AVG Russian Crop Production Fund Presentation

AVG Russian Crop Production Fund
September 14, 2011
AVG RUSSIAN CROP PRODUCTION FUND
All photos are of existing AVG operations

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Disclaimer
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This document serves exclusively as background material introducing the AVG CIS Agricultural Opportunities Fund (the Fund).
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Table of contents
1. Executive summary
a) The opportunity b) Key value drivers c) Strengths
3. Business environment
a) b) c) d) e) Soil Climate Crops Yields Infrastructure Government support Support from state banks Country information
2. Strategy and execution 4. Fund and management company info

a) Geographic diversity b) Land c) Current farm management d) Future farm management e) Yield improvements a) The management company b) Controlling shareholder in one of Russias largest agro-holdings. c) AVG family of agro funds d) Fund data sheet e) Bios f) Risk management
f)
Synergies with Razgulay group
g) Storage h) Exit strategy
5. Financial information
a) KFIs and financial statements from model b) Investment program c) Economics per ha
(Click on links)
1.
Executive summary
2.
3. 4.
Strategy and execution

Business environment Fund and management company information
5.
Financial information
Wheat 2011
Harvest: Hectares planted: Average yield: Estimated sale price: Estimated value: 310,000 tons 103,000 ha 3 tons / ha $US 210 / ton $US 65 million
The Kshensky elevator complex, an AVG AVG RUSSIAN CROP PRODUCTION FUND asset
The opportunity:
Co-invest with one of Russias leading agri-businesses.
Strategy:
Specialize in high-margin grain, sugarbeet, and oilseed production.
20% annual ROE
over first 5 years.
People
Focus on top-quality farm management talent, Russian and international.
Existing operations
Not a start-up. Existing assets and management.
Government partnership
Leading government companies as equity investors.
Access
Highly profitable investment opportunities. of having the Russian government as co-investor and partner.
Yield improvements
20 40 % is realistic within 1-3 years.
Security
Value acquisitions
at steep discount to cash flow value.
Proven team
19 year farming track record.
Grain storage
Essential to achieve good crop prices.
Key value drivers
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
Financial Proven fund management team Access to cheap debt Operational Existing operations and assets Synergies with existing investorcontrolled operations Large, quick, and realistic productivity and yield gains Risk Management Federal govt support Good local govt relations
30% equity IRRs for 5 years
Geographic diversification
High-value acquisition opportunities

Strong fundamentals for ag commodities Forward contracts on sugar-beets and grains $50 million already under management
High-margin business segments
Strong farm management team
Grain storage available
Sugar beets at Razgulays Lgov sugar plant, Kursk

1.
Executive summary
2.
3. 4.

5.
Sugar Beet 2011

Harvest: Hectares planted: Average yield: Estimated sale price: Estimated value: 1.6 million tons 47,000 ha 34 tons / ha $US 70 / ton $US 112 million
<< Return to table of contents The Tikhoretsky sugar-beet processing plant, an AVG asset
Geographic diversity
Expansion plans
Region Currently controlled by AVG. Could be contributed. 40,000 Expansion Total
A hedge against weather risk Allows for more efficient use of machinery
Central Black Earth Southern Urals Total
100,000
140,000
20,000 20,000 80,000
50,000 100,000 250,000
70,000 120,000 330,000
Razgulay combines in Krasnodar
10
Land
Proven ability and expertise:

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.
Fair real value estimate for Black Earth Russian farmland: $4000 - $5000 / ha
11
Current farm management at Razgulay
Financial control Personnel
Legal Supply purchase Produce sales
Technology (GPS) Field equipment Land acquisition 12,000 ha $400 / month

Head of Farming Moscow
Security
Farm Director
Farm Director
Farm Director
Average farm size: Average worker salary:
Head Engineer
Head Engineer
Head Engineer
Average # of workers per 1000 ha:
10
Head Agronomist
Head Agronomist
Head Agronomist
The Razgulay Group is in the process of implementing GPS and related precision-agriculture techniques on its farms.
Farm workers
Farm workers
Farm workers
12
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
Improved technique GPS technologies Precision agriculture Better fertilizer use New machinery No-till technique Better seeds Herbicides and pesticides Wheat (Black Earth Crop Current Yield 3.4 Attainable yield within 3 years 5-6
% Improve ment
60%
Sugar Beet (Black Earth)

