ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED An Income and Capital Growth Commercial Property Fund Focusing on Central and Eastern Europe*

INTERIM REPORT For the 6 months ended 31 March 2010

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED – 31 March 2010 CONTENTS Highlights

3

Chairman‟s Statement

4

Investment Manager‟s Report

7

Independent Review Report

12

Unaudited Condensed Statement of Comprehensive Income

14

Unaudited Condensed Consolidated Statement of Financial Position

16

Unaudited Condensed Consolidated Statement of Changes in Equity

17

Unaudited Condensed Consolidated Cash Flow Statement

18

Notes to the Unaudited Consolidated Financial Statements

19

Directors and Company Information

26

2

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED – 31 March 2010 HIGHLIGHTS 

Adjusted NAV per share¹ of €0.093² (30 September 2009 €0.264).



NAV per share of €0.086² (30 September 2009 €0.233).



Losses in the period of €8.9m (31 March 2009 losses €52.4m) including the net write down of investment property values of €13.5m.



Riviera Shopping City in Odessa, the Fund‟s first 83,000 sqm hypermarket-anchored retail park and shopping centre in Ukraine opened its second phase on 16th of October 2009 featuring anchor tenants Real Hypermarket, OBI DIY, Zara and many more. Subsequently, the third phase (leisure) opened with a 12 lane bowling leisure complex and IMAX multiplex cinema.



The Company completed an agreed €68m investment facility underpinning the successful completion and opening of the Riviera Shopping City, Odessa development.



An amount of €10.5m was raised in October 2009 by the placing and open offer of 210 million new ordinary shares at €0.05 per new ordinary share. This provided some €9.96m of cash to the Group after placement and issue costs to support the Group‟s working capital needs and the cash flow requirements of its Romanian and Ukrainian shopping centres.

¹Adjusted NAV is calculated before any deferred tax liability

²Based on ordinary shares in issue, of which an additional 210 million were issued in the period

3

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED – 31 March 2010 CHAIRMAN’S STATEMENT This report sets out the results of Argo Real Estate Opportunities Fund Limited (“AREOF”/ “Company”/ “Group”)‟s for the 6 month period ended 31 March 2010 and discusses its progress in the ongoing development and active asset management of its retail and mixed-use commercial property investments in Central and Eastern Europe. Financial performance The NAV per share and Adjusted NAV per share as of 31 March 2010 are €0.086 and €0.093 respectively (see Note 4) reflecting a decrease of €0.149 and €0.173 respectively in the 6 month period since 30 September 2009; this decrease arising principally from the placement and rights issue during the period of 210 million shares at a price below NAV and the write down of the Group‟s assets following the upheavals and continued weakness in global economic and financial markets. On the basis of the enlarged issued share capital of 310 million and the net issue proceeds of €9.95m during the period the comparative pro-forma NAV per share and Adjusted NAV per share as of 30 September 2009 would have been €0.107 and €0.117 respectively. The financial statements for the period to 31 March 2010, show a loss attributable to equity shareholders of €6.5m which includes losses on investment properties of €13.5m. Dividend The Board has resolved that the Company will not declare a dividend for the period as it continues to utilise its resources to maximise liquidity within the Company during the current turbulent and hostile trading conditions. Operating activities The Group has operated over recent months in a particularly challenging and difficult environment in which regional and global property markets have remained weak together with the economic and financing background in general. Despite this the Group has made good operational progress with its portfolio of assets. The difficult environment has seen retailer bankruptcies continue and the ongoing demands of tenants to seek rent concessions along with the reluctance to make payment of their contractual rental obligations on time. The effects of this have impacted the Group‟s cashflow and, whilst this situation has been aggressively managed, it has caused a breach of certain loan covenants in specific instances which is fully recognised by the relevant banks who continue to be supportive of the Group‟s activities. Despite this difficult trading environment the Company‟s first investment in the 47,000 sqm European Retail Park, Sibiu, Romania continues to trade with a 97% tenant occupancy level being achieved. In the period, the adjoining 30,000 sqm Phase 3 extension of the European Retail Park is also successfully trading at near 100% tenant occupancy, with its principal anchor tenants being a Carrefour Hypermarket and Mobexpert, a leading furniture retailer, as well as a range of internationally recognised high street brands. The Company‟s other Romanian investment property is the development undertaken on the Suceava Shopping City, Romania which is similarly impacted by the difficult trading environment but is continuing to maintain tenant occupancy at the 98% level.

4

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED – 31 March 2010 CHAIRMAN’S STATEMENT (continued) Construction of the 83,000 sqm Riviera Shopping City, Odessa, the Group‟s first acquisition in Ukraine, was effectively completed in the period. Phase 1 of the centre opened in February 2009 with a 14,000 sqm Obi DIY store and Phase 2 completed with an opening in October 2009 fully supported by key anchor tenants including Real Hypermarket and various Inditex fashion brands. Phase 3 (leisure) is currently in the phased process of completion with a 12-lane City Bowling leisure complex and a nine-screen IMAX multiplex cinema. Riviera Shopping City is currently around 94% let and was the largest retail opening in Ukraine in 2009. The continued challenging market conditions have caused the Group to reassess the viability of developing at the present time its second development site in a primary Ukrainian city centre, together with its three commercial development sites in and around Chisinau, Moldova. During the period the Group decided and completed on the swap of its Ukrainian leasehold development land for freehold land in order to protect its longer term interest and reduce annual costs while warehousing this land for future development or sale. Opportunities to maximize shareholder value on these specific assets are continually being sought and appraised. Full details of all the projects entered into by the Company are further explained in the Investment Manager‟s report on page 7. Placing and Open Offer In order to support the Group‟s working capital needs and the cashflow requirements of its Romanian and Ukrainian shopping centres, an amount of €10.5m was raised in October 2009 by the placing and open offer of 210 million new ordinary shares at €0.05 per new ordinary share. This provided some €9.95m of cash to the Group after placement and issue costs. Financing Facilities The Group‟s €68m Marfin Bank development facility, supporting the funding for the Riviera Shopping City, Odessa development, was during the period converted into a five year investment facility with the relaxation of certain covenant terms for an eighteen month period while current and projected levels of income stabilise. Accounting practices The Group has continued to apply International Financial Reporting Standards as endorsed for use in the European Union (“IFRS”) in the following unaudited consolidated financial statements. The Group's reporting currency is the Euro. Shareholder communication The Manager aims to keep shareholders and other interested parties informed of developments through its website, www.argocapitalproperty.com. Change of Chairman David Jeffreys resigned as Chairman of the Board and as a director with effect from 31 May 2010. Robert Brown has filled this role until such time as the Board appoints a new NonExecutive Chairman. The Board express their thanks to David for his leadership and contribution to the Company since his appointment as Chairman in January 2008.

5

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED – 31 March 2010 CHAIRMAN’S STATEMENT (continued) Outlook While there has been encouraging signs of limited recovery in recent months in certain Central and Eastern European markets this has yet to manifest its effects in the property markets within which the Group operates in the regions. However, there are positive indications that the rate of decline in rental incomes has started to stabilise although 2010 will continue to remain challenging as a result of the time limited rental concessions conceded in our Romanian shopping centres to maintain near full occupancy levels. Similarly while the Riviera Shopping City, Odessa trades well following its opening in 2009, a number of time limited contractual concessions are still required in order to lease up the remaining unlet units in the shopping centre. The difficult regional trading environments continue to impact Group cashflow which is forecast to fund its working capital requirements until the summer of 2011. The preparation of the supporting cashflow forecast has been made on the basis of a number of material risks and judgements that have been considered by the Directors as explained more fully in note 2 to the consolidated financial statements. The Board continues to contemplate a number of initiatives as to how the working capital needs of the Group can continue to be met longer term to meet its ongoing obligations and maintain stakeholder support, including asset sales, additional or restructured bank borrowings or capital raisings.

Robert Brown Acting Chairman 29 June 2010

6

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED – 31 March 2010 INVESTMENT MANAGER’S REPORT Led by Magnus Lofgren and Robert Provine, the Investment Manager implements a focused strategy on behalf of AREOF of creating institutional quality retail property assets in leading primary and secondary cities in Central and Eastern Europe with a particular focus on Romania and Ukraine. Since its inception in August 2006, the Group has committed and invested all of its original €96m equity capital (net of listing costs) to projects, including the acquisition and subsequent extension of the 80,000 sqm Carrefour, Real and Baumaxx anchored European Retail Park Sibiu, the development of the 50,000 sqm Carrefour and Baumaxx anchored Suceava Shopping City and the construction of the 83,000 sqm Real and Obi anchored Riviera Shopping City in Odessa, Ukraine. The 6 month period to 31 March 2010 has seen a degree of stabilisation in the economic downturn, albeit at a low level, as the numbers of retailer bankruptcies and requests for rental concessions are no longer being evidenced at an increasing rate. So while the overall economic weakness remains it would appear to no longer be getting worse. The rental concessions provided to date, which contractually are mostly time-limited, would appear in reality to reflect the new levels of sustainable rents for the properties. These rental concessions have had a negative impact on the income of the Company and are detailed in the Transaction Overviews section. It is the belief of the Investment Manager that the only viable way to increase income from the current levels, and in some cases to protect the rent which is currently passing, is through the implementation of targeted asset management initiatives which are also detailed in the Transaction Overviews section. Although the Polish, Czech and to a limited extent, the Hungarian, regional property investment markets have seen a degree of recovery, the Romanian and Ukrainian markets have yet to see any material improvement largely due to the continued risk-aversion from unleveraged buyers and the unavailability of sizeable debt packages for potential leveraged buyers. Despite the difficult environment, the Company successfully completed and opened the first part of the Third Phase (leisure) of the 83,000 sqm Riviera Shopping City in Odessa, anchored by Real Hypermarket and Inditex fashion brands Zara, Bershka, Stradivarius and Pull & Bear, with the debut of the 12-lane City Bowling leisure complex. The Third Phase final part recently completed with the opening of its nine-screen IMAX Multiplex Cinema. This period has seen continued write down on the Company‟s assets totalling some €13.5m. The effect of this write down on NAV has been largely offset by the further net equity raised which with other net trading income resulted in an NAV attributable to equity holders as of 31 March 2010 of €26.6m. The Group has obtained third party desktop valuations from independent valuers on the portfolio of its property assets as at 31 March 2010, the results of which are reflected in the NAV shown in the consolidated financial statements. The primary drivers of the NAV during the period were (i) the placing and rights issue of €9.95m, net of placement and issue costs, of additional equity, (ii) the write down of €1.5m on the European Retail Park, Sibiu, (iii) the write down of €1.6m on Sibiu Phase 3, (iv) the €7.1m write down on the valuation of Suceava Shopping City, (v) the write down of € 2.1m on the Riviera Shopping City, Odessa, (vi) the write down of €0.7m on the valuation of the Moldova related assets and (vii) the write down of €0.5m on the valuation of the Nikolaev asset. The effects of the rental concessions on income and certain write downs in the year have put selected banking covenants in breach which the Company is managing through agreed concessions from its relationship banks. The breaches and bank discussion status are detailed in the following section.

7

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED – 31 March 2010 INVESTMENT MANAGER’S REPORT (continued) In the current commercial environment, the Investment Manager is focusing on the proactive asset management of the existing properties, completing the tenant leasing of the Odessa Riviera Project and preserving occupancy and rental income through extending the selective rental concessions to distressed retail tenants. As stated in our Annual Report, the following risks continue to exist for the Company: i) ii)

iii) iv)

v)

the potential for continued deterioration in the investment market causing further decreases in capital values, although at current valuations, the Investment Manager does not see the likelihood of further material write downs; continued challenges in the local retail environments causing existing tenants to struggle and either go out of business or ask for reductions in rent reducing the Group‟s income, although again, it is anticipated that we would more likely anticipate a continuation of the current concessions as opposed to deeper concessions being required; retailers continue to limit or delay their expansion into new markets such as the Ukraine which is slowing the leasing up of Riviera Shopping City although its very strong trading since the opening is helping to support retailer interest in the centre; the severe devaluation of the Hryvna, the local Ukrainian currency, has stabilised at approximately 10 : 1 Euro, a level which has alleviated some of the pressure on our Euro-denominated leases. The situation is similar in Romania where the RON has devalued significantly in favour of the Euro; and the occurrence of one or more of the above eventualities creating the requirement of additional capital which would have to be met through a rights issue or other infusion of third party resources.

Despite the challenging environment the Company continues to analyse and pursue discrete asset and strategic disposal discussions with a view to pursuing any credible indications of interest. Transaction Overviews European Retail Park Sibiu, Romania AREOF acquired its original investment in the European Retail Park Sibiu in November 2006 and continues to actively manage this asset. AREOF has expanded the Retail Park with a number of extensions and reconfigurations (known as "Phase 3"). After having completed and opened the 30,000 sqm extension and reconfiguration of the property in 2008/2009, the property has further fortified its position as the dominant and most successful shopping centre in central Romania. A number of further asset management initiatives are being considered which will improve the credit quality and level of income of the centre including an improvement and extension of the Grand Entrance area, the connection of Phase 3 with Phase 1 and the addition of a Multiplex Cinema to the project. To achieve funding of these initiatives, we have been in discussions with the banks to agree funding participation that would enable us to undertake and complete these projects. An agreement has been reached with the banks to part fund these initiatives but this is still awaiting final credit committee approval. Current financing arrangements include €66.5m of debt from KBC Bank, fully swapped for five years along with a syndicated, five year investment loan of €27.8m from KBC, Investkredit and Marfin/Laiki Bank. For Phase 3, the project is currently within all of its loan covenants (€27.8m syndicated facility). However, for Phase I/II of the project (€66.5m syndicated facility) we have submitted a waiver to the bank for a prior loan covenant breach that occurred in 2009. Currently we are back within the loan covenants as of the last reporting date of May 2010.

8

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED – 31 March 2010 INVESTMENT MANAGER’S REPORT (continued) As was the case in 2009, the current market situation has required numerous and ongoing tenant lease term renegotiations and we are proactively managing our tenant relationships to maintain the current level of occupancy. We expect the remainder of 2010 to continue to be tough for retailers but believe that the economy will improve going into 2011. An additional challenge continues to be the timely collection of rent, which has seen rent arrears remaining at historically high levels putting further strains on cashflow. The Project Company is actively managing the situation but if expected rental concessions increase and/or rental collection worsens the Project Company may need to seek external funding to meet its debt service requirements. The valuation of the property as at 31 March 2010 was €77.0m on Phase 1, against a 30 September 2009 valuation of €78.1m, and a valuation of €36.1m on Phase 2, against a 30 September 2009 valuation of €37.3m. Suceava Shopping City, Suceava, Romania The 50,000 sqm centre, which is the dominant shopping centre in the city, remains 98% let despite the high competition in the City. . As was the case in 2009, the current market situation has required numerous and ongoing tenant lease term renegotiations to retain the current level of occupancy. It is anticipated that limited further concessions during the course 2010 may be required and/or rising vacancy may occur, both of which would have a negative impact on rental income. The situation is very fluid and being proactively managed by DTZ with our direct and constant involvement. An additional problem, as in Sibiu, is the collections of rent, which has seen rent arrears stay at elevated levels over the past year, putting additional strain on cash flow. The Project Company is again aggressively managing this situation. The current plan is to continue stabilising the centre with the DTZ Centre Management team and begin to explore several asset management initiatives including the construction of an extension similar to that completed in Sibiu on the parking lot along with the potential addition of a cinema operator beside the Carrefour unit at the back of the scheme. The project has in place a €50m fully swapped three year facility with Alpha Bank of Greece. As a result of the package of rental concessions provided to assist tenants, expected annual rental income has reduced to a level breaching certain loan covenants stipulated under the facility terms. The Company has been in active discussions with the Bank regarding the current situation and has received the Bank‟s first proposal regarding an amendment to the existing terms to deal with the current extraordinary situation. We expect to have a final agreement with the Bank in the foreseeable future. As the terms of the loan give the Bank the right to accelerate repayments the whole of the loan has been restated as being payable within 1 year in these consolidated financial statements although it is not anticipated that this will be enforced. The 31 March 2010 valuation was €59.8m against a 30 September 2009 valuation of €66.1m. Riviera Shopping City, Odessa, Ukraine The Company successfully opened Phase 2 of the 83,000 sqm Riviera Shopping City in Odessa on 16 October 2009 featuring a 12,500 sqm Real Hypermarket, Inditex fashion brands Zara, Stradivarius, Bershka and Pull&Bear along with many others. Attendance and retailer sales have exceeded estimates providing comfort to the Company that this location is and will continue to develop as an important and sustainable regional retail destination.

9

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED – 31 March 2010 INVESTMENT MANAGER’S REPORT (continued) Phase 1 of the centre opened in February 2009 with the launch of the 14,000 sqm Obi DIY Store, with the third and final phase currently being completed in 2010 with the recent successful opening of the City Bowling and Leisure Complex and the currently planned imminent opening of the Imax Multiplex Cinema. Leasing continues to be challenging although it has materially improved with the strong publicity surrounding the successful opening with a current tenant occupancy level around 94%. The Group has fully drawn the €68m Marfin construction facility, which in accordance with the original agreement converted into a five year investment facility on 17 December 2009. The current and projected level of income has required the Company to enter into a “stand-still” agreement on selected loan covenants with Marfin, which is reflected in the updated Investment Facility documentation and is in place until June 2011. The valuation of the property as at 31 March 2010 was €75.7m while at 30 September 2009, prior to completion, the development land and property were valued at €67.5m. Riviera Shopping City II The Group took a strategic decision during this 6 month period to exchange its leasehold interest at the existing location in Nikolaev for an alternative plot of freehold land located at the entrance of the city on the primary motorway from Odessa. The decision factored in a number of considerations including the long term security of the freehold plot as opposed to the more politically exposed leasehold interest and the reduced annual costs of warehousing a freehold land plot for future development or sale. The transaction has been completed in the period and the freehold land is in ownership of the Company with a value, at 31 March 2010, of €1.0m. Moldova Retail and Mixed Use Development Sites, Chisinau, Republic of Moldova In conjunction with a local partner, the Group is completing the assembly of a retail and mixeduse development site in the historic city centre of Chisinau, the Republic of Moldova‟s capital. The Group also owns two further potential out-of-town retail and mixed-use sites on prominent motorway locations on the periphery of Chisinau. As with the rest of Europe, Moldova is suffering from the current economic climate and the Investment Manager is exploring several strategic options including joint ventures and potential sales of selected or all three of the project sites. The Moldovan asset valuations totalled €2.8m as at 31 March 2010 with a small write off of certain related costs in the period of some €0.7m. Proton Corporate Loan There has been acknowledgement with the top management of Proton for over a year on the roll-over of the €25m Proton corporate loan which nominally matures in December 2010. The Managers are now in discussions on the terms of this extension with the Bank before being presented to the Bank‟s Credit Committee for formal approval.

10

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED – 31 March 2010 INVESTMENT MANAGER’S REPORT (continued) Outlook While the Manager does not foresee significant change in terms of recovery of the economic environment in the region, we do believe that a bottom has been reached in terms of economic activity, property valuations and availability of financing. As such, we believe that the current asset valuations underpinning the Group's NAV should provide a base for capital value growth over future periods. The primary challenge remains running the Group on the reduced cashflow from its properties which stresses both loan covenants and the Group level cashflow. The Manager's core focus will continue to be on the effective utilisation of the available cashflow to ensure continuing aggressive asset management of its properties and the effective servicing of its debt. Strategically, a number of ideas have been discussed internally about creating a positive vision for the growth of the business in the future, with the majority of the most compelling revolving around the use of shares as currency to fully or partially pay for new assets to provide critical mass, stronger company cashflow and a more robust strategic outlook. The primary challenge facing the Group over the next 12 months, will be the management of operational cashflow in a lower income environment resulting from a material number of the time-limited rental concessions provided to tenants in 2009 to maintain occupancy levels, having to be extended. The Manager's core focus will thus be on the effective utilisation of the available cashflow to ensure continuing aggressive asset management of its properties and the effective servicing of its debt.

Robert Provine Fund Manager

Magnus Lofgren Fund Manager

On behalf of Argo Capital Management Property Limited 29 June 2010

11

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED – 31 March 2010 INDEPENDENT REVIEW REPORT Independent review report to Argo Real Estate Opportunities Fund Limited Introduction We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2010 which comprises the consolidated income statement, consolidated balance sheet, consolidated statement of changes in equity, consolidated cash flow statement and the related explanatory notes 1-8. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. Directors’ responsibilities The Interim Report, including the financial information contained therein, is the responsibility of and has been approved by the Directors. The Directors are responsible for preparing the interim report in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market which require that the half-yearly report be presented and prepared in a form consistent with that which will be adopted in the company's annual accounts having regard to the accounting standards applicable to such annual accounts. Our responsibility Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. Our report has been prepared in accordance with the terms of our engagement to assist the company in meeting the requirements of the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability. Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, „„Review of Interim Financial Information Performed by the Independent Auditor of the Entity‟‟, issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the Interim Report for the six months ended 31 March 2010 is not prepared, in all material respects, in accordance with the basis of preparation outlined in note 2 and in accordance with the AIM Rules issued by the London Stock Exchange.

12

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED – 31 March 2010 INDEPENDENT REVIEW REPORT (continued) Emphasis of Matter – Going Concern In arriving at our review conclusion, which is not qualified, we have considered the adequacy of the disclosures made by the Directors in the Basis of Preparation note 2 concerning the Group‟s ability to continue as a going concern. These disclosures identify, amongst other factors, breaches of financial loan covenants at the period end and the need to reach agreement with the lender to waive the breaches and amend the loan terms together with the need to refinance certain loans within the next 12 months. These represent material uncertainties which may cast significant doubt on the Group‟s ability to continue as a going concern. The condensed set of financial statements in the Interim Report does not include the adjustments that would result if the Group was unable to continue as a going concern.

BDO Limited Chartered Accountants Place du Pré Rue du Pré St Peter Port Guernsey 29 June 2010

13

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the 6 months ended 31 March 2010 6 months to 6 months to Year ended Note 31 March 2010 31 March 2009 30 September 2009 (unaudited) (unaudited) (audited) €'000 €'000 €'000 INCOME Gross rental income 9,675 6,480 12,108 Related services income 2,980 1,729 3,894 Property operating expenses (3,425) (2,784) (5,066) Net rental and related income 9,230 5,425 10,936 Changes in fair value of investment property Changes in fair value of development property Impairment of financial assets Changes in fair value of assets

5 6 7

(13,536) 62 (13,474)

(22,105) (15,512) (14,974) (52,591)

(25,471) (23,115) (24,405) (72,991)

Operating loss

(1,000) (199) (250) (97) (87) (14) (1,647) (5,891)

(1,000) 3,200 (285) (318) (115) (96) (17) 1,369 (45,797)

(2,000) 3,200 (481) (564) (249) (161) (74) (329) (62,384)

NET FINANCING (EXPENSE)/INCOME Bank Interest Income Loan Interest Income Fair value loss on swap contract Finance costs Net foreign exchange loss Net financing expense

144 622 (266) (6,752) 1,720 (4,532)

180 943 (4,525) (4,976) (1,664) (10,042)

301 1,870 (6,517) (9,800) (4,710) (18,856)

(10,423)

(55,839)

(81,240)

(52) 1,625 1,573 (8,850)

(119) 3,537 3,418 (52,421)

(55) 4,076 4,021 (77,219)

-

(17,028) 4,601

(17,028) 4,601

(159)

(1,616)

666

(159)

(14,043)

(11,761)

(9,009)

(66,464)

(88,980)

EXPENSES Investment manager‟s management fee Investment manager‟s performance fee Legal and professional fees Accounting and administration expenses Auditors‟ remuneration Directors‟ fees and expenses Sundry expenses

LOSS BEFORE TAXATION Taxation - current Taxation - deferred Total Taxation LOSS FOR THE PERIOD OTHER COMPREHENSIVE INCOME Changes in fair value of development property taken against revaluation reserve Deferred tax on revaluation of properties Foreign exchange losses on translation of foreign operations

6

Total other comprehensive income TOTAL COMPREHENSIVE INCOME

All items in the above statement derive from continuing operations. The accompanying notes are an integral part of this statement. 14

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (continued) For the 6 months ended 31 March 2010 6 months to 6 months to Year ended Note 31 March 2010 31 March 2009 30 September 2009 (unaudited) (unaudited) (audited) €'000 €'000 €'000 Loss attributable to : Equity shareholders Non-controlling interest

(6,460) (2,390)

(49,412) (3,009)

(73,242) (3,977)

Total comprehensive income attributable to : Equity shareholders Non-controlling interest

(6,641) (2,368)

(63,518) (2,946)

(85,020) (3,960)

(0.023)

(0.494)

(0.732)

Basic and diluted earnings per share

3

All items in the above statement derive from continuing operations.

The accompanying notes are an integral part of this statement. 15

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 31 March 2010 Note ASSETS Non-current assets Investment properties Property, plant and equipment Tax Receivables Total non current assets Current assets Trade and other receivables Tax receivables Financial assets Cash and cash equivalents Total current assets Total assets EQUITY Capital and reserves attributable to equity holders of the parent company Share capital Share premium Other reserve Translation reserve Retained earnings Total equity attributable to equity holders of the parent company Non-controlling interest Total equity LIABILITIES Non-current liabilities Bank loans Deferred income tax Total non-current liabilities Current liabilities Bank loans Trade and other payables Financial liabilities Current income tax Total current liabilities Total equity and liabilities

5 6

7

8 8

31 March 2010 (unaudited) €'000

31 March 2009 30 September 2009 (unaudited) (audited) €'000 €'000

249,323 121 10,394 259,838

183,900 55,817 239,717

181,504 67,602 8,547 257,653

6,992 700 9,434 10,622 27,748

4,471 7,828 21,558 10,279 44,136

4,170 849 12,565 11,188 28,772

287,586

283,853

286,425

3,100 7,859 95,096 (1,758) (77,662)

1,000 95,096 (3,905) (47,372)

1,000 95,096 (1,577) (71,202)

