TIDMOPF
RNS Number : 3189P
Off-Plan Fund Limited (The)
23 March 2009
+-------------------------------------+--------------------------------------------+
| For Immediate Release | 23 March 2009 |
+-------------------------------------+--------------------------------------------+
THE OFF-PLAN FUND LIMITED
Preliminary Results for the year ended 30 September 2008
The Off-plan Fund Limited, which specialises in providing forward finance to UK
housebuilders, is pleased to announce its preliminary results for the year ended
30 September 2008.
The Fund is managed by Development Capital Management (Jersey) Limited.
Copies of the Financial Statements are currently being printed and will be sent
to shareholders shortly. They may also be obtained free of charge from
Development Capital Management Limited, 36 Dover Street, London, W1S 4NH.
List of Contacts
Development Capital Management
Roger Hornett
Andy Gardiner
020 7355 7600
John East & Partners Limited
Nominated Adviser
Bidhi Bhoma/Simon Clements
020 7628 2200
Corporate Broking
Graeme Cull
020 7628 2200
Buchanan Communications
Charles Ryland
Isabel Podda
020 7466 5000 THE OFF-PLAN FUND LIMITED
ANNUAL REPORT AND CONSOLIDATED FINANCIALSTATEMENTS
FOR THE YEAR ENDED 30
SEPTEMBER 2008
Chairman's Statement
The period under review proved to be another challenging year for the Fund. The
turmoil in global financial markets throughout the period and subsequent to the
year-end, and its impact on the UK residential property market in terms of new
build starts, sales volume and prices, has been well documented. However, the
Board and the Manager have reacted to these developments, taking prudent action
to exit faltering projects with minimal downside risk to the Fund and altering
the Fund's focus within the parameters of its stated investment strategy by the
acquisition and renting out of completed units until sales and prices improve.
Performance
The audited net asset value ("NAV") of the Fund at 30 September 2008 was GBP9.1
million (2007:
GBP9.5 million). The NAV per ordinary share has reduced to
81.2p at year-end from 85.1p at 30 September 2007, largely due to the Fund
exiting the Liverpool development and the write-off of attributable
recognised
profit.
Whilst this asset value performance is reasonable against the extremely
difficult economic backdrop, the Fund's share price performance has been poor.
It fell 27 per cent. from 74.3p to 54.5p during the financial year (implying a
widening discount of 33 per cent. to NAV per share) and since the year-end has
fallen further sharply, touching a low of 8.5p before recovering and settling
recently around 12.5p. Much of this recent fall appears to be as a result of one
of the Fund's largest shareholders apparently willing to sell at any level to
dispose of its entire holding. Given the historic low levels of liquidity in the
Fund's shares, the low share price is not surprising but the discount to NAV is
now stark. Shares in residential property funds are unlikely to be rated
favourably in the prevailing climate and the Fund is arguably too small to
generate much analysis in the market, but the Board and Manager are surprised at
the size of the discount to NAV and that the introduction of an annual
continuation vote at last year's annual general meeting ("AGM") has not had a
more positive impact on the discount.
Portfolio Review
Change in focus
Although the main focus of the Fund has been to provide forward finance to UK
house builders, there is currently a lack of quality new developments coming to
the market as developers are either not starting or are mothballing projects
until the market improves. The Manager has found it increasingly difficult to
source quality deals on its typical financing model without committing far
greater deposits, due to lending banks' aversion to risk. Even where it appears
that deals can be secured on that model, prevailing market conditions add to the
risks inherent in any early stage development financing.
Prior to the year-end the Board and the Manager were of the view that these
market conditions offered the Fund excellent opportunities to buy nearly or
recently completed units which developers are willing to dispose of at deep
discounts to list prices and attractive discounts to independent Red Book
valuations, in order that they can fully exit a development, satisfy financing
arrangements and avoid further marketing costs.
When the Fund was established, the current stage (although not the particular
circumstances and extent) of the property cycle was anticipated and the Fund's
investment strategy as set out in its AIM admission document authorised the
Board and the Manager to take advantage of situations where they believe the
realisable value of potential acquisition properties is such that their on-sale
would generate a profit for the Fund. The Board has therefore authorised the
Manager to source deals with a view to completing on the units and renting them
out until the market for sales, and their prices, improve. Rental prospects and
yields in the Fund's current target markets (Home Counties, inner M25, no
over-supply, with good transport links) and target units (typically 1 bedroom
with parking) remain strong, assisted by demand from young professionals who are
currently unable to purchase.
The Fund has available cash resources that allow it to move quickly to secure
these deals during what may only be a limited window of opportunity. In
purchasing high quality stock at this stage in the cycle, the Fund should be
well positioned to sell the units when the mortgage market improves and
capitalise on the anticipated undersupply of quality units.
The current property portfolio comprises three investments, which are summarised
below:
The Heart, Walton-on-Thames: Subsequent to the year-end the Fund completed its
first investment under this new focus. The development is a major regeneration
project located in Walton-on-Thames and was completed in January 2008. Having
identified the properties as potential units to be acquired at a significant
discount, the Fund reserved nine one-bedroom apartments with parking in
September 2008 at a price of GBP1.65 million, equating to a 24 per cent.
discount to the prevailing Red Book value. The acquisition completed in October
2008 with a view to the units being offered to the rental market. At the time of
writing, the Fund has sold one apartment for GBP190,000 (a 10 per cent. profit
after all transaction costs) and the remaining ten units have been let at an
average yield of 6.2 per cent.
The Board is pleased with this performance, which clearly supports the Fund's
change in focus. The Manager has identified other attractive propositions but
the Board has held off from making further investments in the past few months
following certain shareholder feedback and in anticipation of the forthcoming
continuation vote. If shareholders vote to continue the Fund for another year
this investment approach will be followed for so long as market conditions
dictate.
Canon House, Wallington: In December 2007, the Fund contracted to purchase 118
off-plan units in a new development in Wallington for GBP25.0 million. The Red
Book valuation of GBP27.4 million at
30 September 2008 has fallen from GBP30.7
million in December 2007, reducing the purchase price discount to approximately
10 per cent.
The commencement of construction was delayed as the developer, Henry Homes, has
been unable to progress discussions with a number of housing associations
concerning the disposal of the affordable housing element. The completion of
this element of the transaction is a pre-requisite of the terms of the
development finance being provided by HBOS.
These delays have impacted on the marketing campaign being commenced and
therefore unfortunately there is no positive onward sales progress to report.
However it is possible that these delays will prove beneficial to the Fund as
the construction programme is likely to take at least 12 months from
commencement and it is to be hoped that the residential sales market may be
returning to a healthier state by such time, enabling greater volume and price
on the Fund's onward sales.
Whilst there is clearly some uncertainty over the commencement of the
development, there is a long-stop date of January 2012 by which time the Fund
will require completed units of satisfactory standard to be delivered by the
developer or else be entitled to a return of its deposits. In the meantime the
Fund has been advised that its current committed funds are secure as the deposit
of GBP1.25 million is covered by a Zurich insurance policy and the GBP3 million
guarantee is still retained by the Fund in its AIB ring-fenced bank account.
The Manager continues to maintain vigilance over this project's progress and we
will report any material developments to shareholders as they happen.
Wimbledon House, Leicester: The six apartments in Leicester were valued at
GBP805,000 at
30 September 2008 (2007: GBP911,000) reflecting the state of the
housing market in the local area. All flats are currently let and the Fund
intends to maintain them as investment properties until the local market for
sales improves.
The following are previous projects, which the Fund has now exited:
Oldham Place, Liverpool: As announced on 8 January 2009, the Fund rescinded the
contracts for the purchase of 51 apartments to be built at a development in
Oldham Place, Liverpool, which it had entered into in April 2006 with the
developer, Bentley Properties (Preston) Limited.
Due to delays related to the receivership of the appointed construction company
in December 2007 and an issue relating to the boundary with an adjoining plot of
land which required an amended planning permission, the developer was unable to
complete the units by 31 December 2008 as required in the purchase contracts.
Given prevailing market conditions and short-term prospects for UK residential
property (and inner-city apartments in particular), and having taken legal
advice as to the options available to it, the Board decided to exercise the
Fund's contractual right to rescind all contracts and recover the deposits which
were held by the developer's solicitors in respect of the development, together
with interest thereon. A total of GBP371,000 was received by the Fund in
February 2009.
The onward purchasers of 29 of the units have been informed of the Fund's
intentions in this regard and all such purchasers have indicated their
acceptance of the position on the basis that they were repaid their deposits and
accrued interest.
As a result of this rescission, the Fund has written back the profit of
GBP241,000 that was reported in 2007, together with associated costs of
GBP30,000.
Tring, Herts and Hayes, Middlesex: Despite the continued best efforts of the
Manager, there had been very little progress for some months on either of these
developments and therefore in July 2008 the Fund announced the rescission of
contracts which it had entered into in March 2007 with the developer, FirstMove
Developments Limited, for the purchase of 38 apartments to be built in Tring and
31 apartments to be built in Hayes. Outstanding issues relating to the s.106
(affordable housing) elements on Tring and the purchase of the balance of the
site on Hayes continued to frustrate the Fund's objectives. Neither construction
nor marketing had commenced on either site.
The Board and the Manager believed that these transactions had very little
likelihood of going forward in accordance with the anticipated timetable. Having
taken legal advice as to the options available to it, the Board decided to
exercise the Fund's contractual right to rescind all contracts and recover the
deposits which it had paid in respect of Tring. No deposit had been paid in
respect of Hayes.
Market
Although the financial year finished prior to the first of five successive base
rate cuts which started in October 2008, the difficulties in the housing market
were readily apparent. Average UK house price growth, according to Land Registry
figures, had reversed from plus 8.7 per cent. in September 2007 to minus 8.0 per
cent. in September 2008. Both of the leading UK mortgage lenders (HBOS and
Nationwide) were recording annual price declines of 12.4 per cent. against
growth of 10.7 per cent. and 9.0 per cent. respectively a year earlier, whilst
at the more positive end of the spectrum Rightmove, which had been roughly in
line with the major lenders a year ago, was only reporting a year on year
decline of 3.3 per cent. Prices in London resisted the general trend for the
majority of the year, with certain districts within the M25 area, the Fund's
preferred investment region, continuing to record monthly and annual growth.
The greatest casualty however has been volume, which has suffered not so much
from the price of credit but its availability since the virtual closure of the
wholesale markets to lenders following the global crisis in the banking
industry. The unwillingness of the banks to lend to each other has driven up the
premium cost of short term funding to levels not seen in previous economic
cycles.
Transaction volume has suffered accordingly. At the September year end monthly
mortgage approvals had fallen to 33,000 units from 74,000 at the start of the
year, 102,000 in September 2007 and 119,000 at the height of the boom in January
that year.
Since the year-end interest rates have been slashed by 450 basis points to an
all time low of 0.5 per cent. Three month Sterling LIBOR has fallen from a high
of 6.8 per cent. mid year to an all time low of 1.80 per cent., where the
premium for such credit remains at 130 basis points over base rate as opposed to
the
15 basis points norm prior to the banking crisis. However this has failed
to fuel demand, further evidence that it is not price but availability of credit
which is restricting the market.
Outlook
GDP growth is slowing simultaneously across all continents, a phenomenon not
witnessed in modern economic history. It results from a combination of the
global banking crisis on the one hand and a commodity price boom without
precedent on the other.
The UK treasury reports that the average expectation for house price falls in
2009 is 9.8 per cent. with a peak to trough decline of between 20 per cent. and
35 per cent., and most agencies forecasting, along with RICS, a fall of 25 per
cent. Transaction volumes, having fallen from 1.6 million in 2007 to 0.9 million
in 2008 are forecast by the CML to decline further in 2009 to around 0.7 million
units, whilst few see any improvement in housing starts from 2008 levels.
