3rd Quarter Results

THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION

IN OR INTO THE RUSSIAN FEDERATION, THE UNITED STATES, CANADA, AUSTRALIA OR JAPAN

19 November 2013

AFI DEVELOPMENT PLC

("AFI DEVELOPMENT" OR "THE COMPANY")

RESULTS FOR THE NINE MONTHS TO 30 SEPTEMBER 2013

RENTAL INCOME INCREASED 20% YEAR-ON-YEAR

AFI Development, a leading real estate company focused on developing property in Russia, has today announced its financial results for the nine month period ended 30 September 2013.

Nine months 2013 financial highlights

· Revenues for the nine months to 30 September 2013, including net proceeds from the sale of trading properties, reached US$162.3 million

- Rental income increased 20% year-on-year to US$105.1 million (US$36.6 million for Q3 2013 compared to US$28.4 million in Q3 2012)

- AFIMALL City contribution amounted to US$74.6 million (compared to US$62.1 million in the first nine months of 2012)

· Net profit reached US$84.1 million, compared to a net loss of US$276.6 million in the first nine months of 2012

· Gross profit grew 74% year-on-year to US$58.4 million

· Gross value of portfolio of properties remained largely unchanged at US$2,532 million

· Cash and deposits remain high at US$140.3 million

· The Company decreased the interest rate on the AFIMALL City loan in US dollars from 3 months LIBOR+6.7% to 3 months LIBOR+5.02%

Operational highlights

· AFIMALL City operations continue to improve

- Rental revenue up 20% year-on-year to US$74,5 million

- Continued growth in occupancy with total leased area reaching circa 82,046 sq.m. as at 30 September 2013 (from 80,020 sq.m. as at 30 June 2013 and 74,353 sq.m. at year-end 2012)

· Binding agreement to dispose of Building 1 at Aquamarine III reached in November 2013

- Building 1 at Aquamarine III to be sold for US$91.5 million excluding VAT, resulting in expected profit of US$14.6 million

· Land lease agreement for construction of residential and commercial space signed at Paveletskaya II in November 2013, resulting in a US$64.8 net valuation gain (due to an increase in the fair value of the project)

Commenting on today's announcement, Lev Leviev, Executive Chairman of AFI Development, said:

"We are encouraged by the strong retail demand which is reflected in the steady progress of all performance indicators at AFIMALL City. Our successful sale of the first building within our Aquamarine III development is further testament to the continued strength of the Moscow real estate market. We remain committed to our long-standing strategy of delivering high quality projects tailored to the needs of our residential and commercial customers and look to the future with confidence."

Q3 2013 Results Conference Call:

AFI Development will hold a conference call for analysts and investors to discuss its Q3 2013 financial results on Wednesday, 20 November 2013, following the publication of the Company's financial results.

The details for the conference call are as follows:

Date: Wednesday, 20 November 2013

Time: 6pm Moscow (2pm GMT)

Dial-in Tel: International: +44 (0) 20 3003 2666

UK toll-free: 0808 109 0700

US toll-free: 1 866 966 5335

Russia toll-free: 8 10 8002 4902044

Password: AFI

Please dial in 5/10 minutes prior to the commencement time giving your name, company and stating that you are dialling into the AFI Development conference call quoting the reference AFI.

A replay facility will be available for 1 week following the call.

To access the recording, please dial +44 (0)20 8196 1998 and enter access code 8879626.

Prior to the conference call, the Q3 2013 Investor Presentation of AFI Development will be published on the Company website at http://www.afi-development.com/en/investor-relations/reports-presentations on 20 November 2013 by 2pm Moscow time (10am GMT).

- ends -

For further information, please contact:

AFI Development, Moscow +7 495 796 9988

Ilya Kutnov

Ekaterina Shubina

Citigate Dewe Rogerson, London +44 20 7638 9571

David Westover

Sandra NovakovShelly Chadda

About AFI Development

AFI Development is one of the leading real estate development companies operating in Russia. Established in 2001, AFI Development is a publicly traded subsidiary of Africa Israel Investments Ltd.

