Investment adviser’s report:
for the Irish and UK property markets

Irish Economic Overview
Set against a background of uncertainty in the international economy primarily caused by the credit crisis and the effects of the US sub-prime problems, Ireland’s economic performance remained impressive in 2007 with real GDP estimated to have grown by approximately 5.5 per cent. and employment rising by approximately 3.4 per cent. (Source: AIB Economic Research Unit)

The fundamentals in the Irish economy remain sound. The public finances are in good order, the economy is close to full employment with a flexible labour market and all sectors of the economy have enjoyed strong growth. There has been an encouraging and marked pick up in manufacturing output and the services sector generally has remained buoyant. Services exports are estimated to comprise approximately 45 per cent. of total exports for 2007 (Sources: AIB Economic Research Unit & Thomson Datastream).

The pace of economic growth will reduce in 2008 and the projected rate according to the ESRI is currently in the order of 1.6 per cent. with a recovery in 2009 when growth in real GNP is expected to accelerate to 3 per cent. There has been considerable comment in the media regarding the economy’s dependence on housing activity. While undoubtedly this is a very important element of the economy it must be seen in context. While new housing completions declined by approximately 36 per cent. in 2007 the economy continued to grow by approximately 5.5 per cent. New housing completions in 2008 are projected to be approximately 50,000 units (Sources: AIB ERU, DoE, ESRI).

IRISH PROPERTY MARKET
The Irish property market continued to perform solidly throughout 2007 even though all indices increased by less than in earlier years. The Society of Chartered Surveyors/Investment Property Databank (SCS/IPD) Property Index shows an annualised total return of approximately 9.9 per cent. to December 2007. Growth in the office sector has continued and this has been the leading sector with growth of approximately 10.6 per cent. Property once again has outperformed equities and bonds which for the same period gave returns of approximately minus 24.5 per cent. and plus 0.5 per cent. (Sources: SCS/IPD Index).

OFFICE SECTOR
Letting activity remained buoyant in the office sector with a total take up for 2007 of approximately 250,000 square metres, a level not previously achieved. The activity is being led by the requirements of large single let occupiers from the professional and financial sectors including the main commercial banks and the leading legal and accountancy practices. Despite the large take up in space, there remains substantial demand for further accommodation, possibly up to 300,000 square metres. Prime office rents are in the region of €650 - €700 per square metre. The city centre Central Business District and dockland areas remain the favourite locations. Preferred out of town areas are very much led by developments with close proximity to rail and LUAS transport facilities and good access to national roadways. Out of town rents are in the order of €270 - €325 per square metre. The overall vacancy rate remains in the order of approximately 10 per cent, with a vacancy rate of approximately 5.5 per cent. in the Dublin 2 and 4 postcode areas. Prime office yields are in the order of 4 per cent./ 4.5 per cent. (Sources: CB Richard Ellis Research).

RETAIL MARKET
Conditions in the Irish retail market continue to become more competitive, however, consumer spending remains buoyant despite the negative economic news in the recent months.

There has been a significant increase in new shopping centre developments opening in the past 24 months with approximately 10 new schemes, mainly provincial and outside the Greater Dublin Area, opening in 2007. Increasing competition in the market place has resulted in rents growing at a slower pace. Future retail opportunities lie in the redevelopment of older properties and centres and this will provide further challenges to the rebranding of redevelopment opportunities and the canvassing of new occupiers yet to be seen in the market place.

In the next 24 to 36 months there are fewer new schemes planned to be opened compared to 2007.

INDUSTRIAL MARKET
As ever, the industrial market has moved along in its own particular fashion and activity was strong during 2007 with estimates showing letting and sales activity up by approximately 10 per cent. on the previous year. The two constants in the industrial market are the preference for occupiers to own their own buildings and the skill of developers to build primarily to order with very little over supply of space.

Proximity to motorways and Dublin Port remain of paramount importance. The growth of distribution centres continues at pace particularly for the multiple retailers. Generally rents for prime industrial units are in the order of €130 per square metre per annum, capital values approach €2,500 per square metre and prime yields in the order of 4.75 per cent. to 5 per cent. (Source: CB Richard Ellis Research).

RESIDENTIAL
The year 2007 was a particularly challenging one for the Irish residential market. After over a decade of boom markets, a combination of rising interest rates, uncertainty over stamp duty levels, a tightening of fiscal policies by the lending institutions and the all important lack of consumer confidence has had a detrimental effect on the market.

