RNS Number : 2696E
Aurora Russia Limited
17 December 2009
Aurora Russia Limited ("Aurora Russia" or the "Company")
Results for the 6 months ended 30 September 2009

Investee companies well positioned to grow market share as Russia's economy improves
Successful fundraising of 15 million
Financial highlights
*
Net asset value at 30 September 2009 up 2.0% to 81.43 million or 108.6p per share, compared to 79.86 million or 106.5p per share at 31 March 2009
*
Cash and cash equivalents as at 30 September 2009 were 3.49 million, compared to 4.12 million as at 31 March 2009
*
Consolidated net profit for the period of 1.99 million (1.08 million for 6 months to 30 September 2008)
*
Consolidated earnings per share for the period of 2.65p per share (1.44p per share for 6 months to 30 September 2008)

Operational highlights - Focus on cost efficiency whilst pursuing market share gains.
Fully invested with 64.2million in five companies, three of which are leaders in their field

OSG
*
OSG remains the largest records management company in Russia, Ukraine and Kazakhstan
*
For the period to 30 September 2009, revenues in Russia grew 33% year-on-year in RUR terms while Poland grew 44% year-on-year in PLN terms
*
EBITDA was 1.1m up 21% year-on-year

Unistream Bank
*
Continues to build on position as one of the largest money transfer companies in Russia through c.280 of its own money transfer offices
*
Revenue for the 9 month period to 30 September 2009 reduced by 5% in RUR terms at 35 million, compared to the prior year period, due to the impact of the financial crisis on the construction industry
*
Operating income before fixed expenses during the period increased 9% year-on-year to 15.7 million due to growth in foreign exchange commissions and an increase in the share of own points of sale in the total volume transferred

Superstroy
*
Solid performance through focus on operational efficiencies and cost reduction, with all 45 stores expected to be profitable in 2009
*
EBITDA improved by 188% year-on-year with the company maintaining its market position which, based on estimated turnover figures, ranks the company as 4th among all chain DIY retailers operating in Russia (up from 7th in 2007)

Kreditmart and Flexinvest
*
Due to the financial crisis, Kreditmart has shifted focus on insurance and consumer loans until the mortgage market returns to Russia
*
Management achieved a decrease in monthly cash burn of 71% through cost-cutting and reduction of headcount by 53%
*
Both Kreditmart and Flexinvest Bank together have net cash of 6.7 million and 20 million in assets as at 30 September 2009

Successful fundraising of 15 million

*
On 17 December 2009, the Company announced a Placing of 15 million of newly issued shares
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12.4 million will be used to purchase an additional 43.5% of OSG's shares bringing the shareholding in OSG to 93.6% and to invest new money into OSG to part fund a large warehouse facility
*
Balance of proceeds of the Placing to be used to pay costs associated with the Placing and retained by the Company as working capital

Detailed results for the investee companies are contained in the investment management report

Commenting, Dan Koch, Chairman of Aurora Russia, said:
"While the global operating environment over the period has been challenging, the investee companies have taken prudent measures to ensure that they are positioned for growth. Three of the five investments are market leaders and I believe that they are well-positioned for exit either through a strategic sale or IPO.
I am encouraged that the Rouble is gaining strength and that currency stability will likely support growth in consumption. Russia's reserves of over $400 billion remain one of the world's largest and should allow Russia to recover faster than most world economies."

17 December 2009
Chairman's Statement
Introduction
I am pleased to present the results of Aurora Russia Limited for the 6 months ended 30 September 2009. While the past 12 months have been challenging for companies not only in Russia, but throughout the world, our companies have made prudent decisions to adapt to the changing environment while seeking to increase market share and prepare themselves to resume growth once the market begins to grow again.
I am encouraged by the recent trends being seen in Russia and believe that the services sectors which the Company is targeting will benefit as the economy improves. According to the Ministry of Economic Development, Russia's seasonally-adjusted GDP grew 0.6% in the third quarter compared to the second quarter, with the Russian Government predicting that the economy will grow 3-4% in the fourth quarter of 2009. A recent report by Unicredit is also encouraging when it states that the Russian middle class is expected to double over the next five years. The key drivers contributing to this growth include an increase in productivity and a decline in the working-age population. This trend over the next five years will likely support the growth of migrant labour, low unemployment and robust growth of disposable income. All of these factors are likely to drive the growth of the services sector in Russia and our investee companies in particular.
For the period to 30 September 2009, Aurora Russia Limited recorded a profit of 1.99 million or 2.65p per share, based on the unaudited consolidated statement of comprehensive income. Despite the difficult global operating environment, the net asset value of the Company as at 30 September 2009 was 81.43 million resulting in a Net Asset Value per share of 108.6 p.
Investment Review
Aurora Russia has invested a total of 64.2 million in five companies:
# OSG RECORDS MANAGEMENT, A REGIONAL MARKET LEADER IN RECORDS MANAGEMENT.
# UNISTREAM BANK, A LEADING RUSSIAN MONEY TRANSFER COMPANY.
# SUPERSTROY, ONE OF THE LEADING DIY RETAILERS IN RUSSIA.
# KREDITMART, A FINANCE COMPANY DISTRIBUTING FINANCIAL SERVICES PRODUCTS SUCH AS MORTGAGES, INSURANCE, CONSUMER LOANS, AND PENSION FUNDS.
# FLEXINVEST BANK, A RETAIL BANK OFFERING BANKING SERVICES.

For all of the investee companies, the focus over the past 12 months has been on conserving cash, mitigating risk, reducing costs to drive efficiency, improving margins, and seeking opportunities to grow market share as competitors scale back. In contrast to much of the competition, the investee companies have relatively low levels of debt. As a result all of the companies are well positioned to grow market share as the economy improves. While the operating environment continues to remain difficult, I am encouraged by the first signs of stabilization and growth in the recent monthly performance of the investee companies.
OSG, Unistream and Superstroy have maintained their leading market positions and I believe that although Kreditmart is at an early stage in its development it now appears to be the leading broker of financial products in the market due to its main competitors either having left the market or reduced their size.

Portfolio Valuation
A valuation of the investment portfolio was performed at 30 September 2009, resulting in an increase in value from 74.8 million to 77.8 million or 4%. This valuation, recommended by the Valuation Committee of the Board, was prepared by the Manager using methodology consistent with prior periods and was formally adopted by the Board on 8 December 2009. These valuations are prepared for accounting purposes only and comply with the International Private Equity and Venture Capital Association ('IPEVCA') guidelines. The resultant valuations of investments included in the Company's financial statements may not necessarily reflect the value that a third party would be prepared to pay for these businesses.

The current valuation reflects changes to the valuation performed as of 31 March 2009 as follows: Superstroy has been increased by 1.6 million to 14.8 million, an increase of 12%. Unistream Bank has been increased by 4.7 million to 29.7 million, an increase of 19%. OSG Records Management has been decreased by 0.7 million to 12.9 million, a decrease of 5%. The valuation of Kreditmart and Flexinvest Bank have been decreased by 11% from 23.0 million to 20.4 million, reflecting the current uncertain market conditions and lower values being placed on mortgage broking businesses.

The Placing

The Company also announces today a proposed issue of 37,500,000 new ordinary shares (subject to approval by shareholders at an extraordinary general meeting) at an issue price of 40p per share. It is proposed that 12.4 million of the proceeds of the share issue will be used to purchase an additional 43.5% of OSG's shares bringing the shareholding in OSG to 93.6% (on a fully diluted basis and assuming all convertible loans in OSG held by the Company are converted), and to invest new money into OSG to part fund a large warehouse facility in Moscow. The balance of the proceeds will be used to pay costs associated with the share issue and retained by the Company as working capital.

The balance of OSG's 6.4% shares are held in an option pool, with approximately 2.0% held by previous employees who may wish to exercise and sell the shares to the Company. If such option shares are purchased by the Company, the net amount payable to the option holders will be 0.18 million which will increase the Company's shareholding in OSG to 95.5%. However, the Company expects to increase the management pool by an additional 3.6% resulting in its overall holding in OSG being approximately 92%.

The Company is delighted to have been successful in securing commitments for this placing from both existing and new shareholders resulting in the company widening its investor base. I believe that the benefit to the Company and its shareholders outweighs the dilutive effect the placing has on shareholders not participating. Taking control of OSG and investing in a warehouse in Moscow will no doubt improve the future stability of the business, and improve operational and financial efficiencies resulting in higher growth for OSG and a more attractive and certain exit.

Speaking of shareholder value, I believe that by undertaking this fundraising process the Directors are able to better understand the investor market and what investors are looking for from the Company. A major concern was that no strategy has ever been formally announced as to what the Company will do with sale proceeds of each investment albeit the Company does have a dividend policy. The Board has therefore announced that the Company will return cash to shareholders as each of its portfolio companies are sold. Following the receipt of cash from a disposal of any of its portfolio companies, it will return to Shareholders an amount up to a maximum of the lesser of the total net proceeds received on a realisation of a portfolio company and 1.5 times the total amount invested in that portfolio company plus the pro-rata allocation of costs of the Company to date until the Company has returned a total of 105 million to Shareholders. Any proceeds in excess of this amount should be retained by the Company for re-investment purposes.

However if the amount received on the disposal of a portfolio company is less than 1.5 times the total amount invested in such company plus Allocated Costs, it is anticipated that the total funds received from the sale of the portfolio company (net of disposal expenses) will be returned to Shareholders. Furthermore, in the event that the Board believes that the Company needs to retain any portion of the cash proceeds on the sale of any portfolio company to satisfy its status as a going concern, for general working capital purposes or for the purposes of future investments in existing portfolio companies that are deemed necessary by the Board, it will do so.

The Board has also agreed to amend the option deed to keep the Manager incentivised to continue to manage the investments that the company has made. Details are outlined in Note 17 to these accounts and in the Circular to Shareholders dated 17 December 2009.

I would like to take this opportunity to confirm that following the Placing, it is not the intention of the Board to raise additional capital by issuing further shares at a discount to the prevailing NAV per share in the near to medium term future. Nonetheless, the Board also recognise that it may, at any time, be in the interests of the Company to raise additional capital and it may be necessary to issue further shares on a pre-emptive basis or otherwise and, potentially, at a discount to the prevailing NAV per share.

Outlook

While the global operating environment over the period has been challenging, the investee companies have taken prudent measures to ensure that they are positioned for growth. Three of the five investments are market leaders and I believe that they are well-positioned for exit either through a strategic sale or IPO. While Kreditmart and Flexinvest Bank have been the most affected by the financial crisis, they are well positioned to benefit as the mortgage market recovers in Russia. My feelings arising from a recent visit to Moscow are that confidence is growing and there is improvement in general business sentiment. As challenging as the crisis has been over the past several months, it also provided an opportunity for companies to review how they have operated and to put in place more efficient systems to grow. As a result, the strongest companies have survived and are positioned to benefit as the economy improves. I am encouraged that the Rouble is gaining strength and that currency stability will likely support growth in consumption. Russia's reserves of over $400 billion remain one of the world's largest and should allow Russia to recover faster than most world economies.

I am pleased to report the performance of the investee companies of Aurora Russia Limited and look forward to the future with confidence.

Dan Collinson Koch

Chairman of the Board

Aurora Russia Limited

Investment Manager's Report
17 December 2009
Overview
The six months to 30 September 2009 was a challenging time for companies worldwide as a result of the worldwide financial crisis. While our investee companies focused on conserving cash, cutting overhead, and mitigating risk during this period they also pursued opportunities to gain market share. Aurora Investment Advisors (the 'Manager') provided considerable hands-on operational and strategic support to assist them during this period which we believe will result in long-term value for shareholders.
Since the Company's IPO in March 2006, Aurora Russia Limited has invested a total of 64.2 million in five companies. The companies are valued at 30 September 2009 at 77.8 million, representing an increase of 4% since 31 March 2009. Aurora Russia Limited owns 26% of Unistream Bank, 100% of Kreditmart, 100% of Flexinvest Bank, 24.3% of SuperStroy's holding company, and 39.4% of OSG Records Management plus a convertible loan.
Three of our five investments continue to be the market leaders in their sectors. OSG Records Management continues to have a commanding market lead in records management and services in its key markets of Russia, Ukraine, and Kazakhstan. In addition, OSG continues to have a strong position in the Polish and Bulgarian records management sector. Unistream Bank continues to be a leader in the outbound Russian money transfer market. Unistream continues to build its market share by targeting the underserved inter-Russia money transfer segment as well as opening new money transfer corridors. SuperStroy remains the leading DIY retailer in the Urals region of Russia and is one of the largest independent DIY retailers in Russia. Kreditmart has adapted its strategy to address the downturn in the mortgage market by reducing its cost base and by diversifying its product offering. The company has focused on building its distribution of insurance products and consumer loans and remains positioned to benefit from the untapped potential of Russia's mortgage market. Flexinvest Bank moved its headquarters to central Moscow and is working with Kreditmart to build its distribution of mortgages, consumer loans, and deposit products to its customers.

OSG Records Management

We are delighted with the performance of OSG Records Management during the period despite the worldwide financial crisis. OSG remains the largest records management company in Russia, Ukraine and Kazakhstan. It is the second largest in Poland and is considered a regional market leader. OSG continues to provide cost-effective total records management, document storage, data security, document scanning and confidential data destruction solutions. OSG has a first mover advantage in Central and Eastern Europe which is still underserved. OSG's management estimates that Russia, OSG's largest market, has a vended ratio of under 2%. The market offers enormous growth opportunities and it is expected that the vended portion of the market will increase from approximately US$20 million in 2008 to approximately US$200 million in 2012 reaching the current levels seen in Latin America (vended portion of approximately 20%).
As at 30 September 2009, the company's revenues in Russia have grown 33% year-on-year in RUR terms while Poland grew 44% year-on-year in PLN terms. However, due to exchange rate differences, revenue remained by and large flat in US Dollar (the reporting currency) terms. For the period to 30 September 2009, OSG reported revenues1 of 7.6 million compared to 7.7 million as of the same period in 2008. For the same period EBITDA1 was 1.1 million up 21% year-on-year.
The valuation of our investment (equity and debt) in OSG at 30 September 2009 resulted in a decrease of 0.7 million to 12.9 million compared to the valuation at 31 March 2009 of 13.6 million.
Recognising the high growth prospects of OSG, Aurora Russia Limited has announced that it will invest an additional 12.4 million to purchase the shares of the other non-management shareholders as well as to finance the down payment on a mega-warehouse facility in Moscow. This investment will bring Aurora Russia Limited's shareholding in OSG to 93.6% (on a fully diluted basis and assuming all convertible loans in OSG held by Aurora Russia Limited are converted). The balance of OSG's shares are held in a management option pool of 6.4%, with approximately 2.0% of these held by previous employees who may wish to exercise and sell the shares. If these option shares are purchased by Aurora Russia Limited, the net amount payable to the option holders will be 0.18 million which will increase its shareholding in OSG to 95.6%. However, Aurora Russia Limited expects to increase the management option pool by an additional 3.6% resulting in its fully diluted holding in OSG being approximately 92%.
The additional investment will allow the company to consolidate some of its warehouses in Moscow to provide enhanced operational efficiency, improved EBITDA, and will provide Aurora Russia Limited with full control. It will result in greater transparency to shareholders since the company will now be fully consolidated into the financials of Aurora Russia Limited. We believe that this transaction is in the interests of the company and will improve both the long-term market position of the company as well as greater value over time for Aurora Russia Limited's shareholders.

Unistream Bank

Unistream Bank continues to build on its position as one of the largest money transfer companies in Russia by providing competitive money transfer and foreign exchange products through c.280 of its own money transfer offices throughout Russia. It is regulated by the Central Bank of Russia ("CBR") and has a banking licence to receive and send money transfers, open bank accounts for corporate entities and accept loan payments through its points of sale.
Unistream's primary customers are migrant construction workers who migrate from the former Commonwealth of Independent States (CIS) to work in Russia's growing construction industry. The events of the past year have clearly impacted the construction industry and Unistream has felt this impact as its customers have either lost their jobs in construction or have reduced the amount of money transferred. According to the Central Bank of Russia, outbound transfers for Q2 2009 were down 31% year-on-year in USD terms. Unistream's revenue for the 9 month period to 30 September 2009 was 5% lower in RUR terms at 35 million2 compared to the same period in the prior year, while operating income before fixed expenses during the period increased 9% year-on-year to 15.7 million2 due to growth in foreign exchange commissions and an increase in the share of own points of sale in the total volume transferred.
In 2008, Russia had one of the fastest growth rates for outbound money transfer volumes in the world. Unistream has a commanding lead in the Russian outbound money transfer market and management believes that it can gain market share on the intra-Russia money transfer market as well as expanding in other money transfer corridors.
Russia has committed to invest $1.1 trillion over the next five years to improve its infrastructure. This commitment, along with Russia's declining working-age population, should encourage further growth in migrant labour working in Russia, low unemployment, and robust wage and disposable income growth. All of these factors should benefit the further growth and expansion of Unistream.
Since 2006, Unistream Bank has increased its annual volume of money transfers from approximately US$1.84 billion to approximately US$3.68 billion in 2007 and US$4.91 billion in 2008 (an increase of 33% over 2007). In 2008, Unistream posted revenues2 of 51.0 million up from 29.5 million in 2007.
The valuation of our 26% stake in Unistream Bank at 30 September 2009 resulted in an uplift of 4.7 million to 29.7 million compared to the valuation at 31 March 2009 of 25.0 million.

Kreditmart

Kreditmart commenced operations in March 2007 and distributes a wide range of financial services products through its seven locations in Moscow, St. Petersburg, Tyumen, Yekaterinburg, Kazan, and Rostov-on-Don as well as the internet.
Kreditmart, a wholly owned subsidiary of Aurora Russia Limited, distributes mortgages, equity release loans, insurance, auto loans, pension funds, mutual funds, and other consumer finance products.
While the global financial crisis has impacted Russia, Kreditmart has continued to operate while shifting its focus on insurance and consumer loans until the mortgage market returns. Management decreased monthly cash burn by 71% through aggressive cost-cutting measures and a reduction of headcount by 53%.
Kreditmart broker revenue fell 38% compared to the same period in 2008 to 0.2 million. However, month-on-month revenues have begun to rebound with 26% growth in September. In light of the current market, the valuation of Kreditmart (including Flexinvest- see below) at 30 September 2009 resulted in a write down of 2.6 million to 20.4 million compared to the valuation at 31 March 2009 of 23.0 million.
Since mortgage penetration in Russia remains at less than 3% of GDP and total consumer debt at c.10% of GDP, Russia represents one of the most attractive growth markets in Europe for financial services. Through its established distribution system, Kreditmart is well-positioned to capitalize on this growth.

Flexinvest Bank

Flexinvest Bank ("Flexinvest") was acquired in May 2008 through Flexinvest Limited, a wholly owned subsidiary for a consideration of 5.1 million (RUR 237 million). Additional funds of 1.2 million (RUR 57 million) were invested into the bank by Flexinvest to cover post-acquisition infrastructure costs and fund ongoing operations.
As of 30 September 2009, both Kreditmart and Flexinvest had 20 million in assets. Flexinvest Bank distributes short-term Rouble consumer loans as well as offering a range of deposit and banking products including deposit boxes, currency exchange and money transfer.
Despite recent concerns about the increase in non-performing loans, Russia continues to be an attractive market for retail banking in a medium to long term and recently saw banks like HSBC start its retail operations in Russia.
The Manager remains confident that Flexinvest Bank will have opportunities to grow its assets and will continue benefiting from the already established distribution platform of Kreditmart.
Kreditmart and Flexinvest Bank together reported net cash of 6.7 million as at 30 September 2009.

SuperStroy

Superstroy showed solid performance during the period by focusing on the improvement of operational efficiencies and cost reduction. All 45 stores are expected to be profitable in 2009. RosBusinessConsulting estimates that the overall DIY market in Russia will be down by 25-36% in USD terms in 2009.
For the 9 months ended 30 September 2009, the company's revenues have declined 11% year-on-year in local currency terms to 91.5 million2 with most of the decline due to its wholesale operations while retail sales were down by only 3%. In 2008, it posted revenues of approximately 142.4 million2 up on 2007 revenues of 95.6 million2.
While the company temporarily put its expansion plans on hold during the crisis, it improved EBITDA by 188% year-on-year to 2.2 million2 and increased margins while maintaining its market position.
Based on estimated turnover figures, Superstroy ranks fourth among all chain DIY retailers operating in Russia up from being seventh in 2007.
Superstroy is the only company in Aurora Russia Limited's portfolio that has any debt of any substance. It has a credit line with Sberbank of RUR 800 million (16.5 million) and ZAO Uralprivat bank of RUR 60 million (1.2 million). At 30 September 2009, the outstanding balance on the two facilities was RUR c.0.49 billion (approximately 10.2 million). The interest rate (before fees) is charged at between 16.0% and 16.5% per annum however Sberbank recently approved a reduction in the rate to 14.25% per annum.
Given a general rebound in the valuation multiples of public retailers and DIY retailers, in particular, the valuation of SuperStroy as at 30 September 2009 resulted in an uplift of 1.6 million for our 24.3% stake to 14.8 million compared to the valuation at 31 March 2009 of 13.2 million.

Conclusion

Despite the challenges of the global financial crisis, the value of the portfolio grew by 4% during the period. The Manager remains positive about the growth prospects for the services sectors in Russia. While the Russian economy has historically been dependent on the price of commodities, the economy is becoming more diversified. The services sector should benefit from the continued diversification away from commodities and grow at a faster rate. We remain very positive about all of Aurora Russia Limited's investments and we believe that all five are positioned to benefit from the growth of the services sector and to gain market share.
The Russian market continues to provide opportunities for growth for well-managed companies. Due to the low penetration and vast market potential in the sectors we invest in, our portfolio companies are positioned to grow further over the coming period. We will continue to identify and target the niches where our companies can gain a competitive advantage while securing our current market position for continued growth.

Aurora Investment Advisors Limited

December 2009

1 Translated at September 30 2009 spot rate of 0.63 GBP/USD
2 Translated at September 30 2009 spot rate of 47.7 RUR/GBP
Independent Review Report to Aurora Russia Limited

We have been engaged by the Company to review the unaudited condensed set of financial statements in the half yearly financial report for the six months ended 30 September 2009 which comprise the unaudited condensed consolidated statement of comprehensive income, the unaudited condensed company statement of comprehensive income, the unaudited condensed consolidated statement of financial position, the unaudited condensed company statement of financial position, the unaudited condensed consolidated statement of changes in equity, the unaudited condensed consolidated statement of cash flows and related explanatory notes. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the unaudited condensed set of financial statements.
This report is made solely to the Company, in accordance with the terms of our engagement letter dated 30 September 2009. Our work has been undertaken so that we might state to the Company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have reached.

Directors' responsibilities

The half yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half yearly financial report in accordance with the AIM Rules of the London Stock Exchange.
As disclosed in note 2, the annual financial statements of the Company are prepared in accordance with International Financial Reporting Standards ("IFRS"). The unaudited condensed set of financial statements included in this half yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting".

Our responsibility

Our responsibility is to express to the Company a conclusion on the unaudited condensed set of financial statements in the half yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standards on Review Engagements (UK and Ireland) ISRE 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the unaudited condensed set of financial statements in the half yearly financial report for the six months ended 30 September 2009 is not prepared, in all material respects, in accordance with International Accounting Standard 34.

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Financial highlights:

Net asset value per share at 31 March 2010 of 88.0p per share (Net asset value 99.0m)

Cash and cash equivalents as at 31 March 2010 were 5.70 million

Net profit for the period of 4.8 million

Earnings per share for the period of 5.78p per share

Operational highlights:

73.9 million invested in five companies, three of which are leaders in their field

Successful fundraising of 15 million and acquisition of additional 45.5% of OSG

Intention to return up to 105 million over time to shareholders from proceeds of sale of Company's investments

OSG

OSG remains the largest records management company in Russia, Ukraine and Kazakhstan

Increased stake in OSG to 95.5% following the Placing in January

OSG continued its expansion in Russia and as of Q1 2010 operated in 20 cities (up from 13 in 2009)

For the year ending 31 December 2009, revenues in Russia grew 30% year-on-year in RUR terms while Poland grew 27% year-on-year in PLN terms

EBITDA up 26% to 1.7 million for year ended 31 December 2009

Unistream Bank

Unistream had c.21% of the outbound money transfer market according to Q1 2010 statistics published by the CBR

Rationalized proprietary distribution network by shutting down 88 under-performing cash desks at the end of 2009

Despite closures, the volume in Unistream's cash desks held up well and grew 4% year-on-year in Q1 2010

Revenue for the year ending 31 December 2009 was 51.9 million which was down from 55.1 million compared to the prior year period, due to the impact of the economic environment on the construction industry

EBITDA was 1.3m down 55% year-on-year

Superstroy

Focus in 2009 on conserving cash and reducing net debt

The company's revenues declined by 14% to 132.4 million impacted by fall in DIY market in Russia with most of the decline due to its wholesale operations while retail sales were down by only 8%

Reduction in net debt to 7.7 million from 14.2 million and increase in EBITDA from a negative -1.1 million to a positive 3.5 million for the year ending 31 December 2009

Kreditmart and Flexinvest

Kreditmart impacted by significant contraction in mortgage market

Shift in focus to insurance and consumer loans

Both Kreditmart and Flexinvest Bank together have net cash of 5.5 million and 20.5 million in assets as at 31 March 2010

Principal assets as at 31 March 2010 include a mortgage book net of provision of approximately 8.3 million, yielding 11.7% p.a.

Commenting, Dan Koch, Chairman of Aurora Russia, said:

"Three out of five of our companies are considered to be leaders in their respective markets and we are satisfied that each of them has done what was necessary to maintain this position through the crisis and set a platform to achieve their growth aspirations as and when the Russian market recovers. Economists and analysts have varying views on the strength of the Russian revival but all seem to believe that the country has come through the worst and is now in a good position to grow again over the foreseeable future and to continue to develop as a market economy with an improving international reputation."

It gets a mention in Investors Chronicle today -Aurora Russia has perked up nicely - but this fund is hugely undervalued at 32p against a net assett value of 88p a share