Half-year Report

19 September 2017

EASTERN EUROPEAN PROPERTY FUND LIMITED

Unaudited half-yearly results for the six month period ended 30 June 2017

HIGHLIGHTS

· Property held at 30 June 2017 valued at £12.2 million (30 June 2016: £15.5 million on a like-for-like basis; 31 December 2016: £15.0 million).

· Net asset value at 30 June 2017 of £12.4 million, equivalent to 79.68p per Ordinary Share (30 June 2016: £15.7 million, 100.79p per Ordinary Share; 31 December 2016 of £14.9 million, 95.76p per Ordinary Share).

· Loss for the six months ended 30 June 2017 of £2.6 million (six months ended 30 June 2016: income of £0.3 million; year ended 31 December 2016, loss of £1.2 million), equivalent to a loss per share of 16.79p (30 June 2016: earnings of 2.24p; 31 December 2016: loss of 7.80p) per Ordinary Share.

For further information please visit www.eepfl.com or contact:

Steve Pearce (nominated adviser)

Henry Freeman (corporate broker)

Liberum Capital Limited

Tel: +44 203 100 2000

Bob Locker

CNC Property Fund Management Limited

Tel: +44 1784 424 740

Keiran Gallagher

Pera Pera

Tel: +90 (212) 252 6048

Oliver Cadogan

Walnut Investments OOD

Tel: +40 21 451 0823

Elysium Fund Management Limited

[email protected]

Tel: +44 1481 810 100

CHAIRMAN'S STATEMENT

The uncertain political situation in Turkey during the first half of the year had a detrimental effect on business and investor confidence and, in turn, on the valuation of the Markiz Passage building. This was a substantial contributor to the 16.8% decrease in the value of EEP's net assets since 31 December 2016.

Results

EEP reported a net loss after tax for the period ended 30 June 2017 of £2.6 million (30 June 2016: income of £0.3 million), representing a loss per Ordinary Share of 16.79p (30 June 2016: earnings of 2.24p). A £2.8 million loss on revaluation of investment properties was the main reason for the loss in the six month period ended 30 June 2016, and rental income in the period decreased following the sale of the Romanian subsidiary in December 2016.

Operating expenses continued to decrease, substantially due to the sale of the Romanian subsidiary and associated running costs.

EEP's consolidated net asset value ("NAV") at 30 June 2017 was £12.4 million, representing 79.68p per Ordinary Share (31 December 2016: £14.9 million, 95.76p per Ordinary Share).

The Company's share price decreased by 6.50p during the period from 50.50p at 31 December 2016 to 44.00p at 30 June 2017, with the discount to NAV narrowing from 47.3% at 31 December 2016 to 44.8% at 30 June 2017.

Property Portfolio and Valuations

EEP's two remaining properties continue to be marketed for sale. The enquiries and offers for the Markiz Passage building unfortunately did not progress to serious proposals, but, encouragingly, after the traditional quiet period during Ramadan and the summer months, EEP has received further enquiries. These enquiries are being actively pursued.

The Property Manager and Investment Adviser continue to explore other options to improve the potential liquidity of the property in Sofia.

The aggregate value of EEP's investment properties remaining at 30 June 2017 decreased to the equivalent of £12.2 million during the period and resulted in a net unrealised loss on revaluation of £2.8 million (30 June 2016: loss of £0.1 million). Note 10 provides a reconciliation of the investment property valuation movement.

Further details on each property, the prospects for sales in the foreseeable future, recent market activity and the investment environment are provided in the Property Manager and Investment Advisers' Report. It remains the Board's policy not to disclose the breakdown of individual property values as that information could be detrimental to commercial negotiations with prospective buyers.

Distributions

The Board's intention remains to distribute to Shareholders substantially all net proceeds of property sales, subject to the need to retain sufficient funds for EEP's ongoing operation. Following the disposal of the Romanian subsidiary and receipt of sale proceeds in December 2016, the Board decided to retain the cash and not to immediately undertake further buybacks of Ordinary Shares whilst options for the disposal of the Markiz property are pursued. This policy remains under regular review.

At the AGM held on 18 September 2017, Shareholders resolved to renew EEP's authority to repurchase up to 2,331,132 Ordinary Shares (a maximum of 14.99% of the Ordinary Shares in issue at the date the authority was sought).

Outlook and Strategy

The Property Manager and Investment Advisers refer in their report to an upturn in enquiries for the Turkish property since the quiet summer period, which have been at levels higher than those received during the first half of the year. Whilst it is disappointing not to have been able to progress the enquiries and offers that were received earlier in the year, the renewed interest indicates improving market sentiment. However, it should be noted that, in common with numerous previous similar approaches, there is no certainty that the expressions of interest will progress into bona fide offers for the Company to formally consider.

The Board, Manager, Property Manager and Investment Advisers will be working to advance talks with the interested parties with a view to securing a disposal of EEP's key property asset as soon as possible. However, the Board and the Manager remain concerned at the level of the Company's operating costs relative to the progress being made with asset disposals. Should the latest negotiations not progress sufficiently in the near future, the Board and the Manager will contact shareholders to discuss options for a more cost effective longer-term solution.

The Board, as always, is appreciative of your continued patience. Any shareholder wishing to discuss the Company's affairs is welcome to contact any of the Directors, the Manager, the Property Manager or one of the Investment Advisers.

Martin M. Adams

Chairman

18 September 2017

PROPERTY MANAGER AND INVESTMENT ADVISERS' REPORT

The half year ended 30 June 2017 has effectively been a consolidating period with limited portfolio activity in respect of EEP's two remaining properties in Turkey (Markiz Passage on Istiklal Street, Istanbul) and Bulgaria (The Atrium on George Washington Street, Sofia).

In Turkey, President Erdogan led a successful campaign and, in April 2017, won a referendum to change the constitution and allow the Presidency to assume executive powers. Since the end of the campaigning period, although the result of the referendum was close with the major cities voting against change, the overall position is that the business community appears to have welcomed a calmer political situation and there is hope that the ruling AK Party will focus on creating a positive economic environment as predominantly prevailed in the past.

While the Markiz building has been the subject of continued interest, primarily for purchase, the quality of enquiries and potential bid levels have been very low. The remaining tenant's lease came to an end in March 2017 and as they had been in financial difficulty in the previous six months there was no question of them staying on.

In Bulgaria, while the political regime seems to have the constant possibility of changing, the day to day operation of the country continues with little disruption. Despite repeated allegations of corruption, the economic situation continues to gradually improve and the behaviour of part of the political establishment appears to have limited impact on the population as a whole.

The Atrium in George Washington Street remains largely occupied and has had a steady level of income for some time. This may change next year as the largest tenant, the United Bulgarian Bank ("UBB"), has been taken over by KBC Bank, a Belgian universal multi-channel bank focussing on private clients and small and medium enterprises. Sales interest and enquiries have remained at a very low level.

The properties held at 30 June 2017 were as follows:

Markiz Passage, Istiklal Street, Beyoglu, Istanbul

The property has effectively been vacant since the beginning of 2017 and has been free of any lease encumbrance since March. There has been some lease interest for the whole of the property, which would be considered if the terms were considered satisfactory, but the enquiries to date have never reached a point where serious negotiations could start. As indicated above, potential buyers have made enquiries and visited the property but were clearly looking to exploit the political and economic uncertainty that existed at the time of the referendum and a little time thereafter.

In June, road and landscaping upgrades started on Istiklal Street and early indications suggested they should be a significant improvement on the streetscape of this mainly pedestrianised shopping street when completed. These works are due to complete before the end of 2017. Many of the shops that had become empty in the lead up to the referendum and following acts of terrorism in Istanbul, which led to the significant reduction in tourists, have started to be occupied again, although it should be noted that some of these are more local operations and do not carry the presence of the international retailers that were there before.

More recently, after the summer holidays, enquiries have been received which seem more promising than those received earlier in the year. However at the time of writing it's too early to say how much true intent the individual approaches have and we will be working to establish this as quickly as possible.

The Atrium, George Washington Street, Sofia

Some small variations in the tenancies have occurred which reflects the short-term nature of the majority of the leases at the property. However, overall, the total lease income has remained largely at the same level as has been the case for some time due to the fact that UBB has remained in occupation for many years. However, as indicated above, UBB has been taken over by KBC and the advice received locally is that at the next lease expiry at the end of February 2018, UBB will leave and move to a new building owned by KBC.

The existing property agencies have been advised of the situation regarding UBB and the potential for this space to be available in 2018.

Economic and Political Commentary

Turkey

Although the country has clearly stabilised since the referendum and there have been no terror attacks since early 2016, Turkey remains in a 'state of emergency'. Despite winning the referendum to allow the Presidency to become an executive role, President Erdogan has chosen not to remove the additional powers conferred by this edict and mass arrests have continued, apparently related to the attempted coup in 2016.

