Half Yearly Report

Draganfly Investments Limited

Chairman's statement and interim results

for the period ended 31 October 2010

Interim Results for period from May 1st 2010 to October 31st 2010

Chairman's Statement

During the period under review net assets have risen to £946,354 or 0.83p per share, an increase of 3.75%. The modest gain during the period masks a phase of volatility amongst our quoted portfolio companies, with the unaudited NAV reaching a low point of 0.69p in July, as share prices amongst our holdings in Sirius Minerals and Sino Gas languished at or near 12 month lows. The subsequent recovery has been gratifying and has continued beyond the period end, with Sirius Minerals in particular posting an excellent performance, bouncing from a summer low of 1.75p to a recent high of 17p per share. Immedia has also shown some price strength, and we note that various members of the company's senior staff have been buying Immedia shares.

The general market backdrop has improved, as reflected in gains across equity markets since the summer. Numerous economists and market strategists are forecasting strong GDP growth amongst developed economies, and earnings forecasts for European equities include expectations of 15-20% EPS growth. Equity valuations are by no means stretched with European equities on forward PE forecasts of 11x. We expect the earnings recovery to roll into 2011 and this gives us confidence for both our quoted and private holdings during the current calendar year.

Turning to our private investments, we note the news flow has been quiet during the period under review, yet we believe that much work has been undertaken by our portfolio companies, and we expect this to be reflected in fresh announcements during the coming weeks and months. Continental Petroleum has endured a difficult period whilst seeking to extend its exploration and production licence in Siberia, and we expect to receive clarity on this position soon. This investment remains under review. Having successfully completed a rights issue in the previous period, Microsaic Systems is progressing product commercialisation and we are due an update from the company. Atlantic Healthcare continues to progress the commercialisation of alicaforsen and to strengthen its band of top quality medical advisors. We look forward to an update on commercial progress and strategic initiatives soon, and are very optimistic about the company's prospects.

We hope to be able to provide more detail on each of the individual private holdings as they issue formal updates and announcements. Subject to commercial sensitivities, and with each company's consent, we will seek to post more details by RNS. We have previously mentioned the difficulty smaller companies have experienced in securing access to capital in recent years, and whilst the environment remains harsh, particularly within the corporate banking sector, we expect our private investments to secure fresh capital via both the Private Equity route, and possibly stock market listings during 2011.

During the period under review we have sold out our positions in Rheochem and Iofina and traded Sino Gas and Sirius Minerals. Since the period end we have traded and continue to hold Sirius Minerals and Sino Gas. We also continue to hold Immedia.

The overall liquidity of your company's asset base is much improved as a result of better investment performance, and we have strong cash balances allowing us to seek out fresh investment opportunities.

Finally, we are very encouraged by the much improved trading volumes and liquidity in Draganfly Investments' shares, and welcome increasing retail investor awareness of our existence.

 I would like to thank all investors for their continued support.

Mark Horrocks

For further information please contact:

T Edward G Bayman +44 (0) 1534 787889

Dennis Edmonds +44 (0) 7796 338 372

Clive Carver/Rose Herbert

FinnCap (Nominated Adviser) +44 (0)20 7600 1658

Draganfly Investments Limited

Unaudited Profit and loss account

for the period ended 31 October 2010

Draganfly Investments Limited

Unaudited Balance sheet

as at 31 October 2010

Draganfly Investments Limited

Unaudited Cash flow statement

for the period ended 31 October 2010

Draganfly Investments Limited

Notes to the interim statements

for the period ended 31 October 2010

1 Accounting policies

Basis of preparation

The financial statements are prepared in accordance with applicable UK accounting standards.

Investments

In accordance with FRS 26, investments are designated as at fair value through profit or loss.

Quoted investments are stated at mid-market prices at the balance sheet date.

Unlisted investments are stated at 'price of recent investment', reflecting the early stage nature of the investment. The following considerations are used when calculating the 'price of recent investment':

(i) Where the investment being valued was itself made recently, its cost will generally provide a good indication of fair value.

(ii) Where there has been a recent investment by third parties, the price of that investment will provide a basis of the valuation.

Where a fair value cannot be estimated reliably, the investment is reported at cost or the carrying value at the previous reporting date, unless there is evidence that the investment has since been impaired.

Taxation

The company has been granted exempt company status within the meaning of Article 123A of the Income Tax (Jersey) Law 1961 (as amended). The effect of such special status is that the company is treated as a non-resident company for the purposes of Jersey tax laws and is therefore exempt from Jersey income tax on its profits arising outside Jersey and, by concession, on bank deposit interest arising in Jersey (and from any obligation to withhold Jersey income tax from any interest or dividend payments made by it). This status is renewable on an annual basis upon payment of a fee to the Comptroller of Income Tax in Jersey, and it is the company's intention to maintain this status.

Consequently, no provision for taxation, either current or deferred has been made in these financial statements.

2 Turnover

Turnover is derived from its principal activity and includes dividends received from investments. It also includes realised and unrealised profits and losses on investments.

Draganfly Investments Limited

Notes to the interim statements

for the period ended 31 October 2010

3 Investments

4 Creditors: amounts falling due within one year

Notes to the interim statements

for the period ended 31 October 2010

5 Reconciliation of Shareholders' funds

6 Earnings per share

Basic earnings per share is calculated on the basis of gain for the period of £34,695 and 114,227,000 shares being the weighted average number of shares in issue during the trading period and is stated in pence. 

7 Dividends

No dividends have been paid or proposed.