Results

RNS Number : 2508X

Aurora Russia Limited

23 June 2008

Aurora Russia Limited

Audited results for the 15 months ended 31 March 2008

Aurora Russia Limited ('Aurora Russia' or the 'Company'), the AIM-quoted investment vehicle established to make equity or equity-related investments in small and mid-sized private companies in Russia, announces today the audited results of the Company for the 15 month period ended 31 March 2008.

As previously advised, Aurora Russia has changed its accounting reference date going forwards from 31 December to 31 March in order to allow its investee companies more time to provide their audited financial statements.

The financial information set out in this announcement does not constitute the Company's statutory accounts for the 15 month period ended 31 March 2008.

The financial information for the 15 months period ended 31 March 2008 is derived from the financial statements delivered to the UK Listing Authority. The Auditors reported on those accounts, their report was unqualified and did not contain a statement under section 65(3) of The Companies (Guernsey) Law, 1994.

Financial highlights

· Company net asset value as at 31 March 2008 was £85.58 million, representing 114.1p per share (£71.9 million or 95.9p per share as at 31 December 2006 representing a 19% increase and a 4% increase over the net asset value as at 31 December 2007)

· Revaluation of the Company investment portfolio as at 31 March 2008 resulted in an overall increase in value of £13.75 million from cost of £63.51 million to £77.26 million, an increase of 22%

· Consolidated net profit for the period of £5.22 million (net loss of £321,000 from incorporation in February 2006 to 31 December 2006)

· Consolidated earnings per share for the period of 6.95p per share (loss per share of 0.43p from incorporation in February 2006 to 31 December 2006)

Operational highlights

· Effectively fully invested with £63.51 million (uncommitted funds of £7.71 million) invested across five companies

· Four of the five investments are now leaders in their particular field

· Focus on continuing to provide considerable hands-on operational support to each of the investee companies

Unistream Bank (£10.34 million investment, 26% owned), a leading Russian international money transfer company

- US$3.68 billion transferred during 2007, an increase of 100% on 2006

- 69% increase during first four months of 2008 over the same period in 2007

- 238 cash desks throughout Russia and 44 under construction as at 30 April 2008

- Currently accounts for more than 1% of the global money transfer market

- The valuation of Unistream Bank at 31 March 2008 resulted in a 70% uplift of £7.22 million to £17.56 million

Kreditmart (£22.59 million investment, 100% owned), a finance company distributing mortgages, equity release loans and other consumer finance products

- 10 loan shops and 13 sales points across 8 regions of Russia

- Offering of 400 loan products and signed agreements with over 50 banks to distribute mortgage products

- 317 mortgages worth US$57.8 million originated as at 31 May 2008 with US$32.6 million of approved mortgages in the pipeline

- The valuation of Kreditmart (including Flexinvest) at 31 March 2008 resulted in a 18.5% uplift of £5.38 million to £34.42 million

Volzhski Universalny Bank “VUB” (£4.52 million¹ investment, 100% owned), banking operations that will work closely with Kreditmart distributing retail products and booking mortgages

- Profit of £0.41 million for 2007and £5.66 million in assets as at 31 December 2007

- Currently headquartered in Samara, Russia with plans to relocate to Moscow

- Full retail banking licence

- Anticipated that VUB will enter into an agent bank agreement with Kreditmart, providing Kreditmart with a competitive advantage

SuperStroy (£16.62 million investment, 24.3% owned), one of the leading DIY retailers in Russia

- As at 30 April 2008, 42 stores operating across the Urals region and 11 new stores scheduled to open during 2008, almost doubling selling space since 31 December 2007

- In 2007, revenues were approximately US$94 million, an increase of 67% on the prior year

- Sales during the first four months of 2008 have increased by 66% over the same period in 2007

- Due to the recent date of the investment, SuperStroy continues to be held at cost but the currency revaluation at 31 March 2008 resulted in an uplift of £0.8 million to £17.42 million

OSG Records Management (£7.51 million investment, 39.4% owned), one of the largest records management companies in Russia, Kazakhstan and Ukraine

- Revenues in 2007 of US$10.6 million, an increase of 33% on 2006

- Revenues increased by 64% in first four months of the year over same period in 2007

- Former COO appointed as new CEO in January 2008

- The valuation of OSG at 31 March 2008 resulted in an uplift of £0.35 million to £7.86 million

Commenting, Sir Trevor Chinn, Chairman of Aurora Russia, said:

'We are extremely pleased to have delivered on our investment strategy and invested in five leading companies all of which are growing strongly as demonstrated by the portfolio's 22% revaluation gain and are well positioned to further capitalise on the opportunities presented by the expansion of the Russian economy. Our primary focus is to provide continued support to these companies in delivering significant changes in performance and value creation but we will also continue to identify a number of excellent opportunities within the financial, business and consumer services sectors.'

Enquiries:

Aurora Russia Limited

James Cook, Moscow +7 (495) 644 1662

John McRoberts, London +44 (0) 207 8397112

Investec Investment Banking

Paul Gray +44 (0) 20 7597 5176

Patrick Robb +44 (0) 20 7597 5169

Financial Dynamics

Ed Gascoigne-Pees +44 (0) 20 7269 7132

Felicity Murdoch +44 (0) 20 7269 7243

1 Acquired in May 2008 through Flexinvest who will provide additional funds of £1.8 million to cover post-acquisition infrastructure costs and fund ongoing operations

Chairman's Statement

Results

I am pleased to present the audited results of the Company for the 15 month period ended 31 March 2008. In the Company's interim report for the year ending 31 December 2007 we advised that we had changed our accounting reference date from 31 December to 31 March in order to allow our investee companies more time to provide their audited financial statements. Therefore our next interim statements will cover the six months to 30 September 2008 with our next audited statements covering the year to 31 March 2009.

For the 15 months to 31 March 2008, Aurora Russia recorded a net profit after taxation of £5.22 million or 6.95 p per share, based on the audited consolidated income statement. This contrasts with a loss of £321,000 or 0.43 p per share for the prior period which ran from the Company's incorporation in February 2006 to 31 December 2006. The net asset value of the Company as at 31 March 2008 was £85.58 million or 114.1 p per share, compared to £71.9 million or 95.9 p per share at 31 December 2006, representing a 19% increase. Cash and cash equivalents at 31 March 2008 were £7.83 million, compared to £63.85 million as at 31 December 2006.

Administration and operating expenses of £8.89 million include Company costs of £3.89 million, of which £2.56 million relates to the Manager's fee and the Manager's option which is being amortised over a period of five years. Operating costs of the Company's wholly owned subsidiaries were £5.01 million.

Investment review

Aurora Russia, advised by Aurora Investments Advisors Limited, has now invested £63.51 million into five companies with uncommitted funds of £7.71 million to allow for small follow on investments in its investee companies, if required, and to cover its ongoing expenses. The Company has now implemented its strategy to invest its capital in equity and equity related investments in small and mid-sized private Russian companies, focused on the financial, business and consumer services sectors, where the Directors believe that there is potential for growth together with viable exit opportunities.

We are positive about the prospects for the investments made to date which include:

§ Unistream Bank, a leading Russian money transfer company

§ Kreditmart, a finance company distributing mortgages, equity release loans and other consumer finance products

§ Volzhski Universalny Bank (“VUB”), a retail bank that will work closely with Kreditmart distributing retail products and booking mortgages

§ SuperStroy, one of the leading DIY retailers in Russia

§ Whitebrooks Investments Limited, a regional market leader in records management trading as OSG Records Management

We are delighted with our investment in Unistream Bank which continues to deliver strong growth. Kreditmart is performing well and should benefit from synergies with VUB Bank which was recently acquired by the Company. SuperStroy and OSG both performed well in the first quarter of 2008 in line with their respective budgets.

Portfolio Revaluation Policy

A revaluation of the Company's investment portfolio based on the International Private Equity and Venture Capital Association ('IPEVCA') guidelines was performed at 31 March 2008, resulting in an uplift in value of £13.75 million to £77.26 million, an increase of 21.7%. This revaluation was recommended by the Valuation Committee of the Board who obtained independent professional advice, and formally adopted by the Board on 10 June 2008. It should be noted that 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 investment in Unistream Bank has been increased by £7.22 million to £17.56 million, an increase of 70%. The valuation of Kreditmart (including Flexinvest Limited) which commenced operations during 2007 has been increased by £5.38 million to £34.42 million, an increase of 19%. The valuation of OSG Records Management has resulted in a modest increase of £0.35 million to £7.86 million and the currency revaluation of SuperStroy resulted in an uplift of £0.8 million to £17.42 million.

Hedging Policy

The turmoil in credit markets continue to cause volatility in the currency markets. We have seen a continued weakening of the dollar and sterling against the rouble. The Company will continue to hedge its non sterling monetary assets, including uninvested cash, loans and any expected sale proceeds once a disposal of any of our investments has been agreed.

Outlook

The outlook for the Russian economy remains positive and Russia is expected to continue to attract foreign investment.

We are delighted with our investment portfolio and expect that the strong growth in the Russian economy and the increase in consumer demand will drive the continued growth of Aurora Russia's investee companies well into the future.

Sir Trevor Chinn

Chairman of the Board

Aurora Russia Limited

Investment Manager's Report

Overview

Aurora Russia has invested a total of £63.51 million in five companies. It owns 26% of Unistream Bank, 100% of Kreditmart Finance Limited, 100% of Volzhski Universalny Bank, 24.3% of SuperStroy, and 39.4% of OSG Records Management.

In line with its strategy the Company has invested in private Russian companies focused on the financial, business and consumer services sectors. Aurora Investment Advisors (the 'Manager') continues to provide considerable hands-on operational support to each of the investee companies to assist them in delivering significant step changes in performance and value creation.

Unistream Bank is now a leader in Russian money transfer in terms of volumes transferred, Kreditmart has been described in the Russian media as 'the leading mortgage broker in Russia' and supported by the acquisition of Volzhski Universalny Bank is expected to grow into a leader in financial distribution in Russia in the next few years, SuperStroy is the leading DIY retailer in the Urals region of Russia and OSG Records Management remains the largest records management company in Russia, Kazakhstan and Ukraine.

Unistream Bank

Unistream Bank is now one of the largest money transfer companies in Russia. Aurora Russia completed the second phase of its US$20 million (£10.13 million) investment in Unistream Bank in July 2007 taking its stake from 17.7% to 26%.

In 2006, Unistream Bank transferred approximately US$1.84 billion (£0.94 billion). During 2007, the amount transferred increased by 100% to approximately US$3.68 billion (£1.89 billion). In the first four months of 2008, Unistream Bank's transfer volumes have grown by 69% over the same period in 2007 and the company is performing slightly ahead of its 2008 budget.

Unistream Bank is regulated by the Central Bank of Russia ('CBR') and has a banking license to receive/send money transfers, open bank accounts for corporate entities and accept loan payments through its points of sale. At the end of April 2008 it had 238 of its own cash desks throughout Russia and 44 under construction.

Money transfer companies in Russia, as elsewhere, benefit from immigrant workers sending money back to their families living in less prosperous home countries. A large percentage of these workers are typically employed in construction and therefore there is a strong correlation with the performance of the construction industry. The Russian construction market is expected to grow at an estimated 19-20% per annum as result of which the growth in the Russian money transfer market is expected to remain strong.

Between 2003 and 2006, the Russian money transfer market grew by 57%, one of the fastest growth rates globally. This growth continued into 2007 with volumes increasing from approximately US$7.3 billion (£3.74 billion) in 2006 to between US$10 billion (£5.13 billion) and US$11 billion (£5.64 billion). Worldwide, the official money transfer volumes according to the World Bank were approximately US$350 billion (£179.5 billion). Unistream Bank, therefore now accounts for more than 1% of the global market.

The valuation of Unistream Bank at 31 March 2008 resulted in an uplift of £7.22 million on the initial £10.34 million invested to £17.56 million, an increase of 70%.

Kreditmart

Kreditmart Finance Limited ('Kreditmart') now has 10 loan shops distributing a wide range of financial services products in 8 regions of Russia. Kreditmart, a wholly owned subsidiary of Aurora Russia, distributes mortgages, equity release loans, insurance, credit cards, auto loans, pension funds, mutual funds, and other consumer finance products. Kreditmart has signed agreements with over 50 banks to distribute mortgage products to its customers and currently offers over 400 loan products through its system. By 31 May 2008, Kreditmart had closed 317 mortgages for a total of US$57.8 million (£29.64 million) and has US$32.6 million (£16.72 million) of approved mortgages in the pipeline.

Kreditmart now operates in Moscow, St. Petersburg, Omsk, Novosibirsk, Yekaterinburg, Kazan, Tyumen, and Rostov-on-Don and employs over 170 people. In addition, Kreditmart has opened 13 sales points in some of the leading real estate agencies in Moscow, Novosibirsk, and Ekaterinburg with additional expansion planned in the regions during 2008.

With a wide regional presence, Kreditmart is focusing on Russia's growing mortgage market in the regions outside of Moscow in cities with populations over 1 million. According to CBR, regional loans accounted for approximately 80% of the Russian banks' mortgage portfolios outstanding as of 1 January, 2008, up from 60-70% a year before.

The global liquidity crisis has resulted in most Russian banks increasing their mortgage interest rates by 1-2 per cent but otherwise has done little to hamper the continuing growth of the Russian mortgage market. Russian banks' mortgage loan portfolios almost tripled in 2007 to reach RUR 611 billion (£12.5 billion) with new mortgage loans of RUR 151 billion (£3.1 billion) being granted in the first quarter of 2008, an 84% increase over the first quarter of 2007 .

The valuation of Kreditmart (including Flexinvest-see below) at 31 March 2008 resulted in an uplift of £5.38 million on the initial £29.04 million invested to £34.42 million.

Volzhski Universalny Bank

Volzhski Universalny Bank ('VUB') was acquired in May 2008 through Flexinvest Limited ('Flexinvest'), a wholly owned subsidiary for a consideration of £4.52 million (RUR 210 million). Additional funds of £1.87 million (RUR 87 million) are to be invested into the bank by Flexinvest to cover post-acquisition infrastructure costs and fund ongoing operations.

Prior to acquisition, VUB based in Samara, Russia was focused on the retail banking market. There are plans to move the headquarters to Moscow in the near future. As at 31 December, 2007, it had RUR 263 million in assets (approximately £5.66 million) and posted a profit of RUR 19 million (£0.41 million) for 2007. Loans relating to the existing small business portfolio of VUB that was acquired have since been realised.

It is proposed that VUB will book and hold mortgages distributed through the Kreditmart network which may be sold on to partner banks thereby providing a competitive advantage in Russia's growing mortgage and consumer finance market.

SuperStroy

In December 2007, Aurora Russia invested £16.62 million in SuperStroy, the leading DIY chain in the Urals Region of Russia which is home to approximately 20 million people. SuperStroy opened its first store in 1994 and has successfully expanded its retail network with strong and well-recognised brands, and by April 2008 was operating 42 stores across the Urals. It intends to open 11 new stores by the end of the year almost doubling its selling space since December 2007.

SuperStroy is initially focusing on developing its business in cities with populations of more than 0.5 million people.

Revenue for the 2007 financial year was approximately RUR 4.5 billion (£94.0 million), an increase of 67% from the prior year. For the first four months of 2008 the company is meeting its budget and sales have grown 66% over the same period in 2007.

The DIY market in Russia in 2007 was estimated by Ros Business Consulting ('RBC') to be approximately US$14 billion (£7.2 billion). The top 10 chains had US$2.9 billion (£1.49 billion) of combined turnover, or approximately 20% of the total market size. This suggests a fragmented market with opportunities for future consolidation. RBC also names SuperStroy as the most dynamically growing DIY chain in the supermarket retail format in Russia in 2007 and ranks it #7 among all chain DIY retailers operating in Russia if ranked by turnover, not far behind Leroy Merlin (#4 with US$210 million estimated 2007 turnover, £107.7 million).

The investment has been valued at costing roubles, including transaction costs. However, due to the appreciation of the rouble since our investment was made the value has increased by £0.8 million from £16.62 million to £17.42 million at 31 March 2008.

OSG Records Management

OSG Records Management ('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.

Krzysztof Bobrowski, the former COO, was appointed as the new CEO in January 2008 and appears to be doing an excellent job. The company is ahead of it budget for the first four months 2008, where its revenues have grown by 64 % over the same period in 2007.

In December 2007, the Board agreed to convert the first tranche of the US$5 million convertible loan facility into equity resulting in Aurora Russia's shareholding increasing from 37.1% to 39.1%. The Company's shareholding was further increased to 39.4% in the first quarter through OSG's buyback of shares from the former CEO. The Directors have decided not to convert the remaining loans payable relating to the Whitebrooks loan facility.

In 2007, OSG posted revenues of US$10.6 million (£5.4 million) up from US$8 million (£4.1 million) in 2006 and just under US$5 million (£2.56 million) in 2005. OSG estimates that the outsourced Russian record storage market is currently under 0.03 boxes per adult of the population. This compares to the USA where the records storage market is deemed to be equal to approximately 5 boxes per adult. The Manager expects OSG to continue to grow quickly as the records management market in Russia meets increasing demand.

The valuation of our investment in OSG at 31 December 2007 resulted in a modest uplift from £7.51 million to £7.86 million. The weakening of the US dollar is partly responsible for the poor uplift in value in this investment as OSG had approximately 60% of its revenues denominated in dollars. In the first part of 2008 good progress has been made in changing existing and negotiating new contracts in Russia into roubles.

Conclusion

The Manager is delighted that Aurora Russia is now fully invested in five growth companies that are performing well. Aurora Russia has now been operating for two years at the date of these accounts and the Manager has delivered on the investment strategy outlined in the listing particulars when the Company was admitted to trading on AIM on 24 March 2006. The Russian economy continues to do well and the Manager sees an excellent stream of investment opportunities in the sectors in which Aurora Russia specialises.

Aurora Investment Advisors Limited

Independent Review Report to Aurora Russia Limited

We have audited the financial statements of Aurora Russia Limited and its subsidiaries ('the Group') for the 15 month period ended 31 March 2008, which comprise the consolidated Income Statement, consolidated Balance Sheet, Company Balance Sheet, consolidated Statement of Changes in Equity, consolidated Cash Flow Statement and the related notes. These financial statements have been prepared under the accounting policies set therein.

This report is made solely to the Company's members, as a body, in accordance with Section 64 of the Companies (Guernsey) Law, 1994. Our audit work is undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's 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 and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of the directors and auditors

The Directors' responsibilities for preparing the Report and the Financial Statements in accordance with International Financial Reporting Standards and applicable Guernsey Law are set out in the Statement of Directors' Responsibilities.

Our responsibility is to audit the Financial Statements in accordance with relevant Guernsey legal and regulatory requirements and International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the Financial Statements give a true and fair view in accordance with the relevant financial reporting framework and are properly prepared in accordance with the Companies (Guernsey) Law, 1994. We also report to you if the Directors'' Report is not consistent with the Financial Statements, if the Group has not kept proper accounting records, or if we have not received all the information and explanations we require for our audit.

We read the other information contained in the Report and consider whether it is consistent with the audited Financial Statements. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the Financial Statements. Our responsibilities do not extend to any other information outside the Annual Report.

Basis of audit opinion

We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the Financial Statements. It also includes an assessment of the significant estimates and judgements made by the Directors in the preparation of the Financial Statements, and of whether the accounting policies are appropriate to the Company's circumstances, consistently applied and adequately disclosed. We are not required to review any Corporate Governance disclosures required by the Listing Rules of the Financial Services Authority as the Company has an exemption as an overseas Company, from the requirement to publish a statement of compliance with The Combined Code.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Financial Statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of the information in the Financial Statements.

Opinion

In our opinion the financial statements give a true and fair view, in accordance with International Financial Reporting Standards, issued and adopted by the International Accounting Standards Board, of the state of the Group's and Company's affairs at 31 March 2008 and of the Group's profit for the 15 month period to 31 March 2008, and have been properly prepared in accordance with The Companies (Guernsey) Law, 1994.

Deloitte & Touche LLP

Chartered Accountants

St Peter Port

Guernsey

20 June 2008

Neither an audit nor a review provides assurance on the maintenance and integrity of the website, including controls used to achieve this, and in particular whether any changes may have occurred to the financial information since first published. These matters are the responsibility of the directors but no control procedures can provide absolute assurance in this area.

Legislation in Guernsey governing the preparation and dissemination of financial information differs from legislation in other jurisdictions.

Consolidated Income Statement

For the 15 months ended 31 March 2008

	Notes	Period from 1 January 2007 to 31 March 2008 £'000	Period from incorporation on 22 February 2006 to 31 December 2006 £'000

Revenue		761	-
Administration and operating expenses	5	(8,892)	(2,689)
Unrealised gains/(losses) on revaluation of investments	12	8,357	(272)
Gains on derivatives		89	-
Other exchange gains and losses		610	179

Operating profit/(loss)		925	(2,782)

Bank interest receivable		3,365	2,459
Loan interest receivable		187	2
Finance income		3,552	2,461

Profit/(loss) before tax		4,477	(321)

Tax	6	738	-

Net profit/(loss) for the period	21	5,215	(321)

Profit/(loss) per share -Basic and Diluted	7	6.95p	(0.43p)

All items in the above statement derive from continuing operations.

All losses and income are attributable to the equity holders of the parent company. There are no minority interests.

The accompanying notes form an integral part of these financial statements.

Consolidated Balance Sheet

As at 31 March 2008

	Notes	31 March 2008 £'000	31 December 2006 £'000
Non-current assets
Goodwill	8	169	-
Plant and equipment	9	1,267	3
Investments -at fair value through profit and loss	12	41,008	15,401
Loans receivable from associated company	12	1,832	563
Loans and advances to customers	13	13,922	-
Deferred tax assets	6	784	-

		58,982	15,967
Current assets
Trade and other receivables	14	1,481	274
Cash and cash equivalents		17,806	65,778

		19,287	66,052

Total assets		78,269	82,019

Current liabilities
Derivative liabilities	15	12	8
Trade and other payables	16	648	10,362
Total liabilities		660	10,370

Total net assets		77,609	71,649

Equity
Share capital	17	750	750
Special reserve	19	70,750	70,750
Share options reserve	20	1,220	470
Revenue reserve -surplus/(deficit)	21	4,894	(321)
Translation reserve		(5)	-

Total equity		77,609	71,649

Net asset value per share - Basic and Diluted	22	103.5p	95.5p

The accounts were approved by the Board of Directors on 20 June 2008 and signed on its behalf by:

Director Director

John Whittle Ben Morgan

The accompanying notes form an integral part of these financial statements.

Company Balance Sheet

As at 31 March 2008

	Notes	31 March 2008 £'000	31 December 2006 £'000
Non-current assets
Investments in subsidiaries - at fair value through profit and loss	10	34,423	12,500
Investment -at fair value through profit and loss	12	41,008	15,401
Loans receivable from associated company	12	1,832	563
		77,263	28,464

Current Assets
Trade and other receivables	14	604	153
Cash and cash equivalents		7,829	63,850
		8,433	64,003

Total assets		85,696	92,467

Current liabilities
Deritative liabilities	15	12	8
Trade and other payables	16	103	20,512

Total liabilities		115	20,520

Total net assets		85,581	71,947

Equity
Share capital	17	750	750
Special reserve	19	70,750	70,750
Share options reserve	20	1,220	470
Revenue reserve -surplus/(deficit)	21	12,861	(23)

Total equity		85,581	71,947

Net asset value per share - Basic and Diluted	22	114.1p	95.9p

The accounts were approved by the Board of Directors on 20 June 2008 and signed on its behalf by:

Director Director

John Whittle Ben Morgan

The accompanying notes form an integral part of these financial statements.

Consolidated Statement of Changes in Equity

For the 15 months ended 31 March 2008

	Share
	Notes	Share Capital £'000	Share Premium £'000	Special Reserve £'000	Options Reserve £'000	Revenue Reserve £'000	Translation Reserve £'000	Total £'000
For the period from incorporation on 22 February 2006 to 21 December 2006

Issue of ordinary share capital, net of issue costs	17,18	750	70,750	-	-	-	-	71,500

Conversion of share premium account	18,19	-	(70,750)	70,750	-	-	-	-

Net loss for the period	21	-	-	-	-	(321)	-	(321)

Recognition in respect of share-based payments	20	-	-	-	470	-	-	470

Amount recognised directly in equity		-	-	-	-	-	-	-

At 31 December 2006		750	-	70,750	470	(321)	-	71,649

For the period 1 January 2007 to 31 March 2008

At 1 January 2007		750	-	70,750	470	(321)	-	71,649

Net profit for the period	21	-	-	-	-	5,215	-	5,215

Recognition in respect of share-based payments	20	-	-	-	750	-	-	750

Loss recognised directly in equity		-	-	-	-	-	(5)	(5)

At 31 March 2008		750	-	70,750	1,220	4,894	(5)	77,609

The accompanying notes form an integral part of these financial statements.

Consolidated Cash Flow Statement

For the 15 months ended 31 March 2008

	Notes	Period from 1 January 2007 to 31 March 2008 £'000	Period from incorporation on 22 February 2006 to 31 December 2006 £'000
Cash flows from operating activities

Operating profit/(loss)		925	(2,782)
Adjustments for:
Increase in operating trade and other receivables		(1,357)	(157)
Increase in operating trade and other payables		612	122
Revaluation of investments		(8,085)	272
Recognised share based payments	20	750	470
Realised (losses)/gains on derivatives		(89)	8
Other unrealised exchange losses		(3)	-
Currency translation reserve		(3)	-
Depreciation and amortisation		197	-
Loans advanced to customers	13	(13,922)	-

Net cash outflow from operating activities		(20,975)	(2,067)

Cash flows from investing activities
Acquisition of investments		(27,221)	(5,464)
Acquisition of derivatives		(488)	-
Proceeds on sale of derivatives		530	-
Acquisition of plant and equipment	9	(1,461)	(3)
Loans advanced to associated company		(1,717)	(562)
Taxation paid		(5)	-
Bank interest received		3,365	2,374

Net cash outflow from investing activities		(26,997)	(3,655)

Cash flows from financing activities
Proceeds from issue of ordinary share capital		-	75,000
Issue costs		-	(3,500)
Net cash inflow from financing activities		-	71,500

Net (decrease)/increase in cash and cash equivalents		(47,972)	65,778

Opening cash and cash equivalents		65,778	-

Closing cash and cash equivalents		17,806	65,778

The accompanying notes form an integral part of these financial statements.

Notes to the Financial statements

For the 15 months ended 31 March 2008

1. General information

Aurora Russia Limited ('the Company') was incorporated in Guernsey on 22 February 2006, and was listed on AIM on 24 March 2006. The Company was established to acquire interests in small and mid-sized private companies in Russia, focusing on the financial, business and consumer services sectors.

The preliminary statement is prepared on the basis of the accounting policies disclosed in the prior year financial statements. Whilst the financial information included in this preliminary statement has been computed in accordance with International Financial Reporting Standards (IFRS), this announcement does not itself contain sufficient information to comply with IFRS. The Group's full financial statements that comply with IFRS were approved by the Directors on 23 June 2008.

2. Accounting Policies

Accounting period

On decision of the Board, the Company has changed its accounting period from 31 December to 31 March to allow its investee companies more time to provide their audited financial statements.

Basis of preparation

The financial statements are prepared in accordance with International Financial Reporting Standards ('IFRS'), which comprise standards and interpretations approved by the International Accounting Standards Board and International Accounting Standards and Standing Interpretations Committee interpretations approved by the International Accounting Standards Committee that remain in effect and applicable legal and regulatory requirements of Guernsey Law and of AIM.

The financial statements have been prepared on the historical cost basis modified by the revaluation of investments and financial instruments. The principal accounting policies adopted are set out below.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and any entities controlled by the Company (the 'Group') made up to 31 March each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.

On acquisition the assets and liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired (i.e. discount on acquisition) is credited to the income statement in the period of acquisition.

The results of subsidiaries acquired or disposed of during the period are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Critical accounting judgements and key sources of estimation uncertainty

The preparation of Financial Statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expenses.

The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimate is revised if the revision affects only that year or in the year of the revision and future years if the revision affects both current and future years.

The fair value of the Group's investments is a key source of estimated uncertainty and included within the investment accounting policy as set out below.

Functional and presentation currencies

The Directors have selected sterling as the presentation currency of the Company. The Directors have also selected sterling as the Company's functional currency, as the Company is listed on AIM and has received all its funding in that currency.

Income

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount.

Brokerage fees received from services provided to the banks are recognised in the month when the act of service is rendered with the bank and the loan agreement signed by the client.

Dividend income from investments is recognised when the Company's right to receive payment has been established, normally the ex-dividend date.

Expenses

All expenses are accounted for on an accruals basis and are presented as revenue items, except for expenses that are incidental to the disposal of an investment, which are deducted from the disposal proceeds, and certain set up expenses (see note 5 below).

Segmental reporting

The directors are of the opinion that the Group is engaged in a single segment of business being investment business and in one principal geographical area, Russia.

Taxation

The Company is exempt from Guernsey taxation on income derived outside Guernsey and bank interest earned in Guernsey under the Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989, for which it pays an annual fee of £600. With effect from 1 January 2008, Guernsey abolished the exempt company regime. As a publicly available fund, it will continue to be eligible to apply for exempt status however, and liable to the annual exempt fee if it chooses to do so.

The Group is liable to Russian tax arising on its activities in Russia.

The Group is liable to Cypriot tax arising on the activities of its Cypriot subsidiaries.

The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the period. Taxable profit differs from net profit as reported in the income statement because it excludes items of income and expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

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. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

Foreign currency transactions

Transactions in currencies other than sterling are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated into sterling at the exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the Income Statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated into sterling at foreign exchange rates ruling at the dates the fair value was determined.

On consolidation, the assets and liabilities of the Group's overseas operations are translated at exchange rates prevailing on the balance sheet date. Income and expenses are translated at the average exchange rates for the period unless exchange rates fluctuate significantly. Exchange differences arising, if any, are classified as equity and transferred to the Group's translation reserve. Such translation differences are recognised as income or expenses in the period in which the operation is disposed of.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the rate prevailing on the balance sheet date.

Forward exchange contracts

The Group's activities expose it to financial risks of changes in foreign currency exchange rates. The Group uses forward foreign exchange contracts to hedge net monetary assets denominated in foreign currencies, where practicable, other than the Russian Rouble, and not for speculative purposes. At the balance sheet date outstanding forward exchange contracts are measured at their marked to market price, and are included in the financial statements as either a derivative asset or liability. Gains or losses arising on forward foreign exchange contracts are taken to the Income Statement.

Financial Instruments

Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument, including unconditional commitments to make investments. The Group shall offset financial assets and liabilities if the Group has a legally enforceable right to set off the recognised amounts and interests and intends to settle on a net basis.

Investments

Investments, including investments in subsidiaries, are designated as fair value through profit and loss. Investments are initially recognised at cost on a trade date basis. The investments are subsequently re-measured at fair value, which is determined by the Directors on the recommendation of the Valuation Committee. Unrealised gains or losses arising from the revaluation of investments are taken directly to the Income Statement. All investments of the Company are denominated in Russian Roubles and are revalued in sterling terms even if there is no revaluation of the investment in its currency of denomination.

The fair value of the investments is arrived at on the basis of the recommendation of the Company's Valuation Committee, who take independent professional advice. Fair value is determined as follows:

Unquoted securities are valued based on the realisation value which is estimated by the Committee with prudence and good faith. The Committee will take into account the guidelines and principles for valuation of Portfolio Companies set out by the International Private Equity and Venture Capital Association (IPEVCA), with particular consideration of the following factors:

Fair value is the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm's length transaction
The valuation methodology applied uses reasonable assumptions and estimations and takes account of the nature, facts and circumstances of the investment and its materiality in the context of the total portfolio.
An appropriate methodology incorporates available information about all factors that are likely materially to affect the fair value of the investment. The valuation methodologies are applied consistently from period to period, except where a change would result in a better estimate of fair value. Any changes in valuation methodologies will be clearly disclosed in the financial statements.

The most widely used methodologies are listed below. In assessing which methodology is appropriate, the Committee is predisposed towards those methodologies that draw upon market-based measures of risk and return.

Cost of recent investment
Earnings multiple
Net assets
Available market prices

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 annually. Any impairment is recognised immediately in the income statement and is not subsequently reversed.

Loans and advances to customers

Loans and advances to customers are accounted for at fair value using the effective interest method. Loans and advances are initially recognised when cash is advanced to the borrowers at fair value inclusive of transaction costs. Loans and advances are derecognised when the rights to receive cash flows from them have expired.

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

Cash and cash equivalents

Cash in banks and short term deposits that are held to maturity are carried at cost. Cash and cash equivalents consist of cash in hand and short term deposits in banks with an original maturity of three months or less.

Trade receivables

Trade receivables do not carry any interest and are short-term in nature. They are accordingly stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts.

Trade payables

Trade payables are not interest bearing and are stated at their nominal value.

Financial liabilities and equity

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangement entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Financial liabilities and equity instruments are recorded at the proceeds received, net of issue costs.

Provisions

A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation, and the obligation can be reliably measured. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

Set up expenses

The preliminary expenses of the Company directly attributable to the Offer and costs associated with the establishment of the Company that would otherwise have been avoided are taken to the share premium account.

Share based payments

Share options granted to the manager in respect of ongoing services are conditional upon the achievement of certain performance conditions.

The share options have been valued by an independent valuer in the financial statements as at the date the options were granted. The resulting value is amortised in the Income Statement over the expected life of the options. The options may have a dilutive effect upon the Earnings per Share and the Net Asset Value of the Group.

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. 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.

Fair Value

The Directors consider the carrying value of all financial assets and liabilities to approximate their fair value.

3. Company information

Included in the profit of the Consolidated accounts are the operating results of the Company, which include the revaluation of subsidiary companies as follows:

	1 January 2007 to 31 March 2008 £'000	22 February to 31 December 2006 £'000
Administration and operating expenses	(3,885)	(2,392)
Unrealised gains/(losses) on revaluation of investments	13,749	(272)
Gain on derivatives	89	-
Other exchange losses	(10)	180

Operating profit/(loss)	9,943	(2,484)

Bank interest receivable	2,754	2,459
Loan interest receivable	187	2

Finance income	2,941	2,461

Profit/(loss) before tax	12,884	(23)

Tax	-	-

Net profit/(loss) for the period	12,884	(23)

4. Subsidiary information

Included in the profit of the Consolidated accounts are the operating results of Kreditmart Finance Limited ('Kreditmart') as follows:

	1 January 2007 to 31 March 2008 £'000	22 February to 31 December 2006 £'000
Revenue	760	-
Administration and operating expenses	(5,057)	(134)
Other exchange gains/(losses)	604	(1)

Operating loss	(3,693)	(135)

Bank interest receivable	421	-

Finance income	421	-

Loss before tax	(3,272)	(135)

Tax	762	-

Net loss for the period	(2,510)	(135)

5. Administration and operating expenses

The net profit/(loss) for the period has been arrived at after charging the following items of expenditure:

	1 January 2007 to 31 March 2008 £'000	22 February to 31 December 2006 £'000
Company
Investment management fee	1,810	1,500
Auditors' remuneration	68	32
Directors' remuneration	258	135
Share based payments	750	470
Other operating and administrative expenses	999	249

	3,885	2,386
Kreditmart
Auditors' remuneration	52	10
Directors' remuneration	108	-
Other operating and administrative expenses	4,828	293

	4,988	303
Flexinvest Limited
Auditors' remuneration	4	-
Other operating and administrative expenses	15	-
	19	-

Total for the Group	8,892	2,689

6. Tax

	1 January 2007 to 31 March 2008 £'000	22 February to 31 December 2006 £'000
Kreditmart
Current tax charge	22	-
Deferred tax asset (see below)	(784)	-

	(762)	-

Flexinvest Limited		-
Current tax charge	24	-
Deferred tax asset	-	-

	24	-

Net tax credit to the Income Statement	(738)	-

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

The Group is liable to tax at a rate of 24% arising on its activities in Russia.

The Group is liable to tax at a rate of 10% arising on its activities in Cyprus.

Due to the presence in Russian commercial legislation, and tax legislation in particular, of provisions allowing more than one interpretation, and also due to the practice developed by the tax authorities of making arbitrary judgment of taxpayer activities, if a particular treatment based on Management's judgment of Kreditmart's business activities was to be challenged by the tax authorities, Kreditmart may be assessed for additional taxes, penalties and interest. Such uncertainty may relate to valuation of financial instruments, loss and impairment provisions and market level for deals' pricing. The Company believes that it has already made all tax payments, and therefore no allowance has been made in the financial statements. Tax years remain open to review by the tax authorities for three years.

Kreditmart's principal business activities are within the Russian Federation. Laws and regulations affecting the business environment in the Russian Federation are subject to rapid changes and Kreditmart's assets and operations could be at risk due to negative changes in the political and business environment.

At the balance sheet date, the Group has unused tax losses arising from Kreditmart of £ 3,533,971 (2006: £NIL) available for offset against future profits. A deferred tax asset has been recognised in respect of all of these losses, as management believes that the company will make sufficient future profits to carry forward the current period deferred tax asset.

7. Earnings per share

	31 March 2008 £'000	31 December 2006 £'000
The calculation of the basic and diluted earnings per share is based on the following data:
Profit/(loss) for the purposes of basic and diluted loss per share being net loss attributable to equity holders of the parent	5,215	(321)
Weighted average number of ordinary shares for the purpose of basic profit/(loss) per share (in thousands):	75,000	75,000
Effect of dilutive potential ordinary shares:
Options	-	-
Weighted average number of ordinary shares for the purpose of diluted profit/(loss) loss per share (in thousands):	75,000	75,000

8. Goodwill

	£'000
Cost:
Recognised on acquisition of Flexinvest Limited	171
Exchange gain/(loss) for the period	(2)
At 31 March 2008	169

Net book value:
At 31 March 2008	169

No impairment losses have been recognised in respect of the goodwill in the period ended 31 March 2008. For further details in respect of the acquisition of Flexinvest Limited, please refer to note 12.

9. Plant and equipment

	Fixtures & fittings £'000	Furniture & equipment £'000	Total £'000
Cost:
At 1 January 2007	-	3	3
Additions	459	1,002	1,461
At 31 March 2008	459	1,005	1,464

Depreciation:
At 1 January 2007	-	-	-
Charge for the period	(78)	(119)	(197)
At 31 March 2008	(78)	(119)	(197)

Net book value:
At 1 January 2007	-	3	3

At 31 March 2008	381	886	1,267

The useful lives of the assets are estimated as follows:

Fixtures & fittings 3-4 years

Furniture 5 years

Equipment 3 years

10. Investment in subsidiaries - at fair value through profit and loss

	31 March 2008 £'000	31 December 2006 £'000
Kreditmart

At 1 January 2007, and 22 February 2006	12,500	-
Additions	10,094	12,500
Fair value revaluation *	5,378	-

At 31 March 2008, and 31 December 2006	27,972	12,500

Flexinvest Limited

At 1 January 2007, and 22 February 2006	-	-
Additions	6,451	-
Fair value revaluation *	-	-

At 31 March 2008, and 31 December 2006	6,451	-

	34,423	12,500

* The revaluation calculations performed on Kreditmart included the value of Flexinvest Limited as at 31 March 2008, and as such, no revaluation was performed on the individual subsidiary companies.

The basis of valuation of Kreditmart is dependent upon the availability of short term funding for the acquisition of mortgages prior to their being sold on to partner banks. In the current economic climate there remains a risk that such funding may not always be available.

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	99.5%	Investment holding

11. Acquisition of subsidiary

	Flexinvest Limited Fair value on acquisition £'000
Non-current assets
Quoted investments	73
Current assets
Cash and cash equivalents	104
Current liabilities
Trade and other payables	(2)

	175

Goodwill on acquisition (see note 8)	171
Cost of acquisition	346

Date of acquisition	27 June 2007

The cost of acquisition was paid entirely in cash. The Company purchased a 99.5% stake in Flexinvest Limited, the remaining 0.5% stake being purchased by the Company's subsidiary Kreditmart.

12. Investments -at fair value through profit and loss

	31 March 2008 £’000 Group	31 March 2008 £’000 Company	31 December 2006 £’000 Group	31 December 2006 £’000 Company
Whitebrooks Investments Limited	6,029	6,029	5,036	5,036
Unistream Bank	17,561	17,561	10, 365	10, 365
Grindelia Holdings	17,418	17,418	-	-

Total investments at fair value through profit and loss	41,008	41,008	15,401	15,401

Change in fair value of investments at fair value through profit and loss

	Group

	1 January 2007 to 31 March 2008 £’000	22 February to 31 December 2006 £’000
Whitebrooks Investments Limited	347	(272)
Unistream Bank	7,224	-
Grindelia Holdings	800	-
Quoted Investments	(14)	-

Total unrealised gains/(losses)	8,357	(272)

The Company acquired a 40.3% stake in Whitebrooks Investments Limited ('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 committed to acquire a 26% stake in Unistream Bank ('Unistream') on 30 November 2006, conditional upon Central Bank of Russia ('CBR') approval. At 30 June 2007 funds had been drawn down from this commitment to acquire a 17.7% stake. The remaining 8.3% stake was acquired on 26 July 2007 once the CBR had given its approval for the Company to own more than 20% of a Russian bank.

As a result of the size of the stakes in these two companies, Whitebrooks and Unistream 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 and loss.

In December 2007 the company acquired a 24.3% shareholding in Grindelia Holdings Limited, which owns 99.5% of the retail chain that operate under the brands 'SuperStroy' and 'StroyArsenal'.

In May 2008, the Flexinvest Limited acquired 100% of Volzhski Universalny Bank ('VUB'), a bank registered with the Central Bank of the Russian Federation, which primarily will provide a platform for the booking of Kreditmart mortgages. The total cost of the acquisition was £4.5 million. (see note 26)

In the view of the Valuation Committee, the value of the investment in Whitebrooks Investments Limited, Unistream Bank, Kreditmart (including Flexinvest Limited) and Grindelia Holdings Limited as at 31 March 2008 was estimated at £6.03 million, £17.56 million, £34.42 million and £17.42 million respectively, resulting in an uplift of the investment above historical cost in the Company accounts.

The outstanding balance of the Whitebrooks loan as at 31 March 2008

	Group and Company
	31 March	31 December
	2008	2006
	£’000	£’000

Loans drawn down plus capitalised interest	1,832	563

13. Loans and advances to customers

	31 March	31 December
	2008	2006
	£’000	£’000

Residential Mortgages	13,922	-

The mortgages are secured upon borrowers' private residences, are repayable in equal monthly instalments and mature between 2014 and 2022. Interest is charged at fixed rates and range between 10.5% and 15.5% depending on each borrower.

14. Trade and other receivables

	31 March 2008 £’000 Group	31 March 2008 £’000 Company	31 March 2006 £’000 Group	31 December 2006 £’000 Company

Sundry debtors and prepayments	1,278	401	132	11
Bank interest receivable	56	56	86	86
Amount receivable from related party	147	147	56	56

	1,481	604	274	153

The related party balance is due from Flexinvest Limited and relate to the due diligence costs of the VUB transaction (2006: Aurora Investment Advisors Limited), and is interest free, unsecured and repayable on demand.

15. Derivative liability

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

	Group and Company

	31 March	31 December
	2008	2006
	£’000	£’000
Current derivative liability
Sterling/US dollar forward foreign exchange contracts	(12)	(8)

16. Trade and other payables

	31 March 2008 £’000 Group	31 March 2008 £’000 Company	31 December 2006 £’000 Group	31 December 2006 £’000 Company

Kreditmart – undrawn investment commitment	-	-	-	10, 166
Unistream Bank – undrawn investment commitment	-	-	10,214	10,214
Expense accruals	648	103	148	132
	648	103	10,362	20,512

17. Share capital

	31 March 2008 £’000	31 December 2006 £’000
Authorised Share Capital:
200,000,000 Ordinary Shares of 1p each:	2,000	2,000

Issued Share Capital
75,000,000 fully paid Ordinary Shares of 1p each:	750	750

The Company has one class of ordinary shares which carry no right to fixed income.

2 shares were issued on 24 February 2006 for a consideration of £1 each

74,999,998 shares were issued on 20 March 2006 for a cash consideration of £1 each.

18. Share premium

	31 March 2008 £’000 Group	31 March 2008 £’000 Company	31 December 2006 £’000 Group	31 December 2006 £’000 Company

Balance as at 1 January 2007, and 22 February 2006	-	-	-	-

Premium arising on issue of ordinary shares	-	-	74,250	74,250
Transaction costs on issue of ordinary shares	-	-	(3,500)	(3,500)
Conversion to special distributable reserve	-	-	(70,750)	(70,750)

Balance as at 31 March 2008, and 31 December 2006	-	-	-	-

On 5 April 2006 the Royal Court of Guernsey confirmed the reduction of the capital by way of cancellation of the Company's share premium account. The amount cancelled has been credited to a special reserve (see note 20)

19. Special reserve

	31 March 2008 £’000 Group	31 March 2008 £’000 Company	31 December 2006 £’000 Group	31 December 2006 £’000 Company

Balance as at 31 January 2007, and 22 February 2006	70,750	70,750	-	-
On conversion from share premium	-	-	70,750	70,750
Balance as at 31 March 2008, and 31 December 2006	70,750	70,750	70,750	70,750

The Special reserve is a distributable reserve to be used for all purposes permitted under Guernsey company law including the buy back of shares and the payment of dividends

20. Share options reserve

	31 March 2008 £’000 Group	31 March 2008 £’000 Company	31 December 2006 £’000 Group	31 December 2006 £’000 Company

Balance as at 1 January 2007, and 22 February 2006	470	470	-	-

Recognised fair value of share options issued during the period	750	750	470	470

Balance as at 31 March 2008, and 31 December 2006	1,220	1,220	470	470

Details of share-based payments are shown in note 24

21. Revenue reserve

	31 March 2008 £’000 Group	31 March 2008 £’000 Company	31 December 2006 £’000 Group	31 December 2006 £’000 Company

Balance as at 1 January 2007, and 22 February 2006	(321)	(23)	-	-

Net profit/(loss) for the period	5,215	12,884	(321)	(23)

Balance as at 31 March 2008, and 31 December 2006	4,894	12,861	(321)	(23)

Any surplus or deficit arising from net profits or losses after payment of dividends is taken to this reserve.

22. Net asset value per share

	31 March 2008 £’000 Group	31 March 2008 £’000 Company	31 December 2006 £’000 Group	31 December 2006 £’000 Company

Net assets for the purposes of basic and diluted net asset value per share attributable to equity holders of the parent	£77,609	£85,581	£71,649	£71,947

Weighted average number of ordinary shares for the purpose of basic earnings per share:(in thousands):	75,000	75,000	75,000	75,000

Effect of dilutive potential ordinary shares:
Options	-	-	-	-

Weighted average number of ordinary shares for the purpose of diluted earnings per share	75,000	75,000	75,000	75,000

Net asset value per share -Basic and Diluted	103.5p	114.1p	95.5p	95.9p

23. Share based payments

Terms

The Company has granted an option to the Manager to subscribe for ordinary shares representing 20% of the issued share capital of the Company after the exercise of the Manager option at the placing price per ordinary share (subject to adjustments for any dividends per share paid by the Company prior to exercise by the Manager); provided that the total shareholder return on the ordinary shares as compared to the placing price has increased by at least 12% per annum from the date of admission until exercise measured by reference to the average of the closing mid-market prices of the ordinary shares in the three months prior to the date on which the Manager option becomes exercisable (the 'hurdle rate') and, provided further that if any additional ordinary shares are issued following admission as part of any secondary fundraising, the exercise price of the Manager option in respect of such additional shares shall be the issue price paid for such shares pursuant to such secondary fundraising (subject to adjustments for any dividends per share paid by the Company prior to exercise by the Manager). The Manager option is exercisable at any time during the period between the third and tenth anniversaries of the date of admission; provided that the hurdle rate has been met prior to the date of exercise of the Manager option. The Manager option shall also become exercisable at any time between the date of admission and the tenth anniversary thereof in the event of a takeover of the Company or the Company's liquidation. In such circumstances, the Manager does not need to satisfy the hurdle rate in order to exercise the Manager option.

*Change in the period*
			Exercise price
	Number ‘000	Number ‘000
Options as at 1 January 2007, and 22 February 2006	18,750	-
Options granted during the period	-	18,750	100p
Options as at 31 March 2008, and 31 December 2006	18,750	18,750

Exercisable options at the end of the period	-	-

The options outstanding at 31 March 2008 had a remaining contractual life of 8 years (31 December 2006: 9 years 3 months).

Calculation of the fair value of equity settled share based payments

All share based payments were valued at the date of issue using the Monte Carlo model. The key inputs to this model that drive the option value are:

Share price at grant of options	100p
Exercise price	100p
Expected volatility	20%
Risk free rate	4.39%
Effective dividend yield	0%

Based on the above valuation the total value of the options granted at the date of grant was £3,000,000.

The directors have estimated that the hurdle rate will be achieved, and hence the options will vest, after 5 years. The value of the options will be charged to the income statement on a pro rata basis over the course of the 5 years ending 20 March 2011. The charge arising for the period ended 31 March 2008 is £750,000 (31 December 2006: £470,137).

24. Financial risk factors

The investment strategy of the Company is to make equity or equity-related investments in small and mid-sized private Russian companies focused on the financial, business and consumer services sectors with the objective to provide investors with an attractive level of capital growth from investing in a diversified private equity portfolio. Consistent with that objective, the Company's financial instruments mainly comprise of investments in private equity companies. In addition the Company holds cash and liquid resources as well as having debtors and creditors that arise directly from its operations.

The main risks arising from the Company's financial instruments are credit risk, foreign currency risk, market price risk and interest rate risk.

Capital Management

The capital structure of the Group at year end consists of cash and cash equivalents and equity attributable to equity holders of the Company, comprising issued capital, reserves and retained earnings. The Board continues to monitor the balance of the overall capital structure. The Group is not subject to any external capital requirements.

Credit risk

The Company is exposed to credit risk in respect of its cash and cash equivalents, arising from possible default of the relevant counterparty, with a maximum exposure equal to the carrying value of those assets. The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies. The Company monitors the placement of cash balances on an ongoing basis.

The Company is also exposed to credit risk in respect of the loans granted to Whitebrooks Investments Limited, with a maximum exposure equal to the value of the loans advanced. Under the terms of the loan agreement, should the loans not be repaid by the maturity date, they are converted into ordinary shares of the borrower.

Kreditmart is exposed to credit risk in respect of mortgage loans, arising from possible default of its customers. The credit risk is mitigated by the Risk Department, who on a monthly basis compile a Portfolio Quality report, which analyse the key trends and highlights any risk areas, as well as a review of any delinquent and potentially delinquent accounts. The Risk Department also mitigate the credit risk through the calculation of the Value at Risk ('VAR') to forecast the level of estimated losses, calculate the Loan Loss Provisions ('LLP') on a monthly basis based on Central Bank of Russia Federation instructions and calculate the limits of insurance responsibilities of Insurance companies that provide the customers mortgage insurance.

Value at Risk analysis as calculated by the Risk Department on for the mortgage portfolio as at 31 March 2008:

Rating	31 March	31 December
	2008	2006
Value at Risk	£'000	£'000
High Net-worth (Low risk)	1	-
Prime (Medium risk)	23	-
Sub Prime	-	-
High Risk	84	-
Total Value at Risk	108	-

Kreditmart does not have any Sub-prime customers due to criteria guidelines which do not allow loans to be granted to borrowers without income confirmation documents. Loan payments are current except for £253,215 which is 60 days overdue as at 31 March 2008. (2006:£NIL)

Currency risk

Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. Currency risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the Company's reporting currency. The Company is exposed to foreign exchange risk arising from various currency exposures primarily with respect to Russian Roubles and the US Dollar. All of the Company's equity investments are denominated in Russian Rouble and loans made to Whitebrooks Investments Limited are in US Dollars. The Company does not hedge its currency exposure on equity investments but has put in place hedges on monetary assets to mitigate its US Dollar exposure. The Company does not use such currency derivatives for speculative purposes.

Currency Risk Table

An analysis of the Group's net currency exposure is as follows:

As at 31 March 2008:

Currency of denomination	Sterling £’000	US Dollars £’000	Russian Roubles £’000	Other £’000	Total £’000

Total assets	16,908	8,890	52,346	125	78,269
Total liabilities	(143)	(81)	(416)	(20)	(660)
Off balance sheet assets	1,254	-	-	-	1,254
Off balance sheet liabilities	-	(1,254)	-	-	(1,254)

Net currency exposure	18,019	7,555	51,930	105	77,609

As at 31 December 2006:

Currency of denomination	Sterling £’000	US Dollars £’000	Russian Roubles £’000	Other £’000	Total £’000

Total assets	76,190	5,599	230	-	82,019
Total liabilities	(10,356)	-	(14)	-	(10,370)
Off balance sheet assets	5,524	-	-	-	5,524
Off balance sheet liabilities	-	(5,524)	-	-	(5,524)

Net currency exposure	71,358	75	216	-	71,649

An analysis of the Company's net currency exposure is as follows:

As at 31 March 2008:

Currency of denomination	Sterling £’000	US Dollars £’000	Russian Roubles £’000	Other £’000	Total £’000

Total assets	8,398	1,832	75,466	-	85,696
Total liabilities	(115)	-	-	-	(115)
Off balance sheet assets	1,254	-	-	-	1,254
Off balance sheet liabilities	-	(1,254)	-	-	(1,254)

Net currency exposure	9,537	578	75,466	-	85,581

As at 31 December 2006:

Currency of denomination	Sterling £’000	US Dollars £’000	Russian Roubles £’000	Other £’000	Total £’000

Total assets	86,731	5,599	137	-	92,467
Total liabilities	(20,520)	-	-	-	(20,520)
Off balance sheet assets	5,524	-	-	-	5,524
Off balance sheet liabilities	-	(5,524)	-	-	(5,524)

Net currency exposure	71,735	75	137	-	71,947

Foreign Currency Sensitivity

The following table details the Group's sensitivity to a 10% strengthening of the Sterling against each of the relevant foreign exchange currencies. 10% is the sensitivity rate used when reporting foreign currency risk internally to management and represents management's assessment of the possible change in foreign exchange rates. This analysis assumes that all variables, in particular interest rates remain constant. The analysis is performed on the same basis for the prior period.

Increase/(decrease) in profit/loss:

	31 March 2008 £’000 Group	31 March 2008 £’000 Company	31 December 2006 £’000 Group	31 December 2006 £’000 Company
Russian Rouble	(5,193)	(7,547)	(22)	(14)
US Dollar	(756)	(58)	(8)	(8)
Euro	(13)	-	-	-

Increase/(decrease) in Equity:

	31 March 2008 £’000 Group	31 March 2008 £’000 Company	31 December 2006 £’000 Group	31 December 2006 £’000 Company
Russian Rouble	67	-	30	-
US Dollar	(15)	-	-	-
Euro	(15)	-	-	-

A 10% weakening of the Sterling against each of the relevant foreign exchange currencies at the period end would have had the equal but opposite effect, on the basis that all other variables remain the same.

Market Risk

Market price risk arises principally from uncertainty concerning future values of financial instruments used in the Group's operations. It represents the potential loss the Group might suffer through holding interests in unquoted private companies whose value may fluctuate and which may be difficult to value and/or to realise. The Company seeks to mitigate such risk by assessing such risks as part of the due diligence process related to all potential investments, and by establishing a clear exit strategy for all potential investments.

Pricing Risk Table

All security investments present a risk of loss of capital, the maximum risk resulting from instruments is determined by the fair value of the financial instrument. The following represents the Group and Company's market pricing exposure at year end:

At 31 March 2008:

	Note	Fair Value £’000	% of Net Assets	Fair Value £’000	% of Net Assets
		Group		Company
Securities at fair value through profit & loss -
Unlisted Equities	11,13	41,008	52.84	75,431	88.14
Derivative asset
- Open forwards	16	-	-	-	-
Derivative liabilities
- Open forwards	16	12	0.02	12	0.01

At 31 December 2006:

	Note	Fair Value £’000	% of Net Assets	Fair Value £’000	% of Net Assets
		Group		Company
Securities at fair value through profit & loss -
Unlisted Equities	11,13	15,401	21.50	27,901	38.78
Derivative asset
- Open forwards	16	-	-	-	-
Derivative liabilities
- Open forwards	16	8	0.01	8	0.01

Price sensitivity

The sensitivity analysis below has been determined based on the exposure to equity price risks as at the reporting date

At the reporting date, if the valuations had been 10% higher while all other variables were held constant net profit would increase by £4,099,600 (2006: increase by £1,539,300) for the Group and £7,542,000 (2006: £2,789,300) for the Company

If inputs to the valuation model had been 10% lower it would have had the equal but opposite effect, on the basis that all other variables remain the same

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group is exposed to interest rate risk as a result of the cash and bank balances that are invested at floating interest rates.

The following table details the Group and Company's exposure to interest rate risk as at year end by the earlier of contractual maturities or re-pricing:

Group

At 31 March 2008:	Non interest bearing	Less than 1 month	1-3 months	3 months to 1 year	1 to 2 years	2 to 5 years	Greater than 5 years	Total
	£000	£000	£000	£000	£000	£000	£000	£000
Assets
Non-interest bearing	45,676	-	-	-	-	-	-	45,676
Floating interest rate instruments	-	457	-	-	-	-	-	457
Fixed interest rate instruments *	-	8,339	8,239	3,372	1,737	3,473	6,976	32,136
Total	45,676	8,796	8,239	3,372	1,737	3,473	6,976	78,269

Liabilities
Non-interest bearing	(660)	-	-	-	-	-	-	(660)
Floating interest rate instruments	-	-	-	-	-	-	-	-
Fixed interest rate instruments *	-	-	-	-	-	-	-	-
Total	(660)	-	-	-	-	-	-	(660)
Net Exposure	45,016	8,796	8,239	3,372	1,737	3,473	6,976	77,609

At 31 December 2006:	Non interest bearing	Less than 1 month	1-3 months	3 months to 1 year	1 to 2 years	2 to 5 years	Greater than 5 years	Total
	£000	£000	£000	£000	£000	£000	£000	£000
Assets
Non-interest bearing	17,606	-	-	-	-	-	-	17,606
Floating interest rate instruments	-	30,343	-	-	-	-	-	30,343
Fixed interest rate instruments *	-	3	33,507	560	-	-	-	34,070
Total	17,606	30,346	33,507	560	-	-	-	82,019

Liabilities
Non-interest bearing	(10,370)	-	-	-	-	-	-	(10,370)
Floating interest rate instruments	-	-	-	-	-	-	-	-
Fixed interest rate instruments *	-	-	-	-	-	-	-	-
Total	(10,370)	-	-	-	-	-	-	(10,370)
Net Exposure	7,236	30,346	33,507	560	-	-	-	71,649

Company

At 31 March 2008:	Non interest bearing	Less than 1 month	1-3 months	3 months to 1 year	1 to 2 years	2 to 5 years	Greater than 5 years	Total
	£000	£000	£000	£000	£000	£000	£000	£000
Assets
Non-interest bearing	76,035	-	-	-	-	-	-	76,035
Floating interest rate instruments	-	491	-	-	-	-	-	491
Fixed interest rate instruments *	-	375	7,950	845	-	-	-	9,170
Total	76,035	866	7,950	845	-	-	-	85,696

Liabilities
Non-interest bearing	(115)	-	-	-	-	-	-	(115)
Floating interest rate instruments		-	-	-	-	-	-	-
Fixed interest rate instruments *		-	-	-	-	-	-	-
Total	(115)	-	-	-	-	-	-	(115)
Net Exposure	75,920	866	7,950	845	-	-	-	85,581

At 31 December 2006:	Non interest bearing	Less than 1 month	1-3 months	3 months to 1 year	1 to 2 years	2 to 5 years	Greater than 5 years	Total
	£000	£000	£000	£000	£000	£000	£000	£000
Assets
Non-interest bearing	28,054	-	-	-	-	-	-	28,054
Floating interest rate instruments	-	30,343	-	-	-	-	-	30,343
Fixed interest rate instruments *	-	3	33,507	560	-	-	-	34,070
Total	28,054	30,346	33,507	560	-	-	-	92,467

Liabilities
Non-interest bearing	(20,520)	-	-	-	-	-	-	(20,520)
Floating interest rate instruments		-	-	-	-	-	-	-
Fixed interest rate instruments *		-	-	-	-	-	-	-
Total	(20,520)	-	-	-	-	-	-	(20,520)
Net Exposure	7,534	30,346	33,507	560	-	-	-	71,947

* The Group's fixed interest rate instruments represents cash accounts placed on deposit by the Company, Kreditmart and Flexinvest, the loan facility granted to OSG Records and the mortgages granted by Kreditmart. At 31 March 2008 there is no interest rate exposure in regard to these instruments as all were made at fixed interest rates.

Sensitivity analysis

The sensitivity analysis below have been determined based on the Group's exposure to interest rates for interest bearing assets and liabilities at the balance sheet date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period in the case of instruments that have floating rates.

If interest rates had been 50 basis points lower and all other variables were held constant, the Group's net profit for the 15 months ended 31 March 2008 would have increased by £2,279(from incorporation on 22 February 2006 to 31 December 2006: £151,714) and the Company's by £ 2,279 (2006: £151,714)

If interest rates had been 50 basis points lower it would have had the equal but opposite effect, on the basis that all other variables remain the same.

25. Related party transactions

Transactions between the Company and any subsidiaries which are related parties have been eliminated on consolidation and are not disclosed in this note.

The Company pays fees to Aurora Investment Advisors Limited ('AIAL') for its services as investment manager and advisor. The total charge to the Income Statement during the period was £1,810,480 (2006: £1,500,000). There were no outstanding fees at the period end.

John McRoberts and James Cook each hold 47.5% of the ordinary share capital and 42.5% of the non-voting preference share capital of AIAL. A trust created by Sir Trevor Chinn (in which he has no interest) holds 10% of the non-voting preference shares in AIAL.

The Company paid fees to Investec Administration Services Limited ('IASL') for its services as administrator. The total charge to the Income Statement during the period was £77,500 (2006: £67,010), of which £18,750 (2006: £18,750) was outstanding at the period end. Steve Coe, a former director of the Company, served as a director of IASL until his resignation on 26 April 2007.

The Company pays fees to Close Fund Services Limited ('CFSL') for its services as administrator. The total charge to the Income Statement during the period was £20,500 (2006: £NIL), of which £17,500 (2006: £NIL) was outstanding at the period end. John Whittle was appointed a director of the Company on 17 January 2008. He is also a director of CFSL.

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 Income Statement during the period was £379,124 (2006: £118,205), of which £17,292 (2006: £34,167) was outstanding at the period end.

On 17 July 2006, John McRoberts exercised options in respect of 152 shares in Whitebrooks Investments Limited ('Whitebrooks') at an average price of US$275 per share. The options were granted to Mr McRoberts by an unrelated shareholder in Whitebrooks in connection with consultancy work performed for its shareholders during 2004 and early 2005. Mr McRoberts still holds options in respect of a further 848 shares at an average price of US$275 granted by Tim Slesinger, the largest shareholder in Whitebrooks.

26. Events after the balance sheet date

a) Acquisition of subsidiary

On 6 May 2008, Flexinvest Limited acquired 100% of Volzhski Universalny Bank ('VUB'), a bank registered with the Central Bank of the Russian Federation, which will book and hold mortgages distributed through the Kreditmart network that may be sold on to other banks. The total cost of the acquisition was £4.52 million, which is set out below:

	£’000

Intangible assets (banking licence)	2,660

Other net assets	1,860

Cost of acquisition	4,520

Potential contingencies exist in relation to the conduct of business formerly carried out by VUB. A retention from the purchase consideration has been made to cover any potential claims that may arise and in the opinion of the directors any contingent liability in respect of the past business of VUB is considered remote.

b) Whitebrooks Loan repayment

After year end the Company decided that the loans drawn down by Whitebrooks Investments Limited on the 5th of March 2007 as well as on the 18th of May 2007 will not be converted into shares of the borrower. These loans will be reclassified to long term loans going forward.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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