Audioboom Grp. Regulatory News (BOOM)

13 Mar 2008 13:05

Off-Plan Fund Limited (The)13 March 2008 For Immediate Release 13 March 2008 THE OFF-PLAN FUND LIMITED Preliminary Results for the year ended 30 September 2007 The Off-plan Fund Limited, which specialises in providing forward finance to UKhousebuilders, is pleased to announce its preliminary results for the year ended30 September 2007. Period Highlights • Two new investments: - 38 units Tring, Hertfordshire for £5.9m - 31 units Hayes, Middlesex for £4.6m • 57% of units at Oldham Place sold •Audited NAV up 2.0% to 85.1p per share • Red Book NAV up 7.2% to 94.4p per share • 20% increase in issued share capital • Post year end, new investment in 118 units in Wallington, Surrey for £25m The Fund is managed by Development Capital Management (Jersey) Limited. Copies of the Financial Statements are currently being printed and will be sentto shareholders shortly. They may also be obtained free of charge fromDevelopment Capital Management Limited, 36 Dover Street, London, W1S 4NH. List of ContactsDevelopment Capital ManagementRoger HornettAndy Gardiner020 7355 7600 Numis SecuritiesNick WestlakeCharles Farquhar020 7260 100 Buchanan CommunicationsCharles RylandIsabel Podda020 7466 5000 THE OFF-PLAN FUND LIMITEDANNUAL REPORT AND FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2007 Chairman's Statement The period under review proved to be a challenging one for the Fund. The UKresidential property market remained robust through the end of 2006 and thefirst half of 2007, assisting sales and prices on existing projects buthindering the Manager's focus on new investment opportunities as developerscontinued to find traditional lending sources in ample supply and on generousterms. As shareholders will be aware the premise of the Fund is that its financingmodel is likely to be of equal or greater appeal to developers during periods ofslower growth when lending banks will offer tighter terms and demand morepre-sales. The fall-out of the sub-prime crisis and associated "credit-crunch"in the latter part of the period have, perhaps perversely, improved theoperating environment for the Fund with the Manager in negotiations on a greaternumber of potentially attractive deals with reputable developers in recentmonths and indeed, post the year end, the Fund entered into its largest deal todate in Wallington, Surrey. PortfolioAs reported in the Fund's interim report, investments in developments at Tringand Hayes were added to the portfolio during the financial year and in Decemberthe Fund announced the Wallington deal - a 118 unit project with a GDV of £31m. All three developments are expected to appeal to young professional owneroccupiers and the buy-to-let market given their facilities and excellenttransport links into London. The Manager continues to focus its attention on theLondon/South-east market (in particular "inner M25") as it is of the opinionthat the region will continue to show greater resilience than the UK market as awhole. Early in the period, the Fund exchanged contracts on onward sales of more thanhalf of the units at the Oldham Place site in Liverpool. Owing to certainunanticipated delays in the construction process, the Manager has held back onfull marketing of the remaining units but expects to recommence activity in thenear future. As I reported last year, in February 2007 the Fund elected to exit itsinvestment in Nottingham. It continues to let out the 6 units on which itcompleted in Leicester until the local market improves. PerformanceThe audited net asset value of the Fund increased by 2.0% during the periodunder review from 83.4p per share to 85.1p. As shareholders are aware the Fundalso reports an unaudited "Red Book" net asset value which is intended toprovide investors with an indication of the potential value inherent in theportfolio from the discounted purchase prices. This Red Book NAV increased 7.2%during the period from 88.1p per share to 94.4p. Following the Wallingtoninvestment the Red Book NAV increased further to 107.2p per share. Against these measures of asset performance it is therefore disappointing toreport that the share price during the period fell 11.6% from 84.0p to 74.3p, alevel around which it remains today. The fall occurred in the last 2 months ofthe period and the price has not moved in very little trading since the yearend. Lack of liquidity in the stock remains a key driver in this wideningdiscount. Your Board remain extremely cognisant of this problem. As I reported last yearwe have investigated means with which to address the issue. We were thereforepleased to report the issue of a further 20 per cent. in issued share capital toElsina Limited, a company owned by the trustees for the Tchenguiz family andadvised by the Consensus Business Group (CBG), in April last year at 95p pershare. Disappointingly, and somewhat surprisingly, this had no positive impacton liquidity or the share price. Therefore, following an extensive round of shareholder meetings last Novemberand consultation with the Manager, the Board has decided to put forward aresolution to this year's AGM to consider an amendment to the Fund's articles ofassociation which will, if passed, introduce an annual continuation vote at eachAGM with effect from 2009. Shareholders will have an opportunity each year todecide whether the Fund should continue with its present investment policy orcommence an orderly realisation of the property portfolio. The Board anticipatethat this measure should have a positive impact on liquidity and the share pricediscount over time. OutlookWhile it is difficult to be too confident in the current economic environment,increasing signs of normalisation