I am pleased to report that the strong performance and progress your Company has made in recent years has continued during the first six months of this year. Net assets attributable to the ordinary shareholders at the period end stood at some £371 million (146.7p per share or 133.3p per share on a fully diluted basis), an increase of 37.9 per cent. from the level prevailing at the end of 2006 and 233 per cent. from the level as at 6 May 2005, the last time that the Company raised capital from the equity markets. At that time, new ordinary shares were placed at 58.5 pence per share and that they now stand at a multiple of that price is a tribute to the success of the management team.

The Board has decided to declare an interim dividend of 1p per ordinary share, payable on 5 November to shareholders on the register on 5 October 2007, with an ex-dividend date of 3 October 2007.

During the six month period under review, the Company achieved a favourable settlement of its litigation against Aberdeen Asset Management. I reported on this in the Annual Report and am pleased to say that since then, the Company’s residual claims against UBS have also been successfully settled, as announced on 16th May. These settlements have made a significant contribution to the Company’s performance during the period under review.

I am delighted to report that shortly after the period end, China Real Estate Opportunities Limited (CREO) completed a substantial capital raising on AIM in which REO participated. You may recall that REO was one of the founder investors in CREO when it was launched as a cash shell in December 2005. Following its recent fund raising, CREO’s market capitalisation is now in excess of £355 million and REO remains a substantial shareholder with some 17 per cent. of CREO’s share capital. As the capital raising occurred after the interim period end, the impact is not reflected in the consolidated Balance Sheet.

Irish Economic Overview

The Irish economy continued to experience strong growth in the opening months of the year. The Central Statistics Office (CSO) reports that GNP rose at an annual rate of 6.4 per cent. with GDP expanding at a robust annual rate of 7.5 per cent. compared to 5.1 per cent. during the corresponding period of 2006. Comparisons suggest that growth in the Irish economy continues to outpace that of many of its trading partners both within the Eurozone and beyond.

Growth in the economy is being supported by a number of key elements which include continued low unemployment levels of approximately 4 per cent., the lowest in the European Union, coupled with strong consumer spending. Interest rates have increased in the past twelve months, however, these increases were widely forecast and had previously been factored into the decision making process.

Irish Property Market

The Irish property market continues to perform strongly across all sectors with the Society of Chartered Surveyors / Investment Property Databank (SCS/IPD) Index producing a total return of 5.2 per cent. for the six month period ending June 2007. The retail sector, the “star performer” over the past 10 years or so, continued to deliver strong performance in the period under review. The SCS/IPD retail index recorded a total return of 4.7 per cent. for the six months to the end of June 2007. The lack of city centre opportunities is directing demand to suburban centres. Take-up in new shopping centres countrywide is strong with anchor tenants including Tesco, Marks & Spencer, TK Maxx and Dunnes Stores continually seeking opportunities. Prime retail yields are currently 2.5 per cent. to 3 per cent.

The office market also continues to perform well with strong demand for new accommodation particularly in the Central Business District and the Dublin Dockland areas. There are a number of active enquiries for accommodation in excess of 10,000 sq. m. mainly from professional firms and larger financial institutions. Occupiers are seeking landmark headquarter buildings with significant design merit.

The first six months of 2007 has seen office reservations of approximately 160,000 sq. m., twice the level achieved in the same period last year. The current vacancy rate for the Dublin Office Market is approximately 10 per cent. overall with 7 per cent. vacancy in the city centre. A return of 5.7 per cent. was recorded in the first six months of 2007 on the SCS/IPD Index for the office sector. Average prime office yields are 3.75 per cent. to 4.25 per cent. and a strong rental growth is now showing through. Prime rents are approximately €600 per sq. m. net of incentives.

The industrial market has also continued to strengthen during the first six months of 2007 recording a total return of 5.6 per cent. in the SCS/IPD Index . Expansion work continues on the M50 motorway and the Port Tunnel has now opened. Both of these facilities will benefit property on the M50 and M1 corridors.

In the residential sector, recent uncertainty exacerbated by promised changes in stamp duty levels and interest rate increases, has caused some weakness in the market with values down some 3 per cent. during the first 7 months of the year. Subsequent post budget changes in stamp duty rates should improve the position for first time buyers. Nonetheless, it is expected that the residential sector will remain weak in the short-term though the fundamental drivers underpinning the market should ensure a “soft landing”.

Irish Property Portfolio

The first six months of 2007 has been a busy period with activity in both the development and investment segments of the Company’s Irish portfolio. The Irish portfolio produced a capital return of 4.3 per cent. during the period, exceeding the Society of Chartered Surveyors / Investment Property Databank (SCS/IPD) Irish Index capital return of 3.3 per cent.

Development Portfolio

At Central Park in Leopardstown, planning permission has recently been sought for two additional developments, a residential scheme comprising approximately 344 apartments and an office development of approximately 28,500 sq. m. Central Park’s attractiveness as a residential and office location has been enhanced by the extension to the Luas (light rail transport system) to Central Park.

At the Tedcastles site at North Wall Quay, Dublin 1, close to the heart of the International Financial Services Centre and a short distance from the newly opened Port Tunnel, we have recently lodged a planning application for an office development of approximately 37,000 sq. m. This office development is in two linked buildings fronting the River Liffey. On a site to the rear of this development we are currently preparing a planning application for a mixed use development of approximately 40,000 sq. m. to include retail and leisure components with residential overhead.

Refurbishment works at Stillorgan Shopping Centre which include new floors to the malls along with a new lift and access stairs to the first floor retail element have been completed. The previously anticipated Local Area Plan was issued and put on public display by the Local Planning Authority. Given our extensive interests in the Stillorgan area, including the shopping centre and the Leisureplex and Blakes sites, our planning consultants have made representations and comments on the published plan. We continue to monitor this development closely.

Investment Portfolio

Within the Stillorgan Shopping Centre we have recently completed two new lettings to food tenants, one being a large self service restaurant and the second a food hall. Both of these lettings have complemented the existing tenant profile in the Centre. Outstanding rent reviews in the Centre continue to be settled and are showing good growth on previous rents.

On the retail front, the previously advised acquisition of the lease of 35 Henry Street Dublin 1 and its reletting to Hutchinson 3G has now been completed. Henry Street, with the ongoing refurbishment works at the nearby Ilac Centre and the proposed large scale redevelopment of O’Connell Street, continues to be a favoured location for both national and international traders.

At Central Park, we have agreed terms for the letting of the ground floor retail element of Block P to a nationwide convenience retailer which should considerably enhance the appeal of the Park to other tenants.

Adjacent to the Russell Court complex, we have completed further acquisitions in the Georgian Terrace fronting St Stephen’s Green, including Numbers 97, 98 & 99. Number 97 has subsequently been let on a short term basis. Terms have been agreed to let Number 99 also on a short term lease. Number 98 is fully let.

At 41 St Stephen’s Green, we have recently received planning permission for a change of use from offices to a restaurant. The grant of the planning permission will trigger a surrender of the existing leasehold interest from a firm of solicitors and a reletting at a substantially higher rent to the restaurant tenant, resulting in a significant rental increase.

Rent reviews are due in respect of the Vodafone Building at Central Park, Nos. 43/49 Mespil Road, Dublin 4 and Blocks A & C Russell Court, St. Stephen’s Green, Dublin 2. Agents have been retained and the rent review process has commenced.

UK Economic Overview

The UK property market produced a total return of 4.7 per cent. in the six months to June 2007 according to the IPD, driven largely by growth in Central London office rents.

Demand for prime office space, especially in the West End, is still buoyant with office availability in that area being at its lowest level in six years. Low vacancy rates and rental growth have meant that capital values in the Central London office market have remained resilient in spite of reports of a downturn in the property market. This is supported by the strong level of investment activity, driven primarily by overseas investors, with a total of £5.8 billion transacted in the second quarter, the strongest quarterly volume since 1993. This has pushed prime yields in the West End to 3.5 per cent., whilst yields in the City remain around 4.25 per cent. Prime West End rents are around £1,200 per sq. m. and prime City rents are approaching £600 per sq. m.

Retail returns have moderated since last year: the total IPD return was 3 per cent. in the six months to June 2007 as against 8.8 per cent. over the same period in 2006. This is partly due to the expectation that recent interest rate rises will reduce consumption. This is particularly evident in the secondary market where yields have moved out across all retail sectors. However prime assets like retail superstores and High Street stock located in markets like Central London with good covenants and rental growth prospects continue to attract both overseas and institutional investors. Prime retail yields range from 3.85 per cent. to 4.75 per cent., while secondary yields are from 4.75 per cent. to 5.65 per cent.

The residential market saw house price inflation reach over 11 per cent. year-on-year in June 2007, owing to a continued shortage of available stock and increased levels of employment and earnings. However mortgage approvals are now slowing, suggesting that the market is cooling as the effect of higher interest rates takes hold.

UK Property Portfolio

Following the successful sale of most of our UK property assets in 2005 and 2006, the Company re-entered the UK market with the purchase of the 38.5 acre Battersea Power Station site in December 2006. We remain very pleased with this £400 million acquisition which was made at a price per acre of just over £10.5 million, substantially below the prices paid both before and afterwards for other development sites in Central London. One site in close proximity to Battersea recently sold for a reported £70 million per acre.

Work since the year end has been focused primarily on preparing for a new planning application for the Battersea site. A new design team has been appointed, headed by leading architect Rafael Vinoly, and includes transport, planning, engineering, sustainability, environmental impact and brand development consultants. The Company does not intend to develop the scheme for which the previous owners obtained planning permission and the design team is looking at the profitability and suitability of a number of options. Proposals are likely to be published in 2008.

In July this year, the Company announced that remedial works would commence shortly at Battersea Power Station. The purpose of these works is to reduce the deterioration of the fabric and improve the health and safety in and around the building. The commencement of remedial works demonstrates REO’s commitment to safeguarding the future of the Power Station building and towers.

We have begun the process of consulting with key parties including the London Borough of Wandsworth, The Greater London Authority, English Heritage and local parties. A good rapport has been established with all bodies, who are all keen to see rapid progress. As part of the transportation issues important to the site, we have opened discussions with Network Rail about the future of Battersea Park Station and other possible linkages into the wider rail network

Two additional property purchases near to the Battersea site were completed during the period and contracts were exchanged on a further purchase prior to the interim period end.

Financing

The Company's cash balances at the period end stood at some £38 million and are expected to increase to £66 million following the refinancing of certain properties purchased during the period. In addition to the Company's convertible unsecured loan stock and zero dividend preference shares, its assets are funded predominantly by secured long term borrowings. The interest rate on the vast majority of the Company’s debt is fixed. In addition, there remains a loan note outstanding to Oriental Property Limited, the vendor of the Battersea Power Station, in a principal amount of £150 million. The combination of strong cash balances and long term debt, predominantly at fixed interest rates, should largely insulate the Company from any direct impact arising from the global credit crisis.

Revaluation of interest rate swaps during the period contributed an uplift of some £25 million in net assets.

Proposed Transaction

Your Board of Directors announced in July that it was considering the possibility of a significant transaction to further enhance the company’s asset base. The Company has, subject to shareholder approval, agreed in principle to acquire from Treasury Holdings the 50 per cent. of Havenview Investments Limited that it does not already own and, from Treasury Holdings and others, seven further properties for a total consideration of approximately £120 million. The properties to be acquired are investment and development properties located in and around the Dublin area. The consideration will be satisfied by the issue of new shares at 150p per share. It is also proposed to allow investors to participate in the transaction pursuant to a cash placing at the same price to which the consideration shares are issued.

A circular is expected to be published in early October convening an Extraordinary General Meeting at which shareholders’ approval will be sought. In connection with the transaction it is proposed to rationalise the performance fee payable to Treasury Holdings and details of this will be set out in the circular.

Since Treasury Holdings is a related party of the Company for the purposes of the Listing Rules, the transaction constitutes a related party transaction. Treasury Holdings is not entitled to vote on the resolution needed to approve the transaction. However, independent shareholders together holding 67,821,755 ordinary shares representing 64.5 per cent. of the enfranchised shares have indicated, in writing, their intention to support the transaction.

Outlook

Despite recent volatility in the market for property companies and property investment companies, the Directors remain optimistic over the future of the markets to which the Company is exposed, namely Ireland, the UK and, through its holding in CREO, China. We remain confident of the quality of the Company’s underlying portfolio and of the ability of the management team to deliver superior returns.

R Y F Horney
Chairman
19 September 2007