investment outlook€¦ · slide 3 we continue to see a strong case for the central bank of russia...

Investment Outlook

Third Quarter 2013 Strategy

July 2013

VTBC IM Equity and FI Research Team

Investment Summary

Macro

Fixed-income

Equities

Appendix

Contacts

Content

We continue to see a strong case for the Central Bank of Russia to ease monetary policy. From a monetary supply standpoint, all the prerequisites for inflation deceleration are in place on a 12-16 month horizon. Secondly, based on previous experience, it is natural for the newly appointed CBR Chairman to lower rates during first six months of tenure. The Central Bank of Russia has room to lower interest rates 50-100bp over the next 12 months.

The scenario-weighted upside for the RTS index is over 60% according to our estimates. Dividends and share buy-backs remain the key forces for unlocking fundamental value. Russian equities must more than double in order to close the accumulated five-year performance gap with fixed income.

Russia equities offer deep value as they are priced the cheapest of all GEMs. Russia’s discount to GEMs by P/E forward twelve months is approximately 60% vs. 25-30% historical range.

Russia remains hostage to weak investor sentiment with respect to BRIC and EM equity markets in general. A deterioration in the relative ROE and economic growth momentum is likely to be the key reason behind the EM underperformance. We think that both measures are currently depressed cyclically, not structurally. Outflows from EM equities give rise to market dislocations.

The Russian rouble has tactically retreated to the 32-33 range versus USD. We think that RUB is oversold versus USD. Our scenario probability-weighted exchange rate for 2013 year-end is 31.3.

Russian local government debt was sold off during 2Q13 on the back of international portfolio outflows. Anticipated CBR easing in 2H13 as well as a more attractive valuation could drive back both international and local investors.

Global growth and inflation momentum has trended down over the second quarter of 2013. China and the euro-zone remain the key areas of weakness. Only Japan shows a considerable cyclical improvement.

Speculation about Fed policy normalizing intensified in 2Q13. At the same time, economic conditions (employment, inflation) develop in a way that makes any significant change unlikely, at least until late 2014. Nevertheless, speculation about Fed tapering has made a lot of fixed income investors feel uncomfortable. US fixed-income mutual funds have seen a record outflow in June.

Investment Summary

Source: Bloomberg, VTB Capital IM Research estimates

China and the euro-

zone remain the key

areas of weakness,

where short-term

indicators are

worsening.

2013 GDP & CPI

forecast revision

momentum for the

global economy

remains negative.

Japan stands out as a

happy outlier, where

short-term indicators

have significantly

improved over the last

3 months, thanks to

the BOJ’s strong

accommodative

stance.

US short-term

indicators are under

pressure. 2013 CPI /

GDP forecast revision

momentum is negative

and neutral,

respectively.

The Global Economy – Short-Term Indicators

-0,6

-0,4

-0,2

0

0,2

0,4

0,6

Japan USA Gl obal China Eur ozone

PP

GDP 2013 for ecasts 3 months r evision momentum

-80

-60

-40

-20

0

20

40

60

Japan G-10

count r ies

Eur ozone USA China

Ind

ex

Economic Sur pr ise Index by major r egions

-0,4

-0,3

-0,2

-0,1

0

0,1

0,2

0,3

Japan Gl obal Eur ozone USA China

PP

CPI 2013 for ecasts 3 months r evision momentum

46

47

48

49

50

51

52

Japan China Gl obal USA Eur ozone

Ind

ex

PMI manufactur ing

Acceleration

Deceleration

* The average for the group of countries: US, UK, Japan, Canada, the EU, Norway, Sweden, Switzerland, from 2008 to 2011.

Source: BIS, Bloomberg, VTB Capital IM Research estimates

Inflationary impulse for

the global economy has

dwindled to 9-month low

since QE3

announcement.

Industrial output

momentum stays

positive, but starts to

decelerate.

Positive impact of G-3

unconventional

monetary policy for the

real economy, perhaps,

is close to be over.

Inflation expectations for

the US economy have

moderated to pre-QE

levels. In that respect

Fed tapering looks

unlikely in the short

term.

All in all, we see a higher

probability of a low-

inflationary scenario for

the global economy in

2013.

Quantitative Easing – Is the Game Over?

0

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0,00

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0,04

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0,10

0 6 12 18 24 30 36

PM

I index

change, pp

Indust

rial

Pro

duct

ion I

ndex

change, pp

Months

Industr ial pr oduct ion r esponse to QE*

0

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-0,01

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0 6 12 18 24 30 36

PM

I Price

Index

change,

pp

Price

Index

change, pp

Months

Pr ice index r esponse to QE *

0

1 000 000

2 000 000

3 000 000

4 000 000

5 000 000

6 000 000

7 000 000

8 000 000

9 000 000

10 000 000

Jan

07

Apr 0

7Ju

l 07

Oct

07

Jan

08

Apr 0

8Ju

l 08

Oct

08

Jan

09

Apr 0

9Ju

l 09

Oct

09

Jan

10

Apr 1

0Ju

l 10

Oct

10Ja

n 1

1Apr 1

1Ju

l 11

Oct

11Ja

n 1

2Apr 1

2Ju

l 12

Oct

12Ja

n 1

3Apr 1

3

US

D m

n

Central bank bal ance sheets - extraordinar y

monetar y pol icy measures car ry on

Банк Японии Bank of Engl and US Feder al Reser ve ECB

-2,0

-1,0

0,0

1,0

2,0

3,0

Jun 0

5

Dec

05

Jun 0

6

Dec

06

Jun 0

7

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07

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8

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08

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9

Dec

09

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0

Dec

10

Jun 1

1

Dec

11

Jun 1

2

Dec

12

Jun 1

3

US Inf l at ion expectations rose after QE

announcement

Inflation Expectations QE Announcements

QE1

QE1Expansion

QE2

QE3

Russian economy

decelerated in 1H13. Real

GDP growth slowed to

below 2% YOY.

We see the following key

reasons for that: hawkish

monetary policy of CBR,

fiscal tightening and

flattening oil prices.

Our estimates for all

scenarios in 2013 have

been adjusted downward

again.

Inflation is still above

CBR target bands (5-6%

this year), but should

moderate in the 2H13.

* Scenarios presented dependent on the global economic cycle

Source: Russian Federal State Statistics Service, Central Bank of Russia, Ministry of Finance, VTB Capital IM Research estimates

Russian Economics – New Challenges Ahead

Indicators Average

change, pp Comments

Supply indicators -0.8 Real GDP, industrial output and fixed capital investment growth has significantly cooled over

the 1H2013

Demand indicators -0.7 Retail sales and real wage are slowing

CPI -0.2

CPI is still above the CBR target range (5-6%), but slowing monetary supply growth and

limiting monopoly tariffs will help to bring down CPI in the following 12-16 months. RUB

devaluation plays against CPI deceleration

Federal Budget

Balance -0.8

Decreasing oil price below 100 USD/bar is a threat for the federal budget, deficit is still

possible

Money supply

(М2 aggregate) -2.4

M2 growth has decelerated to 10-15% YoY, less expensive money would be helpful for the

real economy

Our forecasts have been decreased again, weighted probability scenario

Indicators 2012Recessionary

Scenario

Low Inflationary

Scenario

Inflationary Upturn

Scenario Real GDP, % 3,4% 1,8% 2,4% 2,7%Industrial Output, % 2,6% 1,3% 1,9% 2,2%Fixed Asset Investments, % 6,7% 1,7% 2,4% 2,9%Real Retail Sales, % 5,9% 3,3% 4,2% 5,2%Real Wages per capital, % 7,8% 4,6% 5,3% 6,0%CPI, % average per year 5,1% 6,4% 6,7% 6,9%CPI, % December YoY 6,6% 5,4% 6,3% 7,0%Trade Balance, $ bln 193,8 141,3 155,9 173,5Federal Budget Revenues, $ bln 12 854 11 167 12 141 12 840General Budget Deficit(-)/Surplus(+), % -0,2% -3,3% -1,9% -0,8%Money Supply (M2) 11,9% 11,7% 14,7% 20,8%Gross International Reserves (GIR), $ bln 537,6 469,2 512,9 523,8RUB/USD Exchange Rate, eop 30,4 33,2 31,5 29,5RUB/EUR Exchange Rate, eop 40,2 41,5 39,4 36,9CBR Dual-Currency Basket ($55/€45) 34,8 37,0 35,1 32,8Urals Crude Oil, average, $/bbl 110,6 90,0 100,0 112,0Scenario Probability 20% 50% 30%

Russian Econom y – 2013 Forecast

* PPP – Purchasing Power Parity by IMF data Source: CBR, Bloomberg, VTB Capital IM Research estimates

The Russian rouble has tactically retreated to the 32-33 range versus USD (5.4% depreciation in 2Q13 and 7.6%YTD).

Our view is that RUB looks oversold versus USD&EUR for the following reasons:

1. RUB is undervalued by PPP and relative to current oil price;

2. Attractive carry;

3. CBR is implementing currency intervention every day near the upper band of currency basket (38,75);

4. Relative to current oil price, USD/RUB scenario-weighted fair value is estimated at 31.3.

The Russian Rouble – The Worst is Over

20

22

24

26

28

30

32

34

36

38

0 20 40 60 80 100 120 140 160

RU

B/U

SD

eop

Urals, USD/ bbl

USDRUB is Highly Sensit ive to Oil Pr ice: Consensus

vs Bl oomber g for ecasts

Trailing 2000-2008 Trailing 2009-2012

VTBC IM Forecast (2013, eop) Bloomberg Consensus (2013, eop)

0

5

10

15

20

25

30

35

95

96

97

98

99

00 01

02

03

04

05

06

07

08

09 10 11 12

13 F

14 F

15 F

16 F

17 F

RUB/ $ PPP, IMF RUB/ $ official exchange rate, (eop)

USDRUB is st il l modest ly under valued on a PPP*

basis

30,00

33,00

36,00

39,00

42,00

28.02.2009 28.02.2010 28.02.2011 29.02.2012 28.02.2013

RUBBASKET is near t he upper band, where CBR is

f ighting against RUB devaluation and sell FX

CBR lower Band CBR Upper Band RUBBASKET

0,00

2,00

4,00

6,00

8,00

01.01.2010 01.01.2011 01.01.2012 01.01.2013

Car r y r ate is st il l high and at tractive t o buy

RUB at cur rent l evels

Int. Rate Diff (3M RUB Mosprime minus 3M USD Libor)

We still see a strong case

for the Central Bank of

Russia to ease monetary

policy. The reasoning for

this remains intact.

From a monetary supply

standpoint, all the

prerequisites for inflation

deceleration are in place

on a 12-16 month horizon.

Secondly, based on

previous experience, it is

natural for a newly

appointed CBR Chairman

to lower rates.

Thirdly, economic

slowdown creates political

pressure on the CBR to

target both inflation and

GDP growth.

All in all, we still estimate

that the CBR has room to

cut key policy rates 50-

100bp this year.

Central Bank of Russia – On The Way to Policy Easing

Chairman Term Name of the Chairman

Months in office

Interest rate change (bps) during

Interest rates, %

First 6 months since appointment, bps

At the end of term, bps

At the beginning of term

6 months after appointment

At the end of term

Jun’13- Nabiullina E.S.** 7%

Mar’02-Apr’13 Ignatiev S.M. 133 -5 -12 19% 14% 7%

Sep’98-Mar’02 Geraschenko V.V. 42 -60 -81 100% 40% 19%

Nov’95-Sep’98 Dubinin S.K. 34 -26 -2 101% 75% 100%

Oct’94-Nov’95 Paramonova Т.V. 13 -65 -110 211% 147% 101%

Jul’92-Oct’94 Geraschenko V.V. 27 n/a n/a n/a n/a n/a

* Average of key interest rates, including CBR refinancing rate, Moscow interbank rate and average MosPrime rate for all terms

** E. Nabiullina was appointed as a CBR Chairman in June 2013

CBR leadership changes and interest rates*

-69

-66

-111

-18

-23

18

-150,0 -100,0 -50,0 0,0 50,0

EM, Latam

EM total

EM, CEEMEA

EM, Asia

DM total

Russia

Money mar ket r ate changes dur ing the last 12 months,

bps

Source: CBR, Bloomberg, VTB Capital IM Research estimates

-20%

0%

20%

40%

60%

80%

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13

Monetary aggregates growt h is cool ing down and depends on CBR's Inflation Targeting

M2 growth, % yoy M0 growth, % yoy

Local bonds were sold off

in 2Q13. YTMs moved up

40-50bp on average.

Hawkish Fed rhetoric has

stimulated capital

outflows from EM local

fixed income asset class

as a whole and Russian

rouble bonds, especially

OFZs.

