For immediate release
22 May 2006

Preliminary Results for the six month ending 28 February 2007

The Ottoman Fund Limited (the “Fund”), which invests in the development of local housing and holiday homes in the major cities and coastal resorts of Turkey, is pleased to announce its interim financial statements for the period ending 28 February 2007.

Period highlights

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.


Development Capital Management     020 7355 7600
Roger Hornett
Ertan Sevinc
Tom Pridmore

Buchanan Communications     020 7466 5000
Charles Ryland
Isabel Podda

Numis Securities Ltd      020 7260 1000
Iain McDonald
Bruce Garrow

Condensed interim financial statements
for the six months ended 28 February 2007

Chairman’s Statement

The six months since the year end in August 2006 have seen some significant developments for the Ottoman Fund. Further investment has continued, joint ventures and partnerships have been put in place and the development of existing sites has made good progress. The Fund is viewed as a significant property investor in Turkey and is regularly approached by developers and land owners alike, a testament to the hard work of the Manager’s Turkish office.

New Investments

As I mentioned in the annual report, the Fund purchased in September just under one million square metres of land in Riva. This is a significant investment for the Fund in terms of value, physical size and strategic importance. The area, just outside Istanbul on the Black Sea coast, is expected to become a major suburb of the city, particularly with travel time down to 35 minutes following recent infrastructure improvements. These prospects can already be seen in the rising valuations, with the site having increased 20% in value over the six months since its purchase. In addition to the original site, the Fund has continued to aggregate further small plots of adjacent land as suitable opportunities have arisen.

As announced in January, the Fund purchased a 50% share of a 274,524m2 plot at Kazikli, on the Aegean coast. In conjunction with this we entered into a 50/50 joint venture with the co-owner, Ado Group, to develop the site. One of the largest suppliers of building materials to Turkey and neighbouring countries, they bring significant local expertise to the project. Planning approval is progressing well and we are currently tendering for concept designers.

Just after the period end, the Fund bid in partnership with the Akfen Group for a highly prestigious plot in the central business district of Istanbul. We were unsuccessful but both parties considered that our final bid was at the right level and a good relationship has been established with Akfen. The Manager continues to look at other suitable sites that become available as part of the privatisation process.

Existing Portfolio

Progress on the existing investments continues apace. At the Bodrum site concept designs are complete, local architects have been selected and the marketing of phase 1 is due to commence shortly. The final payment at Alanya has been made and the sales strategy is being reviewed with the developer.


The election of a new president led to a political crisis at the end of April as secularist opposition to the nominated candidate, Abdullah Gul, lead to large scale public demonstrations and a statement by the Army which was widely taken as a threat to intervene. In the event the vote was annulled by the Constitutional Court; a parliamentary general election has been called for 22 July.
Negotiations on EU accession are virtually at a standstill. Lack of progress and the negative stance of some EU members have continued to swing opinion away from support for accession.
Losses by the Turkish lira and on the Istanbul stock market at the height of the crisis reversed in early May. Political uncertainty will continue to affect markets, at least until after the parliamentary elections.


The Fund is now 65% invested, whilst the remainder is currently allocated for the sales and development of the invested sites. A number of new investments are under review and the Manager is keen to explore further joint ventures with potential partners in Turkey.
Political uncertainty overshadows the period ahead but the Fund is well-positioned to move forward in any of the likely outcomes.

Sir Timothy Daunt
May 2007

Manager’s Report

During the period a number of further land purchases were made, partnerships have been established with significant companies and the development of our existing sites has progressed well. The focus of investment remains on early stage land purchase and development whether in joint ventures or directly. This continues to be, in the Manager’s experience, the best long term strategy.

Investment activity


As previously mentioned following the year end the Fund purchased 917,900 square metres of development land in Riva. The site is part of the Beykoz-Riva-Kavacik subregion, the north east part of Istanbul on the Asian side, adjoining the Black Sea coast.

The region is expected to become a major new housing area to supply demand from commuters into Istanbul. Significant infrastructure is now in place reducing commuting time down to 35 minutes. A number of key developers are working in the region and prices have been rising as the prospects for the area increase. The Fund purchased the site for $110m in September 2006. Following this the Fund aggregated two further plots for $0.3m in February and continued this process adding a further eleven plots costing $2.3m in April and May. As at the period end the current independent valuation for the holding is $132.4m, an increase of 20% over the six months under review. Overall proposals for the entire site have been submitted to the regional planners and we await the response. Concept designs for phase one, which already has 1:1000 scale permission, are being finalised and local architects are being appointed to produce the technical designs for these 70 units. Once complete the Manager expects construction permits to be granted swiftly.


