DUPD.L Regulatory News (DUPD)

25 April 2016

Dragon-Ukrainian Properties & Development plc

("DUPD" or the "Company")

Results for the year ended 31 December 2015

Dragon-Ukrainian Properties & Development plc, a leading investor in the real estate sector in Ukraine, is pleased to announce its final results for the year ended 31 December 2015.

The Company's Annual Report and Accounts is also available on the Company's website: www.dragon-upd.com using the following link http://www.dragon-upd.com/investor-information/important-information/reports and will shortly be posted to shareholders.

For further information, please contact:

Chairman's Statement

Ukraine entered 2015 facing the threat of an ongoing military conflict in its eastern most regions and the strong economic headwinds of a deep recession, collapsing currency and a pending default on its sovereign debt. Against that backdrop, the country's newly elected President set out to bring peace to the separatist controlled regions while Ukraine's technocrat dominated and reform minded government focused on stabilizing the economy and undertaking structural reforms in 2015 to set the stage for a recovery in 2016. While both ultimately achieved some level of success on each of those fronts, DUPD still found itself operating in one of the most challenging environments it ever faced.

On the military front, the leaders of Germany, France, Ukraine and Russia were able to secure a tenuous ceasefire, monitored by OSCE, in February 2015 that largely held through the end of the year. However, some elements of the Minsk II accords, including greater autonomy for and local elections in the separatist controlled regions as well as the return of control over the border with Russia to the Ukrainian government, remained unfulfilled. Still, the transformation of the war in the east into what many expect to remain a frozen conflict allowed the rest of the country to return to a level of relative normalcy.

On the economic front, the government was able to secure a $40 billion four-year support package, including a $17.5 billion IMF Extended Fund Facility (EFF), bi-lateral and multi-lateral financing, and partial relief from and a restructuring of Ukraine's sovereign debt. Previous actions tied to each disbursement of the EFF created the necessity for the government to undertake and Parliament to support some necessary structural reforms including budget revisions to reduce the deficit, energy tax hikes, improvement in the governance of state-owned enterprises, deregulation and partial changes to the tax code. While much remains to be done, the results of those efforts were already becoming visible by the end of the year.

While GDP declined by a significant 9.9% overall in 2015, seasonally adjusted GDP increased quarter-on-quarter in both the third and fourth quarters of 2015 for the first time since 2013 and is forecasted to continue growing by 1% in 2016. And while the currency declined by an additional 34.3% (at the official USD exchange rate) relative to the US dollar in 2015, the budget deficit came in lower than expected and reserves remained strong at the end of the year allowing the currency to stabilize going into 2016.

Given the difficult economic environment in Ukraine, DUPD remained primarily focused on pursuing our orderly realization strategy while only modestly and prudently investing in the development of existing residential properties that have demonstrated the ability to generate cash.

DUPD generated USD 11.0 million in contracted sales and USD 8.3 million in cash proceeds in 2015, all from its four residential projects. While revenues were down 46% on a year-on-year basis, sales were actually flat a year-on-year basis after eliminating the Henryland transaction from the 2014 results.

Significant milestones in 2015 included the commissioning of the first stage of Obolon Residences and the successful disposal of the rights to develop the second stage of Obolon Residences. In addition, the Company opened a brand-new private school at Green Hills and made other improvements to the infrastructure of the community that resulted in a tripling of transactions in the development in 2015.

As a result of our continued focus on realizations and prudent investment policy, DUPD was able to secure a strong cash position at the end of the year enabling the Company to declare a distribution in 2016 equal to the amount distributed in 2015.

Financial Results

DUPD's overall financial results were, to a large degree, a reflection of the weak economic conditions in Ukraine in 2015.

DUPD incurred a USD 34.0 million loss from operating activities in 2015 (2014: USD 70.2 million loss), USD 31.3 million of which was attributable to the decrease in fair value of Company's projects (2014: USD 66.8 million decrease). As a result, the Company's Net Asset Value decreased by USD 34.0 million to USD 58.4 million as of 31 December 2015.

USD 11.9 million of the decrease in fair value of the Company's projects was attributable to the loss on revaluation of DUPD's shareholding in Arricano Real Estate Plc, driven by a significant reduction in USD denominated rental income from its shopping malls as Arricano was forced to lower rental rates to retain its tenants in light of shrinking retail turnover. An additional USD 8.1 million was attributable to the change in fair value of the Land Bank project as a result of a continued weakening in the demand for undeveloped land.

In terms of liquidity, DUPD's financial position remained healthy with a cash balance of USD 15.9 million and no debt at either the holding company level or project level as of 31 December 2015. Our strong financial position puts the Company in a position to distribute a significant portion of cash generated from the sale of properties in 2016 to shareholders in line with our revised investing policy.

Corporate Governance

There were no changes in the make-up of the Board of Directors of DUPD in 2015.

Awards

The high quality of DUPD's projects continued to be recognized by independent third parties both locally and internationally.

In November 2015 the Obolon Residences residential project received the prestigious award EEA Awards (Award in real estate in Eastern Europe and Asia) in the category "Project of the Year in Residential Real Estate".

In December 2015 the Ukrainian Retail Association revealed the results of the annual shopping and entertainment centres ratings at the Retail & Development Business Summit. The top two positions in the "Traditional Medium Sized Shopping and Entertainment Centre" category were awarded to Prospect (Kiev) and RayON (Kiev), both properties of Arricano Real Estate Plc.

Dividends and Investment Policy

On 24 December 2014, following the adoption of a new investing policy of distributing surplus funds to the Company's shareholders, the Board of Directors declared a dividend of USD 0.055 per Ordinary Share, which was paid in January 2015.

On 29 January 2016, the Board of Directors announced an additional distribution of USD 6.0 million, or USD 0.055 per Ordinary Share, which was paid in February 2016.

Outlook

DUPD's principal objective remains the orderly realization of the Company's properties and return of surplus cash to its shareholders. That said, we do not foresee a quick recovery for the real estate market in Ukraine that will allow rapid monetization of many of DUPD's properties. As such, the Board will continue to prudently evaluate modest investments to protect or enhance the value and salability of the Company's most promising projects that are already under development and have demonstrated their ability to generate cash in the near term.

We expect to build upon our recent successes in sales at Green Hills and Obolon Residences and hope to see progress in sales at Riviera Villas and Sadok Vyshnevyi with the return of modest economic growth in Ukraine in 2016. At the same time, we anticipate that the continued progress in the on-going legal dispute with Stockman will ultimately lead to Arricano regaining control over its key asset Sky Mall in Kyiv.

