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UKRAINE OPPORTUNITY TRUST PLC (THE) – Annual Financial Report.

The
Ukraine
 , Ukr. Ukraina, republic (2005 est. pop.
 Opportunity Trust PLC

Annual Financial Report for the year ended 31
December
 see month.
 2012

The full Annual Report and Financial Statements can be accessed via
the Company’s website at www.ukrotrust.co.uk or by contacting the
Company Secretary on 01392 412122.

 The Company
The Ukraine Opportunity Trust PLC ("UKRO") was incorporated on
16 August 2005. All of the Company's Ordinary Shares were admitted
to the official list of the London Stock Exchange and commenced trading
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 31 December 2012 was
4,554,381 (2011: 4,554,381), of which 900,000 (2011: 900,000) were held
in Treasury and 3,654,381 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
  
n.
1. A residence; a home.

2. One’s legal residence.

v. dom·i·ciled, dom·i·cil·ing, dom·i·ciles

v.tr.
1.
 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 are 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
investments 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

Investment objective and policy         Presented above.
 Management Company                      FPP Asset Management LLP.
Assets attributable to Shareholders     US$20,238,000 as at 31 December
2012.
Market capitalisation                   US$7,583,000 as at 31 December
2012.
Capital structure                       Presented above.
Management fee                          US$400,000 (2 per cent of Net
Asset
                                        Value of the Company).
Performance fee                         US$nil (20 per cent of increase
in the
                                        Net Asset Value of the Company
since
                                        the performance period when such
fee
                                        was last earned).
Ongoing Charges                         4.6 per cent (based on average
Net
                                        Assets throughout the year).
ISA status                              The Company is fully eligible
for
                                        inclusion in ISAs.
AIC                                     The Company is a member of the
                                        Association of Investment
Companies.
Summary of Results                              As at               As
at
                                     31 December 2012    31 December
2011
Assets attributable to Shareholders        US$20.24m
US$19.95m
Net Asset Value per Ordinary Share          US$5.54              US$5.46
Mid market Ordinary Share price             US$2.08              US$2.25
Discount to diluted Net Asset Value           62.55%
59.31%
Mid market Warrant price                        N/A*             US$0.10
Dividend declared                               Nil                  Nil
                                                                    

* The Warrants
expired
  
v. ex·pired, ex·pir·ing, ex·pires

v.intr.
1. To come to an end; terminate:

2.
 in April 2012 and were delisted in June
2012.

                                              Year to             Year
to
                                    31 December 2012    31 December 2011
Total earnings per Ordinary Share:         US$0.0775         US$(0.2111)
basic and diluted
Chairman's Statement
Having re-read my 2011 statement, sadly there is little to add in 2012.
The Ukranian stock market fell by almost 40 per cent again, reflecting
ongoing concerns about the political situation, lack of progress with
the International Monetary Fund ("IMF"), the problematic gas
contract with Gazprom and domestic gas price subsidies. The Hryvnia has
been fixed at 8 to 1 USD since the end of 2008, and there are concerns
whether or not this level can be maintained in light of the above and
some commentators are suggesting a possible 20 per cent devaluation.
Ukraine's dispute with Gazprom began in 2005 and continued after
2009 when a 10-year contract was negotiated. There have been significant
(sometimes total) supply restrictions to Ukraine every year. In January
2013 Ukraine announced a deal to develop the country's major shale
gas reserves with Royal Dutch Shell plc. Shortly afterwards, Gazprom
notified Ukraine that it owed US$7 billion for failing to take up agreed
volumes of gas. Like so many Ukrainian issues, this situation remains
unresolved.
Despite all the above, UKRO's Net Asset Value ("NAV") was
almost unchanged in 2012 because the bulk of the portfolio is
represented by private equity in four operating companies. Details of
these are included in the Investment Manager's report below. Three
corporate investments are re-valued twice a year using rigorous,
consistent methods (cash flow multiples or book values if appropriate)
and a leading international property consultant calculates the fourth
company, the property company's value bi-annually. 

The listing of the Company’s warrants was
cancelled
  
v. can·celed also can·celled, can·cel·ing also can·cel·ling, can·cels also can·cels

v.tr.
1. To cross out with lines or other markings. See Synonyms at erase.

2.
 in June
last year after they reached maturity and none were exercised on expiry.
No shares were bought back during 2012, although the Board
continually
  
adj.
1. Recurring regularly or frequently:

2.
 reviews this and will be seeking to renew the authority at the
AGM
 annual general meeting

 n abbr (= annual general meeting) →

 n abbr (= annual general meeting) →  
.

I would like to thank my fellow Directors, the Investment Manager
and our advisers for all their efforts throughout the year.

 Gordon Lawson Chairman 27 March 2013
 Investment Manager's Report
The Company's NAV was broadly unchanged in 2012, a result that
should be viewed in the context of Ukraine's continuing wearisome
struggle to overcome its political and economic difficulties. In an
economy which fell back into recession at year-end and which saw the
incumbent party grudgingly confirmed in power by parliamentary
elections, it has been difficult to generate momentum and returns. The
UX Ukrainian Equities Index reflected this lingering malaise, falling
another 35 per cent in 2012 after 2011's 40 per cent retreat. In
this context of quasi-existential crisis, the tiny gain in NAV should be
seen as a decent result, albeit that it lagged the performance of the
Global Listed Private Equity Index which recovered nicely from
2011's 18.5 per cent fall with a 29.7 per cent rally over the year.
Many countries have had a better 2012 than Ukraine.
The Company's outperformance of the broader Ukrainian economy and
stock market can be put down at least in part to a focus on the
consumer. More specifically on the Company's private equity
exposure to consumer retailing and financial services - now well over
half the Company's full exposure and more than two-thirds of its
private equity allocation. It is the companies in these sectors that
have performed best, benefiting from the dramatic fall in inflation and
the fact that consumers' real incomes have therefore grown despite
the challenges faced in the country's export sector in particular.
Inflation actually fell below zero in the last few months of 2012 having
been nearer 5 per cent at the beginning of the year - with wage
settlements still reflecting that higher inflation expectation -
consumers ended up with more money to spend in their purses and wallets.
This positive effect was clearly seen at both our restaurant business
and in the consumer finance business which posted good growth despite
the economic headwinds. A longer period of deflation would be a concern,
but seems unlikely.
It is probably worth reiterating the challenges which Ukraine faces in
2013. A double-dip recession and fiscal deterioration make it very
difficult for Authorities to grapple with servicing external debt and
managing an increasing current account deficit which is now approaching
some 8 per cent of GDP - equalled in Europe only by booming Turkey.
Ukraine's GDP growth expectations are pretty subdued (in the 1-2
per cent range for 2013), but without some major shift in the external
trade picture such as spot prices in the important steel, coal or
chemicals sectors, it will be almost impossible for Ukraine to meet the
repayment demands of creditors such as the IMF (US$6 billion in 2013)
whilst controlling the current account and fiscal position. Expensive
imports of energy also remain a key concern both for the trade account
and relations with Russia. At present Ukraine is set to pay over US$400
per 1,000 m3 for its natural gas in 2013 - above the rate for most of
the EU despite Ukraine's important transit role.
Ultimately a swift agreement with the IMF in terms of renewed lending
and the much vaunted increase in domestic energy tariffs which this
would entail seems the only obvious solution to the squeeze. The
currency may also be allowed to weaken somewhat although overall cost of
living comparisons do not show it to be expensive. Moreover with the
corporate sector the main user of external debt, the Authorities may be
reluctant to risk the fiscal fallout from a large devaluation. Broadly
speaking Ukraine has to keep the external financing window open in order
to fund its current account without entirely depleting foreign exchange
reserves which are currently approaching the lows of 2009/10 at US$24.7
billion, down from US$31.8 billion at the beginning of 2012.
Overall for the hard-pressed Ukrainian consumer the picture will be one
of caution in the face of currency uncertainty, political in-fighting
and potential price increases for household bills. Together with subdued
overall GDP growth, we must expect another tough year. The only real
positive is that this difficult outlook is fully reflected in the equity
markets, in interest-rates, and in the discount to NAV of the Company.
For 2013 we have to hope that any surprises will for once be positive
rather than negative.
The largest positive change to NAV (+US$1,890k) came from Food Master,
the Company's restaurant business which saw positive trading into
Q4. One surprise was the relatively small impact the Euro 2012 football
tournament had over the summer. Nevertheless 12-month USD sales growth
remains very impressive at 38 per cent year-on-year and still on track
for the full-year target, as is EBITDA with margins remaining stable
above 22 per cent. The chain now has 52 restaurants, up from 49 at the
beginning of the year, making it we believe Ukraine's second
largest offering after McDonalds. Food Master remains pleased with the
new 'Bistro Olivier' format of mid-market open-kitchen
restaurants which are performing well and has expanded Murakami sushi to
14 sites. The trial of 'Tarantino' - an upmarket Italian
restaurant on a Moscow site has also started well. We have applied a
valuation multiple of 5.6x EV/EBITDA, a 30 per cent discount to
international peers, to value the company, reflecting the market's
cautious view of Ukraine's prospects despite the profitability and
growth of Food Master's restaurants.
Chalsen posted its first quarters results with both positive operating
income and EBITDA. Management has remained focussed on increasing gross
margins towards 25 per cent and reducing operating costs in what is a
fiercely competitive pharmacy sector. This progress is to be welcomed,
but the year saw a small markdown (-US$250k) as in line with Food Master
we moved to a 30 per cent discount to international peers (from 20 per
cent) and hence apply a 0.35x sales multiple instead of 0.4x sales.
Those sales are currently only growing at 1-2 per cent in line with GDP,
so the focus on profitability remains vital. The company also has a
reasonable net cash position which might raise acquisition opportunities
in the event of currency devaluation.
No change in the valuation at Korsando. Korsando has reduced its
quarterly administrative expenses to the region of US$300,000 in line
with the revised budget. This budget reflects the continued moribund
state of the real estate market and our desire to limit the need for any
further financing of Korsando's land bank and office block. Asset
disposals remain our preferred option here, subject to market
conditions. The company has also successfully recovered some cash from
another investment made with a supermarket chain, which allowed Korsando
to report a small net profit in Q3 2012. The real estate market remains
subdued, with little transaction activity reported for larger blocks.
Platinum Bank continues to raise its profile as a credit bank with an
increased branch operation and over 1,500 points of sale nationwide. The
economic environment, in particular the high local interest rates - at
times over 20 per cent -associated with the National Bank of
Ukraine's defensive stance on the exchange rate have made it a
difficult environment to expand credit operations. The Bank will not hit
the 60 per cent plus growth target for the credit book in the full-year
management budgets, we still expect above 30 per cent growth.
Nevertheless in a difficult environment Platinum remains one of the few
profitable operators and at around a 20 per cent Return on Equity the
Bank should comfortably exceed US$110 million in shareholder equity at
year-end. The Company carries this investment at 0.6x book value.
Platinum Bank is a significant player in the non-mortgage credit market
and its business should attract considerable interest when the overall
macro-economic picture improves as it eventually must.
The listed holdings were basically responsible for reducing the gains
from the private equity book to a minimum. This reflects the illiquid
and occasionally downright marginal nature of the local market. We saw
gains in Polish-listed Industrial Milk, but these were the only
significant gains and they were wiped out by the forced take-out in
Ukrros Sugar, where Kernel, a larger agricultural producer, took out
minorities in the sugar producer at less than 25 per cent of what was
paid for control. On the same theme of corporate governance we also had
to write off the investment in Land West which has been absorbed into an
unlisted entity called Ukrlandfarming since January 2011 following a
previous takeover by a firm called Dakor. No terms of acquisition have
been published and only vague assurances given of some form of share
swap following a Warsaw listing of Ukrlandfarming at a future
unspecified date. After the experience with Ukrros it is difficult to be
optimistic we can recover much value. Creativ remains very illiquid and
volatile with price movements determined by single trades. We believe
that the soy and sunseed crushing business remains sound with a natural
hedge against currency depreciation and so retain the position. Dragon
Ukrainian Properties continues its efforts to put its house in order
following a botched buyback process in the Isle of Man but this
London-listed Ukraine play remains as highly discounted to its real
estate NAV as the Company itself having fallen 31 per cent in Dollar
terms in 2012 versus the Company's 8 per cent fall.
FPP Asset Management LLP Investment Manager 27 March 2013
Portfolio Valuation as at 31 December 2012
                                    Fair value            Country of
                                Cost valuation       % of   business
                    Currency US$'000   US$'000  portfolio
operations
Private fixed income securities
Bank Nadra 2.5%          USD   3,044       148        0.7    Ukraine
Loan 10 April 2018
Total fixed income             3,044       148        0.7 securities
Equity
Listed equity
Azovstal Iron &          UAH     427       127        0.6    Ukraine
Steelworks Bank Forum               UAH     192        13        0.1
Ukraine Centrenergo              UAH     325       166        0.8
Ukraine Creativ Industrial       UAH   1,255       870        4.3
Ukraine Group Dragon Ukrainian         GBP   1,371       408        2.0
Ukraine Properties ISFP Money Mkt           UAH     152         -
-    Ukraine Mutual Fund*** JKX Oil & Gas            GBP     197
101        0.5    Ukraine Land West****            USD   1,978         -
-    Ukraine Milkiland                PLN     198       178        0.9
Ukraine Motor Sich               UAH     179       165        0.8
Ukraine Rodovid Bank*            UAH   4,633         -          -
Ukraine Ukrproduct Group         GBP     144        58        0.3
Ukraine Ukrsotsbank              UAH     249        64        0.3
Ukraine Zakhidenergo             UAH     166        36        0.2
Ukraine
                              11,466     2,186       10.8 Private equity
Food Master              USD   3,664     7,928       39.3    Ukraine
(Anthoreal Estates) Bank Nadra **            USD   5,469         -
-    Ukraine Vitalux (Chalsen         USD   2,118     1,537        7.6
Ukraine Trade) Korsando                 USD   6,596     5,111       25.3
Ukraine PT Platinum Bank         USD   1,593     3,288       16.3
Ukraine Public Shares Star Galaxy*             USD   2,885         -
-     Russia SV Company*              USD   7,554         -          -
Ukraine
                              29,879    17,864       88.5
Total equity                  41,345    20,050       99.3
Total portfolio               44,389    20,198      100.0 valuation 

* Investments written down to zero during the 2009 financial year **
Investments written down to zero during the 2010 financial year ***
Investments written down to zero during the 2011 financial year ****
Investments written down to zero during the 2012 financial year

As at 31 December 2012, the portfolio was held in the following
denominations: 89.2% in
USD

 (US Dollar); 7.1% in UAH (
Ukrainian
Hryvnia

; IPA: ) has been the national currency of Ukraine since September 2, 1996.
); 2.8% in
GBP

 (Sterling) and 0.9% in
PLN

 (
Polish

 Zloty).

Portfolio Composition by Industry

 General Retailers                  47% Real Estate
27% Banks                              17% Food Producers
5% Electricity                         1% Industrial Engineering
1% Industrial Metals &                 1% Mining Oil & Gas
1% 

Extracts from the Report of the Directors

 The Directors present their report and Financial Statements for the
year ended 31 December 2012. The Company was incorporated under the name
of The Ukraine Opportunity Trust PLC on 16 August 2005 (Company number:
5537892) and commenced trading 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. 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. 

Business Review

 The Business Review has been prepared in accordance with the
requirements of Section 417 of the Companies Act 2006 and best practice.
The purpose of the Business Review is to inform members of the Company
and help them to assess how the Directors have performed their duty
under Section 172 of the Companies Act 2006 to promote the success of
the Company for the benefit of Shareholders.

The operating and financial review of the performance during the
year is included in the Chairman’s Statement and the Investment
Manager’s Report above.

 Principal Activity and Status The principal activity of the Company is
to carry on business as an investment company. The Company applied for,
and been granted approval from HM Revenue & Customs
("HMRC") as an authorised investment trust under Sections
1158/1159 of the new Investment Trust (Approved Company)(Tax)
Regulations 2011 ("ITR") for the year ended 31 December 2012. 

Performance

The Company’s performance is detailed in the Chairman’s
Statement and the Investment Manager’s Report above.

The
key performance indicators

 (“KPIs”) used to measure
the progress of the Company during the period under review are stated
below, details of which are
disclosed
  
tr.v. dis·closed, dis·clos·ing, dis·clos·es
1. To expose to view, as by removing a cover; uncover.

2. To make known (something heretofore kept secret).
 in the Summary of Results and the
Investment Manager’s Report above.

 -- Net Asset Value ("NAV"). -- The movement in the
Company's Share price. -- Premium/discount of the Share price in
relation to the NAV. 

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 are 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.
The Company has been investing predominantly in unquoted securities but,
is also investing in selected listed equities (mostly pre-IPO and IPO
transactions) in accordance with the published investment policy.
Currently, approximately 88 per cent of the net assets are in private
equity, 11 per cent in listed equity and the balance in fixed income
securities and cash. 

Details of all investments are shown above.

 Principal Risks The Board considers the following as the principal
risks facing the Company. Mitigation of these risks is sought and
achieved in a number of ways. Information regarding the risk assessment
and control procedures is given in the Corporate Governance Statement in
the full Annual Report and also in the notes to the Financial
Statements. 

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. 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.
The Board as a whole undertakes 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 full
Annual Report.
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,
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.
The value of the Company's investments is affected by fluctuations
in the value of the Hryvnia against the US Dollar and by changes 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 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 objectives. 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 as detailed in note
19. 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.
The Company has qualified as an Investment Trust Company in accordance
with Sections 1158/1159 of the ITR for the period under review. The
Company will be treated as an Investment Trust Company for each
subsequent accounting period, subject to there being no serious breaches
of the regulations. Failure by the Company to satisfy the new
requirements of Sections 1158/1159 status, 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.
Operational Risk and Third Party Advisers Like most Investment Trust
Companies, the Company has no employees. All of the Directors are
non-executive. The Company relies on services provided by third parties,
including, in particular, the Investment Manager, FPP Asset Management
Limited LLP ("FPP"), and Capita Sinclair Henderson Limited,
who provide company secretarial and administrative services. The Company
reviews the internal control procedures of its service providers on an
annual basis. 

Full details of the internal control assessment process are shown in
the
Corporate Governance

 Statement.

 Social, Environmental and Employee Issues The Company does not have any
employees and the Board consists entirely of non-executive Directors. As
the Company is an investment company, it has no direct impact on the
community or the environment and as such has no policies in these areas.
In carrying out its activities and in relationships with suppliers the
Company aims to conduct itself responsibly, ethically and fairly.
Current and Future Developments Please refer to the Chairman's
Statement and the Investment Manager's Report above.
Management of Capital 

As part of capital, the Company manages assets
attributable

 to
Shareholders, which includes the following components:

 Share Capital The Company's share capital consists of Ordinary
Shares of US$0.01 each.
The number of Shares in issue as at 31 December 2012 and at the date of
this report was 4,554,381 (2011: 4,554,381) of which 900,000 Shares were
held in Treasury (2011: 900,000) and 3,654,381 were in circulation.
Ordinary Shares in issue carry one vote each on a poll, there are no
restrictions on their transfer. 

On 30 April 2012 holders of Warrants had their final opportunity to
convert their Warrants into shares. The exercise price of each Warrant
was US$10.00. No Warrants were converted. The outstanding Warrants in
issue were delisted in June 2012.

 Issues of New Ordinary Shares By a resolution passed at the Annual
General Meeting of the Company held on 16 May 2012 the Directors were
authorised, in accordance with Section 551 of the Companies Act 2006, to
allot relevant securities up to a maximum nominal amount of US$12,181.
This authority has not been utilised and will expire on the date of the
next Annual General Meeting. A resolution to renew this authority will
be put to Shareholders at the forthcoming Annual General Meeting. 

Ordinary Shares will only be issued on the basis that their issue
does not
dilute

v.
To reduce a solution or mixture in concentration, quality, strength, or purity, as by adding water.

adj.
Thinned or weakened by diluting.
 the
NAV

 per existing Ordinary Share.

 Treasury Shares The Company indicated in its prospectus, published on
27 September 2005, that it intended to make market purchases of its own
Shares for Treasury where it was cost effective and positive for the
management of the Company's capital base to do so under the
authority granted by Shareholders. The Company is permitted to hold
issued share capital in Treasury and to subsequently cancel or sell such
Shares for cash. At the year-end and as at the date of this report the
Company held 900,000 Shares in Treasury, equating to 19.76 per cent of
the issued share capital.
Purchase of Own Shares At the Company's Annual General Meeting held
on 16 May 2012, Shareholders gave authority for the Company to buy back
a total of 547,791 Ordinary Shares representing 12.03 per cent of the
then shares in circulation, for cancellation or for placing into
Treasury in accordance with the Company's published discount
management and share buy-back policy. This authority remained unused
during the period. 

The Directors are seeking to renew this authority at the forthcoming
Annual General Meeting.

Reserves

Please refer to the
notes to the Financial Statements

 below.

Gearing

The Company has no borrowings.

Continuing Appointment of the Investment Manager

 The Board, acting as the Management Engagement Committee, keeps the
performance of the Investment Manager under review. It is the opinion of
the Directors that the continuing appointment of FPP Asset Management
LLP is in the interests of Shareholders as a whole. The reasons for this
view are that the investment performance of the Company is satisfactory
relative to that of the markets in which the Company invests and because
the remuneration of the Investment Manager is reasonable both in
absolute terms and compared to that of the managers of comparable
investment companies. 

Directors

 The Directors in office during the year and up to the date of
this Report are:
 Gordon Lawson Bertrand Lipworth Dmitry Chernobay Robin Monro-Davies
Nigel Pilkington
Going concern The Company's business activities, together with the
factors likely to affect its future development, performance and
position are described in the Chairman's Statement and in the
Investment Manager's Report above. The financial position of the
Company, its cash flows and liquidity position can be found in the
Financial Statements. In addition, note 19 to the Financial Statements
includes the Company's objectives, policies and processes for
managing its capital; its financial risk management objectives; details
of its financial instruments and hedging activities; and its exposure to
credit risk, liquidity risk and other risks. 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 meet its obligations for at least a further 12 months and therefore
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 Financial Statements. 

The full Annual Report contains the following statements regarding
responsibility for the Annual Report and Financial Statements
(references in the following statements are to pages in the Annual
Report).

Statement of Directors’ Responsibilities in respect of the
Annual Report and the Financial Statements

The Directors are responsible for preparing the Annual Report and
the Financial Statements in
accordance

 with applicable law and
regulations.

Company law requires the Directors to prepare Financial Statements
for each financial year. Under that law they have
elected
  
v. e·lect·ed, e·lect·ing, e·lects

v.tr.
1. To select by vote for an office or for membership.

2. To pick out; select:
 to prepare the
Financial Statements in accordance with
International Financial
Reporting Standards

 as adopted by the EU and applicable law.

Under company law the Directors must not approve the Financial
Statements unless they are satisfied that they give a true and fair view
of the state of affairs of the Company and of the profit or loss of the
Company for that period. In preparing these Financial Statements, the
Directors are required to:

— select suitable accounting policies and then apply them
consistently; — make judgements and estimates that are reasonable and
prudent; — state whether they have been prepared in accordance with
International Financial Reporting Standards as adopted by EU law; and —
prepare the Financial Statements on the going concern basis unless it is

inappropriate
 Medtalk adjective A diagnostic or therapeutic procedure proven to be unnecessary for the efficient management of a particular Pt. See Appropriateness, Canadian plan, Practice guidelines Neurology adjective Referring to a response or behavior
 to
presume
  
v. pre·sumed, pre·sum·ing, pre·sumes

v.tr.
1. To take for granted as being true in the absence of proof to the contrary:
 that the Company will continue in business.

The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that the
Financial Statements comply with the Companies Act 2006. They have
general responsibility for taking such steps as are reasonably open to
them to safeguard the assets of the Company and to prevent and detect
fraud and other irregularities.
 Under applicable law and regulations, the Directors are also
responsible for preparing a Report of the Directors,Directors'
Remuneration Report and Corporate Governance Statement that comply with
that law and those regulations. 

The Directors are responsible for the maintenance and integrity of
the corporate and financial information included on the Company’s
website. Legislation in the UK
governing
  
v. gov·erned, gov·ern·ing, gov·erns

v.tr.
1. To make and administer the public policy and affairs of; exercise sovereign authority in.

2.
 the preparation and

dissemination
 Medtalk The spread of a pernicious process–eg, CA, acute infection Oncology Metastasis, see there
 of Financial Statements may differ from legislation in
other jurisdictions.

The Directors confirm to the best of their knowledge:

 -- the Financial Statements, prepared in accordance with International
Financial Reporting Standards as adopted by the EU and applicable law,
give a true and fair view of the assets, liabilities, financial position
and return of the Company; and -- the Chairman's Statement,
Investment Manager's Report and the Report of the Directors
includes a fair review of the development and performance of the
business and the position of the Company, together with a description of
the principal risks and uncertainties that it faces.
On behalf of the Board Gordon Lawson Chairman 27 March 2013
Non-Statutory Accounts
The financial information set out below does not constitute the
Company's statutory accounts for the years ended 31 December 2012
and 2011 but is derived from those accounts. Statutory accounts for 2011
have been delivered to the Registrar of Companies, and those for 2012
will be delivered in due course. The Auditors have reported on those
accounts; their report was (i) unqualified, (ii) did not include a
reference to any matters to which the Auditors drew attention by way of
emphasis without qualifying their report and (iii) did not contain a
statement under Section 498 (2) or (3) of the Companies Act 2006. the
text of the Auditor's report can be found in the Company's
full Annual Report and Financial Statements at www.ukrotrust.co.uk
Statement of Comprehensive Income for the year ended 31 December 2012
                                             Year ended
Year ended
                                       31 December 2012           31
December 2011
                               Revenue Capital    Total  Revenue
Capital    Total
                        Note   US$'000 US$'000  US$'000
US$'000  US$'000  US$'000
Income                     2        69       -       69      267
-      267
Gains/(losses)on investments
Gains/(losses) on fair     9         -     908      908        -
(2,376)  (2,376) value through profit or loss
Exchange losses                      -     (14)     (14)       -
(19)     (19)
                                     -     894      894        -
(2,395)  (2,395)
Expenses
Investment management      3     (400)       -     (400)    (501)
-     (501) fee
Other expenses             4     (521)       -     (521)    (485)
-     (485)
                                 (921)       -     (921)    (986)
-     (986)
Net return before                (852)     894       42     (719)
(2,395)  (3,114) finance income and tax
Finance income Gains in fair value of    13        -      241      241
-    2,167    2,167 Warrants
Net return before tax            (852)   1,135      283     (719)
(228)    (947) Tax                        6        -        -        -
(2)       -       (2)
Net return for the               (852)   1,135      283     (721)
(228)    (949) year
                                  US$      US$      US$       US$
US$      US$ Return per Ordinary Share - Basic and diluted        7
(0.2332)  0.3107   0.0775  (0.1604) (0.0507) (0.2111)
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. See note 1 for further information on the presentation of the
Statement of Comprehensive Income. 

All revenue and capital items in the above statement are
derived
  
v. de·rived, de·riv·ing, de·rives

v.tr.
1. To obtain or receive from a source.

2.
 from
continuing operations

Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the
.

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

The notes form an integral part of these Financial Statements.

 Statement of Changes in Equity for the year ended 31 December 2012
                               Share             Capital
                      Share  premium  Special redemption  Capital
Revenue
                    capital  account  reserve    reserve  reserve
reserve   Total
                    US$'000  US$'000  US$'000
US$'000  US$'000  US$'000 US$'000
As at 1 January          46    5,349   48,278         16  (30,652)
(3,087) 19,950 2012
Revenue return for        -        -        -          -        -
(852)   (852) the year
Losses on                 -        -        -          -   (2,261)
-  (2,261) realisation of investments
Movement in fair          -        -        -          -    3,169
-   3,169 value of investments
Exchange losses           -        -        -          -      (14)
-     (14)
Movement in fair          -        -        -          -      241
-     241 value of Warrants
Total recognised          -        -        -          -    1,135
(852)    283 income and expenses
Refund of buyback         -        -        5          -        -
-       5 commission costs
Reserve transfer          -    1,145     (904)         -     (241)
-       -
Balance at 31            46    6,494   47,379         16  (29,758)
(3,939) 20,238 December 2012
                               Share             Capital
                     Share   premium  Special redemption  Capital
Revenue
                   capital   account  reserve    reserve  reserve
reserve    Total
                   US$'000   US$'000  US$'000
US$'000  US$'000  US$'000  US$'000
As at 1 January         59     5,349   49,175          3  (28,257)
(2,366)  23,963 2011
Revenue return for       -         -        -          -        -
(721)    (721) the year
Gains on                 -         -        -          -      350
-      350 realisation of investments
Movement in fair         -         -        -          -   (2,726)
-   (2,726) value of investments
Exchange losses          -         -        -          -      (19)
-      (19)
Movement in fair         -         -        -          -    2,167
-    2,167 value of Warrants
Total recognised         -         -        -          -     (228)
(721)    (949) income and expenses
Cancellation of         (2)        -        -          2        -
-        - Shares from Treasury
Cost of Share          (11)        -   (3,064)        11        -
-   (3,064) buybacks for cancellation
Reserve transfer         -         -    2,167          -   (2,167)
-        -
Balance at 31           46     5,349   48,278         16  (30,652)
(3,087)  19,950 December 2011 

The notes form an integral part of these Financial Statements.

 Statement of Financial Position as at 31 December 2012
                                Note  31 December  31 December
                                             2012         2011
                                          US$'000      US$'000
Non-current assets
Investments at fair value          9       20,198       20,056 through
profit or loss
Current assets
Other receivables                 11           31           88
Cash and cash equivalents                     189          196
                                              220          284
Total assets                               20,418       20,340
Current liabilities
Other payables                    12          180          149
Warrants at fair value            13            -          241
                                              180          390
Total assets less current                  20,238       19,950
liabilities
Net assets                                 20,238       19,950
Represented by:
Capital and reserves
Share capital                     14           46           46
Special reserve                            47,379       48,278
Capital redemption reserve                     16           16
Capital reserve                           (29,758)     (30,652)
Share premium                               6,494        5,349
Revenue reserve                            (3,939)      (3,087)
Total Shareholders' funds         16       20,238       19,950
                                              US$          US$
Net Asset Value per Ordinary      16         5.54         5.46 Share 

The above financial information has been prepared in accordance with

IFRS

IFRS Inter Frame Relay Service
IFRS Indiana Facilities Registry System
 (as adopted by the EU) and the accounting policies detailed
below.

These Financial Statements were approved by the Board of Directors
on 27 March 2013, and signed on its behalf by:

 Gordon Lawson Chairman
 Company Registered Number 5537892 

The notes below form an integral part of these Financial
Statements.

 Statement of Cash Flows for the year ended 31 December 2012
                                         Year         Year
                                        ended        ended
                                  31 December  31 December
                                         2012         2011
                            Note      US$'000      US$'000
Cash flows from operating activities
Net return before tax                     283         (947)
Adjustments to reconcile net return before tax to net cash flows from
operating activities:
Add back: (gains)/losses on              (908)       2,376 investments
Add back: exchange losses                  14           19
Movement in fair value of                (241)      (2,167) Warrants
Decrease in other                          57            8 receivables
Increase in other payables                 31           25
Income tax paid                             -           (2)
Net cash outflow from                    (764)        (688) operating
activities
Cash flows from investing activities
Purchases of investments                 (574)      (6,368)
Sales of investments                    1,337        9,336
Net cash flows generated                  763        2,968 from
investing activities
Cash flows from financing activities
Cost of Share buybacks for                  -       (3,064) cancellation
Refund of buyback                           5            - commission
costs
Net cash flows generated                    5       (3,064) from/(used
in) financing activities
Increase/(decrease) in cash                 4         (784) and cash
equivalents
Cash and cash equivalents                 196          983 at the start
of the year
Effects of exchange                       (11)          (3) movements
Cash and cash equivalents     17          189          196 at 31
December 

The notes form an integral part of these Financial Statements.

 Notes to the Financial Statements for the year ended 31 December 2012 

1.1 Corporate information

The Ukraine Opportunity Trust PLC (“the Company”) is an
investment trust company domiciled in the United Kingdom and listed on
the
London Stock Exchange

.

The address of the Company’s registered office is
Beaufort

 House, 51 New North Road,
Exeter
 , city (1991 pop. 88,235) and district, Devon, SW England, on the Exe River. It is the market, transportation, administrative, and distribution center for SW England.
, EX4 4EP.

The Company’s objective is to achieve long-term capital growth
from a diversified portfolio of companies incorporated, headquartered or
domiciled in, or whose businesses are primarily carried on in
Ukraine.

1.2 Basis of preparation

 The Financial Statements have been prepared in accordance with IFRS as
adopted by the EU. These comprise standards and interpretations approved
by the International Accounting Standards Board ("IASB"),
together with interpretations of the International Accounting Standards
and Standing Interpretations Committee approved by the International
Accounting Standards Committee that remain in effect, to the extent that
IFRS have been adopted by the EU.
Where presentation guidance set out in the Statement of Recommended
Practice ("SORP") for Investment Trust Companies and Venture
Capital Trusts issued by the Association of Investment Companies in
January 2009 is consistent with the requirements of IFRS, the Directors
have sought to prepare the Financial Statements on a basis compliant
with the recommendations of the SORP.
Fair value measurement of financial assets Fair value is the amount for
which an asset could be exchanged, or a liability settled, between
knowledgeable, willing parties in an arm's length transaction on
the measurement date.
When available, the Company measures the fair value of an instrument
using quoted prices in an active market for that instrument. A market is
regarded as active if quoted prices are readily and regularly available
from an exchange, dealer, broker, industry group, pricing service or
regulatory agency and represent actual and regularly occurring market
transactions on an arm's length basis.
If a market for a financial instrument is not active, the Company
establishes fair value using a valuation technique. The chosen valuation
technique makes maximum use of market inputs, relies as little as
possible on estimates specific to the company, incorporates all factors
that market participants would consider in setting a price, and is
consistent with accepted economic methodologies for pricing financial
instruments. Inputs to valuation techniques reasonably represent market
expectations and measures of the risk-return factors inherent in the
financial instrument. The Company calibrates valuation techniques and
tests them for validity using prices from observable current market
transactions in the same instrument or based on other available
observable market data.
Assets are measured at bid price; liabilities are measured at ask price.
Fair values reflect the credit risk of the instrument and include
adjustments to take account of the credit risk of the Company entity or
counterparty where appropriate. Fair value estimates obtained from
models are adjusted for any other factors, such as liquidity risk or
model uncertainties, to the extent that the Company believes a
third-party market participant would take them into account in pricing a
transaction.
Investments in equity securities The fair value of quoted equity
securities and interests in pooled investment funds is determined by
reference to their closing prices at the reporting date. Fair values for
private equity investments are determined in accordance with
International Private Equity and Venture Capital ("IPEVC")
Valuation Guidelines.
Investments in debt securities The fair value of fixed income securities
is based on quoted market prices at the reporting date, where the quotes
are binding and reflect the price of recent transactions in an active
market. For those securities not actively traded, 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.
Independent pricing services will normally derive the security prices
through recently reported trades for identical or similar securities,
making adjustments through to the reporting date based upon available
market observable information. Some debt securities are valued by
assessing the credit quality of the underlying borrowers and the credit
spreads on comparable quoted debt securities to derive a suitable
discount rate relative to government securities. 

1.3 Accounting policies

The accounting policies which follow set out those policies which
apply in preparing the Financial Statements for the year ended 31
December 2012.

 Functional and presentational currency The Financial Statements are
presented in US Dollars. All values are rounded to the nearest thousand
dollars (US$'000) except where otherwise indicated. 

Use of estimates and judgements The preparation of Financial
Statements in conformity with IFRS requires management to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets, liabilities,
income and expenses. 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.

In particular, information about significant areas of
estimation

 uncertainty in applying accounting policies that have the most
significant effect on the amounts recognised in the Financial Statements
is included in note 9 – Investments at fair value through profit or
loss.

In order to value the private equity investments, there are a number
of valuation techniques that can be used. Judgement is used to determine
the best methodology to obtain the most accurate valuation. The types of
valuation techniques used are disclosed in note 19.

 Going concern The Financial Statements have been prepared on a going
concern basis. The Directors are confident that, given the nature of the
current investment holdings and based on advice from the Investment
Manager, the net realisable value for the portfolio as at the year end
date and as at the date of this report would not differ significantly
from the bid value in current market conditions. However if the Company
was to be wound up there is a risk that liquidation of the portfolio
might take place at a time when liquidity is poor and prices achievable
would be lower in some cases than prevailing market prices. 

1.4 Significant accounting policies

The accounting policies set out below have been applied consistently
to all periods presented in these Financial Statements.

 Income recognition Dividends receivable on quoted equity and non-equity
shares are included in the Financial Statements when the investments
concerned are quoted ex-dividend or where no ex-dividend date is quoted,
when the Company's right to receive payment is established. The
fixed return on a debt security is recognised on a time apportionment
basis so as to reflect the effective yield on the debt security. All
other income is included on an accruals basis. 

Expenses and finance costs All expenses are accounted for on an

accruals

 basis and charged through the revenue account in the Statement
of Comprehensive Income except as follows:

uA transaction costs incurred on the purchase and sale of
investments are expensed through the capital account of the Statement of
Comprehensive Income; and

uA the investment management performance fee (if due), is charged
in total to the capital account of the Statement of Comprehensive
Income, on the basis that the underlying growth in net assets over the
course of the life of the Company will be predominantly of a capital
nature.
 Foreign currency transactions The currency of the Primary Economic
Environment in which the Company operates (the functional currency) is
US Dollars which is also the presentational currency. This was adopted
as this is the major currency in which the majority of transactions are
enacted. Transactions denominated in foreign currencies are translated
into US Dollars at the rates of exchange ruling at the date of the
transaction. 

Monetary assets and liabilities

 are converted to US Dollars at the
rates of exchange ruling at the year end date. Exchange gains and losses

relating to
 relate prep

 relate prep → ,  
 capital items are treated as components of capital elements
of Other Comprehensive Income. Realised and unrealised exchange gains
and losses on non-capital items are taken to the Statement of
Comprehensive Income in the period in which they arise.

Financial instruments - Group of financial assets or financial
liabilities managed on a fair value basis Designation of financial
instruments as at FVTPL (fair value through profit or loss) under this
criterion is based on the manner in which the Company manages and
evaluates the performance of a group of financial assets or financial
liabilities rather than the nature of those financial instruments. 

Designations as at FVTPL made on this basis shall be made at initial
recognition and shall be in accordance with the risk management policies
and investment objective.

Items that are not deemed
financial assets

 or financial liabilities
(accruals and
prepayments

) are shown at their face value.

 Investments at fair value through profit or loss All investments are
initially recognised at fair value which is equal to the cost of the
consideration given. 

Investments are designated as being at FVTPL in accordance with
IAS

 39. For investments actively traded in organised financial markets, fair
value is generally determined by reference to quoted market bid
prices.

 Investments where there is no active market and unquoted investments
are valued at fair value determined in accordance with IPEVC Valuation
Guidelines. This valuation incorporates all factors that market
participants would consider in setting a price.
Net movement arising from changes in fair value are included in the
capital account in the Statement of Comprehensive Income. The net
movement arising from changes in fair value of investments that can be
readily converted to cash are treated as realised gains/losses and of
those that cannot be readily converted to cash are treated as unrealised
gains/losses.
Trade date accounting All regular way purchases and sales of financial
assets are recognised on the 'trade date' i.e. the date the
Company commits to purchase or sell the asset. Regular way purchases or
sales of financial assets are those that require delivery of the asset
within a timeframe generally established by regulation or convention in
the market place. 

Other purchases and sales of financial assets are recognised at the
date of commitment.

 Other receivables Fixed returns on debt securities are recognised on a
time apportionment basis so as to reflect the effective yield on the
debt security.
Other receivables are non-interest bearing and are short term in nature
and are accordingly stated at fair value, with the exception of payments
and accrued income.
Cash and cash equivalents Cash and cash equivalents are defined as cash
in hand, demand deposits and short-term highly liquid investments
readily convertible to known amounts of cash and subject to
insignificant risk of changes in value.
Other payables Other payables are non-interest bearing and are stated at
fair value, with the exception of accruals. 

Warrants

 Derivative financial instruments are recognised in the Statement
of Financial Position when the Company becomes a party to the
contractual provisions of the instrument. The Warrant holders were
entitled to subscribe on the basis of one Ordinary Share for one Warrant
on 30 April in any of the years 2007 to 2012 inclusive. The warrants
expired on 30 April 2012, see above for further details. Movements in
the fair value of the Warrants were taken to the capital account of the
Statement of Comprehensive Income. 

Taxation

 The charge for taxation is based on the net revenue for the
period. Tax deferred or accelerated is accounted for in respect of all
material temporary differences to the extent that it is probable that a
liability or asset will crystallise. Temporary differences arise from
the inclusion of items of income and expenditure in tax computations in
periods different from those in which they are included in the Financial
Statements. Provision is made at the rate which is expected to be
applied when the liability or asset is expected to crystallise.
 Deferred tax arising from unrelieved foreign tax is recognised only if
it is considered more likely than not that there will be suitable
profits from which the future reversal of the underlying temporary
differences can be deducted. 

The tax effect of different items of income/gain and
expenditure/loss is allocated between capital and revenue on the same
basis as the particular item to which it relates, using the
Company’s effective rate of tax for the accounting period.

Reserves

The following are non-statutory reserves, with the exception of the
share premium and capital
redemption

 reserve which are statutory
reserves.

Capital reserve

The following are accounted for in this reserve:

uA gains and losses on the realisation of investments;

uA net movement arising from changes in fair value of investments
that can be readily converted to cash;

uA realised exchange differences of a capital nature;

uA expenses, together with related taxation effect, charged to this
account in accordance with the above policies;

uA movement on fair value of Warrants. Such movements are then
transferred to the special reserve; and

uA net movement arising from changes in fair value of investments
(excluding those that can be readily converted to cash) held at the year
end.

 Share premium The share premium account may be applied by the Company
in paying up unissued Shares to be allotted to Shareholders as fully
paid bonus Shares or in writing off the expenses of, or commission paid
on any issue of Shares.
Special reserve The special reserve was created by a reduction in the
share premium reserve by order of the High Court on 7 December 2005. It
can be used for the repurchase of the Company's Ordinary Shares. 

Capital redemption reserve The capital redemption reserve was
created with the amount that the share capital had been reduced,
equivalent to the
nominal value

 of the Shares repurchased for

cancellation
 (See: cancel)


CANCELLATION. Its general acceptation, is the act of crossing a writing; it is used sometimes to signify the manual operation of tearing or destroying the instrument itself. Hyde v. Hyde, 1 Eq. Cas. Abr. 409; Rob.
.

 Revenue reserve The revenue reserve represents the excess or deficit of
revenue income less expenses. The reserve can be utilised in the
distribution of dividends and the purchase of the Company's own
Shares.
New standards and interpretations not applied IASB and IFRIC have issued
and endorsed the following standards and interpretations, applicable to
the Company, which are not yet effective for the year ended 31 December
2012 and have therefore not been applied in preparing these Financial
Statements.
New/Revised International Financial        Issued            Effective
Reporting Standards                                          date for
                                                             annual
                                                             periods
                                                             beginning
on
                                                             or after
IFRS 7       Financial Instruments:        December 2011     1 January
             Disclosures                                     2013 (and
                                                             interim
             - Amendments enhancing                          periods
             disclosures about offsetting                    within
those
             of financial assets and                         periods)
             financial liabilities
IFRS 7       Financial Instruments:        December 2011     1 January
             Disclosures                                     2015 (or
                                                             otherwise
             - Amendments requiring                          when IFRS 9
             disclosures about the initial                   is first
             application of IFRS 9                           applied)
IFRS 9       Financial Instruments -       Original Issue    1 January
             Classification and            November 2009     2015
             measurement of financial                        (mandatory
             assets                                          application
                                                             date
amended
                                                             December
                                                             2011)
IFRS 9       Financial Instruments         Original issue    1 January
             - Accounting for financial    October 2010      2015
             liabilities and derecognition                   (mandatory
                                                             application
                                                             date
amended
                                                             December
                                                             2011)
IFRS 12      Disclosure of Interests in    Original issue    1 January
             Other Entities                May 2011          2013
             - Disclosure of information
             to evaluate the nature of,
             and risks associated with,
             interests in other entities
             and the effects of those
             interests on its financial
             position, financial
             performance and cash flows
IFRS 13      Fair Value Measurement        Original issue    1 January
             - Replaces the guidance on    May 2011          2013
             fair value measurement in
             existing IFRS accounting
             literature with a single
             standard
Revised International Accounting Standards Revised           Effective
                                                             date
IAS 1        Presentation of Financial     June 2011         1 July 2012
             Statements
             - Amendments to revise the
             way other comprehensive
             income is presented
IAS 32       Financial Instruments:        December 2011     1 January
             Presentation                                    2014
             - Amendments to application
             guidance on the offsetting of
             financial assets and
             financial liabilities 

The Directors do not anticipate that the initial adoption of the
above standards, amendments and interpretations will have a material
impact in future periods.

The Company will only adopt standards at the beginning of its
financial year, therefore any standards or interpretations with an
effective date after 1
January
 see month.
 2012 will not have been adopted.

1.5
Segmental
 /seg·men·tal/ ()
1. pertaining to or forming a segment or a product of division, especially into serially arranged or nearly equal parts.

2. undergoing segmentation.
 reporting

A segment is a distinguishable component of the Company that is
engaged in business activities from which it may earn revenues and
incur

 expenses for which
discrete

 financial information is available and whose
operating results are regularly
renewed
  
v. re·newed, re·new·ing, re·news

v.tr.
1. To make new or as if new again; restore:

2.
 and reviewed by the
Company’s decision makers.

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

 Information regarding the Company's reportable operating segments
is presented below.
31 December 2012                Listed     Private
                               equity/     equity/
                                 fixed       fixed
                                income      income
                      Total securities  securities Unallocated
                    US$'000    US$'000     US$'000
US$'000
Segment income and expenses
Investment income        69         10          59           -
Total gains/            908       (790)      1,698           - (losses)
on investments taken to profit or loss
Other losses            (14)         -           -         (14)
Finance income          241          -           -         241
Expenses               (921)         -           -        (921)
Total net return        283       (780)      1,757        (694) before
tax as per Statement of Comprehensive Income
31 December 2011                Listed     Private
                               equity/     equity/
                                 fixed       fixed
                                income      income
                      Total securities  securities Unallocated
                    US$'000    US$'000     US$'000
US$'000
Segment income and expenses
Investment income       267        143         122           2
Total (losses)/      (2,376)    (2,519)        143           - gains on
investments taken to profit or loss
Other losses            (19)         -           -         (19)
Finance income        2,167          -           -       2,167
Expenses               (986)         -           -        (986)
Total net return       (947)    (2,376)        265       1,164 before
tax as per Statement of Comprehensive Income
31 December 2012                Listed     Private
                               equity/     equity/
                                 fixed       fixed
                                income      income
                      Total securities  securities Unallocated
                    US$'000    US$'000     US$'000
US$'000
Segment assets
Investments at       20,198      2,186      18,012           - fair
value through profit or loss
Receivables              31          -          13          18
Cash and cash           189          -           -         189
equivalents
Total assets as      20,418      2,186      18,025         207 per
Statement of Financial Position
Segment liabilities
Payables               (180)         -           -        (180)
Total liabilities      (180)         -           -        (180) as per
Statement of Financial Position
Net assets           20,238      2,186      18,025          27
31 December 2011                Listed     Private
                               equity/     equity/
                                 fixed       fixed
                                income      income
                      Total securities  securities Unallocated
                    US$'000    US$'000     US$'000
US$'000
Segment assets
Investments at       20,056      3,742      16,314           - fair
value through profit or loss
Receivables              88          9          13          66
Cash and cash           196          -           -         196
equivalents
Total assets as      20,340      3,751      16,327         262 per
Statement of Financial Position
Segment liabilities
Payables               (149)         -           -        (149)
Warrants at fair       (241)         -           -        (241) value
Total liabilities      (390)         -           -        (390) as per
Statement of Financial Position
Net assets           19,950      3,751      16,327        (128)
All assets are allocated to reportable segments other than cash and
prepayments as these are not directly attributable to either segment.
All liabilities are unallocated to reportable segments as these are not
directly attributable to either segment.
The accounting policies of each reported segment are the same as those
for the Company as described in note 1. Segmental net return represents
the net return earned by each segment without allocation of expenses as
they are deemed to be expensed regardless of decisions made in
accordance with each investment segment and are incurred during the
normal course of the day to day running
of the Company.
2. Income                            Year        Year
                                    ended       ended
                              31 December 31 December
                                     2012        2011
                                  US$'000     US$'000
Investment income
Income from fixed income               67         257 securities
Overseas dividends                      2           8
Other interest                          -           2
                                       69         267
Total income comprises:
Dividends                               2           8
Interest                               67         259
                                       69         267
3. Investment management fee
                             Year ended              Year ended
                       31 December 2012        31 December 2011
                Revenue Capital   Total Revenue Capital   Total
                US$'000 US$'000 US$'000 US$'000
US$'000 US$'000
Basic fee           400       -     400     501       -     501
                    400       -     400     501       -     501
The basic investment management fee is calculated at the annual rate of
2 per cent of the Net Asset Value attributable to Shareholders of the
Company on the last business day of each calendar month. The basic
management fee accrues daily and is payable in arrears in respect of
each calendar month.
The Investment Manager is also entitled to a performance fee of 20 per
cent of the increase in the Net Asset Value of the Company (before
deduction of accruals in respect of performance fees, in respect of such
performance period) net of any issues and repurchases of Shares made by
the Company and after adding back any dividends paid by the Company over
the course of a performance period.
The first performance period began on the admission to listing and ended
on 31 December 2005 (there was no fee earned for this period). Each
subsequent performance period is a period of one year ending on 31
December in each year. The performance fee is 20 per cent of the
increase in the Net Asset Value of the Company (adjusted as above) since
the performance period in respect of which a performance fee was last
earned.
No performance fee was payable for either the year ended 31 December
2012 or 31 December 2011.
4. Other expenses                     Year        Year
                                     ended       ended
                               31 December 31 December
                                      2012        2011
                                   US$'000     US$'000
Secretarial services                   103          99
Auditor's remuneration:
- audit                                 61          48
- taxation services                     11          10
- other non-audit services               4           -
Directors' remuneration (see           151         151 note 5)
Legal and professional fees             23          22
Other expenses                         168         155
                                       521         485 

The Auditor’s
remuneration

 comprises audit fees of US$57,000
(2011: US$46,000), expenses of US$4,000 (2011: US$2,000) and fees for
taxation services of US$11,000 (2011: US$10,000.)

5. Directors’ remuneration

An analysis of Directors’ remuneration is shown in the
Directors’ Remuneration Report contained in the full Annual Report
and Financial Statements.

 6. Tax
                              Year ended              Year ended
                        31 December 2012        31 December 2011
                 Revenue Capital   Total Revenue Capital   Total
                 US$'000 US$'000 US$'000 US$'000
US$'000 US$'000
UK corporation         -       -       -       -       -       - tax at
an average rate of 24.5 per cent (2011: 26.5 per cent)
Overseas tax not       -       -       -       2       -       2
recoverable
                       -       -       -       2       -       2
The current taxation charge for the year is lower than the standard rate
of corporation tax in the UK of 26 per cent to 31 March 2012 and 24 per
cent from 1 April 2012 (2011: 28 per cent to 31 March 2011 and 26 per
cent from 1 April 2011). The differences are explained below.
                                 Year ended                 Year ended
                           31 December 2012           31 December 2011
                  Revenue  Capital    Total  Revenue  Capital    Total
                  US$'000  US$'000  US$'000  US$'000
US$'000  US$'000
Net return before    (852)     894       42    (719)   (2,395)  (3,114)
finance income and tax
Theoretical tax      (209)     219       10    (191)     (635)    (826)
at an average rate of UK corporation tax of 24.5 per cent (2011: 26.5
per cent)
Effects of:
- Overseas tax          -        -        -       2         -        2
not recoverable
- (Gains)/losses        -     (219)    (219)      -       728      728
on investments and exchange losses on capital items
- Unrelieved/         209        -      209      193      (93)     100
(relieved) expenses
- Overseas              -        -        -       (2)       -       (2)
dividends not taxable
Actual current          -        -        -        2        -        2
tax charge 

Factors that may affect future tax charges

 The Company intends to meet the conditions for approval as an
Investment Trust Company for the year ended 31 December 2012 and
therefore no deferred tax has been provided on capital gains and losses
arising on the revaluation or disposal of investments.
After claiming relief against accrued income taxable on receipt, the
Company has unrelieved losses of US$6,474,000 (2011: US$5,951,000). It
is unlikely that the Company will generate sufficient taxable profits in
the future to utilise these losses and therefore no deferred tax asset
has been recognised.
7. Return per Ordinary Share
                          Year ended                   Year ended
                       31 December 2012            31 December 2011
                           Weighted                    Weighted
                            average                     average
                             number                      number
                                 of                          of
                      Net  Ordinary Ordinary      Net  ordinary
Ordinary
                   return    Shares    Share   return    Shares
Share
                  US$'000      '000      US$  US$'000
'000       US$
Basicand diluted
Total return per      283     3,654   0.0775     (949)    4,496
(0.2111) Ordinary Share
Revenue return       (852)    3,654  (0.2332)    (721)    4,496
(0.1604) per Ordinary Share
Capital return      1,135     3,654   0.3107     (228)    4,496
(0.0507) per Ordinary Share 

The return per Ordinary Share is calculated based on the return for
the period of US$283,000 (2011: (US$949,000)) and 3,654,000 (2011:
4,496,000) Ordinary Shares, being the weighted average number of Shares
in issue for the year.

8. Dividend

The Company does not propose the payment of a dividend in respect of
the year ended 31 December 2012 (2011: nil).

9. Investments at fair value through profit or loss

                                               Year        Year
                                             ended       ended
                                       31 December 31 December
                                              2012        2011
                                           US$'000     US$'000
Investment portfolio summary
                                                           

Listed equity investments at fair value 2,186 2,854

Private equity investments at fair value 17,864 16,166

 Fixed income securities                        148       1,036
                                            20,198      20,056
                                              2012        2011
                          2012     2012      Total       Total
                        Listed  Private  portfolio   portfolio
                       US$'000  US$'000    US$'000
US$'000
Analysis of investment portfolio movements
Opening book cost       14,493   32,923     47,416      50,040
Opening investment     (10,751) (16,609)   (27,360)    (24,634) holding
losses
Opening valuation        3,742   16,314     20,056      25,406
Movements in the period:
Purchases at cost          574        -        574       6,367
Sales - proceeds        (1,340)       -     (1,340)     (9,341)
Sales - realised        (2,261)       -     (2,261)        350
(losses)/gains on sales
Movement in fair         1,471    1,698      3,169      (2,726) value
Closing valuation        2,186   18,012     20,198      20,056
Closing book cost       11,466   32,923     44,389      47,416
Closing investment      (9,280) (14,911)   (24,191)    (27,360) holding
losses
Closing valuation        2,186   18,012     20,198      20,056
                                               Year        Year
                                              ended       ended
                                        31 December 31 December
                                               2012        2011
                                            US$'000
US$'000
Analysis of capital gains/(losses)
Realised (losses)/gains on sales             (2,261)        350 

Movement in fair value of fixed income (392) (156) securities

 Movement in fair value of other               3,561      (2,570)
investments
Gains/(losses) on investments                   908      (2,376) 

A list of the portfolio holdings by their aggregate market value is
given in the portfolio valuation above.

Transaction costs
incidental

 to the acquisition of investments
totalled US$1,646 and to the disposal of investments totalled US$463 for
the year.

There were no material disposals of unlisted investments in the
year.

Material changes in the value of unlisted investments in the
year:

uA Food Master, ordinary shares value increased during the year to
US$7,928,000. The
carrying value

 at 31 December 2011 was
US$6,040,000.

The table below shows the detail of the private equity investments
with a value of greater than 3 per cent of the portfolio.

 As at 31 December 2012
                                                                                   Net assets/
                                                                                equity due to
                            Proportion                Turnover at    Net
profit  shareholders
                      Fair  of capital      Date of       date of    at 

date of at date of Net income

                   value at    owned at last audited  last audited  last

audited last audited recognised

               31 December 31 December    financial     financial
financial     financial      by the
                       2012        2012   statements    statements
statements    statements     Company
                   US$'000    per cent
US$'000       US$'000       US$'000     US$'000
Food Master          7,928        17.1         2011        30,872
4,685        21,844           - (Anthoreal Estates)
Vitalux (Chalsen     1,537        19.3         2011        21,616
(198)        2,853           - Trade)
Korsando             5,111        19.2         2011         1,135
(526)       35,810           -
PT Platinum Bank     3,288         4.8         2011        88,045
30,558        94,875           - Public shares
As at 31 December 2011
                            Proportion                Turnover at    Net
profit  shareholders
                      Fair  of capital      Date of       date of    at 

date of at date of Net income

                   value at    owned at last audited  last audited  last

audited last audited recognised

                31 December 31 December    financial     financial
financial     financial      by the
                      2012        2012   statements    statements
statements    statements     Company
                   US$'000    per cent
US$'000       US$'000       US$'000     US$'000
Food Master          6,040        17.1         2010        21,311
3,157        17,593           - (Anthoreal Estates)
Vitalux (Chalsen     1,786        19.3         2010        19,425
(558)        3,168           - Trade)
Korsando             5,111        19.2         2010         3,262
(703)       35,050           -
PT Platinum Bank     3,229         4.8         2010        34,080
11,730        82,984           - Public shares
10. Significant interests 

The Company had equity holdings of 3 per cent or more that are
material in the context of the Financial Statements in the following
companies’ securities:

 Name of                                 Equity         31 December 2012
investment                             holding          Percentage held
Food Master (Anthoreal Estates)   5,370 shares                     17.1
Vitalux (Chalsen Trade)           5,563 shares                     19.3
Korsando                         17,980 shares                     19.2
PT Platinum Bank Public shares  115,478 shares                      4.8
11. Other receivables
                                                      31 December  31
December
                                                             2012
2011
                                                          US$'000
US$'000
Accrued income                                                 13
22
Prepayments                                                    17
42
Taxation recoverable                                            1
24
                                                               31
88
12. Other payables
                                                     31 December   31
December
                                                            2012
2011
                                                         US$'000
US$'000
Audit fee                                                     58
49
Investment management fee                                     34
34
Accruals                                                      88
66
Other payables due within one year                           180
149
13. Warrants
Statement of Comprehensive Income
Year ended                      Year ended
                                                   31 December 2012
31 December 2011
                                       Revenue    Capital     Total
Revenue    Capital     Total
                                       US$'000    US$'000
US$'000    US$'000    US$'000   US$'000
Movement in fair value of                    -       (241)     (241)
-     (2,167)   (2,167) Warrants
                                                    31 December  31
December
                                                           2012
2011
                                                        US$'000
US'000 Statement of Financial Position - current liabilities
Warrants at fair value at 31 December 2011                  241        

2,408

 Movement in fair value of Warrants                         (241)      

(2,167)

 Warrants at fair value at 31 December 2012                    -

241

Fair value equates to the ask (cash) price of the Warrants. The
Company’s Warrants expired on 30 April 2012. As at 31 December 2011
the fair value was US$0.20 per Warrant.

 14. Called up share capital
                                                      31 December 31
December
                                                             2012
2011
                                                          US$'000
US$'000
Allotted, called up and fully paid:
4,554,381 (2011: 4,554,381) Ordinary Shares of                 46

46

 US$0.01 each 

The Company’s Warrants expired on 30 April 2012. As at 31
December 2011 the Company had 1,204,000 Warrants in issue.

The number of Ordinary Shares in issue at 31 December 2012 is
4,554,381 of which 900,000 are currently held in Treasury and 3,654,381
are in circulation.

Ordinary Shares in circulation carry one vote each on a poll.

15 Own Shares held in Treasury

During the year, the Company cancelled no Ordinary Shares from
Treasury.

 The Board had originally agreed the purchase of the Shares for capital
management reasons with a view to reducing the discount of the
Company's Net Asset Value.
                                                  Year ended  Year ended
                                                 31 December 31 December
                                                        2012        2011
                                                      Number      Number
                                                   of Shares   of Shares
Opening balance                                      900,000   1,109,291
Additions during the year                                  -           -
Cancelled during the year                                  -
(209,291)
Closing balance at 31 December                       900,000     900,000
Nominal value of own Shares held in Treasury        US$9,000    US$9,000
Per cent of issued share capital held                  19.76%
19.76% 

There were no purchases into Treasury during the year.

16. Issued capital and reserves attributable to Ordinary Shares

The issued capital and reserves attributable to Shareholders are
calculated in accordance with IAS 32 as follows:

                                                    31 December  31
December
                                                          2012
2011
                                                       US$'000
US$'000
Issued capital and reserves attributable to Ordinary    20,238
20,191 Shareholders prior to
Warrant dilution
Warrants at fair value (note 13)                             -         

(241)

Issued capital and reserves attributable to Ordinary    20,238
19,950
 Shareholders
                                                    31 December  31
December
                                                           2012
2011
                                                        US$'000
US$'000
They are represented by:
Share capital                                                46
46
Special reserve*                                         47,379
48,278
Capital redemption reserve                                   16
16
Capital reserve*                                        (29,758)
(30,652)
Share premium                                             6,494
5,349
Revenue reserve*                                         (3,939)
(3,087)
                                                                         

Issued capital and reserves attributable to Ordinary 20,238 19,950
Shareholders

* Distributable reserves (by way of dividend).

The basic Net Asset Value per Ordinary Share as calculated including
the Warrants at fair value is:

                                                      31 December 31
December
                                                            2012
2011
                                                             US$
US$
Basic Net Asset Value                                       5.54
5.46
As at 31 December 2011, the above method of calculation of the Net Asset
Value differed from the Net Asset Values per Ordinary Share which were
announced to the London Stock Exchange, as the latter did not take into
account the outstanding Warrants as at 31 December 2011 as a
preferential liability, before the remaining net assets were attributed
to Ordinary Shares, to reflect the fact that the Warrants would either
lapse or be converted to Ordinary Shares.
On this basis and for information only the Net Asset Value per Ordinary
share was as follows:
                                                     31 December 31
December
                                                            2012
2011
                                                             US$
US$ Basic and diluted Net Asset Value                           5.54

5.53

 The Net Asset Value per Ordinary Share is calculated on the net assets
attributable to Ordinary Shareholders of US$20,238,000 (2011:
US$20,191,000) and 3,654,681 (2011: 3,654,381) Ordinary Shares, being
the number of Shares in issue at 31 December 2012 excluding 900,000
Shares held in Treasury. 

There is no
dilution

.

17. Reconciliation of net cash flow to net funds

                                                            Year
Year
                                                          ended
ended
                                                    31 December  31
December
                                                           2012
2011
                                                        US$'000
US$'000
Opening net funds                                           196
983
Increase/(decrease) in cash and cash equivalents in           4
(784) year
                                                            200
199
Effects of exchange movements                               (11)
(3)
Closing net funds                                           189
196 

18. Capital commitments and
contingent

 liabilities

As at 31 December 2012, there were no contingent liabilities or
capital commitments.

19. Analysis of financial assets and liabilities

The Company's financial instruments comprise its investment
portfolio, cash balances, Warrants and debtors and creditors that arise
from its operations, for example, in respect of sales and purchases
awaiting settlement and debtors for accrued income. 

The Company finances its operations through its issued capital and
existing reserves.

The principal risks 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. 

The policies for managing these risks are summarised below and have
been applied throughout the year:

 Policy
(i) Credit risk 

Credit risk is the risk of financial loss to the Company if the
contractual party to a financial instrument fails to meet its
contractual obligations, and arises principally from the Company’s
fixed income securities.

 Where the Company makes an investment in a loan or other security with
credit risk, that risk is assessed and considered as part of the
investment decision making process by the Investment Manager. 

The Company seeks to manage credit risk by undertaking transactions
with
reputable
  
adj.
Having a good reputation; honorable.


repu·ta·bil
 
counterparties

 and also ensuring that transactions are
settled upon delivery. The receipt of fixed income interest is also
closely monitored.

 The Board reviews the values of the fixed income securities on a
regular basis using reports provided by the Investment Manager. In
addition, short-term flexibility can be achieved via the option to
borrow up to 30 per cent of the Company's net assets.
The carrying amount of fixed income securities, cash and other debtors
(not prepayments) represents the maximum credit exposure. Therefore, the
maximum exposure to credit risk at the year end date was US$350,000
which comprises US$148,000 (2011: US$1,036,000) being the total of the
carrying amount of fixed income securities, plus US$189,000 (2011:
US$196,000) being the carrying amount of cash. There were trade debtors
amounting to US$13,000 (2011: US$22,000).

None of the debtors due to the Company are considered to be past due
or
impaired

 (2011: nil).

(ii) Market price risk

In line with the investment policy, plus in order to limit exposure,
the Company would not normally invest more than 15 per cent in any one
company at the time of purchase.

Details of the Company’s investment portfolio as at 31 December
2012 are disclosed above.

The Company’s investment portfolio is exposed to market price
fluctuations which are monitored by the Investment Manager. Detailed
valuation reports from the Investment Manager are regularly sent to the
Board.

Private equity investments are not immediately sensitive to market
moves. However, over the medium/long term, the valuation techniques
applied to certain private equity investments will be affected by
significant changes in the listed equity markets.

Fixed income securities are mostly exposed to general changes in
interest rates: when interest rates go up, bond prices go down and
vice
versa

.

Listed equity positions in Ukraine may be exposed to general market
moves (refer to liquidity risk).

A significant proportion of the Company’s portfolio is invested
in overseas securities and movements in foreign currencies can affect
their value (refer to foreign currency risk).

The Directors are conscious of the fact that the nature of
investments are such that prices can be
volatile

. Investors should be
aware that the Company is exposed to a higher rate of risk than exists
within a fund which holds traditional blue-chip securities.

Private equity investments in the portfolio have been valued
following the IPEVC Valuation Guidelines applied include cost of
additional investments, net assets, market value of underlying assets,
sales multiples, and earnings multiples. The Manager pays due
consideration to the liquidity of the holding when assessing the fair
value of the security. An indication of how each investment may be
affected by a 10 per cent movement in valuation is illustrated in the
table below. In the case of quoted investments, the price is sourced
from the stock exchange in which it is traded.
 Private equity investment               Sensitivity analysis
                                       Resultant   Resultant
                                       valuation   valuation
                                       after 10%   after 10%
                                     increase in decrease in
                           2012 fair        2012        2012   2011 fair
                               value   valuation   valuation       value
                             US$'000     US$'000
US$'000     US$'000
Food Master (Anthoreal         7,928       8,721       7,135       6,040
Estates) Vitalux (Chalsen Trade)        1,537       1,691       1,383
1,786
Korsando                       5,111       5,622       4,600       5,111
PT Platinum Bank Public        3,288       3,617       2,959       3,229
shares
Private equity valuation      17,864      19,651      16,077      16,166

The valuation techniques applied are based on the following
assumptions:

 For Vitalux (Chalsen Trade) and Food Master (Anthoreal Estates), the
valuations are based on comparable multiples (deemed an appropriate
assumption in relation to the economic environment that the companies
operate in) plus the application of a 30 per cent marketability discount
to reflect minority position.
For Korsando, the valuation is based on the valuation of their land at
US$3.7/mU plus a 5 per cent residential markup provided by an
independent valuation carried out by CB Richard Ellis in December 2011. 

For PT
Platinum
 , metallic chemical element; symbol Pt; at. no. 78; at. wt. 195.08; m.p. 1,772&degC;; b.p. 3,827±100&degC;; sp. gr. 21.45 at 20&degC;; valence +2 or +4.
 Bank Public shares, the valuation is based on 0.6x

October
 see month.
 2012 net asset book value.

Adherence to the investment objectives and the limits on
investment set by the Company mitigates the risk of excessive exposure
to any one particular type of security or issuer.
 If the investment portfolio valuation fell by 10 per cent from the 31
December 2012 valuation with all other variables held constant there
would have been a reduction of US$2,020,000 (2011: US$2,006,000 ) in the
return before taxation. An increase of 10 per cent in the investment
portfolio valuation would have had an equal and opposite effect in the
return before taxation. 

(iii) Interest rate risk

The Company holds fixed income securities (intended to provide
liquidity) and is therefore subject to interest rate risk.

The Board sets an overall investment strategy and also has limits
within the investment portfolio which aim to spread the portfolio
investments and to reduce the impact of interest rate risk on the
valuations.

The Company’s fixed income securities are held over a medium to
long term period and pay a fixed rate of interest which does not
fluctuate with the market.

The Company has the option to
borrow

 funds and hedge currency, but
currently chooses not to, therefore limiting exposure to interest rate
risk.

Details of the Company’s interest rate exposure as at 31
December 2012 is disclosed below.

 If the average coupon from fixed income securities and the bank
interest rates held as at 31 December 2012 had been 1 per cent lower
throughout the year, with all other variables held constant, income
before taxation would have been lower by US$23,000 (2011: US$28,000). If
coupon and interest rates had been higher throughout the year by 1 per
cent income before taxation would have been higher by US$25,000 (2011:
US$30,000). The calculations are based on funds invested in fixed income
securities and cash deposits as at 31 December 2012 and are not
representative of the year as a whole. 

(iv) Liquidity risk

 The Company invests in securities that are not listed or admitted to
trading upon any recognised stock exchange and as a consequence such
securities may not be readily tradable. Private equity investments are
expected to have an average holding period of approximately five to
seven years. Listed equities in Ukraine are often not liquid and the
free float may be placed in the hands of very few investors. 

At 31 December 2012, the Company held
approximately
  
adj.
1. Almost exact or correct:

2.
 1 per cent
(2011: 5 per cent) of its investments in fixed income securities and
convertible loans, intended to provide liquidity on short notice for
purchasing equities or to be converted into Shares.

The Company’s policy is to continue to hold fixed income
securities to maintain this flexibility.

The Company also assesses the
creditworthiness

 of its
receivables

 regularly to ensure they are neither past due or impaired.

The Company maintains appropriate levels of cash in order to finance
its operations.

Liquidity risk is
mitigated
  
v. mit·i·gat·ed, mit·i·gat·ing, mit·i·gates

v.tr.
To moderate (a quality or condition) in force or intensity; alleviate. See Synonyms at relieve.

v.intr.
To become milder.
 by the fact that as a closed end fund,
assets will not need to be liquidated to meet redemptions.

(v) Political risk

The Ukrainian political situation is under constant observation by
both the Investment Manager and the Board. It is commented upon in the
Chairman’s Statement and in the Investment Manager’s Report
above. There are political risks in respect of the Company’s
investments which are greater than those which exist in countries which
have a longer established political system.

(vi) Foreign currency risk

The Company invests primarily in USD, UAH,
EUR

, GBP and PLN equities
and fixed income securities and is therefore subject to foreign currency
risk.

 The functional and presentational currency of the Company is US dollars
(USD) and, therefore, the principal exposure to foreign currency risk
comprises investments priced in other currencies, principally the Euro
(EUR), Sterling (GBP), the Ukrainian Hryvnia (UAH) and the Polish Zloty
(PLN). The Investment Manager monitors the exposure to foreign
currencies on a daily basis and reports to the Board on a regular basis.
The Investment Manager measures the risk of the foreign currency
exposure by considering the effect on the Net Asset Value and income of
a movement in the rates of exchange to which the Company's assets,
liabilities, income and expenses are exposed. 

The Company does not use financial instruments to
mitigate

v.
To moderate in force or intensity.


miti·gation n.
 the
currency exposure in the period between the time that income is included
in the Financial Statements and is converted into USD. The Company may
hold cash balances in USD, UAH and GBP. Shareholders investing in the
Company’s Shares are exposed to currency fluctuations between these
currencies.

The interest rate and currency cash flow profile of the
Company’s financial assets and liabilities at 31 December 2012
was:

 Financial assets
                             No  Floating     Fixed
                       interest  interest  interest
                      rate risk rate risk rate risk Maturity Maturity
Maturity Maturity
                      financial financial financial   within      2-3
3-5       5+
                Total    assets    assets    assets one year    years
years    years
              US$'000   US$'000   US$'000   US$'000
US$'000  US$'000  US$'000  US$'000
USD
Equities       17,864    17,864         -         -
Fixed income      148         -         -       148        -        -
-      148 securities and convertible loans*
Cash              155         -       155         -
               18,167    17,864       155       148
UAH Equities    1,441     1,441         -         -
GBP
Equities          567       567         -         -
Cash               34         -        34         -
                  601       567        34         -
PLN Equities      178       178         -         -
               20,387    20,050       189       148
Financial liabilities
USD
Warrants*           -         -         -         -        -        -
-        -
                    -         -         -         -
Interest rate
sensitivity    20,387    20,050       189       148 gap 

* The contractual maturity dates of the fixed income securities are
shown in the portfolio valuation above.

Of all the financial assets, only fixed income securities and
convertible loans have a contracted maturity date.

The interest rate and currency cash flow profile of the
Company’s financial assets and liabilities at 31 December 2011
was:

 Financial assets
                             No  Floating     Fixed
                       interest  interest  interest
                      rate risk rate risk rate risk Maturity Maturity
Maturity Maturity
                      financial financial financial   within      2-3
3-5       5+
                Total    assets    assets    assets one year    years
years    years
              US$'000   US$'000   US$'000   US$'000
US$'000  US$'000  US$'000  US$'000
USD
Equities       16,268    16,268         -         -
Fixed income    1,036         -         -     1,036      888        -
-      148 securities and convertible loans**
Cash              163         -       163         -
               17,467    16,268       163     1,036
UAH
Equities          993       993         -         -
Cash                9         -         9         -
                1,002       993         9         -
GBP
Equities          742       742         -         -
Cash               24         -        24         -
                  766       742        24         -
EUR Equities      863       863         -         -
PLN Equities      154       154         -         -
               20,252    19,020       196     1,036
Financial liabilities
USD
Warrants*        (241)     (241)        -         -      (241)        -
-        -
                 (241)     (241)        -         -
Interest rate
sensitivity    20,011    18,779       196     1,036 gap 

* Warrant holders had the option to convert in April of each year,
until 2012.

** The contractual maturity dates of the fixed income securities are
shown in the portfolio valuation above.

Of all the financial assets, only fixed income securities and
convertible loans have a contracted maturity date.

Fair values of financial assets and financial liabilities

All of the financial assets and liabilities of the Company are held
at fair value. For investments actively traded in organised financial
markets, fair value is generally determined by reference to quoted
market bid prices.

Fair value
hierarchy
 see ministry and orders, holy.


A structure that has a predetermined ordering from high to low. For example, all files and folders on the hard disk are organized in a hierarchy (see Win Folder organization).
 disclosures

The Company has adopted the amendment to IFRS 7, effective 1 January
2009. This requires the Company to
classify
  
tr.v. clas·si·fied, clas·si·fy·ing, clas·si·fies
1. To arrange or organize according to class or category.

2. To designate (a document, for example) as confidential, secret, or top secret.
 fair value measurements
using a fair value hierarchy that reflects the significance of the
inputs used in making the measurements. The fair value hierarchy
consists of the following three levels:

uA Level 1 – Quoted prices (unadjusted) in active markets for
identical assets or liabilities.

 An active market is a market in which transactions for the asset or
liability occur with sufficient frequency and volume on an ongoing basis
such that quoted prices reflect prices at which an orderly transaction
would take place between market participants at the measurement date.
Quoted prices provided by external pricing services, brokers and vendors
are included in level 1 if they reflect actual and regularly occurring
market transactions on an arm's length basis.
uA Level 2 - Inputs other than quoted prices included within level 1
that are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices). 

Level 2 inputs include the following:

* Quoted prices for similar (i.e. not identical) assets in active
markets.

 * Quoted prices for identical or similar assets or liabilities in
markets that are not active. Characteristics of an inactive market
include a significant decline in the volume and level of trading
activity, the available prices vary significantly over time or among
market participants or the prices are not current. 

* Inputs other than quoted prices that are observable for the asset
(for example, interest rates and yield curves observable at commonly
quoted intervals).

* Inputs that are derived principally from, or
corroborated
  
tr.v. cor·rob·o·rat·ed, cor·rob·o·rat·ing, cor·rob·o·rates
To strengthen or support with other evidence; make more certain. See Synonyms at confirm.
 by,
observable market data by
correlation

 or other means
(market-corroborated inputs).

uA Level 3 – Inputs for the asset or liability that are not based on
observable market data (unobservable inputs).

 The level in the fair value hierarchy within which the fair value
measurement is categorised in its entirety is determined on the basis of
the lowest level input that is significant to the fair value measurement
in its entirety. For this purpose, the significance of an input is
assessed against the fair value measurement in its entirety. If a fair
value measurement uses observable inputs that require significant
adjustment based on unobservable inputs, that measurement is a level 3
measurement. Assessing the significance of a particular input to the
fair value measurement in its entirety requires judgement, considering
factors specific to the asset or liability.
The determination of what constitutes 'observable' requires
significant judgement by the Company. The Company considers observable
data to investments actively traded in organised financial markets. Fair
value is generally determined by reference to Stock Exchange quoted
market bid prices at the close of business at the year end date, without
adjustment for transaction costs necessary to realise the asset. 

The table below sets out fair value measurements of financial assets
and liabilities in accordance with the IFRS fair value hierarchy
system:

 Financial assets at fair value through profit or loss at
Total    Level 1   Level 2 Level 3 31 December 2012
US$'000    US$'000   US$'000 US$'000
Equity investments                      20,050      1,316       870
17,864
Fixed income securities                    148          -         -
148
Total                                   20,198      1,316       870
18,012
Financial assets at fair value through profit or loss at
Total    Level 1   level 2 Level 3 31 December 2011
US$'000    US$'000   US$'000 US$'000
Equity investments                      19,020      1,605     1,249
16,166
Fixed income securities                  1,036          -       888
148
Total                                   20,056      1,605     2,137
16,314
Financial liabilitiesat fair value through profit or loss at
Total    Level 1   Level 2 Level 3
31 December 2011                       US$'000    US$'000
US$'000 US$'000
Warrants                                   241          -       241
-
Total                                      241          -       241
-
There are no other financial assets or liabilities other than those
disclosed above. Receivables consist purely of accrued income and
prepayments and payables consist purely of accruals and are not restated
at fair value. Cash is also not restated at fair value. Investments
whose values are based on quoted market prices in active markets, and
therefore classified within level 1, include active listed equities. The
Company does not adjust the quoted price for these instruments.
Financial instruments that trade in markets that are not considered to
be active but are valued based on quoted market prices, dealer
quotations or alternative pricing sources supported by observable inputs
are classified within level 2. As level 2 investments include positions
that are not traded in active markets and/or are subject to transfer
restrictions, valuations may be adjusted to reflect illiquidity and/or
non-transferability, which are generally based on available market
information.
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 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 IPEVC Valuation Guidelines.
New investments are initially carried at cost, for a limited period,
being the price of the most recent investment in the investee. This is
in accordance with IPEVC Valuation Guidelines as the cost of recent
investments will generally provide a good indication of fair value. Fair
value is the amount for which an asset could be exchanged between
knowledgeable, willing parties in an arm's length transaction. 

There were no transfers between levels for the year ended 31
December 2012 for the financial assets.

 The following table presents the movement in level 3 instruments for
the year ended 31 December 2012:
                                           Fair value       Equity Fixed
income
                                                Total  investments
investments
                                              US$'000
US$'000      US$'000
Opening fair value                             16,314       16,166
148
Purchases                                           -            -
-
Sales - proceeds                                    -            -
-
Total gains for the year included in the        1,698        1,698
  - Statement of Comprehensive Income
Closing fair value                             18,012       17,864
148
The following table presents the movement in level 3 instruments for the
year ended 31 December 2011:
                                                Fair
Fixed
                                               value       Equity
income
                                               Total  investments
investments
                                             US$'000
US$'000      US$'000
Opening fair value                            16,668       15,789
879
Purchases                                      3,970          926
3,044
Sales - proceeds                              (4,348)        (590)
(3,758)
Total gains/(losses) for the year included        24           41
(17) in the Statement of Comprehensive Income
Closing fair value                            16,314       16,166
148 

Although the Company believes that its estimates of fair values are
appropriate, the use of different methodologies or assumptions could
lead to different measurements of fair values. The table below shows how
certain different assumptions would have affected the valuation of the
level 3 investments as at 31 December 2012.

                          2012              Using   Forecast   Alternate
Varying    Resulting
                   Fair value    Cost  multiples     EBITDA       yield
multiples     variance
                      US$'000 US$'000    US$'000
US$'000     US$'000    US$'000      US$'000
Vitalux (Chalsen        1,537       -      1,756**         -           -
-          219 Trade)
Food Master             7,928       -          -      8,785****
-          -          857 (Anthoreal Estates)
PT Platinum Bank        3,288       -          -          -           -
3,410******       122 Public shares
Korsando                5,111   6,596***         -          -
-          -        1,485
Bank Nadra 2.5 per        148       -          -          -         210*
-           62 cent 10 April 2018
                       18,012   6,596      1,756      8,785         210
3,410        2,745
** using forecast sales including 20 per cent marketability discount.
**** using forecast sales for 2012 and EBITDA margin. ****** 0.60x
November 2012 book value. *** land valued at cost. * using Bank Nadra
EuroBond yield with a non-tradeability discount. 

Capital management policies

 The Company's capital management objectives are to ensure that it
will be able to continue as a going concern and to maximise the income
and capital return to its equity Shareholders through an appropriate
balance of equity capital and "debt".
The Board with the assistance of the Investment Manager monitors and
reviews the broad structure of the Company's capital on an ongoing
basis. This review includes: 

uA The Investment Manager’s view of the market;

 uA A review of the Shareholders' funds, which takes account of the
difference between the Net Asset Value per share and the share price
(i.e. the level of share price discount or premium); 

uA The need for any potential new issues of equity shares; and

uA The extent to which revenue in excess of that which is required
to be distributed should be retained.

The Company’s objectives, policies and processes for managing
capital are detailed within the introduction of this report, and are
unchanged from the prior period.

20. Related party transactions

FPP

FPP First Person Perspective
FPP Floating Point Processor
FPP Focal Plane Package
 Asset Management
LLP

, the Investment Manager, is a related
party.

The total investment management charge payable to FPP Asset
Management LLP in the Statement of Comprehensive Income for the year was
US$400,000 (2011: US$501,000) of which US$34,000 (2011: US$34,000) was
outstanding at 31 December 2012. No investment management performance
fee was due to FPP Asset Management LLP for the year ended 31 December
2012 (2011: nil) (see notes 3 and 12). 

There are no transactions or payments to the Directors other than
the remuneration of US$151,000 as detailed in the Directors’
Remuneration Report on page 22 of the full Annual Report.

ANNUAL GENERAL MEETING

 The Company's Annual General Meeting will be held at the offices
of FPP Asset Management LLP, 34 Brook Street, London W1K 5DN on
Wednesday, 15 May 2013 at 2:00 pm. 

The Notice of this Meeting can be found via the Company’s
website at www.ukrotrust.co.uk or by contacting the Company Secretary on
01392 412122.

NATIONAL STORAGE MECHANISM

 A copy of the Annual Report and Financial Statements will be submitted
shortly to the National Storage Mechanism ("NSM") and will be
available for inspection at the NSM, which is situated at:
www.morningstar.co.uk/uk/nsm
Neither the contents of the Company's website nor the contents of
any website accessible from hyperlinks on the Company's website (or
any other website) is incorporated into, or forms part of, this
announcement.