Eastern European Property Fund : Final Results

Eastern European Property Fund Ltd



EASTERN EUROPEAN PROPERTY FUND LIMITED Results for the year ended 31 December 2013
HIGHLIGHTS
·     Three property disposals completed during the year, generating aggregate proceeds of £2.5 million and profit on historical cost of £1.6 million. ·     Property held at 31 December 2013 valued by DTZ Debenham Tie Leung at £18.6 million (2012: £18.8 million on a like-for-like basis). ·     Net asset value at 31 December 2013 of £17.4 million, equivalent to 105.19p per Ordinary Share (2012: £19.4 million, 105.03p per Ordinary Share). ·     Loss for the year ended 31 December 2013 of £0.5 million, equivalent to a loss of 3.00p per Ordinary Share (2012: loss of £2.6 million, 13.97p per Ordinary Share). ·     2,010,000 Ordinary Shares bought for cancellation during the year, returning £1.6 million to Shareholders. Events after the year end: ·     Two adjoining properties, the 'Yellow' Building and Asmali Cumba, sold for US$1.6 million (£0.9 million) on 22 January 2014, crystallising a gain, based on their historic cost, of US$0.8 million (£0.5 million). ·     Share buybacks continued in 2014.
For further information, please visitwww.eepfl.comor contact:
Tom Fyson Liberum Capital Limited Tel: [phone]
Bob Locker CNC Property Fund Management Limited Tel: [phone]	Keiran Gallagher / Oliver Cadogan Pera Pera Tel: [phone]

CHAIRMAN'S STATEMENT

Eastern European Property Fund Limited (the "Company") and its subsidiaries (together "EEP") had a productive start to 2013 in terms of implementing the realisation strategy as investor interest started to return to the underlying property markets in which EEP is invested. However, renewed investor uncertainty returned during 2013 as a result of the turmoil in emerging markets and regional tensions, protests and political demonstrations, particularly in Turkey and Bulgaria, and this proved to be a set back to the rate of progress of property disposals. The situation in Turkey had eased by the end of the year, enabling further property sales from EEP's Istanbul property portfolio in October 2013 and January 2014 (see the 'Property Portfolio' section below for further details). Results EEP reported a net loss for the year ended 31 December 2013 of £0.5 million (2012: loss of £2.6 million) , representing a loss per Ordinary Share of 3.00p (2012: loss of 13.97p). The planned reduction in rental income as a result of disposing of some of EEP's income generating properties and vacating certain remaining properties in preparation for sales contributed to the loss for the year. Operating expenses decreased by 35.3% (before accounting for performance fees) during the year ended 31 December 2013 as a result of the reduction in management fees, lower interest charge associated with the bank loan, which was repaid in November 2012, and a general reduction in other operating expenses. Costs will reduce further as EEP continues its orderly realisation of investment properties. A significant factor behind the smaller loss for the year ended 31 December 2013 was the net gain on the realisation of investment properties of £0.1 million, compared to a net loss of £2.5 million for the year ended 31 December 2012. EEP incurred a higher taxation charge in the year ended 31 December 2013 as a result of corporate income tax on gains on property sales. In the year ended 31 December 2012, EEP had brought forward losses available to offset against the corporate income tax arising from gains on property disposals, but this was fully utilised in 2012. EEP's consolidated net asset value ("NAV") at 31 December 2013 was £17.4 million, equivalent to 105.19p per Ordinary Share (2012: £ 19.4 million; 105.03p per Ordinary Share). Capital was reduced by £1.6 million as a result of the repurchase of Ordinary Shares during 2013. Buy Back of Ordinary Shares The Company's share price decreased by 16.75 p during the year to 70.75p at 31 December 2013, with the discount to NAV widening from 16.8% at 31 December 2012 to 30.8% at 31 December 2013. During the year, a total of 2,010,000 Ordinary Shares were purchased by the Company at an average price per Ordinary Share of 80.86p and cancelled at a total cost of £1.6 million. Since 31 December 2013, the Company has repurchased a further 655,000 Ordinary Shares at an average of 61p per Ordinary Share. Property Portfolio EEP completed three property disposals during the year: ·      On 18 March 2013, the Pera Residence was sold for US$2.1 million (£1.4 million), crystallising a gain, based on historic cost, of US$1.4 million (£0.9 million). As the Turkish subsidiary holding this property had used up all of its brought forward losses, the sale resulted in the payment of corporate income tax of US$0.3 million (£0.2 million) on the gain. The sale price was 26% higher (in Sterling terms) than the fair value of the property at 31 December 2012. ·      On 12 June 2013, the Taka Building was sold for US$1.3 million (£0.8 million), crystallising a gain, based on historic cost, of US$0.8 million (£0.5 million). Corporate income tax of US$0.2 million (£0.1 million) was paid on the gain. The sale price was 18% higher (in Sterling terms) than the fair value of the property at 31 December 2012. ·      On 2 October 2013, the Off Pera Bar was sold for US$0.6 million (£0.3 million), crystallising a gain, based on historic cost, of US$0.3 million (£0.2 million). Corporate income tax of US0.05 million was paid on the gain. The sale price was 5% lower (in Sterling terms) than the fair value of the property at 31 December 2012.

Since the year end, two adjoining properties, the 'Yellow' Building and Asmali Cumba, have been sold for US$1.6 million (£0.9 million). Based on historic cost, the gain crystallised was US$0.8 million (£0.6 million). Following the sale of these two properties, EEP has four properties remaining; two in Turkey and one in each of Bulgaria and Romania. EEP and its service providers continue to implement the realisation investment objective and policy. The Property Manager and Investment Adviser continue to market for sale the remaining properties, which will be sold as and when appropriate offers are received. Investor interest in EEP's remaining properties in Istanbul began to return towards the end of 2013 after the protests earlier in the year had dampened activity in the property market. The economy and property markets continue to improve in Bulgaria and Romania, and although the number of deals concluded for commercial properties in these countries remains low, local property agents are more positive than they have been in recent years. Further information on the property markets and the investment environment is provided in the Property Manager and Investment Adviser's Report. Property Valuations Consistent with previous years, DTZ Debenham Tie Leung carried out independent valuations of all properties held by EEP.  The aggregate value of EEP's investment properties remaining at 31 December 2013 decreased marginally during the year and resulted in a net unrealised loss on revaluation of £0.2 million (2012: loss of £1.8 million) (see note 14). Further details of the individual properties (but not their carrying values) are disclosed in the Property Manager and Investment Adviser's Report. For the reasons explained in last year's Chairman's Statement, EEP has not disclosed the breakdown of individual property values at 31 December 2013. For the same reasons, EEP continues to deem it detrimental to ongoing commercial negotiations in relation to disposals to include a detailed breakdown of individual property values on a country by country basis, as required by accounting standards. Distributions The Board's intention remains to distribute to Shareholders substantially all net proceeds of property sales, subject to meeting solvency requirements. The Board will continue to effect distributions by means of market repurchases of Ordinary Shares at a discount to NAV where the amount of net cash available for distribution is relatively small. However, disposal of EEP's principal asset, the Markiz Passage property, will trigger a more formal return of capital whereby it is intended for Shareholders to have the option to choose to receive proceeds in the form of capital or dividend. It is likely that corporate income tax will arise to the extent any capital gains crystallise on the disposal of the remaining Turkish properties. This liability has been provided for in these consolidated results as deferred tax and calculated on the assumption that the properties are realised at their current carrying values. However, additional taxes, such as a 15% withholding tax, may arise on the repatriation to Guernsey of non-capital reserves from Turkey. At this time, the Board expects that future income (including realised gains on the sale of properties) will exceed expenses (including withholding tax, other sales taxes and sales commission) and, therefore, no operating losses to liquidation have been provided for in these results, which have been prepared on a non-going concern basis. If the Turkish properties are sold in 2014, any profits will be paid as a dividend to the Company in 2015, with the remaining funds being transferred on the liquidation of the Turkish subsidiary later in 2015. If the Turkish properties are not sold in 2014, this process will be put back at least a year, with the subsequent distributions to Shareholders of the Company also being delayed. The Board will endeavour to ensure that cash is distributed to Shareholders as quickly as possible. The Company is limited to repurchasing a maximum of 14.99% of the Ordinary Shares in issue at the time authority was sought and remains in force until the authority to buy back shares is renewed at the AGM to be held on 12 September 2014.  Since the AGM held on 13 September 2013, EEP has repurchased 1,255,000 Ordinary Shares and is permitted to repurchase a further 1,434,393 Ordinary Shares prior to the 2014 AGM.

At the 2014 AGM, Shareholders will be asked to renew the approval of the Company to repurchase up to a maximum of 14.99% of the Ordinary Shares in issue at the date the authority is sought. This will allow the Company to repurchase Ordinary Shares to the value of up to £1,604,000 assuming no change in the prevailing Ordinary Share price and number of shares in issue.
Outlook The Board, the Property Manager and the Investment Adviser remain focussed on selling all of EEP's remaining properties at appropriate prices and, once all of the properties have been disposed of, the next phase of EEP's realisation investment objective and policy will be initiated. After the bulk of the remaining value in the property portfolio has been realised, the Board and Manager intend to consult with Shareholders about the continuing net benefit of retaining the listing of the Ordinary Shares on AIM. The timing and costs involved in appointing a liquidator of the Company and its subsidiaries is reviewed at each meeting of the Board and whilst preliminary discussions have taken place with potential service providers, provisions for the costs of winding-up EEP (including taxes, liquidation costs, the costs of realising the assets and operating costs) have not been included in these results as the costs are not expected to be material. The Board appreciates your continued patience and support.
Martin M. Adams Chairman 20 May 2014

PROPERTY MANAGER AND INVESTMENT ADVISER'S REPORT

During the year ended 31 December 2013, EEP's Property Manager and Investment Adviser continued to seek the realisation of the property portfolio at full market value for each property. While the early part of the year engendered considerable optimism in this respect, following sales in Turkey, the subsequent political unrest in Turkey and Bulgaria completely stalled potential non-local investment into those countries (for commercial property) for the remainder of the year and also subdued local investors' interest. Although Romania has not suffered from political unrest on the streets, the general economic environment, while definitely improving, has not reached the stage where potential investors (foreign to the country or otherwise) are actively looking at short let industrial properties, which are representative of EEP's interest in this country. The inability to obtain financing at sensible terms continues to make the Romanian and Bulgarian markets very difficult from a sales perspective and very few transactions have actually taken place, as cash buyers at the relevant lot size are limited.  However, the local property agents are more optimistic now than at any time in the last five years, as letting activity has improved and the occasional potential investor is beginning to explore the market. Since the year end, a further two properties have been sold in Turkey as one lot, being the "Yellow" Building and Asmali Cumba in Asmalimescit Street, Beyoglu for a cash consideration of US$1.6 million (£0.9 million). During 2013, the Pera Residence, Asmalimescit Street was sold for US$2.1 million (£1.4 million), the Taka Building, Asmalimescit Street was sold for US$1.3 million (£0.8 million) and the Off Pera Bar, Gonul Sokak, Asmalimescit was sold for US$0.6 million (£0.3 million).  This leaves only the Markiz Passage and Nil Passage properties in Istanbul, Turkey at the time of writing this report. The properties held at 31 December 2013 were as follows: Markiz Passage, Istiklal Street, Beyoglu, Istanbul The property has been widely marketed for sale and considerable interest has been shown in it.  Unfortunately, the Gezi Park demonstrations that started in May 2013 effectively stopped all interest at that time and a new marketing strategy had to be adopted from September 2013.  Darty, one of the two remaining occupiers, vacated before the year end and only the Yemek Kulübü (food club) restaurant remains. Nil Passage, Istiklal Street, Beyoglu, Istanbul The property is now being widely marketed either for purchase as a whole or in parts as it has a number of different titles allowing it to be split up. 'Yellow' Building and Asmali Cumba, Asmalimescit Street, Beyoglu, Istanbul These two properties were sold in January 2014 for US$1.6 million (£0.9 million) as a combined lot. The Atrium, 24 George Washington Street, Sofia The United Bulgarian Bank remains in occupation and is still the largest tenant in the building. The new café operator is trading very well and other small lettings have gradually added to the mix and overall income of the property.  The property continues to be widely marketed for sale. Gara Progresului Business & Logistics Centre, Gara Progresului Street, Bucharest There has been a gradual turnover of tenants at this industrial property.  However, it continues to re-let and a growing e-commerce company is gradually taking up more space.  The property continues to be widely marketed for sale. Regional Overview Turkey The political uncertainty following the demonstrations that started in Gezi Park, Istanbul and the high current account deficit have had a negative impact on the economy and have been highlighted by a number of articles in the media during the latter part of 2013 and early 2014. Some of these articles forecast a collapse of what they consider to be the Turkish economic bubble in 2014.  Other than the current account deficit, currency weakness and low growth in consumer credit were cited as the primary reasons that such a collapse might occur.

However, since the municipal elections at the end of March 2014, where the ruling Justice & Development Party (AKP) won c45% of the vote, the economy appears less subdued.  The currency has stabilised and the Government believes it has inflation under control, although the Economist consensus predicts that inflation will rise from 8.4% in 2013 to 9.1% in 2014.  The Economist consensus forecast is that GDP growth for 2014 will be 2%. From a property perspective, new supply early in the year meant that vacancy rates in the Central Business District had risen from 7% to 12%.  However, major investment transactions have been reported, including: the purchase by National Bank of Greece, which owns Finansbank in Turkey, of a 40-storey office tower in Istanbul for US$303 million (Daily Hü rriyet, 18 March 2014); and the sale/purchase of a 78% share of an office/hotel project of c5,500m² for US$57 million on Istiklal Street, close to EEP's properties. Bulgaria Anti-corruption and austerity protests continued throughout 2013 and were still evident during the beginning of 2014.  However, while the protests are ongoing, they have been relatively low key.  According to a poll by the Exacta Research Group, released in February 2014, the approval rating of the Government had decreased to 25%. The economy continues to improve modestly.  GDP growth for 2013 was 0.6% and the European Commission has slightly increased its forecast for Bulgarian GDP growth from 1.5% to 1.7% for 2014, and from 1.8% to 2.0% for 2015.  Growth is expected to be export-driven, but consumer demand is also predicted to improve, despite continuing low double digit employment. Romania GDP growth for 2013 was 3.5%, which was helped by improving exports and a strong harvest. The European Commission forecasts GDP growth of 2.3% in 2014 and 2.5% in 2015. In an attempt to stimulate the economy, the Romanian National Bank lowered the monetary policy rate from 5.24% in July 2013 to 3.5% in February 2014.  In addition, it continues to ease reserve requirements for banks, having already halved them previously from a post-crisis peak of 40% in 2008. Prospects Despite the volatility in Turkey, both politically and economically, the Property Manager and Investment Adviser remain confident of achieving the disposal of the remaining properties held in Istanbul over the next twelve months.  Clearly, the demonstrations and political protests against Prime Minister Recep Tayyip Erdogan and his ruling Justice and Development Party (AKP), had a negative impact on the liquidity of EEP's properties in the latter part of 2013.  However, following the recent municipal elections, which the AKP comfortably won, consumer and investor confidence within the country appears to have returned quite quickly and the current feedback from EEP's target market locally appears positive. As has been the case for some time, the liquidity of commercial property in Bulgaria and Romania remains a problem.  Nevertheless, these economies are improving and the local agents in the property markets are more optimistic about their trading conditions than they have been for some time.  This is leading to more space being let and the perception that rents may be starting to rise.  This has not yet translated into an 'investors' market, but progress in this direction is being made.

Bob Locker CNC Property Fund Management Limited Keiran Gallagher Oliver Cadogan Pera Pera 20 May 2014

The financial information set out in this announcement does not constitute the Company's statutory financial statements for the year ended 31 December 2013.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2013
	Note	Year ended 31 December 2013	Year ended 31 December 2012
		£'000	£'000
Income
Rental income		992	1,322
Other income		70	87
Bank interest receivable		6	14
		------------	------------
Total income		1,068	1,423
		------------	------------
Expenses
Management fees	5	(243)	(372)
Performance fees	5	(120)	210
Administration fees	5	(100)	(125)
Other operating expenses	9	(838)	(1,161)
Interest payable and similar charges	7	(3)	(172)
		------------	------------
Total expenses		(1,304)	(1,620)
		------------	------------
Investment gains and losses
Loss on revaluation of investment properties	14	(212)	(1,806)
Gain/(loss) on disposal of investment properties	14	342	(731)
		------------	------------
Total investment gains/(losses)		130	(2,537)
		------------	------------
Net loss from operating activities before gains and losses on foreign currency translation		(106)	(2,734)
Gain on foreign currency translation	11	391	13
		------------	------------
Net profit/(loss) from operating activities		285	(2,721)
Taxation	21	(811)	118
		------------	------------
Loss for the year		(526)	(2,603)
Other comprehensive income that may be reclassified to profit or loss in subsequent periods
Exchange differences arising from translation of foreign operations	11	75	120
		------------	------------
Total other comprehensive income		75	120
		------------	------------
Total comprehensive loss for the year attributable to the Owners of the Group		(451)	(2,483)
		------------	------------
Loss per share - basic and diluted	12	(3.00)p	(13.97)p
		------------	------------
All the items in the above statement are derived from continuing operations.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Attributable to Owners of the Group
		Note	Share capital	Distributable reserve	Foreign currency translation reserve	Total
			£'000	£'000	£'000	£'000
For the year ended 31 December 2013
Net assets at 1 January 2013			185	19,964	(702)	19,447
Total comprehensive income/(loss) for the year
Loss for the year			-	(526)	-	(526)
Other comprehensive income			-	-	75	75
Contributions by and distributions to owners
Buy back and cancellation of own shares		23	(20)	(1,613)	-	(1,633)
			----------	----------	----------	----------
Net assets at 31 December 2013			165	17,825	(627)	17,363
			----------	----------	----------	----------
For the year ended 31 December 2012
Net assets at 1 January 2012			186	22,669	(822)	22,033
Total comprehensive income/(loss) for the year
Loss for the year			-	(2,603)	-	(2,603)
Other comprehensive income			-	-	120	120
Contributions by and distributions to owners
Buy back and cancellation of own shares		23	(1)	(102)	-	(103)
			----------	----------	----------	----------
Net assets at 31 December 2012			185	19,964	(702)	19,447
			----------	----------	----------	----------

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 December 2013
	Note	31 December 2013	31 December 2012
		£'000	£'000
Current assets
Freehold investment property	14	18,621	20,959
Intangible assets	15	6	8
Property, plant and equipment	16	8	13
Trade and other receivables	19	282	114
Cash and cash equivalents	18	957	807
		----------	----------
Total assets		19,874	21,901
		----------	----------
Current liabilities
Deferred tax liabilities	22	(1,848)	(1,931)
Trade and other payables	20	(276)	(194)
Overseas corporate tax		(316)	(125)
Rents received in advance		(71)	(165)
Other provisions and payables		-	(39)
		----------	----------
Total liabilities		(2,511)	(2,454)
		----------	----------
Net assets		17,363	19,447
		----------	----------
Capital and reserves
Called-up share capital	23	165	185
Distributable reserve		17,825	19,964
Foreign currency translation reserve		(627)	(702)
		----------	----------
Total equity attributable to owners of the Group		17,363	19,447
		----------	----------
NAV per Ordinary Share - basic and diluted	24	105.19p	105.03p
		----------	----------

CONSOLIDATED STATEMENT OF CASH FLOWS for the year ended 31 December 2013
	Note	Year ended 31 December 2013	Year ended 31 December 2012
		£'000	£'000
Net profit/(loss) from operating activities		285	(2,721)
Adjustments for:
Bank interest receivable		(6)	(14)
Loss on revaluation of investment properties	14	212	1,806
(Gain)/loss on disposal of investment properties	14	(342)	731
Gain on foreign currency exchange		(391)	(13)
Amortisation and depreciation	15, 16	4	5
Amortisation of bank loan arrangement fees	7	-	3
Bank loan interest payable	7	-	166
		----------	----------
Net cash outflow from operating activities before working capital changes		(238)	(37)
(Increase)/decrease in trade and other receivables		(233)	327
Increase/(decrease) in trade and other payables and other current liabilities		196	(415)
		----------	----------
Net cash outflow from operating activities after working capital changes		(275)	(125)
Interest received in the year		6	14
Interest paid in the year		-	(169)
Tax paid in the year		(462)	(67)
		----------	----------
Net cash outflow from operating activities		(731)	(347)
Investing activities
Sale of investment property		2,448	10,438
Acquisition and development of investment property		(10)	(214)
		----------	----------
Net cash inflow from investing activities		2,438	10,224
Financing activities
Purchase of own shares	23	(1,633)	(103)
Repayment of bank loan		-	(11,040)
		----------	----------
Net cash outflow from financing activities		(1,633)	(11,143)
		----------	----------
Increase/(decrease) in cash and cash equivalents		74	(1,266)
		----------	----------
Cash and cash equivalents at beginning of year		807	1,995
Increase/(decrease) in cash and cash equivalents		74	(1,266)
Foreign exchange movement		76	78
		----------	----------
Cash and cash equivalents at end of year		957	807
		----------	----------

NOTES TO THE RESULTS for the year ended 31 December 2013

1.  General Information

The Company was incorporated in Guernsey on 27 February 2006 as an authorised closed-ended investment company.  The registered office of the Company is 1st Floor, Royal Chambers, St Julian's Avenue, St Peter Port, Guernsey, GY1 3JX. On 23 March 2006 the Company raised gross proceeds of £20.0 million (net proceeds of £19.1 million) through the issue of 20,000,000 Ordinary Shares at 100p each, with the Ordinary Shares being admitted to trading on AIM, a market operated by the London Stock Exchange. Following the passing of the Discontinuation Resolution at the AGM held on 14 September 2012 and the subsequent passing of the resolution to amend the Company's investment objective and policy at the EGM held on 25 September 2012, the Company's investment objective and policy is to carry out an orderly realisation of the Company's portfolio of assets, distribution of the net proceeds to Shareholders and then undertake a voluntary winding-up of the Company.  Disposals may be by individual sales or as transactions incorporating a group of properties.

2.  Basis of Preparation

a) Statement of compliance

These results have been prepared in accordance with International Financial Reporting Standards ("IFRSs") (with the exception of IFRS 8, as explained in note 6, and IFRS 13 as explained in note 14), they give a true and fair view and are in compliance with the Companies (Guernsey) Law, 2008 (as amended). The results were authorised for issuance by the Board of Directors on 20 May 2014 .

b) Basis of measurement

The results have been prepared on a historic cost basis, except for freehold investment property, which has been measured at fair value. As the Company's investment objective and policy is to carry out an orderly realisation of the Company's portfolio of assets, the results have been prepared on a non-going concern basis.  This has had no significant impact on the results as the properties have been measured at fair value and are expected to be realised in an orderly manner. It is likely that corporate income tax will arise on capital gains on the disposal of the remaining Turkish properties. This liability has been provided for in these results as deferred tax and calculated on the assumption that the properties are realised at their current carrying values. However, additional taxes, such as a 15% withholding tax, may arise on the repatriation to Guernsey of non-capital reserves from Turkey. At this time, the Board expects that future income (including realised gains on the sale of properties) will outweigh expenses (including withholding tax, other sales taxes and sales commission) and, therefore, no losses to liquidation have been provided for in these results, which have been prepared on a non-going concern basis.

c) Functional and presentation currency

These results are presented in Sterling, which is also the Company's functional currency.  All amounts are rounded to the nearest thousand.

d) Use of estimates and judgements

The preparation of consolidated financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expense.  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 the judgements about carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates. The 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 affects only that period, or in the period of the revision and future periods, if the revision affects both current and future periods. Judgements made by management in the application of IFRSs that have a significant effect on the results and estimates with a significant risk of material adjustment in the next year are discussed in note 2b), note 14: Freehold investment property and note 30: Fair values.

3.  Significant accounting policies

a)  Basis of consolidation

These results consolidate the results of the Company and its subsidiary undertakings to 31 December 2013.  The results of the subsidiary undertakings are accounted for in the Consolidated Statement of Comprehensive Income from the date the subsidiaries were formed (the subsidiaries have only been owned by the Company).

Subsidiaries are those entities, including special purpose entities, controlled by the Company.  Control is achieved when the Company is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.  In assessing control, potential voting rights that presently are exercisable are taken into account. The results of subsidiaries are included in the consolidated results from the date that control commences to the date that control ceases.  The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group. All intercompany balances and transactions are eliminated on consolidation.

b)  Revenue

Rental income Rental income from freehold investment property rented under operating leases is recognised through the Consolidated Statement of Comprehensive Income on a straight-line basis over the period commencing on the later of the start of the lease, or acquisition of the property by the Group, and ending on the earlier of the end of the lease and the next break point, unless it is reasonably certain that the break option will not be exercised. Rental income revenue excludes service charges and other costs directly recoverable from tenants. Direct costs of rental income comprise head rents payable, irrecoverable service charge costs and other property outgoings. Rental income is included gross of any income tax charged. Interest income Interest income is accounted for on an accruals basis, taking into account the effective yield.

c)  Expenses

All expenses are accounted for on an accruals basis. The management, performance and administration fees, finance costs and all other expenses (with the exception of bank loan arrangement fees, which are deducted from the carrying amounts of the loans) are charged through the Consolidated Statement of Comprehensive Income in the period in which they are incurred.

d)  Taxation

Investment income is recorded gross of applicable taxes and tax expense is recognised through the Consolidated Statement of Comprehensive Income as incurred. The property subsidiaries are subject to tax on income arising on the property portfolio, after deduction of allowable expenses. Withholding tax and irrecoverable VAT may also arise on distributions and interest from the subsidiaries.

e)  Deferred taxation

Deferred income tax is provided, using the liability method, on all temporary differences at the financial reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences. Deferred income tax assets are recognised for all deductible temporary differences and unused tax losses, to the extent that it is probable that taxable profit will be available in the foreseeable future against which the deductible temporary differences and unused tax losses can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the relevant tax benefit will be realised. Deferred tax is measured at the tax rates that are expected to apply when the liability is settled, based on tax rates (and tax laws) that have been enacted or substantially enacted at the financial reporting date.

f)  Intangible assets

Intangible assets are measured at cost less accumulated amortisation and impairment losses.  Amortisation is recognised through the Consolidated Statement of Comprehensive Income on a straight-line basis over the estimated useful lives of the intangible assets.  The estimated useful life of the trade mark is fifteen years. The amortisation methods, useful lives and residual values of the intangible assets are reviewed at each reporting date.

