13 March 2017

 

Raven Russia Limited ("Raven Russia" or the "Company")

 

Results for the year ended 31 December 2016

 

The Board of Raven Russia releases the results for the year ended 31 December 2016.

 

Highlights

 

·      IFRS profit after tax $7.7 million (2015: Loss of $192.4 million);

·      Underlying earnings after tax of $47.1 million (2015: $54.6 million);

·      Basic underlying earnings per share 7.17 cents (2015: 8.17 cents);

·      IFRS basic earnings per share 1.17 cents (2015: Loss per share 28.81 cents);

·      Year end cash balance of $198.6 million (2015: $202.3 million);

·      Diluted net asset value per share 71 cents (2015: 70 cents); and

·      Distribution of 2p (2015: 1p) by way of tender offer buy back of 1 in 26 shares at 52p.

 

CEO Glyn Hirsch said "Local markets feel like they are bouncing along the bottom and we have backed that belief through seeking acquisition opportunities. We are beginning to feel more confident and look forward to improving macro conditions and hard evidence of improved trading on the ground."

 

 

Enquiries

 

Raven Russia Limited                                                                                                            Tel: + 44 (0) 1481 712955

Anton Bilton                                                                                    

Glyn Hirsch

 

Novella Communications                                                                                                        Tel: +44 (0) 203 151 7008

Tim Robertson

Toby Andrews

 

N+1 Singer                                                                                                                           Tel: +44 (0) 20 7496 3000

Corporate Finance - James Maxwell / Liz Yong

Sales - Alan Geeves / James Waterlow

 

Ravenscroft                                                                                                                          Tel: +44 (0) 1481 729100

Semelia Hamon

 

 

This announcement contains forward-looking statements that involve risk and uncertainties. The Group's actual results could differ materially from those estimated or anticipated in the forward-looking statements as a result of many factors. Information contained in this announcement relating to the Company should not be relied upon as a guide to future performance.

 

About Raven Russia

 

Raven Russia was founded in 2005 to invest in class A warehouse complexes in Russia and lease to Russian and International tenants. Its Ordinary Shares, Preference Shares and Warrants are listed on the Main Market of the London Stock Exchange and admitted to the official list of The International Stock Exchange Authority ("TISEA"). Its Convertible Preference Shares are admitted to the official list of the TISEA and trading on SETSqx market of the London Stock Exchange. The company has a market capitalisation of approximately £335 million and the capital value of all of its listed instruments is £610 million.  The Company operates out of offices in Guernsey, Moscow and Cyprus and has to date completed a portfolio of circa 1.5million square metres of Grade "A" warehouses in Moscow, St Petersburg, Rostov-on-Don and Novosibirsk. For further information visit the Company's website: www.ravenrussia.com

 

Chairman's Message

 

As with my message at the half year, I continue on a more positive note. Our short term objective of improving our balance sheet and seeking acquisitions has been successful and results for the year have exceeded our expectations.

 

Underlying earnings for the year have remained healthy at $47 million (2015: $55 million) with the foreign exchange environment improving for us. Property values have fallen but only slightly, resulting in a deficit of $43 million for the year, driven by the drop in estimated rental values ("ERVs") (2015: loss of $257 million). This has had a marked effect on our IFRS earnings and we have recorded a much improved post tax profit of $7.7 million in 2016 following an after tax loss in 2015 of $192.4 million.

 

The issue of new convertible preference shares in July, raising £109 million, has allowed us to reduce our secured, amortising debt and the cost of that amortisation. We have repaid $165 million of secured debt and amortisation in the year.

 

Included in this was the payment of $16 million for the release from existing bank facilities of $31 million, resulting in a $15 million book profit.

 

Following this restructuring, we still had almost $200 million of cash at the year end and have since announced the conditional acquisition of three properties in St Petersburg for $83 million at an initial yield of over 16%. We expect to complete this transaction in the next month. We have cash of $215 million today and are continuing to assess potential acquisitions.

 

This positive progress is tempered by the fact that our average occupancy levels remained at 81% over the year although this belies our efforts dealing with maturities and securing new lettings.

 

As the percentage of our Rouble denominated leases increased, this translated into a drop in US Dollar denominated net operating income ("NOI") from $174 million in 2015 to $152 million in 2016. Rouble rents now account for 26% (2015: 21%) of our warehouse gross lettable area ("GLA").

 

This gives basic underlying earnings per share of 7.17 cents (2015: 8.17 cents), basic IFRS earnings per share of 1.17 cents (2015: loss per share 28.81 cents) and diluted NAV per share of $0.71 (2015: $0.70).

 

Whilst a number of macroeconomic and political factors have positively contributed to Russian sentiment in the last 12 months and particularly since the year end, we still remain wary and our occupancy levels reflect the continuing caution in the market. That said, we intend to distribute 2p by way of a tender offer buy back of 1 share in every 26 at 52p, making 2.5p for the year.

 

We are again extremely grateful for the continued support of our shareholders over the last twelve months.

 

 

Richard Jewson

Chairman

12 March 2017

 

Strategic Report

 

Chief Executive's Report

 

Dear Shareholders,

 

Let's make Raven Russia great again!

 

That's what we were working flat out on all last year with little macro help. Hard times call for hard work and it has been a year of decisive action and execution. 

 

We are pleased with our results after such a hectic and difficult period. Diluted NAV per share was $0.71 at the year end (2015: $0.70) and IFRS profit before tax, after some one-off profit and further write downs on the portfolio, was $22.2 million (2015: loss of $205.1 million). Basic underlying earnings per share were 7.2 cents (2015: 8.2 cents). With $199 million of year end cash balances, we feel it appropriate to distribute the equivalent of 2p per share, making 2.5p for the year (2015: 2p) by way of a tender offer buy back of 1 in 26 shares at 52p per share.

 

Facing the increasing "Roubilisation" of our business we are embracing that change and ensuring all new rouble rents benefit from attractive annual indexation which varies between 5-7% per annum. In 2016 we let 167,000sqm of space and our average vacancy rate ran at 19%.

 

In order to strengthen our balance sheet and provide funding for opportunistic acquisitions we were delighted by shareholder support for our £109 million issue of convertible preference shares. Those supporters have already been rewarded with 3.2p in dividends and a 16% price rise on their 100p investment.

 

Key employees continue to fight very hard in a difficult business environment for every Dollar, Pound or Rouble of value and we are pleased to have held the team together. 

 

We have put our additional liquidity to good use with $108 million being applied to reorganise the Group's banking. Maturities have been extended, amortisation reduced and covenants adjusted. All this whilst maintaining an average cost of debt of 7.5% (2015: 7.3%) for the Group.

 

In particular we managed to make a $15 million profit by opportunistically negotiating a release from $31 million of loans for a payment of $16 million. (Not everyone has the same view of the future).

 

We also sold a small land plot in St Petersburg for a profit of $3.8 million.

 

Local markets feel like they are bouncing along the bottom and we have backed that belief through seeking acquisition opportunities. We are in the process of investing $83 million to buy a portfolio of income producing properties on a passing yield of 16% and at a price that's below the replacement cost of the assets. The additional annual income of $13 million will flow straight to the bottom line. We continue our quest for more acquisitions.

 

It was disappointing to suffer a small drop in the portfolio valuation at the year end. Hopefully we have seen the last of the falls in ERV and look forward to some hardening of yields.

 

Agents' reports predict a reduction in warehouse supply and increasing take up. We hope they are right as that can only be positive.

 

With the oil price higher, the Rouble stronger and Trump in the Oval Office we are beginning to feel more confident and look forward to improving macro conditions and more hard evidence of improved trading on the ground. 

 

The Russian economy appears to be stabilising and inflation is falling. Further reductions in Rouble interest rates also have the potential to increase the attraction of our high yielding assets.

 

We have been through a storm yet there's the chance of clear skies on the distant horizon. 

 

Glyn Hirsch

Chief Executive Officer

12 March 2017

 

Business Model

 

Our Strategy

 

We continue with our strategy of building and maintaining an investment portfolio of Grade A logistics warehouses in Russia with the aim of producing rental income that delivers progressive distributions to our shareholders.

 

Following the rapid drop in oil prices at the end of 2014 and the effect that had on our market with the related depreciation of the Rouble exchange rate, the last two years were focussed on maintaining the integrity of our existing portfolio. The restructuring of our balance sheet in the second half of last year and the recent relative stability in the market has now allowed us to return to a more progressive business model.

 

Business Model

 

Our business model continues to adapt to underlying Rouble denominated leases rather than the US Dollar pegged model that existed until the beginning of 2015. The issue of convertible preference shares during the year and the use of the proceeds to reduce secured amortising debt facilities means that income generated from the existing portfolio supports on-going cash flow obligations. With a cash surplus we can now return to building our top line by acquisition and build to suit opportunities.  We are currently considering a variety of different earnings enhancing projects and a variety of different fund raising structures, including the issue of convertible preference shares.  Due diligence is being completed on potential warehouse acquisitions with passing rents varying between $10 million and $15 million and initial yields of circa 15%.

 

At the year end, 24% of our warehouse income was denominated in Roubles. These leases represent 26% of the Gross Lettable Area ("GLA") of our warehouse portfolio.

 

As well as managing this transition in our business model fundamentals, we remain focussed on the other elements of our model, being:

 

-     Tenant size and covenant;

-     Tenant concentration;

-     SPV structure; and

-     Conservative gearing.

 

Even after the turmoil of the last two years, we continue to have relatively high occupancy in our portfolio and tenants meet their contractual obligations when due. Our tenants tend to be large domestic or international groups with strong covenants which allow them to take large lettings. Our average letting size by tenant is 11,240sqm (2015: 9,500sqm). We do not have one tenant with more than 11% (2015: 11%) of our portfolio's GLA and the top ten tenants account for 46% (2015: 45%) of our portfolio in GLA terms and 58% (2015: 56%) in income terms.

 

Each of our projects sits in a special purpose vehicle ("SPV") with debt secured on individual assets, no cross collateralisation and minimal recourse to the holding company. As our debt was previously reasonably highly amortised, historically, our gearing has remained manageable, even at times of trough valuations.  The partial repayment programme completed during the year has increased covenant headroom. Our asset specific debt represents 55% (2015: 65%) loan to value at the year end and consolidated balance sheet gearing is 56% (2015: 58.%) [note 35d].

 

Key Performance Indicators ('KPIs')

 

We continue to focus on occupancy KPIs together with the mix of Rouble and US Dollar denominated income and how that is likely to change over the medium term. The components of our balance sheet gearing and our operating cash flows after interest and debt amortisation as a measure of debt service cover were key in our decision to issue new convertible preference shares in the year. .

 

The ability to distribute to ordinary shareholders from cash covered underlying earnings and operating cash-flows after interest remains our focus when determining distribution policy.

 

Portfolio Review

 

Leasing and maturities

 

Warehouse	Moscow	St Petersburg	Regions
Space (000 sqm)	1,077 (73%)	184 (12%)	222 (15%)
NOI ($m)	112 (76%)	18 (12%)	17 (12%)
Office	Moscow	St Petersburg	Regions
Space (000 sqm)	-	16 (100%)	-
NOI ($m)	-	5 (100%)	-

 

The geographical split for warehouse space and income has not varied in the year.

 

Average vacancy has remained stable at 19%, although this does not mean we haven't been busy in leasing, re-negotiating leases and renewing expiring contracts with our customers.

'000 sqm	2016	2017	2018	2019	2020-2027	Total
Maturity profile at 1 January 2016	228	210	131	225	429	1,223
Lease extensions	81	44	20	12	0	157
Vacated/terminated	147	17	23	0	0	187
Remaining lease maturity profile	0	149	88	213	429	879

 

157,000sqm of existing leases have been renegotiated and extended in the financial year. Space vacated on maturity and early terminations of weaker covenants totalled 187,000sqm which, together with existing vacant space, gives 295,700sqm of vacancy at 31 December 2016. The result is a new lease maturity profile as follows:

'000 sqm	2017	2018	2019	2020-2027	Total
Remaining lease maturity profile	149	88	213	429	879
Maturity profile of lease extensions	50	42	21	44	157
New leases	16	35	18	98	167
Maturity profile at 31 December 2016	215	165	252	571	1,203

 

This reflects 167,000sqm of new leases signed in the year in addition to the 157,000sqm of existing lease renegotiations. There are also potential breaks in the portfolio of 70,500sqm in 2017 and 33,100sqm in 2018. Since the year end, a further 16,500sqm of renewals and new lettings have been completed and letters of intent on 4,800sqm signed.

 

During the year we have successfully defended claims from tenants in various levels of the Russian courts and the International Commercial Arbitration Court in Moscow seeking to undermine our signed lease contracts. Whilst we always seek to find compromise if possible, the strength of our contracts has protected us in these litigation challenges.

 

We managed to resolve our dispute with Dixy at Noginsk with both parties agreeing to settle their differences and Dixy leasing 43,000sqm on a new eight year lease at market rent.

 

Our historic long term US Dollar contracts to strong covenants still underpin our NOI, but where space is vacant and available to let we have taken a market lead strategy of leasing to a broader cross section of tenants on varying lease terms to create cash-flow in the short term. By their nature these leases are generally less than five years, contain breaks, are denominated in Roubles and have indexation based on Russian CPI.

 

At the year end 50% of our warehouse GLA had US Dollar denominated leases with an average warehouse rental level of $125 per sqm and a weighed average term to maturity of 3.0 years. Rouble denominated or capped leases account for 26% of our total warehouse space with an average warehouse rent of Roubles 5,120 per sqm and weighted average term to maturity of 4.0 years. Rouble leases have an average minimum annual indexation of 7.7%.

 

Currency exposure of warehouse space	USD	USD/RUB cap	RUB	EUR	Vacant	Total
	sqm '000	sqm '000	sqm '000	sqm '000	Sqm '000	sqm '000
	745	79	313	50	296	1,483
% of total	50%	5%	21%	4%	20%	100%

 

Currency exposure of NOI	USD	USD/RUB cap	RUB	EUR	Total
	$m	$m	$m	$m	$m
	107	9	26	6	148
% of total	72%	6%	18%	4%	100%

 

Investment Portfolio

 

Moscow

 

In Moscow there are nine projects totalling 1,077,000sqm, producing income of $112 million and with 79% of space let.

Warehouse complex	Space (000 sqm)	NOI ($m)	Occupancy
Pushkino	213	17	78%
Istra	206	21	88%
Noginsk	204	26	84%
Klimovsk	158	19	82%
Krekshino	118	15	91%
Nova Riga	67	2	24%
Lobnya	52	8	100%
Sholokhovo	45	3	48%
Southern	14	1	80%

 

The Moscow portfolio had a net reduction of 17,900sqm during the year reflecting the highly competitive market around the capital and optimisation of supply chains by tenants following lease expiries.

 

St Petersburg and Regions

 

Warehouse complex	Space ('000 sqm)	Annualised NOI ($m)	Occupancy
St Petersburg
Shushary	148	15	98%
Pulkovo	36	3	68%
Regions
Novosibirsk	121	10	78%
Rostov	101	7	67%
Office
St Petersburg
Constanta	16	5	100%

 

The regional markets of St Petersburg, Rostov and Novosibirsk have fared better in 2016. These markets certainly feel under less pressure than Moscow as the amount of speculative new development has historically been less. In Rostov and Novosibirsk we are seeing good interest from major occupiers for larger areas of space which we hope to covert into new lettings during the course of the next six months.

 

Tenant Mix

 

Warehouse Tenant Type	Distribution	Retail	Manufacturing	Third Party Logistics operators	Other
Space ('000 sqm)	135 (11%)	347 (29%)	177 (15%)	523 (44%)	6 (1%)

 

 

Portfolio Yields

 

Warehouse	Moscow (%)	St Petersburg (%)	Regions (%)
2015	12.0	13.25	14.5
2016	11 - 12.5	13.25	14.5

 

The investment properties and additional phases of existing projects were valued by Jones Lang LaSalle ("JLL") at the year end, in accordance with the RICS Valuation and Appraisal guidelines, and are carried at a market value of $1.36 billion (see notes 11 & 12 to the financial statements). This has resulted in a decrease of $43.6 million in portfolio value since the end of 2015.

 

Yields have remained stable during the year, although JLL have now taken to quoting a range for yield across all sectors to reflect the difference in quality of assets, leases and differing currencies. The yields used for the portfolio fall within this range. Estimated rental values (ERVs) fell at the start of the year and through the summer, but have now stabilised, albeit at the level where development returns are extremely marginal.

 

No speculative development is planned at the current time although there is 26 hectares at Noginsk on which 134,000sqm of space can be built and at Nova Riga there is the potential to add a further 130,000sqm on the additional 25 hectares of land. Our regional land bank is also attracting interest from some of the largest retailers who are looking to expand their regional distribution hubs, although we would only start development with a long term pre-let agreement signed.

 

Land Bank

 

	Location	Property/Warehouse Complex	Land plot size (ha)
Additional phases of completed property	Moscow	Noginsk	26
		Nova Riga	25
		Lobnya	6
	Regions	Rostov-On-Don	27
Land bank	Regions	Chelyabinsk	59
		Omsk	19
		Omsk 2	9
		Ufa	48
		Novgorod	44
Total			263

 

The Market

 

The warehouse market remains a Rouble denominated business with the highest level of demand from major retailers improving their supply chains across Russia. Completion of new space in the Moscow region was at its lowest level since 2012 at circa 770,000sqm and since the middle of 2016 the market vacancy rate has improved to 12.2%, with the final quarter of the year seeing the highest take up in market history. Total take up for the year was circa 1.2 million sqm, although a considerable amount of this reflected build to suit properties delivered to end users requirements.

 

Rents have stabilised in the second half of the year at between 3,500 and 4,000 Roubles per sqm which at the year end exchange rate to the US Dollar reflect $58-$66 per sqm. At this level, development remains a very marginal return business, unless a tenant has signed a pre-lease agreement.

 

In St Petersburg and our two regional hubs of Rostov and Novosibirsk the level of new supply has dwindled and the vacancy rates are less than 10%. Rents and occupancy have generally held up better than in Moscow, with prime rental levels at similar rates to Moscow having traditionally been 10-15% less.

 

Investment volumes in the year increased to $4.2 billion, with 80% of this in Moscow. Over 90% of all deals were funded by Russian capital, with a concentration on the office market and only $239 million in the warehouse sector. JLL indicate prime yields in the range of 11-12.5% for Moscow warehouses.

 

Looking forward to 2017, vacancy rates are expected to fall, although not substantially and rents stabilise or begin to increase. The supply of new developments will continue to be subdued.

 

Finance Review

 

The theme for this year has been one of adapting our balance sheet to properly support our income profile in today's market. We have also benefited from a more benign macro economic environment following the volatility of the first quarter of 2016.

 

Underlying earnings together with operating cash-flows after interest are the KPIs we use when assessing our ability to make covered distributions. The former also allows a comparison of operating results before mark to market valuation movements. The reconciliation between underlying and IFRS earnings is given in note 9 to the accounts.

 

Underlying Earnings	2016	2015
(Adjusted non IFRS measure)	$'000	$'000
Net rental and related income	151,741	174,123
Administrative expenses	(24,221)	(26,361)
Long term incentives	(3,133)	-
Bad debt provision	(22)	(3,720)
Foreign exchange gains	18,079	1,223
Share of profits of joint ventures	1,780	2,518
Operating profit	144,224	147,783
Net finance charge	(81,923)	(82,836)
Underlying profit before tax	62,301	64,947
Tax	(15,179)	(10,389)
Underlying profit after tax	47,122	54,558
Basic underlying earnings per share (cents)	7.17	8.17

 

Net rental and related income continues to reduce as maturing leases move from US Dollar pegged to Rouble denominated with a drop of $22.4 million over the year.

 

Administrative expenses reduce following a switch of costs from standard employment to a long term incentive charge. Success in recovery of bad debts has also meant no significant charge arose during the year (2015: $3.7 million).

 

Foreign exchange movements continued the theme from the interim results, weak Sterling and strengthening Rouble boosting the US Dollar value of cash and income and reducing the US Dollar value of our Sterling preference shares. This contributed an $18.1 million gain (2015: $1.2 million) to underlying profits and $10.9 million (2015: loss of $1.8 million) to net assets, going some way to recover the significant foreign exchange losses that arose in the income statement in 2014.

 

Finance costs remained flat over the year at $85.4 million (2015: $85.7 million) although the balance sheet mix changed in the second half as we used the proceeds from our convertible preference share issue to reduce our secured amortising debt. Finance income from cash balances held increased to $3.4 million (2015: $2.9 million).

 

Underlying tax increased to $15.2 million (2015: $10.4 million) and we expect this to be a continuing trend as new tax rules are introduced limiting the offset of tax losses in the future. Actual tax paid, after the offset of losses, was $7.7 million (2015: $8.7 million).

 

With the support of an improving foreign exchange environment, underlying earnings have held up well in the year at $47.1 million (2015: $54.6 million) giving Basic Underlying Earnings per Share of 7.2 cents (2015: 8.2 cents).

 

IFRS Earnings	2016	2015
	$'000	$'000
Net rental and related income	151,741	174,123
Administrative expenses	(25,322)	(26,775)
Bad debt provision	(22)	(3,720)
Share based payments and other long term incentives	(9,077)	(3,594)
Foreign exchange profits	18,079	1,223
Share of joint venture profits	1,780	2,518
Operating profit	137,179	143,775
Loss on revaluation	(43,324)	(256,548)
Profit on disposal	3,807	-
Net finance charge	(75,416)	(92,283)
IFRS profit/(loss) before tax	22,246	(205,056)
Tax	(14,527)	12,697
IFRS profit/(loss) after tax	7,719	(192,359)

 

IFRS earnings reflect a number of positive events in the year.

 

Asset valuations continue to align with market ERVs but at a significantly reduced rate compared to 2015. The revaluation loss for the year is $43.3 million (2015: loss of $256.5 million).

 

We also sold a land plot at Pulkovo in St Petersburg generating $3.8 million profit and negotiated a release from bank facilities with HSH Nordbank, generating a $15.4 million profit which is included in Finance Income.

 

Share based payments and other long term incentive charges have increased following the introduction of the new remuneration scheme in the year with some offset against underlying employment costs.

 

This all resulted in a significant improvement in IFRS earnings from a loss of $192.4 million in 2015 to a profit of $7.7 million in 2016.

 

Investment Properties

 

The market value of our investment property fell during the year but at a significantly reduced rate compared to 2015. This was driven by a small reduction in expected ERVs. The year end market value was $1.324 billion (2015: $1.357 billion). After cost additions of $7.1 million during the year this generated a revaluation loss of $40.4 million (2015: $251.6 million).

 

Investment properties under construction including our land bank are valued at $40.8 million (2015: $38.1 million) a revaluation loss of $3.1 million offset by additional costs incurred and positive foreign exchange movements. As noted above we also disposed of land in St Petersburg, generating a profit of $3.8 million.

 

Cash and Debt

 

Cash flow Summary	2016	2015
	$'000	$'000
Net cash generated from operating activities	118,012	136,152
Net cash (used)/generated/in investing activities	(992)	12,868
Net cash used in financing activities	(120,759)	(110,300)
Net (decrease)/increase in cash and cash equivalents	(3,739)	38,720
Effect of foreign exchange rate changes	69	(7,812)
(Decrease)/increase in cash	(3,670)	30,908
Closing cash and cash equivalents	198,621	202,291

 

The summary of cash and debt reflects the work undertaken to reorganise the Group balance sheet. The cash balance movement was minimal in the year but this is after the repayment of secured debt facilities of $164.5 million including amortisation, funded by the issue of convertible preference shares which generated $128.3 million of cash. As part of this exercise, the maturity of secured debt facilities was extended and future amortisation costs reduced.

 

Apart from annual amortisation, we now have no significant debt maturities until 2019 and our weighted average term to maturity has been extended by almost two years to 4.7 years at 31 December 2016.

 

Our cost of debt has increased slightly to 7.5% (2015: 7.3%) as LIBOR increases remain below our cap levels.

 

Debt	2016	2015
	$m	$m
Fixed rate debt	131	260
Debt hedged with swaps	112	212
Debt hedged with caps	469	456
	712	928
Unhedged debt	37	-
	749	928
Unamortised loan origination costs and accrued interest	(9)	(9)
Total debt	740	919
Undrawn facilities	-	-
Weighted average cost of debt	7.48%	7.26%
Weighted average term to maturity	4.7	4.0

 

 

The quantum and number of facilities maturing each year is shown below.

 

Year	2017	2018	2019	2020	2021	2022	2023-2024
Debt maturing ($ million)	0	14	149	39	258	201	88
Percentage of total debt maturing (%)	0	2	20	5	34	27	12
Number of maturing facilities	0	1	3	2	4	3	2

 

As referred to earlier, we have now cleared our facilities with HSH Nordbank which were secured on the Konstanta office block in St Petersburg. This was precipitated by the proposed sale of part of their debt book which was publically announced last year and involved us repaying the majority of one facility and our release from the second, generating a profit of $15 million when compared to the carrying value of the loans of $31 million.

 

Since the year end, we have completed the refinancing of another of our higher amortising loans, repaying the existing bank $75 million of principal and drawing $80 million under the new loan which matures in 2024. The cost of debt is on similar terms to the previous facility but with a much reduced amortisation profile.

 

Subsidiaries

 

The Group's trading subsidiaries have again performed well in the year. Raven Mount contributed $2.1 million of profit (2015: $3.9 million) even in this environment of depressed Sterling exchange rates.

 

Our third party logistics subsidiary, Roslogistics, continues to grow its underlying Rouble turnover and has increased its warehouse space by 26,000sqm, now operating out of 129,000sqm in total.

 

Outlook

 

There has been a significant amount of effort from all areas of the business this year, not only to maintain the occupancy levels of our assets and the integrity of our leases but in fundraising in an uncertain market and then applying those funds to secure significant benefit to our on-going cash flows and balance sheet security. The hard work has also left us in a strong position to take advantage of high yielding opportunities as evidenced by the recent announcement on the acquisition of three assets in St Petersburg.

 

Risk Report

Risk Appetite

The risks facing the business have been at the top of the Board's agenda over the last 24 months and have necessitated rapid changes in our approach.

 

Our risk profile fundamentally remains the same. We invest in a lower risk asset class with historic structural undersupply in a higher risk jurisdiction. As explained in last year's Annual Report, external events meant that our market moved from income streams pegged to the US Dollar to Rouble denominated contracts. In a weak Rouble environment, this can mean progressively lower US Dollar income as current leases mature and are renewed on market terms.

 

The first nine months of this year were focussed on restructuring the Group balance sheet to support the market changes whilst maintaining occupancy levels in the existing portfolio. With this achieved we are now focussed on rebuilding our Net Operating Income through the acquisition of market rented assets or build to suit development projects. Therefore after two years of a defensive position our risk appetite is once again aligned to supporting growth.

 

Risk Management and Internal Controls

 

The business is of a size and culture where risks are discussed and reviewed, formally and informally, at all levels. The Board is responsible for the management of risk and regularly carries out a robust assessment of the principal risks and uncertainties affecting the business, discusses how these impact operations, performance and solvency and what mitigating actions, if any, can be taken. Executive Board members are actively involved in all day to day operational and decision making processes of the business.

 

The Audit Committee is responsible for ensuring that the internal control procedures are robust and that risk management processes are appropriate. A fuller explanation of the processes is given in the Audit Committee Report.

 

At an operational level, weekly meetings are held with the eight heads of department, the two members of Senior Management and two Executive Board members to discuss all business matters including the risk environment. A sub committee of seven of this group including the two Executive Board members, together with the Company Secretary, form a separate Risk Committee which meets bi-monthly to formally review the Group and Company's risk profile and reports to the Audit Committee twice a year.

 

The Audit Committee has not identified any significant failings or weaknesses in the internal control and risk assessment procedures during the year. The introduction of a formal property database management system will be completed early in the second quarter of this year and our financial reporting has adapted to run a three year profile of our contracted Net Operating Income which is updated on a weekly basis.

 

 

Principal Risks and Uncertainties

 

We have set out in the following table the principal risks and uncertainties that face our business, our view on how those risks have changed during the year and a description of how we mitigate or manage those risks. We have also annotated those risks that have been considered as part of the viability assessment.

 

There are no significant changes in the principal risks supported by the sustained period of higher oil prices and stronger Rouble.

 

Financial Risk

 

Risk	Impact	Mitigation	Change
Oil price and Foreign Exchange (Viability Statement Risk)   Oil price volatility returns in the medium term leading to a weakening Rouble.	This leads to further falls in US Dollar equivalent income and an increase in the credit risk of those tenants who remain in US Dollar pegged leases.       Reduced consumer demand reduces appetite for new lettings, renewal of existing leases and restricts rental growth.	While the majority of new leases now being signed are Rouble denominated with Russian inflationary indexation, we still have a high proportion of US Dollar pegged rents.   The logistics market continues to be undersupplied at current levels of consumer demand. A lack of projected investment in new projects has led to market reports forecasting that vacancy levels will remain low.	ð
Interest rates (Viability Statement Risk)   Increases in US LIBOR	Cost of debt increases and Group profitability and debt service cover reduce.	The majority of our variable cost of debt is hedged with the use of swaps and caps on US LIBOR or fixed rate facilities.	ð
Bank Covenants (Viability Statement Risk)   The significant drop in market rents impacts on both loan to value ("LTV") and debt service cover ratio ("DSCR") covenants.	The likelihood of debt facility covenant breaches increases.	We have part prepaid secured, amortising debt facilities during the year, increasing covenant headroom.   There is very little recourse to the holding company and no cross collateralisation between projects on events of default.	ò

 

Property Investment

Acquisitions Immature investment market where legacy issues are common with Russian acquisitions.

Where acquisitions are possible, legacy issues may erode earnings enhancement and integration into our existing systems may involve excessive management resource.

We have an internal management team with both international and Russian experience allowing possible legacy and integration issues to be identified prior to acquisition; and   External advisers undertake full detailed due diligence.

ñ

 

 

Russian Domestic Risk

 

Risk	Impact	Mitigation	Change
Legal Framework   The legal framework in Russia is in the early stages of its development.       This could encourage   tenants to attack lease terms where they now perceive those to be unfavourable.	The large volume of new legislation from various state bodies is open to interpretation, puts strain on the judicial system and can be open to abuse.   Increased litigation on existing leases in an attempt to renegotiate US Dollar denominated leases or seek early termination of contracts.	We have an experienced in house legal team including a litigation specialist. We use a variety of external legal advisors when appropriate.   Our lease agreements have been challenged and have proven to be robust in both ICAC arbitration and in Russian Courts.	ð
Russian Taxation   Russian tax code is changing in line with global taxation trends in areas such as transfer pricing and capital gains tax.	Tax treaties may be renegotiated and new legislation may increase the Group's tax expense.	The key tax treaty for the Group is with Cyprus and this was renegotiated between the two countries during 2013 with no significant impact on the business;   Changes in capital gains tax rules have led to a change in our calculation of Adjusted  Diluted NAV per share; and   Russia remains a relatively low tax jurisdiction with 20% Corporation tax.	ñ

 

Personnel Risks

 

Risk	Impact	Mitigation	Change
Key Personnel   Failing to retain key personnel.	Strategy becomes more difficult to flex or implement.	The Remuneration Committee and Executives review remuneration packages against comparable market information;   Employees have regular appraisals and documented development plans and targets; and   A new incentive scheme was approved at the last AGM with a focus on retention.	ð

 

 

Political and Economic Risk

 

Risk	Impact	Mitigation	Change
Ukraine and sanctions   The Minsk agreement is not implemented satisfactorily and sanctions against Russia remain in place for the foreseeable future and are potentially increased.	Continued isolation of Russia from international markets and exacerbation of the slow down in the Russian economy.	It is difficult to mitigate against the worst case scenario if escalation were to close Russia's borders to Western markets.  However, we have:   -     Maximised cash reserves held at holding company level; -     An organisational structure that would allow us to continue to operate the Russian business autonomously if necessary; and -     A special purpose vehicle ("SPV") structure that protects the holding company assets (principally cash) in a worst case scenario.   With political events in the West, following Brexit and the US elections and with upcoming elections in other EU countries, market sentiment has, for the time being at least, improved towards Russia.	ð

 

Change key

 

            ñ     Increased risk in the period

        

ðStable risk in the period

        

òDecreased risk in the period

 

 

Going Concern

 

The financial position of the Group, its cash flows, liquidity position and borrowings are described in the Financial Review and the notes to the accompanying financial statements.  In addition, in note 35 to the financial statements there is a description of the Group's objectives and policies for managing its capital, financial instruments and hedging activities and its exposure to credit and liquidity risk.

 

The Board receives monthly updates on future cash flow projections and has regular working capital reports presented, in particular, as part of the half year and full year reporting process. After making appropriate enquiries and examining sensitivities that could give rise to financial exposure, the Board has a reasonable expectation that the Company and the Group have adequate resources to continue operations for the foreseeable future.  Accordingly, the Group continues to adopt the going concern basis in preparation of these financial statements.

 

Directors' Responsibility Statement

 

The Statement of Directors' Responsibilities below has been prepared in connection with the Company's full Annual Report and Accounts for the year ended 31 December 2016.

