Half Yearly Report

23 September 2015

Dragon-Ukrainian Properties & Development plc

("DUPD" or the "Company")

Results for the period ended 30 June 2015

Dragon-Ukrainian Properties & Development plc, a leading investor in the real estate sector in Ukraine, is pleased to announce its interim results for the period ended 30 June 2015.

Highlights

Operational Highlights

· The Company is following its investing policy as approved by the EGM in February 2014 notwithstanding the challenging economic environment. DUPD's assets are not directly affected by the arms conflict in the East of Ukraine

· The Company successfully completed construction works of phase 1 of the Obolon Residences project. 100 per cent of the commercial space and 73 per cent of the residential space in phase 1 is contracted for sale

· In the Obolon Residences project cash of USD2.5 million was received for the right to develop phase 2, with a further USD 2.5 million to be received by the end of the 2015

· In Arricano, rental income in USD terms stabilized and certain bank loans were restructured improving the cash position of the company.

Financial Highlights

· Total NAV of USD 70.7 million at 30 June 2015 (down from USD 92.4  million as of 31 December 2014), inclusive of the dividend of USD 6.0 million paid

· Cash balance of USD 12.9 million (compared to USD 16.5 million as of 31 December 2014)

· Net loss from operating activities USD 21.7 million, mostly driven by fair value loss on company projects due to lower prices on comparable properties in the market, longer sales periods and higher discount rates used in valuations (for the period ending 30 June 2014 loss from operating activities USD 25.0 million)

For further information, please contact:

Project Overview

1. Land bank

· First part of land bank (19.9 ha) rezoned.

· The Company is focused on gradually selling the land as it is rezoned and when the land market recovers

2. Obolon Residences

· Business class residential complex with office and retail premises

· Prime location in a prestigious Obolon district in Kyiv

· International standard design

· Phase 1 construction works completed, landscaping works underway

· Commissioning process is undergoing and expected to be finalized in October

· 100 per cent of the commercial space and 73 per cent of the residential space in Phase 1 contracted for sale, totalling 123 out of 160 apartments contracted for sale, of which 12 were sold in 2015

· Contracted sales in Phase 1 as of 1HY2015 reached USD25.8 million, sales proceeds - USD23.1 million

· The Company sold Phase 2 of the Project for USD 5 million to be paid during 2015 in 4 equal instalments, of which USD 2.5 million already received

· Phase 2 is under construction: the building is erected and façade works started, which is to increase the attractiveness of Phase 1.

3. Arricano Real Estate plc

· The largest developer of shopping centres in Ukraine

· Listing on the AIM market of the LSE (ARO LN) since September 2013

· DUPD's shareholding is 12.51%

· Portfolio of nine shopping centres of which six are operational and three under various stages of development

· Stabilization of rental income in USD terms on the back of UAH stabilization and vacancy's contraction down to 8%.

· Three senior bank loans restructured or refinanced allowing for more flexible repayment schedule, including a $19m secured loan from the European Bank for Reconstruction and Development for financing construction payables for Prospect Shopping Centre in Kyiv and repayment of the US$10 million loan from Oschadbank.

4. Riviera Villas

· Elite cottage community near Kyiv

· Unique luxury leisure infrastructure

· Utilities on the site and waterfront infrastructure completed

· 19 households sold. First street out of four completed. Stock of 7 homes available for sale

5. Green Hills

· Business class cottage community, 10km from Kyiv

· The first North American style cottage community developed in the country

· All key infrastructure in place

· 51 households sold (7 in 1H2015) out of 178

· 50 families living in the community

· Private School was commissioned as of 1 September 2015

6. Henryland

· All assets of Henryland were sold for a cash consideration of USD 23.7m in 2013

7. Sadok Vyshnevy

· 38 apartments in a town-house community in Kyiv suburbs

· Utilities on the site

· All homes commissioned, and available for sale

· 17 apartments sold (3 in 2015)

8. Avenue Shopping Centre

· Land plot for a shopping mall development

· Land plot offered for sale

9. Glangate

· Two land plots for shopping centre development in second-tier regional cities of Kremenchuk and Rivne

· Land plots offered for sale

Statement of financial position as at 30 June 2015

These financial statements were approved by the Board of Directors on 21 September 2015 and were signed on its behalf by:

Chairman of the board Mark Iwashko

Non-executive director Aloysius Wilhelmus Johannes van der Heijden

Statement of comprehensive income for the 6 months ended 30 June 2015

The directors believe that all results are derived from continuing activities.

Statement of cash flows for the 6 months ended 30 June 2015

Notes to the financial statements

1. Background

(a) Organisation and operations

Dragon - Ukrainian Properties & Development plc (the Company) was incorporated in the Isle of Man on 23 February 2007. The Company's registered office is 2nd Floor, Belgravia House, 34-44 Circular Road, Douglas, Isle of Man IM1 1AE and its principal place of business is Ukraine. With effect from July 1, 2015 the registered office of the Company has changed to 2nd Floor, St Mary's Court, 20 Hill Street, Douglas, Isle of Man IM1 1EU.

On 1 June 2007 the Company raised USD 208 million through an initial public offering on the Alternative Investment Market (AIM) of the London Stock Exchange. On 29 November 2007, the Company completed a secondary placing on AIM and raised USD 100 million.

The main activities of the Company are investing in the development of its existing real estate properties in Ukraine. The Company provides financing to its investees either through equity or debt financing.

(b) Business environment

Ukraine's political and economic situation has deteriorated significantly since the Government's decision not to sign the Association Agreement and the Deep and Comprehensive Free Trade Agreement with the European Union in late November 2013. Political and social unrest combined with rising regional tensions has deepened the ongoing economic crisis and has resulted in a widening of the state budget deficit and a depletion of the National Bank of Ukraine's foreign currency reserves and, as a result, a further downgrading of the Ukrainian sovereign debt credit ratings.

In February 2014, following the devaluation of the national currency, the National Bank of Ukraine introduced certain administrative restrictions on currency conversion transactions and also announced a transition to a floating foreign exchange rate regime. In March 2014 Republic of Crimea was annexed by the Russian Federation. This event resulted in a significant deterioration of the relationship between Ukraine and the Russian Federation. Following the annexation of Crimea, regional tensions have spread to the Eastern regions of Ukraine, primarily to the parts of Donetsk and Lugansk regions. In May 2014 arms supplies and flood of mercenaries from the Russian Federation escalated unrest into military clashes and armed conflict between armed supporters of the self-declared republics of the Donetsk and Lugansk regions and the Ukrainian forces. As at the date these financial statements were authorised for issue, the instability and unrest continue, and part of the Donetsk and Lugansk regions remains under control of the self-proclaimed republics. As a result, Ukrainian authorities are not currently able to fully enforce Ukrainian laws on this territory. Elections to local councils to be held in Ukraine on 25 October 2015 will not take place in those territories and in number of regions bordering with the line of military confrontation.

Whilst the Directors believe they are taking appropriate measures to support the sustainability of the Company's business in the current circumstances, a further deterioration in the business environment could negatively affect the Company's results and financial position in a manner not currently determinable. These financial statements reflect management's current assessment of the impact of the Ukrainian business environment on the operations and the financial position of the Company. The future business environment may differ from management's assessment.

2. Basis of preparation

(a) Statement of compliance

These financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU.

(b) Basis of measurement

The financial statements are prepared under the historical cost basis, except for the following material items:

(c) Functional and presentation currency

These financial statements are presented in thousands of US dollars (USD), which is the Company's functional currency. All amounts have been rounded to the nearest thousand, unless otherwise indicated.

(i) Determination of functional currency

Functional currency is the currency of the primary economic environment in which the Company operates. If indicators of the primary economic environment are mixed, then management uses its judgement to determine the functional currency that most faithfully represents the economic effect of the underlying transactions, events and conditions. The majority of the Company's investments and transactions are denominated in US dollars. The expenses (including management and performance fees, administrative expenses) are denominated and paid in US dollars. Accordingly, management has determined that the functional currency of the Company is US dollar. All information presented in US dollars is rounded to the nearest thousand

(d) Use of judgments, estimates and assumptions

The preparation of financial statements in conformity with IFRS as adopted by the EU requires the Directors to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses and the disclosure of contingent assets and liabilities. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

As stated in note 1(b) to these financial statements, the political and business situation has deteriorated significantly. This is a key factor in the estimation uncertainty and critical judgements associated with applying the accounting policies in these financial statements

In particular, information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements and could lead to significant adjustment in the next financial year are included in the following notes:

• Note 3(a) - Determination of investment entity criteria

• Note 5 - Valuation of financial assets at fair value through profit or loss

Measurement of fair values

A number of the Company's accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.

