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AFC Asia Frontier Fund September 2013 AFC Uzbekistan Fund August

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AFC Asia Frontier Fund September 2013 AFC Uzbekistan Fund August AFC Asia Frontier Fund AFC Uzbekistan Fund CONFIDENTIAL September 2013 September 2021 EXECUTIVE SUMMARY Uzbekistan’s “Doi Moi” Moment is now! ➢ “Doi Moi” was the term given to Vietnam’s transition toward a market-oriented economy in 1986. It has since emerged as the 3rd largest economy in Southeast Asia and the world’s 2nd largest exporter ➢ Uzbekistan’s “Doi Moi” moment was in 2016 with President Mirziyoyev’s announcement of a radical transformation of Uzbekistan from a centrally-planned to free-market economy ➢ Uzbekistan is emerging as the “Vietnam” of greater Central Asia, and we believe the country in time should become the largest and most influential economy in the region AFC Uzbekistan Fund 2 EXECUTIVE SUMMARY AFC Objective ➢ Capture the value of growth companies in Uzbekistan Opportunity ➢ Uzbekistan is undergoing a rapid economic and political liberalization and this is expected to see the country grow by >5.0% over the coming years. ➢ Restructuring of the economy is leading to strong FDI, USD 1.7 billion in 2020, transforming Uzbekistan into a regional logistics and value-added manufacturing destination for Central Asia ➢ Highly under-leveraged society - consumer and government ➢ Uzbek Som (UZS) - currency expected to remain stable relative to CIS peers Potential ➢ We believe in the ability to achieve significant capital appreciation for at least the next 3 - 5 years AFC Uzbekistan Fund 3 TABLE OF CONTENTS Executive Summary 3 Recent History 5 Why Uzbekistan 7 Investment Strategy 23 Fund Performance and Statistics 26 Fund Information 28 Our Team 29 Contact Information 30 Disclaimer 31 Appendix 32 AFC Uzbekistan Fund 4 UZBEKISTAN RECENT HISTORY ➢ 31st August 1991: Republic of Uzbekistan declares independence from the USSR ➢ 2009: Global Financial Crisis hits Uzbekistan and foreign investors exit the country: Foreign investors (Meridian Hotel, Intercontinental etc.) pull out ➢ 17th March 2014: Uzbekistan is yet to recover and then suffers collateral damage from sanctions on Russia. This causes the foreign exchange rate of the Uzbek Som to blow out; black market currency conversion is the only option ➢ 2nd September 2016: Islam Karimov, President of Uzbekistan since 1989, dies ➢ 14th December 2016: Prime Minister Shavkat Mirziyoyev becomes Uzbekistan’s second President and initiates radical reforms to convert Uzbekistan into a free- market economy ➢ February 2017: Government announces a broad market-oriented five-pillar reform program: improving public administration and state-building; ensuring the rule of law and judiciary reform; maintaining economic growth and liberalizing the economy; enhancing social safety nets; and ensuring security and implementing a constructive foreign policy AFC Uzbekistan Fund 5 UZBEKISTAN RECENT HISTORY ➢ 27th May 2017: Uzbekistan adopts privatization program to divest non-strategic businesses (oil & gas and mining are only strategic sectors) ➢ 5th September 2017: Uzbek Som is devalued by 48% against the USD (UZS 4,210.35 to UZS 8,100) and simultaneously unpegged. Converted to a managed free-float. This move eliminates the black market exchange rate ➢ 15th July 2018: E-visa introduced for citizens of 101 countries, also five-day visa free entry for tourists in transit ➢ 14th February 2019: Uzbekistan launches sovereign bond with rating BB-, Outlook Stable ➢ 2nd March 2019: Capital controls for foreign investors eliminated ➢ 20th August 2019: Central Bank free floats the Uzbek Som ➢ 6th September 2019: Foreigners permitted to freely purchase equity of banks without prior approval from Central Bank AFC Uzbekistan Fund 6 WHY UZBEKISTAN A Country of Deep Value Valuations ➢ Uzbekistan’s listed companies offer generationally attractive valuations in comparison to other Asian frontier and Post-Soviet markets Growth Prospects ➢ Sizable natural resource base (6th in cotton, 7th in production of uranium, 9th in gold production, 18th in natural gas,) ➢ 35 million consumers, 36% urbanization with 2030 target of 60% ➢ Inexpensive labour force accompanied by a domestic industrial manufacturing complex AFC Uzbekistan Fund 7 WHY UZBEKISTAN Liberalization of Uzbek Som ➢ 4th September 2017 central USD/UZS Exchange Rate bank unpegs the Uzbek Som from the USD (peg at UZS 4,210.35/USD) and devalues currency to UZS 8,100. Managed free-float ➢ 20th August, 2019 currency floats free ➢ No capital controls ➢ Foreign exchange reserves of USD 34 billion (63% of GDP) should ensure currency stability Source: Bloomberg ➢ USD/UZS rate as of 31st August 2021: 10,650 AFC Uzbekistan Fund 8 WHY UZBEKISTAN Uzbekistan Gross Domestic Product GDP GDP Per Capita (USD) 90 9% $2,500 80 8% 70 7% $2,000 60 6% $1,500 50 5% 40 4% $1,000 