Annual Report and Accounts

EmdexTrade PLC 29 April 2004 Company Registration No. 4043020 (England and Wales) EMDEXTRADE PLC ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 OCTOBER 2003 EMDEXTRADE PLC COMPANY INFORMATION Directors I G Salter L A Hollender P W Kennedy E A Nil S A Wiggans R I Fossett (Appointed 24 July 2003) Secretary C Gill Company number 4043020 Registered office 15 The Green Richmond Surrey TW9 1PX Auditors RSM Robson Rhodes LLP 186 City Road London EC1V 2NU Business address 15 The Green Richmond Surrey TW9 1PX Bankers National Westminster Bank Plc 45 Fulham Broadway London SW6 1AG Anglo Irish Bank Corporation Plc 10 Old Jewry London EC2V 6HS Nominated advisors Nabarro Wells & Co. Limited Saddlers House Gutter Lane London EC2V 6HS Brokers Keith Bayley Rogers & Co. Limited Sophia House, 76/80 City Road London EC1Y 2EQ Solicitors Field Fisher Waterhouse 35 Vine Street London EC3N 2AA EMDEXTRADE PLC CONTENTS Page Chairman's Report 1 Managing Director's Report 2 Directors' Report 3 - 5 Independent Auditors' Report 6 - 7 Profit and loss account 8 Balance Sheet 9 Cash flow statement 10 Notes to the cash flow statement 11 Notes to the financial statements 12 - 22 EMDEXTRADE PLC CHAIRMAN'S REPORT FOR THE YEAR ENDED 31 OCTOBER 2003 I am pleased to report a 115% increase in turnover to Â£1,679,238 and a significant decrease in the loss for the year to Â£392,030 (2002 Â£463,522). The depletion in shareholders funds caused by the loss for the year was expunged in part by the issue of 4,444,444 ordinary shares of 1p each in satisfaction of a loan of Â£300,000 from CCH Europe GmbH, a company controlled by Eren Nil. As a result, shareholders funds decreased by 14% to Â£536,329. The capitalisation of the outstanding loan demonstrates the confidence of our majority shareholder in the future development of EmdexTrade PLC. We discontinued operations in the US as the costs of continuing operations proved prohibitive in the absence of closing any funds. Ken Mackay resigned as a director, Richard Fossett joined the Board as Chief Operating Officer and Eren Nil has taken over as Managing Director. Our efforts will be focused on increasing turnover during the forthcoming year through organic growth and acquisition with a view to achieving profitability in the short term. Ian Salter Chairman 23 April 2004 EMDEXTRADE PLC MANAGING DIRECTOR'S REPORT FOR THE YEAR ENDED 31 OCTOBER 2003 Trading This year marked the brokering of a substantial trade finance transaction which should continue to yield an attractive return in each of the next five years. This also forms part of a potentially larger series of transactions in the future, demonstrating your management's commitment to sustaining and building quality revenues. Results Turnover for the year more than doubled to Â£1,679,238 (2002: Â£780,449) and the loss for the year reduced by 15% to Â£392,030 (2002: Â£463,522). Cost reduction During the year the Board pursued a review of the company's overall operations and took a series of downsizing measures in respect of headcount and operating expenses. As a result we have achieved a reduction in the Company's administration expenses to a more sustainable level on an ongoing basis, the benefits of which will feed through in the forthcoming year. In addition the Board decided to discontinue operations in the Company's overseas subsidiaries. Capitalisation Pursuant to an agreement between CCH Europe GmbH ('CCH'), a company controlled by Eren Nil, the outstanding loan of Â£300,000 from CCH was satisfied by the issue of 4,444,444 ordinary shares of 1p each to CCH. The loss for the year was expunged in part by the above mentioned issue and as a result shareholders funds decreased by 14% to Â£536,329. Priorities The Company's strategy for 2004 is to focus on growing sales in the trade finance market at a sustainable cost level. The Company's priority is strongly focused on delivering shareholder value and the Board is actively considering acquiring undertakings capable of enhancing shareholder wealth. Eren Nil Managing Director 23 April 2004 EMDEXTRADE PLC DIRECTORS' REPORT FOR THE YEAR ENDED 31 OCTOBER 2003 The directors present their report and financial statements for the year ended 31 October 2003. Principal activities and review of the business The principal activity of the company is to act as an arranger and broker for clients around the world to enable them to buy and sell trade obligations. The detailed business review of the company's activities and of future developments is contained within the Chairman's Report and Managing Director's Report on pages 1 to 2. Results and dividends The results for the year are set out on page 8. The directors do not recommend payment of an ordinary dividend. Annual General Meeting Resolutions 6 and 7 of the notice of Annual General Meeting contain resolutions which renew existing authorisations for a further year. The directors believe that such renewal is necessary to be able to take advantage of business opportunities as they arise and recommend you to vote in favour. Resolution 6 - An Ordinary Resolution will be proposed to grant the directors general authority to allot shares up to an aggregate nominal amount of Â£180,000. Resolution 7 - The principal effect of this resolution is to give the directors authority to allot equity securities for cash other than to existing shareholders up to a limited aggregate nominal value of Â£50,000. Directors The following directors have held office since 1 November 2002: I G Salter S C Corley (Resigned 29 April 2003) L A Hollender P W Kennedy K I Mackay (Resigned 24 June 2003) E A Nil S A Wiggans R I Fossett (Appointed 24 July 2003) EMDEXTRADE PLC DIRECTORS' REPORT (CONTINUED) FOR THE YEAR ENDED 31 OCTOBER 2003 Directors' interests The directors' interests in the shares of the company were as stated below Ordinary shares of 1p each 31 October 2003 1 November 2002 I G Salter 200,000 200,000 L A Hollender 800,000 4,000,000 P W Kennedy 100,000 100,000 E A Nil 37,404,444 24,000,000 S A Wiggans 480,000 2,400,000 R I Fossett - - Deferred 'A' shares of 1p each 31 October 2003 1 November 2002 I G Salter - - L A Hollender 888,889 4,444,445 P W Kennedy - - E A Nil 36,622,223 26,666,667 S A Wiggans 533,333 2,666,666 R I Fossett - - Deferred 'B' shares of 1p each 31 October 2003 1 November 2002 I G Salter - - L A Hollender 444,444 2,222,222 P W Kennedy - - E A Nil 18,311,112 13,333,334 S A Wiggans 266,667 1,333,334 R I Fossett - - R I Fossett's holdings are stated at 31 October 2003 and the date of his appointment. Creditor payment policy The company's current policy concerning the payment of trade creditors is to: - settle the terms of payment with suppliers when agreeing the terms of each transaction; - ensure that suppliers are made aware of the terms of payment by inclusion of the relevant terms in contracts; and - pay in accordance with the company's contractual and other legal obligations. On average, trade creditors at the year end represented 19 (2002- 13) days' purchases. Auditors On 3 May 2003, RSM Robson Rhodes, the company's auditors, transferred substantially the whole of their business to RSM Robson Rhodes LLP, a limited liability partnership incorporated under the Limited Liability Partnerships Act 2000. The directors consented to treating the appointment of RSM Robson Rhodes as extending to RSM Robson Rhodes LLP with effect from the 3 May 2003. In accordance with section 385 of the Companies Act 1985, a resolution proposing that RSM Robson Rhodes LLP be reappointed as auditors of the company will be put to the Annual General Meeting. EMDEXTRADE PLC DIRECTORS' REPORT (CONTINUED) FOR THE YEAR ENDED 31 OCTOBER 2003 Directors' responsibilities Company law requires the directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing those financial statements, the directors are required to: -select suitable accounting policies and then apply them consistently; -make judgements and estimates that are reasonable and prudent; -state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; -prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the company and to enable them to ensure that the financial statements comply with the Companies Act 1985. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. By order of the board C Gill Secretary 23 April 2004 EMDEXTRADE PLC INDEPENDENT AUDITORS' REPORT TO THE SHAREHOLDERS OF EMDEXTRADE PLC We have audited the financial statements of EmdexTrade PLC on pages 8 to 22. This report is made solely to the company's members, as a body, in accordance with Section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of the directors and auditors The directors' responsibilities for preparing the Annual Report and the financial statements in accordance with applicable law and United Kingdom Accounting Standards are set out in the Statement of Directors' Responsibilities. Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and United Kingdom Auditing Standards. We report to you our opinion as to whether the financial statements give a true and fair view and have been properly prepared in accordance with the Companies Act 1985. We also report to you if, in our opinion, the directors' report is not consistent with the financial statements, if the company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors' remuneration and transactions with the company and former members of the group is not disclosed. We read other information contained in the Annual Report and consider whether it is consistent with the audited financial statements. The other information comprises only the Directors' Report, the Chairman's Report and the Managing Director's Report. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information. Basis of audit opinion We conducted our audit in accordance with United Kingdom Auditing Standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the company's circumstances, consistently applied and adequately disclosed. We planned our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. However, the evidence available to us was limited in respect of the matter referred to in Note 1 to the financial statements, concerning the fact that the majority shareholder has committed to using his best endeavours to ensure that sufficient deals are directed through the company to enable it to trade as a going concern. We have been unable to ascertain what deals will be directed through the company and are unable to make an assessment as to whether the company's financial resources will be sufficient to enable it to meet its on-going working capital requirements. Accordingly, there are no other satisfactory procedures that we could adopt to confirm whether the deals referred to in Note 1 will be directed through the company. If these deals do not materialise the company might not be a going concern. If the company were not to be a going concern then adjustments would be required to reduce the carrying value of assets to their recoverable amount and to provide for the costs of closure. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. Qualified opinion arising from limitation in audit scope Except for any adjustments that might have arisen had we obtained evidence that sufficient deals would be directed through the company to enable it to trade as a going concern, in our opinion the financial statements give a true and fair view of the state of affairs of the company as at 31 October 2003 and of its loss for the year then ended and have been properly prepared in accordance with the Companies Act 1985. In respect alone of the limitation on our work relating to the confirmation of future deals referred to above we have not obtained all the information and explanations that we considered necessary for the purpose of our audit. RSM Robson Rhodes LLP Chartered Accountants and Registered Auditors London, England 23 April 2004 EMDEXTRADE PLC PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 OCTOBER 2003 2003 2002 Notes Â£ Â£ Turnover 2 1,679,238 780,449 Cost of sales (1,308,778) (663,373) Gross profit 370,460 117,076 Administrative expenses (747,072) (600,711) Operating loss 3 (376,612) (483,635) Loss on sale of subsidiaries 5 (9,162) - Loss on ordinary activities before (385,774) (483,635) interest Other interest receivable and similar 165 24,589 income Interest payable and similar charges 4 (6,358) (5,301) Loss on ordinary activities before (391,967) (464,347) taxation Tax on loss on ordinary activities 6 (63) 825 Loss on ordinary activities after 13 (392,030) (463,522) taxation Basic and Diluted loss per ordinary 7 (0.97)p (1.16)p share There are no recognised gains and losses other than those passing through the profit and loss account. EMDEXTRADE PLC BALANCE SHEET AS AT 31 OCTOBER 2003 2003 2002 Notes Â£ Â£ Â£ Â£ Fixed assets Tangible assets 8 344,084 402,036 Investments 9 - 110,740 344,084 512,776 Current assets Debtors 10 321,173 110,655 Cash at bank and in hand 30,742 43,922 351,915 154,577 Creditors: amounts falling due within one 