Results for the year ended 31 December 2013

Duet Real Estate Finance Limited

(the "Company")

Final Results

Duet Real Estate Finance Limited (LSE: DREF), a registered closed-ended investment scheme incorporated in Guernsey, today announces its final results for the year ended 31 December 2013.

Highlights

Ø The Company is 95% (2012: 95%) drawn against its commitment to the European Real Estate Debt Fund LP (the "Master Fund"), which is 100% (2012: 85%) invested having completed its investment programme with the final transactions being completed in March and May 2013.

Ø Dividend of 2.25 pence per share for the quarter ended 31 December 2013, paid on 14 March 2014 to members on the Company's register on 21 February 2014.

Ø Dividends paid in the year 2013 total 10 pence per share (2012: 5 pence), equating to a yield of 11.6% (2012: 5.5%) on 31 December 2013 share price of 86.5 pence (2012: 90.5 pence).

Ø Based upon the Net Asset Value ("NAV") as at 31 December 2013 of 93.5 pence per share (2012: 98.5 pence)the total return for the year, including the dividends paid during the year of 10p per share, was 5.1% (2012: 6.3%).

Ø Based upon a share price (bid) of 86.5 pence (2012: 90.5 pence) at the year end, the total shareholder return was 6.6% (2012: -0.5%).

Ø The Master Fund has now entered its realisation phase and will continue to receive repayments on its loans and sell down assets and return capital to the Company, which will be distributed to Investors through future B-share issues.

Chairman's Statement

I am pleased to present the Annual Report and audited Financial Statements of the Company for the year ended 31 December 2013.

Economic Backdrop

The efforts of Central Banks were rewarded in the first half of the year with a period of relative stability and rallying stock markets. The real estate market participated in this improved sentiment, which resulted in generally increased activity in both new acquisitions and refinancings. Whilst occupier activity remained somewhat subdued, we witnessed international investment activity into Europe pick up as Euro breakup concerns receded. The increased market activity brought more investment opportunity to the Investment Adviser, and therefore during the first half of the year, the Master Fund completed its investment programme, investing a further £77.3 million.

Through the second half of 2013, the recovery of certain direct markets has continued. According to CBRE, total investment volume in commercial real estate across Europe for 2013 was €153.9bn, the highest since the last quarter of 2007. On a quarterly basis the €53.4bn transacted in Q4 2013, was 46% up on Q3 2013, and 19% up on Q4 2012, confirming the resurgence of investment activity that was felt from the start of the year. The UK and Germany continue to dominate by volume, but interestingly the likes of Spain, Ireland and Italy witnessed the highest percentage growth, as investors returned to these markets for the first time in search of yield. In the debt space, availability and cost of senior financing has generally improved throughout the year helping borrowers to refinance and encouraging investment activity for a broader range of properties. Despite the increase in portfolio sales of non-performing loans in the second half of 2013, the overall deleveraging of the debt stock continues at a relatively slow pace, CBRE noting that total Commercial Real Estate debt has shrunk by less than 10% since 2008.

Investment Performance, Capital Management and Dividends

The Company's NAV per share at 31 December 2013 was 93.5 pence (31 December 2012: 98.5 pence). The Company paid four dividends during the year, totaling 10 pence per share (2012: 5 pence) equating to a NAV total return for the year of 5.1% (2012: 6.3%).

During the year, the Company bought back and cancelled 122,500 of its own shares for £109,247. All purchases were made at discounts to the prevailing NAV, at an average price of 95% of NAV, and so were accretive to NAV per share. Since the year end and to the date of this report the Company has repurchased a further 250,000 shares, also at discounts to prevailing NAV.

Including the dividend of 2.25 pence per share paid on 14 March 2014 in respect of the fourth quarter, the Company will have paid dividends totaling 10.25 pence per share in respect of the year to 31 December 2013 which, based upon the share price at the year-end of 86.5 pence equates to an annualised yield of 11.8%. Dividends to date (including this distribution) on shares issued at the time of the Company's Initial Public Offering total 19.25 pence per share.

In February 2014, the Board resolved to return an amount of £10.0 million, equivalent to 13.35 pence per share, being the Company's share of proceeds realised by the Master Fund following the realisations of Loans 3, 8 and 1, via an issue of redeemable B shares to existing shareholders and immediate subsequent redemption of those shares pro rata to their holding.

