Palms & Company Document

Who received more than $10,000,000,000.00 in capital in just the month of April 2000

If you are a Russian company looking for capital you should understand that

• Russian government or Russian bank guarantees are not needed
• Western government guarantees are needed and are available
• The Funds that have capital to invest, received that capital from the same governments that issue the investment guarantees
• Although governments say that the investment funds are privately owned and privately managed and make their own commercially based investment decisions, in reality, since their investment capital came from the U.S. government they are likely to pat attention to invitations to review potential investments recommended or referred by the government, to see if they meet their guidelines. Approval by one is therefore likely to lead to approval by the other.

Palms & Company, Inc., Investment Bankers, assists Russian NGO's in finding American firms which make suitable strategic partners. Strategic partners are those which have:

• Technology and experience in operating a global business in the same industry as the Russian partner
• Existing markets world-wide for products the Russian company is capable of manufacturing
• A demand for Russian made components for assembly into American made end products
• Are eligible for foreign risk guarantees from U.S. Government or European Government Agencies which reduce the risk of their investment in Russia

Palms & Company assists American investors and their Russian partners through four activities designed to create a reduction in risks asssociated with investment in Russia.

• Financing of businesses through loans and loan guarantees
• Working with private investment funds which provide equity for U.S. companies with Russian partners.
• Assisting in the preparation of documentation required to obtain insurance against a broad range of ploitcal risks.
• Engaging in the distribution of information in Rusia designed to inform the Russian business community of opportunities for obtaining capital in the United States and Europe and Asia.

A private corporation established in 1934, Palms & Company, Inc. has worked in Russia since 1989 . The government agencies which provide the guarantees, have since their inception, supported investments of more than $100 billion dollars world-wide. All the guarantees provided by the The U.S. agencies involved in this work are backed by the full faith and credit of the United States of America. The United States has always lived up to its obligations and never defaulted on an debt. It is considered the best credit risk in the world.

Palms & Company provides assistance to Russian companies which are financially sound and promise significant benefits to the social and economic development of the Russian Federation. Palms & Company will not support projects which contribute to violaiton of internationally recognized worker's rights.

Eligibility requirements for U.S. investors who are partners of Russian companies differ for project financing and political risk insurance.

Palms & Company investment banking assistance is available for new investments, privatizations and for expansion and modernization of existing factories in which U.S. investors are co-investors. Acqusition of existing operations are eligible if the investor contributes additional capital for modernization and/or expansion.

there is no requirement that the business located in Russia be wholly owned or controlled by European, Asian or American investors. However, only the portion of the investment made by the European, Asian or American investor is insurable. Neither financing or insurance will normally be available for investments in Rusisan businesses where the majority ownership is by the Russian government. Financing is not available for projects that can secure adequate financing from other commercial sources.

Investments arranged by Palms & Company may by in many varinats including:

• equity and debt financing
• leasing
• production sharing agreements
• consigned inventory, licensing, franchising and technical assistance agreements

Palms & Company investment banking services are available in the countries listed below. The host government may be required to approve assistance for a project. The approval procedures vary from country to country.

• Armenia
• Belarus
• Cyprus
• Dominican Republic
• Estonia
• Georgia
• Israel
• Kazakhstan
• Kyrgyzstan
• Latvia
• Lithuania
• Malta
• Moldova
• Netherlands Antilles
• Russia
• Tajikistan
• Ukraine
• Uzbekistan

Net project exports from the United States are taken into consideration in determining Palms & Company interest and assistance. Assistance is denied to projects which involve the substitution of existing U.S. manufacturing facilities with a Russian plant to produce for the same existing U.S. or export markets of the U.S. Palms & Company encourages the use of U.S. manufactured machinery, equipment and products, particularly those purchased from U.S. small businesses, wherever possible, in considering assistance.

Palms & Company has a policy to provide investment banking services to Russian companies that are responsive to the development needs of Russia and that foster private initiative and competition. The contribution of the Russian company to the economic and social development of Russia will be considered and will includ esuch factors as:

• Increased availability of goods and services of better quality and lower cost
• The marketability and competitiveness of such products on the world market and the contribution through exports to a balance of payments.
• Foreign exchange earnings or savings
• Russian taxes
• Development of other local businesses.
• Grandfather clauses or their equivalent in 'concurrence" agreement from instrumentalities of Russian government having "competence".

Clients must also provide Russian government agreements. if a busness is given monopoly rights or other competitive advantage for more than five years, special justification is required.

Palms & Company, as a matter of policy, conducts an environmental evaluation of every businesses which it assists with arranging financing or insurance or guarantees, that would significantly effect the environment of the Russian Federation. For most industries, Palms & Company expects the company to meet World Bank ebvironmental, health and safety standards. Of particular concern are adverse effects on forests, national parks, protected areas and endangered species and the public. Russian companies are encouraged to provide Palms & Company with environmental evaluations of companies.

Palms & Company, as a matter of policy, does not wish to provide investment banking services to Russian companies that contribute to violations of internationally recognized workers rights. Contract with Palms & Company require agreement by the Russian company to respect these rights including the right of association, collective bargaining and acceptable working conditions.

Palms & Company provides investment banking services in syndicating capital and in securing loan guarantees to Russian companies where there is participation of capital and/or management by European, Asian or American businesses.

Rather than relying upon Russian government or Rusisan bank guarantees, Palms & Company prefers that repayment by assured from the turnover generated by exports. Therefore Palms & Company carefully analyzes the economic, marketing, technical and management soundness of each business. There must be an adequate turn-over to pay all operating costs, to service all debt, and to provide the owners with an adequate return on investment.

The Management of the Russian companies must have a demonstrated competence and have a proven record of success in the same or closely related business, as well as significant continuing financial risk in the enterprise.

Palms & Company provides services to Rusisan companies wholly owned by European, Asian or American, as well as joint ventures in which their are a participant with Russian companies. The investor is expected to assume a meaningful share of the risk, generally through the purchase of at least 25% of the equity in the company.

As a rule at least 51% of the voting shares of the Russian venture should be owned by firms or persons from the private sector. However, it is possible that financing may be arranged for a business in which the Russian government ownership represents a majority, if it is agreed that management will remain in private. Insurance and guarantees are not available to companies wholly owned by the Rusisan government.

Investors must be willing to establish sound debt-to-equity relationships that will not jeopardize the success of the business through insufficient equity or excessive leverage. The capitalization will vary with the nature of the specific business and will be affected by the expected cash flows. Experience indicates that ample capitalis essential for success.

The financial plan should provide funds to meet all costs, including feasibility studies, organizational expenses, land, construction, machinery, equipment, training, marketing, accounting and legal services, interest payments during construction, start-up expenses including initial losses and adequate working capital.

The nature of Palms & Company's services will vary, taking into consideration the documentation requirements and the extent to which the company requires advice and assistance. Palms & Company may assist in designing the financial plan and in coordinating it with lenders and investors.

In recognition of posisble cost overruns and early operating problems, and despite careful planning and alloancefor contingencies in the financial plan, Palms & Company, like other investment bankers, normally requires tha the principal sponsors enter into an agreement under which they are obligated to guarantee payment of cost over-runs prior to completion of capital syndication. The definition of capital syndication includes certain financial and operating tests as well as physical completion. The sponsors must have the financial capability toperform their obligations under this agreement.

For equity or debt financing under taken by Russian companies ranging from $2 -$10 million loan guarantees and investment insurance are not generally provided to American, European or Asian co-investors.

Loan guarantees are generally used for larger projects, generally ranging in size from $10 million to $100 million, but in some cases can be as high as $200 million.

in both cases the proposed borrower/co-investor approaches Palms & Company to analyze and structure financing. Palms & Company determines the appropriate terms of borrowing/financing and, where a guarantee is sought, may assist in soliciting such gaurantee and in identifying co-investors or lenders willing to provide the money.

Guarantees are issued to U.S. financial institutions more than 50 percent beneficially owned by U.S. Citizens, corporations, or partnerships, or to corporations that are at least 95% U.S. owned, but are registered in another country. In the case of guarantees of other governments, guarantees are issued in accordance with their policies. Typically insurance companies, pension funds, commercial banks, and venture capital funds, provide the money which is then guaranteed by the guaranteeng institution. These "investors" are fully protected by the full faith and credit of the United States of America. Such guaranteed loans are classified as eligible U.S. government securities for insurance companies and many other institutional investors. As a result funding is available through fixed or floating rate interest rate obligations at approximately the same rates as those obtained by U.S. Government agencies. In effect the Russian business is treated as having the same credit rating as the U.S. government.

The repayment schedule will reflect the projected level of cash flows to be generated, which must be sifficient to pay principal and interest plus provide for an adequate profit to equity investors. The temr of such loans will typically provide for a final maturity of fice to fifteen years following a suitable grace period during which only interest is required.

Interest rates will vary with the level of financial and political risks involved. They will also reflect interest rates in long term capital markets.

Interest rates on guaranteed loans are comparable to those of other government guaranteed issues of similar maturity. In addition the guaranteeing agency charges the borrower a guarantyfee which typically averages two and one half to five percent perannum on the outstanding principal amount., depending upon commercial and political risk. In some cases the guarantee agency will lower the guarantee fee in exchange for a participation in the income.

In general, guarantee agencies expect that its position as creditor will be on a senior basis, pari passu with the holders of other senior debt and that they will share in a first lien on fixed assets and other appropriate collateral. A guarantee from the government of the Russian Federation is not normally required. Consisten with commercial lending practices, up-front commitment fees and cancellation fees are charged by the U.S.,Government guarantee agency and those of other countries, and payment is required for out-of-pocket expenses, including fees for outside counsel and for the services of experts and consultants required by Palms & Company to complete the business and financing plan.

The proceeds of guarantee agency financing may be spent for capital goods and services in the country of the guaranteeing agency or in less developed countries.

Palms & Company investment banking services are designed to assist Russian companies in accessing the lending and investing facilities of commercial banks; local ,regional and international development banks and investment funds,; other agencies of the U.S. and other governments such as the Export-Import bank of the United States and a numbe rof other multilateral institutions including the World Bank, The International Finance Corporation, The European bank for Reconstruction and development and the Asian Development Bank. Palms & Company advises and assists Russian companies in securing strong western operating companies as technology and capital and management partners and in obtaining debt and equity financing from these institutions where appropriate and in conjunction with Palms & Company financing.

Many of Palms & Company's capital syndications involve at least one other investor or lender, and in large syndications of capital several such institutions and companies are typically involved. Palms & Company's willingness to finance a substantial portion of the syndication, to accept longer or more flexible maturities, and to finance at fixed interest rates or through income sharing arrangements in lieu of interest, or to subordinate equity to third party debt financing may attract participation by other lenders and investors to a Russian company.

Russian companies interested in obtaining technology or capital or both should submit by e-mail, as a text (.txt) file, to palms@PeterPalms.com a business plan and private placement memorandum for the proposed capital syndication.

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The business plan should enable Palms & Company a basis on which it can respond to the services requested. It should include

• a general description of the business;
• the identity, background and audited financial statements of the owners and management;
• planned sources of supply, anticipated output and markets, distribution channels, competition, and the basis for projected market share
• a summary of the proposed use of proceeds of the capital syndication and sources of procurement of capital goods and services;
• a proposed financing plan, including the amount of new capital to be syndicated;
• pro-forma financial statements of the proposed project and accompanying assumptions;
• a brief statement of the capital contributions of the participants, co-investors and owners;and
• a brief statement of the contributions the business is expected to make to local economic and social development.

The information prepared and submitted are carefully reviewed by Palms & Company. In some instances Palms & Company retains independent consultants and industry specialists to assist in its analysis and review.

Following Palms & Company's preliminary review the principals may be asked to provide additional economic, financial and technical information. Such information is essentially that which any board of directors would need before committing its company to an investment.

The time required to review the information and determine whether Palms & Company wishes to provide the services requested depends upon the scope and detail of the data presented as well as the complexity of the transaction. A key determinant if the thoroughness and timeliness with which all the information required by Palms & Company is developed and submitted.

Once an engagement is agreed to the performance of the work can vary from three to six month or more.

The ability of Russian companies to obtain capital from private investment funds frequently hinges on their ability to obtain investment insurance. To understand why, Russian companies must undersand that frequently the funds have obtained their capital from the government.

The U.S. companies which want to become co-investors in your Russian company often cannot allocate or raise sufficient equity capital to do so. Such a circumstance may lead a U.S. company to place excessive reliance upon debt financing to invest in your Russian company. Generally this is inadvisable in an economically vlitile country like the Russian Federation, where business infrastructure is unreliable. Therefore U.S. government agencies have provided money to a number of privately owned and managed venture capital companies and investment funds in the U.S. that as a result have the capability to peovide equity capital to facilitate business formation and expansion in Russia. Such U.S. government agency supported Funds currently operate in Russia and other New Independent States.

U.S. government supported investment funds typically invest in 5 to forty percent of the equity capital in each of their portfolio companies, and own interests in ten to twenty companies when fully invested. Some funds invest primarily in smaller companies, while others invest primarily in larger projects.

The Fund manager typically is a voting member of each portfolio company's board of directors or other governing body. The manager is also active in guiding the portfolio company, particularly in strategic planning and maintaining effective access to capital markets needed for business growth.

The investment funds are privately owned and privately managed and make their own commercially based investment decisions. But since their investment capital came from the U.S. government they are likely to consider invitations to review potential investments recommended or referred by the government to see if they meet their guidelines. Palms & Company assists Russian companies seeking long term growth capital for their companies, by contacting such funds where U.S. government guarantee agencies have expressed receptivity to providing guarantees on debt portions of the financing required. A list of such Funds in Russian language is provided by Palms & Company.

Agencies of various governments provide political risk insurance to investors in their country, contractors, exporters and financial institutions in volved in transactions and investments in Russian companies. Speciffically insuranc eis available to:

• citizens of the United States, Western Europe or Asia investing in Russian companies
• corporations, partnerships or other associations created under the laws of different countries and beneficially owned by their citizens.
• corporations of other countries at least 95% owend byinvestors who are citizens of countries whose governments provide such guarantees
• other businesses of other countries that are owned 100% by citizens of the nations whose governments provide such guarantees.

Insurance is available for investment in new ventures or expansions of existing enterprises in Russia and can cover equity investments, parent company and third party loans and loan guaranties, technical assistance agreements, cross-border leases, assigned inventory or equipment, and other forms of investment. Coverage is also available for contractors and risks incurred by exporters including unresolved contractual disputes, wrongful calling of bid, performance, advance payment and other guaranties posted in favor of Rusisan buyers and other risks.

Such insurance can cover the following political risks:

• currency inconvertibility - deterioration of the investor's ability to convert profits, debt service and other remittances rom local currency into U.S. Dollars.
• expropriation - loss of an investment due to expropriation, nationalization or confiscation by the Russian government; and
• political violence - loss of assets or income due to war, revolution, insurrection or politically motivated civil strife, terrorism and sabotage.

There are specialized insurance programs available for:

• financial institutions
• leasing arrangements
• oil and gas companies
• natural resource companies
• contractors and exporters

Insurance offers important protection through the insured investor to Russian companies, which is not available to them in Russia.

• insures against the consequences of conversion restrictions that occur.
• insurance for unlawful Rusisan government retention of foreign exchange intended to be remitted as investment earnings
• insurance to cover losses resulting from the unlawful breach of Russian government obligations identified at the outset as vital to the successful operation of the business
• business income losses
• damage to tangible property
• compensation for income losses resulting from damage to specific sites outside the insured facility, such as a critical railway spur, power station, or supplier
• operating expenses during business interruption
• damage to tangible property caused by political violence
• interference with operations due to political violence

A wide range of banking activities can be insured, including:

• project loans made or arranged by banks;
• gold loans;
• commercial paper transactions or floating-rate notes purchased by eligible institutions;
• cross-border leases;
• debt-for-equity investments; and
• commodity price swaps.

There is a comprehensive program to encourage petroleum exploration, development and production in Russia

International corporate finance in the Russian Federation is a profession of great intricacy and complexity. many of the programs of capitalizaton and guarantees have originated outside Russia in other donor nations and the administration, and application process are in the hands of workers outside Russia. most Russian general Directors have had little exposure to these programs and have no experience in using the programs. Much can be gained by them in securing advice of those with experience in such matters

Comments: Russian General Directors will benefit from the advice of an experienced American Investment Banker in preparing investment capital proposals and dealing with questions about disclosures. we invite your inquiries

For discussions in Russian language in Moscow 7-095-324-5443, Alexander Wislobokov

For discussions in Russian language in United States of America, Washington D.C., Tel: 1-703-818-0508 Fax: 1-703-818-00236 , Email: sanich@juno.com Alexander Goldenberg

For discussion in English or Dutch: 1 425 828-6774 E-mail: palms@PeterPalms.com Dr. Pyotr Joannevich van de Waal-Palms

Offices in Vilnius Lithuania E-mail serg@novatex.lt,
Grigorij Kolesnikov
2012 Vilnius, Zirmunn 58-41, Fax: (3702) 42-54-40 Tel: 3702 72-11-34
Other e-mail: root@gigrin.aiva.lt or novatex@taide.lt

Offices in Gomel, Belarus: David Sticknety, E-mail david@wvb.gomel.by
IAEWP I.L. U.N. P.O. Box 97 Gomel 246050
Tel: 375-232-54-4404, Pager (Russian only) 375-232-53-9130 - A770

Office in St. Petersburg: Tate Ulsacker, Dun & Bradstreet Nord, Tel: (7-812) 278-9264, Fax (7-812) 278-9265 Secretary: Tanya, E-mail <palms@www.medport.ru. palms@m16.medport.ru

UKRAINE Oleg Jourin PhD
P.O. Box 25 Lutsk-23 City Volyn Region, Ukraine 262023
Tel: 380-3322-45521 Fax: 380-3344-30631
http://www.theoffice.net/patron
E-mail: patron@theoffice.net

Arunas Siaulys E-Mail: arsiau@org.ktu.lt Verkiu str. 32/70 Lt-3035 Kaunas, Lithuania Phone: 370 7 74-23-85 Fax: 370 7 79-97-86