First Property Regulatory News (FPO)

Date: 11 June 2012

On Behalf of: First Property Group plc ("First Property", "the Company" or "the Group")

Embargoed: 0700hrs

First Property Group plc

Preliminary Results for the twelve months to 31 March 2012

First Property Group plc (AIM: FPO), the commercial property fund management group, today announces its preliminary results for the 12 months ended 31 March 2012.

Financial highlights:

Operational highlights:

·; Although headline assets under management remained broadly unchanged year on year there was underlying movement in funds with assets in the UK increasing to 27% of total assets under management whilst a weakening Euro versus Sterling resulted in a 6% reduction in assets in Poland to 70% of total assets under management;

·; Material increased contribution to earnings from Group Properties, resulting from a full year's contribution from properties acquired by Fprop Opportunities plc (FOP) in 2010;

·; UK PPP fund, established in February 2010, 90% invested with £93.5 million under management at year end;

·; In receipt of expressions of interest to invest in a new UK fund to pursue the same higher yielding investment strategy as UK PPP;

·; Funds under management once again rated by Investment Property Databank (IPD) as the best performing versus the IPD Central & Eastern European (CEE) universe, now for the six years to 31 December 2011.

Commenting on the results, Ben Habib, Chief Executive of First Property Group, said:

"It has now been over four years since the credit crunch began. Throughout this period First Property Group's client funds have delivered positive overall returns to their investors and the Company has remained profitable at all times, having increased its dividend payment every year since 2008. Our funds have, once again, been ranked as the best performing versus the IPD Central & Eastern European universe, now for the six year period to December 2011. We are proud of this track record, which results from judicious investing and the hard work of our excellent team.

"The investment landscape remains difficult with eurozone problems overhanging all capital markets. However, within Europe, Poland still stands out as one of, if not the best investment markets. Our intention remains to concentrate on Poland and the UK, where we see good value and we have considerable expertise in delivering attractive returns to investors."

A briefing and conference call for analysts will be held at 09.30hrs today at the Group's headquarters, 35 Old Queen Street, London, SW1H 9JA. A conference call facility will also be available on +44 (0)20 8817 9301, passcode 7499797. A recorded copy of the call will subsequently be posted on the company website, www.fprop.com.

For further information please contact:

Notes to investors and editors

First Property Group plc is a commercial property fund manager with operations in the United Kingdom and Central Europe. The Group's investment performance is ranked No.1 versus the Investment Property Databank's (IPD) Central & Eastern European (CEE) universe over the three, four, five and six years to 31 December 2008, 2009, 2010 and 2011.

The business model of First Property Group is to:

·; Raise third party funds to invest in income producing commercial property;

·; Co-invest in these funds;

·; Earn fees for the management of these funds. Fees earned are a function of the value of assets under management as well as the performance of the funds;

·; Earn a return on its own capital invested in these funds.

CHIEF EXECUTIVE'S STATEMENT

Financial results

I am pleased to report final results for the twelve months ended 31 March 2012.

Revenue earned by the Group increased by 31% to £9.34 million (2011: £7.11 million) yielding a 35% increase in profit before tax of £3.97 million (2011: £2.95 million). Diluted earnings per share grew by 44% to 2.73 pence (2011: 1.90 pence).

The Group ended the period with net assets of £17.36 million (2011: £16.57 million) and a cash balance of £9.98 million (2011: £5.44 million), of which £4.76 million (2011: £1.9 million) is held within Fprop Opportunities plc, (84.1% owned by the Group) and £669,000 (2011: £545,000) is held within Corp SA (68.3% owned by the Group), the property management company for Blue Tower in Warsaw.

Dividend

The Directors have resolved to recommend an increased final dividend of 0.75 pence (2011: 0.74 pence), which together with the interim dividend of 0.33 pence (2011: 0.32 pence) equates to a dividend for the year of 1.08 pence (2011: 1.06 pence). The final dividend, if approved, will be paid on 21 September 2012 to shareholders on the register at 24 August 2012.

Review of operations

Property Fund Management (First Property Asset Management Ltd or FPAM)

At 31 March 2012 aggregate assets under management remained broadly unchanged year on year at £365 million (2011: £366 million). The lack of movement in this headline figure masks the underlying movement in funds. Assets under management in the UK increased to 27% (2011: 22%) of total assets under management, whilst a weakening of Euro versus Sterling resulted in a 6% reduction in assets under management in Poland to 70% (2011: 75%) of total assets under management.

We completed six purchases in the period, all in the UK, with a total value of £20.3 million and no sales.