Soy (Southern region)
31
1.8
36
2.5
16%
40%
14
Synergies with Razgulay Group

Management expertise | Personnel recruitment | Co-investment | Forward crop contracts Market intelligence | Investment / acquisition opportunities | Relationships
Grain Storage and processing

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
Sugar Manufacturing
11 operating units: 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)
Crop cultivation
23 operating units: 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% 23% 44%
15
Storage
A key strategic requirement
Access to Razgulays 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

16
Exit strategy
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.
17
1.
Executive summary
2.
3. 4.

5.
Sunflower 2011
Harvest: Hectares planted: Average yield: Estimated sale price: Estimated value: 38,000 tons 24,000 ha 1.6 tons / ha $US350 / ton $US 13 million
18
Soil climate crops yields

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.
19
Infrastructure: Good local roads and rail links

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.
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 overcrowded.
Highway construction in the black earth region in European Russia.
The black sea port of Novorossisk. It, and other Russian ports are being rapidly expanded.
20
Major government sector support

Agriculture is a top government priority. Its viewed as vital element of national security, a key contributing factor to national export earnings, and a key area of sustainable long-term competitiveness Financial support Tax benefits (0% profit tax, 20.2% payroll tax, 10% VAT) Subsidized agricultural credits Subsidized lease terms Fertilizer and energy cost reimbursement Favorable industry regulation 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 for the agricultural sector by purpose

RUR bn
Share of domestic production
300 250 200 150 100 50 0 83 19 7 8 28 11 2008 3 18 19 11 37 10 2009 5 159 99 25 25 11 45 9 2010 228 199 108
246
262
100% 95% 80% 80% 56%
92%
85% 75%
90%
95% 99% 83%
121 22 30 12 48 9 2011E Interest rate subsidies Plant grow ing subsidies Other from federal budget
132
23 31 13 48 9 2012E
Grain
Sugar
Vegetables
Animal breeding subsidies Subsidies on fertilizers Construction capex Subsidies from regional budgets
Source: Russian Ministry of Agriculture
Minimum shares accorging to Doctrine Actual shares, 2009

Source: Russian Ministry of Agriculture
Meat and meat products
Milk and milk products
Potatoes
21
Government support 2
Worldwide
Government agricultural support as % of gross farm receipts
Producer Support Estimate (PSE) as % of gross farm receipts, last 3 years average 2
1 3
Russia
2008-2012 Federal Program for Agriculture Development
% of GDP
PSE as % of GDP
0.39%
0.51%
0.51%
0.49%
0.47%
Japan
47%
0.9%
Turkey
34%
159
3.7% 2008
199
228
246
262
2009
2010
2011
2012
EU27
23%
0.7%
Total government spending, RUR bn

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.
OECD
22%
0.6%
Government support of the industry

Canada 17%
0.6%
Program for Development of sugar beet complex in Russia for over RUR61 bn
of government spending in 2010 2012
Russia
14%
0.6%
Floating import tariff on raw sugar and prohibitive tariff on white sugar allow for
stable domestic sugar price and profitability of domestic producers
United States
9%
0.2%
China
9%
1.4%
Access to long-term loans at subsidized interest rates 0% income tax for agricultural producers until 2013 Despite Russias strong intentions of entering WTO in 2011, the government is
planning to continue general industry support, i.e.:
Brazil
6%
0.4%
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
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)
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 .
Support from VEB, federal and local authorities
Collaboration with major lenders in agriculture
23
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.
Arable land
USA Russia Europe Brazil Other LA countries Indonesia Ukraine 0 38 33 50 100 150
ha mm
Country rank in the world by products

173 123 94 67 59
#1
Oats, sunflower seed, barley, rye, buckwheat
#2
#3 #4
Sugar beets
Potatoes
Wheat
200
Source: Conab, Indonesian Ministry of Agriculture, USDA, FAO, Credit Suisse
Source: FAOSTAT
24
Robust markets
Fastest growing export markets
Expanding economy fueling domestic consumption
Pork
Poultry
Dairy
Food Processing
Import substitution
AVG RUSSIAN CROP PRODUCTION FUND 25
Fast sector growth

Large and fast growing food market in Russia Comments Strong government support
CAGR 2010-14 13.3%

863 982 1,178 1,361 1,125 1,307 1,492 1,708 1,940 2,191
306
CAGR 2005-09 6.6%
Food consumption in Russia has a strong growth potential (CAGR of 13.3% in 2011E2014E)
Obsolete and inefficient production infrastructure Highly fragmented and unconsolidated market
272 240 193 167 124 140 160 211 185
2005A 2006A of Agriculture, 2009A 2010E 2011E Ltd Source: Russian Ministry2007A 2008ABusiness Monitor International 2012E Food consumption, US$ bn
2013E 2014E
Food consumption per capita, US$
Opportunity for the market consolidation for efficient players
1.
Executive summary
2.
3. 4. 5.

Business environment Fund and management company information Financial information
Rice paddies in Krasnodar
Rice: 2011
Harvest: Hectares planted: Average yield: Estimated sale price: Estimated value: 112,000 tons 19,000 ha 6 tons / ha $US 380 / ton $US 43 million
<< Return to table of processing plant in Krasnodar, an AVG asset The Poltavsky ricecontents
27
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%
Stock price (RUR)
100
80
+26%
60
40
20
0 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
Source: Bloomberg
28
29
Controlling shareholder in one of Russias 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
Wheat production
Wheat and sugar production
Financial Indicators
RUR bn 40
30.2 30 25.9
One of top 5 land banks

600
thousand ha 570
500 460 460 450
20% 16% 15% 10%

500 400 300
20
10%
200
10 3.1 0 2009 2010 2009 2010 4.1
5%
100 0
0% 2009 2010
Prodimex
Ivolga-
Razgulay
NAPKO
Zolotoy
Sales
EBITDA
EBITDA margin
Source: Razgulay Group
Holding
Kolos Source: Ministry of Agriculture, IKAR
30
AVG family of FSU ag funds

Name Status Focus Current AUM, or assets currently controlled, proposing to contribute
$200 million
Target addtl raise

$800 million
Annual ROE over 5 years

30%
FSU Agricultural Opportunities Fund Russian Poultry Fund Russian Crop Production Fund Russian Sugar Fund
Fund is registered. Advanced discussions with investors. Assets partly acquired by AAM and acquisition targets identified. Initial planning stage. Fund not registered. Proposed. (Subject of current presentation)
Diversified FSU ag assets. Protein, crops, sugar, rice. Opportunistic focus. Poultry production
$100 million $50 million
$500 million $500 million
30%
Grain, sugar beet, oilseed cultivation, land acquisition. Sugar manufacturing from sugar beets. Rice cultivation
30%
Proposed
$100 million
$600 million
30%
Russian Rice Fund
Proposed
$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)
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Russian crop cultivation fund data sheet (proposed)

Structure Currency Closed end $US Investment project maturity horizon Target Return 3-7 years 20 - 30% annual
Domicile
Cayman Islands
IPO/ Private placement
Geographic Focus
Russia and CIS
Exit Strategy
Sale to strategic investor Private sale of stock
Sector focus
Crop cultivation Agricultural land Dividend policy Quarterly
Investment amount Minimal investment
30% of fund assets Fees $1 million
1.5% management fee 20% performance fee
Investment Manager
Avangard Asset Management
Loss compensation reserve
50% of management equity is held in reserve as a security against possible management loss
Target size
Min: $500 million
Max: $1.5 billion