The Land Registry reported average house prices falling by 13.5 per cent. for
2008 as a whole, whilst the major lenders were less generous with their
calculations - HBOS recording a 12 month fall in prices of 16.2 per cent. and
the Nationwide 15.9 per cent. This would indicate, if the consensus is to be
believed, that the majority of the decline is behind us.
That said, with volume remaining low and developers finding it difficult to
acquire finance, opportunities for the purchase of cheap properties in key
geographical areas at deep discounts to market prices are likely to continue to
emerge. In this respect the Manager believes that the best opportunities exist
in this arena.
AGM and continuation vote
The AGM of the Fund will be held in Jersey on 29 April 2009. As you will be
aware, a continuation vote will be tabled at the AGM as an ordinary resolution.
This is to the effect that the Fund continues to pursue its existing investment
strategy until the conclusion of the next AGM.
Having considered the outlook for the UK residential property market, both in
the short and long-term, and, importantly, the commitments of the Fund to the
Wallington development potentially until January 2012, and having spoken to
several of the Fund's largest shareholders over the past six months, the Board
recommends that shareholders vote in favour of this resolution to continue with
the investment strategy (as per the above discussion on revised focus) for a
further year. During this period, the Fund will seek to identify forced and
distressed sellers with a view to acquiring completed units at significant
discounts to prevailing market value, which also meet the Fund's geographical
and rental requirements. It will also continue to monitor and report on progress
on the Wallington development.
Shareholders should note that if the continuation vote is not passed (on a
simple majority vote of those voting) the Board would be obliged to take all
steps necessary or desirable to effect the orderly realisation of the Company's
property portfolio. The Board does not consider this to be in the best interests
of shareholders at this time for two main reasons. First, the Fund would be
selling its completed units in Leicester and Walton into a very difficult
market. Secondly, even if those units were successfully sold, the proceeds of
sale (together with other cash reserves) could not be distributed to
shareholders while the Fund's liability to complete on the Wallington units
remains.
Board and advisers
Subsequent to the year end Joni Cline resigned as a director in order to make
herself available to pursue other opportunities. Ms Cline had acted as the Board
representative nominated by Concensus Business Group ("CBG") since December
2007. CBG had been offered the opportunity to nominate a director to the Fund's
board in April 2007 in connection with its role as investment adviser to Elsina
Limited ("Elsina"). Elsina is ultimately owned by Investec Trust (Guernsey)
Limited, as trustees for the Tchenguiz Family Trust, and had been interested in
20.3 per cent. of the Fund's share capital. In January this year the Fund
announced that CBG's interest had been reduced to 3.6 per cent. after the bulk
of its shareholding was transferred to Kaupthing Singer & Friedlander ("KS&F")
just prior to KS&F entering into administration in October 2008.
In January 2009 the Board appointed John East & Partners Limited as its
nominated adviser and broker.
Finally I would like to take this opportunity to announce that I shall be
resigning as Chairman and a director of the Fund for personal reasons with
immediate effect from the publication of these financial statements. I have very
much enjoyed chairing the Board and serving as a director of your Fund over the
past three years albeit that much of this period represented a particularly
challenging and unprecedented environment in which to operate. Roger King will
take on the Chairmanship of the Fund on a temporary basis while my fellow
directors consider new candidates for the Board. I would like to wish the
shareholders, my fellow directors and the investment manager the best of fortune
for the remainder of the life of the Fund.
Graham Berry
Chairman
23 March 2009
Consolidated Income Statement
For the year ended 30 September 2008
+----------------+--------+----------+--------+----------+--------+----------+--------+----------+--------+---------+--------+----------+--------+
| | | Year ended | | Year ended | |
+----------------+--------+--------------------------------------------------+--------+-------------------------------------------------+--------+
| | | 30 September 2008 | | 30 September 2007 | |
+----------------+--------+--------------------------------------------------+--------+-------------------------------------------------+--------+
| | | Revenue | | Capital | | Total | | Revenue | | Capital | | Total | |
+----------------+--------+----------+--------+----------+--------+----------+--------+----------+--------+---------+--------+----------+--------+
| | Notes | GBP | | GBP | | GBP | | GBP | | GBP | | GBP | |
+----------------+--------+----------+--------+----------+--------+----------+--------+----------+--------+---------+--------+----------+--------+
| Unrealised | 7 | - | | (106,500 | ) | (106,500 | ) | - | | (78,183 | ) | (78,183 | ) |
| losses on | | | | | | | | | | | | | |
| investment | | | | | | | | | | | | | |
| property | | | | | | | | | | | | | |
+----------------+--------+----------+--------+----------+--------+----------+--------+----------+--------+---------+--------+----------+--------+
| Profit | 9 | (240,870 | ) | - | | (240,870 | ) | 262,662 | | - | | 262,662 | |
| on | | | | | | | | | | | | | |
| off-plan | | | | | | | | | | | | | |
| sales or | | | | | | | | | | | | | |
| write | | | | | | | | | | | | | |
| back on | | | | | | | | | | | | | |
| rescinded | | | | | | | | | | | | | |
| sales | | | | | | | | | | | | | |
+----------------+--------+----------+--------+----------+--------+----------+--------+----------+--------+---------+--------+----------+--------+
| Realised | 9 | (4,113 | ) | - | | (4,113 | ) | - | | - | | - | |
| losses | | | | | | | | | | | | | |
| on | | | | | | | | | | | | | |
| property | | | | | | | | | | | | | |
| contracts | | | | | | | | | | | | | |
| yet to | | | | | | | | | | | | | |
| complete | | | | | | | | | | | | | |
+----------------+--------+----------+--------+----------+--------+----------+--------+----------+--------+---------+--------+----------+--------+
| Realised | 8 | - | | 11,668 | | 11,668 | | - | | (1,841 | ) | (1,841 | ) |
| gains/(losses) | | | | | | | | | | | | | |
| on investments | | | | | | | | | | | | | |
| held at fair | | | | | | | | | | | | | |
| value through | | | | | | | | | | | | | |
| profit or loss | | | | | | | | | | | | | |
+----------------+--------+----------+--------+----------+--------+----------+--------+----------+--------+---------+--------+----------+--------+
| Unrealised | 8 | - | | 20,769 | | 20,769 | | - | | (1,601 | ) | (1,601 | ) |
| gains/(losses) | | | | | | | | | | | | | |
| on investments | | | | | | | | | | | | | |
| held at fair | | | | | | | | | | | | | |
| value through | | | | | | | | | | | | | |
| profit or loss | | | | | | | | | | | | | |
+----------------+--------+----------+--------+----------+--------+----------+--------+----------+--------+---------+--------+----------+--------+
| Interest | 2 | 339,315 | | - | | 339,315 | | 333,711 | | - | | 333,711 | |
| income | | | | | | | | | | | | | |
+----------------+--------+----------+--------+----------+--------+----------+--------+----------+--------+---------+--------+----------+--------+
| Rental | 2 | 36,411 | | - | | 36,411 | | 17,770 | | - | | 17,770 | |
| income | | | | | | | | | | | | | |
+----------------+--------+----------+--------+----------+--------+----------+--------+----------+--------+---------+--------+----------+--------+
| Investment | 3 | (182,477 | ) | - | | (182,477 | ) | (156,210 | ) | - | | (156,210 | ) |
| management | | | | | | | | | | | | | |
| fee | | | | | | | | | | | | | |
+----------------+--------+----------+--------+----------+--------+----------+--------+----------+--------+---------+--------+----------+--------+
| Rental | 4 | (11,537 | ) | - | | (11,537 | ) | (14,994 | ) | - | | (14,994 | ) |
| expenses | | | | | | | | | | | | | |
+----------------+--------+----------+--------+----------+--------+----------+--------+----------+--------+---------+--------+----------+--------+
| Other | 4 | (295,060 | ) | - | | (295,060 | ) | (268,514 | ) | - | | (268,514 | ) |
| expenses | | | | | | | | | | | | | |
+----------------+--------+----------+--------+----------+--------+----------+--------+----------+--------+---------+--------+----------+--------+
| Net | | (358,331 | ) | (74,063 | ) | (432,394 | ) | 174,425 | | (81,625 | ) | 92,800 | |
| (loss)/gain | | | | | | | | | | | | | |
| on ordinary | | | | | | | | | | | | | |
| activities | | | | | | | | | | | | | |
| before | | | | | | | | | | | | | |
| taxation | | | | | | | | | | | | | |
+----------------+--------+----------+--------+----------+--------+----------+--------+----------+--------+---------+--------+----------+--------+
| Taxation | 5 | (6,514 | ) | - | | (6,514 | ) | (3,094 | ) | - | | (3,094 | ) |
+----------------+--------+----------+--------+----------+--------+----------+--------+----------+--------+---------+--------+----------+--------+
| Net | | (364,845 | ) | (74,063 | ) | (438,908 | ) | 171,331 | | (81,625 | ) | 89,706 | |
| (loss)/gain | | | | | | | | | | | | | |
| for the | | | | | | | | | | | | | |
| year after | | | | | | | | | | | | | |
| taxation | | | | | | | | | | | | | |
+----------------+--------+----------+--------+----------+--------+----------+--------+----------+--------+---------+--------+----------+--------+
| (Loss)/gain | 6 | (3.3 | ) | (0.7 | ) | (3.9 | ) | 0.9 | | 0.9 | | 0.9 | |
| per share | | | | | | | | | | | | | |
| (pence) | | | | | | | | | | | | | |
+----------------+--------+----------+--------+----------+--------+----------+--------+----------+--------+---------+--------+----------+--------+
Notes
(a) The total column of this statement represents the profit and loss of the
Company and the Group.
(b) All items in the above statement derive from continuing operations.
