Russian FedeRationFacts and Figures | November 2011modernrussia.com/factsandfigures

1

Table of conTenTs

Key Geographical Data 2Map of Russia 4Administrative Structure 6Rest of World Comparison 8Key Macroeconomic Indicators 10Exports 12Imports 13Employment and Education 14Economically Active Population 15Eurasian Customs Union – A Large Addressable Market 16Human Capital 17

Infrastructure Investment 18

Investment Priorities 21

Priorities in Modernisation of Russia’s Economy 22

Incentives for Investment Projects 27

Inwards FDI Structure 28

Outwards FDI Structure 29

Capital Inflow into Russia 30

Top Inbound M&A Deals 31

Recent IPOs 32

Case Study – Pharmaceutical Industry 33

Banking System 34

Taxes in Russia v. Other BRIC Countries 35

Privatisation Plans 36

2

Russian fedeRaTionKey GeoGRaphical daTa

Capital: MoscowRussia is located in the eastern part of Europe and in the northern part of Asia

Total Area1 17,098.2 thousand km2 (as of 1 January 2010 agricultural acreage amounted to 13% of the total area; forests – 51%; surface waters (including marsh) – 13%)

Population 142,905.2 thousand people – (as of 14 October 2010)

Density of the Population 8.4 people per km2 – (as of 14 October 2010)

Maximum LengthLongitudinal direction – 4 thousand kmLatitudinal direction – 9 thousand km

State BordersNorthwest – Norway and FinlandWest – Poland, Estonia, Latvia, Lithuania, and BelarusSouthwest – UkraineSouth – South Ossetia, Abkhazia, Azerbaijan, Georgia, and KazakhstanSoutheast – China, Mongolia, Democratic People’s Republic of KoreaEast (marine) – USA and Japan

1st by total land area, 6th by GDP

1 According to the Federal State Statistics Service .

3

Longest Rivers2

Lena 4,337 kmYenisei (with Angara) 3,844 kmVolga 3,694 kmOb 3,676 kmAmur 2,824 km

Russia Is Surrounded by Arctic Ocean (Barents Sea, White Sea, Kara Sea, Laptev Sea, East Siberian Sea, Chukotka Sea) Pacific Ocean (Bering Sea, Okhotsk Sea, Sea of Japan) Atlantic Ocean (Baltic Sea, Black Sea, Azov Sea)

Largest Lakes3

Baikal 31.5 thousand km2

Ladoga 17.7 thousand km2

Onega 9.7 thousand km2

Highest ElevationElbrus 5,642 m

Largest Islands Archipelago Novaya Zemlya 82.6 thousand km2

Sakhalin 76.4 thousand km2

Archipelago Novosibirsky 38 thousand km2

Archipelago Severnaya Zemlya 37 thousand km2

Average TemperaturesJanuary from 0°,-5°C (Northern Caucasus) to -40°, -50°C (east of Saha (Yakutia) where the lowest temperatures can reach -65°, 70°C);July from 1°C (northern Siberian coast) to 24°, 25°C (Caspian lowlands)

The Russian Federation has the largest land area in the world; it is eighth by population globally4 and sixth by GDP denominated in USD at purchasing power parity5.

2 Data from statistical handbook of the Federal Agency for Water Recourses.3 According to the Federal Agency for Water Recourses.4 According to preliminary results of the 2010 AII – Russia population census5 According to the World Bank 2011.

4

CENTRAL FEDERAL AREA

NORTHWESTERN FEDERAL AREA

SOUTHERN FEDERAL AREA

NORTH CAUCASUS FEDERAL AREA

VOLGA FEDERAL AREA

MOSCOW URAL FEDERAL AREA

SIBERIAN FEDERAL AREA

FAR EAST FEDERAL AREA

Map of Russia

5

CENTRAL FEDERAL AREA

NORTHWESTERN FEDERAL AREA

SOUTHERN FEDERAL AREA

NORTH CAUCASUS FEDERAL AREA

VOLGA FEDERAL AREA

MOSCOW URAL FEDERAL AREA

SIBERIAN FEDERAL AREA

FAR EAST FEDERAL AREA

6

ExEcutivE Branch

Government• ExercisestheexecutivepowerinRussia• ConsistsofthePrimeMinister,DeputyPrimeMinistersandFederalMinisters

Prime Minister• AppointedbythePresidentwiththeconsentoftheStateDuma

Deputy Prime Ministers• Coordinateactivitiesofvarious federal executive power bodies, or all such bodies in a specific area (economy, social policy, etc.)• Somearesimultaneouslyheads of particular ministries• ProposedbythePrimeMinister and appointed by the President

President• ElectedforsixyearsbycitizensoftheRussianFederation• HeadoftheState;determinestheguidelinesofdomesticandforeignpolicies

Cabinet of Ministers• TheInterior• CivilDefence,Emergenciesand Disaster Relief• ForeignAffairs• Defence• Justice• HealthcareandSocial Development• Culture• EducationandScience• NaturalResourcesand Environmental Protection• IndustryandTrade• CommunicationsandMassMedia• RegionalDevelopment• Agriculture• Sport,TourismandYouthPolicy• Transport• Finance• EconomicDevelopment• Energy

adMinisTRaTive sTRucTuRe

rEgional govErnmEnt

• Eighty-threefederal subjects ruled by Governors who are proposed by the President and approved by regional parliaments

lEgislativE Branch

The Federal Assembly• Consistsoftwochambers–theFederationCouncilandtheState Duma• TheFederationCouncilincludestworepresentativesfromeach subject of the Russian Federation; one from the legislative and one from the executive body of state authority• TheStateDumaconsistsof450deputies(partiespresentinthecurrent Duma are United Russia, KPRF, LDPR, and A Just Russia), and shall be elected for a term of five years (next elections are on 4 December 2011)

Judicial Branch

• ConstitutionCourt(consistsoftwochambers,representedby10and9 judges, respectively; judges are selected by lot; main function is checking the laws for consistency with the Constitution)• TheSupremeCourtoftheRussianFederationisthesupremejudicial body for civil, criminal, administrative, and other cases under the jurisdiction of common courts, shall carry out judicial supervision over their activities, and provide explanations on the issues of court proceedings

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8

ResT of WoRld coMpaRison Russia’s global ranking in production of select industrial and agricultural products

Source: US Geological Survey, 2010

GLOBAL LEADER IN METAL RESERVES

% of total global reserves

19%

25%

13%

6%

0Iron Ore PGM Gold Nickel Copper

1 2 3 3 9

18%

9%11%

9%

4%

COAL PRODUCTION – 2010

MM tons

3,000

4,000

2,000

1,000

0China USA India Australia Russia Indonesia RSA Germany Poland Algeria

Source: BP

3,240

985570 424 317 306 254 182 133 111

GAS PRODUCTION – 2010bcm

540

720

360

180

0USA Russia Canada Iran Qatar Norway China Saudi

ArabiaIndonesia Algeria

Source: BP

611 589

160 139 117 106 97 84 82 80

CRUDE OIL PRODUCTION – 2010mbpd

15

10

5

0Russia Saudi

ArabiaUSA Iran China Canada Mexico UAE Kuwait Venezuela

Source: BP

10.3 107.5

4.2 4.1 3.3 3.0 2.8 2.5 2.5

Russia’s Ranking

9

WHEAT – 2009

USD Bn

18

12

6

0China India USA Russia France Canada Pakistan Turkey Australia Germany

USD Bn

USD Bn

USD Bn

Source: FAO

16.312.1

8.4 7.54.6 4.2 3.5 2.9 2.7 2.3

SUGAR BEET – 2009

1.5

2.0

1.0

0.5

0France USA Germany Russia Turkey Poland UK Ukraine Nether-

landsBelgium

Source: FAO

1.51.2 1.1 1.0

0.70.5 0.4

0.3 0.2 0.2

MILK – 2009

2025

1510

50

USA India China Russia Germany Brazil France New Zealand

U.K. Poland

Source: FAO

22.8

11.79.5 7.8 7.4 7.3 6.4 4.0 3.6 3.2

POULTRY – 2008

Source: FAO

2025

1510

50

USA China Brazil Mexico Russia Iran Indonesia Argentina UK Japan

23.2

16.214.2

3.7 3.3 2.4 2.2 2.1 2.1 2.0

1st by crude oil production, gas and iron ore reserves

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Key MacRoeconoMic indicaToRs In 2011, the Ministry of Economic Development forecasts growth of GDP at 4.2%, inflation below the level of 7%, and the Ministry of Finance forecasts that the fiscal surplus will be 0.5% of GDP

2006 2007 2008 2009 2010

Production Indicators

GDP change (%), year-on-year 8.2 8.5 5.2 -7.8 4.0

Industrial output, change (%), year-on-year 6.3 6.8 0.6 -9.3 8.2

Manufacturing, change (%), year-on-year 8.4 10.5 0.5 -15.2 11.8

Extraction of mineral resources, change (%), year-on-year 2.8 3.3 0.4 -0.6 3.6

Fixed capital investment, change (%), year-on-year 16.7 22.7 9.9 -16.2 6.0

Fiscal and Monetary Indicators

Deficit (surplus) of the federal budget, (% of GDP) 7.4 5.4 4.1 -6.0 -4.0

M2, change (%), end year/end year 48.7 43.5 0.8 17.7 31.1

Inflation (CPI), change (%), at year-end 9.0 11.9 13.3 8.8 8.8

GDP deflator 15.1 13.9 18.0 1.9 11.4

Producer price index (PPI), (%), at year-end 10.4 25.1 -7.0 13.9 16.7

Nominal exchange rate, average, RUB/USD 27.19 25.58 24.85 31.75 30.37

Real effective exchange rate, change (%), year-on-year (IMF) 9.4 4.2 5.1 -5.6 9.6

Reserve Fund, USD Bn, at the end of period 137.1 60.5 25.4

National Wealth Fund, USD Bn, at the end of the period 88.0 91.6 88.4

Reserves (including gold), USD Bn, at the end of the period 303.7 478.8 426.3 439.5 479.4

Source: Federal State Statistics Service, Central Bank of RF, EEG, EIU, IMF, company estimates

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2006 2007 2008 2009 2010

Balance of Payment Indicators

Trade balance, USD Bn 139.3 130.9 179.7 111.6 151.7

Share of energy resources in export of goods, % 63.2 62.1 66.4 63.5 64.5

Current account, USD Bn 94.7 77.8 103.5 48.6 70.3

Export of goods, USD Bn 303.6 354.4 471.6 303.4 400.4

Import of goods, USD Bn 164.3 223.5 291.9 191.8 248.7

Gross foreign direct investments, USD Bn 29.7 55.1 75.0 36.5 42.9

Average export price of Russian crude oil, USD/bbl 61.1 69.3 94.4 61.1 78.2

Financial Markets Indicators

Weighted average corporate loan rate, % 10.4 10.0 12.2 15.3 9.1

CBR refinancing rate, %, at the end of period 11.0 10.0 13.0 8.75 7.75

Real average rate on RUB loans, % (deflated py PPI) 1.6 0.9 -1.7 3.2 -6.5

Stock market index (RTS, in RUR, at the end of period) 1.922 2.291 632 1,445 1,770

Corporate Financial Condition

Share of loss-making companies 29.7 23.4 25.2 30.1 27.8

Share of loans in capital investments 14.3 15.5 17.6 20.1 14.3

Profitability (net profit/paid sales), % 25.6 36.8 21.5 28.7 32.7

Income, Poverty, and Labour Market

Real disposable income, change (%), year-on-year 13.5 12.1 2.3 2.0 4.2

Average wages in USD 390.9 532.2 695.8 587.0 689.9

Unemployment (%, according to ILO definition) 7.2 6.1 6.3 8.4 7.5

Source: Federal State Statistics Service, Central Bank of RF, EEG, EIU, IMF, company estimates

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expoRTs

Other 21%

Crude Oil 34%

Petroleum Products 18%Natural Gas 12%

Fertilizers 2%

Metals 9%

Machinery,Equipment, & Transport 5%

Source: Federal Customs Service

Source: CBR

GOODS EXPORT STRUCTURE $398B USD volume in 2010

EXPORTS OF SERVICES BY DIRECTION OF TRADE$45B USD volume in 2010

UK 9%

USA 9%

Germany 7%

Ukraine 5%

Cyprus 5%

Switzerland 4%Kazakhstan 3%

Other 58%

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iMpoRTs

Metals and Steel 5%

Other 37%

Clothing and Footwear 4%

Medicines 4%Food includingBeverages 7%

Machinery,Equipment & Transport 43%

GOODS IMPORT STRUCTURE

Source: Federal Customs Service

Source: CBR

IMPORTS OF SERVICES BY ORIGIN OF TRADE$74B USD volume in 2010

$230B USD volume in 2010

Turkey 7%

Germany 6%

U.K. 6%

USA 5%

Ukraine 5%

Cyprus 5%

Egypt 4%

Other 62%

14

eMployMenT and educaTion Distribution of Employed Population by Age and Education in 20106 (percentage of total)

6 According to a random poll of population on employment issues.7 Including post-university education.

2008 2009 2010

Employed – total 100 100 100

Including people aged, years:

Less than 20 1.1 1.4 0.8

20 - 24 9.6 10.5 8.7

25 - 29 13.6 14.5 12.7

30 - 34 12.7 13.0 12.4

35 - 39 12.2 12.0 12.3

40 - 44 11.7 11.2 12.2

45 - 49 14.3 13.3 15.3

50 - 54 12.8 11.8 14.0

55 - 59 8.1 8.4 7.7

60 - 72 3.8 3.8 3.8

Average age of employed population, years 40.0 39.5 40.5

Employed – total 100 100 100

Including those with:

Higherprofessionaleducation7 28.9 25.6 32.2

Secondary professional education 27.1 22.1 32.3

Primary professional education 19.7 24.5 14.7

Secondary education 20.0 22.5 17.4

Primary education 4.0 4.9 3.2

No education 0.3 0.4 0.3

Source: Federal State Statistics Service

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econoMically acTive populaTionAs percent of total8

8 According to the data obtained from a random poll of population on employment issues: 1992, 1995, 2010 – as of the end of October; 2000-2009 – as of the end of November. Starting from 2006 data includes Chechen Republic.

1992 1995 2000 2005 2006 2007 2008 2009 2010

Economically Active Population – total 100 100 100 100 100 100 100 100 100

Including:

Employed 94.8 90.5 89.4 92.8 92.8 93.9 93.7 91.6 92.5

Unemployed 5.2 9.5 10.6 7.2 7.2 6.1 6.3 8.4 7.5

Men 100 100 100 100 100 100 100 100 100

Including:

Employed 94.8 90.3 89.2 93.2 92.6 93.6 93.4 91.0 92.0

Unemployed 5.2 9.7 10.7 6.8 7.4 6.4 6.6 9.0 8.0

Women 100 100 100 100 100 100 100 100 100

Including:

Employed 94.8 90.8 89.6 93.0 93.2 94.2 93.9 92.2 93.0

Unemployed 5.2 9.2 10.4 7.0 6.8 5.8 6.1 7.8 7.0

Source: Federal State Statistics Service

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euRasian cusToMs union – a laRGe addRessable MaRKeT

POPULATION

MM

USD Bn

200

150

100

50

0Russia Kazakhstan Belarus Total

Source: Global Insight, Federal State Statistics Service

142167

16 10

2,000

1,500

1,000

500

0Russia Kazakhstan Belarus Total

Source: Global Insight

1,479

1,681

14755

NOMINAL GDP

USD Bn

800

600

400

200

0Russia Kazakhstan Belarus Total

Source: Planet Retail

527 582

34 22

RETAIL MARKET

17

huMan capiTal• Highlyeducatedlabourforce.• OneofthesevenleadingcountriesbythenumberofNobelPrizewinners, most prizes awarded for achievements in the field of physics.• Highlevelofbasiceducation.• Significantscientificresearchandtechnicalresourcesbase.• Substantialhumancapitalsupportingfavourableopportunitiesfor innovative growth.

USD Bn

120%

90%

60%

30%

0Russia

Primary

China Brazil India

Source: Report of UNESCO, 2006, OECD, 2009 data for Brazil and Russia

92%88%

54%

91%

52%

15%

94%

41%

11%

96%

78%

5%

LEVEL OF EDUCATION — BRIC COUNTRIES

%

120%

90%

60%

30%

0Russia China Brazil India

Source: Euromonitor, 2010

99.6%

68.5%

94.3% 92.7%

LITERACY RATE (% OF POPULATION AGED 15+) — BRIC COUNTRIES

Secondary Higher

Highest level of educated population among BRIC countries

18

infRasTRucTuRe invesTMenT

USD Bn

120

90

60

30

0

8

6

4

2

01995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Infrastructure Investment

Source: Federal State Statistics Service

INFRASTRUCTURE INVESTMENT

% of GDP

%

Completed

Project Name Sector Project Budget, USD Bn

Short Description

Nord Stream O&G midstream

10.0 Two line 1224 km 55 bcma pipelines from Russia (Vyborg) to Germany (Greifswald)

Sakhalin-Khabarovsk-Vladivostok pipeline

O&G midstream

10.0 Construction of 1800 km Sakhalin - Khabarovsk - Vladivostok gas transmission system

BPS-2 O&G midstream

3.3 Construction of 1000 km pipeline from Unechka on Belarus border to Ust Luga port near St. Petersburg

Source: Broker reports

19

• RussianinfrastructureinvestmentasapercentageofGDPbyoverthree percentage points of GDP over the last decade, and by ten times in terms of US dollars, and amounted to 7.4% of GDP ($111B USD) in 2010.

• RussianinfrastructureprojectsincludeinvestmentrelatedtotheSochi Winter Olympic Games in 2014 and the APEC summit in Vladivostok in 2012, which are intended to modernise the infrastructure of an entire region.

• TheRussiangovernmentseekstoincreasetheroleoftheprivatesectorin building, operating and financing infrastructure projects.

In Progress

Project Name Sector Project Budget, USD Bn

Short Description

Bovanenko O&G E&P 15.0 Construction of 572 km railway Obskaya-Bovanenko and 2400 km gas pipeline Bovanenko-Ukhta, Uhkta-Torzhok

Moscow-St Petersburg toll road

Roads 18.9 626 km 4-8 lane Moscow-St Petersburg highway, of which the first 43 Petersburg toll road West km has been contracted

Ust-Luga port Water transport

5.0 Harbourdeepening,construction of quays, rail connections and road connection from Novgorod

Source: Broker reports

21

21

invesTMenT pRioRiTiesDIvERSIFICAtIoN oF ECoNoMy – DEvELoPMENt PRIoRIty• ShareofmineralresourcessectorinGDPandinexportisstillfairlyhigh; however, specific measures are being taken in order to diversify the Russian economy; this should have a positive effect on Russia’s global competitiveness

KEy AREAS oF DIvERSIFICAtIoN IDENtIFIED By thE RUSSIAN PRESIDENt: • Energyefficiency• Nucleartechnologies• ITandsoftware• Spacetechnologiesandtelecommunications• Medicaltechnologiesandpharmaceuticals

Other 16%

Utilities 1.6%

National security,insurance 6.2%

Transport &communications 9.7%

Natural resources 10.4%

Real estate 11.4%

Retail & wholesaletrade 18.2%

Manufacturing16.4%

2010 GDP BREAKDOWN

Source: Federal State Statistics Service

Financial services 4.4%

Construction 5.7%

The goal is to modernise and to diversify the economy

22

pRioRiTies in ModeRnisaTion of Russia’s econoMyEnErgy EfficiEncyMain Objectives• ReduceRussia’senergyintensitytoGDPratioby40%throughenergy savings, improving energy efficiency, and eliminating regulatory gaps by 2020

Northern Countries

1.50

1.00

.50

0.00Germany Japan Finland US Brazil Canada India China RussiaSaudi

Arabia

Source: Rosstat, MED, BP Statistical Review of World Energy

0.19 0.190.23

0.32

0.400.48

0.75

0.86

1.14

1.39

ENERGY INTENSITY OF GDP IN 2007

9 In 2005 prices.

23

spacE tEchnologiEs and tElEcommunicationsMain Objectives• Increasetheefficiencyandqualityofinformationservices• Developamoderninformationinfrastructureinallsectorsofthenational economy

2009

NUMBER OF LIFT-OFFS – 2010

40

20

0Russia USA China Europe India Japan South

KoreaIsrael

2008

31

1615

6 3 2 1 1

50

25

0Russia USA China JapanEurope

3225

73

India

26

NorthKorea

1Sea Launch

Project

1Iran

1SouthKorea

1

40

20

0Russia USA China Europe Sea Launch

ProjectIndia Japan Iran

27

1511

6 5 3 1 1

Russia plays a leading role in space exploration

24

mEdical tEchnologiEs and pharmacEuticalsMain Objectives• ProductionofmostmedicinesandmedicalequipmentinRussia• Developmentandproductionofinnovativemedicalproducts; expansion of Russian manufacturers into new markets

While Russia’s healthcare spending is still low, funding has been increasing at a fast pace.

USD

TOTAL HC SPEND PER CAPITA – 2008

US

France

Germany

UK

Italy

Spain

Lithuania

Brazil

Russia

Turkey

Kazakhstan

Ukraine

China

India

Ukraine

Russia

Kazakhstan

Lithuania

China

Spain

Brazil

Turkey

Italy

France

UK

India

Germany

US

%

TOTAL HC SPEND PER CAPITA, GROWTH10 – CAGR 2000-08

Source WHO, McKinsey

0 2,500 5,000 7,500 10,000 0 8 15 23 30

7,536

5,122

4,628

3,924

3,533

3,087

881

620

509

313

267

142

43

722

28

26

26

19

16

15

13

11

11

10

10

9

6

13

One of the fastest growing health markets

10 Without inflation and exchange rate effects.

25

information tEchnologiEs and softwarEMain Objectives• Develophigh-performance,application-orientedcomputingsystems• Improvetheefficiencyandqualityofinformationservices• Developmodern,social,andindustrialinformationinfrastructure

By international standards, current Russian IT spending is low, but growing fast.

IT SPENDUSD Bn, 2010-15

IT SPEND% OF GDP, 2010

Hardware Software

World Market Growth in 2010-15: 6%

CAGR%

Services

51UKUS

FinlandJapan

SwedenDenmarkGermany

France

Russia

34

17

02010 2012 2015

1944

11

55

16

99

26

43

25

19.018.1

17.4

18% p.a.

0 2 4 6 8

Source: Gartner, Global Insight, IDC

7.65.9

5.04.8

4.23.83.83.6

1.7

NUMBER OF HOUSEHOLDS WITH INTERNET BROADBAND ACCESS PER 100 HOUSEHOLDS

30

20 2008 2011

Source: MED

50

40

26

nuclEar tEchnologiEsMain Objectives• Ensureoverallandconsistentdevelopmentofthenationalnuclearpower potential• Guaranteelong-termsupplyofcheapenergy• MaintainRussia’sleadershipontheglobalnuclearmarket• Substantiallyreduceuraniumconsumption• Mitigateenvironmentalimpactandnuclearproliferationrisk

The Safest Nuclear Technology

1 A four-physical barrier defense-in-depth system that prevents the potential release of radioactive emissions outside the power unit.

Containment is a double leak- proof envelope that protects the reactor from outside impacts, both natural and technogenic.

2

3 A safer two-loop steam cycle of the reactor that precludes the potential release of radioactive substance outside of the reactor hall.

There are passive and active (power supply-dependent) safety systems in place at all the reactors, which, in combination, ensure the highest level of safety in all contingencies.

4

27

incenTives foR invesTMenT pRojecTs (in 2011)EncouragE rEgional authoritiEs to improvE thE invEstmEnt climatEA mechanism of grant distribution to the regions achieving the best results in business development and attracting investment has been developed.• Thegovernmentintendstoawardgrantsto20regionsthathave achieved the best results in terms of the efficiency of investment policies and ongoing growth of investment projects• Theplannedvolumeofgrantsin2012–10billionrubles

stratEgic initiativE agEncy (sia)Establishment of Strategic Initiative Agency to promotenew projects. • ThepurposeoftheSIAistoselectthebestideasand help with their implementation • Currently,theagencyhasformedapreliminaryportfolio of investment projectsThere are currently about 2000 selected projects.

russian fund of dirEct invEstmEnts (rfdi)RFDI aims to provide long-term (5-7 years) financing to Russian investment projects, and attract foreign investors to co-invest in these projects.• Thetargetsizeofthefundis$10BUSD,tobe funded from oil revenues; in 2011 $2B USD were allocated from Russia’s oil funds• ThevolumeofRFDIinvestmentperprojectwillamountto at least 50 and not more than $500M USD

Andrei Nikitin(31 years old)Gen. Director

Kirill Dmitriev (36 years old)Director of RFDI

28

inWaRds fdi sTRucTuRe

BY COUNTRY OF ORIGIN

Source: CBR

BY SECTOR

Source: CBR

Luxembourg 7%France 6%

Mining 16%

Manufacturing41%

Real Estate 16%

Trade 9%

Financial Activity 5%

Other 9%

Transport 4%

Rest of World 38%

Cyprus 29%

Netherlands 8%

Germany 7%Ireland 5%

29

BY COUNTRY OF ORIGIN

Source CBR

BY SECTOR

Source CBR

Rest of World 33%

Cyprus 34%

Netherlands 14%

Luxembourg 6%

British Virgin Islands 4%

Belize 5%

Germany 4%

Trade 40%

Manufacturing 29%

Mining 6%

Transport 15%

Real Estate 5%

Other 1%Financial Activity 4%

ouTWaRds fdi sTRucTuRe

30

capiTal infloW inTo Russia

No REStRICtIoNS oN FREE MovEMENt oF CAPItAL IN RUSSIA• Theonlylimitationisinvestmentinstrategiccompanieswhich have special importance for national security and economic stability• Incomparison,therearerestrictionsondirectforeign investments in China and India, and Brazil is planning to limit the free movement of capital

UNLIKE ChINA AND INDIA, IN RUSSIA thERE ARE No FoREIGN CURRENCy LIMItAtIoNS• ThereisaregimeofamanagedfloatingRURexchangerate, with the rate largely determined by the market and the CBR only intervening to reduce volatility • Incomparison,thereareforeigncurrencylimitationsinChina and India

FoREIGN DIRECt INvEStMENtS ovER thE LASt 10 yEARS AMoUNtED to $282B USD

• $42.9BUSDin2010

CUMULATIVE STOCK OF INWARD FDIUSD Bn

240

320

160

80

02001 2002 2003 2004 2005 2006 2007 2008 2009 2010 9M2011

Source: Central Bank of Russian Federation

63 14 30 43 72127

202239

282313

Virtually no restrictions on free movement of capital

31

Virtually no restrictions on free movement of capital

Top inbound M&a deals

TOP RUSSIAN INBOUND M&A DEALS2001 – 2011 YTD

Date % AcquiredValue, USD BnAcquirorTarget

Feb-03

Apr-07

Jun-09

Dec-10

Mar-11

7.6

5.8

4.0

4.6

4.0

100.0

20.0

25.0

66.0

12.1

Source: Thomson Reuters

(Severneftegazprom)

32

RecenT iposDate Value, USD MMIssuer

May-11

Feb-11

Nov-10

1,435

360

388

Apr-11

Nov-10

Oct-10

782

400

241

July-11

Apr-11

Nov-10

565

575

1,003

June-11

Apr-11

Nov-10

588

375

428

Source: Dealogic

33

case sTudy – phaRMaceuTical indusTRy

COMPANIES GROWTH IN RUSSIA

USD MM

2005 2009 % CAGR

% SHARE OF GOV’TSALES 2009

2

3

1

4

5

12

25

40

26

33

Source: 2010 IMS

318

372

116

170

136

783 36

32

87

28

3

585

445

427

418

Novartis11

Sanofi

J&J

Bayer

Pharmstandard

Mainly Rx Mainly BGx Mix of Rx and Branded Gx

11 Including RX, OTC, and Sandoz

34

banKinG sysTeM • Asof1January2011totalassetsoftheRussianbankingsystem amounted to approximately $1,107B USD• RelativelylowdepositactivityinretailbankingamongBRICcountries – 12% in Russia vs. 30% in China

%

%

#

SHARE OF STATE BANKING ASSETS

75

100

50

25

0China India Russia

80 75

40

SHARE OF OWN FUNDS IN BANKING SYSTEM

RELATIVELY LOW COMPETITION — AVERAGE NUMBER OF BRANCHES OF ONE BANK

15

20

10

5

0Russia IndiaBrazil ChinaEurope

15 15

6 64

150

200

100

50

0India Brazil Russia

163

75

3

• Onehundred-oneRussianbanksarecontrolledbynon-residententities, representing around 19% of all banking assets• InRussiathereareover800mediumandsmallregionalbanks,representing around 5.4% of all assets

• Thescopeofanti-crisismeasurestakenbytheBankofRussiain2008-2009 has been estimated at 14% of total banking assets

%

%

#

SHARE OF STATE BANKING ASSETS

75

100

50

25

0China India Russia

80 75

40

SHARE OF OWN FUNDS IN BANKING SYSTEM

RELATIVELY LOW COMPETITION — AVERAGE NUMBER OF BRANCHES OF ONE BANK

15

20

10

5

0Russia IndiaBrazil ChinaEurope

15 15

6 64

150

200

100

50

0India Brazil Russia

163

75

3

The highest share of own funds in the banking system among BRIC countries

35

12TheHeritageFoundation–indexofeconomicfreedomfor2010.

Taxes in Russia vs. oTheR bRic counTRies

RUSSIA hAS thE MoSt LIBERAL AND FAvoRABLE tAx REGIME AMoNG ALL othER BRIC CoUNtRIES• Lowestcorporateincometax–20%• Personalincometaxof13%,regardlessofincomesize• Opportunitytohaveaone-timewrite-offof30%ofdepreciation costs for tax purposes • FromJanuary2011–zeroprofittaxforeducationalandhealthcare institutions • From2011therewillbenocapitalgaintaxincaseoflong-term direct investments • Cutinsocialcontributions(payrolltax)from34%to30%from 1 January 2012

Country Corporate Income tax

Personal Income tax

vAt

China 25% 5-45% 23%

Brazil 34% 7.5-27.5% 17-25%

India 30-40% 10-30% 12.5%

Russia 20% 13% 18%

taxes in Different Countries in 2010, as % of GDP12

Belarus 30.4% Italy 43.1%

Brazil 34.4% Japan 28.3%

Canada 32.2% Kazakhstan 27.7%

China 18.0% South Korea 26.6%

France 44.6% Great Britain 38.9%

Germany 40.6% USA 26.9%

India 18.6% Russia 34.1%

Low corporate and personal taxes

36

pRivaTisaTion plansThe following privatization programme has been developed for 2011-2015:

Company Company Name Stake/CommentsGovernment Stake

United Grain Company 100% By 2012-2013:

100% of shares

Source: MED

VTB 75.5% In 2012-2013: 25.5%-1 share

Sovcomflot

In 2012-2013: 50%-1 share with the possibility of reducing the RF interest in 2014-2015 below controlling stake

100%

RusHydro 57.97%Reducing governmentinterest to full exit by 2017

FGC UES 79.11% During 2012-2013: 4.11%-1 share

SberbankDuring 2012-2013: 7.58%-1 share owned by the Bank of Russia

57.58%

RosAgroLeasing 99.9%

During 2013-2015, with RF retaining the controlling stake (50%+1 share)

Rosneft 75.1% By 2015: 25%-1 share

Rosselkhozbank 100% By 2015: 25% of shares

RZD Starting in 2013 up to 25%-1 share

100%

37

In 2011, the government reviewed the privatisation programme and expanded it, adding a further 10 companies to be privatized in whole or part by 2017.

Company Company Name Stake/CommentsGovernment Stake

Source: MED

50.9%Alrosa By 2017: 50.9% of shares

Sheremetyevo Airport

By 2017: 100% of shares100%

Inter RAO 14.8% The Russian Governmentmakes full exit from thecharter capital

Zarubezhneft 100% By 2017: 100% of shares

Rusnano During 2012-2013: 10%100%

United ShipbuildingCorporation

100%By 2017, with RF retaining the controlling stake

United AircraftCorporation

82.95%By 2017, with RF retaining the controlling stake

UralVagonZavod 100% By 2017, with RF retaining 75%+1 share

Transneft By 2017: 3.1%-1 share78.1%

Aeroflot 51.17% By 2017: 51.17% of shares

Moreover, the Government endorsed the initiative to increase shareholdings in joint-stock companies that had been targeted for privatisation. The initiative provides for full Government exit from Rosneft, Rushydro, FSK UES, Sovkomflot, VTB Bank, Rusagroleasing and Rosselkhozbank.

modernrussia.com/factsandfigures

Ministry of Economic Development of the Russian Federation