A Word of Welcome

Alan and Almie Louis

PROPERTY FINANCIAL REPORT FOR THE PERIOD ENDING FEBRUARY 2010

Each year, the formulation of our Global Property Report is a collaborative effort between our treasury, property management and financial services divisions and it gives us the opportunity to take stock of the current state of the economy and the property market in particular.

While there are some positive signs emerging to indicate that the sustained downturn in the global economy is beginning to ease, in the European context it is evident that this is slower and more volatile than was initially hoped. The national debt of several European economies has caused an unprecedented shaking of the Euro and British Pound and these currencies and economies are therefore being negatively impacted. While positive measures are being taken to rectify the fundamental weaknesses in the economies of the worst affected nations - most notably Greece, Spain and the UK - this medicine may well be painful and prolonged with no absolute guarantee that it will be successful in the short term.

That having been said, there are positive indications that while residential property values remain subdued and under pressure, commercial property currently has long-term prospects and the sector is showing encouraging signs. In a report released in June 2010, the Scottish Widows Investment Partnership said that capital value growth expectations have been bolstered and rents have become less negative, with UK commercial property remaining an "attractive" asset. A similar result was reflected in the RICS European Commercial Property Survey for the first quarter of 2010 which reported that "investment activity increased moderately in Spain, France and Germany and this [has] led to an improvement in sentiment towards future capital values." However, the general consensus is that returns for the commercial property market for 2010 are likely to be subdued, largely as a result of the current economic climate in Europe, with good growth only anticipated in the last quarter of 2011.

A further challenge that property companies in general have experienced is that as property values have declined, banks have requested debt amortisation in line with the decline in property values. Since these loan-to-value covenants have been reviewed, liquidity is adversely affected in the short term. However, while we appreciate that there may be nothing we can do to alter the existing sentiment and the prevailing market conditions at a macro-level, we do have the capacity to optimise our management of the asset and to preserve our clients' best interests.

One of the key advantages Louis Group and our investors have experienced is that we continue to benefit from low vacancy levels in our properties. Our Property Services team works hard to establish and maintain good relationships with our tenants, to ensure that their needs are taken care of and that the opportunities that exist are maximised. We also carefully select the tenants for the buildings we own and manage, with the result that the vast majority are able to remain current with their rental payments. In the event that we see any signs of a default, we are pro-active in renegotiating with tenants to ensure that an early solution can be found. We are also making further capital investment into property, which we continue to believe has good long term prospects. At the same time, we remain open to offers from prospective purchasers in the event that we can realise attractive value for our existing properties.

In conclusion, we believe that despite the challenges that we face, investments in property have always stood the test of time and this remains our "asset class of choice". We will continue to persevere during these difficult times and to retain our spirit of optimism, since we remain confident that there will be a steady upturn in the global economy.

Sincerely,

Dr Alan Louis
International Group CEO