Arricano Real Estate : 25.04.2016 Acquisition

a7c36e7e-7168-4e44-9d6b-007104bbf217.pdf

26 April 2016

Arricano Real Estate plc

("Arricano" or the "Company" or, together with its subsidiaries, the "Group") Final Results for the 12 months ended 31 December 2015

Arricano is one of the leading real estate developers and operators of shopping centres in Ukraine. Today, Arricano owns and operates five completed shopping centres comprising 147,800 sqm of gross leasable area, a 49.9% shareholding in Assofit and land for a further three sites under development.

Highlights

• Recurring revenues were USD20.4 million (2014: USD22.8 million)

• Operating profit increased to USD18.9 million (2014: USD10.5 million), both figures including revaluation gains and adjustments to operating expenses explained below

• Total fair valuation of the Company's portfolio was USD160.3 million as at 31 December 2015 (2014: USD205.6 million)

• Overall occupancy rates for 2015 increased to 96.2% against 89.3% in 2014

• As at 31 December 2015, the Company's borrowings at project level remain conservative with a loan to investment property value ratio of 37.44%, compared to 2014 number of 29.6%

• Net asset value USD3.1 million (2014: USD61.7 million)

Rupert Cottrell, Chairman of Arricano, commented: "Arricano is operating in a challenging market environment, but we continue to attract a strong tenant base and have increased occupancy across the entire portfolio. 2015 saw a record number of visitors to our malls, driven by our innovative approach to the design and management of the spaces."

For further information please contact:

CEO: Arricano Real Estate plc Mykhailo Merkulov	Tel: +380 44 569 6708
Financial PR: Novella Communications Limited Tim Robertson/Ben Heath	Tel: +44 (0)20 3151 7008
Nominated Adviser and Joint Broker: Smith & Williamson Corporate Finance Limited Azhic Basirov	Tel: +44 (0)20 7131 4000
Joint Broker: Whitman Howard Limited Ranald McGregor-Smith	Tel: +44 (0)20 7087 4555

Chairman's Statement

The market environment is still challenging and this was reflected in the total revenues in the period which decreased by 11% from the prior year to USD20.4 million, while retail sales in Ukraine fell by 55% in USD terms. Occupancy across the entire portfolio increased, however, to 96.2%, up from 89.3% at 31 December 2015, demonstrating that the Company continues to have a stable tenant base and the ability to attract new tenants.

Performance in the period has again been adversely affected by the continued volatility of the market environment in Ukraine. The Ukrainian Hryvnia fell by around 52% against the USD, and inflation in the country reached 43% at the end of the year. Fortunately, Arricano remains in a stable financial position, although we do not expect to see any immediate economic recovery. However, Ukraine is set to receive around USD9bn in funding in 2016, from key bodies such as the International Monetary Fund, and the European Union.

As at 31 December 2015, Arricano has 147,800sqm of completed assets spread across five completed shopping centres ("SECs"). In addition, the Company also owns title rights for 14 ha. of development land divided into three specific sites which are at varying stages of development. These are in Lukianivka and Petrivka (both Kyiv), as well as Rozumovska (Odesa).

Reflecting the long-term confidence of the business, the Company confirmed plans to invest approximately USD80 million into the construction of a new SEC in Rozumovska, Odessa. The Odessa Mall is intended to be a three-level SEC and will include a major hypermarket, shops and shopping galleries, leisure and entertainment areas, with a gross leasable area of 39,200 sqm. The development is expected to create 1100 new jobs.

During the period under review, Arricano concluded 187 new lease contracts in its shopping mall network. This equated to letting 19,900 sqm of retail space, including 7,667 sqm in the course of rotation. 2015 also saw a record 39.3 million people visited Arricano SECs, reflecting well upon the image of the Company as a leading in developer and operator of shopping centres in Ukraine.

It has certainly been another challenging year for Arricano and I would like to take this opportunity to thank all employees of the Group for their commitment and continued loyalty to the business. The management team has undergone a number of changes, including the appointment of Tetyana Kolesnyk as the Company's Chief Financial Officer and Mykhailo Merkulov, Chief Executive Officer of the Company, as an Executive Director on the Board of Directors.

Ukraine represents the last sizeable real estate market in Europe that is still severely underdeveloped in terms of retail space. When the country returns to stability, this will again be a key driver of value and appeal to internal and external investors. For the time being, our focus remains on managing and improving our existing portfolio whilst also continuing to progress with development projects. The Board believes that the Company remains in a strong position to endure any current challenges and will continue to be a leading owner and developer of shopping centres in Ukraine.