in the UK credit markets, together withinterest rates down 0.5% from their recent 5.75% peak, provide some optimism forthe on-going health of those areas of the UK residential market in which theFund and the Manager are currently focussed. The Board and the Manager hope totake advantage of the current uncertainty to pursue their intention for the Fundto be fully invested in the next 12 months via a strong pipeline of potentialopportunities and strategic relationships. AGMThe annual general meeting of the Fund will be held in Jersey on 23 April 2008,notice of which can be found on page 24. In addition to the usual resolutionsand proposed introduction of the annual continuation vote, shareholders will beasked to ratify the appointment of Joni Cline to the Board, as a representativeof CBG. My fellow directors and I welcomed Ms Cline to the Board in December andlook forward to her on-going involvement and input in the future. Graham Berry, ChairmanMarch 2008 Manager's Report Given the continuing relatively low level of investment of the Fund's assets inthe property portfolio, the Manager's focus throughout the year under review hasbeen firmly set on sourcing new opportunities. Although a significant number ofdeals with different developers were identified and considered, it wasdisappointing that the Fund only entered into the Tring and Hayes projectsduring the period. The nature and structure of the Fund's investments and associated due diligencemeans that a great deal of the Manager's time can be taken up on deals whichcome close but do not complete for a variety of reasons. This year has been nodifferent. In attempting to ensure that the Fund only enters into the righttransactions on the best terms achievable, the Manager and the Board have had towalk away from a number of potential deals quite some way down the negotiationprocess. However the Manager believes that the current climate will prove more favourablefor the Fund in terms of investment in the right deals with reputable developersat attractive prices and considers the post year-end Wallington transaction as astrong indication of the type of deal that might be done. The somewhat surprising resilience of the UK property market throughout much ofthe period under review worked, in some ways, against the Fund as potentialdeveloper counterparties had less need for the benefits which the Fund'sinvestment model offers (i.e. developers are offered an underwritten value at apremium to their development costs, the ability to gain favourable developmentfinance and still share in capital value growth). Only with the fall-out fromthe sub-prime crisis, events at Northern Rock and associated "credit-crunch"from the summer of 2007 have the relative attractions of the Fund's model comeback into greater focus. The Fund's exit strategy remains a key factor in appraising any deal and theManager continues to monitor the UK residential property market very closely,resulting in a shift in focus to the South-East, within areas with strongtransport links to London. The requirement for housing remains strong,investment buyers are attracted by increasing yields and should the Fund berequired to complete on any units a well located letting portfolio may becreated. PerformanceThe audited net asset value of the Fund increased by 2% during the period underreview from 83.4p per share to 85.1p, as a result of the positive impact ofexchanges on the sales of units in Liverpool and the premium to NAV on thefurther share issuance during the year outweighing operating costs and thedecrease in the valuation of the units in Leicester. As the accounts areprepared under the historic cost convention, any discounts to market valueachieved by the Fund cannot be recognised in the reported balance sheet withonly the book cost of obtaining the contracts recorded. The Fund therefore alsoreports an unaudited "Red Book" net asset value which is intended to provideinvestors with an indication of the potential value inherent in the portfoliofrom these discounted purchase prices. This valuation is derived from the latestRed Book valuations for the property portfolio prepared by independent valuers.This Red Book NAV increased 7.2% during the period from 88.1p per share to 94.4pdue to the discounts achieved on the Tring and Hayes deals. The impact of theWallington investment on this year-end Red Book NAV is a further increase to107.2p per share. Portfolio and ActivityAt 30 September 2007 the Fund held contracts in respect of 51 apartments inLiverpool and 69 in the Home Counties, together with 6 completed units inLeicester. Of the 51 units in Liverpool, 29 contracts had been assigned to endbuyers. During the year, and as described in last year's Report, the Fund elected torescind all 30 contracts in respect of the development in Nottingham rather thancomplete, with associated stamp duty, on a scheme which the Manager felt wouldnot hold sufficient value for the Fund. Following the year end the Fund exchanged contracts on a further 118 units inWallington, Surrey. Oldham Place, LiverpoolThis project comprises 51 apartments, all of which the Fund has contracts topurchase. It is located just east of the city centre, a short walk from LimeStreet station and the Albert dock area. It is situated between two city centreregeneration areas - Ropewalks, a newly established residential quarter, andMount Pleasant, a residential area with a high student population. During the year the Fund secured onward sales of 29 of the 51 units for anaggregate sales value of £4.6m. Construction commenced in Spring 2007 but has been delayed in recent months withissues relating to the construction company going into receivership. The Managercontinues