The Right Messages

to the

Right Audiences

at the

Right Time

Financing Russian real estate through IPO

19 February 2008

The Importance of Marketing, PR and IR pre- and post IPO

Greg Thain

30 St James’s Square London SW1Y 4JH

London SW1Y 4JH

+44 (0)20 7321 5010 www.sharedvalue.net

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Performance of CIS Real Estate Sector IPOs

London SW1Y 4JH +44 (0)20 7321 5010

IPO Date:

• Sistema-Hals – Nov, 06 • Raven Russia – Jul, 05 • AFI Development – May, 07 • LSR – Nov, 07 • Mirland – Dec, 06 • RTM – Jan, 06 • WTC – Feb, 07 • PIK – Jun, 07 • RGI International – Dec, 06 • Open Investments – Nov, 04 • XXI Century – Dec, 05 2

Bull Case for Russian Real Estate Companies

• Steady GDP growth, rising personal incomes, falling interest rates and gradual development of mortgage market are the key drivers of demand in the Russian real estate market • Deficit of high quality properties in all real estate segments in Russia; the supply is considerably less per capita than in more developed economies • Potential of real estate market expansion due to infrastructure investments by the Russian Government making suburban areas more accessible and suitable for commercial and residential developments • Sector characterised by strong financial positions and ability to finance project pipelines London SW1Y 4JH +44 (0)20 7321 5010 3

Bear Case for Russian Real Estate Companies

• Risk of declining profit margins due to a possible economic slowdown • Growing competitiveness in the real estate sector with more western developers and investors entering the Russian market • Increased diversity in the real estate equities space provides a greater choice - investors are becoming more discerning, undertaking forensic searches for evidence of above-average growth and returns potential • Only two out of four IPOs in 2007 performed well* – investors are wary of new placements * Renaissance Capital Dec ‘07 London SW1Y 4JH +44 (0)20 7321 5010 4

Preparing for Flotation – your Business and your Brand

 A successful Real Estate brand must convey stable values of trustworthiness and reliability but should also be aspirational and even inspirational  Property marketing is all about effective customer contact  The consumer has to experience the brand / make an emotional connection with it  • This can be achieved via an integrated marketing campaign utilizing a diverse combination of services: o Advertising o Direct marketing o o o o o Design Events Exhibitions Internet Promotion

Targeted, integrated marketing in terms of both service and delivery can help property companies differentiate themselves in a crowded market

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Why Does IR & PR Matter?

Effective financial communications programs are essential to:

 Raise company profile in the market  Get your message across  Improve liquidity of your stock  Attract a loyal following among analysts and investors  Issue new shares and raise additional financing  Reduce your cost of capital London SW1Y 4JH +44 (0)20 7321 5010 6

What is the Investment Community Looking for?

• Clearly articulated & consistent business strategy o Finished developments o Property pipeline  Identifiable market opportunity  Favourable market conditions & competitive position  Good financial & operating track record  Experienced & high quality management  Transparent shareholder and corporate governance structure  Access to management  Accurate, efficient, timely & effective communications

No Negative Surprises!

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What Makes the Difference between Poor, Average & Great Financial Communications?

        Established team of PR / IR professionals Publication of accounts / operating results Published Annual Report, not just Audited Financial Statements Well executed and regularly updated corporate presentation & website Formal disclosure of news releases to multiple audiences Media profiling through feature coverage in target domestic & international media “Expectations management” – analysts and investors Established corporate governance code & CSR program London SW1Y 4JH +44 (0)20 7321 5010 8

The Communications Landscape

Everybody is talking to somebody

YOUR STORY ANALYST RECOMMENDATIONS INVESTMENT DECISION

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MEDIA COMMENTARY

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Creating a Communications Timeline

£’s

Exercise of over allotment (‘Green Shoe’) option & market stabilization Conditional Trading Pricing & publication of full Prospectus Marketing road show Admission to Official List / Index Closing & settlement Publication of Pathfinder Prospectus Publication of syndicate research & pre-marketing Intention to float Approval of new shares

…proactively utilizing set points of IPO process to re-emphasize your key messages to market participants

TIME

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Communications Framework for a Listed Company A defined calendar of events…

  Half yearly or quarterly financial results + regulatory filings Annual Report      News releases Web site posting Media interviews Analyst meetings & research publication Investor meetings / road shows  Events – Shareholder meetings / Conference attendance / Site visits / Capital Markets Days

…punctuated by Capital Markets activity & M&A transactions

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Life as a Publicly Listed Company News flow

• Use of Primary Information Provider circuits & in-house database • Timely disclosure & regular news flow

Analyst targeting

• Broaden coverage outside analyst syndicate • Education & expectation management to avoid disappointment in earnings cycle

Investor targeting

• Peer group & absentee analysis • Reaching out to new investors

Knowing your shareholders

• Regular road shows and 1:1 meetings • Tracking the register

Talking to the media

• Establishing relationships • “Always-on” news monitoring London SW1Y 4JH +44 (0)20 7321 5010 12

Shared Value’s Track Record with Russian and CIS IPOs

Feb 2005 February 2006

$1,560,000,000 Initial Public Offering & Listing on London Stock Exchange

1,592,663 Global Depositary Receipts

Joint Global Coordinators: Co-Lead Managers: $1,006,000,000 Initial Public Offering & Listing on London Stock Exchange

139,000,000 Global Depositary Receipts

Joint Global Coordinators: Co-Lead Managers:

July 2005

$966,000,000 Initial Public Offering & Listing on London Stock Exchange Joint Global Coordinator: Joint Lead Managers & Joint Bookrunners:

November 2006

$160,000,000 Initial Public Offering & Listing on London Stock Exchange

1,140,000 Global Depositary Receipts

Lead Manager & Sole Bookrunner: Selling Agent: Co-Lead Managers:

June 2005

$40,000,000 Initial Public Offering & Listing on AIM

4,357,953 Ordinary Shares

Nominated Advisor: Broker: Sole Bookrunner: Joint Lead Managers:

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Other Client Mandates Include:

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Appendix – Sistema Case Study

Planned Communications around Sistema’s IPO on the London Stock Exchange

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Sistema to Seek Listing in London & Moscow

• Federal Securities Market Commission approves listing on Russian Trading System (RTS) and Moscow Stock Exchange (MSE) • Announced that Company is considering Listing on LSE through Offering of Global Depositary Receipts (GDRs) • Financial Advisors appointed

“AFK Sistema…said Thursday that it had this week received approval from the Russian securities regulator for a preliminary listing in Moscow, which is expected to be value the company at as much as $9bn (€7.3bn). Russian regulations force domestic companies to list in Moscow before undertaking an initial public offering abroad. However, the company is keen to list in London shortly after its flotation in Moscow, to increase the stock's liquidity and profile.”

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Shares Listed on Local Exchanges

• Initial listing on RTS and MSE • 8.1 million shares in issue

“Russia's major industrial holding AFK Sistema listed its common shares on the Moscow Stock Exchange (MSE) on Thursday…The company listed its shares on the Russian Trading System (RTS) on October 28. Both listings bring the company one step closer to fulfilling its plans of offering its global depositary receipts (GDR) at the London Stock Exchange (LSE) in 2005.”

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Financial Results Announcements

• Quarterly reporting ensures financial transparency and understanding of business • Regular news flow through web-posted and distributed news releases • Bond issue prospectuses and credit ratings analysis provide investors with full disclosure

“Russian holding group Sistema , gearing up for an initial public offering, on Wednesday announced a 91 percent rise in nine-month net profit as group sales rose by 58.5 percent. The conglomerate, more than 75 percent owned by chairman Vladimir Yevtushenkov, has a controlling stake in Russia's No.1 mobile phone company Mobile TeleSystems (MBT.N)."

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Additional Share Issue Approved

• Russian Federal Services Markets Authority approves issue of 1.55 million new shares (19% of capital)

“The lead managers for the international initial public offering of Russia's AFK Sistema, confirmed Tuesday, Jan. 11, they have begun gauging investor interest for the share sale, which is expected to raise more than $1 billion. It is one of many Russian companies queuing up to take advantage of high commodity prices and a booming domestic economy to sell shares on global stock markets. The Moscow-based holding company has said it plans to sell 16% of new capital and to list on London's stock exchange by February. In November, AFK Sistema sold shares on the domestic exchanges, a prerequisite for an international listing.”

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Announcement of Price Range

• IPO Price range of $750 – $975 per share • Announcement of Global Depositary Receipt Offer with 50 GDRs representing 1 common share • Price range of $15 – $19.5 per GDR • Application to UK Listing Authority for admission of GDRs to trading on International Order Book of London Stock Exchange

Billionaire's mobile share sale is Russia's biggest IPO

“AFK Sistema will start selling pounds 860m of shares in London today, in Russia's biggest initial public offering. Morgan Stanley and Credit Suisse First Boston are marketing about 80m global depositary receipts, which have been priced at between $15 and $19.50 by Sistema. The GDRs represent about 16pc of the company's stock, valuing the telecoms conglomerate at up to pounds 5.2billion. The shares will be traded on the London Stock Exchange…”

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IPO Pricing Announced

• Pricing at $17 per GDR • Offering placed with over 300 institutional investors in Europe, the UK and North America • Conditional trading on LSE commences • Closing & settlement on 11 Feb • Admission to UKLA Official List on 14 Feb • Overallotment or ‘greenshoe’ option to Joint global coordinators over secondary element of up to 238,000 shares in form of 11,945,000 GDRs – market stabilisation

“…Out of the top 20 global asset management firms, around 17 took part in the deal with orders from a number of their funds.” “АФК “Система” удалось привлечь во время размещения акций больше средств, чем всем российским эмитентам, вместе взятым. Международные инвесторы оценили “Систему” в $8,2 млрд, выложив за ее акции $1,56 млрд.”

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Overallotment Option Exercised

• Overallotment or ‘greenshoe’ option exercised over 2.5% of company’s equity • Free float increases from 16.5% to 19% 1.83 million shares / 91.6 million GDRs

“Sistema, one of Russia's largest holding companies, completed the largest ever Russian IPO on Tuesday, when more than 300 funds piled into its $1.35bn London flotation.

The deal's resounding success, with the book 2.6 times covered, has reinvigorated a market that had been drained of confidence by Yukos's death struggle with the Russian government and surprise

tax demands against other companies.” London SW1Y 4JH +44 (0)20 7321 5010 21

GDRs Admitted to Official List

• Closing & settlement completed on previous Friday • GDRs admitted to UKLA Official List • Shares commence trading unconditionally

“Sistema, the Russian mobile phone conglomerate, was officially admitted to the London Stock Exchange (LSE) yesterday in the largest Russian initial public offering anywhere in the world. The president of Sistema, Vladimir Evtushenkov, was at the LSE"s headquarters in Paternoster Square to open trading, alongside Clara Furse, the LSE"s chief executive. Investors can now openly trade in global depository receipts, securities that represent Sistema shares which have their primary listing in Russia. These receipts closed up nearly 3 per cent at $17.85 (£9.45) yesterday, 5 per cent higher than the price they were placed at on last Wednesday when conditional trading began.”

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Marking the Occasion

• Market Opening Ceremony at the London Stock Exchange • LSE CEO hosts event • LSE advertises listing • Widespread media coverage • No official comment and Quiet period continues London SW1Y 4JH +44 (0)20 7321 5010 23