The Cubic Property Fund Annual Report 2016

Cubic Property Fund Chairman’s Statement

Dear Shareholders,

I am pleased to report to shareholders on 2016 being a successful year for the Cubic Property Fund. Several longer term strategic initiatives have over the last few years proved to have been very positive for the Fund. This is reflected in the performance for the year ended 31 March 2016 with a closing NAV price of 313.3 pence per share, representing a 14.3% increase from the March 2015 closing price of 274.0 pence per share. The total return for the year to shareholders, once the dividend payment of £2,759,000 is added to the closing NAV was 16.3%. The Funds’ performance for 2016 is ahead of all of the major benchmarks including the UK and European IPD.

The excellent performance of the Fund is in the main because of the Fund continuing to follow its core strategy of the last year. Value for shareholders was achieved by the ongoing effective management of its property portfolio, the continued lowering of its interest rate payments through refinancing several of its loans and taking advantage of commercial property market conditions both in the UK and in Europe.

The 2016 year saw the Fund sell some of its assets posting a strong blended profit of over £4.3m, the largest being the sale of the Viking 4 (Louis Vuitton) asset in Copenhagen at a record low yield. The benefit of this sale was that the remaining holdings in Copenhagen saw continued capital value increases.

The Fund, with the cash generated from sale of some of its assets, increased cash generated from operations and further cash generated from refinancing, acquired several properties during the year. The highlights being:

 50% interest in a further 19 Travis Perkins units situated throughout the UK. This acquisition is structured in the same way to the 35 Travis Perkins property portfolio acquired in 2014 and secured on 15-year lease contracts.  The acquisition of commercial properties in Cheltenham, Nottingham, and Southport providing the Fund with not only stable income streams but also the potential, through management of the assets, to increase value.  Two additional properties were acquired in Copenhagen in prime retail areas at a significant discount to market.  At the end of the financial year, the Fund acquired a minority interest in an office building located within the heart of the City of London with significant potential to enhance rental income and capital growth through the development of the building.

At balance sheet date, the Fund was in the process of acquiring a 40% share at cost, in three Curzon cinema sites, located in Aldgate, Canterbury and Sheffield. At the time of publication of this report,

Cubic Property Fund Contents

Portfolio Report

Headline Statistics 6

Performance Highlights 7

Portfolio Characteristics 9

Top 10 Assets 12

Investment Adviser’s Report 13

Strategy 20

Asset Management 23

Finance Initiatives 27

Audited Consolidated Financial Statements Management and Administration 31

Report of the Directors 33

Custodian’s Report 39

Independent Auditor’s Report 40

Consolidated Statement of Total Return 42 Consolidated Statement of Movements in Net Assets Attributable to 43 Participating Shareholders Consolidated Balance Sheet 44

Consolidated Cash Flow Statement 45

Notes to the Consolidated Financial Statements 46

Cubic Property Fund Headline Statistics

100% 84 £192m Focus on strong Assets Gross asset European real valuation of Fund’s

estate markets portfolio

10.8 yrs 165 1.8m Average weighted Commercial

unexpired lease tenancies sq. ft. term Of commercial

6 55% 98% Countries invested Of rental income Occupancy rate into secured against

top 10 tenants

£11.2m 7.20 yrs 3.64% Annual rent-roll Unexpired debt Average cost of term debt

* All statistics as at 31st March 2016

Cubic Property Fund Performance Highlights

The NAV per share increased to 313.33 pence as at 31 March 2016 (31 March 2015: 273.99 pence per share) representing NAV growth of 14.36% over the last 12 months.

The UK investment market has continued to go from strength to strength with strong capital gains seen across the portfolio over the last 12 months, following on from a strong year in 2015. Whilst there continues to be downward pressure on yields, we are now beginning to see the impact of strengthening economic conditions in the occupational markets, which is driving rental value growth. Momentum in Denmark continues to build as large institutions increased their exposure with yields now heading towards historic lows (as evidenced by sale of Louis Vuitton in 2016). Elsewhere in Europe, strong gains have come from Spain as its long-awaited economic recovery began to gather pace. Despite currency losses in Europe owing to the current strength of Sterling against the Euro, Net Asset Value increased by 13.5% to £104.3m (31 March 2015: £ 91.9m).

Fund’s loan to value NAV per share 53.38% 313.3p

Mortgage Amortisation for the Increase in NAV year 14.36% £1.4m

Cubic Property Fund

*WAULT – Weighted Average unexpired lease term

Cubic Property Fund Portfolio Characteristics

Top 10 Tenants by Income

10.38% 9.14% 6.28%

6.01% 5.45% 4.58%

3.80% 3.65% 3.45%

2.45%

Cubic Property Fund

Asset Locations

Cubic lease expiry profile

50.0% 46.5% 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 12.4% 10.0% 7.5% 6.8% 6.1% 7.1% 4.1% 5.0% 1.5% 2.5% 3.0% 2.5% 0.0%

Cubic debt expiry profile

25.0% 21.1% 20.2% 19.7% 20.0%

14.9% 15.0% 12.5%

10.0%

4.4% 5.0% 3.6% 3.6%

0.0% 0.0% 0.0% 0.0%

Cubic Property Fund Top 10 Assets

Annual Market Owner- Let by Area Gross WAULT Asset Main Tenants Value ship Sector Area (sq. ft.) Rent (years) (£m) (%) (%) (£m)

Banc de Sang Banc de Sang 45.5 15.5% Office 102,000 2.51 100 43.9 Barcelona

27 Ostensjoveien NCP 40.9 34.0% Office 180,000 2.53 100 7.3 Oslo

Merchant Portfolio Travis Perkins 39.8 49.0% Industrial 449,400 2.45 100 15.7 35 UK locations

Merchant Portfolio Travis Perkins 32.7 50.0% Industrial 403,275 2.09 100 14.6 19 UK Locations

26 Købmagergade Superdry 29.7 46.8% Retail 46,000 1.07 94 0.5 Copenhagen

22 Købmagergade Matas 21.9 46.8% Retail 45,750 0.94 100 4.0 Copenhagen Synoptik

24 Købmagergade Benetton 20.7 46.8% Retail 16,500 0.79 100 5.4 Copenhagen

West End Quay Tesco Retail/ 17.1 96.0% 26,250 0.84 100 6.13 London Post Office Leisure

Viking 7 Sand, Havana 15.6 46.8% Retail 11,152 0.58 100 0.5 Copenhagen Shoes

50 La Colomberie, Colomberie 11.6 50.0% Office 28,487 0.85 100 9.1 Jersey Services Ltd

Cubic Property Fund Investment Adviser’s Report

Global Economic Overview

Between Q1 2015 and Q1 2016 the global economic scene was dominated by developments in the oil market, monetary policy decisions and the possibility of a downturn in China’s economy. While economic uncertainty remained high, reduced volatility in global financial markets and the fact that policy measures in China took off at the end of Q1 2016 helped to ease concerns about the health of the global economy.

At the end of the first quarter of 2016, the European Central Bank and the Bank of Japan – two of the world’s four most important monetary institutions – along with several smaller central banks, were pushing their nominal interest rates negative in an effort to stimulate spending and stave off the threat of deflation. Overall, negative interest rates are good for property values – particularly on prime assets, which, even at low capitalisation rates, offer a good income at a relatively low risk. Investors generally take advantage of this by increasingly allocating greater shares of their portfolios to real estate. The below chart shows global interest rates since 2000 with interest rates reaching positive territory in 2015.

Figure: OECD Real Interest Rates

Global Property Market Outlook

Globally, real estate is sought after as an income-producing investment, as global investors seek sound income streams. One of the features of the post-Global Financial Crisis economic landscape has been investors’ relative preference for prime real estate. This preference for prime real estate is not just a preference for lower-risk assets; rent growth, though weak, has been higher in prime real estate (see below).

Figure: EMEA Prime vs. Secondary Market Rental Growth

As the world economy works its way through this soft patch, this preference for prime real estate is expected to reassert itself. As growth picks up again in the second half of 2016, investors’ preferences will shift again toward secondary and value-add real estate situations. More broadly, growth—even sub-par growth—alongside low interest rates is a good environment for real estate. The income returns provided by real estate will continue to attract investors.

European Economic Overview

In 2015, the European economy entered its fourth year of recovery. Throughout the first quarter of 2016, the EU experienced strong GDP growth thanks to loose monetary policies, improving labour markets and low oil prices.

All of the bigger European countries except Italy managed to grow by more than 1% in 2015, the first time this has happened since 2007 and even Italy managed to arrest a three year losing streak on GDP. In almost every country in Europe, improved consumer spending was the major driver of growth. The unemployment rate for the EU as a whole, at 9.1%, was back to the average of the first five years of the millennium although there was a considerable divergence of experience across the member states.

European Property Market Outlook

Investment

The year 2015 saw record commercial real estate investment sales in Europe. It saw the broadest based recovery seen in Europe since before the crash. The first quarter of 2016, however, had approximately 30% less volumes of investment sales than the same time in Q1 2015 as investors struggled to find products in prime markets. Whilst demand for real estate remained strong, the main burden to high turnover was the lack of good quality assets on offer.

The top 10 European CRE investment markets at the end of Q1 2016 were as follows:

Cross Border Investment

Cross border investment was a key driver of activity in 2015. Its share increased to over 50% to overcome for the first time the domestic volume of investment. Cross border investors are driving the peripheral markets in Portugal (87%), Spain (57%), Ireland (57%) and Italy (63%). In Spain however, domestic investors are closing in on cross border investors due to the presence of the SOCIMIs (Spanish REITs); cross border investors outspent domestic buyers also in Poland (82%), Netherlands (69%) and Germany (61%).

In the first quarter of 2016, the share of cross border investment, after climbing up at historic highs last year has started normalising again from 51% in Q4 2015 to 46% in Q1 2016.

UK Economic Markets

Throughout Q1 2015 – Q1 2016 the UK’s macroeconomic fundamentals remained strong with a robust labour market sustaining growth. The British economy decelerated slightly in the first quarter of 2016 and GDP expanded 0.4% on a sequential basis. Similar to the previous quarter, services continued to underpin growth. Moreover, there were mounting concerns that the UK’s economy would be negatively affected by the uncertainty surrounding the EU referendum vote on 23rd June 2016.

It is expected that the economy will grow 1.4% in 2016, and for 2017, it is expected that the economy will grow 0.3%. Inflation was at 0.3% at the end of Q1 2016 and analysts see average inflation at 0.8% in 2016 and at 2.1% in 2017. The unemployment rate for the UK ended the first quarter at 5.1% and is expected to remain stable at this rate for the remainder of the year.

The figure below shows the UK real interest rate, CPI inflation and Bank of England Base Rate for the past 10 years and projection for the coming five years.

Figure: UK Interest Rates and Inflation

Brexit

The full economic impact of Brexit is not clear yet and the country will experience a prolonged period of uncertainty until new agreements are ratified. The alternative perspective is that the Brexit decision will undoubtedly create short term opportunities. The surge in requests to redeem investments has led to significant selling pressure on funds. Forced selling of buildings by investment funds produces acquisitions opportunities for those who remain active in the market. More recently however, we are already seeing the redemption trend reversing, which is placing less pressure on those funds.

From a corporate perspective, the administration of commercial real estate funds will benefit from the government putting corporation tax cut at heart of Brexit recovery plan. The government is planning to slash corporation tax to less than 15 per cent in an effort to woo business deterred from investing in a post-Brexit Britain as part of his new five-point plan to galvanise the economy. At the start of the year, the prediction had been for the UK Bank Rate to rise in December 2016 or January 2017. However, following the Brexit decision the Bank of England lowered to the base rate to 0.25% on 4 August 2016. Whilst a defensive economic strategy, it’s aimed at bolstering consumer confidence by reducing the incentive to save, lowering mortgage repayments and lowering cost of borrowing for businesses. 16

UK Property Markets

Overall, average prime yields have stayed constant over Q1 2015 – Q1 2016 in the UK. Investment volumes in 2015 were very strong and into 2016 the first quarter reached £13.8 billion, 17% above the 5-year average of £11.8 billion. Whilst investors were wary of geopolitical shocks such as how the continued low oil price will impact oil based economies or the ongoing ramifications of the Greek bail out, property as an asset class outperformed investor expectations. However, with the EU referendum looming over the UK, investment volumes were set to see a dip during Q2 2016.

UK Property Performance

The UK IPD (now MSCI) Annual Index recorded 11.1% total return for the year to Q1 2016 driven by the strong capital value growth rather than the falling income return element. In comparison, the year to Q1 2015 saw total returns reach 17.1%. An analysis by property type shows the superior returns from the office and industrial sector. The driver has been the e-tailing sector and the re- pricing of the sector to reflect the appetite to buy-in to the new forms of retailing. The lowest sector, in terms of returns, was supermarkets at 1.9% over the year. These comparatively lower returns are a reflection of more difficult trading conditions for the major supermarkets in face of increased competition.

As shown in the figure overleaf, the 3-monthly total return has been fluctuating between 3% and 5% during the past couple of years, yet has fallen to 1.0% to Q1 2016. The equivalent yield was on a downward trajectory, but has shown signs of levelling out. The most positive aspect is the three- month rental growth change that is currently showing 0.8% over the first quarter. At a sector level, retail, office and industrial are all showing positive growth but industrial is leading the way followed closely by office. The expected total returns for 2016, from the IPF consensus, is currently 7.9%.

Figure: UK property performance

Total Return Rental Value Growth Equivalent Yield (r-h scale) 10% 10%

5% 9%

0% 8%

-5% 7% Equivalent yield month % % monthchange/return - -10% 6% 3

-15% 5% Jul 11 Jul Jul 06 Jul Oct 02 Oct 05 Apr 07 Oct 10 Apr 12 Oct 15 Apr Jan 04 Jan 04 Jun 09 Jan 09 Jun 14 Jan 14 Jun Feb 11 Feb Mar 03 Mar 06 Feb 08 Mar 11 Dec 13 Mar Dec 01 Dec 03 Aug 04 Nov 05 Sep 06 Dec 08 Aug 09 Nov 10 Sep 13 Aug 14 Nov 15 Sep May 02 May 07 May 12 May

Source: MSCI

Rental Value Growth Looking at rental value growth (see Figure below), all three broad commercial property sectors are showing positive growth over the past 12 months. The office sector will continue to be driven by the

Central London markets but there is also increasing evidence of stronger growth in some markets outside of the Central London. The industrial sector has seen a much higher level of annual growth from supply decreasing and the role of industrial buildings in the retailing sector.

Figure: Rental value growth: annual % change

Retail Office Industrial 15%

10%

-5% Annual % change % Annual -10%

-15%

-20% Jul 11 Jul Jul 00 Jul 01 Jul 02 Jul 03 Jul 04 Jul 05 Jul 06 Jul 07 Jul 08 Jul 09 Jul 10 Jul 12 Jul 13 Jul 14 Jul 15 Jul Jan 11 Jan Jan 00 Jan 01 Jan 02 Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Jan

Source: MSCI

Gradually, throughout 2015 and into 2016, the annual rental value growth change has moved from negative to positive territory. The economic environment in the UK remains more buoyant. Office markets in London are showing double-digit growth, with the majority of other markets across the UK showing positive growth. Investment Q1 2016 saw a total UK investment of £13.8 billion, with the office sector and London markets dominating the data. 2015 saw the Leisure and Other sectors with higher than average shares of the market as investors look beyond the main sectors to find and deliver growth. The current data shows that 35% of the total first quarter total was invested within Greater London, below the 42% recorded during Q1 2015, with more investors looking outside London for higher returns.

£80 Retail Office Industrial Leisure Other £70

£60

£50

£40 £ billion £ £30

£20

£10

£0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*

Figure: UK investment by sector

Source: Property Data (Note: * as at 11/07/16)

The average prime yield remained the same from the end of Q1 2015 and the end of Q1 2016 at 4.69%.

UK Property Market Outlook

The London office market is expected to show the highest growth over the forecast period (2016- 2020), followed closely by the London industrial market, driven by the e-tailing market, and a relative lack of supply.

Figure: Rental value growth forecasts (annual average; 2016-2020)

4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% Annual % Annual% growth 0.5% 0.0% uth ses ses ops erty don UK UK UK tern tern tern ther kets arks etail arks ores f UK f Leisure I London I S InTown S RW O RW Other R Other I Rest of Rest I Office P Office R Rest of Rest R O Rest of Rest O Supermar S Out ofTown Out S Other Prop Other Standard Sh Standard RW Retail P Retail RW Standard OfficesStandard Parks Rest o Parks R Rest ofLondonRest R O Rest ofLondonRest O LonCentralR O CentralLondon O ShoppingCentres RW FashionRWParks Retail Warehou Retail Standard IndustrialsStandard Dept / Variety St / Variety Dept I InnerSouth I Eastern I Outer South Outer Eastern I O InnerSouth O Eas Parks LondonSo & Parks O Outer South Outer Eas O R SouthEas& East R DistributionWarehou

Source: RealFor

Compared to the outlook for rental value growth, the strongest capital value growth expectations are within London. Central London retail, offices and wider London industrials are expected to show the strongest growth by over 100 basis points per annum during the forecast period. The difference between the best and worst forecast performance is significant. The expectation is for ‘Rest of UK’ markets, i.e. those outside of the South East; to see capital values fall for the retail and office park markets. This may be a response to yields moving too low for these sectors, and there being a degree of re-pricing as bond yields begin to increase.

However, it should be noted that specific assets will perform differently to the broad sector/region forecasts. For example, not all rest of UK retail will see capital values fall every year during the next five years. These forecasts provide an indication and a ranking of likely performance based upon the current economic forecasts.

Strategy Investment Strategy The Fund adopts a top-down investment approach across its European portfolio to complement its UK holdings whereby it identifies key cities within Europe, and determines the merits of the different sectors within the city. We then analyse specific investment opportunities focusing on property fundamentals such as; tenants, the occupation market, the local investment market and the development pipeline.

Quality of Assets

The Fund continues to be committed to investing into solid real estate fundamentals. We will continue to invest into high quality real estate that meets the necessary criteria for the Fund to provide both rental and capital growth opportunities.

We continue to pursue new opportunities to acquire quality real estate stock in existing core markets as well as new markets in both Europe and the UK.

Gearing

The fund remains below its target Loan to Loan to Value Value range of 50-60% with a current LTV of 100% 53.38%. The Fund has reduced its Loan to

80% Value by 2% from last year through refinancing and debt restructuring as well as 60% paying down existing loans. 40% The focus for the Fund going forward will be 20% continuing to balance return enhancing

0% gearing levels with a defensive LTV profile, in 2012 2013 2014 2015 2016 2017 2018 2019 conjunction with continued investment into property with solid real estate fundamentals. Moving forward we continue to examine refinancing opportunities in order to maximise cash flow for the Fund and maintain a spread of loan expiries.

The continued low interest rate market across Europe has allowed the Fund to Cost of Funds maintain a cost of debt below the 2011 6.00% target of 4.5% through strategic refinancing 5.00% activities. Currently the cost of debt for the 4.00% Fund is 3.64% which represents a reduction 3.00% of 0.47% from last year’s figure of 4.11%. 2.00%

The Fund is currently executing a strategy to 1.00% amalgamate the sub-£5m assets into small 0.00% portfolios with a single bank lending on each 2012 2013 2014 2015 2016 2017 2018 2019 portfolio on a cross collateralised basis. The current low interest rate market combined with the cross collateralisation of these assets in a single company will allow the Fund to benefit from substantial efficiencies both in the costs of debt and administrative running costs. Furthermore, the structure would allow the Fund to continue its exposure to a blend of larger (institutional) assets in conjunction with portfolios of smaller, more diverse assets, providing the ideal real estate ‘spread’. A lower LTV profile has been adopted for these assets to reflect the portfolio nature of the debt.

Hedging

Current Hedging Expiries 35.00%

30.00%

25.00%

20.00%

15.00%

10.00%

5.00%

0.00% < 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year > 10 Years

The Fund continues to maintain a strong hedging position with slightly over 38% of the Funds’ assets hedged for over 5 years. The Fund is constantly monitoring different hedging options both for new acquisitions and refinancing in order to gain the best balance between cash flow to the fund and protection from future interest rate increases.

Cash flow

Following the payments of the Fund’s first ever dividend in March 2015 the Fund has continued to enhance cash flow through its investment into quality real estate fundamentals. The Dividend paid in March 2016 of 8.28 p / share represented an increase on the 2015 dividend of 14%.

The Fund remains focused on delivering sustainable cash flows through the investment into a balance of capital growth and income based products. The efficiencies gained from cross collaterisation of the sub £5m assets combined with ongoing asset management initiatives and further acquisitions of high quality real estate will help to deliver a strong cash flow for the coming year.

The Fund has a balance of rent review structures with 39% of the leases being index linked, 26% having fixed uplifts, and the remaining 34% being open market rent reviews. This provides a balance of cash flow enhancing income growth while ensuring the Fund doesn’t risk becoming over rented in the future.

Cubic Property Fund Asset Management

2 New Lettings

16 Rent Reviews Reviews, Fixed Uplifts & Indexations

23 properties acquired in 5 property owning SPVs The total GAV of new assets is £43.69m

4 Disposals Total capital receipts of £34.5m

New Acquisitions during the year

 Southport asset acquired in August 2015 for £810,000 (7.59% NIY) with the benefit of a lease to the strong covenant of Café Nero till April 2023.

 Nottingham acquired in Q3 2015, Asset acquired in September 2015 for £2.85m reflecting a Net Initial Yield of 7.8% and let to two strong covenants; Bravissimo and All Saints.

 Acquisition of a 42.5% share of 19 Travis Perkins Units completed in November 2015, with 84% of income secured against main Trading Co. All leases are on the basis of new 15 year terms with 5 yearly rent reviews to the higher of OMV and CPI (1%-3% compounded). The price is £32.25m reflecting and advantageous 6.13% NIY and is forecast to produce 7% annual coupon to the Fund.

 Cheltenham acquired in January 2016, a prime leisure unit in Cheltenham that offers 17.5 years’ secure income to Revolution Bars Ltd with rental increases in line with RPI.

 Investment of £1m for 18.9% stake in Well Court, a central London office investment with significant value add opportunities through rental increase of existing office space in late 2016 or extension of existing massing for residential or further office accommodation. The investment is seen as highly reversionary with passing rents of £25-35 per sq. ft. and an ERV of +£50 per sq. ft. The investment has been acquired of a low capital value of £515 per sq. ft. and is targeted to achieve over 20% IRR.

Disposals during the year

 Ashford sale completed during February 2016 for a value of £495,000. Asset had a diminishing lease income with no option to extend lease.

 Louis Vuitton unit sold in March 2016 for a record yield (2.9% gross yield) which reflects a sale value of DKK 200m. The sale provided investors with a 112% RoE (local currency) and is set against the backdrop of acquisition in Q2 2012 at a purchase price of DKK 128m reflecting a 4.6% NIY.

 Sale of a prime distribution warehouse in Doncaster let to Norbert Dentressangle in Q3 2015 completed at a price of £4.26m reflecting a 23% return on equity in just 3 months following acquisition.

Post Balance sheet date Acquisitions

 Acquisition of 40% stake in two Curzon Cinema led property investments completed in April 2016. The investment was entered into at cost and the two properties are located in Canterbury and Sheffield. The combined value of the two sites are £2.52m which will provide the fund with an immediate value gain.

 Post year end exchange on a 40% stake in the Curzon Cinema earmarked for Goodman’s Fields in Aldgate, which is one of London’s newest developments and is within a brand new Berkley Homes development with local occupiers including Sainsbury’s, Premier Inn and

Knight Frank. The acquisition was concluded at £2.9m based on a new 25-year lease to Curzon Cinema’s (South / North) Ltd guaranteed by Trentnet Ltd and two new restaurant units (unlet).

 Agreements reached for 40% stake in an additional three Curzon Cinema lead property investments located in Colchester, Acton and Hoxton. All assets are being bought at cost and forecast to provide an initial 36% RoE at completion of the project works and a 6 year IRR of 13.5% with over 10% per annum post tax cash flow post refinancing at the end of the projects. The properties will benefit from new 25 year leases to Curzon Cinema’s Ltd with a guarantee from Trentnet Ltd. The rent is subject to annual increases in line with RPI (2%-4%) and also an open market review in the 5th year.

 Acquisition of retail units in Euston, London. The property is substantially reversionary with rents off a very low £12 per sq. ft. The asset has been purchased for £1.6m (£226 / sq. ft.) and is forecast to provide an IRR of c.10%. Beyond immediate potential to enhance income and set to directly benefit the parade’s proximity to Euston railway station in light of the government’s ongoing and committed £2.25bn redevelopment program to support High Speed 2 (HS2).

 Acquisition of a single-let industrial headquarters facility in Normanton, West Yorkshire, bought for £2.22m (8.47% NIY). Let to the strong covenant of Harvard Engineering Limited, who are an environmentally progressive manufacturing business, for a further 9.5 years.

 Acquisition of a single-let Grade II listed building retail unit in one of the country’s most affluent high streets in Guildford and let to Gerard Darel for a further 7.92 years. Bought for £2.462m (4.81% NIY) with the yield anticipated to rise to 6.2% following the settlement of the 2019 rent review.

 Acquisition of three prime retail units and residential upper parts in Croydon (London’s largest borough) for £6.05m (4.31% NIY) with a reversionary yield of 5.33% following settlement of the outstanding rent review and is anticipated to rise to 6.44% following the 2017 rent review. The units are set to directly benefit from Westfield’s and Hammerson’s £1.5bn adjacent redevelopment of the Whitgift Shopping Centre.

Post Balance sheet date Sales

 Sale of Ipswich asset, which is single-let to Lloyds, at a sale price of £4.1m. The asset was approaching an unexpired lease term of 10 years, which is often seen as a benchmark in the investment market.

New Lettings

 Handover of Superdry’s new flagship retail unit at Kobmagergade 26 completed on 22 February following an extensive build period which saw the original 180 sq. m ground floor retail unit extended into the courtyard to create a new 820 sq. m store at a cost of DKK 23m. New passing rent of DKK 7.73m.

 The lease re-structuring of the asset in Poland has completed. A new 5-year lease with 3- year break has been agreed from November 2015 at a new rent of €205,240. The lease is guaranteed by the tenant’s parent company, Ingram Micro Inc., who are a $46.5bn turnover company.

Post Balance sheet New Letting Initiatives

 Post year end letting in Harborne to café and tapas operator to replace café operator at 25% rental uplift and for a term of 10 years which, along with the three other existing tenants, has taken the entire retail asset to full occupancy.

 Post year end letting in Norwich of upper floors to local spa / beauty salon operator nearing completion. The lease will be for a term of 10 years at stepped rent commencing at £20k pa rising to £30k per annum in year 6 which has also taken the entire retail and restaurant asset to full occupancy.

 Provisional terms agreed in Q2 2016 at the Horneburg asset for the expansion of Aldi into the Hol’ab unit with the latter to relocate into the vacant unit, with lease extensions agreed with Aldi, Hol’ab and KiK. Fit-out costs and timings being finalised with simultaneous re- gears to all three tenants being targeted in Q4 2016. Provisional headline rates of €7.60 psm to KiK, €8.88 psm to Ho! Lab and €10.20 psm to Aldi have been negotiated.

 Post year end negotiations continue with Rossmann to sign an Agreement for Lease in Peiting.

 Post year end negotiations continue with the office tenants at Well Court to vary and extend their leases to three month rolling terms and achieve an uplift to between £40 - £42 psf. An agreement has been reached with 1st floor tenants (RJD Partners) to extend their lease, with a fixed uplift on 1 November 2016, reverting to £40 per sq. ft. for the term of the lease.

 West End Quay - Post year end negotiations with Fraser & Co. to occupy Unit 12, provisional terms agreed on the basis of new 10-year lease, subject to 5-year tenant break option.

Rent Reviews

 Travis Perkins Portfolio 1 (TP1), fixed uplifts documented across approximately 33% of the portfolio in December 2015, to the higher of two thirds of OMV and 3% per annum compounded taking the total rent to £2,439,289 per annum.

 Sadler House, Jersey was also subject to a 2% fixed increase in February 2016 taking the passing rent to £851,429 p.a.

Post Balance sheet Rent Review Initiatives

 Wandsworth rent review settled in June 2016 at £189,500 pa, which is a significant uplift and above the Savills ERV of £177,000 per annum.

 Synoptik 2013 rent review at 22 Kobmagergade settled at 25% increase. Appeal decision being made to push to 55% progressing.

 Negotiations continue with Carphone Warehouse at West End Quay regarding a lease extension following the settlement of the Superdrug rent review at a 20% increase.

 During the Q1 2016, the fund has benefited from a fixed increase on the Headmasters unit at West End Quay from £52,500 to £55,000 (a c.5% increase).

