Darwin Leisure Property Fund

DARWIN LEISURE PROPERTY FUND

Report & Consolidated Audited Financial Statements

For the year ended 30 September 2012

TABLE OF CONTENTS For the year ended 30 September 2012

Page

General Information 3 The Fund 5 Investment Adviser ’s Report 6 Manager’s Report 10 Trustee’s Report 12 Independent Auditor ’s Report 13 Consolidated Statement of Total Return 15 Consolidated Statement of Changes in Net Assets Attributable to Unitholders 15 Consolidated Balance Sheet 16 Consolidated Statement of Cash Flows 17 Notes to the Consolidated Financial Statements 19 -36

Darwin Leisure Property Fund

GENERAL INFORMATION

TRUSTEE: Kleinwort Benson (Guernsey) Limited PO Box 44 Dorey Court Admiral Park St Peter Port Guernsey GY1 3BG

ADMINISTRATOR, SECRETARY Legis Fund Services Limited AND REGISTRAR: PO Box 91 11 New Street St Peter Port Guernsey GY1 3EG

MANAGER: Darwin Property Investment Management (Guernsey) Limited 11 New Street St Peter Port Guernsey GY1 2PF

DIRECTORS OF THE MANAGER: Ian Michael Burns Anthony Geoffrey David Esse Christopher James Affleck Penney Robin Haake Smith Martin Paul Tolcher

INVESTMENT ADVISER: Darwin Property Investment Management Limited Stanmore House 29/30 St James’s Street London SW1A 1HB

CHANNEL ISLAND S STOCK Legis Fund Services Limited EXCHANGE SPONSOR: PO Box 91 11 New Street St Peter Port Guernsey GY1 3EG

Darwin Leisure Property Fund

GENERAL INFORMATION (CONTINUED)

INDEPENDENT AUDITOR : Grant Thornton Limited PO Box 313 Lefebvre House Lefebvre Street

St Peter Port

Guernsey GY1 3TF

PROPERTY VALUERS: Jones Lang LaSalle LLP 30 Warwick Street London W1B 5NH

BUSINESS VALUERS: Smith and Williamson Ltd 25 Moorgate London EC2R 6AY

LEGAL ADVISE RS TO THE FUND: In Guernsey:

Mourant Ozannes (Resigned 9 January 2012) 1 Le Marchant Street St Peter Port Guernsey GY1 4HP

Babbe (Appointed 9 January 2012) 18-20 Smith Street St Peter Port Guernsey GY1 4BL

In United Kingdom:

Field Fisher Waterhouse LLP 35 Vine Street London EC3N 2AA

Darwin Leisure Property Fund

THE FUND

The Darwin Leisure Property Fund (the “Fund”) was authorised as a Class ‘B’ Scheme by the Guernsey Financial Services Commission under The Protection of Investors (Bailiwick of Guernsey) Law, 1987, (as amended) on 6th December 2007. The Fund was established in Guernsey as a Qualifying Investor Fund, but this was varied with effect from 29 June 2012 to remove the requirement that only qualifying investors could invest.

INVESTMENT SUMMARY

The purpose of the Fund is to invest in a portfolio of interests in UK and Irish based holiday caravan parks. The Fund acts as a pooled investment medium for its unitholders, thereby relieving them of the need to select, manage, and maintain individual property investments.

The Fund has acquired and intends to expand a portfolio of caravan parks so that unitholders can participate in the attractive income available in those markets as well as any future capital value growth.

Investment decisions made by the Manager reflect the long term objective to maximise total return of rental income plus capital appreciation. The Manager has appointed Darwin Property Investment Management Limited, UK (“DPIM”) as its Investment Adviser. DPIM will provide advice to the Manager on property matters in relation to the Fund.

The value of the Fund’s investments is reflected in the value of the units which is dependent upon an independent valuation of the investment properties undertaken by the property valuers.

The financial objective of the Fund is to provide annual compound growth (being defined as the sum of net income added to the movements in the capital value of the underlying assets during the period).

Darwin Leisure Property Fund

INVESTMENT ADVISER’S REPORT For the year ended 30 September 2012

Fund performance

For the year ended 30 September 2012 the valuation unit price of the total Fund increased by 20.2%.

The Industry and Market

The Darwin Leisure Property Fund invests solely in Holiday Parks located in the UK, with a view to making annualised returns of between 8% - 12% through a combination of income and capital growth. The fund yields 6% (net to investors) and remains the only fund that is a pure investment play on the holiday park industry.

Holiday parks have stable long-term cash flows which are typically generated through:

• Sales of lodges, static caravans and pitches to new owners and a flow of upgrade sales to existing owners. • Annual site fees from owners of static caravans and lodges. • Holiday rentals of lodges, static caravans and touring and tenting pitches. • On-site food, beverage and leisure operation revenues.

When the economy is strong, owners tend to trade up to more expensive caravans more regularly (typically every three to five years), generating increased sales, and in times of weakness people switch to camping and caravan holidays, as opposed to other types of holiday, driving rental income.

The market is divided into two types of operators: At least 85 per cent of this lucrative market is made up of lifestyle operators (e.g. husband and wife) who lack the capital to make a significant investment in the business while the balance is multiple site owners. This split has created a hugely inefficient and under-developed industry – the top 3 players own less than 7% of the total market.

The industry in general has suffered slightly from the overall economic downturn, but is relatively resilient because of customers’ increased willingness to holiday in the UK and to take more shorter- break holidays. For the large operators, focused on owner-occupier business models, the current economic downturn has caused significant problems, since their own capacity to raise finance is reduced and the willingness of their owners to upgrade is considerably lower. Consequently, caravan sales are lower and these park operators experience greater pressure on their cashflow.

Darwin Leisure Property Fund

INVESTMENT ADVISER’S REPORT (CONTINUED) For the year ended 30 September 2012

In the case of the Fund, the operational strategy for the parks in the portfolio creates resilience against these factors. The relatively low cost and flexibility of a caravan holiday provides additional stability in times of economic uncertainty. Furthermore, there are various factors which reduce the Fund’s park portfolio’s vulnerability to an economic slowdown, including:

1. Diversity of income streams within the parks 2. Flexibility to switch between holiday rentals and sales as economic conditions change 3. Investment decisions which can be deferred or downscaled according to market conditions

A further driver of value creation for the Fund has been the changing planning landscape. Over the last two years local planners have appreciated the need to allow transformational development, on existing sites, from sub-optimal campsites to year round lodge developments. This has been driven by their recognition of the economic growth and increased employment to the local community which these upgraded sites can bring. This change in their thinking and decision-making will enable the Fund to continue, we believe, to make excess returns over the medium to longer term against the original investment thesis.

