1. Private Equity World Middle East 2005 Russia and Eastern European markets: opportunities in the “new” European Economies Kestutis Sasnauskas, East Capital Private equity EAST CAPITAL

2. EAST CAPITAL 2 East Capital in brief 2 billion USD under management in open ended mutual and private equity funds 60 employees Offices in Stockholm, Moscow and Paris 250.000+ investors 7 year track record Independently owned and managed

3. EAST CAPITAL 3 Our Toolbox UCITS funds East Capital Eastern European Fund East Capital Russian Fund East Capital Baltic Fund East Capital Balkan Fund Central Europe Balkans Baltic States Russia & CIS Offshore funds East Capital Bering Russia Fund Private Equity East Capital Amber Fund East Capital Bering Ukraine Fund Explorer Property Fund- Baltic States

4. EAST CAPITAL 4 Average annual performance of the Funds versus benchmark index since inception Performance in EUR

5. EAST CAPITAL 5 Economic Outlook: stable growth Scouting the Private Equity Landscape in Russia Investment Opportunities in Russian and Eastern European Private Equity Suggested agenda

6. EAST CAPITAL 6 Reasons to invest in Eastern Europe & Russian private equity Strong underlying economic growth Competitive advantages in the enlarged EU Attractive valuations The only way to access rapidly growing sectors of the economy

7. EAST CAPITAL 7 Eastern Europe – Chinese-style economic growth GDP increase (%), 2004

8. EAST CAPITAL 8 What happened before? GDP increase before entering EU

9. EAST CAPITAL 9 What happened later? GDP increase after entering EU

10. EAST CAPITAL 10 Case study: Car industry in Slovakia A school-book study on how to attract FDI Slovakia may soon produce more cars per head of population than any other country in the world –Volkswagen: 300,000 cars/year –Peugeot-Citroën: 300,000 cars/year (production to start in 2006) –Kia Motors: 200,000 cars/year (production to start H2 2006) What made car manufacturers start production in Slovakia? –Tax reforms –Competitive cost structure –Full access to EU markets after May 1 2004

11. EAST CAPITAL 11 Flat taxes in Eastern Europe – some examples Personal income tax Corporate income tax Estonia24%0% (24%) Latvia25%15% Slovakia19% Romania16% Serbia14% Russia13%24% Ukraine13%25% Georgia12%

12. EAST CAPITAL 12 Wage differences between Eastern and Western Europe Nordic vs. Baltic countriesCentral EuropeThe EU “cost leaders” Source: Eurostat,

13. EAST CAPITAL 13 Suggested agenda Economic Outlook: stable growth Scouting the Private Equity Landscape in Russia Investment Opportunities in Russian and Eastern European Private Equity

14. EAST CAPITAL 14 Why private equity in Russia? the only way to access large part of economy is through private equity funds There are approximately 3 million registered private companies in Russia 250 companies are listed on RTS 75 companies have depository receipt programmes 90% of the index is in oil& gas, utilities and telecom

15. EAST CAPITAL 15 Private equity in Russia Few private equity players on the market mainly distributed in two groups: –Local financial industrial groups –Institutional investors (foreign capital) Institutional funds are generally small: 15 – 400 MUSD in size. Debt financing is still expensive, but… …rapidly improving macroeconomic situation resulting in decreasing cost of financing

16. EAST CAPITAL 16 MCAP as % of GDP

17. EAST CAPITAL 17 IPO activity is picking up Within the next year we expect approximately 60 IPOs with a total value exceeding USD 10 bn in Central and Central & Eastern Europe. Main activity in Moscow and Warsaw. IPO volume in Russia 2000- 2005

18. EAST CAPITAL 18 Economic Outlook: stable growth Scouting the Private Equity Landscape in Russia Investment Opportunities in Russian and Eastern European Private Equity Suggested agenda

19. EAST CAPITAL 19 Investment opportunities Possibilities of privatisations of extremely undervalued assets are already exploited Focus on exposure to domestic economy –Consumer goods and retail –Financial sector –Real estate & construction material –Retail & logistics Strong cash flows

20. EAST CAPITAL 20 Banking Assets in % of GDP (2004) Source: Central Banks, 2004-12-31

21. EAST CAPITAL 21 Source: CBR Growth of corporate & retail market in Russia

22. EAST CAPITAL 22 Property market opportunity in the Baltics The Baltic property market is still underdeveloped in a Western European context, characterized by limited size, low transparency and low liquidity… …but, the market offers: –attractive yield rates –low interest rates –high demand for modern properties –declining vacancy rates… ….and strong fundamentals for value growth for investors with local knowledge and relationships Yield rates on A-type commercial property

23. EAST CAPITAL 23 Property market opportunity (cont.) Significant gap (5-7%) between yield rates and mortgage rates Opportunity to make 15-25% annual equity returns based on yield only In addition, market fundamentals indicate good potential for value growth as well: –Strong economic development –Limited availability of office and retail space –Conversion process to Western European levels Furthermore, low correlation with equities, provides an attractive diversification possibility Gap between yield and mortgage rates* Property price development* *Figures for A-type commercial property

24. EAST CAPITAL 24 Contacting East Capital Head office East Capital Kungsgatan 30, Norra Kungstornet – Box 1364 SE-111 93 Stockholm, SWEDEN Telephone: +46 8 505 88 500, Telefax: +46 8 505 88 508 www.eastcapital.com Kestutis Sasnauskas, CEO, East Capital Private Equity Direct phone: +46 8 505 88 515 Email: kestutis.sasnauskas@eastcapital.comkestutis.sasnauskas@eastcapital.com Carl Meurling, East Capital Asset Management AB Direct phone: +46 8 505 88 519 Email: carl.meurling@eastcapital.comcarl.meurling@eastcapital.com