acme corporation sia un-audited condensed consolidated interim

Acme Corporation SIA

Un-audited condensed consolidated Interim Financial Statements for six months ended 30 June 2016

ACME CORPORATION SIA UN-AUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR

6 MONTHS ENDED 30 JUNE 2016

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TABLE OF CONTENTS Report of the Management 3 Statement of Directors’ Responsibility 4 Condensed Consolidated Interim Financial Statements:

Consolidated Statement of Financial Position 5 Consolidated Statement of Comprehensive Income 6 Consolidated Statement of Changes in Equity 7 Consolidated Cash Flow Statement 8 Notes to the Interim Financial Statements 9 - 12



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REPORT OF THE MANAGEMENT

Acme Corporation SIA (hereinafter - ‘the Company’ or ‘Acme Corporation’) and its subsidiaries (hereinafter - ‘the Group’) invest in the operation and management of rental real estates (offices and land development) in Latvia. As at 30 June 2016 Acme Corporation was the parent for four Latvian registered limited liability companies – Slokas 161 SIA (DIY anchored retail real estate), Neatkarīgā patentu aģentūra SIA (office anchored real estate), Big Truck SIA (logistic development) and Muižas Parks SIA (logistic development). In both office and retail segments rents have stabilized. Delinquent rents are being well managed at the moment by our property manager. The financial performance of the Group during first half of 2016 was as expected. Retail Property at Slokas iela 161 has recently been let to Gym LV SIA doing business as Lemon Gym. With Cita Santehnika and Gym LV the Slokas property appears to be stable. Office The office sector is fully let out. For our offices gross rent has settled to a market rate of €10.00 to €12.00 per square meter per month. There are some historical outliers to the current market rate pulling the offices average below current market. Land Management has engaged an architectural firm to prepare the detailed planning for the property. Detailed planning is expected to be complete during 2016. Bond Whilst the bond is listed, it continued to demonstrate a significant level of illiquidity in the first half of 2016. The Group repurchased 73 bonds during first half of 2016 from one of the bondholders. Acme Corporation has made repayment of principal to bondholders of record with the January, April and July 2016 payments. Acme Corporation has made all coupon payments on the bonds to date. Senior Debt At the time of writing one month EURIBOR is quoted at approximately minus 0.37%. These rates continue to be unprecedentedly low and have positive effect onto the Group’s cash flow; movements up in interest rates will have negative impact on the Group’s cash flows. Management is considering a seven year interest rate derivative to fix our borrowing base rate. The Group is open to consider acquisition of new assets. Nevertheless the key focus is on conservative cash flow management, improvement of operations and paying down bank debt. David Allen DeRousse Member of the Board Riga, 30 August 2016



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STATEMENT OF DIRECTORS’ RESPONSIBILITY

The Board of Directors of Acme Corporation SIA is responsible for the preparation of the consolidated financial statements of the Group. The condensed consolidated interim financial statements on pages 5 to 12 are prepared in accordance with the accounting records and source documents and present fairly the financial position of the Group as of 30 June 2016 and the results of its operations and cash flows for the period of 6 months ended 30 June 2016. The condensed consolidated interim financial statements are prepared following the guidelines of IAS 34 “Interim Financial Reporting” as adopted in the European Union on a going concern basis. Appropriate accounting policies have been applied on a consistent basis. Prudent and reasonable judgments and estimates have been made by the Board of Directors in the preparation of the condensed consolidated interim financial statements. The Board of Directors of Acme Corporation SIA is responsible for the maintenance of proper accounting records, the safeguarding of the Group’s assets and the prevention and detection of fraud and other irregularities in the Group. The Board of Directors is also responsible for operating the Group in compliance with the legislation of the Republic of Latvia. These condensed consolidated financial statements are not audited.

David Allen DeRousse Member of the Board Riga, 30 August 2016



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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Note 30.06.2016 31.12.2015 EUR EUR ASSETS Non-current assets 4 Goodwill 605 127 - Property, plant and equipment 416 242 144 647 Investment property 12 165 119 12 228 446 13 186 488 12 373 093 Current assets Inventory 103 56 Trade receivables 16 011 16 697 Current income tax assets - 50 184 Loans - 9 125 Other debtors 134 704 482 401 Cash and cash equivalents 417 262 226 757 568 080 785 220 Total assets 13 754 568 13 158 313

EQUITY

Capital and reserves attributable to equity holders of the Group

Share capital 2 844 2 844 Retained earnings/ (accumulated deficit) 4 726 601 (10 526 513) Profit for the year 694 146 15 253 114 Total equity 5 423 591 4 729 445 LIABILITIES Non-current liabilities 5 Borrowings 6 372 671 5 296 713 Deferred income tax liabilities 1 055 356 1 036 162 7 428 027 6 332 875 Current liabilities Borrowings 462 024 1 722 463 Trade and other payables 440 901 373 480 Current income tax liabilities 25 50 902 950 2 095 993 Total liabilities 8 330 977 8 428 868 Total equity and liabilities 13 754 568 13 158 313 The notes on pages 9 to 12 are an integral part of these condensed interim consolidated financial statements. David Allen DeRousse Member of the Board Riga, 30 August 2016



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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Note 6m 2016 6m 2015 EUR EUR CONTINUING OPERATIONS Revenue 674 650 637 761 Cost of sales (373 612) (337 879) Gross profit 301 038 299 882 Selling expenses (3 854) (1 539) Administrative expenses (44 116) (193 974)6 Other operating income 573 789 - Other operating expenses (14 144) (25 371) Operating profit 812 713 78 998 Finance income - 140 147 Finance costs (99 273) (191 909) Profit before income tax 713 440 27 236 Income tax (19 294) (21 063) Profit for the year from continuing operations 694 146 6 173 DISCONTINUED OPERATIONS Profit for the year from discontinued operations - 13 578 145 PROFIT FOR THE YEAR - 13 584 318 Other comprehensive income - - Total comprehensive income for the year 694 146 13 584 318

Attributable to: Equity holders of the Company 694 146 13 584 318 The notes on pages 9 to 12 are an integral part of these condensed interim consolidated financial statements. David Allen DeRousse Member of the Board Riga, 30 August 2016



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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Attributable to the equity holders of the Company

Share capitalAccumulated

deficitProfit for the

period Total equity EUR EUR EUR EUR Balance at 1 January 2015 2 844 (12 745 457) 2 218 944 (10 523 669)Transfer to accumulated deficit - 2 218 944 (2 218 944) -Effect on disposal of subsidiaries - (15 127) - (15 127)Profit for the reporting period - - 13 584 318 13 584 318

Balance at 30 June 2015 (unaudited) 2 844 (10 541 640) 13 584 318 3 045 522 Balance at 1 January 2016 2 844 (10 526 513) 15 253 114 4 729 445Transfer to retained earnings - 15 253 114 (15 253 114) -Profit for the reporting period - - 694 146 694 146

Balance at 30 June 2016 (unaudited) 2 844 4 726 601 694 146 5 423 591 The notes on pages 9 to 12 are an integral part of these condensed interim consolidated financial statements. David Allen DeRousse Member of the Board Riga, 30 August 2016



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CONSOLIDATED CASH FLOW STATEMENT

Note 6m 2016 6m 2015 EUR EUR Cash flows from operating activities Profit before income tax 713 440 13 605 381 Adjustments for: Depreciation 243 584 239 882 Loss on disposal of fixed assets - 537 Interest income - (212) Interest expense 99 273 151 267 Gain on elimination of bonds at consolidation - (43 970) Effect on disposal of subsidiaries - (13 511 809)

Consolidation adjustment: gain on elimination of intercompany

balances pertinent to assignment of debt (569 487) Changes in working capital Inventory (47) - Trade and other receivables 9 854 (8 971) Trade and other payables 68 692 13 113 Cash generated from operations 565 309 445 218 Income tax paid and transferred (16 828) (63 743) Net cash generated from operating activities 548 481 381 475 Cash flows from investing activities 4 Acquisition of a subsidiary, net of cash (89 486) - Improvements made to investment properties (376 849) (32 665) Repayments on issued loans - 3 505 Interest received - 4955 Purchase of bonds - (124 626) Proceeds from sale of subsidiaries, net of cash 400 000 5 026 920 Net cash used in investing activities (66 335) 4 873 629 Cash flows from financing activities Proceeds from loans 1 400 000 400 000 Repayment of loans (1 522 475) (5 166 094) Repurchase of bonds (80 691) - Interest payments (88 475) (233 002) Net cash used in financing activities (291 641) (4 999 096) Net increase/ (decrease) in cash and cash equivalents 190 505 256 008 Cash and cash equivalents at the beginning of the period 226 757 437 154 Cash and cash equivalents at the end of the period 417 262 693 162 The notes on pages 9 to 12 are an integral part of these condensed interim consolidated financial statements. David Allen DeRousse Member of the Board Riga, 30 August 2016



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NOTES TO THE INTERIM FINANCIAL STATEMENTS 1. General information Core activities of Acme Corporation SIA (‘the Company’) and its subsidiaries (together ‘the Group’) are operation and management of rental retail real estates and rental office real estates in Latvia. The Company is a limited liability company incorporated and domiciled in the Republic of Latvia. The address of its registered office is Citadeles 12, Riga LV-1010, Latvia. The Company was formed as a result of restructuring the Group. These condensed consolidated interim financial statements were authorized for issue by the Board of Directors on 30 August 2016. The Company has the following participating interest in subsidiaries:

Name Country

Participating interest in share capital of subsidiaries at 30.06.2016

Participating interest in share capital of subsidiaries at 31.12.2015

Big Truck SIA Latvia 100% 100%

Neatkarīgā patentu aģentūra SIA Latvia 100% 100%

Muižas Parks SIA Latvia 100% -

Slokas 161 SIA Latvia 100% 100% 2. Basis of preparation These condensed consolidated financial statements cover the period from 1 January 2016 to 30 June 2016. They have been prepared following the guidelines of IAS 34 “Interim Financial Reporting”. They do not include all of the information required in annual financial statements in accordance with IFRS, and should be read in conjunction with the annual consolidated financial statements of Acme Corporation SIA for the year ended 31 December 2015, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted in EU. 3. Accounting policies The accounting policies applied are consistent with those of the annual consolidated financial statements of Acme Corporation SIA for the year ended 31 December 2015, as described in those annual consolidated financial statements. Income taxes in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.