Outlook

Following the completion of its investment programme in May 2013, the Master Fund has now entered its realisation phase and will continue to receive repayments on its loans, sell down assets and return capital to the Company. Your Board anticipates that it will deliver on its targeted returns and lead the Company to be in a position to make cash distributions in excess of 7% per annum based on the issue price and distribute capital via future B-share issues.

David Staples

Chairman

4 April 2014

Investment Adviser's Report

Further to 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.

Through to the end of the year, we have noted a general trend of improvement in loan-to-value positions as a result of the recovery of certain direct markets (as detailed in the Chairman's Statement) and as loans amortise and therefore a further improvement in the risk profile of the portfolio. Furthermore, 4 of the Master Fund's investments have been fully realised during the second half of 2013 and first quarter of 2014 earning returns in-line with the Company's stated objective.

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 commitment to the Master Fund with the remaining 5% undrawn amount 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 and investment activity of the Master Fund is as follows:

Performance - during 2013 and post year end

In January, the Master Fund received a partial repayment of £5.9 million on its CMBS 2 investment, representing 60.8% of the acquisition costs of the bonds following the sale of assets by the borrower. Furthermore in January, the Master Fund advanced a €7 million mezzanine loan secured by an office tower in Brussels (Loan 11).

In March, the Master Fund completed Loan 12, the penultimate loan transaction of its investment programme, providing a €37.5 million mezzanine loan backed by a portfolio of 20 hotels located across Germany.

In May 2013, the Master Fund successfully completed its investment programme through the funding of Loan 13, a £39.5 million mezzanine loan backed by an office located in the City of London.

In October, the Master Fund received a full repayment of £8.6m on its CMBS 2 investment realising a profit and internal rate of return in line with its stated return objective. The Company's share of the final repayment proceeds were distributed to shareholders as part of its dividend paid on 20 December 2013.

In December 2013, the Master Fund fully realised a further two of its mezzanine loan investments, earning returns in line with its investment criteria. The two investments were Loan 3 (secured by eight hotels in Germany) and Loan 8 (secured by an office and light industrial park in France).

During the year the Master Fund continued the process of enforcing its rights under the loan security package to recover outstanding amounts under Loan 4, and the Investment Adviser expects that these actions will result in full recovery of principal, accrued interest and expenses.

In respect of Loan 5, the borrower group's financial performance in 2013 has not met with expectations set-out in their business plan. The magnitude of this underperformance has lead the Master Fund to take the decision to make a significant provision for impairment against the carrying value of the loan. The underlying borrower is working with its lenders on a restructuring solution. The impact of this provision in the Master Fund on the Company's Net Asset Value as at 31 December 2013 is equal to 4.4 pence per Ordinary Share.

In January 2014, the Master Fund received a full repayment of a further mezzanine loan investment, Loan 1 (secured by a retail property in Denmark), earning returns in line with its investment criteria.

The composition of the fully invested portfolio of the Master Fund along with the make-up of the portfolio as at 31 December 2013 are detailed in the tables that follow:

(1) excluding events post 31 December 2013 (see above - 'Performance - during 2013 and post year end')

(2) post provision for impairment

(3) WA - weighted average

ERED Investment Adviser LLP

March 2014

Board of Directors

David Staples (Chairman)

David, a Guernsey resident, has a BSc in Business Economics and Accounting from the University of Southampton. He is a fellow of the Institute of Chartered Accountants in England and Wales and a Chartered Tax Adviser. He also holds the Institute of Directors' diploma in company direction. David joined PricewaterhouseCoopers ("PwC") in the UK in 1978 and became a partner in 1990. David remained with PwC until 2003 and held a number of senior positions during that time, including head of tax for the south east region. David is currently on boards of a number of listed companies, being MedicX Fund Limited, a leading investor in large, purpose-built GP surgeries (of which he is chairman), Gottex Fund Management Holdings Limited, a global alternative investment management group, Aberdeen Private Equity Fund Limited, Global Fixed Income Realisation Limited and Henderson Far East Income Limited. He is also a director of HSBC Private Bank (C.I.) Limited and the general partners of five Apax Partners' private equity funds.

David was appointed to the Board in February 2011 and has served as Chairman since January 2013.

