TIDMRPF
RNS Number : 9617X
Romania Property Fund Limited
14 December 2010
14 December 2010
The Romania Property Fund Limited Reports its Financial Results
for 2009
London, United Kingdom - The Romania Property Fund Limited
("Romania Property Fund" or "the Company") today reports its
financial results for the year ended 31 December 2009.
Overview of 2009
-- Accounting NAV of EUR 22.3 cents (GBP 19.01 pence) per
share.
-- The ownership of the Ploiesti retail project was transferred
to Blackpearl Property Limited ("Blackpearl") and the Company
retained a 50% beneficial ownership in any profits. The scheme has
been redesigned but there are still ongoing legal disputes with
Westhill SRL and Bonhay Investments Limited.
-- Evergreen Residences residential project has been progressed
to the point of preliminary works. The project has Phase 1 building
permit, the buildings on the site have been demolished and
utilities installed. A marketing suite has also been constructed on
site.
Since Year End 2009
-- The Company entered a non-binding heads of terms with
Blackpearl in relation to a potential acquisition by the Company of
a portfolio of additional Romanian property assets and simultaneous
fundraising. Although the original heads of terms have now fallen
away, a revised acquisition is being agreed. The negotiations with
Blackpearl are ongoing and remain contingent on a simultaneous fund
raising.
-- The Company has arranged interim financing, via a loan with
Moserburg Investments Limited, of GBP250,000 of working capital
into the Company and a further EUR150,000 into its Romanian
subsidiary, Gold Developments SPV SRL..
-- A number of creditors to the Company have also agreed to
standstill to allow the Directors to continue their negotiations
regarding the property acquisition from Blackpearl and simultaneous
fund raising. The Directors expect these discussions to be
concluded in the first quarter of 2011. However, there can be no
certainty that those discussions will result in an acquisition by,
and refinancing of, the Company.
-- The Company announced the cancellation of admission of the
Company's Ordinary Shares to trading on AIM, following a period of
six months of suspension from trading and in accordance with AIM
Rule 41. If the Blackpearl discussions are successfully concluded
and the resulting transaction approved by Shareholders, the Company
will apply for its Ordinary Shares to be re-admitted to AIM on
completion of the transaction.
For further information please contact:
The Romania Property Fund
Limited
Richard Prickett, Chairman +44 (0) 777 565 1421
Canaccord Genuity Limited
(Nominated Adviser and Broker)
Sue Inglis/Robert Finlay +44 (0) 207 050 6500
Chairman's statement
The financial loss for the period under review is EUR10,087,688 (2008:
EUR21,282,862), arising primarily as a result of an impairment adjustment
on the Mogosoaia project (EUR5,186,693) and a loss on the disposal
of Ploiesti projects (EUR3,021,068). The Directors booked an impairment
adjustment in relation to Evergreen Residences, Mogosoaia, based on
a valuation from DTZ Echinox SRL, which reflects the current real
estate market in Romania. The Romanian market still suffers from a
lack of liquidity and comparative information is difficult due to
the low number of actual transactions. The Ploiesti project was substantially
written down in the accounts for the year ended 31 December 2008.
As the disposal of Ploiesti did not occur until after the year end
(12 March 2009), in accordance with International Financial Reporting
Standards, it was not possible to include a full write off at the
time of the last accounts.
The Fund at the end of 2009 only had one direct interest which is
the 50% joint venture interest in the Mogosoaia project. The Fund
also had a continuing indirect interest in the Ploiesti project which
was sold to Blackpearl Property Limited ("Blackpearl") for a nominal
consideration. Under the arrangement, the Fund entered into a profit
sharing agreement with Blackpearl, under which it is entitled to receive
50% of the future profits from the Project. Both of these projects
are now managed by the Blackpearl Property team. The sale of the Ploiesti
project was announced on the 13 March 2009.
The Company announced on 17 June 2009 that it had served notice on
Lewis Charles Securities Limited terminating the Management Agreement
for the Romania Fund to take effect on 2 February 2010.
On the 10 June 2010, the directors of The Romania Property Fund reported
that they had requested that the Company's shares be suspended from
trading on AIM with immediate effect due to uncertainty in relation
to the Company's financial position. The Directors noted that given
the Company's financial position, and following discussions with its
auditors, the audited accounts would not be able to include confirmation
that the Company would continue to operate as a going concern. Furthermore,
on the 24 June 2010, the Directors of The Romania Property Fund announced
the signing of non-binding heads of terms with Blackpearl Property
Limited in relation to a potential acquisition by the Company of a
portfolio of additional Romanian property assets and simultaneous
fundraising.
The proposals were subject, amongst other things, to the completion
of satisfactory due diligence and valuations and, if consummated through
legally binding agreements, will constitute a reverse takeover under
Rule 14 of the AIM Rules. These negotiations with Blackpearl are ongoing
and the Company has arranged financing for GBP250,000 of working capital
into the Company and a further EUR150,000 into its Romanian subsidiary,
Gold Developments SPV SRL. A number of creditors to the Company, including
the Directors and Property Adviser, have also agreed to standstill
to allow the Directors to continue their negotiations regarding the
property acquisition and simultaneous fund raising. The Directors
expect these discussions to conclude in the first quarter of 2011.
However, there can be no certainty that those discussions will result
in an acquisition by, and refinancing of, the Company.
On 15 December, it is currently envisaged that the Company will cancel
its admission of the Company's Ordinary Shares to trading on AIM,
following a period of six months of suspension from trading and in
accordance with AIM Rule 41. If the Blackpearl discussions are successfully
concluded and the resulting transaction approved by Shareholders,
the Company will apply for its Ordinary Shares to be re-admitted to
AIM on completion of the transaction.
The Company has dealt with exceptionally challenging market conditions
in Romania and will continue to make difficult decisions in order
to safeguard the interests of the shareholders.
Richard Prickett
Chairman
10 December 2010
Property Adviser's report
Property Portfolio
Evergreen Residences,
Mogosoaia, Bucharest
The scheme is a mixed use development consisting of approximately
1,250 apartments (125,000 sqm) with associated retail/commercial (7,250
sqm). Outline planning has been obtained on the 55,766 sqm site with
a full building permit for phase 1. The demolition of the site has
been completed and the construction contract has been tendered. Pre-sales
will commence in Q2 2011 and a marketing suite has been built on site
in preparation. The scheme offers individuals an affordable home constructed
to western standards and with a high level of finishing. The development
has strong landscaping and leisure is high on the agenda with gyms,
pools, tennis courts etc all being available in phase 1. The development
is situated in the north west, on the edge of Bucharest, on the edge
of the new ring road, the site is a short commute to the main business
areas in the north of the city, including Baneasa Retail and Bucharest
Business Parks.
The area is going through major regeneration and end users will be
attracted by the edge of city location, combined with the life-style
option of being close to Mogosoaia Palace, forests, lakes and open
spaces. All urban utilities are available on the site.
The scheme will be built out in phases over a six to seven year period,
with phase 1 taking two years. Bridging financing has been provided
by Unicredit Bank to date and draw down of EUR5.5m has taken place
on this facility for the demolition, utilities and soft costs of the
project.
The Company, through its wholly owned Luxembourg subsidiary Rominvestments
S.A., currently holds a 50 per cent interest in this project in a
joint venture with the Blackpearl Group.
Crown Retail Park, Ploiesti
The retail park is situated in the retail district on the Ploiesti
ring road. The site extends to approximately ten hectares, benefits
from extensive frontage onto the principle access routes to Bucharest
and to the north of the country, including Brasov. The area is already
established as a retail hub, with Carrefour hypermarket and standalone
big box retailers including Bricostore, Prakitiker and Metro.
The current proposal is to develop
the site in three phases:
The first phase comprises an out of town retail park format appealing
to the bulky goods operators as well as the fashion operators
of the market. This is considered the most marketable retail
accommodation, as there is still a demand from this sector. The
development would comprise an individual 3,500 sq m (built area)
unit, plus a terrace of units ranging from 300 sqm to 3,000 sqm
(built area). The total development would extend to 17,850 sq
i) m, (built area) incorporating a 500 sqm drive through.
The second phase, similar to the first, would again provide units
aimed at the out of town operators, extending to provide 9,822
ii) sqm (built area) of retail accommodation.
The final phase of the scheme comprises a retail mall of 50,000
sq m (built area) providing 35,000 sq m over 3 floors on a footplate
iii) of circa 12,500 sqm.
The total gross lettable area for the completed scheme
is anticipated to be 60,665 sqm
Economy
Romania is forecast to return to growth in 2011 (source: IMF) followed
by GDP growth of 4.4 per cent in 2012 and 4.2 per cent in 2013 (source:
IMF). In 2008, when many countries were entering recession, the real
GDP growth in Romania was 7.4 per cent. Although 2009 has been a difficult
recession year, the forecasts for Romania remain positive and the
country has proved resistant to the current crisis. Due to the poor
start to the year, it now seems likely that GDP will contract by an
estimated 1.9 per cent in 2010 (source: IMF). In addition, after reaching
7.9 per cent in 2008, the annual inflation rate has resumed a downward
trend and is forecast to be 5.9 per cent. in 2010 and 5.2 per cent
in 2011 (source: IMF).
During the period 2001 to 2008, significant economic growth of over
5 per cent per annum ensured the gradual decrease in the gap between
Romania and the other EU member states. The real GDP growth rate of
7.9 per cent for 2006 represented the highest registered in the later
years.
Compared with other EU member states, in 2009 GDP per capita in Purchasing
Power Standards ("PPS") was 11,000 PPS, representing approximately
45 per cent of the EU 27 average, as compared to 2007 when Romania's
PPS ranked 42 per cent of the EU average (source Eurostat).
In summary, over the last ten years, the Romanian economy has been
transformed into one of relative macroeconomic stability, characterised
by sustained high growth, low unemployment and a decline in inflation.
Although 2009 and 2010 to date have been recessionary, Romania is
forecast to rebound in 2011 (source: Oxford Economics).
The current real estate
market
The turmoil in the global credit markets had an immediate effect on
Romanian real estate investment resulting in some transactions failing
and prices being renegotiated downwards. This has caused a marked
reduction in the volume of transactions with activity below levels
of recent years. The rapid slowdown in property investment in the
second half of 2008 became even more abrupt during 2009. The total
volume of EUR56 million in H1 2009, the smallest in the last five
years, was 17 times lower than the investment in the same period of
2008 and three times lower than the total investment H2 2008 (Source:
CB Richard Ellis). This trend in investment in Romania is commonplace
in central and eastern Europe property markets. One of the reasons
for the decrease in volume is that institutional buyers are now looking
toward the western European markets, which have registered the greatest
price corrections.
At the same time, the difference between expectations of buyers willing
to make investments for low prices and expectations of sellers who
are willing to sell at low levels widened considerably.
Jones Lang LaSalle, in its May 2010 bulletin, forecast that Romania
is set for a solid recovery from 2011. They predict that, in the medium
term (2011-2013), the Bucharest market will recover solidly. In addition,
Bucharest will continue to be attractive as an offshore investment
destination, and its economic recovery is expected to outperform western
European levels.
The office property market
Despite the economic downturn a record supply of new office space
was delivered to the Bucharest market in the first half of 2009. In
the current economic climate, the office market in Bucharest exhibited
a decline in demand, the same development pattern as most other European
markets.
As a direct result of the economic slowdown, the cost reduction plans
of most companies affected the market by reducing the size requirement
of office space, renegotiation of rents, subleasing of excess office
space as well as prolonging the leasing arrangements in existing locations
and postponing or cancelling relocation strategies. The decrease in
prime rental level, which began in Q4 of 2008, continued during 2009
and has now decreased too significantly below EUR20 per sq m per month.
