Introduction

Following an extremely difficult year for your Company in 2002 the first six
months of 2003 have seen better performance of our assets. The Company has
also put in place new management arrangements, as announced on 3 April 2003.

As at the period end the net asset value of an Ordinary Share was 49.2p. This
represents an increase of 35.5% over the asset value at 31 December 2002. The
prices at which the company’s securities trade have also improved.

At the end of the period, the Company’s assets were primarily properties based
in Ireland and the UK. The UK property portfolio comprised properties with an
aggregate value of £121.6 million after disposals (31 December 2002 – £128.6
million) and the Irish property portfolio comprised properties with a total value
of 1489.4 million (31 December 2002 – 1454.6 million). The Company’s income
portfolio was valued at £27.5 million (31 December 2002 – £25.6 million).

Property Portfolio

I am pleased to report that your Company’s property portfolio has remained
sound and continues to be underpinned by a sustained rental income flow from
strong covenants. This income flow is expected to increase as forthcoming rent
reviews continue to result in uplifts. The Company sold 6 properties during the
period (five in the UK, and one in the Isle of Man), realising £7.0 million, a net
profit of 13% over valuation.

UK and Offshore Property

The UK property market remains active in spite of press comment about falling
rents in prime London and M4 locations. While the occupier markets in the office
sector particularly are suffering, the same is not true of retail. Whether it be high
streets, shopping centres or retail warehousing, many occupiers are trading well,
with some looking to expand.

Within your Company’s Portfolio, the June 2003 revaluation has seen a
downwards revaluation of the office assets, reflecting the weaker occupier
markets, while the retail properties have generally improved in value in response
to occupier and investor demand.

Property continues to be in favour as an investment asset class, particularly by
large overseas (mostly German) and smaller private investors who continue to
take advantage of historically low interest rates, and long leases.

Within your Company’s UK portfolio, the underlying strength of the tenant
covenants will continue to support performance, through the rental income
stream. There are seven rent reviews due during the second half of 2003 that we
expect to generate further increases in income. The geographical and sector
diversification of the portfolio provides further stability.

Further opportunities to improve the value of the portfolio exist in both the short
and medium term, through negotiations with tenants, refurbishment and
potentially redevelopment.

Ireland

Despite the general continued difficulties in the overall economic environment,
the Irish Property Market enjoyed a pick-up in growth in the first six months of
2003. This growth is focusing particularly on the value of good quality investment
properties with investors competing strongly for such limited opportunities as
become available and against the background of Euro interest rates at an historic
low of 2.1%. There is a scarcity of such stock on the investment market as most
holders are content to retain their investments and enjoy a secure income flow.

Within the market in general, the retail and residential sectors are buoyant with
continued economic growth and low interest rates underpinning consumer
demand in terms of both retail sales and also the demand for housing. The office
sector has been the weaker sector in the market over the past 2 years. The sector
is exhibiting signs of recovery with a total quantity of accommodation taken up
in the first 6 months of 2003 of approximately 550,000 sq. ft. and the vacancy
rate declining to 14.9% as new construction activity has slowed dramatically.
There is a significant difference in the state of the market as between downtown
and suburban locations with over 60% of the currently available space located
in the suburbs.

Against this background of a return to, albeit modest growth in overall market
values, the performance of REO’s Irish portfolio has been extremely good with
the valuation of some of the more important assets increasing by up to 10% over
the period.

Particular highlights during the 6 months were the completion of the Bank of
Ireland Asset Management office block on Mespil Road and the continued
success of the rent review programme in Stillorgan Shopping Centre.

Despite the recent slowdown in absolute levels of growth, Ireland is still forecast
to produce economic growth over the next 3-5 years higher than the average for
the E.U. Against this background we believe there are attractive opportunities for
REO’s development portfolio supporting an investment portfolio that is well let to
strong covenants.

Income Portfolio

Bond markets performed well in the period under review and this has been
reflected in the performance of the bond portfolio, which increased in value from
£18.5 million to £20.7 million. Many of the Company’s holdings of investment
companies have negligible market value. A renewed bull market in equities
might see some value restored to some of these holdings but we believe this is a
distant prospect and there has been little activity in our portfolio over the period.

Share Buy Backs

The Company’s policy of purchasing securities for cancellation continued.
20.81 million Ordinary shares, 2.06 million Zero Dividend Preference shares and
23.50 million CULS units were purchased and cancelled over the period, adding
modestly to NAV per share outstanding. The Board will continue to seek to buy
back further shares and CULS for cancellation.

Management arrangements

INVESCO International Limited was formally appointed as manager to the
Company on 2 May 2003. The new Manager has been working closely with the
Board and Treasury Holdings, our Irish property adviser, on a number of
initiatives to generate long term value for investors.

It remains the Company’s intention to pursue its claim against its former Manager,
Aberdeen Asset Managers Jersey Limited, and associated companies for losses
sustained in the Income Portfolio.

Prospects

Looking forward, I believe that your Company’s portfolio is well positioned to
produce attractive returns. The restoration of a dividend on the Ordinary shares
remains a priority for the Board and we will work towards achieving a stable and
sustainable level of income.

R Y F Horney
Chairman

25 July 2003