Annual Financial Report

30 June 2010 AIM: SPFL

Sofia Property Fund Limited ('the Company')

Results for the year ended 31st December 2009

Overview of 2009

·; Value of the Sofia Property Fund portfolio at 31st December 2009 is EUR 27.5 million

·; Current NAV per share of 28 pence

·; Cash balance at 31st December 2009 of EUR 1,053,703

·; Six contracts with BuySell rescinded after breach of contractual duty by BuySell - the Company is permitted to claim the repayment of its EUR 9.5 million deposit together with penalties of a further EUR 9.5 million

·; Discussions in progress with assorted groups including BuySell to resolve the Company's outstanding claims - further updates to be made in future

·; Construction suspended or deferred on majority of projects pending a revival in the market

·; Placing in December raised over EUR 1,000,000 (before expenses) for working capital

·; Disposals: Bistritsa property option was not exercised and option has now lapsed - sale of Veliko Tarnovo in January 2010 raised EUR 450,000 for working capital

 For further enquires -

Sofia Property Fund Limited

Charles Burton

Dominic Morley, Stuart Gledhill - Panmure Gordon

+44 (0) 20 7459 3600

Ed Portman, Leesa Peters - Conduit PR

+44 (0) 207 429 6607/+44 (0) 7733 363 501

Chairman's Report

2009 was a rather difficult year for the residential property market in Bulgaria reflecting a tough economic environment domestically in Bulgaria and abroad.

In September 2009, Desmond Swayne stepped down from the Board, following four years of service. The Board placed on record its appreciation for his contribution to the fund for his service. He was replaced by Duncan Abbot.

The Board is positioning the Fund to take advantage of any recovery in the Bulgarian property market in the next two years. The land assets held by the Fund are in a good location which should benefit from any recovery in property values. An important feature of the Fund is the absence of any debt. We are also reducing costs, including internalising the management of the Fund during 2009. Further cost reduction will continue to be sought during 2010.

Finally, the published valuation NAV is currently 28p (EUR 31 cents), having fallen from 92p (EUR 96 cents) in 2008, in comparison to the accounting NAV of 27p (EUR 30 cents) having fallen from 87p (EUR 91 cents).

Charles Burton

 29 June 2010

Investment Managers' Report

THE BULGARIAN ECONOMY

Management Update

Disposals

Due to a shortage of available cash the Company was unable to exercise the Bistritsa property option which had a strike price of €4.7 million; this option has now lapsed.

Subsequent to the year end a plot of land in Veliko Tarnovo was sold by the Company for €450,000 in January 2010 to provide additional working capital.

As outlined in note 2(m) of the financial statements the Board has identified further two properties for disposal to meet short term working capital requirements.

BuySell

The Company rescinded 6 contracts with BuySell, a Bulgarian property development company, on 17 April 2009 due to BuySell's non performance of their contractual duty to deliver completed properties in Sofia to the Company by the due date. As a result of BuySell's non-performance the Company is entitled to claim the repayment of its €9.5 million deposit plus penalties of an additional €9.5 million. The Company is currently in talks with various parties, including BuySell with a view to resolving its outstanding claims. The Company believes that there is a reasonable possibility that the talks can be concluded successfully. However at this stage the Group continues to value the Buysell inventory as nil. This would clearly be a positive development for the Company's shareholders. We hope to be able to make further announcements of progress in the near future.

Westhill

One of the Company's Bulgarian subsidiaries is in dispute with Westhill BG 8 AD, a Bulgarian property development company. The latter submitted an insolvency claim against the Company's subsidiary which, in the Company's opinion, is groundless. The Fund's Bulgarian legal advisers have submitted a written response to the relevant Bulgarian court stating the lack of legal grounds to Westhill's claim and requesting its dismissal. The Company is confident that this matter will be concluded successfully. Further announcements will be made as appropriate.

