DUPD.L Regulatory News (DUPD)

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No. 596/2014.

25 September 2019

Dragon-Ukrainian Properties & Development plc

("DUPD" or the "Company")

Results for the period ended 30 June 2019

Dragon-Ukrainian Properties & Development plc, a leading investor in the real estate sector in Ukraine, is pleased to announce its results for the six month period ended 30 June 2019.

Highlights

Operational Highlights

·; The Company continues to follow its investing policy as approved by the EGM in February 2014.

·; The Ukrainian economy continues to recover. Real GDP advanced by 4.6% y-o-y in 2Q19, speeding up from 2.5% in 1Q19, 3.3% in 2018 and 2.5% in 2017. Ukraine's currency, the hryvnia, appreciated by 1.4% y-o-y versus the U.S. dollar in 2018, to UAH 27.7:USD, and rose another 12% to UAH 24.8:USD in mid-September 2019, becoming the best YTD performer among emerging markets.

·; The Company's Green Hills project, a suburban gated community, continues to capitalize on its high quality and leading position in the market recording nine new sales of land plots in 1HY 2019.

·; Two new sales were recorded in the suburban club community Riviera Villas and further improvements were made to the infrastructure at this property.

·; Positive outlook for the operational results of Arricano Real Estate for 1HY 2019 based on trends in the commercial real estate market.

Financial Highlights

·; Total NAV of USD 36.1 million as of 30 June 2019 (marginally down from USD 36.2 million as of 31 December 2018).

·; Cash balance of USD 5.5 million (up from USD 4.8 million as of 31 December 2018). The Company has no debt.

·; DUPD recorded a USD 0.02 million loss from operating activities for the period ending 30 June 2019 (2018: USD 0.7 million profit)

For further information, please contact:

Statement of financial position

These financial statements were approved by the board of Directors (the Board) on 24 September 2019 and were signed on its behalf by:

Non-executive Chairman Mark Iwashko

Statement of comprehensive income for the 6 months ended 30 June

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

Statement of cash flows for the 6 months ended 30 June

Notes to the financial statements

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

The Company's operations are primarily located in Ukraine. The political and economic situation in Ukraine has been subject to significant turbulence in recent years and demonstrates characteristics of an emerging market. Consequently, operations in the country involve risks that do not typically exist in other markets.

The Ukrainian economy continues to recover following a cumulative contraction of 16% in 2014-2015, which was brought about by a military conflict in the east, loss of control over territory and export-oriented production assets in this area, and economic imbalances amassed before the early-2014 change of government. Real GDP advanced by 4.6% y-o-y in 2Q19, speeding up from 2.5% in 1Q19, 3.3% in 2018 and 2.5% in 2017. Ukraine's economic recovery remains driven by domestic consumption and investment demand, while recovery in real exports remains sluggish. Household consumption accelerated 11% y-o-y in 1Q19, after 8.9% in 2018, supported by strong growth in nominal salaries, growing remittances from short-term labor migrants and gradually slowing inflation. Investment in fixed capital grew by 12.3% y-o-y in 1H19, after 16.4% in 2018 and solid double-digit growth in previous years. Initially driven by agriculture, investment growth became broad-based. Investment activity remains supported by the gradually improving business environment, strengthening financial position of private and selected state-owned companies, and higher state investments, including from local budgets.

The National Bank moved to inflation targeting in 2016, setting the goal of trimming headline inflation to 5.0% (+/-1.0pp) by the end of 2019 and keeping it near this level going forward. The NBU uses its discount rate as the main monetary policy instrument, allowing a degree of flexibility to the UAH:USD exchange rate. But due to a weak monetary transmission mechanism and a high share of food items in the inflation basket, NBU attempts to pull inflation into the targeted band were only partially successful. Headline inflation initially settled at NBU's interim target of 12% y-o-y in 2016 but accelerated to 13.7% in 2017, due to a combination of supply-side shocks (poor fruit and vegetable harvest), expanding domestic demand and rising production costs. Tight monetary policy, no new supply-side shocks and slowing remittances trimmed headline inflation to 9.8% y-o-y by end-2018 and 8.8% y-o-y in August 2019.

Ukraine's currency, the hryvnia, appreciated by 1.4% y-o-y versus the U.S. dollar in 2018, to UAH 27.7:USD, and rose another 12% to UAH 24.8:USD in mid-September, becoming the best YTD performer among emerging markets. The central bank's international reserves rose to $20.8bn by end-2018 and to $22.0bn by end-August, the highest level since July 2013. Hryvnia's strong performance reflects a combination of favourable dynamics of global commodity prices, strong agricultural harvest and increased inflows of foreign capital into domestic government bonds following improved market access via Clearstream. Inflows of foreign investment into domestic government bonds totaled $3.1bn in 8M19.

Capitalizing on macroeconomic stability, the NBU has been gradually unwinding the strict capital and exchange restrictions imposed in 2014 and 2015. The pace of liberalization quickened in February 2019, after the new law on currency took effect. Among its latest actions, the NBU lifted restrictions on repatriating dividends, abolished obligatory sales of F/X proceeds, removed curbs on early repayment of external debt and extended settlements of foreign trade transactions to 365 from 180 days.

Ukraine runs moderate current account deficit of 3.3% in 2018, while fiscal deficit stays below 2.5% of GDP. Thanks to fiscal prudency, public debt-to-GDP ratio declined to 61% in 2018, after peaking at 81% in 2016. The banking sector was cleaned of non-viable banks, and the country's largest private bank, Privatbank, was nationalized in December 2016. As of end-1H19, 76 banks operated in Ukraine, more than halving from 180 at end-2013. The banking sector reported record high net profit of UAH 21bn in 2018 following four years of losses.

The Ukrainian government progressed with structural reforms, including those affecting the business environment. Ukraine's ranking in the World Bank's Doing Business survey has improved by 41 spots over the past five years, to 71st (2019 ranking based on 2018 data). In particular, Ukraine leapt in the Paying Taxes sub-index by 110 spots (vs. 2014 ranking) after almost halving the rate of the unified social contribution to 22% in 2016, implementing an electronic system for filing and paying labour taxes and introducing an electronic system for refunding VAT to exporters. Ukraine's Protecting Minority Investors score rose 56 spots over the period, as new regulations made it easier to monitor and review related-party transactions. The government also significantly reduced the number of permits and licensed activities, abolished the obsolete system of mandatory certification of products and eliminated stamps as a mandatory attribute of the legal entity. Ukrainian authorities launched reforms in many other areas, including public procurement, decentralization, energy sector, healthcare and education.

Despite several years of macroeconomic stability, healthy external and fiscal position, Ukraine needs a working IMF program to anchor reforms and maintain access to budget financing amid peaking external debt redemptions. Following the formation of the new government in Sep. 2019, the IMF mission arrived in Kyiv to discuss the new Extended Fund Facility (EFF) for Ukraine, which would replace the current 14-month Stand-By Arrangement (SBA), approved in Dec. 2018.

In September 2019, Fitch upgraded Ukraine's credit rating by one notch, to B, and changed rating outlook to positive from stable. The upgrade was caused by a brightened reform outlook following Volodymyr Zelensky's victory in the presidential elections, his party's triumph in the parliamentary elections, and the appointment of a technocratic and reform-minded government. Ukraine is currently rated B by Fitch (with a positive outlook), B- by S&P and Caa1 by Moody's (both with a stable outlook).

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) Adoption of new and revised International Financial Reporting standards and Interpretations as adopted by the European Union (EU)

As from 1 January 2019, the Company adopted all changes to International Financial Reporting Standards (IFRSs), which are relevant to its operations. This adoption did not have a material effect on the accounting policies of the Company.

The Company has initially applied IFRS 9 from 1 January 2018.

IFRS 9 sets out requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. This standard replaces IAS 39 "Financial Instruments: Recognition and Measurement".

Amendments to IAS 1 "Presentation of Financial Statements"require impairment of financial assets to be presented in a separate line item in the statement of profit or loss and other comprehensive income. Impairment losses on financial assets are presented under 'Other expenses', similar to the presentation under IAS 39, and not presented separately in the statement of profit or loss and other comprehensive income due to materiality considerations.

Additionally, the Company has adopted consequential amendments to IFRS 7 "Financial Instruments: Disclosures" that are applied to disclosures about 2018 but have not been generally applied to comparative information.

Adoption of this standard did not have significant impact on the Company`s financial statements.

IFRS 9 contains three principal classification categories for financial assets: measured at amortised cost, fair value through other comprehensive income ('FVOCI') and fair value through profit or loss ('FVTPL'). The classification of financial assets under IFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. The standard eliminates the existing IAS 39 categories of held-to-maturity, loans and receivables and available-for-sale. Under IFRS 9, derivatives embedded in contracts where the host is a financial asset in the scope of  the standard are never bifurcated. Instead, the whole hybrid instrument is assessed for classification.

The following table below explains the original measurement categories under IAS 39 and the new measurement categories under IFRS 9 for each class of the Company's financial assets and financial liabilities as at 1 January 2018:

Impairment of financial assets

IFRS 9 replaces the 'incurred loss' model in IAS 39 with an 'expected credit loss' (ECL) model.

Impairment losses were evaluated as follows:

·; for bank deposits and cash and cash equivalents the expected credit losses were calculated on the basis of external credit ratings and statistical information on default and repayment for similar financial instruments.

·; for receivables and other accounts receivable the Company measured ECLs as a probability-weighted estimate of credit losses. Credit losses were measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Company expected to receive). Impairment has been measured on a 12-month expected loss basis and reflected the short maturities of the exposures, due to which no impairment allowance has been recognized by the Company.

Under IFRS 9, credit losses are recognised earlier than under IAS 39. For an explanation of how the Company applies the impairment requirements of IFRS 9, see Note 3(h).

(d) 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.

(e) 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 - 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 with a 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.

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 Fourth 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)).

(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 accounts receivable from its investees at fair value through profit or loss, as such that are managed, and whose performance is evaluated, on a fair value basis.

The loans are denominated in USD and EUR, unsecured, interest bearing (up to 11.0%) with variable terms of repayment and represent an alternative to the equity way of financing investments. The Company at its capacity of the shareholder may amend any terms of the loans including modification to convert loans in full or in part into equity.

(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 translated 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 translated 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) Recognition and initial measurement

Trade receivables are initially recognized when they are originated.

All other financial assets and financial liabilities are initially recognized when the Company becomes a party to the contractual provisions of the instrument. A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

The Company derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

The Company derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire. The Company also derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.

On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss.

(ii) Classification and subsequent measurement of financial assets

On initial recognition, a financial asset is classified as measured at: amortised cost; fair value through other comprehensive income (FVOCI) - debt investment; FVOCI - equity investment; or FVTPL.

Financial assets are not reclassified subsequent to their initial recognition unless the Company changes its business model for managing financial assets in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL to eliminate or significantly reduce an accounting mismatch:

·; it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

·; its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

All financial assets not classified as measured at amortised cost as described above are measured at FVTPL. These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognised in profit or loss.

The Company's financial assets comprise finance assets at FVTPL, trade and other receivables, cash and cash equivalents and short-term deposits and are classified into the financial assets at amortised cost category. These assets are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

Cash and cash equivalents comprise cash balances, call deposits and highly liquid investments with maturities of three months or less from the acquisition date that were subject to insignificant risk of changes in their fair value.

The Company makes an assessment of the objective of the business model in which a financial asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes:

·; the stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether management's strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realising cash flows through the sale of the assets;

·; how the performance of the portfolio is evaluated and reported to the Company's management;

·; the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed;

·; how managers of the business are compensated - e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; and

·; the frequency, volume and timing of sales in prior periods, the reasons for such sales and its expectations about future sales activity. However, information about sales activity is not considered in isolation, but as part of an overall assessment of how the Company's stated objective for managing the financial assets is achieved and how cash flows are realised.

Financial assets that are held for trading or managed and whose performance is evaluated on a fair value basis are measured at FVTPL because they are neither held to collect contractual cash flows nor held both to collect contractual cash flows and to sell financial assets.

For the purposes of this assessment, 'principal' is defined as the fair value of the financial asset on initial recognition. 'Interest' is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as profit margin.

In assessing whether the contractual cash flows are solely payments of principal and interest, the Company considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Company considers:

·; contingent events that would change the amount or timing of cash flows;

·; leverage features;

·; prepayment and extension terms;

·; terms that limit the Company's claim to cash flows from specified assets - e.g. non-recourse asset arrangements; and

·; features that modify consideration of the time value of money - e.g. periodical reset of interest rates.

(iii) Classification and subsequent measurement of financial liabilities

Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is classified as at FVTPL if it meets the definition of held-for-trading or it is designated as such on initial recognition.

Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognized in profit or loss. Any gain or loss on derecognition is also recognized in profit or loss.

The Company measures all of its financial liabilities at amortized cost.

(iv) Offsetting

Financial assets and liabilities are offset and the net amount presented in the statements of financial position when, and only when, the Company currently has a legally enforceable right to set off and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. The Company currently has a legally enforceable right to set off if that right is not contingent on a future event and enforceable both in the normal course of business and in the event of default, insolvency or bankruptcy of the Company and all counterparties.

(g) 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.

Share premium

Share premium reserves include amounts that were created due to the issue of share capital at a value price greater than the nominal.

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.

(h) Impairment

The Company uses 'expected credit loss' (ECL) model. This impairment model applies to financial assets measured at amortised cost, contract assets and debt investments at FVOCI, but not to investments in equity instruments.

The financial assets at amortised cost consist of trade and other receivables and cash and cash equivalents.

Loss allowances are measured on either of the following bases:

·; 12-month ECLs: these are ECLs that result from possible default events within the 12 months after the reporting date; and

·; lifetime ECLs: these are ECLs that result from all possible default events over the expected life of a financial instrument.

The Company has elected to measure loss allowances for trade receivables and receivables on internal settlements at an amount equal to lifetime ECLs.

Impairment on cash and cash equivalents is measured on a 12-month expected loss basis and reflects the short maturities of the exposures.

The Company assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due.

The Company considers a financial asset to be in default when:

·; the borrower is unlikely to pay its credit obligations to the Company in full, without recourse by the Company to actions such as realising security (if any is held); or

·; the financial asset is more than 90 days past due.

The maximum period considered when estimating ECLs is the maximum contractual period over which the Company is exposed to credit risk.

Measurement of ECLs

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Company expects to receive).

ECLs are discounted at the effective interest rate of the financial asset.

Credit-impaired financial assets

At each reporting date, the Company assesses whether financial assets carried at amortised cost are credit-impaired. A financial asset is 'credit-impaired' when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

Evidence that a financial asset is credit-impaired includes the following observable data:

·; significant financial difficulty of the borrower or issuer;

·; a breach of contract such as a default or past due event;

·; the restructuring of a debt or advance by the Company on terms that the Company would not consider otherwise;

·; it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation; or

·; the disappearance of an active market for a security because of financial difficulties.

In making an assessment of whether cash and cash equivalents are credit-impaired, the Company considers the following factors:

·; significant financial difficulty of the bank;

·; a breach of contract such as a default or a contractual payment being more than a couple of days past due;

·; it is becoming probable that the bank will enter bankruptcy or other financial reorganisation.

Presentation of impairment

Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets.

Impairment losses on financial assets are presented under 'other expenses' and not presented separately in the statement of profit or loss and OCI due to materiality considerations.

(9) 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.

(f) Finance income and costs

Finance income comprises interest income on financial assets, calculated using the effective interest rate, and currency exchange gains. Finance costs comprise currency exchange losses.

The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to: 

·; the gross carrying amount of the financial asset; or

·; the amortised cost of the financial liability.

In calculating the effective interest rate, the effective interest rate is applied to the gross carrying amount of the asset (when the asset is not credit-impaired). However, for financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortised cost of the financial asset. If the asset is no longer credit-impaired, then the calculation of interest income is made on a gross basis again.

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.

(g) 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.

(h) Fees and administrative expenses

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

(i) 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 in Ukraine.

(j) 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.

(k) 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.

4. Financial assets at fair value through profit or loss

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

* 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 6 months 2019 and 2018. 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.

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. Arricano Real Estate PLC's net assets value according to the audited financial statements as at 31 December 2018 amounted to USD 94,032 thousand (31 December 2017: USD 52,182 thousand).

The Company's share in Arricano Real Estate PLC is 12.51% as at 30 June 2019 and31 December 2018.

 (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, CBRE Ukraine.

• Liabilities are mainly represented by long-term loans payable due to the Company.

• Trade receivables balance is mainly represented by long-term receivables. Fair value of long-term receivables that carry no interest is measured at present value of all future cash receipts discounted using the prevailing market rate(s) of interest for a similar instrument, with a similar credit rating.

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

Summary of fair values of respective investment projects is as follows as at 30 June 2019:

Summary of fair values of respective investment projects as at 31 December 2018 is as follows:

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 2019 and 31 December 2018 the Directors engaged independent appraiser CBRE Ukraine, 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.

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 2019 investment properties were represented by Green Hills, Riviera Villas, Kremenchuk Retail Centre projects and Land bank (82 ha).

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.

As at 30 June 2019 the respective assumptions, which represent key unobservable inputs for determination of fair value, were as follows:

• monthly rental rates - which were based on estimated rental rates ranging from USD 4 to USD 22 per sq. m.

• development costs based on current construction prices

• for Green Hills project average sales price of land amounts to USD 135 per sq. m.

• for Riviera Villas project average cottage sales price amounts to USD 1,397 per sq. m.

• discount rate ranging from 12 to 22%

• sales period - from 1 to 6.5 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

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 31 December 2018 are as follows:

• monthly average rental rates - which were based on estimated rental rates ranging from USD 4 to USD 8 per sq. m.

• development costs based on current construction prices

• for Green Hills project average sales price of land plot amounts to USD 125 per sq. m.

• For Riviera Villas project average cottage sales price amounts to USD 1,433 per sq. m.

• discount rate ranging from 18% to 22%

• 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 481 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 2019 and 31 December 2018. 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.

However, the Ukrainian market for land plots zoned for agricultural use is characterized by low liquidity and restrictions related to disposal of such land. Therefore, although management of the Company exercised the generally acceptable valuation approach in such circumstances taking into account all available information, significant uncertainties with regards to low liquidity and legislation restrictions still exist as at 30 June 2019 and 31 December 2018.

As at 30 June 2019 the respective assumptions were as follows:

• average market prices ranging from USD 45 thousand to USD 131 thousand per ha

• discount rate of 23%

• sales period - from 1 to 7 years

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 31 December 2018 are as follows:

• average market prices ranging from USD 41 thousand to USD 125 thousand per ha

• discount rate of 23%

• sales period - from 1 to 7 years

Inventory

 As at 30 June 2019 inventory was represented by the gated community Sadok Vyshnevyi (10 constructed flats in townhouses and relevant land plots).

As at 30 June 2019 the respective assumptions were as follows:

• average market price USD 375 per sq. m.

• discount rate 18%

• sales period - from 1 to 1.5 years

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 at31 December 2018 are as follows:

• average market price USD 395 per sq. m.

• discount rate 20%

• sales period - from 1 to 3 years

Other assets and liabilities

Liabilities are mainly represented by the long-term loans payable to the Company.

Trade receivables balance is mainly represented by long-term receivables. Fair value of long-term receivables that carry no interest is measured at present value of all estimated future cash receipts discounted using the prevailing market rate(s) of interest for a similar instrument, with a similar credit rating.

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

 (c) 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 are accounted at fair value through profit or loss in accordance with IFRS 9 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).

5. Other accounts receivable

Other accounts receivable are as follows:

6. 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 :

7. Equity

Movements in share capital and share premium are as follows:

The share capital of the Company consists of an unlimited number of ordinary shares of £0.01 each. All ordinary shares rank equally with regard to the Company's residual assets.

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.

As part of an initial public offering on 1 June 2007 104,000,000 ordinary shares were sold to certain institutional investors at a price of USD 2.00 per ordinary share, raising gross proceeds of USD 208,000 thousand. In addition 36,630,100 ordinary shares were sold on 29 November 2007 at a price of USD 2.73 per ordinary share, raising gross proceeds of USD 100,000 thousand. The difference between net proceeds per share and par value is recognised as share premium.

During 2008 the Company issued 1,698,416 new 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.

Following the extraordinary general meetings of members of the Company on 31 July 2008 and 1 December 2008, 11,948,000 of its own shares were authorised for repurchase by the Company and were annulled. The purchase price of repurchased shares ranged from USD 0.50 to USD 1.47 per share. The difference between the total price paid and par value is recognised as a share premium decrease.

Following the extraordinary general meeting of members of the Company on 29 May 2009, 12,664,201 of its own shares were authorised for repurchase by the Company and were annulled. The purchase price of repurchased shares ranged from USD 0.53 to USD 0.68 per share. The difference between the total price paid and par value is recognised as share premium decrease.

Following the extraordinary general meetings of members of the Company on 9 November 2011 and12 December 2011, 8,355,000 of its own shares were repurchased by the Company and were cancelled. The purchase price of repurchased shares ranged from USD 0.48 to USD 0.63 per share. The difference between the total price paid and par value is recognised as share premium decrease.

Distributions to Shareholders

On 24 December 2014 following the adoption of the new investing policy in early 2014 and an assessment of the Company's working capital requirements, the Board of Directors decided to declare a dividend of USD 0.055 per Ordinary Share, which is in accordance with its investing policy of distributing surplus funds to the Company's shareholders.

On 29 January 2016 following review of the Company's performance in 2015 and the re-assessment of the Company's working capital needs, the Board of Directors of the Company decided to make distribution of USD 6,014 thousand, or USD 0.055 per ordinary share, to its shareholders.

On 22 March 2018 having reviewed the Company's performance in 2017, including the sale of the remaining interest in the Obolon Residences project, the Board of Directors of the Company has decided to make a distribution of USD 7,656 thousand, or USD 0.07 per Ordinary Share, to its shareholders. This decision is in accordance with Company's Investing Policy, which states that surplus capital will be returned to shareholders, and is made under Article 127 of Company's Articles of Association.

The relevant record date for the distribution was 3 April 2018, the corresponding ex-distribution date was 29 March 2018, and the distribution was paid to shareholders on 17 April 2018.

On 27 April 2018 the Board of Directors of the Company has decided to make additional distribution of USD 2,187 thousand, or USD 0.02 per Ordinary Share, to its shareholders. This decision is in accordance with Company's Investing Policy, which states that surplus capital will be returned to shareholders and is made under Article 127 of Company's Articles of Association.

The relevant record date for the distribution was 11 May 2018, the corresponding ex-distribution date was 10 May 2018, and the distribution was paid to shareholders on 16 May 2018.

8. Other accounts payable

Other accounts payable are as follows:

9. Management and performance fees

Management and performance fees for the 6 months ended 30 June are as follows:

Unpaid management and performance fees as at 30 June 2019 amounted to USD 400 thousand ( as at 31 December 2018: USD 500 thousand) (Note 8).

Initial Management Agreement

The Company entered into a management agreement dated 16 May 2007 (the Management Agreement) with Dragon Capital Partners Ltd (the Investment Manager) pursuant to which the latter has agreed to provide advisory, management and monitoring services to the Company. The Company may terminate the Investment Manager's appointment on at least 6 months written notice expiring on or after the fifth anniversary of admission to AIM, or without written notice subject to certain criteria.

In consideration for its services thereunder, the Investment Manager was entitled to be paid an annual management fee of 1.5% of the gross asset value of the Company at the end of the relevant accounting period or part thereof plus value added tax or similar taxes which may be applicable. In addition, the Investment Manager was entitled to performance fees based on the net asset value (NAV) growth.

Second Revised Management Agreement

On 23 April 2010 the Board approved changes to the Management Agreement between the Investment Manager and the Company effective as at 31 December 2009 (Second Revised Management Agreement). The performance fee was divided into two parts. One is based on NAV growth, and the second on share price growth. Therefore, prior to the Second Revised Management Agreement the Investment Manager was entitled to an annual performance fee of 20% of the amount of such increase in NAV growth in excess of 10%, and under the Second Revised Management Agreement the Investment Manager is entitled to 10% of the amount of such increase in NAV growth in excess of 10%. The other performance fee of 10% is calculated based on the amount by which the final share price growth exceeds 10% from the base share price set at GBP 1.085 per share.

Since 1 December 2011 the Second Revised Management Agreement was subject to termination with six months' notice by either party.

Third Management Agreement and Fourth Revised Management Agreement

On 17 February 2014 an Extraordinary General Meeting of the shareholders approved a revision of the Management Agreement (Third Management Agreement) and accordingly the Company entered into a new management agreement with DCM Limited (the company which replaced Dragon Capital Partners Limited as the Investment Manager).

On 16 November 2016 the Board announced certain modifications to the existing management arrangement (the Fourth Revised Management agreement). The Fourth Revised Management Agreement became effective on 01 January 2017 and will expire on 31 December 2018.

The Directors (excluding Tomas Fiala who is a related party as explained in detail in the Note 15) believe that the proposed changes incorporated into the Fourth Management Agreement will continue to incentivise the Investment Manager to:

• maximise the disposal proceeds of the Company's properties; and

• achieve the best possible sales value for each property in order to maximise the cash returns to shareholders that would result in the Investment Manager maximising the proposed performance fee payable under the Third and Fourth Management Agreements.

The Fourth Management Agreement has changed certain provisions on management fee of the Third Management Agreement and summary of those changes is presented below:

Management fee

The management fee under the Third Management Agreement changed from a fee of 1.5 per cent of Gross Asset Value to a fixed amount as follows and Fourth Management Agreement modified the fees for 2017 and 2018:

• 1 January 2013 - 30 June 2013: USD 1.25 million

• 1 July 2013 - 31 December 2013: USD 1.25 million

• 1 January 2014 - 31 December 2014: USD 2.5 million

• 1 January 2015 - 31 December 2015: USD 2.1 million

• 1 January 2016 - 31 December 2016: USD 1.7 million

• 1 January 2017 - 31 December 2017: USD 1.25 million under the terms of Fourth Management Agreement (reduced from USD 1.5 million under the Third Revised Management Agreement).

• 1 January 2018 - 31 December 2018: USD 1.0 million under the terms of Fourth Management Agreement (reduced from USD 1.4 million under the Third Revised Management Agreement).

Included as a part of the terms of the Fourth Revised Management Agreement, due to the fact that the Company sold the right to the development of the third phase of the Obolon Residences in 2017, the management fee was reduced to USD 1.0 million in the year of such sale.

The management fee under the Fourth Management Agreements is payable in cash, semi-annually in July and January of each year, within 10 business days after the end of the relevant period.

On 10 December 2018 the Fifth Management Agreement was signed extending the term of the agreement until 31 December 2020. The Fifth Management Agreement modified the terms for the management fee as following

for the year ending 31 December 2019 - USD 800,000

for the year ending 31 December 2020 - USD 800,000

Also a cap on the management fee was introduced which should not exceed 3% of the net asset value of the Company as per officially published financial statements going forward.

Performance fee

The performance fee under the Third Management Agreement changed from one which is calculated in two parts, being an increase in NAV and also an increase in share price performance, to the following, based on distributions to shareholders:

·; in relation to distributions up to threshold 1, a fee of 3.5 percent of such distributions;

·; in relation to distributions from threshold 1 to threshold 2, a fee of 7 percent of such distributions; and

·; in relation to distributions in excess of threshold 2, a fee of 10 percent of such distributions.

Thresholds 1 and 2 are equal to USD 50 million and USD 75 million respectively.

The Performance Fee in the Fourth Revised Management Agreement cancelled all references to the threshold 1 and 2 and replaced it with a fixed performance fee of 5 percent of all distributions to Company's shareholders. Distributions will continue to include cash dividends, share buy backs and other returns of capital, and also in-specie distributions.

The performance fee under the Third and Fourth Management Agreements is payable in cash (or in the case of a distribution that is a distribution in specie, payable by the transfer to the Investment Manager of the appropriate proportion of the financial instrument that is the subject of the distribution), simultaneously with the distributions to which they relate.

The Fifth Management Agreement did not modify the terms for the performance fee which is 5 percent of all distributions to Company's shareholders.

The total management fee for the 6 months ended 30 June 2019 is USD 400 thousand(6 months ended 30 June 2018: USD 500 thousand). There was no performance fee for the 6 months ended 30 June 2019 (6 months ended 30 June 2018: USD 492 thousand).

10. 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 for the 6 months ended 30 June is as follows:

11. Administrative expenses

Administrative expenses for the 6 months ended 30 June are as follows:

12. Contingencies

(a) Litigation

The Company is involved in various legal proceedings in the ordinary course of business but Directors consider that none of them require provisions or could result in material losses for the Company.

(b) Taxation contingencies

The Company is not subject to any tax charges within Isle of Man jurisdiction, however the Company's investees perform most of their operations in Ukraine and are therefore within the jurisdiction of the Ukrainian tax authorities. The Ukrainian tax system can be characterised by numerous taxes and frequently changing legislation, which may be applied retrospectively, be open to wide interpretation and in some cases conflict with other legislative requirements. Instances of inconsistent opinions between local, regional, and national tax authorities and the Ukrainian Ministry of Finance are not unusual. Tax declarations are subject to review and investigation by a number of authorities that are empowered by law to impose severe fines, penalties and interest charges. A tax year remains open for review by the tax authorities during the three subsequent calendar years, however under certain circumstances a tax year may remain open longer. These facts create tax risks substantially more significant than typically found in countries with more developed systems.

The Directors believe that the Company has adequately assessed tax liabilities based on its interpretation of tax legislation, official pronouncements and court decisions for the purpose of assessment of the Company's assets fair value. However, the interpretations of the relevant authorities could differ and the effect on the financial statements, if the authorities were successful in enforcing their interpretations, could be significant.

(c) Insurance

The Company and its investees do not have full coverage for the property, business interruption, or third party liability in respect of property or environmental damage arising from accidents on property or relating to the operations of the Company and its investees. For the real estate projects, the Company uses subcontractors who are responsible for insuring those risks until the time the property is commissioned. Until the Company and its investees obtain adequate insurance coverage, there is a risk that the loss or destruction of certain assets could have a material adverse effect on the Company's operations and financial position.

13. Earnings per share

Basic earnings per share

The calculation of basic earnings per share for the financial statements is based upon the net loss for the 6 months ended 30 June 2019 attributable to the ordinary shareholders of the Company ofUSD 17 thousand (6 months ended 30 June 2018: net gain of USD 749 thousand) and the weighted average number of ordinary shares outstanding, calculated as follows:

Diluted earnings per share

As at 30 June 2019 and 2018 there were no options or warrants in issue. Therefore, there was no dilution on the Company's basic earnings per share.

14. Fair values and financial risk management

(a) Accounting classifications and fair values

The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value. Management believes that fair value of cash and cash equivalents, other accounts receivable and other accounts payable approximates their carrying amount.

(b) Measurement of fair values

(i) Valuation techniques and significant unobservable inputs

The valuation techniques used in measuring Level 3 fair values, as well as the significant unobservable inputs used for Level 3 fair values, are disclosed in the following relevant notes:

• Note 4 - Financial assets at fair value through profit and loss

Reconciliation of Level 3 fair values

The following table shows a reconciliation from the opening balances to the closing balances for Level 3 fair values.

(c) Financial risk management

Exposure to credit, interest rate and currency risk arises in the normal course of the Company's business. The Company does not hedge its exposure to such risks. The political and economic situation is described in Note 1(b) of these financial statements. The deterioration of political and economic situation could negatively impact the results and financial position in a manner not currently determinable.

(i) Risk management policy

The Board has assessed major risks and grouped them in a register of significant risks. This register is reviewed by the Board at least twice per year or more often if there are circumstances requiring such a review.

(ii) Credit risk

Cash and cash equivalents

The Company held cash and cash equivalents of USD 5,451 thousand at 30 June 2019(2018: USD 4,728 thousand). USD 4,499 thousand of the cash and cash equivalents are held with banks, which are rated A, based on Fitch rating.

Impairment on cash and cash equivalents has been measured on a 12-month expected loss basis and reflects the short maturities of the exposures. The Company considers that its cash and cash equivalents have low credit risk based on the external credit ratings of the counterparties, so no expected credit losses were recognised on initial application of IFRS 9 as at 1 January 2019 and as at 30 June 2019.

Other accounts receivable

The Company's exposure to credit risk is influenced mainly by the individual characteristics of each counterparty.

The exposure to credit risk is approved and monitored on an ongoing basis individually for all significant counterparties.

The Company does not require collateral in respect of other accounts receivable.

The Company establishes an allowance for impairment that represents its expected credit losses in respect of other accounts receivable. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified. The collective loss allowance is determined based on historical data of payment statistics for similar financial assets  and the Company's view of economic conditions over the expected lives of the receivables.

Exposure to credit risk

As at 30 June 2019 and 31 December 2018, the expected credit losses were insignificant and were not accounted for. No financial assets were impaired at the above stated dates.

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk is as follows:

(iii) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation.

The following are the contractual maturities of financial liabilities as at 30 June 2019:

The following are the contractual maturities of financial liabilities as of 31 December 2018:

(iv) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

Interest rate risk

Fair value of loans receivable at fair value through profit or loss depends on fair values of underlying real estate projects (see Note 4(b)), therefore fair values are not directly impacted by change in interest rates.

Foreign currency risk

The majority of the Company's income, expenses, assets and liabilities are denominated in US dollars. However, the underlying cash flows of the Company's investees are denominated in Ukrainian hryvnias. Though the Company attempts to peg its revenues to US dollar in the depressed economy it is not always possible to recover in full the effect of Ukrainian hryvnia devaluation. Weakening of the Ukrainian hryvnia would have resulted in decrease in fair value of loans receivable.

(d) Capital management

The Directors seek to maintain a sufficient capital base for meeting the Company's operational and strategic needs, and to maintain confidence of market participants. This is achieved by efficient cash management and constant monitoring of investment projects.

From time to time the Company purchases its own shares on the market; the timing of these purchases depends on market prices. Buy decisions are made on a specific transaction basis by the Board within the limits approved by the Company's shareholders. The Company does not have a defined share buy-back plan.

There were no changes in the Company's approach to capital management during the 6 months ended 2019.

The Company is not subject to externally imposed capital requirements.

15. Related party transactions

(a) Transactions with management and close family members

(i) Directors' remuneration

Directors' compensation included in the statement of comprehensive income for the 6 months ended 30 June is as follows: