Annual Report 2013
Arricano Annual Report 2013 About Arricano
Today, Arricano has 113,800 square metres of completed assets spread across four shopping centres. In addition, the Company also owns title rights for 185,567 square metres of development land divided into four specific sites which are at varying stages of development and has an interest in Sky Mall, a 67,000 square metre shopping centre in Kyiv.
2013 Financial Highlights
Recurring Revenues Profit before tax (excluding the benefits from revaluation of the portfolio) 30 3 2.4 25 25.3
20 0
15 16.4 USD Million USD Million USD 10 -3
5 -5.6 0 -6 2012 2013 2012 2013
Total value of the portfolio Occupancy (independently valued) (across completed portfolio) 300 100 287.8 250 98 98.3
200 96.8 96
150 161.2 %
USD Million USD 94 100
92 50
90 2012 2013 2012 2013 Strategic Report Directors’ Report Financial Statements 14 16 24 27 26 21 12 18 01 02 20 23 06 04
Annual Report 2013 01 Arricano Annual
Chief Executive Officer’s Report OperatingPortfolio Financial Review Consolidated Statement of Profit or Loss Independent Auditors’ Report Statements Financial Consolidated Statement of Financial Position otherand Comprehensive Income Consolidated Statement of Cash Flows Consolidated Statement of Changes in Equity Strategic Report Strategic Our Portfolio at a Glance Report Directors’ Directors’ Report Notes to the Consolidated Statements Chairman’s Statement Board of Directors Management Senior Read more: 10 Page Read more: 10 Page Page 06 Page Read more:
Following the IPO on AIM, the Company acquired Company IPO on AIM, the the Following USD66m, approximately sites for development four development. of stages in varying sites are the in Odessa. one and located in Kyiv are Three 49% shareholding in Kyiv’s Sky Mall, one of the City’s the of one Sky Mall, in Kyiv’s 49% shareholding leading of to a range home centres, shopping largest TopShop & Spencer, Marks including brands retail Comfy. and cities of Kryvyi Rih, Zaporizhzhya, Simferopol and Simferopol Kryvyi Rih, Zaporizhzhya, of cities offering metres over 113,800 square Spread Kyiv. international and domestic of a range consumers brands. retail Consists of four shopping centres located in the centres shopping four of Consists Development Property Development Investment Property Investment Completed Portfolio Our Portfolio at a Glance at Portfolio Our Chairman’s Statement
I am pleased to be able to provide Arricano’s maiden results following its admission to AIM in September 2013.
Our commercial objective is to use the cash generative completed portfolio to support the addition of further lettable space and the development of new shopping centres and entertainment complexes.
02 Arricano Annual Report 2013 Strategic Report Directors’ Report Financial Statements
Annual Report 2013 03 Arricano Annual to capitalise on the under-developed retail real retail under-developed to capitalise on the Outlook well positioned that it is believes Group The it is likely However, Ukraine. in the estate market of the first half at least in the that progress year will be slower than originally financial current economic and political general to the due anticipated (Crimea) Simferopol South Gallery in The uncertainty. we will monitor and as before to operate continues connected Everyone closely. there situation the a peaceful solution for is hoping Company to the is likely there though months, coming over the while issues capital markets to be an impact on the release of time at the However, unresolved. remain has been there Arricano, for this statement of and trading underlying impact on the material no leases with new as usual’, ‘business it remains and extended loans to be signed, continuing paid. rents Rupert Cottrell Chairman 8 April 2014 The search for a new CEO is underway while, at the while, CEO is underway a new for search The is Company the is confident Board the time, same Kovaliv. Yarema of guidance the under in safe hands Reporting, and Planning of head Kolesnyk, Tetiana role management financial on the has also taken who Goncharuk Maxim of departure the following position). (non-Board Officer Financial was Chief
The Board and Management and Board The Executive Chief In December 2013, Emil Budilovsky, role with his down from stepped of Arricano Officer has His position reasons. personal for Company the of head previously Kovaliv, by Yarema been covered basis. on an interim legal department, Company’s the The Market The to overcome, always challenges are While there in the operating has been successfully Arricano changes have been many 2007. There since Ukraine has Company but the that time during market in the every year project a new commissioned consistently shareholder Our aim is to build long-term then. since severely remains Ukraine the believe we value and to high good of in terms undersupplied structurally has been affected by Sentiment space. retail quality is Company the and conditions market current the the pace of to the approach cautious a more taking are projects but existing pipeline development risk on mitigating albeit with a focus continuing, appropriate. where and the second half of the financial year saw the financial the half of second the and management to use its asset continue Company Vunderbuilt S.A. in exchange for ownership of the of ownership for S.A. in exchange Vunderbuilt this as part of Arricano, sites. development four of certain benefit also took over the transaction, by sites arranged to these relating loans shareholder IPO enabled S.A. The of Vunderbuilt beneficiary the bank to land this new to acquire Company the scale the increasing substantially thereby develop, business. the of unchanged has remained strategy Company’s The the value of long-term the skills to increase portfolio, manage over 440 tenants and continue continue and over 440 tenants manage portfolio, opportunities development the forward to move Group. the across part of risk has always been an important Managing we seek to to this end, and strategy Company’s the projects future for tenants anchor secure and pre-let to a minimum. speculative development keep and
Managing risk has always been an Managing strategy Company’s the part of important and we seek to pre-let to this end and projects. future for tenants anchor secure As part of the listing on the AIM market of the of AIM market on the listing the part of As a net raised Company the Stock Exchange, London ordinary new of a placing through million USD23 shares issued 28,350,214 ordinary and shares to million) USD66 to approximately (equivalent Our commercial objective is to use the cash generative cash generative objective is to use the Our commercial further of addition to support the completed portfolio shopping new of development the lettable space and 2013 saw the complexes. entertainment and centres by growing pursue this strategy successfully Company tenants, new securing through revenues recurring Company’s the and rates letting average improving listing. stock market Strategy Today, Arricano has 113,800 square metres of metres has 113,800 square Arricano Today, centres shopping four across completed assets spread and at 98.3 per cent is high occupancy in which USD25 approximately of income rental generated 31 December 2013. In year ended the for million centres, shopping four Company’s to the addition Introduction maiden Arricano’s provide I am pleased to be able to to AIM its admission following full year results set of good has made Company in September 2013. The has and review under period the during progress real leading the of as one its position re-enforced centres shopping of operators and estate developers Ukraine. the in complexes entertainment and and assets was externally of portfolio Company’s The valued as at 31 December 2013 by independently Network. CBRE Affiliate the LLC, part of Expandia the Company also owns title rights for 185,567 for title rights also owns Company the into divided land development of metres square of stages in varying are sites which specific four with in Sky Mall has an interest and development leasable area. of metres 68,000 square was valued at USD287.8 portfolio expanded The and construction under property including million, a total stated at cost for that are prepayments million. USD39.2 of amount Chief Executive Officer’s Report
Arricano is focused on generating value for shareholders over the long-term.
The Company is in a healthy position. We own and operate four shopping centres and entertainment complexes generating strong and predictable cashflows which support our aim to develop similar sites in other under developed retail areas in the Ukraine.
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Annual Report 2013 05 Arricano Annual we are seeking to address this market opportunity this market to address seeking we are that compare formats shopping by developing provide and Europe to Western favourably offering environments retail modern, innovative, retailers. international and domestic mix of a good in establishing and extending Arricano’s presence presence Arricano’s extending and in establishing The Market The value for on generating is focused Arricano Our experiences long-term. over the shareholders neighbouring and Ukrainian in the working of amongst desire is a strong that there show markets habits and western shopping to adopt consumers Ukrainian the Today, trends. similar retail follow and under-supplied structurally is severely market Overview Operational is 123 team which have an asset management We three into our activities we divide and people strong property and development investment, areas: main the is on maximising Our focus management. completed portfolio, existing the of potential this portfolio to extend opportunities examining appropriate securing basis and on a pre-let ideally the of success with the in line increases rental developments. individual
in line with the profitability of the business. of the profitability with the in line as at 31 December 2013, valued the portfolio at portfolio the as at 31 December 2013, valued million to USD161.2 compared million USD287.8 the includes valuation current The year. prior in the property and land development the of acquisition and million at USD86.9 valued construction under investment to the additions direct of million USD38 on a revaluation The period. the during property USD1.7 uplift of a small basis showed comparable attributed is million USD20.7 A value of million. assets, on individual is secured which of majority the 4.73 per cent of in a range rates with interest of rate average weighted and to 11.5 per cent Loans 8.83 per cent level of at a project borrowings Company’s the 2020 and between 2018 and mature low 25 per is a comparatively loan to value ratio free of million was USD11.8 there In addition, cent. cash, as at 31 December 2013. all rents and dollars in US denominated are All loans pays a portion Company The dollars. to US linked are Hryvnia Ukrainian costs in the its operating of administrative and marketing to cover specifically US between the fluctuations therefore expenses, profitability can affect the Hryvnia the and dollar Company. the of this for a dividend recommending is not Board The to intention Company’s it is the however, period, future in the to shareholders distributions make The annual revaluation of the Group’s portfolio portfolio Group’s the of revaluation annual The company holding in the interest Company’s to the Sky Mall. of million, was USD72.7 year-end at the Bank debt
this market opportunity. this market Today, the Ukrainian market is severely market Ukrainian the Today, in and under-supplied structurally Arricano’s extending and establishing to address seeking we are presence In terms of the financial performance, the Company the performance, financial the of In terms saw recurring year which has completed a successful USD25.3 million to significantly increase revenues additional the reflecting million), (2012: USD16.4 centre RayON trade of opening the following revenues USD4.1 million tax was before 2012. Profit in August before profit with underlying million) (2012: USD21.3 of the revaluation from benefits tax (excluding USD5.6 (2012: loss of million USD2.35 of portfolio) costs in the one-off of a series were There million). performance trading the year but nevertheless, prior the from cash generation improved the shows completed portfolio. Results Introduction year a successful on report I am pleased to be able to and AIM market list on the Company saw the which the of potential size and the increase substantially year with five completed the began We business. in) and an interest Sky Mall, case of assets (in the we have a successful in Kyiv, our headquarters From have assisted in team who asset management the across occupancy levels of high maintaining rental appropriate through pushing portfolio, of requirements to the responding and increases own and We position. is in a healthy Company The entertainment and centres shopping four operate predictable and strong generating complexes develop similar support our aim to which cashflows in areas retail developed under sites in other at the time of the IPO acquired a development a development IPO acquired the of time at the more to establish four potential with the pipeline complexes. entertainment and centre shopping our completed portfolio. occupying over 440 tenants whilst this strategy continuing are We Ukraine. the averse basis. so on a risk we do ensuring Chief Executive Officer’s Report continued
Operating Portfolio In the following section we have provided an overview of each asset in the completed portfolio. Sun Gallery (Kryvyi Rih)
It is located at 30-richchia Peremohy Square, in Sun Gallery, opened in 2008, the Saksahanskyi district in the northeastern part of Kryvyi Rih. It is easy to access by car and has is one of the largest shopping good public transport links. The primary shopping centre catchment area includes almost the whole malls in Kryvyi Rih. territory of the Saksahanskyi district and part of the Zhovtnevyi district. The secondary area covers the Dovhyntsivskyi district.
The shopping centre is on two levels, spanning a total GLA of approximately 35,500 square metres. There are approximately 80 gallery tenants, a children’s entertainment zone, a food court with restaurants and cafes, and anchor tenants include the electronics store, Comfy and the hypermarket, Auchan.
Key statistics • GLA c. 35,500 square metres • Vacancy rate as at 31 December 2013 2.9 per cent • Average monthly rental rate USD9.45/square metres as at 31 December 2013 • Visitors (2013) 3.79 million • Bank debt at 31 December 2013 USD15.3 million • Valuation at 31 December 2013 USD28.9 million
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Annual Report 2013 07 Arricano Annual GLA c. 21,400 square metres 21,400 square GLA c. as at 31 December 2013 rate Vacancy 0.54 per cent rate rental monthly Average as metres USD17.09/square 2013 at 30 June Visitors (2013) 4.86 million at 31 December 2013Bank debt million USD14.2 at 31 December 2013 Valuation million USD36.5 Key statistics Key • • • • • • by public and private transport. and by public in April was opened City Mall phase of second The comprises a gallery with approximately 2011 and court a food local tenants, and 80 international entertainment a children’s restaurants, with three with DIY superstore is shared which parking and zone the are tenants anchor City Mall’s Epicenter. in the largest is the which Auchan, hypermarket Comfy. store electronics the and city, The shopping centre is located on the Dnipro river Dnipro on the is located centre shopping The city centre, to Zaporizhzhya with close proximity Zaporizhzhya of populated areas between two densely (1b district administrative Zhovtnevyi in the accessibility with convenient street), Zaporizska
single level.single 21,400 square metres on a metres 21,400 square with a total GLA of approximately approximately GLA of with a total shopping centres in Zaporizhzhya in Zaporizhzhya centres shopping City Mall is one of the largest largest the of is one City Mall City Mall (Zaporizhzhya) City Mall Chief Executive Officer’s Report continued
South Gallery (Simferopol)
The site is linked to the city centre and residential areas The site is located in the east of the city by one of the main thoroughfares of Simferopol. The primary shopping centre catchment north of Simferopol, about area includes northern parts of the Kyivskyi and Zaliznychnyi districts. The secondary area covers almost five minutes’ driving distance the whole city, except for its very southern parts. South Gallery shopping centre (Phases I and II) is from one of the city’s major situated on a land plot with a total area of 10.2 ha. Phase I of the shopping centre tenants include crossroads, Moskovska Square Auchan (international hypermarket chain) and a Comfy electronics store, with a small gallery. With and located directly on the the completion of Phase II in February 2014 the mall is designed to become a regional destination shopping centre with a total GLA of approximately E105 highway. 32,800 square metres.
Key statistics (Phase I) • GLA c. 13,100 square metres • Vacancy rate as at 31 December 2013 0 per cent • Average monthly rental rate USD6.09/ square metres as at 31 December 2013 • Visitors (2012) unknown* • Bank debt at 31 December 2013 USD8.0 million • Valuation at 31 December 2013 USD40 million (including Phase II)
* Footfall counters operational only starting with 2014.
Phase II • GLA – c. 19,700 square metres • 70 per cent let with a vacancy rate of 30 per cent
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Annual Report 2013 09 Arricano Annual GLA c. 24,100 square metres 24,100 square GLA c. as at 31 December 2013 rate Vacancy 1.9 per cent rate rental monthly Average as metres USD31.00/square at 31 December 2013 Visitors (2013) 5.17 million at 31 December 2013Bank debt million USD24.8 at 31 December 2013 Valuation million USD68.3 Key statistics Key • • • • • •
and a member of the Fozzy group. Electronics Electronics Fozzy group. the of a member and within the Comfy also operates supermarket centre. shopping a children’s and restaurants RayON has several retail the to complement zone entertainment the of middle RayON is located in the facilities. densely most the of one district, Desnjanski with an estimated in Kyiv, populated areas 170,000. approximately of area catchment on RayON*. information Additional
Please refer to Note 28 of the Consolidated Financial Statement for details on the RayON litigation case. RayON litigation on the details for Statement Financial Consolidated the 28 of to Note Please refer * by a Silpo foods supermarket, one of the of one supermarket, by a Silpo foods Ukraine in the chains supermarket biggest The shopping centre is located in the north is located in the centre shopping The Dnipro the left bank of the along Kyiv east of links. transportation with satisfactory river, approximately has a GLA of centre shopping The with on two levels, metres 24,100 square concept The spaces. 860 parking approximately which centre, shopping RayON is a district for convenience and clothing on food, focuses is anchored centre shopping The products.
The RayON shopping centre centre RayON shopping The RayON (Kyiv)RayON public to the was opened 2012. in August Chief Executive Officer’s Report continued
Sky Mall, Kyiv
Portfolio – Investment Property Key statistics Land plot: 5.79 hectares • Arricano ownership – 49.97 per cent Sky Mall (Kyiv) Title: Leasehold title Sky Mall is one of the largest shopping centres • GLA – c. 67,000 square metres Development: Retail, leisure and in Kyiv, built to an award-winning design by the • Valuation at 31 December 2013 entertainment international architectural firm Chapman Taylor. – USD209.4 million It is home to top-quality brands, which include • Book value at 31 December 2013 Gross construction c. 44,100 square metres TopShop and Marks & Spencer, and anchored by the – USD20.7 million* area (GBA): (excluding roof and hypermarket Auchan, Comfy and stores of the Inditex surface parking * A value of USD20.7 million is attributed to the Company’s interest and excluding the Group. The first phase of the shopping centre (the in the holding company of Sky Mall. hypermarket) opened in 2007 and the second phase hypermarket building) of the development opened in August 2010. It is Development Properties Gross leasable area c. 30,400 square metres located in the Dniprovskyi district of Kyiv on Vatutina Prospect/Krasnotkatska (Kyiv) (GLA): (excluding the Avenue, on the left bank of the Dnipro River. The The Prospect/Krasnotkatska development property hypermarket) shopping centre has good motor vehicle access and is located directly on the inner ring road of Kyiv on Parking: To include roof parking, public transport links. the left bank of the Dnipro river in the Desnyanskyi surface parking and administrative district, with good automobile basement parking The GLA of the current operating centre (Phases I accessibility and public transport links. The area is Type: Regional mall and II) is approximately 67,000 square metres, with already recognised as a popular shopping destination, (hypermarket approximately 1,880 parking spaces. The shopping located close to a large open-air market and a bazaar- anchored) centre spans three levels with a cinema, children’s style shopping centre (SC Darinok). Bank debt: Up-to USD30 million and entertainment zone, food court, hypermarket facility from Ukrainian and gallery shops. The Prospect/Krasnotkatska development property State Savings Bank is being constructed on a site of about 5.79 hectares Bank debt USD10 million The Company currently owns only 49.97 per cent of and will consist of a two-storey retail and leisure principal balance: the holding company of the asset. complex with a total gross building area of approximately 44,100 square metres (excluding roof Construction start date: It is anticipated that the third phase, which may and surface parking and excluding the hypermarket Q4 2012 be developed provided such development will be building referred to below), an expected GLA Forecast opening date: Q4 2014 feasible at the time, would add a further GLA of of approximately 30,400 square metres and parking. approximately 46,500 square metres. The construction works are in an advanced stage. The Several preliminary concepts are available Company plans to open the centre by the end of the for the development of the third phase. third quarter of 2014. The project has a joint venture with an SPV of retail operator Auchan, Real Estate F.C.A.U LLC, to construct and operate their own hypermarket block within the project with our estimated GBA of approximately 11,700 square metres (excluding parking).
