Half Yearly Report

EASTERN EUROPEAN PROPERTY FUND LIMITED

Unaudited half-yearly results for the six month period ended 30 June 2014

HIGHLIGHTS

· Two properties sold during the period, generating aggregate proceeds of £0.9 million.

· Property held at 30 June 2014 valued at £17.1 million (30 June 2013: £19.0 million on a like-for-like basis; 31 December 2013: £17.7 million on a like-for-like basis).

· Net asset value at 30 June 2014 of £15.8 million, 101.66p per Ordinary Share (30 June 2013: £19.7 million, 112.25p per Ordinary Share; 31 December 2013 of £17.4 million, 105.19p per Ordinary Share).

· Loss for the six months ended 30 June 2014 of £1.0 million (six months ended 30 June 2013: profit of £1.2 million; year ended 31 December 2013, loss of £0.5 million), equal to a loss per share of 6.32p (30 June 2013: earnings of 6.58p; 31 December 2013: loss of 3.00p) per Ordinary Share.

· 955,000 Ordinary Shares bought for cancellation during the period.

Events after the period end:

· Since the period end, 300,000 Ordinary Shares have been purchased for cancellation.

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

Tom Fyson / Tom Bective

Liberum Capital Limited

Tel: +44 203 100 2000

Bob Locker

CNC Property Fund Management Limited

Tel: +44 1784 424 740

Keiran Gallagher / Oliver Cadogan

Pera Pera

Tel: +90 (212) 252 6048

CHAIRMAN'S STATEMENT

EEP sold two properties during the six month period ended 30 June 2014, bringing the total disposals to date to eight since Shareholders approved the realisation investment objective and policy in September 2012. EEP now has four properties remaining in the portfolio; two in Turkey and one in each of Bulgaria and Romania.

Results

EEP reported a net loss for the period ended 30 June 2014 of £1.0 million (30 June 2013: profit of £1.2 million), representing a loss per Ordinary Share of 6.32p (30 June 2013: earnings of 6.58p). The reduction in rental income, arising mainly from the sale of properties, continued during the first half of 2014 which, together with the reduction in valuation of properties, contributed to the loss.

During the period ended 30 June 2014, operating expenses decreased by 12.9% (before accounting for performance fees), compared to the same period in 2013, as a result of the reduction in management fees and a general reduction in other operating expenses. Costs will continue to reduce further as EEP continues its orderly realisation of investment properties.

EEP's consolidated net asset value ("NAV") at 30 June 2014 was £15.8 million, 101.66p per Ordinary Share (30 June 2013: £19.7 million, 112.25p per Ordinary Share; 31 December 2013: £17.4 million, 105.19p per Ordinary Share). Capital was reduced by £0.6 million as a result of the repurchase of Ordinary Shares during the first half of 2014. Compared to the 30 June 2013 NAV, capital has been reduced by £2.2 million.

Buy Back of Ordinary Shares

The Company's share price decreased by 0.25p during the period to 70.50p at 30 June 2014 (30 June 2013: 82.00p, 31 December 2013: 70.75p), with the discount to NAV narrowing from 32.7% at 31 December 2013 to 30.7% at 30 June 2014. During the period, a total of 955,000 Ordinary Shares were purchased by the Company at an average price per Ordinary Share of 62.57p and cancelled at a total cost of £601,000.

Property Portfolio

EEP completed two property disposals in the period under review. On 22 January 2014, two adjoining properties, the 'Yellow' Building and Asmali Cumba, were sold for US$1.6 million (£0.9 million). Based on historic cost, the gain crystallised was US$0.8 million (£0.6 million). Corporate income tax of US$0.2 million was paid on the gain.

The four remaining properties continue to be marketed for sale, which will be disposed of as and when appropriate offers are received. The two adjacent Istanbul properties, including the flagship Markiz building, continue to elicit interest from Turkish buyers. Although some expressions of interest have been received from non-Turkish potential buyers, the political disruption in Turkey and its neighbours has held back serious progress in negotiations. Although the uneventful landslide election of Mr Recep Erdogan as the new President of Turkey in August 2014 has provided some stability to the local business environment, overseas investor interest is likely to remain cautious.