AFI Development is listed on the Main Market of the London Stock Exchange and aims to deliver shareholder value through a commitment to innovation and continuous project development, coupled with the highest standards of design, construction, and quality of customer service.

AFI Development focuses on developing and redeveloping high quality commercial and residential real estate assets across Russia, with Moscow being its main market. The Company's existing portfolio comprises commercial projects focused on offices, shopping centres, hotels and mixed-use properties, and residential projects. AFI Development's strategy is to sell the residential properties it develops and to either lease the commercial properties or sell them for a favourable return.

AFI Development is a leading force in urban regeneration, breathing new life into city squares and neighbourhoods and transforming congested and underdeveloped areas into thriving new communities. The Company's long-term, large-scale regeneration and city infrastructure projects establish the necessary groundwork for the successful launch of commercial and residential properties, providing a strong base for future.

Legal Disclaimer

Some of the information in these materials may contain projections or other forward-looking statements regarding future events, the future financial performance of the Company, its intentions, beliefs or current expectations and those of its officers, directors and employees concerning, among other things, the Company's results of operations, financial condition, liquidity, prospects, growth, strategies and business. You can identify forward looking statements by terms such as "expect", "believe", "anticipate", "estimate", "intend", "will", "could," "may" or "might" or the negative of such terms or other similar expressions. These statements are only predictions and that actual events or results may differ materially. Unless otherwise required by applicable law, regulation or accounting standard, the Company does not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in projections or forward-looking statements of the Company, including, among others, general economic conditions, the competitive environment, risks associated with operating in Russia and market change in the industries the Company operates in, as well as many other risks specifically related to the Company and its operations. 

Chairman and Executive Director's Combined Statement

The growth momentum for revenue and profits of AFI Development has continued throughout the third quarter of 2013. Rental income and realised profit demonstrate convincing growth since the beginning of the year.

We are very pleased with the disposal of the first building within our Aquamarine III project. The Company expects to realise a net profit of US$14.6 million on completion of this transaction.

Supported by the strong retail demand, AFIMALL City continues to show steady progress in rental revenues and occupancy levels. At the same time, construction works at Odinbourg ("Otradnoe ") progress as planned whilst construction at our Tverskaya Plaza Ic development is due to start during the first quarter of next year.

We are also encouraged by the recent signing of the addendum to the land lease agreement at our Paveletskaya Phase II development, which not only allows us to recognise the market value of the project on our balance sheet, but also puts us one step closer to starting construction at this site.

Projects update

AFIMALL City

Revenues and occupancy levels at AFIMALL City continue on their steady growth path. Notwithstanding ongoing construction in the Moscow City area, AFIMALL City continues to attract existing and new customers.

On 17 August 2013 Bellgate Constructions Limited, the Company subsidiary owning and operating AFIMALL City, signed an addendum to the existing loan facility agreement on the reduction of the interest rate for the US dollar portion of the loan from LIBOR + 6.7% to LIBOR + 5.02% p.a., effective from 3 September 2013. At the end of Q3 2013 the outstanding loan amount, denominated in US dollars, was circa US$309.4 million.

Tverskaya Plaza Ic

The design works are approaching the final stage while the Company is finalising its preparations for a general contractor tender. In parallel, the site is being prepared for the start of construction planned for Q1 2014. 

Odinbourg (Otradnoe)

Construction works continue as planned at the site in Odintsovo. The marketing concept for the project has been finalised and the Company will soon be in a position to start pre-sales. 