The Fund

Currently the Fund has 15 parks in the portfolio, providing investors with a combination of capital growth and a secure income stream. The Manager remains cognisant of the fact that an appropriate balance must be kept between providing a secure income stream and delivering capital returns. As at 30 September, the portfolio has two categories of parks:

1. Fully Operating Parks – we continue to improve facilities and the park environment at these sites to ensure that they are, and remain, “best in class”. This then creates a virtuous circle for both holiday home owners and holiday makers, which in turn drives occupancy and therefore profitability. Where feasible, we also seek to move the business model from touring / tenting to static / lodge pitches. 2. Parks in Development and Transition - where significant additional planning permissions have been obtained, or which were acquired for development

The transitional parks are those where we have obtained planning permission to change the product mix from tents to static caravans and lodges. Whilst a campsite does produce excellent returns on the original capital deployed, by transforming these businesses into higher revenue-generating caravan and/or lodge parks, we can provide investors with increased capital returns as well as higher on-going income payments.

Darwin Leisure Property Fund

INVESTMENT ADVISER’S REPORT (CONTINUED) For the year ended 30 September 2012

Fully Operating Parks

Talacre Beach – Talacre won Best Park in Wales for 2012 at the Wyndham / Hoseasons annual awards. The park remains an outstanding example of how to create an environment that surpasses customer expectations. In the early part of the year we undertook a major redevelopment project of the central facilities which resulted in a substantial increase in expenditure by holiday makers and holiday home owners within our food, beverage and leisure outlets.

New Pines - This five star holiday home park in North Wales offers some of the best facilities within North Wales and continues to trade in line with expectations.

Seaview - Overlooking the Dee estuary and Colwyn Bay, Seaview is a peaceful holiday home park offering some spectacular views. It is much sought after as a location by holiday home owners.

Beachside – This small static caravan park, outside Ilfracombe, has been a very popular holiday destination. However, the existing fleet is coming to the end of its useful life and thus presents an opportunity to significantly upgrade the level of accommodation without requiring any further planning permissions. This upgrade will take place in the first half of 2013 with bespoke lodge / caravan units being introduced to create a premium holiday park.

Hawkchurch Country Park – The Fund has obtained planning permission to increase the number of lodges and static caravans at Hawkchurch and it is our plan to embark on the upgrade of the park for start of the 2013 season. As with all the parks that fall into this category, our vision is to withdraw or eliminate our exposure to the more seasonal tenting and touring. We are currently in discussions with the local planners to extend the lodge and static caravan pitches across the whole park.

Newton Mill – Situated within two miles of the centre of Bath this park currently caters solely for touring caravans and tents. Planning consent has been obtained to install lodges at one end of the park but we are working to increase this to encompass the whole of the park.

Peartree Holiday Park – A small tenting and touring park in Wareham in Dorset. We are looking at the options for the park and will embark on discussions with the Local Authority in the near future to add lodges and static caravans to the site. Peartree has traded very profitably but, as with any park, this level of profitability would be substantially increased through a lodge and caravan offering.

Sandymouth Holiday Park – Was the runner up in 2012 for the Best Park in Cornwall at the Wyndham / Hoseasons annual awards and we are currently undertaking a substantial refurbishment of the park. This will bring the amenities up to a premier standard and allow us to offer a mix of holiday and owner-occupied accommodation. We have also obtained additional planning consent to increase our static caravan fleet in what is currently a large tenting field.

Darwin Leisure Property Fund

INVESTMENT ADVISER’S REPORT (CONTINUED) For the year ended 30 September 2012

Swanage Bay View - Set in the hills overlooking Swanage and Poole Bays, this park is an excellent income producer as the Dorset coast remains one of the UK’s tourist “hotspots”.

Tilford Woods – Won Best Lodge Park in the South of England at the 2012 Wyndham / Hoseasons annual awards and is one of the finest examples of a rural retreat offering uncompromising quality. It continues to trade well above expectations and delivers excellent returns for the fund.

Woodside Beach – This park was acquired together with Woodside Bay and is a small caravan park on the edge of the Solent in Osborne Bay on the Isle of Wight. It is our intention to upgrade the site significantly in the first half of 2013 in order to transform the park from the current dated static park into a lodge escape taking advantage of its spectacular location.

Parks in Development and in Transition

Cheddar Woods (previously Broadway House) – Broadway House was a park predominately dedicated to touring and tenting pitches. Work is underway to remove these pitches and create a state-of-the- art caravan and lodge development with brand new leisure facilities. The park should re-open in June 2013 as one of the UK’s most sought after holiday destinations.

Criggan Mill - We have now successfully achieved the planning consent we sought, which will allow us to undertake the redevelopment of the site in order to offer an outstanding lodge holiday experience in a much sought after location on the Lizard Peninsula in Cornwall.

Summerlodge Park – The park is situated four miles from Newquay and therefore has all the benefits that this resort offers whilst retaining its own specific identity. The Fund purchased the park out of administration two years ago and at the end of the 2013 season will re-model it to become another destination park which will meet the expectations of customer requirements and therefore create an extremely profitable enterprise.

Woodside Bay - Over the next two years this development site, located adjacent to Woodside Beach on the Isle of Wight, will become a premium lodge park offering the highest quality accommodation with commensurate amenities.

Outlook

We remain very optimistic about the prospects for the Fund over the next few years, and the returns that it will produce for investors. The Fund is well structured to benefit from the continuing poor economic environment, and will be well placed to prosper further when economic conditions improve.

Darwin Leisure Property Fund

MANAGER’S REPORT For the year ended 30 September 2012

The Manager of the Darwin Leisure Property Fund (the “Fund”) is pleased to submit its Report and Audited Consolidated Financial Statements for the year ended 30 September 2012.

THE FUND

The Fund was established in Guernsey on 5 December 2007 as an open ended unit trust.

On 21 December 2009 the Fund listed on the Channel Islands Stock Exchange.

ACTIVITIES

The Fund’s principal activity is to invest primarily in a portfolio of interests in UK and Irish based holiday caravan parks, which includes land, buildings and static caravans, acquiring and owning such parks with a view to enhancing value through strategic selection and interventionist asset management. Static caravans are moveable as defined in the Caravan Sites and Control of Developments Act 1960 (United Kingdom).

The Fund may invest in such property, directly, or indirectly, through one or more Property Holding Vehicles or other Intermediate Vehicles.

