1 Bank loans Which instruments are most efficient subject to company’s growth? Russian or Foreign banks?

2 The variety of banking instruments Letter of credit Letter of credit – a loan subject to the delivery of goods. It’s an obligation taken on by a bank to make a payment once certain criteria are met. Bank guarantee Bank guarantee – acts as a safety measure for the opposing party in the transaction who runs into cash flow difficulties. These instruments are applicable to the wholesale companies importing short stock-list of highly liquid goods Overdraft Overdraft – a turnover credit Factoring Factoring - a financial transaction (loan) whereby a business pledges its accounts receivable. These instruments are applicable for the companies with «0» collateral value and substantial need in turnover capital: wholesale companies Leasing (financial rent) Leasing (financial rent) –a loan secured by inventory turnover and capital assets Mortgage Mortgage– a loan secured by real property (land) Project finance, when the cost of collateral decreases in proportion to the principle amount of the loan: developers and manufacturers Secured loan Secured loan (inclusive of secured by real estate), term loan Securities loan Securities loan – derivatives (one of causes of financial crisis)

3 The start up: Leasing, factoring Leasing Leasing – provides the ability to update fixed assets quickly but, is not flexible enough to respond to changing rates. The early payment envisages penalties etc. Factoring Factoring – speeds up the turnover of the current assets, minimizes supplier’s payment risk, but envisages high costs. Commission should be factored in in addition to the cost of money.

4 Organic Growth: mortgage, secured loan, syndicated loan Mortgage Mortgage – is an excellent instrument for financing capital construction, and is relatively cheap. However, not every company could combine core trading/service activity with property management. Secured loan/framework credit Secured loan/framework credit – is a convenient instrument subject to availability of a revolving line of credit. It provides flexibility in management of attracted funds. It is accessible subject to minimum collateral (inventory, equipment) and does not require investment into either audit or valuation. Syndicated loan Syndicated loan– is cheaper than a secured loan, since it assumes risk sharing between banks. It requires substantial effort on loan securitisation, working out of legal issued, and audit and valuation costs. The company is expected to have a substantial level of business activity.

5 Russian banks Advantages Broad selection of banks (even after crisis and in anticipation of the second wave) Relative ease of getting a credit The turnover connection makes it possible to get unsecured loans (the volume larger than the overdraft)Disadvantages High cost (as a rule) Short-term crediting (as a rule) Low credit ceiling per borrowing entity (in the majority of banks)

6 Foreign banks Advantages Relative low cost of borrowing (prerequisite audit by either of the four largest auditors, insurance and valuation by accredited companies, and legal support by a recognized international legal company adds from 0.5% to 1.5% to the rate) Long-term creditingDisadvantages Difficult procedure (as a rule) Prerequisite of a hard collateral – 1.5 times the loan Re-payment schedule (amortization) What is a hard collateral? Is it possible for a foreign bank to control or manage hard collateral in case of a default?

7 Financial (bank) instruments and credit Some Russian banks provide a loan or financing secured by collateral using a Bank guarantee, MNT, SLC, ADR, SKR, bank and security deposits, certificates, shares and other financial instruments. This would make sense subject to urgency in dealing with cash shortages, however an early call on these derivatives could result in loss of revenues (interest, discount etc). Disadvantage – high cost of borrowing and high risk for the lender. Investment bank «Sidorov & Co» Terms * Secured by high liquidity shares (Gazprom, VTB etc.) Loan «Credible securities» Loan «Exchange» * Loan «The third tier equities» 3 months % discount504050

8 “Azbuka Vkusa” in brief «Azbuka Vkusa» is the first private supermarket chain that has been set up to operate in a premium end of food retail in Russia Since 1997 «Azbuka Vkusa» retains its leadership position in premium end of food retail by turnover per sq. m., diversity of assortment, and customer service 50 supermarkets by the end of supermarkets by the end of 2013

9 Victoria Lubnina Financial Director “Azbuka Vkusa” supermarket chain