charge 6 (131,022) (13,227)
Loss for the year (7,042,837) (9,021,015)
---------- ----------
Other comprehensive income:
Foreign exchange on subsidiary translation 56,106 (284,154)
Other comprehensive income/(loss) for the year 56,106 (284,154)
---------- ----------
Total comprehensive loss for the year (6,986,731) (9,305,169)
---------- ----------
Loss attributable to:
Equity shareholders of the Company (7,042,815) (9,021,014)
Minority interests (22) (1)
---------- ----------
(7,042,837) (9,021,015)
---------- ----------
Total comprehensive loss attributable to :
Equity shareholders of the Company (6,986,732) (9,305,157)
Minority interests 1 (12)
---------- ----------
(6,986,731) (9,305,169)
---------- ----------
Basic and diluted earnings per share (pence) 7 (5.23) (6.69)
All items in the above statement derive from continuing
operations.
Consolidated Statement of Financial Position
As at 31 August 2012
2012 2011
notes GBP GBP
Assets
Non-current assets
Intangible assets 8 1,438 2,180
Plant and equipment 9 2,863 3,949
Inventories 10 78,635,982 89,500,205
Loans and receivables 11 3,870,603 4,800,000
------------ -------------
82,510,886 94,306,334
Current assets
Other receivables 15 649,558 944,508
Cash and cash equivalents 20 3,069,128 7,180,340
------------ -------------
3,718,686 8,124,848
Total assets 86,229,572 102,431,182
------------ -------------
Liabilities
Current liabilities
Advances received - (1,461,165)
Other payables 16 (77,393) (351,100)
(77,393) (1,812,265)
Net assets 86,152,179 100,618,917
------------ -------------
Equity
Share capital 17 120,003,007 127,483,015
Retained earnings 18 (33,839,300) (26,796,485)
Translation reserve (11,540) (67,646)
------------ -------------
Equity attributable to owners of the parent 86,152,167 100,618,884
Minority interests' equity 12 33
------------ -------------
Total equity 86,152,179 100,618,917
------------ -------------
Net asset value per ordinary share (pence) 19 63.9 74.7
Consolidated Statement of Changes
in Equity
Share Retained Translation Minority
capital earnings reserve interest Total
GBP GBP GBP GBP GBP
For the year ended
31 August 2012
As at 1 September 2011 127,483,015 (26,796,485) (67,646) 33 100,618,917
Return of capital (7,480,008) - - - (7,480,008)
Loss for the year - (7,042,815) - (22) (7,042,837)
Foreign exchange on
subsidiary translation - - 56,106 1 56,107
At 31 August 2012 120,003,007 (33,839,300) (11,540) 12 86,152,179
----------- ------------- ------------- --------------- -----------
For the year ended
31 August 2011
As at 1 September 2010 127,483,015 (17,775,471) 216,508 45 109,924,097
Loss for the year - (9,021,014) - (1) (9,021,015)
Foreign exchange on
subsidiary translation - - (284,154) (11) (284,165)
At 31 August 2011 127,483,015 (26,796,485) (67,646) 33 100,618,917
----------- ------------- ------------- --------------- -----------
Consolidated Statement of Cash Flows
Notes Year ended Year ended
31 August 31 August
2012 2011
GBP GBP
Cash flow from operating activities
Net loss (7,042,837) (9,021,015)
Adjustments for:
Interest (194,446) (153,089)
Tax 131,022 -
Depreciation 9 2,092 3,599
Amortisation 8 742 507
Impairment of inventory 10 5,817,026 4,144,485
Impairment of loan 11 426,055 2,481,093
Profit on sale of inventory 10 (274,426) -
Profit on sale of joint venture 14 (386,897) -
(1,521,669) (2,544,420)
Net foreign exchange losses /(gains) 290,103 (506,904)
Decrease in other receivables 294,950 110,559
(Decrease)/increase in payables (273,707) 16,048
Net cash outflow from operating activities before interest, depreciation,
amortisation and
tax (1,210,323 ) (2,924,717 )
Finance income received 194,446 153,089
Tax paid (131,022) -
Net cash outflow from operating activities (1,146,899) (2,771,628)
Cash flow from investing activities
Advances on sale received - 1,461,165
Purchase of inventories 10 (7,432) (1,170,357)
Proceeds on sale of inventories 4,548,240 -
Purchase of plant and equipment (1,006) -
Repayment of loan 11 - 510,654
------------ --- ------------ ---
Net cash inflow from investing activities 4,539,802 801,462
Cash flow from financing activities
Return of Capital 17 (7,480,008) -
------------ ------------ ---
Net cash outflow from financing activities (7,480,008) -
Net decrease in cash and cash equivalents (4,087,105) (1,970,166)
Cash and cash equivalents at start of the year 7,180,340 9,249,402
Effect of foreign exchange rates 12 (24,107) (98,896)
------------ ------------
Cash and cash equivalents at end of the year 3,069,128 7,180,340
------------ --- ------------ ---
The accompanying notes are an integral part of the financial
statements.
