DUPD.L Regulatory News (DUPD)

30 September 2014

Dragon-Ukrainian Properties & Development plc

("DUPD" or the "Company" and together with its subsidiaries, the "Group")

Results for the period ended 30 June 2014

Dragon-Ukrainian Properties & Development plc, a leading investor in the real estate sector in Ukraine, is pleased to announce its interim results for the period ended 30 June 2014.

Operational Highlights

· Fully invested, focused on delivery and development of existing projects only and execution of its new investing policy

· Despite a challenging market environment, the Company managed to book sales in each of its four cash generating residential projects

· Focused on two top-performing real estate sectors in Ukraine - retail and residential property

· Invested in 10 projects, 5 of these are cash generating

· Substantial progress in the development and sales of the Obolon Residences project. Despite the challenging business environment, 43% of apartments and commercial areas in Phase 1 were pre-sold as of 30 June 2014 in line with the sales schedule out of which 18% were sold in 1HY 2014. Delivery of Phase 1 is expected in summer 2015.

· DUPD actively continued its efforts to obtain the necessary rezoning of the entire Land bank areas. The process of installing infrastructure for 19.9 hectares of already rezoned land is in its final stage and should be completed in spring of 2015

· Arricano Real Estate

o Generated revenues of USD 11.4 million (1H 2013: USD 12.1 million)

o Profit before tax (excluding revaluation) - USD 5.4 million, (1H 2013 - USD 1.6 million)

o On September 25, 2014, a new shopping centre Prospect was opened in Kyiv with GLA over 30,000 sq. metres. 78% of space is already pre-leased

o DUPD maintains representation on the Arricano board and is actively involved with Arricano management in shaping and implementing Arricano's investment strategy

Financial Highlights

· Total NAV of USD 149.8 million as of 30 June 2014 (down 15.1% compared to USD 176.6 million at 31 December 2013)

· NAV per share of USD 1.37 as of 30 June 2014 (down 15.1% compared to USD 1.61 NAV per share at 31 December 2013)

· Cash balance of USD 20.5 million as of 30 June 2014 (31 December 2013: USD 24.8 million)

· Net loss before tax USD 14.5 million mostly driven by additional impairment provisions on Landbank holdings (USD 13.3 million) (1HY 2013 loss USD 18.8 million)

Rory Macnamara, Chairman of the Board commented: "In an unprecedented difficult economic environment the Company managed to book sales in its residential projects and continue development in Obolon Residences project according to its original schedule. This demonstrates the high quality of the Company's projects which remain attractive even in a challenging macroeconomic climate. The Company will continue to work towards generating stable cash flows from its projects and hopes to enable shareholders to benefit from their investment through distributions in due course"

For further information, please contact:

Project Overview

1. Land bank

· Land is registered in legal entities.

· First part of land bank (19.9 ha) rezoned. The process of installing infrastructure for 19.9 hectares of already rezoned land is in its final stage and should be completed in spring of 2015

· The Company is focused on gradually selling the land as it is rezoned when the land market recovers.

2. Obolon Residences

· Business class residential complex with office and retail premises

· Central location in a prestigious Kyiv district

· International standard design and concept

· Local equity co-investor obtained in April 2014

· Construction of Phase 1 progresses according to the original schedule and expected for completion in summer of 2015

· 43 per cent of residential space contracted for sale

· 28 apartments pre-sold in 1HY 2014, out of 70 units pre-sold in total

3. Arricano Real Estate plc

· A leading developer of shopping centres in Ukraine.

· On September 12, 2013, Arricano achieved a listing on the AIM market of the LSE (ARO LN).

· DUPD's shareholding is 12.51%.

· Portfolio of nine shopping centres of which five are operational and four under various stages of development, including:

o Sky Mall (Kyiv) - 'Best Shopping Centre 2010' award

o RayON (Kyiv) - New shopping centre opened in 2012

o Prospect (Kyiv) - New shopping centre commissioned on 25 September 2014

4. Riviera Villas

· Elite cottage community near Kyiv

· Unique luxury social and leisure infrastructure

· Won a prestigious award from European Property Awards 2013 in London, in the category of Development Multiple Units for Ukraine

· Utilities are on the site and waterfront infrastructure is completed

· 18 households sold. First street out of four completed. Stock of 5 homes available for sale. 1 sale is completed in September 2014.

5. Green Hills

· Business class cottage community in close proximity to Kyiv (10 km)

· The first North American style cottage community developed in Ukraine

· All key infrastructure is in place

· 41 households sold out of 178 included in the master plan

6. Henryland

· All assets of Henryland were sold for a cash consideration of USD 23.7m. The Company has already received a dividend of USD 5.3m and is expecting to receive a further final dividend by the end of 2014 upon completion of the sale of the assets

7. Sadok Vyshnevy

· 38 apartments in a town-house community in Kyiv suburbs

· Utilities are on the site

· All homes commissioned, and available for sale

· 7 apartments sold in 1HY 2014

8. Avenue Shopping Centre

· Strong retail location and low level of competition

· Land lease extended by a decision of the Kyiv City Council; lease agreement for the Hindale land plot should be extended for another five years.

· Signing of the extension of the lease agreement not yet finalised with the relevant authorities

· Construction permit pending

9. Glangate

· Two land plots for shopping centre development in second-tier regional cities

· Low level of competition

· Retailers are still focused on Kyiv rather than smaller cities

· Kremenchuk - construction permit received

· Rivne - rezoning of the land plot completed

Contents

Consolidated statement of financial position 3

Consolidated statement of profit or loss and other comprehensive income 5

Consolidated statement of cash flows 7

Consolidated statement of changes in equity 9

Notes to the consolidated interim financial statements 10

The consolidated statement of financial position are to be read in conjunction with the notes to, and forming part of, the interim financial statements set out on pages 10 to 49.

These consolidated interim financial statements were approved by the Board of Directors on 29 September 2014 and were signed on its behalf by:

Rory Macnamara Fredrik Svinhufvud

Non-Executive Chairman Non-Executive Director

The consolidated statement of financial position are to be read in conjunction with the notes to, and forming part of, the interim financial statements set out on pages 10 to 49.

