2005 CLS HOLDINGS PLC INTRODUCTION The business has continued to - - PDF document

CLS HOLDINGS PLC

2005

Interim Report

INTRODUCTION

.03 Chairman’s Statement .14 Unaudited Consolidated Income Statement .15 Unaudited Consolidated Balance Sheet .16 Unaudited Consolidated Statement of Changes in Equity .17 Unaudited Consolidated Cash Flow Statement .18 Independent Review Report to CLS Holdings plc .19 Notes to the Interim Financial Report .32 Directors, Officers and Advisers This is the first time that the results of CLS have been reported under International Financial Reporting Standards (“IFRS”). Although this has resulted in a change in the presentation of the Group’s results, its underlying strategy, direction and resultant cash flows remain unchanged. The primary focus of our attention and resources is on the efficient management of and investment in property assets in order to enhance value. We continue to believe that the primary indicator of our performance is net asset value per share as adjusted to exclude the provision for deferred taxation. We consider it very unlikely that the maximum deferred tax liability that we are obliged to report under IFRS will ever crystallise as the provision takes no account of the way in which the Group would intend to sell its properties and does not allow for the deduction of indexation relief which is available on the disposal of UK properties.

The business has continued to generate profitable growth showing a healthy increase in the value of its property assets in each of its markets comprising the UK, Sweden and Continental Europe.

.01

• Adjusted NAV per share* of 551.2 pence, up 5.7 per cent (Statutory NAV per share of 403.8 pence,

up 4.9 per cent) – adverse foreign exchange translation impact on adjusted NAV per share was 22.0 pence.

• Profit before tax (including property valuation uplift) £38.8 million, up 110.9 per cent.
• Intended distribution for the interim period to 30 June 2005 of £7.0 million by way of tender
• ffer buy-back on the basis of 1 for 60 at 510 pence per share, representing a distribution of

8.5 pence per share, an increase of 13.3 per cent.

• Property portfolio (including share of JVs) valued at £1.05 billion, up 2.6 per cent.
• Net rental income £34.0 million, up 5.6 per cent.
• Annualised added value to shareholders 16.0 per cent, up 7.2 per cent, based on increase

in adjusted NAV per share and distributions in the year (15.8 per cent added value based on statutory NAV up 7.2 per cent).

• Cash £54.2 million, down 5.6 per cent on year end position.

BUSINESS HIGHLIGHTS

• Successful completion of our major refurbishment of Fräsaren 12 at Solna and the
• ccupation by ICA Maxi supermarket in May 2005 and ICA headquarter offices in August 2005,

in all 24,000 sq.m (259,400 sq.ft).

• An additional property, Yrket 3, bought at Solna Business Park, Stockholm for £5.3 million

(SEK 70.0 million) giving a return on equity of 18.4 per cent after financing.

• Office property purchased at 23 rue Raspail, Ivry-sur-Seine, Paris for £8.1 million (c11.6 million)

giving a return on equity of 40.7 per cent.

• Planning permission granted for an extensive £11.5 million refurbishment at Great West

House, Brentford.

• Further letting success in the UK, at Solna in Sweden and in France.

FINANCIAL HIGHLIGHTS

30 June 30 June 2005 2004

INCOME STATEMENT Adjusted earnings per share*† 8.2p 9.7p Down 15.5% Earnings per share 33.8p 15.7p Up 115.3% Net rental income £34.0m £32.2m Up 5.6% Operating profit (excluding fair value gains on investment property) £26.1m £24.6m Up 6.1% Fair value gains on investment property £31.5m £10.4m Up 202.9% Net interest payable £18.6m £16.6m Up 12.0% Underlying profit before tax (excluding fair value gains on investment property) £7.3m £8.0m Down 8.8% Profit before taxation £38.8m £18.4m Up 110.9% Profit for the period £28.2m £13.7m Up 105.8%

30 June 31 Dec 2005 2004

BALANCE SHEET Adjusted NAV per share* 551.2p 521.3p Up 5.7% Statutory NAV per share 403.8p 385.1p Up 4.9% Distribution per share from tender offer buy-backs 8.5p 7.5p Up 13.3% Property portfolio £1,048.9m £1,022.5m Up 2.6% Net asset value £330.4m £323.0m Up 2.3% Cash £54.2m £57.4m Down 5.6% Adjusted gearing* 134.4% 134.1% Up 0.3% Statutory gearing 183.5% 181.5% Up 2.0% Adjusted solidity* 39.2% 39.0% Up 0.2% Statutory solidity (net assets as a ratio of gross assets) 28.3% 28.4% Down 0.1% Shares in issue (000’s) – excluding treasury shares 81,822 83,853 Down 2.4% IAS 32 fair value on fixed loans adjustment after tax 33.1p 27.8p Up 19.1%

* IAS12 requires that a deferred tax provision be made in respect of the potential gain that would arise if properties were to be sold at valuation and for the potential clawback of UK capital allowances to the extent that these amounts are not covered by available tax

• losses. The calculation of this deferred tax liability has been carried out on the basis that the revaluation gains on the properties will

be realised through receipt of net rents for the properties owned. As such the amount provided represents the maximum potential tax liability. Your Board considers it unlikely that this theoretical liability will ever crystallise because it takes no account of the way in which the Group would realise these gains. In particular as further explained in the note on page 6 the deferred tax provision takes no account of the way in which properties are expected to be sold, of the indexation allowance available when calculating a taxable capital gain in the UK or of elections available to ensure that deductions claimed previously for capital allowances are not reversed. The Board has complied with pronouncements from the APB and the UK Listing Authority in showing NAV and Earnings per share including the IAS 12 provision with equal prominence as the adjusted figures. The effect of IAS 12 has been excluded from those statistics that are indicated by an asterisk. At 30 June 2005 the IAS 12 deferred tax charge included in the income statement was £10.2 million and the cumulative reduction to net assets was £120.6 million (31 December 2004: charge to tax of £16.0 million and £114.1 million respectively). The accounting policies of the Group are as set out in the Group’s IFRS Transition Report for the year ended 31 December 2004 with the exception

• f the application of IAS32 and IAS39.

† In line with UK property industry practice adjusted earnings per share does not include gains on revaluations and deferred taxation.

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KEY STATISTICS AND OTHER FINANCIAL INFORMATION

The Group has again produced a solid performance with adjusted NAV per share of 551.2 pence, up 29.9 pence since 31 December 2004 (Statutory NAV per share 403.8 pence, up 18.7 pence per share). The net assets include the effect of notional adverse foreign exchange translation losses of 22.0 pence per share arising on the consolidation of the equity in our Swedish and Continental European operations based in local currency. The property portfolio has shown a further increase in value in each of our three main markets amounting to £31.5 million in the six months to 30 June 2005. For the first time this year, under IFRS, the gain in property valuation has been included within Profit before tax which has amounted to £38.8 million, showing an increase over the corresponding period last year of 110.9 per cent, mainly due to the increase in fair value of properties. In order to better understand the underlying elements of the Group’s performance the movement in its net assets are set out in the table below:

£m

OPENING ASSETS Net assets at 31 December 2004 (UK GAAP) 426.4 Additional IFRS deferred tax provision (107.4) Other IFRS adjustments 4.0 Net assets as restated for IFRS at 31 December 2004 323.0 Adjustment for IAS 39 – fair value financial instruments 8.1 Net assets as restated for IFRS at 1 January 2005 331.1 PROFIT Property trading profit before tax 8.2 Fair value gains on investment properties 31.5 Losses in respect of cable companies (2.4) Gain on sale of equity investment 1.5 Profit before tax 38.8 Current tax (0.5) Deferred tax (10.2) Profit after tax 28.1 OTHER EQUITY MOVEMENTS Tender offer buy-back and market purchases and share issues (10.0) Foreign exchange translation deficit (12.2) Fair value adjustment in respect of non-property assets (6.6) CLOSING ASSETS 30 JUNE 2005 330.4 The annualised return on market capitalisation of the Company (£348.4 million at 31 December 2004) was 14.9 per cent (30 June 2004: 13.9 per cent) based on the aggregation of the May 2005 distribution to shareholders, retained profits less adverse foreign exchange translation movements. Our shares are currently trading at a discount to adjusted NAV per share of 14.9 per cent, based on a share price of 469 pence. In November we intend to make a further distribution to shareholders of £7.0 million under a proposed tender

• ffer buy-back equivalent in cash terms to an interim net dividend of 8.5 pence per share, an increase of

13.3 per cent over the previous interim distribution. There has been growth in value across the portfolio in the UK, Sweden and Continental Europe, the total value

• f which is £1.05 billion including our interests in joint ventures at London Bridge Tower and New London

Bridge House.

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CHAIRMAN’S STATEMENT

ICA, Scandinavia’s largest food retailer, has now taken occupation of both the supermarket and head office at Solna Business Park near Stockholm, covering a total area of 23,800 sq.m (256,183 sq.ft). This project was successfully completed to budget and to the very tight programme demanded by our tenant. In Paris we have purchased a further property at Ivry-sur-Seine, Paris at a cost of £8.1 million on an initial yield of 8.7 per cent. IBM vacated the 6,000 sq.m property Le 41, Courbevoie, Paris causing vacant space in France to rise an additional 4.2 per cent from 5.9 per cent by area at 31 December 2004. However, we pro-actively manage the portfolio and have contained the overall vacancy rate to 9.8 per cent. We continue to believe that there is potential growth in a number of holdings managed by the investment division. The cable companies showed a loss of £2.4 million including an impairment provision of £1.8 million. During the period we sold our holding in Sit-up TV yielding a profit on that investment of £1.6 million and net assets have been enhanced by £6.9 million due to the fact that in accordance with IFRS we now carry our equity investments at fair value rather than at the lower of cost and net realisable value.

FINANCIAL

INCOME STATEMENT

Core property profit of £39.6 million (June 2004: £20.1 million – restated for IFRS) is set out below:

Restated 30 June 30 June 2005 2004 £m £m

Underlying profit before taxation 7.3 8.0 Fair value gains on investment properties 31.5 10.4 Profit before taxation 38.8 18.4 Add back: Consolidated cable company losses 2.4 2.5 Less: Lease surrenders and variations (0.1) – Sale of investment property – (0.5) Net Gains and write-downs on equity investments (1.5) (0.3) Core property profit 39.6 20.1 A summary of the results of the Group, analysed by location and main business activity is as set out below:

Equity Restated June Continental invest- June 2005 UK Sweden Europe† ments 2004 £m £m £m £m £m £m

Net rental income 34.0 16.2 8.0 9.8 – 32.2 Other income 4.1 0.5 0.3 0.3 3.0 1.1 Net rental and other income 38.1 16.7 8.3 10.1 3.0 33.3 Fair value gains on investment property 31.5 12.0 10.8 8.7 – 10.4 (Loss)/gain from sale of investment properties – (0.1) – 0.1 – 0.5 Operating expenses (12.0) (4.3) (1.9) (1.4) (4.4) (9.2) Operating profit/(loss) 57.6 24.3 17.2 17.5 (1.4) 35.0 Share of associates’ losses (0.3) – – – (0.3) – Net interest payable and related charges (18.5) (9.5) (5.6)* (2.7) (0.7) (16.6) Profit/(loss) on ordinary activities before tax 38.8 14.8 11.6 14.8 (2.4) 18.4 Taxation – current (0.5) – – (0.5) – (0.2) Taxation – deferred (10.2) (2.2) (3.5) (4.5) – (5.1) Minority interest 0.1 – – – 0.1 0.6 Retained profit/(loss) 28.2 12.6 8.1 9.8 (2.3) 13.7

* Of the net interest payable of £5.6 million, £0.5 million relates to space undergoing refurbishment at Solna † Includes the results of France, Luxembourg and Germany

.04

.05

BALANCE SHEET

Continental Equity Total UK Sweden Europe Invest. June 2005 £m % £m % £m % £m % £m %

Investment Properties 1,048.9 100 496.1 47.3 284.2 27.1 268.6 25.6 – – Loans (654.6) 100 (325.1) 49.6 (159.6) 24.4 (167.5) 25.6 (2.4) 0.4 Equity in Property Assets 394.3 100 171.0 43.4 124.6 31.6 101.1 25.6 (2.4) (0.6) Other 56.6 100 23.9 42.2 (11.6) (20.5) 17.4 30.8 26.9 47.5 Net Adjusted Equity 450.9 100 194.9 43.2 113.0 25.1 118.5 26.3 24.5 5.4 Equity in Property as a percentage of Investment 37.6% 34.5% 43.8% 37.6%

SHARE CAPITAL

No of shares No of shares Million Million 2005 2004 (six months) (full year)

Opening shares for NAV purposes 83.9 87.6 Tender offer buy-back (2.1) (4.1) Share options exercised – 0.4 Closing shares for NAV purposes 81.8 83.9 Shares held in Treasury by the Company 3.7 1.6 Closing shares in issue 85.5 85.5

Options to purchase 555,000 shares were held by staff and management at 30 June 2005.

NET RENTAL INCOME Net rental income of £34.0 million increased by £1.8 million compared to the six months ended 30 June 2004. This reflected an uplift of £0.9 million in the UK and £0.9 million in France following acquisitions during 2004 and continued letting success reducing vacant space.

Other income as set out in the summary table above, comprises net income from non-property activities and other income.

NET INCOME FROM NON-PROPERTY ACTIVITIES Gross profit from our two cable company investments amounted to £1.5 million, an increase of £1.3 million on the same period last year. The figures for the previous period included a write off of £1.1 million principally relating to disconnections. OTHER INCOME Other income of £2.6 million (30 June 2004: £0.9 million) included £1.6 million profit on the sale of Sit-up TV, an investment within our equity investment portfolio; £0.6 million in respect of dilapidations receipts; £0.2 million revenue from Solna Sports Park which was sold to an external operator in May and sundry other income of £0.2 million.

Operating expenses as set out in the summary table above, comprises administrative expenditure and net property expenses.

ADMINISTRATIVE EXPENDITURE Administrative expenditure of £10.2 million (30 June 2004: £7.3 million) included costs relating to our two cable company investments totalling £4.0 million (30 June 2004: £2.7 million) of which an impairment provision in respect of WightCable North Limited amounted to £1.8 million. In addition, we have expensed professional fees of £1.1 million that were incurred in respect of our development properties. Excluding the above mentioned items, underlying administrative expenditure did not increase compared to the six months to 30 June 2004.

NET PROPERTY EXPENSES Net property expenses amounted to £1.8 million in the six months (30 June 2004: £1.9 million). The main elements

• f expenditure were operating costs of £0.4 million in respect of Solna Sports Park, depreciation of equipment of

£0.2 million, void space costs of £0.3 million, marketing, letting and related legal fees of £0.3 million and bad debts

• f £0.2 million.

GAINS FROM SALE OF INVESTMENT PROPERTY A small net profit of £35,000 (30 June 2004: £0.5 million gain) was made on the sale of three minor French properties for a total consideration of £3.1 million (c4.7 million). FINANCIAL INCOME AND COSTS Interest income of £0.5 million (30 June 2004: £0.9 million) was adversely affected by foreign exchange movements

• f £0.3 million.

Interest payable of £19.0 million (30 June 2004: £17.5 million) comprised bank interest of £17.9 million, net loss

• n fair value of interest rate caps of £0.5 million and depreciation of loan arrangement fees of £0.6 million. The

Group’s policy is to expense all interest payable and financial costs to the income statement, including interest incurred in the funding of refurbishment and development projects. During the period interest was expensed in respect of our Solna refurbishment of £0.6 million and Great West House, currently undergoing a major refurbishment, of £0.2 million. At the period end, gross floating rate loans totalled £264.4 million, 40.4 per cent of the total loan book. All floating rate debt was hedged by interest rate caps at an average cap rate of 5.2 per cent for Sterling, 5.0 per cent for Swedish Kronor and 4.8 per cent for Euro (excluding bank margin). The average cost of borrowing, inclusive of the cost of fixed rate borrowings, interest rate caps and amortisation of arrangement fees, was 6.9 per cent on the UK debt, 4.6 per cent for Sweden and 4.0 per cent for Continental Europe. Adjusted gearing has increased by 0.3 per cent to 134.4 per cent incorporating the effect of the re-financings raising an additional £60.3 million across all three key markets. Interest cover (excluding fair value gains on investment properties) decreased to 1.41 times at 30 June 2005 from 1.49 times at 30 June 2004. TAXATION The Group’s current taxation charge continues to benefit from the utilisation of losses and from significant capital allowances and amortisation deductions. There is a significant increase in the deferred tax provision being charged in the income statement following the adoption of IAS12 as explained in the IFRS transition report issued on 15 September 2005. This deferred tax charge reflects the potential tax on the revaluation gain on the properties for the period to June 2005 and the additional capital allowances claimed in that period. The method of calculation for deferred tax under IAS12 has resulted in a provision being made for the maximum potential tax liability based on the difference between the carrying value of each property and its tax base without taking into account any factors which would mitigate that tax liability. In practice the Group would not suffer this liability even if all its properties were to be sold, as it structures its property disposals to reduce tax liabilities on the gains. For overseas properties, we plan to make corporate disposals, as opposed to property disposals, which would result in smaller tax liabilities than those calculated under IAS12. In the UK the actual gain which would be realised on property disposals would be reduced by indexation allowance. At 30 June 2005 this allowance would reduce the potential taxable gains if UK properties were to be sold, by £136.3 million and the deferred tax provision in the balance sheet, by £40.9 million. Furthermore, on a disposal, the Group intends to make the election available to ensure that there is no claw back

• f capital allowances previously claimed in respect of UK properties. At 30 June 2005 the potential claw back of

allowances in respect of plant and machinery in the Group’s UK properties amounts to £52.9 million. If this amount had been excluded from the provision, the overall deferred tax provision would be further reduced by £15.9 million.

