ciref limited annual report and accounts 2006...company’s dividend target payment ratio. subject...

CIREF LIMITED annual report and accounts 2006

REGISTERED OFFICECHANNEL HOUSEGREEN STREETST HELIERJERSEY JE2 4UH

T +44 (0)1534 834600F +44 (0)1534 834601

BRITISH VIRGIN ISLANDSINVESTMENT MANAGERCOROVEST FUND MANAGERS LTDHARBOUR HOUSEWATERFRONT DRIVEROAD TOWNTORTOLABRITISH VIRGIN ISLANDS

T +1 (284) 495 9097F +1 (302) 397 2761

UNITED KINGDOMPROPERTY ADVISERCOROVEST INTERNATIONAL LTD2ND FLOOR 11 HAYMARKETLONDON SW1Y 4BPT +44 (0)20 7811 0100F +44 (0)20 7811 0101

E [email protected] WWW.CIREF.JE

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Corporate Statement

CIREF is a Jersey registered closed-ended property investment and development company. It invests in commercial real estate primarily in the United Kingdom and Europe, with a focus on retail and commercial assets.

The Company, the successor entity to the Corovest International Real Estate Fund, was admitted to trading on AIM on 26 May 2006.

CIREF is managed by Corovest Fund Managers Limited, a BVI regulated Fund and Investment Manager.

EARNINGS PER SHARE (PENCE)

03* 04* 05* 06

22

811

16

NET ASSET VALUE (£M)

02* 03* 04* 05* 06

9 1113 12

51

NET ASSET VALUE PER SHARE (PENCE)

02* 03* 04* 05* 06

100121

123

140

143

* Historical figures based on CIREF’s predecessor fund – Corovest International Real Estate Fund

23 CASH FLOW INFORMATION CONTINUED23.2 ACQUISITION OF SUBSIDIARIESThe Group acquired the following subsidiaries during the financial year ended 30 September 2006:

Trito Petersfield Limited

Banstead Property Holdings Limited

Trito Blackpool Limited

Ciref Reigate Limited

Ciref Margate Limited

Ciref Margate Two Limited

Ciref Ashtead Limited

TYS Holdings Limited

The assets and liabilities arising from these acquisitions were as follows:

Group Group 30 September 30 September 2006 2005 £ £

Investment property 24,566,746 —

Trade and other receivables 900,447 —

Trade and other payables (794,718) —

Cash and cash equivalents 4,229,621 —

Shareholder loans (1,602,549) —

Interest-bearing borrowings (25,899,605) —

1,399,942 —

Less: minorities (143,744) —

Goodwill (3,148) —

Total purchase consideration 1,253,050 —

Less: cash and cash equivalents (4,229,621) —

Cash flow on acquisition net of cash acquired (2,976,571) —

23.3 PROCEEDS FROM ISSUE OF SHARE CAPITAL

Cost of shares issued 49,705,100 —

Share issue costs written off (1,082,056) —

48,623,044 —

Shareholders’ calendar

YEAR END 30 September 2006

AGM 31 January 2007

FINAL DIVIDEND Record date: 15 December 2006 Payable: February 2007

HALF YEAR 31 March 2007

INTERIM DIVIDEND August 2007

33CIREF Limited | annual report and accounts 2006

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BRITISH VIRGIN ISLANDSTYS Office Development, Tortola

UK AND CHANNEL ISLANDSDelamere Place, Crewe, CheshireFriars Walk Shopping Centre, Newport, WalesHounds Hill Shopping Centre, Blackpool98–100 High Street, Banstead, SurreyPearl House, Swansea, WalesKwik-Fit Portfolio, UK15–17 The Square, Petersfield, HampshireNewington House, Southwark, London7–11 High Street, Reigate, SurreyRegal Walk Shopping Centre, Margate53 The Street, Ashtead, SurreyFour Seasons Care Home GroupTrinity Walk, Shopping Centre, Wakefield*Birchwood Shopping Centre, Warrington*26 The Esplanade, St Helier, Jersey*

SWITZERLANDCo-op VichCo-op Brig

Portfolio

STABLE INCOME MAJOR DEVELOPMENTS VALUE ENHANCING PCIV+

FOUR SEASONS HEALTHCARE

HALLADALE PLC

MODUS ALPHA FUND

HIGH STREET, BANSTEAD

PEARL HOUSE SWANSEA

THE SQUARE, PETERSFIELD

HIGH STREET, REIGATE

TYS OFFICE DEVELOPMENT

THE STREET, ASHTEAD

KWIK-FIT STAFFORD

KWIK-FIT STOCKPORT

DELAMERE PLACE, CREWE

HOUNDS HILL, BLACKPOOL

FRIARS WALK, NEWPORT

TRINITY WALK, WAKEFIELD

NEWINGTON HOUSE

CO-OP’S SWITZERLAND

KWIK-FIT PORTFOLIO

REGAL WALK, MARGATE

26 ESPLANADE, JERSEY

BIRCHWOOD CENTRE, WARRINGTON

CONTENTS Corporate Statement IFC Portfolio 01 Chairman’s Statement 02 Investment Manager’s Review 04 Directors and Advisers 10 Directors’ Report 12 Directors’ Remuneration Report 14 Statement of Directors’ Responsibilities 14 Corporate Governance Report 15 Independent Auditors’ Report 17 Consolidated Income Statement 18 Consolidated Balance Sheet 19 Consolidated Statement of Cash Flows 20 Consolidated Statement of Changes in Equity 21 Notes to the Financial Statements 22

* Acquired post year-end.

+ Property Collective Investment Vehicles.

ELEMENTAL ANALYSIS OF PORTFOLIO

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02 CIREF Limited | annual report and accounts 2006

“ This has been a year of significant activity, with exciting new investments and some disposals. CIREF’s activity levels are likely to continue with the substantial development pipeline and asset management opportunities that have been created.”

Chairman’s Statement

1 2

1. 26 Esplanade, Jersey2. Birchwood Shopping Centre, Warrington

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“ CIREF is well placed to take advantage of the current property environment and we are confident of the future prospects for the Company.”

I am delighted to announce a pleasing set of maiden results for CIREF as a listed company.

The results are attributable to a solid performance by the Investment Manager, Corovest Fund Managers Limited, and a strong real estate market in the geographical regions in which the Company has investments. This has been a year of significant activity, with exciting new investments and some disposals. CIREF’s activity levels are likely to continue with the substantial development pipeline and asset management opportunities that have been created.

A highlight for the year was the admission of the Company to the Alternative Investment Market (“AIM”) of the London Stock Exchange and the raising of £28.2m of new capital. While this came at a cost, the listing should be of substantial benefit to the Company going forward.

The shares debuted at a small premium to their issue price in volatile financial markets. It is pleasing to see that the share price has subsequently settled into a solid trading band, though liquidity remains relatively low. Where appropriate the Company will make acquisitions using its shares and this should, in time, contribute to improved liquidity levels.

The Company produced pleasing results for the period with net profit attributable to equity shareholders of £2.3m and basic (weighted average) earnings per share of 15.72p.

Basic earnings per share is stated after accounting for the significant cost of the Company’s admission to AIM and the funds raised in May 2006. Return on weighted average equity before listing expenses for the year to September 2006 was 14.4%.

Further information on the results, including pro forma comparisons for the prior period, is contained in the Financial Review.

DIVIDENDThe Board of Directors have recommended a dividend of 2.11p per share. This equates to 4.5% of net asset value pro-rated for the period from the date of admission to AIM to the year-end, and is consistent with the Company’s dividend target payment ratio.

Subject to shareholder approval at the Annual General Meeting, the dividend will be paid on 14 February 2007 to shareholders on the register on 15 December 2006.

DIRECTORSLeading up to the admission to AIM, and following my appointment as Chairman, Messrs Peter Todd, Stephen Carlin, Serge Richard, Michael Farrow and John Ruddy were appointed as Directors to the CIREF Board. I would like to welcome my colleagues and wish them every success in their association with the Company.

PROSPECTSThe UK and European real estate markets continue to be driven by strong investment demand. It appears however that yield compression has substantially run its course on the back of the rising short-term interest rates and consequently any further increases in capital value are likely to be modest and driven more by active asset management and rental growth. The consensus forecast is for a stable macro economic environment in which property will continue to provide strong relative risk adjusted returns. CIREF has a portfolio of properties which offers a combination of strong rental flows, certain of which can be enhanced, a potential for capital appreciation, based on the yield compression which has occurred, and opportunities for development profits. CIREF is well placed to take advantage of the current property environment and we are confident of the future prospects for the Company.

ACKNOWLEDGEMENTI would like to thank my Board colleagues for their support and express my thanks to the Investment Manager and all the other service providers to the Company.

GAVIN TIPPERChairman

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“ The generation of total returns through capital growth and dividend distribution using a diversified strategy.”

Investment Manager’s Review

1 2 3 4

5

1. Trinity Walk Shopping Centre, Wakefield2. Delamere Place, Shopping Centre, Crewe3. Houndshill Shopping Centre, Blackpool4. Friars Walk Shopping Centre, Newport5. Houndshill Shopping Centre, Blackpool

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“ The Group’s strategy is to provide investors with strong investment returns based on a balanced exposure to lower risk income-generating assets and opportunities that can provide a higher capital return.”

CIREF is a property investment company incorporated on 28 September 2005 under the laws of Jersey. The Company was formed to act as the listing successor to the Corovest International Real Estate Fund (“the Fund”).

The Company was admitted to AIM on 26 May 2006. It acquired all the assets and liabilities of the Fund prior to admission.

The Company has investments in commercial and retail properties in the UK, Switzerland, the Channel Islands and the British Virgin Islands that provide sustainable occupancy rates and income flows, together with opportunities for development and significant value enhancement.

The Company has an investment management agreement in place with Corovest Fund Managers Limited (“CFM”), a British Virgin Islands registered and regulated Fund Manager. Under the agreement with the Company, CFM is responsible for the investment and management of the Company’s assets.

GROUP STRATEGYThe Group’s strategy is to provide investors with strong investment returns based on a balanced exposure to lower risk income-generating assets and opportunities that can provide a higher capital return.

This is achieved by acquiring property investments selected on the basis of four distinct yet complementary criteria:

STABLE INCOME INVESTMENTSPart of the resources of the Group are applied to investing in properties that provide a stable, predictable and low risk income stream and which have limited, if any, associated development opportunities. The Group will typically only invest in such properties where there are opportunities to enhance the value of the investment, for example where the Directors consider the properties to be under-rented and where rent reviews are due, or where yield compression is expected.

MAJOR DEVELOPMENT PROJECTSThe investments that fall into this category are subject to considerable redevelopment but where the future post-redevelopment income from the project is expected to be underpinned by pre-letting major parts of the development to businesses with strong rental covenants on a long-term basis and from existing tenants currently occupying the properties.

These investments provide the Group with exposure to potentially high return projects but without being overly speculative in nature.

VALUE ENHANCING PROJECTSThe projects that fall into this category are smaller properties which the Board believes can be converted on a relatively low risk basis to provide premium commercial space. These projects may also include an element of residential or mixed use development to enhance the returns from the investment.

INVESTMENTS IN PROPERTY SECURITIESThe Group will look for opportunities to invest in property securities when the value is considered to be superior to that of physical property.

The investments will often be of a strategic nature where a shareholding can be used to unlock value in underlying property assets.

GEARINGThe Company has a conservative policy towards gearing. Where possible, long-term debt is hedged to coincide with lease length periods. Debt, as far as possible, is ring-fenced within special purpose vehicles on a non-recourse basis. The articles of association limit the total borrowings within the Company to six times the adjusted Capital and reserves of the Company.

CO-INVESTMENTThe Company operates a co-investment ownership model. Joint venture partnerships give the Company the opportunity of investing into higher value opportunities whilst managing risk. The model also provides the opportunity of investing in a greater spread of investments than would be the case with sole ownership.

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“ 2005/2006 has been another strong year for property in the UK and Europe, with a total twelve month return to 30 September 2006 of 20.7% (as reported by the Investment Property Databank monthly index for twelve months to 30 September 2006).”

PORTFOLIO DETAILSThe Group held 16 investments in a range of fixed and listed property assets located within the UK, Europe and the British Virgin Islands as at 30 September 2006. Three properties have been acquired post year-end. (Details are set out below).

MARKET OVERVIEW2005/2006 has been another strong year for property in the UK and Europe, with a total twelve month return to 30 September 2006 of 20.7% (as reported by the Investment Property Databank (IPD) monthly index for twelve months to 30 September 2006).

The majority of the return was through capital growth, generated by yield compression driven largely by the weight of funds seeking access to property investments.

CIREF PORTFOLIOThe CIREF UK Portfolio showed a total return for the twelve months to 30 September 2006 of 16.3%. This is considered an acceptable return vis-à-vis the IPD return as two of the properties (Newport and Crewe) are being vacated in order for redevelopment to commence. No development value has been included in the portfolio performance.

ACQUISITIONS AND DISPOSALSThe Company made the following acquisitions and disposals:

ACQUISITIONSBirchwood Shopping Centre, WarringtonCIREF acquired (after the year-end) an effective 33.3% stake in the Birchwood Shopping Centre, Warrington, North West England.

The Shopping Centre, which covers 377,161 sq ft, includes a 108,814 sq ft ASDA Supermarket as well as 1,500 parking spaces. The total site area is approximately 30 acres.

Investment Manager’s Review continued

NAME CATEGORY USE TYPE VALUE (£M) % OWNED

DELAMERE PLACE, CREWE MDP RETAIL CENTRE 23.75 90.78*

FRIARS WALK, NEWPORT MDP RETAIL CENTRE 14.55 80.95*

KWIK-FIT PORTFOLIO, UK SII MOTOR & ANCILLARY 19.68 80.56*

NEWINGTON HOUSE LTD, SOUTHWARK SII OFFICE 10.00 75.27

CO-OP SWITZERLAND SII SUPERMARKET & HOME DEPOT 11.39 30.47

PEARL HOUSE, SWANSEA VEP RETAIL & RESIDENTIAL 3.39 50.00

15–17 THE SQUARE, PETERSFIELD VEP RESIDENTIAL 1.91 60.42

98–100 MAIN STREET, BANSTEAD VEP RETAIL & RESIDENTIAL 1.48 71.43

HOUNDS HILL, BLACKPOOL MDP RETAIL CENTRE 98.47 62.00*

7–11 HIGH STREET, REIGATE VEP RETAIL & OFFICES 3.96 61.36

REGAL WALK, MARGATE VEP RETAIL CENTRE 12.95 52.50

TYS OFFICE DEVELOPMENT, BVI MDP OFFICES 0.44 15.00

HALLADALE PCIV LISTED PROPERTY COMPANY 1.44 1.91

MODUS ALPHA FUND PCIV UNLISTED PROPERTY COMPANY 0.15 1.04

FOUR SEASONS CARE HOME GROUP PCIV CARE HOMES 2.04 70.00**

THE STREET, ASHTEAD, SURREY VEP VACANT DEVELOPMENT PROPERTY 2.18 100.00

CURRENT PORTFOLIO

NAME CATEGORY USE TYPE VALUE (£M)

BIRCHWOOD SHOPPING CENTRE, WARRINGTON

TRINITY WALK SHOPPING CENTRE, WAKEFIELD

26 THE ESPLANADE, ST HELIER, JERSEY

MDP

MDP

SII

RETAIL CENTRE

RETAIL CENTRE

OFFICES

53.55

215.00***

27.10

% OWNED

33.30

72.20*

50.00

ACQUIRED AFTER YEAR END

KEY:MDP: Major Development Project SII: Stable Income Investment VEP: Value Enhancing Project PCIV: Property Collective Investment Vehicle

* % ownership of the Company which owns 50% of the property** % of Joint Venture company invested in Project Fino Joint Venture*** estimated completion value

The properties were valued on a desk-top basis on 30 September 2006 for financial reporting purposes. Recent acquisitions are included at cost.

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A planning application for an extension to the scheme to accommodate another major retail store will be submitted shortly.

The Centre was acquired for a total purchase price of circa £50m on an initial yield of approximately 4.9% rising to over 6% on completion of the proposed retail extension.

The Centre has a strong tenant mix with over 80% of the income secured to national multiple retailers, 50% of which is secured for over ten years.

CIREF has undertaken this investment in partnership with Modus Properties Ltd, which acquired the remaining 66.6%.

Kwik-FitCIREF has acquired its joint venture partner Sandcroft Limited’s 50% share in the portfolio of 29 Kwik-Fit outlets spread around the UK.

The net consideration of £2.28m was settled £354,000 in cash, £347,000 by the issue of 241,812 new ordinary shares in CIREF at 143.50p per share and the balance in shares and loans in two new special purpose development vehicles established to develop the Stockport and Stafford Kwik-Fit properties.

This is considered to be a further step in consolidating the CIREF Portfolio. The acquisition provides CIREF with control over a portfolio with a strong rental stream and provides exposure to two properties with attractive asset management opportunities.

Trinity Walk, WakefieldTrinity Walk Wakefield Limited, in which CIREF holds an effective 36.1% interest, exchanged contracts after year-end to acquire the benefit of the conditional development agreement with Wakefield City Council to complete a 515,000 sq ft new retail scheme on a 28 acre site in Wakefield town centre.