The consolidated statement of profit or loss and other comprehensive income are to be read in conjunction with the notes to, and forming part of, the interim financial statements set out on pages 10 to 49.

The directors believe that all results are derived from continuing activities

The consolidated statement of cash flows are to be read in conjunction with the notes to, and forming part of, the interim financial statements set out on pages 11 to 50.

The consolidated statement of cash flows are to be read in conjunction with the notes to, and forming part of, the interim financial statements set out on pages 11 to 50.

The consolidated statement of changes in equity are to be read in conjunction with the notes to, and forming part of, the interim financial statements set out on pages 12 to 51.

1 Background

(a) Organisation and operations

Dragon - Ukrainian Properties & Development plc (the Parent Company) was incorporated in the Isle of Man on 23 February 2007. The Parent Company's registered office is 2nd Floor, Belgravia House, 34-44 Circular Road, Douglas, Isle of Man IM1 1AE and its principal place of business is Ukraine.

On 1 June 2007 the Parent Company raised USD 208 million through an initial public offering on the Alternative Investment Market (AIM) of the London Stock Exchange. On 29 November 2007, the Parent Company completed a secondary placing on AIM and raised USD 100 million.

The consolidated interim financial statements as at 30 June 2014 comprise the Parent Company and its subsidiaries and the Group's interest in associates (together referred to as the Group).

The main activities of the Group are investing in the development of new properties and redevelopment of existing properties in Ukraine.

(b) Business environment

Ukraine's political and economic situation has deteriorated significantly since the Government's decision not to sign the Association Agreement and the Deep and Comprehensive Free Trade Agreement with the European Union in late November 2013. Political and social unrest combined with rising regional tensions has deepened the ongoing economic crisis and has resulted in a widening of the state budget deficit and a depletion of the National Bank of Ukraine's foreign currency reserves and, as a result, a further downgrading of the Ukrainian sovereign debt credit ratings. In February 2014, following the devaluation of the national currency, the National Bank of Ukraine introduced certain administrative restrictions on currency conversion transactions and also announced a transition to a floating foreign exchange rate regime. The final resolution and the effects of the political and economic crisis are difficult to predict but may have further severe effects on the Ukrainian economy.

Whilst management believes it is taking appropriate measures to support the sustainability of the Group's business in the current circumstances, a continuation of the current unstable business environment could negatively affect the Group's results and financial position in a manner not currently determinable. These consolidated financial statements reflect management's current assessment of the impact of the Ukrainian business environment on the operations and the financial position of the Group. The future business environment may differ from management's assessment. These consolidated financial statements do not include any adjustments for the impact of events in Ukraine that have occurred after the reporting date.

The Directors believe that they are taking all the necessary measures to maintain the viability of the Group and the development of its business in the current business and economic environment.

2 Basis of preparation

(a) Statement of compliance

These consolidated interim financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU.

(b) Basis of measurement

The consolidated interim financial statements are prepared on the historical cost basis except for investment properties and financial assets at fair value through profit and loss, which are carried at fair value.

(c) Functional and presentation currency

The Group consists of entities that are domiciled in Ukraine, Cyprus, British Virgin Islands and Isle of Man.

In prior periods, the Group determined that the functional and presentation currency for all consolidated entities and these consolidated financial statements was the US dollar. All funds raised by the Parent Company were in US dollars, and all project developments in Ukraine were based on US dollars. Deposits and prepayments were also in US dollars.

In 2014, following the worsening of the Ukrainian economic and business environment (see note 1(b)) and the significant devaluation of the Ukrainian Hryvnia against the US Dollar and other currencies, the Group determined that this change in business environment required a change of the functional currency of the Ukrainian entities within the Group. The Group determined that starting from 2014, the Ukrainian Hryvnia would be the functional currency of all Ukrainian entities within the Group. Management also determined that the functional currency of the Group entities domiciled in Cyprus, the British Virgin Islands and the Isle of Man did not change as there were no significant changes in business environment in which these entities operate and no changes in underlying transactions and operations of these entities. Accordingly, the functional currency of these entities remains the US dollar.

The Group also decided that the US dollar will continue to be the presentation currency of the Group, because this is the most suitable currency for the presentation of the Group's financial position and results of operations to shareholders. Accordingly, these consolidated and Parent Company financial statements are presented in thousands of US dollars (USD). All financial information presented in US dollars is rounded to the nearest thousand.

(d) Use of judgments, estimates and assumptions

The preparation of interim financial statements in conformity with IFRS as adopted by the EU requires the Directors to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses and the disclosure of contingent assets and liabilities. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

In particular, information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the consolidated interim financial statements and could lead to significant adjustment in the next financial year are included in the following notes:

• Note 5 - Valuation of investment properties;

• Note 6 - Valuation of prepayments for land;

• Note 7 - Impairment of investments in associates;

• Note 9 - Net realisable value of trading property.

(e) Going concern

These consolidated financial statements are prepared on a going concern basis. For the six months ended 30 June 2014 the Group incurred a net loss of USD 28,723 thousand and negative cash flows from operating activities of USD 2,751 thousand. As at that date the Groups current assets exceeded its current liabilities by USD 46,976 thousand and its Net Asset Value amounted to USD 133,019 thousand.

The Directors believe that the Group's existing cash resources are sufficient to meet the Group's liabilities for the foreseeable future and therefore that the going concern basis for preparing these consolidated financial statements is appropriate.

3 Significant accounting policies

The accounting policies set out below are applied consistently to all periods presented in these consolidated interim financial statements, and are applied consistently by Group entities

(a) Basis of consolidation

(i) Subsidiaries

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has right to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

The financial results of subsidiaries are included in the Consolidated interim financial statements from the date that control commences until the date that control ceases. Where necessary, adjustments are made to the interim financial statements of subsidiaries to bring their accounting policies in line with those used by the Group.

The results of subsidiaries acquired during the year are included in profit or loss from the effective date of acquisition. Losses applicable to the non-controlling interest in a subsidiary are allocated to the non-controlling interest even if doing so causes the non-controlling interest to have a deficit balance.

