UKRO Ukraine

The Ukraine Opportunity Trust PLC
Half-Yearly Report for the Period Ended 30 June 2015

Introduction
The Ukraine Opportunity Trust PLC (“the Company” or “UKRO”) was incorporated on 16 August 2005 and commenced operations on 4 November 2005.

The Company’s Articles of Association contain provisions designed to ensure that, unless the Company is wound up earlier, it will be wound up on
30 September 2020. Furthermore, the Directors may, at their discretion, convene a General Meeting of the Company in 2015 for the purpose of winding-up the Company and the Articles contain provisions designed to ensure that a Special Resolution to wind up the Company proposed at that meeting will be passed.

Capital Structure
The Company’s share capital consists of Ordinary Shares of US$0.01 each (the “Ordinary Shares”).

The number of Ordinary Shares in issue as at 30 June 2015 was 4,404,381, of which 800,000 were held in Treasury and 3,604,381 were in circulation.

Investment Objective
The Company’s investment objective is to achieve long-term capital growth primarily from a diversified portfolio of companies incorporated, headquartered or domiciled in, or whose businesses are primarily carried on in, Ukraine (including the non-Ukrainian holding companies of any such companies). Investments may be made in private equity, listed shares and money market investments.

Investment Policy
The Company seeks to achieve long-term capital growth through investment in selected listed equities (including pre-IPO and IPO transactions), private equity, money market investments and fixed income securities.  Fixed income securities may be held principally for liquidity purposes.

The Company may invest in companies incorporated, resident or domiciled outside Ukraine that directly or indirectly invest in, or that have a substantial link with, Ukraine, and may invest up to 15 per cent of the portfolio in companies incorporated, headquartered or domiciled in, or whose businesses are primarily carried on in, other eastern European countries. 

It is expected that the Company’s portfolio will comprise at least ten investments and that investment will be diversified across industries and sectors exposed to the Ukraine marketplace.  In addition, the Company will seek diversification in terms of the capitalisation size of the investments in which it participates.

The Company does not currently hedge its exposure to changes in the US Dollar/Hryvnia exchange rate but has the power to do so. However, hedging will only take place if the Directors, on the recommendation of the Investment Manager, consider this to be in the Company’s interests.

The Company has the ability under its Articles of Association to borrow up to 30 per cent of its net assets. Examples of when the Directors may exercise the power to borrow include where necessary to make an investment where disposable proceeds from a realisation have not been received or where the Company wishes to purchase its own shares.

Investment Process
The investment approach is bottom-up, founded largely on sector-based company analysis. The Investment Manager will continue to procure extensive research based on reliable local sources. Regular company visits are, and will be, made in order to understand the management objectives and to seek to establish the quality of the assets. In Ukraine, factors such as corporate governance, management, economic instability and institutional reform continue to need to be given greater prominence in reaching an investment decision and give rise to greater risks in comparison to more developed markets.

The investment process for the Company’s private equity investments may involve deal origination and due diligence carried out by the Investment Manager. Once a final private equity proposal has been agreed by the Investment Manager, it will be presented to the Board for review and, if thought fit, approved. The Investment Manager has discretionary authority to invest and divest in respect of all non-private equity investment, but remains subject to the ultimate supervision and control of the Directors at all times.

The Investment Manager has the discretion to make equity investments and disposals involving less than 2.5 per cent (subject to an aggregate maximum of 10 per cent) of the Company’s Gross Assets without prior reference to the Board.
 

Company Summary

Management Company	FPP Asset Management LLP.
Assets attributable to Shareholders	US$11,928,000 as at 30 June 2015.
Market capitalisation	US$7,930,000 as at 30 June 2015.
Management fee	US$140,000 (2 per cent of Net Asset Value (“NAV”) of the Company) for the six months to 30 June 2015.
Performance fee	US$nil (20 per cent of increase in the NAV of the Company since the performance period when such fee was last earned).
Ongoing charges*	6.71 per cent.
ISA status	The Company is fully eligible for inclusion in ISAs.
AIC	The Company is a member of the Association of Investment Companies.

* Ongoing charges incurred in the six months to 30 June 2015 (excluding interest costs and certain non-recurring items) as a percentage of average Net Assets.
 

Summary of Results

	30 June 2015	30 June 2014	31 December 2014
Assets attributable to Shareholders	US$11.93m	US$21.68m	US$12.88m
NAV per Ordinary Share	US$3.31	US$6.01	US$3.57
Mid market Ordinary Share price	US$2.20	US$3.925	US$3.10
Discount to NAV	33.53%	34.69%	13.17%
Dividend declared	Nil	Nil	Nil

   

	Six months to	Six months to	Year to
	30 June 2015	30 June 2014	31 December 2014
Total earnings per Ordinary Share	(US$0.2650)	(US$0.4472)	(US$2.8868)

Proposed Delisting
Having consulted with its major shareholders, and taking into consideration the ongoing conflict in Ukraine, the Board believes the cost of maintaining a public listing outweighs the benefits. As such, the Board will be writing to shareholders via a shareholder circular to seek approval to delist the Company’s shares from trading. A draft circular is currently with the UK Listing Authority for approval, and once approved will be sent to shareholders.

