Investment Policy

The current Investment Guidelines were approved by the Company’s Board of Directors on 22 March 2007. They are the binding framework for the Company’s activities.

Objective

The objective of Eastern Property Holdings (the "Company") is to invest directly, through subsidiaries, or via participation in other companies, in real estate in Russia, the CIS, and other formerly socialist countries or their successors in Central or Eastern Europe in order to provide capital appreciation and dividend income to its shareholders. Investments may be existing properties or development projects which are intended to provide capital appreciation and/ or rent income. The Company may also purchase participations in other companies with real estate related activities and provide real estate financing, real estate management, sale and leaseback of real estate and enter into real estate related financial transactions.

Investments

Real Estate Investments

Investment targets are commercial, residential and industrial properties located in Russia and other CIS countries which provide a reasonable risk/ return ratio. The main criteria to be considered are as follows:
a) Quality of location
b) Economic outlook
c) Infrastructure
d) Architecture
e) Standard of fittings
f) Occupancy
g) Quality of tenants
h) Flexibility of usage
i) Profitability
j) Potential for value appreciation

Development Projects

Development projects might be new construction or refurbishing of existing buildings. If development projects are undertaken with a partner, special care must be taken to protect the interests of the Company through the structure and contractual framework of the endeavor.

Financing of Real Estate Investments

The Company intends to optimise the return on its investments through the conservative use of leverage. Interest expenses will be considered on a consolidated basis.

Participations in Companies

The Company can also invest in majority or minority participations in other companies with real estate related activities, including real estate management.

Real Estate Financing

The Company may provide real estate financing secured by mortgages or other adequate guarantees.

Financial Investments

For temporary or defensive purpose, the Company’s assets can also be invested in financial instruments, such as stock, listed shares, bonds, investment funds and other liquid financial instruments.
The investment in options, futures and other derivatives is only permitted for hedging purposes. The Company may furthermore engage into other financial transactions such as currency and interest rate forwards and swaps for hedging purposes.

Other Investments

The Company can also, subject to approval of the Board of Directors, invest up to 10% of its assets in non-real estate related investments.

Valuation

The entire real estate portfolio will be appraised once a year by an independent real estate appraiser. The results of the yearly appraisal will be used as the basis for valuation in the Company’s annual report. For the purpose of the half year report, a simplified valuation method will be applied.

Investment process

Approval by Board of Directors

All purchases or sales of properties and all investments in other assets in excess of USD 10 million, with the exception of financial investments for temporary or cash management purpose have to be approved by the Board of Directors

Analysis

Prior to the approval, Eastern Property Management Limited will present a comprehensive analysis of potential investments, including financing. Analysis will be based on conservative cost, timing, and rent or sale assumptions.

Changes to, and Compliance with the Investment Guidelines

The Investment Guidelines can be changed or amended by resolution of the Board of Directors. Compliance with the Investment Guidelines is verified periodically by the Board of Directors.