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29 September 2009

R.G.I. International Limited

RESULTS FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2009

R.G.I. International Limited, ('RGI' or 'the Company'), the AIM listed developer of high-end properties in Moscow and the surrounding area, is pleased to announce its results for the six month period ended 30 June 2009.

Financial summary

-	Total market value of the RGI development portfolio decreased by 8.5% to US$742.0 million (31 December 2008: US$811.1 million)
-	The Company's NAV per share increased by 1.3% to US$4.77 per share (31 December 2008: US$4.70)
-	Terms of two major transactions that were executed during 2007 (the Chelsea and the Sucreti transactions) were renegotiated and, as a result, the Company's share in the Sucreti projects increased to 82% (31 December 2008 - 73%) and financial liabilities were reduced by US$55.4m
-	Cash balance at 30 June 2009 of US$15.5 million; inventory of finished apartments and office space valued at US$29.3m

Portfolio review

-	Focus remains on planning and approvals; with the exception of the Tsvetnoy retail centre, there was no construction work across the portfolio
-	Construction work on the Tsvetnoy retail centre proceeded as planned with the 11 level department store design building scheduled to open during second half of 2010
-	Significant progress made with planning approvals for the Kingston Development
-	Scope and size of Chelsea project reassessed in light of current market conditions; short-term focus is on obtaining permissions for two sub-projects totalling 60,000 sq.m

Commenting on the results, Jacob Kriesler, Executive Chairman said:

'Underlying property market forces impacting Russian real estate developers continued to deteriorate during the first half of 2009 and a short-term recovery is still unlikely. We have therefore focused on planning and approvals, where we have made significant progress, particularly with our largest development, Kingston, which passed a milestone public hearing during the period.

The Tsvetnoy retail center is on schedule to open next year. Our debt position remains comfortable and we will continue to work hard with the portfolio on planning and approvals so that we are optimally placed when credit becomes available again.'

For further information please contact:

R.G.I. International Limited Emanuel Kuzinets, Director	+972 3 777 87 00
Citigate Dewe Rogerson - Financial PR Adviser Tom Baldock / Hannah Seward	+44 20 7282 2889
Shore Capital and Corporate Ltd - Nominated Adviser Dru Danford / Pascal Keane	+44 20 7408 4090

There will be a conference call for investors and analysts today at 9:00 am GMT / 12:00 pm Moscow. The international dial in number is +44 20 3003 2666 and the password is 482528.

Notes to Editors

R.G.I. International Limited is a property development and management company whose core business is the development and management of high-end residential, office and retail properties in Moscow and the surrounding area. The Company's developments are characterised by light, space, design excellence and the highest quality building materials.

RGI's management has been developing property in Moscow since 1995 and the Company has been listed on the AIM market of the London Stock Exchange since December 2006. RGI's portfolio is comprised of ten projects, covering a total of 1.603 million sq. metres. The most recent valuation report of LLC Debenham Zadelhoff Limited's, the international property appraiser, dated 30 June 2009, attributed a total market value of US$742.0 million to the portfolio (31 December 2008 - US$ 803.9).

For more information go to www.rgi-international.com.  

CHAIRMAN'S STATEMENT

Despite growing sentiment that the global crisis has seen its bottom and despite improvement in some key Russian macroeconomic indicators (mainly Ruble stabilisation and a recovery in oil prices), underlying property market forces impacting Russian real estate developers continued to deteriorate during the first half of 2009 and a short term recovery is still unlikely. Lending conditions and credit availability to both businesses and households remain poor and represent the biggest obstacles to recovery. At the same time, current demand for Russian real estate across all segments continues to suffer not only from poor liquidity conditions but also from deteriorating wealth and consumer confidence and depressed economic activity (Russian GDP declined 10.2% during the first seven months of the year). These conditions contributed to a further decline of 8.5% in the valuation of our project portfolio from 31 December 2008 (following a 67% decline during the second half of 2008).

As indicated in our 2008 year-end report, we concentrated during the first part of this year on progressing with the Tsvetnoy development and on gaining approvals and permits from the relevant authorities with respect to our other projects. We believe we made good progress on both fronts and are now well positioned to successfully open the Tsvetnoy retail center during the second part of next year and to commence detailed planning and construction works on the Khilkov and Kingston developments as soon as financing is available. We are especially pleased with the progress we made with respect to our largest project, the Kingston development. On 28 August 2009 we successfully passed the crucial public hearing milestone with our proposed new local zoning for the project (Project Planirovky). We now expect the final approval of the plan to be achieved by the end of this year. For further updates on our projects see Development Update below. 

In addition, as we announced on 1 July 2009, we improved our financial position by agreeing to new terms with respect to two major transactions we executed during 2007 (the Chelsea and the Sucreti transactions). As a result, we were released from two financial liabilities of US$55.4 million in aggregate and were able to increase our share in the Sucreti projects (the Kingston, Media City, Dream and Maya developments) from 73% to 82% (a total incremental NAV of US$31.0 million). For further details see Financial Results section below and note 12 to our interim financial statements.

Our cash position together with our inventory of economy class apartments gives us liquid assets of approximately US$44.8 million as at 30 June 2009. Our debt position remains comfortable with no scheduled maturities over the next 12 months and only US$19.4 million due for repayment through February 2012. We will be well positioned to benefit when we see the inevitable recovery of the Moscow real estate market.

Development update

During the first half of 2009, we reassessed our development schedule and delayed the expected completion date of the majority of our projects. Of our ten projects, one is currently in the course of construction (the Tsvetnoy Development) and nine are held for development at different stages of the permit and statutory approval processes. We expect to complete the Tsvetnoy Development to 'shell and core' standards by the end of 2009 and an additional six developments - Khilkov, Zemlianoy, Ostozhenka, Dream, Victory Park and Maya - during 2012. Two additional projects, Chelsea and Media City are due for completion during 2013 while our largest project, the Kingston Development, will be developed in stages over the next eight years. The delay of the expected completion dates of seven of our ten projects - Khilkov, Zemlianoy, Ostozhenka, Chelsea, Media City, Dream and Maya - is due to current market conditions. Our development schedule still assumes that the Moscow property market will recover over the next two to three years and that the necessary financing for construction will be obtained either through construction loans and/or pre-sales.  

Construction work in the Tsvetnoy Development proceeded as planned. The building is now largely completed to 'shell and core' standards and we are currently undertaking the commissioning process. The development, which will operate as a main-stream, inner-city shopping space with a department store design and a varied product category mix, is comprised of 11 levels, including three underground parking levels and eight retail space levels. The gross internal area of the complex is 36,765 sq.m. We believe that today, more than ever, prime location, differentiation and retail business appeal are essential for attracting quality brands and retail operators to new developments. As a result, we were highly focused during the period on refining the Tsvetnoy retail concept and the interior design in order to encourage the retail activity, product mix and brands we desire inside the building. We are now ready to begin the commercial leasing process and the execution of the internal fit-out of the building. This should enable retail shopping to commence in Tsvetnoy during the second part of next year.

We also made significant progress with the approval of the Kingston Development. This project involves the construction of an economy-class residential community with a gross area of 1,330,060 sq.m comprising 642,530 sq.m of apartments, 84,505 sq.m of commercial space and 9,363 parking spaces. The development will also incorporate the construction of social and civil infrastructure and will be completed in five separate phases. As mentioned above, we have recently passed the public hearing milestone on route to approving Project Planirovky by the end of this year. This plan has been designed to accommodate the 'post bubble' reality of the Moscow region real estate market and, as such, allows for modular development (including that of the civic infrastructure), efficient construction and, above all, good quality, Western style living at affordable prices.

The further deterioration in the demand for real estate during the first half of the year and the persistence of the poor lending conditions led us to reassess again the scope and size of the Chelsea development and to eliminate additional capital intensive portions from it. As a result, we are currently working on completing designs and obtaining permissions for only two separate sub-projects within the Chelsea development totalling 60,000 sq.m.     

Portfolio Performance

As at 31 December 2008 our project portfolio comprised ten projects, all of which are under construction or held for development. LLC Debenham Zadelhoff Limited's ('DTZ'), the international property appraiser valued RGI's project portfolio as at 31 December 2008 at US$811.1 million, on the basis of a 100% ownership stake in these properties. During the first six months of 2009, we have not acquired any new projects nor have we disposed of any existing ones. The table below sets out the sequence of valuations carried out by DTZ for 100% ownership interest in RGI's properties as at 30 June 2009, which reflects a further decrease in the valuation of our property portfolio of 8.5% to US$742.0 million.

Valuations For 100% Ownership Stake

DEVELOPMENT	31 DECEMBER 2007	30 JUNE 2008	31 DECEMBER 2008	30 JUNE 2009
	US$ m	US$ m	US$ m	US$ m
Properties in the course of construction
Tsvetnoy	162.9	196.2	116.8	135.4
Properties held for development
Khilkov	226.7	237.8	151.6	127.2
Zemlianoy	32.2	39.2	16.2	2.8
Ostozhenka	23.7	25.3	14.3	13.8
Chelsea	664.8	735.8	131.6	77.7
Victory Park	206.1	211.9	40.0	42.5
Media City	137.5	150.0	17.0	2.8
Dream	71.7	76.7	47.1	33.1
Maya	41.7	43.7	14.8	11.7
Kingston	722.1	734.4	261.7	295.0
Total properties in the course of construction and held for development	2,289.4	2,451.0	811.1	742.0

RGI's current ownership based on the actual beneficial holdings in the projects is as follows: 50% ownership in the Khilkov Development; 82% ownership in the Sucreti projects (Maya, Dream, Media City and Kingston); and 100% in all other projects. The table below sets out DTZ's current and completion valuations of RGI's current ownership in the projects in addition to the Company's updated expected completion dates. 

Valuations for RGI Current Stake

Development	Primary Asset Type	Expected Completion*	GIA	RGI's Current Stake	Valuation as at 30 June 2009		Valuation at Completion
			sq.m		US$ m	US$ m
Properties in the course of construction
Tsvetnoy	Retail	2009	36,765	100%	135.4	191.2
Properties held for development
Khilkov	Residential	2012	27,258	50%	63.6	166.4
Zemlianoy	Hotel	2012	9,630	100%	2.8	30.0
Ostozhenka	Residential	2012	1,000	100%	13.8	25.0
Chelsea	Mixed use	2013	60,002	100%	77.7	437.1
Victory Park	Residential/Hotel	2012	25,000	100%	42.5	136.9
Media City	Office	2013	87,000	82%	2.3	197.8
Dream	Office	2012	18,205	82%	27.2	111.2
Maya	Office	2012	8,811	82%	9.6	45.1
Kingston	Residential	2017**	1,330,060	82%	241.9	1,763.2
Total			1,603,731		616.8	3,103.9

* Expected completion dates are estimated based on best available data and are reexamined periodically. 

** The Kingston Development will be developed in stages. Upon receiving necessary approvals, we intend to either develop it ourselves and/or sell development rights to other developers. We expect the Kingston Development to be completed by 2017.

The Company's NAV per share increased from US$4.70 on 31 December 2008 per share to US$4.77 per share at 30 June 2009 (an increase of 1.5%). The Company's total NAV increased from US$592 million as at 31 December 2008 to US$600 million as at 30 June 2009 (an increase of 1.4%). The Company's NAV calculation is presented in the following table:

NAV Calculation

DEVELOPMENT	RGI'S CURRENT SHARE FAIR VALUE
	31 DECEMBER 2007 US$ m	30 JUNE 2008 US$ m	31 DECEMBER 2008 US$ m	30 JUNE 2009 US$ m
Properties in the course of construction
Tsvetnoy	162.9	196.2	116.8	135.4
Properties held for development
Khilkov	113.4	118.9	75.8	63.6
Zemlianoy	32.2	39.2	16.2	2.8
Ostozhenka	23.7	25.3	14.3	13.8
Chelsea	664.8	735.8	131.6	77.7
Victory Park	206.2	211.9	40.0	42.5
Media City*	100.3	109.5	12.4	2.3
Dream*	52.3	56.0	34.4	27.2
Maya*	30.4	31.9	10.8	9.6
Kingston*	527.1	536.1	191.1	241.9
Total Fair Value of properties	1,913.3	2,060.8	643.4	616.8
Other assets (net)* *	37.5	(28.8)	(51.6)	(16.8)
Total NAV	1,950.8	2,032.0	591.8	600.0
No. of issued shares	125,786,978	125,786,978	125,786,978	125,786,978
NAV per share in US$	15.51	16.15	4.70	4.77

* As at 31 December 2008 the current ownership of the Media City, Dream, Maya and Kingston properties was 73%. On 30 June 2009 the current ownership of such properties increased to 82%. 

** The other assets (net) includes the Group's non property development assets less liabilities, excluding deferred income tax liabilities regarding development property. In this document, 'Group' means RGI and its direct and indirect subsidiaries. 

Financial results

The results for the six month period ended 30 June 2009 are set out in the consolidated financial statements below.

As a result of the real estate market crisis and the significant reduction in the fair value of the Company's development projects, we recorded an impairment loss in 2008 of US$898.3 million. The impact of the impairment loss on the equity holders of the Company was partially offset by a consequential reduction of US$233.1 million in deferred tax liability and by the minority share in the Group's net asset reduction of US$86.5 million. As a result of the further reduction in the fair value of the Company's development projects during the first half of 2009, we recorded an additional impairment loss of US$76.8 million. The impact of the additional impairment loss on the equity holders of the Company was partially offset by a consequential reduction of US$14.65 million in deferred tax liability and by the minority share in the Group's net asset reduction in the amount of US$4.5 million. 

Following the implementation of the Amendment to IAS 40 'Investment Property', which requires measurement of investment property under development at fair value, we have changed the presentation of our Tsvetnoy development in our financial statements and recorded a gain of US$11.5 million in our income statement. No other projects were affected by the amended IAS 40 as Tsvetnoy is the only development in our portfolio which is currently classified as investment property under construction. Prior to 2009 management considered Tsvetnoy project rather for further sales than for holding and use (see note 6 and note 7 to our financial statements below). 

Profit attributable to equity holders of the Company for the six month period ended 30 June 2009 was US$62.7 million compared to a loss of US$12.2 million for the six month period ended 30 June 2008. The profit was primarily a result of the waiver of the two liabilities mentioned above of US$55.4 million, the gain of US$ 22.2 million from acquiring of 9% of the issued share capital of Sucreti from Lirion for a token price (also see note 12 of our financial statements below), the recognition of previous deferred income in the amount of US$53.3 million from the sale of the Butikovsky development (see note 13 to our financial statements below) and the revaluation gain on Tsvetnoy referred to implementation of IAS 40. These gains were partially offset by the impairment loss mentioned above, by our general and administrative expenses for the period of US$7.1 million (compared with US$12.5 million in the same period last year), by our net finance expenses and by our share in the loss of a jointly controlled entity in the amount of US$5.2 million (see note 8 to our financial statements below). The earnings per share for the six month period ended 30 June 2009 was US$0.5 compared to a loss per share of US$0.1 for the same period last year.

The Company's cash balance as at 30 June 2009 was US$15.5 million (31 December 2008: US$21.7 million). In addition, our inventory of completed apartments and office space as at 30 June 2009 was US$29.3 million (31 December 2008: US$37.1 million). As at 30 June 2009 the equity attributable to the Company's equity holders was US$477.0 million (31 December 2008 - US$ 444.4 million). Our debt to equity ratio remains low (15.6% as at 30 June 2009, 31 December - 13.6%) and our current liabilities as at 30 June 2009 amount to only US$6.8 million (31 December 2008 - US$ 95.4 million) compared with current assets of US$49.1 million (31 December 2008 - US$ 62.5 million). Thus we believe we are well positioned to attract financing at competitive rates as soon as lending conditions become more favorable for Russian property developers. 

Strategy

The Company will continue to aim at strengthening its position as one of the leading developers of high-end properties in Moscow and the surrounding areas. To achieve this goal and in light of the Company's revised strategy, RGI intends to pursue the following plan:

Effectively handle the current crisis: To preserve cash and protect RGI's long-term prospects, the Company will continue to be cautious in the short-term and limit its development activity (other than with respect to the Tsvetnoy Development) to obtaining approvals and permits from the relevant authorities. We will not commence any new construction work until sufficient long-term debt financing can be secured on commercially attractive terms and/or sufficient cash flow can be generated from pre-sales. We will consider further revising our strategy and specifications for individual developments while applying a more aggressive development strategy at the appropriate time.

Take advantage of opportunities arising from market distress: RGI is a highly respected Moscow property developer led by a management team with a long track record covering all stages of the economic cycle. There are opportunities in the current market for RGI to leverage its reputation and operational capacity to take an economic interest, for minimal capital outlay, in new real estate projects which the existing development right owners are unable to progress. Management will examine such opportunities on a case-by-case basis and may seek to acquire interest in development projects where the terms are attractive and are likely to enhance shareholder value. 

Disposal/Rental of portfolio projects: In the longer term, we intend to complete the construction of our current development projects. In general, we intend to dispose of our completed residential property developments and we will also now look to dispose of our mid-size commercial projects such as Dream, Maya and the commercial space within Chelsea, Kingston and Victory Park. We intend to retain completed retail projects, including Tsvetnoy, although we will consider selling them under appropriate conditions.

Market update and outlook

The Russian Ministry of Economic Development has stated that economic decline has now bottomed out and is forecasting GDP decline of 8.5% for 2009. However, real estate was one of the first and hardest hit sectors of the Russian economy following the onset of the global recession. Underlying property market forces impacting Russian real estate developers continued to deteriorate during 2009: according to Rosstat, construction output fell by 20.5% in the second quarter of 2009 and recent independent estimates have suggested that newly built economy housing will fall in value by 20-25% during 2009. We believe that in these conditions a significant easing in credit market and a short term recovery of the real estate market are still unlikely.

When conditions begin to ease, we believe that fundamental supply and demand imbalances in residential, commercial and retail property will re-emerge and the sector will once again serve as a growth catalyst for the wider economy. We maintain our belief that in the long-term Moscow has fundamental attractions for real estate investors, and the reduction in the number of newly completed projects will only emphasize the shortage of adequate available property in Russia and especially in Moscow. 

Moscow remains the dominant hub for the Russian and CIS economies and is still an appealing market for both international companies and wealthy individuals. While conditions remain challenging, our focus on the high-end, predominantly central Moscow residential market segment, our strong reputation and our comfortable debt position leave us well positioned to benefit from an improvement in economic fundamentals.

Jacob Kriesler 

Executive Chairman 

29 September 2009

PriceWaterhouseCoopers

Report to R.G.I. International Limited on review of interim financial information

To the Shareholders and Board of Directors of R.G.I. International Limited (the 'Company')

Introduction
1.	We have reviewed the accompanying condensed consolidated interim financial information in the interim financial report of R.G.I. International Limited and its subsidiaries (hereinafter the 'Group') for the six months ended 30 June 2009, which comprises the condensed consolidated interim comprehensive income statement, condensed consolidated interim balance sheet, condensed consolidated interim statement of changes in shareholders' equity, condensed consolidated interim cash flow statement and related notes. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed consolidated interim financial information.
Directors' responsibilities
2.	The interim financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim financial report in accordance with the AIM Rules for Companies which require that the financial information must be presented and prepared in a form consistent with that which will be adopted in the Group's annual consolidated financial statements.
3.	As disclosed in Note 3, the annual consolidated financial statements of the Group are prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The condensed consolidated interim financial information included in this interim financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting' as adopted by the European Union ('International Accounting Standard 34').
Our responsibility
4.	Our responsibility is to express a conclusion on the condensed consolidated interim financial information in the interim financial report based on our review. This report, including the conclusion, has been prepared for the Company for the purpose of the AIM Rules for Companies and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Scope of Review
5.	We conducted our review in accordance with International Standard on Review Engagements 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the International Auditing and Assurance Standards Board. 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 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
6.	Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated interim financial information in the interim financial report for the six months ended 30 June 2009 is not prepared, in all material respects, in accordance with International Accounting Standard 34 and the AIM Rules for Companies.
7.	The maintenance and integrity of R.G.I. International Limited's website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the condensed consolidated interim financial information since they were initially presented on the website.
8.	Legislation in Guernsey governing the preparation and dissemination of condensed consolidated interim financial information may differ from legislation in other jurisdictions.

29 September 2009

CONDENSED CONSOLIDATED INTERIM BALANCE SHEET

(All amounts in US$ thousands unless otherwise stated)  

		30 JUNE  2009	31 DECEMBER 2008
	NOTE	US$'000	US$'000
ASSETS
Non-current assets
Property development rights and costs	6	420,708	652,263
Investment property under construction	6,7	135,442	-
Input VAT		11,779	9,723
Development licenses		111	160
Investment in jointly controlled entity	8	54,151	62,080
Property, plant and equipment		10,469	11,442
Total non-current assets		632,660	735,668
Current assets
Receivables and prepayments		3,630	2,069
Inventories	9	29,302	37,085
Short-term deposit		754	1,627
Cash and cash equivalents		15,452	21,721
Total current assets		49,138	62,502
Total assets		681,798	798,170
LIABILITIES
Non-current liabilities
Deferred income tax liability	10	76,520	93,669
Advance payment under co-investment agreement		-	25,958
Loans and borrowings	11	56,106	44,070
Bonds		24,770	25,540
Total non-current liabilities		157,396	189,237
Current liabilities
Purchase consideration payable	12	-	31,000
Trade and other payables		6,514	7,086
Deferred income	13	-	56,780
Taxes payable		303	555
Total current liabilities		6,817	95,421
Total liabilities		164,213	284,658
Equity
Share capital		1	1
Share premium		456,524	456,524
Share - based payment		6,871	5,730
Accumulated Retained Earnings		13,570	(17,855)
Equity attributable to the Company's equity holders holderhhhhholholders		476,966 54	444,400 54
Minority interest		40,619	69,112
Total equity		517,585	513,512
Total liabilities and equity		681,798	798,170

Approved for issue and signed on behalf of the Board of Directors

Jacob Kriesler	Yoram Evan
Director	Director

The notes on pages 16 to 32 from an integral part of this condensed consolidated interim financial information.

CONDENSED CONSOLIDATED INTERIM COMPREHENSIVE INCOME STATEMENT

(All amounts in US$ thousands unless otherwise stated)

		PERIOD FROM  1 JANUARY 2009 TO 30 JUNE  2009	PERIOD FROM  1 JANUARY 2008 TO 30 JUNE  2008
	NOTE	US$'000	US$'000
Revenue from Butikovsky Project	13	76,815	-
Cost incurred on Butikovsky Project	13	(23,501)
Impairment loss on property development rights	6	(76,816)	-
Impairment of inventory	9	(2,052)	-
Valuation gains on investment property under construction	6,7	11,463	-
General and administrative expenses		(7,113)	(12,468)
Other income	12	79,734	512
Operating Profit/(loss)		58,530	(11,956)
Finance (loss)/ income, net		(6,307)	1,200
Share in result of jointly controlled entity	8	(5,173)	(825)
Profit/(loss) before income tax		47,050	(11,581)
Income tax benefit/(expense)	10	12,212	(635)
Profit/(loss) for the period		59,262	(12,216)
Other comprehensive (loss)/income for the period:
(Losses)/gains recognized directly in equity:
Currency translation difference		(34,124)	67,831
Transactions with minority shareholders		(22,206)
Other comprehensive (loss)/income for the period, net of tax		(56,330)	67,831
Total comprehensive income for the period:		2,932	55,615
Profit/(loss) is attributable to:
Equity holders of the Company		62,738	(12,216)
Minority interest		(3,476)	-
Profit/(loss) for the period		59,262	(12,216)
Total comprehensive (loss)/income is attributable to:
Equity holders of the Company		31,425	46,970
Minority interest		(28,493)	8,645
Profit for the period		2,932	55,615
Earnings per share for profit attributable to the equity holders of the Company during the period (expressed in US$ per share):
Basic and Diluted		0.5	(0.1)

The notes on pages 16 to 32 from an integral part of this condensed consolidated interim financial information.

