THE INFORMATION CONTAINED IN THIS ANNOUNCEMENT IS RESTRICTED AND NOT FOR PUBLICATION, DISTRIBUTION OR RELEASE, DIRECTLY OR INDIRECTLY, IN OR into AUSTRALIA, CANADA, JAPAN, The Russian federation OR THE UNITED STATES

This press release is not a prospectus but an advertisement. Investors should not subscribe for any transferable securities referred to in this announcement except on the basis of information in the prospectus to be published by LSR Group in connection with the admission of GDRs representing LSR Group’s shares to the Official List of the UK Financial Services Authority. Copies of any prospectus may be obtained at the offices of LSR Group.

For Immediate Release 10 October 2007

LSR GROUP ANNOUNCES ITS INTENTION TO CONDUCT A GLOBAL OFFERING

AND LISTING ON THE LONDON STOCK EXCHANGE

LSR Group ("LSR" or the "Group"), one of the leading real estate developers and building materials producers in the St Petersburg and Leningrad region, today announces its intention to list global depositary receipts ("GDRs") representing its ordinary shares on the London Stock Exchange in connection with an offering (the "Offering") of existing ordinary shares ("shares") and GDRs by certain of LSR’s shareholders.

The Global Offering

The Offering is expected to comprise an offering of shares and GDRs to institutional investors outside of the Russian Federation and an offering of shares in the Russian Federation. LSR’s existing ordinary shares have been admitted to list "I" on the Moscow Interbank Currency Exchange and the Russian Trading System Stock Exchange.The Offering is subject to receipt of all necessary regulatory approvals, including the relevant registrations and approvals by the Russian Federal Financial Market Service and the UK Financial Services Authority. The principal purpose of the Offering is to enable the Group to undertake a capital increase following the Offering through a closed subscription for newly-issued ordinary shares, for which certain selling shareholders intend to subscribe using proceeds from the Offering.

The Group intends to use the proceeds of this capital increase to fund its growth strategy, through the expansion and development of its real estate portfolio and the modernisation of its plant and equipment, including the construction of new brick, cement and aerated concrete production facilities, as well as for general corporate purposes.

Deutsche Bank is Global Coordinator for the Global Offering. ABN AMRO Rothschild, Credit Suisse and Deutsche Bank are Joint Bookrunners and URALSIB Financial Corporation is Co-Lead Manager.

Commenting on today’s announcement, Igor Levit, CEO of LSR, said:

"We represent a unique business model in Russia, with our integrated combination of market leading businesses in real estate and building materials. Our leadership in St Petersburg and the wider Leningrad region of Russia ideally positions us to benefit from rapid growth in that area, as well as giving us a platform for expansion throughout other regions in Russia and into the commercial real estate segment."

- Ends -

Enquiries:

LSR Group Tel: +7 (812) 3141044

Julia Sokolova

Citigate Dewe Rogerson Tel: +44 20 7638 9571

David Westover

Marina Zakharova

Scott Fulton

NOTES TO EDITORS

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

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

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

LSR manages and operates its businesses through two divisions:

• Real Estate Development, Commercial Real Estate and Construction, which represented approximately 40 per cent of consolidated revenues in 2006; and
• Building Materials, Aggregates and Construction Services, which represented approximately 60 per cent of consolidated revenues in 2006.

The Group’s portfolio of real estate development projects includes 34 completed projects and over 35 properties at various stages of development and a number of potential projects currently under consideration. As of June 30, 2007, the Group had a development portfolio with a potential net sellable area of approximately 7.8 million meters² located primarily in St Petersburg and the Leningrad region, much of which is in prime locations.

The Group’s Building Materials, Aggregates and Construction Services Division produces and sells a variety of building materials, including precast reinforced concrete products, ready-mix concrete, bricks and aerated concrete blocks. The division also extracts and processes aggregates such as sand and crushed granite. The construction services segment of this division provides tower crane services and operates a fleet of vehicles for the transport of construction materials.

The Group has building materials production facilities and quarries from which it extracts aggregates and clay in St. Petersburg and the Leningrad region. Although historically LSR’s centre of operations has been in St. Petersburg and the surrounding Leningrad region, it has recently started to expand into other regions of Russia, including Moscow and the Moscow region. It has building materials production facilities in Moscow producing reinforced concrete products and ready-mix concrete, and production facilities in each of Estonia and Latvia that produce aerated concrete.

For the years ended December 31, 2004, 2005 and 2006 and for the six months ended June 30, 2006 and 2007, the Group had revenues of RUB 7,530.9 million, RUB 13,085.5 million, RUB 21,110.8 million, RUB 9,336.4 miilion and RUB 16,062.0,million respectively, and as of June 30, 2007 it had total assets of RUB 50,955.4 million. Moody’s Investors Service assigned a B1 rating to LSR Group in July 2007.

Legal disclaimer:

Some of the information in these materials may contain projections or other forward-looking statements regarding future events or the future financial performance of the Company ("LSR" or the "Group"). You can identify forward looking statements by terms such as "expect", "believe", "anticipate", "estimate", "intend", "wiII", "could, " "may" or "might" the negative of such terms or other similar expressions. The Company wishes to caution you that these statements are only predictions and that actual events or results may differ materially. The Company does not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in projections or forward-looking statements of the Company, including, among others, general economic conditions, the competitive environment, risks associated with operating in The Russian Federation, rapid technological and market change in the industries the Company operates in, as well as many other risks specifically related to the Company and its operations.

Neither these materials nor any copy of it may be taken or transmitted into the United States, Australia, Canada or Japan. These materials do not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase nor shall it (or any part of it) or the fact of its distribution, form the basis of, or be relied on in connection with, any contract therefore. The offer and the distribution of these materials and other information in connection with the listing and offer in certain jurisdictions may be restricted by law and persons into whose possession any document or other information referred to herein comes should inform themselves about and observe any such restriction. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

These materials are not an offer for sale of any securities in the United States. Securities may not be offered or sold in the United States absent registration or an exemption from registration under the U.S. Securities Act of 1933. The Company has not registered and does not intend to register any portion of any offering in the United States or to conduct a public offering of any securities in the United States.

This communication is directed only at (i) persons who are outside the United Kingdom or (ii) persons who have professional experience in matters relating to investments falling within ArticIe 19(1) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order") and (iii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2) of the Order (all such persons together being referred to as "relevant persons"). Any investment activity to which this communication relates will only be available to and will only be engaged with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents..

Stabilisation/FSA

This communication is distributed in any member state of the European Economic Area which applies Directive 2000/71/EC (this Directive together with any implementing measures in any member state, the "Prospectus Directive") only to those persons who are investment professionals for the purposes of the Prospectus Directive in such member state, and such other persons as this document may be addressed on legal grounds, and no person that is not a relevant person may act or rely on this document or any of its contents.

Information contained in this communication does not constitute an advertisement or an offer of any securities in The Russian Federation and must not be passed on to third parties or otherwise be made publicly available in The Russian Federation. Any global depositary receipts have not been and will not be registered in The Russian Federation and are not intended for "placement" or "public circulation" in The Russian Federation.