11 (159,670) (45,046) year Net current assets 192,245 109,531 Total assets less current liabilities 536,329 622,307 Capital and reserves Called up share capital 12 1,044,444 1,000,000 Share premium account 13 417,615 156,007 Profit and loss account 13 (925,730) (533,700) Shareholders' funds 14 536,329 622,307 Equity interests (63,671) 22,307 Non-equity interests 600,000 600,000 536,329 622,307 The financial statements set out on pages 8 to 22 were approved by the Board on 23 April 2004 P W Kennedy Director EMDEXTRADE PLC CASH FLOW STATEMENT FOR THE YEAR ENDED 31 OCTOBER 2003 2003 2002 Â£ Â£ Â£ Â£ Net cash outflow from operating activities (358,412) (575,914) Returns on investments and servicing of finance Interest received 165 24,589 Interest paid (6,358) (5,301) Net cash (outflow)/inflow for returns on investments (6,193) 19,288 and servicing of finance Taxation (63) - Capital expenditure Payments to acquire tangible assets (56,142) (400,270) Payments to acquire investments - (110,740) Receipts from sales of investments 101,578 - Net cash inflow/(outflow) for capital expenditure 45,436 (511,010) Net cash outflow before management of liquid (319,232) (1,067,636) resources and financing Financing Tax refund in respect of cost of shares issued 6,052 - Loan subsequently converted to shares 300,000 - Net cash inflow from financing 306,052 - Decrease in cash in the year (13,180) (1,067,636) EMDEXTRADE PLC NOTES TO THE CASH FLOW STATEMENT FOR THE YEAR ENDED 31 OCTOBER 2003 1 Reconciliation of operating loss to net cash outflow from operating activities 2003 2002 Â£ Â£ Operating loss (376,612) (483,635) Depreciation of tangible assets 114,094 984 Increase in debtors (210,518) (54,433) Increase/(decrease) in creditors within one year 114,624 (38,830) Net cash outflow from operating activities (358,412) (575,914) 2 Analysis of net funds 1 November 2002 Cash flow Other non-cash 31 October 2003 changes Â£ Â£ Â£ Â£ Net cash: Cash at bank and in hand 43,922 (13,180) - 30,742 Net funds 43,922 (13,180) - 30,742 3 Reconciliation of net cash flow to movement in net funds 2003 2002 Â£ Â£ Decrease in cash in the year (13,180) (1,067,636) Movement in net funds in the year (13,180) (1,067,636) Opening net funds 43,922 1,111,558 Closing net funds 30,742 43,922 EMDEXTRADE PLC NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 OCTOBER 2003 1 Accounting policies 1.1 Basis of preparation and going concern The financial statements are prepared under the historical cost convention. The financial statements continue to be prepared on a going concern basis on the assumption that the majority shareholder has committed to using his best endeavours to ensure that sufficient deals are directed through the company to enable it to trade as a going concern. Without the support of the majority shareholder the company might not be a going concern. If the company were not to be a going concern then adjustments would be required to reduce the carrying value of assets to their recoverable amount and to provide for the costs of closure. 1.2 Turnover Turnover represents amounts receivable for goods and services net of VAT. 1.3 Tangible fixed assets and depreciation Tangible fixed assets are stated at cost less depreciation. Depreciation is provided at rates calculated to write off the cost less estimated residual value of each asset over its expected useful life, as follows: Computer equipment 33% straight line method As detailed in Financial Reporting Standard 11 'Impairment of fixed assets', adjustments are made to asset values if events indicate that the carrying value of the fixed assets may not be recoverable and that impairment may have occurred. The accounting policy in respect of the website development is detailed below in 1.4 'Website development costs'. 1.4 Website development costs The company capitalises all external costs and those internal costs, which otherwise would not have been incurred, directly attributable to developing its website. The directors estimate that the period over which development costs will be amortised will be 4 years from the date of the completion. The company has adopted the accounting policy detailed in Urgent Issues Task Force 29 'Website development costs' for the treatment of costs associated with the development of the website. All development and design costs have been capitalised. All other costs associated with the website have been charged to the profit and loss account as incurred. 1.5 Investments Fixed asset investments are stated at cost less provision for diminution in value. 1.6 Deferred taxation The payment of taxation is deferred or accelerated because of timing differences between the treatment of certain items for accounting and taxation purposes. Full provision for deferred taxation is made under the liability method, without discounting, on all timing differences that have arisen, but not reversed by the balance sheet date, unless such provision is not permitted by Financial Reporting Standard 19. 1.7 Foreign currency translation Monetary assets and liabilities denominated in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. All differences are taken to profit and loss account. 1.8 Group accounts During the year, the company disposed of all of its subsidiary undertakings. Accordingly group accounts are not presented and the comparative amounts disclosed for the year ended 31 October 2002 are for the company alone. EMDEXTRADE PLC NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 OCTOBER 2003 2 Turnover and loss on ordinary activities before taxation All of the company's turnover and loss before taxation arose from the company's principal activities, namely the arranging and brokering of trade obligations. Certain of the transactions entered into by the company involved other companies controlled by Eren Nil. The company operates in the following geographical segments: Turnover (by origin) 2003 2002 Â£ Â£ United Kingdom 1,679,238 780,449 Turnover (by destination) 2003 2002 Â£ Â£ South America 496,740 - Middle East 1,182,498 780,449 1,679,238 780,449 Loss on ordinary activities after taxation 2003 2002 Â£ Â£ United Kingdom (392,030) (463,522) Net assets/(liabilities) 2003 2002 Â£ Â£ United Kingdom 536,329 622,307 EMDEXTRADE PLC NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 OCTOBER 2003 3 Operating loss 2003 2002 Â£ Â£ Operating loss is stated after charging: Depreciation of tangible assets 114,094 984 Remuneration of auditors for audit work 23,553 12,032 Remuneration of auditors for non-audit work 2,105 1,250 4 Interest payable 2003 2002 Â£ Â£ On bank loans and overdrafts 4,181 5,301 Other interest 2,177 - 6,358 5,301 5 Loss on disposal of subsidiaries 2003 2002 Â£ Â£ Loss on disposal of subsidiaries 9,162 - The loss arises as a result of the foreign exchange rate movements during the year. EMDEXTRADE PLC NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 OCTOBER 2003 6 Taxation 2003 2002 Â£ Â£ Domestic current year tax U.K. corporation tax 63 - Current tax charge 63 - Deferred tax Deferred tax charge credit current year - (825) 63 (825) Factors affecting the tax charge for the year Loss on ordinary activities before taxation (391,967) (464,347) Loss on ordinary activities before taxation multiplied by standard rate of UK (117,590) (139,304) corporation tax of 30.00% (2002: 30.00%) Effects of: Expenditure which is not deductible for tax purposes 4,081 711 Expenses in excess of taxable income 96,934 258,576 Capital allowances less than / (in excess of) depreciation 16,638 (119,983) 117,653 139,304 Current tax charge 63 - The company has trading losses of Â£1,214,935 (2002 - Â£841,127) that are available to offset future taxable profits. The company also has fixed asset timing differences of Â£57,873 (2002 - Â£159,904). A deferred tax asset has not been recognised in respect of these amounts as they will be recoverable only to the extent that the company has sufficient future taxable profits. 7 Loss per share The calculation of basic earnings per ordinary share is based on a loss after tax of Â£392,030 (2002 - Â£463,522) and 40,109,589 (2002 - 40,000,000) ordinary shares, being the weighted average number of shares in issue during the year ended 31 October 2003. Basic and diluted shares are the same because the share option on 800,000 ordinary shares of 1p each is excercisable at a price per share in excess of the average fair value of the ordinary shares for the period ended 31 October 2003. EMDEXTRADE PLC NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 OCTOBER 2003 8 Tangible fixed assets Computer Website Total equipment development Â£ Â£ Â£ Cost At 1 November 2002 2,949 400,270 403,219 Additions 2,597 53,545 