Tourism has improved with a reported 22% increase in numbers in the first seven months of the year and the property market appears to have stabilised following a significant sale of a Dutch fund's commercial property portfolio primarily located in and around Istiklal Street in Istanbul.

The average forecast for GDP growth for Turkey for 2017 is 3.7%, according to the latest Economist consensus poll. The currency appears to have steadied and at the time of writing stood at TL 3.4 to the US Dollar compared to TL 3.5 to the US Dollar at the beginning of 2017. The Turkish stock market has rebounded sharply since the commencement of the year 2017, up 40.5% in US Dollar valuation terms and is one of the best performing markets in the world for the year to date.

However, inflation remains high and was recorded at 9.8% in July. This is partly due to structural issues and the weak currency.

Bulgaria

The political situation remains volatile and the issue of corruption constantly seems to overhang the state, but this seems to have little penetration in terms of the mood of the people to suggest that a significant change in the political and legislative regime seems likely in the near future.

Bulgaria's economy posted 0.9% growth in GDP for the second quarter of 2017. In annual terms economic growth has risen from 3.5% to 3.6% compared to the first quarter, driven mainly by increasing domestic consumption.

Future Prospects

The focus is clearly on trying to dispose of the remaining two properties. In both countries, while the economies are improving and in Turkey the political situation is significantly calmer than it was earlier in the year, they are both still at a stage where selling the properties will likely continue to be a difficult task.

However, the more recent signs from Turkey are that the much calmer environment and improvement in activity levels, particularly in tourism, has led to business confidence returning quite quickly. This has been reflected in the more recent enquiries for the property, which appear to be at a level above that experienced in the first half of the year.

In Bulgaria, the Investment Adviser is investigating a number of options to improve the liquidity of the asset. In this respect, UBB not renewing its lease next year will be helpful as the nature of their occupation, while very positive from an income perspective, has hindered other potential options for improving the marketability of the property. The residential property market has made progress in the last year and small business operations are becoming more active once again. The city centre of Sofia which is very close in terms of the George Washington Street property has seen significant progress in terms of upgrades and landscape improvements in the last two years and includes the direct metro connection to the airport. All of these improvements are contributing towards the attractiveness of the property as an option for leasing and potentially for purchase.

In the event that the properties cannot be sold at acceptable levels in the near future, the Manager and Investment Advisers are aware that steps will need to be taken to contain costs pending a more improved environment when disposal issues are less onerous. In this respect, the Manager, Property Manager and Investment Advisers will prepare detailed options for consideration by the Company.

Bob Locker

CNC Property Fund Management Limited

Keiran Gallagher

Pera Pera

Oliver Cadogan

Walnut Investments OOD

18 September 2017

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the six month period ended 30 June 2017 (unaudited)

1 January 2017

 to 30 June 2017

1 January 2016

 to 30 June 2016

1 January 2016

 to 31 December 2016

Note

(unaudited)

(unaudited)

(audited)

£'000

£'000

£'000

Income

Rental income

98

330

938

Other income

15

30

74

Bank interest receivable

3

2

7

------------

------------

------------

Total income

116

362

1,019

------------

------------

------------

Expenses

Performance fees

5

27

9

94

Building maintenance, power and management

(76)

(135)

(277)

Management fees

5

(87)

(99)

(198)

Administration fees

5

(58)

(50)

(110)

Directors' remuneration

(35)

(41)

(76)

Other operating expenses

(144)

(185)

(458)

-----------

-----------

------------

Total expenses

(373)

(501)

(1,025)

------------

------------

------------

Investment gains and losses

Loss on revaluation of investment properties

10

(2,805)

(155)

(845)

Gain on disposal of investment properties

10

-

9

9

Loss on disposal of subsidiary

-

-

(481)

------------

------------

------------

Total investment losses

(2,805)

(146)

(1,317)

------------

------------

------------

Net loss from operating activities before gains and losses on foreign currency translation

(3,062)

(285)

(1,323)

Gain on foreign currency translation

15

300

192

------------

------------

------------

Net (loss)/profit from operating activities

(3,047)

15

(1,131)

Movement in provision for estimated liquidation costs

5

-

(59)

Taxation

430

333

(23)

------------

------------

------------

(Loss)/profit for the period/year

(2,612)

348

(1,213)

Other comprehensive income/(loss) that may be reclassified to profit or loss in subsequent periods

Exchange differences arising from translation of foreign operations

111

(451)

327

------------

------------

------------

Total other comprehensive income/(loss)

7

111

(451)

327

------------

------------

------------

Total comprehensive loss for the period/year attributable to the Owners of the Group