Detailed planning consent has been granted for this retail centre with an estimated completion value of £215m. Construction is due to commence on site in April 2007, subject to confirmation of the Compulsory Purchase Order, with completion anticipated by Spring 2010.

Contracts have been exchanged for major pre-lettings to Debenhams for a department store of approximately 95,000 sq ft, to Sainsbury’s for a food store of approximately 92,000 sq ft and to Next for a store of approximately 20,000 sq ft.

The scheme will revitalise the city centre providing over 50 retail units on three levels, 72 residential units, a new indoor market hall and a 960 space car park. It should establish Wakefield town centre as a strategic shopping destination.

Trinity Walk is a joint venture with Modus Properties and Simons Development.

26 The Esplanade, JerseyThe Company has exchanged contracts to acquire a 50% interest in a building known as 26 The Esplanade, St. Helier, Jersey.

The 59,000 sq ft building has been acquired on a net yield of 5.9%. It is let to the following three blue chip tenants on leases for periods of more than 15 years:

• JFSC Property Holdings No.1 Limited;• AIB Bank (CI) Limited; and• Capita Fiduciary Group Limited.

The building is currently under construction and is expected to be completed in the Summer of 2007. The total cost of the building was £27.1m, of which the Company’s contribution was £13.55m.

1 2 3

1. Delamere Place Shopping Centre, Crewe2. Kwik-Fit Stockport, proposed re-development3. Trinity Walk Shopping Centre, Wakefield

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“ The Investment Manager will be looking to consolidate the Company’s portfolio with complementary acquisitions and asset management initiatives.”

Four Seasons Health Care GroupCIREF has invested an amount of £1.4m in a consortium of financiers that has recently acquired the Four Seasons Health Care Group.

Although this investment gives CIREF a very minor stake in the consortium, it provides an exposure to the growing care home sector of the real estate market and will be used as a base to expand the Company’s interests in this area.

53 The Street, Ashtead, SurreyCIREF acquired this vacant, former petrol filling station site from Exxon for an amount of £2.18m. The property is located in the centre of the affluent commuter belt town of Ashtead. A planning application is to be submitted for approximately 7,000 sq ft of retail and 13 residential apartments.

DISPOSALS• The Company has completed the sale of twelve apartments

in Banstead, Surrey.

• The Kwik-Fit property in Dundee, Scotland was disposed of for £1,225,000 at a 4.12% yield.

• An effective 50% of the Kwik-Fit properties located in Stockport and Stafford have been disposed of.

UPDATE ON DEVELOPMENT PROJECTSHOUNDS HILL SHOPPING CENTRE, BLACKPOOLThe contractor commenced operations on site in March 2006. The Centre on completion will have 300,000 sq ft of retail space. External and piling works are underway together with internal reconfiguration works to the “pod” area. The construction programme should be completed in time for the opening of the centre scheduled for Spring 2008.

Investment Manager’s Review continued

1 2 3

1&2. Friars Walk Shopping Centre, Newport3. Pearl House, Swansea

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The expected tenants include Debenhams, Next, C&J Clarks, NCP, Early Learning Centre, Game, River Island, Clinton Cards, Signet, Monsoon and Sports World. Letting of the remaining units is progressing well.

The completed value of the Centre should be positively influenced by the yield compression that has influenced the value of regional centres of this type and is not reflected in the current carrying value of the investment.

FRIARS WALK SHOPPING CENTRE, NEWPORT, WALESThe development agreement for a 440,000 sq ft centre was exchanged with the Newport City Council in June 2006. The contract to acquire part of the adjacent land became unconditional in August 2006.

The Debenhams agreement to lease was exchanged in May 2006 and detailed negotiations are progressing well with the remaining tenants targeted by the letting agents.

The project is on track for construction to commence in July 2007 with completion set for Autumn 2009.

The yield compression that has occurred and is not reflected in the carrying value of the investment is also expected to have a significant impact on the end value of the Centre.

DELAMERE PLACE SHOPPING CENTRE, CREWEThe development agreement for a 485,000 sq ft retail centre was signed with the local authority in July 2006. The planning application was ratified by full council on 2 August 2006.

Agreements of lease have been exchanged with both Debenhams and Bhs. Detailed negotiations are progressing well with the targeted multiple retailers.

The project is on track for construction to commence in January 2008 with completion set for September 2010.

UPDATE ON OTHER PROJECTSThe twelve apartments in Banstead have been completed and sold and construction has commenced on the residential element of Petersfield and Swansea.

Planning applications are due to be lodged in the near future for redevelopment of the Reigate property as well as the Kwik-Fit properties in Stockport and Stafford.

“The Centre” in Margate is to be refurbished and rebranded as “Regal Walk” during 2007. A revised tenant layout and mix is being implemented.

FUTURE STRATEGYThe Investment Manager will be looking to consolidate the Company’s portfolio with complementary acquisitions and asset management initiatives.

Consideration is being given to the acquisition of further interests in the various investments.

Further acquisitions in Europe are expected to be made in the next year.

COROVEST FUND MANAGERS LIMITEDInvestment Manager

MAJOR PROJECT DEVELOPMENT PROGRAMME

2006 2007 2008 2009 2010 2011

Com

men

cem

ent d

ate

Com

plet

ion

date

HOUNDS HILL, BLACKPOOL

March 2006 May 2008

FRIARS WALK, NEWPORT

July 2007 Sept 2009

TRINITY WALK, WAKEFIELD

March 2007 Apr 2010

DELAMERE PLACE, CREWE

Jan 2008 Sept 2010

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GAVIN TIPPER Non-executive ChairmanMr Tipper is a chartered accountant with Bachelor of Commerce and Bachelor of Accounting degrees and a Masters in Business Administration. He has been involved in the financial services industry for over 18 years. Prior to joining the Coronation Group in 2001, he was a technical partner in KPMG. Mr Tipper is currently the chief operating officer of Coronation Investments and Trading Limited. Mr Tipper has held directorships in a number of listed South African companies.

ROBERT SMITHNon-executive Director Mr Smith has over 25 years’ experience in the financial services industry. He has a Bachelor of Commerce (Honours) Degree and is currently a Director of Corovest Offshore Limited and Coronation Capital Limited in Ireland. He acts as Corovest’s General Manager for its Irish operation.

MICHAEL WATTERS Non-executive Director Mr Watters is a registered professional engineer with a BSc Eng. (Civil) Degree and an MBA. He has over 17 years’ experience in the investment banking and real estate industries. He has held directorships of some of South Africa’s top rated listed property funds including Sycom Property Fund and Hyprop Investments Ltd as well as the £260m Sapphire Retail Fund in the UK.

PETER TODD Non-executive DirectorMr Todd is a qualified lawyer with a BComm/LLB degree and a higher diploma in taxation. He worked for Arthur Andersen in their tax department before establishing TWS Consulting and Osiris International Trustees Limited. The main focus of his practice was property related and he has many years of experience in consulting to major players in the property industry.

Directors and Advisers

FROM LEFT TO RIGHT: (FRONT ROW) GAVIN TIPPER, JOHN RUDDY; (BACK ROW) MICHAEL FARROW, ROBERT SMITH, MICHAEL WATTERS, STEPHEN CARLIN AND PETER TODD

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STEPHEN CARLIN Non-executive Director Mr Carlin is a qualified engineer with over 25 years’ experience in the real estate industry. He has been involved in many aspects of the industry, including property services, project management and development. Over the past five years he has focused on property investment in the United Kingdom with the emphasis on private investor syndications.

STEWART SIMS-HANDCOCK Non-executive Director Mr Sims-Handcock is the Financial Director of Osiris International Trustees Limited in the BVI. He serves as a director for a number of BVI companies and is Compliance Officer for Osiris. Between February 2001 and July 2004 Mr Sims-Handcock was Financial Manager at Decillion Fund Management in Cape Town where he managed the back office support and fulfilled the role of Compliance Officer to the Financial Services Board. After graduating from the University of Cape Town with a Bachelor of Commerce and a Post Graduate Diploma in Accountancy he completed his articles with BDO Spencer Steward. He worked at Appleton Asset Management as a Financial Manager from 1999 to 2000.

SERGE RICHARD Non-executive Director Mr Richard trained as an accountant and spent seven years working for two major accounting firms in France. In 1995 he joined a leading independent trust company in Geneva, Switzerland where he served as senior manager and a member of the operations board. He has an MBA from the Management School of Reims University, France. He is a co-founder and deputy managing director of BasTrust Corporation Limited.

MICHAEL FARROW Non-executive Director Mr Farrow is a founder Director of Consortia Partnership Limited, a Jersey licensed trust Company; following seven years as an Executive Director and trustee of a very substantial family trust whose main activity was property investment and development in UK, central Europe and California. He currently sits on the Boards of both UK listed and private property companies and funds. From 1993–1997 he was Group Company Secretary of Cater Allen, Jersey and, prior to that, a regular army officer. He holds an MSc in Corporate Governance and is a Fellow of the Chartered Institute of Secretaries and Administrators.

JOHN RUDDY Non-executive Director Mr Ruddy is a Fellow of the Chartered Institute of Bankers, a former John Caulcutt Prize winner and President of the Jersey Centre. He has over 25 years’ experience in the offshore finance industry and was Managing Director of Bemuda Trust (Jersey) Limited between 1984 and 2004.

INVESTMENT MANAGERCOROVEST FUND MANAGERS LIMITED2nd Floor, Harbour House PO Box 2221 Waterfront Drive, Road Town Tortola, British Virgin Islands

SECRETARYCONSORTIA TRUSTEES LIMITEDChannel House Green Street, St Helier Jersey JE2 4UH

REGISTERED OFFICEChannel House Green Street, St Helier Jersey JE2 4UH

NOMINATED ADVISER AND BROKERSEYMOUR PIERCE LIMITEDBucklersbury House 3 Queen Victoria Street London EC4N 8EL

SOLICITORS TO THE COMPANYCAREY OLSEN 47 Esplanade St. Helier Jersey JE1 0BD

PINSENT MASONSCitypoint One Ropemaker Street London EC2Y 9AH

PROPERTY VALUERSCOLLIERS CRE9 Marelybone Lane London W1U 1HL

DTZ DEBENHAM TIE LEUNGOne Curzon Street London W1A 5PZ

CB RICHARD ELLIS33 Rue des Bains 1205 Geneva Switzerland

PROPERTY ADVISERCOROVEST INTERNATIONAL LIMITED2nd Floor 11 Haymarket London SW1Y 4BP

AUDITORS AND REPORTING ACCOUNTANTSKPMG1 Harbourmaster Place IFSC Dublin 1, Ireland

REGISTRARSCapita IRG Offshore Limited Victoria Chambers, Liberation Square 1/3 Esplanade St Helier Jersey JE2 3Q

Details of Professional Advisers

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The Directors present their report together with the audited consolidated financial statements for the year ended 30 September 2006.

RESULTS AND PROPOSED DIVIDENDSThe consolidated income statement is set out on page 18 and shows a profit for the year of £4.480m after taxation and a profit attributable to equity shareholders of the Company of £2.298m.

The Directors of CIREF have resolved to declare a dividend of 2.11p per share. The record date was Friday, 15 December 2006 and the dividend will be paid to shareholders on 14 February 2007, subject to approval at the Annual General Meeting (“AGM”).

The following ordinary shares were issued during the year under review:

Number of Issue price ordinary (inc. premium) Effective date shares pence Reason

In issue at 30 September 2005 1,000 3 April 2006 99,000 100 Share split

Conversion of loan from 3 April 2006 14,170,851 141 Corovest International Real Estate Fund

Conversion of “B Class” shares in the 17 May 2006 1,083,506 137 Corovest International Real Estate Fund

26 May 2006 20,150,000 140 Shares issued as part of listing

In issue at 30 September 2006 35,504,357

PRINCIPAL ACTIVITIES, TRADING REVIEW AND FUTURE DEVELOPMENTSThe principal activity of the Group is the investment in, and development of, commercial property primarily in the United Kingdom and Europe. A review of the activities and prospects of the Group is given in the Chairman’s statement and the Investment Manager’s review on pages 2 to 9.

DIRECTORSThe Directors of the Company during the year were: Gavin Tipper, Stephen Carlin, Michael Farrow, Serge Richard, John Ruddy, Stewart Sims-Handcock, Robert Smith, Peter Todd and Michael Watters.

Michael Watters and Robert Smith served throughout the year. The remaining Directors were appointed during the year as set out in the corporate governance report on pages 15 and 16.

The Company maintains insurance for the Directors in respect of liabilities arising from the performance of their duties.

DIRECTORS’ INTERESTSAs at 30 September 2006, the interests (all of which are beneficial unless otherwise stated) of the Directors, their immediate family members and persons connected with them in the share capital of the Company together with any options in respect of such capital, the existence of which is known to or could with reasonable diligence be ascertained by that Director, whether or not held through another party, were as follows:

Number of ordinary shares

Director 2006 2005

Gavin Robert Tipper 46,155 —

Robert John Mortimer Smith 106,511 —

Michael John Watters 1,036,647 100

Peter McAllister Todd 653,051 —

Stephen Carlin 1,036,647 —

Stewart Sims-Handcock 4,890 —

Serge Stephane Richard — —

Michael James Wills Farrow — —

John Henry Ruddy — —

1. The interest attributed to Robert Smith is held by a trust of which members of Robert Smith’s family are the beneficiaries. The trust’s interest is held directly in the Company.

2. The interest attributed to Michael Watters is held by a discretionary trust of which members of Michael Watters’ family are discretionary beneficiaries. The trust’s interest is held via intermediate companies.

3. The interest attributed to Peter Todd is held by a number of discretionary trusts of which Peter Todd and members of his family are beneficiaries. Some of the trust’s interests are held by a number of intermediate companies and some are held directly in the Company.

4. The interest attributed to Stephen Carlin is held by a discretionary trust of which members of Stephen Carlin’s family are the discretionary beneficiaries. The trust’s interest is held via intermediate companies.

5. The interest attributed to Stewart Sims-Handcock is held by a trust of which Stewart Sims-Handcock is a beneficiary. The trust’s interest is held via an intermediate company.

Directors’ Report

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SHARE OPTIONSThere are no share options granted to Directors.

SUBSTANTIAL SHAREHOLDINGSThe Company has been notified of the following notifiable interests in its issued share capital as at 30 November 2006:

Registered shareholder Number of shares %

Pershing Keen Nominees CCCLT ACCT 7,418,215 20.90

Corovest International Limited & Corovest Fund Managers Ltd 6,170,516 17.38

Goldman Sachs Securities (Nominees) Limited 4,989,155 14.05

Chase Nominees Limited USSLEND ACCT 1,428,571 4.02

Hero Nominees Limited POOLED ACCT 1,366,000 3.85

Coronation Capital Limited 1,180,041 3.32

BBHISL Nominees Limited 1,157,241 3.27

Argon Holdings Inc 1,026,241 2.89

Trito Investments Fund Limited 935,000 2.63

Osiris International Trustees Limited 714,286 2.01

Other shareholders 9,119,088 25.68

35,504,354 100.00

CHARITABLE DONATIONSDuring the year the Group made no charitable donations.

PAYMENT OF SUPPLIERSThe policy of the Company is to settle supplier invoices within the terms of trade agreed with individual suppliers. Where no specific terms have been agreed payment is usually made within one month of receipt of the goods or service.

COMPLIANCE WITH 2003 COMBINED CODEA statement on corporate governance is set out on pages 15 and 16.

STAKEHOLDER PENSIONSAs there are no employees, no pension plan is in place.

POST BALANCE SHEET EVENTSPost balance sheet events are set out in note 21 to the accounts.

AUDITORSKPMG have expressed their willingness to continue in office and a resolution to re-appoint them will be proposed at the AGM.

RESOLUTION TO PURCHASE OWN SHARES Authority will be sought at the AGM to repurchase up to 5% of issued share capital until the conclusion of the 2008 AGM, or for 15 months from the date on which the resolution is passed, whichever is the earlier. Details of the current issued share capital are set out in note 16 to the accounts. The Directors will only exercise this authority if they consider that it will result in an increase in asset value per share for the remaining shareholders and that it will be in the best interests of the Company to do so.

By order of the Board

CONSORTIA PARTNERSHIP LIMITEDCompany Secretary20 December 2006

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REMUNERATION POLICYThe Directors (other than alternate Directors) shall be paid out of the funds of the Company for their services as Directors, such aggregate sums (not exceeding £100,000 per year, or such larger amounts as the Company may by ordinary resolution approve) as the Board may determine. Any such sums shall be distinct from any salary, remuneration or other amounts payable to a Director pursuant to other provisions of the Articles of Association.

The Directors are entitled to be paid all reasonable travelling, hotel and other expenses properly incurred in attending meetings of the Board, committees of the Board, general meetings or otherwise in connection with the business of the Company.

BASIC FEESDirectors fees were paid as follows:

Michael Farrow £16,000 p.a.

John Ruddy £16,000 p.a.

Peter Todd £Nil*

Serge Richard £Nil**

Stewart Sims-Handcock £Nil*

Michael Watters £Nil***

Robert Smith £Nil***

Stephen Carlin £Nil***

Gavin Tipper £Nil***

* Certain sums were paid to Osiris International Trustees Limited pursuant to the terms of an administration agreement ** Certain sums were paid to Bastrust Corporation Limited pursuant to the terms of an employment agreement *** Certain sums were paid to Corovest Fund Managers Limited pursuant to the terms of an investment management agreement

The Directors are responsible for preparing the consolidated financial statements in accordance with applicable law and International Financial Reporting Standards.