(c) The Group has no recognised gains or losses other than those disclosed in
the Consolidated income statement.Consolidated Balance Sheet
As at 30 September 2008
+---------------+--------+------------+--------+------------+--------+
| | | 2008 | | 2007 | |
+---------------+--------+------------+--------+------------+--------+
| | Notes | GBP | | GBP | |
+---------------+--------+------------+--------+------------+--------+
| Non-current | | | | | |
| assets | | | | | |
+---------------+--------+------------+--------+------------+--------+
| Investment | 7 | 804,500 | | 911,000 | |
| property | | | | | |
+---------------+--------+------------+--------+------------+--------+
| Investments | 8 | 3,012,365 | | 5,985,007 | |
| held at | | | | | |
| fair value | | | | | |
| through | | | | | |
| profit or | | | | | |
| loss | | | | | |
+---------------+--------+------------+--------+------------+--------+
| Property | 9 | 1,508,823 | | 446,078 | |
| contracts | | | | | |
| yet to | | | | | |
| complete | | | | | |
+---------------+--------+------------+--------+------------+--------+
| Debtors | 11 | - | | 253,532 | |
+---------------+--------+------------+--------+------------+--------+
| | | 5,325,688 | | 7,595,617 | |
+---------------+--------+------------+--------+------------+--------+
| Current | | | | | |
| assets | | | | | |
+---------------+--------+------------+--------+------------+--------+
| Debtors | 11 | 533,450 | | 437,022 | |
+---------------+--------+------------+--------+------------+--------+
| Cash | 13 | 3,000,000 | | - | |
| in | | | | | |
| escrow | | | | | |
+---------------+--------+------------+--------+------------+--------+
| Cash | | 274,200 | | 1,828,171 | |
| and | | | | | |
| cash | | | | | |
| equivalents | | | | | |
+---------------+--------+------------+--------+------------+--------+
| | | 3,807,650 | | 2,265,193 | |
+---------------+--------+------------+--------+------------+--------+
| Total | | 9,133,338 | | 9,860,810 | |
| assets | | | | | |
+---------------+--------+------------+--------+------------+--------+
| Current | | | | | |
| liabilities | | | | | |
+---------------+--------+------------+--------+------------+--------+
| Other | 12 | (78,242 | ) | (366,806 | ) |
| payables | | | | | |
+---------------+--------+------------+--------+------------+--------+
| Net | | 9,055,096 | | 9,494,004 | |
| assets | | | | | |
+---------------+--------+------------+--------+------------+--------+
| Equity | | | | | |
+---------------+--------+------------+--------+------------+--------+
| Stated | 14 | 10,505,154 | | 10,505,154 | |
| capital | | | | | |
+---------------+--------+------------+--------+------------+--------+
| Capital | 17 | (315,755 | ) | (241,692 | ) |
| reserve | | | | | |
+---------------+--------+------------+--------+------------+--------+
| Issue | | (679,868 | ) | (679,868 | ) |
| costs | | | | | |
| reserve | | | | | |
+---------------+--------+------------+--------+------------+--------+
| Revenue | | (454,435 | ) | (89,590 | ) |
| reserve | | | | | |
+---------------+--------+------------+--------+------------+--------+
| Total | | 9,055,096 | | 9,494,004 | |
| shareholders' | | | | | |
| funds (all | | | | | |
| equity) | | | | | |
+---------------+--------+------------+--------+------------+--------+
| Net | 15 | 81.2 | | 85.1 | |
| asset | | | | | |
| value | | | | | |
| per | | | | | |
| share | | | | | |
| (pence) | | | | | |
+---------------+--------+------------+--------+------------+--------+
Consolidated Statement of Cash Flows
For the year ended 30 September 2008
+---------------------+--------+------------+--------+------------+--------+
| | | 2008 | | 2007 | |
+---------------------+--------+------------+--------+------------+--------+
| | Notes | GBP | | GBP | |
+---------------------+--------+------------+--------+------------+--------+
| Cash | | | | | |
| flow | | | | | |
| from | | | | | |
| operating | | | | | |
| activities | | | | | |
+---------------------+--------+------------+--------+------------+--------+
| Deposits | | (1,502,948 | ) | 138,830 | |
| and | | | | | |
| acquisition | | | | | |
| costs | | | | | |
| relating to | | | | | |
| property | | | | | |
| contracts | | | | | |
+---------------------+--------+------------+--------+------------+--------+
| Cash | | (3,000,000 | ) | - | |
| deposited | | | | | |
| in escrow | | | | | |
+---------------------+--------+------------+--------+------------+--------+
| Expenses | | (2,290 | ) | - | |
| from | | | | | |
| sale of | | | | | |
| property | | | | | |
| contracts | | | | | |
+---------------------+--------+------------+--------+------------+--------+
| Rental | | 34,854 | | 17,772 | |
| income | | | | | |
| received | | | | | |
+---------------------+--------+------------+--------+------------+--------+
| Deposit | | 67,958 | | 63,044 | |
| interest | | | | | |
| received | | | | | |
+---------------------+--------+------------+--------+------------+--------+
| Investment | | (182,477 | ) | (156,210 | ) |
| management | | | | | |
| fees paid | | | | | |
+---------------------+--------+------------+--------+------------+--------+
| Secretarial | | (4,614 | ) | (5,160 | ) |
| fees paid | | | | | |
+---------------------+--------+------------+--------+------------+--------+
| Rental | | (13,072 | ) | (14,994 | ) |
| expenses | | | | | |
+---------------------+--------+------------+--------+------------+--------+
| Other | | (232,864 | ) | (251,967 | ) |
| expenses | | | | | |
+---------------------+--------+------------+--------+------------+--------+
| Net | 18 | (4,835,453 | ) | (208,685 | ) |
| cash | | | | | |
| outflow | | | | | |
| from | | | | | |
| operating | | | | | |
| activities | | | | | |
| after | | | | | |
| interest | | | | | |
| and before | | | | | |
| taxation | | | | | |
+---------------------+--------+------------+--------+------------+--------+
| Taxation | | (6,226 | ) | (3,094 | ) |
| paid | | | | | |
+---------------------+--------+------------+--------+------------+--------+
| Cash | | | | | |
| flow | | | | | |
| from | | | | | |
| investing | | | | | |
| activites | | | | | |
+---------------------+--------+------------+--------+------------+--------+
| Interest | | 247,087 | | 271,833 | |
| income | | | | | |
| received | | | | | |
+---------------------+--------+------------+--------+------------+--------+
| Purchase | | (1,529,299 | ) | (2,086,995 | ) |
| of | | | | | |
| investments | | | | | |
+---------------------+--------+------------+--------+------------+--------+
| Sale | | 4,569,920 | | 2,023,640 | |
| of | | | | | |
| investments | | | | | |
+---------------------+--------+------------+--------+------------+--------+
| Net | | 3,287,708 | | 208,478 | |
| cash | | | | | |
| inflow | | | | | |
| from | | | | | |
| investing | | | | | |
| activities | | | | | |
+---------------------+--------+------------+--------+------------+--------+
| Net | | (1,553,971 | ) | (3,301 | ) |
| cash | | | | | |
| outflow | | | | | |
| before | | | | | |
| financing | | | | | |
+---------------------+--------+------------+--------+------------+--------+
| Cash | | | | | |
| flow | | | | | |
| from | | | | | |
| financing | | | | | |
| activities | | | | | |
+---------------------+--------+------------+--------+------------+--------+
| Issue | | - | | 1,765,908 | |
| of | | | | | |
| shares | | | | | |
+---------------------+--------+------------+--------+------------+--------+
| Expenses | | - | | (70,636 | ) |
| of share | | | | | |
| issue | | | | | |
+---------------------+--------+------------+--------+------------+--------+
| Net | | - | | 1,695,272 | |
| cash | | | | | |
| inflow | | | | | |
| from | | | | | |
| financing | | | | | |
| activities | | | | | |
+---------------------+--------+------------+--------+------------+--------+
| Net | | (1,553,971 | ) | 1,691,971 | |
| (decrease)/increase | | | | | |
| in cash and cash | | | | | |
| equivalents | | | | | |
+---------------------+--------+------------+--------+------------+--------+
| Cash | | 1,828,171 | | 136,200 | |
| and | | | | | |
| cash | | | | | |
| equivalents | | | | | |
| at the | | | | | |
| start of | | | | | |
| the year | | | | | |
+---------------------+--------+------------+--------+------------+--------+
| Cash | | 274,200 | | 1,828,171 | |
| and | | | | | |
| cash | | | | | |
| equivalent | | | | | |
| at the end | | | | | |
| of the | | | | | |
| year | | | | | |
+---------------------+--------+------------+--------+------------+--------+
Consolidated Statement of Changes in Equity
For the year ended 30 September 2008
+----------------+------------+--------+----------+--------+----------+--------+----------+--------+-----------+--------+
| | | | | | Issue | | | | | |
+----------------+------------+--------+----------+--------+----------+--------+----------+--------+-----------+--------+
| | Stated | | Capital | | costs | | Revenue | | | |
+----------------+------------+--------+----------+--------+----------+--------+----------+--------+-----------+--------+
| | capital | | reserves | | reserve | | reserve | | Total | |
+----------------+------------+--------+----------+--------+----------+--------+----------+--------+-----------+--------+
| | GBP | | GBP | | GBP | | GBP | | GBP | |
+----------------+------------+--------+----------+--------+----------+--------+----------+--------+-----------+--------+
| For | | | | | | | | | | |
| the | | | | | | | | | | |
| year | | | | | | | | | | |
| ended | | | | | | | | | | |
| 30 | | | | | | | | | | |
| September 2008 | | | | | | | | | | |
+----------------+------------+--------+----------+--------+----------+--------+----------+--------+-----------+--------+
| At 1 | 10,505,154 | | (241,692 | ) | (679,868 | ) | (89,590 | ) | 9,494,004 | |
| October | | | | | | | | | | |
| 2007 | | | | | | | | | | |
+----------------+------------+--------+----------+--------+----------+--------+----------+--------+-----------+--------+
| Revaluation | - | | (106,500 | ) | - | | - | | (106,500 | ) |
| of | | | | | | | | | | |
| investment | | | | | | | | | | |
| property | | | | | | | | | | |
+----------------+------------+--------+----------+--------+----------+--------+----------+--------+-----------+--------+
| Gain/(loss) | - | | 32,437 | | - | | (364,845 | ) | (332,408 | ) |
| for the | | | | | | | | | | |
| year | | | | | | | | | | |
+----------------+------------+--------+----------+--------+----------+--------+----------+--------+-----------+--------+
| At 30 | 10,505,154 | | (315,755 | ) | (679,868 | ) | (454,435 | ) | 9,055,096 | |
| September | | | | | | | | | | |
| 2008 | | | | | | | | | | |
+----------------+------------+--------+----------+--------+----------+--------+----------+--------+-----------+--------+
| | | | | | | | | | | |
+----------------+------------+--------+----------+--------+----------+--------+----------+--------+-----------+--------+
| For | | | | | | | | | | |
| the | | | | | | | | | | |
| year | | | | | | | | | | |
| ended | | | | | | | | | | |
| 30 | | | | | | | | | | |
| September | | | | | | | | | | |
| 2007 | | | | | | | | | | |
+----------------+------------+--------+----------+--------+----------+--------+----------+--------+-----------+--------+
| At 1 | 8,739,246 | | (117,960 | ) | (609,232 | ) | (260,921 | ) | 7,751,133 | |
| October | | | | | | | | | | |
| 2006 | | | | | | | | | | |
+----------------+------------+--------+----------+--------+----------+--------+----------+--------+-----------+--------+
| Issue | 1,765,908 | | - | | - | | - | | 1,765,908 | |
| of | | | | | | | | | | |
| shares | | | | | | | | | | |
+----------------+------------+--------+----------+--------+----------+--------+----------+--------+-----------+--------+
| Expenses | - | | - | | (70,636 | ) | - | | (70,636 | ) |
| of share | | | | | | | | | | |
| issue | | | | | | | | | | |
+----------------+------------+--------+----------+--------+----------+--------+----------+--------+-----------+--------+
| Revaluation | - | | (120,290 | ) | - | | - | | (120,290 | ) |
| of | | | | | | | | | | |
| investment | | | | | | | | | | |
| property | | | | | | | | | | |
+----------------+------------+--------+----------+--------+----------+--------+----------+--------+-----------+--------+
| (Loss)/gain | - | | (3,442 | ) | - | | 171,331 | | 167,889 | |
| for the | | | | | | | | | | |
| year | | | | | | | | | | |
+----------------+------------+--------+----------+--------+----------+--------+----------+--------+-----------+--------+
| At 30 | 10,505,154 | | (241,692 | ) | (679,868 | ) | (89,590 | ) | 9,494,004 | |
| September | | | | | | | | | | |
| 2007 | | | | | | | | | | |
+----------------+------------+--------+----------+--------+----------+--------+----------+--------+-----------+--------+
Notes to the consolidated financial statements
1.Accounting policies
(a)Basis of preparation
The consolidated annual financial statements have been prepared under the
historical cost convention, as modified to include the revaluation of quoted
investments and investment properties and in accordance with applicable
Accounting Standards and the Statement of Recommended Practice for "Financial
Statements of Investment Trust Companies" issued in January 2003 and amended in
December 2005. For the accounting period beginning on 1 October 2007 the Company
has prepared its financial statements in accordance with International Financial
Reporting Standards ("IFRS"), as adopted by the International Accounting
Standards Board ("IASB"). Prior to the period beginning 1 October 2007, the
Board had elected to continue to adopt UK Generally Accepted Accounting
Principles ("UK GAAP") and therefore with the new Financial Reporting Standards
issued as part of the programme to converge UK GAAP with IFRS. The principal
differences arising from this change to IFRS is that fair value movements are
now recognised through the income statement whereas these were previously
accounted for through reserve movements under UK GAAP. All other differences
have resulted in presentational changes only and have not required the
restatement of any prior period numbers.
