Investment Climate - Ukraine
International and Domestic Investor Views
Dorian B. Foyil
Chairman and CEO
Foyil Financial Group
Foyil SecuritiesStrong Local Presence in Ukraine- with International Reach
Team of over 40 investment banking professionals
Over 15 years as Ukraine’s leading independent brokerage firm
Local network provides access to off-market deals
Diversified business model with a broad network within Ukraine ofboth international and local companies
Audited according to IFRS standards (Baker Tilley)
International investment approach, experience and education.Team members have degrees from:
Cambridge University (UK)
Wharton School of Business (USA)
Duke University (USA)
Yale University (USA)
New York University School of Law (USA)
Texas A&M University (USA)
UCLA (USA)
University of San Francisco (USA)
Duquesne University of Pittsburgh (USA)
Westminster Business School (UK) Investment BankingAsset ManagementReal EstateSales / TradingResearchCustody Services
Foyil Organization Structure
Foyil Corporate Finance is a part of the Foyil Group of companies engaged in financial services
targeting the emerging markets of Eastern Europe, with special focus on Ukraine:
Foyil is wholly owned by its directors and employees. Our employee restricted share plan provides for
greater employee ownership over time
3
Foyil Group
Foyil Focused Funds
(offshore mutual and
hedge funds)
Foyil Premier Funds
(Ukrainian mutual
funds)
Equity and fixed-income
sales and trading
On-line trading
Top-rated investment
research
Certified custody
Mergers and acquisitions
advisory
Initial/Secondary Public
Offerings
Private placements
Private equity capital
raising
Foyil Group
Foyil Focused Funds
(offshore mutual and
hedge funds)
Foyil Premier Funds
(Ukrainian mutual
funds)
Foyil Focused Funds
(offshore mutual and
hedge funds)
Foyil Premier Funds
(Ukrainian mutual
funds)
Equity and fixed-income
sales and trading
On-line trading
Top-rated investment
research
Certified custody
Mergers and acquisitions
advisory
Initial/Secondary Public
Offerings
Private placements
Private equity capital
raising
4
Milestones in Foyil Group’s Development
2008
2007
20062005
2004
2003
2001
1999
Foyil Eastern Europe & Russia Focused Fund
rated as a 5-star fund by Morningstar
Foyil Eastern Europe & Russia Focused Fund
ranked top emerging markets fund by
Morningstar, Bloomberg, CogentHedge, HFM
Week and BarclayHedge
Foyil Eastern Europe & Russia Focused
Fund ranked 1st in Top Fund Scorecard by
The Wall Street Journal Asia, Feb 2006
Foyil Eastern Europe & Russia Focused Fund ranked
2nd in Top Fund Scorecard by The Wall Street Journal
Europe, May & July 2005
Foyil Eastern Europe & Russia Focused Fund ranked 6th
in top 10 offshore hedge funds by Standard & Poor’s, April
2004, and 2nd in top 10 offshore hedge funds, May 2004
Foyil Eastern Europe & Russia Focused Fund
merges with Foyil Ukrainian New Europe
Opportunity Fund
Foyil Eastern Europe & Russia Focused Fund
merges with Foyil Emerging Markets Fund
Launch of Foyil Eastern Europe &
Russia Focused Fund
1997
1996
Foyil begins local operations in Ukraine with first
foreign owned full service brokerage, corporate
finance and investment bank
Foyil Corporate Finance launches Ukrainian Opportunity
Fund, a private equity fund involved in voucher
privatization in Ukraine
Launch of Foyil Ukraine Realty Partners
Ltd; a private equity real estate fund
focused on distressed real estate in
Ukraine & CIS countries2010
5
Foyil Investor Base
Break-down by investor nationality
During its history, Foyil has had more than 150 investors, coming from different countries and investment
backgrounds. Most of these are long term, continuing relationships
Among the notable institutional investors with Foyil are the following:
Deutsche Bank AG, JP Morgan Securities, Kredietbank Luxembourgeoise, Viking Fund Ltd, Lauer & Co, Banco
Nominees, Technical Services of North America, Citibank, Free Market Capital, Shimoda Russia, Citco, The Castlestone
Fund, Bank Brussels Lambert, Solar Group SA, NCB Trust, Mount Blanc Investments, Tarragona Fund, Deltec
Panamerica, Capcor Pension Plan, John Templeton Foundation
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Selected Corporate Finance Deals
Issue of corporate bonds
Lead Manager and
underwriter
2007
Zhydachiv
Pulp and Paper Plant
Private Placement
of shares
Lead Manager
2 006
Private Placement
of shares
Lead Manager
2006
Investment Advisory
Services
Financial advisory services
on investment
opportunities in Ukraine
Financial Advisor
2006
Investment Advisory
Services
Financial advisor on a sale
of minority stake
Financial Advisor
2006
Acquisition of
Kryvyy Rig Cement
Sale of strategic stake
to Heidelberg Cement AG
Lead Manager
2004
Investment Advisory
Services
Financial advisor
on investment and
development
strategies
Sole Financial Advisor
2003 -2005
International Tender
Sale of strategic stake in
Volyn Cement
to Dyckerhoff
Lead Manager
2001
International Tender
US$ 34,000,000
Sale of 81.4% stake in
Rogan Brewery
to Interbrew
Lead Manager
2001
Ukrainian Opportunity
Fund
Private Placement
of shares
US$ 55,000,000
Sole Financial Advisor
1997
Issue of corporate bonds
Lead Manager and
underwriter
2007
Issue of corporate bonds
Lead Manager and
underwriter
2007
Zhydachiv
Pulp and Paper Plant
Private Placement
of shares
Lead Manager
2 006
Zhydachiv
Pulp and Paper Plant
Private Placement
of shares
Lead Manager
2 006
Private Placement
of shares
Lead Manager
2006
Private Placement
of shares
Lead Manager
2006
Investment Advisory
Services
Financial advisory services
on investment
opportunities in Ukraine
Financial Advisor
2006
Investment Advisory
Services
Financial advisory services
on investment
opportunities in Ukraine
Financial Advisor
2006
Investment Advisory
Services
Financial advisor on a sale
of minority stake
Financial Advisor
2006
Investment Advisory
Services
Financial advisor on a sale
of minority stake
Financial Advisor
2006
Acquisition of
Kryvyy Rig Cement
Sale of strategic stake
to Heidelberg Cement AG
Lead Manager
2004
Acquisition of
Kryvyy Rig Cement
Sale of strategic stake
to Heidelberg Cement AG
Lead Manager
2004
Investment Advisory
Services
Financial advisor
on investment and
development
strategies
Sole Financial Advisor
2003 - 2005
Investment Advisory
Services
Financial advisor
on investment and
development
strategies
Sole Financial Advisor
2003 - 2005
International Tender
Sale of strategic stake in
Volyn Cement
to Dyckerhoff
Lead Manager
2001
International Tender
Sale of strategic stake in
Volyn Cement
to Dyckerhoff
Lead Manager
2001
International Tender
US$ 34,000,000
Sale of 81.4% stake in
Rogan Brewery
to Interbrew
Lead Manager
2001
International Tender
US$ 34,000,000
Sale of 81.4% stake in
Rogan Brewery
to Interbrew
Lead Manager
2001
Ukrainian Opportunity
Fund
Private Placement
of shares
US$ 55,000,000
Sole Financial Advisor
1997
Ukrainian Opportunity
Fund
Private Placement
of shares
US$ 55,000,000
Sole Financial Advisor
1997
Investment Climate - Ukraine
International and Domestic Investor Views
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Economic recovery will continue in 2011-2012
Ukrainian economy should grow by 4.8% in 2011 (+5.2% in Q1)
External demand for locally produced commodities (mainly steel and agriculture) and
machinery should remain stable in 2011 (exports up 50% in Q1)
Industrial production should grow by 7.9% in 2011 and remain the major driver of the
economic revival
Local consumption should additionally fuel the economic growth on the back of
reinstating lending and growing disposable income
Inflation should total 12% in 2011 and will mainly be driven by increase of utility tariffs
for households, rise of excise taxes on alcohol and tobacco and growth of prices on
dairy products
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Exchange rate stable at near UAH 8.00/USD 1.00
Exchange rate will remain stable: National currency (Hryvnia) should remain
unchanged in 2011 thanks to stable exports and support of the National Bank of
Ukraine
USD 38bn of international reserves will smooth fluctuations: Currently, the National
Bank of Ukraine possesses USD 38bn of the international reserves. This level is
secured by IMF’s USD 15bn stand-by credit arrangement and will suffice to smooth
the fluctuations on the local FX market.
UAH/USD
10
Government debt at a manageable 36% of GDP
Government debt at a manageable
level: As of September 2011, Ukraine’s
total government debt (direct and
guaranteed) was USD 47.1bn, or 30% of
2011e GDP. Ukraine has enough
resources to meet maturing obligations
in 2011 being additionally supported by
USD 15bn loan from the IMF
Gross external debt equals USD 123bn or 76.6% of GDP: 66% of gross external debt
pertains to the private sector: USD 27bn belong to banks and USD 54bn to the non-banking
corporate sector. Reduced risks have helped Ukrainian banks and companies to reinstate
borrowing on the Eurobond market starting from 2011 and to continue the debt restructuring
process
Source: Bloomberg, Foyil est.
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Ukraine Stock Market Performance
Ukrainian stock market was
one of the best performing
markets in 2010: Ukraine’s
benchmark UX index grew by
68% in 2010
However, UX index
underperformed its peers in
January-September 2011
Why hasn’t Ukraine’s Capital Market Developed More?
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Problems
Legal Structure & Credibility Lack many regulations and many
regulations out-of-date
Solutions regarding capital markets
compatible with EU Standards
Capital Market Infrastructure Lacking Complete Institutional Infrastructure
Domestic Capital Very Limited Permanently growing strength of
Institutional Investors
Pension funds
Investment Funds
Modest growth in Individual Investors
Foreign Capital Lacking due to low creditability of the
country
Creditability of the country at the
‘investable’ level of S&P “A”
Capital Market Specialists Limited number of persons with good
experience most having only theoretical
knowledge
Relative surplus of brokers, analysts and
other experienced market specialists
Can you Guess Which Country this Describes?
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Problems POLAND - 1989 POLAND - 2011Legal Structure & Credibility Lack many regulations and many
regulations out-of-date
Solutions regarding capital markets
compatible with EU Standards
Capital Market Infrastructure Lacking Complete Institutional Infrastructure
Domestic Capital Very Limited Permanently growing strength of
Institutional Investors
Pension funds
Investment Funds
Modest growth in Individual
Investors
Foreign Capital Lacking due to low creditability of
the country
Creditability of the country at the
‘investable’ level of S&P “A”
Capital Market Specialists Limited number of persons with
good experience most having only
theoretical knowledge
Relative surplus of brokers, analysts
and other experienced market
specialists
Why hasn’t Ukraine’s Capital Market Developed More?
Both are POLAND…Surprised?
Poland’s use of Mandatory Pension ContributionsCould Ukraine Benefit as well?
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0,0
10,0
20,0
30,0
40,0
2001 2002 2003 2004 2005 2010
Assets under
Management US$bn3,1 6,7 9,8 11,6 19,0 40,0
Assets under Management US$bn – Polish Pension Funds
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Ukrainian Company Public and Private Placement update
Over the past six years, Ukrainian companies did 66 share placements raising US$3.8bn
80% of placements were by foreign-registered holding companies of Ukrainian entities
Most placements were listed in Warsaw and London followed by Frankfurt
Most Ukrainian placements were done prior to 2009; however, a number of larger IPOs
have happened in the last two years
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Major 2008-2009 placementsDominated by Agriculture
Company Sector % $ Date Market
Myriya Agriculture 20.0% $90.0m June 2008 Frankfurt
Sintal Agro Agriculture 15.0% $34.5m August 2008 Frankfurt
MHP Agriculture 19.4% $322.5m May 2008 London
Landkom Agriculture 5.4% $22.0m March 2008 London
Landkom Agriculture 10.0% $3.5m March 2009 London
MCB Agricole Agriculture 24.4% $56.0m March 2008 Frankfurt
Agroton Agriculture 25.0% $42.0m November 2009 Frankfurt
Major Ukrainian Foreign Placements - 2010 and 2011
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Company Sector % IPO size $ EBITDA Date Market
Kernel Agriculture 6.3% $81.4m 9.9x April 2010 Warsaw
Avangard Agriculture 20.0% $188.0m 6.8x April 2010 London
Agroton Agriculture 26.0% $54.0m 5.9x October 2010 Warsaw
Company Sector % IPO size $ Comment Market
Coal Energy Mining 25% $78m Warsaw
Industrial Milk Agriculture $30m Warsaw
KSG Agro Agriculture 33% $40m Warsaw
Milkiland Agriculture $70m Warsaw
Ovostar Agriculture 25% $33m Warsaw
Sadovaya Mining $31m Warsaw
Valinor Public Agriculture CANCELLED Warsaw
ViOil Agriculture CANCELLED Warsaw
Westa Industrial 25% $47m Warsaw
2010 Placements – Just three…
2011 has been active
The Greek Default?…what does the Market Say?
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Greek 1 Year Government Bond Yields
1 Year Greek Gov’t yields now at 131%
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www.foyil.com
Dorian Foyil – Chairman & CEO
Foyil SecuritiesVerkhniy Val 4A
04071 Kyiv
Ukraine
Tel: +38 (044) 393 2313
Fax: +38 (044) 393 2314