At the same time, the recent discovery of potentially significant natural gas and oil deposits within the boundaries of the Cypriot exclusive economic zone perplexes the geographic and political relationships and developments as Cyprus is in the crossroad of 3 continents.

Any failure to effect and implement an economic restructuring plan, may have a significant negative effect on the financials of the Cypriot economy that could lead to a default and the abandonment of the Euro currency. Such result would have a destabilizing effect on the operations of the Company at the corporate level.  Cyprus has achieved within the first half of 2015 to return to the international debt markets which signifies a return to normality.

On that note, the Company had proactively evaluated the probable effect of the measures in relation to the levy on deposits and the restrictions on capital movement applied to Cyprus based financial institutions. The Company held most of its liquidity with non-Cypriot owned banking institutions, partly in Cyprus and partly outside Cyprus and to this date all operations of the Group's throughout Ukraine continued to be carried out normally.

4.1.1.2 Ukraine

Nearly two years after the clashes that resulted in the fall of the incumbent government in November 2013, the deterioration and finally breaking off of Russia-Ukraine relations and the loss of part of Ukraine's geographic area, the situation remains particularly volatile. The social and geopolitical instability continues to affect not only Ukraine's economic and political well-being, but also relations between Russia and the rest of the world, as the international financial markets remain volatile.

Although Ukraine had made significant progress in increasing its gross domestic product, decreasing inflation, stabilizing its currency, increasing real wages and improving its trade balance between 2011 and 2013 these gains have already being reversed as a result of the current tough relations  with Russia which has plunged the country into a state of  war and separatism.

The implementation of reforms has been impeded by lack of political consensus, controversies over privatization, the restructuring of the energy sector, the removal of exemptions and privileges for certain state-owned enterprises or for certain industry sectors, the limited extent of cooperation with international financial institutions and non-stable taxing environment. Ukraine has engaged in broad discussion with its lender including IMF, for a restructuring of its foreign debt. Such discussions are crucial for the future economic development of the country.  Overall, the future remains uncertain for the country, even though steps have been made towards European integration Should the IMF reforms are implemented and the foreign debt is restructured as well as political stability reemerges the country's economy has the potential to boom. As Ukraine's government relies to a significant extent on official or multilateral borrowings to avoid bankruptcy, finance its budget deficit, fund its payment obligations under domestic and international borrowings and support foreign exchange reserves on the current debt discussions are critical for  Ukraine's ability to achieve a stable political environment to implement strategic, institutional and structural reforms but seems to be mainly depending on how long and how severe the current geopolitical conflict will last.

In the first quarter of 2015, real GDP decreased by (-17,2%) year-on-year. In January-June 2015, consumer price inflation reached 48,1% year-on-year, compared to 5,8% inflation in the first half of 2014. Major sources of price inflation during the first six months of 2015 were sharp depreciation of the hryvnya and the resultant increase in prices for imported goods, growth of the state-regulated tariffs and high inflation expectations. The basic consumer price index, which reflects demand pressure, increased by 40,6% in January-June 2015, compared to the 4% growth in the first half of 2014.

Apart from the international and internal political turmoil, Ukraine's legal system continuous to be in transition and is, therefore, subject to greater risks and uncertainties than a more mature legal system.  In particular, risks associated with the Ukrainian legal system include, but are not limited to:

(i) inconsistencies between and among the Constitution of Ukraine and various laws, presidential decrees, governmental, ministerial and local orders, decisions, resolutions and other acts;

(ii) provisions in the laws and regulations that are ambiguously worded or lack specificity and thereby raise difficulties when implemented or interpreted;

(iii) difficulty in predicting the outcome of judicial application of Ukrainian legislation; and

(iv) the fact that not all Ukrainian resolutions, orders and decrees and other similar acts are readily available to the public or available in understandably organized form. 

Furthermore, several fundamental Ukrainian laws either have only relatively recently become effective or are still pending hearing or adoption by the Parliament.  The recent origin of much of Ukrainian legislation, the lack of consensus about the scope, content and pace of economic and political reform and the rapid evolution of the Ukrainian legal system in ways that may not always coincide with market developments, place the enforceability and underlying constitutionality of laws in doubt, and result in ambiguities, inconsistencies and anomalies. 

In addition, Ukrainian legislation often contemplates implementing regulations. Often such implementing regulations have either not yet been promulgated, leaving substantial gaps in the regulatory infrastructure, or have been promulgated with substantial deviation from the principal rules and conditions imposed by the respective legislation, which results in a lack of clarity and growing conflicts between companies and regulatory authorities.

Tax laws are changing and compared to more developed market economies are in a non-mature level thus creating often an unclear tax environment of unusual complexity. This particularly may affect negatively the ability of the Group to recuperate VAT paid and/or to utilize operating losses as a carry forward tax shield.

During the year from the first quarter of 2014, the Ukrainian hryvnya was subject to significant devaluation. Starting from 7,99 UAH / USD in February 2014, the official exchange rate depreciated to 15,78 UAH / USD at the end of 2014 and reached its record low of 30 UAH/USD in February 2015. By the end of the first quarter of 2015 the official exchange rate stabilized at around 23 UAH/USD. As a result the National Bank of Ukraine, among other measures, imposed certain temporary restrictions to the Banks on processing client payments and on purchasing foreign currencies on the inter-banking market as well as certain capital controls towards foreign payments. 

The final resolution and impact of the political crisis are difficult to predict and the ongoing crisis may further adversely affect Ukrainian economy. Subsequent to 30th of June 2015 the Group has been operating in the normal course of business and the Management of the Group believes that it has undertaken all necessary measures to maintain the economic stability of the Group under these circumstances.

4.1.1.3 Greece

During the period the Hellenic Republic continued discussions with the creditor institutions (EU/ECB/IMF/ESM) resulting in retaining the risk of political and economic instability of the country. Failure to reach agreement at the end of June led to the implementation of capital controls in the banking sector, a 3-week bank holiday on 27 June, as well as the lapse of the existing economic support program for the country which led to the failure of the Hellenic Republic to repay an instalment to the IMF on 30 June.

Following a referendum on a deal proposed by international institutions and further negotiations, a preliminary agreement was reached on 12 July for a 3-year €86 billion support package, which was followed in August by the signing of a related  agreement and the ratifications by Greek and a number of EU member country parliaments of this agreement in August, signaling the commitment of Greece to remain in the Eurozone and effect any necessary reforms requested by the creditor institutions as a prerequisite to capital deployment. As such and following elections in September which secured another tenure for the government that reached this agreement, political and economic instability seems to be withdrawing.

Overall, the program has an aim to reduce the risk of economic instability in Greece; however there is still risk around implementation of the program. The implementation of the program and its effects on the economy are beyond the Group's control.

Various risks emerge should the program not be implemented as planned, including restrictions on use of local bank deposits, liquidity of the financial sector and businesses, recoverability of receivables, impairment of assets, sufficiency of financing by the lending banks, serving of existing financing arrangements and/or compliance with existing terms and financial covenants of such arrangements. These and any possible further negative developments in Greece could impact the results and financial position of the Group΄s Greek operations to some extent, in a manner not currently determinable.

The Group has been closely assessing developments in Greece and preparing for a number of eventualities around the Greek crisis, in line with its established risk management policy in order to ensure that timely actions and response are undertaken so as to minimize any impact on the Group's business and operations.

4.1.2 Risks associated with property holding

Several factors may affect the economic performance and value of the Group's properties, including: 

·      risks associated with construction activity at the properties, including delays, the imposition of liens and defects in workmanship;  

·      the ability to collect rent from tenants , on a timely basis or at all, taking also into account the UAH rapid devaluation;

·      the amount of rent and the terms on which lease renewals and new leases are agreed being less favorable than current leases;  

·      cyclical fluctuations in the property market generally;  

·      local conditions such as an oversupply of similar properties or a reduction in demand for the properties;

·      the attractiveness of the property to tenants or residential purchasers;  

·      decreases in capital valuations of property;  

·      changes in availability and costs of financing, which may affect the sale or refinancing of properties;

·      covenants, conditions, restrictions and easements relating to the properties;  

·      changes in governmental legislation and regulations, including but not limited to designated use, allocation, environmental usage, taxation and insurance;  

·      the risk of bad or unmarketable title due to failure to register or perfect our interests or the existence of prior claims, encumbrances or charges of which we may be unaware at the time of purchase;  

·      the possibility of occupants in the properties, whether squatters or those with legitimate claims to take possession;   

·      the ability to pay for adequate maintenance, insurance and other operating costs, including taxes, which could increase over time; and

·      political uncertainty, acts of terrorism and acts of nature, such as earthquakes and floods that may damage the properties.

