Aurora Russia Interim Results

RNS Number : 2885U

Aurora Russia Limited

20 December 2011

 



20 December 2011

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

Results for the six months ended 30 September 2011

·      The Board and the Manager are focused on ensuring optimal exits from the investee companies

·      Continued strong growth in underlying companies

Financial highlights

·      Net asset value per share as at 30 September 2011 of 70.1p per share (Net asset value £78.9m) down from 83.6p per share at 31 March 2011.

·      Cash and cash equivalents as at 30 September 2011 were £1.6m (£4.1m cash within the Group)

Portfolio highlights

OSG

·      Revenues for the 6 months ended 30 September 2011 were £9.16m compared to £6.82m for the same period in 2010.

·      EBITDA up 17% to £1.08m as at 30 September 2011

·      Equity valuation of Aurora Russia's stake in OSG at 30 September 2011 was £30.7m compared to the valuation at 31 March 2011 of £28.8m

Unistream Bank

·      Unistream's share in the Russia-outbound transfer market is estimated at 16.7% as at Q2 2011

·      Revenues for the nine month period ended 30 September 2011 were RUR 1.7bn, up 11.6% YoY

·      PBT for the nine months to 30 September 2011 was RUR71m up from a loss of RUR24.6m for the same period last year.

·      Equity valuation of Aurora Russia's stake in Unistream at 30 September 2011 was £14.9m, compared to the valuation at 31 March 2011 of £18.7m

Superstroy

·      Revenues grew by 31% YoY for the nine months ended 30 September 2011 to RUR6.5bn

·      EBITDA of RUR45m

·      Equity valuation of Aurora Russia's stake in Superstroy at 30 September 2011 was £15.0m, compared to the valuation at 31 March 2011 of £24.5m

Flexinvest and Kreditmart

·      Flexinvest launched a new retail strategy with a credit card as its main loan product financed by retail deposits

·      After a strategic review, the decision was taken to sell Kreditmart for a nominal price to stop its cash burn.

·      As at 30 September 2011, Flexinvest and Kreditmart had £15.5m in net assets down from £17.6m as at 31 March 2011

·      Equity valuation of Aurora Russia's stake in Kreditmart/ Flexinvest Bank at 30 September 2011 was £16.3m, compared to the valuation at 31 March 2011 of £18.5m

Commenting, Geoff Miller, Chairman of Aurora Russia, said:

"While we are now facing challenging times in Europe which are having a knock-on effect on Russia, oil and commodity prices remain robust and the fundamentals in Russia continue to outperform Western economies. We expect to see continued strong growth in the underlying companies in which we are invested and therefore we remain confident that we can deliver value for shareholders from these assets.  The Company's strategy remains focused on ensuring optimal exits from our investee companies on a two year horizon. I would hope that we can make significant progress in this regard during 2012."

Enquiries:
Aurora Russia Limited
Geoff Miller	[phone]
Numis Securities Limited
Nominated Adviser: Hugh Jonathan	[phone]
Corporate Broking: Rupert Krefting / Nathan Brown
Financial Dynamics
Ed Gascoigne-Pees	[phone]
Jack Hickey

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 2011.

The past six months, since the year end results to 31 March 2011 were announced, have seen a number of changes in both the economic environment and within the Company. We are now facing challenging times in Europe which is having a knock-on effect in Russia. However, oil and commodity prices remain robust and although sentiment has cooled in Russia the fundamentals continue to outperform the economies of the West. The Government of Russia predicts 2012 GDP growth to be 3.7%  with the community of analysts focusing on the Russian market predicting a range of between 2.5% and 4%.

Since taking over as Chairman in August 2011, my focus has been to ensure that the Board reflects the viewpoints of all shareholders, that the corporate governance framework within the Company is appropriate for its size and strategy and that the strategy of the Company is clearly articulated to the market.

The Board has recently completed a visit to all of the portfolio companies, and had presentations from the management of each of the companies, before agreeing the valuations within these accounts. The meetings have reinforced the view of all of us on the Board that these are high quality businesses with strong management, added to which three out of four have leading market positions. The companies have shown good growth in revenues, increasing profitability and each has a clear strategy for future growth. The fact that our investee businesses are in good shape significantly increases our options when seeking exits.

The first statement made by the Company after I was appointed Chairman was a clear, unambiguous commitment to realising value for shareholders from the Company's investments on a two year time horizon. This remains the strategy and the Board and the Company's Manager are focused on ensuring optimal exits from our investee companies. I would hope that we can make significant progress in this regard during 2012.

Results

For the 6 months to 30 September 2011, Aurora Russia recorded a loss of £15.2 million or 13.48p per share, calculated based on the unaudited Company statement of comprehensive income. The net asset value ("NAV") of the Company as at 30 September 2011 was £78.9 million or 70.1p per share. This decline in value, which is detailed further below, derives in largely from adverse stock market and currency movements. Cash and cash equivalents at 30 September 2010 were £1.6 million.

Administration and operating expenses of £12.4 million include Company costs of £1.6 million or 2% of the current NAV. Operating costs of the Company's wholly owned subsidiaries were £10.8 million.

The Annual General Meeting

I would like to take this opportunity to thank our shareholders for their support at the AGM on 28 September 2011 for the re-constituted board and the re-election of all of the Board members including myself.

Composition of the Board

On 1 August this year, the Board said farewell to Dan Koch, the Chairman since 8 September 2008, Alexandr Dumnov who served on the board from 17 June 2010 to 1 August 2011 and Ben Morgan who served on the Board from the listing of the Company in March 2006 to 28 September 2011. The Board welcomes Gilbert Chalk and Tim Slesinger as Directors and looks forward to working with them to bring value to shareholders. I believe that we have a strong Board with a diversity of experience and specialist knowledge that greatly adds to the quality of our debate and, I believe, our decision making.

James Cook also left the board on 17 June 2011 and on 11 November 2011 resigned from the Manager. Michael Hough who has been a minority shareholder in the Manager will now be fully integrated into the Manager and will work with John McRoberts, Andrey Gurin and Mikhail Shorokhov who will continue to manage the portfolio and seek exits for each of the investee companies over the coming months. The Manager has the full support of the Board. The Board believes the Manager is in the best position to bring value to shareholders over the next two years.

I would like to thank all of the members of the Board, past and present, for their considerable contributions to the Company over the period. Despite significant changes to the Board, the focus on delivering shareholder value has remained throughout. Members of the Board have been asked to take on greater levels of responsibility and in some cases to assist in communication with shareholders, which they have done willingly, and our interaction with the market will continue to be as high as we can make it, so as to ensure that the market better understands the workings of the Board.

Investment Review

The Company has sold Kreditmart for a nominal consideration, but has retained an option to acquire 10% of the purchasing entity into which Kreditmart will be integrated and which currently operates an early stage  mortgage and consumer loan brokerage. Athough the company is small it has a good management team. The rationale for entering into this transaction was to stop the cash burn at Kreditmart which continued to undermine the NAV of the Company and consequently value for our shareholders.

The Company has four remaining investments:

• 94.04% of OSG, a regional market leader in records management;

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

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

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

In all of our investee companies the local management and staff have remained loyal and committed through this 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 2011, resulting in a decrease in value from £90.5 million to £76.9 million. This interim valuation, recommended by the Valuation Committee of the Board was prepared by the Manager and formally adopted by the Board on 19 December 2011. These valuations are prepared for accounting purposes only and comply with International Private Equity and Venture Capital Association ("IPEVCA") 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 prior year end valuation performed for March 2011 as follows:

• the value of 94.04% of OSG's equity has increased by £1.9 million to £30.7 million, an increase of 7%

• the value of the Company's 24.3% shareholding in SuperStroy has decreased by £9.5 million to £15 million, a decrease of 39%.

• the value of the Company's 26% stake in Unistream Bank has decreased by £3.8 million to £14.9 million, a decrease of 20%; and

• the value of Flexinvest Bank and Kreditmart has decreased by £2.2 million to £16.3 million, a decrease of 12%."

It is important to note that over the period there was an approximate 9% favorable movement in the £/RUR exchange rate. In addition the RTS (Russian Trading System, denominated in US Dollars) Index comprising 15 of the largest most liquid stocks dropped 34% and the broader MICEX (which is measured in Roubles) comprising over 230 stocks dropped 25%. Therefore the movement of values may be distorted by currency translation effects and the drop in listed comparable companies both in Russia and abroad and may not be the best reflection of the performance of an underlying asset during the reporting period.

Outlook

In March 2012 the Russian Presidential elections will take place. There is widespread belief that following the victory, albeit with a reduced majority, of Vladimir Putin's United Russia Party in the Duma elections on 4 December 2011, he will almost definitely be elected to lead Russia and the administration will seek to foster stability in Government in Russia. It is to be hoped that the fact that support for United Russia has fallen may encourage the Government to pay more attention to reform issues, which could lay the groundwork for a stronger economy. With entry into the WTO and potentially membership to the OECD to follow, international investment companies and the strategic investor community which so far have been cautious to commit to Russia's growing market may have a change of heart leading to an increase in foreign direct investment not only into Russian listed stocks but also into private businesses such as the Company's portfolio companies.

Notwithstanding a difficult global macro economic backdrop, we expect to see continued strong growth in the underlying companies in which we are invested and therefore we remain confident that we can deliver value for shareholders from these assets.

Geoffrey Miller

Chairman of the Board

Aurora Russia Limited

Date: 19 December 2011

Investment Manager's Report

Overview

As we write this report we are once again in a period of economic uncertainty particularly with respect to the European market. However analysts predict that the Russian economy will grow at 4.1% in 2011 with the official forecast for 2012 at 3.7%. We remain cautiously optimistic about the macroeconomic situation, but do have some concern about the potential effects that the European debt crisis may have on commodity prices, particularly on the oil price.  Nonetheless commodity prices remain robust for the time being and we expect that domestic demand will continue to grow in Russia thereby providing opportunities for our investee companies to continue to increase in value.

Aurora Russia's investments comprise OSG, Superstroy and Unistream all of which have grown well over the period and Flexinvest Bank which has progressed well in implementing its revised retail banking strategy. Aurora Russia exited Kreditmart, its loan brokerage business, in early December.  The company was sold for a nominal sum to a competitor as it continued to lose money and undermine shareholder value. Aurora Russia did however retain a 10% non-dilutable interest in the combined business through a 10 year call option at a nominal strike price.

Despite our remaining portfolio companies performing well over the period, at 30 September 2011 they were valued at £76.9 million, 15% lower than the valuation at 31 March 2011 which was £90.5 million.  The reduced value has been driven primarily by the depreciation in the Rouble verses Pounds Sterling, our reporting currency, of approximately 9% and a significant decline in the value of most of the listed companies that served as proxies in the valuation of our portfolio companies.

Superstroy, Unistream and Flexinvest Bank currently report on a calendar year basis so the updates below for are for the nine months ended September 2011.  OSG however has the same reporting cycle as Aurora Russia and therefore its updates are for the six months ended 30 September 2011.

OSG Records Management

OSG had another record month in September 2011 in terms of revenues, which were £1.6 million, up 26% from the prior year period. The company's contractual storage business showed a solid performance during the first six months of current financial year with storage revenue up 22% while services business grew 43%. At the end of September 2011 the number of boxes in storage reached approximately 3 million, an increase of 31% over September 2010.

The share of services revenue of total revenues for the period increased from 50% to 55% compared to the same period last year.  Acceleration in the growth of services revenue generally occurs when clients feel more optimistic about the future.  OSG continues to maintain double digit growth rates through the conversion of so-called "unvended" opportunities into "vended" by promoting the outsourcing of document and archive management.  

For the six months to 30 September 2011, OSG reported revenues of £9.18 million compared to £6.82 million for the same period in 2010. EBITDA was £1.08 million up 17% year-on-year ("YoY") for the same period. The growth in profitability has however been impacted by a decrease in the average storage capacity utilization as OSG expanded capacity in its flagship Moscow facility in Q4 2010 for an additional 0.5 million boxes. In Russia and Poland, OSG has been able to finance the purchase of warehouse racking and vehicles through finance leases and bank loans. At 30 September 2011, the outstanding balance on its lease financing and bank loans was £4.2 million.

The valuation of the investment in OSG at 30 September 2011 resulted in an uplift of £1.9 million to £30.7 million compared to the valuation at 31 March 2011 of £28.8 million. Its valuation proxy was one of the few companies that ended the six month period to 30 September with a similar share price as at the 31 March 2011 but most of the increase in value came from growth in the business partly offset by an increase in net debt of £1.3 million. OSG's reporting currency is in Pounds Sterling, as it has businesses in a number of countries, and therefore the drop in the value of the Rouble verses Pounds Sterling did not have a direct effect on the valuation.

Unistream Bank

According to the Central Bank of Russia, the money transfer market continued to recover with outbound transfers in the six months period to 30 June 2011 up by 43.5% YoY in US Dollar terms. Russia's inbound transfers grew 33.9% in the same time period.

Based on these figures management estimates that Unistream's share of the Russia-outbound remittances market has declined from 18.7% in Q4 2010 to 16.7% in Q2 2011. Unistream's share in the Russia inbound remittances also declined from 14.3% in Q4 2010 to 10.4% in Q2 2011.  The primary reason for this drop in market share has been that Unistream is focusing on its profitability, rather than pricing to maintain its market share in what has become a very competitive market place.  We believe that because the company is profitable and has its own network of approximately 200 outlets it is in a strong position versus its competitors.  We are pleased to report that total volumes are up 16% YoY for the company for the nine months to 30 September, but more importantly volumes through its own locations are up 26% over the same period beating plan by 9%.  In our view this is a key dynamic as the company is able now to offer its customers better service due to its control over its own locations.

Unistream continued to distribute its loyalty cards and by the end of September 0.9 million customers were issued with loyalty cards (this reached 1.1 million by the end of November). The main benefit to a customer is through reduced transaction time and sms-notification services that inform the customer first when a transfer is sent and again when it is picked up by the receiver.

The company is now putting in place human resources to focus on leveraging its own network and loyalty card data to earn additional non-money transfer revenues.  We believe that in the next six months we will see some traction in this area.

Unistream continues signing up new bank agents. As of September 2011, seven of its agents had more than RUR80 million monthly outbound transfer volumes each versus just three a year ago.

Unistream's remittance volume for the nine month period to 30 September 2011 was RUR97.7 billion compared to RUR84 billion for the same period in 2010 with revenue of RUR1.7 billion up 11.6% YoY. At the same time, due to a focus on profit, its profit before tax for the nine months to 30 September 2011 was RUR71 million up from a loss of RUR 24.6 million for the same period last year.

The valuation of the 26% stake in Unistream Bank at 30 September 2011 resulted in a write down of £3.8 million to £14.9 million compared to the valuation at 31 March 2011 of £18.7 million.  9% of this change was due to the depreciation of the currency and 15% due to its valuation proxy experiencing a reduction in its trading multiples. Approximately 4% was recovered through Unistream's growth.

Flexinvest Bank

For the nine months to September 2011 Flexinvest Bank had been implementing its new retail strategy with a credit card as its main loan product financed by retail deposits. At the end of September the bank issued and tested its first cards and began sales and marketing of its card and deposits. Potential customers can apply for a credit card with a maximum limit of RUR200,000 either through the internet or through the call centre. The instant credit decision is based on the scoring model's output and a credit history check. Approved applicants need to come to the branch once to pick up their credit cards and sign the required documents.

During the months of October and November, the bank received 191 and 369 credit card applications respectively. Out of this number it approved 61 applications which correspond to an approval rate of approximately 11%. During the same period the bank issued 48 credit cards for a total of RUR8.4 million of approved overdraft limit. The average percentage rate charged varies for purchases paid with a card versus cash withdrawals and is now at 21.9% for the former and 39.9% for the latter.  The deposit-taking marketing effort brought deposits of RUR17.3 million. Flexinvest Bank pays from as low as 7% for 90-day deposits up to 10% for 1-year deposits.       

The bank has recently enhanced functionalities of its web site www.flexbank.ru allowing customers submit on-line applications and launched a new trade mark  "FLEX BANK" making its brand easier to remember and recognize.

Flexinvest's interest and fee income decreased 6% compared to the prior year period and reached £0.7 million for the nine months ended 30th September 2011. The share of interest income from its existing mortgage portfolio has decreased while fee income has grown by 38% for the same period last year. 

As of 30 September 2011, Flexinvest and Kreditmart (which we value together) had £15.5 million in net assets down from £17.6 million as of 31 March 2011. The valuation of Flexinvest and Kreditmart at 30 September 2011 resulted in a write down of £2.2 million to £16.3 million compared to the valuation at 31 March 2011 of £18.5 million. We attribute £1.1 million of this change to the depreciation of the Rouble against Pounds Sterling, £0.7 million to the cash burn in Kreditmart and Flexinvest Bank, and £0.4 million net change due to an increase in provisioning including £0.2 million provision for the exit costs related to the sale of Kreditmart.

SuperStroy

Superstroy is the largest DIY retailer in the Urals Region of Russia.

The DIY market in Russia in 2010 was estimated by Ros Business Consulting ("RBC") to be approximately US$13.9 billion up approximately 18% YoY. Same source estimates show that the market will grow 16 to 17% in 2011 in US Dollar terms. The top 10 chains have increased their market share from approximately 32.5% in 2009 to 34.1% in 2010. RBC analysts expect further consolidation in the sector in 2011 with the share of top 10 players reaching 36% by year-end. Based on turnover figures estimated by RBC, Superstroy ranks #6 among all DIY retailers operating in Russia, or #2  as far as Russian DIY retailers are concerned. The top 5 DIY retailers are Leroy Merlin, OBI, Castorama, Kesko and one Russian chain, Maxidom.

Superstroy's expansion in 2011 consisted of opening one hypermarket, which was the largest it ever opened, and one supermarket resulting in increase in its trade space by 25.5%. In addition to opening these two new stores it completely renovated three of its existing stores where it also managed to enlarge the trade space of the stores by 88% adding 3.9% to total trade space. Superstroy also moved one store to a new location increasing the trade space of that store by 57%. The company closed one small store with trade space of 0.9% of the total current trade space where a rent increase made it unprofitable. As of September 2011 Superstroy's total trade space was approximately 111,000 sqm, up 28.4% as of 2010 year-end.

For the nine months ended 30 September 2011, Superstroy's revenues have increased 31% YoY in local currency terms to RUR6.46 billion with wholesale revenues generating growth of 50% while retail sales were up 25%. Like-for-like growth September YTD reached 16%.  Opening its largest hypermarket depressed the company's gross margin in 2011, resulting in EBITDA of RUR45 million or 61% lower as compared to the same period of 2010. However, adjusting for new store preopening and renovation costs, adjusted EBITDA for the period was RUR122 million.

At 30 September 2011, the net debt of the company was RUR786 million (approximately £15.8 million).

Although Superstroy is having its best year to date growing its monthly sales by 34% YoY from March to September it has been severely affected by a large reduction in the valuations of similar businesses, used as valuation proxies; these have caused a decline of approximately 30% in the value of Superstroy.  Adding the effects of the 9% decrease in the value of the Rouble verses Pounds Sterling resulted in the business being valued 39% lower than at 31 March 2011.

The valuation of Superstroy as at 30 September 2011 resulted in a write down of £9.5 million for Aurora Russia's 24.3% stake to £15.0 million compared to the valuation at 31 March 2011 of £24.5 million.

Kreditmart

In early December we sold Kreditmart to a competitor in the market for a nominal value in order to stop its cash burn. The buyer will combine Kreditmart with its existing mortgage and consumer loan brokerage that it set up in June 2010.   The buyer will benefit from the existing partner relationships and a known brand while Aurora Russia will retain a 10% non-dilutable option in the combined business valid for 10 years with a nominal strike price.

The valuation of Aurora Russia's portfolio included a provision of £0.2 million relating to the exit of Kreditmart as indicated above.

Conclusion

The Manager is committed to exit the Company's investments and is working hard to identify the optimal avenues through which to achieve this. We have been discussing Aurora Russia's investments with strategic investors as well as with stock market participants with a view to potentially listing OSG, Superstroy and Unistream. There has been some encouraging feedback in both areas.

Regarding Flexinvest Bank, we have been making good progress with its revised strategy and will report to the market on its status regularly.

Aurora Investment Advisors Limited

December 2011

Independent Review Report to Aurora Russia Limited

We have been engaged by the Company to review the unaudited condensed set of consolidated financial statements in the half year financial report for the six months ended 30 September 2011 which comprise the unaudited condensed half year consolidated statement of comprehensive income, the unaudited condensed half year company statement of comprehensive income, the unaudited condensed half year 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 consolidated financial statements.

This report is made solely to the Company, in accordance with the terms of our engagement letter dated 25 October 2011. 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 consolidated 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 consolidated 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 consolidated financial statements in the half year financial report for the six months ended 30 September 2011 is not prepared, in all material respects, in accordance with International Accounting Standard 34.

KPMG Channel Islands Limited

PO Box 20

20 New Street

St Peter Port

Guernsey

GY1 4AN

Date: 19 December 2011

Unaudited Condensed Half Year Consolidated Statement of Comprehensive Income

For the 6 month period 1 April 2011 to 30 September 2011

			1 April 2011		1 April 2010
			to 30 September 2011		to 30 September 2010
	Notes		£'000		£'000
Revenue			10,110		7,905
-  Fees			286		372
-  Storage			4,119		3,382
-  Warehousing, transport, data processing & other			5,064		3,435
-  Interest on long term mortgages and other loans			408		503
-  Interest			137		102
-  Dividends			96		111
Administration and operating expenses	3		(12,420)		(10,115)
Fair value movements on revaluation of investments	10		(13,351)		(2,806)
Exchange losses			(523)		(979)
Operating loss from continued operations			(16,184)		(5,995)
Interest expense			(413)		(285)
Loss from operations			(16,597)		(6,280)
Income tax expense	4		(163)		(47)
Loss for the period			(16,760)		(6,327)
Other comprehensive income
Foreign currency translation differences for foreign operations			(2,140)		(651)
Total comprehensive loss for the period			(18,900)		(6,978)
Loss attributable to:
Owners of the Company			(16,739)		(6,322)
Non-controlling interest			(21)		(5)
Loss for the period			(16,760)		(6,327)
Total comprehensive loss attributable to:
Owners of the Company			(18,862)		(6,964)
Non-controlling interest			(38)		(14)
Total comprehensive loss for the period			(18,900)		(6,978)
Basic and diluted loss per share			(14.88p)		(5.62p)

All items in the above statement derive from continuing operations.

The accompanying notes on pages 17 to 28 form an integral part of these consolidated financial statements.

Unaudited Condensed Half Year Company Statement of Comprehensive Income

For the 6 month period 1 April 2011 to 30 September 2011

			1 April 2011		1 April 2010
			to 30 September 2011		to 30 September 2010
	Notes		£'000		£'000
Revenue			104		120
-  Interest			8		9
-  Dividends			96		111
Administration and operating expenses	3		(1,616)		(2,030)
Fair value movements on revaluation of investments	10		(13,600)		(4,100)
Exchange losses			(55)		(30)
Operating loss before tax			(15,167)		(6,040)
Income tax expense			-		-
Loss and total comprehensive loss for the period			(15,167)		(6,040)
Basic and diluted loss per share			(13.48p)		(5.37p)

All items in the above statement derive from continuing operations.

The accompanying notes on pages 17 to 28 form an integral part of these consolidated financial statements.

Unaudited Condensed Half Year Consolidated Statement of Financial Position

As at 30 September 2011

			30 September 2011		31 March 2011
	Notes		£'000		£'000
Non-current assets
Goodwill	5		13,274		14,164
Other intangible assets	6		9,788		10,793
Plant and equipment	7		8,992		8,782
Investments - at fair value through profit and loss	10		32,940		45,805
Loans and advances to customers	11		6,531		7,787
Deferred tax assets	4		-		236
			71,525		87,567
Current assets
Trade and other receivables			4,835		4,404
Corporate Loans			596		434
Cash and cash equivalents			4,104		6,739
Assets classified as held for sale	8		614		657
			10,149		12,234
Total assets			81,674		99,801
Non-current liabilities
Finance Leases			2,327		1,777
Deferred tax liability	4		1,548		1,792
			3,875		3,569
Current liabilities
Customer accounts and deposits			592		1,016
Tax payable			695		74
Trade and other payables	12		5,508		5,297
			6,795		6,387
Total liabilities			10,670		9,956
Total net assets			71,004		89,845
Equity
Share capital			1,125		1,125
Special reserve			84,073		84,073
Share options reserve			183		128
(Accumulated loss)/ Retained earnings			(12,724)		4,015
Non-controlling interest			639		673
Translation reserve			(2,292)		(169)
Total equity			71,004		89,845
Net asset value per share - basic and diluted			63.1p		79.9p

The accounts on pages 11 to 28 were approved by the Board of Directors on 19 December 2011 and signed on its behalf by:

John Whittle	Geoffrey Miller
Director	Director

Date: 19 December 2011

The accompanying notes on pages 17 to 28 form an integral part of these consolidated financial statements.

Unaudited Condensed Half Year Company Statement of Financial Position

As at 30 September 2011

			30 September 2011		31 March 2011
	Notes		£'000		£'000
Non-current assets
Investment in subsidiaries - at fair value through profit and loss	9		47,000		47,300
Investments - at fair value through profit and loss	10		29,900		43,200
			76,900		90,500
Current assets
Trade and other receivables			724		30
Cash and cash equivalents			1,558		3,794
			2,282		3,824
Total assets			79,182		94,324
Current liabilities
Trade and other payables	12		264		236
Total liabilities			264		236
Total net assets			78,918		94,088
Equity
Share capital			1,125		1,125
Special reserve			84,073		84,073
Share options reserve			-		-
(Accumulated loss)/ Retained earnings			(6,280)		8,890
Total equity			78,918		94,088
Net asset value per share - basic and diluted			70.1p		83.6p

The accounts on pages 11 to 28 were approved by the Board of Directors on 19 December 2011 and signed on its behalf by:

John Whittle	Geoffrey Miller
Director	Director

Date: 19 December 2011

The accompanying notes on pages 17 to 28 form an integral part of these consolidated financial statements.

Unaudited Condensed Half Year Consolidated Statement of Changes in Equity

For the 6 month period 1 April 2011 to 30 September 2011

		Share Capital	Special Reserve	Share Options Reserve	(Accumulated loss)/ Retained earnings	Translation Reserves	Total	Non- controlling Interest	Total
		£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
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 loss for the period
Loss for the period		-	-	-	(6,322)	-	(6,322)	(5)	(6,327)
Other comprehensive loss 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
For the period 1 April 2011 to 30 September 2011
Balance as at 1 April 2011		1,125	84,073	128	4,015	(169)	89,172	673	89,845
Total comprehensive loss for the period
Loss for the period		-	-	-	(16,739)	-	(16,739)	(21)	(16,760)
Other comprehensive loss for the period
Foreign currency translation loss		-	-	-	-	(2,123)	(2,123)	(17)	(2,140)
Transactions with owners, recorded directly in equity
Contributions and distributions to owners
Recognition of share-based payments		-	-	55	-	-	55	4	59
At 30 September 2011		1,125	84,073	183	(12,724)	(2,292)	70,365	639	71,004

The accompanying notes on pages 17 to 28 form an integral part of these consolidated financial statements.

Unaudited Condensed Half Year Consolidated Statement of Cash Flows

For the 6 month period 1 April 2011 to 30 September 2011

			1 April 2011		1 April 2010
	Notes		to 30 September 2011		to 30 September 2010
Cash flows from operating activities			£'000		£'000
Loss before tax			(16,597)		(6,280)
Interest on long term mortgages and other loans			(408)		(503)
Interest income			(137)		(102)
Dividend income			(96)		(111)
			(17,238)		(6,996)
Adjustments for movements in working capital:
(Increase)/ decrease in operating trade and other receivables			(566)		122
Decrease in operating trade and other payables			(432)		(1,048)
Adjust for:
Revaluation of investments	10		13,351		2,806
Recognised share-based payments			59		332
Exchange losses			427		897
Interest expense			413		285
Loss on property, plant and equipment written off			197		4
Depreciation and amortisation			960		835
Provision for loan losses			(4)		(315)
Reserve for aged recievables			69		(56)
Interest paid			(13)		(22)
Taxation rebate/ (paid)			8		(23)
Dividends received			96		111
Bank and loan interest received			539		610
Loans advanced to customers			958		455
Net cash outflow from operating activities			(1,176)		(2,003)
Cash flows from investing activities
(Acquisition)/ disposal of Bonds			(744)		36
Acquisition of plant and equipment			(204)		(686)
Proceeds on sale of assets classified as held for sale	8		43		-
Increase in deposits			188		29
Net cash outflow from investing activities			(717)		(621)
Cash flows from financing activities
Movement on intercompany short term loans			183		-
Financial lease payments - principal			(507)		(431)
Financial lease payments - interest			(398)		(272)
Net cash outflow from financing activities			(722)		(703)
Net decrease in cash and cash equivalents			(2,615)		(3,327)
Opening cash and cash equivalents			6,739		13,242
Effect of exchange rate changes			(20)		(170)
Closing cash and cash equivalents			4,104		9,745

The accompanying notes on pages 17 to 28 form an integral part of these consolidated financial statements.

Notes to the Unaudited Condensed Half Year Consolidated Financial Statements

For the 6 month period 1 April 2011 to 30 September 2011

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 condensed half year 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 per Alternative Investment Market of the London Stock Exchange ('AIM').

The condensed half year 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 annual report and financial statements for the year ended 31 March 2011.

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 2010, 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 2011.

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 2011. 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 27 Separate Financial Statements (Revised) - for accounting periods commencing on or after 1 January 2013

As a consequence of the new IFRS 10 and IFRS 12, what remains in IAS 27 is limited to accounting for subsidiaries, jointly controlled entities and associates in separate financial statements. These amendments are as a result of improvements to the Standards and are not expected to have a significant impact on the Company's or Group's financial statements.

● IAS 28 Investments in Associates and Joint Ventures (Revised) - for accounting periods commencing on or after 1 January 2013

As a consequence of IFRS 11 and IFRS 12 (see below), IAS 28 has been renamed IAS 28 Investments in Associates and Joint Ventures, and describes the application of the equity method to investments in joint ventures in addition to associates. These amendments are as a result of improvements to the Standards and are not expected to have a significant impact on the Company's or Group's financial statements.

● IFRS 7 Financial Instruments - for accounting periods commencing on or after 1 July 2011

The amendment requires additional disclosure about financial assets that have been transferred but not derecognised to enable the user of the Company's financial statements to understand the relationship with those assets that have not been derecognised and their associated liabilities. In addition, the amendment requires disclosures about continuing involvement in derecognised assets to enable the user to evaluate the nature of, and risks associated with, the entity's continuing involvement in those derecognised assets. The amendment affects disclosure only and has no impact on the Company's or Group's financial position or performance.

● IFRS 9 Financial Instruments: Clarification and Measurement - 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.

● IFRS 10 Consolidated Financial Statements - for accounting periods commencing on or after 1 January 2013

The objective of IFRS 10 is to establish principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities. It replaces the consolidation requirements in SIC-12 Consolidation-Special Purpose Entities and IAS 27 Consolidated and Separate Financial Statements and is effective for annual periods beginning on or after 1 January 2013. IFRS 10 builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company. The standard provides additional guidance to assist in the determination of control where this is difficult to assess. The Company is currently in the process of evaluating the effect of this standard.

● IFRS 11 Joint arrangements - for accounting periods commencing on or after 1 January 2013

The core principle of IFRS 11 is that a party to a joint arrangement determines the type of joint arrangement in which it is involved by assessing its rights and obligations and accounts for those rights and obligations in accordance with that type of joint arrangement. IFRS 11 Joint Arrangements provides for a more realistic reflection of joint arrangements by focusing on the rights and obligations of the arrangement, rather than its legal form (as is currently the case). The standard addresses inconsistencies in the reporting of joint arrangements by requiring a single method to account for interests in jointly controlled entities. The Company is currently in the process of evaluating the effect of this standard and it is not expected to have a significant impact.

● IFRS 12 Disclosure of interest in other entities - for accounting periods commencing on or after 1 January 2013

IFRS 12, Disclosure of Interests in Other Entities, applies to entities that have an interest in a subsidiary, a joint arrangement, an associate or an unconsolidated structured entity. The objective of IFRS 12 is to mandate disclosures such that users of financial statements can evaluate the nature of, and risks associated with, an entity's interests in other entities, and the effects of those interests on its financial position, financial performance, and cash flows. To meet those goals, an entity is required to disclose the significant judgments and assumptions it has made in determining the nature of its interest in another entity or arrangement, and in determining the type of joint arrangement in which it has an interest. It is also expected to provide detailed information about its interests in any subsidiaries, joint arrangements, associates or unconsolidated structured entities that is not required by other IFRSs but is required to meet these goals. The Company is currently in the process of evaluating the effect of this standard and it is not expected to have a significant impact.

● IFRS 13 Fair value measurement - for accounting periods commencing on or after 1 January 2013

IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance of how to measure fair value under IFRS when fair value is required or permitted. The Company is currently in the process of evaluating the effect of this standard and it is not expected to have a significant impact.

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 Company and presentation currency of the consolidated financial statements. Unrealised gains and losses arising from the translation of investments are taken directly to other comprehensive income.

The Group has taken advantage of the exemption available to it under IAS 28, 'Investments in associates' and is accounting for the investments in Unistream and Grindelia at fair value through profit or loss, which normally as a result of the size of the equity interest 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 2011.

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.

A deferred tax asset is recognised to the extent that is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

		1 April 2011 to 30 September 2011	1 April 2010 to 30 September 2010
		£'000	£'000
3.	Administration and operating expenses
	Company
	Investment management fee	886	990
	Auditors' remuneration *	226	317
	Directors' remuneration	94	87
	Share-based payments	-	300
	Other operating and administrative expenses
	- Administration fees	35	37
	- Professional fees	204	171
	- Marketing Costs	52	53
	- Other	119	75
		1,616	2,030
	Kreditmart
	Directors' remuneration	-	39
	Other operating and administrative expenses
	- Professional fees	6	7
	- Marketing costs	108	155
	- Personnel	408	697
	- Premises	72	178
	- Depreciation	3	103
	- Credit losses and LLP	(8)	(405)
	- Other	272	74
		861	848
	Flexinvest
	Auditors' remuneration	11	26
	Directors' remuneration	73	73
	Other operating and administrative expenses
	- Professional fees	42	8
	- Marketing costs	4	14
	- Personnel	406	261
	- Premises	112	90
	- Depreciation	35	33
	- Credit losses and LLP	4	85
	- Other	164	105
		851	695
	OSGRME
	Directors' remuneration	258	170
	Share-based payments	59	32
	Other operating and administrative expenses
	- Professional fees	-	124
	- Marketing Costs	116	107
	- Personnel	3,435	2,623
	- Operating lease expense	2,122	1,645
	- Depreciation	921	699
	- Other	2,181	1,142
		9,092	6,542
	Total for the Group	12,420	10,115

* Following the acquisition of OSG the Board of the Company have decided to meet the Group audit costs of its subsidiaries.

4.         Tax

	1 April 2011 to 30 September 2011	1 April 2010 to 30 September 2010
Group
Kreditmart
Current tax charge	(12)	(54)
	(12)	(54)
Flexinvest
Current tax credit/ (charge)	4	(3)
Deferred tax (charge)/ credit	(223)	54
	(219)	51
OSGRME
Current tax (charge)	(64)	(28)
Deferred tax credit/ (charge)	132	(16)
	68	(44)
Net tax credit/ (charge) to the statement of comprehensive income	(163)	(47)

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% (2010: 20%) arising on its activities in Russia.

The Group is liable to pay tax at a rate of 10% (2010: 10%) arising on its activities in Cyprus.

The Group is liable to pay tax at a rate of 19% (2010: 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 2011		30 September 2011	30 September 2011	31 March 2011
Deferred tax asset/(liability) comprises:	£'000		£'000	£'000	£'000
	Assets		Liabilities	Net	Net
				-
Investments	7		-	7	-
Loans to customers	5		-	5	9
Other assets	57		-	57	45
Other liabilities	15		-	15	7
Tax loss carry-forwards	(84)		-	(84)	175
	-		-	-	236

OSG Records Management (Europe) Limited	30 September 2011		30 September 2011	30 September 2011	31 March 2011
Deferred tax liability comprises:	£'000		£'000	£'000	£'000
	Assets		Liabilities	Net	Net
Finance leases	-		(208)	(208)	(300)
Intangibles	-		(1,340)	(1,340)	(1,492)
	-		(1,548)	(1,548)	(1,792)
Group deferred tax asset				-	236
Group deferred tax liability				(1,548)	(1,792)

5.         Goodwill

Group	30 September 2011	31 March 2011
	£'000	£'000
Opening balance	14,164	14,164
		-
Effect of movements in foreign exchange rate	(890)	-
Closing balance	13,274	14,164

No impairment of goodwill on acquisition of OSGRME was necessary at 30 September 2011 based on the increase in the valuation of OSGRME.

In accordance with the valuation at 31 March 2011 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 2011.

6.         Intangible assets

	30 September 2011	31 March 2011
	£'000	£'000
Cost:
Opening balance	10,793	11,078
Currency revaluation Flexinvest Bank	(234)	284
Currency revaluation Intagibles OSG	(482)	-
Amortisation of intangibles	(289)	(569)
Closing balance	9,788	10,793

Reconciliation of intangibles
	Banking	Internally	OSGRME	Customer	Customer
	licence	generated	Trademark	base - large	base - small	Total
		software
	£'000	£'000	£'000	£'000	£'000	£'000
Cost:
At 1 April 2011	2,760	146	598	7,258	600	11,362
Exchange movements	(234)	(7)	(38)	(406)	(31)	(716)
At 30 September 2011	2,526	139	560	6,852	569	10,646
Amortisation:
At 1 April 2011	-	(15)	-	(492)	(62)	(569)
			-
Charge for the period	-	(8)	-	(250)	(31)	(289)
At 30 September 2011	-	(23)	-	(742)	(93)	(858)
Carrying amount:
At 30 September 2011	2,526	116	560	6,110	476	9,788
Carrying amount:
At 31 March 2011	2,760	131	598	6,766	538	10,793

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 2011	1,207		7,274	1,876	10,357
Additions	299		1,115	465	1,879
Disposals	-		(2)	(540)	(542)
Exchange movements	(95)		(610)	(94)	(799)
At 30 September 2011	1,411		7,777	1,707	10,895
Accumulated depreciation:
At 1 April 2011	(247)		(646)	(682)	(1,575)
Charge for the period	(140)		(341)	(189)	(670)
Disposals	-		-	342	342
At 30 September 2011	(387)		(987)	(529)	(1,903)
Net book value:
At 1 April 2011	960		6,628	1,194	8,782
At 30 September 2011	1,024		6,790	1,178	8,992

The useful lives of the assets are estimated as follows:
Vehicles:
Trucks (included under vehicles)	7 years
Cars (included under vehicles)	5 years
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 2011	31 March 2011
Group	£'000	£'000
At beginning of period	657	845
Additions	-	43
Disposals	(43)	(231)
At end of period	614	657

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 2011	31 March 2011
	£'000	£'000
OSG Records Management (Europe) Limited
At beginning of period	28,800	28,100
Fair value revaluation	1,900	700
At end of period*	30,700	28,800
Kreditmart
At beginning of period	12,049	15,749
Fair value revaluation *	(2,200)	(3,700)
At end of period*	9,849	12,049
Flexinvest Limited
Opening and closing balance	6,451	6,451
	47,000	47,300

* The revaluation performed on Kreditmart includes the value of Flexinvest Limited as at 30 September 2011, 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 2011 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.

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 Approach ie adjusted net assets approach was used). 21%, by value at period end, of the portfolio was valued using adjusted net assets approach (31 March 2011: 20%) with the remaining 79% (31 March 2011: 80%) 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 2011:  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 at	Principal activity
			30 September 2011
OSG Records Management (Europe) Limited	Cyprus	Ordinary	94.0%	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
Flexinvest Bank Limited**	Russia	Ordinary	100.0%	Banking and finance

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

** Flexinvest Bank 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

	30September  2011	30September 2011	31 March 2011	31 March 2011
	£'000	£'000	£'000	£'000
	Group	Company	Group	Company
Unistream Bank	14,900	14,900	18,700	18,700
Grindelia Holdings	15,000	15,000	24,500	24,500
Quoted investments	3,040	-	2,605	-
Total investments at fair value through profit and loss	32,940	29,900	45,805	43,200

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

	1 April 2011 to 30 September 2011	1 April 2011  to 30 September 2011	1 April 2010  to 30 September 2010	1 April 2010 to 30 September 2010
	£'000	£'000	£'000	£'000
	Group	Company	Group	Company
OSG Records Management (Europe) Limited (see note 9)	-	1,900	-	600
Unistream Bank	(3,800)	(3,800)	(2,600)	(2,600)
Grindelia Holdings	(9,500)	(9,500)	(200)	(200)
Quoted investments	(51)	-	(6)	-
Kreditmart and Flexinvest (see note 9)	-	(2,200)	-	(1,900)
Total unrealised (losses)/ gains	(13,351)	(13,600)	(2,806)	(4,100)

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%. In the first quarter of 2011, the option pool was increased by a further 938 shares, which reduced the Company's overall holding in OSGRME to approximately 94.04%.

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 2011 was estimated at £ 14.9 million (31 March 2011: £ 18.7 million), and £ 15 million (31 March 2011: £ 24.5 million) respectively. Independent valuations are performed by Deloitte on an annual basis.

11.        Loans and advances to customers

	Group
	30September 2011	31March 2011
	£'000	£'000
Residential mortgages	6,531	7,787
Reconciliation of impairment loss allowance on loans to customers:
Balance at beginning of the year/period	670	938
Movement in allowance for loan losses	(38)	(268)
	632	670

There are currently 75 private loans (mortgages). The Mortgages are secured over borrowers' private residences, are repayable in equal monthly installments and have an average maturity of 25.5 years. Interest is charged at fixed rates, at an average interest rate of 11.84%.

There are currently 55 consumer loans, repayable monthly by equal instalments which have an average maturity period of  0.5 years. Interest is charged at an average rate of 30.43%.

12.        Trade and other payables

	30September 2011	30September 2011	31March   2011	31March   2011
	£'000	£'000	£'000	£'000
	Group	Company	Group	Company
Vat & Social Tax payable	-	-	253	-
Expense accruals and sundry	3,854	264	3,422	236
Income Received in Advance	1,654	-	1,622	-
	5,508	264	5,297	236

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 ("Flexinvest Bank") 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 ("Flexinvest Bank") 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 consultaions 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 Flexinvest Bank 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 2011 to 30 September 2011	1 April 2011 to 30 September 2011	1 April 2011 to 30 September 2011	1 April 2011 to 30 September 2011	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
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
	Aurora	Kreditmart/		Total	Aurora	Kreditmart/	OSGRME	Total
		Flexinvest/Flexinvest Bank	OSGRME			Flexinvest/Flexinvest Bank
Revenue	104	847	9,159	10,110	120	964	6,821	7,905
-  Fees	-	286	-	286	-	372	-	372
-  Storage	-	-	4,119	4,119	-	-	3,382	3,382
-  Warehousing, data processing, transport & other	-	-	5,064	5,064	-	-	3,435	3,435
-  Interest on long term mortgages and other loans	-	408	-	408	-	503	-	503
-  Loan Interest	-	30	(30)	-	-	-	-	-
-  Bank interest	8	123	6	137	9	89	4	102
-  Dividend income	96	-	-	96	111	-	-	111
Administration and operating expenses	(1,616)	(1,674)	(8,171)	(11,461)	(2,030)	(1,406)	(5,843)	(9,279)
- Depreciation and amortisation	-	(38)	(921)	(959)	-	(137)	(699)	(836)
- Interest expense	-	(15)	(398)	(413)	-	(13)	(272)	(285)
Fair value movements on revaluation of investments	(13,600)	(51)	-	(13,651)	(4,100)	(6)	-	(4,106)
-  Kreditmart/Flexinvest/Flexinvest Bank	(2,200)	-	-	(2,200)	(1,900)	-	-	(1,900)
-  Whitebrooks (OSG)	1,900	-	-	1,900	600	-	-	600
-  Unistream	(3,800)	-	-	(3,800)	(2,600)	-	-	(2,600)
-  Grindelia (SuperStroy)	(9,500)	-	-	(9,500)	(200)	-	-	(200)
-  Quoted investments	-	(51)	-	(51)	-	(6)	-	(6)
Exchange losses	(55)	(373)	(95)	(523)	(30)	(865)	(84)	(979)
Loss from discontinued operations	-	-	-	-
Operating profit/(loss) before tax	(15,167)	(1,304)	(426)	(16,897)	(6,040)	(1,463)	(77)	(7,580)
Tax	-	(231)	68	(163)	-	(3)	(44)	(47)
Net segment loss	(15,167)	(1,535)	(358)	(17,060)	(6,040)	(1,466)	(121)	(7,627)

Reconciliation of segment loss to consolidated statement of comprehensive income	1 April 2011 to 30 September 2011	1 April 2010 to 30 September 2010
	£'000	£'000
Total net segment loss	(17,060)	(7,627)
Adjustment for fair value movements on
Kreditmart/Flexinvest/Flexinvest Bank and OSGRME	300	1,300
Net loss for the period for the Group	(16,760)	(6,327)

	30 September 2011	30 September 2011	30 September 2011	30 September 2011	31 March 2011	31 March 2011	31 March 2011	31 March 2011
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
	Aurora	Kreditmart/ Flexinvest/ Flexinvest Bank	OSGRME	Total	Aurora	Kreditmart/ Flexinvest/ Flexinvest Bank	OSGRME	Total
Total segments assets include:
Investments in subsidiaries	47,000	-	-	47,000	47,300	-	-	47,300
Financial assets at fair value through profit or loss	29,900	3,040	-	32,940	43,200	2,605	-	45,805
-  Unistream	14,900	-	-	14,900	18,700	-	-	18,700
-  Grindelia (SuperStroy)	15,000	-	-	15,000	24,500	-	-	24,500
-  Quoted investments	-	3,040	-	3,040	-	2,605	-	2,605
Cash and cash equivalents	1,558	2,190	356	4,104	3,794	2,718	227	6,739
Intangible assets	-	2,526	20,536	23,062	-	2,760	22,198	24,958
Property, plant and equipment	-	308	8,684	8,992	-	418	8,364	8,782
Assets classified as held for sale	-	614	-	614	-	657	-	657
Loans and advances to customers	-	6,531	-	6,531	-	7,787	-	7,787
Other assets	724	1,186	3,521	5,431	30	1,430	3,613	5,073
Segment assets	79,182	16,395	33,097	128,674	94,324	18,375	34,402	147,101
Total segment liabilities	(264)	(891)	(8,175)	(9,330)	(236)	(760)	(7,469)	(8,465)

Reconciliation of segment assets and liabilities to consolidated statement of financial position	30 September 2011	31 March  2011
	£'000	£'000
Segment assets for reportable segments	128,674	147,101
Investment in subsidiaries	(47,000)	(47,300)
Total assets for the Group	81,674	99,801
Segment liabilities for reportable segments	(9,330)	(8,465)
Deferred taxation adjustment on acquisition of OSGRME	(1,340)	(1,491)
Total liabilities for the Group	(10,670)	(9,956)

14.        Related party transactions

The Company has 3 subsidiaries, OSG Records Management (Europe) Limited, Kreditmart Finance Limited and Flexinvest 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 £ 885,840 (6 month period ended 30 September 2010: £ 989,860). There were no outstanding fees at the period/year end. On 18 November 2011, the Company made an advance payment of £450,000 in relation to management fees for the 6 month period ending 30 September 2012.

Mr G Miller holds 100,000 ordinary shares, Mr G Chalk holds 50,000 ordinary shares and Mr T Slesinger 14,310,977 ordinary shares in the Company. Mr G Cameron is a Director of Investec Global Managed Fund, which holds 750,000 shares in the Company and Advocate B Morgan is a partner at Carey Olsen, which provides legal services to the Company.

15.        Contingencies and capital commitments

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

16.        Events after the reporting date

The Company sold OOO Kreditmart, a wholly owned subsidiary of Kreditmart Finance Limited, recently to Lespender Limited, which currently operates a mortgage and consumer loan brokerage for a nominal consideration. The Company also entered into an option agreement to acquire of 10% of the purchasing company for £200 ($330) to be used anytime over a 10 year period from closing. The option is non-dilutable. After completion of the sale, Kreditmart Finance Limited will be able to release funds of £2.5m that were being held in the Kreditmart structure, for future expansion.

There were no further material post balance events to report.

 

END

 

 

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