John Falla

John, a Guernsey resident, is a Chartered Accountant and has a BSc Hons degree in Property Valuation and Management from The City University, London. He is a Chartered Fellow of the Chartered Institute for Securities and Investment having been awarded their diploma. He is a corporate finance director with Edmond de Rothschild (C.I.) Limited in Guernsey. John joined Ernst and Young in London in 1984 as a trainee in the audit department and moved to the corporate finance department in 1989, becoming a senior manager before moving back to Guernsey in 1996. On his return to Guernsey John joined Bermuda Trust Company (Guernsey) Limited, part of the Bank of Bermuda Group as trust development manager focussing on business development as well as dealing with private trust and employee benefit fiduciary and corporate structures. In 1998 John was part of the team that launched the Channel Islands Stock Exchange and he set up the listing department responsible for vetting applications for listing and monitoring compliance with continuing obligations. He was a member of the Market Authority of the Exchange and contributed towards the development of the listing rules of the Exchange. In 2000 John joined LCF Edmond de Rothschild (C.I.) Limited and has provided corporate finance advice to clients including open and closed-ended investment funds, and institutions with significant property interests. John is on the board of a number of Edmond de Rothschild group operating and investment companies.

John was appointed to the Board in February 2011 and has served as Chairman of the Audit Committee since January 2013.

David Moore

David, a Guernsey resident, is a lawyer and an advocate of the Royal Court of Guernsey. He holds an LLB from Wolverhampton University and an LLM from Cambridge University. He is currently a consultant with Bedell Cristin in Guernsey. David was formerly a partner with Mourant Ozannes where he worked from 1993 to January 2013, and was Head of the Corporate Department within Ozannes prior to its merger with Mourant,du Feu & Jeune. Before that he spent 10 years practising in the City of London, predominantly with Ashurst Morris Crisp. He specialises in corporate, banking, insurance and financial matters and is non-executive director of Raven Russia Limited and was, until May 2013, a director (and former Chairman) of Standard Life Investments Property Income Trust Limited. He is also a director of a number of unlisted financial institutions including banking, investment management and insurance companies.

David was appointed to the Board in April 2013.

Directors' Report

The Directors present their annual report on the affairs of Duet Real Estate Finance Limited (the "Company"), together with the audited financial statements, for the year ended 31 December 2013.

The Company

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

Principal activity

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

Business review

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

Results and dividends

The results for the year are shown in the Statement of Comprehensive Income.

The following dividends were paid during the years 2013 and 2012:

Since the year end, a dividend of 2.25 pence per ordinary share was paid on 14 March 2014to ordinary shareholders on the register on 21 February 2014.

Capital structure

The Company has one class of ordinary shares of no par value. The authorised share capital of the Company is an unlimited number of these ordinary shares. The issued share capital of the Company at 31 December 2013 was 74,925,109 (2012: 75,047,609) ordinary shares.

During the year the Company purchased and cancelled 122,500 (2012: 928,640) of its own shares for £109,247 (2012: £835,908).

Further details are shown in note 9.

On 25 February 2014, the Company issued 74,925,109 B shares of no par value to existing holders of ordinary shares pro rata to their current holding. The Company issued these shares with the intention of redeeming them at a predetermined price. On 26 February 2014, the B shares were redeemed by the Company at a redemption price of 13.35 pence per B share. The rationale for this issue and redemption was to effect a return of capital in the amount of £10,002,502 to the Company's shareholders following a distribution of capital from the Master Fund of a similar amount.

Substantial shareholdings

The Company is aware that the following shareholders had an interest in 3% or more of the issued share capital of the Company on 5 March 2014.

Taxation

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

Going concern

The Directors, after due consideration, have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the financial statements are prepared on a going concern basis. In forming this expectation the Directors have considered the level of cash cover for uncalled commitments to invest in the Master Fund (111.2%, when taking account of the level of commitment that will not be drawn down (see note 11)), projected cash inflows and the level of on-going expenses.

Directors

The Directors, who served during the year, were as follows:

John Falla

David Moore (appointed 12 April 2013)

David Staples (Chairman)

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 (2012: 7,000) and David Moore has an interest in 39,329 shares (2012: Nil). David Moore acquired 17,978 shares on 18 April 2013 and 21,351 shares on 4 December 2013. No other Director who held office at 31 December 2013 had an interest in the ordinary shares of the Company.

Management

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

The Company has appointed ERED Investment Adviser LLP ("ERED")as Investment Adviser. ERED is a joint venture between DRC Capital LLP ("DRC") and Duet Private Equity Limited ("DPEL"). DRC was formed by the investment team that provided investment advice to the Company and Master Fund at DPEL.

DRC is authorised and regulated by the UK Financial Conduct Authority. It is also the Sub-Investment Adviser of the Master Fund.

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

The Company has appointed International Administration Group (Guernsey) Limited ("the Administrator") to provide accounting, company secretarial and administration services to the Company. The administration fee payable by the Company is an annual fee of £66,000 payable quarterly in advance. The Company is also required to reimburse the Administrator in respect of all reasonable and properly evidenced out of pocket expenses incurred by the Administrator in the performance of its duties.

Independent auditors

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

By order of the Board:

David Staples

Director

4 April 2014

Report of the Audit Committee

The Audit Committee, which comprises all the Directors, is chaired by John Falla. The Board consider that the inclusion of all Directors on the Audit Committee is appropriate due to the small size of the Board. John Falla replaced David Staples as the Chairman of the Audit Committee in January 2013 when David Staples was appointed Chairman of the Board. The Audit Committee meets as often as required but at least twice a year. The Audit Committee's main functions include, inter alia, making recommendations to the Board in relation to the appointment and remuneration of the Company's auditors and monitoring and reviewing annually their independence, objectivity, effectiveness and qualifications. The Audit Committee also monitors the integrity of the financial statements of the Company, including its annual and interim reports and any preliminary results announcements and provide advice to the Board on whether, taken as a whole, the annual report and accounts are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy.

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

Significant judgements, key assumptions and estimates

The Audit Committee pays particular attention to matters it considers to be important by virtue of their impact on the Company's results or the level of complexity, judgement or estimation involved in their application to the financial statements. The main area of focus during the year is set out below:

Independent auditor

The Audit Committee obtained sufficient assurance on the quality of external audit from its own evaluation, the audit feedback documentation and from correspondence and discussions with the audit partner to recommend that PricewaterhouseCoopers CI LLP are proposed for reappointment at the next Annual General Meeting.

The independent auditor has been in office since the initial reporting period, 31 December 2011.

As the auditor provided no non-audit services this year, except for the review of the interim financial statements, they continue to be objective and remain independent of the Company's management. Note 3 details the total fees paid to PricewaterhouseCoopers CI LLP in the financial year to 31 December 2013. PricewaterhouseCoopers CI LLP have confirmed to the Audit Committee in writing that they, in their professional judgement, are independent within the meaning of regulatory and professional requirements and the objectivity of the entire audit team is not impaired. Having considered this and discussed it with the audit partner, the Audit Committee was satisfied that PricewaterhouseCoopers CI LLP have continued to be independent.

Internal controls

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

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

The Board conducts regular risk assessments to identify any deficiencies in the internal financial, operational and compliance controls operating over all aspects of the Company. The Board is responsible for a formal risk assessment on an annual basis and carries out quarterly reviews. These risk assessment processes are in line with the UK Corporate Governance Code issued in September 2012.

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

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

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

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

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

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

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

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

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

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

· the Board receives regular reports from the Investment Adviser;

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

In accordance with the procedures set out above the Board confirms that it has reviewed the effectiveness of the Company's system of internal control, including the internal control and risk management systems in relation to the financial reporting process, for the period ended 31 December 2013. There are no material matters to report.

John Falla

Audit Committee Chairman

4 April 2014

Corporate Governance

The Board has put in place a framework for corporate governance which it believes is appropriate for an investment company and which will enable the Company to comply with the UK Corporate Governance Code and relevant laws.

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

The Financial Reporting Council (the "FRC") has confirmed that by following the AIC Code of Corporate Governance (the "AIC Code") (including the Guernsey and Jersey editions) produced by the Association of Investment Companies in February 2013, boards of investment companies should fully meet their obligations in relation to the September 2012 FRC published UK Corporate Governance Code which is applicable to the Company for this reporting period ended 31 December 2013 and paragraph 9.8.6 of the Listing Rules.

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

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

Leadership, Board effectiveness and accountability

The Board comprises three directors, all of whom are independent non-executive directors. The Directors believe that the Board has a balance of skills and experience which will enable it to provide effective strategic leadership and proper governance of the Company. Information about the Directors including their relevant experience can be found under the heading Board of Directors.

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

· Formulation and agreement of strategy;

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

· Board membership and other appointments;

· Internal financial and operating controls;

· Communication with shareholders and Stock Exchange announcements;

· Remuneration of the Directors;

· Delegation and overall supervision of all delegated authorities;

· Corporate governance matters;

· Appointment of third party advisers/service providers;

· Dividend policy; and

· Gearing and capital management.

