Zimbabwe 2010 Outlook - Rencap

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Zimbabwe: 2010 outlookCementing the turnaround

Dzika Danha+263 912 573 [email protected]

Anthea Alexander+263 912 421 [email protected] Samir Gadio+263 912 421 [email protected]

OutlookEquity research

29 January 2010

Equity strategyZimbabwe

Evidence of economic turnaround in 2009. Last year saw a tipping point in the reversal of Zimbabwe’s economic

fortunes, effectively ending what we regard as the country’s lost decade (1998-2008) – a period characterised by a precipitous

GDP decline (IMF estimate 40%, cumulatively) and hyperinflation that reached epic proportions. Central to the relative economic

stability reached in 2009 was the formation of a unity government in Feb 2009, and the subsequent dollarisation of Zimbabwe’s

economy in the form of a multi-currency regime. Consequently, the country achieved positive economic growth for the first time

in 10 years, registered at 3.7% by the IMF. Furthermore, inflation was halted, and YoY deflation of -7.7% was achieved to Dec

2010 (Central Statistics Office).

Political developments will determine the nature of economic progress. The relative political stability

achieved in the past 12 months is clearly positive in having re-started the economy. We think more tangible results in resolving

outstanding issues surrounding the Global Political Agreement (GPA) between Zimbabwe’s various political parties will result in

more robust economic growth, accompanied by further improvements in foreign investor sentiment. Any stalling of politicalprogress will curtail economic recovery. We forecast GDP growth of 7.1% for 2010, and expect YoY inflation to trend to 6.1% by

the year-end.

Equities outperformed expectations in 2009. The market’s response to macroeconomic improvements post-

dollarisation have exceeded our expectations. We view the equity market’s performance as largely a mean-reversion to historical

levels, with most of the gains having taken place in 1H09. In 3Q09, performance was more subdued as the market entered a

consolidation phase. Liquidity continued to improve on the back of increased foreign inflows and greater transparency, and 4Q

saw an average daily traded volume of $2.3mn. The fourth quarter also saw the release of some corporate earnings, which were

predominantly poor as companies continued to adjust to the new environment, and this weighed on the market. We estimate the

market capitalisation of the Zimbabwe Stock Exchange (ZSE) advanced 301% to $4.2bn over 2009, and the rebased Industrial

Index and Mining Index closed at 151.99 (+52%), and 185.50 (+85.5%), respectively, at YE09.

Outlook for 2010: We expect recapitalisation by corporates to be a central theme for equities in Zimbabwe over 2010,

driven by the need for companies to sharpen their ability to compete by improving efficiency, through capex and securing

adequate working capital. Domestic credit remains expensive and foreign credit markets are still difficult to access for local

companies, so we think equity issuance is likely to increase – particularly by small and midsized names. In turn, we think this

may hold back the performance of mid-tier stocks in 1H10, although we expect blue chips to outperform the market over the

period. We expect 2H10 to see more positive performance, as recapitalisation and sustained macroeconomic stability bear fruit

in the form of improving corporate profitability. Our base-case target market capitalisation for the ZSE is $5.5bn at YE10,

representing a 31% increase on YE09. Our target YE11 market cap is $6.9bn

Our top picks are Econet Wireless (BUY, target price [TP] $5.90); CBZ Holdings (BUY, TP $0.34); Delta Corporation (BUY,

TP $1.20); AICO Africa (BUY, TP $1.38); Innscor Africa (BUY, TP $1.04); and Pearl Properties (BUY, TP $0.11). We have

placed our rating and target price on African Sun Under Review (previously Buy, $0.36/share), pending adjustments to ourmodel and estimates on the back of the company’s first ever dollar-denominated earnings release.

Important disclosures are found at the Disclosures Appendix. Communicated by Renaissance Securities (Cyprus) Limited, regulated by the Cyprus Securities & ExchangeCommission, which together with non-US affiliates operates outside of the USA under the brand name of Renaissance Capital.



