LSR Group, one of the leading real estate developers and building materials producers in Russia (LSE: LSRG, MICEX, RTS: LSRG), announced today that DSK Block prefabricated construction company, a subsidiary of LSR Group, implementing the programme aimed at modernisation and expansion of the production capacity of reinforced concrete for prefabricated panel housing construction, has finished the installation of the new production equipment within the framework of the first phase of the modernization. The company is conducting trial runs of the equipment that will be put into operation at full capacity in September 2008. The investment in first phase of the modernization is € 19 million (exclusive of VAT).

The capacity of the new equipment is approx. 180 th cub.m of reinforced concrete per year. Currently the plant engineers are conducting trial runs of the equipment, setting up its operating modes and producing first batches of products.

The whole modernisation of DSK Blok is scheduled to be completed in 2011. In fact, that would mean opening a new modern panel plant in St. Petersburg. The modernization of production workshops will enable the company to increase its annual housing construction volume up to 500 th sq.m. The total annual panel construction capacity of the two prefabricated panel plants of LSR Group will reach 750 th sq.m.

The decision to reequip the plant was taken as a result of Blok’s migration to a new, more efficient technology of panel housing production and construction using single-layer external panels to construct seamless facades within shorter time frames. The implementation of a new technology entailed the replacement of the old equipment that previously produced three-layer external wall panels for housing construction. High demand for the company’s products required new technological decisions and a new engineering environment to ensure the necessary volume of production and meet the market demand.

Commenting on the developments, Alexander Gobeev, General Manager of ZAO DSK Blok said: 

“St. Petersburg is developing at an ever high rate with housing construction booming. The city Administration is planning to commission 2,750 th sq.m this year alone with this volume to subsequently grow to over 3 million square meters per year*. The increase in the volume would be impossible without increased production of building materials and components for construction. The commissioning of a new manufacturing facility will be one of the steps towards achieving this goal, and the technologies being implemented by DSK Blok will ensure an entirely new level of construction.”

*In accordance with the concept of public housing policy up to 2011 approved by the city authorities, a total of 3,364 th sq.m of housing is to be built using the city budget funds.

The modernization project primarily focuses on replacing the worn out and outdated equipment. The company launched a tender that resulted in contracts signed with the leading European equipment manufacturers from Germany, Italy and Russia. The manufacturing process will be controlled using an automatic control system. The use of a new technology will result in a lower geometry permissible error, higher concrete quality and enhanced production setup that will ultimately ensure better consumer qualities of the product.

Notes to Editors:

ZAO DSK Blok Prefabricated Construction Company is part of LSR Group. It is a leader in the prefabricated panel construction market of St. Petersburg in the production and construction of reinforced concrete residential buildings. The company was founded in 1992. DSK Blok is the only company in the prefab construction market of St. Petersburg using the “seamless” technology for façade building. In 2006, the company installed 216 th sq.m of housing, in 2007 it completed 148 th sq.m and in the 1st half of 2008 — 119 th sq.m.

In 2007, DSK Blok received the award of ‘Leader of the Russian Economy 2006.’

OJSC LSR Group is a diversified construction company founded in 1993 and operating in a number of complementary market segments. Its core business areas are building materials, construction and real estate development. The Group includes enterprises for extraction and processing of aggregates, production and transportation of building materials, and housing construction — from mass market large-panel housing to elite property built after designs made by leading domestic and foreign architects.

LSR Group has operations and offices in a number of cities in the Leningrad Oblast, in St. Petersburg, Moscow, Yekaterinburg, Lithuania, Latvia, Estonia, Ukraine and Germany. LSR Group employs over 15,000 people.

In 2005 and 2006, the revenues of LSR Group (according to IFRS) were US$ 463 million and US$ 777 million respectively. In 2007, the revenues amounted to US$ 1,403 million.

LSR Group has a B1 rating from Moody’s Investors Service (outlook — Stable) assigned in July 2007 and confirmed on 30 May 2008 and a B+ rating by Fitch Ratings (outlook — Stable) assigned on 30 May 2008. The Group’s shares are listed on MICEX and RTS and on the London Stock Exchange in the form of GDRs since its IPO in November 2007.

In 2007, LSR Group was awarded ‘The Company of the Year’ National Award in the ‘Construction’ category.