TIDMOTM
RNS Number : 6990G
Ottoman Fund Limited (The)
31 May 2017
THE OTTOMAN FUND LIMITED (the "Company")
Interim results for the six months ended 28 February 2017
The Company is pleased to announce its interim results for the
six months ended 28 February 2017, a full copy of which will
shortly be available on the Company's website:
www.theottomanfund.com.
This announcement contains inside information.
Enquiries:
N+1 Singer
James Maxwell / Gillian
Martin 0207 496 3000
Vistra Fund Services
Limited
Company Secretary 01534 504 700
Chairman's Statement
Dear Shareholders,
These accounts are as of 28 February 2017 and show a net asset
value as of that date of GBP1,853,768 as compared with a net asset
value of GBP2,176,322 as of the prior period, 31 August 2016. The
decrease in net asset value within that period is primarily a
reflection of the expenses incurred and the write off of
receivables in the Turkish subsidiaries somewhat offset by foreign
exchange gains.
Subsequent to the date of these accounts, we have made
substantial progress toward our goal of winding up the Company and
making a final distribution. As announced on 5 April 2017, we
settled all legal disputes with Sinan Kalpakçioglu, our former
Chief Financial Officer. Kalpakçioglu, shareholders will recall,
was an accountant who abused his position of trust to embezzle from
our Turkish subsidiary companies. He was caught several years ago.
The Company quickly obtained a "worldwide freezing order" from a
Jersey court - that was unenforceable in Turkey.
The Company nonetheless was able to locate and recover some of
the money Kalpakçioglu embezzled - though other money had been
diverted to a bank secrecy jurisdiction and probably elsewhere. The
Company determined that Turkish civil litigation would likely not
accomplish what was needed and instead commenced a criminal
proceeding against Kalpakcioglu. Kalpakcioglu in turn commenced
civil cases against Company subsidiaries for money supposedly due
him. His civil cases were fabricated and only possible because the
Turkish legal system that has no mechanism to summarily dismiss
phony cases and punish those who bring them.
Kalpakcioglu lost all of the cases he brought while the Company
expected to prevail in its criminal case because the evidence
against Kalpakcioglu was incontrovertible. A fellow director and I
each gave evidence in a Turkish criminal court this past March
along with our former investment advisor. As a lawyer for over
thirty years and a former criminal prosecutor, I can assure our
shareholders that the evidence was clear as can be that
Kalpakçioglu was an embezzler, but given the unfolding realities of
the Turkish legal process following the events of July 2016 (The
Financial Times recently reported that approximately 25% of the
Turkish judiciary has been sacked along with numerous prosecutors
and others), we decided that it was in the Company's interest to
settle at less than full value.
The financial terms of the settlement were that Kalpakcioglu
returned $250,000 of the money he embezzled and handed over his 48%
nominee interest in the Mandalina company. Mandalina, shareholders
will recall, had been created to hold title to the Alanya units and
the proceeds from their sales. Because of Turkish legal
requirements, that company had been structured with Kalpakçioglu
and several others as nominee directors and shareholders pursuant
to nominee shareholder agreements. Nonetheless, Kalpakçioglu
refused to abide by the terms of the nominee shareholding agreement
and claimed, for some unexplained reason, that the shares were his.
Because as of the date of these accounts the Ottoman Fund did not
have "control" over Mandalina, the Mandalina financial statements
are not consolidated in the Company's financial statements.
We now control all of our Turkish holding companies and have
moved a substantial portion of our funds to Jersey with the
ultimate objective of making a final distribution. Our immediate
objectives are to resolve outstanding legal and accounting issues
in Turkey, repatriate additional capital to Jersey, wind up and
liquidate our Turkish subsidiaries and eventually our Jersey
companies and make a final distribution to shareholders. Our
progress in accomplishing these goals has been slow though steadily
moving in the right direction.
The Company books and records for Mandalina are now being passed
to our accountants in Turkey, who will need to review them for tax
and compliance issues. The pace is dictated by Turkish rules
governing corporate decisions, accounting issues and tax
compliance, and continued efforts by certain people in Turkey to
obstruct the winding up.