Company law requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Group and Company and of the profit or loss for that period. In preparing these financial statements, the Directors are required to:

• select suitable accounting policies and apply them consistently; • make judgements and estimates which are reasonable and prudent; • state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial

statements; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Parent Company and enable them to ensure that the financial statements comply with the Companies (Jersey) Law 1991. They are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Directors’ Remuneration Report

Statement of Directors’ Responsibilities

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The Board of Directors is accountable to the Company’s shareholders for the management and control of the Company’s activities and is committed to high standards of corporate governance. This report describes how the Company complies with the provisions of The 2003 Combined Code – Principles of Good Governance and Code of Best Practice (“the 2003 Combined Code”).

The Directors recognise the importance of sound corporate governance and, in so far as is practicable given the Company’s size and the constitution of the Board, comply with the main provisions of the 2003 Combined Code: Principles of Corporate Governance and Code of Best Practice.

THE BOARD OF DIRECTORSDetails of the Directors are set out on pages 10 and 11. The Company is managed by the Board of Directors which comprises the Non-executive Chairman and eight Non-executive Directors, five of whom are independent of the Investment Manager, thus providing an appropriate balance of power and authority. The terms and conditions of appointment of Non-executive Directors are available for inspection at the Company’s registered office.

The Audit Committee of the Company meets at least twice a year (only one meeting held in 2006 due to admission to AIM being eight months into the financial year). The Audit Committee is responsible for ensuring that the Group’s financial performance is properly monitored, controlled and reported. It also meets the auditors and reviews reports from the auditors relating to accounts and internal control systems. The Audit Committee meets once a year with the auditors.

The Company has not established remuneration and nomination committees as such committees would not be appropriate given the nature of the Company’s operations. The Board reviews annually the remuneration of the Directors and agrees the level of Non-executive fees. Consideration will be given by the Board to future succession plans for Board members as well as to whether the Board has the skills required to effectively manage the Company.

The Company has adopted a model code for Directors’ dealings which is appropriate for an AIM quoted company. The Directors comply with Rule 21 of the AIM Rules relating to Directors’ dealings.

The Board reviews the schedule of matters reserved to it for decision at least once a year. Board approval is required for all significant or strategic decisions including major acquisitions, disposals and financing transactions. A procedure for Directors to take independent professional advice if necessary has been agreed by the Board and formally confirmed to all Directors.

The Board meets at least quarterly and each member receives up-to-date financial and commercial information in respect of the activities prior to each meeting, in particular, quarterly management accounts and schedules of income and outgoings (each with comparisons against budget), schedules of acquisitions and disposals and relevant appraisals (prior Board approval being required for large transactions) and cash flow forecasts and details of funding availability.

The Directors have delegated certain of their responsibilities to committees that operate within specified terms of reference and authority limits that are reviewed annually or in response to changed circumstances.

All members of the Board are subject to the re-election provisions of the Articles which require them to offer themselves for re-election at least once every three years and, on appointment, at the first AGM after appointment. Accordingly, Messrs Farrow, Ruddy, Todd, Richard, Sims-Handcock, Carlin and Tipper offer themselves for re-election at the AGM. Details of these Directors are set out on pages 10 and 11.

BOARD AND COMMITTEE MEETINGSThe number of meetings of the Board and of the Audit Committee and individual attendance by Directors, is set out below.

BOARD MEETINGS Attendance Attendance at scheduled at ad-hoc Director Date appointed meetings meetings

Michael Farrow 24 April 2006 100% 50%

John Ruddy 24 April 2006 50% 33%

Peter Todd 3 April 2006 75% 33%

Serge Richard 3 April 2006 50% 17%

Stewart Sims-Handcock 14 October 2005 50% 28%

Michael Watters 28 September 2005 100% 94%

Robert Smith 28 September 2005 75% 89%

Stephen Carlin 3 April 2006 25% 33%

Gavin Tipper 3 April 2006 100% 33%

There were four scheduled meetings and 18 ad-hoc meetings during the 2005/6 financial year.

Corporate Governance Report

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AUDIT COMMITTEE Attendance

Peter Todd (Chairman) 1

Gavin Tipper 1

Rob Smith 1

There was one meeting in the 2005/2006 financial year.

SHAREHOLDERS’ RELATIONSThe Company encourages regular dialogue with its institutional shareholders and private investors at the AGM, through corporate functions and property visits. Update meetings are held with institutional and major shareholders following announcement of preliminary and interim results and as requested throughout the year. Directors are accessible to all shareholders and queries received verbally or in writing are immediately addressed. Directors are introduced to shareholders at the AGM.

Announcements are made to the London Stock Exchange and the business media concerning business developments to provide wider dissemination of information. Registered shareholders are sent copies of both the annual report and accounts and the interim report.

FINANCIAL REPORTINGThe Company’s annual report and accounts includes detailed reviews of the business, together with a detailed review of its financial results and financing position. In this way, and as required by the Combined Code, the Board seeks to present a balanced and understandable assessment of the Company’s position and prospects.

INTERNAL CONTROLThe Board is responsible for maintaining a sound system of internal control to safeguard shareholders’ investment and is responsible for reviewing its effectiveness. Such a system is designed to manage, but not eliminate, the risk of failure to achieve business objectives. There are inherent limitations in any control system and, accordingly, even the most effective system can provide only reasonable, and not absolute, assurance against material misstatement or loss.

The Audit Committee meets with the auditors and deals with any significant internal control matters. In the period under review the Committee met with the auditors on one occasion.

Due to the size of the Group it does not have an internal audit function and the Company believes that a need for such a function does not currently exist, although this is periodically reviewed.

GOING CONCERNThe Directors can report that, based on the Group’s budgets and financial projections, they have satisfied themselves that the business is a going concern. The Board has a reasonable expectation that the Company and Group have adequate resources for facilities to continue in operational existence for the foreseeable future and therefore the accounts are prepared on a going concern basis.

Corporate Governance Report continued

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We have audited the consolidated financial statements of CIREF Limited for the year ended 30 September 2006 which comprise the consolidated balance sheet, Company balance sheet and consolidated statements of income, cash flows and changes in equity and the related notes. These financial statements have been prepared under the accounting policies set out therein.

This report is made solely to the Company’s members, as a body, in accordance with Article 110 of the Companies (Jersey) Law 1991. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for the report, or for the opinions we have formed.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORSAs described in the statement of Directors’ responsibilities on page 14, the Company’s Directors are responsible for preparation of the financial statements in accordance with applicable law and International Financial Reporting Standards.

Our responsibility is to audit the financial statements in accordance with the relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the financial statements give a true and fair review and are properly prepared in accordance with the Companies (Jersey) Law 1991. We also report to you if, in our opinion, the Company has not kept proper accounting records or if we have not received all the information and explanations we require for our audit.

We read the Directors’ report and other information accompanying the financial statements and consider the implications for our report if we become aware of any apparent misstatements within it.

BASIS OF AUDIT OPINIONWe conducted our audit in accordance with International Standards of Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the Directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Group’s and Company’s circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.

OPINIONIn our opinion the financial statements:

• give a true and fair view of the financial position of the Company and of the Group as of 30 September 2006, and of the Group’s results of operations and its cash flows for the year then ended, in accordance with International Financial Reporting Standards; and

• have been properly prepared in accordance with the Companies (Jersey) Law 1991.

KPMGChartered AccountantsRegistered Auditors1 Harbourmaster PlaceIFSCDublin 1Ireland20 December 2006

Independent Auditors’ ReportREPORT OF THE INDEPENDENT AUDITORS, KPMG, TO THE MEMBERS OF CIREF LIMITED

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Group Group 30 September 30 September 2006 2005 Notes £ £

Income

Gross rental income 4 2,097,469 —

Interest income 5 1,565,085 —

Other income 6 594,076 —

Dividend income 24,663 —

Profit on sale of investment property 2,504,158 —

Net gain from fair value adjustment on investment property 830,786 —

Net gain on financial assets at fair value through profit and loss 162,967 —

Total investment income 7,779,204 —

Expenses

Management fees (191,766) —

Professional fees (1,356,452) —

Administrative expenses (144,904) —

Other property expenditure (104,548) —

Foreign exchange loss/gain (2,413) —

Total expenses (1,800,083) —

Operating profit 5,979,121 —

Finance cost (2,238,042) —

Equity accounted profits 738,500 —

Profit for the financial year before tax 4,479,579 —

Taxation 7 — —

Profit for the financial year after tax 4,479,579 —

Attributable to:

Equity holders of the parent 2,298,249 —

Minority interest 2,181,330 —

Profit for the financial year after tax 4,479,579 —

Basic and diluted earnings per share (pence) 22 15.72 —

Proposed dividend per share (declared after year end) (pence) 2.11 —

Consolidated Income StatementFOR THE YEAR ENDED 30 SEPTEMBER 2006

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Group Group Company Company 30 September 30 September 30 September 30 September 2006 2005 2006 2005 Notes £ £ £ £

Assets

Non-current assets

Investment property 8 48,523,404 25,796,020 — —

Long-term receivables 9 20,240,655 10,460,693 18,072,026 3,260,693

Other investments 10 1,594,125 — 1,441,000 —

Investments in subsidiaries 11 — — 12,462,475 8,466,730

Investments in joint ventures 12 2,591,282 3,101,017 186,131 542,677

Investments in associates 13 51,339 6,034 (22,919) 6,034

73,000,805 39,363,764 32,138,713 12,276,134

Current assets

Trade and other receivables 14 9,902,249 343,272 965,878 849,198

Cash and cash equivalents 15 26,200,375 2,373,779 20,979,057 685,767

Total assets 109,103,429 42,080,815 54,083,648 13,811,099

Equity and liabilities

Capital and reserves

Share capital 16 355,044 1,000 355,044 1,000

Share premium 48,269,000 — 48,269,000 —

Retained earnings 2,298,249 — 2,435,298 —

Currency translation reserve (2,175) — — —

Total equity attributable to equity shareholders 50,920,118 1,000 51,059,342 1,000

Minority interest 2,179,735 4,860,230 — —

Total equity 53,099,853 4,861,230 51,059,362 1,000

Non-current liabilities

Interest-bearing borrowings 17 50,639,818 35,708,342 759,753 12,379,049

Current liabilities

Trade and other payables 18 5,363,758 1,511,243 2,264,553 1,431,050

Total equity and liabilities 109,103,429 42,080,815 54,083,648 13,811,099

Net asset value per share (pence) 143.42 —

The financial statements were authorised and approved by the Board of Directors on 21 November 2006 and were signed on their behalf by

R SMITH P TODD

Consolidated Balance SheetAS AT 30 SEPTEMBER 2006

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Consolidated Statement of Cash FlowsFOR THE YEAR ENDED 30 SEPTEMBER 2006

2006 2005 Notes £ £

Cash flows from operating activities

Profit after tax 4,479,579 —

Adjusted for:

Profit on disposal of investment property (2,504,158) —

Net fair value gains on investment property (830,786) —

Net fair value gains on financial instruments (162,967) —

Equity accounted profits from associates (738,500) —

Exchange rate losses 6,100 —

Interest received (1,565,085) —

Interest paid 2,238,042 —

Cash generated from operations 922,225 —

Changes in working capital 23.1 (1,846,274) —

Cash utilised by operations (924,049) —

Interest paid (379,889) —

Net cash from operating activities (1,303,938) —

Cash flows from investing activities

Investment income 1,481,792 —

Purchase of investment properties (4,393,347) —

Sale of investment properties 10,519,166 —

Investment in associates and joint ventures 98,941 —

Short-term loans to joint ventures (6,974,250) —

Increase in investments in subsidiaries (4,915,669) —

Acquisition of subsidiaries 23.2 (1,253,050) 2,373,779

Acquisition of other investments (3,400,000) —

Increase in financial assets (1,431,158) —

Net cash from investing activities (10,267,575) 2,373,779

Cash flows from financing activities

Proceeds from long-term borrowings 5,912,807 —

Repayment of borrowings (23,196,285) —

Dividends paid to minorities (171,315) —

Proceeds from issue of share capital 23.3 48,623,044 —

Net cash from financing activities 31,168,251 —

Net increase/(decrease) in cash 19,596,738 2,373,779

Effect of exchange rate fluctuations on cash held 237 —

Increase in cash on acquisition of Group undertakings 4,229,621 —

Net cash at the beginning of the period 2,373,779 —

Net cash at the end of the period 26,200,375 2,373,779

_7_CFR_arb06.indd 9 04/01/2007 09:18:00


Currency Share Share Retained translation Minority Total capital premium earnings reserve Total interest equity £ £ £ £ £ £ £

Group

Balance at date of incorporation

Shares issued 1,000 — — — 1,000 — 1,000

Acquisition of subsidiaries in period — — — — — 4,860,230 4,860,230

Balance at 30 September 2005 1,000 — — — 1,000 4,860,230 4,861,230

Balance at 1 October 2005 1,000 — — — 1,000 4,860,230 4,861,230

Shares issued 354,044 49,351,056 — — 49,705,100 — 49,705,100

Share issue costs — (1,082,056) — — (1,082,056) — (1,082,056)

Net income for the period — — 2,298,249 — 2,298,249 2,181,330 4,479,579

Minority interest arising on reclassification from associate to subsidiary — — — — — 196,469 196,469

Share of distribution — — — — — (171,315) (171,315)

Acquisition of minority interest in period — — — — — (4,886,979) (4,886,979)

Foreign currency translation — — — (2,175) (2,175) — (2,175)

Balance at 30 September 2006 355,044 48,269,000 2,298,249 (2,175) 50,920,118 2,179,735 53,099,853

Share Share Distributable Non-distributable capital premium reserves reserves Total £ £ £ £ £

Company

Balance at date of incorporation

Shares issued 1,000 — — — 1,000

Balance at 30 September 2005 1,000 — — — 1,000

Balance at 1 October 2005 1,000 — — — 1,000

Shares issued 354,044 49,351,056 — — 49,705,100

Share issue costs — (1,082,056) — — (1,082,056)

Net income for the period — — 2,435,298 — 2,435,298

Balance at 30 September 2006 355,044 48,269,000 2,435,298 — 51,059,342

Consolidated Statement of Changes in EquityFOR THE YEAR ENDED 30 SEPTEMBER 2006

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1 GENERAL INFORMATIONCIREF Limited (“the Company”) is a property investment company incorporated on the 28 of September 2005 under the laws of Jersey. The Company was formed to act as the listing vehicle for the Corovest International Real Estate Fund (“the Fund”), its sole shareholder. The consolidated financial statements of the Company for the period ended 30 September 2006 comprise the Company and its subsidiaries (together referred to as the “Group”) and the Group’s interest in associates and jointly controlled entities.

2 SIGNIFICANT ACCOUNTING POLICIES2.1 STATEMENT OF COMPLIANCEThe consolidated financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) and interpretations adopted by the International Accounting Standards Board (“IASB”). The accounting policies have been applied consistently by the Group. The significant accounting policies adopted by the Company are as follows:

2.2 BASIS OF PREPARATIONThe consolidated financial statements are presented in Great British Pounds (GBP£) and rounded to the nearest pound. They are prepared using the historical cost basis except as detailed below.

The preparation of financial statements in conformity with IFRS requires the use of accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 2.8.

2.3 BASIS OF CONSOLIDATION2.3.1 Investments in subsidiariesSubsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

Subsidiaries are carried at cost less amounts written off at Company level.

The results of subsidiaries are included in the Group results from the effective dates of acquisition to the effective dates of disposal. Any difference between the purchase price of a subsidiary and the Group’s share of the fair value of the identifiable net asset acquired is treated in accordance with the Group’s accounting policy for goodwill.

All material intergroup transactions are eliminated on consolidation. Where necessary, the accounting policies of subsidiaries are changed to ensure consistency with the policies applied by the Group.

Minority interests in Group companies are shown at the net asset value of their percentage holding in the companies concerned.

2.3.2 Investment in associates and joint venturesAssociates are entities over whose financial and operating policies the Group has the ability to exercise significant influence, but not control, and which are neither subsidiaries nor joint ventures. Joint ventures are those entities over which the Group exercises joint control in terms of a contractual agreement.

The equity method of accounting for associates and joint ventures is applied in the Group and Company financial statements. In applying the equity method, account is taken of the share of accumulated retained earnings and reserves, of both the Group and the Company, from the effective date on which the entity became an associate or joint venture and up to the effective date of disposal. Goodwill arising on the acquisition of associated and joint ventures is identified and accounted for in accordance with the Group’s accounting policy for goodwill.

Unrealised gains arising from transaction with associates and joint ventures are eliminated to the extent of the Group’s interest in the entities.

2.3.3 GoodwillAll business combinations are accounted for using the purchase method. Goodwill represents the excess of the cost of subsidiaries and associates over the fair value of the identifiable net assets acquired. It is brought to account in the year in which the subsidiary or associate is acquired. Goodwill relating to equity accounted investments is disclosed as part of the carrying value of the investments.

Goodwill is carried at cost less accumulated impairment losses. Goodwill is allocated to each operating unit and tested annually for impairment.