New house construction has eased with developers allowing the market to take up the existing stock prior to new starts. Some developers have reduced quoting prices while others have maintained prices but offered additional incentives. The uncertainty in the market pre the 2007 Budget particularly in relation to proposed stamp duty changes is easing, thus allowing potential for normal activity levels to return.

With the reduction in market activity, the marginal purchaser has now returned to the letting market which has had the effect of increasing rents and also investors are returning to this market. Overall the fundamentals underpinning the market remain sound. A combination of a sound economic base and a young, dynamic population operating within a robust economy are all factors which underwrite the performance of the residential market and a return to more solid times is anticipated.

SUMMARY
The outlook for 2008 is positive with the core economic fundamentals being strong and at acceptable levels in comparison with Ireland’s international trading neighbours. The Portfolio has performed well and has benefited from careful husbandry and asset management on both the investment and development sides. There are considerable opportunities in the Portfolio which will be exploited in the medium term and there are a number of large and important rent reviews, particularly within the office element of the Portfolio, which will fall due in 2008. The new year will provide an environment where a premium will be placed upon investment and development skills and we are well positioned both in terms of product and personnel to maximise available opportunities.

IRISH PROPERTY PORTFOLIO

The significant volume of activity experienced in recent years has continued in both the development and investment elements of the Portfolio with positive results to report on our projects.

Planning permission has been received on the North Wall Quay Site (Tedcastles) for an office development of approximately 27,700 square metres. This is one of the few remaining waterfront sites on the River Liffey. By virtue of its size and situation, we believe that a larger scheme may be possible and we are currently preparing plans for a revised planning application for a larger iconic building. To the rear of the site we are developing proposals for a mixed use scheme to include approximately 11,150 square metres of retail space and 175 apartments.

Our latest office development on Barrow Street, Montevetro, has received planning permission and construction has now commenced. This very exciting 15 storey building will extend to approximately 19,500 square metres. and will have water frontage to Grand Canal Dock.

In Stillorgan, we have continued to acquire properties in the vicinity of the Shopping Centre to add to and facilitate the development of the proposed scheme. The Local Authority has now published the long awaited Local Area Action Plan and we continue to engage with the Local Authority to achieve a comprehensive Master Plan incorporating our three land holdings in the area to include Stillorgan Shopping Centre, the Leisureplex and Blakes sites.

Initial construction work has commenced on the Arnold Palmer designed golf course at our 437 acre Milverton Desmesne Estate at Skerries in North County Dublin. We are continuing to progress design revisions to the hotel element of the proposed development.

Also during the year, our previously agreed joint venture agreement for the development of Bremore Port at Balbriggan was executed with the Drogheda Port Company. The Bremore Port development will provide substantial opportunities for the Company on both the development and operational fronts.

The development and investment properties acquired from Treasury Holdings in November 2007 have now been fully integrated into the REO portfolio.

The Company also acquired a 21.4 per cent. interest in the Northside Shopping Centre, Dublin, one of the city’s earliest shopping centre developments.

The Group continues to acquire units in Ballymun Shopping Centre with the objective of obtaining full vacant possession prior to commencement of development works. Substantial progress has been made during the course of the year on the design of the proposed development with the objective of a planning application being made during 2008.

In Central Park, Leopardstown, South County Dublin, the Group disposed of its interest in certain lands in the Vantage residential development to Lalco.

In relation to rent reviews generally, large reviews are due in Central Park (Vodafone and First Active) and also at Russell Court, St. Stephen’s Green (KPMG).

Important reviews are due in 2008 at Mespil Road (Bank of Ireland Asset Management) and at Central Park (Merrill Lynch). Strategies dealing with these rent reviews are being prepared.

The overall value of the Irish portfolio as at 31 December 2007 was €1.73 billion, which after acquisitions and capital expenditure, reflects a revaluation of €90 million or 5.2 per cent.

UK ECONOMIC OVERVIEW

Along with the USA and other major western economies, UK economic growth has slowed quite sharply in the second half of 2007. The impact of the Northern Rock crisis and the tightening of credit markets will continue to take its toll on the economy, the housing market in particular, although the extent of its impact is not yet clear. The main areas of concern centre around public finances with the balance of payments current account in deficit to the tune of £20 billion, £6.3 billion more than in the previous quarter, and public sector net borrowing now at £43.6 billion.

Weakness in the high street continues and it remains to be seen how much scope there is to cut interest rates and how effective this will be in reversing the economic trend.

On a brighter note, the economy continues to grow, albeit at a slower rate. GDP growth for 2008 is forecast at 1.8 per cent. against 3.1 per cent. for 2007, followed by a return to trend in 2009. Anecdotal evidence is that the top end housing market in London, where there is substantial support from overseas purchasers, is not greatly affected by concerns in the wider economy and that prices are proving to be tolerably robust.

UK PROPERTY MARKET
The UK property market recorded a total return of minus 3.4 per cent. for 2007 according to IPD. Scarcity of debt, lack of business and consumer confidence, and a marked shift in investor sentiment towards property, have been the key drivers of this negative growth, resulting in significantly increased yields.

UK OFFICE MARKET
At 5.8 per cent., up almost 90 basis points from the beginning of the year, UK office yields are at their highest level in over two years, according to CBRE. Rental growth reached 9.2 per cent. year on year in December 2007, whilst capital values recorded a decrease of 4.8 per cent. over the same period, according to IPD. Capital Economics further points out that with a 31 per cent. rise in new space under construction over the past 6 months, the bulk of this in the City, this can only be seen to put further pressure on rental growth as this new supply pipeline is released into the market. Vacancy rates still remain historically low at 3 per cent. in the City and just 2.3 per cent. in the West End, according to CBRE.

UK RETAIL MARKET
The UK retail property market has been most affected by the economic downturn with total IPD returns showing minus 6.1 per cent. for 2007. Prime yields have increased by 45 basis points to 5.4 per cent. in December 2007, with shifts recorded across all markets, although regional centres were affected more dramatically. Central London retail recorded a modest shift of just 15 basis points, demonstrating a continued, healthy demand for the capital’s prime pitches.

UK RESIDENTIAL
The UK residential market witnessed growth in capital values of c. 7 per cent. in 2007, down from c. 8.5 per cent. in 2006 according to Savills, suggesting the residential market got off relatively unscathed in comparison to other property sectors. However the reduction in mortgage approvals, down to 73,000 for December 2007 (81,000 in November 2007), suggests that further decreases in capital growth for this sector are likely.

The London residential market still reported solid growth in capital values of 13 per cent. during 2007.

BATTERSEA POWER STATION
During 2007, the Group decided that the existing planning permission did not optimise the development potential for the site nor meet the emerging planning guidance for the area. In April 2007, world renowned architect Rafael Viñoly was appointed to produce a new masterplan following a detailed selection process.

The new professional team have approached the development afresh with the aim of producing a truly robust, deliverable scheme that combines best practice in policy terms with a sustainable, exemplary development for London. It is also the intention that the development becomes a catalyst project for the wider redevelopment of the Nine Elms corridor.

To support this broader regeneration of the area, the Greater London Authority has begun work on the production of a dedicated Opportunity Area Planning Framework (“OAPF”) which will consider transportation, density, uses and height. This statutory document will specifically address the Nine Elms corridor. The OAPF is expected to be complete by the end of 2008 and to implement the detailed alterations to the London Plan for the area that were recently adopted. These changes specifically identify Battersea as an area for intensification and higher density where good accessibility and capacity exist.

The London Plan amendments also set much higher sustainability targets and greater reductions in carbon dioxide emissions for all new developments. These changes are fully supported by the Group and it is our intention that the Battersea Power Station development sets new standards in this field. This process will capitalise on the experience of our development manager Treasury Holdings with its considerable understanding of renewable energy and waste management and involvement in a number of such projects including the Dongtan Eco City in Shanghai, China.

The timetable for the development is to complete our masterplan design process by mid 2008 with a new planning application expected to be submitted at the start of 2009.

The Directors present their report on the affairs of the Company, together with the
audited financial statements for the year ended 31 December 2007.

PRINCIPAL ACTIVITIES ANDBUSINESS REVIEW
The business of the Company is that of a property company investing mainly in the Irish and UK property markets but also overseas. A review of the Company’s activities is given in the Chairman’s Statement and in the Investment Advisers’ Report.

STATUS
The Company is a closed ended collective investment fund, as defined in the Collective Investment Funds (Jersey) Law 1988, as amended, and the subordinate legislation made thereunder. It has been granted exempt status under Article 123A of the Income Tax (Jersey) Law 1961. The Company is registered in Jersey under number 79679.

Ordinary shares and units of CULS are eligible for inclusion in a general PEP if acquired in the market using funds contained within the PEP. The ordinary shares and units of CULS are qualifying investments for the stocks and shares component of an ISA.

RESULTS AND DIVIDEND
The financial results for the year ended 31 December 2007 are shown in the Consolidated Profit and Loss Account and Statement of Total Recognised Gains and Losses on pages 34 and 35 respectively.

An interim dividend of 1p per ordinary share was paid on 5 November 2007 to shareholders on the register on 5 October 2007. The final dividend of 1.5p per ordinary share will be paid on 18 July 2008 to shareholders on the register on 20 June 2008.

EXTRAORDINARY GENERAL MEETING (“EGM”)
Shareholders approved all the resolutions proposed at the EGM held on 8 November 2007 concerning:
– the acquisition from Treasury Holdings of the shares in Havenview Investments Limited not already held by the Company and acquisition from Treasury Holdings and others of investment and development properties in and around Dublin for an aggregate consideration of £121.1m to be satisfied by the issue of 80.72m new ordinary shares at £1.50 per share. Details of this transaction are provided in Note 14.

EVENTS SUBSEQUENT TO THE YEAR END
Details of subsequent events are set out in Note 27.

SCHEME OF CAPITAL RESTRUCTURING
On the 18 January 2008 shareholders passed all resolutions proposed at the EGM, the Class Meeting of the ordinary shareholders, the Class Meeting of the Zero Dividend Preference Shareholders and the Court Meeting relating to the Scheme of Capital Restructuring. On the same day CULS holders passed the resolution proposed at the CULS holders meeting relating to the Scheme of Capital Restructuring.

On 14 February 2008 the Court approved a scheme to adopt a new articles of association, to cancel the share premium account and to cancel the existing zero dividend preference shares and to issue in exchange zero dividend preference shares in a new subsidiary, REO Securities Limited. Further details of the scheme are provided in Note 27.

On the 18 February 2008, the entire issued Zero Dividend Preference shares of the Company were suspended from trading prior to cancellation. On the same day zero dividend preference shares in REO Securities Limited issued to the former zero dividend preference shareholders of the Company, commenced trading.

DIRECTORS
The Directors of the Company, all except Mr Leech, whom served throughout the year, are shown with brief biographical details on page 18. Mr Leech was appointed to the board on 27March 2007.

Mr David Moon resigned as a director on 11 December 2007 in order to pursue UK based business interests.

In accordance with the Articles of Association, Mr Barrett and Mr Jenkinson will offer themselves for re-election.

No Director has a service contract with the Company.

Mr Barrett is a director and 50 per cent shareholder of Treasury Holdings (“Treasury”). Treasury has an agreement to provide investment advisory services in respect of the Global Property Portfolio and Irish Property Portfolio and to provide property management services in respect of the Irish properties to Castle Market Holdings Limited and Havenview Investments Limited. The terms of these agreements in force during the year are disclosed in Note 4 to the Financial Statements.

The Directors who held office at the year end and their beneficial interests in the ordinary 1p shares, Zero Dividend Preference 1p shares and 7.5 per cent Convertible Unsecured Loan Stock 2011 (“CULS”) at 31 December 2007 are shown in the table below.

The Board has been advised that the following shareholders owned 3 per cent or more of the issued ordinary share capital of the Company as at 28 March 2008.

(1) See table and footnotes above for additional information concerning these holdings.

Treasury Holdings holds more than 50 per cent of the ordinary share capital. Treasury Holdings and persons acting in concert with it are therefore in a position to increase their shareholdings in the Company without incurring an obligation under the Takeover Code to make a general offer to ordinary shareholders.

On 11 April 2005, a substantial shareholder agreement was put in place between the Company and Treasury Holdings (“Treasury”) for the purposes of regulating the relationship between the Company and Treasury. Under the substantial shareholder agreement, the parties agreed that, for so long as Treasury and its associates exercise, or control the exercise of, 30 per cent or more of the voting rights of the Company or are able to control the appointment of directors who are able to exercise a majority of votes at board meetings, Treasury will not (and will exercise such rights as it may have to procure that its associates will not): (i) take any action which may result in the Company not being able to carry on its business independently of Treasury or its associates or (ii) enter into any transaction or relationship with the Company other than at arm’s length and on a normal commercial basis. In addition, the agreement contains an acknowledgement that both the Company and Treasury remain bound by pre-existing contractual arrangements concerning the management of conflicts of interest between them. This agreement shall continue in full force and effect for so long as Treasury and/or any of its associates continue to own or control ordinary shares carrying in aggregate 30 per cent or more of the voting rights in the Company and shall terminate if the ownership of the ordinary shares and/or any of its associates falls below this level or the ordinary shares cease permanently to be listed on the Official List of the UK Listing Authority.

SHARE BUY-BACKS
The Company’s authority to make market purchases of up to 14.99 per cent of its issued ordinary shares was renewed on 5 June 2007. On the same date the authority to also make market purchases of all its outstanding Zero Dividend Preference (ZDP) shares was also renewed. The Company will be seeking to renew the ordinary authority at this year’s AGM, notice of which is set out on page 70. This authority will only be exercised on terms that are in the interests of shareholders.

ORDINARY SHARES
During the year 29,914 CULS were converted into ordinary shares.

TREASURY SHARES
Due to recent changes in the Companies (Jersey) Law as amended, the Company may now buy back shares, subject to shareholder approval, to be held as treasury shares. The special resolution granting such authority, which is to be put to shareholders at the AGM, is set out in the notice of meeting on page 70.

In the event that shares held as treasury are re-issued, it is the Director’s intention that such shares will be re-issued only at a premium to net asset value.

FINANCIAL STATEMENTS
The Directors’ responsibilities regarding the financial statements and safeguarding of assets are set out on page 30.

REPORT OF THE AUDIT COMMITTEE
The Audit Committee is responsible to the Board for reviewing each aspect of the financial reporting process; the systems of internal control and management of financial risks, the audit process, relationships with external auditors, the Company’s processes for monitoring compliance with laws and regulations, its code of business conduct and for making recommendations to the Board.

The Company’s internal financial controls and risk management systems have been reviewed with the Investment Advisers against risk parameters approved by the Board.

The audit plan and timetable is drawn up and agreed with the Company’s Auditors in advance of the financial year-end. At this stage, matters for audit focus are discussed and agreed. These matters are given particular attention during the audit process and, among other matters, are reported on by the Auditors in their report to the Committee. This report is considered by the Committee and discussed with the Auditors and the Investment Advisers prior to approving and signing the Financial Statements.

The Committee has reviewed the Financial Statements for the year ended 31 December 2007 with the Investment Adviser and Auditors at the conclusion of the audit process.

The Committee recommended approval by the Board of a group audit fee of £295,000. Non-audit work undertaken on behalf of the Company by the Auditors mainly comprised work in connection with the acquisition of Havenview Investments Limited and properties from Treasury Holdings and work on the Company’s taxation affairs. Details of these fees are shown in Note 5 on page 42. The Committee has considered the independence of the Auditors and are satisfied with the confirmation provided by the Auditors as to the adequacy of safeguards in place to maintain their independence.

TERMS OF APPOINTMENT
The Company’s investment management and advisory agreements are considered annually by the Management Engagement Committee. The results of this formal review are advised to the Board. The Management Engagement Committee carried out the most recent review in late 2007 and, on the basis of the Committee’s report, the Board is pleased to confirm that it is satisfied with the performance and current terms of appointment of Treasury Holdings.

As referred to in the Chairman’s Statement, the Board, by mutual agreement with INVESCO Asset Management Limited (“INVESCO”), terminated the Investment Advisory Agreement between the Company and INVESCO with effect from 31 December 2007 in favour of the Board having the option to seek independent advice from INVESCO on a case by case basis and subject to such rates and terms as may be agreed between the Company and INVESCO.

GOING CONCERN
After making enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing Financial Statements.

CREDITOR PAYMENT POLICY
The Company’s policy is to pay Stock Exchange trade creditors on dates of settlement and all other creditors are normally paid within 30 days or in accordance with contracted terms.

By order of the Board
Ogier Fund Administration (Jersey) Limited
Secretary and Administrator

30 March 2008

Whiteley Chambers, Don Street, St. Helier, Jersey JE4 9WG