TIDMECPC
RNS Number : 3338D
European Convergence Property CoPLC
01 December 2009
1 December 2009
EuroPean convergence PROPERTY company plc
("ECPC" OR "THE COMPANY")
Final Results for the year ended 30 June 2009
Chairman's Statement
Since the sale of the Company's Romanian property holding subsidiaries in the
last reporting year, and the subsequent return of capital to shareholders, the
Company has continued to hold its one remaining investment asset, Mall Veliko
Turnovo, in Bulgaria.
During the period and to the date of this report there were three events of note
specific to the Company.
Firstly and secondly, independent valuations of Mall Veliko Turnovo were carried
out on two dates.
The first valuation point was as at 31 December 2008, by the independent firms
SHM Smith Hodgkinson (a firm of chartered surveyors) and Jones Lang Lasalle (one
of the world's leading services and investment management firms). Given the
difficulty in assessing the value of investment property in the current market
conditions, the Board was reassured by the similarity in the two valuations and
adopted the marginally lower valuation, which was reflected in the Interim
Financial Statements. This valuation showed a decrease of EUR3.7m from the
previous valuation.
The second valuation was carried out at 30 June 2009, by SHM Smith Hodgkinson,
and resulted in a further reduction in value of the mall of EUR4.2m. These
reductions in value, together totalling EUR7.9m, reflect the impact on the retail
property investment market in Bulgaria resulting from the current global credit
restrictions and economic conditions.
The third event concerned the deferred sales proceeds relating to the three
subsidiaries sold in the previous financial period. On 27 January 2009 the
Company announced that the purchaser of the three properties had made claims
totalling up to EUR4.5 million against the deferred proceeds of sale for alleged
breaches of warranties contained in the sale and purchase agreements. Subsequent
to the balance sheet date, a settlement agreement was reached between the
Company and the purchaser in the amount of EUR0.9 million. As a provision of EUR0.8
million was made in the accounts for financial year ended 30 June 2008, the
Company has been required to make an additional provision of EUR0.1 million in the
current financial year.
Mall Veliko Turnovo has now been operational for over two years and continues to
enjoy near full occupancy for the retail business. The deterioration in the
local market, which is expected to continue throughout 2010, is putting severe
pressure on rental and occupancy levels. The Company will continue to do all
that it considers reasonably necessary to maintain rental and occupancy levels,
however the outlook remains challenging.
The consolidated net assets of the Company as at 30 June 2009 were EUR9.272m,
giving a net asset value of EUR0.15 per share (31 December 2008 - EUR12.995m and
EUR0.21 per share).
Erwin Brunner
Chairman30 November 2009
For further information please contact:
+-------------------------------+----------------------------------+
| Charlemagne Capital (UK) | +44 (0)207 518 2100 |
| Limited | |
+-------------------------------+----------------------------------+
| Varda Lotan / Christopher | marketing@charlemagnecapital.com |
| Fitzwilliam Lay | www.charlemagnecapital.com |
+-------------------------------+----------------------------------+
| | |
+-------------------------------+----------------------------------+
| Galileo Fund Services Limited | +44 (0)1624 692600 |
+-------------------------------+----------------------------------+
| Ian Dungate, Company | |
| Secretary | |
+-------------------------------+----------------------------------+
| | |
+-------------------------------+----------------------------------+
| Panmure Gordon (UK) Limited | +44 (0)207 459 3600 |
+-------------------------------+----------------------------------+
| Hugh Morgan | |
+-------------------------------+----------------------------------+
| Stuart Gledhill | |
+-------------------------------+----------------------------------+
| | |
+-------------------------------+----------------------------------+
| Smithfield Consultants | +44 (0)207 360 4900 |
+-------------------------------+----------------------------------+
| John Kiely | |
+-------------------------------+----------------------------------+
| Gemma Froggatt | |
+-------------------------------+----------------------------------+
Report of the Manager
Subsequent to sale of the three Romanian assets in October 2007, the Manager has
been working on maintaining the value of the remaining asset and resolving the
deferred sales proceeds issue. The Manager is also in the process of closing
down the remaining unused Romanian and other unused companies and related
elements of the structure.
The Manager is critically reviewing all ongoing costs in relation to managing
the remaining asset, Mall Veliko Turnovo and the Company.
Mall Veliko Turnovo
The Bulgarian wider economy is under considerable stress, with unemployment
increased to 8% and GDP forecast to shrink by 7% during 2009. The Manager
expects that the difficult economic environment is likely to continue throughout
2010.
The difficult operating conditions have led to considerable pressure from
tenants for concessions in their terms, which has resulted in a reduction in
income to the Company over the course of the year. In May 2009, the lending bank
increased the margin on the financing bank loan which placed further stress on
the business. It should be noted that the borrowings are at the subsidiary level
and are non-recourse. However the Manager and the tenants are working together
to ensure business is maintained throughout 2010 which will be another difficult
year in Bulgaria.
Charlemagne Capital (IOM) Limited30 November 2009
Report of the Directors
The Directors hereby submit their annual report together with the audited
consolidated financial statements of European Convergence Property Company plc
(the "Company") for the financial year ended 30 June 2009.
Results and Dividends
The results and position of the Group and the position of the Company at the
year end is set out on pages 10 to 14 of the financial statements.
The Directors do not intend to declare a dividend (2008: EURnil).
Directors
The Directors during the year and up to the date of this Report were:
Erwin Brunner
James C. Rosapepe
Donald C. McCrickard
Anderson A. Whamond
In accordance with the Company's Articles of Association the Directors of the
Company retire and offer themselves for re-appointment at the forthcoming Annual
General Meeting.
Directors' and Other Interests
Save as disclosed in Note 8.1, none of the Directors had any interest during the
year in any material contract for the provision of services which was
significant to the business of the Company. None of the other directors have a
direct or indirect interest of the shares in the Company.
At 30 June 2009 Charlemagne Capital (Investments) Limited (a subsidiary of
Charlemagne Capital Limited, the parent of the Investment Manager) held 97,479
shares in the Company.
Independent Auditors
KPMG Audit LLC Isle of Man have expressed a willingness to continue in office in
accordance with Isle of Man company law.
Corporate Governance
As an AIM listed company, the Company is not required to follow the provisions
of the Combined Code as set out in the UK Financial Services Authority Listing
Rules, however, the Board is committed to high standards of corporate governance
and a summary of the main elements of corporate governance are described below:
Board of Directors
The composition of the Board is set out above. The Board currently comprises a
non-executive chairman and three other non-executive directors.
The Board meets regularly and is provided with relevant information on
financial, business and corporate matters prior to meetings.
Audit Committee
The Audit Committee consists of the Board members. To be quorate at least two
offshore directors must be present, with the majority of the Committee also
being independent of the management of the Company. The Committee overviews the
adequacy of the Company's internal controls, accounting policies and financial
reporting and provides a forum through which the Company's external auditors
report to the Company.
Internal Control
The Directors are responsible for establishing and maintaining the Company's
system of internal control. This system of internal control is designed to
safeguard the Company's assets and to ensure that proper accounting records are
maintained and that financial information produced by the Company is reliable.
There are inherent limitations in any system of internal control and such a
system can provide only reasonable, but not absolute, assurances against
material misstatement or loss. The Directors, through the Audit Committee, have
reviewed the effectiveness of the Company's system of internal controls.
Statement of Directors' Responsibilities in Respect of the Director's Report and
the Financial Statements
The Directors are responsible for preparing the Director's Report and the
financial statements in accordance with applicable law and regulations. In
addition, the Directors have elected to prepare the Group and Parent Company
financial statements in accordance with International Financial Reporting
Standards.
The Group and Parent Company financial statements are required to give a true
and fair view of the state of affairs of the Group and Parent Company and of the
profit or loss of the Group for that period.
In preparing these 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 they have been prepared in accordance with International Financial
Reporting Standards; and
* prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Group and Parent Company will continue in
business.
The Directors are responsible for keeping proper accounting records that
disclose with reasonable accuracy at any time the financial position of the
Parent Company and to allow for the preparation of financial statements. They
have general responsibility for taking such steps as are reasonably open to them
to safeguard the assets of the Group and to prevent and detect fraud and other
irregularities.
The Directors are responsible for the maintenance and integrity of the corporate
and financial information included on the Company's website. Legislation
governing the preparation and dissemination of financial statements may differ
from one jurisdiction to another.
On behalf of the Board
Erwin Brunner
Chairman30 November 2009
Report of the Independent Auditors, KPMG Audit LLC, to the members of European
Convergence Property Company plc
We have audited the Group and Parent Company financial statements (the
"financial statements") of European Convergence Property Company plc for the
year ended 30 June 2009 which comprise the Consolidated Income Statement, the
Consolidated and Parent Company Balance Sheets, the Consolidated Statement of
Changes in Equity and the Consolidated Cash Flow Statement and the related
notes. These financial statements have been prepared under the accounting
policies set out therein.
This report is made solely to the Company's members, as a body. Our audit work
has been undertaken so that we might state to the Company's members those
matters we are required to state to them in an auditor's report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company's members as a
body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of Directors and Auditors
The Directors' responsibilities for preparing the Director's Report and the
financial statements in accordance with applicable law and International
Financial Reporting Standards are set out in the Statement of Directors'
Responsibilities on page 7.
Our responsibility is to audit the financial statements in accordance with
relevant legal and regulatory requirements and International Standards on
Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give a true
and fair view. We also report to you if, in our opinion, the Company has not
kept proper accounting records, or if we have not received all the information
and explanations we require for our audit.
We read the Directors' Report and any other information accompanying the
financial statements and consider the implications for our report if we become
aware of any apparent misstatements or material inconsistencies with the audited
financial statements. Our responsibilities do not extend to any other
information.