Notes to the financial statements
1. General information
The Ottoman Fund Limited has invested in Turkish land and
new-build residential property in major cities and coastal
destinations aimed at both the domestic and tourist markets.
The Company is a limited liability company domiciled in Jersey,
Channel Islands.
The Company is quoted on the AIM market of the London Stock
Exchange plc.
These consolidated financial statements have been approved by
the Board on 14 February 2013.
2. Accounting policies
The consolidated financial statements of the Group for the year
ended 31 August 2012 comprise the Company and its subsidiaries,
listed in note 13, (together, the "Group") and have been prepared
in accordance with International Financial Reporting Standards
("IFRS") issued by the International Accounting Standards Board
("IASB") and interpretations issued by the International Financial
Reporting Committee of the IASB ("IFRIC").
No new standards or amendments to standards were issued which
were relevant to the Group and applicable for the year under
review.
(a) Basis of preparation
The Company has cash and cash equivalents in excess of GBP3m at
the balance sheet date and under GBP100,000 of liabilities. The
Directors have reviewed this information and are comfortable that
the Company will continue as a financially viable entity for the
foreseeable future, based on that the financial statements have
been prepared on a going concern basis.
The consolidated financial statements have been prepared on a
historical cost basis.
(b) Basis of consolidation
Subsidiaries
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries) made up to 31 August each year. The consolidated
financial statements are prepared using uniform accounting policies
for like transactions. Control exists when the Company has the
power, directly or indirectly, to govern the financial and
operating policies of an entity so as to obtain benefits from its
activities. The financial statements of the subsidiaries are
included in the consolidated financial statements from the date
that control commences up to the date that control ceases.
Intercompany transactions, balances and unrealised gains on
transactions between group companies are eliminated. Unrealised
losses are also eliminated unless the transaction provides evidence
of an impairment of the asset transferred.
The Group applies a policy of treating transactions with
minority interests as transactions with parties external to the
Group. Minority interests represent the portion of profit and net
assets not held by the Group. They are presented separately in the
consolidated statement of comprehensive income and in the
consolidated statement of financial position separately from the
amounts attributable to the owners of the parent.
Joint ventures
A joint venture is a contractual arrangement whereby the Group
and another party undertake an economic activity that is subject to
joint control; that is, when the strategic financial and operating
policy decisions relating to the activities require the unanimous
consent of the parties sharing control.
The Group reports its interests in jointly controlled entities
using proportionate consolidation. The Group's share of the assets,
liabilities, income, expenses and cash flows of jointly controlled
entities are combined with the equivalent items in the results on a
line-by-line basis.
(c) Revenue recognition
Interest receivable on fixed interest securities is recognised
using the effective interest method. Interest on short term
deposits, expenses and interest payable are treated on an accruals
basis. Revenue from sales of inventory is recognised when the
significant risks and rewards of an asset have been
transferred.
(d) Expenses
All expenses are charged through the income statement in the
period in which the services or goods are provided to the Group
except for expenses which are incidental to the disposal of an
investment which are deducted from the disposal proceeds of the
investment.
(e) Non current assets
General
Assets are recognised and derecognised at the trade date on
acquisition and disposal respectively. Proceeds will be measured at
fair value which will be regarded as the proceeds of sale less any
transaction costs.
Intangible assets
Intangible assets are stated at cost less any provisions for
amortisation and impairments. They are amortised over their useful
life of 6 years. The amortisation is based on the straight-line
basis. At each balance sheet date, the Group reviews the carrying
amount of its intangible assets to determine whether there is any
indication that those assets have suffered an impairment loss.
Plant & equipment
Plant and equipment is stated at cost less accumulated
depreciation and any recognised impairment loss. Depreciation is
charged so as to write off the cost of assets over their estimated
useful lives, using the straight line method on the following
basis:
Leasehold improvements 3 years
Furniture and fittings 5 years
The gain or loss on the disposal or retirement of an asset is
determined as the difference between the sales proceeds and the
carrying amount of the asset and is recognised in the statement of
comprehensive income.
Inventories
Inventories are stated at the lower of cost and net realisable
value. Land inventory is recognised at the time a liability is
recognised - generally after the exchange of unconditional
contracts.
Net realisable value will be determined by the Board as the
estimated selling price in the ordinary course of business less
costs to complete the sale and selling costs. In determining the
net realisable value, the directors take into account the
valuations received from the independent appraisers, market
conditions at and (where relevant and appropriate) after the
balance sheet date, and offers received from third parties by the
Company.
The valuations of the properties, performed by the independent
appraisers, are based on estimate and subjective judgements that
may vary from the actual values and sales prices realised by the
Company upon ultimate disposal.
Impairment is recognised through the statement of comprehensive
income at the time that the Board believes the net realisable value
is lower than cost and will remain so for the foreseeable
future.