THE BULGARIAN ECONOMY

GDP fell by 4% in the year to Q1 2010 and for 2010 as a whole the economy is now forecast to decline by 1%. Household consumption was especially weak, with unemployment topping 10%, consumer confidence remaining depressed and the threat of further public sector pay and job cuts. In 2010, consumer spending is likely to contract by just over 3%.

Business confidence, industrial output and exports are starting to revive, albeit from depressed levels, providing the basis for an exit from recession later this year. GDP growth of 3¾% is still projected for 2011. However, there is clearly a risk that fiscal austerity - both at home and in neighbouring countries - might delay the recovery.

Despite cuts in infrastructure spending and demands that ministries reduce some public spending by 20%, the fiscal deficit is now expected to be 4¾% of GDP this year as revenues weaken. Reserves are to be tapped to finance the deficit, but increased domestic borrowing has not been ruled out. Finally, a VAT rate rise may still be required if further fiscal slippage threatens.

Low debt levels provide some protection but, given recent FDI outflows, finance minister Djankov still wishes to reinforce the currency board with an ERM-II application in 2011.

BULGARIAN PROPERTY MARKET UPDATE

Overview:

Sofia

• The average price of sold flats in Sofia is 75 500 Euro during 2009 which reflects 953 Eur/m2. There was a 40% decrease in the number of flats sold in 2009 compared to 2008.

• Prices on average in Sofia are around 925 Eur/m2 but better quality properties in more desirable locations are still able to secure over 1,200 Eur/m2.

• Recovery in the residential market is not expected to return in Sofia until first half of 2011 and only a more sustained recovery by Q4 of 2011 - the main driver is expected to be the return of mortgage financing to the market.

Residential real estate prices in Sofia have fallen by up to 32% since the peak in 2008 but these discounts tend to be in poorly located and poorly constructed sites. Prices for good quality apartments in good locations such as Vitosha, Dragalevski or Krustova Vada have held up well, with price falls of between 15 - 17%.

During the second half of 2009, residential prices declined by a further 7% on average. Obtaining mortgage financing continued to be difficult; this coupled with the newer and stricter application requirements caused the market to stagnate. The year-on-year decrease for Bulgaria as a whole was close to 20% on a country average. Sofia overall fared slightly better with a decline of 17% but with significant differences between neighbourhoods. Property prices in the Doctor's Garden remained above 2007-levels.

Supply

During the second half of 2009 the overall supply of new residential units was very modest with only those projects part way through construction being finished and delivered. Practically no new projects were started in Q4 of 2009. According to data published by the National Statistical Institute, the delivery rate was reduced to almost half of what was delivered to the market in 2008.

The supply of high-quality properties on the market is even lower, generally being projects that had previously secured financing but experienced delays due to administrative obstacles. Many residential developments continued to be built out, but at a slower speed. Some projects were put on temporary hold, either due to shortages in financing or low demand.

During second half of 2009 the supply of foreclosed properties increased. It is however not a significant supply factor in the residential market. Whilst statistics are not wholly reliable there are estimated to be around 10,000 unsold units in the Greater Sofia area with a further 3,800 units under construction.

Demand

Demand started picking up marginally in August/September 2009 after an almost complete stand still. This was also driven by lower prices, and slowly decreasing interest rates together with some opportunistic buyers.

Generally buyers are seeking bargains. There are two main trends. Buyers whose budget would normally be only sufficient for a one-bedroom apartment in 2009 are now looking to purchase a larger two-bedroom apartment. Others, who could not afford to purchase a property before are now actively seeking small one-bedroom apartments. The majority of the demand is focused on properties priced below EUR 1,100/sqm for a fully finished product (source King Sturge). Transactions rarely take place before construction is completed, or very close to completion.

Overall the market is demand-driven, and buyers are taking advantage of the market conditions by negotiating optimal terms and prices. The private investment market disappeared during second half of 2009 - demand is now driven almost exclusively by urgent demographic needs.

Pricing

Rental levels in prime locations in Sofia followed the trend of the other sectors of the residential real estate market. On average rental rates fell 25% on a year-on-year basis which is broadly in line with the fall in capital values. In the worst affected areas prices fell on average by EUR 2/sqm/month to an average of just above EUR 5/sqm/month.