10 Arricano Annual Report 2013 Strategic Report Directors’ Report Financial Statements
Annual Report 2013 11 Arricano Annual The events unfolding politically will restrict and will restrict politically unfolding events The could and to a certain extent limit our activities to the relation in consequences have significant currently not in a manner Group the of operations we ahead further looking However, determinable. with significant is in a market our business believe upside. long-term Kovaliv Yarema Officer Executive Chief Acting 8 April 2014 a strong pipeline of further development sites. development further of pipeline a strong Outlook long-term, the for position is in a good Arricano a cash generative low borrowings, as it has relatively and centres completed shopping of portfolio Petrivka (Kyiv) Petrivka is located on property development Petrivka The the in in Kyiv, river Dnipro the bank of right the site has an The district. administrative Obolonskyi is currently Group The 5.4 hectares. of area could which site, the of best use the considering site If the use. retail and both residential include the centre, as a shopping is to be developed GLA to be approximately the expects management metres. 31,450 square
4.5 hectares Odesa Buildings and companies owning the site have been purchased, but land title still needs to be allocated Retail, leisure and entertainment centre metres square 71,000 c. metres square 38,000 deck1,387 (771 parking, roof 616 parking spaces) Regional mall (hypermarket anchored) Q1 2015 Q3 2016 Land plot: Location: Title: Development: Gross construction area (GBA): leasableGross area (GLA): Parking spaces: Type: Expected construction start date: Forecast opening date: Rozumovska (Odesa) Rozumovska fourth Ukraine’s is the Odesa Black Sea port of The and inhabitants, million with over one city, largest Rozumovska The destination. is a popular leisure façade is located partly on the property development with close to its intersection Street Rozumovska of administrative Malynovskyi in the Street, Balkovska to public in close proximity Odesa, of district links. transportation bus city’s main site is located opposite the The directly connects Street Rozumovska station. The 4.5 hectares. of plot with a total area land is expected property development Rozumovska conditions, market given current permits and and 2016. for targeted now is completion to the highway to Kyiv. highway to the the for a lease agreement has signed Group The entertainment and shopping to be a three-storey spacesof parking number with a sufficient centre GLA target The demand. customer to accommodate a including metres, 38,000 square is approximately a leisure galleries, shopping and shops hypermarket, court, restaurants a food area, entertainment and concept design preliminary The area. a service and developer the has been completed and project the of consents relevant the for applying is currently
4.14 hectares plus title Leasehold title to several buildings (historical landmarks) on the site Retail, leisure and entertainment centre c.71,300 square metres for the shopping centre (plus c.38,500 square metres GBA for parking and c.6,600 square metres for the residential block) metres square c.47,000 metres* square c.5,000 includeTo roof parking underground and parking centreCity shopping (pocket hypermarket anchored) with residential Q4 2013 Q4 2015 This comprises mainly residential space with a small amount of amount space with a small residential This comprises mainly property. commercial * Title: Development: Gross construction area (GBA): leasableGross area (GLA): saleable area:Gross Parking spaces: Type: Expected construction start date: Forecast opening date: Land plot: Lukianivka (Kyiv) Lukianivka located on is property development Lukianivka The Shevchenkivskyi the in Kyiv bank of right the plot has a total area land The district. administrative construct to is planning Group The 4.14 hectares. of business central in the centre shopping its flagship in terms vision upmarket with a more Kyiv, of district Lukianivka mix. The tenant and concept the of construction the allows for property development of a multi-use complex, consisting of a shopping a shopping of consisting complex, a multi-use of a hypermarket, alia, inter including, centre leisure and and a leisure galleries, shopping and shops and court, restaurants a food area, entertainment two would also have property The area. a service seven-storey one levels and parking underground will which of construction building, residential centre. shopping the of after completion continue and shopping the GLA of that the is expected It 47,000 would be approximately centre entertainment relevant the obtained Group The metres. square 2013. in June consent building Financial Review
The Company’s revenue mainly consists of rental income from the portfolio of its completed properties. During the year ended 31 December 2013 the Company’s rental income comprised USD25 million (2012: USD16 million). The increase is attributable, primarily, to a full year of revenues from RayON which was opened in August 2012 and accounted for approximately 42 per cent of the Group’s revenues. On a like-for-like basis, rental income increased by 11 per cent in 2013.
12 Arricano Annual Report 2013 Strategic Report Directors’ Report Financial Statements Annual Report 2013 13 Arricano Annual
PJSC “State Savings Bank of Ukraine” – for the – for Ukraine” Bank of “State Savings PJSC – to finance million USD30 of total amount (as at 31 December 2013 only construction down) drawn has been million USD10 total the – for “Raiffeisen Bank Aval” PJSC – to refinance million USD15 of amount borrowings existing total amount the – for Related parties – to refinance million USD36.98 of borrowings existing OJSC “Bank “St. Petersburg” – for the total amount the – for OJSC “Bank “St. Petersburg” construction – to finance million USD25 of
Total assets, as at 31 December 2013, amounted to 2013, amounted as at 31 December assets, Total the from 64 per cent of an increase million, USD410 to the relating 31 December 2012 mainly year end year the During property. in investment additions obtained Company 31 December 2013, the ended subsidiaries new of acquisition through million USD87 by direct was achieved increase million USD38 and cash net Company’s the time same the At additions. USD41 million. to amounted for construction outflows as at 31 December 2013 amounted Cash balance USD86 attracted Company year the the during Thus, costs, transaction of net borrowings, from million to USD11.8 million (2012: USD7.57 million). (2012: USD7.57 million to USD11.8 with to loan agreements entered Group In 2013 the counterparties: following the 1) 2) 3) 4) repaid. were million USD57 and Company in 2013, the subsidiaries of acquisition At to be million USD20 of consideration deferred agreed was recognised by April 2015. This amount paid Company. the of liabilities within other Kolesnyk Tetiana Officer Financial Chief Acting 8 April 2014
Net Asset Value (“NAV”) as at 31 December 2013 was as at 31 December (“NAV”) Value Asset Net resulting million), (2012: USD134.6 million USD231.5 USD2.24 of per Share Value Asset Net in an Adjusted was driven in NAV increase The (2012: USD1.58). cash in September 2013 for placing by the principally assets. further of acquisition as well as the 31 December 2013, was USD3.2 million (2012: million 31 December 2013, was USD3.2 revaluation the for Adjusting million). USD19.8 has Company the periods, respective in the gains of approximately profits an uplift in net achieved million. USD8.5 Employee costs increased by 40 per cent for the for by 40 per cent Employee costs increased ended year, for the profit net Company’s The In 2013, the Company recognised a gain from recognised Company In 2013, the million USD1.7 of property investment of revaluation that demonstrates which million), (2012: USD27 propertythe on fluctuations significant no were there gain in revaluation The year. the during market in an increase resulted income in rental increase The used by USD0.5 services and materials raw in goods, previous to the as compared or 83 per cent, million, million USD12.7 were expenses Operating year. included 2012 results The million). (2012: USD17.9 that was million USD6 of bad debts for allowance a related from receivables attributable to the mainly bankruptcy procedure. an ongoing party under activities operating from profit resultant The 31 December 2013 year ended in the income Finance in 2012. million USD6.3 from million fell by USD2.5 generated mainly in 2012 was income finance The In July Empire. to Weather loan provided the from loan to the an amendment signed Company 2013, the to which according with this counterparty, agreement to 11.85 per cent from was reduced rate interest the income in 2012 financial Also included 3 per cent. USD2 million to lease gain amounting was a finance of lease payment in land to a fall due that arose USD2.7 by costs in 2013 increased finance Agreed in 2013. bank loans agreed the of as a result million, 2012 was principally as a result of the recognition of recognition the of as a result 2012 was principally policy. accounting Company’s with the RayON, in line to the 2013 as compared 31 December year ended bonuses performance of year as a result previous for 2012 and, for results Company’s to the relating IPO in 2013 as well as the staff, the relevant the subsidiaries. new of acquisition by improved gains) revaluation the (if excluding USD8.8 million of profit to a reported million USD13 million). USD4.3 (2012: loss of increased that was further Sun Gallery project, the in 2013. Directors’ Report
Principal Activities The Board of Directors of Arricano Real The principal activities of the Group are real estate Estate Plc (the “Company”) submits to development and construction and the holding of investment properties. the members the Directors’ Report and Review of Developments, Position and presents the audited consolidated financial Performance of the Group’s Business The Company is the owner of the entities owning and statements of the Company and its subsidiary operating four trade centres with total gross leasable area (“GLA”) of 113.800 square metres, located in companies (the Company and its subsidiaries Kyiv, Simferopol, Zaporizhzhya and Krivyj Rig and together referred to as the “Group”) for the owner of 50 per cent minus one share of an entity owning and operating a trade centre in Kyiv with year ended 31 December 2013. GLA of 67,000 square metres. On 27 February 2014, the Second Phase of South Gallery trade centre with a total GLA of 19,700 square metres was opened in Simferopol. In addition, in 2013 the Group has acquired four new subholdings that hold a lease or priority lease rights for various land plots in Kyiv and Odesa and investment property under development. One of the development projects, Prospect trade centre, located in Kyiv with planned GLA of 30,400 square metres, is expected to be opened in 2014.
During the year ended 31 December 2013 the Group incurred negative cash flows from operating activities amounting to USD1,539 thousand (for the year ended 31 December 2012: USD3,504 thousand). The Group has negative working capital of USD143 thousand (31 December 2012: negative working capital of USD12,211 thousand). During the year ended 31 December 2013 the Group was actively involved in construction of trade centres in Kyiv and Simferopol, which required significant financing and resulted in negative cash flow from investing activity of USD44,559 thousand. This was mainly financed by attracting of new loan facilities. In 2013 the Group entered to loan agreements with banks and related parties for total amount of USD106,975 thousand. The cash received was used for settlement of payables due to constructors and for refinancing of some borrowings.
14 Arricano Annual Report 2013 Strategic Report Directors’ Report Financial Statements
Annual Report 2013 15 Arricano Annual of Association, retire at the Annual General Meeting Meeting General Annual at the retire Association, of eligible being and appointment, their that follows Emil Budilovsky Mr. re-election. for themselves offer seeking is not 2014 and on 1 January resigned re-election. of Board the of meeting On 30 October 2013 at the Committee Audit the to form it was decided Directors as Chairman, Zampelas Michael Mr. of consisting the and Raul Parusk, Mr. Philip Scales and Mr. Philip Mr. of Committee consisting Remuneration and Zampelas Michael Mr. Scales as Chairman, Tymochko. Volodymyr Mr. The Group did not operate through any registered registered any through operate not did Group The year. the during branches Auditors Independent Messrs. Company the of auditors independent The to willingness their have expressed KPMG Limited, this authority giving resolution A in office. continue will be remuneration to fix their Directors to the Meeting. General Annual to the proposed Directors, of Board the of By order Directors 3 April 2014 Limassol, Events after the Reporting Date Reporting the after Events date, reporting after the events material The the of understanding have an effect on the which disclosed in are statements, financial consolidated statements. financial consolidated the 28 of note Branches
Peter Scales (appointed on 30 July 2013), Scales (appointed Peter on 30 July 2013), (appointed Zampelas Michael Mr. Articles Company’s with the in accordance are presented on page 16. Mr. Raul Parusk Raul Parusk 16. Mr. on page presented are Rupert Patrick on 30 October 2013), Mr. (appointed Philip on 30 July 2013), Mr. (appointed Cottrell Board of Directors of Board Directors of Board Company’s the of members The Results and Dividends Results and set out in the year are the for results Group’s The Other or Loss and Profit of Statement Consolidated not do Directors The Income. Comprehensive the and a dividend of payment the recommend forward. is carried year the for profit net Capital Share Company’s the of offering public initial part of As AIM, on 20 July 2013 London on the shares 106,000,000 ordinary into divided (or USD68,564) value EUR0.0005 each. nominal of shares was admitted Company On 12 September 2013 the the Shareholders approved the increase of the of increase the approved Shareholders the capital to EUR53,000 share authorised Company’s IPO, of a result AIM. As on London trading for the Company placed 38,650,637 ordinary shares and shares placed 38,650,637 ordinary Company the thousand. USD93,759 effect on equity of had the to transferred were shares 28,350,214 ordinary as consideration control common under entities USD66,056 value of at fair subsidiaries acquired for 10,300,423 ordinary 4) and (see note thousand of settled in cash at a price that were shares USD2.33 per share. Cash proceeds from placement placement from Cash proceeds per share. USD2.33 of 10,300,423 ordinary shares, net of direct costs direct of net shares, 10,300,423 ordinary of thousand, USD1,757 of to IPO process related at As thousand. to USD22,243 amounted unpaid. remain allotted and not are 31 December 2013, 2,729,363 ordinary shares 31 December 2013, 2,729,363 ordinary
In accordance with the Group’s investment policy investment Group’s with the In accordance entertainment and (trade property only commercial pipeline. projects in the will be included centres) will be located only in Kyiv property Investment cities. big other and In 2015 the Group plans to open Lukianivka trade trade to open Lukianivka plans Group In 2015 the object) that is located the of name (working centre By the metres. 47,000 square with GLA of in Kyiv, the this object will become its opening, of time Group. Arricano of project largest Future Developments of the Group the of Developments Future opened Group year 2014 the the of beginning In the centre. South Gallery trade the Phase of Second the will open Group that in 2014 the Also it is planned with GLA of located in Kyiv, centre, trade Prospect metres. 30,400 square Main Risks and Uncertainties and Risks Main by the faced uncertainties risks and principal The policies objects, Group’s with the together Group, those managing and measuring for processes and consolidated the 25 of disclosed in note are risks, statements. financial On 12 September 2013 the Company was admitted Company On 12 September 2013 the Group 31 December 2013 the year ended the During (for USD3,197 thousand of profit net generated for trading on the London AIM. Cash proceeds AIM. London on the trading for shares, 10,300,423 ordinary of placement from to amounted to IPO, costs related direct of net thousand. USD22,243 of profit 31 December 2012: net year ended the had positive equity and thousand), USD19,823 thousand. USD231,521 of Board of Directors
Rupert Cottrell Philip Scales Michael Zampelas Independent Independent Independent Non-Executive Chairman Non-Executive Director Non-Executive Director
Rupert has developed an extensive network of Philip is managing director of IOMA Fund and Michael, together with his associates, established relationships in CEE as a result of a number of board Investment Management Limited (“IOMA”), part of Coopers & Lybrand in Cyprus and Athens in 1970. positions that he has held. Rupert is the former the IOMA Group. IOMA specialises in the provision He served the firm as its Chairman and Chief chairman of the supervisory board of A.S. Magnum of third-party fund administration and investment Executive Officer from its establishment in 1970 Medical, a pan Baltic pharmaceutical group; a former management services. Prior to this, Philip spent until 2001 (latterly as PricewaterhouseCoopers) and director of New European Investments Limited, 18 years as managing director of Northern Trust as a Non-executive Chairman from 2002 until 2005. a closed private investment fund targeting Eastern International Fund Administration Services He also served as an elected member of the board European companies; and was a former Chairman (Isle of Man) Limited (formerly Barings (Isle of Man) of the European Organisation of Coopers & Lybrand of Carpathian plc, an AIM listed Eastern European Limited). He has over 35 years’ experience working Europe from 1991 to 1999. Michael served as commercial property fund, a subsidiary of which offshore, primarily in corporate and mutual fund chairman of the board of a number of local built The Galleria Shopping Mall in Riga. administration, and currently holds a number of government authorities and companies. Currently, directorships of listed companies. he is the independent non-executive Vice Chairman He was previously a non-executive director of of Eurobank Cyprus Limited and the independent The PFI Infrastructure Company plc, an AIM listed IOMA provides secretarial and administrative services Non-Executive Chairman of the Russian transport infrastructure fund that was taken private in 2007, to 13 listed companies, including East Balkan company, Globaltrans Investment Plc, listed on the and was non-executive chairman of Infrastructure Properties Plc, Metro Baltic Horizons Plc and Unitech Main Market of the London Stock Exchange. India plc, an AIM-listed infrastructure fund focused Corporate Parks Plc. Philip is a Fellow of the Institute on India (before Guggenheim acquired a majority of Chartered Secretaries and Administrators. He was Mayor of Nicosia from 2002 to 2006. Since stake) and Diamond Circle Capital plc, listed on the 1997, he has been the Honorary Consul General of Main Market of the London Stock Exchange. Rupert’s Estonia in Cyprus, contributing to the development background in financial services includes executive of the commercial and cultural relations between the director positions at a number of London investment two countries. He has played a significant role in the management firms and four years as a director of promotion of education, culture, community affairs the Financial Intermediaries, Managers and Brokers and business in Cyprus. He is a Fellow of the Institute Regulatory Association (“FIMBRA”) a financial of Chartered Accountants in England and Wales. regulator that is now part of the FCA. Rupert is a Fellow of the Chartered Securities Institute.
16 Arricano Annual Report 2013 Strategic Report Directors’ Report Financial Statements
Annual Report 2013 17 Arricano Annual Raul Parusk Director Non-Executive has an extensive national, Raul, an Estonian held having finance and in banking background then and Tallinn at Bank of positions senior where group, financial regional a large Hansapank, Lithuania. and in Estonia oversaw its operations he two of executive chief Raul was this, Following in one and in Canada (one companies industrial as chief was appointed in 2007 he then and Estonia) providing Expert Capital Management, of executive to Expert Capital Group, services management the founder by Hillar Teder, owned is 100 per cent which of Arricano. shareholder a significant and Volodymyr Tymochko Volodymyr Director Non-Executive Management Asset at Dragon is a director Volodymyr for company managing AM”), an investment (“Dragon sourcing deal include his responsibilities DUPD, and estate projects. DUPD’s real of management the and was an AM, Volodymyr Dragon to joining Prior Investment and Consulting for Director Associate is also a director He International. at Colliers Services Hills Green of a developer Neruhomist, at J Comfort Development. Korona and gated community
Hillar Teder. Hillar has an extensive track record record track Hillar has an extensive Hillar Teder. he In 1995, businesses. successful in building that Multon producer juice Russian the co-founded developed was sold to Coca-Cola in 2005. In 1997, he Estonia in Tallinn, centre shopping Rocca Al Mare the sold to Citycon he which and metres) (32,000 square the co-founded in 2005. In 2000, he (Finland) estate real retail and operator hypermarket Russian was listed on the which SA, O’KEY Group developer, 2010. in Stock Exchange London the of Market Main estate has been active in real 2005 he Since Ukraine. in the development Arricano was founded by Estonian entrepreneur entrepreneur by Estonian was founded Arricano Hillar Teder Director Non-Executive Senior Management
Yarema Kovaliv Tetiana Kolesnyk Acting Chief Executive Officer Acting Chief Financial Officer
Yarema joined Arricano as Head of the Legal Tetiana was appointed as Head of Planning and Department in October 2009. He was appointed Reporting for the Company in November 2010 as Acting Chief Executive Officer of Arricano and has been Acting Chief Financial Officer since Real Estate in January 2014 with responsibility December 2013. She is responsible for the Company’s for strategic and corporate management of the financial management and organising the Finance Company as well as continuing as head of the legal Department. With over ten years of experience department. Prior to joining Arricano, Yarema was in the fields of accounting, taxation, IFRS reporting, head of O’Key LLC’s legal department. Previous to planning and budgeting, she has held various this, he held a similar position at Veneto LLC and positions with a number of companies including had a role as a lawyer in the Ukrainian office of Vitmark Ukraine, and her most recent role, prior TNK BP, Russia’s third-largest oil producer. to joining Arricano, was as Senior Auditor for Ernst & Young. Yarema graduated from the Faculty of Law at the National Taras Shevchenko University, Kyiv. Tetiana received a Master’s degree in Finance from the Odessa National Economic University and has been a member of the Association of Chartered Certified Accountants (ACCA) since 2011.
18 Arricano Annual Report 2013 Strategic Report Directors’ Report Financial Statements
Annual Report 2013 19 Arricano Annual evelopment Director evelopment Kaspar Ots Kaspar D in 2010, Manager as a Project Arricano joined Kaspar RayON City Mall, the managing for with responsibility has 2013, Kaspar Since South Gallery projects. and Arricano, of Director Development of position the held of construction and development the overseeing all new projects by the Company. Prior to joining Prior Company. by the projects all new up projects heading in Estonia, worked he Arricano, and construction leading Estonia’s of some for extensive also gained He companies. development with projects on Ukrainian working of experience Head of position the held he where Property, Instar of Design. Officer Technical Tallinn the from graduated Kaspar his master’s received recently more and University in 2008. in Civil Engineering degree
Tetiana Burkatska Tetiana Officer Operating Chief in October 2010, as Chief Arricano joined Tetiana inof working years With over 20 Officer. Operating oversees and is very experienced she sector, retail the Company’s the of supervision and management the in the projects new as well as the portfolio operating with Arricano, role to her Prior portfolio. development retail Argo within the positions several held she space in the retail of provider a leading network, to join Arricano leaving before last role Her Ukraine. Director. Development was as Argo’s National Kyiv in 1983 from graduated Tetiana in Finance with a specialty University Economic Credit. and
Yuliya has held the position of Leasing Director Leasing of position the has held Yuliya International the from graduated Yuliya Yuliya Shchaslyva Yuliya Director Leasing managing and 2008, developing since at Arricano development and investment both the across projects in the experienced is highly She portfolios. estate, real commercial of leasing and management trade the at Best-Line, career started her having 2003 to 2008, in 1995. From company, industrial and management and leasing the for was responsible she estate. real all Best-Line’s of National Kyiv the from and University Solomon in degree with a master’s University Economic Marketing. Economic Independent Auditors’ Report To the Members of Arricano Real Estate PLC
Report on the Financial Statements
We have audited the accompanying consolidated financial statements of Arricano Real Estate Plc (the ”Company”) and its subsidiaries (the Company and its subsidiaries together referred to as the “Group”) on pages 21 to 60, which comprise the consolidated statement of financial position as at 31 December 2013, the consolidated statement of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.
Board of Directors’ Responsibility for the Financial Statements The Board of Directors is responsible for the preparation of financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap. 113, and for such internal control as the Board of Directors determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2013, and of its consolidated financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap. 113.
