THE OTTOMAN FUND LIMITED

For immediate release
19 November 2007

Preliminary Results for the year ended 31 August 2007

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 2007. 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

Sir Timothy Daunt, Chairman of the Fund, commented:

“The real estate market looks set for continued growth with the new mortgage law set to replace housing loans in January 2008, strong local demand arising from the deficit of quality housing stock and a rapidly expanding population, and increasing overseas interest for second homes in the region. There is every prospect of orderly realisation of the Fund’s assets, so as to maximise value for shareholders over the coming 18-24 months.”

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
Andrew Mitchell

Buchanan Communications      020 7466 5000
Charles Ryland
Isabel Podda

Numis Securities      020 7260 1000
Bruce Garrow
Nick Westlake

THE OTTOMAN FUND LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2007

Chairman’s Statement

Since I last reported to shareholders in May of this year, the Fund has been focusing heavily on development of land which it invested in during 2006. This process has included managing zoning and planning permission approvals across all the sites, selecting and engaging high quality master planners, architects and designers and commencing the initial marketing phase of Golturkbuku, Bodrum. This activity has further enhanced the reputation of the Fund locally as a significant property investor in Turkey, notably through its leading role in the development of the Riva area.

With the share price trading circa 5% below NAV per share, despite these positive developments and good prospects for Turkey, a strategic review was commissioned. Orderly realisation of the portfolio over 18-24 months has now been put in hand, with proceeds being returned to shareholders.

Investment portfolio

As reported in May, the Fund acquired two further sites in Riva and Kazikli, for $110m and $10m respectively. Although there was some strategic aggregation of small land parcels at Riva and Bodrum to improve the capital value of the existing land investment, the fund focused on the development of its existing sites.

The Fund has invested a total of US$163 million in land at Riva, Kazikli and Golturkbuku, Bodrum. These investments were revalued at the year end at US$202 million, an increase of 24% in US dollar terms. The Fund’s NAV based on the fair value of underlying assets at 31 August 2007, as disclosed in the Manager’s report, was 98.4p per share taking into account the devaluation of the US dollar against the pound. Disregarding exchange rate fluctuations, the NAV per share would stand at 104.2p.

Turkey

The recent Parliamentary election resulted in the return of the right wing Justice and Development Party (AKP) with 46.3% of the vote. Recep Tayyip Erdogan was reappointed Prime Minister and Abdullah Gul subsequently elected President. The AKP currently has a popularity rating in excess of 50%. The political uncertainties of mid 2007 have therefore been largely removed.

The economy is performing well with unemployment and inflation hitting record lows during the year and is on course to break into the top 10 global economies in the next 20 years. With corporation tax falling from 30 per cent to 20 per cent, EU membership discussions ongoing and a continuing privatisation programme, foreign direct investment is steadily increasing.

During the first half of 2007 the number of tourist visitors rose by 16.5%. Further investment in airports and hotels, notably in the Izmir region, are adding to the attraction of Turkey as a holiday destination.

Corporate

On 30 August 2007 the Board announced a strategic review, appointing Numis Securities and Fenchurch Advisory Partners jointly to advise the Fund. At its conclusion, the Board announced on 1 November 2007 that the portfolio was to be progressively realised in a managed way over the next 18-24 months so as to maximise its value potential, with all sales proceeds returned to shareholders. A share buy back scheme to return US$30 million to shareholders was announced at the same time.

Also recently announced was the appointment of John Chapman to the Board. John has extensive experience working in the investment fund sector and I look forward to him making a substantial contribution to the Fund.

Prospects

The real estate market looks set for continued growth with the new mortgage law set to replace housing loans in January 2008, strong local demand arising from the deficit of quality housing stock and a rapidly expanding population, and increasing overseas interest for second homes in the region. There is every prospect of orderly realisation of the Fund’s assets, so as to maximise value for shareholders over the coming 18-24 months.

Sir Timothy Daunt
Chairman
November 2007

Manager’s Report

The Manager’s focus is now firmly on maximising value from the existing portfolio in terms of planning, design, construction and marketing. With the previously established local trading relationships progressing well, the Fund is in an excellent position to fully capitalise on the opportunity presented by Turkey’s deficit of quality housing stock and rising demand prompted by its rapidly expanding population and newly emerging mortgage market.

