Half Yearly Report

KEY POINTS

Net asset value at 30 June 2009 of £20.4 million, 105.42p per share, a decrease of 17% (21.79p per share) from 31 December 2008.

Loss for the period ended 30 June 2009 of £3.5 million, equal to 17.90p per share.

Property valued by DTZ Debenham Tie Leung at £26.4 million (31 December 2008: £31.2 million).

Loss on revaluation of investment properties (after accounting for the foreign exchange loss) of £5.3 million.

For further information please visit the www.eepfl.com or contact:

Azhic Basirov / Siobhan Sergeant

Smith & Williamson Corporate Finance Ltd

Tel: +44 207 131 4000

Steve Pearce / Simon Stillwell

Liberum Capital Limited

Tel: +44 203 100 2000

Bob Locker

CNC Property Fund Management Ltd

Tel: +44 1784 424 784

Keiran Gallagher / Ollie Cadogan

Active Property Investments Ltd

Tel: +44 1481 731 987

CHAIRMAN'S STATEMENT

I am pleased to present the half yearly results of the Group for the six month period ended 30 June 2009.

Results and operations

The Group suffered a net loss for the six month period ended 30 June 2009 of £3.5 million (June 2008: loss of £12,000), representing a loss per Ordinary Share of 17.90p (June 2008: loss of 0.06p). The majority (£2.0 million) of this loss was attributable to adverse movements in the US Dollar and the Euro against Sterling.

In line with the terms of the Admission Document, the Group does not hedge exchange rate risk at this time.  As a result, during the period, the Group suffered net foreign exchange losses of £2.8 million (including a loss of £3.5 million, which is included in the movement in unrealised gain on revaluation of investment properties).

The consolidated net asset value at 30 June 2009 was £20.4 million, 105.42p per Ordinary Share (December 2008: £24.7 million, 127.21p per Ordinary Share).

Property

During the period, the Group purchased one small property in Turkey and continued to refurbish the Turkish portfolio to maximise the value of its assets. As mentioned in our previous annual report, the Board and its advisers believe that, due to the investment opportunities available and the better financial and political stability in Turkey than in Romania or Bulgaria, the Group's resources are best employed investing in Turkey. The Group has begun to benefit from its strategy of focusing on the refurbishment of property in Turkey, with rental income for the period increasing by 28%, compared to the same period in 2008.

Property prices in the Group's Target Countries continued to decline during the period and the Group suffered a loss on the revaluation of investment properties of £5.3 million (including a foreign exchange loss of £3.5 million). Further details of the properties are disclosed in the Property Manager and Adviser's Report.

Dividend

The Board considers it prudent to conserve funds and does not propose an interim dividend for the period ended 30 June 2009. The Board expects that the income position of the Group will continue to strengthen as refurbished properties are let and will regularly review its ability to generate a sustainable dividend.

Structure

I mentioned in my last report that the Board had taken steps to implement a more streamlined and efficient structure. The Group has already benefitted from these initial steps in the form of reduced costs, with operating expenses (excluding the performance fee and interest payable) being reduced by 14% from those incurred in the comparable period in 2008. Of particular note was the reduction in administration and building maintenance fees in Turkey, which decreased by 49% from £221,000, for the comparable period in 2008, to £114,000 for the period ended 30 June 2009.

The Board and its advisers believe that the Group would benefit from additional funding and, although there have been few opportunities available in the current economic climate, we continue to explore various strategic options to maximise shareholder value.

Outlook

At 30 June 2009, the Group held property with a fair value of £26.4 million and had £2.8 million of cash, available to use as working capital and for the refurbishment of properties, and an additional £2.4 million, which has been pledged to HSBC but can be used to purchase additional property in Turkey. The Board and its advisers believe that the Group will be able to weather any further short-term downturn in the valuation of its portfolio and will utilise the funds that it currently has available to secure the best medium-term returns for shareholders.  The Group's strategy is to consolidate and to build on the current portfolio in Istanbul and to purchase additional properties in Istanbul as suitable opportunities arise.

Charles Parkinson

Chairman

10 September 2009

24 George Washington Street, Sofia, Bulgaria (Leisure/Office)

The United Bulgarian Bank is in occupation under a lease for approximately 50% of the building.

Although Bulgaria Property Management has sub-let the ground floor to the Bulgarian National Art Centre, which was officially opened in March 2009, and other parts of the upper floors, it is having difficulty maintaining occupancy throughout its leased areas of the building. The Group has provided assistance to Bulgaria Property Management in order to help it in the current difficult conditions.

Transalkim Warehouse, Gara Progresului Street, S. Bucharest, Romania (Industrial)

The property is let to Transalkim, which remains in occupation under a lease due to expire in January 2010. The premises are being marketed as the tenant has indicated that it will leave at the end of its term.

Kadife Palas Building, 134-139 Susam Street, Cihangir, Istanbul, Turkey (Leisure/Office/Residential)

During the period the Group let the remainder of this property. The main restaurant tenant continues to trade well.

6th Floor, The Misir Building, Istiklal Street, Beyoglu, Istanbul, Turkey (Office)

The property remains fully let to Electronik and Propaganda.

Ravouna Apartments, 401 Istiklal Street, Beyoglu, Istanbul, Turkey (Office/Retail)

As mentioned in the previous year end report, the Group had won its possession case against Mudo, the tenant on the ground floor. However, during the period, Mudo appealed to the High Court in Ankara and the Group will now have to wait until late autumn for the result of the hearing. As a result, the Group has not yet been able to proceed with its major renovation proposals for this property.

Markiz (Oriental) Passage, Istiklal Street, Beyoglu, Istanbul, Turkey (Leisure/Office/Retail)

The major tenants remain in occupation and have reported that they are trading well compared to last year. Minor improvements were made to the fabric of the building and the coffee shop was replaced by a casual-style restaurant, resulting in a five-fold increase in footfall in the building.

Negotiations for the letting of the remaining space in all the upper floors are taking place with a single tenant.

Nil Passage, Istiklal Street, Beyoglu, Istanbul, Turkey (Leisure./Office/Retail)

The smaller internal units have been completely vacated and the Group is proceeding with the renovation of the premises.

Pera Residence, Asmalimescrit Street, Beyoglu, Istanbul, Turkey (Retail)

The single restaurant tenant remains in occupation.

"Yellow" Building, Asmalimescrit Street, Beyoglu, Istanbul, Turkey (Retail)

Proposals for the redevelopment of the building, including the addition of two extra floors, have been submitted to the Building Conservation Committee and the local municipality. The Group is in continuing dialogue with these parties in respect of the proposals.

Gonul Sokak, Asmalimescrit Street, Beyoglu, Istanbul, Turkey (Retail/Office)

During the period the Group let the remaining space and this building is now fully let.

Taka Building, Asmalimescrit Street, Beyoglu, Istanbul, Turkey (Retail)

The Taka Building is a small retail unit, which was purchased early in the period. Following minor refurbishment it has been let.

Regional Overview - Romania

Compared to the same period in 2008, GDP registered a fall of 8.8% in the second quarter of 2009 and 7.6% in the first half of the year (source: National Institute of Statistics Romania). That second quarter fall represents the fourth highest decline in the European Union, which experienced an average decline of 4.8% over the same period.

The value of major real estate transactions concluded on the Romanian market in the first half of 2009 fell by 92%, from €815 million in the first six months of 2008 to just €62 million in the first half of this year, while the rented office lettings market shrank by 60%, according to data from Cushman & Wakefield and Jones Lang LaSalle.

The total volume of property investment in Romania in the first half of 2009 was the smallest in the last five years and was only one-third of the total investment in the second half of 2008 (source: CBRE Romania).

The first instalment of €5 billion of the stand-by agreement with the International Monetary Fund ("IMF"), signed in early 2009 - worth a total of €12.95 billion, was transferred to the National Bank of Romania in May 2009. It is hoped that these funds will help to stimulate the economy, including the property market.

The presidential election will be held in Romania in November 2009. A poll by CURS has indicated that the incumbent Traian Basescu (with 33% of the votes) may retain the presidency but his lead over Mircea Geoana has been trimmed from 12% to 6% in recent months. If no candidate garners more than 50% of the vote in the first round, a run-off between the top two candidates will take place within fourteen days. It is unlikely that the outcome would have a significant impact on either the Romanian economy or the Group.

Regional Overview - Bulgaria

Bulgaria's real GDP growth is forecast to contract by 5.3% in 2009, following estimated growth of 6% in 2008, according to the latest forecast of the Economist Intelligence Unit.

Actual real estate deals have decreased by 42% in Bulgaria and 58% in Sofia for the first six months of 2009, compared to the corresponding period in 2008, according to a research conducted by Raiffeisen Imoti.

A new government led by the charismatic former mayor of Sofia, Boyko Borisov and his new centre-right party, Citizens for European Development of Bulgaria, is claiming to fight the corruption and maladministration, which had previously led to funding from the European Union being frozen. 

Regional Overview - Turkey

While the Turkish economy has been reported as being one of the worst hit in terms of GDP contraction, it has been recognised as coming through the global crisis better than other emerging economies. Not a single Turkish bank has required support as they have few toxic assets and limited mortgage exposure. Also, suggestions that Turkish companies that borrowed heavily abroad would have serious problems following the devaluation of the Turkish Lira in 2008 have not yet proved correct.

There is still pressure for the Turkish Government to take up a US$13 billion facility from the IMF as it is believed this will reinforce fiscal stability. However, Mr Erdogan, the country's Prime Minister, is reluctant to use this facility. Some economists support this approach as the economy has shown signs of robustness which suggests that survival without the IMF support may be possible.

Merrill Lynch has recently forecast that Turkish GDP will grow by an average of 4.5% per annum between 2010 and 2019.

Although the Justice and Development Party ("AKP") experienced a drop in support in the March 2009 election for the first time since coming to power in 2002, there is now greater political stability in Turkey than has been the case in recent years and this may help Mr Erdogan's conservative approach to the IMF.

The Turkish Lira has stabilised and recovered against the US Dollar and this appears to have provided greater confidence that the economy will improve, despite the dramatic contraction in GDP in the latter half of 2008 and early 2009.

Prospects

It is likely that there will be a further decline in property values in Romania and Bulgaria in the second half of 2009. While Turkish property may also be affected, it is anticipated that the value of the Group's property in Turkey will remain stable in US Dollar terms as confidence in the Turkish economy improves and the Group continues to benefit from the location of its property in this country, relative to other areas.

Although the yields may continue to increase in Bulgaria and Romania, the scarcity of comparable quality properties (in Sofia in particular) should limit the impact of negative trends on valuations going forward. Therefore, while it would be prudent to acknowledge that further declines in value may occur, it is anticipated that the rental income of the Group will continue to grow and that, in the medium-term, the Group's property values will once again increase.

Bob Locker

CNC Property Fund Management Limited

Keiran Gallagher

Oliver Cadogan

Active Property Investments Limited

10 September 2009

CONDENSED CONSOLIDATED HALF YEARLY STATEMENT OF COMPREHENSIVE INCOME

for the six month period ended 30 June 2009 (unaudited)

1 Jan 2009

 to 30 Jun 2009 

1 Jan 2008

 to 30 Jun 2008 

1 Jan 2008

 to 31Dec 2008

(unaudited)

(unaudited)

(audited)

£'000

£'000

£'000

Income

Rent receivable

857

671

1,499

Bank interest receivable

38

164

261

Other income

14

-

36

------------

------------

------------

Total income

909

835

1,796

------------

------------

------------

Expenses

Administration fees

(62)

(62)

(125)

Management fees

(318)

(283)

(571)

Performance fee

-

(213)

(475)

Interest payable and similar charges

(242)

(384)

(712)

Other operating expenses 

(364)

(519)

(987)

------------

------------

------------

Total expenses

(986)

(1,461)

(2,870)

------------

------------

------------

Investment gains and losses

(Loss)/gain on revaluation of investment properties

(5,348)

1,148

4,866

------------

------------

------------

Total investment (loss)/gain

(5,348)

1,148

4,866

------------

------------

------------

Net (loss)/profit from operating activities before gains and losses on foreign currency exchange

(5,425)

522

3,792

Gain/(loss) on foreign currency exchange

1,473

(7)

(2,023)

------------

------------

------------

Net (loss)/profit from operating activities

(3,952)

515

1,769

Taxation

480

(527)

(653)

------------

------------

------------

(Loss)/profit for the period/year 

(3,472)

(12)

1,116

Other comprehensive (loss)/income

Exchange differences arising from translation of foreign operations

(754)

19

312

------------

------------

------------

Total other comprehensive (loss)/income

(754)

19

312

------------

------------

------------

Total comprehensive (loss)/income for the period/year

(4,226)

7

1,428

------------

------------

------------

(Loss)/earnings per share - basic and fully diluted

(17.90)p

(0.06)p

5.68p

------------

------------

------------

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the six month period ended 30 June 2009 (unaudited)

Share capital

Reserve for own shares

Distributable reserves 

Foreign exchange translation reserve

Total

£'000

£'000

£'000

£'000

£'000

Net assets at 31 December 2008

200

(497)

24,047

918

24,668

Loss for the six month period

-

-

(3,472)

-

(3,472)

Other comprehensive income

-

-

-

(754)

(754)

----------

----------

----------

----------

----------

Net assets at 30 June 2009

200

(497)

20,575

164

20,442

----------

----------

----------

----------

----------

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the six month period ended 30 June 2008 (unaudited)

Share capital

Reserve for own shares

Distributable reserves 

Non-distributable reserves

Foreign exchange translation reserve

Total

£'000

£'000

£'000

£'000

£'000

£'000

Net assets at 31 December 2007

200

-

17,174

5,757

606

23,737

Profit/(loss) for the six month period

-

-

259

(271)

-

(12)

Other comprehensive income

-

-

-

-

19

19

Purchase of own shares for treasury

-

(497)

-

-

-

(497)

----------

----------

----------

----------

----------

----------

Net assets at 30 June 2008

200

(497)

17,433

5,486

625

23,247

----------

----------

----------

----------

----------

----------

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 December 2008 (audited)

Share capital

Reserve for own shares

Distributable reserves 

Non-distributable reserves

Foreign exchange translation reserve

Total

£'000

£'000

£'000

£'000

£'000

£'000

Net assets at 31 December 2007

200

-

17,174

5,757

606

23,737

Profit for the year

-

-

1,116

-

-

1,116

Other comprehensive income

-

-

-

-

312

312

Re-designation of non-distributable reserves

-

-

5,757

(5,757)

-

-

Purchase of own shares for treasury

-

(497)

-

-

-

(497)

----------

----------

----------

----------

----------

----------

Net assets at 31 December 2008

200

(497)

24,047

-

918

24,668

----------

----------

----------

----------

----------

----------

 CONDENSED CONSOLIDATED HALF YEARLY STATEMENT OF FINANCIAL POSITION

as at 30 June 2009 (unaudited)

30 June 2009

30 June 2008

31 Dec 2008

(unaudited)

(unaudited)

(audited)

£'000

£'000

£'000

Non-current assets

Freehold investment property

26,380

26,995

31,205

Property, plant and equipment

36

174

39

Advances for fixed assets

-

24

15

Intangible assets

11

13

12

Deferred tax assets

11

149

-

Cash pledged to bank

2,430

-

-

----------

----------

----------

28,868

27,355

31,271

Current assets

Trade and other receivables 

719

1,633

1,101

Tax assets

34

21

57

Cash and cash equivalents

2,764

5,908

6,428

----------

----------

----------

3,517

7,562

7,586

----------

----------

----------

Total assets

32,385

34,917

38,857

----------

----------

----------

Current liabilities

Trade and other payables

(723)

(1,864)

(927)

Overseas corporate tax

(53)

(68)

(98)

Bank loan

-

-

(11,932)

----------

----------

----------

(776)

(1,932)

(12,957)

Non-current liabilities

Rents received in advance

(225)

(175)

(217)

Deferred tax liabilities

(320)

(783)

(968)

Bank loan

(10,582)

(8,780)

-

Other provisions and payables

(40)

-

(47)

----------

----------

----------

(11,167)

(9,738)

(1,232)

----------

----------

----------

Total liabilities

(11,943)

(11,670)

(14,189)

----------

----------

----------

Net assets

20,442

23,247

24,668

----------

----------

----------

Capital and reserves

Called-up share capital

200

200

200

Reserve for own shares

(497)

-

(497)

Distributable reserves

20,575

16,936

24,047

Non-distributable reserves

-

5,486

-

Foreign exchange translation reserve

164

625

918

----------

----------

----------

Total equity shareholders' funds

20,442

23,247

24,668

----------

----------

----------

Net Asset Value per Ordinary Share

 - basic and fully diluted

105.42p

119.88p

127.21p

----------

----------

----------

 CONDENSED CONSOLIDATED HALF YEARLY STATEMENT OF CASH FLOWS

for the six month period ended 30 June 2009 (unaudited)

1 Jan 2009 to 30 Jun 2009 

1 Jan 2008 to 30 Jun 2008 

1 Jan 2008 to 31 Dec 2008

(unaudited)

(unaudited)

(audited)

£'000

£'000

£'000

Net (loss)/profit from operating activities

(3,952)

515

1,769

Adjustments for:

Bank interest receivable

(38)

(164)

(261)

Loss/(gain) on revaluation of investment properties

5,348

(1,148)

(4,866)

(Gain)/loss on foreign currency exchange

(1,473)

7

2,023

Depreciation and amortisation

12

23

(10)

Interest payable

242

384

660

----------

----------

----------

Net cash inflow/(outflow) from operating activities before working capital changes

139

(383)

(685)

Decrease/(increase) in trade and other receivables 

264

(14)

(166)

(Decrease)/increase in other payables

(40)

(230)

85

(Decrease)/increase in other non-current liabilities

(96)

9

98

Interest received in the six month period/year

38

164

261

Interest paid in the six month period/year

(231)

(364)

(439)

(Tax paid)/tax refund received in the six month period/year

(95)

(396)

107

----------

----------

----------

Net cash outflow from operating activities

(21)

(1,214)

(739)

Investing activities

Acquisition and development of investment property

(537)

(522)

(2,288)

Purchase of property, plant and equipment

-

-

(10)

----------

----------

----------

Net cash outflow from investing activities

(537)

(522)

(2,298)

Financing activities

Cash pledged to bank

(2,430)

-

-

Purchase of own shares to be held in treasury

-

(497)

(497)

----------

----------

----------

Net cash outflow from financing activities

(2,430)

(497)

(497)

----------

----------

----------

Decrease in cash and cash equivalents

(2,988)

(2,233)

(3,534)

----------

----------

----------

Cash and cash equivalents at beginning of the period/year

6,428

8,008

8,008

Decrease in cash and cash equivalents

(2,988)

(2,233)

(3,534)

Foreign exchange movement

(676)

133

1,954

----------

----------

----------

Cash and cash equivalents at end of period/year

2,764

5,908

6,428

----------

----------

----------