Half Yearly Report

RNS Number : 8695X

Custodian REIT PLC

25 November 2014

Custodian REIT plc

("Custodian REIT" or "the Company")

Interim Results

Custodian REIT (LSE: CREI), the UK commercial real estate investment company focused on smaller lot sizes, which listed on the main market of the London Stock Exchange on 26 March 2014 ("Admission"), today reports its interim results for the period from 25 March 2014 to 30 September 2014 ("the Period").

Financial highlights and performance summary

· Net asset value ("NAV") total return¹ of 2.7% since Admission

· Share price total return² of 7.3% on issue price

· Unaudited NAV per share up 1.4% from 98.2p at Admission to 99.6p at 30 September 2014

· Portfolio value of £145.9m (at Admission: £95.2m)

· Average portfolio net initial yield of 7.2%

· Occupancy rate is 98.6%

· Average unexpired lease term of 7.7 years

· Net gearing³ of 7.7%

· Q1 dividend paid at 1.25p per share

· Q2 dividend proposed at 1.25p per share

· Profit before tax of £3.3m

1 NAV movement including dividends paid

2 Increase in share price from issue price including dividends paid

3 Borrowings less cash divided by property portfolio valuation

Operational highlights

· Proceeds raised from IPO fully invested within first six months

· 21 acquisitions completed during the Period for total consideration of £48.4m

· Following the period end, a further £25.0m of gross proceeds raised in October placing

· Strong pipeline of new investment opportunities in £1.0m to £7.5m range

David Hunter, Chairman of Custodian REIT, said:

"The Company has performed solidly since its IPO. This has been a period of significant investment, following which we remain on-track to meet our goal of having our target dividend of 5.25p for the year ending 31 March 2015 fully covered, while enhancing NAV.

"Rental growth is starting to impact valuations. I expect this to be a feature of the property market for some time to come, pushed on by occupational demand following a long period of subdued development, which has led to a shortage of supply of modern buildings.

"I look forward to the Company continuing to deliver our strategy of targeting smaller lot sizes across regional markets, at prices that provide the opportunity for NAV growth and support the target dividend."

Further information

Included in the following announcement are the financial statements of the Company for the period from incorporation to 24 March 2014, which have been prepared to satisfy the Companies Act 2006 requirements to facilitate the payment of quarterly dividends.

Further information regarding the Company can be found at the Company's website www.custodianreit.com or please contact:

Custodian Capital Limited
Richard Shepherd-Cross / Nathan Imlach / Ian Mattioli	Tel: +44 (0)116 240 8740
	www.custodiancapital.com

Numis Securities Limited
Nathan Brown / Hugh Jonathan	Tel: +44 (0)20 7260 1000
	www.numiscorp.com

Camarco
Ed Gascoigne-Pees	Tel: +44 (0)20 3757 4984
	www.camarco.co.uk

Chairman's statement

I am pleased to report the Company's first trading results since its successful admission to the premium segment of the main market of the London Stock Exchange on 26 March 2014. In the midst of a busy phase of initial public offerings ("IPOs"), Custodian REIT was one of only a few property companies to launch successfully. A combination of timing, matched with strong demand for the Company's strategy of targeting single-let, smaller lot sized regional assets with low gearing to deliver an attractive level of income return, met with investor approval.

The Company was seeded with a £95.2 million portfolio ("the Initial Portfolio") of previously syndicated property from clients of Mattioli Woods plc ("Mattioli Woods"), with those clients receiving 76,989,310 ordinary shares in the Company as consideration. In addition, the maximum of 55,000,000 ordinary shares were allotted for cash through a placing and offer for subscription, both of which were significantly oversubscribed, resulting in a total of 131,989,310 ordinary shares being allotted at IPO.

Our challenge is to invest new monies raised promptly, minimising cash drag to ensure the target dividend of 5.25 pence for the year ending 31 March 2015 is fully covered, while enhancing NAV. Responsibility for this lies with the Company's external investment manager, Custodian Capital Limited ("the Investment Manager"). The Company completed £48.4 million of new acquisitions in the period from Admission to 30 September 2014 and I am confident we remain on-track to meet the challenge.

Net Asset Value

The Company delivered NAV total return of 2.7% for the first half, in line with the Board's expectations. This was a period of significant new investment, where the costs (primarily stamp duty) of acquiring 21 new properties diluted the overall portfolio NAV total return by circa 2%.

Share price

In the period to 30 September 2014 the share price total return on the issue price of 100.0 pence was 7.3%, with the closing price at 30 September of 106.0 pence representing a 6.4% premium to NAV. I believe this premium is a function of strong demand for closed-ended property funds and the attractive level of the Company's target dividends.

Placing of new ordinary shares

The £55.0 million raised at IPO plus a further £12.6 million drawn down on the Company's £25.0 million revolving credit facility were deployed during the Period. Following the period end, on 3 October 2014 the Company raised a further £25.0 million (before costs and expenses) through the placing of 23,866,349 new ordinary shares at a price of 104.75 pence per share, representing a premium of 5.2% to the 30 September 2014 NAV. The amount raised was in excess of the £20 million initially targeted, demonstrating the strong ongoing demand for the Company's shares.

The placing allows the Investment Manager to take advantage of the opportunity it perceives there to be in the current market, where pricing for properties in the £1.0 to £7.5 million range has yet to be squeezed by the excessive demand seen for larger lot sizes.

However, the same economic and property market drivers of rental growth apply to large and small properties and it is rental growth that will lead to long-term, sustained NAV performance. The Investment Manager reports a strong pipeline of opportunities, which I expect to secure long-term NAV growth for shareholders.

Dividends

The Company's maiden interim dividend of 1.25 pence for the period ended 30 June 2014 was paid on 30 September 2014. Income is a major component of total return and the Board is committed to growing future dividends. The Board proposes to pay a second interim dividend of 1.25 pence for the quarter ended 30 September 2014, to be approved in December and paid on 31 December 2014.

In the absence of unforeseen circumstances, the Board believes the Company is well placed to meet its target of paying further quarterly dividends to achieve an annual dividend of 5.25 pence per share for the year ending 31 March 2015 and 6.25 pence per share in subsequent years.

Borrowings

The Company has a target gearing level of 25% loan to value. Immediately following the recent placing the Company's borrowings were repaid such that gearing fell to nil, but pipeline transactions are set to see further draw down on the existing revolving credit facility.

Outlook

Custodian REIT has acquired a well-diversified portfolio, with long-term contractual income from good quality tenants, which are the key drivers to delivering a high level of income across the portfolio. Rental growth is starting to impact valuations and I expect this to be a feature of the property market for some time to come, pushed on by occupational demand following a long period of subdued development that has led to a shortage of supply of modern buildings.

I look forward to the Company continuing to deliver our strategy of targeting smaller lot sizes across regional markets, at prices that provide the opportunity for NAV growth and support the target dividend.

David Hunter

Chairman

24 November 2014

Investment Manager's report

2014 has been a busy year for commercial property investment and I believe it is set fair for a strong finish. Investment volumes have increased markedly and, according to Lambert Smith Hampton's UK Investment Transactions Bulletin, are likely to break £50 billion by the year end. This would be the highest volume of investment since 2007 and well above the long-run average.

Across all sectors of the property market initial yields have hardened, as a range of investors have competed for the better quality assets. 2014 marks a turning point, when demand from overseas investors, UK institutions and UK retail property funds has spread from London into the regional property markets. This demand is strongly focused on larger lot sizes (£10 million plus) concentrated on multi-let offices in dominant regional cities, multi-let industrial estates, shopping centres and big-box distribution units.

The portfolio dynamics and investment strategy of Custodian REIT put it slightly out of step with the wider market, and therein lies the Company's opportunity. I believe there is still an opportunity to secure smaller assets (of up to £7.5 million) at prices which have not seen the same competitive pressure and yield hardening as the wider market.

Portfolio performance

The first six months' trading has been dominated by acquisitions, with the Company completing on 21 new properties adding £48.4 million of assets to the portfolio, as set out below:

Industrial

Location: Wakefield Tenant: Bunzl UK Net initial yield: 7.50% Consideration: £1.58m		Location: Liverpool Tenant: DHL International Net initial yield: 7.77% Consideration: £1.55m
Location: Hamilton Tenant: Ichor Systems Net initial yield: 9.01% Consideration: £1.84m		Location: Biggleswade Tenant: Turpin Distribution Services Net initial yield: 7.50% Consideration: £3.79m
Location: Liverpool Tenant: Powder Systems Net initial yield: 7.77% Consideration: £1.55m		Location: Nuneaton Tenant: DX Network Services Net initial yield: 7.75% Consideration: £2.95m
Location: Doncaster Tenant: Portola Packaging Net initial yield: 7.25% Consideration: £4.62m

Other

Location: Southsea

Tenant: JD Wetherspoon

Type: Leisure

Net initial yield: 5.73%

Consideration: £1.32m

Location: Leicester

Tenant: Magnet

Type: Trade counter

Net initial yield: 7.33%

Consideration: £3.20m

Location: High Wycombe

Tenant: Stonegate Pub Co

Type: Leisure

Net initial yield: 6.69%

Consideration: £1.63m

Location: Peterborough

Tenant: Marshall Motor Group

Type: Showroom

Net initial yield: 8.50%

Consideration: £2.50m

Location: Castleford

Tenant: MKM Building Supplies

Type: Trade counter

Net initial yield: 6.45%

Consideration: £1.61m

Retail

Location: Chester Tenant: Whistles Holdings Net initial yield: 6.16% Consideration: £0.89m		Location: Bury St Edmunds Tenant: The Works Stores Net initial yield: 6.54% Consideration: £1.30m
Location: Colchester Tenant: Poundland & Savers Net initial yield: 8.15% & 8.51% Consideration: £2.82m		Location: Southampton Tenant: URBN UK Net initial yield: 7.53% Consideration: £2.76m
Location: Shrewsbury Tenant: Cotswold Outdoor Net initial yield: 5.99% Consideration: £2.13m		Location: Southsea Tenant: Superdrug Stores & Portsmouth City Council Net initial yield:7.39% & 5.51% Consideration: £1.82m
Location: Dumfries Tenant: Iceland Foods Net initial yield: 6.99% Consideration: £1.15m		Location: Nottingham Tenant: The White Company Net initial yield: 7.75% Consideration: £1.71m
Location: Milton Keynes Tenant: Staples UK Net initial yield: 6.95% Consideration: £5.72m

Against the initial portfolio valuation at IPO and aggregate acquisition price of new properties, the 30 September 2014 valuation shows a 1.7% net increase in value, split by sector as follows:

Sector		% change in valuation

Industrial		2.4
Retail		0.8
Other		1.9
Office		1.0

Industrial values have increased in anticipation of rental value growth, based on a lack of supply of available modern space following five years of minimal new development and growing occupier demand. There is very limited vacancy in core industrial and distribution locations and occupier-led or even speculative development is likely be a factor in the next phase of these markets. Custodian REIT's investment strategy is well suited to the industrial and distribution sectors and these remain a key target for acquisitions.

The office market is running at two different speeds. Modern offices, those in demand from growing, modern businesses are in short supply and in key locations the market requires new development to meet occupier demand. Secondary offices are in over-supply and many are being re-developed for alternate uses, not least under the permitted development rights legislation. Over time this will reduce the over-supply, but I believe the market has some way to go yet. The Company's focus is on modern or fit-for-purpose offices.

The 'other' sector of the portfolio has benefitted from market demand for long leases and indexed, or fixed rental uplifts. These are common themes running through the sector and are applicable to the hotels, restaurants and some of the car showrooms held in the portfolio.

I believe the High Street is stronger than many commentators have claimed. In the right towns, there is occupier demand and the slide in rental values has eased or even reversed, with evidence of rental growth showing in some locations. Importantly, occupancy levels are high and with the costs of re-letting often lower than in the alternative sectors, retail property continues to be an important part of an income focused portfolio.

Asset management

The portfolio has a current rent roll of £11.2 million with a net initial yield of 7.22%. Our objective is to build a diversified portfolio of regionally diverse properties to support a fully covered dividend, with low gearing. Income is likely to remain the principal component of total return and new acquisitions have been selected to meet that target, while managing the risks associated with lease break and expiry. The average weighted unexpired lease term (to first break) is 7.7 years.

Research⁴ suggests that circa two thirds of tenants do not vacate their properties at break, so there is great potential for the current portfolio to deliver long income with low vacancy rates. Maintaining and enhancing cash flow from the portfolio is a core objective of the Investment Manager. The current vacancy rate stands at 1.4%.

4 Source: IPD Lease events report 2013

Recent asset management activity

At George Street in Edinburgh, the rent review with Phase Eight is being documented at £109,900 per annum ("pa"), a 12.9% increase from £97,340 pa.

Greggs has not exercised its option to break in the Jewellery Quarter, Birmingham, providing an additional five years' income until expiry in 2020. There is a rent review outstanding, which will be activated now the break notice period has passed.

Revlon International Corporation continues to trade from its distribution unit on Stone Business Park, having not exercised the break option as at April 2015, which expired in October 2014. The next opportunity for the tenant to vacate will be April 2017. This was not reflected in the 30 September valuation, as the notice period had not expired at that time.

Unipart Automotive Limited entered administration on 23 July 2014. Elements of the business were sold to Andrew Page Limited, which is now in occupation of the unit at Europa Park, Sheffield and continues to meet ongoing rental payments. Negotiations have commenced to agree terms for a new 10 year lease with a five year break.

The 60 year ground lease at Abbeyfield Road, Nottingham has been re-geared on a new 125 year lease with effect from 22 July 2013 with Nottingham City Council, agreed for nil premium.

The June 2013 rent review at Pizza Hut, Triangle Retail Park, Leicester, has been settled at £82,250 pa a 5.5% increase from £78,000 pa.

At Weston Road, Crewe, Topps Tiles had an annual RPI-linked rent review in July, increasing the rent by 2.6% to £59,647 pa. South Cheshire Glass's lease expires on 19 February 2015 and the tenant has requested a new lease, with terms to be agreed.

Commercial Road, Portsmouth was vacated by the DSG Group (trading as Currys Digital), in September 2014. There are currently two offers from potential tenants, with one further offer expected. Terms are under negotiation for a new letting.

Kayes Walk, Nottingham is under offer to sell, being sub-scale for Custodian REIT at less than £300,000 in capital value.

Outlook and pipeline

While there has been marked yield compression in the market, competition for smaller assets has allowed the Company to secure a strong pipeline of opportunities, with circa £20 million of properties currently under offer and in solicitors' hands. In addition, we are actively tracking in excess of £35 million of assets, both on and off market.

We believe there is still 'value' in the market despite recent price inflation. Rents are growing in almost all sectors, boding well for long-term capital growth. While yield compression can deliver short-term capital growth, properties are as susceptible to yield hardening as to yield softening and this type of capital performance can be very transient.

The Company's investment strategy aims to identify properties that will deliver unbroken cash flow with the prospect of real rental growth. Rental return and rental growth produce the bulk of long term returns. To underline this, the average net initial yield of the £48.4 million of new properties acquired since IPO has been 7.3%, adding £3.8 million to the annual rent roll of the Company. Recent asset management activity has been directed at maintaining cash flow by keeping tenants in occupation through their break options or re-letting vacant space and enhancing rental returns through settling rent reviews.

The principal driver of short-term capital growth in the last six months has been an imbalance between supply and demand. This imbalance has been driven by a significant 'up-weighting' to property from institutional investors and the strong re-emergence of the open-ended retail funds. At the 2014 peak, upwards of £490 million per month was flowing into the retail property funds, the highest level since December 2009.

This inflow has led to a collective focus on ever larger lots, firstly in London and the South East and more recently across the main regional cities. This excess demand has put pricing for larger lots under pressure and has pushed valuations up accordingly. While the Company's portfolio does not hold these larger lots and therefore has not been exposed to such strong movements in underlying valuations, a focus on smaller lot sizes has enabled the Company to acquire good quality properties at prices we believe represent good value, remaining on target to meet the Company's objective of paying fully covered dividends.

Richard Shepherd-Cross

Investment Manager

24 November 2014

Portfolio summary

Town	Address	Tenure	Tenant	% portfolio income
Industrial
Bedford	Units 1 & 2, Priory Business Park	LH	Emerson Network Power & Elma Electronics	3.5
Doncaster	3 Carriage Drive	FH	Portola Packaging	3.1
Stone	The Diamond, Diamond Way, Stone Business Park	LH	Revlon International	2.9
Biggleswade	Pegasus Drive, Stratton Business Park	FH	Turpin Distribution Services	2.7
Coventry	Orchard Business Park	FH	Royal Mail Group	2.1
Nuneaton	Harrington Way	FH	DX Network Services	2.1

Manchester	Unit 4, The Furrows, Merlin Park, Trafford Park	LH	Unilin Distribution	2.0
Avonmouth	M3, Merebank Road	FH	Superdrug Stores	1.9
Oldbury	Brades Road	FH	Ryland Properties	1.9
Southwark	Verney Road	FH	Constantine	1.8
Aberdeen	Dyce Drive, Kirkhill Industrial Estate	FH	DHL Express (UK)	1.7
Hamilton	Livingstone Drive	FH	Ichor Systems	1.6
Erdington	West Midlands Ambulance Centre	FH	West Midlands Ambulance Service NHS Trust	1.3
Coalville	E/F Reg's Way, Bardon, Coalville	FH	Jewson	1.3
Sheffield Parkway	Parkway One Business Park	FH	Synergy Health (UK)	1.2
Liverpool, Speke	Unit C Estuary Commerce Park	LH	Powder Systems	1.2
Liverpool, Speke	Unit D Estuary Commerce Park	LH	DHL International	1.1
Castleford	Unit 1, Willowbridge Way, Whitwood	FH	Bunzl UK	1.1
Sheffield	2 & 7,8,9, Shepcote Enterprise Park, Europa Drive	LH	River Island Clothing & Andrew Page	0.9
Huntington	Ermine Business Park	FH	PHS Group	0.9
Kilmarnock	3 Queen's Drive	FH	Royal Mail Group	0.8
Hinckley	Phoenix Business Park, Brindley Road	FH	Multi tenanted - Phoenix Park	0.6

Other
Knutsford	Mobberley Road, Parkgate	FH	R Stratton & Co	3.3
Leicester	489 Aylestone Road	FH	Magnet	2.2
Dudley	Castlegate Way	FH	Premier Inn Hotels	2.1
Peterborough	Mallory Road	FH	Marshall Motor Group	2.0
Portishead	Harbour Road	FH	Travelodge Hotels	1.8
Crewe	Counterpoint, Weston Road	FH	Plumbase, Multi Tile F1 Autocentres & South Cheshire Glass	1.4
Solihull	Coventry Road, Elmdon	FH	Allen Ford (UK) t/a Kia	1.3
Redhill	109-115 Brighton Road	FH	Honda Motor Europe	1.2
Bath	Bluecoat House, Saw Close	LH	Prezzo	1.1
High Wycombe	46/50a Frogmore	FH	Stonegate Pub Co	1.0
Castleford	Castlewood Way	FH	MKM Buildings Supplies	1.0
Redcar	High Street and Bath Street	FH	Landmark Property Investments	0.9
Watford	Dome Roundabout	LH	Pizza Hut (UK)	0.8
Nottingham	1 - 10, 1 Cottesmore Road, Lenton	FH	Multi tenanted - Residential	0.7
Leicester	Triangle Retail Park	LH	Pizza Hut (UK)	0.7
Southsea	86/90 Palmerston Road	FH	JD Wetherspoon	0.7
Basingstoke	10 Chequers Road	FH	Teddies Nurseries	0.6
Chesham	107 Bois Moor Road	FH	Teddies Nurseries	0.4
Knutsford	The Old Knutsford Library, Brook Street	FH	Knutsford Day Nurseries	0.4

Office
Leicester	Gateway House, Grove Park	FH	Mattioli Woods, RBS & Regus	4.3
Derby	1 Pride Place, Pride Park	FH	Edwards Geldards	2.3
Leicester	MW House, Grove Park	FH	Mattioli Woods PLC & Chesham Insurance	2.2
Nottingham	The Vision Express Complex 2 Abbeyfield Road	LH	Vision Express (UK)	1.7
Manchester	Unit C Madison Place, Central Park	LH	Central Manchester University Hospitals NHS Foundation Trust	1.1
Nottingham	5 Kayes Walk/49 St Mary's Gate, The Lace Market	FH	Vacant	0.2

Retail
Milton Keynes	1 Grafton Gate East	FH	Staples UK	3.7
Southampton	54 Above Bar Street	LH	URBN UK	2.0
Colchester	2 & 4-6 Long Wyre Street	FH	Poundland & Savers	2.2
Stourbridge	The Crystal Retail Centre, Platts Road	FH	Tesco Stores, Bathstore, KFC, Halfords & Pizza Hut (UK)	1.8
Norwich	9 White Lion Street	FH	Specsavers Optical Superstores	1.8
Llandudno	101 Mostyn Street	LH	WH Smith	1.3
Southsea	19 & 21-23 Palmerston Road	LH	Superdrug Stores & Portsmouth City Council	1.3
Shrewsbury	28/29a Pride Hill	FH	Cotswold Outdoor	1.2
Birmingham	Warstone Lane, Jewellery Quarter	LH	Tesco Stores, Coral, Subway & Greggs	1.2
Nottingham	15 St Peters Gate	FH	The White Company (UK)	1.2
Weston-super-Mare	27/29 High Street	FH	Superdrug Stores	1.1
Portsmouth	109 Commercial Street	FH	Vacant	1.1
Glasgow	Argyle Street	FH	Greggs	1.1
King's Lynn	High Street	FH	Top Man	1.1
Edinburgh	47b George Street	FH	Phase Eight (Fashions & Designs)	0.9
Bury St Edmunds	14 Cornhill	FH	The Works Stores	0.8
Dumfries	165/171 High Street	FH	Iceland Foods	0.7
Hinckley	29/31 Castle Street	FH	W H Smith	0.6
Chester	10 Watergate	LH	Whistles Holdings	0.5
Cirencester	6 Dyer Street & 8 Dyer Street	LH	Framemakers Galleries & Danish Wardrobe Company	0.5
Bury St Edmunds	15 Abbeygate Street	FH	Savers Health & Beauty	0.4
Cheltenham	85 High Street	LH	Done Brothers (Cash Betting) t/a Betfred	0.4

Condensed consolidated statement of comprehensive income

For the period 25 March 2014 to 30 September 2014

		Unaudited period ended 30 Sept 2014	Audited period ended 24 March 2014
	Note	£000	£000

Revenue	4	4,958	-

Investment management fee		(686)	-
Direct operating expenses of let rental property		(492)	-
Professional fees		(345)	-
Directors' fees		(115)	-
Administrative expenses		(59)	-

Expenses		(1,697)	-

Operating profit before financing and revaluation of investment properties		3,261	-

Analysed as:
Operating profit before exceptional items		3,480	-
Exceptional costs of Admission	5	(219)	-

		3,261	-

Unrealised gains/(losses) on revaluation of investment properties - relating to property revaluations		2,597	-
- relating to costs of acquisition		(2,553)	-
	10	44	-

Operating profit before financing		3,305	-

Net finance costs	6, 7	(49)	-

Profit before tax		3,256	-

Income tax expense	8	-	-

Profit for the period and total comprehensive income for the period, net of tax		3,256	-

Attributable to:
Equity holders of the Company		3,256	-

Earnings per ordinary share:
Basic and diluted (pence)	3	2.47	-

The profit for the period arises from the Company's continuing operations.