(2,501)

(103)

(886)

------------

------------

------------

(Loss)/earnings per share - basic and diluted

8

(16.79)p

2.24p

(7.80)p

------------

------------

------------

These results are unaudited and are not the Group's statutory financial statements.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

ATTRIBUTABLE TO THE OWNERS OF THE COMPANY

for the six month period ended 30 June 2017 (unaudited)

Share capital

Distributable reserve

Foreign currency translation reserve

Total

£'000

£'000

£'000

£'000

Net assets at 1 January 2017

155

14,561

176

14,892

Total comprehensive income/(loss) for the year

Loss for the six month period

-

(2,612)

-

(2,612)

Other comprehensive income

-

-

111

111

----------

----------

----------

----------

Net assets at 30 June 2017

155

11,949

287

12,391

----------

----------

----------

----------

for the six month period ended 30 June 2016 (unaudited)

Share capital

Distributable reserve

Foreign currency translation reserve

Total

£'000

£'000

£'000

£'000

Net assets at 1 January 2016

155

15,774

(151)

15,778

Total comprehensive income/(loss) for the year

Profit for the six month period

-

348

-

348

Other comprehensive loss

-

-

(451)

(451)

----------

----------

----------

----------

Net assets at 30 June 2016

155

16,122

(602)

15,675

----------

----------

----------

----------

for the year ended 31 December 2016 (audited)

Share capital

Distributable reserve

Foreign currency translation reserve

Total

£'000

£'000

£'000

£'000

Net assets at 1 January 2016

155

15,774

(151)

15,778

Total comprehensive income/(loss) for the year

Loss for the year

-

(1,213)

-

(1,213)

Other comprehensive income

-

-

327

327

----------

----------

----------

----------

Net assets at 31 December 2016

155

14,561

176

14,892

----------

----------

----------

----------

These results are unaudited and are not the Group's statutory financial statements.

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

as at 30 June 2017 (unaudited)

30 June 2017

30 June 2016

31 December 2016

Note

(unaudited)

(unaudited)

(audited)

£'000

£'000

£'000

Current assets

Freehold investment property

10

12,169

16,736

14,970

Intangible assets

2

4

3

Trade and other receivables

11

344

213

370

Cash and cash equivalents

1,647

1,211

1,918

Property, plant and equipment

-

1

-

----------

----------

----------

Total assets

14,162

18,165

17,261

----------

----------

----------

Current liabilities

Deferred tax liabilities

(1,547)

(2,098)

(2,095)

Trade and other payables

(169)

(253)

(174)

Provision for estimated liquidation costs

2

(53)

-

(59)

Overseas corporate tax

(2)

(54)

(41)

Rents received in advance

-

(85)

-

----------

----------

----------

Total liabilities

(1,771)

(2,490)

(2,369)

----------

----------

----------

Net assets

12,391

15,675

14,892

----------

----------

----------

Capital and reserves

Called-up share capital

12

155

155

155

Distributable reserve

11,949

16,122

14,561

Foreign currency translation reserve

287

(602)

176

----------

----------

----------

Total equity attributable to owners of the Company

12,391

15,675

14,892

----------

----------

----------

NAV per Ordinary Share - basic and diluted

13

79.68p

100.79p

95.76p

----------

----------

----------

These results are unaudited and are not the Group's statutory financial statements.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

for the six month period ended 30 June 2017 (unaudited)

Note

1 January 2017

 to 30 June 2017

1 January 2016

 to 30 June 2016

1 January 2016

 to 31 December 2016

(unaudited)

(unaudited)

(audited)

£'000

£'000

£'000

Net (loss)/profit from operating activities

(3,047)

15

(1,131)

Adjustments for:

Bank interest receivable

(3)

(2)

(7)

Loss on revaluation of investment properties

10

2,805

155

845

Gain on foreign currency exchange

(15)

(300)

(192)

Gain on disposal of investment properties

10

-

(9)

(9)

Loss on disposal of subsidiary

-

-

481

Amortisation and depreciation

-

2

3

----------

----------

----------

Net cash outflow from operating activities before working capital changes

(260)

(139)

(10)

Increase in trade and other receivables

(31)

(22)

(29)

Decrease in trade and other payables and other current liabilities

(48)

(30)

(138)

----------

----------

----------

Net cash outflow from operating activities after working capital changes

(339)

(191)

(177)

Interest received in the period/year

3

2

7

Tax paid in the period/year

(17)

(58)

(152)

----------

----------

----------

Net cash outflow from operating activities

(353)

(247)

(322)

Investing activities

Deferred consideration from sale of subsidiary

11

79

-

-

Sale of investment property

-

556

569

Acquisition and development of investment property

(4)

(17)

(174)

Proceeds from sale of subsidiary

-

-

982

----------

----------

----------

Net cash inflow from investing activities

75

539

1,377

----------

----------

----------

(Decrease)/increase in cash and cash equivalents

(278)

292

1,055

----------

----------

----------

Cash and cash equivalents at the beginning of the period/year

1,918

848

848

(Decrease)/increase in cash and cash equivalents

(278)

292

1,055

Foreign exchange movement

7

71

15

----------

----------

----------

Cash and cash equivalents at the end of the period/year

1,647

1,211

1,918

----------

----------

----------

These results are unaudited and are not the Group's statutory financial statements.

NOTES TO THE HALF-YEARLY RESULTS

for the six months ended 30 June 2017

1. General information

The Company is registered in Guernsey as an authorised closed-ended investment company and its Ordinary Shares are traded on AIM, a securities market operated by the London Stock Exchange.

The Company's investment objective and policy is to carry out an orderly realisation of the Company's portfolio of assets, distribution of the net proceeds to Shareholders and then undertake a voluntary winding-up of the Company. Disposals may be by individual sales or as transactions incorporating a group of properties.

2. Basis of preparation

These unaudited condensed consolidated half-yearly results, which have not been audited by an independent auditor, have been prepared in accordance with IAS 34: Interim financial reporting. They do not include all of the information required for full annual financial statements and should be read in conjunction with the Group's audited consolidated financial statements for the year ended 31 December 2016.

Going concern

The condensed consolidated half-yearly results have been prepared on the same basis as the audited consolidated financial statements for the year ended 31 December 2016, being a non-going concern basis, to reflect the Company's investment objective and policy to carry out an orderly realisation of the Company's portfolio of assets. This has had no significant impact on the condensed consolidated half-yearly results as the properties have been measured at fair value and are expected to be realised in an orderly manner. However, a £53,000 provision (30 June 2016: £nil, 31 December 2016: £59,000) for the estimated costs of winding up the Group has been included in the results.

It is possible that corporate income tax will arise on capital gains on the disposal of the remaining Turkish property. This liability has been provided for in these condensed consolidated half-yearly results as deferred tax and calculated on the assumption that the property is realised at its current carrying value. However, additional taxes, such as a 15% withholding tax, may arise on the repatriation to Guernsey of non-capital reserves from Turkey.

These condensed consolidated half-yearly results were approved by the Board of Directors on 18 September 2017.

3. Significant accounting policies

Except for the adoption of the new, relevant, accounting standards noted below, these unaudited condensed consolidated half-yearly results have adopted the same accounting policies as the last audited financial statements, which were prepared in accordance with International Financial Reporting Standards ("IFRSs") (with the exception of IFRS 8, as explained in note 6, and IFRS 13, as explained in note 10), issued by the International Accounting Standards Board ("IASB"), interpretations issued by the IFRS Interpretations Committee and applicable legal and regulatory requirements of Guernsey Law, which have been adopted and applied consistently.

Effective date

IFRS 12

Disclosure of Interests in Other Entities - annual improvements

1 January 2017

IAS 7

Statement of Cash Flows - amendments resulting from the disclosure initiative

1 January 2017

IAS 12

Income Taxes - amendments regarding the recognition of deferred tax assets for unrealised losses

1 January 2017

During the period, the Group did not adopt any standards or interpretations that had an impact on the financial position or performance of the Group.

The IASB has issued/revised a number of relevant standards and interpretations with an effective date after the date of these unaudited condensed consolidated half-yearly results. Any standards that are not deemed relevant to the operations of the Group have been excluded. The Board has chosen not to early adopt these standards and interpretations and they do not anticipate that they would have a material impact on the Group's financial statements in the period of initial application.

In July 2014, the IASB issued the final version of IFRS 9, Financial Instruments that replaces IAS 39, Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. IFRS 9 brings together all three aspects of the accounting for financial instruments project: classification and measurement, impairment and hedge accounting. IFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted. Except for hedge accounting, retrospective application is required but providing comparative information is not compulsory. For hedge accounting, the requirements are generally applied prospectively, with some limited exceptions.

The Group plans to adopt the new standard on the required effective date. The Group has performed a high-level impact assessment of all three aspects of IFRS 9. This preliminary assessment is based on currently available information and may be subject to changes arising from further detailed analyses or additional reasonable and supportable information being made available to the Group in the future. Overall, the Group expects no significant impact on the consolidated results or equity, and will perform a more detailed assessment before the end of 2017.

i) Classification and measurement

The Group does not expect a significant impact on the consolidated results or equity on applying the classification and measurement requirements of IFRS 9. It expects to continue measuring at fair value all financial assets and liabilities currently held at fair value.

ii) Impairment

IFRS 9 requires the Group to record expected credit losses on any loans and trade receivables, either on a 12-month or lifetime basis. The Group expects to apply the simplified approach and record lifetime expected losses on all investment income and other receivables. Given that investment income and other receivables have not been impaired to date, the Group does not expect there to be a significant impact on its equity from reviewing the expected credit losses on investment income and other receivables over their lifetimes, but it will need to perform a more detailed analysis which considers all reasonable and supportable information, including forward-looking elements to determine the extent of the impact.

iii) Hedge accounting

The Group does not currently designate any hedges as effective hedging relationships which qualify for hedge accounting. Therefore, the Group does not expect there to be any impact with respect to hedge accounting as a result of applying IFRS 9.

The impact that IFRS 15 will have on the Group's consolidated results is also considered to be immaterial because the Group does not have any contracts with customers which meet the definition under IFRS 15.

4. Use of estimates and judgements

The significant judgements made by the Directors in applying the accounting policies and the key sources of estimation uncertainty were the same as those that were applied to the consolidated financial statements for year ended 31 December 2016 (also see note 10).

5. Management, administration and performance fees

Elysium Fund Management Limited ("Elysium") is Manager, Administrator and Company Secretary to the Company, CNC Property Fund Management Limited ("CNC") is Property Manager and Pera Pera Yönetim ve Danişmanlik Hizmetleri ve Tic Limited ("Pera Pera") and Walnut Investments OOD ("Walnut") are the Investment Advisers. Pera Pera is Investment Adviser in respect of the Turkish property and Walnut is Investment Adviser in respect of the Bulgarian property.

Administration fees

The Company pays Elysium, by way of remuneration for its administration and secretarial services, an administration fee of 0.1% of the Gross Asset Value per annum calculated at the close of business at each quarter end, subject to a minimum of £100,000 per annum.

The total fees due to Elysium relating to the period ended 30 June 2017 amounted to £58,000 (30 June 2016: £50,000, 31 December 2016: £110,000), which included £8,000 (30 June 2016: £nil, 31 December 2016: £10,000) for work performed outside of the scope of the administration agreement.

At 30 June 2017, £43,000 (30 June 2016: £25,000; 31 December 2016: £35,000) was payable to Elysium in respect of administration related fees.

Management fees

Elysium is entitled to receive a management fee of 1.25% of the Total Assets of the Group per annum. Total Assets is defined as the ongoing NAV of the Group plus an amount equal to long-term borrowings invested by the Group. The management fee is payable quarterly in advance. The total management fee paid to Elysium for the period ended 30 June 2017 was £87,000 (30 June 2016: £99,000; 31 December 2016: £198,000).

At 30 June 2017, £3,000 (30 June 2016: £nil; 31 December 2016: £nil) was payable to Elysium in respect of management fees.

The Manager is responsible for the payment of the fees of the Investment Advisers and Property Manager. For details on the payment of commissions to the Investment Advisers for the sale of properties, please refer to note 14.

Performance fees

Elysium shall be entitled to receive a performance fee only in the event of a realisation event, which shall be paid no later than the date falling three months after the realisation event. The value of the performance fee shall be calculated by reference to the total distribution to Shareholders, as follows:

Total distribution

Performance fee

Less than 110 pence per Ordinary Share

None.

Greater than 110 pence per Ordinary Share but less than 130 pence per Ordinary Share

10% of the total distribution in excess of 110 pence per Ordinary Share multiplied by the number of shares in issue on the date of the Realisation Event.

Greater than 130 pence per Ordinary Share but less than 150 pence per Ordinary Share

a) 10% of the amount by which the total distribution to Shareholders is in excess of 110 pence per Ordinary Share but less than 130 pence per Ordinary Share; and

b) 20% of the amount by which the total distribution to Shareholders is in excess of 130 pence per Ordinary Share but less than 150 pence per Ordinary Share,

in each case multiplied by the number of Ordinary Shares in issue on the realisation date.