Sentiment in the Bulgarian and Romanian property markets continues to fluctuate. It is particularly disappointing that, despite active sales processes in Sofia and Bucharest over the past four years, EEP has not received a single serious offer for either property. Further information on the property markets and the investment environment is provided in the Property Manager and Investment Adviser's Report.

Property Valuations

Consistent with previous years, DTZ Debenham Tie Leung carried out independent valuations of all properties held by EEP. In US Dollar and Euro terms, the aggregate value of EEP's investment properties remaining at 30 June 2014 was unchanged from 31 December 2013. However, due to foreign exchange rate movements, the value of the remaining properties decreased during the period and resulted in a net unrealised loss on revaluation of £0.6 million (30 June 2013: gain of £1.3 million) (see note 11). Further details of each property (but not their individual carrying values) are disclosed in the Property Manager and Investment Adviser's 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 meeting solvency requirements. The Board will continue to effect distributions by means of market repurchases of Ordinary Shares at a discount to NAV where the amount of net cash available for distribution is relatively small. However, disposal of EEP's principal asset, the Markiz Passage property, will trigger a more formal return of capital whereby it is intended that Shareholders will have the option to receive proceeds in the form of either capital or a dividend.

It is likely that corporate income tax will arise to the extent any capital gains crystallise on the disposal of the remaining Turkish properties. This liability has been provided for in these consolidated results as deferred tax and calculated on the assumption that the properties are realised at their current carrying values. However, additional taxes, such as a 15% withholding tax, may arise on the repatriation to Guernsey of non-capital reserves from Turkey. At this time, the Board expects that future income (including realised gains on the sale of properties) will exceed expenses (including withholding tax, other sales taxes and sales commission) and, therefore, no operating losses to liquidation have been provided for in these consolidated results, which have been prepared on a non-going concern basis.

If the Turkish properties are sold in the second half of 2014, profits will be paid as a dividend to the Company in 2015, with the remaining funds being transferred on the liquidation of the Turkish subsidiary later in 2015. If the Turkish properties are not sold in 2014, this process will be put back by at least a further year, with the subsequent distributions to Shareholders of the Company also being delayed. The Board will ensure that cash is distributed to Shareholders as quickly as possible.

In commercial negotiations, the Property Manager and Investment Adviser continue to negotiate a sale of the properties in Istanbul in a manner that will provide a tax efficient and early distribution of proceeds to Shareholders. However, a balance may need to be struck between final sales price and timing of receipt of proceeds.

At the AGM held on 12 September 2014, Shareholders resolved to renew the approval of the Company to repurchase up to 2,376,102 Ordinary Shares (up to a maximum of 14.99% of the Ordinary Shares in issue at the date the authority was sought). This will allow the Company to repurchase Ordinary Shares to the value of up to approximately £1,675,000 assuming no change in the prevailing Ordinary Share price and current number of shares in issue up to the date of the 2015 AGM.

Outlook

A liquidator will be appointed only after the remaining properties have been sold. The estimated timing and costs involved in appointing a liquidator of the Company and its subsidiaries remain under review at each Board meeting.

The Board appreciates your continued patience and support.

Martin M. Adams

Chairman

12 September 2014

PROPERTY MANAGER AND INVESTMENT ADVISER'S REPORT

For the half year ended 30 June 2014, the Property Manager and Investment Adviser have continued to seek incremental estate improvements to EEP's property portfolio while also trying to sell the properties at full market value.

Although the real estate sector remains strong and enquiries over the period have been maintained at a level that has provided comfort that a sale would be achieved for either of the properties still held in Istanbul, the market continued to be affected by the international disruption in the region and the recently held Presidential elections.

During the first few months of the year in Bulgaria, while there appeared to have been an underlying improvement in the property market, and optimism among property agents that there would be an increase in market activity, this had stalled by the end of the six month period as political instability and a run on two banks affected the economy.

In contrast, Romania appears much more stable and the economy has improved. The property markets are showing more activity, although purchases and sales of commercial property are still low in terms of actual transactions that have completed.

In general, financing remains difficult and there are few, if any, 'international investors' willing to transact within individual countries. Turkey is still the most active and likely location for a sale and there remains some international interest, although the market is still dominated by local investors.

The properties held at 30 June 2014 were as follows:

Markiz Passage, Istiklal Street, Beyoglu, Istanbul

The property is being marketed for sale and it continues to generate interest. Despite the number of enquiries, concluding a sale has proved difficult, due to the uncertainties arising in the economy at critical stages of trying to close deals and disrupting the momentum of the marketing process.

Yemek Kulubu (food club) remains as a tenant.

Nil Passage, Istiklal Street, Beyoglu, Istanbul

This property has now been marketed widely and interest has been shown in different elements of the property. Some of the interest is linked to the Markiz property. It has also been affected by the uncertainty in the market.

The Atrium, 24 George Washington Street, Sofia

This property has been widely marketed for sale and there has been some interest, although not at a level that could be considered serious.

United Bulgarian Bank remains in occupation and is still the largest tenant. A number of other smaller tenants are also in occupation, including the café that opened last year. There is a small amount of tenant turnover but overall occupancy has improved slightly.

Gara Progresului Business & Logistics Centre, Gara Progresului Street, Bucharest

This property has also been widely marketed for sale and interest is beginning to appear from the market. This has not translated into anything serious during the period, but the industrial sector in Bucharest, of which this property forms part, continues to see more transactions taking place.

The gradual turnover of tenants remains a theme. However, it has established a track record of re-letting and an e-commerce company that started last year continues to expand into more space.

Regional Overview

Turkey

In August 2014, Recep Erdogan won Turkey's first direct election to the presidency with 52% of the vote. By electing Recep Erdogan as President, the country has maintained his political presence and, together with his appointed Prime Minister, is likely to see a continued programme of policies that maintain economic stability.

In terms of the economy, annual inflation was reported as 9.3% in the year to July 2014 and the current account deficit as 5.8% of GDP as at 30 June 2014, both persistently high. However, the currency has stabilised and was trading at TRY 2.12 to the US Dollar at 30 June 2014 (31 December 2013: 2.15). In July 2014, the Turkish trade gap decreased to US$6.5 billion from a US$9.9 billion shortfall a year earlier. The economy is forecast to grow 3% for 2014 according to the Economist Economic and Financial Indicators.

Bulgaria

In recent months, the country has suffered due to: two local banks needing to have almost all their deposits guaranteed by the State; and the Government itself resigning in late July. Until the next parliamentary elections in October 2014, a caretaker government is in place. In June, Standard & Poor's lowered the long term sovereign rating one level to BBB-, moving it one step above junk rating. Earlier in the year, the European Commission had increased its forecast for GDP growth to 1.7% from 1.5% for 2014, rising to 2.0% for 2015 and said that it was likely to be export driven, but also that domestic consumer demand was expected to improve.

Romania

In contrast to its southern neighbour, Romania has the appearance of a country getting to grips with its internal issues.

Romania has witnessed several high profile convictions and imprisonments of previously "untouchable" politicians and business people for corruption, fraud and embezzlement. In August, Dan Voiculescu, a billionaire former senator and owner of the largest media network in Romania was sentenced to ten years imprisonment for theft of state assets.

In early August, the Romanian National Bank lowered the monetary policy rate by 25 basis points to 3.25% (it was 5.24% in July 2013 and 3.5% in February 2014).

After 2013 GDP growth of 3.5% (the highest in the EU), which was helped by improving exports and a strong grain harvest, the European Commission has forecast GDP growth of 2.5% in 2014 and 2.6% in 2015, with low single digit inflation and unemployment around 7%.

Prospects

The overall position remains the same as in the previous report, in that the Property Manager and Investment Adviser remain confident of disposals in Istanbul. Although Turkey has a number of immediate external pressures, the majority of the population still support President Recep Erdogan, as evidenced by his recent election. While this may not be a comfortable choice for some opposition groups, it does provide continuation of policy and provides stability, which is reflected in the enquiries and optimism in the real estate sector. We still expect EEP to benefit from the location of its two remaining properties, being on or very close to Istiklal Street, which remains the main shopping street in Istanbul and has limited opportunities for potential investors to buy property in the vicinity.

With Bulgaria and Romania, the overall position may be diverging, although it is too early to predict what impact the recent political events and local banking crisis will have on real estate transactions in Bulgaria. While it appears to be more likely to be on the downside, EEP's property remains one of the more attractive on offer from a location, appearance and value perspective.

The property market in Bucharest is definitely improving in line with the overall economy and the opportunity to sell in this location looks to be improving. Although there is no guarantee that the property will be sold in the near term, EEP's Romanian property is beginning to attract attention and the combination of an improving market and its recent track record of letting will provide potential buyers with confidence that the property has the attributes to be a successful investment.

Bob Locker

CNC Property Fund Management Limited

Keiran Gallagher

Oliver Cadogan

Pera Pera

12 September 2014

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the six month period ended 30 June 2014 (unaudited)

1 January 2014

 to 30 June 2014

1 January 2013

 to 30 June 2013

1 January 2013

 to 31 December 2013

Note

(unaudited)

(unaudited)

(audited)

£'000

£'000

£'000

Income

Rental income

269

535

992

Other income

21

20

70

Bank interest receivable

1

4

6

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

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

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

Total income

291

559

1,068

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

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

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

Expenses

Property maintenance, property management and utilities

(148)

(149)

(284)

Management fees

5

(105)

(125)

(243)

Performance fees

5

7

(174)

(120)

Administration fees

5

(50)

(50)

(100)

Other operating expenses

(232)

(290)

(557)

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

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

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

Total expenses

(528)

(788)

(1,304)

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

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

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

Investment gains and losses

(Loss)/gain on revaluation of investment properties

11

(626)

1,323

(212)

Gain on disposal of investment properties

11

-

362

342

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

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

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

Total investment (losses)/gains

(626)

1,685

130

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

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

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

Net (loss)/profit from operating activities before gains and losses on foreign currency translation

(863)

1,456

(106)

(Loss)/gain on foreign currency translation

7

(3)

151

391

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

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

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

Net (loss)/profit from operating activities

(866)

1,607

285

Taxation

(141)

(409)

(811)

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

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

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

(Loss)/profit for the period/year

(1,007)

1,198

(526)

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

Exchange differences arising from translation of foreign operations

7

54

(126)

75

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

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

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

Total other comprehensive income/(loss)

8

54

(126)

75

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

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

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

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

(953)

1,072

(451)

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

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

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

(Loss)/earnings per share - basic and diluted

9

(6.32)p

6.58p

(3.00)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 2014 (unaudited)

Note

Share capital

Distributable reserve

Foreign currency translation reserve

Total

£'000

£'000

£'000

£'000

Net assets at 1 January 2014

165

17,825

(627)

17,363

Total comprehensive income/(loss) for the year

Loss for the six month period

-

(1,007)

-

(1,007)

Other comprehensive income

-

-

54

54

Contributions by and distributions to owners

Buy back and cancellation of own shares

12

(10)

(591)

-

(601)

----------

----------

----------

----------

Net assets at 30 June 2014

155

16,227

(573)

15,809

----------

----------

----------

----------

for the six month period ended 30 June 2013 (unaudited)

Note

Share capital

Distributable reserve

Foreign currency translation reserve

Total

£'000

£'000

£'000

£'000

Net assets at 1 January 2013

185

19,964

(702)