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.07

BUY-BACKS AND DIVIDENDS A tender offer buy-back was taken up in full in May of this year in lieu of a final dividend for 2004. With the current share price remaining at a discount to net asset value, we are proposing an interim distribution of £7.0 million by way of a further tender offer buy-back of shares on the basis of 510 pence per share for 1 in 60 shares held. This will enhance net asset value per share and is equivalent in cash terms to an interim net dividend of 8.5 pence per share (30 June 2004: 7.5 pence per share), an increase of 13.3 per cent. At 31 December 2004 there were 85,497,177 ordinary shares in issue, of which 1,644,176 were held as Treasury

• shares. The number of shares at that date, used as a base for the purpose of calculating NAV or Earnings per

share and participating in the subsequent tender offer buy-backs, was 83,853,001 as Treasury shares are excluded from such calculations. Since the year end, the Company has completed the 2004 year end tender offer buy-back of 2,045,926 shares (a distribution of £9.9 million) and re-purchased 34,000 shares in the market (at a cost of £0.1 million). All of the shares thus acquired were transferred to Treasury. After the issue of 30,000 shares relating to the exercise of share options and 18,521 allotted from Treasury in payment of a debt, the number of shares in issue at 30 June 2005 (excluding 3,705,581 shares held as Treasury shares) was 81,821,596. Total shares in issue at 30 June 2005, including Treasury shares, were 85,527,177. If the current tender offer proposal to buy back 1,363,693 shares is accepted, ordinary shares in issue for the purposes of NAV and Earnings per share will have been reduced by a further 1.7 per cent to 80,457,903 shares, an

• verall reduction in the six months of 3,395,098 shares equivalent to 4.1 per cent of opening shares.

INVESTMENT PROPERTY The value of our portfolio is now £1,048.9 million and has increased by a net £26.4 million (2.6 per cent) since 31 December 2004. This movement included notional foreign exchange translation movements, which had the effect of reducing Swedish and Continental European property values by £43.1 million. Acquisitions of new properties totalled £13.2 million, refurbishment expenditure amounted to £26.5 million, principally at Solna, Stockholm and a revaluation surplus of £31.5 million was recorded at 30 June 2005. Disposals of £2.9 million were made during the period, offset by an equivalent amount of capitalised rent-free periods transferred from current assets. The revaluation surplus comprises:

£m

UK 12.0 Sweden 10.8 Continental Europe 8.7 31.5 CASH Cash at bank amounted to £54.2 million compared with £57.4 million at 31 December 2004.

DEBT STRUCTURE Net debt amounted to £600.4 million compared to £580.6 million as at 31 December 2004. The increase of £19.8 million reflects new property purchases of £13.7 million and refurbishment expenditure of £27.4 million. New loan finance raised in the six months, net of repayments, amounted to £42.1 million. The interest-bearing debt of the Group at 30 June 2005 was £654.6 million (31 December 2004: £637.9 million). The increase includes re-financing parts of the portfolios in each main market, which raised an additional £60.3 million of which £27.7 million was raised on the UK portfolio, £24.3 million (SEK325 million) in Sweden and £9.1 million (c13.6 million) in France. The funds raised included £9.9 million relating to the purchase of new buildings, of which £6.3 million related to French purchases and £3.6 million to a further property purchase at Solna. The strengthening of Sterling against the Swedish Kronor and the Euro decreased the sterling equivalent of foreign currency loans on translation by £26.3 million. These loans finance properties located in Sweden and Continental Europe. The fair value of the Group’s fixed rate debt was in excess of book value by an amount of £38.7 million (31 December 2004: £33.3 million) reflecting decreased long-term interest rates at 30 June 2005. If we were to hold loans at fair value, the notional after tax adjustment to NAV, at a corporation tax rate of 30 per cent (31 December 2004: 30 per cent) would be £27.1 million or 33.1 pence per share (31 December 2004: £23.3 million

• r 27.8 pence per share).

Gearing adjusted for IAS 12 deferred tax, at 30 June 2005 was 134.4 per cent (31 December 2004: 134.1 per cent), statutory gearing was 183.5 per cent (31 December 2004: 181.5 per cent). Non interest-bearing debt at 30 June 2005, represented by short-term creditors, amounted to £41.2 million (31 December 2004: £45.0 million). EFFECT OF FOREIGN EXCHANGE TRANSLATION ON OVERSEAS NET ASSETS An adverse foreign exchange movement on translation of adjusted net assets in Sweden and Continental Europe

• f £18.0 million (22.0 pence per share) was included within the Group net assets at 30 June 2005. The adverse

translation movement on overseas fixed assets was £43.1 million, offset by an exchange translation gain mainly

• n bank borrowings, of £26.3 million.

Statutory net assets include an offsetting exchange gain relating to the conversion of deferred tax provisions computed in local currency for overseas operations. This had the effect of reducing the above adjusted translation movement of £18.0 million to £12.2 million.

PROPERTY

The valuation of the Group’s portfolio at 30 June 2005, undertaken by Allsop & Co. in respect of the UK and Swedish properties and by DTZ Debenham Tie Leung in respect of the French properties, amounted to £1,048.9 million (31 December 2004: £1,022.5 million). The portfolio comprises 112 properties of which 45 are located in the UK, 23 in Sweden, 42 in France, 1 in Germany and 1 in Luxembourg, with a total lettable area of 609,328 sq.m (6,558,980 sq. ft.). UK The UK portfolio, including joint ventures, has increased in value by 3.5 per cent from £479.4 million to £496.1 million since December. Office yields have shown further compression and we are beginning to realise the benefits of recent refurbishments carried out at a number of our properties including Westminster Tower, SE1 and Quayside, Fulham SW6. There has been much activity within the Spring Gardens Estate during the first half of the year. In April, we started construction of an ‘infill’ office block between Units 3 and 4, which upon completion at the end of 2005 will provide further office accommodation of approximately 855 sq.m (9,203 sq.ft) for our Government tenant. The deal for this letting was signed last year and at completion our tenant will be granted a new 20 year lease at £32.00 per sq.ft.

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On 21 June 2005 planning consent was granted for another infill block between Units 5 and 6. This will provide 1,000 sq.m (10,600 sq.ft) of office accommodation. Our tenant has an option to call for this infill to be built and on completion the building would be let at a rent of £32.00 per sq.ft as part of the new 20 year lease granted in respect

• f the adjoining properties.

One final infill block is capable of being built between Units 1 and 2. This would provide a further 1,558 sq.m (16,770 sq.ft) of net office space. On 9th August 2005 planning consent was granted for this final infill although as yet terms have not been agreed for its construction. The overcladding and refurbishment of Great West House on the Great West Road, Brentford started in March and is progressing well. Completion remains on schedule for the first quarter of 2006. Approximately 5,070 sq.m (54,500 sq.ft) is currently vacant, representing in the order of 44 per cent of our vacant stock in the UK portfolio. There are signs of tenant demand improving in West London and we are gearing up for a proactive marketing campaign in advance of completion during the first quarter of 2006. The UK vacancy rate, excluding joint ventures, which are fully let, has increased marginally from 7.2 per cent to 7.5 per cent since December. This is largely accounted for by the 998 sq.m (15,000 sq.ft) of offices that became vacant at Chancel House, Neasden. We have refurbished the offices vacated on the 5th floor, and carried out other improvement works to the property including replacement air conditioning, lifts and a new reception. The refurbishment of the reception and common areas at Quayside, Fulham, SW6 has also been completed and is having a positive impact on the marketing of the remaining vacant offices. The five apartments on the top two floors of Ingram House, John Adam Street, WC2 have been completed, as has the refurbishment of the offices over the lower three floors. The office space, comprising 365 sq.m (3,929 sq.ft) was let prior to completion to Spayne Lindsay and Co. and the Internet Advertising Bureau at an office rent of £323 per sq.m (£30 per sq.ft), whilst three out of the five apartments have been let. Other important lettings during the first half include the letting of 35 Albert Embankment, SE1 to Lovatt Developments Ltd (331 sq.m, 3,563 sq.ft), the letting of the 9th floor at Westminster Tower, SE1 to Westminster Live Ltd (290 sq.m, 3,124 sq.ft) and the letting at CI Tower, New Malden to the Metropolitan Police Authority (116 sq.m, 1,249 sq.ft). Our marketing of the office element of The Shard at London Bridge continues following the pre-letting of the hotel to Shangri-La at the start of the year. The outlook for the second half is positive. With a strengthening occupational market we look forward to reaping the benefits of the improvements carried out at Chancel House, Quayside and Westminster Tower. Finding new investment product that offers value for money is increasingly challenging but we continue to pursue a number of

• pportunistic and site specific acquisitions.

SWEDEN The Swedish investment market has continued to attract international and local investment and that, together with a fall in short-term Swedish interest rates has contributed to a compression of yields over the last twelve months. The general letting market has stabilised and vacant space is now reducing, particularly in the Greater Stockholm area. Solna Since the beginning of the year we have signed new leases over 9,380 sq.m (100,968 sq.ft) of previously vacant space at Solna Business Park. In Fräsaren 11, Alcatel, the French telecom company, has moved into 1,324 sq.m (14,252 sq.ft). The refurbishment of Fräsaren 12 was completed on schedule enabling ICA to successfully open their supermarket on 25 May and move into its new head office premises on 15 August as planned. Another new tenant, SYSteam, will occupy a further 1,785 sq.m (19,214 sq.ft) with effect from 1 April 2006. At Smeden 1, a ten year lease has been signed with Nautilus, one of the biggest gym operators in Sweden. Our Business Centre has re-opened in newly refurbished space of 1,806 sq.m (19,440 sq.ft) and Ginos Coffee House and restaurant opened for business within its 146 sq.m (1,572 sq.ft) premises in June.