Rupert Cottrell Chairman

25 April 2016

Chief Executive Officer's Report Introduction

2015 has seen the prolongation of a difficult and volatile political environment in Ukraine. However, Arricano continues to make good progress, attracting new tenants, increasing occupancy alongside pro-active marketing campaigns and pursuing the development of new projects.

• Despite the challenging environment Arricano managed to significantly outperform the market level which became possible due to several factors: new professionals from the market joined the company in key business areas, team was reunited and motivated to reach stretch goals, internal processes have been revised and efficiency improved, significant innovations in every business area have been implemented. "Innovation" was a company motto for 2015, the internal innovation campaign generated over 120 ideas, half of which have been implemented in 2015.

Results

Revenues for the period were USD20.4 million (2014:USD22.8 million). As a result, the Net Operating Income ("NOI") from the operating properties was USD20.2 million compared to USD 20.8 million in 2014. Decrease of NOI was driven by the reduction in revenues.

The loss before tax decreased to USD16.3million (2014: loss of USD69.6 million). This decrease was primarily by a reduction in the foreign currency translation loss which, in 2015, was USD 19.2 million compared to USD 49.8 million in 2014 and there was also a significant impairment charge accrued in 2014 of USD 20.7 million.

The portfolio of assets was externally and independently valued as at 31 December 2015 by Expandia LLC, part of the CBRE Affiliate Network. The portfolio was valued at USD160.3 million (31 December 2014: USD205.6 million), the reduction in the value of the portfolio was due to the fall in the value of the Hryvnia and the lower income base of the portfolio.

Bank debt at the year-end was USD60.1 million, with the majority of borrowings at the project level at an average interest rate of 9.8%. Loans mature between 2016 and 2020 and the Company's loan to investment property value ratio is 37.4%. In addition, there was USD4.2 million of cash, cash equivalents, and restricted deposits, as at 31 December 2015.

The Market

The market environment has been tough over the last 12 months, yet the Group's five shopping and entertainment centres have continued to operate as normal every day with a record 39.3 million people visiting the malls over the year. This is a great achievement by the Company and reflects the success of our strategy to focus on enhancing the customer experience of visiting the shopping centres.

The Company has been particularly active during the period in marketing both the SECs and the tenants that occupy them. There has also been a program initiated to redesign a number of the SECs and modernise the layout and accessibility to on-site facilities such as food courts and comfort zones. This, coupled with an increased operational efficiency has improved the customer experience for consumers, and has led to the increase in footfall numbers across the portfolio.

Tenants continue to be impacted by the economic environment and as a result churn levels remain higher than in a normal market. The Company's ability to find new tenants has been critical and

during 2015, the Company signed 187 new lease contracts, including a number of significant tenants. Among these is NAMES'UA, the first ever multi-branded department store that offers Ukrainian-only brands, which opened a 2,140 sqm store within SEC Prospect in October 2015. Other significant tenants included Poisk Home and LC Waikiki.

In terms of the new developments, the Company is progressing projects in Odessa and Lukyanivka, Kyiv. In Odessa, plans were announced in October 2015 to invest USD80 million in the development of this site, the next stage is to complete the financing process. In Lukyanivka, development is underway and completion is expected at the end of 2017. The third development site in Petrivka (Kyiv), remains on hold currently while the management decide on the optimal strategy for development.

On 5 November 2015, the Company announced that the High Court of Justice in London had dismissed the claim filed by Stockman Interhold SA ("Stockman") seeking to overturn the declaration made in August 2014 by the London Court of International Arbitration ("LCIA") that Arricano had validly exercised the call option whereby it sought to acquire a shareholding of 50.03 per cent. in Assofit Holdings Limited, previously the holding company of the Sky Mall shopping centre in Kyiv (the Company owns the other 49.97 per cent.). The Group is now expecting an award of the sole arbitrator in respeсt of Arricano's damages claim.

While the dispute is not yet fully settled, the Company is pleased with progress so far and believes that increasing transparency and public awareness within the Ukrainian business environment is an important agenda to follow.

Outlook

Arricano continues to perform well in the context of the wider environment. To increase occupancy to 96.2% during 2015 is an excellent achievement. The asset and tenant base of the business is strong and we continue to work hard to further strengthen it with focus on servicing our tenants and all visitors to our centres.

Following the "Innovation" year of 2015, Arricano is declaring 2016 to be a "Service" year. The company management believes that increasing its service level to B2C and B2B customers will allow to significantly increase the loyalty and therefore the revenues. Service improvement to B2B customers will involve support to tenants in increasing their turnover, while B2C client will see changes in the product and service offers in the malls which will make them increase frequency of visits and lengths of stay in Arricano malls.

We know in time Ukraine will recover and at that point Arricano will be able to reap the reward of its continued investment in the existing and future portfolio.

Mykhailo Merkulov Chief Executive Officer 25 April 2016