Post on 19-Aug-2020
Slide 1
Investment Outlook
2Q 2013
April 2013
Equity and FI Research Team
VTB Capital Investment Management
Slide 2
Investment Summary
Macro
Equities
Fixed-income
Appendix
Contacts
Content
Slide 3
Global economic cycle conditions have clearly improved over the previous 6 months. The Global PMI index has
entered an expansionary zone. Revised economic growth and inflation consensus forecasts took a turn for the better.
The G10 Economic Surprise Index has significantly improved.
Central bank quantitative easing (QE) efforts over the last 6 months have helped to generate positive
momentum for industrial production and inflation. Inflationary expectations continue to rise in the US as the Fed
continues its aggressive asset purchase program as of January 2013. The ECB's quantitative easing capacity may be
extended in 2013.
Global uncertainties keep investors ‘parked’ in defensive assets, which, in the current environment, are
guaranteed to slowly destruct wealth in real terms. US bond funds have accumulated roughly $1 trillion in
‘excessive’ investments, which were made at the expense of investments in risky assets (primarily equity). The ‘Great
Rotation’ theme is trending, however, it is still premature to call for a wholesale rotation from fixed income into equities.
We 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. The Central Bank of
Russian has room to lower interest rates by 50-100 bps over the next 12 months. This may lead to a 25-95 bps
reduction in OFZ YTMs. Local high-grade corporate spreads to OFZs could contract 80-110 bps. Local high-yield
corporate bond spreads to OFZs could contract 170-220 bps.
We maintain a selective stance towards Russian Eurobonds. We prefer the high-yield corporate segment under a low inflationary scenario.
The scenario-weighted upside for the RTS index is +55% according to our estimates. Dividends and share buy-backs remain key forces that should unlock fundamental value. Following a strong rally on the fixed income side, risk appetite will likely spread to equities. Russian equities should more than double in order to close the accumulated 5 year performance gap with fixed income.
Investment Summary
Slide 4
■ Macro
Slide 5 Source: IMF, Bloomberg, JPMorgan, VTB Capital IM Research estimates
Global economic cycle
conditions have clearly
improved over the
previous 6 months.
The Global PMI index
has entered an
expansionary zone.
The revision momentum
of economic growth and
inflation consensus
forecasts took a turn for
the better.
The G10 Economic
Surprise Index has
significantly improved.
The Global Economic Cycle Has Improved
45
47
49
51
53
55
57
59
Manufacturing PMI is back in an expansionary mode
Increase in industrial activity
Decline in industrial activity
-10
-5
0
5
10
15
Re
al G
DP
gro
wth
, % c
h. y
oy
2013 expected GDP growth versus normalized levels
Bloomberg consensus GDP growth, 2013 Normalized GDP growth
-1,00
-0,80
-0,60
-0,40
-0,20
0,00
0,20
0,40
0,60
0,80
Jul
09
Oct
09
Jan
10
Ap
r 10
Jul
10
Oc
t 10
Jan
11
Ap
r 11
Jul
11
Oc
t 11
Jan
12
Apr
12
Jul
12
Oc
t 12
Jan
13
Real GDP consensus (3 months revision momentum), pp
Inflation consensus (3 months revision momentum), pp
Consensus GDP growth and Inflation estimate revision momentum is no longer negative
-75,0
-37,5
0,0
37,5
75,0
Jun
09
Oc
t 0
9
Feb
10
Jun
10
Oc
t 10
Feb
11
Jun
11
Oc
t 11
Feb
12
Jun
12
Oc
t 12
Feb
13
Economic Surprise Index, G-10 countries
Economic surprise index has significantly improved
Slide 6 * 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
Central bank QE efforts
over the last 6 months
have helped generate
positive momentum for
industrial production and
inflation.
Inflationary expectations
continue to rise in the US,
as the Fed maintains its
aggressive asset purchase
program as of January
2013. The ECB's
quantitative easing
capacity may be extended
in 2013.
The BoJ recently
announced
unconventional stimulus
measures with a target to
double monetary base and
to engineer an inflation of
2% per year.
Quantitative Easing – The Initial Results
0
0.01
0.02
0.03
0.04
0.05
0.06
0.07
-0.02
0.00
0.02
0.04
0.06
0.08
0.10
0 6 12 18 24 30 36
PM
I in
de
x ch
an
ge
, p
p
Ind
ust
ria
l P
rod
uct
ion
In
de
x ch
an
ge
, p
p
Months
Industrial production response to QE*
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
-0.01
0.00
0.01
0.02
0.03
0.04
0.05
0 6 12 18 24 30 36
PM
I Pri
ce I
nd
ex
cha
ng
e,
pp
Pri
ce In
de
x ch
an
ge
, p
p
Months
Consumer price index response 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
Jan
07
Ap
r 0
7Ju
l 0
7O
ct
07
Jan
08
Ap
r 0
8Ju
l 0
8O
ct
08
Jan
09
Ap
r 0
9Ju
l 0
9O
ct
09
Jan
10
Ap
r 1
0Ju
l 10
Oc
t 10
Jan
11
Ap
r 1
1Ju
l 11
Oc
t 11
Jan
12
Ap
r 1
2Ju
l 12
Oc
t 12
Jan
13
US
D b
n
Central bank balance sheets - extraordinary monetary policy measures carry on
Bank of England US Federal Reserve ECB
-2.0
-1.0
0.0
1.0
2.0
3.0
Jun
05
De
c 0
5
Jun
06
De
c 0
6
Jun
07
De
c 0
7
Jun
08
De
c 0
8
Jun
09
De
c 0
9
Jun
10
De
c 10
Jun
11
De
c 11
Jun
12
De
c 12
US Inflation expectations rose after QE announcement
Inflation Expectations QE Announcements
QE1
QE1Expansion
QE2
QE3?
Slide 7
The Russian economy has
been cooling down over the
last few months based on
key macro indicators.
The restrictive monetary
policy pursued by the
Central Bank of Russia,
fiscal tightening, fragile
external demand and flat oil
prices – are the main
reasons why we see this
negative trend.
We have downgraded our
forecasts for all scenarios
in 2013.
* 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 -0.7 Real GDP, industrial output and fixed capital investments have significantly cooled over the
last 3-5 months
Demand indicators -0.1 Retail sales are slowing, but real wage growth is still strong, which puts pressure on
corporate profit margins due to limited productivity gains
CPI -0.1 CPI peaked last February, but it is still above the CBR target range (5-6%). Slowing
monetary supply growth will help to bring down CPI in the following 12-16 months
Federal Budget
Balance 0.8
Budget policy is becoming more tight, budget deficit is under control, gradual adoption of the
“budget rule” (use of LT average oil prices in budget planning)
Money supply
(М2 aggregate) 0.1
M2 growth has decelerated in 2012 to 10-13% YoY, cheaper money would be helpful for the
economy
Changes in our forecasts, weighted probability scenario
Indicators 2012Recessionary
Scenario
Low Inflationary
Scenario
Inflationary Upturn
Scenario Real GDP, % 3.4% 1.7% 2.7% 3.0%Industrial Output, % 2.6% 1.2% 2.6% 3.1%Fixed Asset Investments, % 6.7% 2.3% 3.9% 4.5%Real Retail Sales, % 5.9% 3.1% 5.7% 5.9%Real Wages per capital, % 7.8% 4.4% 6.0% 6.4%CPI, % average per year 5.1% 5.8% 6.0% 7.0%CPI, % December YoY 6.6% 5.3% 5.9% 8.2%Trade Balance, $ bln 193.8 130.0 165.6 174.5Federal Budget Revenues, $ bln 12 854 10 605 12 940 13 385General Budget Deficit(-)/Surplus(+), % -0.2% -4.2% -0.7% 0.0%Money Supply (M2) 11.9% 10.2% 17.5% 21.9%Gross International Reserves (GIR), $ bln 537.6 440.9 524.7 533.1RUB/USD Exchange Rate, eop 30.4 33.2 30.3 29.5RUB/EUR Exchange Rate, eop 40.2 39.9 36.3 35.4CBR Dual-Currency Basket ($55/€45) 34.8 36.2 33.0 32.2Urals Crude Oil, average, $/bbl 110.6 85.0 109.0 115.0Scenario Probability 20% 30% 50%
Russian Econom y – 2013 Forecast
Slide 8
We see a strong case for
the Central Bank of Russia
to ease monetary policy.
We see several reasons for
this.
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.
Thirdly, economic
slowdown creates political
pressure on the CBR to
target both inflation and
GDP growth.
All in all, we estimate that
the CBR has room to cut
key policy rates by 50-100
bps 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- Nabbiullina 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
** Appointment for the CBR Chairman role is expected in June’2013
CBR leadership changes and interest rates*
-112
-76
-75
-47
-26
33
-150 -100 -50 0 50
EM, Latam
EM total
EM, CEEMEA
EM, Asia
DM total
Russia
Money market rate changes during 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
M2 growth, % yoy M0 growth, % yoy
Monetary aggregates growth is cooling down after the CBR's Inflation Targeting
Slide 9
CBR easing could be
positive for both equities
and local fixed income.
Expected interest rates cuts
by CBR between 25 and 100
bps could bring down OFZ
YTM by 25-95 bps.
High-grade corporate bond
spreads to OFZs could
tighten by 80-110 bps
depending on duration.
Also high-yield corporate
spreads to OFZs could
tighten by 170-220 bps
depending on duration.
CBR Easing – What If Scenarios
Interest rates*, % Interest rates change*, bps
Micex Equity Index, 2013 eop
Micex Equity Index, Mid’14 eop
Micex Equity Index, % ch. 2013 eop
Micex Equity Index, % ch. Mid’14 eop
Current Value 6.8% 0 1 437 1 437 1 437 0%
Expected
values
6.6% -25 1 525 1 691 6% 18%
6.3% -50 1 624 1 713 13% 19%
6.1% -75 1 646 1 736 15% 21%
5.8% -100 1 669 1 758 16% 22%
CBR easing impact on the Russian stock market based on previous easing episodes
* Average of money market rates, including CBR refinancing rate, Moscow interbank rate and average “Mosprime” rate for all
terms
Expected bond total returns based on previous easing episodes
Interest rates change**, bps
OFZ HG Corporate Bonds HY Corporate Bonds
Duration, years Duration, years Duration, years
2 3 7 2 3 2 3
Current YTM 0 6.0% 6.2% 6.7% 7.8% 8.2% 12.0% 12.3%
Expected Total
Returns
-25 7.2% 7.5% 8.9% 9.7% 10.9% 11.8% 14.1%
-50 7.5% 7.9% 10.1% 9.9% 11.5% 12.2% 14.9%
-75 7.7% 8.4% 11.3% 10.2% 12.0% 12.6% 15.6%
-100 7.9% 8.8% 12.5% 10.5% 12.6% 13.0% 16.4%
** “Mosprime” rate for 3 months
Source: CBR, Micex, Bloomberg, VTB Capital IM Research estimates
Slide 10
■ Equities
Slide 11
Global uncertainty has
forced investors to hoard
defensive assets. In the
current environment, most of
these assets may spell a
slow and certain wealth
destruction process in real
terms.
The strongly suppressed
appetite for risk assets
(especially, equities) appears
to have lead US fixed-income
funds to accumulate around
$1 trillion in excess
investments.
It is a matter of time until a
correction will occur,
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
Ass
ets
, U
SD
bn
Money market funds Savings accounts
In the US alone $9tn are 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
Yiel
d.%
1Y UST YTM
...despite the fact that it is earning almost 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 fund inflows are far below the long-term trend...
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
...while bond funds enjoy hefty subscriptions
Cumulative bond mutual fund net inflows, $bn Trend
$1 tn above long-term trend
Slide 12
-40,000
-20,000
0
20,000
40,000
$ m
n
Monthly net flows for US Equity mutual funds since the beginning of 2011
-40,000
-20,000
0
20,000
40,000
$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 Search Quairies 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
Google search query
statistics show that the
term ‘Great Rotation’ has
rapidly grown more
popular since December
2012.
US Equity fund inflows
moved firmly into positive
territory since the
beginning of 2013, while
bond fund inflows have
lost some momentum.
Nevertheless, it is still
premature to call for a
wholesale rotation from
fixed income into equities
based on recent
developments.
The Great Rotation – Reality or Myth ?
-400,000
0
400,000
800,000
1,200,000
1,600,000
2,000,000
$ m
n
Cumulative bond fund inflows less equity fund inflows since 2007
Slide 13
Russian Equities – Lagged Fixed Income for Too Long
The last 5 years proved to be exceptionally favorable for fixed income investors and vastly disappointing for equity investors.
Equities should 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 favor of minority shareholders and equity issuance becomes significantly positive.
Russia's fixed income market capitalization is now 2x larger than 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 first time in many years the balance of cash distributions are in favour of minority shareholders and equity issuance becomes meaningfully positive
0
50
100
150
200
250
300
350
99 00 01 02 03 04 05 06 07 08 09 10 11 12
Re
lati
ve p
erf
orm
an
ce i
nd
ex
Russian equities total return relative to bonds total return starting from 1999
MSCI Russia Total Return / EMBI+ Russia Total ReturnNormalized 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
De
via
tio
n f
rom
tre
nd
, %
% Deviation from normalized trend
Source: Bloomberg, VTB Capital IM Research estimates
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 Larger Than Equity Market Freefloat
RTS freefloat Mkt Cap, $ bn Fixed income Mkt Cap, $ bn
Slide 14
Russian Stocks: A Top-Down View
Source: Bloomberg, VTB Capital IM Research estimates
Long-term stock market
performance is mainly
determined by the corporate
profit growth, while P/E
multiple re-pricing is
responsible for short-term
volatility.
The downward EPS revision
cycle for Russian stocks is
almost over and the possibility
for positive surprises begin 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 61%.