The Directors are initially appointed, under letters of appointment, for a period of 12 months and will seek reappointment at the first annual general meeting following their appointment. Thereafter, the Directors will retire by rotation at not less than three yearly intervals and may offer themselves for re-election, subject to satisfactory performance and the support of the Board. Whilst the Board acknowledges the need to review its composition from time to time, it believes that in order to be effective it is desirable that the Board should work together over a reasonable period of time thereby accumulating a thorough knowledge of the Company's business to secure the best results for the Company. Ordinarily a Director should serve no longer than nine years. However the Board believes that in certain circumstances it may be prudent to re-appoint a Director to serve for longer if is deemed in the best interests of the Company having regard to the Director's continuing independence and performance. The Board will at all times seek to maintain a sensible balance of skills, experience and diversity including where possible, by gender. The Board conduct a self assessment process annually. The last assessment was conducted in April 2014 and the Board concluded that it was performing satisfactorily and that no changes were required for the time being.

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

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

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

Committees of the Board

The Company has three committees of the Board, the responsibilities of which are set out in Terms of References which are available on request at the registered office. A separate Report of the Audit Committee is included in this Annual Report.

The Company established a Remuneration and Nomination Committee which comprises all the Directors, with David Staples as the Chairman. The Board consider that the inclusion of all Directors on the Remuneration and Nomination Committee is appropriate due to the small size of the Board. The Remuneration and Nomination Committee has responsibility for considering the remuneration of the Directors and meets at least once a year. It also: (i) identifies individuals qualified to become Board members and selects the director nominees for election at general meetings of the Shareholders or for appointment to fill vacancies; (ii) determines director nominees for each committee of the Board; and (iii) considers the appropriate composition, including gender, of the Board and its committees. The Remuneration and Nomination Committee meet at least once a year to consider the remuneration of the Directors and composition of the Board and its committees.

Following the death of Quentin Burgess, the two remaining non-executive directors met as members of the Nomination and Remuneration Committee to discuss the urgent need to fill the vacancy, and cover all board roles to ensure the continuity of good corporate governance. It was resolved that David Staples should be appointed Chairman, and John Falla, a Chartered Accountant, would become Chairman of the Audit Committee. It was not deemed necessary to have a specific job specification for the role of Chairman as an existing board member was appointed to the role. A nomination process for a new director was undertaken to identify the skills needed in the replacement in order to achieve a balance of skills and diversity within the board. The Nomination and Remuneration Committee did not advertise the position, nor engage the services of an external consultant as it was not at the time a recommendation of the AIC Code of Corporate Governance. Following a nomination process, a number of potential non-executive directors were identified satisfying the objectives to achieve diversity, including gender, within the Board and a shortlist of candidates were interviewed. David Moore was selected and joined the Board as a Director of the Company on 12 April 2013, after appropriate induction.

The Company established a Management Engagement Committee which comprises all the Directors, with John Falla as the Chairman. As of 12 April 2013 David Moore became Chairman. The Management Engagement Committee meets at least once a year. The Management Engagement Committee's main function is to review and make recommendations on any proposed amendment to the investment advisory contract between the Company and the Investment Adviser and keep under review the performance of the Investment Adviser in its role as investment adviser to the Company. The Management Engagement Committee considered the performance of the Investment Adviser and presented its view to the Board and the Board concluded that it is in the interest of shareholders to retain the services of the Investment Adviser for the foreseeable future. The Management Engagement Committee also reviewed the performance of all other service providers to the Company, and considered no changes were necessary to their contract terms.

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

David Moore was appointed on 12 April 2013.

Ad hoc board meetings are called as and when required usually to deal with matters relating to the declaration and payment of dividends, share buy backs etc implementing strategy and policies agreed at the quarterly board meetings. They are therefore usually brief and the board does not insist on all directors attending. A quorum is any two directors.

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

For the year ended 31 December 2013 the Directors believe that the Company has been in compliance with the AIC Code provisions insofar as they apply to the Company's business and with the provisions of the UK Code of Corporate Governance except as noted below:

· As the Company is an externally managed investment company and is a feeder fund into the Master Fund the Company does not have a Chief Executive Officer. All of the Company's day to day management and administration is outsourced to third parties..

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

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

· No separate senior independent director has been appointed as this is not considered appropriate given the size and composition of the Board.

