Kimberly Enterprises Regulatory News (KBE)

Kimberly Enterprises N.V.

Results for the six month period ended 30 June 2013

Kimberly Enterprises N.V. ('Kimberly' or 'the Company') the AIM-listed Central and Eastern European property developer (KBE: L), announces its results for the six month period ended 30 June 2013.

Financial Summary

 * Retrospective application -. Following the application of IFRS 11, the Group's joint ventures are now accounted for using the equity method, whereas previously the Company's accounting policy was the proportionate consolidation method (see Note 4 regarding initial application of the new suite of standards).

As part of its strategy, the Company has focussed on the Czech Republic market, following which during 2013 the Company has started the construction of 77 units on the plot designed for the first stage in the Veleslavin project located in Prague. The estimated sale value of the first phase is €17 million. The project is part of the ENMAN joint venture. 

Gad Raveh, CEO of Kimberly Enterprises N.V.

Enquiries:

Financial Position

At 30 June 2013 the Group has current liabilities totalling EUR 41,357 thousands, which exceeds its current assets amounting to EUR 9,135 thousands and a negative equity which amounts to EUR 17,930 thousands.

As of 30 June 2013, the financial condition of the Group remains weak and it is not able to meet its obligations to its employees and service providers as they fall due. The Group is in breach of:

· Interest bearing loan from bank - totalling EUR 2,890 thousands, loans that were taken by the Company's jointly controlled entities subsidiaries - totalling EUR 1,636 thousands.

· The obligation to make lease payments totalling EUR 8.8 million (relating to the lease of Marina Dorcol in Belgrade, Serbia). After the reporting date, the Company further breached is obligation to pay by an additional amount of EUR 0.8 million.

a. Interest bearing loans from banks

In respect of breached project loan totalling EUR 2,890 thousands, management considers it is unlikely that the Group will generate sufficient cash inflow to repay the obligation which falls due within one year.

The above bank loan was granted to a wholly controlled entity Euro-bul Ltd and is being secured by guarantees provided by ERD.

The Group has breached project bank loans under its joint ventures in the total amount of EUR 1,636 thousands (Group share).

Whilst in the past financing banks have agreed to prolong existing loan facilities of the Company and its jointly controlled entities, there is no assurance that these banks will be prepared to extend existing loan facilities beyond currently committed maturity dates. In the event that a bank is not willing to extend a project loan, it has the option to call in its security. In most cases these loans are secured by the assets they are financing.

Management considers it is unlikely that some of the projects related jointly controlled entities will generate sufficient cash inflows to repay all obligations when they fall due. Management believes that the above mentioned conditions indicate the existence of material uncertainties which cast significant doubt on the Company's ability to continue as a going concern.

b. Lease agreement

Since January 2011, the Group has been in breach of the obligation to make the monthly lease payments. As of 30 June 2013 the total breach was EUR 8.8 million.

The Company is exposed to the following sanctions:

· Termination of the lease contracts which will cause the loss of the right to use of land;

· In the case of termination the final result of termination would be restitution of the amounts paid by Marina Dorcol based on the agreements with the municipality, decreased for the amount of compensation for usage of such land for the period of duration of lease and for compensation of damages which occurred for the municipality, if any.

Should any party commence bankruptcy procedure against Marina Dorcol, the Company would lose control of Marina Dorcol and would be exposed to uncertainty with respect to compensation from the bankruptcy estate, since the Company will be in the "last row of creditors".

In case that the Serbian municipality will wish to terminate the lease contract, it has to give to the Company a written notice. The Company will have 90 days to remedy the breach in order to avoid the agreement termination. However, the management of the Company estimates, inter alia, based on its legal advisor that it is not likely the Serbian municipality will act to terminate the agreement between the parties and that bankruptcy procedure against Marina Dorcol will commence. The Group is currently in the process of negotiation to restructure the liability.

