Black Earth Farming Ltd

Black Earth Farming Ltd Prospectus regarding listing of bonds SEK 750,000,000 9.40% 2013/2017 Sole Lead Manager and Bookrunner

Important information This prospectus (the Prospectus ) has been prepared by Black Earth Farming Ltd (the Company ) in relation to the application for listing of the Company s SEK 750,000,000 9.40% Bonds 30 October 2013/2017 (the Bonds ) at the corporate bond list on NASDAQ OMX Stockholm ( Nasdaq OMX Stockholm ). References to Black Earth Farming, BEF or the Group refer in this Prospectus to Black Earth Farming Ltd and its subsidiaries, unless otherwise indicated by the context. References to the Company only refer to the parent company Black Earth Farming Ltd. ABG Sundal Collier AB ( ABGSC ) has acted as financial advisor to the Company in connection with the issue of the Bonds. The Prospectus has been prepared in accordance with the rules and regulations in the Swedish Financial Instruments Trading Act (Sw. lag (1991:980) om handel med finansiella instrument) and Commission Regulation (EC) no 809/2004 of 29 April 2004 implementing Directive 2003/71/EC of the European Parliament and of the Council. The Prospectus has been approved by and registered with the Swedish Financial Supervisory Authority in accordance with the provisions in Chapter 2, Section 25 and 26 of the Swedish Financial Instruments Trading Act. It should be noted that such approval and such registration does not constitute any guarantee from the Swedish Financial Supervisory Authority that the information in the Prospectus is accurate or complete. This Prospectus is not an offer for sale or a solicitation of an offer to purchase the Bonds in any jurisdiction. It has been prepared solely for the purpose of listing the Bonds at the corporate bond list on Nasdaq OMX Stockholm. This Prospectus may not be distributed in any country other than Sweden where such distribution or disposal requires additional prospectus, registration or additional measures or is contrary to the rules and regulations in such country. Persons into whose possession this Prospectus comes or persons who acquire the Bonds are therefore required to inform themselves about, and to observe, such restrictions. The Prospectus will be available at the Swedish Financial Supervisory Authority s web site (www.fi.se) and the Company s web site (www.blackearthfarming.com). Paper copies may be obtained from the Company. Unless otherwise explicitly stated, no information contained in this Prospectus has been audited or reviewed by auditors. Certain financial information in this Prospectus has been rounded off and, as a result, the numerical figures shown as totals in this Prospectus may vary slightly from the exact arithmetictic aggregation of the figures that precede them. Unless otherwise specified or unless the context otherwise requires RUR refers to Russian ruble, SEK refers to Swedish kronor and USD refers to United States dollars. To the extent this Prospectus contains forward-looking statements and assumptions regarding future market conditions, operations and results, the statements can be included in several sections and include statements concerning the Company s current intentions, assessments and expectations. The words consider, intends, deems, expects, anticipates, plans and similar expressions indicate some of these forward-looking statements. Other such statements may be identified from the context. Although the Company believes that the forecasts of, or indications of, future results, performance and achievements are based on reasonable assumptions and expectations, the Company cannot guarantee the materialization of these forecasts. Actual events and financial outcomes may differ significantly from what is described in such statements as a result of risks and other factors affecting the Company s operations. Such factors of a significant nature are mentioned in the section Risk Factors. The Prospectus shall be read together with all documents which have been incorporated by reference (see Section Documents incorporated by reference below) and possible supplements to the Prospectus. The Prospectus is governed by Swedish law. Disputes concerning, or related to, the contents of this Prospectus shall be the exclusive jurisdiction of the courts of Sweden. The district court of Stockholm (Sw: Stockholms tingsrätt) shall be the court of first instance. Page 2

Table of contents The Bonds in brief... 4 Risk factors... 7 Responsible for the information in the Prospectus... 14 Company and its operations... 15 Legal considerations and supplementary information... 23 Financial overview... 24 Documents incorporated by reference... 24 Addresses... 25 Terms and Conditions... 26 Page 3

The Bonds in brief This Section contains a general and broad description of the Bonds and is not a comprehensive description of the Bonds. Potential investors should therefore carefully consider the Prospectus as a whole, including documents incorporated by reference, before a decision is made to invest in the Bonds. The full terms and conditions for the Bonds can be found in the Section Terms and conditions. Concepts and terms defined in the Section Terms and conditions or anywhere else in the Prospectus are used with the same meaning in this Section unless otherwise is explicitly understood from the context. Issuer: Black Earth Farming Ltd, company registration number 89973. Business description: The Bonds: ISIN-code and short code: Black Earth Farming Ltd (the Company or BEF ), established in 2005, is an integrated agricultural producer operating in the highly fertile Black Earth region of Russia. The Company holds ownership of an extensive first class soil land bank and is a major producer of grains and oilseeds. The business concept includes land ownership and productivity enhancement. As of September 30 2013, BEF had 308,000 ha under control of which 82% was fully owned with over 224,000 ha in production. The Bonds constitute direct, general, unconditional, unsubordinated and unsecured obligations of the Issuer and shall at all times rank pari passu with all direct, unconditional, unsubordinated and unsecured obligations of the Issuer, except those obligations which are mandatorily preferred by law, and without any preference among them. ISIN: SE0005472024. Short code: BEF0 101 03. Registration at Nasdaq OMX Stockholm: Loan amount: Application for registration of the Bonds at Nasdaq OMX Stockholm will be submitted in conjunction with the Swedish Supervisory Authority's approval of this Prospectus. There is no guarantee that such application will be approved. The aggregate amount of the bond loan is an amount of SEK 750,000,000 under 750 Bonds. Issue date: 30 October 2013. Redemption date: Nominal value and round lot: Interest: Interest payment dates: The date falling four years after the Issue Date or such earlier date as may be the case pursuant to the Terms and Conditions. The bond loan is represented by Bonds, each of a nominal amount of SEK 1,000,000, which is also the minimum round lot. The Bonds bear interest from, but excluding, the Issue Date up to, and including, the relevant redemption date at a fixed interest rate of 9.40% per annum. Interest will be paid on the 30 January, 30 April, 30 July and 30 October each year, with the first interest payment on the 30 January 2014 and the last 30 October 2017. Page 4

Early redemption by the Company: Bond holders put option upon change of control: Financial and general undertakings: Credit risk rating: All Bonds, but not only some, can be redeemed early at the option of the Company. The Bonds shall be redeemed at an early redemption amount (in addition to accrued interest, if any) equal to: 104.0% of the Nominal Amount during the period from the date falling 24 months after the Issue date to, but excluding, the date falling 30 months after the Issue date 103.0% of the Nominal Amount during the period from the date falling 30 months after the Issue date to, but excluding, the date falling 36 months after the Issue date 102.0% of the Nominal Amount during the period from the date falling 36 months after the Issue date to, but excluding, the date falling 42 months after the Issue date 101.0% of the Nominal Amount during the period from the date falling 42 months after the Issue date to, but excluding, the redemption date 100.0% of the Nominal Amount during the period from the date falling 6 months prior to, but excluding, the redemption date provided that the voluntary early redemption is financed by way of an issue of market loans, together with accrued but unpaid interest. Upon the Change of Control event each Bondholder has the right to request that all, or only some, of its Bonds to be repurchased at 101.0% of the Nominal Amount together with accrued but unpaid interest. The Company has, among other, undertaken to procure that as long as any Bond is outstanding: The ratio of Total Debt to Total Shareholder Equity will never exceed 75% The Working Capital Financing carve out less cash and cash equivalents of the Group amounts to zero or less for five consecutive days during each calendar year No Market Loan is incurred if such Market Loan has a final redemption date, early redemption dates or instalment dates which occur before the Final Maturity Date None of its subsidiaries incur any Market Loans Not to distribute any funds to shareholders in excess of 30% of the Group s consolidated net profit for the previous fiscal year For a full review of all undertakings associated with the Bonds and the definitions of above mentioned undertakings, see paragraphs 11 and 12 in the Section Terms and Conditions. Neither the Company nor the Bonds have been assigned an official credit rating from a credit rating agency or similar. CSD The Bonds are affiliated to Euroclear Sweden AB s, corp. reg. no. 556112-8074, Box 191, 101 23 Stockholm, ("Euroclear") account-based system, and no physical notes have been, or will be, issued. Clearing and settlement relating to the Bonds are carried out within Euroclear s book-entry system as well as payment of interest and repayment of the principal. Payment of principal and interest as well as, if applicable, withholding of preliminary tax will be made by Euroclear. Agent Bondholders meeting CorpNordic Sweden AB is acting as Agent in relation to the Bonds and on behalf of the Bondholders. The Terms and Conditions contain provisions regarding meeting of Bondholders. Please refer Page 5

to the Section Terms and conditions for more information. Issuing agent Governing law and jurisdiction ABG Sundal Collier Norge ASA. The Bonds shall be governed by and construed in accordance with the laws of the Kingdom of Sweden. Any dispute or claim arising in relation to the Bonds shall be determined by Swedish courts and the District Court of Stockholm shall be the court of first instance. Page 6

Risk factors All investments in bonds involve a degree of risk. The financial performance of BEF and the risks associated with BEF s business are important when making a decision on whether to invest in the Bonds. A number of factors influence and could influence BEF s operations and financial performance and ultimately the Company s ability to make interest payments and payments of principal on maturity. In this Section a number of risk factors are illustrated and discussed, both general risks pertaining to BEF s operations and material risks related to the Bonds as a financial instrument. The Section aims at describing the risks associated with BEF s operations and by that also the Company s ability to fulfil its obligations according to the terms and conditions for the Bonds. The risk factors below are not ranked in order of importance and no claim is being made that the list is exhaustive. Potential investors should carefully consider the risk factors below and other information in this Prospectus before deciding on making an investment in the Bonds. An investor must, in addition, alone or together with financial and/or other advisors, consider the general business prospects, other information in the Prospectus and general information about the applicable market and companies active on that market, based on their personal circumstances. An investor should possess sufficient knowledge to assess the risk factors and sufficient financial strength to bear those risks. Additional risk factors that are not currently known or not currently considered to be material may also affect BEF s future operations, performance and financial position, and consequently the Company s ability to meet its obligations under the terms and conditions for the Bonds. Risks related to BEF s business operations Risks relating to the current macroeconomic environment The global financial turmoil has significantly affected Russia's economy. While the Russian government has introduced a range of stabilization measures aimed at providing liquidity to Russian banks and companies, there continues to be uncertainty regarding the access to capital and cost of capital for the Group and its counterparties. If the Group requires further financing, such financing may involve restrictions on investment and operating activities. There can be no assurance that such funding required by the Group will be made available to it and, if such funding is available, that it will be offered on reasonable terms. If the Group is unable to obtain additional financing as needed, it may be required to reduce the scope of its operations or anticipated expansion, which may have a material adverse effect on the Group's financial condition and result of operations. Risks relating to the Group The Group's performance depends on its current management team and its ability to recruit skilled and suitably experienced personnel for future operations The Company is dependent on the efficient functioning of its management structure in Jersey and Russia. In addition, the Group's farming operations relies on a small senior management team for the implementation of its strategy and the operation of its day-to-day activities. The Group's performance depends to a significant extent on its ability to attract and retain such highly qualified and skilled managerial personnel, and in particular personnel with experience in the Russian agricultural markets. The loss of any key person or the inability to recruit appropriate personnel could have a negative impact on the Group's performance. No assurance can be given that key senior executives or senior executives at the local operational level will remain with the Group. Any inability to attract and retain the Group's key employees and managers and other professional personnel could have a material adverse effect on the Group's business, financial condition and operational results. Page 7

The Group's freehold ownership of agricultural land in Russia may be open to legal challenges Russian law does not allow a foreign-controlled entity to own agricultural land in Russia. Accordingly, the Russian assets of the Group are owned under a cross-ownership structure. Whilst this structure complies with the letter of the Russian law and has been used by a number of foreign funds and companies acquiring Russian assets, no assurances can be given that ownership structures, such as that used by the Group, could not be challenged on the basis that they possibly violate the spirit of the law. If the Company's holding structure of its Russian assets is found to breach Russian law, the Company could be forced to either sell part of its assets, or return the asset to the previous owner, or introduce Russian shareholders to its subsidiaries, which may have a material adverse effect on the Company's business, financial condition and results of operations. The Group's operations may be affected by defects in title to the land plots in Russia It is often difficult to determine with certainty the validity and enforceability of ownership or lease title to land in Russia or to what extent it is encumbered. It is not always clear which governmental body or official has the right to lease or otherwise dispose of certain land plots; the construction approval procedures are intricate and such approvals may be contested or totally cancelled; and the building and environmental regulations sometimes contain requirements that are almost impossible to fully comply with in practice. If the Russian properties owned or leased by the Group, or any activities relating to such properties, are found not to be in compliance with applicable approvals, consents, registrations or other regulations, the Group may be delayed or prevented from using such property or its title to such property may be challenged. This could have a material adverse effect on the Company's business, financial condition and results of operations. The Company is a holding company The Company is a holding company that conducts its operations through subsidiaries and affiliates. The Company holds no significant assets other than direct and indirect investments in the Group companies and is therefore dependent upon receipt of sufficient dividend or interest income from these companies to meet its own obligations. A decrease in dividend or interest income would have an adverse effect on the Company's financial condition, results of operations and ability to meet financial obligations. Risks relating to the Group's business Poor or unexpected weather conditions can affect the Group's results Weather conditions are a significant operating risk affecting the Group. Poor weather conditions and unpredictable climate change may adversely affect farm output which, in turn, may negatively affect Black Earth Farming's business, financial condition and results of operations. The Company does not carry the types of insurance coverage customary in more economically developed countries The insurance industry is not yet well developed in Russia, and many forms of insurance protection common in more economically developed countries are not yet available in Russia on comparable terms, including coverage for business interruption for agricultural business. The Company maintains insurance against some, but not all, potential risks and losses affecting its operations, and the Company cannot guarantee that its insurance will be adequate to cover all of its losses or liabilities, which would usually be covered in other countries. Black Earth Farming also cannot guarantee that insurance will continue to be available to it on commercially reasonable terms. Page 8

Tax risks The Group's operations, including intra-group transactions, are conducted in accordance with the Group s interpretation of applicable tax law, tax treaties and regulations in the affected countries and the requirements of the relevant tax authorities. Even if the Group and its advisers have processes and a framework prepared for transfer pricing and other transactions that may have tax effects, the possibility that the Group s interpretation of applicable laws, tax treaties and regulations, or the affected relevant authorities interpretation of these or administrative practice is not entirely correct, or that such regulations change, potentially with retroactive effect, cannot be universally ruled out. Competition The Company faces competition from other businesses which may have access to superior financing and lower costs. The Company may face increasing competition which could affect the Company s ability to fulfil its obligations under the Bonds. Financial Risk Factors Currency risks The Group is exposed to currency risk, i.e., the risk that currency exchange rate fluctuations will have an adverse effect on cash flow, income statement or balance sheet, in many aspects of its business. Exchange rate fluctuations affect the Group s results partly when sales and purchases in foreign subsidiaries are conducted in different currencies (transaction exposure), and partly when the profit and loss accounts and balance sheet items are translated in to RUR (translation exposure). The Group s transaction exposure arises from the generation of income in markets with currencies other than those in which certain raw materials, finished products and equipment are procured. This outflow is offset by the Group s exports to other countries. The Group is primarily active in the Europe. The Group s transaction exposure risk relates to the positions and future transactions in several currencies. Transaction exposure is to be considered significant if a subsidiary has income and costs in different currencies (e.g. sales in EUR and costs in RUR). The Group s export sales are typically in EUR, while costs are in RUR or linked to USD. Financing risk Financing risk means the risk that finance cannot be arranged, or only at significantly increased costs. The Company s interest-bearing liabilities consist of traded bonds. The Group may also seek access to Russian bank financing. The terms and conditions of the Bonds restrict the amount of debt which the Group may incur which could affect the availability of cash needed for acquisitions or other purposes. A deterioration of the Group s profitability or financial position may seriously affect the Group s ability to fulfil its undertakings according to applicable loan agreements which would potentially lead to default under existing financings, restructuring at a more expensive cost of financing. In addition, the Group currently benefits from advantageous pricing of its financing partly due to the prevailing low interest rates in the market. If financial markets and commercial banks were to increase their required return then the Group may only be able to refinance at more expensive rates or not at all. Any such deterioration in profitability or increase in the cost of financing may have a materially adverse effect on the Group s business, financial position, results of operations and the Issuer s ability to repay amounts due under the Bonds. Page 9

Interest risks The Group is exposed to interest risks on interest-bearing current and non-current liabilities. Changes in interest rates on the Group s liabilities affect the Group s results of operations. In addition, the Group s results of operations and financial position are exposed to the effect of market interest rates. Credit risks in accounts receivable Credit risks in accounts receivable are relatively limited considering that the Group s customer base is diverse and mainly comprises large customers, as distribution primarily takes place through major food retail chains. However, there can be no assurance that financial difficulties at one of the Group s large customers or simultaneously at a number of customers will not occur. If such a situation did arise it may have a materially adverse effect on the Group s business, financial position, results of operations and the Issuer s ability to repay amounts due under the Bonds. Changes in value of fixed assets The Group has fixed assets, of which machinery, equipment and infrastructure represent a large part. Whether or not book adjustments to such fixed assets are required is evaluated annually or whenever there is an indication that tests might be necessary. In the event that future tests regarding continuing changes in the value of tangible assets would lead to write-downs, this may have a materially adverse effect on the Group s business and financial position. Risks relating to Russia The Group's principal activities are within Russia. Besides business risks related to the Group s activities in the agricultural sector, the Group is also exposed to risks related to running such operations in Russia. The risks associated with Russia are similar to other investments in emerging market countries and are not specific to any specific Group company. An investment in the Bonds will be subject to general risks associated with investing in securities associated with companies with operations in Russia. Political and social risks Laws and regulations affecting business operating in Russia are subject to rapid changes and the Group's assets and operations could be at risk in the event of negative changes in the political and business environment. These risks entail in particular expropriation, nationalisation, confiscation of assets and legislative changes relating to the level of foreign ownership. Such instability may in some cases have an adverse impact on Black Earth Farming's business, financial condition and results of operations. Misuse of corporate governance is problematic Deficiencies in legislation on corporate governance, judicial enforcement and corporate legislation may lead to hostile takeovers, where the rights of minority shareholders are disregarded or abused, which could affect the Group's business, results of operations and financial condition. Crime and corruption and the use of illegal or unacceptable business methods and unlawful or arbitrary governmental action The widespread corruption and non-acceptable business practices conducted in Russia as compared with other more developed countries may decrease a Russian company's ability to compete globally. The operations of the Group could be adversely affected by illegal activities, corruption or claims implicating the Group in illegal activities. Page 10

Further, Government authorities have a high degree of discretion in Russia and at times exercise their discretion arbitrarily, without hearing or prior notice, and sometimes in a manner that is inconsistent with legislation or influenced by political or commercial considerations. Although unlawful, selective or arbitrary government action may be challenged in court, such action, if directed at the Company, could have a material adverse effect on the Company's business, financial condition and results of operations. Risks relating to the Bonds Market risk The market value of the Bonds depends on several factors, including, but not limited to, market interest rates. Investments in the Bonds involve the risk that fluctuations in market interest rates may adversely affect the value of the Bonds. Credit risks Investors in the Bonds carry a credit risk relating to the Group as investors ability to receive payment under the terms and conditions of the Bonds is dependent on the Group s ability to meet its payment obligations, which in turn is largely dependent upon the performance of the Group s operations and its financial position. An increased credit risk or decrease in the Group s creditworthiness may cause the market to charge a higher risk premium on the Bonds, which could have a materially adverse effect on the market price thereof. Another aspect of the credit risk is that deterioration in the financial position of the Group may reduce the Group s ability to obtain any debt financing required to repay Bondholders at the time of the maturity of the Bonds. Refinancing risk The Issuer may be required to refinance certain or all of its outstanding debt, including the Bonds. The Issuer s ability to successfully refinance such debt is dependent on the conditions of the financial markets in general at such time. As a result, the Issuer s access to financing sources at a particular time may not be available on favourable terms, or at all. The Issuer s inability to refinance its debt obligations on favourable terms, or at all, could have a material adverse effect on the Group s business, financial condition and results of operations and on the Issuer s ability to repay amounts due under the Bonds. Liquidity risks The Group will apply for listing of the Bonds on the corporate bond list of NASDAQ OMX Stockholm. However, it cannot be guaranteed that the Bonds will be admitted to trading. Further, even if securities are admitted to trading on a regulated market, active trading in the securities does not always occur and hence there is no guarantee that a liquid market for trading in the Bonds will occur or be maintained. This may have the effect that Bondholders cannot sell their Bonds when desired or at a price level which allows for a profit comparable to similar investments with an active and functioning secondary market. Accordingly, an investment in the Bonds is only suitable for investors who can bear the risks associated with a lack of liquidity in the Bonds. There is no guarantee that the redemption amount due to a listing failure will amount to or exceed the price level at which the Bonds could have been sold on NASDAQ OMX Stockholm. Furthermore, the nominal value of the Bonds may not be indicative compared to the market price of the Bonds if the Bonds are admitted for trading on NASDAQ OMX Stockholm. Page 11

The Bonds may not be a suitable investment for all investors Each potential investor in the Bonds must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should: have sufficient knowledge and experience to make a meaningful evaluation of the Bonds, the merits and risks of investing in the Bonds and all other related information; have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Bonds and the impact other Bonds will have on its overall investment portfolio; have sufficient financial resources and liquidity to bear all of the risks of an investment in the Bonds; understand thoroughly the terms and conditions of the Bonds; and be able to evaluate (either alone or with the help of a financial advisor) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks. Structural subordination and insolvency of subsidiaries The Company is dependent on its subsidiaries' ability to make payments to it in order to fulfil its payment obligations under the Bonds. Most assets are owned by and all revenues are generated in subsidiaries of the Issuer. The subsidiaries are legally separated from the Issuer and have no obligation to make payments to the Issuer of any surpluses generated from their business. The subsidiaries' ability to make payments is restricted by, among other things, the availability of funds, corporate restrictions and local law. In the event of insolvency, liquidation or a similar event relating to subsidiary, an entity within the Group, as a shareholder, would be entitled to any payments only after the other creditors have received full payment for their claims. Thus, the Bonds are in the latter case structurally subordinated to the liabilities of such subsidiaries to the extent there is no provision for a prioritised position. There can be no assurance that the Group and its assets would be protected from any actions by the creditors of any subsidiary of the Issuer, whether under bankruptcy law, by contract or otherwise. In addition, defaults by, or the insolvency of, certain subsidiaries of the Issuer could result in the obligation of the Group to make payments under parent company financial or performance guarantees in respect of such subsidiaries obligations or the occurrence of cross defaults on certain borrowings of the Group. Risks related to early redemption Pursuant to the terms and conditions of the Bonds, the Issuer has the right to redeem all outstanding Bonds prior to the final redemption date. If the Bonds are redeemed before the final redemption date, the holders of the Bonds will receive an early redemption amount which exceeds the nominal amount of the Bonds. However, there is a risk that the market value of the Bonds is higher than the early redemption amount and that it may not be possible for Bondholders to reinvest such proceeds at an effective interest rate as high as the interest rate on the Bonds and may only be able to do so at a significantly lower rate. In addition, the terms and conditions of the Bonds contain certain mandatory prepayment rights in favour of the Bondholders, however, it is possible that the Issuer will not have sufficient funds at the time of the mandatory prepayment to make the required redemption of Bonds. No action against the Issuer and Bondholders' representation In accordance with the terms and conditions of the Bonds, an agent will represent all Bondholders in all matters relating to the Bonds and the Bondholders are prevented from taking actions on their own against the Issuer. Consequently, individual Bondholders do not have the right to take legal actions to declare any default by claiming any payment from or enforcing any security granted by the Issuer and may therefore lack effective remedies unless and until a requisite majority of the Bondholders agree to take such action. Page 12

However, the possibility that a Bondholder, in certain situations, could bring its own action against the Issuer (in breach of the terms and conditions of the Bonds) cannot be ruled out, which could negatively impact an acceleration of the Bonds or other action against the Issuer. To enable the agent to represent Bondholders in court, the Bondholders may have to submit a written power of attorney for legal proceedings. The failure of all Bondholders to submit such a power of attorney could negatively affect the legal proceedings. Under the terms and conditions of the Bonds, the agent will in some cases have the right to make decisions and take measures that bind all Bondholders. Consequently, the actions of the agent in such matters could impact a Bondholder s rights under the terms and conditions of the Bonds in a manner that would be undesirable for some of the Bondholders. Bondholders' meetings The terms and conditions of the Bonds will include certain provisions regarding Bondholders meeting. Such meetings may be held in order to resolve on matters relating to the Bondholders interests. The terms and conditions of the Bonds will allow for stated majorities to pass certain resolutions which are binding upon all Bondholders, including Bondholders who have not taken part in the meeting and those who have voted differently to the required majority at a duly convened and conducted Bondholders meeting. Consequently, the actions of the majority in such matters could impact a Bondholder s rights in a manner that would be undesirable for some of the Bondholders. Restrictions on the transferability of the Bonds The Bonds have not been and will not be registered under the U.S. Securities Act of 1933, as amended, or any U.S. state securities laws. Subject to certain exemptions, a holder of the Bonds may not offer or sell the Bonds in the United States. The Issuer has not undertaken to register the Bonds under the U.S. Securities Act or any U.S. state securities laws or to effect any exchange offer for the Bonds in the future. Furthermore, the Issuer has not registered the Bonds under any other country s securities laws. It is the Bondholder's obligation to ensure that the offers and sales of Bonds comply with all applicable securities laws. Amended or new legislation The Finance Documents (including the terms and conditions of the Bonds) will be based on Swedish law in force as at the Issue Date. No assurance can be given on the impact on the rights of the Bondholders of any possible future legislative measures or changes or modifications to administrative practices in Sweden. Page 13

Responsible for the information in the Prospectus The Company issued the Bonds referred to in this Prospectus on 30 October 2013 in accordance with the empowerment from the Board of Directors. The Prospectus has been prepared for the purpose of listing the Bonds at Nasdaq OMX Stockholm and in accordance with the Commission Regulation (EC) no 809/2004 of 29 April 2004 implementing Directive 2003/71/EC of the European Parliament and of the Council and the rules and regulations in Chapter 2 of the Swedish Financial Instruments Trading Act. The Company accepts responsibility for the information contained in the Prospectus and declars that, having taken all reasonable care to ensure that such is the case, the information contained in the Prospectus is, to the best of its knowledge, in accordance with the facts and contains no omission likely to affects its import. The Board of Directors of the Company is, to the extent provided by law, responsible for the information, relating to the Company, contained in the Prospectus and declares that, having taken all reasonable care to ensure that such is the case, the information contained in the Prospectus is, to the best of its knowledge, in accordance with the facts and contains no omission likely to affect its import. 29 January 2014 Black Earth Farming Ltd The Board of Directors Page 14

Company and its operations Company background Black Earth Farming Ltd was established as a limited liability company in 2005 in accordance with Jersey Law (company registration number 89973). The Company has its registered office at Nautilus House la Cour des Casernes, St Helier Jersey JE1 3NH, Channel Islands. Business activity BEF s business concept is to acquire, develop and farm agricultural land assets in Russia, primarily in the Black Earth Region, Russia and secondarily in other regions endowed with fertile agricultural land. As of 30 September 2013, Black Earth Farming has a total of 308 thousand hectares of land under control, of which 254 thousand hectares under registered ownership. The land bank is situated in the Russian regions Kursk, Voronezh, Lipetsk and Tambov. Additionally, the Company has storage capacity of 500 thousand tons on farms as well as in grain elevators. The Group s crop production is focused on applying rigorous scientifically validated farming techniques and management with the aim of generating high yields of good quality crops at low costs. Different season classes of crops, such as winter and spring crops, are used to spread the planning and preparation periods, as well as harvesting work. Improving crop yield performance is a key focus area going forward which includes several key initiatives, amongst others related to soil Ph, soil structure, weed treatment, fertilizer application and seed management. Page 15

Harvest area breakdown (ha) 2008 2009 2010 2011 2012 2013 Winter wheat 48,636 84,698 72,677 93,627 73,912 73,702 Spring wheat 4,339 3,824 10,157 13,093 4,368 3,412 Spring barley 42,638 43,053 13,793 26,535 22,718 21,850 Corn maize 9,950 8,084 8,592 6,149 26,003 36,814 Winter triticale n/a 2,740 302 n/a n/a n/a Total Grains 105,563 142,399 105,521 139,404 127,001 135,778 Winter rape 875 7,045 536 n/a n/a n/a Spring rape 13,149 7,132 29,051 33,494 36,597 31,436 Sunflower 19,378 26,466 36,761 46,518 33,218 28,997 Soya 7,899 7,863 18,187 18,682 Total Oilseeds 33,402 40,643 74,247 87,875 88,002 79,115 Sugar Beet n/a n/a n/a 1,621 5,085 8,821 Potatoes n/a n/a n/a n/a 31 193 Total Commercial Area 138,965 183,042 179,768 228,900 220,119 223,907 Other / Forage crops 2,968 381 1,013 1,951 1,675 2,727 Total harvest area 141,933 183,423 180,781 230,851 221,794 226,634 (*2013 in table above is plan, not forecast/fact) Legal structure The Company is the holding company for a number of legal entities established under the legislation of Cyprus and the Russian Federation. Those entities are along with their subsidiaries together referred to as the Black Earth Farming group (the Group ). The Company holds no significant assets other than direct and indirect investments in the Group companies and is therefore dependent upon receipt of sufficient dividend income from these companies to meet its own obligations. The organization of Russian subsidiaries goes by the joint name of "Agro-Invest". Planalto Enterprises Ltd. The Company owns 100% of the shares in Planalto Enterprises (Cyprus) Ltd. ( Planalto ). Planalto is a holding company incorporated in Cyprus. There are two other subsidiaries in Cyprus; Black Earth Farming Management Limited and Goldney Investments Limited, both which are dormant. Management Company Agro-Invest and Management Company Agro-Invest-Regions Under Russian law, a foreign company, or a Russian company with more than a 50 percent foreign shareholding, cannot own agricultural land in Russia. To comply with this prohibition and to enable indirect ownership of Russian agricultural land, Black Earth Farming has established a cross-ownership structure. The limited liability companies OOO (Limited Liability Company) Management Company Agro-Invest and OOO Management Company Agro-Invest- Regions control 60 percent of the shares in each other and Planalto owns the remaining 40 percent of the shares in OOO Management Company Agro-Invest and OOO Management Company Agro-Invest-Regions. Through such a structure, Planalto indirectly holds 100 percent of the shares in the operating companies. The CEO of OOO Management Company Agro-Invest has financial authority to approve all important transactions of the companies within the Agro-Invest Group before being submitted to the Board of Directors of the Company for final approval. OOO Management Company Agro-Invest has four regional branches; Kurskiy branch, Tambovskij branch, Lipetskiy branch and a branch in Voronezh city. Currently there are five land-related ZAO s (Closed Joint Stock Companies or CJSC ) and twenty-three OOO s ( LLC ) registered under OOO Management Company Agri-Invest. The landrelated ZAO s were established from September 2005 to January 2006 and the land-related OOO s were established from April 2006 onwards. Any further subsidiaries will be established as OOO s. There are also two OAO ( OJSC ) within the legal group, OAO Kastorenskaya MTS (which does not own any land) and Kalacheevskaya Selkhozhimia OJSC.. Liski-Agro-Invest LLC, Raskhovets-Agro-Invest LLC and Staroyurievo-Agro-Invest LLCare under liquidatation. Page 16

The legal structure of Black Earth Region is presented below. Please note that all companies set out below OOO Management Company Agro-Invest are companies incorporated in Russia. Page 17

Share capital, shares and shareholders According to the Company s current Articles of Association adopted on 15 November 2007 and amended on 13 November 2012, the authorized share capital is USD 5,000,000 divided into 500,000,000 shares. The Company has only one class of shares. Each share is entitled to one vote and carries an equal right to the Company s assets and profits. The shares are denominated in USD and have a quota value of USD 0.01 per share. As far as the Company is aware, there are no shareholder agreements or other agreements which could result in a change of control of the Company. Shareholders as per 30 September 2013: Shareholder Shares % of total shares Investment AB Kinnevik 51,811,828 24.9% Alecta Pension Funds 20,708,180 10.0% Luxor Capital Group 17,696,766 8.5% Länsförsäkringar Funds 16,752,387 8.1% Danske Invest Funds 10,700,200 5.2% Top 5 shareholders 122,207,611 58.8% Other 85,461,834 41.2% Total shareholders 207,669,445 100.0% Board of Directors, Management Team and Auditors The office address of the Board of Directors and the Management Team is the registered office of the Company (please refer to the Addresses section below). Board of Directors Name Born Director Since Nationality Position SDR holdings Vigo Carlund 1946 2012 Swedish Chairman of the Board 407,311 Per Brilioth 1969 2006 Swedish Non-executive Director 206,666 Anders Kronborg 1964 2013 Swedish Non-executive Director 7,833 Magnus Unger 1942 2010 Swedish Non-executive Director 250,000 Paul Schroeder 1944 2010 Danish Camilla Öberg 1964 2013 Swedish Non-executive Director and Chairman of Operations Committee Non-executive Director and Chairman of Audit Committee 250,000 Richard Warburton 1966 2010 British Non-executive Director and CEO 430,000 1,500 Vigo Carlund, Chairman of the Board Mr. Carlund is a Swedish citizen born 1946. He has been Director of the Board of Investment AB Kinnevik since 2006 and is Chairman of the Board of Net Entertainment NE AB since 2011. He also serves as Director of the Board of Academic Work Solutions since 2006 and IZettle AB since 2010. Mr. Carlund worked within the Kinnevik Group 1968 2006 and was CEO of Korsnäs AB 1998 2000, and President and CEO of Transcom WorldWide S.A. 2000 2002 and Kinnevik 1999 2006. Page 18

Per Brilioth, Non-executive Director Principal education: Mr. Brilioth holds a BA in Business Administration from the University of Stockholm, and a Master of Finance from the London Business School. Work experience: Mr. Brilioth is managing director and member of the board of Vostok Nafta Investment Ltd. In addition Mr. Brilioth is currently a member of the Board of Directors of RusForest AB, Egidaco Investments PLC, Avito Holdings AB, Kontakt East Holding AB, X5 Group AB and Svenska Fotografiska museet AB. Anders Kronborg, Non-executive Director Principal education: Graduate in Economics from the University of Copenhagen. Work experience: Chief Operating Officer of Investment AB Kinnevik since 2012. CFO of Metro International S.A. since 2007. Member of the Board of Millicom International Cellular S.A., Vireo Energy AB and G3 Good Governance Group Ltd. Magnus Unger, Non-executive Director Principal education: Mr. Unger holds a Master of Science in Economics and Business from the Stockholm School of Economics. Work experience: Mr. Unger is a businessman with many years of industrial experience, with among others SCA/ Mölnlycke and Atlas Copco. Mr. Unger is a member of the Board of Directors of Lundin Petroleum AB and Otirol Art AB. Poul Schroder, Non-executive Director and Chairman of Operations Committee Principal education: Mr. Schroeder is a graduate in economics from the Aarhus Business School and has completed the International Senior Management Program at Columbia University. Work experience: Mr. Schroeder is an independent consultant and has been active in the international agricultural industry since 1966, among others, within the Continental Grain Company and Bunge. Mr. Schroeder is Chairman of the Board of Directors of AlphaCapita and Dan Store. Camilla Öberg, Non-executive Director and Chairman of Audit Committee Principal education: Camilla Öberg holds a Bachelor of Science in Economics from Stockholm School of Economics. Work experience: From 2006 to 2011, Camilla Öberg was employed at the IT-company Logica, serving as CFO of Logica Sweden AB from 2007. Between 1998 and 2006, Camilla Öberg was employed at WM-data, where she, inter alia, worked as head of IR and Group Treasury. Camilla Öberg also worked as CFO of one of WM-data's subsidiaries and as business controller for one of four business areas. During her first two years at WM-data, Camilla Öberg worked as CFO of Företagarservice. Before her time at WM-data, she worked as, inter alia, CFO of Integro AB, as CFO of Lexicon and in accounting and external reporting at SEB. Camilla Öberg is a Board member of Investment AB Välnäslund and Rusforest AB. She is also a partner of Öberg & Öberg Handelsbolag and CFO for Cybercom Group AB. Camilla Öberg is also a Board member of subsidiaries of Cybercom Group AB. Richard Warburton, Executive Director and CEO Principal education: Mr. Warburton holds a Bachelor of Science degree in Agriculture from the University of Newcastle as well as an MBA. Work experience: Mr. Warburton is CEO of KinnAgri Limited and a Director of KCM International and Rolnyvik Sp. z.o.o., all of which are companies in the Investment AB Kinnevik group, as well as a member of the investment committee to funds run by Northbridge Capital Partners. Mr. Warburton was previously head of agriculture at Investment AB Kinnevik. He has also been Equity Partner and Head of Agribusiness Bidwells 1999 2010 and a Director of British Field Products 1994 1998. Page 19

Management Team Name Born Nationality Position SDR holdings Holdings of warrants Richard Warburton 1966 British CEO 430,000 749,999 Erik Danemar 1976 Swedish CFO 25,000 200,000 Fraser Scott 1961 British COO 117,967 199,998 Richard Willows 1953 British Sales & Marketing Director 20,833 100,000 Per Nisser 1981 Swedish Director of Procurement 0 150,000 Victoria Fletcher 1981 British Business Development Director 71,000 150,000 Richard Warburton, Chief Executive Officer and Executive Board Director Principal education: Mr. Warburton holds a Bachelor of Science degree in Agriculture from the University of Newcastle as well as an MBA from Open University. Work experience: Mr. Warburton is CEO of KinnAgri Limited and a Director of KCM International and Rolnyvik Sp. z.o.o., all of which are companies in the Investment AB Kinnevik group, as well as a member of the investment committee to funds run by Northbridge Capital Partners. Mr. Warburton was previously head of agriculture at Investment AB Kinnevik. He has also been Equity Partner and Head of Agribusiness Bidwells 1999 2010 and a Director of British Field Products 1994 1998. Erik Danemar, Chief Financial Officer Principal education: Mr. Danemar holds a BA in Economics and Management from the University of Oxford and an Executive MBA from the London Business School. Work experience: Mr. Danemar has more than nine years of financial sector experience from various positions at Deutsche Bank and United Financial Group in London and Moscow, most recently as Director within equity research focused on mining and basic resources. He was also a Board Director at Ferronordic Machines AB. Fraser Scott, Chief Operating Officer Principal education: Mr. Scott holds a Bachelor of Science in Agriculture from Newcastle University. Work experience: Mr. Scott has more than 20 years experience of large scale corporate farm management, most recently as head of arable and potato operations on 20 thousand ha of arable farming and food operations at the Cooperative farms in the UK. He has also been involved in several large scale agribusinesses as farm and operations manager at Booker, Broad Oak and the Co-operative farms in the UK. Richard Willows, Sales & Marketing Director Mr. Willows has a background in trading of agricultural commodities, specializing in the marketing of quality assured grains and oilseeds for the food industry including direct exporting to key customers in the Baltic States and Europe. He has more than 15 years of experience working in Russia and prior to BEF Richard held the position of General Director of OOO Heartland Farms in the Penza region of Russia. Established in 2002 it was one of the first foreign investors in Russian farming. Per Nisser, Director of Procurement Principal education: Mr. Nisser holds a Master of Science in Engineering Physics from Uppsala University. Work experience: Mr. Nisser has an extensive procurement background from the mobile operator Tele2 AB where he held the positions of Procurement Director in Tele2 Russia and Procurement and Logistics Director in Tele2 Kazakhstan. Experience also covers post acquisition company integration and management consulting. Page 20