Circular to Shareholders

Equest Investments Balkans Ltd 28 March 2008 THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the contents of this document or as to whether or not you should take action you should consult a financial adviser, stockbroker, bank manager, accountant, solicitor or other independent professional adviser immediately. The Directors of Equest Investments Balkans Limited (the 'Company'), whose names appear on page 7 of this document, accept responsibility for the information in this document. To the best of the knowledge and belief of the Directors, who have taken reasonable care to ensure that such is the case, the information contained in this document is in accordance with the facts and does not omit anything which is likely to import such information. If you have sold or transferred all of your Ordinary Shares in the Company, please forward this document, together with the accompanying Form of Proxy and Form of Direction, to the purchaser or to the stockbroker, bank or other agent through whom the sale or transfer was effected, for transmission to the purchaser or transferee. ________________________________________________________________________________________ (incorporated and registered in the British Virgin Islands with registered number 1069511) Recommended proposals for reorganisation of the management structure of the Company, amendments to the articles of association and disapplication of pre-emption rights and Notice of a General Meeting of the Company This document should be read as a whole and in conjunction with the accompanying Form of Proxy and Form of Direction. Your attention is drawn to the letter of recommendation from the Chairman of the Company which is set out in Part I of this document, explaining why the Independent Directors are recommending that Shareholders vote in favour of the Resolutions to be proposed at the General Meeting. Notice of a General Meeting of the Company to be held at Harney Westwood & Riegels, Craigmuir Chambers, PO Box 71, Road Town, Tortola, VG1110, British Virgin Islands at 10.00 a.m. BVI time/ 3.00 p.m. UK time on 25 April 2008 is set out at the end of this document. Holders of Ordinary Shares in the Company will find enclosed a Form of Proxy for use at the General Meeting. To be valid, a Form of Proxy, completed and executed in accordance with the instructions printed thereon, should be returned to the Company's registrars, Olympia Capital (Ireland) Limited, 6th Floor, Block 3, Harcourt Centre, Dublin 2, Ireland, as soon as possible and, in any event, so as to be received not later than 10.00 a.m. British Virgin Islands time / 3.00 p.m. UK time on 23 April 2008. Holders of CREST Depositary Interests representing entitlements to Ordinary Shares will find enclosed a Form of Direction for completion and submission to the Company's registrars. To be valid, a Form of Direction, completed and executed in accordance with the instructions printed thereon, should be returned to the Company's registrars, Olympia Capital (Ireland) Limited, 6th Floor, Block 3, Harcourt Centre, Dublin 2, Ireland, as soon as possible and, in any event, so as to be received not later than 10.00 a.m. UK time on 21 April 2008. Collins Stewart Europe Limited ('Collins Stewart') has given, and not withdrawn, its written consent to the inclusion of its name in the form and context in which they are included. Collins Stewart is regulated and authorised by the Financial Services Authority and is a member of the London Stock Exchange and is acting exclusively for the Company and no one else in connection with the proposals set out in this document. Collins Stewart will not regard any other person as its customer nor be responsible to any other person for providing the protections afforded to customers of Collins Stewart nor for providing advice in relation to the transactions and arrangements detailed in this document. Contents Page Part I Letter from the Chairman of Equest Investments Balkans Limited 7 Part II Summary of the main terms of the Termination Agreement and of the Warrant 20 Instrument Part III Summary of the main terms of the Services Agreement 25 Part IV Summary of the main terms of the Technical Support Agreement 27 Part V Summary of the main terms of the proposed Long Term Incentive Plan 29 Part VI Summary of the proposed changes to the Articles 32 Part VII Additional Information 34 Part VIII Notice of a General Meeting 39 Expected Timetable of Events Latest time and date for receipt of Forms of Direction for the 10.00 a.m. UK time on 21 April 2008 General Meeting Latest time and date for receipt of Forms of Proxy for the 10.00 a.m. BVI time / 3.00 p.m. UK time General Meeting on 23 April 2008 General Meeting 10.00 a.m. BVI time / 3.00 p.m. UK time on 25 April 2008 Definitions 'Administrator' Olympia Capital (Ireland) Limited, or such other administrator of the Company from time to time 'Administration Agreement' the administration agreement dated 20 February 2004 between the Company and Olympia Capital (Ireland) Limited 'Admission' admission of the Ordinary Shares to trading on AIM 'Admission Document' the admission document of the Company dated 14 December 2006, in connection with the admission of all the Company's Ordinary Shares to trading on AIM 'AIM' AIM, a market operated by the London Stock Exchange plc 'AIM Rules' the rules for AIM companies issued by the London Stock Exchange plc in relation to AIM traded securities 'Articles' the articles of association of the Company as at the date of this document 'Associated Changes' has the meaning specified in paragraph 1 of Part I of this document 'Board' the Board of directors of the Company 'Business Day' a day (other than a Saturday, Sunday or public holiday) when banks in England, the Republic of Ireland and the BVI are open for business 'BVI' British Virgin Islands 'CDI Holders' holders of CDIs representing Ordinary Shares 'CDIs' CREST Depositary Interests 'Closing Combined Value per Ordinary has the meaning specified in paragraph 8 of Part I of this Share' document 'Closing NAV per Ordinary Share' in respect of any Ordinary Share in issue at the end of a Performance Period, the average of (i) the Net Asset Value per Ordinary Share at the end of that Performance Period (before making an accrual for the relevant Performance Fee) and (ii) the volume weighted average price per Ordinary Share calculated for the 3 months immediately prior to the end of the Performance Period (as quoted by Bloomberg) converted to Euro at the Euro/ Sterling exchange rate prevailing at the end of the relevant Performance Period 'Consideration Shares' has the meaning specified in paragraph 5 of Part I of this document 'Directors' the directors of the Company 'ECL' Equest Capital Limited, a company incorporated in Jersey, of which the Investment Manager is a wholly owned subsidiary 'Effective Date' has the meaning specified in paragraph 4 of Part I of this document 'Encumbrance' any interest or equity of any person (including any right to acquire, option or right of pre-emption) or any mortgage, charge, pledge, lien, assignment, hypothecation, security, interest, title, retention or any other security agreement or arrangement 'euro' or 'â‚¬' the currency defined in Article 2 of Council Regulation (EC) No. 974/98 of 3 May 1998 'Existing Shares' the 641,510 Ordinary Shares issued to the Investment Manager on Admission 'Form of Direction' The accompanying form of direction for use by CDI Holders in relation to the General Meeting 'Form of Proxy' the accompanying form of proxy for use by Shareholders in relation to the General Meeting 'General Meeting' a meeting of Shareholders of the Company to be held in accordance with the laws of the BVI and the Articles at 10.00 a.m. BVI time / 3.00 p.m. UK time on 25 April 2008, notice of which is set out on page 39 of this document 'Group' the Company and its current and future subsidiaries 'Hard Lock Up' has the meaning specified in Part II of this document 'High Water Mark' unless stated otherwise, has the meaning specified in paragraph 5 of Part I of this document 'Incentive Fee' has the meaning specified in paragraph 8 of Part I of this document 'Incentive High Water Mark' has the meaning specified in paragraph 8 of Part I of this document 'Incentive Hurdle' has the meaning specified in paragraph 8 of Part I of this document 'Incentive Period' has the meaning specified in paragraph 8 of Part I of this document 'Independent Director' all of the Directors except for Petri Karjalainen 'Investment Adviser' Equest Partners Limited, a company incorporated in England and Wales and investment adviser to the Company 'Investment Advisory Agreement' the investment advisory agreement dated 11 December 2006 between the Company, the Investment Manager and the Investment Adviser 'Investment Management Agreement' the amended and restated investment management agreement dated 11 December 2006 between the Company and the Investment Manager 'Investment Manager' Equest Capital Management Limited, a company incorporated in the BVI and investment manager of the Company 'Investments' investments made, directly or indirectly, by the Company 'Investment Restrictions' has the meaning specified in paragraph 12 of Part I of this document 'Irish Stock Exchange' or 'ISE' the Irish Stock Exchange Limited 'Key Individuals' Messrs Kari Haataja, Petri Karjalainen and Georgi Krumov 'London Stock Exchange' London Stock Exchange plc 'Long Term Incentive Plan' or 'LTIP' has the meaning specified in paragraph 4 of Part I of this document 'LTIP Shares' has the meaning specified in paragraph 8 of Part I of this document 'Margin' has the meaning specified in paragraph 8 of Part I of this document 'Net Asset Value' or 'NAV' net asset value of the Company as determined from time to time by the Administrator or other valuer instructed for that purpose 'Net Asset Value per Ordinary Share' the Net Asset Value divided by the number of Ordinary Shares in issue at the time of such valuation 'Nominated Adviser' Collins Stewart Europe Limited 'Notice' has the meaning specified in paragraph 1 of Part I of this document 'Official List' the official list of the ISE 'Ordinary Shares' ordinary shares of no par value in the capital of the Company 'Ordinary Resolution' a resolution passed by Shareholders representing a simple majority of the total voting rights of the Shareholders who (being entitled to do so) vote in person or by proxy on the resolution and do not abstain 'Proposals' has the meaning specified in paragraph 1 of Part I of this document 'Registered Agent' Harneys Corporate Services Limited, or such other registered agent of the Company from time to time 'Registrar' means the Registrar of Corporate Affairs appointed under the BVI Business Companies Act, 2004 (No. 16 of 2004) as amended from time to time 'Resolutions' the resolutions set out in the Notice 'Restricted Shares' has the meaning specified in Part II of this document 'Services Agreement' has the meaning specified in paragraph 4 of Part I of this document 'Shareholders' holders of the Ordinary Shares 'Soft Lock Up' has the meaning specified in Part II of this document 'Target Region' Bulgaria, Romania, Albania, Croatia, FYR Macedonia, Kosovo, Bosnia and Herzegovina, the Republic of Serbia, Slovenia, the Republic of Montenegro, Turkey and Ukraine 'Technical Support Agreement' has the meaning specified in paragraph 4 of Part I of this document 'Termination Agreement' has the meaning specified in paragraph 4 of Part I of this document 'VAT' value added tax 'Warrant Instrument' has the meaning specified in paragraph 5 of Part I of this document 'Warrants' has the meaning specified in paragraph 5 of Part I of this document 'Â£' denotes the lawful currency of the United Kingdom The mid market price of an Ordinary Share at the close of business on 27 March 2008 (being the latest practicable date prior to the publication of this document) was Â£10.65 (Source: the Stock Exchange Daily Official List (London)). Reference to the price of an Ordinary Share on 27 March 2008 shall be construed accordingly. PART I LETTER FROM THE CHAIRMAN _______________________________________________________ (incorporated and registered in the British Virgin Islands with registered number 1069511) Directors: Registered Office: John Carrington (Chairman) HWR Services James Ede-Golightly (Non Executive Craigmuir Chambers Director) PO Box 71 Robin James (Non Executive Director) Road Town Petri Karjalainen (Non Executive Tortola Director) British Virgin Islands Kieron J. O'Rourke (Non Executive Director) 28 March 2008 Dear Shareholder, Proposed Restructuring of the Company 1. Introduction On 13 September 2007, the Board announced that it was evaluating a number of strategic options including changing the nature of the Company from an externally managed fund to an internally managed holding company, whilst retaining the Key Individuals as the management of the Company. Following consultations with a number of Shareholders, representing a majority in number of the Company's Ordinary Shares, and with the Company's advisers, the Board entered into discussions with the Investment Manager with the goal of reaching agreement on a structure that it believed would align more closely the interests of Shareholders and the Investment Manager. On 26 February 2008, the Board announced that it had signed non-binding heads of terms relating to proposed changes to the structure of the management of the Company. The Board believes that changing the nature of the Company's management in the manner set out in paragraphs 5 to 8 (inclusive) below and reflected in Resolution 1 (the 'Proposals'), will ensure the most effective means by which the Company manages its existing investments and sources new investments, and will better enable the Company to improve Shareholder value. The purpose of this document is to provide you with details of, and to seek Shareholder approval for, the Proposals. At the General Meeting, your approval will also be sought for changes in the Articles and disapplication of investment restrictions (further details of which can be found at paragraphs 10 to 12 (inclusive) of this Part I, respectively) (the 'Associated Changes'). Under the ISE listing rules, the Investment Manager and ECL are considered 'related parties' and Petri Karjalainen is considered an 'associate' of the Investment Manager and of ECL. Therefore, the Proposals (as set out in Resolution 1) are considered related party transactions, requiring Shareholder approval. The proposals for amendments to the articles and the disapplication of pre-emption rights require Shareholder approval pursuant to the Articles. The proposal for disapplication of the Investment Restrictions represents a change in the Company's investing strategy and, although not expressly required, the Board is nevertheless seeking Shareholder approval for this change. In addition, the Proposals constitute related party transactions for the purposes of the AIM Rules however, Shareholder approval of the Proposals is not required under the AIM Rules. Part VIII of this document contains a notice of the General Meeting (the 'Notice'), which is to be held at 10.00 a.m. BVI time / 3.00 p.m. UK time on 25 April 2008. Your Board recommends that you vote in favour of all the Resolutions. The Company has received irrevocable undertakings to vote in favour of the Resolutions to be proposed at the General Meeting from the holders of 9,839,006 Ordinary Shares representing 56.79 per cent. of the total issued share capital of the Company. However, as the Investment Manager and Petri Karjalainen (being a related party and an associate of a related party, respectively) and their associates are ineligible to vote on Resolution 1, the irrevocable undertakings in respect of Resolution 1 only, represent 54.75 per cent. of the votes that may be cast by holders of the Ordinary Shares. The Ordinary Shares are admitted to trading on AIM and are admitted to listing on the Official List and trading on the Main Market of the Irish Stock Exchange. Implementation of Resolutions 1 to 3 inclusive is conditional on the Company delisting from the ISE as further explained in paragraph 9 of this Part I. Subject to Shareholder approval, the Board's intention is to implement the Proposals and Associated Changes as soon as reasonably practical after the General Meeting. 