RNS Number:8866N
Ottoman Fund Limited (The)
14 December 2006
For Immediate Release 14 December 2006
THE OTTOMAN FUND LIMITED
Preliminary Results for the year ended 31 August 2006
The Ottoman Fund Limited (the "Fund"), established to provide early stage
wholesale financing to the developers of new-build residential developments in
Turkey, is pleased to announce preliminary results for the year ended 31 August
2006. The Fund, which is managed by Development Capital Management (Jersey)
Limtied, has a planned life of 10 years up to December 2015 with a realisation
period of a further two years. The Fund seeks to provide its shareholders with a
high level of long-term capital appreciation through investment in the Turkish
residential property market.
Period highlights
*Completed successful AIM flotation in December 2005 raising #150m (fully
subscribed)
*Fund is currently 60% invested - well on schedule to be fully invested
within first 18 months
*Euro10.4m investment in Alanya on the southern coast of Turkey (107
apartments)
*$34.4m investment in sea-front development land in Bodrum now valued
at $38.4m
*$110m investment post period end in one million square metres of land
in Riva
Sir Timothy Daunt, Chairman of the Fund, commented :
"The property market in Turkey continues to provide good opportunities; despite
high interest rates, demand still outstrips supply, aided by the developing
mortgage market and increasing suburbanisation. The Manager has been appraising
a significant number of different projects and a healthy pipeline is currently
in place. We hope to convert the best into investments in the near future."
Copies of the Financial Statements are currently being sent to shareholders and may
be obtained free of charge from Development Capital Management Limited, 84 Grosvenor
Street, London, W1K 3JZ.
Contacts :
Development Capital Management 020 7355 7600
Roger Hornett
Tom Pridmore
Buchanan Communications 020 7466 5000
Charles Ryland
Isabel Podda
Numis Securities Ltd 020 7776 1500
Andrew Dawber
Iain McDonald
Bruce Garrow
Adam Shapton
THE OTTOMAN FUND LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE PERIOD 9 DECEMBER 2005 TO 31 AUGUST 2006
Chairman's Statement
It is a pleasure to present to shareholders the first set of Financial
Statements for The Ottoman Fund Limited, covering the period of eight months
from the Fund's launch to 31 August 2006.
The Fund was successfully launched in December 2005, raising #150m through a
placing of ordinary shares on the Alternative Investment Market of the LSE, the
third largest IPO to float on AIM in 2005.
Investment progress
In the period under review the Manager has been extremely active, exploring new
opportunities and securing investments for the Fund, two of which fall into the
period, the third and by far the largest just outside. At the time of writing,
the Fund has made good progress, is currently 60% invested and well on schedule
to be fully invested within the first 18 months.
The Fund's first investment; the Riverside Resort at Alanya, detailed in the
prospectus, was made in April and is now nearly complete. Whilst off-plan sales
to date have been disappointing, the Manager believes that, following
completion, good progress can be made in selling the remaining apartments and
discussions are currently taking place with several institutions.
The second investment was in a substantial parcel of land on the Bodrum
peninsula. This is a very popular area with limited supply and promises to
provide strong returns in the future. The Manager has made good progress in
appointing the highly regarded architects WATG to provide master planning and
concepts, together with the appointment of Doga Gayrimenkul to provide project
management. It is expected that sales and construction will commence towards the
middle of next year.
Finally, following the period end, the Fund made what is likely to be its most
important investment: just under one million square metres of land in Riva to
the north east of Istanbul. At $110m this is possibly the largest land
acquisition in Turkey this year. The area is popular for its natural beauty.
Several major companies have interests there. With limited supply due to
protected forests and the boundary with the Black Sea, development prospects are
good; land prices at Riva are rising. The Manager has started work on obtaining
planning permissions.
Over the eight months since launch it has become increasingly clear that some of
the best long term investments seen by the Fund have been at the early stage of
the development process. The Board is confident that, by purchasing development
land and gaining a far greater degree of control over the entire process and
particularly the supply side, premium returns can be generated, whilst the risk
of over supply can be minimised. The Board and Manager will continue to review
both development and financing investments, selecting the most promising for
inclusion in the Fund.