 

The Board confirms to the best of its knowledge:

 

The financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company and the undertakings included in the consolidation taken as a whole;

 

The strategic report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and

 

The Annual Report and Accounts, taken as a whole, are fair balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy.

 

This responsibility statement was approved by the Board of Directors on 12 March 2017 and is signed on its behalf by:

 

Mark Sinclair                                                                                                Colin Smith

Chief Financial Officer                                                                                    Chief Operating Officer

 

GROUP INCOME STATEMENT
For the year ended 31 December 2016
			2016			2015
		Underlying earnings	Capital		Underlying earnings	Capital
			and other	Total		and other	Total
	Notes	$'000	$'000	$'000	$'000	$'000	$'000
Gross revenue	4 / 5	195,294	-	195,294	219,704	-	219,704
Property operating expenditure and cost of sales		(43,553)	-	(43,553)	(45,581)	-	(45,581)
Net rental and related income		151,741	-	151,741	174,123	-	174,123
Administrative expenses	4 / 6	(24,243)	(1,101)	(25,344)	(30,081)	(414)	(30,495)
Share-based payments and other long term incentives	32	(3,133)	(5,944)	(9,077)	-	(3,594)	(3,594)
Foreign currency profits		18,079	-	18,079	1,223	-	1,223
Operating expenditure		(9,297)	(7,045)	(16,342)	(28,858)	(4,008)	(32,866)
Share of profits of joint ventures	16	1,780	-	1,780	2,518	-	2,518
Operating profit / (loss) before profits and losses on investment property		144,224	(7,045)	137,179	147,783	(4,008)	143,775
Unrealised loss on revaluation of investment property	11	-	(40,192)	(40,192)	-	(251,198)	(251,198)
Profit on disposal of investment property under construction	12	-	3,807	3,807	-	-	-
Unrealised loss on revaluation of investment property under construction	12	-	(3,132)	(3,132)	-	(5,350)	(5,350)
Operating profit / (loss)	4	144,224	(46,562)	97,662	147,783	(260,556)	(112,773)
Finance income	7	3,436	18,086	21,522	2,909	1,584	4,493
Finance expense	7	(85,359)	(11,579)	(96,938)	(85,745)	(11,031)	(96,776)
Profit / (loss) before tax		62,301	(40,055)	22,246	64,947	(270,003)	(205,056)
Tax	8	(15,179)	652	(14,527)	(10,389)	23,086	12,697
Profit / (loss) for the year		47,122	(39,403)	7,719	54,558	(246,917)	(192,359)
Earnings per share:	9
Basic (cents)				1.17			(28.81)
Diluted (cents)				1.16			(28.81)
Underlying earnings per share:	9
Basic (cents)		7.17			8.17
Diluted (cents)		6.81			7.93
The total column of this statement represents the Group's Income Statement, prepared in accordance with IFRS as adopted by the EU. The "underlying earnings" and "capital and other" columns are both supplied as supplementary information permitted by IFRS as adopted by the EU.  Further details of the allocation of items between the supplementary columns are given in note 9.
All items in the above statement derive from continuing operations.
All income is attributable to the equity holders of the parent company.  There are no non-controlling interests.
The accompanying notes are an integral part of this statement.

 

GROUP STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2016
			2016		2015
			$'000		$'000
Profit / (loss) for the year			7,719		(192,359)
Other comprehensive income, net of tax
Items to be reclassified to profit or loss in subsequent periods:
Foreign currency translation on consolidation			10,942		(1,753)
Total comprehensive income for the year, net of tax			18,661		(194,112)
All income is attributable to the equity holders of the parent company.  There are no non-controlling interests.
The accompanying notes are an integral part of this statement.

 

 

GROUP BALANCE SHEET
As at 31 December 2016
		2016		2015
	Notes	$'000		$'000
Non-current assets
Investment property	11	1,300,643		1,333,987
Investment property under construction	12	41,253		39,129
Plant and equipment		3,044		3,141
Goodwill	14	1,882		2,245
Investment in joint ventures	16	9,731		14,968
Other receivables	17	3,724		6,145
Derivative financial instruments	19	5,012		5,585
Deferred tax assets	26	27,451		25,523
		1,392,740		1,430,723
Current assets
Inventory		771		1,381
Trade and other receivables	18	52,669		50,264
Derivative financial instruments	19	358		233
Cash and short term deposits	20	198,621		202,291
		252,419		254,169
Total assets		1,645,159		1,684,892
Current liabilities
Trade and other payables	21	65,408		53,384
Derivative financial instruments	19	943		2,097
Interest bearing loans and borrowings	22	40,787		104,724
		107,138		160,205
Non-current liabilities
Interest bearing loans and borrowings	22	699,038		814,021
Preference shares	23	131,703		156,558
Convertible preference shares	24	119,859		-
Other payables	25	25,259		31,653
Derivative financial instruments	19	67		1,794
Deferred tax liabilities	26	61,869		55,619
		1,037,795		1,059,645
Total liabilities		1,144,933		1,219,850
Net assets		500,226		465,042
Equity
Share capital	27	12,578		12,776
Share premium		216,938		224,735
Warrants	28	1,161		1,167
Own shares held	29	(7,449)		(52,101)
Convertible preference shares	24	8,453		-
Capital reserve		(245,426)		(210,176)
Translation reserve		(177,199)		(188,141)
Retained earnings		691,170		676,782
Total equity	30 / 31	500,226		465,042
Net asset value per share (cents):	31
Basic		76		72
Diluted		71		70
Adjusted net asset value per share (cents):	31
Basic		71		72
Diluted		68		70
The financial statements were approved by the Board of Directors on 12 March 2017 and signed on its behalf by:
Mark Sinclair		Colin Smith
Chief Financial Officer		Chief Operating Officer
The accompanying notes are an integral part of this statement.

 

 

GROUP STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2016
		Share	Share		Own Shares	Convertible Preference Shares	Capital	Translation	Retained
For the year ended 31 December 2015		Capital	Premium	Warrants	Held		Reserve	Reserve	Earnings	Total
	Notes	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000
At 1 January 2015		13,623	267,992	1,195	(63,649)	-	16,597	(186,388)	647,919	697,289
Loss for the year		-	-	-	-	-	-	-	(192,359)	(192,359)
Other comprehensive income		-	-	-	-	-	-	(1,753)	-	(1,753)
Total comprehensive income for the year		-	-	-	-	-	-	(1,753)	(192,359)	(194,112)
Warrants exercised	27 / 28	7	198	(28)	-	-	-	-	-	177
Own shares acquired	29	-	-	-	(76)	-	-	-	-	(76)
Own shares allocated	29	-	-	-	7,932	-	-	-	(9,145)	(1,213)
Ordinary shares cancelled	27 / 29	(854)	(43,455)	-	3,692	-	-	-	-	(40,617)
Share-based payments	32d	-	-	-	-	-	-	-	3,594	3,594
Transfer in respect of capital losses		-	-	-	-	-	(226,773)	-	226,773	-
At 31 December 2015		12,776	224,735	1,167	(52,101)	-	(210,176)	(188,141)	676,782	465,042
For the year ended 31 December 2016
Profit for the year		-	-	-	-	-	-	-	7,719	7,719
Other comprehensive income		-	-	-	-	-	-	10,942	-	10,942
Total comprehensive income for the year		-	-	-	-	-	-	10,942	7,719	18,661
Warrants exercised	27 / 28	2	41	(6)	-	-	-	-	-	37
Convertible preference shares issued	24	-	-	-	-	8,453	-	-	-	8,453
Own shares acquired	29	-	-	-	(133)	-	-	-	-	(133)
Own shares disposed	29	-	-	-	43,161	-	-	-	(28,549)	14,612
Own shares allocated	29	-	-	-	1,543	-	-	-	(1,441)	102
Ordinary shares cancelled	27 / 29	(200)	(7,838)	-	81	-	-	-	-	(7,957)
Share-based payments	32d	-	-	-	-	-	-	-	1,409	1,409
Transfer in respect of capital losses		-	-	-	-	-	(35,250)	-	35,250	-
At 31 December 2016		12,578	216,938	1,161	(7,449)	8,453	(245,426)	(177,199)	691,170	500,226
The accompanying notes are an integral part of this statement.

 

GROUP CASH FLOW STATEMENT
For the year ended 31 December 2016
			2016		2015
		Notes	$'000		$'000
Cash flows from operating activities
Profit / (loss) before tax			22,246		(205,056)
Adjustments for:
Depreciation		6	1,101		1,599
Provision for bad debts		6	22		3,720
Share of profits of joint ventures		16	(1,780)		(2,518)
Finance income		7	(21,522)		(4,493)
Finance expense		7	96,938		96,776
Profit on disposal of investment property under construction		12	(3,807)		-
Loss on revaluation of investment property		11	40,192		251,198
Loss on revaluation of investment property under construction		12	3,132		5,350
Foreign exchange profits			(18,079)		(1,223)
Share-based payments and other long term incentives		32	5,944		3,594
			124,387		148,947
Changes in operating working capital
Decrease / (increase) in operating receivables			4,419		(4,892)
Decrease / (increase) in other operating current assets			391		(159)
Decrease in operating payables			(8,026)		(2,967)
			121,171		140,929
Receipts from joint ventures			4,521		3,954
Tax paid			(7,680)		(8,731)
Net cash generated from operating activities			118,012		136,152
Cash flows from investing activities
Payments for investment property and investment property under construction			(9,163)		(20,028)
Refunds of VAT on construction			493		4,877
Release of restricted cash			-		25,392
Proceeds from disposal of investment property under construction		12	4,595		-
Purchase of plant and equipment			(653)		(755)
Loans repaid			337		473
Interest received			3,399		2,909
Net cash (used in) / generated from investing activities			(992)		12,868
Cash flows from financing activities
Proceeds from long term borrowings			-		80,944
Repayment of long term borrowings			(108,150)		-
Loan amortisation			(56,343)		(57,787)
Bank borrowing costs paid			(66,808)		(69,465)
Exercise of warrants		27 / 28	37		177
Preference shares purchased			(713)		-
Ordinary shares purchased		27 / 29	(7,988)		(41,906)
Ordinary shares sold		29	14,612		-
Dividends paid on preference shares			(15,088)		(17,156)
Dividends paid on convertible preference shares			(4,349)		-
Issue of convertible preference shares		24	128,327		-
Premium paid for derivative financial instruments			(4,296)		(5,107)
Net cash used in financing activities			(120,759)		(110,300)
Net (decrease) / increase in cash and cash equivalents			(3,739)		38,720
Opening cash and cash equivalents			202,291		171,383
Effect of foreign exchange rate changes			69		(7,812)
Closing cash and cash equivalents		20	198,621		202,291
The accompanying notes are an integral part of this statement.

 

NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2016
1. General information   Raven Russia Limited (the "Company") and its subsidiaries (together the "Group") is a property investment group specialising in commercial real estate in Russia.   The Company is incorporated and domiciled in Guernsey under the provisions of the Companies (Guernsey) Law, 2008. The Company's registered office is at La Vieille Cour, La Plaiderie, St Peter Port, Guernsey GY1 6EH.   The audited financial statements of the Group for the year ended 31 December 2016 were authorised by the Board for issue on 12 March 2017.
2. Accounting policies   Basis of preparation   The Company has taken advantage of the exemption conferred by the Companies (Guernsey) Law, 2008, section 244, not to prepare company financial statements as Group financial statements have been prepared for both current and prior periods.  The Group financial statements are presented in US Dollars and all values are rounded to the nearest thousand dollars ($'000) except where otherwise indicated.   The principal accounting policies adopted in the preparation of the Group financial statements are set out below.  The policies have been consistently applied to all years presented, unless otherwise indicated.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the accounting policies.  The areas involving a high degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 3.
Going concern   The financial position of the Group, its cash flows, liquidity position and borrowings are described in the Financial Review and the notes to these financial statements.  After making appropriate enquiries and examining sensitivities that could give rise to financial exposure, the Board has a reasonable expectation that the Group has adequate resources to continue operations for the foreseeable future.  Accordingly, the Group continues to adopt the going concern basis in the preparation of these financial statements.
Statement of compliance   The financial statements of the Group have been prepared in accordance with International Financial Reporting Standards adopted for use in the European Union ("IFRS") and the Companies (Guernsey) Law, 2008.
Changes in accounting policies   The accounting policies adopted are consistent with those of the previous financial year.  The Group has adopted new and amended IFRS and IFRIC interpretations as of 1 January 2016, which had no impact on the financial position or performance of the Group.
Certain new standards, interpretations and amendments to existing standards have been published that are mandatory for later accounting periods and which have not been adopted early.  Of these the only three thought to have a possible impact on the Group are:   IFRS 9 Financial Instruments (effective 1 January 2018) IFRS 15 Revenue from Contracts with Customers (effective 1 January 2018) IFRS 16 Leases (effective 1 January 2019)   The Group is currently assessing the impact of these changes on its financial statements and the effect of this, if any, has yet to be determined.   The standards, amendments or revisions are effective for annual periods beginning on or after the dates noted above.
Basis of consolidation   The consolidated financial statements incorporate the financial statements of the Company, its subsidiaries and the special purpose vehicles ("SPVs") controlled by the Company, made up to 31 December each year.  Control is achieved where the Company is exposed, or has rights, to variable returns from its involvement with or ownership of the investee entity and has the ability to affect those returns through its power over the investee.   The Group has acquired investment properties through the purchase of SPVs.  In the opinion of the Directors, these transactions did not meet the definition of a business combination as set out in IFRS 3 "Business Combinations". Accordingly the transactions have not been accounted for as an acquisition of a business and instead the financial statements reflect the substance of the transactions, which is considered to be the purchase of investment property and investment property under construction.   The results of subsidiaries acquired or disposed of during the year are included in the Income Statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.   Where necessary, adjustments are made to the financial statements of entities acquired to bring the accounting policies into line with those used by the Group.   All intra-group transactions, balances, income and expenditure are eliminated on consolidation.
Joint ventures   A joint venture is a contractual arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture.  Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the activities require unanimous consent of the contracting parties for strategic financial and operating decisions.    The Group's investments in joint ventures are accounted for using the equity method.  Under the equity method, the investment in a joint venture is initially recognised at cost.  The carrying value of the investment is adjusted to recognise changes in the Group's share of net assets of the joint venture since the acquisition date.  Any premium paid for an interest in a joint venture above the fair value of the Group's share of identifiable assets, liabilities and contingent liabilities is determined as goodwill.  Goodwill relating to a joint venture is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment.   The aggregate of the Group's share of profit or loss of joint ventures is shown on the face of the Income Statement within Operating Profit and represents the profit or loss after tax.   Revenue recognition   (a) Property investment   Rental income from operating leases is recognised in income on a straight-line basis over the lease term.  Rental increases calculated with reference to an underlying index and the resulting rental income ("contingent rents") are recognised in income as they are determined.   Incentives for lessees to enter into lease agreements are spread evenly over the lease term, even if the payments are not made on such a basis.  The lease term is the non-cancellable period of the lease, together with any further term for which the tenant has the option to continue the lease, where, at the inception of the lease, the directors are reasonably certain that the tenant will exercise that option.   Premiums received to terminate leases are recognised in the Income Statement as they arise.   (b) Roslogistics   Logistics revenue, excluding value added tax, is recognised as services are provided.   (c) Raven Mount   The sale of completed property and land is recognised on legal completion.
Taxation   The Company is a limited company registered in Guernsey, Channel Islands, and is exempt from taxation.  The Group is liable to Russian, UK and Cypriot tax arising on the results of its Russian, UK and Cypriot operations.   The tax expense represents the sum of the tax currently payable and deferred tax.
(a) Current tax The tax currently payable is based on taxable profit for the year.  Taxable profit differs from net profit (or loss) as reported in the Income Statement because it excludes items of income and expenditure that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.  The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
(b) Tax provisions A current tax provision is recognised when the Group has a present obligation as a result of a past event and it is probable that the Group will be required to settle that obligation.  A provision for uncertain taxes is recorded within current tax payable (see note 21).
(c) Deferred tax Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method.  Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.  Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Unrecognised deferred tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.   Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised, based on tax rates that have been enacted or substantively enacted at the reporting date.  Deferred tax is charged or credited in the Income Statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.   Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.
(d) Value added tax Revenue, expenditure, assets and liabilities are recognised net of the amount of value added tax except:    Where the value added tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the value added tax is    recognised as part of the cost of acquisition of the asset or as part of the expenditure item as applicable; and    Receivables and payables that are stated with the amount of value added tax included.   The net amount of value added tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables, as appropriate, in the Balance Sheet.
Investment property and investment property under construction   Investment property comprises completed property and property under construction held to earn rentals or for capital appreciation or both.  Investment property comprises both freehold and leasehold land and buildings.   Investment property is measured initially at its cost, including related transaction costs.  After initial recognition, investment property is carried at fair value.  The Directors assess the fair value of investment property based on independent valuations carried out by their appointed property valuers or on independent valuations prepared for banking purposes.  The Group has appointed Jones Lang LaSalle as property valuers to prepare valuations on a semi-annual basis. Valuations are undertaken in accordance with appropriate sections of the current Practice Statements contained in the Royal Institution of Chartered Surveyors Appraisal and Valuation Standards, 2014 Edition (the "Red Book").  This is an internationally accepted basis of valuation.  Gains or losses arising from changes in the fair value of investment property are included in the Income Statement in the period in which they arise.  For the purposes of these financial statements, in order to avoid double counting, the assessed fair value is reduced by the present value of any tenant incentives and contracted rent uplifts that are spread over the lease term and increased by the carrying amount of any liability under a head lease that has been recognised in the balance sheet.   Borrowing costs that are directly attributable to the construction of investment property are included in the cost of the property from the date of commencement of construction until construction is completed.
Leasing (as lessors)   Leases where the Group does not transfer substantially all the risks and benefits incidental to ownership of the asset are classified as operating leases.  All of the Group's properties are leased under operating leases and are included in investment property in the Balance Sheet.
Financial assets   The Group classifies its financial assets into one of the categories discussed below, depending upon the purpose for which the asset was acquired.  The Group has not classified any of its financial assets as held to maturity.
(a) Fair value through profit or loss   This category comprises only in-the-money derivatives (see financial liabilities policy for out-of-the-money derivatives), which are carried at fair value with changes in the fair value recognised in the Income Statement in finance income or finance expense.   (b) Loans and receivables   These are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. In the case of the Group, loans and receivables comprise trade and other receivables, loans, security deposits, restricted cash and cash and short term deposits.   Loans and receivables are initially recognised at fair value, plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.   If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows.  The amount of the impairment loss is recognised in administrative expenses.  If in a subsequent period the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment is recognised, the previously recognised impairment loss is reversed.  Any such reversal of an impairment loss is recognised in the Income Statement.   Cash and short term deposits include cash in hand, deposits held at call with banks and other short term highly liquid investments with original maturities of three months or less.
Financial liabilities and equity instruments   Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into.   The Group classifies its financial liabilities into one of the categories listed below.   (a) Fair value through profit or loss This category comprises only out-of-the-money derivatives, which are carried at fair value with changes in the fair value recognised in the Income Statement in finance income or finance expense.   (b) Other financial liabilities Other financial liabilities include interest bearing loans, trade payables (including rent deposits and retentions under construction contracts), preference shares and other short-term monetary liabilities.  Trade payables and other short-term monetary liabilities are initially recorded at fair value and subsequently carried at amortised cost using the effective interest rate method.   Interest bearing loans and preference shares are initially recorded at fair value net of direct issue costs and subsequently carried at amortised cost using the effective interest rate method.  Finance charges, including premiums payable on settlement or redemption and direct issue costs, are charged to the Income Statement using the effective interest rate method.   An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.  The Group considers the convertible preference shares to be a compound financial instrument in that they have a liability and equity component.  On the issue of convertible preference shares the fair value of the liability component is determined and the balance of the proceeds of issue is deemed to be equity.  The Group's other equity instruments are its ordinary shares and warrants.
Own shares held   Own equity instruments which are acquired are recognised at cost and deducted from equity.  No gain or loss is recognised in the Income Statement on the purchase, sale, issue or cancellation of the Group's own equity instruments. Any difference between the carrying amount and the consideration is recognised in retained earnings.
Share-based payments and other long term incentives   The Group rewards its key management and other senior employees by a variety of means many of which are settled by ordinary, preference shares or convertible preference shares of the Company, these include the Executive Share Option Schemes, the Combined Bonus and Long Term Incentive Scheme 2015 to 2017 ("CBLTIS 2015") and the 2016 Retention Scheme.   Awards linked to or that may be settled by ordinary shares These are accounted for as equity-settled transactions in accordance with IFRS 2 Share-based Payment.  The cost of equity-settled transactions is measured by reference to the fair value at the date at which they are granted. Fair value is determined by an external valuer, using an appropriate pricing model.  In valuing equity-settled transactions, no account is taken of any service and performance conditions (vesting conditions), other than performance conditions linked to the price of the shares of the Company (market conditions).  Any other conditions, which are required to be met in order for an employee to become fully entitled to an award are considered to be non-vesting conditions.  Like market conditions, non-vesting conditions are taken into account in determining the fair value at grant date.   The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and service conditions are fulfilled.  The cumulative expense that is recognised at each reporting date until the vesting date, reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest.  The income statement expense or credit for a period represents the movement in cumulative expense recognised at the beginning and end of that period.  Where all of the conditions are communicated to the recipient of the award at the outset, the Group recognises the share-based payment expense on a graded basis.   No expense is recognised for awards that do not ultimately vest, except for equity-settled transactions where vesting is conditional upon a market or non-vesting condition, which are treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other performance and service conditions are satisfied.
Where an equity-settled award is cancelled, it is treated as if it vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately.  This includes any award where non-vesting conditions within the control of either the entity or the employee are not met.   The CBLTIS 2015 and the share component of the 2016 Retention Scheme have been accounted for in this way.   Awards not linked to or settled by ordinary shares These awards are accounted for in accordance with IAS 19 Employee Benefits whereby the Group estimates the cost of awards using the projected unit credit method, which involves estimating the future value of the preference shares or convertible preference shares, as appropriate, at the vesting date and the probability of the awards vesting.  The resulting expense is charged to the Income Statement over the performance period and the liability is remeasured at each Balance Sheet date.   The cash component of the 2016 Retention Scheme has been accounted for in this way.
Foreign currency translation   (a) Functional and presentation currency Items included in the financial statements of each Group entity are measured in the currency of the primary economic environment in which the entity operates (the "functional currency").  For the Company the directors consider this to be Sterling.  The presentation currency of the Group is United States Dollars, which the directors consider to be the key currency for the Group's operations as a whole.   (b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions.  Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at the year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Income Statement.  Non-monetary assets and liabilities are translated using exchange rates at the date of the initial transaction or when their fair values are reassessed.   (c) On consolidation The results and financial position of all the Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows: (i) assets and liabilities for each Balance Sheet are translated at the closing rate at the date of the Balance Sheet; (ii) income and expenditure for each Income Statement are translated at the average exchange rate prevailing in the period unless this does not approximate the rates ruling at the dates of the transactions in which case they are translated at the transaction date rates; and (iii) all resulting exchange differences are recognised in Other Comprehensive Income.   On consolidation, the exchange differences arising from the translation of the net investment in foreign entities are recognised in Other Comprehensive Income.  When a foreign entity is sold, such exchange differences are recognised in the Income Statement as part of the gain or loss on sale.  Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.
Dividends   Dividends to the Company's ordinary shareholders are recognised when they become legally payable.  In the case of interim dividends, this is when declared by the directors.  In the case of final dividends, this is when they are approved by the shareholders at an AGM.
3. Critical accounting estimates and judgements   The Group makes certain estimates and judgements regarding the future.  Estimates and judgements are continually evaluated and are based on historical experience as adjusted for current market conditions and other factors.  The resulting accounting estimates will, by definition, seldom equal the related actual results.  The estimates and judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below.
Judgements other than estimates   In the process of applying the Group's accounting policies the following are considered to have the most significant effect on the amounts recognised in the consolidated financial statements:
(a) Acquisitions   Properties can be acquired through the corporate acquisition of a subsidiary company.  At the time of acquisition, the Group considers whether the acquisition represents the acquisition of a business.  The Group accounts for the acquisition as a business combination where an integrated set of activities is acquired in addition to the property.  More specifically, consideration is made of the extent to which significant processes are acquired and the extent of ancillary services provided by the subsidiary.   When the acquisition of a subsidiary 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.  There were no acquisitions in 2015 or 2016.
(b) Recognition of deferred tax assets   The recognition of deferred tax assets is based upon whether it is probable that sufficient and suitable taxable profits will be available in the future, against which the reversal of temporary differences can be deducted.  Recognition, therefore, involves judgement regarding the future financial performance of the particular legal entity or tax group in which the deferred tax asset has been recognised.
Estimates
(a) Valuation of investment property and investment property under construction   The best evidence of fair value is current prices in an active market for similar lease and other contracts.  In the absence of such information, the Group determines the amount within a range of reasonable, fair value estimates.  In making its estimation the Group considers information from a variety of sources and engages external, professional advisers to carry out third party valuations of its properties.  The external valuations are completed in accordance with appropriate sections of the current Practice Statements contained in the Royal Institution of Chartered Surveyors Appraisal and Valuation Standards, 2014 Edition (the "Red Book").  This is an internationally accepted basis of valuation and is consistent with the requirements of IFRS 13. In our market, where transactional activity is minimal, the valuers are required to use a greater degree of estimation or judgement than in a market where comparable transactions are more readily available.  For the valuations at 31 December 2016 and 31 December 2015 the valuer has highlighted that as a result of market conditions at the valuation date it was necessary to make more judgements than is normally required.   The significant methods and assumptions used in estimating the fair value of investment property and investment property under construction are set out in note 13, along with detail of the sensitivities of the valuations to changes in the key inputs.
(b) Income tax   As part of the process of preparing its financial statements, the Group is required to estimate the provision for income tax in each of the jurisdictions in which it operates.  This process involves an estimation of the actual current tax exposure, together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in the Balance Sheet.   Russian tax legislation is subject to varying interpretations and changes, which may occur frequently.  New legislation and clarifications have been introduced over the last 12 months, but it remains unclear as to how these will be applied in practice.  The interpretation of the legislation that the Group adopts for its transactions and activities may be challenged by the relevant regional and federal authorities from time to time.  Additionally, there may be inconsistent interpretation of tax regulations by each local authority, creating uncertainties in the correct application of the taxation regulations in Russia.  Fiscal periods remain open to review by the authorities for the three calendar years preceding the years of review and in some circumstances may cover a longer period.  Additionally, there have been instances where new tax regulations have been applied retrospectively.  The Group is and has been subject to tax reviews which are worked through with the relevant authorities to resolve.   The Group, in making its tax provision judgements, is confident that an appropriate level of management and control is exerted in each of the jurisdictions in which it operates, all companies are tax resident in their relevant jurisdictions and are the beneficial owners of any income they receive.  Local management use their in house tax knowledge and previous experience as well as independent professional experts when assessing tax risks and the resultant provisions required.  For the current year, the Group has specifically reviewed the potential impact that new regulations may have on its financing arrangements and the provision reflects probabilities of between 20% and 100% of possible outcomes.
4. Segmental information   The Group has three operating segments, which are managed and report independently to the Board.  These comprise:   Property Investment - acquire, develop and lease commercial property in Russia; Roslogistics - provision of warehousing, transport, customs brokerage and related services in Russia; and Raven Mount - sale of residential property in the UK.   Financial information relating to Property Investment is provided to the Board on a property by property basis.  The information provided is gross rentals, operating costs, net operating income, revaluation gains and losses and where relevant the profit or loss on disposal of an investment property.  The individual properties have similar economic characteristics and are considered to be a single reporting segment.   Roslogistics is an independently managed business and the Board is presented with turnover, cost of sales and operating profits or losses after deduction of administrative expenses.   Information about Raven Mount provided to the Board comprises the gross sale proceeds, inventory cost of sales and gross profit, including the share of profits or losses of its joint venture.   Administrative expenses and foreign currency gains or losses are reported to the Board by segment.  Finance income and finance expense are not reported to the Board on a segment basis.  Sales between segments are eliminated prior to provision of financial information to the Board.   For the Balance Sheet, segmental information is provided in relation to investment property, inventory, cash balances and borrowings.  Whilst segment liabilities includes loans and borrowings, segment loss does not include the related finance costs.  If such finance costs were included in segment profit or loss, the profit from Property Investment would have decreased by $68,631k (2015: $71,571k).
(a) Segmental information for the year ended and as at 31 December 2016
Year ended 31 December 2016								Property									Raven					Segment				Central
								Investment				Roslogistics					Mount					Total				Overhead				Total
								$'000				$'000					$'000					$'000				$'000				$'000
Gross revenue								175,661				17,806					1,827					195,294				-				195,294
Operating costs / cost of sales								(35,023)				(7,991)					(539)					(43,553)				-				(43,553)
Net operating income								140,638				9,815					1,288					151,741				-				151,741
Administrative expenses
Running general and administration expenses								(13,887)				(1,355)					(920)					(16,162)				(8,081)				(24,243)
Other acquisition / abortive project costs								-				-					-					-				-				-
Depreciation								(823)				(278)					-					(1,101)				-				(1,101)
Share-based payments and other long term incentives								(2,224)				-					-					(2,224)				(6,853)				(9,077)
Foreign currency profits / (losses)								18,136				(38)					(19)					18,079				-				18,079
								141,840				8,144					349					150,333				(14,934)				135,399
Profit on disposal of investment property under construction								3,807				-					-					3,807				-				3,807
Unrealised loss on revaluation of investment property								(40,192)				-					-					(40,192)				-				(40,192)
Unrealised loss on revaluation of investment property under construction								(3,132)				-					-					(3,132)				-				(3,132)
Share of profits of joint ventures								-				-					1,780					1,780				-				1,780
Segment profit / (loss)								102,323				8,144					2,129					112,596				(14,934)				97,662
Finance income																														21,522
Finance expense																														(96,938)
Profit before tax																														22,246
As at 31 December 2016																	Property									Raven
																	Investment					Roslogistics				Mount				Total
																	$'000					$'000				$'000				$'000
Assets
Investment property																	1,300,643					-				-				1,300,643
Investment property under construction																	41,253					-				-				41,253
Investment in joint ventures																	-					-				9,731				9,731
Inventory																	-					-				771				771
Cash and short term deposits																	192,995					1,014				4,612				198,621
Segment assets																	1,534,891					1,014				15,114				1,551,019
Other non-current assets																														41,113
Other current assets																														53,027
Total assets																														1,645,159
Segment liabilities
Interest bearing loans and borrowings																	739,825					-				-				739,825
Capital expenditure
Payments for investment property and investment property under construction																	9,163					-				-				9,163
(b) Segmental information for the year ended and as at 31 December 2015
Year ended 31 December 2015									Property									Raven				Segment				Central
									Investment				Roslogistics					Mount				Total				Overhead				Total
									$'000				$'000					$'000				$'000				$'000				$'000
Gross revenue									202,286				15,267					2,151				219,704				-				219,704
Operating costs / cost of sales									(39,609)				(6,295)					323				(45,581)				-				(45,581)
Net operating income									162,677				8,972					2,474				174,123				-				174,123
Administrative expenses
Running general and administration expenses									(21,722)				(1,243)					(1,123)				(24,088)				(5,993)				(30,081)
Other acquisition / abortive project costs									1,185				-					-				1,185				-				1,185
Depreciation									(1,352)				(244)					(3)				(1,599)				-				(1,599)
Share-based payments and other long term incentives									(1,425)				-					-				(1,425)				(2,169)				(3,594)
Foreign currency profits /(losses)									1,227				(4)					-				1,223				-				1,223
									140,590				7,481					1,348				149,419				(8,162)				141,257
Profit on disposal of investment property under construction									-				-					-				-				-				-
Unrealised loss on revaluation of investment property									(251,198)				-					-				(251,198)				-				(251,198)
Unrealised loss on revaluation of investment property under construction									(5,350)				-					-				(5,350)				-				(5,350)
Share of profits of joint ventures									-				-					2,518				2,518				-				2,518
Segment (loss) / profit									(115,958)				7,481					3,866				(104,611)				(8,162)				(112,773)
Finance income																														4,493
Finance expense																														(96,776)
Loss before tax																														(205,056)
As at 31 December 2015																		Property								Raven
																		Investment				Roslogistics				Mount				Total
																		$'000				$'000				$'000				$'000
Assets
Investment property																		1,333,987				-				-				1,333,987
Investment property under construction																		39,129				-				-				39,129
Investment in joint ventures																		-				-				14,968				14,968
Inventory																		-				-				1,381				1,381
Cash and short term deposits																		196,861				691				4,739				202,291
Segment assets																		1,569,977				691				21,088				1,591,756
Other non-current assets																														42,639
Other current assets																														50,497
Total assets																														1,684,892
Segment liabilities
Interest bearing loans and borrowings																		918,745				-				-				918,745
Capital expenditure
Payments for investment property and investment property under construction																		20,028				-				-				20,028
5. Gross revenue																										2016				2015
																										$'000				$'000
Rental and related income																										175,661				202,286
Proceeds from the sale of inventory property																										1,827				2,151
Logistics																										17,806				15,267
																										195,294				219,704
The Group's leases typically include annual rental increases ("contingent rents") based on a consumer price index in Russia, Europe or the USA, which are recognised in income as they arise.  Contingent rents included in rental income for the year amounted to $2,135k (2015: $2,148k).   Details of the Group's contracted future minimum lease receivables are detailed in note 38.   The Group recognised revenue of $24.6 million (2015: $23.6 million) from a single tenant of the property investment segment that amounted to more than 10% of Group revenue.
6. Administrative expenses
																										2016				2015
(a) Total administrative expenses																										$'000				$'000
Employment costs																										11,700				14,607
Directors' remuneration																										4,882				3,502
Bad debts																										22				3,720
Office running costs and insurance																										3,218				4,039
Travel costs																										1,540				1,430
Auditors' remuneration																										617				851
Abortive project costs																										-				(1,185)
Legal and professional																										1,814				1,430
Depreciation																										1,101				1,599
Registrar costs and other administrative expenses																										450				502
																										25,344				30,495
(b) Fees for audit and other services provided by the Group's auditor
																										2016				2015
																										$'000				$'000
Audit services																										508				686
Audit related assurance services																										65				73
																										573				759
Other fees:
Taxation services																										44				12
Other services																										-				80
																										44				92
Total fees																										617				851
Ernst & Young also provide audit and taxation services for various SPVs that form part of the property operating costs.  Charges for the audit of SPVs in the year amounted to $306k (2015: $345k) and the fees for taxation services were $170k (2015: $73k).
7. Finance income and expense																										2016				2015
																										$'000				$'000
Finance income
Total interest income on financial assets not at fair value through profit or loss
Income from cash and short term deposits																										3,399				2,909
Interest receivable from joint ventures																										37				-
Other finance income
Profit on purchase and cancellation of loans and borrowings																										15,365				-
Change in fair value of open interest rate derivative financial instruments																										169				1,373
Change in fair value of foreign currency embedded derivatives																										2,552				211
Finance income																										21,522				4,493
Finance expense
Interest expense on loans and borrowings measured at amortised cost																										68,631				71,570
Interest expense on preference shares																										16,518				18,628
Interest expense on convertible preference shares																										7,475				-
Total interest expense on financial liabilities not at fair value through profit or loss																										92,624				90,198
Change in fair value of open forward currency derivative financial instruments																										2,324				2,531
Change in fair value of open interest rate derivative financial instruments																										1,990				4,047
Finance expense																										96,938				96,776
On 20 December 2016, the Group agreed to pay $16.3 million to HSH Nordbank to fully repay and discharge $31.7 million of loans secured on the Konstanta office block, generating a profit for the Group of $15.4 million in the year.   Included in the interest expense on loans and borrowings is $3.8 million (2015: $3.8 million) relating to amortisation of costs incurred in originating the loans.  Included in the interest expense on preference shares is $0.6 million (2015: $0.6 million) relating to the accretion of premiums payable on redemption of preference shares and amortisation of costs incurred in issuing preference shares.  Included in the interest expense on convertible preference shares is $2.8 million relating to the accretion of premiums payable on redemption and amortisation of costs incurred in issuing the convertible preference shares of $0.1 million.
8. Tax																										2016				2015
																										$'000				$'000
The tax expense for the year comprises:
Current taxation																										10,816				11,151
Deferred taxation (note 26)
On the origination and reversal of temporary differences																										3,694				(22,662)
On unrealised foreign exchange movements in loans																										17				(1,203)
Adjustments recognised in the period for tax of prior periods																										-				17
Tax charge / (credit)																										14,527				(12,697)
The charge / (credit) for the year can be reconciled to the profit / (loss) per the Income Statement as follows:
																										2016				2015
																										$'000				$'000
Profit / (loss) before tax																										22,246				(205,056)
Tax at the Russian corporate tax rate of 20%																										4,449				(41,011)
Tax effect of income not subject to tax and non-deductible expenses																										16,170				44,659
Tax on dividends and other inter company gains																										1,235				2,333
Tax effect of financing arrangements																										15,300				(30,478)
Movement on deferred tax assets																										(26,544)				8,783
Movement in tax provisions																										3,917				3,000
Adjustments recognised in the period for current tax of prior periods																										-				17
																										14,527				(12,697)
The majority of income not subject to tax and non-deductible expenses relates to income and expenditure arising in Guernsey.  As explained in note 7, income in Guernsey this year included the one-off waiver of a loan from HSH Nordbank.   The tax effect of financing arrangements includes inter company financing arrangements and the effect of foreign currency loans entered into by the Group's Russian subsidiaries.  Unrealised foreign exchange gains and losses are taxable or tax deductible in Russia.  Therefore the movement in each year is a factor of the related movement in underlying exchange rates, principally the US Dollar / Rouble rate.
9. Earnings measures   In addition to reporting IFRS earnings the Group also reports its own underlying earnings measure.  The Directors consider underlying earnings to be a key performance measure, as this is the measure used by Management to assess the return on holding investment assets for the long term and the Group's ability to declare covered distributions.  As a consequence the underlying earnings measure excludes investment property revaluations, gains or losses on the disposal of investment property, intangible asset movements, gains and losses on derivative financial instruments, share-based payments and other long term incentives (to the extent not settled in cash), the accretion of premiums payable on redemption of preference shares and convertible preference shares, material non-recurring items, depreciation and amortisation of loan origination costs, together with any related tax.
The calculation of basic and diluted earnings per share is based on the following data:																										2016				2015
																										$'000				$'000
Earnings
Net profit / (loss) for the year prepared under IFRS																										7,719				(192,359)
Adjustments to arrive at underlying earnings:
Profit on disposal of investment property under construction																										(3,807)				-
Unrealised loss on revaluation of investment property																										40,192				251,198
Unrealised loss on revaluation of investment property under construction																										3,132				5,350
Change in fair value of open forward currency derivative financial instruments (note 7)																										2,324				2,531
Change in fair value of open interest rate derivative financial instruments (note 7)																										1,821				2,674
Change in fair value of foreign currency embedded derivatives (note 7)																										(2,552)				(211)
Movement on deferred tax thereon																										212				(24,562)
Abortive project costs (note 6a)																										-				(1,185)
Share-based payments and other long term incentives																										5,944				3,594
Premium on redemption of preference shares and amortisation of issue costs (note 7)																										562				614
Premium on redemption of convertible preference shares and amortisation of issue costs (note 7)																										2,892				-
Depreciation (note 6a)																										1,101				1,599
Profit on purchase and cancellation of loans and borrowings (note 7)																										(15,365)				-
Amortisation of loan origination costs (note 7)																										3,811				3,839
Tax on unrealised foreign exchange movements in loans																										(864)				1,476
Underlying earnings																										47,122				54,558
													2016													2015
													Weighted													Weighted
													average													average
									Earnings				shares					EPS				Earnings				shares				EPS
IFRS									$'000				No. '000					Cents				$'000				No. '000				Cents
Basic									7,719				657,468					1.17				(192,359)				667,758				(28.81)
Effect of dilutive potential ordinary shares:
Warrants (note 28)									-				7,651									-				-
LTIP (note 32)									-				1,294									-				-
2016 Retention scheme (note 32)									-				1,009									-				-
CBLTIS 2015 (note 32)									-				275									-				-
CBLTIS 2012 (note 32)									-				-									-				-
ERS (note 32)									-				21									-				-
Convertible preference shares (note 24)									-				-									-				-
Diluted									7,719				667,718					1.16				(192,359)				667,758				(28.81)
													2016													2015
													Weighted													Weighted
													average													average
									Earnings				shares					EPS				Earnings				shares				EPS
Underlying earnings									$'000				No. '000					Cents				$'000				No. '000				Cents
Basic									47,122				657,468					7.17				54,558				667,758				8.17
Effect of dilutive potential ordinary shares:
Warrants (note 28)									-				7,651									-				11,727
LTIP (note 32)									-				1,294									-				2,478
2016 Retention scheme (note 32)									-				1,009									-				-
CBLTIS 2015 (note 32)									-				275									-				2,994
CBLTIS 2012 (note 32)									-				-									-				1,926
ERS (note 32)									-				21									-				300
Convertible preference shares (note 24)									4,584				91,851									-				-
Diluted									51,706				759,569					6.81				54,558				687,183				7.93
The finance expense for the period relating to the convertible preference shares is greater than IFRS basic earnings per share and thus the convertible preference shares are not dilutive for IFRS diluted earnings per share.  In the case of underlying earnings per share the convertible preference shares are dilutive and have been incorporated into the calculation of diluted underlying earnings per share.
10. Ordinary dividends
The Company did not declare a final dividend for the year ended 31 December 2015 or an interim dividend for 2016 and instead implemented two tender offer buy backs of ordinary shares.   In the place of a final dividend for 2015 the Company implemented a tender offer buy back of ordinary shares on the basis of 1 in every 40 shares held at a tender price of 40 pence per share, the equivalent of a final dividend of 1 pence per share.  Instead of an interim dividend for 2016 the Company implemented a tender offer buy back of ordinary shares on the basis of 1 in every 80 shares at a tender price of 40 pence per share, the equivalent of a dividend of 0.5 pence per share.
11. Investment property
Asset class													Logistics					Logistics				Logistics				Office
Location													Moscow					St Petersburg				Regions				St Petersburg				2016
Fair value hierarchy *													Level 3					Level 3				Level 3				Level 3				Total
													$'000					$'000				$'000				$'000				$'000
Market value at 1 January 2016													1,043,952					139,106				148,649				25,140				1,356,847
Property improvements and movement in completion provisions													4,906					2,022				378				(179)				7,127
Unrealised (loss) / profit on revaluation													(43,409)					303				2,819				(143)				(40,430)
Market value at 31 December 2016													1,005,449					141,431				151,846				24,818				1,323,544
Tenant incentives and contracted rent uplift balances													(17,495)					(5,332)				(1,372)				(154)				(24,353)
Head lease obligations (note 25)													1,452					-				-				-				1,452
Carrying value at 31 December 2016													989,406					136,099				150,474				24,664				1,300,643
Revaluation movement in the year ended 31 December 2016
Gross revaluation													(43,409)					303				2,819				(143)				(40,430)
Effect of tenant incentives and contracted rent uplift balances													(948)					-				(54)				1,240				238
Revaluation reported in the Income Statement													(44,357)					303				2,765				1,097				(40,192)
Asset class													Logistics					Logistics				Logistics				Office
Location													Moscow					St Petersburg				Regions				St Petersburg				2015
Fair value hierarchy *													Level 3					Level 3				Level 3				Level 3				Total
													$'000					$'000				$'000				$'000				$'000
Market value at 1 January 2015													1,222,101					170,074				191,576				28,852				1,612,603
Property improvements and movement in completion provisions													(2,768)					(1,194)				114				(266)				(4,114)
Unrealised loss on revaluation													(175,381)					(29,774)				(43,041)				(3,446)				(251,642)
Market value at 31 December 2015													1,043,952					139,106				148,649				25,140				1,356,847
Tenant incentives and contracted rent uplift balances													(16,547)					(5,332)				(1,318)				(1,394)				(24,591)
Head lease obligations (note 25)													1,731					-				-				-				1,731
Carrying value at 31 December 2015													1,029,136					133,774				147,331				23,746				1,333,987
Revaluation movement in the year ended 31 December 2015
Gross revaluation													(175,381)					(29,774)				(43,041)				(3,446)				(251,642)
Effect of tenant incentives and contracted rent uplift balances													(236)					(433)				1,005				108				444
Revaluation reported in the Income Statement													(175,617)					(30,207)				(42,036)				(3,338)				(251,198)
*Classified in accordance with the fair value hierarchy, see note 36.  There were no transfers between fair value hierarchy in 2015 or 2016.
At 31 December 2016 the Group has pledged investment property with a value of $1,288 million (2015: $1,348 million) to secure banking facilities granted to the Group (note 22).
12. Investment property under construction
Asset class					Assets under construction										Land Bank
Location						Moscow				Regions						St Petersburg					Regions								2016
Fair value hierarchy *						Level 3				Level 3			Sub-total			Level 3					Level 3				Sub-total				Total
						$'000				$'000			$'000			$'000					$'000				$'000				$'000
Market value at 1 January 2016						27,700				7,300			35,000			413					2,714				3,127				38,127
Costs incurred						2,353				33			2,386			49					355				404				2,790
Disposal						-				-			-			(543)					-				(543)				(543)
Effect of foreign exchange rate changes						1,774				1,072			2,846			81					593				674				3,520
Unrealised loss on revaluation						(2,227)				(905)			(3,132)			-					-				-				(3,132)
Market value at 31 December 2016						29,600				7,500			37,100			-					3,662				3,662				40,762
Head lease obligations (note 25)						491				-			491			-					-				-				491
Carrying value at 31 December 2016						30,091				7,500			37,591			-					3,662				3,662				41,253
Asset class						Assets under construction										Land Bank
Location						Moscow				Regions						St Petersburg					Regions								2015
Fair value hierarchy *						Level 3				Level 3			Sub-total			Level 3					Level 3				Sub-total				Total
						$'000				$'000			$'000			$'000					$'000				$'000				$'000
Market value at 1 January 2015						34,000				9,500			43,500			-					3,216				3,216				46,716
Costs incurred						789				-			789			413					283				696				1,485
Disposal						-				-			-			-					-				-				-
Effect of foreign exchange rate changes						(2,369)				(1,570)			(3,939)			-					(785)				(785)				(4,724)
Unrealised loss on revaluation						(4,720)				(630)			(5,350)			-					-				-				(5,350)
Market value at 31 December 2015						27,700				7,300			35,000			413					2,714				3,127				38,127
Head lease obligations (note 25)						1,002				-			1,002			-					-				-				1,002
Carrying value at 31 December 2015						28,702				7,300			36,002			413					2,714				3,127				39,129
*Classified in accordance with the fair value hierarchy, see note 36.  There were no transfers between fair value hierarchy in 2015 or 2016.
During the year the Group sold a land plot in St Petersburg for $4.6 million, generating a profit of $3.8 million after costs.   No borrowing costs were capitalised in the year (2015: $nil).   At 31 December 2016 the Group has pledged investment property under construction with a value of $37.1 million (2015: $35.0 million) to secure banking facilities granted to the Group (note 22).
13.  Investment property and investment property under construction - Valuation
It is the Group's policy to carry investment property and investment property under construction at fair value in accordance with IFRS 13 "Fair Value Measurement" and IAS 40 "Investment Property":  - investment property consists of the completed, income producing, portfolio; and  - investment property under construction consists of potential development projects and land bank. The latter is sub-categorised as:  - assets under construction - current development projects and the value of land on additional phases of existing investment property; and  - land bank - land held for potential development.
For the purposes of IFRS 13 disclosure, we have analysed these categories by the geographical market they are located in being Moscow, St Petersburg and the Regions (the other Russian regional cities).  These form distinct markets for valuation purposes as the fundamentals differ in each.
The fair value of the Group's investment property and assets under construction at 31 December 2016 has been arrived at on the basis of market valuations carried out by Jones Lang LaSalle ("JLL"), external valuers to the Group.  JLL have consented to the use of their name in these financial statements.   The Group's land bank in St Petersburg and the Regions is valued by the Directors.
Valuation process   The executive management team members responsible for property matters determine the valuation policies and procedures for property valuations in consultation with the Chief Executive Officer and Chief Financial Officer.
The Group has four qualified RICS members on the management team, one of whom is the Chairman of RICS in Russia and the CIS.  All have relevant valuation and market experience and are actively involved in the valuation process.  They also regularly meet with agents and consultants to obtain additional market information.
The effectiveness and independence of the external valuer is reviewed each year.  The criteria considered include market knowledge, reputation, independence and professional standards.  The Audit Committee also meets the external valuer at least once a year.  Executive management and the Directors have determined that the external valuer is experienced in the Russian market and acts as an "External Valuer" as defined in the "RICS Valuation - Professional Standards".
The external valuers perform their valuations in accordance with the "RICS Valuation - Professional Standards", the 2014 Edition (the "Red Book").  This is an internationally accepted basis of valuation and is consistent with the principles of IFRS 13.
For investment properties and assets under construction, the executive team members consult with the external valuers and the valuers then determine: - whether a property's fair value can be reliably determined; - which valuation method should be applied for each asset; and - the assumptions made for unobservable inputs that are used in valuation methods.
The land bank is valued by the Directors.  The process followed includes regular site inspections, meetings with local real estate experts, comparison to any local land sale information and comparison to transactions in other regional cities including those where the Group has income producing assets.  Updated acquisition appraisals and any indication of value for alternative use are also considered.
Valuations are prepared on a biannual basis.  At each valuation date the executive team members review the information prepared by the property department for valuation purposes being submitted to the external valuers.  Each property valuation is then reviewed and discussed with the external valuer in detail, adjustments made as necessary and results discussed with the Chief Executive Officer and Chief Financial Officer.
The executive management also present the valuation results to the Audit Committee and hold discussions with the Group's auditors.  Both the Audit Committee and the auditors also have discussions with the external valuers.
Valuation assumptions and key inputs
Class of property			Carrying amount								Valuation			Input									Range
			2016				2015				technique												2016					2015
			$'000				$'000
Completed investment property
Moscow - Logistics			989,406				1,029,136				Income capitalisation			Long term ERV per sqm for existing tenants									$85 to $105					$90 to $110
														Short term ERV per sqm for vacant space									Rub4,000					Rub4,500
														Initial yield									2.0% to 16.0%					11.2% to 14.9%
														Equivalent yield									10.7% to 12.2%					10.8% to 12.7%
														Vacancy rate									9% to 77%					13.9% to 100.0%
														Passing rent per sqm									$70 to $158					$62 to $158
														Passing rent per sqm									Rub3,500 to					Rub4,500 to
																							Rub6,744					Rub6,300
St Petersburg - Logistics			136,099				133,774				Income capitalisation			Long term ERV per sqm for existing tenants									$80					$75
														Short term ERV per sqm for vacant space									Rub3,700					Rub4,000
														Initial yield									11.3% to 13.2%					13.3% to 14.1%
														Equivalent yield									12.3% to 12.6%					12.7% to 13.3%
														Vacancy rate									3% to 31%					11.7% to 40.0%
														Passing rent per sqm									$105 to $138					$80 to $133
														Passing rent per sqm									Rub3,500 to					Rub3,060 to
																							Rub4,500					Rub4,600
Regional - Logistics			150,474				147,331				Income capitalisation			Long term ERV per sqm for existing tenants									$80					$75
														Short term ERV per sqm for vacant space									Rub3,700					Rub4,000
														Initial yield									9.0% to 12.4%					12.2% to 13.1%
														Equivalent yield									12.4% to 12.5%					12.7%
														Vacancy rate									22% to 33%					13.0% to 21.0%
														Passing rent per sqm									$102 to $129					$101 to $128
														Passing rent per sqm									Rub3,900 to					Rub3,060 to
																							Rub6,547					Rub4,600
St Petersburg - Office			24,664				23,746				Income capitalisation			ERV per sqm									$235					$235
														Initial yield									20.0%					15.8%
														Equivalent yield									13.0%					13.0%
														Vacancy rate									0%					0%
														Passing rent per sqm									Rub19,545					Rub18,848
																							Range
Other key information							Description																2016					2015
Moscow - Logistics							Land plot ratio																34% - 65%					31% - 65%
							Age of building																2 to 12 years					1 to 11 years
							Outstanding costs (US$'000)																6,803					6,931
St Petersburg - Logistics							Land plot ratio																51% - 57%					51% - 57%
							Age of building																2 to 8 years					1 to 7 years
							Outstanding costs (US$'000)																1,102					743
Regional - Logistics							Land plot ratio																48% - 61%					48% - 61%
							Age of building																7 years					6 years
							Outstanding costs (US$'000)																665					81
St Petersburg - Office							Land plot ratio																320%					320%
							Age of building																10 years					9 years
							Outstanding costs (US$'000)																-					53
Investment property under construction			Carrying amount								Valuation			Input									Range
			2016				2015				technique												2016					2015
			$'000				$'000
Moscow - Logistics			30,091				28,702				Comparable			Value per ha ($m)									$0.29 - $0.61					$0.29 - $0.61
Regional - Logistics			7,500				7,300				Comparable			Value per ha ($m)									$0.29					$0.29