Subsequent events

Disposal of building 1 at Aquamarine III

On 7 November, the Company announced that it had reached a binding agreement to dispose of Building 1 in the Aquamarine III office complex in Moscow. Under the transaction, Krown Investments LLC, the subsidiary holding rights to Aquamarine III, sells premises of the first building in the Complex and part of underground premises with gross area of 10,985.8 sq.m., a terrace of 418.9 sq.m. and approximately a 15.8% share in the title to common areas of the Complex, which total 3,728.6 sq.m. (total transacted area corresponds to approximately 11,994 sq.m.), to a Russian state controlled corporation. The consideration is to be paid in cash and amounts to Russian rouble equivalent of US$91.5 million and applicable Russian VAT.

Completion of the transaction is subject to a condition that AFI Development removes the existing mortgage over the disposed premises and the land lease rights in favour of VTB Bank JSC. VTB Bank JSC has already consented to the transaction. The Company expects the transaction to be completed in December 2013.

Paveletskaya Phase II

In November 2013, the Company subsidiary MKPK JSC and the Moscow city authorities signed an addendum to the land lease agreement for the Paveletskaya Phase II project, amending the permitted use of land from industrial to the construction of residential and commercial premises. The addendum is in line with the previous decisions of the Moscow authorities on development rights of the Company in this project. However, the addendum provides the level of certainty required to change the fair value of the project to market value on the Company balance sheet: the market value of the project confirmed by Cushman & Wakefield, the Company's independent valuers, is US$92.6 million as opposed to the current book value of US$11.6 million. The resulting US$81.0 million gross valuation gain (US$64.8 million net of taxation) is included in AFI Development's Q3 2013 results.

As previously announced, in Paveletskaya Phase II the Company will be allowed to construct 151,373 sq.m.

Lev Leviev Mark Groysman

Executive Chairman of the Board Executive Director

ANNEX A 

30.9.13 - Very significant property disclosure

1. AFIMALL City

2. Ozerkovskaya III

* Note: revaluation loss in the current quarter is related to currency exchange rate fluctuations

3. Tverskaya Plaza IV

4. Tverskaya Plaza II

* Note: revaluation loss in the current quarter is related to currency exchange rate fluctuations

5. Bolshaya Pochtovaya

6. Kossinskaya

* Note: revaluation loss in the current quarter is related to currency exchange rate fluctuations

ANNEX B

30.9.13 - Very significant loans disclosure

AFI DEVELOPMENT PLC

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the period from 1 January 2013 to 30 September 2013

C O N T E N T S

Independent auditors' report on review of condensed consolidated interim financial information

Condensed consolidated income statement

Condensed consolidated statement of comprehensive income

Condensed consolidated statement of changes in equity

Condensed consolidated statement of financial position

Condensed consolidated statement of cash flows

Notes to the condensed consolidated interim financial statements

Independent auditors' report on review of condensed consolidated interim financial information to the members of AFI DEVELOPMENT PLC

Introduction

We have reviewed the accompanying condensed consolidated statement of financial position of AFI Development PLC as at 30 September 2013 and the related condensed consolidated statements of income, comprehensive income, changes in equity and cash flows for the nine-month period then ended and a summary of significant accounting policies and other explanatory notes (interim financial information). The Company's Board of Directors is responsible for the preparation and fair presentation of this interim financial information in accordance with International Financial Reporting Standard IAS 34 "Interim Financial Reporting". Our responsibility is to express a conclusion on this interim financial information based on our review.

Scope of Review

We conducted our review in accordance with the International Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity". A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial information is not prepared, in all material respects, in accordance with International Financial Reporting Standard IAS 34 "Interim Financial Reporting".

Marios G. Gregoriades CPA

Certified Public Accountant and Registered Auditor

For and on behalf of

KPMG Limited

Certified Public Accountants and Registered Auditors

14 Esperidon Street

1087 Nicosia, Cyprus

18 November 2013

CONDENSED CONSOLIDATED INCOME STATEMENT

For the period from 1 January 2013 to 30 September 2013

The notes form an integral part of the condensed consolidated interim financial statements.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the period from 1 January 2013 to 30 September 2013

The notes form an integral part of the condensed consolidated interim financial statements.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the period from 1 January 2013 to 30 September 2013

The notes form an integral part of the condensed consolidated interim financial statements.

