ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED

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ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED

An Income and Capital Growth Commercial Property Fund Focusing on Central and Eastern Europe

INTERIM REPORT

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ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED – 31 March 2012

CONTENTS

Highlights 3

Chairman’s Statement 4

Investment Manager’s Report 7

Independent Review Report 13

Unaudited Consolidated Statement of Comprehensive Income 15 Unaudited Consolidated Statement of Financial Position 16 Unaudited Consolidated Statement of Changes in Equity 17

Unaudited Consolidated Cash Flow Statement 18

Notes to the Unaudited Interim Consolidated Financial

Statements 19

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ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED – 31 March 2012

HIGHLIGHTS

 Adjusted NAV per share¹ of €0.1152 (30 September 2011 €0.1241).  NAV per share of €0.1012 (30 September 2011 €0.1081).

 Losses in the period of €4.9m (31 March 2011 profits €10.8m) which included losses on investment property values of €6.1m.

 Completion of the development of the 16,000 sqm shopping mall of Era Shopping Park, Oradea in early spring 2012.

 Signing of key leases with C&A, Domo/Toyplex and H&M at Sibiu Shopping City.

 Restructured terms agreed with Proton Bank on the Company’s current €25.9m facility whereby this has been extended through to 31 December 2016 with a reduced rate of interest and option to roll up part of the interest falling due up to December 2014.

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¹Adjusted NAV is calculated before any deferred tax liability

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED – 31 March 2012

CHAIRMAN’S STATEMENT

This report sets out the results for Argo Real Estate Opportunities Fund Limited (“AREOF”/ “Company”/ “Group”) covering the 6 month period ended 31 March 2012 and discusses its progress in the ongoing development and active asset management of its retail and mixed-use commercial property investments in Central and Eastern Europe.

Financial Performance

The NAV per share and Adjusted NAV per share as of 31 March 2012 are €0.1012 and €0.1152 (see Note 4) reflecting a decrease of €0.0069 and €0.0089 respectively in the 6 month period since 30 September 2011. This decrease has arisen principally from the decline in the market values of the Group’s property assets where the uncertainties regarding the future direction of the Eurozone and the potential impact on banking facilities has resulted in an additional level of risk being applied in the valuation of the Group’s assets.

The financial statements for the period to 31 March 2012 show a loss attributable to equity shareholders of €4.1m which includes a net loss from fair value adjustment on investment properties of €6.1m.

Dividend

The Board has resolved that the Company will not declare a dividend for the period as it continues to utilise its resources to maximise liquidity within the Company during the current turbulent and hostile trading conditions.

Operating Activities

While the markets within which the Group operates continue to stabilise, the uncertainties surrounding the Eurozone crisis continue to provide risks and impact any recovery in trading conditions.

In Romania, the conditions are particularly challenging where along with the macro-economic effects the pressures from competing centres in several of the regions in which the Group operates changes the balance of negotiation very much in favour of the tenant, both in terms of current leases where rental concessions continue to be sought and also for new tenants who seek turnover only rents as well as rent free holidays and/or fit-out contributions for the larger retailers.

The effect of all these tenant concessions is to continue the lower level of such incomes on a like for like basis being generated which in turn impacts the Group’s cash flow which, while being proactively managed, continues to put pressure on the Group’s loan covenants. In the instances

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where covenant breaches have occurred, the effects of such trading environment difficulties have been fully recognised by the relevant banks who continue to fully support the Group’s activities by providing time limited amortisation and covenant holidays. Negotiations with certain of the Group’s banks are ongoing regarding restructuring of the debt to align terms more closely to those that can be supported by the current reduced level of income pending stronger recovery in market conditions.

Despite the challenging trading environment the Company’s first investment in the 47,000 sqm Sibiu Shopping City, Romania along with its subsequent 30,000 sqm Phase 3 extension continues to maintain its trading dominance in the region.

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED – 31 March 2012

CHAIRMAN’S STATEMENT (continued)

As part of the completion of the recent asset management initiative creating a new gallery linking the Real and Carrefour hypermarkets, along with certain reconfiguration of existing tenants, leases have been signed with C&A, Domo/Toyplex and H&M. The second part of the project providing a new external entrance lobby for the mall is now due to be completed in July 2012.

While the Company’s 50,000 sqm development undertaken on the Suceava Shopping City continues to trade with a 98% tenant occupancy, competition within the city is fierce and while international retailers trade at a satisfactory level, the requirement for tenant concessions is particularly necessary for local tenants. With a number of leases coming up for renewal over the next 18 months the objective is to attract larger unit tenants and enhance the tenant mix.

The recently acquired 65,700 sqm Era Shopping Park, Oradea, anchored by leading tenants Carrefour. Altex and Bricostore completed its development of its 16,000 sqm shopping mall in early spring 2012. Leasing conditions within the area remain challenging with strong competition from two existing competing centres. The key Mobexpert anchor tenant is currently anticipated to open its store in July and this is expected to further drive tenant interest.

The likewise recently acquired 49,800 sqm Era Shopping Park, Iasi anchored by prominent international retailers Praktiker, Decathlon, Carrefour and Mobexpert operates in a city with strong competing centres although reducing rental concessions in 2012 are strengthening the project cash flow. With final agreement and documentation of the restructured €77m debt facility due to be completed shortly the final phase development of the 28,000 sqm shopping mall should be commence construction this summer.

The Company’s first Ukrainian investment property, the 83,000 sqm Riviera Shopping City, Odessa, anchored by key tenants including Real Hypermarket, Inditex fashion brands (Zara, Stradivarius, Bershka, Pull &

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Bear), Obi DIY store, as well as a 12-lane City Bowling leisure complex and a nine-screen IMAX multiplex cinema continues to trade well with near 100% tenant occupancy and continuing year on year increases in income and footfall. A recent asset management initiative creating an attractive fashion gallery and enhancing annual income completed in June 2012. The Group’s previously acquired land assets in Nikolaev, Ukraine and also in and around Chisinau, Moldova, continue to be land banked as development under current economic conditions is not financially viable. Nonetheless, opportunities continue to be sought and appraised in respect of these assets in order to maximize shareholder value.

Comprehensive details of all the projects entered into by the Company are further explained in the Investment Manager’s report on page 7.

Financing Facilities

The Group has successfully renegotiated and agreed terms with its existing Banks on several of its loans.

KBC agreed a further quarter’s amortisation holiday in the period providing the development cash flow to complete the final phase of the current asset management initiative at Sibiu Shopping City, now due to be completed in July 2012.

Proton Bank has agreed to a €29.3m facility which allows the existing facilities to be extended to a maturity date at 31 December 2016. Under the agreed terms a reduced rate of interest is agreed, payable annually at December each year with the option to roll up 50% of the interest due on the December payment dates up to December 2014. Agreed terms have been documented and signed.

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED – 31 March 2012

CHAIRMAN’S STATEMENT (continued) Accounting Practices

The Group has continued to apply International Financial Reporting Standards (“IFRS”), as endorsed for use in the European Union, in the following unaudited consolidated financial statements. The Group's presentational currency is the euro.

Shareholder Communication

The Investment Manager aims to keep shareholders and other interested parties informed of developments through its website: www.argocapitalproperty.com.

Director Changes

Louis Plowden-Wardlaw and Robert Brown stepped down as directors of the Company with effect from 13th June 2012 and 21st June 2012

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over 5 years and I wish to thank them for their valued service during this period.

Outlook

The ongoing turmoil in the Eurozone continues to act as a major drag on the economic performance of both Romania and Ukraine, the Company’s key markets. This trend is almost certain to continue in the near future. Although the International Monetary Fund expects both economies to grow in size in 2012, the rate of growth will see a marked slowdown on that seen in 2011. This downward growth path is unlikely to be reversed as long as the sovereign debt crisis continues to rage in the Eurozone.

International investors are employing a “wait and see” approach as regards deploying capital in South Eastern Europe until a clearer picture emerges of how the Eurozone crisis might be resolved. The same can be said of the region’s banks which remain reluctant to provide debt financing for investments in the sector. Against this background, property prices can only but remain depressed.

The Group remains focused on measures to boost cashflow and on carefully budgeted asset management initiatives aimed at maximising the return on its portfolio. Such initiatives leave the Company well placed to benefit from any upturn in its core markets.

David Clark Chairman 27 June 2012

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED – 31 March 2012

INVESTMENT MANAGER’S REPORT

The Investment Manager implements a focused strategy on behalf of AREOF to create an institutional quality retail property portfolio in leading primary and secondary cities in Central and Eastern Europe with a particular focus on Romania, Ukraine and Moldova. The Manager is repositioning the portfolio to take advantage of a potential macroeconomic improvement in the region through strong asset management, the search for low-cost acquisitions that would increase the visibility of the portfolio and attract new investors and by continuous negotiations with new and existing banks to refinance debt at improved terms.

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During 2011 the economic environment in which the Group operates continued to stabilise however current uncertainty surrounding developments in Greece and the Eurozone could pose a substantial risk. Ukraine proved to be a more strong market although impending national elections are forcing international retailers to postpone expansion plans. Romania continues to enjoy the competitive advantages that it had prior to the crisis that started in 2008 and that is evidenced in a modest GDP growth of 1.5% and low unemployment in the larger cities especially in Bucharest. The skilled, productive yet cheap labour force will continue to be in demand by foreign companies looking to cut costs, however these advantages that Romania enjoys are unlikely to overcome the supply side impact of a continuing Eurozone crisis.

In Romania, the retail market remains challenging as purchasing power and disposable incomes remain low, even though a 6% rise in incomes was registered in 2011, especially in secondary cities. In 2011 retail sales registered a 3.3% decline, but mostly as a result of food sales decreases, whereas non-food sales were stable. Dominant centres experienced stable sales. Average rents and occupancy levels were also stable as non-food retail sales stabilised and next to no supply of new modern retail space came to the market. However, tenants are looking to shift market risk to the landlords by insisting on turnover rents only.

In Ukraine, the overall macroeconomic situation continues to improve with wages rising annually by some 15%. That has an obvious impact on retail turnover which registered a similar annual increase of around 16%. In Odessa, the supply of modern retail space remains at well below Central & Eastern European levels, despite the city’s relative prosperity. A recently opened shopping centre in the west part of the city has not impacted trading in Riviera Shopping City.

Rental concessions to certain Romanian tenants continue to be necessary and as a result the Company’s cash flow still remains weak requiring the support from the project company banks. As described in previous reports these concessions are time limited, although the Manager believes that they will be in place for the next 12-24 months. Competitive forces in certain cities in which the Company’s centres operate, notably Oradea, Iasi, Suceava, together with a generally weak macroeconomic climate, force landlords to be price takers.

General capital market activity in Romania and the Ukraine has been relatively subdued with a general lack of risk appetite and sufficient funding to execute transactions. In Romania there have been only a handful of transactions of developable land and exiting income generating assets mostly as a result of the lack of debt financing. For now there are only 2-3 banks that are providing development financing and the process of fulfilling conditions precedent for drawing down debt are at best arduous.

As previously advised, the Manager successfully renegotiated terms for Sibiu, Suceava, Era Oradea and Odessa and further term negotiations are in progress.

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The six month period to 31 March 2012 has seen a €4.2m decrease in the NAV attributable to equity holders largely due to the net decline of Group asset values reflecting the greater risks of Eurozone uncertainty and lack of property transaction activity particularly in Romania. The Group obtained third party valuations from independent valuers on the portfolio of its property assets as at 31 March 2012.

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED – 31 March 2012

INVESTMENT MANAGER’S REPORT (continued)

The key property asset effects on the NAV during the period were: - Sibiu Shopping City: a decrease in carrying value of €2.0m, - Suceava Shopping City: a decrease in carrying value of €3.0m, - Era Shopping Park, Iasi: a decrease in carrying value of €2.1m, - Era Shopping Park, Oradea: a decrease in carrying value of €2.5m,

and

- Riviera Shopping City, Odessa: an increase in carrying value of €3.5m.

Where the Group provides incentives to its customers, both in terms of fit-out contributions or rental concessions, the cost of these incentives is recognised over the lease term, on a straight line basis, as an adjustment to rental revenue. Incentive adjustments of €0.6m were added to rental income in the period to 31 March 2012 and accumulated incentives at the period end amounted to €10.6m, as detailed in note 5 to the financial statements.

In the current commercial environment, the Investment Manager continues to focus on the proactive asset management of the existing properties, the completion of the bank finance restructuring and development of the Era Iasi asset and the management of existing cash flow and implementing targeted asset management initiatives, in co-operation with our lending banks.

Under current market conditions the following risks continue to exist for the Company:

i) Although certain of the project subsidiary companies remain cash flow positive, principally as a result of past lender concessions by way of amortisation holidays granted, the restrictive use of any surplus funds means that the negative situation of the Company continues. Further equity or other infusion of cash will be required later in 2012.

ii) The weakness and slowness of recovery in the local retail environments causing existing tenants to request reductions in rent which reduces the level of the Group’s income sufficient to service its debts on full repayment basis without further bank concessions being agreed.

Despite the challenging environment the Company continues to consider and pursue discrete asset and strategic disposal discussions where there are any credible indications of interest.

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Transaction Overviews

European Retail Park Sibiu, Romania

AREOF’s Sibiu Shopping City, was acquired in November 2006, and through continued asset management remains the strongest centre within the Romanian asset portfolio.

The retail park was expanded both in 2007 and 2008, with a number of extensions and reconfigurations (known as "Phases 2 and 3"). The connection building between the two Phases was completed in 2011 and has generated increased traffic for Carrefour.

The Manager has focused on the creation of larger units within the Mall in order to secure further anchor tenants. Leases signed with C&A, Domo and H&M has strengthened its position as the most successful shopping centre in central Romania. Decathlon is currently negotiating for a unit of 2,300 sqm in the new connection, which if secured will take the projects occupancy to over 93%. Kiabi declined to open their unit in the Mall despite having signed a lease and the Manager negotiated a material penalty payment for the lease surrender. H&M have replaced this tenant and will open their 1,500 sq m unit in October.

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED – 31 March 2012

INVESTMENT MANAGER’S REPORT (continued)

The final phase of the current asset management initiative for a new mall entrance is currently under development and will be completed by the end of July 2012. These initiatives are being successfully completed by way of partial funding from the KBC-led senior lending syndicate together with a €1.3m euro loan from the Argo Group. The Argo loan has recently been refinanced by a loan from a third party investment fund.

Although retail sales in the centre are improving, rental concessions continue to be applied albeit at a reduced level from the previous period. Current tenant occupancy is just below 90% and is lower than was originally anticipated when the asset management initiative was originated, reflecting a slower recovery in local market conditions than originally anticipated. We expect the rest of the year to be a challenging environment but with improving traffic the tenants are reporting increasing sales.

Current financing arrangements include €59.5m of debt from KBC Bank, fully swapped until loan maturity in November 2013 along with a syndicated, five year investment loan of €27m from KBC, Investkredit and Marfin/Laiki Bank. The continued decrease in rental revenues in 2012 and the longer than anticipated lease up of the new connection units has resulted in the requirement to restructure amortisation payments this year.

The market value of the property as at 31 March 2012 was €80.6m on Phase 1, against a 30 September 2011 valuation of €82.1m; and a valuation of €33.5m on Phase 3, against a comparative September 2011

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valuation of €33.7 m. These falls are in line with the general market decrease in values resulting from the current concerns regarding the Hellenic region.

Suceava Shopping City, Suceava, Romania

The 50,000 sqm centre, faces strong challenges in the City, but nonetheless, a letting occupancy level of 98% is maintained. As the catchment area population is relatively small for the number of shopping centres in the area, competition to secure and retain tenants is fierce and significant rental discounts need to be provided both currently and in the immediate future.

Rental discounts for the period to March 2012 have continued to be provided but at a lower level than the previous period. Carrefour’s popularity continues to drive traffic and the centre’s existing international retailers are satisfied with the level of their turnover. However, turnover for a number of local tenants is low and the Manager’s objective is to increase the number of international tenants to strengthen the tenant mix. A third of the tenant leases come up for renewal over the next 18 months, so this creates opportunities for asset enhancement through the creation of larger units and securing key anchor tenants. Negotiations are ongoing with Decathlon for a unit of 1,700 sqm.

The current plan remains to continue stabilising the rental revenues for the centre and retain the international brands through the restructuring and lease extension of key tenants. The Manager has commenced a cost saving review of the service and related charges and will internalise the property management activity from DTZ at the year end in order to further drive down costs.

The project has in place a €50m three year facility with Alpha Bank of Greece, that expires in November 2012. The Company has already been granted an amortisation payment holiday until April 2012 and is in the process of negotiating a restructuring of this loan facility.

