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ANNUAL REPORTS & ACCOUNTS Analysis & Benchmarking Review for

NOVEMBER 2012
..........................................................................

CONTENTS
1 2 3 4 5

EXECUTIVE SUMMARY METHODOLOGY AND PROCESS KEY RESULTS EXTEL CONTACTS

3 4 6 8 9

1. EXECUTIVE SUMMARY
Thomson Reuters Extel, on behalf of MICEX-RTS Exchange, has carried out a thorough analysis and assessment of English language Annual Reports & Accounts. From our extensive Extel interviews, benchmarking and rankings of investor relations worldwide, it is very evident that for both analysts and investors, the investment decision process involves considerable specific assessment of stocks, within a framework of how well these stocks may fit the overall investment horizons and asset allocation processes of any buyside firm. In undertaking the stock analysis, the fundamental for an investor is to develop the investment model, and from that to clearly define value drivers in a company, and then how well management expresses, endorses and embodies those value drivers. In undertaking this initial model-based assessment, the global data we have shows that over 70% of investors worldwide rely on Annual Report & Accounts from a company as the core dataset they use to construct these models, and the ongoing primary reference point to review and update their analysis. As such, the importance of the Annual Report & Accounts is very clear, and we believe, makes this assessment of the Russian market, all the more valuable. In total, we evaluated reports from 90 companies, and assessed each both independently, and in reference to each other, on six key criteria of the reports. These are the criteria we use in all studies we undertake of this type. For each criterion for each report, a score of 1-10 was recorded, and the overall ranking based on an aggregation of all scores. The criteria applied were –  Ease of finding information  Clarity and visual appeal of design  Granularity and clear exposure of the value drivers.  How well the spirit of the company is communicated  Cover design/immediate impact  How well the corporate story is expressed The full results are provided in the body of this overview report, with the top five firms being – 1. 2. 3. 4. 5. Aeroflot Evraz Rosneft Tiumenenergo Uralkali

We would like to thank MICEX-RTS for the opportunity to undertake this project in partnership with them, and also pass on our appreciation to all companies who submitted nominations, and answered any questions or clarified points that we raised. Steve Kelly

Managing Director Thomson Reuters Extel November 2012

2. METHODOLOGY AND PROCESS
Thomson Reuters Extel undertakes an extensive range of market research projects across the investment community, including comprehensive rankings and ratings of IR best practice. For all studies we undertake where analysis is carried out by our team of dedicated in-house experts on IR best practice, we follow a standard methodology and approach. For the assessment of Annual Reports & Accounts for Russian-based companies in year 2011-2012, we received reports from 90 firms based in different CIS countries, mainly in Russia. The companies could take part in the contest by placing their reports at www.konkurs.micex.rts.ru, where they appeared under the “Best Report in English Section”. All reports have been thoroughly studied and rated on a scale of 1-10 against the following criteria:  Ease of finding information. By this, we examined each report to review how quickly we could reach any part of the report, whether the layout and structure of the report made finding specific information quick and straightforward, and how logically information and data was presented. Each report was assessed on its own merits against these criteria, and viewed in relation to other reports. Clarity and visual appeal of design. We assessed the use of imagery in the report, both on the cover, and within sectional contents. Granularity and clear exposure of the value drivers. Investors and analysts look for consistency within reports in the way detailed numeric information and breakouts are classified and presented, as well as being able rapidly to evaluate the key components of revenue and earnings. Using a core investment modeling process, we sought to replicate this investor approach to mirror the investment process, to identify the ease of analysis that each report provided.  How well the spirit of the company is communicated. In this part of our analysis, we first assessed the core philosophy of the company, and what the prime ‘values’ were that the company wished to identify itself with. Having established these, we then reviewed how well the text, commentary, graphics and visual images allied themselves to these core values, and expressed them cogently to the market. Cover design/immediate impact. Investors have a huge amount of information top review and analyze, across any company. With many PMs having 200 to 300 stocks that they will maintain an interest in at any one time, the need to user the Annual Report & Accounts to make an immediate impact is very important. We reviewed each report on this basis, where the cover design, and crispness and graphic integrity of the overall design and layout were the paramount considerations. How well the corporate story is expressed. Ultimately, investors will decide on an investment based on the degree of commonality between what a company projects, and what the realities are on what it delivers. In this, the position of the Report & Accounts as a fundamental building block in forming perceptions cannot be understated. We reviewed each report to evaluate how closely the corporate messages were reflected in both the numbers and commentary, and in the overall design, and ‘look and feel’ of each report From this approach, each company was scored at a maximum of 10 and a minimum of 1 for each of these overall value drivers. Then each company’s points were summarized and aggregated. Subsequently 60 was the highest number of points IR teams could receive for their report. No company scored at a maximum level. In the various IR reports studies of this type we have undertaken, it is









extremely rare that we award maximum points to any firm. The evaluation period was October 12 to October 28, 2012, and all work undertaken by a three person dedicated assessment team at Thomson Reuters Extel, with all data and results then reviewed and verified by the MD Thomson Reuters Extel.

