Malita Investments Plc

Interim / Quarterly Report • Jul 30, 2014

COMPANY ANNOUNCEMENT

The following is a company announcement issued by Malita Investments p.l.c. pursuant to the Listing Rules of the Malta Financial Services Authority.

30th July 2014

Quote

During the meeting of the Board of Directors of Malita Investments p.l.c. held on Tuesday 29th July 2014, the Company's condensed interim financial statements for the six months ended 30th June 2014 were approved.

The interim financial statements are available for viewing at the Company's registered office or electronically on www.malitainvestments.com

The Directors of the Company have also approved the payment of a gross interim dividend of €450,000 or €0.0150 per ordinary share equating to an interim net dividend of €292,500 or €0.00975 per share. The interim dividend will be paid on Friday 12 September 2014 to the Shareholders on the Company's share register at close of business at the Malta Stock Exchange on Monday 11 th August 2014.

Unquote

By Order of the Board

Dr Noel Buttigieg Scicluna Company Secretary

MALITA INVESTMENTS P.L.C.

Condensed Interim Financial Statements (unaudited) 30 June 2014

	Pages
Interim directors' report	1 - 2
Report on review of interim financial information	3
Condensed statement of financial position	4
Condensed statement of comprehensive income	5
Condensed statement of changes in equity	රි
Condensed statement of cash flows	7
Notes to the condensed interim financial statements	8 - 19

Interim directors' report

The directors present their report together with the condensed interim financial statements for the period ended 30 June 2014.

Principal activities

The company's principal activities include the development, and operation of immovable property, in particular, projects of national and/or strategic importance.

Review of the business

In the first six months of the year, works on the Parliament Building progressed further and are now in their final stages of completion. During this period the Company continued to receive income from its ground rents over the sites of Malta International Airport (MIA) and Valletta Cruise Port (VCP). The Company also received income relating to the Parliament Building and Open Air Theatre as per the relative contractual agreements entered into in 2012.

In the meantime, the Board of Directors continued to consider and evaluate a number of potential projects including ones with a mix of public/private participation.

Result and dividends

The condensed statement of comprehensive income is set out on page 5. The directors declare the payment of an interim gross dividend of €450,000 (June 2013: €442,800) or €0.0150 (June 2013: €0.0146) per ordinary share equating to an interim net dividend of €292,500 (June 2013: €287,700) or €0.00975 (June 2013: 0.00959) per share payable on 12 September 2014.

Directors

The directors of the company who held office during the period were: Kenneth Farrugia (Chairman) Vincent Mifsud Frederick Mifsud Bonnici Publio Danny Rosso Paul Mercieca (appointed on 9 April 2014) Ray Sladden (appointed on 9 April 2014) Robert Suban (appointed on 9 April 2014)

The company's Articles of Association require directors to retire after three years in office, but they are eligible for re-appointment.

Interim directors' report - continued

Statement of directors' responsibilities for the financial statements

The directors are required by the Maltese Companies Act, 1995 to prepare financial statements which give a true and fair view of the state of affairs of the company as at the end of each reporting period and of the profit or loss for that period.

In preparing the financial statements, the directors are responsible for:

• · ensuring that the financial statements have been drawn up in accordance with International Financial Reporting Standards as adopted by the EU;
• · selecting and applying appropriate accounting policies;
• . making accounting estimates that are reasonable in the circumstances;
• · ensuring that the financial statements are prepared on the going concern basis unless it is inappropriate to presume that the company will continue in business as a going concern.

The directors are also responsible for designing, implementing internal controls as the directors determine is necessary to enable the preparation of financial statements that are from material misstatement, whether due to fraud or error, and that comply with the Mallese Companies Act, 1995. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The financial statements of Malita Investments p.l.c. for the period ended 30 June 2014 are included in the Condensed Interim Financial Statements - 30 June 2014, which is published in printed form and will be made available on the company's website. The directors are responsible for the maintenance and integrity of the company's website. Access to information published on the company's website is available in other countries and jurisdictions, where legislation governing the preparation and dissemination of financial statements may differ from requirements or practice in Malta.

On behalf of the board

Kenneth Farrugla Chairman

Frederick Mifsud Bonnici

Director

Registered office Clock Tower l evel 1 Tigne Point Sliema Malta

29 July 2014

Report on Review of Interim Financial Information

To the Directors of Malita Investments p.l.c.

Introduction

We have reviewed the accompanying condensed interim statement of financial position of Malita Investments p.l.c. as of 30 June 2014 and the related condensed statements of comprehensive income, changes in equity and cash flows for the 6-month period then ended. The directors are responsible for the preparation and presentation of this condensed information in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU. Our responsibility is to express a conclusion on this condensed interim financial information based on our review.

Scope of review

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'. A review of interim financial information consists of making inquiries, 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

Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed interim financial information is not prepared, in all material respects, in accordance with International Accounting Standard 34 "Interim Financial Reporting".

Other matters

This report, including the conclusion, has been prepared for and only for the company 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.

PricewaterhouseCoopers

78 Mill Street Qormi Malta

Simon Partner

29 July 2014

Condensed statement of financial position

		As at	As at
		30 June	31 December
		2014	2013
	Notes	€	€
ASSETS
Non-current assets
Property, plant and equipment		4,356	3,127
Investment property	4	127,831,324	122,223,951
		127,835,680	122,227,078
Current assets
Trade and other receivables		518,817	1,434,321
Cash and cash equivalents		8,742,106	12,134,903
		9,260,923	13,569,224
Total assets		137,096,603	135,796,302
EQUITY AND LIABILITIES
Capital and reserves
Share capital	5	73,295,143	73,295,143
Retained earnings		5,380,952	3,967,261
Other reserve - fair value gains	6	10,025,865	4,781,389
Total equity		88,701,960	82,043,793
Non-current liabilities Borrowings		39,932,946	39,931,259
Deferred tax liabilities		1,418,103	1,056,893
		41,351,049	40,988,152
Current liabilities
Capital creditor for acquisition of property		4,123,726	9,742,563
Trade and other payables		803,580	1,555,339
Current tax liabilities		2,116,288	1,466,455
		7,043,594	12,764,357
Total liabilities		48,394,643	53,752,509
Total equity and liabilities		137,096,603	135,796,302

The notes on pages 8 to 19 are an integral part of these condensed interim financial statements.

The condensed interim financial statements on pages 4 to 19 were authorised for issue by the board on 29 July 2014 and were signed on its behalf by:

u min P Kenneth Earrugia Chairman

Erederick Mifsud Bonnici Director

Condensed statement of comprehensive income

	Notes	Period from 1 January to 30 June 2014 €	Period from 1 January to 30 June 2013 ਵ
Revenue	7	3,362,093	3,344,767
Administrative expenses		(200,106)	(176,052)
Change in fair value of investment property		5,605,686	4,096,624
Operating profit		8,767,673	7,265,339
Finance income		64,129	184,173
Finance costs		(658,703)	(658,987)
Profit before tax	g	8,173,099	6,790,525
l ax expense		(1,122,260)	(1,221,704)
Profit for the period - total comprehensive încome		7,050,839	5,568,821
Earnings per share (cents)	11	4.76	3.76

The notes on pages 8 to 19 are an integral part of these condensed interim financial statements.

Condensed statement of changes in equity

	Share capital C	Retained earnings €	Other reserve- fair value gains €	Total €
Balance at 1 January 2013	73,295,143	1,486,134		74,781,277
Comprehensive income Profit for the period		5,568,821		5,568,821
Transactions with owners Dividends to equity shareholders		(473,075)		(473,075)
Balance at 30 June 2013	73,295,143	6,581,880		79,877,023
Balance at 1 July 2013	73,295,143	6,581,880		79,877,023
Comprehensive income Profit for the period		2,454,593		2,454,593
Transactions with owners Transfer within owners' equity Dividends to equity shareholders		(4,781,389) (287,823)	4,781,389	(287,823)
Balance as at 31 December 2013	73,295,143	3,967,261	4,781,389	82,043,793
Balance at 1 January 2014	73,295,143	3,967,261	4,781,389	82,043,793
Comprehensive income Profit for the period		7,050,839		7,050,839
Transactions with owners
Transfer within owners' equity Dividends to equity shareholders		(5,244,476) (392,672)	5,244,476	(392,672)
		(5,637,148)	5,244,476	(392,672)
Balance at 30 June 2014	73,295,143	5,380,952	10,025,865	88,701,960

The notes on pages 8 to 19 are an integral part of these condensed interim financial statements.

Condensed statement of cash flows

		Period from 1 January to	Period from 1 January to
		30 June	30 June
	Note	2014 €	2013 ਵ
Cash flows from operating activities
Cash generated from operations Interest received	12	3,321,522 69,224	4,672,613 214,888
Interest paid and similar charges		(553)	(837)
Tax paid		(111,217)	(35,678)
Net cash generated from operating activities		3,278,976	4,850,986
Cash flows from investing activities
Purchase of property, plant and equipment		(2,114)	(20)
Disposals of held-to-maturity investments Payments to capital creditor		(5,618,837)	2,595,306 (12,703,360)
Net cash used in investing activities		(5,620,951)	(10,108,104)
Cash flows from financing activities
Dividends paid		(392,672)	(473,075)
Interest paid on borrowings		(658,150)
Net cash (used in)/generated from financing activities		(1,050,822)	(473,075)
Net movement in cash and cash equivalents		(3,392,797)	(5,730,193)
Cash and cash equivalents at beginning of period		12,134,903	26,618,331
Cash and cash equivalents at end of period		8,742,106	20,888,138

The notes on pages 8 to 19 are an integral part of these condensed interim financial statements.

Notes to the condensed interim financial statements

1. Summary of significant accounting policies

The Board has adopted the following principal accounting policies which it believes cover most of the type of activities it will undertake in the foreseeable future. Accordingly, not all the accounting policies set out below would necessarily apply as at the date of this report.

1.1 Basis of preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU and the requirements of the Maltese Companies Act, 1995. They have been prepared under the historical cost convention as modified by the fair valuation of investment property.

The preparation of financial statements in conformity with IFRSs as adopted by the EU requires the use of certain accounting estimates. It also requires directors to exercise their judgement in the process of applying the Company's accounting policies (see note 2 -- Critical accounting estimates and judgements).

Standards, interpretations and amendments to published standards effective in 2014

The Company adopted new standards, amendments and interpretations to existing standards that are mandatory for the Company's accounting period beginning on 1 January 2014. The adoption of these revisions to the requirements of IFRSs as adopted by the EU did not result in substantial changes to the Company's accounting policies.

IFRS 13, 'Fair value measurement', aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. IFRS 13 does not require fair value measurements in addition to those already required or permitted by other IFRSs. The Standard is applicable for annual periods beginning on or after 1 January 2013, with earlier application being permitted.

Standards, interpretations and amendments to published standards that are not yet effective

Certain new standards, amendments and interpretations to existing standards have been published by the date of authorisation for issue of these financial statements but are mandatory for the Company's accounting periods beginning after 1 January 2014. The Company has not early adopted these revisions to the requirements of IFRSs as adopted by the EU and the Company's directors are of the opinion that there are no requirements that will have a possible significant impact on the Company's financial statements in the period of initial application.

1.

1.2 Investment property

Investment property is held for long-term rental yields or for capital appreciation or both, and is not occupied by the Company. Investment property also includes property that is being constructed or developed for future use as investment property, when such identification is made.

Investment property is measured initially at its historical cost, including related transaction costs and borrowing costs. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Borrowing costs which are incurred for the purpose of acquiring or constructing a qualifying investment property are capitalised as part of its cost, in accordance with Note 1.11. After initial recognition, investment property is carried at fair value. Given that there is no active market for the investment property held by the Company establishes fair value by using valuation techniques, including the use of discounted cash flow analysis.

Investment property that is being redeveloped for continuing use as investment property continues to be measured at fair value. Fair value measurement on property under construction is only applied if the fair value is considered to be reliably measurable. The fair value of investment property reflects, among other things, rental income from current leases and assumptions about rental income from future leases in the light of current market conditions. The fair value also reflects, on a similar basis, any cash outflows that could be expected in respect of the property.

Subsequent expenditure is capitalised to the asset's carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance costs are charged to profit or loss during the financial period in which they are incurred. When part of an investment property is replaced, the carrying amount of the replaced part is derecognised.

The fair value of investment property does not reflect future capital expenditure that will improve or enhance the property and does not reflect the related future benefits from this future expenditure other than those a rational market participant would take into account when determining the value of the property.

Changes in fair values are recognised in profit or loss. Investment properties are derecognised either when they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal.

1.3 Financial assets

1.3.1 Classification

The Company classifies its financial assets as loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

1.

1.3 Financial assets - continued

1.3.1 Classification - continued

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Company provides money, goods or services directly to a debtor with no intention of trading the asset. They are included in current assets, except for maturities greater than twelve months after the end of the reporting period. The latter are classified as non-current assets. The Company's loans and receivables comprise trade and other receivables and cash equivalents in the statement of financial position (notes 1.5 and 1.6).

1.3.2 Recognition and measurement

The Company recognises a financial asset in its statement of financial position when it becomes a party to the contractual provisions of the instrument. Regular purchases and sales of financial assets are recognised on trade date, which is the date on which an asset is delivered to or by the Company. Any change in fair value for the asset to be received is recognised between the trade date and settlement date in respect of assets which are carried at fair value in accordance with the measurement rules applicable to the respective financial assets.

Financial assets are initially recognised at fair value plus transaction costs. Loans and receivables and held-to-maturity financial assets are subsequently carried at amortised cost using the effective interest method. Amortised cost is the initial measurement amount adjusted for the amortisation of any difference between the initial and maturity amounts using the effective interest method.

Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership or has not retained control of the asset.

1.4 Impairment

The Company assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a 'loss event') and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. The Company first assesses whether objective evidence of impairment exists. The criteria that the Company uses to determine that there is objective evidence of an impairment loss include:

• · significant financial difficulty of the issuer or obligor;
• · a breach of contract, such as a default or delinquency in interest or principal payments;
• · it becomes probable that the borrower will enter bankruptcy or other financial reorganisation.

1. Summary of significant accounting policies - continued

1.4 Impairment - continued

For financial assets carried at amortised cost, the amount of the loss is measured as the difference between the asset's carrying amount at the beginning of the financial period and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate. The asset's carrying amount is accordingly reduced and the amount of the loss is recognised in profit or loss. ff, in a subsequent period, the amount of the impairment loss decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor's credit rating), the reversal of the previously recognised impairment loss is recognised in profit or loss.

1.5 Trade and other receivables

Trade receivables comprise amounts due from customers for ground rents, lease of property and penalties receivable. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as noncurrent assets.

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment (note 1.4). The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in profit or loss. When a receivable is uncollectible, it is written off against the allowance account for trade and other receivables. Subsequent recoveries of amounts previously written off are credited against profit or loss.

1.6 Cash and cash equivalents

Cash and cash equivalents are carried in the statement of financial position at face value. In the statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at call with banks and when applicable bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the statement of financial position.

1.7 Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares are shown in equity as a deduction, net of tax, from the proceeds.

1. Summary of significant accounting policies - continued

1.8 Trade and other payables

Trade payables comprise obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.

Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

1.9 Current and deferred tax

The tax expense for the year comprises current and deferred tax. Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

Deferred tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the transaction neither affects accounting nor taxable profit or loss. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

1.10 Revenue recognition

Revenue comprises the fair value of the consideration for ground rents received or receivable as per contracts entered into, penalties due to delays in completion of the Parliament Building and Open Air Theatre and the lease of the Open Air Theatre as from the date of completion being 18 October 2013.

The Company recognises revenue when the amount of reliably measured, it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the Company's activities as described below.

(a) Interest income

Interest income is recognised for all interest-bearing instruments using the effective interest method.

(b) Dividend income

Dividend income is recognised when the right to receive payment is established.

1. Summary of significant accounting policies - continued

1.10 Revenue recognition - continued

(c) Rental income from investment property

Rental income from investment property is recognised in profit or loss on a straight-line basis over the term of the lease.

1.11 Borrowing costs

Borrowing costs which are incurred for the purpose of acquiring qualifying property, plant and equipment, investment property or property held for development and resale are capitalised as part of its cost. Borrowing costs are capitalised while acquisition is actively underway, during the period of time that is required to complete and prepare the asset for its intended use. Capitalisation of borrowing costs is ceased once the asset is substantially complete and is suspended if the development of the asset is suspended. All other borrowing costs are expensed. Borrowing costs are recognised for all interest-bearing instruments on an accrual basis using the effective interest method. Borrowing costs include the effect of amortising any difference between initial net proceeds and redemption value in respect of interest-bearing borrowings.

1.12 Dividend distributions

Dividend distributions to the Company's shareholders are recognised as a liability in the Company's financial statements in the period in which the dividends are approved by the Company's directors in the case of any interim dividends whilst final dividends that may be proposed by the Board will be recognised as a liability once they are approved by the shareholders of the Company.

2. Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances.

The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.

The Company's investment property comprises the MIA and VCP properties as well as the Parliament Building and Open Air Theatre. The fair value of the MIA and VCP properties is determined based on projected future cash flows, appropriately discounted by a risk adjusted discount rate. As explained in Note 4 - Investment Property, the valuation is determined using discounted cash flow projections considering, inter alia, the projected future cash flows generated by the MIA and VCP properties, ongoing maintenance needs, and other relevant market factors.

A key variable used in the determination of the fair value of the Investment Property is the discount rate. If the discount rate used in the discounted future cash flows for the Investment Property had been 0.5% higher/lower, all other things being equal, the fair value of the Company's investment property would decrease by €4.9 million and €6.0 million respectively.

3. Segment reporting

The directors have reviewed the disclosure requirements of IFRS 8, 'Operating Segments' and determined that the Company effectively has one operating segment, which is the development, management and operation of immovable property, taking cognisance of the information utilised within the Company for the purpose of assessing performance.

4. Investment property

	ਵ	30 June 2014 31 December 2013 ਵ
Property measured at fair value Property measured at cost	45,500,000 82,331,324	39,894,314 82,329,637
Carrying amount	127,831,324	122,223,951

a) Property measured at fair value

MIA and VCP properties

	ਵ	30 June 2014 31 December 2013 ਵ
At 1 January Additions Fair value gains	39,894,314 5,605,686	35,227,489 4,666,825
Carrying amount	45,500,000	39.894.314

Fair values of investment property

The movement in the fair value of investment property comprises the movement in the fair value of the dominium directum of the MIA and VCP properties. This fair value is calculated with reference to the cash flows receivable by the Company in terms of its contractual agreements, discounted to present value as at 30 June 2014. Accordingly, the fair value of the investment property is subject to variation owing to, amongst other things, movements in market interest rates, expected inflation rates and changes in the contractual cash flows owing to the passage of time.

The Company is required to disclose fair value measurements by level of the following fair value measurement hierarchy for non-financial assets:

• Quoted prices (unadjusted) in active markets for identical assets (level 1).
• Inputs other than quoted prices included within level 1 that are observable for the asset either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).
• Inputs for the asset that are not based on observable market data for similar properties (that is, unobservable inputs) (level 3).

The Company's recurring fair value measurements are categorised as level 3 as they are based on significant unobservable inputs.

Investment property - continued বাঁচার বাবার বাবার বাবার করে বাংলাদেশ করে পারে পারে করে পারে করে পারে করে পারে করে পারে করে পারে করে পারে করে পারে করে পারে করে পারে করে পারে করে পারে করে পারে করে পারে করে

Valuation process

The valuation of the MIA and VCP properties is based on the present value of ground rents up to the expiry of the temporary emphyteutical grants and the estimated freehold value thereafter discounted to present value. The fair value of investment property is calculated with reference to the cash flows receivable by the Company in terms of its contractual agreements, discounted to present value as at 30 June 2014. The discount rate is based on the yield to maturity on the longest term available Malta Government Stock (MGS) in issue (MGS 2032) plus a premium reflecting the risk inherent in the underlying cash flows.

In view of the variation in the MGS benchmark referred to above during the period ended 30 June 2014, a fair value gain of €5,605,686 has been recognised in these financial statements.

In accordance with the fair value measurement hierarchy explained above the significant unobservable inputs applied in the valuation of the Company's assets are the following:

• Ground rent, as contractually agreed, which for the coming year is estimated at €1.8 million;
• Average annual growth rate in ground rents receivable of 2.7%, calculated on the basis of the contracts in place.
• Discount rate of 6.57% based on the long-term risk-free rate of return and a specific risk premium for the individual property being valued taking into account factors such as, property illiquidity, management limitations, type, size and location of property, competition, future uncertainty, counter-party risks and resource risks.

The impact of a lower/higher discount rate has been disclosed in Note 2 - Critical accounting estimates and judgements.

b) Property measured at cost

Parliament Building and Open Air Theatre

	ਵ	30 June 2014 31 December 2013 ਵ
At 1 January Amortisation of borrowing costs	82,329,637 1,687	82,326,263 3.374
Carrying amount	82,331,324	82,329,637

As at 30 June 2014, the Parliament Building was still in its final stages of completion while the Open Air Theatre was only completed on 18 October 2013. On this basis, in the directors, it is premature to estimate the separate fair value of the Parliament Building and Open Air Theatre. Accordingly, any changes to the fair value determined on the basis of the projected net rents receivable up to the expiry of the emphyteutical grants, discounted to present value at a rate which reflects the vield to maturity on the longest available term MGS in issue plus a premium reflecting the risk inherent in the underlying cash flows, are not reflected in these financial statements.

5. Share capital

	C	30 June 2014 31 December 2013 €
Authorised 150,000,000 Ordinary A shares of €0.50 each 50,000,000 Ordinary B shares of €0.50 each	75,000,000 25,000,000	75,000,000 25,000,000
	100,000,000	100,000,000
Issued and fully paid 118,108,064 Ordinary A shares of €0.50 each 30,000,000 Ordinary B shares of €0.50 each	59,054,032 15,000,000	59,054,032 15,000,000
Issue costs	74.054.032 (758,889)	74,054,032 (758,889)
	73,295,143	73,295,143

6. Other reserve

The reserve represents the cumulative fair value gains, net of applicable deferred tax liabilities on the Company's investment properties. These gains are initially recognised in the statement of comprehensive income and because of their nature, are subsequently transferred to a nondistributable reserve.

7. Revenue

Revenue comprises the consideration payable by MIA and VCP for the acquisition of the temporary emphyteusis by way of an annual ground rent. Also included in the revenue figure is a penalty payable by Government pursuant to a public deed which was entered into with the Company which stipulated that, the Government was required to complete the development of the Parliament Building and Open Air Theatre in accordance with pre-established specifications and timelines and that, in the event of a delay in completion, the Government was liable to pay the Company a daily penalty broadly in line with the rental income due had the project been completed on time.

A completion certificate was issued for the Open Air Theatre on 18 October 2013 and upon issuance of the certificate the respective lease to the Ministry for Tourism commenced for this property pursuant to a lease agreement entered into with the Company. Lease income attributable to this property has been recognised in the statement of comprehensive income.

8.

	Period from 1 January to 30 June 2014 ਵ	Period from 1 January to 30 June 2013 ਵ
Kenneth Farrugia (Chairman) Vincent Mifsud (Director) Frederick Mifsud Bonnici (Director) Publio Danny Rosso (Director) Paul Mercieca (Director) Ray Sladden (Director) Robert Suban (Director)	12,500 6,250 7,500 6,250 2,125 1.708 2,125	12.500 6.250 7,500 6.250
	38.458	32.500

9. Tax expense

The tax charge for the year is made up as follows:

	Period from 1 January to 30 June 2014 ਵ	Period from 1 January to 30 June 2013 ਵ
Current tax expense Deferred tax expense (note 10)	761.050 361,210	967.649 254.055
Tax expense	1,122,260	1,221,704

The tax on the company's profit before tax differs from the theoretical amount that would arise using the basic tax rate as follows:

	Period from 1 January to 30 June 2014 ਵ	Period from 1 January to 30 June 2013 ਵ
Profit before tax	8,173,099	6.790.525
Tax on profit at 35%	2,860,585	2,376,684
Tax effect of: Income subject to 15% final withholding tax Expenses not deductible for tax purposes Tax rules applicable to immovable property Maintenance allowance	(12,826) 52,731 (1,600,780) (177,450)	(36,835) 61,618 (1,179,763)
Tax charge in the accounts	1,122,260	1,221,704

10. Deferred tax

Deferred tax is provided for using the liability method for temporary differences arising on movements in the fair value of immovable investment property. The calculation of the deferred tax provision is based on the assumption that the Company will retain the immovable investment property beyond the initial twelve-year period from acquisition in which the Company has the option to select the tax regime under which the fair value gain would be brought to tax. Accordingly, the Company provides annually for deferred tax so as to accumulate a provision equivalent to the principal tax rate of 12% of the fair value of investment property by the end of the initial twelve year period from acquisition. The deferred tax provided on the annual fair value movement is calculated based on the standard corporate tax rate of 35% - i.e. the rate at which the cash flows on which the fair value of the properties is based are brought to tax.

The deferred tax balance as at 30 June 2014 represents:

		30 June 2014 31 December 2013 e
Temporary differences on: Fair value gains	1,418,103	1.056.893

The movement for the period comprising the recognition of the above deferred tax liability has been charged to the statement of comprehensive income.

11. Earnings per share

Earnings per share is calculated by dividing the profit attributable to owners of the Company by the total number of ordinary shares in issue during the period.

	Period from 1 January to 30 June 2014	Period from 1 January to 30 June 2013
Profit for the period (€) Total average number of ordinary shares in issue	7,050,839 148,108,064	5.568.821 148,108,064
Earnings per share (cents)	4.76	3.76

Dividends 12.

	30 June 2014 Final dividend ਵ	30 June 2013 Final dividend ਵ
Dividends paid on ordinary shares Gross Tax at source	604.110 211,438	727,808 254.730
	392,672	473,078
Dividends per share (cents)	1.31	1.58

12. Dividends - continued

An interim gross dividend in respect of the period ended 30 June 2014 of €450,000 or €0.0150 per ordinary share equating to an interim net dividend of €292,500 or €0.00975 per share, was declared by the Board of Directors subsequent to the end of the reporting period. The financial statements do not reflect this dividend.

13. Cash generated from operations

Reconciliation of operating profit to cash generated from operations:

	Period from 1 January to 30 June 2014 ਵ	Period from 1 January to 30 June 2013 ਵ
Operating profit	8,767,673	7,265,339
Adjustments for: Depreciation of property, plant and equipment Change in fair value of investment property	885 (5,605,686)	709 (4,096,624)
Changes in working capital: Trade and other receivables Trade and other payables	910.409 (751,759)	(386,773) 1,889,962
Cash generated from operations	3,321,522	4.672.613

14. Statutory information

Malita Investments p.l.c. is a public limited liability company and is incorporated in Malta.