Colliers International predicts that 2010 will bring circa 200,000
sq m of new office space, 50 percent. less than has been delivered
in 2009. This potential supply will be found mainly in buildings where
construction was held up in 2009. Overall rents will maintain their
downward trend established in 2009 by another 10 to 15 per cent. As
such, companies occupying multiple spaces/leases will have an opportunity
to consolidate. In the longer term, with limited new supply forecasted
in 2011 and forecasted economic growth, 2010 will likely be the ideal
time for tenants to make their move.
The retail property
market
The highlight of the Bucharest retail market in 2008 and 2009 has
been the entry of new and important brands, which have added value
to projects and have increased the options for consumers. Romania
was placed seventh out of 67 countries (analysed by new international
retailer openings) in the CBRE report entitled "How Global is the
Business of Retail?" In 2009, numerous brands entered the Bucharest
retail market, including C&A, Decathlon and GAP. Other well known
brands, such as Banana Republic, Bebe, Sphera, X-Side and Waikiki
are expected to follow.
Based on official shopping centre announcements, 2010 should bring
six new shopping centres to the market, totalling 209,000 sq m. The
demand for retail space and hence the number of transactions are expected
to increase during 2010, especially towards the second half of the
year. Demand will remain focused on existing shopping centres, while
pre-leases will only be signed for shopping centres with a strong
chance of delivery and with a good location and tenant mix.
The residential property market
In 2008 in excess of 67,000 new dwellings were completed in Romania,
out of which 4.5 per cent were located in Bucharest and 10.6 per cent.
in Ilfov County. According to data published by the Romanian National
Statistics Institute, the number of dwellings in Romania at the end
of 2008 was approximately 8.3 million units of which 9.5 per cent.
were located in Bucharest. Bucharest's housing construction statistics
still indicate less developed housing market in comparison to the
other central and eastern European capital cities.
Romania has one of the highest levels of home ownership in Europe.
This is due to the fact that individuals were given the opportunity
to purchase their communist apartments after the fall of Ceausescu.
Many of these properties are old fashioned and are in a poor state
of repair. King Sturge (in a June 2010 press release) estimated that
50 per cent of residential buildings are older than 50 years and approximately
30 per cent are between 25 and 50 years. Consequently, there is underlying
strong latent demand for relocation to modern facilities albeit the
number of actual sales fell significantly in 2009 due to the lack
of availability of mortgages arising from the global financial crisis.
Jones Lang LaSalle have noted that it is also highly probable that
2010 will not bring a significant improvement to the market, although
both demand and supply are forecasted to stabilise and 2011 may see
a recovery in the market.
Investing Policy
The Fund is restricted to investments in Romania but can invest
-- in both residential and commercial property.
The Fund's preferred method of investment will be
-- through partnerships with developers.
The Fund will target an Investor
-- IRR in excess of 30%.
The Fund may invest in land to build up a strategic
-- land bank in areas
The Fund may borrow in order to develop its assets. Borrowings
are not expected to exceed 70% of land acquisition and development
-- costs in respect of a particular project.
The Fund should be liquidated and proceeds distributed to shareholders
within 7 years from launch unless shareholders vote to extend
-- the life of the Fund.
The Fund does not intend to pay a dividend (although the Fund
-- is not restricted from doing so).
The Company does not currently intend to carry out any hedging
activity. However, the Company's hedging policy will be reviewed
-- on an ongoing basis.
Sapphire Capital Partners
LLP
December 2010
Board of Directors
Richard Prickett FCA (Non-executive
Chairman)
Richard was appointed a member of the Board on 29 June 2007. Richard
is a chartered accountant and has many years experience in corporate
finance. He is currently a director of Landore Resources Limited ,
non-executive chairman of Asian Growth Properties Limited and a non-executive
director of Patagonia Gold Plc, City Natural Resources High Yield
Trust Limited and The Capital Pub Company Plc.
George Inge FRICS
George was appointed a member of the Board on 29 June 2007. George
trained as a chartered surveyor and spent his early days at Savills
as a land agent, eventually becoming a partner. He was responsible
for the change of Savills from a partnership to public company status.
George became the first Chairman of Savills plc in 1985 and retired
as Chairman in 1995. He has held numerous directorships and was a
non-executive director of Westbury plc from 1995 to 2003. George was
nonexecutive chairman of Severn Trent Property Plc from 1995 to 2006.
Dr Flavius Baias
Flavius was appointed a member of the Board on 29 June 2007. Flavius
is an associate professor of the Law Faculty (University of Bucharest).
Appointed to his current Chair in 1991, Flavius teaches land law and
general theory of contracts. He was appointed Deputy Minister of Justice
in 1998, a position he held until December 2000. Flavius was one of
the founding partners of David and Baias, a top 10 law firm in Romania
established in association with PricewaterhouseCoopers in 2002. He
headed up the real estate and litigation department, but retired from
the firm in 2006. Flavius is the Editorial Director of C.H. Beck Publishing
House, the largest legal publishers in Romania. Flavius is resident
in Romania.
Clive Simon
Clive was appointed a member of the Board on 29 June 2007. Clive is
non-executive chairman of Ardel Fund Services Limited ("Ardel") and
a non-executive director of Ardel Holdings Limited. Before joining
the Ardel in 1998, he was a partner with Coopers and Lybrand (now
PricewaterhouseCoopers CI LLP), working in London, Africa and the
Channel Islands He is also a director of Sofia Property Fund Limited.
His business background is predominantly in the financial services
sector.
Paul Duquemin
Mr Duquemin is the Managing Director of Ardel Fund Services Limited.
Prior to joining Ardel in 2005, he had been a director of BISYS Fund
Services (Guernsey) Limited. He has over 20 years' experience in offshore
finance, mostly in fund administration with Rothschild Asset Management
and BISYS Fund Services (Guernsey) Limited. He is a member of the
Institute of Directors and holds the IoD Diploma in Company Direction.
He also currently sits on the Boards of several offshore funds and
companies. He is a Guernsey resident.
Directors' report
The Directors present their annual report and audited financial statements
of the Romania Property Fund Limited ("the Company") which is incorporated
in Guernsey, Channel Islands, and its subsidiary companies (together
referred to as "the Group"), for the year ended 31 December 2009.
Incorporation
The Company was incorporated in Guernsey on 23 May 2005 with company
registration number 43190. From this date until 29 June 2007 the company
was dormant.
Change of name
On 1 December 2009 the Company changed its name to The
Romania Property Fund Limited.
Principal activity
The Company invests in the Romanian residential and commercial property
market. Its objective is to generate capital gains through investing
in residential and commercial property in Romania. The activities
of the company have remained the same.
Results and dividends
The Group's results for the year are set out in the Consolidated statement
of comprehensive loss.
The Directors did not declare a dividend
for the year.
Listing requirements
Throughout the year ended 31 December 2009 the Company complied with
the conditions set out in the AIM Rules for Companies. The Company's
shares were suspended from trading on 10 June 2010. A reinstatement
of trading in the Company's shares is expected to occur upon approval
of these annual accounts.
Directors
Directors shall be subject to retirement by rotation in accordance
with the articles. No person shall be or become incapable of being
appointed as a Director by reason of having attained the age of 70
or any other age, and no Director will be required to vacate his office
at any time by reason of the fact that he has attained the age of
70 or any other age.
As at the reporting date the Directors had the following beneficial
interests in the ordinary share capital of the Company.
Number
of
Ordinary Percentage
shares %
-------------- -------------
Richard Prickett 7,143 0.036
George Inge 7,143 0.036
Dr Flavius Baias - -
Clive Simon - -
Paul Duquemin - -
During the year the Directors received the following remuneration
in the form of fees:
EUR EUR
2009 2008
-------------- -------------
George Inge 17,074 18,183
Dr Flavius
Baias 17,074 18,183
Clive Simon 20,243 21,821
Paul Duquemin 16,897 18,183
The service of Richard Prickett as a director of the fund are provided
via a consultancy agreement between the Company and European Sales
Company Limited. The Company pays a fee of GBP20,000 per year, payable
quarterly in arrears, to European Sales Company Limited, of which
Mr Richard Prickett is a director.
Clive Simon and Paul Duquemin are Directors of the Company and the
Administrator. The fee paid to Ardel Fund Services Limited is disclosed
on the face of Consolidated statement of comprehensive loss and in
note 4. No other Directors have any interest in contracts with the
Company.
Substantial interests
in Company shares
At 31 December 2009 the following holdings representing more than
3 per cent of the Company's issued shares had been notified to the
Company.
Interest
in Ordinary
voting
capital shares
-------------- -------------
Euroclear Nominees
Limited - EOC01 65.15% 12,753,289
The Bank of New York (Nominees)
Limited BIL 9.46% 1,852,143
Lewis Charles Nominees
Limited 6.86% 1,343,811
HSBC Global Custody Nominee (UK)
Limited - 811809 4.16% 814,286
Pershing Nominees
Ltd FICLT 3.50% 685,000
BBHISL Nominees
Limited - 120281 3.01% 590,000
Employees
The Company has
no employees.
Management
The former investment manager, Lewis Charles Securities Limited, provided
investment advisory services to the Company and property advisory,
property management and monitoring services to those members of the
Group which acquire property, in each case in accordance with the
investment objectives and investment policies of the Group. The Group
terminated the management contract with effect from 2 February 2010
and Sapphire Capital Partners LLP were appointed as Property Adviser
with effect from 29 April 2010.
Corporate governance
The Directors are committed to high standards of corporate governance
and have made it Company policy to comply with best practice in this
area, insofar as the Directors believe it is relevant and appropriate
to the Company. However, as a Guernsey registered Company, it is not
obliged to comply with the 'Combined Code', or the Code of Best Practice
published by the Committee on the Financial Aspects of Corporate Governance.
The Board has made arrangements in respect of corporate governance
which it believes are appropriate for the Company.
The Board consists solely of non-executive Directors of which Richard
Prickett is non-executive Chairman. Since all the Directors are considered
by the Board to be independent non-executive Directors the provisions
of the Code in respect of Directors' remuneration are not relevant
to the Company except in so far as they relate to non-executive Directors.
In view of its non-executive nature and the requirement of the Articles
of Association that all Directors retire in rotation at least every
three years, the Board considers that it is not appropriate for the
Directors to be appointed for a specified term as recommended by the
Code.
A Management Agreement between the Company and the Property Adviser
sets out the matters over which the Property Adviser have authority.
All other matters, including strategy, investment and dividend policies,
gearing and corporate governance procedures, are reserved for the
approval of the Board of Directors. The Board currently meets at least
quarterly and receives full information on the Company's investment
performance, assets, liabilities and other relevant information in
advance of Board meetings.
Individual Directors may, at the expense of the Company, seek independent
professional advice on any matters that concern them in the furtherance
of their duties. The Company maintains appropriate Directors' and
Officers' liability insurance.
Going concern
As detailed in note 3, the Directors consider that the Company will
obtain adequate financial resources to continue in operational existence
for the foreseeable future. The Directors are continuing to negotiate
a new property acquisition and financing with the Blackpearl group
and a number of creditors have agreed to standstill until these negotiations
are completed. For this reason, they continue to adopt the going concern
basis in preparing the financial statements.
Internal controls
The Board is responsible for the Company's system of internal control
and for reviewing its effectiveness. The Board has documented an ongoing
process by which the needs of the Company in managing the risks to
which it is exposed can be met.
The procedures, as documented, have been in place throughout both
the financial period and to the date of approval of this annual report
and financial statements. The Board is satisfied with the effectiveness
of the procedures. By their nature these procedures are able to provide
reasonable, but not absolute, assurance against material misstatement
or loss. During each Board meeting the Board monitors the investment
performance of the Company in comparison to its objectives. The Board
also reviews the Company's activities since the last Board meeting
and ensures that the Property Adviser has followed the agreed investment
policy. Also, at each meeting, the Board receives reports from the
Administrator in respect of compliance matters and duties performed
on behalf of the Company.
The Board has decided that the systems and procedures employed by
the Property Adviser and Administrator, provide assurance that a sound
system of internal control, which safeguards shareholders' investments
and the Company's assets, is maintained. An internal audit function
specific to the Company is therefore considered unnecessary.
Audit committee
The audit committee of The Romania Property Fund Limited, comprising
Clive Simon and George Inge, will be chaired by Clive Simon and will
meet at least twice a year and otherwise as required by the Chairman
of the Committee. The audit committee is responsible for ensuring
that the Group's financial performance is properly monitored, controlled
and reported. It will also meet the auditors and review their findings,
including discussing accounting and audit judgements. The audit committee
will meet at least once a year with the auditors.
Relations with shareholders
The Company welcomes the views of shareholders and places great importance
on communications with them. The Chairman and the other Directors
are available to meet shareholders if required. The Annual General
Meeting of the Company provides a forum, both formal and informal,
for shareholders to meet and discuss issues with the Directors and
Property Adviser of the Company.
Independent auditor
Our auditor, BDO Ltd, have indicated their willingness to continue
in office and a resolution to reappoint them will be proposed at the
forthcoming Annual General Meeting.
By order of the
board
P Duquemin C Simon
Director Director
10 December 2010
Statement of Directors' responsibilities in
respect of the financial statements
Guernsey company law requires the Directors to prepare financial statements
for each financial period which give a true and fair view of the state
of affairs of the Group and of the profit or loss of the Group for
that period. In preparing those financial statements, the Directors
are required to:
select suitable accounting policies and
l then apply them consistently;
make judgements and estimates that are
l reasonable and prudent;
state whether applicable accounting standards have been followed,
l subject to any material departures
disclosed and explained in the
financial statements; and
prepare the financial statements on the going concern basis unless
l it is inappropriate to presume that the
Group will
continue in
business.
The Directors confirm that they have complied with the above requirements
in the preparation of the financial statements.
The Directors are responsible for keeping proper accounting records
which disclose with reasonable accuracy at any time the financial
position of the Group and which enable them to ensure that the financial
statements have been properly prepared in accordance with The Companies
(Guernsey) Law, 2008. They are also responsible for safeguarding the
assets of the Group and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors confirm that they have compiled with the above requirements
in the preparation of these financial statements.
So far as the Directors are aware, there is no relevant audit information
of which the company's auditor is unaware, having taken all the steps
the Directors ought to have taken to make themselves aware of any
relevant audit information and to establish that the Company's auditor
is aware of that information.
Independent auditor's
report
to the members of The Romania Property
Fund Limited
We have audited the group financial statements ("the Financial Statements")
of The Romania Property Fund Limited for the year ended 31 December
2009, which comprise the Consolidated statement of comprehensive loss,
Consolidated statement of financial position, Consolidated statements
of changes in equity, Consolidated statement of cash flows and the
related notes 1 to 32. The financial reporting framework that has
been applied in their preparation is applicable law and International
Financial Reporting Standards ('IFRS'). These financial statements
have been prepared in accordance with the accounting policies stated
in note 2 below.
This report is made solely to the Company's members, as a body, in
accordance with Section 262 of the Companies (Guernsey) Law, 2008.
Our audit work is undertaken so that we might state to the Company's
members those matters we are required to state to them in an auditors'
report and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone other than
the Company and the Company's members as a body, for our audit work,
for this report, or for the opinions we have formed.
Respective responsibilities of the
directors and auditors
As described in the Statement of Directors' Responsibilities the Company's
directors are responsible for the preparation of the financial statements
in accordance with applicable law and IFRS and for being satisfied
that they give a true and fair view.
Our responsibility is to audit the financial statements in accordance
with relevant legal and regulatory requirements and International
Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements
give a true and fair view and are properly prepared in accordance
with the Companies (Guernsey) Law, 2008. We also report to you if,
in our opinion, the Directors' Report is not consistent with the financial
statements, if the Company has not kept proper accounting records,
if we have not received all the information and explanations that
we require for our audit, or if information specified by law is not
disclosed.
We read the other information included in the Annual Report and consider
whether it is consistent with the audited financial statements. This
other information comprises only the Officers and Professional Advisers,
Company Summary, Chairman's statement, Property Adviser's Report,
Board of Directors and the Directors' Report. We consider the implications
for our report if we become aware of any apparent misstatements or
material inconsistencies with the financial statements. Our responsibilities
do not extend to any other information.
Basis of opinion
We conducted our audit in accordance with International Standards
on Auditing (UK and Ireland) issued by the Auditing Practices Board.
An audit includes examination, on a test basis, of evidence relevant
to the amounts and disclosures in the financial statements. It also
includes an assessment of the significant estimates and judgements
made by the directors in the preparation of the financial statements,
and of whether the accounting policies are appropriate to the Company's
circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information
and explanations which we considered necessary in order to provide
us with sufficient evidence to give reasonable assurance that the
financial statements are free from material misstatement, whether
caused by fraud or error. In forming our opinion we also evaluated
the overall adequacy of the presentation of information in the financial
statements.
Opinion
In our opinion:
the Group Financial Statements give a true and fair view, in
l accordance with IFRS, of the state of the
Group's affairs at 31 December 2009 and of its loss
for the year then ended.
The Financial Statements have been properly prepared in accordance
l with the Companies (Guernsey)
Law, 2008.
Emphasis of matter
In forming our opinion on the financial statements, which is not qualified,
we have considered the adequacy of the disclosures made in note 3
to the financial statements concerning the group's ability to continue
as a going concern. As disclosed in note 3 to the financial statements
the group will require additional funding, in excess of the GBP250,000
and EUR150,000 loan agreements entered into post year end. In addition,
the group has a loan for EUR2.8m which is due to be renewed on 15
December 2010. The Directors have obtained confirmation from creditors
totalling GBP450,000 that their outstanding liabilities can be deferred
until alternative financing is sourced and are in advanced stages
of concluding an extension to the loan to 15 January 2011. The directors
are confident that the loan will continue to be extended quarterly
for the foreseeable future. The Directors are reviewing the various
options available to the group, however, as at the date of this report,
no plans have been finalised.
This indicates the existence of a material uncertainty which may cast
significant doubt about the group's ability to continue as a going
concern. The financial statements do not include the adjustments that
would result if the group was unable to continue as a going concern.
BDO Limited
CHARTERED ACCOUNTANTS
Place du
Pre
Rue du Pre
St Peter
Port
Guernsey
GY1 3LL
10 December 2010
Consolidated statement of comprehensive loss
for the year ended 31 December 2009
31 December 31 December
Notes 2009 2008
------------ ------------- -------------
EUR EUR
Revenue
Inventory
sales 2.4 - -
- -
Cost of Sales:
Impairment of inventory 17 5,186,693 18,469,062
------------- -------------
Gross loss (5,186,693) (18,469,062)
Expenditure
Administration fees 4 164,352 220,778
Management fees 6 587,363 678,626
Directors' fees
and expenses 8 120,486 123,203
Other expenses 9 483,976 624,579
Loss on foreign
currency exchange 194,082 776,503
Loss on disposal
of subsidiary 12 3,021,068 -
Total expenditure 4,571,327 2,423,689
------------- -------------
Operating loss (9,758,020) (20,892,751)
Finance income 24,974 200,060
Finance cost (354,642) (590,171)
------------- -------------
Net finance expense (329,668) (390,111)
Loss before tax (10,087,688) (21,282,862)
Taxation 15 - -
Loss for the year (10,087,688) (21,282,862)
Other comprehensive
loss
Exchange differences arising
on translation of
foreign operations:
Loss for the year on translation
of foreign operations (700,832) (1,325,204)
Reclassification adjustment for foreign
exchange on
disposal of foreign
operation 2,299,318 -
Total comprehensive loss for the
year (8,489,202) (22,608,066)
============= =============
Loss per share -
basic and diluted 16 (51.53) (108.72)
(cents per share)
All items in the above statement derive from continuing operations
except where stated otherwise. The loss for the year and the comprehensive
loss for the year is fully attributable to the owners of the Company.
There were no non-controlling interests in the group.
The accompanying notes 1 to 32 form an integral part of
these financial statements
Consolidated statement
of financial position
as at 31 December
2009
31 December 31 December
Notes 2009 2008
------------ ------------- -------------
EUR EUR
Assets
Non current assets
Inventory 17 6,350,000 17,600,000
Total non current
assets 6,350,000 17,600,000
------------- -------------
Current assets
Trade and other
receivables 20 62,623 1,102,184
Cash and cash equivalents 21 830,935 2,112,752
------------- -------------
Total current assets 893,558 3,214,936
------------- -------------
Total assets 7,243,558 20,814,936
============= =============
Equity
Capital and reserves attributable
to
equity holders of the group
Issued capital and
reserves 4,364,741 12,853,943
------------- -------------
Total equity 4,364,741 12,853,943
------------- -------------
Liabilities
Current liabilities
Short term loans
payable 22 2,758,687 4,830,466
Trade and other
payables 24 120,127 169,506
------------- -------------
Total current liabilities 2,878,814 4,999,972
Provision for other
liabilities and
charges 23 - 2,961,018
Non-current liabilities
Founder shares 25 3 3
------------- -------------
Total liabilities 2,878,817 7,960,993
Total equity and liabilities 7,243,558 20,814,936
============= =============
NAV per ordinary share
(Euro per share) 27 0.223 0.657
NAV per ordinary share at launch
(Euro per share) 1.935 1.935
These financial statements were approved by the Board of Directors
and authorised for issue on 10 December 2010.
Signed on behalf
of the Board
P Duquemin C Simon
Director Director
The accompanying notes 1 to 32 form an integral part of
these financial statements
Consolidated statement of changes in equity
for the year ended 31 December 2009
Share Foreign Share Revenue
capital exchange premium reserve Total
reserve
------------- ------------ -------------- ------------- -------------
EUR EUR EUR EUR EUR
As at 31 December
2007 - as previously
reported - 198,709 39,517,333 (4,254,033) 35,462,009
Change in accounting
policy - Foreign
exchange on loans - (1,010,717) - 1,010,717 -
------------- ------------ -------------- ------------- -------------
As at 31 December
2007 - as restated - (812,008) 39,517,333 (3,243,316) 35,462,009
Total comprehensive
loss for the year - (1,325,204) - (21,282,862) (22,608,066)
As at 31 December
2008 - (2,137,212) 39,517,333 (24,526,178) 12,853,943
------------- ------------ -------------- ------------- -------------
Total comprehensive
loss for the year - 1,598,486 - (10,087,688) (8,489,202)
As at 31 December
2009 - (538,726) 39,517,333 (34,613,866) 4,364,741
============= ============ ============== ============= =============
The accompanying notes 1 to 32 form an integral part of
these financial statements
Consolidated statement of cash flows
for the year ended 31 December 2009
31 December 31 December
2009 2008
------------- -------------
EUR EUR
Loss for the year
before tax (10,087,688) (21,282,862)
Adjustment
for:
Impairment of inventory 5,186,693 18,469,062
Loss on disposal
of subsidiary 3,021,068 -
Net finance income 329,668 390,111
Operating cash flows before
movements
in working capital (1,550,259) (2,423,689)
Decrease / (increase) in trade and
other receivables 230,680 (521,282)
Increase in trade
and other payables (2,279) (214,206)
Cash used in operations (1,321,858) (3,159,177)
Interest
paid (354,642) (590,171)
Interest received 24,974 200,060
------------- -------------
Net cash outflow from
operating activities (1,651,526) (3,549,288)
------------- -------------
Investing activities
Cash and cash equivalents disposed
of on disposal of subsidiary (25,131) -
Investment in inventory (467,958) (5,100,257)
------------- -------------
Net cash outflow from
investing activities (493,089) (5,100,257)
------------- -------------
Financing activities
Proceeds from loans 1,563,630 4,830,466
------------- -------------
Net cash inflow
from financing activities 1,563,630 4,830,466
------------- -------------
Decrease in cash and cash equivalents
for the year (580,985) (3,819,079)
Opening cash and
cash equivalents 2,112,752 7,257,035
Effect of foreign currency
exchange rates (700,832) (1,325,204)
------------- -------------
Closing cash and
cash equivalents 830,935 2,112,752
============= =============
The accompanying notes 1 to 32 form an integral part of
these financial statements
Notes to the financial
statements
as at 31 December
2009
1 CORPORATE INFORMATION
The Romania Property Fund Limited formerly Lewis Charles Romania
Property Fund Limited (the "Company") and its subsidiaries (together
the "Group") is an investment fund with an investment portfolio
in Romania. The aim of the Company is to generate capital gains
by investing in both residential and commercial property in Romania,
primarily, although not exclusively, around Bucharest.
The Company is a limited company incorporated in Guernsey. The
life of the Company is fixed by the Articles to sixth anniversary
of Admission. The directors have the right to extend to the seventh
anniversary of Admission, thereafter the duration of the Company
may be extended at an extraordinary general meeting convened
for the purpose.
On 2 August 2007 the Company was listed on the Alternative Investment
Market (AIM) of the London Stock Exchange PLC, however shares
were suspended from trading on 10 June 2010, whilst negotiations
for re-structuring took place. However, these negotiations were
not successful and the company has arranged for alternative finances.
A reinstatement of trading in the Company's shares should occur
on publication of these accounts by the Company.
These financial statements were authorised by the Board for issue
on 10 December 2010 and are signed on its behalf by P Duquemin
and C Simon.
SUMMARY OF SIGNIFICANT ACCOUNTING
2 POLICIES
The principal accounting policies applied in the preparation
of these financial statements are set out below. These policies
have been consistently applied, unless otherwise stated.
(2.1) Basis
of preparation
The financial statements of the Group have been prepared in accordance
with International Financial Reporting Standards ("IFRS") which
comprise standards and interpretations issued by the International
Accounting Standards Board ("IASB"), and International Accounting
Standards and Standing Interpretations approved by the International
Accounting Standards Committee that remain in effect and to the
extent they have been adopted by the European Union.
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It
also requires the Board of Directors to exercise its judgement
in the process of applying the Company's accounting policies.
The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form
the basis of making judgements about the carrying value of assets
and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates and underlying
assumptions are reviewed on an ongoing basis.
Judgements made by management in the application of IFRS that
have a significant effect on the financial statements and estimates
with a significant risk of material adjustment in the next year
are disclosed in note 2.2.
Revisions to accounting estimates are recognised in the year
in which the estimate is revised if the revision only affects
that year, or in the year of the revision and future years if
the revision affects both current and future years.
a) Adoption of new and revised Standards
A number of standards and interpretations issued by the International
Financial Reporting Interpretations Committee are effective for
the current year. These were:
New Standards
IFRS 8: Operating Segments - for accounting periods commencing
on or after 1 January 2009
Revised and amended Standards
Amendment: IFRS 7: 'Improving disclosures about financial instruments'
- for accounting periods commencing on or after 1 January 2009.
IFRS 7: Financial Instruments: Disclosure - Amendments enhancing
disclosures about fair value and liquidity risk - for periods
commencing on or after 1 January 2009.
IAS 1: Presentation of Financial Statements - Amendments relating
to disclosure of puttable instruments and obligations arising
on liquidation - for accounting periods commencing on or after
1 January 2009.
IAS 1: Presentation of Financial Statements - comprehensive revision
including requiring a statement of comprehensive income - for
accounting periods commencing on or after 1 January 2009.
IAS 16: Property, Plant and Equipment Amendments resulting from
May 2008 Annual improvements to IFRS - for accounting periods
commencing on or after 1 January 2009.
IAS 19: Employee benefits - Amendment resulting from May 2008
annual improvements to IFRS - for accounting periods commencing
on or after 1 January 2009.
IAS 20: Government Grants and Disclosure of Government Assistance
Amendments resulting from May 2008 Annual Improvements to IFRS
- for accounting periods commencing on or after 1 January 2009.
IAS 23: Borrowing Costs - Comprehensive revision to prohibit
immediate expensing - for accounting periods commencing on or
after 1 January 2009.
IAS 23: Borrowing Costs -Amendments resulting from May 2008 Annual
Improvements to IFRS - for accounting periods commencing on or
after 1 January 2009.
IAS 27: Consolidated and Separate Financial Statements - Amendments
resulting from May 2008 Annual improvements to IFRS - for accounting
periods commencing on or after 1 January 2009.
IAS 28: Investments in Associates - Amendments resulting from
May 2008 Annual improvements to IFRS - for accounting periods
commencing on or after 1 January 2009.
IAS 29: Financial Reporting In Hyperinflationary Economies -
Amendments resulting from May 2008 Annual improvements to IFRS
- for accounting periods commencing on or after 1 January 2009.
IAS 31: Interests In Joint Ventures - Amendments resulting from
May 2008 Annual Improvements to IFRS - for accounting periods
commencing on or after 1 January 2009.
IAS 32: Financial Instruments: Presentation - Amendments relating
to puttable instruments and obligations arising on liquidation
- for accounting periods commencing on or after 1 January 2009.
IAS 36: Impairment of assets - Amendments resulting from May
2008 Annual Improvements to IFRS - for accounting periods commencing
on or after 1 January 2009.
IAS 38: Intangible Assets - Amendments resulting from May 2008
Annual improvements to IFRS - for accounting periods commencing
on or after 1 January 2009.
IAS 39: Financial Instruments: Recognition and Measurement- Amendments
resulting from May 2008 Annual improvements to IFRS - for accounting
periods commencing on or after 1 January 2009.
IAS 40: Investment Property - Amendments resulting from May 2008
Annual Improvements to IFRS - for accounting periods commencing
on or after 1 January 2009.
IAS 41: Agriculture - Amendments resulting from May 2008 Annual
improvements to IFRS - for accounting periods commencing on or
after 1 January 2009.
Interpretations
IFRIC 13: Customer Loyalty Programmes -for accounting periods
commencing on or after 1 July 2008.
IFRIC 15: Agreements for the Construction of Real Estate - for
accounting periods commencing on or after 1 January 2009.
IFRIC 16: Hedges of a Net investment In a Foreign Operation -
for accounting periods commencing on or after 1 October 2008.
The adoption of these standards and interpretations has not led
to any changes in the Groups accounting policies, except as follows:
IFRS 8, 'Operating Segments' (effective from 1 January 2009):
This standard requires disclosure of information about the Group's
operating segments and replaced the requirement to determine
business and geographical reporting segments of the Group. For
management purposes, the Group is organised into one business
unit. The Group determined that this operating segment was the
same as the business and geographical segment previously identified
under IAS 14, 'Segment Reporting'.
IAS 1 (revised), 'Presentation of Financial Statements' (effective
from 1 January 2009): The revised standard prohibits the presentation
of items of income and expenses (that is, 'non-owner changes
in equity') In the statement of changes in equity, requiring
'non-owner changes in equity' to be presented separately from
owner changes in equity. All non-owner changes in equity will
be required to be shown in a performance statement, but entities
can choose whether to present one performance statement (the
statement of comprehensive income) or two statements (the Income
statement and statement of comprehensive income).
Application of IAS 1 (revised) did not impact on the net assets
of income for the year ended 31 December 2009. Apart from formatting
and the titles of the primary statements there have been no other
changes.
Amendment: IFRS 7, 'improving disclosures about financial instruments':
The amendment requires disclosure of fair value measurements
by level of a three-level fair value of measurement hierarchy.
In addition to that, the amendment clarifies that the maturity
analysis of liabilities should include issued financial guarantee
contracts at the maximum amount of the guarantee in the earliest
period in which the guarantee could be called; and secondly requires
disclosure of remaining contractual maturities of financial derivatives
if the contractual maturities are essential for an understanding
of the timing of the cash flows. The entity has to disclose a
maturity analysis of financial assets it holds for managing liquidity
risk, if that information is necessary to enable users of its
financial statements to evaluate the nature and extent of liquidity
risk. The adoption of the amendment results in additional disclosures
but does not have an impact on profit or earnings per share.
b) Standards and Interpretations in issue and not
yet effective
At the date of authorisation of these financial statements, the
following standards and interpretations, which have not been
applied in these financial statements, were in issue but not
yet effective:-
IFRS 2: Share-based Payment Amendments relating to group cash-settled
share-based payment transactions - for accounting periods commencing
on or after 1 January 2010.
IFRS 2: Share-based Payment - Amendments resulting from April
2009 Annual improvement to IFRS - for accounting periods commencing
on or after 1 January 2010.
IFRS 3: Business Combinations - Comprehensive revision on applying
the acquisition method - for accounting periods commencing on
or after 1 July 2009.
IFRS 3: Business Combinations - Amendments resulting from May
2010 annual improvements - for accounting periods commencing
on or after 1 July 2010.
IFRS 5: Non-current Assets Held for sale and Discontinued Operations
- Amendments resulting from May 2008 annual improvements to IFRSs
- for accounting periods commencing on or after 1 July 2009.
IFRS 5: Non-current Assets Held for Sale and Discontinued Operations
- Amendments resulting from April 2009 annual improvements to
IFRSs - for accounting periods commencing on or after 1 January
2010.
IFRS 7: Financial Instruments: Disclosure - Amendments resulting
from May 2010 annual improvements - for accounting periods commencing
on or after 1 January 2011.
IFRS 7: Financial Instruments: Disclosure - Amendments enhancing
disclosure about transfers of assets - for accounting periods
commencing on or after 1 July 2011.
IFRS 8: Operating Segments - Amendments resulting from April
2009 Annual improvements to IFRSs - for accounting periods commencing
on or after 1 January 2010.
IFRS 9: Financial Instruments - Classification and Measurement
- for accounting periods commencing on or alter 1 January 2013.
IAS 1: Presentation of Financial Statements - Amendments resulting
from April 2009 annual improvements to IFRSs - for accounting
periods commencing on or after 1 January 2010 and from May 2010
annual improvements - for accounting periods commencing on or
after 1 January 2011.
IAS 7: Statement of Cash Flows- Amendments resulting from April
2009 annual Improvements IFRSs - for accounting periods commencing
on or after 1 January 2010.
IAS 17: Leases - Amendments resulting from April 2009 annual
Improvements to IFRSs - for accounting periods commencing on
or after 1 January 2010.
IAS 24: Related Party Disclosures - Revised definition of related
parties - for accounting periods commencing on or after 1 January
2011.
IAS 27: Consolidated and Separate Financial Statements - Consequential
amendments arising from amendments to IFRS 3 - for accounting
periods commencing on or after 1 July 2009 and May 2010 annual
improvements - for accounting periods commencing on or after
1 July 2010.
IAS 28: Investments In Associates - Consequential amendments
arising from amendments to IFRS 3- for accounting periods commencing
on or after 1 July 2009.
IAS 31: Interests in Joint Ventures - Consequential amendments
arising from amendments to IFRS 3- for accounting periods commencing
on or after 1 July 2009.
IAS 32: Financial instruments: Presentation - Amendments relating
to classification of rights issues - for accounting periods commencing
on or after 1 February 2010.
IAS 36: Impairment of Assets - Amendments resulting from April
2009 Annual improvements to IFRS - for accounting periods commencing
on or after 1 January 2010.
IAS 38: Intangible assets - Amendments resulting from May 2010
annual improvements to IFRS - effective 1 January 2010.
IAS 39: Financial instruments: Recognition and Measurement Amendments
for eligible hedged items - for accounting periods commencing
on or after 1 July 2009.
IAS 39: Financial instruments: Recognition and Measurement -
Amendments resulting from April 2009 Annual improvements to IFRS
- for accounting periods commencing on or after 1 January 2010.
IAS 39: Financial Instruments: Recognition and Measurement -
Amendments for embedded derivatives when reclassifying financial
instruments - resulting 30 June 2009.
Interpretations
IFRIC 9: Reassessment of embedded derivatives - amendment from
April 2009 with effect from 1 July 2009.
IFRIC 14 IAS 19 - November 2009 amendment with respect to voluntary
prepaid contributions is effective for annual periods beginning
on or after 1 January 2011.
IFRIC 17: Distributions of Non-cash Assets to Owners - for accounting
periods commencing on or after 1 July 2009.
IFRIC 18: Transfers of Assets from Customers - for accounting
periods commencing on or after 1 July 2009.
IFRIC 19 Extinguishing Financial Liabilities with Equity instruments
- for accounting periods commencing on or after 1 July 2010.
The Directors anticipate that with exception of, IFRS 3, IAS
27 and IFRS 9 the adoption of these standards and interpretations
in future periods will not have material impact on the financial
statements of the Group.
Revised IFRS 3, Business Combinations and complementary Amendments
to IAS 27 'Consolidated and separate financial statements' (both
effective for accounting periods beginning on or after 1 July
2009). The revised IFRS 3 and amendments to IAS 27 arise from
a joint project with the Financial Accounting Standards Board
(FASB), the US standards setter, and result in IFRS being largely
converged with the related, recently issued, US requirements.
There are certain very significant changes to the requirements
of IFRS, and options available, if accounting for business combinations.
The Group is currently assessing the impact of IFRS 3 on the
Financial Statements.
In November 2009, the Board issued the first part of IFRS 9 relating
to the classification and measurement of financial assets. IFRS
9 will ultimately replace IAS 39. This revised standard is still
to be endorsed by the EU. The standard requires an entity to
classify its financial assets on the basis of the entity's business
model for managing the financial assets and the contractual cash
flow characteristics of the financial asset, and subsequently
measures the financial assets as either at amortised cost or
fair value. The new standard is mandatory for annual periods
beginning on or after 1 January 2013.
Significant accounting
(2.2) estimates and judgements
The Group makes estimates and assumptions concerning the future.
The resulting accounting estimate will, by definition, seldom
equal the related actual results. The estimates and assumptions
that have a significant risk of causing a material adjustment
to the carrying amounts of assets and liabilities within the
next financial year are discussed below.
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
In applying the Group's accounting policies, the Directors make
judgements in the following areas:
(a) Inventory
Inventory is tested for impairment at each balance sheet date.
Impairment reviews are undertaken using a valuation undertaken
by an independent professional valuer.
Valuations require numerous estimates and assumptions to be used
such as estimated build area, current design and plans, future
sales revenue, costs to complete and an applicable discount rate.
In addition given the current market situation, resulting in
a limited number of transactions and the general uncertainty
in the market, valuers have relied on their professional judgement
to a greater extent than normal in deriving their opinion of
value. Accordingly, fair value is not intended to represent the
liquidation value of the inventory which would be dependent upon
the price negotiated at the time of sale.
The fair value of inventory as at 31 December 2009 was EUR6,350,000
(2008: EUR17,600,000). Refer to note 17 for further details.
(b) Deferred
tax
The Group is subject to income and capital gains taxes in Romania.
Significant judgement is required in determining the provision
for income and deferred taxes. There are many transactions and
calculations for which the ultimate tax determination and timing
of payment are uncertain during ordinary course of business.
The Group recognises liabilities for anticipated tax issues based
on estimates of whether additional tax will be due. Where the
final tax outcome of these matters is different from the amount
that were initially recorded such differences will impact the
income and deferred tax provisions in the period on which there
determination is made. The deferred tax liability as at 31 December
2009 was EUR nil (2008: EUR nil). Refer to note 15 for further
details.
(c) Performance fee
The Group has to pay a performance fee to investment manager
based on the gains generated on the properties. Provisions for
the performance fee are calculated at each balance sheet date
based on the property valuations, carried out by the valuers,
at that date. The provision for performance fee is an estimate
based on the year end valuation, which will not necessarily be
the actual performance fee paid on disposal of property or at
the end of the termination period. Further details are included
in note 7 to these financial statements. Performance fee payable
as at 31 December 2009 was EUR nil (2008: EUR nil).
(d) Deferred consideration
A deferred consideration for sale of Magnolia arrived at by discounting
the loan receivable at an assumed market rate of 10% over a period
of 3 years is a contingent asset but has not been recognised
due to the remote possibility of its recoverability. In addition
the Group has an option to re-acquire 50% of the share capital
of Magnolia for a nominal consideration. No value has been given
to the option due to the ongoing dispute concerning a bridging
loan from Bonhay Investments Limited to Magnolia. The parties
involved are currently in mediation with a view to achieving
a settlement. Further details are included in note 12.
(2.3) Consolidation
The consolidated financial statements incorporate the financial
statements of the Group, the entities controlled by the Company
(its subsidiaries) and the Company's' joint ventures, made up
to 31 December 2009. Control is achieved where the Company has
the power to govern the financial and operating activities of
an investee entity so as to obtain benefits from its activities.
The results of subsidiaries and joint ventures acquired during
the year are included in the consolidated statements from the
date control passes. They are deconsolidated from the date control
ceases. Where necessary, adjustments are made to the financial
statements of the subsidiaries and Joint venture to bring the
accounting policies into line with those used by the parent Company.
All intra-group transactions, balances, income and expenses
are eliminated on consolidation.
The Group's interests in jointly controlled entities are accounted
for by proportional consolidation. The Group combines its share
of the joint ventures' individual income and expenses, assets
and liabilities and cashflows on a line-by-line basis with similar
items in the Group's financial statements. The Group recognises
the portion of gains or losses on the sale of assets by the Group
to the joint venture that is attributable to the other venturers.
The Group does not recognise its share of profits or losses from
joint ventures that result from the Group's purchase of assets
from the joint venture until it resells the asset to an independent
party. However, a loss on the transaction is recognised immediately
if the loss provides evidence of a reduction in the net realisable
value of current assets, or as an impairment loss.
(2.4) Revenue Recognition
Investment income is recognised on a time apportioned basis using
the effective interest method.
Interest income on debt securities and bank balances is accrued
for on a day-to-day basis. Interest accrued on the purchase and
sale of debt securities is excluded from the cost / proceeds
and is included as investment income.
Revenue from the sale of property or property units is recognised
when the risks and rewards of ownership have been transferred
to the buyer and provided that the Group has no further substantial
acts to complete under the contract.
(2.5) Expenses
Expenses are measured at the fair value of the consideration
paid or payable and are recognised in the income statement on
an accruals basis.
(2.6) Operating profit or loss
Group operating profit or loss includes inventory sale, impairment
of inventory less administrative expenses.
(2.7) Cash and cash equivalents
Cash and cash equivalents are defined as cash on hand and short
term deposits, and other short-term highly liquid investments
that are readily convertible to a known amount of cash and are
subject to an insignificant risk of changes in value.
Any cash held by the Group may be held in Euro-denominated government
bonds with maximum maturities of the lesser of two years or the
remaining life of the Group and/or invested in AAA rated liquid
funds. Such investments will be fair valued to closing bid price,
with movements in fair value being taken to the income statement.
(2.8) Inventories
Land held for development potential with the intention for future
sale is accounted for under International Accounting Standard
No 2 "Inventories". These projects are included within Inventories
and are stated at the lower of cost and net realisable value.
Cost comprises direct materials, direct labour costs and those
overheads that have been incurred in bringing the properties
to their present location and condition. Net realisable value
represents the estimated selling price, less all estimated costs
of completion and costs to be incurred in marketing and selling
the inventories. Where net realisable value is lower than cost,
the difference is provided for as an impairment in the income
statement.
The Group has appointed DTZ Echinox Consulting S.R.L as property
valuers to prepare valuations on an annual basis. Valuations
will be undertaken in accordance with the appropriate sections
of the Practice Statements contained within the RICS Valuation
Standards, 6th Edition (the "Red Book") which is IVS compliant.
(2.9) Segmental reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker.
The chief operating decision maker is the person or group that
allocates resources to and assesses the performance of the operating
segments of an entity. The Group has determined that its chief
operating decision maker is the Board of Directors of the Company.
The Directors are of the opinion that the Company is engaged
in a single segment of business, being property investment business,
and in one geographical area, Romania. Accordingly, all significant
operating decisions are based upon analysis of the Group as one
segment. The financial results from this segment are equivalent
to the financial statements of the Group as a whole.
All the group's revenue is derived from property sales in Romania.
All of the groups non current asset are located in Romania. The
group has no major customer.
(2.10) Taxation
The Company is exempt from Guernsey taxation. As such Company
is only required to pay a fixed annual fee of GBP600.
Current tax arises in jurisdictions other than Guernsey, it is
based on taxable profit for the year and is calculated using
tax rates that have been enacted or substantially enacted. 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 temporary differences and items
that are never taxable or deductible permanent differences. Temporary
differences principally arise from using different balance sheet
values for assets and liabilities than their respective tax base
values. Deferred tax is provided in respect of all these taxable
temporary differences at the balance sheet date.
Deferred tax liabilities are generally recognised for all taxable
temporary differences. Deferred tax assets are regarded as recoverable
and therefore recognised only when, on the basis of all available
evidence, it is probable that suitable taxable profits will be
available against which the future reversal of the underlying
temporary differences can be deducted.
(2.11) Foreign currency translation
Deferred tax is calculated at the tax rates that are expected
to apply in the year when the liability is settled or the asset
is realised.
(a) Functional and presentation currency
The functional currency of the Group is Euros as substantially
all expenses and activity relating to the investments are made
in Euros.
The presentation currency of the Group for accounting purposes
is also the Euro. The information is converted into Sterling
for information purposes only and does not form part of these
audited financial statements.
For the supplementary information, income statement accounts
are converted using the average exchange rate for the year while
balance sheet accounts are converted using the balance sheet
rate. Exchange gains / losses on translation are taken to Statement
of changes in equity.
(b) Transactions and balances
Foreign currency balances are translated into Euro at the rate
of exchange ruling on the last day of the financial period. Foreign
currency transactions are translated at the rate of exchange
ruling on the date of transaction. Gains and losses arising on
currency translation are included in the Income Statement for
the period.
(c) Group companies
The results and financial position of all the Group entities
(none of which has the currency of a hyperinflationary economy)
that have a functional currency different from the presentation
currency are translated into the presentation currency as follows:
(i) assets and liabilities for each balance sheet presented are
translated at the closing rate at the date of that balance sheet;
(ii) income and expenses for each income statement are translated
at average exchange rates (unless the average is not a reasonable
approximation of the cumulative effect of the rates prevailing
on the transaction dates, in which case income and expenses are
translated at the rate on the date of the transactions); and
(iii) all resulting exchange differences are recognised
as a separate component of equity.
(2.12) Impairment
The carrying amount of the Group's assets are reviewed at each
balance sheet date to determine whether there is any indication
of impairment. If any such indication exists, the asset's recoverable
amount is estimated. An impairment loss is recognised whenever
the carrying amount of an asset exceeds its recoverable amount.
Impairment losses are recognised in the income statement as cost
of sales.
(2.13) Financial instruments
Financial assets and financial liabilities are recognised on
the Group's balance sheet when the Group becomes a party to the
contractual provisions of the instrument. The Group shall offset
financial assets and financial liabilities if the Group has a
legally enforceable right to set off the recognised amounts and
interests and intends to settle on a net basis.
(a) Financial assets
The Group's financial assets fall into the category of loans
and receivables. The Group has not classified any of its financial
assets as held at fair value through profit or loss, held to
maturity or as available for sale.
(a)(i) Loans and receivables
These assets are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market.
They arise principally through trade receivables and cash and
cash equivalents, but also incorporate other types of contractual
monetary assets. They are initially recognised at fair value
plus transaction costs that are directly attributable to the
acquisition or issue and subsequently carried at amortised cost
using the effective interest rate method, less provision for
impairment. The effect of discounting on these financial instruments
is not considered material.
Impairment provisions are recognised when there is objective
evidence (such as significant financial difficulties on the part
of the counterparty or default or significant delay in payment)
that the Group will be unable to collect all of the amounts due
under the terms receivable, the amount of such a provision being
the difference between the net carrying amount and the present
value of the future expected cash flows associated with the impaired
receivable.
Cash in banks and short term deposits are carried at cost and
consist of cash in hand and short term deposits in banks with
an original maturity of three months or less.
(a) (ii) De-recognition of financial
assets
A financial asset (in whole or in part)
is derecognised either:
- when the Group has transferred substantially all
the risks and rewards of ownership; or
- when it has transferred and not retained substantially all
the risks and rewards and when it no longer has control over
the asset or a portion
of the asset; or
- when the contractual right to receive
cash flow has expired.
(b) Financial liabilities
The Group classifies its financial liabilities as
other financial liabilities at amortised cost.
Unless otherwise indicated the carrying value of the Group's
financial liabilities are a reasonable approximation of their
fair values.
(b)(i) Financial liabilities
measured at amortised cost
Other financial liabilities include trade payables and other
short-term monetary liabilities, which are initially recognised
at fair value and subsequently carried at amortised cost using
the effective interest method.
(b) (ii) De-recognition of financial
liabilities
A financial liability (in whole or in part) is derecognised when
the Group has extinguished its contractual obligations or it
expires or is cancelled. Any gain or loss on de-recognition is
taken to the income statement.
(c) Share Capital
Financial instruments issued by the Group are treated as equity
only to the extent that they do not meet the definition of a
financial liability. The Company's ordinary shares are classified
as equity instruments. For the purposes of the disclosures given
in Note 28 the Group considers all its share capital, share premium
and all other reserves as equity. The Company is not subject
to any externally imposed capital requirements.
(d) Effective
interest method
The effective interest method is a method of calculating the
amortised cost of a financial asset or liability and of allocating
interest income or expense over the relevant period. The effective
interest rate is the rate that exactly discounts estimated future
cash receipts or payments (including all fees on points paid
or received that form an integral part of the effective interest
rate, transaction costs and other premiums or discounts) through
the expected life of the financial asset or liability, or, where
appropriate, a shorter period.
Borrowing
(2.14) costs
Borrowing costs are expensed out in the year they
are incurred and are not capitalised.
3 GOING CONCERN
The Directors have reviewed the current budgets and cash flow
projections for the period to 31 May 2012. These forecasts indicate
the need for additional funding for continuing working capital.
Confirmation has been obtained from creditors for a deferral
to the value of GBP450,000 but the Group still requires additional
cash for working capital needs. This will be met by a loan facility
of GBP250,000 to the Company and an additional loan facility
of EUR150,000 to Romanian joint venture company SC Gold Developments
SPV SRL. Deferral of payment to creditors and cash received will
allow sufficient time for Directors to consider alternative financing
and disposal of the property within the Joint Venture. Based
on advanced discussions with Unicredit Bank, the directors anticipate
that the loan payable, which is due for renewal on 15 December
2010, by Joint Venture entity will be rolled forward.
Various sources of financing are currently being considered by
the Directors including negotiating new property acquisitions
and raising fresh equity with the Blackpearl group. A final decision
regarding the source of financing has not been made.
Accordingly the Directors have prepared these financial
statements on going concern basis.
4 ADMINISTRATION FEES
Under the Administration Agreement the Administrator is entitled
to receive an annual administration fee at a rate as may be agreed
in writing from time to time between the Company and the Administrator.
The present fee is 0.09% per annum of the Net Asset Value of
the Group up to GBP100 million and 0.07% of the Net Asset Value
of the Group above GBP100 million, subject to a minimum fee during
the period up to September 2009 of GBP104,900 per annum plus
disbursements. With effect from 1 October 2009 minimum fee was
revised to GBP65,958 per annum.
Other administration fees are paid by the underlying subsidiaries
at a rate as may be agreed in writing from time to time between
those companies and their separately appointed administrators.
5 FORMATION EXPENSES
All expenses incurred in the formation of the Company, its subsidiaries
and joint ventures have been included as expenses in the period
in which they were incurred. The Company's principal documents
require these expenses to be written off over the life of the
Company, however accounting standards do not allow such treatment
in the financial statements.
6 MANAGEMENT FEES
The Group paid its former Investment Manager, Lewis Charles Securities
Limited, a management fee of 2% per annum of the net proceeds
of the placing calculated and payable quarterly in advance. The
former Investment Manager was also entitled to a management fee
of 2% of any realised but undistributed capital gains on the
sale of properties, calculated and payable quarterly in arrears.
With effect from 2 February 2010 management agreement with Lewis
Charles Securities was terminated. See note 32 for detailed information.
7 PERFORMANCE FEES
The former Investment Manager Lewis Charles Securities Limited
was entitled to receive a performance fee calculated and payable
based on 20% of the excess of the net cash proceeds from the
sale of property over the 10% property hurdle. 50% of the performance
fees calculated was payable to the former Investment Manager
within 30 days of the receipt of the proceeds of the sale of
a property. The balance was to be paid at the same time into
a reserve account and be invested in Sterling money market deposits,
unless otherwise agreed between the former Investment Manager
and the Company, and held pending the calculation of the overall
returns on the property portfolio at the end of the life of the
Company. No performance fee is shown within these financial statements
as any provision is based on the uplift shown in the fair value
adjustment of the investment properties and no such uplift is
provided in these financial statements. Accordingly no performance
fee provision (2008: EUR Nil) has been provided for. No perf
8 DIRECTORS' FEES AND EXPENSES
George Inge, Dr Flavius Baias and Paul Duquemin each receive
a fee of GBP15,000 (2008: GBP15,000) per annum, Clive Simon receives
a fee of GBP18,000 (2008: GBP18,000) with the Chairman, Richard
Prickett, receiving GBP20,000 (2008: GBP20,000). The Chairman
and Directors are reimbursed other expenses properly incurred
by them in attending meetings and other business of the Group.
The amount per the Consolidated statement of comprehensive loss
also includes the directors fees for the subsidiaries of the
group.
9 OTHER EXPENSES
2009 2008
------------- -------------
EUR EUR
Registrar's
fees (see note
10) 6,320 5,788
Audit fees 72,758 64,273
Legal and professional
fees 225,210 243,209
Consultancy
fees - 72,215
Insurance costs 19,999 20,075
Statutory fees 14,021 15,444
Bank charges 12,045 45,542
Marketing expenses 60,932 -
Other fees
and expenses 72,691 158,033
483,976 624,579
============= =============
10 REGISTRAR'S FEES
Under the Registrar's Agreement the Registrar is entitled to
receive an annual fee at the rate of whichever shall be the greater
of the amount of the minimum Annual Basic Fee, currently GBP4,000
per annum, or the amount per shareholder, currently GBP2.00,
on the Register of Shareholders at the commencement of the fee
year. The Company's fee year commenced on the date of admission
to AIM and on each anniversary of that date.
11 COMMISSION PAID
In return for their services as distributors, Canaccord Genuity
Limited and Lewis Charles Securities Limited received a commission
of 3% in 2007 of the Placing Price of Shares placed by them pursuant
to the Placing. These amounts are a direct expense of issuing
the equity of the Company and have been deducted from the proceeds
received on the share issue. The joint broker agreement with
Lewis Charles Securities was terminated on 2 February 2010.
12 DISPOSAL OF SUBSIDIARY
On 11 March 2009 the Group sold SC Retail Park Magnolia SRL (Magnolia),
a wholly owned Romanian based property development company which
owns the Ploiesti Project which the parent company held via its
Luxembourg subsidiary -Roproperties S.A., to Magnolia Real Estate
Limited. Under the disposal arrangement, Magnolia was sold for
a nominal consideration of RON 200 for share capital and a 50%
interest in any future profits of Magnolia after repayment of
existing loans. In addition Roproperties (a wholly owned subsidiary
of the Fund) has the option to re-acquire 50% of the share capital
of Magnolia, for a nominal consideration. This option can be
exercised within three years from the pre-sales and purchase
agreement dated 11 March 2009. No value has been given to the
option due to the ongoing dispute, between the Blackpearl Group
on the one hand and Westhill SRL and Bonhay Investments Limited
on the other, concerning a bridging loan from Bonhay Investments
Limited to Magnolia. The parties involved are currently i
2009
-------------
EUR
Proceeds -
Deferred consideration 12,538,610
Impairment recognised on deferred
consideration (12,538,610)
-------------
Net proceeds -
Net assets
disposed of 3,021,068
-------------
Loss on disposal 3,021,068
=============
Magnolia was sold for a deferred consideration at the present
value of EUR12,538,610 arrived at by discounting the loan receivable
of EUR14,723,513 at an assumed market rate of 10% over a period
of 3 years. The loan has been treated as deferred consideration
for the purposes of the accounting for this sale transaction,
however due to the dispute and delays detailed above there can
be no certainty over future cashflows for the receipt of the
deferred consideration.
13 FINANCE INCOME
2009 2008
------------- -------------
EUR EUR
Bank interest 24,974 200,060
============= =============
The above interest income arises from financial assets classified
as loans and receivables, including cash and cash equivalents,
and has been calculated using the effective interest method.
There are no other gains or losses on loans and receivable other
than those disclosed above.
14 FINANCE EXPENSE
2009 2008
------------- -------------
EUR EUR
Interest on
short term
loan 354,642 590,171
============= =============
The above finance cost arise from financial liabilities measured
at amortised cost using effective interest rate method. No other
losses have been recognised in respect of financial liabilities
at amortised cost other than disclosed above.
15 TAXATION
(a) Analysis of tax
charge for the year
2009 2008
------------- -------------
EUR EUR
The tax (recoverable) / payable
for the year
comprises:-
Current taxation - -
- Deferred
taxation - -
Income tax
(credit) /
charge - -
============= =============
(b) Deferred
taxation
Deferred taxation is calculated on all temporary timing differences
under the liability method using a principal Romanian tax rate
of 16% (2008: 16%). However, due to uncertainty of future income
deferred tax asset has not been recognised in the financial statements.
LOSS PER SHARE - BASIC
16 AND DILUTED
The consolidated basic and diluted loss per Ordinary Share of
51.53 (2008: 108.72) cents is based on the net loss of EUR10,087,688
(2008: 21,282,862) and on 19,576,405 (2008: 19,576,405) ordinary
shares in issue, being the weighted average number of shares
in issue during the year.
17 INVENTORY
31 December 31 December
Ploiesti Mogosoaia* 2009 2008
------------ -------------- ------------- -------------
EUR EUR EUR EUR
As at 1 January 7,200,000 10,400,000 17,600,000 28,007,787
Additions during
the year 101,774 1,261,198 1,362,972 9,333,613
Foreign exchange
adjustments (770,509) (124,505) (895,014) (1,272,338)
------------ -------------- ------------- -------------
6,531,265 11,536,693 18,067,958 36,069,062
Impairment - (5,186,693) (5,186,693) (18,469,062)
------------ -------------- ------------- -------------
6,531,265 6,350,000 12,881,265 17,600,000
Disposal (6,531,265) - (6,531,265) -
------------ -------------- ------------- -------------
As at 31 December - 6,350,000 6,350,000 17,600,000
============ ============== ============= =============
Net realisable
value - 6,350,000 6,350,000 17,600,000
============ ============== ============= =============
*Inventory at Mogosoaia is pledged with Unicredit Bank against
short term loan as shown in note 22.
The Group's main activity is the development and sale of residential
and commercial property. The process of obtaining zoning and
permits may in itself take some time. This period is then added
to by the time taken to construct the properties. In this time
the costs of the land and the construction are recorded in Inventories.
The Group continually reviews the net realisable value of the
inventory against the cumulative costs that are held on its balance
sheet. To enable this review, management have appointed appropriately
qualified personnel to monitor and control the costs of construction.
The costs that have been incurred and are projected to be incurred
are benchmarked against those available in the market to ensure
that best value is achieved. A strict tendering process is adhered
to when procuring construction services and the costs are controlled
locally on a monthly basis. In addition to this, the Group has
appointed DTZ Echinox Consulting S.R.L to assist them to undertake
an independent assessment of the net realisable value of its
development.
DTZ Echinox Consulting S.R.L in their valuation report as of
31 December 2009 have calculated the value of the Mogosoaia Project,
to be EUR6,350,000, in accordance with RICS valuation standards.
The approved RICS definition of market value is "The estimated
amount for which a property 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 had each
acted knowledgeably, prudently and without compulsion".
18 INVESTMENT IN SUBSIDIARIES
Details of the Company's subsidiary undertaking
are as follows:
% Holding Country
and of Principal
Name of subsidiary voting
undertaking rights incorporation activity
Roproperties
S.A 100% Luxembourg Holding company
Rominvestments
S.A 100% Luxembourg Holding company
Romholdings
S.A 100% Luxembourg Holding company
Romholdings S.A was transferred to Blackpearl Real Estate LLP
for a nominal consideration on 11 June 2010.
19 JOINT VENTURE
On 12 July 2007 the Group acquired, through the acquisition of
Rominvestments S.A, 50% of the equity of SC Gold Developments
SPV SRL, which holds the development Project Mogosoaia.
The Group is entitled to a proportionate share of the income
generated and a proportionate share of the outgoings. The following
amounts are included in the Group's financial statements as a
result of the proportionate consolidation of SC Gold Developments
SPV SRL.
SC Gold Developments
SPV SRL 2009 2008
------------- -------------
EUR EUR
As at 31 December
2009:
Non-current
assets 3,798,746 2,662,053
Current assets 234,847 429,685
Non-current
liabilities (2,758,687) (1,153,430)
Current liabilities (14,501) (259,431)
For the year ended
31 December 2009:
Income 5,489 46,176
Expense 630,241 594,782
20 TRADE AND OTHER RECEIVABLES
2009 2008
------------- -------------
EUR EUR
Debtors 24,896 906,975
Prepayments 37,727 195,209
------------- -------------
62,623 1,102,184
============= =============
The ageing of these receivables
is as follows:
Less than 3
months 24,896 1,090,189
3 to 6 months 37,727 11,995
Over 6 months - -
------------- -------------
62,623 1,102,184
============= =============
It was assessed that all of the receivables are expected to be
recovered. There is no difference between the carrying value
of trade and other receivables and their fair value.
The allocation of the carrying amount of the Group's trade and
other receivables by foreign currency is presented in note 28.
21 CASH AND CASH EQUIVALENTS
2009 2008
------------- -------------
EUR EUR
Blackrock Institutional
Euro Fund 560,450 1,690,706
Cash at bank 270,485 422,046
830,935 2,112,752
============= =============
The cash equivalent investments are considered to be highly liquid,
so that book cost is considered equivalent to fair value. The
weighted average interest rate on cash balances at 31 December
2009 was 0.6% (2008: 3.59%).
22 LOANS PAYABLE
2009 2008
------------- -------------
EUR EUR
Bonhay loan - 3,429,809
Unicredit loan 2,758,687 1,400,657
2,758,687 4,830,466
============= =============
A loan facility with a maximum aggregate of EUR10,000,000 was
obtained from Unicredit Tiriac Bank S.A by SC Gold Developments
SPV SRL. The applicable rate of interest on this loan is EURIBOR
plus 3.5% per annum and this loan is repayable on 15 December
2010. Unicredit have a first rank charge on the land (note 17)
and the shares of the SC Gold Developments SPV SRL. It is intended
that the loan be rolled forward on a three monthly basis.
PROVISION FOR OTHER LIABILITIES
23 AND CHARGES
2009 2008
------------- -------------
EUR EUR
Balance on
1 January 2,961,018 -
Provisions made during
the year - 2,961,018
Reversed during
the year (2,961,018) -
------------- -------------
Balance on
31 December - 2,961,018
============= =============
This represented a provision carried in relation to certain property
development contractors involved in the planning and design of
the Ploiesti project. The estimate of the provision was reassessed
in connection with the disposal of Group's investment in Retail
Park Magnolia and as a result the provision has been reversed.
24 TRADE AND OTHER PAYABLES
2009 2008
------------- -------------
EUR EUR
Directors'
fees 17,746 21,667
Audit fees
payable 28,167 69,379
Legal fees
payable 44,092 11,885
Administration
fees payable - 177
Sundry creditors 30,122 66,398
120,127 169,506
============= =============
25 SHARE CAPITAL
2009 2008
GBP GBP
Authorised
10,000 founder shares
of GBP1 par value 10,000 10,000
------------- -------------
Unlimited number of ordinary
shares of no par value - -
------------- -------------
Issued and
fully paid 2009 2009 2008 2008
------------ -------------- ------------- -------------
Shares EUR Shares EUR
Founder shares
Opening balance 2 3 2 3
Shares issued during
the year / period - - - -
------------ -------------- ------------- -------------
Closing balance 2 3 2 3
------------ -------------- ------------- -------------
Ordinary shares
Opening balance 19,576,405 - 19,576,405 -
Shares issued during
the year / period - - - -
------------ -------------- ------------- -------------
Closing balance 19,576,405 - 19,576,405 -
------------ -------------- ------------- -------------
The Founder shares may only be issued at par and only to the
Investment Manager or nominee of the Investment Manager. The
rights attached to the Founder are as follows:
a) The Founder shares carry voting rights only when
there are no ordinary shares in issue;
b) The Founder shares do not carry any right to dividends
or distributions; and
c) The Founder shares are subject to requisition by the Company
when they are not held by the Investment Manager.
Ordinary shares of nil par value carry
no right to fixed income.
FOREIGN EXCHANGE AND REVENUE
26 RESERVE
Balances in the foreign exchange reserve reflect cumulative unrealised
gains/losses on the translation of results of foreign subsidiaries
into the reporting currency.
The balance on the revenue reserve reflects cumulative operational
expenditure in excess of the operational income.
27 NAV PER SHARE
2009 2008
------------- -------------
EUR EUR
Net Asset Value attributable
to ordinary shareholders 4,364,741 12,853,943
Number of shares
in issue 19,576,405 19,576,405
Net asset value
per share 0.223 0.657
The Net Asset Value per Ordinary Share is based on the Net Asset
Value at the balance sheet date and on 19,576,405 (2008: 19,576,405)
Ordinary Shares, being the number of shares in issue at the balance
sheet date.
28 FINANCIAL INSTRUMENTS RISK MANAGEMENT
Financial risk
factors
The Group's principal financial instruments
comprise the following:
Categories of financial assets
and liabilities
2009 2008
------------- -------------
Loans and receivable EUR EUR
Trade and other
receivables 24,896 906,975
Cash and cash
equivalents 830,935 2,112,752
Financial liabilities measured
at amortised cost
Trade and other
payables (120,127) (169,506)
Short term
loan payable (2,758,687) (4,830,466)
------------- -------------
Net financial
assets (2,022,983) (1,980,245)
============= =============
The Group's activities expose it to a variety of risks from its
use of financial instruments which include:
- market risk (including interest rate
risk, price risk and currency risk)
- credit risk
- liquidity
risk
The accounting policy with respect to these financial
instruments are disclosed in note 2.
The Board of Directors has overall responsibility for the establishment
and oversight of the Group's risk management framework. This
note presents information about the Group's exposure to each
of the above risks and the Board of Directors objectives, policies
and processes for measuring and managing these risks.
Market risk
Price risk
The Group has no exposure to price risk
as it is invested in inventory only.
Interest rate
risk
Interest-bearing financials assets consist only of cash and cash
equivalents only and interest-bearing financial liabilities comprise
only of short term loan playable that mature or reprice in the
short-term, no longer than twelve months. All other financial
assets and liabilities are interest free.
As a result the Group is subject to exposure to fair value interest
rate risk due to fluctuations in the prevailing levels of market
interest rates.
The following table indicates their effective interest rates
at the balance sheet date and the periods in which they re-price.
Greater
2009 than
Interest 6 months
rate Total or less 6 -12 months 1 year
Group % EUR EUR EUR EUR
Cash and cash
equivalents 0.60 830,935 - - -
Unicredit loan EURIBOR+3.5% 2,758,687 - 2,758,687 -
A 100 basis points change in interest rate would increase/decrease
the net interest expense/income by EUR19,080 (2008: EUR26,797)
for the Group.
Greater
2008 than
Interest 6 months
rate Total or less 6 -12 months 1 year
Group % EUR EUR EUR EUR
Cash and cash
equivalents 3.59 2,112,752 2,112,752 - -
Bonhany loan 30.00 3,429,809 - 3,429,809 -
Unicredit loan EURIBOR+3.5% 1,400,657 - 1,400,657 -
The Group may invest in Euro denominated government bonds with
maximum maturities of the lesser of two years or the remaining
life of the Company and/or invest in AAA rated liquidity funds.
Any change to interest rates relevant for a particular security
may result in income either increasing or decreasing. The Group
has chosen to invest in high liquidity, floating rate instruments
to mitigate the risk that similar returns would be unavailable
on the expiry of contracts.
The overall interest rate risks are monitored
by the Board of Directors.
The financial instruments subject to interest rate movements
are disclosed in note 21 and note 22.
Currency risk
Currency risk is the risk that the income statement and balance
sheet can be affected by currency translation movements where
the fair value or the future cash flows of a financial instrument
will fluctuate because of changes in foreign exchange rates.
The Board consider that the Group's exposure to currency risk
is minimal, with the exception of book gains and losses in the
underlying subsidiaries, as the majority of the Group's transactions
are made in Euros and the books and records are kept in Euros.
The Romanian Leu is expected to be replaced
by the Euro in 2014.
The tables below summarise the Group's exposures to foreign currency
risk at 31 December 2009 and 2008 in respect of its financial
instruments. The assets and liabilities are included in the table
below, in Euro's, categorised by the currency at their carrying
amount.
2009 CHF GBP RON EUR Total
Trade and other
receivables - - 24,896 - 24,896
Cash and cash
equivalents - 268,389 196,648 365,898 830,935
------------- ------------ -------------- ------------- -------------
Total assets - 268,389 221,544 365,898 855,831
------------- ------------ -------------- ------------- -------------
Trade and other
payables - (74,081) (14,501) (31,545) (120,127)
Loans - - (2,758,687) - (2,758,687)
------------- ------------ -------------- ------------- -------------
Total liabilities - (74,081) (2,773,188) (31,545) (2,878,814)
------------- ------------ -------------- ------------- -------------
Net assets - 194,308 (2,551,644) 334,353 (2,022,983)
============= ============ ============== ============= =============
2008 CHF GBP RON EUR Total
Trade and other
receivables - - 906,975 - 906,975
Cash and cash
equivalents (386) 939 2,762 2,109,437 2,112,752
------------- ------------ -------------- ------------- -------------
Total assets (386) 939 909,737 2,109,437 3,019,727
------------- ------------ -------------- ------------- -------------
Trade and other
payables (24,117) (98,463) (40,924) (6,002) (169,506)
Loans - - (1,400,657) (3,429,809) (4,830,466)
------------- ------------ -------------- ------------- -------------
Total liabilities (24,117) (98,463) (1,441,581) (3,435,811) (4,999,972)
------------- ------------ -------------- ------------- -------------
Net assets (24,503) (97,524) (531,844) (1,326,374) (1,980,245)
============= ============ ============== ============= =============
The following significant exchange rates
were applied during the year:
Average Reporting Average Reporting
Euro rate date rate date
spot rate spot rate
2009 2009 2008 2008
------------ -------------- ------------- -------------
RON
1 4.2414 4.2322 3.7014 4.0299
GBP
1 1.1268 1.1267 0.8019 0.9595
CHF
1 1.5069 1.4831 1.5790 1.4911
A 10 percent strengthening / weakening of the Euro against the
above currencies at 31 December 2009 and 2008 would have increased
/ decreased net current assets by the amounts shown below. This
analysis assumes that all other variables, in particular interest
rates, remain constant.
2009 2008
Change in net financial assets and liabilities Group Group
------------- -------------
EUR EUR
RON (255,164) (349,185)
GBP 19,431 (9,752)
CHF - (2,450)
Liquidity risk
Liquidity risk is the risk that arises when the maturity of assets
and liabilities does not match. An unmatched position potentially
enhances profitability, but can also increase the risk of losses.
The Group has procedures with the object of minimising such losses
such as maintaining sufficient cash and other highly liquid current
assets and will negotiate additional credit facilities as and
when required in order to ensure that the Group can meet its
liabilities as and when these fall due. Cash and cash equivalents
are placed with financial institutions on a short term basis
reflecting the Group's desire to maintain a high level of liquidity
to enable timely completion of investment transactions.
A summary table with the maturity of financial assets and financial
liabilities is presented below:
Greater
Less than than
6 to 12
2009 6 months months 12 Months
-------------- ------------- -------------
EUR EUR EUR
Financial assets
Trade and other
receivables 24,896 - -
Cash and cash
equivalents 830,935 - -
-------------- ------------- -------------
855,831 - -
-------------- ------------- -------------
Financial liabilities
Loan payable - 2,758,687 -
Trade and other
payables 120,127 - -
-------------- ------------- -------------
120,127 2,758,687 -
============== ============= =============
Greater
Less than than
6 to 12
2008 6 months months 12 Months
-------------- ------------- -------------
EUR EUR EUR
Financial assets
Trade and other
receivables 906,975 - -
Cash and cash
equivalents 2,112,752 - -
-------------- ------------- -------------
3,019,727 - -
-------------- ------------- -------------
Greater
Financial liabilities Less than than
6 to 12
6 months months 12 Months
-------------- ------------- -------------
EUR EUR EUR
Loan payable - 4,830,466 -
Trade and other
payables 169,506 - -
-------------- ------------- -------------
169,506 4,830,466 -
============== ============= =============
Credit risk
Credit risk is the risk that a counterparty will be unwilling
or unable to meet a commitment that it has entered into with
the Group. The Group's exposure to credit risk relates primarily
to cash and cash equivalents. The Group has tried to mitigate
this risk by investing in high liquidity, AAA rated instruments.
The Group holds cash and liquid resources as well as having receivables
and payables that arise directly from its operations. Maximum
exposure of financial assets and liabilities is limited to their
carrying value: Financial assets EUR855,831 (2008: EUR3,019,727),
Financial liabilities EUR2,878,814 (2008: EUR4,999,972).
Fair Values
Estimate of fair
values
Management deems that there is no significant difference between
the fair values of financial assets and liabilities and their
carrying value in the financial statements unless otherwise stated
in these financial statements.
Capital risk management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
provide returns for shareholders and benefits for other stakeholders
and to maintain an optimal structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group
may return the capital to shareholders, issue new shares or sell
assets to reduce debt.
29 RELATED PARTY DISCLOSURES
Transactions with, and amounts due at year end to Directors,
the Investment Manager, the Administrators, the subsidiaries
and joint ventures are as disclosed in the Directors' report
and throughout the financial statements.
30 CONTROLLING PARTY
In the opinion of the Directors there is no immediate or ultimate
controlling party as no one party has the ability to direct the
financial and operating policies of the Company with a view to
gaining economic benefits from their direction.
RECONCILIATION OF NAV PER THE CONSOLIDATED STATEMENTS
31 TO PUBLISHED NAV
2009 2009 2008 2008
EUR Per share EUR Per share
------------ -------------- ------------- -------------
Net Asset Value per
financial statements 4,364,741 0.223 12,853,943 0.657
Add back:
Adjustment to
value of properties - - (1,615,469) (0.083)
Preliminary
expenses 736,747 0.038 872,613 0.045
Published Net
Asset Value 5,101,488 0.261 12,111,087 0.619
============ ============== ============= =============
An adjustment is required within the financial statements to
record the value of the inventory / property assets from fair
value, as used for the published Net Asset Value, to the lower
of cost and net realisable value as required under International
Accounting Standard 2 "Inventories".
The Company's principal documents require the dealing valuation
of the Company's net assets to include preliminary expenses incurred
in the establishment of the Company, such expenses to be amortised
over the expected life of the Company. However, this accounting
treatment is not permitted for financial reporting purposes and
has been adjusted accordingly within these financial statements.
EVENTS AFTER THE BALANCE SHEET
32 DATE
The Group terminated the management agreement with Lewis Charles
Securities Limited with effect from 2 February 2010. An agreement
was signed with Sapphire Capital Partners LLP and to appoint
them as Property Adviser with effect from 29 April 2010 at a
fee of GBP6,000 per month.
The Group, on 24 June 2010, obtained a short term loan of GBP73,000
from Blackpearl Property Limited at an interest rate of 5% per
annum. The loan is secured by assigning Group's beneficial interest
in Magnolia Real Estate SRL to lender. This loan will mature
on earlier of date of restructuring of the Group or date when
a new loan is introduced into The Romania Property Fund.
As discussed in note 3, the Company entered into agreements to
obtain loan facilities of GBP250,000 from Moserburg Investments
Limited which has been earmarked by Directors for working capital
in the Group. A further agreement for a loan of EUR150,000 was
entered into with Moserburg Investments Limited for SC Gold Developments
SPV SRL. Both loans mature on 2 April 2012 and have an interest
payable at 15.5% per annum and are secured against a first ranking
charge over the shareholder loan of Rominvestments S.A or the
first proceeds remitted to The Romania Property Fund or its subsidiaries
from the Borrower for the amount of the Loan.
The Directors are currently negotiating a new property acquisition
and financing arrangement with the Blackpearl group. A number
of creditors have agreed to standstill until these negotiations
are completed and the Group is restructured.
The Group sold its Luxembourg subsidiary Romholdings S.A. to
Blackpearl Real Estate LLP for a nominal consideration of EUR
1 on 11 June 2010. This was a dormant company and no significant
gain or loss occurred on transaction.
THE FOLLOWING PAGES ARE
PRESENTED FOR INFORMATION PURPOSES ONLY
AND DO NOT FORM PART OF THE
AUDITED FINANCIAL STATEMENTS
Consolidated statement of comprehensive loss
For year ended 31 December 2009
Restated into Pound Sterling
31 December 31 December
2009 2008
GBP GBP
Revenue - 149,161
Inventory
sales
- 149,161
------------- -------------
Cost of Sales:
Impairment of inventory 4,592,026 14,810,341
------------- -------------
Gross loss (4,592,026) (14,661,180)
------------- -------------
Expenditure
Administration fees 145,509 177,042
Management fees 520,020 544,190
Directors' fees
and expenses 106,672 98,796
Other expenses 428,487 500,850
Loss on foreign
currency exchange 171,830 -
Loss on disposal
of subsidiary 2,674,695 622,678
Total expenditure 4,047,213 1,943,556
------------- -------------
Operating loss (8,639,239) (16,604,736)
Finance income 22,111 11,267
Finance cost (313,981) (473,258)
------------- -------------
Net finance expense (291,870) (461,991)
Loss before
tax (8,931,109) (17,066,727)
Taxation - -
Loss for the year (8,931,109) (17,066,727)
Other comprehensive
loss
Exchange differences arising
on translation of
foreign operations: (1,684,683) 3,289,623
Reclassification adjustment for foreign
exchange on
disposal of foreign
operation 2,035,695 -
Total comprehensive
loss for the year (8,580,097) (13,777,104)
============= =============
Consolidated statement of financial position
For year ended 31 December 2009
Restated into Pound Sterling
31 December 31 December
2009 2008
GBP GBP
Assets
Non current assets
Inventory 5,414,393 16,843,904
Total non current
assets 5,414,393 16,843,904
------------- -------------
Current assets
Trade and other
receivables 53,396 1,054,834
Cash and cash equivalents 708,505 2,021,988
Total current assets 761,901 3,076,822
------------- -------------
Total assets 6,176,294 19,920,726
============= =============
Equity
Capital and reserves attributable to
equity holders of the group
Issued capital and
reserves 3,721,641 12,301,738
Total equity 3,721,641 12,301,738
------------- -------------
Liabilities
Current liabilities
Short term loans
payable 2,352,223 4,622,949
Trade and other
payables 102,428 162,224
Total current liabilities 2,454,651 4,785,173
Provision for other
liabilities and
charges - 2,833,813
Non-current liabilities
Founder shares 2 2
Total liabilities 2,454,653 7,618,988
------------- -------------
Total equity and
liabilities 6,176,294 19,920,726
============= =============
NAV per ordinary share
(pence per share) 19.01 62.84
NAV per ordinary share at launch
(pence per share)
140.00 140.00
Consolidated statement of changes in equity
for the year ended 31 December 2009
Restated into Pound Sterling
Share Foreign Share Revenue
capital exchange premium reserve Total
reserve
GBP GBP GBP GBP GBP
As at 31 December
2007 - 2,405,015 26,584,758 (2,910,931) 26,078,842
Total comprehensive
loss for the year - 3,289,623 - (17,066,727) (13,777,104)
As at 31 December
2008 - 5,694,638 26,584,758 (19,977,658) 12,301,738
------------- ------------ -------------- ------------- -------------
Total comprehensive
loss for the year - 351,012 - (8,931,109) (8,580,097)
As at 31 December
2009 - 6,045,650 26,584,758 (28,908,767) 3,721,641
============= ============ ============== ============= =============
Consolidated statement of cash flows
for the year ended 31 December 2009
Restated into Pound Sterling
31 December 31 December
2009 2008
GBP GBP
Loss for the year
before tax (8,931,109) (17,066,727)
Adjustment
for:
Impairment of inventory 4,592,026 14,810,341
Loss on disposal
of subsidiary 2,674,695 -
Net finance income 291,871 461,991
Operating cash flows before
movements
in working capital (1,372,517) (1,794,395)
Decrease / (increase) in trade and
other receivables 204,232 (627,636)
Increase in trade
and other payables (2,018) (119,959)
Cash used in operations (1,170,303) (2,541,990)
Interest received (313,981) 11,267
Interest
paid 22,111 (473,259)
------------- -------------
Net cash outflow from
operating activities (1,462,173) (3,003,982)
------------- -------------
Investing activities
Cash and cash equivalents disposed
of on disposal of subsidiary (22,250) -
Investment in inventory (414,305) (8,223,442)
Net cash outflow from
investing activities (436,555) (8,223,442)
------------- -------------
Financing activities
Proceeds from loan 1,384,356 4,622,949
------------- -------------
Net cash inflow
from financing activities 1,384,356 4,622,949
------------- -------------
Decrease in cash and cash equivalents
for the period (514,372) (6,604,475)
Opening cash and
cash equivalents 2,021,988 5,336,840
Effect of foreign currency
exchange rates (799,111) 3,289,623
Closing cash and
cash equivalents 708,505 2,021,988
============= =============
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR KKQDDOBDDABD
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