Investment activity

Golturkbuku, Bodrum

Acquired in April 2006 for $34.3m and increased to $39.6m during the year, through the acquisition of two land parcels totaling 18,350 square metres, the site at Golturkbuku is progressing well and is being developed into 247 units of villas, apartments and hotel villas with a built area of approximately 50,000 square metres.

A hotel and residence management and interior design services agreement has been signed with Banyan Tree Hotels and Resorts, the renowned premium hotel resort, residence and spa operator, who have selected the development for their first offering in Turkey. This partnership illustrates, and will only enhance further, the Fund’s reputation locally. Banyan Tree’s involvement is a validation of the Fund’s decision to invest in the project and is expected to significantly increase the sales prices that can be achieved for the development. The first phase of 16 units was officially released in September and all these units were reserved within one month. Construction of road infrastructure and the on-site sales suite commenced in November on schedule.

Riva

There have been further additions to the original acquisition of 917,900 square metres of land in Riva, which is part of the Beykoz-Riva-Kavacik sub-region, in the north eastern part of the Asian side of Istanbul, adjoining the Black Sea coast. The additional parcels of land have been aggregated to 931,739 square metres.

There are unquestionable factors arising from the Istanbul housing market that support the attractiveness of this development, from the increase in demand being generated by the increase in new households (on average 120,000 per annum), the requirement to replace existing properties due to age and earthquake non-compliance (circa 30,000 units per annum) and the government’s commitment to urban regeneration (circa 60,000 units per annum). The second bridge over the Bosphorous has improved access to the central business districts of the European side of Istanbul since the early 1990’s and this has been enhanced further recently by a major highway connecting Riva with eastern Istanbul. Recent land prices in Riva, showing a 25% increase, are reflective of the growing interest in the area and the limited availability of developable land in Istanbul. Master planning for the Riva region by the Istanbul municipality is continuing.

Local architects have been engaged by the Fund and have commenced technical designs for the coastal parcel’s of the Fund’s site. Construction permits have now been granted in respect of four coastal single villa sites.

Kazikli

This $10m investment in a prime coastal development, 25 miles from Bodrum-Milas International airport, is planned for development into approximately 330 units, comprising villas, apartments and a hotel complex with yachting facilities. It is jointly owned by the Fund and the Ado Group, one of Turkey’s largest suppliers of building materials. The required zoning plans have been obtained from the local authorities and there has been a subsequent increase in permitted building density from 49,000 square metres to 74,000 square metres, resulting in a 51% increase in buildable area.

The master plan and concept design process is now underway and is being performed by Atelier Xavier Bohl, who has a strong reputation from his work on Port Alacati, Marina Limassol and Larnaca. Construction is planned to commence in Q1 2008, with completion by Q1 2010.

Alanya

The 16,400 square metre site consists of 215 apartments of which the Fund has financed 107. Sales opportunities remain subdued due to a combination of increased supply, competition from other units sales in the same development and lower pricing from lower quality developments in the immediate area. The Manager is very conscious of this situation and is attending the leading real estate exhibitions in Germany, Norway and Sweden to strengthen connections with sales agents in these key markets.

The recent announcement of construction of a new airport at Gazipasa, in close proximity (only 30km) to Alanya, is expected to have a beneficial impact upon sales. Currently those visiting or holidaying in Alanya have to fly to Antalya international airport – a 90-minute car journey away. The new airport will cut the post flight travel time to only 20 to 30 minutes and is expected to be operational by mid 2008.

Valuation

Set out below is the recently completed independent revaluation of the Fund's assets that cannot be reflected on the balance sheet under IFRS, but is disclosed in note 8 to the financial statements.

Net assets as at 31 August 2007 £137,386,660
Increase in valuation of inventory properties  
Golturkbuku, Bodrum £3,583,496
Riva £14,264,777
Kazikli £1,110,604
Total increase in valuation of inventory properties at acquisition exchange rate £18,958,577
NAV (fair value basis) before foreign exchange loss £156,345,237
NAV per share (fair value basis) before foreign exchange loss 104.2p
Foreign exchange loss £(8,742,360)
Net asset value (fair value basis) £147,602,877
Number of ordinary shares in issue 150,000,000
Net asset value per share at 31 August 2007 (fair value basis) 98.4p
Net asset value per share at 31 August 2006 (fair value basis) 92.7p

The Ottoman Fund Development Graph

The political climate

The Manager is positive regarding the outcome of the recent Parliamentary and Presidential elections. The threat of military intervention has receded and there is a greater feeling of freedom and liberalism.

