Final Results

RNS Number : 6431D

Off-Plan Fund Limited (The)

25 March 2011

 



25 March 2011

THE OFF-PLAN FUND LIMITED

(the "Company" or the "Fund")

Final Results for the year ended 30 September 2010

CHAIRMAN'S STATEMENT

Introduction

Having undertaken an orderly disposal of its assets, to date the Company has returned approximately £6 million to Participating Shareholders, following compulsory partial redemptions of Participating Shares in October 2009 and April 2010.  Following the redemption in April 2010, the Company's only assets were its cash balances and the benefit of an insurance claim to recover a £1.1 million deposit paid in respect of Canon House, Wallington.  The claim was settled in full and the proceeds received in November 2010.  It is now intended that either all or a substantial majority of this cash, which is expected to be approximately £1.6 million by 31 March 2011, be returned to Members.

 

Rather than immediately seeking to wind up the Company, and following consultation with certain Members, the Board has invited Members to decide whether the Company should continue or be wound up. If the Company is to continue, up to 94 per cent of its cash will be distributed amongst members through the Redemption, leaving a cash balance for the Company's reduced working capital requirements.  The Company's objective on continuation would be to undertake an acquisition or acquisitions which would constitute a reverse takeover under the AIM Rules.

 

Save where the context requires otherwise, defined terms used in this statement have the same meaning as given in the Company's circular to shareholders dated 8 March 2011 ("Circular"). 

Performance

The audited net asset value ("NAV") of the Fund at 30 September 2010 was £1.6 million (2009: £7.1 million). The NAV per ordinary share had increased to 69.8p at year-end from 63.4p at 30 September 2009.

Property disposals completed during the period

During the year, the Fund sold nine apartments at The Heart, Walton-on-Thames, for £1.66 million. One of the apartments was sold in November 2009 for £191,606 and the remaining 8 apartments were sold in March 2010 for a total consideration of £1.332 million.

Recovery of Canon House deposit

Further to the rescission by the Fund of each of the purchase agreements entered into between the Fund and Henry Homes (Wallington) Limited ("HHW") in respect of 118 residential units which were to comprise part of the Canon House development in Wallington (the "Agreements"), the Fund has secured the return of sums outstanding following the rescission of the Agreements.

On 4 and 16 November 2010, Zurich Insurance settled amounts totalling £1,099,997 against these deposit amounts and these are included in the results for the year ended 30 September 2010.

Redemptions during the period

On 26 October 2009 the Fund announced that it had posted a circular to its shareholders detailing proposals to redeem, on a pro rata basis, up to 5,576,549 Participating Shares, equivalent to 50 per cent of the 11,153,098 Participating Shares in issue, for cancellation in accordance with the relevant provisions of the Companies (Jersey) Law 1991. The Participating Shares were redeemed on 30 October 2009 pursuant to Article 36 of the Fund's Articles to those Members that were registered holders on that redemption date at a price of £0.70 per Participating Share.

On 30 April 2010 the Fund announced that it had posted a circular to its shareholders detailing proposals to redeem, on a pro rata basis, up to 3,345,932 Participating Shares, equivalent to 60 per cent of the 5,576,553 Participating Shares in issue, for cancellation in accordance with the relevant provisions of the Companies (Jersey) Law 1991. The Participating Shares were redeemed on 14 May 2010 pursuant to Article 36 of the Fund's Articles to those Members that were registered holders on that redemption date at a price of £0.63 per Participating Share.

Proposed continuation vote

On 8 March 2011, the Company announced that it had posted the Circular to Members detailing the proposed redemption of a substantial majority of the Company's cash balances.  The Circular contains notice of an extraordinary general meeting to be held on 31 March 2011, at which resolutions will be proposed to give Members the option to vote on whether the Company should continue as an investing company (with a new investing policy) or whether the Company should be wound-up and its admission to AIM cancelled.

In order for the Company to be able to continue, two thirds of Participating Shareholders either present in person or by proxy at the EGM must vote in favour of the Continuation Resolution and certain other resolutions required to facilitate the continuation of the Company.  In addition, the consent of the JFSC is required to allow the Company to continue as an operating company so the Proposals are conditional on JFSC consent. 

If the Continuation Resolution and related Resolutions are not passed, or if they are passed but JFSC consent is not received, the Directors will, conditional on shareholder approval, take steps to wind-up the Company.  In order for the Company to be wound up and its admission to AIM cancelled, three quarters (i.e. 75% or more) of Participating Shareholders either present in person or by proxy at the EGM must vote in favour of the Winding-up Resolution.  The Winding-up Resolution, if passed, is conditional on either: (i) any of the Continuation Resolution and related Resolutions not being passed; and (ii) JFSC consent to the Proposals being refused. In the event that the Winding-up Resolution is passed and become effective, the Company will be wound up as soon as practically possible through a full redemption of all of the Participating Shares in issue, as described below.

There is a risk that neither the Continuation Resolution and related Resolutions nor the Winding-Up Resolution is passed.  In such circumstances, the Company will proceed with the Alternative Redemption as detailed below and will in due course convene another meeting to consider the winding up of the Company and cancellation of its admission to trading on AIM.

Continuation

If the relevant Resolutions are passed and the JFSC's consent is obtained, it is proposed that the Company will distribute (subject to the election of Members, as described below) up to 94 per cent. of the Company's cash balance to Members (approximately £1,488,000) by way of a partial redemption of Participating Shares. Following the passing of the relevant Resolutions, up to 94 per cent. of Participating Shareholders' existing holding(s) in the Company will be redeemed at the Effective Price (the "Maximum Redemption"). The Maximum Redemption, however, is not compulsory and Members can elect to have a lower proportion of their holding redeemed should they wish to retain a greater interest in the Company following the Effective Date.  The potential outcomes in the case of the Continuation Resolution (and related Resolutions) being passed, the Winding-Up Resolution being passed or neither being passed are set out below:

	Redemption upon continuation	Upon winding up	Alternative Redemption
Expected available cash as at 28 March 2011 (being the date of the EGM)	£1,590,000*	£1,600,000	£1,600,000
Approximate no. of  Participating Shares to be redeemed	2,096,799	2,230,637	2,183,098
Redemption price	71p	69.5p	71p
Approximate resulting cash redemption	£1,488,000	£1,550,000	£1,550,000
Approximate percentage of Fund's cash assets distributed	94%	97%	97%
Approximate remaining cash assets of the Fund / Retention for winding up costs	£112,000**	£50,000	£50,000

* £10,000 deduction for contingency purposes.

** Assuming all Participating Shareholders elect for the Maximum Redemption.

The Maximum Redemption

In light of the possibility of continuing as an investing company, the Board has considered the minimum prudent working capital requirements of the Company. If the Continuation Resolution is passed, the Board will put in place arrangements to significantly reduce the ongoing working capital requirements of the Company which, in the absence of entering into a transaction, will be not greater than £100,000 per annum.

These arrangements will be put in place immediately following the EGM should the relevant Resolutions be approved by Members.  Therefore, the Company would have sufficient working capital for 12 months following the EGM; however, it is proposed that the Company would seek to raise additional funds after the Effective Date, as described below. 

The Directors will need to be able to confirm the cashflow solvency of the Company for a period of one year after the Redemption in order to comply with the relevant provision of Jersey Law.

Proposed Subscription

Following completion of the election process, the Directors may conclude that it would be advantageous to increase the Company's cash balances.  Subject to investor demand and the passing of the relevant Resolutions, the Company may issue new ordinary shares by way of a subscription or placing immediately following conclusion of the Extraordinary General Meeting.  There can be no guarantee that any such proposed subscription or placing will be successful. Certain Resolutions being proposed at the EGM will give the Directors authority to issue up to 4,000,000 ordinary shares following the Effective Date and Admission without the new pre-emption rights contained in the new Articles applying.  The level of authorities to be granted pursuant to these Resolutions are greater than standard market practice, however, the Directors consider the proposed subscription as a one-off event in connection with the potential continuation of the Company.   They also consider that the Company should have maximum flexibility to raise funds by way of an equity subscription.

Capital Reorganisation

In structuring the Redemption, the Board considers that should the Redemption proceed, it would be more appropriate for the Fund to have a higher number of shares in issue and, therefore, a lower share price following the Effective Date.  Therefore, a capital reorganisation is being proposed which, if approved and conditional upon the Continuation Resolution being passed, will have the effect of replacing each share in issue with 10 new shares, and accordingly reducing the net asset value per share on a pro rata basis. If the relevant resolution is passed, the resulting capital reorganisation will be effected immediately following the Redemption.

Proposed investing policy

Conditional upon the Continuation Resolution and other relevant resolutions being passed at the Extraordinary General Meeting, the Company will continue as an "investing company" for the purposes of the AIM Rules but will have a new objective which would be to make an acquisition or acquisitions which would constitute a reverse takeover under Rule 14 of the AIM Rules within 12 months of the date on which the Company completed its divestment of all of its property assets (i.e. the date of the receipt of funds pursuant to the insurance claim for deposits paid in respect of Canon House, Wallington announced on 24 November 2010).  As such and conditional upon the Continuation Resolution and other relevant resolutions being passed, it is proposed that the Company adopts a new investing policy.

Background

The Board believes that growth in the generation of household and industrial waste has created an increasing waste disposal problem, with associated environmental and public health issues.  Environmental legislation is becoming ever more stringent and the UK government has introduced fiscal legislation in the form of landfill tax to make landfill less economic and alternative disposal and treatment technologies price competitive.  Accordingly, the Board believes that companies providing other treatment solutions, often using new technologies to handle the remaining waste residues could offer solutions for which there will be strong demand. Owing to the relatively high calorific value of much of the residual waste, many of these solutions and technologies focus on either the conversion of waste into a fuel or the recovery of energy from waste which may be used to create higher value products such as power, steam, hydrogen and basic chemicals.

The Board's view is that fully developed and commercially viable waste treatment processes can generate significant value, as they contribute to both solving the waste problem and reducing reliance on imported fossil fuels.  Waste is increasingly considered as a sustainable and renewable source of energy, or feed stock, rather than a problem for disposal.

Change of name

In order to reflect the change in its activities, and conditional upon the Continuation Resolution and other relevant resolutions being approved, it is proposed that the Company's name is changed to Cholet Investments plc.

Board changes and consultancy arrangements

Should the relevant Resolutions be passed at the Extraordinary General Meeting, as described above the operating costs of the Company will be significantly lower than those currently incurred.  It is intended that in the event that such Resolutions are passed, Donald Reid will step down as a director of the Company but Roger King will continue as Non-executive Chairman and Roger Maddock will continue as a Non-executive Director. In addition, conditional on such Resolutions being passed and certain other conditions, the Board intends to appoint Brian Howard to the Board as a Non-executive Director.

Mr. Howard has held senior positions in the waste management and recycling industry for over 25 years. This included fifteen years as the Managing Director of Thames Waste Management Limited, a subsidiary of Thames Water Plc and then RWE A.G. the German multi-utility company, and nine years with Cleanaway Limited.  Prior to this, having obtained a degree in Civil Engineering from University College London and a Masters degree in Structural Engineering from Imperial College, he held appointments in both civil engineering consultancy and contracting companies.

More recently he has worked with the private equity group, Englefield Capital, researching and negotiating possible acquisitions and investments in this sector. Two companies were acquired successfully which had a combined annual turnover of over £40 million. He is a member of both the Institution of Civil Engineers and the Chartered Institute of Waste Management and has an MBA from the City University. Mr. Howard will be paid a fee of £10,000 per annum.

Consultancy arrangements with DCML

Subject to the passing of the Resolutions, the Company also proposes to enter into a consultancy agreement with Development Capital Management Limited ("DCML"). Pursuant to this agreement DCML will provide certain services aimed at helping the Company to achieve its investing policy.

Orderly winding up of the Company

In the event that the relevant Resolutions are not passed at the Extraordinary General Meeting on 31 March 2011 and/or the JFSC do not consent to the Proposals and the Winding-up Resolution is passed, the Board will undertake an orderly winding-up of the Company.  An orderly winding up of the Company requires the following steps to be taken:

1.   All Participating Shares will be redeemed at a price of 69.5 pence per Participating Share;

2.   The holders of founder shares shall vote in favour of the summary winding up of the Company; and

3.   The Directors will implement a summary winding up of the Company.

Assuming a cash balance of approximately £1.6 million as at the date of the EGM, the Board has estimated that the costs of this winding up process will be not greater than £50,000.  This sum will be retained by the Company to fund the winding-up process, which would result in the majority of Company's cash balances being returned to Members, equivalent to approximately 69.5 pence per Participating Share or £1,550,000 million in aggregate.

If the Winding up Resolution is passed and becomes effective, the Directors will exercise their powers pursuant to Article 36.00 of the Company's Articles to redeem the entire participating share capital of the Company held by those Members on the register at 4.30 p.m. on 6 April 2011.  In these circumstances, admission of the Company's participating share capital to trading on AIM would be cancelled at 7.00 a.m. on 7 April 2011.

Readers should note that the full text of the Circular is available on the company's website: www.offplanfund.com

Financial statements prepared on a break-up basis

The financial statements have been prepared on a break-up basis, which is consistent with their preparation in the previous year and is considered by the directors to be the most prudent approach available, notwithstanding that the relevant Resolutions may be passed at the Extraordinary General Meeting.

Roger King

Chairman

25 March 2011

List of Contacts:

Development Capital Management

Andy Gardiner

Tom Pridmore

020 7355 7600

Merchant Securities Limited

(Nominated Adviser and Broker)

Bidhi Bhoma/Simon Clements

020 7628 2200

Consolidated Statement of Comprehensive Income

			Year ended 30 September 2010			Year ended 30 September 2009
			Revenue	Capital	Total	Revenue	Capital	Total
	Note		£	£	£	£	£	£
Unrealised losses on investment property		7	-	-	-	-	(378,016)	(378,016)
Realised losses on property contracts		9	-	-	-	-	(113,323)	(113,323)
Realised gains on sale of property			-	36,316	36,316	-	18,108	18,108
Realised gains on investments held at fair value through profit or loss		8	-	4,820	4,820	-	8,907	8,907
Unrealised (losses)/gains on investments held at fair value through profit or loss		8	-	(6,935)	(6,935)	-	39,486	39,486
Interest income		2	40,457	-	40,457	60,696	-	60,696
Rental income		2	47,838	-	47,838	88,034	-	88,034
Investment management fee		3	(194,223)	-	(194,223)	(186,267)	-	(186,267)
Deposit recovered/(written off)		9	-	1,099,997	1,099,997	-	(1,100,000)	(1,100,000)
Rental expenses		4	(7,708)	-	(7,708)	(31,265)	-	(31,265)
Other expenses		4	(345,133)	-	(345,133)	(275,819)	-	(275,819)
Net profit/(loss) on ordinary activities before taxation			(458,769)	1,134,198	675,429	(344,621)	(1,524,838)	(1,869,459)
Taxation		5	(9,568)	-	(9,568)	(17,607)	-	(17,607)
Provision for winding down expenses		4	(165,524)	-	(165,524)	(100,000)	-	(100,000)
Net profit/(loss) and total comprehensive income for the year			(633,861)	1,134,198	500,337	(462,228)	(1,524,838)	(1,987,066)
Profit/(loss) per share (pence)			(13.7)	24.5	10.8	(4.1)	(13.7)	(17.8)

Notes

(a)  The total column of this statement represents the profit and loss of the Fund.

(b)  Items in the above statement include provisions for an orderly winding down of operations.

(c)  The Group has no recognised gains or losses other than those disclosed in the Consolidated Statement of Comprehensive Income.

(d)  The profit/(loss) per share is calculated on the weight average number of Participating Shares in issue during the year.

(e)  There were no items of Other Comprehensive Income for the year and consequently Net Profit was equal to Total Comprehensive Income.

Consolidated Statement of Financial Position

		2010	2009
	Notes	£	£
Current assets
Investment property	7	-	1,931,184
Investments held at fair value through profit or loss	8	-	105,422
Other receivables	10	1,108,735	161,430
Cash and cash equivalents		784,771	5,041,169
Total assets		1,893,506	7,239,205
Current liabilities
Other payables	11	71,124	71,175
Provision for winding down expenses	12	265,524	100,000
		336,648	171,175
Net Assets		1,556,858	7,068,030
Equity
Stated capital	13	4,493,645	10,505,154
Capital reserve	15	(706,395)	(1,840,593)
Issue costs reserve		(679,868)	(679,868)
Revenue reserve		(1,550,524)	(916,663)
Total shareholders' funds (all equity)		1,556,858	7,068,030
Net asset value per share (pence)	14	69.8	63.4

Consolidated Statement of Cash Flows

		2010	2009
	Notes	£	£
Net cash (outflow) / inflow from operating activities after interest and before taxation	16	(317,608)	1,799,559
Income tax paid		(2,588)	(7,708)
Investing activities
Interest income received		4,500	19,782
Sale of investment property		1,967,500	-
Sale of investments		103,307	2,955,336
Net cash inflow from investing activities		2,075,307	2,975,118
Financing activities
Partial redemptions of shares		(6,011,509)	-
Net cash outflow from financing activities		(6,011,509)	-
Net (decrease) / increase in cash and cash equivalents		(4,256,398)	4,766,969
Cash and cash equivalents at the start of the year		5,041,169	274,200
Cash and cash equivalents at the end of the year		784,771	5,041,169

Consolidated Statement Of Changes In Equity

	Stated Capital	Capital Reserves	Issue Costs Reserve	Revenue Reserve	Total
	£	£	£	£	£
For the year ended 30 September 2010
At 1 October 2009	10,505,154	(1,840,593)	(679,868)	(916,663)	7,068,030
Profit for the year	-	1,134,198	-	(633,861)	500,337
Other comprehensive income	-	-	-	-	-
Total comprehensive income for the year	-	1,134,198	-	(633,861)	(500,337)
Partial redemptions of participation shares	(6,011,509)	-	-	-	(6,011,509)
At 30 September 2010	4,493,645	(706,395)	(679,868)	(1,550,524))	(1,556,858)
For the year ended 30 September 2009
At 1 October 2008	10,505,154	(315,755)	(679,868)	(454,435)	9,055,096
Loss for the year	-	(1,146,822)	-	(462,228)	(1,609,050)
Other comprehensive income	-	-	-	-	-
Total comprehensive income for the year	-	(1,146,822)	-	(462,228)	(1,609,050)
Revaluation of investment property	-	(378,016)	-	-	(378,016)
At 30 September 2009	10,505,154	(1,840,593)	(679,868)	(916,663)	7,068,030

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. Applicable Accounting Standards for these purposes are International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board ("IASB").

Statement of Compliance

The consolidated financial statements have been prepared in accordance with IFRS as issued by the IASB.

Going Concern

At the EGM of the Fund held on 4 December 2009, a resolution was passed to commence an orderly winding down of the Fund's activities. The Fund is hence not a going concern.

The financial statements have therefore been prepared on the break up basis because the Fund is winding down.

The effect on the financial statements is that all assets and liabilities are disclosed as current, and the accounting effect is that the assets and liabilities are recognised at their realisable amounts net of costs of sale (or best estimate thereof). In addition, provision is made for future costs to completion of the orderly wind down of the Fund's activities.

(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 reported 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 property contracts yet to complete and the estimation of costs required to complete the orderly winding down of the Fund. The fair values of the properties are based on the net proceeds of the post balance sheet sale.

(c)    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 30 September 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 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 Fund had one wholly owned subsidiary, OPF Investment Properties Limited, which continued to remain dormant until it was dissolved on 21 July 2010.

(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 Fund 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 Fund 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 Fund'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 Consolidated Statement of Comprehensive Income, 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, investment property and property contracts yet to complete have been capitalised. An assessment of the costs to wind up the Fund is also charged through the income statement. Costs are determined using experience of final legal fees and termination costs to service providers.

(f)     Investments held at fair value through profit or loss

Financial instruments are designated at fair value through 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 or loss are expensed as incurred.

Subsequent to initial recognition, all financial assets at fair value through profit or loss are measured at fair value. Gains and losses arising from changes in fair value are presented in the Consolidated Statement of Comprehensive Income in the year in which they arise. On disposal, realised gains and losses are also recognised in the Consolidated Statement of Comprehensive Income.

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.

(g)     Investment properties

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 Consolidated Statement of Comprehensive Income. As the Financial Statements have been prepared on a break up basis investment property is carried at the amount of net proceeds received from sale.

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.

(h)    Cash and cash equivalents

Cash and cash equivalents in the Consolidated Statement of Financial Position comprise cash at banks with an original maturity of three months or less.

(i)     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 (2009/10: 20 per cent.; 2008/09: 20 per cent.).

With effect from the 2009 year of assessment Jersey abolished the exempt company regime for existing companies.  Profits arising in the Fund for the 2009 year of assessment and future periods will be subject to tax at the rate of zero per cent.  In the prior year the Fund was exempt from taxation under the provisions of Article 123A of the Income Tax (Jersey) Law 1961 as amended.

(j)     Share capital

Founder shares

Founder shares are classified as equity. Founder shares are not eligible for participation in Fund investments and carry no voting rights at general meetings of the Fund.

Participating shares

Participating shares are classified as equity. Participating shares are eligible for participation in Fund investments and carry voting rights at general meetings of the Fund.

(k)    Currency

The results and financial position of the Group are expressed in Pounds Sterling, which is the Group's functional currency.

(l)     Loans and receivables

Loans and receivables are shown on a recoverable basis.  Receivables are of a short-term nature and are accordingly stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts.

(m)    Property contracts yet to complete

The Fund 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 Fund is obliged to purchase these properties at a contracted price, but has the right to sell or transfer the contract to a third party. At the year end there were no properties held using this definition.

(n)     Provisions and contingencies

The Group applies IAS37 "Provisions, Contingent Liabilities and Contingent Assets" ("IAS37") to relevant financial assets and liabilities.  Therefore where the probability of an outflow of resources from a contingent liability is probable a provision is made.  Where the probability is possible but not probable, no provision is recognised.  In respect of a contingent asset, if the contingency is virtually certain (i.e. > 95% certain) the asset is not contingent (and therefore recognised as a receivable); where the contingent benefits are probable (i.e. >50% but <95%) but not certain, an asset is not recognised (and disclosures are made); and where the inflow is not probable (i.e. <50% probability) no asset is recognised and no disclosure is necessary.

(o)    Provision for winding down expenses

Further to the decision for the Fund to be wound down in an orderly fashion, an estimate of the expenses to be incurred by the Fund subsequent to the year end and up to the expected dissolution date of the Fund have been determined and are recognised in the Consolidated Statement of Comprehensive Income.

(p)     Changes in accounting policies

The accounting policies adopted are consistent with those of the previous financial year, except that the Group has adopted the following amendment and new  International Financial Reporting Interpretations Committee (IFRIC) interpretations during the year:           

Amendments to IAS 39, Financial Instruments: Recognition and Measurement (effective for annual periods beginning on or after 1 January 2010).

Amendments to IAS 1 - Presentation of Financial Statements: A Revised Presentation (effective for annual periods beginning on or after 1 January 2010).

Amendments to IAS 27 - Consolidated and Separate Financial Statements (effective for annual periods beginning on or after 1 July 2010).

Revised IFRS 1 - First-time Adoption of International Financial Reporting Standards (effective for annual periods on or after 1 January 2010).

Revised IFRS 2 - Share-based Payment (effective for annual periods on or after 1 January 2010).

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).

Amendment to IFRS 7 - Financial Instruments (effective for annual periods beginning on or after 1 January 2009).

IFRIC 15 - Agreements for the Construction of Real Estate (effective for annual periods beginning on or after 1 January 2009).

Adoption of these standards and interpretations did not have any effect on the financial performance or position of the Group.

There are other standards, amendments and interpretations that are coming into effect, but due to the Fund winding down they have not been adopted:

IAS 24 - Related Party Disclosures (Amendment), (effective for annual periods beginning on or after 1 January 2011).

IAS 32 - Financial Instruments: Presentation - Classification of Rights Issues, (effective for annual periods beginning on or after 1 February 2010).

IFRS 9 - Financial Instruments: Classification and Measurement, (effective for annual periods beginning on or after 1 January 2013).

IFRIC 14 - Prepayments of a Minimum Funding Requirement, (Amendment) (effective for annual periods beginning on or after 1 January 2011).

IFRIC 19 - Extinguishing Financial Liabilities with Equity Instruments, (effective for annual periods beginning on or after 1 July 2010).

Improvements to IFRSs (issued in May 2010), (effective for annual periods beginning on or after 1 July 2010 or 1 January 2011).

2.     Income

		2010	2009
		£	£
Income from fixed interest securities		1,603	19,782
Deposit interest		38,854	40,914
Interest income		40,457	60,696
Rental income		47,838	88,034
		88,295	148,730

3.     Management fee

		2010	2009
		£	£
Management fee		194,223	186,267

The management fees paid to the Manager and Promoter were 2 per cent per annum of the net asset value of the fixed income portfolio held by the Fund, plus any cash amount of deposits paid and outstanding in respect of property contracts yet to complete. In July 2009 the fee was reduced to £175,000 per annum. To take account of the Fund's commencement of an orderly winding down of its activities, the notice period under the management agreement between the Fund and the Manager has been reduced (subject to consent from the Jersey Financial Services Commission). Subject to shareholder approval of the relevant resolutions proposed at the EGM to be held on 31 March 2011, if the Fund is to be wound up, the management fee will no longer be payable. If the Fund is to continue as a cash shell, a consultancy fee of £25,000 per annum shall continue to be payable

4.     Other operating expenses

		2010		2009
		£		£
Legal fees	221,685		112,556
Administration and secretarial services	57,144		38,440
Directors' remuneration	40,000		36,872
Auditors' fees - for audit services	5,700		31,000
Miscellaneous expenses	20,604		56,951
Other expenses		345,133		275,819
Rental expenses		7,708		31,265
Provision for winding down expenses		165,524		100,000
		518,365		407,084

5.     Tax

Profits arising in the Fund for the 2010 Year of Assessment will be subject to Jersey Income Tax at the rate of 0% (2009: 0%).

	2010	2009
	£	£
Reconciliation of taxable profit
Net profit/(loss) on ordinary activities before finance costs and taxation	675,429	(1,869,459)
Adjustment for disallowable income and expenses	(627,591)	1,957,493
Taxable profit	47,838	18,034
Income tax @ 20% (2009: 20%)	9,568	17,607
Effect of different rate	-	-
Total current tax	9,568	17,607

6.     Profit/(loss) per share

The profit per share is based on the net profit for the year of £571,461 (2009: loss of £1,987,066) and on 4,632,365 shares (2009: 11,153,098), being the weighted average number of shares in issue.

7.     Investment property

		2010	2009
		£	£
Opening valuation		1,931,184	804,500
Movement during the year:
Transfer from property contracts yet to complete		-	1,504,700
Sale of investment property		(1,931,184)	-
Fair value adjustment		-	(34,700)
		-	2,274,500
Effect of break up basis			(343,316)
Closing fair value		-	1,931,184

The investment properties were sold in close proximity to the previous year end therefore the net proceeds were used as the closing fair value in the financial statements as at 30 September 2009 (see note 21). The historic cost of these properties was £2,493,883 and the gross sale proceeds received was £1,967,500. The rental income arising from these properties in the year was £47,838 (2009: £88,034) with direct expenses of £7,708 (2009: £31,265).

8.     Investments held at fair value through profit or loss

		2010	2009
		£	£
Opening valuation		105,422	3,012,365
Opening unrealised (profit)/loss		(6,935)	32,551
Opening book cost		98,487	3,044,916
Movements during the year:
Sales - proceeds		(103,307)	(2,951,762)
Sales - realised gains		4,820	8,907
Effective yield adjustment - realised		-	(4,277)
Effective yield adjustment - unrealised		-	703
Closing book cost		-	98,487
Closing unrealised gains		-	6,935
Closing fair value		-	105,422
Being comprised at the year end of:
100,000 Dexia Municipal Agency 4.5% 2011		-	105,422

9.     Property contracts yet to complete

		2009
		£
Opening book cost		1,508,823
Movements in the year:
The Heart
Completion payments	1,499,072
Capitalisation costs	7,812
Sale of Flat 405 at cost	(167,184)
Transfer to Investment Property	(1,504,700)	(165,000)
Canon House
Capitalised costs	19,500
Write-off deposit after rescission of contract	(1,100,000)
Retention recoverable from Mundays Solicitors	(150,000)
Write-off of capitalised costs	(113,323)	(1,343,823)
Closing book cost		-

The Heart

In late 2008, the Fund completed the purchase of 10 one-bedroom apartments at The Heart, Walton-on-Thames, for £1.66 million. One of the apartments was sold during the period for £185,292, one in November 2009 for £191,606 and the remaining 8 apartments were sold in March 2010 for a total consideration of £1.332 million.

Canon House

In the previous year, the Fund exercised its rights to rescind the purchase agreement in respect of the proposed Canon House development in Wallington, which resulted in a write off of capitalised expenses of £113,323 and deposits amounting to £1.1 million. On 22 September 2009 the Fund received £3 million previously held in escrow by AIB as collateral for the completion guarantee provided by AIB to BoS in respect of the Funds former obligation under the agreements. Subsequent to the year end date, on 4 and 16 November 2010, Zurich Insurance settled amounts totalling £1,099,997 against these deposit amounts and these are included in the results for the year ended 30 September 2010.

10.   Other receivables

		2010	2009
		£	£
Amount due on insurance claim for deposit recovery		1,099,997	-
Amount retained by Mundays Solicitors for Wallington		-	150,000
Interest receivable		207	2,897
Rent receivable		1,912	3,704
Prepayments		6,619	4,829
		1,108,735	161,430

Included in the results for the year ended 30 September 2009, £1,100,000 of deposits paid to HHW were written off on rescission of the purchase agreements in respect of Canon House, Wallington. Subsequent to the balance sheet date, on 4 and 16 November 2010, Zurich Insurance settled amounts totalling £1,099,997 against these deposit amounts and these are included in the results for the year ended 30 September 2010.

Prepayments at the year end relate to other expenses which have been settled in advance, the economic benefit of which shall be used up prior to the anticipated wind up date.

11.   Other payables

		2010	2009
		£	£
Accruals		54,245	61,276
Tax		16,879	9,899
		71,124	71,175

12.   Provision for winding down expenses

		2010	2009
		£	£
Legal fees		10,000	-
Administration and secretarial services		27,125	-
Directors' remuneration		23,333	-
Auditors' fees		2,500	-
Miscellaneous expenses		202,566	100,000
		265,524	100,000

13.   Stated capital

The Fund is a no par value ("NPV") company. All costs associated with the issue of shares have been taken to the issue costs reserve.

Authorised:		2010	2009
		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:		2010	2009
		Number	Number
Founder shares		2	2
Participating shares		2,230,637	11,153,098

14.   Net asset value per share

		Net asset value attributable per share
		2010	2009
		P	p
Participating shares		69.8	63.4

		Net asset value
		2010	2009
		£	£
		1,556,858	7,068,030

15.   Capital reserves

		2010	2009
		£	£
Capital reserve - realised
Opening balance		(1,284,829)	(98,521)
Recovery/(write off) of deposit		1,099,997	(1,100,000)
Realised loss on property		-	(113,323)
Realised gain on sale of property		36,316	18,108
Realised gains on investments		4,820	8,907
Closing balance		(143,696)	(1,284,829)
Capital reserve - unrealised
Opening balance		(555,764)	(217,234)
Movements in fair value of investment properties		-	(378,016)
Movements in fair value of investments		(6,935)	39,486
Closing balance		(562,699)	(555,764)
Total capital reserve		(706,395)	(1,840,593)

16.   Cash outflow from operating activities

		2010	2009
		£	£
Deposits and acquisition costs relating to property contracts		150,000	(1,526,384)
Cash released from escrow		-	3,000,000
Rental income received		45,765	89,383
Deposit interest received		38,647	225,444
Sale of property		-	185,292
Proceeds for rescission of Oldham Place		-	332,489
Investment management fees paid		(194,223)	(186,267)
Rental expenses		(7,342)	(31,265)
Other expenses		(350,455)	(289,133)
Net cash (outflow) / inflow from operating activities		(317,608)	1,799,559

17.   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 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 (other than the inclusion of a deposit with Mundays Solicitors for 2009), at 30 September 2010 was as follows:

	Weighted average period for which rate is fixed Years	Weighted average interest rate %	Fixed interest £	Floating rate £	Non-interest bearing £
2010
Assets
Fixed deposits	0.08	0.5	770,380	-	-
Sterling cash deposit	-	-	-	-	14,391
Other receivables	-	-	-	-	1,108,735
Total assets	0.08	0.5	770,380	-	1,123,126

	Weighted average period for which rate is fixed Years	Weighted average interest rate %	Fixed interest £	Floating rate £	Non-interest bearing £
2009
Assets
Fixed interest securities	1.16	0.63	105,422	-	-
Sterling cash deposit	-	1.00	-	5,041,169	-
Other receivables	-	1.00	-	150,000	-
	1.16	0.95	105,422	5,191,169	-

The floating rate assets consist of cash deposits on call earning interest at prevailing market rates.

	Within 1 Year £	Within 2-3 Years £	Within 4-5 Years £	More than 5 Years £	Total £
2010
Fixed rate
Fixed deposits	770,380	-	-	-	770,380
	770,380	-	-	-	770,380
Non-interest bearing
Cash and cash equivalents	14,391	-	-	-	14,391
Other receivables	1,108,735	-	-	-	1,108,735
	1,123,126	-	-	-	1,123,126

	Within 1 Year £	Within 2-3 Years £	Within 4-5 Years £	More than 5 Years £	Total £
2009
Fixed rate
Fixed asset securities	105,422	-	-	-	105,422
	105,422	-	-	-	105,422
Floating rate
Deposit with Mundays	150,000	-	-	-	150,000
Deposit	5,041,169	-	-	-	5,041,169
	5,191,169	-	-	-	5,191,169

Interest rate sensitivity

We have assumed that interest rates are unlikely to change more than 100 basis points over the next year. 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 £nil (2009: £51,912). A decrease of 100 basis points would have had an equal but opposite effect.

(ii)    Liquidity risk

As at 30 September 2010 the Group did not have any significant liabilities payable.

(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.

The Group has a concentration of credit risk arising from cash and cash equivalents which is all maintained with RBS International, Jersey Branch.

Other receivables are represented by retentions and other debtors as shown in the table below:

	£
Insurance claim	1,099,997
Other debtors	8,738
	1,108,735

The insurance claim was received in November 2010.

18.   Controlling party

There is no ultimate controlling party.

19.   Capital management

As a result of the ability to issue, repurchase and resell participating shares, the capital of the Fund can vary depending on subscriptions to the Fund and repurchases by the Fund. The Fund is not subject to externally imposed capital requirements and has no restrictions on the issue, repurchase and resale of participating shares. The primary objective of the Fund's capital management is to ensure that it retains sufficient liquidity to enable it to meet its ongoing expense obligations in a timely manner and to ensure that there is a reasonable buffer amount available at any one time. The Fund includes cash and debtors in its resources to meet its objective and generally relies on the cash flows from rental income to support this.

The Fund is able to reduce its liquidity by returning cash to the shareholders in the form of a dividend or, by redeeming a portion of the Participating Shares in issue.

20.   Subsequent events

Amount receivable under beneficial entitlement to an insurance policy

Following the rescission of the contracts in relation to Canon House, Wallington, the Fund's £1.1m deposits paid under the purchase agreements entered into with Henry Homes (Wallington) Limited ("HHW") are recoverable. However, the Fund provided in full for the £1.1m of deposits paid to HHW at the start of the project as the latest information at the time of signing of the 30 September 2009 accounts suggested that HHW would not be in a position to return these monies. In November 2010, however, these monies were recovered and thus have been included as a receivable item in the consolidated statement of financial position.

Election on winding up or continuance

Rather than immediately seeking to wind up the Company, and following consultation with certain Members, the Board is inviting Members to decide whether the Company should continue or be wound up. If the Company is to continue, up to 94 per cent of its cash will be distributed amongst members through the Redemption, leaving a cash balance for the Company's reduced working capital requirements.  The Company's objective on continuation would be to undertake an acquisition or acquisitions which would constitute a reverse takeover under the AIM Rules.

In order for the Company to be able to continue, two thirds of Participating Shareholders either present in person or by proxy at the EGM must vote in favour of the Continuation Resolution and certain other resolutions required to facilitate the continuation of the Company.  In addition, the consent of the JFSC is required to allow the Company to continue as an operating company so the Proposals are conditional on JFSC consent. 

If the Continuation Resolution and related Resolutions are not passed, or if they are passed but JFSC consent is not received, the Directors will, conditional on shareholder approval, take steps to wind-up the Company.  In order for the Company to be wound up and its admission to AIM cancelled, three quarters (i.e. 75% or more) of Participating Shareholders either present in person or by proxy at the EGM must vote in favour of the Winding-up Resolution.  The Winding-up Resolution, if passed, is conditional on either: (i) any of the Continuation Resolution and related Resolutions not being passed; and (ii) JFSC consent to the Proposals being refused. In the event that the Winding-up Resolution is passed and become effective, the Company will be wound up as soon as practically possible through a full redemption of all of the Participating Shares in issue, as described below.

In the absence of sufficient votes being received, there is a risk that neither the Continuation Resolution and related Resolutions nor the Winding-Up Resolution is passed.  In such circumstances, the Company will proceed with the Alternative Redemption as described in the Chairman's Statement and will in due course convene another meeting to consider the winding up of the Company and cancellation of its admission to trading on AIM. Votes are required to be received by the Registrar by 30 March 2011 and further details of this process are included within the Chairman's Statement on pages 1 to 5.

21.   Dividend

The Company does not propose the payment of a dividend.

22.  Availability of Report and Accounts

Copies of the Report and Accounts will be posted to shareholders today and will be available from the Company's registered office 8th Floor, Union House, Union Street, St Helier, Jersey JE4 8TQ, and on the Company's website www.offplanfund.com.

 

END

 

 

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