17th Sep 2007 16:02
Dragon-Ukrainian Prop. & Dev. PLC17 September 2007 17 September 2007 Dragon Ukrainian Properties & Development Plc Interim Accounts for the period ended 31 August 2007 Chairman's Statement This has been a period of significant achievement. DUPD is well placed to takeadvantage of the many opportunities in the rapidly expanding real estatemarketplace in Ukraine. We have the local knowledge, proprietary contacts andsolid know-how necessary to originate and execute real estate developmentprojects offering above average investment returns to our shareholders. Strategy DUPD is not a passive investor in real estate. We operate proactively asdevelopers, often in the form of partnerships with other reputable localpartners, to pursue lucrative investment projects jointly. It is this in-depthlocal knowledge, our ability to promptly re-zone land and quickly obtain projectand construction permits that gives us an invaluable insight into choosing theright projects and ensuring successful completion and high investment returns.Local developers with domestic insight are often more successful in landacquisition than our international counterparts. Business Model Our business model is similar to that of private equity. We identify investmentopportunities (land plots), assess their growth prospects (prospectiveconstruction projects), execute their development (design the project andmonitor construction works), lease the premises and within 12 months fromcompletion and full lease, exit the investment by selling the subject propertyto an institutional investor. The key factors that are likely to influence the ultimate decision to proceedwith a project are location, marketability, price, financing structure, legaland ownership status. Dragon Capital is the leading investment bank in Ukraine.Through Dragon Capital, DUPD enjoys solid access to capital markets, for bothequity and debt financing. Dragon Capital's sponsorship of DUPD givessubstantial comfort and confidence to institutional investors in terms ofcorporate governance and professional conduct. Ukraine The political instability of recent years is settling down, with newparliamentary elections scheduled to be held this year. The economy has beenrelatively unaffected by the political turmoil: GDP has grown rapidly alongside industrial production, investment activity continues, and disposable incomecontinues to grow. Ukraine is the second largest country in Europe, with a totalland area of 603,700km2. It has a strategic position in Eastern Europe,bordering the Black Sea in the south, Poland, Slovakia and Hungary in the west,Belarus in the north, Moldova and Romania in the south-west and Russia in theeast. It ranks among the 30 largest economies worldwide. In the Soviet era,Ukraine was the second most important republic in terms of its economiccontribution, producing approximately four times the output of the next rankingrepublic. Following the collapse of the Soviet Union, the country progressedtowards a market economy at a gradual pace. From the early 2000s, the economystarted to show strong export-based growth of 5%-10%, with industrial productiongrowing more than 10% per year. Board of Directors Our Board of Directors combines both real estate and investment expertise. TomasFiala (Non-Executive Director) is the founder of Dragon Capital and hassuccessfully completed a large number of real estate investments, all of whichhave generated exceptional investment returns. Fredrik Svinhufvud (Non-ExecutiveDirector) is a very senior manager with in-depth understanding of the Ukrainianmarketplace. Boris Erenburg (Non-Executive Director) and James Morton (Adviserto the Board) are veterans of the investment market and managing several billiondollar funds for Spinnaker Capital and the Cundill Group, respectively. Weremain fully committed to enhancing the diversification of our portfolio,developing high quality properties and realising significant investment returns.Achieving this aim will require significant capital, to which we have accesswith our investor base, which includes some of the world's leading investmentbanks, institutional investors and hedge funds. Along with the rest of theBoard, I am very confident that our company is in excellent shape to meet theopportunities and challenges ahead and build significant value over the comingyears. Aloysius Wilhelmus Johannes van der Heijden Non-Executive Chairman Mr.A.W.J. Van der Heijden Dragon Ukrainian Property and Development Plc 17 September 2007 Consolidated Balance Sheet of DUPD (Unaudited) ------------------------------------------------------------------------------ (in thousand US dollars) Notes August 31, 2007AssetsNon-current assetsInvestments in associates 5 8,000Intangible assets under development 2Total non-current assets 8,002Current assetsPrepayments and other assets 4 56,681Cash and cash equivalents 3 142,420Total current assets 199,101Total assets 207,103 Liabilities and shareholders' equityShareholders' equityShare capital 7 205,061Retained earnings 400Total equity attributable to the equity 205,461holders of the parent 4 Minority interestTotal shareholders' capital 205,465 0 Total non-current liabilitiesCurrent liabilitiesAccruals and other liabilities 6 1,638Total current liabilities 1,638Total liabilities and shareholders' equity 207,103 Consolidated Income Statement of DUPD (Unaudited) ------------------------------------------------------------------------------ (in thousand US dollars) Notes 6 months ended August 31,2007Revenue -ExpensesInvestment manager's fee 10 (1,553)Wages and salaries (49)Lawyers' fees (71)Business trip expenses (21)Insurance expenses (12)Other administrative expenses (63)Operating loss (1,768)Interest income from bank deposits 2,172Profit before tax 404Tax 0Profit for the period 404Minority interest (4)Profit for the period attributable to the equity 400holders of the parent (in US dollars) Basic and diluted earnings per share for profit 0.0038365attributable to the equity holders of the parent ofthe Company during the period Consolidated Statement of changes in Equity (Unaudited) ------------------------------------------------------------------------------ (in US dollars) 6 months ended August 31,2007 Notes Movement during the period Share capital Retained Minority Total earnings interest Balance carried forward at 4 4 February28, 2007Share capital 7 2,080,000 2,080,000Share premium 8 205,920,000 205,920,000Placing fees and formation costs (2,938,603) (2,938,603)Profit for the period 403,861 403,861Minority interest (3,678) 3,678 -Balance carried forward at 205,061,401 400,183 3,678 205,465,262August 31, 2007 Consolidated Statement of cash flows of DUPD (Unaudited) ------------------------------------------------------------------------------ (in thousand US dollars) Notes 6 months ended August 31,2007 Cash flows from operating activitiesOperating loss (1,768)Increase/(decrease) in other assets (49)Increase/(decrease) in accruals and other liabilities 1,638 (2) Purchase of non-current assetsCash generated from operations (181)Cash flows from investing activities Interest received 1,794Prepayments made (56,254)Invested in associates (8,000)Net cash provided by (used in) investing activities (62,460)Financing activitiesProceeds on issue of shares 205,061Net cash provided by financing activities 205,061Net increase /(decrease) in cash and cash equivalents 142,420Cash and cash equivalents at the beginning of period -Cash and cash equivalents at August 31, 2007 142,420 Notes To Consolidated Financial Statements ------------------------------------------------------------------------------ Note 1. General information The Company was incorporated in the Isle of Man on February 23, 2007 withregistered office of the Company beingStandard Bank House, One Circular Road,Douglas, Isle of Man, IM1 1SB. The Company intends to invest in the development of new commercial andresidential properties as well as in the redevelopment of existing properties inUkraine. Note 2. Accounting Policies The principal accounting policies, which have been consistently applied to theCompany's financial information are as follows: 1. Statement of compliance The financial information has been prepared in accordance with InternationalFinancial Reporting Standards ("IFRS") and interpretation adopted by theInternational Accounting Standards Board (IASB). 2. Basis of Preparation The financial information is presented in US Dollars and is prepared onhistorical cost basis. The preparation of financial information in conformity with IFRS requiresmanagement to make judgments, estimates and assumptions that affect theapplication of policies and the reported amounts of assets and liabilities,income and expenses. The estimates and associated assumptions are based onhistorical experience and various other factors that are believed to bereasonable under the circumstances, the results of which form the basis ofmaking the judgments about carrying values of assets and liabilities that areboth readily apparent from other sources. Actual results may differ from theseestimates. The estimates and underlying assumptions are reviewed on an ongoingbasis. Revisions to accounting estimates are recognised in the period in which theestimate is revised, if the revision affects only that period or in the period,of the revision and future periods, if the revision affects both current andfuture periods. a) Foreign currencies and presentation currency The Directors consider that the most appropriate measurement and presentationcurrency for this financial information is US Dollars and this will be thepresentation currency going forward. Transactions in currencies other than US Dollars are recorded at the rates ofexchange prevailing on the dates of the transactions. At each balance sheetdate, monetary assets and liabilities that are denominated in foreign currenciesare retranslated at the rates prevailing on the balance sheet date. Non-monetaryassets and liabilities carried at fair value that are denominated in foreigncurrencies are translated at the rates prevailing at the date when the fairvalue was determined. Gains and losses arising on retranslation are included inthe income statement for the period, except for exchange differences onnon-monetary assets and liabilities where the changes in fair value arerecognised directly in equity. b) principles of consolidation The consolidated financial statements incorporate the financial statements ofthe Company and special-purpose entities controlled by the Company (itssubsidiaries). Control is achieved where the Company has the power to govern thefinancial and operating policies of special-purpose entities so as to obtainbenefits from its activities. All intra-group transactions, balances, income and expenses are eliminated onconsolidation. 3. Subsidiaries The following legal entities are the Company's subsidiaries: 1) Linkdell Limited, a company was incorporated in Republic of Cyprus on April 10, 2007; 2) Riverscope Limited , a company was incorporated in Republic of Cyprus on April 26, 2007; 3) Mountcrest Limited, a company was incorporated in Republic of Cyprus on April 20, 2007; 4) Landshere Limited, a company was incorporated in Republic of Cyprus on April 26, 2007; 5) Landzone Limited, a company was incorporated in Republic of Cyprus on June 19, 2007; Riverscope Limited and Landshere Limited are owned 95% by Dragon CapitalUkrainian Property and Development, plc. All others are 100% owned by theCompany. Note 3. Cash and cash equivalents Cash at bank consists of cash residuals at current and deposit bank accounts.Cash could be used without any restrictions. The carrying amounts of cashpresent its fair values. (in thousand US dollars) August 31, 2007Cash at bank 5,223Deposits (up to 3 months) 71,099Deposits (over 3 months) 66,098Total cash and cash equivalents: 142,420 Note 4. Prepayments and other assets (in thousand US dollars) August 31, 2007Prepayments 56,254Accrued interest 378Deferred expenses 36Other assets 13 Total prepayments and other assets 56,681 The Company has made prepayments for land acquisitions in the amount of 56.254million US dollars. Total contractual obligations, including land cost andagents' commission, are 107.004 million US dollars. The carrying values of theprepayments are close to their fair value. Accrued interest is recognized on an accrual basis, not on cash basis. Theaccrued interest for every balance sheet date equals to the real and currentliability of the debtors. Note 5. Investments in associates Investments are accounted at cost and revaluated using the equity method.Despite there are no efficient stock market for these securities, managementconstantly provides monitoring of their value and believes that the carryingvalues are close to the fair value. The Company invested 8 million US dollars in Henryland Group Ltd, incorporatedunder the law of British Virgin Islands on October 9, 2006 with its corporateoffice at Geneva place, Waterfront Drive P.O. Box 3469, Road Town, BritishVirgin Islands. The Company will acquire throughout its participation in the share capitalincrease, a total of 12 million issued common shares at the price of 1 US dollarper share, which will represent a 38% shareholding in Henryland land Group Ltd. Note 6. Accruals and other liabilities (in thousand US dollars) August 31, 2007Accrued payment to the Investment Manager 1,553Wages and salaries payable 37Outstanding payments for the ongoing costs 49Total accruals and other liabilities 1,638 The Directors consider that the carrying amount of accruals and otherliabilities approximates their fair value. Note 7. Share capital Shares Information: (in thousand US dollars) August 31, 2007 Shares, quantity Value, USDAuthorized common shares 300,000,000 6,000,000Outstanding common shares (195,999,800) (3,920,000)Issued and fully paid common shares 104,000,200 2,080,000 Par value of common share equals to £ 0.01 ($0.02) per share. Note 8. Share premium 104,000,000 ordinary shares of the Company have been placed with certaininstitutional investors by way of an Initial Public Offering at a price of 2.00US dollars (the 'Offer Price') per ordinary share raising gross proceeds of 208million US dollars on June 1, 2007. The difference between par value and offerprice value in the amount of 205.92 million US dollars was recognized as sharepremium. Note 9. Related party transactions Transactions between the Company and its subsidiaries which are related partieshave been eliminated on consolidation and are not disclosed in this note. Note 10. Material contracts On May 16, 2007, the Company entered into a Management Agreement with DragonCapital Partners (the "Manager") pursuant to which the Manager has agreed toprovide advisory, management and monitoring services to the Company. Inconsideration for its services thereunder, the Manager is entitled to be paid anannual management fee of 1.5% of the gross asset value of the Company at the endof the relevant accounting period, or part thereof. On May 16, 2007 the Company granted a Share Option, conditional on Admission, tosubscribe for up to 100,000 Ordinary Shares at the Placing Price to Mr. van derHeijden, a director of the Company. The options vest annually at periods fromthe first to the fifth anniversary of Admission. On May 16, 2007 the Company has entered into two Warrant Instrument Agreements,namely "Dragon Warrant Instrument" and "ZAI Warrant Instrument". Theseagreements entitle Dragon and ZAI to subscribe in cash, at the Placing Price forsuch number of Ordinary Shares which equates to 5% and 1% respectively ofOrdinary Shares in issue at Admission during the period commencing on Admissionand terminating five years thereafter. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
DUPD.L