Corporate rouble bonds

held relatively stable. As

a result, credit spreads to

OFZs have narrowed 40-

50bp.

We think that

expectations of CBR

easing in 2H13 will

support domestic and

international investor

demand for rouble bonds.

Rouble Bonds

Source: Central Bank of Russia, Rosstat, Cbonds, Bloomberg, VTB Capital IM Research estimates

5

5,5

6

6,5

7

7,5

8

8,5

9

0 1 2 3 4 5 6 7 8 9 10 11 12

Yie

ld to M

atu

rity

,%

Duration, Years

OFZ Yield Curve

Fir st-tier Rubl e denominated government and corporat e bonds

Corporate Yield Curve

Ruble BondsCurrent

Value

Recessionary

Scenario

Low

Inflationary

Scenario

Inflationary

Upturn

Scenario

Corporate Bonds Z-spread to OFZ,

bps199 365 180 248

Weighted Average Duration, years

OFZ 5,5 5,5 5,5 5,5

Corporate Bonds 2,1 2,1 2,1 2,1

Expected Yield-to-Maturity RUB terms, %

OFZ 7,3% 7,8% 6,6% 7,5%

Corporate Bonds 8,3% 11,1% 7,4% 9,0%

Expected Total Return USD terms, % per annum

Expected USDRUB appreciation (+) /

depreciation (-), %-2,1% 3,0% 10,0%

OFZs 3,1% 13,5% 16,6%

Corporate Bonds 3,3% 12,4% 17,6%

Weighted average of 3 scenarios (USD)

OFZ 12,4%

Corporate Bonds 12,1%

Scenario probability, % 20% 50% 30%

4

6

8

10

12

Russian debt YTMs, %

OFZ Corporate Ruble Bonds

0

100

200

300

400

Cor por ate Ruble bonds Z-SPREAD, basis points

Corporate Ruble Bonds

Real yields of 10Y OFZs

now stand close to their

long-term average.

Given the anticipated

inflation deceleration in

2H13, we see long-term

rouble yields roughly

100bp lower.

Rouble bond yields

adjusted for our inflation

and FX expectations

provide some 300bp

premium to EM average.

Long-Term Rouble Interest Rates


Russia

Turkey

Indonesia

Poland

South Africa

South Korea

Mexico

HungaryCzech

Chile

Philippines

Brazil

0,0

2,0

4,0

6,0

8,0

10,0

0 5 10 15

Act

ual CPI, Y

OY %

10Y Sovereign Bonds YTM, national currency %

Long Ter m Inter est Rates vs CPI

-500

-250

0

250

500

750

1000

EM Histor ical Spr eads 10YR-CPI, b.p. (2005 –

pr esent , ex2H 2008 – 2009)

last average

-500 -250 0 250 500 750 1000

Czech

Hungary

Poland

Indonesia

EM, ex. Russia and Brazil

Russia (consensus Bloomberg)

South Africa

South Korea

Philippines

Turkey

Chile

Russia (VTBC IM)

Mexico

Int er est Rates adjusted on FX & Infl at ion

Expectat ions, bp

-600 -400 -200 0 200 400 600

Mexico

Russia (VTBC IM)

Philippines

Brazil

South Korea

Turkey

Chile

South Africa

Russia (consensus Bloomberg)

Indonesia

Poland

Czech

Expected FX Depr eciat ion (+) / Appr eciat ion (-),

bp

Credit Spreads – Playing On Corporate ‘Long End’ With

Reasonable Credit Quality

An upward shift of the OFZ

yield curve has resulted in

a compression of IG

corporate credit spreads

by a comparable number.

Given the expectations of

CBR easing we like long

issues with credit quality

close to investment grade,

where we see room for

spreads to tighten 50-

100bp.

Source: Bloomberg, Moscow Exchange, VTB Capital IM Research estimates

0

50

100

150

200

250

300

IG Non-financial Cor por ate Credit Spreads

Corps - HG 1Y Corps - HG 2Y Corps - HG 3YCorps - HG 4Y Corps - HG 5Y

0

50

100

150

200

250

300

IG Financial Cor por ate Cr edit Spr eads

Fins - HG 6M Fins - HG 1Y Fins - HG 2Y

Fins - HG 3Y Fins - HG 4Y Fins - HG 5Y

0

100

200

300

400

500

600

700

HY Financial Cor porate Credit Spreads

Fins - 2nd Tier 6M Fins - 2nd Tier 1YFins - 2nd Tier 2Y Fins - 2nd Tier 3YFins - HY 1Y Fins - HY 2YFins - HY 3Y

0

100

200

300

400

500

600

700

HY Non-financial Cor por ate Cr edit Spr eads

Corps -2nd Tier 6M Corps -2nd Tier 1Y

Corps -2nd Tier 2Y Corps -2nd Tier 3Y

Corps -2nd Tier 4Y Corps -2nd Tier 5Y

Corps -HY 1Y Corps -HY 2Y

After the weak 1Q13

Russian Eurobonds were

still under pressure in

2Q13. YTMs rose more

than 100bp on average

over the last 3 months.

OAS spreads to USTs

rose more than 50bp

along with 10Y UST yield

moving up more than

70bp.

We maintain a selective

stance towards Russian

Eurobonds. Under the

low inflationary scenario

which we believe has the

highest probability of

materialising in 2013, the

latest selloff in

Eurobonds presents a

buying opportunity.

Of course, hawkish Fed

rhetoric is a key risk for

this call.

Russian Eurobonds

0

1

2

3

4

5

6

7

0 2 4 6 8 10 12 14 16

Yie

ld t

o M

atu

rity

, %

Duration, years

Russian Eurobonds - sovereign and corporate issues above "BBB-"

Sovereign Eurobond Curve

Corporate Eurobond Curve

Source: Bloomberg, Merrill Lynch, VTB Capital IM Research estimates

Russian EurobondsCurrent

Value

Recessionary

Scenario

Low

Inflationary

Scenario

Inflationary

Upturn

Scenario

Govt OAS Spreads, bpsSovereign Eurobonds 211 258 149 206Investment Grade Corporate 318 380 204 300High Yield Corporate 560 727 317 535Weighted Average Duration, yearsSovereign Eurobonds 5,9 5,9 5,9 5,9Investment Grade Corporate 4,7 4,7 4,7 4,7High Yield Corporate 4,2 4,2 4,2 4,2Expected Yield-to-Maturity, %10-year US Treasury Bonds 2,5% 2,0% 2,6% 3,6%Sovereign Eurobonds 4,0% 4,5% 4,0% 5,6%Investment Grade Corporate 4,6% 5,2% 4,0% 6,0%High Yield Corporate 6,9% 8,5% 5,0% 8,2%Expected Total Return USD terms, % per annumSovereign Eurobonds 1,7% 4,1% -3,6%Investment Grade Corporate 2,3% 6,6% -0,8%High Yield Corporate 1,6% 12,7% 2,6%Average expected return USD terms,% per annum 1,8% 7,8% -0,6%Weighted average of the 3 scenarios 4,1%Scenario probability, % 20% 50% 30%

0

2

4

6

8

10

12Russian Eur obond YTMs, %

Sovereign Eurobonds High Grade Corporate Eurobonds

High Yield Corporate Eurobonds

0

200

400

600

800

1000

Russian Eur obond OAS spr eads, bps

Sovereign Eurobonds High Grade Corporate Eurobonds

High Yield Corporate Eurobonds

BRIC equities have

underperformed US

equities since 2010. A

deterioration in relative

GDP growth and ROE

profile for BRIC versus US

is likely to be a key reason

for disappointment.

Russian equities have

closely tracked the BRIC

performance since mid-

2011.

We think that relative BRIC

fundamentals look

depressed due to cyclical,

not structural, reasons.

While US corporate

profitability is currently at

all-time highs, BRIC EPS

could rebound from these

levels.

BRIC investment theme

expected to revive as soon

as the general equity risk

appetite improves.

Russia Remains Hostage to Weak BRIC Sentiment

0

50

100

150

200

250

Rela

tive p

erfo

rm

an

ce in

dex (

US

D)

BRIC performance r elative to US (MSCI Indices)

0

50

100

150

200

250

Rela

tive p

erfo

rm

an

ce in

dex (

US

D)

Russia performance r elative to BRIC

6

8

10

12

14

16

18

RO

E

Low interest payments and st r ong cost

cont r ols have dr iven US ROE above BRIC

MSCI BRIC MSCI US

3,4

3,6

3,8

4,0

4,2

4,4

4,6

4,8

Real G

DP

gro

wth

, pp

2013E GDP Gr owth Differ ential

BRIC minus US


Global uncertainty has

forced investors to hoard

defensive assets. In the

current environment, most of

these assets might spell a

slow and certain wealth

destruction process in real

terms.

The strongly suppressed

appetite for risk assets

(especially, equities) appears

to have led US fixed-income

funds to accumulate around

USD 1tn in excess

investments.

It is a matter of time until a

correction occurs, reversing

flows from fixed income into

equities.

Too Much Money Parked in Defensive Assets

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Assets

, U

SD

bn

Money market funds Savings accounts

In t he US alone $9tn ar e accumulated in money market funds

and savings accounts...

0

1

2

3

4

5

6

7

8

9

10

1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Yie

ld.%

1Y UST YTM

...despite t he f act t hat it is earning al most nothing

Source: Bloomberg, ICI, FRB, VTB Capital IM Research estimates

0

500

1 000

1 500

2 000

2 500

3 000

198

319

84

198

519

86

198

719

88

198

919

90

199

119

92

199

319

94

199

519

96

199

719

98

199

92

00

02

00

12

00

22

00

32

00

42

00

52

00

62

00

72

00

82

00

92

010

20

112

012

Equity f und inflows are far below the long-term

t r end...

Cumulative equity mutual fund net inflows, $bn Trend

$ 1tn below long-term trend

0

400

800

1 200

1 600

2 000

198

319

84

198

519

86

198

719

88

198

919

90

199

119

92

199

319

94

199

519

96

199

719

98

199

92

00

02

00

12

00

22

00

32

00

42

00

52

00

62

00

72

00

82

00

92

010

20

112

012

...whil e bond funds enjoy hefty subscriptions

Cumulative bond mutual fund net inflows, $bn Trend

$1 tn above long-term trend

40 000

-20 000

0

20 000

40 000

$ m

n

Monthly net flows for US Equity mutual funds since the beginning of 2011

-70 000

-50 000

-30 000

-10 000

10 000

30 000

50 000

$m

n

Monthly net flows for US Bond mutual funds since the beginning of 2011

0

20

40

60

80

100

120

Number of Google Sear ch Quair ies for

"The Great Rotation" topic

Interest over time. The number 100 represents the peak search interest

Source: Google Trends, ICI, VTB Capital IM Research estimates

Speculation about Fed

tapering has made a lot of

fixed income investors feel

uncomfortable.

US bond mutual funds

registered record outflows

in June.

We think that the first

stage of the great rotation

story is likely to be

accompanied by bond

market outflows and

increased volatility while

steady equity inflows

could follow later.

The Great Rotation – Cash First, Equities Later ?

-400 000

0

400 000

800 000

1 200 000

1 600 000

2 000 000

$ m

n

Cumulative bond fund inflows l ess

equit y fund inflows since 2007

Russian Equity Market Conundrums

Depressed demand for Russian equity risk could be the reason for disproportions in market valuations of certain sectors.

Solid domestic growth stories with shareholder-friendly management are in great investor demand which commands elevated valuations. At the same time, Chinese investment-related and corporate governance plays are heavily discounted.

Some of these valuation conundrums could prove to be market dislocations which have a potential to be exploited for alpha-generation in the long run.

26 028

22 733

0

5 000

10 000

15 000

20 000

25 000

30 000

Magnit Steel and Mining

US

Dm

ln.

Magnit's market cap now exceeds Russian Steel

& Coal market cap

Magnit MMK NLMK Mechel

Evraz Severstal Raspadskaya Belon

TMK KTK

26 02824 509

0

5 000

10 000

15 000

20 000

25 000

30 000

Magnit Utilities

US

Dm

ln.

... and Electric Utilities MktCap

Magnit FSK Rosseti Rushydro

OGK-2 OGK-5 Enel InterRao EON Russia

Mosenergo TGK-1

8 8659 022

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

8 000

9 000

10 000

Yandex Russian grids + FSK

USD

mln

.

Internet serach engine is worth more than

the entire Russian electric grid sector

FSK Russian grids Yandex

31 236

37 436

0

5 000

10 000

15 000

20 000

25 000

30 000

35 000

40 000

Surgutneftegas MktCap Cash&equivalents

US

Dm

ln.

Surgutneftegas' Cash&Equivalents

comparable to its market cap


Russian Equities – Lagged Fixed Income for Too Long

The last five years have proved exceptionally favourable for fixed income investors and vastly disappointing for equity investors.

Equities must double in order to compensate for the gap in relative performance, assuming that bond yields remain flat.

Public companies continue to perform equity buybacks and for the first time in many years the balance of cash distributions in favour of minority shareholders and equity issuance becomes significantly positive.

Russia's fixed income market capitalisation is now double the equity market free float. Should investor preferences reverse at some point in the future, too much money will begin chasing too few assets.

-19

-29

3

-7

-2-6

73 3 4

2 3 4 6

14 4

04

2

10

-22,4

-36

-5,4-8,6 -8,8

-11,6-9

-40

-30

-20

-10

0

10

20

2006 2007 2008 2009 2010 2011 2012

$ b

n

Balance Dividends Share buybacks Equity placements

For the fir st t ime in many year s the balance of cash

dist r ibut ions are in favour of minor ity shareholder s and equity issuance becomes meaningful ly posit ive

0

50

100

150

200

250

300

350

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13

Rela

tive

perf

orm

ance

index

Russian equit ies total r eturn r elat ive t o

bonds total r eturn start ing from 1999

MSCI Russia Total Return / EMBI+ Russia Total Return

Normalized trend (7% p. a.)

0%

50%

100%

150%

200%

250%

300%

350%

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13

Devi

ation f

rom

tre

nd,

%

% Deviat ion f rom normal ized t rend


274

325

88

187223

203 217180

237 246

288

345 358

435

0

50

100

150

200

250

300

350

400

450

500

2006 2007 2008 2009 2010 2011 2012

$ b

n

Russia's Fixed Income Mkt Cap Is Now 2x

Lar ger Than Equit y Market Freefloat

RTS freefloat Mkt Cap, $ bn Fixed income Mkt Cap, $ bn

Russian Stocks: A Top-Down View


Long-term stock market

performance is mainly

determined by corporate profit

growth, while P/E multiple re-

pricing is responsible for

short-term volatility.

The downward EPS revision

cycle for Russian stocks has

progressed and the possibility

for positive surprises starts to

outweigh the risk of further

disappointments.

In a low interest rate

environment, even under the

assumption of zero long-term

growth, a fair P/E multiple

should be in the range of 8x-

12x.

According to our estimates the

probability-weighted upside

for the RTS index is over 60%.

RTS Index Top-Down Scenarios (Next 12 months)

Recessionary

Scenario

Low Inflation

Scenario

Inflationary Upturn

Scenario

EPS 2012, $ 250,0 250,0 250,0 % change 2012 vs 2011 -6% -2% 9%EPS 2013E, $ 235,0 245,0 272,5Russian Sovereign Risk, % 4,5% 4,0% 5,6%Russian ERP, % 20,0% 9,0% 11,0%Terminal earnings growth, % 3,0% 3,0% 3,0%Current RTS Index Value 1259 1259 1259Target P/E multiple 4,6 10,0 7,4RTS Index Fair Value 1092 2446 2005Upside/Downside, % -13,2% 94,3% 59,3%Dividend Yield, % 4,7% 4,9% 5,4%Total Return, % -8,6% 99,1% 64,7%Probability-weighted return, % 67,3%

Estimated probability, % 20% 50% 30%

50

110

170

230

290

350

2008 2009 2010 2011 2012 2013

2006-2010 Forward 12 months Low Inflation Scenario

Inflationary Upturn Scenario Recessionary Scenario

Long-term EPS trend

RTS Index EPS Scenarios

0

3

6

9

12

15

06 07 08 09 10 11 12 13



RTS Index Target P/ E Scenar ios

Russia 2011

Russia 2006

Russia 2015F

0%

10%

20%

30%

40%

50%

60%

70%

80%

12% 17% 22% 27% 32%

Div

idend P

ayout,

%

ROE, %

As ROE declines, increasing dividend payout is a natural development

Dividends to Help Unlock Fundamental Upside

Compared with other

emerging markets, Russia

has the lowest dividend

payout ratio. In the past,

Russian companies

generated high returns on

equity, justifying the

reinvestment of income.

As ROEs decline, a rise in

dividend payouts is a natural

development.

The dividend yield for the

RTS index could reach 5.0%

based on 2013 financials,

with a payout ratio of 25%.

Over the next 3-5 years,

Russian companies are

likely to raise dividend

payout ratios to 35-50%.

18% 18% 19% 20%

26% 33% 34%

40% 40%

43% 47% 47% 47%

50% 50% 52%

60% 71%

0% 20% 40% 60% 80%

RussiaChina

S. KoreaMexico

PeruIndia

PolandChile

IndonesiaArgentina

EgyptPhilippines

BrazilMalaysiaThailandS. AfricaTaiwan

Columbia

Russia has the lowest dividend payout ratio (% net income) among emerging markets (2011)

Source: Bloomberg, RTS-MICEX, VTB Capital IM Research estimates

25%

20%

18%17%

21%

12%

18%

13%

0%

5%

10%

15%

20%

25%

30%

2013F2012201120102009200820072006

Div

ide

nd

Pa

you

t, %

of

ne

t in

com

e

Long-term trend of increasing dividend payouts, with plenty of room to continue

0%

1%

2%

3%

4%

5%

6%

7%

8%

2008 2009 2010 2011 2012 2013

Div

idend Y

ield

, %

Russia now offer s a dividend yiel d

pr emium to emerging markets

Russia Emerging Markets (MSCI EM)

50

110

170

230

290

350

2008 2009 2010 2011 2012 2013



Long-term EPS trend

RTS Index EPS Scenarios

EPS Scenarios for 2013

Metals&Mining, electric

utilities and Gazprom

have already seen their

earnings plummet 30-70%

off peak levels. A low-

base recovery is likely to

follow. The consumer and

banking sectors are still

capable of delivering

double-digit growth.

Our EPS projections for

2013 are well below the

LT trend.

According to our

estimates, the aggregate

ROE for the RTS Index in

2013 will be: 13.9% in the

inflationary scenario,

12.5% in the low

inflationary scenario, and

12.0% in the recessionary

scenario.

The Street consensus

calls for 12.7% ROE in

2013.

-2%

+9%

-6%


12,7%11,8%

12,9%13,7%

22,2%

16,9%

12,6%10,9%

15,8%

19,1%

14,3%12,7%12,5%12,0%

13,9%

0%

5%

10%

15%

20%

25%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012F 2013F

RO

E

Reported 2002-2012(F) Consensus Forecast Low Inflation Scenario

Recessionary Scenario Inflationary Upturn Scenario

RTS Index ROE

5,0

2,9

2,0

0,5

0,4

0,3

-0,4

-0,7

0,2

-4,0 -2,0 0,0 2,0 4,0 6,0

RTS Index t ot al

Gas

Tel ecoms

El ect r ic Ut i l i t ies

Consumer Cycl ical s

Consumer St apl es

Met al s & Mining

Banking

Ot her s

Sector contribution to RTS Index EPS change in 2013 vs 2012 (probability-weighted for 3 scenarios), percentage points

-70,9%

-51,7%

-37,8%

-30,0%

-25,3%

-20,9%

-12,2%

6,2%

6,9%

7,0%

91,9%

-100% -50% 0% 50% 100% 150%

Steel

Base Metals

Discos

Gencos

Gazprom

Fixed-Line Telcos

Fertilizers

Mobiles

Banking

Oil&Gas

Retail

Consensus EPS Revisions 2011-2013 (peak to t r ough), %

0%

8%

15%

23%

30%

38%

2004 2005 2006 2007 2008 2009 2010 2011 2012

Russian Equity Risk Premium (E/ P-BY+g), %

At What P/E Should Russian Stocks Trade?

A low inflationary recovery

scenario assumes that the

P/E for the Russian market

will rerate to 10.0x, which is

close to the upper band of the

historical range.

The inflationary scenario

assumes a target P/E value of

7.4x due to higher interest

rates and risk premiums.

A recessionary scenario

assumes a P/E of 4.6x.

We expect Russia’s P/E

discount to emerging markets

to narrow from the current

60% to 20-25%, which is

justified given the sector

structure of the Russian

market.

Recessionary Scenario = 20%

Low Inflationary Scenario= 9%

Inflationary Scenario = 11%

Sector-neutral P/E calculations for RTS Index

Weight in

RTSI

Weight in

MSCI EM

P/E of

companie

s from

RTSI

P/E of

companies

from MSCI

EM

Discount

to EM

countrie

s

Oil & Gas 51,3% 11,8% 4,5 6,0 -26%

Metals and Fertilizers 13,8% 10,4% 7,6 10,1 -25%

Telecommunication 5,7% 7,6% 7,7 11,6 -34%

Consumer Sector 4,4% 9,2% 21,5 20,0 7%

Financials 19,6% 27,9% 5,3 8,1 -34%

Electric Utilities 4,1% 3,6% 6,5 10,2 -36%

Others 1,0% 29,5% 6,0 9,0 -33%

Total 100,0% 100,0% 6,1 9,8 -38%

Total factoring in MSCI EM 7,4 9,8 -25%


0

3

6

9

12

15

06 07 08 09 10 11 12 13



RTS Index Target P/ E Scenar ios

-70,0%

-60,0%

-50,0%

-40,0%

-30,0%

-20,0%

-10,0%

0,0%

10,0%

2005 2006 2007 2008 2009 2010 2011 2012 2013

P/ E 12m FWD Premium (+) / Discount (-) :

MSCI Russia vs MSCI EM,

Premium (+) / Discount (-) MSCI Russia vs MSCI EM

Average Discount (2005−11)

Dividend Stories – The Easy Money Has Already Been Made

From the beginning of 2010,

dividend stories

outperformed the broad

market by a wide margin.

They are also likely to

outperform during

sideways markets.

The difference in P/E ratios

for dividend stories and the

broad market is now near

historical lows, which might

point to a market reversal

as it was in late 2008.

Dividend Stories in the Sample

Lukoil

MTS

Tatneft preferred

Surgutneftegaz preferred

Bashneft preferred

Gazprom Neft


0

2

4

6

8

10

12

14

2006 2007 2008 2009 2010 2011 2012 2013

P/E

Ra

tio

Dividend Stories MSCI Russia Index

Dividendstor ies no l onger command a sizable

discount to the br oad mar ket ...

-80%

-30%

20%

70%

120%

170%

2006 2007 2008 2009 2010 2011 2012

Pe

rfo

rma

nce

Ind

ex

Dividend stories MSCI Russia Index

Tot al r eturn performance ddddddd

(incl uding dividend r einvestment), %

0

1

2

3

4

5

6

7

8

9

10

-80%

-60%

-40%

-20%

0%

20%

40%

2006 2007 2008 2009 2010 2011 2012 2013

P/E

dif

fere

nce

Per

form

ance

Ind

ex

P/E difference (rhs) MSCI Russia Index

...which may be an indicat ion of market

r eversal

200

400

600

800

1000

1200

1400

1600

1800

0

20

40

60

80

100

120

140

Rela

tive P

erfo

rm

an

ce In

dex

Smal l -Caps r elative to the mar ket

Small-caps relative to the market MSCI Russia Index (rhs)

0

2

4

6

8

10

12

14

16

0

20

40

60

80

100

120

140

P/E

Ratio

Rela

tive P

erfo

rm

an

ce In

dex

Smal l -Caps outper for m the br oad mar ket during P/ E

expansion with a short lag

Small-caps relative to the market MSCI Russia P/E (rhs)

Equities – Time to Revisit the Small-Cap Theme

The small-cap performance cycle can be described as follows:

1) Recovery / bull market. P/E multiples expand. Small caps outperform.

2) Mature bull market. P/E multiples flatten / start to contract. EPS expectations become stretched.

Small-cap performance flattens / reverses.

3) Bear market. P/E multiples contract. Small caps suffer badly from sell-off.

2 3 1 2 3 1 ? 2 3 1 2 3 1 ?


Equities: Sector Preferences


We see Financials and Utilities as potential outperformers.

The outperformance of the oil & gas sector since the beginning of 2011 has made it considerably less attractive. The sector’s relative value no longer warrants an overweight stance.

Metals & mining and consumer sector look less attractive considering their risk-reward tradeoff.

Sector selection scorecard

Sector-

Specific

Risks

Sector-Specific

Catalysts

Sector Value Score Value Score Score Score Value Score Value Score

Oil&Gas 16,1% 0 -43% 2 0 0 -3% 0 84% 1 0,55

Metals&Mining 22,3% 1 29% -1 0 0 -9% -1 49% 2 0,30

Mobile Telecoms 18,6% 1 -35% 2 -1 0 18% 1 123% -1 0,68

Fixed-line

Telecoms21,9% 1 -3% 0 0 0 -18% -2 75% 2 0,35

Financials 73,0% 2 -51% 2 -1 0 -1% 0 65% 2 1,33

Consumer 13,9% 0 4% 0 0 1 8% 1 96% 0 0,23

Electric Gencos 65,1% 2 -42% 2 -1 0 -7% -1 40% 2 1,18

Electric Discos 49,5% 2 -41% 2 -2 0 -13% -1 31% 2 1,10

Weight 7,5% 7,5% 100%

DCF Upside, %

P/E (1Y Fwd)

Discount/Premiu

m to International

Peers

Earnings Revision

Momentum (last

3m)

Current P/BV

Valuation as % of

5Y AverageTotal Score

35% 20% 15% 15%

0,2

0,3

0,4

0,6

0,7

1,1

1,2

1,3

0 0,4 0,8 1,2 1,6

Consumer

Metals&Mining

Fixed-line Telecoms

Oil&Gas

Mobile Telecoms

Electric Discos

Electric Gencos

Financials

Sector Aggregate Score

13,9%

16,1%

18,6%

21,9%

22,3%

49,5%

65,1%

73,0%

0,0% 40,0% 80,0%

Consumer

Oil&Gas

Mobile Telecoms

Fixed-line Telecoms

Metals&Mining

Electric Discos

Electric Gencos

Financials

DCF Upside by Sector, %

Banks and Utilities look

attractive based on a

combination of relative

valuation measures.

Retail and fertilizer sector

valuations look stretched.

* - P/E multiple is used for banks instead of EV/EBITDA. Last 5Y average valuations of EM Utilities were used as a benchmark due to

lack of adequate data for Russian Utilities

Sector Relative Valuations


Mobile Telecoms

Fixed-line Telecoms Electricity Gencos

Electricity DiscosBanking

Consumer Staples

Retail

Transportation

Fertilizers

0,0

5,0

10,0

15,0

20,0

25,0

-5% 0% 5% 10% 15% 20% 25% 30%

P/E

20

13E

EPS CAGR 12-15E

P/ E Mul t iples versus expected growth

At t ract ive

Expensive

118%

115,6%

110%

106%

105%

75%

67%

66%

49%

34%

25%

0% 20% 40% 60% 80% 100% 120% 140%

Fer t il izer s

Met al s&Mining

Ret ail

Mobil e Tel cos

Tr anspor t at ion

Fixed-l ine Tel com

Consumer st apl es

Oil &Gas

El ect r ic Gencos

Banking

El ect r ic Gr ids

EV/ EBITDA 2013E as % of Last 5Y Aver age*

Oil&Gas

Mobile Telecoms

Fixed-line Telecoms

Electricity GenerationElectricity Distribution

Banking

Consumer staples

Retail

Transportation

Fertilizer

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

4,5

5,0

5% 15% 25% 35% 45% 55%

P/B

V M

ult

iple

ROE 2013E, %

P/ BV vs ROE

At t ract ive

Expensive

111%

91%

79%

78%

78%

62%

59%

58%

38%

35%

15%

0% 20% 40% 60% 80% 100% 120%

Mobil e Tel cos

Ret ail

Fer t il izer s

Tr anspor t at ion

Oil &Gas

Banking

Consumer st apl es

Fixed-l ine Tel com

Met al s&Mining

El ect r ic Gencos

El ect r ic Gr ids

P/ BV as % of Last 5Y Average*

Russian electric utilities

display a highly

pronounced discount to

international peers on key

valuation metrics.

Fertilizer and retail sectors

look overvalued compared

with international peers.

It is best to avoid mobile

telecoms and instead

search for value in fixed-

line telecoms as well as

metals & mining from an

opportunistic point of view.

Sector Relative Valuations (continued)


23%18%

-8%

-12%

-44%-46%

-52%-55%

-71%

-80%

-60%

-40%

-20%

0%

20%

40%

P/ E 13E Pr emium/ Discount Rel ative to Internat ional Peers

-7,8%

-24%

-37%

-41%-44%

-56%

-62%

-65%

-85%-90%

-80%

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

P/ BV Pr emium / Discount Rel ative to Internat ional

Peers

23%

16%

-22%-25% -26%

-35%

-60%

-70%

-80%

-60%

-40%

-20%

0%

20%

40%

EV/ EBITDA 13E Pr emium/ Discount vs International

Peers

Metals&Mining

Oil&Gas

Mobile Telecoms

Fixed-line Telecoms

Electricity GenerationBankingConsumer Staples

Retail

Transportation

Fertilizer

0%

20%

40%

60%

80%

100%

120%

30% 40% 50% 60% 70% 80%

P/B

V a

s %

of Last 5Y A

vg

% Buys

El ectr ic Ut il it ies / Metals&Mining wor th a l ook based on a contrar ian approach. Retail and Mobile t elecom sectors l ook overheated

Cheap and

Unpopul ar

Expensive and

Popul ar

Equities: Cycle-Adjusted Valuations All key sectors (except retail

and mobile) presently trade

with significant discounts to

historical average P/E ratios,

using their long-term EPS

trend in the denominator.

The normalisation of sector

ROEs toward long-term

sustainable levels could

provide a huge earnings

boost for metals & mining as

well as electric utilities.

However, profitability in

banking and retail names

looks vulnerable in the long

term.


33,4%

-0,9%

-27,9%

-32,7%

-35,8%

-57,8%

-60,2%

-61,7%

-70,5%

-75,2%

-90% -70% -50% -30% -10% 10% 30% 50%

Ret ail

Mobil es

Base Met al s

Oil &Gas

St eel

Banking

Gazpr om

Discos

Gol d

Gencos

Tr end P/ Es as % of Histor ical Aver age

31,1%

28,1%

-0,3%

-3,2%

-16,6%

-19,1%

-20,4%

-25,3%

-28,6%

-29,2%

-50% -30% -10% 10% 30% 50%

Mobil es

Ret ail

Oil &Gas

Banking

Gazpr om

Discos

St eel

Base Met al s

Gencos

Gol d

Consensus For war d 12m EPS as % of Long-Ter m Tr end

-61.0%

-39.6%

-35.1%

-20.0%

-14.4%

-14.0%

-3.2%

2.4%

8.8%

9.2%

46.9%

-100% -50% 0% 50% 100%

Steel

Base Metals

Discos

Gencos

Gazprom

Mobiles

Fertilizers

Fixed-Line Telcos

Oil&Gas

Banking

Retail

Consensus EPS Revisions 2011-2012 (peak to t rough), %

92.1%

76.1%

58.1%

32.6%

26.2%

25.6%

-1.0%

-6.8%

-7.4%

-27.3%

-47.9%

-75% -25% 25% 75% 125%

El ect r ic Gr ids

El ect r ic Gencos

Met al s&Mining

Consumer discr et ionar y

Tr anspor t at ion

Fer t il izer s

Oil &Gas

Ret ail

Fixed-l ine Tel com

Mobil e Tel cos

Banking

EPS Revisions Resulting For m ROE Nor mal izat ion

What Growth Rates Does The Market Discount?

Based on two-stage DDM, all

sector valuations except for

Retail imply negative growth

rates for the next five years.

Sectors typically considered

to be ‘growth’ now discount

cautious assumptions in

respect to future growth

rates.

Growth sector valuations

look stretched compared with

value sectors.

Assumptions: During next 5 years dividends gradually increase to the

level warranted by LT sustainable ROE and payout ratios, Risk-free

rate assumption is 3.5%, ERP = 8%.


Sector

Forward

12m

P/E

LT ROE

Dividend

payout,

%

Target

P/E

Implied

Growth (5y)

Oil&Gas 4,1 12,0% 70% 8,3 -16,1%

Metals&Mining 8,2 15,0% 70% 9,3 -3,0%

Banking 5,3 15,0% 50% 11,1 -16,7%

"No-growth" Sector 8,3 12,0% 50% 8,3 0,0%

Mobiles 8,5 20,0% 80% 10,0 -4,0%

Fixed Line 11,1 15,0% 70% 9,3 4,4%

Utility Gencos 7,1 11,0% 90% 8,2 -3,6%

Utility Discos 4,0 11,0% 90% 8,2 -16,3%

Consumer Goods 5,4 15,0% 60% 10,0 -14,1%

Retail 25,3 15,0% 50% 11,1 23,0%

RTS Index 5,3 15,0% 70% 9,3 -13,1%

DDM-implied Next 5-year Growth Rates

23,0%

4,4%

0,0%

-3,0%

-3,6%

-4,0%

-13,1%

-14,1%

-16,1%

-16,3%

-16,7%

-30% -10% 10% 30%

Ret ail

Fixed Line

"No-gr owt h" Sect or

Met al s&Mining

Ut il it y Gencos

Mobil es

RTS Index

Consumer Goods

Oil &Gas

Ut il it y Discos

Banking

5Y EPS CAGR, %

DDM-impl ied EPS CAGR for the next 5 year s

0%

10%

20%

30%

40%

50%

60%

5% 15% 25% 35% 50% 70% 90% 120% 160% 200% 400%

Diffe

rence

in th

e a

vera

ge

gro

wth

rate

(5-

year h

orizo

n)

P/ E Premium, %

The theor et ical r elat ionship between the P/ E pr emiums and the

aver age annual growth in ear nings per 5-year hor izon, compar ed with the company without gr owth

60

70

80

90

100

110

120

130

140

Rela

tive p

erfo

rm

an

ce

Gr owth Performance Relat ive to Value (based on

MSCI Russia sub-indices)

Disclaimer

This is a marketing communication. It is not a research report. This document has been prepared by VTB Capital Investment Management Limited and/or one of its affiliates (“VTB

Capital IM"), for information purposes only and is solely intended for the use of the intended recipient(s). This document may include an indicative summary of the terms and conditions

of the securities/transaction described herein and may be amended, superseded or replaced without notice. The conditions of the securities/transaction will be set out in full in the

applicable binding transaction document(s).

Not an offer: This document does not constitute an underwriting commitment, an offer of financing, an offer to sell, or the solicitation of an offer to buy or sell any securities described

herein, which shall be subject to VTB Capital IM internal approvals.

Not advice: VTB Capital IM is acting solely as principal and not as advisor or fiduciary. You must independently determine, with your own professional advisors, the appropriateness of

any contemplated transaction or investment. No part of this material constitutes tax, legal, accounting, financial or investment advice and should not be construed as such.VTB Capital

IM accepts no liability whatsoever for any consequential losses arising from the use of this document or reliance on the information contained herein.

Accuracy: Whilst every care has been taken in preparing this material, VTB Capital IM does not guarantee the accuracy or completeness of information which is contained in this

document and which may have been obtained from or is based upon data from third party sources. All information contained herein is subject to change without any notice. VTB Capital

IM assumes no duty to update any of the content.

Opinions: Information and opinions contained herein have been compiled or arrived at by VTB Capital IM from publicly available information and sources that VTB Capital IM believes

to be reliable. Any views expressed represent the personal assessment of the author(s) only and do not necessarily reflect the views of VTB Capital IM and/or any of its worldwide

affiliates (collectively, the “VTB Group”). All opinions and estimates are given as of the date hereof and are subject to change.

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restricted from dealing in the securities markets. Investors should perform their own due diligence before investing. Importantly, securities and financial instruments denominated in

foreign currencies and ADRs and other investments are subject to exchange rate fluctuations that may adversely affect the value of the investment. The value of investments may fall

as well as rise and investors may not get back the amount invested.

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banking or other services for any companies mentioned herein.

Professional Investors only: This material is intended only for persons regarded as investment professionals as defined in Article 19 of the Financial Services and Markets Act 2000

(Financial Promotion Order) 2001 (or equivalent outside of the UK) or those that would be classified as Eligible Counterparties or Professional Clients/Investors under the Financial

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to any retail investor. This material is intended for Institutional Investors only in connection with its distribution in the US.

THIS DOCUMENT DOES NOT DISCLOSE ALL THE RISKS AND OTHER ISSUES RELATED TO AN OR POTENTIAL INVESTMENT IN THE SECURITIES/TRANSACTION. PRIOR

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Copyright VTB Capital 2012 (all rights reserved).

Contacts

VTB Capital Investment Management

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Moscow, Russia 123317

Tel: +7 (495) 725-55-40

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http://www.vtbcapital-im.com/

Vladimir Potapov, CFA

Head of Portfolio Management

E-mail : [email protected]

Telephone: +7 (495) 725 55 40

John Papesh

Head of International Distribution

E-mail : [email protected]

Telephone: +971 (4) 377 0792

http://www.vtbcapital-am.ru/










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