Revenue earned by this division grew by 9% to £4.34 million (2011: £3.97 million), generating a 12% increase in profit before tax of £3.07 million (2011: £2.74 million). This represents 55% of Group profit before tax and unallocated central overheads. Earnings increased even though assets under management remained unchanged from March 2011 principally because:

- we had the benefit of a full year's worth of fees on assets acquired on behalf of our UK fund, UK PPP, in 2010/11; and

- the €/ £ rate was at an average of €1.16/ £1 during the year whereas at the year end the €/ £ exchange rate was €1.20/ £1. For the majority of the first half of the year assets under management averaged £370 million.

A substantial proportion of our income is earned in Euros and should the €/ £ rate remain at current levels, or weaken, our earnings in Sterling would be adversely affected. It is too early to judge the effect of this, if any, on Group earnings in the current year.

We currently manage six closed end funds. A brief synopsis of the value of assets and maturity of each of these funds is set out below:

In the UK, the core income fund (UK PPP) which we established in February 2010 is generating an un-geared dividend yield of 6.3% per annum for its investors and is nearly fully invested. We are now raising a new UK fund to replicate this investment strategy and have held preliminary discussions with a number of potential investors from whom we have received favourable responses. We hope to report on this further during the course of the year.

Our funds under management have once again been ranked by Investment Property Databank (IPD) as the best performing against the Central & Eastern European universe, now for the six years to December 2011. All four of our funds invested there have come through the credit crunch well and are generating an average pre-tax income return on equity in excess of 20% per annum.

Fprop Opportunities plc (FOP) has some £4.8 million of equity at its disposal for further purchases. It also has access to significant but unspecified amounts of additional equity from institutional investors which have expressed an interest in joint venturing the purchase of properties with FOP. We remain cautious, as ever, particularly in view of the troubles in the eurozone but we are continually evaluating potential investments. We are confident that as and when we identify suitable investment opportunities we will be able to raise the requisite equity capital to acquire them.

Group Properties

Group Properties comprise two directly held properties and shareholdings in four of the Group's six managed funds (as set out in the tables below). It is the Group's policy to carry its investments at the lower of cost or valuation for accounting purposes.

Directly held properties:

The pre-tax profit generated by these two properties during the period represents a rate of return on the equity invested of some 10.1% and 48.9% per annum respectively; both are multi-let office buildings located in Warsaw.

Co-investments:

*represents dividend received

**after non-controlling interest

The results of FOP, of which 84.1% is owned by the Group, are consolidated in these accounts. FOP's revenue and profit before tax for the year to 31 March 2012 amounted to £2.33 million (2011: £907,000) and £1.22 million (2011: £256,000) respectively, whereas the Group's 84.1% share of these amounted to £1.96 million (2011: £763,000) and £1.03 million (2011: £215,000) respectively. The substantial increase in revenue and profit contribution from FOP results from the company having held its two investments for a full year.

The profit before tax earned by FOP equates to a pre-tax return on equity of 15% per annum, even though FOP has only invested half its capital.

Our shareholdings in our two other Polish funds, 5th Property Trading and Regional Property Trading, contributed £182,000 (2011: £221,000) to the Group's profit before tax. We do not have a controlling interest in these funds and they are accounted for as "shares in associates".

Our co-investment in UK PPP contributed £63,000 (2011: £14,000) of dividend income to the Group and is accounted for as a separate line item in our Income Statement.

Fund raising outlook

The fund raising market remains challenging. However, the two funds we have been marketing, our new UK fund and FOP, have both been well received by potential investors.

We are in the process of determining a suitable fund structure for our new UK fund and intend to firm up demand for it once this structure is in place.

We are also in receipt of expressions of interest to invest in FOP on an asset by asset basis. The eurozone troubles last and this year have made us particularly cautious at the moment but we are exploring some interesting investments. If we should proceed with these, we would be confident in raising the required funding. In any event, FOP is currently only half invested.

As mentioned at the time of our interim results, we are considering launching a retail bond in order to assist the Group with seeding new funds under management. We intend to conduct a feasibility study for such a bond shortly.

I am delighted to report that we have appointed Laure Duhot as a non-executive director of First Property Asset Management Ltd, in order to benefit from her experience in fund raising for real estate. Laure is Director of Strategic Capital Markets at Grainger plc and until recently was Head of Equity Raising for Pradera and sat on its executive board.

Commercial property markets outlook

The sovereign debt crisis in the eurozone continues to weigh heavily on the capital markets across Europe and in the UK. In view of the collective failure of eurozone governments to act decisively, we expect this situation to continue for some time to come.

Poland:

The Polish Zloty (PLN) has weakened against the Euro since the middle of last year, from a level of circa PLN 4/ €1 to PLN 4.30/ €1. This increases pressure on tenants who typically pay their rent in Euros. We have not yet experienced any such stress in our portfolios and, as shareholders may recall, our portfolios stood the test of a weakening PLN in 2009 very well, when it reached a low of PLN 4.95/ €1. At its current level we do not therefore think the PLN is likely to adversely impact property values.

Poland's GDP growth in 2011 was 4.3%. This rate of growth is expected to slow this year to 3% (source: IMF) but such a rate would still leave Poland at close to, if not at, the top of all EU member countries. Interest rates are likely to remain low for some time. This factor, coupled with Poland's faster rate of economic growth and the higher yields available in its investment property market, should result in Polish commercial property continuing to deliver attractive rates of return.

United Kingdom:

The outlook for the UK economy is poor.

The UK's GDP contracted by 0.3% in both the last quarter of 2011 and the first quarter of 2012, putting the country back into recession. Property values declined by 0.7% in the first quarter of 2012 (according to IPD) and we expect the tone of the market to remain weak. We do not, however, expect a collapse in prices.

The UK economy re-entering recession is of little consequence to our UK investment strategy which has been predicated on a protracted recessionary environment. We have been typically acquiring well located regional retail warehouses with a strong emphasis on discount retailers, good covenants and long leases. We particularly favour properties which have been recently let and where rents have been set at a low level. This emphasis will continue.

Contrary to most investor interest, we are wary of investing in central London because generally values are too high and yields too low to make it attractive. We can, relatively safely, earn yields of one and a half to twice those available on London property by investing in the regions, where property values have not recovered in the way that they have in London.

Current Trading and Prospects

It has now been over four years since the credit crunch began. Throughout this period First Property Group's client funds have delivered positive overall returns to their investors and the Company has remained profitable at all times, having increased its dividend payment every year since 2008. Our funds have, once again, been ranked as the best performing versus the IPD Central & Eastern European universe, now for the six year period to December 2011. We are proud of this track record, which results from judicious investing and the hard work of our excellent team.

The investment landscape remains difficult with eurozone problems overhanging all capital markets. However, within Europe, Poland still stands out as one of, if not the best investment markets. Our intention remains to concentrate on Poland and the UK, where we see good value and we have considerable expertise in delivering attractive returns to investors.

Ben Habib

Chief Executive

11 June 2012

CONSOLIDATED INCOME STATEMENT

for the year ended 31 March 2012

CONSOLIDATED SEPARATE STATEMENT OF

OTHER COMPREHENSIVE INCOME

for the year ended 31 March 2012

CONSOLIDATED BALANCE SHEETS

As at 31 March 2012

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 March 2012

CONSOLIDATED CASH FLOW STATEMENTS

for the year ended 31 March 2012

1. Basis of preparation

·; These preliminary financial statements have not been audited and are derived from the statutory accounts within the meaning of section 434 of the Companies Act 2006. They have been prepared in accordance with the Group's accounting policies that will be applied in the Group's annual financial statements for the year ended 31 March 2012.These are consistent with the policies applied for the year ended 31 March 2011. These accounting policies are drawn up in accordance with International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board and as adopted by the European Union (EU). Whilst the financial information included in this preliminary statement has been prepared in accordance with IFRS, this announcement does not itself contain sufficient information to fully comply with IFRS. The comparative figures for the financial year ended 31 March 2011 are not the statutory accounts for the financial year but are derived from those accounts prepared under IFRS which have been reported on by the Group's auditors and delivered to the Registrar of Companies. The report of the auditors was unqualified, did not include references to any matter to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

·; These preliminary financial statements were approved by the Board of Directors on 8 June 2012.

2. Revenue

Revenue from continuing operations consist of revenue arising in the United Kingdom 10% (2011: 9%) and Central and Eastern Europe 90% (2011: 91%), and all relates solely to the Group's principal activities. All revenue from discontinued activities relates to the UK, both in 2012 and 2011.

3. Segment reporting 2012

Segment reporting 2011

A new segment arose last year with the launch of the new pan European fund, Fprop Opportunities plc ("FOP") in October 2010. The Group owns 84.1% of this fund through seed capital with the intention of raising further third party investment from co-investees, thereby diluting its stake to associate status. Management has concluded that it does not suit the criteria for existing segments and that for purposes of transparency and clarity it should be reported as a separate segment.

Interest income from the cash that is 100% controlled, is not allocated to a separate segment because all cash is managed centrally and is netted off against unallocated central overheads. Head office costs and overheads that are common to all segments are shown separately under unallocated central overheads. Assets, liabilities and costs which relate to Group central activities have not been allocated to business segments.

The geographic location of non-current assets is UK £1,442,000 (2011: £1,140,000) and Poland £21,008,000 (2011: £22,874,000).

4. Tax expense

The tax charge includes actual current and deferred tax for continuing operations.

Deferred tax assets have been recognised on foreign currency property loans as a result of the weakening in the Polish zloty, the currency in which all Polish taxes are paid.

There was insufficient taxable income earned in the UK with which to relieve operating costs incurred in the UK. This should have given rise to a deferred tax asset. However, the Group was not able to recognise this deferred tax asset in these accounts because there is not a reasonable prospect of earning sufficient taxable income in the UK in the near future.

As a result of the above the effective tax rate payable by the Group decreased to 13% (2011: 21%).

5. Earnings per share

The following numbers of shares have been used to calculate both the basic and diluted earnings per share:

The following earnings have been used to calculate both the basic and diluted earnings per share

6. Investment properties

Investment properties indirectly owned by the Group in FOP are stated at cost and both have been valued by third party professional commercial property values at the Group's financial year and at a fair value of €26.6 million (2011: €26.35 million). The properties have not been depreciated as in the directors opinion the properties estimated residual value at the end of the period of ownership will be higher.

7. Investment in associates and other financial assets

The Group has the following investments:

The Group's investment in associated companies is held at cost plus its share of post acquisitions profits assuming the adoption of the cost model for accounting for investment properties under IAS40 and comprises the following:

If the Group had adopted the alternative fair value model for accounting for investment properties, the carrying value of the investment in associates would have increased by £597,000 (2011: £728,000) to £1,404,000 (2011: £1,413,000).

The addition is in respect of the Group's 0.9% interest in UK Pension Property Portfolio L.P., a fund raised in February 2010. The Group holds two investments, one listed, the other unlisted. Both are held at fair value. All of the assets have been classified as available for sale. In the directors' view the fair value has been estimated to be not materially different from cost. Fair value for the unlisted investment has been arrived at by applying the Group's percentage holding in this investment of the fair value of the net assets of the company.

8. Inventories - land and buildings

The fair value of these properties, both located in Warsaw, Poland at 31 March 2012 was £14.7m (2011: £14.3m) using closing foreign exchange rates and independent third party valuation.

9. Trade and other receivables

10. Trade and other payables

11. Financial liabilities

Loans repayable by FOP to third party shareholders are repayable in August 2020.

Bank loans and finance leases totalling £23,722,000 (2011: £22,179,000) included within financial liabilities are secured against investment properties owned by Fprop Opportunities plc ("FOP") and properties owned by the Group shown under inventories.

There are two foreign currency bank loans. The first of these two is for a sum of £6,639,000 (2011: £6,617,000), is included under non-current financial liabilities and is secured against the Blue Tower office block owned by the Group. It is non-recourse and is denominated in US Dollars. Capital repayments commence in November 2013 at the rate of US$17,675 per month until its maturity in November 2015. Interest payments are charged at an annualised rate of one month US$ Libor plus a margin of 2.15%.

The second bank loan is for a sum of £2,879,000 (2011: nil) is partly included under current liabilities and partly under non-current liabilities and is secured against the Krasnystaw shopping centre owned by FOP. It is non-recourse and is denominated in Euros. The loan was drawn by FOP in June 2011. Capital repayments are made on a quarterly basis at the rate of approximately €30,000 per quarter until its maturity in 2014. Interest payments are fixed for 30% of the loan at an annualised rate of 2.4% plus a margin of 2.8% and for the remaining 70%, charged at an annualised rate of three month Euribor plus a margin of 2.8%.

The finance lease outstanding is for £14,204,000 (2011: £15,562,000) is included partly under current liabilities and partly under non-current liabilities and is secured against the Lodz hypermarket owned by FOP. It is non-recourse and is denominated in Euros. Capital repayments are made on a monthly basis at a rate of approximately €45,000 per month until its maturity in 2017. The monthly interest rate payable is fixed at an annualised rate of 3.58% until October 2013 when it reverts to a floating rate based on an annualised rate of three month Euribor plus an all in margin of 2.68%. Interest rate caps are in place with effect from October 2013 until maturity.

The preliminary results are being circulated to all shareholders and can be downloaded from the company's web site (www.fprop.com). Further copies can be obtained from the registered office at 35 Old Queen Street, London, SW1H 9JA.