30 3% 20 2% $500 10 1% 0 0% $0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2010 2005 2006 2007 2008 2009 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 GDP (USD bn) Real GDP Growth Rate Source: General Statistics Office of Uzbekistan AFC Uzbekistan Fund 9 WHY UZBEKISTAN Strong Fundamentals will Support Growth Sustainable GDP Growth GDP is projected to grow by 5.5% in 2021, accelerating to 6.3% in 2022, according to Moody’s Export-Focused Economy Large, inexpensive labour force, government-focus on incentivizing increased value added exports in manufacturing and natural resources Capital Control/Currency 2nd March 2019 capital controls for foreign investors eliminated. Conversion Restrictions 20th August 2019 all capital controls for locals eliminated Eliminated A new era for Uzbekistan Inflation Target: Single Digits 2020 inflation of 11.1%, down from 15.2% in 2019. Expected to decrease to 11% to 12.5% in 2021 with refinancing rate decreased to 14% from 16% Improving Trade Balance 2020 trade balance of -USD 6 billion, supported by USD 4.8 billion of net remittance inflows Foreign Reserves Increasing USD 34 billion of foreign reserves (63% of GDP) Rapidly AFC Uzbekistan Fund 10 WHY UZBEKISTAN Uniquely Competitive Labour Market - Monthly Minimum Wage (USD) 315 200 168 110 72 71 China (Guangdong) Cambodia Vietnam Kazakhstan Kyrgyzstan Uzbekistan Source: World Bank, State Statistics Committee, Other AFC Uzbekistan Fund 11 WHY UZBEKISTAN A Young and Growing Population ➢ Population of 34 million with a median age of 29.1 years ➢ Urban population of 36%, urbanization rate of 1.28% ➢ This young, under- leveraged population will be a massive driver of future economic growth 0-14 years: 23.19% 15-24 years: 16.63% 25-54 years: 45.68% 55-64 years: 8.63% 65 years and over: 5.87% (2020 est.) Source: CIA World Fact Book AFC Uzbekistan Fund 12 WHY UZBEKISTAN Regional Logistics Hub Navoi SEZ ➢ 22 Special Economic Zones (SEZ’s) throughout Uzbekistan ➢ Improved road, rail and air connectivity strengthens Uzbekistan’s position as a regional logistics and manufacturing centre ➢ Navoi SEZ is a multi-modal logistics hub for the Central Feznavoi.uz Asian region, operating with English law AFC Uzbekistan Fund 13 WHY UZBEKISTAN Interconnected to China-Pakistan Economic Corridor (One Belt One Road) ➢ Attained sea access to Gwadar port in southwest Pakistan and pursuing access to Turkmenbashi Sea Port in Turkmenistan ➢ Highway connection: China- Kazakhstan-Uzbekistan-Westward ➢ Future railroad connection: China- Kyrgyzstan-Uzbekistan-Westward Source: Obortunity.org AFC Uzbekistan Fund 14 WHY UZBEKISTAN Tourism Sector Growing from a Low Base Tourist Arrivals (000's) ➢ Historic Silk Road cities of 8,000 6,750 Samarkand, Bukhara, Khiva 7,000 6,433 (connected by bullet train) 6,000 5,000 ➢ Uzbekistan receiving significant 4,000 2,847 international coverage for its 3,000 1,969 1,938 2,034 2,157 2,000 1,500 tourism potential: CNN, 1,000 Economics, Telegraph - 2013 2014 2015 2016 2017 2018 2019 2020 Source: AFC Research, Stat.uz AFC Uzbekistan Fund 15 WHY UZBEKISTAN GDP Growth to Remain Robust - Inflation Strictly Managed ➢ Uzbekistan is shifting to an inflation-targeting-regime ➢ Central Bank Uzbekistan policy rate at 14% ➢ One-off adjustments in inflation, the benchmark interest rate and GDP, accounting for floating of currency Uzbekistan Inflation Yearly GDP Growth 16 15.2 9% 14.4 14.3 190 14 8% 10.9 170 7% 12 150 6% 10 130 5% 8 6.8 110 6.1 5.6 5.7 90 4% 6 Axis Title UZS UZS trillions 70 3% 4 50 2% 2 30 1% 0 10 0% 2013 2014 2015 2016 2017 2018 2019 2020 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Inflation Rate Construction Industry Agriculture Services GDP Growth Source: World Bank / General Statistics Office of Uzbekistan AFC Uzbekistan Fund 16 WHY UZBEKISTAN Strong Foreign Exchange Reserves will Support Currency & Enable Development Foreign Reserves to External Debt (USD billion) Trade Balance (USD million) 40 6,000 35 4,000 30 25 2,000 20 - 15 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 10 (2,000) 5 (4,000) 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 (6,000) External Debt Foreign Exchange Reserves (8,000) Source: World Bank / General Statistics Office of Uzbekistan AFC Uzbekistan Fund 17 WHY UZBEKISTAN Improving Business Environment Government to Support Economic Recovery ➢ Floating of the currency and elimination of capital controls ➢ No foreign ownership restrictions ➢ Foreigners can own property and companies with no Uzbek ownership/representative ➢ Privatization of SOE’s (State Owned Enterprises) in financial services, construction, consumer goods and manufacturing sectors ➢ Uzbekistan working to enter the WTO and Eurasian Economic Union ➢ Government initiating an aggressive anti-corruption and digitalization campaign to ensure transparency ➢ Visa exemptions for foreign visitors,
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