Dci Advisors Regulatory News (DCI)

18 Sep 2007 07:02

Dolphin Capital Investors Limited18 September 2007 18 September 2007 Dolphin Capital Investors Limited (DCI.L) Interim results for the period ended 30 June 2007 DOLPHIN RECORDS 52% RISE IN NAV DURING H1 2007 Dolphin Capital Investors ("Dolphin" or the "Company"), the leading investor inthe residential resort sector in south-east Europe, announces its results forthe period ended 30 June 2007. Highlights • Total Net Asset Value ("NAV") of the Company of €1,295 millionbefore deferred income tax liabilities (€1,161 million after DITL) • NAV per share of 167p and 150p before and after DITL, up 52% and 48%respectively over NAV per share figures of 110p and 101p as of 31 December 2006 • Profit before tax of €211.3 million (30 June 2006: €60.9 million),resulting in a fully diluted earnings per share of €0.61 • NAV uplift driven primarily by the inclusion of all assets ofCyprus' largest holiday home developer, Aristo Developers Plc ("Aristo"),following the successful acquisition via a public offer in April 2007 • Healthy growth in Aristo's financial performance during H1 2007,with a reported 15% and 19% increase in revenues (€69 million) and net profitafter tax (€13 million) respectively compared to H1 2006 • Aristo integration advancing strongly and existing projectsprogressing in line with their development plans • Successful completion of third fundraising of €450 million in June2007 • In final stage of negotiations relating to a number of pipelineinvestments in core markets of Greece and Cyprus as well as other regionalemerging markets. Commenting, Andreas N Papageorghiou, Chairman of Dolphin Capital Investors,said: "It gives me great pleasure to report yet another successful half-yearly periodfor Dolphin Capital Investors. During this period, the Company maintained itsstrong investment performance, raised €450 million of additional equity capitaland became the largest real estate investment fund listed on AIM. In addition,the acquisition of Aristo, Cyprus' largest landowner and holiday home developer,underpinned Dolphin's market-leading position by combining Dolphin's real estateexpertise with one of the most successful residential developers in the region." Miltos Kambourides, founder and Managing Partner of Dolphin Capital Partners,commented: "Dolphin has had a very productive first half of the year, marked by asignificant capital raise amidst challenging market conditions. With a numberof exciting pipeline opportunities already at an advanced negotiation stage, weremain confident in our ability to deploy the new capital over the coming monthsand further grow the Company." For further information, please contact: Dolphin Capital Partners Miltos E. Kambourides miltos@dolphincp.comPierre A. Charalambides pierre@dolphincp.com Financial Dynamics Tel: +44 (0)20 7831 3113Stephanie Highett/Lauren Mills/Nicole Marino Notes to editors Dolphin Capital Investors Limited ("Dolphin" or the "Company") is the leadinginvestor in the residential resort sector in south-east Europe and currently thelargest real estate investment company listed on AIM. Dolphin seeks to generate strong capital growth for its shareholders byacquiring large seafront sites of striking natural beauty in the easternMediterranean and establishing sophisticated leisure-integrated residentialresorts. Since inception in 2005, Dolphin has raised €859 million, has become one of thelargest private seafront landowners in Greece and Cyprus and has partnered withsome of the world's most recognised architects, golf course designers and hoteloperators. In April 2007, Dolphin acquired Aristo, one of the largest holiday homedevelopers in south-east Europe. This enabled the enlarged Company to combinereal estate private equity investment expertise with leading developmentexperience and local market knowledge. Dolphin is managed by Dolphin Capital Partners ("DCP" or the "Investment Manager"), an independent private equity management firm that specialises in realestate investments in south-east Europe. Dolphin's evolution H2 2005 • Dolphin is formed and funded with €5 million of seed capital. • Dolphin is admitted to trading on AIM, raising €104 million via aplacing with institutional investors. The issue price at admission is 68p.Panmure Gordon acted as sole bookrunner. H1 2006 • Dolphin executes its first investment by committing €23 million toKilada Hills Golf Resort. • €49 million committed to Apollo Heights Polo Resort, Scorpio BayResort and the expansion of Kilada Hills Golf Resort. H2 2006 • €21 million committed to Amanmila Resort and Lavender Bay GolfResort. • Secondary AIM fundraising of an additional €300 million (£202.7million) completed via a placing of 217,959,896 new common shares at 93p pershare. Panmure Gordon acted as sole bookrunner. • €54 million committed to Sitia Bay Golf Resort and Seascape HillsResort and €54 million committed to the expansion and/or increase ofshareholding in Kilada Hills Golf Resort, Lavender Bay Golf Resort and ApolloHeights Polo Resort. H1 2007 • €65 million allocated/committed to Livka Bay Resort and RebrandedHotels and an additional €6.5 million invested for the minority buy-out ofScorpio Bay Resort. • €245 million committed to the acquisition of an 85% shareholding inAristo, the largest holiday home developer in Cyprus and listed on the CyprusStock Exchange. • Third fundraising of an additional €450 million (£303 million) via aplacing of 178,041,096 new common shares at 170p per share. Goldman Sachs andMorgan Stanley acted as joint bookrunners and Panmure Gordon acted as co-leadmanager. Chairman's Statement It gives me great pleasure to report yet another successful half-yearly periodfor Dolphin Capital Investors. During this period, the Company maintained its strong investment performance,raised €450 million of additional equity capital and became the largest realestate investment fund listed on AIM. In addition, the acquisition of Aristo,Cyprus' largest landowner and holiday home developer, underpinned Dolphin'smarket-leading position by combining Dolphin's real estate investment expertisewith one of the most successful residential developers in the region. Dolphin's track record of significant value creation for shareholders continuedin the first six months of 2007. As of 30 June 2007, the total NAV of theCompany was €1,295 million before DITL and €1,161 million after DITL, equivalentto a NAV per share of 167p (€2.48) and 150p (€2.22) respectively, whichrepresents a 52% and 48% uplift over the respective NAV per share figures of110p and 101p as of 31 December 2006. With increasing regional governmental support, legislative improvements, acontinuing compelling supply/demand imbalance and a healthy flow of newattractive investment opportunities, Dolphin is strongly positioned to createfurther growth both in its existing and new target markets. With an exciting portfolio of projects and a promising pipeline in unrivalledlocations, we look forward with confidence to creating further value forshareholders. Andreas N PapageorghiouChairmanDolphin Capital Investors Investment Manager's Report Dolphin Capital Investors is managed by Dolphin Capital Partners ("DCP") andfocused exclusively on the residential resort sector predominantly in theeastern Mediterranean. The Company's investment model is predicated on theacquisition of large-scale sites in prime locations that can be developed intosophisticated leisure-integrated residential resorts to be marketed to affluentinternational and domestic buyers. Since admission to trading on AIM, Dolphinhas established a strong track record of rapid capital deployment and NAV upliftcreation. Capitalising on its first mover advantage in the target region, itsaccess to exclusive deal flow and its network of world acclaimed projectpartners, Dolphin intends to continue to deliver significant capitalappreciation to its shareholders. The first half of 2007 has been particularly successful for Dolphin. During thisperiod, we made a highly strategic move which has taken the Company to its nextphase of evolution: the acquisition in April 2007 of Aristo, Cyprus' largestprivate landowner and holiday home developer. The transaction, Dolphin's largestequity commitment to date and Cyprus' largest public-to-private takeover with anenterprise value of €442 million, served both to double the Company's landbankand significantly enhance its competitive position in the holiday homedevelopment market. Dolphin now combines real estate private equity investmentexpertise with extensive development experience. Following the Aristo acquisition, Dolphin returned to the public markets in June2007 to raise an additional €450 million, thus becoming the largest real estateinvestment company listed on AIM. Dolphin has continued to generate NAV uplift in the first half of 2007. Thetotal NAV of the Company as of 30 June 2007 was €1,295 million before DeferredIncome Tax Liabilities ("DITL") and €1,161 million after DITL, equivalent to aNAV per share of 167p (€2.48) and 150p (€2.22) respectively. This represents a52% and 48% uplift over the respective NAV per share figures of 110p and 101p asof 31 December 2006. As of 31 August 2007, Dolphin has committed a total of €538 million out of €839million of net equity funds raised. This figure does not include €57 millionthat has been committed since May through Aristo for new land acquisitions inCyprus and which will be funded through the €85 million bank facility that wassecured in August. As the recently raised funds are invested and as the ongoing design, planningand permitting application processes of existing projects are progressed, theCompany expects to be able to sustain robust NAV growth and continue to generatestrong returns for shareholders. We are confident that the remaining capital will be deployed in a timely mannerover the coming months as negotiations relating to a number of advancedinvestment pipeline projects are concluded. Sector Dynamics Despite the recent debt market turmoil that has negatively affected the yieldperformance of traditional real estate companies, the structural growth story ofDolphin's investments in strategic seafront land sites and the prospects for theleisure-integrated residential real estate sector remain strong. Foreignproperty ownership continues to be well supported by positive fundamentals suchas demographic trends (including, amongst others, the quest for a place in thesun by the growing Northern European ageing population as well as increasedmobility) and continuing favourable developments in the hospitality/leisure andtourism industries. The global market for holiday homes and timeshare apartments represents one ofthe fastest-growing segments in the hospitality industry, with a 15-yearcompound annual growth rate of nearly 10% (source: "American Resort DevelopmentAssociation", Collins Stewart, June 2007). Cap Cana's recent aggressive salesrecord of $300 million in the Dominican Republic, with more than 95% ofinventory being sold out in only the first few hours of the Trump FarallonEstates sales launch, represents another formidable example of the sector'sincreasing popularity and success. 