The Fund may also invest in other collective investment schemes, listed and unlisted securities, joint ventures and partnerships, where the Manager considers there is a link with the leisure industry. Due to the nature of the Fund’s assets and lead times to complete purchases, there may be short periods where liquidity levels are relatively high. During such periods, uninvested liquidity will be held in cash deposits, Treasury Bills and other government and public securities, money market instruments or any combination of these investments in holiday caravan parks in the UK and Ireland.

DISTRIBUTIONS

The Manager recommended the payment of a distributions for the year ended 30 September 2012 of 3.75 pence per share on the Class C Accumulation units and 3.09 pence per share on the Class C Income units (2011: £Nil)- see note 5.

STATEMENT OF MANAGER’S RESPONSIBILITIES

The Manager is required to prepare consolidated financial statements for each financial period which give a true and fair view of the state of affairs of the Fund and of the total return for that period. In preparing these consolidated financial statements the Manager is required to:

• select suitable accounting policies then apply them consistently; • make judgements and estimates that are reasonable and prudent; • state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the consolidated financial statements; and

Darwin Leisure Property Fund

MANAGER’S REPORT (CONTINUED) For the year ended 30 September 2012

STATEMENT OF MANAGER’S RESPONSIBILITIES (continued)

• Prepare the consolidated financial statements on a going concern basis unless it is inappropriate to presume that the Fund will continue.

The Manager is responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Fund and to enable it to ensure that the consolidated financial statements comply with the terms of the trust instrument, The Protection of Investors (Bailiwick of Guernsey) Law 1987 as amended, The Collective Investment Schemes (Class B) Rules, 1990 and the applicable accounting standards. It is also responsible for safeguarding the assets of the Trust and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

GOING CONCERN

The Directors have, at the time of approving the consolidated financial statements, a reasonable expectation that the Fund and the Group have adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing these consolidated financial statements.

AUDITOR

The Auditor, Grant Thornton Limited, has indicated their willingness to continue in office.

Signed for and on behalf of the Manager by:

I Burns R Smith Director Director

Date: 25 January 2013

Darwin Leisure Property Fund

TRUSTEE’S REPORT TO THE UNITHOLDERS OF DARWIN LEISURE PROPERTY FUND For the year ended 30 September 2012

In our opinion the Manager has managed the Fund during the year ended 30 September 2012 in accordance with the provisions of the principal documents and The Collective Investment Schemes (Class B) Rules 1990 (“the Class B Rules”) made under The Protection of Investors (Bailiwick of Guernsey) Law 1987 (as amended).

Kleinwort Benson (Guernsey) Limited

CE Roe SJ Solway Authorised “A” signatory Authorised “A” signatory

Date: 25 January 2013

Darwin Leisure Property Fund

INDEPENDENT AUDITOR’S REPORT TO THE UNITHOLDERS OF DARWIN LEISURE PROPERTY FUND

We have audited the consolidated financial statements of Darwin Leisure Property Fund (the “Fund”) for the year ended 30 September 2012 which comprise the Consolidated Statement of Total Return, the Consolidated Statement of Changes in Net Assets Attributable to Unitholders, the Consolidated Balance Sheet, the Consolidated Statement of Cash Flows and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

This report is made solely to the unitholders, as a body. Our audit work has been undertaken so that we might state to the Fund’s unitholders those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Fund and the Fund’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Manager and Auditor

As described in the statement of Manager’s Responsibilities on page 10 and 11 the Fund’s Manager is responsible for the preparation of the consolidated financial statements and for being satisfied that they give a true and fair view.

Our responsibility is to audit and express an opinion on the consolidated financial statements in accordance with applicable legal and regulatory requirements and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the consolidated financial statements

An audit involves obtaining evidence about the amounts and disclosures in the consolidated financial statements sufficient to give reasonable assurance that the consolidated financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Fund’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Manager; and the overall presentation of the consolidated financial statements. In addition, we read all the financial and non-financial information in the other reports included to identify material inconsistencies with the audited consolidated financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Darwin Leisure Property Fund

INDEPENDENT AUDITOR’S REPORT TO THE UNITHOLDERS OF DARWIN LEISURE PROPERTY FUND (CONTINUED)

Opinion

In our opinion the consolidated financial statements:

• give a true and fair view of the state of the Fund’s affairs as at 30 September 2012 and of its total return for the year then ended; • have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and • have been properly prepared in accordance with the Trust Instrument, The Protection of Investors (Bailiwick of Guernsey) Law, 1987 as amended and The Collective Investment Schemes (Class B) Rules, 1990.

GRANT THORNTON LIMITED Chartered Accountants PO Box 313 Lefebvre House Lefebvre Street St Peter Port Guernsey GY1 3TF

Date: 25 January 2013

Darwin Leisure Property Fund

CONSOLIDATED STATEMENT OF TOTAL RETURN For the year ended 30 September 2012 2012 2011 £ £ Notes Unrealised movement of investments 20,951,202 2,261,691 Realised loss on disposal of investments (619,953) (647,171) Realised (loss)/gain on disposal of fixed asset (25,526) 28,245 Income – continuing operations 3 23,306,606 16,666,656 Expenses 4 (24,044,785) (16,869,889) Total return before tax and distributions 19,567,544 1,439,532

Equalisation reserve (17,038,573) (1,439,532) Finance costs: distributions 5 (2,528,971) -

Change of net assets attributable to unitholders - -

The results of the year relate to continuing operations. There are no recognised gains or losses for the year other than the total return.

CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS For the year ended 30 September 2012

2012 2011 £ £

Opening net assets attributable to unitholders 73,554,476 63,693,553

Movement due to issues and redemptions of units Amounts receivable on issue of units 4,109,817 10,452,213 77,664,293 74,145,766 Equalisation reserve 17,038,573 1,439,532 Reinvested accummulation distribution 2,095,640 - Management fees (2,432,525) (1,870,447) Peformance fees (3,040,410) (160,375) Closing net assets attributable to unitholders 91,325,571 73,554,476

The notes on pages 19 to 36 form an integral part of these consolidated financial statements.

Darwin Leisure Property Fund

CONSOLIDATED BALANCE SHEET As at 30 September 2012 2012 2011 Notes £ £ Assets

Fixed Assets Investment properties 7 106,002,340 85,890,222 Tangible assets 8 3,490,430 2,498,759

109,492,770 88,388,981 Current Assets Inventories 1,481,321 1,759,184 Debtors 10 2,568,171 2,000,854 Bank balances 1,133,691 2,130,724 5,183,183 5,890,762

Total assets 114,675,953 94,279,743

Liabilities

Creditors: amounts falling due within one year

Loans 12 15,000,000 15,000,000 Creditors 11 8,350,382 5,725,267

Total liabilities 23,350,382 20,725,267

Net assets attributable to unitholders 16 91,325,571 73,554,476

Number of units in issue 13 71,430,921 67,451,122

Fund net asset value per unit 1.2785 1.0905 Individual Fund class value per share C accumulation value per unit 1.3448 1.1317 C Income value per unit 1.0789 0.9336 D accumulation value per unit 1.3457 - E accumulation value per unit 0.9103 -

The consolidated financial statements on pages 15 to 36 were approved and authorised for issue by the Board of Directors of the Manager on 25 January 2013 and are signed on its behalf by

I Burns R Smith Director Director

The notes on pages 19 to 36 form an integral part of these consolidated financial statements.

Darwin Leisure Property Fund

CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 30 September 2012

Year ended 30 Year ended 30 September 2012 September 2011 Reconciliation of total return before distribution to net £ £ cash inflow from operating activities Total return before distributions 19,567,544 1,439,532

Increase in unrealised gain on investments (20,951,202) (2,261,691) Decrease/(increase) in inventories 277,863 (1,526,112) (Increase)/decrease in debtors (567,317) 604,995 Decrease in minority interest - (529,420) Loss/(gain) on disposal of tangible assets 25,526 (28,245) Increase in creditors 2,625,114 2,851,438 Loss on disposal of investment property 581,791 647,171 Finance costs - 187,500 Bank charges 380,481 264,939 Loan interest 431,390 187,307 Depreciation 450,666 298,504

Net cash inflow from operating activities 2,821,856 2,135,918

Investing activities Purchase of tangible assets (1,528,099) (2,156,264) Proceeds on disposal of tangible assets 60,237 28,245 Proceeds from disposal of investment property 784,800 1,376,805 Purchase of investment properties (527,507) (28,773,885) Net cash outflow in investing activities (1,210,569) (29,525,099) Financing activities Proceeds from issue of units 4,109,817 10,452,213 Management fees and performance fees paid and charged to capital (5,472,935) (2,030,822) Bank loan (repaid)/received - Barclays Bank PLC (15,000,000) 15,000,000 Bank loan received - Lloyds TSB Bank PLC 15,000,000 - Bank loan paid - Clydesdale Bank PLC - (798,983) Finance costs - (187,500) Bank charges (380,481) (264,939) Loan Interest (431,390) (187,307) Distributions paid (433,331) -

Net cash (outflow)/inflow from financing activities (2,608,320) 21,982,662

Darwin Leisure Property Fund

CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED) For the year ended 30 September 2012 Year ended 30 Year ended 30 September 2012 September 2011 £ £

Net cash outflow for the year (997,033) (5,406,519)

Net cash and cash equivalents at the beginning of the year 2,130,724 7,537,243

Net cash and cash equivalents as the end of the year 1,133,691 2,130,724

Represented by: Cash and cash equivalents at the end of the year 1,133,691 2,130,724

The notes on pages 19 to 36 form an integral part of these consolidated financial statements.

Darwin Leisure Property Fund

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 September 2012

1. PRINCIPAL ACCOUNTING POLICIES The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Group’s consolidated financial statements.

Basis of accounting

The Consolidated financial statements have been prepared under the historical cost convention, modified by the revaluation of investment properties, and in accordance with applicable United Kingdom Generally Accepted Accounting Practice and the Statement of Recommended Practice “Financial Statements of Authorised Funds” issued by the Investment Management Association in November 2008.

Basis of consolidation

The consolidated financial statements consolidate the results of the Fund and its subsidiaries and quasi subsidiaries drawn up to 30 September each year. The subsidiaries and quasi subsidiaries have been included in the Consolidated Financial Statements using the acquisition method of accounting. Accordingly the Consolidated Statement of Total Return, Consolidated Balance Sheet, Consolidated Changes in Net Assets Attributable to Unitholders and Consolidated Statement of Cash Flows include the results of the subsidiaries from acquisition date.

All of the Group companies have 30 September as their year end.

Consolidated financial statements are prepared using uniform accounting policies for like transactions. Amounts reported in the consolidated financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Group.

Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

Income and turnover

Rental income and deposit interest are accounted for on an accruals basis. Rental income from investment properties leased out under operating leases and sales are recognised in the Consolidated Statement of Total Return on a straight-line basis and shown gross of any UK income tax. Provision is made when there is objective evidence that the Group will not be able to recover balances in full. Outstanding rental income balances are written off when the probability of recovery is assessed as being remote. The turnover consists of fees received for caravan rental and sales at the on-site facilities, and is recognised net of VAT. Other park revenue consists of touring and tenting, bar and restaurant takings and other income.

Darwin Leisure Property Fund

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 30 September 2012

1. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

Expenses

Expenses are accounted for on an accruals basis. Transaction costs directly applicable to the purchase of investment properties are included within the initial cost of the property. Any directly applicable transaction costs incurred in an aborted investment property transaction previously capitalised in the Consolidated Balance Sheet under investment properties are written off to the Consolidated Statement of Total Return when the transaction is aborted.

Management fees and performance fees are charged directly to the capital account because, in the opinion of the Manager, the principle aim of the Fund is to generate long term capital growth.

Organisation Costs

For the purposes of calculating the Net Asset Value for dealing purposes the organisational costs are amortised over 5 years. This does not comply with UK GAAP so for financial reporting purposes these organisation costs have been taken to the Consolidated Statement of Total Return in full in the period in which they are incurred. A reconciliation of the Net Asset Value per the published September Net Asset Value Statement to the Net Asset Value based on these consolidated financial statements is included in Note 16.

Investment properties

Investment properties comprise of:

- Operating assets - These assets are used for their investment potential, any rental income being negotiated at arm’s length. - Assets in development and in transition - These are parks which were acquired as development sites (limited in number) or those parks for which significant planning permission has been obtained. - Non operating assets - These are assets within the parks which have the potential to be exploited for business use at a later date.

Investment property is initially measured at cost, being the fair value of the consideration given, including related transaction costs. After initial recognition, the investment property is carried at fair value. Gains and losses arising from changes in the fair values are included in the Consolidated Statement of Total Return. The fair value is the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction. The estimation of fair value does not assume that either the underlying business is saleable at the reporting date or that their owner/s have the intention to sell in the near future. The objective is to estimate the exchange price at which hypothetical market participants would agree to transact. The fair value

Darwin Leisure Property Fund

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 30 September 2012

1. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

Investment properties (continued)

of the investment property is largely based on estimates using property appraisal techniques and other valuation methods as outlined in Note 2. Such estimates are inherently subjective and actual values can only be determined in a sales transaction.

