Heads of Terms Announcement

Equest Investments Balkans Ltd
26 February 2008



26 February 2008

                         EQUEST INVESTMENTS BALKANS LTD
                            ('EIB' or the 'Company')

        Signing of Heads of Terms with Equest Capital Management Limited

Introduction

Equest Investments  Balkans Ltd today announces the signing of non-binding Heads
of Terms (the 'Heads of Terms')  with,  inter alia,  Equest  Capital  Management
Limited ('ECML' or the 'Investment Manager'),  its investment manager,  relating
to proposed changes to the structure of the management of the Company.

Under the Proposals,  EIB is to be transformed  from an externally  managed fund
structure to an internally  managed  holding  company  structure.  The Proposals
include  internalising the key management team within the Investment  Manager as
the executive  management of the Company and acquiring the Investment  Manager's
operating platform for EIB in London, Sofia,  Bucharest and Belgrade. The annual
management fee of 2.5% per annum currently payable by EIB to ECML will terminate
and be replaced  by new  compensation  arrangements  and  restricted  equity and
warrants under a new four year service agreement.  EIB will also establish a new
long-term  incentive  plan ('LTIP') in relation to performance of the management
with effect from 1 January 2008.

Background

On 13  December  2007,  the board of  directors  (the  'Board')  of the  Company
announced  that it was  evaluating  a  number  of  strategic  options  including
changing the structure of the Company from an externally managed fund to more of
an internally managed holding company structure,  whilst retaining the Company's
Investment Manager as the operative management of the Company.

Following  consultations  with a  number  of  key  shareholders  representing  a
majority of the Company's  shares,  and with the Company's  advisers,  the Board
entered into discussions  with the Investment  Manager in order to seek to align
more closely the interests of shareholders and the Investment Manager. The Board
believes that the  internalisation  of the management of the Company will ensure
the most effective means by which the Company  manages its existing  investments
and the delivery of shareholder value.

The  Proposals  are expected to benefit the  strategic  development  of EIB. The
Company is seeking to continue its growth across the South East European  region
as an active and  concentrated  holding company owning,  managing and developing
its principal holdings in retail (including TechnomarketDomo),  waste management
& infrastructure  (including Novera) and select property developments (including
the Borovets resort development). Furthermore the Proposals and other associated
changes  outlined  below are  expected to improve the  Company's  access to debt
finance and lead to improved analyst coverage of the Company.

The Proposals

The Board believes the benefits of the Proposals include:
          
     •    Key  management of the Investment  Manager (being Kari Haataja,  Petri
          Karjalainen  and Georgi Krumov) will become  executives of the Company
          and commit to devote  substantially  all of their time to the  Company
          with service  contracts for an initial term of four years renewable on
          an  annual  basis,  thereafter.  It is  expected  that some of the key
          managers will join the board of the Company in an executive capacity;

     •    Acquisition of the EIB management team,  operating platform and rights
          of use for the Equest brand name in the South East European region;

     •    EIB's annual  management fee (currently  Euros 5.76 million per annum)
          will be  terminated  with effect from 1 January 2008 and replaced with
          service agreements and a technical support  agreement,  which will, it
          is expected, provide cost savings of approximately 50 per cent. of the
          current annual management fee to the shareholders of EIB;

     •    Additional cost savings to shareholders over time from the termination
          of contracts with other third party service providers  associated with
          a fund structure including administrators and custodians; and

     •    Key management of the Investment Manager agreeing not to raise any new
          external  funds to be managed by the Key  Management  team, but with a
          carve out for  continuing  with their  existing  obligations to Equest
          Balkan Properties PLC and for other non-competing businesses.

In return for terminating the existing management  arrangements,  the Investment
Manager  will receive  shares in the Company  representing  5% of the  Company's
issued share capital, (on a fully diluted basis) and will be granted warrants to
purchase,  for nil consideration,  shares  representing  approximately 3% of the
Company's  issued share capital,  on a fully diluted basis. Any shares issued to
the  Investment  Manager  as part of the  Proposals  will be  subject to lock in
arrangements  and  exercise of the  warrants  will be subject to the  conditions
outlined in the Appendix to this announcement.

The  Proposals  are  subject  to the  negotiation  of  detailed  agreements  and
implementation  will be  subject  to the  approval  of  shareholders  in general
meeting, which, is expected to be held in April 2008.

Further  details of the Heads of Terms in connection  with the Proposals are set
out in the Appendix to this announcement.

Listings

At present  the  ordinary  shares of the  Company  are listed for trading on the
Irish Stock Exchange and on the AIM market of the London Stock Exchange.  Should
the Proposals be  implemented,  the Irish Stock  Exchange has confirmed that the
structure of the Company following implementation would be such that the Company
will no longer comply with the rules relating to the Investment Funds section of
the Irish Stock Exchange Listing  requirements.  Accordingly,  implementation of
the Proposals will be conditional  upon de-listing of the Company's  shares from
the Irish Stock Exchange.

In addition,  as  previously  discussed,  the Board will pursue a listing of the
Company's shares on the regulated stock exchanges of Sofia and/or Bucharest. All
of the investments of the Company are concentrated in this region and, since its
launch in 2004, the Company and the Investment Manager have enjoyed strong brand
recognition  in the region.  The Board may bring  forward  proposals  to approve
these listings at the same time that approval is sought for the Proposals.

The planned IPO of  TechnomarketDomo  is currently  expected to be undertaken in
the second quarter of 2008, on the Sofia and/or Bucharest Stock Exchanges, which
will further increase the profile of the Company within the region.

Commenting on these strategic  developments,  John Carrington,  chairman of EIB,
said:

'The Proposals will provide EIB with direct access to the significant investment
resources,  expertise and brand value of Equest within South Eastern Europe. The
transition  represents a  significant  step in the  transformation  of EIB to an
internally  managed active  investment group focused on leveraging the potential
of South Eastern Europe across several key sectors'.

For further information please contact:

Equest Partners Limited            Petri Karjalainen      + 44 20 7240 7600
                                   Naomi Kora

Collins Stewart Europe Limited     Hugh Field             + 44 20 7523 8350

Financial Dynamics                 Ed Gascoigne-Pees      + 44 20 7831 3113
                                   Nick Henderson


                                    APPENDIX

                          SUMMARY OF THE HEADS OF TERMS

The Heads of Terms, which are not legally binding, provide that the Company
shall undertake the following actions for  the purpose of implementing the
Proposals:
     
1.   EIB shall enter into a service  agreement  (the  'Service  Contract')  with
     Equest Capital Limited ('ECL'),  the parent company of ECML, for an initial
     term of fours years,  renewable on an annual basis thereafter.  The Service
     Contract will contain provisions whereby ECL shall procure the provision of
     the  services of Petri  Karjalainen,  Kari  Haataja and Georgi  Krumov (the
     'Executives') and other senior managers to EIB. The Executives shall devote
     substantially  all of their  professional  time and  attention  (whether as
     managers or  directors  of Company) to the affairs of the Company and shall
     be  subject  to   customary   restrictive   covenants.   The   compensation
     arrangements  under the Service Contract shall be in line with remuneration
     arrangements that are customary for senior executives  operating  similarly
     situated  companies.  In  addition,  during a transition  period,  ECL will
     provide 'back office'  logistics  necessary for EIB's day to day operations
     under a technical services agreement (the 'Technical  Services  Agreement')
     for an annual fee representing  ECL's actual cost of providing the services
     without any profit to ECL.

     It is  expected  that  the  Service  Contract  and the  Technical  Services
     Agreement will cost no more than 50 per cent. of the annual  management fee
     currently payable to ECML.

2.   The  Company  shall put into  place a new long term  share  incentive  plan
     ('LTIP')  that will  entitle  the  Executives  to be awarded  shares in the
     Company.  Such  LTIP is  expected  to  offer  participation  on  comparable
     economics to the existing  performance  arrangements  with ECML i.e. 20% of
     excess  performance  over a hurdle  rate.  The LTIP  will  incentivise  the
     Executives  based on a balance  of NAV  growth  and long term  share  price
     performance over the closing  NAV/share price on 31 December 2007. The LTIP
     will be structured to provide  transparent  alignment of interests  between
     the Executives and the Company's shareholders. Shares issued under the LTIP
     will be issued within 90 days of the end of each annual  performance period
     and shall be subject to lock-up arrangements.

3.   In the light of the  proposed  changes,  EIB shall  terminate  the existing
     investment   management   agreement  between  ECML  and  the  Company  (the
     'Investment Management Agreement') in consideration for the issue by EIB to
     ECL of:

     •    941,540 ordinary shares of no par value  representing 5% of the issued
          share  capital of EIB on a fully  diluted  basis  (the  'Consideration
          Shares'); and

     •    warrants  entitling  ECL to  purchase  for nil  consideration  564,925
          ordinary  shares of no par value  representing  3% of the issued share
          capital of EIB on a current fully diluted basis (the 'Warrants').  The
          Warrants will be exercisable at any time after the expiry of 12 months
          from 1 January 2008 on the  condition  that the last  reported NAV for
          EIB immediately prior to the exercise of the Warrants is not less than
          the  reported NAV as at 31 December  2007 (for the  avoidance of doubt
          excluding the Consideration Shares).

4.   In addition, the current investment advisory agreement between the Company,
     the Investment Manager and Equest Partners Limited will also be terminated.

5.   Lock-up arrangements will be put into place in respect of the Consideration
     Shares  and the  Warrants  to reflect  ECL's  long-term  commitment  to the
     success of EIB.

                                      --oo--



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