18th Aug 2006 07:01
Dolphin Capital Investors Limited18 August 2006 Dolphin Capital Investors Limited (DCI.L) Interim Results for the period ended June 30th 2006 Dolphin Capital Investors, the first company investing in residential resortdevelopments in south east Europe (principally Greece, Cyprus, Turkey &Croatia), announces its maiden results for the period ended June 30th 2006. Highlights • Admitted to AIM in Dec 2005 as the first investment fund dedicated toresidential resorts in the south east Mediterranean at a price of €1.00 (68p)raising €104m • Profit before tax since incorporation on June 7th 2005 €60.9m • In six months to June 30th completed the acquisition of threeinvestments committing a total of €70.2m of which €67.0m was invested. • A further two investments were completed in July thus committing atotal of €91m of the €109m raised by the company (€5m seed capital pre listingand €104m from AIM listing). • The company has identified a substantial pipeline of furtherpotential investment opportunities, and is currently at advanced negotiationstages for new investments which would require over €200 million of additionalcapital. The company's rate of sourcing and executing investments has beenconsiderably ahead of initial forecasts. • A valuation produced by Colliers International at June 30th indicatedan NAV of €1.73 (119p) before founding shareholder warrants and deferred incometax liabilities, of €1.55 (107p) after founding shareholder warrants and beforedeferred income tax liabilities, of €1.34 (93p) after founding shareholderwarrants and deferred income tax liabilities against the issue price of €1.00(68p). After deducting minorities, Dolphin's share of these developmentsrepresents a value of €138.8m against an investment of €67.0m substantiallyahead of expectations at the time of Admission. • Since Admission the share price has risen 32% Outlook • As the region continues to demonstrate strong economic growth and asteadily increasing appeal to tourism, the demand for leisure integrated secondor holiday homes is increasing whilst the supply remains limited. • Dolphin's demonstrated record and first mover's advantage offer thepotential of continuing strong growth and capital appreciation. Contacts: Dolphin Capital Investors www.dolphincp.comMiltos E Kambourides +30 210 3614 [email protected] Pierre A Charalambides +30 210 3614 [email protected] Adventis Financial PR 020 7034 4765Peter Binns 020 7034 4760 / 07768 392 [email protected] Chris Steele 020 7034 4759 / 07979 604 [email protected] Annabel Loveluck 020 7034 4756 / 07817 729 [email protected] Interim Period Milestones > Summer 2005 - Dolphin Capital Investors ("Dolphin") is capitalised with €5mof seed capital > 8 December 2005 - Dolphin completes its admission to trading on AIM raisingan additional €104 million via a placing with institutional investors. The issueprice at admission was 68p > 23 January 2006 - Dolphin commits €23 million to Kilada Hills Golf Resort,probably the first golf-integrated residential resort to be developed in Greece > 11 April 2006 - Dolphin commits €9.5 million to Scorpio Bay Resort, amaster-planned leisure-integrated residential resort near Athens and anadditional amount of €22 million for the expansion of Kilada Hills Golf Resort > 19 May 2006 - Dolphin commits €15.7 million to Apollo Heights Polo Resort,the first polo-integrated residential resort to be developed in Cyprus > 19 July 2006 - Dolphin commits €5 million to Amanmila Resort, most likelythe first villa-integrated Aman resort to be developed in Europe > 31 July 2006 - Dolphin commits €15.9 million to Lavender Hills Resort, agolf-integrated resort to be developed in the area of Volos, Greece > 31 July 2006 - Dolphin's commitments to Projects reach an aggregate of€91.1 million of which €68.8 million has already been invested. In addition,over €200 million of new investments are in advanced negotiations. > As of 30 June 2006, the NAV per share of the Company was: • 119p (€1.73) before founding shareholder warrants and deferred incometax liabilities* • 107p (€1.55) after founding shareholder warrants and before deferredincome tax liabilities* • 93p (€1.34) after founding shareholder warrants and deferred incometax liabilities* * For the NAV calculation as of 30 June 2006, only Kilada Hills Golf Resort,Scorpio Bay Resort and Apollo Heights Polo Resort have been taken into account.The GBP/Euro exchange rate as of that date was 0.692. Accounting for deferredincome tax liability is an IFRS reporting requirement. Chairman's Statement Introduction I am pleased to report an extremely satisfactory performance for the firstreporting period. Since its admission to trading on AIM on 8 December 2005, Dolphin CapitalInvestors ("Dolphin" or the "Company") has performed well ahead of itsinvestment plan. Being the pioneer investment fund in the residential resortsector in south-east Europe, Dolphin has acquired some outstanding sites in theregion at very attractive prices and is planning to develop high-end exclusiveresidential resorts to meet the rapidly growing demand. The total funds raisedof €109 million are now almost fully committed following the closing of threeinvestments as of 30 June 2006 and the signing of two additional investmentsduring the month of July 2006. Furthermore, a highly attractive project pipelinehas been identified and progressed. As of 30 June 2006, Dolphin's share price has recorded a 32% uplift since itsadmission to trading on AIM, considerably above the Company's peer group.Dolphin's NAV after founding shareholder warrants and before deferred income taxliabilities as of 30 June 2006 was 107p (€1.55) per share while the NAV afterfounding shareholder warrants and deferred income tax liabilities as of 30 June2006 was 93p (€1.34) per share (versus the 68p or €1 issue price in December2005) demonstrating Dolphin's ability to create immediate value forshareholders. The natural beauty of south-east Europe combined with the limited supply ofpremium-quality second-home developments in the region, create a very compellinginvestment environment for the Company. Furthermore, the strong execution skills of Dolphin Capital Partners ("DCP" orthe "Investment Manager"), who have proven to be a most efficient and dynamicteam, provide a very positive background to the future prosperity of theCompany. Andreas N PapageorghiouChairman Dolphin Capital InvestorsInvestment Manager Report Introduction Dolphin Capital Investors ("Dolphin" or the "Company") is the first investmentcompany to focus exclusively in residential resort developments in south-eastEurope. The Company takes advantage of: • the growing tourism industry in the region; • the limited supply that currently exists in the market; and • its first mover advantage in the region coupled with the high barriers to entry for other foreign investors. Since its admission to trading on AIM on 8 December 2005, Dolphin has proven tobe successful in sourcing, signing and closing exclusive transactions and haspositioned itself in the market as the leading investor for residential resortdevelopments in south-east Europe. The Company has almost fully committed thetotal funds raised at admission, has closed three major deals as of 30 June 2006and has signed two more during the month of July 2006. As a result, as of theend of July 2006 Dolphin has committed €91 million to projects of which €69million has been invested. Furthermore, a pipeline of very attractiveprospective opportunities has been identified, with a number of them already atadvanced negotiation stages whereby over €200 million of additional capitalcould be committed to projects in the near term. Regional Tourism Market The tourism industry in south-east Europe continues to show strong growthprospects supported by improvements in infrastructure, changes in legislation tofacilitate large-scale investments in the tourism sector and increased economicstability in the region. The recent strong macroeconomic performance of Dolphin's targeted countries,combined with their positive economic outlook, reinforces the prospects offurther market growth. Greece maintained its leadership position within the Eurozone as thefastest-growing economy for the past 11 years in terms of GDP growth and boastsa strong tourism market and modern infrastructure after the Athens 2004Olympics. Tourist arrivals grew to 16 million in 2005 (13% increase over 2004)and further increases are expected for 2006. New legislation is expected tofurther facilitate the creation of large-scale golf-integrated residentialresorts. Dolphin is already well positioned in this market having already closeda total of four investments in Greece and having progressed a very attractiveinvestment pipeline covering all strategic locations for development within thecountry. Cyprus has continued the fiscal discipline necessary to meet its goal ofadopting the euro currency on 1 January 2008 and has the most mature second homemarket in the south-east European region. The country has already witnessed thesuccessful development of Aphrodite Hills, the region's first completedgolf-integrated residential resort. In addition, recent changes in legislationare expected to enable the development of an additional 11 golf-integratedresidential resorts in the country. This new legislation provides a buildingcoefficient of up to 100,000 buildable m2 of real estate to potential golfdevelopments over land sites exceeding 100 hectares that meet certainpredetermined development criteria. Dolphin has already closed its firstinvestment in Cyprus, Apollo Heights Polo Resort, and is negotiating investmentsin a selected number of new golf-integrated residential resorts expected to cometo market over the next two years. Turkey advances its negotiations with the EU initiating a reform process that isexpected to drive economic growth going forward. The country remains anaffordable and attractive tourism destination with a number of golf courseresorts already developed. The country's tourism industry has recentlyexperienced unprecedented growth, with tourist arrivals for 2005 reaching 21million, a 22% increase over 2004. There are currently more than 20 golf coursesin southern Turkey alone and many more have been announced. The government hasbeen a strong supporter of golf courses and residential developments and hasestablished favourable zoning laws. Dolphin is reviewing a number of projectsthat are being planned in this country. Croatia is in the mature stages of its path to full accession into EU and itstourism sector has seen considerable growth in the past few years, especiallysince the country's candidacy for the European Union. Tourist arrivals in 2005reached 10 million representing an increase of 8% over 2004. The incoming fiscaland legislative reforms are expected to improve the investment market and toattract further foreign investors. Dolphin is evaluating a number ofopportunities in the country, which remains untapped in terms of upscaleresidential resorts. Current Investments To date, Dolphin has closed investments in a total of five projects. Four ofthese projects, namely Kilada Hills Golf Resort, Scorpio Bay Resort, ApolloHeights Polo Resort and Amanmila Resort, are part of the six investmentspresented within the Prospective Investment Portfolio section of the Company'sadmission document published in December 2005. The one additional investment,namely Lavender Hills Golf Resort, was sourced post-admission. The two other investments from the Prospective Investment Portfolio remain underreview but have not been brought to closure for separate reasons: the site forKyparissia Bay Resort falls under the Natura 2000 regime and consequently theplanning risk remains relatively high, while, regarding Artemis Hills Resort,Dolphin is not comfortable with the minority position and the terms of theinvestment. All five closed investments aspire to be the first residential resorts of theirkind in their respective markets. Dolphin's capital commitments to andinvestments in each project are summarised below. Project Size DCI Capital Capital (hectares) Shareholding Committed (• m) Invested (• m)Kilada Hills Golf Resort, Greece 200 85% 45.0 45.0Scorpio Bay Resort, Greece 172 51% 9.5 9.5Apollo Heights Polo Resort, 462 64% 15.7 12.5CyprusAmanmila Resort, Greece 200 25%-50% 5.0 -Lavender Hills Golf Resort, 292 85% 15.9 1.8Greece Total 1,326 91.1 68.8 Kilada Hills Golf Resort Dolphin has committed and invested a total of €45 million for an 85% stake inKilada Hills Golf Resort, a high-end master-planned golf-integrated residentialresort to be developed in Peloponnesus, Greece. The Kilada Hills Golf Resort is located within two hours' driving distance fromAthens in the area of Porto Heli, one of the most upmarket second homeresidential areas in Greece. The resort is planned to comprise a brand-nameluxury hotel, more than 400 residential units, an 18 hole golf course, marina,beach club and other leisure activities spread over more than 200 hectares ofland. With most of the key development permits already in place for the firstphase of the resort including the golf course and the hotel, construction isexpected to begin in the first half of 2007, positioning Kilada Hills as thefirst golf-integrated residential resort to come to market in Greece. With the €45 million invested, the local project company has acquired total landof approximately 200 hectares: 80 hectares on which construction permits areabout to be finalised; approximately 120 hectares adjacent land to be permitted;and an on-going development of 10 premium sea front villas under construction. Since the closing of the transaction, in addition to the permit progress, theproject company has advanced its negotiations with world-class signature golfdesigners and resort operators and expects to make appointments before the endof the year. Dolphin's 15% partner in Kilada Hills Golf Resort is G.R. Golfing, a developmentcompany led by Mark Potiriadis who has extensive international developmentexperience and in-depth Greek market knowledge. Scorpio Bay Resort Dolphin has committed and invested a net amount of €9.5 million for a 51% stakein Scorpio Bay Resort, a master-planned leisure-integrated residentialdevelopment in the region of Skroponeri, Greece. Scorpio Bay Resort is situatedone hour's drive from Athens International Airport and when developed, willprobably be the closest seaside residential resort to the Greek capital. The resort's site represents a mountainous peninsula of unspoilt natural beautywith approximately 2 km of sea frontage overlooking a secluded bay and theisland of Evoia. The resort is expected to comprise a luxury hotel integratedwith a residential development and sea related leisure activities. Themaster-planning process has been initiated and the permitting process isexpected to last two to three years. Dolphin's 49% partner in the resort is Egnatia Insurance, a Greek insurancecompany. The investment terms for Dolphin have been improved since the deal wasannounced on 22 April 2006 and Dolphin has restructured the purchase of the landin order to now own a controlling 51% of the project instead of 50%.Specifically, in back-to-back transactions, on 30 June 2006 Dolphin: (i)acquired the site for a total cost of €20.5 million, (ii) funded the projectcompany with €0.5 million, (iii) sold 49% of the project company to EgnatiaInsurance for €18 million and (iv) entered into a loan agreement to provideEgnatia Insurance with a €6.5 million loan at an 8% interest cost for a maximumperiod of 1 year. The loan is secured against Egnatia Insurance's 49%shareholding in the project, and in the event that it is not repaid within 12months, the Company has the right to obtain 100% of the project. Once the loanhas been repaid, Dolphin has a commitment to contribute €6.5 million to theproject company to fund the initial phase of the project's development. The newstructure resulted in a total cash outlay of €27.5 million and cash receipts of€18 million, resulting in a net investment for Dolphin so far of €9.5 million. Apollo Heights Polo Resort Dolphin has committed a total of €15.7 million for a 64.3% stake in ApolloHeights Polo Resort (€12.5 million of which has already been invested to acquirethe land), the first polo-integrated residential resort in Cyprus. Apollo Heights Polo Resort is located between the cities of Paphos and Limassoland is accessible in less than an hour from both of the island's internationalairports. The resort is intended to develop into a premier master-plannedresidential resort integrated with polo, equestrian and potentially golffacilities on a wholly owned site of approximately 462 hectares. The resort's site offers excellent views of the sea, the mountains andneighbouring villages and is adjacent to a number of polo fields and an 18-holegolf course. These fields are the only polo grounds on the island and home tothe Cyprus Polo Club. The master-planning process has been initiated to enablethe project company to submit for planning permission, which is expected to begranted within the next three years. Dolphin is investing €15.7 million of capital to fund the land acquisition andthe permitting process as follows: • €12.2 million was paid upon completion of the transaction,• €3.5 million will be paid gradually to fund the permit and design process of the project (of which €350,000 has already been paid). As of 30 June 2006, Dolphin had acquired a 59% shareholding in Apollo HeightsPolo Resort. Following the full investment of €15.7 million, Dolphin's share inApollo Heights Polo Resort will be increased to 64.3%. The local partners of Dolphin have pioneered the game of polo in Cyprus andpossess significant experience relating to leisure-integrated real estatedevelopments on the island. Amanmila Resort On 19 July 2006 Dolphin committed a total of €5 million for a 25% stake inAmanmila Resort, most likely Europe's first villa-integrated Aman Resort, on theisland of Milos, in the Cyclades, Greece. Amanmila Resort will be located on anunspoilt peninsula of approximately 200 hectares with 5 km of shoreline and withits own natural harbour. The resort, to be developed over a 65 hectare site,will comprise a 40-room Aman hotel together with 40 Aman villas and will bepositioned at the top end of the hotel and real estate market. The remaining seafront land of the peninsula (approximately 135 hectares) will be owned by ajoint venture between Dolphin and S&B Industrial Minerals (Greece's largestmining company), thereby allowing Dolphin to own a larger land site thanoriginally presented in the Dolphin admission document published in December2005. Dolphin is jointly developing the resort with three other equal partners: AmanResorts - the world's most exclusive resort operator; John Heah - award winningarchitect; and S&B Industrial Minerals. The €5 million commitment is intended tofund Dolphin's share of the land acquisition and the first phase of the resort'sdevelopment. The permitting process has been initiated and construction isexpected to begin in two years. Lavender Hills Golf Resort On 31 July 2006 Dolphin committed a total of €15.9 million and invested €2million to date to obtain an 85% stake in Lavender Hills Golf Resort, agolf-integrated residential resort to be developed near the town of Volos,Greece. The Lavender Hills site, situated in the region of Thessalia, at the mouth ofPagasitikos Gulf, represents 292 hectares of unspoilt, undulating hills frontedby a 2 km beach and surrounded by forest. It is accessible in approximately twohours' drive from both Athens International and Thessaloniki Internationalairports. The resort is planned to comprise a hotel, more than 300 residentialunits, an 18-hole golf course, marina, beach club and other leisure activities. The site was acquired from the Church of Greece. Out of the 292 hectares of thesite, 41 hectares are freehold and 251 hectares are leased for 99 years. Only€1.8 million out of Dolphin's €15.9 million commitment has been paid upfront. Anadditional €2 million will be allocated to progress the resort's design andpermit process with the remaining €12.1 million being paid in 5 years subject toall required permits having been obtained. Dolphin's total commitment of €15.9 million for the 85% stake in Lavender HillsGolf Resort will cover the cost of the freehold land, the leasehold payments forthe first 5 years, the permit and design expenses and all related closing costs. The planning application has already been filed and construction is expected tobegin in 24 months. Dolphin's 15% partner is G.R. Golfing, who is also the Company's partner inKilada Hills Golf Resort, Dolphin's most advanced project to date. Additional Project Pipeline The potential in the targeted regions remains very strong. Dolphin has createdan extensive pipeline of very attractive and sizeable investment opportunities.In line with the Company's investment strategy, the focus remains on Greece andCyprus; penetration into Croatia and Turkey is planned for within the next 12months where Dolphin has already progressed discussions with a number ofprojects. From the project pipeline, Dolphin is currently at advanced negotiation stagesfor additional investment opportunities which would require over €200 million ofadditional capital. Financial Overview Dolphin's financial performance since admission to trading on AIM reflects theCompany's ability to execute ahead of its investment plan and the continuingemergence of the south-east European residential resort market. As of 30 June 2006, the uplift in the value of Dolphin's investments from theProspective Investment Portfolio section of the Company's admission documentpublished in December 2005 was €71.8 million (for further explanations pleasesee Valuation section below), which resulted in the full award of the FoundingShareholder Warrants and the issuing of 12.5 million new common shares, subjectto the founding shareholders exercising their warrants. The FoundingShareholder Warrants entitle Dolphin's Founding Shareholders to subscribe, at€0.01 per Common Share, for such number of Common Shares (capped at 12.5 millionCommon Shares) which when multiplied by the placing price of 68 pence (€1.00)equals 50 per cent. of the difference between the market value of the Company'slegal interests in the Prospective Investment Portfolio at acquisition and itscost of investment. 