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 SEPTEMBER 2013

The condensed consolidated interim financial statements were approved by the Board of Directors on 18 November 2013.

The notes form an integral part of the condensed consolidated interim financial statements.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the period from 1 January 2013 to 30 September 2013

The notes form an integral part of the condensed consolidated interim financial statements.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the period from 1 January 2013 to 30 September 2013

1. INCORPORATION AND PRINCIPAL ACTIVITY

AFI Development PLC (the "Company") was incorporated in Cyprus on 13 February 2001 as a limited liability company under the name Donkamill Holdings Limited. In April 2007 the Company was transformed into public company and changed its name to AFI Development PLC. The address of the Company's registered office is 165 Spyrou Araouzou Street, Lordos Waterfront Building, 5th floor, Flat/office 505, 3035 Limassol, Cyprus. The Company is a 64.88% subsidiary of Africa Israel Investments Ltd ("Africa-Israel"), which is listed in the Tel Aviv Stock Exchange ("TASE"). The remaining shareholding of "A" shares is held by a custodian bank in exchange for the GDRs issued and listed in the London Stock Exchange ("LSE"). On 5 July 2010 the Company issued by way of a bonus issue, 523,847,027 "B" shares, which were admitted to a premium listing on the Official List of the UK Listing Authority and to trading on the main market of LSE. On the same date, the ordinary shares of the Company were designated as "A" shares.

These condensed consolidated interim financial statements of the Company for the period from 1 January 2013 to 30 September 2013 comprise of the Company and its subsidiaries (together referred to as the "Group") and the Group's interest in jointly controlled entities. The principal activity of the Group is real estate investment and development.

The principal activity of the Company is the holding of investments in subsidiaries and joint ventures.

2. basis of preparation

Statement of compliance

These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 "Interim Financial Reporting". They do not include all of the information and disclosures 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 the for the year ended 31 December 2012. These interim financial statements were authorised for issue by the Company's Board of Directors on 18 November 2013.

Judgements and Estimates

In preparing these interim financial statements management is required to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

In preparing these condensed consolidated interim financial statements, the significant judgments made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements as at and for the year ended 31 December 2012.

New standards, interpretations and amendments adopted by the Group

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2012, except for the adoption of new standards and interpretations effective as of 1 January 2013.

New standards, interpretations and amendments adopted by the Group (continued)

The Group applies, for the first time, certain standards and amendments that require restatement of previous financial statements. These include IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 13 Fair Value Measurement and amendments to IAS 1 Presentation of Financial Statements. As required by IAS 34, the nature and the effect of these changes are disclosed below.

Several other new standards and amendments apply for the first time in 2013. However, they do not impact the annual consolidated financial statements of the Group or the interim condensed consolidated financial statements of the Group.

The nature and the impact of each new standard/amendment are described below:

IAS 1 Presentation of Items of Other Comprehensive Income - Amendments to IAS 1

The amendments to IAS 1 introduce a grouping of items presented in other comprehensive income (OCI). Items that could be reclassified (or recycled) to profit or loss at a future point in time now have to be presented separately from items that will never be reclassified. The amendment affected presentation only and had no impact on the Group's financial position or performance.

IAS 1 Clarification of the requirement for comparative information (Amendment)

The amendment to IAS 1 clarifies the difference between voluntary additional comparative information and the minimum required comparative information. An entity must include comparative information in the related notes to the financial statements when it voluntarily provides comparative information beyond the minimum required comparative period. The additional voluntarily comparative information does not need to be presented in a complete set of financial statements.

An opening statement of financial position must be presented when an entity applies an accounting policy retrospectively, makes retrospective restatements, or reclassifies items in its financial statements, provided any of those changes has a material effect on the statement of financial position at the beginning of the preceding period. The amendment clarifies that a third balance sheet does not have to be accompanied by comparative information in the related notes. Under IAS 34, the minimum items required for interim condensed financial statements do not include an opening statement of financial position.