Loans and receivables
Loans and receivables are recognised on an amortised cost basis.
Where they are denominated in a foreign currency they are
translated at the prevailing balance sheet exchange rate. Any
foreign exchange difference is recognised through the statement of
comprehensive income.
Loans are reviewed for impairment by the Board on a semi-annual
basis; any impairment is recognised through the statement of
comprehensive income.
(f) Cash and cash equivalents
Cash and cash equivalents comprise current and short term fixed
deposits with banks.
(g) Taxation
Profits arising in the Company for the 2012 year of assessment
and future periods will be subject to tax at the rate of 0% (2011:
0%). However, withholding tax may be payable on repatriation of
assets and income to the Company in Jersey. The Company pays an
International Services Entity fee and neither charges nor pays
Goods and Services Tax. This fee is currently GBP200 (2011: GBP200)
per annum for each Jersey registered company within the Group.
The subsidiaries will be liable for Turkish corporation tax at a
rate of 20%. Additionally, a land sale and purchase fee may arise
when land is sold or purchased.
Deferred tax is recognised in respect of all temporary
differences that have originated but not reversed at the balance
sheet date, where transactions or events that result in an
obligation to pay more tax in the future or right to pay less tax
in the future have occurred at the balance sheet date. This is
subject to deferred tax assets only being recognised if it is
considered more likely than not that there will be suitable profits
from which the future reversal of the temporary differences can be
deducted.
(h) Foreign currency
In these financial statements, the results and financial
position of the Group are expressed in Pound Sterling, which is the
Group's presentation currency. The functional currency of the
Company and Jersey subsidiaries is Pound Sterling; the functional
currency for the Turkish subsidiaries is Turkish Lira.
The results and financial position of the entities based in
Jersey are recorded in Pound Sterling, which is the functional
currency of these entities. In these entities, transactions in
currencies other than sterling are recorded at the rates of
exchange prevailing on the dates of the transactions. Monetary
balances (including loans) and non-monetary balances that are
denominated in foreign currencies are retranslated at the rates
prevailing on the balance sheet date.
The results and financial position of the entities based in
Turkey are recorded in Turkish Lira, which is the functional
currency of these entities. In order to translate the results and
financial position of these entities into the presentation currency
(Pounds Sterling):
- non-monetary assets (including inventory) are translated at
the rates of exchange prevailing on the dates of the
transactions;
- monetary balances (including loans) are translated at the
rates prevailing on the balance sheet date; and
- items to be included in the statement of comprehensive income
are translated at the average exchange rates for the year unless
the average is not a reasonable approximation of the cumulative
effect of the rates prevailing on the transaction dates, in which
case income and expenses are translated at the rate on the dates of
the transactions.
Foreign exchange gains or losses are recorded in either the
statement of comprehensive income or in the statement of changes in
equity depending on their nature.
(i) Share capital
Ordinary shares are classified as equity. External costs
directly attributable to the issue of new shares are shown as a
deduction to reserves. Any redemption in shares is deducted from
ordinary share capital with any transaction costs taken to the
statement of comprehensive income.
(j) Critical accounting estimates and assumptions
The Board makes estimates and assumptions concerning the future
in the preparation of the financial statements. The resulting
accounting estimates will, by definition, seldom equal the related
actual results. The estimates, assumptions and judgements that have
a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year
are outlined below.
Principal assumptions underlying management's estimation of net
realisable value and loan recoverability
In reflection of the economic environment and market conditions
during the prior year which continued throughout the current
financial year end, the frequency of transactions similar to the
inventory and apartments on an arm's length basis remained
consistently low as in the prior periods.
Consistent with previous years the Company has obtained two
independent valuations which have been reviewed by the Board. In
prior years, the more conservative of the two valuations was used
as the starting point for the assessment of the net realisable
values as the Directors believed this represented a more realistic
and prudent outcome. In the current year, the valuations are
significantly different from each other. The reasons for the
differences in the two valuations obtained arise primarily due to
differing assumptions used by the valuers, exacerbated by the lack
of recent comparative sales and the unique nature of the assets.
Following discussions with the Investment Advisor and the valuers,
the Directors believe that an average of the two valuations
represents the most appropriate estimate of the assets' value. As
such this average valuation has been used in the Directors'
assessment of the net realisable value of the properties (note 10)
and the recoverability of the loan receivable from Mandalina (note
11).
As a result of their assessment, the Directors believe that
impairment is necessary to the inventory and the loan receivable.
Please refer to notes 10 and 11 for further details.
Critical judgements in applying the Group's accounting
policies
The Group did not make any other critical accounting judgements
during the current financial year.
(k) Changes in accounting policy and disclosures
New and amended standards adopted by the group
There are no IFRSs or IFRIC interpretations that are effective
for the first time for this financial year that would be expected
to have a material impact on the Group.
