Fusion Antibodies Regulatory News (FAB)

29 Sep 2008 07:00

29 September 2008 

Fabian Romania Limited

Interim results for the period ended 30 June 2008

Fabian Romania Limited ("Fabian", "Fabian Romania" or the "Company"), the AIM quoted dedicated Romanian real estate investor announces its results for the period ended 30 June 2008. The Company's interim report and accounts will be posted to Fabian Romania shareholders shortly.

Highlights 

Secured three further development projects. One in Bucharest and two in western Romania. Net equity investment over the period of €4.4 million creating a portfolio of eleven projects in Romania. The Company's share of the market value of these investments was €134.7 million at 30 June 2008, before deducting the outstanding non-recourse bank financing of €62.3 million

As at 30 June 2008 the Net Asset Value per share, calculated in accordance with the Company's Articles of Association, was €1.667 (2006: €1.548) an increase of 7.7 per cent. over the year

Jaroslav Kinach, Chairman of the Company, commented:

"These acquisitions are in line with the Company's strategy of investing in the Bucharest office market and expanding its footprint beyond the capital region of Bucharest to develop residential units in high growth cities across the country. I am confident that the Company will continue to drive growth by maximising the potential of its investments and development projects." 

Mark Holdsworth, Managing Director of Fabian Capital Limited, the Company's Investment Manager commented:

"The acquisition of three further developments combined with the performance of the existing investments has contributed to the NAV of €1.667 per share, up 0.06 per cent. in the first half of the year which is a satisfactory result in the current pan European economic conditions. Although the residential market has slowed during the latter part of the period, the office market continued to benefit from low vacancy rates with rental levels continuing to move upward. The Company will continue its strategy to develop the value of its portfolio by capitalising on the attractive opportunities in the Romanian property market."

Contacts: 

Chairman's Statement

It gives me great pleasure to present the interim results of Fabian Romania Limited ("the Company").

During the first half of 2008, Fabian Romania has secured three further development projects; Romana, an office development in the centre of Bucharest to be built on a fixed price contract which has commenced on schedule and a 50/50 joint venture with the experienced Hungarian developer SCD Group to develop residential units in Oradea and Satu Mare, both in western Romania. 

These acquisitions are in line with the Company's strategy of investing in the Bucharest office market and expanding its footprint beyond the capital region of Bucharest to develop residential units in high growth cities across the country.

Overall, the Company's completed commercial properties are fully let other than the smaller Evo Centre building with some vacant space. Construction of the commercial and residential development properties are progressing on schedule and within budget. The Lakeview office development is now fully pre-let or terms agreed and development is on schedule towards a successful completion by the last quarter of 2009. Sales in our New Town residential development project in Bucharest are going to plan with the first phase now near fully pre-sold and the construction is progressing on schedule.

Fabian Romania has now fully invested or committed the funds previously raised totalling €59.5 million and therefore future investments will be funded by recycling the proceeds from the disposal of existing assets. In view of prevailing market conditions, the Company will not commit to any project unless it has sufficient funding to carry the project through development towards a successful completion. Funding of the current development projects will be met from existing undrawn bank facilities and from the Company's cash balances.

The Directors are confident that Fabian Romania advised by the Company's Investment Manager, will continue its successful investment and asset management activities by taking advantage of our growing experience and market reputation to capitalise on opportunities in the exciting Romanian real estate market.

We look forward with confidence to continuing to drive growth in net asset value per share through maximising the potential of the Company's current investment portfolio and by working with our development partners to build out the Company's development projects.

Jaroslav Kinach

Chairman

Fabian Romania Limited 

Investment Manager's Report 

Fabian Romania is a property company whose activities are dedicated to Romania. The Company's strategy is capital efficient profitable growth as measured by net asset value per share achieved by serving three distinct groups of customers active in the country's property market. The Company, in conjunction with its co-investment development partners, builds both Class A office buildings for sale to property investing institutions and affordable residential apartments to the country's emerging middle class. It also owns Class A office buildings, which it rents to large foreign multinational and Romanian companies. 

As part of this strategy, the Investment Manager seeks to secure investment opportunities for the Board that meet both the above mentioned needs of the Company's customers as well as the stringent financial return forecasts on behalf of the Company's shareholders.  