56,142 At 31 October 2003 5,546 453,815 459,361 Depreciation At 1 November 2002 1,183 - 1,183 Charge for the year 1,737 112,357 114,094 At 31 October 2003 2,920 112,357 115,277 Net book value At 31 October 2003 2,626 341,458 344,084 At 31 October 2002 1,766 400,270 402,036 9 Fixed asset investments Shares in group undertakings Â£ Cost At 1 November 2002 110,740 Disposals (110,740) At 31 October 2003 - Net book value At 31 October 2003 - At 31 October 2002 110,740 EMDEXTRADE PLC NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 OCTOBER 2003 10 Debtors 2003 2002 Â£ Â£ Amounts owed by subsidiary undertakings - 89,545 Other debtors 305,492 8,567 Prepayments and accrued income 15,681 12,543 321,173 110,655 Amounts falling due after more than one year and included in the debtors above are: 2003 2002 Â£ Â£ Other debtors 98,983 - This represents an amount due from CCH Europe GmbH, a company controlled by Eren Nil. 11 Creditors: amounts falling due within one year 2003 2002 Â£ Â£ Trade creditors 67,351 23,100 Taxes and social security costs 1,329 1,287 Other creditors 40,615 400 Accruals and deferred income 50,375 20,259 159,670 45,046 EMDEXTRADE PLC NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 OCTOBER 2003 12 Share capital 2003 2002 Â£ Â£ Authorised 1,000,000,000 Ordinary shares of 1p each 10,000,000 10,000,000 40,000,000 Deferred 'A' shares of 1p each 400,000 400,000 20,000,000 Deferred 'B' shares of 1p each 200,000 200,000 10,600,000 10,600,000 Allotted, called up and fully paid 44,444,444 Ordinary shares of 1p each 444,444 400,000 40,000,000 Deferred 'A' shares of 1p each 400,000 400,000 20,000,000 Deferred 'B' shares of 1p each 200,000 200,000 1,044,444 1,000,000 On 22 October 2003, 4,444,444 ordinary shares were issued to CCH Europe GmbH, a company controlled by Eren Nil, in respect of the settlement of a Â£300,000 loan facility provided to the company. Deferred 'A' shares and Deferred 'B' shares are no longer convertible. The deferred 'A' and 'B' shares have no voting rights or entitlement to dividends. On distribution of assets on a winding up or return of other capital, the deferred shareholders, after repayment of the ordinary shares at par and the payment of Â£100 on each ordinary share, are entitled to receive a sum equal to the capital paid up on the deferred shares held by them. The company has issued a share option on 800,000 ordinary shares of 1p each to its nominated advisors Nabarro Wells & Co Limited. The option is excerisable at any time up to and including 31 December 2004 at a subscription price of 10p. No accounting entries have been made for this option as it had no intrinsic value at the grant date. 13 Statement of movements on reserves Share premium Profit and loss account account Â£ Â£ Balance at 1 November 2002 156,007 (533,700) Retained loss for the period - (392,030) Premium on shares issued during the period 261,608 - Balance at 31 October 2003 417,615 (925,730) EMDEXTRADE PLC NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 OCTOBER 2003 14 Reconciliation of movements in shareholders' funds 2003 2002 Â£ Â£ Loss for the financial year (392,030) (463,522) Proceeds from issue of shares 300,000 - Tax refund in respect of the cost of shares issued 6,052 - Net depletion in shareholders' funds (85,978) (463,522) Opening shareholders' funds 622,307 1,085,829 Closing shareholders' funds 536,329 622,307 EMDEXTRADE PLC NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 OCTOBER 2003 15 Financial instruments The company's financial instruments comprise cash, its deferred share capital and various items such as debtors and creditors that arise directly from its operations. The company has not entered into derivative transactions nor does it trade in financial instruments as a matter of policy. The main risks arising from the company's financial instruments are interest rate risk and foreign currency risk. At the year end the company did not have any borrowings and the deferred shares have no repayment terms. Accordingly, the company does not have a liquidity risk. The company is financed by share capital, and its assets consist of debtors and cash balances held as a mixture of current and deposit accounts, and currency accounts, as appropriate to the company's operational needs. The company has transactional currency exposures as its income is expected to arise in US Dollars, while its expenses are expected to be payable in US Dollars and Â£ Sterling. It is not the company's policy to protect the company's sterling balance sheet or transactional exposures from movements in exchange rates. With the exception of the analysis of currency exposures, the disclosures below exclude short-term debtors and creditors. Financial assets The interest rate risk and currency profile of the financial assets of the company as at 31 October 2003 is as follows: 2003 US Dollar Â£ Sterling Total Â£ Â£ Â£ Cash at bank and in hand - Fixed interest rate - - - - Floating interest rate - 2,681 2,681 - Non-interest bearing 28,061 - 28,061 28,061 2,681 30,742 Amount falling due after more than one year and included in 98,983 - 98,983 the debtors 127,044 2,681 129,725 2002 US dollar Sterling Total Â£ Â£ Â£ Cash at bank and in hand - Fixed interest rate - 3,830 3,830 - Floating interest rate - 18,772 18,772 - Non-interest bearing current accounts 21,320 - 21,320 21,320 22,602 43,922 EMDEXTRADE PLC NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 OCTOBER 2003 The weighted average interest rate for the fixed rate financial assets is 3.83% (2002 - 4.07%) and is fixed for 14 days (2002 - 14 days). The benchmark for interest on the floating interest rate financial assets is the UK Bank rate. Financial liabilities The company's only financial liability as at 31 October 2003 and as at 31 October 2002 is its non equity deferred share capital, details of which are in note 12. Fair value of financial assets and liabilities With the exception of the deferred share capital, for all of the financial assets and financial liabilities above, fair value equates to book value. In respect of the deferred share capital, with a book value of Â£600,000, the fair value is nil. Currency exposure The company's net foreign currency monetary assets exposure is Â£144,513 (2002 - Â£110,865) in respect of US dollars assets and liabilities (functional currency sterling). 16 Directors' emoluments 2003 2002 Â£ Â£ Emoluments for qualifying services 116,057 113,465 None of the 6 (2002 - 6) directors are accruing retirement benefits under pension schemes in respect of qualifing services. 17 Employees Number of employees There were no employees during year apart from the the 6 (2002 - 6) directors. Employment costs 2003 2002 Â£ Â£ Wages and salaries 227,622 222,276 Social security costs 2,505 2,416 230,127 224,692 18 Control The company considers Eren Nil to be the ultimate controlling party of EmdexTrade PLC. As at 31 October 2003, he owned 84.16% (2002 - 60.00%) of the issued ordinary share capital and is a director of the company. EMDEXTRADE PLC NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 OCTOBER 2003 19 Related party transactions The following related party transactions occurred during the period: (i) Patrick Kennedy During the period the company purchased accountancy services of Â£35,195 (2002 - Â£29,860) and other services of Â£44,340 (2002 - Â£74,560) from Pumphrey Kennedy Chartered Accountants. The company also purchased accountancy services of Â£8,090 and other services of Â£16,388 from PK Partners LLP. Patrick Kennedy, a director of EmdexTrade PLC, was a partner in Pumphrey Kennedy Chartered Accountants and is a member in PK Partners LLP. (ii) Gelgit Teknoloji A.S. During the period the company purchased IT consultancy services of Â£nil (2002 - Â£5,447). Gelgit Tecknoloji A.S. is a company controlled by Emir Nil, a brother of Eren Nil, who is a director and shareholder of the company. (iii) Eren Nil During the period the company paid Â£692,036 (2002 - Â£nil) in commissions to Erem International. The company also paid Â£508,688 (2002 - Â£nil) in commissions to Erem Finance & Investment Consultants E.C. During the period, the company disposed of its entire interest in EmdexTrade FZ-LLC for AED 500,000 (equivalent of Â£86,848) and EmdexTrade Delaware LLC for USD25,000 to Watamu Trading Company EC. As at 31 October 2003, an amount of Â£296,948 was due from CCH Europe GmbH. Erem International, Erem Finance & Investment Consultants E.C., Watamu Trading Company EC and CCH Europe GmbH are companies controlled by Eren Nil. This information is provided by RNS The company news service from the London Stock Exchange

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