Alfa-Bank - Alfa Group

RMikhail GamzinManaging Partner of Russian Technologies“The Fund is focused on investments in companies developing disruptive technologies with sustainablecompetitive advantages which enable them to capture significant market share in large existingand new expanding industries. Investment in high-technology has not only become a priority for theRussian government but a profitable endeavor giving a competitive edge to Russian enterprises in theglobal market place.”ussian Technologies makes equity investments in technologycompanies addressing large existing or expanding newmarkets. The Fund targets companies with managementteams and specialists capable of demonstrating viable businessmodels and a solid vision for future business development.The Fund is focused on early-stage investments where we can workclosely with the management team to influence the formation of thekey aspects of the business to ensure the long term success of the company’sdevelopment. Each investment is approached as a partnershipwith the entrepreneur, the basis of which is the creation of long-termshareholder value.■ Information Communication Technologies■ Digital media■ Semiconductors & optoelectronics■ Clean TechInvestment StrategyFund Operational HighlightsThrough participation on the Board of Directors of all portfoliocompanies, the Fund actively contributes to strategic planning,selection of the key personnel and securing of financing for subsequentinvestment rounds using a broad network of business partners,investors and consultants both inside Russia and on globalmarkets.Russian Technologies often co-invests together with western venturecapital funds forming a powerful syndicate based on synergisticrelationships. The Fund continues to work on building a reputationin the global venture capital industry as a reliable and valuablepartner specializing in mitigating country-specific risk, organizingand scaling local research and development operations, and openinglocal market opportunities through a network of contacts withinRussia’s leading companies.The Fund operates as a financial investor and assumes it will be ableto exit from the investment process within three to five years achievinga high return on investment. The ability to project an exit opportunityis regarded as one of the major criteria in the investment projectselection.In 2007 Vitaly Belik joined the Fund as a Partner. Vitaly is an investment professional with several years of experience working inleading institutional corporate private equity funds. In 2003-2007 Mr. Belik worked at Intel Capital in Moscow. At Intel Capitalhe was responsible for equity investments and M&A initialization. Prior to working at Intel Mr. Belik had worked in various rolesat Delta Capital, Alfa-Bank in Ukraine and Credit Swiss First Boston.Within the past three years (2003-2006) the Fund has established a reputation of the premier venture capital fund on the Russianmarket and has built a portfolio of dynamic companies operating in a wide variety of industries.The Fund focuses on investments in several primary technology domains:Major Highlights of 2006 and Q1 2007In 2006 and beginning of 2007 the Fund continued to strengthen its investment portfolio. In 2006 the Fund made a new investmentin MCC Technologies Ltd. and signed an agreement to participate in a telecommunication project for the development ofan all-Russian network of digital television in DVB-T standard throughout Russia which will be implemented by Golden Telecom.Investment portfolio of the FundUltra Motor Company Ltd.http://www.ultramotors.co.ukUltra Motor is engaged in the production of electric vehicles based on its proprietary technology solutions. In 2006 Ultra Motor raised US $7 million inprivate equity from existing shareholders. Russian Technologies led this round of financing. The proceeds are being used to support the rollout of thecompany’s products on the Indian market and to enter new international markets. In September 2006 the Company signed a strategic partnershipagreement with the world’s largest producer of two-wheeled vehicles the Hero Group (http://www.herocycles.com). As per the framework agreementHero will manufacture co-branded two-wheeled electric vehicles based on Ultra Motor technology and distribute them throughout India in exclusiveretail stores. By the end of March 2007 Hero and Ultra have opened seventeen stores under the joint brand of Hero Electric – Ultra Powered. In the firstsix weeks since the product launch the company’s sales reached US $400,000.PLT Electro-Com Ltd. (Operational subdivision – Electro-Com)http://www.spark-com.ruPLT Electro-Com Ltd. offers a broadband access to the Internet and IP Telephony through its subsidiary group of companies Electro-Com, under thetrademark “Spark”. The network leverages in-building electric grids which circumvent the necessity to make installations in individual apartments,thus providing a true “plug-and-play” service. The consumer buys an adapter and a scratch card in a retail store, and connects to the service throughany electric outlet of the apartment. To support its expansion the company raised US $26 million in private equity in 2006. Russian Technologiesparticipated in the financing round in order to maintain its equity position. By the end of the first quarter 2007 the company had built out a networkwhich covers more than 180,000 apartments in Moscow, Rostov, Kaluga, Ryazan.Lythgoe Enterprises Ltd. (Operational subdivision – Ukrainian High Technologies LLC.)http://www.alternet.uaLythgoe Enterprises Ltd., through its subsidiary Ukrainian High Technologies Ltd., launched the first WiMAX network in Ukraine in October 2005 underits trademark “Alternet”. In 2006 the company raised an additional US $7.5 million in private equity from existing shareholders. By participating in theround and acquiring shares from other shareholders Russian Technologies gained a controlling interest in the company. By the end of the first quarter2007 the company had launched services for fixed broadband radio-access in four major regions of the country (Kiev, the Kiev region, Kharkov, Lvov).The network is also being operated in test mode in three additional cities Dnepropetrovsk, Odessa, and Donetsk.Yutec Technologies Ltd.Yutec develops and sells equipment known as Crystallizers used for paraffin separation to oil and gas refineries. Yutec built and installed its firstcrystallizer in the summer 2005 which was sold to Orsk Refinery of TNK-BP in November 2005 after successful testing and demonstration of theequipment. The operating parameters of the new crystallizer significantly outperformed existing models, both in performance and maintenancecosts. The company is planning to sell its crystallizers to all refineries in Russia, and then enter the global refinery equipment market.PBC Lasers Ltd.PBC Lasers Ltd. is commercializing its patented Photonic Bandgap Crystal Lasers technology for a wide range of high power semiconductor lasers.The company is currently focused on developing products for projection displays, optical storages, and industrial applications. In 2006 the companyengaged with several leading companies in Asia and the United States including JDS Uniphase, Hamamatsu, JVC, and Hitachi. PBC successfullydemonstrated the competitive advantages of its new laser design and continues to work closely with these and other customers to prioritize initialtarget applications. Russian Technologies provided additional financing to the company in 2006 and further increased its equity ownership tobeyond a controlling stake. The Fund also assisted PBC to attract a new Chief Executive Officer to support product and market development. RobertDuboc joined PBC in early 2007 and brings more than 25 years of management experience (including 17 years in the display industry). PBC aims tolaunch its first commercial products in early 2008.Wostec Inc.Wostec Inc. is developing a new non-contact process technology for creating nanostructures on the surface of different material substrates. Wostectechnology can be applied in a wide range of different products. The first products the company is focusing on are high-performance optical componentsfor projection displays and ultra thin membranes for hydrogen fuel cells.SJ Labs Inc.http://www.sjlabs.comSJ Labs, Inc. is one of the world leaders in VoIP softphone development winning numerous industry awards over the past several years. In the first quarterof 2007 the Fund sold its minority stake of the company as per the framework acquisition transaction to the strategic investors (Dan Borislow andDonald Burns) founders of Ymax Communications Corp (MagicJack).MCC Technologies Inc.In 2006 Russian Technologies invested in MCC Technologies Inc. The proceeds were used to continue the research and development of the company’sinnovative technology for separation of fly ash of thermoelectric power stations and landfill fly ash with the aid of a flotation plant. In 2007 the companyplans to begin preparation of pilot production.58 / ALFA GROUP / ANNUAL REPORT 2006ALFA GROUP / ANNUAL REPORT 2006 / 59