As part of an investment project aimed at creating one of the largest brick factories in Russia, OJSC Pobeda LSR (part of LSR Group) has signed a contract for the delivery of brick-making equipment with CERIC, the world’s leading equipment manufacturer for ceramic building materials production. The value of the contract is ?70.673 million. Equipment delivery is to start this year.

The contract provides for the supply of two production lines, one for standard building bricks with an annual capacity of 120 million, and the other for facing bricks with a capacity of 75 million per annum. The total capacity of the factory will subsequently be increased to 220 million standard bricks annually. The factory is currently under construction in the Kirovsky District of the Leningrad Region and will be operational in 2010. The total investment is expected to represent $280 million and the project will be financed in part from the IPO proceeds obtained by OJSC LSR Group in the autumn of 2007.

The new brick factory will help to address growing demand for this building material resulting from an increase in the volume of construction and the dynamic growth of the country housing segment (according to the Reshenie research and consulting company, the ceramic brick market in St. Petersburg and the Leningrad Region represented 356 million bricks in 2006 while in 2007 it exceeded 390 million bricks).

Under the contract, CERIC specialists are also to carry out start-up work and factory personnel training.

To select the equipment supplier for the new factory LSR Group invited bids from a number of leading manufacturers of ceramic building materials equipment. According to Georgy Vedernikov, managing director of LSR Group, the bid made by CERIC provided the best value for money, and CERIC surpassed other major European companies. “At this stage LSR Group has proceeded to select the main contractor to undertake construction work,” said Georgy Vedernikov.

Commenting on the contract concluded, Charles-Antoine de Barbuat, president of CERIC Group noted that “in the course of tendering and deal preparation the specialists of LSR Group have shown high professionalism and subtle knowledge of the production process. The company knows exactly what it needs, Mr. de Barbuat stressed, – so it can competently define both the engineering and financial terms of the project. We feel privileged and proud to cooperate with such a company.”

Notes to Editors:

Founded in 1993, LSR Group is one of the leading real estate development, construction and building materials companies in St. Petersburg and the Leningrad region, combining two complementary market leading businesses.

The Group is one of the leaders in the development of elite residential real estate projects in St Petersburg and a significant developer of mass-market real estate there. The Group also has a market leading position in the production of building materials and aggregates in St Petersburg and the surrounding Leningrad region.

The Group is one of the largest producers of ceramic bricks in Russia and one of the largest producers of aerated concrete in Russia. In 2006 it was, and remains, the market leader in St. Petersburg and the Leningrad region in each of sand, crushed granite, bricks, reinforced concrete, ready-mix concrete and aerated concrete segments.

LSR manages and operates its businesses through two divisions:

• Real Estate Development, Commercial Real Estate and Construction, which represented approximately 35 per cent of consolidated revenues in 2006; and
• Building Materials, Aggregates and Construction Services, which represented approximately 64 per cent of consolidated revenues in 2006.

LSR Group employs nearly 15,000 people. In 2004, 2005 and 2006 the revenues of LSR Group were RUB 7,530.9 million, RUB 13,085.5 million, and RUB 21,110.8 million respectively. For the six months of 2007 the Group’s revenues amounted to RUB 16,062.0 million compared to RUB 9,336.4 million for the same period last year. In July 2007, Moody’s Investors Service assigned a B1 rating to LSR Group; outlook — stable.

In December, 2007 LSR Group has been awarded a National Business Award as the Company of the Year in ‘Construction’ category.

OJSC Pobeda LSR (a company of LSR Group) is the leading ceramic brick producer in Russia comprising three brick factories in St. Petersburg and the Leningrad Region – Keramika, Lenstroikeramika and Pobeda. The total capacity of the brick association is 290 million standard bricks a year. Pobeda LSR produces all kinds of building and facing ceramic bricks as well as porous large format RAUF bricks, and has been extending its own retail network, Brick Centre. The company also possesses its own resource base, the Krasny Bor and Lenstroikeramika-Kariyer quarries of Cambrian blue clay. It has a regional office in Moscow.

CERIC was founded in France in 1960 by a team of expert engineers from the Technical Brick and Roofing-tile Centre (CTTB).

It is a world leader in the field of engineering and implementation of integrated turnkey solutions for the production of ceramic building materials and technical ceramics.

CERIC possesses expertise in manufacturing equipment for load handling and preparation as well as in thermal technologies, and is a reputable provider of services such as auditing, consulting, personnel training and supply of spare parts.

Today CERIC is an international company employing 560 people and having high-tech manufacturing facilities in France and Europe as well as commercial representative offices in Russia, Ukraine and China. In 2006, CERIC was merged with Legri Industry Group to form part of its KEIRIA division. At present KEYRIA employs 2,000 workers and is engineering group No.1 in the world market of plants for the production of building materials.