The Directors are responsible for overseeing all significant fair value measurements, including Level 3 fair values. They review and approve significant unobservable inputs and valuation adjustments before they are included in the Company's financial statements. To assist with the estimation of fair values the Directors, when appropriate, engage registered independent appraiser, having a recognised professional qualification and recent experience in the location and categories of the assets being valued.

When measuring the fair value of an asset or a liability, the Company uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

· Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

· Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

· Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

The Company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

Further information about the assumptions made in measuring fair values is included in the following notes:

· Note 5 - financial assets at fair value through profit or loss.

(e) Going concern

These financial statements are prepared on a going concern basis. For the 6 months 2015 the Company incurred a net loss of USD 21,673 and had negative cash flows from operating activities of USD 3,571 thousand. As at that date the Company's current assets exceeded its current liabilities by USD 15,878 thousand and its Net Asset Value amounted to USD 70,682 thousand.

The Directors believe that the Company's existing cash resources are sufficient to meet the Company's liabilities for the foreseeable future and therefore that the going concern basis for preparing these financial statements is appropriate.

3. Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these ‍financial statements, and have been applied consistently by Company, except as explained in note 4, which addresses changes in accounting policies.

(a) Investment entity

The Company is an investment entity and measures all of its investments at fair value through profit or loss.

In determining whether the Company meets the definition of an investment company, management considered the following:

• The Company raised funds on AIM (through the first and second issue of shares) only for the purpose of making investments in the development of new properties and the redevelopment of existing properties in Ukraine.

• The Company has a clear exit strategy from its real estate projects (either through sale of the properties, or through sale of shareholding right in the entities, which own the properties). This is stated in the Company's new investing policy that was voted and approved by the general meeting of shareholders in February 2014. The full text of the current investing policy could be found on the Company's website http//www.dragon-upd.com/investor-information/important-information/business-strategy-and-investing-policy

• The Company measures and evaluates the performance of substantially all of its investments on a fair value basis.

• The Company's Directors (acting on behalf of the Company) take only strategic decisions and approve the overall direction of investing activity in order to maximise the returns to shareholders. At the same time, the Directors chose and appointed DCM Limited as the Company's investment manager (see note 10). DCM Limited's employees perform recurring management operating activities in accordance with the Third Management Agreement and within the strategic decisions of the Directors. There is no separate substantial business activity beyond earning returns from capital appreciation and investment income. The Directors seek to return any surplus funds and net proceeds from property realisation to shareholders when appropriate, in accordance with its investing policy.

Considering the above, the Company's management determined that the Company meets the definition of investment entity in accordance with IFRS 10 Consolidated Financial Statements and, accordingly, the Company has not consolidate its subsidiaries. Before 1 January 2014 the Company's management consolidated all of its investments at fair value through profit or loss. The Company now measures its investment in subsidiaries at fair value through profit and loss (note 3(b)). Such approach provides a fair and transparent view on the Company to the Company's shareholders and stakeholders.

The Company also elected to measure its investments in associates and loans receivable from its investees at fair value through profit or loss (notes 3(c) and 3(d).

All these assets are presented within financial assets at fair value through profit or loss in the Company's statement of financial position.

(b) Subsidiaries

Subsidiaries are investees controlled by the Company. The Company controls an investee when it is exposed to, or has right to, variable returns from its involvement with the company and has the ability to affect those returns through its power over the investee.

Investments in subsidiaries are measured and accounted for at fair value with gain or loss recognised in profit or loss (see note 3(a)).

Unconsolidated subsidiaries and their grouping by investment in respective projects are as follows:

(c) Associates

Associates are those companies in which the Company has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Company holds between 20% and 50% of the voting power of another company. In certain cases when the Company has less than 20% of the voting power of another company, this company is still accounted for as an associate on the basis of significant influence.

Investments in associates are measured and accounted for at fair value with gain or losses recognised in profit or loss (see note 3(a)).

Investments in associates comprise the investment in Henryland Group Ltd and the investment in Hindale Executive Investments Limited (part of investment in the Avenue Shopping Centre project).

(d) Loans receivable from investees

In additional to equity financing to its investees, as a part of structuring its investments the Company also provides debt financing to its investees. As described in note 3(a), the Company elected to measure loans receivable from its investees at fair value through profit or loss. These investments are presented as "loans and receivables" in accordance with IFRS requirements.

(e) Foreign currency

Transactions in foreign currencies are translated into US dollars at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated into US dollar at the exchange rate at the date that the fair value was determined.

Foreign currency differences arising on retranslation are recognised in profit or loss, except for those arising of financial instruments at fair value through profit or loss, which are recognised as a component of net gain/(loss) from investments at fair value through profit or loss or net gain/(loss) from loans receivable.

(f) Financial instruments

(i) Non-derivative financial assets

The Company initially recognises loans and receivables and deposits on the date that they are originated. All other financial assets are recognised initially on the trade date at which the Company becomes a party to the contractual provisions of the instrument.

The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Company is recognised as a separate asset or liability.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

The Company classifies non-derivative financial assets into the following categories: financial assets at fair value through profit or loss, other loans and receivables and available-for-sale financial assets.

A financial asset is classified at fair value through profit or loss -category if it is classified as held for trading or is designated as such upon initial recognition. Financial assets are designated at fair value through profit or loss if the Company manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Company's documented risk management or investment strategy. Directly attributable transaction costs are recognised in profit or loss as incurred. Financial assets at fair value through profit or loss are measured at fair value, and changes therein are recognised in profit or loss.

Financial assets designated at fair value through profit or loss comprise loans receivable from investees at fair value through profit or loss and investments at fair value through profit or loss (see notes 3(b), 3(c) and 3(d)). 

Held-to-maturity financial assets

If the Company has the positive intent and ability to hold debt securities to maturity, then such financial assets are classified to held-to-maturity. Held-to-maturity financial assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition held-to-maturity financial assets are measured at amortised cost using the effective interest method, less any impairment losses. Any sale or reclassification of a more than insignificant amount of held-to-maturity investments not close to their maturity would result in the reclassification of all held-to-maturity investments as available-for-sale, and prevent the Company from classifying investment securities as held-to-maturity for the current and the following two financial years.

Other loans and receivables are a category of financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses.

Other loans and receivables comprise the following classes of assets: other accounts receivable as presented in note 6 and cash and cash equivalents as presented in note 7.

Cash and cash equivalents

Cash and cash equivalents comprise cash balances, call deposits and liquid investments with maturities at initial recognition of three months or less.

Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale or are not classified in any of the above categories of financial assets. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses, and foreign currency differences on available-for-sale debt instruments, are recognised in other comprehensive income and presented within equity in the fair value reserve. When an investment is derecognised or impaired, the cumulative gain or loss in equity is reclassified to profit or loss. Unquoted equity instruments whose fair value cannot reliably be measured are carried at cost.

For a reconciliation of line items in the statement of financial position to the categories of financial instruments, as defined by IAS 39, see Note 16(a).

(ii) Non-derivative financial liabilities

The Company classifies non-derivative financial liabilities in the other financial liabilities category. Such financial liabilities are recognised initially at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective interest method.

Other financial liabilities comprise other payables as presented in note 9.

Bank overdrafts that are repayable on demand and form an integral part of the Company's cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

(iii) Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects.

When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, net of any tax effects, is recognised as a deduction from equity. Repurchased shares are immediately cancelled and the total number of issued shares reduced by the purchase.

(iv) Derivative financial instruments

Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivative are not closely related, a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and the combined instrument is not measured at fair value through profit or loss.

Derivatives are recognised initially at fair value; attributable transaction costs are recognised in profit or loss when incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are recognised immediately in profit or loss.

(g) Impairment

(i) Non-derivative financial assets

A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

Objective evidence that financial assets (including equity securities) are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Company on terms that the Company would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers in the Company, economic conditions that correlate with defaults or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.

The Company considers evidence of impairment for loans and receivables and held-to-maturity investment securities at both a specific asset and collective level. All individually significant loans and receivables and held-to-maturity investment securities are assessed for specific impairment. All individually significant loans and receivables and held-to-maturity investment securities found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Loans and receivables and held-to-maturity investment securities that are not individually significant are collectively assessed for impairment by grouping together loans and receivables and held-to-maturity investment securities with similar risk characteristics.

In assessing collective impairment the Company uses historical trends of the probability of default, timing of recoveries and the amount of loss incurred, adjusted for the Directors' judgment as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends.

An impairment loss is calculated as the difference between the asset's carrying amount, and the present value of the estimated future cash flows discounted at the asset's original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account against loans and receivables or held-to-maturity investment securities. Interest on the impaired asset continues to be recognised. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

Impairment losses on available-for-sale financial assets are recognised by reclassifying the losses accumulated in the fair value reserve in equity, to profit or loss. The cumulative loss that is reclassified from equity to profit or loss is the difference between the acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss previously recognised in profit or loss. Changes in impairment provisions attributable to application of the effective interest method are reflected as a component of interest income. If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and the increase can be related objectively to an event occurring after the impairment loss was recognised in profit or loss, then the impairment loss is reversed, with the amount of the reversal recognised in profit or loss. However, any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognised in other comprehensive income.

(ii) Non-financial assets

The carrying amounts of non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. For goodwill and intangible assets that have indefinite lives or that are not yet available for use, the recoverable amount is estimated each year on the reporting date.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. A cash-generating unit is the smallest identifiable asset Company that generates cash flows that largely are independent from other assets . Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit on a pro rata basis.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

(h) Provisions

A provision is recognised if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost.

(i) Finance income and costs

Finance income comprises interest income on financial assets and currency exchange gains. Finance costs comprise interest expense and currency exchange losses.

Interest income and expense, including interest income from non-derivative financial assets at fair value through profit or loss, are recognised in profit or loss, using the effective interest method. The effective interest rate is the rate that exactly discounts the estimated future cash payments or receipts, without consideration of future credit losses, over the expected life of the financial instrument or through to the next market based repricing date to the net carrying amount of the financial instrument on initial recognition.

Interest received or receivable, and interest paid or payable, are recognised in profit or loss as finance income and finance costs, respectively, except for those arising on financial instruments at fair value through profit or loss, which are recognised as a component of net gain/(loss) from investments at fair value through profit or loss or net loss from loans receivable.

(j) Dividend income

Dividend income is recognised in profit or loss on the date on which the right to receive payment is established. For quoted equity securities, this is usually the ex-dividend date. For unquoted equity securities, this is usually the date on which the shareholders approve the payment of a dividend. Dividend income from equity securities designated as at fair value through profit or loss is recognised in profit or loss in separate line item.

(k) Net gain/(loss) from financial assets at fair value through profit or loss

Net gain/(loss) from financial assets at fair value through profit or loss includes all realised and unrealised fair value changes, interest income and foreign exchange differences, but excludes dividend income.

(l) Fees and administrative expenses

Fees and administrative expenses are recognised in profit or loss as the related services are performed or expenses are incurred.

(m) Tax

Under the current tax legislation in the Isle of Man, the applicable tax rate is 0% for the Company.

However, some dividend and interest income received by the Company may be subject to withholding tax imposed in certain countries of origin. Income that is subject to such tax is recognised gross of the taxes and the corresponding withholding tax is recognised as tax expense.

(n) Earnings per share

The Company presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise warrants and share options.

(o) Segment reporting

An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company's other components.

The Directors determined that the sole segment in which the Company operates is investing in property development. For operational purposes the Board analyses the Company's activity on the basis of individual projects. Budgeting and comparison of actual versus budgeted results is also done on the basis of individual projects.

(p) New standards and interpretations not yet adopted

A number of new standards, amendments to standards and interpretations are not yet effective for the 6 month period ended 30 June 2015, and have not been applied in preparing these financial statements. Of these pronouncements, potentially the following will have an impact on the Company's financial statements. The Company plans to adopt these pronouncements when they become effective.

IFRS 9 Financial Instruments, published in July 2014, replaces the existing guidance in IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 includes revised guidance on the classification and measurement of financial instruments, including a new expected credit loss model for calculating impairment on financial assets, and the new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from IAS 39. IFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted. The Company is assessing the potential impact on its financial statements resulting from the application of IFRS 9. The Company does not intend to adopt this standard early.

Sale of Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28) address an acknowledged inconsistency berween the requirements in IFRS 10 and those in IAS 28 (2011), in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The main consequence of the amendments is that a full gain or loss is recognised when a transaction involves a business (whether it is housed in a subsidiary or not). A partial gain or loss is recognised when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary. The amendments will be effective for annual periods beginning on or after 1 January 2016. The amendments are not expected to have a significant effect on the Company's financial statements.

Various Improvements to IFRSs have been dealt with on a standard-by-standard basis. All amendments, which result in accounting changes for presentation, recognition or measurement purposes, will come into effect for annual periods beginning after 1 January 2015.

4. Changes in accounting policy and corrections

Except for the changes below, the Company has consistently applied the accounting policies set out in Note 3 to all periods presented in these financial statements.

The Company has adopted the following new standards and amendments to standards, including any consequential amendments to other standards, with a date of initial application of 1 January 2014.

(a) Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32 Financial Instruments: Presentation).

Amendments to IAS 32 Financial Instruments: Presentation - Offsetting Financial Assets and Financial Liabilities specify that an company currently has a legally enforceable right to set-off if that right is not contingent on a future event; and enforceable both in the normal course of business and in the event of default, insolvency or bankruptcy of the company and all counterparties. Application of this amendment had no impact on the financial statements.

(b) Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)

The Company has adopted Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27) (2012) ("Investment Entities" amendments) with a date of initial application of 1 January 2014.

The Directors always treated the Company as an investments entity. The Company published its formal investing strategy adopted by EGM in September 2009 (subsequently modified in February 2014), however, investment entities were not specifically defined in IFRS. With recent changes in IFRS the Company meets the definition of an investment entity (see Note 3(a)). As a result, the Company has changed its accounting policy on accounting for its investments in subsidiaries and associates, to measure them at fair value through profit or loss. Before adoption of "Investment Entities" amendments, the Company consolidated its subsidiaries and associates. As a result of adoption of "Investment Entities" amendments, the Company ceased to prepare consolidated and separate financial statements and now prepares only unconsolidated financial statements in accordance with these amendments.

In accordance with the transitional provisions of the amendments, the Company has applied the new accounting policy retrospectively and restated financial information for the six months ended 30 June 2014 and other comparative information.

(c) Other Corrections

The Company's management identified and corrected a prior period error related to the understatement of the underlying asset in the Obolon Residence project as at 30 June 2014.

Summary of quantitative impacts

The table below presents, in respect of the period immediately preceding the date of initial application, the resulting changes for each financial statement line item affected.

5. Financial assets at fair value through profit or loss

The Company has the following financial assets at fair value through profit or loss as follows:

* Linkdell LTD provides financing through issued loans on the following projects:

(a) Investment in Arricano Real Estate plc

The Company acquired a shareholding in Arricano Real Estate plc (Arricano) in 2010. In September 2013 the shares of Arricano were admitted to trading on the AIM market of the London Stock Exchange. Since then the Company had been accounting for its shareholding in Arricano at its market price.

However, taking into account that severely deteriorated macroeconomic conditions (see note 1(b)) significantly decreased revenues generated by commercial properties in Ukraine while Arricano's share price remained largely unchanged, and due to the limited volume of Arricano shares traded during 2014 and 2015, management changed the valuation methodology to the adjusted net assets method to estimate the fair value of the investment in Arricano. First time that approach was used to estimate the fair value of the investment in Arricano as at 31 December 2014. Under the new valuation method Arricano's net asset value as at 31 December 2014 (as per Arricano's published financial statements as of and for the year ended 31 December 2014) were adjusted by decreasing their assets value by the same proportion as estimated change of fair value of commercial retail real estate property in Ukraine (Arricano's primary assets) for the six-months period ended 30 June 2015, and multiplied by the Company's share in Arricano's net assets as at 30 June 2015. To assist with the estimation of change in fair value of commercial retail real estate property in Ukraine for the six-month period ended 30 June 2015, the Directors engaged independent appraiser DTZ Kiev B.V. The Directors believe that the carrying value of Arricano adequately reflects the quality of its commercial properties, low vacancy rates and sound rental policies.

As there is no other publicly available information as at the moment these financial statements were approved, the Company's management considers this to be the most appropriate method to estimate the fair value of the Company's investment in Arricano.

 (b) Investment in subsidiaries and associates (investees)

(i) Valuation technique and significant unobservable inputs

For the estimation of fair values of the Company's investments management used the adjusted net assets method.

Management performed a detailed review of the investees' assets and liabilities for the purpose of their fair value assessment:

· Assets are mainly represented by real estate properties and prepayments for properties (land). The fair value of these properties and prepayments for properties was assessed by the independent appraiser, DTZ Kiev B.V.

· Liabilities are mainly represented by loans payable due to the Company.

· Other assets and liabilities are short-term by nature and their fair value approximates the carrying amount. Thus, no additional adjustment is required.

The investees' net assets are adjusted for the non-controlling interest based on the ownership percentage.

Notes to the financial statements

Composition of assets and liabilities of the investment projects as at 30 June 2015 are as follows:

\* The Company holds 18,77% in Hindale Executive Investments Limited (Hindale Ltd) and as a result in LLC Promtek, which is 100% owned by Hindale Ltd, through the Company's 100% subsidiary, Landzone Ltd. LLC Promtek's sole purpose is to develop the Avenue Shopping Centre project.

Composition of assets and liabilities of respective investment projects is as follows as at 31 December 2014: