Audioboom Grp. Regulatory News (BOOM)

30 Jun 2006 07:01

Off-Plan Fund Limited (The)30 June 2006 For Immediate Release 30 June 2006 The Off-plan Fund Limited Interim results for the period 1 October 2005 to 31 March 2006 The Off-plan Fund Limited, which specialises in providing forward finance to UK housebuilders, is pleased to announce its interim results for the period ended 31 March 2006. Copies have been published for shareholders and may be also be obtained free of charge from Development Capital Management Limited, 84 Grosvenor Street, London, W1K 3JZ. List of Contacts Development Capital ManagementRoger HornettTom Pridmore020 7355 7600 Buchanan CommunicationsCharles Ryland020 7466 5000 Numis SecuritiesCharles Farquhar020 7776 1500 Chairman's Statement I would like to welcome shareholders both old and new to the first set offinancial statements for the Off-plan Fund Limited since the flotation on theAlternative Investment Market of the London Stock Exchange (AIM). Following theyear end the Fund has undergone a series of important changes, which both theBoard and the Manager hope will place it in a strong future position. At the EGM on the 14 November 2005 a number of amendments to the Fund wereproposed as part of the process of implementing the raising of additionalcapital and of listing on AIM. These resolutions were; extending the life of theFund to 10 years following listing, authorising the issue of the new shares forthe placing and amending the investment restrictions to allow the Managergreater flexibility given the Fund's size. I am pleased to report allresolutions were duly passed and the listing and placing of shares wassuccessful raising a further £6.8m. The Fund made its debut on AIM on 12December 2005 closing at 101.5p a slight premium to the 100p issue price.Further to the resolutions and as a consequence of the additional fund raising555,002 bonus shares were also issued to existing shareholders in order toreduce the dilution of their shareholdings. Since the fundraising the Manager has been reviewing a significant number ofsites and investigating potential opportunities with a range of developersacross the country. The Manager is working closely with several of thesedevelopers on a number of promising opportunities, the first of which to reachfruition, Oldham Place in Liverpool, was announced following the period end. Wehope to make further announcements as each of these discussions conclude. Boththe Board and the Manager are focused on committing the extra funds raised asearly as possible, but of course this will be balanced with the need to hold aquality portfolio of well diversified investments. With regard to the Fund's existing investments the Manager has been holdingdiscussions with several large purchasers in order to realise a potential bulksale of the apartments in Nottingham. Progress to date has been slow but we areconfident the quality of the site will ensure a satisfactory conclusion. InLeicester a show flat has been completed and marketing of the six units hasrecently commenced. As 2006 progresses, the UK housing market seems to be moving to a more firmfooting following the cautious position we saw last year. Prices and volumes areboth on the rise and steady growth over the year would not seem unreasonable,although some of the recent, more over heated figures are unlikely to bemaintained. The development market in the UK has clearly matured from the boom/bust cycles of the past and in response to this the Manager has been tailoringits financing models accordingly. The results of these negotiations we hope toannounce as the year unfolds. It is with regret that on 2 March 2006 the Board announced the retirement ofJames Ogilvy due to health considerations. Mr Ogilvy was instrumental insupporting the Manager in the establishment and launch of the Fund in 2003 andplayed an active role in the Fund's development. Both the Board and the Managerwish to record their gratitude for all that he has done on behalf of the Fundand wish him well in his retirement. As mentioned in the year end financial statements the Board has taken thedecision to present the accounts valuing the property contracts under thehistoric cost accounting method. This treatment results in an NAV per share of85.1p, a 6.2% fall from the year end. Valuing the contracts under 'Red-Book'principles results in a NAV of 91.1p. The changes in NAV resulted principallyfrom the diluting effect of fund raising, 91p per new share after expenses. Forinvestors information the Board will continue to release both figures on aquarterly basis. Subsequent to the period end on 11 May 2006, the Board was pleased to announcethe purchase of a development in Oldham Place, Liverpool. The Fund's uniquefinancing model has enabled the Manager to secure a well located site at anexcellent price. We expect this to be the start of a series of attractiveinvestments, whereby the Fund, working closely with both developers and theirbanks, can secure promising investments and provide an encouraging foundationfor the future. Graham BerryChairmanMay 2006 Manager's Report The last six months have seen a dramatic change in the size of the Fund. Theplacing and AIM listing have allowed the Manager the additional resources topursue some of the more attractive opportunities currently available. Inaddition to this the Manager has completed a review of the major conurbationswithin the UK and is now targeting specific locations where they believe theFund is best placed to invest. During the period the existing portfolio hasmatured as the developments advance towards completion. As the market becomes more sophisticated, the Manager has evolved a number ofunique financing models which, in partnership with developers, can offer theFund very competitive purchase terms. In conjunction with this, the Managercontinues to build relationships with a range of banks in order to work withboth developer and lender at the earliest stage of the development process. The potential returns available within residential property remain strong. Theoff-plan market continues to mature, with greater publicity and marketing ofoff-plan sales to retail investors. This has in turn, lead to greatercompetition and professionalism within the market and a change in the attitudeof both the banks and developers. Principally both parties have assumed a longerterm strategy, thereby smoothing market cyclicality. Portfolio and Activity At the period end the Fund held contracts in respect of 36 properties inLeicester and Nottingham. A 'Red Book' valuation of these properties wasundertaken by Colliers CRE as at 31 March 2006. This valued the portfolio at£5,934,000, a reduction in the September valuation of 2.8% caused by a decreasein the value of the Nottingham site from £5,045,000 to £4,874,000. The Manageris looking to build a portfolio weighted roughly equally between sites,diversified both geographically and across completion dates. The nature ofproperty development has meant however, that prior to the period end, a numberof contracts being worked upon were not ready to be included within theportfolio as at 31 March 2006. The first of these, Oldham Place, was announcedon 11 May 2006. Wimbledon House, Leicester The six apartments at Wimbledon House, Leicester remained valued at £1,060,000.The entire development comprises 24 two bed, two bathroom units in an existingfour storey Victorian warehouse on the lower ground, raised round and two upperfloors. The development is now completed to shell with practical completionexpected in July/August. The interior fit out which includes kitchen andbathroom design has been agreed and an on site show flat has been completed. Thesales and marketing of the development began in May. Waterfront Plaza, Nottingham The development comprises a residential block of 107 units which is nearingexternal completion with final work on the facade and balconies close tocompletion. The interior fit is partially finished with electrical and first fitin the bathrooms and kitchen. Practical completion is expected at the end ofJune 2006. The 30 apartments at Waterfront Plaza were valued at £4,874,000 areduction of 3.4% from the September figure. The Nottingham city centre markethas seen values fall over the last six months, due to what appears to be a shortterm increase in supply. Eight major developments are currently underconstruction creating over 850 units in the city centre competing for buyers.Within this market the Manager is focusing on a sale to bulk purchasers and thesale of the single apartment announced in the year end report has now beendropped. Post Period End - Oldham Place, Liverpool Following the period end the Fund exchanged contracts to purchase 51 apartmentsin Oldham Place, Liverpool. The site is located between two Liverpool city centre regeneration areas; theRopewalks, a newly established residential quarter and Mount Pleasant, an areawith a large student population. Just east of the city centre, it isapproximately a 5 to 10 minute walk to Lime Street railway station and 15minutes from The Albert Dock and Royal Liver Building. The total purchase price of the apartments is £6.6m (£192 per square foot) a 20%discount to the 'Red Book' valuation of £8.25m (£238 per square foot). A 5%deposit (£332,489) has been paid with the remainder due on completion. Theinvestment represents the entire residential element of the site, which combinedwith the alternative financing model, working alongside the developer and bankhas allowed the Fund to invest at a highly attractive price. The development is expected to commence shortly with completion due in June2007. An agent has been appointed and pre-marketing has begun. Fixed Income Portfolio Over the period under review the additional funds raised were invested in 11 newholdings and increases to some existing positions, taking the total number ofsecurities to 27. The theme remains foreign issued GBP denominated debt, with aspread of bank issuers and some corporates, all within the investment graderatings stipulated by the investment mandate. The maturity profile has reducedslightly to 1.7 years down from 2 years at the same point last year. In linewith rising short term interest rates the portfolio yield has increased to 5.2%from 4.9% last year. 92% of the Fund's assets are currently held in thisportfolio, which will be drawn upon as property investments are made. TheManager intends to hold approximately half the Fund's assets as a completionreserve, but in line with the new investment restrictions may reduce this to 30%should it be felt necessary. Market The recovery in the UK's housing market which began towards the end of thesecond quarter of 2005 appears to have gathered pace in early 2006, with homestarts and completions in the first quarter up 19% and 12% year on yearrespectively. The increase in activity coupled with a late jump in prices hascontinued through the first quarter of the year, with the Land Registryreporting sales volumes up 37% year on year. However the economic conditionswould seem too soft to support sustained growth at current rates. Previousforecasts of a fall in house prices now seem overly pessimistic, with mostmarket commentators expecting continued if unspectacular growth. The regional house price data is less clear: the Nationwide Building Societyreported that house price rises accelerated across every region in the 1stQuarter 2006 while the Halifax reported further slowdowns in the North East andScotland. The Land Registry figures cloud the waters a little, by reporting thehighest growth in Northern England and Wales. Importantly they also report ahealthy 6.4% increase in the prices of new apartments over the first quarter.All three show a resurgence in London house price inflation. This above averagegrowth shown in both London and the South East, is a trend we would expect tocontinue as the year progresses. Outside of these areas regional job losses inconsumer facing industries and manufacturing may cause a housing market slowdownin those areas such as South West, the East and North West. The residential letting market continues to show steady growth with the RICSreporting that tenant demand rose at its fastest pace in nearly five years inthe 1st Quarter 2006. Tenant demand has now exceeded new letting instructionsfor seven consecutive quarters. Affordability pressures within the residentialproperty market should ensure that demand remains healthy, supporting furthergrowth in rental incomes. Regionally London remains the strongest rental market.Data from both RICS and the RPI rent index suggest that over the past yearrental growth across the UK has averaged between 3.5% and 4% per annum. Thistrend is expected to continue. Outlook Since the fundraising the Manager has conducted a detailed review of major townsin England, Scotland and Wales. Good local knowledge is one of the key elementsof this business and in each location the Manager has established relationshipswith local developers, agents and lenders in order to ensure the Fund ispositioned to take advantage of opportunities as they arise. This process has enabled the Manager to develop a number of financing modelswhich allow lenders, developers and the Fund to collaborate in structuringforward finance to the mutual benefit of each party. By working in partnershipwith the developer the Fund is able to not only gain very competitive purchaseprices, but work with the developer throughout the project and ensure the Fundhas an attractive portfolio of properties to sell on. We continue to pursue investments located in or around urban areas across thecountry, where there is a strong prospect of demand from owner occupiers, andprivate or institutional investors. Target opportunities within improving citycentres, particularly those with strong inward investment, regeneration and highquality transport infrastructure continue to be a priority. Particularlylocations where there is strong demand from the rental sector. As mentioned above, the Manager is working closely with a number of developersacross the UK on several potential opportunities, these discussions continue andwe expect further announcements to be made in the months ahead. Development Capital Management(Jersey) LimitedMay 2006 ------------------- -------- -------- -------- ----------Balance SheetAS AT 31 MARCH 2006 Notes As at As at As at 31 March 31 March 30 Sept 2006 2005 2005 (Unaudited) (Unaudited) (Audited) (Restated) (Restated) £ £ £ Fixed Interest Investments 4 7,351,126 1,469,171 1,280,973Property contracts yet to 4 362,905 300,527 362,905complete -------- -------- ---------- 7,714,031 1,769,698 1,643,878Current assetsDebtors 127,835 37,605 45,280Cash and cash equivalents 147,350 29,650 148,995 -------- -------- ---------- 275,185 67,255 194,275Creditors-amounts fallingdue within one yearOther payables (79,243) (30,962) (50,167)Net current assets 195,942 36,293 144,108 -------- -------- ----------Total net assets 7,909,973 1,805,991 1,787,986 -------- -------- ---------- EquityStated capital 5 9,294,248 1,970,000 1,970,000Realised capital reserve 2,232 - 1,570Unrealised capital reserve (18,489) 3,457 13,116Revenue reserve (1,368,018) (167,466) (196,700) -------- -------- ----------Total shareholders' funds(all equity) 7,909,973 1,805,991 1,787,986 -------- -------- ---------- Net asset value perShare (pence) 7 85.11 91.67 90.76------------------ -------- -------- -------- ---------- The financial statements were approved by the Board of Directors on 19 June 2006and signed on its behalf by Graham Berry William Roger King ------------------------ -------- -------- -------Cash Flow StatementFOR THE SIX MONTHS ENDED 31 MARCH2006 As at As at As at 31 March 31 March 30 Sept 2006 2005 2005 (Unaudited) (Unaudited) (Audited) £ £ £Cash flows from operating activitiesInvestment income received (17,612) 14,187 28,114Deposit interest received 44,350 11,495 12,793Investment management fees paid (41,298) (24,824) (35,315)Secretarial fees paid (1,691) (1,702) (3,406)Other cash payments (42,088) (49,111) (91,165) -------- -------- -------Net cash outflow from operatingactivities (58,339) (49,955) (88,979)Capital expenditure and investmentactivitiesDeposits and acquisition costsrelating - (286,247) (329,182)to propertyPurchase of investments (6,252,812) (648,121) (648,121)Sale of investments 149,492 - 201,304 -------- -------- -------Net cash outflow from investmentactivities (6,103,320) (934,368) (775,999)Net cash outflow before financing (6,161,659) (984,323) (864,978)FinancingIssue of shares 6,769,246 - -Expenses of share issue (609,232) - - -------- -------- -------Net cash inflow from financing 6,160,014 - -Decrease in cash----------------------- -------- -------- ------- (1,645) (984,323) (864,978) -------- -------- ------- ---------------------------------------------Reconciliation of Movements in Shareholders FundsFOR THE SIX MONTHS ENDED 31 MARCH 2006 Share Capital Revenue Total Capital Reserve Reserve (restated) (restated) £ £ £ £For the six months ended31 March 2006At 1 October 2005 1,970,000 14,686 (196,700) 1,787,986Issue of ordinaryshares for cash 6,769,246 - - 6,769,246Expenses ofshare issue - - (609,232) (609,232)Bonus share issue 555,002 (555,002) -Loss for the period - (30,943) (7,084) (38,027) --------- -------- -------- --------At 31 March2006 9,294,248 (16,257) (1,368,018) 7,909,973 --------- -------- -------- -------- For the six months ended31 March 2005At 1 October 2004 1,970,000 3,079 (148,474) 1,824,605Loss for the period - 378 (18,992) (18,614) --------- -------- -------- --------At 31 March 2005 1,970,000 3,457 (167,466) 1,805,991 --------- -------- -------- -------- For the year ended 30September 2005At 1 October 2004 1,970,000 3,079 (148,474) 1,824,605Loss for the year - 11,607 (48,226) (36,619) --------- -------- -------- --------At 30 September 2005 1,970,000 14,686 (196,700) 1,787,986-------------------- --------- -------- -------- -------- Income Statement FOR THE SIX MONTHS ENDED 31 MARCH 2006 (Unaudited) (Unaudited) (Audited) (Restated) (Restated) Six months ended Six months ended Year ended 31 March 2006 31 March 2005 30 September 2005 Notes Revenue Capital Total Revenue Capital Total Revenue Capital Total £ £ £ £ £ £ £ £ £(Losses)/ gains on investments - (30,943) (30,943) - 378 378 - 11,607 11,607Income 109,433 - 109,433 39,937 - 39,937 77,291 - 77,291Investment 3 (41,298) - (41,298) (11,519) - (11,519) (22,010) - (22,010)management feeOther expenses (75,219) - (75,219) (47,410) - (47,410) (103,507) - (103,507) --------- --------- --------- --------- ------- -------- --------- -------- ---------Net (loss)/gain on ordinary activities before finance costs and taxation (7,084) (30,943) (38,027) (18,992) 378 (18,614) (48,226) 11,607 (36,619) (Loss)/gain on ordinary activitiesbefore and after taxation (7,084) (30,943) (38,027) (18,992) 378 (18,614) (48,226) 11,607 (36,619) --------- --------- --------- --------- ------- -------- --------- -------- ---------(Loss) / gain per ordinaryshare (pence) 2 (0.11) (0.49) (0.60) (0.96) 0.02 (0.94) (2.45) 0.59 (1.86) Notes a. The total column of this statement represents the profit and loss of the company. b. The financial statements have been restated to reflect the changes to accounting practices as set out in the accompanying notes. See note 9 for a summary of these changes. c. All items in the above statement derive from continuing operations. Notes to the Financial Statements 1 ACCOUNTING POLICIES Accounting Policies The financial statements have been prepared under the historical costconvention, as modified to include the revaluation of quoted investments and inaccordance with applicable Accounting Standards and with the Statement ofRecommended Practice for 'Financial Statements of Investment Trust Companies'issued in January 2003 and amended in December 2005. For the accounting periodbeginning on 1 October 2004 the Company had the option to prepare its financialstatements in accordance with International Financial Reporting Standards('IFRS'), as adopted by the International Accounting Standards Board ('IASB').The Board has elected to continue to adopt UK Generally Accepted AccountingPrinciples ('UK GAAP') and thus the new Financial Reporting Standards issued aspart of the programme to converge UK GAAP with IFRS. Figures for the periodended 31 March 2005 and the year ended 30 September 2005 have been restatedaccordingly. The same accounting policies used for the year ended 30 September2005 have been applied with the following exceptions: (a) Income Interest 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 period.Income bought and sold on fixed interest securities is recognised in the incomestatement. (b) Quoted Investments Purchases of investments are recognised on a trade date basis and designatedupon initial recognition as held at fair value through profit or loss. Sales ofassets are also recognised on a trade date basis. Proceeds are measured at fairvalue, which is regarded as the proceeds of any sale less any transaction costs.The fair value of the financial instruments is based on their quoted bid pricesat the balance sheet date, without any deduction for any estimated futureselling costs. Changes in the value of investments and gains and losses on disposal arerecognised in the income statement as 'gains/losses on investments'. Alsoincluded in this caption are transaction costs in relation to the purchase orsale of investments. (d) Property contracts yet to complete The 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 the 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 are takento the realised capital reserve. 2 Returns per share Six months ended 31 March 2006 The return per share is based on the net loss for the period of £38,027 and on6,356,500 shares, being the weighted average number of shares in issue. Six months ended 31 March 2005 The return per share is based on the net loss for the period of £18,614 and on1,970,000 shares, being the weighted average number of shares in issue. Year ended 30 September 2005 The return per share is based on the net loss for the period of £36,619 and on1,970,000 shares, being the weighted average number of shares in issue. 3 Management fee ----------- ------------ ------------ -------- Six months ended Six months ended Year ended 31 March 2006 £ 31 March 2005 £ 30 Sept 2005 £ Management fee 41,298 11,519 22,010----------- ------------ ------------ -------- The management fee paid to Development Capital Management (Jersey ) Limited(DCM) was, until 18 January 2006, 1.25% per annum of the net asset value of thefixed income portfolio held by the Company, plus any cash amount of depositspaid and outstanding in respect of investment properties. This was increased to2% per annum from 19 January 2006. The management agreement between the Companyand DCM is terminable by either party on 12 months notice, subject to an initialterm of 24 months. 4 Fixed Interest Investments ------------------ --------- ---------- -------- Six months Six months Year ended ended ended 31 March 2006 31 March 2005 30 Sept 2005 (Restated) (Restated) (Restated) £ £ £ Opening valuation 1,280,973 819,029 819,029Opening unrealisedappreciation (13,116) (3,079) (3,079) --------- ---------- --------Opening book cost 1,267,857 815,950 815,950Movements during the period:Purchases 6,253,664 648,121 648,121Sales - proceeds (150,344) - (201,304)Amortisation of fixedincome book costs (2,224) (1,643) (3,520)Sales - realised gains 662 - 1,570 --------- ---------- --------Closing book cost 7,369,615 1,465,714 1,267,857Closing unrealisedappreciation Closingvaluation (18,489) 3,457 13,116------------------ --------- ---------- -------- 7,351,126 1,469,171 1,280,973 --------- ---------- -------- Property Contracts Yet to Complete Six months Six months Year ended ended ended 31 March 2006 31 March 2005 30 Sept 2005 £ £ £ Opening book cost 362,905 18,274 18,274Movements during theperiod: - 282,253 344,631 ---------- --------- ----------Purchases Book cost 362,905 300,527 362,905------------------ ---------- --------- ---------- The book costs above refer to the 36 property contracts in respect of WimbledonHouse, Leicester (6 residential apartments) and Waterfront Plaza, Nottingham (30residential apartments). The table below summarises the costs associated withthese contracts and applies the 'Red Book' valuation, prepared by Colliers CREas at 31 March 2006, of the underlying properties as a basis of valuation forthese contracts. The 'Red Book' value may not represent the 'fair value' of thecontracts as explained in the ''market price risk' section of note 8. ---------------- ---------- ----------- -------- Wimbledon Waterfront House Plaza Total £ £ £ Deposits paid 46,575 217,906 264,481Legal and acquisition costs 12,114 86,310 98,424 ---------- ----------- --------Book cost as at 31 March 2006 58,689 304,216 362,905Outstanding completion payments 884,925 4,140,213 5,025,138 ---------- ----------- --------Total historic cost 943,614 4,444,429 5,388,043 ---------- ----------- --------'Red Book' valuation 1,060,000 4,874,000 5,934,000Approximate completion date August 2006 August 2006---------------- ---------- ----------- -------- 5 Stated Capital As at 31 March 2006 and 2005 and 30 September 2005 Authorised:The company is a no par value ('NPV') company NumberFounder shares 1099,999,990 participating shares 99,999,990 100,000,000 As at 31 March 2006 ------------- ------------ ----------- --------Issued: 31 March 2006 31 March 2005 30 Sept 2005Founder shares 2 2 2Participating shares 9,294,248 1,970,000 1,970,000------------- ------------ ----------- -------- On 12 December 2005, 6,769,246 participating shares were issued at 100p raisingnet proceeds of £6,160,014. 555,002 bonus participating shares were also issuedon this date. 6 Transaction costs There were no transactions costs charged to the Company during the period. Aone-off fee, including brokerage costs, is charged by the custodian to theManager, Development Capital Management (Jersey) Limited. 7 Net asset value per share Net asset value per share Net asset value attributable per share 31 March 2006 31 March 2005 30 Sept 2005 p p pParticipating shares (note 5) 85.11 91.67 90.76 Net asset value 31 March 2006 31 March 2005 30 Sept 2005 £ £ £ 7,909,973 1,805,991 1,787,986 --------------- ---------- ------------ 8. Financial instruments & Property Contracts Yet to Complete The Company's financial instruments comprise fixed interest securities, cashbalances and debtors and creditors that arise directly from its operations, forexample, in respect of sales and purchases awaiting settlement, and debtors foraccrued income. The property contracts yet to complete are not 'financialinstruments' but appropriate disclosures have been given below. The main risks which the Company faces from its financial instruments are (i)market price risk, being the risk that the value of investment holdings willfluctuate as a result of changes in market prices caused by factors other thaninterest rate or currency movements, (ii) credit risk, (iii) interest rate riskand (iv) liquidity risk. The Board regularly reviews and agrees policies formanaging each of these risks. The Manager's policies for managing these risksare summarised below and have been applied throughout the period. The numericaldisclosures exclude short-term debtors and creditors. Market price risk Market 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 inthe portfolio in order to reduce risk arising from factors specific to aparticular country or sector. The Manager monitors market prices throughout theyear and reports to the Board, which meets regularly in order to reviewinvestment strategy. 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 each of the property contracts yet to completeat the lower of cost and net realisable value as set out in note 1(d). The totalpurchase price including acquisition costs, of the 36 contracts was £5,388,043and the 'Red Book' valuation of the properties as at 31 March 2006 was£5,934,000. Should the Company complete on all the contracts and subsequent 'RedBook' valuations fall by more than 9%, the Company would then be exposed to anyfurther falls in the market, as the net realisable values would then be belowcost. Credit risk The Company places funds with third parties and is therefore potentially at riskfrom the failure of any such third party of which it is a creditor. The Companyexpects to place any such funds on a short-term basis only and spread these overa number of different providers. The deposits in respect of the property contracts yet to complete are held inescrow with the developer's solicitors. This money is only released to thedeveloper on satisfactory completion of the property. Should a developer defaulton the contract the deposit and any interest earned would be returned to theCompany. Interest rate risk Financial Assets The interest rate risk profile of financial assets at the balance sheet date wasas follows: ---------------- ---------- ----------- ---------Fixed Interest 31 March 2006 31 March 2005 30 Sept 2005 £ £ £ Financial Assets 7,351,126 1,469,171 1,280,973Property contracts yet to complete - - - ---------- ----------- --------- 7,351,126 1,469,171 1,280,973Floating Rate 31 March 2006 31 March 2005 30 Sept 2005 £ £ £Financial Assets 147,350 29,650 148,995Property contracts yet to complete - - - ---------- ----------- --------- 147,350 29,650 148,995Non-Interest Bearing 31 March 2006 31 March 2005 30 Sept 2005 £ £ £Financial Assets 340,933 278,555 340,933Property contracts yet to complete - - - ---------- ----------- --------- 340,933 278,555 340,933 ---------------- ---------- ----------- --------- All short-term debtors and creditors have been excluded from this disclosure. The fixed interest assets have a weighted average maturity of 1.7 years (31March 2005: 2.0 years; 30 September 2005: 1.7 years) and a weighted averageyield of 5.2% (31 March 2005: 4.9%; 30 September 2005: 4.8%) per annum. The floating rate assets consist of cash deposits on call, earning interest atthe prevailing market rates. Changes in interest rates will impact on the value of fixed interest securitiesand future cash flows from floating rate holdings. It will have no impact on theproperty contracts yet to complete. Liquidity risk The Company's assets mainly comprise cash balances and readily realisablesecurities, which can be sold to meet funding commitments if necessary. Theyalso are comprised of property contracts yet to complete. It is the intention ofthe Board to sell on the property contracts yet to complete. However, shouldthere be insufficient liquidity in the market to enable this to happen, theCompany would be liable to pay the remaining commitments set out in thecontracts which is currently £5,025,138. 9. Restatement of figures As mentioned in note 1(a), interest earned on financial assets accrues at theeffective interest rate, which is the rate that exactly discounts estimatedfuture cash receipts through the expected life of the financial asset to thatasset's net carrying amount. Previously, only interest coupons receivable onsuch assets were taken to the revenue account, accrued on a daily basis duringthe period of ownership of the asset. The effect of adopting this new policy has been that amounts previously chargedor credited to capital account are now charged or credited to revenue account.The following tables detail the effects on shareholders' funds: --------------- ------------ ---------- -------- Before Effects of After restatement change restatement £ £ £As at 31 March 2005Stated capital 1,970,000 1,970,000Realised capital reserve - -Unrealised capital reserve 5,100 (1,643) 3,457Revenue reserve As at 30 September 2005 (169,109) 1,643 (167,466) ------------ ---------- -------- 1,805,991 - 1,805,991 ------------ ---------- -------- Stated capital 1,970,000 1,970,000Realised capital reserve 616 954 1,570Unrealised capital reserve 17,590 (4,474) 13,116Revenue reserve As at 31 March 2006 (200,220) 3,520 196,700 ------------ ---------- -------- 1,787,986 - 2,181,386 ------------ ---------- -------- Stated capital 9,294,248 9,294,248Realised capital reserve 1,468 764 2,232Unrealised capital reserve (16,429) (2,060) (18,489)Revenue reserve (1,369,314) 1,296 (1,368,018) ------------ ---------- -------- 7,909,973 - 7,909,973 ------------ ---------- -------- These changes have therefore resulted in a reallocation of shareholders' fundsbetween retained revenue and capital reserve at the period or year ends, but notin the overall total shareholders' funds as at these dates. 10 Subsequent Events Following the period end the Company entered into a contract to purchase 51apartments in Oldham Place, Liverpool. The total purchase price of theapartments is £6.6m of which the Company is paying a 5% deposit, which will beheld in escrow pending completion. This information is provided by RNS The company news service from the London Stock Exchange