RomReal Ltd. — Interim / Quarterly Report 2010

Nov 12, 2010

REPORT FOR THE THIRD QUARTER 2010

12 November 2010

Page 1 of 9

RomReal Ltd

Highlights: Q3 2010

• Statutory Net Asset Value (NAV) under IFRS was EUR 0.81 (NOK 6.6) per share at the end of Q3 2010, a decline of 2.4% compared to the end of Q2 2010.
• Pre-tax loss in Q3 2010 of EUR 173,000. Total assets at the end of Q3 2010 were EUR 55.59 million.
• The Company's cash position at the end of Q3 was EUR 2.57 million. Payroll expenses were 20% less compared to Q2 2010, following a further reduction in the number of employees, to five (5).
• On the Corallia apartment project, as of the date of this report, all of the 37 the apartments and commercial areas have been sold. There is however, an ongoing arbitration process with one of the buyers.
• After the end of Q3, the company successfully sold the 'Bus Station' plot in Constanta for EUR 2.3 million. As agreed during discussions with Alpha Bank regarding a two year extension of the loan, EUR 2.1 million of the proceeds have been used for a partial repayment of the loan.

Kay Thorkildsen, RomReal's CEO, said:

"The Romanian real estate market continues to show a low activity volume with no visible improvement during the third quarter of this year and there are still no signs that the market will improveduring the last quarter. Furthermore, assessing the prospects of the sector continues to be a difficult task as the market has not reached an equilibrium yet.

In this context, Romreal has focused on releasing some of the value of its investment portfolio. These efforts have been successful and the Company has divested one of its plots and collected the cash value after the end of the reporting period. The proceeds, of EUR 2.1 million, were used to partially repay the loan to Alpha Bank as part of a wider discussion with the lender to extend the maturity of the loan. The management is confident that a final agreement will be reached soon.

The Company's strategy remains in line to its commitment to a further consolidation of the cash position through asset divestment."

	3Q 2010	2Q 2010	3Q 2009	FY 2009	FY 2008
Profit/(loss) before tax	(173)	(3,376)	(5,983)	(19,363)	(70,074)
Net assets value	39,907	40,715	52,063	42,163	60,164
NAV (EUR/share)	0.81	0.83	1.06	0.86	1.22
NAV (NOK/share)	6.6	6.3	9.4	7.4	11.9
Cash position	2,571	2,723	2,725	1,862	6,523
Number of plots	16	16	16	16	17
Number of employees	5	7	7	7	16

KEY FIGURES (EUR '000)

OPERATIONAL OVERVIEW

Sales Status - Corallia

At the date of this report all 37 apartments of the Corallia development and all of the four commercial areas have all been sold. However, there is an ongoing arbitration process with one of the buyers.

At the end of Q3 2010, future receivable collections from sales of apartments amounted to EUR 0.63 million. Going into the next quarters, the cash collections will continue for the apartments where instalment payment was agreed. It is expected that up until the end of 2010 another EUR 0.18 million, will be collected in respect of the sale of the last apartments.

The Investment Portfolio

Total size of the Company's Investment Portfolio ("Land Bank") remained constant during the quarter totalling 1,241,349 sqm at the end of Q3 2010.

After the end of Q3 2010, the company sold one of its plots, the Bus Station, located in Constanta, with a size of 5,437 sqm. From the total proceeds, an amount of EUR 2.1 million, has been used to partially repay the loan to Alpha Bank, as part of the overall loan extension discussions with the bank.

In order to release cash from the value of its land bank, RomReal is actively looking for potential investors to further divest some of its plots. However, this is still a difficult task as investment activity in the local real estate market is low. Following the effects of the VAT rate hike, the construction activity remains slightly below the level of 2007.

Movement in Net Asset Value

The IFRS financial statements based Net Asset Value (NAV) is Euro 0.81 per share as at end Q3 2010, 2.4% down from Q2 2010. The company has made a write off for a value of equal to 0.8% of the total value of its investment properties. There were no other changes made by the Company to the value of its other investment properties. The values for these are based on the year end valuation report prepared by Colliers. The report was produced for IFRS accounts purposes at the end of 2009. The management and the Board see the uncertainty in estimating the values of real estate plots in Romania due to the very low number of transactions happening in the market. A new detailed independent valuation report will be developed at the year end and become part of the financial reporting for the full year ending 31.12.2010

		Q3 2010			Q2 2010
Asset base (EUR million)	EUR	EUR/share	NOK/share	EUR	EUR/share	NOK/share
Investment property	47,636	1.0	7.8	48,058	1.0	7.4
Inventories	4,437	0.1	0.7	4,628	0.1	0.7
Cash	2,571	0.1	0.4	2,723	0.1	0.4
Other Assets / (Liabilities)	(14,736)	(0.3)	(2.4)	(14,694)	(0.3)	(2.3)
IFRS Net Asset Value	39,907			40,715
NAV per shareNAV Movement in Quarter	-2.4%-2.0%	0.81	6.6	-1.2%	0.83	6.3

- Number of shares at end of period - 49,247,366

- NOK/share is calculated using closing quarter end exchange rates.

INFORMATION ON FINANCIAL CONDITION AND OPERATING RESULTS

Accounting Principles

The financial statements for the Q3 2010 report have been prepared in accordance with IAS 34 – Interim Financial Reporting. The quarterly result has been prepared in accordance with the current IFRS standards and interpretations. The accounting policies applied in the preparation of the quarterly result are consistent with the principles applied in the financial statements for the year to 31 December 2009.

Comparative data for Q3 2010 and Q3 2009

The interpretations below refers to comparable financial information for Q3 2010 and Q3 2009. They are prepared for RomReal on a consolidated basis and use consistent accounting policies and treatments.

Operating Revenue

The operating revenue for Q3 2010 was EUR 241,000 compared to a total of EUR 120,000 in Q3 2009. This additional income relates to the sales of the finalised apartments (EUR 136,000), while the difference relates to the rent received on some of the land bank assets awaiting development/disposal.

Operating Expenses

Total operating expenses amounted to EUR 394,000 in Q3 2010 compared to EUR 1,034,000 in Q3 2009, resulting to a 62% reduction in these costs. The reduction in costs is a policy actively persued by the Company and has been further realised both at the payroll level and on general and administrative expenses. The payroll expenses were reduced around 20%, following a reduction in the number of personnel. The administrative costs of the Company were 68% less than compared to the similar period of 2009. However, compared with Q2 2010, the administrative costs were 11% higher, as a result of some preparations that the Company needed to make in order to get the Bus Station plot ready for disposal.

Out of the total operating expenses, the main cost items relate to the general and administration costs (75% of total operating expenses) and salaries (13% of total operating expenses).

Other operating income/(expense), net

The other operating income/(expense) for Q3 2010 relates mainly to the change in the value of investment property as a consequence of the change in the exchange rate before translating them into the functional currentcy of the Group.

The net of Other Operating Income/(Expense) in Q3 2010 amounted to a net loss of EUR 1,735,000 compared to a loss of EUR 5,629,000 in Q3 2009.

Profit/(loss) from operations

During Q3 2010, RomReal generated an operating loss of EUR 1,888,000, compared to a loss of EUR 6,543,000 in Q3 2009.

Financial Income and expense

Financial income for Q3 2010 was EUR 2,929,000 while the financial expense in Q3 2010 was EUR 1,214,000, leading to a net financial gain of EUR 1,715,000 compared to a net financial gain of EUR 560,000 in Q3 2009. The financial net gain was primarily due to the unrealised foreign exchange gains resulting from the revaluation of the EUR denominated loans. The financial costs, in the amount of EUR 177,717 comprise of the expense plus interest paid in respect to the Alpha Bank loan during the quarter. It also includes the unrealised loss on the EUR denominated balance of the Romanian companies.

Result before tax

The loss before tax in Q3 2010 was EUR 173,000 compared to a loss before tax of EUR 5.98 million in Q3 2009. During Q3 2010 the RON appreciated against the EURO by 1.8%. The main items that generate foreign exchange differences are the inter-company loans and the loan taken from Alpha Bank amounting to EUR 13.7 million.

From an operational point of view, the Company's policy is to hedge these effects by retaining as much cash in Euros as possible and also by denominating all receivables in Euros as in the case of apartment sales.Although not reflected from an accounting perspective, all final payments made by the customers when receiving apartments are made at the exchange rate ruling at the date of payment, hence offsetting in cash terms part of these losses.

Cash and cash equivalents

The Company's cash and cash equivalents position at end Q3 2010 was EUR 2,571,000 compared to EUR 2,725,000 as at end Q3 2009 and EUR 2,723,000 as at end Q2 2010.

Taxation

The Company is required to calculate its current income tax at a flat rate of 16%. At the beginning of 2009 the fiscal legislation has changed requiring from the companies to pay the higher between a minimum income tax based on the turnover of the respective company, and the 16% rate applied to the taxable profits. This has not resulted in any material charge for the companies within RomReal group.

The Company accounts for deferred tax on all movements in the fair values of its investment properties at a flat rate of 16%. During Q3 2010 there was an decrease in the deferred tax liability amounting to EUR 235,000 due to the net decrease in the value of the investment property value in RON terms. With regards to the deferred tax asset, the Company recognises the amount to be carried forward of unused tax losses and unused tax credits to the extent in which is probable that future taxable profit will be available against the unused tax losses and unused tax credits which can be utilised. Where the Company considers that the likelyhood of this happening is low, future taxable profits will be made available within the legal time framework of five years to utilise the tax losses, then the Company will not recognize such deferred tax assets.

Starting 30 June 2010, the Government has increased the VAT rate from 19% to 24%, in an effort to increase collections of the State budget and reduce the budget deficit. Also, the tax payable by individuals on properties has been increased with 65% for the second building, 150% for the third and 300% for the forth and each one afterwards.

Overview of the Company's debt

As the end of Q3 2010 the group's consolidated net interest-bearing debt amounted to EUR 13.7 million. This is an asset finance facility taken by the Company in December 2007 with Alpha Bank Romania. The EUR 13.7 million loan had an initial term of 3 years and bears an interest rate of EURIBOR (1 Month) plus 4.5%.

The table below shows the total debt for RomReal Ltd as at end Q3 2010 and its maturity:

EUR thousand	End Q3 2010	26 Nov 2010
Alpha Bank	13,700	(13,700)

Following the end of the Q3 2010, the Company has made a partial repayment of EUR 2,100,000 in respect to the loan from Alpha Bank. This reduces the outstanding balance to EUR 11,600,000 and current discussions plan to extent the maturity for another two year on a fixed interest rate.

Total equity

The Company's total equity as at end Q2 2010 was EUR 39.9 million representing 72% of total assets at the end of the period.

RomReal pays an annual fee to the Bermuda Government based on the assessable capital of the company each year, which is the total of share capital plus the share premium. In order to reduce the annual fee, the Company has decided to transfer the share premium to contributed surplus. This represented purely a legal reclassification, which reduced the level of fees payable per annum by almost 90%.

CONSOLIDATED INCOME STATEMENT (UNAUDITED)

Figures in thousand EUR

	Q3 2010	Q3 2009	Year to 30September2010	Year to 30September2009
Rent revenue	105	120	312	447
Revenue from sale of assets	136	-	3,523	-
Operating revenue	241	120	3,835	447
Payroll expenses	(50)	(61)	(176)	(274)
Depreciation and amortization	(23)	(26)	(76)	(83)
Management fees	(25)	(25)	(75)	(75)
General and administrative expenses	(296)	(922)	(955)	(1,798)
Operating expenses	(394)	(1,034)	(1,282)	(2,230)
	-
Profit/ (loss) before other operating items	(153)	(914)	2,553	(1,783)
Other operating income/(expense), net	(1,735)-	(5,629)	(3,679)	(2,899)
Profit from operations	(1,888)	(6,543)	(1,126)	(4,682)
Financial income	2,929	716	7,645	2,450
Financial costs	(1,214)	(156)	(9,188)	(6,967)
Result before tax	-(173)	(5,983)	(2,669)	(9,199)
Tax expense	228	818	(125)	317
Result of the period	55	(5,165)	(2,794)	(8,882)

CONSOLIDATED BALANCE SHEET (UNAUDITED)

	Figures in thousand EUR

ASSETS	September 30, 2010	December 31,2009	September 30,2009
Non-current assets
Intangible fixed assets	1	5	7
Investment properties	47,636	48,058	58,549
Property, plant and equipment	124	197	234
Deferred tax asset	0	0	1,398
Total non current assets	47,762	48,260	60,098
Current assets
Inventories	4,437	8,323	6,914
Other short term receivables	809	349	390
Prepayments	13	57	54
Cash and cash equivalents	2,571	1,862	2,725
Total current assets	7,830	10,591	10,083
TOTAL ASSETS	55,592	58,851	70,181

EQUITY AND LIABILITIES	September 30, 2010	December 31,2009	September 30,2009
Equity
Share capital	85,746	85,746	85,746
Other reserves	425	425	425
Retained earnings	(42,341)	(23,305)	(23,305)
Result of current period	(2,794)	(19,040)	(8,881)
FX reserve	(1,128)	(1,663)	(1,922)
Total equity	39,907	42,163	52,063
Non current liabilities
Non current debt	-	-	13,700
Other non current liabilities	0	0	120
Deferred income tax	974	878	2,317
Total non current liabilities	974	878	16,137
Current Liabilities
Other debt	13,700	13,703	4
Other payables	827	948	873
Deferred income	178	1,135	1,099
Tax payable	5	25	4
Total current liabilities	14,710	15,811	1,980
TOTAL EQUITY AND LIABILITIES	55,592	58,851	70,180

CASH FLOW STATEMENT (UNAUDITED)

	September 30,2010	December 31,2009	September 30,2009
Net cash flow from operating activities	1,231	(3,961)	(3,271)
Net cash flow used in investing activities	-	-	-
Net cash flows from financing activities	(522)	(700)	(527)
Net cash change during period	709	(4,661)	(3,798)
Cash at beginning of period	1,862	6,523	6,523
Cash and cash equivalents at end of the period	2,571	1,862	2,725

Figures in thousand EUR

STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

Figures in thousand EUR
	September 30,2010	December 31,2009	September 30,2009
Equity at the beginning of the period	42,163	60,164	60,164
Result for the period	(2,794)	(19,040)	(8,881)
Other changes	539	1,039	780
Equity at the end of the period	39,907	42,163	52,063

There has been no change in the share capital of the Company during Q3 2010. The total issued number of shares at end Q3 2010 was 49,247,366.