20% of the Founding Shareholder Warrants have been awardedto the Investment Manager. The Company's first Net Asset Valuation ("NAV") was calculated as of 30 June2006 and the results are summarised below after and before Founding ShareholderWarrants and Deferred Income Tax Liabilities ("DITL"). NAV metric • GB£ Total NAV before DITL ('000) 188.2 130.1Total NAV after DITL ('000) 163.0 112.7NAV/Share Before Founding Shareholder Warrants and DITL €1.73 119pNAV/Share After Founding Shareholder Warrants and before DITL €1.55 107pNAV/Share After Founding Shareholder Warrants and DITL €1.34 93p Using GBP/Euro exchange rate of 0.692 as of 30 June 2006 It should be noted that the NAV calculation only includes investments made as of30 June 2006, namely Kilada Hills Golf Resort and Scorpio Bay Resort in Greeceand Apollo Heights Polo Resort in Cyprus. We expect the trend in NAV growth tocontinue, as a result of the following factors: • The inclusion of Amanmila Resort and Lavender Hills Golf Resort in Dolphin's NAV; • The closing of additional attractive investment opportunities from the pipeline that are currently being negotiated; • The progress with the planning and permitting process for each site; • The increase in the shareholding of Apollo Heights Polo Resort as Dolphin funds its remaining commitment; • The conclusion of additional land notarial pre-contracts that have been signed by the Kilada Hills Golf Resort project company. It should also be noted that the reported deferred income tax liability of €25.1million is based on the current fair market value of the land acquired and willonly materialise if the land is sold "as is" by the project companies. In theevent of a land sale, however, Dolphin intends to sell the shares of the holdingSPVs and not the land itself in which case the deferred income tax liabilitywill not materialise. As such, the Investment Manager considers the NAV beforedeferred income tax liability to be a more representative figure. Valuation Colliers International undertook a valuation of the acquired sites to determinetheir Fair Asset Value and in turn the Net Asset Value of the Company as at 30June 2006. This valuation was prepared in accordance with generally acceptedappraisal standards, as set out by the American Society of Appraisers (the "ASA"), and in conformity with the Uniform Standards of Professional AppraisalPractice of the Appraisal Foundation and the Principles of Appraisal Practiceand Code of Ethics of the ASA and RICS (the "Royal Institute of CharteredSurveyors"). Furthermore, the valuation was conducted on an "as is condition"and on an open market comparative basis. In determining the fair market value of the Company's investments (namely KiladaHills Golf Resort, Apollo Heights Polo Resort and Scorpio Bay Resort), thedirect sales comparison approach for non-permitted ("as is") land was used inisolation. Only with respect to the part of the land within Kilada Hills GolfResort for which a number of permits have already been granted, the income andcost approaches were employed to provide validation support to the direct salescomparison approach. The direct sales comparison, income and cost valuationapproaches are summarised in Appendix A. The fair market value of these investments as of 30 June 2006, assuming a 100%ownership basis, has been valued by Colliers International at €184.5 million.After deducting Minority Interests of €45.7 million, Dolphin's share of thatrepresents a valuation of €138.8 million versus an investment of €67 million.This represents an uplift of €71.8 million which is higher than anticipated bythe Investment Manager at the time of admission to trading on AIM and hasresulted in the full realisation of the Founding Shareholders Warrants. Based on the consolidated financial statements of the Company as of 30 June 2006prepared under IFRS, Dolphin's: • Current assets are €55.6 million (excluding inventories of €19.9million which have been included in the investments fair market values). Thisincludes a cash balance of €45.9 million, of which approximately €9 million hasalready been invested in project companies, leaving €36.9 million for furtherinvestment at the Company level. • Total Liabilities are €31.4 million, of which €25.1 million refer todeferred income tax liabilities (which, as mentioned above, is believed to beunlikely to materialise as the exit of investments is expected to be realised byselling the shares of the holding SPVs and not the land itself). Accordingly, Dolphin's Net Asset Value on a fully diluted basis and afterdeferred income tax liabilities as of 30 June 2006 was €163.0 million, whichimplies a Net Asset Value before deferred income tax liabilities of €188.2million versus the €109 million total funds raised at admission to trading onAIM in December 2005. The entire consolidation and reporting process has been reviewed and approved byKPMG, the Company's auditors. Looking Ahead Since its admission to trading on AIM in December 2005, Dolphin has successfullyestablished itself as the leading investment company for the residential resortsector in south-east Europe and has almost fully committed its existing funds. Following a very productive first half of the year, Dolphin expects to furthercapitalise on its first mover advantage and continue to build its investmentportfolio. Dolphin's existing project pipeline consists of highly attractiveinvestment opportunities that the Investment Manager believes could generatestrong development and capital returns. Report on Review of Interim Financial Information To the Shareholders of Dolphin Capital Investors Limited We have reviewed the accompanying consolidated balance sheet of Dolphin CapitalInvestors Limited (the "Company") as of 30 June 2006 and the relatedconsolidated statements of income, changes in equity and cash flows for theperiod from 7 June 2005 to 30 June 2006 and a summary of significant accountingpolicies and other explanatory notes. Management is responsible for thepreparation and fair presentation of this interim financial information inaccordance with International Financial Reporting Standards. Our responsibilityis to express a conclusion on this interim financial information based on ourreview. We conducted our review in accordance with International Standard on ReviewEngagements 2410, "Review of Interim Financial Information Performed by theIndependent Auditor of the Entity". A review of interim financial informationconsists of making enquiries, primarily of persons responsible for financial andaccounting matters, and applying analytical and other review procedures. Areview is substantially less in scope than an audit conducted in accordance withInternational Standards on Auditing and consequently does not enable us toobtain assurance that we would become aware of all significant matters thatmight be identified in an audit. Accordingly we do not express an audit opinion. Based on our review, nothing has come to our attention that causes us to believethat the accompanying interim financial information does not give a true andfair view of the financial position of the entity as at 30 June 2006, and of itsfinancial performance and its cash flows for the period from 7 June 2005 to 30June 2006 in accordance with International Financial Reporting Standards. KPMG Nicosia, 18 August 2006 Consolidated Income Statement Note For the period from 7 June 2005 (date of incorporation) to 30 June 2006 •'000 Gain on