Greater than 150 pence per Ordinary Share

a) 10% of the amount by which the total distribution to Shareholders is in excess of 110 pence per Ordinary Share but less than 130 pence per Ordinary Share; and

b) 20% of the amount by which the total distribution to Shareholders is in excess of 130 pence per Ordinary Share but less than 150 pence per Ordinary Share; and

c) 30% of the amount by which the total distribution to Shareholders is in excess of 150 pence per Ordinary Share,

in each case multiplied by the number of Ordinary Shares in issue on the realisation date.

During the period ended 30 June 2016, the performance fee provision decreased by £27,000 to £nil (30 June 2016: decrease in provision for performance fee by £9,000 to £112,000; 31 December 2016: decrease in provision for performance fee by £94,000 to £27,000).

6. Segmental analysis

In accordance with IFRS 8: Operating segments, the Group is required to present and disclose segmental information based on the internal reports that are regularly reviewed by the Board in order to assess each segment's performance and to allocate resources to them. However, the Board has opted not to comply with IFRS 8 due to reasons of commercial sensitivity and the possible negative impact such information may have on the proceeds from the sale of individual properties.

7. Tax effects of other comprehensive income

There are no tax effects arising from the other comprehensive income disclosed in the condensed consolidated statement of comprehensive income (30 June 2016 and 31 December 2016: £nil).

8. Loss per share - basic and diluted

The loss per Ordinary Share, is based on a loss of £2,612,000 (30 June 2016: profit of £348,000; 31 December 2016: loss of £1,213,000) and on a weighted average number of 15,551,250 (30 June 2016: 15,551,250; 31 December 2016: 15,551,250) Ordinary Shares in issue. There is no difference between the basic and diluted loss per share.

9. Dividends

The Board does not propose an interim dividend for the six months ended 30 June 2017 (2016: nil).

10. Freehold investment property

Six months ended 30 June 2017

Six months ended 30 June 2016

Year ended

31 December 2016

(unaudited)

(unaudited)

(audited)

£'000

£'000

£'000

Brought forward

14,970

17,421

17,421

Additions

4

17

177

Disposals

-

(556)

(1,792)

Realised gain on disposal of investment property

-

9

9

Loss on revaluation of investment properties

(2,805)

(155)

(845)

----------

----------

----------

Carried forward

12,169

16,736

14,970

----------

----------

----------

All investment properties were valued by Cushman & Wakefield, international property advisers, at fair value at 30 June 2017, 30 June 2016 and 31 December 2016 in accordance with the methodology and guidelines set out in the latest edition of the Royal Institution of Chartered Surveyors ("RICS") Appraisal and Valuation Manual. In the opinion of the Board, the Property Manager and the Investment Advisers, the fair value of the properties held at the period end is equal to the values attributed to them in the independent valuation report prepared by Cushman & Wakefield.

Property assets in Turkey and Bulgaria are inherently difficult to value as there is no liquid market or transparent pricing mechanism. As a result, valuations are subject to substantial uncertainty. There is no assurance that the estimates resulting from the valuation process will reflect the actual sales price even where such sales occur shortly after the date of the valuation.

The appraisers determine the fair value by applying the methodology and guidelines as set out in the appropriate sections of both the current Practice Statements and United Kingdom Practice Statements contained within the RICS Valuation - Professional Standards 2014 Edition.

All investment properties are classified as Level 3 in accordance with the fair value hierarchy levels set in IFRS 13: Fair value measurement. Apart from the property disposals in the comparative periods, there were no transfers into or out of Level 3 during the period.

In accordance with IFRS 13: Fair value measurement, it is a requirement for the Group to present and disclose key inputs and the sensitivity of those inputs in the valuation of the properties. However, the Board has opted not to fully comply with IFRS 13 due to reasons of commercial sensitivity and the possible negative impact such information may have on the proceeds from the sale of individual properties.

The Group invests primarily in US Dollars, Euros or local currencies in Turkey and Bulgaria. Although US Dollars, Euros and the local currencies of those countries are freely convertible into other currencies, exchange rate fluctuations could have a material effect on the market value of the Group's property investments which, although expressed in Sterling, are valued by the independent valuer in either US Dollars or Euros.

11. Trade and other receivables

30 June 2017

30 June 2016

31 December 2016

(unaudited)

(unaudited)

(audited)

£'000

£'000

£'000

Deferred consideration (1)

219

-

290

VAT control account

32

21

22

Prepaid tax

6

49

6

Interest receivable on deferred consideration (1)

5

-

-

Other receivables and prepayments

82

143

47

Management fees paid in advance (2)

-

-

5

----------

----------

----------

344

213

370

----------

----------

----------

(1)

The deferred consideration relates to the disposal of Southern Properties SRL and is payable in instalments up to 30 June 2018. Effective 1 January 2017, the balance of the outstanding deferred consideration attracts interest at a fixed rate of 4% per annum. Interest amounting to £5,000 had been accrued up to 30 June 2017. At the date of signing these results, of the €340,000 originally receivable, €115,000 (£79,000) of the deferred consideration had been received. The deferred consideration is secured by a charge on the property.

