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EBRD – a good partner in Russia Verona 28 October 2011

EBRD – a good partner in Russia Verona 28 October 2011. Eric Rasmussen Director Russia Industry, Commerce and Agribusiness. Agenda. EBRD - Priorities and presence in Russia - Private Equity - Information and Communications Technologies (ICT) - Pharma - Annex.

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EBRD – a good partner in Russia Verona 28 October 2011

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  1. EBRD – a good partner in RussiaVerona 28 October 2011 Eric Rasmussen Director Russia Industry, Commerce and Agribusiness

  2. Agenda • EBRD- Priorities and presence in Russia- Private Equity- Information and Communications Technologies (ICT)- Pharma- Annex

  3. EBRD: A network of 36 offices in 30 countries More than half our bankers based in the region

  4. EBRD Global Shareholder Structure2010 Annual Meeting: 50% capital increase to €30bn Triple-A Shareholders Form 60% • Current paid in capital is €6bn including an increase of €1bn in May 2010 • Current callable capital is €15bn • In 2010, the Board of Governors approved a 50% increase in the Bank’s authorised share capital from €20bn to €30bn • The €10bn increase* will provide additional investment capacity for the period 2011-2015 to enhance the Bank’s response to the global crisis *Callable capital to be increased by €9 billion upon receipt of subscriptions from members, with the provision to review its usage after 5 years • (1) Includes European Community and European Investment Bank each at 3%; France, Germany, Italy, UK each at 8.6% • Russia at 4% as at 1 September 2010

  5. EBRD: Cumulative commitments by sector

  6. 70 Cumulative commitments of €62.0 billion 60 50 40 EUR billion 30 20 10 0 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 EBRD’s historical investments of EUR 60 billion. About 25% in Russia. • International financial institution, promotes transition to market economies in 30 countries from central Europe to central Asia • Owned by 61 countries and two inter-governmental institutions • Capital base of €30 billion* *At the Annual Meeting in Zagreb in May 2010, the Board of Governors approved the Bank’s capital increase from €20bn to €30bn authorised capital Note: Unaudited as at 31 December 2010 6

  7. 12 65 Equity ABV (EUR billion) 55 Debt ABV (EUR billion) 10 Net Cumulative Business Volume 45 (EUR billion) 8 35 Annual business volume (ABV) Net cumulative business volume 6 25 4 15 2 5 0 -5 1997 1998 1999 2000 2001 2005 2006 2007 2008 2009 2010 2002 2003 2004 EBRD in 2010 • Invested over €62n in more than 3,119 projects since 1991 • Private sector > 79% of EBRD finance • Debt 83%, Equity 17% of EBRD finance • €9.0bn invested in 2010 Source: EBRD data as at 31 December 2010 7

  8. EBRD’s priorities in Russia Mittelstand and Larger Enterprises Closing the Infrastructure Gap Capital markets and Financial intermediaries • Promote regional growth • via development of independent Russian regional companies • Support modernization and diversification of Russian industry • through engagement of financial industrial groups committed to corporate governance • Build investor confidence and foster transfer of know how and technologies • by pro-active support of foreign partners • Reduce transport bottlenecks and ensure flow of goods via • support of increased private provision of transport services • financing the PPP program • engagement with reform-minded state-owned transport companies • Improve levels of services to population and industrial clients through • rehabilitation of municipal infrastructure and development of new facilities • Modernize power generation and remove electricity transmission bottlenecks • by financing investment programs of private and state companies • Foster sound banking sector • strengthen bank's balance sheets and capital base • Support corporate standards in banks • leveraging equity investments • Encourage consolidation • support M&A • Develop domestic investor base, deepen capital markets • by financing non-bank financial institutions • Support development of RUB interest rate derivative and long term fixed interest rate bond markets • promote wide use of Mosprime • EBRD RUB bond programme

  9. EBRD products Equity Loans Guarantees Direct EBRD financing • New equity • Privatizations • Underwriting • Quasi-equity • ‘Portage’ • Non or limited recourse to sponsors • Hard / local currency • Medium / long term • Floating / fixed rates • Specific risk guarantees • Commodity-backed instruments • Guarantees to Confirming Banks for trade finance instruments (i.e. L/Cs, payment guarantees etc.) of local issuing Bank covering the payment risk • Short-term financing of local Issuing Banks providing exporters/importers with liquidity for pre-export and post import and local trade finance purposes Indirect EBRD financing

  10. EBRD is more than equity and loans • AAA rated and internationally recognised IFI with long-term view • Willing to share risks, including political risks • Experience gained in problem resolution • Extensive knowledge of local business environment • Good working relations with authorities • Good corporate governance (incl. protection of minority interests) • High quality due diligence and opportunity studies

  11. EBRD is a trusted partner in the dialogue on innovation Sustainable Economy Dependence on Natural Resources Diversified Industry Structure Efficient Local Markets Competitive Growth Private Sector know-how, capital & behaviour Functioning of Public Institutions Dialogue and Policy % innovation absorbed by industrial companies Costs and barriers to grow innovation

  12. Russia’s Modernisation Agenda • Modernization of Russia in the 21st century will be based on the values and institutions of democracy • State corporations should be reorganized and privatized • State-run corporations and large companies shall be audited • The government's share in commercial companies, including strategic businesses, should be reviewed • R&D and technological development (Skolkovo and Rusnano) • Develop new generation nuclear reactors and fuel by 2014 • A Russian communication satellites put into operation by 2015 • Corruption will decline as transparency increases

  13. l All bankers agree that the Russian industry offer strong business opportunities ...notably Industrials, Non-Cyclical Consumer Goods & Services and Utilities show high growth. Value of Russian Industries relative to Brazil, India, China and EU (12 months P/E of top 500 companies in each economy) Overvaluation 1.5 Utilities Cyclical Cons. Goods & Services Banks 1.0 Non-Cyclical Cons. Goods & Services Healthcare Telecom 0.5 Healthcare - although closer to overvaluation – has also strong revenue growth compared to healthcare in Brazil, India, China and EU Industrials Technology Energy Basic Materials Undervaluation 0.0 0.0 0.5 1.0 1.5 2.0 2.5 Forecasted Revenue Growth in Russian Industries relative to Brazil, India, China and EUand EU (CAGR 2009 – 2012) Data: Reuters (Dec 2010)

  14. h However investor perception of slow reforms in Russia depresses the value of Russian assets compared to Brazil, India, China, EU… P/E (12 months trailing of the 500 largest companies in each economy) China India EU Brazil Russia Russian companies have lower P/E multiples in spite of projected strong growth Forecast Long-Term EPS Growth 0 15 20 25 Data: Reuters (Oct 2010) and BCG analysis

  15. … albeit new reforms focus on barriers to do business. Finance Skilled labor Corruption Permits Access

  16. Investor perception reflect that Russia is a fabric of different regional investment climates… Investment Risks (Summary from Expert Magazine) Very low Lower Russia Risk Higher Very High Very high Saint Petersburg Moscow city, Moscow region Tatarstan,Bashkortostan, N. Novgorod, Samara, Perm Krasnodar, Rostov Sverdlovsk, Chelyabinsk Higher Voronez, Tula, Tver, Khanty-Mansiysk-Yugra, Yamalo-Nenetsky AO, Krasnoyarsk, Kemerovo, Novosibirsk, Irkutsk,Maritime, Khabarovsk Sakha-Yakutia Leningrad, Vologda, Belgorod, Yaroslavl, Lipetsk, Kaluga Saratov Volgograd Business Potential Average Udmurtia Trans-Baikal Archangelsk, Komi (Syktyvkar),Murmansk,Karelia, Vladimir, Bryansk, Ryazan, Kursk, Kirov, Penza, Ulyanovsk,Tyumen,Astrakhan Altai T. Omsk,Amur Pskov, Novgorod, Orenburg, Chuvashia Stavropol Tomsk Kaliningrad Lower KurganKabardino-Balkarya, N.Ossetya-Alania, Karachayevo-Cherkessya,Kalmykia,Kamchatka Nenetsky (Naryan Mar), Tambov, Ivanovo, Smolensk, Kostroma, Adygeya,Buryatia,Sakhalin Orel Mordovia Chechen, Ingushetia Dagestan Much lower Jewish,Chukotsky Khakassia Mariy ElTyva, Altai Republic.

  17. …which necessitates a differentiated approach to regional development (“European vs Asian modernization models”). Investment Risk Sum Lower Higher Very High Russia Risk High Potential 2 cities 39% 51% 20% % of GDP % of FDI % of Population 26% 34% 10% 13% 17% 10% Higher % of GDP % of FDI % of Population 40% 34% 43% 40% 34% 43% Average potential Average Business Potential % of GDP % of FDI % of Population 20% 15% 33% 20% 15% 33% Lower Potential Lower 2% 0% 4% 2% 0% 4% % of GDP % of FDI % of Population Deeply Depressed Much lower 1% 0% 2% 27% 35% 12% % of GDP % of FDI % of Population 46% 52% 58% 100% 100% 100% 27% 13% 28% Sum

  18. A Good Mitigation Against Regional Risks? …EBRD St. Petersburg RO Ekaterinburg RO Moscow RO Krasnoyarsk RO Vladivostok RO Samara RO Rostov RO • 7Offices in Russia with 120 staff on the ground • EBRD has direct presence in 54 Russian regions. • A “real” presence is maintained in 25 regions with 4 or more larger projects.

  19. EBRD in Private Equity • EBRD’s portfolio of funds: over 15 years of investing in the asset class • 132 funds • 84 fund managers • EUR 2.8 billion in commitments (USD 3.6 billion) to funds with capital of EUR 14.2 billion (USD 18.5 billion) • 1,129 underlying investments, up to 70% exited. • Largest PE Fund program dedicated to the region* * Russia, CIS and CSE Source: EBRD tracked portfolio as at June 2010, excluding real estate funds 19

  20. 2,000 Fund Size 18 EBRD Signed Number of funds 1,500 EUR Million 10 1,000 6 500 4 68% 3 35% 18% 1 14% 7% 0 44% 0-20m 20-50m 50-150m 150-300m` 300-500m 0.5-1bn Fund Size EBRD in Private Equity:Investments by Fund Size: Russia/CIS Note: Percentage is the share of EBRD commitment of the total fund capital Source: EBRD tracked portfolio as at June 2010 20

  21. CEE CIS SEE Number of Funds 400 14 13 350 12 12 11 11 11 300 10 9 9 250 8 7 No. of Funds EURMillion 200 7 6 6 6 5 150 5 5 4 4 4 4 4 100 2 2 50 0 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 EBRD in Private Equity:EBRD Commitments Over Time Source: EBRD tracked portfolio as at June 2010 21

  22. EBRD in ICTSelected Transactions in Technology Funds Russia 2009 Technology Fund - Equity $ 30 million (own account) Poland 2009 Loan and equity € 22 million (own account) Bulgaria 2006 Mezzanine € 3 million (own account) € 10 million (total) CEE Regional 2007 Technology Fund - Equity € 10 million (own account) € 40 million (total) Slovenia 2001 Equity € 3 million (own account) € 9 million (total) CEE Regional 1999 Technology Fund - Equity € 12 million (own account) € 44 million (total) Croatia 2010 Equity € 4 million (own account)

  23. EBRD in ICTSelected Transactions in Telecoms Albania 2008 Privatisation - Loan syndication € 30 million (own account) € 100 million (total) Poland 2011 Equity € 200 million Russia 2004, 2006 and 2009 Loan syndication € 115 million (own account) € 420 million (total) Kazakhstan 2003 Loan syndication $ 60 million (own account) $ 110 million (total) Bulgaria 2004 Privatisation - Equity, Debt and Mezz €90.5 million (own account) €374 million (total) Russia 2011 Rouble Bond Issue RUR 2 billion (own account) RUR 13 billion (total) Russia 2006, 2008, 2010 Loan and equity $ 40 million Kazakhstan 2005 and 2007 Loan syndication for KaR-Tel $ 65 million (own account) $ 130 million (total) Albania 2003 Loan syndication € 35 million (own account) € 85 million (total) Poland 1998 Equity (IPO) $ 76 million

  24. EBRD in ICTSelected Transactions in Media Ukraine 2007 Equity €22.2 million (own account) €200 million (total) Poland 2003 Acquisition debt € 22.5 million (own account) € 52.5 million (total) Czech Republic 2002 Acquisition debt $ 10 million (own account) $ 35 million (total) Romania 2007 Loan and equity $ 8 million (own account) $ 15.5 million (total) Russian Federation 2003 to 2005 Loan syndication $ 90 million (own account) $ 130 million (total) Regional CEE 2006 Loan syndication $ 50 million (own account) $ 100 million (total) Kazakhstan 2009 Loan to RTS Decaux $ 5 million (own account) Romania 2003 Debt Co-financing $ 7 million (own account) $ 11 million (total)

  25. EBRD has invested over EUR 300 millions in the pharmaceutical sector for manufacturing, distribution and retail pharmacies. Russia 2010 Equity € 15 million Russia 2004 to 2011 Loan + Equity +Loan € 58 million Hemopharm Serbia 2002 to 2004 Loans EUR 40 million Ukraine 2010 Equity $ 11.5 million Armenia 2005 to 2010 Equity and Loan EUR 1.9 million EBRD in Pharma Selected Transactions Ukraine 2006 Loan € 32 million

  26. Petrovax: Background Petrovaxis a Russian pharmaceutical company focused on development and commercialization of vaccines and drugs in the field of immunology. The firm had in 2003 one key product(polyoxidonium) an immune stimulant and an adjuvant for the flu vaccine. Petrovax turnoverin 2003 was EUR 5 millions. Weaknesses • Limited financial resources for R&D • Limited production facilities and capabilities • Low brand awareness Strengths • Intellectual property based on polyoxidonium molecule • Highly knowledgeable and ambitious scientific team • Key niche products

  27. Petrovax: Vaccine Project Year: 2004“Vaccine Project”:Construction of a state-of-the-art manufacturing facility for production of flu vaccine in syringes. And the development of a new flu vaccine in a partnership with a leading pharma player.Partner: AbbottEBRD Finance: EUR 25 million loan

  28. Petrovax: R&D Project Year: 2008“R&D Project”: Construction of a 2nd production line. Clinical trials, registration and commercialization of 2 new products; improvement in the organizational structure and corporate governance.EBRD Finance: EUR 15 million equity

  29. Petrovax: Next Innovation Year: 2011“Innovative Pipeline”: Development and commercialization of 3 new innovative medicines.Potential Co-Investor: Rusnano EBRD Finance: EUR 18 million debt

  30. Petrovax Case Story: Status Today Industry Position today: A leading Russian pharmaceutical player with GMP facilities and a strong portfolio of branded products and products at various stages of development. Petrovax has several IP and production collaborations with the world’s leading pharma companies.Partnerships with global companies: Sales: More than 10x increase in sales and profitability over the last 5 years and growing.Corporate Governance and Jobs: New jobs for a new generation of researchers. Implementation of IFRS, modern MIS and corporate governance practices.

  31. Comments on Russia’s outlook: Medium term outlook has improved and Russia has still lots of potential with medium term growth at 4-5% GDP per capita in USD has only just returned to levels of 1991 Russia crisis Collapse of Soviet Union Putin promises to double GDP within a decade

  32. The root of a tree that grew up in wind is strong EBRD is the largest financial investor in Russia • AAA rated IFI and a long-term view • active in 48 Russian regions • seven regional offices in Russia • 120 professionals on the ground with a passion to support your investment Thank you! Eric Rasmussen Director, Industry, Commerce & Agribusiness Russia Business GroupTel: +7 495 787 1111 (ext 164) Email: rasmusse@ebrd.com

  33. Annex. How to obtain EBRD financing www.ebrd.com Financing requirements How to obtain finance? Ensure appropriate returns by carefully assessing the risks: • Management strength and strategy, brands • Clear business plan and project costs • Transparency of operations / IFRS • Disclosed identity of final shareholders and corporate structure • Identified and limited tax liability risk • Recourse to subsidiaries generating profits and holding assets • Provide EBRD with an overview of proposed investment • Commitment to cooperation • clarify role of EBRD • mandate to initiate transaction • mutual understanding of corporate integrity issues • Project / business plan, market analysis, strategy, ownership structure, financial analysis, risk assessment • Exit strategy

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