 

The fair value of investment property is determined using the income capitalisation method where a property's fair value is estimated based on the normalised net operating income of the asset divided by the capitalisation (discount) rate.  Each income stream from every tenant is valued based on capitalising the contracted rent for the term of the lease, including any fixed increases in rent but excluding any future indexation.  Allowance at lease end is made for any potential letting void and an assessment is made of the estimated rental value on re-letting (ERV).  These elements are determined based on current market conditions and values.
Assets under construction (development projects) are valued on a residual value basis using the future anticipated costs to complete construction, a provision for letting costs, a letting void period and an assessment of ERV.  Depending on the status of the development, and how much of development process has been completed an allowance will also be made for developer's profit.
Assets under construction (additional phases of existing sites) are valued on a comparable basis. The value of these plots is estimated based on comparable transactions in the same market. This approach is based on the principle that a buyer will not pay more for an asset than it will cost to buy a comparable substitute property. The unit of comparison applied is the price per square metre.
All of the above valuations are completed by JLL.   The land bank is valued by the Directors using the comparable basis.
Sensitivity analysis of significant changes in unobservable inputs within Level 3 of the hierarchy
The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair value hierarchy of the entity's portfolio of investment property are:   - ERV; - Void period on re-letting; - Initial yield; and - Specific to property under development: construction costs, letting void, construction period and development profit.
In preparing their valuations at 31 December 2016 and 31 December 2015, JLL have specifically referred to the uncertainty in the market caused by sanctions and by an oil price that is low compared with recent history.  The Rouble exchange rate exhibited both volatility and further weakness, inflation remained a concern and debt is comparatively expensive.  Investment in all sectors of the economy is depressed.  There is a resulting lack of clarity as to pricing levels and market drivers.  JLL comment that prices agreed during negotiation are typically reduced prior to exchange of contracts as purchasers bring to bear their greater negotiating position and ability to complete transactions in an uncertain market.  They further say that in this environment, prices and values are going through a period of heightened volatility and as a result there is less certainty with regard to valuations and that market values can change rapidly in the current conditions.  Where the numbers of genuine third party, arm's length, transactions are severely limited it is challenging to draw conclusions on current market yields and to accurately assess ERVs where landlord and tenants are continuing to negotiate to find the new equilibrium due to the Rouble devaluation.  This corresponds to the Group's experience.   Further significant increases (or decreases) in any of the main inputs to the valuation, being yield, ERV (per sqm p.a.) and letting void, would result in a significantly lower (or higher) fair value measurement.
14. Goodwill
											$'000
Balance at 1 January 2015											2,375
Effect of foreign exchange rate changes											(130)
Balance at 31 December 2015											2,245
Effect of foreign exchange rate changes											(363)
Balance at 31 December 2016											1,882
Goodwill acquired through the Raven Mount business combination has been allocated for impairment purposes to its operating segment.  This represents the lowest level within the Group at which goodwill is monitored for internal management purposes.  The recoverable amount of goodwill has been determined based on value in use calculations using cash flow projections and project appraisals approved for internal management reporting and discounted at rates appropriate to the segment.
15. Investment in subsidiary undertakings
The principal subsidiary undertakings of Raven Russia Limited, all of which have been included in these consolidated financial statements, are as follows:
Name				Country of incorporation					Proportion of ownership interest
									2016		2015
CJSC Kulon Development				Russia					100%		100%
Fenix LLC				Russia					100%		100%
Petroestate LLC				Russia					100%		100%
EG Logistics LLC				Russia					100%		100%
CJSC Kulon Istra				Russia					100%		100%
Soyuz-Invest LLC				Russia					100%		100%
CJSC Noginsk Vostok				Russia					100%		100%
Resource Economia LLC				Russia					100%		100%
Kulon Spb LLC				Russia					100%		100%
Logopark Don LLC				Russia					100%		100%
Logopark Ob LLC				Russia					100%		100%
Delta LLC				Russia					100%		100%
CJSC Toros				Russia					100%		100%
Dorfin Limited				Cyprus					100%		100%
League LLC				Russia					100%		100%
Raven Russia Holdings Cyprus Limited				Cyprus					100%		100%
Roslogistics Holdings (Russia) Limited				Cyprus					100%		100%
Avalon Logistics Company LLC				Russia					100%		100%
Raven Mount Group Limited				England					100%		100%
Raven Russia Property Advisors Limited				England					100%		100%
Raven Russia (Service Company) Limited				Guernsey					100%		100%
The Group's investment property and investment property under construction are held by its subsidiary undertakings.
16. Investment in joint ventures
The principal joint ventures of the Group are as follows:
Name		Country of incorporation							Proportion of ownership interest
									2016			2015
Coln Park LLP				England					50%			50%
Coln Park Construction LLP				England					50%			50%
Coln Park LLP and Coln Park Construction LLP are the entities through which the Group undertakes its second home development activity in the UK.  In addition, the Group has a number of other small joint ventures associated with the second home development activity.  The Group's interest in each joint venture has been accounted for using the equity method.  None of the Group's joint ventures are individually material.  Summarised aggregated financial information of the joint ventures, prepared under IFRS, and a reconciliation with the carrying amount of the investments in the consolidated financial statements are set out below:
										2016		2015
Summarised Balance Sheet										$'000		$'000
Non-current assets										4,141		4,833
Inventory										10,960		16,262
Cash and short term deposits										2,558		2,289
Other current assets										1,625		505
Current liabilities										(8,432)		(4,221)
Net assets										10,852		19,668
Investment in joint ventures
Goodwill on acquisition										4,305		5,134
Share of net assets at 50%										5,426		9,834
Carrying value										9,731		14,968
Carrying value at 1 January										14,968		17,355
Share of profit for the year										1,780		2,518
Share of distributions paid										(4,521)		(3,954)
Effect of foreign exchange rate changes										(2,496)		(951)
Carrying value at 31 December										9,731		14,968
										2016		2015
Summarised Income Statement										$'000		$'000
Gross revenue										25,430		18,575
Cost of sales										(19,807)		(12,628)
Administrative expenses										(1,932)		(943)
Finance expense										(125)		-
Profit before tax										3,566		5,004
Tax										(5)		32
Profit for the year										3,561		5,036
Group's share of profit for the year										1,780		2,518
The joint ventures had no contingent liabilities or capital commitments as at 31 December 2016 and 2015.  The joint ventures cannot distribute their profits until they obtain the consent from the joint venture partners.   The Group charged its joint ventures $97k (2015: $92k) for services rendered to them during the year.  The joint ventures recharged certain costs back to the Group that for the year amounted to $146k (2015: $104k) of which $9k (2015: $10k) was included in payables at the balance sheet date.  In addition to the investment shown above the Group has provided a loan to Coln Park LLP of $342k (2015: $368k) generating interest income of $37k (2015: $nil).
17. Other receivables										2016		2015
										$'000		$'000
Loans receivable										611		606
VAT recoverable										2,982		3,024
Security deposits										-		2,391
Prepayments and other receivables										131		124
										3,724		6,145
VAT recoverable arises from the payment of value added tax on construction of investment property, which will be recovered through the offset of VAT paid on future revenue receipts or repayment direct from the taxation authority.  VAT recoverable has been split between current and non-current assets based on the Group's assessment of when recovery will occur.
18. Trade and other receivables										2016		2015
										$'000		$'000
Trade receivables										37,732		38,682
Prepayments										4,257		3,149
Security deposits										2,393		2,041
VAT recoverable										4,893		4,482
Other receivables										319		202
Tax recoverable										3,075		1,708
										52,669		50,264
19. Derivative financial instruments										2016		2015
										$'000		$'000
Interest rate derivative financial instruments
Non-current assets										4,694		2,900
Current assets										95		12
Non-current liabilities										-		(210)
Current liabilities										(25)		(413)
Forward currency derivative financial instruments
Non-current assets										269		2,685
Current assets										8		184
Foreign currency embedded derivatives
Non-current assets										49		-
Current assets										255		37
Non-current liabilities										(67)		(1,584)
Current liabilities										(918)		(1,684)
The Group has entered into a series of interest rate derivative financial instruments to manage the interest rate and resulting cash flow exposure from the Group's banking facilities. At 31 December 2016 the instruments have a notional value of $581 million (2015: $667 million) and a weighted average fixed or capped rate of 1.51% (2015: 1.51%).   The Group had also entered into a series of forward currency derivative financial instruments to hedge interest payments due to preference shareholders against sterling strengthening.  The instruments have a notional amount of $55.8 million (2015: $91.0 million), a weighted average capped rate of $1.55 to £1 (2015: $1.57 to £1) and quarterly maturities with the final instruments maturing on 18 December 2019 (2015: 18 December 2019).   Several of the Group's leases incorporate collars and caps on US Dollar and Russian Rouble exchange rates.  These have been categorised as embedded derivatives and their fair values calculated resulting in the liability disclosed above.
20. Cash and short term deposits										2016		2015
										$'000		$'000
Cash at bank and on call										74,708		84,732
Short term deposits										123,913		117,559
										198,621		202,291
Cash at bank and on call attracts variable interest rates, whilst short term deposits attract fixed rates but mature and re-price over a short period of time.  The weighted average interest rate at the balance sheet date is 2.50% (2015: 1.21%).
21. Trade and other payables										2016		2015
										$'000		$'000
Trade and other payables										8,667		5,196
Construction payables										5,905		3,913
Advanced rentals										28,304		25,801
Other payables										3,770		2,165
Current tax payable										9,471		5,217
Other tax payable										9,283		11,080
Head leases (note 25)										8		12
										65,408		53,384
22. Interest bearing loans and borrowings										2016		2015
										$'000		$'000
Bank loans
Loans due for settlement within 12 months										40,787		104,724
Loans due for settlement after 12 months										699,038		814,021
										739,825		918,745
The Group's borrowings have the following maturity profile:
On demand or within one year										40,787		104,724
In the second year										53,292		162,222
In the third to fifth years										440,432		527,861
After five years										205,314		123,938
										739,825		918,745
The amounts above include unamortised loan origination costs of $12.3 million (2015: $11.3 million) and interest accruals of $3.8 million (2015: $2.3 million).
The principal terms of the Group's interest bearing loans and borrowings on a weighted average basis are summarised below:
As at 31 December 2016									Interest	Maturity
									Rate	(years)		$'000
Secured on investment property and investment property under construction									7.5%	4.7		725,123
Unsecured facility of the Company									8.9%	3.7		14,702
												739,825
As at 31 December 2015
Secured on investment property and investment property under construction									7.2%	4.0		894,995
Unsecured facility of the Company									8.5%	4.7		23,750
												918,745
The interest rates shown above are the weighted average cost, including US LIBOR, as at the Balance Sheet dates.   The table above reflects the impact of the total of $108.2 million of debt which was prepaid in the year across the portfolio to extend the various maturity dates of the loans and reduce amortisation payable.  This amount included the $16.3 million paid to fully repay and discharge the loans secured on Konstanta (see note 7).   On 19 January 2017, the Group refinanced the debt secured on the Klimovsk project, drawing down $80 million under the new facility and repaying the old facility of $75 million in full.   The Group has entered into hedging arrangements in respect of its exposure to interest rates (note 19).  $112 million (2015: $212 million) of Group bank borrowings have been swapped into fixed rates with 3 months remaining (2015: one year) at a weighted average swap rate of 1.08% (2015: 1.44%), $469 million (2015: $456 million) capped at 1.61% (2015: 1.55%) for two years (2015: two years) and $131 million (2015: $260 million) are fixed rate loans with a weighted average rate of 7.10% (2015: 7.21%) for six years (2015: four years).  This gave a weighted average cost of debt to the Group of 7.5% (2015: 7.3%) at the year end.   In December 2016 the Group entered into a six year cap to hedge floating interest rates and a four year forward dated cap starting in June 2017 to extend an existing hedging arrangement.
23. Preference shares										2016		2015
										$'000		$'000
Issued share capital:
At 1 January										156,558		164,300
Purchased in the year										(713)		-
Premium on redemption of preference shares and amortisation of issue costs										562		614
Scrip dividends										614		643
Effect of foreign exchange rate changes										(25,318)		(8,999)
At 31 December										131,703		156,558
										2016		2015
										Number		Number
Issued share capital:
At 1 January										98,328,017		98,012,427
Purchased in the year										(450,000)		-
Scrip dividends										387,310		315,590
At 31 December										98,265,327		98,328,017
Shares in issue										98,752,376		98,365,066
Held by the Company's Employee Benefit Trusts										(487,049)		(37,049)
At 31 December										98,265,327		98,328,017
The preference shares entitle the holders to a cumulative annual dividend of 12 pence per share.
24. Convertible preference shares										2016		2015
										$'000		$'000
Issued share capital:
At 1 January										-		-
Issued in the year (net of issue costs)										138,705		-
Allocated to equity										(8,453)		-
Acquired by Company's Employee Benefit Trust										(10,378)		-
Reissued in the year										2,779		-
Premium on redemption of preference shares and amortisation of issue costs										2,892		-
Movement on accrual for preference dividends										24
Effect of foreign exchange rate changes										(5,710)		-
At 31 December										119,859		-
										2016		2015
										Number		Number
Issued share capital:
At 1 January										-		-
Issued in the year										108,689,501		-
Acquired by Company's Employee Benefit Trust										(8,000,000)		-
Reissued in the year										2,148,375
At 31 December										102,837,876		-
Shares in issue										108,689,501		-
Held by the Company's Employee Benefit Trust										(5,851,625)		-
At 31 December										102,837,876		-
On 7 July 2016 the Company created and issued 108,689,501 convertible preference shares at a subscription price of £1 per share. The convertible preference shares entitle the holders to a cumulative annual dividend of 6.5 pence per share and are redeemable by the Company on 6 July 2026 at £1.35 per share. The convertible preference shares are convertible to ordinary shares at the holder's request at any time prior to redemption at a rate of 1.818 ordinary shares for each convertible preference share.
One of the Company's Employee Benefit Trusts subscribed for 8,000,000 convertible preference shares and has subsequently transferred 2,148,375 to participants of the 2016 Retention Scheme (see note 32).
In applying its accounting policies the Group has determined that the convertible preference shares are a compound financial instruments in that it has a liability component and an equity component.  The Group has determined the fair value of the liability component, which is reflected above, and the residual amount of the fair value of the consideration received on issue is equity.  The fair value of the liability component has been calculated using a discounted cash flow model.
25. Other payables										2016		2015
										$'000		$'000
Rent deposits										23,324		28,932
Head leases										1,935		2,721
										25,259		31,653
The Group has leasehold properties that it classifies as investment property and investment property under construction.  Minimum lease payments due over the remaining term of the leases totalled $5.9 million (2015: $8.5 million) and have a present value at 31 December 2016, as reflected above and in note 21, of $1.9 million (2015: $2.7 million).
26. Deferred tax
									Tax losses	Other		Total
(a) Deferred tax assets									$'000	$'000		$'000
Balance at 1 January 2015									35,783	(17)		35,766
Effect of foreign exchange rate changes									(7,750)	-		(7,750)
(Charge) / credit for the year									(2,554)	61		(2,493)
Balance at 31 December 2015									25,479	44		25,523
Effect of foreign exchange rate changes									4,838	-		4,838
(Charge) / credit for the year									(3,517)	607		(2,910)
Balance at 31 December 2016									26,800	651		27,451
The Group has tax losses in Russia of $346 million (2015: $417 million) and tax losses in the UK of $87 million (2015: $117 million) for which deferred tax assets have not been recognised.  The losses in the UK do not have an expiry date.  Previously losses in Russia expired after 10 years, however following a change in tax law in the year, the losses can now be carried forward indefinitely.  There is, however, a restriction on the use of losses in that taxable profits cannot be reduced by more than 50% in any one year.
									Accelerated	Revaluation
									tax	of investment
									allowances	property		Total
(b) Deferred tax liabilities									$'000	$'000		$'000
Balance at 1 January 2015									33,868	55,250		89,118
Effect of foreign exchange rate changes									(7,158)	-		(7,158)
Charge / (credit) for the year									3,435	(29,776)		(26,341)
Balance at 31 December 2015									30,145	25,474		55,619
Effect of foreign exchange rate changes									5,448	-		5,448
Charge / (credit) for the year									5,069	(4,267)		802
Balance at 31 December 2016									40,662	21,207		61,869
27. Share capital
										2016		2015
										$'000		$'000
Issued share capital:
At 1 January										12,776		13,623
Issued in the year for cash on warrant exercises (note 28)										2		7
Repurchased and cancelled in the year										(200)		(854)
At 31 December										12,578		12,776
										2016		2015
										Number		Number
Issued share capital:
At 1 January										682,560,376		737,598,353
Issued in the year for cash on warrant exercises (note 28)										114,084		457,589
Repurchased and cancelled in the year										(14,705,997)		(55,495,566)
At 31 December										667,968,463		682,560,376
Of the authorised ordinary share capital of 1,500,000,000 at 31 December 2016 (2015: 1,500,000,000), 24,894,739 (2015: 25,008,823) are reserved for warrants.   Details of own shares held are given in note 29.
28. Warrants										2016		2015
										$'000		$'000
At 1 January										1,167		1,195
Exercised in the year (note 27)										(6)		(28)
At 31 December										1,161		1,167
										2016		2015
										Number		Number
At 1 January										25,008,823		25,466,412
Exercised in the year (note 27)										(114,084)		(457,589)
At 31 December										24,894,739		25,008,823
The Company has issued warrants, which entitle each holder to subscribe for ordinary shares in the Company at an exercise price of 25 pence per share.  The warrants expire on 25 March 2019.   66,193 warrants have been exercised in the period since 31 December 2016.
29. Own shares held										2016		2015
										$'000		$'000
At 1 January										(52,101)		(63,649)
Acquisitions										(133)		(76)
Disposal										43,161		-
Cancelled										81		3,692
Allocation to satisfy ERS options exercised (note 32a)										68		258
Allocation to satisfy LTIP options exercised (note 32a)										598		901
Allocation to satisfy CBLTIS 2012 awards vesting (note 32b)										-		6,773
Allocation to satisfy CBLTIS 2015 awards vesting (note 32c)										877		-
At 31 December										(7,449)		(52,101)
										2016		2015
										Number		Number
At 1 January										38,456,594		49,048,873
Acquisitions										282,468		98,040
Disposal										(30,937,631)		-
Cancelled										(64,987)		(3,395,130)
Allocation to satisfy ERS options exercised (note 32a)										(62,756)		(237,146)
Allocation to satisfy LTIP options exercised (note 32a)										(500,000)		(828,515)
Allocation to satisfy CBLTIS 2012 awards vesting (note 32b)										-		(6,229,528)
Allocation to satisfy CBLTIS 2015 awards vesting (note 32c)										(729,608)		-
At 31 December										6,444,080		38,456,594
Allocations are transfers by the Company's Employee Benefit Trusts to settle CBLTIS awards that vest and to satisfy ERS and LTIP options exercised in the year following the vesting of the options.  The amounts shown for share movements are net of the Trustees' participation in tender offers during the period from grant to exercise. Details of outstanding ERS and LTIP options, which are vested but unexercised, are given in note 32a.
30. Equity
The following describes the nature and purpose of each component within equity:
Component	Description and purpose
Share capital	The amount subscribed for ordinary share capital at nominal value.
Share premium	The amount subscribed for ordinary share capital in excess of the nominal value.
Warrants	The consideration attributed to the subscription of warrants less associated costs of issuance.
Own shares held	The cost to the Company of acquiring the own shares held by the Company and its subsidiary undertakings or Employee Benefit Trusts.
Convertible preference shares	The amount subscribed for convertible preference shares which the Directors consider to be Equity.
Capital reserve	The amount of any capital profits and losses, including gains and losses on the disposal of investment properties (after taxation), increases and decreases in the fair value of investment properties held at each period end, foreign exchange profits and losses on capital items, profits and losses on forward currency financial instruments relating to capital items and deferred taxation on the increase in fair value of investment properties.
Translation reserve	The amount of any gains or losses arising on the retranslation of net assets of overseas operations.
Retained earnings	The amount of any profit or loss for the year after payment of dividend, together with the amount of any equity-settled share-based payments, and the transfer of capital items described above.  Retained earnings also includes distributable reserves created when in 2005 and 2006 the Company applied to the Royal Court of Guernsey to cancel its share premium at that time and create a reserve which is distributable.
31. Net asset value per share
As well as reporting IFRS net asset value and net asset value per share, the Group also reports its own adjusted net asset value and adjusted net asset value per share measure. The Directors consider that the adjusted measure provides more relevant information to shareholders as to the net asset value of a property investment group with a strategy of long term investment. The adjustments remove or adjust assets and liabilities, including goodwill and amounts relating to irredeemable preference shares, that are not expected to crystallise in normal circumstances.
										2016		2015
										$'000		$'000
Net asset value										500,226		465,042
Goodwill										(1,882)		(2,245)
Goodwill in joint ventures										(4,305)		(5,134)
Unrealised foreign exchange (profits) / losses on preference shares										(20,362)		4,956
Fair value of interest rate derivative financial instruments (note 19)										(4,764)		(2,289)
Fair value of embedded derivatives (note 19)										681		3,231
Fair value of foreign exchange derivative financial instruments (note 19)										(277)		(2,869)
Adjusted net asset value										469,317		460,692
Assuming exercise / vesting of all dilutive potential ordinary shares
- Convertible preference shares (note 24)										119,859		-
- Warrants (note 28)										7,691		9,215
- ERS (note 32)										-		-
- LTIP (note 32)										1,196		1,611
- 2016 Retention scheme (note 32)										1,498		-
- CBLTIS 2015 (note 32)										-		-
Adjusted fully diluted net asset value										599,561		471,518
Number of ordinary shares (note 27)										667,968,463		682,560,376
Less own shares held (note 29)										(6,444,080)		(38,456,594)
										661,524,383		644,103,782
Assuming exercise / vesting of all dilutive potential ordinary shares
- Convertible preference shares (note 24)										186,959,259		-
- Warrants (note 28)										24,894,739		25,008,823
- ERS (note 32)										-		75,000
- LTIP (note 32)										3,872,973		4,372,973
- 2016 Retention scheme (note 32)										10,897,650		-
- CBLTIS 2015 (note 32)										-		2,993,670
Number of ordinary shares assuming exercise of all potential ordinary shares										888,149,004		676,554,248
										2016		2015
										Cents		Cents
Net asset value per share										76		72
Fully diluted net asset value per share										71		70
Adjusted net asset value per share										71		72
Adjusted fully diluted net asset value per share										68		70
As the preference shares are considered to be capital for capital risk management (see note 35d) unrealised foreign exchange movements on these have been adjusted when calculating adjusted NAV per share.  As explained in note 24 the convertible preference shares are a compound financial instrument and their carrying value is split between non-current liabilities and equity.  Further more the convertible preference shares have a finite life and thus no adjustment has been made for unrealised foreign exchange gains and losses in calculating the Group's adjusted NAV.   The number of potential ordinary shares is the total number of ordinary shares assuming the exercise of all potential ordinary shares less those not expected to vest.
32. Share-based payments and other long term incentives   The Group utilises a number of different Share Schemes to reward and incentivise the Group's executives and senior staff.  The Share Schemes operated in the year are as follows:   Executive Share Option Schemes ("ESOS") The Group operated two ESOS, the Employee Retention Scheme ("ERS") and the Long Term Incentive Plan ("LTIP").  Both schemes involved the grant of options over the Company's ordinary shares by the Company's Employee Benefit Trusts.  The ERS vested in full on the publication of the audited financial statements of the Company for the year ended 31 December 2010 and the ERS options did not have an exercise price.  The LTIP options vested in three equal tranches, subject to performance criteria, on 24 March 2012, 2013 and 2014.  The LTIP options have an exercise price of 25p per option and have vested in full.  Both the ERS and LTIP schemes are closed and further awards cannot be made under either scheme.  Awards made under the ERS and LTIP have been accounted for in accordance with the Group's accounting policy for Share-based payments.   Combined Bonus and Long Term Incentive Scheme 2015 to 2017 ("CBLTIS 2015") During 2015 the Group implemented the CBLTIS 2015. Contingent awards were made in respect of 35 million ordinary shares, which covered the calendar years 2015 to 2017.  The awards are subject to performance criteria; three quarters of the award had performance conditions linked to operating cash flows and the remainder had a share price target.  The awards made have been accounted for in accordance with the Group's accounting policy for share-based payments. During the year the executive directors and certain senior managers waived their entitlement to rewards under this scheme. Additionally after the initial vesting in 2016 the scheme was cancelled.  In accordance with the Group's accounting policy the charge to the income statement in respect of the share price tranche was accelerated following cancellation of the scheme.   2016 Retention Scheme During the year the Group terminated the CBLTIS 2015 and the Company's shareholders approved the introduction of the 2016 Retention scheme. Awards under the scheme have been made to the executive directors of the Company and two senior managers of the Group. The award entitles the participants to three equal payments each equivalent to 150% of their basic salary. The first instalment was payable upon approval of the scheme and the second and third instalments will be payable on 31 December 2017 and 31 March 2019. The sole condition for each instalment being paid is the continuing employment of the participant at the relevant payment date.   Participants will receive payment of an instalment in a combination of the Company's listed securities and cash. The numbers of listed securities to be issued to satisfy such payments will be calculated with reference to the average price of the relevant security prior to the payment date. On 13 July 2016 an employment benefit trust of the Company transferred 2,148,375 convertible preference shares (see note 24) to participants of the scheme in satisfaction of the fist instalment. It is intended that convertible preference shares held by an employment benefit trust will also be used to satisfy the proportion of the second and third instalments that are to be settled in listed securities.
(a) Movements in Executive Share Option Schemes									2016			2015
									Weighted			Weighted
									average			average
							No of		exercise	No of		exercise
							options		price	options		price
Outstanding at the beginning of the year							4,447,973		25p	5,708,784		24p
Exercised during the year
- ERS							(75,000)		0p	(250,000)		0p
- LTIP							(500,000)		25p	(1,010,811)		25p
Outstanding at the end of the year							3,872,973		25p	4,447,973		25p
Represented by:
- ERS							-			75,000
- LTIP							3,872,973			4,372,973
							3,872,973			4,447,973
Exercisable at the end of the year							3,872,973		25p	4,447,973		25p
The weighted average remaining contractual life of options was 1 year (2015: 2 years).
(b) Movements in Combined Bonus and Long Term Incentive Scheme 2012 Awards
										2016		2015
										No of award		No of award
										shares		shares
Awards of Ordinary shares:
- Outstanding at the beginning of the year										-		7,401,158
- Granted during the year										-		-
- Lapsed during the year										-		-
- Vested during the year										-		(7,401,158)
- Outstanding at the end of the year										-		-
(c) Movements in Combined Bonus and Long Term Incentive Scheme 2015 Awards
										2016		2015
										No of award		No of award
										shares		shares
Awards of Ordinary shares:
- Outstanding at the beginning of the year										34,800,000		-
- Granted during the year										-		34,800,000
- Unvested awards waived during the year										(18,750,000)
- Vested during the year (of which entitlement to 2,150,626 was waived)										(2,942,060)
- Lapsed during the year										(6,207,940)		-
- Cancelled during the year										(6,900,000)		-
- Outstanding at the end of the year										-		34,800,000
										2016		2015
(d) Income Statement charge for the year										$'000		$'000
CBLTIS 2012										-		(39)
CBLTIS 2015										1,409		3,633
2016 Retention scheme										7,668		-
										9,077		3,594
To be satisfied by allocation of:
Ordinary shares (IFRS 2 expense)										1,409		3,594
Convertible preference shares (IFRS 2 expense)										4,535		-
Cash										3,133		-
										9,077		3,594
Of the IFRS 2 expense for the year $1.5 million is included in current liabilities.
The fair values at grant of the CBLTIS 2015 awards were assessed using valuation models.  Details of the fair values, models used and key inputs thereto are set out in the table below:
							Tranche with operating			Tranche with
							cash flow targets			share price target
Fair value at grant date							62p			18p
Expected volatility							26%			27%
Risk free rate							1.05%			1.51%
Dividend yield							0%			0%
Model used							Black Scholes			Monte Carlo
33. Capital commitments   The Group has committed to fund the construction of certain additional investment property.  At 31 December 2016, $1.2 million of funding was required (2015: $2.6 million), excluding VAT.
34. Related party transactions   Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.  Further disclosures concerning transactions with the Company's directors are made in the Remuneration Report and note 6.  There are no loan balances with directors.
Remuneration of Directors and other key management personnel										2016		2015
										$'000		$'000
Short term employee benefits										6,821		6,287
Post employment benefits										288		322
Share-based payments and other long term incentives										7,668		2,582
										14,777		9,191
35. Financial instruments - risk management   The Group's activities expose it to a variety of financial risks in relation to the financial instruments it uses: market risk (including currency risk, price risk and cash flow interest rate risk), credit risk and liquidity risk.  The financial risks relate to the following financial instruments: trade receivables, cash and short term deposits, trade and other payables, borrowings, preference shares, convertible preference shares and derivative financial instruments.   Risk management parameters are established by the Board on a project by project basis and overseen by management in conjunction with professional advisers.  Reports are provided to the Board formally on a weekly basis and also when authorised changes are required.
(a) Market risk   Currency risk   The Group operates internationally and is exposed to foreign exchange risk arising from a variety of currency exposures, primarily with respect to US Dollars, Sterling and Russian Rouble.  Foreign exchange risk arises from future commercial transactions (including lease receivables), recognised monetary assets and liabilities and net investments in foreign entities.   The majority of the Group's transactions are denominated in US Dollars, which is also the reporting currency for the Group.  The functional currency of the Company is Sterling, however the functional currencies of the Company's subsidiaries vary.  The analysis that follows considers the impact of Russian Rouble and Sterling on the Group.   Russian Rouble   The rapid depreciation of the Rouble since November 2014 has heightened the Group's currency risk.  New leases are now predominantly Rouble denominated rather than pegged to US Dollars, which will increase the Group's foreign currency risk when servicing US Dollar denominated debt.   The Group holds sufficient Rouble currency to cover Rouble denominated overheads and any future construction cost commitments.   The weak Rouble also has an impact on property values as explained in note 13 to the accounts and increased credit risk as explained below.   Sterling   The Group's exposure to Sterling is primarily driven by the Sterling denominated preference shares and convertible preference shares and the related quarterly dividends, but also head office costs and ordinary share distributions.  Whilst there are no Sterling foreign exchange gains and losses arising in the parent company itself, in preparing the Group financial statements these Sterling amounts are translated to the Group's US Dollar presentation currency and the resulting exchange gains and losses are included in the translation reserve.   The table below summarises the currency in which the Group's financial instruments are denominated:
									Russian
As at 31 December 2016					US Dollar		Sterling		Rouble	Other		Total
					$'000		$'000		$'000	$'000		$'000
Non-current assets
Loans receivable					-		611		-	-		611
Security deposits					-		-		-	-		-
Restricted cash					-		-		-	-		-
Derivative financial instruments					4,694		269		49	-		5,012
Current assets
Trade receivables					29,489		38		6,068	2,137		37,732
Security deposits					2,393		-		-	-		2,393
Derivative financial instruments					95		8		255	-		358
Other current receivables					-		98		217	3		318
Cash and short term deposits					61,846		19,841		116,287	647		198,621
					98,517		20,865		122,876	2,787		245,045
Non-current liabilities
Interest bearing loans and borrowings					699,038		-		-	-		699,038
Preference shares					-		131,703		-	-		131,703
Convertible preference shares					-		119,859		-	-		119,859
Derivative financial instruments					-		-		67	-		67
Rent deposits					21,264		-		1,432	628		23,324
Other payables					23		-		1,912	-		1,935
Current liabilities
Interest bearing loans and borrowings					40,787		-		-	-		40,787
Derivative financial instruments					25		-		918	-		943
Rent deposits					5,375		-		1,265	-		6,640
Other payables					-		2,769		6,078	22		8,869
					766,512		254,331		11,672	650		1,033,165
									Russian
As at 31 December 2015					US Dollar		Sterling		Rouble	Other		Total
					$'000		$'000		$'000	$'000		$'000
Non-current assets
Loans receivable					-		606		-	-		606
Security deposits					2,391		-		-	-		2,391
Derivative financial instruments					2,900		2,685		-	-		5,585
Current assets
Trade receivables					32,519		6		6,157	-		38,682
Security deposits					2,041		-		-	-		2,041
Derivative financial instruments					49		184		-	-		233
Other current receivables					-		76		126	-		202
Cash and short term deposits					155,996		14,286		28,771	3,238		202,291
					195,896		17,843		35,054	3,238		252,031
Non-current liabilities
Interest bearing loans and borrowings					814,021		-		-	-		814,021
Preference shares					-		156,558		-	-		156,558
Derivative financial instruments					210		-		1,584	-		1,794
Rent deposits					27,366		-		1,126	440		28,932
Other payables					-		-		2,721	-		2,721
Current liabilities
Interest bearing loans and borrowings					104,724		-		-	-		104,724
Derivative financial instruments					413		-		1,684	-		2,097
Rent deposits					6,676		-		151	-		6,827
Other payables					-		1,814		4,254	22		6,090
					953,410		158,372		11,520	462		1,123,764
The sensitivity analyses below are based on a change in an assumption while holding all other assumptions constant.  In practice this is unlikely to occur and changes in some of the assumptions may be correlated, for example a change in interest rate and a change in foreign currency exchange rates.  The Group principally manages foreign currency risk on a project by project basis.  The sensitivity analysis prepared by management of foreign currency risk illustrates how changes in the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.   The table below shows the impact on consolidation  if the US Dollar weakened or strengthened by 10% against the Russian Rouble or Sterling, with all other variables in each case remaining constant, then:
										2016		2015
Post tax profit or loss would change by:										$'000		$'000
Russian Rouble										6,619		412
Sterling										1,455		10,502
Net asset value would change by:
Russian Rouble										11,121		2,355
Sterling										22,967		11,184
The majority of sterling sensitivity relates to the retranslation of the value of preference shares and convertible preference shares.   Accounting standards also require disclosure of monetary assets and liabilities that are denominated in currencies different from the functional currency of the specific subsidiary or entity in the Group.  These are set out in the tables below.
										Russian
As at 31 December 2016							US Dollar		Sterling	Rouble		Other
							$'000		$'000	$'000		$'000
Current assets
Trade receivables							5,767		-	-		-
Cash and short term deposits							35,501		-	79,660		-
							41,268		-	79,660		-
Current liabilities
Interest bearing loans and borrowings							63		-	-		-
Rent deposits							5,375		-	-		-
							5,438		-	-		-
Non-current liabilities
Interest bearing loans and borrowings							15,000		-	-		-
Rent deposits							21,264		-	-		-
							36,264		-	-		-
										Russian
As at 31 December 2015							US Dollar		Sterling	Rouble		Other
							$'000		$'000	$'000		$'000
Current assets
Trade receivables							5,257		-	-		-
Cash and short term deposits							128,769		-	-		2,508
							134,026		-	-		2,508
Current liabilities
Interest bearing loans and borrowings							5,020		-	-		-
Rent deposits							6,676		-	-		-
							11,696		-	-		-
Non-current liabilities
Interest bearing loans and borrowings							18,466		-	-		-
Rent deposits							27,366		-	-		-
							45,832		-	-		-
The Group's interest rate risk arises from long-term borrowings (note 22), which include preference shares issued (note 23) and convertible preference shares (note 24).  Borrowings issued at variable rates expose the Group to cash flow interest rate risk, whilst borrowings issued at a fixed rate expose the Group to fair value risk.  The Group's cash flow and fair value risk is reviewed monthly by the Board. The cash flow and fair value risk is approved monthly by the Board.   The Group analyses its interest rate exposure on a dynamic basis.  It takes on exposure to the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flows.  Interest costs may increase as a result of such changes.  They may reduce or create losses in the event that unexpected movements arise.  Various scenarios are simulated taking into consideration refinancing, renewal of existing positions, alternative financing and hedging.  Based on these scenarios the Group calculates the impact on profit and loss of a defined interest rate shift. The simulation is run on an on-going basis to verify that the maximum potential impact is within the parameters expected by management.  Formal reporting to the Board on cash flows is made on a monthly basis.   To date the Group has sought to fix its exposure to interest rate risk on borrowings through fixed rate debt facilities, the use of a variety of interest rate derivatives and the issue of preference shares and convertible preference shares at a fixed coupon.  This gives certainty over future cash flow but exposure to fair value movements, which amounted to an accumulated unrealised loss of $12.4 million at 31 December 2016 (2015: loss of $10.6 million).   Sensitivity analysis on the Group's interest rate borrowings, net of interest bearing deposits, indicate that a 1% increase in LIBOR rates would decrease the profit for the year and decrease net assets by $2.1 million (2015: $2.0 million).  If LIBOR rates were to drop to zero then there would be an increase in the profit for the year and an increase in net assets of $4.2 million (2015: increase of $2.8 million) as the loss on income from cash would be greater than gains on interest expense because of the low LIBOR rates prevailing at this time and the interest rate hedges in place.
(b) Credit risk
The Group's principal financial assets are cash and short term deposits, trade and other receivables and derivative financial instruments.   Credit risk associated with the Group's trade and other receivables has increased during the year.  The Group historically transacted with tenants using US dollar pegged leases, passing foreign exchange risk on to the tenant in exchange for lower US CPI indexation.  The rapid weakening of the rouble has meant that the foreign exchange risk carried by tenants has increased significantly.  This may result in some tenants struggling to meet rental obligations.  The Group has policies in place to ensure that rental contracts are made with tenants meeting appropriate Balance Sheet covenants, supplemented by rental deposits or bank guarantees from international banks.  No significant doubtful receivables existed at the year end and the amounts presented in the Balance Sheet are net of allowances for doubtful receivables.  An allowance for impairment is made where there is objective evidence that the Group will not be able to collect all amounts due according to the terms of the receivables concerned.  Details of the movements in provision for impairment of trade receivables is provided in the table below.
										2016		2015
										$'000		$'000
At 1 January										4,311		591
Effect of foreign exchange rate changes										254		-
Charge for the year										742		3,720
Utilised in the year										-		-
Unused amounts reversed										(721)		-
At 31 December										4,586		4,311
At 31 December 2016 there were no significant amounts of unimpaired trade receivables that were past due for collection (2015: $ nil).   The Group has VAT recoverable of $7.9 million (2015: $7.5 million).  The timing of recovery of these balances is subject to future revenue receipts and application to the Russian Courts.  The Group forecasts the recovery of these balances based upon the timing of future revenue receipts and its experience of successful application to the Russian Courts.  No balances are considered past due or impaired at 31 December 2016 (2015: $nil) based upon this assessment of the timing of future cash receipts.  The Group believes its only exposure is in relation to the timing of recovery.   The credit risk of the Group's cash and short term deposits and derivative financial instruments is limited to the Group's policy of monitoring counterparty exposures.
(c) Liquidity risk   Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions.  The Board and its advisers seek to have appropriate credit facilities in place on a project by project basis, either from available cash resources or from bank facilities.   Management monitor the Group's liquidity position on a daily basis and formal liquidity reports are issued from all jurisdictions on a weekly basis and are reviewed monthly by the Board, along with cash flow forecasts.  A summary table with maturity of financial liabilities is presented below.   All amounts shown are gross undiscounted cash flows.
Financial liabilities												Years
As at 31 December 2016					Total		Current		Year 2	Years 3 to 5		6 to 10
					$'000		$'000		$'000	$'000		$'000
Interest bearing loans and borrowings					964,900		96,014		106,721	542,826		219,339
Preference shares					145,711		14,571		14,571	43,713		72,856
Convertible preference shares					254,153		8,260		8,260	24,780		212,853
Derivative financial instruments					1,010		943		67	-		-
Head leases					1,447		145		145	434		723
Trade and other payables					38,832		15,509		5,471	15,496		2,356
					1,406,053		135,442		135,235	627,249		508,127
As at 31 December 2015
Interest bearing loans and borrowings					1,136,455		167,551		214,778	613,384		140,742
Preference shares					173,977		17,398		17,398	52,193		86,988
Derivative financial instruments					3,891		2,097		284	1,510		-
Head leases					2,083		208		208	625		1,042
Trade and other payables					41,850		12,917		6,521	19,007		3,405
					1,358,256		200,171		239,189	686,719		232,177
Details of the interest rates applicable to the Group's long term borrowings, preference shares and convertible preference shares are given in notes 22, 23 and 24.  The Group is subject to interest costs in perpetuity in respect of preference shares, which have no contractual maturity date.  The table above does not show cash flows beyond 10 years.   The Group monitors its risk to a shortage of funds by forecasting cash flow requirements for future years.  The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of short term borrowing facilities, bank loans and equity fund raisings.   Fair values Set out below is a comparison by class of the carrying amounts and fair value of the Group's financial instruments in the financial statements.
							2016			2015
							Carrying		Fair	Carrying		Fair
							Value		Value	Value		Value
							$'000		$'000	$'000		$'000
Non-current assets
Loans receivable							611		577	606		567
Security deposits							-		-	2,391		2,391
Derivative financial instruments							5,012		5,012	5,585		5,585
Current assets
Trade receivables							37,732		37,732	38,683		38,683
Security deposits							2,393		2,393	2,041		2,041
Other current receivables							318		318	202		202
Derivative financial instruments							358		358	233		233
Cash and short term deposits							198,621		198,621	202,291		202,291
Non-current liabilities
Interest bearing loans and borrowings							699,038		706,682	814,021		821,999
Preference shares							131,703		165,140	156,558		184,705
Convertible preference shares							119,859		143,596	-		-
Derivative financial instruments							67		67	1,794		1,794
Rent deposits							23,324		19,838	28,932		21,999
Other payables							1,935		1,935	2,721		2,721
Current liabilities
Interest bearing loans and borrowings							40,787		45,458	104,724		108,013
Derivative financial instruments							943		943	2,097		2,097
Rent deposits							6,640		6,640	6,827		6,827
Other payables							8,869		8,869	6,090		6,090
The fair values of loans receivable and borrowings have been calculated based on a discounted cash flow model using a discount rate based on the Group's weighted average cost of capital.  The valuation technique falls within level 3 of the fair value hierarchy (see note 36 for definition).  The fair value of short term deposits,  other assets, trade and other receivables, trade and other  payables is assumed to approximate to their book values. The fair value of preference shares and convertible preference shares are assumed  to be their last quoted price, which is considered to be level 1 of the fair value hierarchy.  The fair value of derivatives is determined by a model with market based inputs.
(d) Capital risk management   The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern to provide returns to shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.   For capital risk management, the Directors consider both the ordinary and preference shares to be permanent capital of the Company, with similar rights as to cancellation.   To maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, undertake tender offers, return capital to shareholders, issue new shares or sell assets to reduce debt.  Consistent with others in its industry, the Group monitors capital on the basis of its gearing ratio.  This ratio is calculated as net debt divided by total capital.  Net debt is calculated as total liabilities but excluding provisions, head lease obligations and preference shares, which for capital risk management is considered to be capital rather than debt, less cash and short term deposits.  Total capital is calculated as equity, as shown in the balance sheet, plus preference shares and net debt.  Where the Group has a net cash position, the gearing ratio will be zero.
										2016		2015
										$'000		$'000
Non-current liabilities										904,157		900,366
Current liabilities										107,130		160,193
Total borrowings										1,011,287		1,060,559
Less: cash and short term deposits										198,621		202,291
Net debt										812,666		858,268
Equity										500,226		465,042
Preference shares										131,703		156,558
Total capital										1,444,595		1,479,868
Gearing ratio										56.26%		58.00%
36. Fair value measurement   The following table provides the fair value measurement hierarchy* of the Group's assets and liabilities.
												Total Fair
							Level 1		Level 2	Level 3		Value
As at 31 December 2016							$'000		$'000	$'000		$'000
Assets measured at fair value
Investment property							-		-	1,300,643		1,300,643
Investment property under construction							-		-	41,253		41,253
Derivative financial instruments							-		5,370	-		5,370
Liabilities measured at fair value
Derivative financial instruments							-		1,010	-		1,010
As at 31 December 2015
Assets measured at fair value
Investment property							-		-	1,333,987		1,333,987
Investment property under construction							-		-	39,129		39,129
Derivative financial instruments							-		5,818	-		5,818
Liabilities measured at fair value
Derivative financial instruments							-		3,891	-		3,891
*Explanation of the fair value hierarchy:
Level 1 - Quoted prices in active markets for identical assets or liabilities that can be accessed at the balance sheet date.   Level 2 - Use of a model with inputs that are directly or indirectly observable market data.   Level 3 - Use of a model with inputs that are not based on observable market data.   The Group's foreign currency derivative financial instruments are call options and are measured based on spot exchange rates, the yield curves of the respective currencies as well as the currency basis spreads between the respective currencies.  The Group's interest rate derivative financial instruments comprise swap contracts and interest rate caps.  These contracts are valued using a discounted cash flow model and where not cash collateralised consideration is given to the Group's own credit risk.   There have been no transfers between level 1 and level 2 during the year or the prior year.
37. Subsequent events   On 19 January 2017 the Group entered into a conditional agreement to acquire a portfolio of three properties in St Petersburg.  The agreement provided for entities in the Group to acquire a warehouse and two office buildings for a total consideration of Rub4.9 billion, subject to the satisfaction of certain escrow arrangements.  The acquisitions have yet to complete and have a long stop date of 31 March 2017, with the option to extend this date for a further twenty business days.
38. Operating lease arrangements   The Group earns rental income by leasing its investment properties to tenants under non-cancellable operating leases, which are discussed in detail in the Strategic Report and note 13. At the Balance Sheet date the Group had contracted with tenants for the following future minimum lease payments:-
										2016		2015
										$'000		$'000
Within one year										127,962		136,416
In the second year										113,400		113,410
In the third to fifth year (inclusive)										209,100		208,901
After five years										56,379		59,127
										506,841		517,854