Any premium and discount arising on the acquisition of a non-controlling interest in a subsidiary represents the excess/deficiency of the cost of the additional investment over/under the carrying amount of the net assets acquired at the date of exchange. The effect of these transactions is recognised directly in equity.

On the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently, that retained interest is accounted for as an equity-accounted investee or as an available-for-sale financial asset depending on the level of influence retained.

Consolidated subsidiaries include the following:

On 6 February 2014 the Group acquired 100% of shareholding in Capital Construction LLC for a total consideration of USD 40. The Group intends to use Capital Construction LLC as a general contractor of residential houses for the Green Hills project.

(ii) Associates

Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20% and 50% of the voting power of another entity. In certain cases when the Group has less than 20% of the voting power of another entity, this entity is still accounted for as an associate on the basis of significant influence (see note 7).

Investments in associates are accounted for using the equity method and are recognised initially at cost. The cost of the investment includes transaction costs.

The consolidated interim financial statements include the Group's share of the income and expenses and equity movements of associates, after adjustments to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases.

When the Group's share of losses exceeds its interest in an associate, the carrying amount of that interest including any long-term investments, is reduced to zero, and the recognition of further losses is discontinued, except to the extent that the Group has an obligation to or has made payments on behalf of the investee.

(iii) Joint operations

A joint operation is a joint arrangement carried on by each joint operator using its own assets in pursuit of the joint operations. The consolidated interim financial statements include the assets that the Group controls and the liabilities that it incurs in the course of pursuing the joint operation, and the expenses that the Group incurs and its share of the income that it earns from the joint operation.

(iv) Transactions eliminated on consolidation

Intra-Group balances and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing these consolidated interim financial statements. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group's interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

(b) Foreign currency and operations

(i) Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the reporting period.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured in terms of historical cost are translated using the exchange rate at the date of the transaction. Foreign currency differences arising in retranslation are recognised in profit or loss, except for differences arising on the retranslation of available-for-sale equity instruments which are recognised in other comprehensive income.

(ii) Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to USD at exchange rates at the reporting date. The income and expenses of foreign operations are translated to USD at exchange rates at the dates of the transactions.

Foreign currency differences are recognised in other comprehensive income, and presented in the foreign currency translation reserve in equity. However, if the operation is a non-wholly owned subsidiary, then the relevant proportionate share of the translation difference is allocated to non-controlling interests.

When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interests. When the Group disposes of only part of its investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely to occur in the foreseeable future, foreign exchange gains and losses arising from such item form part of a net investment in a foreign operation and are recognised in other comprehensive income, and presented in the translation reserve in equity.

The principal USD exchange rates used in the preparation of these consolidated financial statements are as follows:

As at the date of these consolidated financial statements 29 September 2014, the exchange rates are USD 0.0772 to UAH 1.

The Ukrainian hryvnia is not a convertible currency outside Ukraine and, accordingly, any conversion of foreign currency amounts into UAH should not be construed as a representation that foreign currency amounts have been, could be, or will be in the future, convertible into UAH at the exchange rates shown, or any other exchange rates.

(c) Financial instruments

(i) Non-derivative financial assets

The Group initially recognises loans and receivables and deposits on the date that they are originated. All other financial assets (including assets designated at fair value through profit or loss) are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument.

The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

The Group classifies non-derivative financial assets into the following categories: financial assets at fair value through profit or loss, held-to-maturity financial assets, loans and receivables and available-for-sale financial assets.

A financial asset is classified at fair value through profit or loss if it is classified as held for trading or is designated as such upon initial recognition. Financial assets are designated at fair value through profit or loss if the Group manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Group's documented risk management or investment strategy. Upon initial recognition attributable transaction costs are recognised in profit or loss as incurred. Financial assets at fair value through profit or loss are measured at fair value, and changes therein are recognised in profit or loss.

If the Group has the positive intent and ability to hold debt securities to maturity, then such financial assets are classified to held-to-maturity. Held-to-maturity financial assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition held-to-maturity financial assets are measured at amortised cost using the effective interest method, less any impairment losses. Any sale or reclassification of a more than insignificant amount of held-to-maturity investments not close to their maturity would result in the reclassification of all held-to-maturity investments as available-for-sale, and prevent the Group from classifying investment securities as held-to-maturity for the current and the following two financial years.

Loans and receivables are a category of financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses.

Loans and receivables comprise the following classes of assets: trade and other receivables as presented in note 10, and cash and cash equivalents as presented in note 11.

Cash and cash equivalents comprise cash balances, call deposits and highly liquid investments with maturities at initial recognition of three months or less.

Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale or are not classified in any of the above categories of financial assets. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses, and foreign currency differences on available-for-sale debt instruments, are recognised in other comprehensive income and presented within equity in the fair value reserve. When an investment is derecognised or impaired, the cumulative gain or loss in equity is reclassified to profit or loss. Unquoted equity instruments whose fair value cannot reliably be measured are carried at cost.

(ii) Non-derivative financial liabilities

The Group initially recognises debt securities issued and subordinated liabilities on the date that they are originated. All other financial liabilities (including liabilities designated at fair value through profit or loss) are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument.

The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

The Group classifies non-derivative financial liabilities in the other financial liabilities category. Such financial liabilities are recognised initially at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective interest method.

Other financial liabilities comprise trade and other payables as presented in note 15 and finance lease liabilities as presented in note 13.

Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

(iii) Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects.

When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, net of any tax effects, is recognised as a deduction from equity. Repurchased shares are immediately cancelled and the total number of shares reduced by the purchase.

(iv) Derivative financial instruments

Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivative are not closely related, a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and the combined instrument is not measured at fair value through profit or loss.

Derivatives are recognised initially at fair value; attributable transaction costs are recognised in profit or loss when incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are recognised immediately in profit or loss.

(v) Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32)

These amendments clarify the application of certain offsetting criteria in IAS 32, including:

- the meaning of "currently has a legally enforceable right of set-off"

- that some gross settlement mechanisms may be considered equivalent to net settlement.

The amendments have been applied retrospectively in accordance with their transitional provisions. As the Group does not currently present any of its financial assets and financial liabilities on a net basis using the provisions of IAS 32, these amendments had no material effect on the consolidated financial statements for any period presented.

(d) Investment properties

Investment properties are those that are held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in production or supply of goods or services or for administrative purposes. Investment properties are carried at fair value.

Investment properties principally comprise freehold land, leasehold land and investment properties held for future redevelopment. Leasehold of land held under operating lease is classified and accounted for as investment property when it meets the definition of investment property.

(i) Initial measurement and recognition

Investment properties are measured initially at cost, including related acquisition costs. Cost includes expenditure that is directly attributable to the acquisition of the investment property. The cost of self-constructed investment property includes the cost of materials and direct labour, any other costs directly attributable to bringing the investment property to a working condition for its intended use and capitalised borrowing costs.

If the Group uses part of the property for its own use, and part to earn rentals or for capital appreciation, and the portions can be sold or leased out separately, they are accounted for separately. Therefore the part that is rented out is investment property. If the portions cannot be sold or leased out separately, the property is investment property only if the company-occupied portion is insignificant.

(ii) Subsequent measurement

Subsequent to initial recognition investment properties are stated at fair value. Any gain or loss arising from a change in fair value is included in profit or loss in the period in which it arises.

When the Group begins to redevelop an existing investment property for continued future use as investment property, the property remains an investment property, which is measured at fair value, and is not reclassified to property and equipment during the redevelopment.

When the use of a property changes such that it is reclassified as property and equipment or inventory, its fair value at the date of reclassification becomes its cost for subsequent accounting.

Investment properties are derecognised on disposal or when they are permanently withdrawn from use and no future economic benefits are expected from its disposal. The gain or loss on disposal is calculated as the difference between the net disposal proceeds and the carrying amount of the asset and is recognised as gain or loss in profit or loss.

It is the Group's policy that an external, independent valuation company, having an appropriate recognised professional qualification and recent experience in the location and category of property being appraised, values the portfolio every six months. The fair value is the amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm's length transaction. The valuation is prepared in accordance with the practice standards contained in the Appraisal and Valuations Standards published by the Royal Institution of Chartered Surveyors (RICS) or in accordance with International Valuation Standards published by the International Valuations Standards Council.

(iii) Reclassification to owner-occupied property or inventory

When the use of a property changes from investment property carried at fair value to owner-occupied property or inventory, the property's deemed cost for subsequent accounting in accordance with IAS 16 Property, Plant and Equipment or IAS 2 Inventories is its fair value at the date of change in use. Any gain or loss arising on revaluation as at the date of transfer is recognised in profit or loss.

(e) Prepayments for land

Prepayments for land are measured at cost less any accumulated impairment losses. The carrying amounts of prepayments for land are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. For details of the impairment assessment refer to note 3(j)(ii).

(f) Property and equipment

(i) Recognition and measurement

Items of property and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.

Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

When parts of an item of property and equipment have different useful lives and are considered major components, they are accounted for as separate items of property and equipment.

The gain or loss on disposal of an item of property and equipment is determined by comparing the proceeds from disposal with the carrying amount of property and equipment, and is recognised net within other income/other expenses in profit or loss.

(ii) Reclassification to investment property

When the use of a property changes from owner-occupied to investment property, the property is re-measured to fair value and reclassified as investment property. Any gain arising on re-measurement is recognised in profit or loss to the extent that it reverses a previous impairment loss on the specific property, with any remaining gain recognised in other comprehensive income and presented in the revaluation reserve in equity. Any loss is recognised immediately in profit or loss.

(iii) Subsequent costs

The cost of replacing a component of an item of property and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group, and its cost can be measured reliably. The carrying amount of the replaced component is derecognised. The costs of the day-to-day servicing of property and equipment are recognised in profit or loss as incurred.

(iv) Depreciation

Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each component of an item of property and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Land is not depreciated.

The estimated useful lives for the current and comparative periods are as follows:

• Vehicles and equipment 5-7 years

• Fixture and fittings 3 years

(g) Intangible assets

(i) Goodwill

Goodwill that arises on the acquisition of subsidiaries is included in intangible assets.

The Group measures goodwill at the acquisition date as:

· The fair value of the consideration transferred, plus

· The recognised amount of any non-controlling interests in the acquiree, plus, if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree, less

· The net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss.

Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

Goodwill is measured at cost less accumulated impairment losses. In respect of equity accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment, and an impairment loss on such an investment is not allocated to any asset, including goodwill, that forms part of the carrying amount of the equity accounted investee.

(ii) Other intangible assets

Other intangible assets that are acquired by the Group, which have finite useful lives, are measured at cost less accumulated amortisation and accumulated impairment losses.

(iii) Subsequent expenditure

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as incurred.

(h) Leased assets

Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

Other leases are operating leases and the leased assets are not recognised in the statement of financial position.

(i) Inventories

Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the first-in first-out principle, and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition.

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

(j) Impairment

(i) Non-derivative financial assets

A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

Objective evidence that financial assets (including equity securities) are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers in the Group, economic conditions that correlate with defaults or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.

The Group considers evidence of impairment for loans and receivables and held-to-maturity investment securities at both a specific asset and collective level. All individually significant loans and receivables and held-to-maturity investment securities are assessed for specific impairment. All individually significant loans and receivables and held-to-maturity investment securities found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Loans and receivables and held-to-maturity investment securities that are not individually significant are collectively assessed for impairment by grouping together loans and receivables and held-to-maturity investment securities with similar risk characteristics.

In assessing collective impairment the Group uses historical trends of the probability of default, timing of recoveries and the amount of loss incurred, adjusted for the Directors' judgment as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset's original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account against loans and receivables or held-to-maturity investment securities. Interest on the impaired asset continues to be recognised. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

Impairment losses on available-for-sale financial assets are recognised by reclassifying the losses accumulated in the fair value reserve in equity, to profit or loss. The cumulative loss that is reclassified from equity to profit or loss is the difference between the acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss previously recognised in profit or loss. Changes in impairment provisions attributable to application of the effective interest method are reflected as a component of interest income. If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and the increase can be related objectively to an event occurring after the impairment loss was recognised in profit or loss, then the impairment loss is reversed, with the amount of the reversal recognised in profit or loss. However, any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognised in other comprehensive income.

(ii) Non-financial assets

The carrying amounts of non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. For goodwill and intangible assets that have indefinite lives or that are not yet available for use, the recoverable amount is estimated each year on the reporting date.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that largely are independent from other assets and groups. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

(k) Share-based payments

The fair value at the date of grant of options granted to directors and employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the directors and employees become unconditionally entitled to the options. The amount recognised as an expense is adjusted to reflect the actual number of share options that vest.

For equity settled share-based payment transactions other than transactions with directors and employees the Group measures the goods or services received at their fair value, unless that fair value cannot be estimated reliably. If this is the case the Group measures their fair values and the corresponding increase in equity, indirectly, by reference to the fair value of equity instruments granted.

(l) Provisions

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost.

(m) Rental income from investment properties

Rental income from investment properties is recognised in profit or loss on a straight-line basis over the term of the lease.

(n) Lease payments

Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense over the term of the lease.

Minimum lease payments made under finance leases are apportioned between the finance cost and the reduction of the outstanding liability. The finance cost is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the contingency no longer exists and the lease adjustment is known.

At inception of an arrangement, the Group determines whether such an arrangement is or contains a lease. This will be the case if the fulfilment of the arrangement is dependent on the use of a specific asset and the arrangement contains a right to use the asset.

At inception or upon reassessment of the arrangement, the Group separates payments and other consideration required by such an arrangement into those for the lease and those for other elements on the basis of their relative fair values. If the Group concludes for a finance lease that it is impracticable to separate the payments reliably, then an asset and a liability are recognised at an amount equal to the fair value of the underlying asset. Subsequently the liability is reduced as payments are made and an imputed finance charge on the liability is recognised using the Group's incremental borrowing rate.

(o) Finance income and costs

Finance income comprises interest income on funds invested, dividend income and currency exchange gains. Interest income is recognised as it accrues in profit or loss, using the effective interest method. Dividend income is recognised on the date that the Group's right to receive payment is established.

Finance costs comprise fair value losses on financial assets at fair value through profit or loss, impairment loss on financial assets and currency exchange losses.

Foreign currency gains and losses are reported on a net basis as either finance income or finance cost depending on whether foreign currency movements are in a net gain or net loss position.

(p) Income tax expense

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:

· temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss,

· temporary differences related to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future, and

· taxable temporary differences arising on the initial recognition of goodwill.

Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax assets and liabilities, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

In accordance with the tax legislation of Ukraine, tax losses and current tax assets of a company in the Group may not be set off against taxable profits and current tax liabilities of other Group companies. In addition, the tax base is determined separately for each of the Group's main activities and, therefore, tax losses and taxable profits related to different activities cannot be offset.

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

(q) Earnings per share

The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Parent Company by the weighted average number of ordinary shares outstanding during the year, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise warrants and share options.

(r) Segment reporting

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group's other components.

The Directors determined that the sole segment in which the Group operates is property development. For operational purposes the Board analyses the Group's activity on the basis of individual projects and they are described in detail in the Annual Report. Budgeting and comparison of actual versus budgeted results is also done on the basis of individual projects.

(s) Measurement of fair values

A number of the Group's accounting policies and disclosures require the measurement of fair values for both financial and non-financial assets and liabilities.

When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

· Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

· Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

· Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

When applicable, further information about the assumptions made in measuring fair values is disclosed in the notes specific to that asset or liability.

(t) New standards and interpretations not yet adopted

A number of new Standards, amendments to Standards and Interpretations are not yet effective for the six-month period ended 30 June 2014, and have not been applied in preparing these consolidated interim financial statements. Of these pronouncements, potentially the following will have an impact on these consolidated financial statements. Management plans to adopt these pronouncements when they become effective, and has not yet analysed the likely impact of these new standards on its financial statements.

IFRS 9 Financial Instruments will be effective for annual periods beginning on or after 1 January 2018 and is intended ultimately to replace International Financial Reporting Standard IAS 39 Financial Instruments: Recognition and Measurement. The first phase of IFRS 9 was issued in November 2009 and relates to the classification and measurement of financial assets. The second phase regarding classification and measurement of financial liabilities was published in October 2010. The third phase was issued in November 2013 and relates to general hedge accounting. The Group recognises that the new standard introduces many changes to the accounting for financial instruments and is likely to have a significant impact on Group's consolidated financial statements. The impact of these changes will be analysed during the course of the project as further phases of the standard are issued. The Group does not intend to adopt this standard early.

International Financial Reporting Standard 15 Revenue from Contracts with Customers (IFRS 15) will be effective for annual periods beginning on or after 1 January 2017. The new standard provides a framework that replaces existing revenue recognition guidance in IFRS. Entities will apply a five-step model to determine when to recognise revenue, and at what amount. The model specifies that revenue should be recognised when (or as) an entity transfers control of goods or services to a customer at the amount to which the entity expects to be entitled. Depending on whether certain criteria are met, revenue is recognised over time, in a manner that depicts the entity's performance, or at a point in time, when control of the goods or services is transferred to the customer. In addition, new qualitative and quantitative disclosure requirements aim to enable financial statement users to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Early application is permitted. The Group has not yet analysed the likely impact of the new standard on its financial position or performance. The Group does not intend to adopt this standard early.

Various improvements to IFRSs have been dealt with on a standard-by-standard basis. All amendments, which result in accounting changes for presentation, recognition or measurement purposes, will come into effect for annual periods beginning after 1 January 2015. Entities are permitted to apply them earlier. The Group has not yet analysed the likely impact of the improvements on its financial position or performance.

4 Disposal of non-controlling interests

(a) Acquisition of subsidiary

In February 2014 the Group acquired 100% of the share capital of Capital Construction LLC for a total consideration of USD 40. The net assets of the acquired subsidiary were as follow at the date of acquisition:

(b) Disposal of non-controlling interests

In January 2013, in accordance with the terms agreed with the Group's partner at the time of making the investment the Group disposed of a 5 per cent interest in Riverscope Ltd (Land bank project) for USD 133 in cash (equivalent of EUR 100), decreasing its ownership form 95 to 90 per cent. The carrying amount of Riverscope Ltd net assets in the Group's financial statements on the date of disposal was USD 59,686 thousand. The Group recognised a decrease in non-controlling interests of USD 3,141 thousand and decrease in accumulated losses of USD 3,141 thousand.

In January 2013, in accordance with the terms agreed with the Group's partner at the time of making the investment the Group disposed of a 5 per cent interest in Landshere Ltd (Land bank project) for USD 133 in cash (equivalent of EUR 100), decreasing its ownership from 95 per cent to 90 per cent. The carrying amount of Landshere Ltd net assets in the Group's financial statements on the date of disposal was USD 59,599 thousand. The Group recognised a decrease in non-controlling interests of USD 3,137 thousand and decrease in accumulated losses of USD 3,137 thousand.

5 Investment properties and property under construction

Movements in investment properties and property under construction for the six months ended 30 June 2014 are as follows:

Movements in investment properties and property under construction for the six months ended 30 June 2013 are as follows:

The carrying values for investment properties and property under construction as at 30 June are as follows:

There are no any changes in the finance lease conditions during six months ended 30 June 2014. Due to changes in the exchange rates during six months ended 30 June 2014 finance lease liabilities on the Kremenchug project decreased by USD 52 thousand.

Mountcrest Limited (Mountcrest - a Group subsidiary) and Intendancy Limited (Intendancy - third party) entered into a Project Development Agreement on 12 December 2007. It was agreed to undertake and bear all design, engineering and construction costs as well as the costs incurred in connection with the maintenance and development of the land plots and facilities of the Riviera Villas project (one of the Group's projects) in the following proportion:

· Mountcrest is to bear or reimburse 58.21% of costs incurred in the process of land plot development and Intendancy 41.79%;

· Mountcrest is to bear or reimburse 59.56% of costs incurred in the process of real estate construction and Intendancy 40.44%.

Irrespective of legal titles that may be attached to the land plots of each of the parties, all benefit from sale or usage of investment property will be split in the following proportion: Mountcrest is entitled to 59.56% of all benefits and Intendancy is entitled to 40.44% of all benefits.

On 20 February 2012 an amendment to the Project Development Agreement was signed. In accordance with this amendment Mountcrest transferred all its rights and obligations under the Project Development Agreement to Stenfield Finance Limited (Stenfield) (a Group subsidiary).

On 20 September 2012 Stenfield and Intendancy (together referred to as the Parties) signed an Amended and Restated Project Development Agreement and agreed to acquire title or to hold under control additional land plots with a total area of 1.7244 hectares (ha) (the "Additional Land Plots") for residential real estate construction. The Parties will bear the acquisition costs of the Additional Land Plots in the same proportions they bear costs incurred in the process of real estate construction. The purchase price of USD 2,346 thousand will be paid in full by Intendancy and Stenfield will reimburse the amount equivalent to its share in the project as stipulated above. This reimbursement will be effected by Stenfield making contributions from its share of future sales proceeds less the budgeted amount of the capital expenditures for the development of the project.

The fair value measurement, developed for determination of fair value of the Group's investment property, is categorised within Level 3 of the IFRS 7 fair value hierarchy, due to the significance of unobservable inputs to the measurement. To assist with the estimation of fair value of investment properties and property under construction as at 30 June 2014 (represented by land plots for cottage communities and trade centres) the Directors engaged registered independent appraiser DTZ Kiev B.V., having a recognised professional qualification and recent experience in the location and categories of the projects being valued.

The fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The valuation is prepared in accordance with practice standards contained in the Appraisal and Valuation Standards published by the Royal Institution of Chartered Surveyors (RICS) or in accordance with International Valuation Standards published by the International Valuations Standards Council.

In the absence of current prices in an active market, the valuations are prepared under the income approach by converting estimated future cash flows to a single current capital value.

Land parcels are value based on market prices for similar properties.

The estimation of fair value was made using a net present value calculation based on certain assumptions, the most important of which as at 30 June 2014 are as follows:

· monthly rental rates - which were based on current rental rates USD 15 per sq. m.

· development costs based on current construction prices

· average land sales price ranging from USD 1,315 to USD 2,010 per sq.m.

· discount rate from 13.7% to 22.5%

· sales period - 6 years

· all relevant licenses and permits, to the extent not yet received, will be obtained, in accordance with the timetables as set out in the investment project plans.

As at 31 December 2013 the respective assumptions were as follows:

· monthly rental rates - which were based on current rental rates ranging from USD 5 to USD 47 per sq. m.

· development costs based on current construction prices

· average land sales price ranging from USD 1,385 to USD 2,180 per sq.m.

· discount rates from 12% to 20.4%

· sales period - from 1 to 5 years

· all relevant licenses and permits, to the extent not yet received, will be obtained, in accordance with the timetables as set out in the investment project plans.

6 Prepayments for land

During six months ended 30 June 2014 the Group did not make any prepayments for land acquisition (land bank project). As a result the gross prepayments for land before impairment losses remain stable of USD 126,366 thousand as at 30 June 2014 and 31 December 2013.

The investment in land bank projects has been historically reflected at cost less impairment. Land plots for the land bank project with a total area of 483 ha are currently registered for agricultural use, and the rezoning process to change the purpose of the land plots to construction use was in progress as at 30 June 2014. Land plots with a total area of 19.9 ha had been rezoned for construction use by the end of 2012. In order to determine whether any impairment losses should be recognised, the Board determined the fair value of the land bank with the help of independent appraiser DTZ Kiev B.V. The fair value of the land bank was determined using agricultural and residential property comparatives according to actual land plot zoning and discounting for the time period likely to be required to sell the land plots.

The estimation of fair value of the underlying assets (the land plots) was made based on certain assumptions, the most important of which as at 30 June 2014 are as follows:

· average market prices ranging from USD 100 thousand to USD 340 thousand per ha

· discount rates ranging from 15.2% to 16.2%

· sales period - from 1.5 to 6 years

As at 31 December 2013 the respective assumptions were as follows:

· average market prices ranging from USD 140 thousand to USD 420 thousand per ha

· discount rates ranging from 13% to 14%

· sales period - from 1 to 6 years

In total the Group recognised an impairment loss on prepayments for land of USD 13,256 thousand for the six months ended 30 June 2014 (for the six months ended 30 June 2013: USD 6,608 thousand).

In December 2008 the Group entered into the following pledge agreements to secure prepayments for land. During 2009 - 2011 several amendments to the agreements were signed to increase the assigned value of the collateral in conformity with prepayments made. The main conditions of the agreements as at 30 June 2014 are as follows:

This table summarises the amount of prepayment intended to be secured by collateral rather than the fair value of the collateral itself. The fair value (or market value) of the land plots owned by the above entities is shown below.

Movements in prepayments for land for the six months ended 30 June 2014 and for the year ended 31 December 2013 are as follows:

7 Investments in associates

The Group has the following investments in associates as follows

The values of the Group's shares in its associates are as follows:

The following is the summarised financial information for the associates, not adjusted for the percentage ownership held by the Group:

The Group has the right to appoint two (out of four) representatives to the Board of Directors of Hindale. Pursuant to the shareholders' agreement, the management structure of Hindale provides that significant operating decisions require consent by all parties to the above shareholders' agreement.

During the six months ended 30 June 2014 the Group did not receive any dividend income from its investment in Henryland Group Ltd (for the six month ended 30 June 2013: USD 1,138 thousand).

During the six months ended 30 June 2014 the Group recognised share of the profit from its investment in Henryland Group Ltd totalling USD 1,032 thousand (for the six month ended 30 June 2013: USD 635 thousand).

In October 2009, due to the fact that certain conditions set out in the shareholders' agreement between the Group and the partner were not met (in particular, certain permits were not procured and the land plot was not cleared of garages before October 2009), the Group decreased its stake in Hindale Executive Investments Limited ("Hindale") from 50% + 1 share to 18.77% and as a result in Promtek LLC ("Promtek"), which is 100% owned by Hindale. Promtek's sole purpose is to develop the Avenue project.

The share capital held by the Group in Hindale was decreased by 1,539 ordinary shares. In return, the Group received USD 5,000 thousand and an option to repurchase the 1,539 ordinary shares of Hindale for USD 5,000 thousand in accordance with the shareholders' agreement. The excess of the fair value of the shares over the purchase price was determined by the Group to be the fair value of the call option and was recognised in the consolidated statement of financial position. By the end of 2011 the fair value of the call option decreased to nil.

The lease agreement for the land plot on which Hindale Ltd is planning to construct the real estate expired on 2 July 2012. There was a risk of non-prolongation of the lease term. Taking this into account the Board decided to fully write off the Avenue project as at 31 December 2012. As a result, impairment of investments in Hindale Ltd of USD 1,624 thousand was recognised for the year ended 31 December 2012.

On 12 December 2013 the extension of the lease agreement was signed by the Kyiv City Council and consequently the Directors decided to reverse the impairment in the amount of USD 468 thousand for the year ended 31 December 2013.

During the six month ended 30 June 2014 the Group recognised share of the loss from its investment in Hindale Executive Investments Limited totalling USD 63 thousand (for the six month ended 30 June 2013: USD nil).

8 Financial assets at fair value through profit and loss

On 10 September 2010 the Parent Company entered into a Shareholders' Agreement (SHA) with Expert Capital SA (currently - Retail Real Estate SA, RRE) and Arricano Trading Limited (currently - Arricano Real Estate, Arricano) and acquired a 35% interest in Arricano, through the issue of 1,077 new shares by Arricano for a consideration of USD 30,000 thousand payable by the Parent Company in cash. Arricano is a leading developer of upscale shopping centres in Ukraine, and the investment of USD 30,000 thousand was earmarked to fund further development of shopping centres and to repay certain existing Arricano debt. In August 2012, the shareholders of Arricano approved a pre-emptive share issue of an additional 25,848 ordinary shares at par value of EUR 1.00 each to the existing shareholders, bringing the total number of shares to 32,310. In September 2012 further shareholder resolutions were passed to increase Arricano's share capital, bringing the total issued share capital to EUR 42,513.16 and the total number of shares to 64,620,000 and the Parent Company's share to 10,770,000 ordinary shares representing 16.67% of total shareholding. The Parent Company made a contribution to the share capital of Arricano of USD 6 thousand (equivalent of EUR 4 thousand) fully paid in cash which equalled 16.67% of the newly issued shares.

On 26 September 2012, in anticipation of a planned listing on the AIM market of the London Stock Exchange, the Board of Arricano approved the issuance of 20,406,316 shares of Arricano to a series of investors in accordance with the previous shareholder resolution. However, as the AIM listing did not proceed as planned, the monies paid by the new investors for the shares were returned to subscribers and 20,406,316 shares remained unpaid. Consequently, Arricano commenced a forfeiture procedure over the 20,406,316 issued shares. This procedure provides for the return of the unpaid shares to Arricano and their consequent cancellation. Consequently, the Parent Company's share in Arricano as at 31 December 2012 continued to represent 16.67% with 10,770,000 ordinary shares.

As at 30 June 2013 ELQ Investors II Ltd had not exercised its right to convert it's holding of a convertible loan facility into 10,770,000 Arricano ordinary shares. Therefore the underlying 10,770,000 Arricano ordinary shares were returned by the escrow agent and allocated to RRE and the Parent Company in the proportion they owned Arricano shares before Arricano had entered into the convertible loan facility. On 12 August 2013 the Parent Company received 2,154,000 ordinary shares at par value which brought the total Parent Company shareholding to 12,924,000 ordinary shares or 12.19% of the increased authorised share capital of 106,000,000.

On 2 August 2013 Arricano made a public statement that it intended to list its shares on AIM in August-September 2013 at a valuation of USD 2.33 per share. As part of this initial public offering, on 20 July 2013 the shareholders of the Arricano approved an increase of the Arricano's authorised share capital to EUR 53,000 divided into 106,000,000 ordinary shares of nominal value EUR 0.0005 each. 