Basis of opinion
We conducted our audit in accordance with International Standards on Auditing
(UK and Ireland) issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements. It also includes an assessment of the
significant estimates and judgments made by the Directors in the preparation of
the financial statements, and of whether the accounting policies are appropriate
to the Group's and Company's circumstances, consistently applied and adequately
disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
Opinion
In our opinion the financial statements give a true and fair view, in accordance
with International Financial Reporting Standards, of the state of the Group and
Parent Company's affairs as at 30 June 2009 and of the Group's loss for the year
then ended.
Emphasis of matter
Without qualifying our audit opinion we draw to your attention the following
matters;
As disclosed in note 3.1 to these financial statements, the global financial
crisis and the deteriorating economic environment in the jurisdictions within
which the Group operates have increased the intensity of the risk factors to
which the Group is exposed. In particular, there is now increased uncertainty as
to the valuation of the investment property held, along with the recoverability
of receivables from third parties. In particular the Group is yet to reach
formal agreement on the level of sales proceeds due (see note 16).
KPMG Audit LLC
Chartered Accountants, Heritage Court, 41 Athol Street Douglas, Isle of Man IM99
1HN30 November 2009
Consolidated Income Statement
+-----------------+--------+----------+---------+
| | Note | Year | Year |
| | | ended | ended |
| | | 30 | 30 |
| | | June | June |
| | | 2009 | 2008 |
+-----------------+--------+----------+---------+
| | | EUR'000 | EUR'000 |
+-----------------+--------+----------+---------+
| | | | |
+-----------------+--------+----------+---------+
| Realised | 2 | - | 6,825 |
| gain on | | | |
| sale of | | | |
| subsidiaries | | | |
+-----------------+--------+----------+---------+
| Net | 10 | (7,960) | (940) |
| loss | | | |
| from | | | |
| fair | | | |
| value | | | |
| adjustment | | | |
| on | | | |
| investment | | | |
| property | | | |
+-----------------+--------+----------+---------+
| | | | |
+-----------------+--------+----------+---------+
| Net | 5 | 2,733 | 4,374 |
| rent | | | |
| and | | | |
| related | | | |
| income | | | |
+-----------------+--------+----------+---------+
| | | | |
+-----------------+--------+----------+---------+
| Manager's | 8.3 | 899 | (2,504) |
| fees | | | |
+-----------------+--------+----------+---------+
| Audit | 9.5 | (174) | (1,857) |
| and | | | |
| professional | | | |
| fees | | | |
+-----------------+--------+----------+---------+
| Other | 9 | (1,253) | (876) |
| expenses | | | |
+-----------------+--------+----------+---------+
| Administrative | | (528) | (5,237) |
| expenses | | | |
+-----------------+--------+----------+---------+
| | | | |
+-----------------+--------+----------+---------+
| Net | | (5,755) | 5,022 |
| operating | | | |
| (loss)/profit | | | |
| before net | | | |
| financing | | | |
| expense | | | |
+-----------------+--------+----------+---------+
| | | | |
+-----------------+--------+----------+---------+
| Financial | 6 | 73 | 889 |
| income | | | |
+-----------------+--------+----------+---------+
| Financial | 6 | (1,057) | (2,352) |
| expenses | | | |
+-----------------+--------+----------+---------+
| Net | | (984) | (1,463) |
| financing | | | |
| expense | | | |
+-----------------+--------+----------+---------+
| | | | |
+-----------------+--------+----------+---------+
| (Loss)/profit | | (6,739) | 3,559 |
| before tax | | | |
+-----------------+--------+----------+---------+
| | | | |
+-----------------+--------+----------+---------+
| Income | 20 | 177 | 5,276 |
| tax | | | |
| credit | | | |
+-----------------+--------+----------+---------+
| | | | |
+-----------------+--------+----------+---------+
| Retained | | (6,562) | 8,835 |
| (loss)/profit | | | |
| for the year | | | |
+-----------------+--------+----------+---------+
| | | | |
+-----------------+--------+----------+---------+
| Basic | 14 | (0.1047) | 0.1409 |
| and | | | |
| diluted | | | |
| (loss)/earnings | | | |
| per share (EUR) | | | |
+-----------------+--------+----------+---------+
Consolidated Balance Sheet
+------------------+--------+--------+--------+
| | Note | At 30 | At 30 |
| | | June | June |
| | | 2009 | 2008 |
+------------------+--------+--------+--------+
| | | EUR'000 | EUR'000 |
+------------------+--------+--------+--------+
| | | | |
+------------------+--------+--------+--------+
| Investment | 10 | 23,600 | 31,560 |
| property | | | |
+------------------+--------+--------+--------+
| Property, | 11 | 98 | - |
| plant and | | | |
| equipment | | | |
+------------------+--------+--------+--------+
| Total | | 23,698 | 31,560 |
| non-current | | | |
| assets | | | |
+------------------+--------+--------+--------+
| | | | |
+------------------+--------+--------+--------+
| Trade | 16 | 2,810 | 4,510 |
| and | | | |
| other | | | |
| receivables | | | |
+------------------+--------+--------+--------+
| Cash | 12 | 4,200 | 2,552 |
| and | | | |
| cash | | | |
| equivalents | | | |
+------------------+--------+--------+--------+
| Total | | 7,010 | 7,062 |
| current | | | |
| assets | | | |
+------------------+--------+--------+--------+
| Total | | 30,708 | 38,622 |
| assets | | | |
+------------------+--------+--------+--------+
| | | | |
+------------------+--------+--------+--------+
| Issued | 13 | 3,682 | 3,762 |
| share | | | |
| capital | | | |
+------------------+--------+--------+--------+
| Retained | | 5,581 | 12,070 |
| earnings | | | |
+------------------+--------+--------+--------+
| Foreign | | 9 | - |
| currency | | | |
| translation | | | |
| reserve | | | |
+------------------+--------+--------+--------+
| Total | | 9,272 | 15,832 |
| equity | | | |
+------------------+--------+--------+--------+
| | | | |
+------------------+--------+--------+--------+
| Interest-bearing | 15 | 19,178 | 19,232 |
| loans and | | | |
| borrowings | | | |
+------------------+--------+--------+--------+
| Deferred | 20 | - | 187 |
| tax | | | |
| liability | | | |
+------------------+--------+--------+--------+
| Total | | 19,178 | 19,419 |
| non-current | | | |
| liabilities | | | |
+------------------+--------+--------+--------+
| | | | |
+------------------+--------+--------+--------+
| Trade | 17 | 2,258 | 3,371 |
| and | | | |
| other | | | |
| payables | | | |
+------------------+--------+--------+--------+
| Total | | 2,258 | 3,371 |
| current | | | |
| liabilities | | | |
+------------------+--------+--------+--------+
| Total | | 21,436 | 22,790 |
| liabilities | | | |
+------------------+--------+--------+--------+
| Total | | 30,708 | 38,622 |
| equity | | | |
| & | | | |
| liabilities | | | |
+------------------+--------+--------+--------+
Approved by the Board of Directors on 30 November 2009.
Director Director
Company Balance Sheet
+--------------+--------+--------+--------+
| | Note | At 30 | At 30 |
| | | June | June |
| | | 2009 | 2008 |
+--------------+--------+--------+--------+
| | | EUR'000 | EUR'000 |
+--------------+--------+--------+--------+
| | | | |
+--------------+--------+--------+--------+
| Investment | 2 | - | - |
| in | | | |
| subsidiaries | | | |
+--------------+--------+--------+--------+
| | | | |
+--------------+--------+--------+--------+
| Total | | - | - |
| non-current | | | |
| assets | | | |
+--------------+--------+--------+--------+
| | | | |
+--------------+--------+--------+--------+
| Intragroup | 16 | 7,213 | 16,375 |
| balances | | | |
+--------------+--------+--------+--------+
| Trade | 16 | 6 | 12 |
| and | | | |
| other | | | |
| receivables | | | |
+--------------+--------+--------+--------+
| Cash | 12 | 2,154 | 1,175 |
| and | | | |
| cash | | | |
| equivalents | | | |
+--------------+--------+--------+--------+
| Total | | 9,373 | 17,562 |
| current | | | |
| assets | | | |
+--------------+--------+--------+--------+
| Total | | 9,373 | 17,562 |
| assets | | | |
+--------------+--------+--------+--------+
| | | | |
+--------------+--------+--------+--------+
| Issued | 13 | 3,682 | 3,762 |
| share | | | |
| capital | | | |
+--------------+--------+--------+--------+
| Retained | | 5,590 | 13,735 |
| profits | | | |
+--------------+--------+--------+--------+
| Total | | 9,272 | 17,497 |
| equity | | | |
+--------------+--------+--------+--------+
| | | | |
+--------------+--------+--------+--------+
| Trade | 17 | 101 | 65 |
| and | | | |
| other | | | |
| payables | | | |
+--------------+--------+--------+--------+
| Total | | 101 | 65 |
| current | | | |
| liabilities | | | |
+--------------+--------+--------+--------+
| Total | | 101 | 65 |
| liabilities | | | |
+--------------+--------+--------+--------+
| Total | | 9,373 | 17,562 |
| equity | | | |
| & | | | |
| liabilities | | | |
+--------------+--------+--------+--------+
The loss recorded by the Company for the year ended 30 June 2009 was EUR8,144,747
(2008: profit EUR15,251,402) after the impairment of intercompany balances.
Approved by the Board of Directors on 30 November 2009.
Director Director
Consolidated Statement of Changes in Equity
+--------------+----------+----------+-------------+----------+
| | Share | Retained | Foreign | Total |
| | capital | earnings | currency | |
| | | | translation | |
| | | | reserve | |
+--------------+----------+----------+-------------+----------+
| | EUR'000 | EUR'000 | EUR'000 | EUR'000 |
+--------------+----------+----------+-------------+----------+
| | | | | |
+--------------+----------+----------+-------------+----------+
| Balance | 62,696 | 3,235 | 1,758 | 67,689 |
| at 1 | | | | |
| July | | | | |
| 2007 | | | | |
+--------------+----------+----------+-------------+----------+
| Capital | (58,934) | - | - | (58,934) |
| distribution | | | | |
+--------------+----------+----------+-------------+----------+
| Foreign | - | - | (1,758) | (1,758) |
| exchange | | | | |
| translation | | | | |
| differences | | | | |
+--------------+----------+----------+-------------+----------+
| Retained | - | 8,835 | - | 8,835 |
| profit | | | | |
| for the | | | | |
| year | | | | |
+--------------+----------+----------+-------------+----------+
| Balance | 3,762 | 12,070 | - | 15,832 |
| at 30 | | | | |
| June | | | | |
| 2008 | | | | |
+--------------+----------+----------+-------------+----------+
| | | | | |
+--------------+----------+----------+-------------+----------+
| Balance | 3,762 | 12,070 | - | 15,832 |
| at 1 | | | | |
| July | | | | |
| 2008 | | | | |
+--------------+----------+----------+-------------+----------+
| Shares | (80) | 73 | - | (7) |
| cancelled | | | | |
| following | | | | |
| market | | | | |
| purchases | | | | |
+--------------+----------+----------+-------------+----------+
| Foreign | - | - | 9 | 9 |
| exchange | | | | |
| translation | | | | |
| differences | | | | |
+--------------+----------+----------+-------------+----------+
| Retained | - | (6,562) | - | (6,562) |
| loss for | | | | |
| the year | | | | |
+--------------+----------+----------+-------------+----------+
| Balance | 3,682 | 5,581 | 9 | 9,272 |
| at 30 | | | | |
| June | | | | |
| 2009 | | | | |
+--------------+----------+----------+-------------+----------+
Consolidated Cash Flow Statement
+---------------------+--------+---------+----------+
| | Note | Year | Year |
| | | ended | ended |
| | | 30 | 30 |
| | | June | June |
| | | 2009 | 2008 |
+---------------------+--------+---------+----------+
| | | EUR'000 | EUR'000 |
+---------------------+--------+---------+----------+
| | | | |
+---------------------+--------+---------+----------+
| Operating | | | |
| activities | | | |
+---------------------+--------+---------+----------+
| Group | | (6,562) | 8,835 |
| (loss)/profit | | | |
| for the year | | | |
+---------------------+--------+---------+----------+
| Adjustments | | | |
| for: | | | |
+---------------------+--------+---------+----------+
| | | - | (6,825) |
| Gain | | | |
| from | | | |
| sale | | | |
| of | | | |
| subsidiaries | | | |
+---------------------+--------+---------+----------+
| | | 7,960 | 940 |
| Net | | | |
| loss | | | |
| from | | | |
| fair | | | |
| value | | | |
| adjustment | | | |
| on | | | |
| investment | | | |
| property | | | |
+---------------------+--------+---------+----------+
| | | (73) | (889) |
| Financial | | | |
| income | | | |
+---------------------+--------+---------+----------+
| | | 9 | (1,758) |
| Foreign | | | |
| currency | | | |
| translation | | | |
| differences | | | |
+---------------------+--------+---------+----------+
| | | 1,057 | 2,352 |
| Financial | | | |
| expense | | | |
+---------------------+--------+---------+----------+
| | | - | 62 |
| Depreciation | | | |
+---------------------+--------+---------+----------+
| | | (177) | (5,276) |
| Income | | | |
| tax | | | |
| credit | | | |
+---------------------+--------+---------+----------+
| Operating | | 2,214 | (2,559) |
| profit/(loss) | | | |
| before | | | |
| changes in | | | |
| working | | | |
| capital | | | |
+---------------------+--------+---------+----------+
| | | | |
+---------------------+--------+---------+----------+
| Decrease | | 1,700 | 2,614 |
| in trade | | | |
| and | | | |
| other | | | |
| receivables | | | |
+---------------------+--------+---------+----------+
| Decrease | | (1,113) | (1,173) |
| in trade | | | |
| and | | | |
| other | | | |
| payables | | | |
+---------------------+--------+---------+----------+
| | | | |
+---------------------+--------+---------+----------+
| Cash | | 2,801 | (1,118) |
| generated | | | |
| from/(used | | | |
| in) | | | |
| operations | | | |
+---------------------+--------+---------+----------+
| Interest | | (1,057) | (2,352) |
| paid | | | |
+---------------------+--------+---------+----------+
| Income | | (10) | 418 |
| and | | | |
| corporation | | | |
| tax (paid)/ | | | |
| received | | | |
+---------------------+--------+---------+----------+
| Interest | | 73 | 889 |
| received | | | |
+---------------------+--------+---------+----------+
| Cash | | 1,807 | (2,163) |
| flows | | | |
| generated | | | |
| from/(used | | | |
| in) | | | |
| operating | | | |
| activities | | | |
+---------------------+--------+---------+----------+
| | | | |
+---------------------+--------+---------+----------+
| Investing | | | |
| activities | | | |
+---------------------+--------+---------+----------+
| Sale | | - | 12,929 |
| of | | | |
| subsidiary | | | |
| companies | | | |
+---------------------+--------+---------+----------+
| Cash | | - | (6,728) |
| sold | | | |
| with | | | |
| subsidiary | | | |
| companies | | | |
+---------------------+--------+---------+----------+
| Repayment | | - | 34,341 |
| of loans | | | |
| by former | | | |
| subsidiaries | | | |
+---------------------+--------+---------+----------+
| Purchase | | (98) | - |
| of | | | |
| property, | | | |
| plant and | | | |
| equipment | | | |
+---------------------+--------+---------+----------+
| Cash | | (98) | 40,542 |
| flows | | | |
| (used | | | |
| in)/generated | | | |
| from | | | |
| investing | | | |
| activities | | | |
+---------------------+--------+---------+----------+
| | | | |
+---------------------+--------+---------+----------+
| Financing | | | |
| activities | | | |
+---------------------+--------+---------+----------+
| Purchase | | (7) | - |
| of own | | | |
| shares | | | |
+---------------------+--------+---------+----------+
| Repayment | | (54) | - |
| of long | | | |
| term | | | |
| loans | | | |
+---------------------+--------+---------+----------+
| Capital | | - | (58,934) |
| distribution | | | |
+---------------------+--------+---------+----------+
| Cash | | (61) | (58,934) |
| flows | | | |
| used | | | |
| in | | | |
| financing | | | |
| activities | | | |
+---------------------+--------+---------+----------+
| | | | |
+---------------------+--------+---------+----------+
| Net | | 1,648 | (20,555) |
| increase/(decrease) | | | |
| in cash and cash | | | |
| equivalents | | | |
+---------------------+--------+---------+----------+
| Cash | | 2,552 | 23,107 |
| and | | | |
| cash | | | |
| equivalents | | | |
| at | | | |
| beginning | | | |
| of year | | | |
+---------------------+--------+---------+----------+
| Cash | 12 | 4,200 | 2,552 |
| and | | | |
| cash | | | |
| equivalents | | | |
| at end of | | | |
| year | | | |
+---------------------+--------+---------+----------+
Notes to the Consolidated Financial Statements
1 The Company
European Convergence Property Company plc (the "Company") was originally
incorporated and registered in the Isle of Man under the Isle of Man Companies
Acts 1931 to 2004 on 1 June 2005 as a public company with registered number
113616C. On 21 December 2007 with the approval of Shareholders in general
meeting, the Company was re-registered as a company under the Isle of Man
Companies Act 2006 with registered number 002085v.
Pursuant to a prospectus dated 15 June 2005 there was an original placing of up
to 100,000,000 Ordinary Shares. Following the closing of the placing on 24 June
2005 62,696,333 Shares were issued.
The Shares of the Company were admitted to trading on the London Stock
Exchange's AIM market ("AIM") on 28 June 2005 when dealings also commenced.
The Company's agents and the Manager perform all significant functions.
Accordingly, the Company itself has no employees.
Capital Distribution
Following approval of the Company's Shareholders in general meeting and as a
consequence of the Directors having determined not to invest surplus cash or
reinvest monies received from the sale of certain property assets an amount of
approximately EUR58.9m or EUR0.94 per share was returned to shareholders pro rata by
way of a capital distribution on 31 January 2008.
Duration
In accordance with the Company's Articles of Association, Shareholders will be
given the opportunity to vote on the life of the Company after approximately 7
years.
Dividend Policy
The Directors anticipate that in respect of any 12 month accounting period they
will recommend the payment as a dividend of substantially all of the Company's
net profits (excluding profits arising from unrealised gains). The Directors may
pay half-yearly interim dividends if they believe that the financial position of
the Company justifies it. If the Company's funds are fully invested, the
Directors may be required to re-invest some of the Company's profits into the
maintenance of the Company's property portfolio. Debt amortisation payments may
cause actual dividends to be less than net profits.
In the current year, no dividend was declared (2008 : GBPnil).
Property Valuation Policy
The Directors have appointed an internationally recognised firm of surveyors as
property valuers for properties in Bulgaria. It is the Directors' intention that
approximately half of the Company's property portfolio will receive a valuation
from the Company's appointed property valuer in each annual financial period.
Financial Year End
The financial year end of the Company is 30 June in each year.
