The management of AS Silvano Fashion Group (SFG) approved an action plan for the restructuring of the group's loss-making retail operations in Russia. In the coming months, SFG will transfer 17 of 24 “Milavitsa” and ‘Oblicie' retail outlets in Russia to franchise partners, who will continue to operate them as “Milavitsa” mono-brand stores. 4 Russian retail outlets will be closed and decision on another 3 outlets is pending. Other cost-cutting measures under the action plan include the optimisation of office and warehouse lease expenses and a reduction in the number of employees. The decision to switch to the franchise business model in Russia follows similar reorganization measures in Poland and Lithuania (see earlier stock exchange releases dated 17.11.2009, “Sale of UAB „Linret LT“” and 25.02.2009, “Sale of Splendo Polska Sp. z o.o.”). Retail in the Russian market remains a key strategic objective for the group, and SFG will continue sales to Russia through wholesale and franchise channels, having already reached agreements with a number of franchise partners. At the completion of the restructuring, the group's products will be sold in approximately 320 “Milavitsa” and “Lauma Lingerie” franchise outlets in 14 countries including primarily CIS countries as well as some EU countries such as Latvia, Lithuania, Portugal, Cyprus, and Romania. In addition to franchise stores, SFG will remain operating 38 own retail outlets in Belarus under the “Milavitsa” brand name and 5 own retail outlets in the Baltics under the “Lauma Lingerie” brand name. In accordance with the management's earlier assessment, the shift of focus to franchise operations will afford the group a capital-effective route to increase market penetration and ensure stable growth of revenues. As a corollary, significant group-wide savings are expected in terms of direct costs and management resources. The Russian retail operations generated an operating loss in the amount of EUR 4.2 million (EEK 65.7 million) in the 9 months' period ending 30 September 2009, including a one-off restructuring loss in the amount of EUR 2.5 million (EEK 39.1 million). ______________________________ Dmitry Ditchkovsky Chairman of the Management Board AS Silvano Fashion Group Tel +375 17 288 07 70