On 12 September 2013 Arricano was admitted for trading on the AIM market of the London Stock Exchange. In conjunction with the IPO, Arricano issued a further 38,650,637 ordinary shares, which increased its equity by USD 93,759 thousand. Of that, 28,350,214 ordinary shares were issued to entities under the common control of Hillar Teder, the ultimate beneficial holder of the principal shareholder of Arricano, as consideration for the acquisition of certain entities at a fair value of USD 66,056 thousand, and 10,300,423 ordinary shares were issued for cash at a price of USD 2.33 per share. The cash proceeds from the placement of 10,300,423 ordinary shares, net of direct costs related to the IPO process of USD 1,757 thousand, amounted to USD 22,243 thousand. As at 31 December 2013, 2,729,363 ordinary shares are not allotted and remain unpaid.

The total Parent Company shareholding of 12,924,000 ordinary shares in Arricano equates to 12.51% of the 103,270,637 issued and fully paid shares as at 30 June 2014. As at 30 June 2014, the closing middle-market price of shares of Arricano were USD 2.5 per share (as at 31 December 2013: USD 2.55 per share) valuing the Parent Company's shareholding in Arricano to USD 32,310 thousand (as at 31 December 2013: USD 32,956 thousand). At the date when these financial statements were authorised for issuance Arricano shares were quoted at a mid-market price at USD 2.425 per share.

Prior to the IPO of Arricano the Parent Company had the right to appoint one (out of four) representatives to the Board of Directors of Arricano. Pursuant to the SHA, the management structure of Arricano provided that significant operating, investment and strategic decisions required consent by each member of the Board of Directors of Arricano appointed by the Parent Company and RRE. As at 31 December 2013 Arricano's Board comprises six directors. The decisions are now decided by a majority of votes and in case of an equality of votes, the chairman has a second, or casting, vote.

Based on the above mentioned considerations, the Directors believe that from the date of Arricano's IPO the Parent Company does not have significant influence over Arricano. As a result, the investment was reclassified from investments in associates to financial assets at fair value through profit or loss and categorised in Level 1 of the fair value hierarchy.

9 Inventories

Inventories as at 30 June are as follows:

As at 30 June 2014 trading property was represented by the gated community Sadok Vyshnevyi (31 newly constructed flats in townhouses and relevant land plots), and a residential complex in Kyiv under construction (Obolon project).

As at 30 June 2014 trading property of USD 3,925 thousand (2013: USD 5,142 thousand) represented the net realisable value as estimated with the assistance of DTZ Kiev B.V., the independent appraiser. There was no impairment loss for the six months ended 30 June 2014 recognised in the profit or loss (the six months ended 30 June 2013: impairment of USD 2,908 thousand). Reversal of write-down of trading property to net realisable value of USD 6,218 thousand and loss from foreign currency translation differences of USD 10,795 thousand were recognised in the profit or loss for the six months ended 30 June 2014.

Since the start of construction at the beginning of 2012 the Obolon project was transferred from investment properties to trading property under construction. According to the report dated 15 July 2014 of DTZ Kiev B.V., the independent appraiser, the net realisable value of the Obolon project is less than the book value. There was no impairment loss for the six months ended 30 June 2014 recognised in profit or loss (the six months ended 30 June 2013: impairment of USD 1,447 thousand). Reversal of write-down of trading property to net realisable value of USD 4,190 thousand and loss from foreign currency translation differences of USD 9,328 thousand were recognised in the profit or loss for the six months ended 30 June 2014.

The estimation of fair value of the inventories was made based on certain assumptions, the most important of which as at 30 June 2014 are as follows:

· average market prices ranging from USD 642 to USD 2,783 per sq m

· discount rates ranging from 13.7% to 25.0%

· sales period - from 2 to 4 years

As at 31 December 2013 the respective assumptions were as follows:

· average market prices ranging from USD 710 to USD 2,540 per sq m

· discount rates ranging from 12% to 19%

· sales period - from 3 to 4 years

10 Trade and other receivables

Trade and other receivables are as follows:

Other receivables mainly include a receivable due from Intendancy as at 30 June 2014 amounting to USD 1,152 thousand (31 December 2013: USD 1,068 thousand) that relates to the sale of land plots in the Riviera Villas project in accordance with the Project Development Agreement concluded by the Group with Intendancy (see note 5).

Prepayments made include advances given to constructors on the Obolon project as at 30 June 2014 amounting to USD 1,502 thousand (31 December 2013: USD 850 thousand).

11 Cash and cash equivalents

Cash and cash equivalents are as follows:

The following table represents an analysis of cash and cash equivalents based on Fitch ratings as at 30 June:

12 Equity

Movements in share capital and share premium are as follows:

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 Parent Company. The par value per ordinary share is USD 0.02.

As part of an initial public offering on 1 June 2007 104,000,000 ordinary shares were sold to certain institutional investors at a price of USD 2.00 per ordinary share, raising gross proceeds of USD 208,000 thousand. In addition 36,630,100 ordinary shares were sold on 29 November 2007 at a price of USD 2.73 per ordinary share, raising gross proceeds of USD 100,000 thousand. The difference between net proceeds per share and par value is recognised as share premium.

During 2008 the Group issued 1,698,416 new ordinary shares at a price of USD 2.60 per ordinary share to settle 70 % of the manager's performance fee for 2007 in the amount of USD 4,432 thousand.

All issued shares are authorised and fully paid. Total authorised shares are 300,000,000.

Following the extraordinary general meetings of members of the Parent Company on 31 July 2008 and 1 December 2008, 11,948,000 of its own shares were repurchased by the Parent Company and were cancelled. The purchase price of repurchased shares ranged from USD 0.50 to USD 1.47 per share. The difference between the total price paid and par value was recognised as a share premium decrease.

Following the extraordinary general meeting of members of the Parent Company on 29 May 2009, 12,664,201 of its own shares were repurchased by the Parent Company and were cancelled. The purchase price of the repurchased shares ranged from USD 0.53 to USD 0.68 per share. The difference between the total price paid and par value was recognised as share premium decrease.

Following the extraordinary general meetings of members of the Parent Company on 9 November 2011 and 12 December 2011, 8,355,000 of its own shares were repurchased by the Parent Company and were cancelled. The purchase price of repurchased shares ranged from USD 0.48 to USD 0.63 per share. The difference between the total price paid and par value was recognised as share premium decrease.

13 Finance lease liabilities

Finance lease liabilities are as follows: