Dci Advisors Regulatory News (DCI)

28 March 2012

DOLPHIN CAPITAL INVESTORS LIMITED

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

and together with its subsidiariesthe "Group")

Trading Update, Restructuring of Ownership in Aristo Developers and Preliminary Annual Results

for the period ended 31 December 2011

Dolphin, a leading global investor in the residential resort sector in emerging markets, is pleased to announce the Aristo Developers Restructuring, its preliminary results for the year ended 31 December 2011, and provide an update on operational progress since its last trading update, released on 6 December 2011.

Aristo Developers Restructuring:

Dolphin and Mr. Theodore Aristodemou, Dolphin's largest shareholder with a 34.89% holding and the CEO of Aristo Developers ("Aristo"), Dolphin's 100% owned and largest subsidiary, have agreed to the exchange of Mr Aristodemou's 34.14% shareholding in Dolphin for a direct 50.25% participation in Aristo (the "Aristo Exchange").

Subject to the completion of the Aristo Exchange, Dolphin's shareholding in Aristo will reduce from 100% to 49.8%, and Mr Aristodemou's shareholding in Dolphin, currently held through Real Yellow Limited and Silver Capital Holdings Limited, will reduce from c. 232 million shares to c. 5 million shares (representing 1.14% of the reduced Dolphin share capital). As part of the Aristo Exchange, Dolphin will retain 100% of the small operations and asset portfolio of Aristo in Greece, and Mr. Aristodemou will retain ownership of 256 residential plots within Aristo's Venus Rock project.

The Aristo Exchange is taking place on a Net Asset Value ("NAV") for NAV basis before deferred income tax liabilities ('DITL') and, as such, it is valued at €375.54 million. The respective Dolphin NAV per share shall remain the same as at 31 December 2011 after the completion of the Aristo Exchange.

Aristo's key assets include Venus Rock Golf Resort, Eagle Pine Golf Resort and a number of other smaller projects in Cyprus.

The Dolphin Board of Directors and its Investment Manager believe this transaction presents the following significant strategic benefits for the Company:

1. The consolidated debt of the Company in its financial statements is reduced from €453.5 million to €124.4 million and consequently the Company's debt to asset ratio drops from 27% to 13%.

2. The annual management fee paid by the Company to the Investment Manager (Dolphin Capital Partners) is reduced by €4.2 million.

3. The significant exposure of Dolphin to Cyprus is decreased and the Company's portfolio will therefore become more balanced across its six markets (Cyprus, Greece, Turkey, Croatia, Dominican Republic and Panama).

4. Mr Aristodemou, who will remain the Aristo CEO, will be further incentivised to deliver maximum value from Aristo.

5. Dolphin will be able to focus more on its core expertise of luxury residential resort development targeting the very high end destination market, a segment which remains in short supply and high demand.

Following completion of the Aristo Exchange, Aristo will be treated in Dolphin's financial statements as an associate entity and will be accounted for accordingly using the equity method (equity accounted investee). A pro forma summary balance sheet of the Company as at 31 December 2011 illustrating its financial position before and after the Aristo Exchange is set out below:

Due to the fact that Mr Aristodemou holds more than 10% of the Company's issued share capital, the entering into the Aristo Exchange represents a related party transaction for the purposes of the AIM Rules for Companies (the "AIM Rules"). In accordance with the AIM Rules, the Board, having consulted with the Company's Nominated Adviser, Grant Thornton UK LLP, believe the Aristo Exchange transaction in question is fair and reasonable insofar as the Shareholders are concerned.

The Aristo Exchange, in addition to the €4.2 million annual management fee reduction, triggers a performance fee of c. €33.5 million to the Investment Manager. Following discussions with Dolphin's Board and Grant Thornton, the Investment Manager has agreed to waive such fee in return for the prorated reduction of the cost basis of the remaining portfolio for the purposes of the calculation of future performance fee entitlements by an amount equal to the net profits realized by the Company through the Aristo Exchange and the retrospective replacement of the 8% soft hurdle existing in Investment Manager Agreement ("IMA") with the average annual one-month Euribor rate.

Dolphin and Mr. Aristodemou agreed the binding share exchange documents and a Shareholders' Agreement on 27 March 2012 and the completion of the transaction is expected to take place by 30 May 2012. The Shareholders' Agreement includes, among others, minority protection rights including a right of first refusal for the issue and sale of shares or assets, limitations on potential discounts on sales of assets or issues of shares relative to their NAV, tag along rights, dividend distributions and Dolphin participation in Aristo's Board of Directors so that Dolphin continues to be actively engaged in the management of the Aristo assets.

Financial highlights: 

·; Total Group NAV as at 31 December 2011 was €1.1 billion and €1 billion before and after DITL respectively. This represents a decrease of €103 million (8.6%) and €90 million (8.3%), respectively, from the third quarter of 2011 driven mainly by an average decrease of 5% in the valuation of the Cyprus assets and an average decrease of 9% in the valuation of the Greek assets. This decrease reflects the difficult economic environment in the region during the entire 2011.

·; Sterling NAV per share as at 31 December 2011 before DITL was 139p and after DITL was 125p. This represents a decrease of 15.4% and 15% versus 164p and 148p respectively as at 30 September 2011, mainly due to the above reasons, the issue of 26.2 million new common shares at 27p in December 2011 and the 3.7% appreciation of Sterling versus Euro over the period.

·; The pro forma Company balance sheet, assuming the completion of the Aristo Exchange and the deconsolidation of the Aristo balance sheet, is significantly less leveraged:

- Gross Assets of €944 million.

- Total Debt of €124 million (down from €453million before the Aristo Exchange) and Group total debt to asset value ratio of only 13% (down from 27% before the Aristo Exchange).

- Group cash balance of approximately €17.5 million as at 23 March 2012.

- No bank debt at the Company level. The Company has provided corporate guarantees on the Playa Grande Convertible Bonds, the construction loan for the Aman at Porto Heli and the servicing of Banco Leon loan interest at Playa Grande.