2006 also saw 36 million more tourists than 2005 worldwide (source: UNWTO WorldTourist Barometer, January 2007), with golf tourism growing at impressive rates.The sport's popularity continues to attain an impressive scale and is fastspreading into new geographic markets, with Stephen Proctor of Sports MarketingSurveys projecting the need for a new golf course to open every working day forthe next 10-15 years across Europe and particularly along the Mediterraneancoast to satisfy the increasing demand (source: "The Business of Golf",Financial Times, July 2007). Dolphin's target region continues to present an enticing investment story.Macroeconomic data has been particularly encouraging for the Company's targetmarkets, with strong GDP growth over the first half of 2007. Cyprus inparticular is enjoying strong economic stability as it prepares for its entryinto the eurozone during this transitional period of set rate conversions.Tourist statistics have also been positive for Greece, Cyprus and Croatia, allof which rank high in the Travel and Tourism Competitiveness Index: Human,Cultural and Natural Resources (source: the latest World Investment Report ofUNCTAD). Greek tourist bookings were at a 10-year high for H1 2007, with foreignarrivals forecast to rise 6% in 2007, bringing the total increase since 2004 tomore than 24% (source: "Tourism Results 2000-2006", Kathimerini Newspaper, July2007). The story is very similar for Croatia and Cyprus, the former havingcompleted another successful tourist season over the past six months with twomillion arrivals (source: Croatian Tourism Board satisfied with course oftourist season", Croatian Ministry of the Sea, Tourism, Transport, andDevelopment, July 2007) whilst the latter aims for 3.5 million tourists by 2010(source: "Strategic Plan for Tourism Development 2003-2010", Cyprus TourismMinistry). Local governments continue to share the Company's desire to revitalise thetourist industry and modernise their countries' infrastructure. The draft "Special National Tourism Zoning Plan", unveiled by the Greek Government in thespring, and the recently published "Golf Investment Guide" by Croatia's stateinvestment proposition agency APIU, both aim to delineate a national zoning planthat will allow for the orderly development of golf residential resorts. Thescale of the proposed reforms are set to be far-reaching, recognising theundisputed success of the golf industry in boosting tourism revenue. Cyprus isalso pressing ahead with its "Strategic Plan for Tourism Development", whichplaces particular emphasis on sports tourism, as can be demonstrated by the 12preliminary licences for golf-integrated residential resorts that are beinggranted by the Cypriot authorities, three of which have been awarded toDolphin's recently acquired Aristo. In Turkey, the recent electoral success of the AKP party has strengthened ourresolve to tap the country's real estate potential. The Government appearspoised to maintain the positive foreign investment climate nurtured since 2002,remaining openly supportive of Foreign Direct Investment ("FDI"), with anestimated $25 billion of FDI this year compared with less than $1 billion a yearsix years ago (source: "FT Report - Investing in Turkey: Polls unlikely to deterinvestors", Financial Times, July 2007) and continuing to focus on structuralreforms and privatisations. GDP growth over the past three years hasconsistently exceeded 5% (source: Turkish Statistical Institute), whilst averageinternational arrivals and income receipts growth has been recorded at 11.1% and13.9% respectively during 1995-2005 (source: "The Travel & Tourism Report 2007 -Part II", UNWTO). The Government is also keen to reinvigorate the country's bidto join the EU. Dolphin is expected to be able to announce the closing of itsfirst investment in Turkey in the near future. Sicily, as one of Italy's few remaining virgin and underdeveloped regions, alsopresents a number of attractive opportunities on which the Company is currentlycompleting extensive due diligence. Dolphin expects to be able to capitalise onthe market potential as the island's business environment becomes more and moretransparent. A final note on the recent fire outbursts in Greece: these were indeedparticularly unfortunate for the country, with the tragic loss of many innocentlives and the natural beauty of large parts of the Peloponnese and the island ofEvia severely damaged. The Dolphin sites have not been affected by this tragedybut the events do reinforce the need for extra protective measures goingforward. We are committed to working with the municipalities in which all of ourprojects are located and ensuring that adequate fire prevention mitigates anypossible future damage. Current Investments Dolphin's investment activity over the first half of 2007 has been focused oncontinued land aggregation, the integration of Aristo and the progression of theplanning applications across the Company's current projects. The existing project portfolio includes investments in 12 majorleisure-integrated residential resorts in Greece, Cyprus and Croatia and severalsmall ones from the Aristo portfolio amounting to c.35 million m2 of acquired/contracted land and c.17km of direct coastline. From the 12 major developments,four were recently added from the Aristo acquisition, namely Venus Rock GolfResort, Eagle Pine Golf Resort, Douneika and Tsilivi. Acquisitions of sizeable land parcels have also been negotiated over the pasttwo months and are expected to be completed soon, with the purpose of adding newmajor projects to the portfolio, accumulating more land in the greater areassurrounding existing projects and creating critical mass in locations deemed asstrategic to Dolphin's investment plans. Notable examples of completedacquisitions post 30 June 2007 include the purchase of a 13-hectare beachfrontsite near Seascape Hills that will accommodate an Aman beachclub and villas andan 84-hectare site contiguous to Eagle Pine Golf Resort that will enable theproject to be significantly expanded. Aristo has also actively been expandingits land portfolio, with the cumulative acquisition of approximately 71 hectaresof land in Cyprus since May 2007. Kilada Hills Golf Resort, Greece • Golf-integrated development spread over a 180-hectare site designed byJean-Michel Gathy of Denniston International • 70 hectares of adjacent landbank • Situated in the upmarket residential area of Porto Heli, 175km fromAthens • To comprise more than 80,000 residential buildable m2, a 117-room andsuite luxury GHM-operated hotel and an 18-hole championship Jack NicklausSignature Golf Course • The golf, hotel and residential building permits received in Q3 2006for the original 80-hectare masterplan made Kilada Hills probably the mostmature project in terms of permits in Greece • Based on the original permits, a €13 million subsidy package wasreceived in March 2007 for the hotel and golf construction • Permits for the new design and expanded masterplan are progressing Seascape Hills Resort, Greece • Aman resort and villa community masterplanned by Ed Tuttle • Nestled within the greenest area of the wider Porto Heli peninsula,only a 10-minute drive from Kilada Hills Golf Resort • Hill-top site of 40 hectares to accommodate a luxury 40-room Amanhotel, 40 Aman villas and a spa • Recent acquisition of a 13-hectare beachfront site that willaccommodate an Aman beach-club and additional villas • Additional 33 hectares of adjacent landbank already acquired • Expected to benefit from the extended range of facilities to beoffered by the neighbouring Kilada Hills Golf Resort • Pending Environmental Impact Study ("EIS") approval Lavender Bay Golf Resort, Greece • Seafront leisure-integrated residential resort spread over a294-hectare site and masterplanned by EDSA • 10-minute drive from Nea Achialos International Airport • To comprise more than 100,000m2 of residential accommodation, a250-room luxury hotel, an 18-hole Gary Player Signature Golf Course and a100-berth marina • Hotel operator selection process in final stages • Preliminary EIS and suitability by the Greek National TourismOrganisation ("GNTO") for hotel component already obtained; final EIS for thehotel submitted and under review • Progressing in parallel the site eligibility for special out of townzoning on the