TIDMOTM
RNS Number : 2147Q
Ottoman Fund Limited (The)
26 February 2016
THE OTTOMAN FUND LIMITED (the "Company")
Final results for the year ended 31 August 2015
The Company is pleased to announce as follows its final results
for the year ended 31 August 2015 together with the publication of
its 2015 annual report and accounts, a full copy of which will
shortly be available on the Company's website:
www.theottomanfund.com.
Enquiries:
N+1 Singer
James Maxwell 0207 496 3000
Vistra Fund Services
Limited
Company Secretary 01534 504 700
Chairman's Statement
Dear Shareholders,
On 25 February 2016 we announced a distribution of 2p per share
or GBP2.7m in total. This figure primarily represents cash proceeds
from the Riva and Bodrum sales, which the Company recovered from
its Turkish subsidiaries' bank accounts following the resolution of
a lengthy process with Garanti Bank.
Following the payment of this distribution, the Group's
principal assets will comprise Jersey bank balances of
approximately GBP3.9 million, a loan to Mandalina that could be
satisfied by the approximately GBP1 million that we believe
Mandalina holds in a Turkish bank account, and a claim against the
Company's former chief financial officer for approximately GBP1
million. In the Group's financial statements, the Mandalina loan
balance and the claim against the former CFO have been fully
provided against, which reflects the uncertainty over their
ultimate collection. The Company currently has collection
proceedings underway against both Mandalina and the Company's
former CFO to recover these amounts. The Company's potential
liabilities following the distribution could total GBP1.65 million
and may include possible Turkish tax liabilities and third party
claims. Any future distributions will be contingent on the
Company's progress in resolving the Group's tax liabilities,
prevailing in the collection proceedings that are now pending,
exchange rate movements, and concluding the various legal cases now
pending in Turkey. For now it is premature to offer a view as to
the likely outcome of these various matters.
Over the past year we have continued our efforts to recover the
money embezzled from the Group. We are working with a Turkish
criminal lawyer and the local prosecutor's office in Istanbul to
commence criminal proceedings against the Company's former CFO, and
I will be traveling to Turkey in the next several weeks to give
evidence. We are also taking the steps necessary to conclude the
Group's affairs so the Company's net assets can be distributed to
shareholders and the Company can then be placed in voluntary
liquidation. These steps include determining the Group's tax
liabilities and if necessary resolving opportunistic litigation
that has been brought against the Company's Turkish subsidiaries
and affiliates.
The resolution of these matters depends on complex Turkish
legal, accounting and tax matters that must be addressed before the
Company is placed in liquidation. We have been working within the
Turkish legal system for about fifteen months and our impression is
that the Turkish legal system is not designed to deal efficiently
with private business disputes or even to punish a clear case of
embezzlement. There are no barriers to filing meritless lawsuits.
There is no mechanism for summarily dismissing a meritless lawsuit.
There are no barriers to filing meritless appeals. There is no real
cost shifting from a losing party to a prevailing one. There is no
mechanism for the posting of security. Nonetheless, we are working
closely with our Turkish accountants and tax advisors, the Istanbul
office of BDO, and our Turkish lawyers, the Istanbul office of the
law firm White & Case LLP, to resolve these outstanding
issues.
Over the next several weeks, we will be sending a circular to
shareholders seeking to extend the life of the Company so we can
continue our efforts to recover Company's assets and make further
distributions to shareholders. The alternative would be to hand the
Company over to a liquidator now. Under this scenario, the Board
would resign and the shareholders would lose any say in how the
liquidator goes about his activities. The liquidator rather than
the Board would have to resolve the issues identified above before
any distributions would be made. The liquidation process would be
non-transparent, costs would likely be higher, the liquidator's
powers would not give him the flexibility the directors have to act
commercially, and there would be no incentives to resolve things
earlier rather than later. Given these facts and likelihoods, it is
the Board's view that extending the life of the Company gives the
best prospect for additional cash distributions.
I might further point out that in seeking to extend the
Company's life, recover money embezzled from the Group, recover
funds that remain in Turkey, and defend the Group against various
bogus lawsuits underway, we weigh the choices we have against the
costs that likely will be incurred, the amount of time that will
likely be required, and the uncertainty of any outcome.
Very truly yours,
John D. Chapman
Chairman
The Ottoman Fund Limited
25 February 2016
Directors' Report
The Directors submit their Report and the audited consolidated
financial statements (the "Financial Statements") of The Ottoman
Fund Limited (the "Company") and its subsidiaries (together, the
"Group") for the year ended 31 August 2015. The Company was formed
on 9 December 2005 and commenced trading on its admission to the
AIM market on 28 December 2005. The Company is quoted on the AIM
market of the London Stock Exchange.
Principal Activity
The Company was established to invest in Turkish property.