Emphasis of Matter We draw your attention to Note 1(b) to the consolidated financial statements, which describes the political and social unrest and regional tensions that started in November 2013 and escalated in 2014 in the Ukraine. The events referred in Note 1(b) could adversely affect the Group’s results and financial position in a manner not currently determinable. Our opinion is not qualified in respect of this matter.
Report On Other Legal Requirements Pursuant to the requirements of the Auditors and Statutory Audits of Annual and Consolidated Accounts Law of 2009 and 2013, we report the following: • We have obtained all the information and explanations we considered necessary for the purposes of our audit. • In our opinion, proper books of account have been kept by the Company so far as appears from our examination of these books. • The Company’s financial statements are in agreement with the books of account. • In our opinion and to the best of the information available to us and according to the explanations given to us, the financial statements give the information required by the Cyprus Companies Law, Cap. 113, in the manner so required. • In our opinion, the information given in the report of the Board of Directors on pages 14 and 15 is consistent with the financial statements.
Other Matter This report, including the opinion mentioned herein, has been prepared for and only for the Company’s members as a body in accordance with Section 34 of the Auditors and Statutory Audits of Annual and Consolidated Accounts Law of 2009 and 2013 and for no other purpose. We do not, in giving the aforementioned opinion, accept or assume responsibility for any other purpose or to any other person to whose knowledge this report may come.
Michalis A. Loizides, FCA Certified Public Accountant and Registered Auditor for and on behalf of
KPMG Limited Certified Public Accountants and Registered Auditors 11, 16th June 1943 Street, 3022 Limassol Cyprus 3 April 2014
20 Arricano Annual Report 2013 Strategic Report Directors’ Report Financial Statements – – – 91 91 2012 455 956 651 1,473 5,630 3,637 3,825 7,565 20,727 43,766 59,535 161,216 190,548 250,083 31 December 4 64 2013 537 663 820 5,833 4,612 1,520 1,519 4,324 10,116 11,840 20,727 10,882 48,469 85,861 409,729 287,799 323,868 31 December Annual Report 2013 21 Arricano Annual 8 5 6 7 8 9 7 12 12 10 24 12 11 Notes Intangible assets Restricted deposits Available-for-sale financial assets financial Available-for-sale Deferred tax asset recoverableLong-term VAT Property equipment and receivableLoans Prepayments made and other assets Cash and cash equivalents Restricted deposits Long-term loans receivableLong-term loans Trade and other receivables other and Trade Current assets Inventories Total assets set out on statements financial consolidated of, the part forming notes to, and with the read in conjunction is to be position financial of statement consolidated The 27 to 60. pages Total non-currentTotal assets recoverable VAT held-for-sale as Assets classified Total current assets (in thousands of USD) ASSETS Non-current assets Investment property as at 31 December 2013 31 December as at Consolidated Statement of Financial Position Position Financial of Statement Consolidated Consolidated Statement of Financial Position as at 31 December 2013 (continued)
31 December 31 December (in thousands of USD) Notes 2013 2012 EQUITY AND LIABILITIES Equity Share capital 13 67 54 Share premium 183,727 159,981 Additional paid-in capital 59,713 59,713 Retained earnings 50,509 47,312 Other reserves (61,983) (131,980) Foreign currency translation differences (512) (512) Total equity 231,521 134,568
Non-current liabilities Long-term borrowings 15 62,391 33,008 Advances received 18 2,900 3,534 Finance lease liability 16 11,248 3,252 Other long-term liabilities 19 10,222 – Deferred tax liability 24 5,443 3,975 Total non-current liabilities 92,204 43,769
Current liabilities Short-term borrowings 15 40,623 43,324 Trade and other payables 17 13,745 23,993 Tax payables 272 133 Advances received 18 20,628 4,294 Current portion of finance lease liability 16 89 2 Other liabilities 19 10,151 – Liabilities classified as held-for-sale 496 – Total current liabilities 86,004 71,746 Total liabilities 178,208 115,515 Total equity and liabilities 409,729 250,083
These consolidated financial statements were approved by the Board of Directors on 3 April 2014 and were signed on its behalf by:
Rupert Cottrell Raul Parusk Director Director
The consolidated statement of financial position is to be read in conjunction with the notes to, and forming part of, the consolidated financial statements set out on pages 27 to 60.
22 Arricano Annual Report 2013 Strategic Report Directors’ Report Financial Statements 24 24 24 2012 554 (166) (536) 6,316 (2,708) (7,562) (1,504) 21,327 22,573 19,847 16,421 26,893 19,823 (17,885) 0.54527 36,354,603 – – – 2013 (249) (983) (904) 4,101 3,197 1,233 1,751 3,831 3,197 (3,789) 10,535 25,299 0.03794 (12,727) (10,265) 84,262,942 Annual Report 2013 23 Arricano Annual 5 14 20 21 22 23 23 24 Notes
Income taxIncome expense Employee costs Depreciation amortisation and Profit before income tax Profit Profit operating from activities income Finance Weighted average number of shares (in shares) set out on statements financial consolidated of, the part forming notes to, and with the read in conjunction is to be position financial of statement consolidated The 27 to 60. pages Gain on revaluation of investment property itemsTotal that will not be reclassified to profit or loss Other comprehensive income comprehensive for theTotal year income Basic and diluted earnings per share (USD) Other income Goods, raw materials and services used Finance costs Items that will not be reclassified to profit or loss: Foreign currency translation differences Net profit for the year Operating expenses Revenue and other Comprehensive Income Comprehensive and other (in thousands of USD except earnings per share) for the year ended 31 December 2013 ended year the for Consolidated Statement of Profit or Loss or Profit of Statement Consolidated Consolidated Statement of Cash Flows for the year ended 31 December 2013
(in thousands of USD) Notes 2013 2012 CASH FLOWS FROM OPERATING ACTIVITIES Profit before income tax 4,101 21,327 Adjustments for: Finance income 23 (3,831) (6,316) Finance costs 23 10,265 7,562 Gain on revaluation of investment property 5 (1,751) (26,893) Loss on sale of investment property – 51 Depreciation and amortisation 249 166 Write-off of prepayments – 1,161 Allowance for bad debts 22 541 6,149 Operating cash flows before changes in working capital 9,574 3,207
Change in inventories 87 (76) Change in trade and other receivables (923) (4,973) Change in prepayments made and other assets (496) (1,376) Change in VAT recoverable 1,966 1,564 Change in trade and other payables (1,202) 1,614 Change in advances received 1,064 126 Change in other liabilities (31) – Income tax paid – (12) Interest paid (11,578) (3,578) Cash flows used in operating activities (1,539) (3,504)
CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of subsidiaries, net of cash acquired 4,233 – Acquisition of investment property (41,172) (9,889) Acquisition of property and equipment (296) (432) Proceeds from sale of investment property – 214 Change in prepayments made and other assets (5,217) – Change in advances received 4,801 – Loans granted (240) (498) Loans repaid 85 1,450 Change in VAT recoverable (5,426) (4,368) Placement of the restricted deposit (1,483) – Interest received 156 – Cash flows used in investing activities (44,559) (13,523)
The consolidated statement of cash flows is to be read in conjunction with the notes to, and forming part of, the consolidated financial statements set out on pages 27 to 60.
24 Arricano Annual Report 2013 Strategic Report Directors’ Report Financial Statements –
32 50 2012 (514) 7,565 (7,663) (8,095) 32,687 (25,122) (3) 2013 (797) 4,275 7,565 22,243 85,945 11,840 50,373 (57,015) Annual Report 2013 25 Arricano Annual Notes
The consolidated statement of cash flows is to be read in conjunction with the notes to, and forming part of, the consolidated financial statements set out on pages statements financial consolidated of, the part forming notes to, and with the read in conjunction is to be cash flows of statement consolidated The During the year ended 31 December 2013, acquisition of investment property of USD5,144 thousand was financed through finance leases (2012: USD1,686 thousand). USD1,686 leases (2012: finance through was financed thousand USD5,144 of property investment of 31 December 2013, acquisition year ended the During Non-cash movements Non-cash 27 to 60. CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares, net of equity costs Proceeds from borrowings, net of transaction costs borrowingsRepayment of lease paymentsFinance Other movements Cash and cash equivalents at December 31 Cash flows (usedfrom financing in) activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at 1 January (in thousands of USD) for the year ended 31 December 2013 (continued) 2013 December 31 ended year the for Consolidated Statement of Cash Flows Flows Cash of Statement Consolidated Consolidated Statement of Changes in Equity as at and for the year ended 31 December 2013
Attributable to equity holders of the Company
Foreign currency Additional Retained translation (In thousands of USD) Share capital Share premium paid-in capital earnings Other reserves differences Total Balances at 1 January 2012 9 89,994 59,713 27,489 (61,980) (536) 114,689 Total comprehensive income for the year Net profit – – – 19,823 – – 19,823 Foreign currency translation differences – – – – – 24 24 Total other comprehensive income – – – – – 24 24 Total comprehensive income for the period – – – 19,823 – 24 19,847
Transactions with owners, recognised directly in equity Contribution from shareholders 45 69,987 – – – – 70,032 Shares to be forfeited – – – – (70,000) – (70,000)
Total transactions with owners 45 69,987 – – (70,000) – 32
Balances at 31 December 2012 54 159,981 59,713 47,312 (131,980) (512) 134,568
Attributable to equity holders of the Company
Foreign currency Additional Retained translation (In thousands of USD) Share capital Share premium paid-in capital earnings Other reserves differences Total Balances at 1 January 2013 54 159,981 59,713 47,312 (131,980) (512) 134,568 Total comprehensive income for the year Net profit and total other comprehensive income – – – 3,197 – – 3,197 Total comprehensive income for the period – – – 3,197 – – 3,197
Transactions with owners, recognised directly in equity Forfeiture of shares (see note 13) (13) (69,987) – – – – (70,000) Reversal of reserve for unpaid shares (see note 13) – – – – 70,000 – 70,000 Contribution from shareholders 26 93,733 – – – – 93,759 Other movements – – – – (3) – (3)
Total transactions with owners 13 23,746 – – 69,997 – 93,756
Balances at 31 December 2013 67 183,727 59,713 50,509 (61,983) (512) 231,521
The consolidated statement of changes in equity is to be read in conjunction with the notes to, and forming part of, the consolidated financial statements set out on pages 27 to 60.
26 Arricano Annual Report 2013 Strategic Report Directors’ Report Financial Statements
Annual Report 2013 27 Arricano Annual The Group’s management believes that it is taking all necessary measures to maintain the viability of the Group and the development of its business in the current current in the its business of development the and Group the of viability the to maintain measures all necessary that it is taking believes management Group’s The environment. economic and business The current economic environment of Cyprus will not have a significant impact on the operations of the Group and the Group does not hold significant funds in Cypriot funds hold significant not does Group the and Group of the operations impact on the have a significant Cyprus will not of environment economic current The what effect, consequently, and Cyprus economy have an impact on the could which developments all to predict is unable management Group’s The institutions. financial Group. the of position financial and flows cash performance, financial future the could have on they if any, Following the positive outcome of the first and second quarterly reviews of the Cyprus economic programme by the European Commission, the European Central Bank Central European the Commission, European by the programme Cyprus economic of the reviews quarterly second first and the of positive outcome the Following to Cyprus. assistance financial of tranches scheduled the of disbursement the endorsed Eurogroup 2013, the during Fund, Monetary International the and was released in line with the provisions of the Memorandum. the of provisions with the in line was released The Eurogroup decision on Cyprus includes plans for the restructuring of the financial sector and safeguards deposits below EUR100,000 in accordance with European deposits below EUR100,000 in accordance safeguards sector and financial the of restructuring the for plans on Cyprus includes decision Eurogroup The reforms structural of fiscal consolidation, areas in the to step up efforts commitment their have reaffirmed authorities Cypriot the In addition, legislation. Union adjustment macroeconomic the regarding institutions Troika the between Cyprus and that was reached agreement the welcomed Eurogroup On 12 April 2013 the completed, were Stability Mechanism European the of Directors of Board the of approval formal the for procedures necessary all the Subsequently Cyprus. for programme of Cyprus the Republic of financing the of tranche first the above procedures, of the completion the Following member states. by Eurozone ratification as well as the to obtain financial support, resulted in an agreement and decision of the Eurogroup on 25 March 2013 on the key elements necessary for a future macroeconomic macroeconomic for a future necessary key elements 2013 on the March on 25 Eurogroup of the decision and in an agreement resulted support, to obtain financial the to address aims programme The of up to EUR10 billion. of Cyprus Republic to the assistance financial of provision the includes which programme adjustment and growth economic sustainable restoring to with a view sector, financial the of viability the restore to and that Cyprus is facing, challenges economic exceptional years. coming in the finances public sound banking the through executed transactions of in respect measures restrictive concerning Representatives of House by the was enacted 2013 legislation On 22 March Bank Central the of Governor the and Finance Minister of by the decided are measures restrictive the of duration and extent The in Cyprus. operating institutions on cash restrictions include cash transactions and to banking with respect measures, restrictive temporary 2013. The on 28 March enforced were Cyprus and of renewal compulsory partial the for also provide They abroad. in Cyprus and institutions credit to other funds of transfers and cheques of cashing the withdrawals, deposits. certain maturing of privatisations. and The negotiations of the Cyprus Government with the European Commission, the European Central Bank and the International Monetary Fund (the “Troika”), in order in order “Troika”), (the Fund Monetary International the Bank and Central European the Commission, European the with Government Cyprus the of negotiations The The main activities of the Group are investing in the development of new properties in the Ukraine and leasing them out. As at 31 December 2013, the Group operates Group the at 31 December 2013, out. As them leasing and Ukraine in the properties new of development in the investing are Group the of activities main The environment business (b) Ukrainian Deep and the and Agreement Association the not to sign decision Government’s the since significantly has deteriorated situation economic and political Ukraine’s The has deepened tensions regional rising with combined unrest social and 2013. Political in late November Union European with the Agreement Trade Free Comprehensive reserves and, currency foreign of Ukraine’s Bank National of the depletion a and deficit state budget the of in a widening has resulted crisis and economic ongoing the environment (c) Cyprus business from Cyprus to borrow of Republic the of inability with the system in conjunction Cyprus banking crisis in the the has been adversely affected from Cyprus economy The Monetary International the Bank and Central European the Commission, European the with negotiations into Cyprus entered of Republic the a result, As markets. international of the restructuring the included decision The 2013. March of 25 decision Eurogroup the and an agreement resulted into support, which financial for “Troika”), (the Fund Product. Domestic Gross in the with a decrease further contracted Cyprus economy 2013 the During “bail in”. through banks in Cyprus two largest of the Cyprus Companies Law, Cap.113, and is listed on London Alternative Investment Market (London AIM). The Company’s registered address is office 1002, 10th floor, floor, 1002, 10th is office address registered Company’s The AIM). (London Market Investment Alternative is listed on London Cap.113, and Law, Cyprus Companies the of and Group, to as the referred are purposes entities special and its subsidiaries and Arricano Cyprus. 3025 Limassol, Street, Thessalonikis Centre, Pentadromos Nicolaou Ukraine. is in the business place of principal their new four of development of process is in the and metres square over 113.800 of with a total area Kryvyi Rig and Zaporizhzhya Simferopol, in Kyiv, centres trade four Odesa. and in Kyiv projects investment National the currency, national the of devaluation the 2014, following In February ratings. credit debt sovereign Ukrainian the of downgrading a further as a result, rate exchange foreign to a floating a transition also announced and transactions conversion on currency restrictions certain administrative introduced Ukraine Bank of economy. the Ukrainian effects on severe have further may but predict to difficult crisis are economic and political of the effects the and resolution final The regime. the of a continuation circumstances, current in the business Group’s the of sustainability to support the measures appropriate it is taking believes Whilst management consolidated These determinable. not currently manner in a position financial and results Group’s affect the could negatively environment business unstable current of the position financial the and the operations on environment business the Ukrainian of the impact of assessment current management’s reflect statements financial for the adjustments any not include do statements financial consolidated These assessment. management’s differ from may environment business future The Group. date. reporting after the that have occurred Ukraine in the events impact of (a) Organisation and operations (a) Organisation provisions the in Cyprus under that was incorporated company is a public “Company”) or the Limited) (“Arricano” Trading Arricano Real Estate PLC (formerly Arricano 1. Background Notes to the Consolidated Financial Statements Financial the Consolidated to Notes Notes to the Consolidated Financial Statements (continued)
2. Basis of Preparation
(a) Statement of compliance These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the European Union (“EU”).
(b) Basis of measurement The consolidated financial statements have been prepared under the historical cost basis except for investment property, which is carried at fair value.
(c) Functional and presentation currency The functional currency of Arricano Real Estate PLC is the US dollar (“USD”). The majority of Group entities are located in the Ukraine and have the Ukrainian hryvnias (“UAH”) as their functional currency.
For the benefits of principal users, the management chose to present the consolidated financial statements in USD, rounded to the nearest thousand.
In translating the consolidated financial statements into USD the Group follows a translation policy in accordance with International Financial Reporting Standard IAS 21, The Effects of Changes in Foreign Exchange Rates and the following procedures are performed: • Historical rates: for the equity accounts except for net profit or loss for the year. • Year-end rate: for all assets and liabilities. • Rates at the dates of the transactions: for the statement of profit or loss and other comprehensive income.
The relevant exchange rates, provided by the National Bank of Ukraine, used in translating the consolidated financial statements of the Group into USD were:
Year-end 2013 exchange rate: USD1 = UAH 7.9930 (2012: 7.9930) Average 2013 exchange rate: USD1 = UAH 7.9930 (2012: 7.9911)
As there were no significant fluctuations of the USD/UAH exchange rate during the year ended 31 December 2013, for practical reasons, the average exchange rate for the year has been applied for translation of the statement of profit or loss and other comprehensive income.
(d) Use of judgments, estimates and assumptions The preparation of consolidated financial statements in conformity with IFRSs as adopted by the EU requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses and the disclosure of contingent assets and liabilities. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.
In particular, information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the consolidated financial statements and have significant risk of resulting in a material adjustment within the next financial year are included in the following notes: • note 5 – valuation of investment property; • note 6 – valuation of available-for-sale financial assets; • note 7 – valuation and presentation of loans receivable; and • note 9 – valuation of trade and other receivables.
(e) Changes in accounting policy With effect from 1 January 2013, the Group has adopted Amendments to IAS 1 Presentation of items of other comprehensive income, IFRS 7 Financial Instruments: Disclosures – Offsetting Financial Assets and Financial Liabilities, IFRS 13 Fair Value Measurement and IFRS 10 Consolidated Financial Statements.
Amendments to IAS 1 Presentation of items of other comprehensive income requires an entity to present separately items of other comprehensive income that could be reclassified in the future to profit or loss from those items that will never be reclassified to profit or loss. In addition, according to the Amendment, the title of statement of comprehensive income was changed to statement of profit or loss and other comprehensive income. Application of Amendments to IAS 1 did not have significant impact on these consolidated financial statements.
Amendments to IFRS 7 Financial Instruments: Disclosures – Offsetting Financial Assets and Financial Liabilities contain new disclosure requirements for financial assets and liabilities that are offset in the statement of financial position or subject to master netting arrangements or similar agreements. Application of amendments to IFRS 7 did not have significant impact on these consolidated financial statements.
IFRS 13 Fair Value Measurement replaces the fair value measurement guidance contained in individual IFRSs with a single source of fair value measurement guidance. It provides a revised definition of fair value, establishes a framework for measuring fair value and sets out disclosure requirements for fair value measurements. IFRS 13 does not introduce new requirements to measure assets or liabilities at fair value, nor does it eliminate the practicability exceptions to fair value measurement that currently exist in certain standards. Application of IFRS 13 resulted in extended disclosures in respect of fair value of investment property made in these consolidated financial statements (refer to note 5(b)).