IFRS applied
The following IFRS standards have been applied in the current financial year:
IFRS 7 "Financial Instruments: Disclosures" and the amendment to IAS 1
"Presentation of Financial Statements"
There is no material financial impact arising from the application of these
standards and interpretations. The financial statements have been updated to
include new disclosures arising from these standards where appropriate.
Going Concern
As more fully described in the Portfolio Review of the Chairman's Statement and
in note 9, the Company contracted to purchase 118 off-plan units in a new
development in Wallington for GBP25.0m for which the Red Book valuation at the
end of September 2008 was GBP27.4m. Due to the delay in the commencement of the
construction, which impacted the marketing strategy, none of the units has been
sold. Whilst there is clearly some uncertainty over the commencement of the
development, there is a long-stop date of January 2012 by which time the Company
will require completed units of satisfactory standard to be delivered by the
developer or else be entitled to a return of its deposits. The Company intends
to commence its sales strategy for the Wallington development once construction
has started. Current market conditions, falling house prices and a significant
reduction in new mortgage approvals give rise to uncertainties concerning the
ability of the Company to sell the properties, and the sales price. If
properties prices fall by a further 10% or more by the date of completion of the
units (which is expected to be at least 18 months from now) from the independent
valuation undertaken by CB Richard Ellis as of 30 September 2008, the Company
would only be able to on-sell any remaining unsold units at a loss. In this case
the Company may choose to acquire and retain some or all units with a view to
achieving better long term returns through rental, but would need to seek
financing to do so. Although there can be no certainty that such financing would
be available, particularly if property values fall even further, the Directors
anticipate a successful outcome to the project or a return of its deposits.
At the Company's forthcoming AGM, an ordinary resolution for the continuation of
the Company is being tabled. If this resolution is passed a further resolution
will be put to the following year's AGM and annually thereafter. If the
resolution is not passed, in this or future years, the Directors will commence
an orderly realisation of the Company's assets. The Directors have recommended,
and expect that, shareholders will vote in favour of continuation of the Company
this year.
These factors, some of which arise in 18 months time or more, indicate the
existence of material uncertainties which cast significant doubt about the
ability of the Company to continue as a going concern. Having considered these
uncertainties, and the options available to the Company, the Directors have a
reasonable expectation that the Company has adequate resources to continue in
operation for the foreseeable future. The financial statements do not include
the adjustments that would result if the company was unable to continue as a
going concern.
(b)Use of estimates and judgments
The preparation of financial statements requires management to make judgments,
estimates and assumptions that affect the application of accounting polices and
the reporting amounts of assets, liabilities, income and expenses. Actual
results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in the period in which the estimate is
revised and in any future periods affected.
The most significant estimates and judgements relate to the determination of
fair value of investment property and the disclosed "Red Book" value of
properties that are the subject of propery contracts yet to complete. The fair
values of both kinds of properties are determined by independent valuers and are
based upon a market approach methodology, using assumptions on local market
prices, comparable units and transaction levels.
(c)Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (its subsidiaries) made up to
30 September each year. Control exists when the Company has the power, directly
or indirectly, to govern the financial and operating policies of an entity so as
to obtain benefits from activities. The financial statements of subsidiaries are
included in the consolidated financial statements from the date that control
commences up to the date that control ceases.
The Company has only one subsidiary, OPF Investment Properties Limited, which it
acquired during the year ended 30 September 2007. As this subsidiary has not yet
commenced trading and remained dormant throughout the year, the Company's
financial statements are materially similar in all respects to the Group's
financial statements, therefore the Company has presented only consolidated
financial statements for the year ended 30 September 2008 and 30 September 2007.
(d)Revenue recognition
(i)Interest income
Interest receivable on fixed interest securities is recognised in 'Interest
income' using the effective interest method. The effective interest method is a
way of calculating the amortised cost of a financial asset or a financial
liability (or groups of financial assets or financial liabilities) and of
allocating the interest income or interest expense over the relevant period.
The effective interest rate is the rate that exactly discounts estimated future
cash receipts or payments through the expected life of the financial instrument
or, where appropriate, a shorter period, to the net carrying amount of the
financial asset or financial liability. When calculating the effective interest
rate, the Group estimates cash flows considering all contractual terms of the
financial instrument but not future credit losses. The calculation includes all
amounts paid or received by the Group that are an integral part of the effective
interest rate, including transaction costs and all other premiums or discounts.
(ii)Profit on off-plan sales
Profit on off-plan sales is recognised once contracts with onward buyers have
become unconditional. The profit or loss is calculated in line with the
profit-share arrangement with each developer based on the difference between the
amount agreed with the buyer and the Company's purchase price.
(iii)Rental income
Rental income from investment properties is based on short term tenancy
agreements and is recognised in the period earned. Property operating costs are
expensed as incurred including any element of expenditure not recovered from
tenants.
(e)Expenses
Expenses are charged through the income statement, except for expenses which are
attributable to the disposal of an investment, which are deducted from the
disposal proceeds of the investment. In addition, certain expenses associated
with the acquisition of an investment have been capitalised.
(f)Investments
General
Assets are recognised at the trade date of acquisition, and are recognised
initially at fair value plus any directly attributable transaction costs.
The Group does not hold, or intend to hold, any financial instruments for the
purpose of trading.
Investments at fair value through profit or loss
An instrument is classified as fair value through profit or loss if it is held
as at fair value through profit or loss. Financial instruments are designated at
fair value through the profit r loss if the Group manages such investments and
makes purchase and sale decisions based on their fair value. Fair value is the
amount at which an investment could be exchanged between knowledgeable willing
parties in an arms length transaction.
Purchases of investments are recognised on the trade date, being the date that
amounts are due for payment. Investments are derecognised when the rights to
receive cash flows from the investments have expired or the Group has
transferred substantially all risks and rewards of ownership. Investments are
initially recognised at fair value being the transaction price. Transaction
costs for all financial assets carried at fair value through profit and loss are
expensed as incurred.
Subsequent to initial recognition, all financial assets at fair value through
the profit and loss are measured at fair value. Gains and losses arising from
changes in fair value are presented in the income statement in the year in which
they arise. On disposal, realised gains and losses are also recognised in the
income statement.
Fair values of financial instruments traded in active markets are based on
quoted market prices as at the balance sheet date. The quoted market price used
for financial assets held by the Group is the current bid price.
Property contracts yet to complete
The Group has contractual obligations to purchase property that is currently
being constructed, i.e. it has entered into contracts to purchase the property
"off-plan". Under these contracts the Group is obliged to purchase these
properties at a contracted price, but has the right to sell or transfer the
contract to a third party. The "Property contracts yet to complete" are included
in the balance sheet at the lower of cost and net realisable value. Cost
includes legal and other expenses incurred to acquire the contracts.
Realised gains and losses arising on the disposal of these contracts are taken
to the realised capital reserve.
Investment property
Property that is held for capital appreciation, and that is not occupied by the
companies in the Group, is classified as investment property.
Investment property is measured initially at its cost, including related
transaction costs. After initial recognition, investment property is carried at
fair value. Changes in fair values are recorded in the income statement.
Fair value is based on active market prices, adjusted if necessary for any
difference in the nature, location or condition of the specific asset. If this
information is not available, the Group uses alternative valuation methods. The
valuations are prepared annually by Savills (L&P) Limited.
Realised gains and losses on the disposal of investment property are recognised
once sale contracts have been exchanged and the purchaser's deposit has been
received.
(g)Cash and cash equivalents
Cash and cash equivalents comprise current deposits with banks. Cash equivalents
comprises of current deposits with banks.
(h)Taxation
The taxation charge arises from income tax deducted at source on the net rental
income. UK tax has been deducted at source on all properties at the current rate
of tax (2008/09 - 20 per cent.; 2007/08 - 22 per cent.).
Deferred tax is recognised in respect of all temporary differences that have
originated but not reversed at the balance sheet date, where transactions or
events that result in an obligation to pay more tax in the future or right to
pay less tax in the future have occurred at the balance sheet date. This is
subject to deferred tax assets only being recognised if it is considered more
likely than not that there will be suitable profits from which the future
reversal of the temporary differences can be deducted.
(i)Share capital
Founder shares
Founder shares are classified as equity. Founder shares are not eligible for
participation in Company investments and carry no voting rights at general
meetings of the Company.
(j)Currency
The results and financial position of the Group are expressed in Pounds
Sterling, which is the Group's functional currency.
(k)New standards and interpretations not applied
At the date of authorisation of these financial statements, the following
standards and Interpretations were in issue but not yet effective
Amendments to IAS 1 - Presentation of Financial Statements: A Revised
Presentation (effective for annual periods beginning on or after 1 January 2009)
Amendments to IAS 16 - Property, Plant and Equipment (effective for annual
periods beginning on or after 1 January 2009)
Amendments to IAS 19 - Employee Benefits (effective for annual periods beginning
on or after 1 January 2009)
Amendments to IAS 23 - Borrowing Costs (effective for annual periods beginning
on or after 1 January 2009)
Amendments to IAS 27 - Consolidated and Separate Financial Statements (effective
for annual periods beginning on or after 1 January 2009)
Amendments to IAS 28 - Investments in Associates (effective for annual periods
beginning on or after 1 January 2009)
Amendments to IAS 29 - Financial Reporting in Hyperinflationary Economies
(effective for annual periods beginning on or after 1 January 2009)
Amendments to IAS 31 - Interests in Joint Ventures (effective for annual periods
beginning on or after 1 January 2009)
Amendments to IAS 36 - Impairment of Assets (effective for annual periods
beginning on or after 1 January 2009)
Amendments to IAS 38 - Intangible Assets (effective for annual periods beginning
on or after 1 January 2009)
Amendments to IAS 39 - Financial Instruments: Recognition and Measurement
(effective for annual periods beginning on or after 1 January 2009)
Amendments to IAS 40 - Investment Property (effective for annual periods
beginning on or after 1 January 2009)
Revised IFRS 1 - First-time Adoption of International Financial Reporting
Standards (effective for annual periods on or after 1 January 2009)
Revised IFRS 2 - Share-based Payment (effective for annual periods on or after 1
January 2009)
Revised IFRS 3 - Business Combinations (effective for annual periods beginning
on or after 1 July 2009)
Revised IFRS 5 - Non-current Assets Held for Sale and Discontinued Operations
(effective for annual periods beginning on or after 1 July 2009)
IFRS 8 - Operating Segments (effective for annual periods beginning on or after
1 January 2009)
The Directors anticipate that the adoption of these standards and
interpretations in future periods will have no material impact on the financial
statements for the Group.
2. Income
+------------+---------+---------+--------+
| | 2008 | 2007 | |
+------------+---------+---------+--------+
| | GBP | GBP | |
+------------+---------+---------+--------+
| Income | 195,349 | 270,667 | |
| from | | | |
| fixed | | | |
| interest | | | |
| securities | | | |
+------------+---------+---------+--------+
| Deposit | 143,966 | 63,044 | |
| interest | | | |
+------------+---------+---------+--------+
| Interest | 339,315 | 333,711 | |
| income | | | |
+------------+---------+---------+--------+
| Rental | 36,411 | 17,770 | |
| income | | | |
+------------+---------+---------+--------+
| | 375,726 | 351,481 | |
+------------+---------+---------+--------+
3. Management fee
+--------------------------------------------------+---------+--------+---------+--------+
| | 2008 | | 2007 | |
+--------------------------------------------------+---------+--------+---------+--------+
| | GBP | | GBP | |
+--------------------------------------------------+---------+--------+---------+--------+
| Management fee | 182,477 | | 156,210 | |
+--------------------------------------------------+---------+--------+---------+--------+
The management fees paid to Development Capital Management (Jersey) Limited are
2 per cent.
per annum of the net asset value of the fixed income portfolio
held by the Company, plus any cash amount of deposits paid and outstanding in
respect of property contracts yet to complete. The management agreement between
the Company and the Manager is terminable by either party on 12 months notice.
4.Other operating expenses
+--------------------------------------------------+---------+--------+---------+--------+
| | 2008 | | 2007 | |
+--------------------------------------------------+---------+--------+---------+--------+
| | GBP | | GBP | |
+--------------------------------------------------+---------+--------+---------+--------+
| Administration and secretarial services | 38,114 | | 38,810 | |
+--------------------------------------------------+---------+--------+---------+--------+
| Directors' remuneration | 43,048 | | 35,000 | |
+--------------------------------------------------+---------+--------+---------+--------+
| Auditors' fees - for audit services | 30,236 | | 19,847 | |
+--------------------------------------------------+---------+--------+---------+--------+
| Auditors' fees - other services | - | | 3,494 | |
+--------------------------------------------------+---------+--------+---------+--------+
| Legal fees | 90,194 | | 98,939 | |
+--------------------------------------------------+---------+--------+---------+--------+
| Rental expenses | 11,537 | | 14,994 | |
+--------------------------------------------------+---------+--------+---------+--------+
| Miscellaneous expenses | 93,468 | | 72,424 | |
+--------------------------------------------------+---------+--------+---------+--------+
| | 306,597 | | 283,508 | |
+--------------------------------------------------+---------+--------+---------+--------+
5. Tax
Under Article 123A of the Income Tax (Jersey) Law 1961, as amended, the Company
has obtained Jersey exempt company status and is therefore exempt for Jersey
income tax on non Jersey source income and bank interest (by concession). A
GBP600 (2007 - GBP600) annual exempt company fee is payable by the Company. From
January 2009 the exempt company regime will no longer apply. The general rate of
corporation tax for companies resident in Jersey will be 0 per cent. from that
date.
+----------------------------------------------------+----------+--------+----------+--------+
| | 2008 | | 2007 | |
+----------------------------------------------------+----------+--------+----------+--------+
| | GBP | | GBP | |
+----------------------------------------------------+----------+--------+----------+--------+
| Income tax on rental income | 6,514 | | 3,094 | |
+----------------------------------------------------+----------+--------+----------+--------+
| Reconciliation of tax charge | | | | |
+----------------------------------------------------+----------+--------+----------+--------+
| Net (loss)/gain on ordinary activities before | (432,394 | ) | 92,800 | |
| finance costs and taxation | | | | |
+----------------------------------------------------+----------+--------+----------+--------+
| Adjustment for disallowable income and expenses | | | | |
+----------------------------------------------------+----------+--------+----------+--------+
| Income | (339,315 | ) | (333,711 | ) |
+----------------------------------------------------+----------+--------+----------+--------+
| Cancellation of gain recognised in prior year | 240,870 | | - | |
+----------------------------------------------------+----------+--------+----------+--------+
| Realised losses/(gains) on investments held at | | | | |
| fair | | | | |
+----------------------------------------------------+----------+--------+----------+--------+
| value through profit or loss | 4,113 | | (262,662 | ) |
+----------------------------------------------------+----------+--------+----------+--------+
| Realised (gains)/losses on investments held at | | | | |
| fair | | | | |
+----------------------------------------------------+----------+--------+----------+--------+
| value through profit or loss | (11,668 | ) | 1,841 | |
+----------------------------------------------------+----------+--------+----------+--------+
| Unrealised (gains)/losses on investments held at | | | | |
| fair | | | | |
+----------------------------------------------------+----------+--------+----------+--------+
| value through profit or loss | (20,769 | ) | 1,601 | |
+----------------------------------------------------+----------+--------+----------+--------+
| Unrealised losses on investment property | 106,500 | | 78,183 | |
+----------------------------------------------------+----------+--------+----------+--------+
| Investment management fee | 182,477 | | 156,210 | |
+----------------------------------------------------+----------+--------+----------+--------+
| Other expenses | 295,060 | | 268,514 | |
+----------------------------------------------------+----------+--------+----------+--------+
| Rental expenses | 6,143 | | 10,965 | |
+----------------------------------------------------+----------+--------+----------+--------+
| Taxable rental income | 31,017 | | 13,741 | |
+----------------------------------------------------+----------+--------+----------+--------+
+----------------------------------------------------+------------+--+------------+--+
| | 2008 | | 2007 | |
+----------------------------------------------------+------------+--+------------+--+
| | GBP | | GBP | |
+----------------------------------------------------+------------+--+------------+--+
| Income tax @ 20% (2007 - 22%) | 6,203 | | 3,023 | |
+----------------------------------------------------+------------+--+------------+--+
| Effect of different rate | 311 | | 71 | |
+----------------------------------------------------+------------+--+------------+--+
| Total tax charge for the year | 6,514 | | 3,094 | |
+----------------------------------------------------+------------+--+------------+--+
6. Returns per share
The return per share is based on the net loss for the year of GBP438,908 (2007:
profit of GBP89,706) and on 11,153,098 shares (2007: 11,153,098), being the
weighted average number of shares in issue.
7.Investment property
+---------------------------------------------------+----------+--------+---------+--------+
| | 2008 | | 2007 | |
+---------------------------------------------------+----------+--------+---------+--------+
| | GBP | | GBP | |
+---------------------------------------------------+----------+--------+---------+--------+
| Opening book cost | 989,183 | | 982,893 | |
+---------------------------------------------------+----------+--------+---------+--------+
| Movement during the year: | | | | |
+---------------------------------------------------+----------+--------+---------+--------+
| Completion payment | - | | 6,290 | |
+---------------------------------------------------+----------+--------+---------+--------+
| Closing book cost | 989,183 | | 989,183 | |
+---------------------------------------------------+----------+--------+---------+--------+
| Closing unrealised depreciation | (184,683 | ) | (78,183 | ) |
+---------------------------------------------------+----------+--------+---------+--------+
| Closing fair value | 804,500 | | 911,000 | |
+---------------------------------------------------+----------+--------+---------+--------+
The investment property was fair valued at the year-end by Savills (L&P) Limited
on a market approach basis taking into account transactions and asking prices
for comparable properties in the relevant location and applying a value
adjustment where thought appropriate by the valuer. The rental income arising
from this property in the year was GBP36,411 (2007 - GBP12,770) with direct
expenses of GBP11,537 (2007 - GBP14,994).
8.Investments held at fair value through profit or loss
+-------------------------------------------------------+------------+--------+------------+--------+
| | | | | |
+-------------------------------------------------------+------------+--------+------------+--------+
| | 2008 | | 2007 | |
+-------------------------------------------------------+------------+--------+------------+--------+
| | GBP | | GBP | |
+-------------------------------------------------------+------------+--------+------------+--------+
| Opening valuation | 5,985,007 | | 5,941,738 | |
+-------------------------------------------------------+------------+--------+------------+--------+
| Opening unrealised loss | 53,320 | | 51,719 | |
+-------------------------------------------------------+------------+--------+------------+--------+
| Opening book cost | 6,038,327 | | 5,993,457 | |
+-------------------------------------------------------+------------+--------+------------+--------+
| | | | | |
+-------------------------------------------------------+------------+--------+------------+--------+
| Movements during the year: | | | | |
+-------------------------------------------------------+------------+--------+------------+--------+
| Purchases | 1,476,152 | | 2,086,995 | |
+-------------------------------------------------------+------------+--------+------------+--------+
| Sales - proceeds | (4,486,169 | ) | (2,023,640 | ) |
+-------------------------------------------------------+------------+--------+------------+--------+
| Amortisation of fixed income book costs | 4,938 | | (16,644 | ) |
+-------------------------------------------------------+------------+--------+------------+--------+
| Sales - realised gains | 11,668 | | (1,841 | ) |
+-------------------------------------------------------+------------+--------+------------+--------+
| Closing book cost | 3,044,916 | | 6,038,327 | |
+-------------------------------------------------------+------------+--------+------------+--------+
| Closing unrealised loss | (32,551 | ) | (53,320 | ) |
+-------------------------------------------------------+------------+--------+------------+--------+
| Closing fair value | 3,012,365 | | 5,985,007 | |
+-------------------------------------------------------+------------+--------+------------+--------+
9. Property contracts yet to complete
+---------------------------------------------+----------+--------+-----------+--------+----------+--------+
| | | | 2008 | | 2007 | |
+---------------------------------------------+----------+--------+-----------+--------+----------+--------+
| | | | GBP | | GBP | |
+---------------------------------------------+----------+--------+-----------+--------+----------+--------+
| Opening book cost | | | 446,078 | | 336,602 | |
+---------------------------------------------+----------+--------+-----------+--------+----------+--------+
| | | | | | | |
+---------------------------------------------+----------+--------+-----------+--------+----------+--------+
| Movements during the year: | | | | | | |
+---------------------------------------------+----------+--------+-----------+--------+----------+--------+
| | | | | | | |
+---------------------------------------------+----------+--------+-----------+--------+----------+--------+
| Write back of Oldham Place sales | | | | | | |
+---------------------------------------------+----------+--------+-----------+--------+----------+--------+
| proceeds recognised in prior year | 430,043 | | | | | |
+---------------------------------------------+----------+--------+-----------+--------+----------+--------+
| Write back of Oldham Place sales | | | | | | |
+---------------------------------------------+----------+--------+-----------+--------+----------+--------+
| realised gain recognised in prior year | (240,870 | ) | | | | |
+---------------------------------------------+----------+--------+-----------+--------+----------+--------+
| | 189,173 | | | | | |
+---------------------------------------------+----------+--------+-----------+--------+----------+--------+
| Proceeds for rescission of Oldham Place | (332,489 | ) | | | | |
+---------------------------------------------+----------+--------+-----------+--------+----------+--------+
| Write off of capitalised costs of Oldham | (4,113 | ) | | | | |
| Place | | | | | | |
+---------------------------------------------+----------+--------+-----------+--------+----------+--------+
| Oldham Place deposit refunded | | | (147,429 | ) | - | |
+---------------------------------------------+----------+--------+-----------+--------+----------+--------+
| Rescission of Tring and Hayes contracts | | | (304,524 | ) | - | |
+---------------------------------------------+----------+--------+-----------+--------+----------+--------+
| | | | | | | |
+---------------------------------------------+----------+--------+-----------+--------+----------+--------+
| Purchases | | | 1,514,698 | | 298,649 | |
+---------------------------------------------+----------+--------+-----------+--------+----------+--------+
| Sales - proceeds | | | - | | (451,835 | ) |
+---------------------------------------------+----------+--------+-----------+--------+----------+--------+
| Sales - realised gain | | | - | | 262,662 | |
+---------------------------------------------+----------+--------+-----------+--------+----------+--------+
| Closing book cost | | | 1,508,823 | | 446,078 | |
+---------------------------------------------+----------+--------+-----------+--------+----------+--------+
The deposit refunded during the year in the table above refers to the rescission
of contracts on 51 units in Oldham Place, Liverpool. The rescission of the Tring
and Hayes contracts resulted in a return of deposit of GBP292,774 and a
write-off of expenses of GBP11,750.
The Purchases during the year in the table above refers to the deposit of
GBP1,250,000 paid in respect of 118 units in a new development at Canon House,
Wallington and associated legal expenses and GBP165,000 paid in respect of 10
units in a new development, the Heart, at Walton on Thames. There are no
unprovided costs in respect of these developments.
The Red Book valuations of the underlying properties, on which the Group holds
contracts are based primarily upon "The estimated amount for which a property
should exchange on the date of the valuation, between a willing buyer and a
willing seller in an arm's-length transaction after proper marketing wherein the
parties had each acted knowledgeably, prudently and without compulsion." This
valuation methodology is designed to encapsulate the fair value of the
properties were they complete and held for investment purposes. The Group
however holds contracts to purchase these properties once complete and therefore
is exposed to additional risks such as the risk that the development fails to
complete or completes in a sub-standard fashion not accounted for in the Red
Book assumptions. The Group is also exposed to changes in the value of
properties caused by other economic factors.
The table below summarises the costs associated with these contracts and refers
to the latest 'Red Book' valuations, prepared by CB Richard Ellis for Canon
House, Wallington and Edwin Evans for The Heart, Walton-on-Thames, of the
underlying properties as a basis of valuation for these contracts.
+-----------------------------------+----------+-+-----------+--+------------+--+------------+-+
| | Oldham | | | | Canon | | | |
+-----------------------------------+----------+-+-----------+--+------------+--+------------+-+
| | Place | | The | | House | | Total | |
| | | | Heart | | | | | |
+-----------------------------------+----------+-+-----------+--+------------+--+------------+-+
| | GBP | | GBP | | GBP | | GBP | |
+-----------------------------------+----------+-+-----------+--+------------+--+------------+-+
| Deposits paid | 336,602 | | 165,000 | | 1,250,000 | | 1,751,602 | |
+-----------------------------------+----------+-+-----------+--+------------+--+------------+-+
| Legal and acquisition costs | - | | - | | 93,823 | | 93,823 | |
+-----------------------------------+----------+-+-----------+--+------------+--+------------+-+
| Proceeds for rescission of | | | | | | | | |
+-----------------------------------+----------+-+-----------+--+------------+--+------------+-+
| Oldham Place | (332,489 | )| - | | - | | (332,489 | )|
+-----------------------------------+----------+-+-----------+--+------------+--+------------+-+
| Write off of capitalised costs | | | | | | | | |
+-----------------------------------+----------+-+-----------+--+------------+--+------------+-+
| of Oldham Place | (4,113 | )| - | | - | | (4,113 | )|
+-----------------------------------+----------+-+-----------+--+------------+--+------------+-+
| Book cost as at 30 September 2008 | - | | 165,000 | | 1,343,823 | | 1,508,823 | |
+-----------------------------------+----------+-+-----------+--+------------+--+------------+-+
| Outstanding completion payments | - | | 1,499,072 | | 23,750,000 | | 25,249,072 | |
+-----------------------------------+----------+-+-----------+--+------------+--+------------+-+
| Total historic cost | - | | 1,664,072 | | 25,093,823 | | 26,757,895 | |
+-----------------------------------+----------+-+-----------+--+------------+--+------------+-+
| 'Red Book' valuation | - | | 2,100,000 | | 27,397,677 | | 29,497,677 | |
+-----------------------------------+----------+-+-----------+--+------------+--+------------+-+
| Approximate completion date | - | | Oct-08 | | Dec-10 | | | |
+-----------------------------------+----------+-+-----------+--+------------+--+------------+-+
On 23 October 2008 the Group completed the purchase of 10 apartments in a
recently completed development in Walton on Thames at GBP165,000 per unit,
equating to a discount of 21 per cent. to the prevailing average "Red Book"
valuation of GBP210,000.
10.Investment in subsidiary undertakings
+----------------------------------------------------+------------+--+------------+--+
| | 2008 | | 2007 | |
+----------------------------------------------------+------------+--+------------+--+
| | GBP | | GBP | |
+----------------------------------------------------+------------+--+------------+--+
| OPF Investment Properties Limited | 1 | | 1 | |
+----------------------------------------------------+------------+--+------------+--+
11.Debtors
(a)Non current assets
+----------------------------------------------+--------+--------+---------+--------+
| | 2008 | | 2007 | |
+----------------------------------------------+--------+--------+---------+--------+
| | GBP | | GBP | |
+----------------------------------------------+--------+--------+---------+--------+
| Amount due on property contracts yet to | - | | 253,532 | |
| complete | | | | |
+----------------------------------------------+--------+--------+---------+--------+
The amounts due in 2007 on property contracts yet to complete relate to the
Group's profit share on Oldham Place payable by the developer on completion of
the development. Oldham Place has since been rescinded so the debtor has been
written off.
(b)Current assets
+----------------------------------------------------+------------+--+------------+--+
| | 2008 | | 2007 | |
+----------------------------------------------------+------------+--+------------+--+
| | GBP | | GBP | |
+----------------------------------------------------+------------+--+------------+--+
| Proceeds from rescission of Oldham Place | 332,489 | | - | |
+----------------------------------------------------+------------+--+------------+--+
| Amount due on property contracts yet to complete | - | | 189,174 | |
+----------------------------------------------------+------------+--+------------+--+
| Interest receivable | 188,981 | | 199,872 | |
+----------------------------------------------------+------------+--+------------+--+
| Prepayments | 11,980 | | 47,976 | |
+----------------------------------------------------+------------+--+------------+--+
| | 533,450 | | 437,022 | |
+----------------------------------------------------+------------+--+------------+--+
12. Other payables
+----------------------------------------------------+------------+--+-----------+--+
| | 2008 | | 2007 | |
+----------------------------------------------------+------------+--+-----------+--+
| | GBP | | GBP | |
+----------------------------------------------------+------------+--+-----------+--+
| Amount due on property contracts yet to complete | - | | 292,774 | |
+----------------------------------------------------+------------+--+-----------+--+
| Accruals | 78,242 | | 74,032 | |
+----------------------------------------------------+------------+--+-----------+--+
| | 78,242 | | 366,806 | |
+----------------------------------------------------+------------+--+-----------+--+
Accrued expenses includes secretarial and administration fees of GBP9,391 (2007:
GBP9,425) due to BNP Paribas Fund Services Jersey Limited.
13.Cash in escrow
The Company holds a deposit of GBP3,000,000 (2007: GBPnil) with AIB Bank (CI)
Limited as a guarantee to HBOS. Under the terms of the guarantee a minimum of
GBP3,000,000 balance needs to be maintained at all times. This guarantee will
reduce in line with the sale of units at Canon House, Wallington and released on
a quarterly basis.
14.Stated capital
The company is a no par value ('NPV') company.
+----------------------------------------------------+-------------+--+-------------+--+
| Authorised: | 2008 | | 2007 | |
+----------------------------------------------------+-------------+--+-------------+--+
| | Number | | Number | |
+----------------------------------------------------+-------------+--+-------------+--+
| Founder shares | 10 | | 10 | |
+----------------------------------------------------+-------------+--+-------------+--+
| 99,999,990 participating shares | 99,999,990 | | 99,999,990 | |
+----------------------------------------------------+-------------+--+-------------+--+
| | 100,000,000 | | 100,000,000 | |
+----------------------------------------------------+-------------+--+-------------+--+
| | | | | |
+----------------------------------------------------+-------------+--+-------------+--+
| Issued and fully paid: | Number | | Number | |
+----------------------------------------------------+-------------+--+-------------+--+
| Founder shares | 2 | | 2 | |
+----------------------------------------------------+-------------+--+-------------+--+
| Participating shares | 11,153,098 | | 11,153,098 | |
+----------------------------------------------------+-------------+--+-------------+--+
All costs associated with the issue of shares have been taken to the issue costs
reserve.
15.Net asset value per share
+----------------------------------------------------+------------+--+-----------+--+
| | Net asset value | |
+----------------------------------------------------+---------------------------+--+
| | attributable per share | |
+----------------------------------------------------+---------------------------+--+
| | 2008 | | 2007 | |
+----------------------------------------------------+------------+--+-----------+--+
| | p | | p | |
+----------------------------------------------------+------------+--+-----------+--+
| Participating shares | 81.2 | | 85.1 | |
+----------------------------------------------------+------------+--+-----------+--+
| | | | | |
+----------------------------------------------------+------------+--+-----------+--+
| | Net asset value | |
+----------------------------------------------------+---------------------------+--+
| | 2008 | | 2007 | |
+----------------------------------------------------+------------+--+-----------+--+
| | GBP | | GBP | |
+----------------------------------------------------+------------+--+-----------+--+
| | 9,055,096 | | 9,494,004 | |
+----------------------------------------------------+------------+--+-----------+--+
16.Transaction costs
There were no transaction costs charged to the Company during the year. A fee,
including brokerage costs, is charged by the custodian of the fixed income
portfolio to the Manager, Development Capital Management (Jersey) Limited.
17.Capital reserves
+----------------------------------------------------+-----------+--+-----------+--+
| | 2008 | | 2007 | |
+----------------------------------------------------+-----------+--+-----------+--+
| | GBP | | GBP | |
+----------------------------------------------------+-----------+--+-----------+--+
| Capital reserve - realized | | | | |
+----------------------------------------------------+-----------+--+-----------+--+
| Opening balance | (110,189 | )| (108,348 | )|
+----------------------------------------------------+-----------+--+-----------+--+
| Realised gains/(losses) on investments | 11,668 | | (1,841 | )|
+----------------------------------------------------+-----------+--+-----------+--+
| Closing balance | (98,521 | )| (110,189 | )|
+----------------------------------------------------+-----------+--+-----------+--+
| | | | | |
+----------------------------------------------------+-----------+--+-----------+--+
| Capital reserve - unrealized | | | | |
+----------------------------------------------------+-----------+--+-----------+--+
| Opening balance | (131,503 | )| (9,612 | )|
+----------------------------------------------------+-----------+--+-----------+--+
| Movements in fair value of investment properties | (106,500 | )| (120,290 | )|
+----------------------------------------------------+-----------+--+-----------+--+
| Movements in fair value of investments | 20,769 | | (1,601 | )|
+----------------------------------------------------+-----------+--+-----------+--+
| Closing balance | (217,234 | )| (131,503 | )|
+----------------------------------------------------+-----------+--+-----------+--+
| | | | | |
+----------------------------------------------------+-----------+--+-----------+--+
| Total capital reserve | (315,755 | )| (241,692 | )|
+----------------------------------------------------+-----------+--+-----------+--+
18.Reconciliation of net (loss)/gain before taxation to net cash outflow from
operating activities
+----------------------------------------------------+------------+--+-----------+--+
| | 2008 | | 2007 | |
+----------------------------------------------------+------------+--+-----------+--+
| | GBP | | GBP | |
+----------------------------------------------------+------------+--+-----------+--+
| Net (loss)/gain before taxation | (432,394 | )| 92,800 | |
+----------------------------------------------------+------------+--+-----------+--+
| Losses/(gains) on properties | 240,870 | | (262,662 | )|
+----------------------------------------------------+------------+--+-----------+--+
| (Gains)/losses on investments | (32,437 | )| 3,442 | |
+----------------------------------------------------+------------+--+-----------+--+
| Losses on revaluation of investment property | 106,500 | | 78,183 | |
+----------------------------------------------------+------------+--+-----------+--+
| Income from investing activities | (195,349 | )| (270,667 | )|
+----------------------------------------------------+------------+--+-----------+--+
| Increase in accruals | 58,437 | | 13,833 | |
+----------------------------------------------------+------------+--+-----------+--+
| Decrease/(increase) in prepayments | 547 | | (2,446 | )|
+----------------------------------------------------+------------+--+-----------+--+
| Increase in accrued income | (40,847 | )| (47,447 | )|
+----------------------------------------------------+------------+--+-----------+--+
| (Increase)/decrease in accrued interest on | (30,604 | )| 30,805 | |
| purchase/sale of fixed interest | | | | |
+----------------------------------------------------+------------+--+-----------+--+
| Amortisation of fixed interest securities | (4,938 | )| 16,644 | |
+----------------------------------------------------+------------+--+-----------+--+
| Deposits and acquisition costs relating to | (1,502,948 | )| 138,830 | |
| property | | | | |
+----------------------------------------------------+------------+--+-----------+--+
| Cash deposited in escrow | (3,000,000 | )| - | |
+----------------------------------------------------+------------+--+-----------+--+
| Expenses from sale of property contracts | (2,290 | )| - | |
+----------------------------------------------------+------------+--+-----------+--+
| Net cash outflow from operating activities | (4,835,453 | )| (208,685 | )|
+----------------------------------------------------+------------+--+-----------+--+
19.Restatement of opening balance as at 1 October 2006 and 30 September 2007
The Group has adopted International Financial Reporting Standard in respect of
the year ended
30 September 2008. In accordance with IFRS 1 "First Time
Adoption of Financial Reporting Standards", the following is a reconciliation
of figures as at 1 October 2006 and 30 September 2007, the date of the Group's
transition to IFRS, which were previously reported under the applicable UK
Accounting Standard and with the Statement of Recommended Practice.
(a)Consolidated Income Statement
+----------------------------------+-------+--+-----------+--+------------+--+------------+--+
| | | | | | | | Restated | |
+----------------------------------+-------+--+-----------+--+------------+--+------------+--+
| | | | As at | | | | as at | |
+----------------------------------+-------+--+-----------+--+------------+--+------------+--+
| | Notes | | 1 October | | IFRS | | 1 October | |
+----------------------------------+-------+--+-----------+--+------------+--+------------+--+
| | | | 2006 | | adjustment | | 2006 | |
+----------------------------------+-------+--+-----------+--+------------+--+------------+--+
| | | | GBP | | GBP | | GBP | |
+----------------------------------+-------+--+-----------+--+------------+--+------------+--+
| Realised losses on property | | | | | | | | |
| contracts yet | | | | | | | | |
+----------------------------------+-------+--+-----------+--+------------+--+------------+--+
| to complete | | | (109,308 | )| - | | (109,308 | )|
+----------------------------------+-------+--+-----------+--+------------+--+------------+--+
| Unrealised losses on investments | | | (65,445 | )| - | | (65,445 | )|
+----------------------------------+-------+--+-----------+--+------------+--+------------+--+
| Investment income | | | 269,039 | | - | | 269,039 | |
+----------------------------------+-------+--+-----------+--+------------+--+------------+--+
| Investment management fees | | | (119,196 | )| - | | (119,196 | )|
+----------------------------------+-------+--+-----------+--+------------+--+------------+--+
| Other expenses | | | (214,064 | )| - | | (214,064 | )|
+----------------------------------+-------+--+-----------+--+------------+--+------------+--+
| Unrealised loss on revaluation | | | | | | | | |
| of investment | | | | | | | | |
+----------------------------------+-------+--+-----------+--+------------+--+------------+--+
| property | 1 | | - | | 42,107 | | 42,107 | |
+----------------------------------+-------+--+-----------+--+------------+--+------------+--+
| | | | (238,974 | )| 42,107 | | (196,867 | )|
+----------------------------------+-------+--+-----------+--+------------+--+------------+--+
Consolidated Income Statement
+----------------------------------+-------+--+------------+--+------------+--+------------+--+
| | | | Previously | | | | Restated | |
+----------------------------------+-------+--+------------+--+------------+--+------------+--+
| | | | reported | | | | as at | |
| | | | as | | | | | |
+----------------------------------+-------+--+------------+--+------------+--+------------+--+
| | | | 30 | | IFRS | | 30 | |
| | | | September | | | | September | |
+----------------------------------+-------+--+------------+--+------------+--+------------+--+
| | Notes | | 2007 | | adjustment | | 2007 | |
+----------------------------------+-------+--+------------+--+------------+--+------------+--+
| | | | GBP | | GBP | | GBP | |
+----------------------------------+-------+--+------------+--+------------+--+------------+--+
| Realised gains on property | | | | | | | | |
| contracts yet | | | | | | | | |
+----------------------------------+-------+--+------------+--+------------+--+------------+--+
| to complete | | | 262,662 | | - | | 262,662 | |
+----------------------------------+-------+--+------------+--+------------+--+------------+--+
| Unrealised losses on investments | | | (3,442 | )| - | | (3,442 | )|
+----------------------------------+-------+--+------------+--+------------+--+------------+--+
| Investment income | | | 333,711 | | - | | 333,711 | |
+----------------------------------+-------+--+------------+--+------------+--+------------+--+
| Rental income | | | 17,770 | | - | | 17,770 | |
+----------------------------------+-------+--+------------+--+------------+--+------------+--+
| Investment management fees | | | (156,210 | )| - | | (156,210 | )|
+----------------------------------+-------+--+------------+--+------------+--+------------+--+
| Rental expenses | | | (14,994 | )| - | | (14,994 | )|
+----------------------------------+-------+--+------------+--+------------+--+------------+--+
| Other expenses | | | (268,514 | )| - | | (268,514 | )|
+----------------------------------+-------+--+------------+--+------------+--+------------+--+
| Unrealised loss on revaluation | 1 | | - | | (78,183 | )| (78,183 | )|
| of investment property | | | | | | | | |
+----------------------------------+-------+--+------------+--+------------+--+------------+--+
| | | | 170,983 | | (78,183 | )| 92,800 | |
+----------------------------------+-------+--+------------+--+------------+--+------------+--+
(b)Consolidated balance sheet
+----------------------------------+-------+--+-----------+---+------------+--+------------+--+
| | | | | | | | Restated | |
+----------------------------------+-------+--+-----------+---+------------+--+------------+--+
| Capital and reserves | | | As at | | | | as at | |
+----------------------------------+-------+--+-----------+---+------------+--+------------+--+
| | Notes | | 1 | | IFRS | | 1 October | |
| | | | October | | | | | |
+----------------------------------+-------+--+-----------+---+------------+--+------------+--+
| | | | 2006 | | adjustment | | 2006 | |
+----------------------------------+-------+--+-----------+---+------------+--+------------+--+
| | | | GBP | | GBP | | GBP | |
+----------------------------------+-------+--+-----------+---+------------+--+------------+--+
| Stated capital | | | 8,739,246 | | - | | 8,739,246 | |
+----------------------------------+-------+--+-----------+---+------------+--+------------+--+
| Realised capital reserves | | | (108,348 | ) | 108,348 | | - | |
+----------------------------------+-------+--+-----------+---+------------+--+------------+--+
| Unrealised capital reserve | | | (51,719 | ) | 51,719 | | - | |
+----------------------------------+-------+--+-----------+---+------------+--+------------+--+
| Capital reserves | | | - | | (160,067 | )| (160,067 | )|
+----------------------------------+-------+--+-----------+---+------------+--+------------+--+
| Investment property revaluation | 1 | | 42,107 | | (42,107 | )| - | |
| reserve | | | | | | | | |
+----------------------------------+-------+--+-----------+---+------------+--+------------+--+
| Issue cost reserve | | | (609,232 | ) | - | | (609,232 | )|
+----------------------------------+-------+--+-----------+---+------------+--+------------+--+
| Revenue reserve | | | (260,921 | ) | 42,107 | | (218,814 | )|
+----------------------------------+-------+--+-----------+---+------------+--+------------+--+
| | | | 7,751,133 | | - | | 7,751,133 | |
+----------------------------------+-------+--+-----------+---+------------+--+------------+--+
+---------------------------------+-------+--+------------+--+------------+--+------------+--+
| Consolidated balance sheet | | | | | | | | |
+---------------------------------+-------+--+------------+--+------------+--+------------+--+
| | | | Previously | | | | Restated | |
+---------------------------------+-------+--+------------+--+------------+--+------------+--+
| | | | reported | | | | as at | |
| | | | as | | | | | |
+---------------------------------+-------+--+------------+--+------------+--+------------+--+
| | | | 30 | | IFRS | | 30 | |
| | | | September | | | | September | |
+---------------------------------+-------+--+------------+--+------------+--+------------+--+
| Capital and reserves | Notes | | 2007 | | adjustment | | 2007 | |
+---------------------------------+-------+--+------------+--+------------+--+------------+--+
| | | | GBP | | GBP | | GBP | |
+---------------------------------+-------+--+------------+--+------------+--+------------+--+
| Stated capital | | | 10,505,154 | | - | | 10,505,154 | |
+---------------------------------+-------+--+------------+--+------------+--+------------+--+
| Realised capital reserves | | | 152,473 | | (152,473 | )| - | |
+---------------------------------+-------+--+------------+--+------------+--+------------+--+
| Unrealised capital reserve | | | (53,320 | )| 53,320 | | - | |
+---------------------------------+-------+--+------------+--+------------+--+------------+--+
| Capital reserves | | | - | | 99,153 | | 99,153 | |
+---------------------------------+-------+--+------------+--+------------+--+------------+--+
| Investment property revaluation | 1 | | (78,183 | )| 78,183 | | - | |
| reserve | | | | | | | | |
+---------------------------------+-------+--+------------+--+------------+--+------------+--+
| Issue cost reserve | | | (679,868 | )| - | | (679,868 | )|
+---------------------------------+-------+--+------------+--+------------+--+------------+--+
| Revenue reserve | | | (352,252 | )| (78,183 | )| (430,435 | )|
+---------------------------------+-------+--+------------+--+------------+--+------------+--+
| | | | 9,494,004 | | - | | 9,494,004 | |
+---------------------------------+-------+--+------------+--+------------+--+------------+--+
Notes to the reconciliation
1.Investment property is carried at fair value. Under IFRS changes in fair value
are recorded as unrealised gains/losses on revaluation of investment property
within the income statement. Previously these were recorded as movements in the
investment property revaluation reserve.
2.The previous headings of 'Capital reserve - realised' and 'Capital reserve -
unrealised' are now included under one combined heading.
(c)Reconciliation of Net Profit under IFRS from UK GAAP
+-----------------------------------------------------+----------+--+------------+--+
| | 2008 | | 2007 | |
+-----------------------------------------------------+----------+--+------------+--+
| | GBP | | GBP | |
+-----------------------------------------------------+----------+--+------------+--+
| Net (loss)/gain after taxation for the year | (438,908 | )| 92,800 | |
+-----------------------------------------------------+----------+--+------------+--+
| Less loss on revaluation of investment property | 106,500 | | 78,183 | |
+-----------------------------------------------------+----------+--+------------+--+
| Net (loss) or gain reported under UK GAAP | (332,408 | )| 170,983 | |
+-----------------------------------------------------+----------+--+------------+--+
20. Financial instruments
The Group's financial instruments comprise fixed interest securities, cash
balances and debtors and creditors that arise directly from its operations, for
example, in respect of sales and purchases awaiting settlement, and debtors for
accrued income.