2 The Subsidiaries
For efficient portfolio management purposes, the Company established the
following subsidiary companies:-
+-------------+---------------+------------+
| | Country | Percentage |
| | of | of |
| | incorporation | shares |
| | | held |
+-------------+---------------+------------+
| European | Bulgaria | 100% |
| Convergence | | |
| Property | | |
| Company | | |
| Bulgaria | | |
| EOOD | | |
+-------------+---------------+------------+
| European | Cayman | 100% |
| Convergence | Islands | |
| Property | | |
| Company | | |
| (Cayman) | | |
| Limited | | |
+-------------+---------------+------------+
| ECPC | Cyprus | 100% |
| (Cyprus) | | |
| Limited | | |
+-------------+---------------+------------+
| European | Malta | 100% |
| Convergence | | |
| Property | | |
| Company | | |
| (Malta) | | |
| Limited | | |
+-------------+---------------+------------+
| European | Romania | 100% |
| Property | | |
| Imobiliar | | |
| Invest | | |
| SRL | | |
+-------------+---------------+------------+
| European | Romania | 100% |
| Property | | |
| Development | | |
| Corporation | | |
| SRL | | |
+-------------+---------------+------------+
| Orange | The | 100% |
| Convergence | Netherlands | |
| Finance BV | | |
+-------------+---------------+------------+
| European | Turkey | 100% |
| Convergence | | |
| Property | | |
| Company | | |
| Real Estate | | |
| Trading and | | |
| Management | | |
| Limited | | |
+-------------+---------------+------------+
In the current year the Group sold its wholly owned subsidiaries Convergence
Property Invest SRL, European Property Development Invest Srl, and European
Property Acquisitions EOOD.
3 Significant Accounting Policies
The principal accounting policies adopted in the preparation of the consolidated
financial statements are set out below.
The annual report of the Company for the year ended 30 June 2009 comprises the
Company and its subsidiaries (together referred to as the "Group").
The annual report was authorised for issue by the Directors on 30 November 2009.
3.1 Basis of presentation
These financial statements have been prepared in accordance with International
Financial Reporting Standards ("IFRS") promulgated by the International
Accounting Standards Board. Management has concluded that the report fairly
represents the entity's financial position, financial performance and cash
flows.
The preparation of the 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 most significant area requiring estimation and
judgement by the Directors is the valuation of investment property (see note 10)
and the recoverability of receivable balances (see note 16).
The activities of the Group are subject to a number of risk factors. The global
financial crisis and the deteriorating economic environment in the jurisdictions
within which the Group operates have increased the intensity of these risk
factors. The economic outlook presents specific challenges for the Group in
terms of the significant reduction in the availability of loan finance for
property transactions in the jurisdictions and the consequent impact on the
valuations of investment property held (see note 10).
In the current market conditions which prevail, there is a greater degree of
uncertainty as to the valuation of property assets than that which exists in a
more active and stronger market.
These factors have also increased the uncertainty as to the recoverability of
amounts due to the Group. In particular the Group is yet to reach agreement in
respect of deferred sales proceeds due (see note 16).
The Company is denominated in Euros ("EUR") and therefore the amounts shown in
these financial statements are presented in EUR.
3.2Foreign currency translation
Euro is the currency of the primary economic environment in which the entity
operates ("The functional currency"). The functional currency of the Romanian
subsidiaries was the Romanian Lei, and the functional currency of the Bulgarian
subsidiary is the Bulgarian Lev. Otherwise the Euro is the functional currency
of the subsidiaries.
Euro is also the currency in which the annual financial statements are presented
("The presentation currency").
Monetary assets and liabilities denominated in foreign currencies as at the date
of these financial statements are translated to EUR at exchange rates prevailing
on that date. Realised and unrealised gains and losses on foreign currency
transactions are charged or credited to the income statement as foreign currency
gains and losses. Expenses are translated into EUR based on exchange rates on the
date of the transaction.
The accounts are presented in Euros by translating the assets and liabilities at
the exchange rate prevailing at the balance sheet date. Items of revenue and
expense are translated at exchange rates on the date of the relevant
transactions. Components of equity are translated at the date of the relevant
transaction and not retranslated. All resulting exchange differences are
recognised in equity.
3.3Investment property
Investment properties are those which are held either to earn rental income or
for capital appreciation or both. Investment properties are stated at fair
value. Any gain or loss arising from a change in fair value is recognised in the
income statement.
An external, independent valuation company, SHM Smith Hodgkinson (Romania) Srl,
having an appropriate recognised professional qualification and recent
experience in the location and category of property being valued, values 50% of
the investment property portfolio every year on the basis of the Income
approach. The fair values are based on market values, being the estimated amount
for which property could be exchanged on the date of valuation between a willing
buyer and a willing seller in an arm's length transaction after property
marketing wherein parties had each acted knowledgeably, prudently and without
compulsion.
3.4Property, plant and equipment
All property, plant and equipment (other than investment properties) is stated
at historical cost less depreciation. Historical cost includes expenditure that
is directly attributable to the acquisition of the items.
Depreciation, based on a component approach, is calculated using the
straight-line method to allocate the cost over the asset's estimated useful
lives. For the majority of the assets this is estimated at 5 years.
3.5Deposit interest
Deposit interest is accounted for on an accruals basis.
3.6 Cash and cash equivalents
Cash and cash equivalents comprise cash deposited with banks and bank overdrafts
repayable on demand.
3.7Revenue and expense recognition
Interest income is recognised in the financial statements on an accruals basis.
Dividend income is recorded when declared.
Rental income from investment property leased out under operating lease is
recognised in the income statement on a straight-line basis over the term of the
lease.
3.7Revenue and expense recognition continued
Expenses are accounted for on an accruals basis. Expenses are charged to the
income statement except for expenses incurred on the acquisition of an
investment property which are included within the cost of that investment.
Expenses arising on the disposal of an investment property are deducted from the
disposal proceeds.
3.8 Basis of consolidation
Subsidiaries
Subsidiaries are those enterprises controlled by the Company. Control exists
where the Company has the power, directly or indirectly, to govern the financial
and operating policies of an enterprise so as to obtain benefits from its
activities. The financial statements of subsidiaries are included in the
consolidated financial statements from the date that control effectively
commences until the date that control effectively ceases.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised gains arising from
intra-group transactions, are eliminated in preparing the consolidated financial
statements.
Financial statements of foreign operations
The assets and liabilities of foreign operations, including goodwill and fair
value adjustments arising on consolidation, are translated to EUR at the foreign
currency exchange rates ruling at the balance sheet date. Foreign exchange
differences arising on translation are recognised directly in equity.
3.9 Dividends
Dividends are recognised as a liability in the year in which they are declared
and approved. There was no dividend declared as at 30 June 2009 (2008: Nil).
3.10 Financial assets
The Group classifies its financial assets in the following categories: at fair
value through profit or loss, loans and receivables, and available for sale. The
classification depends on the purpose for which the financial assets were
acquired. Management determines the classification of its financial assets at
initial recognition. At 30 June 2009 and 2008 the Group did not have any
financial assets at fair value through profit or loss or available for sale.
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They are included
in current assets, except for maturities greater than 12 months after the
balance sheet date. These are classified as non-current assets. The Group's
loans and receivables comprise 'trade and other receivables' and cash and cash
equivalents in the balance sheet.
3.11 Other receivables
Trade and other receivables are stated at their cost which approximates their
market value less provision for any bad and doubtful debts.
3.12 Trade and other payables
Trade and other payables are stated at their cost which approximates their
market value.
3.13 Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value, less
attributable transaction costs. Subsequent to initial recognition,
interest-bearing borrowings are stated at amortised cost with any difference
between cost and redemption value being recognised in the income statement over
the year of the borrowings on an effective interest basis.
3.14 Share Capital
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of ordinary shares and share options are recognised as
a deduction from equity, net of any tax effect.
3.15 Future changes in accounting policies
IASB (International Accounting Standards Board) and IFRIC (International
Financial Reporting Interpretations Committee) have issued the following
relevant standards and interpretations with an effective date after the date of
these financial statements, but the Group has not early adopted them:
+---------+--------------------------------------------+----------------------+
| International Accounting Standards (IAS/IFRS) | Effective for |
| | accounting periods |
| | starting on or after |
+------------------------------------------------------+----------------------+
| | |
+------------------------------------------------------+----------------------+
| IAS 1 | Presentation of Financial Statements | 1 January 2009 |
| | (Revised) | |
+---------+--------------------------------------------+----------------------+
| IAS 23 | Amendment - Borrowing costs | 1 January 2009 |
+---------+--------------------------------------------+----------------------+
| IAS 27 | Consolidated and Separate Financial | 1 January 2009 |
| | Statements (Amended) | |
+---------+--------------------------------------------+----------------------+
| IAS 39 | Financial Instruments: Recognition and | 1 January 2009 |
| | Measurement (Revised) | |
+---------+--------------------------------------------+----------------------+
| IAS 40 | Investment Property (Revised) | 1 January 2009 |
+---------+--------------------------------------------+----------------------+
| IFRS 5 | Non-current Assets Held for Sale and | 1 July 2009 |
| | Discontinued | |
| | Operations (Revised) | |
+---------+--------------------------------------------+----------------------+
| IFRS 7 | Financial Instruments: Disclosures | 1 January 2009 |
| | (Amended) | |
+---------+--------------------------------------------+----------------------+
| IFRS 8 | Operating segments | 1 January 2009 |
+---------+--------------------------------------------+----------------------+
Revised IAS 1 Presentation of Financial Statements (2007) introduces the term
total comprehensive income, which represents changes in equity during a period
other than those changes resulting from transactions with owners in their
capacity as owners. Total comprehensive income may be presented in either a
single statement of comprehensive income (effectively combining both the income
statement and all non-owner changes in equity in a single statement), or an
income statement and a separate statement of comprehensive income. Revised IAS
1, which becomes mandatory for the Group's 2010 consolidated financial
statements, is expected to impact on the presentation of the consolidated
financial statements but will not affect the accounting policies adopted. The
Group plans to provide total comprehensive income in a single statement of
comprehensive income for its 2010 consolidated financial statements.
