THE OTTOMAN FUND LIMITED

For immediate release
30 May 2013

Interim Financial Statements for the period ended 28 February 2013

The Company is pleased to announce as follows its unaudited interim results for the six months ended 28 February 2013, a full copy of which is available on the Company's website: www.theottomanfund.com.

Enquiries:

N+1 Singer     020 7496 3000
James Maxwell / Matt Thomas

Vistra Secretaries Limited      01534 504 700
Company Secretary

Chairman’s Statement

Dear Shareholders:

Our net asset value per share as at 28 February 2013 was 63.5 pence as compared with 63.9 pence as at 31 August, 2012. As I have explained previously, for each valuation period we retain two appraisers, BNP Paribas and TSKB, to each independently appraise the value of our properties. We then use an average of the two valuations for our balance sheet numbers. We and our local advisors believe that this average is the best estimate of value. Shareholders should bear in mind however that Riva and Bodrum are large assets measured in terms of both value and size and that in recent years there have been no truly comparable transactions.

 
BNP Paribas
28 February 2013
($)
TSKB
28 February 2013
($)
Average
28 February 2013
($)
Average
31 August 2012
($)
Riva
79,500,000
129,470,000
104,485,000
94,275,000
Bodrum
29,000,000
34,740,000
31,870,000
31,720,000
Alanya
5,265,000
5,720,000
5,492,500
6,292,500
TOTAL
113,765,000
172,930,000
141,847,500
132,287,500

The market in Turkey for large land plots such as Riva and Bodrum remains subdued. In Turkey as elsewhere in the world demand is primarily for income producing assets or development opportunities in the city centre. Neither Riva nor Bodrum fit that description. With that reality in mind, we continue our efforts to negotiate a revenue sharing agreement for our Riva property, which will appropriately compensate our shareholders without assuming undue risk. Over the last six months we have continued to receive serious expressions of interest for our Bodrum property and several prospective purchasers have undertaken substantial due diligence. We continue to sell units at Alanya and have a full time marketing manager on site. During the current financial year we have sold four units with thirty-seven remaining.

I look forward to writing again when we release our annual report for the year ended 31 August 2013.

Respectfully yours,
John D. Chapman
Chairman
29 May 2013

Independent review report to The Ottoman Fund Limited
Introduction

We have been engaged by the company to review the condensed interim financial statements in the half-yearly financial report for the six months ended 28 February 2013, which comprises the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated statement of cash flows and related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed interim financial statements.

Directors’ responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules for Companies which require that the financial information must be presented and prepared in a form consistent with that which will be adopted in the company’s annual financial statements.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards (“IFRSs”) as issued by the International Accounting Standards Board. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, “Interim Financial Reporting”.

Our responsibility
Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the AIM Rules for Companies and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review
We conducted our review in accordance with International Standard on Review Engagements 2410, ‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’ issued by the International Auditing and Assurance Standards Board. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed unaudited interim financial statements in the half-yearly financial report for the six months ended 28 February 2013 is not prepared, in all material respects, in accordance with International Accounting Standard 34 and the AIM Rules for Companies.

PricewaterhouseCoopers CI LLP
Chartered Accountants
29 May 2013
Jersey, Channel Islands

(a) The maintenance and integrity of The Ottoman Fund Limited website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the condensed unaudited interim financial statements since they were initially presented on the website.

(b) Legislation in Jersey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Consolidated Statement of Comprehensive Income
For the year ended 28 February 2013

    (unaudited)
Six months
ended
28 February
2013
(unaudited)
Six months
ended
29 February
2012
(audited)
Year ended

31 August
2012
  Notes
£
£
£
Revenue        
Bank Interest   117,582 112,846 194,446
Profit on sale of inventory   - - 274,426
Profit on sale of joint venture   - - 386,897
Total revenue   117,582 112,846 855,769
         
Operating Expenses        
Management fee 3 (104,945) (128,725) (217,635)
Other operating expenses   (488,663) (307,686) (755,211)
Inventory impairment 7 - (4,390,277) (5,817,026)
Loan impairment 8 (425,000) (426,055) (426,055)
Total operating expenses   (1,018,608) (5,252,743) (7,215,927)
         
Foreign exchange gains/(losses)   322,409 (212,524) (551,657)
       
Loss before tax   (578,617) (5,352,421) (6,911,815)
       
Taxation 1(g) (4,423) (137,232) (131,022)
       
Loss for the period   (583,040) (5,489,653) (7,042,837)
       
Other comprehensive income:        
Foreign exchange on subsidiary translation   (25,020) 14,560 56,106
       
Other comprehensive income for the period   (25,020) 14,560 56,106
       
Total comprehensive loss for the period   (608,060) (5,475,093) (6,986,731)
       
Loss attributable to:        
Equity shareholders of the Company   (583,026) (5,489,641) (7,042,815)
Minority interests   (14) (12) (22)
  (583,040) (5,489,653) (7,042,837)
       
Total comprehensive loss attributable to:        
Equity shareholders of the Company   (608,049) (5,475,082) (6,986,732)
Minority interests   (11) (11) 1
  (608,060) (5,475,093) (6,986,731)
       
Basic and diluted earnings per share (pence) 4 (0.43) (4.07) (5.23)

The accompanying notes are an integral part of the financial statements.

Consolidated Balance Sheet

 

Notes
(unaudited)
Six months
ended
28 February
2013
(unaudited)
Six months
ended
29 February
2012
(audited)
Year ended

31 August
2012
     
£
£
Non-current assets        
Intangible assets 5 1,106 1,809 1,438
Plant and equipment 6 2,480 4,259 2,863
Inventories 7 78,718,372 85,179,221 78,635,982
Loans and receivables 8 2,958,676 4,171,758 3,870,603
    81,680,634 89,357,047 82,510,886
         
Current assets        
Other receivables   659,221 1,020,558 649,558
Cash and cash equivalents   3,273,947 6,907,811 3,069,128
    3,933,168 7,928,369 3,718,686
         
Total assets   85,613,802 97,285,416 86,229,572
         
Current liabilities        
Advances received 12 - (1,881,591) -
Other payables   (69,683) (260,001) (77,393)
    (69,683) (2,141,592) (77,393)
         
Net assets   85,544,119 95,143,824 86,152,179
         
Equity        
Share capital 9 120,003,007 127,483,015 120,003,007
Retained earnings   (34,422,326) (32,286,126) (33,839,300)
Translation reserve   (36,563) (53,087) (11,540)
Equity attributable to owners of the parent   85,544,118 95,143,802 86,152,167
Minority interests' equity   1 22 12
Total equity   85,544,119 95,143,824 86,152,179
         
Net asset value per ordinary share (pence) 10 63.5 70.6 63.9

The accompanying notes are an integral part of the financial statements.
These financial statements were approved by the Board of Directors on 29 May 2013.


Antony R Gardner-Hillman
Andrew I Wignall

Consolidated Statement of Changes in Equity

 

Share
capital
£


Retained
earnings
£


Translation reserve
£


Minority
interest
£
 


Total
£
For the six months ended 28 February 2013 (unaudited)          
As at 1 September 2012
120,003,007 (33,839,300) (11,540) 12 86,152,179
Loss for the period - (583,026) - (14) (583,040)
Foreign exchange on subsidiary translation - - (25,023) 3 (25,020)
At 28 February 2013 120,003,007 (34,422,326) (36,563) 1 85,544,119
           
For the six months ended 29 February 2012 (unaudited)          
As at 1 September 2011
127,483,015 (26,796,485) (67,646) 33 100,618,917
Loss for the period
-
(5,489,641) - (12) (5,489,653)
Foreign exchange on subsidiary translation
-
- 14,559 1 14,560
At 29 February 2012 127,483,015 (32,286,126) (53,087) 22 95,143,824
           
For the year ended 31 August 2012 (audited)          
As at 1 September 2011
127,483,015 (26,796,485) (67,646) 33 100,618,917
Return of capital (7,480,008) - - - (7,480,008)
Loss for the year
-
(7,042,815) - (22) (7,042,837)
Foreign exchange on subsidiary translation
-
- 56,106 1 56,107
At 31 August 2011 120,003,007 (33,839,300) (11,540) 12 86,152,179

The accompanying notes are an integral part of the financial statements.

Consolidated Statement of Cash Flows

 
(unaudited)
Six months ended
28 February 2013
(unaudited)
Six months ended
29 February 2012
(audited)
Six months ended
31 August 2012
       
Cash flow from operating activities
£
£
£
Loss for the period (583,040) (5,489,653) (7,042,837)
Adjustments for:      
Interest (117,582) (112,846) (194,446)
Tax 4,423 137,232 131,022
Depreciation 383 696 2,092
Amortisation 332 371 742
Impairment of inventory - 4,390,277 5,817,026
Impairment of loan 425,000 426,055 426,055
Profit on sale of inventory - - (274,426)
Profit on sale of joint venture - - (386,897)
  (270,484) (648,868) (1,521,669)
       
Net foreign exchange (gains) / losses (336,508) 240,808 290,103
Increase / (Decrease) in other receivables (9,663) (76,050) 294,950
Increase / (Decrease) in payables (7,710) 329,327 (273,707)
Net cash outflow from operating activities before interest, depreciation, amortisation and tax (624,365) (153,783) (1,210,323)
       
Interest received 117,582 112,846 194,446
Taxation (4,423) (137,232) (131,022)
Net cash outflow from operating activities (511,206) (178,169) (1,146,899)
       
Cash flow from investing activities      
Purchase of inventories (82,390) (69,293) (7,432)
Proceeds on sale of inventories - - 4,548,240
Purchase of plant and equipment   (1,006) (1,006)
Repayment of loan 798,465 - -
Net cash inflow / (outflow) from investing activities 716,075 (70,299) 4,539,802
       
Cash flow from financing activities      
Return of Capital - - (7,480,008)
Net cash outflow from financing activities - - (7,480,008)
       
Net increase / (decrease) in cash and cash equivalents 204,869 (248,468) (4,087,105)
Cash and cash equivalents at start of the period 3,069,128 7,180,340 7,180,340
Effect of foreign exchange rates (50) (24,061) (24,107)
Cash and cash equivalents at end of the year 3,273,947 6,907,811 3,069,128

The accompanying notes are an integral part of the financial statements.

Notes to the financial statements

1. Accounting policies

The annual financial statements for the year ended 31 August 2012 were prepared in accordance with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (IASB) and interpretations issued by the International Financial Reporting Committee of the IASB (IFRIC). The accounting policies adopted in the preparation of the condensed consolidated interim financial statements (the “interim financial statements”) are consistent with those followed in the preparation of the Group’s annual financial statements for the year ended 31 August 2012.

The interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 August 2012, which have been prepared in accordance with IFRS.

These interim financial statements have been reviewed, not audited.

a. Basis of preparation

The interim financial statements have been prepared on a historical cost basis, except for certain financial instruments as detailed in this note.

The interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting.

b. Basis of consolidation

Subsidiaries
The interim financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) (together “the Group”) made up to 28 February 2013. The consolidated financial statements are prepared using uniform accounting policies for like transactions. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of the subsidiaries are included in the consolidated financial statements from the date that control commences up to the date that control ceases.

Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

The Group applies a policy of treating transactions with minority interests as transactions with parties external to the Group. Minority interests represent the portion of profit and net assets not held by the Group. They are presented separately in the consolidated statement of comprehensive income and in the consolidated statement of financial position separately from the amounts attributable to the owners of the parent.

c. Revenue recognition

Interest receivable on fixed interest securities is recognised using the effective interest method. Interest on short term deposits, expenses and interest payable are treated on an accruals basis. Revenue from sales of inventory is recognised when the significant risks and rewards of an asset have been transferred.

d. Expenses

All expenses are charged through the 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.

Intangible assets
Intangible assets are stated at cost less any provisions for amortisation and impairments. They are amortised over their useful life of 6 years. The amortisation is based on the straight-line basis. At each balance sheet date, the Group reviews the carrying amount of its intangible assets to determine whether there is any indication that those assets have suffered an impairment loss.

Plant & equipment
Plant and equipment is stated at cost less accumulated depreciation and any recognised impairment loss. Depreciation is charged so as to write off the cost of assets over their estimated useful lives, using the straight line method on the following basis:

Leasehold improvements
3 years
Furniture and fittings
5 years

The gain or loss on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the statement of comprehensive income.

Inventories
Inventories are stated at the lower of cost and net realisable value. Land inventory is recognised at the time a liability is recognised — generally after the exchange of unconditional contracts.

Net realisable value will be determined by the Board as the estimated selling price in the ordinary course of business less costs to complete and selling costs. In determining the net realisable value, the directors take into account the valuations received from the independent appraisers, market conditions at and (where relevant and appropriate) after the balance sheet date, and offers received from third parties by the Company.

The valuations of the properties performed by the independent appraisers are based on estimate and subjective judgements that may vary from the actual values and sales prices realised by the Company upon ultimate disposal.

Impairment is recognised through the statement of comprehensive income at the time that the Board believes the net realisable value is lower than cost and will remain so for the foreseeable future.

Loans and receivables
Loans and receivables are recognised on an amortised cost basis. Where they are denominated in a foreign currency they are translated at the prevailing balance sheet exchange rate. Any foreign exchange difference is recognised through the statement of comprehensive income.

Loans are reviewed for impairment by the Board on a semi-annual basis; any impairment is recognised through the statement of comprehensive income.

f. Cash and cash equivalents

Cash and cash equivalents comprise current and short term fixed deposits with banks.

g. Taxation

Profits arising in the Company for the 2013 year of assessment and future periods will be subject to tax at the rate of 0% (2012: 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 £200 (2012: £200) per annum for each Jersey registered company within the Group.

The subsidiaries will be liable for Turkish corporation tax at a rate of 20%. Additionally, a land sale and purchase fee may arise when land is sold or purchased.

Deferred tax is recognised in respect of all temporary differences that have originated but not reversed at the balance sheet date, where transactions or events that result in an obligation to pay more tax in the future or right to pay less tax in the future have occurred at the balance sheet date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the temporary differences can be deducted.

h. Foreign currency

In these financial statements, the results and financial position of the Group are expressed in Pound Sterling, which is the Group's presentation currency. The functional currency of the Company and Jersey subsidiaries is Pound Sterling; the functional currency for the Turkish subsidiaries is Turkish Lira.

The results and financial position of the entities based in Jersey are recorded in Pound Sterling, which is the functional currency of these entities. In these entities, transactions in currencies other than sterling are recorded at the rates of exchange prevailing on the dates of the transactions. Monetary balances (including loans) and non-monetary balances that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date.

The results and financial position of the entities based in Turkey are recorded in Turkish Lira, which is the functional currency of these entities. In order to translate the results and financial position of these entities into the presentation currency (Pounds Sterling):

- non-monetary assets (including inventory) are translated at the rates of exchange prevailing on the dates of the transactions;
- monetary balances (including loans) are translated at the rates prevailing on the balance sheet date; and
- items to be included in the statement of comprehensive income are translated at the average exchange rates for the year unless the average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions.

Foreign exchange gains or losses are recorded in either the statement of comprehensive income or in the statement of changes in equity depending on their nature.

(i) Share capital

Ordinary shares are classified as equity. External costs directly attributable to the issue of new shares are shown as a deduction to reserves. Any redemption in shares is deducted from ordinary share capital with any transaction costs taken to the statement of comprehensive income.

(j) Critical accounting estimates and assumptions

The Board makes estimates and assumptions concerning the future in the preparation of the financial statements. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates, assumptions and judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below.

Principal assumptions underlying management’s estimation of net realisable value and loan recoverability
In reflection of the economic environment and market conditions during the prior year which continued throughout the current financial year end, the frequency of transactions similar to the inventory and apartments on an arm’s length basis remained consistently low as in the prior periods.

Consistent with previous years the Company has obtained two independent valuations which have been reviewed by the Board. For all periods up to and including 31 August 2011, the more conservative of the two valuations was used as the starting point for the assessment of the net realisable values as the Directors believed this represented a more realistic and prudent outcome. From the interim period ending 29 February 2012, the valuations have been significantly different from each other. The reasons for the differences in the two valuations obtained arise primarily due to differing assumptions used by the valuers, exacerbated by the lack of recent comparative sales and the unique nature of the assets. Following discussions with the Investment Advisor and the valuers, the Directors believe that an average of the two valuations represents the most appropriate estimate of the assets’ value. As such this average valuation has been used in the Directors’ assessment of the net realisable value of the properties and the recoverability of the loan receivable from Mandalina.

As a result of their assessment, the Directors believe that impairment is necessary to the loan receivable. Please refer to note 8 for further details.

Critical judgements in applying the Group’s accounting policies
The Group did not make any other critical accounting judgements during the current financial year.

2. Segment reporting

The chief operating decision maker (the “CODM”) in relation to the Group is considered to be the Board itself. The factor used to identify the Group’s reportable segments is geographical area. Based on the above and a review of information provided to the Board, it has been concluded that the Group is currently organised into one reportable segment: Turkey.

There are two types of real estate projects within the above segment; these are development land and new build residential property. There are two individual projects held within the development land type and one project in new build residential property. The CODM considers on a quarterly basis the results of the aggregated position of both property types as a whole as part of their ongoing performance review.

2. Segment reporting

The CODM receives regular reports on the Company’s assets by the Investment Advisors, Civitas Property Partners S.A. (“Civitas”). During this financial year Civitas has provided detailed reviews as requested of the Turkish economy and real estate market and also their strategic advice regarding the individual properties listed in the table on page 2. In addition the year end valuations provided by BNP Paribas (through an alliance member, Kuzeybati, formerly an alliance member of Savills) and TSKB are reviewed and reported on by the investment advisor to the Board of Directors.

Other than cash and cash equivalent assets and related interest and charges, the results of the Group are deemed to be generated in Turkey.

3. Management fee

 
Six months ended
28 February 2013
£
Six months ended
29 February 2012
£
Year ended
31 August 2012
£
Management fee 104,945 128,725 217,635

Civitas Property Partners S.A. (“Civitas”) were appointed as Investment Advisors to the Group on 2 December 2009. The advisory fee structure is incentive-based with an annual fixed component of €212,500 and an incentive component based on a percentage of realisation value. The incentive fee paid for the period to 28 February 2013 was £18,298 (29 February 2012: £35,474; 31 August 2012: £35,474).

4. Earnings per share

Basic earnings per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year.

 
Six months ended
28 February 2013
£
Six months ended
29 February 2012
£
Year ended
31 August 2012
£
Loss attributable to equity holders of the group (£583,026) (£5,489,641) (£7,042,815)
Weighted average number of ordinary shares in issue 134,764,709 134,764,709 134,764,709

Due to the options lapsing without exercise in December 2010, there is no dilution to the earnings per share. The earnings per share are calculated as (0.43) pence (29 February 2012:(4.07) pence; 31 August 2012:(5.23) pence).

5. Intangible assets

 
Six months ended
28 February 2013
£
Six months ended
29 February 2012
£
Year ended
31 August 2012
£
Opening net book value 1,438 2,180 2,180
Additions - - -
Amortisation and impairment charge (332) (371) (742)
Closing net book value 1,106 1,809 1,438

The intangible asset relates to computer software, with a useful life of 6 years. There has been no impairment during the period.

6. Plant and equipment

 
Six months ended
28 February 2013
£
Six months ended
29 February 2012
£
Year ended
31 August 2012
£
Opening net book value 2,863 3,949 3,949
Additions - 1,006 1,006
Disposals - - -
Amortisation and impairment charge (383) (696) (2,092)
Closing net book value 2,480 4,259 2,863

7. Inventories

 
Six months ended
28 February 2013
£
Six months ended
29 February 2012
£
Year ended
31 August 2012
£
Opening book cost 78,635,982 89,500,205 89,500,205
Purchases at cost 82,390 69,293 7,432
Sale during the period - - (5,329,055)
Profit on sale - - 274,426
Impairment of inventory - (4,390,277) (5,817,026)
Closing net book value 78,718,372 85,179,221 78,635,982

This represents 149,550 square metres of development land on the Bodrum peninsula and 931,739 square metres on the Riva coastline.

The directors have assessed the net realisable value at 28 February 2013 using the same approach as at the year end (31 August 2012) and are satisfied that no impairment is required (the impairment at 31 August 2012 related to Riva and Bodrum and the impairment at 28 February 2012 related to Riva).

8. Loans and receivables

 
Six months ended
28 February 2013
£
Six months ended
29 February 2012
£
Year ended
31 August 2012
£
Opening Balance 3,870,603 4,800,000 4,800,000
Repayment of loan (798,465) - -
Impairment of loan (425,000) (426,055) (426,055)
Exchange (loss) / gain revaluation of loan 311,538 (202,187) (503,342)
Closing Balance 2,958,676 4,171,758 3,870,603

Previously, the third party loan in respect of the investment in the Riverside Resort in Alanya had been made to the developer, Okyapı Inşaat ve Mühendislik ve Özel Eğitim Hizmetleri Sanayi ve Ticaret Limited Şirketi (“Okyapı”).

As a means of achieving improved economic benefit for the Group, the titles of the apartments are held by Mandalina Yapı Turizm Sanayi ve Ticaret A.Ş. (“Mandalina”) for the ultimate benefit of the Group. Mandalina is not a part of the Group. In order to further protect the Group’s interest in the Alanya apartments, the Group holds signed share transfer letters from the shareholders of Mandalina which may be executed at any time at the discretion of the Directors and would transfer ownership of the shares in the Mandalina from the existing shareholders to the Group.

The loan has been impaired to reflect the anticipated amount to be received based on the value of the Alanya apartments and future running costs of Mandalina which are deducted from the sales proceeds of the Alanya apartments before being remitted to the Group.

The valuation of the Alanya apartments used by the Directors in the assessment of the recoverability of the loan is based on estimate and subjective judgements that may vary from the actual values and sales prices realised upon ultimate disposal.

9. Called up share capital

Authorised:  
Founder shares of no par value 10
Ordinary shares of no par value Unlimited
   
Issued and fully paid: £
2 founder shares of no par value -
134,764,709 ordinary shares of no par value 120,003,007

2 founder shares of no par value are held by Vistra Nominees I Limited. These shares are not eligible for participation in the Company's investments and carry no voting rights at general meetings of the Company.

Capital Management

As a result of the Group being closed-ended, capital management is wholly subject to the discretion of the Board and is not influenced by subscriptions or redemptions. The Group’s objectives for managing capital are to maintain sufficient liquidity to meet the expenses of the Group as they fall due; to invest in the Group’s current assets when the Board feels it will give rise to capital appreciation; and to return capital to shareholders where possible.

10. Net asset value per share

The net asset value per ordinary share is based on the net assets attributable to equity shareholders of £85,544,119 on 134,764,709 shares (29 February 2012: £95,143,824 on 134,764,709 shares; 31 August 2012: £86,152,179 on 134,764,709 shares).

11. Financial risk management

The disclosure on the financial instruments has been limited to the consolidated financial position. This approach has been adopted as this covers all of the principal risks associated with the Group.

The disclosures below assume that the properties held by the Group are in US Dollars as this is the currency in which they are valued by BNP Paribas (formerly Savills). In the opinion of the directors this is also the currency that any future disposals would occur in.

The Group’s financial instruments comprise loans, cash balances, receivables and payables that arise directly from its operations, for example, in respect of sales and purchases awaiting settlement, and receivables for accrued income.

The principal risks the Group faces from its financial instruments are:

(i) Market risk

(ii) Credit risk

(iii) Foreign currency risk

(iv) Interest rate risk

(v) Liquidity risk

As part of regular Board functions, the Board reviews each of these risks. As required by IFRS 7: Disclosure and Presentation, an analysis of financial assets and liabilities, which identifies the risk to the Group of holding such items, is given below.

(i) Market price risk
Market price risk arises mainly from uncertainty about future prices of financial instruments used in the Group’s operations. It represents the potential loss the Group might suffer through holding market positions as a consequence of price movements. The Group has no such exposures to market price risk.

(ii) Credit risk
The Group’s third party loan in respect of the investment in the Riverside Resort in Alanya is potentially at risk from the failure of the third party. On 3 December 2010, the third party loan was assigned to a related entity, see note 8 for further information. The largest counterparty risk is with the Group’s bankers. Bankruptcy or insolvency of Deutsche Bank International Limited may cause the Group’s rights with respect to cash held to be delayed or limited. There is no policy in place to mitigate this risk as the Board believes there is no need to do so.

The Board does not monitor the credit quality of receivables on an ongoing basis. Cash balances have been placed with Deutsche Bank International Limited due to its Moody’s credit rating of A2.

The Group’s principal financial assets are other receivables and cash and cash equivalents. The maximum exposure of the Group to credit risk is the carrying amount of each class of financial assets. Loans and receivables are represented by loans to and receivables from third parties. Other receivables are represented mainly by prepayments and other receivables where no significant credit risk is recognised.

(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.

An analysis of the Group’s currency exposure is detailed below:

  Non-current
assets
28 February
2013
Net monetary
assets
28 February
2013


Liabilities
28 February
2013
Non-current
assets
29 February
2012
Net monetary
assets
29 February
2012


Liabilities
28 February
2012
  £ £ £ £ £ £
Sterling - 2,223,434 (52,795) - 3,309,328 (48,992)
Euro 2,958,676 2,981 - 4,171,758 759 -
US Dollar 78,718,372 1,017,459 - 85,179,221 1,748,578 (1,881,591)
Turkish Lira 3,586 619,611 (16,888) 6,068 728,112 (211,009)
  81,680,634 3,863,485 (69,683) 89,357,047 5,786,777 (2,141,592)
  31 August
2012
31 August
2012
31 August
2012
  £ £ £
Sterling - 1,915,673 (38,035)
Euro 3,870,603 2,490 -
US Dollar 78,635,982 1,139,559 -
Turkish Lira 4,301 583,571 (39,358)
  82,510,886 3,641,293 (77,393)

(iv) Interest rate risk
Interest rate movements may affect: (i) the fair value of the investments in fixed interest rate securities, (ii) the level of income receivable on cash deposits, (iii) interest payable on the company’s variable rate borrowings. There is no policy in place to mitigate this risk as the Board believes such a policy would not be cost effective.

The Company holds only cash deposits.

The interest rate profile of the Group excluding short term receivables and payables was as follows:

  Floating
rate
28 February
2013
Non-interest
bearing
28 February
2013
Floating
rate
29 February
2012
Non-interest
bearing
29 February
2012
Floating
rate
31 August
2012
Non-interest
bearing
31 August
2012
  £ £ £ £ £ £
Sterling 2,251,312 - 3,325,637 20 1,901,420 -
Euro - 2,961,657 734 4,171,783 - 3,873,093
US Dollar 1,007,852 78,727,979 3,385,910 85,189,973 1,128,331 78,647,210
Turkish Lira - 5,781 - 190,800 8,676 21,284
  3,529,164 81,695,417 6,712,281 89,552,576 3,038,427 82,541,587

(v) Liquidity risk
The Group’s assets mainly comprise cash balances, loans receivable and development property, which can be sold to meet funding commitments if necessary. As at 28 February 2013 the Group does not have any significant liabilities due.

The Group has sufficient cash reserves to meet liabilities due.

12. Contingent liability
The Directors have been informed that an intermediate Turkish court has upheld an administrative order disallowing certain tax benefits from a restructuring transaction that may have had similarities to the restructuring of Osmanli Yapi 2. This intermediate court decision is now under appeal to the Turkish Supreme Court. The Company is monitoring the appeal, but at present this development does not meet the Recognition criteria under IAS 37, and the Directors have consequently made no provision in the accounts.

13. Related party transactions
John D. Chapman is a shareholder in the Turkish subsidiaries due to Turkish law requirements. Mr Chapman receives no additional benefit from being a shareholder of the Turkish subsidiaries. Information regarding Directors’ interests can be found in note 14.

Ali Pamir is a director of the Investment Advisor, Civitas Property Partners S.A. and is a director and shareholder of the Turkish subsidiaries due to Turkish law requirements. Mr Pamir receives no additional benefit from being a shareholder of the Turkish subsidiaries. Information regarding amounts paid to the Investment Advisor can be found in note 3.

Sinan Kalpakcioglu is a Turkish resident consultant to The Ottoman Fund Limited. Mr Kalpakcioglu is a director and shareholder of the Turkish subsidiaries due to Turkish law requirements. Mr Kalpakcioglu receives no additional benefit from being a shareholder of the Turkish subsidiaries. Fees paid to Mr Kalpakcioglu during the period amounted to £16,933 (29 February 2012: £9,833; 31 August 2012: £61,458); £7,867 remained outstanding at the period end (29 February 2012: £4,917; 31 August 2012: £6,667).

Vistra Nominees I Limited is a related party being the holder of the 2 founder shares of The Ottoman Fund Limited.

Sinan Kalpakcioglu and Ali Pamir are shareholders in Mandalina, which holds the title to the Alanya apartments.

The Directors do not consider there to be an ultimate controlling party.

14. Directors’s interests
Total compensation paid to the Directors during the period was £137,657 (29 February 2012: £75,000; 31 August 2012: £150,000).

During the year John D. Chapman as Executive Chairman has been employed under an executive service contract that provides for an annual fee of £75,000 pro-rated monthly and a discretionary performance fee. A performance fee has been paid during the period equalling £62,657.

Eitan Milgram is an Executive Vice President of Weiss Asset Management LLC which is a substantial investor in the Company.

15. Subsequent Events
The Directors are satisfied that there were no material events subsequent to the year end that would have an effect on these financial statements.