Interim Results

29 May 2015

THE OTTOMAN FUND LIMITED (the "Company")

Interim results for the 28 February 2015

The Company is pleased to announce its interim results for the six months ended 28 February 2015, a full copy of which will shortly be available on the Company's website: www.theottomanfund.com.

Enquiries:

Chairman's Statement

Dear Shareholders,We have entered into agreements to sell our remaining units in Alanya for EUR 630,000 + VAT. We expect the transactions to close in early June. Once that transaction closes, the Company's only substantial asset will be cash. We will then take the necessary steps to transfer those funds to Jersey for distribution. The timing and amount of any distribution are uncertain because of various legal and tax issues, though I can assure you that the expeditious distribution of the Company's net assets is a high priority for the Company. As previously announced, our former Chief Financial Officer embezzled Company assets in the net amount of $1.35 million. We continue our efforts to recover the stolen money. We are preparing a criminal case against the former CFO and will ensure that the case receives wide publicity in Turkey.I look forward to updating you on our progress when we release our annual report for the year ended 31 August 2015. 

John D. Chapman

Consolidated Statement of Comprehensive Income

The accompanying notes on pages 6 to 16 are an integral part of the financial statements.

Consolidated Statement of Financial Position

The accompanying notes on pages 6 to 16 are an integral part of the financial statements.

These financial statements were approved by the Board of Directors on 28 May 2015.

Antony R. Gardner-Hillman Andrew I. Wignall

Consolidated Statement of Changes in Equity

The accompanying notes on pages 6 to 16 are an integral part of the financial statements.

Consolidated Statement of Cash Flows

The accompanying notes on pages 6 to 16 are an integral part of the financial statements.

Notes to the financial statements

1. Accounting policies

The annual financial statements for the year ended 31 August 2014 were prepared in accordance with International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board (IASB) and interpretations issued by the International Financial Reporting Committee of the IASB (IFRIC). The interim financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) (together "the Group") made up to 28 February 2015. The accounting policies adopted in the preparation of the condensed consolidated interim financial statements (the "interim financial statements") are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 August 2014.

The Ottoman Fund Limited had invested in Turkish land and new-build residential property in Riva, Bodrum and Alanya. The Group has sold its investments in Turkish land and now only holds a loan receivable related to new-build residential property in Alanya. The Company is a limited liability company incorporated and domiciled in Jersey, Channel Islands since 9 December 2005. The Company is quoted on the AIM market of the London Stock Exchange plc.

The interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 August 2014, which have been prepared in accordance with IFRS.

(a) Basis of preparation

The interim financial statements have been prepared on a historical cost basis, except for certain financial instruments as detailed in this note.

The Group has cash and cash equivalents in excess of £7.74m at the period end and liabilities of only £606k. The Directors have reviewed this information and are comfortable that the Company will continue as a financially viable entity for the foreseeable future until such time the Group may have realised all of its assets, the timing of which is difficult to estimate at this time. The Directors intend to recommend to shareholders to extend the life of the Company to enable the conclusion of the ongoing litigation issues. Based on this, the financial statements have been prepared on a going concern basis.

The interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting.

(b) Basis of consolidation

Subsidiaries

The consolidated financial statements are prepared using uniform accounting policies for like transactions. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of the subsidiaries are included in the consolidated financial statements from the date that control commences up to the date that control ceases.

Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

The Group applies a policy of treating transactions with minority interests as transactions with parties external to the Group. Minority interests represent the portion of profit and net assets not held by the Group. They are presented separately in the consolidated statement of comprehensive income and in the consolidated statement of financial position separately from the amounts attributable to the owners of the parent.

Notes to the financial statements (continued)

1. Accounting policies (continued)

(c) Revenue recognition

Interest receivable on fixed interest securities is recognised using the effective interest method. Interest on short term deposits, expenses and interest payable are treated on an accruals basis. Revenue from sales of inventory is recognised when the significant risks and rewards of an asset have been transferred. The gains or losses from sale of inventory are recognised at the book gain or loss amount with any foreign exchange gains or losses being reflected separately in the statement of comprehensive income.

