EY CIS. Russia: time for Chinese investments. A thousand mile trip begins from the first step. Chinese proverb

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1 EY CIS Russia: time for Chinese investments A thousand mile trip begins from the first step Chinese proverb

2 Russia: the facts land area 17 mln sq. km gas and iron ore reserves number of hydropower stations and sources of renewable energy Russia has the number of neighbors 16 countries, more than any other country on Earth Moscow is the city in Europe, with 12 million people number of billionaires (84) live in Moscow Most varied mineral resources St. Petersburg Moscow Kazan Togliatti Ekaterinburg Rostov-on-Don Krasnodar Links Western Europe with China Novosibirsk Highest percentage of population with secondary education 88% 2nd in length of oil and gas pipelines (246 thousand km) Lowest corporate income taxes among BRICS 20% 2nd renewable fresh water reserves electrified railroad network 43,000 km

3 Lake Baikal contains 20% of the world s total freshwater reserve number of seas (12) The closest point between Russia and the USA is only 4 km wide Highest in crude oil production globally 6th in crude oil reserves Border line with China 4,290 km 10+ hours by plane Borders North America 7th in terms of the number of Nobel Prize winners (most prizes are in the field of physics) metals producer globally 6+ hours by plane Vladivostok Yuzhno- Sakhalinsk 85 industrial parks in the sphere of high technologies energy exporter globally 1000 higher education institutions Third wheat producing country Most annual spacecraft launches globally forest area

4 EY CIS: milestones and achievements of the Big4 in terms of revenue and people First of the Big 4 in Russia in offices in the CIS We provide multidisciplinary and professinal services in all Russian regions 100% owned by CIS partners Opened Chinese Desk to better serve Chinese clients 50% of EY s business in the CIS is generated from consultancy and advisory EY served as auditor for the first Russian IPO on NYSE in 1996 We audit 34% of CIS companies listed on the Forbes Global 2000 (2014) Your EY contacts: Loletta Chow Global Leader of China Overseas Investment Network (COIN) Tel: loletta.chow@hk.ey.com Chinese, English Yongmao (Gary) Guo Chinese, English Director, China Desk Leader and Leader of Greater China Tax Outbound Center Tel: +7 (495) gary.guo@ru.ey.com Olga Sivolobchik Russian, English Executive Director (Office: Beijing) Tel: olga.sivolobchik@cn.ey.com Alexei Ivanov Russian, English, French CIS TAS Leader Tel: +7 (495) alexei.ivanov@ru.ey.com Vladimir Abramov Russian, English COIN Leader in EY CIS/Russia Tel: +7 (495) vladimir.abramov@ru.ey.com Russian contacts: Stanislav Voskresensky Deputy Minister of Economic Development of the Russian Federation Alexander Galushka Minister of the Russian Federation for Development of the Far East Gennady Timchenko Head of the Russian-Chinese Business Council Alexander Shokhin Chairman of the Board of Directors of the Russian-Chinese Center for Trade and Economic Cooperation Kirill Dmitriev CEO of RDIF and Co-CEO of RCIF

5 Russia: top industries and regions for Chinese investors Oil & gas Mining Telecommunications Power and utilities Infrastructure Forestry Agriculture Automotive Real estate Consumer and con- products struction Special economic zones (SEZ) There are 17 special economic zones of four types in Russia: industrial, technological, tourist, logistic. They offer the following benefits: Income tax rate is % instead of 20% Property, transport tax exemption (to 15 years) Land tax exemption (to 10 years) Income tax exemption (to cluster residents) Special customs regime. New perspectives: advanced development zones Additionally, there are plans to set up 14 advanced development zones in Russia. Significant tax benefits will be offered to the residents of these zones in the Russian Far East: Zero profits tax rate (federal part) for 10 years The regional part of profits tax will be capped at 5% Social taxes will be cut to 7.6% of payroll (vs the standard rate of 30%) Exemption from regional assets tax and land tax Preferential treatment in connecting to infrastructure in these zones. The management of the advanced development zones will be vested in a management company set up for this purpose and controlled by the Ministry for Development of the Russian Far East

6 Russia: successful Chinese investments and projects Shanghai Industrial Investment Co invests in Baltic Pearl project in St. Petersburg China Huadian and TGK-2 set up a JV to build up a power plant in the city of Yaroslavl in Russia China Chengtong Group invests in Moscow in Greenwood Business Park CNPC invests into Novatek s Yamal LNG project Fuyao Glass Industry Group established a production plant in Kaluzhskaya Oblast in new jobs have been created Russia-China Investment Fund (RCIF) and Vcanland, a leading Chinese tourism developer, invest USD 800 million in the development of tourism and social projects. The focus will be on Hainan Island, Lake Baikal, the cities of Vladivostok and Sochi Chinese home appliance producer Haier invests RUB 2 billion in the manufacturing of refrigerators and home equipment in Tatarstan s industrial park Master Great Wall Motor Co., Chinese motor vehicle manufacturer, builds a plant in Tulskaya Oblast with the annual output of 150,000 vehicles Russian telecom operator MegaFon purchases USD 600 million of equipment and maintenance services from the Chinese telecoms equipment company Huawei Haima, Chinese automotive concern, establishes production in Russia with the annual output of 30,000 vehicles Russia and China signed more than 40 important bilateral agreements on investment projects at the 19th regular meeting of the two Prime Ministers in October in Moscow. The focus of these investments will be on automotive sector, logistics, techno-parks development and others.

7 Russia: appetite for investments from China Dmitry Medvedev, Prime Minister of the Russian Federation Lou Jiwei, Finance Minister of the People s Republic of China Alexander Ivlev, EY Country Managing Partner, Russia China is our top foreign trade partner. We have more significant goals. Russia and China currently enjoy a very high level of relations characterized as strategic partnership. TASS, 13 October 2014 We are pleased to work with the Russian Direct Investment Fund. The new fund [the Russia- China Investment Fund] will enable us to realize investment opportunities providing a good return and mutually beneficial solutions. RDIF news, 5 June 2014 Russia has always been a strong bridge between Europe and Asia. We are interested in making this bridge a two way street filled with great opportunities, solid investments, and numerous success stories. Russia has enormous potential in terms of the scale of its internal market, which is one of the. Li Keqiang, Premier of the People s Republic of China Gennady Timchenko, Board Member, SIBUR Holding and NOVATEK Albert Ng, EY Country Managing Partner, Greater China China is willing to work with Russia to further deepen the cooperation areas of energy, transportation, electricity, and others. We should combine our efforts to expand the cooperation in infrastructure area. Speech at the Shanghai Cooperation Organization Meeting in Tashkent, 29 November, 2013 There is a clear trend toward a convergence of positions with our Asian partners for both economic and political reasons. Russian business is inte rested and not just in supplying raw materials, but in working actively in China. Many objective factors are bringing us together. Kommersant, 15 September 2014 Russia is a strategic market for Chinese companies, and the value we see there now is creating investment opportunities for Chinese companies. From our collaboration with EY Russia, we can help Chinese companies enter the market and then help them to be very successful in the Russian business environment.

8 EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY works together with companies across the CIS and assists them in realizing their business goals. 4,800 professionals work at 21 CIS offices (in Moscow, St. Petersburg, Novosibirsk, Ekaterinburg, Kazan, Krasnodar, Rostov-on-Don, Togliatti, Vladivostok, Yuzhno-Sakhalinsk, Almaty, Astana, Atyrau, Bishkek, Baku, Kyiv, Donetsk, Tashkent, Tbilisi, Yerevan, and Minsk). EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com Ernst & Young (CIS) B.V. All Rights Reserved. This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Neither EYGM Limited nor any other member of the global Ernst & Young organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication. On any specific matter, reference should be made to the appropriate advisor.