The main risks the Group faces from its financial instruments are (i) market
price risk (comprising interest rate risk and other price risk), (ii) liquidity
risk, (iii) credit risk.
The Board regularly reviews and agrees on policies for managing each of these
risks. The Manager's policies for managing these risks are summarised below and
have been applied throughout the year. The numerical disclosures exclude
short-term debtors and creditors.
(i)Market price risk
Market price risk arises mainly from uncertainty about future prices of
financial instruments used in the Group's operations. It represents the
potential loss the Group might suffer through holding market positions as a
consequence of price movements.
It is the Board's policy to hold a broad spread of fixed interest investments in
order to reduce risk arising from factors specific to a particular country or
sector. The Manager monitors market prices throughout the year and reports to
the Board, which meets regularly in order to review investment strategy.
Interest rate risk
Interest rate movements may affect: (i) the fair value of the investments in
fixed interest rate securities, and (ii) the level of income receivable on cash
deposits.
The interest rate profile of the Group excluding short term debtors and
creditors, at 30 September 2008 was as follows:
+------------+----------+--------+----------+--------+-----------+--------+-----------+--------+--------------+--------+
| | Weighted | | Weighted | | | | | | | |
+------------+----------+--------+----------+--------+-----------+--------+-----------+--------+--------------+--------+
| | average | | average | | | | | | | |
+------------+----------+--------+----------+--------+-----------+--------+-----------+--------+--------------+--------+
| | period | | interest | | | | | | | |
| | for | | rate | | | | | | | |
+------------+----------+--------+----------+--------+-----------+--------+-----------+--------+--------------+--------+
| | which | | % | | Fixed | | Floating | | Non-interest | |
+------------+----------+--------+----------+--------+-----------+--------+-----------+--------+--------------+--------+
| | rate | | | | interest | | rate | | bearing | |
| | is | | | | | | | | | |
| | fixed | | | | | | | | | |
+------------+----------+--------+----------+--------+-----------+--------+-----------+--------+--------------+--------+
| 2008 | Years | | | | GBP | | GBP | | GBP | |
+------------+----------+--------+----------+--------+-----------+--------+-----------+--------+--------------+--------+
| Assets | | | | | | | | | | |
+------------+----------+--------+----------+--------+-----------+--------+-----------+--------+--------------+--------+
| Fixed | 0.58 | | 4.90 | | 3,012,365 | | - | | - | |
| interest | | | | | | | | | | |
| securities | | | | | | | | | | |
+------------+----------+--------+----------+--------+-----------+--------+-----------+--------+--------------+--------+
| Sterling | - | | - | | - | | 3,274,200 | | - | |
| cash | | | | | | | | | | |
| deposit | | | | | | | | | | |
+------------+----------+--------+----------+--------+-----------+--------+-----------+--------+--------------+--------+
| Debtors | - | | - | | - | | - | | - | |
+------------+----------+--------+----------+--------+-----------+--------+-----------+--------+--------------+--------+
| Total | 0.58 | | 4.90 | | 3,012,365 | | 3,274,200 | | - | |
| assets | | | | | | | | | | |
+------------+----------+--------+----------+--------+-----------+--------+-----------+--------+--------------+--------+
+------------+----------+--------+----------+--------+-----------+--------+-----------+--------+--------------+--------+
| | Weighted | | Weighted | | | | | | | |
+------------+----------+--------+----------+--------+-----------+--------+-----------+--------+--------------+--------+
| | average | | average | | | | | | | |
+------------+----------+--------+----------+--------+-----------+--------+-----------+--------+--------------+--------+
| | period | | interest | | | | | | | |
| | for | | rate | | | | | | | |
+------------+----------+--------+----------+--------+-----------+--------+-----------+--------+--------------+--------+
| | which | | % | | Fixed | | Floating | | Non-interest | |
+------------+----------+--------+----------+--------+-----------+--------+-----------+--------+--------------+--------+
| | rate | | | | interest | | rate | | bearing | |
| | is | | | | | | | | | |
| | fixed | | | | | | | | | |
+------------+----------+--------+----------+--------+-----------+--------+-----------+--------+--------------+--------+
| 2007 | Years | | | | GBP | | GBP | | GBP | |
+------------+----------+--------+----------+--------+-----------+--------+-----------+--------+--------------+--------+
| Assets | | | | | | | | | | |
+------------+----------+--------+----------+--------+-----------+--------+-----------+--------+--------------+--------+
| Fixed | 1.10 | | 5.10 | | 5,985,007 | | - | | - | |
| interest | | | | | | | | | | |
| securities | | | | | | | | | | |
+------------+----------+--------+----------+--------+-----------+--------+-----------+--------+--------------+--------+
| Sterling | - | | - | | - | | 1,828,171 | | - | |
| cash | | | | | | | | | | |
| deposit | | | | | | | | | | |
+------------+----------+--------+----------+--------+-----------+--------+-----------+--------+--------------+--------+
| Debtors | | | | | | | | | 253,352 | |
+------------+----------+--------+----------+--------+-----------+--------+-----------+--------+--------------+--------+
| Total | 1.10 | | 5.10 | | 5,985,007 | | 1,828,171 | | 253,352 | |
| assets | | | | | | | | | | |
+------------+----------+--------+----------+--------+-----------+--------+-----------+--------+--------------+--------+
The floating rate assets consist of cash deposits on call earning interest at
prevailing market rates.
Maturity profile
The following table sets out the carrying amount, by maturity, of the Group's
financial instruments that are exposed to interest rate risk:
+--------------+-----------+--------+-----------+--------+---------+--------+--------+--------+-----------+--------+
| | Within | | Within | | Within | | More | | | |
| | | | | | | | than | | | |
+--------------+-----------+--------+-----------+--------+---------+--------+--------+--------+-----------+--------+
| | 1 year | | 2-3 | | 4-5 | | 5 | | Total | |
| | | | years | | years | | years | | | |
+--------------+-----------+--------+-----------+--------+---------+--------+--------+--------+-----------+--------+
| 2008 | GBP | | GBP | | GBP | | GBP | | GBP | |
+--------------+-----------+--------+-----------+--------+---------+--------+--------+--------+-----------+--------+
| Fixed | | | | | | | | | | |
| rate | | | | | | | | | | |
+--------------+-----------+--------+-----------+--------+---------+--------+--------+--------+-----------+--------+
| Assets | 2,512,690 | | 298,515 | | 201,160 | | - | | 3,012,365 | |
+--------------+-----------+--------+-----------+--------+---------+--------+--------+--------+-----------+--------+
| | 2,512,690 | | 298,515 | | 201,160 | | - | | 3,012,365 | |
+--------------+-----------+--------+-----------+--------+---------+--------+--------+--------+-----------+--------+
| Floating | | | | | | | | | | |
| rate | | | | | | | | | | |
+--------------+-----------+--------+-----------+--------+---------+--------+--------+--------+-----------+--------+
| Cash | 246,200 | | - | | - | | - | | 246,200 | |
+--------------+-----------+--------+-----------+--------+---------+--------+--------+--------+-----------+--------+
| Deposits | - | | 3,028,000 | | - | | - | | 3,028,000 | |
+--------------+-----------+--------+-----------+--------+---------+--------+--------+--------+-----------+--------+
| | 246,200 | | 3,028,000 | | - | | - | | 3,274,200 | |
+--------------+-----------+--------+-----------+--------+---------+--------+--------+--------+-----------+--------+
| Non-interest | | | | | | | | | | |
| bearing | | | | | | | | | | |
+--------------+-----------+--------+-----------+--------+---------+--------+--------+--------+-----------+--------+
| Other | - | | - | | - | | - | | - | |
| receivables | | | | | | | | | | |
+--------------+-----------+--------+-----------+--------+---------+--------+--------+--------+-----------+--------+
| | - | | - | | - | | - | | - | |
+--------------+-----------+--------+-----------+--------+---------+--------+--------+--------+-----------+--------+
+--------------+-----------+--------+-----------+--------+--------+--------+--------+--------+-----------+--------+
| | Within | | Within | | Within | | More | | | |
| | | | | | | | than | | | |
+--------------+-----------+--------+-----------+--------+--------+--------+--------+--------+-----------+--------+
| | 1 year | | 2-3 | | 4-5 | | 5 | | Total | |
| | | | years | | years | | years | | | |
+--------------+-----------+--------+-----------+--------+--------+--------+--------+--------+-----------+--------+
| 2007 | GBP | | GBP | | GBP | | GBP | | GBP | |
+--------------+-----------+--------+-----------+--------+--------+--------+--------+--------+-----------+--------+
| Fixed | | | | | | | | | | |
| rate | | | | | | | | | | |
+--------------+-----------+--------+-----------+--------+--------+--------+--------+--------+-----------+--------+
| Assets | 1,990,394 | | 3,994,613 | | - | | - | | 5,985,007 | |
+--------------+-----------+--------+-----------+--------+--------+--------+--------+--------+-----------+--------+
| | 1,990,394 | | 3,994,613 | | - | | - | | 5,985,007 | |
+--------------+-----------+--------+-----------+--------+--------+--------+--------+--------+-----------+--------+
| Floating | | | | | | | | | | |
| rate | | | | | | | | | | |
+--------------+-----------+--------+-----------+--------+--------+--------+--------+--------+-----------+--------+
| Cash | 1,828,171 | | - | | - | | - | | 1,828,171 | |
+--------------+-----------+--------+-----------+--------+--------+--------+--------+--------+-----------+--------+
| Deposits | - | | - | | - | | - | | - | |
+--------------+-----------+--------+-----------+--------+--------+--------+--------+--------+-----------+--------+
| | 1,828,171 | | - | | - | | - | | 1,828,171 | |
+--------------+-----------+--------+-----------+--------+--------+--------+--------+--------+-----------+--------+
| Non-interest | | | | | | | | | | |
| bearing | | | | | | | | | | |
+--------------+-----------+--------+-----------+--------+--------+--------+--------+--------+-----------+--------+
| Other | - | | 253,352 | | - | | - | | 253,352 | |
| receivables | | | | | | | | | | |
+--------------+-----------+--------+-----------+--------+--------+--------+--------+--------+-----------+--------+
| | - | | 253,352 | | - | | - | | 253,352 | |
+--------------+-----------+--------+-----------+--------+--------+--------+--------+--------+-----------+--------+
Interest rate sensitivity
An increase of 100 basis points in interest rates during the year would have
increased the net assets attributable to shareholders and changes in net assets
attributable to shareholders by GBP32,742 (2007 GBP18,282). A decrease of 100
basis points would have had an equal but opposite effect.
(ii)Liquidity risk
The Group has a commitment to purchase 118 units in Canon House, Wallington at a
purchase price of GBP25 million, against which the Group has paid a deposit of
GBP4.25 million. The commitment will be reduced by selling the forward purchase
contracts, in line with the Group's strategy, once construction starts with any
shortfall funded by bank financing and the Group's cash balances and readily
realisable securities, which can be sold to meet funding commitments if
necessary. As at 30 September 2008 the Group does not have any significant
liabilities due.
(iii)Credit risk
The Group places funds with third parties and is therefore potentially at risk
from the failure of any such third party of which it is a creditor. The Group
expects to place any such funds on a short-term basis only and spread these over
a number of years.
Management has a credit policy in place and the exposure to credit risk is
monitored on an ongoing basis.
The Group's principal financial assets are fixed interest securities, other
receivables and cash and cash equivalents. The maximum exposure of the Group to
the credit risk is the carrying amount of each class of financial assets.
Other receivables are represented mainly by prepayments and other debtors where
no significant credit risk is recognised.
21.Controlling party
There is no ultimate controlling party.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR BUGDXGUDGGCX
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