DREF.L Regulatory News (DREF)

Duet Real Estate Finance Limited

(the "Company")

Final Results

Duet Real Estate Finance Limited (LSE: DREF), a registered closed-ended investment scheme incorporated in Guernsey, today announces its final results for the period from incorporation on 7 January 2011 to 31 December 2011

Highlights

Ø IPO of the Company in March 2011 raising £50m (gross)

Ø Secondary Placing in August 2011 raising a further £26m (gross)

Ø NAV as at 31 December 2011 of 97.4 pence per share

Ø 2 dividends of 1.0 pence per share paid in 2011

Ø Master Fund 53% invested, with a strong deal pipeline.

Chairman's Statement

I am delighted to be able to present to shareholders the Company's first set of annual results. In common with other investment funds, the Company has had to operate in difficult market conditions both in the UK and Continental Europe. This has been a year in which the banking community has been under unprecedented scrutiny and the European currency has at times been close to falling apart. However these circumstances have presented opportunities for the European Real Estate Debt Fund L.P. (the "Master Fund") which has been busy reviewing and acquiring suitable investments and is now well on the way to completing its investment objective of being fully invested by the middle of this year.

The economic background in the last 12 months has, to say the least, been troublesome with virtually all countries in Western Europe facing deficit issues resulting in the need for austerity measures. Investors have generally adopted a cautious stance when considering new investments, focusing on income and stability rather than assumptions of significant capital gain. The Company has been able to position itself to meet these requirements by offering an attractive income return secured on good quality assets with the opportunity for some growth. The general consensus is that we are beginning to see some signs of stability as the supervision of the European common currency has now gained some semblance of order. Greece has finally agreed to meet the EU's requirements and conditions. The real estate market nevertheless remains lethargic with low turnover and investors continuing to face a shortage of debt finance as banks remain reluctant to lend, except on prime quality assets. This position, though disappointing to the market as a whole, provides the Master Fund with a steady stream of opportunities in its preferred markets as investors need to refinance or seek alternative sources of finance apart from the banks.

The Company

The Company raised gross proceeds of £50 million in its initial public offering ("IPO") in March 2011, and a further £26 million through a secondary placing in August 2011, and was admitted to trading with a premium listing on the main market of the London Stock Exchange on 14 March 2011.

During the period following admission the Company sought to achieve its investment objective to provide shareholders, through its investment in the Master Fund, with regular dividends and an attractive total return whilst limiting downside risk to capital, through exposure to European real estate commercial debt.

Investment Performance

The Company's NAV as at 31 December 2011 was 97.4 pence per share, a decrease of 0.6% from the opening NAV of 98 pence per share at the IPO.

As at the year end the Company had received distributions from the Master Fund totaling £1.7 million, and paid two dividends of 1.0 pence per ordinary share each. A further dividend of 1.0 pence per ordinary share was paid on 23 March 2012. This represents an annualised yield of 4 per cent on the issue price per share at the time of the Company's IPO. It is the Board's intention to continue to pay quarterly dividends, which it anticipates will increase as the commitments of Limited Partners are invested by the Master Fund.

General Financial Information

Launch NAV was 98 pence. NAV at 31 December 2011 was 97.4 pence. The small decline is largely due to the change in the net asset value of the Master Fund as a consequence of costs incurred in the Master Fund during the investment period. This is common in early stage private equity investments.

Outlook

Despite the difficult lending environment, given the size and quality of the current pipeline the Master Fund appears on track to be largely invested by the middle of the year, so that it can fulfil its projected returns.

Quentin Burgess

Chairman

April 2012

Investment Adviser's Report

2011 Year End Review and 2012 Outlook:

The Macro Picture:

Despite a fairly optimistic start to 2011, the year came to an end on a more negative note. The turn occurred at the beginning of the second half of the year, during which the European sovereign debt crisis caused severe concerns amongst investors as the restructuring proposals of Greek sovereign debt finally acknowledged the need for principal write downs. The implications of this to the broader Euro area called into question the very foundations of the common currency and its ability to survive the current economic crisis. To what extent intervention by the ECB, IMF and austerity measures are able to provide a solution for the impending problems remains to be seen.

With the EU struggling to contain the growing sovereign and banking crisis, market volatility increased significantly and a lack of liquidity led to dramatic changes in asset prices. Intervention by the ECB provided support for banks, as it continued to use its balance sheet to purchase assets from these institutions. However, going forward, a central question remains whether the ECB alone can provide sufficient support as its balance sheet approaches 30% of Euro area GDP.

Looking at the year ahead, there are bound to be some significant challenges for the refinancing of sovereign debt within the Euro area. For instance, Greece alone has over €8bn of T-bill redemptions coming up during the first quarter of 2012. Investors are wary of the ability for Greece to meet its fiscal targets, which in turn may result in Greece not being able to raise the capital needed in forthcoming auctions.

The recently announced second bailout of Greece and the effect of the first Long-Term Refinancing Operation (LTRO) have provided the basis for a rally in risk assets for the first months of this year and in general provided well needed relief for sovereign and bank funding needs. In our view, the effect of the LTRO has largely been to spread the inevitable deleveraging requirement over a longer period of time. As a result we continue to believe in a piecemeal workout of financial assets, rather than the wholesale selling of large loan portfolios as the method by which most banks will seek to reduce the size of their balance sheets.

We believe that the uncertainty experienced towards the second half of 2011 will continue to be a main theme for 2012, and the closely related fortunes of sovereigns and banks to be a key aspect in the evolution of Europe's financing markets

What Does This Backdrop Mean for Real Estate Investors?

Much of the negative sentiment mentioned above carried through multiple asset classes including real estate. Investors became more risk averse and additionally banks across the region have continued to decrease commercial real estate lending and exposure. This combination resulted in a stall of the recovery in asset values during the last six months of 2011.

Continued uncertainty about a double dip recession, and how austerity measures will impact business slowed down the up-take and the occupier demand for new space. This was in particular the case within the retail market, which has continued to struggle as a sector with many high street retailers showing decreases in like for like sales for the holiday season over Christmas and the New Year.

The divide between prime and secondary assets was persistent over the year, and in many ways resembled the divergence in sentiment in the sovereign debt space. Location and asset quality became more important than ever, with prime major cities much more resilient than the regions. Even London which has perhaps been the most resilient office market is now expected to see rental levels decline rather than increase as was predicted a year ago.

Banks have a strong preference to lend against prime real estate which is resulting in more competition for these assets, while most banks are continuing to be reluctant to finance secondary assets. The chart below shows how this divide is persistent with regards to location. For instance, prime offices in Dublin and Lisbon have seen little recovery and are currently trading at cyclical high yields, whereas yields in certain prime locations such as Zurich, Munich and Copenhagen are trading at cyclical low yields.

How Has the Lending Market Changed?

The total commercial real estate investment volume in the UK for 2011 has been estimated at £31bn by Cushman & Wakefield, which is a fall of almost 14% compared to the £35.9bn reported in 2010. However, the events of the summer certainly affected the market as UK transaction volume was estimated to be only £6.9bn in the final quarter of 2011, down by more than 40% from the £11.7bn reported for the same period in 2010.

The increased difficulties in obtaining financing and more stringent lender credit requirements were significant factors behind fall off in activity. A recent report from CBRE on the UK Senior Lending Market, further illustrates the decrease in lending activity in the UK market. Only 45 out of 113 institutions polled, reported that they are actively lending, compared to 56 in 2010. Furthermore, 2011 did not only see a decrease in the number of active lenders on the UK market, but also a significant change in risk appetite of those remaining active, resulting in decreased average maximum LTVs to 66.2% (68.5% in 2010), increased average margins up from 2.5% in 2010 to 2.6% in 2011. Furthermore an additional constraint for investors is the reluctance of lenders to underwrite larger loans.

The upcoming implementation of the Basel III rules will further reduce the risk appetite as banks try to enhance their core capital ratios. However, we also believe that the increased cost of capital for banks (see chart with CDS spreads) will push lending margins for senior debt even higher as banks' funding costs are passed onto the borrowers.

The climate has also caused certain banks to adopt more severe measures. Some commercial real estate lenders have chosen to halt new lending altogether, such as SocGen, DG Hyp and EuroHypo. The exit of senior lenders such as these will have a further negative impact on the overall availability of financing in the year to come.

What Will Happen to all The Maturing Loans?

Current market conditions and the historical structure of the European commercial real estate debt market have created a lasting need for new capital in the sector. With almost €500 billion in loans coming due over the next three years: €180 billion in 2012, €170 billion in 2013 and €125 billion in 2014, we are in the early stages of the European deleveraging. Additionally, outside the banking sector, nearly €10.7bn of CMBS loans will mature in 2012 alone. Interestingly, of the CMBS loans that have matured to date, only 27% have been repaid.

These factors have given DTZ cause to update their estimate of the "funding gap" in Europe and consequently have estimated a larger gap than existed a year ago. Whether the methodology and resultant number they estimate is accurate is debatable, however we would concur with the directional move.

There will be no "silver bullet" fix to accommodate the need for lending capital to fill this gap. Our belief and expectation is that the time horizon for the debt opportunity will lengthen. This will be driven by the slow deleveraging which is the only option for the banking sector. There will be many loans extended. Some will be refinanced with non-bank capital provided by funds, insurance companies and other non-traditional lenders. And finally, some banks, that can afford to do so will sell performing and non-performing loan portfolios. We feel however there will be a limited number of banks that can absorb the capital loss generated from such sales. We therefore expect a multi-year process where each year new capital will enter or be created through bank profits and increasingly more deleveraging will occur until equilibrium is achieved.

How Will the Master Fund Position Itself to Secure Quality Investments and Stable Returns?

The number of lending opportunities has increased dramatically over the past year and are quite certain to persist through the next several years. As a result of the market's evolution as described above, we have witnessed an important trend in the opportunities that we are uncovering for investment. The "fatness" of the mezzanine debt tranche is increasing as senior leverage pulls back. This phenomenon is resulting in increased investment sizes for the Master Fund and typically lower LTV exposure for the mezzanine loan. While LTV's are lower, the return profile of the Master Fund's investments has not reduced dramatically. We are therefore able to further protect our investments by adding additional cushion in the form of subordination and maintain returns in a more senior position in the capital structure.

Further to this trend, we are seeing increased desire by the banks to proactively engage their borrowers for refinancing. We have seen more opportunities push forward because there is a greater borrower "acceptance" of the cost of debt capital. This largely comes about as a result of banks beginning to push back on rolling over debt that comes due and borrowers being forced into the market which is revealing the new cost of debt.

Finally, we are beginning to see individual loans being offered for sale at a discount from banks. These tend to be senior loans that are being sold at a discount. These offerings differ dramatically from large portfolios of sub-performing or non-performing loans from a risk perspective. We continue to focus on those loans backed by quality assets with good in place income that meet our typical underwriting standards for new loans.

It is an exciting and challenging investment climate. We will continue to "cherry pick" opportunities for investment that favour marginal safety over marginal return as we maintain our cautious outlook for the asset market.

Since the year end, the Master Fund has made a further investment of €22m in a mezzanine loan, secured by a portfolio of retail properties located throughout Germany. The Master Fund is now 53% invested and we are in advanced discussions on a pipeline of 11 opportunities totaling £249.4m.

Duet Private Equity Limited

6 March 2012

Board of Directors

Quentin Burgess (Chairman)

Quentin Burgess, a UK resident, is an experienced investment manager, having some 30 years experience of working in the real estate fund management sector. He recently retired from AXA Real Estate Investment Managers in London, having spent 5 years specialising in risk management and governance. He has extensive experience of both UK and Pan European real estate, holding a number of directorships of funds operating across Europe.

Prior to joining AXA, Quentin was a director of Hermes Property Asset Management working in a number of senior positions advising British Telecoms Pension Scheme and Royal Mail Pension Plan. Quentin also spent eight years in the property team at Friends Provident Life Office.

Quentin is a Fellow of the Royal Institution of Chartered Surveyors and a member of the Property Investment Forum.

John Falla

John, a Guernsey resident, is a Chartered Accountant and has a BSc Hons degree in Property Valuation and Management from The City University, London. He is a Chartered Fellow of the Chartered Institute for Securities and Investment having been awarded their diploma. He is a corporate finance director with LCF Edmond de Rothschild (C.I.) Limited in Guernsey.

John joined Ernst and Young in London in 1984 as a trainee in the audit department and moved to the corporate finance department in 1989, becoming a senior manager before moving back to Guernsey in 1996.

On his return to Guernsey John joined Bermuda Trust Company (Guernsey) Limited, part of the Bank of Bermuda Group as trust development manager focussing on business development as well as dealing with private trust and employee benefit fiduciary and corporate structures.

In 1998 John was part of the team that launched the Channel Islands Stock Exchange and he set up the listing department responsible for vetting applications for listing and monitoring compliance with continuing obligations. He was a member of the Market Authority of the Exchange and contributed towards the development of the listing rules of the Exchange.

In 2000 John joined LCF Edmond de Rothschild (C.I.) Limited and has provided corporate finance advice to clients including open and closed-ended investment funds, and institutions with significant property interests. John is on the board of a number of Edmond de Rothschild group operating and investment companies.

David Staples

David, who is resident in Guernsey, has a BSc in Business Economics and Accounting from the University of Southampton. He is a fellow of the Institute of Chartered Accountants in England and Wales and a Chartered Tax Adviser. He also holds the Institute of Directors' diploma in company direction.

David joined PricewaterhouseCoopers ("PwC") in the UK in 1978 and became a partner in 1990. David remained with PwC until 2003 and held a number of senior positions during that time, including head of tax for the south east region.

David is currently on boards of a number of listed companies, being MedicX Fund Limited, a leading investor in large, purpose-built GP surgeries (of which he is chairman), Gottex Fund Management Holdings Limited, a global alternative investment management group, Aberdeen Private Equity Fund Limited, Signet Global Fixed Income Strategies Limited and Henderson Far East Income Limited. He is also a director of HSBC Private Bank (C.I.) Limited and the general partner of four Apax Partners' private equity funds.

David is the chairman of the Chartered Institute of Taxation in Guernsey.

Directors' Report

The Directors present their annual report on the affairs of Duet Real Estate Finance Limited (the "Company"), together with the audited financial statements, for the period from incorporation on 7 January 2011 to 31 December 2011.

The Company

The Company was incorporated in Guernsey on 7 January 2011 and is a registered closed-ended investment scheme registered pursuant to the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended, and the Registered Collective Investment Scheme Rules 2008 issued by the Guernsey Financial Services Commission. The ordinary shares were admitted for trading on the Main Market of the London Stock Exchange on 14 March 2011.

Principal activity

The principal activity of the Company is that of an investment company. The Company is a feeder fund and invests solely in the European Real Estate Debt Fund L.P. (the "Master Fund").

Business review

A review of the Company's business during the period designed to provide information primarily about the Company's business and results for the period and an indication of likely future developments is contained in the Chairman's Statement and Investment Adviser's Report.

Capital structure

The Company has one class of ordinary shares of no par value. The authorised share capital of the Company is an unlimited number of these ordinary shares. The issued share capital of the Company at 31 December 2011 was 75,976,249 ordinary shares. One share was issued on incorporation on 7 January 2011. A further 49,999,999 ordinary shares were issued at 100p per share on 14 March 2011 and 25,976,249 shares were issued at 100.25p per share on 16 August 2011.

Further details are shown in note 9.

Substantial shareholdings

The Company is aware that the following shareholders had an interest in 3% or more of the issued share capital of the Company on 9 March 2012.

Dividends

A maiden dividend of 1 pence per ordinary share was paid on 18 August 2011 to ordinary shareholders on the register on 5 August 2011. A second dividend of 1 pence per ordinary share was paid on 2 December 2011 to ordinary shareholders on the register on 11 November 2011, giving a total of dividends paid in the period of £1,259,762. Since the year end, a dividend of 1 pence per ordinary share was paid on 23 March 2012 to ordinary shareholders on the register on 2 March 2012.

Taxation

The Company has obtained exempt tax status in Guernsey under the Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989 and the Company is not, therefore, liable to taxation in Guernsey. The Company pays a fixed fee of £600 per annum.

Going concern

The Directors, after due consideration, have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the financial statements are prepared on a going concern basis. In forming this expectation the Directors have considered the level of cash cover for commitments made to invest in the Master Fund (100.2%), projected cash inflows and the level of ongoing expenses.

Directors

The Directors, who served during the period except as noted, were as follows:

Quentin Burgess (appointed 8 February 2011)

John Falla (appointed 8 February 2011)

David Staples (appointed 8 February 2011)

IAG Limited (appointed 7 January 2011; resigned 8 February 2011)

Directors' interests

No Director has a material interest in any contract which is significant to the Company's business. David Staples has an interest in 7,000 shares. No other Director who held office at 31 December 2011 had an interest in the ordinary shares of the Company. There have been no changes in the interests of the Directors since the year end.

Auditors

PricewaterhouseCoopers CI LLP have expressed their willingness to continue to act as auditors of the Company and a resolution for their reappointment will be proposed at the Annual General meeting.

Management

The board of directors is entirely made up of non-executive directors. The Company has appointed third party service providers to carry out its day to day activities under the Board's control and supervision.

The Company has appointed Duet Private Equity Limited as Investment Adviser. The Investment Adviser is authorised and regulated by the UK Financial Services Authority. It is also the Investment Adviser of the Master Fund.

The Investment Adviser advises the Directors to enable them to make informed decisions for the Company, advises on funding and working capital requirements of the Company (including advice and assistance in any equity/further fund raising processes), oversees and arranges borrowings for the Company within the gearing limit and provides other investment advisory services as detailed in the Company Investment Advisory Agreement including the management of uninvested cash. The Investment Adviser also, upon request by the Company, provides advice to the Company which is similar in scope and/or nature to advice already provided or in the course of being provided to the Master Fund pursuant to the Master Fund Investment Advisory Agreement. The Company Investment Advisory Agreement will terminate at the same date as the Master Fund Investment Advisory Agreement save for the occurrence of certain specified events. The fee payable by the Company to the Investment Adviser is £25,000 per annum payable quarterly in advance.

The Company has appointed International Administration Group (Guernsey) Limited as Administrator to provide accounting, company secretarial and administration services to the Company. The administration fee payable by the Company is an annual fee of £62,000 payable quarterly in advance with a fee of £16,500 paid on flotation. The Company is also required to reimburse the Administrator in respect of all reasonable and properly evidenced out of pocket expenses incurred by the Administrator in the performance of its duties.

Corporate governance

The Company must comply with the provisions of the Companies (Guernsey) Law, 2008 and, since its shares are listed on the London Stock Exchange, the UKLA's Listing and Disclosure Rules. The Board relies on its Company Secretary and advisers to ensure adherence to Guernsey legislation and the UKLA Rules.

The Financial Reporting Council (the "FRC") has confirmed that by following the AIC Code of Corporate Governance (the "AIC Code") produced by the Association of Investment Companies in October 2010, boards of investment companies should fully meet their obligations in relation to the May 2010 FRC published UK Corporate Governance Code which is applicable to the Company for this reporting period ended 31 December 2011 and paragraph 9.8.6 of the Listing Rules.

The Board of the Company has considered the principles and recommendations of the AIC Code by reference to the AIC Corporate Governance Guide for investment companies (the "AIC Guide"). The AIC Guide, as explained in the AIC Guide, addresses all the principles set out in the UK Corporate Governance Code, as well as setting out additional principles and recommendations on issues that are of specific relevance to the Company.

The Board considers that reporting against the principles and recommendations of the AIC Code and by reference to the AIC Guide (which incorporates the UK Corporate Governance Code), will provide better information to shareholders. Copies of the AIC Code and the AIC Guide can be found at www.theaic.co.uk.

The Company established a Remuneration and Nomination Committee which comprises all the Directors, with Quentin Burgess as the Chairman. The Remuneration and Nomination Committee has responsibility for considering the remuneration of the Directors and meets at least once a year. It also: (i) identifies individuals qualified to become Board members and selects the director nominees for election at general meetings of the Shareholders or for appointment to fill vacancies; (ii) determines director nominees for each committee of the Board; and (iii) considers the appropriate composition of the Board and its committees. The Remuneration and Nomination Committee has met and considered the remuneration of the Directors and composition of the Board and its committees and is of the view that no changes are appropriate at the present time.

The Company established a Management Engagement Committee which comprises all the Directors, with John Falla as the Chairman. The Management Engagement Committee meets not less than once a year. The Management Engagement Committee's main function is to review and make recommendations on any proposed amendment to the investment advisory contract between the Company and the Investment Adviser and keep under review the performance of the Investment Adviser in its role as investment adviser to the Company. The Management Engagement Committee has considered the performance of the Investment Adviser and has presented its view to the Board and the Board believe it is in the interest of shareholders to retain the services of the Investment Adviser for the foreseeable future.

The Company has established an Audit Committee which comprises all the Directors. David Staples is the Chairman of the Audit Committee. The Audit Committee meets as often as required but at least twice a year. The Audit Committee's main functions include, inter alia, making recommendations to the Board in relation to the appointment and remuneration of the Company's auditors and monitoring and reviewing annually their independence, objectivity, effectiveness and qualifications. The Audit Committee also monitors the integrity of the financial statements of the Company, including its annual and interim reports and any preliminary results announcements.

The Audit Committee is responsible for overseeing the Company's relationship with the external auditors. The Audit Committee considers the nature, scope and results of the auditors' work and reviews, develops and implements policy on the supply of non-audit services that are to be provided by the external auditors to ensure that the auditors continue to be objective and remain independent from the Company's management whilst still providing value for money. The Audit Committee focuses particularly on compliance with legal requirements, accounting standards and the relevant Listing Rules and ensuring that an effective system of controls is maintained. The ultimate responsibility for reviewing and approving the annual report and financial statements remains with the Board.

The Board welcomes shareholders' views and places great importance on communication with the Company's shareholders. The Board aims to ensure that shareholders are provided with sufficient information to understand the risk/reward balance to which they are exposed by the holding of shares in the Company. In addition to the annual and interim reports and interim management statements the Company provides portfolio updates and makes other announcements of significant developments. These are available of the Company's website (dreflimited.com). The Board obtains the views of the Company's major shareholders primarily through Broker and Investment Adviser visits. The Board gives due consideration to any corporate governance matters raised by shareholders. Should any shareholder wish to raise any matter with the Board or Investment Adviser, they can write to the Company at its registered address as disclosed on the company information page at the end of this report, or alternatively use the contact e-mail address on the Company's website.

Throughout the period from incorporation to 31 December 2011 the Directors believe that the Company has been in compliance with the AIC Code provisions insofar as they apply to the Company's business and with the provisions of the UK Code of Corporate Governance except as noted below:

·; For the period from incorporation on 7 January 2011 to 8 February 2011, the period prior to operations commencing, IAG Limited was the sole director.

·; Since all the Directors are non-executive and day to day management responsibilities are delegated to the Investment Adviser and the Administrator, the Company does not have a Chief Executive Officer.

·; The Board is comprised solely of non-executive directors meaning the Code provisions relating to executive directors' remuneration are not relevant to the Company. Directors' fees are detailed in the Directors' Remuneration Report.

·; As the Company delegates to third parties its day to day operations and has no employees, the Board has determined that there is no requirement for an internal audit function. The Directors review annually whether a function equivalent to an internal audit is needed and will continue to monitor its systems of internal controls in order to provide assurance that they operate as intended.

Leadership, Board effectiveness and accountability

The Board comprises three directors, all of whom are independent non-executive directors. The Directors believe that the Board has a balance of skills and experience which will enable it to provide effective strategic leadership and proper governance of the Company

The Company has no executive directors or employees. The Board has contractually delegated investment advice and administration, including accounting and company secretarial, to external agencies. The Directors are independent of the Investment Adviser and Administrator and free of any business or other relationship that could influence their ability to exercise independent judgement. The relationships with these external agencies are bound by Investment Advisory and Administration Agreements which establish the areas of delegated responsibilities. The Board monitors the performance of the external agencies and their adherence to the agreements. All areas outside these agreements remain under Board authority, which include:

·; Formulation and agreement of strategy;

·; Financial reporting and controls (including oversight of the appointment of and communications with the auditors and the overall audit process);

·; Board membership and other appointments;

·; Internal financial and operating controls;

·; Communication with shareholders and Stock Exchange announcements;

·; Remuneration of the Directors;

·; Delegation and overall supervision of all delegated authorities;

·; Corporate governance matters;

·; Appointment of third party advisers/service providers;

·; Dividend policy; and

·; Gearing and capital management.

The Directors are initially appointed, under letters of appointment, for a period of 12 months and will seek reappointment at the first annual general meeting. Thereafter, the Directors will retire by rotation at not less than three yearly intervals and may offer themselves for re-election, subject to satisfactory performance and the support of the Board. Whilst the Board acknowledges the need to review its composition from time to time, it believes that in order to be effective it is desirable that the Board should work together over a reasonable period of time thereby accumulating a thorough knowledge of the Company's business to secure the best results for the Company. Ordinarily a Director should serve no longer than nine years. However the Board believes that in certain circumstances it may be prudent to re-appoint a Director to serve for longer if is deemed in the best interests of the Company having regard to the Director's continuing independence and performance. The Board will at all times seek to maintain a sensible balance of skills, experience and diversity.

The Articles allow for the removal of a Director without notice, however, the Directors' letters of appointment allow for termination on both sides on three months' notice. The letter of appointment of each Director is available for inspection at the registered office of the Company.

The Board meets at least quarterly and receives full information on financial performance and the financial position along with any other relevant information in advance of meetings.

The table below details the attendance at Board and Committee meetings during the period.

In addition the Remuneration and Nomination Committee met once during the year and all Directors attended. The Management Engagement Committee also met once during the year and all Directors attended.

It is Board policy that no director shall attend any meeting of the Board whilst in the United Kingdom. Mr Burgess is a UK resident and Messrs Falla and Staples are Guernsey resident.

Internal controls

The Board has established a process for identifying, evaluating and managing the financial, operational and compliance risks faced by the Company. The process is subject to regular review by the Board.

The Directors are responsible for the Company's system of internal control which is designed to safeguard the Company's assets, maintain proper accounting records and ensure that financial information used within the business, or published, is reliable. However, such a system can only be designed to manage rather than eliminate the risk of failure to achieve business objectives and therefore can only provide reasonable, but not absolute, assurance against fraud, material misstatement or loss.

The Board conducts regular risk assessments to identify any deficiencies in the internal financial, operational and compliance controls operating over all aspects of the Company. The Board is responsible for a formal risk assessment on an annual basis and carries out quarterly reviews. These risk assessment processes are in line with the revised guidance in the UK Corporate Governance Code published in May 2010.

Since investment management services are provided to the Company by the Investment Adviser and custody of assets and all administrative services are provided to the Company by third party service providers including the Administrator, the Company's system of internal control mainly comprises monitoring the services provided by the Investment Adviser and the Administrator and their associates, including the operating controls established by them, to ensure they meet the Company's business objectives. The Company does not have an internal audit function of its own, but relies on the internal review and business control processes operated by the Investment Adviser and the Administrator to ensure that services are provided within a suitably managed risk environment. The key elements designed to provide effective internal control are as follows:

·; Financial Reporting - Regular and comprehensive review by the Board of key investment and financial data, including Company periodic financial reports, written reports from the Investment Adviser, written reports from the Administrator and Company Secretary;

·; Investment Advisory Agreement - Appointment of an Investment Adviser regulated by the UK Financial Services Authority whose responsibilities are clearly defined in a written agreement;

·; Administration Agreement - Appointment of an Administrator regulated by the Guernsey Financial Services Commission (GFSC), whose responsibilities are clearly defined in a written agreement;

·; Investment Adviser Management Systems - The Investment Adviser's system of internal control includesorganisationalagreements which clearly define the lines of responsibility within that organisation, delegated authorities, control procedures and systems. These are monitored by the Investment Adviser's compliance department which regularly monitors compliance in accordance with their compliance manual.

·; Administrator Management Systems - The Administrator's system of internal control includes internal procedures, checklists and controls that are subject to a compliance monitoring programme conducted by its Compliance Officer. This compliance monitoring programme includes the activities undertaken for the Company by the Administrator and the objectives of the reviews are to ensure that work is carried out in compliance with relevant regulation. Immediate action is taken to resolve any issues raised as a result of both compliance monitoring and permanent control checks. The Administrator is subject to periodic inspection by the Guernsey Financial Services Commission. The Administrator is required to respond to all relevant findings and implement recommendations by set deadlines.

·; Investment Strategy - The setting and monitoring of the Company's investment strategy by the Board.

The Board keeps under review the effectiveness of the Company's system of internal control by monitoring the operation of the key operating controls of the Investment Adviser and the Administrator and their associates as follows:

·; the Board reviews the terms of the investment advisory and administration agreements;

·; the Board receives regular reports from the Administrator which includes input from the compliance officer;

·; the Board receives regular reports from the Investment Adviser;

·; the Board has undertaken a full review of the Company's business risks which have been analysed in accordance with a risk matrix, duly recorded, reviewed and updated regularly. As mentioned above the Board receives various reports to assist with this review.

In accordance with the procedures set out above the Board confirms that it has reviewed the effectiveness of the Company's system of internal control, including the internal control and risk management systems in relation to the financial reporting process, for the period ended 31 December 2011. There are no material matters to report.

Principal Risks and Uncertainties

The principal risks and uncertainties faced by the Company are considered to fall into the following categories:

General market, economic, fiscal and regulatory environment:

·; The Company's and the Master Fund's targeted returns are based on estimates and assumptions that are inherently subject to significant business and economic uncertainties and contingencies, and the actual rate of return may be materially lower than the targeted returns.

·; Declaration, payment and the amount of any future dividends by the Company are subject to the discretion of the Directors and will depend upon, among other things: the performance of the Master Fund, the ability of the Master Fund to make further investments, distributions made by the Master Fund and the size of any such distributions as well as the Company's financial position and cash requirements.

·; The ordinary shares may trade at a discount to Net Asset Value.

·; The Company and the Master Fund are exposed to changes in tax and other laws, accounting standards or regulation and any potential costs arising, potentially with retrospective effect.

·; The Master Fund is exposed to the commercial real estate market. The value of underlying real estate and the rental income it produces may fluctuate as a result of factors which are outside the Company's control.

Concentration and other risks due to the investment strategy of the Company:

·; The Company is not able to participate in the investment decisions of the Master Fund, in which it has committed to invest substantially all of its capital.

·; It may not be possible for the Company to dispose of its interest in the Master Fund if it wished to do so.

·; There can be no assurance that the Master Fund will be able to invest in assets on attractive terms or generate any investment returns.

·; There is no guarantee that the Master Fund will be able to invest fully the total amount of commitments it has received, or that suitable investments will be or can be made, or that any investments will be successful.

·; The value of an investment can go down as well as up and, as a result, a Limited Partner in the Master Fund (including the Company) may lose some or all of its commitment or the value of its investment.

·; There is currency risk in the Master Fund from material movements in the exchange rate between Pounds Sterling and the currency in which certain investments are made.

Reliance on the Investment Adviser:

·; The Investment Adviser is dependent upon the expertise of key personnel in providing investment advisory services to the Company and the Master Fund.

·; Failure by the Investment Adviser or other third-party service providers of the Company and/or the Master Fund to carry out its or their obligations could materially disrupt the business of the Company and/or of the Master Fund.

The principal risks and uncertainties in relation to financial instruments and the mitigation thereof are discussed in note 11. Details of the Board's risk monitoring activities may be found in the Directors' Report.

By order of the Board:

David Staples

Director

10 April 2012

Statement of Directors' Responsibilities

The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable laws and regulations.

The Companies (Guernsey) Law, 2008 requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared financial statements in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union ("EU"). Under The Companies (Guernsey) Law, 2008 the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the Directors are required to:

·; select suitable accounting policies and then apply them consistently;

·; make judgements and accounting estimates that are reasonable and prudent;

·; state whether applicable IFRSs as adopted by the EU 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 adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with The Companies (Guernsey) Law, 2008. They are also responsible for safeguarding the assets of the Company and hence for taking responsible steps for the prevention and detection of fraud and other irregularities.

So far as each of the Directors is aware at the time the report is approved there is no relevant audit information of which the Company's auditor should be aware and the Directors have taken all steps they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information.

The Directors are responsible for the maintenance and integrity of the Company's website. The work carried out by the auditors does not include consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. Legislation in the United Kingdom and Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Directors' statement pursuant to the Disclosure and Transparency Rules

Each of the Directors confirms that, to the best of each person's knowledge and belief that:

·; the financial statements, prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and results of the Company; and

·; the Annual report including the Chairman's Statement, the Investment Adviser's report and the Directors' report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties.

By order of the Board:

David Staples

Director

10 April 2012

Directors' Remuneration Report

The Board of Directors of Duet Real Estate Finance Limited presents its Directors remuneration report in respect of the period ended 31 December 2011.

Remuneration policy

The remuneration policy of the Company is set by the Board.

The remuneration policy of the Company is to pay its non-executive directors fees that are appropriate to the role and the amount of time spent in discharging their duties that are broadly in line with those of comparable investment companies and are sufficient to attract and retain suitably qualified individuals.

All Directors are non-executive directors. In aggregate Directors' fees shall not exceed £125,000 per annum (or such larger sum as the Company may, by ordinary resolution, determine). Each Director has entered into a letter of appointment with the Company which sets out fee arrangements including annual fees and the basis of additional fees.

In addition to the annual fees, each Director is entitled to receive reasonable additional fees in respect of his services in relation to any material transaction undertaken by the Company and in relation to any services provided to the Company that are not currently envisaged or any commitment required in relation to his role in excess of that currently envisaged. The Chairman of the Board and the Audit Committee Chairman are entitled to receive fees at a higher level (£30,000 per annum and £25,000 per annum respectively) than those of the other Directors (£20,000 per annum), reflecting their additional duties and responsibilities. Directors' fees are not subject to any performance criteria.

The Directors may be paid all reasonable travelling, hotel and other expenses properly incurred in connection with the exercise of their powers and discharge of their duties as directors including expenses incurred travelling to and from and attending meetings of the Board, committee meetings, general meetings and separate meetings of holders of any class of securities of the Company.

The Directors are not entitled to any benefits upon termination of their appointment under the terms of their agreements with the Company, or pension, retirement or similar benefits.

Company performance

The Director's believe that total shareholder return is the most appropriate measure of the Company's performance as it is the measure which is most aligned with the interests of shareholders.

The total shareholder return for the period ended 31 December 2011 was 0%*.

*Based on launch NAV of 98 pence, bid price at period end and including dividends.

Directors' remuneration

The fees to Directors during the period to 31 December 2011 were as follows:

Initial fees are in respect of the initial launch and secondary placing and are included in issue costs and reflect the increased workload involved, whilst ongoing fees are included in the statement of comprehensive income.

The approval of this report by the shareholders of the Company is to be sought by ordinary resolution at the annual general meeting to be held on 13 June 2012.

By order of the Board:

David Staples

Director

10 April 2012

Independent Auditors' Report to the Members of Duet Real Estate Finance Limited

Report on the Financial Statements

We have audited the accompanying financial statements (the "financial statements") of Duet Real Estate Finance Limited ("the Company") which comprise the statement of financial position as of 31 December 2011 and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the period then ended and a summary of significant accounting policies and other explanatory information.

Directors' Responsibility for the Financial Statements

The directors are responsible for the preparation of financial statements that give a true and fair view in accordance with International Financial Reporting Standards (as adopted by the European Union) and with the requirements of Guernsey law. The Directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of the Company as of 31 December 2011, and of its financial performance and cash flows for the period then ended in accordance with International Financial Reporting Standards (as adopted by the European Union) and have been properly prepared in accordance with the requirements of The Companies (Guernsey) Law, 2008.

Report on other Legal and Regulatory Requirements

We read the other information contained in the Annual Report and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. The other information comprises the Highlights, the Chairman's Statement, the Investment Adviser's Report, the Board of Directors, the Directors' Report, the Statement of Directors' Responsibilities and the Directors' Remuneration Report.

In our opinion the information given in the Directors' Report is consistent with the financial statements.

This report, including the opinion, has been prepared for and only for the Company's members as a body in accordance with Section 262 of The Companies (Guernsey) Law, 2008 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters which we are required to review under the Listing Rules:

·; the Directors' statement in relation to going concern; and

·; the part of the Corporate Governance Statement relating to the Company's compliance with the nine provisions of the UK Corporate Governance Code specified for our review; and

·; certain elements of the report to Shareholders by the Board on directors' remuneration.

John Patrick RocheFor and on behalf of PricewaterhouseCoopers CI LLPChartered Accountants and Recognised AuditorGuernsey, Channel Islands

10 April 2012

Statement of Comprehensive Income

For the period from 7 January 2011 to 31 December 2011

The accompanying notes form an integral part of these financial statements.

Statement of Financial Position as at 31 December 2011

The accompanying notes form an integral part of these financial statements.

The financial statements were approved by the Board of Directors on 10 April 2012 and were signed on its behalf by:

David Staples

Director

Statement of Changes in Equity

For the period from 7 January 2011 to 31 December 2011

The accompanying notes form an integral part of these financial statements.

Statement of Cash Flows

For the period from 7 January 2011 to 31 December 2011

The accompanying notes form an integral part of these financial statements.

Notes to the financial statements for the period ended 31 December 2011

1. General information

The Company was incorporated in Guernsey on 7 January 2011 and is a registered closed-ended investment scheme registered pursuant to the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended, and The Registered Collective Investment Scheme Rules 2008 issued by the Guernsey Financial Services Commission. The ordinary shares were admitted for trading on the Main Market of the London Stock Exchange on 14 March 2011.

The Company is a feeder fund and invests in the European Real Estate Debt Fund L.P. (the "Master Fund").

2. Summary of significant accounting policies

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied throughout the period unless otherwise stated.

Basis of preparation

The financial statements of the Company have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs), interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC), applicable legal and regulatory requirements of Guernsey Law, the Listing Rules and Disclosure and Transparency Rules of the Financial Services Authority.

The financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets at fair value through profit or loss.

The preparation of the financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires the Directors to exercise judgement in the process of applying the Company's accounting policies. Changes in assumptions may have a significant impact on the financial statements in the period the assumptions changed. The Directors believe that the underlying assumptions are appropriate and that the Company's financial statements therefore present the financial position and results fairly. 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 6.

Going concern

The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. The Company therefore adopts the going concern basis in preparing its financial statements.

New IFRS standards, amendments and interpretations issued but not effective for the financial period and not early adopted

The Company's assessment of the impact of these new standards and interpretations is set out below.

IFRS 9, 'Financial instruments', issued in November 2009. This standard is the first step in the process to replace IAS 39, 'Financial instruments: recognition and measurement'. IFRS 9 introduces new requirements for classifying and measuring financial assets and is likely to affect the Company's accounting for its financial assets. The standard is not applicable until 1 January 2015 but is available for early adoption. However, the standard has not yet been endorsed by the EU. The Company is yet to assess IFRS 9's full impact. However, initial indications are that it should not materially affect the Company's accounting for its financial instruments.

IFRS 10, 'Consolidated financial statements'; IFRS 11, 'Joint arrangements'; IFRS 12, 'Disclosures of interests in other entities'; and IFRS 13, 'Fair value measurement' have also been

issued during the period to 31 December 2011. All of these new standards are effective from 1 January 2013. The Company has yet to assess the full impact of these new standards.

Foreign currency translation

Functional and presentation currency

The Company's share capital is denominated in Sterling and the dividends and distributions paid and to be paid to shareholders are denominated in Sterling. The primary activity of the Company is to act as a feeder fund, investing into the Master Fund which itself has an underlying portfolio of UK and European commercial real estate related debt investments. The performance of the Master Fund is measured and reported to its limited partners in Sterling. The Company's expenses are incurred in Sterling. The Directors therefore consider Sterling as the currency that most appropriately represents the economic effects of the underlying transactions, events and conditions. The financial statements of the Company are presented in Sterling, which is also the Company's functional currency.

Transactions and balances

Foreign currency transactions are translated into Sterling using the exchange rates prevailing at the dates of the transactions. Foreign currency assets and liabilities are translated into Sterling using the exchange rate prevailing at the period end date.

Foreign exchange gains and losses arising from translation are included in the statement of comprehensive income.

Financial assets at fair value through profit or loss

Classification

The Company classifies its investment in the Master Fund as a financial asset at fair value through profit or loss. This financial asset is designated by the Directors at fair value through profit or loss at inception.

Financial assets designated at fair value through profit or loss at inception are financial instruments that are not classified as held for trading but are managed, and their performance is evaluated on a fair value basis in accordance with the Company's documented investment strategy.

The Company's policy requires the Directors to evaluate the information about these financial assets on a fair value basis together with other related financial information. Assets in this category are classified as current assets if they are expected to be realised within 12 months of the period end date. Those not expected to be realised within 12 months of the period end date will be classified as non-current.

Recognition, derecognition and measurement

Investment in the Master Fund is recognised on the date the drawdown payments become due under the drawdown notices as a financial asset at fair value through profit or loss and is initially recognised at fair value. Transaction costs are expensed as incurred in the statement of comprehensive income. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or the Company has transferred substantially all risks and rewards of ownership.

Subsequent to initial recognition, all financial assets at fair value through profit or loss are measured at fair value. Gains and losses arising from changes in the fair value of the 'financial assets at fair value through profit or loss' category are presented in the statement of comprehensive income within net changes in fair value of financial assets at fair value through profit or loss in the period in which they arise.

Distributions of a revenue nature from financial assets at fair value through profit or loss are recognised in the statement of comprehensive income within investment income when the Company's right to receive payments is established.

Fair value estimation

The Company's investment in the Master Fund is subject to the terms and conditions of the Master Fund's Limited Partnership Agreement. The investment is carried at fair value as determined by the Directors at the period end date, such fair value being primarily based on the latest available coterminous reported information from the Master Fund. The Directors review the details of the reported information obtained from the Master Fund and consider: (i) the liquidity of the Master Fund and its underlying investments, (ii) the date of the net asset value (NAV) provided, (iii) any restrictions on redemptions, and (iv) the basis of accounting in the underlying Master Fund and, in instances where the basis of accounting is other than fair value, fair valuation information provided by the Master Fund's adviser. If necessary, the Directors make adjustments to the NAV of the Master Fund to obtain the best estimate of fair value as at the period end date. Net changes in fair value on financial assets at fair value through profit or loss in the statement of comprehensive income includes the change in fair value of the Master Fund.

Receivables

Receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Receivables are recognised initially at fair value. They are subsequently measured at amortised cost using the effective interest rate method, less provision for impairment.

A provision for impairment is established when there is objective evidence that the Company will not be able to collect all amounts to be received. Significant financial difficulties of the counterparty, probability that the counterparty will enter bankruptcy or financial reorganisation, and default in payments are considered indicators that the amount to be received is impaired. Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is recognised using the effective interest rate used to discount the future cash flows for the purpose of measuring the impairment loss.

Cash and cash equivalents

Cash and cash equivalents include cash in hand, demand deposits, other short-term highly liquid investments with original maturities of three months or less.

Payables and accrued expenses

Payables and accrued expenses are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

Transactions costs

Transaction costs are legal and professional fees including certain subscription premium costs incurred to acquire the financial assets at fair value through profit or loss. They include the upfront fees and commissions paid to agents, advisers, brokers and dealers, due diligence fees and payments required in the nature of subscription premia to the Master Fund for transmission to the existing investors where there are admissions of subsequent limited partners. Transaction costs, when incurred, are immediately recognised in the statement of comprehensive income as an expense.

Subscription premium receivable

Subscription premium receivable from the Master Fund when it admits new investors is recognised as "other income - subscription premia" within the statement of comprehensive income as income on a receivable basis when the Company's entitlement has been determined by the Master Fund.

Dividend distribution

Dividend distribution to the Company's shareholders is recognised as a liability in the Company's financial statements in the period in which the dividends are paid.

Taxation

The Company is domiciled in Guernsey, Channel Islands. Under the current laws of Guernsey, there is no income, estate, corporation, capital gains or other taxes payable by the Company. The Company does not currently incur any withholding tax in respect of its income received.

Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board as it is the body that makes strategic decisions. The Board is of the opinion that there is only a single operational segment being the investment in the Master Fund as disclosed in Note 6.

Share capital

Ordinary shares are classified as equity.

3. Expenses

*Net of rebate from the Investment Adviser (note 12).

Auditors' remuneration

4. Taxation

The Company has obtained exemption from Guernsey Income Tax under The Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989 and accordingly is subject to an annual fee of £600.

5. Dividends

A dividend of 1 pence per ordinary share was paid on 18 August 2011 to ordinary shareholders on the register on 5 August 2011, giving a total dividend paid of £500,000.

A dividend of 1 pence per ordinary share was paid on 2 December 2011 to ordinary shareholders on the register on 11 November 2011, giving a total dividend paid of £759,762.

6. Financial assets at fair value through profit or loss

The non-current investment comprises an investment in the Master Fund. The Company has a committed investment of £75,333,953 of which £38,946,398 has been drawn down at the period end. The undrawn commitment to the Master Fund at 31 December 2011 is £36,387,555.

Equalisation is paid to or received from the Master Fund when additional investors are admitted to the Master Fund including the initial investment by the Company. Amounts are paid to or received from the Master Fund so as to equalise (in percentage terms) the net amount drawn from all investors after taking into account any amounts distributed by the Master Fund to prior existing investors. Equalisation paid to the Master Fund is included as part of the purchase cost of the investment and equalisation received from the Master Fund represents a temporary return of capital which can be called again by the Master Fund from the Company as part of its commitment to invest.

The Company received equalisation from the Master Fund in the period of £11,123,382 being £1,427,485 as a consequence of the Master Fund's fifth closing to admit new investors other than the Company and £9,695,897 as a consequence of the Master Fund's sixth closing to admit new investors other than the Company.

In addition subscription premia are payable by the Company to the Master Fund as a condition of its investment in the Master Fund and is received from the Master Fund when it admits new investors on subsequent closings after the Company's initial investment. Subscription premia paid or received by the Company are treated as transaction costs or other income as appropriate.

On admission of the Company as an investor in the Master Fund the subscription premium was paid of £844,920 by the Company to the Master Fund. On subsequent commitment of further funds to the Master Fund following the secondary placing a further subscription premium of £527,661 was paid by the Company to the Master Fund. However as part of the agreement with the Investment Adviser this subscription premium was included in the calculation of the issue expenses as the Investment Adviser had agreed to pay an amount to the Company so as to cap all issue costs at 2% of the IPO fund raising and similarly for the second placing. During this period the Company received subscription premia of £529,222 which has been treated as income.

The Company's investment in the Master Fund is subject to the terms and conditions set out in the Master Fund's offering documents and is accounted for by the Company as at fair value as determined by the Directors at the period end date, this fair value being primarily based on the latest available coterminous reported information from the Master Fund. The Directors review the details of the reported information obtained from the Master Fund and consider: (i) the liquidity of the Master Fund and/or its underlying investments, (ii) the type of investments held within the Master Fund, (iii) the date of the net asset value (NAV) provided, (iv) any restrictions on redemptions, and (v) the basis of accounting adopted by the Master Fund in valuing the investments held and in reporting to investors (the Master Fund reports to investors using IFRS principles). If necessary, the Directors make adjustments to the NAV of the Master Fund so as to obtain the best estimate of fair value as at the period end date. No such adjustments have been made to the reported NAV of the Master Fund as it applies to the Company as at 31 December 2011. In addition to normal short term debtors/creditors and cash balances, the investment portfolio held by the Master Fund as at 31 December 2011 included;

i) Originated debt with fixed or determinable payments that are not quoted in an active market and are classified as "loans and receivables" measured at amortised cost less any impairment; and

ii) Debt instruments comprising of commercial mortgage backed securities which are classified as at fair value through profit or loss and valued by the Master Fund based on a combination of quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs.

Although the Directors use their best judgement in estimating the fair value of investments, there are inherent limitations in any estimation techniques. The Company's investment in the Master Fund is categorised as level 2 within the fair value hierarchy under IFRS 7, in that the fair value is based on inputs other than quoted prices included in level 1 that are observable either directly (as prices) or indirectly (derived from prices).

7. Loss per share and net asset value per share

The loss per share calculation is based on loss for the period and total comprehensive income of £794,944 and the weighted average number of shares in issue since the period of issuance of 50,722,754.

Net asset value per share is based on net assets of £73,986,485 divided by the 75,976,249 ordinary shares in issue at 31 December 2011.

8. Payables

9. Share capital

The authorised shares of the Company are as follows:

Under Guernsey law, the whole of the share capital account is distributable subject to meeting the solvency test criteria and any restrictions in the Articles of Incorporation of the Company.

One share was issued on incorporation on 7 January 2011. A further 49,999,999 ordinary shares were issued at £1 per share on 14 March 2011 and 25,976,249 shares were issued at 100.25p per share on 16 August 2011.

The Company's objective when managing its capital is to follow its investment objective to provide shareholders, through its investment in the Master Fund, with regular dividends and an attractive total return whilst limiting downside risk to capital through exposure to European commercial real estate debt. The Company has a significant commitment to invest in the Master Fund and therefore the Company's financial performance when managing its capital depends primarily on the performance of its investment in the Master Fund. However, in addition the Company may borrow up to 20% of NAV, has the ability to suspend payment of dividends if necessary, may buy back its own shares and may issue further shares.

10. Cash and cash equivalents

11. Financial risk management

The Company is committed to invest in the Master Fund. Funds held to meet future draw downs are invested in money market funds and cash.

The Company's material financial instruments comprise:

·; Investment in the Master Fund

·; Investment in money market funds

·; Cash

.

Financial risk management and policies

The main risks arising from the Company's financial instruments are market risk, credit risk and liquidity risk. The Board regularly reviews and agrees policies for managing these risks and these are summarised below.

Market price risk

Market risk arises mainly from uncertainty about future prices of financial instruments held. It is the intention of the Company to hold its investment in the Master Fund until maturity. It may not be possible for the Company to dispose of its investment in the Master Fund. Any disposal would require the consent of the General Partner of the Master Fund. There is no guarantee that the Company could find a willing buyer or would, on sale, achieve the fair value used for the purpose of valuing investments in these financial statements. The key driver for changes in the value of the Master Fund is changes in the actual or perceived market price of real estate assets securing the investments of the Master Fund. The overall market positions of the Master Fund are managed by the Investment Adviser on a weekly basis. The Investment Adviser of the Company is also the Investment Adviser of the Master Fund.

The Company also holds most of its cash awaiting calls for draw downs from the Master Fund in money market funds which distribute all income and have a stable net asset value.

Foreign currency risk

Substantially all the Company's assets and liabilities are denominated in Pounds Sterling so there is no significant foreign currency risk at the level of the Company. However, the Master Fund's investments may be in Euros and Pounds Sterling although they may also be made in other European currencies. There could be material movements in the exchange rate between Pounds Sterling and the currency in which the Master Fund's investments are made. As a result the value of the Master Fund's investments may go up and down solely as a result of changes in currency exchange rates.

Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company's exposure to market risk for changes in interest rates relates primarily to the Company's money market funds and cash. All cash bears interest at floating rates. The following table sets out the Company's exposure to interest rate risk at 31 December 2011:

The interest bearing assets are all at floating rates denominated in Pounds Sterling. The cash and cash equivalents have daily liquidity. If the interest rate increased/decreased by 50 basis points and all other variables were held constant, the net income would increase/decrease for a year by £182,270.

Credit risk

Credit risk is the risk that an issuer or counterparty will be unable or unwilling to meet a commitment that it has entered into with the Company.

The main concentration of credit risk is in the Master Fund. The credit risk within the Master Fund is largely related to the tenants that occupy the properties that form security for its real estate loan investments. Investments within the Master Fund are generally structured as loans to bankruptcy remote SPVs that own the properties the investments are secured against. Counterparty risk is related to its derivative hedging counterparties. The Master Fund's policy is to enter into financial instruments with a range of reputable counterparties to reduce its exposure to material credit losses.

The Company is also invested in money market instruments totaling £36,413,811 at 31 December 2011, all with a Triple A rating. In addition the Company holds cash at a bank with a rating of A-1+.

The carrying amounts of financial assets best represented the maximum credit risk exposure at the balance sheet date.

Liquidity risk

Liquidity risk is the risk that the Company will encounter in realising assets or otherwise raising funds to meet its financial commitments. Substantially all of the Company's assets will be invested in the Master Fund. Funds held pending investment in the Master Fund are invested in highly liquid money market investments. Commitment cover at 31 December 2011 was 100.2%

At the beginning of each financial year the Investment Adviser prepares an annual budget and cash flow forecast which is approved by the Board and updates are reviewed at each quarterly board meeting. On an ongoing basis the Investment Adviser considers the Company's future working capital requirements and ensures sufficient funds are available in the Company's current account to maintain the day to day cash requirements of the Company.

Fair value

All the Company's investments are carried at fair value at the balance sheet date. For certain financial instruments including debtors and creditors the carrying value approximates to fair value due to the immediate or short term nature of those financial instruments.

12. Related party and material transactions

The Company pays a fixed annual fee of £25,000 to the Investment Adviser, Duet Private Equity Limited. The charge for the period was £19,983 and £6,250 was prepaid at the period end. There are no performance fees payable at the Company level, although the Investment Adviser is incentivised by performance fees payable at the Master Fund level.

Under the terms of an agreement between the Company and the Investment Adviser dated 18 February 2011, Duet Private Equity Limited undertook to reimburse the Company issue expenses and/or subscription premium such that the amount available to be committed to the Master Fund was equal to at least 98% of the gross issue proceeds. The effect of this agreement was to cap the Company's exposure to costs at the initial IPO to a maximum of 2% of the IPO proceeds raised. The rebate due and received by the Company, including other income of £50,000 as shown in the Income Statement, under this agreement during the period was £1,569,092.

Transactions and balances with the Master Fund are disclosed in Note 6.

13. Subsequent events

A dividend of 1 pence per ordinary share (£759,762) was paid on 23 March 2012.

A drawdown notice was received from the Master Fund on 6 March 2012 requiring payment of £5,088,435 to the Master Fund on 30 March 2012.

Company information