1.  EBRD 2004, all rights reserved Russian Financial Markets Conference 5 May 2004, Boston Private Equity in Russia Andre Tikhomirov Senior Banker

2.  EBRD 2004, all rights reserved Introduction - What is the EBRD? International financial institution est. 1991, owned by 62 national and supranational shareholders Promotes market-based economies in 27 countries in Central & Eastern Europe and the former Soviet Union Committed €22.7 billion for 1,017 projects to date Capital base of €20 billion *2003 figures unaudited 2 0 5 10 15 20 25 97989900010203*

3.  EBRD 2004, all rights reserved Introduction - Key Messages EBRD’s experience offers a unique insight into the private equity market in the region, and EBRD wants to raise awareness of this market The asset class is young and returns are only starting to emerge Over 250 exits by EBRD investee funds are examined, which in aggregate show a 22% IRR (25% IRR excluding non-institutional quality funds) 1

4.  EBRD 2004, all rights reserved Introduction – EBRD’s Private Equity Objectives To build an industry that provides capital to growing local private companies To support & develop efficient equity investment intermediaries with the aim to make industry self- sustainable To remain the region’s “Investor of Choice”  an anchor investor who is committed to invest in the region through economic cycles  for prospective institutional investors, an active investor with significant insight into the region 3

5.  EBRD 2004, all rights reserved Introduction – Est. CEE/CIS PE Market EBRD investee funds represent 37% of estimated market and 53% of known funds 4 EBRD committed EBRD funds committed capital Including non-EBRD Funds estimated capital Plus 20% & EBRD direct = estimated private equity market € billion € 1.3 bn € 4.2 bn € 8.0 bn € 11.3 bn 0 2 4 6 8 10 12

6.  EBRD 2004, all rights reserved Introduction – EBRD Database 721 “gross” investments in companies by funds in one database, of which 265 “results” (exits or write-offs) Of which, “Consenters” represent 686 investments and 253 exits Database also tracks “net” performance for EBRD, but portfolio is still young End-2002 data; 2003 ready soon (June) 5

7.  EBRD 2004, all rights reserved Results – All Investments 33% of investments by value have been exited or written off Aggregate performance of fully realised and written off investments: 1.7x, 22% IRR (vs. 2.0x and 25% IRR last year) Source: EBRD (consenting funds only) 6

8.  EBRD 2004, all rights reserved Conclusions – What’s the State of the Region’s PE Market? Capital available lags western comparables Private equity market has developed that is approaching critical mass and institutional quality Initial performance & returns are promising but credibility to deliver returns needs to be cemented 24

9.  EBRD 2004, all rights reserved Results for Russia-focused funds

10.  EBRD 2004, all rights reserved Russia: Portfolio Snapshot Total # of Investments:163 Total Investment Cost:USD 571.8m Average % Owned:28.48% Total Exit Proceeds & Cash Returns:USD 397.6m Total Carrying Value of Remaining Portfolio:USD 317.5m Total Investment Value:USD 715.1m Total Investment Profitability:USD 143.3m

11.  EBRD 2004, all rights reserved Russia: Portfolio Snapshot by Exit Status $125.9m $365.9m $37.0m $32.5m $361.0m $315.7m $48.0m $1.0m $0.0m $100.0m $200.0m $300.0m $400.0m $500.0m $600.0m $700.0m $800.0m Investment at Cost ($571.8m)Total Value ($715.1m) Fully Realised (FR) Partly Realised (PR) Unrealised (UR)Written Off (WO) Overall: 1.3x TVPI, 9.8% IRR U: 0.9x TVPI, -4.6% IRR PR: 0.9x TVPI, -3.4% IRR FR/FR: 2.9x TVPI, 42.1% IRR

12.  EBRD 2004, all rights reserved Russia: Fully Realised by Type of Exit $0.0m $50.0m $100.0m $150.0m $200.0m $250.0m Trade Sale (TS) Flotation/Secondary Sale Sale to Management (MB) Write-off (WO) Investment Cost Exit Proceeds & Cash Returns Note: excludes Repayment of Loans Although trade sale and IPO are still viewed as preferred options, MBO proliferated Russian strategic buyers are coming en masse

13.  EBRD 2004, all rights reserved Russia: Fully Realised by Stage of Investment $0.0m $20.0m $40.0m $60.0m $80.0m $100.0m $120.0m $140.0m Expansion (EX) Other Early Stage (OE) Secondary Purchase (SP) Start Up (SU)OTHER Investment Cost Exit Proceeds & Cash Returns Start-ups are nobody’s favorites Expansions, and most recently, buyouts are in fashion

14.  EBRD 2004, all rights reserved Russia: Fully Realised by Deal Size $0.0m $20.0m $40.0m $60.0m $80.0m $100.0m $120.0m $140.0m $160.0m $180.0m Below USD 2.5mUSD 2.5m - 5.0mUSD 5.0m - 10.0mAbove USD 10.0m Investment CostExit Proceeds & Cash Returns Size matters as usual Large deals are snapped by the Russian money

15.  EBRD 2004, all rights reserved Russia: Portfolio and Performance by Sector $0.0m $20.0m $40.0m $60.0m $80.0m $100.0m $120.0m $140.0m $160.0m $180.0m $200.0m TIM Food & Beverage Manufacturing Primary & Energy ServiceOther Total Investment Cost Investment Cost (FR) Exit Proceeds & Cash Returns (FR) TIM is still a darling, but others also began to deliver specialty funds are being launched

16.  EBRD 2004, all rights reserved Russia: Performance by Vintage $0.0m $20.0m $40.0m $60.0m $80.0m $100.0m $120.0m $140.0m $160.0m $180.0m $200.0m 1993-941995-961997-981999-002001-02 FR Inv CostFR Inv Value UR Inv CostUR Inv Value 2000-2002 preparations for harvest 2003-2004 are going to be big for exits

17.  EBRD 2004, all rights reserved EBRD’s Priorities in Russia to support the existing successful management groups with which the Bank has a long-standing relationship helping to consolidate limited funding resources in the hands of the winners; to build new relationships by carefully selecting up- coming competent management teams; to increase awareness among the leading institutional investors of the Russian PE opportunities and leverage Bank’s credibility and capital to attract those investors into Russia- focused funds managed by the best managers.

18.  EBRD 2004, all rights reserved Copyright 2004 EBRD. All rights reserved This material is for the recipient’s private information. No part of this document may be reproduced or transmitted in any form or by any means, including photocopying and recording, without the written permission of the Bank. Such written permission must also be obtained before any part of this publication is stored in a retrieval system of any nature. While the information contained herein was compiled by the EBRD, we do not guarantee its accuracy or completeness. We accept no liability in relation to use of this information. Copyright 2004 European Bank for Reconstruction and Development. All rights reserved.