In order to manage its financial situation the Company has requested Engel Resources and Development Ltd. ("ERD"), the parent company of the Company's immediate parent company, Engel General Developers Ltd., to provide additional financial assistance to fund the Company's immediate liabilities.

During the reporting period ERD provided several bridge loans for a total amount of approximately EUR 0.5 million. After the reporting period the Company received additional loans from ERD for a total amount of EUR 33 thousands.

The management is also examining other solutions to fund the Company's immediate liabilities and to resolve its financial situation.

Should the going concern assumption not be appropriate, adjustments would have to be made to reflect a situation where the assets may need to be realized other than in the normal course of business and at amounts which could differ significantly from the amounts stated in the consolidated financial statements.

Initial application of new standards

The Group has early adopted IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities, as well as the consequential amendments to IAS 28 Investments in Associates and Joint Ventures (2011), IFRS 13 Fair value measurement, and amendments to IAS 1 presentation of items of Other Comprehensive Income with a date of initial application of 1 January 2013. The adoption of these standards has the following effect on the financial statements.

· IFRS 11 Joint Arrangements

· IFRS 12 Disclosure of Interests in Other Entities

As a result of the adoption of IFRS 11, the Group has changed its accounting policy with respect to its interests in joint arrangements.

Under IFRS 11, the Group classifies its interests in joint arrangements as either joint operations or joint ventures depending on the Group's rights to the assets and obligations for the liabilities of the arrangements. When making this assessment, the Group considered the structure of the arrangements, the legal form of any separate vehicles, the contractual terms of the arrangements and other facts and circumstances. Previously, the structure of the arrangement was the sole focus of classification.

The Group evaluated its involvement in the joint arrangements it holds and classified them as joint ventures. Following the application of IFRS 11 joint ventures are accounted for using the equity method, whereas until application of the standard the Company's accounting policy was the proportionate consolidation method.

Since the Company did not provide guarantees to the joint ventures, losses from the joint ventures are accounted for until the investment is reduced to zero. If the joint venture subsequently reports profits, the Company resumes recognizing its share of those profits only after its share of the profits equals the share of the losses not recognized. Any unrecorded losses at the date of transition are recorded in the retained earnings.

The Group disclosed the interests at the joint ventures as required under IFRS 12 (see Note 10).

Note 11 includes a summary of the adjustments made to the Group's statements of financial position at 30 June 2012 and 31 December 2012, and its statements of profit or loss and other comprehensive income and cash flows for the year ended 31 December 2012 and for the six months' period ended at 30 June 2012 as a result of the implementation of the equity method instead of proportionate consolidation. IFRS 10 Consolidated Financial Statements and the consequential amendments to IAS 28 Investments in Associates and Joint Ventures (2011) did not have any material effect on the Company condensed consolidated interim financial statements.

IFRS 13, fair value measurement, provides a single framework for measuring fair value. The measurement of the fair value of an asset or liability is based on assumptions that market participants would use when pricing the asset or liability under current market conditions, including assumptions about risk. The Company adopted IFRS 13 on 1 January 2013 on a prospective basis. The adoption of IFRS 13 did not require any adjustments to the valuation techniques used by the Company to measure fair value and did not result in any measurement adjustments as at 1 January 2013.

Trading Performance

Further to the announcement issued on 19 June 2013 regarding the agreement to sell the plot designed for the fourth stage of the Safranka project in the Czech Republic (the "Safranka Project"), the Company pleased to announce that the agreement has been finalized and the sale took place in the middle of July.

The Company continues to examine the possibility of disposing further assets in its portfolio.

Outlook

Further to the announcement issued on 13 July 2011 regarding the approval of the district court in Israel for the purchase of Engel Recourses and Development Ltd. by GBES Ltd., the Company's future plans are to continue developing and improving the Company's current portfolio of development projects.

The Company plans to continue to focus on investing in the stable markets of the Czech Republic and Poland.

Condensed consolidated statement of financial position

* Retrospective application - see Note 4 regarding initial application of the new suite of standards.