During the first half of this year, the Company acquired stakes in three further development schemes to take the total number of co-investment developments projects and fully let commercial buildings to eleven.  The Company's aim during the period has been to continue to exploit the unmet needs of the Company's customers both in the residential and commercial office building sub-sectors of the market. This has also had the effect of maintaining a diversified portfolio both in type and location of property, while continuing to focus on areas where we have specific knowledge and experience.

The effect of this investment activity combined with the performance of the Company's existing investments has been a flat NAV per share up just 0.06 per cent. during the first half of this year to €1.667* (31 December 2007 restated: €1.666) and 7.7 per cent. in the last twelve months (30 June 2007 restated: €1.548). This is a satisfactory result in the current pan European economic conditions which have begun to make themselves felt in the country during the period. The investment activities for the first half of this year have created further future development profit which is to be realised between 2010 and 2012 with DPNAV growing 6.4 per cent. during the first half of this year to €2.319* (31 December 2007 restated: €2.180) and 20.8 per cent. in the last twelve months (30 June 2007 restated: €1.920).

The Company's current portfolio consists of 21,239 square metres of income producing commercial properties, 52,409 square metres of commercial properties under development and 151,086 square metres of residential properties under development, delivering 1,554 residential units. 

* The basis for calculating the value of the development projects was revised in the second quarter to exclude the development profit from the project valuation included in the NAV. Prior period valuations have been restated.

The Economy 

Despite unsettled economic conditions elsewhere in Europe, the Romanian economy continues to expand strongly. According to the National Bank of Romania, GDP growth in 2008 is now expected to be 6.5 per cent. on the back of 6.0 per cent. growth in 2007. With GDP growth of 7.9 per cent. in 2006 and 4.1 per cent. in 2005, Romania has been one of the fastest growing economies in the European Union. The economy went through two deep recessions in the 1990's but has now been continuously expanding at above 4 per cent. per annum since the end of 2000. 

On the back of this strong GDP growth, together with high employment and a benign tax environment, real wages grew by a staggering 21 per cent. in 2007 and 24.9 per cent. for the twelve month period to April this year. This comes on the back of a 26 per cent. growth in 2006. This surge in real disposable income is having an impact on consumers with retail sales showing a strong 9.7 per cent. growth for the twelve months up to May of this year, which are in turn driving retailers' demand for new retail space. 

The combination of strong GDP growth and the rise in net wages, together with the appreciation of the RON against the Euro since 2005, has resulted in a consumption boom. This has ensured that the trade deficit has continued to expand. The consensus forecast is for a 14 per cent. current account deficit in 2008 with only half of the deficit expected to be covered by foreign direct investment, with the balance from portfolio inflows. The Central Bank has not been slow to respond to this and has increased interest rates twice during the year to reduce the trade imbalance and curb inflation. This has had some dampening effect on the economy but not as much as anticipated.  The absolute level of the current account deficit remains a concern. 

Financial Markets and Availability of Debt

The impact of the global credit crunch has been less visible in Romania than in Western Europe. With the origin of the banks in the market being Greek, Hungarian, Austrian, Italian and German rather than the UK or United States, their outlook on the economy and their perception of the credit crunch in their home market is somewhat more subdued. 

Money market liquidity and the associated rise in euro denominated interest rates have impacted the current Romanian banking market. However, as the banks become more sophisticated in terms of the financial structures available, the total cost of financing has not increased significantly. That said, loan to value ratios have started to reduce whilst margins have risen. The Investment Manager has good banking relationships but is aware that the availability of debt might be reduced further in the future. Re-financing opportunities are therefore being considered in order to avoid the need for refinancing at possibly less advantageous times in the future.  

The Residential Market

Demand in the residential market is being driven by the increased availability of mortgages as more banks enter the mortgage market and become more sophisticated in their offerings. The absolute level of wealth, combined with low unemployment and the availability of this mortgage finance, means that the emerging middle class are now able to afford new build apartments of 75-100 square metres. The strong growth in real wages has now also opened up the large regional cities of Romania as potential cities for residential schemes. In particular, the cities of western Romania, benefiting from their proximity to the Hungarian border and being the recipients of considerable foreign direct investment, look particularly attractive. 

However, residential market demand has slowed in the latter part of the first half of 2008, mainly due to negative press created by politicians highlighting the international credit crunch ahead of Presidential and Parliamentary elections in November this year and by the rise in mortgage rates to customers by some 200 basis points to around 9.5 per cent..

In the housing market, prices grew on average by 20 per cent. during 2007 according to leading agent Colliers International. The Investment Manager believes that the growth in prices is now slowing down and Colliers International estimated house price growth in the first half of 2008 at approximately 5 per cent.. Towards the end of the period, sales at the New Town residential scheme began to slow, reflecting the subdued nature of the overall residential market. Prior to this slowdown, we were able to increase the prices at the New Town development by 7 per cent. during the early part of the year. 

The Investment Manager believes that the current low level of confidence in the Bucharest housing market is a temporary phenomenon, albeit one that is likely now to last into the first half of next year. Unlike other residential markets in the region, Bucharest has had relatively few modern apartments built for the emerging middle class to date. According to the agents Colliers, 15,000 - 20,000 apartments are due to be built between 2007 and 2010 out of total forecast demand of some 130,000 units. Anecdotal evidence suggests that as a result of press speculation, many prospective buyers are waiting to buy apartments at completion rather than 'off plan' thereby explaining the slowdown in sales volumes for developers. 

The Office Market 

The office market continues to benefit from low vacancy rates which remain below 3 per cent. according to DTZ Echinoz ("DTZ"). An inflow of international companies looking for office space is still visible and the Company has not yet seen any decrease in demand for space to rent for well located schemes. 

In 2007, a number of property agents forecast 300,000 square metres to be delivered during the course of the year. However, only half of this volume was actually delivered by the year end according to the same agents. Forecast supply has for a number of years been consistently overestimated. The constraints and the factors explaining this differentiation is that there is a tendency to announce schemes on to the market prior to the investor / developer having secured the title of the site, building permit, financing or a contractor. 

The Investment Manager believes that between 140,000 square metres and 170,000 square metres of new office space will be delivered onto the market by the end of 2008.  Under such a scenario, and given the city's current total Class A stock of around 1,000,000 square metres, the Investment Manager believes that even if supply were to rise to around 250,000 square metres for each of the next three years, Bucharest will still have less Class A office space than Budapest's stock today of some 2,300,000 square metres. It is likely that Bucharest will remain undersupplied with office space for the coming 3-5 years as both international and local developers are becoming more cautious and scaling back their construction plans in the current financial climate. Given the forecast for strong on-going GDP growth and tenant demand, this bodes exceptionally well for owners of quality office space including the Company. The Investment Manager continues to keep track of the progress of current schemes and their respective prospects in the letting market.

According to local agents, rents continued their upwards move during the period to €22-€24 per square metre per month, a rise of some 10 per cent. on the fourth quarter of 2007. The Investment Manager is aware that city centre rents of €27-28 have been achieved. Investment yields have moved out, although there is limited availability of deals to support this view. Market participants believe that a yield shift of some 50 basis points has occurred and that headline yields are now 6.25-6.5 per cent.. For purchases and sales of completed office buildings, the market has now shifted in favour of the buyer. 

Investment Approach

The Company continues to be conservative in its approach to both financing and development risk. The existing loan portfolio incorporates a mix of fixed and floating loans, which is being actively managed to limit any adverse impact on the Company from a sudden deterioration in European interest rates. The Company's bank debt as at 30 June 2008 stood at €40.8 million, secured against the investment properties valued at €76.1 million, a gearing of 54 per cent..

The Company has always maintained a prudent policy of only buying into co-investment development projects if it has the equity finance to see the project through to completion. On current estimates, the Company does not require any additional equity financing from shareholders in order to build out its current development projects.

New Investments

In line with the Company's previously stated strategy, the Company made three further investments during the first half of the year.

The acquisition of the Romana project, which was secured last year, was completed on 7 March 2008. The site is located in the centre of Bucharest on Dacia Boulevard and will be developed to a standard targeted at attracting the top end of the office rental market. The prospective tenant(s) will be able to customise the fit-out of the building to meet its needs and interest from tenants is already evident. The building will comprise a net lettable office area of around 2,480 square metres over 7 floors, together with 40 car parking spaces. 

On 11 June 2008, the Company agreed to enter into a joint venture with SCD Group to develop residential projects in western Romania. The rationale behind the deal was to implement the strategy as one of the first residential developers in the fast growing secondary cities of Romania together with a strong partner. The joint venture partner SCD, based in Budapest, is a young, dynamic and professional developer with a proven track record of cost efficient developments. The joint venture will develop two sites, the first of which is in Satu Mare and comprises 6,700 square metres with a building permit for 165 apartments. The second site is in Oradea comprising 33,862 square metres with the intention to develop 388 apartments. Detailed planning and construction consents will be required from local planners and are expected to be received by the third quarter of 2008. Both projects are in the final stages of planning and a sales strategy is being formulated.

Portfolio Update

The developments under construction are progressing on schedule without cost overruns or delays. Lakeview, the office development in the central north part of Bucharest is now 93 per cent. let with the remaining 7 per cent. under heads of terms. Completion is anticipated by the end of 2009. Cubic Centre, the office building in Pipera being constructed for the Company by Kendama Limited, is on schedule with anticipated practical completion in the first quarter of 2009. The first phase of New Town, the residential scheme in Bucharest, will be completed and handed-over to customers between January and March 2009. The overall scheme is now 44 per cent. forward sold. The Orchard residential project in Timisoara, western Romania, is at the final stages of planning and it is hoped that a start on site will be achieved by the end of this year.

The income producing buildings Banu, Baneasa, Cascades and Evo Centre are continuing to see strong demand from tenants and rents are continuing to rise. This has resulted in almost flat valuations of the buildings despite a market influenced by upward pressure on yields.

Strategy and Outlook 

Fabian Romania will continue to focus on serving the customers as it has done for the last three years. All too often, Companies fail to perform when management get distracted into diversification. The Investment Manager will concentrate on co-investment developments in the residential market in secondary cities and the office sector in Bucharest as well as income producing office buildings in Bucharest.

Particular attention is being spent on the structuring and financing of projects to drive returns in a prudent manner whilst it will continue to offset construction risk by using strong specialised local and international development partners. This strategy not only mitigates construction risk, it helps the Company focus on its key skills.

The Investment Manager considers all of the Company's current investments as having potential for further value growth but will continually monitor each investment from a return perspective to evaluate the possibility to sell buildings when it is appropriate to do so. Any potential sale proceeds from disposal of assets would be recycled for reinvestment in new projects delivering attractive returns. Without doubt though, the best time to acquire property assets is when everyone is selling. The Investment Manager believes some particularly attractive opportunities are likely to emerge over the next twelve months, in particular from distressed sellers in the present climate.

Risk will continue to be prudently managed. The Company, although focusing on enhancing returns, will continue to mitigate risks and be prudent in every investment decision in order to ensure successful completion of projects. 

Innovation in financing structures will be important to drive returns. The Company is at the forefront in this respect, both agreeing to and introducing western structures to the market in order to further enhance the equity efficiency. Continuity in discussions with banks with a clear and deliberate strategy is one of the Investment Manager's and the Company's competitive advantages.

The share price performance has been disappointing since the IPO in December 2006. However, the continuing progress of the Lakeview and Romana projects, final planning of the Timisoara scheme and the near completion on the Cubic Centre and New Town developments mark a significant step towards the realisation of a substantial part of the future development profit NAV of €2.319 per share. 

We believe the delivery of realised profits from these development projects, forecast to begin in 2009, will drive NAV per share, which we believe sooner rather than later should be reflected in the Company's share price. 

The Investment Manager is confident the Company will continue to develop the value of its portfolio and that the Romanian property market and Romania in general will continue to offer attractive opportunities for the remainder of 2008 and beyond.

Mark Holdsworth & Jan-Olof Hansson

Fabian Capital Limited

26 September 2008

Finance Report 

The Company has continued to produce strong financial results from its investments in income producing properties, joint venture projects and other property investments. At 30 June 2008, net assets were €65.2 million (31 December 2007: €66.4 million) of which €13.8 million was cash remaining from the funds raised at listing but committed to investments currently held. Any further investments will therefore be funded by recycling the proceeds from the disposal of existing assets.

Financial Results

The loss before tax for the six months ended 30 June 2008 amounted to €1.3 million, a decrease of €4.2 million from a profit of €3.1 million for the same period to 30 June 2007. The decrease was the net effect of the following: 

Operating revenues from rental income increased by €1.3 million from four office properties for the whole year, compared to the previous period when only two properties were income producing.

The half year to 30 June 2007 benefited from negative goodwill of €1.6 million arising on the acquisition of the Baneasa Business Centre whereas no similar item arose in the half year to 30 June 2008.

Fair value adjustments to the investment properties resulted in a reduction of €0.7 million in their carrying value in the first half of 2008 compared to a gain of €2.3 million at 30 June 2007. 

Operating expenses of €1.9 million, €0.3 million less than in the half year to 30 June 2007, reflected a reduction in external advisors' fees as certain roles are now performed in house.

Net financing costs were €0.6 million compared to finance income of €0.2 million at 30 June 2008 as a result of increased borrowings as well as lower cash holdings.

Financial Position

Total assets at 30 June 2008 were €116.5 million (31 December 2007: €115.9 million) and principally comprised investment properties, investments in joint ventures, other investments, loans receivable and cash. Total liabilities were €51.3 million (31 December 2007: €49.5 million) and were predominately borrowings secured against the value of the investment properties, deferred tax arising on differences in accounting and tax treatments and trade payables.

Net assets at 30 June 2008, prepared under IFRS, were €65.2 million, a decrease of €1.2 million compared to the December 2007 year end net assets of €66.4 million. In summary, net assets were made up as follows:

The increase in investment property was due to a re-valuation of the Cascades office building and acquisition of the Romana site on Dacia Boulevard, net of a de-valuation on the Banu Antonache, Baneasa Business Centre and Evo Centre properties.

The increase in loans receivable arose from loans made to joint ventures in order to fund further development work on the projects.

The decrease in the cash at bank was principally as a result of investments made of €4.0 million, net operating cash flows of €0.9 million and repayment of borrowings and interest of €3.8 million.

Gearing has decreased by 3.3 per cent. during the first half of this year due to the increase in investment property values and repayments of bank debt. Bank debt at 30 June 2008 amounted to €40.8 million secured over investment properties held valued at €76.1 million resulting in a gearing of 54.1 per cent. 

Net assets per share, prepared under IFRS, decreased slightly in the six month period to 30 June 2008 by 1.72 per cent. to €1.282 per share from €1.304 per share.

Published NAV per share

The net assets per share prepared under IFRS ("IFRS NAV") differ from the amount calculated in accordance with the Company's Articles of Association and which is published quarterly ("Published NAV"). The differences arise as adjustments to certain figures are made for the Published NAV per share which are not recognised within the accounts under IFRS. 

The Published NAV was €1.667 per share, a gain in the last six months of €0.001 per share equating to an increase of 0.06 per cent.. A break-down of the Published NAV is summarised below:

The adjustments to the IFRS NAV to arrive at the Published NAV include the revaluation of joint venture investments, excess consideration on acquisition of assets and liabilities, the exclusion of deferred tax arising on property revaluations and the capitalisation of the Company's share of losses in joint ventures. 

A reconciliation between the IFRS NAV and the Published NAV is as follows:

Valuations of the New Town, Lakeview, Timisoara, Oradea and Satu Mare joint ventures, as prepared by DTZ at 30 June 2008, have been included in the Published NAV. These valuations were not applied to the IFRS accounts to ensure compliance with IFRS.

Under IFRS the acquisition of the Romana office development is classified as an acquisition of assets and liabilities and an excess of €1.4million arose due to the fair value of the assets and liabilities acquired being less than the consideration paid. The Published NAV does not recognise this excess.

The deferred tax liability reported under IFRS of €6.4 million is primarily based on the current fair market value of the investment properties which is only applicable to asset sales. These deferred income tax liabilities are not expected to become payable as, in the event of a property sale, this will be effected through the sale of the shares of the relevant holding SPV and not the property itself. For the purposes of calculating the Published NAV the deferred tax liability is added back in order to report a more representative figure of the value which may be realised as the likelihood is that the deferred tax liability will never crystallise.

Share of losses of joint ventures to date are written off under IFRS whereas when preparing the Published NAV all costs are capitalised in work in progress.

Future Development Profit 

The Published NAV however, excludes the net present value of future profits that will be generated from the development projects. In order to provide transparency to shareholders as to the potential level of such future development profits that may accrue to the Company, DTZ has been asked to provide estimates of these development profits. Shareholders may then choose to discount these profits to estimate their net present value in today's terms based on current market conditions.

The forecast development profits were estimated at €33.2 million or €0.652 per share. If taken into account, the potential future NAV ("Development Profit NAV" or "DPNAV") is expected to be €2.319 per share, an increase of 6.4 per cent. (31 December 2007 restated: €2.180) in the half year to 30 June 2008. 

A break-down of the future development profit at 30 June 2008 is summarised below:

* Fabian Romania estimates

The Company continues to monitor closely its current investments to ensure they reach their full potential and all further investments are assessed as to whether they meet the set determined return on equity requirements. 

Anthony Foster

Fabian Capital Limited

26 September

Condensed consolidated interim income statement (unaudited)

For the six months ended 30 June 2008

As at 30 June 2008, 30 June 2007 and 31 December 2007 there is no difference between basic and diluted earnings per share.

Condensed consolidated interim balance sheet (unaudited)

As at 30 June 2008

Condensed consolidated interim statement of changes in equity (unaudited) 

For the six months ended 30 June 2008

Condensed consolidated interim cash flow statement (unaudited)

For the six months ended 30 June 2008

Notes to the consolidated interim financial statements (unaudited)

For the six months ended 30 June 2008

1. Reporting entity

Fabian Romania Limited (the "Company") is a company domiciled in Jersey. The condensed consolidated interim financial statements as at and for the six months ended 30 June 2008 comprise the Company and its subsidiaries (together the "Group") and the Group's interest in joint ventures.

The Company's shares are listed on the Alternative Investment Market.

The consolidated financial statements of the Group for the period ended 30 June 2008 and for the year ended 31 December 2007 are available on the Company's website www.fabianromania.com. 

2. Basis of preparation

These condensed consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standard (IAS) 34 Interim Financial Reporting. They do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 December 2007. 

The condensed consolidated interim financial statements are presented in Euro (€) rounded to the nearest thousand.

3. Estimates

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

In preparing these condensed consolidated interim financial statements, the significant judgements in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2007.

4. Financial risk management 

During the six month period ended 30 June 2008, the Group's objectives and policies in respect of financial risk management were consistent with that disclosed in the consolidated financial statements as at and for the year ended 31 December 2007.

5. Accounting policies

The accounting policies applied by the Group in these condensed consolidated financial statements were the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2007.

The following new standards, amendments to standards or interpretations are mandatory for the first time for the financial year beginning 1 January 2008 but are not currently relevant for the Group.

IFRIC 11, 'IFRS 2 - Group and treasury share transactions'.

IFRIC 12, 'Service concession arrangements'.

IFRIC 14, 'IAS 19 - the limit on a defined benefit asset, minimum funding requirements and their interaction'.

The following new standards, amendments to standards and interpretations have been issued but are not yet effective for the financial year beginning 1 January 2008 and have not been early adopted:

IFRS 8, 'Operating segments', effective for annual periods beginning on or after 1 January 2009. The Standard requires segment disclosure based on the components of the entity that management monitors in making decisions about operating matters. Operating segments are components of an entity about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. There is no expected impact from this standard.

IAS 23 (amendment), 'Borrowing costs', effective for annual periods beginning on or after 1 January 2009. The revised Standard will require the capitalization of borrowing costs that relate to assets that take a substantial period of time to get ready for use or sale. The Group has early adopted this standard in its annual financial statements as of 31 December 2007. 

IFRS 2 (amendment) 'Share-based payment', effective for annual periods beginning on or after 1 January 2009. There is no expected impact from this standard.

IFRS 3 (amendment), 'Business combinations' and consequential amendments to IAS 27, 'Consolidated and separate financial statements', IAS 28, 'Investments in associates' and IAS 31, 'Interests in joint ventures', effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. Group management is currently assessing the impact of the new requirements regarding acquisition accounting, consolidation and associates on the Group consolidated financial statements.

IAS 1 (amendment), 'Presentation of financial statements', effective for annual periods beginning on or after 1 January 2009. The revised Standard requires information in financial statements to be aggregated on the basis of shared characteristics and introduces a statement of comprehensive income. Items of income and expense and components of other comprehensive income may be presented either in a single statement of comprehensive income with subtotals, or in two separate statements (a separate income statement followed by a statement of comprehensive income). Group management is currently assessing the impact of this standard.

IAS 32 (amendment), 'Financial instruments: Presentation', and consequent amendments to IAS 1, 'Presentation of financial statements', effective for annual periods beginning 1 January 2009. The amendments introduce an exemption to the principle otherwise applied in IAS 32 for the classification of instruments as equity; the amendments allow certain puttable instruments issued by an entity that would normally be classified as liabilities to be classified as equity if and only if they meet certain conditions.  The amendments are not relevant to the Group's financial statements as none of the Group entities have in the past issued puttable instruments that would be affected by the amendments.

IFRIC 15 Agreements for the Construction of Real Estate (effective for annual periods beginning on or after 1 January 2009). IFRIC 15 clarifies that revenue arising from agreements for the construction of real estate is recognised by reference to the stage of completion of the contract activity in the following cases:

1. the agreement meets the definition of a construction contract in accordance with IAS 11.3;

2. the agreement is only for the rendering of services in accordance with IAS 18 (e.g., the entity is not required to supply construction materials); and

3. the agreement is for the sale of goods but the revenue recognition criteria of IAS 18.14 are met continuously as construction progresses.

In all other cases, revenue is recognised when all of the revenue recognition criteria of IAS 18.14 are satisfied (e.g., upon completion of construction or upon delivery).

The Group has not yet completed its analysis of the impact of the new Interpretation as this must be assessed on a contract by contract basis. 

IFRIC 16 Hedges of a Net Investment in a Foreign Operation (effective for annual periods beginning on or after 1 October 2008). The Interpretation explains the type of exposure that may be hedged, where in the group the hedged item may be held, whether the method of consolidation affects hedge effectiveness, the form the hedged instrument may take and which amounts are reclassified from equity to profit or loss on disposal of the foreign operation. The Group has not yet completed its analysis of the impact of the new Interpretation. 

6. Investment property 

At 30 June 2008, the fair value of the investment properties is based on a valuation performed by the appointed independent valuer, DTZ Echinox. The valuation method applied is the capitalisation of rental income based on the rents payable under the existing lease agreements and average market rental values.

7. Investment property under development

8. Other investments

The following loan advances were made during the six months ended 30 June 2008.

(1) No further advance to Cubic Centre Development SRL was made during the period. The increase in the balance receivable relates to interest receivable, which is accrued at the effective rate, as the advance payment is recorded at amortised cost.

(2) The Group made payments to Coltex Invest Construct SRL under the existing loan facility agreement of €2 million to fund working capital. Amounts receivable are shown after the reversal of €10,188 impairment losses previously recognised in the prior period (see note 9). 

(3)  The Group advanced loans to SCD Fabian SRL in order to fund the acquisition of land. The loan bears interest at a rate of 7 per cent. per annum and is repayable, plus any accrued interest, at maturity on 23 May 2011. Amounts receivable are shown after recognition of impairment losses of €21,518 (see note 9).

(4) The Group advanced a further €2,840,000 to their joint venture entity AIG/Lincoln Lakeview S.a.r.L in order to fund the on-going development project. These advances were granted under the existing loan agreement. Amounts receivable are shown after recognition of impairment losses of €293,000 (see note 9).

9. Investments in joint ventures

The carrying value of joint venture arrangements is detailed below:

In accordance with the Group's accounting policy on treatment of joint venture arrangements, the Group's share of losses from joint venture interests are firstly deducted from the cost of investment. Where the Group's share of losses exceeds the cost of investment, any subsequent losses are deducted from amounts receivable from the joint venture.

The Group's share of joint venture losses for the period ended 30 June 2008 have been recognised as follows:

On 28 May 2008, the Company completed the acquisition of a 50 per cent. interest in a joint venture, SCD Fabian OSM SA (incorporated in Luxembourg).

The Group has 50 per cent. interests in joint ventures Phoenix Park S.R.L., AIG/Lincoln Lakeview S.a.r.L, Coltex Invest Construct S.R.L. and SCD Fabian OSM SA whose principal activities are investment in development property, both commercial and residential.

Summary financial information for equity accounted investees, not adjusted for the percentage ownership held by the Group is presented below:

The revenue and expense items for SCD Fabian were for  the period from the date of acquiring an interest on 28 May 2008 until the period end on 30 June 2008.

10. Cash and cash equivalents

Included within cash and cash equivalents are restricted cash balances held on Escrow accounts amounting to €3,375,000 (31 December 2007: €790,000).

11. Interest bearing loans and borrowings

The Group has drawn upon all borrowing facilities in full.

12. Taxation

The Company is an "exempt company" for Jersey tax purposes so that its liability to Jersey taxation is limited to a flat fee, currently levied at £600 sterling per annum.

Tax on profits of the Group arising in Romania are computed using the tax rate of 16 per cent. (2007: 16 per cent.), both for current and deferred tax.

The total tax expense for the period is detailed below:

Movements in the net deferred tax liability are summarized below:

13. Other non-current liabilities

14. Cash generated from operations

Reconciliation of operating profit/(loss) from continuing operations to net cash flow from operating activities:

15. Related party transactions

There is an investment management agreement between the Company and Fabian Capital Limited for the day to day management of the Group. Mark Holdsworth is a Director of both Fabian Romania Limited and Fabian Capital Limited. An investment management fee is payable to the investment manager, Fabian Capital Limited. Investment Management fees are payable quarterly in advance. The fee for the period 1 January 2008 to 30 June 2008 amounted to €931,288 (1 January 2007 to 30 June 2007: €698,046 and year to 31 December 2007: €1,499,994).

During the period an agreement was entered into whereby the Investment Manager would be reimbursed for services provided to the Company in respect of the provision of management information, payment of a proportion of overheads and reimbursement of salary costs of a member of staff who works exclusively for the Group. Fees paid to the Investment Manager during the period under this services agreement amounted to €98,705 (1 January 2007 to 30 June 2007: €nil and year to 31 December 2007: €nil).

Fees paid to JTC Fund Services Limited, the Group's administrators, amounted to €119,866 for the period from 1 January 2008 to 30 June 2008 (1 January 2007 to 30 June 2007: €118,021 and year to 31 December 2007: €197,630) and have been charged to the income statement.

Stephen Burnett, Nigel Le Quesne, Philip Henry Burgin and Nigel Charles Syvret are directors of both the Company and Jersey Trust Company. Directors' fees paid in the period were €77,087 (six months to 30 June 2007: €30,000 and year to 31 December 2007: €174,823).

16. Joint Venture Agreements

On 28 May 2008, the Company completed the acquisition of a 50 per cent.interest in a joint venture, SCD Fabian OSM (incorporated in Luxembourg), which acquired two sites known as Oradea and Satu Mare and located in western Romania. The acquisition price of the two sites amounts to €3,100,000.

17. Acquisition of assets and liabilities

On 7 March 2008, the Company completed the acquisition of 100 per cent. of the share capital HIL Investitii & Constructii S.R.L which has a site on Dacia Boulevard at an acquisition price for €2,537,126 of which €50,000 has been paid to date. The acquisition note is set out below.

As at the date of acquisition, HIL Investitii & Constructii was not a business as defined by IFRS 3 and therefore the acquisition of 100 per cent. of the interest in the subsidiary was not considered a business combination, but rather an acquisition of assets and liabilities. The excess of consideration payable over the net assets acquired has been allocated to the land as detailed in note 6. No deferred tax has been recognised for the above acquisition.

From the date of acquisition to 30 June 2008, the acquisition contributed an operating loss of €226,000 after foreign exchange gains and interest. If the acquisition had been made at the beginning of the financial year the contribution towards operating losses would have been the same as the company was inactive.

18. Commitments and contingencies

On 7 March 2008, the Company completed the acquisition of 100 per cent. of HIL Investitii & Constructii S.R.L.. HIL Investitii & Constructii is committed to meet development costs of €6,250,000 until construction is complete, of which €646,000 has already been paid.

Those commitments and contingencies which existed at 31 December 2007 remain unchanged.

19. Earnings per share

The calculation of basic and diluted earnings per share at 30 June 2008 was based on the loss attributable to ordinary shareholders of €1,138,000 (30 June 2007: profit of €2,889,000 and 31 December 2007: profit of €6,080,000) and a weighted average number of shares of 50,831,130 (30 June 2007: 50,831,130 shares and 31 December 2007: 50,831,130 shares).

20. Subsequent events

In the opinion of the directors no events occurred after the balance sheet date which require to be disclosed.

Availability of interim report

Copies of the Interim report will be available to the public free of charge from the office of the Company's investment manager at Fabian Capital Limted, 52 Berkeley Square, London W1J 5BT. A copy of the Interim statement will also be made available on the Company's website, www.fabianromania.com.

The directors of Fabian accept responsibility for the information contained in this announcement. To the best of the knowledge and belief of the directors of Fabian (who have taken all reasonable care to ensure that such is the case) the information contained in this announcement is in accordance with the facts and does not omit anything likely to affect the import of such information.