November 27, 2009

April 25, 2010 This is bne's Eastern Europe equity capital markets weekly newsletter, a list of the top stories in region last week. You can receive the list as a plain text or html email or as a pdf file. Manage your delivery options here: http://businessneweurope.eu/users/subs.php

TOP STORY STOCKS 1. Russian Sea IPO illustrates gap in valuations 2. UAC could get controlling stake in Antonov 3. UC RUSAL to launch RDRs within a year 4. VimpelCom Ltd successfully completes exchange offer 5. Vimpelcom Ltd. creation approved by minorities NEWS STOCKS 6. MB Capital Partners cuts stake in Cherkizovo Group to 61.5% 7. Sibirtelecom board approves share swap ratios for merger into Rostelecom 8. Telenorís frozen stake in Vimpelcom, held in connection with a fine levied by a Siberian Court, has been released. 9. Transneft: No public placement OTHER NEWS STOCKS 10. Cherkizovo Group 11. FGC not interested in Bashkirenergo tender, interested in Bashkir grid 12. FSK confirms non-participation in OGK1 issue 13. Inter RAO UES to start private share offering on April 28 14. MTS: Change in ADR ratio will come into effect on 3 May 15. OGK-1 may place part of its share issue on the market 16. Quadro Capital Partners, VEB to set up direct invest fund 17. Repsol might sell its 3.2% stake in Alliance Oil Company 18. Surgutneftegas has not been included in MOL's shareholder register 19. Svyazinvest CEO accumulates 0.94% common stake in Uralsvyazinform 20. VimpelCom Ltd offer to VimpelCom holders successfully completed IPO, SPO, ADRs, GDRs, PLACEMENT 21. Bashneft: CEO does not exclude the possibility of an SPO 22. LSR Group: 2009 IFRS Review/SPO Price Range Announced 23. PhosAgro may go public; POSITIVE for Apatit 24. UralChem sets IPO price range at $8.50-$11.00 per GDR DIVDENDS 25. Aeroflotís Board of Directors recommends dividends of USc 1.21/share 26. Dorogobuzhís board recommends dividend payout on preferred shares 27. Gazprom: 2009 dividends in line with historic average 28. Kuzbass Fuel holders approves paying RUB253mn in 2009 dividends 29. LUKOIL to increase dividend payout 30. MMK board recommends FY09 dividends 31. NLMK board announces FY09 dividends recommendation 32. Polyus Gold sets 2009 dividends 33. Sibirtelecom board recommends paying RUB582mn in 2009 dividends 34. Transneft to pay 10% of net profit in 2009 dividends on preferred shares 35. VTB Considers Setting a Minimum Dividend at this Year's Level

36. Yaroslavl Sales Company to pay RUB44mn in 2009 dividends BANKS shares 37. Bank Vozrozhdenie shareholder increases stake 38. Otar Marganiya ups stake in Vozrozhdenie Bank to 19% 39. Sberbank: Subord Repayment Unlocks More Upside UKRAINE STOCKS 40. Avangard sees IPO proceeds of US$ 198-256mn 41. CHEN pays UAH 5.9m in dividends 42. Govt to cut AGM min quorum to 50% 43. HAON to revise its dividend payout for 2009 44. Kulczyk Oil to raise US$ 265mn at IPO in May 45. Prykarpatoblenergo approves 2009 dividends 46. SCSSM makes strategy for Ukrainian stock markets development for period until 2015 47. State Property Fund to sell full stake in Ukrtelecom 48. The AMCU approved the sale of 50% stake in Ukrros: NEUTRAL 49. Ukrproduct group's shareholders to buy back shares worth UAH10mn 50. Ukrros could perform IPO on Warsaw Stock Exchange in 2011 EURASIAN STOCKS 51. Azerbaijan: Azergarant Insurance increases authorized capital 52. Azerbaijan: OJSC AqroLizinq doubles authorized capital SE STOCKS 53. Turk Telekom net profit rises 88% y/y to EUR 272.3mn in Q1 54. Turkey steelmaker Erdemir - Still Not Out of the Woods 55. Turkey's Akfen Holding sets IPO price range at EUR6.21-EUR 8.7 per share CE STOCKS 56. Amrest 1Q10 sales decline 7.7% yoy 57. CEE broadcaster CME expects TV ad prices will start increasing in H210 58. CEE Construction & Engineering - Pick your brick 59. CEZ will hold AGM on Tuesday, June 29 60. Czech equity market correction seen in the second half of the year 61. IT firm Asseco Poland sets SPO price at PLN 54, eyes 13 foreign acquisitions. 62. KIT Digital announced a public offering of 4.23m shares at $13 63. Market share of Philip Morris CR declined in 1Q10 64. MOL was upgraded to 'buy' at Goldman, target price raised to HUF 25,000 65. Net inflows into Polish investment funds reaches highest level since end-2008 66. New shares of developer Orco start trading 67. Orco CEO says may raise further EUR10-20m of new equity 68. Orco: recent capital increase confirmed by court 69. Polish lender Alior Bank prepares IPO for 2011 70. Surgut Misfires Once More Against Hungarian MOL 71. Surgutneftegas is once again excluded from MOL's annual general meeting 72. TPSA: 1Q10 results and conference takeaways 73. Unipetrol benefited from wider margins in both the refining and petchem segments

TOP STORY STOCKS 1. Russian Sea IPO illustrates gap in valuations bne 19 April 2010

Russian Sea is cutting the size of its IPO after restricted investor interest forced it to price the shares at the bottom of their indicative range. The move is an illustration of the gap between investor appetite for Russian assets and ownerís pricing expectations, which has persisted despite the crisis. The seafood distributor and producer set the price of its forthcoming IPO at $6 per share on Friday, announcing that it now hopes to raise a total of $90 mn through an offering of 15 mn shares. Prior to the announcement, the company had set an indicative range of $6 - $8, and had set a target of raising up to $170 mn via the sale of 21.7 mn shares. Russian Sea said in a statement that the price reflected lower-than-expected demand from investors. According to Reuters, a source said that the size of the offer was cut because the main shareholder was unhappy with the price. "This is a fair price. Investor interest was restrained because the company gets the bulk of its income from wholesale distribution, not production. And such a business model involves big risks," Alexei Krivoshapko of Prosperity Capital Management told the news agency. Sources tell bne that owners of Russian assets across the sectors continue to seek top dollar for their assets, while the valuation of those assets by investors lags by some way. With recovery of the Russian stock markets and economy still sluggish, this suggests that amongst the huge anticipated pipeline of Russian floats this year (some expect as much as $20 bn) we could see some struggle to hit targets. 2. UAC could get controlling stake in Antonov Renaissance Capital April 21, 2010 Event: Today (21 Apr), Vedomosti reported that during negotiations over gas prices, representatives of Russia and Ukraine discussed a possible exchange of shares: the Ukrainian government would give United Aircraft Corporation (UAC) 50% + 1 shares in the Ukrainian aerospace construction company Antonov in exchange for a stake in UAC. The size of the Ukraine government's potential stake in UAC would be determined by an independent appraisal. The parties concerned have until 1 Aug 2010 to reach a deal. Antonov produces the AN-148 regional jet (the order book is approximately 130 aircraft until 2025) and the AN-70 and AN-124 (Ruslan) freight aircraft. Also, according to Kommersant yesterday, Antonov has introduced a new 99-passenger regional jet, the AN-158, which will be manufactured in Kiev and also possibly in Voronezh. We see the AN-158 as a possible direct competitor of the Russian Sukhoi Superjet 100, which is produced by Sukhoi Company (which is controlled by UAC). Action: The news is positive for UAC, in our view. Rationale: We believe that the Ukrainian government would receive only a minority stake in UAC under this deal. If UAC obtains a controlling stake in Antonov, this would clearly reduce competition between Antonov and Sukhoi. Mikhail Safin

3. UC RUSAL to launch RDRs within a year Troika Dialog 22 April 2010 UC RUSALís head of capital markets, Oleg Mukhametshin, yesterday announced that the company expects to launch Russian Depository Receipts (RDRs) within a year, which we believe will become a positive development for the stock. To remind, UC RUSAL is incorporated in Jersey and its shares are traded in Hong Kong and on Parisí Euronext exchange. As a non_Russian domiciled entity, UC RUSAL can only list on domestic exchanges via the placement of RDRs. The government suggested the idea of RDRs several years ago, evidently part of a package to create a global financial center in Moscow. That said, the legal basis for this mechanism has not been completed, so we would expect the process to be accelerated now. We contend that UC RUSAL is likely to become the first company to launch RDRs given the political leverage of the company and its ambitions. Importantly, a domestic listing via RDRs would also likely pave the way to UC RUSALís inclusion in the MSCI indexes. MSCI has set out two preconditions that index members need to meet to qualify for inclusion: either domestic incorporation or a domestic listing. Obviously, inclusion into the MSCI indexes would compel all index tracking funds to buy the stock. Following UC RUSAL, we would expect other companies to launch RDR programs, with Petropavlovsk the most likely candidate in the non_ferrous metals space. Mikhail Stiskin 4. VimpelCom Ltd successfully completes exchange offer Troika Dialog 22 April 2010 VimpelCom Ltd yesterday announced that 56.5 mln shares were tendered in its exchange offer, which represents 97.87% of voting shares. The remaining 2.13% will be subject to a squeeze_out, with a price to be specified in a notification that VimpelCom Ltd will deliver to VimpelCom within 35 days. VimpelCom announced that it plans to delist both ADRs and local shares around May 14. The final decision on this will be made by the BoD. Regular trading in VimpelCom Ltd will commence today. The ticker will be changed from VIP_W US to VIP US. Following the completion of the squeeze_out procedure, Telenor and Altimo will hold 38.8% and 38.5% of common shares, respectively, and 35.4% and 43.9% of the charter capital. We assume that the shares to be bought out by VimpelCom Ltd will be treated as treasury stock.

Our target price for VimpelCom Ltd is $28.00 per share and we have a BUY recommendation on the stock. Anna Lepetukhina

5. Vimpelcom Ltd. creation approved by minorities VTB Capital 19 April 2010 Farimex has withdrawn claims on Telenor ó opens the way for the formation of Vimpelcom Ltd. ó creating a strategy by the end of summer to be the next medium term driver ó very good opportunity to enter a fundamentally strong company at quite a cheap valuation News: Vimpelcom Ltd. announced on Friday that it had successfully completed the offer for OJSC Vimpelcomís shareholders. In total, 308.3 million ADRs have been tendered. Assuming that Telenor and Altimo also participate in the offer, a total of 97.29% of OJSC Vimpelcomís shares would be tendered. On a separate note, Interfax reported on Friday from the West Siberian Court that Farimex had withdrawn all its legal claims on Telenor (in the dispute over OJSC Vimpelcomís expansion into Ukraine) Our View: These two events open the way for the formation of Vimpelcom Ltd. We expect Vimpelcom Ltd.ís shares to start trading on the NYSE on 22 April under the same ticker: ìVIPî.

We expect Vimpelcom Ltd.ís new strategy, which we see as the key medium term driver for the company, to be developed during the summer. In our view, Vimpelcom Ltd. will concentrate on creating mergers with ëequalí operators rather than acquiring smaller operations or licences. Vimpelcomís shares are currently depressed by a number of different technical factors related to the creation of Vimpelcom Ltd. They trade at 2010F and 2011F EV/EBITDAs of 5.3x and 4.1x, respectively, and are at a discount of around 10% to MTS. We are reiterating our view that now is a very good opportunity to enter a fundamentally strong company at quite a cheap valuation.

