Sausage and Meat Products Plant in Surgut

Project Purpose development and expansion of sausage and meat products plant in Surgut Leverage utilization of hi-tech production equipment allows to decrease the product costs by reducing manual labor, increase the yield and improve the quality of end products

Meat industry is one of the key sectors of the national economy, which serves to provide the population with the required volume of meat and meat products, with domestic products being highly demanded by the population Consumption of these food products is one of the most important quality of life indicators This line of business aligns with the government policy focused on food security and import substitution for domestic stock

Manufacturing management implies goal-oriented activities for distribution and coordination of financial, physical and labor resources of the plant to reach the desired goal. In the process of manufacture, the plant uses frozen block meat from local suppliers. The products are transported by suppliers at our expense. The equipment, which is and will be used at the plant, comes from Austria and Germany; the rate of wear is insignificant.

For successful implementation of the Project: - alterations have been made to the facility - new equipment has been purchased in part - suppliers have been identified - minimum staff has bee recruited - label design has been developed - STO (corporate standard) system has been developed and implemented - a plan of approved marketing actions is being implemented

The Project is implemented at 10, Ratsionalizatorov Str., Surgut The land parcel is in lease; the agreement has been made between Stroimechzapchast LLS and Ugra Meat Processing Plant LLC Offices are located at the same land parcel The land parcel contains a production facility, which complies with the project implementation requirements

The cost of the equipment owned by the plant is RUB 14.2 mln. Costs make 30% of the total budgeted expenses for upgrade of the shop Utilization of hi-tech production equipment in meat- processing shop allows to decrease the product costs by reducing manual labor, increase the yield and improve the quality of end products

Manufacturing Chain in the Shop Meat defrost Meat chopping in a frozen meat cutter Pickling Meat chopping in a grinder Mincing in a cutter Filling of casing, forming of products Cooking of products Cooling to the required temperature Quality control of finished products Packing, marking, transportation, storage of finished products

The company has invested more than RUB 15 mln in the plant. The range is as follows: Cooked sausages; Ham; Cooked smoked sausages; Semi-smoked sausages; Frankfurters; Sausage links; Deli meat (loin, bacon, roasted ham). All products are certified and comply with the safety requirements.

Ugra Meat Processing Plant LLC is currently selling its products through intermediaries. As a result, Ugra Meat Processing Plant LLC loses RUB 1, ,500 ths proceeds monthly, and RUB 12,000 – 18,000 yearly The reason is that Ugra Meat Processing Plant LLC sells its products to intermediaries at wholesale prices

Implementation of the project promotes job gains, increase in taxes and other local budget revenues, implementation of social programs in the region After full capacity is reached, and the project is paid back, the company will support farms operating in the animal industry by investing own funds in their development Implementation of the project helps to solve the problem of food security in the region In the long view, the company expects to construct an own animal unit The investment project is socially- oriented

Within the Project, Ugra Meat Processing Plant LLC's expectations are as follows: Purchase of equipment – RUB 102,268 ths. Opening of 5 retail units - RUB 13,150 ths; Purchase of 5 vehicles – RUB 10,000 ths. Current capital – RUB 35,000 ths. The Total Project Value will be RUB 160,418 ths.

Additional profit Increase in various- level budget revenues from taxation The client gets fresh products directly from the manufacturer Additional jobs for citizens of Surgut and Surgut District The company intends to arrange a network of retail units to sell its products

The marekting plan intends to bring the company to the food market by a smooth growth of sales and a significant expansion of the range of high-quality sausage products from local manufacturer in the Khanty-Mansiysk Autonomous Region - Ugra The intended sales pattern: 70% - will be group A (cooked sausages) sales; 18% - will be group B (cooked smoked and semi-smoked sausages) sales; 12% - will be group C (deli meat and convenience products) sales. An increase in sales will be determined by the quality of meat, expansion of the product range, professional training of the specialists and sales managers of the company

I. An option without involvement of a Financial Institution and Subsidies. Planning horizon - 10 years 3 project financing options are possible VOLUME OF INVESTMENTS 1Investment loanRUB mln135 2Working capital loanRUB mln35 3Reinvestment of profitsRUB mln15 4TOTALRUB mln185 Another project financing option implies no involvement of a Financial Institution and Subsidies with substitution for bank lending.

II. An option with involvement of a Financial Institution, but no Subsidies. Planning horizon - 10 years This project financing option implies: 1. Compensation of a part of expenses for lease payments; 2. Compensation of the bank interest rate; 3. Involvement of a Financial Institution. VOLUME OF INVESTMENTS 1 Financial Institution's support (8.25% on a repayable basis) RUB mln135 2Working capital loanRUB mln10 3Reinvestment of profitsRUB mln15 4TOTALRUB mln160

III. An option with involvement of a Financial Institution and Subsidies. Planning horizon - 10 years This financing option is a priority for the Project Initiator VOLUME OF INVESTMENTS 1 Financial Institution's support (8.25% on a repayable basis) RUB mln80 2SubsidiesRUB mln55 3Reinvestment of profitsRUB mln15 4TOTALRUB mln150

budget effect more than RUB 110 mln at 10-year planning horizon 50 additional jobs in Surgut in coverage of the needs of the citizens of Surgut in high-quality meat products realization of a case of repayment of the funds invested by the state in private investment projects (withdrawal of the fund from the Project) support of animal farms in the Khanty-Mansiysk Autonomous Region - Ugra delivery of high-quality and moderately priced food products to nursery schools, schools, orphan homes, etc. State support will allow Ugra Meat Processing Plant LLC to reduce the product costs significantly and become competitive for social facilities The project is of interest in terms of budget and social effects:

The plant manufactures sausage and meat products following advanced technologies, which allow top avoid the main problems of Russian meat processing plants, i.e. low productivity and poor performance, and to improve the quality

Contact details Ugra Meat Processing Plant LLC 10, Ratsionalizatorov Str, Surgut, , Tyumen Region, Khanty-Mansiysk Autonomous Region - Ugra Chief Executive Natalia Yurievna Chernyavskaya , Business Director, Project Manager Evgeniy Grigorievich Afinogenov Project Administration Manager from the Regional Investment Center Alexander Viktorovich Shashelev, Surgut ,