2. Background The Company's investment strategy is to make equity or equity related investments in developing enterprises organised or operating throughout the Target Region with the objective to provide Shareholder with long term capital growth. Since it commenced operations on 14 April 2004, the Company has made seven investments in companies operating primarily in Bulgaria, two investments in Romania and two investments in Serbia. As at 30 September 2007, being the latest announcement of the Company's Net Asset Value, the Company announced an unaudited Net Asset Value of â‚¬21.07 per Ordinary Share (equivalent to Â£14.69 based on an exchange rate of 0.697, as at 28 September 2007 (Bloomberg)). To date, the Company has invested in businesses, which the Investment Manager believes will benefit from growth in both the economies and disposable income in the Target Region. Whilst the Company was established with no sector focus in relation to its investment portfolio, the Company's investment portfolio is now broadly concentrated on retail (including TechnomarketDomo), waste management and infrastructure (including Novera) as well as residential property developments (including Borovets). The Company and Investment Manager have also established strong brand recognition in its core market. The Company is now seeking to continue its growth across the Target Region as an active and concentrated holding company owning, managing and developing its principal holdings, and the Board believes that, going forward, this can be achieved most effectively through the implementation of the Proposals. In addition to being admitted to the Official List, the Ordinary Shares were admitted to trading on AIM on 20 December 2006. At the same time, the Company raised an additional Â£43.9 million through a placing of the Ordinary Shares at a price of Â£12.10 per Ordinary Share. Since that time, the Ordinary Shares have traded within a range of Â£10.55 and Â£12.29 per Ordinary Share. The price of the Ordinary Shares on 27 March 2008, was Â£10.65, representing a discount to NAV per Ordinary Share as at 28 September 2007 of 11.98%. 3. Current trading During 2007, the Company invested â‚¬72.8 million of its own resources, â‚¬66.6 million of which was invested in four new investments in Bulgaria, Romania and Serbia and Montenegro (including all acquisition costs) and â‚¬6.2 million of which was invested in follow on investments in existing portfolio companies. The Company has utilised a mixture of debt and equity from strategic partnerships when making acquisitions such that the total acquisition cost of investments in 2007 was approximately â‚¬200 million. Having invested the net proceeds of â‚¬64.5 million, which it raised at the time of the Company's Admission to AIM, the Company is now effectively fully invested. The new investments in 2007 included: (i) a strategic holding in the Rila Samokov 2004 AD, a large scale development at Super Borovets adjacent to Borovets, Bulgaria's oldest mountain and ski resort; (ii) a majority stake in Domo Retail SA, the second largest electronics retail operation in Romania; (iii) 100% of Novera EAD which owns the principal concessions for waste collection and transportation services in Sofia; and (iv) a staged investment in the Technomarket branded operations primarily in Serbia and Montenegro but also in some neighbouring countries. As previously announced, the Company has nominated ING Bank as sole bookrunner and joint lead manager with Raiffeisen Centrobank for a proposed initial public offering of the TechnomarketDomo Group on the Sofia and/or Bucharest Stock Exchanges. This proposed IPO is planned for the first half of 2008 although no assurances can be made that the IPO will take place in this time frame. The Company's investment in the TechnomarketDomo group is held through its 75% indirect holding of TechnomarketDomo Group B. V. ('TechnomarketDomo'). Technomarket, the Bulgarian operations of TechnomarketDomo and the largest electronics retailer and wholesaler in Bulgaria, performed well during 2007 and the unaudited financial results for the 9 months ended 30 September 2007 showed a 26% increase in sales compared to the corresponding period in 2006. Domo, the Romanian operations of TechnomarketDomo, which was acquired in October 2007 through the acquisition by TechnomarketDomo of a 75% interest in Domo, achieved significant growth during 2007. The unaudited financial results of Domo for the 9 months ended 30 September 2007 showed a 55% increase in sales compared to the corresponding period in 2006. 4. Summary of the Proposals and Associated Changes Under the Proposals, the Investment Management Agreement and the Investment Advisory Agreement will be terminated pursuant to a termination agreement (the 'Termination Agreement'), and replaced with a services agreement between ECL, the Key Individuals and the Company (the 'Services Agreement') and a technical support agreement between ECL and the Company (the 'Technical Support Agreement') with effect from the delisting of the Company's Ordinary Shares from the ISE (the 'Effective Date') as further explained in paragraph 9 of this Part I. Furthermore, as part of the Proposals, the Board is proposing that a Long Term Incentive Plan be introduced to replace the current performance fee arrangements as further described below. The Board believes the principal benefits of the Proposals for the Company include: (i) securing the commitment of the Key Individuals to devote substantially all of their time to the Company for an initial term of four years renewable on an annual basis thereafter. As part of this commitment, the Key Individuals will agree not to raise any new external funds to be managed by them. This commitment is subject to a carve out for their existing obligations to Equest Balkan Properties PLC and for other non-competing businesses; (ii) the Key Individuals joining in due course the board of the Company in an executive capacity; (iii) procuring direct access to the investment management team and operating platform of the Investment Manager and securing the Company's right to use the 'Equest' brand name; and (iv) terminating the Company's annual management fee of 2.5 per cent. of committed capital payable to the Investment Manager (currently some â‚¬5.76 million per annum) and replacing it with the Services Agreement and the Technical Support Agreement, which will, it is expected, provide cost savings of approximately 50 per cent. of the current annual management fee to the Shareholders. It is also expected that additional costs savings may be achieved over time from the termination of contracts with other third party service providers associated with a fund structure. The Company is categorised and regulated as an investment fund under the ISE listing rules and as an 'investing company' under the AIM Rules. The Directors believe that such a categorisation is unfavourable as certain investors are unwilling to invest in companies which are classified as funds. If the Proposals are approved and implemented, the Directors believe that a wider group of institutional and other investors will consider investing in the Company. In consideration for terminating the existing management arrangements (including the current performance fee arrangements), the Investment Manager will receive: (i) Ordinary Shares in the Company representing 5% of the Ordinary Shares currently in issue (on a fully diluted basis); and (ii) warrants to purchase Ordinary Shares representing approximately 3% of the Ordinary Shares currently in issue (on a fully diluted basis). The Ordinary Shares issued to the Investment Manager as part of the Proposals will be subject to lock-up arrangements and exercise of the warrants will be subject to the conditions outlined in Part II. The annual management fee of 2.5% of committed capital payable by the Company to the Investment Manager will in effect cease to be payable from 26 February 2008 (being the date on which the heads of terms were signed by ECL and the Company) and will be replaced by new compensation arrangements for senior management (including the Key Individuals). The current performance fee arrangements will be terminated with effect from 31 December 2007 and replaced with a new long-term incentive plan (the 'LTIP') which would become effective from 1 January 2008 and aimed at incentivising the Company's management. For the avoidance of doubt, the Investment Manager will not receive any separate payment of any performance fee to 31 December 2007. Further details of the Proposals are set out in paragraphs 5 to 8 (inclusive) of this Part I. In addition to the Proposals, the Board is seeking your approval for the Associated Changes which include: (i) changes to the Articles including: the removal of the current requirement for the Board to propose at the 2011 annual general meeting of the Company a resolution to the effect that the Company ceases to continue as then constituted; the removal of the restriction on the Company issuing Ordinary Shares at a discount to NAV whilst granting Shareholders pre-emptive rights over all issues of new Ordinary Shares; the quorum requirements for the Company's Shareholder meetings; and (ii) removal of the current investment restrictions in relation to the spread of risk in the Company's investment portfolio. Further details of the Associated Changes are set out in paragraphs 10 to 12 (inclusive) of this Part I. The currently proposed management arrangements are of a medium term nature and the Board intends that the Company will eventually move away from these arrangements to employ directly all of its directors and to set the directors' remuneration on the basis of recommendations of a remuneration committee to be established by the Board. As a result, the Board may seek to agree with ECL and the Key Individuals an early termination of the Services Agreement and the Technical Support Agreement and, for this purpose, no further Shareholder approval shall be required. 5. Management reorganisation Under the Termination Agreement, on the Effective Date, the Investment Manager and ECL will terminate the existing Investment Management Agreement in consideration for the issue by the Company to ECL of: (i) 941,540 Ordinary Shares (the 'Consideration Shares') representing 5% the Ordinary Shares currently in issue (on a fully diluted basis); and (ii) warrants entitling the holder to purchase 564,925 Ordinary Shares representing approximately 3% of the Ordinary Shares currently in issue (on a fully diluted basis) (the 'Warrants'). The Warrants will be granted by the Company under a warrant instrument (the 'Warrant Instrument') and will be exercisable at any time after the expiry of 12 months from 1 January 2008 on the condition that the NAV per Ordinary Share reported immediately prior to the exercise of the Warrants is not less than the audited NAV per Ordinary Share as at 31 December 2007 (the 'High Water Mark'). For the avoidance of doubt, for the purposes of calculating the High Water Mark, the Net Asset Value per Ordinary Share prior to the proposed exercise date of any Warrants shall be calculated as follows: Net Asset Value ____________________________________________ Net Asset Value per Ordinary Share = total number of Ordinary Shares in issue minus the number of Consideration Shares the Consideration Shares shall not be counted in the total number of Ordinary Shares for the purposes of calculating the NAV per Ordinary Share prior to the exercise of the Warrants). Further details of the terms of the Warrant Instrument are set out in Part II of this document. In the event of a new issue of Ordinary Shares prior to the issue of the Consideration Shares and/or exercise of the Warrants, ECL shall be entitled to subscribe pro rata to its share of such new issue of Ordinary Shares as if the Consideration Shares and the Ordinary Shares issuable upon exercise of the Warrants had been issued to ECL. In addition, the Board, the Investment Manager and ECL have agreed that the Consideration Shares, the Existing Shares and any Ordinary Shares issued on exercise of the Warrants shall be subject to lock-up arrangements until 31 December 2011 further details of which are set out in Part II of this document. As part of the approval of the termination of the Investment Management Agreement, the Board is requesting your specific approval for the allotment of the Consideration Shares and the Ordinary Shares to be issued upon exercise of the Warrants. The market value of the Consideration Shares and the Ordinary Shares to be issued upon exercise of the Warrants is equivalent to Â£16,043,852 based on a share price of Â£10.65 per Ordinary Share at the close of business on 27 March 2008. The Consideration Shares will only be issued following delisting from the ISE and both the Consideration Shares and any Ordinary Shares issued upon exercise of the Warrants will rank parri passu with the issued Ordinary Shares including, without limitation, for dividend or interest. An application will be made for the Consideration Shares, once issued, and any Ordinary Shares issued on exercise of the Warrants, to be admitted to trading on AIM. The Company will not be issuing share certificates in respect of the Consideration Shares and any Ordinary Shares issued on exercise of the Warrants. The Consideration Shares and any Ordinary Shares issued on exercise of the Warrants will be held in registered and book-entry form. Further details of the terms of the Termination Agreement and Warrant Instrument are set out in Part III of this document. 6. Services Agreement with the Key Individuals and ECL Under the Proposals, on termination of the Investment Management Agreement the Company will enter into the Services Agreement with the Key Individuals and ECL. Pursuant to the Services Agreement, ECL will procure that the Key Individuals and other senior managers are made available to the Company to perform such services as the Company may reasonably request and that the Key Individuals shall devote substantially all of their professional time and attention to the affairs of the Company for an initial term of four years, which shall renew automatically for successive one year terms unless either party gives to the other written notice of termination at least six (6) months prior to the end of each anniversary. The Key Individuals will be subject to certain non-compete and non-solicitation covenants more particularly described in Part III of this document. In addition, ECL and the Key Individuals will be obliged to present any new business opportunities they identify in the Target Region and which are within the remit of Company's investment objective and strategy, as set out in the Admission Document, to the Company on a pre-emptive basis. The obligations of the Key Individuals under the Services Agreement shall not preclude the Key Individuals (and their affiliates) from discharging their existing obligations to Equest Balkan Properties PLC. The compensation arrangements under the Services Agreement are summarised in Part III of this document. The Board believes that such arrangements are in line with senior management compensation arrangements for comparable listed investment holding companies. The Board has resolved to establish a remuneration committee, consisting of independent non-executive directors, which shall review the compensation arrangements on an annual basis. The total compensation under the Services Agreement shall be â‚¬2.4 million per annum. Such compensation shall be reviewed by the remuneration committee on an annual basis and may be increased at the discretion of the remuneration committee. In the event that the services of any two of the Key Individuals are no longer procured by ECL, the total compensation payable under the Services Agreement shall be reduced by 25 per cent. until such time as ECL procures the services of a suitable replacement for at least one of such Key Individuals. In addition to entering into the Services Agreement, the Key Individuals shall also be available for appointment to the board of the Company for the duration of the Services Agreement. Further details of the proposed terms of the Services Agreement are set out in Part III of this document. 7. Technical Support Agreement with ECL Under the Proposals, the Company and ECL have agreed to enter into the Technical Support Agreement for an initial term of one year, renewable on an annual basis thereafter. Pursuant to the Technical Support Agreement, ECL shall provide or procure the provision of back office technical support and other services necessary for the Company's day to day operations such as office premises in various locations, IT, administrative and finance services. The Board envisages that such back office functions will gradually be brought in-house and the Company will have the right to terminate or scale back certain services under the Technical Support Agreement. In particular, the Board and the Key Individuals will endeavour to bring all finance functions in-house as soon as practicable. The consideration payable to ECL under the Technical Support Agreement shall represent ECL's actual cost of providing the services (without any profit or mark up in favour of ECL) and is not expected to exceed â‚¬480,000 in the first year of the agreement. Your attention is drawn to the details of the proposed terms of the Technical Support Agreement which are set out in Part IV of this document. 8. Long Term Incentive Plan Under the Proposals, the Board is proposing that the current performance fee arrangement is terminated and a LTIP is introduced which is intended to provide transparent alignment of interests between the Key Individuals and other senior managers, and the Shareholders. Currently, the Investment Manager is entitled to a performance fee determined during successive periods of 24 months (the 'Performance Period'). The current performance fee is for the period ending 31 December 2008. The current performance fee is equal to 20 per cent. of the excess of the Closing NAV per Ordinary Share at the end of each Performance Period over (i) â‚¬17.86 (being the higher of (a) the last Net Asset Value per Ordinary Share published prior to Admission, and (b) the placing price of Â£12.10 per Ordinary Share at Admission) increased at a rate of 8 per cent. per annum on a compounding basis up to the end of the relevant Performance Period; (ii) the Closing NAV per Ordinary Share at the end of the immediately preceding Performance Period (after taking into account any Performance Fee paid in respect of that Performance Period); and (iii) a high watermark, which shall be the highest Closing NAV per Ordinary Share at the end of any previous Performance Period in respect of which a Performance Fee was last earned. For this purpose 'Closing NAV per Ordinary Share' shall be the average of (i) the Net Asset Value per Ordinary Share at the end of that Performance Period (before making an accrual for the relevant Performance Fee) and (ii) the volume weighted average price per Ordinary Share calculated for the 3 months immediately prior to the end of the Performance Period converted to Euro at the Euro/Sterling exchange rate prevailing at the end of the relevant Performance Period. Further details on the current performance fee is outlined at paragraph 3.1 at Part VII of this document. The Board is proposing that pursuant to the LTIP, ECL shall be entitled to an incentive fee (the 'Incentive Fee') in certain circumstances, more particularly described below. The first period for calculating an Incentive Fee would begin on 1 January 2008 and end on 31 December 2008; each subsequent incentive period would be a period of twelve months ending on 31 December (an 'Incentive Period'). The LTIP shall be in place for an initial term of four years and thereafter shall remain in operation until termination of the Services Agreement. The payment of any Incentive Fee by the Company under the LTIP will be subject to: (i) the achievement of a performance hurdle condition: the Closing Combined Value per Ordinary Share at the end of the relevant Incentive Period must exceed an amount equal to the NAV per Ordinary Share as at 31 December 2007 increased by the Margin on an annual compounding basis up to the end of the relevant Incentive Period (the 'Incentive Hurdle'); and (ii) the achievement of a high water mark: the Closing Combined Value per Ordinary Share at the end of the relevant Incentive Period must be higher than the highest Closing Combined Value per Ordinary Share at the end of an Incentive Period in respect of which an Incentive Fee, if any, was last earned (the 'Incentive High Water Mark'). The Closing Combined Value per Ordinary Share shall be calculated as the sum of A and B where: A = 50% of the Net Asset Value per Ordinary Share at the end of the relevant Incentive Period (before making an accrual for the relevant Incentive Fee); and B = 50% of the volume weighted average price per Ordinary Share calculated for the 3 months immediately prior to the end of the relevant Incentive Period (as quoted by Bloomberg) converted to Euro at the Euro/Sterling exchange rate prevailing at the end of the relevant Incentive Period. The Margin shall be the average of: (i) the annual rate of interest on 5-year government bonds issued by the Republic of Bulgaria; and (ii) the annual rate of interest on 5-year government bonds issued by the Republic of Romania, as at the end of the relevant Incentive Period. In respect of the first Incentive Period, if the Incentive Hurdle is met, the Incentive Fee will be an amount equal to 20 per cent. of the excess of the Closing Combined Value per Ordinary Share at 31 December 2008 over the Incentive Hurdle. In respect of subsequent Incentive Periods, if the Incentive Hurdle is met and the Incentive High Water Mark is exceeded, the Incentive Fee will be an amount equal to 20 per cent. of the excess of the Closing Combined Value per Ordinary Share at the end of the relevant Incentive Period over the higher of: (i) the Incentive Hurdle; (ii) the Closing Combined Value per Ordinary Share at the end of the immediately preceding Incentive Period (after adjusting for any Incentive Fee paid in respect of that Incentive Period); and (iii) the Incentive High Water Mark. The terms of the LTIP shall be adjusted as is appropriate in the event that there is a further issue of Ordinary Shares, a repurchase of Ordinary Shares or other capital reorganisation of the Company. Further details of the adjustments are set out in Part V of this document. The Company shall pay the Incentive Fee in Ordinary Shares (together with an amount equal to VAT, if any, thereon). The Company shall issue Ordinary Shares to ECL ('LTIP Shares') based on the following formula: Amount of Incentive Fee for the relevant Incentive Period Number of Ordinary Shares issued = _________________________________________________________ The Closing Combined Value per Ordinary Share at the end of the relevant Incentive Period LTIP Shares will be issued within 90 days of the end of each annual Incentive Period and shall be subject to lock-up arrangements as described in detail in Part V of this document. The Company shall have the right, at its absolute discretion, to pay the Incentive Fee in cash instead of in LTIP Shares. The Company reserves the right to, at its absolute discretion, make market purchases of Ordinary Shares for the purpose of paying the Incentive Fee to ECL. Since new Ordinary Shares to be issued under the LTIP may be issued at a price that is below NAV per Ordinary Share, as part of the approval for the LTIP, the Board is seeking your approval, as a separate resolution, to issue such new Ordinary Shares to ECL at a price below NAV per Ordinary Share without having to comply with any pre-emption rights under the Articles. Further details of the proposed LTIP are set out in Part V of this document. 9. Implications of the Proposals on the Irish Stock Exchange Listing Should Resolution 1 be approved by Shareholders and subsequently implemented, the Company would no longer have an investment manager within the meaning of the ISE rules regulating Investment Funds. Accordingly, implementation of this Resolution will be conditional on the delisting of the Ordinary Shares from the ISE. Under the rules of the ISE, a delisting takes effect twenty Business Days following an announcement of the intention to delist being made by the Company. The Ordinary Shares will continue to be admitted to trading on AIM. Shareholders should note that, in the event that the Ordinary Shares are delisted from the ISE, the Company will no longer be subject to the continuing obligations and other rules and regulations (including the mandatory investment restrictions) contained in the Listing Rules. As a result, Shareholders will not have the benefit of the protections afforded by virtue of the Company's compliance with those rules and regulations. Moreover, the Ordinary Shares may remain traded only on AIM. AIM is not a regulated market within the meaning of the European Parliament and Council Directive on markets in financial instruments (No. 2004/39/EC). Following delisting from the ISE, transfers of CDIs representing Ordinary Shares through CREST will be subject to UK stamp duty reserve tax at the rate of 0.5% of the value of the consideration for the transfer. Transfers of Ordinary Shares through Euroclear should not be subject to UK stamp duty or stamp duty reserve tax on the assumption that no instrument of transfer is executed within the UK and provided that Ordinary Shares are not registered in any register of the Company kept in the UK and the Company's central management and control is exercised solely outside the UK. 10. Proposed amendments to the Articles and disapplication of pre-emption rights - conditional on implementation of the Proposals Proposed amendments to the life of the Company The Articles require that, at the Company's annual general meeting to be held in 2011, the Board must propose a resolution to the effect that the Company ceases to continue as then constituted. If Shareholders resolve by simple majority that the Company shall cease to continue as then constituted, the Board will be required to formulate proposals to be put to the Shareholders in respect of the reorganisation, unitisation, reconstruction or winding up of the Company. In view of the Proposals, the Board is proposing to remove all limitations on the continued existence of the Company under the Articles. Proposed amendments to the Board's authority to issue shares Currently the Board has authority to issue shares on such terms as they deem fit subject to the following limitation: any shares proposed to be allotted and issued at a discount to Net Asset Value per Ordinary Share must be authorised by a Shareholders' resolution or must be offered to the then current Shareholders on a pro-rata basis. The Board is proposing to replace the current provisions with provisions that will require all new shares of the Company to be offered to the then current Shareholders on a pro rata basis to their shareholding in the Company, with the exception of (i) shares to be allotted and issued pursuant to the LTIP and any employees' share schemes (if any), (ii) preference shares or other shares with limited rights to participate in a distribution of income or (iii) any shares which are to be allotted and issued pursuant to an offer or an agreement that has been made/entered into prior to the amendment to the Articles, unless the Shareholders determine otherwise by passing an Ordinary Resolution. Disapplication of pre-emption rights In addition, simultaneously with the adoption of the amended and restated Articles, the Board is seeking your approval for a disapplication of pre-emption rights over 1,826,589 Ordinary Shares (being 10% of the total number of currently issued Ordinary Shares together with the Consideration Shares) until the next annual general meeting of the Company when the Board intends to seek a renewal of such authority. The above changes to the Articles and the disapplication of pre-emption rights under the so amended and restated Articles are conditional on the passing and implementation of Resolution 1. Further details of all proposed changes to the Articles are set out in Part VI of this document. 11. Proposed amendments to the Articles - unrelated to the Proposals The Board is proposing a number of amendments to the Articles in respect of the quorum requirements for Shareholder meetings. These proposed amendments are unrelated to the Proposals. Therefore, the implementation of such changes will not be conditional on the passing of Resolution 1. Currently, the Articles require a quorum of two Shareholders together holding no less than 25 per cent. of the votes of the Ordinary Shares entitled to vote on the resolution(s) to be considered at the meeting present in person or by proxy. The Board considers that the 25 per cent. shareholding requirement is impractical and not within the constitution of most companies that are similar in structure and size to the Company. Therefore, the Board is proposing that the required quorum for a meeting of Shareholders will be two Shareholders entitled to vote on the resolution(s) to be considered at the meeting and attending the meeting in person or by proxy. Details of all proposed changes to the Articles are set out in Part VI of this document. 12. Removal of the restrictions on the Company's investing strategy - conditional on implementation of the Proposals As an investment fund, the Company has adhered to the general principle of risk spreading in respect of its investments. The Company's investment restrictions provide that: (i) not more than 20 per cent. of the Company's gross assets will be exposed to the creditworthiness or solvency of a single counterparty; (ii) the Company will not loan or invest more than 20 per cent. of the value of its gross assets in the securities of any one issuer; (iii) the Company will not invest directly in physical commodities; and (iv) no more than 10 per cent., in aggregate of the value of the gross assets of the Company may be invested directly in real property, (together, the 'Investment Restrictions'). The Board believes that the Company's investment objective of achieving long-term growth of capital is better served without the requirement to comply with the Investment Restrictions. The Board proposes to implement its own risk management and corporate governance procedures, which shall be consistent with those of other internally managed holding companies similar in nature and size to the Company. Accordingly, it is proposed that, conditional on the Shareholders approving the Proposals and delisting from the ISE as a result of implementing the Proposals, the general principle of risk spreading through adherence to the Investment Restrictions should no longer apply to the Company's investment strategy. In addition, under its current investment strategy, the Company is precluded from taking management control over the entities owning the underlying investments of the Company. The Board is proposing that this restriction is removed from the Company's investment strategy to allow the Company to become more closely involved in the daily operations of its investments, should it wish to do so. In the event that the Investment Restrictions referred to above are removed, the Company would, in theory, be free to invest all or substantially all of its assets in a single investment subject to compliance only with the Company's own risk management and corporate governance procedures as referred to above. 13. Expected Effective Date for the Proposals and Associated Changes As referred to in paragraph 1 of this Part I, subject to Shareholder approval, the Board intends to implement the Proposals and the Associated Changes as soon as reasonably practical after the General Meeting and no later than 30 November 2008. 14. Proposed additional listings on other stock exchanges As all of the investments of the Company are concentrated in the Target Region and as the Company and the Investment Manager enjoy strong brand recognition in their core markets, the Board believes that the Company and its Shareholders would benefit from the listing of the Company's Ordinary Shares on one or more stock exchanges located within the Target Region. Accordingly, the Board continues to explore the possibility of listing the Company's Ordinary Shares on the regulated stock exchanges of Sofia and/or Bucharest on or after delisting from the ISE. Furthermore, the Board is exploring the desirability and implications of the Company discontinuing under the laws of the BVI and continuing under the laws of another jurisdiction. Such discontinuance/continuance would be undertaken in order to better facilitate the listing of the Company's Ordinary Shares on the regulated stock exchanges of Sofia and/or Bucharest. In addition, the Board will consider the benefits of a listing of the Ordinary Shares on the Channel Islands Stock Exchange which, although not a regulated market within the meaning of the European Parliament and Council Directive on markets in financial instruments (No. 2004/39/EC), is a recognised stock exchange for certain purposes. It should be noted that the implementation of any of the Resolutions and the delisting of the Ordinary Shares from the ISE are not conditional on any such listings being obtained nor on the Company re-domiciling. 15. Borrowings The Company has no borrowing restrictions under the Articles and to-date any borrowings have been undertaken by its subsidiaries on a basis which limits any recourse of lenders to the subsidiary borrowing entity. If the Proposals are implemented and in the light of the other proposed changes to the nature of the Company, going forward, the Board expects to use debt financing by means of inter alia, secured or unsecured bank borrowings, private debt placements or listed debt instruments at the level of both the Company and its subsidiaries. 16. General Meeting Set out on page 39 of this document is a notice convening a general meeting to be held at Harney Westwood & Riegels, Craigmuir Chambers, PO Box 71, Road Town, Tortola, VG1110, British Virgin Islands at 10.00 a.m. BVI time/ 3.00 p.m. UK time on 25 April 2008 at which the following resolutions will be proposed to: Resolution 1 THAT: (i) (a) the termination of the Investment Management Agreement and the Investment Advisory Agreement on the terms set out in paragraph 5 of Part I and in Part II of this document be and is hereby approved, (b) the allotment and issuance of the Consideration Shares by the Board be and is hereby authorised, (c) the allotment and issuance of new Ordinary Shares on exercise of the Warrants be and is hereby authorised and (d) notwithstanding anything in the Articles, for the purposes of determining pre-emption rights on issues of new Ordinary Shares, ECL shall be deemed to hold its then shareholding in the Company plus the Consideration Shares and the Ordinary Shares to be issued on exercise of the Warrants; (ii) the Company entering into the Services Agreement on the terms set out in paragraph 6 of Part I and in Part III of this document be and is hereby approved; (iii) the Company entering into the Technical Support Agreement on the terms set out in paragraph 7 of Part I and in Part IV of this document be and is hereby approved; and (iv) (a) the Company's implementation of the LTIP on the terms set out in paragraph 8 of Part I and in Part V of this document be and is hereby approved and (ii) any allotments and issuances of Ordinary Shares by the Board under the LTIP whether at or below NAV per Ordinary Share at the date of allotment and issue be and are hereby authorised . Resolution 2 THAT subject to and conditional upon the passing and implementation of Resolutions 1 and 3, the removal of restrictions on the Company's investing strategy as provided in paragraph 12 of Part I of this document be and is hereby approved. Resolution 3 THAT subject to and conditional upon the passing and implementation of Resolutions 1 and 2, (i) the proposed amendments to the Articles as set out in paragraph 10 of Part I and in Part VI of this document be and are hereby approved and the Registered Agent of the Company be and is hereby authorised to file the amended and restated Articles with the Registrar; and (ii) in addition to the authorities sought in Resolution 1, the Board be and is hereby empowered in accordance with the amended and restated Articles to allot and issue Ordinary Shares on such terms as they think fit, as if the pre-emption rights set out in the amended and restated Articles did not apply to such allotment provided that: (a) the power conferred by this resolution shall be limited to up to a maximum number of 1,826,589 Ordinary Shares; and (b) this power, unless renewed, shall expire at the end of the next annual general meeting of the Company to be held after the date of the passing of this resolution; but shall extend to the making, before such expiry, of an offer or agreement which would or might require Ordinary Shares to be allotted and issued after such expiry and the Board may allot and issue Ordinary Shares in pursuance of such offer or agreement as if the authority conferred hereby had not expired. Resolution 4 THAT the proposed amendments to the Articles as set out in paragraph 11 of Part I and in Part VI of this document be and are hereby approved and the Registered Agent of the Company be and is hereby authorised to file the amended and restated Articles with the Registrar. 17. Action to be taken Registered holders of Ordinary Shares only (other than CDI Holders) You will find enclosed a Form of Proxy for use at the General Meeting. Whether or not you are intending to be present at the meeting, you are requested to complete the Form of Proxy, which should be returned to the Company's registrar, Olympia Capital (Ireland) Limited, 6th Floor, Block 3, Harcourt Centre, Dublin 2, Ireland as soon as possible and in any event so as to be received not later than 10.00 a.m. BVI time / 3.00 p.m. UK time on 23 April 2008. Completion and return of the Form of Proxy will not prevent you from attending and voting at the General Meeting if you so wish. Only those members entered in the register of members of the Company at 10.00 a.m. BVI time / 3.00 p.m. UK time on 11 April 2008 or, if this General Meeting is adjourned, in the register of members 15 days before the time of any adjourned meeting, shall be entitled to attend and vote at the General Meeting or any adjournment thereof in respect of the number of Ordinary Shares registered in their name at that time. Changes to entries in the register of members after the relevant times shall be disregarded in determining the rights of any person to attend or vote at the General Meeting or any adjournment thereof. CDI Holders CDI Holders may vote in respect of the Resolutions to be considered at the General Meeting by completing the enclosed Form of Direction and submitting it to the Company's registrar, Olympia Capital (Ireland) Limited, 6th Floor, Block 3, Harcourt Centre, Dublin 2, Ireland as soon as possible and in any event so as to be received not later than 10.00 a.m. UK time on 21 April 2008. CDI Holders are not legal owners of the Ordinary Shares represented by the CDIs they hold. The registered legal owner of such Ordinary Shares is Citivic Nominees Limited ('Citivic'), a wholly owned subsidiary of Citigroup, NA. Citivic are the appointed specialised depositary for Euroclear Bank SA/NA ('EB'), who is the central stock depositary and parent company of Euroclear UK & Ireland Limited ('EUIL'). CDIs are registered in the EB system in the name of CREST International Nominees Limited, a wholly owned subsidiary of EUIL, which holds such shares on trust for the CDI Holders. However, the Company wishes to ensure that CDI Holders are able to enjoy the same voting rights in respect of the Resolutions to be proposed at the General Meeting as those enjoyed by the legal owners of Ordinary Shares. Therefore, the Company has entered into an agreement relating to voting services with the Company's registrar and EUIL (the 'Voting Agreement'). Pursuant to the Voting Agreement, provided that a CDI Holder completes and submits a Form of Direction within the requisite deadline (as referred to above) and in accordance with the remaining instructions on the enclosed Form of Direction, its voting instructions will ultimately be sent to Citivic who will exercise its voting rights in respect of the number of Ordinary Shares represented by the CDIs held by the relevant CDI Holder in accordance with the directions of such CDI Holder. Quorum Under the Articles, the General Meeting is duly constituted if there are present two Shareholders attending in person or by proxy together holding no less than 25 per cent. of the votes of the Ordinary Shares entitled to vote on the Resolutions to be considered at the General Meeting. If within 15 minutes (or such longer period as the chairman in his absolute discretion may decide) from the time fixed for the start of the General Meeting a quorum is not present, or if during the General Meeting a quorum ceases to be present, the General Meeting shall stand adjourned to such time and place as the chairman of the meeting may decide by no later than the following business day. At the adjourned General Meeting two Shareholders present in person or by proxy (whatever the number of Ordinary Shares held by them) entitled to vote on the Resolutions proposed to be considered at the General Meeting shall be a quorum. Otherwise the General Meeting shall be dissolved. 18. Documents Available for Inspection Copies of the following documents are available for physical inspection from the date of this document until the close of the General Meeting at the offices of Grant Thornton, 24-26 City Quay, Dublin 2, Ireland: (i) the Articles; (ii) the draft amended and restated Articles pursuant to Resolution 3; (iii) the draft amended and restated Articles pursuant to Resolution 4; (iv) the Investment Management Agreement; (v) the Investment Advisory Agreement; (vi) the draft Termination Agreement; (vii) the draft Services Agreement; (viii) the draft Warrant Instrument; (ix) the draft Technical Support Agreement; (x) the draft LTIP; (xi) a copy of the unaudited interim results of the Company for the six months ended on 30 June 2007; (xii) the audited historical financial information of the Company for each of the two financial years preceding this document; and (xiii) this document. Copies of both sets of amended and restated Articles will also be available 15 minutes prior to, and during, the General Meeting. 19. Voting undertakings The Company has received irrevocable undertakings to vote in favour of the Resolutions to be proposed at the General Meeting from the holders of 9,839,006 Ordinary Shares representing 56.79 per cent. of the total issued share capital of the Company. However, the Investment Manager, which currently holds 647,010 Ordinary Shares, and Petri Karjalainen, who currently holds 73,700 Ordinary Shares, are ineligible to vote (as being a related party and an associate of a related party, respectively), and will take all reasonable steps to ensure that none of their associates vote, on Resolution 1. As a result, the irrevocable undertakings in respect of Resolution 1 only, represent 54.75 per cent. of the votes that may be cast by holders of the Ordinary Shares. 20. Recommendation In compliance with both rule 10.6.2 of the ISE listing rules (which prohibits any director who is an associate of the 'related party' from taking part in the boards' consideration of the related party matters) and regulation 71 (Directors' Interests - General Prohibition on Voting) of the Articles, Petri Karjalainen has not taken part in the Board's consideration of the Proposals. The Independent Directors, who have been advised by Collins Stewart, consider the Proposals fair and reasonable in respect of the Shareholders as a whole. In providing its advice, Collins Stewart has taken into account the Independent Directors' commercial assessment of the proposals set out in this document. In addition, in compliance with AIM Rule 13, the Independent Directors consider, having consulted with the nominated adviser, Collins Stewart, that the terms of the Proposals are fair and reasonable insofar as the Shareholders are concerned. Accordingly, the Independent Directors unanimously recommend that you vote in favour of Resolution 1 and all the Directors unanimously recommend that you vote in favour of Resolutions 2 to 4 inclusive. Yours faithfully John Carrington Chairman PART II SUMMARY OF THE MAIN TERMS OF THE TERMINATION AGREEMENT AND OF THE WARRANT INSTRUMENT Set out below is an outline of the main terms of the Termination Agreement and the related Warrant Instrument: 1. Termination Agreement Termination of the Investment Management Agreement and the Investment Advisory Agreement With effect from the Effective Date and subject to and conditional on the execution of the Services Agreement, the Technical Support Agreement and the LTIP, the Investment Management Agreement and the Investment Advisory Agreement shall be terminated in consideration for the issue by the Company to ECL of: (i) 941,540 Ordinary Shares being the Consideration Shares; and (ii) the Warrants entitling ECL to purchase 564,925 Ordinary Shares. If the conditions are not fulfilled or waived on or before 30 November 2008, the Termination Agreement shall terminate. ECML shall be entitled to management fees under the Investment Management Agreement at the current annual rate of 2.5 per cent. of committed capital up to 26 February 2008. Between 26 February 2008 and the Effective Date, ECML shall be entitled to management fees under the Investment Management Agreement at the current annual rate of 2.5 per cent. of committed capital subject to the following adjustment - ECML shall be obliged to refund to EIBL the difference between: (i) any management fees paid to ECML for the period between 26 February 2008 and the Effective Date at the annual rate of 2.5 per cent. of committed capital; and (ii) any fees that would have been payable to ECL under the Services Agreement and the Technical Support Agreement (based on the annual estimate) pro rated for the period between 26 February 2008 and the Effective Date had the Services Agreement and the Technical Support Agreement been in force. Any investment advisory fees accrued and due under the Investment Advisory Agreement up to the Effective Date shall be paid by the Investment Manager to the Investment Advisor or, in the event that any advisory fees have been prepaid by the Investment Manager, the Investment Advisor shall return to the Investment Manager such amount as is over and above its pro rata entitlement to such advisory fees. Both the Investment Manager and the Investment Advisor shall be entitled to receive reimbursement for any expenses accrued under the Investment Management Agreement up to the Effective Date. Enhanced 'pre-emption' rights In the event of a new issue of Ordinary Shares prior to the issue of the Consideration Shares and/or of any Ordinary Shares on exercise of the Warrants, ECL shall be entitled to subscribe for such number of Ordinary Shares as is pro rata to ECL's then shareholding in the Company plus the Consideration Shares and the Ordinary Shares subject of the Warrants as if these have been issued to ECL. Warranties and limitation of liability Under the Termination Agreement, each party shall warrant to the other parties that, inter alia, it is duly incorporated and validly existing under the laws of the jurisdiction in which it was incorporated and has the power to enter into and to perform its obligations under the agreement. ECL shall warrant to the Company that: (i) all information provided to the valuer for determining the 31 December 2007 net asset value of the Company is accurate and complete in all material respects; (ii) any assumptions made by any entity responsible for determining the 31 December 2007 net asset value of the Company were reasonable at the time they were made; and (iii) to ECL's best knowledge, the 31 December 2007 net asset value of the Company which shall be reported in May 2008 fairly represents the net asset value of the Company as at 31 December 2007. The Company shall warrant that: (i) when issued the Consideration Shares shall be allotted and issued as fully paid; (ii) when issued the Consideration Shares shall rank pari passu with the Ordinary Shares then in issue and have the rights set out in the Articles; and (iii) an application will be made for the Consideration Shares to be admitted to trading on AIM. The total liability of ECL in respect of all claims for breach of the warranties set out above ('Claims') shall be limited to â‚¬3 million. ECL shall not be liable for a Claim unless the Company has given ECL notice of the Claim, stating in reasonable detail the nature of the Claim and, if practicable, the amount claimed on or before the date falling 1 year after the Effective Date. ECL shall not be liable for a Claim unless and until the aggregate amount of all such Claims exceeds â‚¬50,000 but once such aggregate amount has been exceeded ECL shall be liable in respect of the whole of such amount and not just the excess. Lock up arrangements During the period of 6 months from the date of issue of the Consideration Shares and any Ordinary Shares issued upon exercise of the Warrants and from 1 January 2008, ECL and the Investment Manager shall not offer, sell, contract to sell, grant any option to purchase or otherwise dispose of, any interest in the Consideration Shares, any Ordinary Shares issued upon exercise of the Warrants and the Existing Shares, respectively (together referred to as the 'Restricted Shares') (or any securities convertible into or exchangeable for, or representing a right to receive, Restricted Shares or any such substantially similar securities), deposit any Restricted Shares (or any securities convertible into or exchangeable for, or representing a right to receive, Restricted Shares) in any depositary receipt facility, make any short sale, engage in any hedging or other transaction that is designed to or that could reasonably be expected to lead to or result in a sale or disposition of Restricted Shares (even if such disposition would be by someone other than the Company), or enter into a transaction with similar economic effect (the 'Hard Lock Up'). The undertakings referred to above shall not apply: (i) where the disposal, sale or other transfer of Restricted Shares is required by law or by any competent authority or pursuant to a court order; or (ii) to a transaction notified in writing in advance to the Board where the Board gives its consent in writing to such transaction. After the expiry of the Hard Lock Up and subject to the provisions set out below, ECL and the Investment Manager undertake that they shall not, until 31 December 2011, dispose of or create any encumbrance over the Restricted Shares except that: (i) they shall be entitled to create any encumbrance (or agree to do so) over any or all of the Restricted Shares in favour of any loan providers as security for bona fide loans to be advanced to ECL and/or any of its affiliates for the purposes of acquiring shares in the Company; (ii) without prejudice to paragraph (a) above, they shall be entitled to create any encumbrance (or agree to do so) over any or all of the Restricted Shares in favour of any loan providers as security for bona fide loans to be advanced to ECL and/or any of its affiliates (for any purposes other than to acquire shares in the Company) with the Board's consent, such consent not to be unreasonably withheld or delayed; (iii) they shall be entitled to dispose of or create any encumbrance (or agree to do so) over any or all of the Restricted Shares to or in favour of any affiliate, provided that prior to such disposal or the creation of an encumbrance, such affiliate agrees to be bound by the lock-up provisions as they would apply to ECL or the Investment Manager, as applicable; and (iv) they shall be entitled to otherwise dispose of or create any encumbrance (or agree to do so) over any or all of the Restricted Shares with the Board's consent. The Board shall act reasonably in considering a request for its consent and, for this purpose, any Directors related to ECL shall not be included in considering or approving such request, (the arrangements described in this paragraph shall be referred to as the 'Soft Lock Up'). The Soft Lock Up shall apply as follows: (i) during the period to expire on 31 December 2008 (the 'First Year') - to 100% of the Restricted Shares; (ii) during the period from the end of the First Year to 31 December 2009 (the 'Second Year') - to 75% of the Restricted Shares with the remaining 25% being free from the Soft Lock Up; (iii) during the period from the end of the Second Year to 31 December 2010 (the 'Third Year') - to 50% of the Restricted Shares with the remaining 50% being free from the Soft Lock Up; and (iv) during the period from the end of the Third Year to 31 December 2011 - to 25% of the Restricted Shares with the remaining 75% being free from the Soft Lock Up. Neither the Hard Lock Up nor Soft Lock Up restrictions shall prevent ECL and the Investment Manager from disposing of any Restricted Shares in the following circumstances: (i) where such disposal is made in the acceptance of any offer made by any third party for the whole of the ordinary share capital of the Company which is recommended by a majority of the Company's directors; or (ii) where such disposal is made in the execution of an irrevocable commitment to accept any offer made for the whole of the ordinary share capital of the Company which is recommended by a majority of Company's directors; or (iii) where such disposal is made pursuant to an offer by the Company to purchase its own shares which is made on identical terms to all holders of Ordinary Shares and otherwise complies with any legislation applicable to the Company. 2. Warrant Instrument Subscription rights Under the Warrant Instrument, as part consideration for the termination of the Investment Management Agreement and the Investment Advisory Agreement, the Company shall, conditional on implementation of the Proposals, grant ECL the right to subscribe for 564,925 Ordinary Shares comprised in 564,925 Warrants during the period commencing on 1 January 2009 and expiring on the earlier of (i) in respect of any Warrants that become immediately exercisable on a change of control of the Company (as described below), one calendar month after such change of control or (ii) the date which is 5 years from the Effective Date (the 'Subscription Period'). ECL's right to subscribe for Ordinary Shares upon the exercise of the Warrants shall be subject to the conditions outlined below. Exercise conditions of the Warrants A Warrant shall be exercisable subject to the following conditions: (i) ECL not being in any material default at the date of exercise of such Warrant under the Termination Agreement or the Services Agreement or the Technical Support Agreement; and (ii) the last reported NAV per Ordinary Share immediately prior to the proposed exercise date of any Warrants being not less than the High Water Mark. The Directors may waive the condition set out in sub-paragraph (ii) if they are satisfied that the NAV per Ordinary Share prior to the exercise of any Warrants shall not be less than the High Water Mark (even prior to such net asset value being reported). The Warrants are exercisable individually. Issue of Ordinary Shares upon exercise of Warrants The Shares allotted pursuant to an exercise of the Warrants shall: (i) be allotted and issued as fully paid; (ii) rank pari passu with the fully paid Ordinary Shares then in issue and have the rights set out in the Articles; and (iii) subject to the Articles, be entitled to receive any dividend or other distribution which has previously been announced or declared provided that the date by which the holder of Ordinary Shares must be registered to participate in such dividend or other distribution is after the date of valid exercise of the relevant Warrants. The Company undertakes to procure that any Ordinary Shares issued upon exercise of Warrants shall be admitted to listing and trading on any recognised investment exchange(s) on which the Ordinary Shares then in issue are listed and traded. Undertakings of the Company For so long as any Warrants remain outstanding the Company shall comply with the following undertakings: (i) the Company shall at all times maintain sufficient authorised but unissued share capital and all requisite shareholder or other authorities necessary to enable the issue of Ordinary Shares pursuant to the exercise of all the Warrants; (ii) the Company will not unless otherwise authorised by ECL's consent (such consent not to be unreasonably withheld or delayed): (a) create or make any issue of shares or loan stock convertible into shares or grant any options, warrants or rights to subscribe for or convert any security into shares otherwise than in accordance with the Articles; (b) vary, modify or abrogate the rights attaching to the Ordinary Shares or any loan stock convertible into shares issued by the Company (and the creation or issue of any shares which rank in priority in any respect to the Ordinary Shares shall be deemed to constitute an abrogation of the rights attaching to the Ordinary Shares); (c) cancel or reduce any of its share capital, share premium account, capital redemption reserve or loan stock convertible into shares where such cancellation or reduction could reasonably be expected to have a material adverse effect on the interests of ECL; (d) purchase or redeem any of its share capital where (i) such purchase or redemption is not offered to all Shareholders pro rata and on the same terms and (ii) such purchase or redemption could reasonably be expected to have a material adverse effect on the interests of ECL; or (e) capitalise its reserves (including share premium). Rights on reclassification, compulsory offer on a change of control and liquidation If the Company, by reclassification of securities or otherwise, shall change any of the securities as to which ECL has subscription rights pursuant to the Warrant Instrument into the same or a different number of securities of any other class or classes, ECL's subscription rights shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities that were subject to the subscription rights of ECL immediately prior to such reclassification or other change. If a bona fide offer (whether or not such offer is subsequently given effect to by way of a sale and purchase agreement) is made for any issued equity share capital of the Company whilst any of the Warrants remain outstanding and such offer, if accepted in whole or in part, would constitute a change of control, then the outstanding Warrants (or, where the offer is for less than the entire issued share capital of the Company, such number of the outstanding Warrants on a pro rata basis) shall become immediately exercisable (without being subject to any conditions on exercise as described above). All Warrants shall become immediately exercisable (without being subject to any conditions on exercise as described above) on the Company's liquidation. Transfer of Warrants The Warrants shall not be capable of being transferred by ECL or of being mortgaged, pledged or encumbered in any way whatsoever, without the prior written consent of the Company. PART III SUMMARY OF THE MAIN TERMS OF THE SERVICES AGREEMENT Set out below is an outline of the main terms of the Services Agreement: Term and termination The Services Agreement shall commence on the Effective Date and shall have an initial term of four years. Thereafter, the Services Agreement shall renew automatically for successive one year terms unless either party gives to the other written notice of termination at least six (6) months prior to each anniversary of the Services Agreement. Either party shall be entitled to terminate the Services Agreement on 30 days' notice if the other party is in material default of the Services Agreement and has failed to cure such default within 30 days from the date on which the non-defaulting party has notified the defaulting party of the breach or if the other commits any act of fraud or dishonesty, becomes insolvent, bankrupt or makes any arrangement with its creditors. The Company may terminate the appointment of any Key Individual pursuant to the Services Agreement immediately for 'cause' and ECL shall be required to procure the services of a suitable replacement within 180 days (unless the Company and ECL agree that a replacement is not required). Services Under the Services Agreement, ECL shall procure that: 1. the services of the Key Individuals are made available to the Company so that each Key Individual dedicates substantially all of his professional time and attention to the affairs of the Company; and 2. other senior managers proposed by ECL provide support services to the Company as required by and agreed with the Company. Annual remuneration ECL shall be entitled to receive annual remuneration payable in advance on a semi-annual basis in consideration for providing services under the Services Agreement. The remuneration payable under the Services Agreement shall be â‚¬2.4 million per annum. The remuneration shall be reviewed annually by the Board's remuneration committee and may be increased at the discretion of the remuneration committee. In the event that the services of any two of the Key Individuals are no longer procured by ECL, the total compensation payable under the Services Agreement shall be reduced by 25 per cent. until such time as ECL procures the services of a suitable replacement for at least one of such Key Individuals. In addition to the annual remuneration, the Company shall reimburse ECL for any reasonable out of pocket expenses incurred by ECL, the Key Individuals or any senior managers appointed pursuant to the Services Agreement in the course of performance of their services under the Services Agreement. Non-compete provisions and management of conflicts During the term of the Services Agreement, ECL and/or the Key Individuals shall not be directly or indirectly concerned with any other actual or potential undertakings, business activities or interests which could give rise to a direct or indirect conflict of interest with the interests of the Company or any Group company, in all cases subject to the carve outs set out below. In addition, during the term of the Services Agreement, ECL and/or the Key Individuals shall present any new business opportunities they identify in the Target Region, and which are within the remit Company's investment objective and strategy as set out in the Admission Document, to the Company on a pre-emptive basis. If the Board (excluding for these purposes any Directors related to ECL) determines that the Company is not interested in taking up a business opportunity, ECL and/or the Key Individuals shall be allowed to pursue it or make arrangements for someone else to pursue it on their behalf provided that the business opportunity does not compete with the Company's business activities and provided that the Key Individuals are still able to devote substantially all of their professional time and attention to the affairs of the Company. Following termination of the Services Agreement, ECL/the Key Individuals and/or any senior managers appointed pursuant to the Services Agreement shall be subject to customary non-competition and non-solicitation covenants, also subject to the carve outs set out below. ECL and/or the Key Individuals shall be allowed to own (directly or indirectly) interests in other businesses. If these businesses could compete with the Company, these ownership interests will be subject to a cap of 5% aggregate ownership or such higher percentage as may be approved by the Board. The Board shall act reasonably in considering any request for approval of ownership interests exceeding 5% and, for this purposes, any of the Key Individuals who are on the Board shall not be included in the consideration of the matter by the Board. The Key Individuals shall be permitted to continue to provide consulting services to Equest Balkan Properties PLC, including assuming the position of non-executive directors and 'key individuals' as set out in the Admission Document of Equest Balkan Properties PLC dated Dec 2005. The Key Individuals shall be permitted to have executive appointments with ECL and its affiliates. The Key Individuals shall be permitted to assume the position of director of any other companies provided such companies do not compete with the Company and, further provided, that such appointments are in a non-executive capacity. The Key Individuals shall be permitted to own, directly or indirectly, and/or manage property developments in and outside the Target Region. Indemnity The Company shall indemnify ECL against all losses, liabilities, claims, costs, charges and expenses which may be brought against or incurred by ECL in connection with or arising out of ECL's lawful performance of its obligations under the Services Agreement or the failure by the Company or any of its Directors to comply with the AIM Rules or any other applicable law. However, the Company shall not be obliged to indemnify ECL to the extent that any such losses, liabilities, claims, costs, charges or expenses arise because of the fraud, negligence, bad faith or wilful default of ECL or are of such nature that liability may not be excluded pursuant to applicable law. Key man insurance The Board may, at its discretion obtain key man insurance in respect of the Key Individuals and the Company shall be entitled to the proceeds of such insurance. PART IV summary of the main terms of the Technical Support Agreement Set out below is an outline of the main terms of the Technical Support Agreement: Term The Technical Support Agreement shall be for an initial term of 1 year and thereafter shall automatically renew for successive periods of 12 months unless or until terminated by either party by giving the other not less than 3 months' written notice of termination to take effect on or at any time after the expiry of the initial period. The Technical Support Agreement shall commence on the date on which the Investment Management Agreement and the Investment Advisory Agreement terminate pursuant to the Termination Agreement. Services Pursuant to the Technical Services Agreement, ECL shall provide to the Company all back office technical support as is necessary for the daily operation of the Company, including but not limited, to the following: (i) access to offices in Sofia, Belgrade, Bucharest and London; (ii) facilities management services for: switchboard and reception, post room, service helpdesk, cleaning and waste management, grounds maintenance, catering and vending, security, mechanical and electrical services (direct or via subcontractors), provision of storage and stationery, payment of utility, rate, telephone and similar charges, administration of all necessary tax filings and administration of payments payable; (iii) IT systems services; (iv) arranging accounts with banks or with custodians as ECL may from time to time determine for and in the name of the Company, maintaining such accounts, giving payment and other instructions to banks or custodians in respect of such accounts and receiving and paying into such accounts the net proceeds of any equity placings, investment income of the Company and any fees to which the Company is entitled; and (v) undertaking any other acts as are required of ECL or as are necessary or desirable in the reasonable opinion of the Board in furtherance of its duties and consistent with the terms of the Technical Support Agreement. The technical support to be provided by ECL, shall be provided in a manner, to the specification of and of a quality consistent with the provision of such technical support by the Investment Manager during the preceding 12 months. ECL may appoint such advisers, employees and consultants as it deems necessary to assist with the performance of its obligations under the Technical Support Agreement. The Company may terminate any of the services being provided under the Technical Support Agreement (without prejudice to the continuance in force of the remainder of the agreement in respect of the provision of any other services) if it decides that it no longer needs such a service by giving ECL not less than 3 months' written notice of termination to take effect on or at any time after the expiry of the initial period. Upon the written request of the Company, ECL shall use its reasonable endeavours to assist the Company in procuring any of the services directly for the Company. Termination Notwithstanding the above, either party may terminate the Technical Support Agreement if the other: (i) goes into liquidation, becomes insolvent or has an administrator, receiver or similar officer appointed in respect of all or part of its undertaking (or is the subject of a filing with any court for the appointment of any such officer); (ii) commits a material breach of the Technical Support Agreement which, if capable of being remedied, is not remedied within 30 days of receipt of a notice from the other party specifying the breach and putting the defaulting party on notice of the non-defaulting party's intention to terminate the agreement with effect from the expiry of the notice period if such breach has not been remedied to its reasonable satisfaction; or (iii) commits any act or fails to take any action that amounts to gross negligence, wilful misconduct or fraud under the agreement. On termination of the Technical Support Agreement (however caused), the Company shall have the right to require ECL, for a period of two (2) months following the issue of a termination notice, to make available such staff and to render such assistance and documentation as may be reasonably necessary to effect an orderly assumption and handover of the services to the Company or an alternative supplier. Service Charges Services Charges under the Technical Support Agreement shall be paid by the Company to ECL in advance semi-annually within ten (10) Business Days after the receipt of an invoice by the Company. ECL shall make any necessary adjustments to reflect the actual cost incurred by ECL in providing the services during the preceding six (6) months in subsequent invoices. Liability Save in relation to any liability for fraud, death or personal injury resulting from negligence, ECL's total liability under the Technical Support Agreement or in relation to its subject-matter arising from any action (whether in negligence, misrepresentation, contract, tort or otherwise) in connection with the provision by ECL (or any member of its group) of a service shall be limited to the total amount of service charges payable to ECL in respect of that service for the relevant period. Neither party shall be liable to the other by reason of any representation (unless fraudulent) or any implied warranty, condition or other term, or any duty at common law, or under the express terms of the Technical Support Agreement for: (i) any loss of profit, contracts, opportunity, goodwill, reputation, revenues or anticipated savings; and/or (ii) any indirect or consequential loss or damage, whether caused by the negligence, breach of contract, tort, breach of statutory duty of that party, its contractors, agents or employees or otherwise, arising out of or in connection with the agreement. Indemnification The Company shall indemnify ECL (for itself and as agent and trustee for each member of ECL's group) against all losses, liabilities, claims, costs, charges and expenses ('Losses') which may be brought against or incurred by ECL (or any member of its group) in connection with or arising out of: (i) the lawful performance by ECL of its obligations under the Technical Support Agreement; (ii) the failure or alleged failure by the Company or any of the Directors to comply with the AIM Rules and/or other applicable law, save to the extent that any such Losses arise because of the fraud, gross negligence or wilful default of ECL or any member of its group or are of such nature that liability may not be excluded pursuant to applicable law. PART V Summary of the main provisions of the Long Term Incentive Plan Set out below is an outline of the main terms of the Long Term Incentive Plan: Term Pursuant to the LTIP, ECL shall be entitled to the Incentive Fee in certain circumstances, more particularly described below. The first period for calculating an Incentive Fee shall begin on 1 January 2008 and shall end on 31 December 2008; each subsequent Incentive Period is a period of twelve months ending on 31 December. Subject to the carve out set out below, the LTIP shall be in place for an initial term of four years and thereafter shall remain in operation until termination of the Services Agreement. During the initial term, the LTIP shall terminate if the Services Agreement is terminated by the Company in accordance with the termination provisions of the Services Agreement. Performance Conditions The payment of any Incentive Fee by the Company is subject to: (i) the achievement of the Incentive Hurdle; and (ii) the achievement of the Incentive High Water Mark. Further details of the Incentive Hurdle and Incentive High Water Mark are set out in paragraph 8 of Part I of this document. Incentive Fee In respect of the first Incentive Period, if the Incentive Hurdle is met, the Incentive Fee will be an amount equal to 20 per cent. of the excess of the Closing Combined Value per Ordinary Share at 31 December 2008 over the Incentive Hurdle. In respect of subsequent Incentive Periods, if the Incentive Hurdle is met and the Incentive High Water Mark is exceeded, the Incentive Fee will be an amount equal to 20 per cent. of the excess of the Closing Combined Value per Ordinary Share at the end of the relevant Incentive Period over the higher of: (i) the Incentive Hurdle; (ii) the Closing Combined Value per Ordinary Share at the end of the immediately preceding Incentive Period (after adjusting for any Incentive Fee paid in respect of that Incentive Period); and (iii) the Incentive High Water Mark. Adjustments In the event that there is a further issue of Ordinary Shares, a repurchase of Ordinary Shares or other capital reorganisation of the Company, the calculation of the Incentive Fee shall be appropriately adjusted as advised by an independent firm of accountants. Upon a winding up of the Company, the Closing Combined Value per Ordinary Share shall be based on the Closing Combined Value per Ordinary Share for the period from the end of the last Incentive Period to the date of winding up (before making any accrual for the Incentive Fee). The Board shall seek to obtain an independent valuation of all the underlying investments of the Company at the end of each Incentive Period for the purposes of determining the NAV element of the Closing Combined Value per Ordinary Share necessary to calculate the Incentive Fee for that Incentive Period. The Board shall instruct an internationally recognised accounting firm for the purpose of obtaining such an independent valuation and the Board's instructions to, and the methodology to be adopted by, such other accounting firm, shall be consistent in all material respects with the instructions given and methodology used to determine the Net Asset Value as at 31 December 2007. Payment of Incentive Fee The Company shall pay the Incentive Fee in Ordinary Shares (together with an amount equal to VAT, if any, thereon). The Company shall issue Ordinary Shares to ECL ('LTIP Shares') based on the following formula: Amount of Incentive Fee for the relevant Incentive Period Number of Ordinary Shares issued = _________________________________________________________ The Closing Combined Value per Ordinary Share at the end of the relevant Incentive Period LTIP Shares will be issued within 90 days of the end of each annual Incentive Period and shall be subject to the lock-up arrangements described below. The Company shall have the right, at its absolute discretion, to pay the Incentive Fee in cash instead of in LTIP Shares. The Company reserves the right to, at its absolute discretion, make market purchases of Ordinary Shares for the purpose of paying the Incentive Fee to ECL. Lock up arrangements LTIP Shares shall be subject to 6-month lock up arrangements with effect from the end of the Incentive Period in respect of which such LTIP Shares are to be awarded. During this period ECL shall not offer, sell, contract to sell, grant any option to purchase or otherwise dispose of, any interest in the LTIP Shares (or any securities convertible into or exchangeable for, or representing a right to receive, LTIP Shares or any such substantially similar securities), deposit any LTIP Shares (or any securities convertible into or exchangeable for, or representing a right to receive, LTIP Shares) in any depositary receipt facility, make any short sale, engage in any hedging or other transaction that is designed to or that could reasonably be expected to lead to or result in a sale or disposition of such LTIP Shares (even if such disposition would be by someone other than the Company), or enter into a transaction with similar economic effect (the 'LTIP Shares Hard Lock Up'). The undertakings referred to above shall not apply: (i) where the disposal, sale or other transfer of LTIP Shares is required by law or by any competent authority or pursuant to a court order; or (ii) to a transaction notified in writing in advance to the Company where the Company gives its consent in writing to such transaction. After the expiry of the LTIP Shares Hard Lock Up and subject to the provisions set out below, ECL undertakes shall not, until the end of the fourth anniversary from 1 January 2008, dispose of or create any encumbrance over the LTIP Shares except that: (i) they shall be entitled to create any encumbrance (or agree to do so) over any or all of the LTIP Shares in favour of any loan providers as security for loans to be advanced to ECL and/or any of its affiliates; and (ii) they shall be entitled to otherwise dispose of or create any encumbrance (or agree to do so) over any or all of the LTIP Shares with the Board's consent. The Board shall act reasonably in considering a request for its consent and, for this purpose, any directors of the Company who are 'related parties' (as defined in the AIM Rules) to ECL shall not be included in considering or approving such request, (the arrangements described in this paragraph shall be referred to as the 'LTIP Shares Soft Lock Up'). The LTIP Shares Soft Lock Up shall apply as follows: (i) during the period to expire on 31 December 2008 (the 'First Incentive Year') - to 100% of the LTIP Shares; (ii) during the period from the end of the First Incentive Year to 31 December 2009 (the 'Second Incentive Year') - to 75% of the LTIP Shares with the remaining 25% being free from the LTIP Shares Soft Lock Up; (iii) during the period from the end of the Second Incentive Year to 31 December 2010 (the 'Third Incentive Year') - to 50% of the LTIP Shares with the remaining 50% being free from the LTIP Shares Soft Lock Up; and (iv) during the period from the end of the Third Incentive Year to 31 December 2011 - to 25% of the LTIP Shares with the remaining 75% being free from the LTIP Shares Soft Lock Up. Neither the LTIP Shares Hard Lock Up or LTIP Shares Soft Lock Up restrictions shall prevent ECL from disposing of any LTIP Shares in the following circumstances: (i) where such disposal is made in the acceptance of any offer made by any third party for the whole of the ordinary share capital of the Company which is recommended by a majority of the Company's directors; or (ii) where such disposal is made in the execution of an irrevocable commitment to accept any offer made for the whole of the ordinary share capital of the Company which is recommended by a majority of Company's directors; or (iii) where such disposal is made pursuant to an offer by the Company to purchase its own shares which is made on identical terms to all holders of Ordinary Shares and otherwise complies with any legislation applicable to the Company. PART VI SUMMARY OF THE PROPOSED CHANGES TO THE ARTICLES The Board proposes the following changes to the Articles to be made pursuant to Resolution 3: 1. THAT Regulations 2.1 and 2.2 of the Articles be deleted in their entirety and the following substituted in lieu thereof and Regulations 2.3 to 2.9 be re-numbered accordingly: 2.1 Subject to (i) Regulations 2.2 to 2.4 of these Articles and (ii) the terms of any resolution creating new Shares: 2.1.1 the unissued Shares from time to time shall be under the control of the Directors which may issue the same to such persons, against cash or for such other consideration which is not cash, with such restrictions and conditions and /or with payment of commission and at such times as the Directors shall deem appropriate and in accordance with these Articles; and 2.1.2 the Directors shall have the power to cause the Company to grant to any person the option to acquire from the Company any unissued Shares, in each case on such terms as they shall deem appropriate. 2.2 Section 46 of the Companies Act (Pre-emptive rights) does not apply to the Company. 2.3 Unless otherwise determined by a Resolution of Shareholders, each Prescribed Shareholder shall have a non-transferable pre-emption right to subscribe for its Pro Rata Share of any New Securities that the Company may, from time to time, propose to allot and issue wholly for cash, but subject to such exclusions or other arrangements as the Directors may deem necessary or expedient in their exclusive discretion to deal with fractional entitlements or legal or practical problems under the laws of any country, territory or political subdivision thereof, or the requirements of any regulatory authority or Shares exchange in any jurisdiction. 2.4 Subject to Regulation 2.3, if the Company proposes to allot and issue New Securities wholly for cash, it shall issue a written notice to each Prescribed Shareholder of its intention to do so (the 'Rights Notice'). The Rights Notice shall contain a description of, and the price at which, the New Securities are being offered, the general terms upon which New Securities are to be allotted and issued and the number of New Securities for which the relevant Prescribed Shareholder has the right to subscribe for. The Rights Notice shall give the relevant Prescribed Shareholder not less than fourteen (14) days from delivery of the Rights Notice to agree to subscribe for all, or any part, of its Pro Rata Share of such New Securities for the price and upon the general terms specified in the Rights Notice. If a Prescribed Shareholder wishes to subscribe for all, or any part of, its Pro Rata Share of such New Securities, it must issue a written notice to the Company, prior to the expiration of the period contained in the Rights Notice, setting forth the number of New Securities to be subscribed for. If a Prescribed Shareholder fails to exercise its pre-emption right within the period specified in the relevant Rights Notice, then the Company shall have one hundred and twenty (120) days from the expiration of the period contained in the Rights Notice (the 'Fall Out Period') to issue the New Securities that have not been subscribed for to any third party, at a price and upon general terms no more favourable than specified in the relevant Rights Notice. If the Company has not issued the New Securities within the Fall Out Period, the Company shall not thereafter issue any New Securities without first offering such Securities to the Prescribed Shareholders in the manner provided above. 2. THAT the following new definitions be inserted in Regulation 1.1 of the Articles in alphabetical order: 'Employees' Share Scheme' means a scheme or plan for encouraging or facilitating the holding of options, Shares or debentures in the Company by or for the benefit of: (a) the bona fide employees or directors or consultants or former employees or directors or consultants of the Company, the Company's subsidiaries or holding company or any subsidiary of the Company's holding company; or (b) the wives, husbands, widows, widowers or children or step-children under the age of eighteen of such employees, directors or consultants or such former employees, directors or consultants; 'Fall Out Period' has the meaning given to it by Regulation 2.4; 'LTIP' means the long-term incentive plan entered into between the Company and Equest Capital Limited pursuant to which the Company may allot and issue Ordinary Shares to Equest Capital Limited based on set performance conditions; 'New Securities' means any Shares or a right to subscribe for or convert securities into such Shares, other than: (a) Shares which, in respect of dividends, carry a right to participate only up to a specified amount in a distribution; (b) Shares which are held by a person who acquired them pursuant to the LTIP and/or an Employees' Share Scheme or, in the case of Shares which have not been allotted and issued, are to be allotted and issued in pursuance of the LTIP and/ or such a scheme; (c) Ordinary Shares which are to be allotted pursuant to an offer or agreement between the Company and a third party prior to the amendment and restatement date of these Articles; 'Prescribed Shareholder' means a holder of Relevant Shares; 'Pro Rata Share' means, in relation to a Prescribed Shareholder, that proportion of the New Securities, which is in the same proportion that the number of the Relevant Shares held by such Prescribed Shareholder bears to the total allotted and issued Relevant Shares of the Company, in each case as at the date of the Rights Notice; 'Relevant Shares' means New Securities, as well as the allotted and issued Shares that fall within paragraphs (b) and (c) of the definition of New Securities; 'Rights Notice' has the meaning given to it by Regulation 2.4; 3. THAT Regulation 115 of the Articles be deleted in its entirety and Regulations 116 and 117 of the Articles be re-numbered accordingly. The Board proposes the following changes to the Articles to be made pursuant to Resolution 4: 3. THAT Regulation 30 of the Articles be deleted in its entirety and the following be substituted in lieu thereof: 30. QUORUM No business shall be transacted at any meeting of the Shareholders unless a quorum is present. A quorum at a meeting of the Shareholders shall be any two Shareholders, present in person or by proxy (whatever the number of Shares held by them), entitled to vote on the Resolution of Shareholders to be considered at the meeting. The absence of a quorum does not prevent the appointment of a chairman in accordance with the Articles, which is not treated as part of the business of the meeting. 4. THAT Regulation 32.1 of the Articles be deleted in its entirety and the following be substituted in lieu thereof: 32.1 If within 15 minutes (or such longer period as the chairman in his absolute discretion may decide) from the time fixed for the start of a meeting a quorum is not present, or if during a meeting a quorum ceases to be present, the meeting, if convened by or on the requisition of Shareholders, shall be dissolved. In any other case it shall stand adjourned to such time and place as the chairman of the meeting may decide, subject always to the provisions of Regulations 32.3 and 33 of these Articles. The full text of the two sets of draft amended and restated Articles is available for inspection from the date of this document until the close of the General Meeting at the offices of Grant Thornton, 24-26 City Quay, Dublin 2, Ireland. Copies will also be available for inspection 15 minutes prior to and during the General Meeting. PART VII ADDITIONAL INFORMATION 1. The Company 1.1 The Company was incorporated with limited liability in the British Virgin Islands as a private company under the International Business Companies Act Cap. 291 with registered number 571416 on 10 December 2003. On 30 November 2006 the Company was re-registered under the British Virgin Islands Business Companies Act, 2004 with registered number 1069511. The Company's registered office is located at Craigmuir Chambers, P O Box 71, Road Town, Tortola, British Virgin Islands (Telephone: +1 (284) 494 2233). 1.2 In so far as is known to the Company at 27 March 2008 each of the following persons has, directly or indirectly, an interest in 3% or more of the issued Ordinary Shares in the capital of the Company: Name Voting Rights in the Company (%) Kairos Investment Management 22.51 Carmignac Gestion 9.99 UNIQA Financial Services 7.28 GLG Partners 6.81 Invesco Asset Management 6.52 Griffin Capital Management 5.66 CPH Consolidated Crest Holdings 3.57 Vontobel Asset Management 3.16 The City Code on Takeovers and Mergers (the 'Code') does not apply to the Company and Shareholders are not afforded any protection under the Code. 2. Recent developments Save as set out below, since the date of the interim financial statements of the Company dated 30 June 2007, there has been no significant change in the financial or trading position of the Company, except as set out in paragraph 3 of Part I and below: 2.1 Acquisition of 33.5 per cent. equity holding in Rila Samokov 2004 AD for development of Borovets mountain resort (Bulgaria) on 11 July 2007. On 11 July 2007, the Company announced the acquisition of a strategic 33.5 per cent. indirect equity holding in Rila Samokov 2004 AD ('Rila Samokov'), the company which is the land owner and principal developer of a large scale development project in the Borovets mountain resort area in Bulgaria. Rila Samokov owns 1,977,131 sq m of land for development in Borovets. The Company is investing â‚¬25.9 million in cash, comprising a payment for the equity purchase and a capital contribution into Rila Samokov. The Company owns 50 per cent. of Borovets Invest NV, a holding company, which in turn owns 67 per cent. of Rila Samokov. The Company's partner in Borovets Invest NV is an international institution. The other shareholders in Rila Samokov are the Municipality of Samokov (25 per cent. shareholding) and Bulgaria's leading construction company Glavbolgarstroy (8 per cent. shareholding). Rila Samokov's development project in Borovets is one of the largest property development projects in Bulgaria currently in progress. The project involves, over the next five years, the construction of a total 653,815 square metres of residential apartments, hotels and retail space as well as associated infrastructure, including the creation of an additional 36.5 km of ski runs to complement the existing skiing area. On 29 October 2007, the Company announced that the Super Borovets project had obtained a first class investor certificate from the Bulgarian Foreign Investment Agency ('BFIA'). The certificate is granted to select investment projects with investors totalling minimum BGN 70 million and provides a number of core services, among others, the facility to fast track permit and licence procedures, administrative support services from BFIA officials, and also the option for infrastructure support. The project is of regional and national importance as it aims to provide a new platform for development in the area, and also help establish Bulgaria as the top winter and summer holidaying destination in Central and Eastern Europe. The development will take place in two stages, between 2007 and 2012, and will comprise 623,500 square metres of residential units and hotels. In addition, nearly forty kilometres of new ski runs will be built. 2.2 Acquisition of 75 per cent. Stake in Domo Retail S.A. by TechnomarketDomo Group B.V. (previously called Lynx Property B.V.) on 1 October 2007 On 1 October 2007 the Company announced the completion of the acquisition by its 75 per cent. owned subsidiary, TechnomarketDomo Group B.V. (previously called Lynx Property B.V.) ('TechnomarketDomo') of 75 per cent. of the shares of Domo Retail S.A. ('Domo') for a total consideration of â‚¬62.5 million. The consideration has been funded by â‚¬30 million in cash from TechnomarketDomo and a â‚¬35 million loan facility from Raiffeisen Zentralbank Osterreich AG ('RZB'). The Company, from its own resources, has provided a shareholder loan facility of up to â‚¬.5 million to TechnomarketDomo to partially finance the consideration paid by TechnomarketDomo, and Lyra Investment Holding N.V., which owns 25 per cent. of TechnomarketDomo, has provided TechnomarketDomo with the balance of the TechnomarketDomo consideration. TechnomarketDomo has entered into a shareholders agreement with Domo's founding shareholders, which includes, inter alia, rights and obligations in certain circumstances for TechnomarketDomo to acquire the remaining 25 per cent. from Domo's founding shareholders, with consideration to be based on Domo's financial performance in 2007 and 2008. Domo is a consumer electronics and household appliances retailer in Romania. Domo currently operates 116 retail shops located in major cities throughout Romania, with an average size of over 420 sq m. 2.3 Completion and update on the acquisition of interests in companies operating under the Technomarket brand name in the Balkan region on 22 November 2007 In May 2007, the Company entered into agreements to acquire a 23 per cent. interest in Tehnik&Kom (Serbia) (now called K&K Electronics Serbia) and a 50 per cent. interest in K&K Electronics (Montenegro) (the 'Target Companies') with options to acquire up to 100 per cent. equity interests in the Target Companies in stages commencing in 2008 at a price to be determined by an agreed formula based upon sales and EBITDA. The total aggregate consideration of â‚¬5.7 million was funded by cash from the Company's own resources in the form of an equity subscription for â‚¬ 1.7 million in the holding company of the Target Companies, Harwood Holding B. V. ('Harwood') and a â‚¬4 million shareholder loan to Harwood. On 22 November 2007, the Company announced that it had completed the acquisition of the interests in the Target Companies and that it had further agreed with the selling shareholders of the Target Companies (the 'Sellers') that in consideration of the payment of â‚¬ 1 million to the Sellers, Harwood would acquire the entire issued share capital of four additional companies that operate under the Technomarket brand in Albania, the Republic of Macedonia, Bosnia and Herzegovina and Kosovo (the 'Additional Companies') for fair value (on a debt free, cash free basis). As part of the revised terms of the Transaction, the Company agreed to advance a further amount of up to â‚¬10 million to Harwood as a shareholder loan, â‚¬6 million of which were to be advanced in November 2007 and the remaining â‚¬4 million to be advanced after the completion of the Harwood's acquisition of interests in the Additional Companies (to occur no later than 31 March 2008). The shareholder loans were to be used to fund capex. As part of the revised terms of the Transaction, the Company was granted two call options to acquire up to an aggregate of 50 per cent. of the issued share capital of Harwood in 2008 and 2009 which, if exercised, will result in the Company having an indirect 50 per cent. economic interest in all subsidiaries of Harwood (except for the subsidiary registered in the Republic of Macedonia, in which the Company shall have a 75 per cent. economic interest). The price of the two options is to be determined by an agreed formula based upon sales and EBITDA of the Harwood subsidiaries less indebtedness. The Sellers agreed to advance up to â‚¬5 million to Harwood as a shareholder loan in 2008 subject to the Company exercising its first call option. 3. Material contracts Save as disclosed below, no contracts have been entered into (other than contacts entered into in the ordinary course of business) by any member of the Group either: (i) within the period of two years immediately preceding the date of this document which are or may be material to the Group; or (ii) which contain any provisions under which any member of the Group has any obligation or entitlement which is, or may be, material to the Group as at the date of this document, of which the Shareholders may reasonably require details in order to make a properly informed assessment of how to vote at the General Meeting: 3.1 Investment Management Agreement Pursuant to the Investment Management Agreement the Investment Manager, agreed inter alia, to provide the Company with certain investment management services. The Company is required to pay to the Investment Manager a management fee of 2.5 per cent. of committed capital per annum payable semi-annually in advance (together with an amount equal to VAT, if any, thereon). On Admission, the accrued entitlement of the Investment Manager to performance fees under the Investment Management Agreement up to 15 October 2006 was crystallised and the Investment Manager was allotted 641,510 Ordinary Shares representing 4.9 per cent. of the issued share capital of the Company before Admission. Since the date of Admission, the Investment Manager has been entitled to a performance fee (the 'Performance Fee') in certain circumstances, more particularly described below. The first period for calculating a Performance Fee began on the date of Admission and will end on 31 December 2008; each subsequent Performance Period is a period of twenty-four months ending on 31 December. The payment of any Performance Fee by the Company is subject to: (i) the achievement of a performance hurdle condition: the Closing NAV per Ordinary Share at the end of the relevant performance period must exceed an amount equal to the higher of (a) or (b) increased at a rate of 8 per cent. per annum on a compounding basis up to the end of the relevant Performance Period (the 'Performance Hurdle'), where (a) is the last Net Asset Value per Ordinary Share published prior to Admission; and (b) is the Admission placing price of Â£12.10 per Ordinary Share; and (ii) the achievement of a high water mark: the Closing NAV per Ordinary Share at the end of the relevant Performance Period must be higher than the highest Closing NAV per Ordinary Share at the end of a Performance Period in respect of which a Performance Fee, if any, was last earned (the 'high-water mark'). If the Performance Hurdle is met and the high water mark exceeded, the Performance Fee will be an amount equal to 20 per cent. of the excess of the Closing NAV per Ordinary Share at the end of the relevant Performance Period over the higher of: (i) the Performance Hurdle; (ii) the Closing NAV per Ordinary Share at the end of the immediately preceding Performance Period (after adjusting for any Performance Fee paid in respect of that Performance Period); and (ii) the high-water mark, multiplied by the time weighted average of the number of Ordinary Shares in issue in the Performance Period (or since Admission in the first Performance Period). In the event that there is a further issue of Ordinary Shares, a repurchase of Ordinary Shares or other capital reorganisation of the Company, the calculation of the Performance Fee may be appropriately adjusted as advised by an independent firm of accountants. The Performance Fee, if payable in respect of any Performance Period, shall be paid within 30 days following the publication of the audited accounts of the Company at the end of the relevant Performance Period, or within 60 days of the earlier of (i) the termination of the Investment Management Agreement and (ii) the date on which the Company is wound up. Upon a winding up of the Company, the Closing NAV per Ordinary Share shall be based on the Net Asset Value per Ordinary Share for the relevant period (before making any accrual for the Performance Fee). The Company shall pay the Performance Fee in Ordinary Shares (together with an amount equal to VAT, if any, thereon). The Company shall issue Ordinary Shares to the Investment Manager based on the following formula: Amount of Performance Fee for the relevant Performance Period Number of Ordinary Shares issued ------------------------------------------------------------------ = Closing NAV per Ordinary Share at the end of the relevant Performance Period The Ordinary Shares issued in relation to the payment of any Performance Fee shall be subject to a three-year lock-up from the date of issue. The Board will obtain an independent valuation of all of the Investments at the end of each Performance Period for the purposes of determining the Performance Fee due. The Investment Manager will be responsible for the payment of all management fees and performance fees to the Investment Adviser. The appointment of the Investment Manager shall, unless terminated in accordance with the provisions of the Investment Management Agreement, continue for an initial period of five years from the date of Admission and thereafter shall automatically renew for successive periods of 12 months unless terminated by either party by giving to the other not less than two years' written notice of such termination. The earliest date on which notice of termination may be given is two years before the end of the initial period. The Company may terminate the Investment Management Agreement and remove the Investment Manager for, inter alia, material breach of its obligations under the Investment Management Agreement, gross negligence, wilful misconduct, fraud or insolvency of the Investment Manager. Under the Investment Management Agreement, the Company has undertaken to indemnify the Investment Manager against all losses, liabilities, claims, costs, charges and expenses which may be brought against or incurred by the Investment Manager in connection with or arising out of Investment Manager's lawful performance of its obligations under the Investment Management Agreement or the failure by the Company or any of the Directors to comply with the AIM Rules, the rules of the ISE or applicable law. However, the Company is not obliged to indemnify the Investment Manager to the extent that any such losses, liabilities, claims, costs, charges or expenses arise because of the fraud, negligence, bad faith or wilful default of the Investment Manager or are of such nature that liability may not be excluded pursuant to applicable law. In addition to the management and performance fees payable to the Investment Manager as set out above, the Company is responsible for, inter alia, all costs and expenses in relation to accounting, administration, custodian, auditing, legal and management consulting expenses, and related taxes and governmental charges, bank charges and insurance premiums, and the expenses associated with the preparation of the Company's financial statements and tax returns and in connection with the acquisition, management and disposal of the investments, all out of pocket expenses of the Investment Manager reasonably incurred in carrying out its obligations hereunder. The Investment Manager is responsible for the payment of all fees to the Investment Adviser. 3.2 Investment Advisory Agreement Pursuant to the Investment Advisory Agreement the Investment Adviser agreed, inter alia, to provide to the Investment Manager and the Company investment advice in connection with the Investments and to make recommendations on potential investment opportunities, on the implementation of the investment policy and strategy and on the ongoing management of the Investments, including strategy for exiting the Investments. The Investment Adviser is entitled to receive an annual fee of â‚¬2 million in consideration for its services (the 'Investment Advisory Fee'), payable semi-annually in advance by the Investment Manager. The appointment of the Investment Adviser shall, unless terminated under the provisions of the amended and restated Investment Advisory Agreement, continue for an initial period of five years from the date of Admission and thereafter shall automatically renew for successive periods of 12 months unless terminated by any of the parties by giving to the others not less than two years' written notice of such termination. The earliest date on which notice of termination may be given is two years before the end of the initial period. The Company or the Investment Manager may terminate the amended and restated Investment Advisory Agreement and remove the Investment Adviser for, inter alia, material breach of its obligations under the Investment Management Agreement, gross negligence, wilful misconduct, fraud or insolvency of the Investment Adviser. Under the amended and restated Investment Advisory Agreement, the Company has undertaken to indemnify the Investment Adviser and its officers, directors, employees, agents, other affiliates against all losses, liabilities, claims, damages and expenses (including legal fees) which may be brought against or incurred by the Investment Adviser in carrying out their investment advisory activities on behalf of the Company. However, the Company is not obliged to indemnify the Investment Adviser to the extent that any such losses, liabilities, claims, damages and expenses arise as a result of an act or omission involving any fraud, gross negligence or wilful violation of law by the Investment Adviser. In addition to the investment advisory fee payable to the Investment Manager as set out above, the Company is responsible for, inter alia, all costs and expenses in relation to accounting, administration, custodian, auditing, legal and management consulting expenses, and related taxes and governmental charges, bank charges and insurance premiums, and the expenses associated with the preparation of the Company's financial statements and tax returns and in connection with the acquisition, management and disposal of the investments, all out of pocket expenses of the Investment Adviser reasonably incurred in carrying its obligations hereunder. The Investment Manager is responsible for the payment of all fees to the Investment Adviser, unless it has not received the corresponding Management Fee from the Company. PART VIII EQUEST INVESTMENTS BALKANS LIMITED (the 'Company') NOTICE OF A MEETING OF MEMBERS OF THE COMPANY (sent in accordance with the articles of association of the Company and the British Virgin Islands Business Companies Act, 2004) NOTICE IS HEREBY GIVEN THAT A GENERAL MEETING OF MEMBERS OF THE COMPANY will be held at Harney Westwood & Riegels, Craigmuir Chambers, PO Box 71, Road Town, Tortola, VG1110, British Virgin Islands at 10.00 a.m. BVI time/ 3.00 p.m. UK time on 25 April 2008 to consider, and if thought advisable, to pass the following resolutions: Resolution 1 THAT: (i) (a) the termination of the Investment Management Agreement and the Investment Advisory Agreement on the terms set out in paragraph 5 of Part I and in Part II of this document be and he hereby approved, (b) the allotment and issuance of the Consideration Shares by the Board be and is hereby authorised, (c) the allotment and issuance of new Ordinary Shares on exercise of the Warrants be and is hereby authorised and (d) notwithstanding anything in the Articles, for the purposes of determining pre-emption rights on issues of new Ordinary Shares, ECL shall be deemed to hold its then shareholding in the Company plus the Consideration Shares and the Ordinary Shares to be issued on exercise of the Warrants; (ii) the Company entering into the Services Agreement on the terms set out in paragraph 6 of Part I and in Part III of this document be and is hereby approved; (iii) the Company entering into the Technical Support Agreement on the terms set out in paragraph 7 of Part I and in Part IV of this document be and is hereby approved; and (iv) (a) the Company's implementation of the LTIP on the terms set out in paragraph 8 of Part I and in Part V of this document be and is hereby approved and (ii) any allotments and issuances of Ordinary Shares by the Board under the LTIP whether at or below NAV per Ordinary Share at the date of allotment and issue be and are hereby authorised . Resolution 2 THAT subject to and conditional upon the passing and implementation of Resolutions 1 and 3, the removal of restrictions on the Company's investing strategy as provided in paragraph 12 of Part I of this document be and is hereby approved. Resolution 3 THAT subject to and conditional upon the passing and implementation of Resolutions 1 and 2, (i) the proposed amendments to the Articles as set out in paragraph 10 of Part I and in Part VI of this document be and are hereby approved and the Registered Agent of the Company be and is hereby authorised to file the amended and restated Articles with the Registrar; and (ii) in addition to the authorities sought in Resolution 1, the Board be and is hereby empowered in accordance with the amended and restated Articles to allot Ordinary Shares on such terms as they think fit, as if the pre-emption rights set out in the amended and restated Articles did not apply to such allotment provided that: (a) the power conferred by this resolution shall be limited to up to a maximum number of 1,826,589 Ordinary Shares; and (b) this power, unless renewed, shall expire at the end of the next annual general meeting of the Company to be held after the date of the passing of this resolution; but shall extend to the making, before such expiry, of an offer or agreement which would or might require Ordinary Shares to be allotted after such expiry and the Board may allot Ordinary Shares in pursuance of such offer or agreement as if the authority conferred hereby had not expired. Resolution 4 THAT the proposed amendments to the Articles as set out in paragraph 11 of Part I and in Part VI of this document be and are hereby approved and the Registered Agent of the Company be and is hereby authorised to file the amended and restated Articles with the Registrar. BY ORDER OF THE BOARD Dated: 28 March 2008 Registered Office: Harneys Corporate Services Limited Craigmuir Chambers P.O. Box 71 Road Town Tortola British Virgin Islands Notes: Registered holders of Ordinary Shares only (other than CDI Holders) (a) A member of the Company who is the registered holder of Ordinary Shares and is entitled to attend and vote at the above meeting may appoint a proxy to attend and vote instead of him by completing the enclosed Form of Proxy. A proxy need not be a member of the Company. (b) Any Form of Proxy in order to be valid must reach the Company's registrars, Olympia Capital (Ireland) Limited, 6th Floor, Block 3, Harcourt Centre, Dublin 2, Ireland not later than 10.00 a.m. BVI time / 3.00 p.m. UK time on 23 April 2008 or 48 hours before commencement of any adjournment of the meeting. (c) A vote given by a proxy or authorised representative of a company is valid notwithstanding termination of his authority unless notice of the termination is received at the Company's registrars address as set out in note (d) above or at such other place at which the instrument of proxy was duly received by 10.00 a.m. BVI time / 3.00 p.m. UK time on 24 April 2008 or at least 24 hours before the time fixed for holding any adjourned meeting at which the vote is given. (d) The appointment of the proxy will not prevent a member from subsequently attending and voting at the meeting in person. (e) The attention of members of the Company who are the registered legal owners of any Ordinary Shares is directed to the additional notes contained in the Form of Proxy relating to the completion and timely submission of the Form of Proxy. CDI Holders (f) A CDI Holder may instruct Citivic Nominees Limited, the registered legal owner of the Ordinary Shares represented by the CDIs, to vote in accordance with such CDI Holder's instructions by completing and submitting the enclosed Form of Direction. (g) Any Form of Direction in order to be valid must reach the Company's registrar, Olympia Capital (Ireland) Limited, 6th Floor, Block 3, Harcourt Centre, Dublin 2, Ireland not later than 10.00 a.m. UK time on 21 April 2008. (h) The attention of CDI Holders is directed to the additional notes contained in the Form of Direction relating to the completion and timely submission of the Form of Direction. EQUEST INVESTMENTS BALKANS LIMITED FORM OF PROXY For use in connection with a General Meeting of Members convened for 10.00 a.m. BVI time / 3.00 p.m. UK time on 25 April 2008 I/We ................................................................................................................ (block capitals please) of ................................................................................................................ being (a) member(s) of Equest Investment Balkans Limited (the 'Company') HEREBY APPOINT the Chairman of the Meeting or (see note (h)) ________________________________ of ________________________________ or failing him ________________________________ of ________________________________ to be my / our proxy to vote for me / us at the meeting of members of the Company to be held on 25 April 2008 and at any adjournment thereof. My / our proxy is to vote as indicated below in respect of each Resolution as defined in and set out in the notice of the meeting of members dated 28 March 2008 (the 'Notice') in respect of ....................................shares in the Company: Please indicate with an X in the spaces below how you wish your vote to be cast. For Against Resolution 1 To: (i) approve the Proposals, (ii) grant authority to the Board to allot and issue the Consideration Shares, (iii) grant authority to the Board to allot and issue any Ordinary Shares upon exercise of the Warrants, (iv) grant authority to the Board to allot and issue any Ordinary Shares under the LTIP and (v) agree that, notwithstanding anything in the Articles, for the purposes of determining pre-emption rights on issues of new Ordinary Shares, ECL shall be deemed to hold its then shareholding in the Company plus the Consideration Shares and the Ordinary Shares to be issued upon exercise of the Warrants Resolution 2 To approve the removal of restrictions on the Company's investing strategy Resolution 3 Subject to and conditional on passing Resolutions 1 and 2, to approve the amendments to the Articles and disapplication of pre-emption rights Resolution 4 To approve the proposed unconditional changes to the Articles ________________________________ Signed Dated ............................................. 2008 Notes: Please see over Notes: (a) A member of the Company entitled to attend and vote at the above meeting may appoint a proxy to attend and vote instead of him. A proxy need not be a member of the Company. (b) An instrument appointing a proxy shall be in substantially the form attached or such other form as the Chairman of the meeting accepts. (c) The appointment of the proxy will not prevent a member from subsequently attending and voting at the meeting in person. (d) Any Form of Proxy in order to be valid must reach the Company's registrars, Olympia Capital (Ireland) Limited, 6th Floor, Block 3, Harcourt Centre, Dublin 2, Ireland not later than 10.00 a.m. BVI time / 3.00 p.m. UK time on 23 April 2008 or 48 hours before commencement of any adjournment of the meeting. (e) In the case of a corporation this form of proxy must be executed under its common seal or under the hand of an officer or attorney duly authorised in writing. (f) If this form of proxy is returned duly signed but without any indication as to how the person appointed proxy shall vote, he will exercise his discretion as to how he votes and whether or not he abstains from voting. (g) Any alteration made in this form of proxy should be initialled. (h) If any other proxy is preferred delete the words 'the Chairman of the Meeting or,' insert the name of the proxy and initial the alteration. A proxy need not be a member of the Company. (i) In the case of joint holders, the vote of the senior who tenders a vote, whether in person or by proxy, will be acceptable to the exclusion of the votes of the other joint holders and for this purpose seniority shall be determined by the order in which the names stand in the Register of Shareholders of the Company. (j) A vote given by a proxy or authorised representative of a company is valid notwithstanding termination of his authority unless notice of the termination is received at the Company's registrars address as set out in note (d) above or at such other place at which the instrument of proxy was duly received by 10.00 a.m. BVI time / 3.00 p.m. UK time on 24 April 2008 or at least 24 hours before the time fixed for holding any adjourned meeting at which the vote is given. EQUEST INVESTMENTS BALKANS LIMITED Form of Direction For use in connection with a General Meeting of Members convened for 10.00 a.m. BVI time / 3.00 p.m. UK time on 25 April 2008 Form of direction for completion by holders of CREST Depository Interests ('CDIs') representing shares on a 1 for 1 basis in the Company in respect of the General Meeting to be held at 10 a.m. BVI time/ 3.00 p.m. UK time on 25 April 2008 at Harney Westwood & Riegels, Craigmuir, PO Box 71, Road Town, Tortola, VG1110, British Virgin Islands. This voting service has been established by Equest Investment Balkans Limited (the 'Company') and does not form part of the CREST services. I/We ................................................................................................................ (block capitals please) of ................................................................................................................ being a holder of CDIs representing shares in the Company HEREBY DIRECT CITIVIC NOMINEES LIMITED to vote for me in respect of .................................. CDIs held in my/our name at the meeting of members of the Company to be held on 25 April 2008 and at any adjournment thereof. I direct Citivic Nominees Limited to vote as indicated below in respect of each Resolution as defined in and set out in the notice of the meeting of members dated 28 March 2008 (the 'Notice') as follows: For Against Resolution 1 To: (i) approve the Proposals, (ii) grant authority to the Board to allot and issue the Consideration Shares, (iii) grant authority to the Board to allot and issue any Ordinary Shares upon exercise of the Warrants, (iv) grant authority to the Board to allot and issue any Ordinary Shares under the LTIP and (v) agree that, notwithstanding anything in the Articles, for the purposes of determining pre-emption rights on issues of new Ordinary Shares, ECL shall be deemed to hold its then shareholding in the Company plus the Consideration Shares and the Ordinary Shares to be issued upon exercise of the Warrants Resolution 2 To approve the removal of restrictions on the Company's investing strategy Resolution 3 Subject to and conditional on passing Resolutions 1 and 2, to approve the amendments to the Articles and disapplication of pre-emption rights Resolution 4 To approve the proposed unconditional changes to the Articles ________________________________ Signed Dated ............................................. 2008 Notes: Please see over Notes: (a) To be effective, this form of direction and the power of attorney or other authority (if any) under which it is signed, or a notarially or otherwise certified copy of such power or authority, must be deposited at the Company's registrars, Olympia Capital (Ireland) Limited, 6th Floor, Block 3, Harcourt Centre, Dublin 2, Ireland by no later than 10.00 a.m. UK time on 21 April 2008. (b) Any alterations made to this form of direction should be initialled. (c) In the case of a corporation this form of direction should be given under its common seal or under the hand of an officer or attorney duly authorised in writing. (d) Please indicate how you wish your votes to be cast by placing 'X' in the box provided. On receipt of this form duly signed, you will be deemed to have authorised Olympia Capital (Ireland) Limited to direct Citivic Nominees Limited to vote as instructed. (e) In the case of joint holders the vote of the senior who tenders a vote, whether in person or by proxy, will be accepted to the exclusion of the votes of the other joint holders. For this purpose seniority is determined by the order in which the names stand in the Register of CREST Depository Interests in respect of the joint holding. This announcement has been issued through the Companies Announcement Service of The Irish Stock Exchange. This information is provided by RNS The company news service from the London Stock Exchange

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