19,447

Total comprehensive income/(loss) for the year

Profit for the six month period

-

1,198

-

1,198

Other comprehensive loss

-

-

(126)

(126)

Contributions by and distributions to owners

Buy back and cancellation of own shares

12

(9)

(764)

-

(773)

----------

----------

----------

----------

Net assets at 30 June 2013

176

20,398

(828)

19,746

----------

----------

----------

----------

for the year ended 31 December 2013 (audited)

Note

Share capital

Distributable reserve

Foreign currency translation reserve

Total

£'000

£'000

£'000

£'000

Net assets at 1 January 2013

185

19,964

(702)

19,447

Total comprehensive income/(loss) for the year

Loss for the year

-

(526)

-

(526)

Other comprehensive income

-

-

75

75

Contributions by and distributions to owners

Buy back and cancellation of own shares

12

(20)

(1,613)

-

(1,633)

----------

----------

----------

----------

Net assets at 31 December 2013

165

17,825

(627)

17,363

----------

----------

----------

----------

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

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

as at 30 June 2014 (unaudited)

30 June 2014

30 June 2013

31 December 2013

Note

(unaudited)

(unaudited)

(audited)

£'000

£'000

£'000

Current assets

Freehold investment property

11

17,093

20,432

18,621

Intangible assets

6

8

6

Property, plant and equipment

7

11

8

Trade and other receivables

123

170

282

Cash and cash equivalents

740

1,947

957

----------

----------

----------

Total assets

17,969

22,568

19,874

----------

----------

----------

Current liabilities

Deferred tax liabilities

(1,787)

(1,981)

(1,848)

Trade and other payables

(280)

(385)

(276)

Overseas corporate tax

(12)

(255)

(316)

Rents received in advance

(81)

(160)

(71)

Other provisions and payables

-

(41)

-

----------

----------

----------

Total liabilities

(2,160)

(2,822)

(2,511)

----------

----------

----------

Net assets

15,809

19,746

17,363

----------

----------

----------

Capital and reserves

Called-up share capital

12

155

176

165

Distributable reserve

16,227

20,398

17,825

Foreign currency translation reserve

(573)

(828)

(627)

----------

----------

----------

Total equity attributable to owners of the Company

15,809

19,746

17,363

----------

----------

----------

NAV per Ordinary Share

 - basic and diluted

13

101.66p

112.25p

105.19p

----------

----------

----------

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 2014 (unaudited)

Note

1 January 2014

 to 30 June 2014

1 January 2013

 to 30 June 2013

1 January 2013

 to 31 December 2013

(unaudited)

(unaudited)

(audited)

£'000

£'000

£'000

Net (loss)/profit from operating activities

(866)

1,607

285

Adjustments for:

Bank interest receivable

(1)

(4)

(6)

Loss/(gain) on revaluation of investment properties

11

626

(1,323)

212

Gain on disposal of investment properties

11

-

(362)

(342)

Loss/(gain) on foreign currency exchange

3

(151)

(391)

Amortisation and depreciation

2

2

4

----------

----------

----------

Net cash outflow from operating activities before working capital changes

(236)

(231)

(238)

Decrease/(increase) in trade and other receivables

154

(48)

(233)

(Decrease)/increase in trade and other payables and other current liabilities

(128)

356

196

----------

----------

----------

Net cash (outflow)/inflow from operating activities after working capital changes

(210)

77

(275)

Interest received in the period/year

1

4

6

Tax paid in the period/year

(307)

(348)

(462)

----------

----------

----------

Net cash outflow from operating activities

(516)

(267)

(731)

Investing activities

Sale of investment property

904

2,216

2,448

Acquisition and development of investment property

(2)

(4)

(10)

----------

----------

----------

Net cash inflow from investing activities

902

2,212

2,438

Financing activities

Purchase of own shares

12

(601)

(773)

(1,633)

----------

----------

----------

Net cash outflow from financing activities

(601)

(773)

(1,633)

----------

----------

----------

(Decrease)/increase in cash and cash equivalents

(215)

1,172

74

----------

----------

----------

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

957

807

807

(Decrease)/increase in cash and cash equivalents

(215)

1,172

74

Foreign exchange movement

(2)

(32)

76

----------

----------

----------

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

740

1,947

957

----------

----------

----------

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 2014

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 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 2013.

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 2013, 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.

It is likely that corporate income tax will arise on capital gains on the disposal of the remaining Turkish properties. This liability has been provided for in these condensed consolidated half-yearly results as deferred tax and calculated on the assumption that the properties are realised at their current carrying values. However, additional taxes, such as a 15% withholding tax, may arise on the repatriation to Guernsey of non-capital reserves from Turkey. At this time, the Board expects that future income (including realised gains on the sale of properties) will outweigh expenses (including withholding tax, other sales taxes and sales commission) and, therefore, no losses to liquidation have been provided for in these condensed consolidated half-yearly results, which have been prepared on a non-going concern basis.

These condensed consolidated half-yearly results were approved by the Board of Directors on 12 September 2014.

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 11), 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

IAS 32

Financial instruments: Presentation - amendments relating to the offsetting of assets and liabilities

1 January 2014

IFRS 8

Operating Segments - amendments for aggregation of segments and reconciliation of segment assets

1 January 2014

IFRS 10

Consolidated Financial Statements - amendments for investment entities

1 January 2014

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. The Directors have chosen not to early adopt any standards, interpretations or amendments that have been issued but are not yet effective and they do not anticipate that they, with the exception of IFRS 9: Financial Instruments, would have a material impact on the Group's financial statements in the period of initial application. A full assessment of the impact of IFRS 9 has not yet been performed.

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 applied to the consolidated financial statements for year ended 31 December 2013 (see note 11).

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") is the Investment Adviser.

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 of the Group per annum calculated at the close of business at each quarter end, subject to a minimum of £100,000 per annum.

The total administration fees paid to Elysium relating to the period ended 30 June 2014 amounted to £50,000 (30 June 2013: £50,000, 31 December 2013: £100,000).

At 30 June 2014, £25,000 (30 June 2013: £25,000; 31 December 2013: £25,000) was due to Elysium in respect of administration 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 2014 was £105,000 (30 June 2013: £125,000; 31 December 2013: £243,000).

At 30 June 2014 £nil (30 June 2013 and 31 December 2013: £nil) was due to Elysium in respect of management fees.

The Manager is responsible for the payment of the fees of the Investment Adviser and Property Manager. For details on the payment of commissions to the Investment Adviser 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. 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 2014, the performance fee provision decreased by £7,000 to £113,000 (30 June 2013: increase in provision for performance fee by £174,000 to £174,000; 31 December 2013: increase in provision for performance fee by £120,000 to £120,000).

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 disposal of individual properties.

7. Foreign currency

As stated in the Admission Document, on an on-going basis, the Group does not intend to hedge the exchange rate risk between Sterling, and US Dollars, Euros and other local currencies.  The Group has freehold investment property and rental agreements denominated in currencies other than Sterling (the Company's functional and presentational currency).

8. 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 2013 and 31 December 2013: £nil).

9. Loss per share - basic and diluted

The loss per Ordinary Share, is based on a loss of £1,007,000 (30 June 2013: profit of £1,198,000; 31 December 2013: loss of £526,000) and on a weighted average number of 15,923,211 (30 June 2013: 18,203,957; 31 December 2013: 17,529,853) Ordinary Shares in issue. There is no difference between the basic and diluted earnings/loss per share.

10. Dividends

The Board does not propose an interim dividend for the six months ended 30 June 2014 (2013: nil).