During 2014 the Company sold its remaining property interests. The
Company's remaining assets are substantially cash balances. In
addition, the Company has proceeded with legal actions in Turkey to
recover remaining monies taken without authorisation by the former
Chief Financial Officer, totalling $1.35m and to recover a loan to
Mandalina of EUR1.3m. There is no certainty as to the
recoverability of these amounts.
Investment Policy
Upon Admission to AIM, the Company's strategy was to invest in
new-build residential developments in major cities and coastal
locations in Turkey, aimed at both the local and tourist markets
with an emphasis on off-plan sales. The Company now intends to make
no new investments, having sold all investments previously
held.
Results and Dividends
It is not intended in normal circumstances that the Company will
pay dividends on the shares.
The Directors do not recommend the payment of a dividend for the
year ended 31 August 2015 (2014: nil). The consolidated statement
of comprehensive income is set out on page 9 of this Annual Report
and consolidated Financial Statements.
The Group is involved in ongoing litigation in relation to
events from the current and prior years. Details of the ongoing
matters have been disclosed in notes 20 and 21.
Auditor
Baker Tilly Channel Islands Limited were appointed during the
year and have expressed their willingness to continue in office. A
resolution for their re-appointment will be considered at the next
Annual General Meeting ("AGM").
Life
Under the Company's articles, as soon as practicable after 28
December 2015 the Directors are required to convene an
Extraordinary General Meeting ("EGM") to consider a resolution to
wind up the Company. The Directors will shortly be convening an EGM
and expect to be recommending to shareholders that, in lieu of
commencing a winding up at this stage, the articles are amended to
extend the life of the Company, which the Directors believe is the
most appropriate way to facilitate the best conclusion to the
ongoing matters referred to in notes 20 and 21.
Manager & Custodian
Subsequent to the removal of Development Capital Management
(Jersey) Limited as manager of the Company in 2010, management was
internalised at the Board level and the Board engaged with Civitas
Property Partners S.A. to manage and sell the Company's Turkish
assets.
Subsequent to the termination of the custody agreement with BNP
Paribas (Jersey branch) in 2010, the Company has not appointed a
replacement.
Board of Directors
The Directors of the Company are listed on page 27. John D
Chapman (Executive Chairman), Antony Gardner-Hillman and Andrew
Wignall all served as Directors throughout the year. Eitan Milgram
served as a Director from the beginning of the year up until his
resignation on 4 August 2015.
Shareholders' Interests (as at 31 August 2015)
Size of shareholding (in shares) No. of shareholders
1 - 9,999 31
10,000 - 99,999 11
100,000 - 999,999 7
1,000,000 - 9,999,999 9
10m+ 3
At 31 August 2015 the Company was aware of the following
interests of 3% or more in the ordinary share capital of the
Company:
Number % held
QVT Financial LP 43,335,000 32.16%
Weiss Asset Management LLC 40,132,000 29.78%
Toscafund Asset Management LLP 22,551,098 16.73%
Lars Bader 7,940,000 5.89%
JPMorgan Securities CREST transition account 7,113,766 5.28%
The Directors are not aware of other interests of 3% or more in
the Company's issued share capital.
Directors' Interests
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The maximum aggregate amount of ordinary remuneration payable to
the Directors permitted under the Articles is GBP150,000 per annum.
The Directors received in aggregate GBP150,000 for the year ended
31 August 2015 (2014: GBP150,000). Commencing 13 March 2009 John D.
Chapman has been employed under an executive service contract that
provides for an annual fee of GBP75,000 and a discretionary
performance fee. In addition to the above, Andrew Wignall was
remunerated GBP25,000 and Antony Gardner-Hillman was remunerated
GBP18,400 for additional services provided to the Group in
connection with the ongoing matters in Turkey concerning the
recovery of remaining monies taken without authorisation by the
former Chief Financial Officer.
None of the directors have any interests in the Company's share
capital. Eitan Milgram is an Executive Vice President of Weiss
Asset Management LLC, which owns a shareholding of 29.78% in the
Company at the end of this financial period. As noted above, Eitan
Milgram resigned as a director of the Company on 4 August 2015.
Andrew Wignall
Director
The Ottoman Fund Limited
25 February 2016
Statement of Directors' Responsibilities
The Directors are responsible for preparing the consolidated
financial statements in accordance with applicable law and
International Financial Reporting Standards.
The Companies (Jersey) Law 1991 requires the Directors to
prepare financial statements for each financial year which give a
true and fair view of the state of affairs of the Group and of the
profit or loss of the Group for that year. In preparing those
financial statements, the Directors are required to:
-- select suitable accounting policies and apply them consistently;
-- make judgments and estimates that are reasonable and prudent;
-- prepare the financial statements on a going concern basis
unless it is inappropriate to presume that the Group will continue
in business; and
-- state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements.