IFRS 8 introduces the "management approach" to segment reporting, with
information based on internal reports. Management are currently assessing the
impact of this on the disclosures to be presented regarding segmental reporting.
The Directors do not anticipate that the adoption of the other standards and
interpretations will have a material impact on the Group's financial statements
in the period of initial application.
4Segment Reporting
Segment information is presented in respect of the Group's business and
geographical segments. The segments are managed on a worldwide basis, but
operate in two principal geographical areas, Bulgaria and Romania. The location
of the customers is the same as the location of the assets.
+-------------+----------+---------+-------------+----------+
| Year | Bulgaria | Romania | Unallocated | Total |
| ended | | | | |
| 30 | | | | |
| June | | | | |
| 2009 | | | | |
+-------------+----------+---------+-------------+----------+
| | EUR'000 | EUR'000 | EUR'000 | EUR'000 |
+-------------+----------+---------+-------------+----------+
| Net | 2,733 | - | - | 2,733 |
| rent | | | | |
| and | | | | |
| associated | | | | |
| income | | | | |
+-------------+----------+---------+-------------+----------+
| Segment | (8,027) | 132 | 1,333 | (6,562) |
| results | | | | |
+-------------+----------+---------+-------------+----------+
| Segment | 26,007 | - | 4,701 | 30,708 |
| assets | | | | |
+-------------+----------+---------+-------------+----------+
| Segment | (19,580) | - | (1,856) | (21,436) |
| liabilities | | | | |
+-------------+----------+---------+-------------+----------+
+-------------+----------+---------+--------+-------------+----------+
| Year | Bulgaria | Romania | Turkey | Unallocated | Total |
| ended | | | | | |
| 30 | | | | | |
| June | | | | | |
| 2008 | | | | | |
+-------------+----------+---------+--------+-------------+----------+
| | EUR'000 | EUR'000 | EUR'000 | EUR'000 | EUR'000 |
+-------------+----------+---------+--------+-------------+----------+
| Net | 2,777 | 1,597 | - | - | 4,374 |
| rent | | | | | |
| and | | | | | |
| associated | | | | | |
| income | | | | | |
+-------------+----------+---------+--------+-------------+----------+
| Segment | 3,147 | 9,654 | (5) | (3,961) | 8,835 |
| results | | | | | |
+-------------+----------+---------+--------+-------------+----------+
| Segment | 33,064 | - | - | 5,558 | 38,622 |
| assets | | | | | |
+-------------+----------+---------+--------+-------------+----------+
| Segment | (19,497) | - | - | (3,293) | (22,790) |
| liabilities | | | | | |
+-------------+----------+---------+--------+-------------+----------+
5 Net Rent and Related Income
+-------------------+--------+--------+
| | 2009 | 2008 |
+-------------------+--------+--------+
| | EUR'000 | EUR'000 |
+-------------------+--------+--------+
| Gross | 2,733 | 4,374 |
| lease | | |
| payments | | |
| collected/accrued | | |
+-------------------+--------+--------+
The group leases out its investment property under operating leases. The future
minimum lease receipts under non-cancellable leases are as follows:
+---------+--------+--------+
| | 2009 | 2008 |
+---------+--------+--------+
| | EUR'000 | EUR'000 |
+---------+--------+--------+
| Less | 343 | 428 |
| than | | |
| one | | |
| year | | |
+---------+--------+--------+
| Between | - | - |
| one and | | |
| five | | |
| years | | |
+---------+--------+--------+
| More | - | - |
| than | | |
| five | | |
| years | | |
+---------+--------+--------+
| | 343 | 428 |
+---------+--------+--------+
The Group has raised specific provisions for doubtful debts of EURnil (2008:
EUR125,685) against rental income.
6 Net Financing Expense
+-----------+---------+---------+
| | 2009 | 2008 |
+-----------+---------+---------+
| | EUR'000 | EUR'000 |
+-----------+---------+---------+
| Interest | 73 | 889 |
| income | | |
+-----------+---------+---------+
| Financial | 73 | 889 |
| income | | |
+-----------+---------+---------+
| Gross | (1,057) | (1,880) |
| interest | | |
| expense | | |
+-----------+---------+---------+
| Bank | - | (472) |
| charges | | |
+-----------+---------+---------+
| Financial | (1,057) | (2,352) |
| expenses | | |
+-----------+---------+---------+
| Net | (984) | (1,463) |
| financing | | |
| expense | | |
+-----------+---------+---------+
7 Net Asset Value per Share
The net asset value per share as at 30 June 2009 is EUR0.1481 based on net assets
of EUR9,271,455 and 62,616,333 ordinary shares in issue (30 June 2008: EUR0.2525
based on 62,696,333 shares).
8 Related Party Transactions
8.1Directors of the Company
During the year Anderson Whamond was managing director of the Manager and a
shareholder of Charlemagne Capital Limited, the parent of the Manager and
Placing Agent. Mr Whamond's role with the Manager has changed with effect from 1
April 2009 from executive to non-executive. He continues to act as a Director of
the Company. Mr Whamond was also, until 31 March 2009, a director of Charlemagne
Capital Limited ("CCL"), the parent of the Manager and Placing Agent. Mr
Whamond remains a shareholder of CCL and additionally has an indirect family
interest in shares of CCL. There are no service agreements between Mr Whamond
and CCL that are not determinable within one year.
Charlemagne Capital (Investments) Limited, an entity associated with the
Manager, by way of being a subsidiary of Charlemagne Capital Limited, holds
97,479 ordinary shares in the Company.
Save as disclosed above, none of the Directors had any interest during the year
in any material contract for the provision of services which was significant to
the business of the Company.
8.2 Directors of the Subsidiaries
James Houghton and Jane Bates are directors of the Manager and have been
appointed director(s) to a number of the Group subsidiaries. In compliance with
local regulations, certain subsidiaries have appointed directors who are
employees of or are associated with, the relevant registered office service
provider.
8.3 Manager fees
Annual fees
The Manager is entitled to an annual management fee of 1.25% of the net asset
value of the Company from time to time plus borrowings of the Group, payable
quarterly in arrears.
The Manager shall also be entitled to recharge to the Company all and any costs
and disbursements reasonably incurred by it in the performance of its duties
including costs of travel save to the extent that such costs are staff costs or
other internal costs of the Manager. Accordingly, the Company shall be
responsible for paying all the fees and expenses of all valuers, surveyors,
legal advisers and other external advisers to the Company in connection with any
investments made on its behalf. All amounts payable to the Manager by the
Company shall be paid together with any value added tax, if applicable.
Annual management fees payable for the year ended 30 June 2009 amounted to
EUR405,956 (2008: EUR1,108,733).
Performance fees
The Manager is entitled to a performance fee equal to 15% of the total profits
generated by the Company. In order for the performance fee to be payable, the
Company must firstly have returned to its Shareholders an amount equal to the
amount subscribed pursuant to the Placing (ignoring any initial charge paid by
Shareholders). Thereafter the Manager shall be entitled to 15% of any further
distributions of profit or capital. In determining amounts paid to Shareholders
and the amount payable to the Manager pursuant to the performance fee full
account will be taken of any dividends paid, other distributions made and
distributions made on a winding up of the Company.
Payment of the Manager's annual fees and any performance fees shall be paid by a
subsidiary of the Company.
As a result of losses made by the Group for the year ended 31 June 2009,
performance fees of EUR1,304,856 were reversed (2008: expense of EUR1,395,673).
9 Charges and Fees
9.1 Nominated Adviser and Broker fees
As Nominated Adviser and Broker to the Company for the purposes of the AIM
Rules, the nominated advisor and broker is entitled to receive an annual fee of
EUR42,512 (GBP30,000).
Advisory fees payable to the Nominated Adviser and Broker for the year ended 30
June 2009 amounted to EUR42,512 (2008: EUR89,446).
9.2 Custodian fees
The Custodian is entitled to receive fees calculated as 1 basis point per annum
of the value of the debt securities held on behalf of the Company, subject to a
minimum monthly fee of EUR500, payable quarterly in arrears.
9.3 Administrator and Registrar fees
The Custodian expects to review and, subject to written agreement between the
Company and the Custodian, may amend the foregoing fees six months after
Admission and annually thereafter.
Custodian fees payable for the year ended 30 June 2009 amounted to EUR6,938 (2008:
EUR7,050).
The Administrator is entitled to receive a fee of 4 basis points of the net
assets of the Company plus borrowings, subject to a minimum monthly fee of
EUR2,125, payable quarterly in arrears. The Administrator shall assist in the
preparation of the financial statements of the Company for which it shall
receive a fee of EUR2,500 per set.
The Administrator shall provide general secretarial services to the Company for
which it shall receive a minimum annual fee of EUR3,750. Additional fees based on
time and charges, will apply where the number of Board meetings exceeds four per
annum. For attendance at meetings not held in the Isle of Man, an attendance fee
of EUR500 per day or part thereof will be charged.
The Administrator may utilise the services of a CREST accredited registrar for
the purposes of settling share transactions through CREST. The cost of this
service will be borne by the Company. It is anticipated that the cost will be in
the region of GBP6,000 per annum subject to the number of CREST settled
transactions undertaken. The Administrator expects to review and, subject to
written agreement between the Company and the Administrator, may amend the
foregoing fees on an annual basis.
Administration fees payable for the year ended 30 June 2009 amounted to EUR52,125
(2008: EUR70,500).
9.4 Other operating expenses
It is anticipated that the costs of managing any properties in the Company's
investment portfolio will be satisfied out of the service charges generated by
tenants. However, to the extent that this is not the case, all such costs, to
include the costs of all other third party service providers, shall be
chargeable to and payable by the Company. The costs associated with maintaining
the Company's subsidiaries, to include the costs of incorporation and third
party service providers shall be chargeable to each subsidiary and payable by
the Company.
9.5 Audit fees
Audit fees payable for the year ended 30 June 2009 amounted to EUR100,588 (2008:
EUR81,502).
10 Investment Property
+--------------+---------+----------+
| | 30 | 30 |
| | June | June |
| | 2009 | 2008 |
+--------------+---------+----------+
| | Group | Group |
+--------------+---------+----------+
| | EUR000 | EUR'000 |
+--------------+---------+----------+
| At | 31,560 | 131,971 |
| beginning | | |
| of year | | |
+--------------+---------+----------+
| Disposals | - | (99,471) |
| through | | |
| sale of | | |
| subsidiaries | | |
+--------------+---------+----------+
| Net | (7,960) | (940) |
| loss | | |
| from | | |
| fair | | |
| value | | |
| adjustments | | |
| on | | |
| investment | | |
| property | | |
+--------------+---------+----------+
| Balance | 23,600 | 31,560 |
| at end | | |
| of year | | |
+--------------+---------+----------+
The investment property was valued by an independent third party, SHM Smith
Hodgkinson (Romania) Srl based on discounted cash flow valuation technique.
As at 30 June 2009, there was a first rank mortgage on the above property
securing the bank loans of EUR19.2 million (see note 15).
11 Property, Plant & Equipment
+--------------+----------+
| | Group |
+--------------+----------+
| | Fixtures |
| | & |
| | Fittings |
+--------------+----------+
| | EUR'000 |
+--------------+----------+
| Net | - |
| book | |
| amount | |
| at 1 | |
| July | |
| 2008 | |
+--------------+----------+
| Additions | 98 |
+--------------+----------+
| Depreciation | - |
| charge | |
+--------------+----------+
| Net | 98 |
| book | |
| amount | |
| at 30 | |
| June | |
| 2009 | |
+--------------+----------+
| Net | - |
| book | |
| amount | |
| at 30 | |
| June | |
| 2008 | |
+--------------+----------+
There were no impairment charges in 2009.
12 Cash and Cash Equivalents
+-------------+--------+--------+---------+---------+
| | Group | Group | Company | Company |
+-------------+--------+--------+---------+---------+
| | 30 | 30 | 30 | 30 |
| | June | June | June | June |
| | 2009 | 2008 | 2009 | 2008 |
+-------------+--------+--------+---------+---------+
| | EUR'000 | EUR'000 | EUR'000 | EUR'000 |
+-------------+--------+--------+---------+---------+
| | | | | |
+-------------+--------+--------+---------+---------+
| Bank | 4,200 | 2,552 | 2,154 | 1,175 |
| balances | | | | |
+-------------+--------+--------+---------+---------+
| Cash | 4,200 | 2,552 | 2,154 | 1,175 |
| and | | | | |
| cash | | | | |
| equivalents | | | | |
+-------------+--------+--------+---------+---------+
At 30 June 2009, EUR1.99m was held in a bank account with Alpha Bank subject to
the terms of the loan agreement between Alpha Bank and the Company's Bulgarian
subsidiary, under which all obligations to the Bank under the loan agreement
must be fulfilled before the Bulgarian subsidiary is free to pay a dividend.
13Capital and Reserves
Share capital
+-----------+------------+--------+
| | 2009 | 2009 |
+-----------+------------+--------+
| Ordinary | Number | EUR'000 |
| Shares | | |
| of EUR1.00 | | |
| each | | |
+-----------+------------+--------+
| | | |
+-----------+------------+--------+
| In | 62,696,333 | 3,762 |
| issue | | |
| at the | | |
| start | | |
| of the | | |
| year | | |
+-----------+------------+--------+
| Shares | (80,000) | (80) |
| cancelled | | |
+-----------+------------+--------+
| In | 62,616,333 | 3,682 |
| issue | | |
| at 30 | | |
| June | | |
| 2009 | | |
+-----------+------------+--------+
+----------+------------+----------+
| | 2008 | 2008 |
+----------+------------+----------+
| Ordinary | Number | EUR'000 |
| Shares | | |
| of EUR1.00 | | |
| each | | |
+----------+------------+----------+
| | | |
+----------+------------+----------+
| In | 62,696,333 | 62,696 |
| issue | | |
| at the | | |
| start | | |
| of the | | |
| year | | |
+----------+------------+----------+
| Return | - | (58,934) |
| of | | |
| capital | | |
+----------+------------+----------+
| In | 62,696,333 | 3,762 |
| issue | | |
| at 30 | | |
| June | | |
| 2008 | | |
+----------+------------+----------+
At incorporation the authorised share capital of the Company was EUR300 million
divided into 300 million Ordinary Shares of EUR1.00 each.
The holders of ordinary shares are entitled to receive dividends as declared
from time to time and are entitled to one vote per share at meetings of the
Company. All shares rank equally with regard to the Company's assets.
The Group does not have any externally imposed capital requirements.
14 Basic and Diluted Earnings per Share
Basic and diluted earnings per share are calculated by dividing the profit
attributable to equity holders of the Company by the weighted average number of
ordinary shares in issue during the year:
+-----------------+----------+--------+
| | 2009 | 2008 |
+-----------------+----------+--------+
| (Loss)/profit | (6,562) | 8,835 |
| attributable | | |
| to equity | | |
| holders of | | |
| the | | |
| Company | | |
| (EUR'000) | | |
+-----------------+----------+--------+
| Weighted | 62,652 | 62,696 |
| average | | |
| number | | |
| of | | |
| ordinary | | |
| shares | | |
| in issue | | |
| (thousands) | | |
+-----------------+----------+--------+
| Basic | (0.1047) | 0.1409 |
| and | | |
| diluted | | |
| (loss)/earnings | | |
| per share (EUR | | |
| per share) | | |
+-----------------+----------+--------+
15 Interest-Bearing Loans and Borrowings
This note provides information about the contractual terms of the Group's
interest-bearing loans and borrowings. For more information about the Group's
exposure to interest rate and currency risk see note 21.
Non-current liabilities:
+---------+--------+--------+
| | Group | Group |
+---------+--------+--------+
| | 30 | 30 |
| | June | June |
| | 2009 | 2008 |
+---------+--------+--------+
| | EUR'000 | EUR'000 |
+---------+--------+--------+
| Secured | 19,178 | 19,232 |
| bank | | |
| loans | | |
+---------+--------+--------+
Terms and debt repayment schedule:
+-------------+--------+-----------+----------+
| Loan | Bank | Effective | Final |
| Amount | | interest | Maturity |
| | | rate | date |
+-------------+--------+-----------+----------+
| | | 30 | |
| | | June | |
| | | 2009 | |
+-------------+--------+-----------+----------+
| EUR19,178,382 | Alpha | 6.085 | October |
| | Bank | | 2011 |
| | Sofia | | |
| | SA | | |
+-------------+--------+-----------+----------+
16 Receivables
+-------------+--------+--------+---------+---------+
| | Group | Group | Company | Company |
+-------------+--------+--------+---------+---------+
| | 30 | 30 | 30 | 30 |
| | June | June | June | June |
| | 2009 | 2008 | 2009 | 2008 |
+-------------+--------+--------+---------+---------+
| | EUR'000 | EUR'000 | EUR'000 | EUR'000 |
+-------------+--------+--------+---------+---------+
| Trade | 229 | 208 | - | - |
| receivables | | | | |
+-------------+--------+--------+---------+---------+
| Deferred | 2,548 | 4,276 | - | - |
| sale | | | | |
| proceeds | | | | |
+-------------+--------+--------+---------+---------+
| Other | 33 | 26 | 6 | 12 |
+-------------+--------+--------+---------+---------+
| Total | 2,810 | 4,510 | 6 | 12 |
| trade | | | | |
| and | | | | |
| other | | | | |
| receivables | | | | |
+-------------+--------+--------+---------+---------+
The deferred sales proceeds were due to be received by the Group by 24 October
2008, in respect of the three properties sold in 2007. The acquiring company
failed to release the proceeds on time, and failed to notify the Company of any
claims that it had under the sales agreements for each of the properties until
January 2009. Subsequent to year end provisional agreement has been reached for
a settlement of EUR900,000 payable to the acquiring company in return for the
release of the remaining net receivables to the Group. Full provision for the
settlement of EUR900,000 has been made as at 30 June 2009. (see note 17).
Intragroup balances are repayable on demand and bear interest at commercial
rates. Loans to subsidiaries outstanding at the year end have been impaired to
fair value.
17 Trade and Other Payables
+----------+--------+--------+---------+---------+
| | Group | Group | Company | Company |
+----------+--------+--------+---------+---------+
| | 30 | 30 | 30 | 30 |
| | June | June | June | June |
| | 2009 | 2008 | 2009 | 2008 |
+----------+--------+--------+---------+---------+
| | EUR'000 | EUR'000 | EUR'000 | EUR'000 |
+----------+--------+--------+---------+---------+
| Taxation | 26 | 11 | - | - |
+----------+--------+--------+---------+---------+
| Trade | 129 | 131 | - | - |
| payables | | | | |
+----------+--------+--------+---------+---------+
| Rental | - | - | - | - |
| deposits | | | | |
+----------+--------+--------+---------+---------+
| Accruals | 2,103 | 3,229 | 101 | 65 |
+----------+--------+--------+---------+---------+
| Other | - | - | - | - |
+----------+--------+--------+---------+---------+
| Total | 2,258 | 3,371 | 101 | 65 |
+----------+--------+--------+---------+---------+
Accruals include a performance fee of EUR973,566 and other accruals of EUR1,129,985
(2008 - EUR2.278m and EUR951k respectively). Other accruals include a provision of
EUR900,000 against the deferred sales proceeds. See note 16.
18 Exchange Rates
The following exchange rates were used to translate assets and liabilities into
the reporting currency at 30 June 2009:
+--------------+--------+
| Bulgarian | 1.9558 |
| Lev | |
+--------------+--------+
| Turkish Lira | 2.1437 |
+--------------+--------+
19 Directors' Remuneration
The Company
The maximum amount of remuneration payable to the Directors permitted under the
Articles of Association is EUR300,000 p.a. Each Director currently is paid a fee
of EUR22,500 p.a. The Directors are each entitled to receive reimbursement of any
expenses incurred in relation to their appointment. Total fees and expenses paid
to the Directors for the year ended 30 June 2009 amounted to EUR90,000 (2008:
EUR90,000).
The Subsidiaries
No fees are paid to the directors of the subsidiaries except in circumstances
where a director is appointed in compliance with local regulations and in such
cases the fees payable are nominal.
20 Taxation
Group income tax expense
+------------------+--------+---------+
| | Year | Year |
| | to 30 | to 30 |
| | June | June |
| | 2009 | 2008 |
+------------------+--------+---------+
| | EUR'000 | EUR'000 |
+------------------+--------+---------+
| Current | 10 | (418) |
| tax | | |
| expense/(credit) | | |
+------------------+--------+---------+
| Movement | (187) | (4,858) |
| in | | |
| deferred | | |
| tax | | |
| liability | | |
+------------------+--------+---------+
| Income | (177) | (5,276) |
| tax | | |
| credit | | |
| for | | |
| the | | |
| year | | |
+------------------+--------+---------+
+----------------+---------+---------+
| Reconciliation | Year | Year |
| of effective | to 30 | to 30 |
| tax | June | June |
| | 2009 | 2008 |
+----------------+---------+---------+
| | EUR'000 | EUR'000 |
+----------------+---------+---------+
| Accounting | (6,739) | 3,559 |
| (loss)/gain | | |
+----------------+---------+---------+
| Isle | - | - |
| of Man | (177) | (5,276) |
| taxation | | |
| at 0% | | |
| Foreign | | |
| capital | | |
| gains | | |
| tax | | |
| credit | | |
+----------------+---------+---------+
| Income | (177) | (5,276) |
| tax | | |
+----------------+---------+---------+
Deferred income tax is based on temporary differences between revalued amounts
of investment property in the books of the subsidiaries and their respective tax
bases. The deferred tax position as at 30 June 2009 is based on the capital
gains tax rate of 10% in Bulgaria.
Isle of Man
The Isle of Man has introduced a general zero per cent tax rate for companies
with effect from 6 April 2006, with the exception of certain banking income and
income from Isle of Man land and property which is taxed at 10 per cent.
There are no corporation, capital gains or inheritance taxes payable in the Isle
of Man.
No Isle of Man stamp duty or stamp duty reserve tax will be payable on the
issue, transfer, conversion or redemption of Ordinary Shares.
Shareholders resident outside the Isle of Man will not suffer any income tax in
the Isle of Man on any income distributions to them.
Shareholders resident in the Isle of Man will, depending upon their particular
circumstances, be liable to Manx income tax on dividends received from the
Company.
United Kingdom
The affairs of the Company are conducted so that the central management and
control of the Company is not exercised in the UK and so that the Company does
not carry out any trade in the UK (whether or not through a permanent
establishment situated there). On this basis, the Company should not be liable
for UK taxation on its income and gains, other than certain income deriving from
a UK source.
Other
The subsidiaries of the Company are taxed in accordance with the applicable tax
laws in the countries in which they were incorporated.
21 Financial Instruments
The Group's activities expose it to a variety of financial risks: market risk
(including currency risk, cashflow risk, interest rate risk and price risk),
credit risk, and liquidity risk.
Market risk
Property and property related assets are inherently difficult to value due to
the individual nature of each property. As a result, valuations may be subject
to substantial uncertainty. There is no assurance that the estimates resulting
from the valuation process will reflect the actual sales price even where such
sales occur shortly after the valuation date. The performance of the Company
would be adversely affected by a downturn in the property market in terms of
higher capitalisation rates/yields or a weakening of rent levels. Any future
property market recession could materially adversely affect the value of
property held. The Company's market risk is monitored by the Manager on a day to
day basis and by the Directors at Board Meetings.
Price risk
The Group's strategy on the management of market price risk is driven by the
Group's investment objective. The Group was established to invest primarily in
income producing property assets in South East Europe. The main objective of the
Group is to take advantage of the potential for capital appreciation of these
investments. The Group market risk is monitored by the Manager on a day to day
basis and by the Directors at Board Meetings.
The Group is exposed to property price and property rental risk. The value of
the property held at 30 June 2009 is disclosed in note 10. The Group's strategy
is to invest in property assets and then sell them for gain. However as a result
of current global economic conditions (see note 3.1), the property market in
Romania and Bulgaria has declined. The Group therefore expects that it will hold
the assets for a substantial period post completion. This further exposes the
Group to property rental risk.
Foreign exchange risk
The Group's operations are conducted in jurisdictions which generate revenue,
expenses, assets and liabilities in currencies other than the Euro (the
functional currency). As a result, the Group is subject to the effects of
exchange rate fluctuations with respect to these currencies. The currency giving
rise to this risk is primarily Bulgarian Lev.
The Group may invest in financial instruments and enter into transactions
denominated in currencies other than the functional currency. Consequently, the
Group is exposed to risks that the exchange rate of its currency relative to
other foreign currencies may change in a manner that has an adverse affect on
the value of that portion of the Group's assets or liabilities denominated in
currencies other than the functional currency. The Group's policy is not to
enter into any currency hedging transactions.
The following table sets out the Group's total exposure to foreign currency risk
and the net exposure to foreign currencies of the assets and liabilities:
+-----------+--------+-------------+--------+
| 30 | Assets | Liabilities | Net |
| June | | | Assets |
| 2009 | | | |
+-----------+--------+-------------+--------+
| | EUR000 | EUR000 | EUR000 |
+-----------+--------+-------------+--------+
| Bulgarian | 2,309 | (121) | 2,188 |
| Lev | | | |
+-----------+--------+-------------+--------+
| Euro | 28,399 | (21,315) | 7,084 |
+-----------+--------+-------------+--------+
| Total | 30,708 | (21,436) | 9,272 |
+-----------+--------+-------------+--------+
+-----------+--------+-------------+--------+
| 30 | Assets | Liabilities | Net |
| June | | | Assets |
| 2008 | | | |
+-----------+--------+-------------+--------+
| | EUR000 | EUR000 | EUR000 |
+-----------+--------+-------------+--------+
| Bulgarian | 1,504 | (85) | 1,419 |
| Lev | | | |
+-----------+--------+-------------+--------+
| Euro | 37,118 | (22,705) | 14,413 |
+-----------+--------+-------------+--------+
| Total | 38,622 | (22,790) | 15,832 |
+-----------+--------+-------------+--------+
At 30 June 2009 there are no remaining Romanian Lei assets and whilst the
Bulgarian Lev is pegged to the Euro, there is no significant foreign exchange.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market interest rates.
Cash held by the Group is invested at short-term market interest rates. The
Group has interest-bearing loans (see note 15). As a result, the Company is
exposed to fair value interest rate risk due to fluctuations in the prevailing
levels of market interest rates. It is also exposed to interest rate cash flow
risk.
The table below summarises the Group's exposure to interest rate risk. It
includes the Group's financial assets and liabilities at the earlier of
contractual re-pricing or maturity date, measured by the carrying values of
assets and liabilities:
+-----------------+--------+---------+---------+----------+--------+--------------+----------+
| 30 June 2009 | Less | 1-3 | 3 | 1-5 | Over 5 | Non-interest | Total |
| | than 1 | months | months | years | years | bearing | |
| | month | | to 1 | | | | |
| | | | year | | | | |
+-----------------+--------+---------+---------+----------+--------+--------------+----------+
| | EUR'000 | EUR'000 | EUR'000 | EUR'000 | EUR'000 | EUR'000 | EUR'000 |
+-----------------+--------+---------+---------+----------+--------+--------------+----------+
| Financial | | | | | | | |
| assets | | | | | | | |
+-----------------+--------+---------+---------+----------+--------+--------------+----------+
| Trade and other | - | - | - | - | - | 2,810 | 2,810 |
| receivables | | | | | | | |
+-----------------+--------+---------+---------+----------+--------+--------------+----------+
| Cash and cash | 4,200 | - | - | - | - | - | 4,200 |
| equivalents | | | | | | | |
+-----------------+--------+---------+---------+----------+--------+--------------+----------+
| Total financial | 4,200 | - | - | - | - | 2,810 | 7,010 |
| assets | | | | | | | |
+-----------------+--------+---------+---------+----------+--------+--------------+----------+
| Financial | | | | | | | |
| liabilities | | | | | | | |
+-----------------+--------+---------+---------+----------+--------+--------------+----------+
| Interest | - | - | - | (19,178) | - | - | (19,178) |
| bearing loans | | | | | | | |
+-----------------+--------+---------+---------+----------+--------+--------------+----------+
| Trade and other | - | - | - | - | - | (2,258) | (2,258) |
| payables | | | | | | | |
+-----------------+--------+---------+---------+----------+--------+--------------+----------+
| Total financial | - | - | - | (19,178) | - | (2,258) | (21,436) |
| liabilities | | | | | | | |
+-----------------+--------+---------+---------+----------+--------+--------------+----------+
| Total interest | 4,200 | - | - | (19,178) | - | | |
| rate | | | | | | | |
| sensitivity gap | | | | | | | |
+-----------------+--------+---------+---------+----------+--------+--------------+----------+
+-----------------+--------+---------+---------+----------+--------+--------------+----------+
| 30 June 2008 | Less | 1-3 | 3 | 1-5 | Over 5 | Non-interest | Total |
| | than 1 | months | months | years | years | bearing | |
| | month | | to 1 | | | | |
| | | | year | | | | |
+-----------------+--------+---------+---------+----------+--------+--------------+----------+
| | EUR'000 | EUR'000 | EUR'000 | EUR'000 | EUR'000 | EUR'000 | EUR'000 |
+-----------------+--------+---------+---------+----------+--------+--------------+----------+
| Financial | | | | | | | |
| assets | | | | | | | |
+-----------------+--------+---------+---------+----------+--------+--------------+----------+
| Trade and other | - | - | - | - | - | 4,510 | 4,510 |
| receivables | | | | | | | |
+-----------------+--------+---------+---------+----------+--------+--------------+----------+
| Cash and cash | 2,552 | - | - | - | - | - | 2,552 |
| equivalents | | | | | | | |
+-----------------+--------+---------+---------+----------+--------+--------------+----------+
| Total financial | 2,552 | - | - | - | - | 4,510 | 7,062 |
| assets | | | | | | | |
+-----------------+--------+---------+---------+----------+--------+--------------+----------+
| Financial | | | | | | | |
| liabilities | | | | | | | |
+-----------------+--------+---------+---------+----------+--------+--------------+----------+
| Interest | - | - | - | (19,232) | - | - | (19,232) |
| bearing loans | | | | | | | |
+-----------------+--------+---------+---------+----------+--------+--------------+----------+
| Trade and other | - | - | - | - | - | (3,371) | (3,371) |
| payables | | | | | | | |
+-----------------+--------+---------+---------+----------+--------+--------------+----------+
| Total financial | - | - | - | (19,232) | - | (3,371) | (22,603) |
| liabilities | | | | | | | |
+-----------------+--------+---------+---------+----------+--------+--------------+----------+
| Total interest | 2,552 | - | - | (19,232) | - | | |
| rate | | | | | | | |
| sensitivity gap | | | | | | | |
+-----------------+--------+---------+---------+----------+--------+--------------+----------+
If the interest rates to which the Group was exposed had been lower than those
actually experienced by 200 basis points for the full year then this would have
resulted in an increase in profit for the year and net assets at the period end
of EUR0.70m (2008: EUR0.47m). If interest rates had been higher by the same amount
there would have been a similar decrease in profit for the year and net assets
at the period end.
Credit risk
Credit risk is the risk that a counterparty to a financial instrument will fail
to discharge an obligation or commitment that it has entered into with the
Group.
The carrying amounts of financial assets best represent the maximum credit risk
exposure at the balance sheet date. This relates also to financial assets
carried at amortised cost.
At the reporting date, the Group's financial assets exposed to credit risk
amounted to the following:
+-------------------------------------+--------------------+-------------------+
| | 30 June 2009 | 30 June 2008 |
+-------------------------------------+--------------------+-------------------+
| | EUR'000 | EUR'000 |
+-------------------------------------+--------------------+-------------------+
| Trade and other receivables | 2,810 | 4,510 |
+-------------------------------------+--------------------+-------------------+
| Cash at bank | 4,200 | 2,552 |
+-------------------------------------+--------------------+-------------------+
| | 7,010 | 7,062 |
+-------------------------------------+--------------------+-------------------+
As stated within note 16, subsequent to year end the Group reached provisional
agreement in respect ofrecovery of the deferred sales proceeds due.
The Group manages its credit risk by monitoring the creditworthiness of
counterparties regularly and does not expect any counterparty to fail to meet
its obligations.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its
obligations as they fall due. The Group manages its liquidity risk by
maintaining sufficient cash balances for working capital, and obtains secured
bank loans to fund purchases of investment property. The Group's liquidity
position is monitored by the Manager and the Board of Directors.
At the reporting date, the residual undiscounted contractual maturities of
financial liabilities are the following:
+-------------------+--------+--------+--------+--------+--------+----------+--------+
| | Less | 1-3 | 3 | 1-5 | Over 5 | No | Total |
| | than 1 | months | months | years | years | stated | |
| | month | | to 1 | | | maturity | |
| | | | year | | | | |
+-------------------+--------+--------+--------+--------+--------+----------+--------+
| | EUR'000 | EUR'000 | EUR'000 | EUR'000 | EUR'000 | EUR'000 | EUR'000 |
+-------------------+--------+--------+--------+--------+--------+----------+--------+
| Other creditors | - | 509 | 800 | 949 | - | - | 2,258 |
| and accrued | | | | | | | |
| expenses | | | | | | | |
+-------------------+--------+--------+--------+--------+--------+----------+--------+
| Interest bearing | - | - | - | 19,178 | - | - | 19,178 |
| loans and | | | | | | | |
| borrowings | | | | | | | |
+-------------------+--------+--------+--------+--------+--------+----------+--------+
Comparatives as at 30 June 2008
+--------------------+---------+---------+---------+--------+--------+----------+--------+
| | Less | 1-3 | 3 | 1-5 | Over 5 | No | Total |
| | than 1 | months | months | years | years | stated | |
| | month | | to 1 | | | maturity | |
| | | | year | | | | |
+--------------------+---------+---------+---------+--------+--------+----------+--------+
| | EUR'000 | EUR'000 | EUR'000 | EUR'000 | EUR'000 | EUR'000 | EUR'000 |
+--------------------+---------+---------+---------+--------+--------+----------+--------+
| Other creditors | 688 | - | 2,683 | - | - | - | 3,371 |
| and accrued | | | | | | | |
| expenses | | | | | | | |
+--------------------+---------+---------+---------+--------+--------+----------+--------+
| Interest bearing | - | - | - | 19,232 | - | - | 19,232 |
| loans and | | | | | | | |
| borrowings | | | | | | | |
+--------------------+---------+---------+---------+--------+--------+----------+--------+
Fair values
The carrying amounts of all the Company's financial assets and financial
liabilities at the balance sheet date approximated to their fair values.
Fair value estimates are made at a specific point in time, based on market
conditions and information about the financial instrument. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgement (e.g. interest rates, volatility, estimated cash flows, etc) and
therefore cannot be determined with precision.
22 Investment Policy
The Company was established to invest in income producing property assets and
late stage property developments in South East Europe. The Company originally
invested in three such assets in Romania, which were subsequently sold, and one
in Bulgaria which remains in ownership.
The Company uses borrowings in relation to its investments. The debt to equity
ratio differs in respect of each investment but may be as high as 75:25 at the
time of making the investment. By utilising gearing in this way, if the value of
the Company's assets declines then the effect of this gearing will be to have a
disproportionately negative impact on the value of the group's assets and the
debt to equity ratio may exceed 75:25.
The Company was conceived as a one-cycle investment vehicle, and intends to hold
and manage its one remaining asset until divestment can be achieved at an
acceptable level. The Company's intention is to achieve divestment of the
remaining asset, and return cash to shareholders. No further property investment
is anticipated.
At the annual general meeting of the Company to be held in 2012, the Directors
shall propose an ordinary resolution that the Company ceases to continue in
existence. If the resolution is not passed at such annual general meeting, then
the Directors shall propose the same resolution at every fifth annual general
meeting thereafter.
23 Post Balance Sheet Events
A settlement concerning the deferred sales proceeds has been agreed with the
purchaser following the balance sheet date. The additional cost to the Company
was adjusted in the results for the year.
Disclaimer
This document does not constitute an offer to sell or solicitation of an offer
to buy shares in the Company and subscriptions for shares in the Company may
only be made on the terms and subject to the conditions (and risk factors)
contained in the prospectus of the Company. Potential investors should carefully
read the prospectus issued by the Company which contains significant additional
information needed to evaluate an investment in the Company. This document has
not been approved by a competent supervisory authority and no supervisory
authority has consented to the issue of this document. The information in this
document is confidential and it should not be distributed or passed on, directly
or indirectly, by the recipient to any other person without the prior written
consent of Charlemagne Capital (UK) Limited. This document and shares in the
Company shall not be distributed, offered or sold in any jurisdiction in which
such distribution, offer or sale would be unlawful and until the requirements of
such jurisdiction have been satisfied. This document is not intended for public
use or distribution. The purchase of shares in the Company constitutes a high
risk investment and investors may lose a substantial portion or even all of the
money they invest in the Company. An investment in the Company is, therefore,
suitable only for financially sophisticated investors who are capable of
evaluating the risks and merits of such investment and who have sufficient
resources to bear any loss that might result from such investment. If you are in
any doubt about the contents of this document you should consult an independent
financial adviser. Investors in the Company should note that: past performance
should not be seen as an indication of future performance; investments
denominated in foreign currencies result in the risk of loss from currency
movements as well as movements in the value, price or income derived from the
investments themselves; and there are additional risks associated with
investments (made directly or through investment vehicles which invest) in
emerging or developing markets. Charlemagne Capital (UK) Limited does not
guarantee the accuracy, adequacy or completeness of any information contained
herein and is not responsible for any omissions or for the results obtained from
such information. The information is indicative only and is for background
purposes and is subject to material updating, revision, amendment and
verification. All quoted returns are illustrative. No representation or
warranty, express or implied, is made as to the matters stated in this document
and no liability whatsoever is accepted by Charlemagne Capital (UK) Limited or
any other person in relation thereto.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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