We are working closely with BDO's Istanbul office and our
Turkish lawyers to bring these issues to conclusion. We are
confident that these advisors are the right people for doing the
work that needs to be done. We are also in negotiations to sell our
Turkish subsidiaries to a third party, who may be better able to
deal with spurious claims aimed at obstructing the winding up of
our subsidiary companies. It is premature to speculate on whether
those negotiations will come to fruition and their possible
financial terms.
Earlier this month we won a final dismissal of the Nizamoglu
case. Nizamoglu, shareholders will recall, was an unprincipled
opportunist who claimed an entitlement to a substantial brokerage
commission in connection with the Riva sale. He had no real
evidence that he was entitled to anything in connection with the
Riva sale, no contract, no eye witnesses to a promise, no nothing,
but he was nonetheless able to take advantage of inefficiencies in
the Turkish legal system to tie up one of our Turkish subsidiaries
in vexatious lawsuits for several years. Now that we have prevailed
through the end of the appeals process and obtained finality, we
will vigorously pursue Nizamoglu for reimbursement of our legal
fees both to make the Company whole and to deter others who may
have similar designs on Company assets.
Shareholders we know are primarily interested in the magnitude
of the final distribution and its timing. Both issues remain
dependent on the resolution of Turkish tax issues, our ability to
repatriate funds from Turkey, and other issues identified above.
Our ability to address these issues in detail is constrained by
still unresolved uncertainties as to tax obligations and our need
for confidentiality given the realities of where some Company
assets are located. Subject to those constraints, we will keep the
market timely apprised of further material developments.
Very truly yours,
John D. Chapman
Chairman
The Ottoman Fund Limited
30 May 2017
Directors' Report
The Directors submit their Report and the unaudited interim
consolidated financial statements (the "Financial Statements") of
The Ottoman Fund Limited (the "Company") and its subsidiaries
(together, the "Group") for the period ended 28 February 2017. 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
Board is arranging the repatriation of those funds from Turkey.
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, Dividends and Returns
The result for the period was a loss GBP1,215,891. During the
period no dividends or returns of capital have been made.
The Group is involved in ongoing litigation in relation to
events from the current and prior years. Details of the ongoing
matters are disclosed in notes 20 and 21.
Life
Further to the announcement on 17 November 2016 the Company has
twelve months from that date to implement its current investing
policy in accordance with Rule 15 of the AIM Rules. If this is not
fulfilled, the Company will be suspended pursuant to AIM Rule 40.
The Board is hopeful that its efforts will enable the board to
return additional capital to shareholders and wind up the Company
within this timeframe.
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. as Investment Advisor, including to manage
and sell the Company's Turkish assets. In November 2016, the
contract with Civitas was terminated.
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 at the end of these
financial statements. John D Chapman (Executive Chairman), Antony
Gardner-Hillman and Andrew Wignall all served as Directors
throughout the year.
Shareholders' Interests (as at 28 February 2017)
Size of shareholding (in shares) No. of shareholders
1 - 9,999 27
10,000 - 99,999 11
100,000 - 999,999 4
1,000,000 - 9,999,999 13
10m+ 3
At 28 February 2017 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
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 GBP92,500 for the period ended
28 February 2017 (2016: GBP125,000). 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.
None of the directors have any interests in the Company's share
capital.
Andrew Wignall
Director
The Ottoman Fund Limited
30 May 2017
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.
By Order of the Board
Vistra Secretaries Limited
Secretary
30 May 2017
Consolidated Statement of Comprehensive Income
For the period ended 28 February 2017
Period ended Year ended
28 February 31 August
2017 2016
notes GBP GBP
Revenue
Finance income 2(c) 1,361 3,819
Operating expenses
Other operating expenses 5 (1,178,341) (961,844)
Total operating expenses (1,178,341) (961,844)
Foreign exchange gains 9 251,311 480,097
(Loss)/gain before tax (925,669) (477,928)
Tax charge 6 (290,222) (534,342)
Loss for the period (1,215,891) (1,012,270)
------------ -----------
Other comprehensive income:
Foreign exchange gain on subsidiary translation 893,337 153,504
Other comprehensive profit/loss for the year 893,337 153,504
------------ -----------
Total comprehensive (loss)/gain for the year (322,554) (858,766)
------------ -----------
Loss attributable to:
Equity shareholders of the Company (1,215,891) (1,012,270)
Minority interests - -
------------ -----------
(1,215,891) (1,012,270)
------------ -----------
Total comprehensive (loss)/gain attributable to:
Equity shareholders of the Company (322,554) (858,766)
Minority interests - -
------------ -----------
(322,554) (858,766)
------------ -----------
Basic and diluted loss per share (pence) 7(b) (0.90) (0.75)
All items in the above statement derive from discontinuing
operations.