NEWS STOCKS 6. MB Capital Partners cuts stake in Cherkizovo Group to 61.5% bne April 22, 2010 MB Capital Partners, the major shareholder of Russian meat processor Cherkizovo Group, has sold 3.1 million global depositary receipts (GDRs) of the company reducing its stake to 61.5%, reports Prime-Tass. Citing a statement issued by Cherkizovo Group, the news agency says that J.P. Morgan Securities and Russian investment company Renaissance Capital were the bookrunners of the deal. In the meantime, MTS will split its ADRs 2,5 times in order to increase their liquidity, reports local media. Reports suggest that split-up of ADRs will be on May 3. 7. Sibirtelecom board approves share swap ratios for merger into Rostelecom bne April 23, 2010 The board of directors of Russian wireline operator Sibirtelecom has approved the share conversion ratios that might be used during an expected merger of the company into long-distance operator Rostelecom, reports Prime-Tass. Citing Sibirtelecom's press office, the news agency says that Sibirtelecom's expected merger into Rostelecom is part of the restructuring of both companies' parent company, state-controlled telecommunications holding Svyazinvest, during which all of the holding's interregional fixed-line subsidiaries are expected to be integrated into Rostelecom by March 2011 by converting their shares into shares of Rostelecom. In the meantime, Oleg Mukhamedshin, the Director of UC RUSAL, says that the company is going to issue Russian depositary receipts, stated on April 21, 2010, reports local media.

Reports suggest that UC RUSAL can became a debutant because no one issued Russian depositary receipts, although FSFM has already prepared the legislative base for that. In another development, participants of the stock market are preparing for a May lull, reports local media. Reports suggest that a resale on the eve of the holidays is unlikely this year since many expect a rise in share quotations. In another development, MB Capital Partners Ltd., the main shareholder of Cherkizovo Group, is going to sell investors about 7% of the shares, reports local media. Reports suggest that the main owner of the group Igor Babaev is going to sell securities in form of common shares and depositary receipts. 8. Telenorís frozen stake in Vimpelcom, held in connection with a fine levied by a Siberian Court, has been released. Metropol 20 April 2010 A stake in VimpelCom owned by Telenor that was frozen pending Telenorís appeal of USD 1.7bn fine levied by a Siberian court, has been released. The fine was payable to VimpelCom, based on Farimexís suit. Farimex successfully argued that VimpelCom had been damaged by Telenorís refusal to allow it to expand into Ukraine. The appeal by Telenor was adjourned until March by the same Siberian court, and then again to give Telenor and Alfa six months to sort out their differences. Telenor owned 29.9% of VimpelComís voting shares and the stake was frozen by bailiffs who threatened to sell the shares to pay the fine. We argued it was in neither the Russian governmentís nor Telenorís (essentially the Norwegian Government) interest for this bailiffs to actually sell the shares. Any sale would likely precipitate a decline in the Russian stock market, loss of confidence in the Russian legal system, and loss in value of a vey important investment for Telenor. Following the agreement by shareholders to merge VimpelCom and Kyivstar, Farimex has withdrawn the suit against Telenor entirely. There is therefore no reason for bailiffs to hold Telenorís stake in VimpelCom. We have argued all along that this whole case is no more than ëstaticí and have urged investors to take advantage of any weakness associated with VimpelComís share price resulting from news on the case as a buying opportunity. We argued the case would be unlikely to come to anything. This advice appears to have been correct. We reiterate our buy recommendation on VimpelCom as it retrades as VimpelCom Ltd. Philip Townsend 9. Transneft: No public placement UralSib April 20, 2010

