Interim Results

HIGHLIGHTS

Property valued by DTZ Debenham Tie Lung at £27.0 million, an increase of 8%.

Net asset value at 30 June 2008 of £23.2 million, 119.88p per share, an increase of 1% per share from 31 December 2007.

Loss for the six months ended 30 June 2008 of £12,000, equal to 0.06p per share.

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 2008.

Results and operations

In what were difficult trading conditions, the Group suffered a net loss for the six month period ended 30 June 2008 of £12,000 (2007: profit of £2.0 million), representing a loss per Ordinary Share of 0.06p. The consolidated net asset value at 30 June 2008 was £23.2 million (119.88p per Ordinary Share).

The Group purchased one small new property during the six month period and utilised its funds to try to maximise the value of its existing properties through ongoing refurbishment. This has proved to be a profitable strategy with the fair value of the Group's properties, as valued by DTZ Debenham Tie Leung, increasing by £2.1 million, an uplift of £0.6 million during the six month period, excluding additions and foreign exchange movements.

In line with the Admission Document, the Group did not hedge the exchange rate risk, which increased the Group's income for the six month period by £0.6 million.

Share buybacks

The price of the Ordinary Shares has suffered from current market sentiment, falling 15.50p during the six month period to 77.00p at 30 June 2008 (a discount to net asset value of 36%). During the six month period the Board bought back 608,750 Ordinary Shares (at an average price of 81.66p) for £497,094, instead of paying a dividend, to try to narrow the discount of the share price to net asset value. The share price initially rose from 69.25p on 1 May, when we announced that we would buy back shares, to 85p during May, when we were buying back shares. However, at the time of writing, general market conditions have resulted in the share price falling further to 59.50p, a 50% discount to the 30 June 2008 net asset value. We expect world equity markets to continue to suffer difficult trading conditions in the medium-term. Therefore, we will keep under active review the relative merits of further share buy backs against the payment of cash dividends.

Raising further equity

In my last statement I reported that we continued to explore ways to increase the equity base of the Company. However, due to the depressed equity market conditions, which are expected to persist for some months, we were not able to raise further equity. We continue to monitor this situation with our advisers and will seek to raise additional funds when conditions allow.

Outlook

We still believe that the Turkish property market in particular remains positive and that excellent opportunities still exist to acquire further properties in prime locations. The Bulgarian, Romanian and Turkish property markets have not followed the same recent downturn as the UK property market. Although the Board and its advisers believe that the global economic downturn will feed through to the property markets of the Target Countries, we do not anticipate that these markets will suffer to the same extent as has been experienced elsewhere.

Charles Parkinson

Chairman

25 September 2008

PROPERTY MANAGER'S REPORT

Strategy and Overview

With the various uncertainties in the markets, the Group has continued to focus on the consolidation and management of its properties during the first half of 2008.

While the loss of confidence in property in the UK and some other European countries has not carried over to the Target Countries to the same extent, the lack of continuing foreign investment into property in the Target Countries and political uncertainty in Turkey is beginning to slow growth in the property sector. This is more noticeable in Romania and Bulgaria where the European perspective is greater. In Turkey the greater impact has been the political uncertainty where the Governing Party was being challenged by the Secular orientated Higher Courts. The Court ultimately did not rule against the ruling AK Party ("AKP") but has tried to warn it against potential anti-secular activity continuing.

Half year highlights are the completion of George Washington Street, Sofia and the letting of that same building to the United Bulgarian Bank and Bulgarian Property Management. The Group has also completed further consolidating purchases in Beyoglu, Istanbul and continued to progress with existing projects in the same vicinity.

A combination of the above refurbishment and asset management initiatives and continued underlying growth in the target markets has led to the Property Portfolio being valued at levels above the figures for 31 December 2007. This growth compares favourably with the downturns experienced in other European locations and the falling NAVs of many AIM listed European funds.

Notwithstanding the relative success to-date of the Portfolio, it is likely that the Group will be affected to some extent by the enormous weight of uncertainty over the current credit crisis and the downturn in the wider global market. In Turkey, retailers in some of the new malls have already acted together to try to force rent concessions from the landlords. In Bucharest, Romania the lack of foreign investment in land has halted residential development schemes, whilst in Bulgaria commercial development activity around Sofia Airport appears to have slowed considerably.

The US$17.5 million facility was drawn down in full in December 2007 and at 30 June 2008 the Group's gearing was 37.8% (12.4% after accounting for cash and cash equivalents). At 30 June 2008 the Group had £5.9 million of cash and cash equivalents, a proportion of which is available for further purchases.

Property Portfolio

Progress has been made with the Group's refurbishment projects; George Washington Street, Sofia being the most noticeable change from a 'development in progress' to a 'finished investment'. In addition, substantial progress has been made with the legal case at 401 Istiklal Street, Istanbul and ongoing refurbishment work at Markiz Passage and Nil Passage.

DTZ has valued the following properties as at 30 June 2008 at a total equivalent to £26,995,000, an increase of £2,059,000 from 31 December 2007.

Current Holdings

Bulgaria

24 George Washington Street, Sofia

Office

Romania

Transalkim Warehouse, S Bucharest

Industrial

Turkey

134-39, Susam Street, Cihangir, Istanbul

Leisure/Office/ Residential

6th Floor, The Misir Building, Istiklal Street, Beyoglu, Istanbul

Office

Ravouna Apts, 401 Istiklal Street, Beyoglu, Istanbul

Office/Retail

Markiz Passage, Istiklal Street, Beyoglu, Istanbul

Leisure/Office/Retail

Nil Passage, Istiklal Street, Beyoglu, Istanbul

Leisure/Office/ Retail

Pera Residence, Asmalimescit Street, Beyoglu, Istanbul

Retail

'Yellow' Building, Asmalimescit Street, Beyoglu, Istanbul

Retail

Gonul Sokak, Pera, Beyoglu, Istanbul

Retail/Office

The properties in detail are:-

24 George Washington Street, Sofia, Bulgaria

(Office)

This building has been completed and let to the United Bulgarian Bank and Bulgarian Property Management.

Transalkim Warehouse, S Bucharest, Romania

(Industrial)

The property remains let to Transalkim. Transalkim has plans to relocate at the end of the lease in January 2010 but it is having difficulties procuring the redevelopment of its new site.

134-39 Susam Street, Cihangir, Istanbul, Turkey

(Leisure/Office/Residential)

The Annex is let to a Restaurant, which appears to be trading well, and the top floors are let to a 'Next' executive. The ground floor and basement is let to a marketing company. The Group is marketing the remaining space as offices.

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

(Office)

The property remains let to Electronik and Propaganda.

Ravouna Apartments, 401 Istiklal Street, Beyoglu, Istanbul, Turkey

(Office/Retail)

Following a delay in obtaining fire regulations consent, our application to the High Court for possession on grounds of redevelopment has been filed. Also a legal case is ongoing which, if the outcome is favourable, would increase the rent currently payable by the tenant on the ground floor. The hearings are expected to conclude by Spring 2009.

Markiz Passage, Istiklal Street, Beyoglu, Istanbul, Turkey

(Leisure/Office/Retail)

It has been difficult to find a suitable leisure operator to lease the middle floor. Therefore, with the increasing demand and growth in rental for offices in Istiklal Street, the Property Manager is reviewing the potential to let more space in the building for office use.

Nil Passage, Istiklal Street, Beyoglu, Istanbul, Turkey

(Leisure/Office/Retail)

The external facades of this building have been restored and the property is being incrementally improved, while rents from individual office suites continue to be collected.

Pera Residence, Asmalimescit Street, Beyoglu, Istanbul, Turkey

(Retail)

This property is let to an upmarket restaurant operator offering French cuisine.

'Yellow' Building, Asmalimescit Street, Beyoglu, Istanbul, Turkey

(Retail)

We are considering redeveloping the building, including the addition of extra floors, which would be subject to Municipality consents.

Gonul Sokak, Pera, Beyoglu, Istanbul, Turkey

(Retail/Office)

This property, which was purchased recently, has been renovated and is available to let as a restaurant.

REGIONAL OVERVIEW

Romania

Romania's Central Bank is predicting that inflation will reach a higher than expected 6.6% for 2008, with forecasts for 2009 of 4.2%. This is higher than previously suggested and may be due to a weakening in the national currency (the Lei).

Despite the turmoil in international markets, Romania experienced economic growth four times higher than the European Union ("EU") average for the first quarter of this year, growing by 8.2%. However, it is predicted that annual growth will be in the region of 6%, which could be maintained up until 2020.

On the negative side, the EU is applying pressure on Romania to accelerate structural reforms and fiscal consolidation.

Bulgaria

A combination of factors has led to the Bulgarian Government accumulating record budget surpluses. In addition, GDP growth in Bulgaria for the first half of 2008 reached a record of 7% and unemployment fell steadily from 18%, in 2003, to 8%, in 2008.  However, the economy is still considered to be at risk to the global downturn and rising prices have resulted in inflation of 13%, well above the Bulgarian Government's 4.5% target. With a pegged currency and therefore limited monetary options available to the Bulgarian National Bank there may be little that the Bulgarian Government will be able to do to rein in inflation significantly this year.

The main right wing political parties in the Bulgarian opposition are calling for early elections citing the Bulgarian Government's inability to address organised crime and corruption. The EU has frozen hundreds of millions of Euros in aid to the country in order to put pressure on the Government in this regard.

Turkey

Turkey has undergone considerable political turmoil in the first half of 2008 as challenges were made regarding the Governing party (AKP) and its senior ministers' approach to secularism. However, the Judiciary in Ankara eventually ruled out banning the party and instead imposed a restriction on its funding over the coming year. This effectively amounted to a warning over its potential anti-secular activity.

Since the ruling the AKP appear (according to national polls) to have become more popular as stability has returned to the country.

Inflation appears to have peaked at close to 12% mid year, but overall GDP growth is around 4%.

The property markets have slowed following further moves to curtail foreign property ownership after the Judiciary became concerned that the previous legal controls were not working. New legislation is now in place, one outcome of which is that foreign owned companies, as well as private individuals, require clearance for property purchases. This may affect the pace of change, but we see this as potentially beneficial as 'hype' continues to prevail in respect of certain owners' views on the value of their properties when coming to sell.

As indicated previously in the 'Strategy and Overview', prominent retailers have got together in the new shopping malls to complain that their rents are too high which has resulted in concessions being given by the owners at some locations. The impact on the High Street is not clear and certainly rents currently remain buoyant on Istiklal Street, Beyoglu where the Group is focused.

Prospects

The Managers remain positive about the overall position of the Group. While it is likely that the wider economic downturn in the global markets and various local issues will feed through to the property market, we do not anticipate the collapse in values experienced elsewhere. Indeed the supply of space in the restricted urban city centres may slow as the pace of regeneration reduces which will, in turn, maintain rental values. This is becoming evident in the office market in Beyoglu, Istanbul, whereas all of the new shopping malls built in Turkey in the last few years are exhibiting signs of over-supply.

Therefore, the Group will remain committed to investing in existing urban centres, where there is a natural restriction to the provision of supply, and where it can employ its skills to contribute to the regeneration of the historic building fabric.

Bob Locker

CNC Property Fund Management Limited

(formerly Collins Stewart Property Fund Management Limited)

Keiran Gallagher

Oliver Cadogan

Active Property Investments Limited

25 September 2008

CONDENSED CONSOLIDATED HALF YEARLY INCOME STATEMENT

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

01 January 2008

 to 30 June 2008 

01 January 2007 to 30 June 2007

(unaudited)

(unaudited)

£'000

£'000

Income

Rent receivable

671

191

Bank interest receivable

164

114

Movement in unrealised gain on revaluation of investment properties

609

3,004

Gain on foreign currency exchange

532

-

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

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

Total income

1,976

3,309

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

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

Expenses

Administrator's fees

(62)

(64)

Management fees

(283)

(179)

Performance fees

(213)

(200)

Other operating expenses 

(519)

(271)

Finance expenses

(384)

-

Loss on foreign currency exchange

-

(261)

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

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

Total expenses

(1,461)

(975)

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

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

Net profit from operating activities

515

2,334

Taxation

(527)

(343)

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

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

(Loss)/profit for the six month period

(12)

1,991

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

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

Earnings per share - basic and fully diluted

(0.06)p

9.96p

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

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

CONDENSED CONSOLIDATED HALF YEARLY STATEMENT OF CHANGES IN EQUITY

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

Share capital

Distributable reserves 

Non-distributable reserves

Foreign exchange translation reserve

Total

£'000

£'000

£'000

£'000

£'000

Net assets at 31 December 2007

200

17,573

5,358

606

23,737

Profit/(loss) for the six month period

-

259

(271)

-

(12)

Purchase of own shares

-

(497)

-

-

(497)

Foreign exchange movement

-

-

-

19

19

----------

----------

----------

----------

----------

Net assets at 30 June 2008

200

17,335

5,087

625

23,247

----------

----------

----------

----------

----------

CONDENSED CONSOLIDATED HALF YEARLY STATEMENT OF CHANGES IN EQUITY

for the six month period ended 30 June 2007 (unaudited)

Share capital

Distributable reserves 

Non-distributable reserves

Total

£'000

£'000

£'000

£'000

Net assets at 31 December 2006

200

18,415

2,112

20,727

(Loss)/profit for the six month period

-

(423)

2,414

1,991

----------

----------

----------

----------

Net assets at 30 June 2007

200

17,992

4,526

22,718

----------

----------

----------

----------

CONDENSED CONSOLIDATED HALF YEARLY BALANCE SHEET

as at 30 June 2008 (unaudited)

30 June 2008

31 December 2007

(unaudited)

(audited)

£'000

£'000

Non-current assets

Freehold investment property

26,995

24,936

Property, plant and equipment

174

196

Advances for fixed assets

24

28

Intangible assets

13

13

Deferred tax assets

149

148

----------

----------

27,355

25,321

Current assets

Trade and other receivables 

1,633

1,888

Tax assets

21

14

Cash and cash equivalents

5,908

8,008

----------

----------

7,562

9,910

----------

----------

Total assets

34,917

35,231

----------

----------

Current liabilities

Trade and other payables

(1,864)

(1,869)

Overseas corporate tax

(68)

(89)

----------

----------

(1,932)

(1,958)

Non-current liabilities

Rents received in advance

(175)

(166)

Deferred tax liabilities

(783)

(621)

Bank loans

(8,780)

(8,749)

----------

----------

(9,738)

(9,536)

----------

----------

Total liabilities

(11,670)

(11,494)

----------

----------

Net assets

23,247

23,737

----------

----------

Capital and reserves

Called-up share capital

200

200

Distributable reserves

17,335

17,573

Non-distributable reserves

5,087

5,358

Foreign exchange translation reserve

625

606

----------

----------

Total equity shareholders' funds

23,247

23,737

----------

----------

Net Asset Value per Ordinary Share

 - basic and fully diluted

119.88p

118.69p

----------

----------

CONDENSED CONSOLIDATED HALF YEARLY CASH FLOW STATEMENT

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

01 January 2008 to 30 June 2008 

01 January 2007 to 30 June 2007

(unaudited)

(unaudited)

£'000

£'000

Net profit from operating activities

515

2,334

Adjustments for:

Interest payable

384

-

Interest receivable

(164)

(114)

Gain on revaluation of investment properties

(609)

(3,004)

(Gain)/loss on foreign currency exchange

(532)

261

Depreciation and amortisation

23

14

----------

----------

Net cash outflow from operating activities before working capital changes

(383)

(509)

Increase in trade and other receivables 

(14)

(579)

(Decrease)/increase in other payables

(230)

1,117

Increase in other non-current liabilities

9

33

Interest received in the six month period

164

117

Interest paid in the six month period

(364)

-

Tax paid in the six month period

(396)

(16)

----------

----------

Net cash (outflow)/inflow from operating activities

(1,214)

163

Investing activities

Acquisition and development of investment property

(522)

(6,192)

----------

----------

Net cash outflow from investing activities

(522)

(6,192)

Financing activities

Purchase of own shares to be held in treasury

(497)

-

----------

----------

Net cash outflow from financing activities

(497)

-

----------

----------

Decrease in cash and cash equivalents

(2,233)

(6,030)

----------

----------

Cash and cash equivalents at beginning of six month period

8,008

6,439

Decrease in cash and cash equivalents

(2,233)

(6,030)

Foreign exchange movement

133

1,293

----------

----------

Cash and cash equivalents at end of six month period

5,908

1,702

----------

----------