In January the Fund purchased a 50% share in 11 contiguous parcels of prime coastal land in Kazikli village, approximately 25 miles from Bodrum-Milas international airport. The total area of the land is 274,524m2 and cost $10m for the 50% stake. In conjunction with this the Fund also entered into a 50/50 joint venture with Ado Group, one of Turkey’s largest suppliers of building materials. The JV company into which each party has invested $3m of equity, will be responsible for the development of the site. At the period end the company had received approval from the local authorities for a new zoning plan for
the site. As a result of this and general market movements, the land held by the Fund had increased in value by 24% to $12.4m as at the end of February.

Golturkbuku, Bodrum

The site at Bodrum is moving forward well, the concept designs from WATG have been converted to technical specifications and the construction permit has been applied for. Initial pre-marketing of the first phase consisting of 26 three and four bedroom villas has commenced with a full launch expected in June. Discussions are ongoing with several international hotel and spa operators. Prices in the local area have continued to rise and this has been reflected in the land valuation for the site which stood at $38.4m on 28 February against the purchase price of $33.4m. Since the period end the Manager has been able to secure two further plots adjacent to the site along the coast for $5.3m.


Sales at the site remain subdued, which the Manager believes stems from a combination of increased supply and lower pricing of developments in the immediate area. Although the site remains one of the best in the vicinity it is increasingly clear a more aggressive stance on pricing will be required. The remaining payment of €4.1m was made in December 2006 bringing the total investment to $12.7m against an independent valuation of $18.5m at the period end.

Tender for land in Besiktas, Istanbul

Following the period end the Fund formed a joint partnership with the Akfen Real Estate Investment Company to bid for 96,505m2 of state owned land in the central business area of Besiktas in the European side of Istanbul. Akfen is one of the largest conglomerates in Turkey and is a leading property developer both in Turkey and the surrounding region. Together a meaningful bid was tendered. Ultimately however, the site, in a highly sought after area of the capital, was won by the Zorlu Group for a record $800m.


In order that shareholders may identify the value created by the Fund from investing in locations and markets with strong growth potential, independent valuations of the property portfolio are obtained on a regular basis.
Below is set out the revaluation of the Fund's assets that cannot be reflected on the balance sheet under IFRS.

Net assets as at 28 February 2007 £137,958,806
Increase in valuation of inventory properties above cost
Golturkbuku, Bodrum £2,534,034
Riva £11,290,427
Kazikli £1,198,185
Adjusted net asset value £152,981,452

Number of ordinary shares in issue 150,000,000

Adjusted net asset value per share as at 28 February 2007 101.99p
Adjusted net asset value per share as at 30 November 2006 93.87p

The political climate

Turkey has been in an electoral phase for the best part of the last year, with most expecting Prime Minister Erdogan to put his name forward for the Presidency. However it was decided such a move would be too contentious and Foreign Minister Abdullah Gul was nominated by the ruling AKP.
This was still a step too far for the secularists who, fearing creeping Islamism, demonstrated on the streets in large numbers, triggering a political crisis. An announcement from the General Staff followed, which was taken by most as a threat by the Army to become involved. The CHP opposition party then successfully challenged the presidential result in the Constitutional Court, resulting in the Parliament calling an early general election for 22 July and proposing several amendments to the Constitution, including the direct elections of the President by the people.

The stock market’s reaction to all of this was relatively muted, the initial 4% fall having now been regained and the Lira has held its own, a surprising outcome given the strength of both this year. FDI remains undeterred with a foreign-led consortium investing $1.2bn for the operating rights of Izmir's port. The focus of most investors will now be on the forthcoming elections and any reaction by the General Staff.

EU negotiations

The period under review has been interspersed with spasmodic bouts of tension between the negotiating parties. Of particular contention is Article 301 of the penal code covering the crime of anti-Turkishness, an indictable offence in Turkey but strictly against the freedom of speech chapter enshrined in the Treaty of Rome. However it was not this that temporarily halted negotiations but the refusal of the Turkish government to open its ports and airports to Greek Cypriot traffic by early December as the EU directive had demanded. The Turkish government believes this is a problem for the UN to solve and not something which should be seen as part of the EU negotiating process. Willingness for the inclusion of Turkey into the EU will be tested in the coming months particularly with the recent elections of the conservative Nicolas Sarkozy in France and Angela Merkel in Germany.

The economy

The massive increase in interest rates by 425 basis points to 17.50% in June has had a material but generally positive effect on the economy. The Lira has recovered some lost ground and is steady against the US Dollar at $1.40, where it remains competitive; GDP growth has slowed but not reversed and inflation shows signs of coming under control.