28 Arricano Annual Report 2013 Strategic Report Directors’ Report Financial Statements
Annual Report 2013 29 Arricano Annual Note 5 – investment property; and property; 5 – investment Note values. 25(e)(iii) – fair Note (i.e. derived from prices). from derived (i.e. inputs). (unobservable data based on observable market not that are asset or liability the Level 3: inputs for Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. identical for in active markets (unadjusted) prices Level 1: quoted or indirectly as prices) (i.e. directly either asset or liability, the observable for in Level 1 that are included prices than quoted Level 2: inputs other to generate rental income from operations of this trade centre of USD3,566 thousand in 2014. thousand USD3,566 of centre this trade of operations from income rental to generate is planned at the level of USD2,800 thousand. Management believes that operations of the second phase of South Gallery will contribute to positive operating to positive operating South Gallery will contribute phase of second the of that operations believes Management thousand. USD2,800 level of at the is planned and of 2014 quarter the third in centre trade of this the construction to finalise plans Group The Kyiv. in centre trade of the construction ongoing used to finance During the year ended 31 December 2013, the Group finalised construction of the second phase of South Gallery trade centre located in Simferopol, and on and located in Simferopol, centre of South Gallery trade phase second of the construction finalised Group 31 December 2013, the year ended the During centre by this trade to be generated 2014, revenue for budget with the In accordance started its operations. centre this trade phase of second 2014 the 27 February in 2014. Group of the cash flows will be which thousand, to USD20,000 (Oshchadbank) amount Ukraine” Bank of “State Savings PJSC from facilities credit undrawn at 31 December 2013, the As it has power over the investee; it has power over the and investee; with the its involvement from returns to variable or has rights, it is exposed, returns). is a link between power and there investee (i.e. its power over the through returns ability to affect those it has the Further information about the assumptions made in measuring fair values is included in the following notes: following in the values is included fair in measuring made assumptions about the information Further • • The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred. change the which during period reporting the of end at the value hierarchy fair the between levels of transfers recognises Group The • value measurement fair the then value hierarchy, fair the levels of in different be categorised might an asset or a liability value of fair the inputs used to measure If the measurement. entire to the lowest level input that is significant as the value hierarchy fair the level of same in the in its entirety is categorised in a fair value hierarchy based on the inputs used in the valuation techniques as follows: valuation inputs used in the based on the value hierarchy in a fair • • (g) Measurement of fair values fair of (g) Measurement liabilities. and assets non-financial and both financial for values, fair of measurement the require disclosures and policies accounting Group’s the of A number levels different into categorised Fair values are as possible. as far observable data uses market Group the an asset or a liability, value of fair the measuring When Management believes that the measures that it undertakes, as described above, will allow the Group to operate on a going concern basis in the foreseeable future. future. foreseeable basis in the concern on a going to operate Group will allow the above, as described that it undertakes, measures that the believes Management uncertainty no significant is there and is appropriate statements financial consolidated these preparing basis for concern going that the believes management Therefore, concern. as a going ability to continue Group’s the regarding in the of liabilities settlement the of assets and realisation the contemplates which basis, concern going on a prepared are statements financial consolidated These business. course of normal Management is undertaking the following measures in order to ensure the Group’s continued operation on a going concern basis: concern on a going operation continued Group’s the to ensure in order measures following the is undertaking Management • • At the same time, the Group has generated a net profit of USD3,197 thousand for the year ended 31 December 2013 and as at that date has positive equity ofdate has positive equity as at that 2013 and 31 December year ended for the USD3,197 thousand of profit a net has generated Group the time, same the At thousand. USD231,521 (f) Going concern liabilities current Group’s as at 31 December 2013, the in 2013 and USD1,539 thousand to amounting activities operating from cash flows negative incurred Group The and in Kyiv centers trade of was actively involved in construction Group 31 December 2013 the year ended the During thousand. assets by USD143 current exceed of loans presentation in judgment significant exercises management Also, position. liquidity deteriorated resulted in and financing significant required which Simferopol, thousand USD38,579 party of a related from loan receivable the includes 7). This amount assets (see note within current thousand to USD46,552 amounting receivable 31 December 2013. of maturity with a contractual thousand USD7,973 party of a third from loan receivable the 31 December 2014 and of maturity with a contractual introduces a single control model that applies to all entities including special purpose entities. IFRS 10 supersedes a part of IFRS 10 supersedes entities. purpose special including to all entities that applies model control single a introduces IFRS 10 Consolidated Financial Statements definition the changes standard new Entities. The Consolidation – Special Purpose SIC-12 Financial Statements and effective IAS 27 Consolidated and Separate previously an investee when: that an investor controls such control of • • • investees. Group’s the of on consolidation impact had no this standard of Application Notes to the Consolidated Financial Statements (continued)
3. Significant Accounting Policies
The accounting policies set out below are applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by Group entities, except for the changes described in note 2(e).
(a) Basis of consolidation (i) Business combinations Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that currently are exercisable.
The Group measures goodwill at the acquisition date as: • The fair value of the consideration transferred; plus • The recognised amount of any non-controlling interests in the acquiree; plus • If the business combination is achieved in stages, the fair value of the pre-existing equity interest in the acquiree; less • The net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.
The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss. Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.
Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognised in profit or loss.
When the acquisition of subsidiaries does not represent a business, it is accounted for as an acquisition of a group of assets and liabilities. The cost of the acquisition is allocated to the assets and liabilities acquired based on their relative fair values, and no goodwill or deferred tax is recognised.
(ii) Subsidiaries and special purpose entities Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.
30 Arricano Annual Report 2013 Strategic Report Directors’ Report Financial Statements – – – – – – – – –
2012 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% % of ownership 2013 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% % of ownership Annual Report 2013 31 Arricano Annual – – – – – – – – – 4 9 4 5 – 3 3 3 3 3 3 59 69 69 Cost 2012 – – – – – 4 9 4 5 3 3 3 3 3 3 59 69 69 Cost 2013 363 8,109 31,300 11,441 40,666 Cyprus Cyprus Cyprus Cyprus Cyprus Cyprus Cyprus Cyprus Cyprus Ukraine Ukraine Ukraine Ukraine Country of Ukraine Ukraine Ukraine Ukraine Ukraine Ukraine Ukraine Ukraine Ukraine Ukraine incorporation Isle of Man of Isle In 2013, the Company acquired Twible Holdings Limited and its subsidiary LLC Comfort Market Luks, Gelida Holding Limited and its subsidiary LLC Mezokred Holding, Holding, LLC Mezokred its subsidiary Limited and Holding Gelida Luks, Market LLC Comfort its subsidiary Limited and Holdings Twible acquired Company In 2013, the leasehold a lease or priority subsidiaries acquired The LLC Budkhol. its subsidiary Limited and Capital, Wayfield LLC Vektor its subsidiary Limited and Sapete Holdings as an acquisition for was accounted subsidiaries these of acquisition The development. under property investment and Odesa and plots in Kyiv land various for rights In 2012, the Group consolidated LLC Voyazh-Krym as a special purpose entity. The company was established for the purpose of holding land plots (either under lease under plots (either land holding purpose of the for was established company The purpose entity. as a special LLC Voyazh-Krym consolidated Group In 2012, the In 2013, this company needs. in its business Group the to benefit it operated a result As South Gallery. centres, retail Group’s the of one for or freehold) agreements, legal subsidiary. Group’s the became plans Group note 4). The (see Combinations to IFRS 3 Business according of a business definition the meet not did in question entities as the liabilities assets and of plots acquired. land on the properties of investment development or finalise to develop Budkhol LLC Budkhol Vektor Capital LLC Vektor Mezokred Holding LLC Holding Mezokred Comfort Market Luks LLC Market Comfort Wayfield Limited Wayfield Sapete Holdings Limited Sapete Holdings Gelida Holding Limited Holding Gelida Twible Holdings Limited Holdings Twible Arricano Real Estate LLC Arricano Prizma Development LLC Development Prizma Arricano Development LLC Development Arricano Prizma Alfa LLC Alfa Prizma PrJSC UkrPanGroup Arricano Property Management LLC Management Property Arricano PrJSC Grandinvest PrJSC Livoberezhzhiainvest Voyazh-Krym LLC Voyazh-Krym Beta Property Management Limited Management Beta Property Lacecap Limited Sunloop Co Limited Museo Holdings Limited Holdings Museo U.A. Terra Property Management Limited Management Property U.A. Terra (in thousands of USD, except for % of ownership) Limited Holdings Praxifin Consolidated entities, including special purpose entities, are as follows: are purpose entities, special including entities, Consolidated Notes to the Consolidated Financial Statements (continued)
(iii) Transactions with entities under common control Acquisitions from entities under common control Business combinations arising from transfers of interests in entities that are under the control of the ultimate beneficial shareholder that controls the Group are accounted for using book value accounting. Any result from the acquisition is recognised directly in equity.
Disposals to entities under common control Disposals of interests in subsidiaries to entities that are under the control of the shareholder that controls the Group are accounted for using book value accounting. Any result from the disposal is recognised directly in equity.
(iv) Loss of control Upon the loss of control, the Group derecognises the carrying amounts of the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity-accounted investee or as an available-for-sale financial asset depending on the level of influence retained.
(v) Transactions eliminated on consolidation Intra-group balances, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing these consolidated financial statements. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
(b) Foreign currency transactions and operations (i) Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rates as at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the reporting period.
Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured based on historical cost are translated using the exchange rate at the date of the transaction.
Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising on the retranslation of available-for-sale equity instruments which are recognised in other comprehensive income.
(ii) Foreign operations The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to USD at exchange rates at the reporting date. The income and expenses of foreign operations are translated to USD at exchange rates at the dates of the transactions.
Foreign currency differences are recognised in other comprehensive income, and presented in the foreign currency translation reserve in equity. However, if the operation is a non-wholly-owned subsidiary, then the relevant proportionate share of the translation difference is allocated to the non-controlling interests. When a foreign operation is disposed of, such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interests. When the Group disposes of only part of its investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.
When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of a net investment in a foreign operation and are recognised in other comprehensive income, and presented in the translation reserve in equity.
(c) Financial instruments The Group classifies non-derivative financial assets into the following categories: loans and receivables and available-for-sale financial assets.
The Group classifies non-derivative financial liabilities into the other financial liabilities category.
(i) Non-derivative financial assets and financial liabilities – recognition and derecognition The Group initially recognises loans and receivables on the date that they are originated. All other financial assets and financial liabilities are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability.
32 Arricano Annual Report 2013 Strategic Report Directors’ Report Financial Statements
Annual Report 2013 33 Arricano Annual Foreign currency translation differences translation currency Foreign operations. foreign of statements financial the of translation the from arising differences currency comprise all foreign differences translation currency Foreign Other reserves Other the and subsidiaries, in these interest in non-controlling change control, common under subsidiaries disposal of and acquisition effect of comprise the reserves Other shares. of forfeiture effect of Retained earnings Retained Group. by the losses incurred and profits accumulated include earnings Retained Share premium Share nominal. than the greater capital at a value price share issue of to the due created that were amounts include reserves premium Share capital paid-in Additional on these rights have any not do shareholders The reserves. in the directly shareholders by the made contributions includes capital reserve paid-in Additional approval. shareholders’ subject to the Directors, of Board the of discretion distributable at the are which contributions (iii) Capital and reserves capital Share from deduction recognised as a are shares of ordinary attributable to issue costs directly Incremental classified as equity. are shares ordinary issue of the from Proceeds tax effects. any of net equity, in note 17 and other liabilities as presented in note 19. in note as presented liabilities other 17 and in note Other financial liabilities comprise loans and borrowings as presented in note 15, finance lease liability as presented in note 16, trade and other payables as presented payables as and other trade note 16, in presented liability as lease finance note 15, in as presented borrowings and comprise loans liabilities financial Other (ii) Non-derivative financial liabilities – measurement (ii) Non-derivative at fair value less any recognised initially are liabilities financial Such category. liabilities financial the other into liabilities financial non-derivative classifies Group The method. effective interest the using cost at amortised measured are liabilities financial these recognition, to initial Subsequent costs. attributable transaction directly Available-for-sale financial assets comprise equity securities. assets comprise equity financial Available-for-sale fair value reserve. When an investment is derecognised or impaired, the cumulative gain or loss in equity is reclassified to profit or loss. Unquoted equity instruments instruments equity Unquoted or loss. to profit gain or loss in equity is reclassified cumulative the or impaired, is derecognised an investment When value reserve. fair at cost. carried are be measured reliably value cannot fair whose at fair value and changes therein, other than impairment losses (see note 3(i)(i)), are recognised in other comprehensive income and presented within equity in the presented and income comprehensive in other recognised 3(i)(i)), are losses (see note than impairment other therein, changes value and at fair Available-for-sale financial assets financial Available-for-sale of other categories the of any in not classified are or as available-for-sale designated are assets that financial non-derivative assets are financial Available-for-sale measured are they recognition, to initial Subsequent costs. attributable transaction directly fair value plus any at recognised initially assets are Such assets. financial Cash and cash equivalents comprise cash balances and call deposits. and comprise cash balances cash equivalents Cash and Cash and cash equivalents Cash and that are date acquisition the or less from months three of with maturities investments liquid highly and call deposits comprise cash balances, cash equivalents Cash and fair value. in their of changes risk subject to insignificant Loans and receivables comprise the following classes of assets: trade and other receivables as presented in note 9, loans receivable as presented in note 7, restricted 7, restricted in note as presented receivable 9, loans in note as presented receivables other and assets: trade classes of following comprise the receivables and Loans 12. in note as presented cash equivalents cash and and deposits Loans and receivables and Loans recognised initially are Such assets market. quoted in an active not are that payments determinable or assets with fixed financial of a category are receivables and Loans effective the using cost at amortised measured are receivables and loans recognition to initial Subsequent costs. attributable transaction directly value plus any at fair losses. impairment less any method, interest The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire. expire. or or cancelled discharged are obligations its contractual when liability a financial derecognises Group The offsetto has a legal right Group the only when, and when, position financial of statement in the presented amount net the and offset are liabilities assets and Financial simultaneously. liability settle the asset and the or to realise basis a net to settle on either intends and amounts the Notes to the Consolidated Financial Statements (continued)
(d) Investment properties Investment properties are those that are held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in production or supply of goods or services or for administrative purposes.
Investment properties principally comprise freehold land, leasehold land and investment properties held for rental income earning or future redevelopment.
Leasehold of land under operating lease is classified and accounted for as an investment property when the definition of investment property is met. Under investment property accounting, the right to use the land is measured at fair value and the obligation to pay rentals is accounted for as a finance lease.
(i) Initial measurement and recognition Investment properties are measured initially at cost, including related acquisition costs. Cost includes expenditure that is directly attributable to the acquisition of the investment property. The cost of self-constructed investment property includes the cost of materials and direct labour, any other costs directly attributable to bringing the investment property to a working condition for their intended use and capitalised borrowing costs.
If the Group uses part of the property for its own use, and part to earn rentals or for capital appreciation, and the portions can be sold or leased out separately, they are accounted for separately. Therefore the part that is rented out is investment property. If the portions cannot be sold or leased out separately, the property is investment property only if the company-occupied portion is insignificant.
(ii) Subsequent measurement Subsequent to initial recognition investment properties are stated at fair value. Any gain or loss arising from a change in fair value is included in profit or loss in the period in which it arises.
When the Group begins to redevelop an existing investment property for continued future use as investment property, the property remains an investment property, which is measured at fair value, and is not reclassified to property and equipment during the redevelopment.
When the use of a property changes such that it is reclassified as property, plant and equipment, it’s fair value at the date of reclassification becomes its cost for subsequent accounting.
Investment properties are derecognised on disposal or when they are permanently withdrawn from use and no future economic benefits are expected from their disposal. The gain or loss on disposal is calculated as the difference between the net disposal proceeds and the carrying amount of the asset and is recognised as gain or loss in profit or loss.
It is the Group’s policy that an external, independent valuation company, having an appropriate recognised professional qualification and recent experience in the location and category of property being appraised, values the portfolio as at each reporting date. The fair value is the amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction. The valuation is prepared in accordance with International Valuation Standards published by the International Valuation Standards Council.
(iii) Property under development (construction) Property that is being constructed or developed for future use as an investment property and for which it is not possible to reliably determine fair value is accounted for as an investment property that is stated at cost until construction or development is complete, or until it becomes possible to reliably determine its fair value. When construction is performed on the land previously classified as an investment property and measured at fair value, such land continues to be accounted at fair value throughout the construction phase.
(e) Property and equipment (i) Recognition and measurement Items of property and equipment are measured at cost less accumulated depreciation and impairment losses.
Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labor, any other costs directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.
When parts of an item of property and equipment have different useful lives, they are accounted for as separate items (major components) of property and equipment. The gain or loss on disposal of an item of property and equipment is determined by comparing the proceeds from disposal with the carrying amount of property and equipment, and is recognised net within other income/other expenses in profit or loss.
(ii) Reclassification to investment property When the use of a property changes from owner-occupied to investment property, the property is re-measured to fair value and reclassified to investment property. Any gain arising on re-measurement is recognised in profit or loss to the extent that it reverses a previous impairment loss on the specific property, with any remaining gain recognised in other comprehensive income and presented in the revaluation reserve in equity. Any loss is recognised immediately in profit or loss.
(iii) Subsequent costs The cost of replacing part of an item of property and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The costs of the day-to-day servicing of property and equipment are recognised in profit or loss as incurred.
34 Arricano Annual Report 2013 Strategic Report Directors’ Report Financial Statements
Annual Report 2013 35 Arricano Annual 3-5 years 5 years 2.5–5 years software vehicles and equipment equipment and vehicles fixture and fittings fittings and fixture value below its cost is objective evidence of impairment. of value below its cost is objective evidence (h) Assets held-for-sale (h) Assets use, continuing than through sale rather through primarily to be recovered expected that are liabilities, assets and comprising or disposal groups assets, Non-current Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. selling and completion costs of estimated less the business, course of ordinary in the price selling estimated value is the realisable Net (g) Inventories expenditure includes and first-in first-out principle, is based on the inventories cost of The value. realisable net cost and lower of at the measured are Inventories condition. and location existing to their them bringing and inventories the in acquiring incurred Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are date that they the from goodwill, than other assets, of intangible useful lives estimated basis over the or loss on a straight-line in profit is recognised Amortisation for useful lives The estimated the asset. in embodied benefits economic of future of consumption expected pattern the closely reflects this most use since available for as follows: are periods comparative and current the • adjusted if appropriate. and year end at each financial reviewed values are residual useful lives and methods, Amortisation (iii) Amortisation value. less its residual cost, for substituted amount or other asset, the cost of over the is calculated Amortisation (i) Impairment financial assets (i) Non-derivative that it is any objective evidence is there whether determine date to reporting or loss is assessed at each profit fair value through at not carried asset A financial loss event that the asset, and of the recognition initial after the has occurred that a loss event indicates if objective evidence asset is impaired A financial impaired. The estimated useful lives for the current and comparative periods are as follows: are periods comparative and current the useful lives for estimated The • (ii) Subsequent expenditure expenditure, All other relates. it asset to which specific in the embodied benefits economic future the it increases is capitalised only when expenditure Subsequent or loss as incurred. in profit is recognised brands, and goodwill generated on internally expenditure including depreciated. or not amortised are held-for-sale classified as once equipment and plant property, assets and Intangible Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property and equipment. Leased assets are Leased equipment. and of property of an item of each part lives useful estimated the basis over or loss on a straight-line in profit is recognised Depreciation term. lease the of end by the will obtain ownership Group certain that the unless it is reasonably useful lives their and lease term the of shorter over the depreciated depreciated. is not Land (f) Intangible assets (i) Recognition and measurement losses. impairment accumulated and amortisation at cost less accumulated measured are useful lives, have finite which Group, the by acquired assets that are Intangible is allocated loss on a disposal group impairment value less cost to sell. Any fair and amount carrying their lower of at the measured are or disposal group, assets, Such tax assets deferred or assets, financial no loss is allocated to inventories, that except basis, on pro-rata liabilities assets and remaining to the then and goodwill, first to held-for-sale as classification losses on initial Impairment policies. accounting other Group’s with the in accordance to be measured continue which property, investment loss. impairment cumulative of any excess recognised in not are Gains or loss. in profit recognised are or losses on remeasurement gains subsequent and that the on terms Group due to the of an amount restructuring debtor, by a delinquency or default can include impaired assets are that financial Objective evidence in the or issuers borrowers status of payment in the adverse changes bankruptcy, or issuer will enter that a debtor indications otherwise, consider would not Group is measurable that there indicating a security or observable data for an active market of disappearance the with defaults, that correlate conditions economic Group, fair in its decline prolonged or significant a in an equity security, for an investment addition, In assets. of financial a group from cash flows in expected decrease (iv) Depreciation from assets, constructed internally of or in respect use, for ready are and installed are they that date the from depreciated are equipment and plant property, of Items value. its residual an asset less cost of is based on the Depreciation use. for ready asset is completed and that the date the • adjusted if appropriate. and year end at each financial reviewed values are residual useful lives and methods, Depreciation held-for-sale. classified as are reliably. of that asset that can be estimated cash flows future estimated effect on the had a negative Notes to the Consolidated Financial Statements (continued)
Financial assets measured at amortised cost The Group considers evidence of impairment for financial assets measured at amortised cost at both a specific asset and collective level. All individually significant assets are assessed for specific impairment. Those found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Assets that are not individually significant are collectively assessed for impairment by grouping together assets with similar risk characteristics. In assessing collective impairment the Group uses historical trends of the probability of default, timing of recoveries and the amount of loss incurred, adjusted for management’s judgement as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends.
An impairment loss is calculated as the difference between an asset’s carrying amount, and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account. When the Group considers that there are no realistic prospects of recovery of the asset, the relevant amounts are written off. Interest on the impaired asset continues to be recognised through the unwinding of the discount. When a subsequent event causes the amount of impairment loss to decrease and the decrease can be related objectively to an event occurring after the impairment was recognised, the decrease in impairment loss is reversed through profit or loss.
Available-for-sale financial assets Impairment losses on available-for-sale financial assets are recognised by reclassifying the losses accumulated in the fair value reserve in equity, to profit or loss. The cumulative loss that is reclassified from equity to profit or loss is the difference between the acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss previously recognised in profit or loss. Changes in impairment provisions attributable to application of the effective interest method are reflected as a component of interest income. If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and the increase can be related objectively to an event occurring after the impairment loss was recognised in profit or loss, then the impairment loss is reversed, with the amount of the reversal recognised in profit or loss. However, any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognised in other comprehensive income.
(ii) Non-financial assets The carrying amounts of non-financial assets, other than investment property, inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated. For goodwill and intangible assets that have indefinite lives or that are not yet available for use, the recoverable amount is estimated each year at the same time.
For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash-generating unit (“CGU”). Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment testing is performed reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination.
The Group’s corporate assets do not generate separate cash inflows and are utilised by more than one CGU. Corporate assets are allocated to CGUs on a reasonable and consistent basis and tested for impairment as part of the testing of the CGU to which the corporate asset is allocated.
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.
An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount.
Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU (group of CGUs) and then to reduce the carrying amount of the other assets in the CGU (group of CGUs) on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
(j) Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost.
(k) Revenue (i) Rental income from investment property Rental income from investment property is recognised in profit or loss on a straight-line basis over the term of the lease.
(ii) Sale of services Revenue from services rendered is recognised in proportion to the stage of completion of the transaction at the reporting date. The stage of completion is assessed by reference to surveys of work performed.
36 Arricano Annual Report 2013 Strategic Report Directors’ Report Financial Statements
Annual Report 2013 37 Arricano Annual temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor accounting that affects neither and combination a business that is not in a transaction assets or liabilities of recognition initial on the differences temporary or loss; profit taxable in the reverse will not that they that it is probable extent to the entities controlled jointly and in subsidiaries to investments related differences temporary and future; foreseeable goodwill. of recognition initial on the arising differences temporary taxable Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or laws that have been enacted based on the reverse, they when differences temporary to the be applied to expected are that tax rates at the tax is measured Deferred tax positions uncertain impact of the account into takes Group tax the deferred and current of amount the In determining date. reporting by the enacted substantively all open tax years for adequate are tax liabilities for that its accruals believes Group The be due. may interest late-payment and penalties taxes, additional whether and involve may and assumptions and on estimates relies This assessment experience. prior tax law and of interpretations including factors, many of based on its assessment Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts amounts the purposes and reporting financial for liabilities assets and of amounts carrying between the differences temporary of in respect tax is recognised Deferred for: recognised tax is not Deferred purposes. taxation used for • • • recover to period, reporting of the end at the expects, Group the in which manner follow the that would tax consequences the tax reflects deferred of measurement The to be value is presumed at fair measured property investment of amount carrying the For this purpose, liabilities. its assets and of amount carrying or settle the this presumption. rebutted has not Group the and sale, through recovered Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, date, reporting at the enacted or substantively enacted tax rates using year, the or loss for income taxable on the tax payable or receivable expected tax is the Current years. previous of to tax payable in respect adjustment any and (n) Income tax expense relates to a business that it extent to the except or loss in profit recognised tax are deferred tax and tax. Current deferred and comprises current tax expense Income income. comprehensive in equity or in other directly recognised or items combination, Foreign currency gains and losses arising on loans receivable and borrowings are reported on a net basis as either finance income or finance cost. Foreign currency gains currency cost. Foreign or finance income finance basis as either on a net reported are borrowings and receivable on loans losses arising and gains currency Foreign or expense. income as other recognised payable are and receivable on accounts losses arising and Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective the using or loss in profit recognised asset are a qualifying of or production construction acquisition, to the attributable directly not costs that are Borrowing method. interest Finance costs comprise interest expense on borrowings and on deferred consideration and foreign exchange loss. exchange foreign and consideration on deferred and on borrowings expense costs comprise interest Finance Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the contingency no longer exists and exists longer no contingency the lease when the term of remaining the over payments lease minimum the by revising for accounted are lease payments Contingent is known. lease adjustment the (m) Finance income and costs recognised is income Interest lease liabilities. finance of derecognition from income and gains currency foreign invested, on funds income comprises interest income Finance method. effective interest the using or loss, as it accrues in profit is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. liability. the of balance remaining on the interest of rate periodic a constant lease term so as to produce the during is allocated to each period Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense finance The liability. the outstanding of reduction the and expense finance between the apportioned leases are finance under made lease payments Minimum (iii) Lease payments recognised as an received are Lease incentives lease. of the term basis over the or loss on a straight-line in profit recognised leases are operating under made Payments lease. the term of over the total lease expense, the part of integral Other leases are operating leases and the leased assets are not recognised in the statement of financial position. financial of statement in the recognised not leased assets are the leases and operating leases are Other (ii) Leased assets initial Upon leases. as finance classified are ownership of rewards risks and all the substantially Group to the leases that transfer under Group by the held Assets to initial Subsequent lease payments. minimum the value of present the value and its fair lower of to the equal at an amount leased asset is measured the recognition to that asset. applicable policy accounting with the in accordance for asset is accounted the recognition, At inception or upon reassessment of the arrangement, the Group separates payments and other consideration required by such an arrangement into those for the lease the for those into an arrangement by such required consideration other and payments separates Group the arrangement, the of or upon reassessment inception At payments the to separate it is impracticable lease that finance a for concludes Group If the values. fair relative their of basis the on elements other for those and are as payments is reduced liability the asset. Subsequently underlying the of value fair to the equal at an amount recognised are a liability an asset and then reliably, rate. borrowing incremental Group’s the recognised using is liability on the charge an imputed finance and made (l) Leases contains a lease an arrangement (i) Determining whether arrangement of the fulfilment if the case be the This will a lease. is or contains an arrangement such whether determines Group the an arrangement, of inception At asset. use the to conveys a right arrangement the asset and a specific use of the on is dependent Notes to the Consolidated Financial Statements (continued)
a series of judgments about future events. New information may become available that causes the Group to change its judgment regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact the tax expense in the period that such a determination is made.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax assets and liabilities, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.
A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
(o) Earnings per share The Group presents basic and diluted earnings per share (“EPS”) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held.
As at 31 December 2013 and 2012 there were no potential dilutive ordinary shares.
(p) Segment reporting An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. Management believes that during the current year and prior year, the Group operated in and was managed as one operating segment, being property investment, with all investment properties located in the Ukraine.
The Board of Directors, which is considered to be the chief operating decision maker of the Group for IFRS 8 Operating Segments purposes, receives semi-annually management accounts that are prepared in accordance with IFRSs as adopted by the EU and which present aggregated performance of all the Group’s investment properties.
(q) Corresponding figures Certain changes to comparative information in notes were made in these consolidated financial statements to conform to the current year presentation.
(r) New standards and interpretations not yet adopted A number of new standards, amendments to standards and interpretations are not yet effective for the year ended 31 December 2013, and have not been applied in preparing these consolidated financial statements. Of these pronouncements, potentially the following will have an impact on the Group’s operations. Management plans to adopt these pronouncements when they become effective, and has not yet analysed the likely impact of these new standards on its consolidated financial statements. • IFRS 9 Financial Instruments is to be issued in phases and is intended ultimately to replace International Financial Reporting Standard IAS 39 Financial Instruments: Recognition and Measurement. The first phase of IFRS 9 was issued in November 2009 and relates to the classification and measurement of financial assets. The second phase regarding classification and measurement of financial liabilities was published in October 2010. The Group recognises that the new standard introduces many changes to the accounting for financial instruments and is likely to have a significant impact on Group’s consolidated financial statements. The impact of these changes will be analysed during the course of the project as further phases of the standard are issued. The Group does not intend to adopt this standard early. Amendments to IAS 32 Financial Instruments: Presentation – Offsetting Financial Assets and Financial Liabilities specify that an entity currently has a legally enforceable right to set-off if that right is not contingent on a future event; and enforceable both in the normal course of business and in the event of default, insolvency or bankruptcy of the entity and all counterparties. The amendments are effective for annual periods beginning on or after 1 January 2014, and are to be applied retrospectively. The Group does not intend to adopt this standard early. • Amendments to IAS 36 Recoverable Amount Disclosures for Non-Financial Assets. The IASB has issued amendments to reverse the unintended requirement in IFRS 13 Fair Value Measurement to disclose the recoverable amount of every cash-generating unit to which significant goodwill or indefinite-lived intangible assets have been allocated. Under the amendments, the disclosure of information about the recoverable amount of impaired assets will be required only when the recoverable amount is based on fair value less costs of disposal. The amendments apply retrospectively for annual periods beginning on or after 1 January 2014. Early application is permitted, which means that the amendments can be adopted at the same time as IFRS 13. • Various Improvements to IFRSs have been dealt with on a standard-by-standard basis. All amendments, which result in accounting changes for presentation, recognition or measurement purposes, will come into effect for annual periods beginning on or after 1 July 2014. Entities are permitted to apply them earlier. The Group has not yet analysed the likely impact of the improvements on its financial position or performance.
38 Arricano Annual Report 2013 Strategic Report Directors’ Report Financial Statements
8 (2) 15 (25) (206)
(253) (496) 3,752 5,833 2,579 1,209 4,233 5,460
86,056 (2,155) (9,835) 86,859 91,516 20,000 66,056 Annual Report 2013 39 Arricano Annual
(in thousands of USD) Investment property On 12 September 2013 the Group acquired Twible Holdings Limited and its subsidiary LLC Comfort Market Luks, Gelida Holding Limited and its subsidiary LLC Mezokred LLC Mezokred its subsidiary Limited and Holding Gelida Luks, Market LLC Comfort its subsidiary Limited and Holdings Twible acquired Group On 12 September 2013 the of the control common the under entities from Budkhol LLC its subsidiary Limited and Capital, Wayfield LLC Vektor its subsidiary Limited and Sapete Holdings Holding, meet the not did as they liabilities of assets and for as an acquisition was accounted subsidiaries of these acquisition The owner. beneficial ultimate main Company’s exchange of IPO in purposes for the issued shares 28,350,214 ordinary has transferred Group the and Combinations to IFRS 3 Business according of a business definition its subsidiary Limited and Wayfield of shares the of to acquisition related consideration to pay deferred has agreed Group the In addition, liabilities. assets and these for 30 April 2014, before is to be paid USD10,000 thousand to amounting first tranche The in two tranches. thousands USD20,000 of cash payment via LLC Budkhol in total. thousand to USD10,900 amounting plots located in Odesa land three for lease rights land priority are property in investment at 12 September 2013, included As to right had priority plots, land located on these premises non-residential of owner the Capital, being LLC Vektor since recognised were lease rights land priority These finalised sign-off with formal to be concluded was approved lease agreement On 17 December 2013 this land City Council. with Odesa lease agreements land conclude 4 Acquisition of Subsidiaries of 4 Acquisition Group The Company. the of Directors of Board the of sole discretion later than 30 April 2015, at the to not be deferred may tranche second the of payment while the to amounting consideration deferred till 30 April 2015, therefore tranche second the of settlement the to defer its right exercise that it will expects management rate at the outstanding consideration deferred any on interest to pay quarterly is liable Group The liabilities. within non-current is presented thousand USD10,000 recoverableLong-termVAT Property equipment and Prepayments made held-for-sale as Assets classified to be re-assigned are control common under entities party and to a third subsidiaries acquired payable by the stipulate that certain loans agreements purchase share The that formal be nil despite to is considered loans these value of fair relative the acquisition of date as at the EUR1 each. Accordingly, of amount a nominal for to Arricano 2013. of quarter fourth completed in the substantially were loan re-assignment for legal procedures 16). to note 2014 (refer on 20 March The cost of the acquisition was allocated to the assets and liabilities acquired based on their relative fair values as follows: fair relative based on their acquired liabilities and assets the was allocated to acquisition the cost of The The fair value of the shares transferred in the above transaction was determined by the reference to the market price of the Company’s ordinary shares of USD2.33 per USD2.33 of shares ordinary Company’s the of price market to the reference the by determined was above transaction in the transferred shares the value of fair The fair the of An excess trading. for was admitted Company the date party in cash on the settled by a third shares of price based on the was determined This price share. the from as contribution payable was recognised consideration deferred and transferred shares value of fair over the liabilities assets and acquired the value of premium. within share shareholder of 9.75 per cent per annum. 9.75 per cent of receivables other and Trade receivableLoans Cash and cash equivalents lease liability Finance Other long-term liabilities Liabilities classified as held-for-sale Contribution from shareholders Short-term borrowings Trade and other payables receivedAdvances Net identifiable assets and liabilities Deferred consideration (see note 19) Fair value of the shares transferred (see note13) valueFair consideration of transferred Tax payables Tax Notes to the Consolidated Financial Statements (continued)
5 Investment Property
(a) Movements in investment property Movements in investment properties for the year ended 31 December are as follows:
Land Land Property held on held on Prepayment for under (in thousands of USD) freehold leasehold Buildings investment property construction Total At 1 January 2012 10,100 7,684 64,467 19,506 1,221 102,978 Additions 22 1,686 9,985 6,564 13,408 31,665 Transfers* – – 35,245 (26,067) (9,178) – Disposals (118) – (147) – – (265) Fair value gains (losses) on revaluation (800) 1,002 26,691 – – 26,893 Effect of movement in exchange rates (4) (3) (43) (3) (2) (55) At 31 December 2012/ 1 January 2013 9,200 10,369 136,198 – 5,449 161,216 Additions – 5,144 199 11,672 20,958 37,973 Additions through assets acquisition – 62,256 – 1,244 23,359 86,859 Transfers** – – 23,453 (5,412) (18,041) – Fair value gains (losses) on revaluation (200) (300) 2,251 – – 1,751 At 31 December 2013 9,000 77,469 162,101 7,504 31,725 287,799
* In August 2012, the trade centre “RayON” with total gross leasable area (GLA) over 24,000 square metres started its operations in Kyiv and associated ownership rights were obtained by the Group. ** As at 31 December 2013 the Group had not obtained the title documents for the second phase of South Gallery trade centre with a total GLA of nearly 20,000 square metres and a carrying value of USD22,866 thousand (refer to note 1(b) and 28 (c)). On 27 February 2014 the second phase of this trade centre started its operations. Management expects that associated title documents will be obtained subject to completion of formal legal procedures.
During the year ended 31 December 2013, capitalised borrowing costs related to the construction of the new trade centres amounted to USD795 thousand (2012: nil), with a capitalisation rate of 11 per cent (2012: nil).
As at 31 December 2013, in connection with loans and borrowings, the Group pledged as security investment property with a carrying value of USD193,111 thousand (31 December 2012: USD84,500 thousand) (see note 26(a)).
(b) Determination of fair value The fair value measurement, developed for determination of fair value of the Group’s investment property, is categorised within Level 3 category due to significance of unobservable inputs to the entire measurement. To assist with the estimation of the fair value of the Group’s investment property as at 31 December 2013, which is represented by the trade centres, management engaged registered independent appraiser Expandia LLC, part of the CBRE Affiliate Network, having a recognised professional qualification and recent experience in the location and categories of the projects being valued.
The fair values are based on estimated rental value of property. A market yield is applied to the estimated rental value to arrive at the gross property valuation. When actual rents differ materially from the estimated rental value, adjustments are made to reflect actual rents. The valuation is prepared in accordance with the practice standards contained in the Appraisal and Valuation Standards published by the Royal Institution of Chartered Surveyors (“RICS”) or in accordance with International Valuation Standards published by the International Valuation Standards Council.
Valuations reflect, when appropriate, the type of tenants actually in occupation or responsible for meeting lease commitments or likely to be in occupation after letting vacant accommodation, the allocation of maintenance and insurance responsibilities between the Company and the lessee, and the remaining economic life of the property. When rent reviews or lease renewals are pending with anticipated reversionary increases, it is assumed that all notices, and when appropriate counter-notices, have been served validly and within the appropriate time.
Land parcels are valued based on market prices for similar properties.
As at 31 December 2013, the estimation of fair value is made using a net present value calculation based on certain assumptions, the most important of which are as follows: • monthly rental rates which were based on contractual and market rental rates ranging from USD3.00 to USD48.70 per square metres, occupancy rates ranging from 95.00 per cent to 99.00 per cent and discount rates ranging from 13.50 per cent to 17.20 per cent per annum, which represent key unobservable inputs for determination of fair value; and • all relevant licenses and permits, to the extent not yet received, will be obtained, in accordance with the timetables as set out in the investment project plans.