The trend was further enforced by the declining number of expatriates coming to Bulgaria due to the economic downturn.

Forecast

Only very few projects are expected to enter the pipeline in the first half of 2010.

Demand is expected to pick up in 2011 driven by genuine, demographic needs, availability of mortgages and reduced prices.

Price levels are expected to bottom out by the summer with demand rising from a very low level beginning in Q3 2010. A more pronounced recovery of the market is expected within 12-18 months.

GROUP PROPERTIES

Land

Build

Cost €

Valuation €

Area M2

Area M2

31/12/2009

31/12/2009

(Note 1)

1

Goverdartsi (Crystal Vale/ Crystal Glade)

36,562

34,604

5,720,733

5,530,000

2

Beli Iskar (Crystal Heights)

19,432

19,432

1,322,579

1,190,000

3

Razlog/Bansko

18,353

26,119

9,210,616

6,050,000

4

Dolna Banya

48,548

57,621

1,662,035

1,430,000

5

Plovdiv

12,141

12,712

3,890,991

2,770,000

6

Banya

117,774

182,130

3,608,801

4,450,000

7

Sofia Project 55

1,298

2,685

1,738,358

1,610,000

Sub Total

254,108

335,303

27,154,113

23,030,000

8

Sofia Kambanite Bistritsa (Note 2)

-

-

9,284,572

3,955,695

9

Veliko (Note 3)

 -

-

2,494,869

488,277

10

Buy Sell Rescinded Contracts (Note 4)

48,218

89,967

9,531,780

 -

302,326

425,270

48,465,334

27,473,972

Note 1: Some build areas are estimated subject to planning approval.

Note 2: The option on Bistritsa was allowed to lapse post year end and the valuation for the year end was arrived at by discounting the option exercise price payable at balance sheet date.

Note 3: Veliko was sold post year end and the valuation for the year end is based on the disposal proceeds.

Note 4: The Group has terminated these contracts with BuySell and accordingly they have been valued at Nil on the balance sheet.

1 GOVEDARCI

CRYSTAL VALE

Crystal Vale has full residential planning approval and is situated inside the Super Borovets project boundary. Super Borovets is a joint venture between the Omani State General Reserve Fund, Equest and the Municipality of Samokov for the development of an enhanced ski resort in the area surrounding Borovets; the project plans call for the investment of up to €500 million in the construction of new hotels, apartments, ski lifts and supporting infrastructure. The Crystal Vale site has a footprint of 16,776 sq m and a build area of 17,589 sq m.

The project has been designed as an exclusive retreat destination and is aimed at the international and domestic leisure market. The 'Clubhouse' building, which will contain 22 apartments and all central facilities for the project (including swimming pool, spa and restaurant), has been partly completed - to the extent that the roof is in place. Construction was halted in September 2009 awaiting a recovery in market conditions.

CRYSTAL GLADE

The Crystal Glade project is located approximately one kilometre away from Crystal Vale and has a site footprint and build area of 19,786 sq m. The site has residential planning permission and is intended to be a complementary leisure development to Crystal Vale. It will remain in the land bank until Crystal Vale has been substantially completed.

2 BELI ISKAR

CRYSTAL HEIGHTS

The Fund has purchased 19,432 sq m, currently designated as agricultural land, inside the Super Borovets project area beside the village of Beli Iskar. Residential planning permission for the land will be sought in due course.

3 RAZLOG

PANORAMA VILLAS

This project is located close to the ski resort of Bansko and Phase 1 has reached the stage of rough construction; but further work has been suspended pending improved market conditions. Until Phase 1 has been completed the remaining 3 phases will remain in the land bank.

NIRVANA

This undeveloped plot close to the centre of Bansko has residential planning permission and will remain in the land bank.

BANYA

The site will remain in the land bank while neighbouring leisure developments, not owned by the Fund, are completed.