New standards, amendments and interpretations issued but not
effective and not early adopted
At the date of the authorisation of these consolidated financial
statements, the following statements, standards and interpretations
were in issue but not yet effective and have not been early
adopted:
IFRS 9, 'Financial instruments' - classification and
measurement' (effective 1 January 2015)
IFRS 10, 'Consolidated financial statements' (effective 1
January 2013)
IFRS 11, 'Joint arrangements' (effective 1 January 2013)
IFRS 12, 'Disclosures of interests in other entities' (effective
1 January 2013)
IFRS 13, 'Fair value measurement' (effective 1 January 2013)
IAS 28 (revised 2011), 'Associates and joint ventures'
(effective 1 January 2013)
The full impact of the adoption of these standards and
interpretations in future periods on the financial statements of
the Group is still being assessed by the Directors.
3. Segment reporting
The chief operating decision maker (the "CODM") in relation to
the Group is considered to be the Board itself. The factor used to
identify the Group's reportable segments is geographical area.
Based on the above and a review of information provided to the
Board, it has been concluded that the Group is currently organised
into one reportable segment: Turkey.
There are two types of real estate projects within the above
segment; these are development land and new build residential
property. There are two individual projects held within the
development land type and one project in new build residential
property. The CODM considers on a quarterly basis the results of
the aggregated position of both property types as a whole as part
of their ongoing performance review.
The CODM receives regular reports on the Company's assets by the
Investment Advisors, Civitas Property Partners S.A. ("Civitas").
During this financial year Civitas has provided detailed reviews as
requested of the Turkish economy and real estate market and also
their strategic advice regarding the individual properties listed
in the table on page 2. In addition the year end valuations
provided by BNP Paribas (through an alliance member, Kuzeybati,
formerly an alliance member of Savills) and TSKB are reviewed and
reported on by the investment advisor to the Board of
Directors.
Other than cash and cash equivalent assets and related interest
and charges, the results of the Group are deemed to be generated in
Turkey.
4. Management/advisory fee
2012 2011
GBP GBP
Management fee 217,635 311,890
------- -------
Civitas Property Partners S.A. ("Civitas") was appointed as
Investment Advisors to the Group on 2 December 2009. The advisory
fee structure is incentive-based with an annual fixed component of
EUR212,500, and an incentive component based on a percentage of
realisation value. Civitas was paid GBP217,635 (2011: GBP311,890)
during the year.
5. Other operating expenses
2012 2011
GBP GBP
Legal and professional fees 133,193 143,054
Advisory and consultancy fees 121,091 174,471
Marketing 4,738 280
Travel and subsistence 47,717 48,274
Directors' remuneration 150,000 150,000
Administration fees 69,776 80,068
Audit services 51,933 51,200
Depreciation 2,092 3,599
Amortisation 742 507
Other operating expenses 173,929 253,315
------- -------
755,211 904,768
------- -------
The Group has no employees.
6. Tax 2012 2011
GBP GBP
Irrecoverable overseas tax 131,022 13,227
------- ------
This tax represents taxation on taxable profits earned by the
Turkish subsidiaries.
7. Earnings per share
(a) Basic
Basic earnings per share is calculated by dividing the loss
attributable to equity holders of the Company by the weighted
average number of ordinary shares in issue during the year.
2012 2011
Loss attributable to equity holders of the Company (GBP7,042,815) (GBP9,021,014)
--------------- ---------------
Weighted average number of ordinary shares in issue 134,764,709 134,764,709
--------------- ---------------
(b) Diluted
The diluted earnings per share is calculated by adjusting the
weighted average number of ordinary shares outstanding to assume
conversion of all dilutive potential ordinary shares. As the
options expired without exercise (see Note 17), the basic and
diluted earnings per share are the same.
Both the basic and diluted (loss) per share are calculated as
(5.23) pence (2011: (6.69) pence).
8. Intangible assets
Cost GBP
At 1 September 2011 and 31 August 2012 10,132
Amortisation
At 1 September 2011 (7,952)
Charge for the year (742)
------
At 31 August 2011 (8,694)
------
Net book value at 31 August 2012 1,438
------
Net book value at 31 August 2011 2,180
------
The intangible asset relates to computer software, with a useful
life of 6 years. There has been no impairment during the year.
9. Plant and equipment
Furniture and Leasehold
fittings improvements Total
Cost GBP GBP GBP
At 1 September 2011 18,246 46,501 64,747
Additions 1,006 - 1,006
At 31 August 2012 19,252 46,501 65,753
------------- ------------ -------
Depreciation
At 1 September 2011 (15,693) (45,105) (60,798)
Charge for the year (1,696) (396) (2,092)
------------- ------------ -------
At 31 August 2012 (17,389) (45,501) (62,890)
------------- ------------ -------
Net book value at 31 August 2012 1,863 1,000 2,863
------------- ------------ -------
Net book value at 31 August 2011 2,553 1,396 3,949
------------- ------------ -------
10. Inventories 2012 2011
GBP GBP
Opening net realisable value 89,500,205 92,474,333
Purchases at cost 7,432 1,170,357
Sale during the year (5,329,055) -
Profit on sale 274,426 -
Impairment of inventory (5,817,026) (4,144,485)
------------ ------------
Closing net realisable value 78,635,982 89,500,205
------------ ------------
This represents 149,550 square metres of development land on the
Bodrum peninsula and 931,739 square metres on the Riva coastline.
