Presentation of Project «Development of Breeding Livestock Farm «Komsomolets» in Zabaikalsky Krai»

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March 2016

AUGUST 2016

Presentation of Project

«Development of Breeding Livestock Farm

«Komsomolets» in Zabaikalsky Krai»

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Terms and definitions 3

Project summary 4-9

Appendices 10

Project description 10-18

Market overview 19-24

Project financial model 25-29

Key executives’ CV 30-32

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TERMS AND DEFINITIONS

Fund АО «Far East and Baikal Region Development Fund»

Project Development of crop growing in Chernyshevsk district, Zabaikalsky Krai, on the basis of Breeding Livestock Farm «Komsomolets»

Project company ООО «Breeding Livestock Farm «Komsomolets»

SME Corporation АО «Federal Corporation for Small and Medium Enterprise Development»

Guarantor ZАО «Chitinskie Klyuchi»

Beneficiaries Valery Nagel, Ivan Nagel

Agrofund АО «Management Company «Agro-Industrial Development Fund»

$, USD US dollar

EBITDA Earnings before interest, taxes, depreciation and amortization FCFF / FCFE Free cash flow to firm / Free cash flow to equity

NPV Net present value

IRR Internal rate of return

PP / DPP Payback period / discounted payback period

Term Sheet Cooperation agreement between Fund and Beneficiaries setting forth the Project basic parameters and terms by which Fund will provide financing

Due diligence Project full-scope investigation and audit by Fund

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4

PROJECT SUMMARY

PROJECT DESCRIPTION

MARKET OVERVIEW

PROJECT FINANCIAL MODEL

KEY EXECUTIVES’ CV

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93 400

1,000 303

Beneficiaries Fund Banks Reinvestment of net profit

Fund investments:

 farm machinery

 equipment

 current capital for bringing new land into agriculture

1 796 mln RUB

PROJECT KEY

PERFORMANCE FIGURES (2026) PROJECT FINANCING STRUCTURE AND TERMS OF FUND

PARTICIPATION

PROJECT IMPLEMENTATION BENEFITS (2016-2026)

FACILITIES INVESTED IN

Proceeds,

bln RUB 1.55

EBITDA,

bln RUB 0.27

Sales of crops,

kilotons 80.6

Project yield, % 5%

Participation

period, years up to 7

667 644

bln RUB

7,1

bln RUB

Employment generation Gross

regional product growth

Tax revenue

PROJECT BASIC PARAMETERS (1/2)

Project significance

Work progress

• The Project contemplates development of crop growing in Chernyshevsk district, Zabaikalsky Krai, on the basis of Breeding Livestock Farm

«Komsomolets»

• The Project suggests bringing of 104,000 hectares of long-fallow lands into agriculture during 2016-2018 in addition to 7,000 hectares of already cultivated lands. Moreover, there is a potential for further increasing of land assets up to 300,000 hectares and more, that will lead to creation of one of the largest agricultural companies in Russia

• The Project is assigned a status of project of regional significance, that implies priority granting of lands with no tendering process

• Further expansion of the Project can make it one of the key Agrofund projects

• Project implementation will facilitate an integrated development of export potential of Baikal regional agro-industrial complex

Further steps

• Project submitting to the Fund Investment Committee for consideration (ПП-1)

• In case of Project approval by the Fund Investment Committee, its submitting to the BOD Investment Committee

• Attraction of outside advisors for Project due diligence and paperwork for the deal

• Basic terms of Fund participation are cleared with Beneficiaries

• Term Sheet draft is prepared

• Project business plan and financial model are preliminary examined by Fund

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PROJECT BASIC PARAMETERS (2/2)

•Zabaikalsky Krai is referred to the “area of risk farming” because of climatic and natural conditions

•At present tenancy to the lands planned to be used under the Project is not registered. However, Project is assigned a status of the project of regional significance, that implies priority granting of lands with no tendering process

•Independent guarantee/warranty of SME Corporation covers only 50% of loan debt. The uncovered part will be property secured with consideration for the amount of discount acceptable for Fund

•Project company requires financial resources as soon as possible in order to start sowing season in time, otherwise Project implementation will be postponed for a year

•Targeted subsidy for financing Baikal region projects will be applied to Project financing

•Project will be the first project in the framework of cooperation with SME Corporation

•There is a potential for Project further scaling-up (increasing of land bank up to 300,000 hectares and more)

•Further expansion of Project can be financed by Agrofund

Project brief overview

Project

implementation benefits

Restrictions and risks

Implementation aspects

Fund Project structure

•The Project contemplates an integrated development of crop growing (rapeseed, oats and barley) on the basis of Breeding Livestock Farm

«Komsomolets» in Chernyshevsk district, Zabaikalsky Krai

•Project Beneficiaries created Project company in 2014 on the base of bankrupt Federal State Unitary Enterprise «Breeding Livestock Farm

«Komsomolets»

•In 2015 Project company carried out test planting of rapeseed: 1250 t were harvested at a yield of 16 hundred kg/ha, that 1.7 times higher than the average yield in Zabaikalsky Krai (due to scrupulous technology compliance)

•In 2026 the output will make 80 kilotons of grain crops and rapeseed, which will be sold in Zabaikalsky Krai, neighboring regions, as well as exported to the PRC

•Fund project is to finance purchase of Russian-manufactured (Rostselmash, Peterburgsky Traktorny Zavod) and foreign-built agricultural machinery and equipment, as well as current capital required for bringing of 20,000 ha of new lands into agriculture

•Project implementation will result in introducing of 104,000 ha of long-fallow lands into agriculture, that will facilitate recovery of Zabaikalsky Krai agro-industrial potential

•Revenues to budgets of all levels will make up about 954 mln RUB for Project realization period (until 2026)

•Growth of gross regional product by 2026 will be around 7.1 bln RUB

•Fund investments into Project realization will make up 400 mln RUB in the form of contribution to Project company equity capital and a loan

•Amount of the contribution to the equity capital will be 50 mln RUB, and Fund equity stake will be determined by results of independent estimate

•Amount of the loan will be 350 mln RUB and it will be granted for up to 7 years

•Fund exit from Project will be performed by way of put option for Beneficiaries upon expiry of 7 years from the date of the first tranche, or by selling the business to a strategic investor together with Beneficiaries

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7

APPENDICES

PROJECT DESCRIPTION

MARKET OVERVIEW

PROJECT FINANCIAL MODEL

KEY EXECUTIVES’ CV

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PROJECT OVERVIEW

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 0

10 20 30 40 50 60

70 Rapeseed Oats Barley

• Project contemplates development of crop growing in Chernyshevsk district, Zabaikalsky Krai

• Project provides for cultivation of crops, which are in great demand in the PRC – rapeseed, as well as oats and barley

• It is planned to bring 104,000 ha of long-fallow lands into agriculture during 2016-2018 in addition to presently cultivated 7,000 ha.

• Moreover, there is a potential for further increasing of land bank up to 300,000 hectares and more, that will lead to creation of one of the largest agricultural companies in Russia

• Further expansion of Project can be financed by Agrofund

• All production is organic, raised from Russian GMO-free seeds

Forecast volume of output

Source: data given by the Initiator

Project description

Kilotons

Geographic location

Chita

Chernyshevsk

Zabaikalsky Krai

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OVERVIEW OF ZABAIKALSKY KRAI 9

POTENTIAL IN AGRICULTURE

4,481 1,728

208

Pastures Haylands

Ploughlands 4,481

1,728 950

481 Pastures

Haylands Long-fallow lands Ploughlands

9

Total

Land bank, thousand ha

7.65 mln ha

Utilized in 2015

6.42 mln ha

Land type Black earth, meadow black earth

Average humus content 7-8%

Vegetation period, days 120-160 Annual precipitation,

mm 230-400

Average temperatures January: -19.7°C (in south); -37.5°C (in north) July: 20.7°C (in south); 13°C (in north)

Climatic and natural conditions

Oil plant cultivation Cattle breeding Promising lines of agriculture development in Zabaikalsky Krai

Sheep breeding

Plant production in 2015, kilotons

Vegetables Crops Oats 200

63

17

Meat production in 2014, kilotons (dead weight)

Cattle Pork Mutton

29.3

15.1

3.2

Zabaikalsky Krai has a potential to bring into agriculture additional lands in the amount of more than 1.2 mln ha

• Zabaikalsky Krai has a great potential for agriculture development

• As of 2014 the area of cropped lands was 7.25 times less than that in 1990, sheep stock decreased approximately 8 times

• Creation of a large agricultural enterprise will facilitate

recovery of this industry in the region

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CAPEX

5.57%

23.96%

59.91%

10.56% Beneficiaries

Fund Banks

Historical costs Machinery

Construction and installation Equipment

Current capital

CAPEX structure (mln RUB)

Financing sources (mln RUB)

• Fund will invest in:

 Purchase of Russian (Rostselmash, Peterburgsky Traktorny Zavod) and foreign-made agricultural machinery

 Purchase of equipment (grain cleaning, etc.)

 Formation of current capital required for bringing of 20,000 ha of long-fallow lands into agriculture (fertilizers, chemicals, fuel and lubricants)

Main facilities invested in

2015 2016 2017 2018

0

403

678 715

176.3

0

0 0

Historical Future

Historical and predicted CapEx, mln RUB

Note: ^*176.3 mln RUB of historical investment not included

1 972 mln RUB 1 796 mln

RUB

*

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CROP ROTATION AND INTRODUCTION 11

OF NEW LANDS

• Project provides for a classic three-course system: rotation of fallows, oil and grain crops

• In the first year the field is ploughed and left fallow, in the second year it is planted with rapeseed, in the third year – with grain crops. Then the cycle repeats.

• Strict compliance with the crop rotation rules combined with the use of a proper amount of mineral fertilizers allows reaching high yield indices

Fallows Rape

Barley/Oats CROP ROTATION

• Under the Project it is planned to bring 104,000 ha into agriculture within 2016-2018

• **At present* only 481,000 ha are utilized as ploughlands in Zabaikalsky Krai**

• Zabaikalsky Krai has a great potential for development of agro-industrial complex – amount of long-fallow lands is 950,000 ha

• Further expansion of Project company «land bank» can be financed by Agrofund

2015 2016 2017 2018 2019+

8 8 28

78

2015; 0

²⁰ 0

50

34 188

Introduction of new lands Utilized lands Thous. ha

+ Basic scenario: ploughland 112,000 ha

SCHEDULE OF NEW LAND INTRODUCTION

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12

APPENDICES

PROJECT DESCRIPTION

MARKET OVERVIEW

PROJECT FINANCIAL MODEL

KEY EXECUTIVES’ CV

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WORLD RAPESEED MARKET(1/2)

Key rapeseed producing countries Market description

• About 70 mln tons of rapeseed is produced in the world annually. Average yield is 19 hundred kg/ha. The leading rapeseed producers are European Union, Canada, and China

• World consumption of rapeseed is 68-72 mln tons, from which at least 96% is used for rape oil production

• Decline of production in 2015-2016 as compared with the previous season was caused by rainless weather conditions in some regions of Europe, Australia, and Canada, as well as by rapeseed losses in Canada because of frosts

• Russia holds an insignificant share in the world production

≈1 mln tons (at an average yield of 11 hundred kg/ha). However, Russia has a fair chance to considerably ramp up rapeseed production and its export to China and Japan

Product prices, $/t World supply and demand

Index 14/15 15/16П 16/17П 17/18П 18/19П 19/20П 20/21П

Yield (hundred kg/ha) 20 19 19 19 20 20 20

Area (mln ha) 36.0 35.0 35.9 36.4 36.7 36.9 36.9

Production (mln

tons) 71.7 66.6 68.6 70.6 72.0 73.1 74.1

Consumption 71.7 68.3 69.0 70.2 71.5 72.8 74.1

Food 0.6 0.6 0.7 0.7 0.7 0.7 0.7

Feedstuf 2.6 2.3 2.2 2.3 2.3 2.3 2.3

Oil 68.4 65.3 66.1 67.3 68.5 69.8 71.0

Reserves 6.8 5.1 4.7 5.0 5.5 5.8 5.8

- 400 800 1,200 1,600 2,000

31 December 2005; 178

31 January 2003; 308 31 March

2008; 1,519

31 January 2003; 623

Rapeseed Oil

21

14 14

7

3 2 11 2

European Union Canada China

India Australia Ukraine

USA Russia Other

67 mln tons

Source: Quandl, International Grains Council

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WORLD RAPESEED MARKET (2/2)

7.8 2.3

1.3

USA; 0.2; 1.65%0.3Russia; 0.1;

0.83%Other; 0.1;

0.83%

Canada Australia

Ukraine European Union

USA Russia

Other

3.3

2.9 2.3

1.4 0.6

0.6

1.0

China European Union

Japan Mexico

USA Pakistan

Other

Lands under cultivation and rapeseed yield

Canada China India European Union Australia Russia Ukraine USA Pakistan Belarus Kazakhstan

0 1 2 3 4 5 6 7 8 9

0 1 2 3 4

7.9 7.4 7.1 6.5 2.3 1.0 0.7 0.7 0.4 0.3 0.2

1.8 1.9

1.0

3.3

1.3

1.1

2.6

2.0

0.9

1.8

1.0

Land under cultivation, mln ha Yield, t/ha

Largest rapeseed exporters Largest rapeseed importers

12 mln tons

Source: ITC, International Grains Council

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POTENTIAL MARKET OUTLETS

CHINA JAPAN

2.5 3.2

5.3 4.5

3.3 4.3 4.5 4.7 4.9 5.1

Imports, mln tons

2.4

2.5 2.4 2.4

2.3 2.3

2.4 2.4

2.5 2.5 Imports, mln tons

3.9 0.5 0.10.0

Canada Australia Mongolia

Russia

4.5 mln tons

Key suppliers, mln tons

2.1 0.3

Canada Australia Key suppliers, mln tons

2.4 mln tons

Source: ITC, International Grains Council

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RUSSIAN RAPESEED MARKET

Rapeseed production in the Russian Federation (without considering Project implementation)

2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 2017/2018 2018/2019 2019/2020 2020/2021

0

0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8 2

0.8 1.0 1.1 1.1 1.0 1.1 1.2 1.2 1.3 1.3

1.1 1.0

1.4 1.5

1.1 1.5 1.6 1.7 1.8 1.8

1.4

1.0 1.3 1.4

1.1 1.4 1.3 1.4 1.4 1.4

Land under cultivation, mln ha Production, mln tons Yield, t/ha

Key regions producing rapeseed, kilotons

2012 2013 2014 2015 Yield (t/ha) the Russian Federation ^{1 035} ^{1 393} ^{1 464} ^{1 125} 1.1

Kaliningrad Region ⁸⁵ ⁷⁶ ⁹⁷ ¹¹⁰ 3.5

Tula Region ⁹⁰ ⁸² ¹¹⁶ ⁸³ 1.3

the Republic of Tatarstan ⁸⁷ ⁵³ ⁸⁵ ⁷⁹ 1.0

Stavropol Krai ³⁴ ¹⁹⁰ ¹⁹² ⁷⁷ 1.3

Lipetsk Region ⁹⁶ ⁹¹ ⁹¹ ⁷³ 1.7

Ryazan Region ³⁴ ⁴² ⁶⁰ ⁶⁵ 1.3

Tyumen Region ⁵⁶ ⁷⁸ ⁶⁶ ⁶¹ 0.8

Krasnodar Krai ³⁵ ⁸⁹ ⁹⁰ ⁴² 2.4

Kemerovo Region ²⁷ ⁵⁵ ⁵³ ⁴² 0.7

Altai Krai ²⁸ ⁴⁸ ³⁹ ⁴¹ 0.6

Zabaikalsky Krai ³ ² ³ ² 0.9

Kaliningrad Region

Tula Region

Lipetsk Region

Stavropol Krai Krasnodar Krai

the Republic of Tatarstan Ryazan Region

Kemerovo Region

Altai Krai

Zabaikalsky Krai

Source: ЕМИСС, International Grains Council

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ZABAIKALSKY KRAI

2012/2013 2013/2014 2014/2015 2015/2016 2020/2021 2024/2025

0 20 40 60 80 100 120 140 160 180

0 1 2

7 4 5 2

54

140

3 2 3 2

59

154

0.4

0.6 0.7

0.9

1.1 1.1

Land under cultivation, thous. Ha Production, kilotons Average yield, t/ha

Rapeseed production in Zabaikalsky Krai

Actl.

With account for Project realization and further

expansion of «land bank»

Project realization will make it possible for Zabaikalsky Krai to take the lead in rapeseed production in Russia:

 By 2020 the share of Zabaikalye in the all-Russian production output will make up 5%* (at present it is 0.2%)

 With account for potential of further (till 2025) expansion of Project company land bank, the share of Zabaikalye in the all-Russian rapeseed production will make up 13%*

Note: * taking into consideration the predicted volume of rapeseed production in Russia in the amount of 1.8 mln tons Source: Federal State Statistics Service, calculations made by Fund

1.6 Project actual yield in 2015

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18

APPENDICES

PROJECT DESCRIPTION

MARKET OVERVIEW

PROJECT FINANCIAL MODEL

KEY EXECUTIVES’ CV

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OPERATIONALS AND FINANCIALS

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

0 10 20 30 40 50 60

0 5 10 15 20 25 30 35 40

Rapeseed Oats Barley

Rapeseed price Oats price Barley price

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

0 0.5 1 1.5 2 2.5 3

0%

10%

20%

30%

40%

50%

60%

Proceeds EBITDA EBITDA prifitability 70%

(Right scale)

Cultivated crop sales and price forecast

Proceeds dynamics and EBITDA

Source: financial model prepared by Fund on the base of the Initiator’s data

Kilotons  The financial model is based on a

conservative yield index (1.1 t/ha), that corresponds to the average yield index in Russia in 2015.

 Rapeseed price is more than 2 times higher than barley price and more than 3 times higher than oats price

 At the same time the cost of rapeseed sowing does not difer from that of oats and barley sowing

 Sowing of oats and barley is dictated by the need to comply with the crop rotation rules

 EBITDA profitability level remains persistently high throughout the Project life

 Fluctuation of profitability level is caused by crop rotation – profitability level is higher in those years, when the largest area is planted with rapeseed

 The leader of industry – Rusagro company – has this index equal to 50% in crop segment

Comment

Bln RUB

Thous. RUB/t

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20 INDICES

Source: calculations made by Fund Note:¹ year-average price without VAT

1 1 1

Note:² account balance is a part of current capital and is used during the 1^st half of the year for financing of operating activities

Index Unit of

measurement 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Total

Production

Rapeseed sales tons 4 284 20 329 51 224 38 692 20 329 51 224 38 692 20 329 51 224 38 692 20 581 355 601

Oats sales tons 752 2 020 12 303 38 752 30 172 12 303 38 752 30 172 12 303 38 752 28 181 244 461

Barley sales tons 891 2 478 14 243 43 491 33 758 14 243 43 491 33 758 14 243 43 491 31 768 275 853

Rapeseed sale price thous. RUB/ t 21,41 23,24 24,64 25,93 27,21 28,49 29,78 31,19 32,70 34,18 35,67 29,31

Oats sale price thous .RUB/t 6,42 6,97 7,39 7,78 8,16 8,55 8,93 9,36 9,81 10,25 10,70 9,10

Barley sale price thous.RUB/ t 9,63 10,46 11,09 11,67 12,24 12,82 13,40 14,04 14,71 15,38 16,05 13,64

Financial

Proceeds mln RUB 109 519 1 523 1 826 1 222 1 760 2 095 1 401 2 020 2 405 1 554 16 434

Operational costs mln RUB (96) (321) (674) (887) (931) (975) (1 019) (1 067) (1 118) (1 169) (1 220) (9 475)

Administrative costs mln RUB (9) (33) (67) (60) (48) (78) (69) (54) (89) (79) (62) (650)

EBITDA mln RUB 4 165 782 879 244 707 1 008 280 812 1 156 272 6 310

Profitability % 3% 32% 51% 48% 20% 40% 48% 20% 40% 48% 18% 38%

Depreciation mln RUB (25) (81) (125) (132) (132) (132) (132) (132) (132) (132) (106) (1 260)

Financial costs mln RUB (25) (103) (171) (121) (62) (26) (4) (1) - - - (513)

Profit tax with account for deferred tax asset mln RUB - - - - - - - - - - - -

Net profit mln RUB (51) (23) 483 623 48 548 871 148 681 1 024 166 4 517

profitability % -47% -4% 32% 34% 4% 31% 42% 11% 34% 43% 11% 27%

Cash flow from operations mln RUB 64 191 793 872 167 754 1 037 196 867 1 190 171 6 302

Investment (without VAT) mln RUB (223) (506) (430) (68) - - - - - - - (1 228)

Cash flow from financing mln RUB 357 554 (171) (532) (456) (86) (63) (59) - - - (456)

Contributions to equity capital mln RUB 93 50 - - - - - - - - - 143

Interest mln RUB (30) (108) (174) (124) (64) (28) (4) (1) - - - (532)

Attraction / (repayment) of credits mln RUB 294 611 3 (408) (392) (58) (58) (58) - - - (67)

Net cash flow mln RUB 198 239 191 272 (289) 668 974 137 867 1 190 171 4 619

Opening cash balance mln RUB 10 208 446 638 910 621 1 289 2 263 2 400 3 267 4 457 10

Closing cash balance mln RUB 208 446 638 910 621 1 289 2 263 2 400 3 267 4 457 4 628 4 628

FCFF mln RUB (155) (311) 366 807 169 755 1 038 196 867 1 190 171 5 094

Cash flow from operations mln RUB 38 88 623 751 105 727 1 033 196 867 1 190 171 5 789

Investment (without VAT) mln RUB (223) (506) (430) (68) - - - - - - - (1 228)

Interest* (1-t) (@0%) mln RUB 30 108 174 124 64 28 4 1 - - - 532

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PROJECT PERFORMANCE EVALUATION

21 Project NPV sensitivity (mln RUB) Project main investment metrics

Source: calculations made by Fund

Product price +10%

Operational costs -10%

CapEx -10%

Base rate CapEx +10%

Operational costs +10%

Product price -10%

(1,100) (100) 900 1,900 2,900 3,900 3,615 3,310 2,509 2,407 2,302 1,498 1,025

Index mln RUB

NPV

¹

@12% for the period through to 2026 2 407

IRR

¹

, % 46.5%

PP / DPP, years 4 / 4

Free cash flow 5 094

Note: ¹ with account for terminal value