29 January 2010 Zimbabwe: 2010 outlook Renaissance Capital

2

2009: The tipping point

Last year was a tipping point in the reversal of Zimbabwe’s economic fortunes,

effectively ending what we regard as the country’s lost decade of 1998-2008 – a

period characterised by a precipitous GDP decline (IMF estimate 40%) and

hyperinflation that reached epic proportions. Central to the relative economic

stability reached in 2009 was the formation of a unity government in Feb 2009 and

the subsequent adoption of dollarisation in the form of a multi-currency regime.

Consequently, Zimbabwe achieved positive economic growth for the first time in 10

years registered at approximately 3.7% according to the IMF. Inflation was halted,

and estimated deflation of -7.7% YoY was achieved to Jan 2010 (Central Statistics

Office).

Against the backdrop of Zimbabwe’s nascent recovery, significant progress wasmade on a number of fronts last year. Government finances accelerated, with

monthly receipts of $3mn in Jan 2009, rising to an estimated $100mn in Dec 2009

(MoF). International acceptance of the GPA increased donor funding to the country,

to support social causes. In addition, the banking system continued to revive, with

total deposits at the start of Dec 2009 amounting to $1.2bn, vs about $200mn at the

start of 2009. Despite the signing of the GPA, however, political tensions remained

evident, culminating in the Movement for Democratic Change (MDC) temporarily

pulling out of the unity government in October, due to outstanding issues regarding

the GPA. Subsequent interventions by the Southern African Development

Community (SADC), and more importantly incumbent South African President Jacob

Zuma, have seen a renewed effort to deal with all outstanding issues relating to the

agreement. Political tensions have also limited the inflow of funding from external

sources, specifically the West, however Zimbabwe did receive its general allocationfrom the IMF ($510mn), under liquidity support measures to combat the global credit

crunch.

Economic outlook for 2010

Although the economic recovery seen since the start of 2009 remains fragile, we

see opportunities to further entrench the economic gains made last year if policies

are maintained consistently and political tensions calmed. On this front, we expect

dollarisation to remain in place for the foreseeable future – a factor we regard as

critical given its central role in the recovery so far. Politics remains the keydeterminant of external funding for government – specifically, how quickly the

respective parties can resolve their outstanding issues. For 2010, we estimate

Zimbabwe’s intrinsic fiscal shortfall will increase to $810mn (14.6%/GDP), from

$391mn in 2009 (7.5%/GDP). The country’s Ministry of Finance assumes the deficit

will be funded externally. We estimate Zimbabwe’s external debt at $5.4bn, of which

$3.8bn is arrears. We note that the government plans to set up a debt management

and clearance office at the Ministry of Finance to devise a reduction and clearance

strategy. Given that Zimbabwe has not benefited from any of the IMF’s Heavily

Indebted Poor Countries (HIPC) initiatives, we expect this agency to be central to

any debt-reduction strategy.

We think the signing and ratification of the Bilateral Investment Promotion andProtection Agreement (BIPPA) agreement between Zimbabwe and South Africa, in

Dec 2009, should spur increased FDI inflows, particularly from South African

Zimbabwe: Economic overview



Renaissance Capital Zimbabwe: 2010 outlook 29 January 2010

3

corporates. Given the financial strain on Zimbabwe’s government, we expect to see

greater effort in terms of a privatisation strategy. Put simply, the government doesnot have the resources to adequately capitalise most of its parastatals, support loss-

making entities or adequately support its own finances. Other initiatives to promote

greater investment will likely include resolving issues at the Reserve Bank of

Zimbabwe (RBZ) to better promote depth in the financial system, and therefore

credit growth, as well as clarity on the issue of tenure on agricultural land. We think

political noise will continue to threaten economic progress, particularly in terms of

how it affects foreign investor sentiment and therefore FX inflows. However we do

not expect elections to take place in the medium term, given the potential for

repolarisation of the political climate. In our view, the GPA remains the most viable

political arrangement for Zimbabwe. We remain positive on economic prospects for

2010, and forecast GDP growth of 7.1%, and year-end YoY inflation of 6.1%.

Figure 1: Zimbabwe – economic assumptions2000 2001 2002 2003 2004 2005 2006 2007 2008 2009E 2010E 2011E 2012E

Nominal GDP, $bn 6.1 3.7 2.3 1.9 3.9 3.9 3.7 3.6 3.1 5.2 5.5 6.1 6.7Nominal GDP (growth %) 5.9 -39.1 -36.6 -20.6 109.8 -0.8 -3.3 -4.2 -12.2 65.3 5.8 10.9 9.8Nominal GDP market prices, ZMDbn 6.1 3.7 2.3 1.9 3.9 3.9 3.7 3.6 3.1 5.2 5.5 6.1 6.7Nominal GDP market prices (growth %) 5.9 -39.1 -36.6 -20.6 109.8 -0.8 -3.3 -4.2 -12.2 13.1 46.2 5.8 10.9Real GDP growth, % -7.3 -2.7 -4.4 -10.4 -3.6 -4.0 -6.3 -6.9 -14.1 3.7 7.1 8.2 8.3Inflation (end of period, %) 55.2 112.1 198.9 598.7 132.7 585.5 1,281.1 66,212.0 - - 6.1 7.5 7.4Inflation (average, %) 55.7 74.4 134.5 384.7 381.4 266.7 1,033.5 12,562.5 - - 3.4 6.5 7Population 11.7 11.7 11.6 11.6 11.7 11.7 11.7 11.7 11.7 11.8 12.0 12.2 12.5Population growth, % -0.3 -0.3 -0.3 -0.3 1.1 0.0 0.0 0.0 0.0 0.6 1.7 1.7 2.5GDP per capita current, $ 519 316 201 160 333 330 319 305 268 441 458 500 536GDP per capita growth, % 6.3 -39.0 -36.5 -20.3 107.5 -0.8 -3.3 -4.2 -12.2 64.4 4.0 9.1 7.2

Source: Renaissance Capital estimates, IMF, RBZ, Ministry of Finance




4

Figure 2: Zimbabwe’s share of Sub-Sahara African output Figure 3: Zimbabwe’s nominal GDP and real growth

Source: IMF Source: IMF

Figure 4: Zimbabwe – current-account dynamics Figure 5: Zimbabwe – Foreign reserves

Source: IMF Source: IMF

Figure 6: 2009 MoM inflation in Zimbabwe

Source: CSO

0.0%

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$ b n

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$ m n

-3.5

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Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec

%



5


2009

Performance: Last year was eventful for the ZSE. Having been suspended

in Nov 2008, the exchange reopened on 19 Feb 2009 following the

formation of the unity government and official dollarisation of the economy.

Trade commenced in dollars, and a price-discovery process ensued.

Initially turnover was weak, but volume grew consistently over the year.

The market’s response to the macroeconomic improvements post

dollarisation exceeded our expectations. We view its performance as

largely a reversion to mean historical levels. In 3Q09, performance was

more subdued as the market entered a consolidation phase. Liquidity

continued to improve on the back of increased foreign inflows and greater

transparency. The fourth quarter saw the release of some corporate

earnings which were predominantly poor, as companies continued to adjustto the new environment, and this weighed on the market. The rebased

Industrial Index and Mining Index closed the year at 151.99 (+52%), and

185.50 (+85.5%), respectively.

Market capitalisation: As noted, market cap escalated rapidly in 1H. We

estimate the market’s value climbed 295%, from $1bn in Nov 2008 to

$4.1bn at 30 June 2009. The industrial and mining indices added 54% and

172%, respectively, in 1H09. In 3Q09, we estimate the market’s value

gained a further 5.1%, and in 4Q it retreated 3.4%. Over 2H, the industrial

and mining indices lost 1.6% and 31.7%, respectively. The market’s value

closed at $4.2bn on 31 Dec 2009 (up 301% for the year).

Turnover: Total market turnover was $392mn for 2009 vs an estimated$276mn for 2008 (+42%). There was a clear trend of improving liquidity

throughout the year and the daily average improved from $1.1mn for 1H09

to $2.3mn for 2H09, giving an overall average of $1.8mn for the year.

