Interim Results

RNS Number : 2696E

Aurora Russia Limited

17 December 2009

 



17 December 2009

Aurora Russia Limited ("Aurora Russia" or the "Company")

Results for the 6 months ended 30 September 2009 

Investee companies well positioned to grow market share as Russia's economy improves

Successful fundraising of £15 million

Financial highlights 

• Net asset value at 30 September 2009 up 2.0% to £81.43 million or 108.6p per share, compared to £79.86 million or 106.5p per share at 31 March 2009

• Cash and cash equivalents as at 30 September 2009 were £3.49 million, compared to £4.12 million as at 31 March 2009

• Consolidated net profit for the period of £1.99 million (£1.08 million for 6 months to 30 September 2008)

• Consolidated earnings per share for the period of 2.65p per share (1.44p per share for 6 months to 30 September 2008)

Operational highlights - Focus on cost efficiency whilst pursuing market share gains

Fully invested with £64.2million in five companies, three of which are leaders in their field 

OSG

• OSG remains the largest records management company in Russia, Ukraine and Kazakhstan

• For the period to 30 September 2009, revenues in Russia grew 33% year-on-year in RUR terms while Poland grew 44% year-on-year in PLN terms

• EBITDA was £1.1m up 21% year-on-year

Unistream Bank

• Continues to build on position as one of the largest money transfer companies in Russia through c.280 of its own money transfer offices

• Revenue for the 9 month period to 30 September 2009 reduced by 5% in RUR terms at £35 million, compared to the prior year period, due to the impact of the financial crisis on the construction industry 

• Operating income before fixed expenses during the period increased 9% year-on-year to £15.7 million due to growth in foreign exchange commissions and an increase in the share of own points of sale in the total volume transferred

Superstroy

• Solid performance through focus on operational efficiencies and cost reduction, with all 45 stores expected to be profitable in 2009

• EBITDA improved by 188% year-on-year with the company maintaining its market position which, based on estimated turnover figures, ranks the company as 4^th among all chain DIY retailers operating in Russia (up from 7^th in 2007)

Kreditmart and Flexinvest

• Due to the financial crisis, Kreditmart has shifted focus on insurance and consumer loans until the mortgage market returns to Russia

• Management achieved a decrease in monthly cash burn of 71% through cost-cutting and reduction of headcount by 53%

• Both Kreditmart and Flexinvest Bank together have net cash of £6.7 million and £20 million in assets as at 30 September 2009

Successful fundraising of £15 million

• On 17 December 2009, the Company announced a Placing of £15 million of newly issued shares

• £12.4 million will be used to purchase an additional 43.5% of OSG's shares bringing the shareholding in OSG to 93.6% and to invest new money into OSG to part fund a large warehouse facility

• Balance of proceeds of the Placing to be used to pay costs associated with the Placing and retained by the Company as working capital

Detailed results for the investee companies are contained in the investment management report 

Commenting, Dan Koch, Chairman of Aurora Russia, said:

"While the global operating environment over the period has been challenging, the investee companies have taken prudent measures to ensure that they are positioned for growth. Three of the five investments are market leaders and I believe that they are well-positioned for exit either through a strategic sale or IPO.

I am encouraged that the Rouble is gaining strength and that currency stability will likely support growth in consumption. Russia's reserves of over $400 billion remain one of the world's largest and should allow Russia to recover faster than most world economies."

Enquiries:

Aurora Russia Limited

James Cook, Moscow           [phone] 

John McRoberts, London       [phone]

Investec Investment Banking

Patrick Robb                         [phone]

Martin Smith                         [phone]

Financial Dynamics

Ed Gascoigne-Pees               [phone]

Kat Bloom                             [phone]

Chairman's Statement

Introduction

I am pleased to present the results of Aurora Russia Limited for the 6 months ended 30 September 2009. While the past 12 months have been challenging for companies not only in Russia, but throughout the world, our companies have made prudent decisions to adapt to the changing environment while seeking to increase market share and prepare themselves to resume growth once the market begins to grow again.

I am encouraged by the recent trends being seen in Russia and believe that the services sectors which the Company is targeting will benefit as the economy improves. According to the Ministry of Economic Development, Russia's seasonally-adjusted GDP grew 0.6% in the third quarter compared to the second quarter, with the Russian Government predicting that the economy will grow 3-4% in the fourth quarter of 2009. A recent report by Unicredit is also encouraging when it states that the Russian middle class is expected to double over the next five years. The key drivers contributing to this growth include an increase in productivity and a decline in the working-age population. This trend over the next five years will likely support the growth of migrant labour, low unemployment and robust growth of disposable income. All of these factors are likely to drive the growth of the services sector in Russia and our investee companies in particular.

For the period to 30 September 2009, Aurora Russia Limited recorded a profit of £1.99 million or 2.65p per share, based on the unaudited consolidated statement of comprehensive income. Despite the difficult global operating environment, the net asset value of the Company as at 30 September 2009 was £81.43 million resulting in a Net Asset Value per share of 108.6 p.

Investment Review

Aurora Russia has invested a total of £64.2 million in five companies:

• OSG Records Management, a regional market leader in records management.

• Unistream Bank, a leading Russian money transfer company.

• Superstroy, one of the leading DIY retailers in Russia.

• Kreditmart, a finance company distributing financial services products such as mortgages, insurance, consumer loans, and pension funds.

• Flexinvest Bank, a retail bank offering banking services.

For all of the investee companies, the focus over the past 12 months has been on conserving cash, mitigating risk, reducing costs to drive efficiency, improving margins, and seeking opportunities to grow market share as competitors scale back. In contrast to much of the competition, the investee companies have relatively low levels of debt. As a result all of the companies are well positioned to grow market share as the economy improves. While the operating environment continues to remain difficult, I am encouraged by the first signs of stabilization and growth in the recent monthly performance of the investee companies.

OSG, Unistream and Superstroy have maintained their leading market positions and I believe that although Kreditmart is at an early stage in its development it now appears to be the leading broker of financial products in the market due to its main competitors either having left the market or reduced their size.

Portfolio Valuation

A valuation of the investment portfolio was performed at 30 September 2009, resulting in an increase in value from £74.8 million to £77.8 million or 4%. This valuation, recommended by the Valuation Committee of the Board, was prepared by the Manager using methodology consistent with prior periods and was formally adopted by the Board on 8 December 2009. These valuations are prepared for accounting purposes only and comply with the International Private Equity and Venture Capital Association ('IPEVCA') guidelines. The resultant valuations of investments included in the Company's financial statements may not necessarily reflect the value that a third party would be prepared to pay for these businesses.

The current valuation reflects changes to the valuation performed as of 31 March 2009 as follows: Superstroy has been increased by £1.6 million to £14.8 million, an increase of 12%. Unistream Bank has been increased by £4.7 million to £29.7 million, an increase of 19%. OSG Records Management has been decreased by £0.7 million to £12.9 million, a decrease of 5%. The valuation of Kreditmart and Flexinvest Bank have been decreased by 11% from £23.0 million to £20.4 million, reflecting the current uncertain market conditions and lower values being placed on mortgage broking businesses.

The Placing

The Company also announces today a proposed issue of 37,500,000 new ordinary shares (subject to approval by shareholders at an extraordinary general meeting) at an issue price of 40p per share. It is proposed that £12.4 million of the proceeds of the share issue will be used to purchase an additional 43.5% of OSG's shares bringing the shareholding in OSG to 93.6% (on a fully diluted basis and assuming all convertible loans in OSG held by the Company are converted), and to invest new money into OSG to part fund a large warehouse facility in Moscow. The balance of the proceeds will be used to pay costs associated with the share issue and retained by the Company as working capital.

The balance of OSG's 6.4% shares are held in an option pool, with approximately 2.0% held by previous employees who may wish to exercise and sell the shares to the Company. If such option shares are purchased by the Company, the net amount payable to the option holders will be £0.18 million which will increase the Company's shareholding in OSG to 95.5%. However, the Company expects to increase the management pool by an additional 3.6% resulting in its overall holding in OSG being approximately 92%.

The Company is delighted to have been successful in securing commitments for this placing from both existing and new shareholders resulting in the company widening its investor base. I believe that the benefit to the Company and its shareholders outweighs the dilutive effect the placing has on shareholders not participating. Taking control of OSG and investing in a warehouse in Moscow will no doubt improve the future stability of the business, and improve operational and financial efficiencies resulting in higher growth for OSG and a more attractive and certain exit.

Speaking of shareholder value, I believe that by undertaking this fundraising process the Directors are able to better understand the investor market and what investors are looking for from the Company. A major concern was that no strategy has ever been formally announced as to what the Company will do with sale proceeds of each investment albeit the Company does have a dividend policy. The Board has therefore announced that the Company will return cash to shareholders as each of its portfolio companies are sold. Following the receipt of cash from a disposal of any of its portfolio companies, it will return to Shareholders an amount up to a maximum of the lesser of the total net proceeds received on a realisation of a portfolio company and 1.5 times the total amount invested in that portfolio company plus the pro-rata allocation of costs of the Company to date until the Company has returned a total of £105 million to Shareholders. Any proceeds in excess of this amount should be retained by the Company for re-investment purposes.

However if the amount received on the disposal of a portfolio company is less than 1.5 times the total amount invested in such company plus Allocated Costs, it is anticipated that the total funds received from the sale of the portfolio company (net of disposal expenses) will be returned to Shareholders. Furthermore, in the event that the Board believes that the Company needs to retain any portion of the cash proceeds on the sale of any portfolio company to satisfy its status as a going concern, for general working capital purposes or for the purposes of future investments in existing portfolio companies that are deemed necessary by the Board, it will do so.

The Board has also agreed to amend the option deed to keep the Manager incentivised to continue to manage the investments that the company has made. Details are outlined in Note 17 to these accounts and in the Circular to Shareholders dated 17 December 2009.

I would like to take this opportunity to confirm that following the Placing, it is not the intention of the Board to raise additional capital by issuing further shares at a discount to the prevailing NAV per share in the near to medium term future. Nonetheless, the Board also recognise that it may, at any time, be in the interests of the Company to raise additional capital and it may be necessary to issue further shares on a pre-emptive basis or otherwise and, potentially, at a discount to the prevailing NAV per share.

Outlook

While the global operating environment over the period has been challenging, the investee companies have taken prudent measures to ensure that they are positioned for growth. Three of the five investments are market leaders and I believe that they are well-positioned for exit either through a strategic sale or IPO. While Kreditmart and Flexinvest Bank have been the most affected by the financial crisis, they are well positioned to benefit as the mortgage market recovers in Russia. My feelings arising from a recent visit to Moscow are that confidence is growing and there is improvement in general business sentiment. As challenging as the crisis has been over the past several months, it also provided an opportunity for companies to review how they have operated and to put in place more efficient systems to grow. As a result, the strongest companies have survived and are positioned to benefit as the economy improves. I am encouraged that the Rouble is gaining strength and that currency stability will likely support growth in consumption. Russia's reserves of over $400 billion remain one of the world's largest and should allow Russia to recover faster than most world economies.

I am pleased to report the performance of the investee companies of Aurora Russia Limited and look forward to the future with confidence.

Dan Collinson Koch

Chairman of the Board 

Aurora Russia Limited

17 December 2009

Investment Manager's Report

Overview

The six months to 30 September 2009 was a challenging time for companies worldwide as a result of the worldwide financial crisis. While our investee companies focused on conserving cash, cutting overhead, and mitigating risk during this period they also pursued opportunities to gain market share. Aurora Investment Advisors (the 'Manager') provided considerable hands-on operational and strategic support to assist them during this period which we believe will result in long-term value for shareholders.

Since the Company's IPO in March 2006, Aurora Russia Limited has invested a total of £64.2 million in five companies. The companies are valued at 30 September 2009 at £77.8 million, representing an increase of 4% since 31 March 2009. Aurora Russia Limited owns 26% of Unistream Bank, 100% of Kreditmart, 100% of Flexinvest Bank, 24.3% of SuperStroy's holding company, and 39.4% of OSG Records Management plus a convertible loan.

Three of our five investments continue to be the market leaders in their sectors. OSG Records Management continues to have a commanding market lead in records management and services in its key markets of Russia, Ukraine, and Kazakhstan. In addition, OSG continues to have a strong position in the Polish and Bulgarian records management sector. Unistream Bank continues to be a leader in the outbound Russian money transfer market. Unistream continues to build its market share by targeting the underserved inter-Russia money transfer segment as well as opening new money transfer corridors. SuperStroy remains the leading DIY retailer in the Urals region of Russia and is one of the largest independent DIY retailers in Russia. Kreditmart has adapted its strategy to address the downturn in the mortgage market by reducing its cost base and by diversifying its product offering. The company has focused on building its distribution of insurance products and consumer loans and remains positioned to benefit from the untapped potential of Russia's mortgage market. Flexinvest Bank moved its headquarters to central Moscow and is working with Kreditmart to build its distribution of mortgages, consumer loans, and deposit products to its customers.

OSG Records Management

We are delighted with the performance of OSG Records Management during the period despite the worldwide financial crisis. OSG remains the largest records management company in Russia, Ukraine and Kazakhstan. It is the second largest in Poland and is considered a regional market leader. OSG continues to provide cost-effective total records management, document storage, data security, document scanning and confidential data destruction solutions. OSG has a first mover advantage in Central and Eastern Europe which is still underserved. OSG's management estimates that Russia, OSG's largest market, has a vended ratio of under 2%. The market offers enormous growth opportunities and it is expected that the vended portion of the market will increase from approximately US$20 million in 2008 to approximately US$200 million in 2012 reaching the current levels seen in Latin America (vended portion of approximately 20%).

As at 30 September 2009, the company's revenues in Russia have grown 33% year-on-year in RUR terms while Poland grew 44% year-on-year in PLN terms. However, due to exchange rate differences, revenue remained by and large flat in US Dollar (the reporting currency) terms. For the period to 30 September 2009, OSG reported revenues¹ of £7.6 million compared to £7.7 million as of the same period in 2008. For the same period EBITDA¹ was £1.1 million up 21% year-on-year.

The valuation of our investment (equity and debt) in OSG at 30 September 2009 resulted in a decrease of £0.7 million to £12.9 million compared to the valuation at 31 March 2009 of £13.6 million.

Recognising the high growth prospects of OSG, Aurora Russia Limited has announced that it will invest an additional £12.4 million to purchase the shares of the other non-management shareholders as well as to finance the down payment on a mega-warehouse facility in Moscow. This investment will bring Aurora Russia Limited's shareholding in OSG to 93.6% (on a fully diluted basis and assuming all convertible loans in OSG held by Aurora Russia Limited are converted). The balance of OSG's shares are held in a management option pool of 6.4%, with approximately 2.0% of these held by previous employees who may wish to exercise and sell the shares. If these option shares are purchased by Aurora Russia Limited, the net amount payable to the option holders will be £0.18 million which will increase its shareholding in OSG to 95.6%. However, Aurora Russia Limited expects to increase the management option pool by an additional 3.6% resulting in its fully diluted holding in OSG being approximately 92%.

The additional investment will allow the company to consolidate some of its warehouses in Moscow to provide enhanced operational efficiency, improved EBITDA, and will provide Aurora Russia Limited with full control. It will result in greater transparency to shareholders since the company will now be fully consolidated into the financials of Aurora Russia Limited. We believe that this transaction is in the interests of the company and will improve both the long-term market position of the company as well as greater value over time for Aurora Russia Limited's shareholders.

Unistream Bank

Unistream Bank continues to build on its position as one of the largest money transfer companies in Russia by providing competitive money transfer and foreign exchange products through c.280 of its own money transfer offices throughout Russia. It is regulated by the Central Bank of Russia ("CBR") and has a banking licence to receive and send money transfers, open bank accounts for corporate entities and accept loan payments through its points of sale.

Unistream's primary customers are migrant construction workers who migrate from the former Commonwealth of Independent States (CIS) to work in Russia's growing construction industry. The events of the past year have clearly impacted the construction industry and Unistream has felt this impact as its customers have either lost their jobs in construction or have reduced the amount of money transferred. According to the Central Bank of Russia, outbound transfers for Q2 2009 were down 31% year-on-year in USD terms. Unistream's revenue for the 9 month period to 30 September 2009 was 5% lower in RUR terms at £35 million² compared to the same period in the prior year, while operating income before fixed expenses during the period increased 9% year-on-year to £15.7 million² due to growth in foreign exchange commissions and an increase in the share of own points of sale in the total volume transferred.

In 2008, Russia had one of the fastest growth rates for outbound money transfer volumes in the world. Unistream has a commanding lead in the Russian outbound money transfer market and management believes that it can gain market share on the intra-Russia money transfer market as well as expanding in other money transfer corridors.

Russia has committed to invest $1.1 trillion over the next five years to improve its infrastructure. This commitment, along with Russia's declining working-age population, should encourage further growth in migrant labour working in Russia, low unemployment, and robust wage and disposable income growth. All of these factors should benefit the further growth and expansion of Unistream.

Since 2006, Unistream Bank has increased its annual volume of money transfers from approximately US$1.84 billion to approximately US$3.68 billion in 2007 and US$4.91 billion in 2008 (an increase of 33% over 2007). In 2008, Unistream posted revenues² of £51.0 million up from £29.5 million in 2007.

The valuation of our 26% stake in Unistream Bank at 30 September 2009 resulted in an uplift of £4.7 million to £29.7 million compared to the valuation at 31 March 2009 of £25.0 million.

Kreditmart

Kreditmart commenced operations in March 2007 and distributes a wide range of financial services products through its seven locations in Moscow, St. Petersburg, Tyumen, Yekaterinburg, Kazan, and Rostov-on-Don as well as the internet.

Kreditmart, a wholly owned subsidiary of Aurora Russia Limited, distributes mortgages, equity release loans, insurance, auto loans, pension funds, mutual funds, and other consumer finance products.

While the global financial crisis has impacted Russia, Kreditmart has continued to operate while shifting its focus on insurance and consumer loans until the mortgage market returns. Management decreased monthly cash burn by 71% through aggressive cost-cutting measures and a reduction of headcount by 53%.

Kreditmart broker revenue fell 38% compared to the same period in 2008 to £0.2 million. However, month-on-month revenues have begun to rebound with 26% growth in September. In light of the current market, the valuation of Kreditmart (including Flexinvest- see below) at 30 September 2009 resulted in a write down of £2.6 million to £20.4 million compared to the valuation at 31 March 2009 of £23.0 million.

Since mortgage penetration in Russia remains at less than 3% of GDP and total consumer debt at c.10% of GDP, Russia represents one of the most attractive growth markets in Europe for financial services. Through its established distribution system, Kreditmart is well-positioned to capitalize on this growth.

Flexinvest Bank

Flexinvest Bank ("Flexinvest") was acquired in May 2008 through Flexinvest Limited, a wholly owned subsidiary for a consideration of £5.1 million (RUR 237 million). Additional funds of £1.2 million (RUR 57 million) were invested into the bank by Flexinvest to cover post-acquisition infrastructure costs and fund ongoing operations.

As of 30 September 2009, both Kreditmart and Flexinvest had £20 million in assets. Flexinvest Bank distributes short-term Rouble consumer loans as well as offering a range of deposit and banking products including deposit boxes, currency exchange and money transfer.

Despite recent concerns about the increase in non-performing loans, Russia continues to be an attractive market for retail banking in a medium to long term and recently saw banks like HSBC start its retail operations in Russia.

The Manager remains confident that Flexinvest Bank will have opportunities to grow its assets and will continue benefiting from the already established distribution platform of Kreditmart.

Kreditmart and Flexinvest Bank together reported net cash of £6.7 million as at 30 September 2009.

SuperStroy

Superstroy showed solid performance during the period by focusing on the improvement of operational efficiencies and cost reduction. All 45 stores are expected to be profitable in 2009. RosBusinessConsulting estimates that the overall DIY market in Russia will be down by 25-36% in USD terms in 2009.

For the 9 months ended 30 September 2009, the company's revenues have declined 11% year-on-year in local currency terms to £91.5 million² with most of the decline due to its wholesale operations while retail sales were down by only 3%. In 2008, it posted revenues of approximately £142.4 million² up on 2007 revenues of £95.6 million².

While the company temporarily put its expansion plans on hold during the crisis, it improved EBITDA by 188% year-on-year to £2.2 million² and increased margins while maintaining its market position.

Based on estimated turnover figures, Superstroy ranks fourth among all chain DIY retailers operating in Russia up from being seventh in 2007.

Superstroy is the only company in Aurora Russia Limited's portfolio that has any debt of any substance. It has a credit line with Sberbank of RUR 800 million (£16.5 million) and ZAO Uralprivat bank of RUR 60 million (£1.2 million). At 30 September 2009, the outstanding balance on the two facilities was RUR c.0.49 billion (approximately £10.2 million). The interest rate (before fees) is charged at between 16.0% and 16.5% per annum however Sberbank recently approved a reduction in the rate to 14.25% per annum.

Given a general rebound in the valuation multiples of public retailers and DIY retailers, in particular, the valuation of SuperStroy as at 30 September 2009 resulted in an uplift of £1.6 million for our 24.3% stake to £14.8 million compared to the valuation at 31 March 2009 of £13.2 million.

Conclusion

Despite the challenges of the global financial crisis, the value of the portfolio grew by 4% during the period. The Manager remains positive about the growth prospects for the services sectors in Russia. While the Russian economy has historically been dependent on the price of commodities, the economy is becoming more diversified. The services sector should benefit from the continued diversification away from commodities and grow at a faster rate. We remain very positive about all of Aurora Russia Limited's investments and we believe that all five are positioned to benefit from the growth of the services sector and to gain market share.

The Russian market continues to provide opportunities for growth for well-managed companies. Due to the low penetration and vast market potential in the sectors we invest in, our portfolio companies are positioned to grow further over the coming period. We will continue to identify and target the niches where our companies can gain a competitive advantage while securing our current market position for continued growth.

Aurora Investment Advisors Limited 

December 2009

1 Translated at September 30 2009 spot rate of 0.63 GBP/USD

2 Translated at September 30 2009 spot rate of 47.7 RUR/GBP

Independent Review Report to Aurora Russia Limited

We have been engaged by the Company to review the unaudited condensed set of financial statements in the half yearly financial report for the six months ended 30 September 2009 which comprise the unaudited condensed consolidated statement of comprehensive income, the unaudited condensed company statement of comprehensive income, the unaudited condensed consolidated statement of financial position, the unaudited condensed company statement of financial position, the unaudited condensed consolidated statement of changes in equity, the unaudited condensed consolidated statement of cash flows and related explanatory notes. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the unaudited condensed set of financial statements.

This report is made solely to the Company, in accordance with the terms of our engagement letter dated 30 September 2009. Our work has been undertaken so that we might state to the Company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have reached.

Directors' responsibilities

The half yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half yearly financial report in accordance with the AIM Rules of the London Stock Exchange.

As disclosed in note 2, the annual financial statements of the Company are prepared in accordance with International Financial Reporting Standards ("IFRS"). The unaudited condensed set of financial statements included in this half yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting".

Our responsibility

Our responsibility is to express to the Company a conclusion on the unaudited condensed set of financial statements in the half yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standards on Review Engagements (UK and Ireland) ISRE 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the unaudited condensed set of financial statements in the half yearly financial report for the six months ended 30 September 2009 is not prepared, in all material respects, in accordance with International Accounting Standard 34.

KPMG Channel Islands Limited 

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17 December 2009

Unaudited Condensed Half Year Consolidated Statement of Comprehensive Income 

For the 6 month period 1 April 2009 to 30 September 2009

				1 April 2009		1 April 2008
				to 30 September 2009		to 30 September 2008
		Notes		£'000		£'000
	Revenue			1,078		1,470
	- Fees			120		244
	- Interest on long term mortgages and other loans			505		707
	- Loan interest			214		118
	- Bank interest			120		401
	- Dividend income			119		-
	Administration and operating expenses	3		(3,373)		(5,565)
	Fair value movements on revaluation of investments	10		5,081		5,567
	Fair value movements on derivatives			-		3
	Impairment of loan receivable			-		(370)
	Exchange (losses)/gains			(728)		912
	Operating profit before tax			2,058		2,017
	Finance costs
	Interest expense			(5)		(10)
	Profit before tax			2,053		2,007
	Tax	4		(63)		(927)
	Profit and total comprehensive income for the period			1,990		1,080
	Profit per share - basic and diluted			2.65p		1.44p

All items in the above statement derive from continuing operations.

The accompanying notes on pages 16 to 26 form an integral part of these financial statements. 

Unaudited Condensed Half Year Company Statement of Comprehensive Income

For the 6 month period 1 April 2009 to 30 September 2009

				1 April 2009		1 April 2008
				to 30 September 2009		to 30 September 2008
		Notes		£'000		£'000
	Revenue			338		316
	- Loan interest			214		118
	- Bank interest			5		198
	- Dividend income			119		-
	Administration and operating expenses	3		(1,536)		(1,695)
	Fair value movements on revaluation of investments	10		2,478		3,453
	Fair value movements on derivatives			-		3
	Impairment of loan receivable			-		(370)
	Exchange (losses)/gains			(9)		56
	Operating profit before tax			1,271		1,763
	Tax	4		-		-
	Profit and total comprehensive income for the period			1,271		1,763
	Profit per share - basic and diluted			1.69p		2.35p

All items in the above statement derive from continuing operations.

The accompanying notes on pages 16 to 26 form an integral part of these financial statements.

Unaudited Condensed Half Year Consolidated Statement of Financial Position 

As at 30 September 2009

				30 September 2009			31 March 2009
		Notes		£'000			£'000
	Non-current assets
	Goodwill	5		-			-
	Other intangible assets	6		2,299			2,273
	Plant and equipment	7		818			1,019
	Investments - at fair value through profit and loss	10		57,436			51,833
	Loans and advances to customers	11		8,853			9,569
	Deferred tax assets			170			191
				69,576			64,885
	Current assets
	Trade and other receivables			677			1,711
	Cash and cash equivalents			10,205			12,022
	Assets classified as held for sale	8		191			-
				11,073			13,733
	Total assets			80,649			78,618
	Current liabilities
	Derivative liabilities	12		-			46
	Trade and other payables	13		448			742
	Total liabilities			448			788
	Total net assets			80,201			77,830
	Equity
	Share capital			750			750
	Special reserve			70,750			70,750
	Share options reserve			2,120			1,820
	Revenue reserve			7,310			5,320
	Translation reserve			(729)			(810)
	Total equity			80,201			77,830
	Net asset value per share - basic and diluted			106.9p			103.8p
	The accounts on pages 10 to 26 were approved by the Board of Directors on 17 December 2009 and signed on its behalf by:
	John Whittle			Ben Morgan
	Director			Director
	Date
	The accompanying notes on pages 16 to 26 form an integral part of these financial statements.

Unaudited Condensed Half Year Company Statement of Financial Position 

As at 30 September 2009

					30 September 2009			31 March 2009
		Notes			£'000			£'000
	Non-current assets
	Investment in subsidiaries - at fair value through profit and loss	9			20,400			23,000
	Investments - at fair value through profit and loss	10			57,400			51,800
					77,800			74,800
	Current assets
	Trade and other receivables				224			1,112
	Cash and cash equivalents				3,488			4,123
					3,712			5,235
	Total assets				81,512			80,035
	Current liabilities
	Derivative liabilities	12			-			46
	Trade and other payables	13			80			129
	Total liabilities				80			175
	Total net assets				81,432			79,860
	Equity
	Share capital				750			750
	Special reserve				70,750			70,750
	Share options reserve				2,120			1,820
	Revenue reserve				7,812			6,540
	Total equity				81,432			79,860
	Net asset value per share - basic and diluted				108.6p			106.5p
	The accounts on pages 10 to 26 were approved by the Board of Directors on 17 December 2009 and signed on its behalf by:
	John Whittle				Ben Morgan
	Director				Director
	Date
	The accompanying notes on pages 16 to 26 form an integral part of these financial statements.

Unaudited Condensed Half Year Consolidated Statement of Changes in Equity 

For the 6 month period 1 April 2009 to 30 September 2009

							Share
			Share		Special		Options		Revenue		Translation
			Capital		Reserve		Reserve		Reserve		Reserve		Total
			£'000		£'000		£'000		£'000		£'000		£'000
For the period 1 April 2008 to 30 September 2008
At 1 April 2008			750		70,750		1,220		4,894		(5)		77,609
Net profit for the period			-		-		-		1,080		-		1,080
Recognition of share-based payments			-		-		300		-		-		300
Foreign currency translation reserve			-		-		-		-		(114)		(114)
At 30 September 2008			750		70,750		1,520		5,974		(119)		78,875
For the period 1 October 2008 to 31 March 2009
At 1 October 2008			750		70,750		1,520		5,974		(119)		78,875
Net loss for the period			-		-		-		(654)		-		(654)
Recognition of share-based payments			-		-		300		-		-		300
Foreign currency translation reserve			-		-		-		-		(691)		(691)
At 31 March 2009			750		70,750		1,820		5,320		(810)		77,830
For the period 1 April 2009 to 30 September 2009
At 1 April 2009			750		70,750		1,820		5,320		(810)		77,830
Net profit for the period			-		-		-		1,990		-		1,990
Recognition of share-based payments			-		-		300		-		-		300
Foreign currency translation reserve			-		-		-		-		81		81
At 30 September 2009			750		70,750		2,120		7,310		(729)		80,201

The accompanying notes on pages 16 to 26 form an integral part of these financial statements.

Condensed Consolidated Statement of Cash Flows 

For the 6 month period 1 April 2009 to 30 September 2009

	Notes	1 April 2009 to 30 September 2009	1 April 2008 to 30 September 2008
Cash flows from operating activities		£'000	£'000
Profit before tax		2,053	2,007
Loan interest		(214)	(118)
Interest on long term mortgages and other loans		(505)	(707)
Bank interest		(120)	(401)
Dividend income		(119)	-
Adjustments for movements in working capital:		1,095	781
Decrease in operating trade and other receivables		1,019	47
Decrease in operating trade and other payables Adjust for:		(429)	(24)
Revaluation of investments	10	(5,081)	(5,567)
Recognised share based payments		300	300
Fair value movements on revaluation of derivatives		-	(3)
Exchange losses/(gains)		728	(912)
Interest expense		5	10
Impairment of loan receivable		-	370
Loss on property, plant and equipment written off		87	-
Depreciation and amortisation		161	218
Provision for loan losses		(428)	105
Interest paid		(5)	(10)
Taxation paid		-	(86)
Dividend income		119	-
Bank and loan interest received		681	424
Loss on forex contract closed out		(46)	-
Increase in non-current assets held for sale	8	(191)	-
Loans advanced to customers		407	6,389
Net cash (outflow)/inflow from operating activities		(1,578)	2,042
Cash flows from investing activities
Acquisition of subsidiary net of cash acquired		-	(3,110)
Acquisition of investments		-	(15)
Acquisition of plant and equipment	7	(47)	(152)
Loans advanced to associated company		(307)	-
Increase/(decrease) in deposits		112	(1,638)
Net cash outflow from investing activities		(242)	(4,915)
Net decrease in cash and cash equivalents
		(1,820)	(2,873)
Opening cash and cash equivalents		12,022	17,806
Effect of exchange rate changes		3	1,671
Closing cash and cash equivalents		10,205	16,604

The accompanying notes on pages 16 to 26 form an integral part of these financial statements.

Notes to the Unaudited Condensed Half Year Consolidated Financial Statements

For the 15 month period from 1 January 2007 to 31 March 2 For the 6 month period 1 April 2009 to 30 September 2009

1.    General information

The consolidated financial statements of the Company and its subsidiaries ('the Group') are available upon request from the Company's registered office or at www.aurorarussia.com.

2.    Accounting Policies 

2.1 Basis of preparation

These unaudited interim condensed financial statements have been consolidated and prepared in accordance with International Accounting Standard (IAS) 34 "Interim Financial Reporting" and with applicable legal and regulatory requirements of Guernsey Law and of AIM.

The condensed interim financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with Aurora Russia Limited's audited report and financial statements for the year ended 31 March 2009. The condensed interim financial statements were approved by the Board of Directors on 8 December 2009.

2.2 Accounting period

The comparative numbers used for the condensed half year consolidated statement of comprehensive income, condensed half year consolidated statement of changes in equity and condensed half year consolidated statement of cash flows are that of the half year period ended 30 September 2008, which is considered a comparable period as defined per IAS 34. The comparatives used in the condensed half year consolidated and company statements of financial position are that of the previous financial year end, 31 March 2009.

2.3 Significant accounting policies

The same accounting policies, presentation and methods of computation are followed in these condensed interim financial statements as those followed in the preparation of the Company's and Group's audited financial statements for the year ended 31 March 2009, except for the adoption of new Standards and Interpretations effective as of 1 January 2009, noted below:

- IAS 1 Presentation of Financial Statements

The revised Standard separates owner and non-owner changes in equity. The statement of changes in equity includes only details of transactions with owners, with non-owner changes in equity presented as a single line. In addition, the Standard introduces a statement of comprehensive income: it presents all items of recognised income and expense, either in one single statement, or in two linked statements. The Group has elected to present one statement.

- IFRS 8 Operating Segments

This standard requires disclosure of information about the Group's  operating segments and replaces the requirement to determine primary (business) and secondary (geographical) reporting segments of the Group. Adoption of this Standard did not have any effect on the financial position or performance of the Group. Additional disclosures about each of these segments are shown in note 14, including revised comparative information.

2.4 Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker. The Chief Operating Decision Maker, who is responsible for allocating resources, assessing performance of the operating segments and making strategic decisions, has been identified as the Board of Directors of Aurora Russia Limited.

2.5 Investments

Unquoted investments, including investments in subsidiaries, are designated as fair value through profit and loss. Investments are initially recognised at fair value. The investments are subsequently re-measured at fair value, which is determined by the Directors on the recommendation of the Valuation Committee, utilising the International Private Equity and Venture Capital Association ("IPEVCA") guidelines. Unrealised gains and losses arising from the revaluation of investments are taken directly to the statement of comprehensive income. Investments deemed to be denominated in a foreign currency are revalued in Pounds Sterling terms even if there is no revaluation of the investment in its currency of denomination.

Investments are held in Russian Roubles, which the Directors believe best reflect the underlying nature of the currency exposure of the investee companies. The investments are translated into Pounds Sterling at period end, which is the functional currency of the Group and presentation currency of the consolidated financial statements. Unrealised gains and losses arising from the translation of investments are taken directly to the statement of comprehensive income.

The Group has taken advantage of the exemption available to it under IAS 28, "Investments in associates" and is accounting for the investments in Whitebrooks, Unistream and Grindelia at fair value through profit and loss, which normally as a result of the size of the stake in these two companies would potentially qualify as associated companies and are required to be equity accounted.

2.6 Impairment of tangible and intangible assets excluding goodwill

At each reporting date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. Recoverable amount is the higher of fair value less costs to sell and value in use. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. Impairment losses and reversals of impairment losses are recognised immediately in the statement of comprehensive income.

2.7 Intangible assets

An intangible asset is regarded as having an indefinite useful life when, based on all relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows for the Group. Amortisation is not provided for these intangible assets. Intangible assets with indefinite useful lives are tested for impairment at each reporting date by determining the recoverable amount of the assets either individually or at the cash-generating unit level. Where this assessment is performed at the cash-generating unit level, the impairment is determined by assessing the recoverable amount of the cash-generating unit to which the intangible asset relates. In such instances, the recoverable amount is determined as the value-in-use of the cash-generating unit by estimating the expected future cash flows in the unit and choosing a suitable discount rate in order to calculate the present value of those cash flows.

Where the recoverable amount is less than the carrying amount of the asset or the cash-generating unit, an impairment loss is recognised in the statement of comprehensive income.

The useful life of an intangible asset with an indefinite life is reviewed at each reporting date to determine whether the indefinite life assessment continues to be supportable. If not, the change in the useful life assessment is made prospectively.

2.8 Goodwil

Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group's interest in the fair value of the identifiable assets and liabilities of a subsidiary at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill which is recognised as an asset is reviewed for impairment at least at each reporting date or if there is an indication of impairment. Any impairment is recognised immediately in the statement of comprehensive income and is not subsequently reversed.

2.9 Loans and advances to customers

Loans granted by the Group are initially recognised at fair value plus related transaction costs. Where the fair value of consideration given does not equal the fair value of the loan, for example where the loan is issued at lower than market rates, the difference between the fair value of consideration given and the fair value of the loan is recognised as a loss on initial recognition of the loan and included in the consolidated statement of comprehensive income according to the nature of these losses. Subsequently, loans are carried at amortised cost. Loans to customers are carried net of any impairment losses.

All loans are secured against the property of the borrower, with adequate provisions calculated and managed by the Risk Management Department of Kreditmart and Flexinvest.

2.10 Use of estimates

The preparation of the Group's financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and contingencies at the time of the Group's financial statements, and revenue and expenses during the reporting period. Actual results could differ from those estimated. Significant estimates in the Group's financial statements include the amounts recorded for the fair value of the investments and the impairment loss allowance on loans to customers. By their nature, these estimates and assumptions are subject to measurement uncertainty and the effect on the Group's financial statements of changes in estimates in future periods could be significant.

The significant judgements made by management 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 for the year ended 31 March 2009.

2.11 Deferred tax

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method.

3. Administration and operating expenses

							1 April 2009 to 30 September 2009		1 April 2008 to 30 September 2008
							£'000		£'000
	Company
	Investment management fee						876		902
	Auditors' remuneration						22		37
	Directors' remuneration						94		102
	Share-based payments						300		300
	Other operating and administrative expenses						244		354
							1,536		1,695
	Kreditmart
	Auditors' remuneration						25		4
	Directors' remuneration						15		53
	Other operating and administrative expenses						1,354		3,385
							1,394		3,442
	Flexinvest Limited
	Auditors' remuneration						27		12
	Other operating and administrative expenses						416		416
							443		428
	Total for the Group						3,373		5,565

4.    Tax

	Group
	Kreditmart
	Current tax charge						(49)		(21)
	Deferred tax (charge)						-		(935)
							(49)		(956)
	Flexinvest Limited
	Current tax charge						2		(7)
	Deferred tax (charge)/credit						(16)		36
							(14)		29
	Net tax charge to the statement of comprehensive income						(63)		(927)

The Company is exempt from Guernsey taxation on income derived outside Guernsey and bank interest earned in Guernsey.

The Group is liable to pay tax at a rate of 20% (2008: 24%) arising on its activities in Russia. 

The Group is liable to pay tax at a rate of 10% (2008: 10%) arising on its activities in Cyprus.

	Group 2009		30 September 2009		30 September 2009		30  September 2009		31  March 2009
	Deferred tax asset/(liability) comprises:		£'000		£'000		£'000		£'000
			Assets		Liabilities		Net		Net
	Loans to customers		6		-		6		2
	Other assets		75		-		75		45
	Other liabilities		-		(56)		(56)		(45)
	Tax loss carry-forwards		145		-		145		189
			226		(56)		170		191

5.    Goodwill

	Group						30 September 2009		31 March 2009
							£'000		£'000
	Opening balance						-		169
	Exchange gain for the year						-		67
	Impairment						-		(236)
	Closing balance						-		-

In accordance with the valuation at 31 March 2009 performed in respect of Kreditmart by an independant valuer, the goodwill acquired was impaired in full. This is as a result of significant decreases in the Russian mortgage market which resulted in the reduction in value of the consumer loans.

6.    Other intangible assets

.
	Cost:
	Recognised on acquistion of Volzski Universalny Bank ('VUB')						2,680		2,680
	Currency revaluation						(381)		(407)
	Closing balance						2,299		2,272

Intangible assets consist of banking licences acquired from VUB. These banking licences have an indefinite useful life. 

No impairment losses have been recognised in respect of these intangibles in the 6 month period ended 30 September 2009.

7.    Plant and equipment

.
					Fixtures and		Furniture and
	Group				fittings		equipment		Total
					£'000		£'000		£'000
	Cost:
	At 1 April 2009				429		1,153		1,582
	Additions				-		47		47
	Disposals				(161)		(53)		(214)
	Exchange movements on disposals				1		(5)		(4)
	At 30 September 2009				269		1,142		1,411
	Accumulated depreciation:
	At 1 April 2009				(259)		(304)		(563)
	Charge for the period				(64)		(97)		(161)
	Disposals				103		24		127
	Exchange movements on disposals				2		2		4
	At 30 September 2009				(218)		(375)		(593)
	Net book value:
	At 1 April 2009				170		849		1,019
	At 30 September 2009				51		767		818
	The useful lives of the assets are estimated as follows:
	Fixtures and fittings						3-4 years
	Furniture						5 years
	Equipment						3 years

8     Assets classified as held for sale

.					30 September 2009		31 March 2009
	Group				£'000		£'000
	At 1 April 2009				-		-
	Additions				191		-
	At 30 September 2009				191		-

Assets classified as held for sale are the property (flat, cottage and land plot) received after mortgage foreclosure. The assets are available for immediate sale in their present condition. A potential buyer has been found for the flat, and Kreditmart expects to sell the other assets within one year. The assets are recognised at fair value less costs to sell.

9.     Investment in subsidiaries

	Company					30 September 2009		31 March 2009
						£'000		£'000
	Kreditmart
	Opening balance					16,549		27,972
	Additions					-		-
	Fair value revaluation *					(2,600)		(11,423)
	Closing balance					13,949		16,549
	Flexinvest Limited
	Opening and closing balance					6,451		6,451
						20,400		23,000

* The revaluation performed on Kreditmart includes the value of Flexinvest Limited as at 30 September 2009, and as such, no revaluation was performed on Flexinvest Limited.

The Valuation Committee approves the valuations at each period/year end. The valuation of the subsidiaries and investments at 30 September 2009 was performed by Aurora Investment Advisors Limited, whom the Valuation Committee considers to have the necessary expertise. At each 31 March year end, the valuation is performed by an independent reputable valuer with the necessary experience in valuing investments of this nature.

The financial statements of the Group consolidate the results, assets and liabilities of the subsidiary companies listed below:

	Name of subsidiary undertaking	Country of  incorporation						Class of share	% of class held	Principal activity
	Kreditmart Finance Limited			Cyprus				Ordinary	100.0%	Consumer finance
	Flexinvest Limited					Cyprus		Ordinary	100.0%	Investment holding
	Volzhski Universalny Bank ("VUB") Limited*					Russia		Ordinary	100.0%	Banking and finance

* VUB is held directly by Kreditmart and Flexinvest and is an indirectly held subsidiary of Aurora Russia Limited.

10. Investments - at fair value through profit and loss

						30 September 2009		30 September 2009		31  March 2009		31 March 2009
						£'000		£'000		£'000		£'000
						Group		Company		Group		Company
	Whitebrooks Investments Limited ('Whitebrooks') (OSG) - see note below					12,900		12,900		13,600		13,600
	Unistream Bank Limited					29,700		29,700		25,000		25,000
	Grindelia Holdings Limited (SuperStroy)					14,800		14,800		13,200		13,200
	Quoted investments					36		-		33		-
	Total investments at fair value through profit and loss					57,436		57,400		51,833		51,800
	Change in fair value of investments at fair value through profit and loss
						1 April 2009 to 30 September 2009		1 April 2009 to 30 September 2009		1 April 2008 to 30 September 2008		1 April 2008 to 30 September 2008
						£'000		£'000		£'000		£'000
						Group		Company		Group		Company
	Whitebrooks (OSG) (excluding drawdown and interest on loan) - see note below					(1,222)		(1,222)		471		471
	Unistream Bank Limited					4,700		4,700		2,839		2,839
	Grindelia Holdings Limited (SuperStroy)					1,600		1,600		2,266		2,266
	Quoted investments					3		-		(9)		-
	Kreditmart and Flexinvest (see note 9)					-		(2,600)		-		(2,123)
	Total unrealised gains					5,081		2,478		5,567		3,453

Whitebrooks loan:

The Company acquired a 40.3% stake in Whitebrooks on 24 July 2006, diluted to 37.1% after the agreement of a management option scheme. In addition to its investment in the shares of Whitebrooks, the Company has provided the investee company with a loan facility of US$5 million. The drawn down tranches of the loan are each repayable within twelve months of the drawdown date. If not repaid on the due date the lender has the option to convert the amount outstanding into ordinary shares of the borrower. On 27 December 2007 the loan principal amount drawn down on 27 December 2006 plus accrued interest was converted into ordinary shares in accordance with the facility agreement. The conversion resulted in an increase in the diluted holding as at 31 December 2007 to 39.1% and was further increased to 39.4% as a result of the buyback of shares by Whitebrooks from the former chief executive. The Company decided that the loans drawn down by Whitebrooks on the 5th March 2007 as well as on the 18th May 2007 will not be converted into shares of the borrower and will be treated as non current liabilities.

On 22 December 2008, the Board of Directors of Aurora Russia Limited approved a further US$1 million convertible loan facility to Whitebrooks Investments Limited. Interest accrues daily at a rate of 13% p.a. on a 360 day year basis, and is capitalised monthly. The loan is repayable within 12 months. Per the agreement, the Company will have the option to convert all outstanding principal and accrued interest into equity of the borrower at the valuation of $28 million. This replaces the conversion valuation in the existing loan facility. Because of the change in the conversion rate, in April 2009 an additional 692 shares in Whitebrooks were issued to Aurora Russia Limited in respect of the conversion of the loan into equity in December 2007. The drawn down amounts on the loan are repayable within one year of the date of drawdown. In the event of default, a default interest premium of 1% shall accrue on the overdue amount. $500,000 of this facility was advanced to the borrower on 30 March 2009 with the remaining $500,000 advanced on 26 August 2009.

The further loan facility of US$1 million to Whitebrooks includes options which if exercised would give the Company over 50% ownership of Whitebrooks Limited. The Company's ability to exercise these options is subject to certain trigger events including the sale of OSG and as such does not give the Company control of Whitebrooks Limited. As such the Directors consider the nature of this loan to be quasi equity in nature and have reclassified this loan as part of Investments and is valued on this basis.

11.    Loans and advances to customers

										Group
										30 September 2009			31 March 2009
										£'000			£'000
	Residential mortgages									8,853			9,569
	Reconciliation of impairment loss allowance on loans to customers:
	Balance at beginning of the year/period									1,912			195
	Movement in allowance for loan losses									(428)			1,722
	Translation differences									-			(5)
										1,484			1,912

The mortgages are secured over borrowers' private residences, are repayable in equal monthly instalments and have an average maturity of 28 years. Interest is charged at fixed rates, at an average interest rate of 11.77%.

12.    Derivative liabilities 

The Group utilises currency options and forward foreign exchange contracts to hedge its exposure to monetary assets and liabilities.

							Group and Company
							30 September 2009		31 March 2009
							£'000		£'000
Current derivative liabilities
Sterling/US dollar forward foreign exchange contracts							-		(46)

There are no outstanding foreign exchange contracts at period end

13. Trade and other payables

			30 September 2009	30 September 2009	31 March 2009	31 March 2009
			£'000	£'000	£'000	£'000
			Group	Company	Group	Company
Expense accruals and sundry			448	80	742	129
			448	80	742	129

14. Segmental information

The Board of Directors of Aurora Russia Limited decide on the strategic resource allocations of the Group. The operating segments of the Group are the business activities that earn revenue or incur expenses, whose operating results are regularly reviewed by the Board of Directors of Aurora Russia Limited, and for which discrete financial information is available. The Board of Directors considers the Group to be made up of 2 segments, which are reflective of the business activities of the Group and the information used for internal decision-making:

- Aurora Russia Limited (parent company)

- Kreditmart Finance Limited, Flexinvest Limited and Volzhski Universalny Bank ("VUB") Limited (subsidiaries)

The Group is engaged in investment in small and mid-sized companies in Russia and in one principal geographical area, being Russia. The Investment Manager's Report provides more information on Aurora Russia Limited's business and the operations of each investment.

The parent company derives its revenues from its investments by way of interest and dividends.

		1 April 2009 to 30 September 2009		1 April 2009 to 30 September 2009		1 April 2009 to 30 September 2009		1 April 2008 to 30 September 2008		1 April 2008 to 30 September 2008		1 April 2008 to 30 September 2008
		£'000		£'000		£'000		£'000		£'000		£'000
		Aurora		Kreditmart/		Total		Aurora		Kreditmart/		Total
		Flexinvest/VUB						Flexinvest/VUB
	Revenue	338		735		1,073		316		1,144		1,460
	- Fees	-		120		120		-		244		244
	- Interest on long term mortgages and other loans	-		505		505		-		707		707
	- Loan interest	214		-		214		118		-		118
	- Bank interest	5		110		115		198		193		391
	- Dividend income	119		-		119		-		-		0
	Administration and operating expenses	(1,536)		(1,837)		(3,373)		(1,695)		(3,870)		(5,565)
	Fair value movements on revaluation of investments	2,478		3		2,481		3,453		(9)		3,444
	- Kreditmart/Flexinvest/VUB	(2,600)		-		(2,600)		(2,123)		-		(2,123)
	- Whitebrooks (OSG)	(1,222)		-		(1,222)		471		-		471
	- Unistream	4,700		-		4,700		2,839		-		2,839
	- Grindelia (SuperStroy)	1,600		-		1,600		2,266		-		2,266
	- Quoted investments	-		3		3		-		(9)		(9)
	Fair value movements on derivatives	-		-		-		3		-		3
	Impairment of loan receivable	-		-		-		(370)		-		(370)
	Exchange (losses)/gains	(9)		(719)		(728)		56		856		912
	Operating profit/(loss) before tax	1,271		(1,818)		(547)		1,763		(1,879)		(116)
	Tax	-		(63)		(63)		-		(927)		(927)
	Net segment profit/(loss)	1,271		(1,881)		(610)		1,763		(2,806)		(1,043)
	Reconciliation of segment profit/(loss) to consolidated statement of comprehensive income									1 April 2009 to 30 September 2009		1 April 2008 to 30 September 2008
										£'000		£'000
	Total net segment loss									(610)		(1,043)
	Adjustment for fair value movements on
	Kreditmart/Flexinvest/VUB									2,600		2,123
	Net profit for the period for the Group									1,990		1,080

		30 September 2009		30  September 2009				30 September 2009			31  March 2009		31  March   2009				31  March 2009
		£'000		£'000					£'000		£'000		£'000				£'000
		Aurora		Kreditmart/					Total		Aurora		Kreditmart/				Total
		Flexinvest/VUB									Flexinvest/VUB
	Total segments assets include:
	Investments in subsidiaries	20,400		-			20,400				23,000		-			23,000
	Financial assets at fair value through profit or loss	57,400		36			57,436				51,800		33			51,833
	- Whitebrooks (OSG)	12,900		-			12,900				13,600		-			13,600
	- Unistream	29,700		-			29,700				25,000		-			25,000
	- Grindelia (SuperStroy)	14,800		-			14,800				13,200		-			13,200
	- Quoted investments	-		36			36				-		33			33
	Cash and cash equivalents	3,488		6,717			10,205				4,123		7,899			12,022
	Intangible assets	-		2,680			2,680				-		2,680			2,680
	Property, plant and equipment	-		818			818				-		1,019			1,019
	Assets classified as held for sale	-		191			191				-		-			-
	Loans and advances to customers	-		8,853			8,853				-		9,569			9,569
	Other assets	224		814			1,038				1,112		987			2,099
	Segment assets	81,512		20,109			101,621				80,035		22,187			102,222
	Total segment liabilities	(80)		(559)			(639)				(175)		(810)			(985)
	Reconciliation of segment assets and liabilities to consolidated statement of financial position												30 September 2009			31 March 2009
													£'000			£'000
	Segment assets for reportable segments												101,621			102,222
	Exchange loss on translation of intangibles												(381)			(407)
	Investment in subsidiaries												(20,400)			(23,000)
	Intercompany debtors												(191)			(197)
	Total assets for the Group												80,649			78,618
	Segment liabilities for reportable segments												(639)			(985)
	Intercompany creditors												191			197
	Total liabilities for the Group												(448)			(788)

15.    Related party transactions

The Company (Aurora Russia Limited) has three subsidiaries: Kreditmart Finance Limited, Flexinvest Limited and Volzhski Universalny Bank Limited (see note 9). Details of the investments in Whitebrooks Investment Limited, Unistream Bank, and Grindelia Holdings are presented in note 10.

Balances owing between the Company and any subsidiaries which are related parties have been eliminated on consolidation. This includes a loan receivable from Flexinvest Limited (see note 14).

The terms of the loan to Whitebrooks is highlighted in note 10. The loan is considered as quasi equity in nature and is included as part of the investment in Whitebrooks at fair value. The balance of the principal and interest in respect of the loan is £3,412,822 at 30 September 2009 (31 March 2009: £3,221,334). Interest received on this loan of £214,255 is separately disclosed on the face of the statement of comprehensive income (6 month period ended 30 September 2008: £117,864).

The Company pays fees to Aurora Investment Advisors Limited ('AIAL') for its services as investment manager and advisor. The total charge to the statement of comprehensive income during the period was £876,430 (6 month period ended 30 September 2008: £902,661). There were no outstanding fees at the period/year end. AIAL performed the valuation of the subsidiaries and investments as at 30 September 2009.

On 10 March 2009, an amendment was made to the Management Agreement between the Manager, Aurora Investment Advisors Limited ('AIAL'), and the Company, Aurora Russia Limited. With effect from 1 January 2009, the Manager is free to provide investment advice or other equivalent services to persons other than the Company. The Company shall be entitled to co-investment rights in relation to any investments made by a new fund that the Manager proposes to establish after January 2009 in any securities which could otherwise be acquired by the Company in accordance with the Investment Policy ("Co-Investments").

John McRoberts and James Cook each hold 47.5% of the ordinary share capital and 36.25% of the non-voting preference share capital of AIAL at period end.

The Company pays fees to Close Fund Services Limited ('CFSL') for its services as administrator. The total charge to the statement of comprehensive income during the period was £50,451 (6 month period ended 30 September 2008: £32,515), of which £15,452 (31 March 2009: £NIL) was outstanding at the period end. John Whittle was appointed a director of the Company on 17 January 2008. He was also a director of CFSL until 31 May 2009.

The Directors of the Company and of Kreditmart OOO, other than John McRoberts and James Cook, received fees for their services. The total charge to the statement of comprehensive income during the period was £94,279 (6 month period ended 30 September 2008: £101,773), of which £3,330 (31 March 2009: £4,776) was outstanding at the year end.

16.    Reclassification of comparatives

Loan interest, bank interest, as well as dividend income, have been reclassified from "Finance income" to "Revenue" in the Consolidated and Company statement of comprehensive income, statement of cash flows and related notes thereto. The reason for this change is that the ordinary activities of the Company is to earn income on its investments. This is consistent with the 31 March 2009 annual financial statements.

Furthermore, "Taxation Paid" in the statement of cash flows was reclassified from "Investing Activities" to "Operating Activities" in order to comply with IAS 7 "Statements of Cash Flows".

17.     Events after the balance sheet date

On 30 June 2009, the Company entered into an agreement with Grindelia Holdings Limited to borrow RUR 5,832,000 on 20 February 2010 for 1 year with an interest rate of 1% per annum.

Contemporaneous to the issue of these accounts the Company announced a proposed issue of 37,500,000 new ordinary shares at an issue price of 40p per share (subject to shareholder approval at an extraordinary general meeting). £12.4 million of the proceeds of the share issue will be used to purchase an additional 43.5% of OSG's shares bringing the shareholding in OSG to 93.6% (on a fully diluted basis and assuming all convertible loans in OSG held by the Company are converted), and to invest new money into OSG to part fund a large warehouse facility in Moscow. The balance of the proceeds will be used to pay costs associated with the share issue and retained by the Company as working capital. 

The balance of OSG's shares are held in an option pool of 6.4%, with approximately 2.0% held by previous employees who may wish to exercise and sell the shares to the Company. If such option shares are purchased by the Company, the net amount payable to the option holders will be £0.18 million which will increase the Company's shareholding in OSG to 95.5%. However, the Company expects to increase the management pool by an additional 3.6% resulting in its overall holding in OSG being approximately 92%.

At the same time the Board has announced that the Company will return cash to shareholders as each of its portfolio companies are sold. Following the receipt of cash from a disposal of any of its portfolio companies, it will return to Shareholders an amount up to a maximum of the lesser of the total net proceeds received on a realisation of a portfolio company and 1.5 times the total amount invested in that portfolio company plus the pro-rata allocation of costs of the Company to date until the Company has returned a total of £105 million to Shareholders. Any proceeds in excess of this amount should be retained by the Company for re-investment purposes.

Should the amount received on the disposal of a portfolio company be less than 1.5 times the total amount invested in such company plus Allocated Costs, it is anticipated that the total funds received from the sale of the portfolio company (net of disposal expenses) will be returned to Shareholders.

However, in the event that the Board believes that the Company needs to retain a portion of the cash proceeds on the sale of any portfolio company to satisfy its status as a going concern, for general working capital purposes or for the purposes of future investments in existing portfolio companies that are deemed necessary by the Board, it will do so.

The Board has also agreed to amend the option deed to keep the Manager incentivised to continue to manage the investments that the company has made. The option deed was intended to provide a carry mechanism similar to that used in a typical private equity fund structure. However, because the Option Deed did not contemplate the issuance of shares at a discount to the IPO placing price, the pre-condition for exercise is based on an increase in the price per share rather than an increase in the value of the Company, as would be the case in a typical private equity fund. Particularly given the current market conditions it is unlikely that the Manager will ever be in a position to exercise its option over the initial 18,750,000 share options, or over further share options.

Therefore the Company has agreed with the manager to amend the Option Deed, so that the formula used in the condition allows for new Ordinary Shares to be issued at above or below the IPO placing price to more accurately reflect the value of the Company. This amendment will mean that the 12% hurdle rate will be based upon the total funds raised by the Company across all shares issued for cash.

There were no other material subsequent events after the year end.

 

END

 

 

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