11. Freehold investment property

Six months ended 30 June 2014

Six months ended 30 June 2013

Year ended

31 December 2013

(unaudited)

(unaudited)

(audited)

£'000

£'000

£'000

Brought forward

18,621

20,959

20,959

Additions

2

4

10

Disposals

(904)

(2,216)

(2,478)

Realised gain on disposal of investment property

-

362

342

(Loss)/gain on revaluation of investment properties

(626)

1,323

(212)

----------

----------

----------

Carried forward

17,093

20,432

18,621

----------

----------

----------

In the opinion of the Directors, the Property Manager and the Investment Adviser, 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 DTZ Debenham Tie Leung.

Property assets in Turkey, Bulgaria and Romania 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.

For certain properties, the valuation approach is based on discounting the future net income receivable from properties to arrive at the net present value of the future income stream. Future net income comprises the rent secured under existing leases, less any known or expected non-recoverable costs and the current market rent attributable to future vacancy rates. The consideration basis for this calculation excluded the effects of any taxes. The discount factors used to fair value are consistent with those used to value similar properties, with comparable leases in each of the respective markets. For other properties, values are determined on the basis of near vacant possession, whereby capital values are assessed per square metre and cross checked on a rent and yield approach, with adjustments made for void space and expected refurbishment costs prior to letting. This calculation also excludes the effects of any taxes.

All investment properties are classified as Level 3 in accordance with the fair value hierarchy levels set in IFRS 13: Fair value measurement. There were no transfers into or out of Level 3 during the period, or subsequent to 30 June 2014.

In accordance with IFRS 13: Fair value measurement, it is a requirement for the Group to present and disclose the sensitivity of certain 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 disposal of individual properties.

The Group invests primarily in US Dollars, Euros or local currencies in Turkey, Bulgaria and Romania. 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 DTZ Debenham Tie Leung in either US Dollars or Euros.

All investment properties were valued by DTZ Debenham Tie Leung, international property advisers, at fair value at 30 June 2014, 30 June 2013 and 31 December 2013 in accordance with the latest edition of the Royal Institution of Chartered Surveyors ("RICS") Appraisal and Valuation Manual.

12. Share capital and reserves

30 June 2014

30 June 2013

31 December 2013

(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 2013: 17,591,250; 31 December 2013: 16,506,250) Ordinary Shares of 1 pence each

155

176

165

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

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

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

During the six month period ended 30 June 2014, the Company purchased and cancelled 955,000 Ordinary Shares in the Company at a total cost of £0.6 million (30 June 2013: 925,000 Ordinary Shares at a total cost of £0.8 million; year ended 31 December 2013: 2,010,000 Ordinary Shares at a total cost of £1.6 million).

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 financial statements of foreign operations.

Reserve for own shares

The Company has authority to utilise its distributable reserve to buy back for cancellation up to 14.99% of the Ordinary Shares (2,376,102 Ordinary Shares) in issue at the time the notice of the AGM, held on 12 September 2014, was circulated. 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 of cancelled.

During the period ended 30 June 2014, no shares were purchased to be held as Treasury Shares (30 June 2013 and 31 December 2013: nil).

13. NAV per Ordinary Share

The NAV, in pence per Ordinary Share, is based on the net assets attributable to equity Shareholders of £15,809,000 and on 15,551,250 Ordinary Shares in issue at the end of the period (30 June 2013: £19,746,000 based on 17,591,250 Ordinary Shares; 31 December 2013: £17,363,000 based on 16,506,250 Ordinary Shares).

14. Related parties

The relationships and transactions between the Group, Elysium, CNC and Pera Pera 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 Mr Cadogan (who is employed by the Investment Adviser) commission of 2% of the sales proceeds of property in Bulgaria and Romania, if a third party agent is involved, split in the proportion of 1.5% to the agent and 0.5% to Mr Cadogan. If a property sale is executed solely by Mr Cadogan, 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 Mr Cadogan.

The two property sales during the period incurred total sales commission of £15,000, which was payable to Pera Pera.

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 12 September 2014.

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 2013.

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 Adviser, 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 2013.