The accompanying notes are an integral part of the financial
statements.
Consolidated Statement of Financial Position
As at 28 February 2017
As at 28 As at 31
February 2017 August 2016
notes GBP GBP
Assets
Non-current assets
Loans and receivables 8 - -
Current assets
Trade and other receivable 11 79,463 138,491
Cash and cash equivalents 16 2,260,504 3,516,795
Total assets 2,339,967 3,655,286
-------------- ------------
Liabilities
Current liabilities
Trade and other payables 12 (486,199) (1,478,964)
Net assets 1,853,768 2,176,322
-------------- ------------
Equity
Share capital 13 49,940,922 49,940,922
Retained earnings 14 (46,182,669) (44,966,778)
Translation reserve (1,904,485) (2,797,822)
-------------- ------------
Equity attributable to shareholders of the parent 1,853,768 2,176,322
Minority interests' equity - -
-------------- ------------
Total equity 1,853,768 2,176,322
-------------- ------------
Net asset value per ordinary share (pence) 15 1.4 1.6
The accompanying notes are an integral part of the financial
statements.
These financial statements were approved by the Board on 30 May
2017.
Andrew Wignall
Director
Consolidated Statement of
Changes in Equity
Share Retained Translation Minority
capital earnings reserve interest Total
GBP GBP GBP GBP GBP
For the period
ended 28 February
2017
As at 31 August
2016 49,940,922 (44,966,778) (2,797,822) - 2,176,322
Return of capital - - - - -
Loss for the year - (1,215,891) - - (1,215,891)
Foreign exchange
gain on
subsidiary translation - - 893,337 - 893,337
At 28 February
2017 49,940,922 (46,182,669) (1,904,485) - 1,853,768
----------- ------------ ----------- -------- ----------
For the year ended
31 August 2016
As at 1 September
2015 52,636,216 (43,954,508) (2,951,326) - 5,730,382
Return of capital (2,695,294) - - - (2,695,294)
Loss for the year - (1,012,270) - - (1,012,270)
Foreign exchange
gain on
subsidiary translation - - 153,504 - 153,504
At 31 August 2016 49,940,922 (44,966,778) (2,797,822) - 2,176,322
----------- ------------ ----------- -------- ----------
The accompanying notes are an integral part of the financial
statements.
Consolidated Statement of Cash Flows
notes Period ended Year ended
28 February 31 August
2017 2016
GBP GBP
Cash flow from operating activities
Loss (1,215,891 )(1,012,270 )
Adjustments for:
Finance income (1,248 ) (3,819 )
Tax 290,222 534,342
(926,917 ) (481,747 )
Net foreign exchange losses/(gains) 893,337 153,504
Decrease in trade and other receivables 59,028 74,008
(Decrease)/increase in trade and other payables (992,765 ) (163,792 )
Net cash (outflow)/inflow from operating activities before
interest, depreciation, amortisation
and tax (967,317 ) (418,027 )
Finance income received 1,248 3,819
Tax (290,222 ) (534,342 )
Net cash (outflow)/inflow from operating activities (1,256,291 ) (948,550 )
Cash flow from investing activities
Repayment of loan 8 - -
------------ ----------
Net cash inflow from investing activities - -
Cash flow from financing activities
Return of Capital 13 - (2,695,294 )
------------ ----------
Net cash outflow from financing activities - (2,695,294 )
Net decrease in cash and cash equivalents (1,256,291 )(3,643,844 )
Cash and cash equivalents at start of the year 3,516,795 7,160,639
Effect of foreign exchange rates - -
------------ ----------
Cash and cash equivalents at end of the year 2,260,504 3,516,795
------------ ----------
The accompanying notes 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 period 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 30 May 2017.
2. Accounting policies
The consolidated financial statements of the Group for the
period ended 28 February 2017 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. Further to the announcement on 17th November
2016 the Company is likely to remain listed on AIM until 16th
November 2017. The Board will consult with shareholders should
there be a need to extend the life of the Company beyond that
date.
(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 2017 year of assessment
and future periods will be subject to tax at the rate of 0% (2016:
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 (2016: 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.
(g) Taxation
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 2016 and have not been early adopted:
IFRS 9, 'Financial instruments' - classification and
measurement' (effective 1 January 2018)
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.
As noted in these financial statements, the Company is currently
involved in litigation. The operations of the Company now relate to
resolving these issues. It is anticipated that once resolved, the
Company will return all available money to shareholders with
operations therefore coming to an end. On this basis, these
financial statements have been prepared on the basis that the
amounts in the Statement of Comprehensive Income have been derived
from discontinuing operations.
3. Segment reporting
The chief operating decision maker (the "CODM") in relation to
the Group is considered to be the Board itself.
The factor used to identify the Group's reportable segments is
geographical area.
Based on the above and a review of information provided to the
Board, it has been concluded that the Group is currently organised
into one reportable segment: Turkey.
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
As at 28 February 2017 As at 31 August 2016
GBP GBP
Management fee - -
---------------------- --------------------
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 prior financial year would be based upon a percentage
of the realised sales value of the Alanya apartments. The contract
with Civitas has now been terminated, with final payment of
EUR149,073 being made on 23 November 2016.
5. Other operating expenses
As at 28 February 2017 As at 31 August 2016
GBP GBP
Legal fees 265,224 400,527
Professional fees 47,423 191,555
Travel and subsistence 17,298 7,006
Directors' remuneration 92,500 125,000
Administration fees 98,243 142,018
Audit services 28,000 29,000
Write-off of receivables 573,706 -
Other operating expenses 55,947 66,738
---------------------- ---------------------
1,178,341 961,844
---------------------- ---------------------
During the period the Group had one employee in Turkey.
Subsequent to the period end terms were agreed for the termination
of that employment, the costs for whom are included in the amounts
above. Receivables from OY1 and OY2, primarily from the former
finance director, have been written off in the period. Refer to
Note 21 for further detail.
6. Tax As at 28 February 2017 As at 31 August 2016
GBP GBP
Overseas tax - Turkey 290,222 534,342
---------------------- --------------------
This above represents taxation on profits earned by the Turkish
subsidiaries and any related adjustments to tax amounts, and
therefore no tax reconciliation is deemed necessary. The decrease
in tax is partly due to the prior year amount including outstanding
amounts payable in relation to the funds removed from the Group's
Turkish entities without authorisation during the period. In
addition, $275,000 withholding tax provision is in place for an
estimated clearance of intercompany balances of $1,250,000.
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.
As at 28 February 2017 As at 31 August 2016
(Loss)/gain attributable to equity holders of the Company (GBP1,215,891) (GBP1,012,270)
----------------------- ---------------------
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 0.90
pence (2016: 0.75 pence loss).
8. Loans and receivables As at 28 February 2017 As at 31 August 2016
GBP GBP
Opening balance - -
Closing balance - -
---------------------- --------------------
The loan in relation to the Riverside Resort apartments in
Alanya was impaired in 2015 to reflect the Group's ongoing
difficulties with receiving the amounts owed from Mandalina, which
are related to the ongoing litigation in Turkey, see note 21 for
further details.
9. Foreign currency gains As at 28 February 2017 As at 31 August 2016
GBP GBP
Other foreign currency gain 251,311 480,097
Net currency gains 251,311 480,097
---------------------- --------------------
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.
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
As at 28 February 2017 As at 31 August 2016
GBP GBP
VAT receivable 27,835 -
Other receivables 51,628 138,491
79,463 138,491
---------------------- --------------------
The Directors consider that the carrying amount of the above
receivables approximates to their fair value. Prepayments include
advances to suppliers and other receivables relate to payments on
account with the tax office in Turkey.
12. Trade and other payables
As at 28 February 2017 As at 31 August 2016
GBP GBP
Accruals 103,845 52,319
Taxation (overseas taxation - Turkey) 64,560 1,013,234
Tax provision (WHT) 221,249 -
Other payables 96,545 413,411
486,199 1,478,964
---------------------- --------------------
The Directors consider that the carrying amount of the above
payables approximates to their fair value.
See notes 2(g) and 6 for further information on taxation.
13. Share capital
Authorised:
Founder shares of no par value 10
Ordinary shares of no par value Unlimited
As at 28 February 2017
Issued and fully paid: GBP
2 founder shares of no par value -
134,764,709 ordinary shares of no par value (2016: 134,764,709) 49,940,922
----------------------
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 sold its assets during the prior 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 31 August 2016 134,764,709 49,940,922
Movement during the year - -
----------- ----------
Ordinary shares in issue at 28 February 2017 134,764,709 49,940,922
----------- ----------
14. Retained earnings
As at 28 February 2017 As at 31 August 2016
GBP GBP
At start of year (44,966,778) (43,954,508)
Bank and deposit interest earned 1,361 3,819
Operating expenses (1,178,341) (961,844)
(1,176,980) (958,025)
Net movement on foreign exchange 251,311 480,097
Tax (290,222) (534,342)
---------------------- --------------------
Loss for the year (1,215,891) (1,012,270)
At end of year (46,182,669) (44,966,778)
---------------------- --------------------
15. Net asset value per share
The net asset value per ordinary share is based on the net
assets attributable to equity shareholders of GBP1,853,768 (2016:
GBP2,176,322) and on 134,764,709 ordinary shares
(2016: 134,764,709), being the number of ordinary shares in
issue at the year end. The net asset value per share for the period
ended 28 February 2017 was 1.4 pence (2016: 1.6 pence).
16. Cash and cash equivalents
As at 28 February 2017 As at 31 August 2016
GBP GBP
Bank balances 2,260,504 3,516,795
---------------------- --------------------
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 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 A3.
The Group's principal financial assets are other receivables and
cash and cash equivalents. The maximum exposure of the Group to
credit risk is the carrying amount of each class of financial
assets. Other receivables are represented mainly by prepayments and
other receivables, the Directors do not consider there to be
significant credit risk in relation to these amounts.
Credit risk exposure
In summary, compared to the amounts in the consolidated
statement of financial position, the maximum exposure to credit
risk was as follows:
Balance Maximum Balance Maximum
sheet exposure sheet exposure
at 28 February at 28 February at 31 August at 31 August
2017 2017 2016 2016
Non-current assets GBP GBP GBP GBP
Loans and receivables
- - - -
Current assets
Cash and cash equivalents 2,260,504 2,260,504 3,516,795 3,516,795
Other receivables 79,463 79,463 138,491 138,491
2,339,967 2,339,967 3,655,286 3,655,286
-------------- -------------- ------------ ------------
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 Net monetary assets at Liabilities at 28 Net monetary assets at Liabilities at 31
28 February 2017 February 2017 31 August 2016 August 2016
GBP GBP GBP
Pounds Sterling 2,251,736 (40,567) 495,236 (1,538,834)
Euro - - - -
US Dollar - (317,795) 5,146,807 -
Turkish Lira 8,768 (127,837) 88,339 (103,922)
----------------------- ----------------------- ----------------------- -----------------------
2,260,504 (486,199) 5,730,382 (1,642,756)
----------------------- ----------------------- ----------------------- -----------------------
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 2016.