By order of the Board

David Staples

Director

4 April 2014

Principal Risks and Uncertainties

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

General market, economic, fiscal and regulatory environment:

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

· Declaration, payment and the amount of any future dividends by the Company are subject to the discretion of the Directors and will depend upon, among other things: the performance of the Master Fund, 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 investment strategy of the Company:

· The Company is not able to participate in the investment 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 Pounds Sterling and the currency in which certain investments are made.

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

· Repayments from loans may lead to early repayments of capital to shareholders.

Reliance on the Investment Adviser:

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

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

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

Statement of Directors' Responsibilities

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

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

· select suitable accounting policies and then apply them consistently;

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

· state whether applicable IFRSs as adopted by the EU have been followed subject to any material departures disclosed and explained in the financial statements; and

· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

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

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

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

Directors' statement pursuant to the Disclosure and Transparency Rules and the UK Corporate Governance Code

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

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

· the financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for the shareholders to assess the Company's performance, business model and strategy, and

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

By order of the Board

David Staples

Director

4 April 2014

Directors' Remuneration Report

The Board of Directors of Duet Real Estate Finance Limited presents its Directors' remuneration report in respect of the year ended 31 December 2013.

Remuneration policy

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

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

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

The Chairman of the Board and the Audit Committee Chairman are entitled to receive fees at a higher level (£30,000 per annum and £25,000 per annum respectively, increasing to £33,000 and £27,500 respectively from 1 January 2014) than those of the other Directors (£20,000 per annum, increasing to £22,000 from 1 January 2014), reflecting their additional duties and responsibilities. Directors' fees are not subject to any performance criteria. In addition to the annual fees, each Director is entitled to receive reasonable additional fees in respect of his services in relation to any material transaction undertaken by the Company and in relation to any services provided to the Company that are not currently envisaged or any commitment required in relation to his role in excess of that currently envisaged. No additional fees were charged in the year ended 31 December 2013.

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

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

Company performance

The Directors believe that a return calculated on the NAV is the most appropriate measure of the Company's performance as it is the measure which is most aligned with the interests of shareholders.

The NAV total return for the year ended 31 December 2013 was 5.1% (2012: 6.3%).

Directors' remuneration

The fees to Directors during the year ended 31 December 2013 and period ended 31 December 2012 were as follows:

Following the death of Mr Burgess on 29 December 2012, Mr Staples became Chairman of the Board and Mr Falla became Audit Committee Chairman. Mr Moore was appointed on 12 April 2013.

The approval of this report by the shareholders of the Company is to be sought by ordinary resolution at the annual general meeting to be held on 13 June 2014.

By order of the Board

David Staples

Director

4 April 2014

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

Report on the Financial Statements

We have audited the accompanying financial statements of Duet Real Estate Finance Limited ("the Company") which comprise the statement of financial position as of 31 December 2013 and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended and a summary of significant accounting policies and other explanatory information.

Directors' Responsibility for the Financial Statements

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

Auditors' Responsibility

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

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

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

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of the Company as of 31 December 2013, and of its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards (as adopted by the European Union) and have been properly prepared in accordance with the requirements of The Companies (Guernsey) Law, 2008.

Report on other Legal and Regulatory Requirements

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

In our opinion:

· the information given in the Directors' Report is consistent with the financial statements; and

· the information given in the Report of the Audit Committee with respect to internal control and risk management systems is consistent with the financial statements.

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

Matters on which we are required to report by exception

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

· the Directors' statement in relation to going concern;  

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

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

JOHN PATRICK ROCHE

For and on behalf of PricewaterhouseCoopers CI LLPChartered Accountants and Recognised AuditorGuernsey, Channel Islands

4 April 2014

Statement of Comprehensive Income

For the year ended 31 December 2013

The notes form an integral part of these financial statements.

Statement of Financial Position as at 31 December 2013

The notes form an integral part of these financial statements.

The financial statements were approved by the Board of Directors on 4 April

2014 and were signed on its behalf by:

David Staples

Director

Statement of Changes in Equity

For the year ended 31 December 2013

The notes form an integral part of these financial statements.

Statement of Cash Flows

For the year ended 31 December 2013

The notes form an integral part of these financial statements.

Notes to the financial statements for the year ended 31 December 2013

1. General information

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

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

2. Summary of significant accounting policies

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

Basis of preparation

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

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

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

The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in the functional and presentational currency section of the foreign currency translation note and in note 6 and in the following paragraph below.