4 DOLNA BANYA

The Fund owns 4 plots in and around the town of Dolna Banya; the plots have a total surface area of 48,548 sq m and a build area of 57,621 sq m. One of the plots has a construction permit for residential buildings and a restaurant and the other 3 are zoned for residential development. Dolna Banya is famed for its geothermal hot springs and is 16 km from the Boroverts ski resort. The 4 plots will continue to be held in the land bank.

5 PLOVDIV

The Fund owns 12,151sq m of land in Plovdiv, split between 2 separate locations. Both projects have residential planning permission. The first plot ('Plovdiv Reach') is situated 2 km from the city centre, beside the national rowing centre. The second site ('Roman View') is a disused tobacco factory located in the heart of the city centre. Both plots will be held in the land bank until economic recovery warrants their development or sale.

INVESTING POLICY

• The Fund is restricted to investments in Bulgaria and these investments must be largely (but not exclusively) residential in nature.

• The Fund may invest in early stage residential developments mainly, but not exclusively, in and around Sofia and its adjacent ski resorts.

• The Fund may buy land and seek to develop its land through partnerships with Developers.

• The Fund may borrow in order to develop its assets.

• The Fund should be liquidated and proceeds distributed to shareholders by 27 September 2012 (7 years from launch) unless shareholders vote to extend the life of the Fund.

• The Fund does not intend to pay a dividend (although the Fund is not restricted from doing so).

Mark Anderson and Loraine Pinel

Investment Managers

June 2010

Board of Directors

Charles Burton (Chairman)

Charles, a UK resident, has an excellent track record of senior executive responsibility, most recently at Experian Group where he was Global Managing Director of the Business Strategies Division from 2002 until 2008. This role encompassed widespread exposure to the property investment sector, for which the division supplied data, forecasts and due diligence on portfolios and individual sites throughout Europe. Charles is a member of the Scottish Executive's Economic Consultants' group and a Fellow and council member of the Society of Business Economists. He is also a Director of Oxford Economics Ltd.

Daniela Bobeva

Daniela is a Bulgarian resident and has a Master's degree from the Sofia Institute of Economics and a PhD in Economics. She started her career as an economic analyst and adviser to the Prime Minister of Bulgaria and then in 1995-1996 became the President of the Bulgarian Foreign Investment Agency. In 1997, she became Minister of Trade and Foreign Economic Co-operation. From 1998 to 2001, she was elected as the first vice-president of Banking in the newly established multilateral development bank. She is currently Director of European Integration and International Relations at the Bulgarian National Bank. She has more than 30 international publications in the area of macro-economics.

Gerald Williams

Gerald Williams, a Guernsey resident, is a Director of Bachmann Fund Administration Limited and Chief Executive of Concordia Holdings Limited, its parent company. He was previously a Director of Coutts Fund Managers and head of private banking for Coutts offshore private bank. Mr Williams has worked in most major offshore jurisdictions including the Bahamas, Cayman Islands, Isle of Man and Jersey. Mr Williams has a wealth of experience in the trust field and is an associate of the Chartered Institute of Bankers.

Clive Simon

Clive Simon is a Guernsey resident, the Chairman of Bachmann Fund Administration Limited and a Director of Concordia Holdings Limited, its parent company. Before joining the Bachmann Group of Companies in 1998, he was a senior partner with Coopers and Lybrand (now PricewaterhouseCoopers), working in London, Africa and the Channel Islands. His business background is predominantly in the financial services sector.

Duncan Abbot

Duncan Abbot, a UK resident, is a Fellow of the Securities Institute and a Chartered Accountant. From 1995 to 2001 he was Chairman of Christows Group Limited, a stock broking and fund management group. In 2001 he co-founded IIMIA Investment Group plc, subsequently renamed Midas Capital plc, and served as its business development Director until October 2007; he continued to be employed by the group until 31 March 2009. He is a co-founder and Chairman of Coalition Holdings Limited and Chairman of Global Special Opportunities Trust plc.

