Accessing the international markets

1. Accessing the international markets AFG

2. Introduction Are we wasting our time? Equity markets 2008 • Picture in H2 2008 was bleak: • Russia’s markets falling in line with global peers • Uncertainty around stability of the banking system • Oil and other commodity prices in freefall • Pressure on the Ruble leading to substantial government support measures -40% -45% -68% After being a favourite among international capital markets, Russia suffered from one of the biggest declines globally in 2008

3. Introduction Silver linings behind the clouds? Equity markets 2009 YTD • Positive equity market performance for most of 2009 • Structural banking sector crisis avoided through state support • Oil prices almost doubled from their low points in Q1 2009 • Economic decline may have peaked during Q1 or Q2 +78% +6% +0% Crisis may not be over – but equity investors have recovered from their negative opinions

4. Introduction What’s next? • Global risk appetite among investor has recovered strongly in the last 2 months • Key investors recognise the value and strategic potential of the market • Preparation will be likely to exploit suitable timing windows • Investors will pay even more attention to equity story, corporate governance and due diligence performed before the IPO • A record net 40% of fund managers see global Emerging Markets as the region overweight in the next 12 months “Russia is largely a call on whether you’re positive on energy or not,” said Hugh Hunter, who oversees about $2.2 billion as chief executive officer of Blackfriars Asset Management in London and holds an overweight position in Russian shares. “We will see the oil prices inching up in a reasonably steady way.” “Russian stocks are still of good value,” said Singapore-based Mobius, who as Templeton’s executive chairman oversees about $20 billion of emerging-market assets. “They have risen dramatically from their low point but they are still a long way from their previous high.” Russia convinces investors it can slide past bankruptcies

5. Introduction What’s different in doing an IPO today? • Market will eventually open to quality companies, but expectations will be higher • Increased scrutiny over financial performance • Certainty over capital structure • Valuations will be more difficult • Need to be realistic on price expectations • Greater diligence on risk • Reflected in price investors are willing to pay Investors can afford to be more selective

6. The IPO thought process Deciding on the merits of an IPO Benefits Considerations IPO Considerations Benefits • Access to new capital • Broaden investor base • Creates acquisition currency • Increase media and PR profile • Better financing terms through greater corporate transparency • Employees incentivisation • Financial/operational discipline • Shareholder(s) diversification • Extensive disclosure of business: commercial, financial and legal • Increased scrutiny from shareholders and analysts • Loss of control • Corporate Governance • Ongoing reporting requirements

7. What to expect from an IPO The theory • An IPO should be straightforward from a project management perspective • Very well-established process - lots of precedents • Broad pool of experienced professional advisers exist • Investment bankers • Lawyers • Accountants • Financial PR firms • Alignment of interests towards a successful IPO The IPO process is highly complex and demanding for management teams

8. “We were too distracted to run our business properly” “If we knew then what we know now” What really happens in an IPO The reality • The reality is often different - highly complex and demanding projects • Many workstreams • Execution frequently under significant time pressure • Conflicts of interest between parties • Unfamiliar and complex technical issues • Lots of advisers to be appointed… and then managed • Language issues • “Getting comfortable” Client quotes: “Buried under large number of advisers and documents” “Exhausting process” The IPO process is highly complex and demanding for management teams

9. Practical planning and preparation Understanding the process before it begins • Be sure that you understand the process – apply same principles as you would to running a key project: • “Time spent in preparation is never wasted” - be sure of the following: • You really understand the process • What is needed from you and your team • Whether an IPO is right for you • You have the best possible team around you • Consider the use of an IPO adviser The IPO process is wholly manageable with proper understanding and planning

10. Initial planning phases Overview of the path to a potential IPO Phase 1 – Decide on merits of IPO Phase 2 – Decide on the optimal structure for listing Phase 3 – Company IPO Preparation Phase 4 – IPO Execution A well organised path to IPO will ensure that the company is able to control the process

11. Your equity story A key part of the IPO planning process • Be sure you understand what is meant by term “equity story” • “Roadshow test” • Simple, easily intelligible story • 25 minutes • Summary in prospectus, analyst and roadshow presentations • Offering shares on the stock market is like any market with buyers and sellers • Consider the investors view on the company A clear, well thought-out equity story will substantially increase the likelihood of success

12. The optimal listing structure The optimal listing combines… • Balancing the company’s needs with investor tastes will help ensure the optimal listing structure Investor Perspective Company Perspective • What is the company’s equity story? • Sector focus • Characteristics of business units and their respective attractions • Corporate Governance and alignment of interests • “Conglomerate discount” • Maximising shareholder value • Meeting strategic objectives • Practicalities/ timeline for any re-structuring • Management time and resources • Cost Getting the listing structure right will have a tangible effect on the IPO process

13. IPO execution Maintaining control of the process Pre - IPO preparation IPO preparation / execution Marketing and pricing Restructuring Financial statements Business plan Target valuation Equity story / positioning Appointments Due diligence Documentation Pricing Roadshow Marketing preparation/ research Structure & logistics An adviser will advise on structure and positioning, select and manage Bookrunners and other third parties and help manage the whole process

14. Rothschild Contact details • Sebastian Oechelhaeuser • sebastian.oechelhaeuser@rothschild.co.uk • Office: (+44) 207 280 1502 • Mobile: (+44) 780 958 6662 • Peter Whelan • peter.whelan@rothschild.co.uk • Office: (+44) 207 280 1547 • Mobile: (+44) 777 097 7937