During the year the Group sold its 50% share in the Kazikli
village, in the district of Milas, for a total consideration of
$9,500,000 in cash. The sale concluded on 18 April 2012.
In accordance with the accounting policy in note 2, inventories
are stated at the lower of cost and net realisable value.
Consistent with previous years the Company has obtained two
independent valuations of the inventories from BNP Paribas (through
an alliance member, Kuzeybati, formerly an alliance member of
Savills) and TSKB on the basis of market values which have been
reviewed by the Board. In previous years the more conservative of
the two valuations was used as the starting point for the
assessment of the net realisable values as the Directors believed
this represented a more realistic and prudent outcome. In the
current year, the valuations have been significantly different from
each other and, following discussions with the Investment Advisor
and the valuers, the Directors believe that as of the balance sheet
date the current inventory valuation is a fair approximation of
what is realisable.
As a result, in their assessment of the net realisable value of
the properties, the Directors have used an average of the two
valuations to determine the selling price. On this basis, a total
market value of GBP79.6 million (2011: GBP91.5 million) has been
determined by the Directors for inventories held at the balance
sheet date. In accordance with the accounting policy, unrealised
gains or losses as a result of this valuation have not been
recognised in the statement of comprehensive income.
The impairment above relates to Riva (GBP5,199,755) and Bodrum
(GBP617,271). The Directors believe the net realisable values for
Riva (GBP59 million) and Bodrum (GBP19.6 million) at the year end
were lower than their cost and have therefore impaired the assets
accordingly. The prior year impairment relates to Bodrum.
11. Loans and receivables 2012 2011
GBP GBP
Opening balance 4,800,000 7,470,112
Repayment of loan - (510,654)
Impairment of loan (426,055) (2,481,093)
)
Exchange (loss)/gain on Revaluation of loan (503,342 321,635
Closing balance 3,870,603 4,800,000
---------- ----------
Previously, the third party loan in respect of the investment in
the Riverside Resort in Alanya had been made to the developer,
Okyapı İn aat ve Mühendislik ve Özel E itim Hizmetleri Sanayi ve
Ticaret Limited irketi ("Okyapı").
As a means of achieving improved economic benefit for the Group,
the titles of the apartments are held by Mandalina Yapı Turizm
Sanayi ve Ticaret A. . ("Mandalina") for the ultimate benefit of
the Group. Mandalina is not a part of the Group (see Note 22 for
details relating to the shareholders). In order to further protect
the Group's interest in the Alanya apartments, the Group holds
signed share transfer letters from the shareholders of Mandalina
which may be executed at any time at the discretion of the
Directors and would transfer ownership of the shares in the
Mandalina from the existing shareholders to the Group.
The loan has been impaired to reflect the anticipated amount to
be received based on the value of the Alanya apartments and future
running costs of Mandalina which are deducted from the sales
proceeds of the Alanya apartments before being remitted to the
Group.
The valuation of the Alanya apartments used by the Directors in
the assessment of the recoverability of the loan is based on
estimate and subjective judgements that may vary from the actual
values and sales prices realised upon ultimate disposal.
12. Foreign currency losses 2012 2011
GBP GBP
Translation of cash balances (24,107) (98,896)
Other foreign currency loss (527,550) (1,219,745)
Net currency losses (551,657) (1,318,641)
-------- ----------
Foreign currency gains or losses on transactions and balances in
the Turkish subsidiaries are recognised in the translation reserve.
The Company has no accounts in any currency other than Pound
Sterling.
13. Investment in subsidiaries - Company
Country of Authorised Issued Ownership
Name incorporation share capital share capital %
Ottoman Finance Company I Limited Jersey GBP10,000 GBP1 100
Ottoman Finance Company II Limited Jersey GBP10,000 GBP1 100
Ottoman Finance Company III Limited Jersey GBP10,000 GBP1 100
Ottoman Finance Company IV Limited Jersey GBP10,000 GBP1 100
Ottoman Finance Company V Limited Jersey GBP10,000 GBP1 100
Osmanli Yapi 1 Turkey YTL 46,146,312 YTL 46,146,312 99.99
Osmanli Yapi 2 Turkey YTL 188,284,941 YTL 188,284,941 99.99
Osmanli Yapi 3 Turkey YTL 5,249,584 YTL 5,249,584 99.99
Osmanli Yapi 4 Turkey YTL 11,249,104 YTL 11,249,104 99.99
Osmanli Yapi 5 Turkey YTL 14,390,000 YTL 14,390,000 99.99
All of the above companies have been incorporated into the Group
accounts. Osmanli Yapi 5 was sold during the period with any gains
being recognised as part of the sale of inventory in the statement
of comprehensive income.
14. Interests in joint ventures
As part of the sale of the Kazikli village (see note 10), the
Group sold its interest in the joint venture, Mobella Insaat
Taahhut Turizm San ve Tic A.S. ("Mobella"), a project management
company.
On sale of Mobella, a gain of GBP386,897 was recorded by the
Group due to a combination of exchange losses from prior periods,
the write-off of intercompany loans and the write-off of other
assets held in Mobella by the Group.
15. Other receivables
2012 2011
GBP GBP
Prepayments and accrued income 50,381 76,410
VAT receivable 546,889 683,133
Other receivables 52,288 184,965
649,558 944,508
------- -------
The Directors consider that the carrying amount of the above
receivables approximates to their fair value. Prepayments include
advances to suppliers.
16. Other payables
2012 2011
GBP GBP
Accruals 38,035 49,713
Other payables 39,358 301,387
------ -------
77,393 351,100
------ -------
The Directors consider that the carrying amount of the above
payables approximates to their fair value.
17. Share capital
Authorised:
Founder shares of no par value 10
Ordinary shares of no par value Unlimited
Issued and fully paid: GBP
2 founder shares of no par value -
134,764,709 ordinary shares of no par value (2011: 134,764,709) 120,003,007
-----------
The 2 founder shares of no par value are held by Vistra Nominees
I Limited. These shares are not eligible for participation in the
Company's investments and carry no voting rights at general
meetings of the Company.
Capital Management
As a result of the Group being closed-ended, capital management
is wholly subject to the discretion of the Board and is not
influenced by subscriptions or redemptions. The Group's objectives
for managing capital are to maintain sufficient liquidity to meet
the expenses of the Group as they fall due; to invest in the
Group's current assets when the Board feels it will give rise to
capital appreciation; and to return capital to shareholders where
possible.
Movements in ordinary share capital during the year Number GBP
Ordinary shares in issue at 1 September 2011 134,764,709 127,483,015
Movement during the year - (7,480,008)
----------- -----------
Ordinary shares in issue at 31 August 2012 134,764,709 120,003,007
----------- -----------
18. Retained earnings
2012 2011
GBP GBP
At start of year (26,796,485) (17,775,471)
Bank and deposit interest earned 194,446 153,089
Profit on sale of inventory 274,426 -
Profit on sale of joint venture 386,897
Operating expenses (7,215,927) (7,842,236)
(6,360,158) (7,702,374)
Net movement on foreign exchange (551,657) (1,318,641)
Tax (131,022) (13,227)
----------- -----------
Loss for the year (7,042,837) (9,021,015)
Minority interests 22 1
----------- -----------
At end of year (33,839,300) (26,796,485)
----------- -----------
19. Net asset value per share
The net asset value per ordinary share is based on the net
assets attributable to equity shareholders of GBP86,152,179 (2011:
GBP100,618,917) and on 134,764,709 ordinary shares
(2011:134,764,709), being the number of ordinary shares in issue at
the year end. The net asset value per share for the year ended 31
August 2012 was 63.9 pence (2011: 74.7 pence).
20. Cash and cash equivalents
2012 2011
GBP GBP
Bank balances 3,069,128 7,180,340
--------- ---------
21. Financial instruments
The disclosure on the financial instruments has been limited to
the consolidated financial position. This approach has been adopted
as this covers all of the principal risks associated with the
Group.
The disclosures below assume that the properties held by the
Group are in US Dollars as this is the currency in which they are
valued by Kuzeybati (formerly Savills). In the opinion of the
directors this is also the currency that any future disposals would
occur in.
The Group's financial instruments comprise loans, cash balances,
receivables and payables that arise directly from its operations,
for example, in respect of sales and purchases awaiting settlement,
and receivables for accrued income.
The principal risks the Group faces from its financial
instruments are:
(i) Market risk
(ii) Credit risk
(iii) Foreign currency risk
(iv) Interest rate risk
(v) Liquidity risk
As part of regular Board functions, the Board reviews each of
these risks. As required by IFRS 7: Disclosure and Presentation, an
analysis of financial assets and liabilities, which identifies the
risk to the Group of holding such items, is given below.
(i) Market price risk
Market price risk arises mainly from uncertainty about future
prices of financial instruments used in the Group's operations. It
represents the potential loss the Group might suffer through
holding market positions as a consequence of price movements. The
Group has no such exposures to market price risk.
(ii) Credit risk
The Group's third party loan in respect of the investment in the
Riverside Resort in Alanya is potentially at risk from the failure
of the third party. On 3 December 2010, the third party loan was
assigned to a related entity, see note 11 for further information.
