Interim Results

RNS Number : 7169U

Off-Plan Fund Limited (The)

30 June 2009

 



For Immediate Release

30 June 2009

THE OFF-PLAN FUND LIMITED

Interim Results for the six months ended 31 March 2009

The Off-plan Fund Limited ('the Fund' or 'the Company') announces its interim results for the six months ended 31 March 2009.

Chairman's Statement

In my new role as Chairman, I am pleased to present the unaudited financial statements for the six months ended 31 March 2009.

The Fund's annual general meeting was held on 29 April 2009 and all resolutions were duly passed, including the resolution in respect of the Fund continuing to pursue its existing investment strategy for another 12 months until the next AGM when shareholders will have another opportunity to vote on a similar resolution.

Performance

The unaudited net asset value ('NAV') of the Fund at 31 March 2009 was £9.1 million (30 September 2008: £9.1 million). The NAV per ordinary share has increased to 81.9p at period end from 81.2p at 30 September 2008, largely due to the revaluation of the investment properties at The Heart in Walton, described in note 5 to the financial statements.

In respect of the Fund's share price in March 2009 we commented on the significant discount to NAV per share and there has been little improvement in the intervening period. 

Portfolio Review

The current property portfolio comprises three investments, which are summarised below:

The Heart, Walton-on-Thames: During the period, the Fund completed the purchase of 10 one-bedroom apartments with parking in this major regeneration development project for £1.65 million, equating to a 24 per cent. discount to the prevailing Red Book value. The purchase was in line with the Fund's refocused investment strategy of purchasing high quality completed units in the Home Counties and inner M25 markets with good rental prospects which can be held and let until the sales and mortgage markets improve.

In February 2009, one unit was sold for £190,000 (a 10 per cent. profit after deducting all transaction costs) and further offers have been considered at around this level. The other units are all currently let at an average annual yield of 6.2 per cent.

Canon House, Wallington: The Fund's investment adviser is in regular contact with the developer and has recently been made aware that the developer is having considerable difficulties with respect to its obligations to its lending bank and the freehold owner of the site.  Indeed, the Fund has today been given notice that the lending bank, Bank of Scotland Plc, has appointed a receiver under the Law of Property Act 1925 in respect of its charge over the developer's leasehold interest in the site.  The Fund is in discussions with its advisers and the board expects to be in a position to make a further announcement in the near future when it has fully ascertained both the Fund's and the related parties' rights in respect of the development and the contractual position. Construction has yet to commence.

Since the period end, the Fund announced that the beneficial owner of the developer, Mr Nigel Henry, acquired a large stake in the Fund taking his interest in the Fund's shares to 19.4 per cent.

Wimbledon House, Leicester: The six apartments are currently let, at an average yield of 4.3%, and have been revalued at £764,000 (30 September 2008: £805,000).

During the period the Fund rescinded contracts for the purchase of 51 units in a development in Oldham Place, Liverpool, further details of which were provided in the last annual report.

Market

There appears to have been a material change in sentiment towards the UK residential housing market in the three months since the annual report and accounts were published and the board believes there is increasing evidence that the worst may be behind us. Mortgage approvals have risen in each of the last five months, enquiries are at a ten year high and lenders are gradually re-introducing more attractive products. 

Recently, HBOS, the Nationwide and Rightmove all reported average monthly price increases for May, allowing the year-on-year rate of house price falls to decline and indicating that the peak to trough fall may be nearer 20 per cent. than the more pessimistic forecasts of 35 per cent. Leading estate agents are currently suggesting that the market is unrecognisable from six months ago and that most importantly the media has reported positive signs in the last three months. It would appear that London and its surrounding areas, on which the Fund has concentrated in the period under review, is leading the recovery.

On a more cautionary note the availability of credit, although better than it was, remains strained and the level available is a fraction of peak levels. Mortgage approvals and lending are increasing but well down on their peak levels and the board believes will take a long time to recover fully, particularly as fixed rate deals are becoming more expensive.

Outlook

The improving news flow, statistics and signs of returning confidence referred to above should clearly have a positive impact on the Fund's existing investment property portfolio, particularly The Heart. It may also prove beneficial on Wallington if construction does commence in time (with the Fund's long-stop completion commitment date of January 2012 in mind) as an improving backdrop can only be helpful to the Fund in terms of securing onward sales.   

Perversely the prevailing optimism in the market may prove restrictive to the Fund's investment advisers in terms of sourcing new investment opportunities as those previously considered 'forced sellers' that fit the Fund's investment criteria, i.e. suppliers of new build properties, are either given greater leeway by their lending banks or else simply feel they can hold out for better deals. Developers in general have slowed down their speed of development to allow the market to catch-up and preserve cash, which together with other bulk-buyers entering the market, has increased competition. Unfortunately, the Fund was unable to add to its portfolio in the months preceding the AGM as there was material uncertainty as to whether or not shareholders would vote to continue for another 12 months. However with this situation resolved the Fund's investment adviser has built up a substantial list of opportunities in the Fund's target markets and continues to pursue the most attractive pipeline deals that remain available.  

Whilst we hope to be able to announce further news on investment opportunities in due course, our key priority is resolving the Wallington situation, if at all possible, in short order.

Board

As previously announced, I am pleased to welcome Donald Reid to the Board and would also like to take this opportunity to thank Graham Berry for his significant contribution during his tenure as Chairman and wish him well for the future.

Roger King 

Chairman
29 June 2009

Restated Investing Policy

In accordance with the requirements of the AIM Rules (as revised on 1 June 2009), the Company's investing policy (as derived from the original AIM admission document dated 1 December 2005) is as follows:

• to seek to generate long-term capital gains for shareholders through the acquisition, at discounts to their prevailing market values, and onward sale of a diversified portfolio of UK residential properties either before they are built ('off-plan') or where recently built but unsold on completion.

• to hold and seek to rent out properties where market conditions dictate.

In respect of 'off-plan' purchases the Company will put down a deposit with the balance payable on completion if no onward sale has been secured, which may take the form (wholly or partly) of mortgage finance. The Company will typically agree a profit-share on onward sales with the vendor developer, in return for a significant discount on the purchase.

In respect of the purchase of recently completed properties the Company may utilise cash reserves and mortgage finance.

There are no borrowing limits in the Company's articles of association. In addition to securing mortgage finance on its properties, the Company may also be highly geared through the effect of purchasing 'off-plan' properties by way of initial deposits, with liability to provide completion monies where properties are not onsold prior to their completion.

The Company's investing policy is constrained by the following investment restrictions:

• deposits on properties in a single development must not exceed 20 per cent. of the value of the gross assets of the Company.

• investment in developments of a single developer must not exceed 30 per cent. of the value of the gross assets of the Company.

• purchases must be at minimum discount of 10 per cent. to a property's market value.

• no investment will be made unless the property acquired is suitable for a letting portfolio.

• no deposit will be paid if, as a result, the total value of deposits in place is more than two-thirds of the value of the gross assets of the Company.

Enquiries:

Development Capital Management

Roger Hornett

Andy Gardiner

020 7355 7600

John East & Partners Limited, a subsidiary of Merchant Securities Plc

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

Consolidated Income Statement		(unaudited)
		Six months ended
		31 March 2009
		Revenue	Capital	Total
	Notes	£	£	£
Unrealised gains/(losses) on investment property		-	209,800	209,800
Profit on off-plan sales or write back on rescinded sales		-	-	-
Realised losses on property contracts yet to complete		-	-	-
Realised gains on investment property		-	18,108	18,108
Realised gains on investments held at fair value through profit or loss		-	8,907	8,907
Unrealised gains on investments held at fair value through profit or loss		-	32,132	32,132
Interest income		48,186	-	48,186
Rental income		33,920	-	33,920
Investment management fee	4	(92,890)	-	(92,890)
Rental expenses		(15,177)	-	(15,177)
Other expenses		(160,710)	-	(160,710)
Net (loss)/gain on ordinary activities before taxation		(186,671)	268,947	82,276
Taxation	2	(3,243)	-	(3,243)
Net (loss)/gain for the period after taxation	3	(189,914)	268,947	79,033
(Loss)/gain per share (pence)		(1.7)	2.4	0.7

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.