The notes are an integral part of these condensed consolidated interim financial statements.

Condensed consolidated statement of profit or loss

* Retrospective application - see Note 4 regarding initial application of the new suite of standards.

The notes are an integral part of these condensed consolidated interim financial statements.

Condensed consolidated statement of comprehensive income

* Retrospective application - see Note 4 regarding initial application of the new suite of standards.

The notes are an integral part of these condensed consolidated interim financial statements.

Condensed consolidated statement of changes in equity

The notes are an integral part of these condensed consolidated interim financial statements.

Condensed consolidated statement of cash flows

* Retrospective application - see Note 4 regarding initial application of the new suite of standards.

The notes are an integral part of these condensed consolidated interim financial statements.

Notes to the condensed consolidated interim financial statements

1. Reporting entity

Kimberly Enterprises N.V. (the "Company") is a Company domiciled in The Netherlands. The Company owns subsidiary companies and has jointly controlled entities mainly in Eastern Europe which purchase, develop, hold and sell real estate assets.

These condensed consolidated interim financial statements ("interim financial statements") as at and for the six months ended 30 June 2013 comprises the Company and its subsidiaries (together referred to as the "Group") and the Group's interests in associates and jointly controlled entities.

The consolidated financial statements of the Group as at and for the year ended 31 December 2012 are available on the Company's website (www.kimberly-enterprises.com) and upon request from the Company's registered office at Keizersgracht 616, 1017 ER Amsterdam, The Netherlands.

2. Basis of preparation

a. Statement of compliance

These condensed consolidated interim statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU. They do not include all the information required for a complete set of financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last annual consolidated financial statements as at and for the year ended 31 December 2012.

These condensed consolidated interim financial statements were authorized for issue by the Company's Board of Directors on 28 August 2013.

b. Judgements and estimates

In preparing these condensed consolidated interim, Management make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

The significant judgements made by Management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2012.

3. Significant accounting policies

Except as described in Note 4, the accounting policies applied by the Group in these interim financial statements are the same as those applied in the Group's consolidated financial statements as at and for the year ended 31 December 2012. The following changes in accounting policies are also expected to be reflected in the Group's consolidated financial statements as at and for the year ending 31 December 2013. (For the effect of the changes on the Company statement of financial position, statement of profit or loss and other comprehensive income, and statement of cash flows for 31 December 2012 and 30 June 2012 and the twelve and six month respective periods then ended, see Note 11).

4. Initial application of new standards

The Group has early adopted IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities, as well as the consequential amendments to IAS 28 Investments in Associates and Joint Ventures (2011), IFRS 13 Fair value measurement, and amendments to IAS 1 presentation of items of Other Comprehensive Income with a date of initial application of 1 January 2013. The adoption of these standards has the following effect on the financial statements.

· IFRS 11 Joint Arrangements

· IFRS 12 Disclosure of Interests in Other Entities

As a result of the adoption of IFRS 11, the Group has changed its accounting policy with respect to its interests in joint arrangements.

Under IFRS 11, the Group classifies its interests in joint arrangements as either joint operations or joint ventures depending on the Group's rights to the assets and obligations for the liabilities of the arrangements. When making this assessment, the Group considered the structure of the arrangements, the legal form of any separate vehicles, the contractual terms of the arrangements and other facts and circumstances. Previously, the structure of the arrangement was the sole focus of classification.

The Group evaluated its involvement in the joint arrangements it holds and classified them as joint ventures. Following the application of IFRS 11 joint ventures are accounted for using the equity method, whereas until application of the standard the Company's accounting policy was the proportionate consolidation method.

Since the Company did not provide guarantees to the joint ventures, losses from the joint ventures are accounted for until the investment is reduced to zero. If the joint venture subsequently reports profits, the Company resumes recognizing its share of those profits only after its share of the profits equals the share of the losses not recognized. Any unrecorded losses at the date of transition are recorded in the retained earnings.