RTS Index Top-Down Scenarios (Next 12 months)
Recessionary
Scenario
Low Inflation
Scenario
Inflationary Upturn
Scenario
EPS 2012E, $ 260.0 260.0 260.0 % change 2012 vs 2011 -20% 1% 19%EPS 2013E, $ 208.0 263.9 309.4Russian Sovereign Risk, % 4.0% 3.5% 5.0%Russian ERP, % 20.0% 9.0% 11.0%Terminal earnings growth, % 3.0% 3.0% 3.0%Current RTS Index Value 1420 1420 1420Target P/E multiple 4.8 10.5 7.7RTS Index Fair Value 990 2772 2383Upside/Downside, % -30.3% 95.3% 67.9%Dividend Yield, % 3.7% 4.6% 5.4%Total Return, % -26.6% 99.9% 73.3%Probability-weighted return, % 61.3%
Estimated probability, % 20% 30% 50%
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
18
08 09 10 11 12 13
2006-2010 Forward 12 months Low Inflation Scenario
Inflationary Upturn Scenario Recessionary Scenario
RTS Index Target P/E Scenarios
Slide 15
Russia 2011
Russia 2006
Russia 2015F
0%
10%
20%
30%
40%
50%
60%
70%
80%
12% 17% 22% 27% 32%
Div
ide
nd
Pa
you
t, %
ROE, %
As ROE declines, increasing dividend payout is a natural development
Dividends Should Help to Unlock Fundamental Upside
Compared to 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 4.5%
in 2012, with a payout ratio
of 20-25%. 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%
Russia China
S. Korea Mexico
Peru India
Poland Chile
Indonesia Argentina
Egypt Philippines
Brazil Malaysia Thailand S. Africa
Taiwan Columbia
Russia has the lowest dividend payout ratio (% net income) among emerging markets
25%
18% 17%
21%
12%
18%
13%
0%
5%
10%
15%
20%
25%
30%
2012F 2011 2010 2009 2008 2007 2006
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%
2007 2008 2009 2010 2011 2012
Div
ide
nd
Yie
ld,
%
Russia now offers a dividend yield premium to emerging markets
Russia Emerging Markets (MSCI EM)
Source: Bloomberg, RTS-MICEX, VTB Capital IM Research estimates
Slide 16
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
EPS Scenarios for 2013
Our 2013 EPS
expectations for the RTS
index are quite restrained
due to the fact that the
most heavily weighted
sectors in the index (oil
and gas, banks) have
limited long-term growth
potential from the current
base.
According to our
estimates, the aggregate
ROE for the RTS Index in
2013 will be: 15.7% in the
inflationary scenario
(which barely brings
earnings to their long-
term trend), 13.4% in the
low inflationary scenario,
and 10.6% in the
recessionary scenario.
The street consensus
calls for 13.3% ROE in
2013.
-+2%
+19%
-20%
Source: Bloomberg, VTB Capital IM Research estimates
12.7%11.8%
12.9%13.7%
22.2%
16.9%
12.6%10.9%
8.4%
19.1%
14.7%13.3% 13.4%
10.6%
15.7%
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
7.0
1.9
1.5
1.0
1.0
0.7
0.6
0.2
0.1
-4.0 -2.0 0.0 2.0 4.0 6.0 8.0
RTS Index total
Oil
Gas
Telecoms
Banking
Electric Utilities
Metals & Mining
Consumer Cyclicals
Others
Sector contribution to RTS Index EPS change in 2013 vs 2012 (probability-weighted for 3 scenarios), percentage points
-75.6%
-45.8%
-40.5%
-20.0%
-18.0%
-14.4%
-14.0%
1.8%
8.3%
8.8%
43.7%
-100% -50% 0% 50% 100%
Steel
Base Metals
Discos
Gencos
Fertilizers
Mobiles
Gazprom
Fixed-Line Telcos
Oil&Gas
Banking
Retail
Consensus EPS Revisions 2011-2012 (peak to trough), %
Slide 17
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 10.5x, which is
close to the upper band of the
historical range.
The inflationary scenario
assumes a target P/E value of
7.7x due to higher interest
rates and risk premiums.
A recessionary scenario
assumes a P/E of 4.8x.
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 54,4% 12,1% 5,1 6,9 -26%
Metals and Fertilizers 13,9% 11,1% 11,5 11,6 -1%
Telecommunication 4,5% 7,5% 9,4 12,0 -21%
Consumer Sector 1,9% 8,9% 18,6 21,4 -13%
Financials 18,5% 27,1% 5,0 9,6 -48%
Electric Utilities 6,0% 3,5% 7,7 11,5 -33%
Others 0,9% 29,8% 6,0 11,0 -45%
Total 100,0% 100,0% 6,6 11,2 -41%
Total factoring in MSCI EM 7,7 11,2 -32%
Source: Bloomberg, VTB Capital IM Research estimates
0
3
6
9
12
15
18
08 09 10 11 12 13
2006-2010 Forward 12 months Low Inflation Scenario
Inflationary Upturn Scenario Recessionary Scenario
RTS Index Target P/E Scenarios
-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)
Slide 18
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 may
point to a market reversal
as it was in the late 2008.
Dividend Stories in the Sample
Lukoil
MTS
Tatneft preferred
Surgutneftegaz preferred
Bashneft preferred
Gazpromneft
Source: Bloomberg, VTB Capital IM Research estimates
0
2
4
6
8
10
12
14
2006 2007 2008 2009 2010 2011 2012
P/E
Ra
tio
Dividend Stories MSCI Russia Index
Dividend stories no longer command a sizable discount to the broad market...
-80%
-30%
20%
70%
120%
170%
220%
2006 2007 2008 2009 2010 2011 2012 2013
Pe
rfo
rma
nce
Ind
ex
Dividend stories MSCI Russia Index
Total return performance ddddddd(including dividend reinvestment), %
0
1
2
3
4
5
6
7
8
9
10
-80%
-60%
-40%
-20%
0%
20%
40%
60%
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 indication of marketreversal
Slide 19
0
2
4
6
8
10
12
14
0
20
40
60
80
100
120
140
P/E
Ratio
Rel
ati
ve P
erfo
rm
an
ce
Ind
ex
Small-Caps outperform the broad market 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 ?
