Half-yearly results and NAV

Duet Real Estate Finance Limited

(the "Company")

Half-Yearly Results and NAV

Duet Real Estate Finance Limited (LSE: DREF), a registered closed-ended collective investment scheme incorporated in Guernsey, today announces its half-yearly results for the period from 1 January 2016 to 30 June 2016.

Highlights

Ø A total of 14.93 pence per share (period to 30 2015: 23.51 pence) has been returned by way of B share issues and redemptions in the six months ended 30 June 2016. In August 2016 a further 7.67 pence per share was returned by way of the same mechanism.

Ø The NAV total return for the six months ended 30 June 2016 was 1.0% (period to 30 June 2015: 3.6%) including dividends paid and adjusted for capital returned in the period.

Ø The total shareholder return in the six months ended 30 June 2016 was 35.8% (period to 30 June 2015: 9.1%) including dividends paid and adjusted for capital returned in the period.

Ø The Master Fund continues its realisation phase and will continue to receive repayments of or sell off its underlying investments and return capital to the Company. The Directors intend to continue to distribute such proceeds to shareholders by way of further B share issues and redemptions.

Chairman's Statement

I am pleased to present the Company's half-yearly financial report and unaudited condensed interim financial statements for the period ended 30 June 2016.

Investment Performance, Capital Management and Dividends

The Company's NAV per share at 30 June 2016 was 14.6 pence (30 June 2015: 27.4 pence). The Company returned 14.9 pence per share by means of B share issues and redemptions (period to 30 June 2015: 23.5 pence). Based on the opening NAV per share of 29.2 pence as at 31 December 2015 (31 December 2014: 51.3 pence) the NAV total return in the period was 1.0% (period to 30 June 2015: 3.6%).

The Company's share price at 30 June 2016 was 13.25 pence (30 June 2015: 25.25 pence). Based upon an opening share price of 20.75 pence at 31 December 2015 (31 December 2014: 46.75 pence), the total shareholder return in the period to 30 June 2016, including dividends paid and adjusting for capital returned in the period, was 35.8% (period to 30 June 2015: 9.1%) reflecting a much reduced discount of the share price to NAV.

Following the August 2016 return of capital of 7.67 pence per share, the Company has now repaid capital of 87.42 pence per share and paid dividends of 26.05 pence per share. Shareholders who subscribed at launch (at £1 per share) have now had 113.47 pence returned to them.

Outlook

Since the summer of 2013, the Master Fund has been in its realisation phase and will continue to receive repayments on its loans, sell off assets and return capital to the Company. Shareholders should note that the General Partner of the Master Fund, as it was entitled to do, elected to extend the life of the Fund by a further year and one month to 22 January 2017.

As the underlying portfolio of the Master Fund continues to be realised, your Board anticipates continuing to make distributions of capital via B Share issues and redemptions. Your Board has been advised by the Investment Adviser that the Master Fund expects to be fully realised and distributed within the next few months, following which your Board expects to recommend to shareholders that the Company be wound up.

David Staples

Chairman

21 September 2016

Interim Board Report

Principal Risks and Uncertainties

The principal risks and uncertainties faced by the Company, which have not materially changed and which are expected to apply to the remaining period, are considered to fall into the following categories:

General market, economic, fiscal and regulatory environment:

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

· Declaration, payment, and the amount of any future distributions by the Company are subject to the discretion of the Directors and will depend upon, among other things: the performance of the Master Fund, realisations of its underlying investments and consequent returns of capital, distributions made by the Master Fund and the size of any such distributions as well as the Company's financial position and cash requirements.

· The Ordinary Shares may trade at a discount to NAV.

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

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

Concentration and other risks due to the realisation stage of the Master Fund:

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

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

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

· There is currency risk in the Master Fund from material movements in the exchange rate between Sterling and the currency in which certain investments are made, particularly as a result of the increased volatility since the result of the EU referendum. To limit currency risk the Master Fund uses currency derivatives to hedge its exposure, but there is no guarantee that the hedges will be completely effective.

· Borrowers from the Master Fund may repay loans early leading to different returns, and a loss of further returns from that investment.

· As the Master Fund sells off its loans or they are repaid, so the number of remaining loans in the portfolio diminishes which will lead to increased concentration risk and potentially proportionately greater currency risk at the Master Fund level.

Reliance on the Investment Adviser:

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

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

The principal risks and uncertainties in relation to financial instruments are shown on page 19 of the audited financial statements for the year ended 31 December 2015.

Related Parties

Related party disclosures are given in note 15.

Going Concern

The Master Fund, the Company's sole investment, is expected to be fully realised within the next few months. The life of the Master Fund has already been extended for the maximum period of two years and one month to 22 January 2017. It is therefore expected that the Master Fund and hence the Company will distribute the majority of their remaining assets and income before the end of the financial year and the Board is then likely to recommend to shareholders that the Company be wound up. Although the timing cannot be guaranteed, and even though the Company remains solvent the Directors no longer consider that the Company is a going concern and the financial statements have been prepared on a break up basis.

Auditor interim review

The Board determined that, in view of the Company's situation referred to above, it was no longer appropriate to incur the cost of engaging the auditors to conduct a review of and issue a report on the interim financial information.

Statement of Directors' Responsibility

The Directors confirm that, to the best of their knowledge, these unaudited condensed interim financial statements for the period have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' as adopted by the European Union and give a true and fair view of the assets, liabilities, financial position and profit of the Company as required by Disclosure and Transparency Rule DTR 4.2.4. The Chairman's Statement, Interim Board Report and the Investment Adviser's Report (together constituting the Interim Management Report) include a fair review of the information required by the Disclosure and Transparency Rules DTR 4.2.7R and DTR 4.2.8R, namely:

a. an indication of important events that have occurred during the first six months of the financial year and their impact on the unaudited condensed interim financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year; and

b. material related party transactions that have taken place in the first six months of the current financial year that have materially affected the financial position or performance of the Company during that period, and any material changes in the related party transactions disclosed in the Annual Report.

By order of the Board:

David Staples

Director

21 September 2016

Investment Adviser's Report

Upon the completion of its investment programme in May 2013, the Master Fund consisted of 15 investments with an original acquisition cost of £264.7 million. Based on the respective acquisition cost of each investment, the fully invested portfolio had a blended loan-to-value ratio of 69.6% along with a blended cash pay coupon and payment-in-kind coupon of 9.8% and 2.1% respectively. The portfolio provides the income and total return as targeted in the Company's prospectus, whilst maintaining a resilient risk profile.

As at 30 June 2016, the Master Fund consisted of 5 investments with a combined unrealised balance of £39.0 million. Based on the respective balance of each investment, the portfolio as at 30 June 2016 had a blended loan-to-value ratio of 68.4% along with a blended cash pay coupon and payment-in-kind coupon of 6.5% and 4.8% respectively.

In respect of the unrealised investments forming the residual portfolio, we continue to assess and monitor investments, with a particular focus on such aspects as debt servicing arrangements, compliance with loan covenants and the asset management of the underlying real estate.

The Company is 95% drawn against its total commitment to the Master Fund. Following a second partial cancellation of available commitments by the Master Fund in May 2015, a total of £0.53 million (0.7% of total remaining commitment following the second partial cancellation of available commitments) remains available to be drawn by the Master Fund for follow-on contributions to existing investments and for working capital.

A summary of the key performance of the Company and investment activity of the Master Fund is as follows:

Performance - for the six month period to 30 June 2016 and post period end

In July 2016, the Master Fund received a full repayment of mezzanine loan investment 2 (secured by a prime office in the UK), earning returns in line with its investment criteria.

The Investment Adviser anticipates the trend of earlier repayments to continue due to the increased liquidity in the financing markets, the ongoing deleveraging through amortisation of most transactions, and the generally rising trend in asset values which has encouraged borrowers to refinance or sell the assets that back the remaining loans in the Master Fund.

As regards the recent UK EU Referendum result the Investment Adviser remains hopeful that the Master Fund's remaining assets will be fully realised within the next few months and in line with their investment criteria.

Investment Performance

The Company raised £76.0m and has, including the return of capital paid on 11 August 2016, paid dividends totalling £19.3m and returned capital totalling approximately £66.5m. The total value to paid-in ratio of the Company at 30 June 2016 was 1.19 (31 December 2015: 1.19; 30 June 2015: 1.17), based on capital raised.

The composition of the fully invested portfolio of the Master Fund along with the make-up of the portfolio as at 30 June 2016 are detailed in the charts and tables that follow:

Portfolio as at 30 June 2016

(1) Excluding events post 30 June 2016

(2) Post provision for impairment

Portfolio as at 30 June 2016

ERED Investment Adviser LLP

September 2016

Unaudited Condensed Statement of Comprehensive Income

for the period ended 30 June 2016

The notes form an integral part of these unaudited condensed interim financial statements.

Unaudited Condensed Statement of Financial Position

as at 30 June 2016

The notes form an integral part of these unaudited condensed interim financial statements.

The unaudited condensed interim financial statements were approved by the Board of Directors on 21 September 2016 and were signed on its behalf by:

David Staples

Director

Unaudited Condensed Statement of Changes in Equity

for the period ended 30 June 2016

The notes form an integral part of these unaudited condensed interim financial statements.

Unaudited Condensed Statement of Cash Flows

for the period ended 30 June 2016

The notes form an integral part of these unaudited condensed interim financial statements.

Notes to the unaudited interim financial statements for the period ended 30 June 2016

1. General information

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

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

These unaudited condensed interim financial statements were approved for issue on 21 September 2016. These unaudited condensed interim financial statements do not constitute statutory accounts under Guernsey Company.

2. Basis of preparation

As explained in the Interim Board Report, the Directors no longer consider that the Company is a going concern and the financial statements have been prepared on a break up basis.

The preparation of financial statements in accordance with the break up basis requires that assets are reduced to their recoverable amounts and that provisions are made for future losses. The Directors have considered whether there is any indication that the recoverable amount of the Company's assets is lower than the amount recorded as fair value at 30 June 2016. They have concluded that any post balance sheet changes in value reflect fair value changes and do not indicate a reduction in the recoverable amount at 30 June 2016 and, accordingly, that no adjustment is required to the carrying amount of the Company's assets or increase in the Company's liabilities at fair value through profit or loss. In addition the Directors have considered whether any provision is required for future losses. The Company will continue to incur expenses up to the date of liquidation. However, the anticipated redemption value of the Company's assets is expected to exceed the Company's estimated future expenses and, accordingly, the Directors do not consider that a provision for future losses is required. However, as a consequence of the adoption of the break up basis a provision of £25,000 has been made for the estimated costs of winding the Company up which the Directors consider likely once the Master Fund is fully realised and distributed.

The unaudited condensed interim financial statements for the six months ended 30 June 2016 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34 "Interim Financial Reporting" as adopted by the European Union. These unaudited condensed interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2015, which were prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union.

The preparation of unaudited condensed interim financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires the Directors to exercise judgement in the process of applying the Company's accounting policies. Changes in assumptions may have a significant impact on the financial statements in the period the assumptions change. The Directors believe that the underlying assumptions are appropriate and that the Company's financial statements therefore present the financial position and results fairly. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 10.

3. Significant accounting policies

The accounting policies adopted, apart from as explained above, are consistent with those of the previous financial year. Statutory audited annual financial statements of the Company are prepared in accordance with IFRS as adopted by the European Union. These unaudited condensed interim financial statements do not contain all the information and disclosures as presented in the annual financial statements.

New IFRS standards, amendments and interpretations

The Company has adopted the following amendments since 1 January 2016.

Annual improvements 2012-2014 cycle

The Directors have assessed the impact of the amendments and concluded that there is no material impact on the Company's results of operations or financial position.

Impact of standards issued but not yet applied

IFRS 9, 'Financial instruments', issued in November 2009. This standard is the first step in the process to replace IAS 39, 'Financial instruments: recognition and measurement'. IFRS 9 introduces new requirements for classifying and measuring financial assets and may affect the Company's accounting for its financial assets. The standard is not applicable until 1 January 2018 but is available for early adoption. However, the standard has not yet been endorsed by the EU. The Company has yet to assess IFRS 9's full impact. However, initial indications are that it should not materially affect the Company's accounting for its financial instruments.

4. Taxation

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

The Company has obtained exemption from Guernsey Income Tax under The Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989 and accordingly is subject to an annual fee of £1,200.

5. Segment reporting

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

6. Seasonality of operations

The nature of the entity is such that the effect of seasonality is not considered to impact the operations and results of the Company.

7. Expenses

8. Earnings per share and net asset value per share

The earnings per share calculation is based on profit for the period and total comprehensive income of £204,451 (30 June 2015: £1,336,516) and the weighted average number of shares in issue for the period of 71,813,222 (30 June 2015: 73,569,405).

Net asset value per share is based on net assets of £10,486,616 (31 December 2015: £21,003,879) divided by the 71,813,222 (31 December 2015: 71,813,222) Ordinary Shares in issue.

9. Dividends

10. Financial assets at fair value through profit or loss

The investment has been re-categorised as a current asset during the period following the adoption of the break up basis.

The investment comprises an investment in the Master Fund. The Company has a committed investment of £75,333,953 (31 December 2015: £75,333,953) of which £71,451,201 (31 December 2015: £71,451,201) had been drawn down as at the period end. On 22 April 2015 £739,567 of the undrawn down amount was cancelled, and a further £2,610,308 was cancelled on 13 November 2015, leaving the undrawn commitment to the Master Fund at 30 June 2016 at £532,877 (31 December 2015: £532,877).

The fair value of the investment in the Master Fund was impacted by an accrual for the estimated performance fee payable at the Master Fund level.

The Master Fund had a scheduled termination date of 22 December 2014 unless extended at the discretion of the General Partner for a maximum of two years and one month by the addition of a one year period and a further one year and one month period. The General Partner of the Master Fund elected to extend the life of the Fund by one year to 22 December 2015 and has further elected to extend the life of the Fund by one year and one month to 22 January 2017. The life of the Master Fund may only be further extended by agreement with the limited partners.

Equalisation was paid to or received from the Master Fund when additional investors were admitted to the Master Fund, including the initial investment by the Company. Amounts were paid to or received from the Master Fund so as to equalise (in percentage terms) the net amount drawn from all investors after taking into account any amounts distributed by the Master Fund to prior existing investors. Equalisation paid to the Master Fund was included as part of the purchase cost of the investment and equalisation received from the Master Fund represents a temporary return of capital which can be called again by the Master Fund from the Company as part of its commitment to invest. The Company did not receive any equalisation payments from the Master Fund in the period, as the Master Fund is closed to new investors. No further equalisation amounts are expected to be received or paid in future periods.

The Company's investment in the Master Fund is subject to the terms and conditions set out in the Master Fund's offering documents and is accounted for by the Company as at fair value through profit or loss as determined by the Directors at the period end date, this fair value being primarily based on the latest available coterminous reported information from the Master Fund. The Directors review the details of the reported information obtained from the Master Fund and consider: (i) the liquidity of the Master Fund and/or its underlying investments, (ii) the type of investments held within the Master Fund, (iii) the date of the net asset value (NAV) provided, (iv) any restrictions on redemptions, and (v) the basis of accounting adopted by the Master Fund in valuing the investments held and in reporting to investors (the Master Fund reports to investors using IFRS principles). If necessary, the Directors make adjustments to the NAV of the Master Fund so as to obtain the best estimate of fair value as at the period end date. No such adjustments have been made to the reported NAV of the Master Fund as at 30 June 2016. In addition to normal short term receivables/payables and cash balances, the investment portfolio held by the Master Fund as at 30 June 2016 included:

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

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

Although the Directors use their best judgement in estimating the fair value of investments, there are inherent limitations in any estimation techniques.

The significant matters considered by the Directors in determining the fair value of the investment in the Master Fund are noted above. The investment in the Master Fund is a level 3 investment (see below) and as expected, there are significant unobservable inputs used by the General Partner to the Master Fund in assessing its own view on the values of the investments held at the level of the Master Fund. No quantitative information is provided by the Company in respect of those significant unobservable inputs as those inputs are not developed by the Company when measuring its fair value assessment for its investment in the Master Fund and those significant unobservable inputs at the Master Fund level are not reasonably available to the Company.

The Company's investment in the Master Fund is categorised as level 3 within the fair value hierarchy under IFRS 13, which indicates inputs for the asset that are not based on observable market data (unobservable inputs). The table below shows the movements in level 3 investments and the unrealised gain thereon recognised in the statement of comprehensive income.

The Company is exposed to market price risk from its holding in the Master Fund. If the NAV of the Master Fund increased (or decreased) by 5%, with all other variables held constant, net assets would increase (or decrease) by £472,538 (31 December 2015: £1,011,029). The Company's investment in the Master Fund gives rise to no direct exposure to currency risk or interest rate risk although the Master Fund itself is exposed to such risks.

11. Payables

12. Share capital

Authorised

The authorised share capital of the Company is represented by an unlimited number of Ordinary Shares of no par value.

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

Allotted, called up and fully paid

Ordinary Shares carry the rights to any dividend or other distribution out of the profits of the Company and to vote. On winding up, the Ordinary Shareholders shall be entitled to the surplus assets remaining after payment of all creditors.

B Shares do not carry any rights to any dividend or other distribution out of the profits of the Company or any voting rights and are not transferable. B Shares were issued to existing shareholders and redeemed during the period ended 30 June 2016 as detailed below.

On 28 January 2016, the Company made a Capital Return to shareholders of £10,721,714 equivalent to 14.93 pence per Ordinary Share by way of an issue on 26 January 2016 and redemption on 27 January 2016 of B Shares on a pro rata basis.

The Company's objective when managing its capital is to follow its investment objective to provide shareholders, through its investment in the Master Fund, with regular dividends and an attractive total return, whilst limiting downside risk to capital through exposure to European commercial real estate debt. During the period, the Master Fund realised certain of its investments and made capital distributions to the Company. The Company's policy is to return such capital distributions to investors. The mechanism for making these capital returns is largely by way of an issue of redeemable B Shares to existing shareholders and subsequent redemption of these shares pro rata to their holding.

The Company has a significant investment in the Master Fund and therefore the Company's financial performance when managing its capital depends almost entirely on the performance of its investment in the Master Fund. However, in addition the Company may borrow up to 20% of NAV, has the ability to suspend payment of dividends if necessary, may buy back its own shares and may issue further shares.

Purchase of own shares

There were no purchases of own shares during the period (30 June 2015: 428,000 shares purchased for £148,081).

The shares were bought back on the open market and were cancelled. The cancelled shares represented 0.0% (30 June 2015: 0.6%) of the voting rights.

13. Cash and cash equivalents

14. Financial risk management

The Company's activities expose it to a variety of financial risks. The main risks arising from the Company's financial instruments are market risk, credit risk and liquidity risk.

These unaudited condensed interim financial statements do not include all financial risk management information and disclosures required in the annual financial statements, and therefore should be read in conjunction with the Company's annual financial statements for the year ended 31 December 2015.

15. Related party and material transactions

The Company pays a fixed annual fee of £25,000 to the Investment Adviser, ERED Investment Adviser LLP ("ERED"), a joint venture between DRC Capital LLP and Duet Private Equity Limited. The charge for the period was £12,500 (30 June 2015: £12,500) and at 30 June 2016 £6,250 was prepaid (31 December 2015: £Nil). There are no performance fees payable at the Company level, although the Investment Adviser is incentivised by performance fees payable at the Master Fund level.

Transactions and balances with the Master Fund are disclosed in note 10. In addition distributions from the Master Fund of £170,487 (30 June 2015: £1,875,839) are included in investment income in the statement of comprehensive income.

Directors' interests

No Director has a material interest in any contract which is significant to the Company's business. David Staples has an interest in 7,000 shares (31 December 2015: 7,000) and David Moore has an interest in 39,329 shares (31 December 2015: 39,329). No other Director who held office at 30 June 2016 had an interest in the Ordinary Shares of the Company.

16. Subsequent events

On 13 July 2016, a capital distribution of £5,512,878 was received from the Master Fund.

On 11 August 2016, the Company made a Capital Return to shareholders of £5,508,074 equivalent to 7.67 pence per Ordinary Share by way of an issue on 9 August 2016 and redemption on 10 August 2016 of B Shares on a pro rata basis.

On 12 August 2016, a capital distribution of £198,110 was received from the Master Fund.

Corporate information

For further information, please contact:

DRC Capital LLP +44 (0)20 7042 0600

Dale Lattanzio

Cyrus Korat

Stifel Nicolaus Europe Limited +44 (0)20 7710 7600

Neil Winward

Mark Bloomfield

Tunga Chigovanyika