Currency Profit & Loss at Profit & Loss at
28 February 31 August
2017 2016
GBP GBP
Euro - -
US Dollar 2,414 1,998
Turkish Lira 5,954 2,797
---------------- ----------------
8,368 4,795
---------------- ----------------
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 28 February at 28 February at 31 August at 31 August
2017 2017 2016 2016
GBP GBP GBP GBP
Pounds Sterling 2,251,736 - 3,475,387 382
US Dollar - - 25,271 14,698
Turkish Lira - 8,768 - 1,057
-------------- -------------- ------------ ------------
2,251,736 8,768 3,500,658 16,137
-------------- -------------- ------------ ------------
Maturity profile
The following table sets out the carrying amount, by maturity,
of the Group's financial instruments:
2016
28 February 2017 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 2,251,736 - - - 2,251,736
--------- ------ ------- --------- ---------
2,251,736 - - - 2,251,736
--------- ------ ------- --------- ---------
Non-interest bearing
Cash 8,768 --- 8,768
Trade and other receivables 79,463 --- 79,463
Trade and other payables (486,199) ---(486,199)
(397,968) ---(397,968)
--------- ---------
2015
31 August 2016 0 to 3 3 to 6 6 to 12 More than
months months months 1 year Total
GBP GBP GBP GBP GBP
Cash 3,500,658 - - - 3,500,658
--------- ------ ------- ---------- ---------
3,500,658 - - - 3,500,658
--------- ------ ------- ---------- ---------
Non-interest bearing
Cash 16,137 --- 16,137
Trade and other receivables 138,491 --- 138,491
Trade and other payables (1,478,964) ---(1,478,964)
(1,324,336) ---(1,324,336)
----------- -----------
Interest rate sensitivity
An increase of 10 basis points in interest rates during the
period would have increased the net assets attributable to
shareholders and changes in net assets attributable to shareholders
by GBP2,252 (2016:GBP3,501). A decrease of 10 basis points would
have had an equal but opposite effect.
(v) Liquidity risk
The Group's assets mainly comprise cash balances. The Board
monitors the cash situation of the Group on an ongoing basis and
reviews cash flow forecasts at the time of making capital
distributions to shareholders to ensure that sufficient cash is
retained to support the operations of the Group.
The Group has sufficient cash reserves to meet liabilities due
for the foreseeable future.
18. Related party transactions
Information regarding subsidiaries can be found in note 10.
John D. Chapman is a shareholder in the Turkish subsidiaries due
to Turkish law requirements and is also a director. Mr Chapman
receives no additional benefit from being a shareholder or director
of the Turkish subsidiaries.
Andrew Wignall has served as a director of the Turkish
subsidiaries since 4 June 2015 and receives director's fees of
GBP10,000 per annum in total for his services.
Information regarding Directors' interests can be found in note
19.
Ali Pamir is a director of the Investment Advisor, Civitas
Property Partners S.A. and during the year was a director and
shareholder of the Turkish subsidiaries due to Turkish law
requirements. Mr Pamir received no additional benefit from being a
shareholder of the Turkish subsidiaries. Information regarding
amounts paid to the Investment Advisor can be found in note 4.
Subsequent to the period end terms were agreed for the termination
of that employment.
Vistra Nominees I Limited is a related party being the holder of
the 2 founder shares of The Ottoman Fund Limited (see note 13).
The Directors do not consider there to be an ultimate
controlling party.
19. Directors' interests
Total compensation (excluding performance fees and additional
service fees) paid to the Directors of the Company over the period
was GBP92,500 (2016: GBP125,000).
During the year John D. Chapman as Executive Chairman has been
employed under an executive service contract that provides for an
annual fee of GBP75,000 pro-rated monthly and a discretionary
performance fee. No performance fee has been paid during the year
(2016: nil). Antony Gardner-Hillman and Andrew Wignall were
remunerated GBP25,000 per director for their services during the
year.
20. Contingent liabilities
The Directors have been informed that an intermediate Turkish
court has upheld an administrative order disallowing certain tax
benefits from a restructuring transaction that may have had
similarities to the restructuring of Osmanli Yapi 2. This
intermediate court decision is now under appeal to the Turkish
Supreme Court. The Group is monitoring the appeal, but at present
this development does not meet the recognition criteria under IAS
37, and the Directors have consequently made no provision in the
financial statements.
During a prior financial reporting year, a case against the
Group had been lodged in Turkey for US$1m by a party who claimed to
have acted as an intermediary on one of the land sale transactions
during the year and was therefore entitled to a fee. On 19 March
2015, the lawyers acting on behalf of the Group advised that the
case had been heard in court and that the presiding judge, after
hearing from both parties, accepted the Group's lawyer's motion to
immediately dismiss the lawsuit that had been filed against the
Group. The counterparty to the lawsuit appealed the decision, the
appeal hearing took place on February 28, 2017. The case has now
concluded with no liability to the Group. The Directors have
consequently made no provision in the financial statements.
During the prior period, the former finance director filed
various collection proceedings against Osmanli Yapi 1 and Osmanli
Yapi 2 in relation to amounts allegedly payable for purported
services rendered totalling TL1.38m (GBP356k). On 16 February 2017,
the court ruled in favour of OY1 with rejected all claims. On the
same day, the hearing for the case where the former finance
director was claiming approximately USD 300,000 from OY1 took
place. The judge ruled in favour of OY1 with all claims being
rejected by the judge.
Subsequent to the period end proceedings relating to the former
finance director were discontinued following the settlement
agreement.The Directors have consequently made no provision in the
financial statements.
Enforcement Proceedings initiated by Arkan & Ergin against
Osmanlı Yapı 1 and 2:
1. The proceeding initiated against OY 1 at 5th Enforcement
Office of Istanbul under file no. 2016/811
Arkan & Ergin sought 92.516,21 TRL from OY 1 for the regular
financial services and additional services. They claim that they
have provided additional services to OY 1 which amounts to
74.588,15 TRL. This additional request was not supported by any
documents. The part which was grounded was paid to the Enforcement
Office, along with related judicial and attorney's fees. An
objection was filed to the remaining part which halts the
proceeding. The file is still open and Arkan & Ergin may file a
lawsuit at civil courts for the annulment of our objection.
2. The proceeding initiated against OY 2 at 5th Enforcement
Office of Istanbul under file no. 2016/812
Arkan & Ergin sought 127.915,22 TRL from OY 2 for the
regular financial services and additional services. They claim they
have provided additional services to OY 2 which amounts to
98.305,76 TRL. This additional request was not supported by any
documents. The part which was grounded was paid to the Enforcement
Office, along with related judicial and attorney's fees. An
objection was filed to the remaining part which halts the
proceeding. The file is still open and Arkan & Ergin may file a
lawsuit at civil courts for the annulment of our objection.
21. Post balance sheet events
In November 2016 the Company acquired 51% of the Mandalina
shares in issue but only obtained control subsequent to the period
end. As the operational control of Mandalina was acquired
subsequent to the period end the financials of Mandalina have not
been included within these interim consolidated financial
statements.
As at the period end the value of these shares was Nil,
reflecting the difficulties associated with obtaining operational
control of Mandalina and resolving outstanding legal and accounting
issues in Turkey.
On 4 April 2017 the Company settled all claims with its former
finance director. The former finance director transferred the
shares in Mandalina registered in his name, discontinued all
litigation against the Company and repaid $250,000 of the embezzled
money. Ottoman Fund Company I Limited took ownership of the
remaining 24,500 shares in Mandalina as at 4 April 2017, which
represents 49% of the shares in issue. The Company now owns 100% of
the shares of Mandalina.
Other than the above, the Directors are satisfied that there
were no material events subsequent to the period end that would
have an effect on these financial statements.
Corporate Information
Directors of Registered Office Nominated Adviser
the Company 4(th) Floor and Broker
John Chapman St Paul's Gate N+1 Singer
(Executive Chairman) 22-24 New Street One Bartholomew
Antony Gardner-Hillman St Helier Lane
Andrew Wignall Jersey JE1 4TR London EC2N 2AX
Banker
Deutsche Bank Registrar
International Capita Registrars
P.O. Box 727 (Jersey) Ltd
St Pauls Gate 12 Castle Street
New Street St Helier
St Helier Jersey JE2 3RT
Jersey JE4 8ZB
Legal Adviser
(England) Administrator
Travers Smith Vistra Fund Services
LLP Ltd
10 Snow Hill 4(th) Floor
London EC1A 2AL St Paul's Gate
22-24 New Street
St Helier
Jersey JE1 4TR
Legal Adviser Secretary
(Jersey) Vistra Secretaries
Mourant Ozannes Ltd
22 Grenville 4(th) Floor
Street St Paul's Gate
St Helier 22-24 New Street
Jersey JE4 8PX St Helier
Jersey JE1 4TR
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LLFLIESILVID
(END) Dow Jones Newswires
May 31, 2017 06:36 ET (10:36 GMT)
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