IAS 34 Interim financial reporting and segment information for total assets and liabilities (Amendment)

The amendment clarifies the requirements in IAS 34 relating to segment information for total assets and liabilities for each reportable segment to enhance consistency with the requirements in IFRS 8 Operating Segments. Total assets and liabilities for a reportable segment need to be disclosed only when the amounts are regularly provided to the chief operating decision maker and there has been a material change in the total amount disclosed in the entity's previous annual consolidated financial statements for that reportable segment. The Group has been providing this disclosure already as total segment assets were reported to the chief operating decision maker (CODM).

IFRS 10 Consolidated Financial Statements and IAS 27 Separate Financial Statements

IFRS 10 establishes a single control model that applies to all entities including special purpose entities. IFRS 10 replaces the parts of previously existing IAS 27 Consolidated and Separate Financial Statements that dealt with consolidated financial statements and SIC-12 Consolidation - Special Purpose Entities. IFRS 10 changes the definition of control such that an investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. To meet the definition of control in IFRS 10, all three criteria must be met, including:

(a) an investor has power over an investee; (b) the investor has exposure, or rights, to variable returns from its involvement with the investee; and (c) the investor has the ability to use its power over the investee to affect the amount of the investor's returns. IFRS 10 had no impact on the consolidation of investments held by the Group.

IFRS 11 Joint Arrangements and IAS 28 Investment in Associates and Joint Ventures

IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly-controlled Entities - Non-monetary Contributions by Venturers. IFRS 11 removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, JCEs that meet the definition of a joint venture under IFRS 11 must be accounted for using the equity method.

The application of this new standard impacted the financial position of the Group by replacing proportionate consolidation of all the joint ventures of the Group, with the equity method of accounting. IFRS 11 is effective for annual periods beginning on or after 1 January 2013. The effect of IFRS 11 is described in more detail in note 11, which includes quantification of the effect on the financial statements.

IFRS 13 Fair Value Measurement

IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. The application of IFRS 13 has not materially impacted the fair value measurements carried out by the Group. IFRS 13 also requires specific disclosures on fair values, some of which replace existing disclosure requirements in other standards, including IFRS 7 Financial Instruments: Disclosures. Some of these disclosures are specifically required for financial instruments by IAS 34.16A(j), thereby affecting the interim condensed consolidated financial statements period. The Group provides these disclosures in note 24.

The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

Functional and presentation currency

These consolidated financial statements are presented in United States Dollars which is the Company's functional currency. All financial information presented in United States Dollars has been rounded to the nearest thousand, except when otherwise indicated.

Foreign operations

Each entity of the Group determines its own functional currency and items included in the financial statements of each entity are measured using its functional currency. Where the functional currency of an entity of the Group is other than US Dollars, which is the presentation currency of the Group, then the financial statements of the entity are translated in accordance with IAS 21 'The effects of changes in foreign exchange rates'.

The table below shows the exchange rates of Russian Roubles, which is the functional currency of the Russian subsidiaries of the Group, to the US Dollar which is the presentation currency of the Group:

Exchange rate % change % change

Russian Roubles quarter year to date

As of: for US$1

30 September 2013 32.3451 (1.11) 6.5

30 June 2013 32.7090 n/a n/a

31 March 2013 31.0834 n/a n/a

31 December 2012 30.3727 (5.7)

30 September 2012 30.9169 (5.8) (4.0)

Average rate during:

Nine-month period ended 30 September 2013 31.6170

Nine-month period ended 30 September 2012 31.0724

Three-month period ended 30 September 2013 32.7977

Three-month period ended 30 September 2012 32.0072

3. significant accounting policies

The accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2012, except for the adoption of new standards and interpretations effective as of 1 January 2013 as described in the previous note.

4. OPERATING SEGMENTS

The Group has 5 reportable segments, as described below, which are the Group's strategic business units. The following summary describes the operation in each of the Group's reportable segments:

· Development Projects - Commercial projects: Include construction of commercial properties for future lease or sale.