The Directors confirm that they have complied with the above
requirements in preparing the financial statements.
The Directors are responsible for keeping proper accounting
records that disclose with reasonable accuracy, at any time, the
financial position of the Group and to enable them to ensure that
the financial statements comply with the Companies (Jersey) Law
1991. They have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Group and
hence for taking reasonable steps to prevent and detect fraud and
other irregularities.
So far as the Directors are aware, there is no relevant audit
information of which the Group's auditors are unaware, and each
Director has taken all the steps that he ought to have taken as a
director in order to make himself aware of any relevant audit
information and to establish that the Group's auditors are aware of
that information.
By Order of the Board
Vistra Secretaries Limited
Secretary
25 February 2016
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF THE OTTOMAN FUND
LIMITED
We have audited the consolidated financial statements of The
Ottoman Fund Limited (the "company" and together with its
subsidiaries is referred to as the "Group") for the year ended 31
August 2015, which comprise the consolidated statement of
comprehensive income, the consolidated statement of financial
position, the consolidated statement of changes in equity, the
consolidated statement of cash flows, and related notes. The
financial framework that has been applied in their preparation is
applicable law and International Financial Reporting Standards
(IFRS) as adopted by the European Union.
This report is made solely to the company's members, as a body,
in accordance with Article 113A of the Companies (Jersey) Law 1991,
as amended. Our audit work is undertaken so that we might state to
the company's members those matters we are required to state to
them in an auditors' 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 the Directors and Auditor
As explained more fully in the Statement of Directors'
Responsibilities on page 6, the Directors are responsible for the
preparation of the consolidated financial statements and for being
satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the
consolidated financial statements in accordance with applicable law
and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board's
(APBs) Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free from
material misstatement, whether caused by fraud or error. This
includes an assessment of: whether the accounting policies are
appropriate to the Group's circumstances and have been consistently
applied and adequately disclosed; the reasonableness of significant
accounting estimates made by the directors; and the overall
presentation of the financial statements. In addition we read the
other information contained in the annual report and consider
whether it is consistent with the audited financial statements. If
we become aware of any apparent misstatements or material
inconsistencies with the financial statements, we consider the
implications for our report. Our responsibilities do not extend to
any other information.
Opinion on the financial statements
In our opinion the financial statements:
-- give a true and fair view of the state of the Group's affairs
as at 31 August 2015 and of its loss for the year then ended;
-- have been properly prepared in accordance with IFRS as adopted by the European Union; and
-- have been prepared in accordance with the requirements of the
Companies (Jersey) Law, 1991 as amended.
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF THE OTTOMAN FUND
LIMITED (CONTINUED)
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
where the Companies (Jersey) Law 1991 requires us to report to you
if, in our opinion:
-- proper accounting records have not been kept; or
-- proper returns adequate for our audit have not been received
from branches not visited by us; or
-- the financial statements are not in agreement with the accounting records and returns.
Ewan John Spraggon
For and on Behalf of Baker Tilly Channel Islands Limited
Chartered Accountants
St Helier, Jersey
25 February 2016
Consolidated Statement of Comprehensive Income
For the year ended 31 August 2015
Year ended Year ended
31 August 31 August
2015 2014
notes GBP GBP
Revenue
Proceeds from sale of inventory - 75,749,146
Less cost of inventory sold - (68,856,547)
----------- -----------
2(c) 6,892,599
Write back of inventory impairment - 6,151,756
Foreign exchange loss on sale of inventory - (23,075,220)
----------- -----------
- (10,030,865)
Finance income 2(c) 152,581 598,820
Total revenue 152,581 (9,432,045)
Operating expenses
Management/advisory fee 4 (108,844) (1,105,409)
Other operating expenses 5 (1,249,170) (574,124)
Loan impairment 8 (973,069) -
Total operating expenses (2,331,083) (1,679,533)
Foreign exchange gains 9 2,455,587 192,263
Gain/(loss) before tax 277,085 (10,919,315)
Tax charge 6 (2,606,868) (301,276)
Loss for the year (2,329,783) (11,220,591)
----------- -----------
Other comprehensive income:
Foreign exchange loss on subsidiary translation (1,159,163) (1,055,578)
Other comprehensive loss for the year (1,159,163) (1,055,578)
----------- -----------
Total comprehensive loss for the year (3,488,946) (12,276,169)
----------- -----------
Loss attributable to:
Equity shareholders of the Company (2,329,783) (11,220,591)
Minority interests -
----------- -----------
(2,329,783) (11,220,591)
----------- -----------
Total comprehensive loss attributable to:
Equity shareholders of the Company (3,488,946) (12,276,158)
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Minority interests - (11)
----------- -----------
(3,488,946) (12,276,169)
----------- -----------
Basic and diluted loss per share (pence) 7(b) (1.73) (8.33)
All items in the above statement derive from continuing
operations.