Turkey
2006 has so far been a somewhat volatile period for Turkey, both politically and
economically. Presidential and parliamentary elections are due in 2007. Tourist
numbers held up well, despite violence by the PKK during the first half of
2006. Joint Iraqi, US and Turkish involvement to prevent further incidents is
promising. The currency crisis in June caused fears that a return to the dark
days of 2001 was imminent. The run on the Lira triggered by a jump in inflation,
led to a 4.25% rise in interest rates in the space of one month; however this
rapid response from the central bank calmed markets and the Lira rebounded to
below TL1.50. GDP growth in 2006 will be about 5% and inflation 10%, with FDI (a
good indicator of investor confidence) forecast to double to $20bn. EU accession
talks continue to encounter difficulties, not least over the issues of Cyprus,
Armenia and human rights. Turkish public opinion is now less enthusiastic for
membership; progress in negotiation will not be rapid.
Dividend & Share Repurchase Authority
As outlined in the prospectus, the Fund aims for capital growth and therefore
the Board does not anticipate the payment of a regular dividend. The Board
currently has the authority to make share repurchases, which, under Jersey law
must be renewed on an annual basis and accordingly resolution 4 seeks its
renewal.
Outlook
The property market in Turkey continues to provide good opportunities; despite
high interest rates, demand still outstrips supply, aided by the developing
mortgage market and increasing suburbanisation. The Manager has been appraising
a significant number of different projects and a healthy pipeline is currently
in place. We hope to convert the best into investments in the near future.
Annual General Meeting
The first Annual General Meeting of the Fund at 10.30am on 24 January 2007 is to
be held at BNP House, Anley Street, St. Helier, Jersey.
Sir Timothy Daunt
Chairman
October 2006
Manager's Report
Since it's admission to AIM, the first period of the Fund's life has been an
industrious one for the Manager. As at 31 August two deals were closed totaling
$46m and shortly after this a further $110m was invested. As a result the assets
invested in property developments now amount to 60% of the Fund. Additionally a
solid pipeline of projects has been identified, with a number of deals in
advanced negotiations.
Politics
During the early part of the period the political scene was dominated by the
prospect of anticipated parliamentary elections, together with the forthcoming
presidential election. The ruling AKP party led by Recep Tayyip Erdogan, is
considered to have done well, giving rise to press rumours that Erdogan would
call early elections and might even stand for president thereafter. In the event
the June currency crisis put paid to such thoughts, while Erdogan made it clear
that he considered his work as PM to be unfinished, effectively ruling himself
out of any future presidential race.
Of greater importance to business, second homes and tourism, has been the
increasing level of secular violence, orchestrated in large part by the outlawed
PKK Kurdistan Workers Party. A series of raids by Kurdish terrorists, hiding in
Northern Iraq, lead to the Government sending troops to the border and coming
into conflict with the US. The US and Iraq have now joined forces and appointed
senior personnel to address the problem. Kurds in Iraq have also urged the PKK
to lay down its arms or face isolation.
EU accession
Negotiations with the EU commenced on 3 October 2005 and have made little
progress. Although most of the 35 chapters have now been opened for comparison
purposes, only one has so far been closed. The first EU progress report is due
shortly, the Commission having sent a draft to the Turkish government in early
September. The draft criticised the Government for making little progress
towards EU integration on a number of fronts. The response was equally strong,
with Turkey arguing that the report was politically biased and without
foundation.
Of equal significance has been the on-going dispute with the EU over the opening
of ports and airports to traffic from the Republic of Southern Cyprus, an EU
member state. Turkey does not recognise the Greek controlled southern Cypriot
government which has been in power since the end of the 1974 war. Turkey, the
only government to recognise Northern Cyprus as a separate state, wants to
discuss unification but the Republic rejected the overture in a referendum two
years ago and despite repeated intervention by the UN, no further progress has
been made.
Under EU legislation borders between member states must be freely open to all
member state traffic. EU pressure on Turkey to do so however, has met with the
response that to consider the Greek- Cypriot question as part of the EU
negotiating process would be wrong. The French in the meantime, argue you cannot
continue accession talks with a government which refuses to negotiate, whilst
the Finns, who hold the rotating EU presidency at present, clearly do not want
Cyprus to be a deal breaker.
It is clear however that such tension is driving a divide between the Turkish
people and the EU and membership ambitions amongst the electorate are waning.
The economy
The June currency crisis dominated the economic news. Triggered by a sudden and
unexpected rise in May's inflation rate to 9.9%, it coincided with general
concern about the rise in oil prices, their effect on global price stability and
the outlook for interest rates worldwide. The result being that there was a run
on the Turkish Lira, causing in excess of $8bn to leave the country.