2.3.4 Transactions eliminated on consolidationIntergroup balances and any unrealised gains and losses or income and expenses arising from intergroup transactions, are eliminated in preparing the consolidated financial statements. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

Negative goodwill arising on the acquisition of subsidiaries and associates is recognised immediately in the income statement.

2.4 FOREIGN CURRENCY TRANSLATIONTransactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the date of the statement of assets and liabilities are translated to the Great British Pound at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to the reporting currency at the foreign exchange rates ruling at the dates that the values are determined.

Notes to the Financial Statements FOR THE YEAR ENDED 30 SEPTEMBER 2006

_7_CFR_arb06.indd 11 04/01/2007 09:18:00


2 SIGNIFICANT ACCOUNTING POLICIES CONTINUED2.5 INVESTMENT PROPERTYInvestment properties are those which are held either to earn rental income or for capital appreciation or for both. Investment properties are stated at fair value. An external, independent valuation company, having an appropriate recognised professional qualification and recent experience in the location and category of property being valued, values the portfolio on an annual basis. The fair values are based on market values, being the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.

The valuations of investment properties had been prepared in accordance with the appropriate sections of the Practice Statements contained within the Royal Institution of Chartered Surveyors Appraisal and Valuation Standards, 5th Edition (“the Red Book”).

Any gain or loss arising from a change in fair value is recognised in the income statement.

Property that is being constructed or developed for future use as investment property is classified as investment property under development (development projects) and stated at cost until construction or development is complete, at which time it is reclassified and subsequently accounted for as investment property. At the date of transfer, the difference between fair value and cost is recorded as income in the consolidated income statement.

All costs directly associated with the purchase and construction of a property, and all subsequent capital expenditures for the development qualifying as acquisition costs and are capitalised.

Borrowing costs are capitalised if they are directly attributable to the acquisition, construction or production of a qualified asset. Capitalisation of borrowing costs commences when the activities to prepare the asset are in progress and expenditures and borrowing costs are being incurred. Capitalisation of borrowing costs may continue until the assets are substantially ready for their intended use. If the resulting carrying amount of the asset exceeds its recoverable amount, an impairment loss is recognised. The capitalisation rate is arrived at by reference to the actual rate payable on borrowings for development purposes or, with regard to that part of the development cost financed out of general funds, to the average rate.

2.6 FINANCIAL INSTRUMENTS – RECOGNITION CLASSIFICATION AND MEASUREMENTNon-derivative financial instrumentsNon-derivative financial instruments comprise investments in equity securities, trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.

Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit and loss, any directly attributable transaction costs, except as described below. Subsequent to initial recognition non-derivative financial instruments are measured as described below.

A financial instrument is recognised if the Group becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if the Group’s contractual rights to the cash flows from the financial assets expire or if the Group transfers the financial assets to another party without retaining control or substantially all risks and rewards of the asset. Regular way purchases and sales of financial assets are accounted for at trade date, i.e. the date that the Group commits itself to purchase or sell the asset. Financial liabilities are derecognised if the Group’s obligations specified in the contract expire or the discharged or cancelled.

Investments at fair value through profit or lossAn instrument is classified as at fair value through profit or loss if it is held for trading or is designated as such upon initial recognition. 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. Upon initial recognition, attributable transaction costs are recognised in profit or loss when incurred. Financial instruments at fair value through profit or loss are measured at fair value, and changes therein are recognised in profit or loss. Fair values are detemined by reference to their quoted bid price at the reporting date, where such a price is available.

Derivative financial instrumentsThe Group holds derivative financial instruments to hedge its interest rate risk exposures. Embedded derivatives are separated from the host contact and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivative are not closely related, a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and the combined instrument is not measured at fair value through profit or loss.

Derivatives are recognised initially at fair value; attributable transaction costs are recognised in profit or loss when incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for appropriately.

2.7 IMPAIRMENTFinancial assets that are stated at cost or amortised cost are reviewed at each balance sheet date to determine whether there is objective evidence of impairment. If any such indication exists, an impairment loss is recognised in the income statement as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate.

If in a subsequent period the amount of an impaired loss recognised on a financial asset carried at amortised cost decrease and the decrease can be linked objectively to an event occurring after the write-down, the write-down is reversed through the income statement.

2.8 ACCOUNTING ESTIMATES AND ASSUMPTIONSThe Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions relating to the fair value of investment properties have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

2.9 CASH AND CASH EQUIVALENTSCash and cash equivalents comprise cash balances on hand, cash deposited with financial institutions and short-term call deposits.

2.10 REVENUE RECOGNITIONRevenue includes rental income, service charges, and management charges. Rental income from operating leases is recognised in income on a straight-line basis over the lease term. Service and management charges are recognised in the accounting period in which the services are rendered. Interest income is recognised as it accrues using the effective interest rate method.

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3 SEGMENT REPORTINGThe Group’s internal organisation and management structure and its system of internal financial reporting to key management personnel are based neither on individual property types nor on geography. However, management believe that the Group’s risks and returns are related more to the geographical areas in which it operates than the types of property held and therefore that geographical segments form a more appropriate basis for the primary segment reporting format.

GEOGRAPHICAL SEGMENTSThe Group principally holds investment property located within the European Union, namely the United Kingdom and Switzerland. As at 30 September 2006, less than 10% of the Group’s total assets, income and results of operating activities related to geographical segments outside of the United Kingdom.

BUSINESS SEGMENTSThe Group has four business segments, as described in the Investment Manager’s Review on page 5, namely:

• Stable Income Investments (“SII”) • Value Enhancing Projects (“VEP”) • Major Development Projects (“MDP”) • Property Collective Investment Vehicles (“PCIV”)

REVENUE FROM EXTERNAL CUSTOMERS 2006 2005 £000 £000

SII 1,599 —

VEP 498 —

MDP — —

PCIV — —

2,097 —

TOTAL ASSETS 2006 2005 £000 £000

SII 37,270 29,709

VEP 27,641 2,175

MDP 10,123 3,029

PCIV 3,634 —

Unallocated 30,435 7,168

109,103 42,081

CAPITAL EXPENDITURE 2006 2005 £000 £000

SII 2,389 23,436

VEP 27,904 —

MDP — —

PCIV — —

30,293 23,436

Notes to the Financial Statements continuedFOR THE YEAR ENDED 30 SEPTEMBER 2006

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4 GROSS RENTAL INCOME Group Group 30 September 30 September 2006 2005 £ £

Rental income 2,097,469 —

The future aggregate minimum rentals receivable under non-cancellable operating leases are as follows:

Not later than one year 2,366,150 —

Later than one year not later than five years 9,333,516 —

Later than five years 23,934,149 —

35,633,815 —

5 INTEREST INCOME

External interest received 938,290 —

Interest received from associates 41,982 —

Interest received from related parties 584,813 —

1,565,085 —

6 OTHER INCOME

Mezzanine profit share 496,658 —

Other 97,418 —

594,076 —

7 TAXATIONThe Group is exempt from all forms of taxation in Jersey, including income, capital gains and withholding taxes. In jurisdictions other than Jersey, foreign taxes will, in some cases, be withheld at source on dividends and interest received by the Group. Capital gains derived by the Group in such jurisdictions generally will be exempt from foreign income or withholding taxes at source.

INCOME TAX EXPENSEThe fund invests in UK property and therefore is liable to income tax in the UK on the net rental profits. The current rate of UK income tax for a non-resident company is 22%. Based on current UK law, certain subsidiaries in the Group will be subject to UK capital gains tax, or corporation tax on capital gains, on the realisation of UK investment property gains.

Provision has been made for deferred capital gains tax in UK joint ventures, where taxable temporary differences arise.

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8 INVESTMENT PROPERTYThe book cost of properties as at 30 September 2006 was £41,316,953 (2005: £25,436,036). The carrying amount of investment property is the fair value of the property as determined by a registered independent appraiser having an appropriate recognised professional qualification and recent experience in the location and category of the property being valued. Fair values were determined having regard to recent market transactions for similar properties in the same location as the Group’s investment property. Investment property comprises a number of commercial and retail properties that are leased to third parties. (i.e. held as leasehold instead of freehold).

In accordance with IAS 40, a property interest under an operating lease (i.e. held as leasehold) is classified and accounted for as an investment property on a property-by-property basis when the Group holds it to earn rentals or for capital appreciation or both. Any such property interest under an operating lease classified as an investment property is carried at fair value.

Group Group Company Company 30 September 30 September 30 September 30 September 2006 2005 2006 2005 £ £ £ £

Opening balance on 1 October 25,796,020 — — —

Properties acquired during the period 30,293,819 25,796,020 — —

Sale of properties during the period (10,322,653) — — —

Net gain from fair value adjustment 2,756,218 — — —

Closing balance on 30 September 48,523,404 25,796,020 — —

Analysis of additions:

New additions:

Gibson Properties Limited (Kwik-Fit portfolio) 2,227,2101 17,000,000 — —

Newington House Limited 162,1412 8,796,020 — —

Ciref Margate Limited and Ciref Margate Two Limited 12,948,1563 — — —

Ciref Ashtead Limited 2,184,1924 — — —

Ciref Reigate Limited 4,040,3865 — — —

Additions as a result of a change in control of underlying entities:

Trito Petersfield Limited 5,505,2816 — — —

Banstead Property Holdings Limited 3,226,4537 — — —

30,293,819 25,796,020 — —

1 Comprises the acquisition of three additional Kwik-Fit service outlets located in Blackpool, Plymouth and Sale.2 An office building located in Southwark, London.3 Comprises a retail centre in the town centre of Margate, Kent.4 Comprises vacant land to be developed in Ashtead, Surrey.5 The property comprises three retail units, 4,500 sq ft office accommodation, residential accommodation and a leisure club in Reigate, Surrey.6 Comprises three floors of residential accommodation in Petersfield, Hampshire. 7 Comprises two ground floor shops and two floors of residential accommodation in Banstead, Surrey.

9 LONG-TERM RECEIVABLES Group Group Company Company 30 September 30 September 30 September 30 September 2006 2005 2006 2005 Comprising: £ £ £ £

Security deposits with banks 6,304,222 4,056,800 3,833,872 2,056,800

Amounts due from joint ventures 2,965,562 653,893 991,371 653,893

Amounts due from associates 820,871

Amounts due from related parties 6,750,000 5,750,000 550,000 550,000

Amounts due from subsidiaries — — 9,296,783 —

Advance payments on new investments 3,400,000 — 3,400,000 —

20,240,655 10,460,693 18,072,026 3,260,693


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10 OTHER INVESTMENTS Group Group Company Company 30 September 30 September 30 September 30 September 2006 2005 2006 2005 £ £ £ £

Investment securities held at fair value 1,594,125 — 1,441,000 —

Investment securities include £1,441,000 of listed securities held.

11 INVESTMENTS IN SUBSIDIARIESDetailed analysis of the Company’s investments in subsidiaries is given in the note on Related Parties (note 20).

Comprising:

Group Group Company Company 30 September 30 September 30 September 30 September 2006 2005 2006 2005 Cost £ £ £ £

— — 12,462,475 8,466,730

12 INVESTMENTS IN JOINT VENTURESThe Group’s investments in joint ventures are as follows:

(i) 50% in Modus Corovest (Crewe) Limited

(ii) 50% in Modus Corovest (Newport) Limited

(iii) 50% in Modus Corovest (Blackpool) Limited

(iv) 50% in Pearl House Swansea Limited


Investment at cost 2,187,526 2,580,517 (6,741) 448,289

Group’s share of post acquisition reserves 403,756 — 192,872 94,388

Loans — 520,500 — —

Carrying value 2,591,282 3,101,017 186,131 542,677

Modus Corovest (Crewe) Limited is a joint venture with Modus Property Group, which owns Delamere Place situated in the town centre of Crewe, Cheshire.

Modus Corovest (Newport) Limited is a joint venture with Modus Property Group, which owns two long leasehold retail interests in Friars Walk, Newport, Gwent.

Modus Corovest (Blackpool) Limited is a joint venture with Modus Property Group, which owns the Hounds Hill Shopping Centre in Blackpool.

Pearl House Swansea Limited is a joint venture with Vinewood Limited and Saranna Holdings Limited, which owns a long leasehold retail interest in Swansea, Wales.

SUMMARISED FINANCIAL INFORMATIONThe summarised financial information of the joint ventures is set out below:

30 September 30 September 2006 2005 £ £

Investment property 138,472,672 30,764,748

Current assets 2,929,594 3,488,010

Total assets 141,402,356 34,252,758

Shareholders’ funds 3,447,248 (139,252)

Long-term liabilities 130,717,826 29,965,777

Current liabilities 7,237,282 4,426,233

Total equity and liabilities 141,402,356 34,252,758

Revenue 4,006,831 879,034

Net profit/(loss) 1,482,559 (227,119)

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13 INVESTMENTS IN ASSOCIATES Group Group Company Company 30 September 30 September 30 September 30 September 2006 2005 2006 2005 £ £ £ £

Investment at cost 28,759 6,034 7,350 6,034

Group’s share of post acquisition reserves 22,580 — (30,269) —

Carrying value 51,339 6,034 (22,919) 6,034

(I) 30.47% INVESTMENT IN KALIHORA PROPERTY HOLDINGS LIMITEDKalihora Property Holdings Limited is a Cyprus domiciled entity with investments in two retail properties situated in Switzerland.

(II) 30% INVESTMENT IN PASEA INVESTMENTS LIMITEDPasea Investments Limited is a British Virgin Islands domiciled entity with an investment in a commercial property in Tortola, British Virgin Islands.

Summarised financial informationThe summarised financial information of the associates is set out below:

30 September 30 September 2006 2005 £ £

Investment property 11,757,776 11,648,010

Current assets 494,546 418,080

Total assets 12,252,322 12,066,090

Shareholders’ funds 169,405 7,147

Long-term liabilities 11,842,280 11,761,939

Current liabilities 240,637 297,004

Total equity and liabilities 12,252,322 12,066,090

Revenue 792,507 30,503

Net profit/(loss) 74,104 (17,061)

14 TRADE AND OTHER RECEIVABLES Group Group Company Company 30 September 30 September 30 September 30 September 2006 2005 2006 2005 £ £ £ £

Accrued interest 83,293 250,200 240,900 72,007

Deposits and prepayments 218,022 90,000 197,051 —

Short-term loans to shareholders 266,998 3,072 — 765,000

Short-term loans to joint ventures 6,974,250 — — —

Receivables-related parties 1,275,459 — — 12,191

VAT control 356,414 — — —

Sundry receivables 727,813 — 527,927 —

9,902,249 343,272 965,878 849,198

15 CASH AND CASH EQUIVALENTS

Bank balances 983,050 2,373,779 8,405 685,767

Call deposits 25,217,325 — 20,970,652 —

26,200,375 2,373,779 20,979,057 685,767


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16 SHARE CAPITAL Company Company 30 September 30 September 2006 2005 £ £

Authorised

500,000,000 ordinary shares of £0.01 each (2005: 10,000 shares of £1 each) 5,000,000 10,000

Issued

35,504,357 ordinary shares of £0.01 each (2005: 1,000 shares of £1 each) 355,044 1,000

355,044 1,000

On 3 April 2006 it was resolved that the existing 10,000 ordinary shares of £1 each be sub-divided to 1,000,000 ordinary shares of £0.01 each. The authorised share capital was also increased from £10,000 to £5,000,000 by the authorisation of an additional 499,000,000 shares of £0.01 each.

In issue at 1 October 2005 1,000

Share split 99,000

Conversion of loan from Corovest International Real Estate Fund 14,170,851

Conversion of “B Class” shares in the Corovest International Real Estate Fund 1,083,506

Shares issued 20,150,000

Shares in issue at 30 September 2006 35,504,357

17 INTEREST-BEARING BORROWINGS17.1 SECUREDBank loans Group Group 30 September 30 September Property Interest rate 2006 2005

Gibson Properties Limited* 6% – 6.37% 12,928,000 11,348,000

Newington House Limited* 5.74% 7,225,000 7,300,000

Trito Petersfield Limited 6.75% 1,002,332 —

Banstead Property Holdings Limited 6.25% 769,818 —

Ciref Reigate Limited* 5.85% 2,980,000 —

Ciref Margate Limited* 5.83% 10,000,000 —

Ciref Ashtead Limited 6.50% 1,769,267 —

Other1 7.00% 7,915,350 3,161,800

44,589,767 21,809,800

All bank loans are secured over investment property, and bear interest at the specified interest rates.1 Other loans are secured by cash deposits held by the bank, and bear interest as specified* Fixed rates

17.2 UNSECURED


Minority shareholders’ loans 6,050,051 2,271,482 — 751,989

Corovest International Real Estate Fund — 11,627,060 — 11,627,060

Shareholders’ loans 6,050,051 13,898,542 759,753 12,379,049

The shareholders’ loans are unsecured, bear interest at varying rates and have no fixed repayment terms.

Total non-current interest-bearing borrowings 50,639,818 35,708,342 759,753 12,379,049


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17 INTEREST-BEARING BORROWINGS CONTINUED17.2 UNSECURED CONTINUED Group Group Company Company 30 September 30 September 30 September 30 September 2006 2005 2006 2005 £ £ £ £

The maturity of

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