· Development Projects - Residential projects: Include construction and sale of residential properties.

· Asset Management: Includes the operation of investment property for lease.

· Hotel Operation: Includes the operation of Hotels.

· Other - Land bank: Includes the investment and holding of property for future development.

Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit before income tax, as included in the internal management reports that are reviewed by the Group's management team. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries. Inter-segment pricing is determined on an arm's length basis.

Reconciliations of reportable segment revenues, profit or loss, assets and liabilities and other material items.

5. ADMINISTRATIVE EXPENSES

6. other expenses

7. FINANCE COST AND FINANCE INCOME

8. tAX EXPENSE

9. INVESTMENT PROPERTY

The carrying amount of investment property is the fair value of the property as determined by a registered independent appraiser having an appropriate recognised professional qualification and recent experience in the location and category of the property being valued. Fair values were determined having regard to recent market transactions for similar properties in the same location as the Group's investment property. The same applies for investment property under development in note 10 below. The last valuation took place on 30 June 2013. The cumulative adjustments, for all projects, are shown in line "Fair value adjustment" in the table above.

Acquisitions represent the impact of the acquisition of the 50% of joint venture Krown Investments LLC, thereafter owned at 100% and treated as a subsidiary. See note 11 for further details.

The decrease due to the effect of the foreign exchange rates is a result of the weakening of the rouble compared to the US Dollar by 6.5%, during the nine-month period ended 30 September 2013. The fair value adjustment gain is mostly related to this rouble weakening.

10. INVESTMENT PROPERTY UNDER DEVELOPMENT

In November 2013 the Company's subsidiary MKPK JSC and the Moscow city authorities signed an addendum to the land lease agreement for "Paveletskaya Phase II" project, amending the permitted use of land from industrial to the construction of commercial and residential premises. The addendum is in line with the previous decisions of the Moscow city authorities on development rights of the Company in this project. However the addendum provides the level of certainty required to change the fair value of the project to market value. The market value of the project determined by Cushman & Wakefield, the Company's independent appraisers, is US$92.6 million, as of 30 September 2013, as opposed to book value of US$11.6 million. The resulting US$81.0 million gross valuation gain (US$64.8 million net of taxation) is included in the income statement of the nine month period ended 30 September 2013.

According to the article dated 29.10.2013 and published on the official web-site of the Moscow Government, the Construction Department of Moscow Government has made decision to start an active phase of redevelopment at Tverskaya Zastava Square in 2014 (and the first stage of redevelopment will focus on construction of an additional overhead road across the railway lines), whereas the date of completion of these works remains unclear, which will incur significant delay and, thus, pose high uncertainty with the timeline of the subject Plaza IIa project.

Based on the above, the Company recognised a decrease in the fair value of the property of US$13.3 million. The valuation was also determined by the Company's independent appraisers and the fair value loss was recorded in the current period's income statement.

The decrease due to the effect of the foreign exchange rates is a result of the rouble weakening compared to the US Dollar by 6.5% during the nine-month period ended 30 September 2013.

11. SHARE OF INVESTMENT IN JOINT VENTURES

The Group's joint ventures are comprised of the following:

50% interest in Nouana Limited with its subsidiary Tirel LLC, owner of a hotel in Kislovodsk. 50% interest in Craespon Management Ltd with its subsidiary Sanatorium Plaza LLC that operates the aforementioned hotel.

The Group owned a 50% interest in Westec Four Winds Ltd and its subsidiary Dulverton Ltd, owner of investment property in Moscow, which was disposed early January 2013, see notes 18 and 23.

The Group also owned a 50% interest in Krown Investments LLC, owner of investment and trading properties in Moscow. On 12 February 2013 the Group acquired the remaining 50% shareholding, deemed as acquisition of assets and liabilities.