disposal of investment 22.3 7,955 Valuation gains on investment property 9 4,175Total operating profits 12,130 Investment manager fees 7.2 (1,263) Audit and professional fees (22) Other expenses 8,19 (425)Administrative expenses (1,710) Net operating profit before net financing costs 10,420 Financial income 5 2,083Financial expenses 5 (9)Net financial income 2,074 Excess of fair value over cost arising on acquisitions 22 48,386 Profit before tax 60,880 Deferred tax expense 17 (1,070)Profit for the period 59,810Attributable to:Equity holders of the Company 58,296Minority interest 1,514Profit for the period 59,810 Basic earnings per share (•) 15 0.53Fully diluted earnings per share (•) 15 0.48 The notes below are an integral part of these consolidated financial statements. Consolidated Balance Sheet Note At 30 June 2006 •'000 Investment property 9 164,553Property, plant & equipment 10 61 Total non-current assets 164,614 Trading properties 11 19,900Loans receivable 12 6,500Trade and other receivables 3,151Cash and cash equivalents 13 45,916Total current assets 75,467Total assets 240,081 Issued share capital 14 1,090Share premium 14 103,606Retained earnings 14 58,296 162,992Minority interest 45,683Total equity 208,675 Interest-bearing loans 16 4,000Deferred income tax 17 25,143Total non-current liabilities 29,143 Trade and other payables 18 2,263Total current liabilities 2,263Total liabilities 31,406Total equity & liabilities 240,081 Net asset value per share 6 €1.495Net asset value per share (fully diluted) 6 €1.343 The notes below are an integral part of these consolidated financial statements. Consolidated Statement of Changes in Equity Share capital Share premium Retained earnings Minority interest Total •'000 •'000 •'000 •'000 •'000 Balance at beginning of period - - - - -Minority interest on - - - 44,169 44,169acquisitionShares issued in the period 1,090 107,910 - 109,000Placing costs (4,304) (4,304)Retained profit for the period - - 58,296 1,514 59,810Balance at end of period 1,090 103,606 58,296 45,683 208,675 The notes below are an integral part of these consolidated financial statements. Consolidated Cash Flow Statement Note for the period from 7 June 2005 (date of incorporation) to 30 June 2006 •'000 Operating activitiesProfit before tax 60,880Adjustments for: Excess of fair value over cost arising on acquisitions 22 (48,386) Gain on disposal of investment 22.3 (7,955) Valuation gains on investment property 9 (4,175) Net financial income (2,074)Operating profit before changes in working capital (1,710) Increase in trade and other receivables (3,151)Increase in trade and other payables 2,215 Cash used in operations (2,646)Interest paid (9)Realised gains on foreign exchange 892Interest received 1,191Cash flows used in operating activities (572) Investing activitiesAcquisition of subsidiaries net of cash acquired 22 (48,883)Loans receivable 12 (6,500)Purchase of investment property 9 (20.825)Proceeds from disposal of investment in subsidiary 22.3 18,000Cash flows used in investing activities (58,208) Financing activitiesProceeds from the issue of common share capital 104,696Cash flows from financing activities 104,696 Net increase in cash and cash equivalents 45,916Cash and cash equivalents at 7 June 2005 -Cash and cash equivalents at 30 June 2006 13 45,916 The notes below are an integral part of these consolidated financial statements. Notes to the Consolidated Financial Statements 1 The Company Dolphin Capital Investors Limited was incorporated and registered in the BritishVirgin Islands on 7 June 2005. The initial capital of €5 million was subscribed by the Founding Shareholdersincluding the Investment Manager. The Shares of the Company were admitted to trading on the AIM market of theLondon Stock Exchange following a placing on 8 December 2005. An additional €104million was raised as a result of the placing, giving total common shares inissue of 109,000,000. 2 The subsidiaries The company has an interest of more than 20% in the following companies: Country of Percentage of incorporation Shares held Dolphin Holdings One Ltd BVI 100Dolphin Holdings Two Ltd BVI 100DolphinCI One Ltd Cyprus 100DolphinCI Two Ltd Cyprus 100DolphinCI Three Ltd Cyprus 100DolphinCI Four Ltd Cyprus 100DolphinCI Five Ltd Cyprus 100DolphinCI Six Ltd Cyprus 100DolphinCI Seven Ltd Cyprus 100DolphinCI Eight Ltd Cyprus 100DolphinCI Nine Ltd Cyprus 100DolphinCI Ten Ltd Cyprus 100DolphinCI Eleven Ltd Cyprus 100DolphinCI Twelve Ltd Cyprus 100DolphinCI Thirteen Ltd Cyprus 100DolphinCI Fourteen Ltd Cyprus 100DolphinCI Fifteen Ltd Cyprus 100DolphinCI S&B Holdings Ltd Cyprus 50Alasia Polo and Country Resort Ltd Cyprus 59Mind Compass Overseas Ltd Cyprus 85ScorpioBay Holdings Ltd Cyprus 51Ionian Hills Development Holdings Ltd Cyprus 95Mind Compass Parks Ltd Cyprus 100Cape Trahilas Holdings Ltd Cyprus 50Cape Trahilas 1 Ltd Cyprus 50CGH Holdings Ltd Cyprus 59Symboula Estates Ltd Cyprus 59MindCompass Overseas One Ltd Cyprus 85MindCompass Overseas Two Ltd Cyprus 85Ergotex Services Company Ltd Cyprus 85Infratran Co Ltd Cyprus 85Inmerton Co Ltd Cyprus 85Ntekar Co Ltd Cyprus 85Normatron Co Ltd Cyprus 85Detatex Co Ltd Cyprus 85Trekma Co Ltd Cyprus 85Mykonian Co Ltd Cyprus 85Smartek Co Ltd Cyprus 85Leftran Co Ltd Cyprus 85Vexodom Co Ltd Cyprus 85Ionian Hills Resort Ltd Cyprus 95Scorpio Bay Resorts SA Greece 51Isle Demilia SA Greece 100Therissos Hills SA Greece 100MindCompass Overseas SA Greece 85MindCompass Overseas Two SA Greece 85MindCompass Parks SA Greece 100Cape Trahilas 1 SA Greece 50Cape Trahilas 2 SA Greece 50Ionian Hills Resort SA Greece 95 3 Significant accounting policies The principal accounting policies adopted in the preparation of the consolidatedfinancial statements are set out below. The interim report of the Company for the period from 7 June 2005 to 30 June2006 comprises the Company and its subsidiaries (together referred to as the"Group"). The interim report was compiled by the Administrator and authorised for issue bythe Directors on 18 August 2006. 3.1 Basis of presentation These financial statements have been prepared in accordance with InternationalFinancial Reporting Standards ("IFRS"). Management has concluded that thereport fairly represents the entity's financial position, financial performanceand cash flows. The Company's financial statements are denominated in Euros (•). 3.2 Property Valuation and Reporting Policy The Directors have appointed Colliers International, an internationallyrecognised firm of surveyors to conduct a valuation of the Company's acquiredsites to determine their Fair Asset Value and in turn the Net Asset Value of theCompany as at 30 June 2006. This valuation was prepared in accordance withgenerally accepted appraisal standards, as set out by the American Society ofAppraisers (the "ASA"), and in conformity with the Uniform Standards ofProfessional Appraisal Practice of the Appraisal Foundation and the Principlesof Appraisal Practice and Code of Ethics of the ASA and RICS (the "RoyalInstitute of Chartered Surveyors"). Furthermore, the valuation was conducted onan "as is condition" and on an open market comparative basis. Following the completion of Collier International's valuation, all Dolphin'ssubsidiary accounts have been consolidated at the BVI level (where the Companyis incorporated) according to IFRS. On the basis of this consolidation, AngloIrish Fund Services Limited, the administrator has prepared the interimfinancial statements, which have been approved by the Board, and has calculatedthe Company's net asset value. 