Related Party Transaction and Update

Formation Group plc ("Formation" or the "Company")

Related Party Transaction

The Company announces that its wholly owned subsidiary, Formation Design and Build Limited, received a loan of £350,000 (the "Loan") from the Kennedy Family Discretionary Settlement (the "Lender") on 10 January 2012 for the purposes of additional working capital. The loan is repayable within 12 months and interest is payable on the loan at a rate of 6 per cent. per annum. As security for the loan, Formation has granted the Lender a registered charge over the net profit share due to Formation arising from the residential and commercial development at 52-58 Commercial Road, London E1 1LP ("Whitechapel").

Under the AIM Rules, the Loan constitutes a related party transaction given the Lender's relationship with David Anthony Kennedy who, together with certain of his related parties, holds a majority shareholding in Formation. In accordance with the AIM Rules, the directors independent to the transaction are required to consider, having consulted with the Company's Nominated Adviser, that the terms of the transaction are fair and reasonable.

The independent directors consider, having consulted with Zeus Capital, that the terms of the transaction are fair and reasonable insofar as shareholders of Formation are concerned.

Update on Aldgate East Property Development

As announced on 30 August 2011, Julius Properties Limited ("JPL"), a Guernsey registered company that owns the property development above Aldgate East Station, London ("Aldgate"), has entered into a conditional agreement for the disposal of Aldgate to a UK national housebuilder.

The two conditions of this agreement must be satisfied by no later than 22 February 2012. As announced on 1 December 2011, one of the two conditions relating to this agreement has been satisfied. The Directors are pleased to announce that the remaining condition is expected to be satisfied shortly.

As announced on 30 August 2011, if JPL completes the disposal of Aldgate, the Directors anticipate that the contingent liability relating to Formation's guarantee to assist JPL in repaying Aldgate East Property Company Limited a maximum of £11.6 million in respect of capital and interest on loan notes will be extinguished.

In addition, if JPL completes the disposal of Aldgate, the Directors also anticipate that JPL will, after receipt of the deferred element of the consideration, be able to substantially repay the loans provided by JV Finance Ventures Limited, the special purpose vehicle set up by Formation and JV Finance Limited in which Formation has a 36.88% equity interest.

Contact Details

Formation Group PLC

David Kennedy

Chief Executive Officer

Tel: 020 7920 7590

NOMAD to Formation Group PLC

Zeus Capital Limited

Ross Andrews Tel: 0161 831 1512

Tom Rowley