(d) Expenses

All expenses are charged through the statement of comprehensive income in the period in which the services or goods are provided to the Group except for expenses which are incidental to the disposal of an investment which are deducted from the disposal proceeds of the investment.

(e) Non current assets

General

Assets are recognised and derecognised at the trade date on acquisition and disposal respectively. Proceeds will be measured at fair value which will be regarded as the proceeds of sale less any transaction costs.

Intangible assets

Intangible assets are stated at historical cost less any provisions for amortisation and impairments. They are amortised over their useful life of 6 years. The amortisation is based on the straight-line basis. At each balance sheet date, the Group reviews the carrying amount of its intangible assets to determine whether there is any indication that those assets have suffered an impairment loss.

Plant & Equipment

Plant and equipment is stated at historical cost less accumulated depreciation and any recognised impairment loss. Depreciation is charged so as to write off the cost of assets over their estimated useful lives, using the straight line method on the following basis:

The gain or loss on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the statement of comprehensive income.

Inventories

Inventories are stated at the lower of cost and net realisable value. Land inventory is recognised at the time a liability is recognised - generally after the exchange of unconditional contracts.

Net realisable value will be determined by the Board as the estimated selling price in the ordinary course of business less costs to complete the sale and selling costs. In determining the net realisable value, the directors take into account the valuations received from the independent appraisers, market conditions at and (where relevant and appropriate) after the balance sheet date, and offers received from third parties by the Group.

The valuations of the properties, performed by the independent appraisers, are based on estimates and subjective judgements that may vary from the actual values and sales prices realised by the Group upon ultimate disposal.

Notes to the financial statements (continued)

1. Accounting policies (continued)

(e) Non current assets (continued)

Inventories (continued)

Impairment is recognised through the statement of comprehensive income at the time that the Board believes the net realisable value is lower than cost and will remain so for the foreseeable future. Write backs on impairment are recognised through the statement of comprehensive income when the Board believes the foreseeable net realisable value of the inventory is greater than the impairment value. Write backs on impairment are also recorded at the time of sale when the net realised value of the disposal is greater than the previously impaired recorded value of the inventory.

At the time of disposal, the profit on sale is recognised in the statement of comprehensive income along with any recognised foreign exchange gains or losses on disposal.

Loans and receivables

Loans and receivables are recognised on an amortised cost basis. Where they are denominated in a foreign currency they are translated at the prevailing balance sheet exchange rate. Any foreign exchange difference is recognised through the statement of comprehensive income.

Loans are reviewed for impairment by the Board on a semi-annual basis; any impairment is recognised through the statement of comprehensive income.

(f) Cash and cash equivalents

Cash and cash equivalents are classified as loans and receivables and comprise deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less.

(g) Taxation

Profits arising in the Company for the 2015 year of assessment and future periods will be subject to tax at the rate of 0% (2014: 0%). However, withholding tax may be payable on repatriation of assets and income to the Company in Jersey. The Company pays an International Services Entity fee and neither charges nor pays Goods and Services Tax. This fee is currently £200 (2014: £200) per annum for each Jersey registered company within the Group.

The subsidiaries will be liable for Turkish corporation tax at a rate of 20%. Additionally, a land sale and purchase fee may arise when land is sold or purchased.

Deferred tax is recognised in respect of all temporary differences that have originated but not reversed at the balance sheet date, where transactions or events that result in an obligation to pay more tax in the future or right to pay less tax in the future have occurred at the balance sheet date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the temporary differences can be deducted.

(h) Foreign currency

In these financial statements, the results and financial position of the Group are expressed in Pound Sterling, which is the Group's presentational currency. The functional currency of the Company and Jersey subsidiaries is Pound Sterling; the functional currency for the Turkish subsidiaries is Turkish Lira.

