MERCHANT BANKING

Interests from Novus Petroleum
A large proportion of Crosby's profits in 2004 were generated from the various economic interests in oil and gas assets in North America, the Middle East and Pakistan, which the Group acquired as a consequence of its involvement in the bid for Novus Petroleum. This trend continued into 2005, when further profits were generated from the Novus transaction as Crosby continued to restructure and harvest the value embedded in this portfolio of assets.

The North American Assets
In January 2005, subsequent to Crosby's involvement with Novus Petroleum, Crosby sold its various economic interests in Novus's North American assets to Lodore Resources Inc., a company quoted on London's Alternative Investment Market ("AIM"). Crosby retained a 35% equity stake in Lodore. Shortly after acquiring the Novus interests, Lodore also acquired additional interests in further exploration assets in Louisiana.

On 30 June 2005, IB Daiwa announced its intention to acquire 100% of the share capital of Lodore via an all-share offer. In December 2005, IB Daiwa completed the acquisition of Lodore and Crosby exchanged its holding in Lodore for 34,325,000 shares in IB Daiwa.

The Middle Eastern Assets
In July 2005, Crosby completed the reorganisation and refinancing of the four concessions in Oman and one in the UAE that comprised the Middle Eastern assets of Novus. Crosby partnered with Meridian Capital who provided a cash consideration of US$65 million to acquire a 65% equity interest in the Company that was holding the Middle Eastern assets; Meridian also further committed to provide US$20 million to support the exploration and development programme. In November 2005, the company holding the Middle Eastern assets was re-named Indago Petroleum (AIM:IPL) and raised US$120 million via a share placement prior to an admission on to the AIM market on December 2, 2005.

Upon completion of the admission to AIM, Crosby's interest (net of minorities) was approximately 7% of Indago.

The Pakistani Assets
Crosby continues to hold a 52.9% interest in the Pakistani oil and gas assets previously owned by Novus. We are currently working with our partners in Pakistan to restructure these interests.

IB Daiwa
In March 2005, Crosby acquired 107 million warrants that were exercisable, with an exercise price of ¥30 per share during 2005 and ¥31 per share during 2006, into common stock of IB Daiwa Corporation, a Japanese company quoted on JASDAQ (JASDAQ:3587). The stock price of IB Daiwa at the time was ¥18 per share and, in consideration for the warrants, Crosby agreed to mount a proxy battle in Japan to obtain board seats at IB Daiwa and then to assist in the development and implementation of a restructuring of the company.

In June 2005 the shareholders of IB Daiwa voted overwhelmingly to appoint four Crosby executives to its sevenperson board of directors.

IB Daiwa was a struggling Japanese trading company with a variety of loss-making business interests including the manufacture of industrial yarns, wholesale food distribution and real estate. Shortly after the election of the Crosby executives to the board, a plan was put in place to develop IB Daiwa as a business focusing on the acquisition, restructuring and trading of companies involved in natural resource exploration and production, with a particular emphasis on the oil and gas, and base metals sectors. Later in June, IB Daiwa announced its intention to acquire, in an all-paper offer, London AIM-quoted Lodore Resources Inc. and disclosed a 95% interest in Skafell, who were in the process of making a contested bid for the Australian-listed copper mining company Tethyan Copper Company Limited.

By the end of 2005 Crosby had helped IB Daiwa to complete the disposal of its non-core, loss-making subsidiaries and to effect a complete restructuring of the management team. IB Daiwa had also successfully completed its acquisition of Lodore and acquired 100% of Darcy Energy Limited, an oil and gas production business based in Louisiana.

In early January 2005, Lodore announced that the Kami well, its first exploration project, had found commercially recoverable quantities of gas and initial tests indicated that the volumes of condensates exceeded pre-drill estimates. The Kami well is expected to generate total returns over its life of over US$75 million, commencing from second quarter 2006. IB Daiwa's share of future operational costs is estimated to be only US$2 million.

Revenues from existing production at Darcy and Lodore are expected to be in excess of US$40 million per annum. It is expected that these will return IB Daiwa to profit for the first time in its recent history. Both Darcy and Lodore continue to exploit their exploration portfolios.

In March 2006, Lodore announced that it had secured the financing to complete the drilling programme at its three major prospects in the US through a farm-out of a 35% working interest. One of these prospects alone (Big Mouth Bayou in Louisiana) has pre-drill estimates that suggest reserves could be many multiples of the reserve estimate of the Kami well. As part of Lodore's overall financing strategy, Lodore completed in December 2005, a farm-out of a proportion of its working interests in the Padre Island prospects.

Today, IB Daiwa has a substantial portfolio of producing oil and gas assets and a portfolio of high-impact exploration opportunities. The Company plans to continue the process of bringing these opportunities to production, thereby creating further value for shareholders.

IB Daiwa's share price has increased substantially from the time of Crosby's initial involvement, rising from ¥18 per share to over ¥300 per share before settling at the year end at ¥184 per share.

This appreciation of the share price provided Crosby with the opportunity to strengthen the IB Daiwa share register and to extract a financial return from its holding by selling a relatively small proportion to international institutional investors. The sale of 20 million IB Daiwa shares in September 2005, raised net proceeds for Crosby of US$40.4 million dollars. This in-flow of cash allowed Crosby to return funds to shareholders via the Company's maiden dividend that was declared on 22 September 2005.

Crosby still remains a significant shareholder in IB Daiwa and in total, through its subsidiary companies, if Crosby exercised all its warrants the Company would hold 28% of the fully-diluted share capital of IB Daiwa.

Tethyan Copper
In May 2005, Crosby (in conjunction with a consortium of investors) launched an A$101 million (A$0.64 per share) bid for Australian-listed copper mining company, Tethyan Copper Company Limited. Tethyan's principal asset is a giant porphyry copper and gold complex in Pakistan and, as noted in the Interim Report, the management of Tethyan has valued the deposits as possibly being worth many hundreds of millions, if not billions of dollars. Subsequent to the Interim Report, the management of Tethyan further increased their valuation of the deposits.

In late December, Tethyan announced that, subject to shareholder approval, it had entered into an agreement with the FTSE 100 Chilean mining company Antofagasta to develop the copper and gold deposits in Pakistan. In response the Crosby-led consortium increased its offer by 21% to A$0.775 per share. This prompted Antofagasta to make a formal A$1.20 offer for the company alongside a 50:50 joint venture with Barrick Resources to develop the gold deposits at the complex. On March 6, 2006 Crosby announced an increase in its offer to A$1.35.

Until the ultimate outcome of this transaction is known there can be no certainty that our efforts will result in any revenue or value for Crosby. However, this transaction further demonstrates Crosby's ability to identify undervalued assets. The pre-bid share price was A$0.485, thus, Tethyan shareholders have seen a significant increase in the value of their holdings as a result of Crosby's actions.

ASSET MANAGEMENT AND WEALTH MANAGEMENT

Powered by the performance of Crosby Wealth Management (CWM), our asset management businesses increased assets under management from US$400 million to just over US$1 billion by year end.

CWM became fully operational in May 2005. By the end of the year its operations had contributed revenues of US$4.4 million to the Group and attracted more than US$650 million of assets under its management.

The JAIC Crosby Greater China Investment Fund was launched in 2005 which is managed by 50:50 joint venture with Japan Asia Investment Corporation. The fund is a closed-end fund which invests primarily in private equities issued by emerging "small to medium sized" companies with substantial business interests in Greater China.

CORPORATE FINANCE

Crosby continues to retain its 50 per cent interest in SBI Crosby, a joint venture with Softbank E2 Capital, that provides corporate advisory services, acting as an originator of small and mid-cap listing opportunities in Greater China. SBI Crosby has not only had a positive effect on the Group's profit and loss account but it provides access to merchant banking opportunities in China and can also act as a catalyst for future growth of our asset management business.