CADOGAN GROUP LIMITED

CADOGAN GROUP LIMITED Annual Report

CADOGAN GROUP LIMITED CONTENTS Strategic Objectives And Financial Highlights 1-5 Directors And Secretary 6 Chairman s Statement 7 Strategic Report 8-21 Directors Report 22-23 Independent Auditor s Report 24 Consolidated Profit And Loss Account 25 Consolidated Balance Sheet 26 Other Principal Statements 27 Company Balance Sheet 28 Consolidated Cash Flow Statement 29 Notes On The Financial Statements 30-47 Five Year Summary 48 THE MODERN CADOGAN BUSINESS IS BUILT ON THE FOUNDATIONS OF A TRADITIONAL LANDED ESTATE WHICH HAS BEEN IN THE OWNERSHIP OF THE FAMILY OF THE EARL CADOGAN AND HIS SON, VISCOUNT CHELSEA, SINCE 1753.

CADOGAN GROUP LIMITED CADOGAN GROUP LIMITED Financial Highlights Gross Gross rents ( m) rents ( m) Gross 117.1m Gross rents ( m) rents ( m) Gross 117.1m Gross rents ( m) rents ( m) 104.7 117.1m 2010 2009 2010 2009 2010 2010 2009 2010 2009 2010 104.7 117.1 99.2 104.7 2010 92.3 117.1 99.2 2009 88.5 104.7 2010 92.3 99.2 2009 88.5 2010 92.3 Gross Gross property property value ( m) value ( m) 2009 Gross 4,456m Gross property property value ( m) value ( m) Gross 4,456m Gross 4,456.0property value ( m) value ( m) 4,456m 2010 2009 2010 2009 2010 2009 88.5 99.2 104.7 92.3 117.1 99.2 88.5 104.7 92.3 99.2 88.5 92.3 3,875.2 3,875.2 4,456.0 4,456.0 3,455.1 3,455.1 3,875.2 3,875.2 2010 3,043.6 4,456.0 3,043.6 4,456.0 3,455.1 3,455.1 2009 2,736.1 3,875.2 2,736.1 3,875.2 2010 3,043.6 3,043.6 3,455.1 3,455.1 2009 2,736.1 2,736.1 2010 3,043.6 3,043.6 Total return Total return (%) (%) 2009 88.5 2009 2,736.1 2,736.1 Total return 18.5% Total return (%) (%) Total return 18.5% Total return (%) (%) 12.4% 18.5% 12.4% 18.5% 17.8% 12.4% 17.8% 12.4% 2010 18.5% 13.6% 17.8% 13.6% 18.5% 17.8% 2009 12.4% 10.5% 10.5% 12.4% 2010 13.6% 13.6% 17.8% 17.8% 2009 10.5% 10.5% 2010 13.6% 13.6% Profit Profit before before taxation taxation ( m) ( m) Profit 73.8m before taxation ( m) Profit 73.8m before taxation ( m) 57.3 73.8m 73.8m 2010 2009 2010 2009 2010 2010 2009 2010 2009 2010 57.3 73.8 71.6 57.3 2010 42.3 73.8 71.6 2009 38.1 57.3 2010 42.3 71.6 2009 38.1 2010 42.3 Net assets Net assets per share per share ( ) ( ) 2009 Net 32.4 assets 32.4 per share ( ) Net assets 32.4 per share ( ) 27.6 32.4 32.4 32.4 32.4 2010 2009 2010 2009 2010 2009 38.1 27.6 32.4 24.9 27.6 2010 21.4 32.4 24.9 2009 19.2 27.6 2010 21.4 24.9 2009 19.2 2010 21.4 Balance Balance sheet gearing sheet gearing (%) (%) 2009 Profit before taxation ( m) Profit before taxation ( m) 2009 19.2 Balance 13.3% sheet gearing (%) Balance 13.3% sheet gearing (%) 15.2 13.3% 15.2 13.3 14.0 15.2 2010 16.5 13.3 14.0 2009 17.5 15.2 2010 16.5 14.0 2009 17.5 2010 16.5 71.6 57.3 73.8 42.3 71.6 57.3 38.1 42.3 71.6 38.1 42.3 38.1 Net assets per share ( ) Net assets per share ( ) 24.9 27.6 32.4 21.4 24.9 27.6 19.2 21.4 24.9 19.2 21.4 19.2 Balance sheet gearing (%) Balance sheet gearing (%) 14.0 15.2 16.5 13.3 14.0 17.5 15.2 16.5 14.0 17.5 16.5 2009 2009 10.5% 10.5% 2009 2009 17.5 17.5 2 3

Cadogan group limited CADOGAN GROUP LIMITED Cadogan is a major landowner in Chelsea and Knightsbridge with a holding extending to 93 acres. Knightsbridge Station Core Objectives The core objectives and strategies on which we focus and which underpin the management of the estate are: To protect and enhance the estate so that it is the world s leading location in which to live, shop and visit. Cadogan freehold ownership within these areas Brompton Road Sloane Street The portfolio comprises approximately: 1,000,000 sq.ft. of retail space. To maintain and improve the portfolio of properties as a long-term investment, with a focus on delivering top-quality buildings and environment. To make a positive contribution towards a sustainable environment and always to act as long-term stewards of the properties under Cadogan s ownership and control. oad Fulham Road South Kensington Station Sloane Avenue Sloane Square Sloane Square Station 500,000 sq.ft. THE PORTFOLIO COMPRISES APPROXIMATELY: of office space. 1,000,000 SQ.FT. OF RETAIL SPACE. 500,000 SQ.FT. OF OFFICE SPACE. 650 SHORT short LET let RESIDENTIAL UNITS. A residential FURTHER 580 units. RESIDENTIAL UNITS SUBJECT TO LONG LEASES PLUS HOTELS, PUBLIC HOUSES, RESTAURANTS AND OTHER USES. THE 580 TOTAL further CAPITAL residential VALUE OF ALL THE PROPERTIES IS 4.46 BILLION. units subject to long leases THE CURRENT ANNUAL RENTAL INCOME plus hotels, IS 114 public MILLION. houses, restaurants and other uses. To be good neighbours and to deliver excellent customer service to tenants. To recruit and employ the best team and to use the best external advisers. 4.46 billion the total capital value of all the properties. King s Road Chelsea Embankment 114 million the current annual rent roll. 4 5

CADOGAN GROUP LIMITED CADOGAN GROUP LIMITED Directors and Secretary Chairman s Statement Viscount Chelsea* Chairman James Bruce* Deputy Chairman Hugh Seaborn Chief Executive Richard Grant Finance Director John de Havilland* Life President The Earl Cadogan D.L. * Non-executive Charles Ellingworth* Francis Salway* John Gordon* Secretary Paul Loutit Registered Office 18 Cadogan Gardens, London SW3 2RP Company Number 2997357 Auditor Ernst & Young LLP 1 More London Place, London SE1 2AF I am delighted to be reporting another year of growing profits and values for Cadogan in my second year as Chairman, following on from and improving on the overall successful results of. We have continued to implement our well established estate management strategies to improve the quality and value of all our property holdings. High levels of activity across our portfolio have driven growth in value and continued to enhance the attractiveness of our core commercial and residential areas. London s prominent position as a global city has continued, and although there will always be challenges to its success, the ever increasing mobility of the global population brings new visitors and prospective residents to London, drawn by its unique mixture of culture, sophistication, security and vibrancy. London is the UK s largest single economic entity and has continued to grow more strongly than the rest of the country, in the context of the broader economic outlook improving steadily during. Employment growth has been strong in London and this has supported the demand for retail and office space, which has remained very healthy throughout the year. As a consequence of this and other factors central London rents have been rising, yields have fallen and the growth in overall values has continued to outstrip the rest of the UK. We have been a significant beneficiary of the relative strength of the London market. I am therefore able to report that the gross value of our properties reached 4.46 billion, reflecting an increase in values of 13.8% over, our gross rental income was 117.1 million, an increase of 11.8% over, and profit before taxation was 73.8 million, an increase of 28.8% over. Our reported profits were significantly boosted by the substantial profits earned from enfranchisement sales which reached a record level of 121.7 million in. Cadogan has again benefitted from profitable growth while at the same time keeping at the forefront our commitment to enhance the quality of our buildings, environment and neighbourhoods. In we have placed an increased emphasis on the ways in which we engage with our local communities. We have long been aware of our broader responsibilities towards all local stakeholders, and in we have increased our resources in this area, with the aim of delivering a significant enhancement which is already emerging. The outlook for our business remains good across all our sectors. There is little evidence that those various factors which have supported the growth of the business in the last few years are likely to diminish and we thus look forward to 2014 and subsequent years with confidence. We continue to believe that our attractive locations and clear strategic priorities will enable our business to grow further in the years ahead. John de Havilland is retiring as a non-executive director of the board. This is an opportunity to express my great debt of gratitude to John for his invaluable wise counsel, guidance and help to myself and my father, and to the business over very many years. As always I am extremely grateful to my fellow directors and all our staff, led by Hugh Seaborn, for their hard work over the year and for the guidance and assistance which they have given me. Viscount Chelsea 24 April 2014 6 7

STRATEGIC REPORT Overview Property Portfolio The Cadogan estate has been in the ownership of the Cadogan family for nearly 300 years. The estate remains concentrated within its original boundaries in Chelsea and Knightsbridge. This long history of family ownership and concentration in a small geographic area makes us very aware of the impact we have within our locality and also results in our being deeply embedded within the local community. It is these factors, the long history, the family involvement and the concentration of ownership which provide the confidence for Cadogan to commit strategically and to invest, for the very long term. At the centre of our philosophy for the estate is the concept of stewardship. By this we mean the management of assets for future generations, while ensuring that today s activities also meet the needs of the current generation, and doing so in such a way that ensures the assets are passed on in even better condition than they are received. Our aim is that anything we do to an individual building should make a contribution to the wider success of the area in which it stands. Having an understanding of the needs and ambitions of our neighbours is vital to making this strategy a success and emphasises to us constantly the importance of being good neighbours. Our property and investment strategy continues to be focused on our core areas of Chelsea and Knightsbridge, particularly on Sloane Street, Sloane Square, the Duke of Yorks and Kings Road. We aim to provide the highest quality accommodation across a range of types and sizes that meet the needs of a diverse range of occupiers. We aim to develop buildings of a high quality that reflect the character of the area with a commitment to design excellence. This is balanced with conserving the historic character of the area by protecting and enhancing the existing buildings. We seek to assist the long-term sustainability of the area through various means which support community interests, local charities and institutions. has been a successful year across the business. Key financial highlights are set out here. TOTAL PROPERTY PORTFOLIO VALUE GREW TO 4.46 BILLION INCREASE OF 13.8% AFTER ADJUSTING FOR PURCHASES, SALES AND CAPITAL EXPENDITURE RESIDENTIAL PORTFOLIO INCREASED IN VALUE BY 13.1% RETAIL PORTFOLIO INCREASED BY 16.4% This year s performance follows valuation increases in and. The gross value of the Estate s properties has increased from 3.04 billion at the end of 2010 to 4.46 billion at the end of, a total increase in capital value over this most recent three year period of just over 46%. Again in the outstanding performer in terms of capital value growth was our retail portfolio, which grew by 16.4%, after an increase of 13.4% last year. The continuing growth in retail values reflected good levels of occupier demand, particularly from international retailers, and a strong investment market for central London retail properties resulting in a reduction in yields across the estate, averaging about 0.5%. Residential values increased more strongly than in, driven particularly by international investment demand and ever widening appreciation of the attractions of Central London as a global city, offering security, attractive living and investment performance. After a period of such strong growth in values it would not be surprising if there was something of a pause, but the underlying factors seem well set to remain supportive. The office sector has been quieter for us, principally because we have been taking space back for refurbishment and have had little vacant space available and no new supply. London is currently experiencing growing demand for office space, and the impact of this growth is being boosted by the transfer of office uses to residential, which while not generally a factor in our area, is reducing the office stock elsewhere in London and helping to set a firmer tone to office rents across the capital. OFFICE PORTFOLIO INCREASED BY 10.1% 8 9

STRATEGIC REPORT Acquisitions and Disposals We were again active purchasers, particularly in the retail and residential sectors acquiring a number of interests at a total cost of 115 million, all within the area. We acquired eight retail units in the Kings Road in three separate transactions. We continue to see opportunities for further retail acquisitions, and we anticipate that our carefully considered approach to improving the quality of the retail offer here will boost values over the longer term. We were more active than in in the residential market, we acquired a total of 36 long lease flats and one freehold house at a total cost of 76.7 million. We acquire residential properties to enable us to consolidate our ownership, particularly in key mixed-use buildings and to expand our portfolio of market let residential units. Sales of residential properties through the Leasehold Reform Act process reached a highest ever level of 121.7 million ( 90 million). We completed on the sale of 152 units ( 108 units). The profit achieved over the previous year s valuation was 26.3 million, a significant increase over the 16.3 million achieved in. This extremely high level of sales reflected both the exceptional strength of the central London prime residential property market over the last two years and decreasing lease lengths of the leasehold properties on the estate. In addition to the enfranchisement sales we raised a further 1.6 million from the voluntary sale of two properties and from premiums received for other activities. We have continued to receive a steady level of new enfranchisement claims since the beginning of 2014. Developments Expenditure on maintaining and improving our properties was slightly higher in than in, at nearly 22 million which is capitalised in our accounts. In addition, we also undertake a high level of recurring maintenance expenditure focused on our short let residential properties. It is a key aspect of our strategy for the residential letting market that we continue to maintain and progressively improve the standard of accommodation offered. This requires constant expenditure and attention to detail both in terms of the fabric and the customer service delivery. The most significant projects completed during were a 12,000 ft.² Grade 2 listed building which was pre-let to a serviced office provider, a 4,500 ft.² house on Herbert Crescent refurbished to the highest standards, and eight flats on Hans Place which were completed at the turn of the year and which were all swiftly let. In March we commenced the demolition of 131 Sloane Street at the south end of the street. This is a major redevelopment scheme to provide 45,000 ft.² of Grade A office space over five floors, and approximately 50,000 ft.² of retail space, including six large retail units fronting onto Sloane Street, and a new restaurant unit on Pavilion Road. We are now well into the construction phase of this project, which is proceeding well and where we expect to achieve completion in mid-2015. This high quality development will provide a major boost to the retail offer at the south end of Sloane Street and the Sloane Square area. There was significant activity also in planning and preparatory work on a number of future schemes, most notably the major refurbishment of the Cadogan Hotel at 74 Sloane Street and the redevelopment of 206 222 Kings Road, the Habitat, Waitrose, Cinema and Trafalgar pub buildings where we are expecting to undertake significant work starting in 2016. We have held thorough and extensive consultations with local interest groups and stakeholders in advance of submitting a formal planning application to the local authority later in 2014. 10

STRATEGIC REPORT STRATEGIC REPORT Lettings We experienced a level of healthy demand for residential, retail and office units throughout. As a result vacancy levels across all our sectors remained low throughout the year and we anticipate this continuing through 2014. In retail we are continuing to attract top quality retailers new to the area who are able to enhance the retail mix and boost the attractiveness of the area to local residents and visitors alike. Within the last year we have let space to a number of retailers including, J. Crew, Club Monaco, Michael Kors, Cos, Dubarry, all these in Sloane Square or Duke of Yorks. At the north end of Sloane Street Tom Ford, Ermenegildo Zegna and Alberto Ferretti all opened new shops, and Valentino, Loro Piana and Yves St Laurent have undertaken major shop refits. The importance of attractive food and beverage offerings within or close to prime retail pitches is increasingly recognised as vital to the success of the shopping experience. Finding suitable locations and obtaining planning permission for food and beverage outlets in our retail streets remains a challenge, but following on from the extremely successful opening of Café Colbert in Sloane Square we have successfully introduced Comptoir Libanais to the Duke of Yorks. We are also progressing plans to redevelop the existing piazza cafe in Duke of York Square to produce a much enhanced food offering in a new and iconic building. Demand for short-term residential lettings has continued to be strong for most of. We have significantly expanded our letting portfolio over the last three years, principally through acquisition of long lease flats within the area. We now have a total of approximately 650 residential letting units, of which approximately 100 are being refreshed or refurbished at any one time. Our team works hard to manage the challenge of undertaking the redecoration and refurbishment of our letting portfolio as efficiently as possible. This enables us to minimise our void costs, drive up the quality of accommodation presented to the market and improve the financial efficiency of our residential letting operation. The office sector has been relatively quiet for us during. More recently the improving level of demand for office space now being felt across London is reaching us and we are confident that new or refurbished office space which we will be bringing to the market later this year and in 2015 should attract strong interest. 12 13