Cubic Property Fund Finance Initiatives

7 Re-Financings

£1.45m Amortised Representing 1.5% of portfolio debt

2 Loans Restructured

Re-financings Current Year

 Jewsons Portfolio refinanced with HSBC to gear up the portfolio and release £900,000 to the Fund. Terms finalised at a margin of 2.5% at 55% LTV for a 5-year term.  Norwich asset refinanced with Lloyds on a 3-year facility with 100% fixed at an all-in rate 3.70% representing a substantial reduction in cost of funds on the previous facility of 6.02%.  Arnold House refinanced with Lloyds on a 5-year facility with 75% fixed at an all-in rate of 3.40%. The new all in rate represents a substantial reduction on the previous facility of 6.07%.  Southport asset refinanced with Lloyds on a 3-year facility with 50% fixed at an all-in rate of 3.20%.  Dartford asset refinanced with Aldemore Bank on a 15-year facility at a variable rate of 5.85%.  Sidcup asset was refinanced with Lloyds on a 5-year facility with 75% fixed at an all-in rate of 3.24%; this refinancing brings down the cost of funds for this asset from 6.09%.  Exeter asset refinanced with HSBC on a 5-year term at an interest rate of 2.5% over base rate. Post Balance Sheet Date Re-financings

 Refinancing of the first Travis Perkins Portfolio completed in Q2 2016 at a Loan to Value of 58% and a margin of 2.25% and a reduced amortisation profile. 75% of the debt has been hedged on a 5-year SWAP.

Amortisation

 A total of £1.45m was amortised over the year bringing the Fund’s Loan to Value ratio down to 53%, ahead of target. New Loans

 New loan facility entered into on the Nottingham for £1.3m with a gearing level of 45% on drawdown. The loan is for a period of 4 years with 75% fixed at an all-in rate of 3.10%. Post Balance sheet New Loan Initiatives

 Currently in negotiations with RBS to provide debt for Well Court asset. Indicative terms are for a loan amount of £1.96m (40% LTV) at a margin of 2.50%. The term is for 2 years that will cover planning and works periods. Expected drawdown is Q3 2016.  The financing of Cheltenham was completed with Lloyds before end of Quarter 2 2016. Terms have been agreed for a loan amount of £1.2m (50% LTV) at a margin of 2.25% and interest only for the full term (4 years).

Derivatives

 In total, new interest rate derivatives have been put in place for £27.8m over the last year the past year. Loans Restructured

 Debt extension on Kobmagergade 26 (Viking 6) agreed to fund 100% of retail extension and residential conversion works, achieving a 10yr fixed rate on new drawdown of DKK 45m.  Terms agreed for small deals portfolio with Lloyds to enable greater efficiency and pricing. Initially the facility will hold the following assets; Sidcup, Norwich, Harborne, Chiswick, Nottingham and Southport, with scope to add further assets to the facility. Post year end facility has been concluded at a margin of 2.00% and an interest rate derivative on 50% of the facility for 8 years.  Santander, RBSI, RBS, HSBC, and Williams & Glyn have all been approached to create similar cross portfolio facilities. This would allow Cubic to place all assets sub £5m into portfolio facilities and achieve both debt and administrative efficiencies.

CUBIC PROPERTY FUND

Audited Consolidated Financial Statements for the Year Ended 31 March 2016

Cubic Property Fund

Management & Administration

Janine Lewis (resigned 14 July 2015) Eric Mounier Directors Richard van Vliet Michael Fienberg (appointed 15 July 2015) Kerry Fynn (appointed 21 April 2016)

Previous Registered Office Sarnia House, Le Truchot, St Peter Port, Guernsey, GY1 4NA

Registered Office Kingsway House, Havilland Street, St Peter Port, Guernsey, GY1 2QE

Previous Administrator, Secretary, Praxis Fund Services Ltd Registrar, Designated Manager and Sarnia House, Le Truchot, Channel Islands Securities Exchange St Peter Port, Guernsey, GY1 4NA Listing Sponsor

New Administrator, Secretary, Registrar, Cannon Asset Management Ltd Designated Manager and Channel Kingsway House, Havilland Street, Islands Securities Exchange Listing St Peter Port, Guernsey, GY1 2QE Sponsor

Montreux Advisers Ltd Investment Adviser Kingsway House, Havilland Street, St Peter Port, Guernsey, GY1 2QE

ABN AMRO (Guernsey) Ltd Custodian Martello Court, Admiral Park, St Peter Port, Guernsey, GY1 3QJ

Moore Stephens Independent Auditor PO Box 146, Town Mills South, La Rue du Pre, St Peter Port, Guernsey, GY1 3HZ

Cubic Property Fund

Management & Administration (continued)

Carey Olsen Legal Advisers Carey House, Les Banques, St Peter Port, Guernsey, GY1 4BZ

SPV Administrator and Cannon Asset Management Ltd Financial Accountants Kingsway House, Havilland Street, St Peter Port, Guernsey, GY1 2QE

Property Portfolio Valuer Savills 33 Margaret Street, London, W1G 0JD

Cubic Property Fund Report of the Directors

The Directors submit their annual report and audited consolidated financial statements (the “consolidated financial statements”) of Cubic Property Fund Limited (the “Company” or “Fund”) for the year ended 31 March 2016.

Incorporation and structure The Company was incorporated in Jersey on 24 July 2006 with limited liability under the provisions of the Companies (Jersey) Law, 1991 and its shares were listed on the Channel Islands Stock Exchange (subsequently renamed the Channel Islands Securities Exchange, “CISE”) on 28 December 2006. Approval was obtained from the Guernsey Financial Services Commission (the “GFSC”) for the migration of the Company to Guernsey on 17 June 2011. From the date of migration the Company has been governed under The Companies (Guernsey) Law, 2008 and The Protection of Investors (Bailiwick of Guernsey) Law, 1987. The Company is an open-ended investment company, able to issue and redeem participating shares representing the rights of investors at prices based on the underlying value of the properties. The Company is authorised by the GFSC as a Class “B” Collective Investment Scheme. The Articles of Association allow for more than one class of participating share to be issued. At the year-end date the Company had only one active Class Fund, the UK and European Class Fund, which has three share classes in issue: A Class participating shares, C Class participating shares and P Class preference shares. The UK and European Class Fund Shares are denominated in Sterling. No limit has been set with respect to the duration of the Company.

Consolidation These consolidated financial statements include the results of the Company, its subsidiaries, joint ventures and associates (together the “Group”) (see note 12).

Objective and investment policy The investment objective of the Fund is to provide sophisticated, high net worth and institutional investors with the means of participating in UK and European real estate markets. The primary investment objective of the Fund is to achieve appropriate levels of rental income and medium to long term capital growth from a diversified portfolio of property and property-related assets. The Class Fund seeks to acquire a diversified portfolio of predominantly commercial properties in the retail, retail warehouse, office, industrial warehousing and leisure sectors. It may also acquire residential properties, hotels and development land. All investment decisions are made by the Directors of the Company, as advised by the Investment Adviser, and continue to reflect the medium to long term objective of maximising total return consisting of rental income and capital appreciation. The Class Fund will invest in properties via its subsidiaries, joint ventures, associates and investments. A separate special purpose vehicle (“SPV”) may be used to hold each separate property. Any finance sought for property acquisitions will be at the SPV level, thus endeavouring to ring-fence the finance to the property to which it pertains. Neither the Class Fund nor any SPV has at present provided guarantees to any other SPV, with the exception of Bridson Limited and Nevayah Limited. GE Real Estate Finance Limited, the provider of the mortgage, has required that the properties be cross-guaranteed (see note 27). The Directors' intention is to maximise returns to investors and therefore the Directors may hedge any exposure which is not in the base currency of the Company.

Cubic Property Fund Report of the Directors

Strategy The strategy of the Fund is to provide value for shareholders through targeted acquisitions and sales of assets, efficient refinancing of loans as well as effective asset management of its property portfolio (please refer to page 20 of this report - Strategy) The result of the continued refinancing, targeted acquisitions and selected sales means that the overall loan-to-value LTV ratio at the year-end date is 53.4% (2015: 55.4%). The report of the Investment Adviser refers to a Core Portfolio LTV of 53.0% (2015: 54.0%), which is calculated only on those assets that the Investment Adviser believes the Fund should support. Strategies to achieve a positive return to shareholders on the currently non-supported assets are still being actively pursued.

Results and dividends The results of the Group for the year are set out in the Consolidated Statement of Total Return on page 42. A dividend of £2,759,000 was declared in March 2016 (and paid after the year end) in respect of the participating shares relating to the year ended 31 March 2016 (2015: £2,417,025). This is equivalent to income of £0.0829 per participating share (2015:£0.0721) The Company continues to be a Reporting Fund for UK tax purposes in accordance with the Offshore Funds Regulations and accordingly we hereby notify any UK shareholders that the reportable income is £0.0829 per participating share (2015: £0.0721) in respect of the dividend declared for the year and, the additional reportable income for the year to 31 March 2016 is £Nil per participating share (2015: £Nil).

Directors The Directors of the Company are listed on page 31.

Directors’ shareholdings and other interests At the date of signing of this report the Directors have the following direct or indirect interests in the shares of the Company: A Class participating P Class preference C Class participating shares shares shares Number Number Number Eric Mounier 71,141.914 27,057.243 438,199.338 Richard van Vliet 11,534.78 2,981.811 28,873,153 Michael Fienberg - - - Kerry Fynn - - -

Janine Lewis was a director of, and a shareholder in, Praxis Fund Services Limited, the previous administrator, secretary, designated manager and CISE listing sponsor to the Company. She resigned as a director of the Company on 14 July 2015. Eric Mounier is a director of, and a shareholder in, Montreux Advisers Limited (“Montreux”), the investment adviser to the Company. Richard van Vliet is a director of Cannon Asset Management Limited, the administrator and financial accountant to the majority of the Company’s SPVs and the new administrator, secretary, designated manager and CISE listing sponsor to the Company. He is also a director of and shareholder in Cannon Capital Advisors Limited, which has a small shareholding in Montreux. On 28 April 2014 Mr van Vliet was appointed as an alternate director to the Montreux board.

Michael Fienberg was appointed as a non-executive director of the Company on 15 July 2015. He is also a non- executive director of Cannon Asset Management Limited.

Kerry Fynn was appointed as a non – executive director of the Company on 21 April 2016. 34

Cubic Property Fund Report of the Directors

Company statistics Net asset value Net asset per share Change value GBP in period Number of GBP % shares in issue UK and European Class Fund 31 March 2014 per consolidated financial statements* 74,508,786 2.24 (13.51) 33,332,635 per reported NAV 80,567,508 2.42 (20.92)

31 March 2015 per consolidated financial statements* 86,660,148 2.58 15.18 33,540,833 per reported NAV 91,897,891 2.74 13.22

31 March 2016 per consolidated financial statements* 100,752,464 3.03 16.26 33,299,497 per reported NAV 104,328,030 3.13 14.23

*A detailed reconciliation between the NAV per share per these consolidated financial statements and the NAV per share reported on a quarterly basis is set out on note 23 to the consolidated financial statements.

Share Analysis

Number of shares Total number of A Class P Class C Class shares 31 March 2016 4,916,795 8,411,563 19,971,139 33,299,497 31 March 2015 5,136,042 8,433,652 19,971,139 33,540,833 31 March 2014 4,927,844 8,433,652 19,971,139 33,332,635 31 March 2013 6,295,877 8,433,652 - 14,729,529 31 March 2012 6,719,834 8,433,652 - 15,153,486

Proportionate value of Total NAV as per the Fund in GBP A Class P Class C Class FS 31 March 2016 14,995,590 25,654,185 60,909,405 100,752,464 31 March 2015 13,270,099 21,790,202 51,599,847 86,660,148 31 March 2014 11,015,261 18,851,830 44,641,695 74,508,786 31 March 2013 16,276,465 21,803,165 - 38,079,630 31 March 2012 18,381,500 23,069,495 - 41,450,995

Cubic Property Fund Report of the Directors

Company statistics (continued)

Price analytics Distribution per Additional

share for all share Distribution per P Year High price Low price classes share 31 March 2016 3.1330 2.8453 0.08285 0.0884 31 March 2015 2.7399 2.4674 0.07206 0.0905 31 March 2014 2.4171 2.1708 - 0.0911 31 March 2013 3.0619 3.0028 - 0.0897 31 March 2012 3.3537 3.1046 - 0.0581

All shares are priced equally. The highest and lowest prices shown above reflect the highest and lowest prices in the year for each class of share.

Comparative Table 31 March 2016 31 March 2015 31 March 2014 £ £ £ Change in net assets per share Opening net asset value per share 2.581 2.240 2.590

Return before operating charges* 0.862 0.691 0.588 Operating charges (0.326) (0.278) (0.289) Return after operating charges 0.536 0.413 0.299

Closing net asset value per share before distributions 3.117 2.653 2.889 Distributions (0.083) (0.072) - Dilution impact of P Class issue - (0.649)

Closing net asset value per share 3.034 2.581 2.240

*after direct transactions costs of - - -

Performance Return after charges 20.7% 15.2% 11.5%

Other information Closing net asset value 104,328,031 91,897,891 80,567,508 Closing number of shares 33,299,497 33,540,833 33,332,635 Operating charges 8% 4% 6% Direct transaction costs 0% 0% 0%

Highest offer price 3.1330 2.7399 2.4171 Lowest bid price 2.8453 2.4674 2.1708

Cubic Property Fund Report of the Directors

Mortgage facilities and going concern issues At 31 March 2016, the Group had long term mortgage loans in place with its lenders as detailed in note 14. Each mortgage loan was put in place to enable a specific subsidiary, or special purpose vehicle ("SPV"), to purchase the underlying property/ies held by that SPV, and each mortgage loan is secured against the property and, in some instances, other specified assets of that SPV, but not against the assets of the other SPVs or the Company. With the exception of Bridson Limited and Nevayah Limited, as stated above in the Objectives and Investment Policy, the Company has not given any further guarantees. Each mortgage loan has been arranged under specific terms for each property/ies within an SPV. Please refer to note 14 of the consolidated financial statements for details of specific maturity dates for each mortgage. The majority of the mortgage loans require some amortisation of principal which will occur before the maturity date. The Group’s borrowing arrangements include specific financial covenants, primarily requiring the maintenance of loan to value (“LTV”) ratios for each property ranging between 55% and 80% and interest cover ratios of 100% to 140%. The continued improved economic conditions for commercial property and the on-going implementation of the Fund’s strategy of lowering its finance costs has meant that all of its SPVs in the current year were compliant with their LTV covenants in their related mortgage loan agreements. Considerable effort has been made to ensure that current and potential breaches are monitored closely and resolved through negotiation with lenders as soon as practicable. The Group continues to have strong rental inflows and most of the tenants are high quality which provides low risk of tenant failure.

Cash Flow The Directors and Investment Adviser monitor the cash flow of the Group to ensure that there is adequate operating cash in the Company and in each SPV. Based on the current cash flow projections, the Group is expected to generate enough cash from rental income to meet its mortgage commitments and operating expenses for the foreseeable future. In the current year the Company was able to pay a substantial dividend due to the successful sales of several of its properties.