4.1.3 Property Market price risk

Market price risk is the risk that the value of the Company's portfolio investments will fluctuate as a result of changes in market prices. The Group's assets are susceptible to market price risk arising from uncertainties about future prices of the investments. The Group's market price risk is managed through diversification of the investment portfolio, continuous elaboration of the market conditions and active asset management. To quantify the value of its assets and/or indicate the possibility of impairment losses, the Company commissioned internationally acclaimed valuers.

Valuations reported as at 31 December 2014 take into account recent political developments in Ukraine. Given the nature of the Group's assets the most immediate effect would be the prolongation of the period needed to market and effectively sell an asset under such duress conditions.

The BoD is monitoring the situation to ensure that assets value is preserved while at the same time through diversification according to the strategic plan of the Company, Ukrainian operations are gradually becoming part of a larger structure.

4.1.4 Interest rate risk

Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates.

The Group's income and operating cash flows are substantially independent of changes in market interest rates as the Group has no significant interest‑bearing assets apart from its cash balances that are mainly kept for liquidity purposes.

The Group is exposed to interest rate risk in relation to its borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. All of the Group's borrowings are issued at a variable interest rate. Management monitors the interest rate fluctuations on a continuous basis and acts accordingly.

4.1.5 Credit risk

Credit risk arises when a failure by counter parties to discharge their obligations could reduce the amount of future cash inflows from financial assets at hand at the end of the reporting period. Cash balances are held with high credit quality financial institutions and the Group has policies to limit the amount of credit exposure to any financial institution.

Management has been in continuous discussions with banking institutions monitoring their ability to extend financing as per the Group's needs. The sovereign debt crisis has affected the pan-European banking system during 2011 and 2012 imposing financing uncertainties for new development projects.  The financial crisis in the European Union periphery has strained any remaining liquidity and the financial institutions in the region (including those that have Italian, Greek or Austrian parent) have entered into deleveraging programs.

4.1.6 Currency risk

Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates.

Currency risk arises when future commercial transactions and recognized assets and liabilities are denominated in a currency that is not the Group's functional currency. Most of the Group's transactions, including the rental proceeds are denominated in € or pegged to € or USD (the latter being the case of Ukraine). For the rest of the foreign exchange exposure Management monitors the exchange rate fluctuations on a continuous basis and acts accordingly, by limiting net exposures to a few days to 2 months.

Apart from liquidity maintained in local currency for operating reasons the Group's liquid assets are held in EUR denominated deposit accounts while most of the inflows of the company are pegged to the €/USD It should be noted that the current political uncertainty in Ukraine, and the currency devaluation may affect the Group's income streams indirectly through affecting the financial condition of the tenants of the Group's properties their solvency and their income generating capacity. Management is monitoring the situation closely and acts accordingly.

4.1.7 Capital risk management

The Group manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to shareholders through the optimization of the debt and equity balance. The Group's core strategy is described in note 31 of the condensed consolidated interim financial statements.

4.1.8 Compliance risk

Compliance risk is the risk of financial loss, including fines and other penalties, which arises from non‑compliance with laws and regulations of the state. Although the Group is trying to limit such risk, the uncertain environment in which it operates in various countries increases the complexities handled by Management.

4.1.9 Litigation risk

Litigation risk is the risk of financial loss, interruption of the Group's operations or any other undesirable situation that arises from the possibility of non‑execution or violation of legal contracts and consequentially of lawsuits. The risk is restricted through the contracts used by the Group to execute its operations and is discussed in note 29.

4.2.  Operational risk

Operational risk is the risk that derives from the deficiencies relating to the Group's information technology and control systems as well as the risk of human error and natural disasters. The Group's systems are evaluated, maintained and upgraded continuously.

4.3. Fair value estimation

The fair values of the Group's financial assets and liabilities approximate their carrying amounts at the end of the reporting period. Valuations reported as at 31 December 2014 take into account past political developments in Ukraine which given the nature of the Group's assets the most immediate effect would be the prolongation of the period needed to market and effectively sell an asset under such duress conditions.

5. Critical accounting estimates and judgments

The accounting estimates and judgments used in the preparation of the condensed consolidated interim financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2014.