Fusion Antibody Regulatory News (FAB)

28 Sep 2007 10:27

Fabian Romania Limited28 September 2007 28 September 2007 Fabian Romania Limited (FAB.LN) Interim results for the six months ended 30 June 2007 Fabian Romania Limited, the AIM quoted dedicated Romanian real estate investorannounces its unaudited interim results for the six months ended 30 June 2007. Highlights • Net Asset Value per share of the Company of €1.548. An increase of 14 per cent. over the €1.356 as at 31 December 2006, as determined in accordance with its Articles of Association. • Nine investments executed or committed, totalling 62,850 square metres (" sqm") of lettable office space in Bucharest together with 443 residential apartments (Fabian's proportional share). • Lakeview building consent granted and area increased. Post the period end the Lakeview office joint venture development with AIG/Lincoln received its full consents and the scheme is now estimated to have a net lettable office area of 24,100 sqm and 427 parking spaces, above the investment manager's initial expectations. • New Town strong forward sales and under construction at fixed price contract. The construction contract has been agreed with Mivan Kier for the Group's New Town residential scheme. Sales commenced in July with a first release of 119 apartments. To date, 124 apartments have been reserved comprising nearly all of the first release and a number from an initial 50 of the second release now for sale. • Two investments committing a total of €24.9 million were executed during the half year. The Group's share of the market valuations of these investments (before deferred income tax liabilities) was €30.6 million at 30 June 2007 before deducting the outstanding non-recourse bank financing of €15.0 million. On gross assets, this represents an uplift of 23 per cent. from the original investment. • Three further investments announced, committing approximately €22 million in aggregate, which will equate to approximately €15 million in equity post debt drawdown; these investments are not included in the 30 June 2007 valuation. • These five investments are expected to require around €21million of equity (after refinancing). As at 30 June 2007, the Directors estimate the Group has approximately €17 million left to invest. • Further yield convergence for the Group's fully let office buildings to 7.0 and 7.1 per cent. as at 30 June 2007. • The investment manager believes office market rents in Bucharest have increased by approximately €2 sqm/month apparent by the end of June. Contacts: Fabian Romania Property Fund LimitedJaroslav Kinach Tel: +44 20 7499 9988 Fabian Capital LimitedMark Holdsworth Tel: +44 20 7499 9988 Shore Capital - Broker to FabianDru Danford Tel: +44 20 7408 4090 Deloitte Corporate Finance - Nominated Adviser to FabianJonathan Hinton Tel: +44 20 7936 3000 Chairman's Statement It gives me great pleasure to report Fabian Romania's first set of interimresults as an AIM listed company. During this period, considerable progress was made in converting five deals fromthe strong pipeline. These announced transactions commit around €21 million ofthe December 2006 equity fundraising proceeds. The Net Asset Value per share (determined in accordance with the Articles ofAssociation) rose a very healthy 14 per cent. to €1.548 in the first six monthsof 2007. We are pleased to report the positive progress of the two development sitesacquired in 2006, with New Town now well into both construction and sales andLakeview now fully permitted and set to begin construction early in the 2008. The Banu Antonache and Cascades buildings remain fully let and their valuationshave outperformed our expectations, benefiting from the tight office market inBucharest, as did the Baneasa Business Center acquired at the end of the period. Cash balances of around €29 million as at 30 June 2007 provide us withsignificant scope for further investments and approaching €17 million of equityto allocate after allowing for existing commitments. We have a very strong and capable management team and are taking advantage ofour growing experience and market reputation to capitalise on opportunities inthe exciting Romanian real estate market. We look forward with confidence to creating further value for shareholdersthrough the portfolio of existing investments and the attractive pipeline. Jaroslav KinachChairmanFabian Romania Limited Investment Manager's Report to Fabian Romania To the shareholders of Fabian Romania, Fabian Romania Limited, the AIM quoted dedicated Romanian real estate investorannounces its Net Asset Value ("NAV") per share (determined in accordance withthe Articles of Association) as at 30 June 2007 was €1.548 per share. Thisrepresents a rise of 14 per cent. from the 31 December 2006 NAV of €1.356 pershare. The NAV per share calculated under IFRS, before any disclosedadjustments, was up almost 5 per cent. to €1.245 in the first six months of2007. Fabian Romania ("Fabian", "Fabian Romania" or the "Company", together with allits subsidiaries and joint ventures the "Group") invests in the Romanian realestate market seeking attractive absolute returns for shareholders. Theinvestment strategy of the Group is to purchase both income producing officebuildings and retail freeholds as well as to seek further co-investmentdevelopment projects in the office, retail and residential sub-sectors of themarket. To date Group investments made and announced have numbered nine, eightin the Bucharest area and one in Timisaora, with collectively a proportionalshare in 62,850 sqm of net lettable office space and 443 apartments. The Company is reviewing matters which may assist it in addressing the currentshare price which is trading at a discount to NAV per share. Property Portfolio announced at 30 June 2007 Share- NLA Properties Description Location holding Sqm Status 2006 investmentsBanu Office investment Floreasca 100% 4,400 Fully letCascades Office investment Buzesti 100% 4,300 Fully letNew Town Residential development JV Dristorului 50% 72,000 Selling & in constructionLakeview * Office development JV Barbu Vacarescu 50% 24,100 Building permit received 2007 investmentsTimisoara ** Residential development JV Timisoara 50% 35,000 Land acquiredBaneasa Center Office investment Bucaresti-Ploiesti 100% 9,600 Fully letCubic *** Office forward purchase Pipera 100% 27,000 Under construction 2007 announcedEvocenter Office investment Pipera 100% 3,000 50% pre-let & occupiedRomana * Office development Dacia Blvd 100% 2,500 Building permit received Proportional sub-totalsOffice space 62,850Residential area 53,500 Note: * Building permit received since 30 June 2007 **Land and Net Lettable Area ("NLA") sqm increased since 30 June 2007 *** Closed since 30 June 2007, shareholding represents final commitment Developments The Company started the period having raised €38.1 million net of expensespursuant to its listing on the AIM market on 15 December 2006. The other assetsof the company at the start of the period comprised the four core investmentsacquired during 2006. The first half of the year has been highly activeinvolving negotiations with vendors, extensive due diligence on a large numberof potential investments and five new acquisitions either closed or agreed. Inaddition, much further work was undertaken negotiating leasing contracts,publishing the 2006 annual reports and accounts and arranging financing. Fabianannounced and completed the acquisition of both the Baneasa Business Center anda 50 per cent. stake in a residential land plot in the City of Timisoara. TheCompany also announced that it had entered into agreements to: acquire a plot ofland in central Bucharest for a turn-key office building, purchase the Evocentreoffice building in North Bucharest and to forward purchase the Cubic Centeroffice building in the Pipera district of Bucharest once completed. Post June, afixed price contract was agreed with Mivan Kier for the New Town residentialdevelopment. The sales launch occurred in July. The Lakeview office developmentjoint venture with AIG/Lincoln achieved final building consent in earlySeptember. The major highlights for the Company during the period are asfollows. Sales update at New Town During the first half of 2007, much time was committed to working with theCompany's joint venture partner, Mivan Ltd, to secure a fixed price contractwith Mivan Kier Ltd for the construction of the New Town residential scheme. NewTown is a scheme of 72,000 sqm above ground involving the construction of 636apartments targeted at Bucharest's emerging middle class. The scheme was grantedfinal building consent at the start of April 2007. Subsequently, the Companyannounced in July 2007 that its joint venture development company, Phoenix ParkSRL, has agreed a fixed price build contract with Mivan Kier. In tandem with the discussions with Mivan Kier, the finishing touches werebeing put in place with Mivan for the sales launch. A sales and marketing suitewas created by Mivan in central Bucharest and a full launch started in mid July2007. The first release comprised 119 apartments with an average selling priceof €1,219 per sqm followed by the first 50 apartments from the second release,priced 10 per cent. higher. To date, 124 apartments have now been reserved withparking. City wide newspaper and radio advertising has been taken to supportthe releases and sales are going well. DTZ Echinox ("DTZ"), the Company's valuers, have given a land valuation, as at30 June 2007, of €27.9 million of which 50 per cent. is owned by Fabian. TheCompany currently forecasts project completion to be achieved by the end of2009. Building consent granted at Lake View Since 30 June 2007, the Company is pleased to announce that building consent hasbeen granted for the Lakeview co-investment office development project with AIG/Lincoln. This was the last planning hurdle before detailed constructiontendering could commence. The consent allows for a building of 26,125 sqm aboveground with a net lettable area of 24,100 sqm. The amount of net lettable officespace is higher than the investment manager initially expected. The below groundconstructed area is estimated to be approximately 14,875 sqm includingapproximately 427 parking spaces. Ground works are expected to commence in thefirst quarter next year with completion of the project estimated to be duringthe third quarter of 2009. The Company's share of the land valuation within the NAV remains the same as at31 December 2006 of some €8.3 million. This figure was itself unchanged from thecalculation last conducted on the 30 September 2006. For the NAV calculation forthe quarter ending 30 September 2007, DTZ will be asked to reappraise the valueof the scheme in light of the building consent now achieved and marketdevelopments in general. The Baneasa Business Center On 18 June 2007, the Company was pleased to announce that it had entered into anagreement to purchase the Baneasa Business Center office building from theAustrian developer Immoconsult Leasinggesellschaft m.b.H. The transaction valuewas €23.9 million. As at 30 June 2007, the building was valued by DTZ at €27.6million. This represents a satisfactory gain of 15 per cent. over the purchaseprice agreed in late 2006. The building is a Class A office building comprising 9,600 sqm of net lettablearea. It is located in the rapidly emerging office district of North Bucharest.The building hosts a range of multinational tenants including Wrigley, Colgate,Fresenius, Cargill and Volksbank thereby meeting the targeted tenant profile ofthe Company. The average lease length is around three years with a variety ofreversionary leases at rents between €12 per sqm/month to €16 per sqm/month. The acquisition gives the Group further exposure to a high quality officebuilding located in the heart of the emerging business district of NorthBucharest. The investment manager believes there is rising demand for space byboth existing multinational tenants seeking to expand and new multinationaltenants entering Romania. The investment manager is confident that as leasescome up for renewal, upward revisions in rents per square metre per month areachievable. The gain in the value of the property of some €3.7 million can be explained bytwo factors. Firstly, the purchase yield used for the acquisition withImmoconsult was 7.74 per cent. negotiated in the second half of last year. DTZused an up to date market yield of 7.1 per cent. as at 30 June 2007. On rents of€1.85 million per annum at the time the commercial terms with Immoconsult werefirst agreed, yield convergence from 7.74 per cent to 7.1 per cent has equatedto a gain of some €2.2 million. Secondly, since the commercial terms wereagreed, rents benefited from indexation to Eurozone inflation from 1 January2007. The investment manager was able to secure for the Group's benefit, thevalue of this indexation as well as other rental increases. Annualised rentalincome as at 30 June 2007 amounted to €1.96 million per annum a gain of€110,000. Capitalised, this increase in rents delivered a further €1.5 millionof value. Since the half year end, the Group has drawn down on a debt facility withInvestkredit Bank AG to increase total borrowings secured against Baneasa toalmost €19.7 million at an interest rate of 6.28 per cent. fixed for threeyears. This has resulted in a net equity in the company of approximately €4.2million pre-revaluation. With a gain of €3.7 million since acquisition, theGroup will have achieved a highly satisfactory pro forma return on equityinvested of 88 per cent.. Timisoara On 25 June 2007, the Company purchased a 50 per cent. interest in a residentialdevelopment site to build 250 apartments in Timisoara for €4.7 million. Theacquisition is structured through a development company that owns a 1.1 hectaresite in north Timisoara. The equity consideration amounts to approximately €1million. The land has urban zoning approval to build over 250 apartments(subject to building permits) comprising over 30,000 sqm of residentialdevelopment space. Coltex, the co-shareholder holding the other 50 per cent.interest, has entered into a partnership agreement with Fabian. Coltex will alsobe the development manager and has a known track record, having developed andsold the successful Banu Antonache office building to the Group in late 2005. Since the end of the period, a neighbouring plot of 1,820 sqm was purchased bythe joint venture for €819k. This will allow a combined total of 35,000 sqmapproximately of residential development above ground, subject to planningapproval and building consents. The purchase price for both land plots includingacquisition expenses was approximately €5.7 million. This equates to around €445per sqm for the land and €166 per built sqm over ground, assuming 35,000 sqm.The development company has already secured and fully drawdown on a land financefacility from Banca Romanesca for €3.6 million. Including near term workingcapital needs, this leaves an initial net equity requirement of approximately €1million for Fabian. The acquisition is the Group's first purchase outside Bucharest. It gives Fabianfurther exposure to the rising residential sector as well as to Timisoara. TheCity is Romania's third largest city with a population of over 300,000 and islocated in the West close to the Hungarian border. The area is the focus of alarge amount of foreign direct investment in the manufacturing industry,particularly from German and Italian companies. The investment manager believesthe city has attractive characteristics for supply of modern residentialapartments. The land valuation for the initial plot of 1.1 hectares as at 30 June 2007 is€5.9 million of which 50 per cent. is owned by Fabian. This represents a gainex-acquisition costs of some €1.2 million or 26 per cent.. The Company forecaststhe development to be completed by the end of 2010. Cubic Center On 30 April 2007, the Company announced that it had entered into an agreement topurchase at practical completion the Cubic Center office building in the Piperadistrict of North Bucharest. The building will be a Class A office building witha gross area of approximately 44,000 sqm, located in north Bucharest. Thebuilding is being developed by Kendama, an experienced local developer inRomania. Construction has commenced and completion is anticipated in the secondquarter of 2009. Upon completion, the building will provide a net lettableoffice area of 26,000 sqm over 12 floors, together with 533 car spaces. Thebuilding is located in a prominent location in the Pipera district and is likelyto attract international tenants seeking Class A office space. The Group, post the period end, paid a first instalment of €12.25 million uponthe developer securing full construction finance and building consent. Atpractical completion of the building by the developer, the Group will pay thefinal instalment based upon a forward purchase yield of 7.4 per cent. to 7.8 percent. applied to rents achieved. Based upon current rental estimates, the totalvalue of the transaction is estimated to be approximately €60 million. The totalequity requirement for the Group is estimated to be €12 million. The agreement to forward purchase the Cubic Center office building gives theCompany exposure to a Class A office building in the Pipera district ofBucharest secured at an attractive yield. Kendama is responsible for findingtenants, managing the general contractor and financing the project therebyminimising the Group's exposure to development risk. EvoCenter On 4 June 2007, the Company announced that it had reached agreement to purchasethe Evocenter office building in the Pipera / Voluntari district of Bucharestfor a forecast yield of 9 per cent.. The Group had initially proposed topurchase the building empty, thereby taking the letting risk. However, duringthe due diligence process, the Adama Group from Israel, the developer, signed alease taking half of the available space. Post the period end, they have takenadditional space leaving just the ground floor and mezzanine to be rented. Thebuilding will be completed in summer 2007 to a Class A standard and comprises3,000 sqm of net lettable area, 18 covered car parking spaces and ancillaryparking close by. The Group will meet the consideration of €4.9 million from itsown resources. Debt drawdown is anticipated to be shortly after closing whichwill reduce the ongoing equity requirement to around €1 million. Although the transaction size, involving around €1 million of equity, wouldnormally be too small for Fabian Romania, we decided to pursue the acquisitionfor the Group due to the prospective yield on offer. As with the Banu Antonacheacquisition, the Group is taking letting risk. This enables the Group topurchase modern buildings at a more attractive price as a compensation for therisk. However, as current vacancy rates in the City are sub 3 per cent., theletting risk as such is much reduced. In this instance, the letting risk hasbeen reduced further by the decision of Adama to rent two thirds of the space.The transaction is expected to close in the second half of the year. Romana On 14 June 2007, the Company announced the acquisition of the Romana officeproject. This will be the Fund's seventh office building or scheme in Bucharest.The Romana office building will be built for Fabian Romania by Hil Construct ona centrally located site on Dacia Boulevard. The building will be built to ClassA specifications with a gross area of approximately 3,000 sqm. The projectmanagement will be undertaken by Globus, an experienced local developer inRomania. Construction is due to commence in the fourth quarter of 2007, withcompletion anticipated in the third quarter of 2009. Upon completion, thebuilding will provide a net lettable office area of around 2,480 sqm over 7floors, together with 40 car parking spaces. The building is in a prominentposition with views over Plaza Romana and is likely to attract internationaltenants seeking Class A office space. The Group will pay the purchase price of€7.6 million to Hil in 3 instalments; a first instalment of €2 million will bemade for the Group to acquire ownership of the land; a second instalment forconstruction costs of approximately €3 million; and a final payment uponpractical completion of €2.6 million. Including non developer related costs, thetotal purchase price is forecast to be €8 million. On assumed office rents of€19 per sqm/month, the purchase price and total development costs equate to ayield of 8.9 per cent.. Fabian Romania's equity requirement is expected to be€2 million with debt finance to fund the balance. In August, the developersecured the building permit. Other outstanding conditions, to be met prior tocompletion, are on-going. Completion is expected during the second half of theyear. The Economy Romania continued to prosper during the quarter with GDP growth in 2007 nowexpected to be 6.5 per cent. according to ING Bank and 6.3 per cent. in 2008.This continues the trend for the country to be one of the fastest growingeconomies in Europe. High real interest rates and a strengthening currencyagainst the Euro have driven down inflation from to an annualised rate of 4.9per cent. on 31 December 2006 to 3.8 per cent. as at June 2007. On the back offalling inflation, the NBR has cut interest rates to 7 per cent. where they areforecast to remain for the rest of the year. The fiscal deficit is expected byING Bank to remain within the Maastricht criteria at 2.8 per cent. of GDP.Mortgage rates in both local currency and in Euro have continued to fall withintroductory rates in Euro as low as 5.75 per cent. thereby providing furthersupport for the residential market. The Property Market The main trend to emerge during the period has been a marked upturn in officerents. In the investment manager's opinion, prime rents per sqm in the Citycentre have risen to €19-21 per sqm/month from €17-19 per sqm/month at the endof 2006. The upward rise in rents has been driven by continuing low vacancyrates of sub 3 per cent. as well as continued strong foreign direct investmentby new multinationals to Romania and by the expansion of existingmultinationals. The investment manager has experienced this directly with themajority of tenants in the Baneasa Business Center office building seekingadditional space. In terms of new supply of office space according to DTZ estimates, some 115,000sqm of modern Class A was delivered in 2006 somewhat lower than the 180,000 sqmof space that was forecast during the period. The shortfall was caused byproblems over land title, granting of some permits and other issues thatimpacted the amount of announced space that was actually developed. Theinvestment manager believes that current forecasts of 300,000 sqm of new Class Aoffice space to be delivered to the market by the year end of 2007 remainoptimistic. Regardless, total modern stock in Bucharest will remainsubstantially below commensurate levels in Warsaw, Prague and Budapest. The office sub sector of the Romanian property market remained as the main focusof Fabian and other investors' interest during the period. Yields have continuedto fall to close to 6.25 per cent. by the period end for prime buildings. Postthe half year end, GTC, an Israeli developer, sold its America House building inAugust for a yield of 5.6 per cent. to the French pension fund Ixis. However, asrents in the building average €19 per sqm/month the effective yield is over 6per cent. assuming future rents of around €21 per sqm/month for its location onVictoria Square. The investment manager anticipates that yields will fallfurther in the second half of the year driven by strong interest upon the partof foreign investment funds. Forward purchase yields are around 7.25 - 8.00 percent. depending on the location. In retail, similar trends are apparent as in the office market. Strong growth inretail sales and real incomes is driving the demand for retail space by bothhigh street retailers and by hypermarkets in both Bucharest and the regionalcities. Nearly all cities with more than 100,000 inhabitants have at least oneshopping centre project planned. Both the Real group and the Spar chain enteredRomania for the first time in 2006 and along with Auchan and Carrefour, continueto seek new hypermarket locations outside Bucharest from developers. Askingyields for investment transactions continue to fall to sub 7 per cent. Forforward purchases, yields are approximately 7.25 per cent. The residential sector continues to perform well on the back of rising realincomes, increased mortgage volumes and falling interest rates. Residentialsales prices per square metre continue to rise. Reliable statistics are hard tofind but prices per square metre appear to be rising in double digits. Whilst anumber of new residential schemes have been announced, particularly by Spanishdevelopers, it takes time to convert such schemes from the drawing board to theconstruction stage. In the meantime, the shortage of supply of new apartmentsfor sale has meant continued inflation for old style Communist apartments. Saleprices of up to €900 per sqm are reported to have been achieved compared to€1,250 per sqm for new build in comparable parts of Bucharest. The investmentmanager believes this gap to be artificially low. Other activity and outlook As at 30 June 2007, approximately €21 million of equity (after refinancing) fromthe €38.1 million of net proceeds from the AIM listing has been earmarked forinvestment in the five transactions either executed or announced in the quarter.This leaves approximately €17 million of equity to commit to further investmentspost completion of the investments announced to the end of June. The conditions for office co-investment developments continue to improve. Theoffice and retail leasing markets continue to favour the developer and thoughvisibility is difficult, the office rental market appears well supported untilat least the middle of 2009. Even then, Bucharest will still have substantiallyless Class A space than either Prague or Budapest in today's terms. The benefitsto the developer from rising rents and falling yields continue to more thanoffset construction inflation. As stated in the 2006 annual reports and accounts, the investment manager nolonger regards fully let offices at yields below 7 per cent. as attractiveeither on an absolute basis or relative to the opportunities available inRomania in other sub-sectors of the market or through co-developmentopportunities. Exciting opportunities continue to be pursued throughparticipation in office co-investment developments and through the forwardpurchase of office buildings for delivery over the next twelve months where thetaking of letting risk by the Company is compensated by attractive prices. In residential, the demand for new middle income housing has, if anything,accelerated during the year to date, driven by the growth of real incomes. Saleprice inflation acts as a useful natural hedge against construction priceinflation. In addition, economic growth in the large regional cities means thatfor the first time, households and first time buyers outside Bucharest can nowafford to purchase new build apartments. The investment manager is looking at anumber of opportunities in the regional cities to this end as well as acontinued focus on Bucharest. In retail and logistics, yields for fully let buildings or for forward purchasesof buildings once let continue to offer attractive yields of between 7.25 - 8.00per cent. To date, the Group has not purchased any such assets. This is in largepart due to their scarcity value, their large unit price relative to the size ofFabian Romania and legal title issues. However, the investment manager islooking at a number of opportunities in both of these sub-sectors. Economically, the country has continued to prosper since its accession to theEuropean Union. According to economists' forecasts, growth looks set to be above6 per cent. again for the year and inflation to fall close to 4 per cent. by theyear end. The investment manager regards the outlook for the Group, the Romanian propertymarket and Romania in general as attractive for remainder of the current year. Mark HoldsworthFabian Capital Limited28 September 2007 Finance Report Operating revenues of €1.108 million represent a full six months contributionfrom the Banu Antonache and Cascades investment properties. Similarly the €2.3 million fair value adjustment relates to these two propertiesand a 0.4 per cent. reduction in yields to 7.0 per cent. in the period. Negative goodwill recognised of €1.558 million relates to the Baneasa BusinessCenter acquired on the last day in the period under deal terms struck in July2006. Investment manager fees to €698k increased through the larger scale of fundsunder management and growth in net assets. Legal and professional fees includesboth lawyers and agents fees and increased significantly due to the investmentactivity progressed. Currently all costs for transactions announced but notclosed as well as others in the pipeline have been expensed. Bank interest of €693k arose from the significant cash balances held onshort-term money market deposits and overnight deposits for smaller workingcapital balances throughout the period. This resulted in retained earnings in the six months to 30 June 2007 of €2.9million, implying a healthy €0.06 per share. Based on the consolidated interim financial statements prepared under IFRS andthe Group's accounting policies as set out in the 2006 annual report, Fabian'stotal assets are €101.1 million and total liabilities are €37.8 million. Investment properties increased through the first time consolidation of BaneasaBusiness Center and revaluation uplift of Banu Antonache and Cascades. As mentioned in the 2006 annual report, the long term loans receivable and longterm borrowings both show a significant reduction (effectively removing atechnical grossing up of assets and liabilities) as almost €33.1 million ofloans and accrued interest receivable and almost €33.2 million of loans andaccrued interest payable routed through The Netherlands was assigned from athird party, Moulen Beleggingen BV into a new in-house subsidiary, FabianFinance BV as a progression following admission to AIM and the increased scaleof activities. The loans receivable balance comprises the initial €5 million secured loan tothe Cubic Center together with the accrued interest prior to completing thefirst stage of the forward purchase and a temporary reduction in Lakeview toaround €1.2 million post land finance drawdown but prior to constructioncommencing. The investment in joint ventures remains primarily New Town. Inventories and other assets rose due in part to the first time consolidation ofthe Baneasa Business Center. Loans receivable within current assets includes the€1 million loan to the Coltex Invest Construct joint venture for the Timisoararesidential development and this is likely to be extended as the project design,planning and budget progress. Long term borrowings represents bank debt of nearly €32.0 million secured on thethree investment properties. Deferred tax has increased significantly from the uplift in fair values,particularly from the acquisition of the Baneasa Business Center (almost €2.5million). Accordingly the shareholders equity or net assets of Fabian Romania Group underIFRS as at 30 June 2007 were €63.3 million, representing €1.245 per share a 4.7per cent. increase from €1.189 per share at 31 December 2006. Net Asset Value The published NAV as summarised below was calculated according to the Company'sArticles of Association and incorporates the values determines by the Company'svaluers, DTZ, acting through the Red Book methodology of the Royal Institute ofChartered Surveyors, which exclude future development profits. 30 June 2007 30 June 2007 30 June 2007 Market Value Bank (debt) Net Worth Original Investment •m •m •m •mCascades 15.1 (9.4) 5.7 12.2Banu 15.6 (9.1) 6.5 12.3New Town * (^) 15.8 (1.9) 13.9 5.8Lakeview * 8.3 (5.3) 3.0 5.4Cubic Centre 5.0 - 5.0 5.0Baneasa Business Center 27.6 (13.2) 14.4 23.9Timisoara * 3.0 (1.8) 1.2 1.0Net Cash 29.4Other assets/(liabilities) ** (0.4)Sub-total 90.4 (40.8) 78.7 65.5Shares (#) 50,831,130NAVPS (•) 1.548 * represents Fabian's share of the development, and in the case of Lakeview,after post-acquisition debt financing drawdown ** includes deposits on Evocenter & Romana plus deferred tax liabilities addedback (^) includes development WIP financed by bank debt Portfolio Mix Based on the net worth at 30 June 2007 (as set out in the NAV table above) theportfolio may be presented in three categories: income producing 34 per cent.;development 29 per cent.; and cash and other 37 per cent.. If the same categories are applied to the current estimates of total equitycommitments (net of refinancings before disposals, income or revaluations),assuming all executed and announced investments progress as planned, thefollowing split is achieved: Income producing 20 per cent.; development 50 percent.; and cash and other 30 per cent.. Graham AtkinsonFabian Capital Limited Condensed consolidated income statement (unaudited)For the six months ended 30 June 2007 Note Six months Six months Year ended ended ended 31 December 30 June 2007 30 June 2006 2006 •'000 •'000 •'000 Total operating revenues 1,108 586 1,451 Fair value movement on investment properties 4 2,300 2,000 3,600 Negative goodwill on acquisition of subsidiary 3, 12 1,558 - - ExpensesGoodwill impairment 3 - 1,007 1,007Investment management fees 698 267 588Legal and professional fees 934 378 662Other operating expenses 608 637 546Cost of issuing shares - - 400 Total operating expenses 2,240 2,289 3,203 Profit from operating activities 2,726 297 1,848 Loan interest revenues 258 671 1,767Loan interest expense (627) (800) (2,262)Foreign exchange movement (105) (23) 56Bank interest 693 51 137Other financial costs - (7) - Net financing income / (expenses) 219 (108) (302) Share of profit/(loss) of joint ventures using the equity 183 - (202)method of accounting Profit before taxation 3,128 189 1,345 Corporate income tax expense (23) (30) (525) Deferred income tax (216) (281) 565 Net profit/(loss) for the year/periods attributable to 2,889 (122) 1,385equity holders of Fabian Romania Limited Basic and diluted earnings per share (•) 0.06 (0.57) 0.06 As at 30 June 2007, 30 June 2006 and 31 December 2006 there is no differencebetween basic and diluted earnings per share. Consolidated statement of changes in equity (unaudited)For the six month ended 30 June 2007 Retained Share Capital Share Premium Earnings Total •'000 •'000 •'000 •'000 As at 31 December 2006 1 59,737 679 60,417 Profit for the period - - 2,889 2,889 Balance at 30 June 2007 1 59,737 3,568 63,306 For the six months to 30 June 2006 Retained Share Capital Share Premium Earnings Total •'000 •'000 •'000 •'000 As at 31 December 2005 1 21,201 (706) 20,495. Loss for the period - - (121) (121) Balance at 30 June 2006 1 21,201 (827) 20,374 For the year ended 31 December 2006 Retained Share Capital Share Premium Earnings Total •'000 •'000 •'000 •'000 As at 1 January 2006 1 21,201 (706) 20,496. Profit for the year - - 1,385 1,385 -Issue of share capital - 40,000 - 40,000 Cost of shares issued - (1,464) - (1,464) Balance at 31 December 2006 1 59,737 679 60,417 Condensed consolidated balance sheet (unaudited)As at 30 June 2007 Note 30 June 30 June 31 December 2007 2006 2006 •'000 •'000 •'000ASSETSNon-current assetsInvestment properties 4 58,300 26,800 28,400Property, plant and equipment 14 3 11Loan receivables 5 6,260 24,999 36,102Investment in joint ventures 7 5,738 - 5,749Deferred tax assets 151 - 71Set up costs - 112 - 70,463 51,914 70,333Current assetsInventories and other assets 731 367 373Loan receivables 1,032 718 1,770Bank interest receivable 53 3 52Cash and cash equivalents 28,827 2,665 42,196 30,643 3,753 44,391 Total assets 101,106 55,667 114,724 SHAREHOLDERS' EQUITY AND LIABILITIESShareholders' equityShare capital 8 1 - 1Share premium account 8 59,737 21,201 59,737Retained earnings 3,568 (827) 679 Total equity attributable to shareholders of the company 63,306 20,374 60,417 Non-current liabilitiesLong-term borrowings 9 31,983 31,682 50,361Deferred tax liabilities 4,589 2,405 1,776Rental and lease guarantees 271 158 205 Total non-current liabilities 36,843 34,245 52,342 Current liabilitiesCurrent income tax liabilities and other taxes 85 30 369Other liabilities and payables 872 1,018 1,596 Total current liabilities 957 1,048 1,965 Total equity and liabilities 101,106 55,667 114,724 Condensed consolidated cash flow statement (unaudited)For the six months ended 30 June 2007 Note Six months ended Six months ended Year ended 30 June 2007 30 June 2006 31 December 2006 •'000 •'000 •'000 Operating activitiesNet cash flow from operating activities 10 (1,103) (319) 426 Investing activitiesAcquisition of subsidiary investments (10,340) (7,515) (7,5145)Investing in non-current assets (100) (209) -Investment in joint venture undertakings - - (5,750)Loans advanced (6,573) (11,177) (24,130)Loan repayments received 4,727 - 1,850Interest received 1,067 61. 150Acquisition of property and equipment (5) - (218) Net cash outflow from investing activities (11,224) (18,840) (35,613) Financing activitiesProceeds from borrowings - 17,967 35,837Loan repayments (122) (4,626) (5,058))Interest paid (369) (104) (712)Proceeds from share issue - 334 40,359.Expenses in relation to share issue (551) - (1,297) Net cash (outflow)/inflow from financing (1,042) 13,571 69,129activities Net (decrease)/ increase in cash and cash (13,369) (5,588) 33,942equivalents Cash and cash equivalents at start of period/year 42,196 8,254 8,254 Cash and cash equivalents at end of period/year 28,827 2,665 42,196 Notes to the consolidated interim financial statements (unaudited) For the six months ended 30 June 2007 1. Reporting entity Fabian Romania Limited (the "Company") is a company domiciled in Jersey. Thecondensed consolidated interim financial statements as at and the six monthsended 30 June 2007 comprise the Company and its subsidiaries (together the"Group") and the Group's interest in joint ventures. The consolidated financial statements of the Group as at and for the year ended31 December 2006 are available on the Company's website www.fabiancapital.com. The shares of the Company were admitted to trading on the AIM market of theLondon Stock Exchange ("AIM") on 15 December 2006. 2. Accounting policies These condensed consolidated interim financial statements have been prepared inaccordance with International Financial Reporting Standard (IFRS) 34 InterimFinancial Reporting. They do not include all of the information required forfull annual financial statements and should be read in conjunction with theconsolidated financial statements of the Group as at and for the year ended 31December 2006. The accounting policies applied by the Group in these condensed consolidatedfinancial statements are the same as those applied by the Group in itsconsolidated financial statements as at and for the year ended 31 December 2006. The condensed consolidated interim financial statements are presented in Euro(•) rounded to the nearest thousand. 3. Goodwill Six months ended Six months ended Year ended 30 June 2007 30 June 2006 31 December 2006 •'000 •'000 •'000 (Negative) / Positive goodwill arising upon acquisition (1,558) 1,007 1,007Recognition / (Impairment) of goodwill 1,558 (1,007) (1,007) - - - The excess of acquired interest in the net fair value of the purchasedidentifiable assets, liabilities and contingent liabilities over cost ("negativegoodwill") in the period relates to the Fabian Four S.R.L. acquisition ofBaneasa Center S.R.L., as further set out in Note 12. The directors consider that the goodwill arising upon acquisition of thesubsidiaries should be fully recognised / impaired. This is because all thefuture expected value from the property is already being recognised as part ofthe fair value of the investment property as at acquisition and as at thebalance sheet date. 4. Investment properties As at As at As at 30 June 2007 30 June 2006 31 Dec 2006 •'000 •'000 •'000 Brought forward 28,400 12,491 12,491Additions due to business combinations 27,600 12,100 12,100Revaluation (fair value movement) 2,300 2,000 3,600Cost to completion - 209 209 58,300 26,800 28,400 At 30 June 2007, the fair value of the investment properties is based on avaluation performed by the appointed independent valuer, DTZ Echinox. Thevaluation method applied is the capitalisation of rental income based on therents payable under the existing lease agreements and average market rentalvalues. 5. Loan receivables As at As at As at 30 June 2007 30 June 2006 31 Dec 2006 •'000 •'000 •'000 Moulen Beleggingen BV - 24,998 30,749Cubic Center Development S.R.L. 5,061 - -AIG/Lincoln Lakeview S.a.r.L 1,199 - 5,353 6,260 24,998 36,102 The following loan advances and assignments were made during the six monthsended 30 June 2007. On 27 April 2007, Fabian Five S.R.L. entered into a commitment to purchase theCubic Center Development S.R.L. ("Cubic") on completion of the Cubic officedevelopment. On the same day a secured loan of €5 million was made by FabianFive S.R.L. to the target. Interest is to be accrued at 7 per cent. per annum.The loan and interest is repayable in full in four years. On 15 June 2007, a loan assignment agreement was entered into between a numberof the Fabian Group companies and Moulen Bellingengen BV ("Moulen") transferringthe relevant Moulen assets and liabilities to Fabian Finance BV. The terms andconditions of the loans remain unaltered from those reported at 31 December2006. Total loan and interest receivables owing from Moulen in this assignmentwere €30,749k and €2,349k respectively. The shareholder loan receivable from AIG/Lincoln Lakeview S.a.r.L shows a netdecrease over the period. During the period a bank financing facility wassecured to deliver the development project. A tranche was drawn against theland value and the proceeds used to temporarily pay down the initial shareholderloans subject to undertakings that these shareholder loans would be madeavailable again as required for the development project. 6. Investment in Group companies The subsidiaries of Fabian Romania Limited, all of which have been included inthese financial statements, are as follows: Name Country of Proportion of Activity incorporation ownership Cardeka Holdings Limited Cyprus 100% Holding CompanyFabian Finance BV Netherlands 100% Finance CompanyFabian One S.R.L. Romania 100% Holding CompanyFabian Two S.R.L. Romania 100% Holding CompanyFabian Three S.R.L. Romania 100% Holding CompanyFabian Four S.R.L. Romania 100% Holding CompanyFabian Five S.R.L. Romania 100% Holding CompanyFabian Six S.R.L. Romania 100% Holding CompanyRomulex Technology Construct S.R.L. Romania 100% Leasing of owned or rented propertiesCascade Consulting Romania S.R.L. Romania 100% Leasing of owned or rented propertiesCascade Imobiliare Consult S.R.L. Romania 100% Leasing of owned or rented propertiesBaneasa Center S.R.L. Romania 100% Leasing of owned or rented properties 7. Investments in joint ventures The Group has the following investments in joint ventures: Ownership Country of As at As at As at incorporation 30 Jun 2007 30 Jun 2006 31 Dec 2006 Phoenix Park S.R.L. Romania 50% - 50%AIG/Lincoln Lakeview S.a.r.L Luxembourg 50% - 50%Coltex Invest Construct S.R.L. Romania 50% - - On 20 June 2007, Cardeka Holdings Limited concluded a share transfer agreementfor a 50 per cent. shareholding in Coltex Invest Construct S.R.L. ("Coltex") and a shareholder loan of €1 million. The Group has a 50% interest in joint ventures Phoenix Park S.R.L., AIG/LincolnLakeview S.a.r.L and Coltex Invest Construct S.R.L. whose principal activitiesare investment in property. Summary unaudited financial information for equityaccounted investees, not adjusted for the percentage ownership held by the Groupis presented below: As at Six months to 30 Jun 2007 30 Jun 2007 Current Non-Current Current Non-Current Assets Assets Total Assets Liabilities Liabilities Revenue Expenses •'000 •'000 •'000 •'000 •'000 •'000 •'000 Phoenix Park 530 15,279 15,809 1,535 3,714 2 (24)S.R.L. AIG/Lincoln 1,641 10,600 12,241 352 13,157 - (500)LakeviewS.a.r.L Coltex Invest 1,637 5,110 6,747 3,126 3,600 - (10)ConstructS.R.L. The revenue and expense items for Coltex represent the period from the date ofacquiring an interest on 20 June 2007 to the period end on 30 June 2007. 8. Share capital and premium As at As at As at 30 Jun 2007 30 Jun 2006 31 Dec 2006 • • •Authorised share capital20 management shares of €1.00 each - 20 -80 voting shares of €1.00 each - 80 -10,000,000 investment shares of €0.001 each - 10,000 -1,000,000,000 investment shares of €0.00001 each 10,000 - 10,000 10,000 10,100 10,000 As at As at As at 30 Jun 2007 30 Jun 2006 31 Dec 2006 • • •Issued and fully paid up20 management shares of €1.00 each - 20 -80 voting shares of €1.00 each - 80 - - 100 - Issued and fully paid up212,015 investment shares of €0.001 each - 212 -50,831,130 investment shares of €0.00001 each 508 - 508 Total issued 508 312 508 On 15 December 2006 the Company became listed on AIM. The Company raised€40,000,000 (before expenses) through the issue of 29,629,630 new ordinaryshares at €1.35 per share. Prior to the AIM listing, a resolution was passed on the 1 November 2006, forall management and voting shares to be transferred to the Company for their parvalue and dissolved. It was also decided that every existing investment sharebe sub-divided into 100 ordinary shares with a par value of €0.00001 each. A reconciliation is provided below: Voting Management Investment Ordinary Total Shares Shares Shares Shares SharesReconciliation of movement in number of shares outstandingNumber of shares brought forward asat 1 Jan 2006 & 1 Jul 2006 80 20 212,015 - 212,115Redemption of voting and managementshares (80) (20) - - (100)Conversion of investment shares toordinary shares - - (212,015) 21,201,500 20,989,485Issue of ordinary shares - - - 29,629,630 29,629,630 Number of shares carried forward asat 31 Dec 2006 & 30 Jun 2007 - - - 50,831,130 50,831,130 As at As at As at 30 Jun 2007 30 Jun 2006 31 Dec 2006 •'000 •'000 •'000Share premium212,015 investment shares issued at apremium of €99.999 each 21,201 21,201 21,20129,629,630 placement shares of €1.34999 40,000 - 40,000eachCost of placement (1,464) - (1,464) Total Share Premium 59,737 21,201 59,737 9. Long-term borrowings As at As at As at 30 June 2007 30 June 2006 31 Dec 2006 • • • Loan from Moulen Beleggingen BV - 24,999 32,351Loan from Investkredit Bank AG 31,983 6,683 18,010 31,983 31,682 50,361 The following loans and borrowings were assigned during the six months ended 30June 2007. On 15 June 2007, a loan assignment agreement was entered into between a numberof the Fabian Group companies and Moulen Bellingengen BV ("Moulen") transferringthe relevant Moulen assets and liabilities to Fabian Finance BV. The terms andconditions of the loans remain unaltered from those reported at 31 December2006. Total loan and interest liabilities owed to Moulen in this assignment were€30,749k and €2,437k respectively. On 28 June 2007, Baneasa Center S.R.L. became 100 per cent. owned and theexisting loan from Investkredit Bank AG was consolidated, see 'Note 12.Acquisition of subsidiaries'. This loan was refinanced after the period end, see'Note 13. Subsequent events'. 10. Net cash flow from operating activities Reconciliation of operating profit from continuing operations to net cash flowfrom operating activities: Six months ended Six months ended Year ended 30 June 2007 30 June 2006 31 December 2006 •'000 •'000 •'000Operating profit for the year/period 2,726 297 1,848Adjustments for:Revaluation gains on properties (2,300) (2,000) (3,600)Goodwill impairment (1,558) 1,007 1,007Corporate income tax paid (328) (178) (213)Other non-cash items 66 84 199 Changes in working capital 291 470 1185 Net cash flow from operating activities (1,103) (319) 426 11. Related party transactions There is an investment management agreement between the ultimate parent of theGroup and Fabian Capital Limited for the day to day management of the Group.Mark Holdsworth is a director of both the Fabian Romania Limited and FabianCapital Limited. The principal related party transactions which were carried out during theperiod are: An investment management fee is payable to the investment manager, FabianCapital Limited. Investment management fees are payable quarterly in advance. The fee for theperiod 1 January 2007 to 30 June 2007 amounted to €698,046 (1 January 2006 to 30June 2006: €266,573). Fees paid to JTC Fund Services Limited, the Group's administrators, amounted to€118,021 for the period from 1 January 2007 to 30 June 2007 (1 January 2006 to30 June 2006: €57,705) and have been charged to the income statement. Stephen Burnett and Nigel Le Quesne are directors of both the Company and JerseyTrust Company. Directors' fees paid in the period were €30,000 (six months to30 June 2006: • Nil). Joint Venture Agreements On 20 June 2007, Cardeka Holdings Limited completed a share transfer agreementfor a 50 per cent. investment in Coltex Invest Construct S.R.L., a Companydomiciled in Romania. This investee was established for the purpose ofdeveloping and selling real estate residential projects. A loan of €1 millionuntil 31 December 2007 with interest at 6 per cent. per annum was made pursuantto a Loan Agreement of the same date. 12. Acquisition of subsidiaries On 29 June 2007, Fabian Four S.R.L. acquired 100 per cent. of the share capitalof Baneasa Center S.R.L. for cash consideration of €11.704 million. Theacquisition note is set out below. The excess in fair value over costs ("Negative goodwill") recognised of €1.558 million relates to the reduction inyields and indexation of rental income during the time elapsing between strikingdeal terms struck in July 2006 and closing. This transaction has been accountedfor using the purchase method of accounting. Fair value Book Value adjustment Fair Value •'000 •'000 •'000 Net assets acquiredInvestment property 12,019 15,581 27,600Trade and other receivables 101 - 101Cash and cash equivalents 1,364 - 1,364Trade and other payables (95) - (94)Bank loans (13,215) - (13,215)Deferred tax liabilities - (2,493) (2,493) Total net assets 174 13,088 13,262 Excess in fair value over costs (1,558) Total consideration 11,704 Satisfied by cash 11,704 Net cash flow arising on acquisition Cash consideration 11,704Cash and cash equivalent acquired (1,364) 10,340 On 15 January 2007, the Group acquired 100% of the ordinary share capital ofFabian Five S.R.L.The net assets of Fabian Five S.R.L. on this date amounted to €60. On 15 January 2007, the Group acquired 100% of the ordinary share capital ofFabian Six S.R.L.The net assets of Fabian Six S.R.L. on this date amounted to €60. On 16 May 2007, Fabian Romania Limited purchased Topares Investments BV("Topares") for €24,000. The company contained €18,000 cash and was deemed tobe acquired at fair value. The name of Topares was subsequently changed toFabian Finance BV. On 15 June 2007, a loan assignment agreement was enteredinto between a number of the Fabian Group companies and Moulen Bellingengen BV("Moulen") transferring the relevant Moulen assets and liabilities to FabianFinance BV. for a net consideration of €88,172. On 30 May 2007, Fabian Six S.R.L. entered into a binding commitment to purchaseC.H.F. Investitii S.R.L. for €4.9 million on completion of the Evocenter Oneoffice development in Pipera. Completion is expected during the second half of2007. On 8 June 2007, Cardeka Holdings Limited entered into an agreement to purchaseMarcomto Holdings Limited ("Marcomto") subject to certain conditions for €4.6million and a subsidiary of Marcomto entered into a €3.0 million constructioncontract to deliver an office building. Completion is expected during thesecond half of 2007. 13. Subsequent events On 18 July 2007, Baneasa Center S.R.L. made a drawdown of €19.68 million underthe terms of a new facility with Investkredit Bank AG. The majority of theproceeds (€13.215 million) were used to repay an existing loan from InvestkreditBank AG. As a condition of the new loan an interest rate swap was contracted tofix the Euribor borrowing cost at 4.78 per cent per annum until 30 June 2010.The new loan has a further spread of 150 basis points bringing the initial fixedinterest rate to 6.28 per cent. par annum. The interest and capital repaymentsare made at calendar quarter ends. On 18 July 2007, Coltex Invest Construct S.R.L. acquired certain plots of landtotalling 1,820 sqm for a consideration of €819k. Pursuant to the commitment entered into on 27 April 2006 by Fabian Five S.R.L.to purchase the Cubic Center Development S.R.L. ("Cubic") on completion of theCubic office development. A payment of €7.255 million was committed on 4September 2007 for a 49 per cent. shareholding in Cubic following successfulcompletion of certain outstanding conditions including fully committed bankfinancing sufficient for the fixed price construction contract. This brings thetotal commitment to the project to €12.255 million. 14. Net Asset Value The Net Asset Value ("NAV") and Net Asset Value per Share ("NAVPS") publishedquarterly per the Articles of Association uses certain figures which are notrecognised within the accounts under IFRS. The reconciling differences (betweenthe accounts and NAV and NAVPS) include, inter alia, (i) the Group'sprofessional valuer, DTZ Echinox, determines the land values for developmentprojects semi-annually; (ii) deferred tax in relation to the investment propertyrevaluations which is not expected to crystallise (as set out in the 2006 AnnualReport); (iii) proportional share of cash and bank debt within joint ventures. The table below sets out joint venture information used within the NAV and NAVPSas at 30 June 2007 prior to adjusting for percentage ownership. DTZ land value as at Bank debt as at 30 June 2007 30 June 2007Joint Venture project: •m •m Phoenix Park S.R.L. 27.9 3.8AIG/Lincoln Lakeview S.a.r.L. 16.6 10.6Coltex Invest Construct S.R.L. 5.9 3.6 Availability of interim report Copies of the Interim report will be available to the public free of charge fromthe office of the Company's investment manager at Fabian Capital Limted, 52Berkeley Square, London W1J 5BT. A copy of the Interim statement will also bemade available on the Group's website, www.fabianromania.com. The directors of Fabian accept responsibility for the information contained inthis announcement. To the best of the knowledge and belief of the directors ofFabian (who have taken all reasonable care to ensure that such is the case) theinformation contained in this announcement is in accordance with the facts anddoes not omit anything likely to affect the import of such information. This information is provided by RNS The company news service from the London Stock Exchange