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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Madara | LSE:MBF | London | Ordinary Share | JE00B1VN4914 | ORD NPV |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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TIDMMBF
RNS Number : 7665U
Madara Bulgarian Property Fund
30 June 2009
30 June 2009
Madara Bulgarian Property Fund Limited
Audited results for the year ended 31 December 2008
Madara Bulgarian Property Fund Limited (the 'Fund') announces its audited
results for the year ended 31 December 2008.
Key Highlights
Corporate highlights
* Financial restructuring in Q4 2008 was successful in stabilising the Fund's
finances
* Cost cutting has reduced working capital requirements significantly
* Terms of Working Capital Loan agreed in principle with the Fund's principal
shareholder
* Black Sea Gardens development on hold until economic conditions improve
Financial highlights
* Loss per Ordinary Share of EUR0.04 (2007: EUR0.02)
* Book Value of EUR0.87 (2007: EUR0.92) per Ordinary Share based on Net Assets
* Adjusted NAV of EUR0.96 (2007: EUR1.30) per Ordinary Share based on Net Assets
adjusted for the independent valuation of assets, contingent tax and performance
fees
Commenting on the results, Timothy Chadwick, Non-Executive Chairman of the Fund,
said:
"This year was a difficult period for all involved in the overseas property
market due to the deteriorating global economic conditions. The Fund has taken
sensible action to lower running costs as well as putting developments on hold
until conditions improve."
Further information:
Timothy Chadwick, Chairman +44 (0)20 7534 3338
Madara Bulgarian Property Fund Limited
Scott Perkins, Chief Executive +44 (0)20 7534 3338
Madara Capital LLP
Tom Griffiths +44 (0)20 7012
2000
Arbuthnot Securities Limited
Chairman's statement
Introduction
I am pleased to present Madara Bulgarian Property Fund Limited's audited results
for the year ended 31 December 2008. I think that it is fair to say that the
trading conditions experienced in the year have been, to say the least,
extremely challenging. The progress of the Fund has been impeded by the global
economic conditions and this is reflected in the reduction in the Adjusted NAV
of some 26.5% over the preceding 12 months. This reduction is largely due to the
reduced valuation of the assets as independently valued by Colliers
International EOOD, due to the deterioration in the prevailing economic
conditions in Bulgaria. However, the Adjusted NAV remains significantly higher
than that implied by the Fund's prevailing share price during this period.
Portfolio
The Fund currently owns land totalling 408,341 square metres located near Byala
on the central Black Sea coast, south of Varna. Foster + Partners have completed
the detailed masterplan for 200,000 square metres of buildable space in Byala as
part of a 1.2m square metre total project in conjunction with our development
partner, BBT Projects. The project entails luxury residential apartments,
townhouses, and villas along with a hotel, retail space and leisure facilities.
Due to the current economic conditions, this project is currently on hold
pending the availability of satisfactory financing.
The Fund has entered into a conditional agreement to acquire land totalling
124,000 square metres close to the centre of the established ski resort of
Borovets. The acquisition of the land in Borovets has taken significantly longer
than anticipated to complete due to a delay in the land being re-zoned in the
Fund's name. Due to the lengthy delays experienced, discussions with the vendor
are now underway to resolve this situation.
It is the intention of the Board to seek either joint venture partners for the
Fund's existing investments or to negotiate the sale of certain assets at an
acceptable price to provide for any additional investment activity or for
working capital purposes.
Fund's Finances
Given the lack of yield from the existing investments and the poor environment
in both equity and credit markets, the Fund has been reliant on support from its
existing shareholders for finance. A capital raising in Q4 08 from existing
shareholders provided the Fund with some important interim financing and the
Fund has agreed in principle a loan agreement with a party related to the
principal shareholder. The Fund will be reliant on this working capital facility
for the foreseeable future.
Valuation of the Fund's real estate investments
The Fund has re-appointed Colliers International EOOD ("Colliers") as
independent valuer to provide a valuation of its property portfolio on a
semi-annual basis, which they provided as at 31 December 2008. This valuation
was based on certain assumptions of the property market which are subject to
change. For the sake of consistency and prudence, the Directors have used the
Gross Development Value ("GDV") as the basis for the Fund's Adjusted NAV
calculation despite the developments being on hold. The GDV is the lower of the
two valuation methods used by Colliers. Based on this, the Adjusted Net Asset
Value per Ordinary Share as at 31 December 2008 was EUR0.96 per share. The
Adjusted NAV is based on Net Assets adjusted for the independent valuation of
assets, contingent tax and performance fees. This is a reduction of 26.5% over
the preceding 12 months which reflects the prevailing economic conditions in the
region.
The structure and objectives of the Fund
The Fund is a Jersey incorporated company established in April 2006 with
registered number 93301. The Fund's purpose is to make investments in Bulgaria's
property market, primarily in acquiring land capable of development in prime
coastal, mountain resort or city locations. The strategy is subsequently to
develop such acquired land in accordance with its consented (regulated) use or
to profitably trade the acquired land with the benefit of such consent.
The Fund aims to provide shareholders with a total return, which is expected to
comprise primarily capital growth with the potential for dividends over the
medium to long term. The level of any dividend which might become payable will
depend on, amongst others, the rental and other income (including realised
capital gains) generated by the investments made by the Fund. The timing and
amount of any rental or any other income cannot be predicted, therefore there
can be no guarantee as to the amount or timing of any dividend payable by the
Fund.
The Fund will be dissolved and its affairs wound up no later than 30 June 2016
unless its life is extended by the passing of a special resolution by its
shareholders. Following the end of the tenth year of the Fund, or such later
date as its life may be extended by special resolution of shareholders, the
proceeds of the sale of the property portfolio will be returned to shareholders
in such manner as is determined by the Directors.
Dividend policy
The Fund does not currently intend to pay dividends for the first five years of
its life, during which period profits will be reinvested into further property
investments. However, thereafter the Directors will consider the payment of
dividends subject to the prevailing market conditions at the time and dependent
upon the availability of distributable reserves of the Fund and on the
availability of sufficient cash resources.
The investment advisor
Madara Capital LLP is the investment advisor to the Fund. It is a limited
liability partnership registered in England and Wales with its head office
located in London. The Investment Advisor comprises seven principals (four
executives and three non-executives), five of whom are Bulgarian nationals and
residents. The four executives of the investment advisor possess wide-ranging
local knowledge and contacts and have over 35 years' collective real estate
related experience in Bulgaria.
Conclusion
Due to the continuing tough trading conditions, the Black Sea Gardens project
has been put on hold until conditions improve. Discussions with two possible
joint venture partners are continuing and the Fund will advise shareholders of
any significant progress as appropriate. The Fund has secured further working
capital finance in principle and remains free of debt, other than to related
parties. Given the team in place, I am confident we are in a position to weather
the storm until more favourable conditions return. Meanwhile, the Board is
working with the Investment Advisor looking at various options open to the Fund,
including other opportunities which would enhance shareholder value. More
information will be given to shareholders in the coming months.
Timothy Chadwick
Chairman
29 June 2009
Investment Advisor's Report
The period under review has been one of significant challenges for both the Fund
and the industry as a whole. The global credit environment has led to a lack of
development finance available to progress the Black Sea Gardens development, and
the retraction of the equity markets have meant no new investments have been
made.
Bulgarian Economy
In the 4th quarter of 2008, Bulgarian GDP grew by +3.5% annualised. Although
this is half of the equivalent growth the year before (4Q07 GDP growth was +6.9%
annualised), it is still more robust than many other emerging European
countries. Comparable numbers are:
+----------+------------+
| Bulgaria | +3.5% |
+----------+------------+
| Poland | +2.9% |
+----------+------------+
| Romania | +2.9% |
+----------+------------+
| Slovakia | +2.5% |
+----------+------------+
| Czech | +0.7% |
| Republic | |
+----------+------------+
| Hungary | -2.3% |
+----------+------------+
Although FY08 GDP growth was +6%, forecasts from the EU, IMF and the Bulgarian
Central Bank estimate 2009 GDP growth to slow to +1.8-2.0% due to slowing demand
from Europe for exports. Given the large fiscal reserve and low public debt,
Bulgaria's credit outlook remains "positive" according to Moody's. Recently
however, Unicredit, one of Bulgaria's largest banks has become particularly
negative and has downgraded its economic forecasts across the board.
In February, however, Moody's downgraded the credit outlook of Bulgarian banks
from "stable" to "negative" due to "the fundamental credit conditions in the
Bulgarian banking system over the next 12 to 18 months". Two individual banks',
DSK Bank PLC and Raiffeisenbank (Bulgaria) EAD, outlook were also changed from
"stable" to "negative" due to the economic conditions reducing profitability and
asset quality, as well as foreign parent banks either reducing capital to their
Bulgarian subsidiaries or making capital very expensive.
Property Market
According to Global Property Guide (www.globalpropertyguide.com), 2008 saw
property rises of +2.25% in real terms, putting Bulgaria in a very select group
of countries showing growth in the property sector. However, this is from a
background growth rate in 2007 of +19.68%. Indeed Q4 08 saw a reduction in
prices of -5.31%.
In Q4 2008, the average price of dwellings in Bulgaria was BGN1,359 (EUR695) per
sq.m., down 4.1% from the previous quarter (-5.3% when adjusted for inflation),
according to figures from Bulgaria National Statistical Institute (NSI).
Many of the price pressures have been created by over-supply. However, there are
some slightly encouraging trends on this front with residential permits down 15%
year-on-year. Furthermore, the vast majority of new developments have been put
on hold.
Existing Assets
The development of the Black Sea Gardens has been put on hold due to the
prevailing economic conditions. The credit crunch has led to development finance
being unavailable in the region. Furthermore, the demand for second homes among
the end-markets for the development reduced significantly during the period.
Nevertheless, the Investment Advisor has seen the environment stabilise in the
last three months and the number of enquiries into the development has seen a
marginal increase. Discussions continue with several development partners and,
if the economic conditions do not deteriorate again, the Investment Advisor can
foresee an agreement being reached during 2009.
The purchase of land in Borovets has yet to be completed. The granting of the
"regulated" status of the land, allowing construction on the land, is still
being processed. This is taking much longer than had been anticipated, and the
Investment Advisor is in discussions with the vendor to review the options
available to the Fund.
In valuing the assets, Colliers International EOOD uses two valuation methods, a
Gross Development Value and a market comparison. At 31 December 2008 the
valuation has decreased largely due to a reduction in the GDV as a result of
lower selling price assumptions and a delayed start to the projects. Given the
economic conditions described above, the Investment Advisor believes these to be
reasonable assumptions. Clearly, these assumptions will be subject to further
change in the future to reflect the prevailing economic conditions and the
progress of the developments at the time. The GDV is now below the market
comparison and as such is the more prudent of the two valuation methods.
Investment Opportunities
Given the environment for residential property, the Investment Advisor is
assessing opportunities that would provide a certain level of diversity for the
Fund. These include infrastructure and commercial deals which are at an early
stage, but are nevertheless promising.
Cash Position of the Fund
In October 2008, the Investment Advisor made several proposals to the Board of
Directors in an attempt to stabilise the cash position of the Fund. The
proposals were accepted and were somewhat successful. A capital raising from
existing shareholders raised a small amount of money, short-term creditors were
partially issued equity in lieu of cash, and the Investment Advisor accepted a
significant amount of equity in lieu of cash. The Fund also entered into a
revised Investment Advisors Agreement which extended the agreement's duration,
whilst reducing its cash cost in the short-term. The net effect was the issue of
some EUR1m of shares at EUR0.68 per share in November 2008.
Cost cuts were also instigated, which included termination of several staff, the
closure of offices, and key staff deferring payments. The estimated annual cost
saving is in the region of EUR800,000, although some of these payments have been
deferred rather than foregone.
For working capital in 2009, the Fund has entered in principle into an arm's
length loan agreement with a company related to the Fund's largest shareholder.
Should no commercial deal be completed on the Black Sea Gardens project, a
Letter of Intent is in place to extend this loan through 2010.
Conclusion
The progress of the Fund has been significantly impacted by global economic
conditions. Both the Black Sea Gardens and Borovets project have seen little
progress during this period. As the Fund's only long-term liabilities are to
related parties, the Investment Advisor believes that the Fund is in a position
to survive, pending the return of more favourable economic conditions.
Scott Perkins, Chief Executive
Madara Capital LLP
29 June 2009
Corporate Governance Report
for the year ended 31 December 2008
The directors of the Fund recognise the importance of sound corporate
governance. The Fund intends, where appropriate for a company of its size and
nature, to comply with the main provisions of the principles of good governance
and the code of best practice as set out in the Combined Code. The Fund complies
with the corporate governance obligations applicable to Jersey registered public
companies whose shares are traded on AIM. As such, we have chosen to give
relevant disclosures which we believe are necessary or valuable to readers.
The Board
The Board comprised one chairman, six non-executive directors, and one
non-voting director. Subsequent to 31 December 2008 Philip Burgin has resigned
from the board leaving five non-executive directors. Notwithstanding the
relevant recommendation in the Combined Code, the directors do not consider it
necessary, in the light of the size and composition of the Board, for a senior
independent director to be appointed. Furthermore, the Board considers that, in
view of its non-executive nature, it is not appropriate for the directors to be
appointed for a specified term of more than three years as recommended by the
Combined Code. Under the Fund's articles of association, all directors are
subject to re-election at intervals of no more than three years. The Board will
review the level of fees paid to the directors on an ongoing basis.
The Board aims to meet a minimum of four times per year (once per quarter) to
review, direct and supervise the Fund's affairs. The Investment Advisor and the
Administrator maintain more regular contact with the directors on a less formal
basis. Individual directors have direct access to the Fund's company secretary
and, at the expense of the Fund, may seek independent professional advice on any
matter that concerns them in the furtherance of their duties.
The Board undertakes regular reviews of the Fund's investment strategy, risk
profile and investment performance and regularly considers associated matters
such as gearing, marketing/investor relations, peer group information and
general industry issues.
For the purposes of assessing compliance with the listed Fund guide in its
deliberation as to whether or not a director is independent, the Board also
takes into account whether a director has business relationships with the Fund
or any of its related companies, and if so, whether such relationships could
interfere, or be reasonably perceived to interfere, with the exercise of the
director's independent judgement with a view to the best interests of the Fund.
In this connection, the Board notes that Scott Perkins has a significant
beneficial interest in the Investment Advisor, is an executive at the Investment
Advisor and works full-time for the Investment Advisor. The Board therefore
deems Scott Perkins to be non-independent and he therefore carries no voting
power at Board meetings.
The Board also notes that Mark Smith has a minor beneficial interest in the
Investment Advisor. However, the Board considers Mark Smith to be independent in
view of his insignificant beneficial interest, his credentials, his
effectiveness, and his actual conduct during Board meetings.
Furthermore, the Board notes that Nigel Le Quesne and Stephen Burnett are each
shareholders in JTC Group Limited of which JTC Management Limited, JTC Trustees
Limited and JTC Fund Services Limited are wholly owned subsidiaries. However,
the Board considers Nigel Le Quesne and Stephen Burnett to be independent in
view of their credentials, their effectiveness, and their actual conduct during
Board and Board committee meetings.
Board committees
The Board has established a management engagement committee, an audit committee
and a nomination committee, each with formally delegated duties and
responsibilities within written terms of reference. The chairmen of the
committees will be reviewed on an annual basis by the Chairman and the
membership of each of these committees and their terms of reference will be kept
under review. All committee meetings take place in Jersey.
Audit committee
The Audit Committee comprises Timothy Chadwick, Nigel Le Quesne and Stephen
Burnett, with Timothy Chadwick acting as Chairman. The function of this
committee is to ensure that the financial performance of the Fund is properly
reported on and monitored, including reviews of the annual and interim accounts,
results announcements, internal control systems and procedures and accounting
policies. The Audit Committee meets at least twice a year.
Management engagement committee
The Management Engagement Committee comprises Timothy Chadwick and Ivan Nenov,
with Timothy Chadwick acting as Chairman. The function of this committee is to
ensure that the Fund's contracts of engagement with the Investment Advisor,
Administrator and other service providers are operating satisfactorily and to
ensure that the safe and accurate management and administration of the Fund's
affairs and business are competitive and reasonable for shareholders. The
committee makes appropriate recommendations to the Board, which will make any
ultimate decisions. The Management Engagement Committee meets at least once a
year.
Nominations committee
The Nominations Committee comprises Timothy Chadwick, Nigel Le Quesne and Philip
Burgin, with Timothy Chadwick acting as Chairman. This committee has the
responsibility for considering the size, structure and composition of the Board
and the appointment of additional or replacement directors, including assessing
whether candidates have the necessary skills and time available to devote to the
Fund's business, and will make appropriate recommendations to the Board. The
Nominations Committee will meet no less than once a year.
Share dealing code
The Fund has adopted a share dealing code for directors' and key employees'
share dealings which is appropriate for an AIM quoted company. The directors
will comply with Rule 21 of the AIM Rules for Companies relating to directors'
dealings and, in addition, will take all reasonable steps to ensure compliance
by the Fund's applicable employees.
Internal control
The Board is responsible for the Fund's systems of internal control and for
reviewing their effectiveness throughout the year. Such a system can only
provide reasonable assurance against misstatement or loss. The Board has
approved a financial reporting procedure which includes, among other things,
budgeting and monthly reporting procedures. Where there is insufficient
knowledge or experience internally, the Fund retains the services of
consultants.
Going concern
The Group had insufficient liquid resources to meet its liabilities falling due
within one year. During the year, a proportion of Investment Management fees
were settled by way of share-based payments and an agreement has been reached
with the Investment Manager to defer payment on outstanding fees until the Fund
has sufficient resources, and, as such, the Directors have taken a number of
steps to address this, ensuring this is remedial at the date of approving the
financial services.
In order to provide short term liquidity to the Group, a loan agreement has been
agreed in principle with Titan AS EOOD which provides for monthly advances to be
made to the Fund until January 2010. A letter of comfort has been received from
Titan AS EOOD stating that a 12 month extension to the loan term will be
granted, if required. Due diligence has been carried out at the request of the
Directors in order to satisfy themselves that the lender will have sufficient
resources to provide the funding to the Group.
The directors have reviewed the expected future cash flows of the Fund for 12
months from the date of signing the Financial Statements and they are satisfied
there will be adequate resources to meet the Fund's ongoing liabilities as they
fall due. As such, the directors have prepared the Financial Statements on a
going concern basis.
Communication with shareholders
The Board recognises the importance of communication with shareholders. The Fund
has launched an investor relations page on its website in accordance with AIM
Rule 26. The Fund uses its website www.madarafund.com as a means of providing
information to shareholders and other related parties. In addition, the Fund
retains the services of a Corporate Communications Manager, providing an
additional point of contact for investors. The Board encourages shareholder
participation at its annual general meeting where shareholders can be updated on
the Fund's activities and plans.
Timothy J M Chadwick
Chairman
29 June 2009
Group Income Statement
for the year ended 31 December 2008
+------------------------------+----------+-------------+-----------+
| | | Year | 1 July |
| | | ended | 2007 to |
+------------------------------+----------+-------------+-----------+
| | | 31 | 31 |
| | | December | December |
| | | 2008 | 2007 |
+------------------------------+----------+-------------+-----------+
| | Note | EUR | EUR |
+------------------------------+----------+-------------+-----------+
| | | | |
+------------------------------+----------+-------------+-----------+
| Continuing operations | | | |
+------------------------------+----------+-------------+-----------+
| | | | |
+------------------------------+----------+-------------+-----------+
| Expenses | | | |
+------------------------------+----------+-------------+-----------+
| Administrative costs | 11 | 1,587,960 | 778,914 |
+------------------------------+----------+-------------+-----------+
| | | | |
+------------------------------+----------+-------------+-----------+
| Total operating expenses | | 1,587,960 | 778,914 |
+------------------------------+----------+-------------+-----------+
| | | | |
+------------------------------+----------+-------------+-----------+
| Loss from operating | | (1,587,960) | (778,914) |
| activities | | | |
+------------------------------+----------+-------------+-----------+
| | | | |
+------------------------------+----------+-------------+-----------+
| Finance income | 12 | 5,449 | 37,367 |
+------------------------------+----------+-------------+-----------+
| Finance expense | | (2,827) | - |
+------------------------------+----------+-------------+-----------+
| | | | |
+------------------------------+----------+-------------+-----------+
| Net finance income | | 2,622 | 37,367 |
+------------------------------+----------+-------------+-----------+
| | | | |
+------------------------------+----------+-------------+-----------+
| Loss before tax | | (1,585,338) | (741,547) |
+------------------------------+----------+-------------+-----------+
| | | | |
+------------------------------+----------+-------------+-----------+
| Taxation | 13 | - | - |
+------------------------------+----------+-------------+-----------+
| | | | |
+------------------------------+----------+-------------+-----------+
| Loss for the year/period | | (1,585,338) | (741,547) |
+------------------------------+----------+-------------+-----------+
| | | | |
+------------------------------+----------+-------------+-----------+
| Loss per Ordinary share (EUR) | 16 | (0.04) | (0.02) |
+------------------------------+----------+-------------+-----------+
Group Statement of Changes in Equity
for the year ended 31 December 2008
+---------------------------------------+-------------+-------------+-------------+
| | Stated | | |
+---------------------------------------+-------------+-------------+-------------+
| | Capital | Retained | |
| | | | |
+---------------------------------------+-------------+-------------+-------------+
| | Account | Earnings | Total |
| | | | Equity |
+---------------------------------------+-------------+-------------+-------------+
| | EUR | EUR | EUR |
+---------------------------------------+-------------+-------------+-------------+
| | | | |
+---------------------------------------+-------------+-------------+-------------+
| Balances at 1 January 2008 | 37,373,105 | (2,907,517) | 34,465,588 |
+---------------------------------------+-------------+-------------+-------------+
| | | | |
+---------------------------------------+-------------+-------------+-------------+
| Issue of Stated Capital | 953,089 | - | 953,089 |
+---------------------------------------+-------------+-------------+-------------+
| Expenses of share issues | (30,000) | - | (30,000) |
+---------------------------------------+-------------+-------------+-------------+
| Loss for the year | - | (1,585,338) | (1,585,338) |
+---------------------------------------+-------------+-------------+-------------+
| | | | |
+---------------------------------------+-------------+-------------+-------------+
| Balances at 31 December 2008 | 38,296,194 | (4,492,855) | 33,803,339 |
+---------------------------------------+-------------+-------------+-------------+
| | | | |
+---------------------------------------+-------------+-------------+-------------+
| Period 1 July 2007 to 31 December | | | |
| 2007 | | | |
+---------------------------------------+-------------+-------------+-------------+
| | | | |
+---------------------------------------+-------------+-------------+-------------+
| | | | |
+---------------------------------------+-------------+-------------+-------------+
| Balances at 1 July 2007 | 37,373,105 | (2,165,970) | 35,207,135 |
+---------------------------------------+-------------+-------------+-------------+
| | | | |
+---------------------------------------+-------------+-------------+-------------+
| Loss for the period | - | (741,547) | (741,547) |
+---------------------------------------+-------------+-------------+-------------+
| | | | |
+---------------------------------------+-------------+-------------+-------------+
| Balances at 31 December 2007 | 37,373,105 | (2,907,517) | 34,465,588 |
+---------------------------------------+-------------+-------------+-------------+
| | | | |
+---------------------------------------+-------------+-------------+-------------+
Balance Sheets
as at 31 December 2008
+--------------+----------+-------------+-------------+-------------+-------------+
| | | Group | Company | Group | Company |
+--------------+----------+-------------+-------------+-------------+-------------+
| | | As at | As at | As at | As at |
+--------------+----------+-------------+-------------+-------------+-------------+
| | | 31 | 31 | 31 | 31 |
| | | December | December | December | December |
| | | 2008 | 2008 | 2007 | 2007 |
+--------------+----------+-------------+-------------+-------------+-------------+
| | Notes | EUR | EUR | EUR | EUR |
+--------------+----------+-------------+-------------+-------------+-------------+
| | | | | | |
+--------------+----------+-------------+-------------+-------------+-------------+
| ASSETS | | | | | |
+--------------+----------+-------------+-------------+-------------+-------------+
| | | | | | |
+--------------+----------+-------------+-------------+-------------+-------------+
| Non-current | | | | | |
| assets | | | | | |
+--------------+----------+-------------+-------------+-------------+-------------+
| Land | 3 | 27,095,763 | - | 27,095,763 | - |
| acquired | | | | | |
| for | | | | | |
| development | | | | | |
+--------------+----------+-------------+-------------+-------------+-------------+
| Land | 4 | 8,061,771 | - | 8,061,771 | - |
| acquisitions | | | | | |
| yet to | | | | | |
| complete | | | | | |
+--------------+----------+-------------+-------------+-------------+-------------+
| Development | 5 | 870,176 | - | 869,812 | - |
| costs | | | | | |
+--------------+----------+-------------+-------------+-------------+-------------+
| Loans | 6 | - | 33,959,431 | - | 34,352,817 |
| receivable | | | | | |
+--------------+----------+-------------+-------------+-------------+-------------+
| Investments | 7 | - | 1,250 | - | 1,250 |
| in | | | | | |
| subsidiary | | | | | |
| companies | | | | | |
+--------------+----------+-------------+-------------+-------------+-------------+
| | | | | | |
+--------------+----------+-------------+-------------+-------------+-------------+
| Total | | 36,027,710 | 33,960,681 | 36,027,346 | 34,354,067 |
| non-current | | | | | |
| assets | | | | | |
+--------------+----------+-------------+-------------+-------------+-------------+
| | | | | | |
+--------------+----------+-------------+-------------+-------------+-------------+
| Current | | | | | |
| assets | | | | | |
+--------------+----------+-------------+-------------+-------------+-------------+
| Cash and | | 75,723 | 57,913 | 356,174 | 306,993 |
| cash | | | | | |
| equivalents | | | | | |
+--------------+----------+-------------+-------------+-------------+-------------+
| Other | 8 | 34,884 | 623,200 | 579,692 | 640,722 |
| receivables | | | | | |
+--------------+----------+-------------+-------------+-------------+-------------+
| | | | | | |
+--------------+----------+-------------+-------------+-------------+-------------+
| Total | | 110,607 | 681,113 | 935,866 | 947,715 |
| current | | | | | |
| assets | | | | | |
+--------------+----------+-------------+-------------+-------------+-------------+
| | | | | | |
+--------------+----------+-------------+-------------+-------------+-------------+
| Total | | 36,138,317 | 34,641,794 | 36,963,212 | 35,301,782 |
| assets | | | | | |
+--------------+----------+-------------+-------------+-------------+-------------+
| | | | | | |
+--------------+----------+-------------+-------------+-------------+-------------+
| SHAREHOLDERS' | | | | |
| EQUITY AND | | | | |
| LIABILITIES | | | | |
+-------------------------+-------------+-------------+-------------+-------------+
| | | | | | |
+--------------+----------+-------------+-------------+-------------+-------------+
| Equity | | | | | |
+--------------+----------+-------------+-------------+-------------+-------------+
| | | | | | |
+--------------+----------+-------------+-------------+-------------+-------------+
| Stated | 9 | 38,296,194 | 38,296,194 | 37,373,105 | 37,373,105 |
| capital | | | | | |
| account | | | | | |
+--------------+----------+-------------+-------------+-------------+-------------+
| Retained | 10 | (4,492,855) | (4,197,540) | (2,907,517) | (2,817,603) |
| earnings | | | | | |
+--------------+----------+-------------+-------------+-------------+-------------+
| | | | | | |
+--------------+----------+-------------+-------------+-------------+-------------+
| Total | | 33,803,339 | 34,098,654 | 34,465,588 | 34,555,502 |
| equity | | | | | |
+--------------+----------+-------------+-------------+-------------+-------------+
| | | | | | |
+--------------+----------+-------------+-------------+-------------+-------------+
| Current | | | | | |
| liabilities | | | | | |
+--------------+----------+-------------+-------------+-------------+-------------+
| Other | 14 | 2,334,978 | 543,140 | 2,497,624 | 746,280 |
| liabilities | | | | | |
| and | | | | | |
| payables | | | | | |
+--------------+----------+-------------+-------------+-------------+-------------+
| | | | | | |
+--------------+----------+-------------+-------------+-------------+-------------+
| Total | | 2,334,978 | 543,140 | 2,497,624 | 746,280 |
| current | | | | | |
| liabilities | | | | | |
+--------------+----------+-------------+-------------+-------------+-------------+
| | | | | | |
+--------------+----------+-------------+-------------+-------------+-------------+
| Total | | 36,138,317 | 34,641,794 | 36,963,212 | 35,301,782 |
| equity | | | | | |
| and | | | | | |
| liabilities | | | | | |
+--------------+----------+-------------+-------------+-------------+-------------+
| | | | | | |
+--------------+----------+-------------+-------------+-------------+-------------+
| Net | 16 | 0.87 | | 0.92 | |
| asset | | | | | |
| value | | | | | |
| per | | | | | |
| Ordinary | | | | | |
| share | | | | | |
| (EUR) | | | | | |
+--------------+----------+-------------+-------------+-------------+-------------+
Group Cash Flow Statement
for the year ended 31 December 2008
+--------------------------------------------+--------------------+------------------+
| | Year ended | 1 July 2007 to |
+--------------------------------------------+--------------------+------------------+
| | 31 December 2008 | 31 December 2007 |
+--------------------------------------------+--------------------+------------------+
| | EUR | EUR |
+--------------------------------------------+--------------------+------------------+
| | | |
+--------------------------------------------+--------------------+------------------+
| Loss from operating activities | (1,587,960) | (778,914) |
+--------------------------------------------+--------------------+------------------+
| | | |
+--------------------------------------------+--------------------+------------------+
| Expense recognised in profit or loss in | 753,683 | - |
| respect of equity-settled share-based | | |
| payments | | |
+--------------------------------------------+--------------------+------------------+
| | | |
+--------------------------------------------+--------------------+------------------+
| Changes in working capital: | | |
+--------------------------------------------+--------------------+------------------+
| Other payables | (162,646) | (621,831) |
+--------------------------------------------+--------------------+------------------+
| Other receivables | 544,615 | (142,089) |
+--------------------------------------------+--------------------+------------------+
| | | |
+--------------------------------------------+--------------------+------------------+
| Net cash outflow from operating activities | (452,308) | (1,542,834) |
+--------------------------------------------+--------------------+------------------+
| | | |
+--------------------------------------------+--------------------+------------------+
| Investing activities | | |
+--------------------------------------------+--------------------+------------------+
| Land acquisition and development | (364) | (797,480) |
| expenditure | | |
+--------------------------------------------+--------------------+------------------+
| Interest received | 5,642 | 35,253 |
+--------------------------------------------+--------------------+------------------+
| Interest paid | (2,827) | - |
+--------------------------------------------+--------------------+------------------+
| | | |
+--------------------------------------------+--------------------+------------------+
| Net cash inflow/(outflow) from investing | 2,451 | (762,227) |
| activities | | |
+--------------------------------------------+--------------------+------------------+
| | | |
+--------------------------------------------+--------------------+------------------+
| Financing activities | | |
+--------------------------------------------+--------------------+------------------+
| Proceeds of issue of share capital | 199,406 | 12,400 |
+--------------------------------------------+--------------------+------------------+
| Repurchases of share capital | - | (84,000) |
+--------------------------------------------+--------------------+------------------+
| Expenses of share issues | (30,000) | (166,000) |
+--------------------------------------------+--------------------+------------------+
| | | |
+--------------------------------------------+--------------------+------------------+
| Net cash inflow/(outflow) from financing | 169,406 | (237,600) |
| activities | | |
+--------------------------------------------+--------------------+------------------+
| | | |
+--------------------------------------------+--------------------+------------------+
| Net decrease in cash and cash equivalents | (280,451) | (2,542,661) |
+--------------------------------------------+--------------------+------------------+
| | | |
+--------------------------------------------+--------------------+------------------+
| Cash and cash equivalents at start of | 356,174 | 2,898,835 |
| year/period | | |
+--------------------------------------------+--------------------+------------------+
| | | |
+--------------------------------------------+--------------------+------------------+
| Cash and cash equivalents at end of | 75,723 | 356,174 |
| year/period | | |
+--------------------------------------------+--------------------+------------------+
Notes to the Group Financial Statements
for the year ended 31 December 2008
1. Principal accounting policies
The financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRSs and IFRIC interpretations) issued by the
International Accounting Standards Board (IASB).
The financial statements have been prepared under the historical cost convention
and on a going concern basis.
The preparation of financial statements in accordance with IFRSs requires the
use of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the Group's accounting
policies. The areas involving a higher degree of judgement or complexity, or
areas where assumptions and estimates are significant to the group financial
statements are disclosed in note 2.
The following new standards, amendments to standards or interpretations are
mandatory for the first time for the financial year beginning on 1 January 2008
but are not relevant for the Group.
* IFRIC 11 - IFRS 2 Group and Treasury Share Transactions
* IFRIC 12 - Service Concession Arrangements
* IFRIC 14 - IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction
At the date of approval of these group financial statements, the following
Standards and Interpretations were in issue but not yet effective:
* Amendment to IFRS 2 Share-based Payment (effective for annual periods beginning
on or after 1 January 2009)
* IFRS 3 (revised) Business Combinations (effective for annual periods beginning
on or after 1 July 2009)
* IFRS 8 Operating Segments (effective for annual periods beginning on or after 1
January 2009)
* IAS 1 (revised), 'Presentation of Financial Statements' (effective for annual
periods beginning on or after 1 January 2009)
* IAS 23 Amendment - Borrowing Costs (effective for annual periods beginning on or
after 1 January 2009)
* Amendment to IAS 27 - Consolidation and Separate Financial Statements (effective
for annual periods beginning on or after 1 July 2009)
* Amendments to IAS 32 'Financial Instruments: Presentation and IAS 1,
Presentation of Financial Statements' (effective for annual periods beginning on
or after 1 January 2009)
* Amendment to IAS 39 Financial Instruments: Recognition and Measurement
(effective for annual periods beginning on or after 1 July 2009)
* Amendment to IAS 40, Investment Property (effective for annual periods beginning
on or after 1 January 2009)
* IFRIC 13 Customer Loyalty Programmes (effective for annual periods beginning on
or after 1 July 2008)
* IFRIC 15 Agreements for the Construction of Real Estate (effective for annual
periods beginning on or after 1 January 2009)
* IFRIC 16 Hedges of a Net Investment in a Foreign Operation (effective for annual
periods beginning on or after 1 October 2008)
* IFRIC 17 Distributions of Non-cash Assets to Owners (effective prospectively for
annual periods beginning on or after 15 July 2009)
The Directors anticipate that the adoption of these Standards and
Interpretations in future periods will have no material financial impact on the
group financial statements, though certain additional disclosures may be
necessary on their application.
The principal accounting policies are set out below.
Consolidation
Where the Company has the power, either directly or indirectly, to govern the
financial and operating policies of another entity or business so as to obtain
benefits from its activities, it is classified as a subsidiary. The consolidated
financial statements present the results of the Company and its subsidiaries
("the Group") as if they formed a single entity. Intercompany transactions and
balances between Group companies are therefore eliminated in full.
Going concern
The Group currently has insufficient liquid resources to meet its liabilities
falling due within one year. During the year a proportion of Investment
Management fees were settled by way of share-based payments and an agreement has
been reached with the Investment Manager to defer payment on outstanding fees
until the fund has sufficient resources.
In order to provide short term liquidity to the Group a loan agreement has been
agreed in principle with Titan AS EOOD ("Titan") which provides for monthly
advances to be made to the fund until January 2010. A letter of comfort has been
received from Titan stating that a 12 month extension to the loan term will be
granted if required. Due enquiries have been carried out at the request of the
Directors in order to satisfy themselves that the lender will have sufficient
resources to provide the funding to the Group.
The directors have reviewed the expected future cash flows of the fund for 12
months from the date of signing the Financial Statements and they are satisfied
they will have adequate resources to meet ongoing liabilities as they fall due.
As such, the directors have prepared the Financial Statements on a going concern
basis.
Expenses of share issues
Expenses of share issues, including placing expenses, are written off in full
against the stated share capital account.
Land acquisitions and development costs
Expenditure on acquiring land for development, including acquisitions yet to
complete, and costs of development are shown at the lower of cost and net
realisable value.
The Directors are of the opinion that net realisable value is approximately
equal to market value and have engaged the services of an independent company of
chartered surveyors, Colliers CRE, to establish market value, which is defined
as the estimated amount, for which an asset should exchange on the date of
valuation, between a willing buyer and a willing seller in an arm's length
transaction after proper marketing, wherein the parties have each acted
knowledgeably, prudently and without compulsion. The valuation is also dependent
on the assumption that the development of the land goes ahead as specified in
the development plans.
Having established the market value of the land acquired and in the course of
acquisition, the Directors are of the opinion that the market values are in
excess of cost and associated development costs and that such land and
development costs may therefore be included in the accounts at cost in
accordance with the above accounting policy.
Taxation
Tax payable is based on taxable profit for the year. Taxable profit differs from
net profit as reported in the income statement because it excludes items of
income or expense that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method.
Foreign exchange
(i) Functional and presentation currency
The financial information is presented in Euros. The Euro is the functional
currency of the Group, as this is the primary currency of the economic
environment in which the entity operates (see Foreign currency risk section of
note 15).
(ii) Transactions and balances
Transactions undertaken in foreign currencies are translated into Euros at the
rate ruling on the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated into Euros at the rate ruling
on the balance sheet date. Profits and losses on exchange are taken directly to
the income statement.
Financial instruments
The Group classifies its financial assets into one of the following categories,
depending on the purpose for which the asset was acquired. Financial assets are
recognised when the Group becomes party to the contractual obligations of the
instrument. The Group's accounting policy for each category is as follows:
(i) Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, deposits held at call with
banks, other short-term highly liquid investments with original maturities of
three months or less, and bank overdrafts.
(ii) Other receivables
Other receivables are recognised at fair value on initial recognition.
Appropriate allowances for estimated irrecoverable amounts are recognised in
profit or loss when there is objective evidence that the asset is impaired.
Operating income and expenditure
All operating income and expenditure is accounted for on an accruals basis.
2. Critical accounting estimates
The preparation of the financial statements requires the Directors to make
estimates and assumptions that affect the reported amounts of revenues,
expenses, assets and liabilities, and disclosures of contingencies as at the
balance sheet date. If in the future such estimates and assumptions, which are
based on the Directors' best judgement at the balance sheet date, deviate from
the actual circumstances, the original estimates and assumptions will be
modified, as appropriate, in the year in which the circumstances change. The
following policies are considered to be of greater complexity and/or
particularly subject to the exercise of judgement.
Net realisable value of land acquired for development and land acquisitions yet
to complete
The Directors employ the services of professional property valuers but are still
ultimately responsible for ensuring that such valuers are adequately qualified,
competent and base their results on reasonable and realistic assumptions.
The Group operates in Bulgaria where there is a developing market in the type of
land and property development in which the Group is aiming to invest. This
ensures a reasonable supply of various types of evidence upon which to make
judgements on fair values, having regard to adjustments made necessary by
differences in condition or location or changes in economic conditions. Such
evidence includes current and recent sale prices of similar land based on
current market rates with which to calculate discounted cash flows based on
reliable estimates of future development costs and sales revenues, and discount
rates that reflect current market assessments of uncertainties in the amount and
timing of cash flows.
3. Land acquired for development
+------------+------------+------------+------------+------------+------------+
| | | Group | Company | Group | Company |
+------------+ +------------+------------+------------+------------+
| | | As at | As at | As at | As at |
+------------+ +------------+------------+------------+------------+
| | | 31 | 31 | 31 | 31 |
| | | December | December | December | December |
| | | 2008 | 2008 | 2007 | 2007 |
+------------+------------+------------+------------+------------+------------+
| | | EUR | EUR | EUR | EUR |
+------------+------------+------------+------------+------------+------------+
| | | | | | |
+------------+------------+------------+------------+------------+------------+
| As at the beginning of | 27,095,763 | - | 27,345,632 | - |
| the year/period | | | | |
+-------------------------+------------+------------+------------+------------+
| Additions at cost | - | - | 129,410 | - |
+-------------------------+------------+------------+------------+------------+
| VAT capitalised in | - | - | (379,279) | - |
| prior year now | | | | |
| recoverable | | | | |
+-------------------------+------------+------------+------------+------------+
| | | | | | |
+------------+------------+------------+------------+------------+------------+
| As at the end of the | 27,095,763 | - | 27,095,763 | - |
| year/period | | | | |
+------------+------------+------------+------------+------------+------------+
The above land was acquired in 2007 by a subsidiary of the Company from Moran
Trade & Investment, Inc ("Moran"), a related party (see note 19). It is situated
in Byala on the Bulgarian Black Sea coast and was valued by Colliers CRE as at
31 December 2008, on 13 April 2009 at EUR 29,778,478 (2008: EUR 42,517,470) on a
Gross Development Value basis. This valuation is regarded as being the estimated
amount for which this land would exchange on the date of the valuation between a
willing buyer and a willing seller in an arm's length transaction after proper
marketing wherein the parties have each acted knowledgeably, prudently and
without compulsion. The valuation is also dependent on the assumption that the
development of the land goes ahead as specified in the development plans (see
note 5). However, this valuation, which was calculated after providing for
Transfer Tax, has not been incorporated in these financial statements as it is
the Group's accounting policy to value land acquired for development at the
lower of cost and net realisable value. If the land had been sold at this
valuation, EUR 184,254 (2008: EUR 1,455,190) of taxation, being 10% of the potential
profit, would have been payable.
4. Land acquisitions yet to complete
+---------------+--------------+--------------+---------------+--------------+--------------+------------+
| | Group | Company | Group | Company |
+ +---------------+--------------+--------------+------------+
| | As at | As at | As at | As at |
+ +---------------+--------------+--------------+---------------+
| | 31 December | 31 December | 31 December | 31 December |
| | 2008 | 2008 | 2007 | 2007 |
+ +---------------+--------------+--------------+---------------+
| | EUR | EUR | EUR | EUR |
+---------------------------------------------+---------------+--------------+--------------+---------------+
| | | | | | | |
+---------------+--------------+--------------+---------------+--------------+--------------+------------+
| As at the beginning of the | 8,061,771 | - | 8,061,771 | - |
| year/period | | | | |
+---------------------------------------------+---------------+--------------+--------------+------------+
| | | | | | | |
+---------------+--------------+--------------+---------------+--------------+--------------+------------+
| As at the end of the | 8,061,771 | - | 8,061,771 | - |
| year/period | | | | |
+---------------+--------------+--------------+---------------+--------------+--------------+------------+
The above amount consists of the fair value of consideration already transferred
in pursuance of the acquisition of land from Moran, a related party (see note
19). A subsidiary of the Company has entered into a contractual agreement with
Moran to acquire 124,000 square metres of land at Borovets, subject to Moran
first obtaining title to this land, then taking the steps necessary for it to be
granted Regulated Land status. Although the acquisition of this land is taking
longer than anticipated to complete, approximately 50,000 square metres of it is
expected to complete after the date of approval of these group financial
statements, with the completion of the remainder of the land possible before the
end of 2009.
The land which the Group has acquired, or is seeking to acquire, from Moran was
valued by Colliers CRE as at 31 December 2008, on 13 April 2009 at EUR 10,121,834
(assuming the land was granted regulated status).This valuation is regarded as
being the estimated amount for which this land would exchange on the date of the
valuation between a willing buyer and a willing seller in an arm's length
transaction after proper marketing wherein the parties has each acted
knowledgeably, prudently and without compulsion. The valuation is also dependent
on the assumption that the development of the land goes ahead as specified in
the development plans. However, this valuation, which was calculated after
providing for Transfer Tax, has not been incorporated in these financial
statements as it is the Group's accounting policy to value land in the course of
acquisition at the lower of cost and net realisable value. If the land had been
sold at this valuation, EUR 206,006 (2007: EUR 151,072) of taxation, being 10% of
the potential profit, would have been payable.
5. Development costs
+----------+----------+----------+----------+----------+----------+----------+
| | | | Group | Company | Group | Company |
+----------+----------+----------+----------+----------+----------+----------+
| | | | As at | As at | As at | As at |
+----------+----------+----------+----------+----------+----------+----------+
| | | | 31 | 31 | 31 | 31 |
| | | | December | December | December | December |
| | | | 2008 | 2008 | 2007 | 2007 |
+----------+----------+----------+----------+----------+----------+----------+
| | | | EUR | EUR | EUR | EUR |
+----------+----------+----------+----------+----------+----------+----------+
| | | | | | | |
+----------+----------+----------+----------+----------+----------+----------+
| As at the beginning of the | 869,812 | - | 210,332 | - |
| year/period | | | | |
+--------------------------------+----------+----------+----------+----------+
| | | | | | | |
+----------+----------+----------+----------+----------+----------+----------+
| Additions at cost | | 364 | - | 667,480 | - |
+---------------------+----------+----------+----------+----------+----------+
| VAT capitalised in prior year | - | - | (8,000) | - |
| now recoverable | | | | |
+--------------------------------+----------+----------+----------+----------+
| | | | | | | |
+----------+----------+----------+----------+----------+----------+----------+
| As at the end of the | 870,176 | - | 869,812 | - |
| year/period | | | | |
+----------+----------+----------+----------+----------+----------+----------+
The above expenditure relates to the site in Byala which the Group has acquired
(see note 3) and consists of (a) professional fees incurred in the preparation
of initial designs and planning permission application charges, and (b) the
acquisition from a related party (see note 19) of intellectual property rights
to a Master Architecture Agreement for the general and detailed plans for the
development of this site, known as "Black Sea Gardens". This expenditure has
been disbursed on goods and services which accord with the implementation of the
planned development of this land, upon which the valuation disclosed in note 3
is dependent.
6. Loans receivable
+----------+----------+----------+----------+----------+-------------+----------+---------------+
| | | | | Group | Company | Group | Company |
+----------+----------+----------+----------+----------+-------------+----------+---------------+
| | | | | As at | As at | As at | As at |
+----------+----------+----------+----------+----------+-------------+----------+---------------+
| | | | | 31 | 31 | 31 | 31 |
| | | | | December | December | December | December |
| | | | | 2008 | 2008 | 2007 | 2007 |
+----------+----------+----------+----------+----------+-------------+----------+---------------+
| | | | | EUR | EUR | EUR | EUR |
+----------+----------+----------+----------+----------+-------------+----------+---------------+
| | | | | | | | |
+----------+----------+----------+----------+----------+-------------+----------+---------------+
| | Madara Holdings | | - | 33,959,431 | - | 34,352,817 |
| | Limited | | | | | |
+----------+---------------------+----------+----------+-------------+----------+---------------+
| | | | | | | | |
+----------+----------+----------+----------+----------+-------------+----------+---------------+
| | | | | - | 33,959,431 | - | 34,352,817 |
+----------+----------+----------+----------+----------+-------------+----------+---------------+
The loan is repayable on 31 December 2011 and the effective rate of interest is
0%. The directors believe that the carrying value of the loan receivable is not
materially different from its fair value.
7. Investments in subsidiary companies
+----------+----------+----------+----------+----------+----------+----------+----------+
| | | | | | | Company | Company |
+----------+----------+----------+----------+----------+----------+----------+----------+
| | | | | | | Year | 1 July |
| | | | | | | ended | 2007 to |
+----------+----------+----------+----------+----------+----------+----------+----------+
| | | | | | | 31 | 31 |
| | | | | | | December | December |
| | | | | | | 2008 | 2007 |
+----------+----------+----------+----------+----------+----------+----------+----------+
| | Madara Holdings | | | | EUR | EUR |
| | Limited | | | | | |
+----------+---------------------+----------+----------+----------+----------+----------+
| | | | | | | | |
+----------+----------+----------+----------+----------+----------+----------+----------+
| | As at the beginning of the | | | 1,250 | 1,250 |
| | year/period | | | | |
+----------+--------------------------------+----------+----------+----------+----------+
| | | | | | | | |
+----------+----------+----------+----------+----------+----------+----------+----------+
| | As at the end of the | | | 1,250 | 1,250 |
| | year/period | | | | |
+----------+----------+----------+----------+----------+----------+----------+----------+
The details of the subsidiaries are as follows:
+----------+----------+----------+----------+----------+---------------+-------------+------------+
| | | | | | | | Proportion |
| | | | | | | | of |
| | | | | | | | ownership |
+----------+----------+----------+----------+----------+---------------+-------------+------------+
| | | | | | Country | Principal | and |
| | | | | | of | | control |
+----------+----------+----------+----------+----------+---------------+-------------+------------+
| | Name | | | | incorporation | activities | % |
+----------+----------+----------+----------+----------+---------------+-------------+------------+
| | | | | | | | |
+----------+----------+----------+----------+----------+---------------+-------------+------------+
| | | | | | | | |
+----------+----------+----------+----------+----------+---------------+-------------+------------+
| | Madara Holdings | | | Malta | Holding | 100% |
| | Limited | | | | company | |
+----------+---------------------+----------+----------+---------------+-------------+------------+
| | Madara Byala EAD* | | | Bulgaria | Property | 100% |
| | | | | | development | |
+----------+---------------------+----------+----------+---------------+-------------+------------+
| | Madara Borovets | | | Bulgaria | Property | 100% |
| | EAD* | | | | development | |
+----------+----------+----------+----------+----------+---------------+-------------+------------+
* Held by Madara Holdings Limited
All of the above subsidiaries were held throughout the year and were specially
incorporated in pursuance of the Group's intended operating structure.
8. Other receivables
+--+-------------------------+-----+--+------------+------------+------------+------------+
| | | | | Group | Company | Group | Company |
+--+-------------------------+-----+--+------------+------------+------------+------------+
| | | | | As at | As at | As at | As at |
+--+-------------------------+-----+--+------------+------------+------------+------------+
| | | | | 31/12/2008 | 31/12/2008 | 31/12/2007 | 31/12/2007 |
+--+-------------------------+-----+--+------------+------------+------------+------------+
| | | | | EUR | EUR | EUR | EUR |
+--+-------------------------+-----+--+------------+------------+------------+------------+
| | | | | | | | |
+--+-------------------------+-----+--+------------+------------+------------+------------+
| | Trade debtors | | | 8,240 | 6,355 | 27,172 | 25,293 |
+--+-------------------------+-----+--+------------+------------+------------+------------+
| | Other taxation recoverable (see | 4,327 | - | 550,406 | - |
| | note below) | | | | |
+--+----------------------------------+------------+------------+------------+------------+
| | Other debtors | | | 602 | - | - | - |
+--+-------------------------+-----+--+------------+------------+------------+------------+
| | Interest receivable from | | 3 | 3 | 2,114 | 2,114 |
| | deposits | | | | | |
+--+-------------------------------+--+------------+------------+------------+------------+
| | Loans to group companies (see | - | 616,842 | - | 613,315 |
| | note below) | | | | |
+--+----------------------------------+------------+------------+------------+------------+
| | Loans to related parties | | 21,712 | - | - | - |
+--+-------------------------------+--+------------+------------+------------+------------+
| | | | | | | | |
+--+-------------------------+-----+--+------------+------------+------------+------------+
| | | | | 34,884 | 623,200 | 579,692 | 640,722 |
+--+-------------------------+-----+--+------------+------------+------------+------------+
EUR616,432 of the loans to group companies earn interest which is compounded every
three months and added to the outstanding amounts. On each loan, the rate of
interest for each three month period is set at a rate 3% above the 6 month
EURIbor rate prevailing on the first day of the period. These loans are
repayable on or before 26 November 2009. The remaining EUR410 is interest free.
+-----+------------+------+-----+-------------+-------------+-------------+-------------+
| 9. | Stated capital account |
+-----+---------------------------------------------------------------------------------+
| | | | | Company | Company |
+-----+------------+------+-----+---------------------------+---------------------------+
| | Ordinary shares of no | Year ended | Period 1 July 2007 |
| | par value | | |
+-----+-------------------------+---------------------------+---------------------------+
| | | | | 31 December 2008 | to 31 December 2007 |
+-----+------------+------+-----+---------------------------+---------------------------+
| | | | | Number | EUR | Number | EUR |
+-----+------------+------+-----+-------------+-------------+-------------+-------------+
| | | | | | | | |
+-----+------------+------+-----+-------------+-------------+-------------+-------------+
| | Authorised, issued and | 39,013,307 | 38,296,194 | 37,611,705 | 37,373,105 |
| | fully paid | | | | |
+-----+-------------------------+-------------+-------------+-------------+-------------+
| | | | | | | | |
+-----+------------+------+-----+-------------+-------------+-------------+-------------+
| | The Articles of Association of the Company give it the power to issue an |
| | unlimited number of Ordinary shares of no par value, as permitted by the |
| | Law. |
+-----+ +
| | |
+-----+ +
| | |
+-----+---------------------------------------------------------------------------------+
| | During the year, 1,108,358 shares were issued (1 July 2007 - 31 December |
| | 2007 - nil) as partial consideration for services provided by a number of |
| | related parties with equivalent cash value of EUR753,683. 293,244 shares were |
| | issued for cash proceeds of EUR 199,406. Share issue expenses of EUR 30,000 were |
| | charged to the stated capital account. |
+-----+ +
| | |
+-----+ +
| | |
+-----+ +
| | |
+-----+---------------------------------------------------------------------------------+
| | | | | | | | |
+-----+------------+------+-----+-------------+-------------+-------------+-------------+
| 10. | Retained earnings | | | | | |
+-----+-------------------+-----+-------------+-------------+-------------+-------------+
| | | | | Group | Company | Group | Company |
+-----+------------+------+-----+-------------+-------------+-------------+-------------+
| | | | | As at | As at | As at | As at |
+-----+------------+------+-----+-------------+-------------+-------------+-------------+
| | | | | 31 December | 31 | 31 December | 31 |
| | | | | 2008 | December | 2007 | December |
| | | | | | 2008 | | 2007 |
+-----+------------+------+-----+-------------+-------------+-------------+-------------+
| | | | | EUR | EUR | EUR | EUR |
+-----+------------+------+-----+-------------+-------------+-------------+-------------+
| | | | | | |
+-----+-------------------------+-------------+-------------+-------------+-------------+
| | As at the beginning of | (2,907,517) | (2,817,603) | (2,165,970) | (2,131,326) |
| | the year/period | | | | |
+-----+-------------------------+-------------+-------------+-------------+-------------+
| | Loss for the | (1,585,338) | (1,379,937) | (741,547) | (686,277) |
| | year/period | | | | |
+-----+-------------------------+-------------+-------------+-------------+-------------+
| | | | | | | | |
+-----+------------+------+-----+-------------+-------------+-------------+-------------+
| | As at the end of the | (4,492,855) | (4,197,540) | (2,907,517) | (2,817,603) |
| | year/period | | | | |
+-----+------------+------+-----+-------------+-------------+-------------+-------------+
+-----+------------+------+-----+-------------+-----------+-------------+------------+
| | | | | | | | |
+-----+------------+------+-----+-------------+-----------+-------------+------------+
| | | | | | | | |
+-----+------------+------+-----+-------------+-----------+-------------+------------+
| 11. | Administrative | | | | | |
| | costs | | | | | |
+-----+-------------------+-----+-------------+-----------+-------------+------------+
| | | | | Year ended | 1 July |
| | | | | | 2007 to |
+-----+-------------------------+-------------+-----------+-------------+------------+
| | | | | | | 31 December | 31 |
| | | | | | | 2008 | December |
| | | | | | | | 2007 |
+-----+------------+------+-----+-------------+-----------+-------------+------------+
| | | | | | | EUR | EUR |
+-----+------------+------+-----+-------------+-----------+-------------+------------+
| | | | | | | | |
+-----+------------+------+-----+-------------+-----------+-------------+------------+
| | Administration | | | | 187,421 | 146,361 |
| | fees | | | | | |
+-----+-------------------+-----+-------------+-----------+-------------+------------+
| | Investment management fees (see | | 759,290 | 398,256 |
| | below) | | | |
+-----+---------------------------------------+-----------+-------------+------------+
| | Directors fees | | | | 217,088 | 94,423 |
+-----+-------------------+-----+-------------+-----------+-------------+------------+
| | Legal and | | | | 210,186 | 31,263 |
| | professional fees | | | | | |
+-----+-------------------+-----+-------------+-----------+-------------+------------+
| | Audit fees | | | | 68,140 | 44,967 |
+-----+-------------------+-----+-------------+-----------+-------------+------------+
| | Other operating | | | 145,835 | 63,644 |
| | expenses | | | | |
+-----+-------------------------+-------------+-----------+-------------+------------+
| | | | | |
+-----+---------------------------------------+-----------+-------------+------------+
| | Total Administrative costs | | 1,587,960 | 778,914 |
+-----+---------------------------------------+-----------+-------------+------------+
| | | | | | | | |
+-----+------------+------+-----+-------------+-----------+-------------+------------+
| | Under the terms of the investment advisory agreement, the Investment Adviser |
| | receives a fee equivalent to 1.5 per cent per annum of the Net Asset Value |
| | of the Fund (i.e. the Group). |
+-----+ +
| | |
+-----+ +
| | |
+-----+------------------------------------------------------------------------------+
| | The Investment Adviser will also be entitled to a Performance Fee upon |
| | either termination of the Fund or sale of an individual asset held by the |
| | Fund. If realised return on equity on such a sale or termination exceeds 10 |
| | per cent per annum of the initial equity investment contributed by the |
| | Shareholders, the Investment Adviser will be entitled to receive a |
| | Performance Fee equivalent to 20 per cent of such excess. In the event that |
| | any such Performance Fee is paid to the Investment Adviser on the sale of an |
| | individual asset, 20 per cent of the Performance Fee will be retained in an |
| | escrow account to offset any potential future losses on any subsequent sale |
| | of any individual asset. Interest accrued on such escrow account shall be |
| | paid annually to the Investment Adviser. In the event that land acquired |
| | (excluding land acquisitions yet to complete) at present was sold at the |
| | current market value, the Performance Fee payable to the Investment Adviser |
| | is estimated to be EUR nil (31 December 2007 - EUR 1,130,000). |
+-----+ +
| | |
+-----+ +
| | |
+-----+ +
| | |
+-----+ +
| | |
+-----+ +
| | |
+-----+ +
| | |
+-----+ +
| | |
+-----+ +
| | |
+-----+------------------------------------------------------------------------------+
| | | | | | | | |
+-----+------------+------+-----+-------------+-----------+-------------+------------+
| 12. | Finance income | | | | | |
+-----+-------------------+-----+-------------+-----------+-------------+------------+
| | | | | | | Year ended | 1 July |
| | | | | | | | 2007 to |
+-----+------------+------+-----+-------------+-----------+-------------+------------+
| | | | | | | 31 December | 31 |
| | | | | | | 2008 | December |
| | | | | | | | 2007 |
+-----+------------+------+-----+-------------+-----------+-------------+------------+
| | | | | | | EUR | EUR |
+-----+------------+------+-----+-------------+-----------+-------------+------------+
| | | | | |
+-----+---------------------------------------+-----------+-------------+------------+
| | Interest receivable from bank | | 5,449 | 37,367 |
| | deposits | | | |
+-----+---------------------------------------+-----------+-------------+------------+
| | | | | | | | |
+-----+------------+------+-----+-------------+-----------+-------------+------------+
| | | | | | | 5,449 | 37,367 |
+-----+------------+------+-----+-------------+-----------+-------------+------------+
13. Taxation
The Company is currently registered in Jersey as an exempt company. The States
of Jersey Income Tax Authority has granted the Company exemption from Jersey
income tax under the provision of Article 123A of the Income Tax (Jersey) Law
1961. The Company had been charged the annual exemption fee of GBP600.
With effect from 1 January 2009, Jersey will abolish the exempt company regime
for existing companies. At the same time the standard rate of corporate income
tax moves from 20% to 0%. Therefore some entities previously exempt from tax
under the provision will now be taxed at 0%.
Tax on profits of the Group arising in Bulgaria are computed using the tax rate
of 10.0%, both for current and deferred tax.
The total tax charge for the period is detailed below:
+----------+----------+----------+----------+----------+-------------+-----------+
| | | | | | Year | 1 July |
| | | | | | ended | 2007 to |
+----------+----------+----------+----------+----------+-------------+-----------+
| | | | | | 31 | 31 |
| | | | | | December | December |
| | | | | | 2008 | 2007 |
+----------+----------+----------+----------+----------+-------------+-----------+
| | | | | | EUR | EUR |
+----------+----------+----------+----------+----------+-------------+-----------+
| Current taxation on profits | | | - | - |
+--------------------------------+----------+----------+-------------+-----------+
| Deferred tax | | | - | - |
+--------------------------------+----------+----------+-------------+-----------+
| | | | | | | |
+----------+----------+----------+----------+----------+-------------+-----------+
| Tax charge for the year/period | | | - | - |
+--------------------------------+----------+----------+-------------+-----------+
| | | | | | | |
+----------+----------+----------+----------+----------+-------------+-----------+
| Loss before | | | | (1,585,338) | (741,547) |
| taxation | | | | | |
+---------------------+----------+----------+----------+-------------+-----------+
| | | | | | | |
+----------+----------+----------+----------+----------+-------------+-----------+
| | | | | | | |
+----------+----------+----------+----------+----------+-------------+-----------+
| Taxation credit on loss at tax | | | 158,534 | 74,155 |
| rate of 10.0% | | | | |
+--------------------------------+----------+----------+-------------+-----------+
| | | | | | | |
+----------+----------+----------+----------+----------+-------------+-----------+
| Effects | | | | | | |
| of: | | | | | | |
+----------+----------+----------+----------+----------+-------------+-----------+
| Losses under Jersey tax | | | (137,994) | (68,628) |
| jurisdiction not taxable | | | | |
+--------------------------------+----------+----------+-------------+-----------+
| Losses under | | | | (6,775) | (1,348) |
| Maltese tax | | | | | |
| jurisdiction | | | | | |
+---------------------+----------+----------+----------+-------------+-----------+
| Losses under Bulgarian tax | | | (13,765) | (4,179) |
| jurisdiction | | | | |
+--------------------------------+----------+----------+-------------+-----------+
| | | | | | | |
+----------+----------+----------+----------+----------+-------------+-----------+
| Tax charge for the | | | | - | - |
| year/period | | | | | |
+----------+----------+----------+----------+----------+-------------+-----------+
14. Other liabilities and payables
+----------------------------+--+--+-----+------------+------------+------------+------------+
| | | Group | Company | Group | Company |
+-------------------------------+--+------------------+------------+------------+------------+
| | | | As at | As at | As at | As at |
+----------------------------+--+--+------------------+------------+------------+------------+
| | | | 31/12/2008 | 31/12/2008 | 31/12/2007 | 31/12/2007 |
+----------------------------+--+--+------------------+------------+------------+------------+
| | | | EUR | EUR | EUR | EUR |
+----------------------------+--+--+------------------+------------+------------+------------+
| | | | | | | |
+----------------------------+--+--+------------------+------------+------------+------------+
| Trade creditors (see note | | 1,724,966 | - | 1,724,966 | - |
| below) | | | | | |
+-------------------------------+--+------------------+------------+------------+------------+
| Investment management fees (see | 347,311 | 347,311 | 579,021 | 579,021 |
| note below) | | | | |
+----------------------------------+------------------+------------+------------+------------+
| Other creditors | | | 23,510 | - | - | - |
+----------------------------+--+--------+------------+------------+------------+------------+
| Administrative expenses | | 239,191 | 195,829 | 193,637 | 167,259 |
+-------------------------------+--------+------------+------------+------------+------------+
| | | | | | | |
+----------------------------+--+--------+------------+------------+------------+------------+
| | | | 2,334,978 | 543,140 | 2,497,624 | 746,280 |
+----------------------------+--+--+-----+------------+------------+------------+------------+
Written confirmation has been received from Moran and the Investment Adviser
that they will not call upon amounts due to them of EUR1,724,966 and EUR347,311
respectively for at least 12 months from date of signing accounts.
15. Financial risk management
The Group is exposed to a number of risks related to its activities.
Financial risk factors
Financial instruments at the balance sheet date comprise other receivables, cash
and cash equivalents and trade and other payables. The Group is exposed to a
variety of financial risks arising from the financial instruments it holds,
being interest rate risk, business risk, market risk, liquidity risk and foreign
currency risk.
Interest rate risk
As at the balance sheet date, the Group held cash deposits. The only interest
rate risk faced by the Company relates to floating rate loans granted to its
subsidiaries. This risk is eliminated on consolidation and has no impact at
group level. However, the Group may engage in potential borrowings in the future
in pursuance of its activities, in which case the Group may be exposed to the
risk of interest rate fluctuations as borrowings may be obtained either based on
floating interest rate or fixed term interest rate terms. The Group is not
obliged to hedge against interest rate risks.
Business risk
There can be no assurance that the Group will achieve its investment objectives.
There is little operating history by which to evaluate the Group's likely future
performance. The investment results of the Group will be reliant upon the
success of the investment manager. The investment manager is a recently
established entity and there is likewise little operating history by which to
evaluate its likely performance.
Price risk
The Group will invest all of its assets (to the extent not retained in cash) in
underlying entities and thus into various Bulgarian properties and will
accordingly not be diversified. The nature of the Group's investments involves
certain risks. Property investments can perform in a cyclical nature and values
can increase or decrease. Economic, political and legal issues can affect values
as they can with any other investments. The Bulgarian property market is
currently experiencing a downturn which has already adversely affected the value
of the Group's land properties, and any continuation of this downturn could
significantly affect these values. Rental income and the market value for
properties are generally affected by overall conditions in the local economy,
such as growth in gross domestic product, employment trends, inflation and
changes in interest rates.
Liquidity risk
As property investments are relatively illiquid, there can be no assurance that
the Group will encounter little or no difficulty in realising assets or
otherwise raising funds to meet financial commitments. It is therefore the
Group's intention to mitigate such risk by investing in desirable properties in
prime locations.
Foreign currency risk
The assets, liabilities, income and expenditure of the Group are denominated in
the Euro, a strong and stable currency within the global economy.
The only currencies other than the Euro in which the Group transacts are
Sterling, in which a large amount of the parent company's administrative
expenses are billed, and the Bulgarian Lev (BGN). Under Bulgarian law, the Lev
is pegged to the Euro at a fixed rate of BGN 1.95583 per EUR, therefore the
Directors are of the opinion that the Group is not exposed to any currency risk
by transacting in the Lev. All Lev transactions and assets and liabilities of
the group denominated in the Lev have been converted into Euros at the fixed
exchange rate in these financial statements, and are not shown separately.
The following table summarises the Group's exposure to foreign currency risk by
categorising all assets and liabilities of the Group by currency at their
carrying amounts in Euros:
+---------------+-------------+-----------+-------------+-------------+-----------+-------------+
| | As at 31 December 2008 | As at 31 December 2007 |
+---------------+---------------------------------------+---------------------------------------+
| | * Euro | Sterling | Total | * Euro | Sterling | Total |
+---------------+-------------+-----------+-------------+-------------+-----------+-------------+
| | EUR | EUR | EUR | EUR | EUR | EUR |
+---------------+-------------+-----------+-------------+-------------+-----------+-------------+
| | | | | | | |
+---------------+-------------+-----------+-------------+-------------+-----------+-------------+
| Non-current | | | | | | |
+---------------+-------------+-----------+-------------+-------------+-----------+-------------+
| assets | 36,027,710 | - | 36,027,710 | 36,027,346 | - | 36,027,346 |
+---------------+-------------+-----------+-------------+-------------+-----------+-------------+
| Cash and | | | | | | |
| cash | | | | | | |
+---------------+-------------+-----------+-------------+-------------+-----------+-------------+
| equivalents | 75,430 | 293 | 75,723 | 350,688 | 5,486 | 356,174 |
+---------------+-------------+-----------+-------------+-------------+-----------+-------------+
| Other | | | | | | |
+---------------+-------------+-----------+-------------+-------------+-----------+-------------+
| receivables | 32,819 | 2,065 | 34,884 | 558,745 | 20,947 | 579,692 |
+---------------+-------------+-----------+-------------+-------------+-----------+-------------+
| | | | | | | |
+---------------+-------------+-----------+-------------+-------------+-----------+-------------+
| Total | 36,135,959 | 2,358 | 36,138,317 | 36,936,779 | 26,433 | 36,963,212 |
| assets | | | | | | |
+---------------+-------------+-----------+-------------+-------------+-----------+-------------+
| | | | | | | |
+---------------+-------------+-----------+-------------+-------------+-----------+-------------+
| Trade | | | | | | |
| and | | | | | | |
| other | | | | | | |
+---------------+-------------+-----------+-------------+-------------+-----------+-------------+
| payables | 2,212,609 | 122,369 | 2,334,978 | 2,367,014 | 130,610 | 2,497,624 |
+---------------+-------------+-----------+-------------+-------------+-----------+-------------+
| Total | | | | | | |
+---------------+-------------+-----------+-------------+-------------+-----------+-------------+
| liabilities | 2,212,609 | 122,369 | 2,334,978 | 2,367,014 | 130,610 | 2,497,624 |
+---------------+-------------+-----------+-------------+-------------+-----------+-------------+
| Net | | | | | | |
| assets/ | | | | | | |
+---------------+-------------+-----------+-------------+-------------+-----------+-------------+
| (liabilities) | 33,923,350 | (120,011) | 33,803,339 | 34,569,765 | (104,177) | 34,465,588 |
+---------------+-------------+-----------+-------------+-------------+-----------+-------------+
* Includes assets and liabilities denominated in BGN, translated at the fixed
exchange rate of BGN 1.95583 per EUR.
Based on recent market conditions, the Directors believe that it is reasonable
to assume that currency exchange rates could vary by up to 10% over a 12 month
period. This would have an effect on income and expenditure transacted in
currencies other than the Euro. The following sensitivity analysis is based on a
change in an assumption while holding all other assumptions constant. In
practice, this is unlikely to occur and changes in some of the assumptions may
be correlated, for example, a change in interest rates and a change in foreign
currency rates.
If the Euro strengthened/weakened by 10% against Sterling with all other
variables held constant, the loss for the year after tax would have been EUR
45,178 lower or EUR 45,178 higher (period 1 July 2007 to 31 December 2007 - the
loss for the period after tax would have been EUR 87,935 lower or EUR 87,935
higher).
Financial assets and liabilities - Numerical information
Maturity of financial assets
The carrying value of financial assets of the Company and the Group are
realisable as follows:
+-------------------+----------+----------+---------------+---------------+---------------+---------------+
| Company | | | Book | Fair | Book | Fair |
| | | | value | value | value | value |
+-------------------+----------+----------+---------------+---------------+---------------+---------------+
| | | | As at | As at | As at | As at |
+-------------------+----------+----------+---------------+---------------+---------------+---------------+
| | | | 31 | 31 | 31 | 31 |
| | | | December | December | December | December |
| | | | 2008 | 2008 | 2007 | 2007 |
+-------------------+----------+----------+---------------+---------------+---------------+---------------+
| | | | EUR | EUR | EUR | EUR |
+-------------------+----------+----------+---------------+---------------+---------------+---------------+
| In one year or less | | 681,113 | 681,113 | 947,715 | 947,715 |
+------------------------------+----------+---------------+---------------+---------------+---------------+
| In more than three years but no more | 33,959,431 | 33,959,431 | 34,352,817 | 34,352,817 |
| than four years | | | | |
+-----------------------------------------+---------------+---------------+---------------+---------------+
| In more than four years but no more | - | - | - | - |
| than five years | | | | |
+-----------------------------------------+---------------+---------------+---------------+---------------+
| | | | 34,640,544 | 34,640,544 | 35,300,532 | 35,300,532 |
+-------------------+----------+----------+---------------+---------------+---------------+---------------+
| | | | | | | |
+-------------------+----------+----------+---------------+---------------+---------------+---------------+
| Group | | | Book | Fair | Book | Fair |
| | | | value | value | value | value |
+-------------------+----------+----------+---------------+---------------+---------------+---------------+
| | | | As at | As at | As at | As at |
+-------------------+----------+----------+---------------+---------------+---------------+---------------+
| | | | 31 | 31 | 31 | 31 |
| | | | December | December | December | December |
| | | | 2008 | 2008 | 2007 | 2007 |
+-------------------+----------+----------+---------------+---------------+---------------+---------------+
| | | | | | | |
+-------------------+----------+----------+---------------+---------------+---------------+---------------+
| | | | EUR | EUR | EUR | EUR |
+-------------------+----------+----------+---------------+---------------+---------------+---------------+
| In one year or less | | 110,607 | 110,607 | 935,866 | 935,866 |
+------------------------------+----------+---------------+---------------+---------------+---------------+
| | | | 110,607 | 110,607 | 935,866 | 935,866 |
+-------------------+----------+----------+---------------+---------------+---------------+---------------+
Maturity of financial liabilities
The carrying amounts of financial liabilities of the Company and the Group are
repayable as follows:
+----------+------+--+--------------+--------------+--------------+--------------+
| Company | | | Book value | Fair value | Book value | Fair value |
+----------+------+--+--------------+--------------+--------------+--------------+
| | | | As at | As at | As at | As at |
+----------+------+--+--------------+--------------+--------------+--------------+
| | | | 31 December | 31 December | 31 December | 31 December |
| | | | 2008 | 2008 | 2007 | 2007 |
+----------+------+--+--------------+--------------+--------------+--------------+
| | | | EUR | EUR | EUR | EUR |
+----------+------+--+--------------+--------------+--------------+--------------+
| | | | | | | |
+----------+------+--+--------------+--------------+--------------+--------------+
| In one year or | | 543,140 | 543,140 | 746,280 | 746,280 |
| less | | | | | |
+-----------------+--+--------------+--------------+--------------+--------------+
| | | | 543,140 | 543,140 | 746,280 | 746,280 |
+----------+------+--+--------------+--------------+--------------+--------------+
+--------+---------+--+--------------+--------------+--------------+--------------+
| | | | | | | |
+--------+---------+--+--------------+--------------+--------------+--------------+
| Group | | | Book value | Fair value | Book value | Fair value |
+--------+---------+--+--------------+--------------+--------------+--------------+
| | | | As at | As at | As at | As at |
+--------+---------+--+--------------+--------------+--------------+--------------+
| | | | 31 December | 31 December | 31 December | 31 December |
| | | | 2008 | 2008 | 2007 | 2007 |
+--------+---------+--+--------------+--------------+--------------+--------------+
| | | | EUR | EUR | EUR | EUR |
+--------+---------+--+--------------+--------------+--------------+--------------+
| In one year or | | 2,334,978 | 2,334,978 | 2,497,624 | 2,497,624 |
| less | | | | | |
+------------------+--+--------------+--------------+--------------+--------------+
| | | | 2,334,978 | 2,334,978 | 2,497,624 | 2,497,624 |
+--------+---------+--+--------------+--------------+--------------+--------------+
Interest rate profile
The interest rate profiles of the financial assets and liabilities of the
Company and the Group are set out below:
+----------+----------+----------+------------+-----------+---------------+---------------+
| | | | Floating | Fixed | Non-interest | Total |
| | | | Rate | Rate | bearing | |
+----------+----------+----------+------------+-----------+---------------+---------------+
| Company assets: | EUR | EUR | EUR | EUR |
| As at 31 December 2008 | | | | |
+--------------------------------+------------+-----------+---------------+---------------+
| | | | | | | |
+----------+----------+----------+------------+-----------+---------------+---------------+
| Loan to Group company (term of | - | - | 33,959,431 | 33,959,431 |
| loan: 4.0 years) | | | | |
+--------------------------------+------------+-----------+---------------+---------------+
| Loans to Group companies (term | 616,432 | - | 410 | 616,842 |
| of loans: 0.4 years) | | | | |
+--------------------------------+------------+-----------+---------------+---------------+
| Cash | | | 57,913 | - | - | 57,913 |
+----------+----------+----------+------------+-----------+---------------+---------------+
| Other receivables | | - | - | 6,358 | 6,358 |
+---------------------+----------+------------+-----------+---------------+---------------+
| | | | 674,345 | - | 33,966,199 | 34,640,544 |
+----------+----------+----------+------------+-----------+---------------+---------------+
| | | | | | | |
+----------+----------+----------+------------+-----------+---------------+---------------+
| Company assets: | | | | |
| As at 31 December 2007 | | | | |
+--------------------------------+------------+-----------+---------------+---------------+
| | | | | | | |
+----------+----------+----------+------------+-----------+---------------+---------------+
| Loan to Group company (term of | - | - | 34,352,817 | 34,352,817 |
| loan: 4.5 years) | | | | |
+--------------------------------+------------+-----------+---------------+---------------+
| Loans to Group companies (term | 613,315 | - | - | 613,315 |
| of loans: 0.9 years) | | | | |
+--------------------------------+------------+-----------+---------------+---------------+
| Cash | | | 306,993 | - | - | 306,993 |
+----------+----------+----------+------------+-----------+---------------+---------------+
| Other receivables | | - | - | 27,407 | 27,407 |
+---------------------+----------+------------+-----------+---------------+---------------+
| | | | 920,308 | - | 34,380,224 | 35,300,532 |
+----------+----------+----------+------------+-----------+---------------+---------------+
| | | | | | | |
+----------+----------+----------+------------+-----------+---------------+---------------+
| Group assets: | | | | |
| As at 31 December 2008 | | | | |
+--------------------------------+------------+-----------+---------------+---------------+
| Cash | | | 75,723 | - | - | 75,723 |
+----------+----------+----------+------------+-----------+---------------+---------------+
| Other receivables | | - | 20,452 | 14,432 | 34,884 |
+---------------------+----------+------------+-----------+---------------+---------------+
| | | | | | | |
+----------+----------+----------+------------+-----------+---------------+---------------+
| | | | 75,723 | 20,452 | 14,432 | 110,607 |
+----------+----------+----------+------------+-----------+---------------+---------------+
| | | | | | | |
+----------+----------+----------+------------+-----------+---------------+---------------+
| Group assets: | | | | |
| As at 31 December 2007 | | | | |
+--------------------------------+------------+-----------+---------------+---------------+
| Cash | | | 356,174 | - | - | 356,174 |
+----------+----------+----------+------------+-----------+---------------+---------------+
| Other receivables | | - | - | 579,692 | 579,692 |
+---------------------+----------+------------+-----------+---------------+---------------+
| | | | 356,174 | - | 579,692 | 935,866 |
+----------+----------+----------+------------+-----------+---------------+---------------+
All of the above floating rate cash assets are deposits on call earning interest
at prevailing market rates. The floating rate group loans earn interest which is
compounded every three months and added to the outstanding amounts. On each
loan, the rate of interest for each three month period is set at a rate 3% above
the 6 month Euribor rate prevailing on the first day of the period. These loans
are repayable on or before 26 November 2009.
+----------+----------+----------+----------+----------+--------------+--------------+
| | | | Floating | Fixed | Non-interest | Total |
| | | | Rate | Rate | bearing | |
+----------+----------+----------+----------+----------+--------------+--------------+
| Company liabilities: | EUR | EUR | EUR | EUR |
| As at 31 December 2008 | | | | |
+--------------------------------+----------+----------+--------------+--------------+
| | | | | | | |
+----------+----------+----------+----------+----------+--------------+--------------+
| Other | | | - | - | 543,140 | 543,140 |
| payables | | | | | | |
+----------+----------+----------+----------+----------+--------------+--------------+
| | | | | | | |
+----------+----------+----------+----------+----------+--------------+--------------+
| | | | - | - | 543,140 | 543,140 |
+----------+----------+----------+----------+----------+--------------+--------------+
| | | | | | | |
+----------+----------+----------+----------+----------+--------------+--------------+
| Company liabilities: | | | | |
| As at 31 December 2007 | | | | |
+--------------------------------+----------+----------+--------------+--------------+
| | | | | | | |
+----------+----------+----------+----------+----------+--------------+--------------+
| Other | | | - | - | 746,280 | 746,280 |
| payables | | | | | | |
+----------+----------+----------+----------+----------+--------------+--------------+
| | | | | | | |
+----------+----------+----------+----------+----------+--------------+--------------+
| | | | - | - | 746,280 | 746,280 |
+----------+----------+----------+----------+----------+--------------+--------------+
| | | | | | | |
+----------+----------+----------+----------+----------+--------------+--------------+
| Group liabilities: | | | | |
| As at 31 December 2008 | | | | |
+--------------------------------+----------+----------+--------------+--------------+
| | | | | | | |
+----------+----------+----------+----------+----------+--------------+--------------+
| Other | | | - | - | 2,334,978 | 2,334,978 |
| payables | | | | | | |
+----------+----------+----------+----------+----------+--------------+--------------+
| | | | | | | |
+----------+----------+----------+----------+----------+--------------+--------------+
| | | | - | - | 2,334,978 | 2,334,978 |
+----------+----------+----------+----------+----------+--------------+--------------+
| Group liabilities: | | | | |
| As at 31 December 2007 | | | | |
+--------------------------------+----------+----------+--------------+--------------+
| | | | | | | |
+----------+----------+----------+----------+----------+--------------+--------------+
| Other | | | - | - | 2,497,624 | 2,497,624 |
| payables | | | | | | |
+----------+----------+----------+----------+----------+--------------+--------------+
| | | | | | | |
+----------+----------+----------+----------+----------+--------------+--------------+
| | | | - | - | 2,497,624 | 2,497,624 |
+----------+----------+----------+----------+----------+--------------+--------------+
Fair value of financial assets and financial liabilities
The Directors consider that the carrying amount of short-term payables and
receivables are a reasonable approximation of fair value.
16. Loss per Ordinary share and net asset value per Ordinary share
The calculation of loss per Ordinary share for the year to 31 December 2008 was
based on the loss attributable to shareholders of EUR 1,585,338 (six months ended
31 Dec 2007 - loss of EUR 741,547) and a weighted average number of Ordinary
shares in issue of 37,772,010 (six months ended 31 December 2007 - 37,611,705).
The calculation of net asset value per Ordinary share as at 31 December 2008 was
based on the net consolidated assets attributable to shareholders of EUR
33,803,339 (six months ended 31 December 2007 - EUR 34,465,588) and the 39,013,307
Ordinary shares in issue as at 31 December 2008 (31 December 2007 - 37,611,705).
17. Commitments and contingencies
As at 31 December 2008, the Group had no capital commitments other than those
provided for in these financial statements (31 December 2007 - nil, other than
as provided in financial statements).
18. Capital management policies and procedures
The Group's capital management objectives are:
(i) to ensure that the Group and Company are able to continue as going concerns,
and
(ii) to maintain an optimal capital structure which maximises returns for
shareholders whilst minimising the costs of capital.
The capital of the Group and Company as at 31 December 2008 and 31 December 2007
comprise:
+----------+----------+----------+-------------+-------------+-------------+-------------+
| | | | Group | Company | Group | Company |
+----------+----------+----------+-------------+-------------+-------------+-------------+
| | | | As at | As at | As at | As at |
+----------+----------+----------+-------------+-------------+-------------+-------------+
| | | | 31 | 31 | 31 | 31 |
| | | | December | December | December | December |
| | | | 2008 | 2008 | 2007 | 2007 |
+----------+----------+----------+-------------+-------------+-------------+-------------+
| | | | EUR | EUR | EUR | EUR |
+----------+----------+----------+-------------+-------------+-------------+-------------+
| Equity | | | | | | |
+----------+----------+----------+-------------+-------------+-------------+-------------+
| Stated capital | | 38,296,194 | 38,296,194 | 37,373,105 | 37,373,105 |
| account | | | | | |
+---------------------+----------+-------------+-------------+-------------+-------------+
| Retained earnings | (4,492,855) | (4,197,540) | (2,907,517) | (2,817,603) |
+--------------------------------+-------------+-------------+-------------+-------------+
| | | | | | | |
+----------+----------+----------+-------------+-------------+-------------+-------------+
| | | | 33,803,339 | 34,098,654 | 34,465,588 | 34,555,502 |
+----------+----------+----------+-------------+-------------+-------------+-------------+
For each project which the Group enters into, the parent Company commits
sufficient capital to purchase land and/or to finance a project's initial
infrastructure.
Thereafter, each project is funded at an asset-specific level, without recourse
to the Group's resources. However, this may not always be possible, in which
case the Group is prepared to sign guarantees or take on a portion of the debt.
The Group will have a maximum gearing level of an aggregate 80 per cent of the
construction costs of each project. The remaining proportion of the construction
or development costs of each such project would be provided by the Group through
the raising of additional equity or other funding as the Board consider
appropriate.
19. Related party transactions
In note 4, reference was made to the fact that a subsidiary of the Company is in
the process of acquiring land for development from Moran Trade and Investment
Inc ("Moran"). Also, as referred to in note 5, a subsidiary of the Company has
entered into an agreement with BBT Projects Plc, a Bulgarian subsidiary of
Moran, to acquire part of the intellectual property rights to a Master
Architecture Agreement for "Black Sea Gardens" at the Group's development site
in Byala. Throughout the year ended 31 December 2008, and subsequently, Moran
has held 18,721,205 of the shares in issue of the Company, which represents a
holding of 47.99% of the issued share capital as at 31 December 2008 (31
December 2007 - 49.77%. As such, Moran is the ultimate controlling party of the
Company.
Scott Perkins and Mark Smith, who are Directors of the Company, are also
partners of Madara Capital LLP, the investment advisor to the Company. Madara
Capital LLP also holds 2,292,647 (31 December 2007 - 1,300,000) of the issued
shares of the Company. During the period, Madara Capital LLP charged asset and
property advisory fees of EUR 759,290 (period ended 31 December 2007 - EUR 398,256)
to the Company, of which EUR 347,311 was outstanding at 31 December 2008 (31
December 2007 - EUR 579,201).
Nigel Le Quesne, Philip Burgin and Stephen Burnett, who are Directors of the
Company, are all shareholders and directors of JTC Group Limited of which JTC
Management Limited is a wholly-owned subsidiary. JTC Management Limited, which
is Company Secretary and a provider of administration services to the Company,
charged fees totalling EUR 233,807 (period ended 31 December 2007 - EUR 149,001)
during the period, of which EUR 66,701 was outstanding at 31 December 2007 (31
December 2007 - EUR 79,060).
Timothy Chadwick, Michael Chase, Ivan Nenov and Scott Perkins, who are Directors
of the Company, were all issued shares, totalling 74,828 (31 December 2007 -
nil), in the Company in lieu of directors' fees owed for the period to the value
of EUR 50,883 (31 December 2007 - EUR nil). The shares were issued at EUR0.68 per
share (see note 9).
20. Ultimate controlling party
In the directors opinion, the ultimate controlling party is Moran Trade and
Investment, Inc.
Annual Report
The Annual Report for the year ended 31 December 2008 is being posted today to
shareholders, and will be available to view at www.madaracapital.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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