to work closely with the developer and expects that any remainingissues will be resolved and construction underway again by early summer 2008.This is likely to have some impact on the anticipated completion date which isnow expected to be mid 2009. As a result of these delays, the Manager and the local sales agent have notactively marketed the remaining units but will recommence the sales effort assoon as the aforementioned issues are resolved, as well as keeping existingbuyers informed of progress. Brook Street, TringDuring the year, the Fund entered into purchase contracts for all 38 units to bebuilt at the site in Hertfordshire, which is situated a few minutes from thehigh street and the station. It will offer a range of two bedroom apartmentswith parking in an area that has seen limited development of this naturerecently but where demand is expected to be high from owner occupiers as well asbuy-to-let investors given its proximity and transport links to London. Planning permission has been granted and 7 of the units have, as expected, beendesignated as affordable housing, which will leave the Fund with 31 units afterthese 7 are rescinded. Construction on site has yet to commence and the Manager has held back on fullmarketing efforts until it has greater certainty as to the build timetable. TheManager is in regular contact with the developer and hopes to be in a positionto make a further announcement on progress in the near future. Yeading Lane, HayesAt the same time as exchanging on the Tring project, the Fund conditionallyexchanged on 31 units with the same developer in Hayes, Middlesex. This site isalso close to good transport links (road, rail, tube and air) and localamenities. Demand, investor and owner-occupier alike, is expected to be strongdue to local employers such as Heathrow airport, Nestle, Coca Cola,Glaxosmithkline, RAF Northolt and the USAF base at Ruislip. A resolution to grant planning permission has been made and 11 of the units havebeen designated as affordable housing, which will leave the Fund with 20 unitsafter these 11 are rescinded, but the deal remains conditional on the developersecuring the purchase of the balance of the site. Construction and marketinghave therefore yet to commence. Wimbledon House, LeicesterThe Fund owns 6 flats with a market value, as at 30 September 2007, of £911,000in the city centre district. The properties were completed in 2006. Leicester continues to be home to weak sales conditions as evidenced by thereduction of £60,000 in the aggregate market value of the units since March2007. Therefore the Manager's strategy to hold and let these for the foreseeablefuture remains. Currently 5 flats are let and when all six are fully let atmarket rate a gross yield of 4% should be achieved. Canon House, WallingtonSince the year end the Fund has exchanged contracts for the purchase of 118apartments to be built in a new development in Wallington, Surrey. The purchaseprice of £25,000,000 on completion represents a discount of 18% to theprevailing Red Book valuation of £30,595,000. The Fund has paid a deposit of 5%of its contracted purchase price but also, given the relative scale of the deal,ring-fenced a further portion of the Fund's completion reserve for this project. The development is very well located being adjacent to the railway station withtravel times of 30 minutes into London and easy access to the M25, Heathrow andGatwick. The Manager expects strong demand from owner occupiers and investorsgiven the superior on-site facilities such as a gym, running track and conciergeservice. Full planning permissions are in place and construction is expected to commencein April. Agents have already been appointed to commence phased sales and earlyreports are very encouraging. Fixed income portfolioAt 30 September 2007, 63% of the Fund's assets were held in this portfolio ofinvestment grade, foreign issued, sterling denominated debt across a spread ofbank issuers and corporates, pending investment in the property portfolio or asretention for the completion reserve. The Manager intends to hold at least halfthe Fund's assets in the completion reserve but has the flexibility to reducethis to 30%. The maturity profile of the fixed income component has reduced to1.1 years from 1.4 years at the end of the last period and the portfolio yieldhad decreased from 5.11% to 4.93%. At the period end £1.8m, representing the cash proceeds of the April shareissue, was held in cash rather than fixed income due to the prevailinguncertainty of the credit markets. The ring-fenced portion of the completion reserve in respect of the Wallingtondeal will also be retained in cash for the time being until such time as theadditional fees involved in the management of the fixed income portfolio areexceeded by the higher returns from fixed income over cash on deposit. MarketThe Bank of England's interest rate rise to 5.75% in July marked the peak of thecurrent cycle with two 0.25% reductions since then in light of the fall-out fromthe US sub-prime market on the one hand and the Northern Rock crisis on theother. Lenders have belatedly become more cautious with significantly tightercredit checks. The introduction of Home Information Packs (HIPs), against the advice of theRoyal Institution of Chartered Surveyors, has proved controversial andRightmove, the online property group reports that this has led to a number ofpotential sellers no longer speculatively advertising, reducing the stock ofavailable supply and driving prices higher at a time when higher interest ratesand tighter mortgage terms would normally drive them lower. This should prove tobe a temporary phenomenon. At the year end the Land Registry reported annual house price inflation of 8.7%,producing an average price across England and Wales of £183,896. Importantly forthe Fund, apartment prices, which have lagged the market for approximately 3years, outperformed during the last quarter of the period with prices rising by9.6% over the 12 months to an average of £173,824. On a regional basis London continued to outperform although monthly house pricegrowth tailed back from a peak of 3.9% in July to 1.3% in September as thecredit squeeze exerted a similar affect on anticipated City bonuses and in turnhigher value property demand. All 10 regions surveyed by the Land Registryrecorded year on year price growth as at September, with London at the top ofthe league with 16.5% and the West Midlands and East Midlands at the bottom with4.1% and 5.1% respectively. Apart from Wales at 6.6% all other areas recordedaverage house price growth in excess of 7.5%. There was nevertheless evidence in the monthly figures of a price slowdown, with3 of the 10 regions posting a modest decline in September. Such a slowdown wasalso evident in the volume of transactions which fell 6.4% in the 3 months toJuly 2007 on a year-on-year like-for-like basis to a monthly average of 102,367.Equally the mortgage approvals for September showed a decline from 108,000 inAugust to 102,000, significantly below the previous year level of 127,000. Whilesome of this can be put down to the effective exit of Northern Rock from themarket, there is clearly evidence of buyer caution. Since the year end, action by the Bank of England appears to have stabilisedcredit markets with gross mortgage lending in January 2008 back up to 2007levels at £26.5bn. Prices appear relatively stable given the economic back-drop,with asking prices, according to Rightmove, up 3.2% in February. However, volumeremains under pressure with mortgage approvals down to 74,000 in January 2008from 119,000 a year ago as many first time buyers find that tighter lendingconditions are making entry to the market that much harder to achieve.Perversely this has been good for the rental market and is therefore positivefor the Fund in terms of the investor market. OutlookLike most observers the Manager expects to see a continued gradual slowdown inhouse price growth with falling volumes rather than any real prospect of acrash. Strong GDP growth, rising employment and falling unemployment supportthis view. Wage growth remains mildly positive relative to inflation and demandfor new properties averaging 220,000 per annum against supply of nearer 180,000mitigate in favour of a rising trend Such a market backdrop is good for the Fund and as discussed above we havealready noted a pick-up in the number of potential financing opportunities andexpect to see further attractive projects for consideration in the comingmonths. While the Manager acknowledges shareholders' frustration in finalizinginvestments in the past year, significant steps have been taken in creatingstrategic relationships to access higher volumes of pipeline stock. Providingthese favourable market conditions continue the Manager expects that theconversion rate of opportunities into investments will markedly improve in thenext 12 months. Development Capital Management (Jersey) LimitedMarch 2008 CONSOLIDATED BALANCE SHEETAs at 30 September 2007 2007 2006 Notes £ £Non-current assetsQuoted investments 8 5,985,007 5,941,738Property contracts yet to complete 8 446,078 336,602Investment property 8 911,000 1,025,000Debtors 9 253,532 - ----------- ----------- 7,595,617 7,303,340 Current assetsDebtors 9 437,022 366,419Cash and cash equivalents 1,828,171 136,200 ----------- ----------- 2,265,193 502,619Creditors - amounts falling due within one yearOther payables 10 (366,806) (54,826)Net current assets 1,898,387 447,793 ----------- -----------Net assets 9,494,004 7,751,133 ----------- ----------- EquityStated capital 11 10,505,154 8,739,246Realised capital reserve 13 152,473 (108,348)Unrealised capital reserve 13 (53,320) (51,719)Investment property revaluation reserve 13 (78,183) 42,107Issue costs reserve 13 (679,868) (609,232)Revenue reserve 13 (352,252) (260,921) ----------- -----------Total shareholders' funds (all equity) 9,494,004 7,751,133 ----------- ----------- Net asset value per share (pence) 85.1 83.4 The financial statements were approved by the Board of Directors on 13 March2008 and signed on its behalf by: Graham Berry William Roger King The accompanying notes are an integral part of the financial statements. CONSOLIDATED INCOME STATEMENTFor the year ending 30 September 2007 Year ended 30 September 2007 Year ended 30 September 2006 Revenue Capital Total Revenue Capital Total Notes £ £ £ £ £ £ Realisedgains/(losses) onpropertycontractsyet - 262,662 262,662 - (109,308) (109,308)to complete Unrealisedlosses oninvestments - (3,442) (3,442) - (65,445) (65,445) Investmentincome 2 333,711 - 333,711 269,039 - 269,039 Rental 2 17,770 - 17,770 - - -income Investmentmanagement 3 (156,210) - (156,210) (119,196) - (119,196)fee Rentalexpenses 4 (14,994) - (14,994) - - - Other 4 (268,514) - (268,514) (214,064) - (214,064)expenses ------- ------- ------- ------- ------- -------Net(loss)/gainonordinaryactivitiesbeforefinance costs and taxation (88,237) 259,220 170,983 (64,221) (174,753) (238,974) ------- ------- ------- ------- ------- -------Taxation 5 (3,094) - (3,094) - - - ------- ------- ------- ------- ------- -------Net(loss)/gainfor theyear after taxation (91,331) 259,220 167,889 (64,221) (174,753) (238,974) ------- ------- ------- ------- ------- -------(Loss)/gainper share(pence) 6 (0.90) 2.56 1.66 (0.82) (2.23) (3.05) Notes (a) All items in the above statement derive from continuing operations.(b) The Group has no recognised gains or losses other than those disclosed inthe Consolidated Income Statement and Consolidated Statement of Total RecognisedGains and Losses.(c) The accompanying notes are an integral part of the financial statements. CONSOLIDATED STATEMENT OF CASHFLOWSFor the year ended 30 September 2007 2007 2006 Notes £ £Cash flows from operating activitiesInvestment income received 271,833 96,408Deposit interest received 63,044 46,185Rental income 17,772 -Investment management fees paid (156,210) (119,196)Secretarial fees paid (5,160) (3,651)Rental expenses (14,994) -Other cash payments (251,967) (190,818) ---------- ----------Net cash outflow from operating activitiesbefore taxation 15 (75,682) (171,072) Taxation paid (3,094) - Capital expenditure and investmentactivitiesDeposits and acquisition costs relating toproperty 138,830 (1,258,442)Purchase of investments (2,086,995) (6,253,664)Sale of investments 2,023,640 1,510,369 ---------- ----------Net cash inflow/(outflow) from investmentactivities 75,475 (6,001,737) ---------- ---------- Net cash outflow before financing (3,301) (6,172,809) FinancingIssue of shares 1,765,908 6,769,246Expenses of share issue (70,636) (609,232) ---------- ----------Net cash inflow from financing 1,695,272 6,160,014 ---------- ----------Increase/(decrease) in cash 1,691,971 (12,795) ---------- ---------- The accompanying notes are an integral part of the financial statements. CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSESAs at 30 September 2007 2007 2006 £ £Gain/(loss) for the financial year 167,889 (238,974)(Loss)/gain on revaluation of investment properties (120,290) 42,107 ----------- -----------Total gains and losses recognised since last annualreport 47,599 (196,867) ----------- ----------- The Group has no other recognised gains or losses that are not shown in theincome statement. Notes to the consolidated financial statements 1 Accounting policiesThe consolidated financial statements have been prepared under the historicalcost convention, as modified to include the revaluation of quoted investmentsand investment properties and in accordance with applicable Accounting Standardsand the Statement of Recommended Practice for "Financial Statements ofInvestment Trust Companies" issued in January 2003 and amended in December 2005. (a) Basis of consolidationThe financial statements incorporate the financial statements of the Company andentities controlled by the Company (its subsidiaries) made up to 30 September.Control exists when the Company has the power, directly or indirectly, to governthe financial and operating policies of an entity so as to obtain benefits fromits activities. The financial statements of subsidiaries are included in theconsolidated financial statements from the date that control commences up to thedate that control ceases. The Company has only one subsidiary which it acquired during the year ended 30September 2006. As this subsidiary has not yet commenced trading, the Company'sfinancial statements are materially similar in all respects to the Groupfinancial statements, therefore the Company has presented only Group financialstatements for the years ended 30 September 2007 and September 2006. Details ofthis subsidiary are contained in note 7. (b) IncomeInterest income is accrued on a time basis, by reference to the principaloutstanding and at the effective interest rate applicable, which is the ratethat exactly discounts estimated future cash receipts through the expected lifeof the financial asset to that asset's net carrying amount. Interest receivableon cash and short-term deposits is accrued to the end of the financial year. (c) Quoted investmentsPurchases of investments are recognised on a trade date basis and included inthe balance sheet at fair value. Sales of investments are also recognised on atrade date basis. Proceeds are measured at fair value, which is regarded as theproceeds of any sale less any transaction costs. The fair value of the financialinstruments is based on their quoted bid prices at the balance sheet date,without any deduction for any estimated future selling costs. Changes in the value of investments and gains and losses on disposal arerecognised in the consolidated income statement as "gains/losses on investments"and are allocated to realised/unrealised capital reserves as appropriate. (d) Property contracts yet to completeThe Company has contractual obligations to purchase property that is currentlybeing constructed, i.e. it has entered into contracts to purchase the property"off-plan". Under these contracts the Company is obliged to purchase theseproperties at a contracted price, but has the right to sell or transfer thecontract to a third party. The "Property contracts yet to complete" are includedin the balance sheet at the lower of cost and net realisable value. Costincludes legal and other expenses incurred to acquire the contracts. TheDirectors are of the opinion that it is inappropriate to account for thesecontracts using fair value accounting methods because their fair value cannot beestimated with sufficient reliability. Realised gains and losses arising on the disposal of these contracts arerecognised in the Consolidated Income Statement and taken to the realisedcapital reserve, after deduction for costs of disposal. (e) Investment propertyInvestment properties are measured initially at cost, and subsequentlyremeasured to market value, reflecting market conditions at the balance sheetdate. Gains or losses arising from the changes in fair values of investmentproperties are included in the consolidated statement of recognised gains andlosses, as movements on the investment property revaluation reserve. 2 Investment income 2007 2006 £ £Income from investmentsIncome from fixed interest securities 270,667 222,854Other income:Deposit Interest 63,044 46,185 ------------ ------------ 333,711 269,039 ------------ ------------ 3 Management fee 2007 2006 £ £ Management fee 156,210 119,196 ------------ ------------ The management fee payable to Development Capital Management (Jersey) Limited(DCM) was 2% per annum of the net asset value of the fixed income portfolio heldby the Company, plus any cash amount of deposits paid and outstanding in respectof property contracts yet to complete. Prior to 18 January 2006 it was 1.25% perannum. The management agreement between the Company and DCM is terminable by eitherparty on 12 month's notice. 4 Other expenses 2007 2006 £ £Administration and secretarial services 38,810 37,301Directors' remuneration 35,000 28,733Auditors' fees - for audit services 19,847 28,200Auditors' fees - other services 3,494 6,600Legal fees 98,939 55,506Miscellaneous expenses 72,424 57,724 ------------ ------------ 268,514 214,064 ------------ ------------ 5 Tax on ordinary activities 2007 2006 £ £Income tax on rental income 3,094 - ------------ ------------ Income tax is deducted at source on net rental income. 6 Returns per shareThe revenue loss per share is based on the net profit for the year of £91,331(2006: loss of £64,221) and on 10,134,550 shares (2006: 7,829,398 shares), beingthe weighted average number of shares in issue. The capital gain/(loss) per share is based on the net gain for the year of£259,220 (2006: loss of £174,753) and on 10,134,550 shares (2006: 7,829,398shares), being the weighted average number of shares in issue. 7 Subsidiary companiesIn September 2006, the Company acquired the whole of the share capital of OPFInvestment Properties Limited, a Company registered in Jersey. 8 Non-current assetsQuoted investments 2007 2006 £ £ Opening valuation 5,941,738 1,280,973Opening unrealised appreciation 51,719 (13,116) ------------ ------------Opening book cost 5,993,457 1,267,857Movements during the year:Purchases 2,086,995 6,253,664Sales - proceeds (2,023,640) (1,510,369)Amortisation of fixed income book costs (16,644) (17,085)Sales - realised losses (1,841) (610) ------------ ------------Closing book cost 6,038,327 5,993,457Closing unrealised loss (53,320) (51,719) ------------ ------------Closing valuation 5,985,007 5,941,738 ------------ ------------ Property contracts yet to complete 2007 2006 £ £Opening book cost 336,602 362,905Movements during the year:Purchases 298,649 336,602Reclassification to Investment Properties - (58,689)Sales - proceeds (451,835) (194,908)Sales - realised gains/(losses) 262,662 (109,308) ------------ ------------Closing book cost 446,078 336,602Closing unrealized depreciation - - ------------ ------------Net realisable value 446,078 336,602 ------------ ------------ The movement during the year in the table above refers to the disposal of 29apartments at Oldham Place, Liverpool and the deposits and initial costs payableon two new developments at Yeading Lane in Hayes and Brook Street in Tring. Thetable below summarises the costs associated with these contracts and applies the'Red Book' valuation, prepared by Venmore Partnership LLP for Oldham Place at 30September 2007 and Douglas Duff for Yeading Lane and Brook Street at 30September 2006, of the underlying properties as a basis of valuation for thesecontracts. The 'Red Book' value may not represent the 'fair value' of thecontracts as explained in the 'market price risk' section of note 17. Oldham Waterfront Brook Yeading Place Plaza Street Lane £ £ £ £Deposits paid 336,602 - 292,774 -Legal andacquisitioncosts - - 2,937 2,938Proceeds ondisposal (430,043) (21,792) - -Gain ondisposal 240,870 21,792 - - --------- --------- --------- ---------Book cost asat 30 September 2007 147,429 - 295,711 2,938 --------- --------- --------- ---------Outstandingcompletionpayments 2,948,580 - 5,562,697 4,569,894 --------- --------- --------- ---------Total historiccost 3,096,009 - 5,858,408 4,572,832 --------- --------- --------- ---------'Red Book'valuation 3,650,000 - 8,030,000 7,100,000Approximate completion date Jun 2009 - Dec 2008 Jan 2009 The deposit payable on Brook Street relates to 38 units as the terms of therescission of 7 units allocated to affordable housing has not yet beenfinalised. The deposit payable on Yeading Lane has not yet been reflected in theaccounts due to the unfulfilled condition of the developer securing the purchaseof the balance of the site. Investment property 2007 2006 £ £Opening book cost 982,893 -Movements during the year:Reclassification from Property contracts yet to - 58,689completeCompletion payment 6,290 924,204 ------------ ------------Closing book cost 989,183 982,893Closing unrealised (loss)/gain (78,183) 42,107 ------------ ------------Closing valuation 911,000 1,025,000 ------------ ------------ The investment property was valued at the year end by Savills (L&P) Limited onthe basis of open market value. 9 Debtors Amounts falling due within one year 2007 2006 £ £Amounts due on property contracts yet to complete 189,174 173,116Interest receivable 199,872 183,221Prepaid expenses 47,976 10,082 ------------ ------------ 437,022 366,419 ------------ ------------ Amounts falling due after one year 2007 2006 £ £Amounts due on property contracts yet to complete 253,532 - ------------ ------------ The amounts due on property contracts yet to complete relate to the Fund'sprofit share on Oldham Place payable on completion of the development expectedto be in 2009. 10 Creditors: Amounts falling due within one year 2007 2006 £ £Deferred income and accrued expenses 74,032 54,826Amounts due on property contracts yet to complete 292,774 - ------------ ------------ 366,806 54,826 ------------ ------------ Accrued expenses includes secretarial and administration fees of £9,425 (2006:£9,275) due to BNP Paribas Fund Services Jersey Limited. 10 Stated capital The Company is a no par value companyAuthorised: 2007 2006 Founder shares 10 1099,999,990 participating shares 99,999,990 99,999,990 ------------ ------------ 100,000,000 100,000,000 ------------ ------------Issued:Founder shares 2 2Participating shares 11,153,098 9,294,248 ------------ ------------ On 18 April 2007, 1,858,850 participating shares were issued at 95p raising netproceeds of £1,695,272. 12 Transaction costsThere were no transaction costs charged to the Company during the year. A fee,including brokerage costs, is charged by the custodian of the fixed incomeportfolio to the Manager, Development Capital Management (Jersey) Limited. 13 Reserves Investment Capital Capital property Issue reserve reserve revaluation costs Revenue realised unrealised reserve reserve reserve Total £ £ £ £ £ £ At 1 October2006 (108,348) (51,719) 42,107 (609,232) (260,921) (988,113)Net losses onrealisation ofinvestments (1,841) - - - - (1,841)Profit ondisposal ofpropertycontract 262,662 - - - - 262,662Movement inunrealisedappreciation - (1,601) (120,290) - - (121,891)Expenses ofshare issue - - - (70,636) - (70,636)Loss onordinaryactivities forthe year - - - - (91,331) (91,331) -------- -------- --------- -------- -------- --------At 30September 2007 152,473 (53,320) (78,183) (679,868) (352,252) (1,011,150) -------- -------- --------- -------- -------- -------- 13 Net asset value per share Net asset value attributable per share 2007 2006 p pParticipating shares (note 11) 85.12 83.40 Net asset value 2007 2006 £ £ 9,494,004 7,751,133 ------------- ------------ 14 Reconciliation of net gain/(loss) before finance costs and taxation to netcash outflow from operating activities 2007 2006 £ £Net gain/(loss) before finance costs and taxation 170,983 (238,974)(Gains)/losses on properties (262,662) 109,308Losses on investments 3,442 65,445Increase in accruals 13,833 26,451Increase in prepayments (2,446) (6,856)Increase in accrued income (15,476) (143,531)Amortisation of fixed interest securities 16,644 17,085 ------------- ------------Net cash out flow from operating activities (75,682) (171,072) ------------- ------------ 15 Analysis of changes in net funds At At 30 September Cash flows 30 September 2006 2007 £ £ £Cash and cash equivalents 136,200 1,691,971 1,828,171 ----------- ----------- ----------- At At 30 September Cash flows 30 September 2005 2006 £ £ £Cash and cash equivalents 148,995 (12,795) 136,200 ----------- ----------- ----------- 17 Financial instruments and property contracts yet to completeThe Company's financial instruments comprise fixed interest securities, cashbalances, property contracts and debtors and creditors that arise directly fromits operations, for example, in respect of sales and purchases awaitingsettlement, and debtors for accrued income. The main risks the Company faces from its financial instruments are (i) marketprice risk, being the risk that the value of investment holdings will fluctuateas a result of changes in market prices caused by factors other than interestrate or currency movement, (ii) credit risk, (iii) interest rate risk and (iv)liquidity risk. The Board reviews and agrees policies for managing each of these risks. TheManager's policies for managing these risks are summarized below and have beenapplied throughout the period. The numerical disclosures exclude short-termdebtors and creditors. Market price riskMarket price risk arises mainly from uncertainty about future prices offinancial instruments used in the Company's operations. It represents thepotential loss the Company might suffer through holding market positions as aconsequence of price movements. It is the Board's policy to hold a broad spread of fixed interest investments inorder to reduce risk arising from factors specific to a particular country orsector. The Manager monitors market prices throughout the year and reports tothe Board, which meets regularly in order to review investment strategy. The Red Book valuations of the underlying properties, on which the Company holdscontracts are based primarily upon "The estimated amount for which a propertyshould exchange on the date of the valuation, between a willing buyer and awilling seller in an arm's-length transaction after proper marketing wherein theparties had each acted knowledgeably, prudently and without compulsion." Thisvaluation methodology is designed to encapsulate the fair value of theproperties were they complete and held for investment purposes. The Companyhowever holds contracts to purchase these properties once complete and thereforeis exposed to additional risks such as the risk that the development fails tocomplete or completes in a sub-standard fashion not accounted for in the RedBook assumptions. The Company is also exposed to changes in the value of theproperty caused by other economic factors. The contracts are highly leveraged such that small changes in the values of theunderlying properties can generate large changes in the unrealised values of thecontracts. By way of an example the change in value of a contract using a 5%deposit could be affected by approximately twenty times the change in value ofthe underlying asset. It is the Board's policy to value the property contracts yet to complete at thelower of cost and net realisable value as set out in 1(d). This eliminates to asignificant degree the effect of market movements in the underlying property onthe value of the contracts. The total purchase price including acquisitioncosts, of the twenty-two contracts at Oldham Place is £3,096,009 and the RedBook valuation of the properties as at 30 September 2007 is £3,650,000. Thetotal purchase price including acquisition costs, of the thirty-eight contractsat Brook Street is £5,858,408 and the Red Book valuation of the properties is£8,030,000. The total purchase price, including acquisition costs, of thethirty-one contracts at Yeading Lane is £4,572,832 and the Red Book valuation ofthe properties £7,100,000. Should the Company complete on all the contracts and subsequent Red Bookvaluations fall by more than 28%, the Company would then be exposed to anyfurther falls in the market, as the net realisable value would then be belowcost. Credit riskAs part of the fixed interest portfolio the Company places funds with thirdparties and is therefore potentially at risk from the failure of any such thirdparty. The Fund expects to place any such funds on a short-term basis only andspread these over a number of different providers. The deposits in respect of the property contracts yet to complete are held inescrow with the Company's or developer's solicitors. This money is only releasedto the developer on satisfactory completion of the property or in certaininstances when the developer meets certain security criteria. Should a developerdefault on the contract the deposit and any interest earned would be returned tothe Company. Interest rate riskThe interest rate risk profile of financial assets at the balance sheet date wasas follows: Fixed Rate Floating Rate Non-interest Bearing 2007 2006 2007 2006 2007 2006 £ £ £ £ £ £Financial 5,985,007 5,941,738 1,828,171 136,200 - -assetsPropertycontracts - - - - 446,078 366,602yet tocompleteDebtors - - - - 253,352 - -------- -------- -------- ------- ------- ------- All short-term debtors and creditors have been excluded from this disclosure. The fixed interest assets have a weighted average maturity of 1.1 years (30September 2006: 1.4 years) and a weighted average yield of 4.9% per annum (30September 2006: 5.1%). The floating rate assets consist of cash deposits on call, earning interest atthe prevailing market rates. Changes in interest rates will impact on the valueof fixed interest securities and future cash flows from floating rate holdings.They will have no impact on the property contracts yet to complete. Liquidity riskThe Company's assets comprise cash balances and readily realisable securities,which can be sold to meet funding commitments if necessary. They also compriseof property contracts yet to complete which are illiquid. It is the intention of the Board to sell on the property contracts yet tocomplete. However should there be insufficient liquidity in the market to enablethis to happen the Company would be liable to pay the remaining commitment setout in the contracts which is currently £13,081,171. 18 Commitments and contingenciesThe Company has twenty-two property contracts in respect of Oldham Place,Liverpool. Should none of the property contracts be sold prior to completion theCompany would be required to pay a further £2,948,580. Thirty-eight property contracts were entered into during the year to 30September 2007 in respect of Brook Street, Tring. Should none of the propertycontracts be sold prior to completion the Company would be required to pay afurther £5,562,697. Thirty-one property contracts were entered into during the year to 30 September2007 in respect of Yeading Lane, Hayes, subject to the developer completing thepurchase of the balance of the site. Should none of the property contracts besold prior to completion the Company would be required to pay a further£4,569,894. Should the developers fail to satisfactorily complete, the deposits currentlyheld in escrow will be returned together with any interest earned. 19 Consolidated reconciliation of shareholders funds Investment property Issue Share Capital revaluation costs Revenue capital reserves reserve reserve reserve Total £ £ £ £ £ £For the year ended 30 September 2007At 1 October2006 8,739,246 (160,067) 42,107 (609,232) (260,921) 7,751,133Issue ofshares 1,765,908 - - - - 1,705,908Expenses ofshare issue - - - (70,636) - (70,636)Gain/(loss)for the year - 259,220 (120,290) - (91,331) 47,599 --------- -------- --------- -------- -------- --------At 30September 2007 10,505,154 99,153 (78,183) (679,868) (352,252) 9,494,004 --------- -------- --------- -------- -------- --------For the year ended 30 September 2006At 1 October2005 1,970,000 14,686 - - (196,700) 1,787,986Issue ofshares 6,769,246 - - - - 6,769,246Expenses ofshare issue - - - (609,232) - (609,232)(Loss)/gainfor the year - (174,753) 42,107 - (64,221) (196,867) --------- -------- --------- -------- -------- --------At 30September 2006 8,739,246 (160,067) 42,107 (609,232) (260,921) 7,751,133 --------- -------- --------- -------- -------- -------- 20 Post balance sheet eventOn 18 December 2007 the Fund exchanged contracts in respect of the purchase of118 apartments to be built at a new development in Wallington, Surrey, for anaggregate total of £25,000,000 on completion, a discount of 18% to theprevailing Red Book valuation of £30,595,000. A deposit of £1.25m was paid onexchange and a guarantee of £3m was provided over the Fund's cash reserves. 21 Controlling partyThere is no ultimate controlling party. 22 Tax noteUnder Article 123A of the Income Tax (Jersey) law 1961, as amended, the Fund hasobtained Jersey exempt company status for the year and is therefore exempt fromJersey income tax on non Jersey source income and bank interest (by concession).A £600 annual exempt company fee is payable by the Fund. This information is provided by RNS The company news service from the London Stock Exchange