eastern zone Scorpio Bay Resort, Greece • 172-hectare site, situated only an hour's drive from AthensInternational Airport in the region of Skorponeri, featuring 2km of coastlineand dramatic views of the bay and the island of Evia • To comprise a luxury hotel, with at least 80,000 m2 of buildableresidential area • Hotel operator and architect selection process in final stage • Preliminary EIS pending approval • Expected to be the closest high-end seaside residential resort toAthens Amanmila Resort, Greece • The first villa-integrated Aman Resort to be signed up in Europe • Situated on an unspoilt secluded peninsula on the island of Milos • To comprise a 40-room Aman hotel with 40 villas over 65 hectares • Design by John Heah already completed • 135 hectares of adjacent landbank • Preliminary EIS pending submission • Land transfer procedure has progressed and is expected to be completedin the near future Sitia Bay Golf Resort, Greece • Golf-integrated residential resort, to be developed on a 250-hectareseafront site • Situated in Sitia region in eastern Crete, only a 10-minute drive fromSitia International Airport • To comprise an 85-berth marina, an 18-hole Nicklaus DesignChampionship Golf Course, a 250-room luxury hotel and residential unitstotalling more than 110,000m2 • One of the most advanced projects in Crete in terms of permits (EISand tourist suitability for leisure component obtained, special out of townzoning eligibility of the wider Sitia area for residential development) • WATG commissioned to prepare masterplan and architectural design forthe hotel, spa, and conference facilities • Luxury hotel operator to be appointed shortly Tsilivi Resort, Greece • Holiday home community to be developed on a 11-hectare beachfront siteon the island of Zakynthos, Greece • Located in the small village of Tsilivi, only 4km from the town ofZakynthos and a 20-minute drive from the island's airport • To comprise more than 56,000 buildable m2 of residential real estate • One of the largest sites remaining that falls within urban buildingzoning and can benefit from high building coefficients • Permits in place for the first phase, remaining permits expectedshortly Douneika Resort, Greece • 26.5-hectare beachfront site located in the region of Ilia, on thenorth-west coast of the Peloponnese • Only a 30-minute drive from Andravida Airport and approximately twohours from Athens International Airport upon completion of upgrades on theexisting highway, currently under construction • Less than 1km away from an existing marina • In early stages of design and permit process Apollo Heights Polo Resort, Cyprus • Polo and golf-integrated residential resort to be developed on a460-hectare site, masterplanned by EDSA • Located between Paphos and Limassol and accessible in less than anhour from both Cyprus International Airports and in close proximity to EaglePine and Venus Rock Golf Resorts • Multi-phased development with capacity to accommodate more than200,000m2 of residential real estate, a five-star luxury hotel and an 18-holeTony Jacklin Signature Golf Course • Resort expected to benefit from the proximity to the existing 18-holegolf course and polo fields of the neighbouring British Military Bases • Staged permit process expected to span over next few years Eagle Pine Golf Resort, Cyprus • Premier masterplanned leisure-integrated residential community spreadover a c.300 hectare site • Located only a few kilometres from Apollo Heights Polo Resort and a15-minute drive from Venus Rock Golf Resort • Holds preliminary approval for the development of a golf-integratedresort, with a residential development component of up to 100,000m2 on 140hectares • 160-hectare landbank can accommodate more development • Masterplanned by EDSA • Golf design by Graham Marsh in association with Hans-Georg Erhardt • Final permits expected in 2008 Venus Rock Golf Resort, Cyprus • One of the largest seafront residential resort development sites inEurope, spread over 1,000 hectares • Adjacent to Aphrodite Hills • Operating golf course (Secret Valley Golf Club) • A small portion of the site has already been developed, with 187 moreplots permitted for residential development • Holds preliminary approval for the development of two golf-integratedresorts, with a residential development component of up to 100,000m2 each • Masterplan and landscape design have been revised by EDSA • Expected to comprise three golf courses, c. 3,000 residential units, afive-star hotel with spa, marina, beachfront and commercial facilities • British golf legend Tony Jacklin recently appointed to lead golfcourse designs • Final permits expected in 2008 Livka Bay Resort, Croatia • Dolphin's first investment in Croatia and one of the firstleisure-integrated residential resorts in the country, masterplanned byJean-Michael Gathy • Situated on the island of Solta, spread over 56 hectares of naturalcove, some 15km from Split International Airport • To comprise a GHM-operated 80-room luxury hotel, a 160-berth marina,over 250 residential units, beach and club house as well as a retail village • Zoning consent for Phase I received; EIS pending approval; finalpermits for both phases expected within 2008 Aristo Over the past few months, we have taken significant steps to retain and furtherimprove the efficiency of Aristo's existing key management and operations. Wehave focused on restructuring the company into functional business segments andcreating a new brand designed to elevate the Aristo profile and allow thecompany to tap more effectively the more upscale market segments. Morespecifically, and in line with Dolphin's press release on 5 April 2007, Aristo'slargest and more reputable assets have been integrated within Dolphin's coreluxury development division. Discussions with renowned master-planners,architects, golf designers, operators and marketers have already been initiatedwith a view to progressing what are eventually to become world-class holidayhome destinations integrated with championship golf courses and other leisure/retail components. Venus Rock Golf Resort, Aristo's flagship asset spread over a1,000 hectare site, has already secured Tony Jacklin's participation in theproject, through the design of two new 18-hole golf courses, one of which is toreplace the single existing 18-hole course, and is to apply for a third golflicence over the coming months. We have also sought to extract synergies at the operational level through theintegration of Aristo's in-house development and sales teams with those ofDolphin's other projects in Greece, in effect laying the foundation for astronger Aristo development platform dedicated to overseeing the planning andpermit progression of Dolphin's projects both in Greece and Cyprus. A new CEOhas been appointed for Aristo in Greece and further recruitment is under way. Byconsolidating the Greece and Cyprus development functions in Aristo, Dolphinbenefits significantly from savings on development fees previously budgeted forexternal developers and from the synergies and economies of scale that areclearly created. The performance of Aristo for the first half of the year exhibited healthygrowth compared to the same period for 2006. The company achieved a 15% increasein revenue and reported a strong net profit after tax position of €13 million,representing a 19% uplift which, together with the recently secured loanfacility, are expected to be efficiently allocated to further grow the company.It should be noted that these reported profits are generated from the operationsonly and do not include any property revaluations. Aristo also boasts a consistently strengthening marketing force, having sold 401units during the first half of 2007 compared to 300 in the first half of 2006,recording a 34% volume uplift. Aristo has also made substantial inroads into theRussian purchasers' market, with the percentage of sales to Russian second homebuyers of Aristo's total sales increasing from 15% to 29% over H1 2007. Dolphin Capital Atlantis ("DCA"), a Dolphin subsidiary and holding company ofAristo, currently holds 98.74% of the share capital of Aristo. DCA recentlyactivated its right to squeeze out the remaining shareholders, further to thecompletion of the public offer process during the summer. Investment Pipeline We are in the process of closing on a number of attractive investmentopportunities which come from the pipeline identified before the lastfundraising and which are expected to be announced in the near term. Inaddition, we continue to expand the Company's pipeline through the addition ofnew attractive investment opportunities. With close to 75% of the investment pipeline dedicated to projects in Greece andCyprus, our focus remains on our primary target markets to date. We havenonetheless actively sought to replicate our success in other regional emergingmarkets. We aim to expand our position in Croatia and execute our firstinvestments in Turkey. For Turkey in particular, Dolphin has partnered withKemer Group, a pioneer in creating leisure integrated residential communities inthe country, having sold over 2,000 homes to date. The Kemer Group's flagshipdevelopment, the Kemer Golf & Country Club outside of Istanbul, is Turkey'spremier, social, sports and golf club, offering a vast range of facilitiesincluding an 18-hole internationally accredited golf course, restaurants, sportsfacilities, equestrian competition courses, spas, social and cultural eventfacilities, and personal development programmes in a unique natural setting. Further to amendments in Dolphin's investment policy following the latestfundraising, enabling the Company to invest up to 5% of its last reported NAV tonew geographies outside its primary investment region of the easternMediterranean, we are evaluating some very compelling investment opportunitiesintroduced by our operating partners. We believe that such opportunities willoffer significant capital returns, generate positive synergies with Dolphin'sexisting portfolio, enhance existing relationships and create the potential fornew strategic partnerships with international service providers and operatorsthat should benefit the Company's investments in the primary investment region. With approximately €301 million of uncommitted funds as of 31 August 2007, weare confident in our ability to commit the remaining capital efficiently andprofitably before the end of H1 2008. Looking Ahead Our goals over the coming months are to: • commit or invest all remaining capital by the end of the first half of2008; • progress the design and permit process of all existing and newprojects; • continue the integration of Aristo; • upgrade Aristo's large land sites into upscale residential resorts; • expand Aristo's development leadership into Greece and continue toexport the team's development management expertise and experience to otherDolphin projects; • continue to expand Dolphin's network of world class strategicpartnerships and brands; • expand in other regional markets such as Turkey and Sicily and, to alimited extent, outside the eastern Mediterranean; and • prepare for a transition to the main market of the LSE during thecourse of 2008 to establish Dolphin as one of the largest and most profitablereal estate investment companies in south-east Europe and beyond. In addition to creating wealth for Dolphin's shareholders, we remain committedto creating a long-lasting economic and social benefit for the regions,environments and societies where we invest. To facilitate that, we have recentlyestablished a wholly-owned subsidiary, Dolphin Capital Foundation ("DCF"), anon-profit charitable entity dedicated to assisting the surrounding regionalcommunities and environments where Dolphin invests and to contributing to theirwell-being. Dolphin's Board of Directors has approved for the progressivedonation of up to €2 million to be contributed towards DCF charitable projects.The first donations planned are for the purchase of fire-fighting vehicles formunicipalities in Greece where some of Dolphin's major projects are located. Miltos Kambourides Pierre CharalambidesManaging Partner PartnerDolphin Capital Partners Dolphin Capital Partners Finance Director's Report During the first half of its second year of trading, Dolphin has maintained asolid financial performance. As at 30 June 2007, the Company had invested €378million and committed €518 million out of the €839 million net equity fundsraised. Consistent with the Company's valuation policy, Colliers International ("Colliers") proceeded with the appraisal of: (i) eight major pre-Aristo investments, namely Kilada Hills Golf Resort,Scorpio Bay Resort, Seascape Hills Resort, Lavender Bay Golf Resort, Sitia BayGolf Resort, Apollo Heights Polo Resort, Livka Bay Resort and the hotel propertyacquisition in Porto Heli (part of the Rebranded Hotels initiative). (ii) all the assets of Dolphin's largest subsidiary, Aristo which include,amongst others, the flagship projects of Venus Rock Golf Resort and Eagle PineGolf Resort. Based on this valuation, the Company's NAV per share before and after DITL as of30 June 2007 is 167p (€2.48) and 150p (€2.22) respectively, representing anuplift of 52% and 48% over the reported NAV figures of 110p and 101p as of 31December 2006. The major driver of the NAV uplift has been the inclusion of theAristo assets in the Company's portfolio, following the successful acquisitionvia a public offer which contributed into the Dolphin portfolio over 13 millionm2 of prime development land. • £ Uplift since 31 Dec 06Total NAV before DITL (millions) 1,295 871 naTotal NAV after DITL (millions) 1,161 781 naNAV per share before DITL 2.48 167p 52%NAV per share after DITL 2.22 150p 48% Note: -NAV is fully diluted for warrants granted to the Investment Manager(pro-forma number of shares: 4.5 million). -GBP/Euro rate of 0.6726 as of 30 June 2007. The NAV figures shown in the table above are reported on a diluted basis, takinginto account (on a pro-forma basis) the exercise of the over-performancewarrants by the Investment Manager structured into the over-performanceincentive scheme in conjunction with the October 2006 placing and amended in thethird fundraising in June 2007. As of the latest NAV calculation, the accruedover-performance warrants amount to 4.5 million shares, a number that could growsubstantially if the Company's NAV continues to grow at a high pace for theremainder of 2007. The actual number of over-performance warrants granted to DCPwill be calculated based on the NAV as at 31 December 2007. The NAV figures donot take into account, however, the potential payment of the performance feewhich is payable only when cash profits above the 8% return hurdle are realised. It should also be noted that the reported DITL of €134 million, were calculatedbased on the current fair market value of the land acquired as reported byColliers, and are applicable only in the event of direct sale of land or assets.The sale of land is anticipated to take effect through the sale of shares of theholding SPVs and, as such, most of the DITL are not expected to become payable.The NAV before DITL is therefore considered by the Investment Manager as themore representative figure. Dolphin expects a significant NAV uplift over the coming months, drivenprimarily by: • completion of minority buy-outs as in the case of Venus Rock GolfResort where the 14% not currently owned by Aristo is expected to come underDCA's control by the end of 2007; • completion of the Aristo squeeze-out process; • conversion of signed land pre-contracts into final contracts, as inthe case of Amanmila Resort which is currently not reflected in the Company'sNAV; • profits generated by the Aristo operations; • progress with the planning and permitting process of existingprojects; and most importantly, • closing of additional investments from the pipeline. Financial Overview Dolphin's Total Assets as at 30 June 2007 are reported at €1,782 million andTotal Liabilities at €472 million, based on the interim consolidated financialstatements of the Company. The fair market value of Dolphin's investments (both freehold and leaseholdinterests) as at 30 June 2007 was reported by Colliers at €1,270 million,assuming 100% ownership. After deducting minority interests of €149 million andother net liabilities of €308 million, the fair market value of Dolphin's assetsamounts to €813 million versus €378 million of invested funds, which representsan uplift of €435 million or a 2.2x multiple. Current assets are €507 million (after deducting Trading Properties of €351million which are included in Investment Property), made up of a cash balance of€482 million and €25 million of other receivables. Liabilities total €472 million, including €134 million DITL (as alreadyexplained, DITL are unlikely to materialise), €179 million of Interest-bearingloans and Finance lease obligations and €158 million of other payables. The net profit for the first half of 2007 was reported at €212 million resultingin a fully diluted earnings per share of €0.61. KPMG performed the review of the interim consolidated financial statements. Finance and Capital Structure The Investment Manager continues to optimise the Company's capital structure byreviewing all options for cautiously gearing up the balance sheet. During August, Dolphin secured an €85 million debt facility from Bank of Cyprusto refinance Aristo. The interest-only loan has a cost of 95bps over one-monthEuribor with bullet repayment in five years and is secured against DCA's sharesin Aristo. As the Company's projects start to enter into the construction phase, theCompany anticipates further increasing their individual gearing levels. Cash Management Cash is held in overnight deposits and short-term fixed accounts at ourcustodian bank, Anglo Irish Bank Corporation. Approximately 10% of the recentlyraised €450 million has been re-invested in a AAA-rated money market fund,managed by Goldman Sachs Asset Management, pending investment in Dolphinprojects. Tracking of Performance Following the acquisition of Aristo, the Company has undertaken a costallocation exercise, in effect assigning its cost of acquiring Aristo across themain assets of the company according to their pro-rata net equity value, inorder to accurately track the performance of each project or business unit. Bydrawing down the €85 million facility, which is secured against the shares ofthe holding company of Aristo, the cost basis of the individual assets of Aristo(shown in the table below) will be reduced pro-rata. Investments/Commitments The following table summarises Dolphin's investment activity to date: Development Country Land site (hectares) Dolphin Investment Commitment shareholding % 30/06/2007 30/06/2007 •m •m Kilada Hills Greece 250 89 59.4 65.0Scorpio Bay Greece 172 100 9.7 16.0Apollo Heights Cyprus 460 100 16.4 21.4Amanmila Greece 200 25-50 0.5 5.0Lavender Bay Greece 294 96 9.6 46.0Sitia Bay Greece 250 77 11.4 24.0Seascape Hills Greece 86 99 15.4 30.0Livka Bay Croatia 59 90 8.7 35.0Rebranded Hotels Greece 1 100 1.3 30. AristoVenus Rock Golf Resort Cyprus 1,000 85 84.1 84.1Eagle Pine Golf Resort Cyprus 301 85 15.8 15.8Magioko Cyprus 11 85 6.7 6.7Aristo Other Cyprus 397 85 134.6 134.6Tsilivi Greece 11 85 2.7 2.7Douneika Greece 26.5 85 0.9 0.9Aristo Other Greece 2.7 85 0.6 0.6 Subtotal Aristo 1,748 245.4 245.4 Total 3,520 377.6 517.8 Panos KatsavosFinance DirectorDolphin Capital Partners Independent Report on Review of Interim Financial Information To the Shareholders of Dolphin Capital Investors Limited Introduction We have reviewed the accompanying consolidated balance sheet of Dolphin CapitalInvestors Limited (the "Company") as at 30 June 2007 and the relatedconsolidated statements of income, changes in equity and cash flows for thesix-month period then ended and a summary of significant accounting policies andother explanatory notes (the interim financial information). This interimfinancial information is the responsibility of the Company's Board of Directors.Our responsibility is to express a conclusion on this interim financialinformation based on our review. Scope of Review We conducted our review in accordance with International Standard on ReviewEngagements 2410, "Review of Interim Financial Information Performed by theIndependent Auditor of the Entity". A review of interim financial informationconsists of making enquiries, primarily of persons responsible for financial andaccounting matters, and applying analytical and other review procedures. Areview is substantially less in scope than an audit conducted in accordance withInternational Standards on Auditing and consequently does not enable us toobtain assurance that we would become aware of all significant matters thatmight be identified in an audit. Accordingly we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believethat the accompanying interim financial information does not give a true andfair view of the financial position of the Company as at 30 June 2007, and ofits financial performance and its cash flows for the six-month period then endedin accordance with IAS 34, "Interim Financial Reporting". KPMGChartered Accountants17 September 2007Nicosia, Cyprus Interim Consolidated Income StatementFor the six-month period ended 30 June 2007 From 1 January 2007 From 7 June 2005 Note to 30 June 2007 to 30 June 2006 •'000 •'000 Gain on disposal of investment in subsidiary - 7,955Valuation (loss)/gain on property (2,472) 4,175Other operating profits 60 -Total operating (losses)/profits (2,412) 12,130 Investment manager fees 16.2 (4,312) (1,263) Management incentive fees 16.4 (28,753) - Professional fees (4,231) (22) Other expenses (3,461) (425)Total operating and other expenses (40,757) (1,710) Net operating (loss)/profit before net financial income (43,169) 10,420 Financial income 2,429 2,083Financial expense (1,239) (9)Net financial income 1,190 2,074 Excess of fair value over cost arising on acquisitions 17 253,245 48,386 Profit before taxation 211,266 60,880Taxation 5 740 (1,070)Profit for the period 212,006 59,810 Attributable to:Equity holders of the Company 212,176 58,296Minority interest (170) 1,514Profit for the period 212,006 59,810 Basic earnings per share (•) 6 0.62 0.53Fully diluted earnings per share (•) 6 0.61 0.48 The notes below are an integral part of these interim consolidated financialstatements. Interim Consolidated Balance SheetAs at 30 June 2007 30 June 2007 31 December 2006 Note •'000 •'000AssetsInvestment property 7 855,350 278,017Property, plant & equipment 8 59,842 165Investment in associate 9,147 -Intangible assets 250 -Total non-current assets 924,589 278,182 Trading properties 9 350,519 19,900Loans receivable 10 253 6,500Receivables and other assets 23,279 7,570Deferred tax asset 14 1,033 520Cash and cash equivalents 11 482,237 292,929Total current assets 857,321 327,419Total assets 1,781,910 605,601 EquityShare capital 12 5,175 3,395Share premium 12 833,061 395,335Reserves 540 -Retained earnings 322,500 110,324Total equity attributable to equity holders of the 1,161,276 509,054CompanyMinority interest 148,950 31,898Total equity 1,310,226 540,952 LiabilitiesInterest-bearing loans 13 110,058 2,500Finance lease obligation 525 4,532Deferred tax liability 14 134,198 43,372Total non-current liabilities 244,781 50,404 Interest - bearing loans 13 68,592 1,029Finance lease obligation 29 122Amount due to customers for contract work 53,228 -Trade and other payables 101,122 12,951Tax payable 3,932 143Total current liabilities 226,903 14,245Total liabilities 471,684 64,649Total equity & liabilities 1,781,910 605,601 Net asset value per share (• per share) 15 2.24 1.50Diluted net asset value per share (• per share) 15 2.22 1.50 The notes below are an integral part of these interim consolidated financialstatements. Interim Consolidated Statement of Changes in EquityFor the six-month period ended 30 June 2007 Share Share Translation Revaluation Retained Minority Total capital premium reserve reserve earnings Total interest equity •'000 •'000 •'000 •'000 •'000 •'000 •'000 •'000 Balance at 7 50 4,950 - - - 5,000 - 5,000June 2005Shares 1,040 102,960 - - - 104,000 - 104,000issuedPlacing - (4,304) - - - (4,304) - (4,304)costsProfit for - - - - 58,296 58,296 1,514 59,810the periodMinority - - - - - - 44,169 44,169interest onacquisitionsBalance at 1,090 103,606 - - 58,296 162,992 45,683 208,67530 June 2006 Balance at 1 3,395 395,335 - - 110,324 509,054 31,898 540,952January 2007Shares 1,780 448,220 - - - 450,000 - 450,000issuedPlacing - (10,494) - - - (10,494) - (10,494)costsProfit for - - - - 212,176 212,176 (170) 212,006the periodMinority - - - - - - 117,197 117,197interest on acquisitionsForeign - - 234 - - 234 25 259currency translationdifferenceRevaluation - - - 306 - 306 - 306of property, plant andequipment, net of taxBalance at 5,175 833,061 234 306 322,500 1.161,276 148,950 1,310,22630 June 2007 The notes below are an integral part of these interim consolidated financialstatements. Interim Consolidated Cash Flow StatementFor the six-month period ended 30 June 2007 From 1 January 2007 From 7 June 2005 to 30 June 2007 to 30 June 2006 •'000 •'000 Operating activitiesProfit before taxation 211,266 60,880Adjustments for: Excess of fair value over cost arising on acquisitions (253,245) (48,386) Depreciation charge 15 - Foreign currency exchange difference 259 892 Gain on disposal of investment in subsidiary - (7,955) Valuation loss/(gain) on property 2,472 (4,175) Net financial income (1,279) (2,074)Operating loss before changes in working capital (40,512) (818) Increase in receivables and prepayments (15,709) (3,151)Increase in trade and other payables 87,935 2,215Increase in loans receivable (253) (6,500)Cash used in operations 31,461 (8,254)Interest paid (1,150) (9)Taxes paid (135) -Cash flows generated from/(used) in operating activities 30,176 (8,263) Investing activitiesAcquisition of subsidiaries, net of cash acquired (247,769) (48,883)Acquisition of property, plant and equipment (4,939) -Acquisition of trading properties (325) -Acquisition of investment property (21,458) (20,825)Proceeds from disposal of investment in subsidiary - 18,000Interest received 2,429 1,191Cash flows used in investing activities (272,062) (50,517) Financing activitiesProceeds from the issue of share capital 450,000 109,000Payment of placing costs (10,494) (4,304)Finance lease obligation (4,100) -Net repayment of interest-bearing loans (4,212) -Cash flows from financing activities 431,194 104,696 Net increase in cash and cash equivalents 189,308 45,916Cash and cash equivalents at the beginning of the period 292,929 -Cash and cash equivalents at the end of the period 482,237 45,916 The notes below are an integral part of these interim consolidated financialstatements. Notes to the Interim Consolidated Financial Statements 1. General information Dolphin Capital Investors Limited (the "Company") was incorporated andregistered in the British Virgin Islands on 7 June 2005. The Company is a realestate investment company focused on the early-stage, large scaleleisure-integrated residential resorts in Southeast Europe, and managed byDolphin Capital Partners Limited (the "Investment Manager"), an independentprivate equity management firm that specialises in real estate investments inSoutheast Europe. The shares of the Company were admitted to trading on the AIM market of theLondon Stock Exchange ("AIM") on 8 December 2005. The interim consolidated financial statements were authorised for issue by thedirectors on 17 September 2007. 2. Accounting policies The interim consolidated financial statements comprise the Company and itssubsidiaries, together referred to as the "Group". The interim consolidated financial statements of the Group have been prepared inaccordance with all International Financial Reporting Standards (IFRSs) thathave been adopted for application in the European Union, including InternationalAccounting Standard No. 34 "Interim Financial Reporting" and must be read inconjunction with the audited consolidated financial statements of the periodfrom 7 June 2005 to 31 December 2006. The accounting policies applied are thesame as those used in the audited consolidated financial statements referred toabove. The interim consolidated financial statements are presented in Euro (•), roundedto the nearest thousand. 3. Significant company holdings The Company's most significant company holdings are the following: Country of ShareholdingName incorporation InterestScorpio Bay Holdings Limited Cyprus 100.00%Scorpio Bay Resorts S.A. Greece 100.00%Latirus Enterprises Limited Cyprus 80.00%Iktinos Techniki Touristiki S.A. Greece 76.50%Xscape Limited Cyprus 96.30%Golfing Developments S.A. Greece 96.30%MindCompass Overseas Limited Cyprus 88.70%MindCompass Overseas S.A. Greece 88.70%Mindcompass Overseas Two S.A. Greece 88.70%Ergotex Services Limited Cyprus 88.70%D.C. Apollo Heights Polo and Country Cyprus 100.00% Resort Ltd (ex. Alasia Polo and Country Resort Limited)Symboula Estates Ltd Cyprus 100.00%DolphinCI Fourteen Limited Cyprus 100.00%Eidikou Skopou Dekatessera S.A. Greece 99.00%Portoheli Hotel and Marina S.A. Greece 80.00%Aristo Developers plc Cyprus 84.04%Azurna Uvala D.o.o. Croatia 90.00%Alexandra Beach Tourist Enterprises S.A. Greece 42,02% 4. Segment reporting The Company has one business and geographical segment focusing on achievingcapital growth through investing in residential resort developments in SoutheastEurope. 5. Taxation From 1 January 2007 From 7 June 2005 to 30 June 2007 to 30 June 2006 •'000 •'000 Corporate income tax (23) -Defence tax 20 -Deferred tax (737) 1,070Total (740) 1,070 6. Earnings per share Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable toequity holders of the Company by the weighted average number of common shares inissue during the period. From 1 January 2007 From 7 June 2005 to 30 June 2007 to 30 June 2006 •'000 •'000 Profit attributable to equity holders of the Company (•) 212,176 58,296Number of weighted average common shares in issue 343,395 109,000Basic earnings per share (• per share) 0.62 0.53 Weighted average number of common shares 30 June 2007 30 June 2006 '000 '000 Issued common shares at the beginning of the period 339,460 5,000Effect of shares issued during the period 3,935 104,000Weighted average number of common shares at the 343,395 109,000end of the period Diluted earnings per share Diluted earnings per share is calculated by adjusting the number of commonshares outstanding to assume conversion of all dilutive potential shares. TheCompany has one category of dilutive potential common shares: warrants. Thenumber of shares calculated above is compared with the number of shares thatwould have been issued assuming the exercise of the warrants. From 1 January 2007 From 7 June 2005 to 30 June 2007 to 30 June 2006 •'000 •'000 Profit attributable to equity holders of the Company (•'000) 212,176 58,296 Weighted average number of common shares in issue ('000) 343,395 109,000Effect of potential conversion of warrants ('000) 4,468 12,500Weighted average number of common shares 347,863 121,500 for diluted earnings per share ('000) Fully diluted earnings per shares (• per share) 0.61 0.48 7.Investment property 30 June 2007 31 December 2006 •'000 •'000 At beginning of period 278,017 -Additions through: direct acquisitions 21,458 57,565 acquisition of subsidiary companies (see note 17) 556,696 175,936 856,171 233,501Fair value adjustment (821) 44,516At end of period 855,350 278,017 8.Property, plant and equipment 30 June 2007 31 December 2006 •'000 •'000Cost or revaluationAt beginning of period 268 -Additions through:Direct acquisition of property, plant and equipment 4,939 53Acquisition of subsidiary companies (see note 17) 65,779 215Revaluation (1,244) -At end of period 69,742 268 Accumulated depreciationAt beginning of period 103 -Additions through:Acquisition of subsidiary companies (see note 17) 9,782 100Charge for the period 15 3At end of period 9,900 103 Carrying amount 59,842 165 9.Trading properties 30 June 2007 31 December 2006 •'000 •'000 At beginning of period 19,900 -Additions 325 -Additions through acquisition of subsidiaries (see note 17) 330,294 19,900At end of period 350,519 19,900 10. Loans receivable On 30 June 2006, the Company entered into a loan agreement with Egnatia AnonimiAsfalistiki Etaireia (Egnatia) and Le Monde Asfalistiki S.A. (Le Monde)regarding Scorpio Bay Resort, to provide Egnatia and Le Monde with a €6.5million loan at an 8% interest cost for a maximum period of one year. The loanwas secured against Egnatia's and Le Monde's 49% shareholding of Scorpio BayHoldings Ltd and, in the event that it would have not been repaid within 12months, the Company would have the right to obtain 100% of Scorpio Bay HoldingsLtd. On 22 February 2007, the Company activated the above-mentioned securityprovisions of the loan agreement and acquired the remaining 49% shareholdinginterest in Scorpio Bay Holdings Ltd (see also note 17), because Egnatia and LeMonde had entered into liquidation proceedings and were unable to repay theloan. In February 2007, the Company entered into a loan agreement with VirtusInvestments B.V. (Virtus), the minority shareholder of Azurna Uvala D.o.o.(Azurna) of Livka Bay project, to provide Virtus with a €250 thousand loan at anannual interest rate of 8%. The purpose of the loan was the acquisition byVirtus of the 10% of the new share capital of Azurna. The loan is repayable infull not later than 5 February 2010 and was secured against Virtus's 10%shareholding interest in Azurna. In the event that it would have not beenrepaid by the due date, the Company would have the right to withhold the amountof the loan against the purchase price of the consideration of Azurna's sharecapital. 11. Cash and cash equivalents 30 June 2007 31 December 2006 •'000 •'000Bank balances 82,233 53,193One-week deposit 400,000 -One-month fixed deposits - 14,927Two-month fixed deposits - 61,149Three-month fixed deposits 4 163,660Cash and cash equivalents in the statement of cash flows 482,237 292,929 The average interest rate on the above bank balances for the six-month periodended 30 June 2007 was 3.68% (as at 31 December 2006: 3.21%). 12. Share capital and premium Authorised share capital '000 30 June 2007 '000 31 December 2006 of shares •'000 of shares •'000 Common shares of €0.01 each 2,000,000 20,000 500,000 5,000 Movement in share capital and premium '000 Share capital Share premium of shares •'000 •'000Capital at 7 June 2005 5,000 50 4,950Shares issued from AIM primary placement on 104,000 1,040 102,960 8 December 2005Placement costs on AIM primary placement - - (3,411)Shares issued from exercise of warrants on 12,500 125 - 9 October 2006Shares issued from AIM secondary placement on 217,960 2,180 297,831 9 October 2006Placement costs on AIM secondary placement - - (6,995)Capital at 31 December 2006 339,460 3,395 395,335 Capital at 1 January 2007 339,460 3,395 395,335Shares issued from AIM third placement on 178,041 1,780 448,220 27 June 2007Placement costs on AIM third placement - - (10,494)Capital at 30 June 2007 517,501 5,175 833,061 Warrants In conjunction with the secondary placing on 7 October 2006, the InvestmentManager was granted an additional over performance incentive designed to rewardthe Investment Manager if the Company achieves exceptional growth in its netasset value during the period from the date of the Placing to 31 December 2007.The achievement of this additional incentive is predicated upon the Company'snet asset value growth over this period out-performing a hurdle rate of 30% (the'Super Hurdle'). In the event of this over performance, the Investment Managerwill be granted the right to subscribe (at par value of €0,01) for such numberof further common shares as equals 10% of the value of the net asset valuegrowth over the Super Hurdle divided by €1.34. The Investment Manager hasagreed that any common shares subscribed for pursuant to the Warrant Proposalwill be subject to a lock-up requirement for a period of two years from the dateof subscription. The Company and the Investment Manager have agreed to vary the Over-performanceWarrant Deed by increasing the Super Hurdle to include the gross proceeds of thethird fund raising multiplied by 1.11, which results in the equivalent of the30% original Super Hurdle for the remaining period. In addition, the Company and the Investment Manager have agreed a furthervariation to the Over Performance Warrant Deed under which, for the period from1 January 2008 to 31 December 2008, the Investment Manager is to be granted afurther one-off over-performance warrant entitlement to reward exceptionalgrowth. The hurdle for the 2008 Warrant Deed is the net asset value per commonshare on 31 December 2007 multiplied by 1.3 (the "Second Super Hurdle"). In theevent that this Second Super Hurdle is met, the Investment Manager would begranted the right to subscribe (at par value of €0.01) for such number offurther common shares as equals 10% of the excess net asset value achieved bythe Company by the end of 2008 divided by net asset value per common share on 31December 2007 multiplied by 1.3. These new common shares subscribed for wouldbe subject to the same lock-up requirement as for the common shares subscribedfor under the initial Warrant Grant. 13. Interest-bearing loans 30 June 2007 31 December 2006 •'000 •'000 Current portion 68,592 1,029Non current portion 110,058 2,500Total 178,650 3,529 14. Deferred tax assets and liabilities 30 June 2007 31 December 2006 Deferred Deferred Deferred Deferred tax asset tax liability tax asset tax liability •'000 •'000 •'000 •'000 Balance at the beginning of the period 520 (43,372) - -From acquisition of subsidiaries (see note 17) 3 (90,952) 491 (32,828)From revaluation of property, plant - (101) - - and equipmentCharge/(credit) in the interim consolidated 510 227 29 (10,544) income statementBalance at the end of the period 1,033 (134,198) 520 (43,372) Deferred tax assets and liabilities are attributable to the following: 30 June 2007 31 December 2006 Deferred Deferred Deferred Deferred tax asset tax liability tax asset tax liability •'000 •'000 •'000 •'000 Revaluation of investment property - (108,452) - (42,219)Revaluation of trading property - (23,350) - (1,153)Revaluation of property, plant - (2,396) - - and equipmentTax losses 1,033 - 520 -Total 1,033 (134,198) 520 (43,372) The deferred tax provision for the Cyprus subsidiaries is based on the capitalgains tax rate and the corporate tax rate, which are 20% and 10%, respectively.The deferred tax provision for the Greek subsidiaries is based on a 25% taxrate, which is the rate applicable for the year 2007 and thereafter. Thedeferred tax provision for the Croatian subsidiary is based on a 20% tax rate. 15. Net asset value per share 30 June 2007 31 December 2006 '000 '000 Total equity attributable to equity holders of the Company (•) 1,161,276 509,054Number of common shares in issue at end of period 517,501 339,460Net asset value per share (• per share) 2.24 1.50 Number of common shares in issue at end of period 517,501 339,460Effect of potential conversion of warrants 4,468 - 521,969 339,460Diluted net asset value per share (• per share) 2.22 1. 50 16. Related party transactions 16.1 Directors of the Company Miltos Kambourides is the founder and managing partner of the InvestmentManager. The interests of the Directors, all of which are beneficial, in the issued sharecapital of the Company are as follows: Shares '000 Miltos Kambourides (indirect holding) 2,339*Nicholas Moy 50Roger Lane-Smith 45Andreas Papageorghiou 5 \* The number of shares indirectly held by Miltos Kambourides might increase dueto the right of potential conversion of warrants (see also note 12). Save as disclosed, none of the Directors had any interest during the period inany material contract for the provision of services which was significant to thebusiness of the Group. 16.2 Investment Manager fees Annual fees The Investment Manager is entitled to an annual management fee of 2% of theequity funds defined as follows: • €109 million; plus • The gross proceeds of further equity issues; plus • Realised net profits less any amounts distributed to shareholders. In addition, the Company shall reimburse the Investment Manager for anyprofessional fees or other costs incurred on behalf of the Company at itsrequest for services or advice. Annual management fees paid during thesix-month period ended 30 June 2007 amounted to €4,312 thousand. Performance fees The Investment Manager is entitled to a performance fee based on the netrealised cash profits made by the Company subject to the Company receiving the "Relevant Investment Amount" which is defined as an amount equal to: (i) the total cost of the investment; plus (ii) a hurdle amount equal to an annualised percentage return of8% compounded for each year or fraction of a year during which such investmentis held (the "Hurdle"); plus (iii) a sum equal to the amount of any realised losses and/orwrite-downs in respect of any other investment which has not already been takeninto account in determining the Investment Manager's entitlement to aperformance fee. In the event that the Company has received distributions from an investmentequal to the Relevant Investment Amount, any subsequent net realised cashprofits arising shall be distributed in the following order or priority: (i) first, 60% to the Investment Manager and 40% to theCompany until the Investment Manager shall have received an amount equal to 20%of such profits; and (ii) second, 80% to the Company and 20% to the InvestmentManager, such that the Investment Manager shall receive a total performance feeequivalent to 20% of the net realised cash profits. The performance fee payment is subject to the following escrow and clawbackprovisions: Escrow The escrow arrangements for the payment of performance fees payable to theInvestment Manager have been amended to take into account the proceeds of theAIM third placement. The following table displays the current escrowarrangements. Escrow Amended terms Up to €109 million returned 50% of overall performance fee held in escrow Up to €109 million plus the cumulative hurdle returned 25% of any performance fee held in escrow After the return of €409 million post-hurdle, plus the All performance fees released from escrowreturn of 50% of €450 million post-hurdle Clawback If on the earlier of (i) disposal of the Company's interest in a relevantinvestment or (ii) 1 August 2015, the proceeds realised from that investment areless than the Relevant Investment Amount, the Investment Manager shall pay tothe Company an amount equivalent to the difference between the proceeds realisedand the Relevant Investment Amount. The payment of the clawback is subject tothe maximum amount payable by the Investment Manager not exceeding the aggregateperformance fees (net of tax) previously received by the Investment Manager inrelation to other investments. 16.3 Shareholder and development agreements Shareholder agreements Dolphinci Three Limited, a subsidiary of the Group, has signed a shareholderagreement with the minority shareholder of Kilada Hills. Under its currentterms, the shareholding of the parties is diluted at any capital increase incase it fails to participate at a valuation equal to €60 million, plus anyfurther cash invested into the project. Dolphinci Nine Limited, a subsidiary of the Group, has signed a shareholderagreement with the minority shareholder of Lavender Bay. Under its currentterms, the shareholding of the parties is diluted at any capital increase incase it fails to participate at a valuation equal to €1.3 million, plus anyfurther cash invested into the project. Dolphinci Twelve Limited, a subsidiary of the Group, has signed a shareholderagreement with the minority shareholder of Livka Bay. Under its current terms,Dolphinci Twelve Limited has acquired 90% of the shares of the project Livka Bay(Single Purpose Vehicle Four Limited) by paying the minority shareholder thepurchase price proportionally, given that the minority shareholder will besuccessful in obtaining, among others, certain agreed zoning approvals andlocation and construction permits. The shares of the company are held in anescrow account. Dolphinci Thirteen Limited, a subsidiary of the Group, has signed a shareholderagreement with the minority shareholder of Iktinos. Under its current terms,Dolphinci Thirteen Limited has acquired 80% of the shares of Latirus EnterprisesLimited by paying the minority shareholder the purchase price proportionally,given that the minority shareholder will be successful in, among others,acquiring additional specific plots and obtaining construction permits. Dolphinci One Limited (DCI One), a subsidiary of the Group, has signed ashareholders agreement with the minority shareholder of Dolphinci Two Limited(DCI Two), Mr. Theodoros Aristodemou (TA), CEO of Aristo Developers plc(Aristo). Under its current terms: a) DCI Two will not issue any new shares without first offering to each of theother parties hereto pro rata and in the event a party fails to participate itsshareholding will be diluted accordingly based on a valuation at least equal tothe latest annually reported NAV per Aristo share as reported in theconsolidated accounts. b) DCI One retains first refusal rights should the minority shareholder decideto sell his shares. c) DCI Two has drag along rights into a partial or full sale, while TA has tagalong rights in the event of a sale by DCI One. d) After the two-year period from the execution of the agreement, the minorityshareholder has the right to sell its shares to DCI One (put option) while DCIOne retains the right to buy the shares (call option), at prices specified inthe agreement. Development agreements MindCompass Overseas Ltd, a subsidiary of the Group, has signed a developmentmanagement agreement with companies owned by or related to the minorityshareholder of Kilada Hills under the terms of which these companies undertaketo assist MindCompass Overseas Ltd to obtain all permits required to enable thedevelopment of the project, as well as to select advisors, consultants, etc.,during the construction phase. The development manager receives an annual feeplus an incentive and success fee. XScape Ltd, a subsidiary of the Group, has signed a development managementagreement with the companies owned by or related to the minority shareholder ofLavender Bay under the terms of which these companies undertake to assist XScapeLtd to obtain all permits required to enable the development of the project, aswell as to select advisors, consultants, etc., during the construction phase.The development manager receives an annual fee plus an incentive and successfee. Azurna, a subsidiary of the Group, has signed a development management agreementwith the minority shareholder of Livka Bay under the terms of which the minorityshareholder undertakes to assist Azurna to obtain all permits required to enablethe development of the project, to negotiate on acquisition of plots, to conducttechnical due diligence, administer any financing put in place as well as toselect advisors, consultants and contractor(s) for the project. According to theaforementioned agreement, the development manager is entitled to an annual feeof €1.0 million. 16.4 Service agreement TA is entitled to receive annually a net after taxes amount equal to 20% of theNAV Uplift (the "Management Incentive Fee"), which shall be created followingCompletion from Aristo's four potential golf-integrated residential developments(the "Relevant Projects"). The Management Incentive Fee shall be calculated annually starting from the 31stof December 2007 and shall be based on the Relevant Projects' valuation as atthe 31st day of December of each year which shall be determined, each year, byan independent third party valuer and shall be payable to TA at the latest bythe 30th of April of the following year. The Management Incentive Fee shall bepayable for each Relevant Project as long as the project is within itsPre-development Phase and the last relevant valuation for the NAV Uplift will bethe one following the end of the projects' Pre-development Phase. TheManagement Incentive Fee shall be provided for a maximum period of four years,unless an extension applies for a Relevant Project. The NAV Uplift shall be the sum of the individual NAV uplifts generated from theRelevant Projects during each project's Pre-development Phase versus theirCurrent Book Value or versus their NAV of the previous year. NAV is defined asthe gross asset value less any financial debt allocated or charged to theRelevant Projects less the corresponding deferred tax liabilities, calculatedseparately for each Relevant Project as at the 31st day of December of eachyear. Any financial debt allocated or charged on the Relevant Projects whoseproceeds were not invested or used for the benefit of the Relevant Projects willnot be deducted from this calculation. The Current Book Value of the Relevant Projects is agreed to be the net bookvalue as included in the audited consolidated financial statements of Aristo asat 31 December 2006. The Pre-development Phase is defined to start from 5 April 2007 and to end onthe day that the Relevant Project receives planning permission for a golfcourse. As of 30 June 2007, the Management Incentive Fee is estimated to be €28,753thousand. 16.5 Other related parties During the period, the Group incurred the following related party transactionswith the following entities: Company or related party •'000 Nature of transaction Roots Development S.A. 200 Project management services in relation to the Kilada Hills projectRoots Development S.A. 200 Project management services in relation to the Seascape Hills projectRoots Development S.A. 250 Project management services in relation to the Lavender Bay projectErgotex Parks Limited 310 Project management services in relation to the Kilada Hills projectErgotex Parks Limited 50 Project management services in relation to the Seascape Hills projectVirtus Finance S.A. 250 Project management services in relation to the Livka Bay projectElemata B.V. 1,120 Financing from the minority shareholder of Livka Bay projectVirtus Investments B.V. 253 Provision of financing to the minority shareholder of Livka Bay project The above transactions are based on written agreements that were entered into onan arm's length basis. 17. Business combinations During the six-month period ended 30 June 2007, the Group acquired ownershipinterest in the following entities: Acquisitions of Minority Interests Portoheli Azurna Aristo Total Additional Additional Additional Additional Total Hotel and Uvala Developers acquisition acquisition acquisition acquisition acquisitions Marina D.o.o. plc in Scorpio In in Iktinos In S.A. Bay Mind-compass Techniki Xscape Holdings Limited Touristiki Limited Limited S.A. •'000 •'000 •'000 •'000 •'000 •'000 •'000 •'000 •'000 (a) (b) (c) (d) (e) (f) (g) Investment 7,500 39,200 509,996 556,696 - - - - 556,696property Property, plant - - 55,997 55,997 - - - - 55,997and equipment Trading - - 330,294 330,294 - - - - 330,294properties Investment in - - 9,147 9,147 - - - - 9,147associate Intangible assets - - 250 250 - - - - 250 Deferred tax 3 - - 3 - - - - 3asset Cash and cash 45 345 8,764 9,154 - - - - 9,154equivalents Deferred tax (1,432) (5,643) (83,877) (90,952) - - - - (90,952)liability Interest-bearing (510) (13,238) (165,585) (179,333) - - - - (179,333)loans Other net current (33) (573) (63,285) (63,891) - - - - (63,891)liabilities Net assets 5,573 20,091 601,701 627,365 - - - - 627,365 Minority interest (1,115) (2,009) (126,890) (130,014) 11,583 760 307 167 (117,197) Net assets 4,458 18,082 474,811 497,351 11,583 760 307 167 510,168acquired Purchase (2,707) (5,160) (242,556) (250,423) (6,500) - - - (256,923)consideration Excess of fair 1,751 12,922 232,255 246,928 5,083 760 307 167 253,245value overcost arising onacquisitions Analysis of netcash flow andcash equivalents:Purchase (2,707) (5,160) (242,556) (250,423) (6,500) - - - (256,923)consideration Cash and cash 45 345 8,764 9,154 - - - - 9,154equivalents ofacquiredcompanies Cash outflow on (2,662) (4,815) (233,792) (241,269) (6,500) - - - (247,769)acquisitions 17. Business combinations (cont.) (a) Portoheli Hotel and Marina S.A. On 14 February 2007, the Group entered into an agreement to acquire from Mr.George Vernikos, a Greek citizen, the 80% of the share capital of the Greekcompany, Portoheli Hotel and Marina S.A., the owner of Yiouli Hotel atPortoheli, for the amount of €2.7 million. Mr. George Vernikos is thefather-in-law of Mr. Miltos Kambourides, a non-executive and non-independentdirector of the Company. Mr. Kambourides abstained from voting in theInvestment Committee meeting where the final decision to acquire the abovecompany was taken. (b) Azurna Uvala D.o.o. The Group acquired a 90% shareholding interest in Livka Bay Resort, situated inthe island of Solta, Croatia. Livka Bay Resort is intended to become one of thefirst exclusive residential resorts on the Dalmatian coast with a luxury hotel,a 160-berth marina and other supporting recreational, sports and retailfacilities. The Group is committing a total of €35 million in the projectcompany to fund the resort's initial development expenses. The remaining sharesare owned by Virtus Investments BV, a developer of high-end resorts. (c) Aristo Developers plc On 5 April 2007, the Company announced the acquisition of an 80% shareholding inAristo, the largest holiday home development company in Cyprus and listed on theCyprus Stock Exchange. The Company has secured a 60% shareholding from TA, inexchange for €128.7 million and a 15% interest in the Dolphin vehicle acquiringAristo, and 20% from Aristo's second largest shareholder for €57.9 million incash. The purchase price equates to €2.15 per share. Aristo owns a number of strategic assets that are complementary to the Company'sstrategy of acquiring large land sites and establishing premium brandedresidential resorts. Aristo is today believed to be the largest private landowner in Cyprus and the largest holiday home developer, both in terms of annualturnover and number of units sold. Aristo owns three out of the twelve newpreliminary licences for golf-integrated residential resorts granted by theCypriot government. Aristo's flagship asset is Venus Rock, a 1,000 hectare sitethat is one of the largest sea-front residential resort development sites inEurope, and which is expected to comprise up to 3 golf courses, more than 3,000residential units, a 5-star hotel with spa, extensive beach-front entertainment,retail and commercial facilities, marina and other sport facilities. Aristoalso owns Eagle Pine, a 220 hectare site (increased to 300+ hectares in August2007) expected to become a golf integrated resort, situated a few kilometresaway from the Company's Apollo Heights Polo Resort. Subsequent to the announcement, the Company launched a public tender offer toacquire the outstanding 20% of shares in Aristo also at a price of €2.15 pershare which implies a total cash consideration of €57.9 million. As at 30 June2007, the effective shareholding interest of the Company in Aristo was 84.04%. (d) Scorpio Bay Holdings Limited Le Monde and Egnatia, the two minority shareholders of Scorpio Bay Holdings Ltd,have entered into liquidation proceedings, and, as a result, the loan thatEgnatia received from the Group of €6,5 million remained unpaid. The Groupactivated the security provisions of the loan agreement and acquired theirshareholding interest of 49% on Scorpio Bay Holdings Ltd. As from 22 February2007, the Group owns 100% of Scorpio Bay Holdings Ltd (also see note 10). (e) MindCompass Overseas Limited The Company has increased its shareholding interest in Mindcompass Overseas Ltdfrom 87.00% to 88.70%, increasing its share on this company's net assets by €760thousand. (f) Iktinos Techniki Touristiki S.A. The Company has increased its shareholding interest in Iktinos TechnikiTouristiki S.A. from 75.00% to 76.50%, increasing its share on this company'snet assets by €307 thousand. (g) Xscape Limited The Company has increased its shareholding interest in Xscape Ltd from 95.00% to96.30%, increasing its share on this company's net assets by €167 thousand. 18. Commitments On 30 June 2007, the Group had commitments on the following projects: Remaining Investment as at commitments as atIn million of euro Country Commitment 30 June 2007 30 June 2007 Kilada Hills Greece 65.0 59.4 5.6Scorpio Bay Greece 16.0 9.7 6.3Apollo Heights Cyprus 21.4 16.4 5.0Amanmila Greece 5.0 0.5 4.5Lavender Bay Greece 46.0 9.6 36.4Sitia Bay Greece 24.0 11.4 12.6Seascape Hills Greece 30.0 15.3 14.7Livka Bay Croatia 35.0 8.7 26.3Rebranded Hotels Greece 30.0 1.3 28.7Atlantis Cyprus 245.4 221.5 23.9*Total 517.8 353.8 164.0 \* The greatest part of the amount has already been paid after June 30, in thecourse of the public tender offer. The remaining will be paid upon thecompletion of the squeeze-out process 19. Contingent liabilities In addition to the tax liabilities that have already been provided for in theinterim consolidated financial statements based on existing evidence, there is apossibility that additional tax liabilities may arise after the examination ofthe tax and other matters of the companies of the Group. If investment properties, inventories and property, plant and equipment weresold at their fair market value, this would have given rise to a payableperformance fee to the Investment Manager of approximately €71 million. 20. Post balance sheet events The Group had the following post balance sheet events: DCI Two has secured an €85 million debt facility from Bank of Cyprus. Theinterest-only loan has a cost of 95 bps over one-month Euribor with bulletrepayment in five years. The loan is secured against Dolphin Capital AtlantisLtd's (DCA), which owns Aristo, shares in Aristo and will be drawn down asrequired. The Company will use the proceeds of the refinancing to fund Aristo'songoing acquisition programme. On 17 August 2007, DCA announced that its shareholding interest in the sharecapital of Aristo has increased to 98.74%. DCA will exercise its right forsqueeze out, which is provided by Article 36 of Cyprus Public Offers Law of2007, in order to acquire 100% of the shares of Aristo and apply for thedelisting of this company from the Cyprus Stock Exchange. This information is provided by RNS The company news service from the London Stock Exchange