Settlement of Warsaw construction dispute

Carpathian PLC ("Carpathian" or the "Company")

Settlement of construction dispute in Warsaw concluded

The Board of Carpathian PLC, the commercial property investment company formed to focus on retail properties within Central and Eastern Europe, announces the conclusion of the settlement of a construction dispute in Warsaw. The dispute concerned the construction of the Promenada shopping centre in Warsaw which the Company sold in May 2011. The litigation existed at the time of acquisition in 2006, and cash was held back by the Company from its purchase price in an escrow account to cover this and several other specific potential liabilities. On the sale of the asset last year, the litigation was retained by the Group. In relation to selling the asset, the Court required each of the local companies to deposit cash at court as security for the maximum potential liability (ignoring interest) in the litigation (circa €4.8m in aggregate, although the deposits were required to be made in local currency).

Agreement has been reached between all relevant parties on a full and final settlement of all disputes. The original escrow monies will be divided between the plaintiff in the proceedings and the original seller.

The Company is to make a contribution of €0.4m towards the full and final settlement of this litigation, as a consequence of which the litigation will be discontinued and become non-appealable. Whilst there is no prescribed timetable for this, it is expected that the discontinuation should be achieved within 2 months from today. As a result, in due course, the Company's local subsidiaries will recover the cash deposited at court as security (circa €4.8m). In addition, further cash reserves held in one of the local SPVs of €0.85m can now be released as unrestricted cash.

In accounting terms, the relevant provisions against this liability will now be released and cash increased by €4.4m (€3.1m after allowing for Distributed Capital Payout due to the Property Investment Adviser), with NAV decreasing by €0.3m (€1.6m after DCP). It is expected that the cash will be released by the Court in Poland within the 6 -8 weeks from the moment the discontinuation of all litigations in question becomes final and non-appealable, although it should be noted that there is no specific court timetable for this process and it may take longer. Once released, there is a mechanism in place to repatriate the cash to the Company for distribution within a few weeks thereafter.

Once the monies have been released and received by the Company, and subject to agreeing the other cash demands of the Group, your Board expects to make a further announcement regarding the declaration and payment of a further and final cash dividend. At the same time, it is expected that a further update on the planned liquidation and de-listing from AIM can be made.

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