23 June 2008 AIM : LCSS
Lewis Charles Sofia Property Fund
("Lewis Charles" or "the Company" or "the Fund")
Preliminary results for the year
ended 31st December 2007
2007 Financial highlights
- Value of the Lewis Charles Sofia Property Fund portfolio at 31st
December 2007 is EUR 83.9 million compared to an acquisition cost of
EUR 43.9 million
- NAV of 116 pence - increase of 18% on the year before (2006 NAV:
98 pence)
- Construction permit received and construction began at one of the
Razlog/Bankso project sites in October 2007
- Sales on phase one at the Govedarci project commenced mid April
2008 - phase one is expected to be completed by the end of Q4 2008
- Construction at the disused tobacco factory in Plovdiv, Bulgaria's
second most populous city, is expected to commence by early 2009
- Necessary permits for planning and construction at the Banya
projects anticipated to be received by the beginning of 2009
- Charles Burton appointed as Chairman
- The Fund's maiden sale, 10.3% of the BuySell project, to a Greek
Insurance Company for EUR1,891,966
Commenting today, Loraine Pinel, Fund Manager of Lewis Charles Sofia
Property Fund said "2007 was a year of steady progress for the Fund
and we are pleased that this has continued into 2008. This progress
has ranged from the granting of planning permission and the starting
of construction right through to the sale of properties in Sofia.
Despite this, the disappointing drop in share price has been a key
concern. The Fund Managers and Board will nevertheless continue to
focus on delivering projects on schedule in order to optimise
shareholder value. We thank the shareholders for their continued
support. Finally, the Fund welcomes Charles Burton as Chairman of the
Board whose contribution I am sure will be exceedingly valuable."
For further enquires -
Loraine Pinel, Mark Anderson -
Lewis Charles Securities Limited
+44 (0) 20 7456 9100/+44 (0) 7876 560 787
Dominic Morley, Stuart Gledhill - Panmure Gordon
+44 (0) 20 7459 3600
Ed Portman, Leesa Peters - Conduit PR
+44 (0) 207 429 6607/+44 (0) 7733 363 501
Chairman's Statement
It is with pleasure that I welcome shareholders to the 3rd financial
report of The Lewis Charles Sofia Property Fund Limited. The
reporting period covers the Company's operations for 2007.
The fair value of these developments at 31st December 2007 is
Euro 83.9 million (versus an acquisition cost of Euro 43.9
million).
International Accounting Standards (IAS) dictates the basis on which
investment properties are valued within financial statements.
To comply with the IAS standards certain of our investments
are treated as "properties under development" on the
balance sheet and are recorded at the lower of cost and net
realisable value. This is contrary to our policy for the
calculation of the published valuation NAV where we record the fair
value of property based on the valuations prepared by King Sturge and
by Forton International; independent valuers not connected to the
Company. A full reconciliation between the accounting NAV and our
published valuation NAV is included in the notes to the financial
statements.
At the Balance Sheet date the published valuation NAV was 116 pence
per share in comparison to the accounting NAV of 101 pence.
I am also pleased to report that the published valuation NAV has
risen to 116 pence compared to 101 pence as at the end of June
2007. An increase of 15 per cent.
As announced in April my predecessor, Lord Howard of Penrith, has
stepped down as Chairman and as a Director of the
Company. I am honoured to have been appointed to this role and I
would like to thank Lord Howard for his great contribution during
the very important formative years of the Company. I am confident
that the Company will continue to do well. The Company has acquired
some valuable plots of land and is well-diversified in terms of
location and project maturity (from unregulated agricultural land
through to project construction and sales). Several of the projects
are now either being developed or are in the process of obtaining
final planning permits.
Charles Burton
23rd June 2008
Investment Manager's Report
Property Market
2007 was yet another good year for the Bulgarian property market
(residential and commercial). The two most expensive cities in terms
of residential properties are Sofia and Varna. Average prices at the
end of 2007 were Euro927 per square metre for Sofia and Euro901 per
square metre for Varna.
The market in Sofia has become more competitive with approximately 1.4
million square metres of build area scheduled for
completion during 2009. Most of these residential projects are being
sold off plan. New supply is concentrated outside the city centre,
particularly in the south and west. This is because it is now
difficult to obtain large land plots in the city centre. In
addition, transport has improved with the extension to the Sofia
subway expected to be finished sometime in 2009. There has also been
an increase in interest in new build houses (as opposed to
apartments) around Sofia (Bistritsa, Marchaevo and Klanitsa) and
other cities. Demand remains strong, particularly on the quality
projects, both in Sofia and on the outskirts. Bank lending on
commercial and residential projects is still strong. However, banks
are becoming more selective on the projects they choose to lend to.
Mortgage borrowing is also up on the year. This upward trend in
prices is expected to continue as infrastructure around Sofia
improves. Prices in second tier cities are also expected to rise
and may even exceed the rate of increase of those in Sofia.
The Economy
After rapid growth, at above 6%, in both 2006 and 2007, the economy
is expected to slow slightly, in both this year and the next. The
growth rate is expected to remain close to 6% (ref: Oxford
Economics). This compares very favourably with, for example, the
Euro zone average, where growth is expected to be below 2% in both
2008 and 2009.
This slowdown in the rate of expansion in the economy reflects the
impact of the credit crunch on developed countries in Europe.
Already Bulgaria's increase in consumer spending and import growth
has fallen back, as seen in the data for final quarter of 2007.
Export volumes, though, have kept up well and should continue to
stimulate the economy. This suggests a better and sustainable
balance in the economy.
At a time of fragility in global financial markets, the large external
gap is a concern. The last few years have seen the
increasingly large current account deficit effectively covered by FDI
inflows, but this will need to continue. Rising inflation has
also been a concern. In March, Bulgarian inflation rose to 14.2%.
However, this is expected to abate, providing there is a better
harvest this year, after last year's drought. The continuing budget
surplus is a healthy feature and provides a strong underpinning to
the future performance of the economy.
Overall, therefore, the economy appears to be in relatively good
shape and this is likely to support the continued development of the
property market, especially relative to those economies in the Euro
zone.
Strategy
The Company's strategy is to own a portfolio of real estate projects
in varying stages of maturity, from unregulated agricultural land
through to projects ready for sale, and in different parts of the
country. The backbone of the portfolio is the land bank. This has
been selected by the Fund Managers because we believe that over time
there should be a significant increase in the value of the land.
For example, the area may be about to benefit from a significant
upgrade in infrastructure (Kambanite Bistritsa and Govedarci);
located on a junction of two Pan European Transnational Corridors
(leading to a natural increase in employment) such as in Veliko
Tarnovo and Plovdiv; or expected to benefit from an increase in
disposable income (Dolna Banya, Banya and Plovdiv).
The Investment Managers have attempted to reduce and spread risk by
diversifying across the country. This allows the portfolio to benefit
from the fact that increases in residential property prices are not
synchronized across the country; they rise at different speeds at
different times in different regions. This should allow a steady
increase in profits over time as we can concentrate development on
the next region most likely to benefit. The Directors are of the
opinion that the Company is now well placed to benefit from the
careful application of this strategy.
Portfolio Overview
Investments as of 31 December 2007
Area Build Area Cost Valuation
M2 M2 (Euro) (Euro)
1 Govedarci 35,934 34,604 3,563,084 7,751,685
2 Razlog / Bansko 18,354 26,823 7,761,791 10,971,607
3 Plovdiv 12,151 12,712 3,890,334 4,475,000
4 Sofia Vetz Simeonovo 50,814 109,744 10,721,769 20,178,527
5 Veliko Tarnovo 13,443 26,886 2,494,253 3,353,584
6 Dolna Banya 48,548 57,621 1,661,755 1,962,446
7 Sofia Kambanite Bistritsa100,713 100,713 9,230,852 25,093,741
8 Banya 121,420 182,130 3,579,456 8,702,598
9 Other 16,357 16,357 975,228 1,457,902
________ ________ ________ ________
Total 417,734 567,590 43,878,522 83,947,090
________ ________ ________ ________
Options on these properties have been exercised and full ownership
will be transferred to the Fund on satisfactory completion of
projects by the developer.
N.B. Some build areas are estimated subject to planning approval.
Because of the provisions of IAS 2 some of these values may not be
fully reflected in the balance sheet. A full reconciliation between
the accounting NAV and the published value NAV is
included in the notes to the Financial Statements.
1. Sofia (Buysell - VitoshaVets, Simeonovo and Krustova Vada)
As reported on 16 May 2008, the Fund sold 10.3% of the total project
with our first developer BuySell. This is equal to 11,272 square
metres out of the project's 109,744 square metres of build area. The
sold properties comprise 61 apartments, 10 offices, 6 shops and 31
underground parking spaces.
The properties sold are part of the original options that were exercised
in 2005 when the Fund was established. The price achieved in this sale
is an average of Euro930 per square metre (excluding VAT) for the total
build area. As the Fund originally invested a deposit equivalent to 24%
of estimated total costs the proceeds of this transaction return a
proportionate profit to the Fund (the total deposit paid was
Euro10,252,971 million of which this sale has recouped Euro1,038,961).
This sale results in the Fund receiving gross proceeds of Euro1,891,966
of which Euro1,038,961 represents the initial deposit on the property,
which will be repaid immediately. The balance of Euro853,005 has been
offset against the Fund's outstanding liability on completion of the
total project with BuySell.
The buyer is an International Insurance Company based in Greece.
There remains strong interest from other institutional buyers and we
expect to see more sales in the near future. We are also in the
process of retaining one or two local agents to sell the apartments.
Meantime, construction on all of the buildings of the BuySell project is
well advanced with delivery expected in 2009.
2. Govedarci (Crystal Vale)
The Crystal Vale development will consist of a main building containing
22 apartments and nine lodges each containing 13
apartments (a total of 139 apartments). The total build area will be
approximately 13,600 square metres. Crystal Vale will also contain
its own leisure facilities including a swimming pool, restaurant,
bar, spa and tennis courts. The developer for the Crystal Vale
project is Anglo-Bulgarian Real Estate Limited (A-BRE) (www.a-
bre.com).
A feature of the development is the construction of the lodges. These
will be a prefabricated Canadian timber based
construction. This system incorporates a very high degree of thermal
insulation together with a heat recovery ventilation system to
produce accommodation that is cheap to heat and eco-friendly.
Construction began in autumn 2007 and the entire project is expected
to be completed towards the end of 2009 or early 2010. The first
phase is expected to be finished towards the end of 2008. Sales on
phase 1 had been expected to start in March 2008 but did not commence
until the end of April 2008. Detailed information on the project can
be found on (www.crystal-vale.com). The sales strategy is to promote
this development as a premium product both by virtue of location,
year round lifestyle and very high quality of construction and
finish. Agents have been carefully selected in various countries in
order to expose the product to the widest selection of appropriate
potential purchasers.
3. Razlog/Bansko
The Fund appointed Westhill Investments (www.westhilluk.com) to develop
the sites. Construction of the first project (four
phases) started in October 2007 and rough construction has now been
completed on Phase 1. The Fund has now received the construction
permit for Phase 2 which will allow two more buildings comprising a
total of a further 33 apartments. Phases 3 and 4 of the development
will not commence until sales on phases 1 and 2 have reached a
satisfactory level. The project will ultimately consist of 152
apartments and six houses.
To date 28% of the build area of phase 1 has been sold off plan. Now
that rough construction has been completed, the next off plan payment
stage has been triggered bringing the deposits to 50% of purchase
price. The sales team for the next stage of sales has been
appointed and the launch of the main marketing campaign will be timed
to coincide with the September ski season.
The second project has a construction permit and envisages the
development of a six-storey residential apartment building with
fitness and spa areas. Currently we are leaving this project in our
land bank as we do not wish to develop too many properties in the
same area at the same time.
4. Plovdiv
The Fund currently holds planning permission to build a total of 12,712
square metres over two projects.
The larger project comprises a disused tobacco factory located in
the heart of the city centre with views towards the old town. The
development of eight floors will provide a mixture of luxury
apartments and commercial facilities. Construction is expected to
start in Q4 2008 or Q1 2009. The Fund holds design visas on both
sites and is continuing to work with the architects and the
developer, Westhill, in order to progress planning permission on the
two projects. We are expecting to make further announcements in
relation to the tobacco factory later this year.
The smaller project is located 2 kilometres from the city centre and is
situated close to the historic national rowing club.
5. Veliko Tarnovo
This is a large centrally located plot on which all relevant
construction permits for a residential complex have already been
granted. This prime site is currently being held in the land bank in
order to benefit from rising land prices in the area. Veliko
Tarnovo has become a more attractive location for investment following
accession of Bulgaria and Romania to the EU as it is
located on the crossroads of two pan European international corridors
and is the first major town south of the only bridge across the
Danube between Romania and Bulgaria. Growth prospects for the city
continue to improve. With prices having moved up strongly in other
cities, Veliko is now starting to attract more investor attention.
We will continue to hold this land in the land bank until the timing
is right and we can maximize the return to shareholders by either
selling or developing.
6. Dolna Banya
These four sites will be kept in the land bank until further notice.
As mentioned previously the four sites are well positioned and were
bought to take advantage of the modernization and marketing of Dolna
Banya as a modern spa centre. There are several factors that make
Dolna Banya an especially attractive location. Apart from the fact
that it possesses some of Bulgaria's largest thermal springs, Dolna
Banya is just thirty minutes away from Borovecs (the country's second
largest mountain and ski resort) and 60-80 kilometres from Bulgaria's
two largest cities - Sofia, the nation's capital and Plovdiv. Dolna
Banya has been chosen for several large scale projects, including
Wellness Island and a 5 star hotel positioned beside the Jack
Nicklaus 18 hole golf course. The Wellness Island Group is talking
to the German Health Insurance authorities over the possibility of
sending patients across for therapy at the centre.
Given this backdrop and with continued expected economic growth and
increased disposable income to spend on entertainment, health and
relaxation activities, we think it makes sense to continue to hold
the land plots in order to maximise the eventual return to
shareholders.
7. Sofia (Kambanite Bistritsa)
The Manager is continuing to work with the Fund's architects to
submit final development plans for the site in order to identify the
best scheme for future development. It is the Manager's intention
to apply for a construction permit before the end of 2008 and sales
and building to commence in 2009.
In the Manager's opinion, there are few plots of this size in Sofia that
are as well located and the Manager believes that sales
prices in this area have now reached levels which would make development
of the site a highly attractive option. Nikmi
Bulgaria, a local developer, has just sold a nearby development of 52
large luxury houses (Belle Valley) and has also commenced development
of a hotel and leisure complex with a retail element.
The Sofia subway extension to the Sofia Business Park is expected to
be finished in 2009 and will be within walking distance of the site.
In addition, the widening of the ring road and construction of two
bridges over the ring road in this area is nearly complete. The two
bridges offer easy access to the Business Park and make it easier to
drive to the centre of town.
Kambanite Bistritsa has now become a very desirable location in which to
live and prices have adjusted accordingly. This is
borne out by the success of the Belle Valley project. Buyers have
become more discerning in terms of location, quality of life and
accessibility to transport without being in the centre of town. The
Anglo American school is also situated close by.
8. Banya (Razlog)
The Fund own 122,000 square metres in a stunning location with views
towards the three mountain ranges surrounding the Bansko/Razlog resort
area. For planning purposes the site has been divided into three plots
for ease of phasing. The Fund expects to have the necessary permits to
commence construction on the first plot in early 2009. The process is
proceeding well and the land has already been taken out of agricultural
use. The Fund appointed Winslow Developments to regulate and develop
the project in due course. The Banya project is expected to involve the
building of a first-class holiday village consisting of chalets and
upscale apartments. The village is expected to provide all the necessary
facilities to ensure the maximum comfort of its residents such as tennis
courts, swimming pools, spa centre, restaurant and bars.
Apart from being within 5 kilometres of Bansko, Banya is famous
throughout Bulgaria for its hot mineral springs, of which the town
has more than ten. Because of its location close to the ski slopes
and the spa and medical facilities which specialize in rheumatic
and skin diseases, Banya is now starting to see significant
international investment. An example of this is the new Pirinea
Hotel and Spa project.
9. Other
The Fund also owns 16,357 square metres of land in relatively close
proximity to one of the Fund's existing projects. The cost of
acquiring the land purchased to date is approximately Euro1 million.
Once the purchase of the remaining land intended for the plot is
complete, the Fund will make a full announcement as to the location.
Company income statement
for the year ended 31 December 2007
31 Dec 2006
Revenue Capital Total Total
Notes
______ __________ __________ __________ __________
EUR EUR EUR EUR
Expenditure
Administration fees 3 129,612 - 129,612 105,316
Management fees 4 1,035,092 - 1,035,092 1,021,447
Performance fees 5 - 2,376,955 2,376,955 3,016,255
Directors' fees and expenses 6 91,907 - 91,907 78,543
Foreign exchange loss 19,270 - 19,270 8,093
Other expenses 7 1,056,837 - 1,056,837 803,835
______ __________ __________ __________ __________
Total expenditure 2,332,718 2,376,955 4,709,673 5,033,489
______ __________ __________ __________ __________
Operating loss (2,332,718) (2,376,955) (4,709,673) (5,033,489)
Finance income 9 408,577 - 408,577 809,505
__________ __________ __________ __________
Net loss before taxation (1,924,141) (2,376,955) (4,301,096) (4,223,984)
Tax on profit on ordinary
activities 10 - - - -
__________ __________ __________ __________
Loss for the year (1,924,141) (2,376,955) (4,301,096) (4,223,984)
__________ __________ __________ __________
__________ __________ __________ __________
The total column of this statement represents the Company's Income
Statement, prepared in accordance with IFRS. The
supplementary revenue and capital columns are both prepared under
guidance published by the Association of Investment
Companies. All income is attributable to the equity holders of the
parent company. There are no minority interests. All items in the
above statement derive from continuing operations.
Consolidated income statement
for the year ended 31 December 2007
31 Dec 2006
Revenue Capital Total Total
Notes
______ __________ __________ __________ __________
EUR EUR EUR EUR
Income
Sundry income - - - 574
Net change in gains on revaluation
of investment property - 12,387,151 12,387,151 14,491,706
__________ __________ __________ __________
Total income - 12,387,151 12,387,151 14,492,280
__________ __________ __________ __________
Expenditure
Administration fees 3 206,295 - 206,295 105,316
Management fees 4 1,035,092 - 1,035,092 1,021,447
Performance fees 5 - 2,376,955 2,376,955 3,016,255
Directors' fees and expenses 6 91,907 - 91,907 78,543
Foreign exchange loss 21,220 - 21,220 15,130
Other expenses 7 1,310,024 - 1,310,024 1,007,368
__________ __________ __________ __________
Total expenditure 2,664,538 2,376,955 5,041,493 5,244,059
__________ __________ __________ __________
Operating (loss) / profit (2,664,538) 10,010,196 7,345,658 9,248,221
Finance income 9 423,929 - 423,929 813,407
__________ __________ __________ __________
Net (loss)/profit before taxation (2,240,609) 10,010,196 7,769,587 10,061,628
Taxation 10 - (1,238,715) (1,238,715) (1,449,171)
__________ __________ __________ __________
(Loss)/Profit for the year (2,240,609) 8,771,481 6,530,872 8,612,457
__________ __________ __________ __________
__________ __________ __________ __________
Earnings per share - basic and
diluted (cents per share) 11 13.51 17.82
The total column of this statement represents the Group's Income
Statement, prepared in accordance with IFRS. The
supplementary revenue and capital columns are both prepared under
guidance published by the Association of Investment
Companies. All income is attributable to the equity holders of the
parent company. There are no minority interests. All items in the
above statement derive from continuing operations.
Company balance sheet
as at 31 December 2007
Company Company
Notes 2007 2006
______ _________________________ _________________________
EUR EUR EUR EUR
Non-current assets
Investment in subsidiaries 14 41,775,362 27,367,233
____________ ____________
41,775,362 27,367,233
Current assets
Trade and other receivables 15 18,564 58,674
Cash and cash equivalents 16 6,229,149 22,514,641
____________ ____________
6,247,713 22,573,315
____________ ____________
Total assets 48,023,075 49,940,548
____________ ____________
Current liabilities
Trade and other payables 17 (107,246) (100,578)
____________ ____________
(107,246) (100,578)
Non-current liabilities
Trade and other payables 17 (5,393,210) (3,016,255)
(5,393,210) (3,016,255)
____________ ____________
Total liabilities (5,500,456) (3,116,833)
____________ ____________
Net assets 42,522,619 46,823,715
____________ ____________
____________ ____________
Represented by
Share capital 18 - -
Special reserve 19 56,956,985 56,956,985
Capital reserve 20 (6,052,011) (3,675,056)
Revenue reserve 20 (8,382,355) (6,458,214)
____________ ____________
Total Equity 42,522,619 46,823,715
____________ ____________
Consolidated balance sheet
as at 31 December 2007
Company Company
Notes 2007 2006
______ _________________________ _________________________
EUR EUR EUR EUR
Non-current assets
Investment properties 12 55,127,208 27,981,983
____________ ____________
55,127,208 27,981,983
Current assets
Properties under development 13 15,625,171 11,382,006
Property options 5 5
Trade and other receivables 15 22,802 113,872
Non-group receivables 490,098 1,853,792
Cash and cash equivalents 16 7,209,621 23,046,407
____________ ____________
23,347,697 36,396,082
____________ ____________
Total assets 78,474,905 64,378,065
____________ ____________
Current liabilities
Trade and other payables 17 (764,630) (237,964)
____________ ____________
(764,630) (237,964)
Non-current liabilities
Trade and other payables 17 (8,816,842) (3,016,255)
Deferred taxation 10 (2,687,886) (1,449,171)
____________ ____________
(11,504,728) (4,465,426)
____________ ____________
Total liabilities (12,269,358) (4,703,390)
____________ ____________
Net assets 66,205,547 59,674,675
____________ ____________
____________ ____________
Represented by
Share capital 18 - -
Special reserve 19 56,956,985 56,956,985
Capital reserve 20 18,138,960 9,367,479
Revenue reserve 20 (8,890,398) (6,649,789)
____________ ____________
Total Equity 66,205,547 59,674,675
____________ ____________
____________ ____________
NAV per share (Euro per share) 21 1.3694 1.2344
NAV per share at launch (Euro per
share) 1.1781 1.1781
These financial statements were approved by the Board of Directors on 23 June 2008.
Signed on behalf of the Board
Clive Simon Gerald Williams
Director Director
Statements of changes in equity
for the year to 31 December 2007
Consolidated Share Special Capital Revenue 31 December
Capital Reserve Reserve Reserve Total 2006
EUR EUR EUR EUR EUR EUR
As at 31 December 2006 - 56,956,985 9,367,479 (6,649,789) 59,674,675 51,062,218
Issue of ordinary shares - - - - - -
Profit/(loss) for the year - - 8,771,481 (2,240,609) 6,530,872 8,612,457
_______________________________________________________________________
Total recognised income
and expenses for the year - - 8,771,481 (2,240,609) 6,530,872 8,612,457
_______________________________________________________________________
As at 31 December 2007 - 56,956,985 18,138,960 (8,890,398) 66,205,547 59,674,675
_______________________________________________________________________
_______________________________________________________________________
Company Share Special Capital Revenue 31 December
Capital Reserve Reserve Reserve Total 2006
EUR EUR EUR EUR EUR EUR
As at 31 December 2006 - 56,956,985 (3,675,056) (6,458,214) 46,823,715 51,047,699
Issue of ordinary shares - - - - - -
Loss for the year - - (2,376,955) (1,924,141) (4,301,096) (4,223,984)
_______________________________________________________________________
Total recognised income
and expenses for the year - - (2,376,955) (1,924,141) (4,301,096) (4,223,984)
_______________________________________________________________________
As at 31 December 2007 - 56,956,985 (6,052,011) (8,382,355) 42,522,619 46,823,715
_______________________________________________________________________
_______________________________________________________________________
Company cash flow statement
for the year ended 31 December 2007
2007 2006
__________ _________
EUR EUR
Loss for the year (4,301,096) (4,223,984)
Adjustment for:
Bank interest receivable (4,965) (20,020)
__________ _________
Operating cash flows before movements
in working capital (4,306,061) (4,244,004)
Decrease in receivables 40,110 32,720
Increase in payables 2,383,623 3,097,746
__________ _________
(1,882,328) (1,113,538)
Interest received 4,965 20,020
__________ _________
Net cash outflow from operating activities (1,877,363) (1,093,518)
Investing activities
Investment in subsidiary (14,408,129)(27,324,677)
Repayment of loan by property developer - 9,150,471
__________ _________
Net cash outflow from investing activities (14,408,129)(18,174,206)
Cash and cash equivalents at start of year 22,514,641 41,782,365
__________ _________
Cash and cash equivalents at end of year 6,229,149 22,514,641
__________ _________
__________ _________
Consolidated cash flow statement
for the year ended 31 December 2007
2007 2006
__________ _________
EUR EUR
Profit for the year 6,530,872 8,612,457
Adjustment for:
Bank interest receivable (20,317) (23,922)
Revaluation of investments (12,387,151)(14,491,706)
Adjustment for deferred tax 1,238,715 1,449,171
__________ _________
Operating cash flows before movements
in working capital (4,637,881) (4,454,000)
Decrease / (increase) in receivables 91,070 (22,478)
Increase in payables 6,327,253 3,230,935
__________ _________
1,780,442 (1,245,543)
Interest received 20,317 23,922
__________ _________
Net cash inflow /
(outflow) from operating activities 1,800,759 (1,221,621)
__________ _________
Investing activities
Repayment of loan to property developer 1,363,694 9,150,471
Advances of loan to property developer - (1,853,792)
Purchases of investment properties (19,001,239)(24,872,283)
__________ _________
Net cash outflow from investing activities (17,637,545)(17,575,604)
__________ _________
Cash and cash equivalents at start of year 23,046,407 41,843,632
__________ _________
Cash and cash equivalents at end of year 7,209,621 23,046,407
__________ _________
__________ _________
Notes to the consolidated financial statements
as at 31 December 2007
1 CORPORATE INFORMATION
Lewis Charles Sofia Property Fund Limited (the "Company") and
its subsidiaries (together the "Group") is an investment fund
with a major investment portfolio in Bulgaria. The aim of the
Fund is to generate capital gains through investing in
residential property primarily in Sofia and the adjacent ski
resorts. The investment strategy of the Company is to work
with developers at the earliest possible stage.
The company is a limited company incorporated in
Guernsey. The address of the registered office is shown
on page 2.
The Company is listed on the London Stock Exchange,
Alternative Investment Market (AIM).
These financial statements were authorised by the
Board for publication on 23 June 2008
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of
these consolidated financial statements are set out below. These
policies have been consistently applied to all the years
presented, unless otherwise stated.
The financial statements of the Company 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.
2.1 Basis of preparation
The financial statements have been prepared on the historical cost
basis, except for the revaluation of investments.
Financial assets and financial liabilities (including derivative
financial instruments) are held at fair value through profit and
loss.
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.
Revisions to accounting estimates are recognised in the period in
which the estimate is revised if the revision only affects that
period, or in the period of the revision and future periods if
the revision affects both current and future periods.
a) Adoption of new and revised Standards
In the current year, the Group has adopted IFRS7 Financial
Instruments: Disclosures which is effective for annual
reporting periods beginning on or after 1 January 2007, and the
related amendment to IAS 1 Presentation of Financial
Statements . The impact of the adoption of IFRS7 and the changes
to IAS 1 has been to expand the disclosures provided in these
financial statements regarding the Group's financial instruments
and management of capital (see note 22). Four interpretations
issued by the International Financial Reporting Interpretations
Committee are effective for the current year. These are : IFRIC 7
Applying the Restatement Approach under IAS29, Financial
Reporting in Hyperinflationary Economies : IFRIC 8 Scope of IFRS
2 : IFRIC 9 Reassessment of Embedded Derivatives ; and IFRIC 10
Interim Financial Reporting and Impairment . The adoption of
these Interpretations has not led to any changes in the Group's
accounting policies.
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:-
New Standards
IFRS 8: Operating segments - for accounting periods commencing on or
after 1 January 2009.
Revised and amended standards
IFRS 2:Share based payments - for accounting periods commencing on
or after 1 January 2009.
IFRS 3:Business Combinations - for accounting periods commencing on
or after 1 July 2009.
IAS 1:Presentation of Financial Statements - for
accounting periods commencing on or after 1 January 2009.
IAS 23:Borrowing costs - for accounting periods commencing
on or after 1 January 2009.
IAS 27:Consolidated and Separate Financial Statements - for
accounting periods commencing on or after 1 July 2009.
IAS 32:Financial Instruments: Presentation - for accounting periods
commencing on or after 1 January 2009.
Interpretations
IFRIC 11: IFRS 2 - Group and Treasury Share Transactions - for
accounting periods commencing on or after 1 March 2007.
IFRIC 12: Service Concession Arrangements - for accounting periods
commencing on or after 1 January 2008.
IFRIC 13: Customer Loyalty Programmes - for accounting periods
commencing on or after 1 July 2008.
IFRIC 14: IAS 19- The limit on a Defined Benefit Asset,
Minimum Funding Requirements and their Interaction - for
accounting periods commencing on or after 1 January 2008.
The Directors anticipate that the adoption of these standards
and interpretations in future periods will not have material
impact on the financial statements of the Group. The principal
accounting policies adopted are set out below.
2.2 Significant accounting estimates and judgements
In applying the Group's accounting policies, the Directors make
judgements in the following areas
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.
(a) Investment property
The gross property value is the amount for which an asset could
be exchanged between knowledgeable, willing parties in an arm's
length transaction without deduction for any associated transfer
taxes, sales taxes, or other costs normally borne by the seller.
Transaction costs normally borne by the seller are not deducted
in arriving at gross property value, in accordance with IAS 40.
The fair value is calculated by deducting the costs normally
borne by the purchaser from the gross property value. Fair value
is not intended to represent the liquidation value of the
property, which would be dependent upon the price negotiated at
the time of sale less any associated selling costs. The fair
value is largely based on estimates using property appraisal
techniques and other valuation methods as outlined below. Such
estimates are inherently subjective and actual values can only be
determined in a sales transaction.
The Group's valuers derive the fair value by applying the
methodology and valuation guidelines as set out by the Royal
Institution of Chartered Surveyors in the United Kingdom in
accordance with IAS 40. This approach is based on discounting the
future net income receivable from properties to arrive at the net
present value of that future income stream. Future net income
comprises the rent secured under existing leases, less any known
or expected non-recoverable costs and the current market rent
attributable to future vacancy years. The consideration basis
for this calculation excludes the effects of any taxes. The
discount factors used to calculate fair value are consistent with
those used to value similar properties, with comparable leases in
each of the respective markets.
(b) Business combinations
Significant judgement is required when determining the
appropriate method of accounting for acquisitions of shares of a
company owning property.
During the year the Group acquired 100% of the issued share capital
of VT Developments EOOD through the entire
issued share capital of Fumero Properties SA. In the opinion of
the Directors, the special purpose vehicle which itself owns the
investment property (the property at Veliko Tarnova) does not
qualify as a business combination under the definition of IFRS 3
as the acquired entity did not carry out any trade other than the
ownership/operation of the property.
Accordingly this has been accounted for as a direct purchase of
investment property and associated net assets.
It is possible that an alternative interpretation would
result in goodwill arising on the acquisition of the
investment property owning company.
2.3 Accounting policies
The principal accounting policies are set out below. Where
presentational guidance set out in the Statement of
Recommended Practice ("SORP") for investment trusts issued by the
Association of Investment Trusts ("AITC") in
December 2005 is consistent with the requirements of IFRS, the
directors have sought to prepare the financial statements on a
basis compliant with the recommendations of the SORP.
(a) Consolidation
The consolidated financial statements incorporate the
financial statements of the Company and entities controlled
by the Company (and its subsidiaries) made up to 31 December.
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 acquired during the period are
included in the consolidated statements from the date
control passes.
All intra-group transactions, balances, income and expenses are
eliminated on consolidation
(b) Presentation of income statement
In order to reflect the activities of an investment trust
company and in accordance with guidance issued by the
Association of Investment Trust Companies, supplementary
information which analyses the income statement between
items of a revenue and capital nature has been presented
alongside the income statement.
(c) Income
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.
(d) 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.
(e) 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 Company may be held in Euro-denominated
government bonds with maximum maturities of the lesser of two
years or the remaining life of the Company 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.
(f) Options over property
Options over property are treated as current assets and
included in the balance sheet at cost. Cost is deemed to be
the fair value of consideration given. No depreciation is
provided on these assets, however the Directors review each
option for impairment annually.
(g) Investment property
Investment property, which is property held to earn rentals
and/or for capital appreciation, is initially recognised at
cost being the fair value of consideration given including
related transaction costs. After initial recognition at cost,
investment properties are carried at their fair values based
on quarterly professional valuations made by Forton
International JSCo and King Sturge Kft. The valuations are in
accordance with standards complying with the Royal
Institution of Chartered Surveyors Approval and Valuation
manual and the International Valuation Standards Committee.
Gains or losses arising from changes in fair value of
investment property are included in the income statement for
the period in which they arise. Properties are treated as
acquired when the Group assumes the significant risks and
returns of ownership and as disposed of when these are
transferred to the buyer. When the Group redevelops an
existing investment property for continued future use as an
investment property, the property remains an investment
property and is not reclassified.
Transfers are made to investment property when there is a change
in use, evidenced by the end of owner
occupation, commencement of an operating lease to another party
or completion of construction or development.
Transfers are made from investment property when, and
only when, there is a change in use, evidenced by
commencement of owner occupation or commencement of
development with a view to sale.
For a transfer from investment property to owner occupied
property, the deemed cost of property for subsequent
accounting is its fair value at the date of change in use. If
the property occupied by the Group as an owner occupied
property becomes an investment property, the Group accounts
for such property in accordance with the treatment under IAS
16 Property, Plant and Equipment up to the date of change in
use. For a transfer from development to investment property,
any difference between the fair value of the property at that
date and its previous carrying amount is recognised in the
income statement. When the Group completes the construction
or development of a self-constructed investment property, any
difference between the fair value of the property at that
date and its previous carrying amount is recognised in the
income statement.
Development Property
Development property which comprises buildings under
construction includes capitalised interest where applicable
and is carried at cost or, if lower, net realisable value.
Cost includes all directly attributable third party
expenditure incurred.
(h) Segmental reporting
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,
Bulgaria.
(i) Taxation
The Company is exempt from taxation under the provisions
of the Income Tax (Exempt Bodies) (Guernsey) Ordinance,
1989. As such, the Company is only liable to pay a fixed
annual fee, currently GBP600.
The subsidiaries, Lewis Charles Sofia Propert Fund Bulgaria EOOD,
Black Sea Properties EOOD and VT
Developments Bulgaria EOOD will be liable for Bulgarian
Corporation Tax. With effect from 1 January 2007 the
Bulgarian Corporate Tax rate reduced to 10%.The subsidiaries
are not liable for any further local taxes, however
withholding taxes may be payable on repatriation of assets
and income to the Company, as currently there is no double
tax treaty between Guernsey and Bulgaria.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amount of
assets and liabilities in the financial statements and
corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability
method. Deferred tax liabilities are generally recognised for
all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable
profits will be available against which deductible temporary
differences can be utilised. Such assets and liabilities are
not recognised if the temporary differences arise from
goodwill or from the initial recognition (other than in a
business combination) of other assets and liabilities in a
transaction that affects neither the tax profit nor the
accounting profit.
Deferred tax liabilities are recognised for taxable
temporary differences arising on investments in
subsidiaries, except where the Group is able to control
the reversal of the temporary difference and it is
probable that the temporary difference will not reverse in
the foreseeable future.
The carrying amount of deferred tax assets is reviewed at
each balance sheet date and reduced to the extent that it is
no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected
to apply in the period when the liability is settled or the
asset realised. Deferred tax is charged or credited in the
income statement, except when it relates to items charged or
credited directly to equity, in which case the deferred tax is
also dealt with in equity.
(j) Foreign currency translation
a) Functional and reporting currency
The functional currency of the Company is Euros as
substantially all expenses relating to the investments are
made in Euros.
The reporting currency of the Company for accounting
purposes is also the Euro. The financial statements are
converted into Sterling in accordance with International
Financial Reporting Standards, for information purposes
only.
(b) Transactions and balances
Foreign currency balances are translated into Euro at the
rate of exchange ruling on the last day of the company's
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 Consolidated Income Statement.
Items included in the financial statements of each of the
Group's entities are measured using the currency of the
primary economic environment in which the entity operates
(the "functional currency").
(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 interest 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 dates of the
transactions); and
(iii) all resulting exchange differences are recognised as a
separate component of equity
(k) 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 off set 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.
Unless otherwise indicated, the carrying amounts of the
Group's financial assets are a reasonable approximation of
their fair values.
(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 to be 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. For trade
receivables, such impairments directly reduce the carrying
amount of the impaired asset and are recognised against the
relevant income category in the income statement.
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 nor 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 amounts 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 Company or Group has extinguished
its contractual obligations, 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 18 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.
(l) Investment in subsidiary undertakings
Investment in subsidiary undertakings are stated at cost less,
where appropriate, provisions for impairment
3 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 Company up to GBP50 million and 0.07% of the
Net Asset Value of the Company above GBP50 million, subject to a
minimum fee during the year of GBP65,000 per annum
(2006:GBP45,000) plus disbursements. The fees quoted above
include an allowance for Directors' Fees for Gerald Williams and
Clive Simon, which are reported as Director'' Fees within the
Income Statement and the Directors' Report.
4 MANAGEMENT FEES
The Company will pay the Manager, a Management Fee of 2% per
annum of the Net Proceeds of the Placing, calculated and payable
quarterly in advance. The Manager is 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.
5 PERFORMANCE FEES
The Manager will receive a performance fee calculated and payable
in Sterling from the Company based on 20% of the excess of the
net cash proceeds from the sale of property over the 7% Property
Hurdle. The Manager will also receive a performance fee of 5%
over the 23% Property Hurdle. For these purposes, the 7% Property
Hurdle is a 7% compound per annum return on the amount of the
deposit paid on the relevant investment property and the 23%
Property Hurdle is a 23% compound per annum return on the amount
of the deposit paid on the relevant property. In the event that
the Company does not sell on the property prior to completion on
an off-plan basis and instead completes on a property, the
Property Hurdles shall be calculated by reference to the
aggregate of the deposit and the completion balance.
80% of the performance fees calculated will be payable to the
Manager within 30 days of the receipt of the proceeds of the
sale of a property. The balance will be paid at the same time
into a Reserve Account and be invested in Sterling money market
deposits, unless otherwise agreed between the Manager and the
Company. The performance fee shown within these financial
statements is a provision based on the uplift shown in the fair
value adjustment of the investment properties.
6 DIRECTORS' FEES AND EXPENSES
The Chairman receives GBP15,000 per annum, with all other Directors
receiving GBP12,000 per annum. The Chairman and Directors are
reimbursed other expenses properly incurred by them in attending
meetings and other business of the Company.
7 OTHER EXPENSES Consolidated Consolidated Company Company
2007 2006 2007 2006
Total Total Total Total
_______ _______ _______ _______
EUR EUR EUR EUR
Registrar's fees (see note 8) 14,846 15,770 14,846 15,770
Audit fees 44,527 21,527 39,995 21,527
Legal and professional fees 905,020 700,055 905,020 670,726
Consultancy fees 169,798 106,966 - -
Insurance costs 22,610 26,683 22,610 26,683
Statutory fees 5,096 13,969 5,096 1,058
Travel expenses 43,326 44,848 43,326 44,848
Bank charges 13,050 53,035 6,695 5,791
Other fees and expenses 91,751 24,515 19,249 17,432
_______ _______ _______ _______
1,310,024 1,007,368 1,056,837 803,835
_______ _______ _______ _______
_______ _______ _______ _______
8 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 GBP4,400 per
annum, or the amount per shareholder, currently GBP2.20, on the
Register of Shareholders at the commencement of the fee year. The
Company's fee year commenced on the date of Admission and on each
anniversary of that date whilst this Agreement shall continue.
9 FINANCE INCOME
2007 2006 2007 2006
Consolidated Consolidated Company Company
EUR EUR EUR EUR
Bank interest 423,929 813,407 408,577 809,505
____________ ____________ ____________ ____________
____________ ____________ ____________ ____________
The above interest arises from financial assets classified as loans
and receivables, including cash and cash equivalents, and has been calculated
using the effective interest method.
10 TAXATION
(a) Analysis of tax charge for the year
2007 2006 2007 2006
Consolidated Consolidated Company Company
EUR EUR EUR EUR
The tax expense for the year
comprises:- Current taxation - - - -
- Deferred taxation 1,238,715 1,449,171
____________ ____________ ____________ ____________
Income tax expense 1,238,715 1,449,171 - -
____________ ____________ ____________ ____________
____________ ____________ ____________ ____________
2007 2006
Consolidated Consolidated
EUR EUR
Profit/(Loss) before tax 7,769,587 10,061,628
____________ ____________
____________ ____________
Tax at the domestic corporate tax rate applicable to
profits in the country concerned 1,199,072 1,414,023
Tax effect of non deductible expenses and effect
of foreign exchange 39,643 35,148
____________ ____________
Tax charge 1,238,715 1,449,171
____________ ____________
____________ ____________
(b)Deferred taxation
Deferred taxation is calculated, in full, on all temporary timing
differences under the liability method using a principal
Bulgarian tax rate of 10% (2006: 10%). The movement on the deferred
tax account is as follows:
At start of year Charge to income At end of year
EUR EUR EUR
Deferred tax liabilities
Investment properties
- revaluation 1,449,171 1,238,715 2,687,886
______________ ______________ ______________
______________ ______________ ______________
Deferred tax assets have not been recognised on tax losses
carried forward due to lack of certainty of availability of
future taxable profits against which such losses will be
utilised.
11 EARNINGS PER SHARE - BASIC AND DILUTED
The consolidated earnings per Ordinary Share of 13.51 cents are
based on the net income loss of EUR2,240,609 and the
net capital gain for the period of EUR8,771,481. Both calculations
are made based on 48,345,000 Ordinary Shares, being
the weighted average number of shares in issue during the year.
12 INVESTMENT PROPERTIES
Group 2007 2006
EUR EUR
Market value of investment properties at 1 January 27,981,983 -
Acquisitions during the year at cost 14,758,074 13,490,277
Fair value adjustment in the year 12,387,151 14,491,706
___________ ___________
Market value of investment properties at 31 December 55,127,208 27,981,983
___________ ___________
___________ ___________
The fair value of the Group's investment properties at 31
December 2007 has been arrived at on the basis of valuations
carried out at that date by Forton International JSCo and King
Sturge Kft, independent valuers not connected to the Group.
The valuation basis has been market value as defined by the Royal
Institute of Chartered Surveyors (RICS). 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 arms length transaction
after proper marketing wherein the parties had each acted
knowledgeably, prudently and without compulsion".
13 PROPERTIES UNDER DEVELOPMENT
Group 2007 2006
EUR EUR
At 1 January 11,382,006 -
Additions 4,243,165 11,382,006
___________ ___________
At 31 December 15,625,171 11,382,006
___________ ___________
___________ ___________
At valuation 28,819,882 20,590,696
___________ ___________
___________ ___________
The development properties were revalued on an open market basis as
at 31 December 2007 by Forton International
JSCo and King Sturge Kft, independent valuers not connected to the
Group. The carrying value has been set as the lower
of cost and net realisable value as set out under the requirements
of IAS 2, Inventories.
14 INVESTMENT IN SUBSIDIARIES
Share capital Loans Total
EUR EUR EUR
At 1 January 2007 9,257,057 18,110,176 27,367,233
Additions in year 1,264,252 13,143,877 14,408,129
__________ __________ __________
At 31 December 2007 10,521,309 31,254,053 41,775,362
__________ __________ __________
__________ __________ __________
The loans are interest free and have no set repayment terms as
they provided for the purpose of long term financing of the
subsidiaries. The Directors consider the loans to be additional
capital contributions and have therefore been accounted for as
investment in subsidiary undertakings.
Details of the Company's subsidiary undertaking are as follows:
Country of Principal
Name of subsidiary undertaking Holding incorporation activity
Lewis Charles Sofia Property
Fund Bulgaria EOOD 100% Bulgaria Property Investment
Splendid Investments S.A. 100% Luxembourg Holding Company
Black Sea Properties EOOD 100% Bulgaria Property Investment
Fumero Properties S.A. 100% Luxembourg Holding Company
VT Developments Bulgaria EOOD 100% Bulgaria Property Investment
On 23 February 2007 the company acquired VT Developments Bulgaria
EOOD through the acquisition of the entire share capital of
Fumero Properties S.A. an investment property holding company
registered and incorporated in Luxembourg, funded mainly by cash.
15 TRADE AND OTHER RECEIVABLES
Consolidated Consolidated Company Company
2007 2006 2007 2006
____________ ____________ ____________ ____________
EUR EUR EUR EUR
Dividends receivable 680 38,685 680 38,685
Debtors 4,238 55,198 - -
Prepayments 17,884 19,989 17,884 19,989
____________ ____________ ____________ ____________
22,802 113,872 18,564 58,674
____________ ____________ ____________ ____________
____________ ____________ ____________ ____________
The aging of these receivables is as follows:
Less than 3 months 4,920 93,883 682 38,685
3 to 6 months 3,587 1,605 3,587 1,605
Over 6 months 14,295 18,384 14,295 18,384
____________ ____________ ____________ ____________
22,802 113,872 18,564 58,674
Trade receivables are not considered impaired and relate to
receivables for which there is no recent history of default and
as such it is assessed that all of the receivables will be
recovered.
The allocation of the carrying amount of the Group's trade and other
receivables by foreign currency is presented in Note 22.
16 CASH AND CASH EQUIVALENTS
Consolidated Consolidated Company Company
2007 2006 2007 2006
____________ ____________ ____________ ____________
EUR EUR EUR EUR
Lehman Euro Liquidity
Fund 3,840,410 9,275,834 3,840,410 9,275,834
Merrill Lynch
Institutional Liquidity
Fund - 13,045,400 - 13,045,400
Blackrock Euro Liquidity
Fund 179,229 - 179,229 -
Cash at Bank 3,189,982 725,173 2,209,510 193,407
____________ ____________ ____________ ____________
7,209,621 23,046,407 6,229,149 22,514,641
____________ ____________ ____________ ____________
____________ ____________ ____________ ____________
The cash equivalent investments are considered to be highly liquid,
so that book cost is considered equivalent to book value. The
weighted average interest rate on cash balances at 31 December 2007
was 1.13%.(2006: 3.40%). The Company has no material interest bearing
liabilities.
17 TRADE AND OTHER PAYABLES
Consolidated Consolidated Company Company
2007 2006 2007 2006
____________ ____________ ____________ ____________
EUR EUR EUR EUR
Current liabilities
Taxation payable - 136 - -
Audit fee payable 27,196 20,355 27,196 20,355
Legal fee payable 77,450 78,170 77,450 78,170
Sundry creditors 659,984 139,303 2,600 2,053
____________ ____________ ____________ ____________
764,630 237,964 107,246 100,578
____________ ____________ ____________ ____________
Non - current liabilities
Performance fee accrual 5,393,210 3,016,255 5,393,210 3,016,255
Sundry creditors 3,423,632 - - -
____________ ____________ ____________ ____________
8,816,842 3,016,255 5,393,210 3,016,255
____________ ____________ ____________ ____________
____________ ____________ ____________ ____________
There is no difference between the carrying value of trade and other
payables and their fair value.
18 AUTHORISED SHARE CAPITAL Consolidated Company
2007 2007
____________ ____________
EUR EUR
62,500,000 ordinary shares of nil par value - -
____________ ____________
____________ ____________
Issued and fully paid
48,345,000 ordinary shares of nil par value - -
____________ ____________
____________ ____________
The Company has one class of ordinary share which carries no right
to fixed income.
The Company will have a maximum life of seven years expiring on
2012. The Manager intends to arrange the Property Portfolio so
that it can be realised in an orderly way by the end of six
years. If this is achieved the Company will be liquidated at the
end of the six year period. The life of the Company may be
extended by no more than a year (to seven years in total) at the
discretion of the Directors, on the advice of the Manager, if it
is necessary for an orderly realisation of the Company's assets.
19 SHARE PREMIUM AND SPECIAL RESERVE Consolidated Company
2007 2007
____________ ____________
EUR EUR
Share premium - -
Special reserve 56,956,985 56,956,985
____________ ____________
At 31 December 2007 56,956,985 56,956,985
____________ ____________
____________ ____________
On 8 July 2005 the Royal Court of Guernsey approved the reduction
of capital by way of a cancellation of the Company's share
premium account. The amount cancelled, being EUR56,956,985, has
been credited as a distributable reserve established in the
Company's books of account. This shall be available as
distributable profits to be used for all purposes permitted under
Guernsey Company Law including the buy back of shares and the
payment of dividends.
20 CAPITAL AND REVENUE RESERVE
Balances reflected in the capital reserve reflect cumulative
unrealised gains on the revaluation of properties, provision for
performance fees that will become payable as a result of the
uplift in property values and the notional loss on foreign
currency dating back to the conversion of the initial
subscription proceeds.
The balance on the revenue reserve reflects cumulative
operational expenditure in excess of the non-property related
operational income.
The Company does not have any external imposed capital requirements.
21 NAV PER SHARE
Consolidated Consolidated
2007 2007
____________ ____________
Net Asset Value 66,205,547 59,674,675
Average number of shares in issue 48,345,000 48,345,000
Net asset value per share 1.3694 1.2344
The Net Asset Value per Ordinary Share is based on the Net
Asset Value at the Balance Sheet date and on 48,345,000
Ordinary Shares, being the average number of shares in issue
during the year.
22 FINANCIAL RISK MANAGEMENT
Financial risk factors
The Company's activities expose it to a variety of risks from its
use of financial instruments -
- market risk (including price risk, interest rate risk and currency risk)
- liquidity risk
- credit 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 Company's risk management
framework. This note presents information about the Company'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
Market risk is the risk that changes in the market prices will
affect the Company's income or the value of its holdings of
financial instruments. The objective of market risk management
is to manage and control market risk exposure within acceptable
parameters.
Price risk
The Company is exposed to price risk as a result of any change in
the values of underlying property. The Company is not exposed to
the market risk with respect to financial instruments as it does
not hold any equity securities.
Investments in Bulgarian property may be difficult, slow or
impossible to realise. The shares will be subject to general
risks incidental to the ownership of real or heritable property,
including changes in the supply of or demand for competing
investment properties in an area, changes in interest rates and
the availability of mortgage funds, changes in property tax rates
and landlord/tenant or planning laws, credit risks of tenants and
borrowers and environmental factors. The marketability and value
of any investment properties owned by the Company will,
therefore, depend on many factors beyond the control of the
Company and there is no assurance that there will be either a
ready market for any investment properties of the Company or that
such investment properties will be sold at a profit or will yield
a positive cash flow. Changes in Bulgarian law relating to
foreign ownership of property might have an adverse effect on the
net returns from the Property Portfolio.
If property prices in the Bulgarian property market fall by more
than the discounts to current market value achieved by the
Company when it exchanges contracts, investment properties held
in the Property Portfolio may only be realisable at a loss and
may prove difficult to sell at all. In these circumstances, the
Company may complete on the purchase of investment properties and
let them. The ability of the Company to complete on purchases is
dependent on the amount of equity available at the time, which
may not be the same as is currently available. A combination of
higher interest rates, a deteriorating economy (with higher
unemployment) and prolonged deflationary conditions, may result
in falling capital values combined with falling rents and/or void
periods.
Interest rate risk
The majority of the Company's financial assets are non-interest
bearing. Interest-bearing financial assets and interest-
bearing financial liabilities mature or reprice in the short-
term, no longer than twelve months. As a result the Company is
subject to limited exposure to fair value interest rate risk due
to fluctuations in the prevailing levels of market interest
rates.
At any time that the Company is not fully invested the Company
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 Company 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.
At the balance sheet date the Company was not subject to
significant interest rate risk. The instruments subject to
interest rate movements are disclosed in note 16 and are all
at variable rates.
Currency risk
Currency risk is the risk that the Income Statement and
Balance Sheet can be affected by currency translation
movements. The Board consider that the Company's exposure
to currency risk is minimal as the majority of the
Company's transactions are made in Euros and the books and
records are kept in Euros.
Where there are assets and liabilities recorded in Bulgarian
Lev, the risk is considered minimal as the Lev is tied to the
Euro in preparation for adoption of the Euro in Bulgaria. The
Lev is expected to be replaced by the Euro on 1 January 2010.
The tables below summarise exposure to foreign currency risk at 31
December 2007.
Assets and liabilities at carrying amounts are included in the
table, categorised by the currency at their carrying amount
Group
As at 31 December 2007 EUR GBP Total
Investment properties 55,127,208 - 55,127,208
Properties under development 15,625,171 - 15,625,171
Receivables 495,023 17,882 512,905
Cash and cash equivalents 7,198,021 11,600 7,209,621
__________ ______ __________
Total assets 78,445,423 29,482 78,474,905
__________ ______ __________
Trade and other payables 9,554,276 27,196 9,581,472
Deferred taxation 2,687,886 - 2,687,886
__________ ______ __________
Total liabilities 12,242,162 27,196 12,269,358
__________ ______ __________
Net assets 66,203,261 2,286 66,205,547
__________ ______ __________
Group
As at 31 December 2006 EUR GBP Total
Investment properties 27,981,984 - 27,981,984
Properties under development 11,382,006 - 11,382,006
Receivables 1,947,679 19,989 1,967,668
Cash and cash equivalents 23,039,303 7,104 23,046,407
__________ ______ __________
Total assets 64,350,972 27,093 64,378,065
__________ ______ __________
Trade and other payables 3,233,864 20,355 3,254,219
Deferred taxation 1,449,171 - 1,449,171
__________ ______ __________
Total liabilities 4,683,035 20,355 4,703,390
__________ ______ __________
Net assets 59,667,937 6,738 59,674,675
__________ ______ __________
Company
As at 31 December 2007 EUR GBP Total
Investment in subsidiaries 41,775,362 - 41,775,362
Receivables 682 17,882 18,564
Cash and cash equivalents 6,217,549 11,600 6,229,149
__________ ______ __________
Total assets 47,993,593 29,482 48,023,075
__________ ______ __________
Trade and other payables 5,473,260 27,196 5,500,456
__________ ______ __________
Total liabilities 5,473,260 27,196 5,500,456
__________ ______ __________
Net assets 42,520,333 2,286 42,522,619
As at 31 December 2006 EUR GBP Total
Investment in subsidiaries 27,367,233 - 27,367,233
Receivables 38,685 19,989 58,674
Cash and cash equivalents 22,507,537 7,104 22,514,641
__________ ______ __________
Total assets 49,913,455 27,093 49,940,548
__________ ______ __________
Trade and other payables 3,096,478 20,355 3,116,833
__________ ______ __________
Total liabilities 3,096,478 20,355 3,116,833
__________ ______ __________
Net assets 46,816,977 6,738 46,823,715
__________ ______ __________
The following significant exchange rates applied during the year:
Average rate Reporting date
spot rate
2007 2006 2007 2006
Euro
1 GBP 0.691 0.686 0.735 0.674
1 BGN * 1.956 1.956 1.956 1.956
* The Bulgarian Lev (BGN) was fixed to the Euro at 1.95583 BGN
to 1 Euro on 5 July 1999.
The sensitivity analysis below is based on a change in an
assumption while holding all other assumptions constant. In
practice this is unlikely to occur.
The tables above present financial assets and liabilities
denominated in foreign currencies held by the Group and the
Company in 2007 and 2006 used to monitor foreign currency risk at
the reporting dates. If the euro had strengthened by 10% against
the UK pound as at 31 December, with all other variables held
constant, post-tax Group and Company profit for the year would
have been EUR229 (2006:EUR674) lower. Had the Euro weakened by
10% against the pound profits would have increased by the same
amounts.
As the Lev is fixed against the Euro this results in no additional
exposure to any Euro movements
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. 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. An analysis of other financial assets is provided
in notes 15 and 16.
A summary table with maturity of financial liabilities is presented
below:
Consolidated Less than 6 to 12 Greater than
Financial liabilities 2007 6 months months 12 months
____________ _________ _________ ___________
Trade and other payables 9,581,472 278,605 486,025 8,816,842
Deferred taxation 2,687,886 - - 2,687,886
____________ _________ _________ ___________
12,269,358 278,605 486,025 11,504,728
Consolidated Less than 6 to 12 Greater than
Financial liabilities 2006 6 months months 12 months
____________ _________ _________ ___________
Trade and other payables 3,254,219 98,525 139,439 3,016,255
Deferred taxation 1,449,171 - - 1,449,171
____________ _________ _________ ___________
4,703,390 98,525 139,439 4,465,426
____________ _________ _________ ___________
Company Less than 6 to 12 Greater than
Financial liabilities 2007 6 months months 12 months
____________ _________ _________ ___________
Trade and other payables 5,500,456 104,646 2,600 5,393,210
____________ _________ _________ ___________
5,500,456 104,646 2,600 5,393,210
____________ _________ _________ ___________
Company Less than 6 to 12 Greater than
Financial liabilities 2006 6 months months 12 months
____________ _________ _________ ___________
Trade and other payables 3,116,833 98,525 2,053 3,016,255
____________ _________ _________ ___________
3,116,833 98,525 2,053 3,016,255
____________ _________ _________ ___________
As per note 10 Deferred taxation is calculated, in full, on all
temporary timing differences under the liability method using a
principal Bulgarian tax rate of 10% (2006: 10%). This will not
become payable until properties currently held with an unrealised
profit are sold. This cannot be accurately forecast and as such
have been presented as due after 12 months.
Similarly, as per note 5, performance fees will become
payable on the disposal of properties and as such these
fees are also shown as due after 12 months.
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
Company.
The Company holds cash and liquid resources as well as having
receivables and payables that arise directlyfrom its
operations. The Company's investment activities expose it to
various types of risk associated with theproperty market and the
development of real estate projects. Such risks include the risk
that the developer of a site may become insolvent and be unable
to complete the project. Developments in which the Company will,
and does, invest will be financed by a mixture of equity,
deposits on pre-sales and bank financing. The release of bank
financing will be staged and conditional on milestones in the
development being reached. In the event that the development does
not proceed as expected, due to unexpected factors, the bank may
refuse to provide further financing. If the developer is unable
to arrange alternative financing, it may not be possible to
complete the development. This may result in the loss of a
deposit paid by the Company.
The Company also has exposure to credit risk relating to its cash
and cash equivalents. The Company has tried to mitigate this risk
by investing in high liquidity, AAA rated instruments.
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 except as
disclosed in the accounting policies.
23 RELATED PARTY DISCLOSURES
The Company has taken advantage of the exemption within IAS 24
Related Party Disclosures and elected not to disclose details of
intra-group transactions.
Transactions with directors are as disclosed in the Directors'
report, the Consolidated Income Statement and the notes to the
financial statements.
24 CONTROLLING PARTY
In the opinion of the Directors there is no 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.
25 RECONCILIATION OF NAV PER THE FINANCIAL STATEMENTS TO PUBLISHED NAV
EUR Cents per share
Net Asset Value per financial statements 66,205,547 1.37
Add back:
Adjustment to value of properties 8,319,285 0.17
Adjustment to performance fee (2,069,050) (0.04)
Preliminary expenses 1,311,188 0.03
Adjustment to calculated deferred tax 2,687,886 0.06
___________ ____
Published Net Asset Value 76,454,856 1.58
___________ ____
An adjustment is required within the financial statements to
record the value of the properties under development from fair
value, as used for the published Net Asset Value, to cost as
required to ensure compliance with International
Accounting Standard 16 "Property, Plant and Equipment".
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.
26 POST BALANCE SHEET EVENTS
In May 2008 the Company sold its interest in 11,272 square metres
built at VitoshaVets Simeonovo building 92 and VitoshaVets Simeonovo
building 105 to International Life, a Greek Insurance company.
This represents approx 10.3% of the total BuySell project.
The total sale price was Euro 10,486,660 of which the Company received
Euro 1,891,966; of this Euro 1,038,961 was an immediate refund of its
deposit, plus a profit of Euro 853,005 which will be offset against
the Company's liability to BuySell.
27 CAPITAL COMMITMENTS
Under the terms of the property options entered into, where
properties developed are not sold off-plan the Company is
obliged to cover the costs of completion for any unsold
property. This course of action will lead to the Company being
geared, with associated finance costs. The total balance payable
on completion of the development is EUR30,981,553. Under the
terms of the Central Sofia Purchase Options the total balance
payable on completion will be increased in line with any
increase in the Bulgarian Consumer Price Index. The Board
believe it unlikely that any significant proportion of this
capital commitment will become payable because of the nature of
the property market in and around the chosen development areas
and the high level of demand for the type of properties being
developed.
Nevertheless the Board needs to ensure that it has sufficient
liquidity to meet its liabilities. As at 31 December 2007 the
Fund had EUR7.2 million of cash and cash equivalents available.
The most significant potential liability is that under the Central
Sofia Purchase Options as described above. If that
situation was to arise, and to the extent that sales of property
have not been made in the period to completion, the Fund would
have a liability. The Board is confident that, in the current
environment, the property will be sold prior to completion and to
the extent that any property may be unsold on completion that
adequate and suitable funding will be available. Accordingly the
Directors are of the opinion that it is appropriate to prepare
the financial statements on a going concern basis.
Also as at 31 December 2007 the Company has committed to the
rough construction, which constitutes excavation of the site and
subsequent building of the concrete structure, at the Crystal
Vale project and the Panorama Villas 1 project. The costs of
performing this work are estimated at a total of EUR2,050,000.
THE FOLLOWING PAGES DO NOT
FORM PART OF THE AUDITED
FINANCIAL STATEMENTS OF THE
COMPANY AND ARE PRESENTED FOR
INFORMATION PURPOSES ONLY
Company income statement
for the year ended 31 December 2007
Restated into Pounds Sterling for information purposes only
31 Dec 2006
Revenue Capital Total Total
GBP GBP GBP GBP
________________________________ ___________
Expenditure
Administration fees 89,562 - 89,562 71,636
Management fees 715,249 - 715,249 694,788
Performance fees - 1,642,476 1,642,476 2,051,657
Directors' fees and expenses 63,508 - 63,508 53,425
Foreign exchange loss 13,316 - 13,316 5,504
Other expenses 730,274 - 730,274 546,772
___________ ___________ ___________ ___________
Total expenditure 1,611,909 1,642,476 3,254,385 3,423,782
___________ ___________ ___________ ___________
Operating loss (1,611,909) (1,642,476) (3,254,385) (3,423,782)
Finance income 282,327 - 282,327 550,626
___________ ___________ ___________ ___________
Net loss before taxation (1,329,582) (1,642,476) (2,972,058) (2,873,156)
Tax on profit on ordinary
activities - - - -
___________ ___________ ___________ ___________
Loss for the year (1,329,582) (1,642,476) (2,972,058) (2,873,156)
___________ ___________ ___________ ___________
Consolidated income statement
for the year ended 31 December 2007
Restated into Pounds Sterling for information purposes only
31 Dec 2006
Revenue Capital Total Total
GBP GBP GBP GBP
____________________________________________
Income
Sundry income - - - 394
Net change in gains on revaluation
of investment property - 8,559,521 8,559,521 9,959,237
___________ ___________ ___________ ___________
Total income - 8,559,521 8,559,521 9,959,631
___________ ___________ ___________ ___________
Expenditure
Administration fees 142,550 - 142,550 72,377
Management fees 715,249 - 715,249 701,976
Performance fees - 1,642,476 1,642,476 2,072,882
Directors' fees and expenses 63,508 - 63,508 53,978
Foreign exchange loss 14,663 - 14,663 10,398
Other expenses 905,227 - 905,227 692,300
___________ ___________ ___________ ___________
Total expenditure 1,841,197 1,642,476 3,483,673 3,603,911
___________ ___________ ___________ ___________
Net (loss)/profit from (1,841,197) 6,917,045 5,075,848 6,355,720
ordinary activities
___________ ___________ ___________ ___________
Finance income 292,935 - 292,935 559,004
Tax on profit on ordinary
activities - (855,952) (855,952) (995,924)
___________ ___________ ___________ ___________
(Loss)/Profit for the year (1,548,262) 6,061,093 4,512,831 5,918,800
___________ ___________ ___________ ___________
Earnings per share - basic and
diluted (pence per share) 9.33 12.24
Company balance sheet
as at 31 December 2007
Restated into Pounds Sterling for information purposes only
Company Company
2007 2006
________________________ ______________________
GBP GBP GBP GBP
Non-current assets
Investment in subsidiaries 30,704,891 18,842,613
__________ __________
30,704,891 18,842,613
Current assets
Trade and other receivables 13,645 40,398
Cash and cash equivalents 4,578,425 15,501,556
__________ __________
4,592,070 15,541,954
__________ __________
Total assets 35,296,961 34,384,567
__________ __________
Current liabilities
Trade and other payables (78,826) (69,250)
__________ __________
(78,826) (69,250)
Non-current liabilities
Trade and other payables (3,964,009) (2,076,722)
__________ __________
(3,964,009) (2,076,722)
__________ __________
Total liabilities (4,042,835) (2,145,972)
__________ __________
Net assets 31,254,126 32,238,595
__________ __________
Represented by
Share capital - -
Special reserve 38,676,000 38,676,000
Capital reserve (4,142,250) (2,499,774)
Revenue reserve (3,279,624) (3,937,631)
__________ __________
Total Equity 31,254,126 32,238,595
__________ __________
Consolidated balance sheet
as at 31 December 2007
Restated into Pounds Sterling for information purposes only
Consolidated Consolidated
2007 2006
________________________ ______________________
GBP GBP GBP GBP
Non-current assets
Investment properties 40,518,498 19,368,704
__________ __________
40,518,498 19,368,704
Current assets
Properties under development 11,484,501 7,878,511
Property options 4 3
Trade and other receivables 16,758 78,760
Non-group receivables 360,222 1,283,176
Cash and cash equivalents 5,299,071 15,952,378
__________ __________
17,160,556 25,192,828
__________ __________
Total assets 57,679,054 44,561,532
Current liabilities
Trade and other payables (562,003) (165,234)
__________ __________
(562,003) (165,234)
Non-current liabilities
Trade and other payables (6,480,379) (2,094,457)
Deferred taxation (1,975,596) (995,924)
__________ __________
(8,455,975) (3,090,381)
__________ __________
Total liabilities (9,017,978) (3,255,615)
__________ __________
Net assets 48,661,076 41,305,917
__________ __________
Represented by
Share capital - -
Special reserve 38,676,000 38,676,000
Capital reserve 12,503,407 6,442,314
Revenue reserve (2,518,331) (3,812,397)
__________ __________
Total Equity 48,661,076 41,305,917
NAV per share (Pence per share) 100.65 85.44
NAV per share at launch (Pence per
share) 72.80 72.80
Statements of changes in equity
for the year to 31 December 2007
Restated into Pounds Sterling for information purposes only
Consolidated Share Special Capital Revenue 31 December
Capital Reserve Reserve Reserve Total 2006
GBP GBP GBP GBP GBP GBP
As at 31 December 2006 - 38,676,000 6,442,314 (3,812,397) 41,305,917 35,156,848
Profit/(loss) for the year - - 6,061,093 (1,548,262) 4,512,831 5,918,800
Foreign exchange
adjustment arising on
translation to Sterling - - - 9,322,707 9,322,707 230,269
________________________________________________________________
As at 31 December 2007 - 38,676,000 12,503,407 3,962,048 55,141,455 41,305,917
________________________________________________________________
Company Share Special Capital Revenue 31 December
Capital Reserve Reserve Reserve Total 2006
GBP GBP GBP GBP GBP GBP
As at 31 December 2006 - 38,676,000 (2,499,774) (3,937,631) 32,238,595 35,176,152
Loss for the year - - (1,642,476) (1,329,582) (2,972,058) (2,873,156)
Foreign exchange
adjustment arising on
translation to Sterling - - - 5,951,599 5,951,599 (64,401)
________________________________________________________________
As at 31 December 2007 - 38,676,000 (4,142,250) 684,385 35,218,135 32,238,595
________________________________________________________________
Company cash flow statement
for the year ended 31 December 2007
Restated into Pounds Sterling for information purposes only
2007 2006
____________ ___________
GBP GBP
Loss for the year (2,972,058) (2,873,156)
Adjustment for:
Bank interest receivable (3,431) (13,618)
____________ ___________
Operating cash flows before movements
in working capital (2,975,489) (2,886,774)
Decrease in receivables 26,753 22,528
Increase in payables 1,896,863 2,108,064
____________ ___________
(1,051,873) (756,182)
Interest received 3,431 13,618
____________ ___________
Net cash outflow from operating activities(1,048,442) (742,564)
Investing activities
Investment in subsidiary (9,956,017)(18,813,313)
Repayment of loan by property developer - 6,300,191
____________ ___________
Net cash outflow from investing activities(9,956,017)(12,513,122)
Exchange difference arising on
translation to Sterling 81,328 (10,335)
Cash and cash equivalents at start of year 15,501,556 28,767,577
____________ ___________
Cash and cash equivalents at end of year 4,578,425 15,501,556
____________ ___________
Consolidated cash flow statement
for the year ended 31 December 2007
Restated into Pounds Sterling for information purposes only
2007 2006
____________ ___________
GBP GBP
Profit/(Loss) for the year 4,512,831 5,918,800
Adjustment for:
Bank interest receiveable (14,039) (16,441)
Revaluation of investments (8,559,521) (9,959,237)
Adjustment for deferred tax 979,672 995,924
____________ ___________
Operating cash flows before movements
in working capital (3,081,057) (3,060,954)
Decrease / (increase) in receivables 62,001 (15,834)
Increase in payables 4,782,691 2,243,660
____________ ___________
1,763,635 (833,128)
Interest received 14,039 16,441
____________ ___________
Net cash inflow /(outflow)
from operating activities 1,777,674 (816,687)
Investing activities
Repayment of loan by property developer 942,313 6,300,191
Advances of loan to property developer - (1,283,176)
Purchases of investment properties (13,129,856) (17,287,978)
____________ ___________
Net cash outflow from investing activities(12,187,543) (12,270,963)
Exchange difference arising on translation (243,438) 230,268
to Sterling
Cash and cash equivalents at start of year 15,952,378 28,809,760
____________ ___________
Cash and cash equivalents at end of year 5,299,071 15,952,378
____________ ___________
Lewis Charles Sofia Prop Fund (LSE:LCSS)
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