February 19, 2010


To Bondholders of Russian Real Estate Investment Company AB (publ)

Regarding Russian Real Estate Investment Company AB (publ) (“Ruric”) – Company Reorganization – Composition Offer

QVT Financial LP (“QVT”), being a representative of a group of beneficial owners of debentures and bonds issued under Ruric’s 2006/2010 debentures, maximum amount SEK 700,000,000 at 8.5%, loan no. 2 (“Bond Loan No. 2”) and the SEK 400,000,000 16% Bonds 2008/2010, Series No. 3 (“Bond Loan No. 3”), have by a press release issued by Ruric on its website on 11 February 2010 been informed that the administrator, appointed in Ruric’s company reorganization in accordance with the Swedish Company Reorganization Act, has sent out a letter to the creditors with a composition offer and asked the creditors (including the bondholders of Bond Loan No. 2 and Bond Loan No. 3) to answer the composition offer in great haste. It is stated that “it is crucial that we receive an oral or written approval of either composition offer” not later than 26 February 2010 and that alternative 1 is “due to practical and issuing technical reasons” only open for acceptance until 5 March 2010.

QVT has read and considered the composition offer and the other documents provided by Ruric in connection with the press release, and QVT has a number of comments which we wish to bring to your immediate attention.

In summary, we believe that the proposal made by Ruric contains unusually poor terms for the bondholders and that the result, if accepted by the bondholders, will be what we believe to be very cheap long-term financing for Ruric at the expense of the bondholders. It should be especially noted in this respect that Ruric in alternative 1 will receive a period of almost 5 months of interest free financing, and that Ruric may (and most likely will) elect to only pay 3% cash interest on the bond loan until November 2014 (an especially low interest rate given today’s market environment). As regards the chances that bondholders will be repaid in the end, we note that the security offered in alternative 1 is for various reasons (in our opinion) practically worthless, and we believe that the bondholders will have very limited control over the Russian real estate assets. We want to make you aware that there is in fact a third option available – to reject the offer and thereby force Ruric to come back with better terms for the new bonds. This will however not happen if a sufficient number of bondholders follow Ruric’s instructions and make a choice between what we think are two bad options. QVT will therefore not sign any document sent out by Ruric at this stage, but will instead continue its efforts to convince the administrator and Ruric to present a more reasonable offer to the...