Some 74% of total turnover was achieved in 2H09. This was driven largely

by an increase in foreign investor inflows and improved FX liquidity in the

local market. Towards the end of 2009, trade volumes tapered off due to

persistent political uncertainty, compounded by a lull in demand commonly

experienced at year-end.

Sector split: We saw significant changes in sector weightings comparing

YE08 with YE09. The contribution of the telecoms, media and technology

sector increased to 20.5% from 8%, purely driven by gains in EconetWireless. Agriculture was also up (8% to 14%), due to appreciation in

Hippo Valley Estates and Seedco. A strong escalation in CBZ Holding’s

price saw a rise in the banking sector’s contribution to 10% (vs 8% at the

beginning of 2009). Despite gains in Innscor Africa, OK Zimbabwe and

Truworths, the retail sector’s contribution dropped to 10% from 16%. This

was due to losses in small-caps Edgars Stores, Medtech Holdings and Red

Star. The most notable decline was seen in the property sector, which

dropped from a 13% weighting to 3%. Three of the sector’s four counters

(Dawn Properties, Mashonaland Holdings and Pearl Properties) suffered

substantial declines.

Equity market overview




6

Best and worst ZSE performers

Figure 7: Top- and bottom-15 ZSE performers in 2009Top-15 perform ers Worst-15 perfor mers

Hippo Agriculture 1,800%

Redstar Food retail -94%Seedco Agriculture 1,800%

CFX Banking -80%

Truworths Clothing retail 1,500%

NTS Manufacturing -80%National Foods Food processing 1,025%

Dawn Property -74%

CBZ Banking 700%

Trust Banking -65%

Cafca Manufacturing 650%

CelsysTelecoms, media,technology

-63%

OK Zimbabwe Food retail 620%

Apex Manufacturing -63%TSL Agriculture 510%

Ariston Horticulture -63%

Star Africa Conglomerate 450%

Pearl Properties Property -63%

EconetTelecoms, media,technology

390%

Edgars Clothing retail -6%

Source: Zimbabwe Stock Exchange

Due to the price discovery process at the onset of dollar trading, we saw no clear

trends in terms of stock performance. However, some large caps, specifically

Econet and CBZ, have since emerged as top gainers, due to the release of positive

earnings results and increased foreign buying. Small and mid-cap names still

dominate the top performers’ list, due to speculative buying, however clearer trends

are emerging as transparency continues to improve. A number of retail stocks have

recovered rapidly and this is reflected in their share prices (in particular, OK

Zimbabwe and Innscor). At the other end of the spectrum, the property sector

seems largely to have been ignored by investors.



7


Figure 8: YtD performance of Zimbabwe’s industrial and mining indices Figure 9: Market capitalisation evolution

Source: Zimbabwe Stock Exchange Source: Zimbabwe Stock Exchange, Renaissance Capital estimates

Figure 10: One year turnover evolution Figure 11: Sector split by market capitalisation, 2009

Source: Zimbabwe Stock Exchange, Renaissance Capital estimates Source: Zimbabwe Stock Exchange, Renaissance Capital estimates

0

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F e b - 0 9

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Industrial index Mining index

2.2 1.7

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$ m n

Turnover, $mn % of MktCap

TMT21%

Beverages15%

Agriculture14%

Retail10%

Banking9%

Cement/Constr uction5%

Conglomerate5%

Insurance4%

Mining4%

Foodprocessing

4%

Manufacturing3%

Hotels3%

Property3%




8

2010 outlook

We expect recapitalisation to be a central theme for equities in 2010, driven by the

need for companies to improve their ability to compete by improving efficiencies,

through capex and securing adequate working capital. Credit in the local market

remains expensive and foreign credit markets remain difficult to access for local

companies, so we think equity issuance is likely to increase, particularly for small

and midsized names. We believe this may hold back the performance of mid-tier

stocks in 1H10, but we think blue chips will outperform the market over the period.