The largest counterparty risk is with the Group's bankers.
Bankruptcy or insolvency of Deutsche Bank International Limited may
cause the Group's rights with respect to cash held to be delayed or
limited. There is no policy in place to mitigate this risk as the
Board believes there is no need to do so.
The Board does not monitor the credit quality of receivables on
an ongoing basis. Cash balances have been placed with Deutsche Bank
International Limited due to its Moody's credit rating of A2.
The Group's principal financial assets are other receivables and
cash and cash equivalents. The maximum exposure of the Group to
credit risk is the carrying amount of each class of financial
assets. Loans and receivables are represented by loans to and
receivables from third parties. Other receivables are represented
mainly by prepayments and other receivables where no significant
credit risk is recognised.
Credit risk exposure
In summary, compared to the amounts in the consolidated
statement of financial position, the maximum exposure to credit
risk at 31 August 2012 was as follows:
Balance Maximum Balance Maximum
sheet exposure sheet exposure
at 31 August at 31 August at 31 August at 31 August
2012 2012 2011 2011
Non-current assets GBP GBP GBP GBP
Loans and receivables 3,870,603 3,870,603 4,800,000 4,800,000
Current assets
Cash and cash equivalents 3,069,128 3,069,128 7,180,340 7,180,340
Other receivables 649,558 649,558 944,508 944,508
------------ ------------ ------------ ------------
7,589,289 7,589,289 15,603,333 15,603,333
------------ ------------ ------------ ------------
Fair value of financial assets and liabilities
The book values of the cash at bank and loans and receivables
included in these financial statements approximate to their fair
values.
(iii) Foreign currency risk
The Group operates Pound Sterling, Euro, US Dollar and Turkish
Lira bank accounts. Exchange gains or losses arise as a result of
movements in the exchange rates between the date of a transaction
denominated in a currency other than Sterling and its settlement.
There is no policy in place to mitigate this risk as the Board
believes such a policy would not be cost effective.
Currency rate exposure
An analysis of the Group's currency exposure in Pound Sterling
is detailed below:
Currency Non-current Net monetary Liabilities at Non-current Net monetary Liabilities at
assets at 31 assets at 31 31 August 2012 assets at 31 assets at 31 31 August 2011
August 2012 August 2012 August 2011 August 2011
GBP GBP GBP GBP GBP
Pounds Sterling - 1,915,673 (38,035) - 1,874,849 (49,713)
Euro 3,870,603 2,490 - 4,800,000 1,912,374 -
US Dollar 78,635,982 1,139,559 - 89,500,205 1,758,716 (1,461,165)
Turkish Lira 4,301 583,571 (39,358) 6,129 766,644 (301,387)
--------------- -------------- --------------- --------------- -------------- ---------------
82,510,886 3,641,293 (77,393) 94,306,334 6,312,583 (1,812,265)
--------------- -------------- --------------- --------------- -------------- ---------------
Foreign currency sensitivity
The table below details the Group's sensitivity to a 5% increase
in the value of Sterling against the relevant currencies. This
percentage is considered reasonable due to volatility in current
and historic exchange rate movements. With all other variables held
constant, net assets attributable to shareholders and the change in
net assets attributable to shareholders per the consolidated income
statement would have decreased by the amounts shown below. The
analysis has been performed on the same basis as 2011.
Currency Profit & Loss at Equity at Profit & Loss at Equity at
31 August 31 August 31 August 31 August
2012 2012 2011 2011
GBP GBP GBP GBP
Euro 193,655 - 335,619 -
US Dollar 56,978 3,931,799 87,936 4,475,010
Turkish Lira 27,211 215 38,332 306
---------------- ---------- ---------------- ----------
277,844 3,932,014 461,887 4,475,316
---------------- ---------- ---------------- ----------
A 5% weakening of Sterling against the relevant currency would
have resulted in an equal but opposite effect on the amounts in the
financial statements to the amounts shown above, on the basis that
all other variables remain constant.
(iv) Interest rate risk
Interest rate movements may affect: (i) the fair value of the
investments in fixed interest rate securities, (ii) the level of
income receivable on cash deposits, (iii) interest payable on the
company's variable rate borrowings. There is no policy in place to
mitigate this risk as the Board believes such a policy would not be
cost effective.
The Company holds only cash deposits.