Directors' report

The Directors present their report and the consolidated financial statements of Sofia Property Fund Limited which is incorporated in Guernsey, Channel Islands, for the year ended 31 December 2009.

Company status

The Company is a closed-ended, Guernsey registered investment fund. Its shares are listed and traded on AIM.

Change of name

Pursuant to an EGM held on 1 December 2009 the Company changed its name from Lewis Charles Sofia Property Fund Limited to Sofia Property Fund Limited with effect from 2 December 2009.

Principal activity

The Company offers an opportunity to invest in the Bulgarian residential property market and, particularly, apartments and villas to be built in and around Sofia. Its objective is to provide Shareholders with a high level of long-term capital appreciation.

Results and dividends

The results for the year are set out in the consolidated statement of comprehensive income statement on page 17.

The Directors did not declare a dividend for the year.

Listing requirements

Throughout the year the Company complied with the conditions set out in the AIM Rules for Companies.

Directors

The Directors during the year and to date are as follows:

Charles Burton (Chairman)

Daniela Bobeva

Desmond Swayne (resigned 10 September 2009)

Gerald Williams

Clive Simon

Duncan Abbot (appointed 10 September 2009)

Paul Duquemin (As alternate to Clive Simon)

Steve Desmond (As alternate to Gerald Williams)

The biographies of Directors are on page 9.

Directors shall be subject to retirement by rotation at least every three years. No person shall be or become incapable of being appointed as a Director by reason of having attained the age of 70 or any other age and no Director will be required to vacate his office at any time by reason of the fact that he has attained the age of 70 or any other age. A retiring Director shall be eligible for reappointment.

The Board considers that there is balance of skills within the Board and that each of the Directors contributes effectively.

Directors' fees

During the year the Directors received the following remuneration in the form of fees:

2009

2008

€

€

Charles Burton (Chairman)

17,194

11,138

Daniela Bobeva

13,755

15,493

Duncan Abbot (appointed 10 September 2009)

3,420

-

Gerald Williams

8,578

9,193

Clive Simon

8,578

9,193

Desmond Swayne (resigned 10 September 2009)

9,592

14,711

Lord Howard of Penrith (resigned 29 April 2008)

-

9,760

There are no service contracts in existence between the Company and any of the Directors. The Company has put in place relevant cover for Directors in the form of Directors and officers insurance.

The Companys' Articles of Association limit the aggregate fees to the Directors at £75,000 per annum.

Directors' interests

Gerald Williams and Clive Simon are Directors of the Company and the Administrator. The fee paid to Bachmann Fund Administration Limited is disclosed on the face of the statement of comprehensive income and in note 3. No other Directors have any interest in contracts with the company or group.

As at the date of the approval of these financial statements the Directors have the following beneficial interests in the ordinary share capital of the Company;

Number of ordinary shares

% of issued share capital

2009

2008

2009

2008

Daniela Bobeva

-

-

-

-

Gerald Williams

50,000

50,000

0.07%

0.10%

Clive Simon

50,000

50,000

0.07%

0.10%

Charles Burton

50,000

-

0.07%

-

Duncan Abbot

-

-

-

-

Substantial interests in Company Shares

At 31 December 2009 the following holdings representing more than 3 per cent of the Company's issued shares had been notified to the Company.

Interest

Ordinary shares

in voting capital

Vidacos Nominees Limited DMG 7

8,346,004

12.44%

Rathbone Nominees Limited

7,863,339

11.72%

Goldman Sachs Securities (Nominees) Limited ILSEG

7,798,700

11.63%

Nortrust Nominees Limited ADT01

4,605,000

6.87%

Goldman Sachs International CREPTEMP

4,275,000

6.37%

BNY (OCS) Nominees Ltd

3,800,000

5.67%

Credit Suisse Client Nominees (UK) Limited D6M5PB

3,275,000

4.88%

Securities Services Nominees Limited

3,221,166

4.80%

Smith and Williamson Nominees Limited

2,899,750

4.32%

The Bank of New York (Nominees) Limited IMAF

2,815,000

4.20%

Management