40 Arricano Annual Report 2013 Strategic Report Directors’ Report Financial Statements
Annual Report 2013 41 Arricano Annual
USD9,590 thousand) lower. If the discount rate is 1 per cent less, then the fair value of investment properties would be USD13,563 thousand (2012: USD11,046 thousand be USD13,563 would properties investment value of fair the then less, is 1 per cent rate discount If the lower. thousand) USD9,590 If the discount rate applied is 1 per cent higher than that used in the valuation models, the fair value of investment properties would be USD11,747 thousand (2012: thousand USD11,747 would be properties investment value of fair the models, valuation than that used in the higher is 1 per cent applied rate discount If the that as at 31 December 2011 centre was shopping Mall is Sky Assofit of asset underlying major the and flows positive cash strong generated Assofit Historically, for similar properties rates rental in decreases no were There approach. income the using appraiser qualified by an independent as determined value, at fair measured revision only upward where contracts have long-term tenants the of Also, many centre. shopping the value of fair the decrease could materially which that date since is possible; rates rental of from the assets significant of transfer potential Therefore, Assofit. of assets the court to protect by the receiver appointed of a direction under is operating Assofit and receiver; Court appointed by the is controlled entity Beta Prizma Assofit, of subsidiary the Ukrainian payable by by loans represented are Assofit of of liabilities portion 2012, significant at 31 December 2013 and As thousand) higher. thousand) and in Zaporizhzhya centers trade the for to be 100 per cent assumed or are models, valuation used in the than those higher 1 per cent are rates occupancy If the valuation used in the than those higher 1 per cent are rates occupancy (2012: if the higher thousand would be USD1,813 properties investment value of fair the Kyiv, thousand would be USD1,778 properties investment value of fair the Simferopol, and in Zaporizhzhya centers trade the for to be 100 per cent assumed or are models, lower. thousand) (2012: USD2,233 thousand would be USD3,040 properties investment value of fair the then less, 1 per cent are rates occupancy If the higher). for a Limited to Assofit Enterprises Filgate Credit from to be assigned were with accrued interest together loans These Limited. Enterprises LLC, to Filgate Credit the ruled to re-assign courts and lower instances the of rulings the upheld Ukraine Court of Economic Highest 2014 the EUR1 each. On 28 January of price nominal This transfer appealed. may be further of Ukraine Court Highest of the above ruling The to Assofit. thousand to USD120,000 payable amounting loans abovementioned Interhold and Stockman the Company by owned is jointly which the company, to such loans of transfer and if when Assofit of net assets increase shall significantly S.A., is completed. If rental rates are 1 per cent less than those used in valuation models, the fair value of investment properties would be USD1,756 thousand (2012: USD1,457 thousand would be USD1,756 properties investment value of fair the models, used in valuation less than those 1 per cent are rates If rental higher. thousand) (2012: USD1,457 thousand would be USD1,756 properties investment of value fair the then higher, 1 per cent are rates If rental lower. thousand) monthly rental rates which were based on contractual and market rental rates ranging from USD3.00 to USD45.60 per square metres, occupancy rates ranging from ranging rates occupancy metres, per square to USD45.60 USD3.00 from ranging rates rental market and based on contractual were which rates rental monthly inputs for unobservable key represent which per annum, to 16.00 per cent 14.00 per cent from ranging rates discount and to 99.90 per cent, 80.00 per cent and value; fair of determination plans. project investment as set out in the timetables with the in accordance will be obtained, yet received, not extent to the permits, and licenses all relevant • that concluded management of this analysis, result As a in Assofit. investment the for indicators assessed impairment 2012, management at 31 December 2013 and As following: on the based in Assofit investment of impairment of indicators no are 2012 there as at 31 December 2013 and • • • Assofit Holdings Limited (“Assofit”) is not a publicly listed entity and, consequently, does not have published price quotations of its shares. Also, management believes management Also, of its shares. quotations price not have published does consequently, and, entity listed not a publicly is Limited (“Assofit”) Holdings Assofit the equity investment of fair value the that believes management Thus, is significant. in Assofit investment the for value estimates fair of variability and range that the less impairment. as cost measured is equity investment this therefore reliably, measured be cannot in Assofit 6 Available-for-Sale Financial Assets Financial 6 Available-for-Sale holds 49.97 perGroup the in which Limited, Holdings Assofit in investment by the represented assets are financial 2012, available-for-sale at 31 December 2013 and As influence. significant retaining without rights voting nominal of cent • Sensitivity at the date of valuation of date at the Sensitivity areas: following inputs in the to unobservable sensitive as at 31 December 2013 is particularly property investment value of fair used to assess the model valuation The • As at 31 December 2012, the estimation of fair value is made using a net present value calculation based on certain assumptions, the most important of which are which of important most the on certain assumptions, based value calculation present a net using value is made fair of estimation at 31 December 2012, the As as follows: • • 5(a). in note is presented value measurements Level 3 fair for balances closing to the balances opening the from reconciliation The Notes to the Consolidated Financial Statements (continued)
7 Loans Receivable
Loans receivable as at 31 December are as follows:
(in thousands of USD) 2013 2012 Non-current assets Long-term loans receivable due from third parties 1,340 – Accrued interest receivable due from third parties 179 – Long-term loans receivable due from related parties – 1,340 Accrued interest receivable due from related parties – 133 1,519 1,473 Current assets Short-term loans receivable due from related parties 31,917 37,603 Accrued interest receivable due from related parties 8,579 6,163 Short-term loans receivable due from third parties 7,050 – Accrued interest receivable due from third parties 923 – 48,469 43,766
As at 31 December 2013 and 2012, the long-term loans receivable, including long-term accrued interest are due from the same party, which was classified as a related party as at 31 December 2012 and as a third party as at 31 December 2013 due to its disposal out of control of the ultimate controlling party. As at 31 December 2013, this long-term loan receivable amounting to USD1,519 thousand, including accrued interest of USD179 thousand, has maturity date on 31 December 2018, is unsecured and bears a 3.2 per cent interest rate that is fully capitalised and repaid together with the principal. As at 31 December 2012, this loan amounted to USD1,473 thousand, including accrued interest of USD133 thousand. Included in short-term loans receivable as at 31 December 2013 are loans amounting to USD7,973 thousand, including accrued interest of USD923 thousand, which are due from the abovementioned party, which bear a 3.2 per cent interest rate and are overdue. As at 31 December 2012, these loans were classified as due from related party and amounted to USD7,747 thousand, including accrued interest of USD697 thousand. The management of the Group believes that it will be able to recover these loans receivable due to the existence of sufficient assets of short-term nature at the borrower and, accordingly, this loan receivable is not considered to be impaired. Should actual collections prove to be less than management estimates, the Group will be required to record additional impairment expense in the next reporting period.
In July 2011 the Company granted a loan to Weather Empire Limited with the purpose of buying 1,077 shares in the Company’s share capital from Retail Real Estate S.A. As at 31 December 2013, the resulting loan receivable of USD38,579 thousand, including accrued interest of USD8,579 thousand, is classified as short-term with a maturity date on 31 December 2014, is unsecured and bears a 3 per cent fixed interest rate that is fully capitalised and repaid together with the principal. As at 31 December 2012, the abovementioned loan amounted to USD35,466 thousand, including accrued interest of USD5,466 thousand, bore an 11.85 per cent fixed interest rate and was presented as short-term since management believed that the loan will be settled on 31 December 2013 according to its initial contractual maturity that has been renegotiated in July 2013 together with interest rate. The Group management exercises significant judgment in presentation of this loan due within current assets.
In July 2013 the shares of Weather Empire Limited were transferred to the Company’s major shareholders pro-rata to their ownership rights due to non-exercising of the conversion rights by ELQ Investors II Ltd and later on or about 12 August 2013 were transferred in full to Retail Real Estate S.A. (see note 13). Subsequent to this transfer, settlement of the loan by Weather Empire Limited depends on the intention and ability of the Company’s majority shareholder to repay this loan. Management believes that the Company’s majority shareholder will ensure repayment of the loan, therefore the loan is considered to be recoverable. Should actual collections prove to be less than management estimates, the Group will be required to record additional impairment expense in the next reporting period.
Included in short-term loans receivable as at 31 December 2013 is also a loan due from PrJSC Dniprovska Prystan, a subsidiary of Assofit Holdings Limited, amounting to USD664 thousand (31 December 2012: USD498 thousand) which is overdue. The Group has significant influence over the operating activities of PrJSC Dniprovska Prystan by being significant creditor of this company, thus it is considered a related party to the Group. In 2012 the court ruled a decision to initiate bankruptcy proceedings against the mentioned related party and as at 31 December 2013 the decision which would declare PrJSC Dniprovska Prystan insolvent has not yet been made. The management of the Group believes that it will be able to recover the loan due to the existence of sufficient assets of short-term nature in PrJSC Dniprovska Prystan and, accordingly, the loan is not considered to be impaired as at 31 December 2013 and 2012.
As at 31 December 2013, remaining short-term loans receivable granted to related parties of USD1,253 thousand are due within one year, unsecured and interest-free (31 December 2012: USD55 thousand).
42 Arricano Annual Report 2013 Strategic Report Directors’ Report Financial Statements
–
(51) 2012
861 810
8,899 2,827 3,637 10,617
(16,689)
53 2013 (288) 4,324 9,654 1,426 1,191 3,133 10,761 (17,282) Annual Report 2013 43 Arricano Annual
(31 December 2012: USD651 thousand). (31 December 2012: USD651 USD784 thousand (refer to note 11). to note (refer thousand USD784 thousand USD1,222 of amount in the expenses miscellaneous prepaid other 10) and to note in total (refer thousand USD8,894 of amount the for mandate of As at 31 December 2013, Comfort Market Luks LLC has received advance payment from this third party amounting to USD14,636 thousand under the investment investment the under thousand to USD14,636 party amounting this third from payment advance Luks LLC has received Market at 31 December 2013, Comfort As will act as a developer party third this to which according mandate, of a contract Luks LLC has concluded Market Comfort 18). Simultaneously, to note (refer agreement mandate of contract the assets under other party and to this third made at 31 December 2013, prepayment lot. As parking and this hypermarket of in construction to amounted agreement investment abovementioned the assets under other and parties thirds to other made prepayment and thousand to USD8,110 amounted Other receivables from third parties third from receivables Other impairment for Allowance PrJSC Dniprovska would declare which decision as at 31 December 2013 the party and related mentioned the against proceedings bankruptcy to initiate ruled a decision to USD2,739 amounting balance the of portion the that it will be able to recover believes Group the of management The been made. yet has not Prystan insolvent this portion accordingly, and, nature of short-term assets sufficient of to existence due thousand) as at 31 December 2013 (31 December 2012: USD2,449 thousand metres. 20,650 square of area lot with a total estimated parking and metres 11,769 square of Assets Other and Made 11 Prepayments contract associated the and agreement investment the assets under other and made by prepayments represented are made at 31 December 2013, prepayments As As at 31 December 2013, assets classified as held-for-sale are mainly represented by land plot with a carrying amount of USD5,410 thousand. This land plot is intended plot is intended This land USD5,410 thousand. of amount plot with a carrying by land represented mainly are held-for-sale at 31 December 2013, assets classified as As concluded agreement with investment 2014 in accordance of end party by the Luks LLC, to a third Market Comfort subsidiaries, Group’s the of by one to be transferred area with total estimated a hypermarket of in construction Luks LLC acts as an intermediary Market Comfort agreement, Based on this investment parties. between the 10 Assets Held-For-Sale 10 Assets As at 31 December 2013, other receivables from related parties amounting to USD9,260 thousand (31 December 2012: USD8,521 thousand) relate to receivables due receivables to relate thousand) 2012: USD8,521 (31 December thousand to USD9,260 amounting parties related from receivables at 31 December 2013, other As court In 2012 the 14.2 per cent. of rate an effective interest cost using at amortised is measured receivable The overdue. are Prystan, which PrJSC Dniprovska from Other receivables from related parties related from receivables Other impairment for Allowance parties third from receivables Trade Group The owner. beneficial ultimate the of control common the under O’KEY Ukraine, party, related from receivable accounts comprised of mainly are receivables Trade recognised. has been for impairment an allowance faced by this tenant, difficulties financial of result the 2009. As in August with O’KEY Ukraine ceased working receivable of portion remaining the for impairment for allowance has recognised at 31 December 2013, management As to be impaired. considered is not receivable of Prystan. by PrJSC Dniprovska balances of these in settlement uncertainty to significant due thousand) (2012: USD6,072 thousand to USD6,521 amounting Trade receivables from related parties related from receivables Trade Trade and other receivables as at 31 December are as follows: are as at 31 December receivables other and Trade (in thousands of USD) Management expects that long-term VAT recoverable will be recovered in full by 2018. will be recovered recoverable VAT that long-term expects Management Receivables Other and 9 Trade Management presents VAT recoverable within non-current and current assets based on the expected timing of VAT liabilities being available against which VAT recoverable recoverable VAT which available against being liabilities VAT of timing expected on the assets based current and within non-current recoverable VAT presents Management can be utilised. 8 VAT Recoverable 8 VAT Notes to the Consolidated Financial Statements (continued)
12 Cash and Cash Equivalents
Cash and cash equivalents as at 31 December are as follows:
(in thousands of USD) 2013 2012 Bank balances 2,892 6,112 Call deposits 8,798 1,453 Cash in transit 150 – 11,840 7,565
As at 31 December 2012, in connection with its loans and borrowings, the Group pledged bank balances of USD17 thousand (see note 26(a)).
Excluded from cash and cash equivalents as at 31 December 2013 are restricted deposits in the amounts of USD663 thousand and USD820 thousand with maturity in 2014 and 2020, respectively. These deposits serve as pledge under three different loan facilities (see note 26(a)).
As at 31 December 2013, cash and cash equivalents placed with two bank institutions amounted to USD11,476 thousand, or 97 per cent of the total balance of call deposits, cash and cash equivalents (31 December 2012: USD7,497 thousand, or 99 per cent). In accordance with Moody’s rating, these banks are rated as A2 as at 31 December 2013 and 2012. 13 Share Capital
Share capital as at 31 December is as follows: 2013 2013 2013 2012 2012 2012 Number of shares US dollars EUR Number of shares US dollars EUR Issued and fully paid At 1 January 85,026,309 53,856 42,513 6,462 8,667 6,462 Forfeiture of shares (20,406,309) (12,789) (10,203) – – – Issue of shares 38,650,637 25,683 19,325 1,046,153 45,189 36,051 Division of shares – – – 83,973,694 – – At 31 December 103,270,637 66,750 51,635 85,026,309 53,856 42,513
Authorised At 1 January 85,026,309 53,856 42,513 6,462 8,667 6,462 Forfeiture of shares (20,406,309) (12,789) (10,203) – – – Increase of share capital 41,379,989 27,497 20,690 1,046,164 45,189 36,051 Division of shares – – – 83,973,694 – At 31 December 106,000,000 68,564 53,000 85,026,320 53,856 42,513 Par value, EUR – – 0.0005 – – 0.0005
All shares rank equally with regard to the Company’s residual assets. The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to one vote per share at meetings of the Company.
During the years ended 31 December 2013 and 2012 the Group did not declare any dividends.
In August 2012, the shareholders of the Company decided to increase the authorised share capital by 25,848 ordinary shares at par value of EUR1.00 each resulting to an authorised share capital of EUR32.310 divided into 32.310 shares of EUR1.00 each.
Initial public offering of the Company’s shares In 2012, the Company was contemplating an initial public offering of its shares (the “IPO”) at the London AIM. The Company’s authorised share capital was increased to meet the minimum requirements established for the share capital of public companies under the laws of Cyprus. On 12 September 2012 the authorised share capital of the Company was divided into 3,231,000 ordinary shares of nominal value EUR0.01 each and on the same day the authorised share capital was further increased to EUR42,513.16 divided into 4,251,316 ordinary shares of nominal value EUR0.01 each by the creation of 1,020,316 ordinary shares of EUR0.01 each. On 19 September 2012 the authorised share capital was further divided into 85,026,320 ordinary shares with nominal value of EUR0.0005 each, of which 64,620,000 ordinary shares with nominal value of EUR0.0005 each were allotted to existing shareholders.
44 Arricano Annual Report 2013 Strategic Report Directors’ Report Financial Statements
Annual Report 2013 45 Arricano Annual 14 Earnings Per Share Per 14 Earnings shareholders 31 December 2013 attributable to ordinary year ended for the profit as at 31 December 2013 was based on the per share earnings basic of calculation The 84,262,942 (31 December as at 31 December 2013 of outstanding shares ordinary of number average a weighted and thousand), (2012: USD19,823 thousand USD3,197 of Company’s the capital of share 2012, authorised in September Directors of Board the of decision with the 13, in accordance in note described 36,354,603). As 2012: was adjusted shares of number in the this change accordingly, EUR0.0005 each and value of with nominal shares 85,026,320 ordinary capital was split into share no potential has Group The statements. financial consolidated in these presented all periods for per share) earnings of calculation purpose of the (for retrospectively shares. dilutive ordinary In July 2013, the Company entered into settlement and release deed, in accordance with which related parties of the Group and UBS AG agreed to settle the Company’s to settle the agreed UBS AG and Group the of parties related with which in accordance deed, release and settlement into entered Company In July 2013, the thousand to USD36,974 amounting parties related with these two loan agreements concluded Company the Simultaneously, to ELQ Investors II Ltd. due indebtedness As part of the transaction, ELQ Investors II Ltd. received one Initial Arricano Share. The shares purchased by Weather Empire Limited were held under escrow by a Cypriot escrow under held Limited were Empire by Weather purchased shares The Share. Arricano Initial one received ELQ Investors II Ltd. transaction, the part of As to receive right the obtained 14 July 2011 ELQ Investors II Ltd. from agreement, call option with a In accordance Limited. Services Professional Themis agent, escrow in expired right conversion the However, USD1. for Company, the of shares 1,077 ordinary the in turn held which Limited, Empire Weather issued capital of entire the by the was secured loan payable to ELQ Investors II Ltd. 2012, the at 31 December As repayable. II Ltd became to ELQ Investors loan due the accordingly July 2013 and party. by a related held O’KEY Group of shares Call option agreement with ELQ Investors II Ltd. with ELQ Investors Call option agreement provided Inc, Group Sachs Goldman the of subsidiary a wholly-owned ELQ Investors II Ltd., to which pursuant a transaction into entered Company On 14 July 2011 the USD30 amount, maximum the Out of per annum. 11.5 per cent of rate at an interest million up to USD40 of amount maximum in the with convertible loans Company the Empire to Weather per annum) per cent at 11.85 interest an initial a loan (with to provide Company used by the were funds The Company. to the provided were million capital) in the share subscribed of per cent (or 16.67 1,077 shares to purchase in order Islands) British Virgin in the incorporated purpose vehicle Limited (a special Retail Real Estate S.A. from Company Further, with a view to fulfil obligations of the Company under share purchase agreements with new investors, concluded with a view to facilitate the IPO process, IPO process, facilitate the to a view with concluded new investors, with agreements purchase share under Company of the to fulfil obligations with a view Further, value at fair subsidiaries acquired for as consideration control common under to entities transferred were shares 28,350,214 ordinary thousand. USD93,759 on equity of of placement from Cash proceeds per share. USD2.33 of settled in cash at a price that were shares 10,300,423 ordinary 4) and (see note thousand USD66,056 of 2,729,363 at 31 December 2013, As thousand. to USD22,243 amounted thousand, USD1,757 of to IPO process costs related direct of net shares, 10,300,423 ordinary unpaid. remain allotted and not are shares ordinary by 17 December is payable on demand thousand to USD28,500 on 20 September 2013. Loan amounting was repaid thousand to USD8,475 in total. Loan amounting amount the party for related by the loan obtained the of repayment the securing to UBS AG guarantee irrevocable issued the Company latest. Also, the 2014 at the accrued thereon. interest the and thousand USD28,800 of On 12 September 2013 the Company was admitted for trading on London AIM. As a result of IPO, the Company placed 38,650,637 ordinary shares and had an effect and shares ordinary placed 38,650,637 Company the IPO, of a result AIM. As on London trading for was admitted Company On 12 September 2013 the Subsequent to allotment of these shares, the Company did not fulfil certain conditions stipulated in share purchase agreements. In particular, it had not completed the it had In particular, agreements. purchase stipulated in share fulfil certain conditions not did Company the shares, these of to allotment Subsequent agreements purchase share circumstances, those Under development. for certain properties of purchase completed the AIM as well as it had not London on the listing made Company the of Directors of Board The investors. by the shares the of purchase the steps to unwind all necessary to take investors the and Company the require authorised Company’s the of increase the approved Shareholders AIM, on 20 July 2013 the at London shares Company’s the of offering public initial as part of Further, value EUR0.0005 each. nominal of shares 106,000,000 ordinary into divided capital to EUR53,000 (or USD68,564) share on 26 September 2012 the Board of Directors of the Company took decision on allotment of 20,406,309 shares to new investors for total consideration of USD70,000 of total consideration investors for to new 20,406,309 shares of on allotment took decision Company the of Directors of Board on 26 September 2012 the unpaid. were shares 31 December 2012, these at As thousand. consideration the of non-payment and notices with the investors’ non-compliance to the Further to investors. notices necessary the by sending shares a call on unpaid was expected It in question. shares the of forfeiture the for procedure the initiated Company the of Directors of Board 2013 the on 16 April shares, the issue of the for disposal to the with regards its decision will make Directors of Board Company’s the investors, new to the issued shares the of forfeiture the of that upon completion was shares the of to forfeiture related effect the as at 31 December 2012 Thus, Company. the of interests in the and appropriate as it deemed forfeited shares the of shares 2013, unpaid 25 May dated Company, the of Directors of Board the of decision with the in accordance Subsequently, within equity. reserves in other recognised by reserves in other increase and thousand by USD69,987 premium share thousand, capital by USD13 in share in a decrease resulted which legally forfeited, were thousand. USD70,000 Notes to the Consolidated Financial Statements (continued)
15 Loans and Borrowings
This note provides information about the contractual terms of loans. For more information about the Group’s exposure to interest rate and foreign currency risk, refer to note 25.
(in thousands of USD) 2013 2012 Non-current Secured bank loans 62,391 33,008 62,391 33,008 Current Secured bank loans (current portion of long-term bank loans) 10,277 8,138 Unsecured loans from related parties 30,309 565 Unsecured loans from third parties 37 34,621 40,623 43,324 103,014 76,332
Terms and debt repayment schedule As at 31 December 2013, the terms and debt repayment schedule of loans and borrowings are as follows:
Nominal Contractual year Carrying (in thousands of USD) Currency interest rate of maturity value Secured bank loans OJSC “Bank “St. Petersburg” USD 10.50% 2020 24,849 EBRD USD 3M LIBOR +4.5% 2018 23,441 Raiffeisen Bank Aval USD 10.75% 2020 14,287 Oshchadbank USD 11.50% 2020 10,091 72,668
Unsecured loans from related parties International Baltic Investments USD 9.55% 2014 29,808 Loans from other related parties UAH/USD 0.00% 2014 501 30,309
Unsecured loans from third parties Other USD 3.20% 2013 37 37 103,014
46 Arricano Annual Report 2013 Strategic Report Directors’ Report Financial Statements
2012 565 565 value
7,632 Carrying 0.31% 76,332 34,621 34,621 33,514 41,146
2013 2013 2018 2014 0.24% of maturityof 2012-2014 Contractual year Annual Report 2013 47 Arricano Annual
Nominal 11.50% 11.90% interest rate interest 0.00%-3.20% 3M LIBOR +4.5% USD USD USD Currency UAH/ USD UAH/ the ratio of consolidated operating cash flows to net finance charges should not be less than 2.25; should charges net finance to cash flows operating consolidated of ratio the six. exceed not should to EBITDA total debt of ratio the is as follows: USD at 31 December LIBOR for As Unsecured loans from related parties Loans from other related parties Unsecured loans from third parties ELQ Investors II Limited EBRD EBRD of amount loan payable to EBRD in the of amount principal repaid centre, “Sun Gallery” trade that operates company the In July 2013, PrJSC UkrPanGroup, Oshchadbank USD30,000 with a limit of line credit irrevocable (Oshchadbank) for Ukraine” Bank of “State Savings with PJSC loan agreement concluded Group In October 2013, the bears 11.5 per cent line Credit Luks. Market LLC Comfort subsidiary Group’s developed by the that is “Prospekt” centre trade of the construction to finance thousand thousand. to USD20,000 Oshchadbank amount from facilities credit undrawn at 31 December 2013, the in September 2020. As matures and per annum rate interest Ukrsibbank thousand USD6,144 to Ukrsibbank of due loans of balance outstanding the repaid centre, trade “City Mall’ that operates company the Alfa, In July 2013, LLC Prizma 2013.in June concluded to loan agreement according Raiffeisen Bank Aval PJSC from received funds the using PJSC Raiffeisen Bank Aval PJSC existing to refinance thousand USD15,000 with a limit of line credit irrevocable for Raiffeisen Bank Aval with PJSC loan agreement concluded Group 2013, the In June centre trade owning entity Alfa, to LLC Prizma loan was provided in July 2020. The matures and per annum rate interest bears 10.75 per cent line Credit borrowings. “City Mall”. OJSC “Bank “St. Petersburg” “RayON” centre trade the of in respect to constructors due debts to settle the with OJSC “Bank “St. Petersburg” two loan agreements concluded Group In April 2013, the USD11,000 and USD14,000 thousand of amounts for the “South Gallery” located in Simferopol centre trade of the construction the to finance and located in Kyiv 17). to note (refer respectively thousand, loan covenants of Breach at 31 December 2012, As to comply with certain covenants. is required Group the with ELQ Investors II Limited, loan agreement of terms with the In accordance For a description of assets pledged by the Group in connection with loans and borrowings refer to note 26(a). to note refer borrowings and with loans in connection Group by the assets pledged of For a description thousand. USD5,000 covenants: debt following with the complied has not Group the • • loan payable to ELQ Investors II outstanding 31 December 2013. In July 2013, the year ended the during remedied was not covenants with debt non-compliance The 13). to note (refer loan agreements concluded newly the under parties related from received funds the using Limited was fully repaid LIBOR USD 3M (in thousands of USD) Secured loans bank Ukrsibbank As at 31 December 2012, the terms and debt repayment schedule of loans and borrowings are as follows: are borrowings and loans of schedule repayment debt and terms at 31 December 2012, the As Notes to the Consolidated Financial Statements (continued)
16 Finance Lease Liability
Finance lease liabilities as at 31 December are payable as follows:
Present value of Present value of Future minimum lease minimum lease Future minimum lease minimum lease payments Interest payments payments Interest payments (in thousands of USD) 2013 2013 2013 2012 2012 2012 Less than six months 629 600 29 239 238 1 Between six and 12 months 815 755 60 239 238 1 Between one and two years 1,146 1,143 3 478 477 1 Between two and five years 4,245 4,223 22 1,430 1,428 2 More than five years 68,916 57,693 11,223 20,033 16,784 3,249 75,751 64,414 11,337 22,419 19,165 3,254
The imputed finance costs on the liability are based on the Group’s incremental borrowing rate ranging from 13.0 per cent to 17.2 per cent (2012: from 15.3 per cent to 16.0 per cent).
On 17 December 2013, Odesa City Council approved principal terms of land lease agreements to be concluded with one of the Group’s subsidiaries, LLC Vektor Capital (refer to note 4) and approved land allocation project and detailed zoning plan, in accordance with which the Group plans to develop the trade centre on land plots concerned. As a result, the Group assumed that the inception and commencement dates of lease occurred and recognised acquisition of the investment property through the finance lease for the amount of USD5,144 thousand. On 20 March 2014 this land lease agreement was formally signed.
Future minimum lease payments as at 31 December 2013 and 2012 are based on management’s assessment that is based on actual lease payments effective as at 31 December 2013 and 2012, respectively. The future lease payments are subject to review and approval by the municipal authorities and may differ from management’s assessment.
The contractual maturity of land lease agreements is ranging from 2016 to 2038. The Group intends to prolong these lease agreements for the period of usage of the investment property being constructed on the leased land. Consequently, the minimum lease payments are calculated for a period of 50 years. 17 Trade and Other Payables
Trade and other payables as at 31 December are as follows:
(in thousands of USD) 2013 2012 Payables for construction works 10,959 20,097 Trade and other payables to related parties 294 543 Trade and other payables to third parties 2,492 3,353 13,745 23,993
Included in payables for construction works as at 31 December 2012 are payables under financial guarantee contracts amounting to USD4,912 thousand granted on behalf of a related party, PrJSC Dniprovska Prystan, in respect of construction works performed at the trade centre “RayON”. In November 2012 the court ruled a decision to initiate bankruptcy proceedings against this related party. Accordingly, as at 31 December 2012 the Group recognised a provision in respect of guarantees granted to fulfil the related party’s obligations related to construction of the trade centre “RayON”, since it became probable that an outflow of economic resources will be required to settle these obligations. During 2013 the Group repaid USD14,805 thousand due to constructors in respect of the “RayON” trade centre, including obligations under guarantees granted to fulfil related party’s obligations of USD4,912 thousand. Additionally, the Group repaid USD5,292 thousand due to constructors in respect of the second phase of the “South Gallery” trade centre.
The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in note 25.
48 Arricano Annual Report 2013 Strategic Report Directors’ Report Financial Statements – 86 2012 2012 2012 440 663 234 292 178 100
4,294 7,828 4,208 3,534 3,534 1,467 16,421 15,981 86 2013 2013 2013 362 442 427 398 174 807 5,906 2,900 2,248 2,900 20,628 23,528 25,299 24,937 14,636 Annual Report 2013 49 Arricano Annual Direct operating expenses arising from investment property that generated rental income during the year ended 31 December are as follows: 31 December are year ended the during income rental that generated property investment from arising expenses operating Direct the of portion non-current at 31 December 2013, the As ten years. of period the for tenant an anchor from a prepayment received Group In September 2009 the thousand, USD615 and thousand 2012: USD3,534 (as at 31 December thousand to USD615 amounts portion current the and thousand to USD2,900 amounts prepayment payments. rental of two months for tenants from by prepayments represented mainly are parties third from advances Remaining respectively). (2012: 27 per cent, respectively) 10 per cent, and (11 per cent two tenants from was earned income rental Group’s the of 31 December 2013, 21 per cent year ended For the respectively). 11 per cent, and 16 per cent Advances from related parties Other sales revenue Advances from third parties USD222 thousand. to amounting liabilities long-term other note 4) and (see LLC Budkhol its subsidiary Limited and Wayfield of acquisition of is payable in respect maturity. its contractual with in accordance is presented consideration Deferred Repair, maintenance and building services (note 21) Security services (note 22) Communal public services (note 21) Land rent and land taxes (note 22) (in thousands of USD) Advertising (note 22) Rental from income investment properties Revenue for the years ended 31 December is as follows: years ended the for Revenue (in thousands of USD) 20 Revenue 19 Other Liabilities 19 Other that thousand, USD151 of accrued interest including thousand, USD20,151 of consideration by deferred represented are liabilities at 31 December 2013, other As Current Advances receivedunder investment agreement (see note 10) 2012 occurred. 2013 and during income rental generate not that did property investment from arising expenses operating direct No Non-current Advances from third parties Advances from customers as at 31 December are as follows: as at 31 December are customers from Advances (in thousands of USD) 18 Advances Received 18 Advances Notes to the Consolidated Financial Statements (continued)
21 Goods, Raw Materials and Services Used
Goods, raw materials and services used for the years ended 31 December are as follows:
(in thousands of USD) 2013 2012 Repair, maintenance and building services 442 234 Communal public services 398 178 Other costs 143 124 983 536
22 Operating Expenses
Operating expenses for the years ended 31 December are as follows:
(in thousands of USD) 2013 2012 Management, consulting and legal services 8,396 7,479 Advertising 807 663 Office expenses and communication services 584 589 Allowance for bad debts 541 6,149 Security services 427 292 Land rent and land taxes 174 100 Administrative expenses 116 43 Write-off of prepayments made – 1,161 Loss on sale of investment property – 51 Other 1,682 1,358 12,727 17,885
23 Finance Income and Finance Costs
Finance income and finance costs for the years ended 31 December are as follows:
(in thousands of USD) 2013 2012 Interest income 3,541 4,300 Finance income from derecognition of finance lease liability – 2,016 Other finance income 290 – Finance income 3,831 6,316 Interest expense (8,091) (6,941) Interest expense on deferred consideration (see notes 4 and 19) (593) – Foreign exchange loss – (107) Other finance costs (1,581) (514) Finance costs (10,265) (7,562) Net finance cost (6,434) (1,246)
During the year ended 31 December 2012, an amendment to lease terms imposed by municipal authorities resulted in a decrease in the amount of future minimum lease payments. Therefore, the Group derecognised finance lease liability amounting to USD2,016 thousand in profit and loss for the year ended 31 December 2012.
50 Arricano Annual Report 2013 Strategic Report Directors’ Report Financial Statements
–
– – – % (4) (8) 12 10 12
7% 5% 9% 2012 2012 797 (3%) (4%) 21% (21%) 100% 1,747 1,781 1,492 1,504 (3,019) (3,019) (7,354) Net – 8 – 3 – (9) 12 (24) (65) 2012 2013 2013 581 904 904 (569) (834) 2,367 1,504 1,020 1,737 1,871 4,479 (3,923) (3,923) (4,398) (8,598) 21,327 Annual Report 2013 51 Arricano Annual – – – – – – – % (4) (8) 9% 2012 (8%) (5%) 22% 57% 19% (12%) (38%) 100% 3,764 (3,975) (7,739) (7,727) Liabilities – – – – – – – (9) (24) 2013 2013 904 364 779 (316) (196) (491) 3,756 2,322 4,101 (5,443) (9,199) (1,558) (9,166) – – – – 12 10 2012 956 797 373 4,720 1,747 1,781 (3,764) Assets – 8 – – 3 12 2013 581 568 1,520 5,276 2,367 1,737 (3,756)
Net deferred tax assets (liabilities) deferred Net Offset of deferred tax assets and liabilities tax assets and deferred Offset of Deferred tax assets (liabilities) Deferred Tax loss carry-forwards Tax Other long-term payables long-term Other Long-term borrowings Long-term Short-term borrowings Short-term Advances received Advances tax assets and liabilities (c) Recognised deferred items: following attributable to the are liabilities tax assets and at 31 December deferred As Effective income tax expense Effective income payables other and Trade Increase in unrecognised temporary differences temporary in unrecognised Increase Changes in expected pattern of realisation of temporary difference temporary of realisation pattern of in expected Changes Prepaid expenses Prepaid Utilisation of previously unrecognised temporary differences temporary unrecognised previously of Utilisation Trade and other receivables other and Trade Tax exempt income exempt Tax Non-deductible expenses Non-deductible Effect of lower tax rates on taxable profit in other jurisdictions in other profit on taxable lower tax rates Effect of equipment and Property Income tax expense at statutory rate tax expense Income (in thousands of USD) Total income tax expense income Total changed tax code new the changes other Amongst Ukraine. effective in the became tax code 2011 a new in December 2010, on 1 January enacted Based on legislation parliament In December 2013, the respectively. 19 per cent, and tax is 21 per cent income corporate applicable 2013 the In 2012 and rates. tax profit corporate the In accordance beyond. in 2014 and rates to be applied tax profit corporate the changed matters, other among which, tax code to the changes adopted Ukraine the of (b) Reconciliation of effective tax rate effective (b) Reconciliation of to profit tax rate statutory income Ukrainian the 31 December computed by applying years ended the for tax expense income total expected between the difference The is as follows: tax expense reported the tax and before The applicable tax rates are 12.5 per cent for Cyprus companies and 0 per cent for companies incorporated in the Isle of Man. of Isle in the incorporated companies for 0 per cent and Cyprus companies for 12.5 per cent are tax rates applicable The Deferred tax expense Deferred at 16 per cent. will be fixed tax rate the 2016 onwards from and 2015 is 17 per cent for 2014 is 18 per cent, for tax rate changes, with these Investment property Investment (in thousands of USD) tax before Profit Current tax expense Current (in thousands of USD) (a) Income tax expense as follows: are 31 December ended years the for taxes Income 24 Income Tax Expense Tax 24 Income Notes to the Consolidated Financial Statements (continued)
(d) Movements in recognised deferred tax assets and liabilities Movements in recognised deferred tax assets and liabilities during the year ended 31 December 2013 are as follows:
Balance as at Foreign currency Balance as at 1 January 2013 Recognised translation 31 December 2013 (in thousands of USD) asset (liability) in profit or loss adjustment asset (liability) Investment property (7,354) (1,244) – (8,598) Property and equipment (8) 11 – 3 Trade and other receivables 1,781 (44) – 1,737 Trade and other payables (4) (5) – (9) Advances received 797 (216) – 581 Prepaid expenses 10 (10) – – Short-term borrowings 12 (4) – 8 Long-term borrowings – (24) – (24) Other long-term payables – 12 – 12 Tax loss carry-forwards 1,747 620 – 2,367 Deferred tax assets (liabilities) (3,019) (904) – (3,923)
Movements in recognised deferred tax assets and liabilities during the year ended 31 December 2012 are as follows:
Balance as at Foreign currency Balance as at 1 January 2012 Recognised in translation 31 December 2012 (in thousands of USD) asset (liability) profit or los adjustment asset (liability) Investment property (3,398) (3,958) 2 (7,354) Property and equipment (18) 10 – (8) Trade and other receivables 1,854 (73) – 1,781 Trade and other payables – (4) – (4) Advances received – 797 – 797 Prepaid expenses – 10 – 10 Short-term borrowings – 12 – 12 Tax loss carry-forwards 33 1,714 – 1,747 Deferred tax assets (liabilities) (1,529) (1,492) 2 (3,019)
(e) Unrecognised deferred tax assets Deferred tax assets as at 31 December 2013 have not been recognised in respect of the following items:
Utilisation of previously Increase in Balance as at unrecognised unrecognised Balance as at (in thousands of USD) 1 January 2013 temporary differences temporary differences 31 December 2013 Trade and other receivables 607 – – 607 Advances from customers 265 – – 265 Tax loss carry-forwards 3,676 (196) 364 3,844 4,548 (196) 364 4,716
Deferred tax assets as at 31 December 2012 have not been recognised in respect of the following items: Utilisation of previously Increase in Balance as at unrecognised unrecognised Balance as at (in thousands of USD) 1 January 2012 temporary differences temporary differences 31 December 2012 Investment property 517 (517) – – Trade and other receivables 390 (390) 607 607 Advances from customers 1,617 (1,352) – 265 Tax loss carry-forwards 5,402 (2,139) 413 3,676 7,926 (4,398) 1,020 4,548
In accordance with existing Ukrainian legislation tax losses can be carried forward and utilised indefinitely. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the Group can utilise the benefits therefrom.
52 Arricano Annual Report 2013 Strategic Report Directors’ Report Financial Statements – –
2012 3,637 7,565
45,239 56,441 2013 4,324 1,483 88.362 49,988 20,727 11,840 Annual Report 2013 53 Arricano Annual credit risk credit risk liquidity risk market The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables and loans receivable. The main The receivable. loans and receivables other and trade of losses in respect incurred of its estimate that represents impairment for an allowance establishes Group The groups of for established and a collective loss component exposures, significant relates to individually that loss component a specific are this allowance of components of payment data based on historical determined is collective loss allowance The yet identified. but not losses that have been incurred of similar assets in respect assets. similar financial for statistics The Group does not require collateral in respect of trade and other receivables. other and trade of in respect collateral require not does Group The 100 per cent of the Group’s revenue is attributable to sales transactions with domestic customers. with domestic is attributable to sales transactions revenue Group’s the of 100 per cent basis on an ongoing monitored and risk is approved to credit exposure the and tenants than regular other customers in place for policy credit formal has no Management customers. significant all other for individually (i) Trade and other receivables (i) Trade of demographics the also considers management However, of each customer. characteristics individual mainly by the risk is influenced to credit exposure Group’s The In addition the Group is also exposed to the risk of non-recoverability of VAT recoverable and prepaid expenses amounting in total to USD16,716 thousand as at thousand in total to USD16,716 amounting expenses prepaid and recoverable VAT of non-recoverability risk of to the is also exposed Group the In addition thousand). 31 December 2013 (31 December 2012: USD10,106 risk, on credit have an influence may factors as these operate, customers in which country, and industry the risk of default the including base, customer Group’s the 2012, In 2013 and customer. a single receivables from of concentration significant is no There circumstances. economic challenging currently in the particularly Trade and other receivables other and Trade Cash and cash equivalents Restricted deposits receivableLoans Available-for-sale financial assets financial Available-for-sale (in thousands of USD) Exposure to credit risk to credit Exposure as follows: risk as at 31 December was to credit exposure maximum Company’s The (c) Credit risk (c) Credit and arises principally obligations, meet its contractual fails to instrument to a financial or counterparty if a customer Group loss to the financial risk of risk is the Credit assets. financial available-for-sale and receivables and loans Group’s the from The Group’s Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the of adequacy the reviews and procedures and policies risk management Group’s with the compliance monitors management how Committee oversees Audit Group’s The Group. by the risks faced to the in relation framework risk management The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees in which environment control constructive and a disciplined to develop aims procedures, and standards management and its training through Group, The obligations. and roles their understand The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks to monitor and controls, risk limits and to set appropriate Group, by the risks faced the analyse and identify to established are policies risk management Group’s The activities. Group’s the and conditions market in changes to reflect regularly reviewed are systems and policies Risk management to limits. adherence and (b) Risk management framework framework. risk management the of oversight and establishment the for responsibility has overall management The (a) Overview instruments: financial its use of risks from following to the has exposure Group The • • • risk. managing and measuring for processes and policies objectives, Group’s the above risks, the to each of exposure Group’s about the information presents This note statements. financial consolidated these throughout included are disclosures quantitative Further 25 Financial Risk Management 25 Financial Notes to the Consolidated Financial Statements (continued)
(ii) Impairment losses The ageing of trade and other receivables as at 31 December was:
2013 2013 2012 2012 (in thousands of USD) Gross Impairment Gross Impairment Not past due 1,561 – 9,674 (6,072) Past due 0 to 30 days 2,739 – – – Past due 31 to 60 days 17 – 5 – Past due 61 to 90 days 7 – 4 – Past due 91 to 360 days 288 (288) 13 (13) More than one year 17,282 (17,282) 10,681 (10,655) 21,894 (17,570) 20,377 (16,740)
The movement in the allowance for impairment in respect of trade and other receivables during the years ended 31 December was as follows:
(in thousands of USD) 2013 2012 Balance at 1 January (16,740) (10,685) Impairment loss recognised (541) (6,149) Impairment losses related to acquisition of assets (289) – Bad debts write-off/recovery – 94 Balance at 31 December (17,570) (16,740)
(d) Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
The following are the contractual maturities of financial liabilities, including interest payments as at 31 December 2013:
Contractual cash flows (in thousands of USD) Carrying amount Total 2 months or less 2 – 12 months 1 – 2 years 2 – 5 years More than 5 years Secured bank loans 72,668 94,082 1,051 15,307 19,232 43,282 15,210 Unsecured loans from related parties 30,309 30,309 29,808 501 – – – Unsecured loans from third parties 37 37 37 – – – – Finance lease liability 11,337 75,751 148 1,296 1,146 4,245 68,916 Trade and other payables 13,745 13,745 204 13,541 – – – Other liabilities 20,373 21,939 – 11,346 10,593 – – 148,469 235,863 31,248 41,991 30,971 47,527 84,126
The undrawn facility of the credit line from the Ukrainian bank is USD20,000 thousand as at 31 December 2013.