Board Changes
Further to the statement made in the Company's Annual Report for the year ended 31 December 2014, Robin Monro-Davies, a Non-Executive Director and Chairman of the Company retired from the Board at the Company’s Annual General Meeting held on 18 June 2015. Following his resignation, Nigel Pilkington, was appointed Chairman.

Following the result of the Annual General Meeting, when shareholders chose not to elect Beatrice Hollond or re-elect Dmitry Chernobay, Bertrand Lipworth remained on the Board contrary to his initial intention.

Subsequently, Gordon Lawson and Nicholas Cournoyer were appointed as Non-Executive Directors of the Company on 26 June 2015.

On 29 July 2015, the Company announced with great regret that Bertrand Lipworth had passed away. Bertrand had been a Director of the Company since 2007. The Board issued a statement saying "This is a great shock to us all and we will miss Bertrand's wise council and his excellent company."

Risks                           
The Board considers the following as the principal risks and uncertainties facing the Company for the remaining six months of the financial year.

Risks Specific to Investing in Ukraine and Ukrainian Companies
The Company’s investments involve certain additional risks not typically associated with investments in developed and other developing market economies. This is increased with the unresolved conflict with Russia and the uncertainty this causes. The Investment Manager manages the Company’s assets in a manner that will limit the exposure to such risks insofar as is practicable, and formally reports to the Board on a quarterly basis. Independent members of the Board undertake the role of the Investment Committee which reviews and comments on the research into potential private equity investments for the Company. More details regarding this function of the Board can be found in the Corporate Governance Statement in the Company’s Annual Report and Financial Statements for the year ended 31 December 2014.

The quality of financial reporting of Ukrainian companies is not at the same level as that of Western European companies. Most Ukrainian companies do not use internationally accepted accounting standards, or have their accounts subject to external audit, which may create a lack of transparency.

There are differences between Western European and Ukrainian securities markets, including the relative underdevelopment and illiquidity of the Ukrainian securities market, together with less government supervision and regulation. The Ukrainian legal framework governing securities transactions is underdeveloped, incomplete and provides guidance only with respect to the most basic and unsophisticated transactions. There is an inherent lack of minority investor protection in Ukrainian law, however a change in political will would hopefully see this improve in the future.

The value of the Company’s investments is affected by fluctuations in the value of the Hryvnia against the US Dollar and by tightening in local exchange control regulations, tax laws and economic or monetary policies. The Company is also subject to the risks in Ukraine of continued inflation and significant currency devaluation.

Due to the limited number of investment opportunities available to the Company, the portfolio is concentrated and therefore the insolvency or other business failure of any one or more of the Company’s investment enterprises could have a material effect on the Company, its operations and ability to achieve its objective. Laws on the insolvency of enterprises have been enacted in Ukraine but, as yet, there has been little practical experience in the manner of implementation of these laws. In order to mitigate this risk, the Company has sought to invest in a diversified portfolio of assets, however, changing asset values and commercial investment decisions have impacted this policy.

Risks Relating to the Company
The Company by its nature is exposed to market risk due to fluctuations in the market prices of its investments, interest rates, exchange rates and currency markets, credit risk, liquidity risk, cash flow risk and political risk. The Investment Manager actively monitors the Company’s performance and the performance of the market in which it invests and formally reports to the Board on a quarterly basis.

The Company, as part of its investment strategy, invests in certain securities that are not listed or admitted to trading on any recognised stock exchange and as a consequence, such securities are not readily tradeable.

The Company seeks to provide attractive long-term absolute returns, rather than returns relative to a particular index or benchmark. Its portfolio is managed without reference to the composition of any stock market index. Therefore, it is quite likely that there will be periods when the Company’s performance will be quite unlike that of any index, which may or may not be to the advantage of shareholders.

Failure by the Company to satisfy the requirements of Sections 1158/1159 of the CTA could result in the Company being subject to capital gains tax. In order to minimise the impact of taxation costs, the Directors, Investment Manager and Company Secretary monitor the Company’s position on a monthly basis. On a quarterly basis, a more detailed assessment is made between the Board and the Investment Manager. The Board had, in late 2013, engaged lawyers to carry out a review of the share register to ensure the Company is not a close company (as defined in the CTA). The review concluded that the Company was not, and had not been, a close company; the Board regularly monitors this. The Board acknowledges that it has no control over shareholders purchasing shares, nor their concentration on the share register.

A further prerequisite to qualify as an Investment Trust Company is the requirement to diversify risk in the portfolio; this is also a requirement of the Listing Rules. As the Company increases its focus on the successful private equity investments, the portfolio will become increasingly concentrated. The Board monitors the risk diversification and the Company’s compliance with the Listing Rules and the CTA.

