Benefits of Making Business in Russia | Buy & Sell Business

1. BENEFITS OF MAKING BUSINESS IN RUSSIA WWW.MERGERSCORP.COM

2. At MergersCorp M&A International we help our clients confidentially buy and sell privately held businesses, aligning the interests of all parties for mutual success and satisfaction. It is our goal to make the process of either buying a new business or selling your current business as smooth and efficient as possible. We know how important confidentiality is to our sellers and we treat it with the utmost importance. WWW.MERGERSCORP.COM

3. BENEFITS OF MAKING BUSINESS IN RUSSIA WWW.MERGERSCORP.COM

4. Country Overview Russia - the largest country on earth - emerged from a decade of post-Soviet economic and political turmoil to seek to reassert itself as a world power. Income from vast natural resources, above all oil and gas, helped Russia overcome the economic collapse of 1998, but the oil price slump of 2014 ended the long run of prosperity. The state-run gas monopoly Gazprom still supplies a large share of Europe's needs. Vladimir Putin - Russia's dominant political figure since 2000 - has enhanced his control over state institutions and the media - a process supplemented more recently by an emphasis on fierce nationalism and hostility to the West. Russia, a Nations Online Project Profile of the world's largest country. The country, officially the Russian Federation, which is commonly referred to as Russia, is located partly in Eastern Europe and partly in North Asia; it borders the Arctic Ocean to the north.

5. Executive Summary Modest annual GDP growth will not in itself lead to halving poverty by 2024. However, this goal could be achieved by an additional redistribution of roughly 0.4 percent of GDP annually through social assistance and transfers. This assumes a significant improvement in the coverage of the poor within the current social assistance system, with some of these additional funds to be secured through savings resulting from efficiency enhancements. With an area of 17,098,242 km², the country is more than twice the size of the contiguous United States. It is the largest country in the world (by area) and covers more than 11% of the Earth's landmass. However, vast regions of the country were uninhabited or uninhabitable. Russia is a country with a low population density (8.5 people/km², compared with Germany 226 people/km², and the USA about 33 people/km²). But still, Russia has a population of 146.8 million people (in 2020), it is the number 9 in the Top 10 of the most populous countries. Most Russians live in the westernmost fifth of the country in the European part of Russia.

6. Introduction – Doing business in Russia The world’s 9th largest economy, Russia presents great opportunities for UK businesses, but it’s important to know the local business etiquette, and to work with a professional translation provider to ensure you can overcome any language barriers. Russia is ranked 28 among 190 economies in the ease of doing business, according to the latest World Bank annual ratings. The rank of Russia improved to 28 in 2019 from 31 in 2018.The United States is committed to supporting the trade and investment relationship between the United States and Russia in non-sanctioned sectors of the economy. The foreign Commercial Service (FCS) at the U.S. Mission in Russia serves as an important resource for both U.S. and Russian Businesses seeking to develop and expand new relationships. FCS had helped Russian and American firms introduce innovative technologies and increase investment, strengthening ties between our two countries. The inhumane cap imposed by the Russian Federation on our staff has reduced our in-country presence, limiting our ability to provide the full suite of services.

7. Conducting business in Russia The limited liability company is the most popular type of entity in Russia because of its incorporation requirements. Russian limited liability companies can be registered by at least one shareholder and a maximum number of 50 shareholders. The minimum share capital to open a limited liability company in Russia is 10,000 rubles (approximately 400 US dollars) and half it must be paid upon incorporation, while the other half within a year. The Russian joint stock company can be open or closed. Open joint stock companies can transfer their shares to the public, while closed companies may only transfer shares between its shareholders. The minimum share capital in case of joint stock companies is 10,000 rubles for closed companies and 100,000 for open ones. The capital is divided into shares which will be registered with the Federal Securities Commission. At least 50% of the share capital must be deposited within 3 months from registration, while the other half must be subscribed within a year after the incorporation.

8. Taxation in Russia If taxes are filed less than 180 days late, 5% of the tax owed is charged for each full or partial month the declaration is late. This fine may not total 30% of the total sum of taxes due, or the minimum amount set annually. If the declaration is more than 180 days late, 30% of the tax owed is charged, plus 10% for each full or partial month after the first 180 days. Those who hold official residency in Russia pay 13% income tax and non-residents pay 30%. Dividend income tax rate for Russian residents is 9% and it is 15% for non-residents. Exceptions to this rule do exist; read more in our guide to Russian income tax. Non-residents will be taxed in Russia at a rate of 30% for the first 183 days, even if you are on a 12-month contract. If you receive official residency or stay longer than 183 days, your Russian tax liability can be reduced to 13% and any overpayment in the interim period is recouped. In some cases non-residents may be exempt from the Russian tax rate of 30% if granted migration status as a highly qualified specialist. In such circumstances earnings are taxed in Russia at the typical rate of 13%.

9. Trade Russia is the 14th largest export economy in the world and the 27th most complex economy according to the Economic Complexity Index (ECI). In 2017, Russia exported $341B and imported $221B, resulting in a positive trade balance of $120B. In 2017 the GDP of Russia was $1.58T and its GDP per capita was $25.5k. The top exports of Russia are Crude Petroleum($96.6B), Refined Petroleum ($58.4B), Petroleum Gas($19.8B), Coal Briquettes ($16.1B) and Wheat ($7.93B), using the 1992 revision of the HS (Harmonized System) classification. Its top imports are Packaged Medicaments ($8.23B), Cars ($7.69B), Vehicle Parts($7.44B), Broadcasting Equipment ($7.04B) and Planes, Helicopters, and/or Spacecraft ($6.33B). The top export destinations of Russia are China($39.1B), the Netherlands ($27.7B), Germany ($19.9B), Belarus ($18.5B) and the United States ($15.4B). The top import origins are China ($43.8B), Germany($27.2B), Belarus ($12.5B), the United States ($10.9B) and Italy ($9.2B). During the last five years the imports of Russia have decreased at an annualized rate of - 7.3%, from $324B to $221B.

10. Banking in Russia Banks in Russia are subject to various and ever-changing regulations from the Bank of Russia, as well as mandatory Russian legislation requirements set by the Russian Federation. The state-owned Sber bank is considered the largest bank in Russia. The top Russian banks offer everything from standard personal accounts and mortgages to company loans, brokerage and investments, with state-owned Sber bank and VTB boasting more assets than the next 20 banks combined. There are many options to choose a Russian bank, although the six largest banks in Russia include: - Sbe rbank - VTB - Gazprom bank - VTB24 - Bank Otkritie Financial Corporation - Bank of Moscow Other Russian banks include Russian Agricultural Bank , Alfa Bank, Promsvyaz bank, Bank Ural Sib and Sovcom bank.

11. Our M&A Process NEGOTIATION & CLOSE POST MERGER INTEGRATION (PMI) INTEGRATION (PMI) POST MERGER TARGET APPRAISAL APPROACH DUE DILIGENCE Key Areas  Target & market analysis;  Initial assessment of synergies & value drivers;  Indicative valuation;  Go or No-Go decision;  Preparation of transaction documents (NDA – Non- disclosure Agreement/LOI- Letter of Intent);  Select Transaction team;  Appoint advisors;  Consider funding ability.  Initial approach letter;  Signing of NDA;  Prepare & share initial information requests;  Formulation of LOI (Letter of Intent) & possible negotiations;  Initial meeting and Q&A;  Circulate information on the Target to the Transaction team.  Set scope of due diligence;  Set up VDR (virtual data room);  Coordinating of due diligence, further meetings and Q&A sessions;  Consider points relevant to the Post-Merger (PMI) phase;  Revisit indicative valuation & prepare detailed valuation based on due diligence findings;  SPA negotiations with the seller;  Development of final structure (share/asset deal) and final valuation;  Approvals;  Signing of SPA & Close.  Consider the extent of integration;  Development of 100 Day PMI Plan;  Consider short & long term objectives;  Estimate requirements to capture synergies;  Determine resource needs & optimal allocation. Parties Involved  CFO;  Head of M&A;  Accountants;  Corporate finance advisors;  Consultants.  Senior management;  CEO, CFO, CTO;  Strategy director;  Head of M&A;  Head of Business Development;  Consultants.  Company general counsel;  Lawyers;  Senior management.  Company general counsel;  Lawyers;  Senior management/HR. 11 © Midaxo 2018 www.midaxo.com

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13. MergersCorp.com The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. Member firms of the MergersCorp network of independent firms are affiliated with MergersCorp International. MergersCorp International provides no client services. No member firm has any authority to obligate or bind MergersCorp International or any other member firm vis-à-vis third parties, nor does MergersCorp International have any such authority to obligate or bind any member firm. Copyright © 2020 MergersCorp International. All rights reserved. 13 © Midaxo 2018 www.midaxo.com