This document discusses mezzanine financing opportunities in Russia and provides an example investment case study. Mezzanine financing involves providing debt capital with equity-like returns through interest payments and equity warrants. NewRussiaGrowth Private Equity Advisors seeks to provide $10-50 million in mezzanine financing to Russian companies, targeting a 10%+ annual return on the debt plus equity upside through warrants. The document analyzes a past investment in Begemot, a leading Russian toy retailer, where NRG provided debt financing at an 8-10% rate plus a 10% equity warrant. NRG has successfully invested over $177 million through its first fund and is raising a second, targeting $250 million for mezzanine deals in

1. NewRussiaGrowth Private Equity AdvisorsMezzanine opportunities in RussiaMarch 2011

2. MezzanineIn architecture, a mezzanine - an intermediate floor or the lowest balcony in a theatre.(from Italian mezzano “middle”)Cash Interest

3. PIK Interest

4. Ownership (equity kicker)

5. Pre-money EV $80m

6. Equity $60m

7. Debt $20m

8. New investments $20m PE – 25% post-money EV$100mMezz– Debt $20m @ 8-10% plus 10% option call @ $60m Mcap3x growth2

9. Standard Terms of VRG TransactionsInvestment StructureHybrid investments (collateralized debt + equity kickers)

10. 18-54 month repayment of investment capital

11. Ticket size: $10 – 50m

12. Collateralized

13. Pledge of target companies’ shares, liquid assets

14. Personal guarantees of the companies’ owners Target Returns10%+ targeted interest/current return

15. Equity kickers leading to 30%+ targeted gross return3

16. 2011 NRG Investment Case Study: BegemotCompany DescriptionLeading toy retailer in Russia, second only to Detskiy Mir in terms of revenue from toys

17. Focus on mid-market and low-cost segments with retail prices 40% lower on average than in DetskiyMir

18. 54 owned shops and 144 franchisees in 192 Russian cities

19. Key toy supplier for leading retail chains in Russia, such as Magnit, Perekrestok and Sedmoi Continent

20. In-house ERP system allows daily control of all sales and stocks

21. Average markup is 75%: Private label markup is 250%, which accounts for 15% of total sales

22. EBITDA in 2010 has grow by 45% as a result of significant increase in number of franchisees

23. After new debt, the debt/EBITDA ratio below 2xKey Financials4

24. 2009 NRG Investment Case Study: BegemotTransaction Structure 5

25. NRG at a GlanceTop-5 independent alternative investment manager with focus on Russia & CIS

26. Currently NRG works with Volga River One Fund, which has successfully invested in various Russian companies from telecoms to baby food producers

27. NRG completed the 1st closing of Volga River Growth Fund in 4Q 2010PrivateEquityHybrid EquityVolga River OneVolga River GrowthEstablished in 2006

28. 20 LPs

29. $177m

30. Team of 10 professionals

31. 5 portfolio companies, 1 exit

32. Established in 2010

33. 1st closing: Q4 2010

34. Target size: $250m

35. Team of 5 professionals

36. Leading Investor for 1 closing: EBRD 6