STRATEGIC REPORT Retail Environment www.sloanestreet.co.uk www.dukeofyorksquare.com The retail industry is subject to unprecedented change. The straightened economic environment exposed the change in consumer behaviours which are magnified by the adoption of technological advances. Our response to these changes is many fold. Our retail estate management approach is founded on thorough consumer research which informs our strategies and tactics. This assists us in maintaining careful tenant selection to ensure every shop contributes to the overall attraction of the area. We seek to enhance the trading environment for our retailers by supporting them with sophisticated destination marketing through events, PR and digital promotions. On Sloane Street, our most valuable asset, we have recently developed and published a new five year strategy to enhance Sloane Street s prominence and pre-eminence on the international and local stage. The strategy is multi-stranded and will cover every aspect of activity on and around Sloane Street. We are working with the Local Authority with the aim of improving the public realm so that the environment better complements the world renowned luxury brands that trade there. The most visible element of the new strategy is the appointment of Sloane Street s own team of multi-lingual Ambassadors, who provide a seven day per week presence on Sloane Street. Their primary aim is to help to increase footfall and their core role is to direct and welcome visitors to Sloane Street, Sloane Square and the retail areas adjacent. They also keep an eye on security and report issues that undermine cleanliness and tidiness. In their first four months the Ambassadors welcomed almost 36,000 visitors to Sloane Street (an average of 270 per day). Other key elements in the strategy include work to improve security for residents, shoppers and businesses and the creation of a retailer alliance for sharing intelligence, fostering collaboration and harnessing the skills and knowledge of all the retailers in Sloane Street. Increasingly we collate local data including footfall and trading figures, to provide the retail brands with an insight into local trading activity and this is augmented through active retailer forums. We continuously seek to enhance the experience of visiting the area by ensuring a broad range of uses and a variety of operators whether shops, restaurants, hotels or other uses. 14 15

STRATEGIC REPORT STRATEGIC REPORT Stewardship and Community Engagement Financial Review Cadogan has a long history of engaging with, and contributing to, Chelsea s rich mix of communities and community infrastructure. We recognise fully, as a property owner and developer with a long term interest in our area, the need to enhance and maintain the quality of our local area as a place to work, do business, reside and visit and actively mitigate any adverse impact of our operations upon those who live and work around us. In the local community we are supporting a wide range of voluntary and community organisations and community events within the area. This includes but is far from limited to, charities like the Kensington and Chelsea Foundation which links local residents and businesses to 400 small local charities, Bed Head Football Club, which aims to provide structure, guidance and life skills to under-15 year olds through sport and Age UK which works locally to assist the elderly. We have also increased dialogue with customers and other external members of the community who are impacted by our physical redevelopment schemes. This has included regular newsletters and other community engagement activities, including the School of Fish, whereby local schoolchildren prepared their own decorative contributions to the 131 Sloane Street development hoarding. TRADING HIGHLIGHTS RENTAL INCOME ROSE TO 117.1 MILLION INCREASE OF 11.8% RESIDENTIAL ENFRANCHISEMENT SALES INCREASED TO 121.7 MILLION INCREASE OF 35.2% PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION INCREASED TO 73.8 MILLION INCREASE OF 28.8% EARNINGS PER SHARE INCREASED TO 53.9 PENCE PER SHARE INCREASE OF 31.8% During we have raised the profile of our community engagement activities both within the business and externally in the local community. We have reorganised ourselves internally to provide additional resources and sharper focus on this area of our activities. We have produced a clear, concise forward-looking strategy, formalising and enhancing the cohesion of the work we undertake on stewardship and community engagement. Our new strategy summarises the key ways in which we will be taking forward our commitment to engage more intensively and effectively with our customers, partners, local communities and interest groups. This will help us to sharpen our focus on the facets of the business that are most visible to our key local stakeholders and ensure that we act in ways that maintain and enhance our reputation and which convey clearly our responsibility to contribute positively to the local area. Central to our business is our stewardship strategy which focuses on four core areas: our local community our customers (both commercial and residential) our environmental impact our people (Cadogan employees and our contractors) Cadogan Hall is a significant financial commitment to the local community. The Hall is celebrating its 10th anniversary and its artistic success continues. Particular highlights organised to celebrate its anniversary have included John Lill s performance of the complete Beethoven piano sonata cycle over eight nights, a gala concert with Kiri Te Kanawa held in December, and a concert of Mozart arias to be performed in May by Rolando Villazon. We have also just completed construction works within the Hall to extend the seating area which has provided an additional 60 seats, many in a prime viewing location, which will assist in improving the Hall s viability. In 2014 we are using our resources and expertise particularly to secure job opportunities for unemployed local people. Our aim is for 17 local people to be offered construction training and job opportunities, including apprenticeships and to organise for 11 young people to enter sustainable employment on our major construction projects. Most of the growth in rental income came from the retail sector and, and to a lesser extent from the residential sector. Rental income receivable in the year benefited from the completion of a number of outstanding rent reviews, which added approximately 3.0 million of back rent, attributable to earlier years, to this year s total rental income. The demand for prime retail units was good throughout the year, best exemplified by the successful lettings of the three large newly refurbished units at 201 206 Sloane Street. The size, quality and location of these units enabled us to secure exciting brands and establish new rent levels on Sloane Street, both of which are progressively benefiting our other holdings in this location. Since the year end we have completed the long outstanding rent review with Harvey Nichols on their store at the north end of Sloane Street. The final outcome was in line with our expectations. It is ten years since we opened the first phase of our Duke of York s development and as we grant ten year leases we have been dealing with the consequential lease expiries of a number of units in this development. This has provided us with an opportunity to strengthen the retail mix and to better meet the changing requirements of some of our retailers. The changes we have made to the retail mix, coupled with the introduction of additional and improved food and beverage with more to follow, have added to the attractiveness of Duke of York s Square, which we are already seeing in improved footfall figures. These changes have generated improvements in value and we expect there to be more to come. Our residential market let portfolio is continuing to increase which reflects the continuing programme of acquisitions since. Annual rental income from the residential letting portfolio increased from 20.3 million at the beginning of the year to 22.8 million at the end of the year. Rental growth in the residential letting sector has moderated during the year, but the improved efficiency of our refurbishment and refreshment process and close watch on the relative strength of demand in the market has ensured that we minimise our void periods and maximise our net return. Operating profit for the year increased, from 69.0 million to 77.6 million, principally reflecting the growth in rental income. Profit before taxation rose from 57.3 million to 73.8 million, reflecting the growth in operating profit but also more significantly reflecting the high level of enfranchisement sales during the year. Enfranchisement sales of 121.7 million resulted in a profit over the previous year s valuation of 26.3 million, 10.0 million ahead of the figures. In this year s results there were no write backs of provisions against the value of our investment properties. In last year s results profits benefited by 3.9 million from the write back of such provisions. Net interest payable rose from 28.9 million to 31.1 million an increase of 7.3%. This increase reflected the additional cost of the fourth round of finance raising from the private placement market, which we completed in September of last year. More detail of this finance raising is set out below. 16 17

STRATEGIC REPORT Balance Sheet and Borrowings The rise in the year end value of our investment properties was again the major factor contributing to the rise in group shareholders funds, which rose from 3.32 billion to 3.89 billion. Net assets per share increased from 27.64 to 32.44, an increase of 17.4%. Balance sheet gearing reduced from 15.2% to 13.3%, again principally the result of the rise in property values. All our financial ratios remain healthy and we continue to maintain significant headroom against the various covenants and prudential limits required of us by our bankers and our internal guidelines. Year-end net borrowings were 516.5 million, a small increase from the previous year-end figure of 504.3 million. The main financing event during the year was the raising of an additional 100 million from the private placement market. This was arranged in July and drawn down in September in two equal tranches, one maturing in 2026, the other in 2030. Funds came from existing borrowers, who were keen to extend their relationship with Cadogan. The all in interest rate is 3.91% fixed through to maturity. The principal purpose behind this finance raising was to provide funds for future acquisitions and development expenditure and to take advantage of the low interest rate environment before an anticipated rise in rates comes through. The majority of this additional finance was held as cash on deposit at the year end, amounting to 88.1 million, but we have development commitments and the prospect of further acquisitions over the next couple of years, which we anticipate will utilise these funds. At the year end the group had substantial funds available for future acquisitions. Total available financial headroom was 158 million at the year-end, comprising the above cash and 70 million of committed facilities; and in addition we have a further 60 million of uncommitted facilities. Approach to Risk Management Cadogan is a long term property investor with a clearly defined focus on high quality property assets located in central London. The group has appropriate policies and methodologies in place to identify, assess and manage the risks faced by the business. Because of its private ownership and long-term outlook the group aims for, and is able to achieve, a high level of resilience in all areas of its business. The group maintains a Risk Register which identifies the principal risks impacting on the operations and financial position. The Register provides an assessment of the likelihood of the identified risks materialising and includes an estimate of the potential impact of each area of risk on the business. The Register is formally reviewed by the board regularly and this forms an important part of the overall risk management process. The group also make use of appropriate external specialists to advise on compliance with the established policies and external regulations. The principal risks and uncertainties faced by the group and a brief summary of how it deals with each of these areas of risk are set out below: Risks associated with London s position as a global capital London s advance as a global capital has been a significant factor in the overall prosperity of central London in recent years. There are risks to this position from a number of factors, most significantly from terrorism, from under-investment in infrastructure and from adverse changes to the tax regime, particularly affecting overseas investors. It is difficult for the group to manage or control these risks but Cadogan takes an active role in lobbying through organisations such as London First to ensure that the long-term health of London is at the forefront of the minds of national and local government. Property market risks the risks arising from property cycles and from shorter term unexpected changes in the market for property investment, development and occupation. Cadogan regularly undertake substantial development projects, but schedules these as far as possible to ensure that the company s exposure to development risk is controlled, both relative to its own overall portfolio and to potentially competing schemes in the same area. Cadogan consult widely on development schemes to ensure that schemes are designed to the highest quality and to assist in obtaining the most appropriate planning consent. Finance and cash flow risks the risks associated with unexpected changes in interest rates and availability of debt finance. The majority of long-term borrowings are at fixed rates of interest, achieved either by agreement with the lender, or through the interest rate derivatives market. The board requires at least 75% of long-term debt to be subject to fixed rates of interest. The group does not undertake financial instrument transactions that are speculative or unrelated to trading activities. Board approval is required for the use of any new financial instrument. The group seeks to manage refinancing risk through the use of a spread of loan maturities. In normal circumstances loan terms are for an initial period of 10 years or more. The incidence of maturities is spread so as to ensure that major re-financings do not coincide in a single year. The various private placings of debt which the group has undertaken in recent years have included a significant proportion of US dollar borrowings. All exposure to US dollars in relation to both interest and capital repayments was swapped into sterling on the date on which the loans were committed, and as a result there is no residual foreign exchange risk exposure to the group. Operationally the group has no foreign currency exposure. Property operational risks the risks associated with the management and ownership of property. We have a balanced profile of future debt maturities extending out to 2056. As at 31 December our borrowing facilities had an average maturity of 16.6 years and 43% of our total borrowings facilities do not mature for more than 15 years. All of our currently drawn borrowings are at fixed rates of interest, either through direct agreement with the lender or through the use of swaps; the average rate across all our loans is 5.56%, down from 5.90% last year, principally as a consequence of the fourth round private placing referred to above. We are proud of and value the relationships we have developed with our long-term lenders. The borrowing strategy which we have developed, which is based on fixed rates of interest and long-term maturities, provides certainty in our financing profile and supports our resilience and overall strategy for the business. As a long-term investor the group is less reliant than others upon predicting property market cycles and aims to manage the impact of the property cycle and any other short-term fluctuations in values or activity levels by ensuring that the group has a relatively high proportion of committed long term loan finance and high levels of available liquidity. These factors also assist the group in managing cash flow and liquidity risks. Although the group s properties are concentrated in a relatively small geographic area there are a large number of properties in many different uses. The largest individual property represents 5% of the total portfolio value and the highest individual rent 4.8% of total annual rental income. All of the group s properties are located in Kensington and Chelsea and the company monitors and is actively involved in consultation with the Royal Borough of Kensington and Chelsea where it considers that it could be affected by changes or developments to local planning policies. All the group s properties are insured against loss or damage on a full reinstatement basis, including three years loss of rental income. Cover includes terrorism risk which is provided by a major insurer and member of Pool Re. The group accords a high priority to health and safety issues and has well established compliance and reporting procedures to ensure that health and safety risks are reduced and eliminated as far as is practicable. From time to time the group undertakes an external audit of its health and safety policies and procedures, the results of which have confirmed the quality and integrity of health and safety practices. 19

STRATEGIC REPORT Prospects The prospects for London s property markets remain good, even after the strong rises experienced in. Overall there are above average levels of occupier and investment demand coming from a wide range of sources which should support rental and capital values. As always there are some uncertainties; the May 2015 general election and the possibility of a Mansion Tax may dampen the residential market, the type of factors which attract international people and capital may change. The wider rise in domestic business confidence should help to ensure that the prospects for letting and for growing rents across the commercial sectors remain excellent. Although the prospect of a rise in interest rates from the present, below long-term trend, levels could impact on investment yields, the income returns from other asset classes remain constrained which, together with the rental outlook, should continue to stimulate the high level of investment demand for real estate in central London. This should support capital values over the next phase of the economic cycle. However, the yield compression of commercial property we have experienced in the past few years which has contributed greatly to increased values, will inevitably slow. I am delighted with the progress on the redevelopment of 131 Sloane Street, and we have recently launched to the market the six retail units which front onto Sloane Street to encouraging initial interest. The 45,000 ft.² of office space above the retail units, which will be of the highest quality, will not be marketed until nearer completion, expected in mid-2015, and all the signs currently are that we will be launching into a buoyant market. For 2014 and the years ahead, we remain committed to our long term strategy of developing and enhancing the Estate. We will continue to focus on our existing assets and to enhance the quality of accommodation and services for our customers. I believe that this focus, coupled with the consistent application of our estate strategy will enable the business to continue to prosper in 2014 and beyond. Hugh Seaborn 24 April 2014 20 21

CADOGAN GROUP LIMITED 31 DECEMBER CADOGAN GROUP LIMITED 31 DECEMBER Directors Report The directors present their report and the financial statements for the year ended 31 December. Principal Activity and Review of the Business The principal activity of the group during the year continued to be property investment. The group s other activities include the operation of hotels and a concert hall. A review of the group s business during and its future prospects is contained in the Strategic Report on pages 8 to 21. Dividends Interim dividends of 30,000,000 ( 34,000,000) equivalent to 25.0p per ordinary share ( 28.3p per ordinary share) were declared and paid during the year. Risk Management A summary of the principal risks and uncertainties has been included in the Strategic Report. Directors All the directors holding office during the financial year and up to the date of this report are listed on page 6. The ultimate holding company maintains liability insurance for its directors and officers and for those of its subsidiaries in respect of proceedings brought by third parties, subject to the conditions set out in section 234 of the Companies Act 2006. Such qualifying third party indemnity provision remains in force as at the date of approving the directors report. Charitable Contributions The group s charitable contributions for the year were 43,000 ( 151,000). In addition, the Cadogan Charity, a shareholder in the company, makes donations to a variety of local and national charities. Going Concern The group s business activities, together with the factors likely to affect its future development, its financial position, financial risk management objectives, details of its financial instruments and derivative activities, and its exposures to price, credit, liquidity and cash flow risk are set out in the Strategic Report. The group has considerable financial resources derived from an established investment property portfolio in prime central London. The group has substantial long-term committed financing arrangements and also has access to overdraft and revolving credit facilities from its bankers. Taking these factors into account the directors believe that the group is well placed to manage its business risks successfully. After making enquiries, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and financial statements. Statement of Directors Responsibilities The directors are responsible for preparing the annual report and financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and the company and of the profit or loss of the group for that period. In preparing those financial statements, the directors are required to: select suitable accounting policies and then apply them consistently; make judgements and estimates that are reasonable and prudent; state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. The directors are responsible for keeping adequate accounting records that disclose with reasonable accuracy at any time the financial position of the company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Disclosure of Information to the Auditors So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information, being information needed by the auditor in connection with preparing its report, of which the auditor is unaware. Having made enquiries of fellow directors and the group s auditor, each director has taken all the steps that he is obliged to take as a director in order to make himself aware of any relevant audit information and to establish that the auditor is aware of that information. Auditor A resolution concerning the re-appointment of Ernst & Young LLP as auditor will be proposed at the forthcoming annual general meeting. By order of the board Paul Loutit Secretary 24 April 2014 Registered No: 2997357 22 23

CADOGAN GROUP LIMITED 31 DECEMBER CADOGAN GROUP LIMITED 31 DECEMBER Independent Auditor s Report Consolidated Profit and Loss Account We have audited the financial statements of Cadogan Group Limited for the year ended 31 December which comprise the Consolidated Profit and Loss Account, the Consolidated and Company Balance Sheets, the Consolidated Statement of Total Recognised Gains and Losses, The Note of Historical Cost Profit and Losses, The Reconciliation of Movement in Consolidated Shareholders Funds, the Consolidated Cash Flow Statement and the related notes 1 to 25. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). This report is made solely to the company s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company s members 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 company and the company s members 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 pages 22 and 23, 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 and the parent company 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 and financial statements 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 the financial statements In our opinion the financial statements: give a true and fair view of the state of the group s and parent company s affairs as at 31 December and of the group s profit 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 Companies Act 2006. Opinion on other matters prescribed by the Companies Act 2006 In our opinion the information given in the Chairman s Statement, the Strategic Report and the Directors Report for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or the parent company financial statements are not in agreement with the accounting records and returns; or certain disclosures of directors remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit. Eamonn McGrath (Senior statutory auditor) for and on behalf of Ernst & Young LLP, Statutory Auditor London 24 April 2014 TURNOVER Note Continuing operations 128,040 113,845 Acquisitions - 2,604 GROUP TURNOVER 2 128,040 116,449 Cost of sales (34,790) (34,086) GROSS PROFIT 93,250 82,363 Administrative expenses (15,631) (17,295) Movements in provision for diminution of value 3-3,919 OPERATING PROFIT 6 Continuing operations 77,619 68,795 Acquisitions - 192 77,619 68,987 Profit on sale of investment properties 4 27,276 17,293 PROFIT ON ORDINARY ACTIVITIES BEFORE INTEREST 104,895 86,280 Interest receivable 263 733 Interest payable 5 (31,319) (29,677) PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 73,839 57,336 Tax on profit on ordinary activities 8 (9,164) (8,218) PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION ATTRIBUTABLE TO SHAREHOLDERS 64,675 49,118 Dividends 9 (30,000) (34,000) RETAINED PROFIT FOR THE YEAR 10 34,675 15,118 EARNINGS PER SHARE 11 53.9p 40.9p Notes 1 to 25 form an integral part of these financial statements. 24 25

CADOGAN GROUP LIMITED 31 DECEMBER CADOGAN GROUP LIMITED 31 DECEMBER Consolidated Balance Sheet Other Principal Statements FIXED ASSETS Note Tangible fixed assets 12 4,458,971 3,878,514 CURRENT ASSETS Stock 37 59 Debtors 14 20,391 13,299 Cash at bank and in hand 22 88,146 4,364 CREDITORS amounts falling due within one year 108,574 17,722 Bank loans and other borrowings 16 4,000 4,000 Trade and other creditors 15 52,192 50,784 Corporation tax 5,192 4,696 61,384 59,480 NET CURRENT ASSETS/(LIABILITIES) 47,190 (41,758) TOTAL ASSETS LESS CURRENT LIABILITIES 4,506,161 3,836,756 CREDITORS amounts falling due after more than one year Bank loans and other long term borrowings 16 600,672 504,672 CONSOLIDATED STATEMENT OF RECOGNISED GAINS AND LOSSES FOR THE YEAR ENDED 31 DECEMBER Profit for the year attributable to shareholders 64,675 49,118 Unrealised actuarial gain/(loss) on pension commitments 1,645 (1,240) Deferred taxation on the actuarial (gain)/loss on pension commitments (329) 285 Unrealised surplus on revaluation of investment properties 536,788 313,693 Unrealised surplus on revaluation of land and buildings 3,047 564 Attributable taxation on realised revaluation surplus (157) - Total recognised gains and losses in the year 605,669 362,420 NOTE OF HISTORICAL COST PROFITS AND LOSSES FOR THE YEAR ENDED 31 DECEMBER Reported profit on ordinary activities before taxation 73,839 57,336 Realisation of property revaluation gains of previous years 94,389 72,049 Historical cost profit on ordinary activities before taxation 168,228 129,385 Historical cost profit for the year retained after taxation and dividends 128,907 87,167 PROVISIONS FOR LIABILITIES AND CHARGES Deferred taxation 17 10,410 11,240 Long term pension liability 23 2,876 4,310 3,892,203 3,316,534 CAPITAL AND RESERVES Share capital 18 120,000 120,000 Revaluation reserve 19 2,854,425 2,408,979 Profit and loss account 19 917,778 787,555 SHAREHOLDERS FUNDS 3,892,203 3,316,534 Viscount Chelsea - Director RECONCILIATION OF MOVEMENT IN CONSOLIDATED SHAREHOLDERS FUNDS FOR THE YEAR ENDED 31 DECEMBER Total recognised gains and losses in the year 605,669 362,420 Dividends (30,000) (34,000) Net addition to shareholders funds 575,669 328,420 Opening shareholders funds 3,316,534 2,988,114 Closing shareholders funds 3,892,203 3,316,534 Notes 1 to 25 form an integral part of these financial statements. Hugh Seaborn - Director 24 April 2014 Notes 1 to 25 form an integral part of these financial statements. 26 27

CADOGAN GROUP LIMITED 31 DECEMBER CADOGAN GROUP LIMITED 31 DECEMBER Company Balance Sheet Consolidated Cash Flow Statement Note Note FIXED ASSETS Investments 13 117,317 117,317 CURRENT ASSETS Amounts due from subsidiary undertakings 929,833 814,098 CREDITORS amounts falling due within one year Other creditors 15 82 82 Taxation 9 9 91 91 NET CURRENT ASSETS 929,742 814,007 TOTAL ASSETS LESS CURRENT LIABILITIES 1,047,059 931,324 CREDITORS amounts falling due after more than one year Long term borrowings 16 3,080 3,080 1,043,979 928,244 CAPITAL AND RESERVES Share capital 18 120,000 120,000 Profit and loss account 19 923,979 808,244 SHAREHOLDERS FUNDS 1,043,979 928,244 Net cash inflow from operating activities 20 74,143 60,072 Returns on investments and servicing of finance Interest received 241 1,279 Interest paid (29,979) (29,728) Net cash outflow from returns on investments and servicing of finance (29,738) (28,449) Taxation Corporation tax paid (9,416) (8,793) Capital expenditure and financial investment Purchase of tangible fixed assets (140,542) (141,066) Proceeds from sales of fixed assets 123,335 91,485 Net cash outflow from capital expenditure and financial investment (17,207) (49,581) Acquisitions and disposals Purchase of subsidiary undertaking - (4,855) Net cash acquired with subsidiary undertaking - 18 Net cash outflow from acquisitions and disposals - (4,837) Equity dividends paid (30,000) (34,000) Viscount Chelsea - Director Net cash outflow before financing (12,218) (65,588) Hugh Seaborn - Director 24 April 2014 Notes 1 to 25 form an integral part of these financial statements. Financing Increase in long term borrowings 100,000 30,000 Repayment of long term borrowings (4,000) (23,376) Net cash inflow from financing 21 96,000 6,624 Increase/(decrease) in cash for the year 22 83,782 (58,964) Notes 1 to 25 form an integral part of these financial statements. 28 29

CADOGAN GROUP LIMITED 31 DECEMBER CADOGAN GROUP LIMITED 31 DECEMBER 1 ACCOUNTING POLICIES 1 ACCOUNTING POLICIES (continued) (a) (b) (c) (d) Accounting convention The financial statements have been prepared under the historical cost convention modified by the revaluation of investment properties and properties under development and in accordance with UK applicable accounting standards. Compliance with SSAP 19 Accounting for Investment Properties requires a departure from the requirements of the Companies Act 2006 relating to depreciation and an explanation of this departure is given in (g) below. Basis of consolidation The group financial statements consolidate the financial statements of Cadogan Group Limited and its subsidiary undertakings for the year ended 31 December. No profit and loss account is presented for Cadogan Group Limited as permitted by section 408 of the Companies Act 2006. Turnover Turnover in the property investment business is stated net of VAT, and comprises gross rents, including reverse premiums received on early lease terminations, commissions and other fees receivable. The cost of all lease incentives (such as rent-free periods) is offset against the total rent due and the net rental income is then spread evenly over the period from the start of the lease to the date of the next rent review or the lease end date. Increases in rents arising from rent reviews are recognised when the review has been completed and agreed with the tenant. Turnover in the hotel and concert hall operations represents amounts derived from the provision of goods and services, stated net of VAT. Investments Investments in subsidiaries are included at cost, less a provision for diminution in value where applicable. (e) (f) (g) Land and buildings, investment properties and properties under development Land and buildings, investment properties and properties under development are included in the financial statements at market valuation at the year end. Any surplus arising on revaluation is taken through the statement of total recognised gains and losses to the revaluation reserve. Any resulting deficit, if temporary, is taken through the statement of total recognised gains and losses to the revaluation reserve. If a deficit below original cost arises and is deemed to be permanent it is taken through the profit and loss account. Additions to properties include costs of a capital nature only; interest and other costs in respect of developments and refurbishments are charged to the profit and loss account as incurred. Profit on sale of properties Profits or losses on the sale of investment properties are calculated by reference to the book value at the end of the previous year, adjusted for any subsequent capital expenditure, and are treated as exceptional items. Such transactions are recognised on the exchange of contracts, providing no material conditions remain outstanding. Depreciation In accordance with SSAP 19 no depreciation is provided on freehold investment properties. Although the Companies Act 2006 requires all properties to be depreciated the directors believe that departure from this requirement is necessary in order for the financial statements to give a true and fair view. Depreciation is reflected in the open market value of the investment properties and land and buildings included in the financial statements and cannot be quantified separately. Plant and equipment is depreciated on a straight line basis at annual rates varying between 10% and 33%. (h) (i) (j) (k) Stocks Stocks are stated at the lower of cost and net realisable value. Taxation Provision is made for deferred taxation on all material timing differences. No deferred taxation is provided on the revaluation of investment properties, unless a binding agreement for the sale of the asset exists at the year end. Foreign currencies Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction or at the contracted rate if the transaction is covered by a forward foreign currency contract. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date or if appropriate at the forward contract rate. Derivative instruments The group uses forward foreign currency contracts to reduce exposure to foreign exchange rates. The group also uses interest rate swaps to adjust interest rate exposures. The group considers its derivative instruments qualify for hedge accounting when certain criteria are met. Details of the relevant criteria are set out below. Forward foreign currency contracts The criteria for forward foreign currency contracts are: the instrument must be related to a firm foreign currency commitment; it must involve the same currency as the hedged item; and it must reduce the risk of foreign currency exchange movements on the group s operations. The rates under such contracts are used to record the hedged item. As a result, gains and losses are offset against the foreign exchange gains and losses on the related financial assets and liabilities, or where the instrument is used to hedge a committed future transaction, are not recognised until the transaction occurs. (l) Interest rate swaps The group s criteria for interest rate swaps are: the instrument must be related to an asset or a liability; and it must change the character of the interest rate by converting a variable rate to a fixed rate or vice versa. Interest differentials are recognised by accruing within net interest payable. Interest rate swaps are not revalued to fair value or shown on the group balance sheet at the year end. If they are terminated early, the gain/ loss is spread over the remaining maturity of the original instrument. Pension benefits The pension costs relating to the group s defined benefit scheme are accounted for in accordance with Financial Reporting Standard 17 Retirement Benefits (FRS17). Current service costs and net financial returns are included in the profit and loss account in the year to which they relate. Actuarial gain and losses and movements on the deferred asset relating to the pension liability are recognised in the statement of recognised gains and losses. The annual contributions for defined contribution schemes are charged to the profit and loss account in the year to which they relate. 30 31

CADOGAN GROUP LIMITED 31 DECEMBER CADOGAN GROUP LIMITED 31 DECEMBER 2 TURNOVER AND SEGMENTAL ANALYSIS Turnover, group profit on ordinary activities before tax and net assets are analysed as follows: Property Investment Hotels and Concert Hall Total 3 MOVEMENTS IN PROVISION FOR DIMINUTION IN VALUE Write back of impairment losses on investment properties - 3,919 Turnover Gross rental income and other sales 117,093 104,714 9,657 9,160 126,750 113,874 Other income 1,290 2,575 - - 1,290 2,575 Total turnover 118,383 107,289 9,657 9,160 128,040 116,449 Turnover of No. 11 Cadogan Gardens included above - - - 2,604-2,604 4 PROFIT ON SALE OF INVESTMENT PROPERTIES Profits on sales of freeholds and receipt of long lease premiums, less directly related costs and expenses 27,276 17,293 Operating profit Continuing operations 77,260 68,655 359 332 77,619 68,987 Profit on disposal of fixed assets 27,276 17,293 Net interest (31,056) (28,944) Profit on ordinary activities before taxation 73,839 57,336 Operating profit of No. 11 Cadogan Gardens included above - - - 192-192 Net assets Continuing operations 3,822,972 3,248,099 69,231 68,435 3,892,203 3,316,534 Net assets of No. 11 Cadogan Gardens included above - - - 33,510-33,510 5 INTEREST PAYABLE Interest on bank loans and other borrowings not wholly repayable within five years 30,960 29,199 Interest on bank loans, overdrafts and other borrowings repayable within five years 177 340 Other interest 182 138 31,319 29,677 All operations take place within the United Kingdom. The group operates in two principal areas of activity, property investment and hotels and concert hall activities. 32 33

CADOGAN GROUP LIMITED 31 DECEMBER CADOGAN GROUP LIMITED 31 DECEMBER 6 OPERATING PROFIT Operating profit is stated after charging: Depreciation 1,222 2,050 Auditors remuneration: Audit of the financial statements includes 51,150 in respect of the company ( - 50,000) 206 195 Other fees to auditors tax services 220 338 Other fees to auditors other services 192 242 Hire of plant and equipment 22 18 8 TAXATION (a) Analysis of charge in the year Current tax: UK corporation tax 10,557 9,355 Adjustments in respect of previous years (563) (679) Total current tax 9,994 8,676 Deferred tax: Origination and reversal of timing differences (830) (458) Total deferred tax (830) (458) 7 DIRECTORS AND EMPLOYEES Tax on profit on ordinary activities 9,164 8,218 Aggregate directors emoluments in respect of qualifying services 1,920 1,690 (b) Factors affecting tax charge for the year Included within directors emoluments above are contributions to money purchase pension schemes for three directors amounting to 145,000 ( 3 directors 128,000). The emoluments, excluding pension contributions, of the highest paid director were 802,000 ( 645,000). The tax charge for the current year is lower than the current standard rate of corporation tax in the UK of 23.25% ( 24.5%). The difference is explained as follows: Standard tax rate 23 25 Employee costs: Actual current tax rate 13 15 Difference (10) (10) Wages and salaries 6,953 6,833 Social security costs 734 754 Pension costs defined contribution scheme 506 468 Pension costs net cost of defined benefit scheme 152 159 8,345 8,214 The average number of persons employed by the group, including executive directors, during the year was 180 ( 185). Explained by: Effect of rollover relief and indexation allowance on taxable profits on property disposals. (9) (7) Capital allowances in excess of depreciation (1) (1) Non-taxable write back of provision for diminution in value of investment properties - (2) Sundry permanent differences 1 1 Adjustment to tax in respect of prior periods (1) (1) (10) (10) 34 35

CADOGAN GROUP LIMITED 31 DECEMBER CADOGAN GROUP LIMITED 31 DECEMBER 8 TAXATION (continued) (c) Factors that may affect future tax charges The UK corporation tax rate reduced to 23% from April. The rate will reduce to 21% from April 2014 and 20% from April 2015. As at the balance sheet date, both these future tax reductions have been enacted and hence in accordance with accounting standards, they have been reflected in the group s financial statements as at 31 December. The rate changes will impact the amount of future tax payments to be made by the group. 12 TANGIBLE FIXED ASSETS Freehold investment properties Freehold land and buildings Total properties Plant and equipment Group Total No provision has been made for deferred tax which would arise in the event that the group disposed of its investment properties at their current market values included in these financial statements. Tax would be payable on these disposals to the extent that rollover relief is not available. The total potential deferred tax liability on the sale of all the group s investment properties is 738 million ( 741 million). Cost or valuation At 1 January 3,791,703 83,490 3,875,193 11,743 3,886,936 Revaluation 536,788 3,047 539,835-539,835 Additions 136,771 188 136,959 860 137,819 Disposals (95,975) - (95,975) - (95,975) 9 DIVIDENDS 25.0p per share paid on 16 October 30,000-15.83p per share paid on 11 June - 19,000 12.5p per share paid on 28 December - 15,000 30,000 34,000 At 31 December 4,369,287 86,725 4,456,012 12,603 4,468,615 Depreciation At 1 January - - - 8,422 8,422 Charge for the year - - - 1,222 1,222 At 31 December - - - 9,644 9,644 Net book value 10 RETAINED PROFIT FOR THE YEAR The profit for the year has been retained by: The company 115,735 131,315 Subsidiaries (81,060) (116,197) 34,675 15,118 At 31 December 4,369,287 86,725 4,456,012 2,959 4,458,971 At 31 December 3,791,703 83,490 3,875,193 3,321 3,878,514 The valuation of the group s freehold properties at 31 December was carried out by Chapman Petrie (commercial properties) and Cluttons (residential properties), both firms of chartered surveyors, on the basis of market value, in accordance with the Appraisal and Valuation Manual of the Royal Institution of Chartered Surveyors. The historical cost of freehold properties at 31 December was 1,600,323,000 ( 1,464,950,000). These amounts are stated after the deduction of accumulated impairment losses of 2,611,000 ( 2,611,000). The parent company s profit before dividends for the financial year was 145,735,000 ( 165,315,000). 11 EARNINGS PER SHARE The calculation of earnings per ordinary share for is based on earnings attributable to ordinary shareholders of 64,675,000 ( 49,118,000) and on 120,000,000 ordinary shares ( 120,000,000 ordinary shares) being the effective number of such shares in issue during the year. 36 37

CADOGAN GROUP LIMITED 31 DECEMBER CADOGAN GROUP LIMITED 31 DECEMBER 13 FIXED ASSET INVESTMENTS Company 14 DEBTORS Group Investment in subsidiary companies at cost At 31 December and 31 December 117,317 The principal subsidiary companies at 31 December were: Company Nature of business Proportion of shares held % Held directly Cadogan Estates Limited Chelsea Land Limited Held indirectly Cadogan Estates Property Investments Limited Cadogan Developments Limited Cadogan Hall Limited Cadogan Holdings Limited Chelsea Land Developments Limited Cadogan Hotel Partners Limited Leda Hotels Limited Property investment Intermediate holding company Property investment Property development Venue management Property investment Property investment Hotel operator Hotel operator 100 100 100 100 100 100 100 100 100 Trade debtors 4,733 1,991 Other debtors 7,658 4,509 Accrued income 8,000 6,799 15 TRADE AND OTHER CREDITORS Group 20,391 13,299 Company Trade creditors 2,628 5,147 - - Other creditors and accruals 20,393 18,878 52 53 Social security and other taxation 589 543 30 29 Deferred income 28,582 26,216 - - 52,192 50,784 82 82 16 BORROWINGS (a) Bank loans and overdrafts Group Bank loans and overdrafts - - At 31 December the group had committed but undrawn credit facilities of 50.0 million ( - 50.0 million) under a revolving credit facility arrangement. 38 39

CADOGAN GROUP LIMITED 31 DECEMBER CADOGAN GROUP LIMITED 31 DECEMBER 16 BORROWINGS (continued) 16 BORROWINGS (continued) (b) Other long term borrowings (b) Other long term borrowings (continued) Group Company 604,672,000 ( 508,672,000) of the total borrowings and overdrafts is subject to fixed rates of interest to maturity, which average 5.56% ( 5.90%). The 6.941% commercial mortgage loan 2025 is secured by fixed charges over specific assets of subsidiary companies. Amounts falling within one year: 6.941% commercial mortgage loan 2025 4,000 4,000 - - Amounts falling due in two to five years: 5.75% unsecured loan notes 2016 3,080 3,080 3,080 3,080 6.941% commercial mortgage loan 2025 16,000 16,000 - - 6.45% $40m unsecured loan notes 2018 20,141 - - - All the interest payments and principal repayments relating to the loan notes issued in US dollars were swapped into sterling at fixed exchange rates. This currency swap has the effect of reducing the effective interest rate on the US dollar loans from the rates shown above to an average effective rate of 6.04% ( 6.04%). This, combined with the fixed interest rates payable on the sterling loan notes gives an overall effective interest rate across all the series of notes, fixed until maturity, of 5.32% ( 5.66%). The market value of the group s swap contracts at 31 December was 27,837,000 ( 54,707,000) less than their book value. 7.33% 4m unsecured loan notes 2018 4,000 - - - 43,221 19,080 3,080 3,080 Amounts falling due in more than five years: 6.45% $40m unsecured loan notes 2018-20,141 - - 7.33% 4m unsecured loan notes 2018-4,000 - - 6.60% $45m unsecured loan notes 2020 22,659 22,659 - - 17 DEFERRED TAXATION Group 5.04% 45 m unsecured loan notes 2021 45,000 45,000 - - 3.45% 15 m unsecured loan notes 2022 15,000 15,000 - - 6.75% $23m unsecured loan notes 2023 11,581 11,581 - - 6.941% commercial mortgage loan 2025 68,000 72,000 - - 3.75% 50 m unsecured loan notes 2026 50,000-3.88% 15 m unsecured loan notes 2027 15,000 15,000 - - 5.25% $60 m unsecured loan notes 2028 37,523 37,523 - - 4.07% 50 m unsecured loan notes 2030 50,000-5.53% $60 m unsecured loan notes 2032 37,524 37,524 - - 5.77% $90m unsecured loan notes 2036 45,720 45,720 - - 6.01% 30 m unsecured loan noted 2041 30,000 30,000 - - 6.87% 20m unsecured loan notes 2042 20,000 20,000 - - 5.92% $30m unsecured loan notes 2046 15,240 15,240 - - At 1 January 11,240 11,698 Deferred tax charge for the year: Profit and loss account (830) (458) At 31 December 10,410 11,240 The liability for deferred taxation comprises the following: Accelerated capital allowances 10,805 11,725 Other timing differences (395) (485) 10,410 11,240 Deferred tax has not been provided on the chargeable gains that have been rolled over. The unprovided deferred tax on rolled over gains is 148,683,000 ( 145,560,000). 5.11% 25m unsecured loan notes 2046 25,000 25,000 - - 7.40% $58m unsecured loan notes 2051 29,204 29,204 - - 5.13% 40m unsecured loan notes 2056 40,000 40,000 - - 557,451 485,592 - - Total other long term borrowings 604,672 508,672 3,080 3,080 40 41

CADOGAN GROUP LIMITED 31 DECEMBER CADOGAN GROUP LIMITED 31 DECEMBER 18 SHARE CAPITAL Authorised, allotted, issued and fully paid Number of shares Authorised, allotted, issued and fully paid Number of shares Ordinary shares of 1 each 120,000,000 120,000 120,000,000 120,000 19 RESERVES Arising on land and buildings Arising on investment properties Revaluation reserve Total Group Profit and loss account At 1 January 10,059 2,398,920 2,408,979 787,555 Profit for the year - - - 64,675 Dividend declared and paid - - - (30,000) Surplus on revaluation of land and buildings and investment properties 3,047 536,788 539,835 - Revaluation surplus realised on premiums and sales of freeholds - (94,389) (94,389) 94,389 Attributable taxation on disposal of investment properties - - - (157) Actuarial gain on pension commitments - - - 1,645 Attributable taxation on actuarial gain on pension commitments - - - (329) At 31 December 13,106 2,841,319 2,854,425 917,778 20 RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES Group Operating profit 77,619 68,987 Depreciation 1,222 2,050 Provisions for diminution in value - (3,919) Difference between current service cost and pension contributions (539) (564) Decrease in stock 22 1 Increase in debtors (7,070) (3,027) Increase/(decrease) in creditors 2,889 (3,456) Movement in working capital (4,159) (6,482) Net cash inflow from operating activities 74,143 60,072 21 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT Group Increase/(decrease) in cash for the year 83,782 (58,964) Cash inflow from increase in debt (96,000) (6,624) Loans acquired with subsidiary undertaking - (19,376) Movement in net debt for the year (12,218) (84,964) Net debt at 31 December (504,308) (419,344) Net debt at 31 December (516,526) (504,308) Company Profit and loss account At 1 January 808,244 Profit for the year 145,735 Dividend declared and paid (30,000) At 31 December 923,979 22 ANALYSIS OF NET DEBT At 31 December Cash flow Group At 31 December Cash at bank and in hand 4,364 83,782 88,146 Debt due within one year (4,000) - (4,000) Debt due after one year (504,672) (96,000) (600,672) (504,308) (12,218) (516,526) 42 43

CADOGAN GROUP LIMITED 31 DECEMBER CADOGAN GROUP LIMITED 31 DECEMBER 23 PENSION ARRANGEMENTS 23 PENSION ARRANGEMENTS (continued) The group operates both defined benefit and defined contribution funded pension schemes for its employees. The assets of these schemes are held separately from those of the group in independently administered funds. Defined benefit scheme Under the mortality tables adopted, the assumed future life expectancy at age 60 is as follows: Life expectancy at age 60 Years Years The group s defined benefit pension scheme, which is closed to new members, is called the Cadogan Pension & Assurance Scheme ( the Scheme ). The Scheme provides benefits based on final pensionable earnings, and contributions are based on valuations carried out every three years by an independent actuary using the attained age method. The following disclosures exclude any allowance for defined contribution schemes operated by the group. The FRS 17 liability value does not include allowance for any discretionary benefits. The group expects to contribute around 715,000 to the Scheme during the year to 31 December. Assumptions The principal assumptions used to calculate Scheme liabilities include: Discount rate 4.50%pa 4.40%pa Inflation assumption (RPI) 3.00%pa 2.50%pa Pension increases in payment 5.00%pa 5.00%pa Revaluation in deferment 5.00%pa 5.00%pa Salary Increases 4.50%pa 4.00%pa Retirements All members retire at age 60 All members retire at age 60 Male currently aged 40 30.4 30.3 Female currently aged 40 32.9 32.8 Male currently aged 60 28.8 28.7 Female currently aged 60 31.2 31.2 Assets The major categories of assets as a proportion of total assets are as follows: Asset category % Equities 28 53 Gilts 36 - Bonds 35 36 Other 1 11 Total 100 100 % Withdrawals An allowance is made for a certain proportion of active members to leave service each year before reaching Normal Retirement Date The actual return on the Scheme s assets net of expenses over the period to the Review Date was a gain of 2,321,000 ( gain - 1,812,000). Post retirement mortality assumption S1NXA based on year of birth using the CMI 2010 core projection model with a long term improvement rate of 1% per annum and a multiplier of 80% S1NXA based on year of birth using the CMI 2010 core projection model with a long term improvement rate of 1% per annum and a multiplier of 80% The assets do not include any investment in shares or property of the group. The expected return on assets is a weighted average of the assumed long-term returns for the various asset classes. Equity returns are developed based on the selection of an appropriate risk premium above the risk free rate which is measured in accordance with the yield on government bonds. Bond returns are selected by reference to the yields on government and corporate debt as appropriate to the Scheme s holdings of these instruments. Tax-free cash No allowance No allowance Long term expected rate of return on the Scheme s assets 4.60%pa 4.60%pa Amounts recognised in the balance sheet Other assumptions are as for the long term ongoing funding basis in the actuarial valuation as at 25 December 2010. Fair value of assets 28,506 26,185 Present value of funded obligations (32,101) (31,782) Deficit before tax (3,595) (5,597) Related deferred tax asset 719 1,287 Net deficit (2,876) (4,310) 44 45

CADOGAN GROUP LIMITED 31 DECEMBER CADOGAN GROUP LIMITED 31 DECEMBER 23 PENSION ARRANGEMENTS (continued) Amounts recognised in the statement of total recognised gains and losses over the year 23 PENSION ARRANGEMENTS (continued) Summary of prior year amounts 2010 2009 Actuarial gains and (losses) 1,645 (1,240) Effect of limit on recognisable surplus - - Total amount recognised in statement of total recognised gains and losses 1,645 (1,240) Amounts recognised in the profit and loss account over the year Current service cost (152) (159) Interest cost (1,387) (1,357) Expected return on assets 1,205 1,219 Total amounts recognised in the profit and loss account over the year (334) (297) Present value of defined benefit obligation (32,101) (31,782) (29,156) (24,559) (23,317) Scheme assets 28,506 26,185 24,373 25,094 21,903 Surplus/(deficit) (3,595) (5,597) (4,783) 535 (1,414) Experience gains and losses on scheme liabilities 44 23 63 1,151 (16) Changes in assumptions used to value scheme liabilities 485 (1,856) (3,631) (1,292) (3,523) Experience adjustments on scheme assets 1,116 593 (2,277) 1,833 2,586 The cumulative amount of actuarial gains and losses recognised in the statement of total recognised gains and losses since the Scheme s inception was a loss of 3,792,000 ( loss 5,108,000). Defined contribution schemes The pension charge in respect of defined contribution schemes represents contributions payable by the group to such schemes and amounted to 506,000 ( 468,000), of which nil ( nil) was unpaid at the balance sheet date. Reconciliation of assets and defined benefit obligation The change in assets over the year was: Fair value of assets at 1 January 26,185 24,373 Expected return on assets 1,205 1,219 Employer contributions 691 723 Benefits paid (691) (723) Actuarial gain on assets 1,116 593 Fair value of assets at 31 December 28,506 26,185 24 CAPITAL AND OTHER COMMITMENTS Outstanding capital commitments were as follows: Capital expenditure contracted for but not provided for in the financial statements 50,129 21,068 There were no outstanding commitments for capital expenditure in the company at either year end. Group The change in defined benefit obligation over the year was: Defined benefit obligation at 1 January 31,782 29,156 Current service cost 152 159 Interest cost 1,387 1,357 Benefits paid (691) (723) Actuarial (gain)/loss (529) 1,833 Defined benefit obligation at 31 December 32,101 31,782 25 ULTIMATE OWNERSHIP The ultimate holding company is Cadogan Settled Estates Limited, which is registered in England and Wales and which is ultimately controlled by The Eighth Earl Cadogan s 6 December 1961 Settlement. The consolidated financial statements of Cadogan Settled Estates Limited may be obtained from The Registrar of Companies, Companies House, Crown Way, Cardiff, CF14 3UZ. 46 47

CADOGAN GROUP LIMITED 31 DECEMBER Five Year Summary 2010 2009 Net assets Properties at valuation m 4,456.0 3,875.2 3,455.1 3,043.6 2,736.1 Net borrowings m 516.5 504.3 419.3 425.4 403.5 Shareholders funds m 3,892.2 3,316.5 2,988.1 2,571.5 2,300.8 Net assets per share 32.44 27.64 24.90 21.43 19.17 Earnings Gross rents m 117.1 104.7 99.2 92.3 88.5 Operating profit m 77.6 69.0 83.2 62.6 57.0 Profit on sale of investment properties m 27.3 17.3 17.2 4.3 6.4 Profit before interest m 104.9 86.3 100.4 66.9 63.4 Net interest payable m 31.1 29.0 28.8 24.6 25.4 Profit before taxation m 73.8 57.3 71.6 42.3 38.0 Taxation m 9.1 8.2 10.7 10.3 9.9 Profit after taxation m 64.7 49.1 60.9 32.0 28.1 Earnings for ordinary shareholders m 64.7 49.1 60.9 32.0 28.1 Earnings per share p 53.9 40.9 50.7 26.7 23.5 Key financial ratios Balance sheet gearing % 13.27 15.21 14.03 16.54 17.54 Gross rents/interest cover times 3.77 3.61 3.44 3.75 3.48 Interest cover times 3.37 2.85 2.93 2.67 2.50 48

18 Cadogan Gardens London SW3 2RP T. 020 7730 4567 www.cadogan.co.uk