Sc Master Retrospect

In retrospect - Investment Proposal Reference Material Author Johan Werbrouck: Managing Partner Steinberg Capital Management S.A. Steinberg Capital SICAR S.C.A. SC_MASTER_GALT&TAGGART 1

AGENDA Steinberg Capital’s SICAR S.C.A. and its Management Company Steinberg Capital Management S.A. wish to engage in a strategic Partnership Agreement. A. The decision about opening a SICAR for Ukraine was taken due to five preconditions B. Executive Summary Steinberg Capital SICAR SCA C. Development perspectives of Ukrainian economy – between European Union and Russia SC_MASTER_GALT&TAGGART 2

A. The decision about opening a SICAR for Ukraine was taken due to five preconditions SC_MASTER_GALT&TAGGART 3

The decision about opening a SICAR for Ukraine was taken due to five preconditions Preconditions for launching a SICAR for Ukraine 1 Ukraine is one of the largest European countries with the huge potential 2 Stability of macroeconomic situation Launch of Steinberg 3 Economical growth and positive development forecast Capital SICAR S.C.A. in July 2007. 4 Flow-in of foreign investments into national economics 5 Inefficiencies available for high IRR’s SC_MASTER_GALT&TAGGART 4

1 ONE OF THE BIGGEST EUROPEAN COUNTRIES Ukraine is one of the biggest European countries with the huge development potential Ukraine within the European context Top-10 European countries, GDP1) in 2006 [bn USD] and forecast of GDP area [thousand km2] Population [m people] annual growth for 2007-2011 Russia Russia Germany 1,9% Ukraine Germany Great Britain 2,3% France France France 2,0% Spain England Italy 1,4% Sweden Italy Russia 4,8% Germany Ukraine Spain 2,3% Finland Spain Poland 4,3% Norway Poland Netherlands 2,8% Poland Romania Ukraine 6,0% Italy Netherlands Belgium 2,1% 1) GDP is calculated according to purchase capability Source: CIA SC_MASTER_GALT&TAGGART 5

2 ECONOMICAL STABILIZATION Improvement of all the major macroeconomic indicators, and GDP tripled in 7 years Ukrainian economics – major indicators, from 2000 till 2006/2007(forecast)1) 2000 Δ 6 years 2006 2007 Nominal GDP [bn USD] 31 x 3,2 >100 106 Inflation rate 25,8% x 2,2 11,6% 10,7% Budget balance +0,6% -2,4% -1,8% -2,0% [% from GDP] Foreign-exchange reserves [bn USD] 1,5 x 15 22,2 25,0 Foreign trade [bn USD] 30,4 x3 81,4 90,0 Direct foreign investments [bn 0,6 x 7,5 4,5 5,2 USD] Direct foreign investments [ % 1,9% x2 4,5% 4,9% from GDP] 1) Some data from 2006 are preliminary, the data for 2007 forecasted Sources: EIU, National Bank of Ukraine,State committee of statistics of Ukraine, Steinberg Capital SC_MASTER_GALT&TAGGART 6

3 POSITIVE DEVELOPMENT FORECAST According to forecasts, high growth speed of economics will be preserved Маcroeconomics: dynamics and forecast Annual GDP growth, 2000-2011 (forecast) [%] • Financial and budget discipline • Growth of Ukrainian economics and demand Inflation, 2000-2011 (forecast) [%] • Increasing income from the tax charges to the budgets • Growth of investment activity Sources: EIU, National Bank of Ukraine,State committee of statistics of Ukraine, Steinberg Capital SC_MASTER_GALT&TAGGART 7

4 FOREIGN INVESTMENT FLOW-IN Starting from 2004 – intensive flow-in of foreign investments into the economics of the state Overview of investment activity Growth of investments in Ukraine, [bn USD] Foreign investments growth in 5 largest regions, 2005 [%] CAGR1): 32% Kyiv region 4% х 2,3 Kyiv 22% 20,6 Orange Revolution 16,4 Kyiv Kharkov 9,0 Dnepropetrovsk 6,8 Donetsk 5,5 4,6 Odessa 3,9 Odessa region 4% Donetsk region 4% Dnepropetrovsk region 10,5% 1) Cumulative annual growth Source: State committee of statistics, Steinberg Capital SC_MASTER_GALT&TAGGART 8

5 Inefficiencies present Three inefficiencies are going to be present for the next 5-7 years. Triple Inefficiencies in Ukraine – Private Equity • riple effect possible: Triple inefficiency play T o Market inefficiency: Low acquisition multiples (1-4) o Business inefficiency: Easy to add value (Full Potential Plans) o Economy inefficiency: Ride the wave of macroeconomic expansion, which will aid both business expansion and exit multiples (7-9) SC_MASTER_GALT&TAGGART 9

Opportunities. Sub-prime Crisis is Opportunity • urrent market crisis is an opportunity for PE in Ukraine, not a threat C -Current turmoil on financial markets is induced by increasing defaults of sub-prime mortgage loans in USA and, consequently, a re-pricing of risk across the board -Victims of volatility are: >hedge funds and bank conduits as they deprived of their short-terrm financing and forced to fire-sell high quality paper at heavily discounted prices >private equity operating in mature markets as easy and agressive financing will be very hard to obtain in the short term >some merchant banks engaged in agressive buy-out operations which will be unable to syndicate their debt underwritings - This crisis is, as a matter of fact, good news for Steinberg Capital's investors >there is no economic link with the crisis "originator" (sub-prime) >our buy-out activity will not suffer as limited leverage is expected to be used >no liquidity crisis to be expected as western banks are still in a buying spreee in Ukraine >equity multiples are expected to go down, at least on the short term >investors could benefit from a strong diversification opportunity in a low-debt environment SC_MASTER_GALT&TAGGART 10

B. Executive Summary Investment Proposal of the SICAR towards Limited Partners SC_MASTER_GALT&TAGGART 11

Executive Summary. Steinberg Capital’s SICAR S.C.A. Investment proposal in Ukraine ambitions for its investors a 30-35% net IRR%/year. • Steinberg Capital targets 35%/year whilst leveraging three inefficiencies present in Ukraine, unexisting elsewhere in Europe and US - Market inefficiency: Low acquisition multiples (1-4 X EBITDA entry multiples – proprietary dealflow) - Business inefficiency: Easy to add value (organisational, financial, operational, strategic) - Economy inefficiency: Ride the wave of macroeconomic expansion (7-9% GDP growth), which will aid both business expansion and exit multiples (6-8) • 150-200 Mio $ will be invested in Ukraine for the next 2,5 years in 7-9 mid sized companies and prepared for exit to strategic investors • The Track record of Steinberg Capital combines the strength of western professionals with a local partner - Western professionals: BC partners, Industrikapital, 3i, BAIN & Co, McKinsey, GE Capital, BASF, GE, E-on Fortis Private Equity, Roland Berger, AT Kearny, Deloitte • Strong Governance mechanisms and deep due dilligence lowers risks for investors - Luxemburg registered SICAR: Only SICAR for Ukraine, authorised by the Luxemburg authorities - majority Control Share blocks are transformed into Special Purpose Vehicals and fall under Luxemburg law - Investee companies are bought with controlling ownership and a controlling seat in the board (general partner role) - The investment thesis, due dilligence and exit are supported by an active and captive advisory board with strong track record - Due Dilligence is contracted with local advisors - Sal. Oppenheim is the custodian and administratorof the accounts in Luxemburg - Arendt&Medernach is the law firm contracted by Steinberg Capital for the legal and fiscal part • Existing Dealflow supports the underlying fundamentals in terms of disciplined investment process • 18 Mio $ commitment with signed contracts on the Sal. Oppenheim held share register • First Engagement letters(LOI) are signed with 4 belgian groups: in the area of OTC, agrobusiness (2) as potential co-investors SC_MASTER_GALT&TAGGART 12

In the next 10 years, Emerging Markets Private Equity will provide a unique opportunity to achieve superior returns Why Ukraine  rolonged period of significant economic recovery and growth expected P  cquisition multiples of 1-4 times EBITDA are possible in the region A  xit multiples in 5 years should approach current Western European E multiples of 6-10 times EBITDA  ragmented industries with abundance of complementary acquisition F opportunities  perating improvements can have high leverage in increasing company O value  he Ukraine is exhibiting exceptionally high growth year to year T  onstantly improving legal and business environment C  rrival of Western and Russian strategic investors is expected to accelerate A post WTO accession increasing exit opportunities for the Fund. SC_MASTER_GALT&TAGGART 13

In the next 10 years, Emerging Markets Private Equity will provide a unique opportunity to achieve superior returns Triple Inefficiencies in Ukraine – Private Equity • riple effect possible: Triple inefficiency play T o Market inefficiency: Low acquisition multiples (1-4) o Business inefficiency: Easy to add value (Full Potential Plans) o Economy inefficiency: Ride the wave of macroeconomic expansion, which will aid both business expansion and exit multiples (7-9) SC_MASTER_GALT&TAGGART 14

Fund Thesis: Positioning Inside Ukraine Sweet Spot: • Controlling Ownership Buyout • High end Mid Control Cap (> 51%) • Strong Management • Criticall mass • Exit options Buyout • Value Creation Minority opportunity Ownership Co- Model Investment Majority (< 51%) Growth Financing Small to medium cap Medium to large cap Sweetspot Steinberg Capital 1-5 Mio $ 5-15 Mio $ 15-30 Mio $ No particular focus, Captive Funds, US government focus, No exit enforcement Equity Value SC_MASTER_GALT&TAGGART 15 • … • … • …

