DUPD.L Regulatory News (DUPD)

Dragon-Ukrainian Properties & Development plc

("DUPD" or the "Company")

Results for the period ended 30 June 2016

Dragon-Ukrainian Properties & Development plc, a leading investor in the real estate sector in Ukraine, is pleased to announce its interim results for the period ended 30 June 2016.

Highlights

Operational Highlights

· The Company is following its investing policy as approved by the EGM in February 2014. DUPD's assets are not directly affected by the arms conflict in the East of Ukraine

· The Company commissioned phase 1 of the Obolon Residences project in October 2015. All commercial space, 44% of parking space and 83% of the residential space in phase 1 has been already sold.

· EEA Awards have awarded Obolon Residences project with "Project of the year in residential real estate" for 2015

· Green Hills North American style cottage community carries on with positive sales dynamics despite challenging economic environment. 43% of land plots are sold with 50 families already living in the community

Financial Highlights

· Total NAV of USD 48.9 million at 30 June 2016 (down from USD 58.4 million as of 31 December 2015)

· Cash balance of USD 8.4 million (compared to USD 15.9 million as of 31 December 2015); significant decrease in cash balance is due to USD 6 million distribution paid to shareholders

· Net loss of USD 3.5 million, mostly driven by fair value loss on company projects due to lower valuation of share in Arricano, longer sales periods and slightly higher discount rates used in valuations (for the period ending 30 June 2015 loss of USD 21.7 million)

For further information, please contact:

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

· EEA Awards have awarded Obolon Residences with "Project of the year in residential real estate" in 2015

· Construction of Phase 1 was completed in summer of 2015. As of 1H 2016, 15 families have moved into their apartments.

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

· ~83% of residential space in Phase 1 sold

· All commercial space is sold, ~44% of parking space and ~30% 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 3.6 ha of land is sold (29%)

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

· 7.0 ha (43%) out of 16.2 ha of land is sold, including 1.1 ha sold in 1H 2016 (vs. 0.6 ha sold in 1H 2015)

· 50 families living in the community.

· Construction works in Phase 2 are on schedule.

6. Sadok Vyshnevy

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

· Utilities on the site

· All homes commissioned, and available for sale

· 19 apartments or 50% of all apartments sold

7. Avenue Shopping Centre

· Land plot for a shopping mall development

· Land plot offered for sale

8. Glangate

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

· Rivne land plot was sold in July 2016 for cash consideration of $1.3 m, which was received in full.

· Kremenchuk land plot is offered for sale

These financial statements were approved by the Board of Directors on 21 September 2016 and were signed on its behalf by:

Chairman of the board Mark Iwashko

Non-executive director Aloysius Wilhelmus Johannes van der Heijden

Statement of comprehensive income for the 6 months ended 30 June 2016

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

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Statement of cash flows for the 6 months ended 30 June 2016

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, Belgravia House, 34-44 Circular Road, Douglas, Isle of Man IM1 1AE and its principal place of business is Ukraine. With effect from July 1, 2015 the registered office of the Company has changed to 2nd Floor, St Mary's Court, 20 Hill Street, Douglas, Isle of Man IM1 1EU.

On 1 June 2007 the Company raised USD 208 million through an initial public offering on the Alternative Investment 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.

(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.

Though the foreign currency restrictions were gradually eased by the National Bank of Ukraine they are still in place with no clear indication when they would be fully lifted. For the first 2 quarters of 2016 current accounts deficit remained at moderate levels (below 1%), the foreign currency reserves remained at quite comfortable level thus resulting in a relatively stable exchange rate of US dollar to hryvnia.

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.

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. For the 6 months 2016 the Company incurred a net loss of USD 3,502 and had negative cash flows from operating activities of USD 7,488 thousand. As at that date the Company's current assets exceeded its current liabilities by USD 7,586 thousand and its Net Asset Value amounted to USD 48,871 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.

Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these financial statements, and have been applied consistently by Company.

(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 company, 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 right 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 consolidate its subsidiaries. Before 1 January 2014 the Company's management consolidated all of its investments at fair value through profit or loss. The Company now measures its investment 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 gain or loss 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 gain 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).

(d) Loans receivable from investees

In additional 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 of 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.

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 investments at fair value through profit or loss (see notes 3(b), 3(c) and 3(d)).

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 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.

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.

Impairment losses on available-for-sale financial assets are recognised by reclassifying the losses accumulated in the fair value reserve in equity, to profit or loss. The cumulative loss that is reclassified from equity to profit or loss is the difference between the acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss previously recognised in profit or loss. Changes in impairment provisions attributable to application of the effective interest method are reflected as a component of interest income. If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and the increase can be related objectively to an event occurring after the impairment loss was recognised in profit or loss, then the impairment loss is reversed, with the amount of the reversal recognised in profit or loss. However, any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognised in other comprehensive income.

(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 as 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 13(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 six-month period ended 30 June 2016, 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 2017. The amendments are not expected to have a significant effect on the Company's financial statements.

Disclosure Initiative (amendments to IAS 7) require entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities. Amendments to IAS 7 is effective for annual reporting periods beginning on or after 1 January 2017, with early adoption permitted. The Company is assessing the potential impact on its financial statements resulting from the application of amendments to IAS 7. The Company does not intend to adopt this standard early.

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 2017.

Financial assets at fair value through profit or loss

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

* 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. Since then the Company had been accounting for its shareholding in Arricano at its market price.

There was no active market trading in Arricano shares during 2016 and 2015. 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 31 December 2015 (as per Arricano's published audited financial statements as at 31 December 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 30 June 2016 and 31 December 2015 respectivly, 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 30 June 2016 and 31 December 2015, the Directors engaged independent appraiser DTZ Kiev B.V.

(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 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.

Composition of assets and liabilities of the investment projects as at 30 June 2016 are as follows:

Composition of assets and liabilities of respective investment projects is as follows as at 31 December 2015:

To assist with the estimation of fair value of investment properties, prepayments for land and inventories (together "the real estate projects") as at 30 June 2016 and 31 December 2015, the Directors engaged independent appraiser DTZ Kiev B.V., having a recognised professional qualification and recent experience in the location and categories of the projects being valued.

The fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The valuation is prepared in accordance with practice standards contained in the Appraisal and Valuation Standards published by the Royal Institution of Chartered Surveyors (RICS) or in accordance with International Valuation Standards published by the International Valuations Standards Council.

Management did not engage independent appraiser to arrive fair value of Rivne project. In July 2016 the project was sold for consideration fully received in cash of USD 1,321 thousand. The selling price was agreed with the buyer before 30 June 2016 and therefore is an appropriate indicator of project fair value.

The fair value measurement, developed for determination of fair value of the properties, is categorised within Level 3 of the fair value hierarchy, due to the significance of unobservable inputs to the measurement.

Investment properties

As at 30 June 2016 and 31 December 2015 investment property was represented by Green Hills and Riviera Villas, and Rivne and Kremenchuk Retail Centres projects.

In the absence of current prices in an active market, the valuations are prepared under the income approach by converting estimated future cash flows to a single current capital value.

The estimation of fair value was made using a net present value calculation based on certain assumptions, which represent key unobservable inputs, the most important of which as at 30 June 2016 are as follows:

· monthly rental rates - which were based on current rental rates ranging from USD 3.6 to USD 33.7 per sq. m.

· development costs based on current construction prices

· average sales price of cottages ranging from USD 827 to USD 1,469 per sq.m.

· discount rate ranging from 23% sales period - from 1 to 7 years

· all relevant licenses and permits, to the extent not yet received, will be obtained, in accordance with the timetables as set out in the investment project plans.

· all relevant licenses and permits, to the extent not yet received, will be obtained, in accordance with the timetables as set out in the investment project plans.

As at 31 December 2015 the respective assumptions, which represent key unobservable inputs for determination of fair value, were as follows:

· monthly rental rates - which were based on current rental rates ranging from USD 4 to USD 33.7 per sq. m.

· development costs based on current construction prices

· average land sales price ranging from USD 843 to USD 1,624 per sq.m.

· discount rate - from 23% to 24.5%

· sales period - from 1 to 7 years

· all relevant licenses and permits, to the extent not yet received, will be obtained, in accordance with the timetables as set out in the investment project plans..

Prepayments for land

Land plots for the land bank project with a total area of 483 ha are currently registered for agricultural use, and the rezoning process to change the purpose of the land plots to construction use was in progress as at 30 June 2016 and 31 December 2015. Land plots with a total area of 19.9 ha had been rezoned for construction use by the end of 2012. The fair value of the land bank was determined using agricultural and residential property comparatives according to actual land plot zoning and discounting for the time period likely to be required to sell the land plots.

The estimation of fair value of the underlying assets (the land plots) was made based on certain assumptions, which represent key unobservable inputs, the most important of which as at 30 June 2016 are as follows:

· average present value market prices ranging from USD 30 thousand to USD 300 thousand per ha 

· discount rates ranging from 21.5% to 22.5%

· sales period - from 1 to 7 years

As at 31 December 2015 the respective assumptions were as follows:

· average present value market prices ranging from USD 33 thousand to USD 211 thousand per ha

· discount rates ranging from 21,5% to 22,5%

· sales period - from 1 to 7 years

Inventory

As at 30 June 2016 and 31 December 2015 inventory was represented by the gated community Sadok Vyshnevyi (22 newly constructed flats in townhouses and relevant land plots) and the Obolon project (residential complex in Kyiv under construction).

The estimation of fair value was made using a net present value calculation based on certain assumptions, which represent key unobservable inputs, the most important of which as at 30 June 2016 are as follows:

· average market prices ranging from USD 414 to USD 1,940 per sq m

· discount rates ranging from 19.25% to 23.5%

· sales period - from 2 to 5 years

As at 31 December 2015 the respective assumptions were as follows:

· average market prices ranging from USD 475 to USD 2,222 per sq m

· discount rates ranging from 19% to 23.5%

· sales period - from 2 to 5 years

Other assets and liabilities

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

The financial instruments not measured at fair value comprise other accounts receivable, cash and cash equivalents, other accounts payable. The carrying amount of such instruments approximates their fair value due to their short-term nature (except for loans payable).

(b) Loans receivable at fair value through profit or loss

The loans are denominated in USD, unsecured, interest free or interest bearing (up to 11%) and represent an alternative to the equity way of financing investments.

Loans receivable are designated at fair value through profit or loss in accordance with IAS 39 Financial Instruments: Recognition and Measurement and measured at fair value in accordance with IFRS 13 Fair value measurement as the present value of the expected future cash flows, discounted using a market-related rate (see notes 3(a) and 3(d)). Expected future cash flows are represented by cash flows generated from the underlying assets for the loans (the real estate projects).

Other accounts receivable

Other accounts receivable are as follows:

Cash and cash equivalents

Cash and cash equivalents are as follows:

The following table represents an analysis of cash and cash equivalents based on Fitch ratings:

Equity

Movements in share capital and share premium are as follows: