Proposed placing & possible offer for Raven Mount

17th Feb 2009 10:49



THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF IRELAND, THE REPUBLIC OF SOUTH AFRICA AND THEIR RESPECTIVE TERRITORIES AND POSSESSIONS AND ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION

17 February 2009

Proposed placing of up to £125m and possible offer for Raven Mount

Raven Russia Limited ("Raven Russia"), the leading developer of warehouses and logistics parks in Russia, announces its intention to raise up to £125 million via a placing of Preference Shares and Warrants. In addition, Raven Russia proposes to acquire Raven Mount Group plc ("Raven Mount"), the AIM listed property company, for £57 million (1).

Fundraising by way of cash placing of up to 125 million Units each comprising 1 Preference Share and 1 Warrant (2),(3) at an issue price of £1 per Unit

- £75 million already placed with Invesco

- Potential to raise up to a further £50 million through the issue of additional 

Units, in the event of excess demand

Fund raising will strengthen Raven Russia's financial position and enable the Company to take advantage of opportunities in a distressed market

Subject to the placing being successful, Raven Russia proposes to acquire Raven Mount for £57 million (1)

Proposed acquisition of Raven Mount to be financed through the issue of 0.525 Units comprising 1 Preference Share and 1 Warrant in Raven Russia (2) for every Raven Mount share (4)

Raven Mount currently has cash balance of £20.8 million and no debt (5) 

Proposed acquisition supported by shareholders representing 41.7 per cent. of the issued share capital of Raven Russia and 64.1 per cent. of the issued share capital of Raven Mount.

The proposed acquisition is supported by Raven Mount's four largest shareholders, including Schroder Investment Management and Laxey Partners, who are also major shareholders in Raven Russia. Following completion of the proposed acquisition Anton Bilton and Glyn Hirsch, who are currently also directors of Raven Mount, will be able to concentrate all of their time on Raven Russia.

Richard Jewson, Chairman of Raven Russia commented: 

"These two proposed transactions will transform the long-term prospects of Raven Russia.

First, the refinancing will put the Group in a strong financial position. This will enable it to both withstand a prolonged downturn, and to take advantage of new opportunities which may emerge in a distressed market.

Secondly the acquisition of Raven Mount will enable our two key executive directors, Anton Bilton and Glyn Hirsch - who are currently also directors of Raven Mount - to concentrate the whole of their time on Raven Russia business."

Glyn Hirsch, Chief Executive Officer of Raven Russia commented:

"These transactions will help to transform Raven Russia by significantly strengthening the Company's balance sheet and putting us in an excellent position to take advantage of the opportunities to acquire distressed assets that will inevitably arise in these uncertain times.

They also show the commitment and belief of our major shareholders in providing cash and assets to support our investment strategy."

Anton Bilton, Chairman of Raven Mount and Executive Deputy Chairman of Raven Russia, commented: 

"As the largest shareholder in Raven Mount, a company with significant cash and no debt, this proposed takeover underlines my belief in the investment strategy of Raven Russia. I am effectively investing a further £15 million plus in Raven Russia, which clearly demonstrates my strong belief in the future of the Company."

Bim Sandhu, Chief Executive of Raven Mount, commented:

"The Possible Offer represents the culmination of the reinvention strategy implemented by Raven Mount following the acquisition of Swan Hill Group plc and Raven Property Holdings plc businesses in 2004 and 2005. The disposal of the Swan Hill Pension Fund and the Audley Assisted Living businesses last year and the resulting cash rich lowly geared balance sheet has made Raven Mount an attractive vehicle. I am pleased that we have been able to reach agreement with Raven Russia, a company of which we have a detailed understanding having set it up and acted as its property advisor until late last year, on the terms of the Possible Offer, the terms of which I believe are highly attractive for both sets of shareholders."

Note:

This is based on the issue price of £1 for each Unit pursuant to the Placing. The possible offer is being made on the basis of 0.525 Units for each Raven Mount share held (each Unit comprising 1 Preference Share and 1 Warrant)

New Preference Shares and Warrants to be issued to trading on AIM as separate classes of securities

The fundraising will be subject to shareholder approval at an Extraordinary General Meeting of the Company which is expected to take place 24 March 2009

At the issue price of £1 per Unit

Cash balance following repayment of all debt excluding joint ventures

Enquiries

Raven Russia Limited
Anton Bilton / Glyn Hirsch	Tel: +44 (0)1481 71 2955
Bell Pottinger Corporate & Financial
Charles Cook / Mike Davies / Andrew Benbow	Tel: +44 (0)20 7861 3232
Numis Securities Limited
Nick Westlake (NOMAD and Financial Adviser) / Rupert Krefting (Corporate Broking)	Tel: +44 (0)20 7260 1000
Raven Mount Group plc	Tel: +44 (0)20 7235 0422
Bim Sandhu / Mark Kirkland
Oriel Securities Limited	Tel: +44 (0)20 7710 7610
Michael Shaw / Neil Langford
Singer Capital Markets Limited	Tel: +44 (0)20 3205 7500
Nicholas How / James Maxwell

 

THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF IRELAND, THE REPUBLIC OF SOUTH AFRICA AND THEIR RESPECTIVE TERRITORIES AND POSSESSIONS AND ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION

Proposed Placing to raise up to £125 million by issuing up to 125 million Units eachat £1.00 and comprising 1 Preference Share and 1 Warrant

1 Introduction

Raven Russia announces that it proposes to raise £75 million through the issue of 75 million Units to Invesco at a price of £1.00 per Unit. Each Unit comprises 1 Preference Share and 1 Warrant. 

Raven Russia has retained Numis, as book runner and joint broker and Singer, as joint broker, to assess demand for additional Units and in the event there is excess demand, the Company will issue up to 50 million additional Units at the Placing Price. Consequently, the maximum amount that could be raised pursuant to the Placing is £125 million. 

The Preference Shares and Warrants to be issued pursuant to the Placing will each be admitted to trading on AIM as separate classes of securities and will be separately tradeable. 

Raven Russia also announces today that, subject to satisfaction or waiver of certain pre-conditions, the Board has reached agreement on the terms of a Possible Offer by Raven Russia for the entire issued share capital of Raven Mount. 

In connection with the Placing and the Possible Offer, the Company also proposes making certain changes to the Share Option Plan, the terms of which were previously approved by Ordinary Shareholders at an extraordinary general meeting of the Company held on 28 August 2008.

The resolutions required to implement the Placing, the Possible Offer and the Changes to the Share Option Plan will be put to Ordinary Shareholders at the Extraordinary General Meeting, which is expected to be held on 24 March 2009. Further details of the resolutions to be proposed at the EGM are set out in paragraph 12 below. A circular to Ordinary Shareholders, convening the EGM, will be posted shortly.

2 Current Trading and Reasons for the Placing and Possible Offer for Raven Mount

The Group is in a stable position with a portfolio of high quality Warehouse and office buildings and continues to trade in line with the Directors' expectations. Construction of new Warehouses continues to be completed broadly on time and on budget and the letting programme for these is progressing satisfactorily. In the last quarter of 2008, the Group signed leases with an aggregate annualised net operating income of $4.4 million. In January 2009, the Group has signed preliminary lease agreements for $5.6 million of annualised net operating income and a letter of intent for $1.5 million of annualised net operating income.

 

The current annualised net operating income of the Group is $51.9 million (0.39 million m2 of leased space) and the Group has signed preliminary lease agreements and letters of intent which will convert into signed leases of $24.9 million of annualised net operating income (0.19 million m2 of space), representing in total $76.8 million of annualised net operating income (0.58 million m2 of leased space). As construction finishes, the Group will have a further 0.48 million m2 available to let (taking the total space to 1.06 million m2) and this could increase the annualised net operating income from these properties to $140 million. 

The turmoil in the world's financial markets has hampered the Group's ability to raise further bank debt and will have an effect on the valuation of the Group's completed investment property assets. Since 30 June 2008, the Group anticipates the value of the completed assets will have fallen in the period to 31 December 2008 by approximately 20 per cent. reflecting an initial yield shift from 10 per cent. to 12 per cent. across the portfolio, which will result in the Group incurring a loss on revaluation of investment properties of approximately $90 million. Full details will be published with the announcement of preliminary results for the year ended 31 December 2008 which are expected to be published towards the end of March 2009. Despite the deterioration in global economic confidence, the Group has obtained credit committee approval from the European Bank for Reconstruction and Development for the Megalogix joint venture for a new facility of $40 million.

This background leads the Board to take a cautious approach by raising additional capital. The net proceeds of the Placing and the Possible Offer will put the Group in a strong financial position. It will provide additional working capital should the letting market deteriorate or properties stand vacant longer than anticipated. It will also provide the Group with the resources to take advantage of opportunities in a distressed market. These opportunities could involve the purchase of property or the Company's own shares and/or commencing construction on the additional phases of Warehouses on land the Group already owns.

 

3 Dividend policy

In the light of the global financial crisis and Raven Russia's continued focus on cash conservation the Board has decided to adopt a new policy in relation to ordinary dividends. The Board intends to pay a 2009 dividend of 1p per share and no final dividend will be paid for 2008. When financial conditions improve and the Group's portfolio matures, the Board intends to adopt a progressive dividend policy going forward.

 

4 Description of the Placing

 

Details of the Placing

The Company proposes to raise £75 million through the issue of 75 million Units to Invesco at a price of £1.00 per Unit. Each Unit comprises 1 Preference Share and 1 Warrant. 

Raven Russia has retained Numis, as book runner and joint broker and Singer, as joint broker, to assess demand for additional Units and in the event there is excess demand, the Company will issue up to 50 million additional Units at the Placing Price. Consequently, the maximum amount that could be raised pursuant to the Placing is £125 million.

The Preference Shares and Warrants to be issued pursuant to the Placing will each be admitted to trading on AIM as separate classes of securities and will be separately tradeable. 

Members of the public are not eligible to take part in the Placing which is only being directed at (i) in the United Kingdom, "qualified investors" (as defined in section 86 FSMA) who are persons of a kind described in Articles 19, 43 or 49 of the Order, or (ii) persons who may otherwise lawfully participate. No other person may participate in the Placing or rely on any communication relating to it.

The Preference Shares and Warrants to be issued pursuant to the Placing will each be admitted to trading on AIM as separate classes of securities. Application will be made for the Preference Shares and the Warrants to each be admitted to trading on AIM in due course. It is currently expected that Admission will occur on around 25 March 2009.

The Placing is conditional, inter alia, on:

If any conditions under the Placing Agreement are not fulfilled or (where capable of waiver) waived on or before 8.00 am on 25 March 2009 (or such later time and date (being no later than 8.00 am on 8 April 2009) as the Company and Numis may agree), any monies held by Numis or Singer will be returned to Placees, without interest, as soon as practicable thereafter.

Under the terms of the Placing Agreement, Numis has the right to terminate their obligations if, inter alia, any of the warranties contained therein are or become untrue, inaccurate or misleading in any material respect or a force majeure event or material adverse change in respect of the Group (taken as a whole) occurs prior to Admission.

Further details of the Placing and Placing Agreement will be set out in the Circular. 

The Company will make appropriate announcements to a Regulatory Information Service giving the details of the results of the Placing prior to the EGM.

Preference Shares and Warrants

Subject to the Law, cumulative dividends on the Preference Shares will be payable quarterly in arrears at the rate of 12 per cent. of the Fixed Amount (being £1.00) per annum.

On a return of capital on a winding up, holders of Preference Shares shall be entitled, in priority to other shareholders, to be paid out of the assets of the Company available for distribution to members, of an amount in respect of each Preference Share equal to the aggregate of the Fixed Amount (being £1) together with a sum equal to any arrears and accruals of the Preference Dividend.

Holders of Preference Shares are entitled to attend any general meeting of the Company and to speak and vote at a general meeting of the Company on a resolution proposing to wind up the Company or to abrogate, vary or modify any of the rights or privileges of the holders of Preference Shares. Holders of Preference Shares will also have the right to speak and vote at a general meeting in respect of any matter in circumstances where the dividend payable on the Preference Shares is in arrears.

The Preference Shares benefit from certain protections that are detailed in the summary set out in Part A of Appendix 2 to this announcement.

The Preference Shares are redeemable in the limited circumstances detailed in the summary set out in Part A of Appendix 2 to this announcement; namely a takeover offer being completed for the Company and in circumstances where there are less than 35 million Preference Shares in issue and the Company (by notice) removes certain protections attaching to the Preference Shares. In such circumstances, the redemption price of each Preference Share will be an amount equal to the Fixed Amount (being £1) and all arrears and accruals of the Preference Dividend.

Further details of the rights attaching to the Preference Shares can be found in Part A of Appendix 2 to this announcement.

The Warrants will be constituted by the Warrant Instrument to be adopted by the Company prior to Admission. Each Warrant will entitle the holder to subscribe for one Ordinary Share at the price of 25 pence during the period commencing on Admission and ending on the tenth anniversary of Admission.

Further details of the Warrants can be found in Part B of Appendix 2 to this announcement.

5 Possible Offer for Raven Mount 

The Boards of Raven Russia and Raven Mount are pleased to announce that, subject to satisfaction or waiver of certain pre-conditions, they have reached agreement on the terms of a possible offer by Raven Russia for the entire issued and to be issued share capital of Raven Mount.

It is intended that, if made, the Possible Offer will be on the following basis:

for each Raven Mount Share held:

0.525 Units (each Unit comprising 1 Preference Share and 1 Warrant)

Based on the issue price of £1.00 for each Unit pursuant to the Placing, the Possible Offer would value each Raven Mount Share at 52.5 pence and the entire issued share capital of Raven Mount at £57 million.

The Possible Offer value (based on the issue price of £1.00 for each Unit pursuant to the Placing) would represent a premium of 156 per cent. to Raven Mount's closing mid price of 20.5 pence as at the close of business on 16 February 2009, the day before this announcement.

Raven Mount's four largest shareholders, comprising Anton Bilton, Bim Sandhu (who are both directors of Raven Mount), Schroder Investment Management and Laxey Partners, who in aggregate have an interest in 74.8 per cent. of Raven Mount's existing issued ordinary share capital, are also all major shareholders in Raven Russia, owning in aggregate 17.8 per cent. of Raven Russia's existing issued ordinary share capital. They are all supportive of the Possible Offer and together Raven Russia has received an irrevocable commitment and letters of intent to accept the Possible Offer in respect of 69.6 million Raven Mount Shares, representing approximately 64.1 per cent. of the existing issued Raven Mount share capital.

In addition, Raven Russia has also received irrevocable commitments and a letter of intent from Raven Russia directors and shareholders, representing approximately 41.7 per cent. of the existing issued Raven Russia share capital, to vote in favour of the Placing, including the resolutions required to issue the Units. 

Raven Russia has based its offer value on the unaudited net assets of Raven Mount as at 31 December 2008 as adjusted by an up-to-date valuation of Raven Mount's major property assets which has been carried out by an independent valuer on behalf of Raven Russia. The Offer Document would include a combined valuation report on behalf of Raven Russia on Raven Mount's major property assets as required by Rule 29 of the City Code.

As at 31 December 2008, Raven Mount, excluding debt in joint ventures, had cash on its balance sheet of £37.5 million, and debt of £15.11 million, and owned approximately 29 million Raven Russia Ordinary Shares as well as a number of residential properties based in the UK, development projects and a strategic land bank of owned and optioned sites. This cash, which, following repayment of all debt excluding debt in joint ventures2, amounted to approximately £20.8 million on 16 February 2009, the day before this announcement, together with the net proceeds from the Placing, will put the Raven Russia Group in a strong financial position. It will provide additional working capital should the letting market deteriorate or properties stand vacant longer than anticipated. It will also provide the Enlarged Group with further resources to take advantage of opportunities in a distressed market. 

The 29 million Raven Russia Ordinary Shares could be cancelled, which would be enhancing to the NAV per Ordinary Share of Raven Russia, thereby benefiting Raven Russia's shareholders, or they could also be used by Raven Russia to satisfy awards under its employee incentive plans.

In addition, the Possible Offer for Raven Mount would mean that the interests of Raven Russia's management would be further aligned with its shareholders, as Anton Bilton, currently Executive Deputy Chairman of Raven Russia and Executive Chairman of Raven Mount, and Glyn Hirsch, currently Chief Executive Officer of Raven Russia and a director of Raven Mount, would both devote all of their time to Raven Russia.

1 This excludes debt in joint ventures amounting to £7.0 million at 31 December 2008, of which £2.25 million is guaranteed by Raven Mount

2 Joint venture debt was £7.5 million at 16 February 2009, of which £2.25 million is guaranteed by Raven Mount

6 Changes to the Share Option Plan

At an extraordinary general meeting of the Company on 28 August 2008, the Ordinary Shareholders approved the creation of two share incentive schemes to provide equity incentives to its employees. These were intended to replace the previous scheme, which had been put in place when the Company was externally managed on property matters. 

The first scheme that was approved at the August 2008 extraordinary general meeting was the employee retention scheme and related to 5 million Ordinary Shares. On 31 December 2008 and 8 January 2009, the Company purchased, in aggregate, 5 million Ordinary Shares (through its subsidiary, Raven Russia (Guernsey) 2 Limited) in the market. In due course, these shares will be placed into a Raven Russia employee benefit trust and used to satisfy awards under the employee retention scheme.

The second scheme approved at the August 2008 extraordinary general meeting of the Company was the Share Option Plan relating to a "share option pool" over 18.5 million Ordinary Shares. No awards have been made to date under this plan. In light of market conditions and the recent share price performance of the Company, the Board considers it appropriate to amend certain aspects of the Share Option Plan. Full details of the amendments will be contained in the Circular but the amendments will include:

7 Financing of the Group

In accordance with the Group's strategy, to date the Group has financed the acquisition and construction of its Warehouse portfolio through a combination of equity and debt finance, the latter in the form of both construction and investment loans, secured on each of the Group's properties on a non-recourse basis to the Company.

All facilities, except for the construction facilities at Noginsk Phase 1 of $65 million (the "Noginsk Facility") and at Rostov on Don of $60 million (the "Rostov on Don Facility"), are on a long term basis and are not repayable until dates ranging from 2012 to 2017. The Noginsk Facility falls due for repayment in October 2009 when the construction of the property is completed. At that time, the Company intends to convert the construction loan into an investment loan. The Group is currently in advanced discussions with HSH Nordbank in relation to the terms of this investment loan and has no reason to believe that such terms will not be agreed. The Rostov on Don Facility is to be repaid in two tranches of $20 million in September 2009 and $40 million in September 2010. 

The non-recourse nature of each of the Group's banking facilities, being secured on individual property assets, protects the remainder of the Group from default on any one facility. In the event of a default, the Group would seek to renegotiate the relevant facility with the banking partners. The Directors believe that such re-negotiations would be successful. However, if this were not the case, ultimately the facilities such as the Noginsk Facility, permit ownership of the underlying asset to be transferred to the relevant bank in full satisfaction of the outstanding debt.

The Group is in ongoing discussions with a number of other banks in relation to securing new financing facilities. In particular, the credit committee of the European Bank for Reconstruction and Development has approved a $40 million facility on Novosibirsk which is now progressing to documentation stage. A second bank, which has an existing facility in relation to Phase 1 and 2 at Istra, has an option to enter into investment finance for Phase 3 and 4 at Istra once construction is completed.

Although the Group has continued to progress and sign new facilities and draw down on existing facilities, the recent contraction of the global credit markets has hampered the Group's ability to raise further bank debt. 

As mentioned above, the objective of the Placing and Possible Offer is to secure the Company's position during the letting phase of its portfolio development. Once appropriate letting levels have been achieved, this will allow the Company to pursue further property investment or shareholder value enhancing opportunities. The intention is to raise up to £125 million by the issue of Preference Shares and Warrants, of which £75 million (has already been placed with the Company's largest shareholder, Invesco as detailed above. The acquisition of Raven Mount, were it to proceed, would provide the Group with additional cash resources which would increase over time as the Raven Mount property portfolio is sold down. 

The Group is currently in compliance with all of the banking covenants under its financing facilities and expects to continue to be so following receipt of its updated property valuations, details of which will be incorporated into its preliminary results for the year ended 31 December 2008. In the current uncertain economic environment, if yields continue to shift outwards and therefore values continue to deteriorate, then the terms of the Group's banking facilities allow for any future loan to value covenant breaches to be remedied through prepayment of part of the relevant facility. The Directors believe it is unlikely that property values will fall such that the funds available to the Group will not be sufficient to remedy a further deterioration in property valuations.

8 Working Capital

The Directors are of the opinion (having made due and careful enquiry) that, after taking into account the financing facilities available and the minimum gross proceeds of the Placing of £75 million, the working capital of the Group will be sufficient for its present requirements, that is, for at least the period of 12 months from the anticipated date of Admission.

9 Russian property market overview

The Russian Warehouse sector remains an attractive asset class, offering investors high income returns and the potential for capital growth. Compared to other European countries, Russia still has a deficit of supply on a per capita basis. This and the difficulty in securing and developing large scale land plots in and around the major Russian cities is likely to limit supply in the future. Very little new development is planned to start this year improving the prospects for a stable market from the end of 2009 into 2010.

Tenants have continued to commit to new leases in the Group's portfolio over the past three months and discussions are ongoing on all of the current developments with potential occupiers, although at a lower level than previously. However, the lack of capital available to potential occupiers has created a new type of demand from those who previously wished to construct their own facilities but are now seeking to rent.

Rental rates have decreased by approximately 10 per cent. in Moscow in the last six months, reflecting increased competition for tenants and the Rouble devaluation against the US dollar (in which rents are denominated). The Directors believe that there have been virtually no sales of completed Warehouses in Russia in the last six months, and the Directors anticipate that the valuation of Raven Russia's portfolio will be marked down by approximately 20 per cent. to reflect the change in the market.

10 Related Party Transaction

Because Invesco is a substantial Ordinary Shareholder in the Company, under the AIM Rules Invesco's participation in the Placing will comprise a related party transaction. The Directors of the Company consider, having consulted with Numis, its nominated adviser for the purposes of the AIM Rules, that Invesco's participation in the Placing is fair and reasonable insofar as the Ordinary Shareholders are concerned.

11 Mark Sinclair to be appointed to the Company's Board

The Board is proposing that, subject to relevant approvals, Mark Sinclair be appointed as a director of the Company. Mark, a Guernsey resident, is a chartered accountant, and spent 18 years at BDO Stoy Hayward, a leading professional firm in the UK. He was a partner in the London real estate group responsible for a portfolio of large property companies, both listed and private. He was also the lead partner of the London real estate audit group. He joined the Raven Group in June 2006 as Finance Director of Raven Russia Property Management Limited, the property adviser to Raven Russia Limited and is currently a senior member of the Raven Russia Limited finance team following the Internalisation in November 2008. He has significant experience in all financial aspects of property transactions and company reporting. 

The full list of Mark's current directorships and partnerships is as follows: 

Heid Limited

Capital City Developments Limited

Raven Russia Property Management Limited

Raven Russia Property Advisors Limited

Raven Russia Service Company Limited

The full list of Mark's previous directorships and partnerships in the last five years is as follows: 

BDO Stoy Hayward LLP

 

12 Resolutions

The resolutions to be put to Ordinary Shareholders at the EGM, and which will be set out in full in the notice of EGM to be attached to the Circular, will include:

(i) a resolution to:

(a) increase the authorised share capital of the Company to: (I) create sufficient headroom for any Preference Shares and Ordinary Shares that may need to be issued on exercise of the Warrants that are the subject of the Placing and/or are issued to Raven Mount Shareholders in connection with the Possible Offer and (II) provide some headroom in both instruments;

(b) authorise the directors to allot the Preference Shares and issue the Warrants in connection with, inter alia, the Placing and/or the Possible Offer;

(c) disapply the pre-emption rights in the Existing Articles: (I) in connection with the issue of Warrants and the Preference Shares; and (II) to provide a general disapplication of such rights;

(d) authorise the Company to make acquisitions of Ordinary Shares on market  within the limits specified in such resolution; 

(e) adopt new articles of association which will replace the Existing Articles. The changes to the Existing Articles will include those necessary to incorporate the rights attaching to the Preference Shares as detailed in Part 1 of Appendix 2 to this announcement, those deemed appropriate to allow the Company to benefit from recent developments in Guernsey company law and finally changes addressing some duplication and administrative issues in the Existing Articles. Details of the proposed changes will be set out in the Circular; and

(ii) a resolution to approve the changes proposed to be made to the Share Option Plan, as detailed in paragraph 6 above.

13 Circular

A circular to Ordinary Shareholders in connection with the Placing and the matters referred to in this announcement, and including a notice of the EGM, is expected to be sent to Ordinary Shareholders shortly. This Circular will also constitute an admission document for the Preference Shares and the Warrants for the purposes of Admission.

  Appendix 1

Definitions

The following definitions apply throughout this announcement, unless the context otherwise requires:

"Admission"	the admission to trading on AIM of the Preference Shares and Warrants to be issued pursuant to the Placing becoming effective in accordance with the AIM Rules
"AIM"	the market operated by the London Stock Exchange
"AIM Rules"	the AIM Rules for Companies published by the London Stock Exchange from time to time
"Changes to the Share Option Plan"	the proposed changes to be made to the Share Option Plan, as set out in paragraph 6 of this announcement
"Circular"	the circular to be sent to Ordinary Shareholders in connection with, inter alia, the Placing, the Possible Offer and the Changes to the Share Option Plan (incorporating an admission document for the purposes of the AIM Rules in relation to Admission) and including a notice of the EGM
"City Code"	the City Code on Takeovers and Mergers issued by the Panel on Takeovers and Mergers in the United Kingdom and, from time to time, any successor or replacement body thereof
"Company" or "Raven Russia"	Raven Russia Limited
"CREST"	the computerised settlement system operated by Euroclear which facilitates the transfer of title to shares in uncertificated form
"CREST Regulations"	the Uncertificated Securities Regulations 2001 (SI 2001/3755), as amended
"Directors" or "Board"	the directors of the Company as at the date of this announcement
"EGM" or "Extraordinary General Meeting"	the extraordinary general meeting of the Company to be held at which the Resolutions will be put to the Ordinary Shareholders, notice of which will be set out in the Circular
"Enlarged Group"	the Raven Russia Group as enlarged following consummation of a Possible Offer
"Euroclear"	Euroclear UK & Ireland Limited, a company incorporated under the laws of England and Wales and the operator of CREST
"Existing Articles"	the Company's articles of association as at the date of this announcement
"Fixed Amount"	£1.00
"Framework Agreement"	the agreement dated 9 July 2008 (as amended on 4 September 2008) between the Company, Raven Mount, Raven Mount Holdings plc (now in members' voluntary liquidation), Russian Property Management Limited and Raven Mount Admission Limited (now Raven Mount Group plc) for the sale and purchase of the entire issued share capital of RRPA and the disposal of RRPM to the Company
"FSMA"	Financial Services and Markets Act 2000, as amended
"Group"	the Company and its subsidiary undertakings from time to time and "member of the Group" shall be construed accordingly
"Internalisation"	the acquisition by the Company of the entire issued share capital of RRPM and RRPA pursuant to the Framework Agreement which completed on 26 November 2008
"Invesco"	Invesco Perpetual
"Law"	the Companies (Guernsey) Law, 2008 as amended
"London Stock Exchange"	London Stock Exchange plc
"Numis"	Numis Securities Limited
"Offer Document"	the document to be sent to Raven Mount Shareholders if the Possible Offer proceeds
"Official List"	the Official List of the London Stock Exchange
"Order"	the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended
"Ordinary Shareholder"	a holder of Ordinary Shares
"Ordinary Shares"	ordinary shares of £0.01 each in the capital of the Company
"Placees"	the persons procured by Numis to subscribe for Units pursuant to the Placing
"Placing"	the proposed conditional placing by Numis, on behalf of the Company, of up to 125 million Units at the Placing Price pursuant to the terms and conditions of the Placing Agreement
"Placing Agreement"	the agreement dated 17 February 2009 between the Company and Numis relating to the Placing
"Placing Price"	£1.00 per Unit
"£" and "p"	respectively pounds and pence sterling, the lawful currency of the United Kingdom
"Possible Offer"	the possible offer by the Company of the entire issued and to be issued share capital of Raven Mount (other than any Raven Mount Shares already held by the Company)
"Preference Dividend"	the cumulative redeemable preferential dividend accruing on each Preference Share as set out in more detail in Part A of Appendix 2
"Preference Shares"	the cumulative redeemable preference shares of £0.01 each in the capital of the Company
"Prospectus Directive"	the Prospectus Directive of the European Parliament and Council (2003/71/EC)
"Raven Mount"	Raven Mount Group plc
"Raven Mount Shares"	means the ordinary shares of £0.001 each in the capital of Raven Mount
"Regulatory Information Service"	Regulatory Information Service operated by the London Stock Exchange
"Resolutions"	the resolutions to be proposed at the EGM in relation to, inter alia, the matters described in paragraph 12 of this announcement
"Rouble"	the lawful currency of the Russian Federation
"RRPA"	Raven Russia Property Advisors Limited
"RRPM"	Raven Russia Property Management Limited
"Share Option Plan"	the Raven Russia 2008 Unapproved Employee Share Option Scheme
"Shares"	Ordinary Shares and Preference Shares
"Singer"	Singer Capital Markets Limited
"Statutes"	the Law and every other statute, statutory instrument, regulation or order for the time being in force concerning companies whether registered under the Law or not
"UK" or "United Kingdom"	the United Kingdom of Great Britain and Northern Ireland
"uncertificated" or "in uncertificated form"	recorded in the register as being held in uncertificated form in CREST and title to which, by virtue of the CREST Regulations, may be transferred by means of CREST
"Units"	the units, each consisting of one Preference Share and one Warrant
"US", "USA" or "United States"	the United States of America, its territories and possessions, any state of the US and the District of Columbia and all other areas subject to its jurisdiction
"US dollar" or "$"	US dollars, the lawful currency of the United States
"VAT"	value added tax
"Warehouse(s)"	the entire spectrum of both newly-built and existing Warehouse buildings, including, but not limited to, high bay logistics buildings, cold storage, industrial and manufacturing factories, light assembly, storage depots, retail Warehouses, leisure boxes, multiplexes, supermarkets, exhibition centres, refineries and multi-storey Warehouse buildings, any of which may have an office content
"Warrant"	a warrant to subscribe for 1 Ordinary Share in the Company at 25 pence per Ordinary Share and "Warrants" shall be construed accordingly
"Warrantholder"	a holder of a Warrant
"Warrant Instrument"	the warrant instrument to be adopted by the Company constituting the Warrants

Copies of the interim results of the Company for the period ended 30 June 2008 and the annual report and financial statements of the Company for the years ended 31 December 2007 and 31 December 2006 are available in the investors section of the Company's website at www.ravenrussia.com.

Expected Timetable of Principal Events

Expected Timetable of Principal Events
Publication of this announcement	17 February 2009
Expected date of publication of the Circular	on or before 23 February 2009
EGM*	24 March 2009
Admission effective and dealings in the Preference Shares and Warrants expected to commence on AIM*	25 March 2009
CREST accounts credited with Preference Shares and Warrants (as applicable)*	by 25 March 2009
Definitive share certificates and warrant certificates in respect of the Preference Shares and the Warrants expected to be dispatched, (as applicable)*	by 30 March 2009
*subject to change, depending upon the date the Circular is published and posted to Ordinary Shareholders

Appendix 2

Principal Terms of the Preference Shares and the Warrants

Part A - Raven Russia 12% Preference Shares

Fixed Amount	£1 per Preference Share.
Preference Dividends	Cumulative preferential dividends will accrue from day to day on the Preference Shares at a rate of 12 per cent. per annum on the Fixed Amount (being £1) from (and including) the date of issue and will be payable quarterly in equal instalments in arrears on 31 March, 30 June, 30 September and 31 December in each year, save that in respect of any Preference Shares issued on or before 31 March 2009 the first payment of the Preference Dividend will be made on 30 June 2009 in respect of the period from the date of issue of the Preference Shares to (but excluding) 30 June 2009 and shall be calculated on a pro rata basis. The holders of the Preference Shares shall rank for dividends in priority to the holders of any other class of shares of the Company (save for any Further Preference Shares (as defined below)). If all or any part of the Preference Dividend is in arrears, interest shall accrue on such unpaid sum at the rate of 15% per annum from the date upon which such arrears arise until the date of payment. In the event that the arrears of the Preference Dividend shall remain unpaid for six months then the interest rate at which interest will accrue on such arrears will from such time increase to the rate of 20% per annum. If there are any arrears of the Preference Dividend outstanding the Company may not pay any distribution (as defined in section 301 of the Law but excluding for these purposes distributions falling within sections 302(1)(a), (d) and (e) of the Law) in respect of the Ordinary Shares or any other shares ranking for distribution after the Preferences Shares or Further Preference Shares. The holders of the Preference Shares shall not be entitled to participate in any further dividends or bonus share issue of the Company.
Scrip Preference Dividend	Subject to the provisions of the Statutes, the board shall offer all holders of Preference Shares the right to elect to receive the Preference Dividend or any part thereof as a scrip dividend of Preference Shares instead of in cash.
Redemption	The Preference Shares only have the right to be redeemed in the following circumstances: subject to the Statutes, on completion of a takeover bid or merger transaction to which the City Code applies (but which for the avoidance of doubt will not include a subscription for or purchase of new shares or securities in the Company), as a result of which any person or persons acting in concert (as defined in the City Code) holds shares carrying in aggregate 50% or more of the voting rights (as defined in the City Code) of the Company; or subject to the Statutes, if the Company has served a Rights Cessation Notice (as defined below) on holders of Preference Shares where, at such time, there are fewer than 35,000,000 Preference Shares in issue. In these circumstances, a holder of Preference Shares can elect to redeem all (but not part) of his holding. The amount to be paid on such redemption per Preference Share will be an amount equal to the aggregate of (i) the Fixed Amount (being £1); and (ii) a sum equal to all arrears and accruals of the Preference Dividend thereon to be calculated down to and including the day of redemption (together with any accrued interest) and to be payable irrespective of whether or not such dividend has been declared or earned or become due and payable. If the Company fails to redeem any Preference Shares on the date fixed for such redemption, interest shall accrue on unpaid redemption monies at the rate of 15% per annum from the date upon which such redemption monies were required to be paid until the date of payment. In the event that the relevant unpaid redemption monies have been unpaid for 6 months from the date fixed for redemption then the interest rate at which interest will accrue on such unpaid redemption monies will increase from such time to the rate of 20% per annum.
Capital	On a return of capital on a winding up (other than a redemption or purchase by the Company of any of its share capital) the holders of Preference Shares shall be entitled, in priority to other shareholders (save for the rights relating to Further Preference Shares (as defined below)), to be paid out of the assets of the Company available for distribution to members an amount in respect of each Preference Share equal to the aggregate of the Fixed Amount (being £1) together with a sum equal to any arrears and accruals of the Preference Dividend in respect of such Preference Share (and any accrued interest), whether earned or declared or not, calculated down to the date of commencement of the winding up. The holders of the Preference Shares shall not have any further right to participate in the assets of the Company on any such return of capital.
Voting Rights	The holders of the Preference Shares shall have the right to receive notice of and to attend any general meeting of the Company and to attend, speak and vote at a general meeting of the Company: if, and when at the date of the notice convening the meeting, the Preference Dividend is in arrears (and for this purpose, the Preferred Dividend shall be deemed to be payable quarterly on the dates set out above); or if a resolution is to be proposed abrogating, varying or modifying any of the rights or privileges of the holders of the Preference Shares or for the winding up of the Company pursuant to Part XIX of the Law, in which case they shall only be entitled to vote on such resolution. Save as set out herein, the Preference Shares shall not confer on the holders thereof the right to speak or vote at any general meeting of the Company. Whenever the holders of Preference Shares are entitled to vote at a general meeting of the Company upon any resolution proposed at such general meeting, on a show of hands every holder thereof who is present in person or by proxy shall have one vote and on a poll every holder thereof who (being an individual) is present in person or by proxy or (being a corporation) is present by a duly authorised representative or by proxy shall have one vote in respect of each Preference Share registered in the name of such holder. The holders of the Preference Shares shall have the right to have sent to them (at the same time as the same are sent to the holders of the Ordinary Shares) a copy of the Company's annual report and accounts and (if available) the Company's six monthly interim unaudited financial statements and such other Company information that is sent to the holders of Ordinary Shares.
Variation of Rights	For as long as any Preference Shares remain in issue, the issue or allotment of or the creation or increase of the amount of any shares of any class or any security convertible into shares of any class ranking, as regards rights to participate in the Company's profits or assets, in priority to the Preference Shares shall be deemed to constitute a variation of the class rights attaching to the Preference Shares. The Company may from time to time without the consent of the holders of the outstanding Preference Shares create and issue further preference shares (including but not limited to Preference Shares) ("Further Preference Shares") ranking as regards their participation in the profits and assets of the Company pari passu with but not in priority to Preference Shares and so that any such Further Preference Shares may either carry as regards participation in the profits and assets of the Company, rights and restrictions identical in all respects with the Preference Shares or with any other series of Further Preference Shares or rights and restrictions differing therefrom in any respect including but without prejudice to the generality of the foregoing in that: (i) the rate of dividend may differ; (ii) the Further Preference Shares may rank for dividends from such date as may be provided by the terms of issue thereof and the dates for payment of the dividend may differ; (iii) a premium may be payable on a return of capital or there may be no such premium; or (iv) the Further Preference Shares may be redeemable and/or convertible into Ordinary Shares on such terms and conditions as may be prescribed by the terms of issue thereof. In the event that the Company creates and issues Further Preference Shares (except where the Further Preference Shares being created and/or issued are Preference Shares), then unless authorised by the consent in writing of the holders of three-fourths in number of the Preference Shares then in issue (excluding any Preference Shares held as treasury shares) or with the sanction of an extraordinary resolution passed at a separate general meeting of the holders of the Preference Shares, the Company shall not create or issue such Further Preference Shares unless: the board has made an offer to each person who holds Preference Shares to allot to him on the same or more favourable terms such proportion of those Further Preference Shares that is as nearly as practicable (fractions being disregarded) equal to the proportion in number held by him of the aggregate Preference Shares then in issue; and the period, which shall not be less than 21 clear days, during which any offer referred to above may be accepted, has expired or the Company has received notice of the acceptance or refusal of every offer made. Until the Rights Cessation Date (as defined below), then save with such consent or sanction on the part of the holders of the Preference Shares as is required for a variation of the rights attached to such shares: the Company shall not make a distribution (as defined in section 301 of the Law but excluding for these purposes distributions falling within sections 302(1)(a), (d) and (e) of the Law) in respect of Ordinary Shares or any other shares ranking for distribution after the Preference Shares or Further Preference Shares (a "Qualifying Distribution") which either itself or when taken together with the aggregate amount of Qualifying Distributions in the previous 12 month period would exceed 10% of the consolidated net asset value of the Company at the point in time the Company proposes to make the relevant Qualifying Distribution; and   there shall not take place: (a) a conversion of the Company under Part  V of the Law;  (b) a migration of the Company under Part VIII of the Law; or (c) a voluntary striking off of the Company under Part XX of the Law. If at any time there are fewer than 35,000,000 Preference Shares in issue, the Company may (but shall not be obliged to) serve a notice on the holders of Preference Shares (a "Rights Cessation Notice") providing that the provisions set out above in respect of distributions and other corporate events shall cease to apply from the date specified in the Rights Cessation Notice provided that such date can be no earlier than a date which is 30 days after the date of the Rights Cessation Notice (such date being referred to as the "Rights Cessation Date").
Form	The Preference Shares will be issued in either certificated form or uncertificated form in CREST.
Purchase of Preference Shares	The Company will have the power in its articles of incorporation to buyback the Preference Shares.
Yield	12 per cent. per annum, payable quarterly.
Listing	On AIM, a market operated by London Stock Exchange plc.
Part B - Warrants
Exercise Amount	25 pence.
Expiry Date	Tenth anniversary of the date of issue of Admission.
Transfer	Freely transferable.
Undertakings of the Company	The Company shall not in any way modify the rights attaching to the existing Ordinary Shares as a class in any way which operates to vary the rights of the Warrantholders in relation to the Warrants. Warrantholders will have made available to them, at the same time and in the same manner as the same are made available to holders of Ordinary Shares, copies of the audited accounts of the Company (with the relevant directors' and auditor's reports) and copies of all other circulars or notices which are made available to holders of Ordinary Shares. In the event that the Company is proposing to make a dividend (as defined in section 302 of the Law) to the holders of Ordinary Shares (a "Qualifying Dividend") of an amount which is not consistent with the stated dividend policy of the Company, the Company will notify Warrantholders of such proposed Qualifying Dividend at least 60 days prior to the scheduled record date for such Qualifying Dividend.
Adjustment of Subscription Rights	While any Warrants remain exercisable: after any allotment of fully paid Ordinary Shares by way of capitalisation of profits or reserves to holders of the Ordinary Shares on the register of members of the Company on a date (or by reference to a record date) other than pursuant to a scrip dividend; or upon any sub-division or consolidation of the Ordinary Shares, the number and/or nominal value of Ordinary Shares to be subscribed on a subsequent exercise of each Warrant will be increased or (as the case may be) reduced proportionately on the basis that immediately after the allotment, sub-division or consolidation, the Ordinary Shares to be issued if the subscription rights attaching to the then outstanding Warrants were exercised shall constitute the same percentage of the total number of issued Ordinary Shares as that which such Ordinary Shares would have constituted immediately before such allotment, sub-division or consolidation and the Exercise Amount of the then outstanding Warrants shall be adjusted accordingly.  While any Warrants remain exercisable, in the event that the Company pays a Qualifying Dividend which exceeds 10% of the consolidated net asset value of the Company on the date of payment of the Qualifying Dividend, the Exercise Amount shall be adjusted in such manner as the auditors of the Company certify as fair and reasonable to take into account such Qualifying Dividend. Such adjustment shall become effective on the date which the auditors of the Company make their certification. For the purposes of this paragraph, the consolidated net asset value of the Company on the date of payment of a Qualifying Dividend shall be determined by reference to the latest published audited accounts or (if such accounts have been published since the publication of the Company's last audited accounts) the latest published interim half yearly unaudited accounts of the Company.
General Offers	Save as set out below, if at any time: an offer is made to all holders of equity share capital of the Company (as defined in the articles of incorporation of the Company) (or all such holders other than the offeror and/or any company controlled by the offeror and/or any person acting in concert with the offeror (as such expression is defined in the latest edition of the City Code)) to acquire the whole or any part of such equity share capital of the Company; and the Company becomes aware that, as a result of such an offer, the right to cast a majority of votes which may ordinarily be cast on a poll at a general meeting of the Company has or will become vested in the offeror and/or such persons or companies as aforesaid, the Company shall forthwith give notice to the Warrantholders of such vesting within 14 days of its becoming so aware (the "General Offer"). For the avoidance of doubt, the summoning of a meeting by the Court in connection with an arrangement under Part VIII of the Law or the preparation of an amalgamation proposal under Part VI of the Law in either case providing for the acquisition by any person of the whole or any part of such equity share capital of the Company shall be deemed to be the making of a General Offer. Where a General Offer is made and: the offeror and/or any company controlled by the offeror and/or any person acting in concert with the offeror shall have made an offer to Warrantholders or to all Warrantholders other than the offeror and/or any company controlled by the offeror and/or any person acting in concert with the offeror to acquire all of the outstanding Warrants; or the offeror and/or any company controlled by the offeror and/or any person acting in concert with the offeror shall have proposed an arrangement or amalgamation ("scheme") with regard to the acquisition of all the outstanding Warrants, and in either case the value of the consideration (on such basis as the auditors of the Company may determine, acting as experts, and shall have confirmed in writing to the Warrantholders no less than 21 days (or, if that is not possible, such period as is possible) prior to the expiry of such offer or the date on which such scheme becomes effective) receivable by a Warrantholder pursuant to such offer or scheme represents no less than that which he would have received pursuant to the offer made or scheme proposed to holders of Ordinary Shares had his subscription rights been exercised on the date upon which such offer became wholly unconditional or such scheme became effective (after deduction of the costs of subscription) then any Warrants which are not the subject of an acceptance of the offer to Warrantholders or are not effectively transferred or cancelled pursuant to such scheme shall lapse upon the expiry of that offer or (provided such scheme becomes effective) upon the date upon which that scheme is sanctioned by the Court in the case of an arrangement or in the case of an amalgamation is recorded on the register of companies in Guernsey. If on a date (or by reference to a record date) while any Warrants remain outstanding: an offer or invitation is made by the Company (whether by way of rights or otherwise (including but not limited to an open offer) but not being an All Share Offer (as defined below)) to all the holders of Ordinary Shares; or any offer or invitation (not being a General Offer) is made to all the holders of Ordinary Shares otherwise than by the Company, then the Company shall procure (but in the case of any offer or invitation (not being a General Offer) is made to all the holders of Ordinary Shares otherwise than by the Company, only in so far as it is able) that at the same time the same offer or invitation is made to the Warrantholders as if their respective Warrants had been exercised and the Warrantholders entered in the register of members accordingly on the day immediately preceding the record date of such offer or invitation then applicable. Provided that, if the directors of the Company so resolve, in the case of any such offer or invitation made by the Company, the Company shall not be required to procure that the same offer or invitation is made to the Warrantholders but that the Exercise Amount and/or the subscription rights shall be adjusted in such manner as the auditors of the Company shall certify to be fair and reasonable to take account of such offer or invitation by the Company. If a General Offer is made whereunder the consideration consists solely of the issue of ordinary shares of the offeror and the offeror makes available an offer of warrants to subscribe for ordinary shares of the offeror in exchange for Warrants which the auditors of the Company consider in their opinion is fair and reasonable (having regard to the terms of the offer and any other circumstances which may appear to the Auditors to be relevant) (an "All Share Offer") then any director of the Company shall be authorised as attorney for each and any of the Warrantholders: to execute a transfer thereof in favour of the offeror in consideration of the issue of a warrant to subscribe for ordinary shares of the offeror as aforesaid whereupon the relevant Warrants shall lapse; and to do such acts and things as may be reasonably necessary or appropriate in connection therewith, subject, in each case, to such offer becoming or being declared wholly unconditional and the offeror being in a position compulsorily to acquire the whole of the then issued ordinary share capital of the Company in accordance with the Law or in the case of such an offer implemented by a scheme, the date upon which that scheme is sanctioned by the Court in the case of an arrangement (provided that such scheme becomes effective) or in the case of an amalgamation is recorded in the register of companies in Guernsey.
Purchase and Cancellation	The Company may at any time purchase Warrants: by tender (available to all Warrantholders alike) at any price; or on market; or by private treaty at any price. All Warrants purchased shall be cancelled forthwith and may not be reissued or sold.
Listing	On AIM, a market operated by London Stock Exchange plc.

Appendix 3

Risk Factors

An investment in the Company involves significant risks and is only suitable for investors who are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses (which may be equal to the whole amount invested) which may result from such an investment. Accordingly, prospective investors should carefully review and evaluate the risks and the other information contained in this document before making a decision to invest in the Company. If in any doubt prospective investors should immediately seek their own personal financial advice from their independent professional adviser authorised under FSMA who specialises in advising on the acquisition of shares and other securities or other advisers such as legal advisers and accountants.

This announcement contains forward-looking statements that involve risks and uncertainties. The Group's actual results could differ materially from those estimated or anticipated in the forward-looking statements as a result of many factors, including the risks faced by the Group which are described below and elsewhere in this announcement.

If any of the following risks actually occur, the Company's business, financial condition, capital resources, results and/or future operations of the Company could be materially and adversely affected. In such circumstances, the trading price of the Preference Shares and Warrants could decline and investors may lose all or part of their investment. Additional risks and uncertainties not currently known to the Board may also have an adverse effect on the Company's business and the information set out below does not purport to be an exhaustive summary of the risks affecting the Company.

Prospective investors should be aware that the value of the Preference Shares and  Warrants (and any Ordinary Shares issued upon the exercise of the Warrants) may go down as well as up and that they may not be able to realise their investment. Prospective investors should also be aware that the coupon income from the Preference Shares may go down should the Company be unable to pay dividends on the Preference Shares.

There can be no guarantee that the Company's objectives will be achieved.

In this section "Key Managers" is defined as Mark Sinclair, Adrian Baker and Igor Bogorodov.

References below to the Company are also deemed to include, where appropriate, each member of the Group.

1 General Risk Factors

1.1 Current crisis in the global financial markets and the deterioration in the global economic outlook

The global financial system has been experiencing difficulties since August 2007 and the financial markets have deteriorated dramatically since the bankruptcy filing by Lehman Brothers in September 2008. This has led to severe dislocation of financial markets around the world and unprecedented levels of illiquidity. In recent months, there has also been growing concern in the financial markets about a global recession. These conditions have produced downward pressure on stock prices and on the availability of credit for financial institutions and corporations. If these levels of market disruption and volatility continue, the Group might experience reductions in business activity, increased funding costs and funding pressures, a decrease in the market price of its Shares and Warrants, decreased asset values, additional write-downs and impairment charges and lower profitability.

1.2 Working Capital

If the Company does not raise sufficient capital through the Placing (including as a result of the Resolutions not being approved), the Company's business, results of operations and financial condition may suffer, its ability to access funding may be further limited and its cost of funding may increase.

1.3 Gearing

The Directors intend to continue to secure borrowing facilities in the future. It is not certain that such facilities will be able to be secured at levels or on terms acceptable to the Directors. Any amounts that are secured under a bank facility are likely to rank ahead of shareholders' entitlements and, accordingly, should the Company's assets not grow at a sufficient rate to cover the costs of operating the Company, shareholders may not recover their investment.

Prospective investors should be aware that, whilst the use of borrowings should enhance the net asset value of the Company's Shares where the value of the Company's underlying assets is rising, it will have the opposite effect where the underlying asset value is falling. In addition, in the event that the rental income of the Company's property portfolio falls, including as a result of defaults by tenants pursuant to their leases with the Company, the use of borrowings will increase the impact of such falls on the net revenue of the Company and, accordingly, will have an adverse effect on the Company's ability to pay dividends to the holders of its Shares.

Should any fall in the underlying asset value or revenues result in the Company breaching financial covenants given to any lender, the Company may be required to repay such borrowings in whole or in part together with any related costs. If the Company is required to repay all or part of its borrowings, it may be required to sell assets at less than their market value.

1.4 Global economic conditions

The Company's business is affected by economic conditions in the geographical areas in which it operates. The global financial markets and credit conditions have been affected by financial dislocations which are impacting the wider economy. Adverse economic conditions in these markets could have a material adverse effect on the Company's business, financial condition and results of operations.

1.5 Currency risk

The Company transacts in currencies other than Sterling, primarily in US dollars and Russian Roubles. The Company's bank loans are predominantly US dollar denominated as are the terms of the rental contracts. Construction contracts are mostly Rouble denominated. Consequently, the Company's performance will be subject to the effect of exchange rate fluctuations with respect to the currencies employed.

1.6 Tax

If a member of the Group is found to be, or to have been, tax resident in any jurisdiction other than that in which it is incorporated or domiciled or to have a taxable permanent establishment or other taxable presence elsewhere, other than in the case of certain members of the Group providing advisory and staff services which may have permanent establishments in Russia and the UK, whether on the basis of existing law or the current practice of any tax authority or by reason of a change in law or practice, this may have a material adverse effect on the amount of tax payable by the Group.

Any change in any member of the Group's tax status or in taxation legislation, practice or its interpretation, could adversely affect the post-tax returns to shareholders.

1.7 Retention of key employees

The Company's future success is substantially dependent on the continued services and performance of certain key employees and its ability to continue to attract and retain highly skilled and qualified personnel. The Directors cannot give assurances that members of the management team will continue to remain with the Company. The loss of the services of key employees could damage the Company's business. The nature of the Company and its business model will create a reliance on a small number of key personnel, whose expertise in their particular business activity is important to the fortunes of the Company going forward. The Company will be dependent, in particular, on the Key Managers. The loss of key personnel and/or the inability to recruit further key personnel could have a material adverse effect on the future of the Company through the impairment of the day-to-day running of the Company, the inability to develop new projects and the inability to develop new and maintain existing relationships.

2 Risk factors relating to property

2.1 Fall in rental income and default

The net revenue generated from the Group's properties may depend on the financial stability of its tenants and its commercial relationships with its' major customers. In the event of a number of tenants defaulting, the Group may experience delays in enforcing its rights as landlord and may incur costs, including litigation and related expenses, in protecting its investment and re-letting the relevant units. In the event of a tenant going bankrupt or becoming insolvent, and thus seeking the protection of bankruptcy or insolvency laws, the Group may experience delays in receipt of rental and/or other contractual payments or it may be unable to collect such payments at all.

If a lease is terminated, the Group may be unable to lease the property for the rent previously received or sell the property without incurring a loss. In the event of a default by a tenant leading to a vacancy or during any other period of vacancy, the Group will suffer a rental shortfall and incur additional expenses until the property is re-let. These expenses could include legal and surveyor's costs in re-letting, maintenance costs, insurance, rates and marketing costs.

2.2 Increase in operating costs

The Group's operating and other expenses could increase without a corresponding increase in turnover or tenant reimbursements of operating and other costs. Factors which could increase operating and other expenses include:

• increases in the rate of inflation;

• increases in payroll expenses and energy costs;

• increases in property taxes and other statutory charges;

• increases in insurance premiums;

• increases in the costs of maintaining properties; and

• failure to perform by sub-contractors leading to increases in operating costs.

Such increases could have a material adverse effect on the Group's business, financial conditions or results of operations.

2.3 Delay in construction and construction cost overruns

The Group may also face delays in construction work, budget overruns, insolvency of contractors or sub-contractors, labour disputes, shortages of construction materials, accidents or unforeseen technical difficulties, which may or may not be under the Group's control. Occurrence of any of these risks may cause delays, cost overruns, or loss of income and, in some cases, cause the development project to not be completed and other direct and indirect costs and losses.

2.4 Risk on land valuation

A significant proportion of the Company's net asset value comprises property and property related assets. If the property market weakens, the Company may have to write down the book value of the properties held by any member of the Group with a corresponding loss recognised in the profit and loss account.

Property and property related assets are inherently difficult to value due to the individual nature of each property and the particular terms of the agreements to which interests in those ventures are held. As a result, valuations can be uncertain and there can be no assurance that the estimates resulting from the valuation process will reflect actual sale prices that could be realised in the future. 

Both rental income and the market value of properties are generally affected by overall conditions in the Russian economy, inflation and changes in interest rates, which may in turn impact upon the demand for properties. 

The potential for the development and/or expansion of Warehouses may be adversely affected by a number of factors, including constraints on location, planning legislation and the need to obtain other licences, consents and approvals and the existence of restrictive covenants affecting the title to the property.

2.5 Liquidity of underlying investments

Investments in property are relatively illiquid and more difficult to realise than equities or bonds.

2.6 Legal changes

Any changes to the laws and regulations relating to Russian property may have an adverse effect on the capital value and/or the rental income of the Company's property portfolio.

2.7 Uninsured losses

The Group attempts to ensure that all its properties are adequately insured to cover losses. However, changes in the costs or availability of insurance could expose the Company to uninsured losses. In addition, certain types of risk may be, or may become in the future, uninsurable or not economically insurable or may not be currently, or in the future, covered by the Group's insurance. In the event that any of the properties incurs a loss that is not fully covered by insurance, the value of the Group's assets will be reduced by the amount of any such uninsured loss. In addition, the Group may have no source of funding to repair or reconstruct the damaged property, and there can be no assurance that any such sources of funding will be available to it for such purposes in the future.

2.8 Geographic concentration of properties

All of the Group's properties are located in Russia, with the majority of the properties being located in the Moscow and St Petersburg regions. Consequently, any downturn in the Moscow or St Petersburg economies, or Russia's economy as a whole, could materially adversely affect the Group's business, financial condition or results of operations, particularly as the Group has only a limited ability to help offset such a downturn through alternative activities.

3 Risk factors relating to Russia 

Potential investors should note that there are significant risks inherent in investing in Russia. The value of Russian companies and assets may be affected by various uncertainties such as economic, political or diplomatic developments, social and religious instability, taxation and interest rates, currency repatriation restrictions, crime and corruption and developments in the law or regulations in Russia and, in particular, the risks of expropriation, nationalisation and confiscation of assets and changes in legislation relating to the level, or permissibility, of foreign ownership.

3.1 Political risk

Significant political instability or social unrest could have a material adverse effect on the value of foreign investments in Russia and, therefore, the value of the Company's assets.

3.2 Economic risk

Since the collapse of the Soviet Union, Russia has at various times been affected by declines in gross domestic product, hyperinflation, an unstable currency and high government indebtedness relative to Gross Domestic Product. Although Russia now has these factors under a greater degree of control, it cannot be guaranteed that this state of affairs will continue or that Russia's economy will not rapidly deteriorate. This could materially affect the value of the Company's assets.

3.3 Physical infrastructure

Russia's physical infrastructure largely dates back to Soviet times and much has not been adequately funded and maintained over the last ten years. The deterioration of Russia's physical infrastructure may harm the national economy, disrupt the transportation of goods and supplies, add costs to doing business in Russia and interrupt business operations, each of which could have a material adverse effect on the Group's business.

3.4 Reliance on oil and gas

The Russian economy is heavily dependent on the production and export of oil and is therefore highly sensitive to changes in the world oil price. It is impossible to predict future oil price movements with any certainty. A reduction in the world oil prices may lead to a decline in the value of Russian assets. In addition, it may have materially adverse effects on the Russian economy.

Making the economy less dependent on oil and natural gas export is a stated priority of Ex-President Putin and current President Medvedev, but there can be no guarantee that this will happen going forward.

3.5 Crime and corruption

High crime levels, including extortion and fraud, are still prevalent in Russia. Many businesses, particularly in large cities, are subject to the influences of criminal elements. Part of the Russian economic system continue to suffer from corruption. The Company may have to cease or alter certain activities or liquidate certain investments as a result of criminal threats or activities. Legal rights may be difficult to enforce in the face of organised crime or corruption. Prospective counterparties to the Company may seek to structure transactions in an irregular fashion, and to evade fiscal or legal requirements. They may also deliberately conceal information from the Company and its advisers or provide inaccurate or misleading information.

Further, it is possible that permits, authorisations, re-zoning approvals or other similar matters may have been obtained in breach of legal requirements (often on the basis of illegal payments having been made). Such matters would be susceptible to subsequent challenge as ultra vires. Similar issues may arise in the context of compliance with privatisation procedures and auctions related to the acquisition of land, lease and development rights. It can be difficult, or impossible, to monitor or verify this issue one way or another.

3.6 Official data

The quality and reliability of official data published by the Russian government and its agencies is generally not equivalent to that of more developed Western countries.

3.7 Accounting practice

Accounting, auditing and financial reporting standards in Russia do not always match International Financial Reporting Standards and are not always equivalent to those applicable in more developed market economies. The quality and reliability of information available to the Company is likely to be less than when investing in Western countries. The obligation on Russian companies to publish financial information is also relatively limited, thus making satisfactory due diligence prior to any acquisition harder to achieve.

3.8 Foreign currency and exchange rates

The Company's assets may be invested in assets denominated in Roubles, which are not externally convertible into other currencies outside Russia. The value of the Company's assets, as measured in Sterling or US dollars, may be affected, both positively and negatively, by fluctuations in currency rates and exchange control regulations. The Company, as a non-resident of Russia, is restricted in the operations in which it may engage involving Roubles since it may only hold Roubles in special bank accounts, the proceeds from which may not be freely converted and repatriated.

3.9 Foreign investment restrictions

The laws and regulations affecting foreign investment in Russian enterprises continue to evolve in an unpredictable manner. Laws and regulations, particularly involving taxation, foreign investment and trade, title to securities, and transfer of title that are applicable to the Company's activities can change quickly and unpredictably (sometimes with retroactive effect) in a manner far more volatile than in more developed market economies. Although basic commercial laws are in place, they are often unclear or contradictory and subject to varying interpretations and may at any time be amended, modified, repealed or replaced in a manner materially adverse to the interests of the Company.

3.10 Repatriation restrictions

Russian foreign investment legislation currently guarantees the right of foreign investors to transfer abroad income received from investments such as profits, dividends and interest payments. This right is subject to settlement of all applicable taxes and duties. However, more recent legislation governing currency regulation and control, guarantees the right to export interest, dividends and other income on investments, but does not expressly permit the repatriation of capital from the realisation of investments. Current practice is to recognise the right to repatriation of capital. Authorities currently do not attempt to restrict repatriation beyond the extent of the earlier law. No guarantee can be made, however, that amounts representing realisation of capital or income will be capable of being remitted.

Russian currency control legislation pertaining to the payment of dividends currently permits Rouble dividends on common stock to be paid to a special Rouble account of a non-resident shareholder or its nominee, and to be converted into a convertible currency and repatriated without restriction, but it is possible that this situation may change.

3.11 Re-nationalisation, requisition, compulsory purchase

Russia has, since the early 1990s, undertaken a substantial programme of privatisation. However, an anti-privatisation lobby still exists within the Russian parliament. Re-nationalisation of assets cannot be ruled out. Any such activity could materially adversely affect the value of the Company's assets. Further, land may be subject to compulsory purchase by the state for its own needs or as a sanction for the inappropriate use of that land.

The law on investment activity in Russia provides that in the event that property (including, by implication, real estate) is nationalised or requisitioned by the state, the owner is entitled to full reimbursement for all incurred losses, including loss of profit. It is not clear from the law how such losses will be calculated nor whether there is any way to seek to challenge (and so to prevent) confiscation of real estate.

During Russia's transformation from a centralised economy to a market economy, legislation has been enacted to protect private property against expropriation and nationalisation. However, it is possible that due to the lack of experience in enforcing these provisions and due to political or legal changes, these protections could not be enforced, in the event of an attempted expropriation or nationalisation. Some government entities have tried to invalidate earlier privatisations. Expropriation or nationalisation of the companies in which the Company invests, their assets or portions thereof, potentially with little or no compensation, would have a material adverse effect on the Company.

3.12 Russian taxation

Russian tax law and practice is not as clearly established as that of the UK and the practice of the Russian tax authorities may not always be in accordance with the law. The Russian tax authorities do not always apply the law evenly to all taxpayers, sometimes motivated by political reasons. It is possible that the current interpretation of the law or understanding of practice may change or, indeed, that the law may be changed with retrospective effect, although legislation with retrospective effect that cause a deterioration in taxpayers' positions is generally prohibited.

Russian tax laws, such as the Tax Code, have been in force for a short period relative to tax laws in more developed market economies: therefore the government's implementation of these tax laws is often unclear or inconsistent. Often, differing legal interpretations exist between companies that are taxed and government organisations, such as the Minister of Finance, the Federal Tax Service and its various inspectorates, creating uncertainties and areas of conflict. Generally, tax declarations remain open and subject to inspection by tax and/or customs authorities for a period of three years following the tax year in question. There is some discussion over a change to the limitation period but how this will be resolved is currently unclear. Further, the tax authorities have in the past sought, and may again in the future, seek, ways to look back beyond the three year period. The fact that a year has been reviewed by tax authorities does not close that year nor any tax declaration applicable to that year, from further review during the three-year period. These facts create tax risks in Russia substantially more significant than typically found in countries with more developed tax systems.

The taxation system in Russia is subject to frequent change and inconsistent enforcement at the federal, regional and local levels. Until the recent adoption of the new Tax Code, the system of tax collection was relatively ineffective, resulting in the continual imposition of new taxes in an attempt to raise government revenues. There can be no guarantee that the Tax Code will not be changed in the future in a way that reverses recent positive changes. Among other things, the potential for government deficits raises the risk of a sudden imposition of additional taxes on the Company or entities in which it invests.

Accordingly, it is possible that the Company or any entity in which it invests could become subject to taxation in Russia that is not anticipated either at the date of this document or when its investments into Russia are made, valued or disposed of, which could have a materially adverse effect on the Company.

Equally, the timing for recovering VAT by the Group from the Russian government in respect of construction costs can be hard to predict.

3.13 Legal system

The volume of new legislation which has appeared, as well as the magnitude of the legislative changes taking place, has resulted in a lack of confidence in the Russian courts to give clear and consistent judgments. Legal acts are published by a variety of state bodies and complete compliance with legal rules and standards, including in relation to privatisation, has often been difficult to achieve even for those attempting to do so. There is also a lack of precedent in relation to market-oriented legal relations.

Russia had little regulation on the issues relating to private ownership of real estate during the Soviet period. As a result, many aspects of the legislative framework relating to the holding of real estate in Russia remain undeveloped. The process of development of the legislative environment has not been finalised yet. The law is evolving rapidly and it is difficult to predict future changes.

Due to the inconsistency of Russian legislation, the same provisions of the law may be applied differently by different local authorities and state bodies. As an example, when applying for registration of sale and purchase agreements for real estate, registration may depend upon the decision of a state official who has, at least in practical terms, wide-ranging discretion over registration practices and procedures. The uncertainty as to how the law will be applied by different local authorities and state bodies may have adverse consequences for the Company.

Under Russian law, any legal rule affecting the rights and duties of private individuals must be published. However, there remains the risk of unpublished laws being applied in which case the validity of any act affecting the rights and duties of private individuals that is not based on published law can be challenged in court. Courts normally give protection to the rights of private individuals except, perhaps, in high profile cases where political reasons may prevail.

The independence of the judicial system and its immunity from economic, political and nationalistic influences in Russia remain largely untested. The court system is understaffed and under-funded. Judges and the courts are generally inexperienced in the area of business and corporate law. Judicial precedents have no binding effect on subsequent decisions as Russia is a civil law jurisdiction. In addition, most court decisions are not readily available to the public. Enforcement of court judgements can in practice be very difficult in Russia. All of these factors make judicial decisions in Russia difficult to predict and effective redress uncertain. Additionally, court claims may be used in furtherance of political or private objectives and court judgements are not always enforced or followed by law enforcement agencies.

Disputes concerning real estate are within the exclusive competence of the court of the Russian Federation. This does not therefore allow such disputes to be referred to arbitration outside Russia so that the Company may well be exposed to the issues outlined above.

3.14 Town-planning issues

City (or other authorities') reconstruction or zoning plans may envisage the demolition or reconstruction of buildings. It may be difficult to ascertain whether an investment that the Company proposes to make is, or may be in the future, affected by such plans. Buildings constructed in Russia often fail to comply with various matters of public or administrative law. As examples, they may not comply with the building code regulations, with the detailed requirements of the permits authorising their construction or with local authority zoning requirements. It can be difficult or, in some cases, impossible to verify compliance due to various factors, not least obtaining information from all relevant authorities in this context.

3.15 Servitude and easement

In Russia, the concept of an easement or servitude such as right of way or access is non-existent or in its infancy. Accordingly the rights relating to a property over another's land (e.g. for drainage, access, rights of light, cabling, structural support etc,) are generally ill-defined concepts. The Company may be uncertain as to its rights over adjoining land, and similarly, neighbours to the Company's property may have ill-defined rights over the Company's property.

3.16 Governmental authorities' powers

Government authorities have a high degree of discretion in Russia and at times exercise their discretion arbitrarily, without hearing or prior notice, and sometimes in a manner that is contrary to law. Moreover, the government also has the power under certain circumstances, by regulation or a government act, to interfere with the performance of, nullify or terminate contracts. Unlawful or arbitrary governmental actions have included withdrawal of licences, sudden and unexpected tax audits, criminal prosecutions and civil actions. Federal and local government entities have also used common defect in matters surrounding share issuances and registration as pretexts for court claims and other demands to invalidate such issuances and registrations and/or to void transactions, often for political or private gain.

3.17 Liability of investors in joint stock companies

The Russian Civil Code, the Federal Law on joint stock companies and the Federal Law on limited liability companies generally provide that shareholders in a Russian joint stock company and members of a Russian limited liability company are not liable for the obligations of the company and bear only the risk of loss of their investment. An exception to this rule, however, is when one company is capable of determining such decisions of its subsidiary.

Such a company is called an effective parent. The company whose decisions are capable of being so determined is called an effective subsidiary. Under certain circumstances the effective parent bears joint and several responsibility for transactions concluded by the effective subsidiary in carrying out these decisions. In addition, an effective parent is secondarily liable for an effective subsidiary's debts if an effective subsidiary becomes insolvent or bankrupt resulting from the action or inaction of an effective parent.

3.18 Insurance

The insurance industry in Russia is in an early stage of development and, accordingly, the insurance cover available is relatively limited. Many forms of insurance common in more developed countries are not yet available in Russia. Accordingly, there is a risk that losses and liabilities of Russian companies in which the Company invests, could have a materially adverse effect on their value. It may not be possible for the Company to obtain insurance for the loss of rent (or to do so at commercial rates).

As leases may be terminable in certain circumstances under Russian law, the certainty of the Company's lease income cannot necessarily be guaranteed. The Company may also not be able to obtain title insurance due to limited product availability and cost.

3.19 Environmental concerns

The Group may be liable for the costs of removal, investigation or remediation of any hazardous or toxic substances that are located on or in a property owned or occupied by it, or that are migrating or have migrated from a property owned or occupied by it. The costs of any required removal, investigation or remediation of such substances may be substantial regardless of whether the Group originally caused the contamination.

The presence of such substances, or the failure to remedy the situation properly, may also adversely affect the value of the property or the Group's ability to sell, let or regenerate the property. The Group could be required to remove or remediate any hazardous substances that it has caused or knowingly permitted to be located at any property that it has owned or occupied in the past.

Laws and regulations, which may be amended over time, may also impose liability for the presence of certain materials or substances or the release of certain materials or substances into the air, land or water or the migration of certain materials or substances from an investment, including asbestos, and such presence, release or migration can form the basis for liability to third parties for personal injury or other damages. The Group may be affected by the additional cost of environmental liabilities imposed by environmental regulation, which could have a material adverse effect on its business, financial condition or results of operations.

3.20 Liabilities in acquired entities

The Company may need to make investments by acquiring existing companies with undisclosed or unascertained liabilities embedded in such companies. The Company will seek to obtain appropriate contractual protection but obtaining comprehensive protection and the efficacy and enforceability of such protection (to the extent obtained) cannot be guaranteed.

3.21 Title, Immovables Register and Register of Rights

In accordance with the Federal Law on the State Register of Immovable Property dated 24 July 2007, the State Register of Immovable Property (the "Immovables Register"), administered by the Federal Agency, was established. The Immovables Register discloses, inter alia, certain key information in respect of land such as its location, designated use, ownership title, cadastre value, etc. The general information from the Immovables Register is publicly available and may be obtained by any interested person. Additionally, there is a uniform register of rights to immovable property and transactions with it which also contains key information in respect of land and buildings, similar to the Immovables Register. However, the quality and reliability of the official information in both registers is generally not equivalent to that of more developed Western countries. Further, the state gives no clear guarantee relating to the accuracy and completeness of the information contained in either register.

Thus, although the Company may be forced to rely upon the information contained in either register, it may not have effective redress against the state if the information upon which the Company relied, in deciding whether or not to make an investment, was inaccurate. misleading or incomplete. The information in either register may be subject to a challenge in the court by any interested party.

Broadly speaking, the Company will only acquire a title to assets which is as good as the title of the seller of such assets to the Company. It can be difficult, or impossible, in certain cases, to establish beyond doubt that such title is incapable of challenge. Any successful challenge to the validity of the seller's title to an asset may in turn have adverse consequences for the Company's title to such asset.

3.22 Land lease expiry or termination

The Company may acquire investments where it has only a leasehold interest in the land (but ownership of any building on it). The land lease is likely to be capable of being terminated early in various circumstances; ordinarily this would only be in the event of breach of the land lease provisions, but there may be other circumstances provided for in the lease in question. Furthermore, the land lease may not contain renewal rights. In the event of termination of a land lease (whether during the term, generally for breach, or at the expiry of the term) there is a risk that the landowner will acquire the right to buy the building in question on that land, from the Company, for a price unspecified, but to be determined by the court. This is one possible outcome of a number of possible outcomes contemplated by the Civil Code. Due to a lack of court practice on how these provisions will actually operate, the Company's position, and the ongoing status of its investment, will be unclear upon termination of any land lease rights.

4 Risk Factors relating to the Preference Shares and Warrants 

4.1 Risks relating to the Preference Shares and Warrants trading on AIM 

The Preference Shares and Warrants will be admitted to trading on AIM, a market designed primarily for emerging or smaller companies to which a higher investment risk tends to be attached than that associated with larger or more established companies. An investment in the Preference Shares and Warrants quoted on AIM may carry a higher risk than an investment in the Preference Shares and Warrants quoted on the Official List as it may be more difficult for investors to realise their investment on AIM than to realise an investment in a company whose shares or warrants are quoted on the Official List. The AIM Rules are less demanding than those of the Official List. AIM has been in existence since June 1995 but its future success and liquidity in the market for Preference Shares and Warrants cannot be assured.

4.2 Trading in Shares and Warrants may be illiquid

Admission to AIM of the Preference Shares and Warrants should not be taken as implying that there will be a liquid market for such Preference Shares and Warrants (and any Ordinary Shares issued upon the exercise of the Warrants). 

4.3 If the Company is wound up, distributions to holders of the Preference Shares will be subordinated to the claims of creditors

On a return of capital on a winding-up, holders of Preference Shares will be entitled to be paid out of the assets of the Company available to members only after the claims of all creditors of the Company have been settled.

4.4 If the Company is wound up, distributions to holders of the Ordinary Shares issued following the exercise of Warrants will be subordinated to the claims of creditors and the holders of Preference Shares

On a return of capital on a winding-up, holders of Ordinary Shares issued following the exercise of the Warrants will be entitled to be paid out of the assets of the Company available to members only after the claims of all creditors of the Company and the holders of the Preference Shares have been settled.

4.5 Dividends 

The ability of the Company to pay out dividends on the Shares will depend on, inter alia, rental and capital value growth in the underlying assets.

On 1 July 2008, the Law came into force in Guernsey. This replaced The Companies (Guernsey) Law, 1994. One of the immediate effects of Law was to replace the capital maintenance requirements in respect of dividend and distribution payments to be made from distributable profits (similar to that to which UK companies are subject and formerly applicable to Guernsey companies) with a solvency based test similar to that applicable to companies incorporated in New Zealand. The use of the solvency test now requires the directors of a company to carry out a liquidity or cashflow test and a balance sheet solvency test before any dividend or distribution payment can be made. The test requires the board to make a future assessment by making reference to the solvency test being satisfied immediately after a distribution or dividend payment is made. If at the time a dividend or distribution payment is to be made the directors believe that the solvency test cannot be passed, then no payment may be made to holders of the Shares.

Investors should be aware that the payment of the Preference Dividend on the Preference Shares will be subject to the Company satisfying this legal requirement.

The corporate structure of the Company's entitles it to certain benefits under the double taxation treaty signed between Russia and Cyprus in 1998 and effective from 2000. Should this treaty be amended or terminated, tax efficiencies within the Company could be reduced and adversely affect the overall performance of the Company and its ability to pay dividends. 

4.6 Volatility

The market price of the Preference Shares and Warrants (and any Ordinary Shares issued upon the exercise of the Warrants) could be subject to significant fluctuations due to a change in sentiment in the market regarding the Preference Shares and Warrants (or securities similar to them) or in response to various factors and events, including legal or regulatory changes affecting the Group's operations, variations in the Group's operating results or property valuation and any further downturn in the broader Russian property market.

4.7 Absence of voting rights

Holders of Preference Shares will only be entitled to receive notice of and to attend any general meetings of Ordinary Shareholders and to speak or vote upon any resolution proposed at such meeting if a resolution is proposed either varying or abrogating any of the rights and restrictions attached to the Preference Shares or to wind-up the Company (and only then in each case to speak and vote upon any such resolution) or in the event that any of the dividends on the Preference Shares are in arrears subject to certain terms and conditions as more particularly described in the relevant sections of Part 1 of Appendix 2 of this announcement.

4.8 Perpetual Securities

The Company is unable to redeem the Preference Shares at any time and the holders of the Preference Shares have limited rights to call for their redemption which are more particularly described in the relevant sections of Part 1 of Appendix 2 of this announcement.

4.9 Net asset value and market price

There is no guarantee that the market price of the Warrants will fully reflect the underlying value of the assets held by the Company. As well as being affected by the underlying value of the assets held, the market value of the Warrants will, amongst other factors, be influenced by the market price of the Ordinary Shares and the supply and demand for the Warrants in the market. As such, the market value of the Warrants may vary considerably from the underlying value of the Group's assets. 

4.10 Payment by the Company of coupon payments on the Preference Shares may prevent the payment of dividends on, and the redemption or purchase by the Company of, the Ordinary Shares issued upon exercise of the Warrants

The Preference Shares rank in priority to the Ordinary Shares and their rights contain provisions to the effect that if the Preference Dividend on them is not paid on the dates provided, then the Company will be restricted from paying dividends on, and/or purchasing any of the Ordinary Shares, as the case may be.

4.11 Future sales of Ordinary Shares and/or Warrants in the public market

Sales of a substantial number of Ordinary Shares and/or Warrants in the public market could adversely depress the market price of the Warrants.

ENDIOEEAEAXFADNEFE

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