5 years with a possible 2 year extension
Administrator Auditor Legal
Term
32
Bios
Rustem Mirgalimov Dmitry Steinsapir Eldar Nazmutdinov
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
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 Russias 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
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 Russias first brokerages Extensive experience in M&A in financial services, IT, telecoms, and retail 2002 Degree in international law from MGIMO, Russias leading university of international relations. Certified tax consultant
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)
Registered CPA (2006)
33
Risk management
Risk factor
Response Political country risk
Partnership with federal government Partnership with federal government Expert experience in land acquisition, title due diligence. Partnership with federal government Partnership with federal government Crop insurance. Crop diversity. Geographic diversity. Unlikely over long term Strong forward fundamentals Crop insurance. Crop diversity. Geographic diversity.
1 2 3 4 5 6 7 8 9
Legal conflict resolution risk Land title risk

Government corruption risk Weather risk Government regulation risk (export restrictions) Commodity price risk Crop risk Decrease in asset prices
Already deeply undervalued. Nowhere to go but up.
34
Soy 2011
Harvest: Hectares planted: Average yield: Estimated sale price: Estimated value: 37,000 tons 23,000 ha 1.6 tons / ha $US 530 / ton $US 20 million
1. Executive summary
2.
3. 4. 5.

Business environment Fund and management company information Financial information
Harvesting soy on a Razgulay farm in Krasnodar
3 5
Key assumptions and financial indicators from model

Basic Assumptions
Note: In addition to choosing a scenario, you can manually insert any value in the high-lighted column. Production
Operating costs + Depreciation (% of revenue) 1 time land improvement ($ per ha) Yield within 3 years of start cultivation Crop failure allowance Best scenario Base scenario Worst scenario 60% 70% 80% 100 150 200 6,0 7% 5,0 10% 4,0 20% Current 70% 150 3,2 10% Current 100% 0% 0% 9% 15% 4% 25%
Key Results
Returns
ROE (annual) IRR (cumulative) IRR for the project
Year 1
-11% 0% 29%
Year 2
19% 0%
Year 3
24% 0%
Year 4
20% 0%
Year 5
17% 7%
Year 6
14% 21%
Year 7
12% 29%
Debt
Debt Interest coverage 76 497 642 0 136 709 367 13 199 544 831 19 199 544 831 24 199 544 831 29 199 544 831 33 199 544 831 37
Financial
Debt to equity ratio Wheat price: (% increase per yr) Land price: (% increase per yr) Tax rate Discount rate Real Interest Rate Contingency on equity capital
Best scenario Base scenario Worst scenario 70% 60% 50% 13% 12% 11% 40% 35% 20% 7% 9% 11% 12% 15% 18% 1% 2% 4% 25% 25% 25%
Required Investment
Total project Cumulative project From debt Cumulative debt From equity Cumulative equity 127 496 070 127 496 070 76 497 642 76 497 642 50 998 428 50 998 428 100 352 875 227 848 945 60 211 725 136 709 367 40 141 150 91 139 578 104 725 774 332 574 719 62 835 465 199 544 831 41 890 310 133 029 888 0 332 574 719 0 199 544 831 0 133 029 888 0 332 574 719 0 199 544 831 0 133 029 888 0 332 574 719 0 199 544 831 0 133 029 888 0 332 574 719 0 199 544 831 0 133 029 888
Other
% of land owned as property (as opposed to lease) Exchange rates Inflation (For other assumptions, see "Additional Assumptions" sheet) 70% Constant Zero (Changeable)
Contribution to increase in shareholder's equity

Net profit from operations Land appreciation Additional Capital 28% 24% 48% 45% 22% 33% 54% 46% 0% 52% 48% 0% 48% 52% 0% 44% 56% 0%
Other
Shareholders equity Net cash flow 45 868 475 -85 526 809 -5 129 953 298 886 524 120 000 129 918 581 3 232 758 25 197 802 469 121 235 120 000 255 630 283 -17 656 075 60 408 755 430 750 217 200 000 389 704 920 67 957 846 77 292 284 403 651 697 200 000 564 086 377 93 413 013 97 227 053 327 594 700 200 000 782 765 792 104 669 581 113 261 306 247 886 437 200 000 1 056 436 563 129 734 548 129 734 548 374 979 859 200 000
Currently running: (Drop down menu):
Base scenario
Net profit DCF value of company Land controlled (ha)
For additional ratios and financial indicators, see the "Additional FI" sheet.
36
Financial statements from model

Current Scenario: Income Statement Revenue from cultivation Cost of goods sold, operating expenses, depreciation One time land improvement costs per ha of acquired land Operating Profit Interest Expense Amortization of Land improvement costs Profi t before Tax Tax Net Profit after Tax -5,129,953 1,529,953 3,600,000 -5,129,953 18,000,000 Base scenario 1 Year 1 Year 2 121,413,600 84,989,520 12,000,000 36,424,080 2,734,187 6,000,000 27,689,893 2,492,090 25,197,802 21% Balance Sheet Cash and Cash Equivalents Goods in process Land Beginning of Year Add: Purchase of Land Add: Appeciation in land value Land Value at the end of year One time land improvement costs (Gross) Less: Accumulated Amortization One time land improvement costs (Net) Total Assets Long-Term Debt Shareholders Equity Capital Retained earnings Add: Appeciation in land value Total Shareholder's Equity Total Liabilities and Shareholders Equity Cash Flow Statement Net Cash flow from Operating activities Land Purchase Land improvement costs Net Cash flow from Investing activities Financing activities Cash infl ow (outfl ow) from Long-term borrowing 76,497,642 Equity Capital raised Dividends Paid Net Cash flow from Financing activities Change in Cash Position Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year 23,969,261 127,496,070 23,969,261 50,998,428 60,211,725 40,141,150 -1,763,846 98,589,029 89,821,786 23,969,261 113,791,047 62,835,465 41,890,310 -4,228,613 100,497,161 82,841,086 113,791,047 196,632,134 -5,410,460 -5,410,460 62,547,386 196,632,134 259,179,520 -6,805,894 -6,805,894 86,607,119 259,179,520 345,786,640 -7,928,291 -7,928,291 96,741,289 345,786,640 442,527,929 -9,081,418 -9,081,418 120,653,130 442,527,929 563,181,059 45,868,475 122,366,117 Year 1 -27,026,809 58,500,000 18,000,000 -76,500,000 12,000,000 -12,000,000 -71,077,500 50,998,428 -5,129,953 91,139,578 18,304,003 20,475,000 129,918,581 266,627,948 Year 2 3,232,758 133,029,888 74,484,146 48,116,250 255,630,283 455,175,115 Year 3 53,421,425 71,077,500 133,029,888 146,365,970 110,309,063 389,704,920 589,249,751 Year 4 67,957,846 133,029,888 236,787,130 194,269,359 564,086,377 763,631,208 Year 5 93,413,013 133,029,888 342,120,144 307,615,760 782,765,792 982,310,623 Year 6 104,669,581 133,029,888 462,773,274 460,633,401 1,056,436,563 1,255,981,394 Year 7 129,734,548 58,500,000 18,000,000 3,600,000 14,400,000 122,366,117 76,497,642 58,500,000 20,475,000 78,975,000 30,000,000 9,600,000 20,400,000 266,627,948 136,709,367 Year 1 23,969,261 25,496,856 Year 2 113,791,047 53,461,901 58,500,000 Year 3 196,632,134 66,449,231 78,975,000 71,077,500 27,641,250 177,693,750 30,000,000 15,600,000 14,400,000 455,175,115 199,544,831 62,192,813 239,886,563 30,000,000 21,600,000 8,400,000 589,249,751 199,544,831 83,960,297 323,846,859 30,000,000 27,600,000 2,400,000 763,631,208 199,544,831 982,310,623 199,544,831 1,255,981,394 199,544,831 113,346,401 437,193,260 30,000,000 30,000,000 153,017,641 590,210,901 30,000,000 30,000,000 76,374,144 3,990,897 6,000,000 66,383,247 5,974,492 60,408,755 24% Year 4 259,179,520 81,783,669 177,693,750 94,927,473 3,990,897 6,000,000 84,936,576 7,644,292 77,292,284 24% Year 5 345,786,640 91,597,709 239,886,563 116,833,812 3,990,897 6,000,000 106,842,916 9,615,862 97,227,053 25% Year 6 442,527,929 102,589,434 323,846,859 130,853,870 3,990,897 2,400,000 124,462,973 11,201,668 113,261,306 26% Year 7 563,181,059 102,589,434 437,193,260 142,565,438 12,830,889 129,734,548 27% 146,556,334 3,990,897 2 Year 3 254,580,480 178,206,336 3 Year 4 316,424,909 221,497,436 4 Year 5 389,446,042 272,612,229 5 Year 6 436,179,567 305,325,697 6 Year 7 488,521,115 341,964,780 7
Razgulays 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
37
Additional information
Investment Program:
Item
Land acquisition Equipment purchase / lease, upgrades Working capital Senior management Total
Economics per hectare:

Comments
250,000 ha @$500 / ha $500 per ha for 330,000 ha $500 per ha for 330,000 ha For first three years @ $1 million per year. Over 3 years
Amount
$125 mil $165 mil $165 mil $3 mil $458 mil
NET SALES / ha (4 tons/ha @ $250 less moisture and foreign matter avg) VARIABLE COSTS PER HA Land Equipment Fertilizer Fuel & Lubricants Seeds Chemicals Storage and Transport Field Labor TOTAL VARIABLE COSTS Management TOTAL COSTS GROSS PROFIT PER HA CONTINGENCY @ 12% NET PROFIT PER HA PROFITS / SALES
$1,000
$43 $70 $85 $50 $70 $56 $40 $20 $434 $30 $464 $536 -$120 $416 42%
Razgulay combines in Volgograd, 2009

38
Contact info
Charles Bausman Director for Investments AVG Capital Partners 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
c.bausman@avgfund.com
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 (THESECURITIES 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
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AVG Russian Crop Production Fund Presentation

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AVG Russian Crop Production Fund

September 14, 2011

AVG RUSSIAN CROP PRODUCTION FUND

All photos are of existing AVG operations

AVG RUSSIAN CROP PRODUCTION FUND

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AVG RUSSIAN CROP PRODUCTION FUND

2. Strategy and execution 4. Fund and management company info

Synergies with Razgulay group

g) Storage h) Exit strategy

AVG RUSSIAN CROP PRODUCTION FUND

Strategy and execution

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20% annual ROE

over first 5 years.

Focus on top-quality farm management talent, Russian and international.

Not a start-up. Existing assets and management.

Leading government companies as equity investors.

20 40 % is realistic within 1-3 years.

at steep discount to cash flow value.

19 year farming track record.

Essential to achieve good crop prices.

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AVG RUSSIAN CROP PRODUCTION FUND

Key value drivers

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AVG RUSSIAN CROP PRODUCTION FUND

30% equity IRRs for 5 years

High-value acquisition opportunities

High-margin business segments

Strong farm management team

Grain storage available

Sugar beets at Razgulays Lgov sugar plant, Kursk

AVG RUSSIAN CROP PRODUCTION FUND

Strategy and execution

Sugar Beet 2011

AVG RUSSIAN CROP PRODUCTION FUND

Central Black Earth Southern Urals Total

20,000 20,000 80,000

50,000 100,000 250,000

70,000 120,000 330,000

Razgulay combines in Krasnodar

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AVG RUSSIAN CROP PRODUCTION FUND

Proven ability and expertise:

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

Strong local government relationships.

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AVG RUSSIAN CROP PRODUCTION FUND

Current farm management at Razgulay

Financial control Personnel

Legal Supply purchase Produce sales

Technology (GPS) Field equipment Land acquisition 12,000 ha $400 / month

Average farm size: Average worker salary:

Average # of workers per 1000 ha:

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AVG RUSSIAN CROP PRODUCTION FUND

Future farm management

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AVG RUSSIAN CROP PRODUCTION FUND

Sugar Beet (Black Earth)

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AVG RUSSIAN CROP PRODUCTION FUND