We believe that 2016 will mark a turning point for Ukraine as continued support from the IMF and other donors coupled with the economic reforms that are currently underway set the stage for a return to economic growth and remain hopeful that the real estate market will also begin to show signs of recovery in the not so distant future.

Mark Iwashko

Non-executive Chairman

22 April 2016

Investment Manager's Report

In 2015 we witnessed the Ukrainian economy starting to recover albeit there was persistent political turbulence. This situation led to further hesitance among investors and clients, and was restraining our residential sales dynamics and divestment efforts.

Further pursuing the strategy of orderly realization of the Company's assets, in 2015 we managed to significantly develop the residential part of the portfolio as well as to provide a further distribution to shareholders. In 2015 our four residential projects generated USD 11.0 million in contracted sales and USD 8.3 million in cash proceeds. For two years in a row, the majority of contracted sales, USD 7.9 million or 72% of the total amount, were generated by Obolon Residences - our high-end apartment complex project. This figure comprises USD 2.9 million from sales in Phase 1 and USD 5.0 million from the sale of Phase 2 to a third-party investor, received in 4 quarterly tranches in the course of 2015. By the end of 2015, 127 out of 160 apartments in Phase I (78% by area) were sold.

In September 2015 we successfully commissioned Phase 1 and started the formal process of registering property rights, which in Ukraine significantly increases the attractiveness of unsold premises for potential buyers. In order to guarantee a superior service for our clients, we attracted a leading local property maintenance company Comfort House, and DUPD established a 50-50% joint-venture for the management of the property Comfort House Obolon.

Our suburban gated community Green Hills managed to capitalize on its high quality and leading position in the market as we closed 23 site sales during 2015 (2014: 6). Total contracted sales amounted to USD 2.3 million in 2015, whereas cash proceeds reached USD 1.3 million, with the combined area of land sold to date reaching 5.9 hectares (36% of the total area for sales). The sales were boosted by the opening of a brand-new private school on 1 September 2015, and further progress of construction works in the community. We also started construction of a new kindergarten expected to be completed in time for the start of the next school year as part of our continued effort to further improve the project's appeal.

Despite the deterioration of market conditions and further devaluation of national currency, we have managed to keep unchanged our USD-denominated prices for Sadok Vyshnevy, our economy class townhouse community. There were 5 deals closed in 2015 for the total amount of USD 0.8 million, bringing the total number of sales to 18 out of 38 apartments in total.

For Riviera Villas, the luxury suburban community project, 2015 was another challenging year. Despite the improved number of calls and visits in the second half of the year, only 1 sale was closed. We expect that further sales of the project will be greatly dependent on the macroeconomic recovery in the country, which we believe is required for upmarket real estate sales to pick up. In the meantime, by the end of 2015 general construction of 2 homes on Street 3 were completed.

In December 2015, we also received the remaining USD 569,000 from the sale of our shareholding in the Henryland project, being the final tranche of the total amount of distributions of USD 9 million attributable to DUPD.

Our portfolio investment, Arricano Real Estate plc, in which DUPD holds a 12.51% stake, continued the LCIA arbitration process regarding Sky Mall, the shopping centre located in Kyiv. During 2015 Arricano took numerous steps to regain control over Sky Mall. After a few intermediate arbitration hearings taking place in the course of the year, the final hearing took place at LCIA in November 2015, following which Arricano is now expecting the final award in the case. Arricano also had a change in its Board of Directors - Mr. Merkulov now combines the CEO position with the seat of an Executive Director on the Board of Directors. Loan restructuring efforts continued leading to refinancing of the USD 10 million Oshchadbank loan on Prospect mall (Kyiv) with a USD 19 million loan from EBRD, conversion of the City Mall USD denominated loan from Raiffeisen Bank Aval to UAH - both in Q12015, and restructuring of the repayment schedule with Bank of St. Petersburg on Rayon shopping centre (Kyiv) in June 2015.

The progress in sales in 2015 confirms our strong focus on the strategy approved by shareholders in early 2014. We are confident that 2016 will bring more good news for the Company.

22 April 2016

Market Overview

Macroeconomic highlights

Despite continuing to face multiple headwinds, the Ukrainian economy demonstrated early recovery signs in the second half of 2015, with Q3 and Q4 2015 real GDP moving up by 0.7% and 1.5% q-o-q in seasonally adjusted terms, respectively, after seven consecutive quarters of decline. For the full year, real GDP still fell 9.9% y-o-y, driven by shrinking household consumption (-20%) and investment (-9%), but a modest recovery of around 1% is forecast for 2016.

Consumer inflation accelerated to 43% in 2015 on hikes to utilities tariffs and hryvnia devaluation (interbank market rate -21% to UAH 24.1:USD at end-2015) but is expected to slow to the low double digits in 2016.

Bank lending remained frozen, with the outstanding loan book shrinking by 22% y-o-y (F/X-adjusted), hit by bank liquidations, and the operating banks remaining preoccupied with sorting out their non-performing loans.

Construction activity registered a 12.3% y-o-y drop in 2015 (vs. -20.4% y-o-y in 2014), driven by the non-residential (-14.2% y-o-y) and infrastructure (-16.3% y-o-y) segments. However, the pace of decline in residential construction slowed to a mere 1.1% y-o-y.

Commercial property

Kyiv's retail properties experienced the second consecutive year of a tenant's market in 2015. Shrinking retail turnover (-21% for the full year) and hryvnia devaluation squeezed both developers' rental income and retailers' margins. Landlords were forced to provide generous rent discounts, in some cases over 50%, or fix the exchange rate at artificially low levels in order to retain their tenants. This helped to improve the vacancy ratio to 5.0% from 7.3%, while prime rental rates fell to USD 50-60/sqm from USD 70/sqm in 2014.

The office segment faced a further contraction in business activity, with the bulk of transactions being either relocations or extensions of existing leases. Yet despite weak demand and sizable new supply (+56,000 sqm or +3.3%), the vacancy rate fell to 17.5% last year from 19.8% in 2014, with prime rental rates dropping by 9.6% y-o-y to USD 27/sqm/month.

The unfavourable economic environment also weighed on the warehousing market. With 77,000 sqm of new space (+4.8%) delivered against the backdrop of still sluggish demand, the vacancy rate increased to 10.5% from 7.0% in 2014 while rents fell to USD 4.5/sqm from USD 5.5/sqm in 2014.

Residential property

Kyiv's market for primary residential real estate demonstrated positive dynamics in 2015, fuelled by developer-offered discounts and instalment plans for newly commenced properties and launch of new phases in existing developments. In Q1-Q3 2015, 19 residential projects with a combined 7,200 apartments, mostly in the low-end segment, were commissioned in the Ukrainian capital. Compared to the same period in 2014, new supply increased by 24.8%.

As of September 2015, the primary residential market in Kyiv was represented by 199 development projects (38,300 apartments), with 63% of them being "economy" and "comfort" types and their share continuing to grow at the expense of higher-end apartments.

Land

The land market experienced no major developments in 2015, with prices of land plots for individual construction around Kyiv and number of sales remaining largely unchanged. The outlook for the land market remains constrained by the slow pace of economic stabilization and low confidence level of domestic and foreign economic agents.

Project Overview

1. Land bank

· The Company is focused on gradually selling the land as it is rezoned and when the land market recovers

2. Obolon Residences

· Business class residential complex with office and retail premises

· Prime location in the prestigious Obolon district in Kyiv

· International standard design

· Obolon Residences was nominated "Project of the year in residential real estate" by EEA Awards in association with EuropaProperty.com and Ukrainian Real Estate Club.

· Construction of Phase 1 was completed in summer of 2015

· DUPD sold the rights to develop the second phase of the Project in 2015 for USD 5 million.

· ~80% of residential space in Phase 1 contracted for sale

· All commercial space is sold, ~30% of parking space and ~24% of storages are sold.

3. Arricano Real Estate plc

· The largest developer of shopping centres in Ukraine

· Listing on the AIM market of the LSE (ARO LN) since September 2013

· DUPD's shareholding is 12.51%

· Portfolio of nine shopping centres of which six are operational and three under various stages of development

· heavy devaluation of hryvnia and falling consumer disposable income has resulted in debt renegotiations/refinancings

4. Riviera Villas

· Elite cottage community near Kyiv

· Project consists of two land parcels, one owned by DUPD and one owned by its partner

· Unique luxury leisure infrastructure

· Utilities on the site and waterfront infrastructure completed

· Total of 4.9 ha of land is sold (34%)

5. Green Hills

· Business class cottage community, 10km from Kyiv

· The first North American style cottage community developed in the country

· All key infrastructure in place

· 2.6 ha of land was sold in 2015 (0.5 ha - in 2014) out of 16.2 ha

· 50 families living in the community

· Private School commissioned in 2015 and opened its doors on September 1st

6. Henryland

· All assets of Henryland were sold for a cash consideration of USD 23.7m in 2013

· DUPD's share of consideration was USD 9.0m, which was received in full

7. Sadok Vyshnevy

· 38 apartments in a town-house community in Kyiv suburbs

· Utilities on the site

· All homes commissioned, and available for sale

· 18 apartments or 47% of all apartments sold (of which 11% were in 2015)

8. Avenue Shopping Centre

· Land plot for a shopping mall development

· Land plot offered for sale

9. Glangate

· Two land plots for shopping centre development in second-tier regional cities of Kremenchuk and Rivne

· Land plots offered for sale

Investing Policy

Dragon - Ukrainian Properties & Development plc ("DUPD" or "the Company") is an "investing company" for the purposes of the AIM Rules for Companies. The AIM Rules for Companies require an investing company to have in place an investing policy which is "sufficiently precise and detailed so that it is clear, specific and definitive". The AIM Rules for Companies provide guidance in relation to what this investing policy is expected to include as a minimum.

On 17 February 2014, the Company's shareholders approved a new investing policy, which is set out below.

Investing strategy - asset allocation - geographic focus and sector focus

The Board will seek to realise the Company's properties in an orderly manner, such realisations to be effected at such times, on such terms and in such manner as the Board (in its absolute discretion) may determine.

Assets or companies in which the Company can invest

The Company will not make any investments in new properties.

However, this will not preclude the Board (in its absolute discretion) from making any investment in existing properties in the following circumstances:

· where the Board, as advised by the Manager, believes such investment is to protect or enhance the value and saleability of such property;

· where the Company is contractually committed to make such investment;

· in respect of properties currently under construction, where the Company continues to pursue, where necessary, any licences and/or approvals which are required for a particular property to continue its development;

· undertaking investment in additional phases of such properties (other than the existing phase currently being developed in respect of such property) where the Board, as advised by the Manager, believes such investment in additional phases is to protect or enhance the value and saleability of such property;

· authorising the expenditure of such capital as is necessary to: (i) acquire any joint venture party's interests in any of the Company's existing investments; or (ii) carry out any construction necessary to maximise value and saleability of any existing property; and

· entering into any contract or other arrangement with any third party to realise all or any part of its existing properties.

In addition, the Company will only commence construction on any of its existing properties that have yet to commence construction to protect or enhance the value and saleability of such property. In respect of such properties, the Company will also continue to pursue, where necessary, any licences and/or approvals which are required for a particular property.

These above restrictions will not preclude the Company making investments in short-dated cash or near cash equivalent securities, which form part of its cash management practices.

Strategy by which the investing policy will be achieved

The Board and the Manager will investigate a number of approaches to realisation of its properties, which will include, but not be limited to, sales of individual assets or groups of assets or a sale of the entire portfolio (or a combination of such methodologies), or an in-specie distribution of such property. The Board will only consider in-specie distributions to shareholders when other realisation alternatives have been fully explored and the relevant property investment is quoted on a stock exchange.

The Board and the Manager may decide to appoint independent advisers to assist in the execution of the New Investing Policy, including, but not limited to, property valuers and property agents.

Whether investments will be active or passive investments

The Manager assumes a proactive approach to every property project in the Company's property portfolio.

Holding period for investments

The New Investing Policy includes an orderly realisation of the Company's properties over the medium term with a view to maximising returns for shareholders. Accordingly, the Board will seek to realise the Company's properties and exercise all legal rights of the Company in such manner and on such timescale as the Directors see fit, with a view to ensuring that returns to shareholders are maximised.

Spread of investments and maximum exposure limits

The Company does not have a prescribed policy in relation to the spread of investments or maximum exposure limits.

The realisation of the Company's properties may, over time, result in the Company having a reduction in the diversification of investments. However, the realisation of the Company's properties over time will also result in the reduction of the Company's overall investment in real estate assets.

Policy in relation to gearing and cross holdings 

The Board (in its absolute discretion) may make prudent use of leverage to make investments or expenditure consistent with its investing policy and to satisfy working capital requirements. Borrowings may be undertaken by the Company itself or by any of its subsidiaries or project companies.

Given that the New Investing Policy is an orderly realisation of the Company's properties over the medium term, it is not expected that the Company will secure additional debt financing other than where the Company believes it is required to protect or enhance the value and saleability of such property.

Investing restrictions

Other than the requirement for the Manager to manage any potential conflicts of interest, and the requirement to invest in accordance with its New Investing Policy, there are no other investing restrictions.

Nature of returns that the Company will seek to deliver to shareholders

Under the New Investing Policy, the Board will seek to return any surplus funds to shareholders when appropriate. The net proceeds of all property realisations will be returned to shareholders, at the Board's discretion, having regard to:

· the requirement to invest further funds in the Company's existing property projects only to protect or enhance the value and saleability of such property, and/or where the Company is contractually committed to make such investment;

· the Company's working capital requirements and running costs (including the fees payable under the Third Management Agreement);

· the cost and tax-efficiency of individual transactions and/or distributions; and

· the 2006 Act.

It is expected that surplus capital will be returned to shareholders over time in a manner which may involve dividends, share buy-backs, voluntary tender offers, dividends and/or capital reductions. The decision to make any such returns, the method through which such returns are effected, and the quantum and timing of any such returns will be at the sole discretion of the Board. The Board will only consider in-specie distributions to shareholders when other realisation alternatives have been fully explored and the relevant property investment is quoted on a stock exchange.

Other matters

Cash management

Pending future returns of value to shareholders, all of the Company's funds (whether in the form of cash or otherwise) will be kept under the control of the Board or as it may direct.

Currency hedging

The Company will hedge currency and interest rate risk as and to the extent that the Board (in its absolute discretion) considers appropriate.

Management of liabilities

The Company will endeavour, at the direction of the Board (in its absolute discretion), to manage all actual or potential material liabilities, risks or exposures of the Company (including, without limitation, any existing contractual commitments, disputes (potential or actual) and litigation (threatened or actual)) in a manner consistent with the orderly realisation of the Company's properties.

Conflict policy

The Dragon Capital Group pursues a number of real estate development projects in Ukraine. Under the terms of the Third Management Agreement the Manager has no ability to commit the Company or any of its subsidiaries to make any acquisition or disposal. In the event that any Relevant Party has the opportunity to acquire Conflict Property then the Manager shall cause the Relevant Party to provide, inter alia, all material details of the Conflict Property to the Company, in order for the Company to decide whether or not to notify the Manager that it should pursue the opportunity to acquire the Conflict Property (within the scope of the New Investing Policy). If the Company so notifies the Manager of its intention to pursue the opportunity to acquire a Conflict Property, the Manager shall procure that no affiliate of the Manager shall acquire any interest in the Conflict Property in question without the prior consent of the Company.

Directors' Remuneration Report

In November 2014 the Board revised the remuneration policy of the Board members.

According to the new policy, as Non-executive Chairman, Mr. Iwashko is entitled to a fee of USD 40,000 plus any applicable taxes plus USD 10,000 towards compensating his costs associated with carrying out his duty as the Chairman of the Board.

Mr. Lou van der Heijden is entitled to a fee of USD 35,000 plus any applicable taxes plus USD 5,000 as compensation for additional duties for chairing the Audit Committee.

The directors' fees for 2015 are summarized in the table below:

The aggregate amount paid to Directors for the period ending 31 December 2015 was equal to USD 92 thousand including reimbursement of all reasonable business and travel expenses.

There were no other payments besides the ones mentioned above being paid to the Directors for the year ending 31 December 2015.

Corporate Governance

Combined Code

The Directors recognize the importance of sound corporate governance. The Company has complied, where possible, with the Corporate Governance Guidelines for AIM Companies published by the Quoted Companies Alliance. The Directors are committed to maintaining the highest standards of corporate governance in the future.

The Board and Board Committees

After the appointment of Mr. Iwashko on 26 November 2014 and the resignation of Mr. Macnamara and Mr. Svinhufvud with effect from 30 November 2014, the Board is comprised of three directors: the Chairman, Mark Iwashko, and two non-executive directors: Aloysius Johannes van der Heijden and Tomas Fiala. Tomas Fiala, one of the Company's Directors, is the principal shareholder and Managing Director of Dragon Capital Group which held 18,927,822 ordinary shares in the Company at the reporting date (17.31% of the total number of shares). DCM Limited is the investment manager for the Company and is a part of Dragon Capital Group. Save in that respect, the Board considers the Directors (with the exception of Tomas Fiala), to be independent for the purposes of the above-mentioned Corporate Governance Guidelines. The letters of appointment of all directors are available for inspection at the Company's registered office during normal business hours.

The Board meets from time to time as required to take decisions on investment projects and to consider general matters affecting the Company and otherwise as required. Issues which do not require discussion by Board members are dealt with by written board resolution.

The Audit Committee was chaired by Mr van der Heijden and comprised of Mr van der Heijden and Mr Mark Iwashko. The Audit Committee meets at least twice a year and otherwise on an ad hoc basis as required. The Audit Committee reviews the annual and interim accounts and supporting property valuation reports and monitors internal controls, adherence to accounting policies and standards. It meets regularly with the Company's auditors to review their reports on draft accounts and internal controls.

Risk Management and Internal Control

Risk management is the responsibility of the Audit Committee, which is responsible to the Board for ensuring that proper procedures are in place, and are being effectively implemented to identify, evaluate and manage any significant risks faced by the Company.

An outline of major risk factors affecting the Company was described in the admission document and is regularly reviewed by the Audit committee for their importance to the Company and for the controls that are in place. The Board, on the advice of the Manager, updates this risk outline as changes arise in the nature of risks and reviews and amends controls that are necessary to mitigate them. The Audit Committee reviews the risk outline and the effectiveness of the risk-modelling undertaken by the Manager on a regular basis.

Relations with shareholders

The board acknowledges that a significant part of its role is to represent and promote the interests of shareholders. The board is accountable to shareholders for the performance and activities of the Company. The board encourages participation at the Annual General Meeting at which a detailed review of the business and objectives of the Company are given to shareholders. The company proposes separate resolutions at the AGM for each substantially separate issue, and there is always an individual resolution relating to re-election of every director, appointing auditors and approval of financial statements. The Chairman of the Board and the Partners of the Manager meet major shareholders several times a year, and financial results are reported to them every six months. Investors have also access to current information on the Company through its website, www.dragon-upd.com, which is frequently updated.

Directors' Report

The Directors present their annual report and the audited Company financial statements of Dragon-Ukrainian Properties & Development plc (the 'Company') for the year ended 31 December 2015.

Principal activities

The principal activities of the Company is that of investing in the development of its existing real estate properties in Ukraine. On 17 February 2014 an Extraordinary Meeting of Shareholders approved a new Investing Policy as defined by the AIM Rules for Companies. Under this revised policy the Board will seek to realise the Company's Properties in an orderly manner, such realisations to be effected at such times, on such terms and in such manner as the Board (in its absolute discretion) may determine. The full text of the Investing Policy can be found on the Company's website at

http://www.dragon-upd.com/files/Investing%20Policy%20approved%20by%20the%20EGM%20held%20on%2017%20Feb%202014.pdf

The Company was incorporated in the Isle of Man under the provisions of the Companies Act 1931 to 2004 on the 23 February 2007 with a company number 119018C. Following the resolution of the Extraordinary Meeting of Shareholders passed on 17 February 2014 the Company was de-registered under the provisions of the Companies Acts 1931 to 2004 and has re-registered under the provisions of the Companies Act 2006 on 27 February 2014 with a company number 010832V. The Company's registered office is 2nd Floor, St Mary's Court, 20 Hill Street, Douglas, Isle of Man, IM1 1EU and its principal place of business is Ukraine

On 1 June 2007 the Company raised USD 208 million through an Initial Public Offering on the AIM market of the London Stock Exchange. On 29 November 2007 the Company completed a secondary placing on AIM and raised USD 100 million.

Results

The Company made a loss before taxation for the year ended 31 December 2015 of USD 33,968,000 (2014 -loss of USD 70,173,000) all of which has been transferred from reserves.

Distribution

On 22 January 2016 the Directors, after having reviewed the updated cash flow projection prepared by the Investment Manager and acting in line with the Company's investing policy to distribute funds received from the sale of the company's assets, adopted a resolution for a distribution to the Company's shareholders in the amount of USD 0.055 per share or USD 6,014,883 in total under article 128 of the Company's Articles of Association.

The Directors satisfied themselves on reasonable grounds, that immediately after the Distribution:

1. the Company would be able to pay its debts as they become due in the normal course of the Company's business; and

2. the value of the Company's assets would exceed the value of its liabilities thus conforming to the requirements of the Companies Act 2006 section 50, being the Solvency Test.

The above mentioned cash distribution of USD 6,014,883 or USD 0.055 per share was paid on 19 February 2016. As the decision for distribution was passed after the reporting date this amount is not included in the Financial Statements for the year ended 31 December 2015 and will be included in the subsequent Financial Statements.

Directors

The Directors of the Company during the year and to date are:

Aloysius Wilhelmus Johannes van der Heijden

Date of appointment 10 April 2007

Tomas Fiala

Date of appointment 26 February 2007

Mark Iwashko

Date of appointment: 26 November 2014

Directors' interests

The Directors interests in the shares of the Company as at 31 December are as follows:

Mr Tomas Fiala, one of the Company's directors, is the principal shareholder and managing director of the Dragon Capital Group which acquired 6,831,500 shares (6.25%) of the Company during the first (June 2007) and second (November 2007) share issues. Also Mr Tomas Fiala was a director of Dragon Capital Partners which received 1,698,416 (1.55%) ordinary shares at a price of USD 2.60 per ordinary share to settle 70 % of the Manager's performance fee for 2007 in the amount of USD 4,432 thousand.

DCM Limited, the Company's investment manager is the asset management arm of the Dragon Capital Group.

Through a series of market purchases in 2011 (totalling 1,274,153 ordinary shares) and 2012 (totalling 6,281,158 ordinary shares) the holding of the Dragon Capital Group in the Company increased to 16,085,227 ordinary shares or 14.71% of the Company's issued share capital as at 31 December 2012.

During 2013 the Dragon Capital Group made additional market purchases of 2,842,595 shares in the Company, which resulted in a total shareholding of 18,927,822 ordinary shares, or 17.31% of the Company's issued share capital being the Dragon Capital Group shareholding at the reporting date.

In January 2016 Dragon Capital Group sold 47,930 shares bringing its current shareholding to 18,879,892 or 17.26% of the issued share capital.

Auditors

The auditors, KPMG Audit LLC, being eligible, have expressed their willingness to continue in office.

On behalf of the Board

Mark Iwashko

Non-executive Chairman

22 April 2016

Statement of Directors' Responsibilities in Respect of the Directors' Report and the Financial Statements

The Directors are responsible for preparing the Directors' Report and the financial statements in accordance with applicable law and regulations. In addition, the Directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards, as adopted by the EU.

The financial statements are required to give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

In preparing these financial statements, the Directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgements and estimates that are reasonable and prudent;

· state whether they have been prepared in accordance with International Financial Reporting Standards as adopted by the EU; and

· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation governing the preparation and dissemination of financial statements may differ from one jurisdiction to another.

Mark Iwashko

Non-Executive Chairman

22 April 2016

Report of the Independent Auditors, KPMG Audit LLC, to the members of Dragon-Ukrainian Properties & Development plc

We have audited the financial statements of Dragon-Ukrainian Properties & Development plc (the "Company") for the year ended 31 December 2015 which comprise the Statement of Financial Position, the Statement of Comprehensive Income, the Statement of Cash Flows and the Statement of Changes in Equity and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards, as adopted by the EU.

This report is made solely to the Company's members, as a body. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and Auditor

As explained more fully in the Directors' Responsibilities Statement, the Directors are responsible for the preparation of financial statements that give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual financial statements to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on the financial statements

In our opinion the financial statements:

· give a true and fair view of the state of the Company's affairs as at 31 December 2015 and of its loss for the year then ended; and

· have been properly prepared in accordance with International Financial Reporting Standards, as adopted by the EU.

Emphasis of matter

We draw attention to note 1(b) to the Company's financial statements, which describes the political and social unrest and regional tensions that started in November 2013 and escalated in 2014 and afterwards in Ukraine. The events referred to in note 1(b) have adversely affected and could continue to adversely affect the Company's results and financial position in a manner not currently determinable.

We also draw attention to notes 2(d) and 4 to these financial statements, which refer to significant areas of estimation uncertainty and critical judgments in applying accounting policies. Actual results could differ from the estimates made and there could be significant adjustment in the next financial year.

Our opinion is not qualified in respect of these matters.

KPMG Audit LLC

Chartered Accountants

Heritage Court

41 Athol Street

Douglas

Isle of Man IM99 1HN

22 April 2016

These financial statements were approved by the board of Directors (the Board) on 22 April 2016 and were signed on its behalf by:

Non-executive Chairman Mark Iwashko

Non-executive director Aloysius Wilhelmus Johannes van der Heijden

The Directors believe that all results are derived from continuing activities.

Notes to the Financial Statements for the year ended 31 December 2015

1. Background

(a) Organisation and operations

Dragon - Ukrainian Properties & Development plc (the 'Company') was incorporated in the Isle of Man on 23 February 2007. The Company's registered office is 2nd Floor, St Mary's Court, 20 Hill Street, Douglas, Isle of Man, IM1 1EU and its principal place of business is Ukraine.

On 1 June 2007 the Company raised USD 208 million through an initial public offering on the AIM Market (AIM) of the London Stock Exchange. On 29 November 2007, the Company completed a secondary placing on AIM and raised USD 100 million.

The main activities of the Company are investing in the development of its existing real estate properties in Ukraine. The Company provides financing to its investees either through equity or debt financing. On 17 February 2014 an Extraordinary Meeting of Shareholders approved a new Investing Policy as defined by the AIM Rules for Companies. Under this revised policy the Board will seek to realise the Company's Properties in an orderly manner, such realisations to be effected at such times, on such terms and in such manner as the Board (in its absolute discretion) may determine.

(b) Business environment

Ukraine's political and economic situation deteriorated significantly in 2014. Political and social unrest, which started in November 2013 has deepened the ongoing economic crisis and has resulted in a widening of the state budget deficit and contributed to further depletion of the National Bank of Ukraine's foreign currency reserves. As a result, downgrading of the Ukrainian sovereign debt credit ratings occurred.

In March 2014 Autonomous Republic of Crimea (Crimea) was annexed by the Russian Federation and this annexation is not recognised by the international community. This event resulted in a significant deterioration of political and economic relationships between Ukraine and the Russian Federation. Following the annexation of Crimea, regional tensions have spread to the Eastern regions of Ukraine, primarily to the parts of Donetsk and Lugansk regions. In May 2014, unrest escalated into military clashes and armed conflict between armed supporters of the self-declared republics of Donetsk and Lugansk regions and the Ukrainian forces. As at the date these financial statements were authorised for issue part of Donetsk and Lugansk regions remains under control of the self-proclaimed republics. As a result, Ukrainian authorities are not currently able to fully enforce Ukrainian laws in these regions.

Disruption of economic ties with Crimea and economic disruption in Donetsk and Lugansk regions because of the military conflict has deepened the ongoing economic crisis, caused a fall in the country's gross domestic product and foreign trade, deterioration in state finances, significant devaluation of the national currency and a further downgrading of the Ukrainian sovereign debt credit ratings in 2015. Following the devaluation of the national currency, the National Bank of Ukraine introduced certain administrative restrictions on currency conversion transactions, which among others included in certain specific cases restrictions on purchases of foreign currency, the requirement to convert 75% of foreign currency proceeds to local currency, a ban on payment of dividends abroad, a ban on early repayment of foreign loans and certain restrictions on cash withdrawals from banks. These measures allowed to increase foreign currency reserves and stabilise the exchange rate by the end of 2015. Subsequently Ukrainian sovereign debt credit ratings have improved one notch.

Whilst the Directors believe they are taking appropriate measures to support the sustainability of the Company's business in the current circumstances, a continuation of the current unstable business environment could negatively affect the Company's results and financial position in a manner not currently determinable. These financial statements reflect management's current assessment of the impact of the Ukrainian business environment on the operations and the financial position of the Company. The future business environment may differ from management's assessment.

2. Basis of preparation

(a) Statement of compliance

These financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU.

(b) Basis of measurement

The financial statements are prepared under the historical cost basis, except for the following material items:

(c) Functional and presentation currency

These financial statements are presented in thousands of US dollars (USD), which is the Company's functional currency. All amounts have been rounded to the nearest thousand, unless otherwise indicated.

(i) Determination of functional currency

Functional currency is the currency of the primary economic environment in which the Company operates. If indicators of the primary economic environment are mixed, then management uses its judgement to determine the functional currency that most faithfully represents the economic effect of the underlying transactions, events and conditions. The majority of the Company's investments and transactions are denominated in US dollars. The expenses (including management and performance fees, administrative expenses) are denominated and paid in US dollars. Accordingly, management has determined that the functional currency of the Company is US dollar. All information presented in US dollars is rounded to the nearest thousand unless otherwise stated therein.

(d) Use of judgments, estimates and assumptions

The preparation of financial statements in conformity with IFRS as adopted by the EU requires the Directors to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses and the disclosure of contingent assets and liabilities. Actual results may differ from these 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.

As stated in note 1(b) to these financial statements, the political and business situation has deteriorated significantly. This is a key factor in the estimation uncertainty and critical judgements associated with applying the accounting policies in these financial statements.

In particular, information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements and could lead to significant adjustment in the next financial year are included in the following notes:

• Note 3(a) - Determination of investment entity criteria

• Note 4 - Valuation of financial assets at fair value through profit or loss

Measurement of fair values

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

The Directors are responsible for overseeing all significant fair value measurements, including Level 3 fair values. They review and approve significant unobservable inputs and valuation adjustments before they are included in the Company's financial statements. To assist with the estimation of fair values the Directors, when appropriate, engage registered independent appraiser, having a recognised professional qualification and recent experience in the location and categories of the assets being valued.

When measuring the fair value of an asset or a liability, the Company uses market observable data as far as possible. 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 Company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

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

· Note 4 - financial assets at fair value through profit or loss.

(e) Going concern

These financial statements are prepared on a going concern basis. In the year ended 31 December 2015 the Company incurred a net loss of USD 33,968 thousand (31 December 2014: USD 70,173 thousand) and had positive cash flows from operating activities of USD 5,380 thousand (31 December 2014: negative cash flows from operating activities of USD 5,495 thousand). As at that date the Company's current assets exceeded its current liabilities by USD 14,762 thousand (31 December 2014: USD 17,052 thousand) and its Net Asset Value amounted to USD 58,387 thousand (31 December 2014: USD 92,355 thousand).

The Directors believe that the Company's existing cash resources are sufficient to meet the Company's liabilities for the foreseeable future and therefore that the going concern basis for preparing these financial statements is appropriate.

3. Significant accounting policies

The Company has consistently applied the following accounting policies to all periods presented in these financial statements.

(a) Investment entity

The Company is an investment entity as defined by IFRS and measures all of its investments at fair value through profit or loss.

In determining whether the Company meets the definition of an investment entity, management considered the following:

• The Company raised funds on AIM (through the first and second issue of shares) only for the purpose of making investments in the development of new properties and the redevelopment of existing properties in Ukraine.

• The Company has a clear exit strategy from its real estate projects (either through sale of the properties, or through sale of shareholding rights in the entities, which own the properties). This is stated in the Company's new investing policy that was voted and approved by the general meeting of shareholders in February 2014. The full text of the current investing policy could be found on the Company's website http://www.dragon-upd.com/investor-information/important-information/business-strategy-and-investing-policy 

• The Company measures and evaluates the performance of substantially all of its investments on a fair value basis.

• The Company's Directors (acting on behalf of the Company) take only strategic decisions and approve overall direction of investing activity in order to maximise the returns to shareholders. At the same time, the Directors chose and appointed DCM Limited as the Company's investment manager (see note 9). DCM Limited's employees perform recurring management operating activities in accordance with the Third Management Agreement and within the strategic decisions of the Directors. There is no separate substantial business activity beyond earning returns from capital appreciation and investment income. The Directors seek to return any surplus funds and net proceeds from property realisation to shareholders when appropriate, in accordance with its investing policy.

Considering the above, the Company's management determined that the Company meets the definition of investment entity in accordance with IFRS 10 Consolidated Financial Statements and, accordingly, the Company has not consolidated its subsidiaries. The Company measures its investments in subsidiaries at fair value through profit and loss (note 3(b)). Such approach provides a fair and transparent view on the Company to the Company's shareholders and stakeholders.

The Company also elected to measure its investments in associates and loans receivable from its investees at fair value through profit or loss (notes 3(c) and 3(d)).

All these assets are presented within financial assets at fair value through profit or loss in the Company's statement of financial position.

(b) Subsidiaries

Subsidiaries are investees controlled by the Company. The Company controls an investee when it is exposed to, or has right to, variable returns from its involvement with the company and has the ability to affect those returns through its power over the investee.

Investments in subsidiaries are measured and accounted for at fair value with gains or losses recognised in profit or loss (see note 3(a)).

Unconsolidated subsidiaries and their grouping by investment in respective projects are as follows:

(c) Associates

Associates are those companies in which the Company has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Company holds between 20% and 50% of the voting power of another company. In certain cases when the Company has less than 20% of the voting power of another company, this company is still accounted for as an associate on the basis of significant influence.

Investments in associates are measured and accounted for at fair value with gains or losses recognised in profit or loss (see note 3(a)).

Investments in associates comprise the investment in Hindale Executive Investments Limited (part of investment in the Avenue Shopping Centre project). The investment in Henryland Group Ltd was disposed of during the year ended 31 December 2015 (see note 4(b)(ii)).

(d) Loans receivable from investees

In addition to equity financing to its investees, as a part of structuring its investments the Company also provides debt financing to its investees. As described in note 3(a), the Company elected to measure loans receivable from its investees at fair value through profit or loss. These investments are presented as "loans and receivables" in accordance with IFRS requirements.

(e) Foreign currency

Transactions in foreign currencies are translated into US dollars 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.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated into US dollar 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, except for those arising on financial instruments at fair value through profit or loss, which are recognised as a component of net gain/(loss) from investments at fair value through profit or loss or net gain/(loss) from loans receivable.

(f) Financial instruments

(i) Non-derivative financial assets

The Company initially recognises loans and receivables and deposits on the date that they are originated. All other financial assets are recognised initially on the trade date at which the Company becomes a party to the contractual provisions of the instrument.

The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Company is recognised as a separate asset or liability.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

The Company classifies non-derivative financial assets into the following categories: financial assets at fair value through profit or loss, other loans and receivables and available-for-sale financial assets.

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

A financial asset is classified at fair value through profit or loss -category if it is classified as held for trading or is designated as such upon initial recognition. Financial assets are designated at fair value through profit or loss if the Company manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Company's documented risk management or investment strategy. Directly attributable transaction costs are recognised in profit or loss as incurred. Financial assets at fair value through profit or loss are measured at fair value, and changes therein are recognised in profit or loss.

Financial assets designated at fair value through profit or loss comprise loans receivable from investees at fair value through profit or loss and equity investments at fair value through profit or loss (see notes 3(b), 3(c) and 3(d)).

Other loans and receivables

Other loans and receivables are a category of financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses.

Other loans and receivables comprise the following classes of assets: other accounts receivable as presented in note 5 and cash and cash equivalents as presented in note 6.

Cash and cash equivalents

Cash and cash equivalents comprise cash balances, call deposits and liquid investments with maturities at initial recognition of three months or less.

(ii) Non-derivative financial liabilities

The Company classifies non-derivative financial liabilities in the other financial liabilities category. Such financial liabilities are recognised initially at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective interest method.

Other financial liabilities comprise other payables as presented in note 8.

Bank overdrafts that are repayable on demand and form an integral part of the Company's cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

(iii) Share capital

Ordinary shares

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects.

Repurchase, disposal and reissue of share capital (treasury shares)

When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, net of any tax effects, is recognised as a deduction from equity. Repurchased shares are immediately cancelled and the total number of issued shares reduced by the purchase.

(g) Impairment

(i) Non-derivative financial assets

A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

Objective evidence that financial assets (including equity securities) are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Company on terms that the Company would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers in the Company, economic conditions that correlate with defaults or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.

Loans and receivables

The Company considers evidence of impairment for loans and receivables at both a specific asset and collective level. All individually significant loans and receivables are assessed for specific impairment. All individually significant loans and receivables found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Loans and receivables that are not individually significant are collectively assessed for impairment by grouping together loans and receivables with similar risk characteristics.

In assessing collective impairment the Company uses historical trends of the probability of default, timing of recoveries and the amount of loss incurred, adjusted for the Directors' judgment as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends.

An impairment loss is calculated as the difference between the asset's carrying amount, and the present value of the estimated future cash flows discounted at the asset's original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account against loans and receivables or. Interest on the impaired asset continues to be recognised. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

(h) Provisions

A provision is recognised if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. 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 the risks specific to the liability. The unwinding of the discount is recognised as finance cost.

(i) Finance income and costs

Finance income comprises interest income on financial assets and currency exchange gains. Finance costs comprise interest expense and currency exchange losses.

Interest income and expense, including interest income from non-derivative financial assets at fair value through profit or loss, are recognised in profit or loss, using the effective interest method. The effective interest rate is the rate that exactly discounts the estimated future cash payments or receipts, without consideration of future credit losses, over the expected life of the financial instrument or through to the next market based repricing date to the net carrying amount of the financial instrument on initial recognition.

Interest received or receivable, and interest paid or payable, are recognised in profit or loss as finance income and finance costs, respectively, except for those arising on financial instruments at fair value through profit or loss, which are recognised as a component of net gain/(loss) from investments at fair value through profit or loss or net loss from loans receivable.

(j) Dividend income

Dividend income is recognised in profit or loss on the date on which the right to receive payment is established. For quoted equity securities, this is usually the ex-dividend date. For unquoted equity securities, this is usually the date on which the shareholders approve the payment of a dividend. Dividend income from equity securities designated at fair value through profit or loss is recognised in profit or loss in separate line item.

(k) Net gain/(loss) from financial assets at fair value through profit or loss

Net gain/(loss) from financial assets at fair value through profit or loss includes all realised and unrealised fair value changes, interest income and foreign exchange differences, but excludes dividend income.

(l) Fees and administrative expenses

Fees and administrative expenses are recognised in profit or loss as the related services are performed or expenses are incurred.

(m) Tax

Under the current tax legislation in the Isle of Man, the applicable tax rate is 0% for the Company.

However, some dividend and interest income received by the Company may be subject to withholding tax imposed in certain countries of origin. Income that is subject to such tax is recognised gross of the taxes and the corresponding withholding tax is recognised as tax expense.

Further, as stated in note 12(b), the Company's investees perform most of their operations in Ukraine and are therefore within the jurisdiction of the Ukrainian tax authorities.

(n) Earnings per share

The Company presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise warrants and share options.

(o) Segment reporting

An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company's other components.

The Directors determined that the sole segment in which the Company operates is investing in property development.

(p) New standards and interpretations not yet adopted

A number of new standards, amendments to standards and interpretations are not yet effective for the year ended 31 December 2015, and have not been applied in preparing these financial statements. Of these pronouncements, potentially the following will have an impact on the Company's financial statements (subject to adoption by the EU). The Company plans to adopt these pronouncements when they become effective.

IFRS 9 Financial Instruments, published in July 2014, replaces the existing guidance in IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 includes revised guidance on the classification and measurement of financial instruments, including a new expected credit loss model for calculating impairment on financial assets, and the new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from IAS 39. IFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted. The Company is assessing the potential impact on its financial statements resulting from the application of IFRS 9. The Company does not intend to adopt this standard early.

Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28) address an acknowledged inconsistency between the requirements in IFRS 10 and those in IAS 28 (2011), in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The main consequence of the amendments is that a full gain or loss is recognised when a transaction involves a business (whether it is housed in a subsidiary or not). A partial gain or loss is recognised when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary. The amendments will be effective for annual periods beginning on or after 1 January 2016. The amendments are not expected to have a significant effect on the Company's financial statements.

Various improvements to IFRSs have been dealt with on a standard-by-standard basis. All amendments, which result in accounting changes for presentation, recognition or measurement purposes, will come into effect for annual periods beginning after 1 January 2015. 

4. Financial assets at fair value through profit or loss

The Company has the following financial assets at fair value through profit or loss as at 31 December:

 * Linkdell Ltd provides financing through issued loans on the following projects:

(a) Investment in Arricano Real Estate plc

The Company acquired a shareholding in Arricano Real Estate plc (′Arricano′) in 2010. In September 2013 the shares of Arricano were admitted to trading on the AIM market of the London Stock Exchange.

There was no active market trading in Arricano shares during 2015 and 2014. Therefore, management used the adjusted net assets method to estimate the fair value of investment in Arricano. The Company's management considers this to be the most appropriate method to estimate the fair value of the Company's investment in Arricano. Under this valuation method Arricano's net assets value as at 30 June (as per Arricano's published unaudited interim financial statements as at and for the six-month periods ended 30 June 2015 and 2014) were adjusted by the same proportion as estimated change of fair value of commercial retail real estate property in Ukraine (Arricano's primary assets) for the six-month period ended 31 December 2015 and 2014 respectively, and multiplied by the Company's share in Arricano's net assets. To assist with the estimation of change in fair value of commercial retail real estate property in Ukraine for the six-month period ended 31 December 2015 and 2014, the Directors engaged independent appraiser DTZ Kiev B.V.

Sensitivity of fair value measurement to changes in unobservable inputs

Although management believes that its estimates of fair value are appropriate, the use of different methodologies or assumptions could lead to different measurements of fair value.

If the estimated decrease in fair value of commercial retail real estate property denominated in US dollars during the six-month period ended 31 December 2015 was 30% less than that used in the valuation model, the fair value of the investment in Arricano as at 31 December 2015 would be USD 2,827 thousand higher (31 December 2014: USD 2,792 thousand). If the estimated decrease in fair value of commercial retail real estate property denominated in US dollars during the six-month period ended 31 December 2015 was 30% higher, then the fair value of the investment in Arricano as at 31 December 2015 would be USD 2,110 thousand lower (31 December 2014: USD 2,792 thousand).

(b) Investment in subsidiaries and associates (investees)

(i) Valuation technique and significant unobservable inputs

For the estimation of fair values of the Company's investments the Company's management used the adjusted net assets method.

Management performed a detailed review of the investees' assets and liabilities for the purpose of their fair value assessment:

· Assets are mainly represented by real estate properties and prepayments for properties (land). The fair value of these properties and prepayments for properties was assessed by the independent appraiser, DTZ Kiev B.V.

· Liabilities are mainly represented by loans payable due to the Company.

· Other assets and liabilities are short-term by nature and their fair value approximates the carrying amount. Thus, no additional adjustment is required.

The investees' net assets are adjusted for the non-controlling interest based on the ownership percentage.

(ii) Disposal of investment in associate

During 2015 the Company disposed its investment in Henryland Group Limited for consideration amounting to USD 569 thousand. As a result of the disposal the Company recognised a net gain on disposal in amount of USD 32 thousand.

Summary of fair values of respective investment projects is as follows as at 31 December 2015:

Summary of fair values of respective investment projects as at 31 December 2014 are as follows: