Interim Results

RNS Number : 4893Y

Aurora Russia Limited

23 December 2010

 



23 December 2010

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

Results for the six months ended 30 September 2010

Investee companies focused on returning to a strategy of growth as recovery of Russian

 economy takes hold

Financial highlights

·      Net asset value per share as at 30 September 2010 of 82.9p per share (Net asset value £93.2 million)

·      Cash and cash equivalents as at 30 September 2010 were £4.25 million

Portfolio highlights

OSG

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

·      OSG expanded its operations with the Armenian operation and added additional racking in its main Moscow facility in Lobnya

·      Revenues were £9.8 million representing an increase of 23% compared to the prior year period

·      Record month in September 2010 in terms of revenues

·      EBITDA up 20% to £1.4 million as at 30 September 2010

Unistream Bank

·      Unistream's share in the Russia-outbound and inbound remittances is estimated at 19.2% and 12.1% respectively according to Q3 2010 official statistics published by the CBR first week of December

·      Volumes grew 10.9% year-on-year ("YoY") and due to cuts in advertising and company-owned cash desk running costs, operating expenses reduced 11% YoY

·      Revenue for the nine months ended 30 September 2010 was RUR1.5 billion which was down 10.1% compared to the prior year period

Superstroy

·      Superstroy is the leading DIY company in the Urals Region of Russia

·      Resumed growth strategy in May 2010 opening three new stores increasing its trade space by 10.8% and all three stores have outperformed their budgets

·      For the nine months ended 30 September 2010, Superstroy's revenues have increased 13% YoY to RUR4.93 billion with wholesale revenues generating growth of 29% while retail sales were up 9%

·      Superstroy delivered 8% growth in EBITDA to RUR115 million YoY as at 30 September 2010

Kreditmart and Flexinvest

·      Kreditmart has returned to its core business of broking mortgages now that the mortgage market has begun to grow again

·      Flexinvest Bank's interest and fee income grew 47% compared to the prior year period and was at £746,000 for the nine months ended 30 September 2010

·      Kreditmart's broker fees were £424,000 for the nine months ended 30 September 2010, representing a 156% increase YoY

·      As at 30 September 2010, Flexinvest and Kreditmart had £18.0 million in net assets down from £19.7 million as at 31 March 2010. This decrease is mostly attributable to the depreciation of the Rouble against the Sterling

Board change

The Board accepts John McRoberts' resignation as detailed in the Notice of AGM announcement made on 28 October 2010. John will continue to provide his investment advice to the Company from within Aurora Investment Advisors Limited.

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

"Growth has now returned to Russia's economy with economists expecting increases in GDP of c. 4% over the next few years. I am optimistic that the worst of the recession is over and continue to believe that our portfolio companies are well positioned to benefit from the improved economic climate. I am also encouraged to see that there is renewed activity in the Russian IPO and M&A market which suggests a better exit climate for our investments."

Enquiries:

Aurora Russia Limited                                                  

Dan Koch                                                                      [phone]     

Numis Securities Limited                                            

Nominated Adviser: Hugh Jonathan                                  [phone]                 

Corporate Broking: Rupert Krefting / Nathan Brown          

Financial Dynamics

Ed Gascoigne-Pees                                                       [phone]

Sue I Ong

Chairman's Statement

Introduction

I am pleased to present the results of Aurora Russia Limited (the "Company" or "Aurora Russia") for the 6 months ended 30 September 2010. 

Growth has now returned to Russia's economy with economists expecting increases in GDP of c. 4% over the next few years. I am optimistic that the worst of the recession is over and continue to believe that our portfolio companies are well positioned to benefit from the improved economic climate. I am also encouraged to see that there is renewed activity in the Russian IPO and M&A market which suggests a better exit climate for our investments.

Results

For the 6 months to 30 September 2010, Aurora Russia and its subsidiaries (the "Group") recorded a loss of £6.3 million or (5.62p) per share, calculated on the weighted average number of shares and based on the unaudited consolidated statement of comprehensive income. The net asset value ("NAV") of the Company as at 30 September 2010 was £93.2 million or 82.9p per share. Company cash and cash equivalents at 30 September 2010 were £4.25 million.

Administration and operating expenses of £10.12 million include Company costs of £2.03 million or 2.3% of the current NAV. Operating costs of the Company's wholly owned subsidiaries were £8.09 million. 

The £2.03 million Company costs include costs of approximately £0.3 million incurred in relation to the non-cash accrual of £2.72 million for the options that may be issued to the Manager under the previous incentive arrangements. This arrangement is expected to be cancelled and transferred to shareholders' reserves at the end of the current year.

The Annual General Meeting

I would also like to take this opportunity to thank our shareholders for their support in the continuation vote at the AGM on 3 December 2010 and the re-election to the Board of John Whittle, Alexandr Dumnov and myself.

Continuation of the Company

The Directors considered that it was in the best interests of the shareholders that the life of the Company be continued. The Directors have always been committed to crystallise value for shareholders through the sale of the Company's investments over a sensible period of time and believe that the continuation of the Company will enable the Company to achieve this in a controlled manner, thereby maximizing shareholder value.

The Board has agreed that it will return all of the net cash proceeds from realisations of the Company's assets to shareholders, as long as the discount of the Company's share price is more than 20% of the latest published NAV of the Company. If for a period of six months immediately preceding the sale of an asset the share price discount to the NAV per share is less than 20%, then the Board will have the discretion to make additional investments in line with the strategy of the Company.

Management Fees and Incentivisation Arrangements

The Board indicated in the circular relating to the AGM that it has agreed with the Manager to reduce the management fee from 2.0% to 1.5% of NAV per annum with effect from 31 March 2011 and to put in place a new incentive structure to better align its interests with shareholders, replacing the current option programme for the Manager. The new incentive structure would involve the payment of a performance fee to the Manager, calculated by reference to a percentage of the value of any disposals realised by the Company.

In the event that any follow on investments are made by the Company following the narrowing of the share price discount to NAV as described above, it is proposed that the Manager will receive a performance fee equal to 20% of the value of any amounts realised on the disposal of such further investments in excess of the amounts so invested. The 20% performance fee would be subject to a hurdle rate which is expected to be at 12% per annum (the same as the hurdle rate for the Manager's current incentive arrangements under the Option Deed).

Composition of the Board

The Directors believe that it is right to strengthen the Board where possible and the Board has agreed to appoint two new Independent Directors to represent shareholders as a whole as soon as practicable following the AGM. The Board does not intend to increase the size of the Board from seven Directors by such appointments, but rather two existing directors (including John McRoberts) would step down so as to keep the Board at its current size. The Board will consider in due course whether it is appropriate to reduce the size of the Board to either six or five Directors, provided that it can maintain a board with the skills that are needed in a company such as Aurora Russia.

John McRoberts stepped down from the Board on 22 December 2010 and I would like to take this opportunity to thank him for his contribution as a Director of the Company.  John will continue to provide his skill and expertise to the Company from within the Manager.

Investment Review

Following the additional investment in OSG, Aurora Russia has invested a total of £73.9 million into five companies and has funds of £4.25 million remaining in the Company to allow for small follow-on investments in its investee companies and to cover its ongoing expenses.

Aurora Russia has five investments:

• 26% of Unistream Bank, a leading Russian money transfer company;

• 100% of Kreditmart, a finance company distributing mortgages, equity release loans and other consumer finance products;

• 100% of Fleixinvest Bank which provides retail banking services;

• 95.5% of OSG, a regional market leader in records management; and

• 24.3% of SuperStroy, one of the leading DIY Retailers in Russia

In all of our investee companies the local management and staff have remained loyal and committed through this difficult period and I would like to thank them for their hard work and dedication.

Portfolio Valuation

A valuation of the investment portfolio was performed at 30 September 2010, resulting in a small decrease in value from £92.2 million to £88.1 million. This interim valuation, recommended by the Valuation Committee of the Board was prepared by the Manager and formally adopted by the Board on 9 December 2010. These valuations are prepared for accounting purposes only and comply with International Private Equity and Venture Capital ("IPEV") Valuation guidelines. The resultant valuations of investments included in the Company's financial statements will not necessarily reflect the market value that a third party would be prepared to pay for these businesses.

The current valuation of Aurora Russia's shareholdings reflects changes to the previous year valuation performed for March 2009 as follows:

• the value of the Company's 26% stake in Unistream Bank has decreased by £2.6 million to £21.8 million, a decrease of 11%;

• the value of Kreditmart and Flexinvest Bank has decreased by £1.9 million to £20.3 million, a decrease of 9%;

• the value of 95.5% of OSG's equity has increased by £0.6 million to £28.7 million, an increase of 2%; and

• the value of the Company's 24.3% shareholding in SuperStroy has decreased by £0.2 million to £17.3 million, a decrease of 1%.

In assessing these changes, one should take into consideration that over the period there was c. 9% unfavorable movement in the £/RUR exchange rate. Therefore the movement of values may be distorted by currency translation effects and may not be the best reflection of the performance of an underlying asset during the reporting period.

Outlook

I share the view that a number of economists have about GDP growth in the emerging markets outperforming growth in the developed world by some margin over the next couple of years. According to recent forecasts, Russia will grow at rates of around 4% in the next two years.

Such events as the 2014 Winter Olympics in Russia and the FIFA World Cup in 2018 mean that Russia is at the beginning of a new infrastructure development cycle benefiting many sectors of the Russian economy, particularly construction with Unistream and potentially Superstroy having direct benefits from this trend.

The recovery of consumption which is the key driver that our investee companies need to generate further growth is perhaps happening slightly more slowly than many anticipated.  Similar to the 1998 financial crisis, the recent crisis affected confidence in the future for both business and the consumer, which takes time to be restored, but it seems we are noticing the first signs of that confidence returning.

Dan Collinson Koch

Chairman of the Board

Aurora Russia Limited

Date: 22 December 2010

Investment Manager's Report

Overview

In the six months to 30 September 2010 our investee companies focused on returning to a strategy of growth as the recovery of the Russian economy took hold.

We are delighted to report that OSG, Unistream and Superstroy are all expected to post profits for the year ending 31 December 2010 and that all three companies remain leaders in their field; OSG is the largest records management company in Russia, Ukraine and Kazakhstan, Unistream is the leading outbound money transfer company in Russia and Superstroy is the leading DIY company in the Urals Region of Russia.

Kreditmart and Flexinvest Bank continue to face challenges in capturing market share as much of the volume of mortgages is still going through the large state-owned Russian banks. However, there remains enormous potential in the sector and both Kreditmart and Flexinvest Bank continue to find opportunities for capturing market share as the market recovers.

Since the Company's IPO in March 2006, Aurora Russia has invested a total of £73.9 million in five companies.  The companies are valued at 30 September 2010 at £88.1 million, representing a decrease of 4.5% since 31 March 2010.  The 9% depreciation of the Rouble against Sterling is largely responsible for this decrease.

It is worth mentioning that all our investee companies currently report on a calendar year basis and therefore the updates below will be for the nine months ended September 2010 rather than the six months ending on that date.

OSG Records Management

OSG had a record month in September 2010 in terms of revenues, which were £1.2 million, up 40% from the prior year period and representing 9% growth over the previous month.  The company's contractual storage business showed a solid performance during the first nine months of 2010 with storage revenue up 24% while services business grew 22%. OSG continued to expand in the Russian regions by adding offices in nine new cities and recently launching operations in Armenia.  The number of boxes in storage in September 2010 increased 26% over September 2009.

Growth in services remained challenging in 2010 as many businesses budgeted for 2010 on the assumption that recovery from the financial crisis would take more time and focused budgets on cost-cutting. OSG's management believes that 2011 will see acceleration of growth in services due to the pent-up demand as a result of cost savings by many of OSG's clients during the financial crisis.

For the nine months to 30 September 2010, OSG reported revenues of £9.78 million compared to £7.95 million for the same period in 2009. EBITDA was £1.35 million up 20% year-on-year ("YoY") for the same period.

In Russia and Poland, OSG has been able to finance the purchase of warehouse racking and vehicles through finance leases. At 30 September 2010, the outstanding balance on its lease financing was c. £2.3 million.

The valuation of the investment in OSG at 30 September 2010 resulted in an uplift of £0.6 million to £28.7 million compared to the valuation at 31 March 2010 of £28.1 million.

Unistream Bank

According to the Central Bank of Russia, the money transfer market began to recover with outbound transfers in the nine month period to 30 September 2010 up by 29% YoY in US$ terms. Russia's inbound transfers grew 9% in the same time period.

Figures released from the CBR in early December estimate that Unistream's share of the Russia-outbound remittances market has dropped from 20.8% to 19.2% as at Q3 2010.  However, Unistream's share in the Russia-inbound remittances grew to 12.1% as of Q3 2010, from 9.4% in Q1 2010.

To improve customer retention, Unistream launched its loyalty programme in August 2010 and by November 187,000 customers had been issued with loyalty cards. So far statistics show that on the cards issued in September 56% were used again in October in money transfer transactions.

Unistream has recently started offering mobile transfers with a number of mobile operators in Russia. The volume of mobile transfers has seen steady monthly growth to RUR160.8 million in September up from RUR142.7 million in August and RUR126.6 million in July.

Unistream's remittance volume for the nine month period to 30 September 2010 was down 2% YoY with revenue down by 10.1% in RUR terms at RUR1.5 billion compared to the same period in the prior year. At the same time, due to cuts in advertising and company-owned cash desk running costs, operating expenses reduced 11% YoY. Volumes have started to grow again in August and September with a 10.9% and 9.7% YoY increase respectively.

The valuation of the 26% stake in Unistream Bank at 30 September 2010 resulted in a write down of £2.6 million to £21.8 million compared to the valuation at 31 March 2010 of £24.4 million.

Kreditmart

Government statistics show that the volume of mortgages in Russia more than doubled in the first seven months of 2010 to RUR192 billion from RUR82 billion over the same period in 2009. While we see growth in the mortgage market, private banks find it difficult to compete with terms offered by the state banks posing challenges for brokers. The share of mortgages written by top three state banks in 1H 2010 was at 72%.

As a broker, Kreditmart does not act as a lender but instead selects the best loans for its customers among offers from over 50 banks.

Kreditmart's customer acquisition efforts are geared towards two web sites: www.kreditmart.ru and a recently launched site: www.besmart.ru with the latter allowing consumers to do their own comparison of mortgage and consumer loan products directly online.  Fees from leads generated by the site are paid by participating banks to Kreditmart.

The bulk of Kreditmart's fee and commission income is from approval fees. Customers pay a fee of 1.5% and 5% for mortgages and consumer loans respectively. Kreditmart's broker revenues were £424,000 for the nine months ended 30 September 2010. This represents an increase of 156% compared to the prior year period, due to the increased growth in the number of mortgages and consumer loans versus 2009.

Flexinvest Bank

Flexinvest began to offer its clients mortgages again in Q1 2010 when the market began to show the first signs of recovery.  Given the current shortage of long-term funding for mortgages, its model relies on originating mortgage loans for further on-sale to its partner banks.  New mortgages are held on the bank's balance sheet for an average of 40 days before they are sold to Flexinvest's partners. Flexinvest collects fee and interest income from its customers and in some cases, up to a 1% premium on the book value of loans it sells.

Flexinvest's interest and fee income grew 47% compared to the prior year period and reached £746,000 for the nine months ended 30th September 2010 (growth is due to the transfer of loans).

Although there is a positive trend in the number of loans written by Flexinvest Bank, scalability of its current business model relies on availability of long-term funding and therefore the management intends to focus on retail deposits in 2011 and to offer a new consumer loan product.

As of 30 September 2010, Flexinvest and Kreditmart had £18.0 million in net assets down from £19.7 million as of 31 March 2010. The valuation of Flexinvest and Kreditmart at 30 September 2010 resulted in a write down of £1.9 million to £20.3 million compared to the valuation at 31 March 2010 of £22.2 million. We attribute £1.3 million of this change to the depreciation of the Rouble against Sterling.

SuperStroy

The growth rate of the Russian retail sector dropped severely last year due to worsening economic conditions, weakening purchasing power growth and the depreciating rouble. As a result, the retail market's value increased by only 5% in 2009 while its share of non-food retail decreased by three percentage points as sales of durables dropped. Nevertheless, the situation has improved this year with a 9% growth forecast, and the retail market is expected to once again reach double-digit growth rates in subsequent years. Superstroy's management estimates that the DIY market will grow around 10% in 2010.

Superstroy grew its revenues by 32% YoY in September following growth of 28% YoY in August and 23% YoY in July.  Superstroy began to grow again in April following the global financial crisis.

Superstroy resumed its growth strategy in May 2010 opening three new stores increasing its trade space by 10.8 %. All three stores have outperformed their budgets.

For the nine months ended 30 September 2010, the Superstroy's revenues have increased 13% YoY in local currency terms to RUR 4.93 billion with wholesale revenues generating growth of 29% while retail sales were up 9%. 

In spite of opening new stores which typically operate at a loss in their first several months, Superstroy managed to deliver 8% growth in EBITDA to RUR 115 million as compared to the same period of 2009. Adjusted for pre-opening costs, EBITDA grew 43.6% to RUR 153 million.

At 30 September 2010, the outstanding balance on the two loan facilities was RUR 0.62 billion (approximately £12.8 million). The interest rate (before fees) is charged at c.11.0% per annum.

The valuation of Superstroy as at 30 September 2010 resulted in a slight write down of £0.2 million for Aurora Russia's 24.3% stake to £17.3 million compared to the valuation at 31 March 2010 of £17.5 million.

Conclusion

The Manager is encouraged that growth has now returned to Russia which is a strong driver for all Aurora Russia's investee companies.  We continue to look for the best exit opportunities for all of the investments and believe that the prospects for attractive exits have improved as strategic buyers and investors look to Russia as a market for growth. This has recently been demonstrated by a surge of M&A and IPO activity involving Russian companies. 

Aurora Investment Advisors Limited

December 2010

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 year financial report for the six months ended 30 September 2010 which comprise the unaudited condensed half year consolidated statement of comprehensive income, the unaudited condensed half year company statement of comprehensive income, the unaudited half year condensed consolidated statement of financial position, the unaudited condensed half year company statement of financial position, the unaudited condensed half year consolidated statement of changes in equity, the unaudited condensed half year consolidated statement of cash flows and related explanatory notes. We have read the other information contained in the half year 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 4 November 2010. 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 year financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half year 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 year 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 year 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 year financial report for the six months ended 30 September 2010 is not prepared, in all material respects, in accordance with International Accounting Standard 34.

PO Box 20

20 New Street

St Peter Port

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Unaudited Condensed Half Year Consolidated Statement of Comprehensive Income

For the 6 month period 1 April 2010 to 30 September 2010

			1 April 2010		1 April 2009
			to 30 September 2010		to 30 September 2009
	Notes		£'000		£'000
Revenue			7,905		1,078
-  Fees			372		120
-  Storage			3,382		-
-  Warehousing, transport, data processing & other			3,435		-
-  Interest on long term mortgages and other loans			503		505
-  Interest			102		334
-  Dividends			111		119
Administration and operating expenses	3		(10,115)		(3,373)
Fair value movements on revaluation of investments	10		(2,806)		5,081
Exchange losses			(979)		(728)
Operating (loss)/ income			(5,995)		2,058
Interest expense			(285)		(5)
(Loss)/ profit before tax			(6,280)		2,053
Income tax expense	4		(47)		(63)
(Loss)/ profit for the period			(6,327)		1,990
Other comprehensive income
Foreign currency translation differences for foreign operations			(651)		81
Total comprehensive (loss)/ income for the period			(6,978)		2,071
(Loss)/ profit attributable to:
Owners of the Company			(6,322)		1,990
Non-controlling interest			(5)		-
(Loss)/ profit for the period			(6,327)		1,990
Total comprehensive (loss)/ income attributable to:
Owners of the Company			(6,964)		2,071
Non-controlling interest			(14)		-
Total comprehensive (loss)/ income  for the period			(6,978)		2,071
Basic and diluted (loss)/ earnings per share			(5.62p)		2.65p

All items in the above statement derive from continuing operations.

The accompanying notes on pages 16 to 27 form an integral part of these financial statements.

Unaudited Condensed Half Year Company Statement of Comprehensive Income

For the 6 month period 1 April 2010 to 30 September 2010

			1 April 2010		1 April 2009
			to 30 September 2010		to 30 September 2009
	Notes		£'000		£'000
Revenue			120		338
-  Interest			9		219
-  Dividends			111		119
Administration and operating expenses	3		(2,030)		(1,536)
Fair value movements on revaluation of investments	10		(4,100)		2,478
Exchange losses			(30)		(9)
Operating (loss)/ profit before tax			(6,040)		1,271
Income tax expense	4		-		-
Profit and total comprehensive (loss)/ income for the period			(6,040)		1,271
Basic and diluted (loss)/ earnings per share			(5.37p)		1.69p

All items in the above statement derive from continuing operations.

The accompanying notes on pages 16 to 27 form an integral part of these financial statements.

Unaudited Condensed Half Year Consolidated Statement of Financial Position

As at 30 September 2010

			30 September 2010		31 March 2010
	Notes		£'000		£'000
Non-current assets
Goodwill	5		14,164		14,164
Other intangible assets	6		10,612		11,078
Plant and equipment	7		6,738		6,444
Investments - at fair value through profit and loss	10		40,179		43,085
Loans and advances to customers	11		7,742		8,618
Deferred tax assets	4		177		190
			79,612		83,579
Current assets
Trade and other receivables			4,353		4,450
Cash and cash equivalents			9,745		13,242
Assets classified as held for sale	8		845		845
			14,943		18,537
Total assets			94,555		102,116
Non-current liabilities
Finance Leases			1,490		1,567
Deferred tax liability	4		1,709		1,699
			3,199		3,266
Current liabilities
Finance leases			270		719
Tax payable			414		-
Trade and other payables	12		3,789		4,602
			4,473		5,321
Total liabilities			7,672		8,587
Total net assets			86,883		93,529
Equity
Share capital			1,125		1,125
Special reserve			84,073		84,073
Share options reserve			2,768		2,437
Retained earnings			(465)		5,857
Non-controlling interest			487		500
Translation reserve			(1,105)		(463)
Total equity			86,883		93,529
Net asset value per share - basic and diluted			77.2p		83.1p

The accounts on pages 10 to 27 were approved by the Board of Directors on 22 December 2010 and signed on its behalf by: 

Director                                                                                    Director

Date: 22 December 2010                                   

The accompanying notes on pages 16 to 27 form an integral part of these financial statements.       

Unaudited Condensed Half Year Company Statement of Financial Position

As at 30 September 2010

			30 September 2010		31 March 2010
	Notes		£'000		£'000
Non-current assets
Investment in subsidiaries - at fair value through profit and loss	9		49,000		50,300
Investments - at fair value through profit and loss	10		39,100		41,900
			88,100		92,200
Current assets
Trade and other receivables			1,226		1,171
Cash and cash equivalents			4,250		5,704
			5,476		6,875
Total assets			93,576		99,075
Current liabilities
Trade and other payables	12		330		89
Total liabilities			330		89
Total net assets			93,246		98,986
Equity
Share capital			1,125		1,125
Special reserve			84,073		84,073
Share options reserve			2,720		2,420
Revenue reserve			5,328		11,368
Total equity			93,246		98,986
Net asset value per share - basic and diluted			82.9p		88.0p

The accounts on pages 10 to 27 were approved by the Board of Directors on 22 December 2010 and signed on its behalf by:                                                 

Director                                                                                    Director                        

Date: 22 December 2010                                                           

The accompanying notes on pages 16 to 27 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 2010 to 30 September 2010

			Share Capital	Special Reserve	Share Options Reserve	Retained earnings	Translation Reserves	Total	Non- controlling Interest	Total
		Notes	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
For the year 1 April 2009 to 30 September 2009
Balance as at 1 April 2009			750	70,750	1,820	5,320	(810)	77,830	-	77,830
Total comprehensive income for the period
Profit for the period			-	-	-	1,990	-	1,990	-	1,990
Other comprehensive income for the period
Foreign currency translation profit			-	-	-	-	81	81	-	81
Transactions with owners, recorded directly in equity
Contributions and distributions to owners
Recognition of share-based payments			-	-	300	-	-	300	-	300
At 30 September 2009			750	70,750	2,120	7,310	(729)	80,201	-	80,201
For the period 1 April 2010 to 30 September 2010
Balance as at 1 April 2010			1,125	84,073	2,437	5,857	(463)	93,029	500	93,529
Total comprehensive income for the period
Loss for the period			-	-	-	(6,322)	-	(6,322)	(5)	(6,327)
Other comprehensive income for the period
Foreign currency translation loss			-	-	-	-	(642)	(642)	(9)	(651)
Transactions with owners, recorded directly in equity
Contributions and distributions to owners
Recognition of share based payments			-	-	331	-	-	331	1	332
At 30 September 2010			1,125	84,073	2,768	(465)	(1,105)	86,396	487	86,883

The accompanying notes on pages 16 to 27 form an integral part of these financial statements.

Unaudited Condensed Half Year Consolidated Statement of Cash Flows

For the 6 month period 1 April 2010 to 30 September 2010

			1 April 2010		1 April 2009
	Notes		to 30 September 2010		to 30 September 2009
Cash flows from operating activities			£'000		£'000
(Loss)/ profit before tax			(6,280)		2,053
Interest on long term mortgages and other loans			(503)		(505)
Interest income			(102)		(334)
Dividend income			(111)		(119)
			(6,996)		1,095
Adjustments for movements in working capital:
Decrease in operating trade and other receivables			122		1,019
Decrease in operating trade and other payables			(1,048)		(429)
Adjust for:
Revaluation of investments	10		2,806		(5,081)
Recognised share based payments			332		300
Exchange losses			897		728
Interest expense			285		5
Loss on property, plant and equipment written off			4		87
Depreciation and amortisation			835		161
Provision for loan losses			(315)		(428)
Reserve for aged recievables			(56)		-
Interest paid			(22)		(5)
Taxation paid			(23)		-
Dividends received			111		119
Bank and loan interest received			610		681
Loss on forex contract closed out			-		(46)
Increase in non-current assets held for sale	8		-		(191)
Loans advanced to customers			455		407
Net cash outflow from operating activities			(2,003)		(1,578)
Cash flows from investing activities
Proceeds from the disposal of Bonds			36		-
Acquisition of plant and equipment			(686)		(47)
Loans advanced to associated company			-		(307)
Increase in deposits			29		112
Net cash outflow from investing activities			(621)		(242)
Cash flows from financing activities
Financial lease payments - principal			(431)		-
Financial lease payments - interest			(272)		-
Net cash outflow from financing activities			(703)		-
Net decrease in cash and cash equivalents			(3,327)		(1,820)
Opening cash and cash equivalents			13,242		12,022
Effect of exchange rate changes			(170)		3
Closing cash and cash equivalents			9,745		10,205

The accompanying notes on pages 16 to 27 form an integral part of these financial statements.

Notes to the Unaudited Condensed Half Year Consolidated Financial Statements

For the 6 month period 1 April 2010 to 30 September 2010

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 2010. The condensed interim financial statements were approved by the Board of Directors on 22 December 2010.

2.2        Accounting period                                                                                                      

The comparative numbers used for the condensed half year consolidated statement of comprehensive income, condensed half year company 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 2009, 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 2010.     

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 2010. The following standards, amendments to standards and interpretations, effective in future accounting periods, and which are relevant to the Company and the Group, have not been early adopted in these financial statements:        

● IAS 24 Related Party Transactions (Revised) - for accounting periods commencing on or after 1 January 2011                                                                                                      

The definition of related party has been clarified to simplify the identification of related party relationships, particularly in relation to significant influence and joint control. However, the company has taken advantage of the exemption available to it under IAS 28 and the standard is not expected to have a significant impact on the financial statements. This standard will be adopted retrospectively for the first time for the year ending 31 March 2012.     

● IFRS 9 Financial Instruments- for accounting periods commencing on or after 1 January 2013                                                                                                      

IFRS 9 deals with classification and measurement of financial assets and its requirements represent a significant change from the existing requirements in IAS 39 in respect of financial assets: amortised cost and fair value. Financial assets are measured at amortised cost when the business model is to hold assets in order to collect contractual cash flows. All other financial assets are measured at fair value with changes recognised in profit or loss. For an investment in an equity instrument that is not held for trading, an entity may on initial recognition elect to present all fair value changes from the investment in other comprehensive income. IFRS 9 will be adopted for the first time for the year ending 31 March 2014 and will be applied retrospectively, subject to certain transitional provisions. The company is currently in the process of evaluating the potential effect of this standard. The standard is not expected to have a significant impact on the financial statements since all of the company's financial assets are designated at fair value through profit and loss.           

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 or 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 Valuation ('IPEV') Board's guidelines. Unrealised gains and losses arising from the revaluation of investments are taken directly to profit or loss. 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 profit or loss.                                                                                                           

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

            The estimated useful lives for the current and comparative periods are as follows:     

            Software                                                 10 years     

            Customer base - large customers             15 years                              

            Customer base - small customers            10 years       

            Trademark and banking licence                Indefinite 

2.8        Goodwill                                                                                                         

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 2010.                                                                                                 

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 2010 to 30 September 2010	1 April 2009 to 30 September 2009
						£'000	£'000
	Company
	Investment management fee					990	876
	Auditors' remuneration *					317	22
	Directors' remuneration					87	94
	Share-based payments					300	300
	Other operating and administrative expenses
	- Administration fees					37	51
	- Professional fees					171	83
	- Marketing Costs					53	41
	- Other					75	69
						2,030	1,536
	Kreditmart and Flexinvest
	Auditors' remuneration					26	52
	Directors' remuneration					112	89
	Other operating and administrative expenses
	- Administration fees					25	-
	- Professional fees					15	15
	- Marketing costs					170	209
	- Personnel					958	904
	- Premises					268	380
	- Depreciation					137	161
	- Credit losses and LLP					(321)	(230)
	- Other					153	257
						1,543	1,837
	OSGRME
	Auditors' remuneration					47	-
	Directors' remuneration					170	-
	Share-based payments					32	-
	Other operating and administrative expenses
	- Administration fees					11
	- Professional fees					66	-
	- Marketing Costs					107	-
	- Personnel					2,623	-
	- Premises					1,818	-
	- Depreciation					699	-
	- Other					969	-
						6,542	-
	Total for the Group					10,115	3,373
	* Following the acquisition of OSG the Board of the Company have decided to meet the non-statutory audit costs of the Russian entities. These being audit costs associated with IFRS and Group reporting requirements beyond those that a Russian entity would not ordinarily expect to bear if it were only reporting under Russian GAAP. The intention of the Board of the Company is to avoid depressing earnings of these entities on which an eventual sale price is likely to be determined.
	4. Tax
	Group
	Kreditmart and Flexinvest
	Current tax charge					(57)	(47)
	Deferred tax (charge)					54	(16)
						(3)	(63)
	OSGRME
	Current tax charge					(28)	-
	Deferred tax charge					(16)	-
						(44)	-
	Net tax charge to the statement of comprehensive income					(47)	(63)
	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% (2009: 20%) arising on its activities in Russia.
	The Group is liable to pay tax at a rate of 10% (2009: 10%) arising on its activities in Cyprus.
	The Group is liable to pay tax at a rate of 19% (2009: 19%) arising on its activities in Poland.
	The Group is liable to pay tax at a rate of 25%, 20%, 20% and 10% arising on its activities in Ukraine, Kazakhstan, Armenia and Bulgaria respectively.
	Group
	Kreditmart and Flexinvest		30 September 2010		30 September 2010	30 September 2010	31 March 2010
	Deferred tax asset/(liability) comprises:		£'000		£'000	£'000	£'000
			Assets		Liabilities	Net	Net
						-
	Investments		-		(2)	(2)	-
	Loans to customers		-		(5)	(5)	5
	Other assets		62		-	62	48
	Other liabilities		16		(22)	(6)	14
	Tax loss carry-forwards		128		-	128	123
			206		(29)	177	190
	OSG Records Management (Europe) Limited		30 September 2010		30 September 2010	30 September 2010	31 March 2010
	Deferred tax asset/(liability) comprises:		£'000		£'000	£'000	£'000
			Assets		Liabilities	Net	Net
	Finance leases		-		(160)	(160)	(94)
	Intangibles		-		(1,549)	(1,549)	(1,605)
			-		(1,709)	(1,709)	(1,699)
	Group deferred tax asset					177	190
	Group deferred tax liability					(1,709)	(1,699)
	5. Goodwill
	Group					30 September 2010	31 March 2010
						£'000	£'000
	Opening balance					14,164	-
	Recognised on acquisition of OSG Records Management (Europe) Limited					-	14,164
	Closing balance					14,164	14,164
	No impairment of goodwill on acquisition of OSGRME was necessary at 31 March 2010 based on the increase in the valuation of OSGRME.
	In accordance with the valuation at 31 March 2010 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 loans.
	No impairment losses have been recognised in respect of these intangibles in the 6 month period ended 30 September 2010.
	6. Intangible assets
						30 September 2010	31 March 2010
						£'000	£'000
	Cost:
	Opening balance					11,078	2,273
	Currency revaluation					(182)	203
	Recognised on acquisition of subsidiaries					-	8,744
	Amortisation of intangibles					(284)	(142)
	Closing balance					10,612	11,078

Reconciliation of intangibles
	Banking	Internally		OSGRME	Customer	Customer
	licence	generated		Trademark	base - large	base - small	Total
		software
	£'000	£'000		£'000	£'000	£'000	£'000
Carrying amount:
At 1 April 2010	2,476	150		598	7,381	615	11,220
Exchange movements	(182)	-		-	-	-	(182)
At 30 September 2010	2,294	150		598	7,381	615	11,038
Amortisation:
At 1 April 2010	-	(4)		-	(123)	(15)	(142)
				-
Charge for the period	-	(8)		-	(246)	(30)	(284)
At 30 September 2010	-	(12)		-	(369)	(45)	(426)
Carrying amount:
At 30 September 2010	2,294	138		598	7,012	570	10,612
Carrying amount:
At 30 September 2009	2,299		-	-	-	-	2,299

The valuation of the banking licence was considered by the Valuation Committee and independent reputable valuer and based on fair market values less costs to sell, it was determined that no impairment was required. 

The fair valuation of the intangibles at acquisition date of OSGRME was determined by an independent 3rd party using various valuation methods: the Cost Approach (using historcial costs and consumer price inflation), and the Income Approach (using the Multiple Excess Earnings method and Discounted Cash Flow Analysis).                  

The banking licence and the trademark are both considered by the Directors to have an indefinite useful life. They are expected to generate value indefinitely. The banking licence is registered in Moscow and the OSGRME trademark is registered in Russia, Poland and Ukraine. Furthermore, there were no impairment indicators identified by the Directors in respect of the other intangibles that were subject to amortisation.

7.	Plant and equipment
			Vehicles		Fixtures and	Furniture and
	Group				fittings	equipment	Total
			£'000		£'000	£'000	£'000
	Cost:
	At 1 April 2010		753		4,609	1,958	7,320
	Additions		364		602	441	1,407
	Disposals		(65)		(98)	(172)	(335)
	Exchange movements on disposals		(58)		(327)	(108)	(493)
	At 30 September 2010		994		4,786	2,119	7,899
	Accumulated depreciation:
	At 1 April 2010		(53)		(305)	(516)	(874)
	Charge for the period		(117)		(195)	(238)	(550)
	Disposals		41		95	127	263
	At 30 September 2010		(129)		(405)	(627)	(1,161)
	Net book value:
	At 1 April 2010		700		4,304	1,442	6,444
	At 30 September 2010		865		4,381	1,492	6,738
	The useful lives of the assets are estimated as follows:
	Fixtures and fittings
	Fixtures and fittings					3-4 years
	Warehouse equipment & racks					5-20 years
	Furniture & equipment
	Office equipment					5-10 years
	Furniture					5 years
	Equipment					3 years
	Hardware					2-5 years
8.	Assets classified as held for sale					30 September 2010	31 March 2010
	Group					£'000	£'000
	At beginning of period					845	-
	Additions					-	914
	Disposals					-	(69)
	At end of period					845	845

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 2010	31 March 2010
							£'000	£'000
	OSG Records Management (Europe) Limited
	At beginning of period						28,100	-
	Reclassification for investments at fair value through profit or loss						-	13,600
	Acquisition of subsidiary						-	8,584
	Additions						-	600
	Fair value revaluation						600	5,316
	At end of period*						28,700	28,100
	Kreditmart
	At beginning of period						15,749	16,549
	Additions						-	-
	Fair value revaluation *						(1,900)	(800)
	At end of period*						13,849	15,749
	Flexinvest Limited
	Opening and closing balance						6,451	6,451
							49,000	50,300

* The revaluation performed on Kreditmart includes the value of Flexinvest Limited as at 30 September 2010, 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 2010 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.                                                                                              

Methodologies and assumptions used in valuing investments and investments in subsidiaries:

1) Market Approach:                                                                                          

The market comparable method indicates the market value of the ordinary shares of a business by comparing it to publicly traded companies in similar lines of business. The conditions and prospects of companies in similar lines of business depend on common factors such as overall demand for their products and services. An analysis of the market multiples of companies engaged in similar businesses yields insight into investor perceptions and, therefore, the value of the subject company.  

In the market approach, recent sales and listings of comparable assets are gathered and analysed. After identifying and selecting the comparable publicly traded companies, their business and financial profiles are analysed for relative similarity. Price or EV multiples of the publicly traded companies are calculated and then adjusted for factors such as relative size, growth, profitability, risk, and return on investment. The adjusted multiples are then applied to the relevant element of the subject company's business.                      

All valuations of unquoted investments and investments in subsidiaries (collectively referred to as the "portfolio") were performed using either an enterprise value/revenue or enterprise value/EBITDA multiple (except for Kreditmart and Flexinvest where a Net Asset Assets Approach ie a price/book value approach was used). 23%, by value at year end, of the portfolio was valued using a price/book valuation approach (31 March 2010: 24%) with the remaining 77% (31 March 2010: 76%) of the portfolio being valued using an enterprise value/revenue multiple and enterprise value/EBITDA multiple approach.                                                                                     

The key assumptions in the valuations were as follows:                

- Liquidity discount: 15%-20% (31 March 2010:  15%-20%)          

2) Income Approach:

The income approach methodology is used a a cross-check for the Market Approach and indicates the market value of a business enterprise based on the present value of the cash flows that the business can be expected to generate in the future. Such cash flows are discounted at a discount rate that reflects the time value of money and the risks associated with the cash flows.

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
OSG Records Management (Europe) Limited			Cyprus	Ordinary	95.5%	Financing
OSG Records Management Center Limited Liability Company*			Russia	Ordinary	100.0%	Document storage, data security and records management services
OSG Polska Limited Liability Company*			Poland	Ordinary	100.0%
OSG Records Management Limited Liability Company*			Ukraine	Ordinary	100.0%
OSG Records Management Limited Liability Company*			Kazakhstan	Ordinary	100.0%
OSG Records Management Limited Liability Company*			Armenia	Ordinary	100.0%
OSG Records Management Limited Liability Company*			Bulgaria	Ordinary	100.0%
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

* Direct subsidiaries of OSG Records Management (Europe) Limited and indirect subsidiaries of the Company.                                                                    

** VUB is held directly by Kreditmart and Flexinvest and is an indirectly held subsidiary of the Company.

10. Investments - at fair value through profit and loss

								30 September 2010	30 September 2010	31 March 2010	31 March 2010
								£'000	£'000	£'000	£'000
								Group	Company	Group	Company
OSG Records Management (Europe) Limited
(investment in subsidiary at 31 March 2010 - see note 9)								-	-	-	-
Unistream Bank								21,800	21,800	24,400	24,400
Grindelia Holdings								17,300	17,300	17,500	17,500
Quoted investments								1,079	-	1,185	-
Total investments at fair value through profit and loss								40,179	39,100	43,085	41,900
								1 April 2010  to 30 September 2010	1 April 2010  to 30 September 2010	1 April 2009 to 30 September 2009	1 April 2009  to 30 September 2009
								£'000	£'000	£'000	£'000
								Group	Company	Group	Company
OSG Records Management (Europe) Limited (see note 9)								-	600	(1,222)	(1,222)
Unistream Bank								(2,600)	(2,600)	4,700	4,700
Grindelia Holdings								(200)	(200)	1,600	1,600
Quoted investments								(6)	-	3	-
Kreditmart and Flexinvest (see note 9)								-	(1,900)	-	(2,600)
Total unrealised (losses)/ gains								(2,806)	(4,100)	5,081	2,478

The Directors of the Company have set aside £2.6 million as a capital commitment for the future purchase of a warehouse by OSGRME. On 30 March 2010, £0.6 million share capital injection was made by the Company into OSGRME for 'racking', 1,822 shares were issued by OSGRME in this regard, which thus increased the Company's overall holding in OSGRME to approximately 95.52%.                         

As a result of the size of the stakes in these two companies, Unistream (and OSGRME up to 12 January 2010 when a controlling interest was acquired) could potentially qualify as associated companies, which would normally require that they be equity accounted in the books of the Company. However, the Company has taken advantage of the exemption available to it under IAS 28, and hence accounts for these as investments at fair value through profit or loss.           

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. The Company receives quarterly payments in advance of Grindelia Holdings Limited declaring a dividend.             

In the view of the Valuation Committee, the value of the investment in Unistream Bank and Grindelia Holdings Limited as at 30 September 2010 was estimated at £ 21.8 million (31 March 2010: £ 24.4 million), and £ 17.3 million (31 March 2010: £ 17.5 million) respectively.      

11. Loans and advances to customers

			Group
			30 September 2010	31 March 2010
			£'000	£'000
Residential mortgages			7,742	8,618
Reconciliation of impairment loss allowance on loans to customers:
Balance at beginning of the year/period			938	1,912
Movement in allowance for loan losses			(362)	(974)
Translation differences			-	-
			576	938

The Mortgages are secured over borrowers' private residences, are repayable in equal monthly instalments and have an average maturity of 26.5 years. Interest is charged at fixed rates, at an average interest rate of 11.67%.             

There are currently 104 consumer loans, repayable monthly by equal instalments which have an average maturity period of 1.03 years. Interest is charged at an average rate of 30.63%.

12. Trade and other payables

		30 September 2010	30 September 2010	31 March 2010	31 March 2010
		£'000	£'000	£'000	£'000
		Group	Company	Group	Company
Trade Payables		-	-	380	-
Expense accruals and sundry		1,512	330	2,789	89
Income Received in Advance		2,277	-	1,433	-
		3,789	330	4,602	89

13. 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 3 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)

- OSG Records Management (Europe) Limited ("OSGRME") (subsidiary)   

The Group is engaged in investment in small and mid-sized companies in Russia and in one principal geographical area, being Russia.

Kreditmart Finance Limited, Flexinvest Limited and Volzhski Universalny Bank ("VUB") Limited (subsidiaries) disburse mortgage and consumer loans for private clients, place deposits, and render other services (money transfers, safe boxes). Kreditmart provides private clients with consultations on mortgage, consumer loans, vehicle insurance, and other financial services.

The OSG Group consists of six legal entities: OSG Records Management (Europe) Ltd (Cyprus), OSG Records Management Center (Russia), OSG Polska (Poland), OSG Records Management (Ukraine), OSG Records Management (Armenia), OSG Records Management (Bulgaria) and OSG Records Management (Kazakhstan). OSG Records Management (Europe) Ltd (Cyprus) is a parent company for OSG Group which owns 100% of shares of 6 operating units in Russia (being the largest operation), Poland, Ukraine, Kazakhstan, Armenia and Bulgaria. The OSG Group provides records management services (document storage and other services) through its 100% owned operating subsidiaries. More than half of sales revenues are earned through providing document storage services. The remaining revenues come from the following warehouse services, transportation of documents; archive services, data processing services and destruction of documents and tapes. Approximately 70% of the operating income is derived from Russia, with the bulk of the remaining portion being derived from Poland.

The main customers of Kreditmart, Flexinvest and VUB are private clients and the main customers of OSGRME are financial institutions, telecom and other companies.                                              

The Investment Manager's Report provides more information on the Company'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 2010 to 30 September 2010	1 April 2010 to 30 September 2010	1 April 2010 to 30 September 2010	1 April 2010 to 30 September 2010	1 April 2009 to 30 September 2009	1 April 2009 to 30 September 2009	1 April 2009 to 30 September 2009	1 April 2009 to 30 September 2009
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
	Aurora	Kreditmart/		Total	Aurora	Kreditmart/	OSGRME	Total
		Flexinvest/VUB	OSGRME			Flexinvest/VUB
Revenue	120	964	6,821	7,905	343	735	-	1,078
-  Fees	-	372	-	372	-	120	-	120
-  Storage	-	-	3,382	3,382	-	-	-	-
-  Warehousing, data processing, transport & other	-	-	3,435	3,435	-	-	-	-
-  Interest on long term mortgages and other loans	-	503	-	503	-	505	-	505
-  Loan Interest	-	-	-	-	214	-	-	214
-  Bank interest	9	89	4	102	10	110	-	120
-  Dividend income	111	-	-	111	119	-	-	119
Administration and operating expenses	(2,030)	(1,406)	(5,843)	(9,279)	(1,536)	(1,837)		(3,373)
- Depreciation and amortisation	-	(137)	(699)	(836)	-	-	-	-
- Interest expense	-	(13)	(272)	(285)	(5)	-	-	(5)
Fair value movements on revaluation of investments	(4,100)	(6)	-	(4,106)	2,478	3	-	2,481
-  Kreditmart/Flexinvest/VUB	(1,900)	-	-	(1,900)	(2,600)	-	-	(2,600)
-  Whitebrooks (OSG)	600	-	-	600	(1,222)	-	-	(1,222)
-  Unistream	(2,600)	-	-	(2,600)	4,700	-	-	4,700
-  Grindelia (SuperStroy)	(200)	-	-	(200)	1,600	-	-	1,600
-  Quoted investments	-	(6)	-	(6)	-	3	-	3
Exchange (losses)/gains	(30)	(865)	(84)	(979)	(9)	(719)		(728)
Operating profit/(loss) before tax	(6,040)	(1,463)	(77)	(7,580)	1,271	(1,818)	-	(547)
Tax	-	(3)	(44)	(47)	-	(63)	-	(63)
Net segment (loss)/ profit	(6,040)	(1,466)	(121)	(7,627)	1,271	(1,881)	-	(610)

Reconciliation of segment profit/(loss) to consolidated statement of comprehensive income						1 April 2010 to 30 September 2010	1 April 2009 to 30 September 2009
						£'000	£'000
Total net segment loss						(7,627)	(610)
Adjustment for fair value movements on
Kreditmart/Flexinvest/VUB and OSGRME						1,300	2,600
Net (loss)/ profit for the period for the Group						(6,327)	1,990

	30 September 2010	30 September 2010	30 September 2010	30 September 2010	31 March 2010	31 March 2010	31 March 2010	31 March 2010
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
	Aurora	Kreditmart/ Flexinvest/ VUB	OSGRME	Total	Aurora	Kreditmart/ Flexinvest/ VUB	OSGRME	Total
Total segments assets include:
Investments in subsidiaries	49,000	-	-	49,000	50,300	-	-	50,300
Financial assets at fair value through profit or loss	39,100	1,079	-	40,179	41,900	1,185	-	43,085
-  Unistream	21,800	-	-	21,800	24,400	-	-	24,400
-  Grindelia (SuperStroy)	17,300	-	-	17,300	17,500	-	-	17,500
-  Quoted investments	-	1,079	-	1,079	-	1,185	-	1,185
Cash and cash equivalents	4,250	4,852	643	9,745	5,704	5,502	2,036	13,242
Intangible assets	-	2,680	-	2,680	-	2,680	-	2,680
Property, plant and equipment	-	509	6,230	6,739	-	689	5,755	6,444
Assets classified as held for sale	-	845	-	845	-	845	-	845
Loans and advances to customers	-	7,742	-	7,742	-	8,618	-	8,618
Other assets	1,226	851	2,644	4,721	1,171	949	2,711	4,831
Segment assets	93,576	18,558	9,517	121,651	99,075	20,468	10,502	130,045
Total segment liabilities	(330)	(587)	(5,397)	(6,314)	(89)	(760)	(6,324)	(7,173)

Reconciliation of segment assets and liabilities to consolidated statement of financial position						30 September 2010	31 March 2010
						£'000	£'000
Segment assets for reportable segments						121,651	130,045
Exchange loss on translation of intangibles						(386)	(204)
Investment in subsidiaries						(49,000)	(50,300)
Goodwill on acquisition of OSGRME						14,164	14,164
Fair value adjustment of Net Assets on acquisition of OSGRME						8,317	8,602
Intercompany debtors						(191)	(191)
Total assets for the Group						94,555	102,116
Segment liabilities for reportable segments						(6,314)	(7,173)
Deferred taxation adjustment on acquisition of OSGRME						(1,549)	(1,605)
Intercompany creditors						191	191
Total liabilities for the Group						(7,672)	(8,587)

14. Related party transactions

The Company has 4 subsidiaries, OSG Records Management (Europe) Limited, Kreditmart Finance Limited, Flexinvest Limited and Volzhski Universalny Bank Limited (see note 9). Details of the investments in 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.

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 £ 989,860 (6 month period ended 30 September 2009: £ 876,430). There were no outstanding fees at the period/year end. AIAL performed the valuation of the subsidiaries and investments as at 30 September 2010.

John McRoberts and James Cook hold 45% and 47.5% respectively, of the ordinary share capital of AIAL and 36.25% and 33.75% respectively, 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 £ 37,500 (6 month period ended 30 September 2009: £50,451), of which £ nil (31 March 2010: £ 5,000) was outstanding at the period end.

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 £ 87,222 (6 month period ended 30 September 2009: £ 94,279), of which £ 1,250 (31 March 2010: £ 3,330) was outstanding at the period end.

15. Reclassification of comparatives

Movements in foreign currency translation differences have been reclassified from "Equity" in the consolidated statement of changes in equity to "Other comprehensive income" in the consolidated statement of comprehensive income per IAS 1 Presentation of Financial Statements.

16. Contingencies and capital commitments

As detailed in note 10, The Directors of the Company have set aside £2.6 million as a capital commitment for the future purchase of a warehouse by OSGRME.

The Group had no other contingencies and capital commitments outstanding at the reporting date.

17. Events after the reporting date

The Management Agreement currently provides that the Company shall pay to the Manager a semi-annual management fee of an amount equal to 1% of the net asset value of the Company as at each valuation date of 31 March and 30 September in each calendar year, payable in advance following such valuation date.

Additionally, the Manager currently has an Option to acquire new shares representing 20% of the share capital of the Company (on a fully diluted basis, i.e. post the issuance of the Option Shares), such Option to be exercised at a price of £1.00 per share in respect of 18,750,000 Option Shares and at a price of £0.40 per share in respect of 9,375,000 Option Shares (related to the additional Ordinary Shares issued in the December 2009 placing), provided that the relevant performance condition has been satisfied.

However, the Directors also consider that the Manager should be properly incentivised to maximise the value of the Company's shares, by being incentivised to sell the Company's investments over a sensible period, which would not necessarily be the case if the existing option arrangements remain in place.

Accordingly, the Directors and the Manager intend to enter into the Amended Management Agreement and to terminate the Option Deed.  The Amended Management Agreement would amend the management fees and performance fees payable to the Manager as follows:

(a) reducing the semi-annual management fee from 1% to 0.75% of the net asset value of the Company;

(b)  replacing the existing performance fee arrangements comprising the issue of the Option Shares with performance fees calculated as follows:

-  2.5% of the value of any disposals realised by the Company would be payable to the Manager, calculated on the value of assets of the Company realised up to £45 million, i.e. £0.40 per share (the "2.5% Tranche");

- 7.5% of the value of any disposals realised by the Company would be payable to the Manager, calculated on the value of assets of the Company realised between £45 million and £99 million, i.e. £0.40 per share to £0.88 per share (NAV) (the "7.5% Tranche"); and

- 20% of the value of any disposals realised by the Company would be payable to the Manager, calculated on the value of assets of the Company realised over £99 million, i.e. over £0.88 per share (the "20% Tranche"),

such performance fees to decline by 20% per annum from December 2011 (for the 2.5% Tranche) and by 20% per annum from December 2012 (for the 7.5% Tranche and the 20% Tranche).

In consequence of the proposed change to the management incentives, the non-cash provision for share based payments amounting to £600,000 per annum will cease to be made, reducing the reported expenses by this amount in addition to the reduction in management fees paid, and the historic provisions, totalling £2.437 million at 31 March 2010, will be cancelled and transferred to shareholder's reserves during the second half year.

 

END

 

 

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