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In April 2005 we purchased an additional building at Solna Business Park, known as Yrket 3, for a total price of SEK 70 million (£5.3 million) including costs. The property comprises a lettable area of 6,273 sq.m (67,524 sq.ft) and generates rent of SEK 5.0 million (£0.4 million), 85 per cent of which is secure until 2009. The return on equity after financing is 18.4 per cent and the purchase allows us to improve access to our existing buildings, particularly those used for retail purposes. The property also has significant development potential in its own right. Solna Business Park has now become a landmark within Greater Stockholm and is fast developing a reputation as one of the capital’s best developments of its type. Lövgärdet has continued to be fully let and has performed well and in accordance with our projections. Vänerparken provides key facilities and services to its local community including hospital services and sports and leisure facilities as well as offices and a university, which has extended its lease to mid 2008. The development is currently 96 per cent let. CONTINENTAL EUROPE Overall, the French letting market remains quiet reflecting the economy as a whole. Take–up of new lettings in France in general was slightly down on the same period for the previous year. Vacant space in the portfolio has increased to 14,157 sq.m (152,389 sq.ft) or 9.3 per cent by area (December 2004: 5.9 per cent). The principal reason for this was the vacation of the 6,026 sq.m (64,865 sq.ft) property, Le 41, in Paris-La Défense by IBM, who had previously fully occupied the building. This currently accounts for 42.6 per cent

• f vacant space in the French portfolio. The property has undergone a minor refurbishment and is being actively

marketed for letting. New space was let amounting to 6,376 sq.m (68,633 sq.ft), within a variety of properties during the six months to 30 June 2005. As a consequence, with the exception of the above mentioned Le 41, vacant space within the rest of the portfolio reduced slightly from 5.9 per cent to 5.6 per cent by area. Furthermore, the negotiation in 1/15 Belin in Rueil of a new 6/9 year lease covering a net 9,468 sq.m (101,915 sq.ft) with BNP Paribas Insurance, completed in July, contemporaneously with the surrender of a lease by a previous

• tenant. This will result in an increase in revenue effective from January 2006 and in addition we will have secured

a further long-term lease to a prime tenant. In September 2005 we have signed two major lettings, one of 1,193 sq.m in Sigma to Database Factory, thereafter it only remains 579 sq.m (8.8 per cent) vacant in the building, and one of 1,064 sq.m in the Paul Doumer property to Veritas, the property is thereafter fully let. Revenue has been enhanced by rent indexation uplifts during the first half of the year of 5.5 per cent generating additional annual income of £0.8 million (c1.1 million). In March 2005 one 5,547 sq.m (59,709 sq.ft) property, Rue Raspail, Ivry-sur-Seine, Paris, was purchased at a cost

• f £8.1 million (c11.6 million) at an initial yield of 8.7 per cent and generates a return on equity of 40.7 per cent.

Three small properties with an area of 2,134 sq.m (22,971 sq.ft) were sold in the period generating a profit of £35,000. Two properties underwent significant renovation programs: Le Clemenceau in Courbevoie (Entry hall, new lifts) and Marcel Pourtout, in Rueil (Entry hall, surroundings and partial façade modification). We have recently contracted to purchase a 1,595 sq.m office property in Hamburg which is let to a sole tenant on a 15 year lease at a purchase price of £2.3 million (c3.4 million) at a yield of 6.9 per cent.

.10

Rent, book value and yields are analysed by location as set out below:

Yield Yield Total Net Book

• n net

when Rent rent Value rent fully let £000 % £000 % £000 % % %

UK London City Fringes 212 0.3% 212 0.3% 2,850 0.2% 7.4% London Mid town 6,980 9.3% 6,980 10.2% 106,350 10.1% 6.6% London West End 4,045 5.4% 4,045 5.9% 67,730 6.5% 6.0% London West 5,052 6.7% 4,649 6.8% 70,856 6.7% 6.6% London South Bank 12,357 16.4% 12,342 18.1% 184,608 17.6% 6.7% London South West 1,367 1.8% 1,227 1.8% 19,500 1.9% 6.3% London North West 3,063 4.1% 2,414 3.5% 42,500 4.1% 5.7% Outside London 245 0.3% 245 0.4% 1,825 0.2% 13.4% Total UK 33,321 44.3% 32,114 47.0% 496,219 47.1% 6.5% 6.7%* Sweden Sweden Gothenburg 5,700 7.6% 2,457 3.6% 38,886 3.7% 6.3% Sweden Stockholm 11,752 15.6% 9,749 14.3% 200,581 19.1% 4.9% Sweden Vänersborg 4,318 5.7% 3,701 5.4% 44,684 4.3% 8.3% Total Sweden 21,770 28.9% 15,907 23.3% 284,151 27.1% 5.6% 6.4%† Continental Europe France Paris 15,547 20.6% 15,547 22.9% 217,450 20.7% 7.1% France Lyon 2,692 3.6% 2,692 3.9% 30,275 2.9% 8.9% France Lille 565 0.8% 565 0.8% 6,289 0.6% 9.0% France Antibes 409 0.5% 409 0.6% 4,137 0.4% 9.9% Total France 19,213 25.5% 19,213 28.2% 258,151 24.6% 7.4% 8.4% Luxembourg 785 1.0% 785 1.2% 8,688 0.8% 9.0% Total Luxembourg 785 1.0% 785 1.2% 8,688 0.8% 9.0% 9.0% Germany 223 0.3% 206 0.3% 1,738 0.2% 11.9% Total Germany 223 0.3% 206 0.3% 1,738 0.2% 11.9% 11.9% Total Continental Europe 20,221 26.8% 20,204 29.7% 268,577 25.6% 7.5% 8.4% Group Total 75,312 100.0% 68,225 100.0% 1,048,947 100.0% 6.5% 7.0% Conversion rates: SEK/GBP 14.144 Euro/GBP 1.496 * Yields based on receivable rent and potential rents have been calculated on the assumption that book values at 30 June 2005 will

increase by anticipated refurbishment expenditure of approximately £13.7 million in respect of projects in the UK.

†Yields based on receivable rent and potential rents have been calculated on the assumption that book values will increase by

anticipated refurbishment expenditure of approximately £15.3 million in respect of projects in Solna, Stockholm, Sweden.

.11

Rent analysed by length of lease and location is set out below:

Space under refurb- Contracted Contracted ishment aggregate but not Unlet

• r with

rental income space planning producing at ERV consent Total Total Sq.m Sq.ft £000 £000 £000 £000 £000 %

UK >10 yrs 61,505 662,061 12,510 294 12,804 36.5% UK 5-10 yrs 43,429 467,484 10,477 10,477 29.9% UK < 5 yrs 45,786 492,855 9,994 46 10,040 28.6% Development Stock 1,177 12,670 15 15 0.0% Vacant 11,269 121,306 1,736 1,736 4.9% Total UK 163,166 1,756,376 32,981 340 1,751 – 35,072 100.0% Sweden > 10 yrs 40,966 440,969 4,563 4,563 17.7% Sweden 5-10 yrs 43,462 467,836 3,413 3,413 13.3% Sweden < 5 yrs 174,345 1,876,695 13,794 13,794 53.6% Refurbished space 25,358 272,960 3,106* 3,106 12.1% Vacant 10,193 109,720 859 859 3.3% Total Sweden 294,324 3,168,180 21,770 – 859 3,106 25,735 100.0% France 5-10 yrs 60,724 653,649 8,660 8,660 40.0% France < 5 yrs 70,164 755,264 10,553 10,553 48.8% Vacant 14,157 152,390 2,424 2,424 11.2% Total France 145,045 1,561,303 19,213 – 2,424 – 21,637 100.0% Luxembourg < 5 yrs 3,698 39,806 785 785 100.0% Total Luxembourg 3,698 39,806 785 – – – 785 100.0% Germany < 5 yrs 3,095 33,315 223 223 100.0% Total Germany 3,095 33,315 223 – – – 223 100.0% Summary Group > 10 yrs 102,471 1,103,030 17,073 294 17,367 20.8% Group 5-10 yrs 147,615 1,588,969 22,550 22,550 27.0% Group < 5 yrs 297,088 3,197,935 35,349 46 35,395 42.4% Refurbished space 25,358 272,960 3,106 3,106 3.7% Development Stock 1,177 12,670 15 15 0.0% Vacant 35,619 383,416 5,019 5,019 6.0% Group Total 609,328 6,558,980 74,972 340 5,034 3,106 83,452 100.0% * Of the rental due on refurbished space in Sweden, £0.3 million relates to Fräsaren 11, Solna (2,523 sq.m) which requires further

capital expenditure of £1.9 million.

.12

EQUITY INVESTMENTS

At 30 June 2005, equity investments held amounted to £19.1 million (December 2004:£22.7 million) excluding the Group’s cable assets and holdings in associates. The majority by value of these equity investments are listed investments, which are carried at fair market value, and represent approximately 1.6 per cent of the gross assets

• f the Group.

The carrying value of our portfolio of listed investments was £16.4 million at 30 June 2005, which includes an unrealised gain of £6.9 million. We believe that our unlisted investments have potential for growth in value in due course and we continue to be closely involved in monitoring their progress and add commercial support where appropriate. The investment division has been further formalised through the establishment of CLS Capital Partners Ltd as a holding company for all CLS’ venture capital investments. We have recruited a Board for CLS Capital Partners, the membership of which includes a number of non-executive directors who have either held senior positions in venture capital organisations or at Board level within successful blue chip companies.

CONCLUSION

The property portfolio has continued to perform well and we continue to search for attractive property investments that meet our strict investment criteria, within the UK, Sweden and Continental Europe. Our focus remains on our overriding objective to optimise shareholder returns. Finally, I am pleased to announce a restructuring of the senior management team in line with our overall planning for succession within the Group. Per Sjöberg will succeed Tom Thomson as Chief Executive Officer with effect from 1 January 2006. Per graduated from Stockholm University with a Bachelor degree in Business

• Administration. He is also an engineer and has experience of a number of large development projects globally.

Before joining CLS Per worked as an independent consultant, and set up his own consultancy company in 1996. He has been responsible for property development activities at the Group since 1 November 2001 and was appointed to the main board as Group Development Director on 6 February 2004. I would like to welcome Per to his new role and wish him every success. Tom Thomson has been associated with CLS for more than twenty years and has been Chief Executive Officer since October 2001. He will retain his main Board position and will become non-executive Vice Chairman. I give him my heart-felt thanks for the very significant contribution he has made to the success of the Group over the years and I very much look forward to continue to work with him in his new role for the foreseeable future.

• S. A. Mortstedt

Executive Chairman 23 September 2005

.13

30 June 30 June 31 Dec 2005 2004 2004 Restated Restated £000 £000 £000

Revenue 45,231 42,355 86,913 Rental and similar income 38,386 36,172 74,489 Service charge and similar income 4,066 3,462 6,900 Service charge expense and similar charges (8,438) (7,475) (13,772) Net rental income 34,014 32,159 67,617 Turnover from non-property activities 2,779 2,721 5,524 Cost of sales of non-property activities (1,275) (2,536) (4,076) Net income non-property activities 1,504 185 1,448 Other operating gains 2,626 945 2,651 Administrative expenses (10,224) (7,277) (15,003) Net property expenses (1,800) (1,891) (3,902) Operating profit before net gains on investment properties 26,120 24,121 52,811 Net gain from fair value adjustment on investment property 31,545 10,389 36,988 Profit from sale of investment property 35 539 464 Operating profit 57,700 35,049 90,263 Finance income 453 897 1,801 Finance expense (19,038) (17,462) (36,050) Share of loss of associates (277) (40) (201) Profit before income tax 38,838 18,444 55,813 Taxation – current (497) (252) (596) Taxation – deferred (10,188) (5,125) (16,042) (10,685) (5,377) (16,638) Profit for the period 28,153 13,067 39,175 Attributable to: Equity holders of the Company 28,224 13,680 40,253 Equity minority interest (71) (613) (1,078) 28,153 13,067 39,175 Basic Earnings per Share 33.8p 15.7p 46.7p Diluted Earnings per Share 33.6p 15.5p 46.5p

.14

UNAUDITED CONSOLIDATED INCOME STATEMENT

for the six months ended 30 June 2005

30 June 30 June 31 Dec 2005 2004 2004 Restated Restated £000 £000 £000

ASSETS Non-current assets Investment property 1,048,948 918,671 1,022,539 Property, plant and equipment 10,337 7,235 10,710 Intangible assets 2,823 198 2,944 Investment in associates 3,618 3,731 3,010 Available-for-sale investments 19,129 171 171 Derivative financial instruments 1,003 – – Deferred income tax assets 16,298 13,684 13,813 Trade and other receivables 433 3,455 3,163 1,102,589 947,145 1,056,350 Current assets Trade and other receivables 9,145 15,682 11,261 Investments – 8,036 10,492 Cash and cash equivalents 54,244 61,896 57,371 63,389 85,614 79,124 Total assets 1,165,978 1,032,759 1,135,474 LIABILITIES Non-current liabilities Trade and other payables 1,151 4,187 1,279 Deferred income tax liabilities 136,848 109,066 127,951 Borrowings, including finance leases 626,387 555,008 620,508 Provisions for other liabilities and charges – – 301 764,386 668,261 750,039 Current liabilities Trade and other payables 39,789 35,100 44,128 Current income tax liabilities 1,330 1,149 902 Borrowings, including finance leases 28,363 33,620 17,447 Derivative financial instruments 1,675 – – 71,157 69,869 62,477 Total liabilities 835,543 738,130 812,516 NET ASSETS 330,435 294,629 322,958 EQUITY Capital and reserves attributable to the Company’s equity holders Share capital 21,382 21,365 21,374 Other reserves 115,668 113,394 122,070 Retained earnings 194,120 161,383 181,492 331,170 296,142 324,936 Equity minority interests (735) (1,513) (1,978) TOTAL EQUITY 330,435 294,629 322,958

.15

UNAUDITED CONSOLIDATED BALANCE SHEET

at 30 June 2005

.16

Attributable to equity holders of the Company Share Other Retained Minority capital reserves earnings Interest Total £000 £000 £000 £000 £000

Balance at 1 January 2004 as restated under IFRS 21,911 120,610 157,034 (900) 298,655 Arising in the period:– Currency translation differences on foreign currency net investments – (8,159) – – (8,159) Expenses of share issue/purchase of own shares – – (67) – (67) Purchase of own shares – – (9,264) – (9,264) Issue of shares 63 329 – – 392 Cancellation of shares (609) 609 – – – Net gains/(losses) recognised directly in equity (546) (7,221) (9,331) – (17,098) Employee share option scheme – 5 – – 5 Profit/(loss) for the period – – 13,680 (613) 13,067 Total (decrease)/increase in equity for the period (546) (7,216) 4,349 (613) (4,026) At 30 June 2004 as restated under IFRS 21,365 113,394 161,383 (1,513) 294,629 Arising in the period:– Currency translation differences on foreign currency net investments – 8,644 (1) – 8,643 Expenses of share issue/purchase of own shares – – (51) – (51) Purchase of own shares – – (6,412) – (6,412) Issue of shares 9 27 – – 36 Net gains/(losses) recognised directly in equity 9 8,671 (6,464) – 2,216 Employee share option scheme – 5 – – 5 Profit for the period – – 26,573 (465) 26,108 Total increase/(decrease) in equity for the period 9 8,676 20,109 (465) 28,329 At 31 December 2004 as restated under IFRS 21,374 122,070 181,492 (1,978) 322,958 Adoption of IAS 32 and IAS 39 – 12,270 (4,148) – 8,122 At 1 January 2005 21,374 134,340 177,344 (1,978) 331,080 Arising in the period:– Fair value gains/(losses) – available-for-sale – (5,069) – – (5,069) – cash flow hedges – (1,523) – – (1,523) Currency translation differences on foreign currency net investments – (12,219) – – (12,219) Expenses of share issue/purchase of own shares – – (69) – (69) Purchase of own shares – – (10,066) – (10,066) Issue of shares 8 136 – – 144 Net gains/(losses) recognised directly in equity 8 (18,675) (10,135) – (28,802) Employee share option scheme – 3 – – 3 Reduction in minority interest – – (1,314) 1,314 – Profit for the period – – 28,225 (71) 28,154 Total increase/(decrease) in equity for the period 8 (18,672) 16,776 1,243 (645) At 30 June 2005 21,382 115,668 194,120 (735) 330,435

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

30 June 30 June 31 Dec 2005 2004 2004 Restated Restated £000 £000 £000

Cash flows from operating activities Cash generated from operations 22,440 22,585 52,257 Interest paid (17,756) (16,719) (33,326) Income tax paid (228) (238) (539) Net cash inflow from operating activities 4,456 5,628 18,392 Cash flows from investing activities Purchase of investment property (13,154) (16,067) (38,249) Capital expenditure on investment property (27,387) (6,818) (31,177) Proceeds from sale of investment property 2,973 1,202 8,486 Purchases of property, plant and equipment (PPE) (474) (352) (1,545) Proceeds from sale of PPE – – 2,029 Purchase of available-for-sale financial assets (2,181) (4,073) (6,529) Purchase of interests in associates (277) (546) (1,486) Interest received 783 794 1,715 Net cash outflow from investing activities (39,717) (25,860) (66,756) Cash flows from financing activities Issue of shares 143 392 428 Purchase of own shares (10,136) (9,331) (15,795) New loans 61,121 45,003 112,938 Issue costs of new loans (796) (936) (2,018) Interest rate caps purchased (6) (1,063) (1,234) Repayment of loans (18,192) (9,168) (45,814) Net cash inflow from financing activities 32,134 24,897 48,505 Net (decrease)/increase in cash and cash equivalents (3,127) 4,665 141 Cash and cash equivalents at beginning of period 57,371 57,231 57,230 Cash and cash equivalents at end of period 54,244 61,896 57,371

UNAUDITED CONSOLIDATED CASH FLOW STATEMENT

for the six months ended 30 June 2005

.17

.18

INTRODUCTION We have been instructed by the company to review the financial information for the six months ended 30 June 2005 which comprises consolidated interim balance sheet as at 30 June 2005 and the related consolidated interim statements of income, cash flows and statement of changes in equity for the six months then ended and related

• notes. We have read the other information contained in the interim report and considered whether it contains any

apparent misstatements or material inconsistencies with the financial information. DIRECTORS’ RESPONSIBILITIES The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority. As disclosed in note 2, the next annual financial statements of the group will be prepared in accordance with accounting standards adopted for use in the European Union. This interim report has been prepared in accordance with the basis set out in note 3. The accounting policies are consistent with those that the directors intend to use in the next annual financial

• statements. As explained in note 2, there is, however, a possibility that the directors may determine that some

changes are necessary when preparing the full annual financial statements for the first time in accordance with accounting standards adopted for use in the European Union. The IFRS standards and IFRIC interpretations that will be applicable and adopted for use in the European Union at 31 December 2005 are not known with certainty at the time of preparing this interim financial information. REVIEW WORK PERFORMED We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the disclosed accounting policies have been applied. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit and therefore provides a lower level of assurance. Accordingly we do not express an audit opinion on the financial information. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Listing Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. REVIEW CONCLUSION On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2005. PricewaterhouseCoopers LLP Chartered Accountants London 23 September 2005

INDEPENDENT REVIEW REPORT TO CLS HOLDINGS PLC

.19

NOTES TO THE INTERIM FINANCIAL REPORT

1. GENERAL INFORMATION CLS Holdings plc (‘the Company’) and its subsidiaries (together ‘CLS Holdings’ or the ‘Group’) are an investment property group which is principally involved in the investment, development and management of commercial properties. The Group’s principal operations are carried out in the United Kingdom, Sweden and Continental Europe. The Company is registered in the UK, registration number 2714781, of registered address: One Citadel Place, Tinworth Street, London SE11 5EF. The Company has its primary listing on the London Stock Exchange. The Interim Report is unaudited and does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The statutory accounts for 2004, which were prepared under UK Generally Accepted Accounting Principles (‘UK GAAP’), a copy of the statutory accounts for that year has been filed with the Registrar of Companies. The Auditors’ opinion on those accounts was unqualified and did not contain a statement made under section 237 of the Companies Act 1985. The interim financial information was approved by a duly appointed and authorised committee of the board

• f directors on 22 September 2005. It has been reviewed by the auditors as set out in their report on page 18.

The income statement and balance sheet have been prepared, in accordance with applicable International Accounting Standards (‘IAS’) and International Financial Reporting Standards (‘IFRS’) issued by the International Accounting Standards Board (‘IASB’) and on the basis that all such standards will be endorsed by the European Union (‘EU’). These standards are collectively referred to as ‘IFRS’. The maintenance and integrity of the CLS Holdings Plc web site is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim report since it was initially presented on the web site. Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions. 2. TRANSITION TO IFRS To date, CLS Holdings plc (‘CLS Holdings’ or the ‘Group’) has prepared its financial statements under UK

• GAAP. Under European legislation, all companies listed in the EU are required to prepare consolidated

financial statements under IFRS for financial periods beginning on or after 1 January 2005. As a result the Group will be required to prepare its consolidated financial statements in accordance with IFRS as adopted by the EU. The Group’s first IFRS financial statements will be for the year ended 31 December 2005. This report is prepared in accordance with the transitional provisions set out in IFRS 1 – ‘First-time Adoption

• f IFRS’. The Group has applied IFRS 1 to provide a starting point for reporting under IFRS. The date of

transition to IFRS is 1 January 2004, as determined in accordance with IFRS 1. All comparative information in these financial statements has been restated to reflect the Group’s adoption of IFRS. In accordance with the transitional provisions set out in IFRS 1, and other relevant standards, the Group has applied IFRS expected to be in force as at 31 December 2005 in its financial reporting with effect from 1 January 2004 (date of transition to IFRS), however the Group has made use of the exemption available under IFRS 1 to only apply IAS 32 and IAS 39 from 1 January 2005. The reconciliations of equity at 1 January 2004 (the date of transition to IFRS) and at 31 December 2004 (date of last UK GAAP financial statements) and the reconciliation of profit for 2004, as required by IFRS 1, including the significant accounting policies and selected notes to 31 December 2004, have been published* in the ‘IFRS Transition Report 31 December 2004’.

.20

2. TRANSITION TO IFRS (continued) Reconciliations of equity and profit for the periods ended 30 June 2004 and 31 December 2004, and a reconciliation of equity at 1 January 2005 (the date of transition for IAS 32 and IAS 39) have been presented below in section 4 below. This Interim Report has been prepared in accordance with those IFRS standards and International Financial Reporting Interpretations Committee (‘IFRIC’) interpretations issued and effective or issued and early adopted as at the time of preparing this report. The IFRS standards and IFRIC interpretations that will be applicable at 31 December 2005, including those that will be applicable on an optional basis, are not known with certainty at the time of preparing this report, as further standards and interpretations may be issued that could be applicable for financial years beginning on or after 1 January 2005 or that are applicable to later accounting periods but with the option for companies to adopt for earlier periods. The Group’s first annual financial statements prepared under IFRS may, therefore, be prepared in accordance with different accounting policies to those used in the preparation of the financial information in this document. In addition, IFRS is currently being applied in the EU and other countries for the first time and contains many new and revised standards. Therefore practice on which to draw in applying the standards may develop. At this preliminary stage, before the Group’s first annual financial statements prepared under IFRS are completed, it should be noted that the financial information in this document could be subject to change. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgement in the process of applying the Group’s accounting policies. Although these estimates are based on management’s best knowledge of the amount, events or actions, actual results ultimately may differ from those estimates. * The ‘IFRS Transition Report 31 December 2004’ was released to the Stock Exchange and published on the Company’s website,

www.clsholdings.com, on 15 September 2005.

3. ACCOUNTING POLICIES The interim financial report has been prepared in accordance with the Group’s IFRS accounting policies. These are the first IFRS financial statements of the company, details of the impact of transition to IFRS are set out in the following sections, and in the published* ‘IFRS Transition Report 31 December 2004’. Changes in accounting policies The same accounting policies and methods of computation are followed in the interim financial report as were followed in the published* ‘IFRS Transition Report 31 December 2004’. For the recognition and measurement of financial instruments, the Group applied the exemption in IFRS 1 – ‘First Time Adoption of International Financial Reporting Standards’ to adopt IAS 32 – ‘Financial Instruments: Disclosure and Presentation’ and IAS 39 – ‘Financial Instruments: Recognition and Measurement’ from 1 January 2005 and comparative information presented does not need to comply with these standards in the first year on transition.

NOTES TO THE INTERIM FINANCIAL REPORT

.21

3. ACCOUNTING POLICIES (continued) The principal changes with the adoption of IAS 32 and IAS 39 from 1 January 2005 are: Hedge accounting Hedging instruments such as interest rate swaps and forward foreign exchange contracts have been included in the balance sheet at fair value. Movements in fair value of these hedging instruments are recognised in the income statement or in equity, as appropriate. To the extent that such instruments are ineffective hedges, they are included in the balance sheet at fair value with changes in fair value being recognised in the income statement. These instruments are classified in the balance sheet as ‘Derivative financial instruments’ under either assets or liabilities, as appropriate. Investments Investments are carried at fair value on the balance sheet, with changes in the fair value being recognised either in the income statement or in equity and recycled through the income statement when the investments are realised, as appropriate. Under UK GAAP these investments were carried at the lower of cost and market value. Under IFRS, these investments will classified as ‘Available-for-sale investments’ in the balance sheet. Other financial instruments Movements in the fair value of those derivative financial instruments which are not accounted for as hedging instruments are recognised in the income statement and not by way of a note, as is the case under UK GAAP. These instruments are classified in the balance sheet as ‘Derivative financial instruments’ under either assets or liabilities, as appropriate. Borrowings The version of IAS 39 adopted by the EU prohibits the option to carry borrowings at their fair values, and consequently the Group continue to include borrowings in the balance sheet at amortised cost. The fair value of borrowings will be disclosed under IAS 32, as is the case under UK GAAP. A reconciliation of the transition to IAS 32 and IAS 39 at 1 January 2005 can be found in section 4.5 below. The revised accounting policies for derivative financial instruments and other investments are set out in the published* ‘IFRS Transition Report 31 December 2004’. * The ‘IFRS Transition Report 31 December 2004’ was released to the Stock Exchange and published on the Company’s website,

www.clsholdings.com, on 15 September 2005.

NOTES TO THE INTERIM FINANCIAL REPORT

.22

4. RECONCILIATIONS BETWEEN IFRS AND UK GAAP (as set out on the following pages) 4.1 RECONCILIATION OF CONSOLIDATED IFRS BALANCE SHEET AT 30 JUNE 2004

Previously reported Share based Business Income under payments combinations taxes UK GAAP* IFRS 2 IFRS 3 IAS 12 £000 £000 £000 £000

ASSETS Non-current assets Investment property 882,390 – – – Property, plant and equipment 5,063 – – – Intangible assets – – – – Investments in associates 3,731 – – – Investments in joint ventures 8,554 – – – Investments 171 – – – Deferred income tax assets – – – 13,684 Trade and other receivables 3,379 – – – 903,288 – – 13,684 Current assets Trade and other receivables 15,049 – – – Investments 8,036 – – – Cash and cash equivalents 60,189 – – – 83,274 – – – Total assets 986,562 – – 13,684 LIABILITIES Non-current liabilities Trade and other payables 4,187 – – – Deferred income tax liabilities 6,231 – – 102,835 Borrowings, including finance leases 526,612 – – – Provisions for other liabilities and charges – – – – 537,030 – – 102,835 Current liabilities Trade and other payables 33,017 – – – Current income tax liabilities 1,149 – – – Borrowings, including finance leases 32,970 – – – 67,136 – – – Total liabilities 604,166 – – 102,835 Net assets 382,396 – – (89,151) EQUITY Capital and reserves attributable to the Company’s equity holders Share capital 21,365 – – – Other reserves 332,281 10 – 3,082 Retained earnings 30,263 (10) – (92,233) 383,909 – – (89,151) Minority interest (1,513) – – – Total equity 382,396 – – (89,151) Notes – refer to section 4.7 a. b. c.

* Reformatted to reflect IFRS reporting requirements

NOTES TO THE INTERIM FINANCIAL REPORT

.23

Operating Interests lease Foreign Investments in joint Impairment Investment Total Restated Leases incentives exchange in associates ventures

• f assets

property Adjustments under IAS 17 SIC 15 IAS 21 IAS 28 IAS 31 IAS 36 IAS 40 IFRS £000 £000 £000 £000 £000 £000 £000 £000 £000

146 – – – 36,135 – – 36,281 918,671 – – – – 2,172 – – 2,172 7,235 – – – – 198 – – 198 198 – – – (71) – 71 – – 3,731 – – – – (8,554) – – (8,554) – – – – – – – – – 171 – – – – – – – 13,684 13,684 – – – – 76 – – 76 3,455 146 – – (71) 30,027 71 – 43,857 947,145 – 179 – – 454 – – 633 15,682 – – – – – – – – 8,036 – – – – 1,707 – – 1,707 61,896 – 179 – – 2,161 – – 2,340 85,614 146 179 – (71) 32,188 71 – 46,197 1,032,759 – – – – – – – – 4,187 – – – – – – – 102,835 109,066 146 – – – 28,250 – – 28,396 555,008 – – – – – – – – – 146 – – – 28,250 – – 131,231 668,261 – – – – 2,083 – – 2,083 35,100 – – – – – – – – 1,149 – – – – 650 – – 650 33,620 – – – – 2,733 – – 2,733 69,869 146 – – – 30,983 – – 133,964 738,130 – 179 – (71) 1,205 71 – (87,767) 294,629 – – – – – – – – 21,365 – – 3,814 – – – (225,793) (218,887) 113,394 – 179 (3,814) (71) 1,205 71 225,793 131,120 161,383 – 179 – (71) 1,205 71 – (87,767) 296,142 – – – – – – – – (1,513) – 179 – (71) 1,205 71 – (87,767) 294,629 d. e. f. g. h. i. j.

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4.2 RECONCILIATION OF CONSOLIDATED IFRS INCOME STATEMENT FOR THE PERIOD ENDED 30 JUNE 2004

Previously reported Share based Business Income under payments combinations taxes UK GAAP* IFRS 2 IFRS 3 IAS 12 £000 £000 £000 £000

Rental and similar income 34,818 – – – Service charge and similar income 3,264 – – – Service charge expense and similar charges (7,234) – – – Net rental income 30,848 – – – Turnover from non-property activities 2,721 – – – Cost of sales of non-property activities (2,536) – – – Net income non-property activities 185 – – – Other operating gains/(losses) – net 945 – – – Administrative expenses (7,185) (5) – – Net property expenses (1,896) – – – Operating profit before net gain on investment properties 22,897 (5) – – Net gain from fair value adjustment on investment property – – – – Profit on sale of investment property 539 – – – Operating profit 23,436 (5) – – Finance income 897 – – – Finance expense (17,457) – – – Share of (loss)/profit of associates (40) – – – Share of (loss)/profit of JVs 1,180 – – – Profit before income tax 8,016 (5) – – Taxation – current (252) – – – Taxation – deferred (551) – – (4,574) Profit for the period 7,213 (5) – (4,574) Attributable to: Equity holders of the parent 7,826 (5) – (4,574) Minority interest (613) – – – 7,213 (5) – (4,574) Notes – refer to section 4.7 a. b. c.

* Reformatted to reflect IFRS reporting requirements

NOTES TO THE INTERIM FINANCIAL REPORT

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Operating Interests lease Foreign Investments in joint Impairment Investment Total Restated Leases incentives exchange in associates ventures

• f assets

property Adjustments under IAS 17 SIC 15 IAS 21 IAS 28 IAS 31 IAS 36 IAS 40 IFRS £000 £000 £000 £000 £000 £000 £000 £000 £000

– 44 – – 1,310 – – 1,354 36,172 – – – – 198 – – 198 3,462 – – – – (241) – – (241) (7,475) – 44 – – 1,267 – – 1,311 32,159 – – – – – – – – 2,721 – – – – – – – – (2,536) – – – – – – – – 185 – – – – – – – – 945 – – – – (87) – – (92) (7,277) 5 – – – – – – 5 (1,891) 5 44 – – 1,180 – – 1,224 24,121 – – – – – – 10,389 10,389 10,389 – – – – – – – – 539 5 44 – – 1,180 – 10,389 11,613 35,049 – – – – – – – – 897 (5) – – – – – – (5) (17,462) – – – 71 – (71) – – (40) – – – – (1,180) – – (1,180) – – 44 – 71 – (71) 10,389 10,428 18,444 – – – – – – – – (252) – – – – – – – (4,574) (5,125) – 44 – 71 – (71) 10,389 5,854 13,067 – 44 – 71 – (71) 10,389 5,854 13,680 – – – – – – – – (613) – 44 – 71 – (71) 10,389 5,854 13,067 d. e. f. g. h. i. j.

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4.3 RECONCILIATION OF CONSOLIDATED IFRS BALANCE SHEET AT 31 DECEMBER 2004

Previously reported Share based Business Income under payments combinations taxes UK GAAP* IFRS 2 IFRS 3 IAS 12 £000 £000 £000 £000

ASSETS Non-current assets Investment properties 981,560 – – – Property, plant and equipment 5,040 – – – Intangible assets – – 2,509 – Investments in associates 3,010 – – – Investments in joint ventures 13,848 – – – Investments 171 – – – Deferred income tax assets – – – 13,813 Trade and other receivables 3,096 – – – 1,006,725 – 2,509 13,813 Current assets Trade and other receivables 10,480 – – – Investments 10,492 – – – Cash and cash equivalents 56,680 – – – 77,652 – – – Total assets 1,084,377 – 2,509 13,813 LIABILITIES Non-current liabilities Trade and other payables 1,279 – – – Deferred income tax liabilities 6,777 – – 121,174 Borrowings, including finance leases 592,439 – – – Provisions for other liabilities and charges 301 – – – 600,796 – – 121,174 Current liabilities Trade and other payables 39,472 – – – Current income tax liabilities 902 – – – Borrowings, including finance leases 16,825 – – – 57,199 – – – Total liabilities 657,995 – – 121,174 Net assets 426,382 – 2,509 (107,361) EQUITY Capital and reserves attributable to the Company’s equity holders Share capital 21,374 – – – Other reserves 374,592 15 97 (951) Retained earnings 32,394 (15) 2,412 (106,410) 428,360 – 2,509 (107,361) Minority interest (1,978) – – – Total equity 426,382 – 2,509 (107,361) Notes – refer to section 4.7 a. b. c.

* Reformatted to reflect IFRS reporting requirements

NOTES TO THE INTERIM FINANCIAL REPORT

.27

Operating Interests lease Foreign Investments in joint Impairment Investment Total Restated Leases incentives exchange in associates ventures

• f assets

property Adjustments under IAS 17 SIC 15 IAS 21 IAS 28 IAS 31 IAS 36 IAS 40 IFRS £000 £000 £000 £000 £000 £000 £000 £000 £000

146 – – – 40,833 – – 40,979 1,022,539 – – – – 5,670 – – 5,670 10,710 – – – – 435 – – 2,944 2,944 – – – (143) – 143 – – 3,010 – – – – (13,848) – – (13,848) – – – – – – – – – 171 – – – – – – – 13,813 13,813 – – – – 67 – – 67 3,163 146 – – (143) 33,157 143 – 49,625 1,056,350 – 223 – – 558 – – 781 11,261 – – – – – – – – 10,492 – – – – 691 – – 691 57,371 – 223 – – 1,249 – – 1,472 79,124 146 223 – (143) 34,406 143 – 51,097 1,135,474 – – – – – – – – 1,279 – – – – – – – 121,174 127,951 146 – – – 27,923 – – 28,069 620,508 – – – – – – – – 301 146 – – – 27,923 – – 149,243 750,039 – – – – 4,656 – – 4,656 44,128 – – – – – – – – 902 – – – – 622 – – 622 17,447 – – – – 5,278 – – 5,278 62,477 146 – – – 33,201 – – 154,521 812,516 – 223 – (143) 1,205 143 – (103,424) 322,958 – – – – – – – – 21,374 – – 13,096 – – – (264,779) (252,522) 122,070 – 223 (13,096) (143) 1,205 143 264,779 149,098 181,492 – 223 – (143) 1,205 143 – (103,424) 324,936 – – – – – – – – (1,978) – 223 – (143) 1,205 143 – (103,424) 322,958 d. e. f. g. h. i. j.

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4.4 RECONCILIATION OF CONSOLIDATED IFRS INCOME STATEMENT FOR YEAR ENDED 31 DECEMBER 2004

Previously reported Share based Business Income under payments combinations taxes UK GAAP* IFRS 2 IFRS 3 IAS 12 £000 £000 £000 £000

Rental and similar income 71,787 – – – Service charge and similar income 6,401 – – – Service charge expense and similar charges (13,293) – – – Net rental income 64,895 – – – Turnover from non-property activities 5,524 – – – Cost of sales of non-property activities (4,076) – – – Net income non-property activities 1,448 – – – Other operating gains/(losses) – net 2,651 – – – Administrative expenses (14,845) (10) – – Net property expenses (3,911) – – – Operating profit before net gain on investment properties 50,238 (10) – – Net gain from fair value adjustment on investment property – – (1,394) – Profit on sale of investment properties 464 – – – Operating profit 50,702 (10) (1,394) – Finance income 1,801 – – – Finance expense (36,041) – – – Share of (loss)/profit of associates (201) – – – Share of (loss)/profit of JVs 2,491 – – – Profit before income tax 18,752 (10) (1,394) – Taxation – current (596) – – – Taxation – deferred (1,097) – 3,806 (18,751) Profit for year 17,059 (10) 2,412 (18,751) Attributable to: Equity holders of the parent 18,137 (10) 2,412 (18,751) Minority interest (1,078) – – – 17,059 (10) 2,412 (18,751) Notes – refer to section 4.7 a. b. c.

* Reformatted to reflect IFRS reporting requirements

NOTES TO THE INTERIM FINANCIAL REPORT

.29

Operating Interests lease Foreign Investments in joint Impairment Investment Total Restated Leases incentives exchange in associates ventures

• f assets

property Adjustments under IAS 17 SIC 15 IAS 21 IAS 28 IAS 31 IAS 36 IAS 40 IFRS £000 £000 £000 £000 £000 £000 £000 £000 £000

– 83 – – 2,619 – – 2,702 74,489 – – – – 499 – – 499 6,900 – – – – (479) – – (479) (13,772) – 83 – – 2,639 – – 2,722 67,617 – – – – – – – – 5,524 – – – – – – – – (4,076) – – – – – – – – 1,448 – – – – – – – – 2,651 – – – – (148) – – (158) (15,003) 9 – – – – – – 9 (3,902) 9 83 – – 2,491 – – 2,573 52,811 – 5 – – – – 38,377 36,988 36,988 – – – – – – – – 464 9 88 – – 2,491 – 38,377 39,561 90,263 – – – – – – – – 1,801 (9) – – – – – – (9) (36,050) – – – 143 – (143) – – (201) – – – – (2,491) – – (2,491) – – 88 – 143 – (143) 38,377 37,061 55,813 – – – – – – – – (596) – – – – – – – (14,945) (16,042) – 88 – 143 – (143) 38,377 22,116 39,175 – 88 – 143 – (143) 38,377 22,116 40,253 – – – – – – – – (1,078) – 88 – 143 – (143) 38,377 22,116 39,175 d. e. f. g. h. i. j.

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4.5 RECONCILIATION OF CONSOLIDATED IFRS BALANCE SHEET AT 1 JANUARY 2005

Financial Income Total IFRS (excl. IAS 32 instruments taxes Adjustments (incl. IAS 32 and IAS 39) IAS 39 IAS 12 and IAS 39) £000 £000 £000 £000 £000

ASSETS Non-current assets Investment property 1,022,539 – – – 1,022,539 Property, plant and equipment 10,710 – – – 10,710 Intangible assets 2,944 – – – 2,944 Investments in associates 3,010 – – – 3,010 Available-for-sale investments – 22,671 – 22,671 22,671 Investments 171 (171) – (171) – Derivative financial instruments – 1,315 – 1,315 1,315 Deferred income tax assets 13,813 – 1,016 1,016 14,829 Trade and other receivables 3,163 (1,968) – (1,968) 1,195 1,056,350 21,847 1,016 22,863 1,079,213 Current assets Trade and other receivables 11,261 (599) – (599) 10,662 Investments 10,492 (10,492) – (10,492) – Cash and cash equivalents 57,371 – – – 57,371 79,124 (11,091) – (11,091) 68,033 Total assets 1,135,474 10,756 1,016 11,772 1,147,246 LIABILITIES Non-current liabilities Trade and other payables 1,279 – – – 1,279 Deferred income tax liabilities 127,951 – 2,888 2,888 130,839 Borrowings, including finance leases 620,508 – – – 620,508 Derivative financial instruments – 1,063 – 1,063 1,063 Provisions for other liabilities and charges 301 (301) – (301) – 750,039 762 2,888 3,650 753,689 Current liabilities Trade and other payables 44,128 – – – 44,128 Current income tax liabilities 902 – – – 902 Borrowings, including finance leases 17,447 – – – 17,447 62,477 – – – 62,477 Total liabilities 812,516 762 2,888 3,650 816,166 Net assets 322,958 9,994 (1,872) 8,122 331,080 EQUITY Capital and reserves attributable to the Company’s equity holders Share capital 21,374 – – – 21,374 Other reserves 122,070 12,270 – 12,270 134,340 Retained earnings 181,492 (2,276) (1,872) (4,148) 177,344 324,936 9,994 (1,872) 8,122 333,058 Minority interest (1,978) – – – (1,978) Total equity 322,958 9,994 (1,872) 8,122 331,080 Notes – refer to section 4.7 k. c.

NOTES TO THE INTERIM FINANCIAL REPORT

4.6 NOTES TO THE CONSOLIDATED IFRS STATEMENT OF CASH FLOWS The transition to IFRS will not affect the cash flows of the business. The presentation of the cash flow statement for the Group does not differ significantly from that under UK GAAP, except for the inclusion of short term deposits within the definition of cash and cash equivalents. Previously these were shown separately from cash as liquid resources. From 1 January 2005, due to the classification of investments as ‘available-for-sale’ financial assets, the movement in investments will now be shown in the cash flow statement under cash flows from investing activities rather than in cash generated from operations. There are no other material differences between the cash flow statement presented under IFRS and the cash flow statement presented under UK GAAP. 4.7 NOTES TO IFRS RECONCILIATIONS a. IFRS 2 – Share-based payments Share option plans are fair valued at the date of grant and costs taken to the income statement over the vesting period. IFRS 1 transitional exemption applied. A corresponding release from equity means that there is no effect on the balance sheet or NAV. b. IFRS 3 – Business combinations In the light of IFRS 3, a portfolio acquired during 2004 has been reclassified as a business combination rather than as a purchase of assets. c. IAS 12 – Income taxes Provision is now made for the deferred tax liability associated with the revaluation of investment properties, this was not required under UK GAAP. d. IAS 17 – Leases Investment property head leases are capitalised and shown as a corresponding lease liability. e. SIC 15 – Operating lease incentives Lease incentives are now amortised over the period of the lease, rather than to the first rent review. f. IAS 21 – The effects of changes in foreign exchange rates Under UK GAAP revaluation movements on overseas assets were booked at the closing rate and retranslated at each reporting period. Since the revaluation movements are now posted to the income statement, they are translated at the average rate. On transition to IFRS, all previous exchange gains held within the revaluation reserve have been transferred back to the cumulative translation reserve. g. IAS 28 – Investments in associates Cessation of goodwill amortisation. Negative goodwill eliminated. h. IAS 31 – Interests in joint ventures Proportional consolidation for all joint ventures. The net investment line is now eliminated and joint ventures are shown gross on a line-by-line basis. Cessation of goodwill amortisation. Negative goodwill eliminated. i. IAS 36 – Impairment of assets Certain assets are reviewed for impairment. An impairment loss is recognised for the amount by which the assets’ carrying amount exceeds its recoverable amount. j. IAS 40 – Investment property Investment property revaluations and tax thereon taken through the income statement. k. IAS 32 and IAS 39 – Financial instruments Financial assets and liabilities such as interest rate swaps, caps, floors and forward foreign exchange contracts have been included in the balance sheet at fair value. Investments are carried at fair value

• n the balance sheet.

.31

NOTES TO THE INTERIM FINANCIAL REPORT

DIRECTORS Sten Mortstedt (Executive Chairman) Thomas Thomson BA (Chief Executive and Vice Chairman) Dan Bäverstam (Chief Financial Officer) Steven Board FCCA (Chief Operating Officer) Per Sjöberg (Group Development Director) James Dean FRICS * † (Non-executive Director) Keith Harris PhD * † ‡ (Non-executive Director) Thomas Lundqvist † (Non-executive Director) Bengt Mortstedt Juris Cand (Non-Executive Director) * = member of Remuneration Committee † = member of Audit Committee ‡ = senior independent director COMPANY SECRETARY Steven Board FCCA REGISTERED OFFICE One Citadel Place Tinworth Street London SE11 5EF REGISTERED NUMBER 2714781 REGISTERED AUDITORS PricewaterhouseCoopers LLP Chartered Accountants 1 Embankment Place London WC2N 6RH REGISTRARS AND TRANSFER OFFICE Computershare Services Plc P O Box 435 Owen House 8 Bankhead Crossway North Edinburgh EH11 4BR CLEARING BANK Royal Bank of Scotland Plc 24 Grosvenor Place London SW1X 7HP FINANCIAL ADVISERS Williams de Broë Plc 6 Broadgate London EC2M 2RP JOINT STOCKBROKERS Williams de Broë Plc 6 Broadgate London EC2M 2RP KBC Peel Hunt 11 Old Broad Street London EC2N 1PH CLS Holdings plc on line: www.clsholdings.com e-mail: enquiries@clsholdings.com

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DIRECTORS, OFFICERS AND ADVISERS

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CLS HOLDINGS PLC

One Citadel Place Tinworth Street London SE11 5EF Tel: +44 (0)20 7582 7766 Fax: +44 (0)20 7582 2363 www.clsholdings.com