Dci Advisors Regulatory News (DCI)

30 June 2022

DOLPHIN CAPITAL INVESTORS LIMITED

("DCI" or "Dolphin" or the "Company"

and together with its subsidiaries the "Group")

Annual Financial Results for

the year ended 31 December 2021

and Trading Update

Dolphin, an investor in high-end resort developments in the eastern Mediterranean, announces results for the year ended 31 December 2021 and a trading update.

Financial Highlights:

- Gross Assets of €189.1 million (31 December 2020: €205.2 million).

- Total Group Net Asset Value ("NAV") of €125.7 million and €119.1 million before and after Deferred Tax Liabilities ("DTL") respectively. This represents a decrease of €31.0 million and €29.6 million (19.8% and 19.9%) respectively, against the 2020 year-end figures.

- NAV reduction is principally due to a €24.2 million reduction in valuations as well as other operational, corporate, finance and management expenses as detailed in section F below. The reduction in valuations includes a €13.2 million downward adjustment of Lavender Bay's investment property so as to account for the valuation uncertainty resulting from an ownership dispute with the Greek State as further detailed in Note 34 of the consolidated financial statements for the year ended 31 December 2021.

- Sterling NAV per share as at 31 December 2021 stood at 12p before DTL and 11p after DTL, versus 16p and 15p, a 25.5% and 25.7% decrease before and after DTL respectively, compared to 31 December 2020. The Sterling NAV per share reduction mainly reflects the factors mentioned above and further decreased by a 7% appreciation of Sterling versus the Euro during the period.

- Total debt of €17.4 million with a Group total debt to gross asset ratio of 9.2%.

Operations, Finance and Divestments Highlights:

- It was jointly decided by the One&Only Kea Island ("OOKI") shareholders that it is for the best interest of the resort to open for the 2023 season. This decision reflects the delays in construction attributed mainly to global supply chain issues, but also enables us to redesign and improve the offering of certain key project components such as the Spa and Beach Club. Construction works continue with the guest rooms and main building having significantly advanced and in the final stages of internal works completion. Construction of villas is also progressing. In parallel, we have been able to source significant demand for the One&Only Kea Island Private Homes ("OOKI PHs") available at the project through real estate agents, DCP's sales network, as well as dedicated social media campaigns and related PR activities in cooperation with One&Only. We have already signed reservation agreements and/ or sales contracts and received deposits for ten properties, all of which were sold on an off-plan basis.

- At our Kilada Country Club, Golf and Residences development ("Kilada"), construction works continued with all key contractors having been appointed. Earthworks and rough shaping in approximately 70% of the project area have been completed, while the specialized golf contractor is progressing with irrigation and drainage works. Most of the first phase roads have also been opened and key infrastructure works have been installed. In addition, the final notarial Deed for the acquisition of 24 founder plots in Kilada by Amanzoe for a €10.0 million consideration payable in instalments was concluded on 2 August 2021. We are working with the buyer to register mortgages over the respective lots so that they can start releasing the sales instalments and we expect that this will be concluded within Q3 2022. These founder lot sales, together with the preferred equity investment agreement entered into on 19 December 2019 and the €6.0 million Greek state subsidy which was awarded to the project on 2 November 2021, are estimated to fully cover the Kilada first phase development costs. During the period, two new reservation agreements and one pre-contract for the sale of residential plots have been concluded. New product offerings, including apartments and family units, have been designed and are being introduced to the market through a series of promotional efforts, including targeted social media and real estate agent campaigns, advertising and participation in international real estate fairs. New sales material has been prepared and a dedicated Kilada sales office will open during the season in close proximity to the site.

- Gross property sales by Aristo Developers Ltd ("Aristo"), a 47.9% DCI affiliate, during the 12 months to December 2021 were €25.5 million, an increase of 64% compared to the 2020 corresponding period, primarily due to Aristo's efforts in repositioning its product portfolio following the termination of the Cypriot citizenship incentive schemes and its targeted sales efforts to attract clients from new markets given the significant reduction of Chinese and Russian buyer inflow.

- On 16 May 2022 the official zoning and the relevant declaration of public policy were formally announced and published regulating the development in the non-military Sovereign Base Areas in Cyprus where the largest part of our 447-hectare Apollo project is located. Prior to the finalization of the zoning entitlements, there is a four-month period during which objections can be filed. Although, the zoning announced is in line with the provisional zoning, the Company is examining the option of filing an objection with a view to improving the official zoning for Apollo.

- Dolphin has now fully exited from the LaVanta project and Itacare investment.

- As announced with the Company's annual results for the year ended on 7 June 2021, Dolphin entered into a loan facility of €15.0 million with two institutional private credit providers. The first tranche of €1.75 million was drawn down on 4 June 2021, the second tranche of €12.31 million was drawn down on 16 July 2021 and a final amount of €0.81 million for the loan's interest reserve account was drawn down on 4 March 2022

An amount of c. €2.1 million of the loan has been already repaid through the proceeds generated from the sale of the Company's interests in the LaVanta project. The total outstanding loan facility currently amounts to c. €12.8 million. The Board is investigating the refinancing of this facility before it is due to mature in July 2023, in case asset sale proceeds have not repaid the loan in full.

- Following the Extraordinary General Meeting ("EGM") that was held on 22 December 2021, shareholders approved:

o  the continuation of the Company without setting a termination date or a date for a further continuation vote in order to enable the Company to optimise the value that can be realised from its investments by removing commercially prejudicial deadlines from negotiations with potential buyers.

o  the New Investing Policy and Realisation Strategy and the new Investment Manager's Agreement ("IMA") - please refer to: https://www.dolphinci.com/wp-content/uploads/211202_rns.pdf  for further details.

o  Amendments on the Memorandum and Articles of Association of the Company - please refer to: https://www.dolphinci.com/wp-content/uploads/211202_DCI-memorandum-and-articles.pdf for further details.

For further information, please contact:

A. Chairman's Statement

Dear Shareholder

Overview

Since its launch in 2005, Dolphin Capital Investors Ltd (the "Company" or "DCI") has experienced a somewhat turbulent history. During its 17-year life, DCI's main development markets, Greece and Cyprus, have endured the severest of economic crises, requiring financial bailout programmes led by the European Central Bank and the International Monetary Fund, as well as the impact of the Covid-19 pandemic. Unfortunately, from a financial perspective, Shareholders have had little to cheer and, in 2015, they first voted for DCI to cease making new investments and commence the gradual sale of the remaining portfolio and return of capital to investors. At 31 December 2021, DCI had a market capitalisation of approximately £39.3 million, while the Company's NAV was €119.1 million, equivalent to £100 million, after DTL.

Over the years, there have been a number of attempts to reduce the Company's operating costs, renegotiate contracts and align economic interests between Dolphin Capital Partners ("DCP"), the investment manager, DCI and its Shareholders, but, to date, none has resulted in a distribution to Shareholders. The current Board is focused on maximising the potential proceeds for shareholders while winding down the Company's investments.

The current three non-executive independent Directors were appointed to DCI's four-person Board on 30 June 2021. Immediately following our appointment, we started work with DCP to prepare a detailed strategic review focused on the investment portfolio and realisation processes, the investment management arrangements, corporate governance, operating costs and cash flows. This provided a framework to adopt a new Investing Policy and Realisation Strategy, negotiate a new investment management agreement and improve corporate governance arrangements, which were approved by Shareholders at an EGM held on 22 December 2021. Since then, the focus of both DCI and DCP has been on progressing the disposals of investments in order to generate cash to repay the outstanding debt and, in due course, commence distributions to Shareholders.

Summary of Financial Performance

At the 31 December 2021 financial year end, the Company's consolidated Net Asset Value ("NAV") after DTL was €119.1 million (2020: €148.6 million), representing a decrease of 19.9% compared to 31 December 2020. The NAV reflects a reduction of 17.6% in the value of investments by €24.2 million (2020: €19.6 million) to €113.5 million (2020: €137.7 million) and 2021 operating expenses of €7.3 million (2020: €7.5 million). The net loss after tax attributable to the owners of the Company was €21.3 million (2020: €21.1 million).

As at 31 December 2021, the DCI group had three principal liabilities:

· €12.8 million owed under a term loan facility, repayable no later than 30 June 2023, unless extended by a further 6 months at the option of the Company; €4.7 million owed to PBZ, the Croatian lender to the Livka Bay investment; and,

· €1.3 million owed to DCP in the form of accrued but unpaid investment management fees during 2021.

In sterling terms, DCI's NAV per Share declined to 11p on 31 December 2021 (31 December 2020: 15p).

The current Audit Committee has spent considerable time both with the valuers of each investment and with the auditors in Cyprus and Greece. The carrying values reflect a mix of the independently determined specific valuations of each of the properties held by American Appraisal, HVS and Colliers and the requirements of international financial reporting standards in respect of minority equity interests. As such, although these values are fair, they do not necessarily reflect the prices which the Board and DCP believe could be achieved in, for example, an accelerated sale process.

Investment Portfolio

The new Investing Policy and Realisation Strategy approved by Shareholders at the EGM provides clarity as to the strategic framework and direction for the Company during its remaining life.

All the investments remaining in DCI's portfolio were acquired in 2006 and 2007. The 15-year gestation periods to develop and/or sell each of these investments is a reflection of both macroeconomic factors and the substantial challenges inherent in obtaining the numerous licences and planning consents, constructing adequate infrastructure, raising finance from investors and selling the properties.

The Investment Manager's Report in section B provides details of the status, strategy and challenges facing each of the investments. From a portfolio standpoint, most of DCI's value remains principally in three equity interests: OOKI, Kilada and Aristo Developers.

OOKI and Kilada are each under development with noticeable monthly on-the-ground development progress and an increasing number of sales commitments and enquiries. It is the Board's and DCP's belief that, in the absence of any immediate liquidity requirements at the DCI level, the optimum time to sell each of these holdings will be following completion and opening of the first phase of each of the developments. By that time, construction costs will have been largely determined and a significant number of individual property sales will have been completed to evidence rising achievable disposal prices. However, in view of existing liquidity constraints all asset disposal opportunities, including OOKI and Kilada, at prices exceeding their NAV will be considered together with other funding alternatives.

Although construction at OOKI is progressing well and is broadly in line with the overall budget, labour shortages and logistical challenges relating to the timely procurement and pricing of building materials have caused some delays. Rather than partially open the resort for a few months half-way through the 2022 season, the joint venture board has decided to delay the opening until Q2 2023. One&Only's appointed General Manager for OOKI has now relocated to Greece and is currently planning the pre-opening process, staff recruitment and training.

Construction of the centrepiece Jack Niklaus Signature Golf Course at Kilada continues to progress well, despite delays caused by archaeological findings. The first villa plots have been sold and Kilada will soon commence a sales campaign for multi-family town houses and apartments. As Greece's first project to receive 'Strategic Investment' status, Kilada's application for €6.0 million of state subsidies was awarded to the project in Q4 2021, but this can only be drawn in stages, subject to construction milestones. The seeding of the greens and completion of the golf course, scheduled for late 2023, will be a key attraction for individual property buyers.

Although it is not currently envisaged that DCI will be required to invest further monies into OOKI or the first phase of Kilada, as the development activities underway are, on paper, self-financed from existing project resources, the board cannot rule out the possibility of having to support the projects with some short-term working capital funding.

We plan to defer until 2023 a decision on selling one or both of the OOKI and Kilada investments, to the extent that there are no pressing liquidity needs at the DCI level or an opportunity to generate value for our Shareholders from these investments in the interim. The improving macro-economic situation in Greece and promising forecasts for tourist arrivals in 2022, which will include real estate buying interest from individuals, support our decision to be patient. The conflict in Ukraine is accelerating a general slowdown in the EU economy, with higher prices of energy and construction materials; and increasing inflation. Although we are aiming to pass on higher development costs to customers, profit margins are likely to be squeezed.

Besides OOKI and Kilada, our principal focus in 2022 is to try to realise the 47.9% equity holding in Aristo Developers in Cyprus and/or dispose of the Livka Bay project in Croatia.

Aristo is one of Cyprus' principal residential property developers, headquartered in Paphos. The slump in foreign purchases of property in Cyprus following the suspension in 2020 of its citizenship scheme, seems to have bottomed, but prices have yet to recover. Despite the high level of ownership of properties in Cyprus by Russian investors, the conflict in Ukraine has not attracted significant new flight capital from Russia, due, in large part, to the imposition of capital controls by Moscow and sanctions by the EU. The Board, DCP and Aristo Developers' controlling shareholder, Mr. Theodoros Aristodemou, meet regularly with a view to aligning the interests of the two shareholders. DCI and Aristo Developers are working with an investment bank in an attempt to accelerate a sale. Settlement of Mr. Aristodemou's defaulted final payment to DCI of €3.5 million in respect of the sale of an equity interest in Venus Rock is expected to form part of an eventual sale package.

A potential buyer of the Livka Bay project in Croatia has been identified and, although there is no assurance that a sale will complete, due diligence is underway. A sale will encompass settlement of the remaining loan from PBZ.

DCI's undeveloped land holdings at Scorpio Bay, Lavender Bay, Plaka Bay and Apollo Heights each faces resort permitting challenges and complications, described in more detail in the Investment Manager's Report. There has been a lack of credible investment interest from resort developers in any of these plots for over 15 years. The situation at Lavender Bay has been complicated by a challenge in Q1 2022 by the Greek state in relation to DCI's ownership title, which needs to be addressed in tandem with the original vendor of the land, the Archdiocese of Dimitriada. As a conservative measure, the now disputed ownership of Lavender Bay has led the Company to write down the value of the asset to €5.1 million (2020: €18.3 million). The liability to pay further instalments of €20.8 million to the Church for the land purchase has been retained in the 2021 financial statements although the Company has no intention to make any further payments until the ownership dispute has been resolved. The Church and DCP are negotiating a skeleton compromise to jointly pursue the establishment of our legal rights over the property through the Greek courts as well as to write off the Company's remaining liability. Further announcements to Shareholders will be made in due course.

As an alternative strategy to simply posting for sale the land plots at Scorpio Bay, Plaka Bay and Apollo Heights, early-stage discussions have recently commenced with renewable energy developers interested to build solar or wind farms. The development of renewable energy in Greece and Cyprus and the subsequent consolidation of operators has trailed the industry trend in other southern European countries. The increased recent significant development interest in renewable energy is supported by the availability of sector-specific finance under the EU-funded €31 billion Recovery and Resilience Plan for Greece and €1.2 billion for Cyprus. Each site in DCI's undeveloped land bank is large, with potential for the installation of significant renewable energy developments, and the coastline locations provide the potential for either wind or solar energy. DCI is open to selling, leasing or perhaps even exchanging the land in return for renewable project equity.

It remains the intention of the Board and the Investment Manager to dispose of all the Company's remaining investments by the end of 2024 consistent with the new Investing Policy and Realisation Strategy.

Investment Management Agreement

In order to reduce the loss of value to Shareholders from operating costs as the Company implements its new Investing Policy and Realisation Strategy, the new Investment Management Agreement ("IMA") better aligns DCP's interests with those of Shareholders.

The IMA has been effective since 1 January 2022. Its key terms eliminate an annual fixed investment management fee and has been replaced by the introduction of an incentive fee arrangement payable to DCP on the following basis:

· An incentive fee will only accrue when Shareholders receive a distribution from the Company.

· No incentive fee will accrue or be payable to DCP until Shareholders have first received aggregate distributions of at least €40.0 million, which approximates to the current market capitalisation of the Company.

· Thereafter, an incentive fee of 15% will be payable to DCP on all distributions paid to Shareholders.

· Once €80.0 million has been distributed to Shareholders, a bonus of €1.0 million for every additional €5.0 million of distributions will be payable to DCP until a total of €100.0 million has been distributed to Shareholders.

· In order to permit DCP to meet its working capital commitments, quarterly advances will be paid by DCI in the amounts of €2.4 million in total for 2022, €2.3 million for 2023 and €1.3 million for 2024. These advances will be repaid by DCP to the Company by way of set off against accrued incentive fee entitlements.

· All fees accrued and paid in cash to DCP with effect from 1 January 2022 under the terms of an asset management agreement entered into between DCP and the project company for the OOKI investment will also be set off against the accrued incentive fee entitlements.

· In order to discourage 'cherry picking' through the priority sale of DCI's more attractive investments, 25% of any incentive fee entitlements payable will be held in escrow and released with the last distribution to Shareholders after the last remaining investment has been sold.

The IMA has an initial term of twelve months and, thereafter, may be terminated on six months' notice by either party.

The Financial Statements for the financial year ended 31 December 2021 contained in this report disclose an investment management fee of €3.6 million (2020: €3.6 million), which reflects the previous investment management arrangements, as detailed in Note 28.2 of the consolidated financial statements.

Operations of the Company

The strategic review undertaken by the Board in consultation with DCP identified a number of potential improvements and cost savings to the operation of the Company and reduction of cash outflows. Other than introducing a new IMA, these included:

· reducing the independent Directors' remuneration from an annualised rate of €367,000 to a current annualised rate of €200,000;

· negotiating new service agreements and fee terms with all of the Company's major service providers;

· appointing FIM Capital Limited ("FIM") to replace the Company's former Jersey based administrator;

· terminating the appointment of the Company's former custodian;

· terminating the appointment of the Company's former public relations adviser;

· appointing finnCap as the Company's combined Nominated Adviser and Broker to replace the split roles previously undertaken by Grant Thornton and Panmure Gordon; and

· closing subsidiary companies which are either dormant or have no further use to DCI.

These changes have been made to improve and streamline operations to significantly reduce the operating costs and cash outflows of the Company.

The principal immediate financial challenge that will continue to face DCI is meeting the Company's cash flow obligations towards creditors while maximising the equity value upon realisation of the individual assets. The €15.0 million term loan facility signed on 3 June 2021 is expensive and has a relatively short maturity. Although €2.1 million has already been repaid, the Company is in discussions with potential lenders to refinance the existing facility with a new increased loan that would enable the Company to replenish its cash balance and extend the loan maturity. DCP remains optimistic that a balance can be struck between early realisations of investments to raise funds to meet liabilities and disposals at attractive prices. Detailed updated cash flow forecasts are reviewed by the Board, DCP and the Administrator at least twice a month.

The Board intends to use substantially all net proceeds from the sale of the Company's investments to repay the outstanding balance of the term loan facility. After repaying the loan and other accrued liabilities, all remaining cash held by the Company will be distributed to Shareholders, subject to retaining sufficient funds to meet the Company's obligations and to cover its reasonable working capital requirements. Given the unpredictable timing of disposals of investments and of the economic recovery in Greece, Cyprus and Croatia, the timing and quantum of distributions to Shareholders cannot be determined with any certainty.

Shareholders should be aware that delays in realising the Livka Bay and/ or Aristo investments will require the Board to reconsider its current strategy. For example, the Company may be forced to accelerate the sale of part or all of either the OOKI or Kilada holdings or to raise further capital to bridge the period until investments are sold.

Corporate Governance

FIM, which is regulated by the Isle of Man Financial Services Authority, provides the full range of services associated with a closed end fund, listed on the AIM segment of the London Stock Exchange, being company secretarial, accounting and administration services to DCI and its subsidiary companies. FIM has embedded improved professional governance standards, systems and policies and the control environment within the group is now more robust. FIM is also responsible for preparing the accounts of the Company. To ensure that DCI's decisions are promptly executed and monitored, FIM is in the process of assuming representation on the boards of most of the group holding companies.

Relinquishing the administration and accounting services to FIM, has allowed the Board and DCP to focus on the commercial issues of project development, realisations of investments and contingency planning for potential cash flow shortfalls. Board meetings are held once a month, usually in person, with bi-weekly Videoconference calls to review interim commercial and financial developments. The Directors make regular site visits to the key assets and engage directly, in co-operation with DCP, with all of the key stakeholders.

The Company's new Memorandum and Articles of Association (the "Articles") approved and adopted at the 2021 EGM improve the Company's corporate governance and the accountability of the Board to Shareholders. Additionally, Shareholders have improved rights that are more closely aligned to the constitution of a company incorporated under the UK Companies Act 2006. The Articles contain inter alia a requirement for the Company to hold annual general meetings ("AGM") to approve the annual report and accounts; the re-election of Directors by rotation on a three year cycle; and the ability of Shareholders owning 10 per cent. or more of Common Shares to requisition an EGM at any time.

The Company's first AGM will be held in Q4 2022, at which Shareholders will be requested to approve the Annual Report & Accounts for 2021.

Prospects

There has been much activity since we joined the Board on 30 June 2021 aimed at stabilising DCI, reducing cash outflows, aligning DCP's interests with those of Shareholders and improving corporate governance. We have no doubt that there may be surprises and disappointments as we endeavour to dispose of investments to repay debt and then commence distributions to Shareholders. As the implementation of the Investing Policy and Realisation Strategy progresses, however, the Board and DCP will remain closely engaged with Shareholders and other stakeholders in order to communicate, as best we reasonably can, the continuing challenges the Company faces.

We are most appreciative of your patience and support.

Martin M. Adams

Chairman

Dolphin Capital Investors Ltd

30 June 2022

B. Investment Manager's Report

B.1. Business Overview

During the period we focused on enhancing the value of our portfolio assets, while addressing the day-to-day challenges presented by COVID-19 and, recently, by the conflict in Ukraine:

- progressing construction works at OOKI and Kilada;

- adjusting our retail and project sales and marketing strategies to meet the post Covid era challenges;

- securing liquidity at the DCI level to meet all our operational expenses in the medium-term;

- making permitting advances across our asset portfolio; and,

- monitoring our operational budgets and reducing overhead costs.

B.2. Bridge Financing

On 3 June 2021, Dolphin entered into a bridge loan facility of €15.0 million with two institutional private credit providers acting on behalf of their managed and advised funds which has been fully drawn down and partially repaid. The current outstanding balance of this facility is c. €12.8 million.

B.3. Major Assets Review

- One&Only at Kea Island, Greece - www.oneandonlyresorts.com/kea-island

o It was jointly decided by the OOKI shareholders that it is for the best interest of the resort to open for the 2023 season. This decision reflects the delays in construction attributed mainly to global supply chain issues, but also enables us to redesign and improve the offering of certain key project components such as the Spa and Beach Club.

o Construction works progressed throughout all project areas. More specifically, all guest room structures were completed and internal works have advanced, while, most furniture and equipment for the guest rooms have been ordered and are ready to be installed. The Main Building structure is complete with internal architectural finishes underway, and the main back of house area, which is located in the basement of the Main building, is complete. Internal roadway paving commenced in areas where infrastructure works has been completed and landscaping works have also commenced. Despite the global increase in prices, effects from Covid-19 and other factors actions have been taken to contain the level of impact to the hotel budget by proactive measures which included: redesign of certain project elements, direct procurement, and negotiations with suppliers, for both financial and timing matters. Nevertheless, there will be an impact on the cost of future construction, such as the private residences, however we expect that such cost overruns would be matched by higher sales proceeds thus not having a material effect on our development margins.  

o Five one-bedroom One&Only Kea Island Private Homes ("OOKI PHs"), and six larger OOKI PHs are currently under construction.

o The Spa and Beach Club is under re-design and works are expected to begin within Q2 2022.

o The raising of the profile of the project and more specifically of the OOKI PHs continues, in close co-operation with the One&Only sales and marketing teams and through several marketing activities. The website that has been created within the general One&Only website (www.oneandonlyresorts.com/kea-island), including online enquiries, alongside a series of marketing collateral (printed and digital) showcasing the OOKI PHs available for sale as well as the destination, is constantly being updated. Photoshoots have been conducted and all available marketing material produced will be updated in summer 2022. Most activities are currently online targeted promotional sales actions, via social media, newsletters, electronic direct mails, webinars, presentations to journalists and digital presentations to potential clients. Several site visits by prospective buyers have been conducted until November 2021, and more are planned in the coming months. The international PR campaign is underway with ongoing extensive publicity in high profile publications and all sales and marketing activities have resumed in spring 2022 in collaboration with One & Only and other One & Only resorts.

o A total of 10 sales of OOKI PHs have been concluded to date, including all five one-bedroom units out of the eight with a guaranteed yield. Most buyers originate from Western European countries and the USA and are very familiar with the One&Only brand. Sales officially launched in June 2020 and a number of promotional activities to showcase the OOKI PHs have been undertaken with One & Only, agents and via connectors. An additional three OOKI PHs are expected to be signed by the end of July which should bring total aggregate sales value to over €48.0 million.

- Kilada Country Club, Golf & Residences, Greece - www.mykilada.com

o Works continue with the construction of the golf course. Approximately 70% of the surface area of the golf course is excavated and shaped, with irrigation and drainage works progressing in those areas. The golf irrigation lake is complete and the main irrigation pump station is installed. All Phase One internal roads within the residential areas of the project have been constructed to rough grade, and sewerage and water networks are complete. Archaeological findings within the excavation areas of the project have led to material continuing delays on progress, which in coordination with the local antiquities department are investigated before works can continue.

o The preferred equity co-investor, has contributed to date €11.5 million into the project, out of his €12.0 million commitment. 

o The notarial Deed for the acquisition of 24 founder plots in Kilada by Amanzoe for a consideration of €10.0 million was concluded on 2 August 2021. We are working with the buyer to register mortgages over the respective lots so that they can start releasing the sales instalments. We expect that this will be concluded within Q3 2022. We had also applied for a Greek state subsidy for Kilada on 31 July 2021 so that the project can make use of the development incentives offered to large scale touristic infrastructure developments and, due to the project status as a Strategic Investment for Greece, we were able to obtain a €6.0 million subsidy awarded to the project on 2 November 2021.

o During the period, two new reservation agreements and one pre-contract for the sale of residential plots have been concluded. New family style units have been designed and new sales material has been prepared while a dedicated Kilada sales office will open during the season in close proximity to the site. The project's PR, sales and marketing activities have resumed after a short break in the winter, and those include targeted social media campaigns, PR activities, advertising campaigns in international media, participation in international real estate affairs, and actions in collaboration with PGA, Arcis and select real estate agents.

- Lavender Bay

o The Greek Council for Public Properties issued an Opinion on 29 September 2021 claiming that the land that was sold to Golfing Developments S.A. (our wholly owned subsidiary that owns the Lavender investment) belonged to the Greek State and not the Archdiocese of Dimitriada which had sold the property to us in 2006 and 2007. This Opinion was adopted by the Ministry of Finance in Q1 2022, who has since taken steps to register the property in the name of the Greek State at the local land registries.

o In view of these developments we are in negotiations with the original vendor with a view to ensuring that no additional funds are paid to them under our sale and purchase contracts until the resolution of this legal dispute with the Greek State and, to potentially reduce the overall quantum of our deferred liabilities to them, by capitalizing such deferred payments against a minority equity position in the project. In parallel, we are working with their legal counsels to prepare our legal recourse against the Greek State to the competent courts so that the matter can be finally judicially resolved.

- Livka Bay

o We remain in discussions with local estate agents and potential investors, relating to the divestment of the project.

- Apollo Heights

o The official zoning and the relevant declaration of public policy were formally announced and published on 16 May 2022, regulating the development in the non-military Sovereign Base Areas in Cyprus where the largest part of Apollo Heights is located.

o Prior to the finalization of the zoning entitlements, there is a four-month period during which objections can be filed.

o Although, the zoning announced is in line with the provisional zoning, the Company is examining the option of filing an objection with a view to improving the official zoning for Apollo.

- Aristo (a 47.9% affiliate) - www.aristodevelopers.com

o Operating Performance

§ The termination of the Cyprus citizenship investment programme and the travel restrictions imposed in both China and Cyprus in the aftermath of the COVID-19 breakout continue to create a major obstacle to Aristo's sales efforts especially in Asia, while the sanctions against Russia, imposed by EU, following the conflict in Ukraine are also expected to worsen the situation.

§ Notwithstanding these headwinds, 62 homes and plots were sold during 2021, representing total sales of €26.0 million, up 68% compared to €15.5 million in Covid-hit 2020.

§ 21 homes and plots were sold in total up to the end of April 2022, representing total sales of €8.9 million, up 49% compared to €5.9 million for the same period in 2021.

§ The main source of clients was Cypriots during 2021, representing c. 40% of sales.

C. Group Assets

A summary of Dolphin's current investments is presented below.

* Further details on debt maturities are set out under note 23 of the financial statements.

*\* Total real estate value includes equity investments in OOKI and Aristo.

A breakdown of Dolphin's portfolio, as at 31 December 2021, with certain key metrics is provided below:

***DCI's portfolio in Cyprus includes its equity investment in Aristo Developers Ltd, which owns assets in Cyprus that are subject to Aristo's debt and other obligations.

D. Market Dynamics

Greece

The OECD projects that Greece's GDP will grow by 2.8% in 2022 and 2.5% in 2023.

Greece's economy recovered strongly following the progressive lifting of Covid-19 containment measures since April 2021. By September 2021, business confidence had recovered to post-financial crisis levels as businesses re-opened. International air arrivals during July-August reached more than 60% of the 2019 peak.

According to the Bank of Greece, in 2021, the balance of travel services showed a surplus of €9.5bn vs surplus of €3.5bn in 2020 and €15.4bn in 2019. Travel receipts rose by €6.3bn or 146.7% y-o-y to €10.7bn, reaching 59% of the 2019 results, while travel payments also increased by €326.4m or 41.2% y-o-y to €1.1bn, reaching 41% of the 2019 level. The rise in travel receipts was due to a 99.4% y-o-y increase in inbound traveller flows which reached 14.7m visitors, (47% of the 2019 level), as well as to a rise of 22.1% y-o-y in average expenditure per trip which came to €713 versus €564 in 2019.

The government's recovery and resilience plan is expected to boost activity and productivity through investments in the green transition, upgrading digital infrastructure and skills, and supporting private firms' investments. Realising the projected acceleration in investment will require resolving banks' remaining non-performing loans and tax credits and improving the investment climate and the public sector's performance.

However, the price inflation in Greece is forecasted at 6.1% in 2022 and at 1.2% in 2023 according to IMF. In addition, according to Eurostat flash estimates, in May 2022, the Greek Harmonized Index of Consumer Prices (HICP) recorded a 10.7% increase y-o-y and a 1.2% increase m-o-m.

Besides the inflationary pressure, a very strong tourism season is in progress. According to the President of the Greek Tourism Confederation (SETE), the revenues from Greek tourism this season may reach or even exceed 2019 levels.

Cyprus

Even though Cyprus' economy was negatively affected by the rising Covid-19 infection rates at the end of 2020, a strong recovery of the economy was recorded by the end of 2021. According to IMF forecasts, a 4.8% increase in GDP was expected during 2021, reaching almost pre-crisis levels. This increase is mainly driven by domestic demand (aided by Government measures to combat the pandemic), as well as the relatively good performance of the tourism sector prompted by the accelerating pace of the Covid-19 vaccinations and the improved epidemiological situation on the island.

Despite the disruption caused by the pandemic and the termination of the Cyprus Investment Program (CIP), the Real Estate & Construction sector maintained its position as one of the fastest growing sectors of the economy, highlighting its resilience and importance to the overall economy according to the PWC Real Estate Market Report.

During 2021, a total of 3,691 properties in Cyprus were acquired by foreigners, compared to 2,985 properties during 2020, representing an overall 24% increase. From August 2021 onwards, monthly transactions from foreigners appear to be consistently surpassing pre-pandemic levels (i.e. compared to 2019), demonstrating the overall momentum in the Cyprus real estate market.

However, the current situation in Ukraine has had an impact on Russian demand for properties in Cyprus, which has been drastically reduced, together with the reduction of the incoming tourism in general, which is also a lead-in for interest in real estate. In addition, rising price inflation which leads to increased travel costs and cost of construction materials, is evident in the Cyprus market. According to the property price index published by the Central Bank of Cyprus for the fourth quarter of 2021, residential property prices rose by 1% year-on-year for houses and 6.3% year-on-year for apartments. At the same time, construction costs rose by 17.3% year-on-year during the fourth quarter of the previous quarter, something which will inevitably be reflected in how property prices are calculated.

Residential property in Cyprus continued to be in high demand in April 2022, with 938 successful transactions completed on the island - a 13% increase from April 2021. According to the country's Land Registry, this is the greatest figure since 2008. The most stable sales are in Limassol, following by Nicosia and the resort cities of Paphos and Larnaca.

Croatia

2021 was defined by a gradual return to normality, after the dual crises of the Covid-19 pandemic and an earthquake in the previous year. According to the European Commission the economic developments in 2021 point to a V-shaped recovery of the Croatian economy. After a drop of 8.1% in 2020, the country recorded an annual GDP growth of 10.4 percent in 2021, reaching the pre-crisis level of economic activity.

The recovery in 2021 was supported by exports of goods and services, with tourism playing a key role as well as private consumption. Resilience and a quick recovery of Croatian tourism was also reflected in high demand for hotels, as mentioned in the Colliers CRE Investment Market report. The total transaction volume of commercial real estate was around €700 million in 2021, representing a 40% increase year-on-year.

GDP growth in 2022 is expected to remain dynamic, at 3.4% but lower than the initial projection for a 4.8% growth. mainly driven from a positive contribution from domestic demand, the expected acceleration of post-earthquake reconstruction in the Banovina region and Zagreb and the implementation of the EU backed National Recovery and Resilience Plan.

E. Future Objectives

The Company's main objectives for 2022 are to:

1. secure adequate working capital liquidity for DCI;

2. execute further portfolio asset disposals;

3. complete construction at OOKI and achieve more residential sales;

4. progress construction at Kilada and generate plot/villa sales; and,

5. progress planning and permitting selectively for the remaining portfolio.

F. Financial Position for the year ended 31 December 2021

F.1. Consolidated statement of profit or loss for the year ended 31 December 2021

Financial Results

Loss after tax for the period ended 31 December 2021 attributable to owners of the Company amounted to €21.3 million (2020: €21.1 million). Loss per share was €0.02 and €0.02 in 2021 and 2020 respectively.

The principal factors affecting the 2021 result were €24.2 million year-end valuation reduction as well as the Company's other operational, corporate, finance and management expenses counterbalanced by €6.0 million share of profits on equity-accounted investees as further explained below. Consolidated statement of profit or loss and other comprehensive income for the year ended

31 December 2021

Further analysis of individual revenue and expense items is provided below.

Revenue

Revenues of €4.7 million (31 December 2020: €3.6 million), were derived from the following sources:

Sale of trading & investment properties in 2021 is attributable to LaVanta sales while in 2020 €1.5 million was attributable to a sale of a land plot situated outside the Kilada development perimeter and the remainder to LaVanta sales .

Cost of sales

Cost of sales comprises the following:

Professional Fees

The charge for the period was €2.1 million (31 December 2020: €2.2 million) and comprises the following:

Administrative and other expenses

The administrative and other expenses amounted to €1.3million (31 December 2020: €1.3 million) and are analysed as follows:

Change in valuations

Change in valuations amounted to €24.6 million (31 December 2020: €10.2 million) and are analysed as follows:

F.2. Consolidated statement of financial position as at 31 December 2021

The reported NAV as at 31 December 2021 is presented below:

___________

Notes:

1. Euro/GBP rate 0.83939 as at 31 December 2021 and 0.90453 as at 31 December 2020.

2. NAV per share has been calculated on the basis of 904,626,856 issued shares as at 31 December 2021 and as at 31 December 2020.

Total Group NAV as at 31 December 2021 was €125.7 million and €119.1 million before and after DTL respectively. This represents a decrease of €31.0 million (19.8%) and €29.6 million (19.9%), respectively, from the 31 December 2020 figures.

Sterling NAV per share as at 31 December 2021 was 12p before DTL and 11p after DTL and decreased by 25.5% and 25.7%, before and after DTL respectively compared to the 31 December 2020 figures. NAV reduction was primarily due to the appreciation of Sterling versus the Euro during the period of approximately 7%, the valuation reduction on certain portfolio assets and to other operational, corporate, finance and management expenses of the Group. The reduction in valuations includes a €13.2 million downward adjustment of Lavender' s Bay investment property so as to account for the valuation uncertainty resulting from the ongoing ownership dispute in Lavender with the Greek State as detailed in Note 34 of the consolidated financial statements for the year ended 31 December 2021.

The Company's consolidated assets of €189.1 million include €117.8 million of real estate assets, €65.6 million of equity- accounting investees (which represents the 33% investment in Kea Resort as well as the Company's 47.9% interest in Aristo), €1.1 million of other assets (trade and other receivables), and €4.6 million in cash.

The figure of €117.8 million of real estate assets (property, plant and equipment, trading properties and investment property) represents the independent property valuations conducted as at 31 December 2021 by American Appraisal (for the Greek and Cypriot projects) for both freehold and long leasehold interests of Kilada, Scorpio Bay, Lavender Bay, Apollo Heights and Plaka Bay projects as well as the appraised value of Livka Bay (Colliers International conducted the independent property valuation for Croatia).

The Company's consolidated liabilities (excluding DTL) total €54.5 million and mainly comprise €28.3 million of interest bearing loans and finance lease obligations. The €26.2 million of trade and other payables comprise mainly €20.8 million of option contracts to acquire land in the Company's Lavender Bay project. The Company is in negotiations with the original vendor with a view to ensuring that both no additional deferred payments are made to them under the relevant sale and purchase contracts until the resolution of this legal dispute with the Greek State and also to reducing the overall quantum of subsidiary's deferred liabilities to them, potentially swapping all or part of the deferred payments against equity in the project as detailed in Note 34 of the consolidated financial statements.

The consolidated financial statements have been audited by KPMG.

The accounts will be available on www.dolphinci.com and will also be posted.

G. Directors' report

The Directors present their report together with the audited financial statements of the Company and its subsidiary undertakings (together the "Group") for the months ended 31 December 2021.

Principal Activities

The principal activity of the Group is the development of beachfront properties in the Eastern Mediterranean - Greece, Cyprus and Croatia.

Business Review for the period and Future Developments

The consolidated statement of comprehensive income for the twelve month period and the statement of net assets as at 31 December 2021 are set out on pages 10 and 11 of this report. The assets of the Group are principally development properties and these are valued twice a year by the Directors based on recommendations from the Investment Manager. In addition, external valuers are contracted in each relevant country at the financial year end to assess the current value of those properties.

A review of the development and performance of the Group and of expected future developments has been set out in the Chairman's Statement.

No dividends were declared or paid during the financial period under review.

Principal Risks and Uncertainties

The Group's business is property development in the Eastern Mediterranean. Its principal risks are therefore related to the property market in these countries in general, and also the particular circumstances of the property development projects that it is undertaking.

The Directors seek to mitigate and manage these risks through continual review, policy setting and enforcement of contractual rights and obligations. They also regularly monitor the economic and investment environment in countries that the Group operates in and the management of the Group's property development portfolio.

Directors The Directors of the Company who held office throughout the financial period and up to the date of this report were as follows:

· Andrew Coppel - appointed 5 October 2015, resigned 30 June 2021

· Miltos Kambourides

· Mark Townsend - appointed 24 February 2015, resigned 30 June 2021

· Graham Warner - appointed 24 February 2015, resigned 30 June 2021

· Martin Adams - appointed 30 June 2021

· Nicolai Huls - appointed 30 June 2021

· Nicholas Paris - appointed 30 June 2021

On 30 June 2021, Andrew Coppel resigned as Chairman of the Board of Directors and Martin Adams was elected to that role.

All Directors are or were independent non-executive Directors except Miltos Kambourides, who is considered to be non-independent because of his role as the founder and majority owner of Dolphin Capital Partners Limited, the Company's Investment Manager.

Directors' remuneration during the twelve months ended 31 December 2021

The Directors remuneration details during the period of this report were as follows:

*Andrew Coppel, Mark Townsend and Graham Warner resigned as Directors on 30 June 2021 and the Board on which they served awarded them termination payments in exchange for each of them waiving any rights that they had to make claims against the Company.

**Miltos Kambourides continued to waive his right to collect a Director's fee from the Company in light of his involvement as the founder and majority owner of the Company's Investment Manager.

*** Martin Adams, Nicolai Huls and Nicholas Paris were appointed as Directors by the outgoing Directors on 30 June 2021. On 1 July 2021, the new Directors announced that the aggregate remuneration henceforth of all Directors would be limited to Euros 200,000 compared to remuneration paid of Euros 379,000 in the year ended 31 December 2020 and Euros 496,000 in the year ended 31 December 2019.

Directors' interests

The interests of the Directors in the Company's shares as at 27 June 2022 were as follows:

Board committees

The Directors have appointed an Audit Committee to oversee the financial reporting of the Group and ensure that adequate internal controls are in place to manage the risks associated with the business. Until their resignation as Directors on 30 June 2021, Graham Warner and Mark Townsend served on the Audit Committee with Graham Warner being the Chair of it. Since 1 July 2021, Nicholas Paris and Nicolai Huls have served on the Audit Committee with Nicholas Paris being its Chair.

In addition, the Directors have appointed a Nomination & Corporate Governance Committee to review the effectiveness of the Board and recommend any changes to it and oversee the corporate governance policies of the Company. Until their resignations as Directors, Mark Townsend and Andrew Coppel served on the Committee with Mark Townsend being the Chairman. Since 1 July 2021, Nicolai Huls, Martin Adams and Nicholas Paris have served on the Committee with Nicolai Huls being the Chairman.

Management of the Group

The Directors delegated the investment management of the Group to Dolphin Capital Partners Limited in accordance with an agreement dated 1 January 2022. Details of the terms of this agreement are set out in Note 28.2 of these accounts.

Board of Directors

The Board of Dolphin Capital Investors Ltd fully endorses the importance of good corporate governance and applies the QCA Corporate Governance Code, published in April 2018 by the Quoted Companies Alliance (the "QCA Code"), which the Board believes to be the most appropriate recognised governance code for a company of the Company's size with shares admitted to trading on the AIM market of the London Stock Exchange. This is a practical, outcome-oriented approach to corporate governance that is tailored for small and mid-size quoted companies in the UK and which provides the Company with the framework to help ensure that a strong level of governance is maintained.

Responsibilities of the Board

The Board is responsible for the determination of the investment policy of the Company and for its overall supervision via the investment policy and objectives that it has been set out. The Board is also responsible for the Company's day-to-day operations. In order to fulfil these obligations, the Board has delegated operations through arrangements with the Investment Manager, Dolphin Capital Partners and the Administrator FIM Capital Limited.

MARTIN ADAMS

Independent Non-Executive Chairman

Martin has served for over 30 years in executive and non-executive capacities, both as chairman and director of over 20 closed-end funds and fund-invested operating companies listed on European stock exchanges; and on the boards of fund management companies. His investment experience encompasses private equity, property, infrastructure and renewables assets, predominantly in Asia and Europe. In his capacity as chairman of various fund boards, he has both renegotiated management contracts and implemented strategies to realise illiquid assets over time in order to return capital to shareholders.

Martin is currently the Chairman of Eastern European Property Fund Limited, senior independent director of Marwyn Value Investors Limited and a non-executive director of National Investment and Infrastructure Fund Limited in India, Metage Funds Limited, Vietnam Phoenix Fund Limited, VFMC Service Company Limited, Armadillo Investments Limited and BRX Research and Development Company Limited,. He started his career with the Lloyds Bank group, where he was based in the UK, Hong Kong, Portugal and the Netherlands. He is resident in Portugal.

NICHOLAS PARIS

Independent Non-executive Director and chairman of the Audit Committee

Nick is a Fellow of the Institute of Chartered Accountants in England and Wales, a Member of the Chartered Alternative Investment Analysts Association and a Fellow of the Chartered Institute for Securities & Investment. He has more than 30 years' experience in closed end funds. In his career, he has developed significant expertise in analysing, launching and investing in such funds and he has acted as an independent non-executive Director of a number of stock exchange listed funds.

Nick is a very experienced shareholder in, and director of, funds holding illiquid assets in challenging markets. He was a portfolio manager within the LIM Advisors Group until September 2020 where he was responsible for their investments in closed end funds. He is also the Managing Director of Myanmar Investments International Limited, a London listed closed end fund, Non-Executive Chairman of ASEANA Properties Limited and is a member of the Board of Nominees of Fondul Proprietatea S.A. which is listed in both Romania and London. He was formerly a director of Global Resources Investment Trust plc, RDL Realisation PLC and TAU Capital PLC which were all listed in London. He is resident in the UK.

NICOLAI HULS

Independent Non-executive Director and chairman of the Nomination & Corporate Governance Committee

Nicolai is an experienced investment analyst and fund manager with more than 20 years' experience and a particular focus on researching investment funds having worked for a number of leading private banks in Europe including Bank Insinger de Beaufort, Schretlen & Co, Rabobank Private Banking and LCF Edmond de Rothschild. Currently he is a director and sits on the investment committee of Discover Investment Company Betsy Innovations B.V and PBB Holding B.V.

Nicolai has worked for more than 10 years supporting shareholders and investors in the analysis of international listed funds' holdings of alternative assets and subsequently monitoring and advising boards and management teams on the monetisation of their investment portfolios. He is resident in The Netherlands.

MILTOS KAMBOURIDES

Non-executive Director, Founder and Managing Partner of the Investment Manager and its subsidiaries. Dolphin Capital Ventures Limited, Dolphin Capital Finance Limited and other non-real estate related private investment companies.

Miltos was previously a founding partner of Soros Real Estate Partners (SREP), a global real estate private equity business formed in 1999 by George Soros, which executed a number of complex real estate transactions in Western Europe and Japan.

While at SREP, he was primarily responsible for investments relating to property outsourcing in the UK and for the SREP investment strategy in Southeast Europe. He was the deal leader and founder of Mapeley Ltd, which went on to become the second largest real estate outsourcing company in the UK after winning two major 20-year multi-billion-GBP contracts: one with the Inland Revenue and Custom & Excise Departments of the UK and one with the Abbey National Bank.

Prior to joining Soros, Miltos spent two years at Goldman Sachs working on real estate private equity transactions in the UK, France and Spain. In 1998, he received a Goldman Sachs Global Innovation Award for his work at Trillium, the largest real estate outsourcing company in the UK.

He graduated from the Massachusetts Institute of Technology with a BS and MS in Mechanical Engineering and a BS in Mathematics. He has received several academic honours and participated twice in the International Math Olympiad (Beijing 1990, Moscow 1992) and once in the Balkan Math Olympiad (Sofia 1990) where he received a bronze medal.

The Directors skills are kept up to date by attending seminars, conferences and specialized courses from advisers as well as personal reading into the subjects of real estate management and development as well as corporate finance. The Directors also receive ad hoc guidance on certain matters, for example, the AIM Rules for Companies from the Company's Nominated Adviser as well as receiving updates on the regulatory environment from FIM, who provide specialist fund administration services to a variety of closed ended funds and collective investment schemes.

The role and responsibilities of the Directors are set out in Statement of Directors' Responsibilities and the Terms of Reference of the Audit Committee are summarised at the foot of this document.

All Directors are able to take independent professional advice in the furtherance of their duties, if necessary, at the Company's expense.

Six formal Board meetings (including Board calls) were held in the year since 1 of July 2021 to 22 December 2021. A summary of Board and Committee meetings attended in the 6 months to 22 December 2021 is set out below:

Audit Committee:

The Audit Committee is chaired by Nick Paris and its other member is Nicolai Huls and aims to meet at least three times a year.

The Committee provides oversight and review of the financial reporting process, the audit process, the system of internal controls, the accounting policies, principles and practices underlying them, liaising with the external auditors and reviewing the effectiveness of internal controls, and overall compliance with laws and regulations and review the budgetary process.

Substantial Shareholders

The Directors are aware of the following direct and indirect interests comprising more than 3% of the issued share capital of the Company as at 27 June 2022, which is the latest practicable date before the publication of this report:

Continuation of the Company

At an Extraordinary General Meeting ("EGM") of Shareholders held on 11 December 2021, Shareholders approved the continuation of the Company with no set end date in order that the Company could pursue the New Investment Policy and Realisation Strategy. In addition, they approved a revised Investment Management Agreement ("IMA") eliminating the fixed management fees of €3.6 million per annum and introducing quarterly advances of incentive fees whose level would be tied to distributions made to Shareholders.

INDEPENDENT AUDITORS' REPORT

TO THE MEMBERS OF

DOLPHIN CAPITAL INVESTORS LIMITED

Report on the audit of the consolidated financial statements

Qualified Opinion

We have audited the accompanying consolidated financial statements of Dolphin Capital Investors Limited (the 'Company'), and its subsidiaries (together with the Company, the 'Group'), which are presented on pages 9 to 58 and comprise the consolidated statement of financial position as at 31 December 2021, and the consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, except for the possible effects of the matter described in the Basis for Qualified Opinion section of our report, the accompanying consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2021, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union ('IFRS-EU').

Basis for Qualified Opinion

As described in Note 34, an amount of €5.1 million is included in Investment Property as of 31 December 2021 relating to land acquired or leased by its subsidiary company Golfing Development S.A. In prior years at Nies (Sourpi, Thessaly), for which a fair value adjustment of €13.2 million was recorded as loss in 2021 in profit or loss. The respective land is disputed by the Greek State as to its private character, for which various legal actions are in progress by the Group's component, Golfing Development S.A., claiming its ownership and legal rights. The outcome of these legal actions cannot be reliably determined at this stage.

Based on the above, we were unable to obtain sufficient and appropriate audit evidence in relation to the ownership and fair value of the Investment Property of total amount of €5.1 million representing approximately 2.7% of the total assets of the Group. Consequently, we were unable to determine whether and to what extent any adjustments to the fair value of this property were necessary.

We conducted our audit in accordance with International Standards on Auditing ('ISAs'). Our responsibilities under those standards are further described in the 'Auditors' responsibilities for the audit of the consolidated financial statements' section of our report. We are independent of the Group in accordance with the International Code of Ethics (Including International Independence Standards) for Professional Accountants of the International Ethics Standards Board for Accountants (''IESBA Code'') together with the ethical requirements in Cyprus that are relevant to our audit of the consolidated financial statements, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. This matter was addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter.

Valuation of immovable property

(Refer to notes 15 to 16, and 19 to the consolidated financial statements)

Other information

The Board of Directors is responsible for the other information. The other information comprises the information included in the Group's annual report but does not include the consolidated financial statements and our auditors' report thereon (which is expected to be made available to us after the date of this auditor's report) and the Directors' report (which we obtained prior to the date of this auditor's report).

Our opinion on the consolidated financial statements does not cover the other information and we will not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. When we read the annual report, or otherwise appears to be materially misstated.

If, based on the work we have performed on the other information that we obtained prior to the date of this auditor's report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

When we read the annual report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.

Responsibilities of the Board of Directors and those charged with governance for the consolidated financial statements

The Board of Directors is responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with IFRS-EU, and for such internal control as the Board of Directors determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the Board of Directors is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting, unless there is an intention to either liquidate the Company or to cease Group's operations, or there is no realistic alternative but to do so.

The Board of Directors is responsible for overseeing the Group's financial reporting process.

Auditors' responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional skepticism throughout the audit. We also:

· Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

· Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.

· Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Directors.

· Conclude on the appropriateness of the Board of Directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Group to cease to continue as a going concern.

· Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves a true and fair view.

· Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with Governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with Governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with those charged with Governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors' report.

Other matter

This report, including the opinion, has been prepared for and only for the Company's members as a body and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whose knowledge this report may come to. These financial statements have not been prepared for the purpose of complying with the legal requirements of the British Virgin Islands Law. 

The engagement partner on the audit resulting in this independent auditors' report is Demetris S. Vakis.

____________________

NOTE: the pages referenced in the "INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF DOLPHIN CAPITAL INVESTORS LIMITED" are included in section H of the report that follows.

________________

H. Consolidated statement of profit or loss and other comprehensive income

For the year ended 31 December 2021

Consolidated statement of financial position

As at 31 December 2021

Consolidated statement of changes in equity

For the year ended 31 December 2021

Consolidated statement of cash flows

For the year ended 31 December 2021

Notes to the consolidated financial statements

For the year ended 31 December 2021

1. REPORTING ENTITY

Dolphin Capital Investors Limited (the 'Company') was incorporated and registered in the British Virgin Islands ('BVI') on 7 June 2005. The Company is a real estate investment company focused on the early-stage, large-scale leisure-integrated residential resorts in south-east Europe, and managed by Dolphin Capital Partners Limited (the 'Investment Manager'), an independent private equity management firm that specialises in real estate investments, primarily in south-east Europe. The shares of the Company were admitted to trading on the AIM market of the London Stock Exchange ('AIM') on 8 December 2005.

The consolidated financial statements of the Company as at 31 December 2021 comprise the financial statements of the Company and its subsidiaries (together referred to as the 'Group') and the Group's interests in equity-accounted investees.

2. basis of preparation

a. Statement of compliance

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union ('EU').

The consolidated financial statements were authorised for issue by the Board of Directors on 28 June 2022.

b. Basis of preparation

The consolidated financial statements have been prepared on a going concern basis, which assumes that the Group will be able to discharge its liabilities in the normal course of business.

On 22 December 2021, an Extraordinary General Meeting was held and the Shareholders approved a continuation of the Company without setting a termination date or a date for a further continuation vote in order to provide time to optimise for Shareholders the value that can be realised from the Company's investments by removing potentially commercially prejudicial deadlines from negotiations with potential buyers. Notwithstanding the absence of a formal date for Shareholders to consider a continuation of the Company, the Board may, at any time, propose a further continuation vote to Shareholders.

The Group's cash flow forecasts for the foreseeable future involve uncertainties related primarily to the exact disposal proceeds and timing of disposals of the assets expected to be disposed of. Management believes that the proceeds from forecast asset sales will be sufficient to maintain the Group's cash flow at a positive level. Should the need arise, management will take actions to reduce costs and is confident that it can secure additional loan facilities and/or obtain repayment extension on existing ones, until planned asset sales are realised and proceeds received. 

If for any reason the Group is unable to continue as a going concern, then this could have an impact on the Group's ability to realise assets at their recognised values and to extinguish liabilities in the normal course of business at the amounts stated in the consolidated financial statements.

Based on these factors, management has a reasonable expectation that the Group has and will have adequate resources to continue in operational existence for the foreseeable future.

c. Basis of measurement

The consolidated financial statements have been prepared under the historical cost convention, with the exception of property (investment property and property, plant and equipment), which are stated at their fair values.

d. Adoption of new and revised standards and interpretations

As from 1 January 2021, the Group adopted all changes to IFRS which are relevant to its operations. This adoption did not have a material effect on the consolidated financial statements of the Group.

The following standards, amendments to standards and interpretations have been issued but are not yet effective for annual periods beginning on 1 January 2021. Those which may be relevant to the Group are set out below. The Group does not plan to adopt these standards early. The Group continues to assess the potential impact on its consolidated financial statements resulting from the application of the following standards.

(i) Standards and interpretations adopted by the EU

IFRS 3 Business Combinations (Amendments) (effective for annual periods beginning on or after 1 January 2022)

The amendments to IFRS 3 relate to an update of a reference to the Conceptual Framework of Financial Reporting without changing the accounting requirements for business combinations.

IAS 16 Property, Plant and Equipment (Amendments) (effective for annual periods beginning on or after 1 January 2022)

The amendments to IAS 16 prohibit a company from deducting, from the cost of property, plant and equipment, amounts received from selling items produced while the company is preparing the asset for its intended use. Instead, a company will recognise such sales proceeds together with the costs of producing those items in profit or loss. The Group is currently evaluating the expected impact of adopting the amendments on its financial statements. As such, the expected impact of the amendments is not yet known or reasonably estimable.

IAS 37 Provisions, Contingent Liabilities and Contingent Assets (Amendments) (effective for annual periods beginning on or after 1 January 2022)

The amendments to IAS 37 specify what is included in the costs to fulfil a contract when assessing whether a contract is onerous. The Group is currently evaluating the expected impact of adopting the amendments on its financial statements. As such, the expected impact of the amendments is not yet known or reasonably estimable.

IAS 1 Presentation of Financial Statements (Amendments) and IFRS Practice Statement 2 Making Materiality Judgements: Disclosure of Accounting Policies (effective for annual periods beginning on or after 1 January 2023)

The amendments to IAS 1 and the update to IFRS Practice Statement 2 aim to help companies on the application of materiality to the disclosure of accounting policies. The key amendments to IAS 1 include: (1) requiring companies to disclose their material accounting policies rather than their significant accounting policies, (2) clarifying that accounting policies related to immaterial transactions, other events or conditions are themselves immaterial and as such need not be disclosed, and (3) clarifying that not all accounting policies that relate to material transactions, other events or conditions are themselves material to a company's financial statements. The amendments to IFRS Practice Statement 2 are to include guidance and two additional examples on the application of materiality to accounting policy disclosures. The amendments are consistent with the refined definition of material i.e. 'Accounting policy information is material if, when considered together with other information included in an entity's financial statements, it can reasonably be expected to influence decisions that the primary users of general-purpose financial statements make on the basis of those financial statements'. The Group is currently evaluating the expected impact of adopting the amendments on its financial statements. As such, the expected impact of the amendments is not yet known or reasonably estimable.

IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (Amendments): Definition of Accounting Estimates (effective for annual periods beginning on or after 1 January 2023)

The amendments to IAS 8 are issued to clarify how companies should distinguish changes in accounting policies from changes in accounting estimates, with a primary focus on the definition of and clarifications on accounting estimates. The amendments introduce a new definition for accounting estimates: clarifying that they are monetary amounts in the financial statements that are subject to measurement uncertainty. The amendments also clarify the relationship between accounting policies and accounting estimates by specifying that a company develops an accounting estimate to achieve the objective set out by an accounting policy. Developing an accounting estimate includes both: (1) selecting a measurement technique (estimation or valuation technique), and (2) choosing the inputs to be used when applying the chosen measurement technique. The effects of changes in such inputs or measurement techniques are changes in accounting estimates. The definition of accounting policies remains unchanged.

The Group is currently evaluating the expected impact of adopting the amendments on its financial statements. As such, the expected impact of the amendments is not yet known or reasonably estimable.

(ii) Standards and interpretations not adopted by the EU

IAS 1 Presentation of Financial Statements (Amendments): Classification of Liabilities as Current or Non-current (effective for annual periods beginning on or after 1 January 2023)

IASB has amended IAS 1 to promote consistency in application and clarify the requirements on determining if a liability is current or non-current. Under existing IAS 1 requirements, companies classify a liability as current when they do not have an unconditional right to defer settlement of the liability for at least twelve months after the end of the reporting period. As part of its amendments, the IASB has removed the requirement for a right to be unconditional and instead, now requires that a right to defer settlement must have substance and exist at the end of the reporting period.

IAS 12 Income Taxes (Amendments): Deferred Tax related to Assets and Liabilities arising from a Single Transaction (effective for annual periods beginning on or after 1 January 2023)

Targeted amendments to IAS 12 clarify how companies should account for deferred tax on certain transactions (e.g. leases and decommissioning provisions). The amendments narrow the scope of the initial recognition exemption (IRE) so that it does not apply to transactions that give rise to equal and offsetting temporary differences. As a result, companies will need to recognise a deferred tax asset and a deferred tax liability for temporary differences arising on initial recognition of a lease and a decommissioning provision.

IFRS 10 Consolidated Financial Statements (Amendments) and IAS 28 Investments in Associates and Joint Ventures (Amendments): Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (effective date postponed indefinitely; early adoption continues to be permitted)

The amendments address an acknowledged inconsistency between the requirements in IFRS 10 and those in IAS 28, 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 (as defined in IFRS 3). A partial gain or loss is recognised when a transaction involves assets that do not constitute a business. In December 2015, the IASB postponed the effective date of this amendment indefinitely pending the outcome of its research project on the equity method of accounting. 

e. Use of estimates and judgements

In preparing these consolidated financial statements, management has made judgements, estimates and assumptions that affect the application of accounting principles and the related amounts of assets and liabilities, income and expenses. The estimates and underlying assumptions are based on historical experience and various other factors that are deemed to be reasonable based on knowledge available at that time. Actual results may deviate from such estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.

Material valuation uncertainty

Due to market conditions as formed by the COVID-19 pandemic, management's estimates of the fair value of the assets valued at fair value have increased valuation uncertainty compared to previous years.

Impairment of investment in equity-accounted investees

The Company follows the requirements of IAS 36 to determine whether the investments in equity-accounted investees are impaired and calculates the amount of the impairment. An impairment loss is recognised for the difference between the carrying amount and the recoverable amount of the asset. The recoverable amount is the greater of the fair value less costs to sell and value in use. As at 31 December 2021, the Group assessed whether the carrying amount of equity-accounted investees is impaired, by comparing it with its fair value less cost to sell.

Measurement of fair values

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

The Group has an established control framework with respect to the measurement of fair values. This includes a valuation team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values.

When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Significant unobservable inputs and valuation adjustments are regularly reviewed and changes in fair value measurements from period to period are analysed.

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

When applicable, further information about the assumptions made in measuring fair values is included in the notes specific to that asset or liability.

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

- Note 3 and 15: property, plant and equipment;

- Note 3 and 16: investment property.

f. Functional and presentation currency

These consolidated financial statements are presented in Euro (€), which is the Company's functional currency. All amounts have been rounded to the nearest thousand, unless otherwise indicated.

3. MEASUREMENT of fair values

Properties

The fair value of investment property and land and buildings classified as property, plant and equipment is determined at the end of each reporting period. External, independent valuation companies, having appropriate recognised professional qualifications and recent experience in the location and category of the properties being valued, value the Group's properties at the end of each year and where necessary, semi-annually.

The Directors have appointed American Appraisal, Colliers International and HVS (for One&Only Kea Resort), three internationally recognised firms of surveyors, to conduct valuations of the Group's acquired properties to determine their fair value. These valuations are prepared in accordance with generally accepted appraisal standards, as set out by the Royal Institute of Chartered Surveyors ('RICS'). Furthermore, the valuations are conducted on an 'as is condition' and on an open market comparative basis.

The valuation analysis of properties is based on all the pertinent market factors that relate both to the real estate market and, more specifically, to the subject properties. The valuation analysis of a property typically uses four approaches: the cost approach, the direct sales comparison approach, the income approach and the residual value approach. The cost approach measures value by estimating the Replacement Cost New or the Reproduction Cost New of property and then determining the deductions for accrued depreciation that should be made to reflect the age, condition and situation of the asset during its past and proposed future economic working life. The direct sales comparison approach is based on the premise that persons in the marketplace buy by comparison. It involves acquiring market sales/offerings data on properties similar to the subject property. The prices of the comparables are then adjusted for any dissimilar characteristics as compared to the subject's characteristics. Once the sales prices are adjusted, they can be reconciled to estimate the fair value for the subject property. Based on the income approach, an estimate is made of prospective economic benefits of ownership. These amounts are discounted and/or capitalised at appropriate rates of return in order to provide an indication of value. The residual value approach is used for the valuation of the land and depends on two basic factors: the location and the total value of the buildings developed on a site. Under this approach, the residual value of the land is calculated by subtracting the development cost from the estimated sales value of the completed development.

Each of the above-mentioned valuation techniques results in a separate valuation indication for the subject property. A reconciliation process is then performed to weigh the merits and limiting conditions of each approach. Once this is accomplished, a value conclusion is reached by placing primary weight on the technique, or techniques, that are considered to be the most reliable, given all factors.

4. PRINCIPAL subsidiaries

The Group's most significant subsidiaries were the following:

The above shareholding interest percentages are rounded to the nearest integer.

\* This entity holds 48% shareholding interest in DCI Holdings Two Ltd ('DCI H 2' owner of Aristo Developers Ltd)

** This entity holds 50% shareholding interest in Single Purpose Vehicle Fourteen Limited (owner of 'One&Only Kea Resort')

*** Disposed in 2021

5. Significant accounting policies

The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all periods presented in these consolidated financial statements unless otherwise stated.

5.1 Subsidiaries

Subsidiaries are the entities controlled by the Group. The Group 'controls' an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.

5.2 Non-controlling interests ('NCI')

NCI are measured initially at their proportionate share of the acquiree's identifiable net assets at the date of acquisition. Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

5.3 Loss of control

When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related NCI and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.

5.4 Transactions eliminated on consolidation

Intra-group balances and any unrealised gains and losses arising from intra-group transactions are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity-accounted investees are eliminated to the extent of the Group's interest in the entity. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

5.5 Business combinations

The Group accounts for business combinations using the acquisition method when the acquired set of activities and assets meets the definition of a business and control is transferred to the Group (see Note 5.1). In determining whether a particular set of activities and assets is a business, the Group assesses whether the set of assets and activities acquired includes, at a minimum, an input and substantive process and whether the acquired set has the ability to produce outputs.

The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss.

Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration that meets the definition of a financial instrument is classified as equity, then it is not re-measured and settlement is accounted for within equity. Otherwise, other contingent consideration is remeasured at fair value at each reporting date and subsequent changes in the fair value of the contingent consideration are recognised in profit or loss.

5.6 Interest in equity-accounted investees

The Group's interests in equity-accounted investees comprise interests in associates and a joint venture. Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. A joint venture is an arrangement in which the Group has joint control, whereby the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities. Interests in associates and the joint venture are accounted for using the equity method and are initially recognised at cost, which includes transaction costs. The Group's investment includes goodwill identified on acquisition, net of any accumulated impairment losses. Subsequent to initial recognition, the consolidated financial statements include the Group's share of the income and expenses and equity movements of equity-accounted investees, after adjustments to align the accounting policies with those of the Group, until the date that significant influence or joint control ceases. When the Group's share of losses exceeds its interest in an equity-accounted investee, the carrying amount of that interest (including any long-term investments) is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee.

After application of the equity method, the Group assess the recoverable amount for each associate or joint venture, unless the associate or joint venture does not generate cash inflows from continuing use that are largely independent of those from other assets of the entity. An impairment loss is recognised for the difference between the carrying amount and the recoverable amount of the equity-accounted investees. The recoverable amount is the greater of the fair value less costs to sell and value in use.

5.7 Investment property

Investment property is property held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of the business, use in the production or supply of goods or services or for administration purposes. Investment property is initially measured at cost and subsequently at fair value with any change therein recognised in profit or loss.

Cost includes expenditure that is directly attributable to the acquisition of the investment property. The cost of self-constructed investment property includes the cost of materials and direct labour, any other costs directly attributable to bringing the investment property to a working condition for their intended use.

Any gain or loss on disposal of an investment property (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognised in profit or loss. When an investment property that was previously classified as property, plant and equipment is sold, any related amount included in the revaluation reserve is transferred to retained earnings.

When the use of property changes such that it is reclassified as property, plant and equipment, its fair value at the date of reclassification becomes its cost for subsequent accounting.

5.8 Property, plant and equipment

Land and buildings are carried at fair value, based on valuations by external independent valuers, less subsequent accumulated depreciation for buildings and the subsequent accumulated impairment losses. Revaluations are carried out at the end of each year and where necessary, semi-annually. Properties under construction are stated at cost less any accumulated impairment losses. All other property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. Any gain or loss on disposal of an item of property, plant and equipment is recognised in profit or loss.

Increases in the carrying amount arising on revaluation of property, plant and equipment are credited to fair value reserve in shareholders' equity. Decreases that offset previous increases of the same asset are charged against that reserve; all other decreases are recognised in profit or loss. Increase is recognised to the profit or loss to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss.

The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for their intended use.

Depreciation charge is recognised in profit or loss on a straight-line basis over the estimated useful lives of items of property, plant and equipment. Freehold land is not depreciated.

The annual rates of depreciation are as follows:

Buildings 3%

Machinery and equipment 10% - 33.33%

Motor vehicles and other 10% - 20%

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

The Group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when that cost is incurred if it is probable that the future economic benefits embodied with the item will flow to the Group and the cost of the item can be measured reliably. All other costs are recognised in profit or loss as incurred.

5.9 Trading properties

Trading properties (inventory) are shown at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of the business less the estimated costs of completion and the estimated costs necessary to make the sale. Cost of trading properties is determined on the basis of specific identification of their individual costs and represents the fair value paid at the date that the land was acquired by the Group.

5.10 Leases

At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

At commencement or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of its relative stand-alone prices. However, for the leases of property the Group has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component.

The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.

The Group determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased.

Lease payments included in the measurement of the lease liability comprise the following:

- fixed payments, including in-substance fixed payments;

- variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

- amounts expected to be payable under a residual value guarantee; and

- the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain not to terminate early.

The lease liability is measured at amortised cost using the effective interest method. It is re-measured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group's estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in-substance fixed lease payment.

When the lease liability is re-measured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

The Group presents right-of-use assets that do not meet the definition of investment property in 'property, plant and equipment' and lease liabilities in 'loans and borrowings' in the statement of financial position.

Short-term leases and leases of low-value assets

The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and short-term leases, including IT equipment. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

5.11 Financial instruments

Recognition and initial measurement

Trade receivables and debt securities issued are initially recognised when they are originated. All other financial assets and financial liabilities are initially recognised when the Group becomes a party to the contractual provisions of the instrument.

A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

Classification and subsequent measurement

Financial assets

On initial recognition, a financial asset is classified as measured at: amortised cost; FVOCI - debt investment; FVOCI - equity investment; or FVTPL.

Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:

- it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

- its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

- it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

- its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment's fair value in OCI. This election is made on an investment‑by‑investment basis.

All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Cash and cash equivalents

Cash and cash equivalents comprise cash deposited with banks and bank overdrafts repayable on demand. Cash equivalents are short-term, highly-liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose of the consolidated statement of cash flows.

Financial assets - Business model assessment

The Group makes an assessment of the objective of the business model in which a financial asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes:

- the stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether management's strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realising cash flows through the sale of the assets;

- how the performance of the portfolio is evaluated and reported to the Group's management;

- the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed;

- how managers of the business are compensated - e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; and

- the frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and expectations about future sales activity.

Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered sales for this purpose, consistent with the Group's continuing recognition of the assets.

Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL.

Financial assets - Assessment whether contractual cash flows are solely payments of principal and interest

For the purposes of this assessment, 'principal' is defined as the fair value of the financial asset on initial recognition. 'Interest' is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin.

In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Group considers:

- contingent events that would change the amount or timing of cash flows;

- terms that may adjust the contractual coupon rate, including variable‑rate features;

- prepayment and extension features; and

- terms that limit the Group's claim to cash flows from specified assets (e.g. non‑recourse features).

A prepayment feature is consistent with the solely payments of principal and interest criterion if the prepayment amount substantially represents unpaid amounts of principal and interest on the principal amount outstanding, which may include reasonable additional compensation for early termination of the contract. Additionally, for a financial asset acquired at a discount or premium to its contractual par amount, a feature that permits or requires prepayment at an amount that substantially represents the contractual par amount plus accrued (but unpaid) contractual interest (which may also include reasonable additional compensation for early termination) is treated as consistent with this criterion if the fair value of the prepayment feature is insignificant at initial recognition.

Financial assets - Subsequent measurement and gains and losses

· Financial assets at FVTPL: These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognised in profit or loss.

· Financial assets at amortised cost: These assets are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is recognised in profit or loss.

· Debt investments at FVOCI: These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognised in profit or loss. Other net gains and losses are recognised in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.

· Equity investments at FVOCI: These assets are subsequently measured at fair value. Dividends are recognised as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognised in OCI and are never reclassified to profit or loss.

Financial liabilities - Classification, subsequent measurement and gains and losses

Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss.