Aurora Russia : Interim Results 2015

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R U S S I A L I M I T E D

2015

Aurora Russia Limited

Interim Report and Unaudited Condensed Half Year Financial Statements

For the 6 month period 1 April 2015 to 30 September 2015

01

Aurora Russia Limited

Company Summary

The Company

Aurora Russia Limited (the 'Company') is a Guernsey registered closed-ended investment company and its shares are traded on the Alternative Investment Market of the London Stock Exchange ('AIM'). It was incorporated on 22 February 2006 and dealings commenced on AIM on 20 March 2006.

Investing policy

Interim Report and Unaudited Condensed Half Year Financial Statements 2015

The Company's investing policy was to make equity or equity-related investments in small and mid-sized private Russian companies focused on the financial, business and consumer services sectors. The Directors are seeking to complete the realisation of the Company's residual

investment in a timely manner.

The Investment Manager

The Board is pursuing its realisation policy with the assistance of Mr Nicholas Henderson-Stewart, who was appointed as Advisor effective 19 June 2014.

Registered address

Dorey Court Admiral Park St Peter Port Guernsey GY1 2HT

Website

www.aurorarussia.com

Company Registration Number

44388

Contents

1. Company Summary

2. Chairman's Statement

3. Investment Advisor's Report

4. Independent Review Report

5. Unaudited Condensed Half Year Statement of Comprehensive Income

6. Unaudited Condensed Half Year Statement of Financial Position

7. Unaudited Condensed Half Year Statement of Changes in Equity

8. Unaudited Condensed Half Year Statement of Cash Flows

9. Notes to the Unaudited Condensed Half Year Financial Statements IBC Directors and Advisors

02

Aurora Russia Limited

Chairman's Statement

Introduction

The results of Aurora Russia Limited (the "Company" or "Aurora Russia") for the 6 months ended 30 September 2015 are presented below.

The last 6 months in Russia have seen a further contraction in

Interim Report and Unaudited Condensed Half Year Financial Statements 2015

the Russian economy. The key drivers of the valuation of Russian assets being the Ukraine crisis, sanctions, and the oil price continue to play a pivotal role. These three variables have stabilised in the third quarter with oil hovering at the $45 range at that time, the Ukraine crisis an unresolved stalemate and sanctions making doing business in Russia more difficult. The future in Russia is as ever unpredictable, but it would seem the beginning of the end of the crisis is in sight, with the IMF forecasting economic growth of 0.2% in 2016. This should serve to further ease pressure on the economy.

The Annual General Meeting ('AGM')

The AGM will be held on 23 December 2015. Notice of the AGM has been sent to all shareholders by post and, as announced on

24 November 2015, the AGM notice can also be downloaded from the Company's website. As required by the Company's articles of incorporation, a continuation vote is to be proposed at the AGM, which the Board has recommended be approved, and all shareholders should read the covering circular explaining the rationale for this recommendation prior to making their decision as to how they wish to cast their votes.

Review

A share buy back was undertaken in April 2015 following the earlier successful sale in February of the Company's investment in Superstroy. The buy back resulted in a net amount of £668,720 being returned to shareholders.

The Company's sole remaining asset now is its 26% shareholding in OJSC Unistream Bank ("Unistream"), a Russian bank and money transfer company, that has performed well in the nine months ended 30 September 2015. As further set out in the Investment Advisor's report, Unistream's trade volumes, revenue, and EBITDA continue to grow year on year in Rouble terms. Unistream's share of the money remittance market also grew strongly to 17.2% in June 2015 from 13.4% in December 2014, according to Central Bank of Russia figures. The Board remains confident in Unistream's future and is determined to achieve a sale for a price that reflects its fair value in current market conditions. Aurora Russia is currently in discussions with various strategic investors to sell its 26% stake in Unistream. The Board and the Investment Advisor have continued their extensive negotiations over the last six months with prospective acquirers of the Company's investment in Unistream. These negotiations have not been made easier by the Company's position as a minority holder in Unistream and the limited appetite for Russian assets during the period. Notwithstanding these obstacles,

the Board believes that the prospect of a sale is realistic given Unistream remains an attractive company due to its consistent growth, strong market positioning and cash generation.

Results

For the 6 months to 30 September 2015, Aurora Russia recorded a loss of £2.35 million or 6.11 pence per share, calculated based on the unaudited condensed half year's statement of comprehensive income. The net asset value ('NAV') of the Company as at 30 September 2015 was £4.79 million or 12.6 pence per share. This decline in value is derived from the reasons set out above and in the Investment Advisor's report.

Direct administration and operating expenses of the Company for the 6 months amounted to £430,000 which includes one off payments of £11,438 to JTC Fund Solutions (Guernsey) Limited,

£18,000 to Numis Securities Limited for additional work undertaken, incentive fees of £75,000 to the Directors and £6,000 to Mr Nicholas Henderson-Stewart and performance fees of £34,816 to AIAL and

£68,000 to Mr Nicholas Henderson-Stewart. This overall cost compares to £371,000 in the same period last year. Cash balances as at 30 September 2015 stood at £1.67 million.

Investments

The Company has one remaining investment, 26.0% of Unistream, a Russian bank including a leading money transfer business.

Portfolio Valuation

A re-valuation of the investment portfolio was performed as at 30 September 2015, resulting in a decrease in the value of Unistream from £5.3 million to £3.4 million (36% since 31 March, 2015). This value is based largely on an indicative offer from a third party, supported by a market approach. This valuation was prepared for accounting purposes only and is in accordance with the International Private Equity and Venture Capital Board's ('IPEV') valuation guidelines.

Outlook

The Board with the assistance of the Investment Advisor is seeking to achieve a sale of the Company's holding in Unistream in the near term at a price which reflects Unistream's market position, trading results and balance sheet. Based on recent discussions, the Board believes that a sale at the valuation included in this interim report should be feasible.

Gilbert Chalk

Chairman of the Board

Aurora Russia Limited 11 December 2015

03

Aurora Russia Limited

Investment Advisor's Report

Overview

The Russian economy has continued to decline since the March 2015 annual report and audited financial statements. Although experiencing some relief between April-June when the oil price rallied strongly, the economy has since again been under strain as the oil price fell once more to under $50 per barrel. The Ukraine crisis

The valuation of Aurora's stake in Unistream as at 30 September 2015 was marked down to £3.4 million, based largely on an indicative third party offer. The valuation was supported by a market-based approach using a weighted combination of revenue and EBITDA multiples as detailed in notes 4 and 7 of the financial statements. The main factors in the decrease in the valuation

has been out of the headlines for some time, as a fragile ceasefire

were adverse currency movements and an increase in the liquidity

appears to be holding. However, the fundamental differences in views between Russia and the US/EU countries remain and neither side shows much willingness to compromise. So it seems the sanctions imposed on Russia will not be lifted any time soon and the market will continue to heavily discount Russian assets until the situation in Ukraine resolves itself.

Russia's sizeable foreign currency reserves have remained stable over the last six months at $360 billion. The reserves coupled with low debt to GDP levels and a positive trade balance will continue to limit the blow caused to the Russian economy by low commodity prices and Western sanctions.

Trading Update Unistream

Unistream has performed relatively well in the first nine months of 2015. Results were buoyed by a strong first half period, when currency turmoil in Russia led Unistream's clients to actively trade currency and send money to Russia to take some advantage of a cheap Rouble environment. There was a marked slowdown in the third quarter as customers' falling disposable income reduced their cash transfer activities. Unistream's management accounts show that volume transfers in the first nine months of 2015 were RUR159.8 billion (£1.71 billion using average exchange rate for the year), up 12.4% year on year. Net revenues grew 11.1% to RUR2.3 billion (£25 million) for the same period.

The Central Bank of Russia's statistics indicate Unistream's share of the Russian money remittance market grew from 13.4% in December 2014 to 17.2% in June 2015. The growth in transfer volumes and market share growth were driven by an increase in partner networks, such as with Tinkoff Bank and Megafon. This drove revenue growth, but slightly reduced the share of profit attributed to Unistream (the remainder being the partner's commission).

Interim Report and Unaudited Condensed Half Year Financial Statements 2015

discount from 40% to 45%, reflecting more stringent working capital requirements, which is expected to reduce significantly the cash available for distribution to Unistream's shareholders.

Conclusion

I will continue to work closely with Aurora Russia's Board of Directors to achieve its stated objective of realising Unistream at a price that properly reflects its value. As the Chairman states in his report, we believe that such a sale is feasible.

Nicholas Henderson-Stewart 11 December 2015