Condensed consolidated statement of financial position

As at 30 September 2014

Registered number: 8863271

		Unaudited 30 Sept 2014	Audited 24 March 2014
	Note	£000	£000

Non-current assets
Investment properties	10	145,894	-

Total non-current assets		145,894	-

Trade and other receivables	11	1,898	50
Cash and cash equivalents		1,343	-

Total current assets		3,241	50

Total assets		149,135	50

Equity
Issued capital	14	1,320	50
Share premium	14	128,487	-
Retained earnings	14	1,608	-

Total equity attributable to equity holders of the Company		131,415	50

Non-current liabilities
Borrowings	12	12,600	-

Total non-current liabilities		12,600	-

Current liabilities

Trade and other payables	12	2,812	-
Deferred income		2,308	-

Total current liabilities		5,120	-

Total liabilities		17,720	-

Total equities and liabilities		149,135	50

These interim financial statements of Custodian REIT plc were approved and authorised for issue by the Board of Directors on 24 November 2014 and are signed on its behalf by:

Ian Mattioli

Director

Condensed consolidated statement of cash flows

For the period 25 March 2014 to 30 September 2014

		Unaudited period ended 30 Sept 2014	Audited period ended 24 March 2014
	Note	£000	£000

Operating activities
Profit for the period		3,305	-
Adjustments for:
(Increase)/decrease in fair value of investment property	10	(44)	-
Finance charges	7	(36)	-

Cash flows from operating activities before changes in working capital and provisions		3,225	-

Decrease/(increase) in trade and other receivables		(1,898)	-
(Decrease)/increase in trade and other payables		5,120	-

Cash generated from operations		6,447	-

Interest paid	7	(56)	-
Net cash flows from operating activities		6,391	-

Investing activities
Purchase of investment property		(68,859)	-
Interest received	6	43	-

Net cash from investing activities		(68,816)	-

Financing activities
Proceeds from the issue of share capital		55,000	-
Payment of costs of share issue		(2,182)	-
Repayment of debt		-
New borrowings		12,600	-
Dividends paid	9	(1,650)	-

Net cash from financing activities		63,768	-

Net (decrease)/increase in cash and cash equivalents		1,343	-
Cash and cash equivalents at start of the period		-	-
Cash and cash equivalents at end of the period		1,343	-

Condensed consolidated statement of changes in equity

For the period 25 March 2014 to 30 September 2014

	Note	Issued capital £000	Share premium £000	Retained earnings £000	Total equity £000

As at 27 January 2014		-	-	-	-

Total comprehensive income for period
Profit for the period		-	-	-	-

Total comprehensive income for period		-	-	-	-

Transactions with owners of the Company, recognised directly in equity
Issue of share capital		50	-	-	50

As at 24 March 2014 (audited)		50	-	-	50

Total comprehensive income for period
Profit for the period (unaudited)	14	-	-	3,256	3,256

Total comprehensive income for period		-	-	3,256	3,256

Transactions with owners of the Company, recognised directly in equity
Dividends (unaudited)	9	-	-	(1,650)	(1,650)
Issue of share capital (unaudited)	14	1,270	128,487	-	129,757
Profit on disposal of own shares (unaudited)	14	-	-	2	2

As at 30 September 2014 (unaudited)		1,320	128,487	1,608	131,415

Retained earnings includes £1,564,000 of realised profits and £44,000 of unrealised profits.

Notes to the interim financial statements

1. Corporate information

The Company is a public limited company incorporated and domiciled in England and Wales, whose shares are publicly traded on the London Stock Exchange plc's main market for listed securities. The interim financial statements have been prepared on a historical cost basis, except for the revaluation of investment properties and certain financial assets, and are presented in pounds sterling with all values rounded to the nearest thousand pounds (£000), except when otherwise indicated. The interim financial statements were authorised for issue in accordance with a resolution of the Directors on 24 November 2014.

2. Basis of preparation and accounting policies

2.1 Basis of preparation

The interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting. The interim financial statements do not include all the information and disclosures required in the annual financial statements. The annual report for the year ending 31 March 2015 will be prepared in accordance with International Financial Reporting Standards adopted by the International Accounting Standards Board ("IASB") and interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC") of the IASB (together "IFRS") as adopted by the European Union, and in accordance with the requirements of the Companies Act applicable to companies reporting under IFRS.

The Company has prepared non-trading financial statements for the period from incorporation on 27 January 2014 to 24 March 2014 to satisfy Section 837 of the Companies Act 2006 and facilitate its stated policy of making quarterly dividend payments. The information relating to the period is unaudited and does not constitute statutory financial statements within the meaning of section 434 of the Companies Act 2006. A copy of the statutory accounts for the period has been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

The interim financial statements have been reviewed by the auditor and their report to the Company is included within these interim financial statements.

Certain statements in this report are forward looking statements. By their nature, forward looking statements involve a number of risks, uncertainties or assumptions that could cause actual results or events to differ materially from those expressed or implied by those statements. Forward looking statements regarding past trends or activities should not be taken as representation that such trends or activities will continue in the future. Accordingly, undue reliance should not be placed on forward looking statements.

2.2 Significant accounting policies

The principal accounting policies adopted by the Company and applied to these interim financial statements, which are consistent with those policies applied to the Company's first annual report and financial statements, are set out below.

Going concern

The Directorsbelieve the Company is well placed to manage its business risks successfully. The Company's projections show that the Company should continue to be cash generative and be able to operate within the level of its current financing arrangements. Accordingly, the Directorscontinue to adopt the going concern basis for the preparation of the financial statements.

Income recognition

Revenue is recognised to the extent that it is probable that economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates, VAT and other sales taxes or duties.

Rental income from operating leases on properties owned by the Company is accounted for on a straight line basis over the term of the lease. Rental income excludes service charges and other costs directly recoverable from tenants.

Lease incentives are amortised on a straight-line basis over the lease term.

Revenue and profits on the sale of properties are recognised on the completion of contracts. The amount of profit recognised is the difference between the sale proceeds and the carrying amount.

Taxation

The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the period. Taxable profit differs from net profit as reported in the statement of comprehensive income because it excludes items of income and expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date.

Investment properties

Investment properties are properties held to earn rentals and/or for capital appreciation. Investment properties are initially recognised at cost including direct transaction costs. Investment properties are subsequently valued externally or by the Directors on an open market basis at the reporting date and recorded at valuation. Any surplus or deficit arising on revaluing investment properties is recognised in the statement of comprehensive income in the period in which it arises. Dilapidation receipts are held in the statement of financial position and offset against subsequent associated expenditure. Any ultimate gains or shortfalls are recognised in the statement of comprehensive income, offset against any directly corresponding movement in fair value of the investment property to which they relate.

Group undertakings

Investments are included in the statement of financial position at cost less any provision for impairment.

Financial assets

The Company's financial assets include cash and cash equivalents and trade and other receivables. All financial assets are initially recognised at fair value plus transaction costs, when the Company becomes party to the contractual provisions of the instrument. Interest resulting from holding financial assets is recognised in the statement of comprehensive income on an accruals basis.

Loans and receivables are measured subsequent to initial recognition at amortised cost using the effective interest method, less provision for impairment. Provision for impairment of trade and other receivables is made when objective evidence is received that the Company will not be able to collect all amounts due to it in accordance with the original terms of the receivable. The amount of the impairment is determined as the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the effective rate computed at initial recognition. Any change in value through impairment or reversal of impairment is recognised in the statement of comprehensive income.

A financial asset is derecognised only where the contractual rights to the cash flows from the asset expire or the financial asset is transferred and that transfer qualifies for derecognition. A financial asset is transferred if the contractual rights to receive the cash flows of the asset have been transferred or the Company retains the contractual rights to receive the cash flows of the asset but assumes a contractual obligation to pay the cash flows to one or more recipients. A financial asset that is transferred qualifies for derecognition if the Company transfers substantially all the risks and rewards of ownership of the asset.

Cash and cash equivalents

Cash and cash equivalents include cash in hand and demand deposits, and other short-term highly liquid investments that are readily convertible into a known amount of cash and are subject to an insignificant risk of changes in value.

Financial liabilities and equity investments

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity investments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Share capital represents the nominal value of equity shares issued. Share premium represents the excess over nominal value of the fair value of the consideration received for equity shares, net of direct issue costs.

Retained earnings include all current and prior period results as disclosed in the statement of comprehensive income. Retained earnings include realised and unrealised profits. Profits are considered unrealised where they arise from movements in the fair value of investment properties that are considered to be temporary rather than permanent.

Bank borrowings

Interest-bearing bank loans and overdrafts are recorded at the fair value of net proceeds received, net of direct issue costs. Finance charges, including premiums payable on settlements or redemption and direct issue costs, are accounted for on an accruals basis in the statement of comprehensive income using the effective interest rate method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

Trade payables

Trade payables are initially measured at fair value and are subsequently measured at amortised cost, using the effective interest rate method.

Exceptional items

Certain items have been disclosed as exceptional in the income statement where they relate to the Company's IPO and are therefore considered to be one off costs, as set out in Note 5.

Segmental reporting

An operating segment is a distinguishable component of the Company that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the Company's chief operating decision maker to make decisions about the allocation of resources and assessment of performance and about which discrete financial information is available. As the chief operating decision maker reviews financial information for and makes decisions about the Company's investment properties and properties held for trading as a portfolio, the Directors have identified a single operating segment, that of investment in and trading of commercial properties.

2.3 Key sources of judgements and estimation uncertainty

The preparation of the financial statements requires the Company to make estimates and assumptions that affect the reported amount of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities. If in the future such estimates and assumptions, which are based on the Directors' best judgement at the date of preparation of the financial statements, deviate from actual circumstances, the original estimates and assumptions will be modified as appropriate in the period in which the circumstances change. The areas where a higher degree of judgement or complexity arises, or where assumptions and estimates are significant to the financial statements, are discussed below.

Valuation of properties

Investment properties are valued at the reporting date at fair value. Where investment properties are being redeveloped the property continues to be treated as an investment property. Surpluses and deficits attributable to the Company arising from revaluation are recognised in the statement of comprehensive income. Valuation surpluses reflected in retained earnings are not distributable until realised on sale.

The Company considers valuations performed by independent valuers in determining the fair value of its investment properties. The valuations are based upon assumptions including future rental income, anticipated maintenance costs and appropriate discount rates. The valuers also make reference to market evidence of transaction prices for similar properties.

3. Earnings per ordinary share

Basic earnings per share amounts are calculated by dividing net profit for the period attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the period.

Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. There are no dilutive shares.

The following reflects the income and share data used in the basic and diluted earnings per share computations:

	Unaudited period ended 30 Sept 2014	Audited period ended 24 March 2014

Net profit and diluted net profit attributable to equity holders of the Company (£000)	3,256	-

Weighted average number of ordinary shares:

Issued ordinary shares at start period	5,000,000	-
Effect of shares issued during period ended 30 Sept 2014	126,989,310	5,000,000


Basic weighted average number of shares	131,989,310	5,000,000

Effect of options exercisable at the balance sheet date	-	-

Diluted weighted average number of shares	131,989,310	5,000,000

Basic and diluted earnings per share (pence)	2.47	-

4. Revenue

	Unaudited period ended 30 Sept 2014 £000	Audited period ended 24 March 2014 £000

Gross rental income from investment properties	4,644	-
Income from recharges	314	-

	4,958	-

5. Exceptional items

One-off costs incurred on Admission totalled £2.40 million of which £0.22 million was recognised in the statement of comprehensive income and £2.18 million was taken to the share premium account as being directly related to the issue of new shares.

6. Finance income

	Unaudited period ended 30 Sept 2014 £000	Audited period ended 24 March 2014 £000

Bank interest received	43	-

	43	-

7. Finance costs

	Unaudited period ended 30 Sept 2014 £000	Audited period ended 24 March 2014 £000

Amortisation of arrangement fees on revolving credit facility	36	-
Loan interest paid and bank charges	56	-

	92	-

8. Income tax

The tax charge assessed for the period is lower than the standard rate of corporation tax in the UK during the period of 21.3%. The differences are explained below:

	Unaudited period ended 30 Sept 2014 £000	Audited period ended 24 March 2014 £000

Accounting profit before income tax	3,256	-

Tax charge on profit or loss at a standard rate of 21.3%	694	-

Effects of:
REIT tax exempt rental profits and gains	(704)	-
Non-taxable revaluation deficit	10	-

Income tax expense for the period	Nil	Nil

Effective income tax rate	0.0%	0.0%

The Company operates as a Real Estate Investment Trust and hence profits and gains from the property investment business are normally exempt from corporation tax.

The UK Government reduced the rate of corporation tax from 23% to 21% with effect from 1 April 2014. The rate of UK corporation tax will reduce from 21% to 20% from 1 April 2015.

9. Dividends

	Unaudited period ended 30 Sept 2014 £000	Audited period ended 24 March 2014 £000

Equity dividends on ordinary shares: - Interim dividend for the period ended 30 June 2014: 1.25p	1,650	-

	1,650	-

The interim dividend for the period ended 30 June 2014 was approved by the Directors on 29 September 2014.

The Directors propose an interim dividend relating to the period ended 30 September 2014 of 1.25p per ordinary share to be paid as a property income distribution ("PID"). This dividend has not been included as a liability in these financial statements. The interim dividend is expected to be approved in December 2014 and paid on 31 December 2014 to shareholders on the register at the close of business on 5 December 2014.

In the absence of unforeseen circumstances, the Board intends to pay further quarterly dividends to achieve an annual dividend of 5.25 pence per share⁵ for the financial period ending 31 March 2015, implying an annualised dividend yield of 5.25% calculated by reference to the Company's IPO issue price of 100 pence per share.

5 This is a target only and not a profit forecast. There can be no assurance that the target can or will be met and it should not be taken as an indication of the Company's expected or actual future results. Accordingly, shareholders or potential investors in the Company should not place any reliance on this target in deciding whether or not to invest in the Company or assume that the Company will make any distributions at all and should decide for themselves whether or not the target dividend yield is reasonable or achievable.

10. Investment properties

	Unaudited £000	Unaudited £000

At 27 January 2014 and at 25 March 2014		-
Portfolio acquired at IPO on 26 March 2014		95,190
Additions		50,660

Property revaluations	2,597
Acquisition costs	(2,553)
Revaluation gain		44

As at 30 September 2014		145,894

The closing book value at 30 September 2014 comprises £113.1 million of freehold and £32.8 million of leasehold properties summarised as follows:

	Freehold	Leasehold	Total
Investment properties	Unaudited £000	Unaudited £000	Unaudited £000

Cost	113,264	32,586	145,850
Valuation (deficit)/gain	(180)	224	44

At 30 September 2014	113,084	32,810	145,894

The investment properties are stated at the Directors' estimate of their 30 September 2014 fair values. Lambert Smith Hampton Group Limited ("LSH"), a professionally qualified independent valuer, valued the properties as at 30 September 2014 in accordance with the Appraisal and Valuation Standards published by the Royal Institution of Chartered Surveyors. LSH has recent experience in the relevant location and category of the properties being valued.

Investment properties are the only assets or liabilities included in level 3 of the IFRS 13 fair value hierarchy. There are no assets or liabilities included in levels 1 or 2.

Investment properties have been valued using the investment method which involves applying a yield to rental income streams. Inputs include yield, current rent and estimated rental value ("ERV"). For the period end valuation, the yields used ranged from 4.9% to 15.3%. Valuation reports are based on both information provided by the Company e.g. current rents and lease terms which are derived from the Company's financial and property management systems are subject to the Company's overall control environment, and assumptions applied by the valuer e.g. ERVs and yields. These assumptions are based on market observation and the valuer's professional judgement. Included within the consolidated condensed statement of comprehensive income is £44,093 of valuation gains which represent unrealised movements on investment property.

11. Trade and other receivables

	Unaudited at 30 Sept 2014	Audited at 24 March 2014
	£000	£000
Falling due in less than one year:

Trade receivables	962	-
Other receivables	450	-
Prepayments and accrued income	486	-

	1,898	-

The Company has provided fully for those receivable balances that it does not expect to recover. This assessment has been undertaken by reviewing the status of all significant balances that are past due and involves assessing both the reason for non-payment and the creditworthiness of the counterparty.

12. Trade and other payables

	Unaudited at 30 Sept 2014	Audited at 24 March 2014
	£000	£000
Falling due in less than one year:

Trade and other payables	725	-
Social security and other taxes	721	-
Accruals	1,136	-
Rental deposit held	230	-

	2,812	-

	Unaudited at 30 Sept 2014	Audited at 24 March 2014
	£000	£000
Falling due in more than one year:

Bank borrowings	12,600	-

	12,600	-

The Directors consider that the carrying amount of trade and other payables approximates to their fair value. Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. For most suppliers interest is charged if payment is not made within the required terms. Thereafter, interest is chargeable on the outstanding balances at various rates. The Group has financial risk management policies in place to ensure that all payables are paid within the credit timescale.

13. Borrowings

The Company intends to operate with a conservative level of gearing, with expected borrowings over the medium term of up to 25% of the aggregate market value of all properties at the time of drawdown. On 25 February 2014, the Company and Lloyds Bank plc entered into a revolving credit facility agreement pursuant to which Lloyds Bank plc has agreed to provide the Company with a revolving credit facility ("the RCF") of £25 million for a term of five years.

Under the terms of agreement, the Company pays interest of 2.45% above LIBOR pa on the outstanding amounts utilised under the agreement from time to time.

At 30 September 2014, £12.6 million of the RCF has been drawn down to fund property acquisitions.

14. Issued capital and reserves

Share capital	Redeemable ordinary shares of 1p	Ordinary shares of 1p	Unaudited £000

Issued and fully paid:

At 24 March 2014	4,999,999	1	50

At 30 September 2014	-	131,989,310	1,320

At incorporation the issued share capital of the Company consisted of one ordinary share of 1 pence and 4,999,999 redeemable ordinary shares of 1 pence each, which were issued to the subscriber to the Company's memorandum of association, Mattioli Woods plc. On 26 March 2014 the redeemable ordinary shares were redeemed by the Company at par value and 131,989,309 ordinary shares were issued at an issue price of £1 each, including a premium of 99 pence per share.

The Board has discretion to issue up to 168,010,690 ordinary shares prior to 20 February 2015 pursuant to a placing programme ("the Placing Programme") intended to satisfy market demand for the ordinary shares and raise further monies for investment in accordance with the Company's investment policy.

A placing was completed under the Placing Programme in October 2014, which is detailed further in Note 16.

Rights, preferences and restrictions on shares

All ordinary shares carry equal rights and no privileges are attached to any shares in the Company. All the shares are freely transferable, except as otherwise provided by law. The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company's residual assets.

On 25 February 2014, Ian Mattioli, the Company and the Company's broker, Numis Securities Limited ("Numis"), entered into a lock-in agreement. Under the terms of the agreement, Ian Mattioli has undertaken not to dispose of any ordinary shares or any interest in ordinary shares for a period of twelve months commencing on Admission and for a further period of twelve months' thereafter not to dispose any ordinary shares or any interest in ordinary shares without the prior written consent of Numis.

Other reserves	Share premium account unaudited £000	Retained earnings unaudited £000

At 27 January 2014 and 25 March 2014	-	-

Shares issued during the period	130,669	-
Costs of share issue	(2,182)	-
Profit for the period	-	3,256
Dividends	-	(1,650)
Profit on sale of own shares taken directly to equity	-	2

At 30 September 2014	128,487	1,608

The following table describes the nature and purpose of each reserve within equity:

Reserve	Description and purpose

Share premium	Amounts subscribed for share capital in excess of nominal value less any associated issue costs that have been capitalised.

Retained earnings	All other net gains and losses and transactions with owners (e.g. dividends) not recognised elsewhere.

15. Related party transactions

Save for transactions with directors, the Investment Management Agreement and the acquisition of the Interim Portfolio described below, the Company is not a party to, nor had any interest in, any other related party transaction since its incorporation on 27 January 2014.

Transactions with directors

Each of the directors is engaged under a letter of appointment with the Company and does not have a service contract with the Company. Under the terms of their appointment, each director is required to retire by rotation and seek re-election at least every three years. Each director's appointment under their respective letter of appointment is terminable immediately by either party (the Company or the director) giving written notice and no compensation or benefits are payable upon termination of office as a director of the Company becoming effective.

Investment Management Agreement

On 25 February 2014 the Company entered into a three year Investment Management Agreement with the Investment Manager under which the Investment Manager has been appointed as Alternative Investment Fund Manager with responsibility for the property management of the Company's assets, subject to the overall supervision of the Directors. The Investment Manager manages the Company's investments in accordance with the policies laid down by the Board (including, without limitation, the investment policy of the Company) and in accordance with the investment restrictions referred to in the Investment Management Agreement.

Ian Mattioli is Chief Executive of Mattioli Woods, the parent company of the Investment Manager, and a director of the Investment Manager. As a result, Ian Mattioli is deemed not to be independent. The Company Secretary, Nathan Imlach, is also a director of Mattioli Woods and the Investment Manager. Ian Mattioli received £13,000 of directors' fees during the period.

During the period the Company paid the Investment Manager £696,321 in respect of annual management charges, company secretarial and administration fees. The Company owed the Investment Manager £546,871 at 30 September 2014.

Acquisition of the Initial Portfolio

On 26 March 2014 the Company acquired the Initial Portfolio of 48 properties held in a syndicated structure by clients of Mattioli Woods including Ian Mattioli, Nathan Imlach and Richard Shepherd-Cross and the private pension schemes of Ian Mattioli, Nathan Imlach and Richard Shepherd-Cross.

The Initial Portfolio included MW House and Gateway House at Grove Park, Enderby, which are partially let to Mattioli Woods. Mattioli Woods paid the Company rentals of £180,197 during the period and owed the Company £514 at 30 September 2014.

Ian Mattioli, Nathan Imlach, Richard Shepherd-Cross and the private pension schemes of Ian Mattioli, Nathan Imlach and Richard Shepherd-Cross continue to have a beneficial interest in the Company.

16. Events after the reporting date

Placing

A share placing was completed on 3 October 2014, raising £25.0 million (before costs and expenses) through the issue of 23,866,349 new ordinary shares of 1p each in the capital of the Company ("the New Shares") under the Placing Programme established in the Company's February 2014 prospectus.

The New Shares were issued at 104.75 pence per share, which represented a premium of 5.2% to the estimated net asset value per share as at 30 September 2014 at that time.

Acquisitions

On 4 November 2014 the Company acquired a 112,435 sq ft warehouse on a 6.84 acre site at Chesford Grange, Warrington let to JTF Wholesale Limited for £6.0 million. The property is let on a 15 year lease expiring on 14 December 2023 with no breaks at a current rent of £485,000 pa, reflecting a net initial yield of 7.64%.

On 17 November 2014 the Company acquired a petrol filling station and convenience store site at Beechings Way, Gillingham let to Somerfield Stores Limited (trading as the Co-operative) for £3.05 million. The property is let on a 25 year lease expiring on 15 April 2028 with no breaks at a current rent of £268,500 pa, reflecting a net initial yield of 8.32%.

Independent auditor's review report to Custodian REIT plc for the period ended 30 September 2014

We have been engaged by the Company to review the condensed set of interim financial statements in the interim financial statements for the period ended 30 September 2014 which comprise the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statement of cash flows, the condensed consolidated statement of changes in equity and the related notes. We have read the other information contained in the interim financial statements and considered whether they contain any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review 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, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The interim financial statements are the responsibility of, and have been approved by, the Directors. The Directors are responsible for preparing the interim financial statements in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in the notes, the annual financial statements of the Company are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in these interim financial statements has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting", as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the interim financial statements based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim financial statements for the period ended 30 September 2014 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Jonathan Dodworth (Senior Statutory Auditor)

for and on behalf of Deloitte LLP

Chartered Accountants and Statutory Auditor

Birmingham, United Kingdom

24 November 2014

Directors' responsibilities for the interim financial statements

The Directors have prepared the interim financial statements of the Company for the period from 25 March 2014 to 30 September 2014.

The Directors confirm:

· The interim financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting';

· The interim financial statements include a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

· The interim financial statements include a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

Principal risks and uncertainties

There are a number of potential risks and uncertainties which could have a material impact on the Company's performance over the remaining six months of the financial period and could cause actual results to differ materially from expected and historical results. The table below outlines the current risk factors identified, but does not purport to be exhaustive as there may be additional risks that materialise over time that the Company has not yet identified or has deemed not to likely to have a potentially material adverse effect on the business:

Industry risks
Risk type	Risks	Mitigating factors
Investment portfolio	· Tenant default · Change in demand for space · Market pricing affecting value · Excess concentration in geographical location or sector · Lease expiries concentrated in a specific year · Decrease in occupancy	· Investment policy limits the Company's rent roll to no more than 10% to a single tenant, and no more than 50% in any particular sector or geographical region · Focused on established business locations for investment · Active portfolio diversification between office, industrial (distribution, manufacturing and warehousing), motortrade, retail and other · Active management of lease expiry profile in forming acquisition decisions · Building specifications not tailored to one user
Financial	· Reduced availability or increased cost of debt	· Target gearing of 25% LTV on property portfolio · Existing facilities sufficient for spending commitments and agreed until 2019 · On-going monitoring and management of the forecast cash position
Operational	· Inadequate performance, controls or systems operated by the Investment Manager	· Ongoing review of performance by independent Board of Directors
Regulatory risk	· The Group may be adversely affected as a result of new or revised legislation or regulations or by changes in the interpretation or enforcement of existing laws and regulations.	· Strong compliance culture · External professional advisers are engaged to review and advise upon control environment · Business model and culture embraces FCA principles, including treating clients fairly · Financial strength provides comfort should capital resource requirements be increased.

Consolidated financial statements for the period from 27 January 2014 to 24 March 2014.

Strategic report

Investment strategy

Custodian REIT plc ("Custodian REIT" or "the Company") is a UK real estate investment trust ("REIT"). The Company did not trade during the period from incorporation on 27 January 2014 to 24 March 2014 ("the Period"), prior to its listing on the main market of the London Stock Exchange on 26 March 2014 ("Admission"). On Admission, it acquired a portfolio of £95 million of UK commercial property ("the Initial Portfolio"), sourced from an existing portfolio of 48 properties held by clients of Mattioli Woods plc ("Mattioli Woods") in a syndicated structure. Its portfolio comprises properties let to institutional grade tenants on long leases throughout the UK and is characterised by small lot sizes, with individual property values of less than £7.5 million at acquisition.

The Company offers investors the opportunity to access a diversified portfolio of UK commercial real estate through a closed-ended fund. By targeting smaller lot sizes, the Company intends to provide investors with an attractive level of income together with the potential for capital growth.

Investment policy

The Company's investment objectives are:

· To hold a portfolio of UK commercial property, diversified by sector, location, tenant and lease term.

· To focus on areas with high residual values, strong local economies and an imbalance between supply and demand. Within these locations, the objective is to acquire modern buildings or those that are considered fit for purpose by occupiers.

· To have no one tenant or property accounting for more than 10% of the total rent roll of the portfolio at the time of purchase, except:

- In the case of a single tenant which is a governmental body or department, where no limit shall apply; or

- In the case of a single tenant rated by Dun & Bradstreet ICC Client Services as having a credit rating of less than 60, where the exposure to such single tenant may not exceed 5% of the total rent roll (a credit rating of 60 represents "normal, limited risk potential, normal terms").

· To maintain an average unexpired lease term of over five years across the portfolio secured against low risk tenants and to minimise rental voids.

· Not to undertake speculative development (that is, development of property which has not been leased or pre-leased), save for refurbishment of existing holdings, but may (provided that it shall not exceed 20% of the gross assets of the Company) invest in forward funding agreements or forward commitments (these being arrangements by which the Company may acquire pre-development land under a structure designed to provide the Company with investment rather than development risk) of pre-let developments, where the Company intends to own the completed development.

· To target borrowings of up to 25% of the aggregate market value of all the properties of the Company at the time of borrowing.

Performance summary

The Company did not trade during the Period and commenced trading on 26 March 2014. Its subsidiary company, Custodian Real Estate Investment Limited, is dormant. A summary of the Company's outlook, portfolio, the markets in which it operates, its principal risks and uncertainties and its key performance indicators are included in the interim financial statements prepared to 30 September 2014 ("the Interim Report"), which is available at www.custodianreit.com.

Finance

The Company intends to operate with a conservative level of gearing, with expected borrowings over the medium term of up to 25% of the aggregate market value of all properties at the time of drawdown. On 25 February 2014, the Company agreed a revolving credit facility ("the RCF") of £25 million for a term of five years with Lloyds Bank plc.

The RCF is secured by way of a first charge over a discrete portfolio of properties, providing the lender with a maximum loan-to-value ratio of 49% on those properties specifically charged to it and a floating charge. The Company pays annual interest of 2.45% above 3-month LIBOR on such amounts as are drawn down under the agreement from time to time.

Dividends

In the absence of unforeseen circumstances, the Board intends to pay quarterly dividends to achieve an annual dividend of 5.25 pence per share for the period ending 31 March 2015 and 6.25 pence per share in subsequent years, implying an initial annualised dividend yield of 5.25% and 6.25% thereafter, calculated by reference to the Company's issue price of 100p per share⁶ ("the Issue Price").

6 This is a target only and not a profit forecast. There can be no assurance that the target can or will be met and it should not be taken as an indication of the Company's expected or actual future results. Accordingly, shareholders or potential investors in the Company should not place any reliance on this target in deciding whether or not to invest in the Company or assume that the Company will make any distributions at all and should decide for themselves whether or not the target dividend yield is reasonable or achievable.

Employees

The Company has four non-executive directors and no employees. The Board is conscious of the increased focus on diversity in the boardroom and acknowledges the importance of diversity, while noting that changes to the composition of the Board should not be forced. All non-executive directors are male, but the Board believes that for any future appointment the best person for the role should be selected, while recognising the benefits of diversity when considering a particular appointment.

Going concern

At 24 March 2014 the Company had no liabilities and did not trade, thus the Directors considered the Company to be a going concern.

At 30 September 2014 the Company had net assets of £131.4 million and had undrawn debt facilities of £12.4 million, as detailed in the Interim Report. The Company then raised a further £25 million (before costs and expenses) through a placing in October 2014. The Company's external investment manager, Custodian Capital Limited ("the Investment Manager") intends to deploy the Company's cash and debt facilities to achieve its dividend targets, while ensuring it has sufficient liquidity to cover its short term liabilities.

Taxation

The Company will operate as a REIT and hence profits and gains from the property investment business are normally expected to be exempt from corporation tax.

Corporate social responsibility

The Company is committed to delivering its strategic objectives in an ethical and responsible manner. Non-executive directors are incentivised through their remuneration packages and shareholdings in the Company.

Environmental and social policy

The Company's environmental and social policy addresses the importance of these issues in the day-to-day running of the business, as detailed below.

Environmental policy

There are four key areas of the environmental policy to be applied following Admission:

· An independent environmental report is required for all potential acquisitions, which considers, amongst other matters, the historic and current usage of the site and the extent of any contamination present.

· An ongoing examination of the business activities of existing and new tenants is carried out to prevent pollution risks occurring. The Company monitors all incoming tenants through its insurance programme to identify potential risk, and high-risk business activities are avoided. As part of the active management of the portfolio, any change in tenant business practice considered to be an environmental hazard is reported and suitably dealt with.

· All sites are visited periodically and any obvious environmental issues are reported to the Board.

· All leases prepared after the adoption of the policy will commit occupiers to observe any environmental regulations. Any problems are referred to the Board.

Social policy

The activities of the Company are to be carried out in a responsible manner, taking into account the social impact. Due to the Company not directly carrying out development or refurbishments, there is minimal social risk attached to its activities.

Greenhouse gas emissions

Under the Companies Act 2006 (Strategic and Directors' Reports) Regulations 2013, the Company is required to report annual greenhouse gas emissions. The Company did not trade during the Period, hence the first annual report on emissions from its property portfolio will be reported in the Annual Report for the year ending 31 March 2015.

Approval

This report was approved by the Board of Directors on 24 November 2014 and signed on its behalf by:

Ian Mattioli

Director

Governance report

The Company is committed to the principles of corporate governance contained in the UK Corporate Governance Code issued by the Financial Reporting Council ("the Code") in 2012, for which the Board is accountable to shareholders.

As a newly incorporated company, the Company does not comply with the Code (or the Association of Investment Companies' Code ("the AIC Code") as at 24 March 2014. However, the Directors recognise the value of the Code and have taken appropriate measures to ensure that, following Admission, the Company complies with the Code so far as is possible, given the Company's size and nature of business. Areas of non-compliance with the Code are as follows:

· There is no chief executive position within the Company, which is not in accordance with provision A.2.1 of the Code. As an investment company, the Company has no employees and therefore no requirement for a chief executive.

· The Company has not established a nomination committee, which is not in accordance with Provision B.2.1 of the Code. As all of the directors are non-executive, the Company considers (and the AIC Code recognises) that the Board as a whole can fulfil the role otherwise undertaken by such committees.

· The Company has not established a remuneration committee, which is not in accordance with Provision D.2.1 of the Code. As all of the directors are non-executive, the Company considers that the Board as a whole can fulfil the role otherwise undertaken by such committees.

Directors and officers

During the Period there were three Board meetings, attended by all directors.

The Board comprises four directors, all of whom have wide experience, are non-executive and, save for Ian Mattioli, are independent of the Investment Manager. The Directors are responsible for managing the Company's business in accordance with its Articles of Association ("the Articles") and investment policy (as set out in the Strategic Report) and have overall responsibility for the Company's activities, including its investment activities and reviewing the performance of the Company's portfolio.

The Directors may delegate certain functions to other parties. In particular, the Directors have delegated responsibility for management of the Company's property investments to the Investment Manager. The Directors have responsibility for exercising overall control and supervision of the Investment Manager.

In making any new appointment the Board will consider a number of factors, but principally the skills and experience that will be relevant to the specific role and that will complement the existing Board members. The Articles stipulate that all new directors shall retire and offer themselves for re-appointment every three years.

Board of Directors

The Board comprises four non-executive directors. A short biography of each director is set out below.

David Hunter - Independent Chairman, age 61

David is an international property consultant specialising in property funds and companies. He is on the boards of both listed and unlisted companies in UK and overseas, and has corporate advisory roles in the UK and France. He has over 25 years' experience as a fund manager, including as Managing Director of Aberdeen Asset Management's property fund business. David is a former President of the British Property Federation and was actively involved in the introduction of REITs to the UK.

Barry Gilbertson PP RICS- Independent Director, age 63

Barry is an international consultant with more than 40 years' experience advising on property. He has been an adviser to the Bank of England since 2003 and is a former global President of the Royal Institution of Chartered Surveyors. He was the first chartered surveyor to become a full equity partner in any firm of chartered accountants, worldwide, in 1996 when he joined the Coopers & Lybrand (now PricewaterhouseCoopers) partnership. Barry has been a non-executive consultant to Knight Frank LLP, and currently holds independent non-executive directorships of two quoted companies - Granite REIT which is quoted on the NYSE, and Rona Incorporated, which is quoted on the TSX. Barry became a Member of Council of The University of Bath in 2014.

Matthew Thorne MA, FCA - Independent Director, age 62

Matthew qualified as a chartered accountant in 1978 with Price Waterhouse. He is an independent non-executive director of Bankers Investment Trust Plc, chairing the audit committee, and since May 2007 has been an advisor to Consensus Business Group (led by Vincent Tchenguiz). He is also an advisory board and panel member of Greenwich Hospital and Governor and Chair of the Finance and Executive Committee of the Cheltenham Ladies College. Matthew's previous executive roles have included Group Finance Director of McCarthy & Stone plc from 1993 to 2007, Finance Director of Ricardo plc from 1991-1992 and Investment Director of Beazer PLC from 1983 to 1991.

Ian Mattioli - Director, age 52

Ian has worked in the pensions industry since 1983 advising on all aspects of establishing and running pension schemes. Ian is a former director of Pointon York and, together with Bob Woods founded Mattioli Woods plc in 1991. Ian is now CEO of the Mattioli Woods which has over £4.6 billion of assets under management, administration and advice. In 2002, Ian established the property business in the group, which in 2011 was rebranded as Custodian Capital. His personal achievements include winning the London Stock Exchange AIM Entrepreneur of the Year award.

Directors' interests are set out in the Directors' remuneration report.

The Board considers that the length of time each director, including the Chairman, serves on the Board should not be limited and has not set a finite tenure policy. Length of service of current directors and future succession planning is reviewed each year as part of the Board evaluation process.

The Investment Manager

The Company has appointed Custodian Capital Limited as Investment Manager and Alternative Investment Fund Manager ("AIFM") under an investment management agreement (detailed in Note 9). The Investment Manager is a private company limited by shares and comprises a team of experienced individuals with expertise in the operation of, and investment in, UK commercial real estate.

The Investment Manager is a subsidiary of Mattioli Woods (a related party), a provider of specialist pension consultancy and administration, employee benefits and wealth management. The Investment Manager is authorised and regulated by the FCA and has an established market presence in the small property sector, with a proven track record of property syndication and asset management.

Ian Mattioli is beneficially interested in the share capital of Mattioli Woods, the parent company of the Investment Manager, and therefore has an indirect interest in the Investment Manager.

Key personnel

The Investment Manager's key personnel are:

Richard Shepherd-Cross BSc MRICS - Managing Director

Richard has 20 years' experience in the commercial property market. He sits on the board of the Investment Manager, operating the business and managing a core team of 10. Richard is a former director at Jones Lang LaSalle in London where he led the portfolio investment team. Richard has had responsibility for developing the services of Mattioli Woods' property business and for establishing Custodian Capital in 2011.

Nathan Imlach CA FCSI CF - Finance Director

Nathan qualified as a chartered accountant in 1993 with Ernst & Young, specialising in providing mergers and acquisitions advice to a broad range of quoted and unquoted clients in the UK and abroad. He joined Mattioli Woods as its Finance Director in 2005, prior to its admission to AIM. Nathan has also been the Finance Director of Custodian Capital since its formation in 2011 and oversees the reporting and accounting framework of the company. He is a Fellow of the Chartered Institute for Securities & Investment and holds the Corporate Finance qualification from the Institute of Chartered Accountants in England and Wales. Nathan is also a trustee of Leicester Grammar School.

Ian Mattioli (Founder and Chairman)

Ian's biography is set out above.

AIFM Directive

The directive creates a European Union ("EU") wide framework for regulating an AIFM. The Company's activities fall within the scope of the directive and the Board has determined that the Investment Manager will act as AIFM for these purposes. The Period does not fall within the scope of the directive's reporting requirements.

Non-mainstream pooled investments

Following Admission, the Company currently conducts its affairs so that its shares can be recommended by independent financial advisers to retail investors in accordance with the rules of the Financial Conduct Authority ("FCA") in relation to non-mainstream pooled investments, and intends to continue to do so for the foreseeable future.

Board committees

Audit Committee

The Audit Committee comprises the independent directors and is chaired by Matthew Thorne. Its responsibilities are set out in the Audit Committee report below.

Management Engagement Committee

The Management Engagement Committee comprises the independent directors and is chaired by Barry Gilbertson. On a regular basis, it will review the appropriateness of the Investment Manager's continuing appointment together with the terms of conditions thereof and make recommendations on any proposed amendments to the Investment Management Agreement. The Management Engagement Committee will also perform a review of the performance of other key service providers to the Company.

Directors' share dealings

The Directors have adopted a code of directors' dealings in ordinary shares, which is based on the Model Code for directors' dealings contained in the Listing Rules (the "Model Code"). The Board will be responsible for taking all proper and reasonable steps to ensure compliance with the Model Code.

Nominations and Remuneration Committee

The Board has not established a separate Nominations Committee or Remuneration Committee as, given the nature of the Company's operations, these duties are performed by the Board as a whole.

The Board will have annual performance appraisals. The Board as a whole will consider its performance and the performance of its subcommittees. The Chairman will review the performance of the non-executive directors and the non-executive directors will review the Chairman's performance. The questions set out in the Higgs guidance will be considered at each appraisal, where relevant to the Company. As part of the annual performance appraisal process, the training needs for Board members will be considered and, where necessary, acted upon.

Shareholders

The Company encourages two-way communication with both its institutional and private investors and responds quickly to all queries received either orally or in writing. All shareholders have at least 21 days' notice of the AGM, where all directors and committee members are available to answer questions.

At the AGM all votes are dealt with on a show of hands and the number of proxy votes cast is indicated. Votes on separate issues are proposed as separate resolutions.

The Investment Manager and corporate broker regularly update the Board with the views of shareholders and analysts.

Conflicts of interest

The Articles allow the Board to authorise potential conflicts of interest that may arise, subject to imposing limits or conditions when giving authorisation if this is appropriate. Only independent directors (who have no interest in the matter being considered) will be able to take the relevant decision and, in taking the decision, the Directors must act in a way they consider will be most likely to promote the Company's success. Procedures have been established to monitor actual and potential conflicts of interest on a regular basis, and the Board is satisfied that these procedures are working effectively.

Internal control

The Investment Manager is responsible for operating the Company's system of internal control and reviewing of the effectiveness of this. Such a system is designed to manage, rather than eliminate, the risk of failure to achieve business objectives and can provide only reasonable but not absolute assurance against material misstatement or loss.

The Board has an ongoing process for identifying, evaluating and managing the significant risks faced by the Company. This process has been in place since Admission. The process is regularly reviewed by the Board, based on reports from management, and accords with the Internal Control Guidance for Directors on the Combined Code produced by the Turnbull working party.

Key features of the Company's system of internal control include:

· A detailed authorisation process and formal delegation of authority;

· A comprehensive financial reporting and forecasting system;

· A defined schedule of matters reserved for the Board; and

· An annual review of the effectiveness of internal controls and formal consideration of business risks. Issues are also raised at quarterly Board meetings as appropriate.

The Board has considered the requirements of the Bribery Act 2010 and has taken steps to ensure that it has adequate procedures in place to comply with the requirements of the Act. Responsibility for the Company's bribery prevention policies rests with the Investment Manager.

Steps are being taken to embed internal control and risk management further into the operations of the business and to deal with areas of improvement which come to the Board's attention.

Approval

This report was approved by the Board of Directors on 24 November 2014 and signed on its behalf by:

Ian Mattioli

Director

Audit Committee report

Composition

Throughout the Period, the Audit Committee comprised Matthew Thorne as Chairman, David Hunter and Barry Gilbertson, all of whom are independent non-executive directors.

Responsibilities

The Committee meets regularly to monitor the integrity of the Company's financial statements and is also responsible for the appointment, performance and independence of the external auditor. We have also considered the Board's additional requirement under the Code to state whether, in the Board's opinion, the Annual Report is fair, balanced and understandable. In providing support to the Board in making this statement, the Audit Committee has reviewed and approved a process undertaken by management to provide confirmation to the Board.

The Audit Committee is mindful of the transitional arrangements of the Code and proposed EU legislation in relation to auditor appointment and restrictions on the level of non-audit fees paid to, and services performed by, the external auditor, and continues to monitor developments and the Company's policy for non-audit services provided by the external auditor. An audit tendering policy suitable for the Company's size will be introduced when there is certainty over the final requirements that will be applicable to the Company.

The key responsibilities and principal activities of the Committee are as follows:

· To monitor the integrity of the financial statements of the Company, and any formal announcements relating to the Company's financial performance, reviewing significant financial reporting judgements contained in them;

· To advise the Board on whether the Interim Report, Annual Report and financial statements are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model, strategy and risks;

· To monitor and review the effectiveness of the Company's internal control environment and the processes in place to monitor this;

· To make recommendations to the Board, for it to be put to shareholders for their approval in general meeting, in relation to the appointment, reappointment and removal of the external auditor and to approve the remuneration and terms of engagement of the external auditor;

· To review the appointment of the external auditor as auditor and tax adviser, monitoring the external auditor's independence and objectivity and the effectiveness of the audit process, taking into consideration relevant UK professional and regulatory requirements;

· To develop and implement policy on the engagement of the external auditor to supply non-audit services, taking into account relevant ethical guidance regarding the provision of non-audit services by the external audit firm; and to report to the Board, identifying any matters in respect of which it considers that action or improvement is needed and making recommendations as to the steps to be take;

· To agree the scope of statutory audit work and any additional assurance work to be undertaken; and

· To gain assurance around the external valuation of the property portfolio and the independence of the valuers.

Meetings

The Audit Committee will meet no less than three times a year; typically in May to consider the annual report and external audit findings, in November to consider the interim report and interim announcement and external review findings, and in January to plan for the financial year ahead. Any other matters, including internal controls, are considered as and when necessary.

Meetings are attended by the Committee members and the external auditor. The Committee will allow time to speak with the external auditor without the executive management present for at least one meeting each year.

Primary areas of judgement in relation to the Annual Report and Financial Statements

The Committee considers the significant judgements made in the Annual Report and financial statements and receives reports from management and the external auditor on those judgements. The Committee pays particular attention to the matters it considers to be important by virtue of size, potential impact, complexity and level of judgement.

The principal issue considered by the Committee for the Period was the completeness of liabilities recognised in respect of professional services received by the Company during the Period.

Although covenant compliance is a matter for the whole Board, and the Company remains lowly geared, the Committee consider reports to support the Company's going concern statement in financial reports, which include covenant headroom, sensitivity analysis, undrawn facilities and forecasts.

Audit

No internal audit function is considered necessary due to the current size and complexity of the Company's operations. In addition, the Company's day to day operations are subcontracted to the Investment Manager.

Given the external auditor's detailed knowledge of the structure of the organisation, certain services provided by them, subject to the amount of fee involved, are not considered to impair the external auditor's independence or objectivity. Services included in this category are: accounting advice; tax compliance and advisory; reporting accountant work; compliance and regulatory certificates and minor projects, where the fee involved will not exceed £10,000 without the prior consent of the Committee.

The Committee will not normally allow the external auditor to be used for the following: compiling accounting records; internal audit services; IT consultancy; Remuneration Committee advice; valuation work; and work on internal controls.

Deloitte LLP was appointed as the Company's auditor in 2014. Under the Financial Reporting Council's transitional arrangements the Company is required to re-tender, at the latest, by 2024. The Committee intends to re-tender within the timeframe set by the Financial Reporting Council.

Deloitte LLP has confirmed its willingness to continue in office and ordinary resolutions reappointing Deloitte LLP as auditor and authorising the Committee to set the auditor's remuneration will be proposed at the AGM.

The Committee Chairman has access to the external audit partner outside of Committee meetings and meets the external auditor without management present to discuss matters relevant to the Company.

Approval

This report was approved by the Audit Committee on 24 November 2014 and signed on its behalf by:

Matthew Thorne

Chairman of the Audit Committee

24 November 2014

Directors' remuneration report

The Non-executive Directors and Company Secretary are the only officers of the Company. The Directors are engaged under letters of appointment and do not have service contracts with the Company, and the Company Secretary is engaged under the terms of the Investment Management Agreement with the Investment Manager. The Company has no employees.

Under the terms of their appointment, each director is required to retire by rotation and seek re-election at least every three years. Each directors' appointment under their respective letter of appointment is terminable immediately by either party (the Company or the director) giving written notice and no compensation or benefits are payable upon termination of office as a director of the Company becoming effective.

Remuneration policy

The Company's objective is to have a simple and transparent remuneration structure, aligned with the Company's strategy.

The Company aims to provide remuneration packages which will retain non-executive directors with the skills and experience necessary to maximise shareholder value on a long term basis.

The remuneration policy has been prepared in accordance with Schedule 8 of The Large and Medium-sized Companies and Company's (Accounts and Reports) Regulations 2008 ("the Regulations") as amended in August 2013. The policy report will be subject to a binding shareholder vote at the 2014 Annual General Meeting and the policy will take effect immediately.

Fees

The estimated aggregate remuneration to be paid to the non-executive directors in respect of the financial period to 31 March 2015 will not exceed £190,000. The Company has agreed to pay David Hunter, Barry Gilbertson, Ian Mattioli and Matthew Thorne annual fees of £42,500, £28,000, £26,000 and £32,500 respectively. The Company also agreed to pay on Admission to each of David Hunter, Barry Gilbertson and Matthew Thorne by way of remuneration for services supplied prior to Admission an amount (after deduction of tax) equal to £10,000, which each such director agreed to apply in the subscription of ordinary shares at the Issue Price.

Directors' remuneration (audited)

		Period ended 24 March 2014
		£000

David Hunter		-
Matthew Thorne		-
Barry Gilbertson		-
Ian Mattioli		-

		-

Directors' interests (audited)

At 24 March 2014 none of the directors had any interest in the ordinary shares of the Company.

No director has or has had any interest in any transactions which are or were unusual in their nature or conditions, or significant to the business of the Company and which were affected by the Company since its date of incorporation or remain in any respect outstanding or unperformed.

No loan or guarantee has been granted or provided by any member of the Company for the benefit of any director.

Save as disclosed below in relation to the arrangements in place with Ian Mattioli, there are no restrictions agreed by any director on the disposal within a certain period of time of their holdings in the Company's securities.

Lock-in agreement

On 25 February 2014, Ian Mattioli, the Company and the Company's broker, Numis Securities Limited ("Numis"), entered into a lock-in agreement. Under the terms of the agreement, Ian Mattioli has undertaken not to dispose of any ordinary shares or any interest in ordinary shares for a period of twelve months commencing on Admission and for a further period of twelve months' thereafter not to dispose of any ordinary shares or any interest in ordinary shares without the prior written consent of Numis.

Approval

The Companies Act 2006 requires the auditor to report to the shareholders on certain parts of the Directors' remuneration report and to state whether, in their opinion, those parts of the report have been properly prepared in accordance with the Regulations. The parts of the annual report on remuneration that are subject to audit are indicated in that report.

This report was approved by the Board of Directors on 24 November 2014 and signed on its behalf by:

Ian Mattioli

Director

Directors' report

Report and financial statements

The Directors have pleasure in presenting their report together with the financial statements for the period ended 24 March 2014. The Governance report forms part of this report. For the purposes of this report, the expression 'Company' means Custodian REIT plc and the expression 'Group' means the Company and its subsidiary.

Business review

The Company was incorporated on 27 January 2014 and changed its accounting reference date to 31 March 2014 on 18 November 2014 to satisfy Section 837 of the Companies Act 2006 and facilitate its objective of paying quarterly dividends. As the Company commenced trading on 26 March, the comparative amounts presented in the financial statements are nil.

During the Period the Group did not trade. The Group's principal activity is commercial property investment. The Strategic Report includes further information about the Group's principal activities, financial performance during the year and indications of likely future developments.

Details of significant events since the period end are contained in Note 10 to the consolidated financial statements.

The Directors believe they have adequately discharged their responsibilities under section 414C of the Companies Act 2006 to provide a balanced and comprehensive review of the development and performance of the business.

Results and dividends

The Group profit for the period after taxation amounted to £nil, reflecting that the Company did not commence trading until after the period end.

On 30 September 2014, an interim dividend for the period ended 30 June 2014 of 1.25p per share was paid. The Directors propose paying a dividend of 1.25p per share in respect of the quarter ended 30 September 2014, which is expected to be approved in December.

Directors

A list of current serving directors and their biographies is shown in the Governance report. At 24 March 2014 none of the directors had a direct interest in the ordinary share capital of the Company.

The appointment and replacement of directors is governed by the Articles, the Code, the Companies Act and related legislation. The Articles themselves may be amended by special resolution of the shareholders.

Directors' interests

Directors' fees and beneficial interests in the shares of the Company are disclosed in the Directors' remuneration report. During the Period, no director had a material interest in a contract to which the Company or its subsidiary was a party (other than their own letter of appointment), requiring disclosure under the Companies Act 2006 other than in respect of Custodian Capital Limited and the Investment Management Agreement as disclosed in Note 9.

Conflicts of interest

There are procedures in place to deal with any directors' conflicts of interest arising under section 175 of the Companies Act 2006 and such procedures have operated effectively since the Company was incorporated.

Directors' indemnity

All directors and officers of the Company have the benefit of the indemnity provision contained in the Articles. The provision, which is a qualifying third party indemnity provision, was in force throughout the Period and is currently still in force. The Group also purchased and maintained throughout the Period directors' and officers' liability insurance in respect of itself and its directors and officers as permitted by Section 234 of the Companies Act 2006, although no cover exists in the event directors or officers are found to have acted fraudulently or dishonestly.

Donations

No political or charitable donations were made during the Period.

Capital structure

The Company's authorised and issued share capital during the Period and as at 24 March 2014 is shown in Note 5.

The ordinary shares rank pari passu in all respects. Save as agreed at the AGM, the ordinary shares have pre-emption rights in respect of any future issues of ordinary shares to the extent conferred by section 561 of the Companies Act 2006.

There are no restrictions on the transfer of ordinary shares in the Company, other than:

· Certain restrictions that may be imposed from time to time by laws and regulations and pursuant to the Listing Rules of the FCA, whereby certain directors and officers require approval to deal in ordinary shares of the Company; and

· Restrictions on Ian Mattioli as a result of him entering into a lock-in deed with the Company and Numis, as described in the Directors' remuneration report.

The Group is not aware of any other agreements between holders of securities that may result in restrictions on the transfer of ordinary shares.

There are no specific restrictions on the size of a holding nor on the transfer of shares, which are both governed by the general provisions of the Articles and prevailing legislation. No person has any special rights of control over the Company's share capital and all issued shares are fully paid.

CREST

Custodian REIT plc share dealings are settled in CREST, the computerised system for the settlement of share dealings on the London Stock Exchange. CREST reduces the amount of documentation required and makes the trading of shares faster and more secure. CREST enables shares to be held in an electronic form instead of the traditional share certificates. CREST is voluntary and shareholders can keep their share certificates if they wish. This may be preferable for shareholders who do not trade in shares on a frequent basis.

Substantial shareholdings

On 24 November 2014, the Company had been notified, in accordance with chapter 5 of the Disclosure and Transparency Rules, of the following interests representing 3% or more of its issued share capital:

Shareholder

Number of

ordinary shares

Percentage

holding

F&C Asset Management

14,601,498

9.4%

Investec Wealth & Investment

8,523,210

5.5%

Close company provisions

The Company is not a close company within the provisions of the Income and Corporation Taxes Act 1988.

Change of control

The Company has borrowing facilities provided by its bankers which include provisions which may require any outstanding borrowings to be repaid, altered or terminated upon the occurrence of a change of control in the Company.

Related party transactions

Details of related party transactions are given in Note 9.

Environmental

The Board believes good environmental practices such as the recycling of paper waste will support its strategy by enhancing the reputation of the Group. However, due to the nature of its business generally, the Group does not have a significant environmental impact.

Principal risks and uncertainties

The Directors' view of the principal risks and uncertainties facing the business is shown in the Interim Report.

Financial risk management

The Group's financial risk management is based upon sound economic objectives and good corporate practice. The Board has overall responsibility for risk management and internal control. Our process for identifying and managing risks is set out in more detail in the Governance report.

Since Admission the Group has sought to manage financial risk, to ensure sufficient liquidity is available to meet the identifiable needs of the Group and to invest cash assets safely and profitably. Short term flexibility is achieved through the use of bank facilities. The Group does not undertake any trading activity in financial instruments. All activities are transacted in Sterling. The Group does not engage in any hedging activities.

The Group reviews the credit quality of customers and limits credit exposures accordingly. All trade receivables are subject to credit risk exposure. However, there is no specific concentration of credit risk as the amounts recognised represent a large number of receivables from various customers.

Auditor

Deloitte LLP, who have been the Group's auditor since 20 May 2014, have confirmed their willingness to continue in office as auditor in accordance with Section 489 of the Companies Act 2006. The Group is satisfied that Deloitte LLP are independent and there are adequate safeguards in place to safeguard their objectivity. A resolution to reappoint Deloitte LLP as the Group's auditor will be proposed at the forthcoming Annual General Meeting.

Directors' statement as to disclosure of information to the auditor

The directors who were members of the Board at the time of approving the Directors' report are listed in the Governance report. Having made enquiries of fellow directors and of the Company's auditor, each of these directors confirms that:

· To the best of each director's knowledge and belief, there is no relevant audit information of which the Company's auditor is unaware; and

· Each director has taken all steps they might reasonably be expected to have taken as a director to make themselves aware of any relevant audit information and to establish that the Company's auditor is aware of that information.

This confirmation is given and should be interpreted in accordance with the provisions of Section 418 of the Companies Act 2006.

Annual General Meeting

The AGM of the Company will be held at Canaccord Genuity Limited, 88 Wood Street, London, UK EC2V 7QR on 21 January 2015 at 9:00am.

On a show of hands at a general meeting of the Company, every holder of ordinary shares present in person or by proxy and entitled to vote shall have one vote unless the proxy is appointed by more than one shareholder and has been instructed by one or more shareholders to vote for the resolution and by one or more shareholders to vote against the resolution, in which case the proxy has one vote for and one vote against. This is to reflect the Shareholders' Rights Regulations which have amended the Companies Act 2006.

On a poll, every member present in person or by proxy and entitled to vote shall have one vote for every ordinary share held. None of the ordinary shares carry any special voting rights with regard to control of the Company. The Notice of AGM specifies deadlines for exercising voting rights and appointing a proxy or proxies to vote in relation to resolutions to be passed at the AGM. The relevant proxy votes are counted and the number for, against or withheld in relation to each resolution are announced at the AGM.

Going concern

The Directors believe the Group is well placed to manage its business risks successfully. The Group's forecasts and projections show that the Group should continue to be cash generative and able to operate within the level of its current financing arrangements. Accordingly, the Directors continue to adopt the going concern basis for the preparation of the financial statements.

Events since 24 March 2014

Details of significant events occurring after the end of the reporting period are given in Note 10.

Approval

This report was approved by the Board of Directors on 24 November 2014 and signed on its behalf by:

Ian Mattioli

Director

Directors' responsibilities for the financial statements

The Directors are responsible for preparing the Directors' report, Strategic report and the consolidated financial statements in accordance with applicable law and regulations.

UK company law requires the directors to prepare Group and Company financial statements for each financial year. The Directors are required to prepare Group financial statements in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union and Article 4 of the IAS Regulation and have elected to prepare the Company financial statements in accordance with IFRSs as adopted by the EU.

The financial statements are required by law and IFRSs adopted by the EU to present fairly the financial position of the Group and Company and the financial performance of the Group. The Companies Act 2006 provides in relation to such financial statements that references in the relevant part of that Act to financial statements giving a true and fair view are references to their achieving a fair presentation.

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 each of the Group and Company financial statements, IAS 1 requires the directors to:

· Select suitable accounting policies and then apply them consistently;

· Make judgements and estimates that are reasonable and prudent;

· State whether they have been prepared in accordance with IFRSs adopted by the EU; and

· Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's and the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and 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 UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement

We confirm that to the best of our knowledge:

· The consolidated financial statements, prepared in accordance with IFRS as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;

· The Strategic report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and

· The annual report and consolidated financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy.

Approval

This report was approved by the Board of Directors on 24 November 2014 and signed on its behalf by:

Ian Mattioli

Director

Independent auditor's report to the members of Custodian REIT plc for the period ended 24 March 2014

Opinion on financial statements of Custodian REIT plc	In our opinion the financial statements: · Give a true and fair view of the state of the group and company's affairs as at 24 March 2014 and of its consolidated result for the period from 27 January to 24 March 2014; · Have been properly prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union ("EU"); and · Have been prepared in accordance with the requirements of the Companies Act 2006. The financial statements comprise the Consolidated and company statement of comprehensive income, Consolidated statement of financial position, Company statement of financial position, Consolidated and company statement of cash flows, Consolidated and company statement of changes in equity and the related Notes 1 to 10. The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as adopted by the EU.
Separate opinion in relation to IFRSs as issued by the IASB	As explained in note 2.1 to the financial statements, in addition to applying IFRSs as adopted by the EU, the company has also applied IFRSs as issued by the International Accounting Standards Board ("IASB"). In our opinion the financial statements comply with IFRSs as issued by the IASB.
Going concern	As required by the Listing Rules we have reviewed the directors' statement contained within the Directors' report that the Group is a going concern. We confirm that: · We have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate; and · We have not identified any material uncertainties that may cast significant doubt on the company's ability to continue as a going concern. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the company's ability to continue as a going concern.
Our assessment of risks of material misstatement	The assessed risk of material misstatement described below had the greatest effect on our audit strategy, the allocation of resources in the audit and directing the efforts of the engagement team:

Risk			How the scope of our audit responded to the risk
Understatement of liabilities and expenses Although there was no trading activity during the period, there is a risk that the liabilities and expenses relating to the initial public offering ("IPO") may not have been recognised appropriately in this company's accounts depending on the contractual terms from the professional services suppliers. In particular the company had not completed its IPO process at the balance sheet date and therefore the costs associated with that process were underwritten by the guarantor company.			We carried out testing around the IPO services received and payments made post the period end. We then further performed the following testing: · Checked against relevant invoices; · Reviewed the key contract terms with the main service providers to determine that the guarantor company had underwritten the expenses; and · Assessed the appropriateness of the accounting treatment.
The description of the risk above should be read in conjunction with the significant issues considered by the Audit Committee as discussed in its report. Our audit procedures relating to these matters were designed in the context of our audit of the financial statements as a whole, and not to express an opinion on individual accounts or disclosures. Our opinion on the financial statements is not modified with respect to the risk described above, and we do not express an opinion on this individual matter.
Our application of materiality		We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work. We determined materiality for the company to be £1,000, which is 2% of shareholders' equity. We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £50, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.
An overview of the scope of our audit	Our audit was scoped by obtaining an understanding of the entity and its environment, including internal control and assessing the risks of material misstatement. Audit work to respond to the risks of material misstatement was performed directly by the audit engagement team.
Opinion on other matters prescribed by the Companies Act 2006		In our opinion: · The part of the Directors' remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006; and · The information given in 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:
Adequacy of explanations received and accounting records	Under the Companies Act 2006 we are required to report to you if, in our opinion: · We have not received all the information and explanations we require for our audit; or · Adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or · The financial statements are not in agreement with the accounting records and returns. We have nothing to report in respect of these matters.
Directors' remuneration	Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors' remuneration have not been made or the part of the Directors' remuneration report to be audited is not in agreement with the accounting records and returns. We have nothing to report arising from these matters.
Corporate Governance Statement	Under the Listing Rules we are also required to review the part of the Corporate Governance Statement relating to the company's compliance with ten provisions of the UK Corporate Governance Code. We have nothing to report arising from our review.
Our duty to read other information in the Annual Report	Under International Standards on Auditing (UK and Ireland), we are required to report to you if, in our opinion, information in the annual report is: · Materially inconsistent with the information in the audited financial statements; or · Apparently materially incorrect based on, or materially inconsistent with, our knowledge of the company acquired in the course of performing our audit; or · Otherwise misleading. In particular, we are required to consider whether we have identified any inconsistencies between our knowledge acquired during the audit and the directors' statement that they consider the annual report is fair, balanced and understandable and whether the annual report appropriately discloses those matters that we communicated to the audit committee which we consider should have been disclosed. We confirm that we have not identified any such inconsistencies or misleading statements.
Respective responsibilities of directors and auditor	As explained more fully in the Directors' report, 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. We also comply with International Standard on Quality Control 1 (UK and Ireland). Our audit methodology and tools aim to ensure that our quality control procedures are effective, understood and applied. Our quality controls and systems include our dedicated professional standards review team and independent partner reviews. 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.
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 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 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.

Jonathan Dodworth (Senior statutory auditor)

for and on behalf of Deloitte LLP

Chartered Accountants and Statutory Auditor

Birmingham, UK

24 November 2014

Consolidated and company statement of comprehensive income

For the period 27 January 2014 to 24 March 2014

Group and company		Period ended 24 Mar 2014
	Note	£000

Revenue		-

Investment management fee		-
Direct operating expenses of let rental property		-
Professional fees		-
Directors' fees		-
Administrative expenses		-

Expenses		-

Operating profit before financing and revaluation of investment properties		-

Unrealised gains/(losses) on revaluation of investment properties		-
		-

Operating profit before financing		-

Finance income		-
Finance costs		-

Net finance cost		-

Profit before tax		-

Income tax expense		-

Profit for the period and total comprehensive income for the period, net of tax		-

Attributable to:
Equity holders of the Company		-

Earnings per ordinary share:
Basic and diluted (pence)		-

The profit for the period arises from the Company's continuing operations.

Consolidated statement of financial position

As at 24 March 2014

Registered number: 8863271

		24 Mar 2014
	Note	£000

Non-current assets
Investment properties		-

Total non-current assets		-

Other receivables	9	50
Cash and cash equivalents		-

Total current assets		50

Total assets		50

Equity
Issued capital	5	50
Share premium		-
Retained earnings		-

Total equity attributable to equity holders of the Company		50

Non-current liabilities
Borrowings		-

Total non-current liabilities		-

Current liabilities

Trade and other payables		-
Deferred income		-

Total current liabilities		-

Total liabilities		-

Total equities and liabilities		50

These consolidated financial statements of Custodian REIT plc were approved and authorised for issue by the Board of Directors on 24 November 2014 and are signed on its behalf by:

Ian Mattioli

Director

Company statement of financial position

As at 24 March 2014

Registered number: 8863271

		24 Mar 2014
	Note	£000

Non-current assets
Investment properties		-
Investments	3	-

Total non-current assets		-

Other receivables	9	50
Cash and cash equivalents		-

Total current assets		50

Total assets		50

Equity
Issued capital	5	50
Share premium		-
Retained earnings		-

Total equity attributable to equity holders of the Company		50

Non-current liabilities
Borrowings		-

Total non-current liabilities		-

Current liabilities

Trade and other payables		-
Deferred income		-

Total current liabilities		-

Total liabilities		-

Total equities and liabilities		50

These consolidated financial statements of Custodian REIT plc were approved and authorised for issue by the Board of Directors on 24 November 2014 and are signed on its behalf by:

Ian Mattioli

Director

Consolidated and company statement of cash flows

For the period 27 January 2014 to 24 March 2014

Group and company		Period ended 24 Mar 2014
	Note	£000

Operating activities
Profit for the period		-
Adjustments for:
(Increase)/decrease in fair value of investment property		-
Finance costs		-

Cash flows from operating activities before changes in working capital and provisions		-

Decrease/(increase) in trade and other receivables		-
(Decrease)/increase in trade and other payables		-

Cash generated from operations		-

Interest paid		-
Net cash flows from operating activities		-

Investing activities
Purchase of investment property		-
Interest received		-

Net cash from investing activities		-

Financing activities
Proceeds from the issue of share capital		-
Payment of costs of share issue		-
Repayment of debt		-
New borrowings		-
Dividends paid		-

Net cash from financing activities		-

Net (decrease)/increase in cash and cash equivalents		-
Cash and cash equivalents at start period		-

Cash and cash equivalents at end period		-

Consolidated and company statement of changes in equity

For the period 27 January 2014 to 24 March 2014

Group and company	Note	Issued capital £000	Share premium £000	Retained earnings £000	Total equity £000

As at 27 January 2014		-	-	-	-

Total comprehensive income for period
Profit for the period		-	-	-	-

Total comprehensive income for period		-	-	-	-

Transactions with owners of the Company, recognised directly in equity
Issue of share capital	5	50	-	-	50

As at 24 March 2014		50	-	-	50

Notes to the consolidated financial statements

1. Corporate information

As at the period end date of 24 March 2014 the Company was a public limited company incorporated and domiciled in England and Wales. At the Company's accounting reference date of 31 March 2014, the Company's shares were publicly traded on the London Stock Exchange plc's main market for listed securities. The consolidated financial statements have been prepared on a historical cost basis and are presented in pounds sterling with all values rounded to the nearest thousand pounds (£000), except when otherwise indicated. The consolidated financial statements were authorised for issue in accordance with a resolution of the directors on 24 November 2014.

2. Basis of preparation and accounting policies

2.1 Basis of preparation

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards adopted by the International Accounting Standards Board ("IASB") and interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC") of the IASB (together "IFRS") as adopted by the European Union, and in accordance with the requirements of the Companies Act applicable to companies reporting under IFRS, and therefore they comply with Article 4 of the EU IAS Regulation.

2.2 Basis of consolidation

The consolidated financial statements consolidate those of the parent company and its subsidiary. The parent controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. The subsidiary has a reporting date in line with the Company. All transactions and balances between group companies are eliminated on consolidation, including unrealised gains and losses on transactions between group companies. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Amounts reported in the financial statements of the subsidiary are adjusted where necessary to ensure consistency with the accounting policies adopted by the Group. Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the period are recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable.

2.3 Standards in issue but not yet effective

At the date of authorisation of these consolidated financial statements, the following standards, amendments and interpretations which have not been applied in these consolidated financial statements were in issue but not yet effective (and in some cases had not yet been adopted by the EU):

· IFRS 9 'Financial Instruments'

· Amendment to IAS 32 'Offsetting Financial Assets and Financial Liabilities'

· IFRS 10 'Consolidated Financial Statements'

· IFRS 11 'Joint Arrangements'

· IFRS 12 'Disclosure of Interest in Other Entities'

· IAS 27 (Revised) 'Separate Financial Statements'

· IAS 28 (Revised) 'Investments in Associates and Joint Ventures'

· Amendments to IFRS 10, IFRS 12 and IAS 27 'Investment Entities'

· Amendments to IAS 36 'Recoverable Amount Disclosures for Non-Financial Assets'

· Amendments to IAS 39 'Novation of Derivative and Continuation of Hedge'

· IFRIC 21 'Levies'

· Amendment to IAS 19 'Defined Benefit Plans Employee Contributions'

· The Annual Improvements 2010-2013 Cycle

· Amendments to IFRS 11 'Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11)'

· Amendments to IAS 16 and IAS 38 'Clarification of Acceptable Methods of Depreciation and Amortisation'

· IFRS 15 'Revenue from Contracts with Customers'

The adoption of these standards, amendments and interpretations will either result in changes to presentation and disclosure, or are not expected to have a material impact on the consolidated financial statements.

These consolidated financial statements are prepared to 24 March 2014, applying the provisions of the Companies Act 2006 allowing the consolidated financial statements to be drawn up to seven days before or after the accounting reference date of 31 March 2014.

2.4 Significant accounting policies

The principal accounting policies adopted by the Company and applied to these consolidated financial statements are set out in the Interim Report.

3. Investments

Shares in subsidiaries

Name and company number

Country of registration and incorporation

Principal activity

Ordinary shares held

At 30 Sept

2014

Custodian Real Estate Limited
(Company number 8882372)

England and Wales

Dormant

100%

4. Borrowings

The Company's borrowings are set out in the Strategic Report.

5. Issued capital and reserves

Group and company	Number of shares	£000


Issued and fully paid:
Ordinary shares of 1p	1	-
Redeemable ordinary shares of 1p	4,999,999	50

At 27 January and 24 March 2014	5,000,000	50

At incorporation the issued share capital of the Company consisted of one ordinary share of 1p and 4,999,999 redeemable ordinary shares of 1p each, which were issued to the subscriber to the Company's Memorandum of Association, Mattioli Woods. On 26 March 2014 the redeemable ordinary shares were redeemed by the Company at par value and 131,989,309 ordinary shares were issued at an issue price of £1 each, including a premium of 99p per share.

The Company raised a further £25 million (before costs and expenses) through a placing of 23,866,349 new ordinary shares in the Company on 8 October 2014.

The Board has discretion to issue a further 144,144,341 ordinary shares prior to 20 February 2015 pursuant to a placing programme ("the Placing Programme") intended to satisfy market demand for the ordinary shares and raise further monies for investment in accordance with the Company's investment policy.

Rights, preferences and restrictions on shares

On 25 February 2014, Ian Mattioli, the Company and Numis entered into a lock-in agreement as detailed in the Directors' remuneration report.

6. Ultimate parent undertaking

At incorporation 100% of the ordinary share capital of the Company was owned by Mattioli Woods. Following Admission on 26 March 2014 there is no ultimate parent.

7. Capital risk management

The Company has not traded during the Period and as at the period end was not exposed to any capital risk.

8. Contingent liabilities

Transactions had been entered into at the period end date regarding professional services relating to the Company's Admission and the acquisition of the Initial Portfolio as described in the Strategic Report, the crystallisation of which were contingent on Admission. At the period end date, any liabilities incurred by the Company for services received before 24 March 2014 were guaranteed by Mattioli Woods, its parent at the period end date.

Group and company		£000


Investment properties acquired at Admission		95,190
Net trade and other receivables acquired at Admission		403
Professional services (to be charged against share premium)		2,182
Professional services (to be charged to the income statement)		219

		97,994

Included within professional services above are non-audit fees payable to the Company's auditor, Deloitte LLP, relating to reporting accountant work on Admission of £145,000 and tax advisory services of £77,000. Audit fees for the Period, which were not committed to at 24 March 2014, are £17,000.

9. Related party transactions

At 24 March 2014 Mattioli Woods owed the Company £50,000 relating to called up, fully paid ordinary shares. This amount was settled following Admission on 26 March 2014.

Transactions with directors

Investment Management Agreement

On 25 February 2014 the Company entered into a three year Investment Management Agreement with the Investment Manager under which the Investment Manager has been appointed as AIFM with responsibility for the management of the Company's property assets, subject to the overall supervision of the directors.

The Investment Manager shall be paid on a quarterly basis a fund and asset management fee calculated by reference to the net asset value ("NAV") of the Company each quarter as follows:

· 0.9% of the NAV of the Company as at the relevant quarter day which is less than or equal to £200 million divided by 4; plus

· 0.75% of the NAV of the Company as at the relevant quarter day which is in excess of £200 million divided by 4.

The Investment Manager has agreed to provide day-to-day administration of the Company and act as secretary to the Company, including maintenance of accounting records and preparing annual accounts of the Company. The Company will pay to the Investment Manager an administrative fee equal to 0.125% of the NAV of the Company at the end of the quarter, subject to a minimum of £44,000 per quarter (adjusted for RPI).

The Investment Manager manages the Company's investments in accordance with the policies laid down by the Board (including, without limitation, the investment policy of the Company stated in the Strategic Report) and in accordance with the investment restrictions referred to in the Investment Management Agreement.

The Investment Management Agreement is terminable by either party by giving not less than twelve months' prior written notice to the other, which notice may only be given after the expiry of the initial three year term. The Investment Management Agreement may also be terminated on the occurrence of an insolvency event in relation to either party, if the Investment Manager is fraudulent, grossly negligent or commits a material breach which, if capable of remedy, is not remedied within three months, or on a force majeure event continuing for more than 90 days.

Ian Mattioli is Chief Executive of Mattioli Woods, the parent company of the Investment Manager at 24 March 2014, and is a director of the Investment Manager. As a result, Ian Mattioli is not independent. The Company Secretary, Nathan Imlach, is also a director of Mattioli Woods and the Investment Manager.

10. Events after the reporting date

Acquisitions

The Company has acquired 23 investment properties, details of which are set out in the Interim Report.

Equity

The Company has issued equity via an initial public offering and subsequent placing as set out in Note 5.

Dividends

On 30 September 2014 the Company paid a dividend of 1.25p per share to ordinary shareholders in respect of the quarter ended 30 June 2014.

11. Distribution of the annual report and accounts to members

The announcement above does not constitute a full financial statement of the Group's affairs for the period ended 24 March 2014. The Group's auditors have reported on the full accounts for the period and have accompanied them with an unqualified report. The accounts have yet to be delivered to the Registrar of Companies.

The annual report and accounts will be posted to shareholders in due course, and will be available on our website (www.custodianreit.com) and for inspection by the public at the Company's registered office address: 1 Penman Way, Grove Park, Enderby, Leicester LE19 1SY during normal business hours on any weekday. Further copies will be available on request.

The Company's annual general meeting will take place on 21 January 2015 at Canaccord Genuity Limited, 88 Wood Street, London, UK EC2V 7QR.

- Ends -

This information is provided by RNS

The company news service from the London Stock Exchange

END

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