INVESTMENT MEMORANDUM

INVESTMENT MEMORANDUM

Maxwell Capital Ventureclose-end mutual investment fund

of extra risky (venture) investments

Managing CompanyMaxwell Asset Management, LLC

Venture fund volume

3 061 000 000 rubles

Sectorial focus

Medical innovations and biotechnologies sector

SUMMARY

Maxwell Asset Management company is one of significant participant in collectiveinvestments market and included in TOP-10 of managing companies of the Russian Federationby net assets value of open-end mutual investment funds being managed. Today Maxwell AssetManagement manages 16 mutual investment funds.

Specialization of Maxwell Capital Venture close-end mutual investment fund of extrarisky (venture) investments (hereinafter referred to as the “Fund”) is medical innovations andbiotechnologies sector.

Within this specialization the fund team developed the Concept of key markets being thebase of investment process.

The main competitive advantages of the Fund are: Specialized fund. All-in-one structured system of projects selection and promoting Balanced project portfolio Professional fund team Formed investors’ pool Strong partners – strategic players on key markets

(VBD, Genencor, Alltech, Biocad, Sibbiopfarm, Big Pharma)

Volume of the Fund being created is 3061 M RUR, term of activities – 10 years. It issupposed to pay profit to the holders on quarterly basis. The estimated period of simple return forFund investors is 5,25 years, discounted period of return – 6 years, the norm of internalprofitability of the Fund - 28,69%.

Fund portfolio structure is diversified by stages of development: 5% of Fund assets –seed (10 projects), 20% - start-up (12 projects), 75% - early growth (20 projects).

Currently in the portfolio there are 26 projects from 10 companies applicants. 8 of themare described in the memorandum presented and supposed for investment during first year offund activities.

Fund investors are RVC, OJSC, 2 companies included in Maxwell Capital financialgroup, Narodny Credit Bank, 6 specialists in the field of venture investments and 5 Fundadvisors.

In the Fund specialists with reach experience of project management in the field ofbiotechnologies are working, there provided technical, finance and scientific projects expertise.

The specialists of the fund are: Avdeenko V., Benevolenskii M., Komarov A., KurakovaN., Movsesyan O., Orlova N.

The Specialists’ wide network of professional contacts in the venture, biotech andmedical sectors of Russia and the world is of great importance.

Scientific expertise of projects shall be executed by Fund Advisors, RAMS academiciansGrachev S., Kubatiev A., Smirnov V., Tsyb A., and professor Sushkevich G.

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With purpose of RVC interests protection as well as for transparency of project selectionprocedures ensuring, control over purpose usage of monetary assets and estimation of efficiencyof Specialists of Managing company activities there formed

Supervisory council, the members of which are: S.I. Kolesnikov – Chairman deputy of the State Duma committee on health protection. V.K.Lepakchin – the head of State centre of drug side effect monitoring of the Russian

Federation. V.I.Sergienko – Chairman of Committee on business activity in public health and

medical industry of Chamber of commerce and industry of the Russian Federation. V.M. Cherepov – Director of department on cooperation with sectorial associations of the

Russian Union of Industrialists and Entrepreneurs, chairman deputy of medicalcommission of RUIE.

There invited into Supervisory council L.M.Roshal’ – chairman of commission of the PublicChamber of the Russian Federation on public health matters.

Investment priorities of the fund being created and its focusing on innovation activities inthe field of key trend of science and technology of the Russian Federation – living systems(biotechnology, medical innovations and instrument making) – assist “RVC”, OJSC in solvingproblems of new innovation companies development in the Russian Federation and venturebusiness culture forming.

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Summary table of fund data

General info

Managing company Maxwell Asset Management Ltd.

Venture fund Maxwell Capital Venture

Sectorial purpose Biotech and medical innovations

Fund volume 3 061 000 000 RUR

Fund activities terms 10 years, from 2008 to 2018

Payment of profit to fund investors Quarterly

Fund investors

RVC, OJSC 1

Legal entities 3

Individuals 11

Maxwell Capital Venture Fund RUR %%

RVC, OJSC share 1 500 000 000 49,00%

Individuals share 1 561 000 000 51,00%

Incl. share of specialists and advisors of the fund 33 671 000 1,10%

Fund team

Number of specialists in the field of venture investments 6

Number of advisors in the fund 5

Number of ready venture projects, incl. 8

In agreement of intent stage 2

In negotiations on the deal stage 3

In preliminary estimation stage 3

Expected figures of the fund activities For 10 years

Profit from venture projects (RUR) 18 009 800 000

IRR of the fund 28,69%

Profit of the fund investors (RUR) 15 344 629 784

Simple period of return 5,25 years

Discounted period of return 6,0 years

quantity

Projects sharein the fundportfolio

Averageinvestmentsvolume (M.RUR)

Term ofinvestments(years) IRR

Venture projects, incl. 42

Seed projects 10 5% 12,5 7 81,58%П

start-up projects 12 20% 48 5 62,98%

early growth projects 20 75% 120 4 39,69%

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FUND MANAGING COMPANY ................................................................................................8

Background and potentialities of managing company and (or) it’s participants ................8Financial results of managing company funds .....................................................................11Copporate management ..........................................................................................................13

Management bodies structure ............................................................................................13TOP_MANAGEMENT.......................................................................................................14Organizational chart and stuffing structure .....................................................................16

The specialized service organizations ....................................................................................18Fund specialized depository. Entity maintaining the register of fund investment units'holders. .................................................................................................................................18Fund valuator.......................................................................................................................18Fund auditor ........................................................................................................................19

Ownership structure ...............................................................................................................20Owners and beneficionaries of the company ........................................................................20Information protection............................................................................................................21

FUND TEAM ...............................................................................................................................23

Expert group on venture investments....................................................................................23Unique abilities ....................................................................................................................23Experience and professional achievements .......................................................................25Assignment of duties on fund management ......................................................................27Cooperation experience.......................................................................................................28Motivation ............................................................................................................................28

Fund advisors...........................................................................................................................29Unique abilities ....................................................................................................................29Professional achievements ..................................................................................................31Advisors role in the fund: ...................................................................................................33

Shares of specialists and advisors in the fund.......................................................................33Other essential information on the fund team ..................................................................33

FUND STRATEGY .....................................................................................................................35

Investment Situation ...............................................................................................................35The current Situation in the High-Technology Sector .....................................................35Investment Situation in Russia...........................................................................................37

Fund Specialization .................................................................................................................39Fund Specialization by Sector ............................................................................................39Description of Key Markets and Target Segments ..........................................................41

Investment Policy of the Fund ................................................................................................48Investment Criteria .............................................................................................................48Investment Goals .................................................................................................................49Structure of the Fund Portfolio..........................................................................................50

Investment Activity of the Fund.............................................................................................51Types and Structure of Investment Deals .........................................................................51Subsequent investment deals ..............................................................................................52Increase in the Value of Portfolio Companies ..................................................................52Arrangements for Exiting from Investments ....................................................................53

Partners of Fund ......................................................................................................................55Partner 1. Biotechnological company Alltech ...................................................................55Partner 2. Genencor (Danisco Division) ............................................................................56Partner 3. Research Company Abercade ..........................................................................56

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Partner 4. Venture Entrepreneurship Center of the International Higher BusinessSchool MIRBIS ....................................................................................................................58Partner 5. Moscow State University (MSU) Scientific Park............................................58Partner 6. Production Association SIBBIOPHARM .......................................................58

FINANCE .....................................................................................................................................60

Fund financial model...............................................................................................................60Model benchmark................................................................................................................62Fund profitability indicators ..............................................................................................64Investment expenses plan....................................................................................................66Norms and plan of expenses being reimbursed at the cost of the fund assets ...............67Norms and plan of the managing company fee.................................................................68Managing company budget ................................................................................................68Schedule of fund formation ................................................................................................72

Taxation....................................................................................................................................72Politics of profit distribution by units....................................................................................73

INVESTMENT PORTFOLIO ...................................................................................................74

General Portfolio Description.................................................................................................74Memorandum of Understanding Phase.................................................................................76

Company 1. “Biotech” Ltd. – Interleukins and Interferons............................................76Company 2. NPO Enzymatic Technologies Ltd. - SOD...................................................77

Phase of Deal Discussions (if Available) ................................................................................79Company 3. MBF Ltd. – Medical Nutrition......................................................................79Company 4. “NPP “TRIS” Ltd., Yeasts for Bioethanol Production ..............................81Company 5. Close Joint Stock Company (ZAO) PINNI, Genetic Human Passport.....82

Preliminary Assessment Phase ...............................................................................................83Company 6. Biosystems Ltd., G-CSF “Granstim” ...........................................................83Company 7. Medbiopharm Ltd., Blood Substitute Product “Krunidon”......................84Company 8. Biosystems Ltd., “Rekalfin” Product ...........................................................85

FUND INVESTORS ....................................................................................................................87

List of fund investors...............................................................................................................87The characteristic of investors of fund ..................................................................................89

Financial standing ...............................................................................................................89Investment focus ..................................................................................................................90

Non-financial background of investors .................................................................................90“RVC”, OJSC as a fund investor ...........................................................................................91

Purposive character of investments from “RVC”, OJSC................................................91Additional support of the fund from “RVC”, OJSC........................................................91Additional support of RVC, OJSC from managing company ........................................91RVC OJSC units buy-out ...................................................................................................92

FUND MANAGEMENT.............................................................................................................93

Investment process ..................................................................................................................93Innovation companies search .............................................................................................93Innovation companies analysis ...........................................................................................94Agreement of intent contents..............................................................................................95Due diligence procedures prior to the deal .......................................................................95The deal legal support .........................................................................................................96Post-investment monitoring of the company and the deal...............................................97New financing management................................................................................................97Exit management .................................................................................................................97

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Investment decision taking procedure ...................................................................................98Composition and competence of managing company and fund bodies..........................98Deal primary expertise ......................................................................................................100Internal approving of the deal..........................................................................................100Investment Committee ......................................................................................................100Intent agreement................................................................................................................100Due diligence prior to the deal ........................................................................................101Deal conclusion ..................................................................................................................101Money transferring within the deal .................................................................................101Refinancing of the company .............................................................................................101Investment ceasing.............................................................................................................101Decision on exit ..................................................................................................................101

Procedure of reporting to investors .....................................................................................101Provision of investors with information ..............................................................................102Risk management ..................................................................................................................103

General investment risks ..................................................................................................103Fund’s specialization - related risks ................................................................................104Risks of each potential investment object .......................................................................105Risk management systems and mechanisms ...................................................................105Risk limits by kinds and types of deals and industries...................................................106Temporarily free monetary assets management.............................................................106

Close-end mutual investment fund management particulars ...........................................107Regulator’s requirements observance .............................................................................107Amendment of legislation on investment funds. .............................................................108

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FUND MANAGING COMPANY

Managing company full corporate name: Maxwell Asset Management Limited LiabilityCompany

Managing company short corporate name: Maxwell Asset Management Ltd

Registered office: 1, Bolshaya Yakimanka, Moscow, 119180

Address: 1, Bolshaya Yakimanka, Moscow, 119180

Information on state registration: main state registration number 1037736007033, recordon state registration of a legal entity is made on March 13, 2003 by tax office of Ministry oftaxation of Russia # 36 for South-Western administrative district of Ministry of taxation ofRussia.

Charter capital volume as of the last reporting date: 30 000 000,00 (Thirty million) rubles

Information on reorganizations: no reorganizations have been executed during the periodof managing company existing

License for carrying out investment funds, mutual investment funds and non-statepension funds management activities dated June 17, 2003, No. 21-000-1-00122, issued toMaxwell Asset Management Ltd. by the Federal Financial Markets Service.

Background and potentialities of managing company and (or) it’s participants

Maxwell Asset Management Ltd. company was incorporated in March 2003 and sincethen has become on of the leaders on collective investments market. According to theinformation of the National Manager’s League as of beginning of the year 2008 Maxwell AssetManagement MC ranked on 9th place by net assets value of open-end managed funds.

Today the company manages 16 mutual investment funds, 14 among which are beingopen-end and focused on the investor community. Maxwell Asset Management MC offers entirespectrum of investment strategies with different “risk-profitability” ratios. Investment objects areshares, bonds, commercial and residential real estate, and units of third-party mutual funds.

For the moment it’s own and agents' network of MC includes 212 sales points in 39 citiesall over Russia.

Decisions on funds’ managing are taken by investment committee presented by funds’managers, analyst department employees and the company’s top-management representatives.Control for the funds’ rules and risk-management are executed by the company’s controller.

As of January 1, 2008 Maxwell Asset Management Ltd assets total 175,34 mln RUR.,internal funds: 86,74 mln RUR, profit volume for the last three years: 56,04 mln. RUR.

Maxwell Asset Management company and the funds being managed by it not oncebecame leaders of financial ratings and different financial awards winners

In the Rating of the funds assets management quality in the Expert RA - NLM revision(28.09.2007) 3 funds managed by Maxwell Asset Management Ltd. at once were pulled

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with the highest mark of the assets management quality. These are Maxwell Equity Fund,First Fund of Funds and Maxwell Bonds Fund. Each of them was assigned with A rating- high level of the fund's assets management.

Maxwell Asset Management company has won national award "Financial Elite of Russia2007" in nomination "The most clients-oriented company". The prize "Financial Elite ofRussia" has been awarded since the year 2004 and is being the evidence of expressivesocial recognition of business reputation, professional competence and socialresponsibility of the nominee. The prize is a meaningful result of a sequence of financialawards, professional competitions, relevant ratings and listings during the current year.

Maxwell Asset Management company was awarded with a prize "Financial Olympus2006" in nomination "Management strategy", “Result and success” category. Annualprize «Russian Financial Olympus» has been awarded from the year 1995 as a specialrecognition by the Russian society of the highest professional competence of theNominees in banking, insurance, investment, leasing, audit and other financial services.

First Fund of Funds mutual investment fund managed by Maxwell Asset Managementhas won the prize "Company of the year 2005" in the main nomination "Mutualinvestment funds". National award "Company of the year" has been awarded annuallyfrom year 1999 to the companies had been demonstrating outstanding achievements intheir business development. This project is being under the auspices of the Ministry ofEconomic Development and Trade of RF. The prize-winners are determined by ExpertBoard of the competition consisting of the most prominent representatives of business,state and public bodies.

Maxwell Asset Management company has won the award “Pifia-2006” in nomination"Best specialized funds". The prize "Pifia" has been established by the internetinformation portal FundsHub.ru for marking with special awards most interestingprojects, noticeable achievements and outstanding contributions to asset managementindustry of the leading management companies, investment funds, mass media andpersonalities of the industry.

Maxwell Asset Management company was awarded with a prize "Financial Olympus2006" in nomination "Management strategy", “Result and success” category.

First Fund of Funds mutual investment fund managed by Maxwell Asset Managementcompany became the winner of the award "Financial Elite of Russia 2006" in thenomination "Innovation of the year".

Maxwell Asset Management company became the winner of the award “The company ofthe year 2005” in nomination “Mutual investment fund”.

Maxwell Capital mutual investment fund is “The best mutual investment fund of theyear” following the results of “Financial Elite of Russia 2005” award.

First Fund of Funds is the biggest Russian open-end fund of funds (Investfunds.ru, MIF’rating by the net assets value dated 29.02.2008)

Maxwell Capital took the second place among open-end blend funds in MIF rating byprofitability/risk ratio as of 28.09.07.

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According to Investfunds.ru, Maxwell Metallurgy mutual fund managed by MaxwellAsset Management became the most profitable among open-end blend funds for the firsttwo months of the year 2008 (since 31.12.07 to 29.02.08).

The biggest and the senior funds managed by Maxwell Asset Management company areMaxwell Capital open-end blend fund and First Fund of Funds open-end mutual fund of funds.

Maxwell Capital open-end mutual blend fund

Maxwell Capital fund took 3rd place by the net assets value (NAV) as of 29.12.07 amongall open-end blend funds, 8th place among all open-end MIFs of Russia. NAV amounted 2 166,1mln rubles or 8,26 % of the total volume of net assets in all open-end mutual blend funds ofRussia and 2,14 % of the total volume of net assets in open-end mutual funds.

Maxwell Capital fund took 3rd place by the net assets value (NAV) as of 29.06.07 amongall open-end blend funds, 8th place among all open-end MIFs of Russia. NAV 2 729,1 mlnrubles or 8,26 % of the total volume of net assets in all open-end mutual blend funds of Russiaand 2,14 % of the total volume of net assets in open-end mutual funds.

Maxwell Capital fund took 2nd place by attracted assets volume among open-end blendfunds and 5th place among all open-end mutual funds for the year 2006 (1 481,5 mln. RUR). Forthe year 2005 – 2nd place among open-end blend funds and 8th place among all open-endmutual funds (254,4 mln. RUR).

Maxwell Capital fund took 2nd place by profitability among open-end blend funds and7th place among all open-end mutual funds (70,67%) for the year 2006.

On 06.07.2006 the fund fell into the five most profitable open-end mutual funds of theyear 2006. For the first half of the year Maxwell Capital gained 35,04 % for the holders ofinvestment units.

By the risk/profitability ratio (on the basis of Sharpe’s ratio) Maxwell Capital fund took2nd place among open-end funds and 2nd place among open-end blend funds as of 31.07.2007,as of 21.05.07 – 1st place among open-end mutual funds of all types.

According to the weekly Kommersant–Dengi (#36, 11.09 – 17.09.2006) Maxwell Capitalfund had shown the best profitability result among open-end mutual blend funds for the last 9months, 1 year and 2 years (as of 12.09.2006). For these periods holders of investment unitsgained 60,1%, 88,5% and 184,5% accordingly.

In Smart Money magazine’s rating (# 32 dated 23.10.2006) Maxwell Capital fund took1st place among blend funds by management quality and by risk/profitability ratio.

In the rating of assets management quality made by rating agency Expert RA incooperation with National Managers’ League (NLM) Maxwell Capital fund was assigned withthe highest A rating – high level of the assets management quality. Asset management appraisalis executed by three key indicators – Jensen alpha ratio, Omega ratio and Sharpe ratio (Expertmagazine # 44, 27.11-3.12.2006).

First Fund of Funds open-end mutual fund of funds

By net assets value (NAV) as of 29.06.07 First Fund of Funds is the biggest one amongRussian funds of funds.

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NAV amounted 364,7 mln RUR (14,14 mln USA dollars) or 41,8% of the total volumeof net assets in all funds of funds

By attracted assets’ volume the fund became the biggest one among funds of funds forthe year 2006 (149,5 mln Rub) and 2005 г. (80,5 mln RUR).

By profitability for the years 2006 and 2005 First Fund of Funds took 1st place amongfunds of funds (48,53% and 60,66% accordingly).

In the rating of assets management quality made by rating agency Expert RA incooperation with National Managers’ League (NLM) Maxwell Capital fund was assigned withthe highest A rating – high level of the assets management quality. Asset management appraisalis executed by three key indicators – Jensen alpha ratio, Omega ratio and Sharpe ratio (Expertmagazin # 44, 27.11-3.12.2006).

Financial results of managing company funds

Funds’ data are shown as of February 29, 2008.

Maxwell Capital open-end mutual investment blend fundNet assets value: 1859,8 mln. RUR.Profitability since activities starting: 264,5% (since April 30, 2004)

First Fund of Funds open-end mutual investment fund of fundsNet assets value: 317,8 mln. RUR.Profitability since activities starting: 130,2% (since September 30, 2004)

Maxwell Equity Fund open-end mutual investment equity fundNet assets value: 227,0 mln. RUR.Profitability since activities starting: 63,3% (since September 30, 2005г.)

Maxwell Bonds Fund open-end mutual investment bonds fundNet assets value: 134,4 mln. RUR.Profitability since activities starting: 27,0% (since August 31, 2005)

Maxwell Telecom open-end mutual investment equity fundNet assets value: 107,2 mln. RUR.Profitability since activities starting: 29,7% (since December 30, 2005)

Maxwell State Enterprises Fund open-end mutual investment equity fundNet assets value: 74,1 mln. RUR.Profitability since activities starting: 9,2% (since 30 June 2006г.)

Maxwell Oil & Gas open-end mutual investment equity fundNet assets value: 61,3 mln. RUR.Profitability since activities starting: -10,3% (since October 31, 2006г.)

Maxwell Energo open-end mutual investment equity fundNet assets value: 415,9 mln. RUR.Profitability since activities starting: -0,5% (since December 29, 2006г.)

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Maxwell Index MICEX open-end mutual investment index fundNet assets value: 59,8 mln. RUR.Profitability since activities starting: 2,81% (since May 31, 2007г.)

Maxwell Finance open-end mutual investment blend fundNet assets value: 36,5 mln. RUR.Profitability since activities starting: -15,1% (since July 31, 2007г.)

Maxwell Metallurgy open-end mutual investment blend fundNet assets value: 51,5 mln. RUR.Fund has been operating for less than 6 months

Maxwell Retail open-end mutual investment blend fundNet assets value: 34,3 mln. RUR.Fund has been operating for less than 6 months

Maxwell Pension open-end mutual investment blend fundNet assets value: 34,7 mln. RUR.Fund has been operating for less than 6 months

Maxwell Olympic open-end mutual investment equity fundNet assets value: 29,2 mln. RUR.Fund has been operating for less than 6 months

Maxwell Strategic Investments close-end mutual investment fund of extra risky (venture)investmentsNet assets value: 2,2 mln. RUR.Profitability since activities starting: -10,8% (since 1 августа 2005г.)

Maxwell Real Estate close-end mutual investment real estate fundNet assets value: 73,3 mln. RUR.Profitability since activities starting: 633,0% (since 14 апреля 2004 года)

Quantity of Maxwell funds’ holders of investment units exceeds 16 000 individuals andlegal entities.

Maxwell Asset Management Ltd. alongside with Maxwell Capital Ltd. investmentcompany and partner bank MAXWELL BANK OJSC belongs to financial group MaxwellCapital.

Maxwell Capital Ltd. IC operates on Russian equity market since the year 2000.Background and client base accumulated by Maxwell Capital IC team allows to expectsuccessful cooperation with venture fund in part of external investors’ attraction into investmentprojects of the fund on respective projects’ development stages both in form of initial publicoffering (IPO) and in form of private placement to the portfolio investors. Such cooperationmodel allows the fund to gain an access to the external investors’ assets and increase probabilityof successful opt-out of the fund from investment projects through public or private placement ofthe shares, that as a rule can provide as much fair estimation of the fund’s investment projects aspossible as of the moment of the opt-out.

Units in all open-end funds managed by Maxwell Asset Management Ltd. are listed onMICEX, and Maxwell Capital and First Fund of Funds units are listed in the highest quotation

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list A1 MICEX. Units in the venture fund are also assumed to be listed in MICEX, and MaxwellCapital IC will provide daily bilateral quotations of the fund’s units to make them liquid.

Auxiliary potentials for the fund provided by membership in the financial group MaxwellCapital of the general-purpose commercial bank MAXWELL BANK OJSC are associated firstof all with possibility of attraction through banking organization additional short-term and long-term financing of the fund’s investment projects on the basis of fixed-terms, pays and collectionprinciples, that can substantially decrease risks both of the fund and it’s investors especially atthe stage of further financing of the fund’s projects after initial investments by the fund of theseprojects. As well it is possible to use credit resources of MAXWELL BANK while opt-out fromsuccessful projects using management buy-in and/or management buy-out mechanisms. Andsettlement & cash services provided by MAXWELL BANK to the companies shares andparticipatory shares in which would be acquired into the venture fund will allow to createadditional effective control over financial flows of such companies and decrease risks associatedwith inappropriate and/or non-effective usage of monetary assets invested by the fund.

Copporate management

Management bodies structure

Superior body of Maxwell Asset Management Ltd (hereinafter referred to as the“Company”) is General meeting of the Company’s participants. Maxwell Asset ManagementLtd. Charter contains full list of the issues pertaining to the competence of the General meeting.Decisions of the General meeting of the Company’s participants shall be taken through an openvoting.

Decisions pertained to the competence of the General meeting of the Company’sparticipants associated with alteration of memorandum of association, net profit distributionamong the company's participants, reorganization and winding-up of the Company, additionalcharging of all participants of the Company, dissolving or restricting of additional rights grantedto all participants of the Company, alteration of maximum share of the Company’s participantand participants’ shares proportion, money value of non-monetary contributions to the chartercapital made by participants and third parties being admitted to the Company, alteration of netprofit distribution procedure shall be taken by all participants of the Company unanimously.(Art. 10.6 of the Charter of Maxwell Asset Management Ltd.)

Decisions associated with amendments to the Company’s Charter including chartercapital amount alteration, establishment of filial branches and representative offices, additionalcharging of a certain participant of the Company provided that the participant to be additionallycharged has voted for such decision or given his written consent, dissolving or restricting ofadditional rights granted to a certain participant provided that the Company’s participant to beadditionally charged has voted for such decision or given his written consent, shall be taken bytwo-thirds of total vote of the Company’s participants. (art. 10.6 of the Charter of MaxwellAsset Management Ltd.)

Other issues pertained to the competence of General meeting of the Company’sparticipants shall be taken by majority vote of the Company’s participants.

The sole executive body of Maxwell Asset Management Ltd. is General director of theCompany. General director shall be assigned by decision of the General meeting of theCompany's participants for 3 years. To the competence of General director there pertained allissues of current activities of the Company excluding questions pertained to the Generalmeeting’s competence.

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The sole participant of Maxwell Asset Management Ltd. is Maxwell Capital GroupCJSC.

Functions of the sole executive body of Maxwell Asset Management Ltd. are beingexecuted by Lanin Petr Vladimirovich (Decision of the sole participant of Maxwell AssetManagement Ltd. dated 07.09.2006 #7). Mr.Lanin was born on November 06, 1972. Graduatedfrom Moscow Institute of Steel and Alloys with specialization Engineer-metallurgist. Has secondhigher education by profession “Finance and Credit” (diploma from MIRBIS Moscowinternational business school), and qualification certificate of specialist in the sphere of financialmarket in broker’s activities, dealer’s activities, securities management activities (series 1.0) andsecurities management activities and/or mutual investment funds and other forms of collectiveinvestments management companies’ activities (series 5.0). Since the year 2004 has beenholding executive offices in companies belonging to Maxwell Capital group.

TOP_MANAGEMENT

Kirpichenko Dmitry Petrovich – the President of Maxwell Capital financial group.

In 1992 worked at ground zero and then during 5 years - on positions of president of theboard deputy and vice-president – fully participated in development of main businesses ofGLOBEX commercial bank.

Since 1998 in the office of vice-president was engaged in development of Russianactivities’ direction in ATON IC, playing full role in brokerage services, trust management,private banking establishing. With his participation in 2002 ATON IC effectuated as theunderwriter first Russian successful IPO for RBC Information Systems OJSC (MICEX, RTS:RBCI).

In the beginning of 2004 took the lead of Maxwell Capital financial group.

Graduated from Lomonosov’s Moscow State University with specialization in appliedmathematics, Financial Academy affiliated with Government of the Russian Federation withspecialization in banking and insurance activities.

Lanin Petr Vladimirovich – General director of Maxwell Asset Management company.Inside of the group coordinates activities of Department of development.

Till 2000 leaded securities department in Macprombank CB. Since 2000 – Generaldirector in Maxwell Capital IC, since 2003 – General director in Maxwell Asset ManagementLtd.

Graduated from Moscow Institute of Steel and Alloys.Has MBA degree in Plekchanov’s Academy with specialization finance and credit.

Sabitova Tatiana Yuryevna – General director of Maxwell Capital IC. Inside the groupcoordinates Finance department’ activities.

Has been professionally working on Russian stock market since 1994. Leaded clientsservice departments in different investment companies, during a few years had been holddifferent management positions in ATON IC. In 2004 started working in Maxwell AssetManagement Ltd.

Graduated from Moscow Aviation Institute with specialization in automatic controlsystems.

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Kovalchuk Vladislav Vladimirovich – Managing director of Maxwell AssetManagement company. Inside the group coordinates activities of Asset management andmarketing department.

Has been working on Russian stock market since 1994. Worked at ground zero and formore that 5 years held managing positions in CentreInvest Securities IC. As Developmentdirector played full role in Moscow branch of BrokerCreditService IC establishing, and thenworked as Executive director in Cerich Capital Management IC. Since 2004 works in MaxwellCapital financial group.

Graduated from St.-Petersburg state academy of aerospace instrument making.Has MBA degree in Open University Business School (UK).Served internship in financial institutes in UK.

Usichenko Sergey Ivanovich – Head of trust management department of Maxwell AssetManagement Ltd.

Works on Russian stock market since 1998. Since 1998 till 2004 held positions ofportfolio manager and head of trust management department in investment companies. Has beenworking in Maxwell Asset Management MC since 2004. Has proven experience in investmentportfolios exceeding 5 billion RUR management.

Graduated from economic faculty in Pridneprovskaya Academy of construction andarchitecture with specialization in finance and credit. Has MBA degree in High School ofInternational Business.

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Organizational chart and stuffing structure

General Director (1)

General Director Deputy (1) General Director Deputy, Managing Director (1)General Director Deputy, Managing Director

(1)

GeneralDirectorDeputy,

Controller(1)

Accountingoffice (17persons)

Operationsregistrationdepartment(8 persons)

HRdepartment(1 person)

Client relations andmarketing department (107

persons)

Technicaldepartment(7 persons)

Real Estatemamgement

department (3persons)

Assetmanagementdepartment(6 persons)

Legaldepartment(5 persons)

Chief accountant(1)

Departmentdirector (1)

Departmentdirector (1) Department director (1)


Departmentdirector



Chief accountantdeputy (1)

DepartmentDirector

Deputy (1)Leading

specialist Clients service offices

DepartmentDirector

Deputy (1)Real estate fund

manager (1)Assets

manager (2)Leadinglawyer(1)

Senior accountant(1) Specialist

Maintenancedivision Manager (1) Lawyer (2)

Head clients service officeAssistant to

manager

Back-office Clients service manager (2)

Head ofdivision

Assistant tomanager(1)

Accountant onlease relations(1) Manager's assistant (4) Trader(1)

Leadingspecialist (2) Senior consultant

Leadingspecialist (2)

Lawyer onreal estate

dealsregistering

(1)

Specialist (1) Consultant (4)

Assistant totrader (1)

Accountant oncapital assets (1) Junior consultant (1) Specialist

Analyticaldepartment (2

pers)

Intern (5)

Risk manager(1)

Agents'operationsregistering

officeDevelopment

divisionDepartment

director

Accountant oncashless

settlement (2)Leading

specialist (1)Supplementary offices in

Moscow (12 offices)Head ofdivision

DepartmentDirector Deputy

Internalcontrol

department(1 pers)

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Personnel capacity in Maxwell Asset Management Ltd. as of March 01, 2008 totals 187 persons.

Supplementary office manager(12)

Specialist (2) Consultant(12)

Accountant onsalaries (1) Junior consultant (24)



Leadinganalyst(1)

Accountant (7)Supplementary offices(Regional) (5 offices) Specialist

Leadingspecialist

Supplementary office manager(5) Analyst

Senior cashkeeper (1) Manager's deputy

Office administrator

Reception (8persons) Assistant (1)

Cash keeper (3) System administrator

Secretary

Seniorsecretary (1)

Clients service manager (3)

Consultant Secretary (7)

Junior consultant (10)

Intern (5)

Courier

ITdepartment(17persons)

Supplementary offices(Regional trade centers) (4

offices)Departmentdirector(1)

Supplementary office manager(5)

Consultant (1)

Junior consultant (8)

DepartmentDirector

Deputy (1)

Marketingdivision

Regionsservicedivision

Systemadministrator

(5)

Head ofdivision

Head ofdivision(1)

Programmer(7)



Specialist (2) Specialist

technicalsupport

engineer(3)

17

18

The specialized service organizations

Fund specialized depository. Entity maintaining the register of fund investmentunits' holders.

Corporate name of specialized depository: Gardian Investment company closed joint-stock company (Gardian IC CJSC).

Corporate name of the entity maintaining the register of holders of investment units:Gardian Investment company closed joint-stock company (Gardian IC CJSC)

Location: 1, Bolshaya Yakimanka, Moscow 119180, the Russian Federation. Telephone:(495) 782-88-88

Internet site: n\aGeneral director: Alikin Dmitrii VladimirovichGardian IC CJSC belongs to Maxwell Capital financial group. The company is capable of

clients servicing high modern technologies and focused on gaining leading positions amongcompanies servicing mutual funds. Combining of depository’s, registrator’s and controller’sfunctions shall allow to optimize management companies activities, decrease risks and minimizeexpenses.

The company engages highly qualified personnel having working experience onsecurities market since 90-s in mutual investment funds of all categories and types servicing.

Pricing policy of Gardian IC CJSC does not make provisions for additional fee for legaland consulting services for clients.

Total design value of the fee of Gardian IC CJSC as specialized depository and entitymaintaining register of investment units holders is not to exceed 0,1 % (excl. VAT) of averageannual net assets value of the Fund.

Fund valuator

Corporate name of the fund valuator: Banks-expert limited liability company auditingorganization.

Location: building 1, 14, Spartakovskaya ploschad’, Moscow, 107082.Telephone: (495) 942-78-67Internet site: n/aGeneral director: Novikov Oleg Vladimirovich

Banks-expert Ltd. auditing organization started operating activities in 1999. Banks-expertLtd. has unblemished business reputation, significant corporate resource, high index of businessactivity, promising growing-points, uses information technologies, and is characterized onbusiness services market as financially sound. Banks-expert Ltd. actively takes part in manycompetitions and tenders on evaluation hold by different corporations and state services.

During operating period Banks-expert Ltd. drawn up more than 1000 reports onevaluation of business, enterprises, real estate including land plots, assets, property complexes,machinery and equipment, value of one square meter of an lease object in federal property andother evaluation objects.

Banks-expert Ltd. is engaged as auditor by MAXWELL BANK OJSC. Clients of Banks-expert Ltd. are Russian Academy of Science (ILARAN, CKB RAN, AkademSnab RAN. Ipk ran,Uzkoe sanatorium of RAN), Shishkin Les Holding, AUTOMIR, OKAMET CJSC, ORLIS CJSC,Russkoe zoloto CJSC, MPShTO Firm Salyut CJSC, RBC Bank OJSC, Novyi Simvol Bank,Priroda Bank and others.

19

It is supposed that fee for evaluation of the majority innovation companies would rangefrom 50000 to 150000 rubles for one company evaluation.

While innovation companies evaluation the evaluator will use three different methods,the main points of which are as following:

1. Profit approach – aggregate of evaluation methods of an object based on estimation ofexpectable profits from the object’s usage.

2. Comparative approach – aggregate of evaluation methods of an object based oncomparison of the object with objects – analogues information on value of which is available.Object – analogue of the evaluation object shall agree with evaluation objects by maineconomical, material, technical and other characteristics determining its value.

3. Expenses approach - aggregate of evaluation methods of an object based ondetermination of expenses necessary for reproducing or replacement of evaluation object takinginto account depreciation and going out of date. Expenses for reproducing of evaluation objectinclude expenses necessary for creation of exact copy of evaluation object using materials andtechnologies applied while producing evaluation object. Expenses for replacement of evaluationobject include expenses necessary for creation of analogous object using materials andtechnologies applied as of the date of evaluation.

Combining results of each approach the evaluator will assign each method with an indexwhich will according to his opinion show most accurately contribution of one or another method.Then on the basis of corrected results from each method there will be determined average valueof evaluation object, which will be the ultimate evaluation result.

Fund auditor

Corporate name of the fund auditor: Consulting & Auditing firm Delovaya PerspektivaLimited Liability Company

Location: Build. 1, 6 Maly Palashevsky pereulok, 103104 Moscow, Russian FederationTelephone: (495) 299-70-45

Internet site: http://www.del-p.ru/main.htmlGeneral director: Petrenko Elena Vladimirovna

The group of auditing companies Delovaya Perspektiva was established in 1995.Companies belonging to the group from the very moment of their beginning were focused onconsulting and auditing services rendering to banks, credit organizations, as well as to financialcompanies and professional participants on securities market. For the moment the Groupincludes two auditing and consulting companies one of which – KAF Delovaya Perspectiva Ltd.(hereinafter referred to as “Delovaya Perspectiva”, or the “Auditor”) audits funds managed byMaxwell Asset Management Ltd. during the whole period of the managing company activities infunds trust management.

Delovaya Perspectiva renders complex services including not only accounting reportsaudit but also legal and practical assistance providing by this additional control over theCompanies activities by a non-affiliated company.

The Auditor’s business reputation is based on principles of doing business usingintellectual potentials of the company in combination with practical experience of the specialistsand the code of conduct.

Specialists of Delovaya Perspectiva have good knowledge in theory and practice ofaccounting, economics and finances, legislations and laws, state qualification certificates ofCentral Bank of Russia and Finance Ministry of the Russian Federation confirming the right for

http://www.del-p.ru/main.html

20

auditing activities. Quite a few specialists are engaged in scientific research and teacher activitiesin the sphere of finance, taxation and accounting, publish articles in different professionaleditions.

Among KAF Delovaya Perspectiva Ltd. clients there are 14 banks and non-banking creditcompanies, near 20 professional participants of securities market, 30 management companies,and also companies engaged in other activities types.

The auditor’s fee rate depends on average annual net assets value of the fund, quantityand nature of operations with the Fund’s assets, and ranges from 0,002% to 0,005% of averageannual net assets value. For other funds managed by Maxwell Asset Management Ltd. theauditor’s fee amounted from 30 000 to 150 000 rubles per year.

Ownership structure

Full corporate name of the sole participant in Maxwell Asset Management Ltd.: MaxwellCapital Group Closed Joint-Stock Company.

Location: 1, Bolshaya Yakimanka, Moscow, 119180, the Russian FederationPostal address: 1, Bolshaya Yakimanka, Moscow, 119180, the Russian FederationInternet site: n/aGeneral director: Kovalchuk Vladislav VladimirovichContacts: telephone (495)782-88-88, [email protected] share: 100 %

Owners and beneficionaries of the company

Maxwell Capital Group CJSC is being a company incorporated in accordance with theRussian Federation legislation for carrying out following activities:

financial industrial group and holding companies management;activities of holding companies in the sphere of financial intermediation;capital investments in securities and property;consulting on commercial activities and management issues;broker’s activities on securities market;dealer’s activities on securities market;securities management;depository’s activities;stock operations with stock instruments;magazines and periodical editing;book producing;newspapers edition;other services.The main emphasis in the current activities of Maxwell Capital Group CJSC is placed on

holding activities of financial companies.Along with 100% participation in Maxwell Asset Management Ltd. Maxwell Capital

Group CJSC owns 100% share in Maxwell Capital IC Ltd.The ultimate beneficiary of Maxwell Capital Group CJSC is Kirpichenko Dmitry

Petrovich.

Essential provisions of statutory documents

Rights and obligations of the company’s participants. Maxwell Asset Management Ltd.Charter provides following rights of participants:

mailto:[email protected]

21

- to take part in the Company’s activities management following the proceduredetermined by the federal law and statutory documents of the Company;

- to get information on the Company’s activities and see over it’s accounting books andother documentation following the procedure determined by the statutory documents;

- to take part in the profit distribution;- to sell or alienate in other manner their share in the Company or it’s part to one or more

participants of the Company in the manner set by the Federal law and the Company’s Charter;- to opt-out from the Company any moment regardless other participants’ consent;- in case of winding-up to get a part of property rest after settlement with creditors, or it’s

value.The Company’s participants can enjoy additional rights which shall be granted by the

General meeting decision taken by all participants unanimously.Additional rights granted to a certain participant in case of alienation his share (part of the

share) shall not be transferred to the share’s (share part’s) transferee.Dissolving of restriction of additional rights granted to a certain participant shall be

executed by a decision of the General meeting taken by not less than two-thirds of total vote ofthe Company’s participants provided that the participant enjoying such additional rights votedfor such decision of gave his written consent.

The Company’s participant granted with additional rights can remise from execution ofadditional rights granted to him by addressing written notice on that. The Company’sparticipants have other rights provided by the Federal law.

The Company’s participants are obliged:- to make contributions in a manner, amount, nomenclature and in terms stipulated by the

Federal law and statutory documents of the Company;- not to disclosure confidential information on the Company’s activities.Finance and credit relations. The Company keeps operational accounting and statistic

records in accordance with the procedure set by the relevant legislation of the RussianFederation. The Company and its officers bear responsibility for authenticity of data included inthe report. For carrying out control over financial activities the Company can engage auditorsand auditing companies.

Subsidiaries, filial branches and representative offices. The Company can havesubsidiaries, filial branches and representative offices both in Russia and abroad. Establishing offilial branches and representative offices in Russia and abroad shall be carried out according toprocedure stipulated by the relevant legislation of the Russian Federation.

Information protection

Security provision is an internal part of Maxwell Asset Management Ltd. activities.Security involves skills and possibility of the Company to resist any efforts to damage legitimateinterests of the Company.

Procedure of information received in the course of Maxwell Asset Management Ltd.activities confidentiality provision includes:

- restriction of access for persons not engaged directly in gathering, compilation, analysis,depositing and transferring information on clients’ operations and/or deals;

- delimitation of access rights while data input and proceeding in purpose of protectionfrom illegal actions of the Company’s different divisions officers, as well as procedures ofrestriction the Company’s employees to the confidential information;

- restriction of distribution of information received by Maxwell Asset Management Ltd.employees when on duty;

- responsibility for non-observance of measures aimed at information confidentialityprovision.

22

Measures associated with restriction of access for persons not engaged directly ingathering, compilation, analysis, depositing and transferring information on clients’ operationsand/or deals shall be effectuated by placement of the Company’s divisions and equipment in themanner shutting out possibility of uncontrolled entering in such premises and to such equipmentof unauthorized persons.

Delimitation of access rights while data input and proceeding in purpose of protectionfrom illegal actions of the Company’s different divisions officers, as well as procedures of theCompany’s employees access to the confidential information restriction include followingmeasures:

- the Company’s employees has access only to the information necessary for execution oftheir direct duties within their power. Access to the data including generalized and other fixedinformation is provided to the restricted set of officers in Maxwell Asset Management Ltd.stipulated by internal documents.

- security system including delimitation of access to different levels of data andenvironment of software is based on generally approved security systems in operational systemsallowing to schedule rights of certain users and users groups, and to control user’s actions(gaining access, reading, data alteration, deletion and so on). In the Company there carried outmaintenance of security system providing permanent following the Company’s divisionsactivities technologies;

Besides, restriction of distribution of information received by Maxwell AssetManagement Ltd. employees when on duty involves following procedures:

- all the documents in hard copies including above-mentioned information shall be keptin lockup boxes of safes;

- set of persons empowered to copy documents including files, any records kept in localarea networks is determined by the Company’s internal documents.

The Company also realizes juridical methods of information protection by including intocontracts to be concluded with employees provisions on commercial information protection andresponsibility for non-observance of these obligations. For illegal disclosure of confidentialinformation the Company’s employees shall bear disciplinary, administrative, civil-law andcriminal responsibility in accordance with relevant legislation of the Russian Federation.

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FUND TEAM

Expert group on venture investments

Members of the team who have signed civil-law contract with managing companyinclude specialists with experience in the field of venture investments into medical innovationand biotech, and advisors (members of fund council of scientists and experts) with expertknowledge in the field of priority directions of science and machinery of Russia (live systems –biotech, medical technology, production of medical tools).

Membership of expert group on venture investments:

# Name PositionContract

typeContact information

1Avdeenko

Vladimir. N.Head of Project management

departmentcivil law contract

Telephone:+7 (495) 725-8378

Telefax:+7 (495) 730-7459

E-mail:[email protected]

2Benevolensky

Maxim S.

Deputy head ofexpertise&analysis

department. Expert intechnological expertise

civil law contract

Telephone:+7 (495) 101-5489


3Komarov

Alexandr Y.Head of Investment committee civil law contract

Telephone:+7 (926) 224-55-85

Telefax:+7 (495) 781-53-89


4KurakovaNatalia G.

Head of department ofinnovation politics

civil law contract

Telephone:+7 (916) 506-62-12

Telefax:+7 (495) 662-78-82

E-mail: [email protected]

5Movsesyan Oleg

V.

Coordinator of the project“Biotechnological incubator –

MSU”civil law contract

Telephone:+7 (495) 930-84-54

Telefax:+7 (495) 930-84-60


6Orlova

Nadezhda V.Head of expertise&analysis

departmentcivil law contract

Telephone:+7 (903) 147-99-29


Unique abilities

Avdeenko Vladimir N.

The expert’s experience in business development of innovation companies and projects isunique for the fund. Abercade research company managed by Avdeenko V. Is the only companyin Russia fully engaged in biotech and constantly monitoring all sectors of this market.Avdeenko V. has wide connections with key players of the market, possibilities of informationexchange, draws up documentation on strategic development of projects, has experience in






24

investment attracting. Avdeenko V. is the author of unique system of regular monitoring andanalysis of biotech market in Russia and the world.

Key knowledge: Management and strategic business planning of innovation companies and

projects development. Investment attracting. Developing of system of regular monitoring and analysis of biotech market.

Benevolensky Maxim S.

Technological expertise, experience in technologies optimization and management ofscientific and industrial groups are unique for the fund.

Key knowledge: Technological expertise of projecs Awareness of latest scientific acgievements in the field of biotechnologies in the

world Mnagement of scientific and industrial groups Connections with internatioinal suppliers of equipment and technology

Komarov Alexandr Y.

During past year and a half has been being the head of venture investment department inNP “National association of business-angels”. He developed unique methodology of search andselection of innovation projects based on experience of ready projects of early developmentstages for refinancing. Good connections in business angels’ society will help the fund to gainaccess for prospect projects of early development stages.

Kurakova Natalia G.

One of the leading experts in Russia in the field of innovation management of biotech andmedical projects. Her experience and qualification are proved by participation in expert groupsof highest level:

Expert of the Ministry of public health and social development of Russia oninnovation politics in public health;

Member of working group “Innovation and HR support of public healthdevelopment on working out of Concept of public health development till 2020;

Expert of national Association of innovation and technologies development;

Natalia is the moderator of conference of the Ministry of public health and socialdevelopment of Russia “Realization of innovation projects in the field of public health: state andbusiness integration” (Order of the Ministry of public health and social development of Russiadd. Feb.11, 2008 #58), partner of which is Maxwell Asset Management company

Natalia is one of reputable specialists in the field of business training of stuff for ventureindustry. As the director of venture business centre of Moscow international business schoolMIRBIS and the leader of MBA programme “Management of hi-tech innovation projects” ofMIRBIS, in coordination with Ministry of economical development and trade and Governmentof Moscow moderated the first conference “HR support of venture industry” in Russia sponsoredby Maxwell Asset Management.

25

Movsesyan Oleg V.

As the head of one of senior innovation&technology centres of Russia (Science part ofMSU) Movsesyan O. has unique experience in the field of incubation, business development ofseed and start-up companies. Has reach experience of attracting of venture investment intoinnovation start-up projects. Participates on regular basis as an expert in selection oftechnological companies and projects under programmes START, UMNIK (Fund of smallenterprises support in STC), the member of Science&Technique council affiliated withDepartment of support and development of small businesses of Moscow on expertise ofinnovation projects.

Orlova Nadezhda V.

The specialist’s experience in project preparation, investors search and market knowledgeare unique for the fund.

Key knowledge: System analysis of biotech market Creation of effective strategies of innovation companies development Innovation companies development management Investments attracting

Experience and professional achievements


Since 2002 is the director of Abercade company which under his leadership: Became one of the leading companies in the field of innovation markets study; Is being on of few companies in Russia rendering complex of business services

for innovation sector of economics; is being a consultant of International science&technique centre on analysis of

innovation projects, consultant of Economics Ministry of Moscow region onconsumer markets, consult RAS Bioengineering centre on issue of estimation ofscientific developments investments prospects;

develop and implement complex programmes of business development includingdetailed research of sectors and markets, programme of organizationaldevelopment, working-out and support of venture financing attracting models;

develop their own research projects “Russian biotech market” and “Packageindustry in Russia”


Experience in the field of biotech of 10 years. Worked in the largest world corporationAdjinomoto on positions of researcher and fermentation group manager. Developed a few uniquetechnologies on optimization of culture conditions aimed at obtaining of maximum conversion ofprimary materials into target product. A few publications and patents were based on the results.Has splendid knowledge in technological processes, equipment and estimation of the subjectfield of biotech projects. Has experience in upgrade of PA Sibbiofarm, LLC. Drawn up alltechnical specifications on optimization of production stages and references for tenders oftechnology and equipment suppliers. Implemented a series of innovation products in production.Has experience of cooperation with largest world suppliers of unique equipment for researchesand production in biotech. Leadership experience.

26

Komarov Alexandr Y.

Under the leadership of Alexandr Komarov there were developed: Six innovation projects for raising of federal financing under FCNTP programme Ten innovation projects for business angels’ investments presented in the course

of the First and the Second presentations within Moscow venture forum (Jun. 21,2007, Oct. 30, 2008)

During employment with NP “SBAR” 300 innovation projects were expertised, 17selected, on 5 of them investment agreements were signed.

Kurakova Natalia G.

Natalia has job experience of 7 years in transnational investment company PragmaticVision International, LLC

As the leader of innovation projects, the head of innovation developments departmentsNatalia was engaged in:

Expertise of investment projects of Russian scientific centres and companies(search of analogues, determination of intellectual property contents, originalityestimation, legal support);

Project implementation management; Information provision of the projects using professional resourses (technical,

patent, marketing, legal databases).

The work resulted in successful exits from projects by selling them to such companies asProcter&Gamble, Intel, Motorola, Bosh-Siemens, Hilti, Ford, Xerox

Has experience of successful management of innovation centre of Sechenov ММА (2002– 2005), venture business centre of Mirbis IBS (since 2005- currently).

Author of monography “Innovations in biology and medicine: planning andmanagement”

Degree of doctor in biology.

Movsesyan Oleg V.

Movsesyan O. is the author of creation concept of biotech incubator on the basis ofbiology faculty in MSU, partnership relationships with which Maxwell Asset Management issetting up.

Since 1999 Movsesyan O. leads Science park of MSU, on the basis of which more than100 small hi-tech companies are established. Participated in financing raise for such companiesas IT, Agama (search service Aport), RedLab etc.

Orlova Nadezhda V.

For more than 7 years specializes in investment analysis and project management in thefield of biotech. Has working experience both with small companies (projects) created on thebasis of R&D institutes, and management and restructuring of the largest microbiologicalproduction in CIS region. Started up and manages business (as the Partner) of Abercade researchcompany. The company renders unique services on system analysis of market (regularmonitoring of more than 20 sectors of biotech market) and project management in the field of

27

biotech. Multiannual experience of cooperation with Russian and international investors onfinancing attracting into biotech projects.

Assignment of duties on fund management

Taking into account the above-mentioned abilities, experience and achievements ofspecialists, duties on fund management are supposed to be assigned as the following:

Komarov Alexandr Y.

Search of innovation companies; Preliminary investment analysis of innovation companies; Preparation of primary project of business plan; Preparation for the project/company bringing in Investment committee session; Fund representative activities in managing bodies of portfolio companies.

Orlova Nadezhda V.

Due diligence of the company including:

Analysis of the product/technology marketing prospects; Analysis of the company management efficiency (HR audit) Check of the company assets quality, patent expertise (legal audit) Financial audit; Drawing up of investment memorandum.


Companies due diligence including:

Expertise of data and indicators of technology/project; Expertise of technological process; Decisions making on optimization of technologies/processes.


Creation of effective business strategies and business models for portfoliocompanies

Innovation company development management after investment; Attracting of co-investments, arrangement of next stages of financing; Arrangement of exit from funded companies.

Kurakova Natalia G.

Coordination of investment policy if the fund with relevant state bodies in thefield of public health;

Arrangement of business incubation of innovation companies of early stages(business activator)

HR support of the fund; Fund international connections.

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Movsesyan Oleg V.

Coordination of actions on creation and management of biotech incubator on thebasis of MSU biology faculty;

Innovation companies consulting on issues of incubation, business development,business estimation and financing attracting.

Cooperation experience

The specialists team began to take shape in March, 2007 and was structured in full by theend of 2007. Selection of specialists for the team shall be executed by managing company due todiversification of assets being managed and venture investment line development. Regardlessresults of RVC selection the team will continue its work and will deal with formation of venturefund with or without state participation.

During their cooperation activities members of the team has been solving followingproblems:

Analysis of target markets and sectors for definition of investment focus of thefund (Avdeenko V., Orlova N.);

Preparation of preliminary investment portfolio of the fund (Avdeenko V.,Benevolensky M., Orlova N.);

Infrastructure issues:o Creation in cooperation with Mirbis MIBS of business activator

(Kurakova N.);o Preliminary actions on creation and management of biotech incubator on

the basis of MSU biology faculty (Movsesyan O.);o Connections with business angels sociaty (Komarov A.).

Activities on image positioning of Maxwell Asset Managemnt company in thecertain (medicine and biotech) innovation field (Kurakova N.)

Connections with representatives of federal bodies in the field of public health forcoordination of strategic issues (Kurakova N.) etc.

Besides, it is to be noted long-term successful cooperation of Avdeenko V.,Benevolensky M. and Orlova N. resulted in:

Implementation of project on complex upgrade of the CIS largest microbiologicalproduction (JV Sibbiofarm);

Development of business strategy and attracting of investments into Russian start-up company on the market of test systems of resistancy for anti-tuberculosisdrugs.

Preparation of development strategy, strategic investor attracting in Biokhimmashcompany;

Working-out of development strategy and international financing attraction forVOSTOC, OJSC (enzyme preparations production);

Creation of exclusive in Russia monitoring system of biotech sector.

Motivation

Bonus system of specialists encouragement will be linked with financial results of thefund for a period and correlate with managing company success fee rate.

Upon fund formation each specialist will be able to enter option contract for buyout ofRVC, OJSC share which shall allow them to buy out RVC, OJSC units by primary cost increases

29

for per annum during fund operating. Thus, the specialists will be interested in maximumincrease of a unit value.

Alongside with that effective motivation include certain agreement of the parties andgeneral concernment in positive result. It is important for specialists to understand indicators onthe basis of which their efficiency would be estimated. Such indicators can be the following:

Achievement of planned figures of the Fund assets value increase; Improvement of capitalization of portfolio company supervised by the specialist;

Non material motivation means such as: possibility of public activities, speeches inconferences, generation of public recognition, responsibility and direct participation in strategicdecisions on Fund management taking, are important conditions which allow to combineworking comfort, professional communication and advancement of the specialist.

Fund advisors

Membership of the council of scientists and experts:

№ Name Position and degreeContract

type Contact information

1GrachevSergei V.

CSE member,Director of R&D centre of

Sechenov Moscow medicineacademy

civil law contract

Telephone:+7 (495) 248-31-22

Telefax:+7 (495) 708-37-75


2KubatievAslan A.

CSE member,Director of SE R&D institute of

general pathology andpathophysiology of RAMS.

civil law contractTelephone:

+7 (495) 151-17-56E-mail: [email protected]

3Smirnov

Vladimir N.

CSE member,Director of R&D institute of

molecular cardiology ofRussian cardiology

science&industry centre ofMPHSD of RF

civil law contract

Telephone:+7(495)415-00-35

Telefax:+7(495)149-26-52


4SushkevichGennady N.

CSE member,Deputy director of SE R&D

Institute of emergency childrensurgery and trauma of Moscow

department of public health

civil law contract

Telephone:+7 (495) 959-28-96


5Tsyb

Anatoly F.

CSE member,Director of SE – Medical

radiological scientific centreRAMS

civil law contract

Telephone:+7(495)956-14-39

Telefax:+7(495)956-14-40


Unique abilities

Grachev Sergei V.

Grachev S. being the deputy rector on science of Sechenov MMS is the leader of thelargest base of high school education science in RF, focused on fundamental, search and appliedscientific researches aimed at actual problems of medicine, biology, pharmacy and public healthsolving. R&D centre leaded by Grachev S. includes 5 R&D institutes: R&D institute ofphisiopulmonology, R&D institute of parasitology and tropical medicine, R&D institute of







30

molecular medicine, R&D institute of public health and public health management, R&Dinstitute of pharmacy, as well as 35 R&D departments and laboratories. Connection with one ofthe largest R&D base in RF leaded by Grachev S. is a unique possibility for the fund to gainaccess for innovation technologies for their future commercialization.

Kubatiev Aslan A.

Kubatiev A. is a reputable specialist in the field of molecular biotech, particularly, indevelopment of gene therapy methods, transgenic bodies creation, system of transfer of geneengineering construction into eucariotic cell.

Developed by Kubatiev A. unique within RAMS bioengineering laboratory has reachexperience in commercialization of its scientific developments in cooperation with differentscience&industry enterprises. Kubatiev A. has unique expert knowledge in the field of up-to-dateproblems of molecular and cell pathophisiology, nanophisioligy and nanopathology.

Smirnov Vladimir N.

Smirnov V. is the unique specialist in the field of methods of cell therapy of damagedbodies and tissues, technology of delivering and crioconservation of stem cells. He is the authorof unique technology of transplantation of stem cells for treatment of a few inherited and evokeddiseases.

Main scientific focus of Smirnov V. is issues of cell biology, biochemistry as well asmolecular genetics. Smirnov V. has unique expert possibilities for qualified analysis of projectsassociated with cell technologies – one of the most prospective directions of research all over theworld.

Sushkevich Gennady N.

Scientific research by Sushkevich G. are devoted to development of a wide range oftopical issues of fundamental as well as applied type. In particular, study of biological andmedical effects of radiation, general pathological role of intravascular blood coagulation,thrombosis and bleeding, search of new means and techniques of anticoagulation and bleedingblocking character, possibility to use stem cells to treat trauma of central nerve system, clinicalpathophisiology of emergency surgery diseases and heavy children trauma.

His unique experience of working in World Health Organization, connections in Russianand international scientific society will help the fund to co-ordinate its strategy with direction ofglobal trends of world medical science and practice development.

Tsyb Anatoly F.

The unique specialist in the field of diagnostics and treatment of different types ofoncology diseases. Has unique expert knowledge in the field of fundamental and clinicalmedicine. Has unique experience of commercialization of scientific developments. Theideologist of development of specialized biotech incubator on the basis of Obninsk techno parkin the framework of the program of Ministry of economical development of RF on creation ofinnovation business incubators network.

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Professional achievements

Grachev Sergei V.

Currently Grachev S. is deputy rector on science of Sechenov ММА, director of R&Dcentre of Sechenov ММА, secretary academician of RAMS medicine&biology department. Keydirection of Grachev’s scientific activities is pathophisiology of extreme conditions. His scienceworks “Holmium laser in medicine”, “Scientific researches in medicine”, “Modeling role of CO2in action of active forms of oxygen” were used as a basis of creation of a few drugs andinstruments of medical purpose.

Grachev S. pays special attention to creation of innovation structure of R&D activities.He was a member of international jury of VIII Moscow international salon of innovations andinvestments held with support of Government of the Russian Federation (order dd. Aug. 14,2007 # 1047-р). In the salon there were represented 350 participants, presented more than 1800of innovation developments.

Grachev S. represents Sechenov ММА in NP “Centre of new medical technologiesTEMPO” joined 10 leading biotech organizations in Russia.

The winner of Government of the Russian Federation award in the field of science andtechnique.

Kubatiev Aslan A.

For 17 years Kubatiev A. leads SE R&D institute of general pathology andpathophysiology of RAMS. Science focus of Kubatiev A. is study of general laws andmechanisms of pathological, adaptive and compensating processes on different levels ofintegration of live systems. Under his leadership the institute became a modern centre allowingresearches on molecular and cell levels.

For the past 2 years under leadership of Kubatiev A. the institute developed uniquesoftware and instrumental complexes for:За последние 2 года под руководствомА.А.Кубатиева институт разработал уникальные программно-аппаратные комплексы для:

functional diagnostics of heart and aspiration diseases by means of correlationlaser spectroscopy

analysis of gene expression by means of biology microchips

The institute actively researches under regional programmers, 28 grunts of RFFI, 3international grunts and 40 contracts.

Kubatiev A. is RAMS academician, chief redactor of Pathogenes magazine, President ofinternational society on adaptive medicine.

Smirnov Vladimir N.

Smirnov V. is doctor in biology, professor, Active correspondent member of RAMS,Correspondent member of RAS, Director of R&D institute of Experimental Cardiology ofCardio complex RKNPK RAMS.

Under leadership of Smirnov V. beginning from the date of establishment (1973) R&Dinstitute of Experimental Cardiology of Cardio complex is one of the leaders in Russia in study

32

of techniques of heart diseases development and development of new methods for diagnosticsand treatment.

Smirnov’s professional achievements are: study of stem cells role in atherosclerotic damages in cardiovascular human

system; development of culture methods of mesenchymal stem cells; evidence of stem cells ability for directed differentiation into different cell types; working out of method of virus transfer of genes into marrowy precursor cells. Under his leadership scientific researches are implemented in practical medicine: development of sorbents for gem dialysis and plasmaphoresis; Puroplaza thrombolytic drug etc.

Institute members won 7 state awards of the Russian Federation, patented innovationsand pioneer researches.

Smirnov academician twice won State award, won Lenin award, is being the author ofmore than 300 scientific publications in the home and foreign media.

Sushkevich Gennady N.

Currently Sushkevich G., doctor of medicine, professor is deputy director on science,manager of department of clinical pathophysiology of SE R&D institute Emergency childrensurgery and traumatology.

Over 15 years of service as employee and expert of World Health Organization he hasbeing coordinator of large numbers of international projects in the field of:

Radiology and radiation medicine; Study of medical consequences of Chernobyl disaster; Setup of telemedical system in various regions of the world; Setup of international bank of thyroid gland cancer tissues.

Member of bureau of international organization of radiopathologists, winner of stateaward of the Russian Federation in the field of science and technique for development ofproblem of pathologic behavior, prevention and treatment of intravascular blood coagulation inthe course of different diseases and pathological conditions.

Tsyb Anatoly F.

For 30 years has been heading the largest Medical radiological research centre ofRAMS, a leading enterprise on development and application of hi-tech radiological methods ofdiagnostics and treatment in oncology medicine. Under direct leadership of Tsyb A. new uniquetechnologies were developed in diagnostics and treatment of heavy diseases, based on highlypower accelerators, up-to-date sources of nuclear radiation as well as physical and chemicalfactors increasing radio sensitivity of cancerous cells:

X-ray therapy using fast neutrons of reactor; Optimal models of combined treatment with intraoperational therapy and

hyperthermy; Radiocore theraphy of distant metastasis including children thyroid carcinoma; Photodynamic laser therapy in treatment of oncology; Intratels brachitherapy for prostate oncoma.

33

Diagnostic significance of X-ray methods is defined and their application indifferent cancerous growths is well reasoned.

Tsyb A. is the author and co-author of more than 500 scientific works including 26pornographies

He is the Chairman of Russian scientific commission on radiological protection, chiefredactor of bulletin of Russian state medical and dissymmetric register “Radiation and risk”,deputy chief redactor of Medical radiology magazine.

Winner of State award of USSR in the field of science and technique (1991), winner ofState award of Government of RF in the field of science and technique (1997), Honoured workerof science of RF.

Advisors role in the fund:

Participation in science&technique and other expertise oftechnologies/developments directed for consideration by managing companyspecialists;

If needed recommendations on engagement of certain specialists (soecialisedexperts) in science&technique and other expertise of innovation projects;

Estimation of developments of technology/product development available ininnovation companies;

Participation in estimation of commercial potential (being in demand) of thedevelopment;

Participation in estimation of innovation companies top-management competencein scientific field;

Recommendations of innovation projects to the fund.

Shares of specialists and advisors in the fund

№ NameThe target fund share to bebuy-out by fund specialists

1 Avdeenko Vladimir N. 0,1%2 Benevolensky Maxim S. 0,1%3 Komarov Alexandr Y. 0,1%4 Kurakova Natalia G. 0,1%5 Movsesyan Oleg V. 0,1%6 Orlova Nadezhda V 0,1%

№ NameThe target fund share to bebuy-out by fund Advisors

1 Grachev S. 0,1%2 Kubatiev A. 0,1%3 Smirnov V. 0,1%4 Sushkevich G. 0,1%5 Tsyb A. 0,1%

Other essential information on the fund team

Taking into account RVC OJSC interests as fund investor managing company establishedsupervisory committee with following functions:

34

control over intended use of monetary asset; securing of transparency of projects selections procedure; independent control and appraisal of efficiency of managing company specialists

activities;

Persons accepted their membership in supervisory council:1. S.I. Kolesnikov – Chairman deputy of the State Duma committee on

health protection.2. V.K. Lepakchin – the head of State centre of drug side effect monitoring

of the Russian Federation.3. V.I. Sergienko – Chairman of Committee on business activity in public

health and medical industry of Chamber of commerce and industry of theRussian Federation.

4. V.M. Cherepov – Director of department on cooperation with sectorialassociations of the Russian Union of Industrialists and Entrepreneurs,chairman deputy of medical commission of RUIE.

Invited: L.M.Roshal’ – chairman of commission of the Public Chamber of the Russian

Federation on public health matters.

35

FUND STRATEGY

Investment Situation

The current Situation in the High-Technology Sector

Assessments of the innovative nature of a country’s economy are generally based on theshare of R&D expenditure in the GPD structure. The Organization for Economic Cooperationand Development has conducted the annual monitoring of this indicator since 1981. Whencalculating the indicator, all types of R&D investment (public, private, venture and corporate)are added up.

In 1981 this indicator was equal to 1.65% in the European Union countries, while in theUSA it constituted 2.34% of the GDP. There was no country in the world, which invested morethan 3% of its GDP into R&D at that time.

Starting with 2003 such countries as Sweden, Finland and Japan began to invest over 3%of their GDP into R&D, while the world average did not exceed 2.3%. In 2007 the fastest rate ofgrowth of R&D investment was observed in China, Ireland and Turkey. According to the OECD,in 2007 the R&D investment in Russia constituted 1.4% of the GDP1, i.e. about USD 17.5million.

In 2007 the total world investment in the high-tech sector was about 1,213 billion USD.The high-tech economic sectors have traditionally included the aerospace, double-purpose andbiological technologies as well as the science of life, information and nanotechnologies, semi-conductors and robotics. In the last few years high technologies have also incorporated the so-called “clean” technologies or alternative power engineering.

Another indicator characterizing the level of development of the high-tech economicsector is the activity of private and venture investors.

American venture companies remain major actors in the market of venture investment butthe volume of non-American venture investment is growing year in year out.

USA

In 2007 venture capitalists have financed 3,813 deals USD 29.4 billion worth havingestablished a record in the volume of investment since 2001. The data are provided byPricewaterhouseCoopers, the National Venture Association and Thomson Financial in theirregular monitoring MoneyTree Report on the status of the venture sector in the USA.

As compared to 2006, the volume of venture investment grew by 10.8% in terms ofmoney, and the number of deals increased by 5%. The largest amount of investment went to theclean technologies and biotechnologies sector as well as in the sector of companies specializingin the development of software for the Internet. Another trend characteristic of US venturecapitalists as well as of the world at large is globalization of the venture capital. According to areport on the global venture capital published in June 2007 by Deloitte Company, 34% of the USventure funds intended to focus their international expansion on China, and 24% - on India.

1 In 2007 Russia’s GDP (nominal) was USD 1,250 billion.

36

Canada

Canadian technological companies have attracted the interest of the global venturecommunity of investors as a result of a new public taxation program for research and high-techcompanies. A tax concession can be granted to companies situated in the Canadian territory andcontrolled by a resident of that country. That innovation created tension among investors-USresidents because Canadian legislation contains a few “irritating provisions” making it difficultfor venture investors who are US residents to withdraw from Canadian projects.

Europe

The number of venture funds in Europe is constantly growing. For instance, in 2005 thetotal volume of attracted investment including buy-out funds constituted over 60 billion euro. Ofthis amount 12.6 billion were venture investment per se.

According to the European Venture Association, in 2006 the largest volume of ventureinvestment was attracted by Great Britain (1.78 billion euro), France (195 deals with a total valueof 875 million euro) and Germany (207 deals 428 million euro worth).

India

In 2006 the volume of venture investment reached USD 6.5 billion. In 2007 the volumeof investment grew by another 15% against 2006. Most of the VI fell on the IT andcommunications, and about USD 750 million were invested in biotechnologies.

China

In China the volume of venture investment doubled from USD 420 million in 2002 toUSD 1 billion in 2003. In 2004 the volume of investment grew by 45% against the previous year.By 2005 a few companies in the country have successfully came to the IPO, and the country’sgovernment changed legislation concerning investment attraction.

According to the Library House, a research center in Cambridge, in 2006 investment ofventure capital in China amounted to USD 2.9 billion. Biotechnology and life science constituteone of the priority lines of investment.

One of the world trends in the high-tech market is a gradual reduction of interest in ITand the telecommunications sector and, on the other hand, increasing investment in thebiotechnological and biopharmaceutical sectors. Many countries are adopting pubic programs ofpharmaceutics and biotechnology development. Such programs exist in India and China as wellas in some EU countries.

According to Abercade Research Company, in 2006 capitalization of the internationalbiotechnology market reached about USD 550 billion while the total sales volume surpassedUSD 95 billion.

The R&D Scoreboard 2006 study undertaken in 2005 by the British Trade and IndustryDepartment showed that the world pharmaceutical industry rates second in the volume ofinvestment into research and development constituting USD 70 billion.

37

The rate of putting new products into the international pharmaceutical, medical andbiotechnologies market is second only to the rate of introduction of new products into the marketof hardware and telecommunications.

According to IMS Health, in 2007 about 40% of the income of the top 20 pharmaceuticalcompanies was obtained thanks to effective license agreements with biotechnological companies.Back in 2001 that share constituted only 16-20% of the common benefit.

Investment Situation in Russia

The history of venture funds in Russia dates back to April 1993, when representatives ofthe G8 countries reached agreement in Tokyo on allocating funds to Russia for the developmentof venture projects under the EBRD auspices. The total amount of approximately US 500 millionwas to be divided between venture funds controlled by the EBRD and the so-called regionalventure funds established in Russia. The first such fund was established in 1994, and the last one– the eleventh fund – was established in 1996. Practice has shown that EBRD funds mostlyinvest in medium-size companies in the phase of expansion.

It is rather hard to determine the total number of venture funds operating in Russiabecause not all of them are active. It is believed that the number of existing funds ranges from 60to 100 but only 25-30 of them are active. These funds invest into a wide range of Russianeconomic sectors including the mining and processing of mineral resources, the pulp and paperindustry, communications, the mass media, the high-tech sector, production of consumer goods,pharmaceutics, transport, distribution, real estate and services.

The Expert Magazine believes that in 2005 the amount of venture investment in Russiaconstituted USD 626 million, and the number of deals was 16. More than two thirds of the fundswere involved in five largest deals, and practically all of the deals were concluded with late-phase companies. In 2006 there was a positive trend towards an increase in the volume of deals;total investments in terms of money were equal to approximately USD 653 million. As comparedto the previous period, investment priorities of the funds have practically remained the same.However, the telecommunications sector ceded its first place to consumer market companies.

According to Albina Nikkonen, RAVI Executive Director, Russian venture funds haveinvested about USD 2.5 billion over the last 10 years. Some of the funds existing in Russia wereunwilling to disclose the data on their projects, while some others are absolutely open, but it doesnot mean that the latter are overly flexible or undemanding to their potential clients.

As it has already been mentioned, Russia’s current peculiarity is the availability of asufficiently developed sector of direct investment and venture funding of projects in their latephases of development, while the number of solely venture funds investing in perspectiveprojects and companies in their initial phases of development remains insignificant.

38

5% 7%

62%

26%

SeedStart upEarly growthMezzanine

Distribution of direct and venture investment by phases in 2006.

Maxwell Asset Management Company has decided to set up a specialized venture fund inthe area of biotechnologies. The decision is connected with the fact that the Fund’s professionalshave:

Rich experience in managing projects in the area of biotechnologies; A clear idea of the biotechnological market segments the Fund will invest in; Technological expertise in expert examination of projects and developments; Systemic experience in staging and monitoring the outputs of research in

biotechnologies; Close connections with the world and Russian research centers and major

corporations in this area; An effective financial management system; A package of projects it is managing.

According to Abercade Research Company, in 2006 the volume of the Russianbiotechnological market was about USD 1 billion. Of this amount industrial biotechnologiesaccounted for USD 167.5 million and biopharmaceutical products – for USD 600 million. InEurope the volume of biopharmaceutical sales was USD 12 billion during the same period, in theUSA and Canada – USD 74 billion, and in Asia – over USD 3 billion.

Biotechnological Market in RF, 2004

64%4%

20%

1%

1%

9%

1%

Biopharmaа Enzymes

Agriculture Environmental protection

Mining industries Yeast

Live microorganism cultures

Biotechnological market segments in Russia in 2006

2006

39

Fund Specialization

Fund Specialization by Sector

The Fund intends to invest in companies operating in the following areas of science andtechnology in the Russian Federation:

Live systems (biotechnologies, medical technologies and medical equipment); Nanosystems and materials; Rational use of nature; Biocatalytic, biosynthetic and biosensor technologies; Biomedical and veterinary technologies of life support and protection of human

beings and animals; Genomic and post-genomic technologies in developing pharmaceuticals; Cellular technologies; Nanotechnologies and nanomaterials; Bioengineering technologies; Technologies for processing and utilization of anthropogenic formations and

wastes; Technologies for creating biocompatible materials; Technologies for creating membranes and catalytic systems; Technologies for environmentally friendly resource-saving production and

processing of farm produce and foodstuffs.

Within the framework of the above areas the Fund’s professionals have formulated a Key MarketsConcept providing a basis for the Fund’s investment process.

Key Market Concept

The Key Market Concept is based on the following five principles:

1. The Fund will invest resources in those markets where the application ofinnovations is critical for successful competition.

2. The Fund will invest resources in the development of products and not in theestablishment of production facilities.

3. Within the key markets, the Fund will undertake an active search for companiesand products instead of relying on incoming applications.

4. The task of the Fund is to provide the innovators access to all key resourcesrequired for business development and not only to provide the funding.

5. The Fund shall strive to create integral product lines in the key markets so that theproducts of different companies helped promote one another.

The Key Market Concept has been formulated as an integral structured system:

In each key market target segments have been indentified; In each target segment groups of commodities of innovatory biotechnological

products have been singled out;

40

In each group of commodities a pipe line of products has been formed.

Thus, the pipe line of the Fund’s projects is a result of a thorough and systematicpreparation undertaken by its professionals in 2007-2008.

Below are presented the main definitions of the Concept and a description of the KeyMarkets and the most important target segments. The companies whose projects have beenincluded into the pipe line are presented in the section on the Fund’s Investment Portfolio.

What is a key market?

A key market is, firstly, a large market (with a capacity of over USD 10 billion),secondly, a fast growing market (at least 10% annually in the last 3 years) and, thirdly, a marketpossessing a high growth capacity for the next 10 years (at least a 2-fold growth).

We single out the following four key markets:

What is a supplementary market?

A supplementary market is a narrow market for niche products that has no prospects tobecome a large one but successfully supplements products of the Fund’s target markets.

The Fund singles out the following two important supplementary markets:

1. The market of R&D services2. The market of medical and biotechnological equipment

What is a key segment?

A key segment is a segment of a key market, which can serve as a driver for the entire keymarket regardless of its size.

For instance, the market of enzymatic preparations is a small segment in the mixed foddermarket but livestock breeding profitability depends on what enzymatic preparations are used andhow because the application of enzymes has a strong impact on fodder efficiency.

41

Thus, a market with a volume of USD 100 million can influence the development of amarket with a volume of USD 20 billion.

Key segments have been identified within each key market.

In each target segment the Fund has singled out several commodity groups of innovatorybiotechnological products.

In each innovatory group the Fund’s professionals have identified and prepared severalcompanies whose products meet the investment criteria.

Description of Key Markets and Target Segments

Pharmaceutical Preparations Market

According to Farmexpert Company, in the next five years the market of pharmaceuticalswill grow from USR 13.5 billion to USD 22.2 billion. The annual growth rate constitutesapproximately 13%.

Already today the volume of the Russian pharmaceutical market is comparable to thoseof Mexico, Argentina, Canada, Spain, Turkey and Poland. The share of innovatory preparationsin the market constitutes only 15% (85% of generic ones) and, according to Farmexpert, thesame situation will prevail in the next five years.

The forecast of analysts does not take into account the fact that innovation companiesattracted by venture funds can offer a wide range of original (innovatory) preparations and, in

42

this way, major actors in the pharmaceutical market will be able to increase the share ofinnovatory products considerably without assuming the risks involved in their development.

Under this model innovation companies will receive strategic partners interested ininnovatory products (profitability of such products is significantly higher than that of the genericones), the Fund will obtain an instrument for product development and withdrawal from theproject through its sale to “strategists”, while pharmaceutical companies will get new originalpreparations.

Foodstuffs Market

The Russian foodstuffs market is somewhat similar to its domestic automobile industry;formally the greater part of production is Russian but a considerable part of raw foodstuffs andfood ingredients is imported, just like “Russian” cars made of imported components.

Dependence of the market on imported raw products and low efficiency of foodstuffsproduction facilities cause a high extent of volatility in the foodstuffs market, which gives rise toideas of administrative regulation and such like.

A radical intensification of foodstuffs production, development of in-depth processingtechnologies and localization of food ingredients production in Russia may become a goodalternative to such measures as a “temporary freeze on prices”, higher import duties, etc. TheFund has all grounds to suppose that innovations in the foodstuffs market are critical for asustainable growth of the foodstuffs sector in the country’s economy.

Food Ingredients

In the course of the last 10 years the market of food ingredients has been growing by 15-50% annually (in various groups of commodities), with over 60% of consumption falling onimports.

In some cases the situation is caused by the actual world monopoly of China (forinstance, in the production of citric and lactic acids). But the main cause is lack of readiness onthe part of large companies to develop original food ingredients; actors in the market lackcompetence and investment resources adequate to the risk and scope of investment.

Under such circumstances cooperation of supplier companies (such as Soyuzsnabhttp://www.ssnab.ru/),

innovation companies and the Fund will result in a radical change of the import todomestic production ratio in the market of food ingredients.

Another example is Partner Company (http://www.bifidok.ru/); its Bifidok trademark isRussia’s leader in the production of bifidobacterine for dairy products. Partner Company hassuccessfully developed a range of products containing bifidus bacteria, the technology for whichwas created by the State Research Center of Applied Microbiology and Biotechnology (town ofObolensk).

The Fund’s investment into the development of new bifidus- and lactobateria-containingpreparations and their introduction into the market will permit such companies as Unimilk tocreate a wide range of new enriched dairy products.

http://www.ssnab.ru/

http://www.bifidok.ru/

43

The national cuisine of the various ethnic groups living in Russia harbors a vast potentialincluding an optimistic outlook for the world market. For example, the research center offunctional diet of Ajinimoto Company (Japan) is actively studying the ingredients ensuring thehigh dietetic qualities and the rich taste of traditional Russian dishes. After identifying theiractive substances, the company hopes to arrange their industrial production usingbiotechnologies. The same was the case with the Japanese flavoring substance Umami wellknown as sodium glutamate. Ajinimoto’s Russian enterprise (Agri Company) has formed a largeresearch team whose task is to develop new flavoring substances.

All of these examples show that the era of “simple things” in the foodstuffs market, whensuccess was guaranteed by a high quality and an original packing, has ended.

The battle for consumers has shifted into the area of “diversity and nuances” such asexotic taste, medicinal effect, and endless variation of the assortment in combination with“environmental friendliness” and the natural origin of ingredients.

All this requires new technological solutions and new biological ingredients (because“chemical” ingredients do not match the idea of environmental friendliness and natural originof products).

The Fund’s position in the foodstuffs market is based on the use of these newpossibilities.

Clinic Nutrition and Enriched Products

The world market of clinic nutrition grows by 7% annually. One of the main actors isNumico Company with its well-known manufacturers such as Nutricia (Netherlands) and MulipaGmbH&Co (Germany).

There are several reasons for the Fund’s professionals to consider the clinic nutrition andenriched products segment promising such as:

Рост объёма рынка лечебного питания

9,6

11

12,3

13,6

0

4

8

12

16

US

$B

n

2001 2003 2005 2007

Growth of the Clinic Nutrition Market

44

1. Formation of the foodstuffs market in Russia has been largely completed,competition between major actors is intensifying, and in such segments as dairyproducts the ability to create an original assortment assimilating modern scientificachievements is an indispensable condition for victory (it is not coincidental thatone of the major actors, Wimm-Bill-Dann Company, has introduced its newtrademark NЕО into the market).

2. In many cases successful technologies developed in the biopharmaceutical marketcan provide a basis for medicinal and enriched products. Therefore, the Fund canuse similar technologies for creating and developing various products therebymaking investment more effective and saving time.

3. There are innovation companies in the market, which have already succeeded inthis segment (for instance, Partner CJSC) and are ready to invest in widening theirrange of products and entering new markets.

Agricultural Sector‘In 2007 the increase in the sales of commodity output produced on the farms and

personal holdings constituted 15.6% against 2005, which exceeds the target indicator of 6% by2.6 times’. (www.rost.ru).

The national project “Development of the Agro-processing Sector’ (whose report wasquoted above) stipulates for a number of measures encouraging the procurement of farmingequipment and livestock. However, the key element in livestock breeding is the technology offeeding animals.

The uneven growth of fodder prices in the world markets coupled with the increasingnumber (and size) of livestock-breeding farms create vast possibilities for the application ofmodern innovatory animal feeding technologies.

It should be noted that, besides Russia, the Chinese market also harbors great prospects inthis segment due to its transformation from an exporter into a major importer of mixed fodderand pre-mixes (the growing population and the limited territory do not permit China to expandits fodder base).

Biological preparations are applied at all stages of agricultural production. Fashion foraggressive chemicals dating back to the 1960s is gradually passing and, despite the fact thatchemical products still provide a basis for the intensification of agricultural production biologicalpreparations are winning the market over.

The main types of biological preparations used in agriculture are fodder productioncomponents (enzymes, amino acids, proteins, etc.), biological pest killers, growth stimulatorsand silage ferments. As in the case of food ingredients, imported biological preparations form abasis of the Russian market.

A major international actor actively developing the Russian mixed fodder and pre-mixmarket is Provimi Company. In some segments the market is controlled by Novozyme andGenecore companies (enzymes) as well as Ajinomoto and Si-Dji companies (amino acids).

The largest Russian companies in this segment are Sibbiopharm PA Ltd.(www.sibbio.ru), CJSC ‘Vostok Biotechnological Company’

http://www.rost.ru/

http://www.sibbio.ru/

45

(http://www.vostokbiotech.ru/news.php), and a Ukrainian company ‘Enzyme’(http://www.enzim.biz/), which has been actively developing in the last two years.

Besides the companies producing a large assortment there are several small but dynamicmono-liner companies such as Biotroph Company http://www.biotroph.ru (Biotroph silageferment) and RubAgroTrade Company (lysine-containing dietary supplement ‘Liprot’).

There is a separate segment of veterinary preparations (probiotics, antibiotics andvaccines) for livestock breeding. Besides the above companies, of certain interest in this segmentis Rosagrobioprom Company uniting several biofactories.

The Fund’s professionals are conducting active negotiations with all major companies inthe agricultural sector trying to use the strategic position and competence of the market leadersfor the development of portfolio companies.

Industrial Reagents Market

Oilfield Chemicals

Biological preparations for the extraction and transportation of oil and gas(polysaccharides, gums, biological oil destructors, etc.)

Application of biological preparations in the process of mining and transportation ofhydrocarbons becomes a common practice for oil and gas companies in Russia.

Biological preparations for the oil and gas industry are produced in small amounts byRussian companies Sibbiopharm, Enzyme and Vostok as well as experimental productionfacilities of sectoral research institutions (for instance, Gas Research Institute). However, thebulk of them are imported by Russian subsidiaries of such companies as Clariant, Chlumberge,etc. The market of biological preparations for the mining, transportation and processing ofhydrocarbons will continue to grow because the environmental requirements become ever morestringent and the introduction of modern oil- and gas-extracting technologies cannot do withoutbiological reagents.

Line of investment: Development of new products:

Microorganisms and products of their biosynthesis increasing oil reservoirrecovery

Sulfate reducing preparations decreasing the corrosion of oil and gas pipelines.

Reagents for the Pulp-and-Paper Industry

Biological preparations for the pulp-and-paper industry

At present 100% of reagents for cellulose production is imported. The market is not large(less than USD 10 million annually) but is growing fast – several-fold in the last three years.Growth rates remain high because, firstly, the environmental requirements to the pulp-and-paperindustry become more stringent and, secondly, there will be a substantial increase in thecellulose output (due to modernization and construction of new factories).

http://www.vostokbiotech.ru/news.php

http://www.enzim.biz/

http://www.biotroph.ru/

46

Reagents for the Production of Biofuel

Up to 20 bioethanol-producing factories are supposed to be built in Russia.

Possible lines of investment

1. Bioethanol production is a major consumer of enzymatic preparations (alfa- andgluco-amylase). The construction of a dozen of ethanol-producing factories willcreate an additional demand for enzymes in the amount of USD 40-50 million peryear. The industrial production of these enzymes can be arranged both on thebasis of the existing manufacturers (Sibbiopharm and Enzyme) and as newly-established enterprises. Major bioethanol manufacturers may also be interested inenzyme production.

2. Another important product for bioethanol production is yeast. There are a numberof innovatory products in this area, industrial production of which is promising.

3. The main problem in bioethanol production is its high cost price: all types of rawmaterials (except sugar cane) currently used permit to produce unprofitablebioethanol. Business efficiency is achieved thanks to the sale of co-products(DDGS, gluten, etc.). Intensive research is underway in the world includingRussia to create a technology of bioethanol production from vegetable biomass,which will make production much more economical. Investment in thedevelopment of such technologies can be very promising.

Foodstuff Production Waste Utilization

The toughening of environmental protection laws and rising penalties for environmentalpollution encourage foodstuff producers to introduce technologies for conversion/utilization offood wastes.

Utilization/processing of industrial wastes using biological preparations is a small but avery promising market. Russian companies do not regard waste utilization as an important task(with the exception of large enterprises using advanced technologies). But increasingcompetition, growth of production costs (raw materials and energy) and pressure of environmentprotection agencies will change the situation and in a few years the very notion of ‘waste’ maybecome senseless.

It should also be taken into consideration that construction of bioethanol-producing factories will result ina huge amount of wastes, processing of which into fodder with a high content of proteins may acquiregood prospects (especially considering a probable rise in prices on cereals and a resulting sharp increasein the cost of fodder base in Russia).

Supplementary Markets

R&D service

Knowledge production is a source of creating innovatory products but the process itselfdemands innovation. The Fund assumes that emergence of new projects (both in the ventureindustry and within the framework of development of the research sector) may become a driverto the R&D tools market. Research centers and innovation companies need modern reagents,equipment, effective research methods and up-to-date research management technologies. Themarket of such products will never be comparable to the market of foodstuffs or pharmaceuticals

47

but the increase in demand in this sector will be measured by tens of percent in the next fewyears.

It should also be remembered that in the process of creating innovations researchersreceive various side-effects (like optimization of research methods, new technologies andexperience of professionals from related fields). These indirect results may be capitalized by theFund adding value to the entire project portfolio.

For instance, a successful technology of the end product extraction and purificationcreated within the framework of a project can be applied during the phase of finalization of aproduction technology for other portfolio products, and later on it can be offered in the market asan effective solution for a certain category of tasks.

Therefore, supplementary market projects are based on the principle of an internalincubator processing the “wastes” of the research process into added value.

Market of Medical and Biotechnological Equipment

The establishment of production facilities cannot be a target priority of the Fund butdevelopment of new technologies for the production of biological products and new hard-wiredsolutions may become a successful supplement to the basic products.

For instance, the development of products for utilization of foodstuff production wastescan be effectively supplemented by the development of a set of equipment and industrialregulations. As a result, not only a preparation but also a comprehensive solution created bydifferent companies in the Fund’s portfolio will be promoted in the market.

The increase in the amounts (and types) of biological preparations produced in Russiaraises the demand for corresponding equipment both for production and research. At presentRussia lacks a production base permitting to manufacture equipment complying withinternational standards.

For instance, fermenters and bioreactors are used in the fermentation process (animportant phase in the production of pharmaceutical substances). In the last three years thegrowth of the world market of such equipment constituted 10-15%, and in the Russian and CISmarket it reached 50-150% annually. Major engineering companies (such as Bioengineering inSwitzerland) are operating to the limit of their technological capacity. Some of their potentialclients do not receive the required extent of services. The period of equipment manufacturesometimes is as long as 1.5-2 years, and the cost of supply is constantly growing.

The Fund’s professionals have conducted preliminary talks with international companiesand specialists (in Germany, the Republic of Korea and the Czech Republic) ready to participatein the project of localization of the production of certain types of manufacturing equipment forthe cultivation of industrial strains in the Russian Federation.

Technologies based on the filtration principle are widely applicable not only in thepharmaceutical industry but also in the production of food ingredients. Therefore, a portfoliocompany developing fermentation equipment can be integrated into the process of developmentand production of other portfolio products (such as biopharmaceutical preparations, foodingredients and fodder components).

48

Concluding this review of key markets it is worthwhile to point out once again that thechoice of professionals for the Fund is based on a detailed analysis of the market developmentprospects as well as on a large extent of preparatory work for the search of candidate companiesand their preparation for investment.

Investment Policy of the Fund

Investment Criteria

Experts of the Management Company and the Fund will select projects for makinginvestments based on the following key groups of criteria:

Technological Criteria:

1. Innovation capability ensuring critical competitive product advantages.2. Science and technical novelty proved by patents or otherwise.3. Project R & D at the advanced stage. The final R & D stage should not exceed 8

months. While developing a schedule for the projects requiring R & D, potentialdelays (planned delays) for at least 3-4 months should be taken into consideration.

4. Proof of technology operability/availability of prototype or model of innovativeproducts.

5. Sustainable competitive technology advantages over similar products (replacingtechnologies should be also considered as competitive technologies).

Investment Criteria:

1. Expected return on venture investments while entering the project is rarely lessthan 25-35% according to worldwide practice. The estimated profitability of thefund being set up will vary within these limits. Estimated model rate of the fundIRR is 28,69%. To provide an investor with this return Managing company(taking into account that part of the projects statistically will be losing) will selectto the fund projects with expected IRR no less than 45%.

2. Clear strategy of the Fund’s exit from the project. It should be noted that thiscriterion will be taken in consideration at the earliest stages of project selectionand review, since for venture investments it is expected that return on investmentsand major profit will be gained by selling business share.

3. Volume of investments in the early stage projects will not exceed US$ 1,000,000.The overall maximal volume of investments for one company should be no morethan US$10M.

4. The experience and achievements of the earlier company periods/project initiators(launch of other innovative products to the market, experience in attractinginvestments, sales of completed R & D results, etc.)

5. The period of return on investments should not exceed five years.

Organizational Criteria:

1. Possibility of involving strategic partners as co-investors. As noted above, theparticipation of partners as early as at the stage of project appraisal is a key factorfor making decision on the Fund’s investments.

2. Availability of specific industrial or other “entry barriers”: e.g. licensing,certification needs, etc. For medical projects: the necessity of conducting clinicaltrials and receiving regulatory approvals. In addition, for exporting medical

49

products it will be necessary to receive regulatory approvals in each individualcountry. Also, if medical projects are funded, clinical trials must be conducted inthe exporting country.

3. Availability of a mature team of specialists who have expertise required forproject implementation.

4. Availability of a set of documents prepared by the applicants, including a detailedbusiness plan of company development.

Market Assessment

1. The potential market size for innovative product sales should be no less thanUS$50M.

2. Sales should start no later than on Year 3 of the project implementation period;the possibility of exiting the project should be no later than on Year 7 of theproject implementation period.

3. Availability of product/technology export potential. Russian and FSU markets arethe key markets for the first stage of investments. However, from the strategicperspective, the Fund is focused on investments in such projects which candevelop in the large regional markets (e.g. Central and Southern Asia, Eastern andCentral Europe).

4. Availability of proved interest from potential technology/product buyers. Theinterest can be proved in different ways: a preliminary agreement for productsupplies; option for product sales; licensing agreement or contractual productionagreement. Structuring of relations between a portfolio company and key couner-agents is one of the essential tasks of the Fund’s experts.

Investment Goals

The key targeted indicators to be used for making conclusions on investment success aregiven below:

Create a new cost based on the effective integration of such key resources as newknowledge, investments, and business talents.

Gain a planned or higher profit rate in the project. Company’s exit no later than on Year 7 of the project implementation period. In

most cases, the best scenario for a venture fund is to exit from the list ofshareholders no later than on Year 5 of the company development period.However, in view of the need of conducting clinical trails for numerous projects,the Fund experts believe that this period can be extended to 7 years.

Minimize venture funding risks assessed with the use of risk managementinstruments approved by the Investment Committee for the ManagementCompany experts.

In case when it turns out that an innovation company which had received investmentsfrom the Fund experiences a significant delay or failure (as demonstrated by its monitoringresults) in the achievement of key performance indicators included in its business plan, the issueon further cooperation with the company will be raised at the Investment Committee meeting.Based on advice of the Management Company experts, the Investment Committee is authorizedto make the following decisions:

Terminate funding of the company; Exit from the company ahead the schedule for minimizing losses;

50

Restructure the company’s business; Initiate a procedure of dissolution of the company.

Structure of the Fund Portfolio

According to the proposed model of the Key Markets and having assessed its internalresources (e.g. team qualification and composition), the Management Company “Maxwell” isproposing to establish a venture fund with the total amount of RUR 3 billion and 60 million.

Based on the reviewed global experience, experts of the Management Company havedeveloped a diversified structure of the Fund’s portfolio of projects:

Seed-stage projects, which have only a promising idea and initial proof oftechnology functionality – no more than 5% of the total size of the Fund Portfolio(RUR 153M).

Thus, assuming that an average amount of investments required for a seed-stagecompany is US$500K (about RUR 12.5M), no more than 10 projects of companiesstaying at this stage would be funded.

It should be noted that in view of the limited period of the Fund existence (max. 10years without an extension option) and the duration of innovative cycle of thecompany development from the seed stage to the exit stage (7 years), the Fundexperts propose to allocate the investment volume within the first three years of theFund operations. Beginning from the fourth year, the search, selection and investmentin the seed-stage projects will be terminated.

Start-up projects, which have a ready-for-sales product but have not launched itsserial production or sales: no more than 20% of the overall size of the FundPortfolio (RUR 612M).

Thus, assuming that an average amount of investments required for a start-upcompany is US$2M (about RUR 50M), no more than 12 companies of this stagewould receive investments. In view of the limited period of the Fund existence (max.10 years without an extension option) and the duration of innovative cycle of thecompany development from the start-up stage to the exit stage (5 years), the Fundexperts propose to allocate the investment volume within the first five years of theFund operations. Beginning from the sixth year, the search, selection and investmentin the start-up projects will be terminated.

Early-growth stage projects, which need investments for expanding theirproduction capabilities, product advertising and promotion will make 75% of theoverall size of the Fund Portfolio (RUR 2,295M).

Since an average amount of investments required for such projects is US$5M (aboutRUR120M), the Fund would provide investments to about 20 companies of this stage.

For different stage projects, the Management Company experts have established thefollowing limits for deal amounts:

51

Deal Amount LimitsProject Stage Average deal amount,

RUR MMinimal deal amount,

RUR MMaximal deal amount,

RUR MSeed 12,5 10 24Start Up 50 Not established 100Early Growth 120 Not established 240

The Key Markets Model assumes that 90% of funds will be invested in the key marketsegments and 10% - in the additional market segments.

Investment limits for the key markets are shown in next Diagram. Investment limits forthe additional markets are not established.

Key Market Limits

40%

20%

20%

20%

Pharmaceuticals

Foodstuffs

Agriculture

Industrial reagents

Investment Activity of the Fund

Types and Structure of Investment Deals

The Fund monetary resources can be invested in innovative companies with the followingorganizational and legal forms:

Limited liability company, provided that the Fund share in the innovative companycapital will be more than 50% of votes.

Close joint stock company, provided that the Fund share in the company’s authorizedcapital will be at least 25% + 1 share of vote percentage.

The Fund property can be invested in companies’ securities both included and notincludes in the quotation lists of stock exchanges. Company activities should match one or moreof the RF top priority areas of science and technology development and/or/ their products shouldbe on the list of the RF critical technologies approved by the RF President (see “TargetedIndustries of the Fund”).

52

Subsequent investment deals

Financing of innovation company will be made by a few tranches in accordance withdrawn up and approved by Investment Committee strategic business plan, achievement or failureto achieve of which will be the key criterion for taking of decision on following-on financing.The Fund will both create its own reserves for following tranches and raise additional financingincluding loans (credits from commercial banks MAXWELL, Narodny Credit etc.) and commonco-financing of other investors and venture funds. Volume and terms of subsequent investmentdeals will directly depend of achievement the figures of business plan of strategic developmentof innovation company.

Increase in the Value of Portfolio Companies

Thorough preparation stage is a key to success. As early as the stage of the Fundfoundation, experts of the Management Company have made a lot of work providing a basis forsuccessful growth of the companies.

The management team of the Fund has identified five key instruments of businessdevelopment. Using these instruments, the Fund can change value of the companies whichreceived investments.

To plan financial deals and, as a result, to use the money as effectively as possible and tocontrol risk is one of the key tasks of the Fund’s Management Company.

The opportunities of the MAXWELL CAPITAL Group (the Commercial BankMAXWELL, a division for corporate funding of the MAXWELL CAPITAL IC) to be used atthe stages of project seed, company growth, and at the stage of Fund exit from the project, aredescribed in the section “Management Company of the Fund.”

1. Development of Markets

Innovative companies request finances for the following purposes: new researchactivities; completion of earlier studies; construction of plants, i.e. for everything except forselling a product they have.

Often times it looks that the product is sold poorly because some research is notcompleted. However, the truth is rather simple: a product is sold poorly because nobody isselling it.

Experts of the Fund are aware of this specific feature of innovative companies. Therefore,at the preparatory stage, the key tasks include search for commercial partners, promotionconcepts development and personnel reserve formation for sales team.

Currently the Fund already has in place:

A well-thought product promotion concept for the targeted companies; A network of strong partners for product promotion purposes.

2. Support of Competences

If an innovative company has all the competences required for successful business, mostprobably, it is called “Microsoft.”

53

As a rule, financing is not the only component required for the development of aninnovative company. Innovators should be aware of how to make businesses, interact withcontractors and suppliers, and to scale up success when it is achieved.

The Fund has brought together a strong team of experts in different business areaswho will facilitate activities as necessary. In addition, the Fund experts arecapable to involve international experts in different targeted areas.

3. Optimization of the Processes

As a rule, innovative company develops a business plan, supposing that it is a uniqueentity in the Universe. For this reason, all most all companies are striving to receive investmentsto set up production or conduct additional tests. In the Fund’s Portfolio, most of these tasks canbe optimized.

The Fund may have an integrated production base for several products from theportfolio.

The Fund may purchase process equipment for several projects by establishingcollective facilitation centers within the portfolio.

Playing the role of “single customer,” the Fund team may receive significantdiscounts from suppliers of equipment, consumables, business services, etc. Allthese actions save investors’ time and money, enabling to meet the goal withlower costs and risks.

4. Technology Incubator.

As a rule, those companies which have reached the stage of sales start/growth, possesspromising developments not brought to the stage of product. In addition, outside their portfolio,such companies may have ideas on new products of interest for the Fund.

The Fund will strive to integrate early stage projects in businesses of those companieswhich have demonstrated good growth at the stage of sales start/growth.

Thus, in several years the Fund will create an ”internal incubator” for projects which willbe promoted to the market through the partners with known success stories.

Such approach will strengthen positions of the portfolio companies by adding newproducts to their assortment. For the Fund, early stage projects will imply higher profitability andintegration of successful partners in the business – reliable risk control.

Arrangements for Exiting from Investments

The Fund “MAXWELL CAPITAL VENTURE” is focused on the effective use ofinvestors’ funds, gradually gaining experience and risks. The Fund management tactics is aimedat entering sales start/growth projects at their initial stage. As the key exit instruments, it usessales to the strategic investors and LBO.

In the later stage projects, the Fund will use international cooperation instruments on awide scale (exit sales to foundations or integration in small-cap companies).

The Fund’s strategic goal is to “cultivate” innovative companies – potential marketleaders. As a rule, IPO is the main exit from such projects.

54

Sales to the Strategic Investor

Availability of strong partners, interested in purchase of Fund investments is an importantcondition of success, mostly at an early stage. Therefore, sales to strategic investor is a good exitoption for the in case of the “first wave” projects. As noted, experts of the Fund will holddiscussion about all the portfolio’s companies with large corporation considered as strategicinvestors.

In facts, using this model the Fund will release large companies from some risks at thestage of product search, selection and launch to the initial sales stage. Then, a partner corporationwill buy out the product and develop it independently.

This model will enable the Fund to control risks. On the other hand, it will limitinvestment profitability and pose a threat of portfolio companies’ business dependence on one ormore large partners. That is why as business develops, the Fund will focus on the projectstargeted at IPO.

LBO/LBA

A good exit from projects at the stage of sales growth is their sales to the managementteam. Such companies are included in the Fund’s portfolio. The main objective of cooperationwith such companies is to create new products (with higher profitability and functionality) inthose markets where the companies are well represented.

Since such companies already have growing income and the renewal of their assortmentshould increase revenues and EBITDA, the management team is interested in attractinginvestments in exchange of later buying out the Fund’s share.

This exit model (like sales to strategic investors) is a good instrument for the initial stageof Fund operations. “Pluses” and “Minuses” of these models are similar: a limited risk andproject profitability and dependence on a small group of counteragents.

In Russia, venture industry will be evolving as a part of the global investment market.Therefore, we believe that the capability to integrate Fund’s successful projects in internationalpartner projects (regardless of their jurisdiction) is an essential advantage of the Fund“MAXWELL CAPITAL VENTURE.”

The set of instruments used in international cooperation may include, in particular, salesof investments to exit-funds or project integration into public companies with smallcapitalization.

Sales to exit-funds

Markets with well-developed venture investment industry have multiple specializedfunds, e.g. those which buy out companies from other Funds (exit funds). Experts of theManagement Company “Maxwell Asset Management” hold extensive discussions with theFunds and VC companies from Europe, U.S. and professional communities of China and India,exploring business cooperation options.

We have not made a final decision as regards the selection of specific partners. However,we believe that the cooperation with international Funds and VC companies is one of the targetsof the Fund, since it is impossible to run such business in the isolation, within a single country.

55

IPO

To bring a company to IPO means that the Fund was able to find and cultivate a newleader, a company capable to become a core of the giant corporation. These project is theultimate goal of establishing venture funds, because they provide the highest profitability toinvestors and bring the glory to managers.

The strategy of MAXWELL CAPITAL VENTURE is targeted at searching for suchcompanies. However, it is necessary to make a long and twisty way to reach this goal, since:

1. Russia is missing infrastructure bringing innovative companies to IPO. MICEX andRTS are oriented to servicing blue chips, while Russian AIM creation projects are still onlyprojects.

2. Global financial market trends will not facilitate Russian start-ups. In the next fewyears, international investors will be very careful in making decisions, mostly with regard to newcompanies.

3. It is necessary to have an extensive experience and time to identify and cultivateappropriately a start-up to the level of a stock company. Venture industry in Russia is only beingestablished and so far such experienced players simply do not exist.

These reasons are significant limiting factors on the way to IPO. However, they are notfundamental: companies from Russia can become leaders likewise companies from othercountries.

MAXWELL CAPITAL VENTURE Fund has built a system of search, selection andmanagement of innovative companies at the key markets. The system enables to identify andsupport potential leades of new economics.

Partners of Fund

Partner 1. Biotechnological company Alltech

Alltech is an international biotechnological company rendering nature solutions in thefield of feedstuff producing and animals feeding. Alltech has branches in more than 76countries. Head office is situated in Lexington, Kentucky, USA. Other big Alltech centres arelocated in Dublin (Ireland) and Peking (China).

More than 1300 people are engaged in different innovation solutions development,necessary for rapidly changing market. Over more than 20 years Alltech is investingprogrammes of research and development to provide variety of nature products being producedand technologies being developed, that is the key direction of feed producing and cattle breedingindustries development.

Alltech is one of the leading companies in the field of cattle health, thanks tocommitment to scientific research and development.

Today Alltech sales volume is increasing for 25% per year, while total turnover exceeds $300 M.

The company can act as strategic investor for the Fund projects connected withagriculture and food products, participate in the fund projects estimation using its sciencepotential and knowledge of the market.

56

Currently verbal understanding on strategic partnership is achieved with the President ofthe company Mr. T.P. Lyons.

Contacts: T.P. Lyons, президент; тел: +1 (859)-885-96-13; 3031 Catnip Hill PikeNicholasville, KY 40356 USA; e-mail: [email protected]

Partner 2. Genencor (Danisco Division)

Genencor (Danisco Division), is one of the leaders in the field of development andproducing of industrial ferments and one of the largest biotechnological companies in the world.Main markets are industrial components for biopower, biosecurity, textile, food and feedingindustries. 1475 employees of the company developed more than 250 products being produced in10 factories and sold in more than 80 countries of the world. By incorporating into Danisco thecompany gained access to new markets of food ingredients. Currently Danisco is one of theleading world producers of ingredients for food industry.

Genencor is potential strategic investor ib such spheres as agricultural production,biopower, food ingredients. As well the company’s experts can participate in the fund projectsestimation.

Currently verbal understanding on strategic partnership is achieved with the the Head ofrepresentative office of the company Mr. Faber Likel.

Contacts: Alexei Alabaev, Manager Market Development, Faber Likel, the Head ofGenencor representative office in Russia, Director on sales in CIS.

Moscow, RussiaPhone: +7 (095) 258-1435Fax: +7 (095) 258-1436e-mail: [email protected]

Partner 3. Research Company Abercade

Research Company Abercade is focused on research of industrial markets andtechnologies. It also provides management of development projects of investment companies inbiotech market.

Since 200, Abercade has shaped practices in Biotech area. The following activities arecarried out within these practices:

1. Market Research

Since 2001, Abercade has been publishing annual reports on the Russian biotech marketstate. Since 2005, Abercade has been issuing annual market monitoring reports for individualmarket segements (enzymes, amino acids, biofuel, etc.).

Key market research projects implemented in 2003-2007: Research of the market of products and techniques for treatment of oncological

diseases and diabetes and diagnostic kits using monoclonal antibodies andhybridomas (2003).

Research of the RF market of antibiotics and enzymes (2003).


57

Assessment of RF production effectiveness of agricultural biotech products(2003).

Organization of RF production of biochips for resistant TB diagnostics (2004). Database of research institutes involved in biotech area (Biodirectory) (2004). Analysis of the RF market of enzymes (2004-2007). Analysis of the market of plant protectants (2005 – 2007). Program of upgrading of PA Sibbiopharm Ltd. (2005-2006). Analysis of the market of amino acids in Russia, Ukraine and the Republic of

Belarus (2006). Analysis of the market of biofuel (bioethanol, biobutanol) in Russia, CIS, Asian

and EC countries (2007). Analysis of the market of grain processing products (starch, glucose, fructose,

GPS) in Russia, CIS, Asian and EC countries (2007).

2. 2. Communication Projects: organization of conferences and workshops onbiotech market-related issues.

For several years, Abercade has been a co-organizer of the Conference “Biotechnologyand Business” which is held annually and brings together about 300companies, researchorganizations, and investors.

Since 2004, Abercade has participated in the Global Biotech Forum (BIO) and madearrangements for Russian biotech companies attending this Forum (www.bio.org).

3. 3. Investment Projects

Since 2001, Abercade has been conducting continuous monitoring of projects related tothe development and production of biologics. In a 5-year period, an extensive database wasdeveloped incorporating center and companies; appraisal of dozens of projects was carried outand funding for several projects was mobilized.

Since 2005, Abercade has provided management for PA Sibbiopharm Upgrading Project.Sibbiopharm is the largest Russian manufacturer of enzymatic products. Within this projects,experts of the company handle the following tasks:

Attract funding. The first tranche for 2006-2007 in the amount of US$8M forproduction upgrading and US$1.3M for funding R&D of two new products.

Shape a pool of technology partners (suppliers of equipment, technologies, andsolutions). Organize a series of tenders for purchasing industrial, technologicaland research equipment as well as industrial technologies for manufacturing newproducts.

In 2007, Abercade provided support for the project establishing a large biofuel (and co-products) production facility in RF with the processed grain volume of up to 1 mln. tons peryear.

In 2008, Abercade has started an upgrading project of the Joint Stock Company“Enzyme” (Ukraine), running the first in Ukraine and the second in CIS manufacturer ofenzymatic products.

MC “Maxwell Asset Management” in cooperation with RC Abercade is planning toimplement investment activities of the Fund.

58

Partner 4. Venture Entrepreneurship Center of the International Higher BusinessSchool MIRBIS

It was found in 2003 as a division of the International Higher Business School MIRBISfor providing consulting and expert services, shaping management teams for innovative projectsand integrating MBA “Management of Hightech Innovative Projects” graduates in the realisticbusiness processes in the area of innovations.

During a four-year period of Center operations, two major consulting projects wereimplemented and investment attractiveness review was performed for 17 innovative projects inthe area of medicine and public health.

Partnership with this entity will enable the Fund to form teams for project management,business navigation and business communications in the professional environment.

The Management Company and the Venture Entrepreneurship Center MIRBIS havemade a strategic decision to set up a “Project Incubator” within the infrastructure of the Fund ofVenture Investments.

This understanding is fixed by signed Agreement on cooperation.

Partner 5. Moscow State University (MSU) Scientific Park

An Innovation Technology Center “MSU Scientific Park” was founded in 1992. The keyobjective of its establishing was to facilitate innovation activity and set up conditions forsuccessful commercialization or high-tech research results.

Today, clients-residents of “MSU Scientific Park” (the area is over 11,000 sq. km)include 40 small innovation companies with annual sales volumes above RUR 4.5 billion and2500 employees. Currently, within MSU Scientific Park in the base of Biological Faculty, abiotech incubator is created under the Program of the RF Ministry for Economic Development.

It is targeted at developing a network of innovation business incubators. MSU andMaxwell Asset Management have approached the stage of signing MOU on cooperativeincubator development and management.

Partner 6. Production Association SIBBIOPHARM

Production Association SIBBIOPHARM, LLC – the largest Russian enterprise havingexperience of 40 years in producing of microbiological production. Currently the enterprise isbeing an up-to-date production able to produce almost any technology of microbiologicalsynthesis. The company accomplished complex modernization which allowed producing ofwide spectrum of biological preparations with low cost price.

The company has reach reserves of production capacities which can be used inbiotechnological production.

PO Sibbiopharm, LLC can cooperate with Fund projects for producing (contractproducing) of necessary volumes of microbiological production, technological scaling foragriculture and food production.

59

Currently verbal understanding on strategic partnership is achieved with the Generaldirector of the company Mr. Krichevsky A.

Contacts: Krichevsky Alexandr N., General director, address: building 1, 1,Skladochnaya Street, Moscow, Russia, 127018; Tel.: +7(495) 785-71-30, +7 (901) 583-1350, e-mail: [email protected]

During the preparatory stage, the Fund experts have built partnership with the following:

Russian companies and research centers:

PA Sibbiopharm (manufacturer of enzymatic products) OJSC “Vostok” (manufacturer of enzymatic products)) OJSC “Biochimmash” (equipment and technologies for biologics production) “Elevar” company (food industry engineering) “Bigor” company (food industry engineering) RAS Center “Bioengineria” (agrobiology research) SRC “Vector” (the world largest center of virology research) “Partner” company (RF largest bifidobacterin producer)) Engelgardt Instiute of Microbiology All-Russian Research Center of Molecular Diagnostics and Therapy (known for

its cooperative projects with the Group “Ondustrial Investors”). AIC “Titam” (first CIS biofuel producer) OJSC “Enzim” (Ukraine, the leading manufacturer of enzymatic products)

large international biotech corportation:

Ajinomoto (world leader in amino acid production) «CJ Corp» (World Number 2 company in amino acid production) «Genencor» (world leader in enzymatic products manufacture) «DSM» (production of a wide range of industrial bioproducts)

international organizations:

International Science and technology Center (ISTC) U.S. State Department (BioIndustry Initiative Program) U.S. Department of Agriculture “ANWAR” Program (France)

non-profit organizations and funds:

“Biomak” Consortium TEMPO Association Russian Society of Biotechnologists

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FINANCE

Fund financial model

1st year 2nd year 3rd year

M RUR I quar II quar III quar IV quar I quar II quar III quar IV quar I quar II quar III quar IV quar

Fund NAV 3 061,0 3 061,0 3 061,0 3 061,0 3 061,0 3 061,0 3 061,0 3 061,0 3 061,0 3 061,0 3 061,0 3 061,0

Investment activities (by periods)

Investments in venture projects, incl. 0,0 -84,0 -66,3 -66,3 -54,3 -150,3 -126,3 -174,3 -54,3 -126,3 -180,5 -180,5

seed 0,0 0,0 -6,3 -6,3 -6,3 -6,3 -6,3 -6,3 -6,3 -6,3 -12,5 -12,5

start-up 0,0 -24,0 0,0 0,0 -48,0 -24,0 0,0 -48,0 -48,0 0,0 -48,0 -48,0

early growth 0,0 -60,0 -60,0 -60,0 0,0 -120,0 -120,0 -120,0 0,0 -120,0 -120,0 -120,0

Exit from venture projects, incl. 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0

seed 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0

start-up 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0

early growth 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0

Profit on venture investments 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0

Free MA managing

Deposits and S 2 908,0 2 828,2 2 765,2 2 702,3 2 650,7 2 508,0 2 388,1 2 222,5 2 171,0 2 051,1 1 879,6 1 708,1

MA on s/acc 153,1 148,9 145,5 142,2 139,5 132,0 125,7 117,0 114,3 108,0 98,9 89,9

Profit on deposits and S 50,9 49,5 48,4 47,3 46,4 43,9 41,8 38,9 38,0 35,9 32,9 29,9

Fund expenses, incl. -27,2 -27,2 -27,2 -27,2 -27,2 -27,2 -27,2 -27,2 -27,2 -27,2 -27,2 -27,2

MF MC -21,5 -21,5 -21,5 -21,5 -21,5 -21,5 -21,5 -21,5 -21,5 -21,5 -21,5 -21,5

SpecCO -1,9 -1,9 -1,9 -1,9 -1,9 -1,9 -1,9 -1,9 -1,9 -1,9 -1,9 -1,9

other expenses -3,8 -3,8 -3,8 -3,8 -3,8 -3,8 -3,8 -3,8 -3,8 -3,8 -3,8 -3,8

Profit distribution

Fund net profit for the period 23,7 22,3 21,2 20,1 19,2 16,7 14,6 11,7 10,8 8,7 5,7 2,7

Payment of the profit to the holders of units -23,7 -22,3 -21,2 -20,1 -19,2 -16,7 -14,6 -11,7 -10,8 -8,7 -5,7 -2,7

Payment of SF MC 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0

Main fund figures accumulated

Accumulated venture investments 0,0 84,0 150,3 216,5 270,8 421,0 547,3 721,5 775,8 902,0 1 082,5 1 263,0

Profit paid to the fund units holders 23,7 46,1 67,3 87,4 106,7 123,4 138,0 149,8 160,6 169,3 175,1 177,8

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Fund financial model (continued)

M RUR4thyear

5thyear

6thyear

7thyear

8thyear

9thyear

10thyear TOTAL

Fund NAV 3 061,0 3 061,0 3 061,0 3 061,0 3 061,0 3 061,0 3 061,0 for 10 years

Investment activities (by periods)

Investments in venture projects, incl. -481,0 -481,0 -372,0 -324,0 -180,0 0,0 0,0 -3 101,0

seed -25,0 -25,0 0,0 0,0 0,0 0,0 0,0 -125,0

start-up -96,0 -96,0 -72,0 -24,0 0,0 0,0 0,0 -576,0

early growth -360,0 -360,0 -300,0 -300,0 -180,0 0,0 0,0 -2 400,0

Exit from venture projects, incl. 1 499,9 1 978,8 3 415,5 2 457,7 3 530,6 4 103,5 4 124,6 21 110,8

seed 0,0 0,0 0,0 0,0 1 072,9 2 145,8 2 145,8 5 364,4

start-up 0,0 478,9 1 915,6 957,8 957,8 957,8 478,9 5 746,8

early growth 1 499,9 1 499,9 1 499,9 1 499,9 1 499,9 1 000,0 1 499,9 9 999,6

Profit on venture investments 1 139,9 1 570,8 2 863,5 2 001,7 3 049,6 3 717,5 3 666,6 18 009,8

Free MA managing

Deposits and S 1 593,2 1 523,8 1 694,8 1 820,2 2 106,2 2 472,9 2 908,0

MA on s/acc 83,9 80,2 89,2 95,8 110,9 130,2 153,1

Profit on deposits and S 111,5 106,7 118,6 127,4 147,4 173,1 203,6 1 492,0

Fund expenses, incl. -108,6 -108,6 -108,6 -108,6 -108,6 -108,6 -108,6 -1 086,3

MF MC -85,9 -85,9 -85,9 -85,9 -85,9 -85,9 -85,9 -858,6

SpecCO -7,5 -7,5 -7,5 -7,5 -7,5 -7,5 -7,5 -74,7

other expenses -15,3 -15,3 -15,3 -15,3 -15,3 -15,3 -15,3 -153,1

Profit distribution

Fund net profit for the period 1 142,8 1 568,9 2 873,5 2 020,5 3 088,4 3 782,0 3 761,5 18 415,5

Payment of the profit to the holders of units-1

142,8-1

568,9-2

333,1-1

616,4-2

470,7-3

025,6 -3 009,2 -15 344,6

Payment of SF MC 0,0 0,0 -540,4 -404,1 -617,7 -756,4 -752,3 -3 070,9

Main fund figures accumulated

Accumulated venture investments 1 384,0 1 457,0 1 277,0 1 145,0 844,0 458,0 0,0

Profit paid to the fund units holders 1 320,6 2 889,5 5 222,7 6 839,1 9 309,812

335,415

344,6

62

Comments to the table

Financial model of the fund is shown for the whole operating period – 10 years. First 3years of the fund activities are given by quarters

Following abbreviations are used in the table:

NAV – fund net assets valueMC – managing companyMA – monetary assetsS – securities, bonds and shares circulating on Russian stock exchangess/acc – settlement bank accounts of the fundMF –management feeSF – success feeSpecSO – specialized servicing organizations of the fund (specialized depository,

registrator, auditor, valuator)

All data in the table (except for the chapter “main fund figures accumulated”) are givenfor the relevant period, a year or a quarter.

Data in the chapter “main fund figures accumulated” are given for the whole operatingperiod of the fund by accumulative method.

In accordance with policy of profit distribution by units described in detail in the relevantchapter of Memorandum, all net profit of the fund for the reporting quarter shall be used forpayment of profit on units to investors.

Model benchmark

For the model drawing up following benchmarks were used:

1. Volume of the venture fund amounts 3061 M RUR.2. Term of the fund activities – 10 years, from 2008 to 20183. Expenses for the fund management (managing company, specialized depository,

registrator, valuator, auditor) – 2,5% (VAT excl.) of NAV of the fund, not toexceed 76,525 M RUR per year (VAT excl.).

4. Expenses to be reimbursed on account of the fund assets – 0,5% (VAT incl.) ofNAV of the fund per year.

5. Managing company fee following the fund activities results – 20% of financialresults per financial year, but no sooner than return to units holders of initialinvestments (3061 M RUR) into the fund.

6. Profit from alternative investments of free cash of the fund – 7% per annum.7. Payments to the fund investors shall be made quarterly.8. Fund Discount rate taken is 20%

For seed projects: Share of seed projects in the fund assets totals 5%. Average volume of investments into 1 project 12,5 M RUR. Volume of initial investments 50% of total investments. Reinvestments shall be made in 2 years after initial investments. Number of seed projects– 10

63

Project exit – in 7 years Investments into projects shall be made within first 3 years Beginning from the 4th year search, selection and investment into new seed

projects shall be stopped. Number of losing projects (total investment loss) – 20% Number of not successful projects (return of fund investments only) – 30% Number of successful projects – 30% (IRR=80%) Number of high-yielding projects – 20% (IRR=120%)

For start-up projects: Share of start-up projects in the fund assets totals 20%. Average volume of investments into 1 project 48,0 M RUR. Volume of initial investments 50% of total investments. Reinvestments shall be made in 1 year after initial investments. Number of start-up projects – 10 Project exit – in 5 years Investments into projects shall be made within first 5 years Beginning from the 6th year search, selection and investment into new start-up


For early growth projects: Share of early growth projects in the fund assets totals 75%. Average volume of investments into 1 project 120,0 M RUR. Volume of initial investments 50% of total investments. Reinvestments shall be made in 1 year after initial investments. Number of early growth projects – 20 Project exit – in 4 years Investments into projects shall be made within first 6 years Beginning from the 7th year search, selection and investment into new early growth


64

Fund profitability indicators

Expected fund assets value in innovation companies in total and in certain companies(as of the end of the reporting year, M RUR):

fund assets value in companies

year Seed stage srart-up stage early growth stage total over the fund

1 18,8 72,0 360,0 450,8

2 112,5 408,0 1 440,0 1 960,5

3 231,3 912,0 2 880,0 4 023,3

4 100,0 384,0 900,0 1 384,0

5 125,0 432,0 900,0 1 457,0

6 125,0 312,0 840,0 1 277,0

7 125,0 240,0 780,0 1 145,0

8 100,0 144,0 600,0 844,0

9 50,0 48,0 360,0 458,0

10 0,0 0,0 0,0 0,0

Expected shares of the fund in total issue of securities included in the fund and in thecapital of innovation companies in total considering all possible dilutions of the charter capitalby years (as of the end of reporting period):

Expected shares of the fund in total issue of securitiesincluded in the fund and in the capital of innovation

companies

seed srart-up early growthtotal in the

fund

years min max min max min max min max

1 25,0% 50,0% 25,0% 50,0% 25,0% 25,0% 25,0% 50,0%

2 25,0% 50,0% 25,0% 66,7% 25,0% 40,0% 25,0% 66,7%

3 40,0% 66,7% 40,0% 66,7% 25,0% 40,0% 25,0% 66,7%

4 40,0% 66,7% 40,0% 66,7% 25,0% 40,0% 25,0% 66,7%

5 40,0% 66,7% 40,0% 66,7% 25,0% 40,0% 25,0% 66,7%

6 40,0% 66,7% 40,0% 66,7% 25,0% 40,0% 25,0% 66,7%

7 40,0% 66,7% 40,0% 66,7% 25,0% 40,0% 25,0% 66,7%

8 40,0% 66,7% 40,0% 66,7% 25,0% 40,0% 25,0% 66,7%

9 40,0% 66,7% 40,0% 66,7% 25,0% 40,0% 25,0% 66,7%

10 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

65

Internal rate of return (IRR) over the portfolio and for certain deals

IRR over the portfolio in total: 28,69%

For certain deals:

IRR forcertain deals

for successful seed projects

min 80,00%

max 120,00%

average for successful projects 101,57%

average for all seed projects 81,58%

for successful start-up projects

min 60,00%

max 90,00%


average for all start-up projects 62,98%

For successful early growth projects

min 40,00%

max 60,00%


average for all early growth projects 39,69%

Multiplier for venture projects:

Over the fund portfolio total: 5,88

For certain deals:Multiplier

for successful seed projects

min 40,06

max 150,48

average for successful projects 84,23

average for all seed projects 42,42

for successful start-up projects

min 8,52

max 18,90


average for all start-up projects 9,28

For successful early growth projects

min 3,29

max 5,33


average for all early growth projects 3,27

Return on investments (ROI) over the fund portfolio total and for certain deals

ROI over the fund portfolio total: 466,1%.

For certain deals:For seed projects 752,28%

For start-up projects 334,55%

For early growth projects 208,81%

66

Plan of exit from investments (M RUR):

yearsfrom seedprojects

from start-up projects

from earlygrowthprojects

Total for allprojects

1 0,0 0,0 0,0 0,0

2 0,0 0,0 0,0 0,0

3 0,0 0,0 0,0 0,0

4 0,0 0,0 1 499,9 1 499,9

5 0,0 478,9 1 499,9 1 978,8

6 0,0 1 915,6 1 499,9 3 415,5

7 0,0 957,8 1 499,9 2 457,7

8 1 072,9 957,8 1 499,9 3 530,6

9 2 145,8 957,8 1 000,0 4 103,5

10 2 145,8 478,9 1 499,9 4 124,6

Investment expenses plan

Schedule of investment expenses on account of the fund by quarters/years (M, RUR)годы 1 2 3 4 5 6 7 8 9 10

seedprojects 12,50 18,75 37,50 25,00 25,00 0,00 0,00 0,00 0,00 0,00

includinginitialfinancing 12,50 18,75 25,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00

includingrefinancing 0,00 0,00 12,50 25,00 25,00 0,00 0,00 0,00 0,00 0,00

start upprojects 24,00 72,00 144,00 96,00 96,00 72,00 24,00 0,00 0,00 0,00



earlygrowthprojects 180,00 240,00 360,00 360,00 360,00 300,00 300,00 180,00 0,00 0,00



Allinvestmentdeals 216,50 330,75 541,50 481,00 481,00 372,00 324,00 180,00 0,00 0,00



67

Schedule of investment expenses on account of the fund by progressive total (M, RUR)годы 1 2 3 4 5 6 7 8 9 10

seedprojects 18,75 75,00 231,25 100,00 125,00 125,00 125,00 125,00 125,00 125,00



start upprojects 72,00 264,00 912,00 384,00 480,00 552,00 576,00 576,00 576,00 576,00



earlygrowthprojects 360,00 900,00 2 880,00

1260,00 1 620,00 1 920,00 2 220,00 2 400,00 2 400,00 2 400,00

includinginitialfinancing 360,00 720,00 1 800,00 720,00 900,00 1 020,00 1 200,00 1 200,00 1 200,00 1 200,00

includingrefinancing 0,00 180,00 1 080,00 540,00 720,00 900,00 1 020,00 1 200,00 1 200,00 1 200,00

Allinvestmentdeals 450,75 1 239,00 4 023,25

1744,00 2 225,00 2 597,00 2 921,00 3 101,00 3 101,00 3 101,00

includinginitialfinancing 450,75 1 011,00 2 588,50 998,50 1 226,50 1 370,50 1 550,50 1 550,50 1 550,50 1 550,50

includingrefinancing 0,00 228,00 1 434,75 745,50 998,50 1 226,50 1 370,50 1 550,50 1 550,50 1 550,50

Norms and plan of expenses being reimbursed at the cost of the fund assets

Expenses associated with fund trust management shall be reimbursed at the cost of theproperty included in the Fund. Such expenses cover the following:

- maintenance of the property included in the Fund;- deal making with the property included in the Fund;- calling and holding of general meeting of investment units holders;- provision and publishing of information on Fund, reporting to federal executive body on

securities market in accordance with regulatory acts requirements;- legal services remuneration, law costs and state duty payments associated with Fund

trust management;- servicing of the Fund settlement account including expenses for transfer of monetary

compensation to investment units holder for investment units redemption;- exercising rights arisen from securities included in the Fund by managing company;- payment of legal tax and duties to budget regarding assets included in the Fund;- notarial certification of documents connected with the Fund trust management;- expenses for payment of investment projects analysis including different types of

expertise, reporting audit and legal expertise of statutory documents and activities of economicsocieties, shares (participatory shares in the charter capital) of which are to be acquired into thefund

Maximum volume of expenses reimbursable at the expense of the property included intothe Fund totals 0,5 (Zero point five) percent (VAT inclusive)

68

Norms and plan of the managing company fee

year management fee success fee Total

1 85,86 85,86

2 85,86 85,86

3 85,86 85,86

4 85,86 85,86

5 85,86 85,86

6 85,86 540,41 626,27

7 85,86 404,11 489,96

8 85,86 617,68 703,54

9 85,86 756,40 842,26

10 85,86 752,31 838,16

Managing company budget

For the purpose of drawing-up of Maxwell Asset Management company budget regardingMaxwell Capital Venture fund we are considering process of the Fund setup and operating as aseparate project, and analyzing expenses arisen from venture fund management separately fromMaxwell Asset Management company budget of profits and expenses kept in accordance withoperating activities of the company.

First six months shall be dedicated to creation of projects “flow”, advertising campaigndeveloping, arrangement of meetings with potential companies – investment objects andinvestors. Main expenses: remuneration of managing stuff, advertising services payment,participation in specialized exhibitions, fairs, round tables.

Stuff schedule.

Positions1year

2year

3year

4year

5year

6year

7year

8year

9year

10year

Project leader 1 1 1 1 1 1 1 1 1 1

Deputy leader 1 1 1 1 2 2 2 2 2 2

Head of economic department 1 1 1 1 1 1 1 1 1 1

economist 0 0 1 1 2 2 2 2 2 2

specialists (projects manager)* 6 6 6 6 6 6 6 6 6 6

assistant to specialist 0 0 2 2 4 4 6 6 6 6

lawyer 1 1 1 2 2 2 3 3 3 3

system administrator 1 1 1 1 1 1 1 1 1 1

IT-specialist 1 1 1 1 1 1 1 1 1 1

accountant 2 2 2 2 2 2 2 2 2 2

marketing specialist 1 1 1 1 1 1 1 1 1 1

finance controller 1 1 1 1 1 1 1 1 1 1

MSD specialist 1 1 1 1 1 1 1 1 1 1

driver 1 1 1 1 1 1 1 1 1 1

* specialists (projects manager) – Specialist in the field of venture investments.

Changing of personnel capacity is connected with changing of number of projects beingconsidered and financed by the fund. Regular stuff: Project leader, his deputy, 6 specialists inthe field of venture investments, head of economic department, system administrator,accountants, driver. Additional stuff shall be engaged according to increase of projects “flow”and during investment period of certain projects.

69

Budget of salary-related expenses (M. RUR).

Positions 1 year 2 year 3 year 4 year 5 year 6 year 7 year 8 year 9 year10year

Project leader 1,70 1,95 2,25 2,58 2,97 3,42 3,93 4,52 5,20 5,98

Deputy leader 0,71 0,81 0,94 1,08 2,48 2,85 3,28 3,77 4,33 4,98Head of economicdepartment 0,42 0,49 0,56 0,65 0,74 0,85 0,98 1,13 1,30 1,49

economist 0,00 0,00 0,45 0,52 1,19 1,37 1,57 1,81 2,08 2,39specialists (projectsmanager)* 8,50 9,77 11,24 12,92 14,86 71,13 60,06 84,37 101,63 105,12

assistant to specialist 0,00 0,00 0,90 1,03 2,38 2,73 4,72 5,42 6,24 7,17

lawyer 0,57 0,65 0,75 1,72 1,98 2,28 3,93 4,52 5,20 5,98

system administrator 0,42 0,49 0,56 0,65 0,74 0,85 0,98 1,13 1,30 1,49

IT-specialist 0,42 0,49 0,56 0,65 0,74 0,85 0,98 1,13 1,30 1,49

accountant 0,68 0,78 0,90 1,03 1,19 1,37 1,57 1,81 2,08 2,39

marketing specialist 0,57 0,65 0,75 0,86 0,99 1,14 1,31 1,51 1,73 1,99

finance controller 0,57 0,65 0,75 0,86 0,99 1,14 1,31 1,51 1,73 1,99

MSD specialist 0,25 0,29 0,34 0,39 0,45 0,51 0,59 0,68 0,78 0,90

driver 0,23 0,26 0,30 0,34 0,40 0,46 0,52 0,60 0,69 0,80

TOTAL: 15,04 17,29 21,24 25,28 32,10 90,95 85,74 113,90 135,59 144,17

In the estimation salary indexation of 15% per year is downloaded. Total expenses forsalary shall change accordingly to change of stuff capacity in different periods and depending onprojects “flow” increase, and during investment periods of certain projects.

Remuneration of Specialists in the field of venture investments is linked with results oftheir activities on search, selection and management of venture projects invested by the Fund inaccordance with detailed business plan of the Fund activities. Depending on the business planachievement Specialists gain yearly fixed bonus. Upon realization of successful exit of the Fundfrom the projects Specialists shall gain bonus in the form of share in success fee of Managingcompany.

Managing expenses include expenses for search of new products and search of investorsfor the fund’s share in the funded projects sale. In this respect fund representatives visitspecialized exhibitions and venture-related fairs on the regular basis.

Traveling expenses include regular participation of the specialists in such undertakingsboth in Russia and overseas. As well there included all trips necessary for a project analysis andtaking of decision on its financing (visiting its developers, companies – competitors, potentialcompanies-suppliers over the projects etc.)

The fund activities require office of 180 square meters (based on stuff capacity of 20 – 30person).

Managing expenses include expenses for connection and Internet.

On-costs include expenses for office supplies, office equipment servicing, acquirement ofliterature, house wares, entertainment costs etc. They are also divided into regular part in theframework of operational activities of the fund (included in managing costs) and variablecomponent depending on quantity of projects analyzed by the fund and made ready for financingand sale.

70

Transport expenses within the group of managing expenses include maintenance andhandling of a vehicle (POL, repair and repair parts, parking).

Tax contributions include property tax, transport tax, state duty.

In the course of projects preparing scientific&technical expertise shall be executed overeach projects, plus additional expenses are required for legal and consulting outsourcing

In the framework of the fund activities a separate web-site will be created for posting ofdetailed information on fund activities and promising projects selecting. The obligatoryinformation on the fund in accordance with relevant legislation will be disclosed on the mainweb site of Maxwell Asset Management Ltd.

Other expenses settlement (M. RUR).

Cost items1year

2year

3year

4year

5year

6year

7year

8year

9year

10year

Managing expenses incl. 30,17 31,11 31,46 31,82 32,25 32,74 32,86 31,36 30,87 30,63

Software, web-site, alarmservicing 0,49 0,57 0,67 0,75 0,83 0,93 1,05 1,17 1,31 1,47

Participation in the fairs,exhibitions, conferences and

handout printing 1,24 1,45 1,69 1,98 2,32 2,71 2,71 1,73 1,11 0,71

Advertising campaign 9,91 9,91 9,91 9,91 9,91 19,82 19,82 19,82 19,82 19,82

Unexpected expenses 0,15 0,80 0,80 0,80 0,80 0,80 0,80 0,15 0,15 0,15

Projects expenses, incl. 1,66 1,93 3,42 4,37 5,68 7,50 9,87 13,35 17,72 20,46

Outsourcing payment 0,32 0,35 0,40 0,44 0,50 0,56 0,43 0,34 0,26 0,21

Outsourcing legal servicespayment 0,45 0,53 0,62 0,72 0,84 0,99 1,15 1,35 1,58 1,85

Payment for consultingservices in the course of

project development 0,62 0,73 0,85 0,99 1,16 1,36 1,59 1,86 1,45 1,13

Road-show arrangement 0,00 0,00 1,18 1,77 2,66 3,98 5,97 8,96 13,44 16,13

Other services 0,28 0,33 0,38 0,45 0,52 0,61 0,72 0,84 0,98 1,15

Operational expenses, incl. 12,21 13,58 14,51 16,16 17,19 19,18 20,38 22,76 24,21 24,16

Lease and communalpayments 7,65 8,41 8,65 9,51 9,65 10,61 10,65 11,71 11,65 12,81

Connection and Internet 0,79 0,92 1,07 1,26 1,47 1,72 2,01 2,36 2,76 3,23

On-cost 0,46 0,52 0,58 0,65 0,73 0,81 0,91 1,02 1,14 1,28

Transport costs 0,44 0,51 0,60 0,70 0,82 0,95 1,12 1,31 1,53 1,79

Traveling costs 1,42 1,59 1,78 1,99 2,23 2,50 2,79 3,13 3,51 2,73

Other services payment 1,47 1,64 1,84 2,06 2,31 2,58 2,89 3,24 3,63 2,32

TOTAL: 44,05 46,63 49,39 52,36 55,12 59,42 63,10 67,47 72,80 75,25

During first year of fund activities non-recurrent capital investments will be made inoffice equipment, furniture, one car, software etc. acquirement.

Capital investments are estimated on the basis of stuff capacity of 20 employees.

71

Capital non-recurrent payments

Cost items1year

2year

3year

4year

5year

6year

7year

8year

9year

10year

Acquirement of specialized software 0,45 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00

Costs for creation of corporate style of venturefund 0,47 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00

Fire and security alarm, office repair,preparation of working places 5,10 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00

Permanent assets acquirement, incl. 4,23 0,68 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00

Office furniture 1,39 0,28 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00

Office appliances 1,86 0,37 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00

Connection 0,16 0,03 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00

Vehicle 0,83 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00

TOTAL: 10,24 0,68 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00

Managing company profit from venture fund management are described in detail in theprevious chapter “Finance. Norms and schedule of managing company fee» of Memorandum.

Consolidated budget of managing company:

MC budget1year

2year

3year

4year

5year 6 year 7 year 8 year 9 year

10year

Profits

Management fee 85,86 85,86 85,86 85,86 85,86 85,86 85,86 85,86 85,86 85,86

Success fee 0,00 0,00 0,00 0,00 0,00 540,41 404,11 617,68 756,40 752,31

Total profits 85,86 85,86 85,86 85,86 85,86 626,27 489,96 703,54 842,26 838,16

Expenses

Managing expenses,incl. 30,76 34,55 39,87 45,34 54,37 139,05 132,58 166,62 193,51 204,10

LCF 15,04 17,29 21,24 25,28 32,10 90,95 85,74 113,90 135,59 144,17

Charges on LCF 3,94 4,53 5,56 6,62 8,41 23,83 22,46 29,84 35,52 37,77Advertising

campaign 9,91 9,91 9,91 9,91 9,91 19,82 19,82 19,82 19,82 19,82

Other managingexpenses 1,87 2,81 3,16 3,52 3,95 4,44 4,56 3,06 2,57 2,33

Projects costs 1,66 1,93 3,42 4,37 5,68 7,50 9,87 13,35 17,72 20,46Operationalexpenses, incl. 12,21 13,58 14,51 16,16 17,19 19,18 20,38 22,76 24,21 24,16

Lease andcommunal payments 7,65 8,41 8,65 9,51 9,65 10,61 10,65 11,71 11,65 12,81

Other operationalexpenses 4,56 5,17 5,86 6,65 7,55 8,57 9,73 11,05 12,56 11,35

Total expenses 44,64 50,07 57,80 65,88 77,24 165,72 162,83 202,73 235,44 248,72

Taxes, incl. 16,87 15,27 13,09 10,81 7,76 177,23 128,98 194,92 235,82 230,89

VAT 9,18 8,79 8,37 7,91 7,49 87,76 66,41 98,32 118,67 117,67

Profit tax 7,69 6,48 4,73 2,90 0,27 89,47 62,57 96,60 117,16 113,23

Net profit 24,35 20,52 14,96 9,17 0,85 283,32 198,15 305,89 371,00 358,55

72

Schedule of fund formation

Supposed schedule of fund formation:1. Fund trust management rules drawing-up and coordination of its provisions with

“RVC”, OJSC – till Jul. 1, 20082. Signing of contracts with specialized depository, entity maintaining register of

investment units holders, fund evaluator, fund auditor and submitting of thedocuments in FSFM for registration – till Jul. 15, 2008

3. Fund registration – till Aug. 15, 20084. Start of the fund formation – from Aug. 29, 2008

In accordance with relevant legislation fund formation must be finished within threemonths from the moment of fund formation starting.

According to entered engagements of the investors (except “RVC”, OJSC), the investorsare ready to make payments for their shares in fund within two weeks from the moment of fundformation starting. Upon fund registration (not later Aug. 15, 2008) managing company shallagree with “RVC”, OJSC the deadline for acquirement of fund units by “RVC”, OJSC andensure settlement of units by other investors not later that date.

Taxation

Managing company tax environment:

In the course of venture fund management activities Maxwell Asset Management, LLCbenefits:

1. with a fee depending on average annual fund net assets value and

2. as depends from fund assets value increase (success fee)

All mentioned fees gained are to be imposed by Value Added Tax (VAT) of 18% rateand Income tax of 24% rate.

Portfolio companies tax environment:

Only Russian innovation companies registered in a form of CJSC (closed joint-stockcompany) or LLC (limited liability company) shall be included as venture investment objects inthe fund. Income of such companies will be charged by income tax of 24% rate and in the courseof realization of their production these companies will pay VAT of 18% rate in accordance withrelevant legislation.

Fund investors tax environment

In the process of fund operating activities its property value does change, that effects unitvalue estimation. If in future an investor decides to sell his unit (or the fund is terminating),financial result of the operation - the income of investor (difference between unit value as of themoment of sale and value of initial investments) – shall be taxed at the account of investmentactor (investor). As well there shall be taxed all payments made from the fund to investorsbenefit during the whole period of fund operating. Depending on investor status taxation ofincome gained varies as the following:

For investors – individuals being RF citizens: 13%For investors – individuals being non-residents: 30%

73

For investors – Russian legal entities: 24%For investors – foreign companies: depending on availability of double taxation treaty

between the Russian Federation and the country of such company residence and provisions ofsuch treaty. For example for investor – residents of Cyprus there provided zero tax rate for abovementioned incomes, and for investors – BVI residents above mentioned incomes (“incomesgained in result of distribution among foreign organizations of profit or property of companies,other entities and their associations including while winding-up; other similar incomes”) shall betaxed by 20% rate.

Politics of profit distribution by units

It is supposed to benefit fund investors with profit on units on quarterly basis.

Income on Fund investment units shall be paid to investment units holders upon quantityof Fund investment units held by them as of the date of arranging the register of persons havingright to receive profit on investment units. This register of persons shall be arranged on the basisof data of register of investment units holders as of the last working date of reporting period. Thepayment shall be made within 20 days from the day of reporting period end;

reporting period is one quarter. First reporting period begins on starting date ofFund formation and ends on Dec. 31, 2008;

interim payments of income on investment unit within reporting period are notprovided;

payment of income on investment unit shall be made in monetary form bycashless transfer to the bank account indicated in the register of investment unitsholders as of the last working date of reporting period;

Income on investment unit is considered to be the sum of monetary assets included intothe Fund within reporting month:

1. а) in the form of dividends (profit from participation in limited liabilitycompanies), interests on deposits and incomes on bonds,

2. b) from realization of Fund property (except for shares left out from quotationlists of stock exchanges, and participatory shares in charter capital of limitedliability companies) minus sum of money paid for acquisition of this property intothe Fund,

3. c) from realization of shares left out from quotation lists of stock exchanges, andparticipatory shares in charter capital of limited liability companies.

74

INVESTMENT PORTFOLIO

General Portfolio Description

Companies included in the portfolio have been selected in consistency with the Fund’sinvestment strategy. This implies that products of the candidate companies are positioned in themarkets playing the key role for the Fund (biopharma, agro and food sector and industrialbiotech) and that innovations put in these products are capable to create critical competitiveadvantages.

Fund portfolio includes both biopharmaceutical products and industrial and foodbiopreparations.

Fund Specialists suggested integrated pipe line on the basis of conditionalcorrespondence between pharmaceutical and industrial preparations.

1. “Preclinical tests” phase corresponds with step of creation of laboratory model forindustrial preparations.

2. “Clinical tests” phase is considered as corresponding to step of scaling oflaboratory model for the purpose of industrial production

3. Analogue of “Obtaining of pharmaceutical point” phase is a complex of licensingprocedures conditionally named “product certification”. These phases have incommon the fact that they resulting in product publishing.

4. “Test sales” phase corresponds with step of industrial approbation, when theproduct is used by clients in a test run accompanying by drawing up of relevantreports on tests executed. Successful ending of this stage opens possibility ofactive sales growth for the company.

Product PipeLine

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The portfolio’s companies have been founded by employees or graduates from the largestRussian research centers (the Saint Petersburg State University, the Research Institute of HighlyPure Biopreparations, the Bakh Institute of Biochemistry, etc.). Thus, the Fund ensures highintellectual level and integrated expertise in the targeted areas.

Each company in cooperation with the Fund’s experts is conducting discussions with themajor companies at the target markets concerning its participation in the development ofproducts of the candidate companies. For example, the discussions are held on SOD product withPharmstandard (the biggest Russian pharma company), on acidic beta-galactosidase for dairyindustry) – with Wimm-Bill-Dann Company (the leader in dairy industry).

The establishing of strategic alliances between the candidate companies and the majorplayers will provide the Fund with significant support at the stage of product development. In thefuture, it may serve as a basis for the Fund exit from the project by selling its share to thestrategic partners.

At the first stage of activities, the Fund will prefer those products which already have testsales or start sales in the first project year. Therefore, at the stage of Memorandum signature,the products of the both submitted projects (SOD and Ronkoleukin) are already sold in themarket; at the stage of discussions one product is already sold (test-systems) and for the twoadditional products the sales can be started in the first or second project year.

Nevertheless, each of the companies involved in the project, has products at the earlystage of development. In future, these products may attract investments of the Fund. Theproposed approach enables the Fund to employ the lowest risk projects at the early stage of itsactivity, gain some experience and re-invest revenues in the projects with a higher risk andhigher profitability. In addition, this approach facilitates long-term strategic relations with thosecompanies whose projects have already become successful in the market.

At the first stage, the key area of the Fund investments will cover product development inthe market. The Fund does not consider organization of production as a top priority, while usingany opportunities for contractual production and co-production.

Such approach helps the Fund to save time and resources (since in any case theorganization of production is a long and expensive process). On the other hand, the Fund will beable to find out promptly which products are successful in the market and which are not. In thelatter scenario, the projects will be closed with minimal losses.

Most of the products, regardless of the market or company-owner, use similar productiontechnologies. As a result, it is possible to use flexible approach for relocating productionfacilities to those sites where their effectiveness would be the highest, optimize productiontechnologies, consolidate product manufacturing for cost optimization and to apply integratedexpertise of the portfolio’s companies for developing best technological options. If the Fund’sportfolio is sold, the strategic investor could be interested in purchasing several products, sinceduring further industrial launches the basis of technological solutions would remain the same andthe costs of product launches would be minimized. Some of the proposed options will enable todesign products supplementing each other in the product line of a potential manufacturer.

If the Fund will later consider a production base foundation for manufacturing portfolioproducts, such approach will lead to the establishing of one universal production center, savinginvestors’ time and money.

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In general, those companies which are included in the portfolio at the initial stage willprovide the Fund with the following opportunities:

1. To gain gradually some experience, income and risk through the regulation ofinvestment flow depending on success of the projects.

2. To achieve success at the market rather than to get stuck in the delayedconstruction work of production facilities or R&D.

3. To set up an integrated expertise in the key targeted areas and a centralizedservice system (e.g. purchase of reagents, consumables, etc.)

4. To use successful companies as a source of new projects.5. To create a network of strategic partners for the key markets which in the future

will provide a basis for the Fund’s exit from the projects.

Memorandum of Understanding Phase

Company 1. “Biotech” Ltd. – Interleukins and Interferons

Biotech Ltd. Company was established in 1992 in the laboratory of biochemistry geneticsof the Saint Petersburg State University (SPSU). Currently, the company has 100 employees.The company has its own production facility and laboratories with modern equipment (researchbase), as well as the system for sales and promotion of Ronleukin.

In 2006, the sales volume amounted to RUR 50.2 mln. and the annual sale growth ratewas 15% and in 2007 – RUR 63 mln. and 25%, respectively, i.e. the company has gainedexperience not only in the development, but also in the registration and promotion ofpharmaceuticals in the market.

Within the project, it is planned to:1. Create an effective promotion system for Ronleukin – a recombinant human

interleukin-2 from yeast.2. To complete development, registration and market launch of a line of human

recombinant interferons α16 and β1а, γ, and interferons coupled with albumin.

From the Fund’s standpoint, the Biotech Company has the following three key elementsimpacting cost and its attractiveness for investors:

Market share (a possibility within 2-3 years to increase significantly the salesvolumes of Ronleukin (up to US$10-12M per year) in case of sales and promotionsystem optimization and availability of investments about US$1M)

Rights for new products (The Fund believes that there is a high probability tocomplete tests and registration of a series of immunomodulators (interferongroup)

Company’s capability to discover and bring new products to the markets(currently the Fund experts are optimizing load structure of the R&D Group. It isassumed that the Group will perform not only “in-house” studies for productdevelopment, but will also cooperate with the major pharmaceutical companies ona contractual basis).

The Fund is planning to participate in the development of each cost element (expansionof sales, launch of additional products in the market and development of novel products) in thefollowing forms:

The Fund will provide investments for financing Biotech projects.

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The Fund will participate in management of the company, monitoring financialand commercial module (monitoring of investments and sales trends).

The Fund will attract partners capable to enhance Biotech positions in the keyareas of business development.

The Fund, on a stage-by-stage basis, will be increasing its capital contribution to Biotechas the Fund’s investments in the company will be growing. At the initial stage, the Fund will notbuy out shares from the Biotech owners, but will make contributions to the company’s capital forits development. The total estimated volume of investments to be provided by the Fund to thecompany may range between US$2-5M (from 46 to 115 mln. RUB) within a five-year period.

The key investments are targeted at increasing market share of the company anddiscovering new products. Based on the existing Memorandum of Understanding, theinvestments will be made as tranches in accordance with the Company’s Business Plan. Newtranches will be provided only in case when the partners decide that the completed stages weresuccessful. The Fund’s initial share in the company capital is 25% plus one vote. The Companywill be reorganized into a Close Joint Stock Company (ZAO). The initial tranch which the Fundcan provide to Biotech Ltd. is US$1 million (23 mln RUR)

In case of positive assessment of the company’s investment indicators, it is planned toconclude a deal with Biotech Ltd. within 3-4 months from the date of Fund foundation.

Key indicators of Biotech Ltd.

Forecasted sales volume of the product line for 2008-2012, RUR Thou.Year Sales volume, RUR

thousandEBIDTA

2008 73 000 22 080

2009 115 000 34 500

2010 207 000 72 450

2011 345 000 120 750

2012 460 000 160 000

Key Economic IndicatorsIRR ROI EV/EBIDTA EV/S NPV

113,8% 86,9% 8 2,8 99 940,83

As an exit from the project, the Fund envisages a sale to the strategic investor. Suchcompanies as Hoffmann la Roche (Switzerland), Schering-Plough (U.S.), and “Biocad (Russia)could become strategic investors.

Company 2. NPO Enzymatic Technologies Ltd. - SOD

The NPO Enzymatic Technologies Limited Liability Company was founded to integrateintellectual property, products and research capabilities of experts employed in the ResearchInstitute of Genetics (Moscow) and the Research Institute of Highly Pure Preparations (SaintPetersburg).

In the project, the NPO Enzymatic Technologies Ltd. will shape and bring to the market apackage including six SOD-containing products. By their properties, the products exceedsubstantially the competitors’ products. Superoxide dismutase (SOD) is a unique antioxidant

78

employed as the main active ingredient in the production of drugs, cosmetics, medical skin careproducts and biologically active supplement formulas, as well as in cellular biology research.

The NPO Enzymatic Technologies Ltd. registered the first products of the line and startedtheir sales: Rexod 0.8 mln. Units (eye drops) and Rexod 1.6 and 3.2 mln. Units (lyophilizate formaking injection solutions).

In 2007, the sales volume was low (since the registration process was just completed) andmade up RUR 1,280,000 (about US$60,000). Additionally, the Company produced and soldsome SOD-containing cosmetic products. In 2007, their sales volume was RUR 10,000,000(about US$435 000).

The key factors underlying the Fund’s interest in making investments in the NPOEnzymatic Technologies Ltd. project include the following:

Effective economy and rapidly growing market. The product developed by thecompany demonstrates unique properties vs. analogs. It is characterized by a lowproduction cost and high purity vs. commercially available products.

Availability of the product and test sales. Rexod is registered, and test sales in themarket have been initiated.

Rights for new products. The Company has a full spectrum of the Russian andinternational patents for the line of SOD-products under development.

The Company’s capabilities in developing and brining new products to themarket.

The Fund is planning to participate in the development of the NPO EnzymaticTechnologies Ltd. project in the following ways:

The Fund will provide investments for financing projects of the NPO EnzymaticTechnologies Ltd.

The Fund will be involved in management of the company, monitoring financialand commercial module (monitoring of investments and sales development).

The Fund will attract partners capable to enhance company’s positions in the keyareas of business development.

The Fund, on a stage-by-stage basis, will be increasing its capital contribution to the NPOEnzymatic Technologies Ltd. as the Fund’s investments in the company will be growing. At theinitial stage, the Fund will not buy out shares from the NPO Enzymatic Technologies Ltd.owners, but will make contributions to the company’s capital for its development. The totalestimated volume of investments to be provided by the Fund to the NPO EnzymaticTechnologies Ltd. may reach US$3.5M (RUR 80,5 M) within a three-year period.

The key investments are targeted at increasing market share of the company anddiscovering new products. Based on the existing Memorandum of Understanding, theinvestments will be made as tranches in accordance with the Company’s Business Plan. Newtranches will be provided only in case when the partners decide that the completed stages weresuccessful. The Fund’s initial share in the company capital is 25% plus one vote. The Companywill be reorganized into a Close Joint Stock Company (ZAO). The initial tranch which the Fundcan provide to Biotech Ltd. is US$1.5 million (RUR 34,5 M).

In case of positive assessment of the company’s investment indicators, it is planned toconclude a deal with the NPO Enzymatic Technologies Ltd. within 3-4 months from the date ofFund foundation.

79

Key indicators of the NPO Enzymatic Technologies Ltd.

Forecasted sales volume of the product line for 2008-2012, Thousand RURYear Sales volume, RUR

thousandEBIDTA

2008 13 000 6 110

2009 30 000 14 100

2010 60 000 21 000

2011 140 000 49 500

2012 260 000 84 000


60,7% 25,5% 9 2,9 20 438,72

The complex of SOD-containing products received on the basis of universal highlyproductive technology could be used in the following ways:

1. to be offered to the strategic investor as a platform for achieving a significantshare of the antioxidants’ market. In this scenario, the Fund may exit from theproject through a sale to the strategic investor.

2. the Fund may continue to provide investments to the project at the stage of “salesexpansion”. In this case, the company will be able to gain a significant marketshare by its own efforts, and IPO will be an instrument for the Fund’s exit.

Phase of Deal Discussions (if Available)

Company 3. MBF Ltd. – Medical Nutrition

The objective of the MBF Ltd. project is to develop, produce and promote a series ofmedical nutrition products.

This project encompasses development and registration of products; organization ofproduction and promotion of health nutrition products to meet the requirements of individualswith different chronic diseases and patients receiving post-operation and rehabilitation therapy.

From the Fund’s standpoint, The Company has a number of competitive advantages:

Available production facilities for manufacturing substances (food products andbiologically active substances) protected by patents and trademarks of thecompany;

Opportunities for developing unique product formulas based on the requirementsof different consumer groups. The company has more than eight substances withdifferent functional activity and can combine them in any proportions. It canmanufacture products for cancer patients and individuals with gastrointestinaldiseases or allergic disorders.

Available facilities for conducting preclinical trials of new substances andproducts (control analytical laboratory, vivarium, etc.)

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The key factors underlying the Fund’s interest in making investments in the MBF Ltd.project include the following:

Availability of the rapidly growing market and strategic investors interested inproduct acquisition. The products developed by the company demonstrated theirefficacy in the tests conducted at the SRC for Prophylactic Medicine, RF Ministryof Health and Social Development. The market of medical treatment is evolvingdynamically in the Eastern Europe and Russia, its average growth rate in the last2-3 years was 20-25. In this context, the world leaders in medical nutritionproduction are interested in their presence within these markets and in theexpansion of their assortments by adding new effective products. The Company isplanning to hold 5-7% in the first two years and then to increase gradually itsmarket share to 12-17%. The estimated revenues for the second year is RUR 96mln. with the further growth up to RUR 280-350 mln. (as soon as the productioncapacity is reached and the effective sales system is put in place).

Rights for new products. The Company holds patents for the developed formulasof health nutrition products.

The Company’s capabilities in developing new products and providingconsulting services to consumers on their use.

The Fund is planning to participate in the development of the MBF Ltd. project in thefollowing ways:

The Fund will provide investments for financing projects of the MBF Ltd. The Fund will be involved in management of the company, monitoring financial

and commercial module (monitoring of investments and sales development). The Fund will attract partners capable to enhance company’s positions in the key

areas of business development.

The total estimated volume of investments to be provided by the Fund to the MBF Ltd.may reach RUR 130 mln. (US$5.4M) within a three-year period.

The key investments are targeted at increasing market share of the company anddiscovering new products. The amount of initial tranch which the Fund may provide to the MBFLtd. is about US$0.5M, the second tranch – about US$2M.

In case of positive assessment of the company’s investment indicators, it is planned toconclude a deal with the MBF Ltd. within 4-5 months from the date of Fund foundation.

Key indicators of the MBF Ltd.

Forecasted sales volume of the product line for 2008-2012, RUR thousandYear Sales volume, RUR

thousandEBIDTA

2008 0 0

2009 96 000 52 000

2010 168 000 97 000

2011 351 000 193 000

2012 480 000 264 000

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174,2% 132,1% 8 4,4 171 679,53

If a balanced line of effective products is created and their pilot production is arranged,such strategic investors as Nestle and Nutritek Group could be interested in acquiring the project.

Company 4. “NPP “TRIS” Ltd., Yeasts for Bioethanol Production

“NPP “TRIS” Ltd. was founded in 1992 on the base of the Research Institute of Genetics.The Company developed several biotech products currently sold in the market. Within theprojects, experts of “NPP “TRIS” Ltd. proposed to develop a technology for generating noveldry alcohol yeasts “Fuel-yeast” for (bio)ethanol production from starch-containing feedstock.

As soon as this method is introduced, the manufacturers of bioethanol from starch-containing feedstock will be able to use energy-saving technologies (without cooking) and toavoid medium contamination with extrinsic microflora. Thus, a bioethnol manufacturer willreduce production costs significantly (by 20-30%).

The following activities are planned in the project:1. To create two types of yeast products: «Fuel-yeast – red» and «Fuel-yeast – blue»,

distinguished by the mechanism of antibacterial action.2. To carry pout industrial tests at bioethanol production facilities in Kazakhstan,

United States, China, and Europe.3. To register the technology, product and trademarks.4. To sell products in Russia, U.S., China and Europe.

The total estimated volume of investments to be provided by the Fund to the Companymay range between US$1.8M and US$2.2M(RUR 41.4 and RUR 50.6 M) within a three-yearperiod.

The key investments are targeted at registering the product and performing industrialtests. The Fund’s initial share in the company capital is 25% plus one vote. The Company will bereorganized into a Close Joint Stock Company (ZAO). The amount of initial tranch which theFund may provide to the NPP TRIS Ltd. is US$0.8M (RUR 18.4 M).

In case of positive assessment of the company’s investment indicators, it is planned toconclude a deal with the NPP TRIS Ltd. within 3 months from the date of Fund foundation.

Key indicators of the NPP TRIS Ltd.


thousandEBIDTA

2008 0 0

2009 0 0

2010 50 000 15 000

2011 100 000 35 000

2012 200 000 60 000

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45,1% 24,6% 8 2,4 12 299,77

As an exit from the projects, the Fund may consider the following options:1. Sale to a strategic partner. Such companies as Genecor and Novozymes can

become the strategic partners.2. The Fund may continue making project investments at the stage of “sales

expansion”. In this case the company will be able to shape a significant marketshare by its own efforts, while IPO will serve as an instrument for the Fund’s exit.

Company 5. Close Joint Stock Company (ZAO) PINNI, Genetic Human Passport

ZAO PINNI is a unique company in Russia due to its multi-year experience in employingSNP mass-spectrometry for identification. In addition, the company has gained considerableexperience in the commercial use of this technique. In the last two years, there was a tripleincrease in the number of requests for genotyping fulfilled by the company. Also, the quantity ofidentified polymorphisms has demonstrated a manifold growth.

ZAO PINNI has the following competitive advantages:

1. An exclusive position in Russia as regards availability of the state-of-the-art-method of polymorphism identification in human genome.

2. The highly skilled personnel.3. The experience in practical application of the technique.

In 2007, the sales volume of the ZAO PINNI genotyping services amounted to RUR3,312,717.

The project objective is to develop and introduce a novel, highly efficient method ofidentification of genetic susceptibility to diseases in the public health and to use it as a basis forcreating a standard of individual genetic passport.

The application of this method will make it possible to make the following evaluationsand predictions with high probability:

Risk of development of multifactorial diseases in specific individuals Individual susceptibility or resistance to infectious diseases Individual sensitivity to drugs. Individual tolerance of environmental factors

The Fund is planning to finance the following project activities:1. To update the technology based on human “genetic passport” analysis.2. To fit the laboratory with advanced equipment applicable for commercial

purposes.3. To register the technology based on human “genetic passport” analysis.4. To promote genotyping services in the market.

The total estimated volume of investments to be provided by the Fund may reach at leastRUR120,000,000 mln. in a 5-year period.

83

The Fund’s initial capital contribution in the company is 51%. The initial tranch whichthe Fund may provide to ZAO PINNI is US$0.5M.

Key indicators of the ZAO PINNI.


thousandEBIDTA

2008 13 200 -10 200

2009 33 000 22 000

2010 70 500 50 500

2011 112 500 80 500

2012 150 000 110 000


88,5% 31,1% 8 5,86 37 284,06

The project payoff period is 5 years. As soon as the full capacity is achieved, thelaboratory will be able to perform annually up to 1 mln. of tests. If the current price (RUR 150)for identifying 1 polymorphism (SNP) is maintained, the annual turnover in monetary terms inthe last year of project implementation will make up RUR 150 mln. With the expenses of RUR40 mln., in the last project year EBITDA will reach RUR 110 mln.

The project NPV will be RUR 54 mln., IRR - 35%, а ROI – 44%.

In case of positive assessment of the company’s investment indicators, it is planned toconclude a deal with the MBF Ltd. within 4-5 months from the date of Fund foundation.

As an exit from the project, The Fund may consider a package sale to the ZAO PINNIManagement or strategic investor.

Preliminary Assessment Phase

Company 6. Biosystems Ltd., G-CSF “Granstim”

The “Biosystems” Ltd. Company has developed a recombinant granulocytic colony-stimulating factor for medical applications (Granstim).

The project objective: to complete clinical trials and bring Granstim to the marketplace.

Granstim has several competitive advantages as a product from an yeast producer:1. Economic effectiveness. The production of Granstim from yeasts is significantly

cheaper than Filgrastim or Lenograstim.2. Product purity and a lack of toxins. No side effects or adverse events.3. Standard. The yeast-derived GCSF is approved by the WHO as a G-CSF standard

The following activities are planned in the project:1. To complete clinical trials of Granstim.2. To establish an effective promotion system for Granstim – human G-CSF.

From the Fund’s standpoint, the BIOSYSTEM Ltd. Company has the following three keyelements impacting cost and its attractiveness for investors:

84

Market share. A possibility within 3-5 years to achieve the sales volumes inRussia US$ 5-7M per year in case of sales and promotion system optimizationand availability of investments about US$2.1M. If additional investments in theamount of US$3M become available, to enter the U.S. market and reach estimatedsales volumes of Granstim in the U.S. market in amount of US$30M.

Company’s capability to discover and bring new products to the markets(currently the Fund experts are optimizing load structure of the R&D Group. It isassumed that the Group will perform not only “in-house” studies for productdevelopment, but will also cooperate with the major pharmaceutical companies ona contractual basis).

The total estimated volume of investments to be provided by the Fund to the companymay range between US$2M and 5M within a five-year period.

The key investments are targeted at increasing market share of the company and finishingclinical trials of Granstim. The Fund’s initial share in the company capital is 25% plus one vote.The Company will be reorganized into a Close Joint Stock Company (ZAO).

Key indicators of the Biosystems Ltd.


thousandEBIDTA

2008 0 0

2009 30 000 10 000

2010 40 000 12 000

2011 100 000 30 000

2012 150 000 50 000


53,8% 33,4% 8 2,66 14 372,21

In case of positive assessment of the company’s investment indicators, it is planned toconclude a deal with the BIOSYSTEMS Ltd. within 3-4 months from the date of Fundfoundation.

As an exit from the project, the Fund envisages a sale to the strategic investor. Suchcompanies as Hoffmann la Roche (Switzerland), Schering-Plough (U.S.), and “Biocad (Russia)could become strategic investors.

Company 7. Medbiopharm Ltd., Blood Substitute Product “Krunidon”

Since 2006, Medbiopharm Ltd. has been investigating a possibility of using bovine bloodas a source material for blood substitutes. The company relied on the international experience ofusing bovine blood, e.g. Biopure Corporation (U.S.).

The project objective: to develop, produce and to sell a domestic universal bloodsubstitute product “Krunidon” with an oxygen transfer function. The main raw material for thisproduct is cattle blood, a rich source of hemoglobin.

85

This product (if its claimed consumer properties are confirmed) may become abreakthrough in the market of blood substitutes, since for the first time in the world a bloodsubstitute, the same as donor blood, would be developed. .

Krunidon has a chance to displace multiple competitors from the market and contribute tothe company’s dramatic growth.

The project may initiate growth of a large corporation which will gain a significant shareof the global market of blood substitutes. It is planned to perform a thorough project assessmentwithin six months, including an independent technology review. The Fund’s investments canused to organize production and establish market in Russia.

The estimated amount of revenues at the project implementation stage is RUR 3.1 bln.,EBITDA – RUR 1.55 bln.

Key indicators of the Medbiopharm LTD.


thousandEBIDTA

2008 0 0

2009 0 0

2010 100 000 50 000

2011 1 000 000 500 000

2012 2 000 000 1 000 000


70,1% 120,3% 10 5 360 875,34

IPO is considered as the key option for exiting this project, since the company may claimfor a significant share of the blood substitutes market and become a large public corporation inthe future.

Company 8. Biosystems Ltd., “Rekalfin” Product

The project objective: to complete registration and bring “Recalfin” to the marketplaceas a preparation developped by “Biosystems” Ltd.

“Recalfin” is a recombinant alpha-fetoprotein (r AFP), produced with a yeast strain. AFPis nature immunomodulator, which can regulate development and grow of the normal cells andlaunch the program of the death for the cancer cells. The main application area is a treatment ofthe oncological diseases.

The estimated volume of the world market for such types of preparations in 2012 is goingto be USD600-1000 M.

The Fund is planning to use the following approach to making investments in this project:

86

1. The initial investments will be made in exchange of the provision of exclusiveownership rights for the existing and future research results. This procedure canbe implemented through an agreement on cession rights or participation in theAuthorized Capital of the patent holding company.

2. As soon as the first positive results of the funded scientific studies are obtained, itwill be possible to attract an institutional investor, e.g. pharmaceutical company.In this case, the funding risks will be shared by the co-investors. At this stage, theFund can make a decision on exiting the business and fixing the profit gainedthrough increasing the cost of the technological cluster or on extending itsparticipation in the project as a “passive” (without additional financing) or“active” (with additional financing) party.

3. As soon as the results are obtained in all research aspects, i.e. after receiving apackage of registered drugs ready for therapeutic application a decision on IPOcan be made. It will enable to fix the profit for project participants and to receivefunds for the market promotion of the developed innovative drugs.

The Fund’s financial participation in the design company’s business is based on buildingup its share in the Authorized Capital, depending on the company’s current cost growth and theproposed amount of financing.

As a result of the project implementation, the following values are predicted for the keyindicators2:

Key indicators of Biosystems Ltd., “Rekalfin” Product


thousandEBIDTA

2008 0 0

2009 0 0

2010 30 000 10 000

2011 90 000 37 000

2012 200 000 83 000


54,5% 87,7% 8 3,32 26 307,98

It is assumed that within six months the Fund will perform a thorough project review andmake its decision on expediency of its participation in the project. If the Fund will take apossitive decision for making investments in the project, then a Close Joint Stock Company(ZAO) is going to be registered for the realization of this project.

2 Taking in consideration that in the case of the positive decisions a separated ZAO companywill be registered; all key indicators calculated for the project and not for the whole company“Biosystems”.

87

FUND INVESTORS

List of fund investors

1. MENOSTAR HOLDINGS LIMITED (Cyprus)

Target value of to be acquired units: 600 000 000 (Six hundred million) rubles.

MENOSTAR HOLDINGS LIMITED company belongs to Maxwell Capital financialgroup and is the holding company for all Russian member companies of the group.

Contact:Director of MENOSTAR HOLDINGS LIMITED Dmitry P. КKirpichenkoTel.: (495) 782-8888.

2. WALLBROM CONSULTING LTD. (BVI)

Target value of to be acquired units: 427 329 000 (Four hundred twenty seven millionsthree hundred twenty nine thousand) rubles.

Beneficiary of WALLBROM CONSULTING LTD. – president of Maxwell Capitalfinancial group Dmitry P. КKirpichenko.

Contact:Director of WALLBROM CONSULTING LTD. Dmitry P. Kirpichenko.Tel.: (495) 782-8888.

3. Narodny Credit Bank, LLC

Target value of to be acquired units: 400 000 000 (Four hundred million) rubles.

Narodny Credit Bank for many years has been the settlement bank for most membercompanies of Maxwell Capital group. Narodny Credit Bank for a few times allowed credits forprojects of the group. Narodny Credit Bank is also a customer of Maxwell Capital company forbrokerage and depository services.

Contact:CEO Narodny Credit Bank, LLC Vitalii Y. Yun.Tel.: (495) 739-5588

4. Fund investors – individuals who expressed their intention to take part in fundformation by buying units - are members of the fund team, specialists with working experiencein the field of venture investments, and advisors (members of council of scientists and experts ofthe fund) with expert knowledge in the field of priority directions of science and techniquesdevelopment in the Russian Federation

4.1. V. N. AvdeenkoValue of units this person intends to acquire: 3 061 000 (Three million sixty one

thousand) rubles. Share in the fund: 0,1%.Contact information. Telephone: +7(495) 725-8378, e-mail: [email protected]


88

4.2. M.S. BenevolenskyValue of units this person intends to acquire: 3 061 000 (Three million sixty one

thousand) rubles. Share in the fund: 0,1%.Contact information. Telephone: +7(495) 101-5489, e-mail: [email protected]

4.3. S.V. GrachevValue of units this person intends to acquire: 3 061 000 (Three million sixty one

thousand) rubles. Share in the fund: 0,1%.Contact information. Telephone: +7(495) 248-31-22, e-mail: [email protected]

4.4. A.Y. KomarovValue of units this person intends to acquire: 3 061 000 (Three million sixty one


4.5. A.A. KubatievValue of units this person intends to acquire: 3 061 000 (Three million sixty one


4.6. N.G. KurakovaValue of units this person intends to acquire: 3 061 000 (Three million sixty one


4.7. O.V.MovsesyanValue of units this person intends to acquire: 3 061 000 (Three million sixty one


4.8. N.V. OrlovaValue of units this person intends to acquire: 3 061 000 (Three million sixty one


4.9. V.N. SmirnovValue of units this person intends to acquire: 3 061 000 (Three million sixty one


4.10. G.N. SushkevichValue of units this person intends to acquire: 3 061 000 (Three million sixty one


4.11. A.F. TsybValue of units this person intends to acquire: 3 061 000 (Three million sixty one











89

The characteristic of investors of fund

Financial standing

1. MENOSTAR HOLDINGS LIMITEDAs of Jan. 1, 2008 MENOSTAR HOLDINGS LIMITED company’s assets totaled 70,96

M USD, own assets: 40,67 M USD, profit over past three years: 40,18 M USD

MENOSTAR HOLDINGS LIMITED has for many years successfully invested in open-end mutual investments funds managed by Maxwell Asset Management Ltd., as well as in Finam– Information Technology close-end mutual investment fund of extra risky (venture)investments. The company also participated in the initial placement of Finam – IT units withinInnovation and developing companies sector on MICEX stock exchange on June 14, 2007. Itwas the first initial placement of venture fund units on a stock exchange in the RussianFederation.

MENOSTAR HOLDINGS LIMITED has no previous record of investment in ventureand/or innovation companies or standalone venture fund(s) management.

MENOSTAR HOLDNINGS LIMITED is being a qualified investor and meetsrequirements of Regulations on procedure of declaring entities to be qualified investors.

2. WALLBROM CONSULTING LTD.As of Jan. 1, 2008 WALLBROM CONSULTING LTD. company’s assets totaled 29,1 M

USD, own assets: 27,3 M USD, profit over past three years: 26,8 M USD

WALLBROM CONSULTING LTD. has no previous record of investment in ventureand/or innovation companies or standalone venture fund(s) management.

WALLBROM CONSULTING LTD. is being a qualified investor and meets requirementsof Regulations on procedure of declaring entities to be qualified investors.

3. Narodny Credit BankAs of Jan. 1, 2008 Narodny Credit Bank’s assets totaled 5095,38 M RUR, own assets:

1419,191 M RUR, profit over past three years: 255,4 M RUR

Narodny Credit Bank has no previous record of investment in venture and/or innovationcompanies or standalone venture fund(s) management.

Narodny Credit Bank is being a qualified investor and meets requirements of Regulationson procedure of declaring entities to be qualified investors.

Details on experience of investments into innovation companies and management ofinnovation companies of individual fund investors is available in the Chapter “The team” andAppendix #4 (Data on specialists in the sphere of venture investments).

Value of net asset being in ownness of individual investors can not be disclosed due torefusal of above mentioned persons to provide such information

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Investment focus

1. MENOSTAR HOLDINGS LIMITED

MENOSTAR HOLDINGS LIMITED as a portfolio investor actively participates in theRussian stock market, and handles a significant amount of M&A deals for its own benefit as wellas on behalf of its partners.

2. WALLBROM CONSULTING LTD.

WALLBROM CONSULTING LTD. major activity involves trade in stocks and optionson the quotation lists of Russian and foreign stock exchanges. The Company develops andsuccessfully employs automatic trade strategies aimed at profit exceeding the correspondingindex. Over the past 12 months the strategy aimed at S&P500 index resulted in a profitexceeding index change by 8,9%.

3. Narodny Credit Bank, LLC

Narodny Credit Bank, LLC was registered by Central Bank of Russia on Jun. 28, 1993under registration number 2401.

Registered charter capital of the Bank totals 1,1 billion rubles.Currently the Bank’s valid licenses issued by the Central Bank of Russia cover:- RUR and hard currency banking of companies cash (license #2401 dd. Jul.17, 2000 -

unlimited);- RUR and hard currency banking of individuals cash (license #2401 dd. Jul.14, 2000 –

unlimited).On Sep.7, 2005 Bank control committee of Bank of Russia enlisted the Bank in the

individuals’ deposits insurance system.Bank is an affiliated member of international banking system MasterCard and is engaged

in emitting and acquiring activities within the system in accordance with PSAN dd. Mar.07,2006.

Balanced financial policy of the Bank provides for deposits and operations security. TheBank focuses on financial operations characterized by stable and foreseeable income. Theseinclude loans to legal entities. The Bank offers to its customers a variety of loan products, forexample, account overdraft, liquid property secured loans, etc. based on the customer activityand benefit.

Biography of individual fund investors is given in detail in the Chapter “The team” andAppendix #4 (Data on specialists in the sphere of venture investments).

Non-financial background of investors

Participation of MENOSTAR HOLDINGS LIMITED and WALLBROMCONSULTING LTD. in the fund immediately makes formation and successful development ofthe fund of primary importance for Maxwell Capital group as a major investor of the fund. It is asecurity for other investors providing for maximum involvement of the Managing Company inthe achievement of the declared targets, quality expertise of fund’s projects choice and liquidityevents exit strategy.

Extra advantages made available to the venture fund thanks to participation of NarodnyCredit Bank are associated in the first place with a possibility to draw more short-term andmedium-term financing of the fund’s investment projects through the bank subject to terms,

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interest and payback requirements. This importantly reduces the risks to the fund itself as well asits investors particularly so for follow-up financing of the fund’s projects after initial fund’sinvestment in the projects. Narodny Credit Bank resources are also available for investmentprojects exit strategies of the fund involving management buy-in and/or management buy-out.

Non-financial advantages of individual investors are described in the Chapter “Theteam” and Appendix #4 (Data on specialists in the sphere of venture investments).

“RVC”, OJSC as a fund investor

Purposive character of investments from “RVC”, OJSC

Investment priorities of the fund being created and its focusing on innovation activities inthe field of key trend of science and technology of the Russian Federation – living systems(biotechnology, medical innovations and instrument making) – assist “RVC”, OJSC in solvingproblems of new innovation companies development in the Russian Federation and venturebusiness culture forming.

Maxwell Asset Management company’s involvement in management of biotechnologicalincubator being created on the basis of Moscow State University Scientific Park, developing ofconception of biotechnological part of technopark in Obninsk, organization (in cooperation withMIRBIS Moscow international business school and Innovation & technological business facultyof Academy of national economy affiliated with Government of the Russian Federation) of“Projects Incubator”, as well as close relationship between the company and the leading medicalacademical and educational scientific centers conform fully to “RVC”, OJSC goals ofstimulation and improvement of connections between science, education and innovationbusiness.

Intensive creation of strategic alliances and developing of fund’s foreign partners networkmeet the challenge of “RVC” OJSC in the field of marketing new technologies and technologicalproducts being created in Russia in the international market.

Additional support of the fund from “RVC”, OJSC

Managing company expects contributory influence of “RVC”, OJSC in the followingproblems solving:

1. creation of legal basis providing for venture investment regulation, technologiestransfer matters, CMIFVI activities etc.;

2. participation in development and improvement of innovation infrastructure of theRussian Federation (building-up of technoparks, business incubators, centers oftechnologies transfer etc.);

3. information and PR support;4. realization of plans on financing of Seed projects as potential recipients of the

fund investments;5. engagement of international partners in activities of the fund being created.

Additional support of RVC, OJSC from managing company

Maxwell Asset Management company is ready to contribute in development ofinnovation sector of the Russian Federation being realized by “RVC”, OJSC and offer thefollowing:

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1. information and PR support of “RVC”, OJSC activities;2. expert and analytical support in venture investments sector state and development

prospects;3. its recommendations on issues associated with optimization of Russian legal basis

for venture funds activities;4. support and active participation in round tables of different subjects held by

“RVC”, OJSC;5. co-operating in build-up of strategic alliances with foreign partners and “RVC”

OJSC international prestige improving.

RVC OJSC units buy-out

Each investor of the fund having certified their intention to acquire the fund units haveextended their intention to buy-out the units belonging to RVC OJSC. Details on the amount ofRVC OSC units to be acquired by preliminary intent of each investor are given in the tablebelow:

Investor’s name

Amount of units supposed to be bought-out by theinvestor (as percentage of the total amount of units

belonging to RVC OJSC)

MENOSTAR HOLDINGS LIMITED 40,00%

WALLBROM CONSULTING LTD. 24,80%

Narodny Credit Bank, LLC 33,00%

V. N. Avdeenko 0,20%

M.S. Benevolensky 0,20%

S.V. Grachev 0,20%

A.Y. Komarov 0,20%

A.A. Kubatiev 0,20%

N.G. Kurakova 0,20%

O.V.Movsesyan 0,20%

N.V. Orlova 0,20%

V.N. Smirnov 0,20%

G.N. Sushkevich 0,20%

A.F. Tsyb 0,20%

Total 100,00%

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FUND MANAGEMENT

Investment process

Innovation companies search

Main sources of innovation projects – potential investment objects for the fundSpecialists will be the following:

1. Innovation investment projects databases Catalogues and databases of RAVI (the Federal and regional venture

fairs). The databases are publicly available at web site www.rvca.ru Catalogues and the database of Moscow World Salon of Innovations and

Investments. The databases are publicly available at web sitehttp://salon.extech.ru

Catalogues and the database of Archimedes International IndustrialProperty Salon. The database is publicly available at web sitewww.intelexpo.ru

Catalogues and the database of Center of Modern Medical Technology"TEMPO". http://www.nptemp.ru

In purposes of space saving there are shown only principal databases. Estimate totalnumber of projects in different databases to be monitored by the fund Specialists amounts about3000 items.

2. The venture fund web site to be opened in case of decision on the fund formationis taken. Materials posted to the web site will allow the projects initiators, first, topreliminarily learn the fund’s requirements for investment projects, and also to fillin the forms for investments placement on-line, that will essentially improveefficiency of the projects’ preliminary analysis and selection.

3. Participation in specialized medical exhibitions and conferences. During the pastyear Maxwell Asset Management has been actively generating innovationenvironment in the medical innovations and biotechnologies sphere by taking partas a partner and moderator in the biggest sectorial conferences and exhibitions:

Participant of session of relevant committees of the Chamber ofCommerce and Industry of the Russian Federation– “Round Table” on“Actual issues of legislation support of pharmaceutical sector innovationdevelopment”, (Oct. 24, 2007). Speech of Mr. D.S.Popov, the member ofMaxwell Capital Group Board of directors on “Venture investments as afinancing mechanism of pharmaceutical sector innovation development”

Participant of the conference “Biotechnology of XXI century: problemsand prospects’ held within biotechnological exhibition – fair “Rosbiotech– 2007” (Nov. 21-24, 2007, Moscow).

Speech of Mr. D.S.Popov, the member of Maxwell Capital Group Boardof directors on “Venture fund: effective mechanism of biotechnologicalprojects investing”.

Sponsor and participant of workshop conference “Human Resources in theRussian venture investment industry” (Feb. 01, 2008). Speech of Mr.

http://www.rvca.ru/

http://salon.extech.ru/

http://www.intelexpo.ru/

http://www.nptemp.ru/summaries/

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D.S.Popov, the member of Maxwell Capital Group Board of directors on“Actual problems of portfolio forming and innovation projects expertise ina venture fund”.

Participant and moderator of “Venture investments into biotechnology”section of International Congress “EurasiaBIO” 2008, the annual event inbiotechnology and renewable power sector in Russia and CIS membercountries (Apr. 24-25, 2008)

Partner of the Ministry of Public Health and Social Development,moderator of “Generating of medical innovations clusters as forms ofPublic Private Partnership” section of All-Russian workshop conference“Realization of investment projects in the public health sphere: integrationof business and state” to be held within IV International specializedforum/exhibition “Medicine-2008” (May 26-29, 2008)

4. Working with specialized and sectorial institutes on search for innovationtechnologies developers. This activity has been already begun by the fundemployees, particularly, the primary pool of investment projects was formed asthe result of such monitoring. Members of the council of scientists and experts(CSE) has contributed in formation of the pool of R&D institutes – the fundpartners:

R&D institute of molecular cardiology of the Russian cardiologicalscientific & production centre of the Ministry of Public Health and SocialDevelopment of the Russian Federation (director is Vladimir N. Smirnov,an academician, the fund CSE member)

State Institution R&D institute of pathonomy and pathophysiology(director is Aslan A. Kubatiev, RAMS member, the fund CSE member)

Medical Radiological scientific centre of RAMS (director is Anatolii F.Tsyb, RAMS member, the fund CSE member)

R&D centre of Sechenov Moscow Medical Academy (director is Sergei V.Grachev, RAMS member, the fund CSE member)

State Institution N.F.Gamalea R&D institute of epidemiology andmicrobioligy (director is Alexandr L. Gintsburg, RAMS member)

Federal State Institution Russian Scientific Centre of radiology andnuclear medicine of the Ministry of Public Health and Social Development(director is V.P.Kcharchenko, RAMS member)

State Institution V.N.Orekchovich R&D institute of biomedical chemistry(director is Alexandr I. Archakov)

Research and Scientific Centre of Human vital activity problems of RAS(director is Vitalii A. Shestakov, professor)

5. Working with relevant experts. Using experts of the sector as information source,in the first place, will allow to substantively cut time of promising technologiesand projects searching and, in the next place, will actually allow executingpreliminary expertise of technologies by the relevant experts simultaneously withprojects searching.

Innovation companies analysis

Selection and preliminary analysis can be schematically shown as the following:

1. Applications acceptance2. Information structuring and entering of the applications into projects database

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3. Primary selection by the fund Specialists with respect to basic investment criteria.Declining of applications being not in line with basic investment criteria/return ofapplications not meeting filling-in requirements for follow-on revision to projectsinitiators

4. Primary expertise of accepted applications. Declining of applications being not inline with basic investment criteria

5. Expert estimation of a project prospects by the relevant experts6. Deepen analysis by the Specialists of the given data and background for business

plan drawing up7. The project’s business plan drawing-up in co-operation with applicants8. The project bringing in Investment committee9. Taking of decision on due diligence execution by Investment Committee10. Agreement of intent signing11. Due diligence12. Taking of decision by Investment committee on investment into the project

following the results of due diligence

Agreement of intent contents

In purpose of confirming of the innovation company’s managers and owners intent toattract venture financing, as well as of recording of agreements made in the course ofpreliminary negotiations, following conditions shall be included into agreement of intent:

The parties’ intent to contract provided that in case of positive due diligence resultthe company would confirm correspondence of declared situation to reality

Necessary amount of investments, tranches proportions and schedule of rendering Share in the charter capital to be granted to the venture fund in return for

necessary investments Terms of investments (investment tranches), including those depending on

achievement of certain financial and other indicators by the company Presented by the company mangers (owners) basic indicators of the company

assets quality, condition and/or value of which can effect the company value, thereal condition of which will be expertised in the course of due diligence

Agreements on the form the fund representatives’ participation in the companymanagement

Declared basic indicators of a product/technology corresponding of which toreality will be checked in the course of an independent technological expertise

Access of the fund specialists to confidential information including informationdeemed to be commercial and technological secret for due diligence period aswell as for the period of co-operative business.

Due diligence procedures prior to the deal

Main procedures of due diligence:

Commercial issues

Checkup of market prospects of product/technology/company, engagement ofrelevant experts if needed in purpose of definition of feasibility and practicabilityof projections on production and sales, including export potentialities checkup.Alongside with that engagement of marketing agencies in research and/or readyreports acquirement are possible.

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Checkup of feasibility of business plan financial projections Analysis of information on business management efficiency including analysis of

the company financial indicators based on accounting and management reporting Business plan analysis by the company specialists Checkup of the company assets quality with engagement of qualified evaluators if

needed Check up of the company with respect to tax-related risks by efforts of

outsourcing auditing services

Technical issues

Iindependent expertise of data and indicators of technology/product declared byapplicants in the course of preliminary negotiations

If needed consulting and expertise from relevant experts on other issuesassociated with technological process

Management issues

Checkup of knowledge of the company key specialists by collecting opinionsfrom relevant experts, suppliers, customers and other groups being in touch withthe company management

Overseeing results of the company activities for the past periods with respect toevaluation of business management efficiency

Overseeing the background including projects had been already realized byspecialists of the innovation company

If needed personnel audit by means of outsourcing

Legal issues

due diligence of the company assets clearance; checkup of the company with respect to latent liabilities availability; patent expertise by means of outsourcing; checkup in the line of the company security service (criminal history records

check regarding owners, managers and key specialists etc.).

Methodology and means:

analysis of information on projects which had been already realized withparticipation of initiators’ team members;

engagement into checkup specialists in certain fields (patent specialists, auditors,lawyers, marketing specialists, environmental safety specialists, evaluators etc.);

information obtaining from independent sources (mass media, sectorialmonitorings, marketing researches)

obtaining information on the company managers from the relevant experts andmarket players (customers, suppliers, competitors etc.)

The deal legal support

On the taking of final decision on investment there shall be concluded either a contract ofshares sale (if the innovation company acts in the form of closed joint-stock company) or acontract of participatory shares sale (in case of limited liability company).

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Post-investment monitoring of the company and the deal

Managing company specialists must gain access for financial and management reporting.Accounting reporting will be checked by the company specialists as agreed with managers andowners of the company. For this, specialists of Maxwell investment & banking department willbe engaged. In purpose of business transparency improvement accounting in the fundedcompanies shall be kept in accordance with IAS requirements. Among other things availabilityof audited reporting according to IAS will allow to substantially raise attractiveness of thecompany for investors of next phases and substantially increase business capitalization. Controlover operating activities of the company will be executed through participation of managingcompany representatives in its board of directors

One more way of the company cash flows controlling shall be settlement & cashservicing of the company by Maxwell bank that will allow managing company and the bank tomonitor inside business situation more exactly.

New financing management

If innovation company achieved key marks had been defined in the business planmanaging company specialist in charge of control over innovation company activities must makeInvestment committee aware on advisability of a new investor attraction. Alongside with thatInvestment committee can at its own initiative and on the basis of managing company annualreport to raise a question with the head of venture investment department on practicability ofinvolving a new investor into the project. Decision on a new investor involving approved byInvestment Committee shall be brought for discussion in the board of directors of innovationcompany.

In case decision on additional investment attraction is taken by the board of directorsmanagement of innovation company additional investment will be performed by employees ofbank’s investment & banking department that shall allow to prepare the project for nextfinancing rounds in a quality manner. Search for, attraction of investors for next phases andtransaction support will be executed by the Specialist with participation and engagement ofinvestment & banking department employees.

Exit management

It is supposed that main methods of the fund exit from the funded companies shall be thefollowing:

Sale of the share (block of shares) to a strategic investor. This way is among themain ones, as operating within medical and biotechnological sectors is preferablefor specialized investors perfectly aware of medicine and biotechnology marketspecificity. As strategic investors there may be considered Russian and foreigncompanies interested in acquirement of prospect developments which havealready confirmed their being in demand on medical and biotechnologicalmarkets.

Sale to a private equity fund. In case of this exit strategy support in evaluation,background of the company for sale as well as consulting and deal support shallbe performed by specialists of Maxwell Capital investment company.

Private placement – shares sale by way of private offering Placement through IPO. Acceptable trading floors for the shares of the fund high-

tech companies will be first of all MICEX (Innovation developing companiessector) and RTS (segment of stock exchange market for the companies of low andmedium-level capitalization). Besides that, possibility of placement in Stock

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Exchange of high technologies (http://fbvt.ru) can be considered, but the finalchoice of placement floor will be made on taking the decision on exit from firstprojects.

It should be noted that in case of exit by private or public offering the specialists ofMaxwell Capital investment company having experience on execution and support of deals ofthis kind shall be engaged.

Investment decision taking procedure

Composition and competence of managing company and fund bodies

Management bodies of managing company and fund empowered to participate ininvestment decision making procedure include:

Investment committee key functions of which are the following: Taking of decisions on fund operating matters of principal Approving of deal key conditions, first of all, volume and schedule of financing,

participatory share (share block) in the charter capital of a company Taking of decisions on starting of investments into companies being investment

objects Taking of decision on contribution of a next scheduled tranch into innovation

company Taking of decision on exit the project and approving core conditions of deal

closing Taking of decision on attraction additional monetary assets by the fund Taking of decision on an auditing company assignment Approving of annual report from the managing company on fund activities

Members of Investment committee:

1. Kirpichenko D. - President of financial group Maxwell Capital Group2. Popov D. - member of board of directors of financial group Maxwell Capital

Group3. RVC, OJSC representative4. Yun V. - chairnam of managing board of bank Narodnii Credit, LLC5. Orlova N. - head of expertise&analysis department of managing company

Maxwell Asset Management

The council of scientists and experts (CSE) with following key functions: Participation in technical or other expertise of technologies/developments

presented by managing company specialists If needed recommendations on certain specialists (ad hoc experts) engagement in

technical or other expertise of innovation projects Appraisal of available practice of innovation company on technology/product Participation in appraisal on commercial potential (being in demand) of the

innovation Participation in appraisal of scientific expert knowledge of innovation company

managing team

CSE decisions are of advisory nature, the ultimate decision on all key issues shall betaken by Investment Committee.

http://fbvt.ru/

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List of CSE members: S.V. Grachev - director of R&D centre of Sechenov Moscow Medical Academy A. A. Kubatiev - director of State Institution R&D institute of pathonomy and

pathophysiology of RAMS V. N. Smirnov - director of R&D institute of molecular cardiology of the Russian

cardiological scientific & production centre of the Ministry of Public Health andSocial Development of the Russian Federation

G.N. Sushkevich – director deputy of State Institution R&D institute of urgentpediatric surgery and trauma surgery of Public Health Department of Moscow

A. F. Tsyb - director of Medical Radiological scientific centre of RAMS

Fund supervisory board, with following key functions: control over intended use of monetary asset; securing of transparency of projects selections procedure; independent control and appraisal of efficiency of managing company specialists

activities;

Supervisory board’s decisions are of advisory nature, the ultimate decision on all keyissues shall be taken by Investment Committee.

List of Supervisory board members: S.I. Kolesnikov – Chairman deputy of the State Duma committee on health

protection. V.K.Lepakchin – the head of State centre of drug side effect monitoring of the

Russian Federation. V.I.Sergienko – Chairman of Committee on business activity in public health and

medical industry of Chamber of commerce and industry of the RussianFederation.

V.M. Cherepov – Director of department on cooperation with sectorialassociations of the Russian Union of Industrialists and Entrepreneurs, chairmandeputy of medical commission of RUIE.

Invitee: L.M.Roshal’ – chairman of commission of the Public Chamber of the Russian

Federation on public health matters.

Managing company which shall by efforts of staff and outsourcing specialists: Search, select and make preliminary estimation of investment objects Negotiate deal conditions on behalf of the fund with owners and managers of

innovation companies Enter and sign on behalf of the fund documents on fund assets investment Control performing of all contracts concluded on behalf of the fund Take any actions necessary for the fund interests protection including if needed

acting as plaintiff and defendant at law Apply fund assets to management aims Take decision on investing of free monetary assets Keep accounting of the fund in accordance with Russian legislation and

International Accounting Standards Hire employees for management company functions fulfillment Build up Supervisory board and the council of scientists and experts

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Managing company is answerable before Investment Committee by providing InvestmentCommittee with annual report on the fund activities.

Managing company key specialists are: Vladimir N. Avdeenko Maxim S. Benevolenskii Alexandr Y. Komarov Natalia G. Kurakova Nadezhda V. Orlova

Deal primary expertise

Primary expertise of an offered deal shall be performed by managing companySpecialists by means of formal and primary valid test. In purpose of control over Specialistsactivity information on each supposed deals will be available for Supervisory board members. Ifneeded, as agreed with management, a Specialist can engage in the expertise of acceptedapplication experts and specialists of Supervisory board and the Council of scientists andexperts, as well as other specialists. If a Specialist consider the investment proposal to be worthfurther examining he draw up in accordance with internal rules of the company a report onfurther project expertise which shall be proposed to the head of venture financing department ofmanaging company.

Internal approving of the deal

The head of venture financing department of managing company shall constitute a workgroup of not less than three Specialists which shall take a decision on possibility of dealconsideration by Investment committee. In case the decision to bring the deal in InvestmentCommittee is taken the Specialist in charge of the project expertise shall in accordance withinternal rules of the company prepare the company for presentation before InvestmentCommittee. If needed, the Specialist can engage in the expertise of accepted application expertsand specialists of Supervisory board and The Council of scientists and experts, as well as otherspecialists. The decision shall be taken by a simple majority vote.

Investment Committee

Investment Committee envisages materials presented by managing company Specialistsand takes a decision on possibility of intent agreement signing and due diligence starting. Ifneeded Investment Committee invite to the meeting Specialists and employees of managingcompany, expert of Supervisory board and The Council of scientists and experts, as well asrepresentatives of the company – potential investment object. If needed in the course of themeeting Investment Committee and innovation company representatives shall agree conditionsand details of the deal. The decision on intent agreement signing and due diligence starting shallbe taken by a simple majority vote of Investment Committee members.

Intent agreement

After basic conditions of the deal are approved by Investment Committee managingcompany Specialist draws up agreed project of intent agreement which is to be signed byrepresentatives of managing company and the company – potential recipient of investments. Ifdeal conditions were amended the project shall be re-agreed with Investment Committeemembers.

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Due diligence prior to the deal

After the intent agreement is signed managing company specialists shall load duediligence procedure.

Deal conclusion

Following the results of due diligence the Specialist shall draw up a report to be approvedby the head of venture financing department of managing company. On considering of theultimate report Investment Committee takes final decision on investing/refusal to invest theproject or forwarding the project for additional expertise. In case the positive decision is taken byInvestment Committee managing company Specialist shall prepare the package of documents fordeal conclusion. If deal conditions were amended the project shall be reagreed with InvestmentCommittee members.

Money transferring within the deal

After the investment decision is taken by Investment Committee, managing companyapply fund evaluator for official appraisal of supposed investment object and shares(participatory shares) value to be acquired by the fund. On receiving from the evaluator officialappraisal confirming value of shares (participatory shares) to be acquired into the fund,Managing company shall enter a contract of shares (participatory shares) sale and on receipt ofthe specialized depository’s approval of the deal shall transfer monetary assets in return forshares (participatory shares) under the contract.

Refinancing of the company

Specialist in charge of the control over the funded company activities bring materials inInvestment Committee for taking the decision on refinancing of the company. InvestmentCommittee following the facts of achievement of key figures indicated in the business plan orother documents takes a decision on contribution of the next investment tranch in the company.

Investment ceasing

Decision on ceasing of investing into the company shall be taken by InvestmentCommittee following the results of the company activities for reporting period. In the course ofInvestment Committee meeting the Specialist in charge of control over the company activities isto explain reasons of the deal failure.

Decision on exit

Decision on exit shall be taken by Investment Committee following indicators of thecompany business plan, actual figures of the company development and recommendations of theSpecialist in charge of control over the company activities.

Procedure of reporting to investors

In accordance with the Federal Law dd. Nov. 29, 2001 # 156-FZ “On investment funds”Maxwell Asset Management (the Company) shall provide all interested persons upon theirrequest with following:

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1. rules of trust management by the mutual investment fund as well as full text ofregistered amendments and additions therein;

2. rules of keeping register of investment units holders;3. reference on value of the assets included into the mutual investment fund with

relevant appendixes;4. reference on mutual investment fund net assets value and estimated value of one

investment unit according to the latest appraisal;5. balance sheet of the property included into mutual investment fund, balance sheet

and profit & loss report of managing company and specialized depository,auditor’s report drawn up as of the latest reporting date.

Managing company as well discloses information in accordance with procedure andwithin the terms stipulated by statutory acts of the federal executive body on securities market.To observe this, Maxwell Asset Management Ltd. publishes the following information byposting to the official web site:

on value of net assets and estimated value of one investment unit to be definedevery month as of the last working day of a calendar month as well as of the dayfollowing the last day of the period of acceptance of applications for acquirementof investment units;

on payment of profit on investment units in close-end mutual investment fund ifthe rules of the fund provide for such payments;

drawn up as of the last working day of a calendar quarter reference on value ofmutual investment fund assets including appendixes, reference on value of mutualinvestment fund net assets with appendixes, report on increase (decrease) of thevalue of property included into mutual investment fund; quarter balance sheet andprofit & loss report of managing company (quarterly);

balance sheet of the property included into mutual investment fund drawn up as ofthe last working day of a calendar year; annual balance sheet and profit & lossreport of managing company; auditor’s report on results of annual audit ofaccounting, keeping records and reporting regarding the property included intomutual investment fund and transactions with such property, report onremuneration of managing company of mutual investment fund and expensesassociated with trust management of mutual investment fund (annually);

information on contents of internal document fixing rules of estimation of valueof mutual investment fund assets and volume of obligations to be executed at theexpense of such assets.

Alongside with that additional reporting in a form suitable for investors is made publiclyavailable by Maxwell Asset Management, Ltd. on the web site. This information includes fundsinvestments, current funds assets structure, analysis of activities of economic sectors andcompanies, shares (participatory shares) in which are included in the fund assets as well as profitresults of funds calculated in accordance with relevant legislation of the Russian Federation.

Upon investors’ special request Maxwell Asset Management, Ltd. prepare any requiredinformation on funds activities classified by certain indicators.

Provision of investors with information

Maxwell Asset Management Ltd. shall provide RVC OJSC and fund investors on regularbasis at least once in a quarter with consolidated reporting including information on fundsinvestments, current funds assets structure, analysis of activities of economic sectors andcompanies, shares (participatory shares) in which are included in the fund assets, profit results offunds calculated in accordance with relevant legislation of the Russian Federation, as well as

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analysis of dynamics of the risks raised in the course of venture companies activities, shares(participatory shares) in which are included in the fund assets for in arrears of the fundmanagement.

In addition to the above-mentioned reporting managing company shall on regular basisbut at least twice a year provide Investment Committee and RVC representatives with thefollowing:

Short reference on development process and activities results of the company inthe form approved by Investment Committee illustrating correspondence of actualdevelopment plan with earlier approved business plan

Calendar schedule with quarter and if needed monthly specification of workingprocess regarding the project

Report of the Specialist in charge of working with innovation company on theproject development with further projections of the company businessdevelopment and, if needed, with recommendations on amendment of businessplan and calendar schedule of the project development

Accounting and other additional reporting upon request of Investment Committee

This information will be a form of internal reporting and will not be published byfollowing reasons:

Commercial importance. All above-mentioned information gives potentialcompetitors an understanding of project development, basic competitiveadvantages of the technology, designed sales volume and business financialindicators, results achieved and gaps of realization etc.

Possible disinclination of a potential buyer of the business to disclose for marketplayers financial and other figures of the business to be acquired as well astechnological and other indicators of innovation production.

Competitors possible interference in business development

Risk management

General investment risks

Typical risks in venture investing are the following:

General investments-related risks Political risks including possibility of political changes to instability Risk of increase of state influence in different economic sectors, particularly

investments limitation and improvement of regulation over companies being inthe sphere of state interests, and risk of possible nationalization of assets ofcompanies invested by the fund

Economical risks associated with cyclical nature of economic processes in thecountry, particularly slowdown of economic growth and inflation increase.

Risk of general investment climate changes including changes in taxation and inlegislation in the investment field

Risks of world-wide financial climate changes, particularly currency related risks,risks of world interest rates changes resulting in increase of loans value forRussian companies and risks of raise of prices for import primary materials,products and equipment which could be used while innovation production

Risk of general market situation resulting in substantial decrease of assets valueand making exit of the venture fund from the projects more difficult

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Risks of force-majeur including possibility of man-caused disasters and naturecataclysms, illegal actions of third parties and others.

Scientific & technical risks Risk of misappraisal of innovation technology/product prospects as a result of

general in uncertainty of both technological field in future and the very project Failure to achieve in the process of working-out/production of key basic figures of

technology/product making the product noncompetitive on the market Appearance of more prospect technology/product having undoubted competitive

advantages as compared with innovation of the company invested by the fund Lack of correspondence of technical facilities level with the one required for

successful project realization Origin of unforeseen technical problems Risk of “drain” of key scientific & technical information including know-how of

technology/product

Stuff-related risks Failure of the stuff to meet requirements regarding background, qualification and

knowledge necessary for the project realization Key stuff – creators leaving or refusal to cooperate

Legal risks Mistakes in the course of patent support of technology/product making the

following possible: Patent evasion resulting in advent of competitors implementing similar technical

solutions not covered by innovation company patents Prohibition of the patent resulting in impossibility of innovation production

technical solutions of which are partly covered by third parties patents Cancellation of the patent

Commercial risks Risk of failure to achieve key figures regarding economical efficiency of the

project (cost price when on industrial production and other) Significant delay of project realization terms as a result of failure to observe

realization schedule Risk of new competitors presence including risk of copying Market risks including lack of foreseeable demand for innovation production Risk of significant increase of the project budget

Fund’s specialization - related risks

Basic risks typical for a fund of medical and biotechnological specialization includefollowing:

General decrease, stagnation and slow-down of medicine and biotechnologiessector

Toughening of legislation in the field of medical and biotechnical technologies,particularly toughening of rules and conditions of clinical tests of medicalproducts and goods, and conditions of advertising, marketing and sale of certainmedical goods

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Failure to obtain approval from controlling bodies in the medical field of usingmedical equipment and products which planned to be produced and sold by thecompanies invested by the fund.

Risks of each potential investment object

Following risks are typical for each potential investment object: Risk of innovation project mistaken choice as a result of information

incompleteness and subjectivity of perception. Risks of changes in trends in scientific & technical researches and innovations

which could not be foreseen in advance. Possibility of scientific mistake in the course of research. Risk of failure to observe schedule of researches, design activities and marketing

actions. Risk of standards and certification requirements violation. Risk of mistaken choice of patent terms, information “drain” and appearance of

analogues. Insufficient technological and design working-out. Possibility of marketing mistake (supply and sales wrong organization,

competition intensification, non-acceptance of the new production by the market). Risk of the project budget exceeding. Risk of disadvantageous project exit.

Risk management systems and mechanisms

Main methods of investment risks decrease shall be the following:

Diversification including: Intra-sector diversification providing investment in medical and

biotechnological projects of different orientation regarding both product type(devices and equipment, medications of prescribed use, biologically activehelpings and others) and nomenclature of medical diseases (cardiology,infectious diseases, oncology, neurology and others)

Diversification by financing of projects being on different developmentphases. This will allow, in the first place, to reduce investment risks bysimultaneous financing of high-risky projects of early stages and projectsproved to be sound and promising, and in the second place, to improve fund’sprofitability by financing both the projects of posterior stages withcomparatively low profitability and the projects of first stages having higherprofitability

Diversification by investment in projects based on “explosive” technologies -wholly changing of restructuring the market which are potentially highlyprofitable but also high-risky and requiring substantial inputs for creation andmarketing, and improving technologies with lower risk level and bringing lessprofit.

Limitation Limitation of maximum investment in one company. It is supposed to define

limits of financing (to be approved by Investment Committee) depending ofproject development stage

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Limitation of maximum investments in main investment directions,particularly in accordance with intra-sectorial specialization and type of thefinal product

Engagement of qualified specialists in expertise and due diligence procedure: The Council of scientists and experts members Supervisory board members Specialists to be engaged by recommendation of Supervisory board and The

Council of scientists and experts members Specialists of Maxwell investment & banking department Specialists of Maxwell legal department Highly tailored specialists (patent experts, evaluators, auditors etc.)

Risks dividing by engagement of other investors in financing of investmentprojects (venture investment funds, private equity funds, strategic investors)

Participation of the fund Specialists in innovation companies managementthrough Board of directors

Limitation of innovation companies managers in key decisions taking byprovision of obligatory approving of key deals by Board of directors by statutorydocuments of innovation company

Monitoring of innovation company activities by controlling over fulfillment ofbusiness plan approved by Investment Committee when taking decision oninvesting in the company

Risk limits by kinds and types of deals and industries

One of risk management mechanisms is limitations of risks for types and kinds of dealsand industries:

limit for maximum volume of investments into one company. Depending on stageof the project development it is supposed to define critical limits of financing tobe approved by Investment Committee;

limit for maximum volume of investments by main investment directions,including those regarding intrasectorial specialization and type of the targetproduct. It is supposed to form a diversified portfolio of projects by followingactivities directions:

- medical technologies;- medical tools;- industrial biotechs;- medical biotechs;- agrobiotechs etc.

Temporarily free monetary assets management

Fund monetary assets before using of them for innovation companies shares andparticipatory shares acquirement and monetary assets received from sale of such shares andparticipatory shares shall be invested due to the strategy basically aimed at gaining of stableprofit on the market of financial instruments with fixed-interest rate, and of profit on bankdeposits exceeding inflation rate.

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Placement of free monetary assets on bank deposits provides guaranteed profit but reducepossibility for using fund assets for urgent investments in the fund projects.

Using alternatively state, municipal and corporate bonds allows to provide more fastmobilization of required monetary assets but results in risks of portfolio value change due to themarket current situation.

Balanced approach in portfolio composition implies good correlation of credit andinterest related risks. In accordance with this strategy on different stages of fund activities as arule:

Up to 35% of free monetary assets can be invested in state and municipal bonds; Up to 50% - in corporate bonds; Up to 75% - deposited in commercial banks;

As well short-term investment of a part of free monetary assets in shares in Russianjoint-stock companies is possible,

Portfolio structure described above is totally corresponding with venture funds assetsstructure, and its extra conservatism is caused by necessity to transfer profitable assets into freemonetary assets any moment at minimum commission fee and in the shortest possible time.

Close-end mutual investment fund management particulars

Regulator’s requirements observance

Close-end mutual investment fund is a fund trust management rules of which include,along with essential terms defined by Civil Code of the Russian Federation and Federal law “Oninvestment units”, provision on lack of right of investment units holders to demand frommanaging company termination of trust management contract until its expiration (except forcasualties provided by law).

In other wording close-end mutual investment fund is created for a certain term withinwhich a holder of investment unit has no right to demand redemption of the unit and payment ofcorresponding compensation.

This particular of CMIF corresponds with venture investment requirements: venture fundis created for a certain term within which investors has no right to demand from managingcompany investment return. Term of CMIF trust management contract shall be indicated in trustmanagement rules and is 10 years in our matter and is not renewable.

On the other hand venture fund set up in a form of close-end mutual investment fund inaccordance with Russian legislation on investment funds has a few significant peculiaritiesassociated with regulatory activities of Federal Service on Financial Markets. This regulationimposes different limitations on CMIF activities.

The most important of these requirements restricting managing company while fundassets investing in selected projects is definition of minimum share to be acquired in a venturecompany. For example, regarding close joint-stock companies not less than 25% of ordinaryshares may be acquired into CMIF, and regarding limited liability company – not less than 50%of voting participatory shares. We believe that venture projects search and selection proceduresconcerned in this Memorandum would allow managing company to select necessary quantity ofprojects meeting these requirements.

Another important requirement to CVMIF assets structure is that noncompliance of assetscomposition and (or) structure in a close-end mutual investment fund of extra risky (venture)

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investments with Regulation, other statutory acts or fund investment declaration raised fromchange of estimation value of securities, real estate items or other property included into theinvestment fund, or other circumstances beyond the control of the fund managing company, shallbe eliminated by managing company by means most accurately meeting interests of holders ofinvestment units in mutual investment fund, within 1 year from the date when thisnoncompliance was or should be discovered. Particularly, upon expiry of 6 years from the fundactivities starting the estimation value of the shares in Russian joint-stock companies and bondsfrom Russian economic companies both included into I list of stock exchanges and left out fromquotation lists of stock exchanges, and estimation value of participatory shares in charter capitalof Russian limited liability companies in the aggregate shall total at least 50 percent of the fundassets value. Any venture fund activities are cyclical. But in the course of exit from the project,monetary assets and profit return to the fund this requirement of the regulator can be broken.Nevertheless we consider 1 year period provided by the regulator for elimination of breaches ofthis kind to be quite sufficient for successful venture activities.

One more important particular of CMIF activities is that by no means all expenses whichcan be considered reasonable in the course of venture investment process can be reimbursed atthe expense of the fund assets. Expenses associated with trust management by property includedin the investment fund shall be reimbursed at the expense of this property. List of such expensesis stipulated by statutory acts issued by FSFM and is limiting. All other expenses are to be paidby managing company at its own account. Payment and reimbursement from the fund assets ofother (not provided by statutory acts from FSFM) expenses incurred by managing company inthe frame of fund assets trust management is correspondingly excluded. Control over thisrequirement of the regulator observance in on-line mode shall be performed by specializeddepository of the fund. And besides that the appropriateness of expenses reimbursed from thefund assets is to be annually confirmed by the fund Auditor.

Amendment of legislation on investment funds.

Art. 14.1. of the Federal Law “On Investment funds” # 334-FZ dd. Dec. 06, 2007 in thelatest edition provides that close-end mutual investment fund trust management rules canenvisage and in the cases stipulated by FSFM must envisage that investment units in the fund arereserved for qualified investors.

The main advantage available for the venture fund investors (in case it’s registered as afund for qualified investors) is possibility to form the fund by partial payment for units(commitments), that should, according to legislative conception, make the scheme of ventureinvestment through CMIF similar to world-wide accepted procedures of capital attraction intoventure fund.

Nevertheless a few other provisions made in the latest edition of the law make this way ofCMIF formation not only disadvantageous but also extra risky in the situation of ventureinvestments.

For example, p. 3 Art. 17.1 of the Law says «in case of investment units holder’s failureto perform his commitment to pay for not paid part of investment units within the terms the partof his investment units is to be redeemed without monetary compensation regardless to the factwhether he demanded its redemption or not. Quantity of investment units to be redeemed shallby divide the sum of monetary assets due to be paid for investment units and failured to betransferred in time (forfeit inclusive), into value of one investment units…” In this case fund willnot get planned investments that can threaten or even break up the investment process. And inreturn all legal means available for managing company is to initiate long-term law proceedings

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aimed at forfeit receiving from such investor which is not its crucial aim while successfulmanaging by venture projects.

Essential provision of the law is restriction of units for qualified investors for circulation.Units in such fund will not be permitted to be listed in stock exchanges for free circulation. Andthe role of units trading in stock exchanges is not to be undervalued

From one hand circulation of investment units in closed funds on securities markettheoretically will be a mean of investments in CMIF liquidity improvement: investor can sale theunits prior to trust management contract expiration.

On the other hand, units circulation on stock exchange is a possibility for investors notparticipated in the fund formation to take part in investment into companies the shares in whichare not listed on the stock exchange directly. Circulation of CMIF units in stock exchangetheoretically allows involving more investors’ categories into venture investment, to makeventure investment really collective.

For a few categories of qualified investors availability of stock quatations of fund units isoften an obligatory condition while investing. And for commercial banks this effects estimationof obligatory norms.

It it also necessary to note that not all the specialists of the fund, in spite of their highestqualification can meet requirements on declaring of individuals to be qualified investors.

Besides that, p. 8 Art. 17 of the Law directly prohibits to amend trust management rulesof a mutual investment fund by including or excluding the refer on the units’ reserving forqualified investors. That is, if a CMIF is already formed and has been working to amend itsrules so that it becomes a fund for qualified investors will be impossible.

Nevertheless, upon enforcing of all designed amendments to "Regulations on compoundsand structure of assets" regarding compounds and structure of assets of the funds being funds ofextra risky (venture) investments, only qualified investors will be able to be investors intoventure funds, and stock exchange circulation of such fund units will not be allowed.

In this case, upon consultations of Managing company with RVC, OJSC, there will betaken the decision on operating of the fund as one for qualified investors only, or alternativelythe fund can operate as close-end mutual investment equity fund. However, position of RVC,OJSC on this question will be determining.

INVESTMENT MEMORANDUM

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