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

(All amounts in US$ thousands unless otherwise stated)

		ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY
	NOTE	SHARE CAPITAL	SHARE PREMIUM	SHARE-BASED PAYMENT	ACCUMULATED RETAINED EARNINGS	TOTAL		MINORITY INTEREST		TOTAL EQUITY
		US$'000	US$'000	US$'000	US$'000	US$'000		US$'000		US$'000
Balance At 1 January 2009		1	456,524	5,730	(17,855)	444,400		69,112		513,512
Total comprehensive (loss)/income for the period		-	-	-	31,425	31,425		(28,493)		2,932
Share based payment		-	-	1,141	-	1,141		-		1,141
Balance At 30 June 2009		1	456,524	6,871	13,570	476,966		40,619		517,585

		ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY
	NOTE	SHARE CAPITAL	SHARE PREMIUM	SHARE-BASED PAYMENT	ACCUMULATED RETAINED EARNINGS	TOTAL		MINORITY INTEREST	TOTAL EQUITY
		US$'000	US$'000	US$'000	US$'000	US$'000		US$'000	US$'000
Balance At 1 January 2008		1	456,524	5,984	815,777	1,278,286		186,235	1,464,521
Total comprehensive (loss)/income for the period		-	-	278	46,692	46,970		8,645	55,615
Share-based payment		-	-	4,593	-	4,593		-	4,593
Balance At 30 June 2008		1	456,524	10,855	862,469	1,329,849		194,880	1,524,729
Total comprehensive (loss)/income for the period		-	-	-	(880,324)	(880,324)		(125,768)	(1,006,092)
Share-based payment		-	-	(5,125)	-	(5,125)		-	(5,125)
Balance At 31 December 2008		1	456,524	5,730	(17,855)	444,400		69,112	513,512

The notes on pages 16 to 32 from an integral part of this condensed consolidated interim financial information.

CONDENSED CONSOLIDATED INTERIM CASH FLOW STATEMENT

(All amounts in US$ thousands unless otherwise stated)

		PERIOD FROM  1 JANUARY 2009 TO 30 JUNE 2009	PERIOD FROM  1 JANUARY 2008 TO 30 JUNE 2008
	NOTE	US$'000	US$'000
Cash flow from operating activities before working capital changes
Profit/ (loss) before income tax		47,050	(11,581)
Revenue from sale of Butikovsky Project	13	(76,815)	-
Costs incurred on Butikovsky Project	13	23,501	-
Impairment of inventory	9	2,052	-
Selling of inventory		(1,521)	-
Impairment loss on property development rights	6	76,816	-
Valuation gains on investment property under construction	6	(11,463)	-
Debts forgiveness	12	(55,200)	-
Transactions with minority shareholders	12	(22,206)	-
Share-based payment		1,141	4,593
Depreciation		201	397
Share in result of jointly controlled entity	8	5,173	825
Interest income		(1,155)	(2,625)
Foreign exchange loss, net		5,951	6,741
Change in fair value of derivatives		(378)	(8,482)
Interest expense and discount amortization		1,320	3,253
Gain from repurchase of bonds		(138)	-
Other non-monetary activities		809	11
Net cash outflow from operating activities before working capital changes		(4,862)	(6,868)
Change in trade and other payables		(532)	(2,636)
Change in receivables and prepayments		(1,687)	(1,369)
Change in other taxes payable		(218)	578
Cash used in operations		(7,299)	(10,295)
Interest received, net		1,155	2,625
Interest paid, net		(3,538)	-
Income tax paid		(42)	(227)
Net cash used in operating activities		(9,724)	(7,897)
Cash flows from investing activities
Acquisition of subsidiaries, net of cash and cash equivalents acquired		-	(2,000)
Investment in jointly controlled entity		(1,033)	(8,301)
Investment from deposit		873	-
Investments in current projects		(13,374)	(88,281)
Selling of inventory		7,757	-
Selling of plant and equipment		74	-
Purchase of plant and equipment		-	(1,945)
Net cash used in investing activities		(5,703)	(100,527)
Cash flow from financing activities
Proceeds from issue of bonds, net			15,572
Early repayment of bonds		(578)	-
Derivative payment		(639)	-
Proceeds from construction loans		12,036	21,841
Interest paid		-	(1,840)
Net cash generated from financing activities		10,819	35,573
Effect of exchange rate changes on cash and cash equivalents		(1,661)	1,203
Net decrease in cash and cash equivalents		(6,269)	(71,648)
Cash and cash equivalents, beginning of the period		21,721	162,774
Cash and cash equivalents, end of the period		15,452	91,126

The notes on pages 16 to 32 from an integral part of this condensed consolidated interim financial information.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

1.    GENERAL INFORMATION

The interim condensed consolidated financial statements of R.G.I. International Limited ('RGI' or the 'Company') and its subsidiaries and the Group's interest in jointly controlled entity (together referred to as the 'Group') for the six months period ended 30 June 2009 were authorized for issue in accordance with a resolution of the directors of RGI ('the Directors') on 29 September 2009.

The Company was incorporated in Guernsey on 14 March 2006 as a limited liability company in accordance with the provisions of The Companies (Guernsey) Law, 2008. As at 30 June 2009, the registered office and business address was Frances House, Sir William Place, St. Peter Port, Guernsey, GY1 4HQ.

The principal business activity of the Group is property development and property management in the Russian Federation, with its core business being the development and management of high-end office and retail business and luxury residential and retail properties in central Moscow and the surrounding areas.

The Group's projects are described in Note 6 and Note 7. 

2.    OPERATING ENVIRONMENT OF THE GROUP

Russian Federation. The effects of the global financial crisis continued to have a severe effect on the Russian economy in 2009:

	Low commodity prices have resulted in lower income from exports and thus lower domestic demand. Russia's economy contracted by 7 percent year-on-year in the first quarter of 2009 and, according to the Russian Economic Development Ministry, Russia's gross domestic product is expected to decrease by 8.5 percent in 2009.
	The rise in Russian and emerging market risk premia resulted in a steep increase in financing costs.
	The depreciation of the Russian Rouble against hard currencies increased the burden of foreign currency corporate debt, which has risen considerably in recent years.

As part of preventive steps to ease the effects of the situation in financial markets on the economy, the Government is likely to run a large fiscal deficit in 2009. 

The tax, currency and customs legislation within the Russian Federation is subject to varying interpretations and frequent changes, and other legal and fiscal impediments contribute to the challenges faced by entities currently operating in the Russian Federation. The future economic direction of the Russian Federation is largely dependent upon the effectiveness of economic, financial and monetary measures undertaken by the Government, together with tax, legal, regulatory, and political developments.

Management is unable to predict all developments in the economic environment, which could have an impact on the Company's operations in the future and consequently what effect, if any, they could have on the financial position of the Company.

Impact of the ongoing global financial and economic crisis. The ongoing global financial and economic crisis that emerged out of the severe reduction in global liquidity, which commenced in the middle of 2007 (often referred to as the 'Credit Crunch') has resulted in, among other things, a lower level of capital market funding, lower liquidity levels across the banking sector and wider economy, and, at times, higher interbank lending

rates and very high volatility in stock and currency markets. The uncertainties in the global financial markets have also led to failures of banks and other corporates, and to bank rescues in the United States of America, Western Europe, Russia and elsewhere. The full extent of the impact of the ongoing financial crisis is proving to be difficult to anticipate or completely guard against. 

Impact on liquidity. The volume of wholesale financing has significantly reduced since August 2007. Such circumstances may affect the ability of the Company to obtain new borrowings and refinance its exiting borrowings at terms and conditions similar to those applied to earlier transactions.

The market in Russia for many types of real estate has been severely affected by the recent volatility in global financial markets. The effect of the above changes on the property industry has seen property prices, for all types, decline from the peaks seen in June 2008. These declines are a direct result of increasing vacancy rates and a reduction in the demand for property by investors. Management is unable to reliably determine the effects on the Company's future financial position of any further deterioration in the liquidity of the financial markets and the increased volatility in the currency and equity markets. Management believes it is taking all the necessary measures to support the sustainability and development of the Company's business in the current circumstances.

The tax, currency and customs legislation within the Russian Federation is subject to varying interpretations and frequent changes. Furthermore, the need for further developments in the bankruptcy laws, the absence of formalized procedures for the registration and enforcement of collateral, and other legal and fiscal impediments contribute to the challenges faced by banks currently operating in the Russian Federation. The future economic direction of the Russian Federation is largely dependent upon with tax, legal, regulatory, and political developments.

3.    BASIS OF PREPARATION

This condensed consolidated interim financial information for the six months period ended 30 June 2009 has been prepared in accordance with  IFRS, as adopted by the EU applicable to interim financial reporting, IAS 34, 'Interim financial reporting'.