The interest rate profile of the Group excluding short term
receivables and payables was as follows:
Currency Floating Non interest Floating Non interest
rate bearing rate bearing
at 31 August at 31 August at 31 August at 31 August
2012 2012 2011 2011
GBP GBP GBP GBP
Pounds Sterling 1,901,420 - 1,875,580 26
Euro - 3,873,093 1,912,336 4,800,038
US Dollar 1,128,331 78,647,210 129 92,719,957
Turkish Lira 8,676 21,284 17,855 154,625
------------ ------------ ------------ ------------
3,038,427 82,541,587 3,805,900 97,674,646
------------ ------------ ------------ ------------
Maturity profile
The following table sets out the carrying amount, by maturity,
of the Group's financial instruments:
2012
0 to 3 3 to 6 6 to 12 More than
months months months 1 year Total
GBP GBP GBP GBP GBP
Floating rate
Cash 3,038,427 - - - 3,038,427
--------- ------ ------- --------- ---------
3,038,427 - - - 3,038,427
--------- ------ ------- --------- ---------
Non-interest bearing
Cash 30,701 - - - 30,701
Other receivables 420,434 -229,124 -649,558
Other payables (77,393) - - -(77,393)
------- ------- -------
373,742 -229,124 -602,866
------- ------- -------
2011
0 to 3 3 to 6 6 to 12 More than
months months months 1 year Total
GBP GBP GBP GBP GBP
Floating rate
Cash 7,180,340 - - - 7,180,340
--------- ------ ------- --------- ---------
7,180,340 - - - 7,180,340
--------- ------ ------- --------- ---------
Non-interest bearing
Other receivables 261,375 - 683,133 - 944,508
Advances received - (1,461,165) - -(1,461,165)
Other payables (351,100) - - - (351,099)
-------- ----------- ------- ----------
(89,725) (1,461,165) 683,133 - (867,756)
-------- ----------- ------- ----------
Interest rate sensitivity
An increase of 10 basis points in interest rates during the
period would have increased the net assets attributable to
shareholders and changes in net assets attributable to shareholders
by GBP3,038 (2011:GBP7,180). A decrease of 10 basis points would
have had an equal but opposite effect.
(v) Liquidity risk
The Group's assets mainly comprise cash balances, loans
receivable and development property, which can be sold to meet
funding commitments if necessary. As at 31 August 2012 the Group
does not have any significant liabilities due.
The Group has sufficient cash reserves to meet liabilities
due.
22. Related party transactions
Information regarding subsidiaries can be found in note 13.
Information regarding the joint venture can be found in note
14.
John D. Chapman is a shareholder in the Turkish subsidiaries due
to Turkish law requirements. Mr Chapman receives no additional
benefit from being a shareholder of the Turkish subsidiaries.
Information regarding Directors' interests can be found in note
23.
Ali Pamir is a director of the Investment Advisor, Civitas
Property Partners S.A. and is a director and shareholder of the
Turkish subsidiaries due to Turkish law requirements. Mr Pamir
receives no additional benefit from being a shareholder of the
Turkish subsidiaries. Information regarding amounts paid to the
Investment Advisor can be found in note 4.
Sinan Kalpakcioglu has been engaged during the period as a
Turkish resident consultant to The Ottoman Fund Limited. Mr
Kalpakcioglu is a director and shareholder of the Turkish
subsidiaries due to Turkish law requirements. Mr Kalpakcioglu
receives no additional benefit from being a shareholder of the
Turkish subsidiaries. Fees paid to Mr Kalpakcioglu amounted to
GBP61,458 (2011: GBP27,042); GBP6,667 remained outstanding at the
year end (2011: nil).
Vistra Nominees I Limited is a related party being the holder of
the 2 founder shares of The Ottoman Fund Limited (see Note 17).
Sinan Kalpakcioglu and Ali Pamir are shareholders in Mandalina,
which holds the title to the Alanya apartments (see Note 11).
The Directors do not consider there to be an ultimate
controlling party.
23. Directors' interests
Total compensation paid to the Directors over the year was
GBP150,000 (2011: GBP150,000).
During the year John D. Chapman as Executive Chairman has been
employed under an executive service contract that provides for an
annual fee of GBP75,000 pro-rated monthly and a discretionary
performance fee. No performance fee has been paid during the
year.
Eitan Milgram is an Executive Vice President of Weiss Asset
Management LLC which is a substantial investor in the Company.
24. Contingent liability
The Directors have been informed that an intermediate Turkish
court has upheld an administrative order disallowing certain tax
benefits from a restructuring transaction that may have had
similarities to the restructuring of Osmanli Yapi 2. This
intermediate court decision is now under appeal to the Turkish
Supreme Court. The Company is monitoring the appeal, but at present
this development does not meet the Recognition criteria under IAS
37, and the Directors have consequently made no provision in the
accounts.
25. Post balance sheet events
During the year the Directors resolved to amalgamate Osmanli
Yapi 1 & Osmanli Yapi 4 and to also amalgamate Osmanli Yapi 2
& Osmanli Yapi 3 to reduce some of the costs of the Group. The
process is progressing but has not been finalised at the time of
signing of the financial statements.
On 11 January 2013, the Board resolved that a performance fee of
US$100,000 be paid to Mr Chapman in accordance with section 5.1(b)
of Mr Chapman's Executive Officer Services Agreement with the
Company.
Other than the above, the Directors are satisfied that there
were no material events subsequent to the year end that would have
an effect on these financial statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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