Related Party Transactions
FPP Asset Management LLP, as Investment Manager of the Company, is a related party by virtue of its management contract with the Company (novated to it on 7 December 2008). During the six months to 30 June 2015, services with a total value of US$140,000 (six months to 30 June 2014: US$225,000; year ended 31 December 2014: US$414,000) were purchased under the contract. No investment management performance fee was payable for the six months to 30 June 2015 (six months to 30 June 2014: US$nil; year ended 31 December 2014: US$nil). At 30 June 2015, the amount due to the Investment Manager, included within creditors, was US$20,000 (30 June 2014: US$36,000; 31 December 2014: US$22,000).

There were no changes in the transactions or arrangements with related parties as described in the Company’s Annual Report and Financial Statements for the year ended 31 December 2014 that would have a material effect on the financial position or performance of the Company in the first six months of the current financial year.


Interim Management Report and Responsibility Statement of the Directors in respect of the Half-Yearly Financial Report

Interim Management Report
Under the Disclosure and Transparency Rules the Company is required to make a number of disclosures, including the following:

Important events that have occurred during the period under review; key factors influencing the financial statements; and principal risks and uncertainties for the remaining six months of the financial year. These are set out in this Half-Yearly Report.

Responsibility Statement
The Directors confirm that to the best of their knowledge:

(a) the condensed set of financial statements has been prepared in accordance with International Accounting Standard (“IAS”) 34, Interim Financial Reporting, as adopted by the European Union, and gives a true and fair view of the assets, liabilities, financial position and profit or loss of the Company;

(b) the Half-Yearly Report includes a fair review of the information required to be disclosed under the Disclosure and Transparency Rule 4.2.7R. This includes (i) an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed interim financial information presented in the Half-Yearly Report and (ii) a description of the principal risks and uncertainties for the remaining six months of the financial year; and

(c) the Half-Yearly Report includes a fair review of the information required to be disclosed under Disclosure and Transparency Rule 4.2.8R, being any changes in related party transactions described in the last annual report.

On behalf of the Board
Nigel Pilkington
Chairman
26 August 2015
 

Investment Management Report for The Ukraine Opportunity Trust PLC for the six months to 30 June 2015
Ukraine has seen immense changes over the last year and a half. Politically we have seen the overthrow of the previous government in February 2014, closely followed by the Russian annexation of Crimea in March of that year. Mr Poroshenko then won the May 2014 Presidential election with 54.7 per cent support. The October parliamentary election returned a large pro-reform majority, led by the People’s Front of the Prime Minister, Mr Yatsenyuk, and the Petro Poroshenko Bloc. Hostilities in the East of Ukraine, which peaked in early 2015, were finally brought to some sort of conclusion by the second ceasefire agreement signed in Minsk in February 2015. In March, the IMF board then approved a new programme loan, the first US$5 billion tranche of which was disbursed. This process, combined with an increase in interest rates and some exchange controls brought an end to repeated phases of Hryvnia weakness, allowing it to settle at around UAH22 per Dollar, compared to a low of UAH30 per Dollar in February.

In 2014, Ukraine’s GDP fell by 6.8 per cent and a similar economic contraction is expected this year. 2014 average inflation rose to 12.1 per cent, driven by currency weakness and IMF-led increases in utility tariffs. Inflation has continued to accelerate in 2015 as the currency has weakened further in Q1, this despite a higher base, low global energy prices and recession. Inflation accelerated rapidly to April 2015 when it peaked at 60 per cent. As of July, it has fallen back marginally to 55.3 per cent year-on-year, although month-on-month inflation has fallen to near zero from 14 per cent in April. This situation obviously still represents a major challenge for Ukrainian companies and consumers as incomes have singularly failed to keep pace with inflation, leading to a fall in real purchasing power.

The external position of Ukraine has improved with both the current account deficit and the trade deficit contracting in 2015. The major positive effect of lower energy prices was in part cancelled out by lower demand in ex-Soviet CIS markets, but the Economist Intelligence Unit expects a ‘marked narrowing’ of the current account deficit from last year’s 4 per cent of GDP to around 1.7 per cent of GDP in 2015. Taken together with the renewal of the IMF programme, this improvement will reduce the pressure on Ukraine’s foreign reserves which had been sharply reduced by debt repayments and a fall in FDI. It remains to be seen whether Ukraine can deliver a significant debt restructuring along the lines outlined by the IMF, as talks with creditors are currently entering their fifth month. Currency depreciation and a deep recession have increased Ukraine’s sovereign debt burden from around 40 per cent of GDP pre-crisis to nearer 70 per cent of GDP and this could hit 80 per cent this year without any restructuring agreement. Ukraine and the IMF have asked for a 40 per cent cut in debt principal, but creditors are reluctant to concede this degree of haircut. Ultimately some compromise will likely be reached which allows Ukraine to re-build its reserves.

In an environment of accelerating inflation and economic contraction it was a difficult first half for our portfolio of companies. Managements must focus on trying to maintain sales volumes whilst passing through Hryvnia price increases where they can; at the same time a focus on cost containment and minimising financial debt remain paramount. It is too much to expect Dollar sales growth for 2015 in these circumstances, but our consumer-facing companies have delivered good local currency growth and maintained some measure of profitability in what have been challenging circumstances. The Company’s insistence on minimal debt exposures for all our companies has also been important in an environment of rising local rates. Suppliers are quick to deny their services to companies they deem too risky in terms of working capital or debt exposure, and we have had no such problems at our pharmacy chain or the restaurants, in this situation, a conservative balance sheet becomes a competitive advantage.

The Company has continued the process of regularly reviewing asset valuations in this difficult environment. Property holdings are marked in line with third party estimates of their value as produced by a leading international property consultant. In the half year we also decreased the valuation of Food Master in line with the slight fall in rolling 12- month US Dollar cash flow as per the Q1 numbers. The listed holding in Creative, a sunflower and soy oil processor, was also marked down to account for the limited liquidity of the locally-listed shares. The Company continues to retain a considerable cash position, reflecting the uncertain environment. 

The ongoing conflict in Ukraine has prompted the Board and ourselves to review the Company’s public market listing and whether the costs of maintaining this outweigh the benefits.  Our goal is to continue to do everything to maximise the net asset value of the Company’s investments and to protect long-term value for shareholders. Our collective judgement is that the current listed investment trust structure and the recurring expenses that it entails are not justifiable at current asset values. As such, the Board will be writing to shareholders via a shareholder circular to seek approval to delist the Company’s shares from trading.

FPP would also like to take this opportunity to extend our condolences to the family and friends of Mr Bertrand Lipworth, a Director of the Company, who died in July. Bertrand’s contribution to the management of the business, most particularly his expertise in Private Equity transactions, was a great asset to us and he will be much missed by all who knew and worked with him.

FPP Asset Management LLP
Investment Manager
26 August 2015
ukro@fpictet.com

Forward-looking statements
This Half-Yearly Report may contain certain "forward-looking statements" which reflect the Company’s and/or the Directors’ current views with respect to financial performance, business strategy and future plans, both with respect to the group and the sectors and industries in which  the Company invests. Statements which include the words “expects”, “intends”, “plans”, “believes”, “projects”, “anticipates”, “will”, “targets”, “aims”, “may”, “would”, “could”, “continue” and similar statements are of a future or forward-looking nature. All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause the Company’s actual results to differ materially from those indicated in these statements. Any forward-looking statements in this Half-Yearly Report reflect the Company’s current views with respect to future events and are subject to risks, uncertainties and assumptions relating to the Company’s investments, results and growth strategy. These forward-looking statements speak only as of the date of this Half-Yearly Report. Subject to any legal or regulatory obligations, the Company undertakes no obligation publicly to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. All subsequent written and oral forward-looking statements attributable to the Company or individuals acting on behalf of the Company are expressly qualified in their entirety by this paragraph. Nothing in this publication should be considered as a profit forecast.

Portfolio Valuation as at 30 June 2015

Security Name	Currency	Cost	Fair value valuation as  at  30 June  2015	% of net assets  as at 30  June 2015
		US$’000	US$’000
Private fixed income securities
Bank Nadra 2.5% Loan 10 April 2018	UAH	3,044	218	1.8
Total fixed income securities		3,044	218	1.8
Equities
Listed equity
Azovstal Iron & Steelworks	UAH	427	52	0.4
Black Iron	CAD	18	15	0.1
Centrenergo	UAH	248	59	0.5
Creative Industrial Group	UAH	1,255	403	3.4
Ferrexpo	GBP	452	314	2.6
Kernel	PLN	227	201	1.7
MHP	USD	186	201	1.7
Ukrproduct Group	GBP	144	25	0.2
Ukrsotsbank	UAH	249	13	0.1
Zakhidenergo	UAH	167	19	0.2
		3,373	1,302	10.9
Private equity
Food Master (Anthoreal Estates)	UAH	5,663	5,389	45.2
Vitalux (Chalsen Trade)	UAH	2,118	545	4.6
Ekipazh	UAH	541	456	3.8
Elcinory	UAH	1,131	668	5.6
UKRO Land Invest	UAH	2,513	1,000	8.4
		11,966	8,058	67.6
Total equity		15,339	9,360	78.5
Total portfolio valuation		18,383	9,578	80.3
Cash and cash equivalents			2,566	21.5
Other net liabilities			(216)	(1.8)
Net assets			11,928	100.0

As at 30 June 2015, the portfolio was held in the following denominations: 2.1% in USD (US Dollar); 92.1% in UAH (Ukranian Hryvnia); 3.5% in GBP (Sterling); 2.1% in PLN (Polish Zloty); and 0.2% in CAD (Canadian Dollar).
 

Statement of Comprehensive Income (unaudited)
for the six months to 30 June 2015

	Six months to 30 June 2015			Six months to 30 June 2014			Year ended 31 December 2014 (audited)
	Revenue  return	Capital  return	Total	Revenue    return	Capital  return	Total	Revenue   return	Capital  return	Total
	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000
Income	44	-	44	44	-	44	35	80	115
Losses on investments
Losses on fair value through profit or loss investments	-	(372)	(372)	-	(1,064)	(1,064)	-	(9,338)	(9,338)
Exchange gains/(losses)	-	14	14	-	(3)	(3)	-	(15)	(15)
	-	(358)	(358)	-	(1,067)	(1,067)	-	(9,353)	(9,353)
Expenses
Investment management fee	(140)	-	(140)	(225)	-	(225)	(414)	-	(414)
Other expenses	(488)	-	(488)	(360)	-	(360)	(747)	-	(747)
	(628)	-	(628)	(585)	-	(585)	(1,161)	-	(1,161)
Net return before tax	(584)	(358)	(942)	(541)	(1,067)	(1,608)	(1,126)	(9,273)	(10,399)
Tax (Note 3)	(13)	-	(13)	(4)	-	(4)	(5)	-	(5)
Net return for the period	(597)	(358)	(955)	(545)	(1,067)	(1,612)	(1,131)	(9,273)	(10,404)
	US$	US$	US$	US$	US$	US$	US$	US$	US$
Return per Ordinary Share Basic and Diluted (Note 4)	(0.1657)	(0.0993)	(0.2650)	(0.1512)	(0.2960)	(0.4472)	(0.3138)	(2.5730)	(2.8868)

The total column of this statement is the Statement of Comprehensive Income of the Company prepared in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the EU. The supplementary revenue return and capital return columns have been prepared under guidance published by the Association of Investment Companies.

All revenue and capital items in the above statement are derived from continuing operations.

The Company does not have any income or expense that is not included in net return for the period, and therefore the “Net return for the period” is also the “Total comprehensive income for the period”, as defined in IAS 1 (revised). All of the net return and total comprehensive income for the period is attributable to the owners of the Company.
 

Statement of Changes in Equity (unaudited)
for the six months to 30 June 2015

	Share capital	Share premium account	Special reserve	Capital redemption reserve	Capital  reserve	Revenue   reserve	Total
	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000
As at 1 January 2015	44	6,494	47,227	18	(34,968)	(5,932)	12,883
Revenue return for the period	-	-	-	-	-	(597)	(597)
Losses on realisation of investments	-	-	-	-	(84)	-	(84)
Movement in fair value of investments	-	-	-	-	(288)	-	(288)
Exchange gains	-	-	-	-	14	-	14
Total recognised income and expenses	-	-	-	-	(358)	(597)	(955)
Balance at 30 June 2015	44	6,494	47,227	18	(35,326)	(6,529)	11,928

Statement of Changes in Equity (unaudited)
for the six months to 30 June 2014

	Share capital	Share premium account	Special reserve	Capital redemption reserve	Capital  reserve	Revenue   reserve	Total
	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000
As at 1 January 2014	44	6,494	47,227	18	(25,695)	(4,801)	23,287
Revenue return for the period	-	-	-	-	-	(545)	(545)
Movement in fair value of investments	-	-	-	-	(1,064)	-	(1,064)
Exchange losses	-	-	-	-	(3)	-	(3)
Total recognised income and expenses	-	-	-	-	(1,067)	(545)	(1,612)
Balance at 30 June 2014	44	6,494	47,227	18	(26,762)	(5,346)	21,675

Statement of Changes in Equity (audited)
for the year ended 31 December 2014

	Share capital	Share premium account	Special reserve	Capital redemption reserve	Capital  reserve	Revenue   reserve	Total
	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000
As at 1 January 2014	44	6,494	47,227	18	(25,695)	(4,801)	23,287
Revenue return for the year	-	-	-	-	-	(1,131)	(1,131)
Losses on realisation of investments	-	-	-	-	(2,997)	-	(2,997)
Capital dividend received	-	-	-	-	80	-	80
Movement in fair value of investments	-	-	-	-	(6,341)	-	(6,341)
Exchange losses	-	-	-	-	(15)	-	(15)
Total recognised income and expenses	-	-	-	-	(9,273)	(1,131)	(10,404)
Balance at 31 December 2014	44	6,494	47,227	18	(34,968)	(5,932)	12,883

Statement of Financial Position (unaudited)
as at 30 June 2015

	As at 30 June	As at 30 June	As at 31 December 2014
	2015	2014	(audited)
	US$’000	US$’000	US$’000
Non-current assets
Investments at fair value through profit or loss	9,578	17,875	9,806
Current assets
Other receivables	28	33	81
Cash and cash equivalents	2,566	3,963	3,245
	2,594	3,996	3,326
Total assets	12,172	21,871	13,132
Current liabilities
Other payables	(244)	(196)	(249)
	(244)	(196)	(249)
Total assets less current liabilities/net assets	11,928	21,675	12,883
Represented by:
Capital and reserves
Share capital	44	44	44
Special reserve*	47,227	47,227	47,227
Capital redemption reserve	18	18	18
Capital reserve*	(35,326)	(26,762)	(34,968)
Share premium account	6,494	6,494	6,494
Revenue reserve*	(6,529)	(5,346)	(5,932)
Total Shareholders’ funds	11,928	21,675	12,883
	US$	US$	US$
NAV per Ordinary Share (Note 6)	3.31	6.01	3.57

The above financial information has been prepared in accordance with IFRS (as adopted by the EU).

* These reserves are distributable (by way of dividend).

Statement of Cash Flows (unaudited)
for the six months to 30 June 2015

	Six months to  30  June 2015	Six months to  30 June 2014	Year ended 31 December 2014  (audited)
	US$’000	US$’000	US$’000
Cash flows from operating activities
Net return before tax	(942)	(1,612)	(10,399)
Adjustments to reconcile net return before tax to net cash flows from operating activities:
Add back: losses on investments	372	1,064	9,338
Add back: exchange (gains)/losses	(14)	3	15
Decrease/(increase) in other receivables	53	22	(25)
(Decrease)/increase in other payables	(5)	7	60
Net cash outflow from operating activities	(536)	(516)	(1,011)
Taxation
Irrecoverable overseas tax paid	(13)	-	(5)
	(13)	-	(5)
Cash flows from investing activities
Purchases of investments	(309)	(2,136)	(2,430)
Sales of investments	164	-	87
Net cash flows used in investing activities	(145)	(2,136)	(2,343)
Decrease in cash and cash equivalents (Note 8)	(694)	(2,652)	(3,359)
Cash and cash equivalents at start of period/year	3,245	6,618	6,618
Effect of exchange movements	15	(3)	(14)
Cash and cash equivalents at end of period/year (Note 8)	2,566	3,963	3,245

Notes

1. Accounting policies
The interim financial information has been prepared in accordance with IAS34, ‘Interim Financial Reporting’ and also in accordance with the accounting policies set out in the statutory accounts for the year ended 31 December 2014. The interim financial information should be read in conjunction with the statutory accounts for the year ended 31 December 2014, which have been prepared in accordance with IFRS.

The Company has adequate financial resources and no significant investment commitments and as a consequence, the Directors believe that the Company is well placed to manage its business risks successfully.  After making appropriate enquiries, the Directors have a reasonable expectation that the Company has adequate available financial resources to continue in operational existence for the foreseeable future and accordingly have concluded that it is appropriate to continue to adopt the going concern basis in preparing the Half-Yearly Report.

2. Financial information
The financial information contained in this Half-Yearly Report does not constitute full statutory accounts as defined in sections 434-436 of the Companies Act 2006. The financial information for the six months to 30 June 2015 and 30 June 2014 has not been audited or reviewed.

The information for the year ended 31 December 2014 has been extracted from the latest published audited accounts. Those statutory accounts have been filed with the Registrar of Companies and included a report of the auditors which was unqualified and did not contain a statement under sections 498(2) or (3) of the Companies Act 2006.

3. Tax credit/charge on ordinary activities               
The tax charge for the six months to 30 June 2015 is US$13,000 (six months to 30 June 2014: US$4,000 year ended 31 December 2014: US$5,000). The tax charge for the six months to 30 June 2015 relates entirely to irrecoverable overseas withholding tax. The estimated effective tax rate is zero per cent for the year ending 31 December 2015. This is because investment gains are exempt from Capital Gains Tax owing to the Company’s current status as an Investment Trust Company and there is expected to be an excess of management expenses over taxable income in the year ending
31 December 2015. Therefore there is no liability to Corporation Tax during the six months to 30 June 2015 (six months to 30 June 2014: US$nil; year ended 31 December 2014: US$nil).

However, as a result of the Company’s intention to delist before the year ending 31 December 2015, the Company will become an unapproved Investment Trust Company for the full year and therefore will be subject to Corporation Tax on all profits and required to recognise deferred tax on gains and losses arising on the revaluation or disposal of investments. The Directors’ current expectation is that unless there is a very significant change to the current political and military impasse in Ukraine before the end of 2015, asset values will be at best around current levels, meaning little or no tax is likely to become payable.

4. Return per Ordinary Share

	Net  return  US$’000	Six months to 30 June 2015 Weighted average number of Ordinary Shares ‘000	Ordinary  Share  US$
Total return per ordinary share	(955)	3,604	(0.2650)
Revenue return per ordinary share	(597)	3,604	(0.1657)
Capital return per ordinary share	(358)	3,604	(0.0993)

   

	Net  return  US$’000	Six months to 30 June 2014 Weighted Average number of Ordinary Shares ‘000	Ordinary  Share  US$
Total return per ordinary share	(1,612)	3,604	(0.4472)
Revenue return per ordinary share	(545)	3,604	(0.1512)
Capital return per ordinary share	(1,067)	3,604	(0.2960)

   

	Net  return  US$’000	Year to 31 December 2014 Weighted Average number of Ordinary Shares ‘000	Ordinary  Share  US$
Total return per ordinary share	(10,404)	3,604	(2.8868)
Revenue return per ordinary share	(1,131)	3,604	(0.3138)
Capital return per ordinary share	(9,273)	3,604	(2.5730)

5. Segment reporting
As detailed in the Company’s Report and Financial Statements for the year ended 31 December 2014, the Company operates in a single geographical segment (being an investment business mainly operating in Ukraine-based entities) but identifies two key areas based on the decision making process by the Board and Investment Manager and has therefore prepared an analysis of results by segment based on these key decision making processes. These two identifiable segments are:

1) the listed investment portfolio (both equity and fixed income securities); and

2) the private investment portfolio (both equity and fixed income securities).

The listed investment portfolio and the private investment portfolio are shown above. Information regarding the Company’s reportable operating segments is presented below.

30 June 2015		Listed  equity/	Private  equity/
		fixed  income	fixed  income
	Total	securities	securities	Unallocated
	US$’000	US$’000	US$’000	US$’000
Segment income and expenses
Investment income	44	44	-	-
Total losses on investments taken to profit or loss	(372)	(107)	(265)	-
Other gains	14	-	-	14
Expenses	(628)	-	-	(628)
Total net return after tax as per Statement of Comprehensive Income	(942)	(63)	(265)	(614)

   

30 June 2014		Listed  equity/	Private  equity/
		fixed  income	fixed  income
	Total	securities	securities	Unallocated
	US$’000	US$’000	US$’000	US$’000
Segment income and expenses
Investment income	44	15	29	-
Total losses on investments taken to profit or loss	(1,064)	(76)	(988)	-
Other losses	(3)	-	-	(3)
Expenses	(585)	-	-	(585)
Total net return after tax as per Statement of Comprehensive Income	(1,608)	(61)	(959)	(588)

   

31 December 2014		Listed  equity/	Private  equity/
		fixed  income	Fixed  income
	Total	securities	securities	Unallocated
	US$’000	US$’000	US$’000	US$’000
Segment income and expenses
Investment income	115	19	96	-
Total losses on investments taken to profit or loss	(9,338)	(754)	(8,584)	-
Other losses	(15)	-	-	(15)
Expenses	(1,161)	-	-	(1,161)
Total net return after tax as per Statement of Comprehensive Income	(10,399)	(735)	(8,488)	(1,176)

6. Net assets attributable to Ordinary Shares
The total net assets attributable to Shareholders are calculated as follows:

	30 June 2015	30 June 2014	31 December 2014
	US$’000	US$’000	US$’000
Shareholders’ funds	11,928	21,675	12,883

  The basic NAV per Ordinary Share is as follows:

NAV	US$3.31	US$6.01	US$3.57
Number of Ordinary Shares	3,604,381	3,604,381	3,604,381

7. Fair value hierarchy
Financial assets and financial liabilities of the Company are carried in the Statement of Financial Position at their fair value. The fair value is the amount at which the asset could be sold or the liability transferred in a current transaction between market participants, other than a forced or liquidation sale. For investments actively traded in organised financial markets, fair value is generally determined by reference to quoted market bid prices.

The Company measures fair values using the following hierarchy that reflects the significance of the inputs used in making the measurements.

Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant assets as follows:

• Level 1 – valued using quoted prices, unadjusted in active markets for identical assets or liabilities.

• Level 2 – valued by reference to valuation techniques using observable inputs for the asset or liability other than quoted prices included in level 1.

• Level 3 – valued by reference to valuation techniques using inputs that are not based on observable market data for the asset or liability.

The tables below set out fair value measurements of financial instruments as at the respective period ends, by the level in the fair value hierarchy into which the fair value measurement is categorised.

Financial assets at fair value though profit or loss at 30 June 2015	Total	Level 1	Level 2	Level 3
	US$’000	US$’000	US$’000	US$’000
Equity investments	9,360	899	403	8,058
Fixed income securities	218	-	-	218
Total	9,578	899	403	8,276

   

Financial assets at fair value though profit or loss at 30 June 2014	Total	Level 1	Level 2	Level 3
	US$’000	US$’000	US$’000	US$’000
Equity investments	17,504	1,029	851	15,624
Fixed income securities	371	-	-	371
Total	17,875	1,029	851	15,995

   

Financial assets at fair value though profit or loss at 31 December 2014	Total	Level 1	Level 2	Level 3
	US$’000	US$’000	US$’000	US$’000
Equity investments	9,565	654	632	8,279
Fixed income securities	241	-	-	241
Total	9,806	654	632	8,520

There have been no transfers during the period between levels 1 and 2 fair value measurements and no transfers into or out of level 3 fair value measurements.

Investments classified within level 3 have significant unobservable inputs. Level 3 instruments include private equity and corporate debt securities. As observable prices are not available for these securities, the Company has used valuation techniques to derive the fair value. In respect of debt securities, fair value is determined by management based on an analysis of available market inputs, which may include values obtained from one or more independent pricing services or by discounting expected future cash flows using a current market rate applicable to the yield, credit quality, liquidity and maturity of the investment. Cash flows are estimated using issuer-specific default statistics and prepayment assumptions. In respect of unquoted instruments, or where the market for a financial instrument is not active, fair value is established by using recognised valuation methodologies, in accordance with International Private Equity and Venture Capital (“IPEV”) Valuation Guidelines. New investments are initially carried at cost, for a limited period, being the price of the most recent investment in the company. This is in accordance with IPEV Valuation Guidelines as the cost of recent investments will generally provide a good indication of fair value. Details of the valuation can be seen above. Fair value is the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction.

The following table presents the movement in level 3 instruments for the period ended 30 June 2015:

	Fair value  total	Equity  investments	Fixed income   investments
	US$’000	US$’000	US$’000
Opening fair value	8,520	8,279	241
Purchases	21	21	-
Total losses for the period included in the Statement of Comprehensive Income	(265)	(242)	(23)
Closing fair value	8,276	8,058	218

8. Reconciliation of net cash flow to net funds

	Six months to  30 June 2015	Six months to  30 June 2014	Year ended  31 December 2014
	US$’000	US$’000	US$’000
Opening net funds	3,245	6,618	6,618
Decrease in cash in period	(694)	(2,652)	(3,359)
	2,551	3,966	3,259
Effects of exchange movements	15	(3)	(14)
Closing net funds	2,566	3,963	3,245

9. Principal financial risks

The principal financial risks which the Company faces in its investment portfolio management activities are:

• credit risk;
• market price risk, i.e. the movements in value of investment holdings caused by factors other than interest rate movement;
• interest rate risk;
• liquidity risk;
• political risk; and
• foreign currency risk.

Further details of the Company’s management of these risks and exposure to them is set out above and in Note 17 of the Company’s Annual Report and Financial Statements for the year ended 31 December 2014, as issued on 30 April 2015. There have been no changes to the management of or exposure to these risks since that date.
 

Shareholder Information

Share dealing
The Company’s Ordinary Shares (Code UKRO) are traded on the London Stock Exchange and can be traded through your usual stockbroker.

Share register enquires
The register for the Ordinary Shares is maintained by Computershare Investor Services PLC. In the event of queries regarding your holding, please contact the Registrar on 0870 707 1380 or email web.queries@computershare.co.uk. Changes of name and/or address must be notified in writing to the Registrar to the address shown below.

Share capital and NAV information as at 30 June 2015

Ordinary Shares US$0.01	4,404,381 (of which 800,000 held in Treasury)
SEDOL number	B0HW611
ISIN number	GB00B0HW6117

The Company releases its NAV per Ordinary Share to the London Stock Exchange following each month end.

Investment Manager: FPP Asset Management LLP
The Investment Manager was incorporated in 1998 to offer specialist fund management services to sophisticated investors worldwide and is regulated by the FCA in the conduct of this investment business in the UK.

Sources of information
Information about the Company, including copies of Annual and Half-Yearly Reports and announcements released to the London Stock Exchange, can be obtained from the Company’s website: www.ukrotrust.co.uk. Copies of the Annual and Half-Yearly Reports are available from the Company Secretary, telephone: 01392 412122.
 

 Directors and Advisers

Directors (all non-executive)		Custodians
Nigel Pilkington (Chairman)		Raiffeisen Zentralbank Österreich AG
Nicholas Cournoyer		Am Stadtpark 9
Gordon Lawson		1030 Vienna
		Austria
Secretary and Registered Office		CJSC OTP Bank
Capita Sinclair Henderson Limited		Zhylyanska St. 43
(trading as Capita Asset Services -		01033 Kiev
Fund Solutions)		Ukraine
Beaufort House
51 New North Road		Bankers
Exeter EX4 4EP		Lloyds Bank Plc
Tel: 01392 412122		234 High Street
Fax: 01392 253282		Exeter EH4 3NL
Investment Manager and AIFM		Registrar and Transfer Office
FPP Asset Management LLP		Computershare Investor Services PLC
34 Brook Street		The Pavilions
London W1K 5DN		Bridgwater Road
www.fpictet.com		Bristol BS99 6ZZ
		Telephone: 0870 707 1380
Auditor
KPMG LLP		Solicitors
100 Temple Street		Slaughter and May
Bristol BS1 6AG		One Bunhill Row
		London EC1Y 8YY
Corporate Broker
finnCap Limited
60 New Broad Street
London EC2M 1JJ

An investment company as defined under Section 833 of the Companies Act 2006.

Registered in England and Wales  No.5537892

This is a Half-Yearly Report and full details of the Company including the NAV, report and accounts and factsheets are available at www.ukrotrust.co.uk. The information provided in this statement should not be considered as a financial promotion.

END

Neither the contents of the Company’s website nor the contents of any website accessible from hyperlinks on this announcement (or any other website) is incorporated into, or forms part of, this announcement.