Dci Advisors Regulatory News (DCI)

3 June 2015

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 2014

Trading Update and completion of Strategy Review

Dolphin, a leading investor in high end residential resorts in the Eastern Mediterranean, Caribbean and Central America, is pleased to announce its audited financial results for the year ended 31 December 2014.

A. Financial highlights: 

· Total Group Net Asset Value ("NAV") as at 31 December 2014 was €644 million and €557 million before and after Deferred Income Tax Liabilities ("DITL") respectively. This represents a 2.1% increase of €13 million and €12 million respectively, on the third quarter figures.

· This moderate NAV uplift is mainly due to valuation gains in Amanzoe, Aristo, Playa Grande Club & Reserve, Pearl Island and growth in the value of the American properties in Euro terms due to the appreciation of the U.S. Dollar against the Euro by c.3.6% during the period. This was slightly offset by a valuation decrease in Sitia Bay Golf Resort, Apollo Heights, Livka Bay Resort, the Nikki Beach Resort and the effect of regular operational and corporate expenses.

· In accordance with the Company's valuation policy, a full independent property valuation was undertaken on the Company's property portfolio as at 31 December 2014.

· Sterling NAV per share as at 31 December 2014 increased by 2.3%, compared to the 30 September 2014 figures, and was 78p before DITL and 68p after DITL.

· The Company continues to have a strong asset base:

- Gross Assets of €1,006 million (including Dolphin's share of Aristo DITL).

- Total Debt of €240 million (€215 million as at 30 September 2014) with a Group total debt to total assets value ratio of 25%.

- €50 million and US$9.17 million of convertible bonds, due in 2018, are held at the Company level. The Company has provided corporate guarantees on the US$31 million outstanding Playa Grande Convertible Bonds due in March 2016 and the US$19 million Playa Grande construction loan.

· Profit for the year was €22 million and implied earnings per share was €0.03. This is the first time since 2007 that the Company has reported annual profits. 

· Cash at 31 December 2014 was €30.9 million (2013: €7.1 million), of which €23.9 million was cash restricted for certain developments.

B. Review of Strategy

Following the announcement of 25 February 2015, the newly constituted Board conducted a review of the Company's existing strategy in conjunction with Dolphin Capital Partners (the "Investment Manager" or "DCP"), taking into account representations made by certain Shareholders.

The Board announces that it has completed its review of the Company's strategy and is pleased to lay out a package of measures that it believes will provide a clear focus in terms of the achievement of the refocused strategy, which aims to: deliver faster returns to Shareholders; reduce the discount to NAV at which the Shares trade; further align the interests of the Shareholders and DCP; and strengthen the governance and reporting regime of the Company.

The conclusion of the review was that the Company's investments should be categorised as "Core Projects" or "Non-Core Assets". The Core Projects are the Company's existing developments known as Amanzoe, Kilada Hills and the Kea Resort (in Greece), Playa Grande Club & Reserve (Dominican Republic) and Pearl Island (Panama) and represent the most mature and advanced developments of the Company. The remainder of the Company's investments are categorised as "Non-Core Assets".

In respect of the Core Projects, the Board and DCP have concluded that it would be in the best interests of Shareholders to continue to develop these assets and complete the main infrastructure and leisure facilities (where not already complete). Thus, the Core Projects would become large scale leisure integrated residential resorts which it is hoped will generate significant returns to Shareholders.

In respect of those Non-Core Assets that are represented by real estate assets, the Board and DCP have concluded that, given their respective stages of development, it would be in the best interests of Shareholders to seek to realise them as part of an orderly sales process. In the meantime, and subject to the Board approval on any additional investment, the Company will continue to advance their development potential in terms of zoning, branding, designing and permitting in order to maximise realisable proceeds or accelerate the time frame for their realisation. In respect of the Non-Core Assets that are represented by investments in the equity of investee companies, principally the investment in Aristo, the Board and DCP have concluded that such investments are no longer core to the Company's strategy going forward, and that it would be in the best interests of Shareholders to seek to realise them.

In terms of the divestment of the Non-Core Assets, the Board will explore with DCP the best manner in which this can be achieved, in the light of prevailing market conditions and circumstances, in order to maximise returns to Shareholders. Moreover, the Board and DCP will explore all available alternatives for the realisation of the Company's investment in Aristo, either through an outright sale of its investment or through the listing of Aristo's shares on a stock exchange, and assist the Aristo management in the divestment of Aristo's two major projects (Venus Rock and Eagle Pine), which is expected to significantly deleverage, and provide the necessary working capital to Aristo.

The Board will work closely with and monitor the performance of DCP (which, as investment manager, has a detailed knowledge of each of the Core Projects and Non-Core Assets) in terms of executing the refocused strategy. A budget is required to be prepared by the Investment Manager for approval by the Board prior to each calendar year, as well as monthly cash spending reporting and quarterly actual versus budget reviews, with Board approval required for amendments/material deviations. Further, the allocation and timing of further capital investment into the Core Projects will be at the sole discretion of the Board and will only be made if and to the extent that the Board is satisfied it is in the best interests of Shareholders. Monies raised from the sale of Non-Core Assets will firstly be invested in those Core Projects that require funding, namely Pearl Island (Ritz Carlton phase) and Kilada Hills Golf Resort, subject to the Company's working capital needs, at the Board's discretion.

In terms of returns generated from the Core Projects and from the disposal of Non-Core Assets, in accordance with the Company's distribution policy (as set out in the original Admission Document) and subject to the Company's working capital requirements, the equity funding needs of the Core Projects and to providing for the other financial commitments of the Company, these will be utilised to pay dividends or other distributions to Shareholders (including by way of share buy backs) at the discretion of the Board.

The Board anticipates that the refocused strategy, as described above, will assist the Company in the achievement of its Investing Policy and in reducing the discount at which the Shares trade to their underlying Net Asset Value per Share.

These measures are being implemented in conjunction with a placing and direct subscription of new shares (together the "Fundraising"), the proceeds of which will be used to finance the implementation of the above strategy and provide working capital to the Company as it seeks to implement the above strategy, further details of which have been announced separately today (the "Placing Announcement").

B.1. Amendment to the Investment Management Agreement

In order to further align the interests of Shareholders and DCP in terms of the achievement of the Investing Policy, the Directors (other than Miltos Kambourides due to his role with DCP) have reached a mutual consensus with DCP to amend the terms of the Investment Management Agreement.

Currently DCP receives an annual management fee equal to 2% of the total equity funds (€681.4 million as at 2 June 2015, resulting to an annual fee of €13.6 million). Subject to shareholder approval, with effect from 1 January 2017, this annual management fee will be changed to the lower of, (i) a flat fee of €8.5 million, or (ii) 1.25% of the Gross Asset Value of the Company. To transition from the current management fee to the revised management fee, with effect from 1 July 2015, the management fee will be €6 million for the second half of 2015 and €8.5 million for the 2016 calendar year.

The Board believes that the new management fee will represent a considerable cost saving to the Company, with the reduction in the annual management fee estimated at c. €23.5 million over the remaining term of the Investment Management Agreement being to August 2020.

Subject to shareholder approval, with effect from completion of the Fundraising, the revised performance fees payable to DCP will comprise three elements:

· In respect of Non-Core Assets, provided any sale consideration equals 65% of the NAV attributable to that investment as at 1 January 2015 ("Base Investment NAV), a performance fee equal to 12.5% of the profit up to 80% of the Base Investment NAV attributable to the investment, increasing to 17.5% of the profit up to 100% of the NAV attributable to the investment and thereafter at the rate of 25% of any profit over the NAV attributable to the investment, subject to a 50% one year look-back period;

· In respect of the Core Projects, they will be treated as a single portfolio with a base cost of €169.6 million (the "Base Cost") which represents the total aggregate Relevant Investment Amount in respect of these projects under the terms of the existing Investment Management Agreement. Once the Company has received a distribution from the Core Projects (or the disposal thereof) equal to the Base Cost plus a percentage of the annual corporate overhead expenses (to include a proportionate share of the management fee payable to DCP) and other non-project allocated costs and a hurdle at the rate of Euribor plus 500 basis points (not to exceed 6%) the excess is divided 60% to DCP and 40% to the Company until DCP has received an amount equal to 20% of such excess and thereafter 80% to the Company and 20% to DCP.

· Notwithstanding that this element of the performance fee is ultimately calculated and paid by reference to the Core Projects as one portfolio, on each individual sale of a Core Project (or a part thereof), DCP will be entitled to receive (as an advance) an amount equal to one-third of the fee that it would have received if, on the sale, the entitlement to a performance fee were calculated on the excess received by the Company over and above the Base Cost attributable to that core Project as increased by the corporate overheads attributable to that core Project and the hurdle outlined above.

Under the Share Incentive Plan, the Company has granted two nil-cost share option awards to DCP (the "DCP Awards") as follows:

The full vesting of the DCP Awards are subject to the satisfaction of both performance vesting targets (ranging from stock prices of 35p to 80p) and time vesting conditions. The proposed changes to the Investment Management Agreement outlined above are subject to the approval of Shareholders and further details are included in the Placing Announcement.

B.2. Corporate Governance

As reported by the Company on 25 February 2015, following consultation with the majority of the Company's shareholders, the Investment Manager and its Nominated Adviser, the Company's Board of Directors was strengthened with the appointment of five new Board members, bringing the total number of members to eight.

The new Board comprises the following members, who include a number of seasoned luxury resort, real estate, lodging and investment professionals who bring valuable experience and insights to the Company:

· Laurence Geller, Non-executive Chairman and chairman of the Strategy and Oversight Committee. Founder of Strategic Hotels & Resorts Inc., an industry leading owner and asset manager of high-end hotels and resorts;

· Robert Heller, Non-executive Director and chairman of the Finance Committee. CEO of Spectrum Gaming Capital, Former managing director at UBS Investment Bank, former President of Baha Mar Development Co;

· Graham Warner, Non-executive Director and chairman of the Audit Committee. Former finance director at JO Hambro Capital Management Group;

· Roger Lane-Smith, Senior Independent Non-Executive Director and chairman of the Nomination and Governance Committee, Senior Partner and Former Executive Chairman of DLA Piper LLP. Roger Lane-Smith has expressed his intention to retire from the Board by the end of 2015 and will lead the effort by the Company to identify a suitable Senior Independent director with UK public company board experience;

· David Heller, Non-executive Director, former Co-Head of Goldman Sachs Global Securities Division;

· Mark Townsend, Non-executive Director. Investment Consultant to Asset Value Investors Limited;

· Justin Rimel, Non-executive Director. Managing director of Third Point's real estate division; and

· Miltos Kambourides, Non-executive Director. Founder of the Company and managing partner of DCP.

In addition, the following Board committees have been established:

· Audit Committee: to provide oversight of the financial reporting process, the audit process, the system of internal controls, overall compliance with laws and regulations and review the budgetary process. The Audit Committee is chaired by Graham Warner and its other members are Rob Heller and Mark Townsend;

· Finance Committee: to provide oversight in matters relating to the capital structure of the Company and matters of financial strategy. The Finance Committee is chaired by Rob Heller and its others members are Justin Rimel and Mark Townsend;

· Nomination and Corporate Governance Committee: to evaluate the Company's corporate governance policies and programmes and principles and recommend changes to the Board, identify, evaluate and recommend to the Board qualified nominees for Board election and review and evaluate the Board's performance. The Corporate Governance Committee is chaired by Roger Lane-Smith and its other members are David Heller and Laurence Geller; and

· Strategy and Oversight Committee: to work with and monitor DCP in the execution of the Investing Policy. The Strategy and Oversight Committee is chaired by Laurence Geller and its other members are Graham Warner and Robert Heller.

Moreover, a formal budgeting and control process has been put in place by the Board with a view to improving capital allocation, investment and spending. The key elements of this process include:

· Budget to be prepared by the Investment Manager for approval by the Board prior to each calendar year;

· Monthly cash spending reporting and quarterly actual vs. budget reviews, with Board approval required for amendments/material deviations; and

· All capital allocations to be decided by the Board.

In order to reflect the fact that Laurence Geller, Robert Heller and Graham Warner will be spending more time on the affairs of the Company, they will be participating in the Share Incentive Plan under the terms of which they will receive Dolphin shares awards (subject to three year vesting) equal to 1.25% of the Dolphin share capital post-offering awarded equally (25%) at 35p, 40p, 45p and 50p and annual director fees of £200,000, £150,000 and £150,000 respectively.

The proposed adoption of the Share Incentive Plan is subject to the approval of Shareholders and accordingly further details are included in the Placing Announcement.

C. Operating Highlights since last Trading Update of 4 December 2014:

C.1. CORE PROJECTS

· Amanzoe, Greece (www.amanzoe.com)

- Amanzoe opened for the 2015 season on 1 April 2015. Current confirmed reservations for the 2015 season are higher on a year-on-year basis. The Beach Club reopened for the season on 1 May 2015 with upgraded facilities.

- The construction of three villas enters the final stages with delivery expected to the owners within the months of June and July 2015. With these villas the total number of completed villas will be increased to seven and thus an additional 39 rooms will be added to the resort. Earthworks for an additional previously sold villa commenced in May 2015.

- Works continue on the construction of additional leisure amenities, including two spa treatment rooms, a gym and extensive back-of-house facilities at the Amanzoe beach club, and are expected to be operational by the end of June 2015.

- Amanzoe continues to receive positive reviews and was named, amongst others, as one of the best spas of the year by Tatler magazine and Best European Resort by Gallivanters' Guide.

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

- The construction of the Aman Hotel at Playa Grande Club & Reserve (now officially named "Amanera") continues on schedule, with the anticipated opening in December 2015, expected to coincide with the completion of the golf course redevelopment.

- Construction of the hotel pavilions and the lodge is underway, with overall progress approximately 80% complete. The service buildings have been completed whilst the construction of the beach club commenced in Q2 2015. The demolition of the old golf clubhouse has been initiated with golf clubhouse / spa / fitness scheduled facilities to begin construction thereafter.

- Progress on the renovation of the Robert Trent Jones Sr. golf course is also continuing at full pace. Following the completion of the back nine holes, the renovation of the front nine holes is well underway. The golf course is set for completion to coincide with the commencement of operations at Amanera.

- Sales have gained momentum driven by strong market conditions in the North American markets. A fourth Aman Founder Villa has been sold and a reservation was taken on the first two-bedroom villa. We have seen a significant increase in site visits and communication from prospective homeowners with discussions ongoing with potential purchasers to buy the remaining three Aman Founder Villas.

- As previously announced on 12 November 2014, Dolphin has closed on a $30.5 million mezzanine debt facility (the "Facility") with Melody Business Finance. This funding enabled Dolphin to accelerate the completion of all complementary leisure facilities to the Aman Hotel (including the Aman beach club, golf clubhouse, spa, gym, tennis, kids' club, hiking and equestrian trails), and to seek to cover all general project overhead costs and debt service until the project becomes cashflow positive without relying on further pre-sales.

· Kilada Hills Golf Resort, Greece

- Subsequent to the Central Administrative Council's approval of the Strategic Investment proposal on 5 November 2014, the decision, as a draft Presidential Decree, was also approved by the ministerial council, and the Council of State issued a positive consultation on 29 April 2015. The "Strategic Development" final permits are pending and depend on the issuance of a Presidential Decree which, after its recent approval by the Council of State, is expected within 2015.

- The Company remains in negotiations with a major regional bank for a long term senior construction loan facility and a VAT bridge facility, and is also in discussions with third party investors to source the additional funds required for the project development, and/or to provide the equity funding from DCI resources.

· Kea Resort, Greece

- On 6 April 2015, Kea Resort received its final construction permit, following the issuance of a Construction Approval (the first of a two stage Construction Permit process which was recently enacted in Greece on 12 February 2015).

- On 3 December 2014, the Company's subsidiaries (holding the shareholding in Kea Resort) signed a mandate letter for the arrangement and underwriting of financing with a major regional bank for a €22 million long term senior construction loan facility, a c. €7 million VAT bridge facility for the construction cost input VAT and a €5.4 million Letter of Guarantee (the "LG") for the pre-financing of the state subsidies, subject to, amongst other things, an equity investment of a minimum of €10 million. The documentation for the latter LG was executed on 31 December 2014 while the Bank has also recently completed the legal due diligence on the project and is currently under negotiation with the Company regarding the definitive loan documentation.

- On 18 March 2015, the Company signed a Memorandum of Understanding with a renowned international resort investor relating to a potential €20 million equity investment in the project, in return for a 50% shareholding stake in the Kea Resort. Should this investment reach a binding agreement, the Company's interest in the project would be reduced to c.34%. Further details with regard to this potential transaction will be announced in due course depending on progress made.

- As previously reported, the hotel's construction can begin as soon as the construction execution drawings are completed as the final construction permit has now been received, but remains subject to finalising the funding package which, in addition to the bank financing, would require an equity contribution either by the Company or in the form of the third party investment discussed above.

· Pearl Island ("Pearl Island" - www.pearlisland.com), Panama

- The Zoniro Panama development team has been enhanced with the appointment of a new director of Development. The new appointee will spearhead the design, value-engineering and construction and development efforts of the Ritz Carlton Reserve phase.

- The Ritz Carlton Reserve project obtained final approval from a regional bank to increase the debt facility from $21 million to $33 million and is now in the process of completing the binding loan documents, while reviewing options to invest the c. $32 million of additional equity required. The team is currently preparing for the commencement of infrastructure works and the construction of the first mockup hotel room in the third and fourth quarters of 2015.

- The regional investor group that acquired the Founders' Phase has almost completed construction of the first group of turn-key villas and condos which are scheduled to be delivered in the first half of 2015. The beach club, airport, service pier and first phase of the marina have been largely completed with full completion of the common amenities and infrastructure of the Founders' Phase expected to be concluded in full by mid-2015.

- The sale of lots and turn-key properties in the Founders' Phase continued to gain momentum in 2014. Residential sales from the Founders' Phase to date amount to c.$70 million from units sold, reflecting strong demand, a stable economy and limited supply of luxury residential opportunities in Panama.

C.2. NON-CORE ASSETS

· The Nikki Beach Resort & Spa at Porto Heli ("Nikki Beach" - www.nikkibeachhotels.com)

- The Nikki Beach Resort at Porto Heli remained closed for the off-season period, during which minor improvement works were made, and reopened on 1 May 2015.

- Nikki Beach has continued to receive positive reviews in the international press. In Greece it was awarded the Best All Day Restaurant Award at the 100% Hotel Design Awards, the Gold award as a Strategic Investment and Silver Award in the Hotel Renovation & Restoration Category in the Annual Tourism Awards.

· Sitia Bay Resort

- Following the urban planning approval for the development of 20 hectares which form the residential element of the first phase of the project, received on 29 September 2014, Sitia Bay is expecting the issuance of the relevant Presidential Decree, which is under review by the Council of State, and which will allow the commencement of the necessary infrastructure works and the sale of approximately 83 residential lots.

· Aristo Developers Ltd (a 49.8% affiliate of DCI)

- 85 homes and plots were sold by Aristo in 2014, representing total sales of €23 million, a slight improvement on 2013.

- Despite the fact that the Aristo sales performance in 2014 was slightly improved compared to 2013, it was still poor in terms of Aristo's size and product inventory and created a strain on Aristo's operational cash flow.

- In an effort to enhance its sales performance, Aristo focused its efforts on the actions relating to the strategic review of its sales team, the reshuffling of its organisation and the launch of a new sales office in Beijing, China to allow direct access to the Chinese market.

- In addition, Aristo actively pursues sales in connection to the respective "visa/residence" and "passport" incentive legislation enacted in Cyprus and has taken actions to revive and strengthen both its relationships with its network of agents and real estate brokers as well as its executive team with the addition of a number of new senior executives.

- These combined efforts have started delivering tangible results with a 63% increase in retail sales being achieved in the first five months of 2015 on a year-on-year basis:

- Additionally, Aristo's management has focused on monetising certain core and non-core land holdings along with seeking to finalise the ongoing bank restructuring discussions with Bank of Cyprus ("BoC") by end of Q2 2015. BoC is the largest Aristo group lender with c. €260 million of outstanding debt, of Aristo's total €386 million outstanding debt as at 31 December 2014.

- As previously announced, following an investigation carried out by the Cypriot authorities pertaining to the subdivision of 177 land plots in a 160,000 m2site, owned by Aristo in the Paphos area, charges were filed by the Cypriot Authorities against Mr. Aristodemou (Aristo's CEO). The respective trial began in January 2015 and is expected to conclude and the judgment to be handed out by the end of June 2015.

· Update on Venus Rock disposal

- The Company appointed Citigroup Global Markets Limited ("Citi") as financial adviser to engage investors in a competitive process for the sale of the Venus Rock project in Cyprus.

- To date, Citi has contacted a preliminary list of potential investors that was approved by the Company. Certain of these investors have requested to enter into discussions with the Company with a view to further exploring the potential for their cooperation with Aristo in Venus Rock through a joint venture or similar transaction. The Company, in consultation with Aristo, is currently considering its overall options to extract value from its investment in Venus Rock.

· Sale of Syros, Greece

- As previously reported a binding pre-agreement with a foreign investor group for the sale of 10 land plots on the island of Syros was concluded. Subsequent to the pre-agreement, final agreements for seven of the land plots were signed up through 29 January 2015, and final agreements for the remaining three are expected to be signed within the next quarter. The land was part of the Aristo Greek portfolio which was 100% retained by DCI following the divestment of 50.2% of Aristo in 2012.

- The transaction net consideration payable to Zoniro amounts to €1.94 million of which the Company has received €1.12 million to date. €0.9 million from the proceeds have been used for the repayment of debt which was secured against the plots.

Commenting, Laurence Geller, Chairman of Dolphin's Board of Directors, said:

"Over recent months, the management and the Board have worked hard together to complete an in-depth strategic review of the Company and the business. I am confident that the resulting package of measures will provide a solid basis to enable the acceleration of returns to shareholders and that the implementation of the refocused strategy will deliver a more robust business. The Company is making good progress, as evidenced by the uplift in NAV, and market dynamics in the tourism sector are in the Company's favour. On that basis, the outlook for 2015 and beyond is encouraging."

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

"We are very pleased to be announcing a number of strategic measures which will help support the business going forward. Significant progress has been made in this regard and, alongside this, we have taken great strides forward with our Core Projects and Non-Core Assets in the last twelve months.

"I would like to thank the newly configured Board for all their input to date and we look forward to working closely with them to realise the ultimate aim of unlocking value and accelerating returns to shareholders."

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. Dolphin seeks to generate strong capital growth for its shareholders through the development of its Core Projects of assets in to sophisticated leisure-integrated residential resorts and the orderly disposal of its Non-Core Assets.

Since its inception in 2005, Dolphin 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 58 million m2 of prime coastal developable land and comprises five Core leisure-integrated residential resorts under development and 10 Non-Core Assets in Greece, Cyprus, Croatia, Turkey, the Dominican Republic and Panama and a 49.8% strategic shareholding in Aristo Developers Ltd, the largest developer and private land owner in Cyprus.

Dolphin is managed by Dolphin Capital Partners, an independent real estate private equity firm.

D. Chairman's Statement

I am pleased to report Dolphin's preliminary annual results for the year ended 31 December 2014, together with a trading update since the period end and the outcome of the review of the Company's strategy.

Over the past few months we have undertaken an in-depth strategic review of the business, during which the Board has worked alongside the Company's investment manager. We believe this important piece of work will go a long way to helping narrow the discount at which Dolphin's shares trade relative to underlying NAV and, importantly, to unlocking the Company's value and accelerating returns to shareholders.

The package of measures we have announced today will deliver a more robust business, with a greater focus combined with further alignment of interests, cost efficiencies and corporate governance. Altogether, this will provide a structure through which the refocused strategy can be implemented, streamlining development plans for the Company's more mature Core Projects and working to realise the non-core assets, all to the benefit of our investors.

To this end, the Company has outlined its intention to undertake a placing of new shares with the aim of raising capital for the Company to finance the implementation of the refocused strategy. More details on this are provided in the Placing Announcement issued today.

Beyond this work at a strategic level, it has also been a year of significant progress for the Dolphin portfolio, which is reflected in the results announced today. Profit for the year was €22 million, implying earnings per share of €0.03 and marking the first time since 2007 that the Company has reported an annual profit.

Total Group Net Asset Value ("NAV") as at 31 December 2014 is set at €644 million before Deferred Income Tax Liabilities ("DITL") and €557 million after DITL. This represents a 6.6% and 6.4% increase of €40 million and €34 million respectively, on the 31 December 2013 figures. Sterling NAV per share before DITL as at 31 December 2014 remained almost unchanged to 78p, compared to 31 December 2013 figures.

The moderate NAV uplift is largely due to valuation gains in Amanzoe, Aristo, Playa Grande Club & Reserve, Pearl Island and a growth in the value of the American properties in Euro terms due to the appreciation of the U.S. Dollar against the Euro during the period. Although this was slightly offset by a valuation decrease in Sitia Bay Golf Resort, Apollo Heights, Livka Bay Resort, the Nikki Beach and the effect of regular operational and corporate expenses.

Overall, 2014 has been a year of recalibration and progress for Dolphin. I am pleased with what has been achieved and believe that we have a solid base on which to implement the business strategy to ensure that shareholder value is maximised in 2015 and beyond.

Laurence Geller

Chairman

Dolphin Capital Investors Limited

3 June 2015

E. Investment Manager's Report

Significant progress has been made across the portfolio during 2014 and in the months since the Company's last trading update of 4 December 2014.

We have focused efforts on progressing the development pipeline, in particular at Playa Grande Club & Reserve, which has been rebranded to "Amanera" and which we were able to accelerate at the end of 2014 with the closure of a $30.5 million mezzanine debt investment. Amanera is on schedule to open by the end of Q4 2015.

A number of permit approvals have been secured, including the final construction permit for Kea Resort, Greece and planning approval for the development of 20 hectares at Sitia Bay Resort which puts us in a good position to move forward on these projects.

Alongside this, Amanzoe was cash positive for a second year in succession and current confirmed reservations are up on last year, boding well for 2015. Like Amanzoe, Nikki Beach continues to attract critical praise and has recently reopened for the season ahead of its first full year of trading.

With the economic and industry backdrop improving, we are broadly optimistic for the year ahead.

E.1 Market Dynamics

· The latest UNWTO World Tourism Barometer shows that international tourist arrivals reached 1,138 million arrivals in 2014, representing a 4.7% increase over the previous year. The figure is 51 million greater than in 2013 and marks a fifth successive year of above average growth for global tourism. 2015, promises to continue this trend.

· According to the same report, in 2014, the European tourism market grew by 4%, an increase of 22 million arrivals, reaching a total of 588 million. Northern Europe and Southern and Mediterranean Europe led the growth (both +7%). In 2014, the Americas (+7%) registered the strongest growth, welcoming an additional 13 million international tourists. Arrivals to the Caribbean grew by 7% and arrivals to Central and South America both grew at 6%, double the rate recorded in 2013 and well above the world average.

· For 2015, UNWRO forecasts international tourist arrivals to growth between 3% and 4%. Growth is expected to be stronger in Asia and the Pacific (+4% to 5%) and the Americas (+4% to 5%), followed by Europe (+3% to 4%). We believe Europe's tourism performance should be very solid in 2015 with the Euro currently trading at $1.12.

· The key points for Dolphin's markets are as follows:

- In Greece, international tourist arrivals, according to the Tourism Research Institute, set a new historical record for 2014 by reaching 21.5 million, a 20% increase compared to 2013. Despite the political and economic climate, 2015 is expected to set a new record.

- In Cyprus, tourist arrivals during 2014 amounted to 2.4 million and were stable when compared to 2013, as reported by the Statistical Service of the Republic of Cyprus. Nevertheless, it is encouraging to note that, despite the banking crisis that occurred in early 2013, the tourism industry remained unharmed and expectations for 2015 are positive.

- Improving infrastructure and promoting tourism, as well as strong economic fundamentals in the North American market, allowed the Dominican Republic to achieve some of the most significant level of growth in the Caribbean in 2014. 2014 saw 9.1% growth in tourist arrivals, reaching over 5.5 million visitors according to the Dominican Republic's Central Bank.

- Panama has grown increasingly important in the business tourism industry as a result of the country's central location, accessibility, facilities and safety which serve to attract meetings and conventions. Over the course of 2014 the total number of visitors was approximately 2.14 million, indicating a 2.0% increase compared to 2013, based on the data provided by the National Institute of Statistic and Census. Moreover, Panama City in particular is characterised as city of the future for the world's billionaires, by the Wealth Report as published by Knight Frank.

- In Croatia, foreign tourist arrivals for 2014 had an annual growth of 5% and reached 11.7 million according to the Croatian Bureau of Statistics. With most of the major feeder markets within Europe improving their economic conditions, this number is expected to grow further in 2015.

- In Turkey, the country's Statistical Institute reported that the number of foreign visitors rose by 5.5% from a year earlier to 36.8 million in 2014. According to World Tourism Organisation data, Turkey is ranked as the sixth most visited country in the world. Provided that recent domestic tension fully settles, 2015 expectations are optimistic.

· The accumulation of wealth and the growing high net worth population provide strong fundamentals for our business. The Wealth-X and Sotheby's International Realty Global Luxury Residential Real Estate Report forecasts that the ongoing wealth creation cycle will have significant positive consequences on the luxury residential real estate market - with a noted emphasis on new developments and a change in investment grade cities. The ease of travel, the prevalence of private jets amongst the high net worth individuals and the attractiveness of holiday destinations is compelling them to travel and invest in properties in vacation locations. The reports have published the following findings, supporting this trend:

- In 2014 the growth in the number of high and ultra-high net worth individuals across the globe reached all-time highs in terms of their wealth and population. Over the next five years, the number of millionaires is projected to rise by 53%, from 35 million as of 2014 to 53 million by 2019. Between 2008 and mid-2014 the number of millionaires increased by 54% and the number with wealth above US$ 100 million increased by 106%.

- On average, high net worth individuals own 2.7 properties and hold over 8% of their net worth in real estate assets. 79% of the world's ultra high net worth individuals own more than two residences.

- The average high net worth individual spends US$1.1 million a year on luxury goods and services, ranging from expenditure on travel to food. The total high net worth population spends an estimated US$45 billion annually on travel and hospitality and account for a total 22.5% of the total luxury travel market.

E.1. Updated Portfolio Characteristics

A summary of Dolphin's current investments is presented below. As at 31 December 2014, the net invested amount is €586* million.

 *Residual investment cost, including amounts paid in shares.

**Pro-forma shareholding, current DCI interest 92%

A breakdown of Dolphin's portfolio for certain key metrics is provided below.

*Residual investment cost, including amounts paid in shares.

Project exits completed by Dolphin to date are summarised below.

E.2. Non- Core Assets

i. Aristo Developers (www.aristodevelopers.com)

The Company owns a 49.8% shareholding in Aristo, one of the largest residential real estate developer in Cyprus, and a member of the FIABCI International Real Estate Federation & the EU Eco-Management & Audit Scheme ("EMAS"). With 29 years of development expertise and market knowledge, Aristo has sold more than 3,000 holiday homes since 2004, and has over 250 projects, island wide, and 50 projects currently in the market and an extensive sales network in the UK, Russia, and China. Aristo is also the owner of the Venus Rock and Eagle Pine projects in Cyprus. As at 31 December 2014 Aristo has assets of €903 million and liabilities of €391 million (both excluding Intercompany balances) and a loan to value of 33.8%, with total debt outstanding of €386 million.

The Board and DCP aim to assist the Aristo management team in the recovery of its business in a sustainable manner by undertaking initiatives to strengthen its sales and marketing team, pursue sales in connection to the respective "visa/residence" and "passport" incentive legislation enacted in Cyprus and taking actions to revive and enhance both its relationships with its network of agents and real estate brokers, as well as its executive team with the addition of a number of new senior executives.

Additionally, the Board and DCP will assist Aristo's management on certain core and non-core land holdings (including Venus Rock and Eagle Pine) along with seeking to finalise the ongoing bank restructuring discussions with Bank of Cyprus ("BoC") and Aristo's other lenders. A restructuring agreement with BoC, the largest lender of the Aristo Group with €260 million of outstanding debt, is targeted to be concluded by end of Q2 2015.

As noted above, the Company intends to explore all available alternatives for the realisation of its investment in Aristo, either through an outright sale of shares or through the listing of Aristo's shares on a stock exchange, following the completion of the above initiatives and, principally, the divestment of Aristo's two major projects (Venus Rock and Eagle Pine), which is expected to significantly deleverage, and provide the necessary working capital to, Aristo and subject to availability of funds, make distributions to Aristo shareholders.

ii. Other Non-Core Assets

The other Non-Core Assets include 10 leisure-integrated residential resort projects, spread over 1,756 hectares of land. These assets are expected to further increase in value, if the Board authorises the additional investment required to complete their permitting and design phase and become fully permitted projects. In accordance with the Investing Policy, the Company intends to market them in an expeditious, but orderly fashion, taking into account market conditions, while advancing their development maturity in terms of zoning, branding, designing and permitting.

F. Finance Director's Report

Net Asset Value ('NAV')

The audited NAV as at 31 December 2014 is presented below:

Notes:

1. Euro/GBP rate 0.78247 as at 31 December 2014, 0.83478 as at 31 December 2013 and 0.8005 as at 30 June 2014.

2. Euro/USD rate 1.2141 as at 31 December 2014, 1.37660 as at 31 December 2013 and 1.36452 as at 30 June 2014.

3. NAV per share has been calculated on the basis of 642,440,167 issued shares as at 31 December 2014, 31 December 2013 and as at 30 June 2014.

4. NAV before DITL includes the 49.8% shareholding in Aristo before DITL.

Consistent with the Company's valuation policy, the entire portfolio was revalued as at 31 December 2014, which resulted in a net increase in the overall portfolio valuation. Colliers International provided valuations for Playa Grande Club & Reserve, Pearl Island, La Vanta Resort and Livka Bay Resort, and the valuations on the Company's portfolio in Greece and Cyprus were conducted by American Appraisal.

More specifically there were revaluation gains mainly in Amanzoe (due to the permits received for three more Villas and the hotel performance), Playa Grande Club & Reserve (based on final permits received for the hotel and comparables used for the remaining land), Pearl Island (based on to comparable property valuations), Kea (due to permitting advancements) and Aristo (due to the increase in Venus Rock latest independent valuation, following the termination of the sale contract with the China Glory Investment Group).

Another factor that contributed to NAV growth was the revaluation gain following from the acquisition of an additional 9% stake in Plaka Bay Resort and the appreciation of the Americas properties in Euro terms due to the appreciation of the United States Dollar against the Euro by c. 13.6% during the period. NAV decline during 2014 was broadly driven by a valuation markdown mainly in Sitia Bay Golf Resort, Apollo Heights Polo Resort, Nikki Beach and Livka Bay Resort, as well as the effect of the regular operational and corporate expenses.

Sterling NAV per share before DITL as at 31 December 2014 remained almost unchanged to 78p, compared to 31 December 2013, as the effect of the above factors was counterbalanced by c. 6.3% Sterling appreciation versus the Euro, during the period.

The increase in the NAV after DITL resulted in an accounting gain of €22 million, for the year ended 31 December 2014, implying earnings per share of €0.03.

Financial position

_______

*Amounts include the 49.8% DITL of Aristo

** Includes restricted cash of €23.9 million

The Company's NAV before DITL, after deducting from total consolidated assets, non-controlling interests of €30 million, other liabilities of €84 million and total debt of €248 million, is set at €644 million as at 31 December 2014.

The Company's consolidated assets (including €975 million total assets plus €31 million of 49.8% DITL of Aristo) total €1,006 million and include €681 million of real estate assets, €265 million of investments in equity accounted investees, €60 million of other assets and cash. The €681 million figure represents the fair market valuation of Dolphin's real estate portfolio (both freehold and leasehold interests) as at 31 December 2014, assuming 100% ownership. The €265 million figure represents the 49.8% investment in Aristo and the 25% stake in Nikki Beach. The €29 million of other assets comprise mainly €6 million of VAT receivable, €3 million of deferred income tax assets, and €4 million of government grants.

The Company's consolidated liabilities total €332 million and comprise €84 million of other liabilities as well as €248 million of interest-bearing loans and finance lease obligations, out of which €50 million and US$9.17 million are convertible bonds that are held at Company level.

The remaining loans are held by Group subsidiaries and are non-recourse to Dolphin (except for the US$31 million Playa Grande convertible Bond and the US$19 million Playa Grande construction loan which are guaranteed by the Company).

The €84 million of other payables comprise mainly €25 million of option contracts to acquire land, €7.5 million deferred income from government grants and €17 million advances from villa sales.

Panos Katsavos

Finance Director

Dolphin Capital Partners

3 June 2015

Consolidated statement of profit or loss and other comprehensive income

For the year ended 31 December 2014

Consolidated statement of financial position

As at 31 December 2014

Consolidated statement of changes in equity

For the year ended 31 December 2014

Consolidated statement of cash flows

For the year ended 31 December 2014

1. REPORTING ENTITY

Dolphin Capital Investors Limited (the 'Company') was incorporated and registered in the British Virgin Islands ('BVIs') 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 the Americas, 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 2014 comprise the financial statements of the Company and its subsidiaries (together referred to as the 'Group') and the Group's interests in associates and jointly controlled entities.

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 2 June 2015.

b. Basis of measurement

The consolidated financial statements have been prepared under the historical cost convention, with the exception of property (investment property, property, plant and equipment) and available-for-sale financial assets, which are stated at their fair values and investments in associates and jointly controlled entities, which are accounted for in accordance with the equity method of accounting.

c. Adoption of new and revised standards and interpretations

As from 1 January 2014, 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 Company other than the disclosure effect explained below:

(a) IFRS 12 Disclosure of interest in other entities

As a result of IFRS 12, the Group has expanded its disclosures about its interests in subsidiaries (see note 27) and equity accounted investees (see note 16).

The following standards, amendments to standards and interpretations have been issued but are not yet effective for annual periods beginning on 1 January 2014. Those which may be relevant to the Group are set out below. The Group does not plan to adopt these standards early. Although the Group continues to assess the potential impact on its consolidated financial statements resulting from the application of the following standards, it currently expects that their adoption in future periods will not have a significant effect on the consolidated financial statements of the Company.

(i) Standards and interpretations adopted by the EU

· IAS 19 (Amendments) 'Defined Benefit Plans: Employee Contributions' (effective for annual periods beginning on or after 1 July 2014).

· Improvements to IFRSs 2010-2012 (effective for annual periods beginning on or after 1 July 2014).

· Improvements to IFRSs 2011-2013 (effective for annual periods beginning on or after 1 July 2014).

(ii) Standards and interpretations not adopted by the EU

· IFRS 14 'Regulatory Deferral Accounts' (effective for annual periods beginning on or after 1 January 2016).

· IFRS 10, IFRS 12 and IAS 28 (Amendments): Investment Entities: Applying the Consolidation Exception (effective for annual periods beginning on or after 1 January 2016).

· IFRS 11 'Accounting for acquisitions of interests in Joint Operations' (Amendments) (effective for annual periods beginning on or after 1 January 2016

· IAS 1 (Amendments): Disclosure Initiative (effective for annual periods beginning on or after 1 January 2016).

· IFRS 10 and IAS 28 (Amendments): Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (effective for annual periods beginning on or after 1 January 2016).

· IAS 27 (Amendments) 'Equity method in separate financial statements' (effective for annual periods beginning on or after 1 January 2016).

· IAS 16 and IAS 41 (Amendments): 'Bearer plants' (effective for annual periods beginning on or after 1 January 2016).

· IAS 16 and IAS 38 (Amendments) 'Clarification of acceptable methods of depreciation and amortisation' (effective for annual periods beginning on or after 1 January 2016).

· Annual Improvements to IFRSs 2012-2014 Cycle (effective the latest as from the commencement date of its first annual period beginning on or after 1 January 2016).

· IFRS 15 'Revenue from contracts with customers' (effective for annual periods beginning on or after 1 January 2017).

· IFRS 9 'Financial Instruments' (effective for annual periods beginning on or after 1 January 2018).

d. Use of estimates and judgements

The preparation of consolidated financial statements in accordance with IFRS requires from Management the exercise of judgement, to make estimates and assumptions that influence 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.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. In particular, information about significant areas of estimation, uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the consolidated financial statements are described below:

Work in progress

Work in progress is stated at cost plus any attributable profit less any foreseeable losses and less amounts received or receivable as progress payments. The cost of work in progress includes materials, labour and direct expenses plus attributable overheads based on a normal level of activity. The Group uses its judgement to select a variety of methods and make assumptions that are mainly based on market conditions existing at each statement of financial position date.

Revenue recognition

The Group applies the provisions of IAS18 for accounting for revenue from sale of developed property, under which income and cost of sales are recognised upon delivery and when substantially all risks have been transferred to the buyer.

Provision for bad and doubtful debts

The Group reviews its trade and other receivables for evidence of their recoverability. Such evidence includes the customer's payment record and the customer's overall financial position. If indications of irrecoverability exist, the recoverable amount is estimated and a respective provision for bad and doubtful debts is made. The amount of the provision is charged through the consolidated statement of comprehensive income. The review of credit risk is continuous and the methodology and assumptions used for estimating the provision are reviewed regularly and adjusted accordingly.

Income taxes

Significant judgement is required in determining the provision for income taxes. There are transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

Fair value measurement

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 market observable 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.

e. Functional and presentation currency

The consolidated financial statements are presented in euro (€), which is the functional currency of the Company, rounded to the nearest thousand.

3. Determination 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 and quarterly.

The Directors have appointed Colliers International and American Appraisal (Hellas), two 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 American Society of Appraisers (the 'ASA'), and in conformity with the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation and the Principles of Appraisal Practice and Code of Ethics of the ASA and 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 from the estimated sales value of the completed development, the development cost.

Each of the above-mentioned valuation techniques results in a separate valuation indication for the subject property. Then a reconciliation process is 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.

Financial assets

The fair value of financial assets that are listed on a stock exchange is determined by reference to their quoted bid price at the reporting date. If the market for a financial asset is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques. These include the use of recent arm's length transactions, reference to other instruments that are substantially the same and discounted cash flow analysis, making maximum use of market inputs and relying as little as possible on entity specific inputs. Equity investments for which fair values cannot be measured reliably are recognised at cost less impairment.

Trade and other receivables

The fair value of trade and other receivables, excluding construction work in process, is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date.

Non-derivative financial liabilities

Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. For finance leases, the market rate of interest is determined by reference to similar lease agreements.

4. Significant subsidiaries

As at 31 December 2014, the Group's most significant subsidiaries were the following:

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

As at 31 December 2014, all or part of the shares held by the Company in some of its subsidiaries are pledged as a security for loans (see note 20).

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 those entities, including special purpose entities, controlled by the Group. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

5.2 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 associates 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.

5.3 Business combinations

Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that currently are exercisable.

The Group measures goodwill at the acquisition date as the fair value of the consideration transferred, plus the recognised amount of any non-controlling interests in the acquiree, plus if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree, less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss. The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss. Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred. Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss. The interest of non-controlling shareholders in the acquiree is initially measured at the non-controlling shareholders' proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

5.4 Associates and jointly controlled entities

Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20% and 50% of the voting power of another entity. Joint ventures are those entities over whose activities the Group has joint control, established by contractual agreement and requiring unanimous consent for strategic financial and operating decisions. Associates and jointly controlled entities are accounted for using the equity method (equity accounted investees) and are initially recognised at cost. The Group's investment includes goodwill identified on acquisition, net of any accumulated impairment losses. 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, from the date that significant influence or joint control commences 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.

5.5 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 and capitalised borrowing costs.

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.

A property interest under an operating lease is classified and accounted for as an investment property on a property-by-property basis when the Group holds it to earn rentals or for capital appreciation or both. Any such property interest under an operating lease classified as an investment property is carried at fair value. Lease payments are accounted for as described in accounting policy 5.9.

5.6 Property, plant and equipment

Land and buildings are carried at fair value, based on valuations by external independent valuers, less subsequent depreciation for buildings. Revaluations are carried out with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair value at the statement of financial position date. All other property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.

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.

The cost of self-constructed assets includes the cost of materials, direct labour, the initial estimate, where relevant, of the costs of dismantling and removing the items and restoring the site on which they are located, and appropriate proportion of production overheads.

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, unless it constitutes part of the cost of another asset in which case is included in this asset's carrying amount. 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%

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.

5.7 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.

5.8 Work in progress

Work in progress is stated at cost plus any attributable profit less any foreseeable losses and less amounts received or receivable as progress payments. The cost of work in progress includes materials, labour and direct expenses plus attributable overheads based on a normal level of activity.

5.9 Leased assets

Leases under the terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Property held under operating leases that would otherwise meet the definition of investment property may be classified as investment property on a property-by-property basis. Such property is accounted for as if it were a finance lease and the fair value model is used for the asset recognised. Minimum lease payments on finance leases are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

5.10 Trade and other receivables

Trade and other receivables are stated at their cost less impairment losses (see accounting policy 5.21).

5.11 Financial assets

The classification of the Group's investments in equity securities depends on the purpose for which the investments were acquired. Management determines the classification of investments at initial recognition and re-evaluates this designation at every statement of financial position date.

(i) Financial assets at fair value through profit or loss

This category has two sub-categories: financial assets held for trading and those designated at fair value through profit or loss at inception. A financial asset is classified in the held for trading category if acquired principally for the purpose of generating a profit from short-term fluctuations in price. Assets in this category are classified as current assets if they are either held for trading or are expected to be realised within 12 months of the statement of financial position date. Realised and unrealised gains and losses arising from changes in the fair value of financial assets at fair value through profit or loss are included in the profit or loss in the period in which they arise.

(ii) Available-for-sale financial assets

Investments intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, are classified as available for sale. These are included in non-current assets unless management has the express intention of holding the investment for less than 12 months from the reporting date or unless they will need to be sold to raise operating capital, in which case they are included in current assets. Unrealised gains and losses arising from changes in the fair value of available-for-sale financial assets are recognised in other comprehensive income and then in equity. When available-for-sale financial assets are sold or impaired, the accumulated fair value adjustments are included in profit or loss. In respect of available-for-sale equity securities, impairment losses previously recognised in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognised in other comprehensive income and accumulated under the heading of fair value reserve.

5.12 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.

5.13 Share capital and premium

Share capital represents the issued amount of shares outstanding at their par value. Any excess amount of capital raised is included in share premium. External costs directly attributable to the issue of new shares, other than on a business combination, are shown as a deduction, net of tax, in share premium from the proceeds. Share issue costs incurred directly in connection with a business combination are included in the cost of acquisition.

5.14 Own shares

When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, in net of any tax effects, is recognised as a reduction from equity. Repurchased shares are classified as own shares and are presented as a reduction from total equity. When own shares are sold or reissued subsequently, the amount received is recognised as an increase in equity, and the resulting surplus or deficit on the transaction is transferred to share premium.

5.15 Dividends

Dividends are recognised as a liability in the period in which they are declared and approved and are subtracted directly from retained earnings.

5.16 Interest-bearing borrowings

Interest-bearing borrowings are recognised initially at fair value, less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in profit or loss over the period of the borrowings on an effective interest basis.

5.17 Trade and other payables

Trade and other payables are stated at their cost.

5.18 Prepayments from clients

Payments received in advance on development contracts for which no revenue has been recognised yet, are recorded as prepayments from clients as at the statement of financial position date and carried under creditors. Payments received in advance on development contracts for which revenue has been recognised, are recorded as prepayments from clients to the extent that they exceed revenue that was recognised in profit or loss as at the statement of financial position date.

5.19 Provisions

A provision is recognised in the consolidated statement of financial position when the Group has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

5.20 Expenses

Investment manager fees, management incentive fees, professional fees, selling, administration and other expenses are accounted for on an accrual basis. Expenses are charged to profit or loss, except for expenses incurred on the acquisition of an investment property, which are included within the cost of that investment. Expenses arising on the disposal of an investment property are deducted from the disposal proceeds.

5.21 Impairment

The carrying amounts of the Group's assets, other than investment property (see accounting policy 5.5) and deferred tax assets (see accounting policy 5.29), are reviewed at each statement of financial position date to determine whether there is any indication of impairment. If any such indication exists, the assets' recoverable amount is estimated. The recoverable amount is the greater of the net selling price and value in use of an asset. In assessing value in use of an asset, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units and then, to reduce the carrying amount of the other assets in the unit on a pro rata basis.

5.22 Revenue recognition

Revenue comprises the invoiced amount for the sale of goods and services net of value added tax, rebates and discounts. Revenues earned by the Group are recognised on the following bases:

Income from land and buildings under development

The Group applies IAS 18 'Revenue' for income from land and buildings under development, according to which revenue and the related costs are recognised in profit or loss when the building has been completed and delivered and all associated risks have been transferred to the buyer.

Construction contracts

Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the statement of financial position date, as measured by the proportion that contract costs incurred for work performed to date compared to the estimated total contract costs, except where this would not be representative of the stage of completion. Variations in contract work, claims and incentive payments are included to the extent that they have been agreed with the customer.

Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that it is probable they will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

5.23 Finance income and costs

Finance income comprises interest income on funds invested, dividend income and gains on the disposal of and increase in the fair value of financial assets at fair value through profit or loss. Interest income is recognised as it accrues in profit or loss, using the effective interest method.

Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions and losses on the disposal of and reduction in the fair value of financial assets at fair value through profit or loss.

The interest expense component of finance lease payments is recognised in profit or loss using the effective interest method.

5.24 Foreign currency translation

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the period. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognised in profit or loss.

5.25 Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to euro at exchange rates at the reporting date. The income and expenses of foreign operations, excluding foreign operations in hyperinflationary economies, are translated to euro at exchange rates at the dates of the transactions.

The income and expenses of foreign operations in hyperinflationary economies are translated to euro at the exchange rate at the reporting date. Prior to translating the financial statements of foreign operations in hyperinflationary economies, their financial statements for the current period are restated to account for changes in the general purchasing power of the local currency. The restatement is based on relevant price indices at the reporting date.

Foreign currency differences are recognised directly in equity in the foreign currency translation reserve. When a foreign operation is disposed of, in part or in full, the relevant amount in the foreign currency translation reserve is transferred to profit or loss.

5.26 Segment reporting

A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. Segment results that are reported to Group's chief operating decision maker include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

5.27 Earnings per share

The Group presents basic and diluted (if applicable) earnings per share ('EPS') data for its shares. Basic EPS is calculated by dividing the profit or loss attributable to shareholders of the Company by the weighted average number of shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to shareholders and the weighted average number of shares outstanding for the effects of all dilutive potential shares.

5.28 NAV per share

The Group presents NAV per share by dividing the total equity attributable to owners of the Company by the number of shares outstanding as at the statement of financial position date.

5.29 Income tax

Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss, except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the statement of financial position date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised using the statement of financial position method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognised for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

In determining the amount of current and deferred tax, the Group takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. This assessment relies on estimates and assumptions and may involve a series of judgements about future events. New information may become available that causes the Group to change its judgement regarding the adequacy of existing tax liabilities; such changes to the tax liabilities will impact tax expense in the period that such a determination is made.

5.30 Government grants

Government grants are recognised when there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received. Government grants related to non-current assets are recognised as deferred income that is recognised in profit or loss on a systematic basis over the useful life of the asset. Government grants that relate to expenses are recognised in profit or loss as revenue.

5.31 Comparatives

Where necessary, comparative figures have been adjusted to conform to changes in presentation in the current year.

6. Segment reporting

The Group has one operation, investing in real estate, and three reportable segments as shown below, which represent the geographical regions in which the Group operates.