200
400
600
800
1000
1200
1400
1600
1800
0
20
40
60
80
100
120
140
Rel
ati
ve P
erfo
rm
an
ce
Ind
ex
Small-Caps relative to the market
Small-caps relative to the market MSCI Russia Index (rhs)
Source: Bloomberg, VTB Capital IM Research estimates
Slide 20
■ Fixed Income
Slide 21
We expect that the 12m
total return for sovereign
ruble bonds to be 7.9% in
USD.
Corporate bonds could
return 9.1% in USD during
the next 12 months.
Corporate credit spreads
were generally flat in
1Q13 and still have room
for narrowing.
CBR easing could trigger
domestic and foreign
demand for ruble bonds
as a whole.
Ruble Bonds
Source: Central Bank of Russia, Rosstat, Cbonds, Bloomberg, VTB Capital IM Research estimates
0
100
200
300
400Corporate Ruble bonds Z-SPREAD, basis points
Corporate Ruble Bonds
4
6
8
10
12
Russian debt YTMs, %
OFZ Corporate Ruble Bonds
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
Ma
turi
ty,%
Duration, Years
OFZ Yield Curve
First-tier Ruble denominated government and corporate bonds
Corporate Yield Curve
R uble BondsC urrent
Value
R ecessionary
Scenario
L ow
Inflationary
Scenario
Inflationary
Upturn
Scenario
C orporate Bonds, spreads to
OF Z, bps241 365 1 80 262
W eighted Average Duration, years
OF Z 4.0 4.0 4.0 4.0
C orporate Bonds 2.0 2.0 2.0 2.0
E xpected Y ield-to-Maturity R UB terms, %
OF Z 6.9% 8.2% 6.6% 7.4%
C orporate Bonds 8.3% 1 1 .8% 8.4% 1 0.0%
E xpected T otal R eturn USD terms, % per annum
E xpected R UB/USD appreciation
(+) / depreciation (-), %-6.8% 2.4% 5.0%
OF Zs -3.2% 1 0.6% 1 0.8%
C orporate Bonds -1 .3% 1 1 .1 % 1 2.1 %
W eighted average of 3 scenarios (USD)
OF Z 7.9%
C orporate Bonds 9.1 %
Scenario probability, % 20% 30% 50%
Slide 22
10-year OFZ yields adjusted for CPI and FX expectations do not look very attractive compared to other EMs Based on comparison with other EMs, Russian long-term ruble rates look fair.
EM Interest Rates adjusted for Inflation & FX Expectations
Long Term Ruble Interest Rates Look Fair Based on EM Comparison
-600
-400
-200
0
200
400
600
800
1000
EM Historical Spreads 10YR-CPI, b.p. (2005 – present, ex 2H 2008 – 2009)
last average
Russia
Turkey Indonesia
Poland
South Africa
South Korea
Mexico Hungary Czech Republic
Chile
Philippines
Brazil
0
2
4
6
8
10
12
0 2 4 6 8 10 12
CP
I, %
10 Year OFZ Yields, %
Long Term Interest Rates vs CPI
Nom. Interest
Rate, % Current CPI, %
Real Rate, bp, (1)-(2)
Ex CPI 4Q Ahead
Anticipated 1Y change in inflation, bp
Current FX Rate
Expected FX Depreciation
(+), bp
Real Interest Rate adj. on FX & Infl.Expectations,
bp, (3)-(5)-(8)
Current CDS, bp
1 2 3 4 5 6 8 9 10 Россия 6.9 7.3 -40 30.2 Recession Scenario 5.3 -200 986 -826 150 Low Inflation Scenario 5.9 -140 27 74 150 Inflation Upturn Scenario 8.2 90 -238 109 150 Turkey 6.9 7.03 -10 6 -103 1.8 10 83 138 Indonesia 5.8 5.3 49 5.7 39 9678 -3 13 139 Poland 4.0 1.3 273 2.3 100 3.1 241 -68 91 South Africa 7.2 5.9 129 5.6 -35 8.9 -88 251 173 South Korea 3.1 1.4 172 2.6 120 1086.3 -381 432 68 Mexico 5.3 3.6 173 3.4 -19 12.7 -561 753 94 Hungary 6.4 2.8 362 3.7 90 219.5 843 -571 344 Czech 2.4 1.7 68 1.6 -10 19.1 223 -145 57 Chile 5.7 1.3 436 2.7 140 472.4 161 135 65 Philippines 3.8 3.4 40 4 60 40.7 -301 281 100 Brazil 9.8 6.31 353 5.3 -101 2.0 30 424 131 EM, Ex Russia 144 127
Source: Bloomberg, VTB Capital IM Research estimates
Slide 23
Credit Spreads – Betting On Corporate “Long End” With
Reasonable Credit Quality
High-yield corporate spreads with 1-2 year duration look attractive and are trading ~600bps above OFZ rates.
High-grade corporate spreads on the long end have been widening during 2012 ─ 1Q 2013 from 80bps to 205bps. The latter together with expected CBR interest rate cuts make the rationale for our second favorite bet.
Financial sector spreads look less attractive when weighed against potential risks. We believe that the economic slowdown and resulting pressure on loan portfolio quality are not yet priced in.
0
100
200
300
400
500
600
700
800
Corporate Credit Spreads
Corps - HG 1Y Corps - HG 2Y Corps - HG 3Y
Corps - 2nd Tier 1Y Corps - 2nd Tier 2Y Corps - 2nd Tier 3Y
Corps - HY 1Y Corps - HY 2Y Corps - HY 3Y
0
100
200
300
400
500
600
700
800
Financial Credit Spreads
Fins - HG 1Y Fins - HG 2Y Fins - HG 3Y
Fins - 2nd Tier 1Y Fins - 2nd Tier 2Y Fins - HY 1Y
Fins - HY 2Y
0
100
200
300
400
500
600
700
800
Corporate Credit Spreads (less than 1 year)
Corps - 2nd Tier 6M Corps - HY 6M
0
100
200
300
400
500
600
700
800
Financial Credit Spreads (less than 1 year)
Fins - HG 6M Fins - 2nd Tier 6M Fins - HY 6M
Source: Bloomberg, Moscow Exchange, VTB Capital IM Research estimates
Slide 24
Russian Eurobonds
came under pressure in
the 1Q13, especially in
the sovereign and
investment grade
corporate segments.
We maintain a selective
stance towards Russian
Eurobonds. We prefer
the high-yield corporate
segment under a low
inflationary scenario.
However, should the
global economic cycle
decline ─ sovereign and
investment grade
corporate Eurobonds
could outperform ruble
bonds in USD terms.
Russian Eurobonds
0
200
400
600
800
1000Russian Eurobonds OAS spreads, bps
Sovereign Eurobonds
High Grade Corporate Eurobonds
High Yield Corporate Eurobonds
0
2
4
6
8
10
12Russian Eurobond YTMs, %
Sovereign Eurobonds
High Grade Corporate Eurobonds
High Yield Corporate Eurobonds
0
1
2
3
4
5
6
0 2 4 6 8 10 12 14 16 18
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
R uble BondsC urrent
Value
R ecessionary
Scenario
L ow
Inflationary
Scenario
Inflationary
Upturn
Scenario
C orporate Bonds, spreads to
OF Z, bps241 365 1 80 262
W eighted Average Duration, years
OF Z 4.0 4.0 4.0 4.0
C orporate Bonds 2.0 2.0 2.0 2.0
E xpected Y ield-to-Maturity R UB terms, %
OF Z 6.9% 8.2% 6.6% 7.4%
C orporate Bonds 8.3% 1 1 .8% 8.4% 1 0.0%
E xpected T otal R eturn USD terms, % per annum
E xpected R UB/USD appreciation
(+) / depreciation (-), %-6.8% 2.4% 5.0%
OF Zs -3.2% 1 0.6% 1 0.8%
C orporate Bonds -1 .3% 1 1 .1 % 1 2.1 %
W eighted average of 3 scenarios (USD)
OF Z 7.9%
C orporate Bonds 9.1 %
Scenario probability, % 20% 30% 50%
Slide 25
■ Appendix
Slide 26
Economic cycle Cycle description Scenario
probability Reasoning
Recessionary
The scenario is accompanied by a decline in economic activity. Real GDP growth is significantly below potential GDP growth. Inflation could be at zero or negative. Financial assets are under stress, company valuations could be below fair value.
30%
The 2013 consensus forecasts* for GDP growth and inflation have begun gaining positive momentum. A recessionary scenario has already materialized in the Euro area. A slowdown has occurred in the Chinese economy.
Inflationary Upturn
This scenario is accompanied by an increase in economic activity. Real GDP growth and inflation peaks.
60%
Central banks continue their expansionary and unconventional monetary policies. These measures increase the probability of an inflationary upturn scenario. Thus it could mitigate the debt situation and fiscal deficits of developed countries over the long term.
Low Inflationary
The most favorable cycle for risky assets. This scenario is accompanied by low inflation and expanding economic activity. Real GDP growth accelerates while inflation is low and stable.
10% Central banks continue their expansionary unconventional monetary policies while inflationary forces remain well anchored.
Sources Bloomberg, VTB Capital IM Research estimates
* Bloomberg consensus forecast
2013 Macro Scenarios
Slide 27
Equities: Sector Preferences
Source: Bloomberg, VTB Capital IM Research estimates
We see Financials, Utilities and Consumer Staples (with the exception of Retail) 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 mobile telecoms 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 11,2% 0 -43% 2 0 0 0% 0 84% 1 0,45
Metals&Mining 22,3% 1 29% -1 0 0 6% 0 49% 2 0,55
Mobile Telecoms 23,9% 1 -35% 2 -1 0 8% 0 123% -1 0,48
Fixed-line
Telecoms14,1% 1 -3% 0 0 0 -9% -1 75% 2 0,55
Financials 49,6% 2 -51% 2 -1 0 3% 0 65% 2 1,33
Consumer 21,6% 1 4% 0 0 1 18% 1 96% 0 0,63
Electric Gencos 61,6% 2 -42% 2 -1 0 -7% -1 40% 2 1,18
Electric Discos 50,3% 2 -41% 2 -2 0 -13% -1 31% 2 1,10
Weight 7,5% 7,5% 100%40% 15% 15% 15%
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
0,5
0,5
0,5
0,6
0,6
1,1
1,2
1,3
0 0,4 0,8 1,2 1,6
Metals&Mining
Fixed-line Telecoms
Mobile Telecoms
Oil&Gas
Consumer
Electric Discos
Electric Gencos
Financials
Sector Aggregate Score
11.2%
14.1%
21.6%
22.3%
23.9%
49.6%
50.3%
61.6%
0.0% 40.0% 80.0%
Oil&Gas
Fixed-line Telecoms
Consumer
Metals&Mining
Mobile Telecoms
Financials
Electric Discos
Electric Gencos
DCF Upside by Sector, %
Slide 28
Banks and Utilities look
attractive based on a
combination of relative
valuation measures.
Retail and Mobile
Telecom 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
Source: Bloomberg, VTB Capital IM Research estimates
Metals&Mining
Oil&Gas
Mobile Telecoms
Fixed-line TelecomsElectricity Gencos
Electricity Discos
Banking
Consumer Staples
Retail
Transportation
Fertilizers
4,0
6,0
8,0
10,0
12,0
14,0
16,0
18,0
20,0
-5% 5% 15% 25% 35% 45%
P/E
20
13E
EPS CAGR 12-15E
P/E Multiples versus expected growth
Attractive
Expensive
118%
113.4%
94%
90%
87%
84%
67%
55%
42%
33%
26%
0% 20% 40% 60% 80% 100% 120% 140%
Metals&Mining
Mobile Telcos
Retail
Fertilizers
Transportation
Fixed-line Telcom
Oil&Gas
Electric Gencos
Consumer discretionary
Banking
Electric Grids
EV/EBITDA 2013E as % of Last 5Y Average*
Oil&Gas
Mobile Telecoms
Fixed-line Telecoms
Electricity GenerationElectricity Distribution
Banking
Consumer staples
Retail
Transportation
Fertilizer
0,0
1,0
2,0
3,0
4,0
5,0
6,0
5% 15% 25% 35% 45% 55%
P/B
V M
ult
iple
ROE 2013E, %
P/BV vs ROE
Attractive
Expensive
123%
110%
84%
81%
75%
66%
65%
61%
49%
49%
31%
0% 20% 40% 60% 80% 100% 120% 140%
Mobile Telcos
Retail
Oil&Gas
Consumer discretionary
Fixed-line Telcom
Fertilizers
Banking
Transportation
Metals&Mining
Electric Gencos
Electric Grids
P/BV as % of Last 5Y Average*
Slide 29
Russian electric utilities
display a highly
pronounced discount to
international peers on key
valuation metrics.
Metals & mining, as well
as retail, look overvalued
compared to international
peers.
It is best to avoid retail and
mobile telecoms and
instead search for value in
electric utilities / metals &
mining from an
opportunistic point of view.
Sector Relative Valuations (continued)
Source: Bloomberg, VTB Capital IM Research estimates
29%
4%
-3%
-21%
-35%
-41% -42% -43%
-51%
-60%
-40%
-20%
0%
20%
40%
P/E 13E Premium/Discount Relative to International Peers
3,0%
-24% -24%
-30%
-51% -51% -53%-55%
-70%
-80%
-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
P/BV Premium / Discount Relative to International Peers
7%
-11% -12%
-23%-25%
-31%
-56%
-69%
-80%
-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
EV/EBITDA 13E Premium/Discount vs International Peers
Metals&Mining
Oil&Gas
Mobile Telecoms
Fixed-line TelecomsElectricity GenerationElectric Grids
Banking
Consumer Staples
Retail
Transportation
Fertilizer
0%
20%
40%
60%
80%
100%
120%
140%
30% 40% 50% 60% 70% 80%
P/
BV
as
% o
f La
st 5
Y A
vg
% Buys
Electric Utilities / Metals&Mining worth a look based on a contrarian approach. Retail and Mobile telecom sectors look overheated
Cheap and
Unpopular
Expensive and
Popular
Slide 30
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.
Normalization 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
look vulnerable in the long
term.
Source: Bloomberg, VTB Capital IM Research estimates
14.7%
13.8%
-13.4%
-26.8%
-29.2%
-48.8%
-52.7%
-53.7%
-65.3%
-78.5%
-90% -70% -50% -30% -10% 10% 30%
Mobiles
Retail
Base Metals
Oil&Gas
Steel
Banking
Gazprom
Discos
Gold
Gencos
Trend P/Es as % of Historical Average
28.3%
16.1%
7.9%
3.9%
-9.5%
-10.2%
-24.5%
-27.1%
-29.1%
-30.2%
-50% -30% -10% 10% 30% 50%
Retail
Mobiles
Banking
Oil&Gas
Base Metals
Gazprom
Steel
Discos
Gencos
Gold
Consensus Forward 12m EPS as % of Long-Term Trend
-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 trough), %
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%
Electric Grids
Electric Gencos
Metals&Mining
Consumer discretionary
Transportation
Fertilizers
Oil&Gas
Retail
Fixed-line Telcom
Mobile Telcos
Banking
EPS Revisions Resulting Form ROE Normalization
Slide 31
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 5 years.
Sectors typically considered
to be “growth” now discount
very cautious assumptions in
respect to future growth
rates.
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%.
Source: Bloomberg, VTB Capital IM Research estimates
Sector
Forward
12m
P/E
LT ROE
Dividend
payout,
%
Target
P/E
Implied
Growth (5y)
Oil&Gas 4.4 12.0% 70% 8.9 -15.9%
Metals&Mining 9.0 15.0% 70% 10.0 -2.6%
Banking 5.7 15.0% 50% 12.5 -17.9%
"No-growth" Sector 9.1 12.0% 50% 9.1 0.0%
Mobiles 9.8 20.0% 80% 10.7 -2.1%
Fixed Line 9.4 15.0% 70% 10.0 -1.5%
Utility Gencos 7.8 11.0% 90% 8.7 -2.7%
Utility Discos 8.4 11.0% 90% 8.7 -0.8%
Consumer Goods 5.9 15.0% 60% 10.9 -14.2%
Retail 21.4 15.0% 50% 12.5 14.3%
RTS Index 5.9 15.0% 70% 10.0 -12.4%
DDM-implied Next 5-year Growth Rates
14.3%
0.0%
-0.8%
-1.5%
-2.1%
-2.6%
-2.7%
-12.4%
-14.2%
-15.9%
-17.9%
-30% -20% -10% 0% 10% 20%
Retail
"No-growth" Sector
Utility Discos
Fixed Line
Mobiles
Metals&Mining
Utility Gencos
RTS Index
Consumer Goods
Oil&Gas
Banking
5Y EPS CAGR, %
DDM-implied EPS CAGR for next 5 years
0%
10%
20%
30%
40%
50%
60%
5% 15% 25% 35% 50% 70% 90% 120% 160% 200% 400%
Dif
fere
nce
in th
e a
vera
ge
gro
wth
rate
(5-
yea
r ho
rizo
n)
P/E Premium, %
The theoretical relationship between the P/E premiums and the average annual growth in earnings per 5-year horizon, compared with the company without growth
60
70
80
90
100
110
120
130
140
Rel
ativ
e pe
rfo
rman
ce
Growth Performance Relative to Value (based on MSCI Russia sub-indices)
Slide 32
VTB Capital Investment Management
10 Presnenskaya Emb. Block C
Moscow, Russia 123317
Tel: +7 (495) 725-55-40
Fax: +7 (495) 725-55-38
Contacts
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,
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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.
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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
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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.
Past performance: The value of any investment may fluctuate as a result of market changes. Past performance is not indicative of future performance. The information in this document is not intended to predict actual
results and no assurances are given with respect thereto.
Risks: Certain transactions, including futures, options and other derivatives, involve significant risk, and may not be suitable for all investors. Many persons, physical and legal, may be 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.
Conflicts: The VTB Group may and may seek to do business with any companies covered in this material. Thus, investors should be aware that the VTB Group may have a conflict of interest that could affect the
objectivity of this material. The VTB Group, its officers, directors, and employees may from time to time have long or short positions in, act as principal in, and buy or sell, the securities or derivatives, if any, referred to
in this material, and other divisions of the VTB Group outside of the sales and trading division may perform investment 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 Services Authority’s Conduct of Business rules (or equivalent outside of
the UK) and is not intended to be distributed directly or indirectly to any other class of person. It is not available 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 TO TRANSACTING, POTENTIAL
INVESTORS SHOULD ENSURE THAT THEY FULLY UNDERSTAND THE TERMS OF THE SECURITIES/TRANSACTION AND ANY RISKS ASSOCIATED THEREWITH. THIS DOCUMENT IS NOT A
PROSPECTUS. INVESTORS SHOULD ONLY SUBSCRIBE FOR ANY TRANSFERABLE SECURITIES DESCRIBED HEREIN ON THE BASIS OF INFORMATION IN THE LEGALLY BINDING TRANSACTION
DOCUMENT(S) AND NOT ON THE BASIS OF ANY INFORMATION PROVIDED HEREIN.
Copyright VTB Capital 2012 (all rights reserved).
John Papesh
Head of International Distribution
E-mail: John.Papesh@vtbcapital.com
Tel: +971 (4) 377-07-92
Vladimir Potapov, CFA
Chief Executive Officer
Global Head of Portfolio Management
E-mail: Vladimir.Potapov@vtbcapital.com
Tel: +7 (495) 725-55-40
www.vtbcapital-im.com