The above mentioned acquisition of the 50% shareholding in the previously joint venture Krown Investments LLC had the following effect on the Group's assets and liabilities:

Change in accounting policy

Under IAS 31 Interests in Joint Ventures (prior to the transition to IFRS 11), the Group's interest in these joint ventures was classified as a jointly controlled entity and the Group's share of the assets, liabilities, revenue, income and expenses were proportionately consolidated in the consolidated financial statements. Upon adoption of IFRS 11, the Group has determined its interest to be a joint venture and it is required to be accounted for using the equity method. The effect of applying IFRS 11 is as follows:

There is no material impact on the interim condensed consolidated statement of cash flows or the basic and diluted Earnings per share.

12. PROPERTY, PLANT AND EQUIPMENT

13. LOANS RECEIVABLE

Terms and loan repayment schedule

Terms and conditions of outstanding loans were as follows:

Due to the reason that the Group acquired, during the period, the remaining 50% of the assets and liabilities of the joint venture Krown Investments LLC any loan balance with other Group entities are now eliminated in full upon consolidation. See note 11 for more details.

14. TRADING PROPERTIES

Trading properties comprise of the unsold apartments and parking spaces. During the period the Group has sold a number of the remaining apartments and parking places and their cost was transferred to income statement.

The transfer from trading properties under construction represents the completion of the construction of the 643 parking places units which were disposed upon transferring of the rights to the buyer VTB Bank according to the agreement described below.

In November 2012 Bellgate Constructions Limited ("Bellgate"), the Company's subsidiary owning and operating AFIMALL City, entered into an agreement to dispose approximately 643 parking spaces to VTB Bank. The transaction was structured in two stages. The first stage entailed a sale-purchase transaction between Bellgate and VTB Bank of 21,354 sq.m. of parking space. During the second stage 9,247 sq.m. owned (at completion) by VTB Bank will be exchanged for 7,847 sq. m. owned by Bellgate. The first stage of the transaction was completed on 3 June 2013 with the transfer of the rights to the buyer, who became liable for the risks associated with ownership and can utilize the space and is free to sell to another party and therefore revenue of US$54,492 thousand and a corresponding cost of the disposed properties of US$29,772 thousand were recognised in the income statement during second quarter of 2013..

15. TRADING PROPERTIES UNDER CONSTRUCTION

Trading properties under construction comprise of "Odinburg" project which involves primarily the construction of residential properties.

The 643 parking places underneath AFIMALL City were completed during the period, reclassified to trading properties and disposed according to the agreement with VTB Bank described in note 14 above.

16. TRADE AND OTHER RECEIVABLES

Trade receivables net

Trade receivables are presented net of an accumulated provision for doubtful debts of US$13,715 thousand (2012: US$13,736 thousand).

17. CASH AND CASH EQUIVALENTS

18. ASSETS HELD FOR SALE

In December 2012 the Company entered into an agreement to dispose of, its 50% of stake in Westec Four Winds Limited (along with its partner, Snegiri Development), which had developed and operated Four Winds. The deal was completed in January 2013 with total consideration received by the Company of circa US$103.4 million. The transaction also resulted in reduction of overall debt of AFI Development following the removal of the project loan by Nordea Bank from its consolidated balance sheet. The total profit on disposal was US$50,725 thousand, US$18,637 thousand of which were recognised as a fair value gain in 2012 and the rest upon completion. The corresponding translation reserve was reclassified to profit or loss upon the disposal of the joint venture in January 2013. An amount of US$30,288 was reclassified as realised foreign exchange loss in financing expenses.

19. SHARE CAPITAL AND RESERVES

Employee Share option plan

There were no changes as to the employee share option plan during the nine-month period ended 30 September 2013 apart from the cancelation of 523,848 options due to the resignation of an employee.

Translation reserve

The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations to the Group presentation currency and the foreign exchange differences on loans designated as loans to an investee company which are accounted for as part of the investor's investment (IAS21.15) as their repayment is not planned or likely to occur in the foreseeable future. These foreign exchange differences are recognised directly to Translation Reserve.

Retained earnings

The amount at each reporting date is available for distribution. No dividends were proposed, declared or paid during the period ended 30 September 2013.

20. LOANS AND BORROWINGS

There were no material changes to loans during the nine month period ended 30 September 2013 apart from the following:

On 25 January 2013 Krown Investments LLC ("Krown"), a 100% subsidiary, acquired a new secured loan from JSC VTB Bank for refinancing the repayment of borrowings due to related parties. This loan agreement offers a credit line of US$220 million, which was drawn down during the first quarter of 2013. The agreed interest is three-month LIBOR plus 5.7% p.a., payable every quarter. The loan repayment date is in 731 days from the date of signing the loan agreement. Securities provided to the Bank are on the 100% of the shares of Krown and on properties/buildings of Aquamarine Phase III. A decrease in the market value of the pledged buildings by more than 15% will enable the bank to demand repayment of the loan before the agreed maturity date. In case of disposal of the pledged building, at least 80% of sale proceeds should be directed to the Bank for the repayment of the loan.

During the period the Group received the third and the fourth tranche, of total apprx. US$86,854 million (RUR 2,633 million), of the secured loan from a bank of the VTB Group ("the Bank") signed on 22 June 2012 by its subsidiary Bellgate Construction Ltd ("Bellgate").  This new loan facility agreement offers a credit line totalling RUR 21 billion, which can be drawn down in 5 tranches, each with a designated purpose: the majority of the funds are designated to refinance existing loans previously issued by JSC VTB Bank. The remaining funds are designated for the refinancing of construction costs related to the AFIMALL City parking and for the financing of the outstanding payments constituting part of the consideration for the acquisition of the parking.

On 17 August 2013 Bellgate Constructions Limited signed an addendum to the current Loan Facility Agreement with a bank of the VTB Group. According to the new terms under the above mentioned addendum the applicable interest rate to the US Dollar denominated loan facility has been decreased from 3-month LIBOR plus 6.7% p.a. to 3-month LIBOR plus 5.02% p.a. The change was effective upon the registration date of the mortgage agreements, on 3 September 2013.

During the period Eitan K LLC, a 100% subsidiary, repaid in full the outstanding loan amount obtained from Sberbank, which as at 1 January 2013 amounted to US$20 million, ahead of the contractual repayment date.

21. LONG TERM AMOUNTS PAYABLE

Represented an amount payable to the City of Moscow, for the acquisition of the parking area under the AFIMALL City. The amount is payable in three yearly installments starting from February 2012 and with the last falling due in February 2014. On the 28 February 2013 the company paid the second installment of RUR 1,333 million (approx. US$ 43,544 thousand) and the third installment, which is payable within the next twelve months, is presented as current liability in "Trade and other payables", see note 22 below.

22. TRADE AND OTHER PAYABLES

Payables to related parties

Include an amount of US$6,359 thousand (31/12/12: US$3,761 thousand) payable to Danya Cebus Rus LLC, related party of the Group, for new contracts signed in relation to the construction of Group's projects.

Receipts in advance from sale of investment

In 2012 the Company received an advance payment for the disposal of the Westec Four Winds plaza which was classified as current liability until the completion of the transaction in January 2013.

23. DISPOSAL OF INVESTMENTS IN JOINT VENTURE/SUBSIDIARIES

The selling price of the disposal of Westec Four Winds Ltd was US$103,380 thousand. The resulting profit on sale amounting to US$32,088 thousand was recognised in income statement and a translation reserve of US$30,288 thousand was reclassified as a realised exchange loss in financing expenses of the income statement.

The above disposal had the following effect on the Group's assets and liabilities:

24. FINANCIAL INSTRUMENTS

Set out below an overview of the financial instruments, other than cash and short term deposits, held by the group as at 30 September 2013:

Set out below is a comparison of the carrying amounts and fair values of financial instruments as at 30 September 2013: