Final Results

10th Mar 2008 07:02

Raven Russia Limited10 March 2008 10 March 2008 Raven Russia Limited ("Raven Russia" or the "Company") Results for the period to 31 December 2007 The Board of Raven Russia is pleased to release below the results for the yearended 31 December 2007. Highlights • 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 (9.65cents))• EPS - diluted 11.18p (22.32cents) (2006: 4.79p (9.62cents))• 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 Official List *Adjusted NAV is calculated gross of deferred tax on revaluation gains Anton Bilton, Chairman of the Property Adviser to Raven Russia said: "RavenRussia's great progress vindicates our effort and investment over the last fouryears. The Russian economy is developing quickly and we are providing keylogistics infrastructure across the country. We have a large excess of tenantdemand over supply for our asset type and consequently rents are rising. We areachieving yields on cost in excess of 13% and are financing at an interest costof below 7%". Richard Jewson, Chairman of Raven Russia said: "I am, delighted with theseresults. The high level of profitability underlines the success of RavenRussia's business model and the refinancing of completed assets demonstrates ourability to create a high quality institutional portfolio in this excitingmarket. The Group's strong profits are providing a platform for our progressivedividend policy and allow our investors to share in the success of the Russianeconomy in which we operate". For further enquiries please contact; Jeremy CareyTavistock Communications 020 7920 3150 Bruce Garrow 020 7260 1242Nick Westlake 020 7260 1345Numis Securities Chairman's Statement The Board is pleased to announce the results of Raven Russia Limited (RavenRussia) for the year ended 31 December 2007. The year has seen considerable progress in creating Raven Russia's high qualityportfolio of warehouses in Russia and we remain on target to create a portfoliocomprising 2.4 million square metres at an estimated end value of $2.4 billionincluding VAT, producing a yield on cost to the Group of 14%. Since the year end we have agreed lettings comfortably above budgeted levels anddrawn financing of $179 million at an average cost of borrowing to the group of6.6%. The prospect of creating a portfolio yielding in excess of 13% on cost at afinancing rate of below 7% is likely to create substantial return forshareholders through dividend and capital appreciation. The Russian business environment continues to improve and there is a strong needfor investment in the logistics infrastructure, which the Company is best placedto provide. Results Overview The Company is well into its development programme and the majority of assetsand liabilities are now denominated in US Dollars. As explained in the half yearresults, this has triggered a change in the Company and Group's functionalcurrency from Sterling to US Dollars. We have also adopted a change in reportingcurrency to US Dollars. Comparative information has been restated whereappropriate. The Group has recorded profits of $95.2 million (2006: $32.6 million) for theyear to 31 December 2007, including net revaluation gains of $60.8 million(2006: $5.3 million). This gives earnings per share (EPS) of 11.20p (22.36cents) (2006: 4.80p (9.65 cents) and an adjusted net asset value (NAV) per shareof 115p ($2.30) (2006: 107p ($2.14)) after paying dividends of $39.6 million(2006: $17.1 million) in the year. Our four, fully let, income producing assets have generated net income in theyear of $25.9 million. In addition, the first phase of our Istra project wascompleted in December 2007 and together, these assets will produce an annualisednet rental income of $34.7 million and an ungeared, yield on cost of 13%. These investment assets have been independently valued by Jones LangLasalle(JLL) at 31 December 2007 to have a combined value of $346 million, an uplift of$86 million compared to a total cost of $260 million and an uplift of 34% since31 December 2006 or date of acquisition if later. This results in a revaluationgain in the current financial year of $80 million and an implied, ungeared yieldof 10%. As noted below, the Board takes a conservative approach to the valuationof assets under construction, carrying them on balance sheet at cost. Therefore,the revaluation gain takes no account of any premium attributable to thoseassets. Investment income generated from our cash resources totalled $24 million (2006:$29 million) and hedging instruments produced a net gain of $3million (2006:nil). Assets under construction, carried on our balance sheet at cost, total $247million (2006: $52 million) with cash balances of $481 million (2006: $756million). Financing We began drawing on refinancing facilities in November and had drawn $89.3million (2006: nil) by the year end. A further $89.7 million was drawn inJanuary 2008. Therefore we have refinanced all investment properties other thanthe first phase of Istra. These refinancing transactions have generated cash of$179 million for Raven Russia, a loan to cost ratio (and return of equityinvested) of 83% and a loan to value ratio of 64%. Interest rate hedging of exposure to USLIBOR is in place, with $41.3 million ofthe debt drawn capped for 5 years at a ceiling of 5.50% plus margin and $137.7million fixed for 5 years with interest rate swaps at a weighted average rate of3.92% plus margin. The current weighted average cost of debt to the Group is 6.60%. The ungeared,yield on cost of the properties refinanced is 13%. We are currently finalising facility documents on $213 million of constructiondebt, to be drawn over the next 6 months and are working on taking a further$397 million through credit approval process with various banks. Since the beginning of the last quarter of 2007, the global banking market hasbeen in turmoil. At the half year, we had predicted drawing on all of ourinvestment financing facilities and obtaining credit approval on $503 million ofconstruction debt by this time. We have drawn all investment facilities and havegained approval on $213 million of construction debt to date. A further $397million is awaiting credit approval which we expect to be achieved shortly. Thisdemonstrates both the quality of our projects and our balance sheet, as eachlead bank has underwritten the approved amounts without a syndicationrequirement and all indications are that this will also be the case on theamounts going to credit, which we consider to be a significant achievement inthe current climate. We are also working with our banking partners to putfurther investment financing packages in place as completed assets come onstream during 2008. There is no doubt that this year will be a tough year for raising debt financebut we are demonstrating that, with the high quality assets that we areproducing, it is possible and on competitive terms. Hedging Details of our interest rate hedging instruments are given above. We have alsotaken out currency hedging derivatives where we have exposure to Roubledenominated construction contracts. At the year end, we had Non DeliverableForward (NDF) instruments with a mark to market gain of $1 million. Share Price and Dividends Our share price at the year end was 89p and has continued to under perform sincethe year end in line with other companies in the property sector. This hascaused some disappointment to your Board and the Property Adviser as the Companyis trading at a significant discount to reported NAV. This may be expected, inthe current market, for a UK listed investment vehicle investing in the UKcommercial market with stock previously valued at yields of circa 5% or lower.However, Raven Russia operates a business model that is generating ungearedyields of 13% with funding of below 7%. We are also experiencing further yieldcompression pushing the capital value down to implied yields of 10%, which stillremains a comparatively high figure in the global market. Add to this a buoyantrental market as described later in the Property Advisers' Review and therewould appear to be no obvious correlation between the share price and theunderlying property performance of the Company. Since incorporation, we have paid dividends of 6.5p. In line with the Boardsexpressed desire to pursue a progressive distribution strategy, for the periodended 31 December 2007, the Board is proposing to pay a final divided of 4p pershare to shareholders on the register as at 28th March 2008 with an ex-dividenddate of 26th March 2008. If approved, shareholders will have received a total of6.5p per share for the full 12 months of 2007. The Company will again offer a full scrip alternative so that shareholders havethe option of receiving cash dividends or increasing their shareholdings withminimal transaction costs. As noted in the interim announcement, the Board continues to actively monitorshare buy back opportunities but remains conscious of maintaining appropriatecash resources to meet its development commitments. Outlook Your Board is extremely pleased with progress made during the year. The returnsdemonstrated on our completed assets prove that our business model has thepotential to deliver above average shareholder value and returns. Ourdevelopment programme is pushing ahead and we are confident that the assetscompleting in the current year will attract high quality tenants. We are alsoactively investigating a move from AIM to the Official List as we feel thecurrent size, increasing maturity and ambitions of the Company are moreaccurately reflected by listing on London's main board. Further updates will beprovided on progress for a move in due course. In conclusion, your Board looks forward to another year of progress in 2008 andone we believe will continue to demonstrate the tremendous success and futurepotential of your Company. Finally, I would like to thank our employees and advisers for all their effortsand contributing to our success. Richard JewsonChairman10 March 2008 PROPERTY REVIEW In the twelve months ending 31 December 2007 Raven Russia signed four propertyacquisitions excluding Megalogix. The total end value of these projects oncebuilt and let is circa $344 million. In total since inception the Company hascommitted 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 tohigh 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 StPetersburg which are all fully let and producing a yield on cost on an ungearedbasis of 13%. The first phase of Istra has also been completed and is fully let.Our annualised rent roll at the year end stood at $34.7 million. Contracted rents on all of the Company's properties total $64.4 million perannum, represented by $34.7 million from the investment portfolio and $29.7million per annum due under pre lettings, excluding Megalogix. A further $8.8million 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 6.5years although we anticipate this will rise as prelets on mainly 10 year leasescomplete. The majority of the leases allow for the annual increase in rentsbased on US CPI providing attractive incremental cashflows. In total these properties comprise 221,800 square metres (2.39 million squarefeet) of Gross Lettable Area ("GLA") and produce an annual income ofapproximately $34.7 million on an investment of $260.3 million. The investment properties were valued at the period end by JLL in accordancewith the RICS Valuation and Appraisal guidelines. The valuations show an upliftof $80 million from 31 December 2006 (or completion if later), reflectingpositive yield compression from the date of acquisition. The Company continuesto hold its development stock at cost until each building is complete and readyfor occupation. We believe this approach, whilst more cautious than some otherRussian developers, is appropriate given the risks of development. However weare confident of creating substantial valuation uplifts for investors from thedevelopment portfolio. The rent payable on the investment portfolio is $34.7 million compared to amarket level of $37.0 million, as estimated by Jones Lang Lasalle (JLL). Notonly does this give us a very stable and reliable income stream, it also meansthe portfolio has a reversionary potential of $2.3 million. Property SQ M Type Invested To Total Annual Project Raven Date Investment Rent Status Russia ($M)* ($M)* ($M) ShareInvestment Baltia, 28,000 Warehouse 29.1 29.1 3.5 Fully let 100%Moscow Southern, 14,000 Warehouse 15.6 15.6 2.1 Fully let 100%Moscow Krekshino, 114,000 Warehouse 106 115 13.6 Fully let 100%Moscow 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 COMPLETEDShushari, 143,000 Warehouse 94 126 16.4 Q1 2008 100%St Petersburg Pulkovo 1 St 34,800 Warehouse 2.6 40 4.8 Q3 2008 100%Petersburg Pulkovo 2 St 67,000 Warehouse 5.6 65 8.5 Q2 2009 100%Petersburg Noginsk, 275,000 Warehouse 9.5 278 33.4 Q4 2008 100%Moscow 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, 55,000 Warehouse 14 56 6.7 Q3 2008 100%Moscow 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 1,525,427 483.1 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 Grouphas committed to projects with a potential area of 900,000 square metres and anend value of $800 million, anticipating a yield on cost of over 13% after profitshare and interest. In total therefore we are creating a portfolio of over $2.3billion 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 letwarehouse and office buildings. Except for Megalogix, the Company has structuredthese as forward funded projects with local development partners, combined withan investment commitment on completion. In total we are now on site building 1.5 million square metres as shown in thetable above. Of this approximately 650,000 square metres is due for delivery in2008 and the balance in 2009/2010 is subject to tenant demand. All our projects are being constructed to Grade A standards and we have ensuredthat our design allows maximum flexibility to phase development to meet therequirements of occupiers. The Company has contracted to commit an initial amount of approximately $1.2billion to the forward funded projects. A further $800 million, net of VAT, hasbeen conditionally committed to fund further phases of development and theacquisition of partners' interests in these same projects, including Megalogix. We anticipate these projects will produce total net rental income ofapproximately $229 million on an anticipated end value of $1.86 billion, net ofVAT, when built and let. We estimate the yield on investment from theseprojects is expected to be in the region of 14% after accounting for forwardfunding financing income and the Company's share of potential developmentprofits. At Shushari, St Petersburg the first phase of 65,000 square metres (0.7 millionsquare 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 outworks. The remaining two phases are expected to be completed by the summer andwe anticipate pre-letting these prior to completion of construction. At Istra, Moscow the first 50,000 square metres (0.54 million square feet) wasdelivered at the end of 2007. A long term lease has been entered into withInterleasing and a preliminary lease for the remaining space has been enteredinto with Bacardi. Phase 2, comprising 52,000 square metres (0.56 million squarefeet), is also 100% prelet to DSV on a 10 year lease and this phase is due fordelivery next month. Rents on both phases are 8% above our expectations when wecompleted the acquisition. The third phase is already on site for delivery bythe year end and negotiations with tenants are progressing well. At Noginsk, Moscow, Phase 1 of this project, 110,000 square metres (1.18 millionsquare feet), started slightly later than we had hoped although we expectdelivery by the end of 2008. The balance, up to a further 200,000 square metreswill commence once we have substantially pre-let the first phase. Our partner at EG Logistics has suffered some minor delays rezoning a small areaof land and this has pushed back the delivery date for the project until Q32008. We have already signed a prelet on 30,000 square metres with the partnerand we have now concluded an LOI on the balance of the space (24,130 squaremetres) at a rent 5% ahead of our expectations. SKF, our partners on a project to develop 108,000 square metres to the south ofMoscow are on site and expect to deliver the first 50,000 square metres by theyear end. Work at Pulkovo 1, adjacent to St Petersburg International Airport has startedand the partner is in the final stages of tendering Pulkovo 2 for a start onsite at the start of the summer. The conditions precedent necessary to close the proposed JV with RDI have yet tobe satisfied, although we continue to work with the partner to finalise these. In September we signed a development joint venture agreement with a localpartner in Kiev, Ukraine. The 20 hectare site is well located on the Kiev -Odessa highway and we have already commenced demolition of the existingbuildings on the site. With our partner we expect to deliver a total of 118,000square metres by the end of 2009. Megalogix Joint Venture The Megalogix Joint Venture has completed the acquisition of sites suitable forwarehouse development in 6 major regional cities, and has signed conditionalagreements to acquire land in a further 3 cities. Due diligence is also ongoingon a number of other opportunities in other major cities. In Rostov on Don, the first phase of the project of 100,890 square metres (1.09million square feet) has already started on site and is due for delivery by theend of 2008. Subject to tenant demand there is the potential to develop afurther 127,440 square metres (1.372 million square feet). In Novosibirsk workshave also commenced building 116,820 square metres (1.26 million square feet)which will be delivered by the end of 2008. There is good early interest fromtenants for these projects. Elsewhere we are finalising the design, permitting and tendering process for afurther 6 sites. Our plan is to commence construction once full permits andfinancing facilities are in place during the summer. In total the first phasesof these projects will provide 361,000 square metres of Grade A warehouse space,although in total there is the potential to build 1.282 million square metres. Deal Pipeline In addition to these projects we are actively considering or are in detailednegotiations on a number of other projects which meet the Company's investmentobjectives. We estimate that the end value of these projects could amount inaggregate to approximately $1.25 billion, net of VAT and excluding the Company'sshare 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 forproperty. If tenants require space then that demand creates stable or increasingrents which underpin value. An investor will buy a stable rental income streamon an aggressive yield if they can see underlying occupier demand and thepotential for rental increase at the expiry of the lease. Tenant demand in Russia is still very strong, driven by a number of factors. Theconsumer driven retail boom referred to in last year's Property Advisors reviewis still in full swing. The average Russian is spending money and the majorretailers are opening more and more stores across the country. Ikea has opened 10 mega mall retail developments in Russia totaling 1.67 millionsquare metres and has plans for 6 further stores. They are not alone inexpanding quickly: many high profile European retailers are increasing theirofferings at a rapid rate including Auchan Castorama, Media Markt and Metro. Weshould of course not forget the Russian retailers who are also in on the act. All this is good for Raven Russia as retailers and the FMCG companies needdistribution space. The impact of the credit crunch is being felt in Russia and although agentsestimate 1.3 million square metres of warehouse space will be delivered inMoscow in 2008, we doubt it will actually be more than 750,000 square metres.With demand remaining strong we expect rents to continue to rise, although ourfocus is on securing the best tenants on the longest term leases; security ofcash flow being paramount. It is also worth noting tenants have income from themajority of their clients in Roubles and the decline in the US Dollar has maderents much more affordable. As mentioned above rents are rising and tenant demand is strong. This is goodnews for values which we expect to continue to grow. When this growth happenswill be determined, to some extent, by the availability of debt. We have already seen compression from mid teen initial yields to high singledigits, continued growth is likely due to the excellent demand dynamics. Duringthe first six months of 2007 yield compression was substantial, in the secondsix months of the year much less so, unsurprisingly. We have seen increasing investor interest in Russia over the past year with newnames entering the market looking for stock. Now the presidential election isover and the political outlook is clearer we expect these investors to commitfunds into the market. Raven Russia Property Management Limited We have built the best and most experienced team in the warehouse market overthe past 2.5 years. We have recruited heavily and have a team that can sourceand close deals, build buildings, find tenants and arrange debt. In everythingwe do we are setting new standards and often creating a way to integrate westernbest practice and Russian standards. Outlook This year the portfolio will change dramatically as we turn land into buildingswith tenants and construction projects into income producing assets. Our focusis building on time and budget, leasing to good tenants on long term leases, andrefinancing for the long term at competitive margins and loan to values. Raven Russia Property Management Limited10 March 2008 Independent auditors' report to the members of Raven Russia Limited We have audited the Group and parent company financial statements ("theFinancial Statements") of Raven Russia Limited for the year ended 31 December2007, which comprise the Consolidated and Company Income Statement, Consolidatedand Company Balance Sheet, Consolidated and Company Cash Flow Statement,Consolidated and Company Statement of Change in Equity and the related notes 1to 32. These Financial Statements have been prepared under InternationalFinancial Reporting Standards in accordance with the accounting policies as setout on pages 33 to 39. This report is made solely to the Company's members, as a body, in accordancewith Section 64 of the Companies (Guernsey) Law, 1994. Our audit work isundertaken so that we might state to the Company's members those matters we arerequired to state to them in an auditors' report and for no other purpose. Tothe fullest extent permitted by law we do not accept or assume responsibility toanyone other than the Company and the Company's members as a body, for our auditwork, for this report, or for the opinions we have formed. Respective responsibilities of the directors and auditors As described in the Directors' Responsibility Statement within the Directors'Report, the Company's directors are responsible for the preparation of theFinancial Statements in accordance with applicable law and InternationalFinancial Reporting Standards ("IFRS"). Our responsibility is to audit the Financial Statements in accordance with therelevant legal and regulatory requirements and International Standards onAuditing (UK and Ireland). We report to you our opinion as to whether the Financial Statements give a trueand fair view and are properly prepared in accordance with the Companies(Guernsey) Law, 1994. We also report to you if, in our opinion, the Directors'Report is not consistent with the Financial Statements, if the Company has notkept proper accounting records, if we have not received all the information andexplanations we require for our audit, or if the information specified by law isnot disclosed. We read the other information included in the Annual Report and consider whetherit is consistent with the audited Financial Statements. This other informationcomprises only the Chairman's Statement, Property Review, Directors' Report andCorporate Governance. We consider the implications for our report if we becomeaware of any apparent misstatements or material inconsistencies with theFinancial Statements. Our responsibilities do not extend to any otherinformation. Basis of opinion We conducted our audit in accordance with International Standards on Auditing(UK and Ireland) issued by the Auditing Practices Board. An audit includesexamination, on a test basis, of evidence relevant to the amounts anddisclosures in the Financial Statements. It also includes an assessment of thesignificant estimates and judgements made by the Directors in the preparation ofthe Financial Statements, and of whether the accounting policies are appropriateto the Company's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information andexplanations which we considered necessary in order to provide us withsufficient evidence to give reasonable assurance that the Financial Statementsare free from material misstatement, whether caused by fraud or otherirregularity or error. In forming our opinion we also evaluated the overalladequacy of the presentation of information in the Financial Statements. Opinion In our opinion: • The Group Financial Statements give a true and fair view, in accordance with IFRS, of the state of the Group's affairs at 31 December 2007 and of its profit for the year then ended. • The Parent Company Financial Statements give a true and fair view, in accordance with IFRS, of the state of the Company's affairs at 31 December 2007 and of its profit for the year then ended. • The Financial Statements have been properly prepared in accordance with the Companies (Guernsey) Law, 1994. BDO Stoy Hayward LLP BDO Novus Limited 10 March 2008 10 March 2008 RAVEN RUSSIA LIMITED Consolidated Income StatementFor the year ended 31 December 2007 2007 2006 Revenue Capital Total Revenue Capital Total Notes US$'000 US$'000 US$'000 US$'000 US$'000 US$'000-----------------------------------------------------------------------------------------------------Gross rental and 4 38,522 - 38,522 16,949 - 16,949related income Property operating expenditure andrelated cost (12,643) - (12,643) (5,977) - (5,977) ----------------------------------------------------------------------Net rental and related income 25,879 - 25,879 10,972 - 10,972 ----------------------------------------------------------------------Administrative expenses 5 (18,480) - (18,480) (9,053) - (9,053) Foreign currency gains 2,432 - 2,432 153 - 153 ----------------------------------------------------------------------Operating expenditure (16,048) - (16,048) (8,900) - (8,900) -----------------------------------------------------------------------Operating profit before gains oninvestment properties 9,831 - 9,831 2,072 - 2,072 ----------------------------------------------------------------------Unrealised gains on revaluation ofinvestment properties 10 - 79,659 79,659 - 6,997 6,997 ----------------------------------------------------------------------Operating profit 9,831 79,659 89,490 2,072 6,997 9,069 ----------------------------------------------------------------------Finance income 6 29,849 - 29,849 30,039 - 30,039 Finance expense 6 (1,798) - (1,798) (2,073) - (2,073) ----------------------------------------------------------------------Profit before tax 37,882 79,659 117,541 30,038 6,997 37,035 Tax 7 (3,389) (18,898) (22,287) (2,791) (1,679) (4,470) ----------------------------------------------------------------------Net profit for the year 34,493 60,761 95,254 27,247 5,318 32,565 ======================================================================Earnings per share - basic (cents) 8 22.36 9.65 ===== ==== Earnings per share - 8 22.32 9.62diluted (cents) ===== ==== Company Income StatementFor the year ended 31 December 2007 2007 2006 Notes US$'000 US$'000--------------------------------------------------------------------------------Revenue 4 63,398 39,796 =========================== Administration expenses 5 28,591 15,813Foreign currency losses 7,501 12,753 ---------------------------Operating expenditure 36,092 28,566 ---------------------------Profit before tax 27,306 11,230 ---------------------------Tax - - ---------------------------Net profit for the year 27,306 11,230 =========================== All items in the above statement derive from continuing operations. The accompanying notes are an integral part of this statement. Consolidated Balance SheetAs at 31 December 2007 2007 2006 Notes US$'000 US$'000 Non-current assetsInvestment property 10 346,250 140,755Investment property under construction 11 246,768 51,941Property, plant and equipment 906 -Intangible assets 12 2,265 -Deferred tax asset 20 1,876 1,025Other receivables 15 88,756 21,920 ------------------------ 686,821 215,641 ------------------------Current assetsTrade and other receivables 16 27,910 13,963Forward currency derivative contracts 17 1,030 -Cash and cash equivalents 18 480,829 756,183 ------------------------ 509,769 770,146 ------------------------ ------------------------Total assets 1,196,590 985,787 ------------------------Non-current liabilitiesInterest bearing loans and borrowings 19 128,256 17,320Deferred tax liability 20 25,256 5,517Other payables 21 12,432 5,203 ------------------------ 165,944 28,040 ------------------------Current liabilitiesTrade and other payables 22 56,378 44,424Interest bearing loans and borrowings 19 4,804 2,873 ------------------------ 61,182 47,297 ------------------------ ------------------------Total liabilities 227,126 75,337 ------------------------ ------------------------Net assets 969,464 910,450 ======================== EquityShare capital 23 8,648 8,538Share premium 24 11,180 -Special reserve 24 870,692 882,942Capital reserve 24 68,994 8,233Warrant reserve 24 2,571 2,571Share options reserve 24 4,670 2,474Share based payment reserve 24 - 2,815Retained earnings 24 22,691 15,504Translation reserve 24 (19,982) (12,627) ------------------------Total equity 969,464 910,450 ======================== Net asset value per share (dollars) 25 2.25 2.14 ======================== Company Balance SheetAs at 31 December 2007 2007 2006 Notes US$'000 US$'000--------------------------------------------------------------------------------Non-current assets Investment in subsidiary 13 611,651 162,495undertakings Current assetsTrade and other receivables 16 6,870 266 Cash and cash equivalents 18 288,340 743,145 ------------------------- 295,210 743,411 -------------------------Total assets 906,861 905,906 -------------------------Current liabilitiesTrade and other payables 22 9,100 6,566 -------------------------Total liabilities 9,100 6,566 ------------------------- Net assets 897,761 899,340 =========================EquityShare capital 23 8,648 8,538Share premium 24 11,180 -Special reserve 24 870,692 882,942Warrant reserve 24 2,571 2,571Share options reserve 24 4,670 2,474Share based payment reserve 24 - 2,815Retained earnings 24 - - -------------------------Total equity 897,761 899,340 =========================Net asset value per share (dollars) 25 2.09 2.11 ========================= Consolidated Statement of Changes in Equity Share Share Based Share Share Special Capital Warrant Options Translation Payment Retained Capital Premium Reserve Reserve Reserve Reserve Reserve Reserve Earnings Total Notes US£'000 US£'000 US£'000 US£'000 US£'000 US£'000 US£'000 US£'000 US£'000 US£'000 At 1 January 2006 3,076 - 288,253 2,915 2,571 1,051 - - (2,549) 295,317 Net profit for the year - - - - - - - - 32,565 32,565 Translation onconsolidation - - - - - - (12,627) - - (12,627) ------------------------------------------------------------------------------------------Total recognised incomefor the year - - - - - - (12,627) - 32,565 19,938 ------------------------------------------------------------------------------------------Issue of ordinaryshare capital, net of issue costs 5,420 597,685 - - - - - - - 603,105 Shares issued in respectof Property Adviser'sfees 42 4,885 - - - - - - - 4,927 Conversion of sharepremium (602,570) 602,570 - - - - - - - Dividends paid 9 - - - - - - - - (17,075)(17,075) Transfer from special reserves to retainedearnings - - (7,881) - - - - - 7,881 - Transfer in respect ofgains on investmentproperties - - - 5,318 - - - - (5,318) - Share based paymentexpense 26(b) - - - - - 1,423 - - - 1,423 Property Adviser's feesto be settled by postbalance sheet issue ofshares - - - - - - - 2,815 - 2,815 ------------------------------------------------------------------------------------------At 31 December 2006 8,538 - 882,942 8,233 2,571 2,474 (12,627) 2,815 15,504 910,450 ------------------------------------------------------------------------------------------ For the year ended31 December 2007 Net profit for theyear - - - - - - - - 95,254 95,254 Translation onconsolidation - - - - - - (7,355) - - (7,355) ------------------------------------------------------------------------------------------Total recognised incomefor the year - - - - - - (7,355) - 95,254 87,899 ------------------------------------------------------------------------------------------Shares issued inrespect of PropertyAdviser's fees 25 2,790 - - - - - (2,815) - - Scrip dividend issueof ordinary sharecapital 85 8,390 - - - - - - - 8,475 Dividends paid 9 - - - - - - - - (39,556)(39,556) Transfer from special reserves to retainedearnings - - (12,250) - - - - - 12,250 - Transfer in respect ofgains on investmentproperties - - - 60,761 - - - - (60,761) - Share based paymentexpense 26(b) - - - - - 2,196 - - - 2,196 ------------------------------------------------------------------------------------------At 31 December 2007 8,648 11,180 870,692 68,994 2,571 4,670 (19,982) - 22,691 969,464 ------------------------------------------------------------------------------------------ The accompanying notes are an integral part of this statement. Company Statement of Changes in Equity Share Share Based For the year ended Share Share Special Warrant Options Payment Retained 31 December 2006 Capital Premium Reserve Reserve Reserve Reserve Earnings Total Notes US£'000 US£'000 US£'000 US£'000 US£'000 US£'000 US£'000 US£'000 -------------------------------------------------------------------------------------------------------At 1 January 2006 3,076 - 288,253 2,571 1,051 - (2,036) 292,915 Net profit and total recognisedgain for the year - - - - - - 11,230 11,230 Issue of ordinary share capital, netof issue costs 5,420 597,685 - - - - - 603,105 Shares issued in respect of PropertyAdviser's fees 42 4,885 - - - - - 4,927 Conversion of share premium - (602,570) 602,570 - - - - - Dividends Paid 9 - - - - - - (17,075) (17,075) Transfer from special reserves toretained earnings - - (7,881) - - - 7,881 - Share based payment 26(b) - - - - 1,423 - - 1,423expense Property Adviser's Interestbearing loans and borrowings fees to be settledby post balancesheet issue ofshares - - - - - 2,815 - 2,815-------------------------------------------------------------------------------------------------------At 31 December 2006 8,538 - 882,942 2,571 2,474 2,815 - 899,340------------------------------------------------------------------------------------------------------- For the year ended31 December 2007 Net profit and total recognisedgain for the year - - - - - - 27,306 27,306 Shares issued in respect of PropertyAdviser's fees 25 2,790 - - - (2,815) - - Scrip dividend issue of ordinaryshare capital 85 8,390 - - - - - 8,475 Dividends Paid 9 - - - - - - (39,556) (39,556) Transfer from special reserves toretained earnings - - (12,250) - - - 12,250 - Share based payment 26(b) expense - - - - 2,196 - - 2,196-------------------------------------------------------------------------------------------------------At 31 December 2007 8,648 11,180 870,692 2,571 4,670 - - 897,761------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of this statement. Consolidated Cash Flow StatementFor the year ended 31 December 2007 2007 2006 Notes US$'000 US$'000 Cash flows from operating activities Profit before tax 117,541 37,035 Adjustments for:Investment income 6 (29,849) (30,039)Finance expense 6 1,798 2,073Gains on revaluation of investment properties 10 (79,659) (6,997)Foreign exchange loss arising from non-operating activities (11,161) -Recognised share based payments 26(b) 2,196 279Performance fee to be settled by share issue - 1,407 --------------------- 866 3,758 Increase in operating trade and other receivables (30,852) (10,441)Increase in operating trade and other payables 16,869 11,983 --------------------- (13,117) 5,300 Tax paid (2,327) (877) ---------------------Cash (used in) / generated from operations (15,444) 4,423 ---------------------Cash flows from investing activities Purchase of investment properties (55,853) (12,919)Payments for investment properties under construction (261,004) (110,005)Capital expenditure (819) -Acquisitions (1,825) -Loans advanced (64,371) (20,612)Loans repaid 15,154 969Investment income received 29,849 29,619 ---------------------Net cash used in investing activities (338,869) (112,948) ---------------------Cash flows from financing activities Proceeds from the issue of share capital - 603,158Issue costs - (52)Long term borrowings 95,838 -Other borrowings 34,245 -Repayments of borrowings (17,216) (2,366)Bank borrowing costs paid 6 (1,798) (2,073)Dividends paid (31,081) (17,075) ---------------------Net cash from financing activities 79,988 581,592 ---------------------Net (decrease) / increase in cash and cash equivalents (274,325) 473,067 ===================== Opening cash and cash equivalents 18 756,183 283,619Effect of foreign exchange rate changes (1,029) (503) ---------------------Closing cash and cash equivalents 18 480,829 756,183 ===================== The accompanying notes are an integral part of this statement. Company Cash Flow StatementFor the year ended 31 December 2007 2007 2006 Notes US$'000 US$'000-------------------------------------------------------------------------------------------Cash flows from operating activities Profit before tax 27,306 11,230 Adjustments for:Foreign exchange loss arising from non-operating activities 7,501 11,285Recognised share based payments 26(b) 2,196 1,423Performance fee to be settled by share issue - 2,815Investment income 4 (23,556) (28,756)Interest accrued included in the carrying value of subsidiary 4 (39,842) (11,040) ------------------------- (26,395) (13,043)Increase in operating trade and other receivables 105 (139)Increase in operating trade and other payables 1,211 2,360 -------------------------Cash used in operations (25,079) (10,822) ------------------------- Cash flows from investing activities Investment in subsidiary undertakings (422,201) (141,386)Loans repaid - 969Investment income received 23,556 28,756Dividends received - 117 ------------------------- Net cash used in investing activities (398,645) (111,544) -------------------------Cash flows from financing activities Proceeds from the issue of share capital - 603,158Issue costs - (52)Dividends paid (31,081) (17,075) -------------------------Net cash (used in) / from financing activities (31,081) 586,031 -------------------------Net (decrease) / increase in cash and cash (454,805) 463,665equivalents ========================== Opening cash and cash equivalents 18 743,145 279,480 -------------------------Closing cash and cash equivalents 18 288,340 743,145 ======================== The accompanying notes are an integral part of this statement. Notes to the Financial StatementsFor the year ended 31 December 2007 1 General information Raven Russia Limited (the "Company") and its subsidaries (together the "Group")is a property investment group specialising in commercial real estate in Russia. The Company is a limited liability company incorporated and domiciled inGuernsey. The address of its registered office is Regency Court, GlategnyEsplanade, St Peter Port, Guernsey. These financial statements were approved for issue by the Board of Directors on9 March 2008 and signed on the Board's behalf by Stephen Coe and David Moore. 2 Accounting policies Basis of preparation The principal accounting policies adpoted in the preparation of the financialstatements are set out below. The policies have been consistently applied to allyears presented, unless otherwise stated. These financial statements have been prepared in accordance with InternationalFinancial Reporting Standards, International Accounting Standards andInterpretations (collectively "IFRS") issued by the International AccountingStandards Board ("IASB"). The preparation of financial statements in conformity with IFRS requires the useof certain critical accounting estimates. It also requires management toexercise its judgement in the process of applying the accounting policies. Theareas involving a high degree of judgement or complexity, or areas whereassumptions and estimates are significant to the financial statements aredisclosed in note 3. Changes in accounting policies (a) New standards, amendments to published standards and interpretations toexisting standards effective in 2007 adopted by the Group IFRS 7, Financial Instruments: disclosures and a complementary amendment to IAS1, Presentation of Financial Statements - capital disclosures. IFRS 7 introducesnew requirements aimed at expanding the disclosure of information about theGroup's financial instruments. It requires disclosure of qualitative andquantitative information about exposure to risks arising from financialinstruments. The amendment to IAS 1 introduces disclosures about the level andmanagement of an entity's capital. The Company and its Group have applied IFRS 7and the amendment to IAS 1 in these financial statements, with the relevantdisclosures included in note 29. The IASB also issued various interpretations that effective 1 January 2007,which had no impact on the financial statements. These are IFRIC 7, IFRIC 8,IFRIC 9 and IFRIC 10. (b) Standards, amendments and interpretations to published standards not yeteffective Certain new standards, amendments and interpretations to existing standards havebeen published that are mandatory for later accounting periods and which havenot been adopted early. These are: • IFRS 8: Operating segments (effective for accounting periods beginning on or after 1 January 2009). This standard sets out requirements for the disclosure of information about an entity's operating segments and replaces IAS 14. As this is a disclosure standard it will not have any impact on the results of net assets of the Company or its Group. • IAS 23: Borrowing costs (revised) (effective for accounting periods beginning on or after 1 January 2009). This amendment will have no impact on the results or net assets of the Company or its Group. • IFRIC 11: IFRS 2 Group and treasury share transactions (effective for accounting periods beginning on or after 1 March 2007). The Group is currently assessing the impact of this interpretation on the financial statements. • Revised IFRS 3: Business combinations and complementary amendments to IAS 27 Consolidated and separate financial statements (both effective for accounting periods beginning on or after 1 July 2009). The Group is currently assessing the impact of these changes on the financial statements. • Amendment to IFRS 2: Share-based payments - vesting conditions and cancellations (effective for accounting periods beginning on or after 1 January 2009). The Group is currently assessing the impact of this amendment on the financial statements. The IASB has also issued IFRIC 12 Service concession arrangements, IFRIC 13Customer loyalty programmes and IFRIC 14 re IAS 19 the limit on a definedbenefit asset, minimum funding requirements and their interaction and IAS 32,all of which are not relevant to the operations of the Company or the Group. Basis of consolidation The consolidated financial statements incorporate the financial statements ofthe Company and the special purpose vehicles controlled by the Company, made upto 31 December each year. Control is achieved where the Company has the power togovern the financial and operating policies of an investee entity so as toobtain benefit from its activities. Investment properties have been acquired through special purpose vehicles(SPVs). In the opinion of the Directors, these transactions did not meet thedefinition of a business combination as set out in IFRS 3 "BusinessCombinations". Accordingly the transactions have not been accounted for asbusiness acquisitions and instead the financial statements reflect the substanceof the transactions, which is considered to be the purchases of investmentproperties. The results of subsidiaries acquired or disposed of during the year are includedin the consolidated income statement from the effective date of acquisition orup to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of entitiesacquired to bring the accounting policies used into line with those used by theGroup. All intra-group transactions, balances, income and expenses are eliminated onconsolidation. Joint ventures A joint venture is a contractual arrangement whereby two or more partiesundertake economic activity that is subject to joint control. The Groupundertakes its joint ventures through jointly controlled entities. Theconsolidated financial statements include the Group's proportionate share ofthese entities' assets, liabilities, income and expenses on a line by line basisfrom the date on which joint control commences to the date on which jointcontrol ceases. Any premium paid for an interest in a jointly controlled entityabove the fair value of Group's share of identifiable assets, liabilities andcontingent liablities is accounted for in accordance with the goodwill policy. Goodwill Goodwill represents the excess of the cost of a business combination over theinterest in the fair value of identifiable assets, liabilities and contingentliabilities acquired. Cost comprises the fair values of assets given,liabiltiies assumed and equity instruments issued, plus any direct costs ofacquisition. Goodwill is capitalised as an intangible asset with any impairment in carryingvalue being charged to the consolidated income statement. Impairment tests ongoodwill are undertaken annually at the financial year end. Impairment chargesare included in the administrative expenses line item in the consolidated incomestatement. An impairment loss recognised for goodwill is not reversed. Revenue recognition Rental income from operating leases is recognised in income on a straight-linebasis over the lease term. Rent is billed in advance and then allocated to theappropriate period. Therefore, deferred revenue generally represents proportionof rentals invoiced in advance as at the reporting date and any advance paymentsfrom tenants. Revenue is recognised when it is probable that the economicbenefits associated with the transaction will flow to the Group and the amountof revenue can be measured reliably. Interest income is accrued on a time basis, by reference to the principaloutstanding and at the effective interest rate applicable. Leasing All of the Group's properties are leased out under operating leases and areincluded in investment property in the balance sheet. Foreign currency translation a) Functional and presentation currency Items included in the financial statements of each of Group entity are measuredin the currency of the primary economic environment in which the entity operates(the "functional currency"). On 5 July 2007 the Company converted substantiallyall of its sterling assets and income streams to United States dollars, whichthe directors determined, resulted in the Company's functional currency changingfrom sterling to United States dollars. In accordance with IAS 21 the Companyconverted all of its assets, liabilities, income and expenses at the sterlingUnited States dollar spot rate on 5 July 2007. At the same time the directorsresolved to change the presentation currency of the Company and its Group fromsterling to United States dollars. b) Transactions and balances Foreign currency transactions are translated into the functional currency usingthe exchange rates prevailing at the dates of the transactions. Foreign exchangegains and losses resulting from the settlement of such transactions and from thetranslation at the year-end exchange rates of monetary assets and liabilitiesdenominated in foreign currencies are recognised in the income statement. c) On consolidation The results and financial position of all the Group entities that have afunctional currency different from the presentation currency are translated intothe presentation currency as follows: (i) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of the balance sheet; (ii) income and expenses for each income statement are translated at the average exchange rate prevailing in the period; and (iii) all resulting exchange differences are recognised as a separate component of equity. On consolidation, the exchange differences arising from the translation of thenet investment in foreign entities are taken to shareholders' equity. When aforeign operation is sold, such exchange differences are recognised in theincome statement as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreignentity are treated as assets and liabilities of the foreign entity andtranslated at the closing rate. Taxation The Company is exempt from Guernsey taxation on income derived outside ofGuernsey and bank interest earned in Guernsey under the Income Tax (ExemptBodies) (Guernsey) Ordinance, 1989. A fixed annual fee of £600 is payable to theStates of Guernsey in respect of this exemption. No charge to Guernsey taxationwill arise on capital gains. The Group is liable to Russian tax arising on the activities of its Russianoperations. The Group is liable to Cypriot tax arising on the activities of its Cypriotoperations. The tax expense represents the sum of the tax currently payable and deferredtax. The tax currently payable is based on taxable profit for the year. Taxableprofit differs from net profit as reported in the income statement because itexcludes items of income and expense that are taxable or deductible in otheryears and it further excludes items that are never taxable or deductible. TheGroup's liability for current tax is calculated using tax rates that have beenenacted or substantively enacted by the balance sheet date. Deferred tax is the tax expected to be payable or recoverable on differencesbetween the carrying amount of assets and liabilities in the financialstatements and the corresponding tax bases used in the computation of taxableprofit, and is accounted for using the balance sheet liability method. Deferredtax liabilities are generally recognised for all taxable temporary differencesand deferred tax assets are recognised to the extent that it is probable thattaxable profits will be available against which deductible temporary differencescan be utilised. Such assets and liabilities are not recognised if the temporarydifference arises from goodwill or from the initial recognition (other than in abusiness combination) of other assets and liabilities in a transaction thataffects neither the taxable profit nor the accounting profit. The carrying amount of deferred tax assets is reviewed at each balance sheetdate and reduced to the extent that it is no longer probable that sufficienttaxable profits will be available to allow all or part of the asset to berecovered. Deferred tax is calculated at the tax rates that are expected to apply in theperiod when the liability is settled or the asset realised. Deferred tax ischarged or credited in the income statement, except when it relates to itemscharged or credited directly to equity, in which case the deferred tax is alsodealt with in equity. Investment property Property held to earn rentals and/or for capital appreciation is classified asinvestment property. Investment property comprises freehold land and freehold buildings. Investment property is measured initially at its cost, including relatedtransaction costs. After initial recognition, investment property is carried at fair value. TheGroup has appointed Jones Lang LaSalle as property valuers to prepare valuationson a semi-annual basis. Valuations will be undertaken in accordance withtheappropriate sections of the current Practice Statements contained in the RoyalInstitution of Chartered Surveyors Appraisal and Valuation Standards, 5thEdition (the "Red Book"). This is an internationally accepted basis ofvaluation. Gains or losses arising from changes in the fair value of investmentproperty are included in the income statement in the period in which they arise. The acquisition of a corporate vehicle, whose only activity is that of holdingthe targeted investment property, is accounted for based on the substance of thetransaction. The Directors consider the substance of such transactions to beproperty acquisitions as opposed to a business combination under IFRS 3. Investment property under construction Properties in the course of construction for rental purposes, or for purposesnot yet determined are carried at cost, less any recognised impairment loss.Cost includes professional fees and borrowing costs capitalised in accordancewith the Group's accounting policy. Upon practical completion of theconstruction of property the property is transferred to investment property atfair value, with the resulting gain or loss reflected in the Consolidated IncomeStatement. Borrowing costs Borrowing costs that are directly attributable to the construction of investmentproperty are capitalised from the date of commencement of the project, until theconstruction is complete. All other borrowing costs are recognised in the income statement in the periodin which they are incurred. Financial assets The Group and the Company classify their financial assets into one of thecategories discussed below, depending upon the purpose for which the asset wasacquired. The Group and the Company have not classified any of its financialassets as held to maturity or as assets available-for-sale. Unless otherwise indicated, the carrying amounts of the Groups financial assetsare a reasonable approximation of their fair values. a) Fair value through profit or loss This category comprises only in-the-money derivatives (see financial liabilitiespolicy for out-of money derivatives), which are carried at fair value withchanges in the fair value recognised in the income statement in finance incomeor expense line item. b) Loans and receivables These are non-derivative financial assets with fixed or determinable paymentsthat are not quoted in an active market. In the case of the Company and itsGroup, loans and receivables comprise trade and other receivables, intra-grouploans and cash and cash equivalents. Loans and receivables are initially recognised at fair value, plus transactioncosts that are directly attributable to their acquisition or issue, and aresubsequently carried at amortised cost using the effective interest rate method,less provision for impairment. Cash and cash equivalents include cash in hand, deposits held at call withbanks, other short term highly liquid investments with original maturities ofthree months or less. Financial liabilities The Group and the Company classify their financial liabilities into one of thecategories listed below. Unless otherwise indicated, the carrying amounts of the Groups financialliabilities are a reasonable approximation of their fair values. a) Fair value through profit or loss This category comprises only out-of-the-money derivatives, which are carried atfair value with changes in the fair value recognised in the income statement inthe finance income or expense line item. b) Other financial liabilities Other financial liabilities include interest bearing loans, trade payables(including rent deposits and retentions under construction contracts) and othershort-term monetary liabilities. Trade payables and other short-term monetaryliabilities are initially recognised at fair value and subsequently carried atamortised cost using the effective interest method. Interest bearing loans areinitially recorded at fair value net of direct issue costs, and subsequentlycarried at amortised cost using the effective interest method. Finance charges,including premiums payable on settlement or redemption and direct issue costs,are accounted for on an accruals basis to the profit and loss account using theeffective interest method and are added to the carrying amount of the instrumentto the extent that they are not settled in the period in which they arise. Expenses Expenses are accounted for on an accruals basis. Fees payable to the PropertyAdviser are calculated with reference to the cost or valuation of the underlyingproperties held by the Group. Fees in respect of properties under constructionare included within the cost of such properties, until such times as they aretransferred to investment property, whereupon future fees are expensed in theincome statement. All other administration expenses are charged through the income statement. Transaction costs directly attributable to the purchase of the investmentproperties are included within the cost of the property. Segmental reporting A business segment is a distinguishable component of the Group that is engagedin providing an individual product or service or a group of related products orservices and that is subject to risks and returns that are different from thoseof other business segments. A geographical segment is a distinguishablecomponent of the Group that is engaged in providing products or services withina particular economic environment and that is subject to risks and returns thatare different from those of components operating in other economic environments. Share-based payments The Group makes equity-settled and cash-settled share-based payments to certainemployees and service providers. Equity-settled, share based payments aremeasured at fair value as at the date of grant. The fair value determined atgrant date is expensed on a straight line basis over the vesting period. Vestingconditions associated with the instruments are market related and areaccordingly ignored when assessing the number of instruments that will vest. Dividends Dividends to the Company's shareholders are recognised when they become legallypayable. In the case of interim dividends, this is when declared by thedirectors. In the case of final dividends, this is when approved by theshareholders at an AGM. Investment in subsidiary undertakings Investment in subsidiary undertakings are stated at cost less, whereappropriate, provisions for impairment. 3. Critical accounting estimates and judgements The Group makes certain estimates and assumptions regarding the future.Estimates and judgements are continually evaluated and are based on historicalexperience as adjusted for current market conditions and other factors. Theresulting accounting estimates will, by definition, seldom equal the relatedactual results. The estimates and assumptions that have a significant risk ofcausing a material adjustment to the carrying amounts of assets and liabilitieswithin the next financial year are outlined below. a) Estimate of fair value of investment properties The best evidence of fair value is current prices in an active market forsimilar lease and other contracts. In the absence of such information, the Groupdetermines the amount within a range of reasonable, fair value estimates. Inmaking its judgement, the Group considers information from a variety of sourcesand engages external, professional advisers to carry out third party valuationsof its properties. These are completed in accordance with the appropriatesections of the current Practice Statements contained in the Royal Institutionof Chartered Surveyors Appraisal and Valuation Standards, 5th Edition (the "RedBook"). This is an internationally accepted basis of valuation. In completing these valuations the valuer considers the following: (i) current prices in an active market for properties of a different nature, condition or location (or subject to different lease or other contracts), adjusted to reflect those differences; (ii) recent prices of similar properties in less active markets, with adjustments to reflect any changes in economic conditions since the date of the transactions that occurred at those prices; and (iii) discounted cash flow projections based on reliable estimates of future cash flows, derived from the terms of any existing lease and other contracts and (where possible) from external evidence such as current market rents for similar properties in the same location and condition, and using discount rates that reflect current market assessments of the uncertainty in the amount and timing of the cash flows. b) Income taxes and VAT The Group is subject to income taxes and VAT in different jurisdictions.Estimates are required in determining the worldwide provision for these taxes.There are some transactions and calculations for which the ultimate taxdetermination is uncertain. The Group recognises liabilities for anticipated taxaudit issues based on whether additional taxes will be due. Where the final taxoutcome of these matters is different from the amounts that were initiallyrecorded, such differences will impact the income tax, deferred tax provisionsand recoverable VAT balances in the period in which such determination is made. c) Acquisitions The consideration payable in respect of each acquisition is dependant uponcertain future events. In calculating each acquisition the Directors haveassessed the most probable outcome as at the balance sheet date. The Directorswill reconsider the consideration payable at each year end and adjustaccordingly. d) Estimate of fair value of financial instruments In accordance with the stated accounting policy, the Group is required todetermine the fair value of the financial instruments it employs, being interestrate derivative contracts and forward currency derivative contracts. Theseinstruments are valued by reference to valuation techniques employed by thecounterparty to the instrument. Those techniques are significantly affected bythe assumptions used, including discount rates and estimates of future cashflows. 4. Revenue 2007 2006 US$'000 US$'000Company:Income from cash and cash equivalents 23,556 28,640Dividends from subsidiary undertakings - 116Interest from subsidiary undertakings 39,842 11,040 63,398 39,796 ----------------------- 63,398 39,796 =======================Group: Gross rental income for the year ended 31 December 2007 amounted to US$38.5million (2006: US$16.9 million). The Group leases all of its investment properties under operating leases. Leasesare typically for terms of three, five, seven or ten years. At the balance sheet date the Group had contracted with tenants for thefollowing future minimum lease payments:- US$'000 Within one year 38,360In second year 38,059In the third to fifth years (inclusive) 96,839After five years 94,305 ------- 267,563 =======5. Administration expenses 2007 2007 2006 2006 Company Group Company Group US$'000 US$'000 US$'000 US$'000 Property Adviser management fees 16,707 4,832 5,879 1,828Property Adviser performance fees - - 4,021 1,407Equity-settled share-based payment expense (see note 26) 2,196 796 1,423 279Directors' remuneration 409 409 324 324Auditors' remuneration 84 84 44 117Depreciation - 53 - -Administration, registrar & other operating expenditure 9,195 12,306 4,122 5,098 ---------------------------------------------- 28,591 18,480 15,813 9,053 ----------------------------------------------The Property Adviser fees are project specific and are included in the cost ofinvestment properties under construction on consolidation where appropriate.Cumulative fees of US$ 21.084 million (2006: US$ 7.809 million) were included inthe cost of investment properties and properties under construction at 31December 2007. Performance fees are partly share-based payments as detailedin note 26. 6. Finance income and expense 2007 2007 2006 2006 Group Group Group Group US$'000 US$'000 US$'000 US$'000Finance incomeIncome from cash and cash equivalents 24,433 28,754Interest income on loans receivable 2,594 1,285 ------ ------Total interest income 27,027 30,039 Net gain on maturing forward currency derivative contracts 1,792 -Net change in fair value of open forward currency derivative contracts 1,030 -Net change in fair value of open interest rate derivative contracts - - ----- ------ 2,822 - ------ ------ 29,849 30,039 ------ ------Finance expense Interest expense on financial liablities measured at amortised cost 1,798 2,073Net change in fair value of open interest rate derivative contracts - - ----- ----- 1,798 2,073 ----- -----The above financial income and expense include the following in respect of assets and liabilities not atfair value through profit or loss: 2007 2006 Group Group US$'000 US$'000 Total interest income on financial assets 27,027 30,039Total interest expense on financial liabilities (1,798) (2,073) ------------------ 25,229 27,966 ------------------ 7. Tax 2007 2006 Group Group US$'000 US$'000 The tax expense for the year comprises:- Current taxation 3,402 593(Over)/under provision in prior year (3) 284Increase in deferred tax asset (851) (312)Increase in deferred tax liability 19,739 3,905 ------------------Income tax expense 22,287 4,470 ------------------ The charge for the year can be reconciled to the profit per the consolidated income statement as follows: 2007 2006 Group Group US$'000 US$'000 Profit before tax 117,541 37,035 ===================Tax at the Russian corporate tax rate of 24% 28,210 8,890Tax effect of income not subject to tax (4,610) (7,127)Tax effect of non deductible expenses 3,031 2,423Tax effect of financing arrangements (4,341) -Under provision in prior year (3) 284 ------------------Tax charge 22,287 4,470 ================== 8. Earnings per share 2007 2006The calculation of the basic and diluted earnings per share is based on the following data: Group Group US$'000 US$'000 Earnings for the purposes of basic and diluted earnings per share being net profit 95,254 32,565attributable to equity holders of the parent. =================== Number of sharesNumber of ordinary shares for the purposes of basic earningsper share and dilutive earnings per share: 2007 2006 Group Group No '000 No '000Weighted average number of ordinary shares for the purposes of basic earnings per share 426,063 337,565 Effect of dilutive potential ordinary shares:Options 134 184Warrants 539 736 -------------------Weighted average number of ordinary shares for the purposes 426,736 338,485of diluted EPS =================== The Company has issued 25,088,757 options (2006: 25,058,189), which vesting is based on the share price basedperformance criteria. At 31 December 2007 the performance criteria had not been met and accordingly the options havenot been included in the calculation of dilutive earnings per share. 9. Dividends 2007 2006 US$'000 US$'000Final dividend of 2 pence (2006: nil) per ordinary share proposed and paid during the year relating to the previous year's results 17,531 -Interim dividend of 2.5 pence (2006: 2 pence) per ordinary share paid during the year 22,025 17,075 ------------------- 39,556 17,075 =================== The directors are proposing a final dividend of 4 pence (2006: 2 pence) per ordinary share, totalling US$ 34,305,024(2006: US$17,075,551). This dividend has not been accrued at the balance sheet date. During the year, script dividends of 622,536 in respect of 2006 final dividend and 3,531,478 in respect of 2007interim were taken up by the shareholders 10. Investment property 2007 2006 Group Group US$'000 US$'000 Balance at 1 January 140,755 56,097Effect of foreign exchange rate changes 2,228 (6,826)Acquisitions in the year 55,853 -Transfer from investment property under construction (note 11) 67,755 84,487 ------------------- 266,591 133,758 Unrealised gains on revaluation of investment properties 79,659 6,997 -------------------Balance at 31 December 346,250 140,755 =================== The fair value of the Group's investment property at 31 December 2007 and 31 December 2006 has been arrived at onthe basis of market valuations carried out at that date by Jones Lang LaSalle, independent valuers not connected withthe Group. The valuations were carried out in accordance with guidance issued by the Royal Institution of CharteredSurveyors. The definition of Market Value is "the estimated amount for which an asset should exchange on the date of valuationbetween a willing buyer and willing seller in an arms length transaction after proper marketing wherein parties hadeach acted knowledgeably, prudently and without compulsion". The Group has pledged approximately US$279 million of its investment property to secure banking facilities granted tothe Group (note 19). 11. Investment property under construction 2007 2006 Group Group US$'000 US$'000 Balance at 1 January 51,941 -Costs incurred 261,002 140,888Effect of foreign exchange rate changes 1,580 (4,460)Transfer to investment property (note 10) (67,755) (84,487) ----------------------Balance at 31 December 246,768 51,941 ====================== 12. Intangible assets 2007 2006 Group GroupGoodwill US$'000 US$'000 Balance at 1 January - -Acquired through business combinations (note 30) 2,265 - -------------------Balance at 31 December 2,265 - =================== Goodwill has arisen on the acquisition of 50% of Roslogistics at which point acontract was put in place with the other party giving joint control. 13. Investment in subsidiary undertakings Share Loans Total Capital US$'000 US$'000 US$'000 Balance at 1 January 2006 30 19,230 19,260Loans to subsidiary undertakings - 143,235 143,235 -------------------------------Balance at 31 December 2006 30 162,465 162,495Acquisition of shares in subsidiary undertakings 1 - 1Loans to subsidiary undertakings - 449,155 449,155 -------------------------------Balance at 31 December 2007 31 611,620 611,651 =============================== The Group's investment properties are held by its subsidiary undertakings. All loans to subsidiary undertakings are unsecured and repayable on demand andare subject to a weighted average interest rate of 12.23% (2006: 11.8%). The principal subsidiary undertakings of Raven Russia Limited, all of which havebeen included in these consolidated financial statements, are as follows: Name Country of Proportion of ownership incorporation interest at 31 December 2007 2006 ZAO Kulon Estates Russia 100% 100%ZAO Kulon Developments Russia 100% 100%Petroestate LLC Russia 100% -OOO Fenix Russia 100% 100%OOO EG Logistics Russia 100% -ZAO Kulon Istra Russia 100% -LLC Kalyinovka Enterprises Ukraine 100% -OOO Real Invest Russia 100% -OOO Soyuz-Invest Russia 100% -OOO Rezerv-Invest Russia 100% -OOO Omega Russia 100% -OOO Terramarket Russia 100% -OOO Piramida Russia 100% -ZAO Noginsk Vostok Russia 100% -OOO Kulon spb Russia 100% -OOO Pulkovo Estates Russia 100% -ZAO Resource Economia Russia 100% 50% 14. Investment in joint ventures The Group has interests in joint controlled entities as follows: Name Country of Proportion of ownership incorporation interest at 31 December 2007 2006 Megalogix Limited Cyprus 50% 50%Roslogistics Holdings (Russia) Limited Cyprus 50% - The Group's 50% interest in Megalogix Limited has been accounted for byproportionate consolidation. The following amounts have been recognised in theconsolidated balance sheet and income statement relating to Megalogix Limited. 2007 2006 US$'000 US$'000Non-current assets 11,730 1,228Current assets 16,492 62Current liabilities (593) -Non-current liabilities (27,726) (1,029) -------------------------------Net liabilities (97) 261 =============================== Income - -Expenses (358) (20) -------------------------------Loss after tax (358) (20) =============================== The Group's share of Megalogix Limited's contingent liabilities and capitalcommitments is US$ nil (2006: US$ nil) and US$174 million (2006: US$ nil)respectively. The Group's 50% interest in Roslogistics Holdings (Russia) Limited has beenaccounted for by proportionate consolidation. The following amounts have beenrecognised in the consolidated balance sheet and income statement relating toRoslogistics Holdings (Russia) Limited. 2007 2006 US$'000 US$'000 Non-current assets 1,106 -Current assets 3,016 -Current liabilities (1,560) -Non-current liabilities (1,731) - -------------------------------Net assets 831 - =============================== Income 1,225 -Expenses (1,392) - -------------------------------Loss after tax (167) - =============================== The Group's share of Roslogistics Holdings (Russia) Limited's contingentliabilities and capital commitments is US$ nil (2006: US$ nil) and US$ nil(2006: US$ nil) respectively. 15. Other receivables 2007 2007 2006 2006 Company Group Company Group US$'000 US$'000 US$'000 US$'000Loans receivable - 58,913 - 21,032VAT recoverable - 24,321 - 753Other assets - 5,522 - 135 ----------------------- ------------------- - 88,756 - 21,920 ======================= =================== VAT recoverable arises through the payment of value added tax on construction ofinvestment properties which will be recovered through the offset of VAT paid onfuture revenue receipts. VAT recoverable has been split between current andnon-current assets based on the Group's assessment of when recovery will occur. The loans receivable are unsecured, with a weighted average loan period of 1year and a weighted average interest rate of 12.72%. 16. Trade and other receivables 2007 2007 2006 2006 Company Group Company Group US$'000 US$'000 US$'000 US$'000 Trade receivables - 2,315 - 4,319Prepayments 1,220 11,554 266 -VAT recoverable - 5,580 - -Loans receivable - 2,413 - -Other receivables - 6,048 - 9,644Loan to subsidiary undertaking 5,650 - - - ----------------------------------------------- 6,870 27,910 266 13,963 =============================================== 17. Forward currency derivative contracts The Group has entered into a series of forward currency derivative contracts tomanage its exposure to certain russian rouble construction contracts. At 31December 2007 there were open contracts to sell US dollars amounting to US$ 21.7million and buy russian rouble of RUR 560.6 million, an average rate of 25.85.The fair values of the contracts at 31 December 2007 amounted to US$ 1,030,425(asset). 18. Cash and cash equivalents 2007 2007 2006 2006 Company Group Company Group US$'000 US$'000 US$'000 US$'000 Cash at bank and on call 37,010 229,500 29,074 42,112Money market instruments 251,330 251,329 714,071 714,071 ---------------------------------------------- 288,340 480,829 743,145 756,183 ============================================== All the money market instruments attract variable interest rates. The weightedaverage interest rate at the balance sheet date is 5.46%. 19. Interest bearing loans and borrowings 2007 2007 2006 2006 Company Group Company Group US$'000 US$'000 US$'000 US$'000 (a) Bank loansLoans due for settlement within 12 months - 2,893 - 2,105Loans due for settlement after 12 months - 92,945 - 15,110 ----------------------------------------------- - 95,838 - 17,215 =============================================== 2007 2007 2006 2006 Company Group Company Group(b) Other interest bearing loans US$'000 US$'000 US$'000 US$'000 Loans due for settlement within 12 months - 1,911 - 768Loans due for settlement after 12 months - 35,311 - 2,210 --------------------------------------------------- - 37,222 - 2,978 ===================================================Total loans due for settlement within 12 months - 4,804 - 2,873Total loans due for settlement after 12 months - 128,256 - 17,320 --------------------------------------------------- - 133,060 - 20,193 =================================================== 2007 2006 Group GroupThe Group's bank borrowings have the following maturity profile: US$'000 US$'000 On demand or within one year 2,893 2,105In the second year 2,625 15,110In the third to fifth years 89,274 -After five years 1,046 - ------------------- 95,838 17,215 ===================The Group's exposure to, and the credit ratings of, its counterparties are continuously monitored.The average investment grade of the Group's bank borrowings at 31 December 2007 was A and for 31 December 2006it was A. The other interest bearing loans are unrated. 20. Deferred tax (a) Deferred tax asset Tax losses Other Total S$'000 US$'000 US$'000Balance at 1 January 2006 713 - 713Credit to income 266 46 312Balance at 31 December 2006 979 46 1,025Credit to income 552 299 851 -----------------------------------Balance at 31 December 2007 1,531 345 1,876 =================================== The Group does not have any unrecognised deferred tax assets Revaulation Accelerated tax of investment allowances property Total(b) Deferred tax liability US$'000 US$'000 US$'000 Balance at 1 January 2006 691 921 1,612Charge to income 2,226 1,679 3,905Balance at 31 December 2006 2,917 2,600 5,517Charge to income 841 18,898 19,739 ----------------------------------------------------Balance at 31 December 2007 3,758 21,498 25,256 ==================================================== 21. Other payables 2007 2007 2006 2006 Company Group Company Group US$'000 US$'000 US$'000 US$'000 Rent deposits - 3,909 - 1,506Deferred revenue - 89 - 105Retention under construction contracts - 8,434 - 3,592 ------------------------------------------------------------- - 12,432 - 5,203 ============================================================= 22. Trade and other payables 2007 2007 2006 2006 Company Group Company Group US$'000 US$'000 US$'000 US$'000 Investment property acquisition obligations - 22,350 - 35,260Other creditors 9,100 34,028 6,566 9,164 ------------------------------------------------------------- 9,100 56,378 6,566 44,424 ============================================================= 23. Share capital 2007 2006 US$'000 US$'000Authorised share capital:1,000,000,000 ordinary shares of 1p each: 20,105 20,105 ===================Issued share capital: 4,247 8,648 8,538 =================== 2007 2006Ordinary shares of 1p each: No No Balance at 1 January 424,663,711 153,000,000Issued in the year 5,376,855 271,663,711 ------------------------Balance at 31 December 430,040,566 424,663,711 ======================== Included in the issued shares during the year are 1,222,841 ordinary shares(2006: 2,098,501) issued to the Property Adviser in settlement of theirperformance fee. Of the authorised share capital 41,815,542 ordinary sharesare reserved for options and warrants. 24. Reserves The following describes the nature and purpose of each reserve within equity: Reserve: Description and purpose Share capital: The amount subscribed for share capital at nominal value. Share premium: The amount subscribed for share capital in excess of nominal value. Special reserve: During 2006 the Company applied to the Royal Court of Guernsey to reduce its capital by cancellation of its share premium at that time and creation of a separate special reserve, which is an additional distributable reserve to be used for all purposes permitted under Guernsey Company law, including the buy back of shares and the payment of dividends. Capital reserve: The amount of any capital profits and losses, including gains and losses on the disposal of investment properties (after taxation), increases and decreases in the fair value of investment properties held at each period end and deferred taxation of the increase in fair value of investment properties. Warrant reserve: The amount of share-based payment expenses in relation to warrants issued, to be credited to share capital and premium upon the exercise of a warrant or credited to retained reserves should a warrant lapse. Share optionreserve: The amount of share-based payment expenses in relation to options issued, to be credited to share capital and premium upon the exercise of options or credited to retained reserves should options lapse. Share-basedpayment reserve: The amount of any performance fee due to the Property Adviser that is to be settled by a post balance sheet issue of shares. Retained earnings: The amount of any profit or loss for the year after payment of dividends. Translation reserve:The amount of any gains or losses arising on the retranslation of net assets of overseas operations into US dollars. 25. Net asset value per share 2007 2007 2006 2006 Company Group Company Group US$'000 US$'000 US$'000 US$'000 Net asset value 897,761 969,464 899,340 910,450Net asset value attributable to future issues of shares - - (2,815) (2,815) ----------------------------------------------------------Adjusted net asset value 897,761 969,464 896,525 907,635 =========================================================Number of ordinary shares at 31 December 430,040,566 430,040,566 424,663,711 424,663,711 Net asset value per share 2.09 2.25 2.11 2.14 ==== ==== ==== ==== 26. Share-based payments (a) Terms In 2005, as part consideration for the services offered by Cenkos SecuritiesLimited and Kinmont Limited under the Placing Agreement, options were granted tothese companies pursuant to which they have the right to subscribe for 1,530,000and 382,500 ordinary shares respectively at £1.00 per share, such options to beexercisable at any time during the period to 24 July 2010. In 2005, to incentivise personnel of the Property Adviser involved in providingadvice to the Group, the Company granted to the trustee of the Raven MountEmployee Benefit Trust an option to acquire up to 7.5% of its issued ordinaryshare capital from time to time. The options will vest in three tranches. Theoptions are exercisable over a period of 4 to 12 years following admissiondependent on cumulative performance criteria of between 9% and 12% of totalshareholders return having been met. The exercise price for each tranche is set by reference to the average price ofthe Company's shares in the month preceding the first and second anniversariesof the Company's Admission to AIM (for tranche two and three). Tranche oneoptions have an exercise price of £1.00 per share. In 2005, the Company has issued warrants to the Property Adviser pursuant towhich the Property Adviser has been granted the right to subscribe for 7,650,000ordinary shares in the Company at £1.00 per ordinary share such warrants to beexercisable at any time during the period of 5 years from the date of Admission.The Warrant Instrument provides that the Warrant Holder from time to time maytransfer all or part of their Warrants. 2007 2006 No. of options Weighted No. of options Weighted average average exercise price exercise price Outstanding at beginning of period 34,620,687 101p 21,037,500 100pAdjustment to equity settled options 30,570 107p 13,583,187 101p -------------------------------------------------------------------------Outstanding at the end of the period 34,651,257 103p 34,620,687 101p ========================================================================= Exercisable options at the end of the period 1,912,500 100p 1,912,500 100p ========================================================================= Exercisable warrants at the end of the period 7,650,000 100p 7,650,000 100p ========================================================================= Under the agreement, the Raven Mount Plc Employee Benefit Trust has the right to7.5% of the issued share capital. The directors estimate the number of optionsto vest and make an adjustment in each year accordingly. Following the issue ofadditional shares during the year, an adjustment was made to options granted tothe trust in 2005, to maintain its right to 7.5% of the issued share capital ofthe company. The weighted average exercise price of outstanding options at 31 December 2007was 103.3p (2006: 106.3p) with a weighted average remaining contractual life of8.4 years. The weighted average exercise price of outstanding warrants at 31 December 2007was £1.00, with a weighted average remaining contractual life of 2.6 years. (b) Share based payment charge The Group recognised a total share-based payment expense of US$2,196,000 (2006:US$1,423,000). Of the share-based payment costs relating to warrants and optionsUS$796,000 (2006: US$279,000) was expensed and US$1,400,000 (2006: US$1,144,000)was included in investment property under construction. (c) Other equity-settled payments Any performance fee payable to the Property Adviser is to be settled as to 30%in cash and as to the balance in ordinary shares allotted by reference to theaverage closing mid-market price of such shares over the last 20 trading daysfor the relevant accounting period for which the performance relates. 27. Capital commitment The Company had committed to fund the development of and/or purchase assets withan estimated end value of US$1,069 million (2006: US$889 million). The actualvalue of total commitments may differ due to changing construction budgets andphasing, the share of development profits where appropriate and the set off ofaccrued mezzanine finance interest receivable. At 31 December 2007, US$301million of the above commitment have been incurred. 28. Investment Adviser As disclosed in the Directors' Report the Property Adviser received US$16,474,540 for the services of property management and an allotment of 1,222,841shares during the year as part payment of a prior year performance fee. As at 31 December 2007, US$ 2,876,531 of the above fees remains outstanding andUS$ 15,503,372 has been capitalised in investment property under construction. 29. Related party transactions Transactions between the Company and its subsidiaries which are related partieshave been eliminated on consolidation and are not disclosed in this note. Directors' interests Directors who held office at the year end and their interests in the shares ofthe Company as at 31 December 2007 were Percentage of issued Ordinary shares share capitalRichard Jewson 60,000 0.014%Stephen Coe 20,000 0.005%David Moore 29,227 0.007%John Peters 45,000 0.010% During the year the Directors received the following emoluments in the form offees Richard Jewson £50,000.00Stephen Coe £23,333.31David Moore £40,000.00John Peters £40,000.00Adrian Collins £40,000.00Glyn Hirsch £0 Administrators Stephen Coe was formerly a director of Investec Administration Services Limitedwhich acted as the companies Administrator until 15 November 2007. InvestecAdministration Services Limited received £505,190.90 in payment ofadministration services during the period to the date of termination of itsappointment. Legal Advisers David moore is a partner in Ozannes, Advocates and Notaries Public. Ozannesprovide independent legal advice to the company. Total legal fees paid toOxannes in the year ended 31 December 2007 amounted to £128,753.76 The majority of the Group's transactions are denominated in US dollars. As theGroup's capital was raised in sterling, the decision was taken to convert themajority of the Group's cash and cash equivalents to US dollars in July 2007.The average exchange rate on conversion was just over US$2 to £1. In some cases underlying construction contracts on the Group's developmentprojects are denominated in Russian roubles. Non deliverable forwardcontracts have been taken out to hedge against the US dollar Russian roubleexposure, on a project by project basis, where appropriate. At holding company level, the Group's exposure to sterling is restricted to headoffice costs and dividend payments. As the Group had minimal gearing during theyear and only began drawing on external finance at the end of the last quarter,there was no significant exposure to interest rate risk. 30. Financial instruments - risk management The Group's activities expose it to a variety of financial risks in relation tothe financial instruments it uses: market risk (including currency risk, pricerisk and cash flow interest rate risk), credit risk and liquidity risk. Thefinancial risks relate to the following financial instruments: trade receivables,cash and cash equivalents, trade and other payables, borrowings and derivativecontracts. Risk management parameters are established by the Board on a project by projectbasis and overseen by the property adviser and administrator in conjunction withprofessional advisers. Reports are provided to the Board formally on aquarterly basis and also when authorised changes are required. Cash and cashequivalents are actively managed by two major investment banks, who report tothe administrator on performance on a monthly basis. a) Market risk Currency risk The Group operates internationally and is exposed to foreign exchange riskarising from a variety of currency exposures, primarily with respect to USdollars, sterling and the Russian rouble. Foreign exchange risk arises fromfuture commercial transactions (including construction contracts and leasereceivables), recognised monetary assets and liabilities and net investments inforeign entities. The majority of the Group's transactions are denominated in US dollars. As theGroup's capital was raised in sterling, the decision was taken to convert themajority of the Group's cash and cash equivalents to US dollars in July 2007.The average exchange rate on conversion was just over US$2 to £1. In some cases underlying construction contracts on the Group's developmentprojects are denominated in Russian roubles. Non deliverable forward contractshave been taken out to hedge against the US dollar Russian rouble exposure, ona project by project basis, where appropriate. At holding company level, the Group's exposure to sterling is restricted to headoffice costs and dividend payments. The table below summarises the Group's and Company's currency profile at 31 December. Group As at 31 December 2007 US Dollars Russian Rouble Sterling & other Total US$'000 US$'000 US$'000 S$'000 Non-current assets Loans receivable Other non-current assets 58,913 - - 58,913 Current assets 228 4,894 400 5,522 Trade receivables Loans receivable 1,367 832 116 2,315 Other current receivables - 2,413 - 2,413 Forward currency derivative contracts 3,314 2,731 3 6,048 Cash and cash equivalents 1,030 - - 1,030 396,151 54,867 29,811 480,829 ----------------------------------------------------- Non-current liabilites 461,003 65,737 30,330 557,070 ----------------------------------------------------- Interest bearing bank loans and borrowings Rent deposits 128,256 - - 128,256 Retentions under construction contracts 3,909 - - 3,909 Current liabilities 6,670 1,764 - 8,434 Interest bearing bank loans and borrowings Investment property acquisition obligations 4,804 - - 4,804 Other creditors 22,350 - - 22,350 11,593 13,332 9,103 34,028 ----------------------------------------------------- 177,582 15,096 9,103 201,781 ----------------------------------------------------- Group As at 31 December 2006 US Dollars Russian Rouble Sterling & other Total US$'000 US$'000 US$'000 US$'000Non-current assetsLoans receivableOther non-current assets 21,032 - - 21,032 Current assets - 135 - 135 Trade receivables Other current receivables 4,319 - - 4,319 Cash and cash equivalents 5,066 4,313 265 9,644 - - 756,183 756,183 ------------------------------------------------------ 30,417 4,448 756,448 791,313 ------------------------------------------------------ Non-current liabilitiesInterest bearing bank loans and borrowings 17,320 - - 17,320Rent deposits 1,506 - - 1,506 Retentions under construction contracts 3,592 - - 3,592 Current liabilities Interest bearing bank loans and borrowings 2,873 - - 2,873Investment property acquisition obligations 35,260 - - 35,260 Other creditors 336 2,262 6,566 9,164 ------------------------------------------------------- 60,887 2,262 6,566 69,715 ------------------------------------------------------- Company As at 31 December 2007 US Dollars Sterling Other Total US$'000 US$'000 US$'000 US$'000 Non-current assets Loans to subsidiaries Current assets 597,860 447 13,313 611,620 Loans to subsidiaries 5,650 - - 5,650Cash and cash equivalents 263,009 25,331 - 288,340 ------------------------------------------------------ 866,519 25,778 13,313 905,610 ------------------------------------------------------ Current liabilities Trade and other payables 558 8,005 537 9,100 ------------------------------------------------------ 558 8,005 537 9,100 ----------------------------------------------------- Company As at 31 December 2006 US Dollars Sterling Other Total US$'000 US$'000 US$'000 US$'000 Non-current assets Loans to subsidiaries Current assets 162,465 - - 162,465 Cash and cash equivalents - 743,145 - 743,145 ----------------------------------------------------------- Current liabilities 162,465 743,145 - 905,610 ----------------------------------------------------------- Trade and other payables - 6,566 - 6,566 ----------------------------------------------------------- - 6,566 - 6,566 ----------------------------------------------------------- The sensitivity analyses below are based on a change in an assumption whileholding all other assumptions constant. In practice this is unlikely to occurand changes in some of the assumptions may be correlated, for example a changein interest rate and a change in foreign currency exchange rates. The Groupprincipally manages foreign currency risk on a project basis. The sensitivityanalysis prepared by management for foreign currency risk illustrates howchanges in the fair value or future cash flows of a financial instrument willfluctuate because of changes in foreign exchange rates. The tables above present financial assets and liabilities denominated inforeign currencies held by the Group in 2007 and 2006 used to monitor foreigncurrency risk at the reporting dates. If the US dollar weakened or strengthenedby 10% against the Russian rouble, with all other variables held constant, posttax profit for the year would move by $5m. If the US dollar weakened orstrengthened by 10% against sterling with all other variables held constant,post tax profit for the year would move by $2m. Cash flow and fair value interest rate risk The Group has significant interest-bearing cash resources, the majority ofwhich are held in liquidity funds of two major investment banks and in businessaccounts with its principal bankers. The Group's interest rate risk arises from long-term borrowings (see note 19). Borrowings issued at variable rates expose the Group to cash flow interest raterisk, whilst borrowings issued at a fixed rate expose the Group to fair valuerisk. The Group's cash flow and fair value interest rate risk is periodicallymonitored by the Group's Board of directors and advisers on a project basis.The cash flow and fair value risk policy is approved quarterly by the Board ofdirectors. The Group analyses its interest rate exposure on a dynamic basis. It takes onexposure to the effects of fluctuations in the prevailing levels of marketinterest rates on its financial position and cash flows. Interest costs mayincrease as a result of such changes. They may reduce or create losses in theevent that unexpected movements arise. Various scenarios are simulated takinginto consideration refinancing, renewal of existing positions, alternativefinancing and hedging. Based on these scenarios, the Group calculates theimpact on profit and loss of a defined interest rate shift. The scenarios arerun for only liabilities that represent the major interest-bearing positions.The simulation is run on an ongoing basis to verify that the maximum potentialimpact is within the parameters expected by management. Formal reporting to theBoard on cash flows is made on a quarterly basis. To date the Group has soughtto fix its exposure to interest rates on borrowings through the use of a varietyof interest rate derivatives. Trade and other receivables and payables are interest free and have settlementdates within one year. As the Group had minimal gearing during the year and onlybegan drawing on external finance at the end of the last quarter, there was nosignificant exposure to interest rate risk. b) Credit risk The Group has no significant concentrations of credit risk. Credit riskarises from the holding of cash and cash equivalents as well as creditexposures with respect to rental customers, including outstanding receivables.Credit risk is managed by the property adviser and the administrator andstructures the levels of credit risk it accepts by placing limits on itsexposure to a single counterparty or groups of related counterparties and togeographical and industry segments, where appropriate. Such risks are subjectto regular review and are reported to the Board, formally, on a quarterly basis. The Group has policies in place to ensure that rental contracts are made withcustomers meeting appropriate balance sheet covenants, supplemented by rentaldeposits or bank guarantees from International banks. The Group also haspolicies that limit the amount of credit exposure to any financial institution. c) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash, theavailability of funding through an adequate amount of committed creditfacilities and the abililty to close out market positions. Due to the dynamicnature of the underlying businesses, the Board and its advisers seek to haveappropriate credit facilities in place on a project by project basis, eitherfrom available internal cash resources or from bank facilities. The Group's liqiuidity position is monitored on a daily basis by the propertyadviser and the administrators, reviewing any cash draw request. Formalliquidity reports are issued from all jurisdictions on a weekly basis and arereviewed quarterly by the Board of directors, along with cash flow forecasts.A summary table with maturity of financial assets and liabilities is presentedbelow. Group 2007 2006 Financial assets - non-current US$'000 US$'000 Trade and other receivables with no fixed term 88,756 21,920 Financial assets - current Trade and other receivables - maturity withinone year 27,910 13,963 Forward currency derivative contracts - maturing withinone year 1,030 -Cash and cash equivalents - maturity within one year 480,829 756,183 ------------------------------- 509,769 770,146 ------------------------------- Financial liabilities - non-currentInterest bearing loans and borrowings - maturing - between one and two years 37,936 18,089 - between two and five years 89,274 - - after more than five years 1,046 - ------------------------------- 128,256 18,089 ------------------------------- Financial liabilities - currentTrade and other payable - maturity withinone year 56,378 44,424 Interest bearing loans and borrowings - maturitywithin one year 4,804 2,873 -------------------------------- 61,182 47,297 -------------------------------- 409,087 726,680 ================================Company 2007 2006 Financial assets - non-current US$'000 US$'000 Loans to subsidiaries with no fixed term 449,155 143,255 Financial assets - current Trade and other receivables - maturity within one year 6,870 266Cash and cash equivalents - maturity within one year 288,340 743,145 -------------------------------- 295,210 743,411 Financial liabilities - current -------------------------------- Trade and other payable - maturity within one year 9,100 6,566 753,465 893,232 ================================ (d) Capital risk management The Group's objectives when managing capital are to safeguard the Group'sability to continue are a going concern in order to provide returns forshareholders and benefits for other stakeholders and to maintain an optimalcapital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust theamount of dividends paid to shareholders, return capital to shareholders, issuenew shares or sell assets to reduce debt. Consistent with others in theindustry, the Group monitors capital on the basis of the gearing ratio. Thisratio is calculated as net debt divided by total capital. Net debt iscalculated as total borrowings (including borrowings and trade and otherpayables, as shown in the consolidated balance sheet) less cash and cashequivalents. Total capital is calculated as equity, as shown in theconsolidated balance sheet, plus net debt. Where the Group or Company are in anet cash position, the gearing ratio will be zero. The gearing ratios at 31 December 2007 and 2006 were as follows: Group 2007 2006 US$'000 US$'000 Non-current liabilities Current liabilities 165,944 28,040 Total borrowings 61,182 47,297 ---------------------------------Less: cash and cash equivalents 227,126 75,337 Net debt 480,829 756,183 --------------------------------- (253,703) (680,846) --------------------------------- Equity 969,464 910,450 --------------------------------- Total capital 715,761 229,604 --------------------------------- Gearing ratio Nil Nil Company 2007 2006 US$'000 US$'000 Non-current liabilities Current liabilities - - Total borrowings 9,100 6,566 --------------------------------- Less: cash and cash equivalents 9,100 6,566 Net debt 288,340 743,145 --------------------------------- (279,240) (736,579) --------------------------------- Equity 897,761 899,340 --------------------------------- Total capital 618,521 162,761 --------------------------------- Gearing ratio Nil Nil 31. Acquisitions in the year On 16 August 2007 the Group acquired, via its wholly owned subsidiary RavenRussia Holdings 9 Limited, 50% of the issued ordinary share capital ofRoslogistics Holdings (Russia) Limited. This company in turn acquired 100% ofthe trade of Avalon Logistics Company, Avalon Imports and Avalon SystemsVisions, which operate a logistics and import business in Russia. 32. Subsequent events There has been no significant events since the balance sheet date, which in theopinion of the Directors require disclosure in the financial statements. 33. Segmental information The Directors are of the opinion that the Group is engaged in two businesssegments, being property investment and logistics operations, and in onegeographical area, the Commonwealth of Independent States. Property Investment Logistics Total Income Statement 2007 2007 2007 US$'000 US$'000 US$'000 Revenue External sales 37,297 1,225 38,522 ================================== Segment result Operating profit / (loss) 90,280 (214) 90,066 Finance income 30,221 - 30,221 Finance expense (1,793) (5) (1,798) ---------------------------------- Profit / (loss) before tax 118,708 (219) 118,489 Tax (22,339) 52 (22,287) ---------------------------------- Net profit / (loss) for the year 96,369 (167) 96,202 ================================== Other information Depreciation - 53 53 ================================== Gains on revaluation of investment properties 79,659 - 79,659 ================================== Recognised share based payments (2,126) 0 (2,126) ================================== Capital expenditure Purchase of investment properties (55,853) 0 (55,853) Payments for investment properties under construction (261,004) 0 (261,004) Purchase of property, plant andequipment 0 (819) (819) Property Investment Logistics Total Balance Sheet 2007 2007 2007 Assets US$'000 US$'000 US$'000 Non-current assets 683,774 3,048 686,822 Current assets 507,327 3,015 510,342 ----------------------------------- Total assets 1,191,101 6,063 1,197,164 ----------------------------------- Liabilities Non-current liabilities (164,213) (1,731) (165,944) Current liabilities (59,246) (1,560) (60,806) Total liabilities (223,459) (3,291) (226,750) ----------------------------------- Net assets 967,642 2,772 970,414 =================================== Comparative segmental information has not been provided as the Group only engaged in one business segment during 2006, being property investment. Advisers Registered Office:Regency Court Glategny Esplanade St Peter Port Guernsey GY1 3ST Property Adviser: Raven Russia Property Management Limited 21 Knightsbridge London SW1X 7LY Nominated Advisers, Joint Brokers & Financial Advisers: Numis Securities Limited 10 Paternoster Square London EC4M 7LT Joint Brokers: Credit Suisse Securities (Europe) Limited 20 Columbus Courtyard London E14 4DA Principal Bankers: Credit Suisse Goldman Sachs Royal Bank of Scotland International Investec Private Bank Guernsey Advocates: Ozannes 1 Le Marchant Street St Peter Port Guernsey GY1 4HP Administrator & Secretary: Walbrook Fund Managers Limited Regency Court Glategny Esplanade St Peter Port Guernsey GY1 3ST Valuer: Jones Lang LaSalle Kosmodamianskaya NAB 52 Korp 3 Moscow Registrars: Capita IRG (CI) Limited 1 Le Truchot St Peter Port Guernsey UK Transfer Agent: Capita Registrars The Registry 34 Beckenham Road Beckenham Kent BR3 4TU Independent Auditors: BDO Novus Limited BDO Stoy Hayward Elizabeth House Emerald House St Peter Port East Street Guernsey Epsom GY1 3LL Surrey KT17 1HS This information is provided by RNS The company news service from the London Stock Exchange

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