Notes to the financial statements (continued)

1. Accounting policies (continued)

(h) Foreign currency (continued)

The results and financial position of the entities based in Jersey are recorded in Pound Sterling, which is the functional currency of these entities. In these entities, transactions in currencies other than sterling are recorded at the rates of exchange prevailing on the dates of the transactions. Monetary balances (including loans) and non-monetary balances that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date.

The results and financial position of the entities based in Turkey are recorded in Turkish Lira, which is the functional currency of these entities. In order to translate the results and financial position of these entities into the presentation currency (Pounds Sterling):

- non-monetary assets (including inventory) are translated at the rates of exchange prevailing on the dates of the transactions ("historical translated cost");

- monetary balances (including loans) are translated at the rates prevailing on the balance sheet date; and

- items to be included in the statement of comprehensive income are translated at the average exchange rates for the year unless the average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions.

Foreign exchange gains or losses are recorded in either the statement of comprehensive income or in the statement of changes in equity depending on their nature and how they have been derived. Exchange gains/losses on the translation of subsidiaries are accounted for in the translation reserve.

(i) Share capital

Ordinary shares are classified as equity. External costs directly attributable to the issue of new shares are shown as a deduction to reserves. Any redemption in shares is deducted from ordinary share capital with any transaction costs taken to the statement of comprehensive income.

(j) Critical accounting estimates and assumptions

The Board makes estimates and assumptions concerning the future in the preparation of the financial statements. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates, assumptions and judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below.

In previous years the Company obtained two independent valuations which were reviewed by the Board. Having held discussions with the Investment Advisor and the valuers, the Directors believed that an average of the two valuations taking into account other management assumptions represented the most appropriate estimate of the assets value. As such this average valuation was used in the Directors' assessment of the recoverability of the loan receivable from Mandalina (note 8). For the current period, the Directors have taken into account amounts receivable from Mandalina and offers received for the remaining Alanya apartments for their assessment of the recoverability of the loan receivable. The Directors have changed their method of assessing the recoverability as they believe the revised method provides a more accurate reflection of what is recoverable.

In addition to the above, the Directors have made assessments with regard to contingent liabilities and an assessment of the matter discovered in December 2014 in relation to the financial impact of the amount of funds that have been removed from the Group's Turkish entities (and entities affiliated with the Group) without authorisation. Please refer to notes 12 and 15.

Notes to the financial statements (continued)

2. Segment reporting

The chief operating decision maker (the "CODM") in relation to the Group is considered to be the Board itself. The factor used to identify the Group's reportable segments is geographical area.

Based on the above and a review of information provided to the Board, it has been concluded that the Group is currently organised into one reportable segment: Turkey.

Within the above segment, the remaining ongoing project relates to new build residential property. The CODM considers on a quarterly basis the results of the position of the project as part of their ongoing performance review.

The CODM receives regular reports on the Company's assets by the Investment Advisors, Civitas Property Partners S.A. ("Civitas"). During this financial year Civitas has provided detailed reviews, as requested, of the Turkish economy and real estate market and also their strategic advice regarding the new build residential property project.

Other than cash and cash equivalent assets and related interest and charges, the results of the Group are deemed to be generated in Turkey.

3. Management fee

Civitas Property Partners S.A. ("Civitas") were appointed as Investment Advisors to the Group on 2 December 2009. The advisory fee structure is incentive-based with an annual fixed component of €212,500 and an incentive component based on a percentage of realisation value. There was no incentive fee paid for the period to 28 February 2015 (28 February 2014: £18,217; 31 August 2014: £925,692).

4. Earnings per share

Basic earnings per share is calculated by dividing the gain/(loss) attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period.

Due to the options lapsing without exercise in December 2010, there is no dilution to the earnings per share.The earnings per share are calculated as (0.21) pence (28 February 2014: 0.63 pence; 31 August 2014: (8.33) pence).

Notes to the financial statements (continued)

5. Intangible assets

The intangible asset related to computer software, with a useful life of 6 years.

6. Plant and equipment

7. Inventories

In the prior year, the above represented 149,550 square metres of development land on the Bodrum peninsula and 931,739 square metres on the Riva coastline.

Notes to the financial statements (continued)

8. Loans and receivables

The valuation of the Alanya apartments used by the Directors in the assessment of the recoverability of the loan is based on valuation estimates and subjective judgements, which may vary from the actual values and sales prices realised upon ultimate disposal.

9. Called up share capital

2 founder shares of no par value are held by Vistra Nominees I Limited. These shares are not eligible for participation in the Company's investments and carry no voting rights at general meetings of the Company.

Capital Management

As a result of the Group being closed-ended, capital management is wholly subject to the discretion of the Board and is not influenced by subscriptions or redemptions. The Group's objectives for managing capital are to maintain sufficient liquidity to meet the expenses of the Group as they fall due; to invest in the Group's current assets when the Board feels it will give rise to capital appreciation; and to return capital to shareholders where possible.

10. Net asset value per share

The net asset value per ordinary share is based on the net assets attributable to equity shareholders of £8,691,428 on 134,764,709 shares (28 February 2014: £68,140,917 on 134,764,709 shares; 31 August 2014: £40,976,092 on 134,764,709 shares).

Notes to the financial statements (continued)

11. Financial risk management

The disclosure on the financial risk management has been limited to the consolidated financial position. This approach has been adopted as this covers all of the principal risks associated with the Group.

The disclosures below assume, for the prior periods, that the properties held by the Group are in US Dollars as this is the currency in which they were valued by BNP Paribas and TSKB. In the opinion of the directors this is also the currency that disposals occurred in.

The Group's financial instruments comprise loans, cash balances, receivables and payables that arise directly from its operations, for example, in respect of sales and purchases awaiting settlement, and receivables for accrued income.

The principal risks the Group faces from its financial instruments are:

(i) Market risk

(ii) Credit risk

(iii) Foreign currency risk

(iv) Interest rate risk

(v) Liquidity risk

As part of regular Board functions, the Board reviews each of these risks. As required by IFRS 7: Disclosure and Presentation, an analysis of financial assets and liabilities, which identifies the risk to the Group of holding such items, is given below.

(i) Market price risk

Market price risk arises mainly from uncertainty about future prices of financial instruments used in the Group's operations. It represents the potential loss the Group might suffer through holding market positions as a consequence of price movements. The Group has no such exposures to market price risk.

(ii) Credit risk

Credit risk is the risk that counterparties will be unable to deliver on assets due to the Group. The Group's third party loan in respect of the investment in the Riverside Resort in Alanya is potentially at risk from the failure of the third party. On 3 December 2010, the third party loan was assigned to a related entity, Mandalina Yapi Insaat Sanayi Ve Ticaret A.S. In order to protect the Group's interest in the Alanya apartments, the Group holds signed share transfer letters from the shareholders of Mandalina which may be executed at any time at the discretion of the Directors and would transfer ownership of the shares in the Mandalina from the existing shareholders to the Group.

The largest counterparty risk is with the Group's bankers. Bankruptcy or insolvency of Deutsche Bank International Limited may cause the Group's rights with respect to cash held to be delayed or limited. There is no policy in place to mitigate this risk as the Board believes there is no need to do so, due to the likelihood of it occurring being deemed to be minimal.

The Board does not monitor the credit quality of receivables on an ongoing basis. Cash balances have been placed with Deutsche Bank International Limited due to its Moody's credit rating of A3.

The Group's principal financial assets are other receivables and cash and cash equivalents. The maximum exposure of the Group to credit risk is the carrying amount of each class of financial assets. Loans and receivables are represented by loans to and receivables from third parties. Other receivables are represented mainly by prepayments and other receivables where no significant credit risk is recognised.

Notes to the financial statements (continued)

11. Financial risk management (continued)

(iii) Foreign currency risk

The Group operates Pound Sterling, Euro, US Dollar and Turkish Lira bank accounts. Exchange gains or losses arise as a result of movements in the exchange rates between the date of a transaction denominated in a currency other than Sterling and its settlement. There is no policy in place to mitigate this risk as the Board believes such a policy would not be cost effective given the Group's exposure.