bne: As monopoly owner and operator of energy pipelines for export, Transneft is seen by investors as perhaps the ultimate test case of the governmentís recent announcements that it wants to liberalise the economy. Hence the rapid spread of rumour whenever a possible float is mentioned. This view however is somewhat offhand given the political context surrounding pipeline route and the overwhelming role that energy exports have in the Russian economy. CEO denies any IPO. Interfax reports that Transneft (TRNFP ñ Not rated) CEO Nikolai Tokarev has said that if the company decides to organize an additional share issue to finance its projects, the whole issue will most certainly be bought by the Russian government. Tokarev fully excluded the possibility of a placement on the market, a sale to side investors or a conversion. He also noted that recent sharp growth in Transneft shares is largely attributed to speculation about an IPO spread by market players in order to push the price up and fix profits. On a separate note, the company claimed that it will allocate 10% of its 2009 RAS net income for dividends on preferred shares. This translates to around $7.9/share for prefs with a 0.7% dividend yield. Money to go to development of new project. Transneft is currently seeking RUB45 bln ($1.54 bln) to finance the construction of its new Zapolyarnoye-Purpe pipeline, located in the northern part of West Siberia. Free-float is to remain 22%. We view Tokarevís statement as reasonable and we do not expect any increase in Transneftís freefloat in the near future. Regarding dividends, Transneft, being short of money to finance its projects, will allocate most of its profits to internal financing. We do not expect any noticeable dividends from the company in the coming years. Transneft is currently not under our coverage. Victor Mishnyakov

OTHER NEWS STOCKS 10. Cherkizovo Group UralSib April 22, 2010 Major shareholder will sell 7% stake on the market 7% stake will be offered to public. The main shareholder of Cherkizovo Group (CHE LI ñ Not Rated) ñ MB Capital Partners (controlled by Igor Babaev) ñ will sell 7% of its 58.7% stake on the market, newswires reported yesterday. Given yesterdayís closing price of $22.5/GDR (3 GDRs = 2 ordinary shares) on LSE, Babaev may get up to $102 mln. The offering range is indicated at $20.25-22.57/GDR. The offer will include both GDRís and local shares; however, the exact parameters of the offer will be disclosed only today. Shareholder considers current level high. The company explained the sale as an intent to increase liquidity on the market. Cherkizovo stock has been in demand recently and has performed well, gaining 27% since the release of 2009 results on 31 March. However, we believe this move can be

explained by the shareholders desire to book some profits from these gains ñ Babaev may be trying to monetize part of his stake. Mixed news, as short term overhangs are possible. The offer will not be dilutive to existing shareholders, as no new shares will be issued, and will affect the fundamentals of the company. Babaev will remain as the majority shareholder. On a positive note, the offer will improve liquidity, although it will also increase the supply of stock and create a possible short-term overhang. The stock appreciated 1.5% yesterday (along with 0.6% of growth in URALSIBís Consumer index), following this news. We would not exclude price weakness during the offering. Tigran Hovhannisyan 11. FGC not interested in Bashkirenergo tender, interested in Bashkir grid Troika Dialog 23 April 2010 Federal Grid Company (FGC) is not interested in the tender offer made by Bashneft to Bashkirenergo minority shareholders, Interfax cited FGC CEO Oleg Budargin as saying yesterday. Bashneft submitted a mandatory tender offer for Bashkirenergo to the Federal Financial Markets Service (FFMS) for approval on April 9. FGC holds a 21.3% stake in Bashkirenergoís charter capital (22.3% of common shares). We are not surprised by FGCís decision not to participate, as it is planned to contribute its stake to InterRAO UES, along with other assets. Moreover, Bashkirenergoís six_month average market price is R44.76 per share, or 5% below the current price. The exact tender offer price will be announced next week, we expect, but it could be close to that market average. Budargin also said that the company is negotiating a swap scheme with Bashkirenergo to consolidate Bashkir transmission assets (BSK). These assets might be contributed as a payment for FGCís new share issue in 2010. A similar swap scheme is reportedly being planned for the Tatarstan transmission assets with Tatenergo. Budargin stated that there is no exact value estimate at this point, but disclosed the estimated range for Bashkirenergo grid assets of R5_6 bln (and R12_15 bln for Tatenergoís grid). That FGC is interested in the grid is nothing new. The announced value range for Bashkirenergo grid assets implies an adequate RAB/BV of 2.0_2.4, we estimate, which is in line with the average for MRSK branches that have already been transferred to RAB. The news is neutral for FGCís stock, as the terms of the asset swaps have yet to be developed and the size of the two deals is relatively small (the aggregate value is only 2.6_3.2% of FGCís 2010 iRAB). To recap, Bashkirenergo is an integrated utility that will be broken up in the future. This could happen already by January 1, 2011. The breakup should unleash some hidden value. The Bashkirenergo disco, which we estimate is worth more than the transco (BSK), should migrate to RAB, which could happen in 2011, or from January 1, 2012 at the latest, and it should be a positive trigger for the stock.

