INVESTMENT PROPOSAL Innovation project Industrial manufacture of block heat-insulation foam glass branded `NEO TIM` with 50 000

m3 per year Investment opportunity summary. National investment association presents project of construction of a new production plant (hereinafter referred to as Plant) of block foam glass of `NEO TIM` trade mark in Kaluga Region. Planned production standard volume is 50 thousand cubic metres per year, in blocks and shaped parts. Proposal for investor: project financing of the Plant construction or acquiring a share in the capital with subsequent exit. Total finance amount for project realization RUB 656 million (USD 22.6 million), including: 105 million RUB (USD 3.6 million, 16%) funds that were already invested in the project by its initiator: a plot of land was bought, service lines were made, project documentation was made, and license was bought; 551 million RUB (USD 19 million, 84%) a requested financing for equipment purchase, construction, balancing and commissioning (in the form of project financing or acquiring a share in the capital). Plant construction term is 12 months incl. balancing and commissioning (while in this investment proposal a pessimistic variant of 16 months is used). Project initiator: A Moscow registered company Dielnio LLC ( `Dielnio`) and Valentin Leonidov, who is the only founder and the CEO of the company. Dielnio LLC is the owner of the trade mark NEO TIM and at present it is an exclusive foam glass distributor of Lanzhou `Pengfei Heat Preservation Co.`, Ltd, China, http://www.china-pengfei.com) on the Russian market. It distributes production directly as well as through dealers` network in Saint-Petersburg, Lypetsk, Khabarovsk. The main task of Dielnio LLC is the construction of the Plant. Project initiator has already experience of creation of foam glass manufacturing in Russia. At present test production of foam glass branded NEOPORM is started in city of Vladimir at the capacities of CJS Company STESS-Vladimir (www.a-stess.com). V.Leonidov is one of the patent holders of production technology of NEOPORM foam glass. 1. Project characteristics: Innovation project character New product, implemented in Russia for the first time on the industrial level, is of high qualitaty and cheaper in production comparatively to the other foam glass brands; New technology of manufacture, developed with the participation of the project initiator, is his intellectual property, as well as the trade mark of `NEO TIM`; Innovation character of the project is proved by patents of V.Leonidov 2255059 Method of foam glass production, 2255058 Method of furnace charge preparation for foam glass manufacture, 2272005 Method of gauged foam glass manufacture and others. 2. Intellectual constituent of the project. The product and its production technology is the result of intellectual work protected by Russian and international patents. Features and properties of the heat-insulation foam glass `NEO TIM` were verified by several independent examinations of specialized institutes. The material is certified, and certificates for industrial production are available. 3. Energy and resources saving. High quality and material longevity provides the consumer with substantial energy saving in the exploitation process of the built objects and drastically decreases expenses for its capital and major repairs. 4. Ecological aspect. Basic material for foam glass production is glass scrap. Glass scrap is a waste product, a widespread and dangerous environment pollutant that does not dissolve in natural conditions. Production process corresponds to the modern policy of dangerous wastes utilization. Meanwhile final production is ecologically clean. Thus the project contributes to the environment protection. 5. Import substituting. NEO TIM is import substituting product, qualitatively being as good as world analogues and at the same time it is supposed to be sold at 30-40% lower price. At present foam glass is not produced on the industrial level in Russia, and is imported in small volumes. Thereby price and quality ratio cannot satisfy consumer, who is forced to choose between qualitative but

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expensive foam glass of American company `Pittsburgh Corning` and cheap but low-quality Byelorussian production. Project replication. In future it is planned to create analogous enterprises in connection with high demand for this type of production. Relatively small volume of investments (it is required USD 19 million or RUR 551 million) and short term of Plant construction (12-16 months). High degree of project elaboration, including: Strong professional team, Already established ties with consumers of the product with the approved interest from their side, Availability of the construction site with advantageous geographic location and communication lines already laid, Developed project documentation; Project initiator has his own successfully functioning business of this profile and assets of high quality including plot of land with infrastructure, intellectual property, etc., Support of the project by regional administration. Uniqueness of the project: Use of products made of foam glass as heat-insulation material excludes any possibility of fire emergence on the built facilities, as this material is absolutely noncombustible and consequently it does not emit gases dangerous for human organism like various kinds of foam polystyrene, polyurethane foam and heat-insulation materials with application of phenol group of components. This material does not absorb water and subsequently it does not change its thermal conductivity 0,0450,07 W/(m*K) with time and subsequently it provides effectiveness, energy saving for all period of a building / facility exploitation; Possibility to utilize scrap of any glass, container glass as well as flat glass. Their dumps can be seen everywhere in Russia. Glass scrap does not dissolve with time and the only way of its utilization is its processing into the new generally useful product foam glass and its products.

Foam glass characteristics. Foam glass (cellular glass, foamed glass) is a light and durable highly porous cellular inorganic heat-insulation material that is hardened glass foam consisting of a multitude of closed cells of spherical or six-sided form with dimensions of 0,3-2,0 mm and being obtained by means of baking of fine ground glass and gasifier. Glass mass is used as a raw material for foam glass production, which can be made of the following starting materials: quartz sand, limestone, sodium carbonate and sodium sulfate. Wastes of glass production also can be used glass scrape. Thus, the problem of container glass and broken glass utilization is solved. By the complex of its characteristics foam glass essentially surpasses other materials of analogous purpose. The project concerns the manufacture of a strategic product for Russia, on which depends greatly competitiveness of Russian economics as a whole as well as life conditions of citizens of the country. Two basic kinds of foam glass are cellular and block foam glass. This project concerns output of block foam glass and formed parts made of it.

Foam glass corresponds to all characteristics demanded by the market: Thermo technical efficiency (heat-conduction coefficient from 0,045 up to 0,055 V/m*K); Waterproofing (moisture absorption is not more than 1% of the volume); High strength (compressive resistance from 1,2 up to 2,0 MPa); High frost-proof and heat resistance (possibility of usage in temperature range from -2600 up to +6000); High acoustic absorption (not less than 56dB); Dimensional stability of the material during 50-100 year exploitation; Low density of material (from 100 up to 160 kg/cubic metres); Durability in aggressive media; Vapor resistance;

Incombustibility; Steadiness to rodents and other vermin; Firmness; Dimensional stability; Acid resistance; Easy processing.

As a whole this predetermines: 1. Durability of material (possibility of usage without replacing in constructions for 50-100 years); 2. Possibility of usage for multiple appointments (as heat-insulation, acoustic insulation, waterproofing, construction material, filling agent in plastics, etc.); 3. Practical irreplaceability while using in aggressive media (extraction of minerals, pipelines), including also strategic branches (for example, navy ships, nuclear power industry). Sphere of application of foam glass is exclusively wide. The main sphere of foam glass usage is creation of heat and acoustic insulation. As a heat insulator it can be used in the industrial, military, construction, housing and public utilities as well as in agriculture (heat-insulation qualities and its ecological cleanness). Foam glass use is more effective than use of other heat-insulation materials in the spheres: Oil extraction; Oil and gas industry and pipeline transportation; Energy; Chemical and petrochemical industry (due to durability to acid-base influence as well as influence of active hydrocarbon liquids and gases); Nuclear power industry (here foam glass is unrivalled as it has high class of fire safety and fire resistance among classic construction heat-insulation materials); Navy ships and submarines and military-industrial complex as a whole; Heat insulation of pipelines and heat aggregates (due to wide temperature range of application); Heat insulation of underground constructions and facilities; Heat protection in industry, especially food and pharmacology (due to sanitary safety and cleanness of foam glass); Creation of heat-insulation constructions in buildings being exploited in complex termo-hidro regime (port constructions, pools, aqua-parks, saunas, etc.); Capital construction, including high-rise construction (due to high durability and fire resistance of material); Heat insulation of spacious roofings and complex geometric form roofings; Ancient buildings restoration; Heat insulation layer of roadbed that decreases blowup deformation by frost penetration, excludes the possibility of roadbed subsidence during thawing of its foundation (this technology is widely used in road construction in Norway, Germany and USA). Characteristics of foam glass market The whole demand of Russian market for foam glass is evaluated minimum in 3 -3,5 million cubic metres, only Moscow demands are up to 200 thousand cubic metres. Hereby production volume of 50 thousand cubic metres that will be annually produced according to this project will cover not more than 1,5-2% of Russian market and 25% of Moscow market. General tendency at Russian market of heat insulation materials in combination with competitive advantages of foam glass NEO TIM allows to substitute foam glass of foreign competitors and gain a significant segment of heat insulation materials market with the perspective of coming out to foreign markets. Taking into account increasing value of energy carriers and the necessity of real implementation of energy saving, heat insulation materials will always be in short supply. Deficit of production capacities to produce heat insulation materials of high quality in Russia in combination with high prices of foreign suppliers dictate as the only acceptable way out of this situation the development of domestic production.

At present it is easier to organize new production of highly qualitative heat insulation material from the very beginning than to modernize existing morally and physically worn out manufactures. Constantly growing demand for the production determines high level of business profitability. Economic analysis of the work of domestic and foreign companies, producing heat insulation materials shows that this production is profitable. Investment volume necessary for production organization averages 10-20 million EUR, business profitability is 40-50%. Investments in construction of factory of effective thermal insulator will pay off the expenses already in 1,5-2,5 years. Consequently, manufacturing of heat insulation materials belongs to a number of the most profitable industrial branches in Russia, surpassing by profitability even oil-producing industry, construction branch and average figures of Russian economy. Foam glass production was started in the Soviet Union back in 1930s, but it was stopped due to high production costs. Until recently foam glass was produced only in USA, Europe, Japan, China and Belorussia. And only nowadays Russia returns to foam glass manufacturing. Russian foam glass market appeared not more than 5 years ago, and till 2008 inclusive it was characterized by increasing growth rate. In 2005 volume of Russian foam glass market was 26,6 thousand cubic metres. In 2006 the market increased up to 27,1 thousand cubic metres, and in 2007 it was 44 thousand cubic metres, in 2008 85 thousand cubic metres. This volume is practically null in comparison with market needs. In 2009 in connection with financial-economic crisis domestic foam glass production decreased and insignificant market augmentation was provided at the expense of import. In 2010 foam glass sale volume in Russia reduced to pre-crisis level of 2007, so it was insignificant. Nowadays in Russia foam glass was used successfully during the construction of such objects as, for example: industrial enterprises 82% (Sakhalin Energy, gas pipeline Yamal-Europe, closed corporation Kyshtym Copper Electrolytic Plant, JSC Slavneft-Yaroslavnefteorgsynthes, LLC Srtoygascomplex, Exxon neftegas limited, AvtoVaz, LLC TNK, etc.); social sector and construction 12% (sport complex and pool Olympiyskiy (roofing), stadium Luzhniky, Tower-2000 (Moscow-City), roof of the building of Ministry of Foreign Affairs of Russia, building of the Chamber of Accounts, Grand Kremlin Palace (roof of Winter garden, thermal insulation of basement walls), heat insulation of pavements with heating cable, Shift camp Pangody (territory with especially complex geological climatic conditions), reconstruction of the roofing of the embassy of the UK in Moscow, Palace of Congresses in the Kremlin, television center Ostankino, hotel Russia, Gostiniy Dvor, dome of the Novosibirsk opera theatre, etc.. It is important to note that till 2007 practically 100% demand was from the industrial sector, and for the recent two years the demand from social housing is growing. Consumers. Project initiator (company Dielnio) formed and continues to form widespread clients` base for foam glass NEO TIM. Among potential consumers of the produce there are such large-scale structures as Mosenergo with great volume of orders. Besides, great interest in the product showed leading Russian consumers OSJC Lukoil, OSJC Zarubezhneft, OJSC Rosneft, OSJC Gasprom, OSJC Russneft, concern Minatomprom, construction companies. Demand rate of any of these companies exceeds the planned production capabilities of the factory. There are letters from abovementioned companies about the possibility and practicability of foam glass usage at company objects` building. Nominal annual demand is: Rosoil 50-75 thousand cubic metres. Russoil up to 60 thousand cubic metres. Zarubezhneftestroymontazh up to 50 thousand cubic metres. Therefore the demand for foam glass in Russia is practically unlimited. In future the project initiator plans the creation of several more plants for foam glass production in different regions of Russia. Suppliers. The enterprise will work on glass scrape, solving thus the problem of broken glass utilization. By the present moment there are agreements with broken glass suppliers, in particular, guarantee letter from the company Prompostavka (city of Gus-Khrustalny, Vladimir region) for supply of 5000 tons of glass scrape annually, and from group of companies StiS (city of Elektrostal, Moscow region) for supply of 15 tons of glass scrape per day. There is an agreement also with other broken glass suppliers. Reference data: 1 ton of broken glass makes more than 6 cubic metres of foam glass. For annual production of 50000 cubic metres the agreements only with the companies Prompostavka and StiS surpass needs of this production. In perspective, it is planned to put into operation the second stage of the plant, which will work on granulated glass which is obtained from quartz sands. Sand quarry is located near the industrial area of

the plant. Second stage of the plant (i.e. production of foam glass from quartz sand) is out of scope of this project. Competitors. There is practically no industrial full-scale production of foam glass in Russia at present. Even in pre-crisis period production volume did not exceed 75-80 thousand cubic metres per year (2008-2009) or 0,2% of total volume of the heat insulation materials market. In connection with crisis production volume decreased three times down to 25 thousand cubic metres. Till 2006 Russia did not have own foam glass production, and only import produce was represented on the market. In 2006 the first manufacture appeared block and granulated foam glass branded Penosytal from eponymous company CJSC Penosytal (www.penosytal.ru). In 2008 one more plant was open for the foam glass production Penostek (foam glass of Penostek mark). The crisis caused the reduction of foam glass manufacturing. On the Russian market there are almost no competitors. At the world market main competitors are manufacturers of USA, PRC, Japan, South Korea. The main competitor is Pittsburgh Corning (USABelgium, www.foamglas.com). At present imported foam glass as well domestic production is presented in Russia, but its volume at the market is insignificant. The main foreign foam glass suppliers to Russia are companies Pittsburgh Corning and Gomelsteklo. Among import foam glass prevails production of the Pittsburgh Corning Company, though its prices are higher than those of all other competitors. OJSC Gomelsteklo (www.gomelglass.com) at present is the only large-scale producer of foam glass and heat insulation products on its basis on the territory of the former USSR. Its output is 35-40 thousand cubic metres per year, although quality of this production is not high. CJSC STES-Vladimir (city of Vladimir) carries out test foam glass production of several thousand cubic metres annually. This test production was organized by means of shareholders of CJSC STESVladimir (www.a-stess.com), where one of the main shareholders was Valentin Leonidov. Also an insignificant size of the market is represented by the products of CJSC SKLOPLAST (Zaporozje, Ukraine) and Lanzhou Pengfei Heat Preservation (Lanzhou, China, www.chinapengfei.com). LLC Dielnio is the exclusive distributor of the latter on the Russian market. Therefore it can be stated that this project practically has no competitors in Russia. Table. Comparison of foam glass features of various manufacturers Characteristics Block foam glass of Foam glass of Foam glass PITTSBURGH OJSC NEO TIM CORNING Gomelsteklo Density, kg/m cubic 125 175 180-220 130-160 Compression strength, MPa 0,7 1,2 0,7-0,9 0,7-1,0 Thermal conductivity, W (m*K) at 298 0,05 0,055 0,07-0,09 0,045-0,055 K (25 ) Water absorption, % of the volume No more than 2 Up to 10 Up to 1,5 Temperature of use, from 273 up to from -30 up to from -273 up to +500 +400 +450* *Upper temperature limit of exploitation 550-6000, resistance to short-term heat influence 7500. Price substantiation Foam glass of Pittsburgh orning (USA) comparable by its quality (thermal conductivity) to NEO TIM costs about 18000 RUB/cubic metre. Gomel foam glass having quality two times lower costs about 7500 RUB/cubic metre. Its thermal conductivity is two times higher than Pittsburgh orning Foamglas hence to produce analogue heat insulation effect the layer should be two times thicker and 3 times heavier. Bids from oil companies (in particular, LUKoil, Rosneft, Russneft, Zarubezhneft) state that the companies will buy the product of LLC Dielnio if the price will be lower than Pittsburgh orning one by 25-30%. Letters of intent are available. Therefore the price of 12000-14000 RUB/cubic metre is the price that will suit the large-scale Russian consumers. The price this project is grounded upon is substantially lower about 10700 RUB/cubic metres. Competitive advantages and promotion of foam glass NEO TIM Two groups of manufactures and suppliers are considered competitors:

1. Foam glass producers - Pittsburgh Corning (USA), OJSC Gomelsteklo (Byelorussia) and
CJSC SKLOPLAST (Ukraine). 2. Producers of hard mineral-cotton plate companies Saint-Gobain, Rockwool, Paroc, etc. The competition level cannot be considered high because of sharp deficit of qualitative products. Besides, the production of foam glass NEO TIM has a whole number of competitive advantages: 1. With regard to Pittsburgh Corning, SKLOPLAST and Gomelsteklo production close location to the markets. 2. With regard to Pittsburgh Corning production price is almost 2 times lower. 3. With regard to Gomelsteklo higher quality and durability. 4. With regard to manufacturers of hard mineral-cotton plate higher quality and much longer term of exploitation of foam glass. Besides, hard mineral-cotton plate is also rather expensive material. Foam glass NEO TIM as per quality practically is not inferior to the Pittsburgh Corning product and substantially exceeds foam glass of Belorussian production. List of work already fulfilled by the project initiator within the framework of preparation for project realization. 1. Necessary agreements are achieved and contracts are concluded between LLC Dielnio and LLC Production of heat insulation materials Lanzhou Pengfei on technical support of the project. 2. The product went through all necessary examinations and certification. 3. To create manufacture the project initiator bought a plot of land in Kaluga region (village Aduevo of Medynskiy district), i.e. in immediate geographic and logistics vicinity simultaneously to the main consumers of production and raw material suppliers. Kaluga region is also very popular among foreign investors and corporations for unique investor-friendly policy of region governor Artamonov and his team. Surface of the area is 10 hectares, that allows not only developing manufacture of the abovestated volume, but is also essential for its widening in future. Production area 5 hectares is laid out and covered with 200 thousand cubic metres of imported coat, drainage is provided from influence of surface and ground waters: drainage ditch is arranged, 3 km long, and depth is 2,5m. Artesian water-well was drilled and developed; access 0,5km long road was built; power transmission line of 10 kW and 3km long was built; power transformation station was mounted with power 1MW. Agreements with OJSC Kalugaenergo were signed, about connection of additional 1 MW and technical maintenance of electrical networks and electrical equipment. 4. Technological project of production and plant construction project (with capacity of 50 thousand cubic metres of foam glass per year) were developed by leading Russian Scientific-Research Institute of Glass (city of Gus-Khrustalniy). The circle of general contractor and subcontractor construction organizations and equipment suppliers was defined. 5. The agreement of realization of investment project with Kaluga region (signed by governor Artamonov) and Medynskiy district administration was concluded. All questions on the Plant construction are being solved on the level of Kaluga region administration. The local authorities issued permission for the Plant construction. On the basis of this permission the ground works on the site were done and communication networks were built. 6. Clients` base was created and is being built-up. Sales of foam glass NEO TIM were carried out through LLC Dielnio and its dealers net in Saint Petersburg, Khabarovsk, Lipetsk. Connections were set and potential purchasers of NEO TIM foam glass were defined as well as raw material suppliers for foam glass production. Arrangements were achieved with potential wholesale consumers: OJSC Rosneft, OJSC LUKoil, CJSC Zarubezhneft, OJSC Russneft (50-100 thousand cubic metres for each annually at 25-30% lower prices than the analogous Pittsburgh Corner foamglass) for long-term perspective. 7. Leading scientific-research and project institutes of Russia made certificates and conclusions about application of foam glass in industry, construction, energy sector (Scientific-research institute Mosstroy, Kucherenko Central Scientific-Research Institute, Project Institute-2, Scientific-Research Institute of Construction Physics). 8. Personnel was prepared for plant construction support and its successful work.

9. In order to check sales, the analogous material of 3000 cubic metres was bought in China and successfully sold in Russia. It turned out that there were many purchases, and the market was practically unlimited. Investment raising. Investments of a bank or investor into the project and investments of the project initiator fall out as follows: 105 million RUB ($3.6 million) assets already invested in the project by its initiator: a piece of land was bought, communication lines were laid, project documentation was made, and license was bought 551 million RUB ($19 million) project financing (or a bank credit) for equipment purchase, construction, balancing and commissioning. Thus, investments of the participants are subdivided as follows: Project initiator 16% Bank or investor 84%

In case of project financing interest rate is supposed to be 9% per annum, term is 4 years, capital and percent repayment starting from the 5th quarter (12 month from the beginning of plant construction) quarterly by equal parts. Financial project indices on 4-year interval Index Unit of measurement Volume of production Cubic metres Sales proceeds (with VAT) Thousand RUB (USD) Sales proceeds (without VAT) Thousand RUB (USD) EBITDA Thousand RUB (USD) Expenses volume at the investment stage of the Thousand RUB (USD) project (construction term and product launching 1 year (12 months)) Loan Thousand RUB (USD) Loan servicing Thousand RUB (USD) Net profit Thousand RUB (USD) Cash flow Thousand RUB (USD) Indices of project efficiency Net cash flow without servicing the loan Thousand RUB (USD) Project payback period Internal rate of return Rate of return of invested capital resulted 4 years The same, average annual rate (exploitation stage of the project) years % % Value 150 000 1 492 589 (51 469) 1 264 906 (43 617) 704 094 (24 279) -551 049 (-19 002) 551 049 (19 002) -631 451 (-21 774) 430 620 (14 849) 45 447 (1 567) 711 991 (24551) 3,5 8,5% 20,5% 40,2%

The production will be still profitable even at sharp reduction of selling prices. We are ready to present any additional information on this project. Sincerely Yours, President of National Investment Association Irina Sheshero Tel.+7-499-990-1298, info@investas.ru, www.investas.ru Vice-President Sergey Kondratiev Tel.+7-499-990-1298, mobile +7-910-412-3044, info@investas.ru, www.investas.ru