The Group disclosed the interests at the joint ventures as required under IFRS 12 (see Note 10).

Note 11 includes a summary of the adjustments made to the Group's statements of financial position at 30 June 2012 and 31 December 2012, and its statements of profit or loss and other comprehensive income and cash flows for the year ended 31 December 2012 and for the six months' period ended at 30 June 2012 as a result of the implementation of the equity method instead of proportionate consolidation. IFRS 10 Consolidated Financial Statements and the consequential amendments to IAS 28 Investments in Associates and Joint Ventures (2011) did not have any material effect on the Company condensed consolidated interim financial statements.

IFRS 13, fair value measurement, provides a single framework for measuring fair value. The measurement of the fair value of an asset or liability is based on assumptions that market participants would use when pricing the asset or liability under current market conditions, including assumptions about risk. The Company adopted IFRS 13 on 1 January 2013 on a prospective basis. The adoption of IFRS 13 did not require any adjustments to the valuation techniques used by the Company to measure fair value and did not result in any measurement adjustments as at 1 January 2013.

Presentation of items of other comprehensive income

As a result of the amendment to IAS 1, the group has modified the presentation of items of other comprehensive income in its condensed consolidated statements of profit and loss and other comprehensive income. To present separately items that would be reclassified to profit or loss in the future from those that would never be. Comparative information has also been re-presented accordingly.

The adoption of the amendment to IAS 1 has no impact on the recognized assets, liabilities and comprehensive income of the Group.

5. Operating segments

The chief operating decision-maker has been identified as the CEO of the Group who reviews the Group's internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports.

The chief operating decision-maker assesses the performance of the operating segments based on a measure of adjusted earnings before tax.

The Group considers that the business has the following 2 operating segments:

· Development and sale of residential real estate projects.

· Land designated for commercial project.

* Retrospective application - see Note 4 regarding initial application of the new suite of standards.

Reconciliation of reportable segment assets and liabilities:

* Retrospective application - see Note 4 regarding initial application of the new suite of standards.

6. Financial risk management

There has been no change in the Group's financial risk management objectives and policies as compared with those disclosed in the consolidated financial statements as at and for the year ended 31 December 2012.

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation.

The Group relies on external funding to finance its current and future development projects. Future acquisitions of investment properties and land designated for residential projects and the ability of the Group to expand its operations is dependent on its ability to obtain future bank and/or related parties financing. The Group intends to repay its existing bank loans from its operating activity (mainly sales of housing units and undeveloped plots). The Group's bank financing is project-specific and generally secured by the physical assets of the relevant project company. The Group has been able in a few cases to secure project funding however, there is no assurance that banks will provide funding for new projects or prolong overdue loans.

At 30 June 2013 the Group has current liabilities totalling EUR 41,357 thousands, which exceeds its current assets amounting to EUR 9,135 thousands and a negative equity which amounts to EUR 17,930 thousands.

As of 30 June 2013, the financial condition of the Group remains weak and it is not able to meet its obligations to its employees and service providers as they fall due. The Group is in breach of:

· Interest bearing loan from bank - totalling EUR 2,890 thousands, loans that were taken by the Company's jointly controlled entities subsidiaries - totalling EUR 1,636 thousands (see Note 10.b).

· The obligation to make lease payments totalling EUR 8.8 million (relating to the lease of Marina Dorcol in Belgrade, Serbia). After the reporting date the Company further breached is obligation to pay by an additional amount of EUR 0.8 million.

a. Interest bearing loans from banks

In respect of breached project loan totalling EUR 2,890 thousands management considers it is unlikely that the Group will generate sufficient cash inflow to repay the obligation which fall due within one year.

The above bank loan was granted to a wholly controlled entity Euro-bul Ltd and is being secured by guarantees provided by ERD.

The Group have breached project bank loans under its joint ventures in the total amount of EUR 1,636 thousands (Group share), (see Note 10.b).