26,635 11,119 37,754

44,819 14,501 59,320

23,317 13,487 36,804

153,351 4,146 157,497

193,323 6,310 199,633

173,277 5,771 179,048

75,121 10,690 6,397 127 92,335

11,118 13,643 139 24,900

53,215 11,147 6,131 80 70,573

287,586

283,853

286,425

The financial statements were approved and authorised for issue by the Board of Directors on 29 June 2010 and signed on its behalf by Robert Brown. Robert Brown Director The accompanying notes are an integral part of this statement. 16

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY As at 31 March 2010 Group

At 1 October 2008 Total comprehensive income for the year At 30 September 2009

1,000 -

-

- (22,210)

-

-

-

Shares issued in the period (note 8)

2,100

7,859

-

-

At 31 March 2010

3,100

7,859 95,096

At 1 October 2008

1,000

- 95,096

At 31 March 2009

1,000

-

€'000

649 (63,459) (85,020) (3,960) (88,980)

-

-

€'000

22,210 (2,226) (7,743) 108,337 17,447 125,784

- (1,577) (71,202)

Total comprehensive income for the period

€'000

Tota l

€'000

Mino rit Inter y est

€'000

Tota l

€'000

- 95,096

Total comprehensive income for the period

1,000

- 95,096

Reta ine Earn d ings

€'000

Tran slati Rese on rve

Othe r Rese r ve

€'000

luati Rese on r ve

Share Prem ium

€'000

Reva

Share Capi tal

Amount attributable to Parent Company Equity Holders

23,317 13,487

36,804

(181) (6,460) (6,641) (2,368) (9,009) -

9,959

-

9,959

- (1,758) (77,662)

26,635

11,119

37,754

22,210 (2,226) (7,743) 108,337 17,447 125,784

- (22,210) (1,679) (39,629) (63,518) (2,946) (66,464)

- 95,096

The accompanying notes are an integral part of this statement. 17

- (3,905) (47,372)

44,819 14,501

59,320

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED UNAUDITED CONDENSED CONSOLIDATED CASH FLOW STATEMENT For the 6 months ended 31 March 2010 Note

OPERATING ACTIVITIES Loss for the period

6 months to 6 months to Year ended 31 March 2010 31 March 2009 30 September 2009 (unaudited) (unaudited) (audited) €'000 €'000 €'000 (8,850)

(52,421)

(77,219)

17 13,536 (62) 5,796 (181) (1,573)

12 22,105 15,512 14,974 10,042 (1,616) (3,418)

25 25,471 23,115 24,405 13,892 666 (4,021)

8,683

5,190

6,334

(3,630) (23)

1,247 (8,149)

850 (13,666)

5,030

(1,712)

(6,482)

Interest received Interest paid Taxation (paid)/received

295 (8,057) (4)

187 (7,578) (5)

301 (14,008) 339

Cash generated from operating activities

(2,736)

(9,108)

(19,850)

Purchase of investment properties Purchase of property, plant and equipment Loans advanced Loans repaid

(48) (8,554) (13) 236

(27,877) 28

(989) (40,016) (6) 248

Cash flows from investing activities

(8,379)

(27,849)

(40,763)

FINANCING ACTIVITIES Proceeds from ordinary shares issued Drawdown of bank loans including costs Bank loans repaid Cash flows from financing activities

9,959 3,900 (1,920) 11,939

34,348 (4,006) 30,342

86,223 (32,954) 53,269

Increase in cash and cash equivalents

824

(6,615)

(7,344)

(1,389)

(1,664)

(26)

(565)

(8,279)

(7,370)

Cash and cash equivalents at start of period

11,188

18,558

18,558

Cash and cash equivalents at 31 March 2010

10,623

10,279

11,188

Adjustments for : Depreciation Changes in fair value of investment property Changes in fair value of development property Impairment of financial assets Net financing expense Exchange translation movements Taxation

6 5 6 7

Operating cash flows before movements in working capital Movements in working capital : (Decrease)/Increase in operating trade and other receivables Decrease in operating trade and other payables Cash generated from operations

INVESTING ACTIVITIES

Net foreign exchange difference

The accompanying notes are an integral part of this statement. 18

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED – 31 March 2010 NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 1. GENERAL INFORMATION The Company is a limited liability, authorised closed-ended investment company incorporated in Guernsey. The shares of the Company have been admitted to trading on the Alternative Investment Market of the London Stock Exchange. The Company invests in commercial property in Central and Eastern Europe which is held through its subsidiary and associated companies. The consolidated financial statements of the Company for the period ended 31 March 2010 comprise the financial statements of the Company and its subsidiaries (together referred to as the “Group”). 2. SIGNIFICANT ACCOUNTING POLICIES a. Basis of preparation The principle accounting policies adopted in the preparation of the unaudited condensed interim consolidated financial statements are set out below. The unaudited condensed interim consolidated financial statements have been prepared using the recognition and measurement principles of International Financial Reporting Standards (with the exception of IAS 34, Interims) which comprise standards and interpretations approved by the International Accounting Standards and Standings Committee that remain in effect and to the extent that they have been adopted by the European Union. These interim financial statements are unaudited but have been reviewed by the auditors whose review report is set out on page 12. The same accounting policies, presentation and methods of computation are followed in these interim consolidated financial statements as those followed in the preparation of the Group‟s annual financial statements for the year ended 30 September 2009, except where new International Accounting Standards have become effective, notably the adoption of IAS 1, Presentation of Financial Statements – A Revised Approach, and which are expected to be applied for the consolidated financial statements for the year ending 30 September 2010. The report of the auditors on the financial statements for the year ended 30 September 2009 was unqualified but did include references to an emphasis of matter in respect of the going concern of the Group arising from its need for further working capital in the second half of 2010 and the breach of certain banking covenants requiring specific loans to be reported as falling due for payment within one year despite the good relationship and ongoing support of the banks concerned. The unaudited condensed interim consolidated financial statements have been prepared on a going concern basis which assumes that the Group will be able to meet its liabilities as they fall due, for the foreseeable future. The Manager have prepared cash flow forecasts which indicate the Group to have available cash funds up until the summer 2011 beyond which it will need further working capital for which it is looking at a number of sources including asset sales, additional or restructuring of bank borrowings and further issue of capital. In reviewing those forecasts the Directors have taken into account material risks and uncertainties, including the following: 

Certain surplus cash funds are held in project subsidiary companies and the release of these funds for use of the Group‟s working capital needs in general would in some circumstances require the support of the specific lending banks financing these projects.

19

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED – 31 March 2010 NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (continued) 









The Group‟s €25m corporate loan facility with Proton Bank matures in December 2010 and the Bank has acknowledged the need to restructure this loan for a further period although the final terms of such restructuring are still to be agreed and approved. In the event that this restructuring is not successful the Group would require further funding to meet this obligation. The breach of several loan covenants gives the right to the lending bank to accelerate the repayment of the debt but the Company has a good relationship with its long term relationship banks and is actively engaged where these breaches have occurred in agreeing amended terms which would improve the Group‟s cashflow as a result of improved debt servicing arrangements. The sale of specific non-core asset disposals is anticipated to take place within the next 12 months, which should this not occur would require limited additional funds to support the Group‟s working capital needs. The uncertain trading environment and its impact on tenants and their ability to pay their contractual rent obligations in a timely manner. The continuing downward pressure on rental income could likewise result in the breach of certain loan covenants, again providing the lenders with the right to request early repayment of outstanding borrowings. The uncertainties facing property valuations in the current difficult economic and financial markets. In the event that property valuations continue to deteriorate it is likely that the Group could further strain financial loan covenants. Again breaches of such covenants would provide the lenders with the right, if they should choose, to request early repayment of outstanding borrowings.

The above represents material uncertainties which may cast significant doubt on the Group's ability to continue as a going concern. In the Directors' view discussions are continuing on the above satisfactorily and they have therefore concluded that it is appropriate to prepare these financial statements on a going concern basis. The financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern. The condensed financial statements are presented in Euros and all values are rounded to the nearest thousand (€‟000) except when otherwise indicated. The financial information summarised does not constitute statutory accounts. b. Basis of consolidation The consolidated financial statements incorporate the results of the Company and entities controlled by the Company (its subsidiaries) made up to 31 March 2010. Control exists where the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. All inter-company loan balances, interest charges and investments are eliminated on consolidation. The financial statements of the subsidiaries are prepared for the same reporting period as the Company. The accounting policies are applied consistently throughout the Group. 3. BASIC AND DILUTED EARNINGS PER SHARE The basic and diluted earnings per ordinary share are based on the loss for the period of €6.46m and on 284.6 million ordinary shares (2009: loss €49.41m and 100 million ordinary shares), being the weighted average number of shares in issue during the period. There were no dilutive interests as at 31 March 2010.

20

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED – 31 March 2010 NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (continued) 4. NET ASSET VALUE PER SHARE The Net Asset Value per share is based on shareholders‟ equity at the period end as follows: 31 March 2010

31 March 2009 30 September 2009

€'000

€'000

€'000

26,635

44,819

23,317

2,238

3,530

3,107

28,873

48,349

26,424

310 million

100 million

100 million

Net Asset Value per share

€0.0859

€0.4482

€0.2332

Adjusted Net Asset Value per share

€0.0931

€0.4835

€0.2642

Net Asset Value Add back deferred tax provision attributable to equity shareholders Adjusted Net Assets

Number of ordinary shares in issue

The adjustment added back to arrive at the Adjusted Net Asset Value has been made to reflect the likely value of the Group given that the deferred tax liability provided is unlikely to crystallise in full as the Group is likely to dispose of the property holding companies rather than the properties themselves

21

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED – 31 March 2010 NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (continued) 5. INVESTMENT PROPERTY 31 March 2010 €'000

31 March 2009 30 September 2009 €'000 €'000

Carrying value At 1 October 2009 Reclassification of development property on completion Additions Capital expenditure during the period Fair value write down

181,504

158,490

158,490

77,268 4,039 48 (13,536)

47,496 19 (22,105)

47,496 989 (25,471)

At 31 March 2010

249,323

183,900

181,504

Fair value Adjustment for rent recognised in advance

251,393

183,900

181,504

(2,070)

-

-

At 31 March 2010

249,323

183,900

181,504

Adjustment from fair value to carrying value

The fair value of the Group‟s investment properties at 31 March 2010 has been determined by desktop valuations carried out on an open market basis by independent valuers, DTZ and Jones Lang LaSalle, in accordance with the requirements of the Appraisal and Valuation Manual, 6th Edition published by the Royal Institution of Chartered Surveyors. Open market value, deemed to be fair value, is determined by reference to market based evidence, which is the amount for which the asset could be exchanged between a knowledgeable willing buyer and seller, in an arms‟ length transaction. The valuation methodology involves the discounted cashflow of the future rental income streams and a reversionary value discounted to a present value estimate and/or the capitalisation of the rental income stream at an all risks market yield to determine the present value. It also includes an assessment of the recent open market sales and investments within the Central and Eastern European regions.

22

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED – 31 March 2010 NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (continued) 6. PROPERTY, PLANT AND EQUIPMENT Development Buildings & Machinery Land Construction & equipment €'000

€'000

€'000 €'000

Cost or valuation At 1 October 2008 Additions Reclassification as investment property on development completion Valuation loss for the year Valuation loss taken against revaluation reserve

Total

65,188 1,151

38,908 49,891

126 32

104,222 51,074

(27,896) (21,415)

(19,600) (1,700)

-

(47,496) (23,115)

(17,028)

-

-

(17,028)

At 30 September 2009

-

67,499

158

67,657

Additions Reclassification as investment property on development completion

-

9,769

35

9,804

-

(77,268)

-

(77,268)

At 31 March 2010

-

-

193

193

At 1 October 2008 Charge for period

-

-

30 25

30 25

At 30 September 2009 Charge for period At 31 March 2010

-

-

55 17 72

55 17 72

Carrying amount at 31 March 2010

-

-

121

121

Carrying amount at 30 September 2009

-

67,499

103

67,602

Depreciation

23

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED – 31 March 2010 NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (continued)

Development Buildings & Machinery Land Construction & equipment €'000

€'000

Total

€'000 €'000

Cost or valuation 65,188 915

38,908 30,739

126 19

104,222 31,673

(27,896) (15,512)

(19,600) -

-

(47,496) (15,512)

(17,028)

-

-

(17,028)

5,667

50,047

145

55,859

At 1 October 2008 Charge for period

-

-

30 12

30 12

At 31 March 2009

-

-

42

42

5,667

50,047

103

55,817

At 1 October 2008 Additions Reclassification as investment property on development completion Valuation loss for the period Valuation loss taken against revaluation reserve At 31 March 2009 Depreciation

Carrying amount at 31 March 2009

7. FINANCIAL ASSETS 31 March 2010

Loans receivable Recoverability impairment provision

31 March 2009 30 September 2009

€'000

€'000

€'000

10,622 (1,188)

36,532 (14,974)

36,970 (24,405)

9,434

21,558

12,565

Loans receivable represents advances, deposits and related accrued interest for purchases of land in Moldova of €2.09m secured on land assets, together with a loan in Romania of €8.53m unsecured. Desktop valuations arrived at on an open market value basis, carried out by independent valuers, DTZ, have been carried out on the land assets in Moldova. During the period loans previously advanced for the purchase of land in Ukraine and certain land in Moldova were realised when the land purchase transactions were completed. The costs relating to these land purchases are included as part of the acquisition cost and shown as additions to investment property in note 5 above.

24

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED – 31 March 2010 NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (continued) 8. SHARE CAPITAL AND PREMIUM No. of shares millions 100

Share capital €'000 1,000

Share premium €'000 -

€'000 1,000

At 30 September 2009

100

1,000

-

1,000

Proceeds from shares issued

210 ___ 310 ___

2,100 ____ 3,100 ____

7,859 ____ 7,859 ____

9,959 ____ 10,959 ____

At 31 March 2009

At 31 March 2010

Total

The total number of authorised shares is 450 million (2009 : 250 million) with a par value of €0.01 each (2009 : €0.01 each). All issued shares are fully paid. The Company has only one class of ordinary shares which carry no right to fixed income. In October 2009 210 million new ordinary shares of €0.01 per share were issued at a price of €0.05 per share. From the funds raised of €10.5m placement and issue costs of €0.54m have been deducted.

25

ARGO REAL ESTATE OPPORTUNITIES FUND LIMITED – 31 March 2010 DIRECTORS AND COMPANY INFORMATION Directors: Dr Robert Brown (Acting Chairman) Louis Plowden-Wardlaw Dr Ralph Hill

Legal advisors in Guernsey: Carey Olsen Carey House Les Banques St Peter Port Guernsey GY1 4BZ Channel Islands

Registered office: Isabelle Chambers Route Isabelle St Peter Port Guernsey Channel Islands Printed with

Legal advisors in the UK: Salans LLP Millenium Bridge House 2 Lambeth Hill London EC4V 4AJ

Investment Manager (and adviser): Argo Capital Management Property Limited Governors Square Suite 4-212, 23 Lime Tree Bay Avenue PO Box 10630 Grand Cayman KY1-1006 Cayman Islands

Bankers in Guernsey: Royal Bank of Scotland International Limited Royal Bank Place 1 Glategny Esplanade St Peter Port Guernsey GY1 4BQ Channel Islands

Auditors: BDO Limited PO Box 180 Place du Pré Rue du Pré St Peter Port Guernsey GY1 3LL Channel Islands

Registrar: Morgan Sharpe Administration Limited PO Box 327, Isabelle Chambers Route Isabelle St Peter Port Guernsey GY1 3TX Channel Islands Printed with

Nominated adviser and broker: Oriel Securities Limited 125 Wood Street London EC2V 7AN

PR Consultants: Cardew Group Financial & Corporate Communications 12 Suffolk Street London SW1Y 4HG Administrator and secretary: Morgan Sharpe Administration Limited PO Box 327, Isabelle Chambers Route Isabelle St Peter Port Guernsey GY1 3TX Channel Islands Printed with

26