As the consolidated financial statements of the Master Fund do not distinguish between distributions of an income or capital nature, the Directors have sought confirmation from the General Partner of the Master Fund as to the form of amounts received by the Partnership to fund such distributions. The General Partner has provided confirmation to the satisfaction of the Directors that the form of distributions from the Master Fund to the Company in the year and prior year were funded (in full) by the settlement of interest accrued on intragroup loans advanced by the Master Fund to its subsidiary. As such, all distributions received in the year and prior year from the Master Fund are accounted for as Investment Income. The Directors also note their intention to account for distributions as a reduction to the cost of the Company's investment in the Master Fund in the event that the General Partner advises the Company that distributions have been financed by a return of principal on its intragroup loan.

New IFRS standards, amendments and interpretations

The Company has adopted all relevant and below mentioned standards since 1 January 2013.

The Directors have assessed the impact of these amendments and concluded that these new accounting standards do not affect the Company's results of operations or financial position.

Certain additional disclosures requirements in IFRS 13 have been included in these financial statements.

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

There are no other new IFRS standards, amendments and interpretations issued but not effective for the financial year and not early adopted which are expected to have a material impact of the financial statements.

Impact of standards issued but not yet applied

IFRS 9, 'Financial instruments', issued in November 2009 and October 2010. 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 2015 but is available for early adoption. However, the standard has not yet been endorsed by the EU. The Company is yet to assess IFRS 9's full impact. However, initial indications are that it should not materially affect the Company's accounting for its financial instruments.

IFRS 10, 'Consolidated financial statements'; IFRS 11, 'Joint arrangements', IFRS 12 'Disclosures of interests in other entities', IAS 27, 'Separate financial statements' and IAS 32, 'Financial instruments: Presentation' have also been issued. All of these new standards are effective from 1 January 2014. The Company has yet to assess the full impact of these new standards. However, initial indications are that they should not impact materially on the Company's financial statements.

Foreign currency translation

Functional and presentation currency

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

Transactions and balances

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

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

Financial assets at fair value through profit or loss

Classification

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

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

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

Recognition, derecognition and measurement

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

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

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

Fair value estimation

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

Transfers between levels of the fair value hierarchy

Transfers between levels of the fair value hierarchy are deemed to have occurred at the end of the reporting period.

Receivables

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

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

Cash and cash equivalents

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

Payables and accrued expenses

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

Dividend distribution

Dividend distribution to the Company's shareholders is recognised as a liability in the Company's financial statements in the period in which the dividends are declared and have received all of the required approvals by either the Directors or shareholders.

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 its income received.

Segment reporting

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

Share capital

Ordinary shares are classified as equity.

3. Expenses

Auditors' remuneration

4. Taxation

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

5. Dividends

6. Financial assets at fair value through profit or loss

The non-current investment comprises an investment in the Master Fund. The Company has a committed investment of £75,333,953 (2012: £75,333,953) of which £71,451,201 (2012: £63,898,919) has been drawn down at the period end. The undrawn commitment to the Master Fund at 31 December 2013 is £3,882,752 (2012: £11,435,034). The undrawn commitment will not be drawn in its entirety by the Master Fund, as Limited Partners are proportionally drawn on their commitment, other than for advisory fees, on which the Company pays a reduced fee. The level of commitment that will not be drawn down is £1,441,000 (2012: £1,234,000).

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 year, 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 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 NAV provided, (iv) any restrictions on redemptions, and (v) the basis of accounting adopted by the Master Fund in valuing the investments held and in reporting to investors (the Master Fund reports to investors using IFRS principles). If necessary, the Directors make adjustments to the NAV of the Master Fund so as to obtain the best estimate of fair value as at the period end date. No such adjustments have been made to the reported NAV of the Master Fund as it applies to the Company as at 31 December 2013. In addition to normal short term receivables/payables and cash balances, the investment portfolio held by the Master Fund as at 31 December 2013 included;

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

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

Although the Directors use their best judgment 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.

Investments of £63,126,188 were transferred from level 2 to level 3 on 31 December 2012. Level 2 inputs, other than quoted prices included as level 1, are observable either directly (as prices) or indirectly (derived from prices).

The Company is exposed to market price risk from its holding in the Master Fund. If the fair value of the investment in the Master Fund increased (or decreased) by 5%, with all other variables held constant, net assets would increase (or decrease) by £3,369,462 (31 December 2012: £3,156,309). 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.

7. Earnings per share and net asset value per share

The earnings per share calculation is based on profit/(loss) for the year and total comprehensive income of £3,786,862 (2012: £4,538,596) and the weighted average number of shares in issue for the year of 74,963,554 (2012: 75,712,393).

Net asset value per share is based on net assets of £70,088,284 (2012: £73,905,630) divided by the 74,925,109 (2012: 75,047,609) ordinary shares in issue at 31 December 2013.

8. Payables

9. Share capital

The authorised shares of the Company are as follows:

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

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

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

Purchase of own shares

During the year the Company purchased 122,500 (2012: 928,640) of its own shares for £109,247 (2012: £835,908).

The shares were bought back on the open market and were cancelled. The cancelled shares represented 0.2% (2012: 1.2%) of the voting rights.

All shares bought back were purchased at a discount to NAV inclusive of the transaction costs and so their subsequent cancellation was accretive to NAV per share.

10. Cash and cash equivalents

11. Financial risk management

The Company is committed to invest in the Master Fund. Funds held to meet future drawdowns and funds held pending return to shareholders are invested in money market funds and cash.

The Company's material financial instruments comprise:

· Investment in the Master Fund

· Investment in money market funds

· Cash

Financial risk management and policies

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

Market price risk

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

The Company also holds most of its cash awaiting calls for drawdowns from the Master Fund and cash pending return to shareholders in money market funds which distribute all income and have a stable NAV.

Foreign currency risk

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

Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company's exposure to market risk for changes in interest rates relates primarily to the Company's money market funds and cash. All cash bears interest at floating rates. The following table sets out the Company's exposure to interest rate risk at 31 December 2013:

The interest bearing assets are all at floating rates denominated in Pounds Sterling. The cash and cash equivalents have daily liquidity. If the interest rate increased/decreased by 50 basis points and all other variables were held constant, the net income would increase/decrease for a year by £13,574 (2012: £53,970).

Credit risk

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

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

The Company is also invested in money market instruments totaling £2,695,450 (2012: £10,781,078) at 31 December 2013, all with a Triple A rating. In addition the Company holds cash at a bank with a rating of A-1+.

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

Liquidity risk

Liquidity risk is the risk that the Company will encounter in realising assets or otherwise raising funds to meet its financial commitments. Substantially all of the Company's assets are invested in the Master Fund. Funds held pending investment in the Master Fund are invested in highly liquid money market investments. Commitment cover at 31 December 2013 was 69.9% (2012: 94.4%) or when taking account of the level of commitment that will not be drawn down is 111.2% (2012: 105.8%). The undrawn commitment will not be drawn in its entirety by the Master Fund, as Limited Partners are proportionally drawn on their commitment, other than for advisory fees, on which the Company pays a reduced fee. For further information on commitments see note 6.

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

Fair value

All the Company's investments are carried at fair value at the balance sheet date. For certain financial instruments including receivables and payables the carrying value approximates to fair value due to the immediate or short term nature of those financial instruments. Interest receivables, receivables and payables are considered to fall within level 3 of the fair value hierarchy, whilst cash and cash equivalents are deemed level 1 assets.

12. 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 investment advisory agreement was novated from Duet Private Equity Limited to ERED on 11 May 2012. The charge for the year was £25,000 (2012: £25,000) and there was a prepayment of £6,250 at 31 December 2013 (2012: 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 6.

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 (2012: 7,000) and David Moore has an interest in 39,329 shares (2012: Nil). David Moore acquired 17,978 shares on 18 April 2013 and 21,351 shares on 4 December 2013. No other Director who held office at 31 December 2013 had an interest in the ordinary shares of the Company.

13. Subsequent events

A distribution of £10,002,745 was received from the Master Fund on 20 January 2014 representing the Company's share of proceeds realised on three of its mezzanine loan investments.

On 25 February 2014, the Company issued 74,925,109 B shares of no par value to existing holders of ordinary shares pro rata to their current holding. The Company issued these shares with the intention of redeeming them at a predetermined price per share. On 26 February 2014, the B shares were redeemed by the Company at a redemption price of 13.35 pence per B share. The rationale for this issue and redemption was to effect a return of capital in the amount of £10,002,502 to the Company's shareholders following a distribution of capital from the Master Fund of a similar amount.

A dividend of 2.25 pence per ordinary share was paid on 14 March 2014to ordinary shareholders on the register on 21 February 2014

Subsequent to 31 December 2013, up to the date of this report, a further 250,000 shares have been bought back for £184,013.

Company Information