2006 was a poor year for tourism, especially the final quarter, where terrorist attacks in August targeting Istanbul, Marmaris, Antalya, Van and Diyarkbakir, reduced foreign arrivals leaving full year numbers down 6.2% at 12.2m visitors. Full year revenue fell back 7.2% to $16.9bn. It should not be forgotten however that 2005 had been an exceptional year with arrivals 20% ahead of 2004 levels, thus the decline still leaves tourism up on 2004 levels. Since the end of November the position seems to have improved with arrivals recording a 7.6% year on year increase in December and 7.1% in January. The decision of the Turkish, US and Iraqi authorities to join forces against the terrorists creeping across the Iraqi border, no doubt played a major role here. The outlawed PKK Kurdistan Workers Party, which claimed responsibility for the terrorist attacks, is increasingly losing any popular support they may have had.
The most recent numbers have shown foreign tourist arrivals increased by 25.6% in February year on year which bodes very well for the summer season.

The property market

The long awaited mortgage law was finally presented to and passed by parliament at the end of February and will take effect from 1 January 2008. Fixed and variable rate mortgages will replace typical 5 year housing loans and will be tradable by the banks. They will be offered for periods of 20 years or more and sensibly there will be no tax breaks against interest paid. Those with housing loans may switch to mortgages without the usual 2.0% early repayment penalty and in addition the 5.0% banking insurance operating tax will be dropped.
There is a huge shortage of appropriate housing. Industry and government agree that demand will average 700,000 a year for the next decade. Less than half that number are currently being built. Meanwhile some 55% of all residences have been built without a licence or permit, most not even approaching earthquake standards. Approximately 60% of existing housing stock is over 20 years old and 40% of all houses are in need of considerable repair. The market in these circumstances is likely to remain tight and prices firm.
The mini economic crisis of 2006 however took its toll on the property market, with 65% of first time buyers delaying for a year. New build held up well, with buyers encouraged by free gifts, the promise of holidays and pre-arranged attractive financing. The situation appears to have stabilised, although
it is difficult to predict in the current climate.


Whilst the current unrest is causing some media commentators alarm, the fundamentals of the local property market remain strong. The position of the portfolio means that little of the stock due to come to the market in the near future will be aimed at the international investor. Our focus on a more direct development strategy also gives us the flexibility to adapt to market movements.

For the remainder of the year the Manager expects the focus to be predominantly on moving the existing sites through planning and into construction. Sales and marketing strategies are being drawn up and we expect phased releases to have started for most sites by the year end.

Development Capital Management (Jersey) Limited
May 2007

As at 28 February 2007

(unaudited) (audited)
28 February
31 August
notes £ £

Non-current assets

Inventories 4 79,524,583 19,377,286
Loans & receivables 5 7,192,613 4,381,865
86,717,196 23,759,151

Current assets

Other receivables 325,219 612,736
Cash and cash equivalents 51,104,890 114,862,336
51,430,109 115,475,072
Total assets 138,147,305 139,234,223

Current liabilities

Other payables (188,499) (197,125)
Net assets 137,958,806 139,037,098

Equity Share capital

Equity Share

Share Capital 6 150,000,000 150,000,000
Retained earnings (12,041,133) (10,962,860)
Equity attributable to owners of the parent 137,958,867 139,037,140
Minority interest equity (61) (42)
Total Equity 137,958,806 139,037,098
Net asset value per share (pence) 7 92.0 92.7

For the six months ended 28 February 2007

(unaudited) (audited)
Six months
28 February
9 December
to 31 August
notes £ £


Bank interest 1,350,306 3,709,237
Total income 1,350,306 3,709,237

Operating expenses

Management fee 2 (1,487,671) (2,030,136)
Other operating expenses (583,365) (663,645)
Foreign exchange gains/(losses) 12,134 (210,870)
Total operating expenses (2,058,902) (2,904,651)
(Loss)/profit for the period (708,596) 804,586
Attributable to:
Equity shareholders of the company (708,607) 804,585
Minority interest 11 1
(708,596) 804,586
Basic and diluted (loss)/ earnings per share (pence) 3 (0.5) 0.5

For the six months ended 28 February 2007

(unaudited) (audited)
28 February
31 August
Cash flow from operating activities £ £
(Loss)/profit for period (708,596) 804,586
Net foreign exchange (gains)/losses (12,134) 210,870
Decrease/(increase) in other receivables 287,517 (612,736)
(Decrease)/increase in other payables (8,626) 197,125
Net cash (outflow)/inflow from operating activities (441,839) 599,845

Cash flow from investing activities

Purchase of inventories (60,147,297) (19,768,599)
Loan to developer (2,798,088) (4,472,247)
Net cash outflow from investing activities (62,945,385) (24,240,846)

Cash flow from financing activities

Issue of shares - 150,000,000
Share issue expenses - (11,250,000)
Net cash inflow from financing activities - 138,750,000
Net (decrease)/increase in cash and cash equivalents (63,387,224) 115,108,999
Cash and cash equivalents at 31 August 2006 114,862,336 -
Effect of foreign exchange rates (370,222) (246,663)
Cash and cash equivalents at 28 February 2007 51,104,890 114,862,336



For the period 9 December 2006 to
31 August 2006 (audited)

Issue of share capital 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)
Profit for the period - 804,587 (1) 804,586
Balance at 31 August 2006 150,000,000 (10,962,860) (42) 139,037,098

For the six months ended
28 February 2007 (unaudited)

Balance at 31 August 2006 150,000,000 (10,962,860) (42) 139,037,098
Foreign exchange on subsidiary translation - (369,666) (30) (369,696)
Loss for the period - (708,607) 11 (708,596)
Balance at 28 February 2007 150,000,000 (12,041,133) (61) 137,958,806

Notes to the Financial Statements (unaudited)
For the six months ended 28 February 2007

1 Accounting Policies

These condensed interim financial statements 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 interim financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 28 February. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from 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
Expenses are charged through the income statement, except for expenses which are incidental to the disposal of an investment which are deducted from the disposal proceeds of the investment. In addition certain expenses associated with the acquisition of an investment have been capitalised.

(e) Investments
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 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 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) Movements in fair value Changes in the fair value of all held-at-fair-value assets are taken to the income statement. On disposal, realised gains and losses are also recognised in the income statement.

(g) Cash and cash equivalents
Cash and cash equivalents comprise current deposits with banks.

(h) Taxation
The Fund is an Exempt Company for Jersey taxation purposes. The Company 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, a 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.

(i) Foreign currency
The results and financial position of the Fund are expressed in pounds sterling, which is the functional currency of the Company. 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. Gains and losses arising on retranslation are included in net profit or loss for the period where investments are classified as fair value through profit or loss. Exchange differences on translation of the company's net investment in foreign operations are recognised directly in equity.

(j) Share Capital
Shares are classified as equity. External costs directly attributable to the issue of new shares are shown as a deduction to reserves.

2 Management fee

Six months ended
28 February 2007
09 December 2005
to 31 August 2006
Management fee 1,487,671 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 management agreement between the Fund and the Manager is terminable by the Manager on six month's notice and the Fund on twelve months notice, subject to an initial term of twenty four months. The Manager is entitled to receive a performance fee of 20% of any cash returns from the sale of a property investment above a hurdle rate of 10% compound per annum up to 100% and 30% of any returns in excess of this. As at 28 February 2007 there is no contingent performance fee. 20% of the performance fee calculated is subject to a claw back retention against the future performance of the Fund.

3 Earnings per share

The basic and diluted earnings per share is based on the net loss for the period of £708,596 (2006:profit of £804,586) and on 150,000,000 shares.

4 Inventories

(a) Land held for development 28 February 2007
31 August 2006
Opening book cost 19,377,286 -
Purchases at cost 60,147,297 19,377,286
Closing book cost 79,524,583 19,377,286

 5 Loans and receivables

28 February 2007
31 August 2006
Loans to third party 7,270,339 4,472,251
Exchange loss on revaluation of loan (77,726) (90,386)
7,192,613 4,381,865

6 Called up share capita


Founder shares of no par value 10
Shares of no par value Unlimited

Issued and fully paid:

2 Founder shares of no par value -
150,000,000 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 shares of no par value were issued.

7 Net asset value per share

The net asset value per share is based on the net assets attributable to equity shareholders of £137,958,806 (31 August 2006: £139,037,098) and on 150,000,000 shares, being the number of shares in issue at the end of each relevant period.

8 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 regularly 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.

Foreign currency risk
The Fund 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:

at 28 February
Net monetary
at 28 February
at 31 August
Net monetary
at 31 August
£ £ £ £
Euro 7,192,613 612,568 4,381,865 3,395,067
US Dollar 79,524,583 14,025,880 19,377,286 56,997,128
Turkish Lira - 112,736 - 1,811,722
86,717,196 14,751,184 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.

at 28 February
Non interest
at 28 February
at 31 August
Non interest
at 31 August
Sterling 36,353,715 - 52,658,419 -
Euro 612,569 7,490,701 601,592 7,175,340
US Dollar - 79,524,583 56,997,128 19,377,286
Turkish Lira 112,736 - 1,811,722 -
37,079,020 87,015,284 112,068,861 26,552,626

Liquidity risk

The Fund's assets mainly comprise cash balances and realisable investments, which can be sold to meet funding commitments if necessary.