Redemption policy The Directors agreed to keep the redemption exit charge at 5% for redeeming shareholders of the Fund. The Directors believed that this represents a reasonable exit cost for shareholders as it relates closely to the estimated costs of selling property owned by the Fund in order to realise funds to facilitate the payment to redeeming shareholders. This approach was maintained for the whole of the financial year but will be kept under review by the Directors in the light of changing market conditions.

Corporate governance As a Guernsey resident company, the Company complies with the Code of Corporate Governance issued by the Guernsey Financial Services Commission.

Independent Auditor Moore Stephens have indicated their willingness to continue in office. A resolution to reappoint Moore Stephens will be proposed at the Annual General Meeting.

Cubic Property Fund Independent Auditor’s Report to the shareholders of Cubic Property Fund Limited

We have audited the consolidated financial statements of Cubic Property Fund Limited (the “Group”) for the year ended 31 March 2016 which comprise the Consolidated Statement of Total Return, the Consolidated Statement of Movement in Net Assets Attributable to Participating Shareholders, the Consolidated Balance Sheet, the Consolidated Cash Flow Statement and the notes 1 to 29. 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) including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”.

This report is made solely to the shareholders as a body, in accordance with The Authorised Collective Investment Schemes (Class B) Rules 2013, The Companies (Guernsey) Law, 2008 and the Principal Documents. Our audit work has been undertaken so that we might state to the shareholders those matters we are required to state to them in an auditor’s 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 Group and the shareholders as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditor As explained more fully in the Statement of Directors’ Responsibilities (set out on page 38), the directors are responsible for the preparation of the 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 financial statements in accordance with applicable law 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 financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the 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 Group’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statements In our opinion the financial statements: • give a true and fair view of the state of the Group’s affairs as at 31 March 2016 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 prepared in accordance with the requirements of The Authorised Collective Investment Schemes (Class B) Rules 2013, The Companies (Guernsey) Law, 2008 and the Principal Documents.

Cubic Property Fund Consolidated Statement of Total Return For the year ended 31 March 2016

2016 2016 2015 2015 Notes GBP GBP GBP GBP Net capital gain 3 28,508,757 18,243,019

Revenue 4 14,172,154 12,436,428 Less: share of joint venture turnover 16 (420,440) (715,844) Less: share of associates’ turnover 16 (2,382,454) (2,196,756) Group’s revenue 4 11,369,260 9,523,828 Expenses 5 (4,858,940) (3,775,260) Finance costs – loan interest (3,826,545) (4,946,085) Finance costs – loan fees (2,172,483) (611,883) Finance costs – participating preference share dividend (743,952) (763,659) Net loss for the year before share of joint ventures and associates (232,660) (573,059)

Share of joint ventures’ results 16 207,637 131,389 Share of associates’ results 16 991,718 1,039,678 Loss on Unquoted Investment 16 (189,653) - Net profit for the year before taxation and capital items 777,042 598,008

Taxation charge 6 (3,830,225) (1,560,537)

Net loss for the year after taxation (3,053,183) (962,529)

Total Return before distributions and non- controlling interest 25,455,574 17,280,490

Distribution to Shareholders (2,759,000) (2,417,025)

Non-controlling interest share in net gain (8,426,322) (3,442,032)

Increase in net assets attributable to participating shareholders 14,270,252 11,421,433 Profit per participating share Basic and Diluted 9 0.429 0.342

All items in the above statement derive from continuing operations. The accompanying notes on pages 46 to 78 form an integral part of these financial statements.

Cubic Property Fund Consolidated Statement of Movements in Net Assets Attributable to Participating Shareholders

For the year ended 31 March 2016

Notes 2016 2016 2015 2015 GBP GBP GBP GBP

Net assets attributable to participating shareholders at

the beginning of the year 86,660,148 74,508,786

Movements due to the issue and redemption of shares:

Amounts received on issue of A Class participating shares 19 368,699 1,576,559

Less: Amounts paid on

redemption of A Class participating shares 19 (1,008,280) (998,738)

Less: Amounts paid on redemption of P Class participating shares 19 (63,351) -

(702,932) 577,821

Increase in net assets attributable to participating shareholders 14,270,252 11,421,433

Exchange difference on retranslation of net assets of subsidiary undertakings 524,996 152,108

Net assets attributable to participating shareholders at the end of the year 23 100,752,464 86,660,148

The accompanying notes on pages 46 to 78 form an integral part of these financial statements.

Cubic Property Fund Consolidated Cash Flow Statement

For the year ended 31 March 2016

2016 2015 Notes GBP GBP

Net cash inflow from operating activities 7 7,779,983 5,715,744

Investing activities Purchase of investment properties 8 (60,623,825) (7,188,949) Sale of investment properties 23,399,466 45,182,636 Funds in transit for acquisitions 10,825,246 (10,825,246) Proceeds from sale of JV - 1,518,894 Acquisition of associates (1,000,000) (2,917,682) Net cash (outflow)/ inflow from investing activities (27,399,113) 25,769,653 Financing activities Distributions to participating preference shareholders (743,952) (763,659) Distributions to participating shareholders - (2,417,025) Loan Interest Received 39,678 133,154 Loan interest paid (2,971,945) (5,565,020) Loan fees paid (2,172,483) (611,883) Amounts received on issue of A Class participating non-preference shares 19 368,699 1,576,559 Amounts paid on redemption of A Class participating non- preference shares 19 (1,008,280) (998,738) Amounts paid on redemption of P Class participating preference shares 19 (63,351) - Amounts drawn down /(repaid) on loans 36,452,611 (25,133,815) Net cash inflow/(outflow) from financing activities 29,900,977 (33,780,427)

Net increase/(decrease) in cash and cash equivalents for the year 10,281,847 (2,295,030) Effect of foreign exchange rate movements 524,997 152,108 Cash at beginning of the year 10,410,647 12,553,569 Cash at end of the year 21,217,491 10,410,647

The accompanying notes on pages 46 to 78 form an integral part of these financial statements.

Cubic Property Fund

Notes to the Consolidated Financial Statements

1. General Information These consolidated financial statements include the results of Cubic Property Fund Limited (the “Company”), its subsidiaries, associates and its joint ventures (together the “Group”). The registered office during the financial year was Kingsway House, Havilland Street, St Peter Port, Guernsey GY1 2QE, Channel Islands. The Company was incorporated as an open-ended investment company with limited liability in Jersey, Channel Islands on 24 July 2006. With effect from 17 June 2011 the Company has been registered in Guernsey as an authorised open-ended Class B collective investment scheme under the provisions of the Protection of Investors (Bailiwick of Guernsey) Law, 1987. The investment objectives of the Group is to provide sophisticated, high net worth and institutional investors with the means of participating in UK and European real estate markets by achieving appropriate levels of rental income and medium to long term capital growth from a diversified portfolio of property and property-related assets. The Group seeks to acquire a diversified portfolio of predominantly commercial properties in the retail, retail warehouse, office, industrial warehousing and leisure sectors. It may also acquire residential properties, hotels and development land. Until the date of migration investment decisions were made on behalf of the Group by the Manager, advised by the Investment Adviser. Since the migration all investment decisions have been made by the Directors of the Company, advised by the Investment Adviser, and reflect the objective to maximise total return, consisting of rental income plus capital appreciation.

Accounting convention The consolidated financial statements have been prepared in accordance with Financial Reporting Standard 102 (FRS 102), under the historical cost convention, as modified by the revaluation of investment property and derivatives and in accordance with applicable Guernsey law, and the Statement of Recommended Practice for Authorised Funds (“SORP”) issued by the Investment Management Association in May 2014. The financial statements for the year ended 31 March 2016 are the first financial statements that comply with FRS 102, with the financial statements for the year ended 31 March 2015 being prepared under old UK GAAP. The date of transition is 1 April 2014. The directors do not believe that the transition to FRS 102 has resulted in any material changes in accounting policies to those used previously. There have been no adjustments to total return or financial position and so no reconciliation has been necessary. The functional and presentational currency of the Company is Pounds Sterling (“Sterling”). 2. 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: a. Fundamental accounting concept The Directors and Investment Adviser are monitoring the cash flow of the Group to ensure that there is adequate operating cash in the Company and each SPV. Based on the current cash flow projections, the Group is expected to generate enough cash from rental income to meet its mortgage commitments and operating expenses in the foreseeable future and as such these consolidated financial statements have been prepared on a going concern basis. The Directors are also monitoring the redemption policy of the Company to ensure redemption requests can be met and to date there are no outstanding redemptions. The redemption terms as set out in the Company’s Offering Memorandum Supplement allow for the Directors to levy redemption charges of up to 10% of the redemption proceeds. On 19 June 2014, the Directors agreed to reduce the redemption charge for redeeming shareholders of the Fund from 10% to 5%. Payment of redemption proceeds may be delayed should insufficient funds be available.

Cubic Property Fund Notes to the Consolidated Financial Statements (continued)

2. Accounting Policies (continued)

a. Fundamental accounting concept (continued) There is no requirement for assets to be realised to meet redemptions should the Directors believe that such realisations required to meet redemptions would be detrimental to the remaining shareholders. b. Investment property Property that is held for long term rental yields or for capital appreciation or both, and that is not occupied by companies in the Group, is classified as investment property. Investment property is measured initially at its cost, including related transaction costs. After initial recognition, investment property is carried at fair value. Changes in fair value are recognised in full in the statement of total return. Subsequent expenditure is charged to the asset’s carrying amount only when it is probable that future economic benefits associated with the asset will flow to the Group and the cost of the item can be measured reliably. Investment property is derecognised when the right to receive cash flows from the property has expired or been transferred and the Group has transferred substantially all the risks and rewards of ownership. Realised and unrealised changes in fair value are recorded in the Consolidated Statement of Total Return. c. Income Properties are rented out under operating leases. Rental income under operating leases is accounted for on a straight line basis over the term of the relevant lease and as further detailed in note 2m on Leases, as below. Interest income and other income are accounted for on an effective yield basis. d. Share capital Ordinary and management shares are classed as equity. External costs directly attributable to the issue of new shares are shown in equity as a deduction from proceeds. e. Participating share issues and redemptions Participating shares may be issued or redeemed at the relevant price on the quarterly subscription days at the prices calculated in accordance with the Company’s prospectus and based on the value of the underlying investments held. The Directors’ present policy is that: - (i) On the issue of participating shares, the amount received is credited to the share capital account. Any component of such shares that creates a financial liability of the group is presented as a liability in the Balance Sheet; measured initially at fair value net of transaction costs and thereafter at amortised cost until extinguished on conversion or redemption. The corresponding dividends relating to the liability component are charged as a finance cost in the statement of total return. (ii) On redemption, the amount paid is debited to the share capital account. Should that account be fully utilised, the amount payable on redemption is debited to realised reserves. f. Expenses All expenses are accounted for on an accrual basis and allocated to the Consolidated Statement of Total Return. The Class Fund is responsible for the payment of management fees, Investment Adviser’s fees and Custodian fees and the payment of other expenses as detailed in the Company’s prospectus.

Cubic Property Fund Notes to the Consolidated Financial Statements (continued)

2. Accounting Policies (continued)

g. Formation expenses Formation costs relating to the set-up of the Company’s subsidiaries and the Class Fund have been written off in full as incurred. h. Basis of consolidation The consolidated financial statements include the results for the year ended 31 March 2016 for the Company, its underlying subsidiaries (see note 12), joint ventures and associates. Intra-group transactions, balances and unrealised gains on transactions within the Group are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Adjustments in subsidiaries have been made where necessary to ensure consistency with the accounting policies adopted by the Group. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de- consolidated from the date on which control ceases. (i) Investments in a joint venture Joint ventures are entities in which the Group holds an interest on a long-term basis and which are jointly controlled by the Group and other ventures under a contractual agreement. The Group’s share is accounted at fair value with changes in value recognised in the Consolidated Statement of Total Return. (ii) Investments in associates Associates are entities, other than subsidiaries, in which the Group holds 20% or more of the equity share capital and over which the Group exercises significant influence. The Group’s share is accounted for at fair value with changes in fair value recognised in The Consolidated Statement of Total Return. (iii) Non-controlling interest Non-controlling interest is separately disclosed on the Consolidated Balance Sheet. This represents the aggregate share of net assets or liabilities of subsidiary undertakings included in the consolidated financial statements that are attributable to the non-controlling interest. In accordance with UK Accounting Standards, profit or loss movements in the Statement of Total Return are shown net of the portion attributable to the non-controlling interest even if this results in the non-controlling interest having a deficit balance. i. Cash and cash equivalents Cash comprises cash at bank. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to insignificant changes in value. j. Foreign currency The assets and liabilities of the Group are translated into Sterling at the closing rate and its profit and loss account is translated at average rates, with the resulting exchange differences arising taken directly to the translation reserve (see note 24). All translation differences are taken to the Consolidated Statement of Total Return. k. Mortgage loans Mortgage loans are recognised when the proceeds have been received. Amounts held by other parties on retention accounts are recognised separately as other long-term current assets. Interest payable is calculated on an effective yield basis. When terms of mortgage loan agreements are breached and the breach renders the loan potentially repayable upon demand, the whole loan is reclassified as a current liability.

Cubic Property Fund Notes to the Consolidated Financial Statements (continued)

2. Accounting Policies (continued)

l. Deferred tax Provision is made for deferred tax liabilities, using the liability method, on all material timing differences, including revaluation gains and losses recognised in the Consolidated Statement of Total Return. Deferred tax is calculated at the rates at which it is expected that the tax will arise. Deferred tax is recognised in the Consolidated Statement of Total Return for the period, except to the extent that it is attributable to a gain or loss that is recognised directly in the statement of movements in net assets attributed to participating shareholders. Deferred tax balances are not discounted. m. Leases The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets, or the arrangement conveys a right to use the lease. A reassessment is made after inception of the lease only if one of the following applies: (i) There is a change in contractual terms, other than a renewal or extension of the arrangement; (ii) A renewal option is exercised or extension granted, unless the term of the renewal or extension was originally included in the lease term; (iii) There is a change in the determination of whether fulfilment is dependent on a specified asset; or (iv) There is a substantial change to the asset. Where a reassessment is made, lease accounting shall commence or cease from the date when the change in circumstances gave rise to the reassessment for scenarios (i), (iii) or (iv) and at the date of renewal or extension period for scenario (ii). Any lease surrender income received is taken to the Consolidated Statement of Total Return in the period in which it is received. Under FRS 102, lease incentives are recognised through the Consolidated Statement of Total Return over the lease term. However, those lease incentives in place as at 31 March 2016 are recognised over the shorter of the lease term and the date of the next market rent review. Rent reviews are recognised when agreed with the tenant, with effect from the date of the rent review. Leases, under the terms of which the Group retains substantially all the risks and rewards of ownership, are classified as operating leases. Receipts from operating leases are credited to the Consolidated Statement of Total Return on an accrual basis over the period of the lease. n. Derivative instruments The Group’s only derivative instruments are interest rate swaps. The Group uses interest rate swaps to adjust interest rate exposures. The Group does not designate derivatives as hedge instruments for hedge accounting purposes as the instruments do not meet the criteria to qualify for hedge accounting. The fair value of the derivatives held at the balance sheet date is determined by reference to their observable rates. o. Distributions The Directors intend to make distributions when the Class Fund has sufficient income and cash. The Class Fund is registered for reporting status as set out under The Offshore Funds (Tax) Regulations 2009. As a reporting fund, the Class Fund is required to report its income to HMRC on an annual basis as stated in Part III Chapter III of The Offshore Funds (Tax) Regulations 2009.

Cubic Property Fund Notes to the Consolidated Financial Statements (continued)

2. Accounting Policies (continued) p. Performance Fee The Investment Adviser is entitled to a performance fee in respect of the Class Fund. The performance fee is payable quarterly and calculated and accrued on each Subscription Day. The performance fee is payable on the increase of the NAV of the Class Fund over the previous highest NAV recorded for the Class Fund (after adding an amount equal to all subsequent subscriptions less redemptions). The performance fee is equal to 20% of the relevant increase in the NAV of the Class Fund over and above the Hurdle Rate Return. The "Hurdle Rate Return" is equal to an amount calculated by applying a compound annual rate of return of 10% to the aggregate of (i) and (ii) minus (iii) where: (i) is the highest NAV of the Class Fund as at any previous date upon which the performance fee has been paid; (ii) is the total of all subsequent subscriptions less all subsequent redemptions (calculated at the time of the relevant subscription or redemption) made in respect of the Class Fund since the date on which the figure determined pursuant to (i) above is recorded; and (iii) is the total of all distributions made in respect of the Shares in the Class Fund since the date on which the previous highest NAV is recorded for the Class Fund (calculated as at the relevant dates upon which distributions have been made). q. Depreciation Where a property has undergone a significant refit in order for it to gain a tenancy, then the costs of the work and fixtures and fittings will be capitalised and depreciated over a period which will be based on the terms and conditions of each Lease Agreement. These fixtures and fittings will be depreciated using the straight line method. r. Estimates The Directors make estimates and assumptions concerning the Group’s future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. (a) Investment property The fair values of investment property are determined by independent qualified valuers using the income capitalisation basis and the discounted cash flow method. In determining the fair values, consideration has been given to assumptions that are mainly based on market conditions existing at the year-end date and appropriate capitalisation rates. These estimates are regularly compared to actual market data and actual transactions entered into by the Fund. In the event of a sale, the Fund might not realise the valuation price. (b) Income taxes The Fund is subject to income taxes in different jurisdictions. Significant judgment is required in determining the Fund's provision for income taxes and deferred taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. Tax provisions are determined based on the Fund's structure and tax legislation existing at the year-end date. If a change in either one of these would result in significantly different amounts than those initially recorded, then any such change will impact the tax provisions in the period in which the change occurs. In recognising deferred taxes on revaluations of investment property, consideration has been given to their recoverability during the lifetime of the Fund based on current market data, historical experience and other factors.

Cubic Property Fund Notes to the Consolidated Financial Statements (continued)

2. Accounting Policies (continued) r. Estimates (continued) Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. s. Capital management The Group’s principal capital items are its investment properties and cash and liquid resources. The Group has engaged its Investment Adviser to advise on strategies for managing its capital. Quantitative information on the Group’s capital assets is contained in the Consolidated Balance Sheet. A comprehensive review of the Group’s capital management is included in the Investment Adviser’s report.

t. Judgments “Functional currency” is the currency of the primary economic environment in which the Fund operates. If indicators of the primary economic environment are mixed, then management uses its judgment to determine the functional currency that most faithfully represents the economic effect of the underlying transactions, events and conditions. The majority of the Fund’s investor subscriptions and redemptions, determined by net asset value, are received and paid in Sterling. Expenses (including management fees, custodian fees, and administration fees) are denominated and paid in Sterling. Accordingly, management has determined that the functional currency of the Fund is Sterling.

3. Net capital gain

2016 2015 GBP GBP

Non-derivative securities: Net gain on investment properties 24,839,956 2,560,914 Net unrealised gain on investment properties from joint ventures (see note 16) 200,000 235,000 Net unrealised gain on investment properties from associates (see note 16) 2,918,385 3,107,093 Net unrealised foreign exchange (losses)/gains on retranslation of fund assets (1,782,461) 6,274,626 Gain on sale of properties * 4,247,801 6,782,538 Loss on repossessed asset (6,202,142) - Gain on mortgage of repossessed asset 5,047,585 - Loss on Sale of JV Property (see note 16) - (670,803) Derivative securities: Net realised loss on interest rate swaps (760,367) (46,349) Net capital gain 28,508,757 18,243,019

Cubic Property Fund Notes to the Consolidated Financial Statements (continued)

3. Net capital gain (continued)

2016 GBP

Gain / (Loss) Date *Gain on sale of properties

Amagertorv property (Copenhagen) 01 Feb 2016 4,040,285 Doncaster property (UK) 25 Aug 2015 717,830 Nottingham property (UK) 31 Mar 2015 (51,630) Kent property (UK) 11 Mar 2016 (458,684) Total Realised Gain 4,247,801

4. Revenue

2016 2015 GBP GBP

Rental income 10,301,677 9,717,607 Interest income 39,678 133,154 Other income 829,363 709,511 11,170,718 10,560,272 Net foreign exchange gains/(losses) 198,542 (1,036,444) Group’s revenue 11,369,260 9,523,828 Share of joint ventures’ rental income (see note 16) 420,440 408,097 Share of joint ventures’ other income (see note 16) - 307,747 Share of associates’ rental income (see note 16) 1,988,136 2,183,027 Share of associates’ other income (see note 16) 394,318 13,729 Revenue 14,172,154 12,436,428

Total rental income receivable for the year, including that arising from the Group’s joint ventures and associates, amounted to £12,710,253 (2015: £12,308,731).

Cubic Property Fund Notes to the Consolidated Financial Statements (continued)

5. Expenses 2016 2015 GBP GBP

Investment Adviser’s fees 1,911,481 1,367,015 Property management fees and other property expenses 277,951 42,543 Directors’ fees 31,370 35,000 Property valuation fees 147,735 107,558 Fund Administration fees 92,369 106,486 Custodian fees 55,206 49,114 Legal and professional fees 790,183 759,550 Arbitration costs 406,012 - Administration fees 271,036 741,912 Property utility expenses 365,948 228,770 Bank charges 55,629 61,489 Audit fees 98,363 56,000 Depreciation (note 10) 111,218 141,447 Other expenses 244,439 78,376 4,858,940 3,775,260

6. Taxation The Directors conduct the Group’s affairs such that management and control is not exercised in the United Kingdom and so that neither the Company nor any of its subsidiaries carry on any trade in the United Kingdom. Accordingly, the Company and its subsidiaries are not liable for United Kingdom taxation on their income or gains other than certain income deriving from a United Kingdom source. The Group is subject to United Kingdom income tax on income arising on the UK property portfolio after deduction of its allowable debt financing costs and other allowable expenses. The Company also has subsidiaries in other overseas jurisdictions such as Poland, Denmark and Germany which are also liable for overseas taxes. The major components of income tax for the year ended 31 March 2016 are as follows: 2016 2015 GBP GBP

Taxation charge on ordinary activities 3,830,225 1,560,537

Tax reconciliation: Net profit for the year before taxation and capital items 777,042 598,008

Profit on ordinary activities multiplied by standard rate of tax in Guernsey of 0% - - Higher tax rates on overseas earnings 3,830,225 1,560,537

3,830,225 1,560,537 Taxation charge

Cubic Property Fund Notes to the Consolidated Financial Statements (continued)

6. Taxation (continued) 2016 2015 Deferred tax (liability)/asset GBP GBP

Balance at the beginning of the year (2,094,417) (1,722,240) Timing differences on revaluation of investment properties (4,270,362) (372,177) Balance at the end of the year (6,364,779) (2,094,417)

7. Notes to the cash flow statement

Reconciliation of cash profit to net cash flow from operating activities

2016 2015 GBP GBP Cash flows from operating activities

Increase in net assets attributable to participating shareholders 14,270,252 11,421,433 Adjustments: Interest income (39,678) (133,154) Finance costs – loan interest 3,826,545 4,946,085 Finance costs – loan fees 2,172,483 611,883 Finance costs – participating preference share 743,952 763,659 Finance costs – participating shareholder dividend 2,759,000 2,417,025 Realised gain on sale of investment properties (4,247,801) (6,782,538) Realised loss on sale of JV asset - 670,803 Unrealised gain on investment properties (24,839,965) (2,560,914) Realised loss on repossessed assets 6,202,142 - Realised gain on mortgage from repossessed asset (5,047,585) - Unrealised gains on retranslation of Fund assets ( - (6,274,626) Unrealised loss/ (gain) on financial assets/liabilities 760,367 46,349 Depreciation of fixtures & fittings 111,218 141,447 Taxation charge 3,830,225 1,560,537 Non-controlling interest 8,426,322 3,442,032 Decrease/(increase) in receivables 631,506 (1,604,383) Increase/(decrease) in payables (19,022) (245,060) Increase in joint venture assets and liabilities (160,486) (242,647) Increase in associates’ assets and liabilities (2,092,320) (1,437,086) Increase in unquoted investments (191,564) - Increase in deferred income 303,501 116,783 Taxation Recovered (paid) 380,891 (1,141,884) Net cash inflow from operating activities 7,779,983 5,715,744

Cubic Property Fund Notes to the Consolidated Financial Statements (continued)

8. Investment properties

2016 2015 GBP GBP

Cost at the beginning of the year 158,129,614 189,340,763 Purchases at cost 60,623,825 7,188,949 Disposals at cost (19,151,665) (38,400,098) Property repossessed (6,202,142) - Cost at the end of the year 193,399,632 158,129,614 Cumulative fair value adjustments 15,180,843 (9,659,113) At fair value at the end of the year 208,580,475 148,470,501

Refer to the Consolidated Portfolio Statement in note 26 for details of the investment properties. The repossessed properties, 239 – 245 The Marlowes & 1 Seldon Hill, were as a result of the inability to rent the empty space which led to a breach of LTV requirements. On 10 June 2015, LPA Receivers were appointed by Newcastle Building Society at which point the fund no longer controlled the property. The directors wrote off the cost of the properties at this point. Investment properties, including freehold and long-term leasehold properties are independently valued each quarter by Savills (UK) Limited (2015: Savills (UK) Limited). The valuation has been prepared on the basis of Market Value as defined in Valuation Practice Statement 4 1.2 of the Red Book, being: “The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.” At the year end, the Directors are not aware of any material changes in the values of the properties as reported by Savills (UK) Limited. For details of the respective proportions of these assets attributable to the Group and to non-controlling interest, please refer to note 28.

9. Profit per participating share The basic profit per participating share for the year ended 31 March 2016 has been calculated as £0.429 (2015: £0.342), being £14,270,252 (2015: £11,421,433) divided by 33,299,497 (2015: 33,414,807) weighted average number of participating shares in issue during the year, in accordance with the following formula: Net profit after tax, dividends and amount attributable to non-controlling interest Weighted average number of participating shares in issue during the year The diluted profit per participating share ratio has been calculated using the following formula: Net profit after tax, dividends and amount attributable to non-controlling interest Weighted average number of participating shares in issue during the year plus any dilutive participating shares There were no dilutive participating shares in issue during the year under review and therefore the diluted profit per participating share is the same as the basic profit per participating share computed above.

Cubic Property Fund Notes to the Consolidated Financial Statements (continued)

10. Fixtures and fittings A reconciliation of the movement is set out below: 2016 2015 GBP GBP

Net book value at the beginning of the year 122,701 264,148 Depreciation for the year (111,218) (141,447) Net book value at the end of the year 11,483 122,701

The balance relates to refits of two properties for the purpose of re-letting the properties to new tenants. The cost of the refits has been capitalised and is depreciated over the initial period of the leases using the straight line method.

11. Debtors 2016 2015 GBP GBP

Rent receivable 630,070 639,672 Loan funds in transit - 3,974,755 Property purchase paid in advance - 6,850,490 Other debtors and prepayments 1,969,581 2,591,486 2,599,651 14,056,403

Cubic Property Fund Notes to the Consolidated Financial Statements (continued)

12. Investments in underlying entities The Group consists of the following subsidiaries which are owned and controlled by the Company in the proportions indicated: Country of incorporation ≥50% owned entities: % owned Arkle Holdings Limited Guernsey 100.00 Arnold House Holdings Limited Guernsey 100.00 Arcserve Limited UK 100.00 Ashford Property Holdings Limited British Virgin Islands 100.00 Balavan Limited British Virgin Islands 100.00 Bellbrook Estates Limited British Virgin Islands 97.11 Benbow House Limited British Virgin Islands 100.00 Bewcastle Holdings Limited Jersey 100.00 Bonnybridge Limited Guernsey 100.00 Bridson Limited British Virgin Islands 100.00 Cheffins Limited British Virgin Islands 50.00 Cool Ridge Property Development Limited British Virgin Islands 100.00 Dartford Property Holdings Limited British Virgin Islands 96.00 Don Holdings Limited Guernsey 100.00 Exeter Properties Group Limited British Virgin Islands 95.24 Footprint Sp zoo Poland 100.00 Graymont Limited British Virgin Islands 100.00 Hanford Property Holdings Limited British Virgin Islands 100.00 Hansodeal Limited Cyprus 100.00 Harborne Holdings Limited Guernsey 100.00 Inlay Properties Limited British Virgin Islands 100.00 Karrera Properties Limited British Virgin Islands 100.00 Kerrymay Properties Limited British Virgin Islands 100.00 Macein Limited Guernsey 50.00 McKenna Property Holdings Limited British Virgin Islands 100.00 Nevayah Limited British Virgin Islands 100.00 Northcroft Limited British Virgin Islands 100.00 Robinia Holdings Limited British Virgin Islands 100.00 Sadler House Limited Jersey 50.00 San Pier Limited British Virgin Islands 100.00 Silverstream Properties Limited British Virgin Islands 100.00 Solomain Limited UK 100.00 Tarvin Properties Limited British Virgin Islands 100.00 Tradebridge Limited Guernsey 85.00 Travaldo Properties Limited British Virgin Islands 100.00 Wallis Holdings Limited Guernsey 100.00 Wallis Properties Sarl Luxembourg 100.00 Wallis Property Holdings Limited British Virgin Islands 100.00 West End Quay Limited British Virgin Islands 95.60 Westmead Property Holdings Limited British Virgin Islands 97.88

Cubic Property Fund Notes to the Consolidated Financial Statements (continued)

12.… Investments in underlying entities (continued) Country of <50% owned: incorporation % owned Antiku Investment Limited Cyprus 15.48 Merchant Properties Unit Trust** Guernsey 49.01 Merchant Properties LP** UK 48.54 Merchant Property Limited**** Guernsey 42.50 Neter Holding BV Netherlands 15.48 Recober Inversiones 2013 Spain Spain 15.48 Sang Holding Limited** British Virgin Islands 15.48 Spirasol Limited* Cyprus 46.83 Saresco International Limited*** British Virgin Islands 16.90 Viking One ApS* Denmark 46.83 Viking Two ApS* Denmark 46.83 Viking Four ApS* Denmark 46.83 Viking Five ApS* Denmark 46.83 Viking Six ApS* Denmark 46.83 Viking Seven ApS* Denmark 46.83 Østensjøveien 27 ANS** Norway 34.00 Østensjøveien 27 Holding AS** Norway 34.00 Østensjøveien 27 Invest AS** Norway 34.00

*Whilst the Company owns less than 50% of the total equity of these companies, it owns more than 50% of the voting shares and therefore controls the companies. As a result of this these companies are treated as subsidiaries of the Company and are consolidated in the Group’s financial statements. **The Company owns less than 50% of these entities and does not control them, but is deemed to have significant influence over them. As a result these entities are treated as associates of the Company and have been accounted for on an equity basis in the Group’s financial statements. ***The Company owns less than 20% of this entity. As a result this entity is treated as an unquoted investment for the Company and has been accounted for on an equity basis in the Group’s financial statements. ****The Company owns an effective 42.5% of this entity, through its holding in Tradebridge Limited which owns 50% of this entity. As the Company Directors have a majority on the board the entity is treated as a subsidiary of the Company and is consolidated in the Group’s financial statements. The principal activity of all the above subsidiaries is property holding. No goodwill arose on the acquisition of any subsidiary.

Cubic Property Fund Notes to the Consolidated Financial Statements (continued)

13. Creditors 2016 2015 GBP GBP Creditors and accruals Interest payable 310,574 119,740 VAT payable 374,922 629,310 Investment Adviser’s fees 438,050 519,401 Taxation payable 81,088 140,243 Property valuation and property management fees 33,006 30,469 Directors’ fees 7,500 8,630 Administration fees 20,392 22,851 Custodian fees 12,974 11,334 Sundry creditors 653,306 137,863 Stamp duty payable 191,375 170,500 Participating preference share dividend payable 743,952 763,659 Audit fees 75,000 53,393 Shareholder loan interest payable to non-controlling interest 869,230 205,463 3,811,369 2,812,856

14. Mortgage loans payable

As at 31 March 2016 Short-term Long-term Total Notes Lender/Subsidiary portion portion (see below) GBP GBP GBP Aldermore Bank Plc Dartford Property Holdings Limited 27,652 805,441 833,093 1 Royal Bank of Scotland Tradebridge Limited 180,000 20,737,500 20,917,500 2 BRFkredit Bank Viking Two ApS - 9,022,229 9,022,229 3 Viking Five ApS 187,242 8,194,490 8,381,732 4 Viking Six ApS - 10,310,659 10,310,659 5 Viking Seven ApS - 8,101,620 8,101,620 6 Lloyds Balavan Limited - 2,499,800 2,499,800 7 Harborne Holdings Limited - 1,650,000 1,650,000 8 Arnold House Holdings Limited - 6,814,132 6,814,132 9 Hanford Property Holdings Limited 16,000 2,890,000 2,906,000 10 Northcroft Limited - 1,350,000 1,350,000 11 Benbow House Limited 29,500 1,257,775 1,287,275 12 Travaldo Properties Limited - 388,763 388,763 13 BZ WBK Footprint Sp Zoo 936,658 - 936,658 14

Cubic Property Fund Notes to the Consolidated Financial Statements (continued)

14. Mortgage loans payable (continued)

As at 31 March 2016 Short-term Long-term Total Notes Lender/Subsidiary portion portion (see below) GBP GBP GBP Nationwide Building Society Karrera Properties Limited 5,400 1,485,966 1,491,366 15 Bewcastle Holdings Limited 151,670 6,895,948 7,047,618 16 HSBC Exeter Properties Limited 34,842 1,835,158 1,870,000 17 Bridson Limited 60,353 1,369,472 1,429,825 18 Nevayah Limited 63,028 1,307,147 1,370,175 19 Santander McKenna Property Holdings Limited 2,348,000 - 2,348,000 20 Robinia Holdings Limited 3,100,000 - 3,100,000 21 West End Quay Limited 180,000 9,135,000 9,315,000 22 Kerrymay Limited 26,000 655,000 681,000 23

7,346,345 96,706,100 104,052,445

For details of the respective proportions of these liabilities attributable to the Group and to non-controlling interest, please refer to note 28.

Note Maturity Interest rate Properties 1 14 December 2030 3 Month LIBOR plus 5.25% 36 Westgate Road, Dartford, Kent 2 12 November 2020 £15,688,125 SWAP agreement fixed Various properties (see note 26) rate 1.46% plus lenders margin 2.35 remainder LIBOR plus 2.35% 3 30 June 2042 2.56% fixed for 4 years Købmagergade 24, Copenhagen 4 30 Sept 2042 2.24% fixed for 4 years Købmagergade 22, Copenhagen 5 31 January 2044 2.17% fixed for 10 years Købmagergade 26, Copenhagen 6 31 January 2044 2.17% fixed for 10 years ostergard 40, , Copenhagen 7 12 January 2018 2.5% above the Bank’s base rate Turnham Green Terrace, London 8 3 October 2018 2.5% above the Bank’s base rate School Yard, Harborne 9 26 November 2020 Fixed rate of 3.68% on the first 70% Arnold House, St Julian’s Avenue, St and the remaining portion at 2.05% Peter Port, Guernsey above the Bank’s base rate 10 10 December 2020 Fixed rate of 3.49% on first 23/24 High Street, Sidcup, £2,182,500 and variable rate of 2.5% Kent above the banks base rate on remaining £727,500 11 3 March 2018 3.69% fixed 19/25 Red Lion Street, Norwich, Norfolk

Cubic Property Fund Notes to the Consolidated Financial Statements (continued)

14. Mortgage loans payable (continued) Note Maturity Interest rate Properties 12 10 December 2019 Fixed rate of Lenders cost of funds 3 Thurland Street, plus margin of 2% on first £970,987. Nottingham Variable rate of 2% above base rate on remaining £323,663 13 8 January 2021 2.25% above the Bank’s base rate 353 Lord Street, Southport 14 1 April 2016 3.69% fixed (2015: 3.69%) 20c, Fabryczna Street, Pietrzykowice, Poland 15 16 May 2017 6.72% fixed Omega House, Smugglers Way, Wandsworth, London 16 19 November 2017 LIBOR plus 1.37% on £3,220,000 of 55-67 & 79, Friar Street, Worcester the loan and the remaining portion at a fixed rate of 6.05% (at 31 March 2015: 4.04%, 2014: 4.02%)

17 11 February 2021 2.5% above the Bank’s base rate 65 High Street, Exeter 18 22 March 2021 2.5% above the Bank’s base rate Build Centre, Coldhurst Street, Oldham 19 31 January 2021 2.5% above the Bank’s base rate Build Centre, Station lane, Witney, Oxfordshire and Build Centre, Fitzherbert Road, Farlington, Portsmouth 20 30 January 2017 4.13% fixed 13-15 Cornhill, Ipswich 21 20 February 2017 Fixed rate of 4.38% on first 50% and Palmer & Harvey Unit, Sortmill Road, the remaining 50% at 3 month LIBOR Snodland, Kent plus 2.75% (At 31 March 2015 3.86%, 2014: 3.84%) 22 30 April 2022 LIBOR plus Margin (2.15%) 1-3 West End Quay, Paddington, London 23 3 July 2019 Fixed rate of 2.38% above the Bank’s Tritton Road, Lincoln margin on first 50% and the remaining portion at the Bank’s margin plus 3 month LIBOR

All loans are secured by a first legal charge over the properties to which each loan relates and, in addition, by a Deed of Rental Assignment. Cross-guarantees are in place relating to the loans payable by Bridson Limited and Nevayah Limited to GE Capital Bank. All loans are denominated in Sterling except the loan from BZ WBK S.A. (which is denominated in Euro) and the loans from BRFkredit Bank (which are denominated in Danish Kroner).

Cubic Property Fund Notes to the Consolidated Financial Statements (continued)

14. Mortgage loans payable (continued) As at 31 March 2015 Short-term Long-term Total Lender/Subsidiary portion portion GBP GBP GBP

GE Capital Bank Bridson Limited 181,921 479,067 660,988 Nevayah Limited 40,000 1,227,783 1,267,783 Bank of Ireland Dartford Property Holdings Limited 945,000 - 945,000 Exeter Properties Group Limited 2,233,883 - 2,233,883 BRFkredit Bank Viking Two ApS - 8,539,335 8,539,335 Viking Four ApS 120,639 7,315,299 7,435,938 Viking Five ApS 66,603 7,933,027 7,999,630 Viking Six ApS - 6,572,409 6,572,409 Lloyds Balavan Limited - 2,499,800 2,499,800 Harborne Holdings Limited - 1,650,000 1,650,000 BZ WBK Footprint Sp Zoo 998,860 - 998,860 Nationwide Building Society Karrera Properties Limited 6,000 1,490,626 1,496,626 Bewcastle Holdings Limited 300,000 6,934,061 7,234,061 Newcastle Building Society Tarvin Properties Limited* 5,047,585 - 5,047,585 Santander Ashford Property Holdings Limited 30,000 282,500 312,500 McKenna Property Holdings Limited 56,000 2,348,000 2,404,000 Robinia Holdings Limited 160,000 3,100,000 3,260,000 West End Quay Limited 140,000 6,180,000 6,320,000 Kerrymay Limited 26,000 681,000 707,000 West Bromwich Commercial Bank Arnold House Holdings Limited - 6,838,072 6,838,072 Hanford Property Holdings Limited - 2,785,629 2,785,629 Northcroft Limited 1,728,412 - 1,728,412

12,080,903 66,856,608 78,937,511

* The loan payable by Tarvin Properties Limited is in breach of its specified LTV limits and so has been classified as a current liability in the prior year financial statements. The property was taken by the receivers on 10 June 2015.

Cubic Property Fund Notes to the Consolidated Financial Statements (continued)

15. Financial liabilities Typically, the derivative contracts that the Group holds are aimed at reducing the risk to the Group (the Group does not designate any derivative as a hedging instrument for hedge accounting purposes). The Group holds derivatives in the form of interest rate swap agreements. Interest rate swap agreements are contractual agreements between two parties to exchange streams of payments over time based on specified notional amounts. The interest rate swaps are contracts taken out between the Company’s SPVs and lenders of the mortgage loans with the aim of fixing interest rates payable on floating rate mortgage loans. 2016 2015 GBP GBP Derivative contracts Liability Liability

Interest rate swaps 899,037 138,670

The total notional amount of the swaps is £35,722,625 (2015: £7,945,000). The Group pays fixed interest rates of between 0.89% and 2.00% (2015: between 0.89% and 2.00%). The maturity dates of the swap contracts range between February 2017 and October 2022 (2015: February 2017 and October 2022). There are no options contained within the swap instruments.

16. Other investments Interest in joint ventures The Group has entered into two joint venture agreement (March 2015: one Joint Venture agreement), in which it holds a 50% stake in each. The principal activities of the joint ventures are property investment. The Group has no contingent liabilities or further capital commitments to the joint ventures. Cumulatively, the Group has advanced the joint ventures a total of £2,109,886 (2015: £2,189,942) in the form of shareholder loans and a further £NIL (2015: £NIL) in mezzanine finance. The following is the Group’s share of the joint ventures:

2016 2015 GBP GBP

Fixed assets 5,863,076 5,684,100 Current assets 75,831 231,407 Share of gross assets 5,938,907 5,915,507

Liabilities due within a year (137,430) (236,574) Liabilities due after more than one year (2,922,500) (2,960,442) Share of gross liabilities (3,059,930) (3,197,016)

Share of net assets 2,878,977 2,718,491

Cubic Property Fund Notes to the Consolidated Financial Statements (continued)

16. Other investments (continued) Interest in joint ventures (continued)

Net capital loss for the year: Realised loss on sale of investment property (note 3) - (670,803) Net unrealised gain on investment property 200,000 235,000 200,000 (435,803)

Revenue 420,440 715,844 Expenses (212,803) (584,455) Taxation - - Profit from operations 207,637 131,389

Profit/(loss) for the year 407,637 (304,414)

Interest in associates The Group has a 49.0085% stake in Merchant Properties LP, and a 34% stake in Østensjøveien 27 ANS and a 15.48% investment into the Banc de sang property investment in which the Group retains a significant interest. The Group has no contingent liabilities or further capital commitments to the associates. Cumulatively, the Group has advanced the associates a total of £10,791,266 (2015: £11,856,388) in the form of shareholder loans. The following is the Group’s share of the associates: 2016 2015 GBP GBP Fixed assets 40,099,484 36,882,349 Current assets 1349,245,378 1,803,665349 Share of gross assets 41,344,862 38,686,014

Liabilities due within a year (586,787) (588,182) Liabilities due after more than one year (23,834,274) (23,266,352) Share of gross liabilities (24,421,061) (23,854,534)

Share of net assets 16,923,801 14,831,480 Net capital loss for the year: Net unrealised gain on investment property 2,918,385 3,107,093 2,918,385 3,107,093

Revenue 2,382,454 2,196,756 Expenses (1,390,736) (1,157,078) Taxation - - Profit from operations 991,718 1,039,678

Profit for the year 3,910,103 4,146,771

Cubic Property Fund Notes to the Consolidated Financial Statements (continued)

16. Other investments (continued) Unquoted Investment During the year the Group acquired a 16.90% stake in Saresco International Limited. Its principal activity is property investment. Cumulatively, the Group has advanced the investment a total of £1,000,000 in the form of equity and shareholder loans. The following is the Group’s share of the investment: 2016 2015 GBP GBP

Net Asset Value 1,191,564 - 349 Loss on investment for the year (189,653) -

17. Other loans payable

2016 2015 GBP GBP Loans payable to non-controlling shareholders of the subsidiaries and Joint Venture partner 18,384,680 12,094,597

The loans bear interest at rates to be determined from time to time by the Directors, are unsecured and have no fixed dates for repayment. Although the loans have no fixed dates for repayment, the Directors believe that these will not have to be repaid in the next 12 months and have therefore classified the loans as long-term liabilities.

18. Other long term liabilities 2016 2015 GBP GBP

Security deposits payable to tenants 1,336,539 1,558,721

19. Share capital Authorised share capital Cubic Property Fund Limited is authorised to issue 10 management shares and an unlimited number of participating redeemable preference shares (“participating shares”) of no par value. Management shares were issued for cash at £1 each to the Manager in order to comply with Jersey law, which requires that participating shares must have a preference over another class of capital. The same requirement exists in Guernsey law now that the Company has migrated to Guernsey. The holders of management shares carry no right to vote at general meetings. The holders of management shares are not entitled to a dividend and the shares are not redeemable. In a winding up, they rank only for a return of paid up nominal capital pari passu out of the assets of the Company (after the return of nominal capital paid up on participating shares). The management shares were issued to the previous Manager at par and the proceeds of the issue are represented by a separate management fund. All participating shares, including A Class shares, C Class shares and P Class shares, carry the right to a proportionate share in the assets of the relevant Class Fund and to any dividends that may be declared.

Cubic Property Fund Notes to the Consolidated Financial Statements (continued)

19. Share capital (continued) Holders of the participating shares are entitled to receive notice of all general meetings of the Company and to attend such meetings and vote. The holders of participating shares are entitled to one vote for each whole share of which they are a holder. Shares are redeemable by shareholders at prices based on the value of the net assets of the relevant Class Fund as determined in accordance with the Company’s Articles of Association (subject to a lock-in period in respect of P Class and C Class shares). A Class shares may be subscribed for or redeemed on the first business day of each calendar quarter. P Class shares receive a preference dividend of 3% per annum on the amount paid up per share.

On 2 April 2013, the Company raised £30,571,820 of new shareholder capital, through a rights issue, in the form of C Class (2013 series) shares.

Movement of share capital

For the year ended 31 March 2016

Number of shares A Class C Class P Class Management

Brought forward 5,136,042 19,971,139 8,433,652 10 Issued in the year 130,067 - - - Redeemed in the year (349,314) - (22,089) - Carried forward 4,916,795 19,971,139 8,411,563 10

Amount A Class C Class GBPP Class Management Total GBP GBP GBP GBP GBP

Brought forward 44,974,076 30,571,820 25,455,292 10 101,001,198 Issued in the year 368,699 - - - 368,699 Redeemed in the year (1,008,280) - (63,351) - (1,071,632) Carried forward 44,334,495 30,571,820 25,391,941 10 100,298,466

For the year ended 31 March 2015

Number of shares A Class C Class P Class Management

Brought forward 4,927,844 19,971,139 8,433,652 10 Issued in the year 596,699 - - - Redeemed in the year (388,501) - - - Carried forward 5,136,042 19,971,139 8,433,652 10

Cubic Property Fund Notes to the Consolidated Financial Statements (continued)

19. Share capital (continued)

Amount A Class C Class GBPP Class Management Total GBP GBP GBP GBP GBP

Brought forward 44,396,255 30,571,820 25,455,292 10 100,423,377 Issued in the year 1,576,559 - - - 1,576,559 Redeemed in the year (998,738) - - - (998,738) Carried forward 44,974,076 30,571,820 25,455,292 10 101,001,198

A dividend of £2,759,000 has been declared in relation to the participating shares in respect of the year ended 31 March 2016 (2015: £2,417,025).

20. Related party transactions Praxis Fund Services Limited, Cannon Asset Management Limited and Montreux Advisors Limited are all considered related parties. Praxis Fund Services Limited (resigned with effect from 15 July 2015) and Cannon Asset Management Limited (appointed 15 July 2015), acted as the Administrator, Secretary, Registrar and Designated Manager (hereinafter referred to as the “Administrator”) for the year. Montreux Advisers Limited acted as the Investment Adviser and Cannon Asset Management Limited was the administrator to most of the Group’s SPV companies. The Administrator is considered a related party as Janine Lewis (resigned with effect from 15 July 2015) and Richard van Vliet were directors of the Administrator. Further the Investment Adviser is considered a related party due to contractual arrangements and the fact that it influences key investment decisions for the Group. The SPV Administrator is considered a related party as Richard van Vliet is a Director of the Company and of the SPV Administrator. Fees payable are as follows: The Investment Adviser is entitled to receive an investment advisory fee of 0.68% per annum of the Gross Asset Value of the Class Fund. The Investment Adviser receives acquisition fees of up to 1.5% of the purchase price of any new property acquisition and a disposal fee of up to 1.5% of the sale price of any property disposals. In addition should an initial charge, not exceeding 5%, on subscription for participating shares be paid to the Investment Adviser, such charges in the majority of cases are paid by the Investment Adviser to the introducing financial advisor. All other costs and expenses, including performance fees, are borne by the Class Fund. The amount payable to the Investment Adviser in the year was £1,911,481 (2015: £1,367,015) and at the year end the amount still outstanding was £438,050 (2015: £519,401). No performance fee was paid during the year (2015: £Nil). The Administrator is entitled to receive an administration fee of 0.10% per annum of the Net Asset Value of the Class Fund subject to a minimum of £60,000 per annum, plus transaction fees, paid quarterly in arrears. The amount payable in the year was £92,369 (2015: £106,486) and at the year end the amount still outstanding was £20,392 (2015: £22,851).

Cubic Property Fund Notes to the Consolidated Financial Statements

(continued)

20. Related party transactions (continued) With the exception of Janine Lewis, whose annual fee increased to £15,000 with effect from 1 May 2013, the Directors are entitled to the sum of £10,000 each per annum for their services to the Company. The Directors may also receive Directors’ fees in respect of services provided to the subsidiaries. Directors fees of £31,370 were paid for the year (2015: £35,000). No fee was paid in the current year relating to the Directors’ services to the subsidiaries (2015: £Nil). The fees payable are as disclosed in note 5 with the amounts outstanding at the year-end disclosed in note 13. The SPV Administrator is entitled to receive fees for the administration of each of the underlying SPVs. The fees payable to the SPV Administrator in the year were £204,404 (2015: £180,672).

Lorca Management Limited has a significant interest of 45.22% in the Viking investments in Copenhagen and Lorca is a 45% JV partner in the Sadler House property in Jersey. It also has a 50% interest in Macein Limited.

21. Controlling Party The immediate and ultimate controlling party by virtue of their shareholding in the Fund, as defined by Financial Reporting Standard 102 Section 33 (Related Party Disclosures), is Lorca Management Limited.

22. Financial instruments Fair values The Directors consider that the carrying amounts of trade and other receivables, cash and cash equivalents, creditors and accruals, mortgage loans payable, other loans payable and net assets attributable to participating shareholders approximate their fair values.

The Group's investing activities expose it to various types of risk that are associated with financial instruments and markets in which it invests. These risks are dealt with at length in the private placement memorandum. Some of the most important types of financial risk to which the Group is exposed are summarised as follows:

Fair value hierarchy The following table analyses the Group’s assets and liabilities measured at fair value. The different levels have been defined as follows:

▪ Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities;

▪ Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices);

▪ Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

31 March 2016 Level 1 Level 2 Level 3 Total GBP GBP GBP GBP

Interest rate swaps - (899,037) - (899,037)

31 March 2015 Level 1 Level 2 Level 3 Total GBP GBP GBP GBP

Interest rate swaps - (138,670) - (138,670) 68

Cubic Property Fund Notes to the Consolidated Financial Statements (continued)

22. Financial instruments (continued) Credit risk Credit risk is the risk that a counterparty will be unable or unwilling to meet commitments it has entered into with the Group. The Group’s main credit risk arises from the possibility of defaults on rental income. As at the year-end date, the maximum exposure relating to tenant default is the entire balance of rental debtors, amounting to £630,070 (2015: £639,672). In the event of default by an occupational tenant, the Group may additionally suffer a rental income shortfall and incur additional costs including legal expenses and expenses relating to re-letting the property. The Directors consider the inherent risk small due to their policy of investing in large-size properties and letting out to well-known and reputable businesses.

Liquidity risk Liquidity risk is the risk the Group will encounter in realising assets or otherwise raising funds to meet financial commitments, including potential quarterly redemptions. As the Group invests substantial amounts in individual investments, there is also an inherent risk, should a shareholder wish to redeem, that sufficient cash will not be available to meet the redemption without the need for forced sales. This risk is mitigated as dealing in the Company can only occur quarterly. In the event of insufficient funds being available to meet redemption requests, the Directors are permitted to delay such redemptions until sufficient assets are realised. The Directors may also impose redemption charges.

The Group’s liquidity position has been monitored on a regular basis by the Board of Directors.

The following tables analyse the Group's non-derivative financial liabilities into relevant maturity groupings based on the remaining period at the year end to the contractual maturity date.

31 March 2016 Total 0-1 year 1-2 years 2-5 years More than 5 years or no maturity GBP GBP GBP GBP GBP

Mortgage loans (104,052,445) (7,346,345) (11,686,331) (41,029,906) (43,989,863) Other loans payable (18,384,680) - - - (18,384,680) Creditors (3,811,369) (3,811,369) - - - Distributions payable (2,759,000) (2,759,000) - - - Security Deposits (1,336,539) - - - (1,336,539) (130,344,033) (13,916,714) (11,686,331) (41,029,906) (63,711,082)

31 March 2015 Total 0-1 year 1-2 years 2-5 years More than 5 years or no maturity GBP GBP GBP GBP GBP

Mortgage loans (78,937,511) (12,080,903) (7,322,466) (28,986,830) (30,547,312) Other loans payable (12,094,597) - - - (12,094,597) Creditors (2,812,856) (2,812,856) - - - Security Deposits (1,558,721) - - - (1,558,721) (95,403,685) (14,893,759) (7,322,466) (28,986,830) (44,200,630)

Cubic Property Fund Notes to the Consolidated Financial Statements (continued)

22. Financial instruments (continued) Market price risk The Group is exposed to market price risk in relation to the fair value of its interest rate swaps. No sensitivity analysis has been performed in respect of this risk exposure as the amounts concerned are not material.

Changes in market conditions may adversely affect rental income arising from the Group’s property portfolio and the market value of the properties. Furthermore, the Group has various loan covenants for the mortgage loans such as LTV ratios which may also be adversely affected by any adverse movements in property values. The conditions are regularly reviewed by the Directors with guidance from the Investment Adviser to ensure that the Group’s positions are adequately balanced to minimise the impact of market price risk.

Interest rate risk

The floating rate loans taken out by the subsidiaries to finance property purchases leave the Group exposed to risks associated with the effects of fluctuations in the prevailing levels of market interest rates. The following tables summarise the Group’s exposure to interest rate risk* and set out the carrying amount, by maturity, of the Group’s financial instruments that are exposed to interest rate risk.

31 March 2016 More than 5 years or no Total 0-1 year 1-2 years 2-5 years maturity GBP GBP GBP GBP GBP Interest bearing Mortgage loans (104,052,445) (7,346,345) (11,686,331) (41,029,906) (43,989,863) Other loans payable (18,384,680) - - - (18,384,680) Cash at bank and in hand 21,217,491 21,217,491 - - - (101,219,634) 13,871,146 (11,686,331) (41,029,906) (62,374,543)

More than 5 31 March 2015 years or no Total 0-1 year 1-2 years 2-5 years maturity GBP GBP GBP GBP GBP Interest bearing Mortgage loans* (78,937,511) (12,080,903) (7,322,466) (28,986,830) (30,547,312) Other loans payable (12,094,597) - - - (12,094,597) Cash at bank and in hand 10,410,648 10,410,648 - - - (80,621,460) (1,670,255) (7,322,466) (28,986,830) (42,641,909)

*The tables above include loans with both fixed and floating rates of interest.

The sensitivity analyses below have been determined based on the Group’s exposure to interest rates for interest bearing assets and liabilities (included in the interest rate exposure table above) at the 31 March 2016 and the stipulated change taking place at the beginning of the financial year and held constant through the reporting year in the case of instruments that have floating interest rates.

Cubic Property Fund Notes to the Consolidated Financial Statements (continued)

22. Financial instruments (continued) Interest rate risk (continued)

If interest rates had been 1% higher/lower, for assets and liabilities as at 31 March 2016 that are subject to changing interest rates, and all other variables were held constant, the Group’s change in net assets attributable to participating shareholders for the year would have been a decrease/increase of £1,071,782 (2015: £789,512) due to the increase/decrease in the interest paid on the Group’s floating rate net interest bearing liability.

Currency risk

The Group invests in properties that are domiciled in countries with different currencies from the Group’s reporting currency of Sterling. Accordingly, any changes in exchange rates may significantly affect the cash flows from the rentals and the value of the property in the Group’s books. This risk is managed through the investment strategies for each Class Fund. With regards to the UK and European Class Fund, which is the only Class Fund at the year-end date, investments are limited to properties in the UK and European markets. The currency exposure as at 31 March 2016 was as follows:

Investment Cash Other net Total net % of properties liabilities assets exposure GBP GBP GBP GBP

GBP 120,630,000 6,221,536 (141,222,834) (14,371,298) (14.26) EUR 3,692,259 723,055 787,039 5,202,353 5.16 DKK 82,594,319 14,163,495 11,486,902 108,244,716 107.44 NOK - 19,254 (37,161) (17,907) (0.02) PLN 1,663,897 90,151 (59,448) 1,694,600 1.68 208,580,475 21,217,491 (129,045,502) 100,752,464 100.00

The currency exposure as at 31 March 2015 was as follows:

Investment Cash Other net Total net % of exposure properties liabilities assets GBP GBP GBP GBP

GBP 81,700,001 6,427,708 (45,780,514) 42,347,195 48.87 EUR 4,980,707 512,397 1,509,723 7,002,827 8.08 DKK 61,789,793 3,465,653 (32,086,756) 33,168,690 38.27 NOK - 4,890 4,136,546 4,141,436 4.78 PLN - - - - - 148,470,501 10,410,648 (72,221,001) 86,660,148 100.00

The sensitivity analysis below has been determined based on the sensitivity of the Group’s outstanding foreign currency denominated financial assets and liabilities to a 10% increase/decrease in Sterling against Euro, Danish Kroner, Polish Zloty and Norwegian Kroner translated at the year-end date.

Cubic Property Fund Notes to the Consolidated Financial Statements (continued)

22. Financial instruments (continued) Currency risk (continued) As at 31 March 2016, if Sterling had weakened by 10% against the Euro, Danish Kroner and Norwegian Kroner, with all other variables held constant, the net assets attributable to participating shareholders would have been £11,636,504 (2015: £4,431,295) or 11.05% higher (2015: 5.11% higher). Conversely, if Sterling had strengthened by 10% against the Euro, Danish Krona, Polish Zloty and Norwegian Kroner, with all other variables held constant, the net assets attributable to participating shareholders would have been £11,636,504 (2015: £4,431,295) or 11.05% lower (2015: 5.11% lower).

23. Reconciliation of net asset value 2016 2015 GBP GBP Per audited financial statements Total assets 253,403,442 190,610,224 Total liabilities (138,452,100) (98,177,520) Net (assets) attributable to non-controlling interest (14,198,878) (5,772,556) Net asset value 100,752,464 86,660,148

Adjustments made: Underwater SPVs excluded from valuation - 3,570,710 Property acquisition and bank refinance costs* 2,729,544 1,512,063 Overaccruedacquisition costs* expense (53,014) 16,300 Interest rate swap unrealised loss not included 899,037 138,670 Reportedvaluation** net asset value 104,328,031 91,897,891

Number of participating shares 33,299,497 33,540,833

Reported net asset value per share GBP 3.13 GBP 2.74 Net asset value per participating share as per audited

consolidated financial statements GBP 3.03 GBP 2.58

* Relates to property acquisition and bank refinancing costs which are amortised in the Company valuation but immediately expensed in the financial statements.

24. Other reserves

For the year ended 31 March 2016

Capital Profit and loss Net Translation Total reserve account deficit reserve reserves GBP GBP GBP GBP GBP

Balance brought forward (13,976,734) (669,558) (14,646,292) 305,242 (14,341,050) Movement in the year 17,323,435 (3,053,183) 14,270,252 524,996 14,795,248 Balance carried forward 3,346,701 (3,722,741) (376,040) 830,238 454,198

Cubic Property Fund Notes to the Consolidated Financial Statements

(continued)

24. Other reserves For the year ended 31 March 2015

Capital Profit and loss Net Translation Total reserve account Deficit reserve reserves GBP GBP GBP GBP GBP

Balance brought forward (26,360,696) 292,970 (26,067,726) 153,135 (25,914,591) Movement in the year 12,383,962 (962,528) 11,421,434 152,107 11,573,541 Balance carried forward (13,976,734) (669,558) (14,646,292) 305,242 (14,341,050)

Capital reserve comprises accumulated revaluation gains and losses of the Group’s investment property, derivatives and other capital items. Translation reserve comprises accumulated exchange differences arising on the translation of the net investment in foreign entities into sterling.

25. Segmental reporting The Company has two significant geographical operating segments, the United Kingdom and Continental Europe. United Continental Kingdom Europe Total For the year ended/as at 31 March 2016 GBP GBP GBP

Revenue 8,697,888 5,474,266 14,172,154

Net income before tax and capital items 1,020,045 (243,003) 777,042

Net capital gain 6,594,029 21,914,728 28,508,757

Net assets 60,566,171 40,186,293 100,752,464

Share of net income before tax and capital items relating to joint ventures and associates 884,681 314,674 1,199,355 Share of net capital gain relating to joint ventures and associates 1,759,749 1,358,636 3,118,385

United Continental Kingdom Europe Total For the year ended/as at 31 March 2015 GBP GBP GBP

Revenue 7,447,940 4,988,488 12,436,428

Net income before tax and capital items (1,701,113) 2,299,121 598,008

Net capital gain 13,231,924 5,011,095 18,243,019

Net assets 52,273,290 34,386,858 86,660,148

Cubic Property Fund Notes to the Consolidated Financial Statements (continued)

25. Segmental reporting (continued)

Share of net income before tax and capital items relating to joint ventures and associates 674,601 496,466 1,171,067 Share of net capital gain relating to joint ventures and associates 1,530,834 1,140,456 2,671,290 All turnover is derived from external customers.

26. Consolidated Portfolio Statement As at 31 March 2016 Market Cost Value Portfolio Investment properties GBP GBP % 1-13, West End Quay, Paddington 13,221,548 17,100,000 16.97 13-15 Cornhill, Ipswich 4,209,513 4,500,000 4.47 18-28 Turnham Green Terrace, London 4,447,720 4,950,000 4.91 19-25, Red Lion Street, Norwich 3,861,234 2,675,000 2.66 20c Fabryczna Street, Pietrzykowice, Poland 2,615,459 1,663,897 1.65 Revolution Bar, Clarence Parade, 2,611,096 2,400,000 2.38 Cheltenham 24/34, High Street, Sidcup 4,961,950 4,975,000 4.94 11-15 Pelham Street, Nottingham 3,005,812 2,825,000 2.80 36, Westgate Road, Dartford, Kent 2,617,213 1,850,000 1.84 55-67 & 79, Friar Street, Worcester 11,604,015 11,550,000 11.46 65, High Street, Exeter 3,341,161 3,400,000 3.37 Am Poggenpohl 1, Homeburg, Germany 3,022,765 1,275,655 1.27 Arnold House, St Julian’s Avenue, St Peter Port, Guernsey 11,220,832 11,000,000 10.92 Bahnhofstr. 12-14, Bad Munder, Germany 2,732,402 1,901,597 1.89 Build Centre, Coldhurst Street, Oldham 3,314,228 2,425,000 2.41 City Office Park, Tritton Road, Lincoln 1,940,867 1,200,000 1.19 Købmagergade 22, Copenhagen, Denmark 15,197,419 20,203,285 20.05 Købmagergade 24, Copenhagen, Denmark 15,803,946 20,734,951 20.58 Købmagergade 26, Copenhagen, Denmark 13,946,684 26,583,272 26.38 Ostergard 40 + Vimmelskaflet Copenhagen 16,708,251 15,072,811 14.96 Omega House, Wandsworth, London 2,973,435 2,550,000 2.53 Palmer & Harvey Unit, Snodland 7,403,892 8,100,000 8.04 The School Yard, High Street, Harborne 2,741,229 3,000,000 2.98 Plumb Centre, Fitzherbert Road, Portsmouth 1,524,192 1,475,000 1.46 Plumb Centre, Station Lane, Witney 1,306,603 1,175,000 1.17 Schongauer Str. 46, Peiting, Germany 2,279,376 515,007 0.51 353 Lord Street, Southport 800,000 750,000 0.74 159,412,842 175,850,484 174.53 Tradebridge properties (as below) 33,986,791 32,730,000 32.49 193,399,633 208,580,484 207.02 Loans payable (122,437,125) (121.52) Other net assets 28,807,992 28.59 Non-controlling interests (14,198,878) (14.09) Total net asset value 100,752,464 100.00 74

Cubic Property Fund Notes to the Consolidated Financial Statements (continued)

26. Consolidated Portfolio Statement (continued)

Market Cost Value Portfolio Tradebridge properties GBP GBP % Station Lane, Birtley, Tyne & Wear 1,135,000 1.13 Factory Road, Blaydon , Tyne & Wear 1,445,000 1.43 The Station Yard, Blythe Bridge, Staffordshire 1,150,000 1.14 Windsor Street, Bradford, West Yorkshire 1,000,000 0.99 St Andrews Works, Bridport, Dorset 2,785,000 2.76 Hobson Industrial Estate, Burnopfield, Tyne &

Wear 805,000 0.80 Middlebrook Way, Cromer, Norfolk 1,060,000 1.05 Mid Craig Road, Dundee, Forfar 1,435,000 1.42 Law Place, East Kilbride, Lanarkshire 1,500,000 1.49 Woolley Bridge, Glossop, Derbyshire 1,370,000 1.36 Quedgeley West Business Park, Gloucester,

Gloucestershire 3,325,000 3.30 Thames Way, Gravesend, Kent 3,585,000 3.56 Shore Street, Inverness, Inverness-shire 1,470,000 1.46 Mintsfeet Trading Estate, Kendal, Cumbria 1,445,000 1.43 Hamlin Way, Kings Lynn, Norfolk 2,530,000 2.51 Bamfield Road, Leek, Staffordshire 1,835,000 1.82 Trostre Road, Llanelli, Carmarthenshire 1,990,000 1.98 Livsey Street, Rochdale, Greater Manchester 1,240,000 1.23 George Holmes Way, Swadlincote, Derbyshire 1,625,000 1.61 33,986,791 32,730,000 32.49

The Tradebridge properties were purchased jointly and as such the Directors are of the opinion that the cost associated with calculating the cost of each individual property outweighs the benefit it will provide.

Cubic Property Fund Notes to the Consolidated Financial Statements (continued)

26. Consolidated Portfolio Statement (continued)

As at 31 March 2015 Market Cost Value Portfolio Investment properties GBP GBP % 1-13, West End Quay, Paddington 13,221,548 16,500,000 19.04 13-15 Cornhill, Ipswich 4,209,513 4,700,000 5.42 18-28 Turnham Green Terrace, London 4,447,720 4,600,000 5.31 19-25, Red Lion Street, Norwich 3,861,234 2,700,000 3.12 20c Fabryczna Street, Pietrzykowice, Poland 2,615,459 1,592,011 1.84 239-245, The Marlowes & 1 Seldon Hill, Hemel Hempstead 6,202,142 2,650,000 3.06 24/34, High Street, Sidcup 4,961,950 4,700,000 5.42 3, Bank Street, Ashford, Kent 1,059,810 600,000 0.69 36, Westgate Road, Dartford, Kent 2,617,213 1,800,000 2.08 55-67 & 79, Friar Street, Worcester 11,604,015 11,000,000 12.69 65, High Street, Exeter 3,341,161 3,300,000 3.81 Am Poggenpohl 1, Homeburg, Germany 3,022,765 1,156,100 1.33 Amagertorv 2, Copenhagen, Denmark 14,579,980 15,041,096 17.36 Arnold House, St Julian’s Avenue, St Peter Port, Guernsey 11,220,832 10,750,000 12.40 Bahnhofstr. 12-14, Bad Munder, Germany 2,732,402 1,597,533 1.84 Build Centre, Coldhurst Street, Oldham 3,314,228 2,400,000 2.77 City Office Park, Tritton Road, Lincoln 1,940,867 1,175,000 1.36 Købmagergade 22, Copenhagen, Denmark 15,197,419 16,181,308 18.67 Købmagergade 24, Copenhagen, Denmark 15,803,946 17,273,001 19.93 Købmagergade 26, Copenhagen, Denmark 13,946,684 13,294,388 15.34 Omega House, Wandsworth, London 2,973,435 2,150,000 2.48 Palmer & Harvey Unit, Snodland 7,403,892 7,575,000 8.74 The School Yard, High Street, Harborne 2,741,229 2,800,000 3.23 Plumb Centre, Fitzherbert Road, Portsmouth 1,524,192 1,250,000 1.44 Plumb Centre, Station Lane, Witney 1,306,603 1,050,000 1.21 Schongauer Str. 46, Peiting, Germany 2,279,376 635,064 0.73 Total investment properties 158,129,615 148,470,501 171.32 Loans payable (91,032,108) (105.04) Other net assets 34,994,311 40.38 Non-controlling interests (5,772,556) (6.66) Total net asset value 86,660,148 100.00

Cubic Property Fund Notes to the Consolidated Financial Statements (continued)

27. Contingent Liabilities and Commitments Cross-guarantees are in place relating to the loans payable by Bridson Limited and Nevayah Limited to HSBC Bank because that was a condition of refinance from redeeming the loan with GE Capital Bank. The Company has no other contingent liabilities or commitments.

28. Minority Interests The Group in the main owns property through companies which are 100% owned, however there are several companies whereby the Group does not own 100% of the shares (see Note 12). Where the Group can demonstrate that it either owns a majority of the share capital of the SPV or can demonstrate that it controls the boards of the SPV, then the SPV will be classified as a subsidiary of the group and will be taken into these financial statements in full. The shares that it does not own are classified as minority interests and in these financial statements are shown on the Consolidated Balance sheet as “net assets attributable to non – controlling interest”. The minority interests share in the following assets and liabilities of the Group. As at 31 March 2016

Group assets Minority

with interest Minorities Share Property investments 137,674,319 63,723,389 Cash at bank 15,379,659 7,971,491 Debtors 1,369,258 549,927 Creditors (4,151,191) (1,412,137) Bank loan (68,751,833) (31,603,254) Deferred tax liability (6,364,779) (3,384,153) Tenants deposits (1,336,539) (710,638) Loans and equity (51,720,636) (20,935,747) Total NAV 22,098,258 14,198,878

As at 31 March 2015

Group Assets Minority

with interest Minorities Share Property investments 83,389,794 33,808,713 Cash at bank 3,602,164 1,848,640 Debtors 2,699,443 1,253,101 Creditors (1,782,799) (239,878) Bank loan (40,046,195) (16,664,219) Deferred tax liability (2,094,417) (1,113,602) Tenants deposits (1,437,302) (764,213) Loans and equity (31,533,945) (12,355,987) Total NAV 12,796,743 5,772,555

Cubic Property Fund Notes to the Consolidated Financial Statements (continued)

29. Post year end events Director Appointments

On 21 April 2016 Kerry Flynn was appointed a director of the Fund.

Property Activity

On 22 April 2016 the Group completed the acquisition of Units A, B, C, D and E, 141-153 Drummond Street, Euston, London, for consideration of £1.6 million.

On 26 June 2016 the Group completed the acquisition of Unit G1, Tyler Close, Normanton for consideration of £2.3 million.

On 10 August 2016 the Group completed the acquisition of 159 High Street, Guildford for consideration of £2.525 million. On 14 September 2016 the Group completed the acquisition of 63, 75 and 12/131 North End, Croydon for consideration of £6.05 million. On 14 April 2016 the Group acquired an effective share of 40% in Curzon Cinema, Westgate Hall Road, Canterbury for consideration of £899,026. This was acquired as part of a joint venture whereby the Group acquired 50% of Macein Limited, with their joint venture partner. Macein Limited owns 80% of the shares in Corinthian Curzon (Canterbury) Limited, the property holding company of the above property. On 14 April 2016 the Group acquired an effective share of 40% in Curzon Cinema, 16 George Street, Sheffield for consideration of £948,874. This was acquired as part of a joint venture whereby the Group acquired 50% of Macein Limited, with their joint venture partner. Macein Limited owns 80% of the shares in Corinthian Curzon (George) Limited, the property holding company of the above property. On 9 August 2016 the Group sold 13 Cornhill, Ipswich, Suffolk for £4.3 million. Financing Activity

On 19 August 2016 Balavan Limited, a company within the Group, agreed a new facility agreement with Lloyds Bank Plc for £20 million. The facility will be used to fund a property portfolio consisting of eleven properties. The eleven properties are made up of an existing property (18/28 Turnham Green Terrace, London), the acquisition of four new properties as disclosed above and the transfer of six existing properties from companies owned by the Fund which already have mortgage facilities with Lloyds Bank Plc. The companies with their respective facilities are listed below:

Company £ Arkle Holdings Limited 1,200,000 Benbow House Limited 1,279,900 Harborne Holdings Limited 1,650,000 Northcroft Limited 1,350,000 Travaldo Properties Limited 392,000 Hanford Property Holdings Limited 2,902,000 Total 8,773,900

Cubic Property Fund Kingsway House, Havilland Street, St Peter Port, Guernsey, GY1 3FN