As a Buyout Fund, Steinberg Capital is modelled after Bain Capital, with emphasis on due dilligence and active value creation Controlling Investment Due Value Ownership Thesis Dilligence Creation • Insight in • Commercial • A superior end game • Legal insight in Steinberg analysis and • Financial profit and • Financial Engineering Capital clearly “Industry • Shareholder value drivers positioned Concept” structure for the investee • Fiscal • Leverage of companies Engineering as active Advisory • Mix of former Buyout Fund Board, partners private Investing equity and Chairmen international • Activation of directors at locally based blue chip advisors companies - BAIN & Co • Big picture and Not sustainable • Full strategic value as differentiator No exit enforcement Potential insights in market Driven • Local Partner: Millennium Capital Value Creation SC_MASTER_GALT&TAGGART 16

Total Size of committed capital is set at 150-200 Mio $ till end of year in two more closings. Up till now 20 Mio $ has been confirmed and signed as for the first closing. Segments HNWI’s, UHNWI’s, Omnibus Seggregated NGO’s: EBRD Institutionals: Hedge Single & Multiple family Offices Accounts OPIC, IFC Funds, FoF, Holdings [Mio. $] 150-200 20-50 • EIB FOR DISCUSSION 55-75 • EBRD FOR DISCUSSION 55 • IFC • OPIC 100% 18-20 FOR DISCUSSION Match: SC_MASTER_GALT&TAGGART 17

The initial closing is executed at end of August and has 20 Mio $ commitments as to date from partners, family offices and HNWI’s. Status [Mio. $] Detail / Names / Origin Level of committment2) Closure Segment 20-25 • Industrial Holding 3-7 • N.A. 75% • Belgium • RE exp. CEE 1 • Additional Eur. Private investors 100% • Industrials – Flanders • Investing chairmen 2 100% • Family Offices • Family Offices 2 • Steinberg Capital Partners1) 100% • Founder & partners • HNWI’s • "Investors of the first 100% hour„ 15 • Entrepreneurs/cashed in (BBoom G.)/Sell.M Remarks: Campaign towards First Closing is lined up (Family offices US/EU), Omnibus Seggregated Accounts, UHNWI Success rate: 70%; driver is pre-qualification and introductions of first investors to personal contacts Ø ticket: 1,3 Mio. $ SC_MASTER_GALT&TAGGART 18

Investment Proposal Steinberg Capital SICAR ambitions for its investors a yearly 35% IRR with a fiscal neutral basis. The team tilts the risk/reward curve towards the lower risk zone Risk Key Drivers in optimising Risk/ Return High A. Legal Structure: SICAR & SPV’s - Luxemburg B. Governance Structures o Controlling Ownership: enforce exit o Controlling Seat in the Board/target Company Medium o Management Buy In & Alignment: - Envy ratio - Variable Compensation Plan C. Investment Process: o Western Discipline/IC/FIM/PIM o Advisory Board Low o Local Advisors: Deep Due Dilligence D. Active Value Creation: Full Potential Plan E. Exit thesis based on Industry Concepts F. Co-Investors/Western Origin 15% 25% 35% Return (increased by working with three inefficiencies) SC_MASTER_GALT&TAGGART 19

The Legal Structures are designed by Luxemburg based Arendt & Medernach. Sal. Oppenheim is Custodian, E&Y Auditor. Advisory Company Luxemburg 2 Oppenheim Pramerica 1 General Partner 20-30 Limited partners Domicile Steinberg Sicar Luxemburg Central Administration Registrar 5 SPV SPV 4 6 Invested Invested Invested Invested Invested Invested Sal. Oppenheim Company Company Company Company Company Company Custody 7 3 1 Instruction on drawdowns 2 Sending out of drawdown notices 3 Collection of monies under the respect of AML en KYC rules 4 Notification & reconciliation of the Sicar's investments 5 Investment decision on transmission of documents on SVP's and properties 6 Notification & reconciliation of the Sicar's investments 7 Check on duty acquisitions & payments SC_MASTER_GALT&TAGGART 20

The Investment process 1 Business 2 Partner 3 Weekly 4 PIM (1) 5 Investment 6 FIM 7 IC II 8 IC III Proposals Screening: Partner Committe I J.W. Meeting (IC) Budget Approval Pre due Full due Conditions 1 Pager Decision Allocation: to be • Company • Expenses> $5000 dilligence dilligence Investment Criteria: renegotiated: • Business • Work > 5 days • Valuation • Financials • arket Attract. M Decision: • ompany Attract. C Go/No Go • Terms • Valuation • eal Structure Attr. D • alue Add Potential V Iterative Process Pre Selection • Input Advisory Board/Experts Activation of Consultants • BAIN & Co • E&Y • Boutique Experts (1) PIM: Private Investment Memorandum (2) FIM: Final Investment Memorandum SC_MASTER_GALT&TAGGART 21

Steinberg Capital is focussing on a limited number of industries for creating value. Industry Selected Targeted Key-Investment Sub-Sectors Considerations Food Processing and • Farming • Rising disposal income Agri-culture • Meat processing • Low investment in sector to date • Milk processing • Generally under-managed businesses • Food ingredients • Low valuations • Bakery • Strong interest for restructured and well-capitalized businesses from strategy players in Europe Basic industries • Light manufacturing • Long term growth in real estate and construction • Building materials • Market fragmentation and aggregates • Opportunities for import substitution • Power equipment • Outsourcing of manufacturing processes from Europe Financial Services • Insurance • Consumers demand broader product offering • Consumer Credit • Unexploited market niches • Leasing • Limited access to capital for local companies creates an opportunity for leasing services • Strong interest from potential strategic investors Technology, media • Publishing • Well-managed middle-market targets and telecommuni- • Mass media • Fragmented markets cations Consumer products • Fastfood restaurants • Regional niches and services • Retail • Consolidation opportunities • Significant value creation potential through expanding product offering and distribution SC_MASTER_GALT&TAGGART 22

Critical Success Factor: Investment Thesis & Control Management Investment Thesis & Commercial Due Dilligence Analysis Industry concept/ End Game Is the Market attractive? Is the Company attractive? Is the Deal Structure attractive? Can we add susbstantial Value? GO NO GO NO GO NO GO NO GO Industry Selection Exit Thesis: IRR: >35% Full Potential Plan • Size • Criticall mass Co-Investors • Advisory Board • Segments • Consolidation Mezzanine Finance • External Advisors • Growth & Growth drivers • Management/Scalability Legal • > Strategic Full Potential • Value Chain Integration • Stable Free Cash Flow • > Financial Full Potential • Key Success Factors • Controlling Ownership • > Operational Full Potential • Profit Drivers (Rev/Cost) • > Organisational Full Potential • End Game Analysis SC_MASTER_GALT&TAGGART 23

The current dealflow is multi-sourced (open architecture) and flanked by advisors and industry experts. Post Acquisition Deal Sourcing Due Dilligence Deal Structuring Exit Value Improvement Entry Value Creation Key sources Key success factors Name Sector Size [Mio. $]2) Fit1) • Third party advisors • Arm's length • Fast food systems Franchise Food N.A. – Legal advisors • Patronage deals • UPG Food Processing – Management • Comission based deals • Univest Print Printing consultants • Exclusivity • Energy (Co/ Renewable Energy - BAIN & Co. Morgan Stanley) - Roland Berger • OTC: - PWC/E&Y • Retail OTC: pot. Co-Inv - Deloitte • Financial Services Retail – Banks • Juices/Drinks Financial Services - Credit Suisse • Investment Criteria • Intercable Consumer Goods First Boston • Sweetspot debriefing Construction - Dragon Capital • Exit Focus Materials - Forum • Investment Thesis • Valuation • Company Dealflow • Roadshow regions • Holding contacts 1) Subject to investment committee, advisory board, due dilligence process (market, company, deal attractiveness) 2) Subject to further due dilligence SC_MASTER_GALT&TAGGART 24

1 2 3 Transaction Focus: Investee Company Selection Criteria • Experienced, committed management team with proven track record in its sector • Evidence of company’s potential to become a market leader • Growth dynamics and strong potential for expansion • Privately owned and unlisted • Cash positive or break-even, with clear revenue models • Clear exit strategy within 3-5 years • Committed to financial transparency • Low political risk and no affiliation with shadowy business structures • Average equity investment required: $15-25m • Geographical location: Ukraine • Cut-off project IRR level – 35% Source: Johan Werbrouck, Chairman Steinberg Capital SC_MASTER_GALT&TAGGART 25

Exits can be multiple Exit Routes • Strategic Investors: Multinational companies from Western Europe, USA, Asia and Latin America • Russian and former Soviet block businesses, which are expanding in the region • Local business people • Management buyouts • Secondary Buyouts • IPO’s in the West or in the region • Additional factors aiding exits in the next 5 years: o ocal pension fund industry is developing fast L o ocal mutual fund industry is being born L o everaged buyouts will be coming L Source: UNECE, Economic Survey of Europe, 2005; CIA World Factbook 2005 SC_MASTER_GALT&TAGGART 26

Steinberg Capital - Appendix – Key Persons involved Investment Committee members, Partners & Advsiory Board

CV – Partners Steinberg Capital Werner Claes Mr. Claes was the former Executive Director Global Private Equity Fortis Bank with the following responsibilities: - Mezzanine Finance - Private Equity in Central and Eastern Europe - Membership of all important investment committees of Fortis Bank - Director of various investee companies. Prior to this role he was Director Central Risk Management, Fortis Group, and Director International Credits. Other responsibilities included: - resident of Credit Council of ALCO-FUIB (First Ukrainian International Bank) P - oard Member of Fortis Bank Polska B -Board member of Czech Ventures -Due Diligence Team leader in all emerging market exercises Fortis Bank. Werner has university degrees in interpreting Dutch-French-Russian, has a Post- Universitary Degree in Business Economics (Vlekho), and two Masters in Financial Management and Accountancy. SC_MASTER_GALT&TAGGART 28

CV – Partners Steinberg Capital Hans M.C. Vanoorbeek Mr. Vanoorbeek has more than 10 years in the private equity industry and a strong direct track record in private equity and buyouts as former Partner at Industrikapital Ltd and BC partners since 1995. At Industri Kapital Ltd he established a large network of investment bankers, M&A intermediaries, accountants, consultants and lawyers in London and the Benelux. This combined with an already existing network has ledto the generation of a proprietary deal flow (approximately generated 35 proprietary deals in the Benelux and eight outside the Benelux). He participated in approximately 50 auctions (whereof approx. 25 second rounds) and 12 exclusive deals (whereof 6 very intensive). Prior working experience can be found at Goldman Sachs and KPMG. He is co-investor and entrepreneur in two companies in Belgium. Mr. Vanoorbeek is a MBA graduate of Harvard Business School, and has earned a masters in law and economics of the Catholic University of Leuven. SC_MASTER_GALT&TAGGART 29

CV – Partners Steinberg Capital Johan J.G. Werbrouck: Founder & Managing Partner Mr. Werbrouck started his corporate career at BASF AG and rotated into international business development and corporate development functions in Germany (HQ), France and Belgium. Afterwards he joined Roland Berger in Duesseldorf and advised german clients out of the Group Wide Chemical Competence Center He joined BAIN&Company to work on private equity related advisory and bancinsurance related strategic assignments. Overall, he worked mainly in the areas of commercial due Diligence, valuation and full potential plans. Afterwards he joined GE in Italy at Executive level to spearhead the European Services Council. This was done through selection of best practices across the 12 industrial business units of GE, both in long and short cycle businesses. He rotated as Vice President Europe to GE Capital Commercial Finance (Asset Based Lending) out of the UK, where he headed a pan-European team of 8 professionals in 6 countries From 2001 to 2003 he was a Group Director at Viterra Energy Services, a division of E-On AG, and was responsible for the restructuring of the Six Sigma program in 28 countries, whilst trimming the company and designing the growth story with the Board to a successful exit at the end of 2003 to CVC Germany. The division was sold at a 10 X EBITDA multiple for 1 Billion Euro. In the beginning of 2004 he created Mercurius Group Ltd as platform to position Steinberg Capital and was the only financier in setting up the operations of Steinberg Capital. He is trained as Commercial Engineer at the Catholic University Leuven and has obtained a MBA at the Vlerick School for Management in 1991-1992. SC_MASTER_GALT&TAGGART 30

The Investment process/Post Acquisition Value add Full Potential Program Financial Full Potential Operational Potential Organizational Full Potential Strategic Full Potential • Manage Balance Sheet • Manage Assets • Build processes • Define visions and missions - Sell non-required assets - Utilize capacities - Identify core processes • Inject growth initiatives - Use off-balance sheet financing - Focus/consolidate operations - Define process owner - Core (products, regions, channels, Customers) - Outsource non-core activities - Redesign processes - adjacencies • Optimize financial structure - Find the optimal mix • Manage Costs • Build structure debt/mezzanine/equity • Make add-on acquisitions - Optimize purchasing - Form homogenous operating units short-/long-term - screening - Increase effiency of direct labor - Define corporate center and corporate - Reduce working capital services - Evaluation of targets - Optimize sales force efficieny and - Optimize cash management G&A efficiency - Transaction support - Streamline/consolidate R&D • Build systems • Review tax/legal strucure - Integrate planning, reporting • Build exit story • Manage Sales - Develop new incentive schemes - Develop and communicate „success story“ - Identify areas of under-penetration, - Establish performance standards cross selling opportunities - Prepare business plan - Compare internally, external - Conduct sales emergency programm - Perform sales enhencement • Build Management Team programs - Shared vision, values of core management - Develop high potentials 31

Additional PE track record Introduction to the Advisory Board The management team’s expertise will be further supported by an active, fi rst class Advisory Board created within Steinberg Capital Management, whose members have significant experience in building shareholder value in both Ukrainian and international companies. In addition, each international Board member has a first-hand experience in the private equity field. Board members are asked to contribute actively across the Steinberg Capital value chain, utilizing their core strengths and in-depth knowledge to help the Company realize successful investments. The Advisory Board meets formally 4 times per year and will be contacted on an ad-hoc basis deal-by- deal. The following individuals have agreed and already participate on the Advisory Board: SC_MASTER_GALT&TAGGART 32

1 2 3 Investment Process: Role Advisory Board Advisory Board: • Industry Know How Pre-Investment Check- Due DilligenceReport Due Dilligence • Networks list & Risk ratings Report • Business Judgment Deal Origination Initial Screening Detailed Due Investment Deal Origination Pre-Investment Dilligence Committee Approval Committee Investment Execution of Reallisation and Transaction Management Exit Exit The Advisory Board meets formally 4 times per year. In addition, on a ad-hoc basis, they are send an investment summary of the deals at the pre-Investment committee stage. Leveraging networks, industry know how and/or deal attractiveness judgment are part of their role. SC_MASTER_GALT&TAGGART 33

CV – Advisory Board Partners Jean Cristophe Laloux: Luxemburg Mr. Laloux is a Director of Private Equity for Southeast Europe at European Investment Bank, based in Luxemburg. Prior to this responsibility, he was the direct advisor of the EIB President, Mr. Maystadt. He was a former Boston Consulting Group consultant. His contribution to Steinberg Capital is defined at fund level where corporate governance best practices will be exchanged. At present, his director assignment at the European investment Bank, based out of Luxemburg brings him in the Board Seat positions of EIB backed private equity funds. Mr. Laloux has obtained his MBA at Kellog/Chicago. Prior to this, he earned a masters degree in Commercial engineering at the Catholic University Leuven and a postgraduate management at the Vlerick School of Management. SC_MASTER_GALT&TAGGART 34

Steinberg Capital in Ukraine: constant presence and international structure of investment teams The only private equity fund solely focussed among the current players on buyouts Team of partners with a local operational experience, contacts and infrastructure A team of international partners with top track record In private equity and active value creation for investee companies and portfolio management Target net IRR per year of 30-35% for investors. SC_MASTER_GALT&TAGGART 35

Private Equity - Appendix – - Market Size in Ukraine: Private Equity Committed Capital - Multiples versus Local Multiples (proprietary dealflow SC) - Best performing Asset Class

Private Equity Landscape in Ukraine In the course of the next years, private equity will increase its total committed capital. Current committed capital as % of GDP is still in the initial stage as opposed to CEE. [Mio $] SC_MASTER_GALT&TAGGART 37

U.S. buy-out industry Increasing amount of ... chasing fewer deals... ... means higher purchase investment capital ... multiples LBO Dollars Raised Number of LBO/Merchant Bank Purchase Multiples Deals $28,987M 277 $30,000 300 10.0 275 270 $22,600M 255 8.6 248 245 $25,000 250 $18,431M 8.0 7.0 7.1 Number of Deals Closed 6.5 $20,000 200 EBIT Multiples 6.0 5.4 $11,612M $15,000 150 4.0 $5,905M $5,174M $10,000 100 2.0 $5,000 50 $0 0 0.0 1992 1993 1994 1995 1996 1997 1992 1993 1994 1995 1996 1997 1993 '2/95 '2/96 '2/97 2/98 Sources: BUYOUTS Newsletter; 1997 Buyouts Yearbook SC_MASTER_GALT&TAGGART 38

Industries with high growth rates (e.g. telecom) will command higher purchase multiples relative to mature or volatile industries Purchase Multiples by Industry (1997) Buyout Purchase EBITDA Multiples (1997) 13 10.9 10 8.1 7.4 7.5 7.1 Buyout Purchase Price 8 7.0 6.9 7.0 6.8 (EBITDA Multiples) 6.5 5.9 6.0 5.4 5 3 0 Auto- Chemi- Tech- Food & Forest General Health- Home Publi- Retailing Services Telecom Textiles motive cals nology Beverage Products Indus- care Furni- shing tries shing Sources: BancAmerica Robertson Stephens, Portfolio Management Data LLC SC_MASTER_GALT&TAGGART 39

Private Equity at 14% of total portfolio among UHNWI and HNWI’s (Source Merrill Lynch) SC_MASTER_GALT&TAGGART 40

C. Development perspectives of Ukrainian economy – between European Union and Russia SC_MASTER_GALT&TAGGART 41

Economy of the country attracts investors, but a range of measures on macro- and micro- levels is necessary Attractiveness of Ukraine for investors: brief overview • 1 Ukraine – economics with investment 2• A rangeof economical industries will attract potential for EU and Russia: particular attention of the investors: - High speed of economical growth - Ferrous metallurgy - Capacious internal market - Banking sector - Position between EU and Russia - Retail - Low production costs • 3 For increasing the attractiveness of the 4• For increasing attractiveness of business, a country, a range of state measures is range of measures in the 5 key spheres is necessary in the 5 key spheres: necessary: - Power sector - Transparency - Liberalization - Clear development strategy - Taxation - Investments - External-economic policy - Personnel - Privatization - Innovations Source: Steinberg Capital SC_MASTER_GALT&TAGGART 42

1 INVESTMENT POTENTIAL Ukraine offers a range of advantages to the investors – speedy growth, capacious market, low costs, etc. Ukrainian GDP pro capita in the context of developing countries Forecast of average annual GDP growth for 2007-2011 for some growing economies [%] Comments • Ukraine has one of the quickest China growing economies in the world, and Ukraine is one of the largest countries in Europe. This combination tells about Тurkey economical potential • Capacious internal market for ЕU Russia and Russia • Advantageous capacities for locating Romania a range of industries (raw materials, Тhailand low costs) Mexico Brasil Sources:: EIU, Steinberg Capital SC_MASTER_GALT&TAGGART 43

1 INVESTMENT POTENTIAL Ukrainian economics will be particularly attractive for the investors from EU and Russia Ukraine: location between Russia and European Union Attractiveness for EU Attractiveness for Russia • Capacious sales market, • Capacious sales market, geographic nearness geographic nearness • Comparatively stable • Historical and cultural macroeconomic Russia closeness development • Existing links between • Low costs of inputs (e.g. capital and external EU raw materials, personnel) relations • Political course oriented • Relative confidence in for European Union political system Source: Roland Berger SC_MASTER_GALT&TAGGART 44

EUROPEAN UNION Membership in the EU – priorities in external politics. The EU is still the major economical partner Relationship EU-Ukraine Major tendencies Trade ЕU-Ukraine, 2005 1 High probability of achieving the Free Trade Agreement after Ukraine joins USD 13,2 bn USD 10,2 bn WTO 2 High probability of improving visa regime for the Ukrainians Other goods Other goods 3 Ukrainian lobby in the EU (Poland, Sweden, Great Britain) Investments Plans of accepting the EU standards and laws in Ukraine Paper 4 Textiles Services Transportation Autos services Share in FDI 1) 47% 50% 43% 52% 54% 72% Products of chemical industry Minerals Raw materials Machines and The EU facilities Metals investments in Ukraine [bn USD] Import into Export to 2000 2001 2002 2003 2004 2005 Ukraine from Ukraine from the EU the ЕU 1) Direct foreign investments Source: State committee of statistics of Ukraine, Steinberg Capital SC_MASTER_GALT&TAGGART 45

RUSSIA Russia is the largest sales market for Ukrainian goods and also a considerable investor Relations Ukraine-Russia % from the total Tendencies 24% 42% 19% 38% 18% 42% 22% 36% amount • Decrease in the share of the Russian capital in FDI • Legal obstacles for some Ukrainian goods exported to Russia force the Ukrainians to search for new sales markets • Tensions in relations (e.g. gas crisis in 2005) Ukrainian- Russian trade [bn USD] - Import of Russian goods and services - Export of Ukrainian goods and services Comments Share in FDI 7% 7% 6% 6% 8% 5% • Russian businessmen have been recently exploring the following industries in Ukraine: - consumer goods Russian - trade investments in - banking Ukraine, - non-ferrous metallurgy 2000-2005 [bn USD] 2000 2001 2002 2003 2004 2005 Source: State committee of statistics, Steinberg Capital SC_MASTER_GALT&TAGGART 46

2 ATTRACTIVE INDUSTRIES Investments from the EU come to the consumer goods industry and services, from Russia – to the heavy industry Overview of the shares of foreign investors in the industries of Ukraine1) Investments from the EU: The EU investors control over 80% • Consumer goods – know-how of work with the consumer • Tabacco industry • Household chemicals and cosmetics • Industries with the high penetration rate – resources • Beer manufacture Investments from Russia: The EU investors control from 20% to 80% Russia and the EU control • Heavy industry – the investors are • Ferrous metallurgy • Construction materials • Oil manufacture from 20% to 80%: the leaders of the world market • Fertilizers industry production • Fixed telephony • Communications – work experience • Banking sector • Dairy products • Retail within the industry in Russia • Automotive • Engineered products • Building Control over Ukrainian capital more than 80% Investors from Russia control Russian investors control over from 20% to 80% 80% State property Private property • Power production • Ironstone extraction • Grains • TV and the press • non-ferrous metallurgy • Coal extraction • Pharmaceutics • Confectionary industry • Petroleum refining • Oil and gas extraction • Sugar industry • Мeat industry • Mobile telephony • Post • Paper industry • Industry alcoholic products • Railway 1) Based on the costs of the produced goods, or on the market share of the services of the company with the foreign investments more than 50% from the capital Source: Steinberg Capital SC_MASTER_GALT&TAGGART 47

2 ATTRACTIVE INDUSTRIES Investors are mostly interested in the industries with the highest market capacity and growth Growth speed and market capacities of the industries of Ukraine Market capacity in 2006 Ferrous metallurgy Retail from 10, very [USD bn] (Power industry)1) Banking sector attractive Grains Construction, Pharmaceutics Engineered goods Dairy industry Мeat industry Automotive Fertilizers industry Railway transportations Sugar manufacture from 1 to 10, attractive Fixed communication Ore, oil, and gas extraction Industry of alcoholic products Confectionary industry Construction material Oils manufacture Coil extraction Paper industry Non-attractive Textile industry Juices manufacture Cable TV Before 1, Market turnover Bun goods manufacture Woodwork industry Internet-providers growth in Post 2006 [%] Up to 5%, non-attractive from 5 tо 20%, attractive from 20%, very attractive 1) Current state monopoly, privatization is possible in the medium term perspective Source: State committee of statistics of Ukraine, Steinberg Capital SC_MASTER_GALT&TAGGART 48

2 ATTRACTIVE INDUSTRIES Therefore, the investments in the following industries are the most probable The most attractive industries for FDI1) Very attractive industries Investors • Ferrous I • Banking sector II III Retail • Investors metallurgy from EU from Russia Attractive industries Industries with the • Power production • Sugar manufacture Industries with the high high participation level participation level of of European investors • Аutomotive • Oil manufacture Russian investors • Engineered products • Household chemicals and • Non-ferrous metallurgy cosmetics • Petroleum refining • Тobacco industry • Mobile telephony 1) Alcohol beverages production is not considered due to the strong position of Ukrainian producers, including Russian and world markets. These companies invest into business already now. Source: Roland Berger SC_MASTER_GALT&TAGGART 49

2 ATTRACTIVE INDUSTRIES: II. BANKING SECTOR Banks are rapidly growing. High fragmentation level serves as a precondition for consolidation processes in the future Major actors of the banking sector General cost of the bank assets [USD bn] Assets of the Top-10 banks, 2006(3 Q) [USD bn] Assets share Bank assets as 25% 30% 46% 34% 45% 77%. % of GDP 10% CEE1) Ø 78% 79% 9% 6% CAGR +31% +26% 6% 130 6% 5% 3% 42 3% 23 21 3% 14 16 2% 46% Forecast - banks with Ukrainian capital 1) Central and Eastern Europe - banks with the share of foreign capital Source: National Bank of Ukraine SC_MASTER_GALT&TAGGART 50

2 ATTRACTIVE INDUSTRIES: III. RETAIL Sales networks demonstrate quick growth; 2 Western networks on the market; new actors are expected The rating of the retail networks in Ukraine and the possible new actors The networks, entering the market Growth 71% 75% 78% 45% 106% 50% 54% 38% 48% 50% speed, 2005-20 06. [%] Networks considering entering the market Metro C&C BILLA 2005 2006 Metro C&C - Networks with the foreign capital BILLA Source: the press, companies’ information, estimations by Steinberg Capital SC_MASTER_GALT&TAGGART 51

3 MEASURES ON STATE LEVEL To improve investment attractiveness of the country the government should work in the following 5 spheres Major aspects on macro level (state) Attention focus Directions Power saving, exploration of the alternative power sources, search 1 Power policy for alternative power suppliers Cutting-off bureaucracy, simplifying the relationship processes with 2 Liberalization business, removing contradictions in the laws Stimulation of the internal investments, solving the problems with 3 Taxation VAT compensations, decreasing taxes Solving the problems with the quotes and antidumping, getting closer 4 External economical policy to the European markets Preparation of the enterprises to privatization (restructuring, etc.), 5 Privatization transparency of the tenders, fulfilling plans by the investors Source: Steinberg Capital SC_MASTER_GALT&TAGGART 52

4 MEASURES ON THE BUSINESS LEVEL The enterprises aiming at attracting the investors should be prepared to the changes Major aspects on micro-level (enterprises) Attention focus Directions Ownership structure, organizational structure, reporting procedure 1 Transparency and the system of informing the management Clear strategy of business development, implementation of the 2 Development strategy modern management methods 3 Investments Readiness to invest own assets into business development Development of the employees motivation methods, development and 4 Personnel learning, options of carrer growth Openness to innovations, orientation to the consumer, development 5 Innovations of new products, entering the new markets Source: Steinberg Capital SC_MASTER_GALT&TAGGART 53

SC_MASTER_GALT&TAGGART 54

Sc Master Retrospect

by johanw on Jan 13, 2010

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Sc Master Retrospect — Presentation Transcript