Investment Climate - Ukraine

International and Domestic Investor Views

Dorian B. Foyil

Chairman and CEO

Foyil Financial Group

Foyil SecuritiesStrong Local Presence in Ukraine- with International Reach

Team of over 40 investment banking professionals

Over 15 years as Ukraine’s leading independent brokerage firm

Local network provides access to off-market deals

Diversified business model with a broad network within Ukraine ofboth international and local companies

Audited according to IFRS standards (Baker Tilley)

International investment approach, experience and education.Team members have degrees from:

Cambridge University (UK)

Wharton School of Business (USA)

Duke University (USA)

Yale University (USA)

New York University School of Law (USA)

Texas A&M University (USA)

UCLA (USA)

University of San Francisco (USA)

Duquesne University of Pittsburgh (USA)

Westminster Business School (UK) Investment BankingAsset ManagementReal EstateSales / TradingResearchCustody Services

Foyil Organization Structure

Foyil Corporate Finance is a part of the Foyil Group of companies engaged in financial services

targeting the emerging markets of Eastern Europe, with special focus on Ukraine:

Foyil is wholly owned by its directors and employees. Our employee restricted share plan provides for

greater employee ownership over time

3

Foyil Group

Foyil Focused Funds

(offshore mutual and

hedge funds)

Foyil Premier Funds

(Ukrainian mutual

funds)

Equity and fixed-income

sales and trading

On-line trading

Top-rated investment

research

Certified custody

Mergers and acquisitions

advisory

Initial/Secondary Public

Offerings

Private placements

Private equity capital

raising

Foyil Group

Foyil Focused Funds

(offshore mutual and

hedge funds)

Foyil Premier Funds

(Ukrainian mutual

funds)

Foyil Focused Funds

(offshore mutual and

hedge funds)

Foyil Premier Funds

(Ukrainian mutual

funds)

Equity and fixed-income

sales and trading

On-line trading

Top-rated investment

research

Certified custody

Mergers and acquisitions

advisory

Initial/Secondary Public

Offerings

Private placements

Private equity capital

raising

4

Milestones in Foyil Group’s Development

2008

2007

20062005

2004

2003

2001

1999

Foyil Eastern Europe & Russia Focused Fund

rated as a 5-star fund by Morningstar

Foyil Eastern Europe & Russia Focused Fund

ranked top emerging markets fund by

Morningstar, Bloomberg, CogentHedge, HFM

Week and BarclayHedge

Foyil Eastern Europe & Russia Focused

Fund ranked 1st in Top Fund Scorecard by

The Wall Street Journal Asia, Feb 2006

Foyil Eastern Europe & Russia Focused Fund ranked

2nd in Top Fund Scorecard by The Wall Street Journal

Europe, May & July 2005

Foyil Eastern Europe & Russia Focused Fund ranked 6th

in top 10 offshore hedge funds by Standard & Poor’s, April

2004, and 2nd in top 10 offshore hedge funds, May 2004

Foyil Eastern Europe & Russia Focused Fund

merges with Foyil Ukrainian New Europe

Opportunity Fund

Foyil Eastern Europe & Russia Focused Fund

merges with Foyil Emerging Markets Fund

Launch of Foyil Eastern Europe &

Russia Focused Fund

1997

1996

Foyil begins local operations in Ukraine with first

foreign owned full service brokerage, corporate

finance and investment bank

Foyil Corporate Finance launches Ukrainian Opportunity

Fund, a private equity fund involved in voucher

privatization in Ukraine

Launch of Foyil Ukraine Realty Partners

Ltd; a private equity real estate fund

focused on distressed real estate in

Ukraine & CIS countries2010

5

Foyil Investor Base

Break-down by investor nationality

During its history, Foyil has had more than 150 investors, coming from different countries and investment

backgrounds. Most of these are long term, continuing relationships

Among the notable institutional investors with Foyil are the following:

Deutsche Bank AG, JP Morgan Securities, Kredietbank Luxembourgeoise, Viking Fund Ltd, Lauer & Co, Banco

Nominees, Technical Services of North America, Citibank, Free Market Capital, Shimoda Russia, Citco, The Castlestone

Fund, Bank Brussels Lambert, Solar Group SA, NCB Trust, Mount Blanc Investments, Tarragona Fund, Deltec

Panamerica, Capcor Pension Plan, John Templeton Foundation

6

Selected Corporate Finance Deals

Issue of corporate bonds

Lead Manager and

underwriter

2007

Zhydachiv

Pulp and Paper Plant

Private Placement

of shares

Lead Manager

2 006

Private Placement

of shares

Lead Manager

2006

Investment Advisory

Services

Financial advisory services

on investment

opportunities in Ukraine

Financial Advisor

2006

Investment Advisory

Services

Financial advisor on a sale

of minority stake

Financial Advisor

2006

Acquisition of

Kryvyy Rig Cement

Sale of strategic stake

to Heidelberg Cement AG

Lead Manager

2004

Investment Advisory

Services

Financial advisor

on investment and

development

strategies

Sole Financial Advisor

2003 -2005

International Tender

Sale of strategic stake in

Volyn Cement

to Dyckerhoff

Lead Manager

2001

International Tender

US$ 34,000,000

Sale of 81.4% stake in

Rogan Brewery

to Interbrew

Lead Manager

2001

Ukrainian Opportunity

Fund

Private Placement

of shares

US$ 55,000,000

Sole Financial Advisor

1997

Issue of corporate bonds

Lead Manager and

underwriter

2007

Issue of corporate bonds

Lead Manager and

underwriter

2007

Zhydachiv

Pulp and Paper Plant

Private Placement

of shares

Lead Manager

2 006

Zhydachiv

Pulp and Paper Plant

Private Placement

of shares

Lead Manager

2 006

Private Placement

of shares

Lead Manager

2006

Private Placement

of shares

Lead Manager

2006

Investment Advisory

Services

Financial advisory services

on investment

opportunities in Ukraine

Financial Advisor

2006

Investment Advisory

Services

Financial advisory services

on investment

opportunities in Ukraine

Financial Advisor

2006

Investment Advisory

Services

Financial advisor on a sale

of minority stake

Financial Advisor

2006

Investment Advisory

Services

Financial advisor on a sale

of minority stake

Financial Advisor

2006

Acquisition of

Kryvyy Rig Cement

Sale of strategic stake

to Heidelberg Cement AG

Lead Manager

2004

Acquisition of

Kryvyy Rig Cement

Sale of strategic stake

to Heidelberg Cement AG

Lead Manager

2004

Investment Advisory

Services

Financial advisor

on investment and

development

strategies

Sole Financial Advisor

2003 - 2005

Investment Advisory

Services

Financial advisor

on investment and

development

strategies

Sole Financial Advisor

2003 - 2005

International Tender

Sale of strategic stake in

Volyn Cement

to Dyckerhoff

Lead Manager

2001

International Tender

Sale of strategic stake in

Volyn Cement

to Dyckerhoff

Lead Manager

2001

International Tender

US$ 34,000,000

Sale of 81.4% stake in

Rogan Brewery

to Interbrew

Lead Manager

2001

International Tender

US$ 34,000,000

Sale of 81.4% stake in

Rogan Brewery

to Interbrew

Lead Manager

2001

Ukrainian Opportunity

Fund

Private Placement

of shares

US$ 55,000,000

Sole Financial Advisor

1997

Ukrainian Opportunity

Fund

Private Placement

of shares

US$ 55,000,000

Sole Financial Advisor

1997

Investment Climate - Ukraine

International and Domestic Investor Views

8

Economic recovery will continue in 2011-2012

Ukrainian economy should grow by 4.8% in 2011 (+5.2% in Q1)

External demand for locally produced commodities (mainly steel and agriculture) and

machinery should remain stable in 2011 (exports up 50% in Q1)

Industrial production should grow by 7.9% in 2011 and remain the major driver of the

economic revival

Local consumption should additionally fuel the economic growth on the back of

reinstating lending and growing disposable income

Inflation should total 12% in 2011 and will mainly be driven by increase of utility tariffs

for households, rise of excise taxes on alcohol and tobacco and growth of prices on

dairy products

9

Exchange rate stable at near UAH 8.00/USD 1.00

Exchange rate will remain stable: National currency (Hryvnia) should remain

unchanged in 2011 thanks to stable exports and support of the National Bank of

Ukraine

USD 38bn of international reserves will smooth fluctuations: Currently, the National

Bank of Ukraine possesses USD 38bn of the international reserves. This level is

secured by IMF’s USD 15bn stand-by credit arrangement and will suffice to smooth

the fluctuations on the local FX market.

UAH/USD

10

Government debt at a manageable 36% of GDP

Government debt at a manageable

level: As of September 2011, Ukraine’s

total government debt (direct and

guaranteed) was USD 47.1bn, or 30% of

2011e GDP. Ukraine has enough

resources to meet maturing obligations

in 2011 being additionally supported by

USD 15bn loan from the IMF

Gross external debt equals USD 123bn or 76.6% of GDP: 66% of gross external debt

pertains to the private sector: USD 27bn belong to banks and USD 54bn to the non-banking

corporate sector. Reduced risks have helped Ukrainian banks and companies to reinstate

borrowing on the Eurobond market starting from 2011 and to continue the debt restructuring

process

Source: Bloomberg, Foyil est.

11

Ukraine Stock Market Performance

Ukrainian stock market was

one of the best performing

markets in 2010: Ukraine’s

benchmark UX index grew by

68% in 2010

However, UX index

underperformed its peers in

January-September 2011

Why hasn’t Ukraine’s Capital Market Developed More?

12

Problems

Legal Structure & Credibility Lack many regulations and many

regulations out-of-date

Solutions regarding capital markets

compatible with EU Standards

Capital Market Infrastructure Lacking Complete Institutional Infrastructure

Domestic Capital Very Limited Permanently growing strength of

Institutional Investors

Pension funds

Investment Funds

Modest growth in Individual Investors

Foreign Capital Lacking due to low creditability of the

country

Creditability of the country at the

‘investable’ level of S&P “A”

Capital Market Specialists Limited number of persons with good

experience most having only theoretical

knowledge

Relative surplus of brokers, analysts and

other experienced market specialists

Can you Guess Which Country this Describes?

13

Problems POLAND - 1989 POLAND - 2011Legal Structure & Credibility Lack many regulations and many

regulations out-of-date

Solutions regarding capital markets

compatible with EU Standards

Capital Market Infrastructure Lacking Complete Institutional Infrastructure

Domestic Capital Very Limited Permanently growing strength of

Institutional Investors

Pension funds

Investment Funds

Modest growth in Individual

Investors

Foreign Capital Lacking due to low creditability of

the country

Creditability of the country at the

‘investable’ level of S&P “A”

Capital Market Specialists Limited number of persons with

good experience most having only

theoretical knowledge

Relative surplus of brokers, analysts

and other experienced market

specialists

Why hasn’t Ukraine’s Capital Market Developed More?

Both are POLAND…Surprised?

Poland’s use of Mandatory Pension ContributionsCould Ukraine Benefit as well?

14

0,0

10,0

20,0

30,0

40,0

2001 2002 2003 2004 2005 2010

Assets under

Management US$bn3,1 6,7 9,8 11,6 19,0 40,0

Assets under Management US$bn – Polish Pension Funds

15

Ukrainian Company Public and Private Placement update

Over the past six years, Ukrainian companies did 66 share placements raising US$3.8bn

80% of placements were by foreign-registered holding companies of Ukrainian entities

Most placements were listed in Warsaw and London followed by Frankfurt

Most Ukrainian placements were done prior to 2009; however, a number of larger IPOs

have happened in the last two years

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Major 2008-2009 placementsDominated by Agriculture

Company Sector % $ Date Market

Myriya Agriculture 20.0% $90.0m June 2008 Frankfurt

Sintal Agro Agriculture 15.0% $34.5m August 2008 Frankfurt

MHP Agriculture 19.4% $322.5m May 2008 London

Landkom Agriculture 5.4% $22.0m March 2008 London

Landkom Agriculture 10.0% $3.5m March 2009 London

MCB Agricole Agriculture 24.4% $56.0m March 2008 Frankfurt

Agroton Agriculture 25.0% $42.0m November 2009 Frankfurt

Major Ukrainian Foreign Placements - 2010 and 2011

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Company Sector % IPO size $ EBITDA Date Market

Kernel Agriculture 6.3% $81.4m 9.9x April 2010 Warsaw

Avangard Agriculture 20.0% $188.0m 6.8x April 2010 London

Agroton Agriculture 26.0% $54.0m 5.9x October 2010 Warsaw

Company Sector % IPO size $ Comment Market

Coal Energy Mining 25% $78m Warsaw

Industrial Milk Agriculture $30m Warsaw

KSG Agro Agriculture 33% $40m Warsaw

Milkiland Agriculture $70m Warsaw

Ovostar Agriculture 25% $33m Warsaw

Sadovaya Mining $31m Warsaw

Valinor Public Agriculture CANCELLED Warsaw

ViOil Agriculture CANCELLED Warsaw

Westa Industrial 25% $47m Warsaw

2010 Placements – Just three…

2011 has been active

The Greek Default?…what does the Market Say?

18

Greek 1 Year Government Bond Yields

1 Year Greek Gov’t yields now at 131%

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www.foyil.com

Dorian Foyil – Chairman & CEO

Foyil SecuritiesVerkhniy Val 4A

04071 Kyiv

Ukraine

Tel: +38 (044) 393 2313

Fax: +38 (044) 393 2314