The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2008, which have been prepared in accordance with IFRS.

The group operates in the Russian Ruble ('RUR') economic environment. Accordingly, the functional currency of each of the Group's entities is 'RUR'. The Group's consolidated condensed interim financial statements have been presented in US dollars ('US$'), as the Directors believe that this presentation is more appropriate for the users. 

4.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2008, as described in those annual financial statements, except for the adoption of new standards, amendments to standards and interpretations as described below: 

	IAS 1 (revised), 'Presentation of financial statements', effective for annual periods beginning on or after 1 January 2009. IAS 1 introduces an additional statement, 'statement of comprehensive income'. The statement may be presented as a separate statement which includes net income and all items carried in the reported period directly to equity that do not result from transactions with the shareholders in their capacity as shareholders (other comprehensive income) and the tax effect of these items carried directly to equity, with allocation between the Group and the minority interests. Alternatively, the items of other comprehensive income may be displayed along with the items of the statement of income in a single statement entitled 'statement of comprehensive income' which replaces the statement of income, while properly allocated between the Group and the minority interests. Items carried to equity resulting from transactions with the shareholders in their capacity as shareholders will be disclosed in the statement of changes in equity as will the summary line carried forward from the statement of comprehensive income, with allocation between the Group and the minority interests. Management elected to present a single statement entitled 'statement of comprehensive income' which replaces the statement of income.
	IFRS 8 'Operating segments'. IFRS 8 replaces IAS 14, 'Segment reporting'. The standard applies to entities whose debt or equity instruments are traded in a public market or that file, or are in the process of filing, their financial statements with a regulatory organization for the purpose of issuing any class of instruments in a public market. IFRS 8 requires an entity to report financial and descriptive information about its operating segments, with segment information presented on a similar basis to that used for internal reporting purposes. This amendment was adopted on 1 January 2009.  Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker (CODM), which has been identified as the Chief Executive Officer.  The CODM is using as a performance measure the Net Assets' Value (NAV), determined based on DTZ's valuation report, which approximates to the IFRS net assets. Disclosure of revenues from external customers, segment profit or loss and reconciliation to the total profit before tax per IFRS report is not relevant for the Group, since most of the developments are in an early stage and the core activities are not reflected in the income statement. The initial adoption of the Standard did not have any material effect on the interim consolidated financial statements, because the chief operating decision maker treats the Group's activity as one segment.
	IAS 23 (amendment), 'Borrowing costs', effective for annual periods beginning on or after 1 January 2009. The main change to IAS 23 is the removal of the option of immediately recognizing as an expense borrowing costs that relate to assets that take a substantial period of time to get ready for use or sale. An entity is, therefore, required to capitalize such borrowings costs as part of the cost of the asset. The revised Standard applies prospectively to borrowing costs relating to qualifying assts for which the commencement date for capitalization is on after 1 January 2009. There is no effect of the revised Standard on the financial statements since the Group's existing policy is to capitalize borrowing costs to the property development costs.
	IFRS 7 (amendment), 'Financial Instruments: Disclosures', effective for annual periods beginning on or after 1 January 2009. The amendment requires enhanced disclosures about fair value measurements and liquidity risk. The Group has included the maximum amount of financial guarantees in the contractual maturity analyses and will present the additional disclosures in its next complete financial statements for the year ended 31 December 2009.
	IFRS 2 (amendment), 'Share-based payment', effective for annual periods beginning on or after 1 January 2009. The amendment clarifies that only service conditions and performance conditions are vesting conditions. Other features of a share-based payment are not vesting conditions. The amendment specifies that all cancellations, whether by the entity or by other parties, should receive the same accounting treatment. This amendment was adopted on January 1, 2009. The initial adoption of the Standard did not have any material effect on the interim consolidated financial statements.
	IAS 32 (amendment), 'Financial instruments: presentation', and consequential amendments to IAS 1, 'Presentation of financial statements', effective for annual periods beginning on or after 1 January 2009. The amendment requires classification as equity of some financial instruments that meet the definition of a financial liability. This amendment was adopted on January 1, 2009. The initial adoption of the Standard did not have any material effect on the interim consolidated financial statements.
	IFRIC 15 'Agreements for the Construction of Real Estate', effective for annual periods beginning on or after 1 January 2009. The interpretation applies to the accounting for revenue and associated expenses by entities that undertake the construction of real estate directly or through subcontractors, and provides guidance for determining whether agreements for the construction of real estate are within the scope of IAS 11 or IAS 18. It also provides criteria for determining when entities should recognize revenue on such transactions. The Interpretation was applied retrospectively on January 1, 2009. The initial adoption of the Interpretation did not have any material effect on the interim consolidated financial statements.
	IAS 40, 'Investment property'. Commencing in 2009, entities reporting under IFRS are required to re-classify investment property under construction ('IPUC') to investment property. In addition entities which measure their completed investment property at fair value will also need to measure their IPUC at fair value, subject to fair value being reliably determinable. Accordingly, the Group only revalues IPUC, for which it is determined that a substantial part of the development risks have been eliminated. This determination is based on completing a significant stage of construction. IPUC which do not meet these criteria continue to be measured at cost, net of impairment provisions. Prior to 2009 management considered their development portfolio rather for further sales than for holding and use and in 2009 only Tsvetnoy started to be considered as IPUC.
	IFRIC 16, Hedges of a Net Investment in a Foreign Operation (effective for annual periods beginning on or after 1 October 2008). The interpretation explains which currency risk exposures are eligible for hedge accounting and states that translation from the functional currency to the presentation currency does not create an exposure to which hedge accounting could be applied. The IFRIC allows the hedging instrument to be held by any entity or entities within a group except the foreign operation that itself is being hedged. The interpretation also clarifies how the gain or loss recycled from the currency translation reserve to profit or loss is calculated on disposal of the hedged foreign operation. Reporting entities will apply IAS 39 to discontinue hedge accounting prospectively when their hedges do not meet the criteria for hedge accounting in IFRIC 16. The adoption of the Interpretation will not have any material effect on the interim consolidated financial statements.

Standards issued but not yet effective:

	IAS 36 (amendment), 'Impairment of Assets', effective for annual periods beginning on or after 1 January 2010. The amendment defines the required accounting unit to which goodwill will be allocated for impairment testing of goodwill. Pursuant to the amendment, the largest unit permitted for impairment testing of goodwill acquired in a business combination is an operating segment as defined in IFRS 8, 'Operating Segments' before the aggregation for reporting purposes. The Group is currently assessing the impact of the interpretation on its consolidated financial statements.
	IFRS 3 (revised), 'Business combinations' and consequential amendments to IAS 27, 'Consolidated and separate financial statements', IAS 28, 'Investments in associates' and IAS 31, 'Interests in joint ventures', effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. Management is assessing the impact of the new requirements regarding acquisition accounting, consolidation and associates on the Group.
	Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate-IFRS 1 and IAS 27 Amendment (issued in May 2008; effective for annual periods beginning on or after 1 January 2009). The amendment allows first-time adopters of IFRS to measure investments in subsidiaries, jointly controlled entities or associates at fair value or at previous GAAP carrying value as deemed cost in the separate financial statements. The amendment also requires distributions from pre-acquisition net assets of investees to be recognised in profit or loss rather than as a recovery of the investment. Management is assessing the impact of the new requirements regarding jointly controlled activities on the Group.  Eligible Hedged Items-Amendment to IAS 39, Financial Instruments: Recognition and Measurement (effective with retrospective application for annual periods beginning on or after 1 July 2009). The amendment clarifies how the principles that determine whether a hedged risk or portion of cash flows is eligible for designation should be applied in particular situations. Embedded Derivatives - Amendments to IFRIC 9 and IAS 39 (effective for annual periods ending on or after 30 June 2009). The amendments clarify that on reclassification of a financial asset out of the 'at fair value through profit or loss' category, all embedded derivatives have to be assessed and, if necessary, separately accounted for.

5.    CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING POLICIES 

The Group makes estimates and assumptions that affect the reported amounts of assets and liabilities. Estimates and judgments are continually evaluated and are based on the Director's experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Directors also make certain judgments, apart from those involving estimations, in the process of applying the accounting policies. Judgments that have the most significant effect on the amounts recognized in the consolidated financial statements and which could cause a significant adjustment to the carrying amount of assets and liabilities within the next financial year include:

Impairment of the development rights and costs

The Group has obtained a report from an international valuation company, DTZ Debenham Zadelhoff Limited's ('DTZ'), setting out the estimated market values for the Group's development rights in their current state as at 30 June 2009, based on the assumption as to use of each property by a typical local developer in Russia. Had a different assessment been made of the assumptions underlying the valuation report the recorded fair values of the property development rights would have been higher or lower as at the above mentioned date. 

As a result of the current economic environment and market conditions, indicators of impairment have been identified. For these properties, the development projects' recoverable amount was determined based on reliable estimates of future cash flows, supported by the terms of any existing lease and other contracts and by external evidence such as current market prices for similar properties in the same location and condition, and using 

discount rates that reflect current market assessments of the uncertainty in the amount and timing of the cash flows. 

Management has reviewed the appraisers' assumptions underlying discounted cash flow models used in the valuation, and confirmed that factors such as the discount rate applied have been appropriately determined considering the market conditions at the balance sheet date. Notwithstanding the above, management considers that the valuation of its investment properties is currently subject to an increased degree of judgement and an increased likelihood that actual proceeds on a sale may differ from the carrying value.

The principal assumptions underlying the recoverable amount of the Group's development portfolio are those related to current market level of: the forecast sale or rental prices per square meter for residential, retail or office space as appropriate for the individual developments on completion; the level of construction costs per square meter; the size of the project; the level of developer profit assumed to be required in the current market; the forecast yields for retail and office accommodation; financing cost and the expected completion date. The principal assumptions made, and the impact on the aggregate valuations by changing these assumptions is as follows:

	sale prices for office and retail space between US$5,000 and US$13,000 per square meter. Rental revenues for retail space of US$1,750 per square meter and sales prices for residential properties between US$2,700 and US$25,000 per square meter. If these values were to differ by 10% from management's estimates, the carrying value of the property development rights and costs would be an estimated US$227.0 million lower/higher;
	construction costs, between US$780 and US$2,500 per square meter. If these values were to differ by 10% from management's estimates, the carrying value of the property development rights and costs would be an estimated US$174.0 million lower or US$172.0 million higher;
	gross buildable area is assumed to be 1.6 million square meters. If these values were to differ by 10% from management's estimates, the carrying value of the property development rights and costs would be an estimated US$69.0 million lower or US$83.0 million higher;
	development profit, between 10% and 45% per project. If these values were to differ by 10% from management's estimates, the carrying value of the property development rights and costs would be an estimated US$54.0 million lower or US$57.0 million higher;
	yield achieved on commercial or retail space of 11%. If this value were to differ by 10% from management's estimates, the carrying value of the property development rights and costs would be an estimated US$22.0 million lower or US$26.0 million higher;
	completion dates of properties held for development between 2012 and 2017. A one year delay in completion across all properties held for development will result in an estimated decrease of the carrying value of the property development rights of US$63.0 million.

6.    PROPERTY DEVELOPMENT RIGHTS AND COSTS

The Group was involved in the development of the following projects:

NAME OF PROJECT	TYPE OF PROJECT	GROUP'S INTEREST CURRENT SHARE
		30.06.2009	31.12.2008
Jointly controlled
Khilkov (1)	Residential	50%	50%
Consolidated
Ostozhenka	Residential	100%	100%
Kingston	Residential	82%	73%
Victory Park	Mixed Use	100%	100%
Chelsea	Mixed Use	100%	100%
Tsvetnoy (2)	Retail	100%	100%
Zemlianoy	Hotel	100%	100%
Media City	Office	82%	73%
Dream	Office	82%	73%
Maya	Office	82%	73%

(1) Refer to Note 8 for further information 

(2) Refer to Note 7 for further information 

In respect of the Group's current development portfolio, the following property development rights and property development costs are held:

	ACQUISITION  OF NEW PROJECTS THROUGH BUSINESS COMBINATIONS	TRANSLATION DIFFERENCE FROM ACQUISITION	PROPERTY DEVELOPMENT COSTS	PREPAYMENTS	IMPAIRMENT PROPERTY DEVELOPMENT RIGHTS	VALUATION GAIN	RECLASS PROPERTY DEVELOPMENT COSTS	RECLASS TO INVESTMENT PROPERTY UNDER CONSTRUCTION	TOTAL RIGHTS AND COSTS AT 30 JUNE 2009
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Tsvetnoy	55,870	(8,131)	58,486	17,754	-	11,463	-	(135,442)	-
Zemlianoy	19,623	(3,416)	5,402	65	(18,887)	-	-	-	2,787
Ostozhenka	10,311	(1,634)	564	-	-	-	-	-	9,241
Chelsea	503,315	(62,957)	45,388	1,625	(409,662)	-	-	-	77,709
Victory Park	154,135	(19,877)	814	10	(97,454)	-	(1,088)	-	36,540
Media City	100,503	(14,299)	1,604	2,323	(87,292)	-	-	-	2,839
Dream	55, 452	(9,911)	6,623	47	(19,070)	-	-	-	33,141
Maya	32,410	(4,963)	951	160	(16,878)	-	-	-	11,680
Kingston	661,247	(96,596)	7,780	246	(325,906)	-	-	-	246,771
	1,592,866	(221,784)	127,612	22,230	(975,149)	11,463	(1,088)	(135,442)	420,708

The movements in property development rights and property development costs during the six months period ended 30 June 2009 is as follows:

	AT 31 DECEMBER 2008	PROPERTY DEVELOPMENT COSTS	RECLASS PROPERTY DEVELOPMENT COSTS	PREPAYMENTS	IMPAIRMENT PROPERTY DEVELOPMENT RIGHTS(*)	VALUATION GAIN	RECLASS TO INVESTMENT PROPERTY UNDER CONSTRUCTION	TRANSLATION DIFFERENCE	TOTAL RIGHTS AND  COSTS AT 30 JUNE 2009
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Tsvetnoy	114,084	17,353	-	(1,218)	-	11,463	(135,442)	(6,240)	-
Zemlianoy	16,218	87	-	(48)	(11,738)	-	-	(1,732)	2,787
Ostozhenka	9,740	94	-	-	-	-	-	(593)	9,241
Chelsea	131,625	466	(3,466)	(451)	(39,910)	-	-	(10,555)	77,709
Victory Park	39,978	99	(1,088)	(8)	-	-	-	(2,441)	36,540
Media City	16,984	52	-	-	(12,380)	-	-	(1,817)	2,839
Dream	47,063	130	-	(3)	(10,512)	-	-	(3,537)	33,141
Maya	14,841	165	-	-	(2,276)	-	-	(1,050)	11,680
Kingston	261,730	928	-	89	-	-	-	(15,976)	246,771
	652,263	19,374	(4,554)	(1,639)	(76,816)	11,463	(135,442)	(43,941)	420,708

(*) Management has adopted the market value assessment determined by DTZ as at 30 June 2009. Refer to Note 5 for further information as to the key valuation assumptions used.

The movements in property development rights and property development costs during 2008 were as follows:

	AT 31 DECEMBER 2007	PROPERTY DEVELOPMENT COSTS	RECLASSIFIED TO INVENTORY	PREPAYMENTS	IMPAIRMENT	TRANSLATION DIFFERENCE		TOTAL RIGHTS  AND COSTS AT   31 DECEMBER  2008
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000		US$'000
Tsvetnoy	89,551	23,806	-	15,461	-	(14,734)		114,084
Zemlianoy	25,440	1,994	-	120	(7,149)	(4,187)		16,218
Ostozhenka	11,266	341	-	(13)	-	(1,854)		9,740
Chelsea	618,151	15,844	(32,341)	1,432	(369,752)	(101,709)		131,625
Victory Park	164,271	982	-	19	(97,454)	(27,840)		39,978
Media City	105,652	1,139	-	2,474	(74,912)	(17,369)		16,984
Dream	62,617	3,259	-	(2)	(8,558)	(10,253)		47,063
Maya	34,443	687	-	(27)	(14,602)	(5,660)		14,841
Kingston	693,421	6,698	-	167	(325,906)	(112,650)		261,730
	1,804,812	54,750	(32,341)	19,631	(898,333)	(296,256)		652,263

Prior to 2009 management considered their development portfolio rather for further sales than for holding and use and in 2009 only Tsvetnoy started to be considered as investment property under construction.

Interest capitalized into the development costs amounted to US$2,458,755 for six months period ended June 30, 2009 (US$38,220 for six months period ended June 30 2008).

In common with a number of Moscow real estate developers, the Group will be exposed to certain risks associated with the delay in the commencement and completion of its projects. Certain subsidiaries within the Group have entered into investment contracts in respect of the Chelsea, Dream, Khilkov, Kingston, Maya, Media City, Tsvetnoy and Zemlianoy projects. Such investment contracts specify the term during which construction of the relevant project must be completed. These investment contracts will individually expire at various dates from December 2009 to December 2012. According to the Group's current business plans, construction of a number of development projects is not going to be complete until after the relevant investment contracts have expired. The Group therefore intends to renegotiate the terms of the relevant investment contracts to reflect the revised business plan and timetable approved by the Directors in light of current market conditions. Whilst the Directors expect that the Moscow City Government will accommodate the Group's requests to amend the terms of such agreements, the Moscow City Government may refuse to renew or may terminate the relevant investment contract, if certain project milestones are not achieved or if construction is not completed in accordance with the construction schedule or by the expiration date required in the relevant agreement, on the grounds that the relevant member of the Group did not comply with the substantial requirements of the contract. The Group has also not entered into any land lease agreements in respect of, nor does it hold any title to the buildings located at the Dream, Maya, Media City and Zemlianoy projects and part of the Chelsea project. In the event that the Group fails to successfully renegotiate the relevant investment contract in respect of any of these projects, it would lose all its rights in respect of the relevant project and any investment made in such project to date.

7.    INVESTMENT PROPERTY UNDER CONSTRUCTION

In accordance with IAS 40, the Tsvetnoy Development, which is currently under construction, was re-classified as investment property under construction. This determination is based on completing a significant stage of construction. Management has utilized appraisal reports prepared by DTZ as at 30 June 2009 to support their assessment of fair value of the investment property under construction.

	TSVETNOY DEVELOPMENT US$'000
At 31 December 2008	-
Re-class from property development rights and costs	135,442
Total investment property	135,442

8.    INVESTMENT IN JOINTLY CONTROLLED ENTITY

The Group's investment in a jointly controlled entity relates to its 50% interest in Lafar Management Limited, which holds 100% interest in LLC Stolichnoe Podvorie, an entity involved in the development of a luxury residential development at 3 Khilkov Lane, Moscow, Russian Federation. 

The following table sets out the assets and liabilities of the joint-venture:

	30 JUNE 2009	31 DECEMBER 2008
	US$'000	US$'000
ASSETS
Non-current assets
Property development rights and costs	127,161	151,604
Receivables	22	20
Total non-current assets	127,183	151,624
Current assets
Debtors and prepayments	335	357
Cash and cash equivalents	46	28
Total current assets	381	385
Total assets	127,564	152,009
LIABILITIES
Non-current liabilities
Deferred income tax liability	18,465	27,751
Total non-current liabilities	18,465	27,751
Current liabilities
Borrowings	46,352	45,556
Trade and other payables	10	173
Total current liabilities	46,362	45,729
EQUITY
Share capital	1	1
Retained earnings	86,861	119,077
Profit of current period	(10,345)	(32,216)
Translation reserve	(13,780)	(8,333)
Total equity	62,737	78,529
Total liabilities and equity	127,564	152,009

The total loss in the six months period ended 30 June 2009 of US$10,345,000 (US$1,650,000 for the six months period ended 30 June 2008) includes income of US$4,681,000 (US$2,364,000 for the six months period ended 30 June 2008) and expenses of US$15,026,000 (for the six months period ended 30 June 2008 of US$4,014,000). The expenses include the impairment arising from new valuation of the Khilkov development in the amount of US$8,141,000.  

The table below presents the Group's share of the results of the joint venture as presented at 30 June 2009 and 31 December 2008:  

	30 JUNE 2009	31 DECEMBER 2008
	US$'000	US$'000
Investment in jointly controlled entity (50%)	31,368	39,265
Loans to jointly controlled entity	21,440	21,408
Additional investment in jointly controlled entity	1,343	1,407
Total investment in jointly controlled entity	54,151	62,080
SHARE OF RESULT OF JOINTLY CONTROLLED ENTITY	(5,173)	(16,108)

9.    INVENTORIES

Inventories were originally acquired by the Group as part of property development costs or property, plant and equipment. Following the revision in the Group's business strategy the Directors decided to move certain assets that are no longer needed as part of the revised development plans from property development costs into inventories for selling. In addition, the Directors decided to sell part of Company's office in Moscow that is no longer used by the Group.

Inventories at 30 June 2009 as detailed below:

	APARTMENTS	OFFICE	TOTAL
	US$'000	US$'000	US$'000
At 31 December 2007	-	-	-
Transferred from property development costs	32,341	-	32,341
Transferred from property, plant and equipment	-	6,218	6,218
Total before impairment	32,341	6,218	38,559
Impairment	(1,474)	-	(1,474)
At 31 December 2008	30,867	6,218	37,085
Transferred from property development costs	3,466	-	3,466
Disposal	(6,618)	-	(6,618)
Impairment (*)	(714)	(1,338)	(2,052)
Translation difference	(2,199)	(380)	(2,579)
At 30 June 2009	24,802	4,500	29,302

* In accordance with the Group's accounting policies the Inventory's carrying value as at 30 June 2009 was written down by US$2,052,000 (for period ended 31 December 2008 - US$1,474,000) to reflect its net realizable value. The Inventory's net realizable value was based upon the Directors' assessment.

10.    INCOME TAX

The income tax expense comprises the following:

	PERIOD FROM 1 JANUARY 2009 TO 30 JUNE 2009 US$'000	PERIOD FROM 1 JANUARY 2008 TO 30 JUNE 2008 US$'000
Current tax	42	227
Deferred tax	(12,254)	408
Income tax (benefit)/expenses for the period	(12,212)	635

Deferred tax during six months period ended 30 June 2009 comprises the following:

		RECOGNIZED IN INCOME STATEMENT
	31  DECEMBER 2008	IMPAIRMENT	VALUATION GAIN	OTHER CHANGES	TRANSLATION DIFFERENCE	30  JUNE  2009
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Tax effect of deductible/(taxable) temporary differences
Property development rights	92,054	(14,654)	2,293	-	(4,804)	74,889
Property development costs	1,418	-	-	107	(77)	1,448
Investment in joint controlled entity profit	132	-	-	-	(10)	122
Other	65	-	-		(4)	61
Total net deferred tax liability	93,669	(14,654)	2,293	107	(4,895)	76,520

Deferred tax during six months period ended 30 June 2008 comprises the following:

		RECOGNIZED IN INCOME STATEMENT
	31 DECEMBER 2007	OTHER  CHANGES	TRANSLATION DIFFERENCE	30 JUNE  2008
	US$'000	US$'000	US$'000	US$'000
Tax effect of deductible/(taxable) temporary differences
Property development rights	390,426	-	17,972	408,398
Property development costs	670	408	191	1,269
Investment in joint controlled entity profit	189	-	9	198
Other	94	-	4	98
Total net deferred tax liability	391,379	408	18,176	409,963

11.    LOANS AND BORROWINGS

On 26 March 2008, the Group's subsidiary LLC Central Market entered into a loan facility of US$100,000,000 with JSC 'Commercial Savings Bank of the Russian Federation' ('Sberbank'), the largest banks in Russia. The loan is secured against the proprietary rights to the Tsvetnoy Development, the share capital of LLC Central Market and the right of a long term land lease on which Tsvetnoy project is being built. The loan facility has no recourse to the Company. 

The loan is being used to fund the construction of the Tsvetnoy Project.

The loan agreement that is in place as at 30 June 2009 is set out below:

LENDER	ORIGINAL  CURRENCY  OF LOAN	TOTAL AMOUNT  OF LOAN  FACILITY	NOMINAL  INTEREST  RATE	REPAYMENT  DATE	OUTSTANDING NOMINAL AMOUNT  AT  30 JUNE  2009
		US$'000			US$'000
Sberbank	US$	100,000	LIBOR+PREMIUM	25 March 2012	56,106
Total loans					56,106

The Loan's fair value as at 30 June 2009 does not differ from its carrying value.

The loan agreement that was in place as at 31 December 2008 is set out below:

LENDER	ORIGINAL  CURRENCY  OF LOAN	TOTAL AMOUNT  OF LOAN  FACILITY	NOMINAL  INTEREST  RATE	REPAYMENT  DATE	OUTSTANDING NOMINAL AMOUNT  AT 31 DECEMBER 2008
		US$'000			US$'000
Sberbank	US$	100,000	LIBOR+PREMIUM	25 March 2012	44,070
Total loans					44,070

12.    OTHER INCOME

Advance payment under co-investment agreement

On 16 March 2007, the Group concluded a co-investment agreement with Atropa Investment Limited ('Atropa'), whereby Atropa agreed to participate in the financing and construction of the Chelsea Project. Under the terms of such co-investment agreement, Atropa was entitled to acquire 3,000 sq. m within the Chelsea project after completion. An advance payment of US$30,000,000 was made on behalf of Atropa to fulfill its obligations under the co-investment agreement. 

Following negotiations with Atropa, it was agreed on 30 June 2009 that the Group will waive Atropa's ongoing obligations with regards to the Chelsea project and that the Group will be released from its obligations to transfer 3,000 square meters of premises within the Chelsea Project to Atropa after completion. Therefore, the Group has written off this obligation as at 30 June 2009.

Transactions with minority shareholders for Sucreti assets

In June 2007, the Group announced an investment in four new developments in Moscow and the surrounding area. The investment was made through the acquisition of a 73% shareholding in Sucreti Holdings Limited ('Sucreti'). Sucreti holds the development rights for the Dream, Maya, Media City and Kingston Projects. The remaining interest in Sucreti (being 27%) was retained by Lirion Participation Corp ('Lirion').

Under the sale and purchase agreement for the acquisition of Sucreti and its subsidiaries (the 'Sucreti SPA'), as at 31 December 2008 the Group was obligated to pay an additional amount of US$31,000,000 to the sellers, subject to the fulfillment by the Seller of certain obligation undertaken.

Under the terms of the above transaction, Lirion committed to a number of ongoing obligations in respect of the four projects, including extending the terms of the project investment contracts and formalising certain project lease rights. Certain of Lirion's obligations in respect of the Dream, Maya and Media City Projects weren't fulfilled and as a consequence the Group's management entered into negotiations with Lirion regarding the terms of the original transaction.

Following negotiations with Lirion, in June 2009 the Group has agreed to waive certain of Lirion's obligations in respect of the Dream, Maya and Media City Projects. 

In return, Lirion has agreed to transfer 9% of the issued share capital of Sucreti to the Group and to release the Group from obligation to pay the above described additional amount of US$31,000,000.

	PERIOD FROM 1 JANUARY 2009 TO 30 JUNE 2009	PERIOD FROM 1 JANUARY 2008 TO 30 JUNE 2008
	US$'000	US$'000
Cancelling co-investment agreement	24,374	-
Transactions with minority shareholders	22,206	-
Restructuring purchase consideration payable	31,000	-
Other income	2,154	512
Total other income at 30 June 2009	79,734	512

13.    DEFERRED INCOME RECOGNISED AS INCOME IN SIX MONTHS ENDED 30 JUNE 2009.

On 20 December 2007, the Group sold its wholly-owned subsidiary, Nospelt Limited (Butikovsky Project), for total cash consideration of US$97,200,000. Under the terms of the sale of Nospelt Limited, the Group had agreed to procure the transfer of the ownership rights to the Butikovsky Project to Nospelt Limited. In the event that such ownership right would not be transferred to Nospelt Limited by 30 June 2009, the purchaser had the option to require that the Group re-purchases Nospelt Limited for US$97,200,000 plus costs and any liabilities the purchaser has incurred. As at 30 June 2009 the Group has fulfilled its obligation with respect to the transfer of the ownership right and thus recognized the deferred income as income.  

The movement in deferred income during the period is as follows:  

	REVENUE FROM  SALE OF  BUTIKOVSKY PROJECT	COSTS INCURRED ON BUTIKOVSKY PROJECT	TOTAL  INCOME
	US$'000	US$'000	US$'000
At 20 December 2007	97,200	(30,196)	67,004
Translation difference (on consideration)	720	237	957
At 31 December 2007	97,920	(29,959)	67,961
Translation difference	(16,112)	4,931	(11,181)
At 31 December 2008	81,808	(25,028)	56,780
Translation difference	(4,993)	1,527	(3,466)
At 30 June 2009 recognized as income in six months ended 30 June 2009	76,815	(23,501)	53,314

14.    COMMITMENTS

At 30 June 2009, the Group had contractual capital expenditure commitments in respect of property development totaling US$23,738,000 (at 31 December 2008: US$44,825,000). The Group has already allocated the necessary resources in respect of these commitments. 

15.    RELATED PARTY TRANSACTIONS 

For the purpose of these interim condensed financial statements, related parties are defined in accordance with IAS 24 'Related Party Disclosures'. 

The nature of the related party relationships for those related parties with whom the Group entered into significant transactions or had significant balances outstanding as of 30 June 2009 are detailed below:

Loans issued and related interest during six months period ended 30 June 2009:

	LAFAR  MANAGEMENT LIMITED US$'000	STOLICHNOE PODVORIE LLC US$'000
Total outstanding loans and accrued interest due from related parties on 31 December 2008	3,303	18,105
Loans provided to related parties during the period	14	45
Translation difference	-	(1,108)
Total outstanding loans and accrued interest due from related parties on 30 June 2009	3,400	18,040
Total interest income during six months period ended 30 June 2009	83	998

Loans issued and related interest during six months period ended 30 June 2008:

	LAFAR  MANAGEMENT  LIMITED US$'000	STOLICHNOE PODVORIE LLC US$'000
Total outstanding loans and accrued interest due from related parties on 31 December 2007	2,844	11,631
Loans provided to related parties during the period	-	8,066
Translation difference	-	540
Total outstanding loans and accrued interest due from related parties on 30 June 2008	2,919	21,111
Total interest income during six months period ended 30 June 2008	75	874

Lafar Management Limited is a jointly controlled entity in which the Group holds an economic interest of 50%. Litonor Financial Limited holds the remaining 50% of the voting shares of Lafar Management Limited. Lafar Management Limited holds 100% of the share capital of its Russian subsidiary, LLC Stolichnoe Podvorie.

Key management remuneration

In the reporting period, key management of the Group received compensation in the form of salary and other benefits classified as short-term in accordance with IAS 19 'Employee Benefits'. The total remuneration and benefits accrued to the Directors was US$1,642,671 (six months period ended 30 June 2008: US$1,594,000). There are no other individuals who are not Directors who are considered to be key management in the Group. 

During 2007 and 2008 1,700,000 awards were granted to executive Directors as a part of its LTIP. The total executive Directors' award value was estimated at US$7,083,150 (on 30 June 2008: US$17,024,462), with the portion amortized during the six months period ended 30 June 2009 being US$1,386,638 (for the six months period ended 30 June 2008: US$3,111,111). 

There are no long-term remunerations and benefits provided by compensation agreements with the key management and non-executive directors, other than the described above LTIP.

Other transactions with related parties:

	TRANSACTIONS VALUE  DURING THE PERIOD US$'000	OUTSTANDING AMOUNT AT 30 JUNE 2009 US$'000
Construction agreements (expenditure for the Group)	-	347
Rent contracts (revenue for the Group)	7	-

All of the transactions listed above are with parties beneficially owned by the Group's founder, Chief Executive and controlling shareholder, Boris Kuzinez. The amounts relate to rent and development services in accordance with rental and construction agreements between those entities and the Group. The majority of these arrangements have either been terminated or is not expected to continue in future periods.

Transactions with related parties during six months period ended 30 June 2008 were as follows:

	TRANSACTIONS VALUE  DURING THE PERIOD US$'000	OUTSTANDING AMOUNT AT 30 JUNE 2008 US$'000
Construction agreements (revenue for the Group)	669	(1,133)
Purchase of equipment (expenditure for the Group)	9	-
Rent contracts (revenue for the Group)	20	-

ENDIR VVLFLKKBBBBE