	g)  Property, plant and equipment
	Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses.  Cost includes expenditures that are directly attributable to the acquisition of the asset. Depreciation is recognised through the Consolidated Statement of Comprehensive Income on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. When parts of an item of property, plant and equipment have different useful lives, those components are accounted for as separate items of property, plant and equipment.  The estimated useful lives of the furniture and fixtures are from five to ten years. The depreciation methods, useful lives and residual values of the property, plant and equipment are reviewed at each reporting date.
	h)  Freehold investment property
	Freehold investment property is initially measured at cost, being the fair value of consideration given, including related transaction costs.  Additions to freehold investment property consist of costs of a capital nature and, in the case of investment property under development, capitalised interest. After initial recognition, freehold investment property is carried at its fair value. The fair value of the freehold investment property 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 appraisers determine the fair value by applying the methodology and guidelines as set out in the appropriate sections of both the current Practice Statements and United Kingdom Practice Statements contained within the RICS Valuation - Professional Standards January 2014 Edition (the "Red Book"). For certain properties, the approach is based on discounting the future net income receivable from properties to arrive at the net present value of the 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 fair value are consistent with those used to value similar properties, with comparable leases in each of the respective markets. For other properties, values are determined on the basis of near vacant possession, whereby capital values are assessed per square metre and cross checked on a rent and yield approach, with adjustments made for void space and expected refurbishment costs prior to letting.  This calculation also excludes the effects of any taxes. All freehold investment properties are valued twice per year by independent appraisers. The last valuation of the investment properties was carried out by DTZ Debenham Tie Leung at 31 December 2013. The difference between the fair value of an investment property at the reporting date and its carrying amount prior to re-measurement is recognised through the Consolidated Statement of Comprehensive Income as a valuation gain or loss.
	When the Group begins to redevelop an existing investment property for continued future use as an investment property, the property remains an investment property and is accounted for as such. When the Group begins to redevelop an existing investment property with a view to sale, the property is transferred to trading properties and held as a current asset. The property is re-measured to fair value as at the date of the transfer with any gain or loss being taken to the Consolidated Statement of Comprehensive Income. The re-measured amount becomes the deemed cost at which the property is then carried in trading properties.
	i) Impairment of intangible assets and property, plant and equipment
	The assets or groups of assets are assessed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Individual assets are grouped for impairment assessment purposes at the lowest level at which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets. If any such indication of impairment exists, the Group makes an estimate of its recoverable amount. An asset group's recoverable amount is the higher of its fair value less costs to sell and its value in use. Where the carrying amount of an asset group exceeds its recoverable amount, the asset group is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are adjusted for the risks specific to the asset group and are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money.
	j)  Trade and other receivables
	Trade and other receivables are carried at the original invoice amount, less allowance for doubtful receivables. Provision is made when there is objective evidence that the Group will be unable to recover balances in full. Balances are written off when the probability of recovery is assessed as being remote.
	k)  Trade and other payables
	Trade and other payables are carried at payment or settlement amounts. Where the time value of money is material, payables are carried at amortised cost.
	l)  Share capital
	Ordinary Shares are classified as equity. Incremental costs directly attributable to the issue of Ordinary Shares are recognised as a deduction from equity. When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, is recognised as a deduction from equity.  Repurchased shares that are classified as Treasury Shares are presented as a deduction from equity. When Treasury Shares are sold or subsequently reissued, the amount received is recognised as an increase in equity and the resulting surplus or deficit is transferred to/from retained earnings. Funds received from the issue of Ordinary Shares are allocated as a distributable reserve.
	m)  Distributable and non-distributable reserves
	All income and expenses, foreign exchange gains and losses and realised investment gains and losses of the Group are allocated to the distributable reserve. Dividends are accounted for when paid and are reflected in the Consolidated Statement of Changes in Equity.
	n)  Cash and cash equivalents
	Cash and cash equivalents comprise cash balances and call deposits. Cash and cash equivalents are defined as cash in hand, demand deposits and short-term, highly liquid investments readily convertible to known amounts of cash and subject to an insignificant risk of changes in value.
o)  NAV per share and earnings/(loss) per share
The NAV per share disclosed on the face of the Consolidated Statement of Financial Position is calculated by dividing the net assets by the number of Ordinary Shares in issue at the year end. Earnings/(loss) per share is calculated by dividing the profit/(loss) for the year by the weighted average number of Ordinary Shares in issue during the year.
p)  Foreign currency transactions
The currency of the primary economic environment in which the Company operates (the functional currency) is deemed to be Sterling as the Company's Ordinary Shares were issued in Sterling and the majority of the Company's expenses are in Sterling. Sterling is also the Group's presentational currency. The functional and presentational currencies of the majority of the Company's subsidiaries are not Sterling. Transactions involving currencies other than Sterling are recorded at the exchange rates ruling on the transaction dates.  At each financial reporting date, monetary items and non-monetary assets and liabilities that are fair valued, which are denominated in currencies other than Sterling, are revalued at the closing rates of exchange. Gains and losses on revaluation are recognised through the Consolidated Statement of Comprehensive Income.

q)  Financial statements of foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to Sterling at the foreign exchange rates ruling at the financial reporting date. The income and expenses of foreign operations are translated into Sterling at average foreign exchange rates for the year. Foreign currency differences arising on translation are recognised in the Consolidated Statement of Comprehensive Income, in Other Comprehensive Income, in accordance with IAS 1: Presentation of Financial Statements .

r)  Operating leases

Rental income from freehold investment property leased out under an operating lease is recognised in the Statement of Comprehensive Income on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income over the terms of the lease.

s)  Segmental reporting

Following the change in the Company's investment objective and policy in September 2012 to carry out an orderly realisation of the investment properties, the Board has opted not to comply with the segmental reporting disclosure requirements of IFRS 8 for the 31 December 2012 and the 31 December 2013 consolidated financial statements due to reasons of commercial sensitivity and the possible negative impact such information may have on the disposal of individual properties .

4.  Changes in accounting policy and disclosures a)  New and amended standards and interpretations
The accounting policies adopted are consistent with those of the previous financial year.  The Group adopted the following new and amended relevant IFRS adopted in the year commencing 1 January 2013:
IAS 1: Presentation of financial statements (amended) , effective 1 July 2012.
IFRS 7: Financial instruments: disclosures (amended) , effective 1 January 2013.
IFRS 10: Consolidated financial statements , effective 1 January 2013.
IFRS 12: Disclosure of interests in other entities, effective 1 January 2013.
IFRS 13: Fair value measurement, effective 1 January 2013.
The adoption of these standards and interpretations did not have an impact on the results or performance of the Group.
b)  Standards, interpretations and amendments issued but not yet effective
The International Accounting Standards Board ("IASB") has issued/revised a number of relevant standards with an effective date after the date of these results. The Directors have chosen not to early adopt these standards and interpretations and they do not anticipate that they, with the exception of IFRS 9, would have a material impact on the Group's financial statements in the period of initial application.  A full assessment of the impact of IFRS 9 has not yet been performed.
			Effective date
	IFRS 7	Financial Instruments: Disclosures - deferral of mandatory effective date of IFRS 9 and amendments to transition disclosures.	1 January 2015
	IFRS 8	Operating Segments - amendments for aggregation of segments and reconciliation of segment assets	1 January 2014
	IFRS 9	Financial Instruments	1 January 2018
	IFRS 10	Consolidated Financial Statements - amendments for investment entities	1 January 2014
	IFRS 12	Disclosure of Interests in Other Entities - amendments for investment entities.	1 January 2014
	IAS 24	Related Party Disclosures - management entities.	1 July 2014
	IAS 32	Financial Instruments: Presentation - amendments relating to the offsetting of assets and liabilities.	1 January 2014

5.  Management and administration fees
Elysium Fund Management Limited ("Elysium") is Manager, Administrator and Company Secretary to the Company, CNC Property Fund Management Limited ("CNC") is Property Manager and Pera Pera Yönetim ve Danişmanlik Hizmetleri ve Tic Limited ("Pera Pera") is the Investment Adviser.
Administration fees The Company pays Elysium, by way of remuneration for its administration and secretarial services, an administration fee of 0.1% of the Gross Asset Value per annum calculated at the close of business at each quarter end, subject to a minimum of £100,000 per annum. In the year ended 31 December 2012, an additional one-off fee of £25,000 was paid to Elysium for work performed outside the scope of the administration agreement. The total administration fees paid to Elysium relating to the year ended 31 December 2013 amounted to £100,000 (2012: £125,000).
Management fees Elysium is entitled to receive a management fee of 1.25% of the Total Assets of the Group per annum. Total assets is defined as the ongoing NAV of the Group plus an amount equal to long-term borrowings invested by the Group. The management fee is payable quarterly in advance. The total management fee paid to Elysium for the year ended 31 December 2013 was £243,000 (2012: £372,000). The Manager is responsible for the payment of the fees of the Investment Adviser and Property Manager. For details on the payment of commissions to the Investment Adviser for the sale of properties, please refer to note 25.
The Manager has the benefit of an indemnity from the Group in relation to liabilities incurred by the Manager in the discharge of its duties other than those arising by reason of any fraud, willful default, negligence or bad faith on the part of the Manager or its delegates.
The Manager's appointment as investment manager is terminable by either party on not less than twelve months' notice. The Management Agreement may also be terminated by either the Manager or the Group if the other party, or CNC, has gone into liquidation, administration or receivership or has committed a substantial or continuing breach of the Management Agreement.
Performance fees Elysium shall be entitled to receive a performance fee only in the event of a Realisation Event (as defined below), which shall be paid no later than the date falling three months after the relevant Realisation Event. A Realisation Event shall be any of the following:
a)     an offer for the entire issued share capital of the Company being declared unconditional in all respects, in which case the total distribution made to Shareholders will be the amount of any such offer per Ordinary Share together with any dividends per Ordinary Share or capital returned by way of tender offer per Ordinary Share or any other amount returned pari passu to all Shareholders from 1 January 2011 to the realisation date; or
b)    the sale of substantially all of the Company's properties (comprising not less than 90% by value of the total property assets then held), in which case the total distribution made to Shareholders will be the NAV per Ordinary Share of the Company immediately after receipt of the proceeds of the sale of substantially all of its properties together with any dividends per Ordinary Share or capital returned as described in a); or
c)     the Company entering liquidation, in which case the total distribution made to Shareholders will be the NAV per Ordinary Share of the Company immediately prior to the moment at which it enters liquidation together with any dividends per Ordinary Share or capital returned by way of tender offer per Ordinary Share or any other amount as described in a).
The total distribution to Shareholders shall be calculated on a basis that does not recognise any liability of the Company to Elysium in respect of: (i) any performance fee that is, or may become, payable; and (ii) any liquidation costs or expenses.
The value of the performance fee shall be calculated by reference to the total distribution to Shareholders, as follows:
Total distribution	Performance fee
Less than 110 pence per Ordinary Share	None.
Greater than 110 pence per Ordinary Share but less than 130 pence per Ordinary Share	10% of the total distribution in excess of 110 pence per Ordinary Share multiplied by the number of shares in issue on the date of the Realisation Event.
Greater than 130 pence per Ordinary Share but less than 150 pence per Ordinary Share	a)     10% of the amount by which the total distribution to Shareholders is in excess of 110 pence per Ordinary Share but less than 130 pence per Ordinary Share; and b)    20% of the amount by which the total distribution to Shareholders is in excess of 130 pence per Ordinary Share but less than 150 pence per Ordinary Share, in each case multiplied by the number of Ordinary Shares in issue on the realisation date.
Greater than 150 pence per Ordinary Share	a)     10% of the amount by which the total distribution to Shareholders is in excess of 110 pence per Ordinary Share but less than 130 pence per Ordinary Share; and b)    20% of the amount by which the total distribution to Shareholders is in excess of 130 pence per Ordinary Share but less than 150 pence per Ordinary Share; and c)     30% of the amount by which the total distribution to Shareholders is in excess of 150 pence per Ordinary Share, in each case multiplied by the number of Ordinary Shares in issue on the realisation date.
During the year ended 31 December 2013, a provision for performance fee of £120,000 was made (2012: the provision was reduced by £210,000 to £nil).

6.  Segmental analysis

In accordance with IFRS 8: Operating segments , the Group is required to present and disclose segmental information based on the internal reports that are regularly reviewed by the Board in order to assess each segment's  performance and to allocate resources to them.  However, the Board has opted not to comply with IFRS 8 for the 31 December 2012 and 31 December 2013 consolidated financial statements due to reasons of commercial sensitivity and the possible negative impact such information may have on the disposal of individual properties .

7.  Interest payable and similar charges
	Year ended 31 December 2013	Year ended 31 December 2012
	£'000	£'000
Other finance charges	3	3
Bank loan interest payable	-	166
Amortisation of bank loan arrangement fees	-	3
	----------	----------
	3	172
	----------	----------
Until it was fully repaid on 30 November 2012, HSBC Bank plc had made available to the Company's Turkish subsidiary a US$17.5 million loan facility, which was drawn down on 19 December 2007 and repaid in various tranches during 2012. Interest was payable at 2.35% per annum above the US$ London interbank euro-currency deposit rate. Following the repayment of the loan, the security that HSBC Bank plc held over the Turkish properties was released.
Bank loan arrangement fees amounted to US$148,750 (0.85% of the amounts drawn down).  The fees were deducted from the amount of the loan and were being amortised over the period of the loan.  The Bank loan arrangement fees were fully amortised at 31 December 2012.

8.  Directors' remuneration
	Year ended 31 December 2013	Year ended 31 December 2012	Amount due at 31 December 2013	Amount due at 31 December 2012
	£'000	£'000	£'000	£'000
Martin M. Adams (appointed 8 May 2012)	45	29	-	11
Carol Goodwin	20	25	-	5
Hugh Ward	20	25	-	5
Charles Parkinson (resigned 8 May 2012)	-	14	-	-
	----------	----------	----------	----------
	85	93	-	21
	----------	----------	----------	----------
No bonuses or pension contributions were paid or were payable on behalf of the Directors.

9.  Other operating expenses
	Year ended 31 December 2013	Year ended 31 December 2012
	£'000	£'000
Building maintenance, power, and management	284	325
Administration of subsidiaries	97	90
Directors' remuneration (note 8)	85	93
Legal, professional and consultancy fees	71	125
Auditor's remuneration	66	69
Nominated Adviser and Broker fees	45	45
Property sales commission	37	156
Insurance	24	36
Property conveyance fees	13	48
Registrar fees	13	15
Depreciation and amortisation (notes 15 and 16)	4	5
Other expenses	101	111
Allowance for doubtful debt [1]	(2)	43
	----------	----------
	838	1,161
	----------	----------
[1] Relates to unpaid rental income that is not expected to be received and a reversal of an allowance for rental income that was not expected to be received at 31 December 2012 but was subsequently received.

10.  Tax effects of other comprehensive loss

There are no tax effects arising from the other comprehensive loss disclosed in the Consolidated Statement of Comprehensive Income (2012: £nil).

11.  Foreign currency

The gains and losses on foreign currency translation included in the Consolidated Statement of Comprehensive Income for the year ended 31 December 2013 amounted to a net gain of £391,000 (2012: gain of £13,000).  The gains and losses include exchange differences arising on the settlement of monetary and non-monetary items denominated in currencies other than Sterling, the Group's presentational and the Company's functional currency.  The changes in the value of cash and deferred tax resulting from movements in foreign currency exchange rates make up the majority of this balance. The exchange difference arising from the translation of foreign operations included within other comprehensive income amounted to a net income of £75,000 for the year ended 31 December 2013 (2012: income of £120,000).  This relates to the retranslation of share capital and reserves of the Company's subsidiary undertakings. As stated in the Admission Document, on an on-going basis, the Group does not intend to hedge the exchange rate risk between Sterling, and US Dollars, Euros and other local currencies.  The Group has freehold investment property and rental agreements denominated in currencies other than Sterling (the Company's functional and presentational currency).

12.  Loss per share - basic and diluted

The loss per Ordinary Share is based on a loss of £526,000 (2012: loss of £2,603,000) and on a weighted average number of 17,529,853 (2012: 18,630,348) Ordinary Shares in issue.  There is no difference between the basic and diluted earnings per share.

13.  Dividends

The Board does not propose an interim or final dividend for the year ended 31 December 2013 (2012: £nil).

14.  Freehold investment property
	Year ended 31 December 2013	Year ended 31 December 2012
	£'000	£'000
Brought forward	20,959	33,718
Additions	10	211
Disposals	(2,478)	(10,433)
Realised gain/(loss) on disposal of investment properties	342	(731)
Loss on revaluation of investment properties	(212)	(1,806)
	----------	----------
Carried forward	18,621	20,959
	----------	----------
In the opinion of the Directors, the Property Manager and the Investment Adviser, the fair value of the properties held at the year end is equal to the values attributed to them in the independent valuation report prepared by DTZ Debenham Tie Leung .
Property assets in Turkey, Bulgaria and Romania are inherently difficult to value as there is no liquid market or transparent pricing mechanism. As a result, valuations are subject to substantial uncertainty. There is no assurance that the estimates resulting from the valuation process will reflect the actual sales price even where such sales occur shortly after the date of the valuation.
The appraisers determine the fair value by applying the methodology and guidelines as set out in the appropriate sections of both the current Practice Statements and United Kingdom Practice Statements contained within the RICS Valuation - Professional Standards January 2014 Edition. For certain properties, the valuation approach is based on discounting the future net income receivable from properties to arrive at the net present value of the 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 fair value are consistent with those used to value similar properties, with comparable leases in each of the respective markets. For other properties, values are determined on the basis of near vacant possession, whereby capital values are assessed per square metre and cross checked on a rent and yield approach, with adjustments made for void space and expected refurbishment costs prior to letting.  This calculation also excludes the effects of any taxes.
All investment properties are classified as Level 3 in accordance with the fair value hierarchy levels set in IFRS 13: Fair value measurement .  There were no transfers into or out of Level 3 during the year, or subsequent to the year end.
In accordance with IFRS 13: Fair value measurement , it is a requirement for the Group to present and disclose the sensitivity of certain inputs in the valuation of the properties.  However, the Board has opted not to fully comply with IFRS 13 due to reasons of commercial sensitivity and the possible negative impact such information may have on the disposal of individual properties .
The Group invests primarily in US Dollars, Euros or local currencies in Turkey, Bulgaria and Romania . Although US Dollars, Euros and the local currencies of those countries are freely convertible into other currencies, exchange rate fluctuations could have a material effect on the market value of the Group's property investments, which although expressed in Sterling, are valued by DTZ Debenham Tie Leung in either US Dollars or Euros .
All investment properties were valued by DTZ Debenham Tie Leung, international property advisers, at fair value (see note 3h) at 31 December 2013 and 31 December 2012 in accordance with the latest edition of the Royal Institution of Chartered Surveyors ("RICS") Appraisal and Valuation Manual. Since the year end, two adjoining properties, the 'Yellow' Building and Asmali Cumba, were sold for US$1.6 million (£0.9 million).  Based on historic cost, the gain crystallised was US$0.6 million (£0.6 million).

15.  Intangible assets
During the period ended 31 March 2007, the Group purchased a trademark for Markiz Patisserie.  The estimated useful economic life of the trade mark is fifteen years.
	Year ended 31 December 2013	Year ended 31 December 2012
	£'000	£'000
Cost
Brought forward	14	14
Foreign exchange movement	(3)	-
	----------	----------
Carried forward	11	14
	----------	----------
Accumulated Amortisation
Brought forward	(6)	(5)
Provided during the year	(1)	(1)
Foreign exchange movement	2	-
	----------	----------
Carried forward	(5)	(6)
	----------	----------
Net book value	6	8
	----------	----------

16.  Property, plant and equipment
			Year ended 31 December 2013		Year ended 31 December 2012
			£'000		£'000
Cost
Brought forward			36		44
Disposals			-		(9)
Foreign exchange movement			(7)		1
			----------		----------
Carried forward			29		36
			----------		----------
Accumulated Depreciation
Brought forward			(23)		(23)
Provided during the year			(3)		(4)
Disposals			-		2
Foreign exchange movement			5		2
			----------		----------
Carried forward			(21)		(23)
			----------		----------
Net book value			8		13
			----------		----------
17.  Investments in subsidiary undertakings
Details of the subsidiary undertakings held by the Company at 31 December 2013 were as follows:
				31 December 2013		31 December 2012
	Registered	Principal activity		% of ordinary shares held
Markiz Gayrimenkul Yatirim ve Ticaret Limited Şirketi	Turkey	Property investment		100%		100%
Sarnia Eastern Property (Cyprus) Limited	Cyprus	Investment holding		100%		100%
Sarnia Eastern Property (Malta) Limited	Malta	Investment holding		100%		100%
Sarnia Real Estate (Cyprus) Limited	Cyprus	Investment holding		100%		100%
Southern Properties EOOD	Bulgaria	Property investment		100%		100%
Southern Properties SRL	Romania	Property investment		100%		100%
Gateway Properties SRL [1]	Romania	Property investment		sold		100%
[1] Gateway Properties SRL was voluntarily suspended from the Registrar of Companies in Romania on 30 June 2009 to save costs, but was unsuspended during the course of 2012 in preparation for its disposal in September 2013.
Sarnia Eastern Property (Cyprus) Limited and Sarnia Real Estate (Cyprus) Limited each have 50% shareholdings in Southern Properties SRL and Gateway Properties SRL.  All other companies are wholly (and directly) owned by the Company. In determining whether the Company has control over its subsidiary undertakings, the Company considered: ·      That it holds all of the voting rights of each subsidiary, either directly or indirectly, which gives the Company the current ability to direct all activities of each subsidiary; ·      That the Company is exposed to variability in returns, whether those returns are positive or negative; and ·      That the Board acts as principal on behalf of Shareholders to direct the activities of each subsidiary.
The intercompany loan from the Company to the Turkish subsidiary has been fully repaid and, therefore, future distributions from the Turkish subsidiary to the Company will incur 15% withholding tax.

18.  Cash and cash equivalents
	31 December 2013	31 December 2012
	£'000	£'000
Cash balances with banks	957	807
	----------	----------
The Group did not have any cash equivalents at the financial reporting date. Cash balances held with banks earn interest at prevailing bank interest rates.

19.  Trade and other receivables
	31 December 2013	31 December 2012
	£'000	£'000
VAT control account	25	35
Prepaid tax	7	-
Other receivables and prepayments	250	79
	----------	----------
	282	114
	----------	----------

20.  Trade and other payables
	31 December 2013		31 December 2012
	£'000		£'000
Administration fee	25		25
Other payables and accruals	251		148
Directors' fees	-		21
	----------		----------
	276		194
	----------		----------
21.  Taxation
The taxation charge in the Consolidated Statement of Comprehensive Income is made up as follows:
		Year ended 31 December 2013	Year ended 31 December 2012
		£'000	£'000
Deferred taxation (note 22)		(327)	300
Overseas corporate tax		(444)	(117)
Other taxes and duties charged overseas (1)		(22)	(48)
Withholding tax		(18)	(17)
		----------	----------
		(811)	118
		----------	----------
The Group has been granted exemption from Guernsey taxation under The Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989 and is charged an annual exemption fee, which is currently £600.
(1) Other taxes and duties charged overseas relate to taxes imposed in the Turkish, Bulgarian and Romanian subsidiaries for expenses such as environment tax, withholding tax, property tax and stamp tax.

	Year ended 31 December 2013	Year ended 31 December 2012
	£'000	£'000
Profit/(loss) before tax	285	(2,721)
	----------	----------
Tax calculated at domestic rates applicable to the respective countries	744	(268)
Non-deductible expenses	2	1
Tax losses not recognised	-	-
Reversal of previously recognised tax losses	-	(28)
Other taxes	65	177
	----------	----------
Taxation payable/(receivable)	811	(118)
	----------	----------
Domestic tax rates in the other jurisdictions in which the Group operates was as follows:
	Year ended 31 December 2013	Year ended 31 December 2012
Turkey	20%	20%
Bulgaria	10%	10%
Romania	16%	16%
The deferred tax liability has largely been created by the movement in unrealised gain or loss on freehold investment property.  In the year ended 31 December 2013 the following movements occurred: ·      The Turkish subsidiary's deferred tax liabilities increased by TRY 975,000; ·      The Bulgarian subsidiary's deferred tax was unchanged; and ·      The Romanian subsidiary's deferred tax was unchanged.
Withholding tax has been deducted from interest receivable in relation to the loan interest payable by the Turkish and Bulgarian subsidiaries at a rate of 10%.
It is likely that corporate income tax will arise on capital gains on the disposal of the remaining Turkish properties. The corporate income tax likely to arise, if the properties are realised at their current carrying values, has been provided for in these results as deferred tax. However, additional taxes, such as a 15% withholding tax, may arise on the repatriation to Guernsey of non-capital reserves from Turkey.

22.  Deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the items detailed in the table below:
	31 December 2013	31 December 2012
	£'000	£'000
Deferred tax asset	-	-
Deferred tax liability	(1,848)	(1,931)
	----------	----------
Net deferred tax liability	(1,848)	(1,931)
	----------	----------
The positive movement in the net deferred tax liability for the year (including movements on foreign exchange rates) is £83,000 (2012: positive movement of £259,000).  After negating the effect of movements in foreign exchange rates of £410,000 (2012: £41,000), the negative deferred tax movement for the year was £327,000 (2012: positive movement of £300,000) (note 21).
The deferred tax assets and deferred tax liabilities at 31 December 2013 and 31 December 2012 were as follows:

	31 December 2013		31 December 2012
	Assets	Liabilities	Assets	Liabilities
	£'000	£'000	£'000	£'000
Gains on freehold investment property	-	(1,850)	-	(1,933)
Trade and other payables	2	-	2	-
	----------	----------	----------	----------
Total	2	(1,850)	2	(1,933)
Amount netted off	(2)	2	(2)	2
	----------	----------	----------	----------
Deferred tax liability	-	(1,848)	-	(1,931)
	----------	----------	----------	----------

23.  Share capital and reserves
	31 December 2013	31 December 2012
	£'000	£'000
Authorised:
200,000,000 Ordinary Shares of 1 pence each	2,000	2,000
	----------	----------
Issued and fully paid:
16,506,250 (2012: 18,516,250) Ordinary Shares of 1 pence each	165	185
	----------	----------
During the year, the Company purchased and cancelled 2,010,000 Ordinary Shares in the Company at a total cost of £1.6 million. During the year ended 31 December 2012, the Company purchased and cancelled 120,000 Ordinary Shares in the Company at a total cost of £0.1 million. Since the year end 655,000 Ordinary Shares have been purchased for cancellation at a total cost of £0.4 million.
The Company has one class of Ordinary Shares, which carry no right to fixed income.  Ordinary Shares carry the right to vote at general meetings and the entitlement to receive any dividends and surplus assets of the Company on a winding-up. Any Ordinary Shares held in treasury do not have the right to vote at general meetings nor do they have an entitlement to receive any dividends or surplus assets of the Company on a winding-up. Foreign currency translation reserve The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations.
Reserve for own shares The Company has the authority to utilise the distributable reserves to buy back for cancellation up to 14.99% of the Ordinary Shares (2,689,393 Ordinary Shares) in issue at the time the notice of the AGM, held on 13 September 2013, was circulated.  In addition, the Company has the authority to purchase up to 10% of the Ordinary Shares in issue and hold them as Treasury Shares until a time when they are either re-issued or cancelled. No shares were purchased to be held as Treasury Shares during the year (2012: nil).

24.  NAV per Ordinary Share

The NAV, in pence per Ordinary Share, is based on the net assets attributable to equity Shareholders of £17,363,000 at 31 December 2013 (2012: £19,447,000) and on 16,506,250 Ordinary Shares in issue at the end of the year (2012: 18,516,250).

25.  Related parties

The relationship and transactions between the Group, Elysium, CNC and Pera Pera are disclosed in the Report of the Directors and note 5.  In addition, with effect from 8 May 2012, Andrew Duquemin was appointed as an alternate Director for Carol Goodwin.  Mr Duquemin is executive chairman of Elysium. During the year, the Group incurred £100,000, £243,000 and £120,000 in respect of administration, management and performance fees, respectively (2012: £125,000, £372,000 and benefitted from a reduction in performance fee provision of £210,000).  The administration, management and performance fees were payable to Elysium.  The £120,000 performance fee provision is in respect of a possible future performance fee due to Elysium, based on the 31 December 2013 NAV, and the liability has not yet crystallised (see note 5 for further details regarding when a performance fee becomes payable). At 31 December 2013, £25,000, £nil and £120,000 (2012: £25,000, £nil and £nil) was due to Elysium in respect of administration, management and performance fees, respectively. The management and performance fees payable to CNC and Pera Pera are borne by Elysium.

The Group has agreed to pay Mr Cadogan (who is employed by the Investment Adviser) commission of 2% of the sales proceeds of property in Romania and Bulgaria, if a third party agent is involved, split in the proportion of 1.5% to the agent and 0.5% to Mr Cadogan.  If a property sale is executed solely by Mr Cadogan, the rate would be 1.5%.  The Group has agreed to pay Pera Pera commission on any property sales in Turkey on the same terms as those agreed with Mr Cadogan. The three property sales during the year incurred total sales commission of £37,000 (2012: four sales, incurring commission of £156,000), which was payable to Pera Pera. The relationship that the Company has with each of its subsidiaries is disclosed in full in note 17.

The Directors are not aware of any ultimate controlling party.

26.  Maturity of financial liabilities

The maturity of the Group's financial liabilities at 31 December 2013 was as follows:

	31 December 2013				31 December 2012
	Total	Less than one month	Between one month and six months	Between six months and one year	Total	Less than one month	Between one month and six months	Between six months and one year
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Trade and other payables	276	61	93	122	194	78	88	28
Overseas corporate tax	316	175	141	-	125	12	113	-
Rents received in advance	71	4	-	67	165	4	-	161
Other provisions and payables	-	-	-	-	39	5	-	34
	----------	----------	----------	----------	----------	----------	----------	----------
	663	240	234	189	523	99	201	223
	----------	----------	----------	----------	----------	----------	----------	----------

27.  Financial risk management

The Group holds cash and cash equivalents, has trade and other receivables/payables, tax assets and liabilities, and receives rents in advance, all of which arise directly from its operations. The main risks arising from the Group's assets are market risk, liquidity risk and credit risk.  Market risk comprises of price risk, interest rate risk and foreign currency risk.  For a more complete list of the risks facing the Group, please refer to the risk warning in the Admission Document.

The Manager is responsible for identifying and controlling risks.  The Board of Directors supervises the Investment Manager and is ultimately responsible for the overall risk management approach within the Group.  The Board reviews and agrees policies for managing its risk exposure.  These policies are summarised below and have remained unchanged during the year under review.
Excessive risk concentration Concentration indicates the relative sensitivity of the Group's performance to developments affecting a particular industry or geographical location.  Concentrations of risk arise when a number of financial instruments or contracts are entered into with the same counterparty, or where a number of counterparties are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions.  Concentrations of liquidity risk may arise from the repayment terms of financial liabilities, sources of borrowing facilities or reliance on a particular market in which to realise liquid assets.  Concentrations of foreign exchange risk may arise if the Group has a significant net open position in a single foreign currency, or aggregate net open positions in several currencies that tend to move together.
Following the passing of the Discontinuation Resolution at the AGM held on 14 September 2012 and the subsequent passing of the resolution to amend the Company's investment objective and policy at the EGM held on 25 September 2012, the Company's investment objective and policy is to carry out an orderly realisation of the Company's portfolio of assets, distribution of the net proceeds to Shareholders and then undertake a voluntary winding-up of the Company.  Disposals may be by individual sales or as transactions incorporating a group of properties.  Depending on the timing of property sales, the Group may become more greatly exposed to a higher concentration of geographical risk than it is now exposed to.
Market price risk The Group's exposure to market price risk mainly arises as a result of fluctuations in the value of the Group's portfolio of investment properties.  The Board has contracted with CNC and Pera Pera to provide up-to-date information regarding the markets in which the properties are invested.  The properties are valued on a six monthly basis by independent property valuers DTZ Debenham Tie Leung in order that the Board can respond to any adverse effects on a timely basis.  A 10% increase in the value of the freehold investment property at 31 December 2013 would have increased net assets by £1,862,000 (2012: £2,096,000; or £1,881,000 on a like-for-like basis).  A decrease of 10% would have had an equal but opposite effect.
Liquidity risk The Group has invested in investment properties, which, by their nature, are illiquid.  However, the Group maintains sufficient cash balances to meet its working capital requirements.  See note 26 for details of the contractual maturities of financial liabilities.
Credit risk The risk of financial loss arising from the failure of a party to honour its obligations arises principally in connection with property leases and the investment of surplus cash and transactions where the Group sells properties with an element of deferred consideration.
Tenant rent payments are monitored regularly and appropriate action is taken to recover monies owed or if necessary to terminate the lease.  Credit risk is minimised through the requirement, where possible, for tenants to pay rent in advance.   Deferred consideration terms are only agreed with counterparties approved by the Board or, where some additional security is available.
Funds may be invested and derivative transactions contracted only with banks and financial institutions with a high credit rating.  The bank accounts held by the Group are principally with HSBC Bank plc, the Group's primary bank.  At the year end a total of £900,000 (2012: £742,000) was held on deposit with HSBC Bank plc.  Standard & Poor's rating agency has assigned an AA- credit rating to HSBC Bank plc.
Interest rate risk The Group's exposure to interest rate risk is on its cash balances.  The cash balances are held in instant access or short-term deposits earning interest at floating rates.  The Group does not hedge against movements in interest rates.
Interest rate risk profile of assets and liabilities
	Total as per Consolidated Statement of Financial Position	Floating rate	Assets on which no interest is received
	£'000	£'000	£'000
Assets as at 31 December 2013
Cash and cash equivalents	957	957	-
Other current assets	18,917	-	18,917
	------------	-----------	------------
Total assets	19,874	957	18,917
	------------	-----------	------------

Assets as at 31 December 2012
Cash and cash equivalents	807	807	-
Other current assets	21,094	-	21,094
	------------	-----------	------------
Total assets	21,901	807	21,094
	------------	-----------	------------
	Total as per Consolidated Statement of Financial Position	Floating rate	Liabilities on which no interest is paid
	£'000	£'000	£'000
Liabilities as at 31 December 2013
Current liabilities	2,511	-	2,511
	-----------	-----------	-----------
Total liabilities	2,511	-	2,511
	-----------	-----------	-----------

Liabilities as at 31 December 2012
Other current liabilities	2,454	-	2,454
	-----------	-----------	-----------
Total liabilities	2,454	-	2,454
	-----------	-----------	-----------

Interest sensitivity analysis Assuming all factors remained the same, a 0.5% increase in the US$ London interbank euro-currency deposit rate would have decreased the loss for the year by £5,000 (2012: increased loss by £21,000).  A decrease of 0.5% would have had an equal but opposite effect.

Foreign currency risk The Group conducts business in jurisdictions that generate revenue, expenses and liabilities in currencies other than Sterling.  As a result, the Group is subject to the effects of exchange rate fluctuations with respect to any of these currencies. The Group reports its consolidated results and its consolidated financial position in Sterling.  The Group invests primarily in US Dollars, Euros or local currency in Turkey, Bulgaria and Romania and, accordingly, it generates revenue in currencies other than Sterling.  The Group declares its dividends (when applicable) in Sterling and the amount received by Shareholders will be an amount in Sterling.  As a consequence, Shareholders may experience fluctuations in the market price of their Ordinary Shares as a result of movements in the exchange rate between Sterling and US Dollars, Euros and any other local currencies.  Such movements in the exchange rate may also adversely affect the NAV of the Group and the amount of dividends paid.  In addition, the amount of any dividends declared by the Group will be determined based on the results of the Group's operations.

Although US Dollars, Euros and the local currencies of Turkey, Bulgaria and Romania are freely convertible into other currencies, exchange rate fluctuations could have a material effect on the value of the Group's property investments, which are expressed in Sterling . As stated in the Admission Document, on an on-going basis, the Group does not intend to hedge the currency risk between Sterling, and US Dollars, Euros and other local currencies. The Group has freehold investment property and rental agreements denominated in currencies other than Sterling (the functional and presentational currency). At 31 December 2013, the Group had exposure to the Turkish Lira amounting to a net liability of £262,000.  During the year, the Turkish Lira devalued by 22.7% against Sterling.  For the impact on equity of similar future volatility, please refer to the foreign currency sensitivity analysis below.

Currency split of financial assets and liabilities as at 31 December 2013
	Total	GBP	EUR	US$	TRY	BGN	LEU
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Financial assets:
Trade and other receivables	282	9	-	193	19	17	44
Cash and cash equivalents	957	37	4	820	44	38	14
	------------	------------	------------	------------	------------	------------	------------
Total financial assets	1,239	46	4	1,013	63	55	58
	------------	------------	------------	------------	------------	------------	------------
Financial liabilities:
Trade and other payables	(276)	(179)	(43)	-	(10)	(19)	(25)
Overseas corporate tax	(316)	-	-	-	(315)	(1)	-
Rents received in advance	(71)	-	-	(67)	-	-	(4)
	------------	------------	------------	------------	------------	------------	------------
Total financial liabilities	(663)	(179)	(43)	(67)	(325)	(20)	(29)
	------------	------------	------------	------------	------------	------------	------------
Net financial assets/(liabilities)	576	(133)	(39)	946	(262)	35	29
	------------	------------	------------	------------	------------	------------	------------
Net exposure to currency	100%	(23.1)%	(6.8)%	164.2%	(45.5)%	6.1%	5.1%
	------------	------------	------------	------------	------------	------------	------------

Currency split of financial assets and liabilities as at 31 December 2012
	Total	GBP	EUR	US$	TRY	BGN		LEU
	£'000	£'000	£'000	£'000	£'000	£'000		£'000
Financial assets:
Trade and other receivables	114	9	-	-	19	20		66
Cash and cash equivalents	807	318	27	87	341	15		19
	------------	------------	------------	------------	------------	------------		------------
Total financial assets	921	327	27	87	360	35		85
	------------	------------	------------	------------	------------	------------		------------
Financial liabilities:
Trade and other payables	(194)	(86)	(22)	-	(15)	(19)		(52)
Overseas corporate tax	(125)	-	-	-	(124)	(1)		-
Rents received in advance	(165)	-	-	(146)	(15)	-		(4)
Other provisions and payables	(39)	-	-	-	-	-		(39)
	------------	------------	------------	------------	------------	------------		------------
Total financial liabilities	(523)	(86)	(22)	(146)	(154)	(20)		(95)
	------------	------------	------------	------------	------------	------------		------------
Net financial assets/(liabilities)	398	241	5	(59)	206	15		(10)
	------------	------------	------------	------------	------------	------------		------------
Net exposure to currency	100%	60.5%	1.3%	(14.8)%	51.7%	3.8%		(2.5)%
	------------	------------	------------	------------	------------	------------		------------
Foreign currency sensitivity analysis A 5% strengthening of Sterling against each currency (20% against the Turkish Lira, given its recent volatility) would have decreased the net assets at 31 December 2013 and 31 December 2012 and increased the loss for each year by the amounts shown below.  This analysis assumes that all other variables remain constant and that any change in foreign exchange rates would not affect the prices of the properties. The effect on equity of a strengthening of Sterling by 5% against each currency (20% against the Turkish Lira):
					Financial assets and liabilities only
					31 December 2013		31 December 2012
					£'000		£'000
Euro					2		-
US Dollar					(47)		3
Turkish Lira					52		(41)
Bulgarian Lev					(2)		(1)
Romanian Leu					(1)		1
					------------		------------
Total					4		(38)
					------------		------------
A weakening of Sterling against each currency would have an equal but opposite effect.

In order to manage the Group's exposure to foreign currency risk, rather than purchase properties in local currency, the Group agreed prices for the properties and subsequently values the properties in either US Dollars or Euros.  However, all payments for the properties were made in the relevant local currency, namely the Bulgarian Lev, Romanian Leu or Turkish Lira, at the relevant exchange rates at the time of payment.  The same process is used in respect of rental agreements.  The Board believes that this removes some of the volatility and reduces the foreign exchange exposure that may be experienced with the less stable local currencies, namely the Bulgarian Lev, Romanian Leu, and Turkish Lira. In addition, the Group entered into the bank facility in US Dollars in Turkey in order to reduce the Group's net exposure to US Dollars (the currency with which the Turkish properties are linked).  As the bank loan was repaid in full during the year ended 31 December 2012 using the proceeds from the sale of investment properties and some of the Group's working capital, the partial hedge provided by the loan no longer exists.

Possible adverse economic and political conditions The financial operations of the Group may be adversely affected by general economic conditions and particularly by economic conditions in Turkey, Bulgaria and Romania.  The returns that are likely to be achieved on an investment in property or land in those countries will be materially affected by the political and economic climate in Eastern Europe, particularly in Turkey, Bulgaria and Romania.  In particular, changes in the rates of inflation and interest rates in Turkey, Bulgaria and Romania may affect the income generated by, and capital values of, the investment properties. The property and land markets in which the Group invests are relatively immature and the economies of Turkey, Bulgaria and Romania are not as developed as certain other countries in Western Europe.  Further, those countries carry risks of political, legal and economic instability, which could adversely affect the Group's results or operations.  The ability to enforce the Group's legal rights in Turkey, Bulgaria and Romania differ from those prevailing in certain other countries in Western Europe.  With any investment in any country, there exists the risk of adverse political or regulatory developments including, but not limited to, nationalisation , confiscation without fair compensation, terrorism, war or currency restrictions.  The latter may be imposed to prevent capital flight and may make it difficult or impossible to exchange local currency into foreign currency or to repatriate foreign currency. Further, deterioration in the Western European economies could be expected to have an adverse effect on the economies of Turkey, Bulgaria and Romania and potentially on property values and the level of rents in those countries.

Risks of property ownership Investments in property may be difficult, slow or impossible to realise.  The Ordinary Shares will be subject to the 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 properties owned by the Group will, therefore, depend on many factors beyond the control of the Group and there is no assurance that there will be either a ready market for any properties held by the Group or that such properties will be sold at a profit or will yield a positive cash flow. Changes in law relating to foreign ownership of property in any of the jurisdictions in which the Group invests might also have an adverse effect on the net returns from the property portfolio. Property investment risk The performance of the Group could be adversely affected by a downturn in the property market in terms of capital value or weakening of rental markets.  In the event of default by a tenant, the Group may suffer a rental shortfall and incur additional costs including legal expenses and costs of maintaining, insuring and re-letting the property.  Any future property market recession could materially adversely affect the value of the properties. Returns from an investment in property depend largely upon the amount of rental income generated from the property and the expenses incurred in the development or redevelopment and management of the property, as well as changes in its market value.

Rental income and the market value for properties are generally affected by overall conditions in the local economy, such as growth in GDP, employment trends, inflation and changes in interest rates.  Changes in GDP may also impact employment levels, which in turn may impact demand for premises, especially for office space for commercial enterprises.  Furthermore, movements in interest rates may also affect the cost of financing for real estate companies. Both rental income and property values may also be affected by other factors relevant to the real estate market, such as competition from other property owners and developers, the perceptions of prospective tenants on the attractiveness, convenience and safety of properties, the inability to collect rents because of the bankruptcy or insolvency of tenants or otherwise, the periodic need to renovate, repair or re-lease space and the costs thereof, the costs of maintenance and insurance, and increased operating costs.  In addition, the owner must meet certain significant expenditures, including operating expenses, even if the property is vacant. Investments in property are relatively illiquid and more difficult to realise than investments in equities or bonds.

28.  Capital commitments

All contracted capital commitments have been provided for.

29.  Subsequent events

Since the year end, as part of a share buyback programme launched on 3 February 2014 by EEP and managed by Liberum Capital Limited, a total of 655,000 Ordinary Shares have been purchased and cancelled.  The total cost of the Ordinary Shares purchased was £402,000. On 14 February 2014, a further share buyback programme was initiated and Liberum Capital Limited was appointed to manage the programme to buy back for cancellation up to 655,000 Ordinary Shares. Two adjoining properties, the 'Yellow' Building and Asmali Cumba, sold for US$1.6 million (£0.9 million) on 22 January 2014, crystallising a gain, based on their historic cost, of US$0.8 million (£0.5 million). There were no other material events after the financial reporting date that required disclosure as at 20 May 2014.

30.  Fair values

For receivables and payables with a remaining life of less than one year, the notional amount is deemed to reflect the fair value.  The fair value of the deferred tax liabilities is linked to the fair value of the freehold investment property and is thus carried at its fair value.  All other receivables/payables are discounted to determine the fair value. There is no significant difference between the carrying amount and the fair value of the Group's assets and liabilities.

31.  Operating leases
The Group leases out its freehold investment property under operating leases.  At 31 December 2013, the future minimum lease receipts under non-cancellable leases were as follows:
	31 December 2013	31 December 2012
	£'000	£'000
Less than one year	517	416
Between one and five years	236	323
More than five years	6	-
	----------	----------
	759	739
	----------	----------
The total above comprises the total contracted rent receivable as at 31 December 2013. Leases have for the most part been negotiated for terms of between one and five years and are either for fixed amounts per annum over the term of the lease or are increased annually at amounts set in advance or are linked to various price indices.  The lessees do not have options to purchase the properties at the expiry of the lease periods.

32.  Capital management policy and procedures

The Group's capital management objectives are: ·      to ensure that it will be able to continue to operate in order to return funds in an orderly manner to Shareholders; and ·      to maximise its total return primarily through the capital appreciation of its investments. The Board, with the assistance of the Manager, Property Manager and Investment Adviser, monitors and reviews the structure of the Group's capital on an ad hoc basis. This review includes: ·      the current and future levels of gearing; ·      cash flow projections for the Group; ·      the working capital requirements of the Group; ·      the need to buy back Ordinary Shares for cancellation or to be held in treasury, which takes account of the difference between the NAV per Ordinary Share and the Ordinary Share price; ·      the current and future dividend policy; and ·      the return of funds to Shareholders.

Following the passing of the Discontinuation Resolution at the AGM held on 14 September 2012 and the subsequent passing of the resolution to amend the Company's investment objective and policy at the EGM held on 25 September 2012, the Board and its advisers have continued to focus on the orderly realisation of the Company's portfolio of assets and distribution of the net proceeds to Shareholders. As disclosed in the Consolidated Statement of Financial Position, the total equity Shareholders' funds were £17,363,000 at 31 December 2013 (2012: £19,447,000).

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