(2)

£5,000 was paid to Pera Pera during the year as an advance of the fees due to Pera Pera for the quarter ending 31 March 2017.

12. Share capital and reserves

30 June 2017

30 June 2016

31 December 2016

(unaudited)

(unaudited)

(audited)

£'000

£'000

£'000

Authorised:

200,000,000 Ordinary Shares of 1 pence each

2,000

2,000

2,000

------------

------------

------------

Issued and fully paid:

15,551,250 (30 June 2016 and 31 December 2016: 15,551,250) Ordinary Shares of 1 pence each

155

155

155

------------

------------

------------

No Ordinary Shares were purchased or cancelled during the period.

The Company has one class of Ordinary Shares, which carry no right to fixed income. Ordinary Shares carry the right to vote at general meetings and the entitlement to receive any dividends and surplus assets of the Company on a winding-up.

Any Ordinary Shares held in treasury do not have the right to vote at general meetings nor do they have an entitlement to receive any dividends or surplus assets of the Company on a winding-up.

Foreign currency translation reserve

The translation reserve comprises all foreign currency differences arising from the translation of the results of foreign operations.

Reserve for own shares

The Company has the authority to utilise its distributable reserve to buy back for cancellation up to 2,331,132 Ordinary Shares (14.99% of the Ordinary Shares in issue at the time the authority was sought). In addition, the Company has the authority to purchase up to 10% of the Ordinary Shares in issue and hold them as Treasury Shares until a time when they are either re-issued or cancelled.

During the period ended 30 June 2017, no shares were purchased to be held as Treasury Shares (30 June 2016 and 31 December 2016: nil).

13. NAV per Ordinary Share

The NAV, in pence per Ordinary Share, is based on the net assets attributable to equity Shareholders of £12,391,000 and on 15,551,250 Ordinary Shares in issue at the end of the period (30 June 2016: £15,675,000 based on 15,551,250 Ordinary Shares; 31 December 2016: £14,892,000 based on 15,551,250 Ordinary Shares).

14. Related parties

The relationships and transactions between the Group, Elysium, CNC, Pera Pera and Walnut are disclosed in note 5. In addition, with effect from 8 May 2012, Andrew Duquemin was appointed as an alternate Director for Carol Goodwin. Mr Duquemin is executive chairman of Elysium.

The Group has agreed to pay Walnut commission of 2% of the sales proceeds of property in Bulgaria, if a third party agent is involved, split in the proportion of 1.5% to the agent and 0.5% to Walnut. If a property sale is executed solely by Walnut, the rate would be 1.5%. The Group has agreed to pay Pera Pera commission on any property sales in Turkey on the same terms as those agreed with Walnut.

No commissions were incurred during the six months ended 30 June 2017. The disposal of various units within the Nil Passage property during the period ended 30 June 2016 incurred total sales commission of £8,000, which was payable to Pera Pera. The disposal of the subsidiary containing the Gara Progresului, Business & Logistics Centre in Bucharest in December 2016 incurred sales commission of £19,000, which was paid to Walnut.

The Directors are not aware of any ultimate controlling party.

15. Subsequent events

There were no material events after the financial reporting date that required disclosure as at 18 September 2017.

16. Capital management policy and procedures

The Group's financial risk management objectives and policies are consistent with those disclosed in the consolidated financial statements for the year ended 31 December 2016.

The Group's capital management objectives are:

· to ensure that it will be able to continue to operate in order to return funds in an orderly manner to Shareholders; and

· to maximise its total return primarily through the capital appreciation of its investments.

The Board, with the assistance of the Manager, Property Manager and Investment Advisers, monitors and reviews the structure of the Group's capital on an ad hoc basis. This review includes:

· the current and future levels of gearing;

· cash flow projections for the Group;

· the working capital requirements of the Group;

· the need to buy back Ordinary Shares for cancellation or to be held in treasury, which takes account of the difference between the NAV per Ordinary Share and the Ordinary Share price;

· the current and future dividend policy; and

· the return of funds to Shareholders.

The Group's objectives, policies and processes for managing capital are as disclosed in the Group's consolidated financial statements for the year ended 31 December 2016.