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4. Acquisitions On 14 January 2016 the Company entered into agreement with related company H.B.I. SIA for acquisition of 100% of shares of Muižas parks SIA. The acquisition was made for the Group to gain 100% control of the development land in Kekava parish, which prior to acquisition was only part owned by Big Truck SIA. For consolidation purposes it is assumed that acquisition was made on 1 January 2016. The details of the business combination are as follows: (a) Consideration transferred Purchase consideration stands at EUR 90 000. It was fully settled in cash. (b) Assets acquired and liabilities recognized at the date of acquisition EURNon-current assets Property, plant and equipment 3 203Investment property 71 800 75 003Current assets Inventory 2 113Other debtors 15Cash and cash equivalents 514 2 642Current liabilities Borrowings from the Group and its related companies 592 707Current income tax liabilities 50Other payables 15 592 772

Identifiable net assets (515 127) (c) Goodwill arising on acquisition Consideration transferred 90 000Less: fair value of net identifiable assets (negative) 515 127Goodwill arising on acquisition 605 127 The Group has not tested goodwill for impairment as of 30 June 2016. It will be done before the end of the current annual period, tentatively during last quarter of 2016. (d) Net cash outflow on acquisition of subsidiary Consideration paid in cash (90 000)Less: cash balances acquired 514 (89 486) (e) Goodwill Goodwill of EUR 605 127 is related to the Group’s capacity to 100% control the development land and resultant benefits in the form of recovery of impairment and/or potential future profitability either through disposal or development of the land. Goodwill has been allocated to the property development segment and is not expected to be deductible for tax purposes.



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(f) Impact of acquisition on the results of the Group Muižas Parks SIA during the period from 1 January 2016 until 30 June 2016 had no revenues and incurred a loss of EUR 269. 5. Borrowings In 2016 the Group repurchased 73 bonds at total consideration of EUR 80 691. By 30 June 2016 the Group in total has repurchased 4 278 out of 5 030 bonds. The fair value of the bonds as at 30 June 2016 stands at EUR 831 231, if assessed with reference to the price at which transfer of 73 bonds was executed during public trading session on 13 May 2016, being the sole transaction executed during first part of 2016.

6. Related party transactions On 2 May 2016 a company controlled by the Group’s shareholders assigned to the Company claim from Muižas Parks SIA of EUR 579 487 for total consideration of EUR 10 000. Due to netting of intercompany balances stemming from this transaction on 30 June 2016, the Group has realised gain of EUR 569 487. This amount in disclosed in Consolidated Statement of Comprehensive Income within the caption ‘Other operating income’. 7. Segment reporting Management currently identifies the Group’s operating segments with reference to the type of real estate that the Group owns. These operating segments are monitored and strategic decisions are made on the basis of operating results for each property which are reported in the same form as general purpose financial statements. Segment information can be analysed as follows for the 6 month period ended 30 June 2016:

Grocery

rent Household

rent Office rent

Property develop-

ment Total

EUR EUR EUR EUR EUR

Revenue from external customers - 35 189 639 461 - 674 650

Revenue from other segments - - - - -

Segment revenues - 35 189 639 461 - 674 650

Profit/ (loss) before tax - (29 884) 297 277 (11 925) 255 468

Segment assets - 991 587 13 489 468 204 323 14 685 378

Segment information for the 6 month period ended 30 June 2015 is as follows:

Grocery

rent Household

rent Office rent

Property develop-

ment Total

EUR EUR EUR EUR EUR

Revenue from external customers - 44 429 593 332 - 637 761

Discontinued operations 157 269 25 410 - - 182 679

Segment revenues 157 269 69 839 593 332 - 820 440

Profit/ (loss) before tax 46 380 9 117 160 057 (13 491) 202 063

Segment assets - 846 300 12 646 564 521 054 14 013 918



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The totals presented for the Group’s operating segments reconcile to the Group’s loss before tax as presented in its financial statements as follows:

6m 2016 6m 2015 EUR EURRevenues Total segment revenues 674 650 637 761Discontinued operations - 182 679Group revenues 674 650 820 440

Profit or loss Segment profit/ (loss) before tax 255 468 202 063Gain on disposal of subsidiaries - 13 511 809Operating expenses of the Company (5 919) (121 283)Finance items of the Company (15 244) (85 543)Finance items within the Group (90 352) 11 556Gain on elimination of intercompany balances pertinent to assignment of debt 569 487 87 355Group profit before income tax 713 440 13 605 957

acme corporation sia un-audited condensed consolidated interim

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