Operating highlights since last Trading Update of 6 December 2011:

FIRST PHASES OF ADVANCED PROJECTS:

·; The Porto Heli Collection (www.portohelicollection.com), Greece

Amanzoe (formerly "The Aman at Porto Heli")

- Amanzoe has been selected to be the commercial name of the Aman hotel, drawing its name from the Sanskrit word for 'peace' and 'zoe', the Greek word for 'life'.

- Mr. Henry Gray was appointed as the General Manager of Amanzoe on 15 January 2012. Henry and his wife Char, who will serve as Amanzoe's Executive Assistant Manager, have over 25 years of management experience with Amanresorts and other luxury operators, and have been awarded several times (including this year), the award of General Manager of the year by the prestigious Gallivanters' Readers Awards. Several other key appointments have been made including the resort's Financial Controller and HR Manager whose efforts are currently focused on recruiting the remaining required personnel. Upwards of 180 employees should be employed in the course of the next two months.

- Construction works continue to progress rapidly and on budget and will be completed for both the Amanzoe hotel and the Aman beach club by the end of May 2012. Amanzoe will become operational during summer 2012, at which time the first two Aman Villas will be completed and delivered. The construction of four additional Aman Villas is also underway.

- The completion of the Aman hotel and the first villas will mark the formal launch for the sales of the Aman Villas which are predominantly promoted through word of mouth amongst Aman clients.

- The consideration for the three Aman Villas sold to Archimedia was increased by a further €2.1 million due to the expansion of their size, resulting in a total consideration of €14.5 million.

- To date, the Company has drawn down €31.2 million from the €33 million construction loan for the Aman hotel and €5.4 million from the €8 million VAT bridge facility.

- During March 2012, the Company received the first 50% of the total approved subsidies of €7.8 million. The remaining 50% is expected to be released after completion of the works and commencement of the hotel operations.

·; Venus Rock Golf Resort ("Venus Rock" - www.venusrock.com), Cyprus

- Construction works for the golf course continue to progress on schedule and on budget. Rough shaping of the course has been completed, while irrigation works and drainage works have also advanced.

- To date, €12 million has been drawn from the €50 million construction loan for the project.

- The formal launch of the sales programme will most likely be pushed back towards the second half of 2012, after the grassing of the golf course and the completion of other preparatory site works are completed. It is anticipated that this will benefit the marketing, as, under current market conditions, projects with completed phases are more attractive to potential buyers. This date is also in line with the expected date for approval of the relevant lotting and building permits.

·; Playa Grande Club & Reserve ("Playa Grande" - www.playagrande.com), Dominican Republic

- The demolition of the dilapidated Occidental Hotel, which previously occupied the site, and the construction of the new model golf villa to showcase the development and host prospective real estate buyers, have been completed.

- The construction tender and permitting process for the renovation of the golf course and the infrastructure works of the Aman hotel has been finalized.

- The value engineering process for the vertical construction of the Aman hotel is also progressing to achieve the desired budget.

- The construction of the new public access to Playa Grande beach is underway and DR Beachfront, the prior owner of Playa Grande which has retained certain development parcels, has commenced infrastructure works on the Playa Grande beach which will enable its individual investors to build their homes, adding further momentum to the project.

- The syndication for the financing of the Aman Hotel and Villas at Playa Grande is underway, with a number of regional and Dominican banks invited to participate. A term sheet has been signed with Banco Leon, the lead bank in the syndicate, for a c.US$19 million debt facility (which includes the refinancing of c. US$5.4 million of Banco Leon's existing debt and new development capital of c.US$13.6 million).

·; Pearl Island (www.pearlisland.com), Panama

- A loan facility has been arranged with Banco General, Panama's largest bank, to provide US$15 million of debt financing for the construction of the Founders' Phase (first phase). The loan agreements are being finalized in order to disburse the funds. This is a significant milestone for the project as the bank facility, together with the existing and future sales deposits, is expected to fund the majority of the construction of the Founders' Phase infrastructure and leisure facilities with only limited additional equity required from Dolphin.

- The construction of the airstrip and other infrastructure works are progressing, while designs, permits and construction contracts are in place or being processed to accelerate construction of the infrastructure and leisure facilities (beach club, marina, equestrian) with the loan disbursement.

- Three further new sales reservations were made in the final quarter of 2011, bringing the total sales to 17 lots or US$11.8 million and representing 50% of the first 34 lots released. We expect the pace of sales to increase considerably following the completion of the construction financing and further progress with construction works.

- The Inter-American Development Bank has advanced its due diligence on a total US$21 million debt facility for the financing of an 80-room Ritz Carlton Reserve hotel on one of the main beaches of the island and it is at the stage of submitting the loan for Credit Committee approval. The Project is progressing discussions with leading regional developers to develop the Ritz Carlton Reserve hotel in joint venture with Dolphin and Grupo Eleta (Dolphin's Panama-based joint venture partner).

OTHER PHASES OF THE ADVANCED PROJECTS AND MAJOR PROJECTS

·; The Porto Heli Collection - The Golf Hotel and Golf Course

The revised Environmental Impact Study ("EIS") for the Golf Hotel and Golf Course, which was approved on 21 November 2011 at a public hearing at the Peloponnese Regional Council, was officially issued on 29 February 2012. The revised EIS enlarges the previously permitted area of the Jack Nicklaus Signature golf course.

·; Sitia Bay Golf Resort (www.sitiabayresort.com)

On 27 December 2011, Sitia Bay received final approval from the relevant governmental committee for subsidies amounting to €11.2 million for the construction of a hotel and €0.7 million for the construction of a 32-berth marina. The subsidies are conditional upon construction commencing within two years from the date of the award and completion of the project within a maximum of four years, which is in line with the Company's business plan for the site.

·; Scorpio Bay Resort received on 12 March 2012 the Preliminary Environmental Impact Study ("PEIS") approval for the development of 40,400 m2 of hotel and branded residential units.

·; 36 homes and plots were sold by Aristo in the three month period from December 2011 to the end of February 2012 for €5.1 million, representing a 9% decrease in value, but a 17% increase in the number of units compared to the respective period of the previous year.

Cash Generation Potential of the DCI portfolio:

Following the Aristo Exchange, Dolphin will own 49.8% of the Aristo Portfolio, including the Venus Rock Golf Resort and Eagle Pine Resort. Dolphin's cash generation potential forecast has been updated accordingly to reflect completion of the Aristo Exchange.

As a result, the Investment Manager estimates that the first phases of the Advanced Projects have the potential to generate aggregate cash returns to Dolphin of over €560 million, or circa 107p per share (post Aristo Exchange), over the next six years through the development and sale of residential units and retail land plots and the sales and operational profits of their leisure components (hotels, golf courses, marinas etc.).

When all their phases are developed, the four Advanced Projects collectively could generate circa €1.5 billion of net pre-tax cash returns to Dolphin, or circa 284p per share, through the development and sale of all their planned residential units and retail land plots and the sales and operational profits of their leisure components (hotels, golf courses, marinas etc.) over an estimated period of 12 years (2012-2023).

The Company's remaining portfolio comprises 10 major leisure-integrated residential resort projects with the potential to be developed over the next 12 years, which are expected to increase in book value as they complete their permitting and design phases and reach Advanced Project status. In addition, the Company anticipates that, upon market recovery, it should start receiving dividends from its shareholding in Aristo Developers, the largest developer and private land owner in Cyprus.

The Investment Manager estimates Dolphin's total portfolio net cash generation potential to be in excess of €4.2 billion, or circa 808p per share, over the next 12 years. 

Strategic Focus

The strategic priorities of the Company are the following:

1. Complete the construction of Amanzoe by the end of May 2012 and start operations shortly after. Amanzoe represents the showcase of the Company's development capabilities for sustainable luxury residential resorts in the eastern Mediterranean and is expected to draw significant attention from sophisticated travellers and villa buyers.

2. Continue the construction of the infrastructure and leisure works at Venus Rock Golf Resort (Cyprus) and Pearl Island (Panama). As the resorts take shape and awareness of the projects is spread, increased levels of interest are expected for the residential component.

3. Increase the Company's cash balance through a combination of villa and lot sales, project exits and joint ventures.

4. Secure additional funding for Playa Grande in order to commence vertical construction works and be in a position to start pre-sales and marketing.

5. Begin construction of the Nikki Beach resort, the next component of the Porto Heli Collection after Amanzoe. This product will complement the offering at Amanzoe and strengthen Dolphin's presence in the Porto Heli area.

6. Advance the zoning and permitting of Dolphin's other Major Projects, enabling the Company to either partially or wholly sell them or develop them and realise their full cash return potential.

7. Assist Aristo's management in expanding retail and land sales to existing and new markets. The short to medium term objective is for Aristo to start generating cash surpluses again in order to reduce leverage and distribute dividends to Dolphin. Aristo's performance is closely correlated to market recovery.

8. Subject to having excess cash liquidity in the short to medium term, opportunistically buy back DCI shares in an effort to narrow the trading discount to NAV.

Commenting, Andreas N. Papageorghiou, Chairman of Dolphin Capital Investors, said:

"While 2011 was a challenging year in terms of the Greek debt crisis and the broader macro-economic and political environment, Dolphin continued to make good progress in its operational and strategic objectives to appropriately position the Company to capitalise on an upswing in demand that should result from the anticipated recovery in our key markets. Our first luxury resort, Amanzoe in Greece, is almost completed and the first phases of two other advanced projects are well funded and progressing. Looking ahead, this gives me confidence that it is only a matter of time before Dolphin starts realising profits from its portfolio, which we believe has enormous undervalued potential to generate significant returns to its shareholders."

Miltos Kambourides, Founder and Managing Partner of Dolphin Capital Partners, added:

"The Aristo Exchange is an important strategic transaction for Dolphin, as a result of which the Company's balance sheet characteristics are being significantly improved. We now look forward to continuing to execute our strategic objectives from a more focused standpoint in terms of product offering and market positioning. The Amanzoe, whose opening is due this summer, should set the standard for the remaining portfolio and its as yet unexploited potential."

Conference call for analysts and investors

There will be a conference call at 11am UK time on 28th March 2012, which can be accessed using the following dial-in numbers:

International dial-in: +44(0)20 3106 4822 

Password: 5314815

For further information, please contact:

Notes to Editors

Dolphin (www.dolphinci.com) is a leading global investor in the residential resort sector in emerging markets and one of the largest real estate investment companies quoted on AIM in terms of net assets. Dolphin seeks to generate strong capital growth for its shareholders by acquiring large seafront sites of striking natural beauty in the eastern Mediterranean, Caribbean and Latin America and establishing sophisticated leisure-integrated residential resorts.

Since its inception in 2005, Dolphin has raised €898 million of equity, has become one of the largest private seafront landowners in Greece and Cyprus and has partnered with some of the world's most recognised architects, golf course designers and hotel operators.

Dolphin's portfolio is currently spread over approximately 63 million m2 of prime coastal developable land and comprises 14 large-scale, leisure-integrated residential resorts under development in Greece, Cyprus, Croatia, Turkey, the Dominican Republic and Panama and a 49.8% strategic participation in Aristo Developers Ltd, which is one of the largest holiday home developers in south east Europe with more than 60 smaller holiday home projects in Cyprus.

Dolphin is managed by Dolphin Capital Partners, an independent real estate private equity firm.Chairman's Statement

I am pleased to report Dolphin's preliminary results for the year ended 31 December 2011.

The restructuring of Aristo represents a very important achievement for the Company, as it is taking place on a NAV for NAV basis, reduces the Company's debt to asset ratio from 27% to 13%, decreases the Company's fixed overheads by €4.2 million per annum and results in Dolphin having a more balanced real estate portfolio. In addition, Mr. Aristodemou, who will retain his position as the Aristo CEO, will be further incentivised to generate maximum value from Aristo.

During 2011, the Company made significant progress on the construction works for the first high-end resort of its portfolio, Amanzoe, in Greece. This flagship component of the first phase of The Porto Heli Collection is set to become the first villa-integrated Aman resort in Europe and one of the most exclusive destinations in the Mediterranean. The opening of the hotel this coming summer will be a catalyst for formal sales activity relating both to the Aman Villas and the Seafront Villas.

In addition, construction works at Venus Rock and Pearl Island have also progressed considerably, while Dolphin achieved a number of significant planning and development milestones for its remaining portfolio.

We are also encouraged by the recent developments for the economy of Greece and the European Union and now anticipate stabilisation, which should have a positive impact on the market perception of our region.

The Company's NAV, before and after DITL, as at 31 December 2011 is reported at €1.1 billion and €1 billion, respectively, and the NAV per share before and after DITL in Euro terms was €1.65 and €1.50 respectively, representing a 17.9% decrease from 31 December 2010. This drop was driven by significant reductions in property valuations in Greece and Cyprus during 2011, due to the recent economic crisis and the uncertainty that it has created for the region.

In 2011, Dolphin faced its fourth consecutive year of adverse market conditions, and the Investment Manager has continued to steer the Company through these challenging circumstances successfully through prudent management, while continuing to progress its projects. Three out of the four Advanced Projects are on track to complete the first phases of their development. We therefore continue to be confident that Dolphin is well positioned to take full advantage of the anticipated market recovery and generate significant returns to its shareholders.

Andreas N. Papageorghiou

Chairman

Dolphin Capital Investors Limited

28 March 2012

Investment Manager's Report

The last year was characterised by continued economic uncertainty in Greece and, to a certain extent, Cyprus, which resulted in challenging conditions in our markets for the fourth consecutive year following the global economic slowdown. However, our team worked hard throughout the period to ensure that the Company maintained its strong financial position, made progress on the delivery of its Advanced Projects and added value across the other properties in its portfolio through permitting gains and design work.

The highlight of our development activity is the progress achieved at Amanzoe in Greece leading to the expected opening of this landmark resort this summer. This represents a very exciting and important stage in the Company's development as Amanzoe will be the first of our luxury resorts to come to market and should serve as a showcase of Dolphin's development capabilities, profit potential and vision.

The Aristo Exchange is another significant milestone which improves the balance sheet characteristics and geographical profile of the Company by reducing its exposure to Cyprus and allows us to continue to execute our strategic objectives from a more focused standpoint in terms of product offering and market positioning.

In line with the Company's stated strategy, no new investments were made in 2011. During this period, the Group executed over €85 million of asset sales and divestments, bringing the total asset sales by Dolphin so far to €410 million, a figure higher than the book value of the respective assets sold.

Updated Portfolio characteristics and cash generation potential

The Advanced Projects are spread over 3,737 hectares of land, of which 656 hectares represent the first phases of these developments. The total residential capacity of these projects is approximately 740,000 buildable m2, of which circa 267,000 m2 are planned for their first phases. In addition to the built product and leisure facilities, the four Advanced Projects have the potential to sell over 3.3 million m2 of land in the form of land plots.

The Advanced Projects are planned to include 12 luxury hotels, four 18-hole championship golf courses and one marina, of which the following will be completed in their first phases:

- the first Aman residential resort in Europe (Amanzoe), the first Aman golf-integrated resort worldwide (Playa Grande) and the first Nikki Beach resort in the eastern Mediterranean (The Nikki at Porto Heli);

- two golf courses in Venus Rock Golf Resort designed by Tony Jacklin and one in Playa Grande Club & Reserve designed by Robert Trent Jones, Snr. and renovated by his son Rees Jones; and

- a marina at Pearl Island which will be expanded as the other phases of the development progress.

As summarised in the table below, the Investment Manager estimates that the Advanced Projects alone have the potential to generate for Dolphin:

·; more than €560 million of net cash returns or circa 107p per share (post Aristo Exchange), from the development and sale of their first phases alone (which represents circa only 38% of their estimated total profitability) over a period of approximately six years (2012-2017).

·; circa €1.5 billion of net cash returns, or circa 284p per share, through the development and sale of all their planned residential units and retail land plots and the sales and operational profits of their leisure components (hotels, golf courses, marinas etc.) over an estimated period of 12 years (2012-2023).

Dolphin's remaining portfolio includes:

·; Its other 10 major leisure-integrated residential resort projects, spread over 2,160 hectares of land and conservatively expected to build and sell c. 660,000 residential buildable m2, representing only a circa 3% building coefficient. These projects are expected to further increase in book value as they complete their permitting and design phase and reach Advanced Project status. The Investment Manager estimates their net cash generation potential to be in excess of €1.3 billion, or circa 250p per share, spread over the next 12 years.

·; Aristo Developers, the largest developer and private land owner in Cyprus, with currently more than 107,000 buildable m2 of residential product in stock or under construction and c. 114,000 m2 in the form of readily available land plots with a total listed sales potential of over €240 million. In addition, Aristo holds a vast portfolio of land assets with the potential to sell over 610,000 residential buildable m2 once fully developed. Following the recent restructuring, Dolphin shall retain a strategic 49.8% participation in Aristo. The Investment Manager estimates that upon market recovery, Aristo will have a dividend capacity in excess of €30 million per year.

Based on the above, the Investment Manager estimates Dolphin's total portfolio net cash generation potential to be in excess of €4.2 billion, or c. 808p per share, over the next 12 years. This cash generation estimate is summarised in the following table and comprises the aggregate of:

i. the revenues expected to be realized from the sales of the residential units and retail land plots, minus the corresponding construction and sales related costs;

ii. the forecasted net operating income and sales profits from the sale of the projects' leisure components;

iii. the residual value of the Company's land portfolio; and,

iv. the collection of dividends from Aristo and the residual value of Dolphin's stake in the Aristo business.

Basic Assumptions

- All cost assumptions cover future development, marketing, sales, branding and agency costs and do not include already incurred expenses for land acquisition and development.

- The above cash returns do not include financial costs, annual management and performance fees, overhead costs and subsidiaries' maintenance costs during the period.

- No inflation adjustments have been made.

- Cash returns are calculated on a before corporate income tax basis. Actual taxes would depend on the jurisdiction of each project and the structure of each specific sale transaction.

- Residential units are assumed to be developed on a "sell and build basis", apart from minor investments in "show" units.

- No interim project exits have been assumed.

- Under the current plans, not all the land of the Major Projects will be developed in the next 12 years which leaves residual developable land. This is estimated to have a residual building coefficient of c. 1.5 million buildable m2 estimated at an average value of €800 per buildable m2.

- Dividends are assumed to be distributed upon Aristo achieving significant positive cashflows from 2014 onwards and are assumed to stabilize at €30 million (for 100%) from 2018 onwards. The Aristo Terminal Value is calculated at 8x on its estimated annual dividends. These dividends exclude the financial returns of Venus Rock and Eagle Pine.

- Net Operating Income is calculated over a period of six years. The sale of the Leisure components ("Leisure Sales") assumes that the hotels, golf courses and other leisure components are sold in years 5 to 6 at a multiple to their NOI ranging from 8x to 10x.

- All statements are based on future expectations rather than on historical facts and are forward looking statements that involve a number of assumptions, risks and uncertainties. The Company and the Investment Manager cannot give any assurance that such statements will prove to be correct. Any forward looking statements made by or on behalf of the Company are made only on a best estimate basis as of the date they are made and they do not constitute future earnings, revenues or profits forecasts or guidance. Neither the Company nor the Investment Manager undertake to update forward looking statements to reflect any changes in expectations, events, conditions or circumstances upon which such statements are made.

Development update

1. The Porto Heli Collection, Greece

Progress since last annual report:

The commercial name of the Aman hotel at Porto Heli has been selected to be Amanzoe, meaning "peaceful life", deriving from 'aman' the Sanskrit word for 'peace' and 'zoe' the Greek word for 'life'. The hotel's website www.amanzoe.com will launch by 1 April.

Construction works progressed on schedule and on budget. Amanzoe should be delivered by end of May 2012, along with the completion of the Aman Beach Club. Situated approximately five minutes away by car, the Beach Club lies on a secluded cove with crystal clear waters, and boasts all day dining by the water, private lounging facilities, changing areas and two lap pools. The Beach Club will operate as a private Club open only to members, guests of the hotel and villa owners.

Amanzoe will be operational during summer 2012, at which time the first two Aman Villas will be completed and delivered. The construction of the four additional Aman Villas already sold is underway.

In the meantime, the General Manager, Financial Controller and HR Manager of the hotel have been appointed and their efforts are currently focused on recruiting and training the required hotel personnel. By summer, Amanzoe is expected to employ more than 180 people.

To date, the Company has drawn down €31.2 million from the €33 million construction loan and €5.4 million from the €8 million VAT bridge facility for Amanzoe. In addition, a final approval was received on 27 June 2011 for subsidies amounting to €7.8 million for the construction of the hotel. On 9 September 2011 the Company applied for the drawdown of the first 50% of the subsidy funds, which will be released subject to an audit of the construction progress by the relevant governmental committee. This has now been finalized, and the Company collected this first €3.9 million tranche in March 2012.

The Company received a payment of €5.4 million from the sale of shares in Amanzoe to Archimedia, the owner of 14.29% of Amanzoe and the holder of an option to exchange its project share participation for three Aman Villas. The sales consideration for the transaction in question was increased to a total of €14.5 million due to the expansion of the sizes of the Aman Villas, while the remaining payment of €9.1 million will be received in line with construction milestones. The Company also received deposits for two additional Aman Villas and the remaining payments will be received according to the construction progress.

The highly anticipated opening of Amanzoe this summer is expected to further enhance the sales momentum, not only for the Aman Villas but also for the Seafront Villas as focus will be shifted to the entire Porto Heli area.

The Nikki Beach Hotel received approval for €4.25 million of subsidies. The Company signed a term sheet on 20 May 2011 with a major European bank for a €10.5 million long-term asset-backed construction facility for the development of the project. Commencement of construction will start when the financing is finalised and when additional equity funds are available or when a JV partner comes on board. With regards to the latter, the Company is in advanced discussions with interested parties.

2. Venus Rock Golf Resort, Cyprus

Progress since last annual report:

Works for the construction of the first phase of the project's 36-hole golf course, which entail the replacement of the existing 18-hole course, progressed on schedule and on budget, following the appointment of Benedetti (www.benedetti.fr). The contractor started work on 23 October 2011, and has completed rough shaping and commenced drainage and excavation works. A nursery to prepare the turf for the golf course has been set up on site from which grass will be relocated onto the course for the first nine holes starting in June 2012. Works are carried out in a phased manner, allowing the existing golf course to remain open for play in order to accommodate the existing Secret Valley golf club members, and the residents of the 300 homes already sold.

On 25 August 2011, Venus Rock received the anticipated planning permission for the beachfront development to include a 14,551m2 commercial centre and the redevelopment of the coastal road, followed on 30 September 2011 by further approvals for the Golf Club House and the Treatment Plant for waste water. Works at the beachfront development are expected to be initiated within Q4 2012.

An application was been made to the relevant authorities regarding the lotting and building permit for the new golf residential developments on 9 February 2011. This application, along with the application for the construction permit for the desalination plant, is expected to be approved by Q3 of 2012, as it currently remains under review by the relevant authorities. In addition the construction permit application for the club house has been filed and is under review by the authorities.

The formal launch of the sales programme will most likely be pushed back to Q3 2012, after the grassing of the golf course and the completion of other preparatory site works are completed which will benefit the sale of lots/residences as, under the current market conditions, projects with completed phases are more attractive to potential buyers. This timing is also in line with the expected approval of the relevant lotting and building permits.

To date approximately €12 million has been drawn down from the €50 million construction loan for the project.

3. Playa Grande Club & Reserve, Dominican Republic

Progress since last annual report:

John Heah has been appointed as new lead architect of the Playa Grande Aman Golf Resort, the first golf-integrated Aman resort in the world. The masterplan and the concept architectural design for the key project components have already been prepared and approved by Aman Resorts.

The demolition of the dilapidated Occidental Hotel which previously occupied the site was completed, paving the way for the initiation of the golf course renovation. The construction of the new model golf villa to showcase the development and host prospective real estate buyers has also been completed. The designs, permits and construction tenders for the renovation of the golf course and the infrastructure works of the Aman hotel have been finalized.

The Aman hotel designs are currently being concluded and, in parallel, are undergoing value engineering to achieve the most competitive budget possible prior to beginning the hotel's construction.

Marketing and sales collateral for a select release of a limited number of Aman Villas is being finalised in anticipation of the formal sales launch in the second half of 2012.

The Company is looking to finance the renovation of the golf course and the construction of the Aman hotel with a combination of local bank debt, equity and limited pre-sales.

The syndication for the financing of the Aman Hotel and Villas at Playa Grande is underway, with a number of regional and Dominican banks invited to participate. A term sheet has been signed with Banco Leon, the lead bank in the syndicate, for a c.US$19 million debt facility (which includes the refinancing of c.US$5.4 million of Banco Leon's existing debt and new development capital of c.US$13.6 million).

4. Pearl Island, Panama

Progress since last annual report:

A loan facility has been agreed with Banco General, Panama's largest bank, to provide US$15 million of debt financing for the construction of the Founders' Phase (first phase) and the loan agreements are being finalized in order to disburse the funds. This is a significant milestone for the project as the bank facility, together with the existing and future sales deposits, are expected to fund the majority of the construction of the Founders' phase infrastructure and leisure facilities with limited additional equity required from Dolphin.

The construction of both the airstrip and other infrastructure works are progressing, while designs, permits and construction contracts are in place or being processed to accelerate construction of the infrastructure and leisure facilities (beach club, marina, equestrian) with the loan disbursement.

The PR and marketing activities for the first Founders' phase of the project are continuing. A full scale PR and marketing campaign for Pearl Island was launched in September 2011, focusing on promoting Pearl Island as a high-end destination and lifestyle location. A new microsite and online portal, www.pearlislandliving.com, was established to provide owners, potential buyers and journalists with constant updates on the project, together with imagery, videos and information on the area.

Total sales reservations during the year reached 17 lots or US$11.8 million, representing 50% of the first 34 lots released. We expect the pace of sales to continue to increase following the completion of the construction financing and further progress with construction works.

The Inter-American Development Bank has advanced its due diligence on a total US$21 million debt facility for the financing of an 80-room Ritz Carlton Reserve hotel on one of the main beaches of the island and it is at the stage of submitting the loan for Credit Committee approval. The Project is progressing discussions with leading regional developers to develop the Ritz Carlton Reserve hotel in joint venture with Dolphin and Grupo Eleta (Dolphin's Panama-based joint venture partner in the project).

Placement of New Shares

In December 2011, Dolphin raised €8,500,000 through the issue of new shares at £0.27 per share (with warrants attached to subscribe for additional Dolphin shares equal to 25 per cent of the aggregate value of the new shares at a price of £0.35 per share). The Company issued 26,210,536 new shares and 5,054,889 warrants. Following this admission, the total number of shares of the Company in issue is 665,048,350.

Aristo (www.aristodevelopers.com)

During 2011, Aristo continued to leverage its strong asset base, existing stock and expertise in order to implement its strategy and remain self-funded.

The company continued to navigate the effect of the slowdown in sales, restructured its key financial obligations and launched new attractive discount schemes to monetise its existing inventory.

Due to the adverse market conditions, only a small numbers of projects were released in 2011. The plan for 2012 is to release more new projects and invest selectively in constructing show villas in key projects. Aristo's sales effort to the international markets has been significantly enhanced with the hiring in November 2011 of an experienced sales executive, Christos Pateras, to revitalize Aristo's sales and marketing in its two core foreign markets of UK and Russia and expand Aristo's reach in new markets such as China, northern Europe and the Middle East. Already, a series of mainly exclusive agreements have been signed with a number of leading overseas agents and major tour operators with encouraging early results.

In 2011, Aristo strengthened its presence in Russia by increasing the size of the local team and expanding the range of marketing actions. Additionally, following some signs of recovery in the UK, Aristo reinforced its activities in that country by participating in exhibitions and targeted events across the country.

Sales performance

In 2011, Aristo generated €66.9 million of sales, including a strategic sale of the Group's 50% shareholding stake in the Kings Avenue Mall project in central Paphos at an enterprise value of €39.5 million. The purchasers paid the Company a cash consideration of €15 million and have assumed the project's €24.5 million of bank loans and other liabilities. The net consideration of €15 million represented a premium of 13% to the project's net asset value (as derived from the independent valuation by Colliers of €75.5 million for 100%) and a premium of 31% to the Company's allocated investment cost of €11.5 million.

Aristo's generated €27.4 million gross retail sales in 2011 which was 29% lower than 2010, in line with the market downturn. This figure corresponds to 137 units (homes and lots), a 28% decrease from the respective period of 2010.

The retail sales achieved during 2011 were lower than 2010, reflecting the difficult economic environment of the past year in the region. However demand from Russian clients is growing relative to others.

Aristo Developers Restructuring

The Aristo Exchange described in the Highlights section has the following effects on the Company's share capital, balance sheet and Management Fee.

Common Shares Outstanding:

After the completion of the Aristo Exchange and the cancellation of the 227,044,080 Treasury Shares that the Company will receive from Mr. Aristodemou in the context of the Aristo Exchange, the total number of Company shares will amount to 438,004,270 common shares.

Pro forma Balance Sheet:

Following the completion of the Aristo Exchange, Aristo will be treated in Dolphin's financial statements as an associate entity and will be accounted for accordingly using the equity method (equity accounted investee). As such only Aristo's net asset value will be recorded in the financial statements of Dolphin and not its overall assets and liabilities (including its loans and borrowings).

In the context of the Aristo Exchange, a c. €16 million existing bank loan of the Aristo Group will be taken over by Dolphin as an offset against an equal existing net receivable by Aristo from Dolphin. The effect of this loan undertaking has been taken into account in the NAV used for the calculation of the Aristo transaction exchange ratios. Dolphin has not provided any bank or other guarantees in favour of Aristo.

Management Fee:

- The management fee paid by the Company to the Investment Manager is reduced by €4.2 million per annum which corresponds to 2% on the €208 million investment cost of the 50.25% shareholding in Aristo that is transferred to Mr. Aristodemou.

- The Aristo Exchange triggers an entitlement to an incentive fee of c. €33.5 million for the Investment Manager which corresponds to 20% on the €167 million, the difference between the €375.5 million transaction value at NAV and the respective relevant investment acquisition cost of €208 million. Following discussions with the Board of the Company, the Investment Manager agreed to waive the payment of this performance fee in return for the reduction of the cost basis of the remaining portfolio for the purposes of the calculation of future performance fee entitlements by an equal amount of €167 million and the retrospective replacement of the 8% soft hurdle with the average annual one-month Euribor rate applicable during the term of the IMA. Dolphin's Board (excluding Miltos Kambourides by dint of his interest in the Investment Manager) consider, having consulted with Grant Thornton, the Company's Nominated Adviser that, in light of the waiver of the Investment Manager's entitlement to a crystalized incentive fee of c. €33.5 million, the amendment to the IMA is fair and reasonable insofar as Dolphin's shareholders are concerned and should allow the Investment Manager to sell assets at lower prices which are nevertheless very accretive to the current share price.

Market Dynamics

Greece has been in the spotlight during 2011 with the various scenarios of a possible default and an exit from the Eurozone. Following the successful completion of its recent debt restructuring, which is expected to contribute to increased stability, the Greek government will now turn to policies that will encourage growth with focus in areas such as tourism in which the country has a strong competitive advantage. To this effect, a number of new laws have been enacted by the Greek Parliament to support the local tourism industry including, specifically, new legislation setting a workable framework for the development and the exploitation of integrated residential and golf resorts. It is anticipated that the reduction in Government debt, together with a fundamental restructuring of the Greek economy and institutions that has been pushed through the Greek parliament in recent months, will transform the country in the medium term into a more competitive and healthier economy and that this will have a positive impact on all sectors including tourism and real estate.

The Cyprus economy has also, albeit to a lesser extent, been impacted by the Eurozone woes and the sovereign debt crisis. However, the recent discovery of significant gas reserves in Cypriot waters is expected to have a strong and lasting positive impact on the island's economy, and consequently its property market. Noble Energy has confirmed in December 2011 that it has discovered natural gas reserves of over 5 trillion cubic feet in exploration block 12, one of Cyprus' 13 exploration blocks. With a conservative average gas price of $3 per thousand cubic feet, the proven reserves in this block alone have the capacity to generate revenues in excess of $15 billion. By extrapolation, the exploitation of all 13 exploration blocks is expected to generate very significant revenues for Cyprus relative to the country's current GDP of c. $25 billion and lead to very strong GDP growth in the medium term.

World travel successfully steered its way past political crises and natural catastrophes in 2011 where it grew by 3% and is expected to record a new all-time high in 2012, according to the most recent World Travel Monitor Forum. The World Tourism Organization (UNWTO) predicted that international arrivals will increase by 4-4.5% in 2012. The protests, conflicts and revolutions in Arab countries at the start of 2011, the tsunami and nuclear disaster in Japan, the euro zone debt crisis, were just the most prominent in a long series of disruptive events around the world. Yet at the same time, 'New World' economies continued to boom in 2011, increasing private wealth in those countries. Salaries in China, Russia, Brazil and India are raising fast, with a resulting trend to upwards mobility. This continued to drive demand for foreign travel in these so-called 'emerging markets'.

In general, the most important observations for the countries we are invested in are as follows:

·; Tourist arrivals in Greece from January to December 2011 recorded almost a 9% increase compared to the corresponding period of 2010. The year-end figures for 2011 were in excess of 11 million, which proves that, despite the unfavourable international press coverage of the Greek situation, travellers still consider Greece as a popular destination. In that regard, the readers of Conde Nast Traveller magazine voted the Greek Islands as the World's Best Islands and the third most popular destination in all categories.

·; Cyprus has also seen an impressive increase in tourist arrivals of 10% for the period January 2011 to December 2011, benefiting amongst other factors from the political uncertainty of the Middle East and North African region and the strong presence of Russian and Chinese travellers.

·; 2011 was a record year for the Croatian tourism industry as the country was visited by more than 11 million tourists, which corresponds to an increase of c.8% when compared to the same period last year. The country will also become an EU Member State in 2013.

·; Another key Mediterranean destination, Turkey, also noted an increase of almost 10% during 2011 compared to 2010.

·; Strong growth in tourism was also witnessed in Dolphin's Central American/Caribbean markets. Tourist arrivals in Panama for 2011 reached almost 1.5 million, an increase of 11.2% from 2010. Panama's economy expanded by 10.6% in 2011, based on data published by the National Institute of Statistics and Census, after growing 7.5% in 2010. Panama is one of Latin America's top-performing economies and the focus remains on sectors in which the government believes it has competitive advantages including tourism - which is currently the single largest contributor to the country's GDP - construction and banking.

·; On similar lines, the number of tourists visiting the Dominican Republic by air in 2011 passed 4.3 million, an increase of 4.4% from 2010, reaffirming its position as the top tourist destination in the Caribbean. GDP expanded by 4.2% on average during the first three quarters of 2011, boosted in part by expansion in tourism and the real estate sector.

Outlook

With the Amanzoe hotel due to complete in May and expected to open this summer, we look forward to 2012 with cautious optimism, and expect this landmark project to become cash flow positive and act as a showcase of Dolphin's development capabilities and the potential profitability of the remaining portfolio. Furthermore, we are encouraged by the resilience of the prices for ultra-high-end homes across the world which created a bifurcated market: a small top end segment that in some locations is at its historic highs and the rest of the market struggling with depressed prices and sluggish demand.

The impact of the Greek austerity budget had a serious dampening effect on the potential domestic demand. Greece, however, retains its place as an exciting international destination and Dolphin's projects in this country, which are geared towards the top international luxury market, should benefit from the favourable existing supply/demand balance.

As a result of the team's work over this and previous years, Dolphin has brought to maturity a very promising luxury residential real estate pipeline offering a unique prime product that is scarce in supply in its key markets. Due to the market conditions though, the missing elements are the availability of construction financing and the increase in institutional investor appetite for residential resorts and development equity. As these two elements recover, Dolphin will be able to accelerate its development plans and realise significant shareholder returns from its portfolio.

The Portfolio

A pro forma summary of Dolphin's current investments, assuming completion of the Aristo Exchange, is presented below. The pro forma Group's net invested amount is set at €523 million, down from a total gross investment amount including exited projects/assets of €790 million.

\* This is the net investment cost, excluding investments in assets sold and including amounts paid in shares.

**Excluding Venus Rock and Eagle Pine. The Aristo Group is reported at Net Asset Value.

Exits

Finance Director's Report

Net Asset Value ('NAV')

Consistent with the Company's valuation policy, Colliers International ("Colliers") performed a valuation of the entire portfolio as at 31 December 2011. Specifically, the following factors contributed to a decrease in NAV compared to the previous year:

·; a 6% net decrease in the overall portfolio valuation (only Pearl Island and Nikki Beach Resort recorded a net increase in their value) reflecting market conditions;

·; Regular fixed Dolphin operational, corporate and management expenses.

Sterling NAV per share before deferred income tax liabilities ("DITL") decreased by 19.7% driven, in addition to the reasons mentioned above, by the 2.19% appreciation of Sterling versus the Euro, by the issuance of 11,128,586 new DCI shares and the transfer of 306,681 own shares, held to treasury, to settle Grupo Eleta's deferred consideration for the Pearl Island transaction and by the issuance of 26,210,536 new DCI shares from the Company's last capital raise at 27p in December 2011.

The reported NAV as at 31 December 2011 is presented below:

Notes:

1. Euro/GBP rate 0.83783 as at 31 December 2011.

2. NAV per share has been calculated on the basis of 665,048,350 issued shares as at 31 December 2011.

Consistent with prior years, NAV figures do not take into account the potential payment of the Investment Manager's performance fee, calculated as 20% of the net realised cash profits from each project only after achieving a hurdle of 8% annual compounded return. Based on the 31 December 2011 NAV, the performance fee that would be payable (assuming that the whole portfolio was sold at NAV before DITL) was approximately €63 million.

Finally, the reported DITL of €104 million were calculated based on the current fair market value of the land acquired as reported by Colliers, and are applicable only in the event of a direct sale of land or assets. The sale of land is anticipated to take effect through the sale of shares of the holding Special Purpose Vehicles and, as such, most of the DITL are not expected to materialize or become payable. The NAV before DITL is therefore considered by Investment Manager as the more representative figure.

A solid financial position

The Company's NAV before DITL, after deducting from total consolidated assets, non-controlling interests of €36million, other liabilities of €96 million and total debt of €463 million is set at €1,100 million as at 31 December 2011.

The reduction in the NAV after DITL resulted in an accounting loss of €166 million, mainly due to a decrease in the overall portfolio valuation, for the year ended 31 December 2011 implying a loss per share of €0.25.

The consolidated financial statements have been audited by KPMG.

The Company's consolidated assets total €1.69 billion and include €1.61 billion of real estate assets €52 million of other assets and €31 million of cash. The €1.61 billion figure represents Colliers' fair market valuation of Dolphin's real estate portfolio (both freehold and leasehold interests) as at 31 December 2011, assuming 100% ownership. The €52 million of other assets comprise mainly €21 million of Aristo trade receivables, €12 million of VAT receivable, €8.7 million receivable from Archimedia and €4 million of deferred income tax assets.

The Company's consolidated liabilities total €663 million and include €104 million of DITL, €96 million of other liabilities as well as €463 million of interest-bearing loans and finance lease obligations all of which are held by Group subsidiaries and are non-recourse to Dolphin (except for the Aman at Porto Heli construction facility, the Playa Grande convertible Bond and the servicing of Banco Leon loan interest at Playa Grande which are guaranteed by the Company). The total Group debt of €454 million is 79% accounted for by Aristo. The total expected debt service obligations of Aristo for 2012 are estimated at €22 million and are expected to be covered by Aristo's operational cash flow. The €96 million of other payables comprise mainly €14 million of advances from customers relating to contractual construction works in progress by Aristo and €23 million of deferred land payments, €22 million of which could materialise at the end of 2013.

Aristo Developers pro forma financials

Aristo Developers' pro forma consolidated statement of comprehensive income (adjusted to exclude gains/losses from revaluation and negative goodwill from acquisitions) for the 12-month period ended 31 December 2011 and 31 December 2010 is as follows:

In terms of accounting results, excluding asset revaluations, Aristo reported an after tax operating loss of €20 million versus a loss of €11.9 million in 2010. The operating results have been affected by the significant drop in sales in 2009/2010 which resulted in a decrease in units delivered in 2011. This was partially counterbalanced by the reduced administrative and sales expenses incurred as a consequence of restructuring efforts.

Panos Katsavos

Finance Director

Dolphin Capital Partners

28 March 2012

Consolidated statement of comprehensive income

For the year ended 31 December 2011

Consolidated statement of financial position

As at 31 December 2011

Consolidated statement of changes in equity

For the year ended 31 December 2011

Consolidated statement of cash flows

For the year ended 31 December 2011