Tangible assets

Tangible assets held for use in the operation of the caravan parks are stated at cost or fair value less subsequent depreciation and impairment losses. Tangible assets are depreciated on a straight line basis as follows: Plant and machinery 4 - 10 years straight line Buildings and improvements 4 - 10 years straight line Office equipment 4 - 10 years straight line Furniture and fittings 4 - 10 years straight line Static caravans and Motor vehicles 4 years straight line

Financial instruments

Financial assets and financial liabilities are recognised on the Consolidated Balance Sheet when the Group becomes party to the contractual provisions of the instrument.

Debtors – debtors do not carry interest and are stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts.

Financial liabilities – Financial liabilities are classified according to the substance of the contractual arrangements entered into.

Trade and other creditors – Trade and other creditors are not interest bearing and are recorded at their nominal value.

Loans and borrowings

All loans and borrowings are initially recognised at fair value less directly attributable transaction costs. After initial recognition interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Non-interest bearing loans continue to be measured at the fair value, which is its discounted repayment amount. If the due date of the liability is less than one year, discounting is omitted.

Darwin Leisure Property Fund

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 30 September 2012

1. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

Loans and borrowings (continued)

Loans and borrowings are classified as current unless the Group has an unconditional right to defer settlement for at least 12 months after the balance sheet date.

Deferred acquisition costs are costs incurred in obtaining the loan and is presented together with the loan balance. Deferred acquisition costs are amortised over the repayment period of the loan. Finance costs incurred from loans and borrowings are recognised in the Consolidated Statement of Total Return.

Inventories Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the first in, first out method. Net realised value is based on the estimated selling price less all estimated costs.

Equalisation reserve Equalisation reserve is the amount included in the purchase price of units which represents their proportion of the net income of the Fund already accrued up to the date of purchase. If this charge were not made, the income which existing unitholders could expect to receive would be diluted every time new shares were created. This amount is refunded to unitholders as part of their first distribution after the purchase of units.

The equalisation reserve represents the total return after distributions.

Distributions

The net distributable income of the Fund will be allocated at the end of each calendar quarter in an Accounting Period which ends on 31 December, 31 March, 30 June and 30 September. In the case of Income Units, the income allocated will be distributed within 50 Business Days of the relevant quarter date.

Darwin Leisure Property Fund

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 30 September 2012

2. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

Valuation of Investment Property

In accordance with the Group’s accounting policies, investment property is stated at fair value as at the balance sheet date. This is determined by the investment adviser and independent valuation experts using recognised valuation techniques.

-Operating assets

These are stated at fair value as determined by the investment adviser using the Discounted Cash Flow (DCF) method. Caravan parks are commercial businesses and, from time to time, the Manager will be purchasing non-transferable securities. The Manager has determined that it is appropriate and prudent to have the operating assets reviewed by independent business valuers.

The independent business valuers to the Fund scrutinise the operating assets by using a ten-year Discounted Cash Flow (DCF) model, which incorporates management projections of revenues and costs for each of the parks. The business valuers provides an independent assessment review of the methodology and the underlying assumptions. The inputs for the DCF model are drawn from the management accounts. The business valuers is responsible for setting the Weighted average Cost of Capital (WACC) for the Fund, which is then used to discount the future cash flows, which are used to value the Fund. The independent valuers then provide a key findings report on the valuations, which is sent directly to the Fund Administrator to calculate the NAV of the Fund before releasing it to the Channel Islands Stock Exchange.

The investment valuation included on a discounted cash flow basis is subject to a number of assumptions, and therefore significant judgement is required in determining the underlying valuation. The key variable in this valuation is the calculation of the WACC, set by the business valuers, which as at the September 30 2012 valuation was determined at 12.2%.

-Assets in development and in transition

These are parks which were acquired as development sites (limited in number) or those parks for which significant planning permission has been obtained. Extensive discussions were held with the business valuers to determine the most appropriate methodology for valuing these parks,. Consideration was given to using the DCF approach but it was concluded that such an approach might risk over-valuing the parks. Therefore, having a reviewed a number of alternatives, it was decided to use an EBITDA multiple approach, the valuation from which was more conservative than the full DCF, since it used assumptions from existing park performance rather than the expected yield from newly transformed parks. Consequently, these assets are valued on a capitalisation of earnings model, the assumptions for which are reviewed and assessed by the independent business valuers.

Darwin Leisure Property Fund

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 30 September 2012

2. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (CONTINUED)

Valuation of Investment Property

-Non-operating assets These assets which are not part of the operating assets of the portfolio, for example, property that was acquired with the park which is used for park manager accommodation, or land which as yet has no planning permissions, have been valued by Jones Lang LaSalle Limited, a financial and professional services firm specialising in real estate. Jones Lang LaSalle is a member of the Royal Institute of Chartered Surveyors with revenues of $3.6 bn in 2011. The determination of the fair value of investment properties requires the use of estimates such as future cash flows for assets and discount rate applicable to those assets.

The continuing volatility in the global financial system is reflected in the turbulence in commercial real estate markets across the world. The significant reduction in transaction volume continued this year. Therefore, in arriving at their estimates of market values as at 30 September 2012, the investment adviser has used their market knowledge and professional judgement and has not relied solely on historic transactional comparables. In these circumstances, there is a greater degree of uncertainty than that which exists in a more active market in estimating the market Values of investment property. Such estimates are inherently subjective and actual values can only be determined in a sales transaction. The lack of liquidity in capital markets also means that, if it was intended to dispose of the properties, it may be difficult to achieve a successful sale of the investment properties in the short term, unless offered as a discount sale.

The Directors of the Manager are confident that the valuation included in the consolidated financial statements has been incorporated on a consistent basis using sensible and supportable assumptions.

3. INCOME – CONTINUING OPERATIONS Year ended 30 Year ended 30 September 2012 September 2011 £ £ Bank interest income 1,401 17,002 Private static fleet rental 2,476,699 4,084,838 Hire fleet rental 4,861,541 1,896,491 Operating income (i) 2,379,762 2,440,495 Sales revenue on caravans 9,355,786 5,206,265 Touring income 1,513,211 1,283,916 Other park revenue (i) 2,718,206 1,737,649 Total Income 23,306,606 16,666,656

Darwin Leisure Property Fund

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 30 September 2012

3. INCOME – CONTINUING OPERATIONS (CONTINUED)

(i) Operating income comprises of income generated on contracts within Darwin Contract Management Limited. Other park revenue consists bar and restaurant takings and other income.

4. EXPENSES

Year ended 30 Year ended 30 September 2012 September 2011

£ £ Park cost of sales 4,545,324 2,132,916 Caravans cost of sales 5,707,954 4,004,497 General and administrative expenses 2,329,668 2,117,381 Audit and accounting fees 66,264 96,001 Wages and salaries 5,067,775 4,770,093 Legal and professional 2,497,146 1,121,231 Consultancy fees 202,997 86,917 Marketing expenses 364,872 398,304 Bank charges 380,481 264,939 Write off debtor 370,342 24,900 Loan interest 431,390 187,307 Operating expenses 1,355,713 1,183,804 Property expenses 27,029 8,018 Administrator’s fees 160,609 141,224 Depreciation 500,080 298,504 Trustee’s fees 37,141 33,853 Total Expenses 24,044,785 16,869,889

5. FINANCE COSTS : DISTRIBUTIONS

The Manager recommended that a distribution be made for the year ended 30 September 2012 of £2,528,971 being 3.09 pence per Class C Income Unit and 3.75 pence per Class C Accumulation Unit (30 September 2011: nil).

6. TAXATION

The Fund is exempt from Income Tax in Guernsey under the Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989. The Fund pays an annual fee to the States of Guernsey Income Tax Office, presently set at £600. The Group is liable to United Kingdom income tax on its net rental income.

Darwin Leisure Property Fund

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 30 September 2012

7. INVESTMENT PROPERTIES Year ended 30 Year ended 30 September 2012 September 2011 £ £ At start of year 85,890,222 56,878,622 Additions 527,507 28,773,885 Proceeds on disposals (784,800) (1,376,805) Realised loss on disposal (581,791) (647,171) Unrealised gain on revaluation of investments 20,951,202 2,261,691 At end of year 106,002,340 85,890,222

Percent of total 2012 investments 2011 Operating assets £ £ Sunnybank Caravan Park - - 1,000,000 Hawkchurch Country Park 5,588,169 4.87% 5,787,339 Pear Tree Holiday Park 1,394,531 1.22% 1,519,100 Tilford Woods Lodges Park 4,476,552 3.90% 4,507,723 Newton Mill Holiday Camping Park 4,351,256 3.79% 3,654,231 Beachside Holiday Park 865,756 0.75% 1,040,244 Sandymouth Holiday Park 6,467,362 5.64% 8,873,640 Swanage Bay View Holiday Park 13,588,746 11.85% 15,705,809 Talacre Beach Caravan and Leisure Park, The New Pines Holiday Homes Resort and Seaview Holiday Home Park 29,983,404 26.15% 26,182,371 Broadway House Holiday Park - - 6,498,865 Criggan Mill LLP - - 1,325,000 Summer Lodge Holiday Park - - 4,665,170 Woodside Beach Holiday Park - - 3,725,730 66,715,776 58.17% 84,485,222

Percent of total 2012 investments 2011 Assets in development and in transition £ £ Broadway House Holiday Park 11,158,384 9.73% - Criggan Mill LLP 3,069,000 2.68% - Summer Lodge Holiday Park 10,948,887 9.55% - Woodside Beach Holiday Park 12,785,293 11.15% - 37,961,564 33.11% -

Darwin Leisure Property Fund

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 30 September 2012

7. INVESTMENT PROPERTIES (CONTINUED) Non-operating assets Darwin Parks Group 1,325,000 1.16% 1,405,000 106,002,340 92.44% 85,890,222 Total assets excluding investment properties 8,673,613 7.56% 8,389,521 Total assets attributable to unitholders 114,675,953 100.00% 94,279,743

In 2012 the property investments were valued using two different valuation methods, these methods are mentioned in note 2. The above tables have been separated accordingly to reflect this change.

Included in property additions above are incidental costs incurred in acquiring property during the year.

The Darwin Parks Group investment consists of non-operating assets which are located within the parks and are valued separately

8. TANGIBLE FIXED ASSETS

Buildings and Static Plant and Office Furniture Motor improvements caravan machinery Equipment and vehicles Total fittings £ £ £ £ £ £ £ At 30 September 2011 336,075 1,713,667 438,236 275,574 255,091 8,125 3,026,768 Disposals (36,027) (16,162) (4,748) (10,121) (18,704) - (85,762) Additions 17,038 469,444 52,113 340,229 635,403 13,872 1,528,099 At 30 September 2012 317,086 2,166,949 485,601 605,682 871,790 21,997 4,469,105 Depreciation

At 30 September 2011 89,883 171,104 67,496 116,245 80,874 2,407 528,009

Disposal (12,286) (12,380) (3,881) (7,234) (13,633) - (49,414) Charge 42,402 264,213 64,990 13,853 110,899 3,723 500,080 At 30 September 2012 119,999 422,937 128,605 122,864 178,140 6,130 978,675 Carrying amount At 30 September 2012 197,087 1,744,012 356,996 482,818 693,650 15,867 3,490,430 At 30 September 2011 246,192 1,542,563 370,740 159,329 174,217 5,718 2,498,759

Darwin Leisure Property Fund

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 30 September 2012

9. INVESTMENT IN SUBSIDIARIES

The Fund holds and operates its investment property portfolio through subsidiary companies. The financial statements consolidate the results of the Fund and its subsidiaries drawn up to 30 September each year. The subsidiaries have been included in the Fund’s consolidated financial statements using the acquisition method of accounting. Accordingly the Consolidated Statement of Total Return and Consolidated Statement of Cash Flows include the results of the subsidiaries and the Consolidated Balance Sheet included the position of the subsidiaries.

Name Place of Group % Principal registration ownership activity

Immediate parent - Darwin Leisure Property Fund Darwin West Country (Guernsey) Limited Guernsey 100% Property holding Darwin Finance (Guernsey) Limited Guernsey 100% Property finance Immediate parent - Darwin West Country (Guernsey) Limited Darwin (Hawkchurch Country Park) Limited UK 100% Park operation Darwin (Sunnybank) Limited UK 100% non operating Darwin (Beachside) Limited UK 100% Park operation Darwin (Broadway House) Limited UK 100% Park operation Darwin (Carlton Manor) Limited UK 100% non operating Darwin (Newton Mill) Limited UK 100% Park operation Darwin (Pear Tree Park) Limited UK 100% Park operation Darwin (Tilford Woods) Limited UK 100% Park operation Darwin (Swanage Bay View) Limited UK 100% Park operation Darwin (Sandymouth Bay) Limited UK 100% Park operation Darwin (Woodside Beach) Limited UK 100% Park operation Darwin (Woodside Bay) Limited UK 100% non operating Darwin (North West) Limited (i) UK 100% Park operation Darwin (Seaview Gwespyr) Limited (i) UK 100% non operating Darwin (Summer Lodge) Limited UK 100% Park operation Darwin Contract Management Limited (ii) UK 100% non operating Darwin (Holiday Park) 1 Limited UK 100% non operating Immediate parent - Criggin Mill Limited Partnership Criggan Mill LLP UK 100% non operating

In the 2011 the Fund purchased the remaining 49% of Criggan Mill LLP through its subsidiary Darwin (Holiday Park) 1 Limited.

Darwin Leisure Property Fund

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 30 September 2012

10. DEBTORS AND PREPAYMENTS Year ended 30 Year ended 30 September 2012 September 2011 £ £ Trade debtors 463,753 317,752 VAT refundable 745,450 1,125,517 Deferred arrangement costs 112,884 109,375 Other debtors and prepayments 1,246,084 448,210 2,568,171 2,000,854

11. CREDITORS Year ended 30 Year ended 30 September 2012 September 2011 £ £ Trade creditors 2,169,276 2,883,825 Other creditors 5,468,406 2,504,373 Accrued expenses 712,700 337,069

8,350,382 5,725,267

12. LOANS Year ended 30 Year ended 30 September 2012 September 2011 £ £ Bank loan - Lloyds TSB Bank PLC (i) 15,000,000 - Bank loan - Barclays Bank PLC (ii) - 15,000,000 15,000,000 15,000,000

(i) The Loan facility of £15,000,000 is with Lloyds TSB Bank PLC the money was used to repay the loan facility above (i). The rate of interest for each Interest Period will be LIBOR, plus regulatory cost, plus an interest margin of 1.85% per annum provided that in respect of the aggregate amount of any borrowing which exceeds £7,500,000, the margin applicable to such amount shall be 2.2% per annum. Interest is payable on a quarterly basis. The loan is secured by a legal mortgage over Talacre Beach Leisure Park, The New Pines Caravan Holiday Home and Leisure Park and Seaview Holiday Home Park, Sandymouth Holiday Park and Swanage Bay Holiday Park. In addition they have first equitable charge over all other assets and property of the Fund.

Darwin Leisure Property Fund

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 30 September 2012

12. LOANS (CONTINUED)

(ii) The Loan facility of £15,000,000 was borrowed from Barclays Bank PLC in order to purchase the investment in Darwin (North West) Limited associated parks. The bank had first charge on the properties being Talacre Beach Leisure Park, The New Pines Caravan Holiday Home and Leisure Park and Seaview Holiday Home Park. The interest rate on the loan being 2.25% above LIBOR. The loan facility was repaid using the loan from Lloyds TSB bank PLC on the 31 July 2012.

Under the facility agreement the facility expires on the third anniversary of the receipt of the Funds.

13. UNITHOLDERS’ CAPITAL

In accordance with the trust instrument distributions may be made to the unitholders of the Fund. Distributions are made rateably in accordance with the number of units held or deemed to be held on the relevant distribution date. The unitholders are only entitled to vote at meetings of the unitholders on specific resolutions as detailed in the trust instrument. At meetings of the unitholders, on a poll, every holder is entitled to one vote in respect of each unit held.

In a winding-up the unitholders have the right to receive all surplus assets available for distribution after settlement of the Class units’ liabilities.

There is no upper or lower number of units that may be issued in the Fund.

Reconciliation of movement in units in issue and cost of units in issue

2012 2012 2011 2011 C Accumulation units Units Cost Units Cost Opening balance 53,427,484 56,330,093 64,980,686 70,333,731 Issued 3,201,588 6,166,255 16,500 20,000 Redemptions (11,730,220) (16,470,548) (11,569,702) (14,023,638) Closing balance 44,898,852 46,025,800 53,427,484 56,330,093

C Income units Opening balance 14,023,638 14,023,638 - - Issued 3,739,266 4,206,300 14,023,638 14,023,638 Closing balance 17,762,904 18,229,938 14,023,638 14,023,638

Darwin Leisure Property Fund

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 30 September 2012

13. UNITHOLDERS’ CAPITAL (CONTINUED)

Reconciliation of movement in units in issue and cost of units in issue

2012 2012 2011 2011 D Accumulation units Units Cost Units Cost Issued 8,729,965 12,264,251 - - Closing balance 8,729,965 12,264,251 - -

E Accumulation units Issued 39,200 39,200 - - Closing balance 39,200 39,200 - -

Total shares in issue and cost 71,430,921 76,559,189 67,451,122 70,353,731

14. RELATED PARTY TRANSACTIONS

Fees Payable to the Manager

The management fee is charged at 1.5% of the Net asset Value of the Fund for the Class “A” income and accumulation, 1% p.a. of the Net Asset Value of the Fund for the Class “C” units, 0.8% p.a. of the Net Asset Value of the Fund for the Class “D” units. For Class “E”, “F”, “G”, “H” and “I” there is an Initial Charge or Exit Penalty Charge on accumulation units at a rate of 1.75% per annum. These fees are calculated by reference to the Gross Asset Value of the Fund attributable to the relevant Units and shall be calculated and accrue at each Dealing Day.

This fee is payable monthly in arrears. In the case of this charge 28.57% of the 1.75% Management fee may be used to pay trail commissions to intermediaries.

In addition, the Manager shall be entitled to receive a performance fee set at 15% of the out performance of the Fund when measured against a benchmark set at LIBOR plus 1%.

Fees charged during the year by the Manager were £5,472,935 (2011: £1,870,447) of which £2,884,740 (2011: £198,951) remained unpaid at 30 September 2012.

Fees Payable to the Administrator

The administration fee is charged at 0.20% p.a. of the Net Asset Value of the Fund up to £50 million, 0.15% p.a. of the Net Asset Value above £50 million and, subject to a minimum fee of £15,000 per annum.

Fees charged by the Administrator during the year were £160,609 (2011: £141,224), of which £14,772 (2011: £24,783) remained unpaid at 30 September 2012.

Darwin Leisure Property Fund

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 30 September 2012

14. RELATED PARTY TRANSACTIONS (CONTINUED)

Fees payable to the Trustee

The trustee fee is charged at 0.05% p.a. of the Net Asset Value of the Fund for the first £50 million and 0.03% p.a. of the Net Asset Value of the Fund thereafter, subject to a minimum annual fee of £20,000.

Fees charged by the Trustee during the year, including fees capitalised, were £37,141 (2011: £33,853), of which £3,372 (2011: £5,819) remains unpaid at 30 September 2012.

Directors

M Tolcher, I Burns, A Esse, J Penney and R Smith are Directors of Darwin Property Investment Management (Guernsey) Limited, Darwin West Country (Guernsey) Limited and Darwin Finance (Guernsey) Limited.

15. FINANCIAL RISK MANAGEMENT AND TREASURY POLICIES

Market price risk

The Group has no significant exposure to price risk as it does not hold any equity securities or commodities. It can however be exposed to property price risk including property rental risk.

Rental income and the market value for properties are generally affected by overall conditions in the economy, such as changes in gross domestic product, employment trends, inflation, the availability of banking finance and changes in interest rates, which in turn may impact the demand for caravan rental.

Both rental income and property values may also be affected by other factors specific to the real estate and leisure markets, such as competition from other property owners, the perceptions of prospective tenants of the attractiveness, convenience and safety of properties, the periodic need to renovate, repair and release space and the costs thereof, the costs of maintenance and insurance, and increased operating costs.

The Directors of the Manager monitor the operating assets monthly using the DCF model received from the investment adviser. The investment adviser has engaged the services of independent valuation consultants to conduct a review the non-operating assets which are reviewed annually using the report received from Jones Lang LaSalle Limited.

Darwin Leisure Property Fund

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 30 September 2012

15. FINANCIAL RISK MANAGEMENT AND TREASURY POLICIES (CONTINUED)

Liquidity risk

The Fund’s constitution provides for the monthly creation and cancellation of units and it is therefore exposed to the liquidity risk of meeting unitholder redemptions at any time and the repayment of the loan. The Fund’s main assets are property assets which are traded in an environment where deal timescales can take place over months. As a result, the Fund may not be able to liquidate quickly some of its properties at an amount close to its fair value in order to meet liquidity requirements. Minimum cash balances are maintained to ensure that the Fund is able to meet expenses, distributions and requests for redemption of units. Where redemption requests exceed cash available to the Fund, the Manager is entitled to suspend the redemption process until the Fund has been able to realise sufficient funds from the orderly disposal of property. Less than one More than one year year Total £ £ £ Loans 15,000,000 - 15,000,000 Creditors 8,350,382 - 8,350,382 at 30 September 2012 23,350,382 - 23,350,382

Loans 15,000,000 - 15,000,000 Creditors 5,725,267 - 5,725,267 at 30 September 2011 20,725,267 - 20,725,267

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 Fund. In the event of a default by a tenant, the Fund will suffer a rental income shortfall and incur additional costs, including legal expenses, in maintaining, insuring and re-letting the property. There are no significant concentrations of credit risk within the Fund.

Credit risk in respect of other financial assets is reflected in the carrying value of these assets being set to their fair value, as they represent cash and financial instruments held with the Fund’s bankers. The Manager regularly reviews the credit ratings of the Fund’s bankers.

Interest rate risk

The Fund is exposed to risk associated with the effects of fluctuation in the prevailing levels of market interest rates on its cash position.

Darwin Leisure Property Fund

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 30 September 2012

15. FINANCIAL RISK MANAGEMENT AND TREASURY POLICIES (CONTINUED)

Interest rate risk (continued)

The interest rate profile of the financial assets and liabilities as at the consolidated balance sheet date is as follows:

2012 Non-interest Floating rate bearing Total £ £ £ Assets Bank balances 1,133,691 - 1,133,691 Debtors - 2,568,171 2,568,171

Total assets 1,133,691 2,568,171 3,701,862

Liabilities Loans (15,000,000) - (15,000,000) Creditors (8,350,382) (8,350,382) Net assets attributable to unitholders (91,325,571) (91,325,571) Total Liabilities (15,000,000) (99,675,953) (114,675,953)

Total interest sensitivity gap (13,866,309) (97,107,782) (110,974,091)

2011 Non-interest Floating rate bearing Total £ £ £ Assets Bank balances 2,130,724 - 2,130,724 Debtors - 2,000,854 2,000,854 Total assets 2,130,724 2,000,854 4,131,578

Liabilities Loans (15,000,000) - (15,000,000) Creditors - (5,725,267) (5,725,267) Net assets attributable to unitholders - (73,554,476) (73,554,476) Total Liabilities (15,000,000) (79,279,743) (94,279,743)

Total interest sensitivity gap (12,869,276) (77,278,889) (90,148,165)

Darwin Leisure Property Fund

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 30 September 2012

15. FINANCIAL RISK MANAGEMENT AND TREASURY POLICIES (CONTINUED)

Currency Risk

The Fund will compute its Net Asset Value in Sterling and the NAV of Unit Classes other than Sterling Unit Classes will be notionally converted to the relevant currency of the Unit Class at the exchange rate prevailing on the Valuation Date. There is, therefore, a currency exchange risk, which may affect the value of the Units and of any income arising from them. It is intended that this risk may be mitigated by the use of hedging arrangements funded by the relevant Unit Classes. At 30 September 2012 there was no non sterling investment in the Fund. With effect from 1 October 2012 multi-currency share classes became available to investors.

16. NET ASSET VALUE PER UNIT Year ended 30 Year ended 30 September 2012 September 2011 £ £

Fund net asset value per September valuation 101,255,168 79,535,433 Adjustment on non operating assets 145,000 (295,000) Adjustment to asset valuation on consolidation (10,074,597) (5,536,417) Deferred organisation costs - (149,540)

Fund net asset value per financial statements 91,325,571 73,554,476

Units in issue 71,430,921 67,451,122 Net asset value per unit (valuation) 1.4175 1.1792 Net asset value per unit (financial statements) 1.2785 1.0905

Individual Fund class value per unit C accumulation value per unit (Valuation) 1.4910 1.2237 C accumulation value per unit (Financial Statements) 1.3448 1.1317

C Income value per unit (Valuation) 1.1962 1.0095 C Income value per unit (Financial Statements) 1.0789 0.9336

D accumulation value per unit (valuation) 1.4920 - D accumulation value per unit (Financial Statements) 1.3457 -

E accumulation value per unit (Valuation) 1.0093 - E accumulation value per unit (Financial Statements) 0.9103 -

Darwin Leisure Property Fund

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 30 September 2012

17. CONTROLLING PARTY

Darwin Property Investment Management (Guernsey) Limited (“the Manager”) together with Kleinwort Benson (Guernsey) Limited (“the Trustee”) are regarded as the controlling parties of the Fund by virtue of them acting in concert under the terms of the Trust Instrument.

18. POST BALANCE SHEET EVENTS

On 30 November the Fund declared a 2% interim distribution totalling £2,025,103. This amount is a declaration of 2.98 pence per unit on the Class C Accumulation units and 2.39 pence per unit on the Class C Income units 2.98 pence per unit on the D Accumulation units and 2.02 pence per unit on the E accumulation units.