Turkey had been entwined in a pre-electoral phase for more than a year, with the press and business leaders convinced of anticipated elections, a situation which held back private sector investment but encouraged unsustainable public sector front-end loading.

In the event, unsuccessful and controversial presidential elections were held on May 1st forcing PM Erdogan to go to the country on 22 July. Abdullah Gul, a long time ally of the Prime Minister and at the time the Foreign Minister, had been the only candidate for the presidency. The result was a stand-off over the mechanics of the electoral process as laid down by the constitution and an objection, upheld by the Supreme Court, to Gul’s candidacy. PM Erdogan had no alternative but to call a General Election.

The election result indicated that there is no longer any significant appetite in Turkey for military intervention in politics, with the AKP, right wing Justice and Development Party swept back to unitary power with 46.3% of the vote gaining 341 of the 550 Meclis seats from an 84% turnout. Since then the AKP’s popularity has increased to around 54%.

The new government lost no time in calling new presidential elections with Abdullah Gul standing again against two other candidates, one from the MHP and the other from the DSP. The main opposition CHP refused both to put forward a candidate and to vote. Abdullah Gul was successful in the third round on August 28th gaining a simple majority and was duly sworn in promising to be the President of all the people, adding that the Constitution would ensure secular control.

EU negotiations

EU negotiations were put on hold by the Turkish government prior to the elections and so there has been little progress in the period. However the new government has confirmed its commitment to membership.

The economy

The six months under review has been a relatively successful one in economic terms, with unemployment dropping to a post WWII low of 8.9% from February’s high of 11.4%, considered by many to be the main election issue. In July, inflation, as measured by the CPI fell to an all time recorded low of 6.9%, an achievement which should not be underestimated.

The economy grew by a real 3.9% in the second quarter, following 6.8% in the first and in comparison with 6.1% for the whole of 2006, when nominal GDP was exactly US$400bn. Private consumption fell by 0.3% but government consumption surged 26%, primarily as a result of a 47% acceleration in public works, boosting overall construction by 15.7% and GDFCF by exactly 10.0%. Without the government’s pre-electoral surge total investment might well have been negative. Despite such spending the first half year budget deficit improved to $13.3bn (2.7% of GDP) from $14.1bn in the comparable 2006 period.

Both the trade and current accounts remain a problem but are not insurmountable and the decision in late September by the Central Bank to lower interest rates by 25 basis points reflects the Governor’s confidence in the ability of the government to control inflation. It should also help an overvalued Lira, which at Ytl/$1.22 is harming exports. Two further recent interest rate cuts of 50 basis points each should further boost economical output and strengthen the housing market.

Tourism

It is always difficult to gauge just how tourism plays a part in any second homes market but there is undoubtedly a strong link in Turkey as the improvement in coastal apartment prices over the last two years indicates. Looking over the 15 years to end 2005, according to the OECD, tourism rose by 241%.

In the first half of 2007 tourism rose by 16.5% as measured by tourist arrivals, although heavy discounts would suggest that in revenue terms there will be little change from the previous year. The new Izmir terminal and the opening of 5 new hotels in the vicinity led to a pick up of 15% in that region alone. Such a pace of growth has continued into July and August, unaffected by bomb attacks in both May and June in Ankara where 6 were killed and 56 injured.

The property market

The Turkish residential property market tends to be volatile with average prices not always an indication of underlying trends in the high end sector where demand exceeds supply. This is particularly true of regional pockets in Istanbul and its environs.

The election process and the accompanying atmosphere of uncertainty led to some sharp falls in average prices in May and June. However given the overall surplus housing demand in excess of 350,000 units arising from the high population growth, the Manager expects this trend to be short lived. Istanbul saw average residential property prices fall by 1.3% in May and 6.6% in June, whereas Izmir recorded declines of 6.3% and 18.1% respectively. In June only Ankara managed to constrain the decline to below 6.0%, the 4.5% drop following on from a 2.5% fall the previous month. Antalya fell 2.1% in May followed by 14.5% in June. However in central Istanbul apartment prices bear out our earlier point. A high end 3 bed unit overlooking the water can command upwards of $3,250 per square metre against prices as low as $2,200 in other parts. Indeed such high end apartments regularly sell for $500,000 to $600,000.

The news that the new mortgage law, extending loan periods and encouraging inter-bank competition, was coming into force in January 2008 was well received by the market with 71.0% of all loans outstanding converted to the more attractive mortgage formula by the 6 June deadline. The level of mortgage debt was 4.5% of GDP at the end of 2006, compared to 55% in the UK, illustrating the potential for more structured housing growth. Arguably the decision not to allow tax relief on mortgage interest paid is a sensible one and may well have prevented the market from overheating very rapidly. It is interesting that despite high interest rates by western economy standards, default levels on housing loans are only 0.2% against 0.8% in the UK and 1.7% in the US.

Given the benign level of inflation and the overvalued currency it is likely that the Central Bank will continue to lower interest rates between now and the end of the year. Many economists are penciling in a level of 16.0% and this seems a reasonable and possibly conservative target. There is no compelling reason why further declines cannot take place in 2008, which combined with the mortgage law, should produce a pick up in both demand and prices.

Prospects

The economy, and specifically the property sector, continue to provide positive results, which, together with its strong strategic relationships locally, should enable the Fund to progress its developments in line with expectations.

The Manager will continue to focus on progressing the existing portfolio in line with the proposed realisation strategy.

Development Capital Management (Jersey) Limited
November 2007

Financial summary and investment portfolio

The portfolio currently consists of land, cash, money market funds and financing agreements over property in Turkey. Under IFRS development property must be shown at book cost, therefore in order to show an indicative value for these investments, the projects have been externally valued using a study on comparable market prices.

Development Category Area No. of units Invested Funds Current Market
Valuation
Golturkbuku Land 185,175 250 £23m £23m
Riva Land 931,739 1,000** £62m £71m
Kazikli Land 123,832 330** £5m £6m*
Alanya Loan 14,024 107 £7m £7m
Development Totals £97m £107m

* This represents the Fund’s 50% share.
** Estimates

CONSOLIDATED BALANCE SHEET
As at 31 August 2007

Group
2007
Company
2007
Group
2006
Company
2006
notes £ £ £ £

Non-current assets

Intangible assets 7 3,099 - - -
Investment in subsidiaries 11 - 5 - 5
Inventories 8 89,927,782 - 19,377,286 -
Loans and receivables 9 7,211,525 96,468,242 4,381,865 81,928,195
97,142,406 96,468,247 23,759,151 81,928,200

Current assets

Other receivables 13 13 597,017 24,345 612,736 265,720
Cash and cash equivalents 18 44,898,891 35,221,363 114,862,336 56,053,485
45,495,908 35,245,708 115,475,072 56,319,205
Total assets 142,638,314 131,713,955 139,234,223 138,247,405

Current liabilities

Other payables 14 (5,251,654) (149,288) (197,125) (196,542)
Net assets 137,386,660 131,564,667 139,037,098 138,050,863

Equity

Share capital 15 150,000,000 150,000,000 150,000,000 150,000,000
Retained earnings 16 (12,613,335) (18,435,333) (10,962,860) (11,949,137)
Equity attributable to owners of the parent 137,386,665 131,564,667 139,037,140 138,050,863
Minority interest equity (5) - (42) -
Total Equity 137,386,660 131,564,667 139,037,098 138,050,863
Net asset value per Ordinary
share (pence)

17

91.6

87.7

92.7

92.0

These financial statements were approved by the Board of Directors on 14 November 2007.
Sir Timothy Daunt
Roger King

CONSOLIDATED INCOME STATEMENT
For year ended 31 August 2007

Year ended
31 August 2007
Period ended
9 December to
31 August 2006
notes £ £

Income

Bank interest 2,607,646 3,709,237
Total income 2,607,646 3,709,237

Operating expenses

Management fee 4 (2,999,985) (2,030,136)
Other operating expenses 5 (1,026,652) (663,645)
Foreign exchange losses 10 (4,646) (210,870)
Total operating expenses (4,031,283) (2,904,651)
 
(Loss) / profit for the period (1,423,637) 804,586

Attributable to:

Equity shareholders of the company (1,423,656) 804,585
Minority interest 19 1
(1,423,637) 804,586
 
Basic and diluted earnings per share (pence) 6 (0.95) 0.54

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For year ended 31 August 2007

Share
retained
retained
earnings
Minority
interest
Total

Group

For the period 9 December 2005
to 31 August 2006
£ £ £ £
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

Group

For the year ended 31 August 2007 £ £ £ £
Balance at 1 September 2006 150,000,000 (10,962,860) (42) 139,037,098
Loss for the year - (1,423,656) 19 (1,423,637)
Foreign exchange on subsidiary translation - (226,819) 18 (226,801)
At 31 August 2007 150,000,000 (12,613,335) (5) 137,386,660
 

Company

Share
retained
retained
earnings
Minority
interest
Total

For the period 9 December 2005 to 31 August 2006

£ £ £ £
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

Company

For the year ended 31 August 2007 £ £ £ £
Balance at 1 September 2006 150,000,000 (11,949,137) - 138,050,863
Loss for the year - (6,486,196) - (6,486,196)
At 31 August 2007 150,000,000 (18,435,333) - 131,564,667

CONSOLIDATED STATEMENT OF CASH FLOWS
For year ended 31 August 2007

Group
Year ended
31 August
2007
Company
Year ended
31 August
2007
Group
Period ended
9 December
2005
to 31 August
2006
Company
Period ended
9 December
2005
to 31 August
2006
£ £ £ £
 
Bank Interest received 2,607,646 2,169,409 3,709,237 3,708,374
Total operating expenses (4,031,283) (8,655,605) (2,904,651) (4,407,511)
(Loss)/ profit for the period (1,423,637) (6,486,196) 804,586 (699,137)
         
Net foreign exchange losses 4,646 4,860,223 210,870 1,722,927
Decrease / (increase) in other receivables 15,719 241,375 (612,736) (265,720)
Increase / (decrease) in other payables 89,039 (47,254) 197,125 196,537

Net cash (outflow) / inflow
from operating activities

(1,314,233) (1,431,852) 599,845 954,607

Cash flow from
investing activities

Loans to subsidiaries - (19,407,111) - (83,530,638)
Purchase of inventories (65,585,006) - (19,768,599) -
Loan to developer (2,750,760) - (4,472,247) -
         
Net cash outflow from investing activities (68,335,766) (19,407,111) (24,240,846) (83,530,638)

Cash flow from
financing activities

Issue of 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 (decrease) / increase in cash
and cash equivalents
(69,649,999) (20,838,963) 115,108,999 56,173,969
         
Cash and cash equivalents at start
of the period
114,862,336 56,053,485 - -
Effect of foreign exchange rates (313,446) 6,841 (246,663) (120,484)
Cash and cash equivalents
at end of the period

44,898,891

35,221,363

114,862,336

56,053,485

Notes to the Financial Statements

1 General information

The Ottoman Fund Limited invests in Turkish new build residential property in major cities and coastal destinations aimed at both the domestic and tourist markets.

The Company is a limited liability company domiciled in Jersey, Channel Islands.

The Company has its primary listing on the Alternative Investment Market (AIM).

These consolidated financial statements have been approved by the Board of Directors on 14 November 2007.

2 Accounting policies

The consolidated financial statements of the Fund for the period ended 31 August 2007 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
 
Subsidiaries
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.

Joint ventures
A joint venture is a contractual agreement whereby two or more entities undertake an activity that is the subject of joint control. The results and assets and liabilities of joint ventures held by subsidiaries are incorporated in these financial statements using the proportionate consolidation method.

(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 services 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) Non-current assets

Intangible assets
Intangible assets are stated at cost less any provisions for amortisation and impairments. They are amortised over their useful life. At each balance sheet date, the Group reviews the carrying amount of its intangible assets to determine whether there is any indication that those assets have suffered an impairment loss.

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, 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.

(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 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:

International Accounting Standards (IAS/IFRS)
IFRS 7 Financial Instruments: Disclosures - effective on or after 1 January 2007
IFRS 8 Operating Segments - effective on or after 1 January 2009

International Financial Reporting Interpretations Committee (IFRIC)
IFRIC 11 Group and Treasury Share Transactions -
effective on or after 1 March 2007

IFRIC 12 Service Concession Agreements -
effective on or after 1 January 2008

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.

3 Segment reporting

The Group’s activities are based in Turkey and Jersey. The Group invests in Turkish new build residential property through its Turkish subsidiary companies. Accordingly, the net revenue and assets of the Group are substantially derived from its Turkey based activities. The Group also holds assets and generates revenue in Jersey. Such activities are undertaken by the Company and by Ottoman Finance Company 1 Limited which has issued the loan to the third party described in note 9. In the opinion of the Directors, sufficient information of the Group’s operating segments has been provided above.

4 Management fee

2007
£
2006
£
Management fee 2,999,985 2,030,136

The Manager receives a management fee quarterly in advance of 2% per annum of the amount subscribed at 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 interim term of twenty-four months.

5 Other operating expenses

2007
£
2006
£
Advisory and consultancy fees 191,711 30,183
Directors remuneration 103,063 76,521
Administration fees 97,289 63,707
Legal and professional fees 94,034 69,072
Travel and subsistence 90,000 56,839
Marketing 63,196 136,841
Audit services- for audit work 40,000 40,000
Other operating expenses 347,359 90,482
1,026,652 663,645

The company has no employees.

6 Earnings per share

The basic and diluted earnings per Ordinary share is based on the net loss for the period of £1,423,637 (2006: profit £804,586) and on 150,000,000 shares (2006: 150,000,000 shares).

7 Intangible assets

Group
2007
£
Company
2007
£
Group
2006
£
Company
2006
£
Opening book cost 3,984 - - -
Amortisation and impairment charge (885) - - -
Closing net book cost 3,099 - - -

The intangible asset relates to a CRM programme, with a useful life of 6 years. There has been no impairment during the period.

8 Inventories

Group
2007
£
Company
2007
£
Group
2006
£
Company
2006
£
Opening book cost 19,377,286 - - -
Purchases at cost 70,550,496 - 19,377,286 -
Closing book cost 89,927,782 - 19,377,286 -

This represents the purchase of 185,175 square metres of development land on the Bodrum penisula, 931,739 square metres on the Riva coastline and 247,664 square metres, of which the Fund has a 50% share, in the Kazikli village, in the district of Milas.

In accordance with the accounting policy in note 2, inventories are stated at the lower of cost and net realisable value. Inventories were valued at the year end by Elit Gayrimenkul Degerleme A.S. and Kuzey Bati Real Estate on the basis of open market value. On this basis, a total fair value of £100.1 million has been determined for inventories held by the Company at the balance sheet date. In accordance with the Company's accounting policy, unrealised gains/losses as a result of this valuation have not been recognised in the consolidated income statement.

Reconciliation of book cost to Open Market Value 2007 £
Closing book cost 89,927,782

Increase in valuation of inventory properties
at acquisition exchange rate

Golturkbuku, Bodrum 3,583,496
Riva 14,264,477
Kazikli 1,110,604
Total increase in valuation of inventory properties at acquisition exchange rate 18,958,577
Foreign exchange loss (8,742,360)
Open market value 100,143,999

9 Loans and receivables

Group
2007
£
Company
2007
£
Group
2006
£
Company
2006
£
Loan to third party 7,223,011 - 4,472,251 -
Loans to subsidiaries - 102,937,749 - 83,530,638
Exchange loss on revaluation of loan (11,486) (6,469,507) (90,386) (1,602,443)
7,211,525 96,468,242 4,381,865 81,928,195

The third party loan is €10,377,760 in respect of the investment in the Riverside Resort in Alanya 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.

10 Foreign currency losses

Group
2007
£
Company
2007
£
Group
2006
£
Company
2006
£
Translation of cash balances (38,410) (38,410) (167,574) (167,574)
Foreign exchange on settlement 45,250 45,250 47,090 47,090
Loss on loans (11,486) (4,867,063) (90,386) (1,602,443)
Net currency losses (4,646) (4,860,223) (210,870) (1,722,927)

11 Investment in subsidiary undertakings

 
Name
Country of
incorporation
Authorised
share capital
Issued
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 YTL 46,146,312 YTL 46,146,312 99.99
Osmanli Yapi 2 Turkey YTL 188,284,941 YTL 188,284,941 99.99
Osmanli Yapi 3 Turkey YTL 5,249,584 YTL 5,249,584 99.99
Osmanli Yapi Turkey YTL 11,249,104 YTL 11,249,104 99.99

All of the above companies have been incorporated into the group accounts.

12 Interests in joint ventures

The Group has the following interest in a joint venture, Mobella, a project management company.

Country of
Domicile
Ownership
%
Mobella Turkey 50

Summarised financial information of joint venture is as follows:

Assets Liabilities Equity Revenue Loss
Mobella 990,310 (32,267) 958,043 947 (47,415)

13 Debtors

Group
2007
£
Company
2007
£
Group
2006
£
Company
2006
£
Prepayments 167,204 24,345 265,720 265,720
Recoverable land tax 375,080 - 347,016 -
Other debtors 54,733 - - -
597,017 24,345 612,736 265,720

The directors consider that the carrying amount of the debtors approximates to their fair value. Prepayments include advances to suppliers.

14 Creditors - amounts falling due within one year

Group
2007
£
Company
2007
£
Group
2006
£
Company
2006
£
Accruals 187,767 149,283 197,125 196,537
Amounts due to subsidiaries - 5 - 5
Accrued tax 23,107 - - -
Other payables 5,040,780 - - -
5,251,654 149,288 197,125 196,542

Other payables include £4,965,490 in respect of the balance payment, described in note 20, of the acquisition of the land in Riva.

15 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.

16 Retained earnings

Group
2007
£
Company
2007
£
Group
2006
£
Company
2006
£
At start of the period (10,962,860) (11,949,137) - -
Bank and deposit interest earned 2,607,646 2,169,409 3,709,237 3,708,374
Operating expenses (4,026,637) (3,795,382) (2,693,781) (2,684,584)
(1,418,991) (1,625,973) 1,015,456 1,023,790
Net movement on foreign exchange (4,646) (4,860,223) (210,870) (1,722,927)
(Loss) / profit for the period (1,423,637) (6,486,196) 804,586 (699,137)
Foreign exchange on subsidiary translation (226,801) - (517,488) -
Sales commission and formation expenses - - (11,250,000) (11,250,000)
Minority interest (37) - 42 -
At end of the period (12,613,335) (18,435,333) (10,962,860) (11,949,137)

17 Net asset value per share

The net asset value per Ordinary share is based on the net assets attributable to equity shareholders of £137,386,660 (2006: £139,037,098) and on 150,000,000 Ordinary shares, being the number of Ordinary shares in issue at the period end.

18 Cash and cash equivalents

Group
2007
£
Company
2007
£
Group
2006
£
Company
2006
£
Bank balances 44,898,891 35,221,363 112,068,861 53,260,010
Loan guarantee - - 2,793,475 2,793,475
44,898,891 35,221,363 114,862,336 56,053,485

19 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:

The Board reviews and agrees policies for managing each of these risks. As required by IAS 32: 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 Group 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 at 31 August 2007 is dependent on successful completion and sale of properties by the third party developer. Further details of loans made to subsidiaries and developers can be found in note 9.

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:

Non-current
assets
at 31 August
2007
£
Net monetary
assets
at 31 August
2007
£
Non-current
assets
at 31 August
2006
£
Net monetary
assets
at 31 August
2006
£
Sterling - 34,470,508 - 52,658,419
Euro 7,211,525 625,912 4,381,865 3,395,067
US Dollar 89,927,782 4,687,988 19,377,286 56,997,128
Turkish Lira 3,099 459,846 - 1,811,722
97,142,406 40,244,254 23,759,151 114,862,336

Interest rate risk
The Group’s cash balances earn interest at the prevailing market rate, dependant on the account type.

Floating rate
at 31 August
2007
£
Non interest
bearing at
31 August
2007
£
Floating rate
at 31 August
2006
£
Non interest
bearing at
31 August
2006
£
Sterling 34,595,451 - - 52,658,419
Euro 625,912 7,211,525 601,592 7,175,340
US Dollar 9,653,478 89,927,782 56,997,128 19,377,286
Turkish Lira 24,050 3,099 1,811,722 -
44,898,891 97,142,406 112,068,861 26,552,626

 
Liquidity risk
The Group’s assets mainly comprise cash balances and realisable investments, which can be sold to meet funding commitments if necessary.

20 Commitments

The Group has an agreement to pay $10 million in September 2007 in respect of the balance of the acquisition of the land in Riva.

21 Post balance sheet events

On 1 November 2007, the Board announced the implementation of a managed realisation of the portfolio and a $30 million share buy back scheme.

22 Related party transactions

Information regarding subsidiaries and subsidiary loans can be found in notes 9 and 11. 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.

23 Directors’ interests

Total compensation to the Directors over the period was £103,063
(2006: £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 shares held by the Manager.