Whilst in the past financing banks have agreed to prolong existing loan facilities of the Company and its jointly controlled entities, there is no assurance that these banks will be prepared to extend existing loan facilities beyond currently committed maturity dates. In the event that a bank is not willing to extend a project loan, it has the option to call in its security. In most cases these loans are secured by the assets they are financing.

Management considers it is unlikely that some of the projects related jointly controlled entities will generate sufficient cash inflows to repay all obligations when they fall due. Management believes that the above mentioned conditions indicate the existence of material uncertainties which cast significant doubt on the Company's ability to continue as a going concern.

b. Lease agreement

Since January 2011, the Group has been in breach of the obligation to make the monthly lease payments. As of 30 June 2013 the total breach was EUR 8.8 million.

The Company is exposed to the following sanctions:

· Termination of the lease contracts which will cause the loss of the right to use of land;

· In the case of termination the final result of termination would be restitution of the amounts paid by Marina Dorcol based on the agreements with the municipality, decreased for the amount of compensation for usage of such land for the period of duration of lease and for compensation of damages which occurred for the municipality, if any.

Should any party commence bankruptcy procedure against Marina Dorcol, the Company would lose control of Marina Dorcol and would be exposed to uncertainty with respect to compensation from the bankruptcy estate, since the Company will be in the "last row of creditors".

In case that the Serbian municipality will wish to terminate the lease contract, it has to give to the Company a written notice. The Company will have 90 days to remedy the breach in order to avoid the agreement termination. However, the management of the Company estimates, inter alia, based on its legal advisor that it is not likely the Serbian municipality will act to terminate the agreement between the parties and that bankruptcy procedure against Marina Dorcol will commence. The group is currently in the process of negotiation to restructure the liability.

In order to manage its financial situation the Company has requested Engel Resources and Development Ltd., the parent company of the Company's immediate parent company, Engel General Developers Ltd., ("ERD") to provide additional financial assistance to fund the Company's immediate liabilities.

During the reporting period ERD provided several bridge loans for a total amount of approximately EUR 0.5 million. After the reporting period the Company received additional loans from ERD for a total amount of EUR 33 thousands regarding the related guarantees granted to ERD.

The management is also examining other solutions to fund the Company's immediate liabilities and to resolve its financial situation.

Should the going concern assumption not be appropriate, adjustments would have to be made to reflect a situation where the assets may need to be realized other than in the normal course of business and at amounts which could differ significantly from the amounts stated in the consolidated financial statements.

7. Tax expense

Tax expense is recognised based on Management's best estimate of the weighted-average annual income tax rate expected for the full financial year multiply by the pre-tax income of the interim reporting period.

The Group's consolidated effective tax rate in respect of continuing operations for the six months ended 30 June 2013 was 10% (six months ended 30 June 2012: -6%).

The change in effective tax rate was caused mainly by the following factors:

· Current year losses for which no deferred tax asset was recognized.

· Effect of different tax rates in foreign jurisdictions.

· De-recognition of previously recognized deferred tax assets.

8. Related parties

a. Related party transactions

In order to manage its financial situation the Company requested ERD to provide additional financial support to assist the Company to settle its immediate liabilities.

During the reporting period ERD provided several bridge loans in the total amount of approximately EUR 0.5 million. After the reporting period the Company received additional loans from ERD in the total amount of EUR 33 thousands.

b. Securities provided by parent company and related parties

As a part of previous year's loan agreement with ERD, the Company agreed to pledge a plot in Wilanow district in Warsaw, Poland ("Willanow 2") designated for commercial purposes in favor of ERD.

During the reporting period ERD has finalized an agreement to sell the plot of Wilanow 2 to a third party for a total consideration of EUR 4.14 million.

In accordance with the agreement with ERD, the net proceeds of the sale will be deducted from the total debt of the Group towards ERD; therefore during the reporting period a total amount of EUR 2.5 million was transferred to ERD.

As a result of the above the Company ceased to consolidate the Polish subsidiary in its consolidated financial statements, as the significant risks and rewards related to the ownership of the investment property held by the subsidiary were transferred to ERD (see Note 9.b).

c. Directors

As of 30 June 2013, the Company has 4 directors (31 December 2012: 4 directors).

9. Disposal of subsidiary and group held for sale

a. During the reporting period, a receiver was appointed by court in Hungary due to an appeal of one of the entity's creditors in the jointly controlled entity, Engel Ingatlan Ingatlanfejlesztő Kft. ("Ingatlan"), which owns the Punko project in Hungary.

As a consequence the Company ceased to consolidate the jointly controlled entity in the interim financial report. The Group recognize a profit on the book value of its investment in Ingatlan, in the amount of EUR 0.6 million.

ENMAN B.V., the parent company of Ingatlan, provided guarantees for the interest payments and the costs overruns, to the lender bank. The amount of the loan as of the reporting period is EUR 6,099 thousands (the Company's share is EUR 1,525 thousands).

The disposal due to loss of control in the jointly controlled entity had the following effect on the Joint Venture ("ENMAN") assets and liabilities (below presented the Group's part):

b. As a result of selling a plot in Wilanow area, Warsaw, Poland, to third party (see Note 8.b) the Company ceased to consolidate the Polish subsidiary in its consolidated financial statements, as the significant risks and rewards related to the ownership and sell of the investment property held by the subsidiary were transferred to ERD.

During the reporting period the final sale agreement has been signed and a total amount of EUR 2.5 million was transferred to ERD which were deducted from the total debt of the Group towards ERD.

The disposal due to loss of control in the wholly owned subsidiary had the following effect on the Group's assets and liabilities (presented previously under assets and liabilities in disposal held for sale):

10. Interest in other entities

Joint ventures

a. Arces International B.V. ("Arces") - holding company, Amsterdam, The Netherlands. The Company and HCEPP II Luxembourg Master S.à r.l ("Heitman") each hold 50% of Arces' shares.

Arces incorporated with the purpose of investment in real estate development project companies in Eastern Europe. Arces has investments in Poland, Hungary and the Czech Republic.

The following table summaries the financial information of Arces. The table also reconciles the summarized financial information of the Group's interest in Arces, which is accounted for using the equity method.

Comments in respect to the investment in Arces:

i. Due to the joint venture continuing accumulate losses management decided to book impairment on the given loan and recorded the loss at the income statement under share of profit (loss) of equity accounted investments.

ii. The Company did not provide any guarantees for the joint venture; therefore losses are accounted only until the Company investment account is reduced to zero (see Note 4).

iii. Arces has an exposure as per the bank loans which financed the project in Gyor Hungary in the amount of EUR 12,648 thousands (the Company's share is EUR 6,324 thousands). The bank claims that the loans were additionally guaranteed by Arces International B.V. The Company has disputed the validity of this guarantee with the bank and there is legal dispute between the Company and Heitman regarding the responsibility of this guarantee, however, no official legal claim has been filed by any of the parties.

As a consequence to the liquidation process of the Hungarian entity the Company has ceased to consolidate the Hungarian subsidiary ("Engel project") in its consolidated financial statements, see Note 34.a in the annual reports for the period ended 31 December 2011.

iv. During the reporting period the company Palác Engel Šafranka s.r.o., a wholly owned subsidiary of Arces, sold the plot designed for the fourth stage of the Safranka project in the Czech Republic (the "Safranka Project") for a total cash consideration of EUR 2.5 million, following which the subsidiary booked a loss in the amount of EUR 17 thousands (the Company share is EUR 8.5 thousands) in the reports of the second quarter of 2013.

b. ENMAN B.V. ("ENMAN") - holding company, Amsterdam, The Netherlands. The Company and HEPP III Luxembourg Master S.à r.l. ("Heitman") each hold 50% of ENMAN's shares.

On July 2010 the Company signed an amendment to its joint venture agreement with Heitman according to which the Company's share in profit distributions from ENMAN are 25% and the Company's share in profit distributions from "Troya" project in Czech Republic are 50%.

ENMAN incorporated with the purpose of investment in real estate development project companies in Eastern Europe. ENMAN has investments in Poland, Hungary, Romania and the Czech Republic.

The following table summaries the financial information of ENMAN. The table also reconciles the summarized financial information of the Group's interest in ENMAN, which is accounted for using the equity method.

Comments in respect to the investment in ENMAN:

i. Due to the joint venture continuing accumulate losses management decided to book impairment on the given loan and recorded the loss at the income statement under share of profit (loss) of equity accounted investments.

ii. The Company did not provide any guarantees for the joint venture; therefore losses are accounted only until the Company investment account is reduced to zero (see Note 4).

iii. Current liabilities include EUR 6,544 thousands (the Company's share is EUR 1,636 thousands), interest bearing bank loans were in breach of repayment terms as of the reporting date.

iv. ENMAN has provided guarantees for interest payments and costs overruns, to the bank which finances the Ingatlan project in Budapest, Hungary, the amount of the loan as of the reporting period EUR 6,099 thousands (the Company's share is EUR 1,525 thousands), see Note 9.a.

c. Montreal Residential Holdings Master Limited Partnership ("MLP") - holding partnership, Quebec, Canada.

The Company owns "ECG Trust Canada Holding Trust" ("ECG") (95% interest subsidiary) which holds 20% interest in future distributions of MLP.

The remaining 80% in future distributions is owned by Lehman Brothers Real Estate Partners II ("Lehman Brothers") represented by Silverpeak Real Estate Partners ("Silverpeak").

MLP holds three parcels of land in Montreal, Quebec, Canada which are slated for the development of condominium projects.

The following table summaries the financial information of MLP. The table also reconciles the summarized financial information of the Group's interest in MLP, which is accounted for using the equity method.

Comments in respect to the investment in MLP:

i. Due to the joint venture continuing accumulate losses management decided to book impairment on the given loan and recorded the loss at the income statement under share of profit (loss) of equity accounted investments.

ii. The Company did not provide any guarantees for the joint venture; therefore losses are accounted only until the Company investment account is reduced to zero (see Note 4).

11. Adoption of IFRS 11

The following tables summarize the material impact resulting from the above changes in accounting policies on the Group's financial position, comprehensive income and of cash flows.

As the Group has taken advantage of the transitional provisions of Consolidated Financial Statements, Joint Arrangements and Disclosure of interests in Other Entities: Transaction Guidance (Amendments to IFRS 10, IFRS 11 and IFRS 12), the following tables do not include the effect of the changes in accounting policy for subsidiaries on the current period.

Condensed consolidated statement of financial position:

Condensed consolidated statement of financial position (continued):

Condensed consolidated statement of profit and loss and other comprehensive income:

Condensed consolidated statement of cash flows:

12. New IFRS pronouncements

Amendments to IAS 32 - Offsetting Financial Assets and Financial Liabilities (Effective for annual periods beginning on or after 1 January 2014; to be applied retrospectively. Earlier application is permitted, however the additional disclosures required by Amendments to IFRS 7 Disclosures - Offsetting Financial Assets and Financial Liabilities must also be made.)

The Amendments do not introduce new rules for offsetting financial assets and liabilities; rather they clarify the offsetting criteria to address inconsistencies in their application.

The Amendments clarify that an entity currently has a legally enforceable right to set-off if that right is:

· not contingent on a future event; and

· enforceable both in the normal course of business and in the event of default, insolvency or bankruptcy of the entity and all counterparties.

The entity does not expect the Amendments to have any impact on the financial statements since it does not apply offsetting to any of its financial assets and financial liabilities and it has not entered into master netting arrangements.

***