The 31 March 2012 market value of the property was €62.5m against a 30 September 2011 valuation of €65.2m.

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED – 31 March 2012

INVESTMENT MANAGER’S REPORT (continued)

Era Shopping Park, Oradea, Romania

Era Shopping Park, Oradea comprises some 65,700 sqm of retail park, which opened Phase 1 of its development in March 2009 with leading anchor tenants Carrefour, Altex, and Bricostore. Phase 2, which comprises the 16,000 sqm Mall, was completed in early spring 2012. The final phase 3 of approximately 4,000 sqm will be delivered dependent on specific tenant requirements.

The project has in place a €62.3m construction facility from EFG, Banca Romanesca, Bancpost and Bank of Cyprus and the remaining proportion of

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the facility has been drawn to complete the shopping mall. In addition, the lenders are providing a standby facility of €1.3m for financing tenant fit-outs, the availability period of which expires at the end of June 2012 and an extension request has been submitted for banks’ approval.

The 8,000 sqm Mobexpert unit was handed over for tenant fit-out in September 2011. However the tenant did not have sufficient funds available to complete this fit-out and open in time for Christmas as originally anticipated. This is a key anchor tenant and its delayed opening has severely impacted on the leasing progress of the Mall. The tenant has renegotiated the terms of the lease and requested a fit-out contribution further to which The Manager has secured the lenders’ approval to provide €400,000 from available facilities. It is expected that Mobexpert will now open in July 2012.

Leasing market conditions in Oradea remain challenging with strong competition from two existing projects. Tenants are requiring greater concessions from landlords, resulting in more protracted negotiation periods. Phase 2 of the Mall has secured additional demand from furniture operators, however a number of tenants have suspended lease negotiations until the opening of Mobexpert. Despite difficult market conditions there has been an increase of tenant interest since completion of the Mall with a number of units in the Gallery under active negotiations. The market value of the property was 80.1m as at 31 March 2012, against a 30 September 2011 value of €80.3m.

Era Shopping Park, Iasi, Romania

Era Shopping Park, Iasi comprises some 49,800 sqm of retail park of which Phase 1 of some 33,000 sqm comprising Carrefour, Praktiker and the Gallery was completed in September 2008. The Gallery was extended in September 2009 with the addition of an 8,000 sqm Mobexpert furniture store and in May 2010 Decathlon purchased a 2.4 hectare site and constructed and opened their 3,000 sqm store.

Construction of the 28,000 sqm Mall extension is due to commence this summer, which will connect to the existing Gallery. There is a further 8 hectares of land available for sale to owner occupiers or the development of further retail units. In addition, there is a further 15 hectares of adjacent greenfield land suitable for longer term development.

A €77m development facility provided by EFG, Banca Romanesca, Bancpost and Bank of Cyprus is in place for the construction finance of the total project, of which €60m has been drawn to date. The restructuring of the existing facility has received credit committee approvals and the facility agreement is under negotiation. The completion of documentation on the restated facility agreement is expected in the near future. The Mall currently has all permits necessary to commence construction and negotiations are progressing with a number of contractors. The current construction program envisages delivery of Phase 1, 15,000 sqm by the summer of 2013 and Phase 2 of 13,000 sqm by November 2013.

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ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED – 31 March 2012

INVESTMENT MANAGER’S REPORT (continued)

Rental concessions throughout 2012 are reducing, which has improved project cash flows. Competition in the city has increased with the recent opening of the Palais Shopping Centre in the heart of the City. We believe that in the long term this will have a greater impact on the city centre projects.

A number of asset management initiatives are currently being pursued to improve circulation and strengthen tenant mix by relocating a number of tenants within the Gallery. Occupancy for the Park remains at 96%.

The market value of the property was €80.1m as at 31 March 2011 against a 30 September 2011 valuation of €82.1m.

Riviera Shopping City, Odessa, Ukraine

The Company’s 83,000 sqm Riviera Shopping City centre in Odessa initially opened in 2009 with key anchor tenants including Obi DIY Store, Real Hypermarket, Inditex fashion brands Zara, Stradivarius, Bershka, Pull & Bear and Oysho along with many others. Subsequent phased completion of the development saw the successful opening of the City Bowling and Leisure Complex along with the Imax Multiplex Cinema.

Attendance and retailer sales continue to exceed estimates confirming the Company’s development as an important and sustainable regional retail destination. The footflow of the Mall for 2012 has increased by 23% compared with the same period of 2011.

The leasing situation of the centre has continually improved since completion and its attractiveness has led to strong demand amongst retailers for space in the centre which has resulted in the occupancy level being near 100%.

The asset management initiative creating an attractive fashion gallery in space previous occupied by an underperforming tenant is currently being completed and when fully let will provide a further increase to net revenue of approximately €0.7m.

Current financing arrangements consist of a €68m Marfin Bank investment facility. Under the agreed loan terms there was an initial eighteen month amortisation holiday which was further extended by agreement with the Bank for a further twelve month period through to June 2012. Given the steadily improving performance of the centre as rental incomes stabilise and are added to through management initiatives, it is expected that the Company will be able to fully cover both interest and amortisation in the future.

The market value of the property of €92.2 as at 31 March 2012 against a 30 September 2011 valuation of €88.5m.

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The 20 hectare freehold plot is located about 5 km’s outside of the city centre on the primary motorway from Odessa and near a future intersection with the planned Nikolaev ring road.

While there are very few land transactions currently in the region the Company continues to appraise development or other strategic opportunities to realise value from this asset. It is felt that when market conditions improve this site could accommodate a logistic warehouse park site servicing this important port city or an out of town factory outlet retail project.

The freehold land is in ownership of the Company and carries the same market value of €0.76m at 31 March 2012 as at 30 September 2011.

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED – 31 March 2012

INVESTMENT MANAGER’S REPORT (continued)

Moldova Retail and Mixed Use Development Sites, Chisinau, Republic of Moldova

In conjunction with a local partner, the Group is completing the assembly of a retail and mixed-use development site in the historic city centre of Chisinau, the Republic of Moldova’s capital. The Group also owns two further potential out-of-town retail and mixed-use sites on prominent motorway locations on the periphery of Chisinau.

The Investment Manager has entered into a commercial relationship with a local partner for the exploitation of the Company’s land assets with the goal of realising equity proceeds from these assets within the period through to April 2013.

The Moldovan asset market values as at 31 March 2012 totalled €4.4m, which is the same valuation as at 30 September 2011.

Proton Corporate Loan

Since the period end the Company has agreed restructuring terms with Proton Bank on both its original €25m facility and its further short-term extension facility of €0.9m. Under the restructured terms a €29.3m facility is provided through to 31 December 2016 with the option for annual interest, at a lower agreed rate, to be part capitalised for the first three repayments that are due through to December 2014. Agreed terms have been documented and signed.

Outlook

The modest increase in asset prices during the first half of 2011 stalled midway through the year and experienced a reversal in the second half of the year. To blame was the intensification of the Eurozone crisis which has discouraged major investors from putting money to work in the South Eastern European property sector and caused the region’s banks to become more cautions with regard to providing debt financing for such investments. This trend continued into 2012 and has intensified in recent months.

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Economic forecasters predict the economies of Romania and Ukraine, the Company’s core markets, to once again outperform their European counterparts in 2012. However, the Manager does not expect this to result in any significant uplift in property prices. Furthermore, this outperformance is unlikely to lead to any material reduction in the level of tenant rental concessions granted, nor make the securing of tenants for the recently completed centre in Oradea any easier. As a consequence, cashflows and debt covenants will remain under pressure.

The Company has so far successfully retained the support of its lenders throughout the current crisis and the Manager expects this to remain the case going forward, as exemplified by the recent agreement between the Group and Proton Bank.

The Manager remains focused on measures to maximise cashflows from the Company’s existing portfolio of assets as well as initiatives aimed at enlarging the Group’s portfolio and strengthening its balance sheet.

Dennis Selinas Graeme Daniel

Fund Manager Finance Director

On behalf of Argo Capital Management Property Limited 27 June 2012

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ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED – 31 March 2012

INDEPENDENT REVIEW REPORT

Independent review report to Argo Real Estate Opportunities Fund Limited

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2012 which comprises the unaudited consolidated statement of comprehensive income, unaudited consolidated statement of financial position, unaudited consolidated statement of changes in equity, unaudited consolidated cash flow statement and the related explanatory notes. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors’ responsibilities

The interim report, including the financial information contained therein, is the responsibility of and has been approved by the Directors. The Directors are responsible for preparing the interim report in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market which require that the half-yearly report be presented and prepared in a form consistent with that which will be adopted in the company's annual accounts having regard to the accounting standards applicable to such annual accounts.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Our report has been prepared in accordance with the terms of our engagement to assist the company in meeting the requirements of the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ‘‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’’, issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards

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on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim report for the six months ended 31 March 2012 is not prepared, in all material respects, in accordance with the basis of preparation outlined in note 2 and in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market.

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED – 31 March 2012

INDEPENDENT REVIEW REPORT (continued) Emphasis of Matter – Going Concern

In arriving at our review conclusion, which is not qualified, we have considered the adequacy of the disclosures made by the Directors in the Basis of Preparation note 2a concerning the Group’s ability to continue as a going concern. These disclosures identify, amongst other factors, the reliance on the Investment Manager or related companies to the Investment Manager to provide continued financial support to the Group, the ongoing support of the lending banks where risks to a breach of terms is possible under the current trading environment and the ongoing support of lending banks where loans are due to expire within the next twelve months. These represent material uncertainties which may cast significant doubt on the Group’s ability to continue as a going concern. The condensed set of financial statements in the interim report does not include the adjustments that would result if the Group was unable to continue as a going concern.

BDO Limited Chartered Accountants Place du Pré Rue du Pré St Peter Port Guernsey 27 June 2012

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ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED

UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

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Note 6 months to 31 March 2012 6 months to 31 March 2011 Year ended 30 September 2011 (unaudited) (unaudited) (audited)

€'000 €'000 €'000 Continuing operations

Gross rental income 13,379 8,933 19,160

Related services income 5,738 3,049 6,400

Property operating expenses (6,962) (3,966) (8,066)

Net rental and related income 12,155 8,016 17,494

Administrative expenses (2,091) (1,720) (3,415)

Changes in fair value of investment property 5 (6,101) 9,569 16,760

Changes in fair value of financial assets 6 (56) 109 116

Negative goodwill arising on acquisition - - 14,840

Operating profit 3,907 15,974 45,795

Finance Income 496 294 619

Finance Expense (11,345) (8,153) (16,400)

Fair value gain on swap contract 218 2,910 2,303

Net foreign exchange gain/ (loss) 409 (411) 27

(Loss)/ profit before tax (6,315) 10,614 32,344

Taxation credit/ (charge) 1,417 136 (1,097)

(Loss)/ profit for the year (4,898) 10,750 31,247

Foreign exchange (losses)/ gains on translation of

foreign operations (86) 80 218

Total other comprehensive (loss)/ income (4,984) 10,830 31,465

(Loss)/ profit attributable to :

Equity shareholders (4,122) 9,802 27,390

Non-controlling interest (776) 948 3,857

(4,898) 10,750 31,247

Total comprehensive (loss)/ income attributable to :

Equity shareholders (4,205) 9,873 27,569

Non-controlling interest (779) 957 3,896

(4,984) 10,830 31,465

Basic and diluted earnings per share 3 (0.007) 0.032 0.086

The accompanying notes are an integral part of this statement. ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED

UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 31 March 2012

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Note 31 March 2012 31 March 2011 30 September 2011 (unaudited) (unaudited) (audited)

€'000 €'000 €'000

ASSETS

Non-current assets

Investment properties 5 429,639 254,612 433,264

Property, plant and equipment 221 171 215

Other tax receivables 5,530 7,046 6,399

Trade and other receivables 7,089 4,435 6,098

Total non current assets 442,479 266,264 445,976

Current assets

Trade and other receivables 9,919 7,372 9,021

Other tax receivables 2,022 1,737 2,570

Financial assets 6 10,199 9,779 10,039

Cash and cash equivalents 15,025 3,661 12,185

Total current assets 37,165 22,549 33,815

Total assets 479,644 288,813 479,791

EQUITY

Capital and reserves attributable to equity holders of the parent company

Share capital 7 6,080 3,100 6,080

Share premium 7 18,159 7,859 18,159

Other reserve 95,096 95,096 95,096

Translation reserve (1,559) (1,584) (1,476)

Retained earnings (56,271) (69,737) (52,149)

Total equity attributable to equity

holders of the parent company 61,505 34,734 65,710

Non-controlling interest 14,724 12,564 15,503

Total equity 76,229 47,298 81,213

Non-current liabilities

Loans and borrowings 217,513 223,323 288,021

Deferred income tax 10,824 4,407 12,250

Total non-current liabilities 228,337 227,730 300,271

Current liabilities

Loans and borrowings 150,164 3,276 72,917

Trade and other payables 22,611 8,606 22,872

Financial liabilities 2,295 1,906 2,513

Current income tax 8 (3) 5

Total current liabilities 175,078 13,785 98,307

Total equity and liabilities 479,644 288,813 479,791

LIABILITIES

The financial statements were approved and authorised for issue by the Board of Directors on 27 June 2012 and signed on its behalf by David Clark.

David Clark

Director and Chairman

The accompanying notes are an integral part of this statement. ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY As at 31 March 2012

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Amount attributable to Parent Company Equity Holders Shar e Cap ital Shar e Pre miu m Oth er Res erve Tra nsla tion Res erve Ret aine d Ear nin gs Tot al Non -cont rolli ng inte rest Tot al €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 At 1 October 2010 3,100 7,859 95,096 (1,655) (79,539) 24,861 11,607 36,468

Total comprehensive income for

the period - - - 179 27,390 27,569 3,896 31,465

Shares issued in the period 2,980 10,300 - - - 13,280 - 13,280

At 30 September 2011 6,080 18,159 95,096 (1,476) (52,149) 65,710 15,503 81,213

Total comprehensive loss for the

period - - - (83) (4,122) (4,205) (779) (4,984)

At 31 March 2012 6,080 18,159 95,096 (1,559) (56,271) 61,505 14,724 76,229

At 1 October 2010 3,100 7,859 95,096 (1,655) (79,539) 24,861 11,607 36,468

Total comprehensive income for

the period - - - 71 9,802 9,873 957 10,830

At 31 March 2011 3,100 7,859 95,096 (1,584) (69,737) 34,734 12,564 47,298

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ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED UNAUDITED CONSOLIDATED CASH FLOW STATEMENT For the 6 months ended 31 March 2012

Note 6 months to 31 March 2012 6 months to 31 March 2011 Year ended 30 September 2011 (unaudited) (unaudited) (audited)

€'000 €'000 €'000 OPERATING ACTIVITIES

(Loss)/ profit for the period (4,898) 10,750 31,247

Adjustments for :

Depreciation 38 21 37

Changes in fair value of investment property 5 6,101 (9,569) (16,760)

Impairment of financial assets 6 56 (109) (116)

Negative goodwill arising on acquisition - - (14,840)

Finance income (714) (3,041) (2,922)

Finance expense 11,345 7,959 16,336

Exchange translation movements (86) 71 179

Taxation (1,417) (136) 1,097

Operating cash flows before movements in

working capital 10,425 5,946 14,258

Movements in working capital :

Decrease in operating trade and other receivables 99 784 2,180

(Decrease)/ increase in operating trade and other

payables (2,416) 1,366 (978)

Cash generated from operations 8,108 8,096 15,460

Interest received 346 - 338

Interest paid (8,554) (7,711) (14,588)

Taxation paid (94) (10) (11)

Cash generated from operating activities (194) 375 1,199

INVESTING ACTIVITIES

Acquisition of subsidiaries, net of cash acquired - - 5,209

Purchase of investment properties (2,341) (607) (3,946)

Purchase of property, plant and equipment (44) (39) (46)

Proceeds from sale of property, plant and equipment - - 10

Loans advanced (9) (5) (12)

Cash flows from investing activities (2,394) (651) 1,215

FINANCING ACTIVITIES

Drawdown of bank loans including costs 5,814 900 5,004

Drawdown of other loan borrowings 1,000 - 1,300

Bank loans repaid (965) (903) (903)

Cash flows from financing activities 5,849 (3) 5,401

Increase/ (decrease) in cash and cash equivalents 3,261 (279) 7,815

Net foreign exchange losses on cash and cash

equivalents (421) (476) (46)

2,840 (755) 7,769

Cash and cash equivalents at start of period 12,185 4,416 4,416

Cash and cash equivalents at end of period 15,025 3,661 12,185

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ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED – 31 March 2012

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL INFORMATION

The Company is a limited liability, authorised closed-ended investment company incorporated in Guernsey. The shares of the Company have been admitted to trading on the Alternative Investment Market of the London Stock Exchange and also on the open market of the Frankfurt Stock Exchange.

The Company invests in commercial property in Central and Eastern Europe which is held through its subsidiary companies. The consolidated financial statements of the Company for the period ended 31 March 2012 comprise the financial statements of the Company and its subsidiaries (together referred to as the “Group”).

2. SIGNIFICANT ACCOUNTING POLICIES a. Basis of preparation

The principle accounting policies adopted in the preparation of the unaudited condensed interim consolidated financial statements are set out below.

The unaudited interim consolidated financial statements have been prepared using the recognition and measurement principles of International Financial Reporting Standards.

These interim financial statements are unaudited but have been reviewed by the auditors whose review report is set out on pages 13 and 14.

The same accounting policies, presentation and methods of computation are followed in these interim consolidated financial statements as those followed in the preparation of the Group’s annual financial statements for the year ended 30 September 2011 and which are expected to be applied for the consolidated financial statements for the year ending 30 September 2012.

The report of the auditors on the financial statements for the year ended 30 September 2011 was unqualified but did include references to an emphasis of matter in respect of the going concern of the Group. This arose from its need for further working capital in the foreseeable future together with the breach of certain banking covenants and the possibility of further loan covenant breaches when previously agreed covenant holidays expire, thus requiring the support of the lending banks for the ongoing and future development of the Group.

Going Concern

The continuation of subdued trading conditions in the local markets in which the Group operates continue to impact project level cashflows through the need to grant tenant discounts to maintain centre occupancy levels. While the Investment Manager continues to seek asset management initiatives to improve income levels and to renegotiate

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existing bank loan facilities to assist the position pending a recovery of rental incomes, the cashflow forecasts prepared by the Investment Manager for the next 12 months indicate that the Group requires additional working capital for the foreseeable future. This requirement is currently being provided by the Investment Manager or funds advised by a fellow subsidiary of the Investment Manager’s parent company. Firstly, by its agreement to defer receiving its management fee as and when it becomes due; secondly, in providing a short term loan facility to assist with specific project funding needs and thirdly, by providing an undertaking to provide additional working capital over the next 12 months, as and when this is required.

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED – 31 March 2012

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (continued)

In order to meet the liabilities and those specifically falling due to the Investment Manager’s and/or its related companies’ provision of ongoing support to the Group, as well as to enhance working capital, the Company continues to look at a number of sources including additional or further restructuring of bank borrowings, asset sales and the issue of additional equity capital.

In reviewing the forecasts the Directors have taken into account material risks, uncertainties and circumstances which include the following:

• The continued and ongoing support of the Investment Manager and related companies to the Investment Manager to the funding needs of the Company is critical to enable its obligations to be met over the next 12 months.

• Certain surplus cash funds are held in project subsidiary companies and the release of these funds for use of the Group’s working capital needs in general would in some circumstances require the support of the specific lending banks financing these projects.

• The continuing uncertain trading environment and its impact on tenants and their ability to pay their contractual rent obligations in a timely manner. With tenant negotiations ongoing the continued downward pressure on rental income is likely to impact on certain bank loan covenants particularly as agreed loan amortisation holidays and covenant waivers that had previously been put in place expire in 2012 and this requires further negotiations and ongoing support of the Group’s lending banks.

• Several of the Group’s bank loans mature within the next 12 months. Should the Group fail to extend the maturity of these loans the value of certain of the Group’s assets will be negatively impacted. Furthermore, certain covenant holidays the Group has benefitted from have expired. If these are not renewed it is likely that the Group will fall into default on certain of its loan facilities.

• The uncertainties that currently exist within the Eurozone could impact the availability of financing for investment in Romania, specifically with regard to the financing of the Mall development of the Era Iasi centre and more generally the lack of available financing and reduced level of property transactions could impact risk

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premiums that could result in a deterioration of property values leading to a further strain on financial loan covenants.

The above represents material uncertainties which may cast significant doubt on the Group's ability to continue as a going concern. In the Directors' view discussions are continuing on the above satisfactorily and they have therefore concluded that it is appropriate to prepare these financial statements on a going concern basis. The financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern..

The condensed financial statements are presented in euros and all values are rounded to the nearest thousand (€’000) except when otherwise indicated.

The financial information summarised does not constitute statutory accounts.

b. Basis of consolidation

The consolidated financial statements incorporate the results of the Company and entities controlled by the Company (its subsidiaries) made up to 31 March 2012. Control exists where the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. All inter-company loan balances, interest charges and investments are eliminated on consolidation.

The financial statements of the subsidiaries are prepared for the same reporting period as the Company. The accounting policies are applied consistently throughout the Group.

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED – 31 March 2012

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (continued)

3. BASIC AND DILUTED EARNINGS PER SHARE

The basic and diluted earnings per ordinary share are based on the loss for the period of €4.1m and on 608 million ordinary shares (31 March 2011: profit €9.8m and 310 million ordinary shares), being the weighted average number of shares in issue during the period.

There were no dilutive interests as at 31 March 2012.

4. NET ASSET VALUE PER SHARE

The Net Asset Value per share is based on shareholders’ equity at the period end as follows:

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31 March 2012 31 March 2011 30 September 2011 €'000 €'000 €'000

Net Asset Value 61,505 34,734 65,710

Add back deferred tax provision

attributable to equity shareholders 8,519 2,361 9,729

Adjusted Net Assets 70,024 37,095 75,439

Number of ordinary shares in issue 608 million 310 million 608 million

Net Asset Value per share €0.1012 €0.1120 €0.1081

Adjusted Net Asset Value per share €0.1152 €0.1197 €0.1241

The adjustment added back to arrive at the Adjusted Net Asset Value has been made to reflect the likely value of the Group given that the deferred tax liability provided is unlikely to crystallise in full as the Group is likely to dispose of the property holding companies rather than the properties themselves.

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED – 31 March 2012

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (continued)

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31 March 2012 31 March 2011 30 September 2011 €'000 €'000 €'000 Carrying value

At start of period 433,264 243,870 243,870

Acquisition of subsidiaries - - 168,688

Capital expenditure during the period 2,476 1,173 3,946

Fair value (write down)/ uplift (6,101) 9,569 16,760

At end of period 429,639 254,612 433,264

Adjustment from fair value to carrying value

Fair value 440,186 262,482 443,215

Adjustment for rent recognised in advance (10,547) (7,870) (9,951)

At end of period 429,639 254,612 433,264

The fair value of the Group’s investment properties at 31 March 2012 has been determined by desktop valuations carried out on an open market basis by independent valuers, Colliers International and Jones Lang LaSalle, in accordance with the requirements of the RICS Valuation – Professional Standards (incorporating the International Valuation Standards) Global edition March 2012.

Open market value, deemed to be fair value, is determined by reference to market based evidence, which is the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing and where the parties has each acted knowledgeably, prudently and without compulsion. The valuation methodology involves the discounted cash flow of the future rental income streams and a reversionary value discounted to a present value estimate and/or the capitalisation of the rental income stream at an all risks market yield to determine the present value. It also includes an assessment of the recent open market sales and investments within the Central and Eastern European regions.

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED – 31 March 2012

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NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (continued)

6. FINANCIAL ASSETS

31 March 2012 31 March 2011 30 September 2011 €'000 €'000 €'000

Loans receivable 11,429 10,962 11,213

Recoverability impairment provision (1,230) (1,183) (1,174)

10,199 9,779 10,039

Loans receivable represents advances, deposits and related accrued interest for purchases of land in Moldova of €2.3m secured on land assets, together with a loan in Romania of €9.1m unsecured. Desktop valuations arrived at on an open market value basis, carried out by independent valuers, Colliers International, have been carried out on the land assets in Moldova.

7. SHARE CAPITAL AND PREMIUM No. of shares Share capital Share premium Total millions €'000 €'000 €'000 At 31 March 2012 608 6,080 18,159 24,239 At 31 March 2011 310 3,100 7,859 10,959 At 30 September 2011 608 6,080 18,159 24,239

The total number of authorised shares is 1 billion (2011: 450 million) with a par value of €0.01 each (2010: €0.01 each). All issued shares are fully paid.

The Company has only one class of ordinary shares which carry no right to fixed income.

8. EVENTS AFTER THE BALANCE SHEET DATE Bank Financing

In June 2011 the Company completed on agreed loan restructuring terms with Proton Bank on both its original €25m facility and its further short-term extension facility of €0.9m. Under the restructured short-terms a facility of upto €29.3m is provided through to 31 December 2016 with the option for annual interest, at a lower agreed rate of Euribor plus 4.6%, to be part capitalised for the first three repayments that are due through to December 2014.

As part of the conditions of meeting this agreement outstanding interest of €2.1m was payable. This interest has been paid by way of a loan from Argo Special Situations Fund LP, a Fund managed by a subsidiary of Argo Group Limited which together with similarly managed Argo Funds own 74% of the share capital of the Company; as such, this loan has been made by a related party. Under the terms of the loan the Company has the right to repay the loan within a 2 year period. In the event of default of

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the terms the lender has the right to exercise the option for a debt for equity conversion equating to a 51% shareholding in North Real Estate Opportunities Fund Holding LP, a wholly own subsidiary of the Company.

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED DIRECTORS AND COMPANY INFORMATION

Directors: Legal advisors in Guernsey:

David Clark (Chairman) Carey Olsen

Dr Ralph Hill Carey House

David Fisher Les Banques

St Peter Port

Guernsey GY1 4BZ Channel Islands

Registered office: Legal advisors in the UK:

Isabelle Chambers Salans LLP

Route Isabelle Millenium Bridge House

St Peter Port 2 Lambeth Hill

Guernsey London EC4V 4AJ

Channel Islands Printed with

Investment Manager (and adviser): Bankers in Guernsey: Argo Capital Management Property Limited

Governors Square Royal Bank of Scotland International Limited

Royal Bank Place Suite 4-212, 23 Lime Tree Bay Avenue

PO Box 10630 1 Glategny EsplanadeSt Peter Port

Grand Cayman KY1-1006 Guernsey GY1 4BQ

Cayman Islands Channel Islands

Auditors: Registrar:

BDO Limited PO Box 180

Morgan Sharpe Administration Limited

PO Box 327, Isabelle Chambers

Place du Pré Route Isabelle

Rue du Pré St Peter Port

St Peter Port Guernsey GY1 3TX

Guernsey GY1 3LL Channel Islands Printed with

Channel Islands

Nominated adviser and broker: PR Consultants:

finnCap Limited Bishopsgate Communications Ltd

60 New Broad Street 3rd Floor

London EC2M 1JJ 3 London Wall Buildings

London Wall London EC2M 5SY

Joint broker: Administrator and secretary:

Shore Capital Stockbrokers Limited

Bond Street House Morgan Sharpe Administration Limited

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14 Clifford Street Route Isabelle

London W1S 4JC St Peter Port

Figure

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