AVG Russian Crop Production Fund Presentation

AVG RUSSIAN CROP PRODUCTION FUND

AVG Russian Crop

Production Fund

1

September 14, 2011

AVG RUSSIAN CROP PRODUCTION FUND << Return to table of contents 2

All photos are of existing AVG operations

AVG RUSSIAN CROP PRODUCTION FUND << Return to table of contents

Disclaimer

THIS DOCUMENT IS CONFIDENTIAL

AND IS AVAILABLE ONLY TO

POTENTIAL INVESTORS WHO ARE

ADDRESSEES OUTSIDE OF THE

UNITED STATES, AUSTRALIA,

CANADA OR JAPAN.

IMPORTANT: You must read the

following before continuing. The following

applies to the presentation (the

„„document‟‟) following this notice, and

you are therefore advised to read this

carefully before reading, accessing or

making any other use of the document.

In accessing the document, you agree to

be bound by the following terms and

conditions, including any modifications to

them any time you receive any

information from us as a result of such

access. The document has been

prepared solely in connection with the

information purposes for certain

institutional and professional investors of

the securities described herein. This

document is not being made available to

the public.

3

This document serves exclusively as

background material introducing the AVG

CIS Agricultural Opportunities Fund (the

“Fund”).

Any potential investor should be aware

that the value of the investment is

subject to a variety of risks and may fall,

as well as rise, and investors may not get

back the amount invested.

This document is neither an offer to sell,

nor a solicitation of any offer to buy

shares in the Fund or interests in AVG

Capital Partners in any jurisdiction.

NOTHING IN THIS DOCUMENT

CONSTITUTES AN OFFER OF

SECURITIES FOR SALE IN ANY

JURISDICTION WHERE IT IS

UNLAWFUL TO DO SO. THE

SECURITIES THAT MAY BE

DESCRIBED HEREIN HAVE NOT

BEEN, AND WILL NOT BE

REGISTERED UNDER THE US

SECURITIES ACT OF 1933, AS

AMENDED (THE„„SECURITIES ACT‟‟),

OR THE SECURITIES LAWS OF ANY

STATE OF THE UNITED STATES OR

OTHER JURISDICTION AND THE

SECURITIES MAY NOT BE OFFERED

OR SOLD WITHIN THE UNITED

STATES (AS DEFINED IN

REGULATION S UNDER THE

SECURITIES ACT), EXCEPT

PURSUANT TO AN EXEMPTION

FROM, OR IN A TRANSACTION NOT

SUBJECT TO, THE REGISTRATION

REQUIREMENTS OF THE

SECURITIES ACT AND APPLICABLE

STATE OR LOCAL SECURITIES LAWS.

THIS DOCUMENT IS NOT AN

ADVERTISEMENT AND IT MAY NOT

BE FORWARDED OR DISTRIBUTED

TO ANY PERSON AND MAY NOT BE

REPRODUCED IN ANY MANNER

WHATSOEVER. ANY FORWARDING,

DISTRIBUTION OR REPRODUCTION

OF THIS DOCUMENT IN WHOLE OR

IN PART IS UNAUTHORISED. FAILURE

TO COMPLY WITH THIS DIRECTIVE

MAY RESULT IN A VIOLATION OF THE

SECURITIES ACT OR THE

APPLICABLE LAWS OF OTHER

JURISDICTIONS


Table of contents

4

(Click on links)

1. Executive summary

a) The opportunity

b) Key value drivers

c) Strengths

3. Business environment

a) Soil • Climate • Crops • Yields

b) Infrastructure

c) Government support

d) Support from state banks

e) Country information

4. Fund and management company

info

a) The management company

b) Controlling shareholder in one of

Russia‟s largest agro-holdings.

c) AVG family of agro funds

d) Fund data sheet

e) Bios

f) Risk management

5. Financial information

a) KFIs and financial statements from

model

b) Investment program

c) Economics per ha

2. Strategy and execution

a) Geographic diversity

b) Land

c) Current farm management

d) Future farm management

e) Yield improvements

f) Synergies with Razgulay

group

g) Storage

h) Exit strategy





4. Fund and management company information


Wheat 2011 Harvest: 310,000 tons

Hectares planted: 103,000 ha

Average yield: 3 tons / ha

Estimated sale price: $US 210 / ton

Estimated value: $US 65 million

The Kshensky elevator complex, an AVG asset


The opportunity:

6

Co-invest with one of Russia‟s leading

agri-businesses.

≈ 20% annual

ROE over first 5 years.

Existing

operations

Not a start-up. Existing assets

and management.

Access Highly profitable investment

opportunities.

Security

of having the Russian

government as co-investor and

partner.

Proven team 19 year farming track record.

Specialize in high-margin grain, sugar-

beet, and oilseed production.

People

Focus on top-quality farm

management talent, Russian

and international.

Government

partnership

Leading government

companies as equity investors.

Yield

improvements

20 – 40 % is realistic within 1-3

years.

Value

acquisitions

at steep discount to cash flow

value.

Grain storage Essential to achieve good crop

prices.

Strategy:


Key value drivers

7

Micro:

Expertise in land purchase

Inexpensive asset acquisition

Strong management

Macro:

Strong ag commodity fundamentals

Strong Russian economic growth (5%)

Government subsidies

Large scale public and private sector

investment in ag sector and infrastructure


Strengths

8

Financial Operational Risk Management

Proven fund management team Existing operations and assets Federal govt support

Access to cheap debt Synergies with existing investor-

controlled operations

Good local govt relations

30% equity IRRs for 5 years Large, quick, and realistic

productivity and yield gains

Geographic diversification

High-value acquisition

opportunities

High-margin business segments

Strong fundamentals for ag

commodities

Strong farm management team

Forward contracts on sugar-beets

and grains

Grain storage available

$50 million already under

management

Sugar beets at Razgulay‟s Lgov sugar plant, Kursk







Sugar Beet 2011 Harvest: 1.6 million tons





The Tikhoretsky sugar-beet processing plant, an AVG asset


Geographic diversity

10

A hedge against

weather risk

Allows for more

efficient use of

machinery

Region

≈ Currently

controlled by

AVG. Could be

contributed.

≈ Expan-

sion ≈ Total

Central Black

Earth 40,000 100,000 140,000

Southern 20,000 50,000 70,000

Urals 20,000 100,000 120,000

≈ Total 80,000 250,000 330,000

Expansion plans

Razgulay combines in Krasnodar


Land

Proven ability and expertise:

11

Fair real value estimate for Black Earth Russian farmland: $4000 - $5000 / ha

Expertise in sourcing, performing

due diligence on, and acquiring land.

19 years experience and relationships.

Partnership with federal government.

Razgulay founded in 1992. One of the first large Russian agri-businesses.

Strong local government

relationships.


Current farm management at Razgulay

Farm Director

Head Engineer

Head Agronomist

Farm workers

Head of Farming

Moscow

12

Farm Director

Head Engineer

Head Agronomist

Farm workers

Farm Director

Head Engineer

Head Agronomist

Farm workers

Financial control

Legal Technology

(GPS)

Personnel Supply

purchase Field

equipment

Security Produce

sales Land

acquisition

Average farm size: 12,000 ha

Average worker salary: $400 / month

Average # of workers per 1000 ha: 10

The Razgulay Group is in the

process of implementing GPS

and related precision-agriculture

techniques on its farms.


Future farm management

CEO and top management based in

agricultural regions, not in Moscow.

Recruit top-quality international

farming team.

Work with leading global farm

management consultants to improve

technique and source talent.

Focus on achieving high quality

management, and intensive farming

per 3000 ha block.

Major strategic focus on retaining

top talent

Embrace new technologies (i.e. GPS

control systems) to improve yield

and productivity.

13


Yield improvements

Crop Current Yield

Attainable yield within 3 years

% Improvement

Wheat (Black Earth 3.4 5-6 ≈ 60%

Sugar Beet (Black Earth)

31 36 ≈ 16%

Soy (Southern region) 1.8 2.5 ≈ 40%

14

Improved technique New machinery

GPS technologies No-till technique

Precision

agriculture Better seeds

Better fertilizer use Herbicides and

pesticides


Synergies with Razgulay Group

Management expertise | Personnel recruitment | Co-investment | Forward crop contracts

Market intelligence | Investment / acquisition opportunities | Relationships

15

Grain Storage and processing Sugar Manufacturing Crop cultivation

• 22 operating units:

• 12 elevators 2.4 mm tons

capacity

• Largest in Russia - 3 grain

processing plants

• 7 flour mills

• Processed 543,000 tons in 2010


• 10 processing plants

• 1 milk bottling plant

• Annual capacity: 4 mm tons

sugar beet and 1.4 mm tons

sugar in bulk.

• 2010 sales: 475,000 tons (14% of

Russian market)


• Total land: 460,000 ha.

Cultivating 332,000 ha.

• 2010 harvest figures:

• Sugar beet: 926,000 tons

• Grain and oil seeds: 400,000

tons

• Bulk rice - 130,000 tons

% of sales

33%

44%

23%


Storage

16

A key strategic requirement

Access to Razgulay’s network of elevators

Extensive use of bagging

Important to achieving

maximal grain prices in Russia

A major operational and

financial advantage

All photos are of existing AVG operations


Exit strategy

17

IPO, sale, or further round financing.

Eligible for IPO in 3 years.

Convincing precedent for FSU ag

IPOs in London, Warsaw, Frankfurt,

Stockholm, Moscow.

As Russian farming becomes more

productive, and more fully invested,

possible selective asset sales at

steep premium to acquisition cost.

AVG will be proactive in maximizing

shareholder valuation in future years.

AVG RUSSIAN CROP PRODUCTION FUND 18






Sunflower 2011 Harvest: 38,000 tons


Average yield: 1.6 tons / ha

Estimated sale price: $US350 / ton



Soil • climate • crops • yields

19

Wheat

Barley

Sugar-beet

Sunflower

Soy

Rapeseed

Rice

Potatoes

Buckwheat

The richest topsoil in

the world. Called “Black Earth”, or

“Chernozem” it is unusually fertile,

a true natural phenomenon. It

contains a very high percentage of

humus (10% to 15%), and high

percentages of phophoric acids,

phosphorus, and ammonia,

requiring less fertilizer and

delivering excellent yields. Most

topsoil in the US and Europe has

a depth of 6 -12 inches (15 – 30

cm). In this region of Russia, the

topsoil averages 40 inches (1

meter) in depth, and sometimes

reaches 80 inchest (2 meters)!

Climate The climate in this region is similar

to the northern American Midwest

(North Dakota), but delivers better

yields due to the richer soil.

Yields Without fertilizer, Chernozem

yields an average of 3 metric tons

of wheat per hectare, and with

fertilizer, reliable yields are as

high as 6 tons. The soil is so rich it is actually black,

like potting soil from a garden shop.

Hence its name, “Black Earth”.


Infrastructure: Good local roads and rail links

20

Local roads connecting farms in a typical Central Black

Earth region. Small circles are usually farms 3 – 4 km

distant from each other.

A typical local road in the central black earth

region: well-maintained and not crowded.

Compare to Brazil: almost no rail and far

fewer roads which are badly over-

crowded.

The black sea port of

Novorossisk. It, and

other Russian ports

are being rapidly

expanded.

It is a common

misperception that

Russia has poor

infrastructure.

In fact, in the

agricultural regions, it is

quite well developed,

and not over-burdened,

as in Brazil.

The government is

investing heavily in

modernization,

particularly of ports and

transportation.

Highway

construction in

the black

earth region in

European

Russia.


Major government sector support

21

Agriculture is a top government priority. It‟s viewed as vital element of national security, a key contributing factor to national

export earnings, and a key area of sustainable long-term competitiveness

Tax benefits (0% profit tax, 20.2% payroll tax, 10% VAT)

Subsidized agricultural credits

Subsidized lease terms

Fertilizer and energy cost reimbursement

Introduction of minimum shares of domestic food

production by segment

Government grain purchase to support prices

Effective tariff regulation and state protection from

imports

Financial support Favorable industry regulation

Share of domestic production

Source: Russian Ministry of Agriculture

95%

80% 80%85%

90%95%

100%

56%

92%

75%83%

99%

Grain Sugar Vegetables Meat and meat

products

Milk and milk

products

Potatoes

Minimum shares accorging to Doctrine

Actual shares, 2009

Financial support for the agricultural sector by purpose

11 10 9 9 928 37 45 48 488 11 11 12 137

19 25 30 31

19

1825 22 2383

99108

121 132

35 5 4 6

159

199

228246

262

0

50

100

150

200

250

300

2008 2009 2010 2011E 2012E

Animal breeding subsidies Interest rate subsidies

Subsidies on fertilizers Plant grow ing subsidies

Construction capex Other from federal budget

Subsidies from regional budgets

Source: Russian Ministry of Agriculture

RUR bn


Government agricultural support as % of gross farm receipts 2008-2012 Federal Program for Agriculture Development

Source: Federal Program for Agriculture Development and Regulation of Agricultural Markets for 2008-2012;

2008-2010 GDP data - Rosstat, 2011-2012 GDP - Federal Law for Federal budget

Note: Total government spending includes plant growing subsidies, interest subsidies, animal breeding subsidies,

land fertilities subsidies, construction capex, etc.

% of

GDP

Government support of the industry

Program for Development of sugar beet complex in Russia for over RUR61 bn

of government spending in 2010 – 2012

Floating import tariff on raw sugar and prohibitive tariff on white sugar allow for

stable domestic sugar price and profitability of domestic producers

Access to long-term loans at subsidized interest rates

0% income tax for agricultural producers until 2013

Despite Russia‟s strong intentions of entering WTO in 2011, the government is

planning to continue general industry support, i.e.:

− Ministry of Agriculture insists on maintaining overall government

agricultural spending at the current level until 2017

− Ongoing negotiations with WTO members on keeping meat import quotas

and raw sugar tariffs at the previously agreed level

Producer Support Estimate (PSE) as % of gross farm receipts,

last 3 years average

Source: OECD, PSE database, 2009 and 2010

(1) PSE is an indicator of the annual monetary value of gross transfers from consumers and taxpayers to agricultural

producers, arising from policy measure. It measures support arising from policies targeted to agriculture relative to a

situation without such policies

(2) 2007-09 average for Japan, EU27, OECD, Turkey, Canada and United States (latest available).

2005-07 average for Russia, China and Brazil (latest available)

(3) 2009 data for Japan, EU27, OECD, Turkey, Canada and United States (latest available).

2007 data for Russia, China and Brazil (latest available)

2

1

6%

9%

9%

14%

17%

22%

23%

34%

47%

Brazil

China

United States

Russia

Canada

OECD

EU27

Turkey

Japan

PSE as % of GDP 3

0.9%

3.7%

0.7%

0.6%

0.6%

0.6%

0.2%

1.4%

0.4%

Russia Worldwide

228 246 262

199 159

2008 2009 2010 2011 2012

Total government spending, RUR bn

0.39% 0.51% 0.51% 0.49% 0.47%

Government support 2


Strong partnerships with authorities and state banks

AVG works closely with VEB in managing and developing Razgulay and related investment projects. A government owned bank,

VEB, the 3rd largest bank in Russia, holds 80% of the outstanding debt of Razgulay.

AVG also closely cooperates with regional governors and administrations in subsidies, land purchasing and investment projects

sourcing matters.

Russian government debt financing ≈ 70% of investment need, at preliminary agreed near 2% real interest rate, dramatically

increases equity returns .

23

Support from VEB, federal and local authorities Collaboration with major lenders in agriculture


Russian agriculture is highly attractive

A top 5 world agro economy

#2 in arable land. Large arable land expansion possibilities

Relatively inexpensive land resources ($300-400/Ha vs approx.

$4000 for global comps)

Projected investment of $17 to $20 billion per year in 2011-2015

Government subsidies and incentives

Large and growing export and domestic markets.

Import substitution.

24

173

123

94

67

59

38

33

0 50 100 150 200

USA

Russia

Europe

Brazil

Other LA countries

Indonesia

Ukraine

Arable land

Source: FAOSTAT Source: Conab, Indonesian Ministry of Agriculture, USDA, FAO, Credit Suisse

ha mm

Country rank in the world by products

#1

#2

#3

#4

Oats, sunflower seed,

barley, rye, buckwheat

Sugar beets

Potatoes

Wheat


Robust markets

25

Fastest growing export markets

Import

substitution

Expanding economy fueling

domestic consumption

Pork Poultry Dairy Food Processing


Strong government support Comments Large and fast growing food market in Russia

Food consumption in Russia has a strong

growth potential (CAGR of 13.3% in 2011E-

2014E)

Obsolete and inefficient production

infrastructure

Highly fragmented and unconsolidated market

Opportunity for the market consolidation for

efficient players

124140

167193

160185

211

240

272

306

2005A 2006A 2007A 2008A 2009A 2010E 2011E 2012E 2013E 2014E

Food consumption, US$ bn Food consumption per capita, US$

863 982 1,178 1,361 1,125 1,307 1,492 1,708 1,940 2,191

Source: Russian Ministry of Agriculture, Business Monitor International Ltd

CAGR 2005-09 6.6%

CAGR 2010-14 13.3%

Fast sector growth







Rice: 2011 Harvest: 112,000 tons





The Poltavsky rice processing plant in Krasnodar, an AVG asset

Rice paddies in Krasnodar


The fund management company

Founded in 2007

Over $200 million AUM (including soft commitments)

Successful track record in agriculture – in spring 2010 acquired

control of Razgulay Group, a public company, one of largest

Russian diversified agro-holdings. Stock gain as of March 31,

2011: 26%

28

Stock price (RUR)

Source: Bloomberg

0

20

40

60

80

100

Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11

+26%


29


Controlling shareholder in one of Russia’s

largest agro-holdings

Razgulay Group is one of the largest players in the

Russian agricultural market:

‒ 460 ha land bank under management

‒ # 1 in rice cultivation (over 30% of Russian market)

‒ A leading sugar manufacturer (14% of the Russian

market)

‒ One of largest elevator operators in Russia

30

Wheat production

Wheat and sugar production

One of top 5 land banks

Source: Ministry of Agriculture, IKAR

Financial Indicators

RUR bn

Source: Razgulay Group

30.2

25.9

0

10

20

30

40

2009 2010П

3.1 4.1

2009 2010П

10%

16%

0%

5%

10%

15%

20%

2009 2010П

Sales EBITDA EBITDA margin

thousand ha 570

500460 460 450

0

100

200

300

400

500

600

Prodimex Иволга-

холдинг

Разгуляй НАПКО Золотой

КолосIvolga-

Holding

Razgulay

NAPKO Zolotoy

Kolos


AVG family of FSU ag funds

31

Name Status Focus

Current AUM, or

assets currently

controlled, proposing

to contribute

Target

add’tl

raise

≈ Annual

ROE over

5 years

1 FSU

Agricultural

Opportunities

Fund

Fund is registered. Advanced

discussions with investors. Assets partly

acquired by AAM and acquisition targets

identified.

Diversified FSU ag

assets. Protein,

crops, sugar, rice.

Opportunistic focus.

≈ $200 million $800

million

30%

2 Russian

Poultry Fund

Initial planning stage. Fund not

registered.

Poultry production ≈ $100 million $500

million

30%

3 Russian Crop

Production

Fund

Proposed. (Subject of current

presentation)

Grain, sugar beet,

oilseed cultivation,

land acquisition.

≈ $50 million $500

million

30%

4 Russian Sugar

Fund

Proposed Sugar

manufacturing from

sugar beets.

≈ $100 million $600

million

30%

5 Russian Rice

Fund

Proposed Rice cultivation ≈ $50 million $200

million

30%

• Total assets currently owned by AVG and in operation: $100 million.

• Investment projects: ≈ $2 billion.

• 70% debt financing available for all projects @ 2% real interest.

Additional investment projects:

• Greenhouse vegetable cultivation

• Aquaculture (fish farming)


Russian crop cultivation fund data sheet (proposed)

32

Structure Closed end

Currency $US

Domicile Cayman Islands

Geographic

Focus Russia and CIS

Sector focus Crop cultivation

Agricultural land

Investment

amount 30% of fund assets

Minimal

investment $1 million

Investment

Manager

Avangard Asset Management

Target size Min: $500 million

Max: $1.5 billion

Term 5 years with a possible 2 year extension

Investment

project maturity

horizon

3-7 years

Target Return 20 - 30% annual

Exit Strategy

IPO/ Private placement

Sale to strategic investor

Private sale of stock

Dividend policy Quarterly

Fees 1.5% management fee

20% performance fee

Loss

compensation

reserve

50% of management equity is held in reserve as a

security against possible management loss

Administrator

Auditor

Legal


Bios

33

Rustem Mirgalimov

Since 2010 and currently: Chairman of the

Board and CEO of the Razgulay Group

Since 2007 and currently: Managing

Partner of AVG Capital Partners

2006-2008: Member of Supervisory Board

of the Russian National Association of

Securities Markets Participants

Prior to AVG, Senior Executive and from

2004 Deputy Chairman of AK BARS Bank,

a Top-20 Russian universal bank

Prior to AK BARS Bank, Mr. Mirgalimov

was the CEO of Art-Finance, an

investment company

MBA 2005 Chicago Business School

Degree in finance from Kazan State

Financial and Economic Institute (1995)

and in law from Kazan State University

(1997)

Dmitry Steinsapir

From 2010 and currently: Board member of Razgulay Group

Since 2009 and currently: Managing Partner at AVG Capital Partners

2006-2008: Member of Supervisory Board of the Russian National Association of Securities Markets Participants

2005 -2007: Member of the board of RTS, the leading Russian securities exchange.

Prior to AVG, led the investment division of AK BARS Bank, and was CEO of AK BARS Finance.

Prior to AK BARS, CEO of the Prospekt Brokerage, one of Russia‟s first brokerages

Prior to Prospekt, senior management positions at Russian branches of ING Barings and ABN Amro

MBA 2005 Chicago Business School

MBA 1996 Moscow International Business School

Registered CPA (2006)

Eldar Nazmutdinov

Since 2010: Partner at AVG Capital Partners

Prior to AVG, co-head of legal department of

New Russia Growth, a Russian growth

strategy private equity fund

Prior to NRG, head of legal at Sputnik Group,

a leading Russian private equity fund

Prior to Sputnik, Deputy CEO at the Prospekt

Brokerage, one of Russia‟s first brokerages

Extensive experience in M&A in financial

services, IT, telecoms, and retail

2002 Degree in international law from

MGIMO, Russia‟s leading university of

international relations.

Certified tax consultant


Risk management

34

Political country risk 1 Partnership with federal government

Legal conflict resolution risk 2 Partnership with federal government

Land title risk 3 Expert experience in land acquisition, title due diligence.

Partnership with federal government

Government corruption risk 4 Partnership with federal government

Weather risk 5 Crop insurance. Crop diversity. Geographic diversity.

Government regulation risk

(export restrictions) 6 Unlikely over long term

Commodity price risk 7 Strong forward fundamentals

Crop risk 8 Crop insurance. Crop diversity. Geographic diversity.

Decrease in asset prices 9 Already deeply undervalued. Nowhere to go but up.

Risk factor Response







3

5

Soy 2011 Harvest: 37,000 tons


Average yield: 1.6 tons / ha



Harvesting soy on a Razgulay farm in Krasnodar


Key Results

Returns Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7

ROE (annual) -11% 19% 24% 20% 17% 14% 12%

Production Best scenario Base scenario Worst scenario Current IRR (cumulative) 0% 0% 0% 0% 7% 21% 29%

Operating costs + Depreciation (% of revenue) 60% 70% 80% 70% IRR for the project 29%

1 time land improvement ($ per ha) 100 150 200 150

Yield within 3 years of start cultivation 6,0 5,0 4,0 3,2 Debt

Crop failure allowance 7% 10% 20% 10% Debt 76 497 642 136 709 367 199 544 831 199 544 831 199 544 831 199 544 831 199 544 831

Interest coverage 0 13 19 24 29 33 37

Financial Best scenario Base scenario Worst scenario Current

Debt to equity ratio 70% 60% 50% 100% Required Investment

Wheat price: (% increase per yr) 13% 12% 11% 0% Total project 127 496 070 100 352 875 104 725 774 0 0 0 0

Land price: (% increase per yr) 40% 35% 20% 0% Cumulative project 127 496 070 227 848 945 332 574 719 332 574 719 332 574 719 332 574 719 332 574 719

Tax rate 7% 9% 11% 9% From debt 76 497 642 60 211 725 62 835 465 0 0 0 0

Discount rate 12% 15% 18% 15% Cumulative debt 76 497 642 136 709 367 199 544 831 199 544 831 199 544 831 199 544 831 199 544 831

Real Interest Rate 1% 2% 4% 4% From equity 50 998 428 40 141 150 41 890 310 0 0 0 0

Contingency on equity capital 25% 25% 25% 25% Cumulative equity 50 998 428 91 139 578 133 029 888 133 029 888 133 029 888 133 029 888 133 029 888

Other Contribution to increase in shareholder's equity

% of land owned as property (as opposed to lease) 70% (Changeable) Net profit from operations 28% 45% 54% 52% 48% 44%

Exchange rates Constant Land appreciation 24% 22% 46% 48% 52% 56%

Inflation Zero Additional Capital 48% 33% 0% 0% 0% 0%

Other

Shareholders equity 45 868 475 129 918 581 255 630 283 389 704 920 564 086 377 782 765 792 1 056 436 563

Net cash flow -85 526 809 3 232 758 -17 656 075 67 957 846 93 413 013 104 669 581 129 734 548

Net profit -5 129 953 25 197 802 60 408 755 77 292 284 97 227 053 113 261 306 129 734 548

DCF value of company 298 886 524 469 121 235 430 750 217 403 651 697 327 594 700 247 886 437 374 979 859

Land controlled (ha) 120 000 120 000 200 000 200 000 200 000 200 000 200 000

For additional ratios and financial indicators, see the "Additional FI" sheet.

Base scenarioCurrently running: (Drop down menu):

(For other assumptions, see "Additional Assumptions" sheet)

Basic Assumptions

Note: In addition to choosing a scenario, you can manually insert any value in the high-lighted column.

Key assumptions and financial indicators from model


Current Scenario: Base scenario1 2 3 4 5 6 7

Income Statement Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7

Revenue from cultivation 121,413,600 254,580,480 316,424,909 389,446,042 436,179,567 488,521,115

Cost of goods sold, operating expenses,

depreciation84,989,520 178,206,336 221,497,436 272,612,229 305,325,697 341,964,780

One time land improvement costs per ha

of acquired land18,000,000 12,000,000

Operating Profit 36,424,080 76,374,144 94,927,473 116,833,812 130,853,870 146,556,334

Interest Expense 1,529,953 2,734,187 3,990,897 3,990,897 3,990,897 3,990,897 3,990,897

Amortization of Land improvement costs 3,600,000 6,000,000 6,000,000 6,000,000 6,000,000 2,400,000

Profit before Tax -5,129,953 27,689,893 66,383,247 84,936,576 106,842,916 124,462,973 142,565,438

Tax 2,492,090 5,974,492 7,644,292 9,615,862 11,201,668 12,830,889

Net Profit after Tax -5,129,953 25,197,802 60,408,755 77,292,284 97,227,053 113,261,306 129,734,548

21% 24% 24% 25% 26% 27%

Balance Sheet Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7

Cash and Cash Equivalents 23,969,261 113,791,047 196,632,134 259,179,520 345,786,640 442,527,929 563,181,059

Goods in process 25,496,856 53,461,901 66,449,231 81,783,669 91,597,709 102,589,434 102,589,434

Land Beginning of Year 58,500,000 78,975,000 177,693,750 239,886,563 323,846,859 437,193,260

Add: Purchase of Land 58,500,000 71,077,500

Add: Appeciation in land value 20,475,000 27,641,250 62,192,813 83,960,297 113,346,401 153,017,641

Land Value at the end of year 58,500,000 78,975,000 177,693,750 239,886,563 323,846,859 437,193,260 590,210,901

One time land improvement costs (Gross) 18,000,000 30,000,000 30,000,000 30,000,000 30,000,000 30,000,000 30,000,000

Less: Accumulated Amortization 3,600,000 9,600,000 15,600,000 21,600,000 27,600,000 30,000,000 30,000,000

One time land improvement costs (Net) 14,400,000 20,400,000 14,400,000 8,400,000 2,400,000

Total Assets 122,366,117 266,627,948 455,175,115 589,249,751 763,631,208 982,310,623 1,255,981,394

Long-Term Debt 76,497,642 136,709,367 199,544,831 199,544,831 199,544,831 199,544,831 199,544,831

Shareholders Equity

Capital 50,998,428 91,139,578 133,029,888 133,029,888 133,029,888 133,029,888 133,029,888

Retained earnings -5,129,953 18,304,003 74,484,146 146,365,970 236,787,130 342,120,144 462,773,274

Add: Appeciation in land value 20,475,000 48,116,250 110,309,063 194,269,359 307,615,760 460,633,401

Total Shareholder's Equity 45,868,475 129,918,581 255,630,283 389,704,920 564,086,377 782,765,792 1,056,436,563

Total Liabilities and Shareholders Equity 122,366,117 266,627,948 455,175,115 589,249,751 763,631,208 982,310,623 1,255,981,394

Cash Flow Statement Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7

Net Cash flow from Operating activities -27,026,809 3,232,758 53,421,425 67,957,846 93,413,013 104,669,581 129,734,548

Land Purchase 58,500,000 71,077,500

Land improvement costs 18,000,000 12,000,000

Net Cash flow from Investing activities -76,500,000 -12,000,000 -71,077,500

Financing activities

Cash inflow (outflow) from Long-term borrowing76,497,642 60,211,725 62,835,465

Equity Capital raised 50,998,428 40,141,150 41,890,310

Dividends Paid -1,763,846 -4,228,613 -5,410,460 -6,805,894 -7,928,291 -9,081,418

Net Cash flow from Financing activities 127,496,070 98,589,029 100,497,161 -5,410,460 -6,805,894 -7,928,291 -9,081,418

Change in Cash Position 23,969,261 89,821,786 82,841,086 62,547,386 86,607,119 96,741,289 120,653,130

Cash and cash equivalents, beginning of year 23,969,261 113,791,047 196,632,134 259,179,520 345,786,640 442,527,929

Cash and cash equivalents, end of year 23,969,261 113,791,047 196,632,134 259,179,520 345,786,640 442,527,929 563,181,059

Financial statements from model

Razgulay’s estimated

2011 crop value:

Sugar Beet: $112 million

Wheat: $65 million

Rice: $43 million

Soy: $20 million

Flax: $16 million

Sunflower: $13 million

Barley: $12 million

Other: $1 million

Total: $282 million


Additional information

38

NET SALES / ha $1,000

(4 tons/ha @ $250 less

moisture and foreign

matter avg)

VARIABLE COSTS PER HA

Land $43

Equipment $70

Fertilizer $85

Fuel & Lubricants $50

Seeds $70

Chemicals $56

Storage and Transport $40

Field Labor $20

TOTAL VARIABLE COSTS $434

Management $30

TOTAL COSTS $464

GROSS PROFIT PER HA $536

CONTINGENCY @ 12% -$120

NET PROFIT PER HA $416

PROFITS / SALES 42%

Economics per hectare:

Item Amount Comments

Land acquisition $125 mil ≈ 250,000 ha @$500 / ha

Equipment purchase

/ lease, upgrades $165 mil ≈ $500 per ha for 330,000 ha

Working capital $165 mil ≈ $500 per ha for 330,000 ha

Senior management $3 mil For first three years @ $1 million per year.

Total ≈ $458

mil Over ≈ 3 years

Investment Program:

Razgulay combines in Volgograd, 2009


Contact info

39

Charles Bausman

Director for Investments

AVG Capital Partners

[email protected]

www.avgfund.com

Disclaimer THIS DOCUMENT IS CONFIDENTIAL AND IS AVAILABLE ONLY TO POTENTIAL INVESTORS WHO ARE ADDRESSEES OUTSIDE OF THE UNITED STATES, AUSTRALIA, CANADA OR

JAPAN.

IMPORTANT: You must read the following before continuing. The following applies to the presentation (the „„document‟‟) following this notice, and you are therefore advised to read this

carefully before reading, accessing or making any other use of the document. In accessing the document, you agree to be bound by the following terms and conditions, including any

modifications to them any time you receive any information from us as a result of such access. The document has been prepared solely in connection with the information purposes for certain

institutional and professional investors of the securities described herein. This document is not being made available to the public.

This document serves exclusively as background material introducing the AVG CIS Agricultural Opportunities Fund (the “Fund”).

Any potential investor should be aware that the value of the investment is subject to a variety of risks and may fall, as well as rise, and investors may not get back the amount invested.

This document is neither an offer to sell, nor a solicitation of any offer to buy shares in the Fund or interests in AVG Capital Partners in any jurisdiction.

NOTHING IN THIS DOCUMENT CONSTITUTES AN OFFER OF SECURITIES FOR SALE IN ANY JURISDICTION WHERE IT IS UNLAWFUL TO DO SO. THE SECURITIES THAT MAY BE

DESCRIBED HEREIN HAVE NOT BEEN, AND WILL NOT BE REGISTERED UNDER THE US SECURITIES ACT OF 1933, AS AMENDED (THE„„SECURITIES ACT‟‟), OR THE SECURITIES

LAWS OF ANY STATE OF THE UNITED STATES OR OTHER JURISDICTION AND THE SECURITIES MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES (AS DEFINED IN

REGULATION S UNDER THE SECURITIES ACT), EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS

OF THE SECURITIES ACT AND APPLICABLE STATE OR LOCAL SECURITIES LAWS. THIS DOCUMENT IS NOT AN ADVERTISEMENT AND IT MAY NOT BE FORWARDED OR

DISTRIBUTED TO ANY PERSON AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT

IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE SECURITIES ACT OR THE APPLICABLE LAWS OF

OTHER JURISDICTIONS

Moscow office

109428, Moscow, Ryazansky prospect, 61/4

Phone: +7 (495) 232 5543

Mobile: +7 (985) 920 3076

Cayman office

P/o box 1344

20 Genesis Close

Grand Cayman KY1-1108, Cayman Islands

Documents

AVG Russian Crop Production Fund Presentation