We regard management strategy, cost-containment strategies and capital adequacy

as crucial in identifying stock we think will perform strongly. We recommend an

overweight stance in the blue chips (including Delta Corporation and Econet

Wireless) particularly in 1H; and would look to go down the liquidity curve in 2H,following recapitalisation efforts by mid-tier names. We believe Zimbabwean equities

will continue to see net foreign inflows over the year, with local pension funds

becoming increasingly active as inflows improve. Although we remain bullish on

Zimbabwe equities in 2010, we see the central risks to this position as political, and

associated, potential adverse, policy changes.

Key catalysts

A political resolution and external funding. Any tangible political results

achieved, particularly in terms of resolving outstanding issues related to the

GPA, are likely to improve foreign investor sentiment and subsequent

inflows. On the flipside, we think continued stalling on a political resolution

will weaken Zimbabwe’s economic recovery, and therefore corporate

earnings. We would expect improved sentiment from Western governments

to result in increased funding for Zimbabwe’s government and traction on

debt reduction.

Earnings visibility and recapitalisation initiatives. We expect the first

set of full-year dollar earnings releases this quarter, and we think these will

likely highlight the strain on Zimbabwe’s corporates, in light of a lack of

capital and an inability to control costs in the face of strained revenues. We

think the blue chips’ results are more likely to surprise on the upside. Going

forward, we would expect capitalised businesses with dominant marketshares to outperform the market.

Equity strategy



9


Figure 12: Recommended sector allocationSector 2010 weight ing Comments Focus names 4Q09 weight ing

Telecoms OverweightMobile penetration at end-Dec 2009 estimated at 29% from about 14% at Dec 2008. We expectto see increased additions in 2010.

Econet Overweight

Manufacturing Underweight Low capacity utilisation, cost pressures, significant capex required. ART Corp, PGI Neutral

Mining NeutralWe expect production to increase rapidly from a low base following liberalisation of the sector in1Q09, assuming global commodity prices remain as they are; we expect continued growth inproduction in 2010. Further recapitalisation expected in the industry.

RioZim, Falgold,Hwange

Neutral

Banking OverweightTotal deposits in the system continue to rise estimated currently at $1.2bn in Dec 2009. Loan-to-deposit ratios remain low, which we think remains the opportunity. Further reforms of the RBZshould enhance sector efficiency.

CBZH, Barclays, NMB Overweight

Retail OverweightWe think competition in the sector is set to remain significant, and smaller players are likely tocontinue to drop out, in line with the reformalisation of the retail industry which started in 2009.We favour larger retailers with a nationwide presence.

Innscor, OKZimbabwe

Neutral

Beverages OverweightWe still see evidence of undersupply in the market. Per-capita consumption in the marketremains low (lager: 14 l/capita vs 40 l/capita in 1990s).

Delta Overweight

Insurance Underweight Insurance set to be a marginal product, in light of constrained disposable incomes. Zimre, Nicoz Diamond Underweight

Agriculture Neutral Prospects of upcoming season will depend on the availability of credit and availability of inputs.

AICO, Ariston,

Interfresh Neutral

Property NeutralWhile rental yields have improved in the short term, we think they are likely to be soft in themedium term. With a lack of marginal buyers in the sector we expect to see softer valuations,however we believe property prices will bottom out in 2010.

Pearl Properties,Dawn Properties,Mash Holdings

Neutral

Hotels NeutralOccupancies appear to have troughed in 1H09, particularly in resort areas. Capex remainscritical to ensuring higher average room rates. Significant pick up in occupancies from a lowbase in evidence in 4Q09 and 1Q10. The 2010 World Cup in South Africa is a potential catalyst.

African Sun, RTG Neutral

Source: Renaissance Capital estimates

We envisage three potential scenarios for Zimbabwe’s equity market over 2010,

specifically:

A bull scenario (to which we assign 10% probability), with a targetmarket capitalisation of $5.75bn (+37%). This scenario assumes a mildly

positive performance by equities in 1H, with large volumes of equity issuance

and genuine political progress. We assume a positive bias in 2H on more

encouraging earnings from corporate, as the benefits of recapitalisation and

sustained macroeconomic stability emerge, supported by increased FDI and

donor inflows. This scenario assumes global markets and commodity prices

continue to re-rate upwards, supported by continued government policy

measures to support a sustained global economic recovery.

A base scenario (to which we assign 60% probability), with a target

market capitalisation of $5.5bn, (+31%). This scenario assumes a

lacklustre performance by equities in 1H, with large volumes of equity

issuance and a lack of political clarity dampening foreign investor sentiment.It assumes a positive bias in 2H on more encouraging corporate earnings, as

we begin to see the benefits of recapitalisation and sustained

macroeconomic stability. This scenario also assumes global markets and

commodity prices hold at current levels.

A bear scenario (to which we assign 30% probability), with a target

market capitalisation of $4.75bn (+13%). This scenario assumes a negative

performance by equities in 1H against large volumes of equity issuance and a

regression of political progress. We assume a positive bias in 2H on more

encouraging earnings from corporates as we begin to see the benefits of

recapitalisation and sustained macroeconomic stability. This scenario

assumes global markets and commodities correct downwards aggressively,

on widespread fiscal and monetary tightening, impacting foreign investorsentiment towards emerging markets.



29 January 2010 Zimbabwe: 2010 outlook

10

Figure 13: Zimbabwe valuations

Company Price, LCU27 Jan 2010 Targetprice

Upside/downsidepotential

RatingP/E EV/EBITDA EBITDA marg in

Div. Yield2010E MktC$m2009E 2010E 2011E 2009E 2010E 2011E 2010E 2011E

Agriculture AICO 0.25 1.38 452% BUY 8.7x 6.2x 4.5x 4.9x 3.3x 2.4x 23% 26% 7% 13Construction PG Industries 0.10 0.39 290% BUY 50.0x 18.0x 7.0x 16.5x 12.5x 4.9x 7% 12% 4% 29Consumer and retail Dairibord Zimbabwe 0.11 0.44 304% BUY 13.6x 5.8x 4.0x 8.1x 3.4x 2.5x 12% 13% 7% 38Consumer and retail Delta Corporation 0.50 1.20 140% BUY 33.2x 14.5x 8.7x 46.9x 8.9x 5.8x 17% 21% 0% 57Consumer and retail Innscor 0.67 1.04 55% BUY 33.5x 12.4x 9.7x 31.3x 8.8x 6.8x 9% 9% 2% 36Consumer and retail OK Zimbabwe 0.07 Not rated 9.4x 8.8x 7.4x 7.0x 12% 12% 0% 5Hotels African Sun 0.07 Under review na 5.3x 2.0x -20.6x 4.1x 1.3x 23% 27% 18% 58Manufacturing ART Corp 0.03 0.15 359% BUY 5.7x 2.4x 1.8x 5.4x 2.4x 1.7x 10% 12% 17% 9Real estate Pearl Properties 0.03 0.11 348% BUY 0.0x 0.0x 3Telecoms Econet Wireless 4.79 5.91 23% BUY na 10.6x 7.4x 33.0x 5.5x 4.0x 53% 53% 3% 83Banking CBZ Holdings 0.17 0.34 100% BUY 2.1x 1.6x 1.3x 1.3x 1.0x 0.8x 0% 11Cap-weighted average, Zimbabwean non-financials 15.5x 10.8x 7.3x 29.7x 6.5x 4.6x 28% 30% 3% 2,1Renaissance Zimbabwe Index 88.60

Valuations




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Where the relevant issuer has a significant material event with further information pending or to be announced, it may be necessary to temporarily place the investment ratingUnder Review. This does not revise the previously published rating, but indicates that the analyst is actively reviewing the investment rating or waiting for sufficient informationto re-evaluate the analyst’s expectation of total return on equity.

If data upon which the rating is based is no longer valid, but updated data is not anticipated to be available in the near future, the investment rating may be Suspended untilfurther notice. The analyst may also choose to temporarily suspend maintenance of the investment rating when unable to provide an independent expectation of total returndue to circumstances beyond the analyst’s control such as an actual, apparent or potential conflict of interest or best business practice obligations. The analyst may not be atliberty to explain the reason for the suspension other than to Renaissance Capital’s Research Management and Compliance Officers. Previously published investment ratingsshould not be relied upon as they may no longer reflect the analysts’ current expectations of total return.

If issuing of research is restricted due to legal, regulatory or contractual obligations publishing investment ratings will be Restricted. Previously published investment ratingsshould not be relied upon as they may no longer reflect the analysts’ current expectations of total return. While restricted, the analyst may not always be able to keep youinformed of events or provide background information relating to the issuer.

If for any reason Renaissance Capital no longer wishes to provide continuous coverage of an issuer, investment ratings for the issuer will be Terminated. A notice will bepublished whenever formal coverage of an issuer is discontinued.

Where Renaissance Capital has not expressed a commitment to provide continuous coverage and/or an expectation of total return, to keep you informed, analysts may preparereports covering significant events or background information without an investment rating (Unrated).

Your decision to buy or sell a security should be based upon your personal investment objectives and should be made only after evaluating the security’s expected performanceand risk.

Renaissance Capital equity research distribution ratingsInvestment Rating Distribution Investment Banking Relationships*Renaissance Capital Research Renaissance Capital Research

Buy 133 37% Buy 3 60%Hold 51 14% Hold 1 20%Sell 13 4% Sell 0 0%Under Review 24 7% Under review 1 20%Suspended 0 0% Suspended 0 0%Restricted 0 0% Restricted 0 0%Unrated 138 38% Unrated 0 0%

359 5 *Companies from which RenCap has received compensation within the past 12 months.NR – Not RatedUR – Under Review

Disclosures appendix



© 2010 Renaissance Securities (Cyprus) Limited, an indirect subsidiary of RenaissanceCapital Holdings Limited ("Renaissance Capital"), which together with other subsidiariesoperates outside of the USA under the brand name of Renaissance Capital, for contactdetails see Bloomberg page RENA, or contact the relevant office . All rights reserved.This document and/or information has been prepared by and, except as otherwise specifiedherein, is communicated by Renaissance Securities (Cyprus) Limited, regulated by theCyprus Securities and Exchange Commission (License No: KEPEY 053/04). The RenCap-NES Leading GDP Indicator is a model that seeks to forecast GDP growth and wasdeveloped by and is the exclusive property of Renaissance Capital and the New EconomicSchool (e-mail: [email protected]).

This document is for information purposes only. The information presented herein does notcomprise a prospectus of securities for the purposes of EU Directive 2003/71/EC or Federal

Law No. 39-FZ of 22 April 1994 (as amended) of the Russian Federation "On the SecuritiesMarket". Any decision to purchase securities in any proposed offering should be madesolely on the basis of the information to be contained in the final prospectus published inrelation to such offering. This document does not form a fiduciary relationship or constituteadvice and is not and should not be construed as an offer, or a solicitation of an offer, or aninvitation or inducement to engage in investment activity, and cannot be relied upon as arepresentation that any particular transaction necessarily could have been or can beeffected at the stated price. This document is not an advertisement of securities. Opinionsexpressed herein may differ or be contrary to opinions expressed by other business areasor groups of Renaissance Capital as a result of using different assumptions and criteria. Allsuch information and opinions are subject to change without notice, and neitherRenaissance Capital nor any of its subsidiaries or affiliates is under any obligation to updateor keep current the information contained herein or in any other medium.

Descriptions of any company or companies or their securities or the markets ordevelopments mentioned herein are not intended to be complete. This document and/orinformation should not be regarded by recipients as a substitute for the exercise of theirown judgment as the information has no regard to the specific investment objectives,financial situation or particular needs of any specific recipient. The application of taxationlaws depends on an investor’s individual circumstances and, accordingly, each investorshould seek independent professional advice on taxation implications before making anyinvestment decision. The information and opinions herein have been compiled or arrived atbased on information obtained from sources believed to be reliable and in good faith. Suchinformation has not been independently verified, is provided on an ‘as is’ basis and norepresentation or warranty, either expressed or implied, is provided in relation to theaccuracy, completeness, reliability, merchantability or fitness for a particular purpose ofsuch information and opinions, except with respect to information concerning RenaissanceCapital, its subsidiaries and affiliates. All statements of opinion and all projections,forecasts, or statements relating to expectations regarding future events or the possiblefuture performance of investments represent Renaissance Capital’s own assessment andinterpretation of information available to them currently.

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Excluding significant beneficial ownership of securities where Renaissance Capital hasexpressed a commitment to provide continuous coverage in relation to an issuer or anissuer’s securities, Renaissance Capital and its affiliates, their directors, representatives,employees (excluding the US broker-dealer unless specifically disclosed), or clients mayhave or have had interests in the securities of issuers described in the Investment Researchor long or short positions in any of the securities mentioned in the Investment Research orother related financial instruments at any time and may make a purchase and/or sale, oroffer to make a purchase and/or sale, of any such securities or other financial instrumentsfrom time to time in the open market or otherwise, in each case as principals or as agents.Where Renaissance Capital has not expressed a commitment to provide continuouscoverage in relation to an issuer or an issuer’s securities, Renaissance Capital and its

affiliates (excluding the US broker-dealer unless specifically disclosed) may act or haveacted as market maker in the securities or other financial instruments described in theInvestment Research, or in securities underlying or related to such securities. Employees ofRenaissance Capital or its affiliates may serve or have served as officers or directors of therelevant companies. Renaissance Capital and its affiliates may have or have had arelationship with or provide or have provided investment banking, capital markets, advisory,investment management, and/or other financial services to the relevant companies,

and have established and maintain information barriers, such as ‘Chinese Walls’, to controlthe flow of information contained in one or more areas within the Renaissance Group ofcompanies to which Renaissance Capital belongs, into other areas, units, groups oraffiliates of the Renaissance Group.

The information herein is not intended for distribution to the public and may not bereproduced, redistributed or published, in whole or in part, for any purpose without thewritten permission of Renaissance Capital, and neither Renaissance Capital nor any of itsaffiliates accepts any liability whatsoever for the actions of third parties in this respect. Thisinformation may not be used to create any financial instruments or products or any indices.Neither Renaissance Capital and its affiliates, nor their directors, representatives, oremployees accept any liability for any direct or consequential loss or damage arising out ofthe use of all or any part of the information herein.

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institutional investors only. RenCap Securities, Inc. accepts responsibility for the content of aresearch report prepared by another non-US affiliate when distributed to US persons byRenCap Securities, Inc. Although it has accepted responsibility for the content of thisresearch report when distributed to US investors, RenCap Securities, Inc. did not contributeto the preparation of this report and the analysts authoring this are not employed by, and arenot associated persons of, RenCap Securities, Inc. Among other things, this means that theentity issuing this report and the analysts authoring this report are not subject to all thedisclosures and other US regulatory requirements to which RenCap Securities, Inc. and itsemployees and associated persons are subject. Any US person receiving this report whowishes to effect transactions in any securities referred to herein should contact RenCapSecurities, Inc., not its non-US affiliate. RenCap Securities, Inc. is a subsidiary ofRenaissance Capital Holdings Limited and forms a part of a group of companies operatingoutside of the United States as "Renaissance Capital". Contact: RenCap Securities, Inc.,780 Third Avenue, 20th Floor, New York, New York 10017, Telephone: +1 (212) 824-1099.

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Other distribution: The distribution of this document in other jurisdictions may be restrictedby law and persons into whose possession this document comes should inform themselvesabout, and observe, any such restriction.

Additional information (including information about the RenCap-NES Leading GDPIndicator) and supporting documentation is available upon request.



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Renaissance Capital Research

Head of ResearchRoland Nash

+ 7 (495) 258 [email protected]

Head of Equity ResearchAlexander Burgansky


Head of Macro/Fixed Income ResearchAlexei Moisseev


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[email protected] MundyOvanes Oganisian

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Macro & Fixed Income Research+ 7 (495) 258 7946Alexei [email protected] PodguzovPetr GrishinMaxim RaskosnovAndrey Markov

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