3.3 Foreign currency translation Monetary assets and liabilities denominated in foreign currencies as at the dateof these financial statements are translated to • at exchange rates prevailingon that date. Realised and unrealised gains and losses on foreign currencytransactions are charged or credited to the income statement as foreign currencygains and losses. Expenses are translated into • based on exchange rates on thedate of the transaction. 3.4 Investment property Investment properties are those which are held either to earn rental income orfor capital appreciation or both. Investment properties are stated at fairvalue. Any gain or loss arising from a change in fair value is recognised in theincome statement. A property interest under an operating lease is classified and accounted for asan investment property on a property-by-property basis when the Group holds itto earn rentals or for capital appreciation or both. Any such property interestunder an operating lease classified as an investment property is carried at fairvalue. 3.5 Property, plant & equipment Property, plant and equipment are stated at cost less accumulated depreciationand impairment losses. Depreciation is charged to the income statement on astraight-line basis over the estimated useful lives of items of property, plantand equipment. Freehold land is not depreciated. The annual rates ofdepreciation are as follows: Buildings 4% Motor vehicles 20% 3.6 Trading properties Trading properties (inventory) are shown at lower of cost and net realisablevalue. Net realisable value is the estimated selling price in the ordinarycourse of the business less the estimated costs of completion and the estimatedcosts necessary to make the sale. Cost of trading properties is determined on the basis of specific identificationof their individual costs and represents the fair value paid by the Group at thedate that the land was acquired by the Group. 3.7 Deposit interest Deposit interest is accounted for on an accruals basis. 3.8 Cash and cash equivalents Cash and cash equivalents comprise cash deposited with banks and bank overdraftsrepayable on demand. 3.9 Revenue and expense recognition Interest income is recognised in the financial statements on an accrual basis. Expenses are accounted for on an accrual basis. Expenses are charged to theincome statement except for expenses incurred on the acquisition of aninvestment property which are included within the cost of that investment.Expenses arising on the disposal of an investment property are deducted from thedisposal proceeds. 3.10 Basis of consolidation Subsidiaries Subsidiaries are those enterprises controlled by the Company. Control existswhere the Company has the power, directly or indirectly, to govern the financialand operating policies of an enterprise so as to obtain benefits from itsactivities. The financial statements of subsidiaries are included in theconsolidated financial statements from the date that control effectivelycommences until the date that control effectively ceases. Transactions eliminated on consolidation Intra-group balances and transactions, and any gains or losses arising fromintra-group transactions, are eliminated in preparing the consolidated financialstatements. 3.11 Dividends Dividends are recognised as a liability in the period in which they are declaredand approved. There was no dividend declared as at 30 June 2006. 3.12 Other receivables Trade and other receivables are stated at their cost. 3.13 Trade and other payables Trade and other payables are stated at their cost. 3.14 Interest-bearing borrowings Interest-bearing borrowings are recognised initially at fair value, lessattributable transaction costs. Subsequent to initial recognition,interest-bearing borrowings are stated at amortised cost with any differencebetween cost and redemption value being recognised in the income statement overthe period of the borrowings on an effective interest basis. 3.15 Deferred income tax In accordance with IAS 12, deferred taxation is provided in full on timingdifferences which result in an obligation at the balance sheet date to pay moretax, or a right to pay less tax, at a future date, at rates expected to applywhen they crystallise based on current tax rates and law. Timing differencesarise from the inclusion of items of income and expenditure in taxationcomputations in periods different from those in which they are included in thefinancial statements. Deferred tax assets are recognised to the extent that itis regarded as more likely than not that they will be recovered. Deferred taxassets and liabilities are not discounted. 4 Segment reporting The Company has one segment focusing on achieving capital growth throughinvesting in residential resort developments in south-eastern Europe. Noadditional disclosure is included in relation to segment reporting, as theCompany's activities are limited to one business and geographic segment. 5 Net financial income 30 June 2006 •'000Interest income 1,191Foreign exchange gain 892Financial income 2,083Gross interest expense -Bank charges (9)Financial expenses (9)Net financial income 2,074 6 Net asset value per share The net asset value per share as at 30 June 2006 is €1.495 per common sharebased on 109,000,000 common shares in issue as at that date. Following theexercise of the Founding Shareholder Warrants, which are exercisable within 30days of the issue of this report, a further issue of 12,500,000 common shareswill be in issue generating total consideration of €125,000. As a result, thefully diluted net asset value per common share as at 30 June 2006 is €1.343 percommon share based on 121,500,000 common shares in issue. 7 Related party transactions 7.1 Directors of the Company Miltos Kambourides is the co-founder and managing partner of the InvestmentManager. The interests of the Directors, all of which are beneficial, in the issued sharecapital of the Company are as follows: Common shares % of issued share capital 30 June 2006 30 June 2006 Miltos Kambourides (via the Investment Manager) 233,100 0.21%Nicholas Moy 50,000 0.05%Andreas Papageorghiou 5,000 0.00% Save as disclosed, none of the Directors had any interest during the period inany material contract for the provision of services which was significant to thebusiness of the Company. 7.2 Investment Manager fees Annual fees The Investment Manager is entitled to an annual management fee of 2% of thetotal funds raised by the Company, payable quarterly in advance. In addition, the Company shall reimburse the Investment Manager for anyprofessional fees or other costs incurred on behalf of the Company at itsrequest for services or advice. Annual management fees paid during the period from 7 June 2005 to 30 June 2006amounted to €1,262,736. Performance fees The Investment Manager is entitled to a performance fee based on the netrealised cash profits made by the Company subject to the Company receiving the "Relevant Investment Amount" which is defined as an amount equal to: (i) the total cost of the investment; plus (ii) a hurdle amount equal to an annualized percentage returnof 8% compounded for each year or fraction of a year during which suchinvestment is held (the "Hurdle"); plus (iii) a sum equal to the amount of any realised losses and/orwrite-downs in respect of any other investment which has not already been takeninto account in determining the Investment Manager's entitlement to aperformance fee. In the event that the Company has received distributions from an investmentequal to the Relevant Investment Amount any subsequent net realised cash profitsarising shall be distributed in the following order or priority: (i) first, 60% to the Investment Manager and 40% to theCompany until the Investment Manager shall have received an amount equal to 20%of such profits; and (ii) second, 80% to the Company and 20% to the InvestmentManager, such that the Investment Manager shall receive a total performance feeequivalent to 20% of the net realised cash profits. The performance fee payment is subject to the following escrow and clawbackprovisions. Escrow Half of any performance fee payable to the Investment Manager shall be placed inan escrow account operated by the Administrator (the "Escrow Account") until thedate on which the cumulative distributions made by the Company to itsShareholders first equals or exceeds the total funds raised by the Company as atAdmission (being €109 million) (the "Distributions Equalisation Date"). On theDistributions Equalisation Date, 50 per cent. of any escrowed funds will bereleased to the Investment Manager (meaning that in aggregate the InvestmentManager will have received 75 per cent. of the performance fees payable). Uponthe Company making cumulative distributions equal to the total funds raised bythe Company plus the Hurdle, any remaining funds in the Escrow Account will alsobe released to the Investment Manager. Clawback If on the earlier of (i) disposal of the Company's interest in a relevantinvestment or (ii) 1 August 2015, the proceeds realised from that investment areless than the Relevant Investment Amount, the Investment Manager shall pay tothe Company an amount equivalent to the difference between the proceeds realisedand the Relevant Investment Amount. The payment of the clawback is subject tothe maximum amount payable by the Investment Manager not exceeding the aggregateperformance fees (net of tax) previously received by the Investment Manager inrelation to other investments. Performance fees paid or accrued during the period from 7 June 2005 to 30 June2006 amounted to •nil. If investment properties and inventory were sold at theirfair market value, this would give rise to a performance fee payable of €10.1million. 8 Charges and fees 8.1 Nominated Adviser Pursuant to the Placing, the Nominated Adviser received a fee in connection withthe admission of the Company to AIM and is entitled to receive an annual fee of£25,000 payable quarterly in advance. Advisory fees paid to the Nominated Adviser for the period from 7 June 2005 to30 June 2006 amounted to €20,732. 8.2 Broker fees The Broker is entitled to receive a fee of £40,000 per annum payable in advance.Fees paid for the period from 7 June 2005 to 30 June 2006 amounted to €29,652. 8.3 Custodian fees The Custodian is entitled to receive fees calculated as 3 basis point per annumof the value of the non-real estate assets held on behalf of the Company,subject to a minimum monthly fee of €1,000, payable quarterly in arrearstogether with other agreed transaction settlement charges. Custodian fees paid for the period from 7 June 2005 to 30 June 2006 amounted to€6,741. 8.4 Administrator fees The Administrator is entitled to receive a fee of 6 basis points of the netassets of the Company plus borrowings, subject to a minimum monthly fee of€4,000, payable quarterly in arrears. The Administrator shall assist in the preparation of the financial statements ofthe Company for which it shall receive a fee of €2,500 per set. The Administrator shall provide general secretarial services to the Company forwhich it shall receive a minimum annual fee of €2,500. Administration fees paid for the period from 7 June 2005 to 30 June 2006amounted to €35,614 and secretarial fees were €1,405. 8.5 Registrar fees The Registrar is entitled to receive a fee of £4,500 per annum plus out ofpocket expenses. Fees paid for the period from 7 June 2005 to 30 June 2006amounted to €2,091. 8.6 Depositary fees The Depositary is entitled to receive a management fee of £6,000 per annum plusout of pocket expenses. Fees paid for the period from 7 June 2005 to 30 June2006 amounted to €7,907. 8.7 Preliminary (formation) expenses The estimated total costs and expenses payable by the Company in connection withthe Placing and Admission (including professional fees, the costs of printingand the other fees payable including commission payable to the Placing Agent)was approximated to equal 4% of the gross amount raised. The actual totalamount of preliminary expenses paid was €4,303,852 representing 4.14% of thegross amount raised. This has been charged to the share premium account. 9 Investment property Land •'000At beginning of period -Additions through: direct acquisitions of property 20,825 acquisition of subsidiary companies (see note 22) 139,553 160,378Fair value adjustment 4,175At end of period 164,553 The additions through direct acquisitions of property include leases in theamount of €940,800. Security At 30 June 2006, properties with a carrying amount of €4,000,000 were pledged tosecure bank loans (see note 16). 10 Property, plant & equipment Land & buildings Motor vehicles Total •'000 •'000 •'000 Opening net book amount - - -Additions through acquisitions of 21 40 61subsidiariesClosing net book amount 21 40 61 There were no impairment charges during the period. 11 Trading properties 30 June 2006 •'000 At beginning of period -Additions through acquisition of subsidiaries (see note 22.2) 19,900At end of period 19,900 12 Loans receivable The Company entered into a loan agreement with Egnatia Anonimi AsfalistikiEtaireia ("Egnatia") on 30 June 2006 regarding Scorpio Bay Resort to provideEgnatia with a €6.5 million loan at an 8% interest cost for a maximum period of1 year. The loan is secured against Egnatia's 49% shareholding of Scorpio BayHoldings Ltd and, in the event that it is not repaid within 12 months, theCompany has the right to obtain 100% of Scorpio Bay Holdings Ltd. 13 Cash and cash equivalents 30 June 2006 •'000 Bank balances 45,916Bank overdrafts -Cash and cash equivalents in the statement of cash flows 45,916 The average interest rate on the above bank balances for the period from 7 June2005 to 30 June 2006 was 2.29%. 14 Capital and reserves Reconciliation of movement in capital and reserves Share capital Share premium Retained earnings Total •'000 •'000 •'000 •'000At beginning of period - - - -Profit for the period - - 58,296 58,296Shares issued 1,090 103,606 - 104,696At end of period 1,090 103,606 58,296 162,992 Share capitalCommon Shares of €0.01 each Number •'000 In issue at the start of the period - -Issued during the period 109,000,000 1,090In issue at 30 June 2006 109,000,000 1,090 Warrants The Founding Shareholder Warrants entitle the Founding Shareholders tosubscribe, at par value per common share of €0.01, for such number of commonshares (capped at 12.5 million common shares) which when multiplied by thePlacing Price of 68p (€1.00) equals 50% of the difference between the marketvalue of the Company's legal interests in the Prospective Investment Portfolioand its cost of investment. The valuation of the Company's legal interests inthe Prospective Investment Portfolio was carried out by the Company's propertyvaluer, Colliers International S.A. as at 30 June 2006. Based on the valuation,the Founding Shareholders are entitled to receive the full warrant allocation of12.5 million common shares which shall be issued within 30 days from the issueof this report. 15 Earnings per share Basic Basic earnings per share is calculated by dividing the profit attributable toequity holders of the Company by the number of common shares in issue during theperiod. 30 June 2006 Profit attributable to equity holders of the Company (€000) 58,296Number of common shares in issue (thousands) 109,000Basic earnings per share (• per share) 0.53 Diluted Diluted earnings per share is calculated adjusting the number of common sharesoutstanding to assume conversion of all dilutive potential shares. The Companyhas one category of dilutive potential common shares: warrants. The number ofshares calculated above is compared with the number of shares that would havebeen issued assuming the exercise of the warrants. 30 June 2006 Profit attributable to equity holders of the Company (€000) 58,296 Number of common shares in issue (thousands) 109,000Adjustment for Founding Shareholder Warrants (thousands) 12,500 Number of common shares for diluted earnings per share (thousands) 121,500Fully diluted earnings per common share (• per share) 0.48 16 Interest-bearing loans This note provides information about the contractual terms of theinterest-bearing loans. For more information about the Group's exposure tointerest rate and currency risk see note 21. Non-current liabilities 30 June 2006 •'000 LoansSecured bank loans 4,000 Terms and debt repayment schedule The Group has obtained a loan of €4 million from EFG Eurobank Ergasias inAthens. The loan bears interest at Euribor plus 2.20% and it is repayable insixteen equal quarterly instalments, commencing 27 months from the date theinitial funds were disbursed to the Group. 17 Deferred income tax Deferred income tax is based on temporary differences between the revaluedamounts of investment property and trading property in the books of theCompany's Greek and Cyprus subsidiaries and their respective tax bases. Thedeferred tax provision for the Cyprus subsidiaries is based on the capital gainstax rate, which is 20%. The deferred tax provision for the Greek subsidiariesis based on a 25% tax rate. 18 Trade and other payables 30 June 2006 •'000Taxation (see note 20) 48Trade payables 1,646Accruals 569 Total 2,263 19 Directors' remuneration From admission of the Company to trading on AIM each director is paid €15,000p.a., except Messrs Achilleoudis and Kambourides who have waived their fees.Total fees and expenses paid to the Directors for the period from 7 June 2005 to30 June 2006 amounted to €38,935. 20 Taxation As a company incorporated under the BVI International Business Companies Act(Cap. 291), the Company is exempt from taxes on profit, income or dividends.Each company incorporated in BVI is required to pay an annual government feewhich is determined by reference to the amount of the Company's authorised sharecapital. The subsidiaries of the Company in Greece and Cyprus are taxed in accordancewith the applicable tax laws in those countries. 21 Financial instruments The Group's activities expose it to a variety of financial risks: market pricerisk, credit risk, liquidity risk and interest rate risk. Market price risk The Group is exposed to property price and market rental risks. Credit risk The maximum exposure to credit risk is represented by the carrying amount ofeach financial asset in the balance sheet. Management does not expect anycounterparty to fail to meet its obligations. Liquidity risk The Company maintains sufficient cash balances for working capital requirements. Interest rate risk The Company is exposed to risks associated with the effects of fluctuations inprevailing market interest rates on its cash balances and long-term borrowings.Cash is invested at short-term market interest rates. 22 Business combinations 22.1 During the period the Group acquired 59.02% of the Alasia Polo and CountryResort Limited Group, a development of a polo integrated residential communitynear Limassol, Cyprus. The assets and liabilities arising from the acquisition are as follows: Fair value •'000Investment property - land 63,315Property plant & equipment 57Cash & cash equivalents 355Deferred taxation (12,573)Net current assets 218Net assets 51,372Minority interest (40.98%) (21,053)Net assets acquired 30,319 Purchase consideration, settled in cash 12,539Cash & cash equivalents in subsidiary acquired (355)Cash outflow on acquisition 12,184Excess of fair value over cost arising on acquisition 17,780 22.2 During the period, the Group acquired 85.3% of the MindCompass OverseasLimited group, a development of a golf integrated resort at Kilada Hills,Peloponissos, Greece. The assets and liabilities arising from the acquisition are as follows: Fair value •'000Investment property - land 76,238Property plant & equipment 4Trading properties 19,900Cash & cash equivalents 8,534Deferred taxation (11,493)Interest bearing loans (4,000)Net current assets (275)Net assets 88,908Minority interest (14.7%) (13,069)Net assets acquired 75,839 Purchase consideration, settled in cash 45,233Cash & cash equivalents in subsidiary acquired (8,534)Cash outflow on acquisition 36,699Excess of fair value over cost arising on acquisition 30,606 22.3 During the period, the Group sold a minority 49% holding initially acquiredin Scorpio Bay Holdings Limited for total consideration of €18 million. Theoriginal purchase consideration for acquiring all of the issued share capital ofScorpio Bay Holdings Limited was €20.5 million. This gave rise to a realisedgain to the Group of €8 million and a minority interest of €10,045,000. 23 Post balance sheet events On 19 July 2006, the Company entered into a commitment for the investment of €5million into the Amanmila project. This project involves the future jointownership with S&B Industrial Minerals S.A. of approximately 140 hectares ofland on the island of Milos (Cyclades) in Greece and the development, through ajoint venture with Aman Resorts and John Heah, of probably Europe's firstvilla-integrated Aman Resort. On 31 July 2006, the Company entered into a commitment for the investment of€15.9 million into the Lavender Hills project. The project represents thedevelopment of a sea-front master-planned leisure integrated resort withresidential units, a hotel and a golf course located in the area of Nies,Thessalia, Greece. The Company has already invested €1.8 million in July 2006. Appendix A Direct Sales Comparison Approach This technique is based on the premise that persons in the marketplace buy bycomparison. It involves acquiring market sales/offerings data on propertiessimilar to the subject property. The prices of the comparables are then adjustedfor any dissimilar characteristics as compared to the subject's characteristics.Once the sales prices are adjusted, they can be reconciled to estimate themarket value for the subject property. Income Approach An estimate is made of prospective economic benefits of ownership. These amountsare discounted and/or capitalised at appropriate rates of return in order toprovide an indication of value. Cost Approach Value is measured by estimating the Replacement Cost New or the ReproductionCost New of property and then determining the deductions for accrueddepreciation that should be made to reflect the age, condition and situation ofthe asset during its past and proposed future economic working life. 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