Sirius Real Estate Limited Interim Report 2011

Sirius Real Estate Limited Interim Report 2011
About Sirius Real Estate
Sirius Real Estate Limited develops mixeduse commercial sites in Germany into innovative Business Parks, offering flexible workspace and services to suit small and medium sized enterprises.
Key portfolio statistics
Total number of properties: Total portfolio split: Total lettable space (sqm):
Storage
38
Office
13% 23%
Production
Other
36%
1.15m
28%
Contents
IFC 1 2 4 6 9 10 11 12 12 13 IBC About Sirius Real Estate Highlights Our progress Board of Directors Chairmans statement Independent review report Unaudited consolidated statement of comprehensive income Unaudited consolidated statement of financial position Unaudited consolidated statement of changes in equity Unaudited consolidated statement of cash flows Notes forming part of the financial statements Shareholder information and corporate details
business review
financial statements
Highlights
Results highlights
Gross annualised rent roll
44.4m
2011
Recurring PBT
1.2m 0.9m*
2011 2010
Average rent per sqm

4.18
30 Sept 11
41.5m
2010
4.13
31 Mar 11
44.4m
Property portfolio
492.0m
30 Sept 11
0.9m
Adjusted NAV per share
66.63c
30 Sept 11
4.18
LTV across the portfolio
61.0%
30 Sept 11
505.5m
31 Mar 11
72.85c
31 Mar 11
60.2%
31 Mar 11
492.0m
Property portfolio revalued by DTZ.
66.63c
61.0%
Operational highlights
Average monthly sales enquiries
957
2011
Move-outs
New lettings
871
2010
37,275 sqm
Compared to September 2010: 73,966 sqm
65,153 sqm
At 5.18 per sqm representing an improved return on investment
957
10% increase in average monthly sales enquiries.
Land disposals
Cost savings
Occupancy rate
77%
2011
73%
2010
2.5m
With capacity to make further disposals in a profitable and timely manner.
1.0m
On track to deliver 1m of cost savings.
Management structure
Smartspace
Good demand for highly flexible Smartspace solutions.
77%
www.sirius-real-estate.com
Good progress on agreeing new management structure.
* Excluding property revaluation, change in fair value derivative instruments and costs incurred for advice relating to the asset management agreement.
Our progress
Increasing occupancy, revenue, efficiency.

The Company is trading broadly in line with expectations and remains focused on increasing occupancy, revenues and efficiency across the portfolio.
Solid lettings performance

We are starting to see some significantly improved returns from creating the unique Sirius product.
E read more in the Chairmans statement on page 6
Focus on retention
The team has been focusing on tenant retention with an encouraging reflection of this emphasis shown in the results.
Continued cost reduction

The Companys programme of cost reduction and cost recovery has continued into the current financial year.
for more information, news and investor relations, visit us online at www.sirius-real-estate.com
business review
5.18
2011
4.16
2010
+1.02
Average rate per sqm achieved on new lettings
Despite the challenging economic background we are seeing a much improved rate from new lettings.
27,878
2011
+14,766
Net lettings (sqm)
13,112
2010 The increase in net lettings represents a solid improvement and contributes to the increased occupancy rate.
73,966
2010
36,691
Fewer move-outs (sqm)
Munich Neuaubing
In July, the Company extended a 34,200 sqm lease with an existing multinational tenant at our Munich Neuaubing site for ten years, which over the lease will generate 44.7m of income (inclusive of service charge).
37,275
2011
Cost benefits have come despite the well documented increases in electricity and heating costs throughout Germany this year. The main benefits have come from optimising and controlling our facility management and utilities suppliers combined with the use of significantly improved cost allocation tools.
The improved optimisation and transparency to tenants makes the recovery of service charge costs an easier process and we expect this will continue into the future. Overall, we expect to make further savings of approximately 1m in the current financial year.
Board of Directors
Introducing the Board
Chairmans introduction
I would like to welcome the new Directors to the Board. The Company has maintained the correct Board composition to retain its current tax, residency and regulatory structure and also has greater representation from key shareholders on the Board. Collectively their wealth of experience is proving extremely useful in this period of transition for Sirius.
Robert Sinclair Chairman
1 Apr 1 2007
18 Feb 2010
17 May 2011
15 Jul 2011
26 Jul 2011
12 Aug 2011
15 Nov 2011
Robert Sinclair Christopher Fish Richard Kingston Walter Hens Wessel Hamman Ian Clarke Rolf Elgeti Shelagh Mason Eitan Milgram Charles Parkinson Amanda Spring Justin Schaefer
Robert Sinclair
Non-executive Chairman Robert Sinclair is managing director of the Guernsey-based Artemis Group and a director of a number of investment fund management companies and investment funds associated with clients of that group. He is chairman of Schroder Oriental Income Fund Limited and is a director of ING UK Real Estate Income Trust Limited. Robert is a Fellow of the Institute of Chartered Accountants in England and Wales.
Length of appointment
Change of responsibility
business review
Walter Hens
Non-executive Director Walter Hens has over 38 years experience in the European real estate sector, including 20 years with SEGRO plc where he most recently held the positions of European managing director and group executive director. Walter was responsible for Segros European operations from 2003 to 2007, during which time the company built up a major pan-European portfolio, including a number of major acquisitions in Germany. Walter is a Fellow of the Royal Institute of Chartered Surveyors.
Wessel Hamman
Non-executive Director Wessel Hamman was appointed a Director of the Company on 17 May 2011. Wessel is a partner and chief executive of Clearance Capital LLP, a specialist European real estate securities investor and advisor to the Karoo Investment Fund S.C.A. SICAV-SIF. Wessel is a Chartered Accountant by training and spent eleven years in the investment banking industry before co-founding Clearance Capital in 2008.
Ian Clarke
Non-executive Director Ian Clarke has over 20 years experience in the finance industry in Guernsey including wealth management, the administration of international trusts, corporate entities and regulated funds. Most recently the managing director of a fund administrator in Guernsey, he has sat on the boards of several funds, some of which have been listed on recognised Stock Exchanges.
Rolf Elgeti
Non-executive Director Rolf Elgeti is currently chief executive officer of TAG Immobilien AG, a German listed real estate group with ca 2bn of assets under management. He is also non executive chairman of Treveria plc, a German retail focused real estate company and member of the supervisory board of Estavis AG, a German listed real estate company specialised in residential property investments in Germany. He graduated with an MBA from the University of Mannheim, Germany, and received an MBA from ESSEC, Paris, in 1999.
Shelagh Mason
Non-executive Director Shelagh Mason is a resident of Guernsey. She is an English property solicitor with over 25 years experience in commercial property. She is currently a partner in Spicer and Partners Guernsey LLP specialising in English commercial property. She holds numerous positions on boards as non-executive director, as well as being a past Chairman of the Guernsey Branch of the Institute of Directors and a member of the Chamber of Commerce and the Guernsey International Legal Association.
Charles Parkinson
Non-executive Director Charles Parkinson is the Minister of the Treasury & Resources Department for the States of Guernsey. After graduating from Cambridge he qualified as a Chartered Accountant and was then called to the Bar in London. He was an executive in the Corporate Finance division of Morgan Grenfell (now Deutsche Bank) before returning to Guernsey. He holds several non-executive directorships in investment and property companies, as well as chairing AIM-listed Eastern European Property Fund.
Amanda Spring
Non-executive Director Amanda Spring is based in Budapest, Hungary and has a wealth of experience in the multi-let sector having previously been director of Central Europe at TeeslandiOG and prior to that having responsibility for the asset management of their mainland Europe funds. Prior to this she was managing director of DTZs Moscow office.
Justin Schaefer
Non-executive Director Justin Schaefer is an investment analyst at Weiss Asset Management, where he has worked since 2008. Prior to Weiss, Justin graduated from the Massachusetts Institute of Technology in Cambridge, MA.
Chairmans statement
Summary
E The Companys focus is on increasing rental income and reducing the cost base of the business. E The move-outs in the period of 37,275 sqm were significantly lower than the 73,966 sqm experienced for the same period last year. E The Board is in process of determining the optimum management structure for the Company going forward. E The Company has delivered a satisfactory trading performance for the six months of this financial year and is on track to meet management expectations for the full year.
Introduction
I am pleased to announce the Groups half-yearly results for the six months ended 30 September 2011. In a difficult trading environment, the Company has made good progress. Our rent roll is continuing to increase, reflecting demand from the SME market for our unique mix of commercial, office and light engineering space. At the same time, the Company has remained focused on renewing existing leases with key tenants, which is reflected in our improved retention rates. The programme of cost reduction and better cost recovery from service charges continues and the Company expects to benefit by a further 1m of cost reductions in this financial year. This has been achieved despite the substantial increases in electricity and heating costs experienced throughout Germany. Good progress has also been made on the future management structure and the Company will in due course make an announcement on long-term plans for the management team.
Results
For the period under review, gross income was 22.1m (2010: 22.0m). The improvement in total income is despite the loss of 345k of surrender premiums which were received in the same period last year. The property portfolio, consisting of 38 properties, had an annualised gross rent roll of 44.4m (30 September 2010: 41.5m) over a total lettable area of 1.15m sqm. Recurring profit before tax for the period was 0.9m (2010: 1.2m), excluding property revaluation, change in fair value derivative instruments and the one-off impact of the 0.4m costs incurred for advice relating to the asset management contract. Good progress has been made on reducing the irrecoverable service charge costs through a combination of optimising contracts and improving allocation,
6 Sirius Real Estate Limited Interim Report 2011 www.sirius-real-estate.com
business review
The Company saw a 10% increase in the total number of enquiries for the period compared to twelve months ago.
therefore bad debts relating to unpaid service charges are expected to be much lower than previous years although there will be an impact from the increased cost of utilities. Capital expenditure during the six months to 30 September 2011 was 4.8m, which was mainly related to creating new space for letting and dealing with the associated regulatory requirements. We expect capex investment in the second half to be much lower. The adjusted EPS, which excludes: property revaluation; related deferred tax and non-controlling interest; and change in fair value on derivative financial instruments, was 0.27c as at 30 September 2011 (2010: (0.11c)).
Net Asset Value (NAV)

DTZ Zadelhoff Tie Leung GmbH have valued the portfolio at 492.0m (31 March 2011: 505.5m). The adjusted NAV per share, which excludes deferred tax and change in fair value adjustment on financial derivative instruments, was 66.63c as at 30 September 2011 (31 March 2011: 72.85c). The reduction in valuation is not reflective of the Companys performance as both income and cost recoveries are moving in a positive direction. Our valuers have indicated that the reduction is due to their perception of market conditions.
(31 March 2011: 304.3m), representing an LTV of 61.0% (31 March 2011: 60.2%). Both banking facilities are operating within covenants and the facility with the Royal Bank of Scotland matures in October 2012. As at 30 September 2011, the Company had cash reserves of 13m, which is down from 24m at the same point last year. The reduction in cash balances stems primarily from debt amortisation and required capital expenditure. The Board is in the process of finalising a plan to ensure that the Company has sufficient operating cash flow to service its borrowings and cover future capital expenditure requirements. This is likely to include further asset management activities to optimise the portfolio and some strategic asset disposals of carefully selected assets enabling a consolidation of the business and the creation of a new financial and operational base upon which the Company would seek to grow.
Asset management
The Sirius brand is now well established amongst the German business park sector and is widely known amongst the German SME market for providing truly flexible workspace throughout the country. As yet, the political and economic turmoil across Europe has yet to result in a slowdown in demand for our product and the manager has continued to see a high level of enquiries for new space in the Companys portfolio. Sales enquiries are exceeding 1,000 per month in the majority of months, and the Company saw a 10% increase in the total number of enquiries for the period compared to twelve months ago. The Company signed 65,153 sqm of new leases compared with move-outs of 37,275 sqm. This compares to 87,078 sqm of new leases and 73,966 sqm of move-outs in the same period last year. On a sqm basis, net lettings of 27,878 sqm versus 13,112 sqm represents a solid improvement. However, further success has been achieved in the rental rate in the period of 5.18 per sqm compared to 4.16 per sqm last year. Despite the challenging
Sirius Real Estate Limited Interim Report 2011 7
Dividend
The Companys focus is on increasing rental income and reducing the cost base of the business so that the Company can return to paying dividends in due course. We will continue to review this policy and expect to reinstate a progressive dividend once it is prudent to do so.
Finance
As at 30 September 2011 the Companys borrowings, excluding capitalised loan costs, totalled 300.0m
Chairmans statement continued
Asset management continued

economic background the Company is starting to see some significantly improved returns from creating the unique Sirius product. As a result, occupancy was 77% as at 30 September 2011, compared with 73% as at 30 September 2010 and 76% as at 31 March 2011. It is worth noting that the new lettings signed in the period will underpin the next period. This is because there has been a longer than expected lag between signing and moving in. These will come through in the second half of the financial year but will be offset, somewhat, by the move-out of Siemens (13,161 sqm) which took place post the half year in October 2011. The improved lettings rate is reflected in the average rental value of the portfolio improving to 4.18 psm (31 March 2011: 4.13 psm). A key focus for the Asset Management team has been on tenant retention and in particular retaining the Companys largest tenants. In July, the Company extended a 34,200 sqm lease with an existing multinational tenant at our Munich Neuaubing site for ten years at an average rate of 4.46 psm, which over the lease will generate 44.7m of income (inclusive of service charge). Additionally, the move-outs in the period of 37,275 sqm were significantly lower than the 73,966 sqm experienced for the same period last year. This is an encouraging reflection of the emphasis the team has placed on retention. The programme of cost reduction and cost recovery has continued into the current financial year. This benefit has come despite the well documented increases in electricity and heating costs throughout Germany this year. The main benefits have come from optimising and controlling our facility management and utilities suppliers combined with the use of significantly improved cost allocation tools. The improved optimisation and transparency to tenants makes the recovery of service charge costs an easier process and we expect this will continue into the future to have a positive effect on the bottom line. Overall, we anticipate making further savings of approximately 1m in the current financial year. In September, the Company sold a parcel of land at the Bremen Brinkmann site and sold part of one of the sites in Bonn. These two disposals will generate close to 2.5m of proceeds and around 600,000 of profit, which will be reported in the second half of this financial year. These properties are currently generating 115,000 of annual income. Approximately 2m of the proceeds will be used to repay the loans outstanding at these sites.
Asset management contract

As previously announced, the Board is in the process of determining the optimum management structure for the Company going forward. The Board has been in discussions with various parties including PCSREAM, the current Asset Manager. As a result of these discussions, the Board will in due course be making an announcement confirming the long-term management structure of the business.
Board changes
On 15 July 2011, Dick Kingston stood down from the Board. His significant real estate experience was invaluable to the Company and on behalf of the Board I would like to thank him for his contributions. My appointment as Chairman followed once Dick stepped down. Subsequently, on 26 July 2011, the Company was pleased to announce the appointments of Ian Clarke, Rolf Elgeti, Shelagh Mason, Eitan Milgram, Charles Parkinson and Amanda Spring as Non-executive Directors. On 15 November 2011, Justin Schaefer was also appointed as Non-executive Director, replacing Eitan Milgram. With the new Directors to the Board, the Company has retained a good balance of independent Directors plus greater representation from key shareholders. Their wealth of experience is proving extremely useful in this period of transition for Sirius.
Outlook
The Company has delivered a satisfactory trading performance for the first six months of this financial year and is on track to meet management expectations for the full year. Given the wider market environment, this reflects well on the business and its ability to adapt to the needs of tenants. The Board is focused on finalising the future management structure together with a new strategic plan to create a long-term financial and operational platform on which to grow the business in the current market environment. The Board is confident that Sirius can, with time, deliver significant returns to shareholders.
business review
Independent review report
to the members of Sirius Real Estate Limited

Introduction
We have been engaged by the Company to review the unaudited set of financial statements in the Interim Report for the six months ended 30 September 2011, which comprises the unaudited consolidated statement of comprehensive income, unaudited consolidated statement of financial position, unaudited consolidated statement of changes in equity, unaudited consolidated statement of cash flows and the related explanatory notes. We have read the other information contained in the Interim Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the set of financial statements. This report is made solely to the Company in accordance with the terms of our engagement. Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the unaudited set of financial statements in the Interim Report for the six months ended 30 September 2011 is not prepared, in all material respects, in accordance with the recognition and measurement requirements of IFRS as adopted by the EU and the AIM Rules.
Directors responsibilities
The Interim Report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Interim Report in accordance with the AIM Rules. As disclosed in note 2(a), the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU. The unaudited set of financial statements included in this interim report has been prepared in accordance with the recognition and measurement requirements of IFRSs as adopted by the EU.
KPMG Channel Islands Limited Chartered Accountants Guernsey 2 December 2011
Our responsibility
Our responsibility is to express to the Company a conclusion on the unaudited set of financial statements in the Interim Report based on our review.
Unaudited consolidated statement of comprehensive income

for the six months ended 30 September 2011
Notes
(Unaudited) six months ended 30 September 2011 000
(Audited) twelve months ended 31 March 2011 000
Rental income Direct costs Net rental income Deficit on revaluation of investment properties Administrative expenses Other operating expenses Operating (loss)/profit Finance income Finance expense Change in fair value of derivative financial instruments (Loss)/profit before tax Taxation (Loss)/profit for the period (Loss)/profit attributable to: Owners of the Company Non-controlling interest Loss for the period Earnings per share Basic and diluted, for comprehensive income for the period attributable to ordinary equity holders of the Parent Company
4 5 10 5 5 6 6
22,078 (9,858) 12,220 (19,387) (1,729) (1,099) (9,995) 82 (8,917) (4,201) (23,031) (177) (23,208) (22,929) (279) (23,208)
22,012 (10,274) 11,738 (1,710) (1,985) (1,026) 7,017 64 (8,981) (1,500) (3,400) (234) (3,634) (3,908) 274 (3,634)
45,568 (22,922) 22,646 (367) (4,141) (2,175) 15,963 126 (17,832) 5,184 3,441 (711) 2,730 2,519 211 2,730
(7.59)c
(1.29)c
0.83c
The notes on pages 13 to 20 form an integral part of these financial statements.
10
business review
Unaudited consolidated statement of financial position

as at 30 September 2011
Notes
(Unaudited) 30 September 2011 000
(Unaudited) 30 September 2010 000
(Audited) 31 March 2011 000
Noncurrent assets Investment properties Plant and equipment Total noncurrent assets Current assets Trade and other receivables Prepayments Derivative financial instruments Cash and cash equivalents Total current assets Total assets Current liabilities Trade and other payables Interest-bearing loans and borrowings Current tax liabilities Derivative financial instruments Total current liabilities Noncurrent liabilities Interest-bearing loans and borrowings Deferred tax liabilities Total noncurrent liabilities Total liabilities Net assets Equity Issued share capital Other distributable reserve Retained earnings Total equity attributable to the equity holders of the Parent Company Non-controlling interests Total equity
10
491,960 3,349 495,309 6,775 483 25 12,613 19,896 515,205
501,180 4,903 506,083 8,292 479 28,650 37,421 543,504 (15,290) (7,383) (564) (15,963) (39,200) (299,001) (1,687) (300,688) (339,888) 203,616 300,111 (97,577) 202,534 1,082 203,616
505,500 4,679 510,179 7,272 233 165 23,583 31,253 541,432 (17,162) (7,669) (707) (9,444) (34,982) (294,546) (1,924) (296,470) (331,452) 209,980 300,111 (91,150) 208,961 1,019 209,980
14 11
12 13 14
(14,580) (7,842) (67) (13,505) (35,994)
13 7
(290,576) (1,863) (292,439) (328,433) 186,772
15
300,111 (114,079) 186,032 740 186,772
The notes on pages 13 to 20 form an integral part of these financial statements. The financial statements on pages 10 to 20 were approved by the Board of Directors on 2 December 2011 and were signed on its behalf by:
Charles Parkinson Director
11
Unaudited consolidated statement of changes in equity

Issued share capital 000
Other distributable reserve 000
Retained earnings 000
Total equity attributable to the equity holders of the Parent Company 000
Non-controlling interests 000
Total equity 000
As at 31 March 2010 Loss for the period As at 30 September 2010 Profit for the period As at 31 March 2011 Loss for the period As at 30 September 2011
300,111 300,111 300,111 300,111
(93,669) (3,908) (97,577) 6,427 (91,150) (22,929) (114,079)
206,442 (3,908) 202,534 6,427 208,961 (22,929) 186,032
808 274 1,082 (63) 1,019 (279) 740
207,250 (3,634) 203,616 6,364 209,980 (23,208) 186,772
Unaudited consolidated statement of cash flows

Operating activities (Loss)/profit before tax Adjustments for: Deficit on revaluation of investment properties Change in fair value of derivative financial instruments Depreciation Finance income Finance expense Cash flows from operations before changes in working capital Changes in working capital Decrease in trade and other receivables (Decrease)/increase in trade and other payables Taxation paid Cash flows from operating activities Investing activities Development expenditure Purchase of plant and equipment Proceeds on disposal of plant and equipment Interest received Cash flows used in investing activities Financing activities Proceeds from loans Repayment of loans Finance charges paid Cash flows from financing activities Decrease in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period
(23,031) 19,387 4,201 418 (82) 8,917 9,810 248 (2,461) (877) 6,720 (4,829) (276) 82 (5,023) (4,334) (8,333) (12,667) (10,970) 23,583 12,613
(3,400) 1,710 1,500 414 (64) 8,981 9,141 3,401 (848) (33) 11,661 (5,611) (563) 64 (6,110) 1,990 (3,900) (8,392) (10,302) (4,751) 33,401 28,650
3,441 367 (5,184) 881 (126) 17,832 17,211 4,665 3,080 (121) 24,835 (9,303) (901) 56 126 (10,022) 2,490 (9,121) (18,000) (24,631) (9,818) 33,401 23,583

12 Sirius Real Estate Limited Interim Report 2011 www.sirius-real-estate.com
business review
Notes forming part of the financial statements

1. General information
Sirius Real Estate Limited (the Company) is a company incorporated and domiciled in Guernsey whose shares are publicly traded on AIM. The consolidated financial statements of Sirius Real Estate Limited comprise the Company and its subsidiaries (together referred to as the Group). The principal activity of the Group is investment in and development of commercial property to provide flexible workspace in Germany. The consolidated financial statements of the Group as at and for the year ended 31 March 2011 are available upon request from the Companys registered office at PO Box 119, Martello Court, Admiral Park, St. Peter Port, Guernsey GY1 3HB, Channel Islands or at www.sirius-real-estate.com. The Company acts as the investment holding company of the Group.
2. Significant accounting policies

(a) Basis of preparation The consolidated financial statements have been prepared on a historical cost basis, except for investment properties, investment properties under construction and derivative financial instruments which have been measured at fair value. The consolidated financial statements are presented in euros and all values are rounded to the nearest thousand (000) except where otherwise indicated. The consolidated financial statements of the Group for the year ended 31 March 2011 have been prepared in accordance with IFRSs adopted for use in the EU (Adopted IFRSs), and The Companies (Guernsey) Law, 2008. The interim set of financial statements included in this Interim Report has been prepared in accordance with the recognition and measurement requirements of Adopted IFRSs. The interim set of financial statements has been prepared applying the accounting policies and presentation that were applied in the preparation of the Companys published consolidated financial statements for the year ended 31 March 2011. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 March 2011. These financial statements have been prepared on a going concern basis as it is the view of the Directors that this is the most appropriate basis of preparation to adopt having considered the issues identified below: Asset management agreement On 3 May 2011, the Company announced that it was in discussion with the Asset Manager with the objective of agreeing new management arrangements following termination of the existing arrangement as part of a review to ensure shareholders receive the best value and quality of service. The Board has been in discussions with various parties including PCSREAM, the current Asset Manager. Financial The Group incurred a net loss of 23,208,000 during the period ended 30 September 2011 (30 September 2010: 3,634,000). The Directors have prepared cash flow forecasts for a period greater than twelve months from the date of approval of the half-yearly results. These forecasts show that the Group will require additional financing in October 2012. The Board is in the process of finalising a plan to ensure that the Company has sufficient operating cash flow to service its borrowings and cover future capital expenditure requirements. This is likely to include further asset management activities to optimise the portfolio and some strategic asset disposals of carefully selected assets enabling a consolidation of the business and the creation of a new financial and operational base upon which the Company would seek to grow. Based on the reasons outlined above, the Directors believe that it remains appropriate to prepare the financial statements on a going concern basis.
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Notes forming part of the financial statements continued

2. Significant accounting policies continued

(b) Basis of consolidation The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 30 September 2011. The financial statements of the subsidiaries are prepared for the same reporting period as the Parent Company, using consistent accounting policies. All intra-group balances and transactions and any unrealised income and expenses and profits and losses arising from intra-group transactions are eliminated in preparing the consolidated financial statements. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. Non-controlling interests represent the portion of profit or loss and net assets not held by the Group and are presented separately in the consolidated statement of comprehensive income and within equity in the consolidated statement of financial position, separately from the Parent Company shareholders equity. (c) Significant accounting policies The accounting policies applied by the Group in these consolidated financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 March 2011.
3. Operating segments
Segment information is presented in respect of the Groups operating segments. The operating segments are based on the Groups management and internal reporting structure. Segment results and assets include items directly attributable to a segment as well as those that can be allocated to a segment on a reasonable basis. Management considers that there is only one geographical segment which is Germany, and one business segment which is investment in commercial property.
4. Revenue
(Unaudited) six months ended 30 September 2011 000 (Unaudited) six months ended 30 September 2010 000 (Audited) twelve months ended 31 March 2011 000
Rental income from investment properties
22,078
22,012
45,568
5. Operating profit/(loss)
The following items have been charged or credited in arriving at operating profit/(loss): Direct costs
Service charge income Property costs Irrecoverable property costs Property management fee Asset management fee Development fee Direct costs
(15,088) 22,503 7,415 877 1,518 48 9,858
(12,431) 20,432 8,001 739 1,476 58 10,274
(24,995) 43,292 18,297 1,559 2,974 92 22,922
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5. Operating profit/(loss) continued

Administrative expenses
Audit fee Legal and professional fees Other administration costs Non-recurring costs Administrative expenses Other operating expenses
112 936 320 361 1,729

100 1,251 285 349 1,985

252 2,598 909 382 4,141

Directors fees Bank fees Depreciation Marketing and other expenses Other operating expenses
106 54 418 521 1,099
105 63 414 444 1,026
220 174 881 900 2,175
The Group has no full-time employees and the Board of Directors consists of nine Non-executive Directors. The employees working for the Group are all employed by Principle Capital Sirius Real Estate Asset Management Ltd, the Asset Manager or Sirius Facilities GmbH, the German operating company of the Asset Manager.
6. Finance income and expense

Bank interest income Finance income Bank interest expense Amortisation of capitalised finance costs Finance expense Net finance expense
82 82 (8,380) (537) (8,917) (8,835)
64 64 (8,447) (534) (8,981) (8,917)
126 126 (16,760) (1,072) (17,832) (17,706)
7. Taxation
Consolidated statement of comprehensive income
Current income tax Current income tax charge Adjustments in respect of prior period Deferred tax Relating to origination and reversal of temporary differences Income tax (credit)/charge reported in the statement of comprehensive income
(178) (60)* (238) 61 (177)
292 (116) 176 58 234
(583) 167 (416) (295) (711)

15

7. Taxation continued
Deferred income tax liability
Opening balance Revaluation of investment properties to fair value Balance as at period end
1,924 (61) 1,863
1,629 58 1,687
1,629 295 1,924
* This relates to refunds of prior year tax which have not been included in the March 2011 accrual.
Management does not recognise deferred tax assets in respect of revaluation losses as they may not be used to offset taxable profits elsewhere in the Group.
8. Earnings per share

The calculation of the basic, diluted and adjusted earnings per share is based on the following data:
Earnings (Loss)/profit for the period attributable to the equity holders of the parent Basic and diluted earnings Add back revaluation deficits (net of related tax) Add back change in fair value of derivative financial instruments Add back non-recurring costs Adjusted earnings Number of shares Weighted average number of ordinary shares for the purpose of basic and diluted earnings per share Weighted average number of ordinary shares for the purpose of adjusted earnings per share Basic and diluted earnings per share Adjusted earnings per share
(22,929) (22,929) 19,196 4,201 361 829 302,223,176 302,223,176 (7.59)c 0.27c
(3,908) (3,908) 1,721 1,500 349 (338) 302,223,176 302,223,176 (1.29)c (0.11)c
2,519 2,519 438 (5,184) 382 (1,845) 302,223,176 302,223,176 0.83c (0.61)c
The number of shares has been adjusted for the 25,576,824 shares held by the Company as treasury shares. The Directors have chosen to disclose adjusted earnings per share in order to provide a better indication of the Groups underlying business performance; accordingly it excludes the effect of non-recurring costs, deferred tax and the revaluation deficits on the investment properties and derivative instruments. As there are no share options in issue, the diluted earnings per share is identical to the basic earnings per share.
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business review
9. Net assets per share

(Unaudited) 30 September 2011 000 (Unaudited) 30 September 2010 000 (Audited) 31 March 2011 000
Net assets Net assets for the purpose of assets per share (assets attributable to the equity holders of the parent) Deferred tax arising on revaluation of properties Derivative financial instruments Adjusted net assets attributable to equity holders of the parent Number of shares Number of ordinary shares for the purpose of net assets per share Net assets per share Adjusted net assets per share
186,032 1,863 13,480 201,375 302,223,176 61.55c 66.63c
202,534 1,685 15,963 220,182 302,223,176 67.01c 72.85c
208,961 1,921 9,279 220,161 302,223,176 69.14c 72.85c
The number of shares has been adjusted for the 25,576,824 shares held by the Company as treasury shares.
10. Investment properties

Opening balance Additions Revaluation of investment properties to fair value Balance as at period end
505,500 5,847 (19,387) 491,960
500,010 2,880 (1,710) 501,180
500,010 5,857 (367) 505,500
The fair value of the Groups investment properties at 30 September 2011 has been arrived at on the basis of a valuation carried out at that date by DTZ Zadelhoff Tie Leung GmbH, an independent valuer. The value of each of the properties has been assessed in accordance with the RICS Valuation Standards on the basis of market value. Market value was primarily derived using a ten-year discounted cash flow model supported by comparable evidence. The discounted cash flow calculation is a valuation of rental income considering non-recoverable costs and applying a discount rate for the current income risk over a ten-year period. After ten years a determining residual value (exit scenario) is calculated. A cap rate is applied to the more uncertain future income, discounted to a present value. On 14 September 2011 an agreement was made to dispose of some land at the Brinkmann site for 1,073,670. The sale is conditional on the purchaser acquiring an adjacent piece of land from the local authority and this is expected to take place at the latest by 28 March 2012. On 29 September 2011 an agreement was made to dispose of two buildings at the Knigswinter site for 1,450,000. Due to the process that needs to be followed, legal title on the deal is expected to transfer on 2 January 2012.
11. Cash and cash equivalents

Cash at banks and in hand Balance as at period end The fair value of cash is 12,612,510 (31 March 2011: 23,583,498).
12,613 12,613
28,650 28,650
23,583 23,583
As at 30 September 2011 5,281,934 (31 March 2011: 6,717,701) of cash is held in blocked accounts. Of this 142,077 (31 March 2011: 1,370,898) is under control of lenders who release this to the Group upon request to be used for capital expenditure on properties. 1,958,257 (31 March 2011: 1,941,435) relates to deposits received from tenants and 15,585 (31 March 2011: 15,546) is cash held on escrow as requested by a supplier and an amount of 3,166,015 (31 March 2011: 3,389,822) relates to amounts reserved for future bank loan interest and amortisation payments.
17

12. Trade and other payables

Trade payables Accrued expenses Accrued interest Other payables Related party payables Balance as at period end
3,785 5,267 1,154 3,976 398 14,580
4,559 3,571 2,416 3,411 1,333 15,290
5,665 3,991 1,107 6,283 116 17,162
13. Interest-bearing loans and borrowings

Effective interest rate % Maturity (Unaudited) 30 September 2011 000 (Unaudited) 30 September 2010 000 (Audited) 31 March 2011 000
Current ABN Amro Loan Berlin-Hannoversche Hypothekenbank AG fixed rate facility Berlin-Hannoversche Hypothekenbank AG hedged floating rate facility Berlin-Hannoversche Hypothekenbank AG capped floating rate facility Capitalised finance charges on all loans Noncurrent ABN Amro Loan Berlin-Hannoversche Hypothekenbank AG fixed rate facility Berlin-Hannoversche Hypothekenbank AG hedged floating rate facility Berlin-Hannoversche Hypothekenbank AG capped floating rate facility Capitalised finance charges on all loans Total
5.85 5.28 Hedged floating Capped floating
15 October 2012 30 March 2013 31 March 2013 31 December 2013 31 December 2013
2,186 1,325 4,135 1,323 (1,127) 7,842
2,030 1,271 3,894 1,251 (1,063) 7,383 93,414 49,787 115,136 42,248 (1,584) 299,001 306,384
2,156 1,290 4,012 1,286 (1,075) 7,669 91,217 49,661 113,108 41,605 (1,045) 294,546 302,215
5.85 5.28 Hedged floating Capped floating
15 October 2012 30 March 2013 31 March 2013 31 December 2013 31 December 2013
90,116 48,990 111,001 40,925 (456) 290,576 298,418
The Group has pledged 34 investment properties to secure related interest-bearing debt facilities granted to the Group. The 34 properties had a combined valuation of 453,660,000 as at 30 September 2011 (31 March 2011: 465,310,000).
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business review
13. Interest-bearing loans and borrowings continued

ABN Amro Bank N.V. This facility had 100,951,940 drawn down, of which 8,649,346 has been amortised to date, resulting in a liability of 92,302,594 as at 30 September 2011. The interest is fixed at a weighted average interest rate of 5.85% per annum. The final repayment date is 15 October 2012. This loan is secured over 16 property assets and is subject to various covenants with which the Group has complied. Berlin-Hannoversche Hypothekenbank AG Facilities of 226,500,000 have been granted by Berlin-Hannoversche Hypothekenbank AG. To date 18,801,981 has been amortised, resulting in a liability of 207,698,019 at September 2011. The facility is split into three portfolios: Portfolio I is split with either an interest rate of 1.18 margin over three months EURIBOR fixed by a SWAP at 4.42%, or a fixed rate of 5.46%. The latest drawdown has a fixed rate of 2.81% for the loan facility. Portfolio II has an interest rate of 1.08 margin over three months EURIBOR fixed by a SWAP at 4.95% and Portfolio III is at a floating rate capped at 5.98%. This facility is secured over 18 property assets and is subject to various covenants with which the Group has complied.
14. Financial instruments

Fair values Set out below is a comparison by category of carrying amounts and fair values of all the Groups financial instruments that are carried in the financial statements:
(Unaudited) 30 September 2011 Carrying amount 000 Fair value 000 (Unaudited) 30 September 2010 Carrying amount 000 Fair value 000 (Audited) 31 March 2011 Carrying amount 000 Fair value 000
Financial assets Cash Derivative financial instruments Trade receivables Financial liabilities Trade payables Derivative financial instruments Interest-bearing loans and borrowings: Floating rate borrowings hedged* Floating rate borrowings capped** Fixed rate borrowings
12,613 25 3,661 3,785 13,505 115,136 42,248 142,616
12,613 25 3,661 3,785 13,505 115,136 42,248 145,575
28,650 3,464 4,559 15,963 119,030 43,499 146,502
28,650 3,464 4,559 15,963 119,030 43,499 154,276
23,583 165 5,577 5,665 9,444 117,120 42,891 144,324
23,583 165 5,577 5,665 9,444 117,120 42,891 149,616
* The Group holds interest rate swap contracts designed to manage the interest rate and liquidity risk of expected cash flows of borrowing for the Groups variable rate facility with Berlin-Hannoversche Hypothekenbank AG. The swap contracts mature between March 2013 and June 2018. ** The Group holds interest rate caps designed to manage the interest rate and liquidity risk of expected cash flows of borrowing for the Groups variable rate facility with Berlin-Hannoversche Hypothekenbank AG. The cap contracts mature at December 2013, the same time as the loans.
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15. Issued share capital

Number Share capital
Authorised Ordinary shares of no par value As at 30 September 2011 Issued and fully paid Ordinary shares of no par value Share brought back and held in treasury As at 30 September 2011
Unlimited Unlimited 327,800,000 (25,576,824) 302,223,176
Holders of the ordinary shares are entitled to receive dividends and other distributions and to attend and vote at any general meeting. The Company holds 25,576,824 of its own shares, which continue to be held as treasury. No share buybacks were made in the period.
16. Dividends
In order to sustain investment in the Groups portfolio whilst also ensuring cash resources are preserved, the Board has proposed to not pay a dividend in the period ended 30 September 2011.
17. Capital commitments

As at 30 September 2011 the Group had contracted capital expenditure on existing properties of 1,160,737. These were committed but not yet provided for.
18. Carried interest

Marba Holland B.V. is a joint venture between a subsidiary of Principle Capital Holdings S.A., Frank and Kevin Oppenheim and certain other individuals. Marba Holland B.V. has a right to carried interest. In any year Marba Holland B.V. is not entitled to any carried interest unless the Groups net asset value per ordinary share exceeds the performance hurdle applicable to that financial year. For the period ended September 2011 the performance hurdle applicable is calculated as 10% of the higher of: the average of the net asset values per ordinary share at the end of 31 March 2010 and 31 March 2011; and the net asset value per ordinary share at the end of 31 March 2011. If the hurdle is achieved then Marba Holland B.V. will be entitled to 20% of the amount by which the performance hurdle is exceeded by the Group in respect of that financial period. The carried interest will also be payable on the occurrence of certain other events, such as a takeover or liquidation of the Group. No amount has been provided as at 30 September 2011 as the minimum hurdle rate required has not been achieved.
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Shareholder information and corporate details
Directors Robert Sinclair (Non-executive Chairman) Walter Hens (Non-executive Director) Wessel Hamman (Non-executive Director) Ian Clarke (Non-executive Director) Rolf Elgeti (Non-executive Director) Shelagh Mason (Non-executive Director) Charles Parkinson (Non-executive Director) Amanda Spring (Non-executive Director) Justin Schaefer (Non-executive Director) Registered office PO Box 119 Martello Court Admiral Park St. Peter Port Guernsey GY1 3HB Channel Islands www.siriusrealestate.com Registered number Incorporated in Guernsey under The Companies (Guernsey) Laws, 2008, as amended, under number 46442 Company secretary and administrator Intertrust Fund Services (Guernsey) Limited PO Box 119 Martello Court Admiral Park St. Peter Port Guernsey GY1 3HB Channel Islands
Asset manager Principal Capital Sirius Real Estate Asset Management Limited St Jamess House 23 King Street London SW1Y 6QY Nominated adviser and broker Peel Hunt LLP Moor House 120 London Wall London EC2Y 5ET Property valuers DTZ Zadelhoff Tie Leung GmbH Eschersheimer Landstrasse 6 60322 Frankfurt am Main Germany
Auditors KPMG Channel Islands Limited 20 New Street St. Peter Port Guernsey GY1 4AN Channel Islands Guernsey solicitors Carey Olsen PO Box 98 7 New Street St. Peter Port Guernsey GY1 4BZ Channel Islands UK solicitors Norton Rose LLP 3 More London Riverside London SE1 2AQ
Sirius Real Estate Ltd

PO Box 119 Martello Court Admiral Park St. Peter Port Guernsey GY1 3HB Channel Islands www.siriusrealestate.com

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Average rent per sqm

Good progress on agreeing new management structure.