Russian Financial Market Developments EBRD Activities and Case Studies

1. EBRD Investing in RussiaPresentation to the Expert Magazine ConferenceLeonid Vindman 11 November, 2005

2. Russian Financial Market Developments • EBRD Activities and Case Studies

3. Developments in the RussianFinancial Market

4. Investor appetite- Political Risk- Judicial Risk (Conflicting Laws/Security/Interpretation - Qualitiy of Corporate Governance Financial Instrument Alternatives in Russia Russia‘s Position: Bond/Debt Market developed Structured / multi-product deals developing Limited Project Finance Transactions Financial Product Complexity Project Financing Greenfield Joint Venture Capital Markets(DCM, ECM & VC) Corporate Debt Secured/Unsecured Commodity Trade Financing ECA Financing Developement of Investor appetite and the Legal / Regulatory Framework

5. Banking Market Domestic and International Banks • Domestic Banks constrained by short-term funding: • Availability of funding, notably amongst large institutions and state banks (Sberbank and VTB) • Deposit structure generally limits tenors to 1-3 years • International banks mostly Top Name Lending: • Increased lending activities with focus on top “quality name” borrowers • Growth due to “jumbo-deal” lending and re-financing • Slow expansion in “mid-tier” lending • Expansion through organic growth and limited acquisitions Increased liquidity but still supply 6-10% of the corporate funding needs

6. Syndicated loan market development:Volumes and Pricing 2000-2005 Volume (USD mm) Average pricing (bps) Source: Dealogic Loanware

7. Top 15 foreign loan providers in 2004 USD mm Source: Dealogic Loanware and EBRD

8. Debt & Equity Capital Markets • Growing DCM market of ca. $9.8bn in 2004and $12bn in 9Mos05(average tenor 6.3 yrs and historically low margins at L+225 bps) • ECM $4bn over the last 12 month vs. $1.4bn during the last 10 years. • Market appetite for equity and bond limited to larger players, but “mid-tier” companies beginning to access capital markets • Extended maturities for large issuers • More active use in derivative instruments esp. hedging foreign currency exposures • Rouble bond market developing ($5bn in 9M05) but short–term and speculative Rapid growth as source of financing to major companies

9. USD SaleProceeds Facility Agent Offshore Accounts Off-taker Lenders DeptService Completion Guarantee DSRA OperatingCosts Excess Funds(after DS) Off-shore USD Proceeds for Conversion Loan Agreement & Security Package Production (Export) Off-take Agreement On -shore& Off-shoreSponsor (s) Funding On-shore Onshore Account Bank Excess Funds Equity Subordinated Debt NEW Co(Greenfield, JV) Goods Project Financing • Project Finance is not well defined in Russia although borrowers becoming more sophisticated • PF (i.e. “Off-balance sheet, limited / non sponsor recourse projects repaid from future cash-flows” projects) traditionally limited to IFI’s • Sponsors often under-estimate the complexity of greenfield / brownfield construction • Huge demand with main beneficiaries in natural resources, infrastructure, construction and other capital intensive industries and projects Sample Illustration:

10. Conclusions & Outlook • Global banking market liquidity is likely to remain high and oil prices set to remain high • Still an uneven market with over 60% for extraction related industries – although beginning to diversify (in 1H05 30% of lent to FI and 13% to telecoms) • Covenants have loosened and unsecured lending increasing (top borrowers) • Refinancing for “top tier” companies a new driving force in the market • Pricing continue to fall • Corporate lending has barely scratched the surface of the manufacturing economy, although growing investor demand for “second tier” companies • Normal instrument migration is occurring: structured trade finance has given way to corporate finance, capital markets, and structured transactions but . . . • Project financing expected to grow to meet expansion and modernizing needs of more sophisticated customers Liquidity available, but complex projects and medium size companies lack funding

11. EBRD Activities and Case Studies

12. Since 1991 the EBRD financed projects with a Cumulative Business Volume of €5.9 billion (23% of total) At the end of February 2004 the Portfolio Stock was at €3.75 billion (22%) and Operating Assets at €2.3 billion (21%) Private/ State: 76% / 24% Debt/ Equity/ Guarantee: 81% / 14% / 5% Growing Presence in Russia € billion Cumulative Business Volume

13. Major Presence in Russia Moscow St Petersburg Yekaterinburg Vladivostok

14. Salekhard Khanty-Manskiysk Ekaterinburg Tyumen Kurgan Active Investment in the Regions Chukota Murmansk Kaliningrad Karelia Koryask St.Petersburg Nenets AO Pskov Taimyr Archangelsk Novgorod Komi Vologda Tver Smolensk Yaroslavl Magadan Moscow Kostroma Kaluga Bryansk Ivanovo Vladimir Oryol Tula Kamchatka Kirov N.Novgorod Komi-Permyatski Ryazan Kursk Lipetsk Mariy El Belgorod Mordovia Chuvashia Tambov Sakha Evenkysky Udmurtya Perm Krasondar Voronezh Penza Tatarstan Ulyanovsk Maikop Cherkessk Rostov-on-Don Nal’chik Bahkortostan Samara Volgograd Saratov Vladikavkaz Sakhalin Elista Orenburg Astrakhan Stavropol Chelyabinsk Tomsk Omsk Krasnoyarsk Nazran Groznyi Amur Khabarovsk Makhachkala Irkutsk Novosibirsk Kemerovo Forest Products Pharmaceuticals Chita Portfolio Jewish Portfolio Ust-Ordynsky Altai-T Buryatia Khakssia Pipeline Aginsky Buryatia Primorsk Pipeline Tyva Main Players Altai-O Automotive Chemicals Non-Ferrous Retail Portfolio Portfolio Portfolio Portfolio Pipeline Pipeline Pipeline Pipeline Main Players Main players Main Players Main Players Ferrous Metals Consumer Products Heavy Machinery Aerospace Construction Portfolio Portfolio Portfolio Portfolio Portfolio Pipeline Pipeline Pipeline Pipeline Pipeline Target Related Co’s Main Player Main Players

15. Portfolio Volume €3.75 billion Russia Portfolio Stock by Sector

16. A Diverse Range of Financial Products Equity Guarantees Debt • Specific risk guarantees (i.e. political, commercial risk participations) • Commodity-backed instruments (i.e. warehouse receipts) • Trade facilitation program (with participation of local banks) • Corporate or Project specific • Non or limited recourse to sponsors • Syndicated loans (w. underwriting) • Parallel with ECA’s, other IFI’s or Banks • Hard / local currency (incl. Rouble financing) • Tenors between 5 to 15 years • Venture Capital • Privatizations • New Equity • Quasi-equity • ‘Portage’

17. Example 1: Toyota Russia LLC Toyota Russia • Equity $15 million • Purchase of a 20% equity stake in “Toyota Russia“ a greenfield assembly plant to serve the fast growing local market. • Political risk comfort. June 2005

18. Example 2: Severstal - Arcelor JV Severstal - Arcelor JV • EBRD Loan: US 90 million, of which US 33 million syndicated • Creating a joint venture between Arcelor, the biggest global steel producer and Severstal a major Russian steel producer for a greenfield construction of a galvanized steel plant. Signed on 11 February 2003

19. Example 3: Long-term debt to TogliattiAzot • EBRD’s largest-ever loan for energy efficiency of US$ 160m (Bank’s portion US$ 100m) • Reparation and modernisation of four ammonia production units • The project will result in significant gas savings and reduction of carbon dioxide emissions, that can be used as carbon credits under Kyoto Protocol Signed on 9 December 2004

20. Example 4: Sirocco Aerospace Sirocco Aerospace • US$ 45m EBRD senior loan to finance the manufacturing of TU-204-120 aircraft at the Aviastar manufacturing facility in Ulyanovsk • Objective to assist the restructuring and development of the Russian aerospace industry Signed on 17 December 2003

21. Example 5: Narzan • US$ 12.25m combined EBRD loan and equity investment to finance a Russian mineral water producer, including his CAPEX and working capital • The investment will help one of Russia’s best-known mineral water companies to expand its bottling capacity, develop new products and provide it with working capital Signed on 11 May 2004

22. Example 6: International Moscow Bank IMB Syndicated Loan • Provision of a US$ 200m syndicated loan (EBRD portion US$ 30m) earmarked for IMB on-lending to Russian small and medium-sized enterprises, particularly in less-developed regions • First of a string of deals the Bank is working on to provide Russian banks with long-term funds so they can give Russian businesses much needed access to longer-maturity credit Signed on 06 May 2004

23. Example 7: Archangelsk Municipal Water Services Development Archangelsk Municipal Water Services Development • € 9.9m EBRD senior loan for the rehabilitation of municipal infrastructure and services for water supply and sewerage • Aim to improve the quality/service standards of water supply and sewerage facilities, as well as to strengthen the financial and operational performance of the Archangelsk Oblast Signed on 09 December 2003

24. Indirect financing: Supporting Small Business in Russia The Russia Small Business Fund (RSBF) • Covers over 130 cities • Disbursed more than US$1.8billion through over 220,000 loans • Loans portfolio consists of 80% micro loans (under US$10,000) financing through more than 250 fully functioning participating branches of Banks in Russia • Excellent repayment ratio at 99.4% at end 2004 RSBF Disbursements 1997 – 2004 Contact: www.microcredit.ru

25. How to contact us • Moscow Resident Office Victor Pastor, Director, Russia Team Leonid S. Vindman, Principal Banker Russia TeamTel: +7-095-787-1111 / fax: 787-1122E-mail: VindmanL@mos.ebrd.com • Procurement Opportunities and General Information via web site: www.ebrd.com • PublicationsTel: +44-20-7338-7553 / fax: +44-20-7338-6102

26. Thank you. Leonid S. Vindman, Principal Banker Russia TeamTel: +7-095-787-1111 / fax: 787-1122E-mail: VindmanL@mos.ebrd.com