DCI ADVISORS LTD (FORMERLY: DOLPHIN CAPITAL INVESTORS LTD)

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six-month period ended 30 June 2023

1.      REPORTING ENTITY

DCI Advisors Ltd (Formerly: Dolphin Capital Investors Ltd) (the 'Company') was incorporated and registered in the British Virgin Islands ('BVI') on 7 June 2005. The Company is a real estate investment company focused on the early-stage, large-scale leisure-integrated residential resorts in the Eastern Mediterranean. The Company was managed, until 20 March 2023, by Dolphin Capital Partners Ltd (the 'Investment Manager'), an independent private management firm that specialises in real estate investments, primarily in south-east Europe, and thereafter the Company became self-managed. The shares of the Company were admitted to trading on the AIM market of the London Stock Exchange ('AIM') on 8 December 2005.

With effect from 01 June 2023, the name of the Company was changed from Dolphin Capital Investors Ltd to DCI Advisors Ltd.

These condensed consolidated interim financial statements of the Company as at and for the six-month period ended 30 June 2023 comprise the financial statements of the Company and its subsidiaries (together referred to as the 'Group') and the Group's interests in equity-accounted investees. These interim financial statements have not been subject to an audit.

2.      basis of preparation

a.      Statement of compliance

These condensed consolidated interim financial statements for the six-month period ended 30 June 2023 have been prepared in accordance with IAS 34 Interim Financial Reporting and should be read in conjunction with the Group's last annual consolidated financial statements as at and for the year ended 31 December 2022 ('last annual financial statements'). They do not include all of the information required for a complete set of financial statements prepared in accordance with IFRS Standards. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last annual financial statements. They are presented in Euro (€), rounded to the nearest thousand.

These condensed consolidated interim financial statements were authorised for issue by the Board of Directors on 28 September 2023.

b.      Basis of preparation

The condensed consolidated interim financial statements of the Company for the six-month period ended 30 June 2023 have been prepared on a going concern basis, which assumes that the Group will be able to discharge its liabilities in the normal course of business.

The Group's cash flow forecasts for the foreseeable future involve uncertainties related primarily to the exact disposal proceeds and timing of disposals of the assets expected to be disposed of. Management believes that the proceeds from forecast asset sales will be sufficient to maintain the Group's cash flow at a positive level. Should the need arise, management will take actions to reduce costs and is confident that it can secure additional loan facilities and/or obtain repayment extension on existing ones, until planned asset sales are realised and proceeds received.

?f, for any reason, the Group is unable to continue as a going concern, then this could have an impact on the Group's ability to realise assets at their recognised values and to extinguish liabilities in the normal course of business at the amounts stated in the condensed consolidated interim financial statements.

Based on these factors, management has a reasonable expectation that the Group has and will have adequate resources to continue in operational existence for the foreseeable future.

3.      PRINCIPAL subsidiaries

The Group's most significant subsidiaries were the following:

The above shareholding interest percentages are rounded to the nearest integer.

(1)   This entity holds a 48% shareholding interest in DCI Holdings Two Ltd ("DCI H2") which is the owner of Aristo Developers Ltd.

(2)   In December 2022 year this entity disposed of the 50% shareholding interest in Single Purpose Vehicle Fourteen Limited (owner of One&Only Kea Resort

4.      Significant accounting policies

The accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2022. ? number of new standards are effective from 1 January 2023, but they do not have a material effect on the Group's financial statements.

Where necessary, comparative figures have been adjusted to conform to changes in presentation in the current period.

5.      USE OF JUDGEMENTS AND ESTIMATES

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

ln preparing these condensed consolidated interim financial statements, the significant judgements made by the management in applying the Group's accounting policies and the key sources of estimation and uncertainty were the same as those applied to the last annual financial statements.

6.      revenue

7.      PROFESSIONAL FEES

8.      ADMINISTRATIVE AND OTHER EXPENSES

9.      Taxation

10.    LOSS per share

Basic loss per share

Basic loss per share is calculated by dividing the loss attributable to owners of the Company by the weighted average number of common shares outstanding during the year.

Diluted loss per share

As at 30 June 2023 and 2022, the diluted loss per share is the same as the basic loss per share, as there were no outstanding dilutive potential ordinary shares (a financial instrument or other contract that, when converted to ordinary shares, would decrease earnings per share or increase loss per share) during these periods.

11.    Property, plant and equipment

Fair value hierarchy

The fair value of land and buildings, has been categorised as a Level 3 fair value based on the inputs to the valuation techniques used.

Valuation techniques and significant unobservable inputs

The valuation techniques used in measuring the fair value of land and buildings, as well as the significant unobservable inputs used, are the same as those used as at 31 December 2022.

12.    Investment property

Fair value hierarchy

The fair value of investment property has been categorised as a Level 3 fair value based on the inputs to the valuation techniques used.

Valuation techniques and significant unobservable inputs

The valuation techniques used in measuring the fair value of investment property, as well as the significant unobservable inputs used, are the same as those used as at 31 December 2022.

13. equity-accounted investees

Single Purpose Vehicle Fourteen Limited ('SPV 14')

On 23 December 2022 it was announced that the Company had completed the disposal of its entire interest in the One&Only at Kea Island ('OOKI') Project. Prior to the sale, the Company was the owner of 66.67% of Single Purpose Vehicle Ten Ltd ('SPV10') which, in turn, indirectly owned 50% of SPV 14, thereby providing the Company with an effective equity interest of 33.33% in SPV 14 and the OOKI project.

DCI Holdings Two Limited ("DCI H2")

As at 30 June 2023, 30 June 2022 and 31 December 2023 the investment in DCI ?2 is presented at its recoverable amount of €42.7 million. The recoverable amount is calculated based on the NAV of DCI ?2 group at the reporting date adjusted by approximately 30% discount on the DCI ?2 group's real estate properties. The fair value of the investment in DCI ?2 has been categorised as a Level 3 fair value based on the inputs to the valuation techniques used.

The details of the above investments are as follows:

The above shareholding interest percentages are rounded to the nearest integer.

14.    Trading properties

15.    RECEIVABLES AND OTHER ASSETS

The amount receivable from Investment Manager relates to €3.0 million (2022: €3.0 million) of advance payments made net of variable management fee payable of €1.1 million (2022: €1.1 million). See note 21.2 for further information.

16.    capital and reserves

Capital

Authorised share capital

Movement in share capital and premium

Reserves

Translation reserve: Translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations.

Revaluation reserve: Revaluation reserve relates to the revaluation of property, plant and equipment from both subsidiaries and equity-accounted investees, net of any deferred tax.

17.    loans AND BORROWINGS

Loans denominated in Euros

The maturity date of the outstanding bank loan to Azurna Uvala (the owner of "Livka Bay") was extended to 31 December 2023 in the reporting period.

Redeemable preference shares

On 18 December 2019, the Company signed an agreement with an international investor for a €12 million investment in the Kilada Hills Project. The investor agreed to subscribe for both common and preferred shares. The total
€12 million investment was payable in 24 monthly instalments of €500,000 each. Under the terms of the agreement, the investor is entitled to a priority return of the total investment amount from the net disposal proceeds realised from the project and retains a 15% shareholding stake in Kilada. As of 30 June 2023, 15.00% (31 December and 30 June 2022: 15.00%) of the ordinary shares have been transferred to the investor.

As of 30 June 2023, 12,000 redeemable preference shares (31 December and 30 June 2022: 12,000) were issued as fully paid with value of €1,000 per share. The redeemable preference shares were issued with a zero-coupon rate and are discounted with a 0.66% effective monthly interest rate, do not carry the right to vote and are redeemable when net disposal proceeds are realised from the Kilada Project.

Shareholder Loans

During 2023 the company entered into a number of shareholder loans totaling €1.4 million (31 December and 30 June 2022: €Nil).  These loans attract an interest rate of 12% per annum on a non-compounding basis, with no fees payable on disbursement or repayments. The initial termination date of the loans is the 30 September 2023. If, prior to the initial termination date, the Group provides collateral in the form of security over certain Company assets which exceeds the aggregate value of the loans, the termination date will be extended to 12 months from the date of entering into agreements.

Terms and conditions of the loans

The terms and conditions of other outstanding loans is as follows:

Security given to lenders

As at 30 June 2023, the Group's loans were secured as follows:

·      Regarding the Kilada preference shares, upon transfer of the entire amount of €12 million from the investor in accordance with the terms of the agreement, a mortgage is set against the immovable property of the Kilada Hills Project, in the amount of €15 million (2021: €15 million).

·      Regarding the Livka Bay loan, a mortgage against the immovable property of the Croatian subsidiary, Azurna Uvala (the owner of "Livka Bay"), with a carrying value of €17.7 million (2021: €17.0 million), two promissory notes, a debenture note and a letter of support from its parent company Single Purpose Vehicle Four Limited.

·      Regarding the Shareholder Loans, in line with the agreements the group is expected to provide collateral in the form of security over certain Company assets before the 30 September 2023.

·      The Company is in the process of removing the security of a senior loan facility which was a fixed and floating charge over all of the Company's assets and was repaid in December 2022.

·      In addition, the development at OOKI was partly funded by a construction loan which was secured over its assets and those of Scorpio Bay asset. Steps are being taken to remove the security over Scorpio Bay now that we have sold our interest in OOKI.

18.    Deferred tax liabilities

Deferred tax liabilities are attributable to the following:

19.    Trade and other payables

Land creditors relate to contracts in connection with the purchase of land at Lavender Bay from the Church. The above outstanding amount bears an annual interest rate equal to the inflation rate, which cannot exceed 2% p.a.. Full settlement is due on 31 December 2025. The Group is in negotiations with the land creditor with a view to ensuring that no additional funds are paid to them under the sale and purchase contracts until the resolution of the legal dispute with the Greek State and, also to reduce the overall quantum of the Group's deferred liabilities to them, potentially swapping all or part of the deferred payments against equity in the project.

20.    NAV per share

21.    Related party transactions

21.1        Directors' interest and remuneration

Directors' interests

Miltos Kambourides is the founder and managing partner of the Investment Manager whose IMA was terminated on 20 March 2023.

Martin Adams, Nick Paris and Nicolai Huls were non-executive Directors throughout 2022, with Mr. Martin Adams serving as Chairman of the Board of Directors. On 10 February 2023, Martin Adams resigned as a Director and Sean Hurst was appointed as a non-executive Director and Chairman.

The interests of the Directors as at 30 June 2023, all of which are beneficial, in the issued share capital of the Company as at this date were as follows:

Save as disclosed in this Note, none of the Directors had any interest during the year in any material contract for the provision of services which was significant to the business of the Group.

Directors' remuneration

The Directors' remuneration details were as follows:

Miltos Kambourides waived his fees for 2022 through to the date he was removed from the board.

21.2        Investment Manager remuneration

On 20 March 2023 the Directors terminated the Investment Management Agreement dated 1 December 2021 (the "IMA") between the Company and the Investment Manager. Since 31 December 2021 no fixed management fee was due to the Investment Manager. The following outlines the amount receivable from the investment manager following the termination.

21.3        Other related party transactions

21.3.1 Exactarea Holdings Limited

On 15th December 2022 SPV10 entered into a bridge loan facility with its 33% shareholder Exacterea Holding Limited, making available of a principle amount up to €6.6 million. The loan is interest-free and repayable at the latest six months from the date of the agreement.

This loan was in connection with the sale of our interest in OOKI, agreed to be deemed to be fully repaid when the courts in Cyprus approved an application to reduce the share premium reserve account of SPV10.

As at the 30 June 2023 and 31 December 2022 the full €6.6 million was outstanding. While the application above was approved on 16th of January 2023, the Company is awaiting confirmation before the loan is deemed fully repaid.

21.3.2 Discover Investment Company and Almitas Capital LLC

Nicolai Huls is a Director of Discover Investment Company which provided a shareholder loan of €350 thousand to the Company in May 2023. In September 2023, Almitas Capital LLC, who owns more than 10% of the issued share capital of the Company, provided two loans to the Company amounting to US$330 thousand in total.

The terms of each of these loans are the same as the loans provided by other shareholders who are not Related Parties and the loans are for a 12 month term bearing an interest rate of 12% per annum with no fees payable on disbursement or repayment. If the loans have not been repaid within 6 months from initiation, collateral in the form of security over certain Company assets will be put in place which exceeds the aggregate value of the loans.    

22. CONTINGENT LIABILITY

The Company is currently in dispute a supplier over invoices for services during 2023 for which contracted terms had not been agreed. The Directors intend to contend these amounts and no provision has been made in the accounts.

23.    SUBSEQUENT EVENTS

There were no other material events after the reporting period except the one described above and in note 21.3, which have a bearing on the understanding of the consolidated financial statements as at 30 June 2023.