Final Results -23-

necessary, by issuing new shares, reducing or increasing debt, paying dividends 
and returning capital to shareholders. 
 
 
The Group is not subject to any externally imposed capital requirements. 
 
 
Interest rate risk 
The Group has interest bearing assets but no non-intragroup interest bearing 
liabilities. 
 
 
Interest bearing assets comprise intragroup loans and cash and cash equivalents 
which earn interest at a variable rate. The Group has a policy of maintaining 
cash deposits at the most competitive rates monitoring the risk exposure to 
various financial institutions. The directors will revisit the appropriateness 
of this policy should the Group's operations change in size or nature. See notes 
16 and 18 for details of the applicable interest rates. 
 
 
The Group has not entered into any derivative transactions during the period 
under review. 
 
 
In the normal course of business the Group is exposed to credit and interest 
rate risk. However, the Group does not use derivatives to reduce exposure to 
fluctuations in interest rates. 
 
 
The Group is exposed to interest rate risk as a result of positive balances in 
respect of cash and cash equivalents in Sterling, Euros and Lev's. 
 
 
As at 31 December 2008, if interest rates had increased or decreased by 1% per 
annum with all other variables held constant, pre-tax profit and equity would 
have increased or decreased in accordance with the amounts set out in the table 
below: 
 
 
+-------------------------------+-----------+--+----------+--+---------+--+----------+ 
|                               |    31 December 2008     |  |   31 December 2007    | 
+-------------------------------+-------------------------+--+-----------------------+ 
|                               |     Group |  |  Company |  |   Group |  |  Company | 
+-------------------------------+-----------+--+----------+--+---------+--+----------+ 
|                               |   GBP'000 |  |  GBP'000 |  | GBP'000 |  |  GBP'000 | 
+-------------------------------+-----------+--+----------+--+---------+--+----------+ 
| +/- 1% per annum change in    |           |  |          |  |         |  |          | 
| interest rates                |           |  |          |  |         |  |          | 
+-------------------------------+-----------+--+----------+--+---------+--+----------+ 
| Change in pre-tax profit and  |       172 |  |      155 |  |     104 |  |       98 | 
| equity                        |           |  |          |  |         |  |          | 
+-------------------------------+-----------+--+----------+--+---------+--+----------+ 
 
 
 
 
 
 
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 
for the year ended 31 December 2008 
 
 
21FINANCIAL INSTRUMENTS (continued) 
 
 
Foreign currency exchange rate risk 
The Group is exposed to foreign exchange rate risk as a result of having cash 
and cash equivalents in Euros and Lev in its bank accounts and those of its 
subsidiaries. During the year, the Group did not enter into any arrangements to 
hedge this risk, as the directors did not consider the exposure to be 
significant given the short term nature of the balances. The Group will review 
this policy as appropriate in the future. 
 
 
The Group also has foreign exchange risk in respect of its investment in its 
wholly owned subsidiary, Bulgarian Property Developments EOOD, which accounts in 
Bulgarian Lev, as a result there are gains and losses in respect of translating 
those accounts into Sterling. 
 
 
The Group is exposed to foreign currency risk in respect of transactions not 
denominated in Sterling. Currently the Bulgarian Lev is pegged to the Euro at 
1.95583 Lev/Euro. The Sterling: Euro exchange rate as at 31 December 2008 was 
1.02 (31 December 2007, 1.36). 
 
 
As at 31 December 2008, if the Euro had strengthened or weakened against 
Sterling by 10% with all other variables held constant, pre-tax profit and 
equity would have been increased or decreased as follows: 
 
 
+---------------------------------------+------------------+--+------------------+ 
|                                       | 31 December 2008 |  | 31 December 2007 | 
+---------------------------------------+------------------+--+------------------+ 
|                                       |          GBP'000 |  |          GBP'000 | 
+---------------------------------------+------------------+--+------------------+ 
|                                       |            Group |  |            Group | 
+---------------------------------------+------------------+--+------------------+ 
| Euro strengthening by 10% against     |                  |  |                  | 
| Sterling                              |                  |  |                  | 
+---------------------------------------+------------------+--+------------------+ 
| Effect on income statement            |            (117) |  |            (103) | 
+---------------------------------------+------------------+--+------------------+ 
| Effect on exchange differences on     |            4,098 |  |            3,182 | 
| translation of foreign operations     |                  |  |                  | 
+---------------------------------------+------------------+--+------------------+ 
| Total effect on equity                |            3,981 |  |            3,079 | 
+---------------------------------------+------------------+--+------------------+ 
|                                       |                  |  |                  | 
+---------------------------------------+------------------+--+------------------+ 
| Euro weakening by 10% against         |                  |  |                  | 
| Sterling                              |                  |  |                  | 
+---------------------------------------+------------------+--+------------------+ 
| Effect on income statement            |              107 |  |               94 | 
+---------------------------------------+------------------+--+------------------+ 
| Effect on exchange differences on     |          (3,726) |  |          (2,893) | 
| translation of foreign operations     |                  |  |                  | 
+---------------------------------------+------------------+--+------------------+ 
| Total effect on equity                |          (3,619) |  |          (2,799) | 
+---------------------------------------+------------------+--+------------------+ 
 
 
 
 
 
 
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 
for the year ended 31 December 2008 
 
 
22    CALLED UP SHARE CAPITAL 
 
 
+---------------------------------------+-------------------+--+-------------------+ 
|                                       | As at 31 December |  | As at 31 December | 
|                                       |              2008 |  | 2007              | 
+---------------------------------------+-------------------+--+-------------------+ 
| Ordinary Share Capital of 25p Nominal |                   |  |                   | 
| Value:                                |                   |  |                   | 
+---------------------------------------+-------------------+--+-------------------+ 
| Authorised (number)                   |       200,000,000 |  |       200,000,000 | 
+---------------------------------------+-------------------+--+-------------------+ 
| Authorised (value)                    |     GBP50,000,000 |  |     GBP50,000,000 | 
+---------------------------------------+-------------------+--+-------------------+ 
|                                       |                   |  |                   | 
+---------------------------------------+-------------------+--+-------------------+ 
| Allotted, issued and fully paid       |       108,238,914 |  |       106,966,187 | 
| (number)                              |                   |  |                   | 
+---------------------------------------+-------------------+--+-------------------+ 
|                                       |                   |  |                   | 
+---------------------------------------+-------------------+--+-------------------+ 
| Value                                 |     GBP27,059,729 |  |     GBP26,741,547 | 
+---------------------------------------+-------------------+--+-------------------+ 
 
 
On 28 April 2008, the Company issued 1,272,727 ordinary shares of 25p for a 
consideration of GBP700,000. These shares represented the exercise of an option 
granted to Fairfax IS Limited on 20 December 2005 at an exercise price of 55p 
per 25p ordinary share. 
 
 
On 28 June 2007, 34,250,000 ordinary shares of 25p each were issued and allotted 
at 64p per share, in order to facilitate the development of the Group's 
activities. The total consideration of GBP21,239,000 (GBP21,920,000 net of issue 
costs of GBP681,000) was fully paid on 3 July 2007. 
 
 
Under an agreement dated 15 September 2004, the Company granted Matrix 
Securities Limited the right to subscribe for 175,530 ordinary shares of 25p in 
the Company at an exercise price of 50p. On 13 September 2007, these options 
were exercised. 
 
 
 
 
23CAPITAL COMMITMENTS 
As at 31 December 2008, the Group had commitments of Lev 2,838,000 relating to 
the completion for some of the new buildings being constructed by Group's Joint 
Venture Varna Logistics AD. 
 
 
24     RELATED PARTY TRANSACTIONS 
 
 
Bulgarian Property Management Limited 
On 15 September 2004, the Company entered into a Management Agreement with 
Bulgarian Property Management LLP, to provide certain management services to the 
Company in consideration of the payment by the Company of an annual 
administration fee and an annual performance fee. These obligations also include 
the provision of services to fulfill the Company's executive functions. These 
services represent the executive requirements for the Company. The details of 
this arrangement were fully disclosed both in the admission document when the 
Company was admitted to AIM and in the offer for subscription document dated 15 
September 2004. This agreement was amended on 19 December 2005 to provide for a 
change to the annual performance fee, where the hurdle rate was raised from the