1. CRIMEA: TOURISM BUSINESS OPPORTUNITIES AND STRATEGY by Global Vision Advisory Services and One Baltic Group December 2013

2. Tourism business in Crimea – investment thesis 2 Recreation and Health Care sector accounts directly for 10% of Crimea GDP, but it strongly influences all the Crimean economy, especially retail sector, transportation, real estate and financial services. Tourism affects up to 40% of Crimean economy and is the leading industry in the region. Less than 15% of total number of tourist (~800 000 visitors in 2012) to Crimea were registered as tourists, while another 85% (up to 5 million visitors) entered Crimea not for the tourism, but for private visits", "business, etc. Crimean hotel infrastructure grew rapidly over post-crisis period, but even now it is sufficient only for accommodation of up to 800 000 of registered tourists. About 800 of existing hotels are old, not integrated into chains and stay at the low quality level. Crimea tourism sector is still in serious shortage of medium- and high-quality hotels. Only 11% of hotels (3% of total accommodation space) are rated 3 stars or higher Tourism and recreation services in Crimea are comparable to the services, tourists can have in Greece, Turkey and Cyprus, by the seasonal/weather factors (though the climate here is more healthy and moderate) and by flight time (for direct flights). The average price of vacation is still about 50% lower. Average price per room per night in 2012 was only £50 ($78), but mainly due to lower quality of existing hotels. Top level tourism in Crimea is more attractive business, as wealthy Ukrainian and foreign tourists spending is at level of the EU Mediterranean resorts.

3. Less than 15% of tourists to Crimea are officially registered as tourists 3 Source: Statistical office of Autonomous Republic of Crimea, Tourism and resorts department of Autonomous Republic of Crimea, Arbat Capital

4. Crimea hotels infrastructure grew fast over last four years: number of hotels and hotels roominess more than double 4 Source: Statistical office of Autonomous Republic of Crimea, Tourism and resorts department of Autonomous Republic of Crimea, Arbat Capital Tourism infrastructure in Crimea in 2005-2013 200520062007200820092010201120122013E Hotels quantity7881829396104172210224 capacity*1314 15 16283540 Sanatoriums quantity569565556553554548544558 capacity*127126122121120 123 Total quantity647646638646650652716768782 capacity*140 136 135136148158163 * thousand guests

5. Crimea tourism sector is still in serious shortage of medium- and high-quality hotels 5 Source: Tourism and resorts department of Autonomous Republic of Crimea CategoryQuantity 5* Hotel2 4* Hotel6 3* Hotel18 Non-rated Hotel198 Sanatorium558 Total782 Crimea tourism infrastructure, current situation The most part of Crimean hotels were build in Soviet era and now are uncompetitive due to poor quality Less than 15% of hotels in Crimea is rated 3* or higher, sanatoriums accounts for more than 70% of total tourists accommodation sites Foreign hotel chains operate only 2% of total hotels in Crimea, but up to 15% of 3* or higher rated Crimean hotels International hotel operators in Crimea Hotel chainHotelCategoryLocation Royal Hotels & Spa ResortsRoyal Park HotelHotel 4*Yalta Rezidor GroupRadisson Resort & SPA Alushta HotelHotel 4*Alushta Premier HotelsOreanda HotelHotel 4*Yalta Reikartz Hotel GroupKirov Holiday CenterSanatoriumYalta Best Western InternationalSevastopol HotelHotel 3*Sevastopol Source: hotel operators data

6. Present hotels infrastructure is sufficient for accommodation of officially registered tourists, but isnt enough for total tourist flow 6 Source: Tourism and resorts department of Autonomous Republic of Crimea, Arbat Capital

7. Vacation in Crimea for EU/UK tourists is similar to Greece, Turkey and Cyprus by flight time, but average price of vacation is 50% lower 7 Number of visits by UK residents in 2012, thsd Spending on visits per UK resident in 2012, £ Average price per room per night in 2012, £ Flight from London Destination point Average Flight Time Distance, miles France8 781394103Nice1:33639 Spain11 11047686Barcelona1:40707 Italy2 630586111Rimini1:49780 Crimea81*-50Simferopol3:241622 Greece1 82459289Rhodes3:371733 Turkey1 41955099Antalya3:451808 Cyprus82168096Paphos4:051980 * UK residents visits to Ukraine as a whole Source: UK Office for National Statistics, Hotels.com Crimea vs. other popular European / Mediterranean resorts

8. Crimea economy: tourism, agriculture, services dominate 8 Source: Statistical office of Autonomous Republic of Crimea

9. Crimean economy: regional GDP is more balanced, than Ukrainian (more tourism, construction and agriculture, less industry and trade) 9 Source: State statistics services of Ukraine, Statistical office of Autonomous Republic of Crimea, Arbat Capital

10. Crimea as a part of Ukraine: leader in services and grape/wine 10 * 2011 ** Jan-Mar 2013 Source: State statistics services of Ukraine, Statistical office of Autonomous Republic of Crimea, Arbat Capital

11. GDP per capita (USD) in 2004-2011 grew at almost 15% yoy pace, official data only 11 CAGR 14.5% CAGR 14.7% Source: State statistics services of Ukraine, Statistical office of Autonomous Republic of Crimea, Arbat Capital

12. Crimea trade balance: growing tourism and local consumption 12 Source: Statistical office of Autonomous Republic of Crimea, Arbat Capital * Dramatic import of goods increase in 2011-2012 is related to purchase of offshore oil & gas exploration and production equipment

13. Foreign direct investments to Crimea 13 Source: Statistical office of Autonomous Republic of Crimea

14. Crimea: agricultural sector - ideal climate for growth 14 Source: State statistics services of Ukraine, Statistical office of Autonomous Republic of Crimea, Arbat Capital Key figures of Crimea agricultural sector performance in 2000-2012 2000200120022003200420052006200720082009201020112012Growth* Agriculture output, mln hryvnia (2010 const.price)49384840459544695016529554516210731176627360--- Production of grapes, thsd t17984911688311659119117125 94-1.1% Crimea production of grapes, as % of Ukraine34.925.025.333.222.226.319.533.028.126.727.424.020.6- Production of meat, thsd t696782941021151201361381391451481476.5% Production of eggs, mln.447495582548 5826096526997638117937464.5% Production of grain crops, thsd t106414131106665120511601221122817341662140419319083.0% Production of potatoes, thsd t2502271511462011591801873504013664673447.7% Production of vegetables, thsd t18517616013212712816021028639839943339110.5% Production of fruits and berries, thsd t134393512630593755106771161001233.9% * Average annual growth rate in 2000-2012 Source: State statistics services of Ukraine, Statistical office of Autonomous Republic of Crimea, Arbat Capital

15. Crimea: industrial sector – still balanced and exporting goods 15 Source: Statistical office of Autonomous Republic of Crimea, Arbat Capital Industrial production, % yoy 2003200420052006200720082009201020112012 Total industrial sector18.928.213.82.712.33.1-17.310.54.3-1.3 Mining and quarrying6.99.89.54.7-4.1-7.5-10.1-6.91.25.5 Production of foodstuffs, beverages and tobacco products29.437.522.2-4.814.36.7-6.7-0.3-6.21.3 Textile industry-12.0-45.4-21.538.1-25.8-13.8-25.8-5.7-35.82.4 Manufacture of paper and paper products, printing-1.83.412.9-1.822.65.5-14.722.2-16.0-21.3 Manufacture of refined petroleum and chemical products22.332.617.43.67.5-1.1-15.022.76.5-6.9 Manufacture of other non-metallic mineral products-8.630.1-1.18.88.92.6-46.83.19.4-6.8 Manufacture of basic metals and fabricated metal products5.544.58.85.28.5-2.0-12.410.1-3.1-11.5 Engineering industry6.215.8-5.127.733.15.8-28.534.323.9-4.5 Electricity, gas, steam and air conditioning supply26.221.07.61.69.74.9-23.447.96.028.3 Source: Statistical office of Autonomous Republic of Crimea, Arbat Capital

16. Crimea: construction sector – not enough to satisfy the demand 16 Source: Statistical office of Autonomous Republic of Crimea, Arbat Capital Key figures of Crimea construction sector performance in 2000-2012 2000200120022003200420052006200720082009201020112012 New home construction, thsd sq.m.179205226196274283370522416387535504733 Fixed assets investments, mln hryvnia784120814831913274033754684700786555536678116257- Fixed assets investments, mln $143225278359515661930139216456878532036- Total appartments, mln sq.m.37.337.737.537.838.138.539.039.740.039.3 39.8- Total appartments per capita, sq.m.18.018.218.318.618.719.019.419.820.019.7 20.0- Real construction output, % yoy-27.05.6-9.922.219.1-1.919.713-21.4-37.9-18.2-3.8-14.4 Source: Statistical office of Autonomous Republic of Crimea, Arbat Capital

17. Crimea: transport network – road (highways) and airlines in demand 17 Crimean and Ukrainian transportion system CrimeaUkraine Length of rail tracks (thsd km)0.621.6 Density of rail track (km per 1000 sq.km)2336 Length of motor roads (thsd km)6.3166 Density of motor roads (km per 1000 sq.km)245275 Source: State statistics services of Ukraine Source: Statistical office of Autonomous Republic of Crimea

18. The Infrastructure for growth in Crimea: the main bottlenecks 18 Old and underinvested infrastructure is a key problem for further business development. Crimea needs modernization of power grid, highways and airport. Crimea still lacks consistent sustainable electric power supply. Due to its geographical position and scarce traditional energy resources Crimea has limited facilities for cheap power generation, while old worn-out backbone power grids make it impossible to import relatively cheap power from mainland Ukraine or Russia in sufficient quantities. The situation has improved over past 3 years, but Crimean power system still has major capacity for modernization. Poor condition of road network is another serious obstacle for the development of the tourist sector. The regional road network is comparable with Ukrainian road network density (per 1000 habitants and 1000 sq km of land), but Crimean motor-roads are mainly lower quality and require major upgrades. Number of flights is limited by capacity of Simferopol international airport to handle aircraft and passenger numbers. Modernization of Simferopol airport or new international airport facilities will significantly increase aircraft traffic and make Crimea easier to access for tourists.

19. Crimea business: sectors, which need the right strategy for growth 19 What tourism-related business will grow in Crimea in the coming years? Where European entrepreneurs can get the good market share? Infrastructure engineering Infrastructure sector is a key for tourism development in Crimea. Government and private sector both will create strong demand for the engineers in coming years. Power generation (including Renewable Energy) and grids are extremely underinvested and EU could focus on the sector in order to modernize the region. Construction, architecture and design Construction sector incurs a large deficit of specialists. Growing incomes lift construction activity in the region and increase demand for good quality housing and commercial/public buildings. Tourism and related services Second phase of post-Soviet touristic boom is starting. The region now needs more investments and management efforts in hotel chains, restaurants chains and entertainment. Entertainment business Good possibilities for new cinemas, kids parks, movies production in the historical Yalta Film Studious. H otels, recreational facilities and health/medical services Great potential for hotel management/efficiency upgrade due to lack of domestic hotel networks. Famous for the recitation resorts with the best medical specialists in the USSR, Crimea today cant develop it because some investments into equipment, staff training needed. With the $250-300 mln of new investments, the region will be a leader in the growing business of health services for wealthy retired people from the ex-USSR countries (especially Russia, Ukraine, Kazakhstan, etc.)

20. Contacts 20 Global Vision Advisory Services Ltd 125 Old Brompton Road Glen House 2nd Floor London SW3 7RP UK One Baltic Investment Group Terbatas 14, Riga LV-1011 Latvia