Currency rate exposure

An analysis of the Group's currency exposure is detailed below:

Notes to the financial statements (continued)

11. Financial risk management (continued)

(iv) Interest rate risk

Interest rate movements may affect the level of income receivable on cash deposits. There is no policy in place to mitigate this risk as the Board believes such a policy would not be cost effective, given the Group's exposure.

The Group holds only cash deposits.

The interest rate profile of the Group excluding short term receivables and payables was as follows:

(v) Liquidity risk

The Group's assets mainly comprise cash balances, loans receivable and development property, which can be sold to meet funding commitments if necessary. As at 28 February 2015 the Group does not have any significant liabilities due.

The Group has sufficient cash reserves to meet liabilities due.

12. Contingent liability

The Directors have been informed that an intermediate Turkish court has upheld an administrative order disallowing certain tax benefits from a restructuring transaction that may have had similarities to the restructuring of Osmanli Yapi 2. This intermediate court decision is now under appeal to the Turkish Supreme Court. The Group is monitoring the appeal, but at present this development does not meet the recognition criteria under IAS 37, and the Directors have consequently made no provision in the financial statements.

During the prior year, a case against the Group was lodged in Turkey for US$1m by a party who claims to have acted as an intermediary on one of the land sale transactions during the prior year. The Directors have obtained legal advice as to the likely outcome of the case and are of the understanding that it is probable that the Group will successfully defend this action. The Directors are therefore of the opinion, taking this advice into consideration that it is not appropriate to provide for this legal claim as it does not meet the recognition criteria under IAS 37. Please refer to note 15 for further information.

Notes to the financial statements (continued)

13. Related party transactions

John D. Chapman is a shareholder in the Turkish subsidiaries due to Turkish law requirements. Mr Chapman receives no additional benefit from being a shareholder of the Turkish subsidiaries.

Information regarding Directors' interests can be found in note 14.

Ali Pamir is a director of the Investment Advisor, Civitas Property Partners S.A. and is a director and shareholder of the Turkish subsidiaries due to Turkish law requirements. Mr Pamir receives no additional benefit from being a shareholder of the Turkish subsidiaries. Information regarding amounts paid to the Investment Advisor can be found in note 3.

Sinan Kalpakcioglu was a Turkish resident consultant to The Ottoman Fund Limited. Mr Kalpakcioglu is a director and shareholder of the Turkish subsidiaries due to Turkish law requirements. Mr Kalpakcioglu receives no additional benefit from being a shareholder of the Turkish subsidiaries. Fees paid to Mr Kalpakcioglu during the period amounted to £3,933 (28 February 2014: £23,600; 31 August 2014: £55,200); no amounts remained outstanding at the period end (28 February 2014: £7,867; 31 August 2014: £7,867).

Vistra Nominees I Limited is a related party being the holder of the 2 founder shares of The Ottoman Fund Limited.

Sinan Kalpakcioglu and Ali Pamir are shareholders in Mandalina, which holds the title to the Alanya apartments.

The Directors do not consider there to be an ultimate controlling party.

14. Directors' interests

Total compensation (excluding performance fees) paid to the Directors during the period was £75,000 (28 February 2014: £75,000; 31 August 2014: £150,000).

During the period John D. Chapman as Executive Chairman has been employed under an executive service contract that provides for an annual fee of £75,000 pro-rated monthly and a discretionary performance fee.

Eitan Milgram is an Executive Vice President of Weiss Asset Management LLC which is a substantial investor in the Company.

15. Subsequent Events

On 19 March 2015, the lawyers acting on behalf of the Group in relation to the case against the Group for US$1m by a party who claimed to have acted as an intermediary on one of the land sales advised that the case had been heard in court and that the presiding judge, after hearing from both parties, accepted the Group's lawyer's motion to immediately dismiss the lawsuit that had been filed against the Group. The counterparty to the lawsuit has appealed the decision and the case is therefore yet to be concluded.

Other than the above, the Directors are satisfied that there were no material events subsequent to the period end that would have an effect on these financial statements.