The following are the contractual maturities of financial liabilities, including interest payments as at 31 December 2012:
Contractual cash flows (in thousands of USD) Carrying amount Total 2 months or less 2 – 12 months 1 – 2 years 2 – 5 years More than 5 years Secured bank loans 41,146 47,328 643 9,669 11,695 21,078 4,243 Unsecured loans from third parties 34,621 38,720 866 37,854 – – – Unsecured loans from related parties 565 565 – 565 – – – Finance lease liability 3,254 22,420 80 398 478 1,431 20,033 Trade and other payables 23,993 23,993 18,701 5,292 – – – 103,579 133,026 20,290 53,778 12,173 22,509 24,276
54 Arricano Annual Report 2013 Strategic Report Directors’ Report Financial Statements
– – –
29 EUR
2012 Equity (144)
(1,823) (1,852) (3,596) (3,254) (1,386) 44,686 (42,818) (33,514) (33,514) 2012 2012 – – 1 USD 2013 (144) (4,378) (3,596) 48,071 (45,523) (41,146) (79,072) (11,337) (42,338) (23,441) (23,441) Profit or loss Annual Report 2013 55 Arricano Annual – – – GBP (24) (60) Equity (302) (302) (5,958) 2013 – – 1 EUR (24) (60) (740) (741) (5,958) 2013 Profit or loss USD 575 168 (1,631) (73,556) (72,668) analysis Sensitivity shown amounts by the equity and profit net as at 31 December would have decreased currencies following the against hryvnia Ukrainian the of weakening A 10 per cent constant. remain rates, interest in particular variables, that all other assumes This analysis below. Net short position Refer to notes 7, 15 and 16 for information about maturity dates and effective interest rates of fixed rate and floating rate financial instruments. Re-pricing for fixed for Re-pricing instruments. financial rate floating rate and fixed of rates effective interest and dates about maturity information 16 for 7, 15 and Refer to notes Profile follows: as at 31 December was as instruments financial interest-bearing Group’s of the profile rate interest The new financing management uses its judgment to decide whether a fixed or variable rate would be more favourable to the Group over the expected period until maturity. until expected period the Group over the to favourable more be rate would or variable a fixed whether decide to uses its judgment management financing new instruments. financial rate of fixed maturity occurs at instruments financial rate (ii) Interest rate risk rate (ii) Interest debt). rate flows (variable cash future debt) or their rate value (fixed fair their either by changing borrowings and loans impact primarily rates in interest Changes of obtaining time at the However, rates. or variable be to fixed should exposure Group’s the of much how determining of policy have a formal not does Management Trade and other payables to the currencies but opposite effect on these equal at 31 December would have had the currencies these against hryvnia Ukrainian the of strengthening A 10 per cent constant. remain variables basis that all other on the above, shown amounts GBP Secured loans bank Restricted deposits EUR Loans borrowings and (in thousands of USD) Fixed rate instruments receivableLoans lease liability Finance rate instrumentsVariable Loans borrowings and USD Cash and cash equivalents Exposure to currency risk to currency Exposure amounts: based on notional risk as at 31 December was as follows currency to foreign exposure Group’s The Interest on borrowings is denominated in the currency of the borrowing. Generally, borrowings are denominated in USD which does not always match the cash flows the always match not does which in USD denominated are borrowings Generally, borrowing. the of currency in the is denominated on borrowings Interest in UAH. executed primarily Group, the of operation underlying by the generated US Dollar (“USD”), but also Euro (“EUR”). but also Euro Dollar (“USD”), US (i) Currency risk (i) Currency the primarily (“UAH”), hryvnias Ukrainian than the other in a currency denominated that are borrowings and purchases risk on sales, to currency is exposed Group The (e) Market risk (e) Market value of or the income Group’s will affect the equity prices and rates interest rates, exchange as foreign such prices, in market risk that changes risk is the Market while within acceptable parametres, exposures risk market control and manage is to management risk market of objective The instruments. financial of its holdings return. the optimising (in thousands of USD) (in thousands of USD) Notes to the Consolidated Financial Statements (continued)
Fair value sensitivity analysis for fixed rate instruments The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss or as available-for-sale, and the Group does not designate derivatives (interest rate swaps) as hedging instruments under a fair value hedge accounting model. Therefore a change in interest rates at the reporting date would not affect profit or loss or equity.
Cash flow sensitivity analysis for variable rate instruments An increase of 100 basis points in interest rates at the reporting date would have decreased equity and profit or loss as at and for the year ended 31 December by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.
2013 2012 (in thousands of USD) Profit or loss Equity Profit or loss Equity Loans and borrowings (190) (190) (265) (265) (190) (190) (265) (265)
A decrease of 100 basis points in interest rates at 31 December would have had the equal but opposite effect to the amounts shown above.
(iii) Fair values Estimated fair values of the financial assets and liabilities have been determined using available market information and appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to produce the estimated fair values. Accordingly, the estimates are not necessarily indicative of the amounts that could be realised in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair values.
The estimated fair values of financial assets and liabilities are determined using discounted cash flow and other appropriate valuation methodologies, at year-end, and are not indicative of the fair value of those instruments at the date these consolidated financial statements are prepared or distributed. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Group’s entire holdings of a particular financial instrument. Fair value estimates are based on judgments regarding future expected cash flows, current economic conditions, risk characteristics of various financial instruments and other factors.
Fair value estimates are based on existing financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities not considered financial instruments. In addition, tax ramifications related to the realisation of the unrealised gains and losses can have an effect on fair value estimates and have not been considered.
Management believes that for all the financial assets and liabilities the carrying value is estimated to approximate the fair value as at 31 December 2013 and 2012. Such fair value was estimated by discounting the expected future cash flows under the market interest rate for similar financial instruments that prevails as at the reporting date. The estimated fair value is categorised within Level 2 of fair value hierarchy.
(f) Capital management Management defines capital as total equity attributable to equity holders of the Company. The Group has no formal policy for capital management but management seeks to maintain a sufficient capital base for meeting the Group’s operational and strategic needs, and to maintain confidence of market participants. The Group strives to achieve with efficient cash management, and constant monitoring of the Group’s investment projects. With these measures the Group aims for steady profits growth. There were no changes in the Group’s approach to capital management during the year. 26 Commitments and Contingencies
(a) Pledged assets As at 31 December, in connection with loans and borrowings, the Group pledged the following assets:
(in thousands of USD) 2013 2012 Investment property (note 5) 193,111 84,500 Restricted deposits (note 12) 1,483 – Bank balances (note 12) – 17 194,594 84,517
56 Arricano Annual Report 2013 Strategic Report Directors’ Report Financial Statements 2012 1,676 2,056 3,732 2013 1,491 1,470 2,961 Annual Report 2013 57 Arricano Annual Future rights on income of Prizma Alfa LLC under all lease agreements; LLC under Alfa Prizma of on income rights Future and PrJSC Livoberezhzhiainvest; and UkrPanGroup PrJSC Grandinvest, PrJSC subsidiaries: following in the Investments Krym”. LLC “Voyazh and PrJSC Livoberezhzhiainvest PrJSC Grandinvest, between the Agreement Investment the under rights Property LLC; and Ukraine Hypermarket with Auchan lease agreements LLC under Alfa Prizma of on income rights Future PrJSC UkrPanGroup. and Grandinvest PrJSC subsidiaries: following in the Investments
Management is unaware of any other significant actual, pending or threatened claims against the Group. the against claims or threatened pending actual, significant other any of is unaware Management Current litigations with Assofit do not allow the Group to exercise significant influence over the investee. Adverse developments in these litigations may negatively may these litigations in developments Adverse the investee. over influence significant exercise to Group not allow the do with Assofit litigations Current voting nominal of not affect legal title to 49.97 per cent do litigations that pending believes Management Assofit. in investment of the amount recoverable the influence of of a series the basis and PB, on Assofit Stockman, against Counterclaim and filed its Defence 2014, Arricano On 7 March investee. in the rights ownership and nominees. its and by Stockman duties fiduciary the of violations On 14 October 2013 Stockman, Assofit and the Ukrainian subsidiary of Assofit initiated legal proceedings before the District Court of Nicosia for the alleged violation of violation the alleged for Nicosia of Court the District before proceedings legal initiated Assofit of subsidiary Ukrainian the and Assofit On 14 October 2013 Stockman, these date that the At and Filgate. Assofit between loan agreement based on the lent funds of the recovery DUPD and and Teder Hillar by Arricano, duties fiduciary pending. remain proceedings litigation these issuance for authorised are statements financial consolidated On 12 March 2012, Arricano filed the application to the District Court of Larnaca to wind up its associate, Assofit Holdings Limited, on grounds of oppression of minority. of minority. of oppression grounds on Limited, Holdings Assofit up its associate, to wind of Larnaca Court District to the application filed the 2012, Arricano On 12 March Limited inHoldings Assofit level of at the a receiver of appointment the for applied has successfully 2012 Arricano on 30 March this application, of frame Within the Larnaca Court of District the of order 2014, based on an interim On 9 January is completed. up application winding the of consideration its assets until to protect order nullified without temporarily were subsidiaries Ukrainian of the management or Assofit of Directors of Board the or change to appoint receiver the powers of the 2014, Arricano January On 21 of Larnaca. Court District with the order this interim receiver contested The assets. Assofit’s to protect receiver the powers of the affecting of receiver and the (of Both applications grounds. procedural based on the order this interim of Cyprus to suspend Court Supreme with the application certiorari filed the for issuance. authorised are statements financial consolidated these date as at the ongoing remain Arricano) Less than one year appealed the Company The Agreement. Call Option the terminated had validly that Stockman declaring an award rendered sole arbitrator On 13 December 2011, the has validly Company the whether of question the remitted court the a result As successful. its appeal was partially and Wales and England Court of High the before award statements financial consolidated that these date the At sole arbitrator. by the anew to be considered Agreement Call Option the under granted call option the exercised pending. remains arbitration the issuance for authorised are As at 31 December 2013, the Group is involved in arbitration dispute with Stockman Interhold S.A. (Stockman), being the majority shareholder of Assofit, regarding regarding Assofit, of shareholder majority the being S.A. (Stockman), Interhold dispute with Stockman is involved in arbitration Group at 31 December 2013, the As being Stockman of shareholding the to acquire option the was granted Arricano Agreement, Option with this Call In accordance Agreement. Call Option of invalidation sought Company November 2010, the 2011. In March November 2010 up to 15 15 from starting period the during Assofit capital of share in the to 50.03 per cent equal by Stockman initiated that were proceedings arbitration by legal and buy-out was suspended the however Agreement, Call Option by the granted option the to exercise Court London by The case was considered The Agreement. Call Option the under call option to the relating agreement the of termination the of validity to the in relation (“LCIA”). Arbitration International of Between one and five years (d) Litigation complaints. and is subject to legal actions Group the business, course of ordinary In the (in thousands of USD) The future minimum lease payments under non-cancellable leases are as follows: leases are non-cancellable under lease payments minimum future The (c) Operating leases commitments (c) Operating as lessor The Group remaining have lease agreements non-cancellable These centres. trade four of that consists portfolio property on its investment lease agreements into entered Group The conditions. market to prevailing basis according on an annual rate rent the of revision upward a clause to enable include All agreements to ten years. one from terms (b) Construction commitments as at 31 December 2013 (2012: USD16,966 thousand USD25,751 for in Kyiv centres two trade party to construct with a related contracts into entered Group The in Simferopol). Gallery project South of phase second the to construct contract the under thousand As at 31 December 2013, the Group has also pledged the following: the has also pledged Group at 31 December 2013, the As • • • following: the has also pledged Group at 31 December 2012, the As • • an entity Limited, Co by Bytenem held Group O’KEY of shares by the II is secured loan payable to ELQ Investors as at 31 December 2012 the above, to the In addition with Arricano. control common under Notes to the Consolidated Financial Statements (continued)
(e) Guarantees The Group considers that financial guarantee contracts entered into by the Group to guarantee the indebtedness of related parties are insurance arrangements, and accounts for them as such. In this respect, the Group treats the guarantee contract as a contingent liability until such time as it becomes probable that the Group will be required to make a payment under the guarantee.
As at 31 December 2013, the Company issued the irrevocable guarantee to UBS AG securing the repayment of the loan by a related party for the amount of USD28,800 thousand and the interest accrued thereon and all losses incurred therewith. No provision for the related party’s obligation under this guarantee is recognised in these consolidated financial statements since management believes that as at 31 December 2013 it is not probable that there will be an outflow of economic resources in relation to this guarantee.
On 17 March 2014, the amount of the irrecoverable guarantee provided to UBS AG was reduced to USD15,300 thousand plus the interest accrued thereon and losses incurred therewith.
(f) Taxation contingencies The Group performs most of its operations in the Ukraine and therefore within the jurisdiction of the Ukrainian tax authorities. The Ukrainian tax system can be characterised by numerous taxes and frequently changing legislation which may be applied retroactively, open to wide interpretation and in some cases are conflicting. Instances of inconsistent opinions between local, regional, and national tax authorities and between the Ministry of Finance and other state authorities are not unusual. Tax declarations are subject to review and investigation by a number of authorities that are enacted by law to impose severe fines, penalties and interest charges. A tax year remains open for review by the tax authorities during the three subsequent calendar years, however under certain circumstances a tax year may remain open longer.
These facts create tax risks substantially more significant than typically found in countries with more developed systems. Management believes that it has adequately provided for tax liabilities based on its interpretation of tax legislation and official pronouncements. However, the interpretations of the relevant authorities could differ and the effect on these consolidated financial statements, if the authorities were successful in enforcing their interpretations, could be significant. No provisions for potential tax assessments have been made in these consolidated financial statements. 27 Related Party Transactions
(a) Control relationships The Group’s shareholders are Retail Real Estate S.A., Vunderbuilt S.A., Dragon – Ukrainian Properties and Development plc, Weather Empire Limited, Sigma Real Estate Limited, Rauno Teder and Jüri Põld. The Group’s ultimate controlling party is Estonian individual Hillar Teder.
(b) Transactions with management and close family members Key management remuneration Key management compensation included in the statement of profit or loss and other comprehensive income for the year ended 31 December 2013 is represented by salary and bonuses of USD675 thousand (2012: USD351 thousand).
58 Arricano Annual Report 2013 Strategic Report Directors’ Report Financial Statements
– – – – 86 2012 2012 565 543 (278) 1,473 8,899 4,216 16,938 15,744 43,766 10,617 48,066
(16,689) –
86 (86) 2013 2013 294 9,654 3,112 7,267 (1,960) 10,151 61,385 30,309 10,545 40,496 10,761 50,896 10,000 (17,282) Annual Report 2013 59 Arricano Annual Expenses incurred and income earned from transactions with entities under common control for the years ended 31 December are as follows: 31 December are ended years the for control common under with entities transactions from earned income and incurred Expenses notesdescribed in are control common under with entities balances and transactions significant of conditions and terms The secured. are balances the of None 19. 7, 9, 15, 17, 18 and Other liabilities Advances receivedAdvances Short-term loans and borrowings Trade and other payables Payables for construction works Interest expense Interest (in thousands of USD) Short-term loans receivable receivablesTrade Other receivables Provision for impairment of trade and other receivables from related parties Other long-term liabilities Interest income Other operating expenses (2012: nil). thousand USD24,849 of Prepayments property investment for (d) Guarantees issued by the related parties the related issued by (d) Guarantees PrJSC Real Estate PLC (PrJSC Grandinvest, Arricano of subsidiaries payable by Ukrainian loans to EBRD securing issued guarantees parties related Group’s The to in relation liabilities outstanding of amount total the cover guarantees The OJSC “Bank “St. Petersburg”. to EBRD and PrJSC Livoberezhzhiainvest) and UkrPanGroup as at 31 December 2013 “St. Petersburg” to OJSC “Bank in relationship and thousand) (2012: USD33,514 thousand USD23,441 as at 31 December 2013 of EBRD loans Prices for related party transactions are determined on an ongoing basis. The terms of related party transactions may differ from the market terms. market the from differ may party transactions related of terms The basis. on an ongoing determined are party transactions related for Prices Long-term loans receivableLong-term loans thousand to USD20,872 amounted control common under entities by the works performed 31 December 2013, construction year ended the During thousand). (2012: USD5,517 (in thousands of USD) (c) Transactions and balances with entities under common control and balances with entities (c) Transactions as follows: are as at 31 December control common under with entities balances Outstanding Notes to the Consolidated Financial Statements (continued)
28 Events Subsequent to the Reporting Date
(a) Change in terms of loans and borrowings On 31 January 2014, the Group signed amended loan agreement with EBRD, stipulating an increase in interest rate to 3m LIBOR+6.5 per cent with an effect from 17 March 2014 and an increase in the amount of loan principal payable in 2014 by USD1,711 thousand.
During 2014 and before the date that these consolidated financial statements are authorised for issuance, the Group repaid loans in the amounts of USD3,322 thousand due to EBRD and USD3,435 thousand due to a related party. In addition, portion of the abovementioned loan from the related party in the amount of USD9,765 thousand has been refinanced. On 17 March 2014, the Group signed amended loan agreement with a related party, stipulating an increase in the interest rate to 10.55 per cent.
(b) Litigation of PrJSC Dniprovska Prystan against PrJSC Livoberezhzhyainvest On 5 March 2014, PrJSC Dniprovska Prystan acting through the asset manager (a bankruptcy receiver) as appointed by the court within its bankruptcy proceedings filed a claim against PrJSC Livoberezhzhiainvest to nullify the ownership right to the trade centre RayON and to return the trade centre to PrJSC Dniprovska Prystan. The Group management believes that claims of PrJSC Dnirpovska Prystan are not substantiated and the Group will be successful in defending legitimacy of the abovementioned ownership right in the court. As at 31 December 2013, the carrying value of the trade centre RayON amounts to USD67,000 thousand.
(c) Changes in the Ukrainian business environment Subsequent to the reporting date, the regional parliament in the Autonomous Republic of Crimea declared its independence from the Ukraine and signed an agreement with the Russian Federation outlining the Republic of Crimea’s intention to join the Russian Federation. The Ukrainian state authorities and authorities of other leading countries do not recognise these declarations and agreements as they believe they are in violation of the Ukrainian constitution and international law.
However, as a result of these events and the Crimean parliament no longer recognising the authority of the Ukrainian national government, the Ukrainian authorities are not currently able to enforce Ukrainian laws on the territory of the Autonomous Republic of Crimea.
As at 31 December 2013, the carrying value of the Group’s investment property located in Simferopol, the administrative centre of the Autonomous Republic of Crimea, amounted to USD40,000 thousand. Included in this investment property is the second phase of the South Gallery trade centre with a carrying value as at 31 December 2013 of USD22,866 thousand, the title document for which is not yet obtained by the Group as at the date that these consolidated financial statements are authorised for issuance. The ultimate effect of these developments in the Autonomous Republic of Crimea on the Group’s ability to continue operations in this region, to realise its related assets and to maintain and secure its ownership rights cannot yet be determined.
(d) Changes in the Group structure On 4 March 2014 the Group approved to establish LLC Budholinvest, a new subsidiary with incorporation in the Ukraine. This subsidiary will be acting as the financing or investment company for one of the investment projects in Kyiv.
60 Arricano Annual Report 2013 Board of Directors Raul Parusk (appointed on 30 October 2013) Patrick Rupert Cottrell (appointed on 30 July 2013) Philip Peter Scales (appointed on 30 July 2013) Michael Zampelas (appointed on 30 July 2013) Emil Budilovsky (resigned with effect as of 1 January 2014) Hillar Teder Volodymyr Tymochko Alternate Director Iarema Kovaliv (for Hillar Teder) Secretary Asoted Secretarial Limited (appointed on 30 October 2013) Montrago Services Limited (resigned on 30 October 2013)
Independent Auditors KPMG Limited Nominated Advisor Smith & Williamson Corporate Finance Bankers Hellenic Bank Public Company Ltd UniCredit Bank, Estonia Barclays Wealth, Isle of Man UBS AG, Switzerland OJSC Bank St. Petersburg, Russian Federation PJSC State Savings Bank of Ukraine, Ukraine PJSC Raiffeisen Bank Aval, Ukraine Registered Office Office 1002, 10th floor Nicolaou Pentadromos Centre Thessalonikis Street 3025 Limassol, Cyprus Arricano Real Estate PLC 13th floor, 33 T. Shevchenko Boulevard, 01032, Kyiv, Ukraine +38 (044) 569-67-08 [email protected] Arricano Annual Report 2013
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