Final Results

18th Mar 2008 07:01

Raven Mount plc18 March 2008 18 March 2008 RAVEN MOUNT PLC ("Raven Mount" or the "Company") PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2007 Highlights • Group loss before tax was £4.8 million (2006: profit £0.2 million) on turnover of £68.6 million (2006: £71.8 million). • Property Fund Management business earns fees as at 31 December 2007 on US$1,342 million (30 June 2007: US$969 million) committed funds by Raven Russia Limited and generated a management fee during the year of £8.3 million (2006: £2.9 million excludes £2.0 million performance fee). • Audley, our Independent Living business commenced development on four sites comprising 408 units, first completion due in 2008. • £31.9 million net debt as at 31 December 2007 and unutilised facilities of approximately £21.7 million. • Final dividend of 1.4p per Ordinary share, an increase of 40% (2006: 1.0p). • Pension Scheme after tax surplus of £3.6 million (2006: deficit £0.8 million). • Adjusted shareholders' funds per share of 74.7p (2006: 75.0p). • All remaining Swan Hill units sold. Commenting on the results, Anton Bilton, Executive Chairman, said: "As we expected, the economic world started to change during 2007 and I am verypleased in the strategic decisions we made three years ago which have usstrongly positioned in new, exciting, growing markets and exiting the troubledmainstream UK residential and commercial property scene." Bim Sandhu, Chief Executive, said: "We continue to devote significant resources to our Property Fund Managementbusiness and now employ over 60 people (excluding Raven Mount directors)directly in helping Raven Russia achieve its significant aims. From a pureproperty perspective we are delighted by the enormous strides that we are makingin helping to create a world class new-build logistics portfolio from scratch insuch a short space of time. " Enquiries to: Raven Mount plc 020 7235 0422 Anton Bilton, Executive Chairman Bim Sandhu, Chief Executive Mark Kirkland, Finance Director Shore Capital & Corporate Limited 020 7408 4090 Guy Peters Notes for Editors Raven Mount is an AIM quoted company whose principal areas of operation are property fund management, property development and the development and operation of Independent Living facilities. Raven Mount was founded in November 2003 by Anton Bilton (Executive Chairman), Bim Sandhu (Chief Executive) and Glyn Hirsch (Executive Deputy Chairman) and took control of Swan Hill Group PLC, the housebuilder, in December 2003 in a hostile takeover supported by Swan Hill's four largest shareholders. In December 2004, shareholders approved the reversal of Anton Bilton and Bim Sandhu's private residential development group, Raven Property Holdings plc, for a total consideration of up to £39.9 million payable in Raven Mount shares and began a strategic reinvention of the business. In July 2005, Raven Mount subscribed £10 million towards the £153 million flotation of Raven Russia Limited ('Raven Russia') on AIM. Raven Russia was formed at Raven Mount's instigation as a vehicle for institutional shareholders to invest in the Russian property market with an initial focus on the Warehouse property market in the Moscow and St Petersburg regions. Raven Mount's wholly owned subsidiary, Raven Russia Property Management Limited, acts as the property adviser to Raven Russia. In April 2006, Raven Russia raised a further £310 million through the placing of 270 million shares at £1.15 per share. Raven Mount is actively involved in the development and management of Independent Living facilities for the elderly through its Audley brand in which it has a 75% interest with the remaining 25% being owned by the management team. Audley has commenced development on four separate schemes, representing a total of 408 individual units, at St. Elphins (Matlock, 127 units), Mote House (Maidstone, 87 units), Inglewood (Berkshire, 96 units), and Ilkley (Yorkshire, 98 units). Audley owns and manages existing facilities at Willicombe Park (Tunbridge Wells, 67 units), Flete House (Devon, 30 units) and manages Hollins Hall (Harrogate, 171 units), totalling 168 units under management. In addition, Raven Mount continues to investigate suitable resort/second home opportunities, both in the UK and internationally. Raven Mount has outline planning consent, in a joint venture with John Hitchcox and Yoo Limited, comprising a hotel and 160 second homes in 650 acres at Coln in the Cotswolds, of which it currently has detailed consent for 52 units. The principal shareholders of Raven Mount are Anton Bilton and Bim Sandhu, whose combined interests currently equate to 43.8% of the issued share capital. Other major shareholders are Schroder Investment Management (12.3%), Silchester International Investors (6.8%), Deutsche Bank AG London (5.6%) and Laxey (3.4%). www.theravengroup.co.ukwww.audleylife.co.ukwww.thelakesbyyoo.comwww.ravenrussia.com Chairman's Statement 2007 was our final year of "cleaning out". The remnants of the Swan Hillbusiness have gone and we can now turn the corner focusing on the new growingbusinesses that we have created. As we expected, the economic world started to change during 2007 and I am verypleased with the strategic decisions we made three years ago which have usstrongly positioned in new, exciting, growing markets and exiting the troubledmainstream UK residential and commercial property scene. In addition, we have a strong balance sheet for these new businesses to utilise. Our Independent Living business, Audley Court, now has 408 units underconstruction and 260 in planning. Initial interest in these schemes has beenencouraging as the UK remains very under served for the high quality productthat we are creating. At the same time our market is growing strongly as thedemographic improves with increasing longevity. Our fund management business goes from strength to strength and we have built anexcellent team in Russia which now comprises over 60 professionals. I would goas far as to say that I believe we have the best internationally skilled andmulti-disciplined property team available in the country. The substantialinvestment we have made in assembling this team has ensured the success of RavenRussia ($118 million pre-tax profit for the year to 31 December 2007) and givesus an extraordinarily well placed platform for further expansion in Russia. Raven Russia has grown its development portfolio substantially to over 20million square feet of warehouses with an end value well in excess of $2bn andthe logistics market in which it operates is demonstrating strong rental growthand yield compression. Our management fee income is currently running at an annualised rate of £13.5million which is starting to repay our efforts and investment of the last 4years. Our second-home joint venture, The Lakes, in the Cotswolds has been very wellreceived and we have secured 30 reservations from our soft launch. We expectfurther exciting news once the formal advertising campaign begins after Easter. Generally, I am delighted that we had the foresight to see the fizziness of theUK market three years ago and the strength of conviction to turn away from ourtraditional businesses and to adapt to the necessary changes to implement a newstrategy with new businesses in exciting areas with real prospects for continuedgrowth. This has been hard work and I'd like to thank everyone in the Group fortheir efforts in embracing these challenges and making them happen. We are now very well positioned for the future with established businesses inexciting growth areas and a strong balance sheet. The job in hand is to grow these saplings into strong, valuable and sturdytrees. Anton J G Bilton Executive Chairman 18 March 2008 Chief Executive's Report Results for the year ended 31 December 2007 We generated a loss before tax for the year of £4.8 million for the year ended31 December 2007 (2006: £0.2 million profit). Turnover for the year decreasedslightly from £71.8 million to £68.6 million, although, as in prior periods,comparisons of turnover and relationship to profit are not directly relevant asthe Company continues to evolve new business areas whilst there is a decline inthe traditional house building business. The relative movement in profitability is largely accounted for by the fall inour gross operating margin on the sale of our mainstream residential property,increased overheads and holding costs in our Independent Living business (offsetby profits in the Property Fund Management business) and the fact that lastyears results were flattered by the sale of strategic land which yielded aprofit of £ 3.4 million. Despite the after tax loss for the year of £2.2 million, Net Assets increased by£1.7 million from £80.3 million at the year end to £82.0 million largely as aresult of the net actuarial post tax gain of £3.2 million in relation to the IAS19 pension fund surplus. It is important for shareholders to recognise that NetAssets do not incorporate the majority of the uplift in value of the four Audleysites we have acquired (as inventories are stated at cost), the majority of theuplift on The Lakes second homes development and most importantly the value ofour Property Fund Management division. We moved from net cash of £8.8 million to net debt of £31.9 million as wecontinued to invest heavily in the Independent Living business and in completinga number of residential sites. Our current gearing level remains at arelatively conservative 39 per cent. Operating Review Our Company's three principal areas of focus continue to be Property FundManagement, the Development and Operation of Independent Living facilities andResidential Development. Property Fund Management Our Company generated total fees of £8.3 million (2006: £2.9 million excludingthe £2.0 million performance fee) producing an operating profit of £2.9 million(2006: a loss of £ 1.8 million excluding the performance fee). As at the yearend Raven Mount was earning its core property advisory fee of 2% on US$1,342million (2006: US$465 million) of gross assets purchased or committed to bepurchased by Raven Russia. We expect this figure to increase significantly overthe next two years as Raven Russia builds out its development portfolio andcompleted investment property is revalued to reflect market levels. We continue to devote significant resources to this and now employ over 60people (excluding Raven Mount directors) directly in helping Raven Russiaachieve its significant aims. From a pure property perspective we are delightedby the enormous strides that we are making in helping to create a world classnew-build logistics portfolio from scratch in such a short space of time. It istherefore particularly disappointing that the Raven Russia share price has beenunfairly tarnished by, amongst other things, general sentiment against propertystocks and by investor perception of political risk caused by the intermittentwar of words between the West and Russia. This not only impacts the value ofour shareholding in Raven Russia but also means that we have not received aperformance fee (since this is based on total shareholder return i.e. shareprice movement and dividends paid) for the year ended 31 December 2007 which ourproperty efforts have merited. These efforts are however reflected to some extent in Raven Russia's results forthe corresponding year end to ours. The reason why I say 'to some extent' isthat neither the Raven Russia balance sheet nor the income statement reflect theuplifts in value of the substantial development sites we have helped RavenRussia acquire as these are valued at cost until they are complete and ready foroccupation. Nor indeed do the accounts reflect the value of the pipeline ofdeals. Mark Kirkland has included some key financial information on Raven Russia in hisFinance Director's report and we have also included, as a separate extract, ourProperty Adviser's Report to the shareholders of Raven Russia. Nevertheless, Iwould strongly encourage shareholders to view the full financial statements formore details on the progress that we and Raven Russia are making(www.ravenrussia.co.uk). Whilst a significant number of people still continue to be suspicious ofundertaking business in Russia, we believe that the business environment is notas frightening as those who are unfamiliar with it would choose to believe andis getting progressively better. We are also lucky (although the use of thatword does no justice to Anton and Glyn's considerable efforts in identifyingthem) with the quality of the local joint venture partners with whom we areworking to help Raven Russia develop its portfolio. As with all partners thereare always issues to be resolved but as Samuel Johnson said 'Marriage has manypains but celibacy has no pleasure'. We could not have achieved what we havewithout them. The political situation is stable given the recent election of Dmitry Medvedevas President from May. More and more international businesses are recognisingthe strong macro economic factors which are the drivers of the Russian economyand the need to have a presence in the market. We have quoted a number of factsand statistics in past reports and I would like to add to those courtesy of arecent article by Liam Halligan of The Sunday Telegraph: • In 2007, the Russian economy grew by 8.1% having grown an average 7% per annum since 1998; • Russia's reserves have increased from nothing in 1998 to $480 billion today, the third largest in the world; • Russia is now almost debt free with a budget surplus of 6% of GDP and a trade surplus almost twice as much again; • Three years ago Russia overtook Saudi Arabia to become the world's largest oil exporter; • Retail sales are growing at 13% per annum in real terms; • Construction is growing by 16% per annum; domestic investment by 20% per annum; • Russia is now the 9th largest economy in the world and rising fast. All these factors bode well for the logistics business in which we are helpingRaven Russia to invest and for our long term involvement in this economy. Independent Living - Raven Audley Court plc (operating as Audley) We are still at the early stages of development of this business and the currentyear has been a period of consolidation with the normal "teething" problems of anew business rather than one of spectacular progress. Work in progress increased from £12.1 million to £38.2 million which has beenfunded to date by specific external banking facilities drawn down of £14.0million and the balance from internal Raven Mount Group resources. No saleswere made during the year as we had no completed properties. During the year wepurchased Willicombe Park, Tunbridge Wells from Nick Sanderson, CEO of Audley,and his former business partner which was funded by another £4.0 million of bankdebt. As at 31 December 2007 we have four owned development sites comprising 408 unitsin various stages of construction, own one mature business comprising 67 unitsand are managing two sites comprising 101 units. We have 3 sites potentiallycomprising approximately 260 units which we have under contract on a subject toplanning basis. The exchange on a subject to planning basis on a further sitecomprising 67 units has been delayed by the vendor due to difficulties withobtaining vacant possession. Behind this there are a number of potential dealsin the pipeline. The market for land purchases in the first half of last yearwas extremely difficult because of the overheated property market, particularlyin this sector. The market slowed in the second half of the year as vendors'expectations of prices were slow to match the deteriorating market. However, Ibelieve vendors will become more realistic as every passing month confirms thatthe credit issue is not a temporary one. Counter balancing this to some extentis the increasing number of players coming into this market competing for sites. The construction industry overheated throughout 2007 not helped by the boomingprices in raw materials and it is only now, as residential developers arereporting a reduction in future development activity, that we would hope priceswill stabilise. We have had to make considerable efforts in trying to controlcontractors costs and this, combined with the longer time taken to put in placeconstruction finance, has resulted in delays on the delivery of units. We nowexpect the first delivery of units on St Elphins and Mote Park in the thirdquarter of this year and Inglewood and Ilkley in the first half of next year.Audley is therefore not likely to be operationally profitable until next year.A lot will be dependent on sales activity. The slowdown in general housing activity, upon which I comment below, will havean impact on sales to the extent that some of our residents will need to selltheir properties prior to completing the purchase of our units. However, we arelikely to suffer less than the normal residential vendor. This is partlybecause our buyers are typically selling family homes (rather than flats) forwhich there is generally an undersupply of stock and great demand. Secondly, ourpotential residents tend to have significant equity in their houses and are 'downsizing' to cheaper property. They are themselves less sensitive to theprices achieved for their own units and less reliant on the mortgage market,which facilitates transactions. Thirdly, we are, as with all developers, oneend of a housing chain. Finally, some of our purchasers are forced to move on a'needs' basis and may, for example, have the potential to gear up on theirexisting house to release equity to purchase one of our units. Having saidthat, we must remain realistic and recognise that the speed of sales may beaffected and we will endeavour to come up with ideas which help potentialresidents facilitate the move to our units. Nevertheless we remain confident of this sector, the dynamics driving it and theability to deliver long term returns. Residential Development There is no doubt in my mind that we are currently experiencing the worstconditions in the mainstream residential property market in the UK since theearly Nineties. A significant reason for this is the increasingly tighterlending practices of the UK banking institutions towards both end purchasers anddevelopers. A lack of liquidity provision by the banks has a huge impact on thelevel of transactions in the mainstream residential market and this was bestdemonstrated by the latest statistic from the Bank of England which showed thatthere had been a 40 per cent. fall in the mortgages approved for new buyers inJanuary 2008 compared to January 2007. Tighter lending criteria in particularhave an impact on the first time buyer market and the buy to let markets whichare perhaps the key components of the housing food chain. Shareholders will note that we have taken a very negative stance on the UKHousebuilding sector over the past few years and as a result of that we have notpurchased any new pure residential property sites other than those acquiredthrough the acquisition of Raven Property Holdings (RPH) three years ago and wecontinue to maintain this stance. All housing stock from the Swan Hill subsidiary has been disposed during theyear, including the sale of all the units at the last remaining site in Swindon.This was quicker than I forecast in the last annual report and this was as adirect result of a large number of investor sales at discounts to asking priceswhich nevertheless were within the provisions that we had made. Shareholderswill be aware that Swan Hill acted as a main contractor on most of its sites,including the Swindon site, and therefore legacy issues will remain to be dealtwith over the next few years but we believe that we have made appropriateprovisions in respect of likely issues. With respect to mainstream residential sites acquired as part of the RPHpurchase we are left with one construction completed site, three sites which arecurrently under construction and one large site where we have been reluctant tocommence construction. During the year we completed the construction of our 247-unit New EnglandQuarter, Brighton Station development. As at the year end 27 units remained tobe sold of which 12 have been sold since the year end, 1 exchanged, 1 reservedand 13 remaining to be sold. Under the terms of our JV agreement with Barratt Iexpect the year end stock value of £1.5 million to be converted into cash beforethe year end. Sales interest has slowed considerably on the three sites that are currentlyunder construction as the days of selling a substantial number of properties offplan have diminished; this tends to happen when prices are perceived to befalling! We are expecting construction completion at our 54-unit Lewes scheme(www.theprintworkslewes.co.uk) by the half year. Of the 40 private units we arecurrently exchanged on 24 units (£8.1 million by value) and have a further unit(£0.3 million) under offer. The remaining 15 units are valued at £4.1 million atcurrent asking prices. We have also exchanged on the 14 social housing unitswhich will release an additional £0.5 million of cash. There is a limitedsupply of housing stock in the Lewes market and this should assist sales of ourremaining units. The 51-unit residential and 9,000 sq ft commercial Brackley scheme(www.collegeplacebrackley.co.uk) is expected to be construction complete withinthe next year. All the commercial space is currently under offer and if theseoffers conclude this will yield an approximate rental income of £0.1 million anda capital value of approximately £1.5 million. We have undertaken limitedmarketing of the residential units which are valued at £10.6 million at currentasking prices but expect this to pick up as we near completion. As noted abovethere is currently a limited demand for purchasing units off plan and we havetaken the decision to focus the marketing budget on this site to nearer theexpected date of practical completion. This is a JV with the SouthNorthamptonshire Council and some of our risk on this site is mitigated by thevariable site price payable to the council. We also expect the 149 unit residential, 12,000 sq ft commercial Sheffield Phase1 scheme (www.kelhamriverside.com) to be construction completed within the nextyear. We have currently exchanged on 50 units valued at £6.6 million, have 12units valued at £1.7 million under offer with 87 units valued at £13.8 millionremaining to be sold. Of the commercial space we have 2,300 sq ft under offer ata rent of £21,850. We remain cautious on residential sales rates on this siteuntil the site is nearer completion. The only site on which we have not commenced development on is the 339-unitSheffield Phase II site on which we received vacant possession in January 2008.We do not currently intend to start construction on this site and we will marketthis site with a view to disposing of the site if a reasonable price can beobtained in the market. We have written down the value of this site by £2.6million in the year end figures to reflect our negative outlook on the UKhousing market. We continue to hold a strategic land bank of owned sites and sites under optionwhich can be acquired at varying percentages of their market value. Thesestrategic sites are carried at £0.9 million in our balance sheet but we wouldhope that with a fair wind and a lot of patience these could be worth severaltimes that figure over the medium to long term without comparatively too muchadditional expenditure. Whist we have no current intention to develop thesesites should they gain planning consents we will review the situation nearer thetime. We also have one second homes scheme, The Lakes joint venture with Yoo, at ColnPark, Lechlade in the Cotswolds (www.thelakesbyyoo.com), on which we currentlyhave outline planning permission for 160 second homes, of which 52 currentlyhave detailed consent, and a hotel. We are pleased with the buyer response thatwe have received given the limited marketing that we have done to date. We haveexchanged on 15 of these units at an average price of £900,000 and have afurther 15 under offer at an average price of over £1 million. Cash and Liquidity Whatever happened to all that liquidity? It seems to have been disappearingsince last summer even quicker than Gordon Brown's ratings or non-domiciles. Liquidity, both in terms of access to capital and the number of transactionsbeing undertaken, is the life blood of the property industry. The banking heartthat circulates that liquidity is suffering from recurring, but to date, minorheart attacks and is having to be resuscitated each time by the US Fed and/orvarious Sovereign Funds. If the banks are scared of dealing with each other(you just have to look at Libor rates over the last eight months) just think howmuch more nervous they are of lending to their clients! With few exceptions, the general approach of the banks in the property sectorhas been to reduce access to debt, make it more expensive and more restrictiveand where liquidity is made available to focus lending on quality clients. Thisresponse is to be expected as the banks seek to rebuild their own balance sheetsbut what it inevitably means is that business life has become much tougher and,in my opinion, will continue to do so for the foreseeable future. This willinevitably have a huge impact on returns on equity on those industries andsectors that are capital intensive. It is worth considering the impact of this on our main areas of operation. The level of gearing is particularly important to our fund management businessas we receive our property advisory fees based on the level of Raven Russia'sgross assets and not net assets. There is no doubt that the credit crunch hasreduced the appetite of Western banks to lend in their 'secondary' markets andto syndicate. Having said that, an increasing number of Western banks areentering the Russian banking market (e.g. Barclays announcement of a few weeksago of the purchase of Expobank) realising the potential of a Russian marketshowing average GDP growth of 7% per annum since 1998, although many of themhave yet to transact anything substantial. They are attracted by margins onlending which yield them substantially greater profits than in more matureeconomies. When they do decide to lend, Raven Russia will inevitably be nearthe top of the queue as it is seen to be a quality client with a strong balancesheet. An indication of this is the recent announcement by Raven Russia that ithad secured refinancing on four of its properties at a weighted average cost ofdebt of 6.6% in US Dollars with the yield to cost on the properties of 13% andgearing of 82.5% on cost. Although margins on lending have widened this hasbeen more than offset by the fall in US Libor. We therefore take the view that,to the extent that it is available, credit will continue to be available forRaven Russia prior to most of its competitors to enable it to fulfil itsbusiness plan although it will take more time to implement as the banks willremain cautious in their approach, particularly in the syndication market. Whatis more likely to limit the growth of Raven Russia in the short term is theability to raise additional equity when the shares are trading at a substantialdiscount to NAV. It is therefore likely that once Raven Russia's funds arefully invested Raven Mount will seek to leverage the extensive and costlyplatform that we have established in this area by seeking joint ventures withmajor third party investors who are seeking exposure to the Russian propertymarket and more generally other former CIS countries. The banks are also very much attracted by the Independent Living sector becauseof the expected growth supported by strong demographic trends and the huge underprovision in this sector (one major Investment Bank who have made a hugeinvestment in this sector in Australia and New Zealand recently informed me thatwe were 15-20 years behind them). Once again they are keen to lend and onceagain they see our Audley business as a quality client. Nevertheless, they havebeen much quicker to change their recommended terms, make them more onerous andtake much longer in providing debt. There is no doubt that this has slowed usdown more than we would have liked and has meant that we will have to devotemore equity to the business than we would wish. We have therefore taken theview that given the more restrictive gearing available, the size of theopportunity in this sector and the need to maintain momentum we will considerseeking a financial joint venture partner for this business. The biggest impact of the credit crisis and the general malaise in the housingmarket has been in our approach to the development of a potential internationalsecond home niche area within Residential Development. In general, we havetaken the approach to retrench and to focus on one major site in the Caribbean,which we are hoping to buy subject to planning (and is still in the early stagesof master planning). Our other activities are currently funded out of equity and a group leveloverdraft. We are fortunate that our gearing is relatively low and our fundmanagement cash flow is strong and getting stronger but whenever I try to takesolace from that I am reminded of that old adage that in these sort ofcircumstances if you owe the banks a lot of money they are the ones who have aproblem but if you owe the banks a small amount of money you are the one withthe problem! For those who have been following the US Presidential election process, let'shope the liquidity markets make a John McCain style comeback! Swan Hill Pension Scheme Under International Accounting Standard 19 the 2006 scheme deficit of £1.1million on a pre-tax basis had become a 'surplus' of £5.0 million. The mainfactors behind this are detailed in the Finance Director's report. Sounds gooddoesn't it? Unfortunately, I do not think we are standing on firm footings as the accountingfor pension schemes is like standing on shifting sand and hoping, nay praying,you are not about to be sucked into quick sand. The UK Accounting StandardsBoard ('ASB') has recently proposed changes which makes me think that we areabout to be. The ASB is proposing two major changes which will have afundamental impact on the accounting of schemes. Firstly, they are proposingthat the present value of future liabilities should be discounted using the 'risk-free rate', which basically means that the rate should be based on therelatively low returns on government bonds, rather than double A-rated bonds,and would therefore make liabilities significantly bigger. I do not agree withthis when the underlying assets are in fact invested in a range of investmentswhich carry varying rates of return and risk - it only makes sense to me ifschemes were forced to invest in such 'risk-free' assets. We can all guess whatis coming next! Such accounting does not change the actual pension liabilityitself, which is the actual amount which will be paid to pensioners over thenext seventy odd years, merely the recording of it today. Secondly, the ASB isproposing removing the current provisions which allow for averaging of thediscount rate which means that there will be bigger swings in pension schemevalues. Pension liabilities are long term liabilities payable over severaldecades and should not be subject to the vagaries of such adjustments. Further pressure is being applied by the pensions regulator increasinglydictating to schemes the minimum longevity assumptions to be used in actuarialvaluations; a highly relevant issue to us as the next actuarial valuation is dueas at 5 April 2008. Recent draft guidance from the regulator indicates that itwould take a closer look at scheme funding plans which use assumed mortalityimprovements less prudent than the PA92 Long Cohort assumptions, which currentlywould be almost all of them! The PA92 Long Cohort assumptions would add around4 years to the life expectancy of our Scheme's membership compared to the PMA92/PFA92 standard tables used in the 2005 actuarial valuation. Each additionalyear of life expectancy adds about 5% to pension liabilities. The net result of all these changes will be to increase pension scheme fundingand lead to increased volatility in reporting earnings and net asset values.This will only add further pressure on those schemes which have not alreadyclosed to new members to do so and for those that have, such as ours, to payinsurance companies to take them over. That is the position we as a Companyfind ourselves in. In my 2005 Chief Executive's Report, I indicated that wewould await developments in the 'insurance industry which may come up withproducts whereby the risk and volatility can be passed on to third parties withstronger balance sheets than ours'. The time is with us as a number of players(Aegon, Norwich Union, Paternoster, Pension Insurance Corporation, Synesis Lifeetc) have entered the UK defined benefit pension buy-out market in competitionto the more established incumbents Legal & General and the Prudential. This hasmade the market significantly more competitive and we, along with most othercompanies in a similar position, are considering our options accordingly. In the meantime, it is worth emphasising again that our Independent Livingbusiness provides some 'hedge' against the residual pension fund risk that wecarry because, for example, the very demographic trends that work against us onthe pension fund also work for us in the Independent Living business. But, andit's a big but, that comment only applies in the long run. Acquisition of Raven Property Holdings plc ('RPH') Shareholders will be aware that the Company purchased RPH in December 2004 for atotal consideration of up to £39.9 million, all payable in shares depending uponthe value of assets it acquired (as and when they received detailed planningpermission) providing that such permission was received within the period to 31December 2007. During the year the Company issued 3,919,323 shares at anaverage price of 142p representing £5.6 million by value, being the balance ofthe maximum consideration. Essentially, this means that any residual valuegenerated by those assets is for the benefit of all Raven Mount shareholdersunder the terms of the Acquisition Agreement. Overall, the consideration of £39.9 million has been paid for by the issue of49,140,984 shares at an average price of approximately 81p, which coincidentallyis the share price of the Company as I write the first draft of my Report. £7.5million of the consideration of £39.9 million was goodwill which was effectivelywritten off on consolidation on the acquisition of RPH. This goodwill has morethan been repaid in the setting up of our fund management business (never mindthe goodwill on Audley) whose value is not reflected in the net assets of theCompany. I thought it would be useful to provide a broad reconciliation of the Net Assetswe acquired on the takeover of Swan Hill in December 2003 versus the Net Assetsas at 31 December 2007 as this has been raised by a number of shareholders: £'m Net Assets as at 31 December 2003(including £2 million capital introduced by RM) 72.5Consideration paid for RPH 39.9Subtotal 112.4 Goodwill on RPH written off on acquisition (7.5)Losses in the period 2004-2007 (8.6)Dividends paid (including 2006 5p Special) (10.4)Payments to Pension Scheme (8.9)Pension fund asset net of deferred tax 3.9Other movements 1.1Net Assets as at 31 December 2007 82.0 Of course, we now have 2 businesses which have a substantial goodwill valuewhich is not reflected in the year end Net Asset position. I should also notethat Net Assets includes £2.7 million of losses attributable to MinorityShareholders and therefore Shareholders Funds are actually £84.7 million, whichis higher than the Net Assets shown above. Dividends The Directors continue to adopt a progressive dividend policy reflecting ourfaith in the Company's business models. The Directors therefore propose to paya Final Dividend of 1.4 pence per ordinary share, making the total dividend paidin respect of the year to 31 December 2007, 2.2 pence per ordinary share, anincrease of 37.5% compared to the Ordinary dividend relating to the year ending31 December 2006 of 1.6 pence (excluding the 5.0 pence Special Dividend). Thiswill be payable to shareholders whose name appears on the Register of Members asat 18 April 2008 and payable on 16 May 2008. Prospects We live in uncertain and volatile economic times in an increasingly inter-linkedworld which makes any forecasting hazardous. I have talked about the wonderfulprospects of our two new business areas in recent reports and whilst the currentbusiness environment might delay the realisation of these prospects I continueto believe that we will be able to deliver in terms of hard numbers before ourself imposed 5 year 're-invention' period which commenced at the end of December2004. The movement in our share price over the last year has been very disappointing,even for those of us that do not attach much value to it in the short term, butit has to be put in the context of a general malaise in the market - we alsohave been tarnished more specifically with the commercial property brush, thehousebuilding brush, the Russian brush, the AIM brush and probably Basil Brushwhen the share price fell to 70 pence! There is some small comfort to be gainedfrom a recent edition of the Investors Chronicle which included us in their listof the 6 most under valued stocks out of the 3,000 they looked at. As always I should like to conclude by thanking my fellow Directors, our staff,our advisers and our partners for their guidance, efforts and perseveranceduring the year. Bim Sandhu Chief Executive 18 March 2008 Finance Director's Report Overview of results The Group generated a loss on ordinary activities before taxation of £4.8million (2006: profit £0.2 million) for the year to 31 December 2007, based onturnover of £68.6 million (2006: £71.8 million). Accounting policies The Group's financial statements have been prepared in accordance with theInternational Financial Reporting Standards (IFRS). The table in note 2 showsthe transition from UK GAAP to IFRS. This is the first accounting period that the Group has been required to prepareaccounts under IFRS. The impact of this change, in terms of the figures, hasbeen primarily in respect of deferred taxation where full recognition ofdeferred tax assets and liabilities is required under International AccountingStandard 12: Income Taxes. The effect on the Group has been to recognise adeferred tax liability in respect of the fair value uplift of inventoriesarising from the deferred consideration payable in connection with the RPHacquisition. In addition, a liability has been recognised on the fair valueuplift on the Raven Russia Limited shares and an asset has been recognised as aresult of writing off the sales and marketing costs, as a tax deduction willonly be obtained for these when expensed under UK GAAP. In addition, the Group has fair valued its shares and warrants in Raven RussiaLimited and Oriel Securities Limited. Pension fund Under IAS 19 "Employment Benefits', the surplus in respect of the final salarypension scheme as at 31 December 2007 was £5.0 million (2006: deficit £1.1million). The total market value of the pension scheme assets as at 31 December2007 was £67.2 million and the present value of its liabilities was £62.2million. The main factors have been contributions during the year of £1.8 millionincluding £0.2 million towards administrative expenses and the actuarial gain of£3.2 million principally comprising actual returns for the year on the schemeassets in excess of expected returns and changes in assumptions underlying thepresent value of the scheme liabilities. There is a net credit to the profit and loss account of £1.2 millionrepresenting the difference between the expected return on the scheme assets andinterest liabilities. Capital structure/deferred shares A total of 3,919,323 Ordinary shares were issued during the year. In respect ofthe RPH acquisition, 2,744,021 and 1,175,302 Ordinary shares were issued inApril and December 2007 respectively. No further consideration is payable inrespect of RPH acquisition. As at 31 December 2007, the Company had 112,021,317 Ordinary shares in issue. Group bank facilities The Group has unsecured committed bank facilities totalling £40.0 million,subject to fulfilling certain criteria, of which £18.3 million was drawn down atthe year end. These facilities are due for renewal in August 2008. Systems and controls The growth of our Property Fund Management activities has lead to a significantoperation in Russia. We have ensured that sufficient processes and controls arein place to monitor these activities and in particular the relationship withRaven Russia Limited. The agreement of fees due between the two companies isgoverned by our Property Advisory Agreement and is subject to independentassessment and verification by Walbrook Fund Managers Limited, Administrator andSecretary to Raven Russia Limited. Financial Review Income Statement Revenues During 2007, the Group had revenue of £68.6 million (2006: £71.8 million). Revenues from Residential development amounted to £60.8 million (2006: £66.8million) of which £Nil million (2006: £3.8 million) related to land sales. Themain contributors to revenue during the year being Brighton, £33.8 million andParamount (Swindon), £21.3 million, neither of which, however, contribute to netprofits. In respect of our Property Fund Management activities, the Groupreceived management fee income of £8.5 million (2006: £2.9 million, excludingthe £2.0 million performance fee). Independent Living is an early stagebusiness and is not anticipating having new stock available to sell until laterin 2008. As at 31 December 2007, the Group was earning management fees based on US$1,342million of funds committed by Raven Russia Limited. Administrative expenses Administrative expenses have increased significantly during 2007 to £16.1million (2006: £12.9 million) as both our Property Fund Management andIndependent Living activities continue to grow. Direct costs relating to theold Swan Hill business have been significantly reduced in line with the winddown of those remaining assets and where appropriate, incorporated into otherGroup activities. Finance income Dividend income of £0.7 million was received in respect of our Raven RussiaLimited and Oriel Securities Limited shares. Taxation There is no UK corporation tax liability for 2007 due to the availability oflosses within the Group. The main element of the tax credit of £2.7 million is in recognition of a £2.0million asset in respect of unutilised losses. Dividends In 2007, shareholders received dividend payments totalling 1.8 pence perOrdinary share (2006: 6.35 pence). It should be noted that last year's figureincluded a 5.0 pence per Ordinary share Special Dividend. It is proposed to pay a final 2007 dividend of 1.4 pence per Ordinary share(2006: 1.0 pence). Loss per share Basic loss per Ordinary share was 2.0 pence (2006: loss 1.1 pence) based on theloss after tax of £2.2 million (2006: £1.2 million) and on 110.1 million (2006:106.9 million) Ordinary shares being the weighted average number of Ordinaryshares in issue during the year. Balance sheet Non current assets During the year the Group purchased the share capital of Audley Court WillicombePark Limited and the trade and assets of Audley Court Estates for a totalconsideration of £4.1 million. Inventories Total inventories as at the year end were £83.6 million (2006: £65.1 million). During the year the Group sold out of all its remaining Swan Hill developments,hence a fall in inventories of £11.5 million in relation to these developments. Prior year provisions of £3.6 million were released during the year followingsales completion at the Paramount (Swindon) development. As at the year end there is a provision on the Clifton project in respect of anongoing dispute with the contractor, which was made as part of the Interimfigures. The Group has taken a provision of £2.6 million against the Sheffield IIproject. The Group continues to assess its options with regard to thisdevelopment and has taken this provision in light of current market conditions. Inventories in relation to RPH totalled £38.5 million (2006: £40.5 million), themajor items being Brighton (£1.5 million), Sheffield I and II (£21.2 million)and Lewes (£9.2 million). Inventories in respect of Audley at the year end totalled £44.5 million (2006:£12.1 million). The Group has not reflected significant uplifts in value following independentvaluations, notably on Coln and the Audley sites, other than Mote. Available for sale investments As at the year end, the Group held 12.4 million Raven Russia Limited shares, ata cost of £12.9 million. Based on a year end Raven Russia Limited share priceof 89.75 pence per share, the market value of these shares totals £11.2 million(2006: £12.3 million). In addition, the value of the 7.65 million warrants overRaven Russia Limited shares as at 31 December 2007 was calculated using theBlack-Scholes model as £0.4 million, a reduction of £0.7 million from the prioryear as a result of the fall in Raven Russia Limited share price. The Group continued to hold its minority stake in Oriel Securities Limited("Oriel"), an independent stockbroking and advisory business at cost. Since webought our stake the business has performed well and become more established andrespected. For the year ended 31 December 2007, it made a pre tax profit (postbonuses) of £5.0 million and had cash at bank at the year end of £9.6 million. Although market conditions are not ideal for an imminent exit, Oriel's strongmarket position makes it an attractive company within the sector and we willcontinue to monitor our options. Cash and bank Net debt as at the year end was £31.9 million (2006: cash £8.8 million). Shareholders' funds Shareholders' funds at the year end increased to £82.0 million (2006: £80.2million). The principal movements were the dividends paid of £2.0 million andthe actuarial gains of £2.3 million on the pension scheme. The table belowillustrates our view of the proforma shareholders' funds of the Group. 2007 2006 £m £mProforma shareholders' fundsShareholders' funds 82.0 80.2RPH acquisition deferred consideration add-back - 5.6Cash receivable from exercise of Share Options 5.1 6.5Minority interest removed under IAS 27 2.7 1.3Proforma shareholders' funds 89.8 93.6 Diluted Ordinary shares (see note 9) 120.8m 124.9mProforma shareholders' funds per diluted Ordinary share 74.3p 75.0p The above table does not reflect the excess over book value of certain stockitems. Shareholder return The share price decreased from 161.0 pence to 83.25 pence per Ordinary shareover the year, a decrease of 48 per cent., and taking into account receivingtotal dividends of 1.8 pence during the year, this giving a total shareholderreturn of -47.2 per cent. Raven Russia Limited In 2005 Raven Russia Limited (Raven Russia) was floated on AIM. At flotationthe Group purchased £10.0 million of shares in the company and entered into a 5year property advisory agreement to provide property advisory, management anddevelopment monitoring services to Raven Russia. In 2006, the agreement wasextended to 31 December 2015 The Group will receive an annual fee of 2 per cent. of gross assets inconsideration for its services. In addition, the Group is entitled to aperformance fee which is calculated by reference to excess returns achieved bythe shareholders of Raven Russia. Fees to the Group would range from 20 percent. to 35 per cent. based on shareholder returns in excess of 12 per cent. to25 per cent. per annum. In the year to 31 December 2007 the Group receivedmanagement fees of £8,305,375. As at the year end, the Group has a balance of£2,834,333 due in management fees which has been received post year end. Raven Russia Property Management Limited, a subsidiary of the Company, has beengranted the right to subscribe for 7,650,000 Ordinary shares in Raven Russia atthe placing price of 100 pence per share, exercisable until 25 July 2010. Raven Russia has granted various options to Raven Mount Employee Benefit Trust,to acquire up to 7.5 per cent. of the issued ordinary share capital of RavenRussia, on behalf of Raven Mount employees, including Directors in three equaltranches at an exercise price of the Placing Price in respect of the firsttranche and the average closing mid-market price for the 20 trading dayspreceding the first and second anniversaries of Admission for the second andthird tranches respectively. The options are performance related andexercisable between 3 and 12 years from the date of grant. Options areexercisable if compound shareholder returns exceed 12 per cent. per annum overthe respective 3 year vesting periods; no options are exercisable if compoundreturns do not exceed 9 per cent. per annum over the vesting period. The following represents the highlights of the results of Raven Russia Limitedfor the year ended 31 December 2007, for information to Raven Mountshareholders. • Pre tax profit of $118 million (2006: $37 million) including revaluation gains of $80 million (2006: $7 million) • EPS - basic 11.20p (22.36 cents) (2006: 4.80p (9.65 cents)) • EPS - diluted 11.18p (22.32 cents) (2006: 4.79p (9.62 cents)) • Final dividend proposed of 4p (2006: 2p) giving total dividends for the year of 6.5p (2006: 4p) an increase of 55.6% • Adjusted NAV per share of 115p ($2.30) (2006: 107p ($2.14) after dividends, an increase of 7.5% • Fully let properties comprising 221,800 sq m generating $34.7 million annualised net income at an ungeared yield on cost of 13% • Investment properties valued at $346 million, a 34% increase on cost • Four investment properties refinanced, generating $179 million at a weighted cost of debt to the Group of 6.6% and gearing levels of 83% loan to cost and 64% loan to value • Significant tenant demand resulting in rental levels well above expectation • Development projects underway with potential to produce 2.2 million sq m for all phases • Board intends to move from AIM to the Official List Mark Kirkland Finance Director 18 March 2008 The following is the Property Advisors Report for the year ended 31 December2007 given to Raven Russia Limited shareholders, for the information of RavenMount shareholders. "Property Review In the twelve months ending 31 December 2007 Raven Russia signed four property acquisitions excluding Megalogix. The total end value of these projects once built and let is circa $344 million. In total since inception the Company has committed to projects with a potential end value of over $2.3 billion. Our focus is now on building out the development portfolio and leasing it to high quality tenants. Investment Portfolio The Company owns three multi let warehouse and office buildings in Moscow (Southern, Baltia and Krekshino) and the Constanta office building in St Petersburg which are all fully let and producing a yield on cost on an ungeared basis of13%. The first phase of Istra has also been completed and is fully let. Our annualised rent roll at the year end stoodat $34.7 million. Contracted rents on all of the Company's properties total $64.4 million per annum, represented by $34.7 million from theinvestment portfolio and $29.7 million per annum due under pre lettings, excluding Megalogix. A further $8.8 million per annum is currently under negotiation where letters of intent ('LOI') have been signed with prospective tenants on the development portfolio. The weighted average unexpired lease term on the investment portfolio is 6.5 years although we anticipate this will riseas prelets on mainly 10 year leases complete. The majority of the leases allow for the annual increase in rents based on US CPI providing attractive incremental cashflows. In total these properties comprise 221,800 square metres (2.39 million square feet) of Gross Lettable Area ('GLA') and produce an annual income of approximately $34.7 million on an investment of $260.3 million. The investment properties were valued at the period end by Jones Land Lasalle (JLL) in accordance with the RICS Valuation and Appraisal guidelines. The valuations show an uplift of $80 million from 31 December 2006 (or completion if later), reflecting positive yield compression from the date of acquisition. The Company continues to hold its development stock at cost until each building is complete and ready for occupation. We believe this approach, whilst more cautious than some other Russian developers, is appropriate given the risks of development. However we are confident of creating substantial valuation uplifts for investors from the development portfolio. The rent payable on the investment portfolio is $34.7 million compared to a market level of $37.0 million, as estimated by JLL. Not only does this give us a very stable and reliable income stream, it also means the portfolio has a reversionary potential of $2.3 million. Property SQ M Type Invested Total Annual Project Raven To Date Investment Rent Status Russia ($M)* ($M)* ($M) Share# InvestmentBaltia, Moscow 28,000 Warehouse 29.1 29.1 3.5 Fully let 100%Southern, Moscow 14,000 Warehouse 15.6 15.6 2.1 Fully let 100%Krekshino, Moscow 114,000 Warehouse 106 115 13.6 Fully let 100%Istra Phase 1 50,000 Warehouse 36.7 43.6 6.5 Fully let 100%Constanta, 15,800 Office 57 57 9.0 Fully let 100%St Petersburg Development Next Phase Completed Shushari, St Petersburg 143,000 Warehouse 94 126 16.4 Q1 2008 100%Pulkovo 1 St Petersburg 34,800 Warehouse 2.6 40 4.8 Q3 2008 100%Pulkovo 2 St Petersburg 67,000 Warehouse 5.6 65 8.5 Q2 2009 100%Noginsk, Moscow 275,000 Warehouse 9.5 278 33.4 Q4 2008 100%Istra, Moscow 156,000 Warehouse 47.7 158 18.6 Q4 2008 100%Rostov on Don 230,000 Warehouse 12.9 211 27.8 Q4 2008 50%EG Logistics, Moscow 55,000 Warehouse 14 56 6.7 Q3 2008 100%Klimovsk 108,044 Warehouse 24.8 112 13.2 Q4 2008 100%Novosibirsk 116 820 Warehouse 18.4 101 13.2 Q4 2008 50%Kalinovka 117,963 Warehouse 9.2 95 12.8 Q3 2009 100%Total 1,532,427 483.1 1,502.3 190.1 * Total Investment is net of VAT and before Raven Russia profit share and mezzanine interest on development properties. # Raven Russia share on completion of the development. In addition to the above properties where investment has commenced, the Group has committed to projects with a potentialarea of 900,000 square meters and an end value of $800 million, anticipating a yield on cost of over 13% after profit share and interest. In total therefore we are creating a portfolio of over $2.3 billion at yield on cost of 14%. Development Portfolio The Company has continued to progress building out its development portfolio. Each of these development projects involves the construction of multi let warehouse and office buildings. Except for Megalogix, the Company has structuredthese as forward funded projects with local development partners, combined with an investment commitment on completion. In total we are now on site building 1.5 million square meters as shown in the table above. Of this approximately 650,000 square meters is due for delivery in 2008 and the balance in 2009/2010 is subject to tenant demand. All our projects are being constructed to Grade A standards and we have ensured that our design allows maximum flexibility to phase development to meet the requirements of occupiers. The Company has contracted to commit an initial amount of approximately $1.2 billion to the forward funded projects. A further $800 million, net of VAT, has been conditionally committed to fund further phases of development and the acquisition of partners' interests in these same projects, including Megalogix. We anticipate these projects will produce total net rental income of approximately $229 million on an anticipated end value of $1.86 billion, net of VAT, when built and let. We estimate the yield on investment from these projects is expected to be in the region of 14% after accounting for forward funding financing income and the Company's share of potential development profits. At Shushari, St Petersburg the first phase of 65,000 square meters (0.7 million square feet), which has been pre-let on a 10-year lease to Avalon Logistics (LLC), is physically complete and the tenant has just commenced its fit out works. The remaining two phases are expected to be completed by the summer and we anticipate pre-letting these prior to completion of construction. At Istra, Moscow the first 50,000 square meters (0.54 million square feet) was delivered at the end of 2007. A long term lease has been entered into with Interleasing and a preliminary lease for the remaining space has been entered intowith Bacardi. Phase 2, comprising 52,000 square meters (0.56 million square feet), is also 100% prelet to DSV on a 10 year lease and this phase is due for delivery next month. Rents on both phases are 8% above our expectations when we completed the acquisition. The third phase is already on site for delivery by the year end and negotiations with tenants are progressing well. At Noginsk, Moscow, Phase 1 of this project, 110,000 square meters (1.18 million square feet), started slightly later than we had hoped although we expect delivery by the end of 2008. The balance, up to a further 200,000 square meters will commence once we have substantially pre-let the first phase. Our partner at EG Logistics has suffered some minor delays rezoning a small area of land and this has pushed back the delivery date for the project until Q3 2008. We have already signed a prelet on 30,000 square meters with the partner and we have now concluded an LOI on the balance of the space (24,130 square meters) at a rent 5% ahead of our expectations. SKF, our partners on a project to develop 108,000 square meters to the south of Moscow are on site and expect to deliverthe first 50,000 square metres by the year end. Work at Pulkovo 1, adjacent to St Petersburg International Airport has started and the partner is in the final stages oftendering Pulkovo 2 for a start on site at the start of the summer. The conditions precedent necessary to close the proposed JV with RDI have yet to be satisfied, although we continue to work with the partner to finalise these. In September we signed a development joint venture agreement with a local partner in Kiev, Ukraine. The 20 hectare siteis well located on the Kiev - Odessa highway and we have already commenced demolition of the existing buildings on the site. With our partner we expect to deliver a total of 118,000 square meters by the end of 2009. Megalogix Joint Venture The Megalogix Joint Venture has completed the acquisition of sites suitable for warehouse development in 6 major regional cities, and has signed conditional agreements to acquire land in a further 3 cities. Due diligence is also ongoing on a number of other opportunities in other major cities. In Rostov on Don, the first phase of the project of 100,890 square meters (1.09 million square feet) has already startedon site and is due for delivery by the end of 2008. Subject to tenant demand there is the potential to develop a further 127,440 square meters (1.372 million square feet). In Novosibirsk works have also commenced building 116,820 square meters (1.26 million square feet) which will be delivered by the end of 2008. There is good early interest from tenants for these projects. Elsewhere we are finalising the design, permitting and tendering process for a further 6 sites. Our plan is to commenceconstruction once full permits and financing facilities are in place during the summer. In total the first phases of these projects will provide 361,000 square meters of Grade A warehouse space, although in total there is the potential to build 1.282 million square meters. Deal Pipeline In addition to these projects we are actively considering or are in detailed negotiations on a number of other projects which meet the Company's investment objectives. We estimate that the end value of these projects could amount in aggregate to approximately $1.25 billion, net of VAT and excluding the Company's share of the Megalogix joint venture. The Market There are three key components to the value of property in the market: debt, investor's perspective and occupier demand. Occupier demand is the most important factor in determining the outlook for property. If tenants require space then thatdemand creates stable or increasing rents which underpin value. An investor will buy a stable rental income stream on an aggressive yield if they can see underlying occupier demand and the potential for rental increase at the expiry of the lease. Tenant demand in Russia is still very strong, driven by a number of factors. The consumer driven retail boom referred to in last year's Property Advisors review is still in full swing. The average Russian is spending money and the major retailers are opening more and more stores across the country. Ikea has opened 10 mega mall retail developments in Russia totaling 1.67 million square meters and has plans for 6 further stores. They are not alone in expanding quickly: many high profile European retailers are increasing their offerings at a rapid rate including Auchan Castorama, Media Markt and Metro. We should of course not forget the Russianretailers who are also in on the act. All this is good for Raven Russia as retailers and the FMCG companies need distribution space. The impact of the credit crunch is being felt in Russia and although agents estimate 1.3 million square meters of warehouse space will be delivered in Moscow in 2008, we doubt it will actually be more than 750,000 square meters. Withdemand remaining strong we expect rents to continue to rise, although our focus is on securing the best tenants on the longest term leases; security of cash flow being paramount. It is also worth noting tenants have income from the majority of their clients in Roubles and the decline in the US Dollar has made rents much more affordable. As mentioned above rents are rising and tenant demand is strong. This is good news for values which we expect to continue to grow. When this growth happens will be determined, to some extent, by the availability of debt. We have already seen compression from mid teen initial yields to high single digits, continued growth is likely due to the excellent demand dynamics. During the first six months of 2007 yield compression was substantial, in the second sixmonths of the year much less so, unsurprisingly. We have seen increasing investor interest in Russia over the past year with new names entering the market looking for stock. Now the presidential election is over and the political outlook is clearer we expect these investors to commit funds into the market. Raven Russia Property Management Limited We have built the best and most experienced team in the warehouse market over the past 2.5 years. We have recruited heavily and have a team that can source and close deals, build buildings, find tenants and arrange debt. In everything we do we are setting new standards and often creating a way to integrate western best practice and Russian standards. Outlook This year the portfolio will change dramatically as we turn land into buildings with tenants and construction projects into income producing assets. Our focus is building on time and budget, leasing to good tenants on long term leases, and refinancing for the long term at competitive margins and loan to values." Consolidated Income StatementFor the year ended 31 December 2007 2007 2006 Note £'000 £'000 Revenue 2 68,569 71,781Cost of sales (59,901) (60,769)Gross profit 8,668 11,012Administrative expenses (16,123) (12,858)Other income 1,033 -Group operating loss 5 (6,422) (1,846)Finance income 6 6,375 5,302Finance cost 6 (4,445) (3,260)Share of (loss)/profit of joint ventures (324) 48(Loss)/profit before tax (4,816) 244Tax 7 2,652 (1,405)Loss for the year (2,164) (1,161) Attributable to:Equity holders of the parent (2,164) (1,161)Minority interest 23 - - (2,164) (1,161) Basic and diluted loss per Ordinary share 9 (2.0) p (1.1) p All amounts in the current and prior periods relate to continuingactivities. Consolidated Statement of Recognised Income and ExpensesFor the year ended 31 December 2007 2007 2006 £'000 £'000 Losses on revaluation of available for sale 22 (a) (3,769) (387)investmentsPension scheme actuarial gain 4 3,199 3,876Deferred tax on items taken directly to equity 7 178 (966)(Loss) for the year (2,164) (1,161)Total recognised income and expense in the year (2,556) 1,362 Attributable to:Equity holders of the parent (2,556) 1,362Minority interest 23 - - (2,556) 1,362 Consolidated Balance SheetAs at 31 December 2007 2007 2006 Note £'000 £'000Non current assetsProperty 10 4,229 -Plant and equipment 10 966 363Investment in jointly controlled entities 11 42 34Deferred tax assets 19 2,827 552Retirement benefit surplus 4 5,027 - 13,091 949Current assetsInventories 12 83,586 65,105Trade and other receivables 13 21,177 12,940Available for sale investments 14 16,335 18,167Cash and cash equivalents 25 4,392 16,053Total current assets 125,490 112,265Total assets 138,581 113,214 Current liabilitiesTrade and other payables 15 (11,951) (15,172)Bank loans and overdrafts 16 (18,330) (7,287)Short-term provisions 18 (1,593) (1,894)Total current liabilities (31,874) (24,353) Non current liabilitiesBank loans 17 (17,968) -Retirement benefit liability 4 - (1,107)Deferred tax liabilities 19 (6,767) (7,500)Total non current liabilities (24,735) (8,607)Total liabilities (56,609) (32,960)Net assets 81,972 80,254 EquityCalled up share capital 20 118 114Share premium account 22 (a) 2,418 2,418Other reserves 22 (b) 99,974 97,048Retained earnings 22 (a) (20,538) (19,326)Equity attributable to equity holders of the 22 (a) 81,972 80,254parentMinority interests 23 - -Total equity 81,972 80,254 The financial statements were approved by the Board of Directors and authorisedfor issue on 18 March 2008. ...................... ............................A J G Bilton B S SandhuExecutive Chairman Chief Executive Consolidated cash flow statementFor the year ended 31 December 2007 2007 2006 Note £'000 £'000 (Loss)/profit before tax 5 (4,816) 244Finance income (6,375) (5,302)Finance cost 4,445 3,260Share of loss/(profit) of joint ventures 324 (48) (6,422) (1,846)Adjustments for non-cash items: Depreciation charge 260 133 Share-based payment charge 671 554Operating cash flows before movements in working capital (5,491) (1,159)(Decrease)/increase in provisions (301) 37(Increase)/decrease in inventories (18,481) 24,264Increase in receivables (4,841) (3,915)Increase in payables 2,967 1,639Pension contributions (1,799) (1,770) (22,455) 20,255Net cash flows from operating activities (27,946) 19,096Investing activitiesInterest received 450 1,303Dividend received 437 242Purchase of available for sale investment (297) (4,718)Amounts invested in jointly controlled (5,166) (5,772)entitiesProceeds on disposal of plant and 74 -equipmentPurchase of property (4,265) -Purchase of plant and equipment (901) (162)Net cash flows from investing activities (9,668) (9,107)Financing activitiesInterest paid (1,067) (68)Dividends paid (1,991) (6,821)Issue of Ordinary shares - 420New bank loans raised 17,968 -Repayment of bank loans (7,287) (2,580)Net cash flows from investing activities 7,623 (9,049) Net (decrease)/increase in cash and cash equivalents (29,991) 940Cash and cash equivalents at beginning of year 16,053 15,113Cash and cash equivalents at end of year 25 (13,938) 16,053 Notes to the financial statements 1. Transition to International Financing Reporting Standards ('IFRS') These are the Group's first consolidated financial statements prepared in accordance with IFRS. In preparing its opening IFRS balance sheet and comparative information for the year to 31 December 2006, theGroup has adjusted amounts previously reported in financial statements prepared in accordance with UK GAAP.However, the Group has elected to apply the following transitional reliefs available under IFRS 1. Not to apply IFRS 2 'Share-based payments' to equity instruments granted since the Group's formation if thoseequity instruments vested before the date of transition to IFRS. Not to apply IFRS 3 retrospectively to business combinations occurring prior to the date of Group's transition. Not to apply IAS 19 'Employee benefits' paragraph 120 A(p) to restate disclosures in respect to the previousperiods. The reconciliation of total equity at 31 December 2005 and 2006 is as follows: 31 December 31 December 2006 2005 £'000 £'000 Loss after tax as previously reported under UK (1,720) GAAP IFRS adjustments: Sales and marketing expenditure write off c (145) Reversal of negative goodwill elimination (132) Related deferred tax asset arising on sales and marketing expenditure write off 43 Movement in deferred tax liability on fair value uplift on a 793 inventories Loss after tax as reported under IFRS (1,161) Equity as previously reported under UK GAAP 87,149 89,316 IFRS adjustments: Deferred tax arising on fair value uplift of inventories a (6,763) (7,556) Mark to market of available for sale b 2,455 2,842 investments Related deferred tax liability on mark to market of available for b (737) (852) sale investments Sales and marketing expenditure write off c (820) (684) Related deferred tax asset arising on sales and marketing expenditure write off c 246 204 Negative goodwill elimination d - 132 Re-classification of convertible shares from creditors to equity 6 6 Minority interest adjustment required by IAS 27 e (1,282) (361) Total IFRS adjustments (6,895) (6,269) Equity as reported under IFRS 80,254 83,047 The principal reasons for the adjustments shown in the reconciliations between UK GAAP and IFRS are set outbelow: a The recognition of the deferred tax liability on the fair value uplift upon the inventory acquired as a result of the RPH acquisition (refer to note 28a) which was not permitted under UK GAAP. b Under IFRS, investments classified as available for sale are carried at their fair value and any movements in fair value to be accounted through equity. Under UK GAAP, these were carried at the lower of cost and net realisable value. c Under IAS 2 'Inventories', costs relating to sales and marketing activities on property developments have been written off as incurred through cost of sales. The Group's policy under UK GAAP was to expense the expenditure against the eventual sales of those developments. d Under IFRS 3 negative goodwill is not recognised on the consolidated balance sheet but is taken as an immediate credit to the income statement. e IAS 27 stipulates that the minority share of retained losses should not be recognised unless there is a binding obligation on the minority to cover the deficit. 2. Segmental analysis The Group operates in the following main business segments residential and other property development in the UK and Property Fund management. The Group's primary format for reporting segment information is business segment. Property Residential fund and other management / property of Russia/ development Ukraine - UK properties Total 2007 2007 2007 £'000 £'000 £'000 Revenue 60,052 8,517 68,569 Segment result (9,365) 2,943 (6,422) Finance income 5,740 635 6,375 Finance cost (4,445) - (4,445) Share of joint ventures loss (324) - (324) (Loss)/profit before tax (8,394) 3,578 (4,816) Tax income 2,734 (82) 2,652 (Loss)/profit for the year (5,660) 3,496 (2,164) Other segment items included in the income statement are as follows: Depreciation 206 54 260 Share-based payment 356 315 671 Property fund Residential management and other of Russia/ property Ukraine - UK properties Total 2006 2006 2006 £'000 £'000 £'000 Revenue 66,842 4,939 71,781 Segment result (2,054) 208 (1,846) Finance income 4,916 386 5,302 Finance cost (3,260) - (3,260) Share of joint ventures profit 48 - 48 Profit/(loss) before tax (350) 594 244 Tax expense (1,405) - (1,405) (Loss)/profit for the year (1,755) 594 (1,161) Other segment items included in the income statement are as follows: Depreciation 128 5 133 Share-based payments 276 278 554 Segmental assets and liabilities at 31 December 2007 and capital expenditure for the year then ended are as follows: Property fund Residential management and other of Russia/ property Ukraine - UK properties Total 2007 2007 2007 £'000 £'000 £'000 Total assets 119,823 18,758 138,581 Total liabilities (55,786) (823) (56,609) 64,037 17,935 81,972 Capital expenditure 4,675 491 5,166 Segmental assets and liabilities at 31 December 2006 and capital expenditure for the year then ended are as follows: Property fund Residential management and other of Russia/ property Ukraine - UK properties Total 2006 2006 2006 £'000 £'000 £'000 Assets 97,866 15,348 113,214 Liabilities (32,009) (951) (32,960) 65,857 14,397 80,254 Capital expenditure 112 50 162 The geographical split is the same as the segmental split. 3. Employee information (a) The average number of persons employed by the Group during the year was 130 (2006: 95). The total number of employees of the Group at 31 December 2007 was 145 (2006: 103). 2007 2006 £'000 £'000 (b) Group employment costs including Directors: Gross salaries and wages 6,974 7,486 Employer's national insurance contributions or foreign 750 866 equivalents Employer's pension costs 225 229 7,949 8,581 Key management and personnel, as defined under IAS 24 'Related Party Disclosures' have been identified as the Board of Directors as the controls operated by the Group ensure that all key decisions are reserved for the Board. (c) Directors' remuneration (including non-executives) was: Emoluments 1,091 1,645 Pension contributions 165 158 Equity settled share based payments charge (see note 421 382 21) Total 1,677 2,185 Gains on exercise of share options - 180 4. Employee benefits Defined contribution scheme The Group operates a defined contribution plan based on a stakeholder pension contract and contributes to certain personal pension schemes. The Group's contributions to these are charged to the income statement in the period in which they are payable and amounted to £225,000 (2006: £229,000). Defined benefit scheme Benefit accruals under the Group's final salary pension scheme ceased with effect from 31 December 2005. The Group pays contributions to the fund in order to provide security for existing pensions and the accrued benefits of current and former employees. Group contributions to the scheme for the period totalled £1.8 million (2006: £3.4 million). Following the latest actuarial valuation as at 5 April 2005, the Group's contributions were fixed at £1.8 million per annum (including £0.2 million towards administrative expenses) for six years from 1 January 2006, after which they were expected to reduce to those required to meet the scheme's administration expenses. The next actuarial valuation of the pension scheme is at 5 April 2008. The net credit to finance income in the income statement for the scheme was £1.2 million (2006: credit £0.2 million). (See note 6). As at 31 December 2007, the scheme had an IAS 19 surplus of £5.0 million (2006: £1.1 million deficit), leading to the inclusion in the balance sheet of a net retirement benefit surplus, after deferred tax, of £3.6 million (2006: £0.8 million after deferred tax). The total actuarial gain recognised in the statement of recognised income and expense is £2.3 million (2006: gain of £2.8 million) after deferred tax. These amounts and those set out below have been determined on the advice of qualified actuaries, who are employees of Watson Wyatt Limited, based on the most recent full actuarial valuation at 5 April 2005 updated to 31 December 2007. The mortality assumptions adopted were in line with standard tables PMA92/PFA92 calendar year 2005 treating members as being one year older than their actual ages. An allowance was made for possible future mortality improvements equivalent financially to a reduction in the discount rate of 0.25 per cent. per annum. This is broadly equivalent to an increase in life expectancy of one year every ten years. The mortality assumption will be reviewed following the 2008 actuarial valuation. To give an indication of the sensitivity of the liabilities to the mortality assumptions, a one year increase in life expectancy would increase the liabilities by £3.1 million to £65.3 million. The financial assumptions used for IAS 19 purposes were: 2007 2006 % per % per annum annum Price inflation 3.3 3.1 General salary and wage inflation n/a n/a Pension increases 3.3 3.1 Discount rate 6.0 5.2 The IAS 19 valuation assumes that mortality in retirement will be in the line with standard tables. The tables used are PMA92/PFA92 projected to calendar year 2005, with a + 1 year age rating. An allowance is also made for anticipated future improvements in life expectancy by reducing the discount rate by 0.25% pa. The allowance made for future improvements in mortality is subjective and there are differing views on the rate and extent to which mortality improvements will continue in the future. The scheme's assets (excluding money purchase assets) and the expected rates of return are given below. The expected rates of return are based on market expectations at the beginning of the year for returns over the entire life of the liabilities. 2007 2007 2006 2006 Expected Market Expected Market rate of return value rate of return value % per annum £m % per annum £m Equities 42.4 39.6 Bonds 20.6 20.3 Property 0.8 1.8 Cash 3.4 3.6 Total 7.6 67.2 7.4 65.3 The position of the scheme (excluding money purchase assets and liabilities) can be summarised as follows: 2007 2006 £m £m Present value of the defined benefit (62.2) (66.4) obligation Assets at fair value 67.2 65.3 Retirement benefit surplus/(liability) 5.0 (1.1) Reconciliation of present value of defined benefit obligation for year to 31 December 2007 2007 2006 £m £m Defined benefit obligation at start of 66.4 67.9 year Interest cost 3.4 3.2 Gain on change of assumptions (4.6) (2.3) Experience loss 0.5 0.5 Actual benefit payments (3.5) (2.9) Defined benefit obligation at end of 62.2 66.4 year 2007 2006 £m £m Analysis of the amount charged to other finance income Expected return on scheme assets 4.6 3.4 Interest on scheme liabilities (3.4) (3.2) Net return 1.2 0.2 Net credit for the period 1.2 0.2 Statement of recognised income and expenses (SORIE) Actuarial gain recognised in SORIE 3.2 3.9 Cumulative actuarial gains recognised at beginning of year 3.9 - Cumulative actuarial gains recognised at the end of year 7.1 3.9 Reconciliation of fair value of assets for the year 31 December 2007 2007 2006 £m £m Fair value of Scheme assets at start of 65.3 59.2 year Expected return on Scheme assets 4.6 3.5 Actuarial (loss)/gain on Scheme assets (0.9) 2.1 Company contributions 1.7 3.4 Actual benefit payments (3.5) (2.9) Fair value of Scheme assets at end of 67.2 65.3 year The Company contributions are in cash except for in 2006 the transfer of £1.6 million of available for sale investments into the Scheme. Return on assets for year to 31 December 2007 2007 2006 £m £m Expected return on Scheme assets 4.6 3.4 Actuarial (loss)/gain on Scheme assets (0.9) 2.1 Actual return on Scheme assets 3.7 5.5 2007 2006 £m £m History of disclosure information Loss/(gain)on Scheme assets 0.9 m 2.1 m % of Scheme assets at end of year 1.3 % 3.2 % Experience loss on defined benefit obligations 0.5 m 0.5 m % of Scheme liabilities at end of year 0.9 % 0.8 % Gain on defined benefit obligation on change of 4.6 m 2.3 m assumptions % of Scheme liabilities at end of year 7.4 % 3.5 % Net balance sheet position Defined benefit obligation (62.2) (66.4) Fair value of assets 67.2 65.3 Funded status 5.0 (1.1) 2007 2006 £m £m Reconciliation of change in funded status for the year to 31 December 2007 Defined benefit liability at start of year (1.1) (8.7) Pension income 1.2 0.3 Company contributions 1.7 3.4 Gain recognised in SORIE 3.2 3.9 Defined benefit asset/(liability) 5.0 (1.1) 5. Group operating loss 2007 2006 £'000 £'000 Group operating loss is stated after charging: Depreciation of fixed assets 260 133 Auditors' - Fees payable to the Company's auditor for the audit remuneration of the Group's annual accounts 40 40 - Fees payable to the Company's auditor for the audit of the subsidiary accounts 103 100 - Tax services 221 223 - Audit of the pension scheme 9 9 - Other services 4 5 Total amount paid to auditors 377 377 Operating lease - Land and buildings, cars 636 693 rentals Share based payments charge 671 554 6. Finance income and expense 2007 2006 £'000 £'000 Group Finance income Bank interest receivable 1,049 1,486 Return on amount charged to pension scheme 4,592 3,430 Dividend received on Raven Russia Limited shares 541 242 Dividend received on Oriel Securities Limited shares 193 - Profit on transfer of Raven Russia shares to pension scheme - 144 6,375 5,302 Finance expense Bank interest payable (1,085) (56) Interest on defined benefit pension plan (3,360) (3,204) obligation (4,445) (3,260) 7. Tax expense 2007 2006 £'000 £'000(a) Tax recognised in the income statement comprises: Current tax expense UK corporation tax charge at the rate of 30 per cent. (2006: 30 per cent.) based on the taxable result for the year - - Over provision in respect of prior years - (114) - (114) Overseas tax - Current 82 - 82 (114) Deferred tax expense (note 19) Origination and reversal of temporary differences (734) 1,519 Recognition of deferred tax asset on trading - current year (1,486) - losses - prior year (514) - Total tax (credit)/expense reported in the income (2,652) 1,405 statement (b) The tax charge for the period is lower than the standard rate of corporation tax in the UK (30 per cent.) due to: (Loss)/profit before tax (4,816) 244 Expected tax (credit)/charge at 30 per cent. (1,445) 73 Over provision in respect of prior periods - (114) Dividends not taxable (220) (73) Items not deductible for tax purposes 51 39 Pension scheme income return not taxable (369) (68) Inter-group trading profits - 2,319 Utilisation of tax losses (669) (771) Total tax (credits)/expense reported in the income (2,652) 1,405 statement (c) Reconciliation of movement of deferred tax net liabilities 2007 2007 2006 2006 £'000 £'000 £'000 £'000 Net deferred tax liability at 1 January (6,948) (4,334) Amounts credited/(charged) to income Sales and marketing write-off 239 15 Recognition of trading losses 2,000 (1,270) Fair value uplift of inventories 1,404 793 Pension scheme (813) (1,186) 2,830 (1,648) Amounts (charged)/credited to equity Pension scheme actuarial gain (927) (1,082) Available for sale investments 1,105 116 Net deferred tax liabilities 178 (966) (3,940) (6,948) Deferred tax assets (note 19) 2,827 552 Deferred tax liabilities (note 19) (6,767) (7,500) Net deferred tax liabilities (3,940) (6,948) 8. Dividends 2007 2006 £'000 £'000 On Ordinary shares of Raven Mount plc - Final paid for 2006 1.0p per share (2005: 1,106 798 0.75p) - Interim paid for 2007 0.8p per share 885 645 (2005: 0.6p) - Special paid for 2007 nil pence per share (2006: - 5,378 5.0p) 1,991 6,821 Proposed for approval at AGM Final dividend for 2007 1.4 pence (2006: 1.0 pence) 1,568 1,106 9. Loss and shareholders' funds per Ordinary share The basic loss per Ordinary share is calculated in accordance with IAS 33 on the loss for the year (before dividends on Ordinary shares) of £2,164,000 (2006: loss £1,161,000) and 110.1 million shares (2006: 106.9 million), being the weighted average number of Ordinary shares in issue excluding those owned by the Employee Share Trust. Since none of the Company's potential Ordinary shares are dilutive, there is no difference between the basic and diluted loss per share. Shareholders' funds per Ordinary share are 73.2 pence (2006: 74.2 pence). The calculation is based on shareholders' funds as at the year end of £82.0 million (2006: £80.3 million) divided by the number of shares in issue at the year end amounting to 112.0 million (2006: 108.1 million). The Directors consider that as a property development group with a significant level of inventory held at fair value at acquisition (plus subsequent costs), along with available for sale assets held at fair value, shareholders funds per share is a meaningful performance indicator. Adjusted shareholders' funds per share are 74.7 pence (2006: 75.0 pence) based on the adjusted shareholders' funds and adjusted Ordinary shares for the exercise of all outstanding options and conversion of the convertibles, are shown below. 2007 2006 £'000 £'000 Shareholders' funds per balance sheet 81,972 80,254 Deferred consideration payable in Ordinary shares - 5,594 Cash receivable from share options 5,140 6,517 Minority interest removed under IAS 27 3,176 1,282 Adjusted shareholders' funds 90,288 93,647 '000 '000 Ordinary shares in issue at 31 December 2007 112,021 108,102 Share issuable under share options 6,425 7,774 Shares issuable on conversion of Convertible Ordinary shares 2,376 5,558 Shares issuable as deferred consideration at 31 December 2007 share price of 83.25 pence (2006: 161.0 - 3,475 pence) Diluted Ordinary shares as at 31 December 2007 120,822 124,909 In 2007, of the 8,477,797 issued options in the Unapproved and Approved Option Plan 6,425,000 were dilutive as they were options at 80 pence and the share price at 31 December 2007 was 83.25 pence. In 2006, all of the issued options (7,774,522) in the Unapproved and Approved Options were dilutive as they were exercisable options between 80-105 pence and the share price at 31 December 2006 was 161 pence. 10. Property, Plant and Equipment Freehold Plant Total land and and buildings equipment £,000 £'000 £'000Group Cost At 1 January 2007 - 1,514 1,514Additions 4,265 901 5,166Disposals - (82) (82)At 31 December 2007 4,265 2,333 6,598DepreciationAt 1 January 2007 - 1,151 1,151Charge for the year 36 224 260Disposals - (8) (8)At 31 December 2007 36 1,367 1,403Net book valueAt 31 December 2007 4,229 966 5,195At 31 December 2006 - 363 363 Group Cost At 1 January 2006 - 1,352 1,352Additions - 162 162At 31 December 2006 - 1,514 1,514DepreciationAt 1 January 2006 - 1,018 1,018Charge for the year - 133 133At 31 December 2006 - 1,151 1,151Net book valueAt 31 December 2006 - 363 363At 31 December 2005 - 334 334 11. Investments in jointly controlled entities 2007 2006 £'000 £'000(a) Group Cost At 1 January and 31 December - - Share of retained profits At 1 January 34 53 Loss for the year (324) (19) Off-set against amounts due from jointly controlled 332 - entity At 31 December 42 34 Net book value At 31 December 42 34 There are no recognised gains or losses in the trading joint ventures apart from the loss for the year. The Group has off-set losses recognised in the year against amounts receivable from the jointly controlled entity in accordance with its accounting policy and IAS 31. (b) Investments in trading joint ventures The Group's investment in trading joint ventures relates to: i) Coln Park LLP, a limited liability partnership operating in Great Britain. Coln Park is the 50% joint venture established to develop second homes in Gloucestershire. ii) Wellington Square Development Company Limited ("WSDC"), a company incorporated and operating in Great Britain. The total issued Ordinary share capital of this company is £100 of which 50 per cent. is owned by a subsidiary. WSDC is the joint venture company established to develop the retail town centre scheme in Stockton-on-Tees. The scheme was sold during 2004, however the company is still in existence. The Group's share of the assets and liabilities of its trading joint ventures was as follows: 2007 2007 2006 2006 £'000 £'000 £'000 £'000 Share of assets Current assets: Inventories 5,049 2,776 Receivables 184 178 Cash and cash equivalents 231 232 5,464 3,186 Share of liabilities Current liabilities (5,422) (3,152) 42 34 The balances with joint ventures are shown in note 13. 12. Inventories 2007 2006 £'000 £'000 Land held for development 10,409 8,480 Construction work in progress 73,177 56,625 83,586 65,105 As at 31 December 2007 borrowings of £17,968,000 (2006: £nil) were secured against inventories. 13.. Trade and other receivables 2007 2006 £'000 £'000 Amounts falling due within one year Trade receivables 1,511 1,292 Loan to jointly controlled entity 4,724 2,765 Loan to jointly controlled entity partner 5,892 3,007 VAT 2,197 843 Other receivables 3,006 457 Prepayments and accrued income 3,847 4,576 Total 21,177 12,940 All remaining trade and other receivables are non-interest bearing. Loans to jointly controlled and to the jointly controlled entity partner are interest bearing and repayable on demand The Directors consider that the carrying amount of these assets approximate their fair value. Further disclosures relating to financial instruments are set out in note 17. 14. Available for sale investments 2007 2006 £'000 £'000 Listed shares - Traded on AIM 11,165 12,312 Warrants in Raven Russia Limited 452 1,137 Other investment 4,718 4,718 16,335 18,167 Listed shares comprise amounts invested in Raven Russia Limited. The market value of the listed shares at 31 December 2007 was £11.2 million (2006: £12.3 million). In addition, the Group also holds warrants to subscribe for 7,650,000 Ordinary shares in Raven Russia Limited at £1. The warrants are exercisable at any time during the five year period commencing 29 July 2005, the date of Raven Russia Limited's admission to AIM. The warrants have been valued using a Black-Scholes valuation model. The other investment represents shares in Oriel Securities Limited, an unlisted independent UK stockbroking and advisory business. Fair value is assessed using earnings multiples, calculated with reference to comparable entities. There is no material difference between fair values and cost. 15. Trade and other payables 2007 2006 £'000 £'000 Deferred income 62 1,257 Trade payables 5,780 3,986 Social security and other taxation 295 357 Accruals 5,814 3,978 Deferred consideration - 5,594 11,951 15,172 The Directors consider that the carrying value of the trade and other payables included in current liabilities approximate to fair value as a result of the short maturity period of the amounts held at the year end. Further disclosures relating to financial instruments are set out in note 17. 16. Bank loans and overdrafts 2007 2006 £'000 £'000 Current liabilities Bank loans - 7,287 Overdrafts 18,330 - 18,330 7,287 17. Financial instruments (a) The Group is exposed through its operations to the following financial risks: o Credit risk o Fair value or cash flow interest rate risk o Other market price risk o Liquidity risk o Foreign exchange risk In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note describes the Group's objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements. There have been no substantive changes in the Group's exposure to financial instrument risks, its objectives, policies and processes for managing those risk or the methods used to measure them from previous periods unless otherwise stated in this note. Principal financial instruments The principal financial instruments used the by the Group, from which financial instrument risk arises, are as follows: o Trade and other receivables o Cash at bank o Bank overdrafts o Investments in quoted and unquoted equity securities o Trade and other payables o Floating-rate bank loans General objectives, policies and processes The Board has overall responsibility for the determination of the Groups risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group's finance function. The Board receives monthly reports through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets. The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility. Further details regarding these policies are set out below. Credit risk Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions. For banks and financial institutions, only independently rated parties with minimum credit rating 'A' are accepted. Credit risk also arises from receivables. The Group reviews the credit-worthiness of those entities it contracts with. Principal receivables are loans to Joint Ventures and JV partners, secured on developments which have been independently valued at amounts significantly greater than the loans. Other receivables are due in respect of fund management, and these are due from Raven Russia Limited which has substantial cash and property assets. The Group does not enter into derivatives to manage credit risk, although in certain isolated cases may take steps to mitigate such risks if it is sufficiently concentrated. Market risk Market risk arises from the Group's use of interest bearing, tradable and foreign currency financial instruments. It is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in interest rates (interest rate risk), foreign exchange rates (currency risk) or other market factors (other price risk). During 2007 and 2006, the Group's borrowings at variable rate were denominated in Sterling. Other market price risk The Group's balance sheet is exposed to market price risk as the Group holds some equity investments in other companies (see note 14). The Directors believe that the exposure to market price risk from these activities is acceptable in the Group's circumstances. Liquidity risk Liquidity risk arises from the Group's management of working capital and the finance charges and principal repayments on its debt instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. The Board receives and monitors rolling 12 month cash flow projections on a monthly basis as well as information regarding cash balances. Interest rate risk The Group's loans are all at floating rates of interest. The Group has loans in respect of Audley property developments which cover the expected period of development. If interest rates fluctuate, so will the profits from those developments. The Group also has committed Group facilities which are renewed on an annual basis, when interest rate risk is considered. A change of one per cent. in interest rates would increase the Group's annual interest charge by £363,000 based on the year end balances. Foreign exchange risk The Group's principal exchange risk is in respect of its property fund management income, which is receivable in Sterling but calculated as a percentage of gross assets which are denominated in US dollars. (b) Borrowing facilities 2007 2006 £'000 £'000 The Group has borrowing facilities as follows: Available overdraft facilities 40,000 40,000 Bank loans 17,968 7,287 57,968 47,287 Amounts drawn - Overdraft facilities (18,330) - - Bank loans (17,968) (7,287) Amounts undrawn 21,670 40,000 Cash at bank 4,392 16,053 Total cash and facilities available to the Group 26,062 56,053 ' The committed facilities are unsecured. The bank loan facilities are secured over the assets held by the relevant subsidiaries to which the loan has been provided. (c) Bank borrowings Floating Fixed 2007 rate rate Total £'000 £'000 £'000 Expiry in more than 2 year less than 5 years 17,968 - 17,968 Floating Fixed 2006 rate rate Total £'000 £'000 £'000 Expiry within 1 and 2 years 7,287 - 7,287 (d) Profile of net financial assets/(liabilities) The net financial assets at 31 December 2007 were as follows: 2007 2006 £'000 £'000 Available for sale investments 16,335 18,167 Cash at bank 4,392 16,053 Bank loans and overdrafts (18,330) (7,287) Bank loans due after more than one year (17,968) - Trade receivables 1,511 1,292 Loan to jointly controlled entity 4,724 2,765 Loan to jointly controlled entity partner 5,892 3,007 Other receivables 3,006 457 Trade payables (5,780) (3,986) (6,218) 30,468 The above balances are all denominated in Sterling with the exception of Euro cash at bank balances of £nil (2006: £33,000). The committed facilities are available for 364 days from 1 September 2007 at a rate of 1 per cent. over base rate. The weighted average interest rate for the period for sterling borrowings was 6.51 per cent. The Group did not use any financial derivatives during the year. The fair value of the available for sale listed investments held by the Group was £11.2 million (2006: £12.3 million). In the opinion of the Directors there is no significant difference between the fair values and the book values of the other financial assets and liabilities. 18. Short-term provisions Provisions for Maintenance £'000 Group At 1 January 2007 1,894 Charged to profit and loss account 364 Utilised and released in the year (665) At 31 December 2007 1,593 This housing maintenance provision arises principally from warranties and other liabilities on housing sold. Whilst such warranties extend to a period of ten years, payment of these costs is likely to occur within a period of two years. The provision made is the Directors' best estimate of the Group's liability. 19. Deferred tax asset and liabilities 2007 2006 £'000 £'000 Details of the deferred tax asset amounts charged to the income statement and amounts charged to reserves are as follows: Deferred tax asset relating to: Trading losses 2,000 - Retirement benefit liability - 332 Mark to market of available for sale investments 368 - Sales and marketing write off 459 220 2,827 552 Deferred tax liability relating to: Fair value uplift on inventories 5,359 6,763 Excess of fair value of investments - 737 Retirement benefit surplus 1,408 - 6,767 7,500 The Group anticipates taxable profits, based on internal forecasts of the next 18 months, will be available against which the unused tax losses or unused tax credits can be utilised. 20. Called up share capital 2007 2007 2006 2006 No '000 £'000 No '000 £'000 Authorised Ordinary shares of 0.1 pence 244,000 244 244,000 244 £1 Convertible Ordinary shares 6 6 6 6 250 250 Allotted, called up and fully paid Ordinary shares of 0.1 pence 112,021 112 108,102 108 £1 Convertible Ordinary shares 6 6 6 6 118 114 The £1 Convertible Ordinary shares are convertible at the option of the holders according to a pre-determined formula at any time in the five years from the Company's admission to AIM, 17 December 2003, or, to the extent not converted by 17 December 2008, at the rate of 396 Ordinary shares for each Convertible Ordinary share held at the fifth anniversary of Admission. On the basis of the 31 December 2007 share price of 83.25 pence (2006: 161 pence), the Convertible Ordinary shares would convert into the minimum 2,376,000 (2006: 5,558,000) Ordinary shares. The movements in issued Ordinary share capital during the period were as follows: Ordinary shares of 0.1pence each No. '000 £'000 At 1 January 2007 108,102 108 Issued during the period 3,919 4 At 31 December 2007 112,021 112 The Ordinary shares issued during the period comprise 2,744,201 issued in April 2007 and 1,175,302 issued in December 2007 in relation to the remaining deferred consideration payable for the acquisition of RPH. In addition to the above, the Company has authorised 50,000 £1 redeemable preference shares, none of which have been allotted. If they were to be allotted these shares would be classified as a liability in accordance with IAS 32. 21. Share schemes Share Options In December 2005, the Company adopted an Unapproved share option plan and an Approved Company share option plan which provide for the issue of options over Ordinary shares in the Company. The total number of Ordinary shares over which Option Shares may be granted is limited to 10 per cent. of the total number of issued Ordinary shares of the Company at any time. The total number of shares under option is 8,477,797 representing 7.6 per cent of the issued share capital at the year end. Unapproved share option plan (Unapproved Plan) Option Shares under the Unapproved Plan are exercisable in 3 equal parts. For each part, exercise will be on or after the third, fourth and fifth anniversaries of the Date of Grant at the earliest and the Performance Condition shall first be tested for each one third part on these anniversaries. Unexercised options may be reviewed against the Performance Condition in subsequent periods broadly every 6 months, but always from the Date of Grant. Options lapse if not exercised within 7 years and 3 months from the Date of Grant. The Performance Condition states that the share price increase must exceed the RPI plus 3 per cent. per annum and exceed the increase in the FTSE Small Cap Index for the relevant period. Since the grant of these options, the share price has increased by 8.1 per cent, RPI by 8.9 per cent and the FTSE small cap by 6.0 per cent. Option Shares were issued under the Unapproved Plan on 8 December 2005 over 6,665,000 Ordinary shares in the Company at an exercise price of 80.0 pence, being the average share price for the month of November 2005. Further option shares were issued under the Unapproved Plan on the 21 March 2007 over 1,005,000 Ordinary shares at an exercise price of 155.1 pence, being the average share price for the 5 trading days prior to issue. All options lapse if they have not been exercised within seven years and three months from the date of grant of the options. Approved Company share option plan (CSOP) Employees and full-time Directors of the Group have been offered Option shares subject to a maximum value at any one time per employee of £30,000 (being the Inland Revenue limit for CSOPs). Option Shares cannot be exercised until 3 years after grant and are subject to a performance condition that the share price increase must exceed the RPI plus 3 per cent. per annum. This is first measured on the third anniversary of the date of grant, thereafter half yearly based on the prior December or June. The options lapse if they are not exercised within seven years and three months from the date of grant of the option. 1,223,809 option shares were issued under the CSOP on 28 April 2006 and a further 221,111 Option shares were issued on 21 March 2007. As at 31 December 2007, 397,123 options have lapsed leaving 1,047,797 Option shares in the Company in issue at exercise prices between 105 pence and 151.5 pence. 28,571 Option shares under the CSOP were granted to each of the Executive Directors in 2006, in addition to the Unapproved Plan. 2007 2007 2006 2006 Weighted Weighted average average exercise exercise price price (pence) Number (pence) Number Outstanding at the beginning of the 83.62 7,774,522 80.00 7,190,000 year Granted during the year 148.34 1,226,111 105.00 1,223,809 Exercised during the year - - 80.00 (525,000) Lapsed during the year 97.93 (522,836) 105.00 (114,287) Outstanding at the end of the year 92.93 8,477,797 83.62 7,774,522 As at both 31 December 2007 and 31 December 2006 none of the share options were exercisable. The Group uses a calculated Beta to factor in market vesting conditions. The following information is relevant in the determination of the fair value of options granted during the year under the equity settled share based remuneration scheme operated by Raven Mount plc Equity-settled 2007 2006 Option pricing model used Black-Scholes Black-Scholes Weighted average share price at grant date 148.34 105.00 (pence) Weighted average exercise price 148.34 105.00 (pence) Weighted average contractual life 1,123 1,096 (days) Equity-settled Equity volatility 60% 60% Expected dividend growth rate 1.69% 1.69% Risk-free interest rate 4.5% 4.5% 2007 2006 £'000 £'000 The share-based remuneration expense comprises: Equity-settled schemes 671 554 The volatility was calculated in accordance with the Group's calculated Beta based on a statistical analysis of the Company's share price. The exercise price of options outstanding at the end of the year ranged between 80p and 155.1p (2006: 80p and 105p) and their weighted average contractual life was 2.09 years (2006: 2.56 years). Of the total number of options outstanding at the end of the year, nil (2006: nil) had vested and were exercisable at the end of the year. The weighted average fair value of each option granted during the year was 148.34p (2006: 105.0p). The expected life of the options is based on historical data. Convertible Ordinary shares In addition, A J G Bilton, B S Sandhu and G V Hirsch are interested in 6,000 Convertible Ordinary shares, under an equity settled share based payment arrangement, held by the trustees of the Raven Mount Employee Benefit Trust, a discretionary trust, as potential beneficiaries under the trust. The trust was established on the Admission of Raven Mount plc to AIM, prior to the takeover of Swan Hill Group plc and the share options were granted for services rendered in respect of the Group's admission to AIM. To the extent not previously converted, each Convertible Ordinary share will convert into 396 Ordinary shares on the fifth anniversary of the Admission of Raven Mount to AIM, being 17 December 2008. Based on the Raven Mount share price of 83.25 pence as at 31 December 2007, the Convertible Ordinary share would have converted into the minimum 2,376,000 Ordinary shares. 22a. Reserves Available Share Capital Reserve Reverse for sale Profit Share premium redemption for own acquisition Merger investment and loss capital account reserve shares reserve reserve reserve account Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Group At 1 January 2006 112 1,998 50 (150) 62,277 31,462 1,990 (14,692) 83,047 Issue of deferred consideration shares 2 - - - - 1,690 - - 1,690 Share based payment credit - - - - - - - 554 554 Issue of new shares - 420 - - - - - - 422 Dividend payments - - - - - - - (6,821) (6,821) Actuarial gains net of deferred taxation on pension - - - - - - - 2,794 2,794 scheme Loss for the year - - - - - - - (1,161) (1,161) Mark to market of available for sale investments - - - - - - (387) - (387) Deferred tax on reduction - - - - - - - - - in fair value of invest - - - - - - 116 - 116 As at 31 December 2006 114 2,418 50 (150) 62,277 33,152 1,719 (19,326) 80,254 As at 1 January 2007 114 2,418 50 (150) 62,277 33,152 1,719 (19,326) 80,254 Issue of deferred consideration shares 4 - - - - 5,590 - - 5,594 Share based payment credit - - - - - - - 671 671 Dividend payments - - - - - - - (1,991) (1,991) Actuarial gains net of deferred taxation on pension - - - - - - - 2,272 2,272 scheme Loss for the year - - - - - - - (2,164) (2,164) Mark to market of available for sale investments - - - - - - (3,769) - (3,769) Deferred tax on reduction in fair value of - - - - - - 1,105 - 1,105 investments At 31 December 2007 118 2,418 50 (150) 62,277 38,742 (945) (20,538) 81,972 Reserve Description and purpose Share premium Amounts subscribed for share capital in excess of nominal value. Capital redemption Amounts transferred from share capital on redemption of preference shares. Reserve for own shares Group holding in its own shares. Reverse acquisition reserve Amounts arising on adopting reverse acquisition accounting for the acquisition of Swan Hill Group PLC by Raven Mount plc. Merger reserve Amounts arising on the acquisition of Raven Property Holdings Plc, value of consideration paid in shares in excess of nominal value of shares. Available for sale Amounts arising on the mark to market of the available for sale investments less investments reserve deferred taxation. 22b. Other Reserves 2007 2006 £'000 £'000 Capital redemption reserve 50 50 Reserve for own shares (150) (150) Reverse acquisition 62,277 62,277 reserve Merger reserve 38,742 33,152 Available for sale investments (945) 1,719 reserve 99,974 97,048 23. Minority Interest Not Recognised recognised in the in the consolidated consolidated balance balance sheet sheet £'000 £'000 Minority interest at 1 January 2007 - (1,282) Share of loss for the year to 31 December 2007 - (1,894) Minority interest at 31 December 2007 - (3,176) IAS 27 stipulates the minority share of retained losses should not be recognised in the balance sheet unless there is a binding obligation on the minority to cover the deficit. 24. Commitments Commitments contracted for at 31 December 2007 but not provided for in these accounts were £nil (2006: £nil). As at 31 December 2007, the Group has outstanding total commitments for future minimum lease payments under non-cancellable operating leases which fall due as follows: Operating leases-lessee 2007 2006 £'000 £'000 Not later than one year 747 765 Later than one year and not later than five 2,494 2,807 years Later than five years 810 1,209 4,051 4,781 Operating leases-lessor The minimum rent receivables under non-cancellable operating leases are as follows: 2007 2006 £'000 £'000 Not later than one year 325 337 Later than one year and not later than five 1,001 1,179 years Later than five years - 129 1,326 1,645 25. Notes supporting the cash flow statement Cash and cash equivalents for purposes of the cash flow statement comprises: 2007 2006 £'000 £'000 Cash available on demand 1,387 2,851 Short-term deposits 3,005 13,202 4,392 16,053 Overdrafts (18,330) - Cash and cash equivalents at 31 December (13,938) 16,053 Company balance sheet as at 31 December 2007 2007 2006 Note £'000 £'000 Fixed assets Fixed asset investments Investment in subsidiary companies 4 88,746 88,444 88,746 88,444 Current assets Debtors 5 55,539 32,842 Creditors: Amounts falling due within one 6 (35,338) (17,715) year Net current assets 20,201 15,127 Total assets less current liabilities 108,947 103,571 Capital and reserves Called up share capital 7 118 114 Share premium account 8 2,418 2,418 Capital redemption reserve 8 50 50 Merger reserve 8 86,567 80,977 Profit and loss account 8 19,794 20,012 Shareholders' funds 8 108,947 103,571 The financial statements were approved by the Board of Directors and authorisedfor issue on 18 March 2008. ................. ..................A J G Bilton B S SandhuExecutive Chairman Chief Executive Notes to the Company financial statements 1. Profit after tax As permitted by Section 230 of the Companies Act 1985 the Company has elected not to present its own profit and loss account for the year. The profit after tax for the year recognised in the profit and loss account for the Company was £1,102,000 (2006: £2,494,000). 2. Employee information 2007 2006 £'000 £'000 Gross salaries and wages 933 1,492 Employer's national insurance contributions 152 282 Employer's pension costs 165 156 1,250 1,930 The average and total number of employees of the Company was 6 (2006: 6). These are three of the four Executive Directors (2006: 3) and the three Non Executive Directors (2006: 3). Equity settled share-based payment The grants and related accounting treatment adopted by the Company under FRS 20 'Share based payment' are identical to that adopted by the Group under IFRS 2 'Share based payment'. For details please refer to note 21 of the consolidated financial statements. The charge for the Company was £369,000 (2006: £554,000). 3. Dividends 2007 2006 £'000 £'000 On Ordinary shares of Raven Mount plc - Final paid for 2006 1.0p per share (2005: 1,106 798 0.75p) - Interim paid for 2007 0.8p per share (2005: 885 645 0.6p) - Special paid for 2007 nil pence per share - 5,378 (2006: 5.0p) 1,991 6,821 Proposed for approval at AGM Final dividend for 2007 1.4 pence (2006: 1.0 pence) 1,568 1,106 4. Fixed asset investments Subsidiary companies £'000 Cost At 1 January 88,444 Additions - capital contribution re equity-settled share-based payment charge 302 At 31 December 2007 88,746 The following are the main operating subsidiary companies of Raven Mount plc at 31 December 2007. Those companies marked with an asterisk (*) are owned directly by Raven Mount plc and the remainder by subsidiaries. All companies are incorporated and operate in Great Britain, and are 100 per cent. wholly owned (except where indicated). Residential and other property Raven Property Holdings plc* ("RPH") Swan Hill Homes Limited Swan Hill Swindon Limited Swan Hill Property Holdings Limited Swan Hill Developments Limited Raven Property Group plc* Raven Brighton Limited Asset Management Raven Russia Property Advisors Limited (operates partially in Russia)* Raven Russia Property Management Limited* Independent Living Raven Audley Court plc (75% owned) Raven Audley Clevedon Limited (75% owned) Raven Audley St Elphins Limited (75% owned) Raven Audley Inglewood Limited (75% owned) Raven Devon Limited 5. Debtors 2007 2006 £'000 £'000 Amounts falling due within one year Amounts owed by Group companies 55,056 32,379 Other debtors 405 375 Prepayments and accrued income 78 88 Total 55,539 32,842 Amounts owed by Group companies are trading balances that are repayable on demand. 6. Creditors: Amounts falling due within one year 2007 2006 £'000 £'000 Bank loans and overdrafts 6,723 - Amount due to Group companies 28,405 11,220 Accruals and other creditors 210 901 Deferred consideration - 5,594 35,338 17,715 Amounts due to Group companies are trading balances that are repayable on demand. 7. Called Up Share Capital The movements in issued share capital during the year were as follows: 2007 2007 2006 2006 Ordinary shares of 0.1 pence No '000 £'000 No '000 £'000 Authorised Ordinary shares of 0.1 pence 244,000 244 244,000 244 £1 Convertible Ordinary shares 6 6 6 6 250 250 Allotted, called up and fully paid Ordinary shares of 0.1 pence 112,021 112 108,102 108 £1 Convertible Ordinary shares 6 6 6 6 118 114 Included in share capital are 6,000 £1 Convertible Ordinary shares. The Convertible Ordinary shares carry, in proportion to the number of Ordinary shares they convert into, the same rights to dividends, voting and return of capital as the Ordinary shares. They are convertible at the option of the holders according to a pre-determined formula at any time in the five years from the Company's admission to AIM, 17 December 2003, or, to the extent not converted by 17 December 2008, at the rate of 396 Ordinary shares for each Convertible Ordinary share held at the fifth anniversary of Admission. On the basis of the 31 December 2007 share price of 83.25 pence, the Convertible Ordinary shares would convert into the minimum 2,376,000 Ordinary shares. Ordinary shares of 0.1pence each No. '000 £'000 Allotted and fully paid At 1 January 2007 108,102 108 Issued during the year 3,919 4 At 31 December 2007 112,021 112 The Ordinary shares issued during the period comprise 2,744,021 issued in April 2007 and 1,175,302 issued in December 2007 in relation to the deferred consideration payable for the acquisition of RPH. In addition to the above, the Company has authorised 50,000 £1 redeemable preference shares, none of which have been allotted. If they were to be allotted these shares would be classified as a liability in accordance with FRS 25. 8. Reserves Capital Profit Share Share redemption Merger and loss capital premium reserve reserve account Total £'000 £'000 £'000 £'000 £'000 £'000 Company At 1 January 2006 112 1,998 50 79,287 23,785 105,232 Issue of deferred consideration shares - - - 1,690 - 1,690 Share based payment credit - - - - 554 554 Issue of new shares 2 420 - - - 422 Dividend payments - - - - (6,821) (6,821) Profit for the year - - - - 2,494 2,494 At 31 December 2006 114 2,418 50 80,977 20,012 103,571 At 1 January 2007 114 2,418 50 80,977 20,012 103,571 Issue of deferred consideration shares 4 - - 5,590 - 5,594 Share based payment credit - - - - 671 671 Dividend payments - - - - (1,991) (1,991) Profit for the year - - - - 1,102 1,102 At 31 December 2007 118 2,418 50 86,567 19,794 108,947 This information is provided by RNS The company news service from the London Stock Exchange

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