The accompanying notes on pages 13 to 26 are an integral part of
the financial statements.
Consolidated Statement of Financial Position
As at 31 August 2015
As at 31 As at 31
August 2015 August 2014
notes GBP GBP
Assets
Non-current assets
Loans and receivables 8 - 1,933,733
------------ ------------
- 1,933,733
Current assets
Trade and other receivables 11 212,499 1,227,634
Cash and cash equivalents 16 7,160,639 37,902,728
------------ ------------
7,373,138 39,130,362
Total assets 7,373,138 41,064,095
------------ ------------
Liabilities
Current liabilities
Trade and other payables 12 (1,642,756) (88,003)
(1,642,756) (88,003)
Net assets 5,730,382 40,976,092
------------ ------------
Equity
Share capital 13 52,636,216 84,392,980
Retained earnings 14 (43,954,508) (41,624,725)
Translation reserve (2,951,326) (1,792,163)
------------ ------------
Equity attributable to shareholders of the parent 5,730,382 40,976,092
Minority interests' equity - -
------------ ------------
Total equity 5,730,382 40,976,092
------------ ------------
Net asset value per ordinary share (pence) 15 4.3 30.4
The accompanying notes on pages 13 to 26 are an integral part of
the financial statements.
These financial statements were approved by the Board on 25
February 2016.
Antony Gardner-Hillman Andrew Wignall
Director Director
Consolidated Statement of
Changes in Equity
Share Retained Translation Minority
capital earnings reserve interest Total
GBP GBP GBP GBP GBP
For the year ended
31 August 2015
As at 1 September
2014 84,392,980 (41,624,725) (1,792,163) - 40,976,092
Return of capital (31,756,764) - - - (31,756,764)
Loss for the year - (2,329,783) - - (2,329,783)
Foreign exchange
loss on
subsidiary translation - - (1,159,163) - (1,159,163)
At 31 August 2015 52,636,216 (43,954,508) (2,951,326) - 5,730,382
-------------- ------------ ----------- -------- -----------
For the year ended
31 August 2014
As at 1 September
2013 120,003,007 (30,404,134) (736,596) 11 88,862,288
Return of capital (35,610,027) - - - (35,610,027)
Loss for the year - (11,220,591) - - (11,220,591)
Foreign exchange
loss on
subsidiary translation - - (1,055,567) (11) (1,055,578)
At 31 August 2014 84,392,980 (41,624,725) (1,792,163) - 40,976,092
-------------- ------------ ----------- -------- -----------
The accompanying notes on pages 13 to 26 are an integral part of
the financial statements.
Consolidated Statement of Cash Flows
notes Year ended Year ended
31 August 31 August
2015 2014
GBP GBP
Cash flow from operating activities
Loss (2,329,783) (11,220,591)
Adjustments for:
Finance income (152,581) (598,820)
Tax 2,606,868 301,276
Depreciation - 3,462
Amortisation - 774
Write back of inventory - (6,151,756)
Impairment of loan 8 973,069 -
Profit on sale of inventory - (6,892,599)
1,097,573 (24,558,254)
Net foreign exchange (gains)/ losses (1,083,913) 22,183,405
Decrease/(increase) in trade and other receivables 1,015,135 (550,913)
Increase/(decrease) in trade and other payables 1,554,753 (10,474)
Net cash inflow/(outflow) from operating activities before interest,
depreciation, amortisation
and tax 2,583,548 (2,936,236)
Finance income received 152,581 598,820
Tax (2,606,868) (301,276)
Net cash inflow/(outflow) from operating activities 129,261 (2,638,692)
Cash flow from investing activities
Purchase of inventories - (39,389)
Proceeds on sale of inventories - 72,597,621
Repayment of loan 8 885,414 826,220
----------- -----------
Net cash inflow from investing activities 885,414 73,384,452
Cash flow from financing activities
Return of Capital 13 (31,756,764) (35,610,027)
----------- -----------
Net cash outflow from financing activities (31,756,764) (35,610,027)
Net (decrease)/increase in cash and cash equivalents (30,742,089) 35,135,733
Cash and cash equivalents at start of the year 37,902,728 2,766,951
Effect of foreign exchange rates - 44
----------- -----------
Cash and cash equivalents at end of the year 7,160,639 37,902,728
----------- -----------
The accompanying notes on pages 13 to 26 are an integral part of
the financial statements.
Notes to the consolidated financial statements
1. General information
The Ottoman Fund Limited had invested in Turkish land and
new-build residential property in Riva, Bodrum and Alanya. The
Group has as at the year end sold its investments. The Company is a
limited liability company incorporated and domiciled in Jersey,
Channel Islands since 9 December 2005. The Company is quoted on the
AIM market of the London Stock Exchange plc. These consolidated
financial statements have been approved by the Board on 25 February
2016.
2. Accounting policies
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The consolidated financial statements of the Group for the year
ended 31 August 2015 comprise the Company and its subsidiaries,
listed in note 10, (together, the "Group") and have been prepared
in accordance with International Financial Reporting Standards
("IFRS") issued by the International Accounting Standards Board
("IASB") as applicable in the European Union and interpretations
issued by the International Financial Reporting Committee of the
IASB ("IFRIC").
These policies have been consistently applied in all years
presented, unless otherwise stated.
No new standards or amendments to standards were issued which
were relevant to the Group and applicable for the year under
review.
(a) Basis of preparation & going concern
The consolidated financial statements have been prepared on a
historical cost basis.
The Company has sufficient funds to remain in operation for the
foreseeable future. However the shareholders are due to vote on
extending the Company's life. See "Life" paragraph in the
Directors' Report. The directors have assumed that the Company's
life will be extended and accordingly have prepared these financial
statements on the going concern assumption.
(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 of an entity exists when the Company
directly or indirectly controls a majority of the voting rights in
that entity or has the ability to appoint or remove the majority of
its board of directors. 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 in the
consolidated statement of comprehensive income and in the
consolidated statement of financial position separately from the
amounts attributable to the owners of the parent.
(c) Revenue recognition
Interest receivable on fixed interest securities is recognised
using the effective interest method. Interest on short term
deposits, expenses and interest payable are treated on an accruals
basis. Revenue from sales of inventory is recognised when the
significant risks and rewards of an asset have been transferred.
The gains or losses from sale of inventory are recognised at the
book gain or loss amount with any foreign exchange gains or losses
being reflected separately in the statement of comprehensive
income.
(d) Expenses
All expenses are charged through the statement of comprehensive
income in the period in which the services or goods are provided to
the Group except for expenses which are incidental to the disposal
of an investment which are deducted from the disposal proceeds of
the investment.
(e) Non current assets
General
Assets are recognised and derecognised at the trade date on
acquisition and disposal respectively. Proceeds will be measured at
fair value which will be regarded as the proceeds of sale less any
transaction costs.
Loans and receivables
Loans and receivables are recognised on an amortised cost basis.
Where they are denominated in a foreign currency they are
translated at the prevailing balance sheet exchange rate. Any
foreign exchange difference is recognised through the statement of
comprehensive income.
Loans are reviewed for impairment by the Board on a semi-annual
basis; any impairment is recognised through the statement of
comprehensive income.
(f) Cash and cash equivalents
Cash and cash equivalents are classified as loans and
receivables and comprise deposits held at call with banks and other
short-term highly liquid investments with original maturities of
three months or less.
(g) Taxation
Profits arising in the Company for the 2015 year of assessment
and future periods will be subject to tax at the rate of 0% (2014:
0%). However, withholding tax may be payable on repatriation of
assets and income to the Company in Jersey. The Company pays an
International Services Entity fee and neither charges nor pays
Goods and Services Tax. This fee is currently GBP200 (2014: GBP200)
per annum for each Jersey registered company within the Group.
The subsidiaries will be liable for Turkish corporation tax at a
rate of 20%. Additionally, a land sale and purchase fee may arise
when land is sold or purchased and a dividend tax of 15% may arise
on certain distributions from the subsidiaries.
Deferred tax is recognised in respect of all temporary
differences that have originated but not reversed at the balance
sheet date, where transactions or events that result in an
obligation to pay more tax in the future or right to pay less tax
in the future have occurred at the balance sheet date. This is
subject to deferred tax assets only being recognised if it is
considered more likely than not that there will be suitable profits
from which the future reversal of the temporary differences can be
deducted.
(h) Foreign currency
In these financial statements, the results and financial
position of the Group are expressed in Pound Sterling, which is the
Group's presentational currency. The functional currency of the
Company and Jersey subsidiaries is Pound Sterling; the functional
currency for the Turkish subsidiaries is Turkish Lira.
The results and financial position of the entities based in
Jersey are recorded in Pound Sterling, which is the functional
currency of these entities. In these entities, transactions in
currencies other than sterling are recorded at the rates of
exchange prevailing on the dates of the transactions. Monetary
balances (including loans) and non-monetary balances that are
denominated in foreign currencies are retranslated at the rates
prevailing on the balance sheet date.
The results and financial position of the entities based in
Turkey are recorded in Turkish Lira, which is the functional
currency of these entities. In order to translate the results and
financial position of these entities into the presentation currency
(Pounds Sterling):
- non-monetary assets (including inventory) are translated at
the rates of exchange prevailing on the dates of the transactions
("historical translated cost");
- monetary balances (including loans) are translated at the
rates prevailing on the balance sheet date; and
- items to be included in the statement of comprehensive income
are translated at the average exchange rates for the year unless
the average is not a reasonable approximation of the cumulative
effect of the rates prevailing on the transaction dates, in which
case income and expenses are translated at the rate on the dates of
the transactions.
Foreign exchange gains or losses are recorded in either the
statement of comprehensive income or in the statement of changes in
equity depending on their nature and how they have been derived.
Exchange gains/losses on the translation of subsidiaries balances
are accounted for in the translation reserve.
(i) Share capital
Ordinary shares are classified as equity. External costs
directly attributable to the issue of new shares are shown as a
deduction to reserves. Any redemption of 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.
The Directors' have assessed the recoverability of the loan
receivable from Mandalina Yapi
Insaat Sanayi ve Ticaret Anonim Sirketi ("Mandalina"), the
results of which are disclosed in note 8.
In addition to the above, the Directors have made assessments
with regard to contingent liabilities and an assessment of the
matter discovered during 2014 in relation to the financial impact
of the amount of funds that have been removed from the Group's
Turkish entities (and entities affiliated with the Group) without
authorisation. Please refer to notes 20 and 21.
(k) Changes in accounting policy and disclosures
New and amended standards adopted by the group
There are no IFRSs or IFRIC interpretations that are effective
for the first time for this financial year that would be expected
to have a material impact on the Group.
New standards, amendments and interpretations issued but not
effective and not early adopted
At the date of the authorisation of these consolidated financial
statements, the following statements, standards and interpretations
were in issue but not yet effective for periods commencing on or
after 1 January 2015 and have not been early adopted:
IFRS 9, 'Financial instruments' - classification and
measurement' (effective 1 January 2015)
The full impact of the adoption of these standards and
interpretations in future periods on the financial statements of
the Group is still being assessed by the Directors.
3. Segment reporting
The chief operating decision maker (the "CODM") in relation to
the Group is considered to be the Board itself. The factor used to
identify the Group's reportable segments is geographical area.
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Based on the above and a review of information provided to the
Board, it has been concluded that the Group is currently organised
into one reportable segment: Turkey.
Within the above segment, the remaining significant asset at the
year end date was cash. The CODM considers on a regular basis the
repatriation of money from Turkey to Jersey.
4. Management/advisory fee
2015 2014
GBP GBP
Management fee 108,844 1,105,409
------- ---------
Civitas was appointed as Investment Advisor to the Group on 2
December 2009. The advisory fee structure was incentive-based with
an annual fixed component of EUR212,500, and an incentive component
based on a percentage of realisation value. It was agreed that the
fee for the current financial year would be based upon a percentage
of the realised sales value of the Alanya apartments. In the prior
year, Civitas was paid GBP179,717 in relation to the fixed
component. The incentive fee paid for the prior year was GBP925,692
which included commissions received on the sale of inventory being
either 1% or 2% depending on the asset sold.
5. Other operating expenses
2015 2014
GBP GBP
Legal and professional fees 763,418 59,440
Advisory and consultancy fees 52,507 97,038
Marketing - 5,336
Travel and subsistence 31,632 7,513
Directors' remuneration 150,000 150,000
Administration fees 96,318 70,000
Audit services 37,006 60,734
Depreciation - 3,462
Amortisation - 774
Other operating expenses 118,289 119,827
--------- -------
1,249,170 574,124
--------- -------
The Group has one employee in Turkey, the costs for whom are
included in the amounts above.
6. Tax 2015 2014
GBP GBP
Overseas tax - Turkey 2,606,868 301,276
--------- -------
This above represents taxation on profits earned by the Turkish
subsidiaries, and therefore no tax reconciliation is deemed
necessary. The increase in tax compared to the prior year is partly
due to the outstanding amounts payable in relation to the funds
removed from the Group's Turkish entities without authorisation
during the period.
Refer to note 2(g) for further information.
7. Earnings per share
(a) Basic
Basic earnings per share is calculated by dividing the gain
attributable to equity holders of the Company by the weighted
average number of ordinary shares in issue during the year.
2015 2014
(Loss)/gain attributable to equity holders of the Company (GBP2,329,783) (GBP11,220,591)
--------------- ----------------
Weighted average number of ordinary shares in issue 134,764,709 134,764,709
--------------- ----------------
(b) Diluted
The diluted earnings per share is calculated by adjusting the
weighted average number of ordinary shares outstanding to assume
conversion of all dilutive potential ordinary shares. As the
options expired without exercise, the basic and diluted earnings
per share are the same.
Both the basic and diluted loss per share are calculated as 1.73
pence (2014: 8.33 pence loss).
8. Loans and receivables 2015 2014
GBP GBP
Opening balance 1,923,733 2,923,760
Repayment of loan (885,414) (826,220)
Impairment of loan (973,069) -
Exchange (loss)/gain on revaluation of loan (65,250) (163,807)
Closing balance - 1,933,733
--------- ---------
The loan in relation to the Riverside Resort apartments in
Alanya has been impaired this year to reflect the Group's ongoing
difficulties with receiving the amounts owed from Mandalina, which
are related to the action being taken against the Group's former
Chief Financial Officer in Turkey, see note 21 for further
details.
9. Foreign currency gains 2015 2014
GBP GBP
Translation of cash balances - 44
Other foreign currency gain 2,455,587 192,219
Net currency gains 2,455,587 192,263
--------- -------
Foreign currency gains or losses on transactions and balances in
the Turkish subsidiaries are recognised in the translation reserve,
not in the amounts above. The Company has no accounts in any
currency other than Pound Sterling. The translation of cash
balances relates to the Jersey group entities, with the balances of
the Turkish entities being recognised as subsidiary translation
foreign exchange as part of other foreign exchange losses. The
translation of cash balances noted above for the prior year relates
to the translation of cash held by Ottoman Finance Company 1
Limited in Euros. The balance of this account at 31 August 2015 was
nil.
10. Investment in subsidiaries - Company
Country of Authorised Issued Ownership
Name incorporation share capital share capital %
Ottoman Finance Company I Limited Jersey GBP10,000 GBP1 100
Ottoman Finance Company II Limited Jersey GBP10,000 GBP1 100
Osmanli Yapi 1 Turkey YTL 57,395,416 YTL 50,000 99.99
Osmanli Yapi 2 Turkey YTL 193,534,525 YTL 50,000 99.99
All of the above companies have been incorporated into the Group
accounts.
11. Trade and other receivables
2015 2014
GBP GBP
Prepayments and accrued income 20,950 1,139,616
VAT receivable 9,171 731
Other receivables 182,378 87,287
212,499 1,227,634
------- ---------
The Directors consider that the carrying amount of the above
receivables approximates to their fair value. Prepayments include
advances to suppliers.
12. Trade and other payables
2015 2014
GBP GBP
Accruals 42,648 68,840
Taxation 1,188,751 -
Other payables 411,357 19,163
1,642,756 88,003
--------- ------
The Directors consider that the carrying amount of the above
payables approximates to their fair value.
See notes 6 and 2(g) for further information on taxation.
13. 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 (2014: 134,764,709) 52,636,216
----------
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 determined by the Board and is not influenced by
subscriptions or redemptions. The Group's objectives for managing
capital are to maintain sufficient liquidity to meet the expenses
of the Group as they fall due and to invest in the Group's current
assets when the Board feels it will give rise to capital
appreciation. As the Group has sold assets during the year, the
Board decided to return excess capital to shareholders. As part of
the process, the Board reviews cash flow forecasts to ensure that
sufficient cash is retained to support the operations of the
Group.
Movements in ordinary share capital during the year Number GBP
Ordinary shares in issue at 1 September 2014 134,764,709 84,392,980
Movement during the year - (31,756,764)
----------- -----------
Ordinary shares in issue at 31 August 2015 134,764,709 52,636,216
----------- -----------
14. Retained earnings
2015 2014
GBP GBP
At start of year (41,624,725) (30,404,134)
Bank and deposit interest earned 152,581 598,820
Profit on sale of inventory - 6,892,599
Disposal of inventory - (16,923,464)
Operating expenses (2,331,083) (1,679,533)
(2,178,502) (11,111,578)
Net movement on foreign exchange 2,455,587 192,263
Tax (2,606,868) (301,276)
----------- -----------
Loss for the year (2,329,783) (11,220,591)
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Minority interests - -
----------- -----------
At end of year (43,954,508) (41,624,725)
----------- -----------
15. Net asset value per share
The net asset value per ordinary share is based on the net
assets attributable to equity shareholders of GBP5,730,382 (2014:
GBP40,976,092) and on 134,764,709 ordinary shares
(2014: 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 2015 was 4.3 pence (2014: 30.4 pence).
16. Cash and cash equivalents
2015 2014
GBP GBP
Bank balances 7,160,639 37,902,728
--------- ----------
17. Financial instruments
The Group's financial instruments comprise loans, cash balances,
receivables and payables that arise directly from its operations,
for example, in respect of receivables for accrued income.
The principal risks the Group faces from its financial
instruments are:
(i) Market risk
(ii) Credit risk
(iii) Foreign currency risk
(iv) Interest rate risk
(v) Liquidity risk
As part of regular Board functions, the Board reviews each of
these risks. As required by IFRS 7: Disclosure and Presentation, an
analysis of financial assets and liabilities, which identifies the
risk to the Group of holding such items, is given below.
(i) Market price risk
Market price risk arises mainly from uncertainty about future
prices of financial instruments used in the Group's operations. It
represents the potential loss the Group might suffer through
holding market positions as a consequence of price movements.
Consistent with the prior year, the Group has no such exposures to
market price risk.
(ii) Credit risk
Credit risk is the risk that counterparties will be unable to
deliver on assets due to the Group. The largest counterparty risk
is with the Group's bankers. Bankruptcy or insolvency of Deutsche
Bank International Limited may cause the Group's rights with
respect to cash held to be delayed or limited. There is no policy
in place to mitigate this risk as the Board believes there is no
need to do so, due to the likelihood of it occurring being
remote.
The Group's holds a third party loan in respect of the
investment in the Riverside Resort in Alanya which is potentially
at risk from the failure of the third party to repay the loan. The
Board considers the recovery of the loan on an ongoing basis;
please refer to note 8 for further details.
The Board monitors 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. 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 2015 was as follows:
Balance Maximum Balance Maximum
sheet exposure sheet exposure
at 31 August at 31 August at 31 August at 31 August
2015 2015 2014 2014
Non-current assets GBP GBP GBP GBP
Loans and receivables - - 1,933,733 1,933,733
Current assets
Cash and cash equivalents 7,160,639 7,160,639 37,902,728 37,902,728
Other receivables 212,499 212,499 1,227,634 1,227,634
------------ ------------ ------------ ------------
7,373,138 7,373,138 41,064,095 41,064,095
------------ ------------ ------------ ------------
Fair value of financial assets and liabilities
The book values of the cash at bank and loans and receivables
included in these financial statements approximate to their fair
values.
(iii) Foreign currency risk
The Group operates Pound Sterling, Euro, US Dollar and Turkish
Lira bank accounts. Exchange gains or losses arise as a result of
movements in the exchange rates between the date of a transaction
denominated in a currency other than Sterling and its settlement.
There is no policy in place to mitigate this risk as the Board
believes such a policy would not be cost effective given the
Group's exposure.
Currency rate exposure
An analysis of the Group's currency exposure in Pound Sterling
is detailed below:
Currency Non-current Net monetary Liabilities at Non-current Net monetary Liabilities at
assets at 31 assets at 31 31 August 2015 assets at 31 assets at 31 31 August 2014
August 2015 August 2015 August 2014 August 2014
GBP GBP GBP GBP GBP
Pounds Sterling - 495,236 (1,538,834) - 13,053,770 (56,133)
Euro - - - 1,933,733 567 -
US Dollar - 5,146,807 - - 24,818,749 -
Turkish Lira - 88,339 (103,922) - 1,169,272 (31,870)
--------------- -------------- --------------- --------------- -------------- ---------------
- 5,730,382 (1,642,756) 1,933,733 39,042,358 (88,003)
--------------- -------------- --------------- --------------- -------------- ---------------
Foreign currency sensitivity
The table below details the Group's sensitivity to a 5% increase
in the value of Sterling against the relevant currencies. This
percentage is considered reasonable due to volatility in current
and historic exchange rate movements. With all other variables held
constant, net assets attributable to shareholders and the change in
net assets attributable to shareholders per the consolidated income
statement would have decreased by the amounts shown below. The
analysis has been performed on the same basis as for 2014.
Currency Profit & Loss at Equity at Profit & Loss at Equity at
31 August 31 August 31 August 31 August
2015 2015 2014 2014
GBP GBP GBP GBP
Euro - - 96,715 -
US Dollar 257,340 - 1,240,937 -
Turkish Lira (779) - 56,870 -
---------------- ---------- ---------------- ----------
256,561 - 1,394,522 -
---------------- ---------- ---------------- ----------
A 5% weakening of Sterling against the relevant currency would
have resulted in an equal but opposite effect on the amounts in the
financial statements to the amounts shown above, on the basis that
all other variables remain constant.
(iv) Interest rate risk
Interest rate movements may affect the level of income
receivable on cash deposits. There is no policy in place to
mitigate this risk as the Board believes such a policy would not be
cost effective, given the Group's exposure.
The Group holds only cash deposits.
The interest rate profile of the Group excluding short term
receivables and payables was as follows:
Currency Floating Non interest Floating Non interest
rate bearing rate bearing
at 31 August at 31 August at 31 August at 31 August
2015 2015 2014 2014
GBP GBP GBP GBP
Pounds Sterling 2,013,120 - 13,082,567 219
Euro - - - 1,934,300
US Dollar 4,473,540 673,267 24,818,749 -
Turkish Lira - 712 - 625
------------ ------------ ------------ ------------
6,486,660 673,979 37,901,316 1,935,144
------------ ------------ ------------ ------------
Maturity profile
The following table sets out the carrying amount, by maturity,
of the Group's financial instruments:
2015
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 6,486,660 - - - 6,486,660
--------- ------ ------- --------- ---------
6,486,660 - - - 6,486,660
--------- ------ ------- --------- ---------
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