The accompanying notes are an integral part of the financial statements.

	(unaudited)			(audited)
Six months ended			Year ended
31 March 2008			30 September 2008
Revenue	Capital	Total	Revenue	Capital	Total
£	£	£	£	£	£
-	(38,000)	(38,000)	-	(106,500)	(106,500)
-	-	-	(240,870)	-	(240,870)
-	-	-	(4,113)	-	(4,113)
-	-	-	-	-	-
-	11,668	11,668	-	11,668	11,668
-	34,284	34,284	-	20,769	20,769
148,280	-	148,280	339,315	-	339,315
18,236	-	18,236	36,411	-	36,411
(93,531)	-	(93,531)	(182,477)	-	(182,477)
(2,095)	-	(2,095)	(11,537)	-	(11,537)
(103,518)	-	(103,518)	(295,060)	-	(295,060)
(32,628)	7,952	(24,676)	(358,331)	(74,063)	(432,394)
(3,537)	-	(3,537)	(6,514)	-	(6,514)
(36,165)	7,952	(28,213)	(364,845)	(74,063)	(438,908)
(0.3)	0.1	(0.3)	(3.3)	(0.6)	(3.9)

Consolidated Balance Sheet		(unaudited)	(unaudited)	(audited)
		31 March	31 March	30 September
		2009	2008	2008
	Notes	£	£	£
Non-current assets
Investment property	5	2,519,000	873,000	804,500
Investments held at fair value through profit or loss	6	97,834	2,925,713	3,012,365
Property contracts yet to complete	7	1,353,573	1,781,927	1,508,823
Debtors		-	253,532	-
		3,970,407	5,834,172	5,325,688
Current assets
Debtors		18,419	279,889	533,450
Cash in escrow	8	3,000,000	3,000,000	3,000,000
Cash and cash equivalents		2,215,242	402,320	274,200
		5,233,661	3,682,209	3,807,650
Creditors - amounts falling due within one year
Other payables		(69,939)	(50,590)	(78,242)
Net current assets		5,163,722	3,631,619	3,729,408
Total net assets		9,134,129	9,465,791	9,055,096
Equity
Stated capital	9	10,505,154	10,505,154	10,505,154
Capital reserve		(46,808)	(233,740)	(315,755)
Issue costs reserve		(679,868)	(679,868)	(679,868)
Revenue reserve		(644,349)	(125,755)	(454,435)
Total shareholders' funds (all equity)	10	9,134,129	9,465,791	9,055,096
Net asset value per share (pence)		81.9	84.9	81.2

The financial statements were approved by the Board of Directors on 29 June 2009 and signed on its behalf by:

Donald Reid

The accompanying notes are an integral part of the financial statements.

Consolidated Cash Flow Statement		(unaudited)	(unaudited)	(audited)
		Six months ended	Six months ended	Year ended
		31 March 2009	31 March 2008	30 September 2008
		£	£	£
Cash flow from operating activities
Deposits and acquisition costs relating to property contracts		-	(1,628,623)	(1,502,948)
Cash deposited in escrow		-	(3,000,000)	(3,000,000)
Expenses from sale of property contracts		-	(2,290)	(2,290)
Rental income received		46,862	13,684	34,854
Deposit interest received		104,015	28,147	67,958
Investment management fees paid		(92,890)	(93,531)	(182,477)
Secretarial fees paid		(2,343)	(1,975)	(4,614)
Rental expenses		(20,925)	(1,849)	(13,072)
Other expenses		(174,931)	(115,370)	(232,864)
Net cash outflow from operating activities		(140,212)	(4,801,807)	(4,835,453)
Taxation paid		(3,532)	(2,239)	(6,226)
Cash flow from investing activites
Interest income received		98,999	236,335	247,087
Purchase of investments		-	(1,428,060)	(1,529,299)
Sale of investments		2,984,640	4,569,920	4,569,920
Proceeds from rescission of Oldham Place		332,489	-	-
Purchase of investment property		(1,516,634)	-	-
Proceeds from sale of investment property		185,292	-	-
Net cash inflow from investing activities		2,084,786	3,378,195	3,287,708
Increase/(decrease) in cash		1,941,042	(1,425,851)	(1,553,971)
Cash and cash equivalents at the start of the period		274,200	1,828,171	1,828,171
Cash and cash equivalents at the end of the period		2,215,242	402,320	274,200

The accompanying notes are an integral part of the financial statements.

Consolidated statement of changes in equity						Issue
				Stated	Capital	costs	Revenue
				capital	reserves	reserve	reserve	Total
				£	£	£	£	£
For the six months ended 31 March 2009 (unaudited)
At 1 October 2008				10,505,154	(315,755)	(679,868)	(454,435)	9,055,096
Revaluation of investment property				-	209,800	-	-	209,800
Gain/(loss) for the period				-	59,147	-	(189,914)	(130,767)
At 31 March 2009				10,505,154	(46,808)	(679,868)	(644,349)	9,134,129
For the six months ended 31 March 2008 (unaudited)
At 1 October 2007				10,505,154	(241,692)	(679,868)	(89,590)	9,494,004
Revaluation of investment property				-	(38,000)	-	-	(38,000)
Gain/(loss) for the period				-	45,952	-	(36,165)	9,787
At 31 March 2008				10,505,154	(233,740)	(679,868)	(125,755)	9,465,791
For the year ended 30 September 2008 (audited)
At 1 October 2007				10,505,154	(241,692)	(679,868)	(89,590)	9,494,004
Revaluation of investment property				-	(106,500)	-	-	(106,500)
Gain/(loss) for the year				-	32,437	-	(364,845)	(332,408)
At 30 September 2008				10,505,154	(315,755)	(679,868)	(454,435)	9,055,096

The accompanying notes are an integral part of the financial statements

Notes to the financial statements

1. Accounting Policies

(a) Basis of preparation

The consolidated interim 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 2009.

(i) IFRS applied

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 principle 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.

The accounting policies adopted in the preparation of the interim financial statements are consistent with those followed in the preparation of the annual financial statements for the year ended 30 September 2008. New accounting standards have been issued since the year end 30 September 2008 but none of these are yet effective.

(ii) Going concern

The Company contracted to purchase 118 off-plan units in a new development in Wallington for £25 million for which the Red Book valuation at 31 March 2009 was £26.1 million. Due to the on-going delay in the commencement of the construction as explained in the Chairman's Statement, which has impacted the marketing strategy, none of the units have 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 4 per cent. 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 31 March 2009, 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.

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 fair value of properties that are the subject of property 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 markets prices, comparable units and transaction levels.

(c) Basis of consolidation

The consolidated interim financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up for the six months ended 31 March. 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 period, 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 six months ended 31 March 2009 and 31 March 2008 and the year ended 30 September 2008.

(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 a 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

(i) 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 intends to hold, any financial instruments for the purpose of trading.

(ii) Investments at fair value through profit or loss

An instrument is classified as at 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 or 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 or 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.

(iii) 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.

(iv) 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, although the property may not be revalued in the year of acquisition. 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 for Wimbledon House and Edwin Evans Surveyors Limited for The Heart.

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.

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.

2. Taxation

Under Article 123A of the Income Tax (Jersey) Law 1961, as amended, the Company had obtained Jersey exempt company status and is therefore exempt for Jersey income tax on non Jersey source income and bank interest (by concession). A £600 (2008 - £600) annual exempt company fee is payable by the Company. From January 2009 the exempt company regime no longer applies. The general rate of corporation tax for companies resident in Jersey will be 0 per cent. from that date onwards. 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.).

3. Returns per share

The return per share is based on the net gain for the period of £79,033 (31 March 2008: net loss £28,213; 30 September 2008 net loss: £438,908) and on 11,153,098 shares (31 March 2008: 11,153,098; 30 September 2008: 11,153,098), being the weighted average number of shares in issue.

4. Management fee

	Six months ended	Six months ended	Year ended
	31 March 2009	31 March 2008	30 September 2008
	£	£	£
Management fee	92,890	95,531	182,477

The management fees paid to Development Capital Management (Jersey) Limited are two per cent. per annum of the net asset value of the fixed income portfolio held by the Company, plus any cash amount paid, and outstanding, in respect of property contracts yet to complete and investment property. The management agreement between the Company and the Manager is terminable by either party on 12 months notice.

5. Investment property

	Wimbledon House	The Heart	Total
	£	£	£
Opening book cost	989,183	-	989,183
Transfer from property contracts yet to complete	-	165,000	165,000
Movements during the period:
Completion payment	-	1,506,884	1,506,884
Sales - net proceeds	-	(185,292)	(185,292)
Sales - realised gain	-	18,108	18,108
Closing book cost	989,183	1,504,700	2,493,883
Closing unrealized (depreciation)/appreciation	(225,183)	250,300	25,117
Closing valuation	764,000	1,755,000	2,519,000

Both investment properties were fair valued at the period-end by Savills (L&P) Limited for Wimbledon House and Edwin Evans Surveyors Limited for The Heart 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 these properties in the period was £33,920 (2008 - £18,236) with direct expenses of £15,177 (2008 - £2,095).

6. Investments held at fair value through profit or loss

	31 March 2009	31 March 2008	30 September 2008
	£	£	£
Opening valuation	3,012,365	5,985,007	5,985,007
Opening unrealised loss	32,551	53,320	53,320
Opening book cost	3,044,916	6,038,327	6,038,327
Movements during the period:
Purchases	-	1,378,132	1,476,152
Sales - proceeds	(2,951,762)	(4,486,169)	(4,486,169)
Amortisation of fixed income book costs	(3,808)	2,791	4,938
Sales - realised gains	8,907	11,668	11,668
Closing book cost	98,253	2,944,749	3,044,916
Closing unrealized loss	(419)	(19,036)	(32,551)
Closing fair value	97,834	2,925,713	3,012,365

7. Property contracts yet to complete

	31 March 2009	31 March 2008	30 September 2008
	£	£	£
Opening book cost	1,508,823	446,078	446,078
Movements during the period:
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 Place	-	-	(4,113)
Oldham Place deposit refunded	-	-	(147,429)
Rescission of Tring and Hayes contracts	-	-	(304,524)
Purchases	9,750	1,335,849	1,514,698
Reclassification of The Heart to Investment property	(165,000)	-	-
Closing book cost	1,353,573	1,781,927	1,508,823

The reclassification shown in the table above shows the reclassification during the period of The Heart from 'Property contracts yet to complete' to 'Investment property' on completion of the construction. This has been reclassified at the book cost of £165,000.

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 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 update to the original Red Book valuation, prepared by CB Richard Ellis for Canon House, Wallington, of the underlying properties as a basis of valuation for these contracts.

	Canon House
	£
Deposits paid	1,250,000
Legal and acquisition costs	103,573
Book cost as at 31 March 2009	1,353,573
Outstanding completion payments	23,750,000
Total historic cost	25,103,573
'Red Book' valuation	26,068,293

8. Cash in escrow 

The Company holds a deposit of £3,000,000 (31 March 2008: £3,000,000; 30 September 2008: £3,000,000) with AIB Bank (CI) as a guarantee to HBOS. Under the terms of the guarantee a minimum of £3,000,000 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.

9. Stated capital 

The Company is a no par value ('NPV') company

	31 March 2009	31 March 2008	30 September 2008
Authorised:	Number	Number	Number
Founder shares	10	10	10
99,999,990 participating shares	99,999,990	99,999,990	99,999,990
	100,000,000	100,000,000	100,000,000
Issued and fully paid:	Number	Number	Number
Founder shares	2	2	2
Participating shares	11,153,098	11,153,098	11,153,098

All costs associated with the issue of shares have been taken to the issue costs reserve.

10. Net asset value per share

	Net asset value
	attributable per share
	31 March 2009	31 March 2008		30 September 2008
	p	p		p
Participating shares	81.9	84.9		81.2
	Net asset value
	31 March 2009	31 March 2008	30 September 2008
	£	£	£
	9,134,129	9,465,791	9,055,096

11. 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, and (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 period. 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.   

The portfolio of fixed interest investments has been reduced to 1 bond during the period.

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, as at 31 March 2009 was as follows:

	Weighted average
	period for which	Weighted average	Fixed	Floating	Non-interest
	rate is fixed	interest rate	rate	rate	bearing
31 March 2009	Years	%	£	£	£
Assets
Fixed interest securities	1.86	4.50	97,834	-	-
Sterling cash deposit	-	-	-	5,215,242	-
Debtors	-	-	-	-	-
Total assets	1.86	4.50	97,834	5,215,242	-
	Weighted average
	period for which	Weighted average	Fixed	Floating	Non-interest
	rate is fixed	interest rate	rate	rate	bearing
31 March 2008	Years	%	£	£	£
Assets
Fixed interest securities	1.00	5.00	2,925,713	-	-
Sterling cash deposit	-	-	-	3,402,320	-
Debtors	-	-	-	-	253,352
Total assets	1.00	5.00	2,925,713	3,402,320	253,352
	Weighted average
	period for which	Weighted average	Fixed	Floating	Non-interest
	rate is fixed	interest rate	rate	rate	Bearing
30 September 2008	Years	%	£	£	£
Assets
Fixed interest securities	0.58	4.90	3,012,365	-	-
Sterling cash deposit	-	-	-	3,274,200	-
Debtors	-	-	-	-	-
Total assets	0.58	4.90	3,012,365	3,274,200	-

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 years	4-5 years	5 years	Total
31 March 2009	£	£	£	£	£
Fixed rate
Assets	-	97,834	-	-	97,834
	-	97,834	-	-	97,834
Floating rate
Cash	2,135,025	-	-	-	2,135,025
Deposits	-	3,080,217	-	-	3,080,217
	2,135,025	3,080,217	-	-	5,215,242
	Within	Within	Within	More than
	1 year	2-3 years	4-5 years	5 years	Total
31 March 2008	£	£	£	£	£
Fixed rate
Assets	2,521,480	301,255	102,978	-	2,925,713
	2,521,480	301,255	102,978	-	2,925,713
Floating rate
Cash	402,320	-	-	-	402,320
Deposits	-	3,000,000	-	-	3,000,000
	402,320	3,000,000	-	-	3,402,320
Non-interest bearing
Other receivables	-	253,352	-	-	253,352
	-	253,352	-	-	253,352
	Within	Within	Within	More than
	1 year	2-3 years	4-5 years	5 years	Total
30 September 2008	£	£	£	£	£
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

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 £52,152 (31 March 2008: £34,023; 30 September 2008: £32,742). 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 £25 million, against which the Group has paid a deposit of £4.25 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 31 March 2009 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. 

12. Availability of Interim Results

The interim results are available on the Company's website (www.offplanfund.com) and can be obtained in hard copy by request free of charge from Development Capital Management Limited, 36 Dover Street, London, W1S 4NH.

 

END

 

 

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