3. KEY RESULTS
Adhering to the established methodology we defined the following top results of annual reports produced by Russian companies. Top 20 Results
Granularity and clear exposure of the value drivers How well the corporate story is expressed

Position

Firm

Ease of finding information

Clarity and visual appeal of design

How well the spirit of the company is communicated

Cover design/ immediate impact

Total number of points

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Aeroflot EVRAZ Rosneft Tiumenenergo Uralkali Polymetal Gazprom Neft UniCredit EuroChem NLMK EDC Kazakhtelecom TransContainer Transgarant Rosselkhozbank SITRONICS Lenenergo OJSC IC RUSSINVEST Pharmstandard Ros Agro

9 7 7 6 6 5 10 7 10 8 8 10 5 4 6 9 8 5 7 7

8 9 9 7 8 8 7 7 6 5 6 4 5 6 4 6 6 5 5 6

9 10 8 9 8 9 9 6 9 8 8 8 9 7 6 3 4 6 6 4

9 6 7 7 7 6 3 7 4 5 4 5 5 5 4 5 3 6 2 5

8 6 7 8 7 6 4 8 5 5 5 5 5 5 9 5 6 7 4 1

8 9 8 8 8 9 9 6 6 8 7 5 7 8 5 5 5 2 5 5

51 47 46 45 44 43 42 41 40 39 38 37 36 35 34 33 32 31 29 28

Other reports were very well presented, but were considered to have lower results based on the estimate criteria, compared to the companies listed in Top 20. The other companies assessed were ranked as follows.

Position 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60

Firm INTER RAO UES MRSK-Yuga MOESK IRKUT Corporation Afrikantov OKBM URALCHEM TMK Akron Nordgold MRSK Center X5 Rusgrain Holding AB "BPF" (ZAO) MegaFon MRSK Volgi Promsvyazbank Norilsk Nickel Agropromkredit Garuda Indonesia - The Airline of Indonesia FSK YeES VTB Bank Setevaya Kompaniya NMTP Gazprombank Kubanenergo Mostotrest Mosenergo MTS Rostelecom Severstal Holding MRSK Bashneft Bank ZENIT Halyk Bank Tatneft' imeni V.D. Shashina Enel OGK-5 O2TV Kazakhmys MRSK Tsentra i Privolzh'ya AFK Sistema

61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90

SUEK PhosAgro FPK MEGABANK TNK-BP MRSK Urala Zolotie Vorota Bank Eurasian Bank NOVATEK Raiffeisenbank LUKOIL RBK RusHydro Sberbank Rossii MMK MRSK Severo-Zapad NOMOS-BANK Russian Railways OPIN KOMOS GRUPP Gruppa E4 Gruppa GMS Gruppa LSR Transsib RE Nordea Bank Nizhnekamskneftekhim Gruppa Kompaniy PIK ABLV Bank OGK-2 Rosbank

4. EXTEL
POWERFUL GROWTH IN PARTICIPANTS

THOMSON REUTERS EXTEL Established in 1999, when Thomson Reuters acquired the Extel Survey from the FT Group (part of Pearson). Initially 5 people, the team has expanded over the period 1999-2011 to a current strength of 25. This expansion has both enabled us to develop the Pan-European Survey to become the leading indicator of investment industry opinion in Europe, and to respond to the demands we have had for additional survey and investment industry research consultancy work. Our policy is to keep the consultancy team as small and focused as possible, in order that we provide direct service to each of limited number clients. ACTIVITIES  Thomson Reuters Europe  Thomson Reuters UK Small Caps  SRI (socially responsible investing) (undertaken in conjunction with UKSIF -- the UK industry group for social investing)  Middle East IR Study (undertaken in conjunction with Middle East IR Society)  Thomson Reuters Extel Asia & Japan  Consultancy projects on behalf of sellside firms, buyside houses and quoted companies. We have undertaken a range of specific assignments over the last 6 years for organizations in all three of these areas. As is usual with this work, client names and the nature of the work remain confidential. They include a major US investment bank, several European investment banks, two UK-based FM institutions and quoted companies in insurance, pharmaceuticals, real estate and transport

Buyside Firms
2500

2000

1500

1000

500

0

Sellside Firms
300

250

200

150

100

50

0

Quoted Companies
800 700 600 500 400 300 200 100 0

5. CONTACTS
Thomson Reuters Extel The Thomson Reuters Building 30 South Colonnade Canary Wharf London E14 5EP, UK T. +44 (0) 20 7542 7700 F. +44 (0) 20 7542 7704 E. extelsurveys@thomsonreuters.com www.extelsurveys.com

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