The response of the newly installed Central Bank governor, Durmus Yilmaz, was to
call an emergency meeting of the monetary policy committee and immediately raise
interest rates by 175 basis points. Two weeks later, a further rise of 225 basis
points was announced and then in July another 25 basis points took interest
rates to 17.5% from their April low of 13.25%. It should be noted however, that
in the 18 months prior to this move, interest rates had been gradually reduced
by a total of 475 basis points.
Such rapid action, stemmed the outflow of currency and provided support for the
Lira, which had fallen approximately 30% against the Dollar to a level of
TL1.77, not seen since the 2001 devaluation. Following the measures the currency
has rallied, gaining around 13% to TL1.52, a point at which the Government feels
satisfied. Ali Babacan, economy minister, believes the Lira should not rise
above the TL1.50 level if industry is to remain competitive.
The impact of such measures on the economy has been noteworthy, with inflation
dipping back from its July high of 11.7% to 10.3%. Further declines may be
expected but at this stage the Government's forecast of 4.0% for 2007 and 2008,
seems optimistic. Consumer confidence fell from a high of 100.7 in May to 86.6
in July but has since recovered to 91.4. The measures seem to be slowing
economic growth without stymieing it. In turn they should address the Current
Account deficit, the other reason behind the run on the Lira.
The crisis came too late to have any meaningful effect on GDP growth during the
second quarter, which recorded year on year real expansion of 7.5% after 6.5% in
the first quarter and 8.9% last year. Capital investment (GDFCF) added 18.8% and
private consumption 10.1%, with government consumption some 18.0% ahead, fuelled
by strong tax receipts and a first half budget surplus which will guarantee the
administration meets its 2006 target of a 6.5% primary balance. An overall
surplus for the year is possible but not yet probable. FDI in Turkey continues
to increase rapidly with the level at the end of August reaching $12.4bn. The
Government forecasts $20bn for the year end, a doubling of the 2005 figure.
Tourism
The inward tourism market has not been as badly affected by the earlier bird flu
scare and increasing levels of terrorist bomb attacks as might have been
expected. In the first half of the year tourist numbers were down 8.0% to 7.9m
but with gradual improvements as the year wore on.
August, despite the terrorist attacks in a number of cities including Izmir, saw
an increase of 2.2%. It may well be that for many holidaymakers price is taking
priority over security. If the improvement continues, the Government's $20bn
revenue target for the year may still be achievable. In the meantime TUROFED,
the official government tourist agency, is already forecasting a 20% rise in
tourism for 2007.
The property market
The rise in interest rates has taken its toll on the residential property market
more than any other area of the economy. Monthly interest rates on housing loans
have increased from 1% to 2.5%, with the result that a survey amongst would-be
buyers revealed that 65% of them would delay their purchase for at least a year.
The demand for new properties has fared better than that for existing homes
since developers have been able to offer incentives that homeowners cannot. Free
holidays, white and brown goods, are some of the schemes which have been
introduced. The result is that apartment prices in Istanbul have declined by
between 7% and 15% but a gap has opened up between new and old, with new prices
largely maintaining pre-crisis levels.
Rents continue to move ahead as a result of the supply/demand imbalance. In
August alone prices were up 1.98% to stand approximately 20% higher than a year
ago.
The Government is doing all it can to alleviate the problem and TOKI, the
housing development association, has announced it will put a total of 6,220
affordable homes on the market in various suburbs of Istanbul, Izmir and
Tekirdag at interest rates as low as 0.1% for the first nine months and 1.39%
per month thereafter for their ten year duration. Thus construction activity,
which rose by 21.5% in 2005 and 19.5% in the first half of the current year, is
likely to continue to boost economic growth and employment.
Such a difficult situation will however command further action and the mortgage
reform bill, which was removed from last year's parliamentary agenda, is likely
to be high on this year's. Rumours suggest that new loans will permit a 30 year
borrowing period, with strong fiscal benefits built in. If this is the case it
should provide a strong fillip for the private housing market and a boost to
economic activity.
Investment activity
As at the period end the Fund had made two investments: one the Riverside Resort
at Alanya which was presented when the Fund launched and a further investment in
166,825 square metres of development land on the Bodrum peninsula announced at
the end of April. Just subsequent to the year end the Fund also made a
significant purchase of 917,900 square metres of land located in Riva to the
north east of Istanbul.
Riverside Resort, Alanya
The Riverside Resort is a gated development complex of one, two and three
bedroom apartments, all with balconies or terraces, recreation facilities,
including a half Olympic sized pool and indoor gymnasium. The site is situated
on the edge of the Dim River, 200 metres from the Mediterranean Sea and six
kilometres from the city centre of Alanya, a bustling historic town with nearby
Antalya airport providing regular flights to major European cities.
The complex is built on a 16,400 square metre site and is composed of 215
apartments spread across four blocks of nine floors plus penthouses. The Fund
has contracted to finance the development of 107 apartments based on a price of
Euro740 per square metre to be paid in two tranches, the first Euro6.2m was paid in
April and a further Euro4.2m is due on completion.
Sales at the development have so far been slow, principally due to a number of
cheaper lower quality developments in the immediate region, making off-plan
sales more difficult. The site is now close to completion and we expect the
final payment to be made in the coming weeks.
Following this the Manager will be increasing the sales effort, as we believe
that better results can be achieved once the units are finished and the quality
of the development becomes more apparent. To this end discussions are taking
place with a number of institutions in order to increase sales once the
apartments are completed.
Land on the Bodrum peninsula
At the end of April the Fund purchased 166,825 square metres of sea-front
development land on the Bodrum peninsula, approximately 50kms from Bodrum
international airport. The total purchase price for the site was $34.4m
equivalent to $200 per square metre. As at the period end the site has been
valued at $38.4m.
The peninsula is one of the most attractive spots within Turkey, and popular
with both local and foreign tourists, with its typical Mediterranean landscape,
extremely mild climate, historical and archaeological identity and its active
night life. In 2005 just over 2.5m tourists visited the area. Besides tourism,
Bodrum has also become a highly preferred area amongst holiday home investors.
Villas in Bodrum and particularly in the northern part of the peninsula, where
the Fund has invested, are particularly sought after by wealthy local buyers.
The Manager believes that the most effective way to maximise returns in the
current Turkish property market is to ensure that developments have a unique
concept and to present buyers with a quality offering. By ensuring control over
the entire development and adding in boutique hotels, leisure and retail
facilities to the core residential offering, the Manager believes that a site
will stand out, improving demand and adding a premium to the achievable sales
prices.
Since the announcement in April the Manager has appointed Wimberley Allison Tong
and Goo (WATG) to provide the master planning and architects concept. WATG is
the world's number one hospitality, leisure and entertainment design firm. They
have significant experience in designing hotels, resorts and mixed use schemes
and have designed some of the world's great hotels and resorts, many of which
have become international landmarks. Their past projects have included The
Venetian Resort-Hotel-Casino, Las Vegas; Atlantis Paradise Island, Bahamas; The
Ritz- Carlton, Bali; Hotel Bora Bora, French Polynesia and Disney's Grand
Floridian Resort and Spa.
The Manager has also selected Doga Gayrimenkul to project manage the
development. A young dynamic company with good local contacts, Doga
Gayrimenkul will be overseeing the development from initial planning through to
final handover. They have been involved in the Mese Park and Selenium Country
developments and the Ide Is Merkezi business center. Together the Manager and
Doga Gayrimenkul are currently putting the construction company role out to
tender. Once selected we would expect sales and construction to commence in the
first half of 2007.
Development land in Riva
Following the period end the Fund announced the purchase of a significant parcel
of land in the Riva area. The area is part of the Beykoz-Riva-Kavacik sub
region, located in the north eastern part of the Asian side of Istanbul. Riva is
expected to become a major new area for the development of housing for the
expanding population of Istanbul. Other developers active in the region or with
land holdings there include Alarko, Yapi Kredi Koray, and Dogus.
The total purchase price was $110 million, consisting of an immediate payment of
US$100 million and a payment of $10 million due in September 2007. The Manager
is currently seeking to appoint architects and project managers for the site.
Other activity and outlook
Throughout the period the Manager has appraised a sizeable number of potential
investments. In the main many of the proposals have been very similar apartment
block projects, which, given current supply of comparable projects under
construction, could lead to an oversupply in this sub-sector.
Consequently the Manager is of the view that earlier stage development, where we
can design our own concept and manage not just the immediate development, but
the surrounding area and thus have better control over sales, will be an
effective long term strategy. It is apparent that successful projects have to be
of high quality construction, good architectural design and offer a lifestyle
concept to buyers. By investing in larger sites and combining quality foreign
architecture, with strong international brands the Fund can seek to set prices
in the areas it invests and to some degree immunize against price fluctuations.
Clearly it would be foolish to rule out finding value in shorter term, lower
quality, high volume sites. By their nature, they are however, far more
susceptible to market movements and need to be viewed in that light.
Looking forward the Manager is currently reviewing investments in a number of
front line locations around Turkey and sites in Istanbul and Izmir. We are also
investigating the feasibility of a golf resort in southern Turkey and projects
in some Anatolian towns. We believe that this strong pipeline will generate more
than sufficient investments to enable the Fund's remaining assets to be fully
invested.
Development Capital Management
October 2006
CONSOLIDATED BALANCE SHEET
As at 31 August 2006
Group Company
2006 2006
Notes # #
Non-current assets
Investment in Subsidiaries 8 - 5
Inventories 5 19,377,286 -
Loans & receivables 6 4,381,865 81,928,195
---------- ---------
23,759,151 81,928,200
Current assets
Other receivables 9 612,736 265,720
Cash and cash equivalents 14 114,862,336 56,053,485
---------- ---------
115,475,072 56,319,205
---------- ---------
Total assets 139,234,223 138,247,405
---------- ---------
Current liabilities
Other payables 10 (197,125) (196,542)
---------- ----------
Net assets 139,037,098 138,050,863
---------- ----------
Equity
Share capital 11 150,000,000 150,000,000
Retained earnings 12 (10,962,860) (11,949,137)
---------- ----------
Equity attributable to owners of the parent 139,037,140 138,050,863
Minority interest equity (42) -
---------- ----------
Total Equity 139,037,098 138,050,863
---------- ----------
Net asset value per Ordinary share (pence) 13 92.7 92.7
These financial statements were approved by the Board of Directors on
11 December 2006
Sir Timothy Daunt
Roger King
CONSOLIDATED INCOME STATEMENT
For the period 9 December 2005 to 31 August 2006
notes #
Income
Bank interest 3,709,237
---------
Total income 3,709,237
---------
Operating expenses
Management fee 2 (2,030,136)
Other operating expenses 3 (663,645)
Foreign exchange losses (210,870)
---------
Total operating expenses (2,904,651)
---------
Profit for the period 804,586
Attributable to:
Equity shareholders of the company 804,585
Minority interest 1
---------
804,586
---------
Basic and diluted earnings per share (pence) 4 0.5
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the period 9 December 2005 to 31 August 2006
Group Share Retained Minority
capital earnings interest Total
# # #
Balance at commencement - - - -
of period
Profit for the period - 804,587 (1) 804,586
Issue of shares 150,000,000 - - 150,000,000
Expenses of share issue - (11,250,000) - (11,250,000)
Foreign exchange on
subsidiary translation - (517,447) (41) (517,488)
---------- ---------- ------- ----------
At 31 August 2006 150,000,000 (10,962,860) (42) 139,037,098
---------- ---------- ------- ----------
Company Share Revenue Minority
capital reserves interest Total
# # # #
Balance at commencement - - - -
of period
Loss for the period - (699,137) - (699,137)
Issue of shares 150,000,000 - - 150,000,000
Expenses of share issue - (11,250,000) - (11,250,000)
---------- ---------- ------- ----------
At 31 August 2006 150,000,000 (11,949,137) - 138,050,863
---------- ---------- ------- ----------
CONSOLIDATED STATEMENT OF CASH FLOWS
For the period 9 December 2005 to 31 August 2006
Group Company
# #
Cash flow from operating activities
Profit/(loss) for period 804,586 (699,137)
Net foreign exchange losses 210,870 1,722,927
Increase in other receivables (612,736) (265,720)
Increase in other payables 197,125 196,537
--------- ---------
Net cash outflow from operating activities 599,845 954,607
--------- ---------
Cash flow from investing activities
Loans to subsidiaries - (83,530,638)
Purchase of land (19,768,599) -
Loan to developer (4,472,247) -
---------- ----------
Net cash outflow from investing activities (24,240,846) (83,530,638)
---------- ----------
Cash flow from financing activities
Issue of Ordinary shares 150,000,000 150,000,000
Share issue expenses (11,250,000) (11,250,000)
---------- ----------
Net cash inflow from financing activities 138,750,000 138,750,000
---------- ----------
---------- ----------
Net increase in cash and cash equivalents 115,108,999 56,173,969
---------- ----------
Cash and cash equivalents at start of the period - -
Effect of foreign exchange rates (246,663) (120,484)
---------- ----------
Cash and cash equivalents at 31 August 2006 114,862,336 56,053,485
---------- ----------
Notes to the Financial Statements
1 Accounting Policies
The consolidated financial statements of the Fund for the period ended 31 August
2006 comprise the Fund and its subsidiaries (together, the 'Group') and have
been prepared in accordance with International Financial Reporting Standards
("IFRS") issued by the International Accounting Standards Board (IASB) and
interpretations issued by the International Financial Reporting Committee of the
IASB (IFRIC).
(a) Basis of preparation
The financial statements have been prepared on a historical cost basis, except
for certain financial instruments detailed below.
(b) Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Fund and entities controlled by the Fund (its subsidiaries) made up to 31
August each year. Control exists when the Fund has the power, directly or
indirectly, to govern the financial and operating policies of an entity so as to
obtain benefits from its 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.
(c) Revenue recognition
Interest receivable on fixed interest securities is recognised on an effective
yield basis. Interest on short term deposits, expenses and interest payable are
treated on an accruals basis.
(d) Expenses
All expenses are charged through the income statement in the period in which the
service or goods are provided to the fund, except for expenses which are
incidental to the disposal of an investment which are deducted from the disposal
proceeds of the investment.
(e) Investments
General
Assets are recognised at the trade date on acquisition and disposal. Proceeds
will be measured at fair value which will be regarded as the proceeds of sale
less any transaction costs.
Inventories
Inventories are stated at the lower of cost and net realisable value. Land
inventory is recognised at the time a liability is recognised - generally after
the exchange of unconditional contracts.
Loans and receivables
Loans and receivables are recognised on an amortised cost basis. Where they are
denominated in a foreign currency they are translated at the prevailing balance
sheet exchange rate.
(f) Cash and cash equivalents
Cash and cash equivalents comprise current deposits with banks.
(g) Taxation
The Fund is an Exempt Company for Jersey taxation purposes. The Fund pays an
exempt company fee, for each company within the group, which is currently #600
per annum. However, withholding tax may be payable on repatriation of assets and
income to the Fund.
The subsidiaries will be liable for Turkish corporation tax at a rate of 20%.
Additionally, the land sale and purchase fee may arise when land is purchased.
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.
(h) Foreign currency
The results and financial position of the Fund are expressed in pounds Sterling,
which is the functional currency of the Fund.
Transactions in currencies other than sterling are recorded at the rates of
exchange prevailing on the dates of the transactions. At each balance sheet
date, monetary items and non monetary assets and liabilities that are fair
valued and that are denominated in foreign currencies are retranslated at the
rates prevailing on the balance sheet date. Exchange differences on translation
of the Fund's net investment in foreign operations are recognised directly in
equity.
(i) Share Capital
Ordinary share capital
Ordinary shares are classified as equity. External costs directly attributable
to the issue of new shares are shown as a deduction to reserves
(j) New standards and interpretations not applied
During the year, the IASB and IRIC have issued the following standards and
interpretations to be applied to financial periods commencing on or after the
following dates:
1 January 2006
International Accounting Standards (IAS/IFRS)
IFRS 1 Amendment relating to IFRS 6
IFRS 4 Insurance contracts (amendment to IAS 30 and IFRS 4 - Financial Guarantee
Contracts)
IFRS 6 Exploration and Evaluation of Mineral Assets
IFRS 6 Amendment relating to IFRS 6
IFRS 7 Financial Instruments: Disclosures
IAS 39 Fair Value Option
IAS 39 Amendments to IAS 30 - Transition and Initial Recognition of Financial
Assets and Financial Liabilities (Day 1 Profits)
IAS 39 Cash Flow Hedge Accounting
IAS 39 Amendment to IAS 39 and IFRS 4 - Financial Guarantee Contracts
IAS 21 Amendments to IAS 21 - The Effects of Changes in Foreign Exchange Rates -
Net Investment in a Foreign Operation
IAS 19 Amendment - Actuarial Gains and Losses, Group Plans and Disclosures
IFRIC 4 Determining whether an arrangement contains a lease
IFRIC 5 Rights to Interests arising from Decommissioning, Restoration and
Environmental Rehabilitation Funds
IFRIC 8 Scope of IFRS 2
IFRIC 9 Reassessment of Embedded Derivatives
1 January 2007
IAS 1 Amendment - Presentation of Financial Statements: Capital Disclosures
The directors do not anticipate that the adoption of these standards and
interpretations will have a material impact on the financial statements in the
period of initial application. Upon adoption of IFRS 7, the Group will have to
disclose additional information about its financial instruments, their
significance and the nature and extent of risks that they give rise to. There
will be no effect on reported income or net assets.
2 Management fee
Management fee 2,030,136
The Manager receives a management fee quarterly in advance of 2% per annum of
the net amount raised by the placing plus any capital gains retained for
investment. The fees of the Investment Adviser will be met by the Manager.
The management agreement between the Fund and the Manager is terminable by the
Manager on six month's notice and the Fund on twelve month's notice, subject to
an initial term of twenty four months.
3 Other operating expenses
Marketing 136,841
Legal and professional fees 169,072
Administration fees 63,707
Directors remuneration 76,521
Travel and subsistence 56,839
Audit services 40,000
Other operating expenses 120,665
---------
663,645
---------
The company has no employees.
4 Earnings per share
The basic and diluted earnings per Ordinary share is based on the net profit for
the period of #804,586 and on 150,000,000 Ordinary shares.
5 Inventories
Group Company
Land held for development 19,377,286 -
This represents the purchase of 166,825 square metre of development land on the
Bodrum peninsula. The fund intends to develop the site into a villa complex.
6 Loans and receivables
Loan to third party 4,472,251 -
Loans to subsidiaries - 83,530,638
Exchange loss on revaluation of loan (90,386) (1,602,443)
--------- ---------
4,381,865 81,928,195
--------- ---------
The third party loan is EUR 6,226,656 in respect of the investment in the
Riverside Resort secured by a mortgage. No interest is accruing and repayments
are based upon sales of the development. The intercompany loans have no interest
accruing, nor repayment date and principally relate to the purchase and
development of land. The fund has a guarantee in place for EUR 4,151,104 in
respect of a second tranche payment to Okyapi, for the Riverside Resort
development in Alanya should it complete, this is included within the cash
balance.
7 Foreign currency loses
Translation of cash balances (167,574) (167,574)
Foreign exchange on settlement 47,090 47,090
Loss on loans (90,386) (1,602,443)
-------- ---------
Net currency losses (210,870) (1,722,927)
-------- ---------
8 Investment in subsidiary undertakings
Name Country of Authorised Issued
incorporation Share capital Share capital Ownership %
Ottoman Finance
Company 1
Limited Jersey 10,000 #1 100
Ottoman Finance
Company 2
Limited Jersey 10,000 #1 100
Ottoman Finance
Company 3
Limited Jersey 10,000 #1 100
Ottoman Finance
Company 4
Limited Jersey 10,000 #1 100
Ottoman Finance
Company 5
Limited Jersey 10,000 #1 100
Osmanli Yapi 1 Turkey TL 50, 000 TL 50, 000 99.99
Osmanli Yapi 2 Turkey TL 50, 000 TL 50, 000 99.99
Osmanli Yapi 3 Turkey TL 50, 000 TL 50, 000 99.99
Osmanli Yapi 4 Turkey TL 50, 000 TL 50, 000 99.99
All of the above subsidiaries have been incorporated into the group accounts.
9 Debtors - Group and Company
Group Company
# #
Prepayments 265,720 265,720
Land registry tax recoverable. 347,016 -
-------- ---------
612,736 265,720
-------- ---------
The fund paid sellers fees in respect of a land purchase at Riva to take place
on 1 September 2006. This amount was deducted from the purchase price paid to
seller on 1 September 2006.
The directors consider that the carrying amount of the debtors approximates to
their fair value.
10 Creditors - amounts falling due within one year
Group Company
Accruals 197,125 196,537
Amounts due to subsidiaries - 5
-------- ---------
197,125 196,542
-------- ---------
The directors consider that the carrying amount of the creditors approximates to
their fair value.
11 Called up share capital
Authorised:
Founder shares of no par value 10
Ordinary shares of no par value Unlimited
Issued and fully paid: #
2 Founder shares of no par value -
---------
150,000,000 Ordinary Shares of no par value 150,000,000
On incorporation of the Fund, 2 Founder shares of no par value were issued to
the Manager. These shares are not eligible for participation in the Fund
investments and carry no voting rights at general meetings of the Fund.
On the initial launch date, 28 December 2005, 150,000,000 Ordinary shares of no
par value were issued.
12 Retained earnings
Group Company
# #
At start of the period - -
Bank and deposit interest earned 3,709,237 3,708,374
Operating expenses (2,693,781) (2,684,584)
--------- ---------
1,015,456 1,023,790
--------- ---------
Net movement on foreign exchange (210,870) (1,722,927)
--------- ---------
Profit/(loss) for the period 804,586 (699,137)
Foreign exchange on subsidiary translation (517,488) -
Sales commission and formation expenses (11,250,000) (11,250,000)
Minority interest 42 -
---------- ----------
At 31 August 2006 (10,962,860) (11,949,137)
13 Net Asset Value per share
The net asset value per Ordinary share is based on the net assets attributable
to equity shareholders of #139,037,098 and on 150,000,000 Ordinary shares, being
the number of Ordinary shares in issue at the period end.
14 Cash and cash equivalents
Group Company
# #
Bank balances 112,068,861 53,260,010
Loan guarantee 2,793,475 2,793,475
---------- ---------
114,862,336 56,053,485
---------- ---------
Details of the loan guarantee are provided in note 6.
15 Financial instruments
The Fund's financial instruments comprise investments, loans, 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 principal risks the Group faces through the holding of financial instruments
are:
* Market risk
* Credit risk
* Foreign currency risk
* Interest rate risk, and
* Liquidity risk
The Board reviews and agrees policies for managing each of these risks. As
required by IAS32: Disclosure and Presentation, an analysis of financial assets
and liabilities, which identifies the risk to the Fund of holding such items is
given below.
Market price risk
Market price risk arises mainly from uncertainty about future prices of
financial instruments used in the Fund's operations. It represents the potential
loss the Fund might suffer through holding market positions as a consequence of
price movements and movements in exchange rates.
Credit risk
The Fund places loans with third parties and is therefore potentially at risk
from the failure of any such third party of which it is a debtor.
Recovery of the loans is dependent on successful completion and sale of
properties by the developer.
Further details of loans made to subsidiaries and developers can be found in
note 6.
Foreign currency risk
The Group operates Sterling, Euro, US dollar and Turkish Lira bank accounts.
Exchange gains or losses arise as a result of the movement in the exchange rate
between the date of the transaction denominated in a currency other than
Sterling and its settlement. An analysis of the Group's currency exposure is
detailed below:
Investment Net mometary
At 31 August At 31 August
# #
Euro 4,381,865 3,395,067
US Dollar 19,377,286 56,997,128
Turkish Lira - 1,811,722
------------ ------------
23,759,151 62,203,917
------------ ------------
Interest rate risk
The Fund cash balances earn interest at the prevailing market rate, dependant on
the account type.
Floating rate Non interest
bearing
At 31 August At 31 August
Sterling 52,658,419 -
Euro 601,592 7,175,340
US Dollar 56,997,128 19,377,286
Turkish Lira 1,811,722 -
-------------- ---------------
112,068,861 26,552,626
-------------- ---------------
Liquidity risk
The Fund assets mainly comprise cash balances and realisable investments, which
can be sold to meet funding commitments if necessary.
16 Commitments
As part of the financing agreement covering the Riverside Resort in Alanya a
further payment of EUR 4,151,104 will become due on completion of the
development. This is expected to be early December 2006. This commitment is
covered by the guarantee laid out in note 6.
17 Post balance sheet events
On the 1 September the Fund agreed to purchase 917,900 square metres of
development land, located in Riva, a region to the north east of Istanbul. The
total purchase price amounts to USD 110m, USD 10m of which is due in one year's
time. The Fund intends to develop the site over a four to five year period.
18 Related party transactions
Information regarding subsidiaries and subsidiary loans can be found in note 6.
The Fund's Broker, Numis Securities Limited holds an option to purchase 1.25% of
the issued share capital of the fund at a price of #1 per share. This option
will lapse on the 5th anniversary of admission.
19 Directors interests
Total compensation to the Directors over the period was #76,521.
Sir Timothy Daunt and Sencar Toker each hold 5,000 Ordinary shares. By virtue of
being a director of the Manager Roger Maddock is treated as being interested in
the one million shares held by the Manager.
20 Domicile
The Ottoman Fund Limited is a company domiciled in Jersey, Channel Islands.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR GUGCAPUPQGUC
Ottoman Fund (LSE:OTM)
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