Alexander Kotikov 12. FSK confirms non-participation in OGK1 issue Renaissance Capital April 22, 2010 Event: The Federal Grid Company (FSK) has no plans to participate in a forthcoming primary issue of OGK1 shares intended to raise funds for investment in new capacity. FSK Deputy CEO Dmitry Troshenkov, speaking at an analyst briefing yesterday (21 Apr) added that FSK has neither the legal basis nor financial means to buy more OGK1 shares. Existing legislation precludes the monopoly transmission company from participation in the competitive generation business. RusHydro, also a signficant OGK1 shareholder, has already disclosed that it will not participate in the new issue. Action: Positive for OGK1 shares, in our view. Rationale: InterRAO, which already has operational control of OGK1, has already disclosed that the company is prepared to buy the new OGK1 issue to the maximum extent. We estimate that if InterRAO were to acquire the shares foregone by FSK and RusHydro this would give InterRAO an OGK1 stake of around 38% - thereby triggering a mandatory tender offer to other OGK1 shareholders. Furthermore, we judge that the emergence of a committed and well-resourced controlling shareholder would strengthen both operational management and financial management at OGK1. Vladimir Sklyar 13. Inter RAO UES to start private share offering on April 28 bne April 23, 2010 Russian electric power company Inter RAO UES plans to start an offering of 1.6 trillion newly-issued shares on April 28, reports Prime-Tass. The news agency says that the company plans to sell the shares to state-owned Vnesheconombank (VEB), the Federal State Property Management Agency, and state-owned nuclear monopoly Rosatom. In the meantime, Albert Shigabutdinov, the CEO of Russia's TAIF, says that the company plans to make an initial public offering (IPO) in the next two to three years, reports Prime-Tass. The news agency quoted Shigabutdinov as saying the IPO could be made on several stock exchanges in Europe, East Asia or Russia. In another development, Russia's State Duma, the parliament's lower house, approved all three readings of a bill to set aside up to $676mn in the 2010 federal budget to buy a stake in Indian mobile operator Sistema Shyam TeleServices

(SSTL), which is a subsidiary of Russian multi-industry holding AFK Sistema, reports Prime-Tass. The news agency says that the bill now needs to be approved by the Federation Council, which is the upper house of the parliament, in one reading and be signed into law by the president. 14. MTS: Change in ADR ratio will come into effect on 3 May UralSib April 21, 2010 New ratio is set at two common shares per ADR. Yesterday, MTS (MBT ñ Buy) announced it will change its ADR ratio from five common shares per ADR currently to two common shares per ADR. The split is to become effective on 3 May. On the record date set for 28 April, ADR holders will receive the right to get an additional 1.5 ADRs for each ADR they have. The issuance of additional ADRs is planned on or around 30 April. The number of common shares will remain unchanged. Management sees broader investors base. The company last made a split in January 2005. Since then, the ADR price appreciated more than 60%. Commenting on the split, the president and CEO of MTS, Mikhail Shamolin, outlined that the company will be able to broaden its investor base and provide additional flexibility to shareholders in managing their portfolios, given the lower price that will follow the spilt. In the event of holding an uneven number of ADRs, its holder can either buy or sell 0.5 ADRs to round their number. Marginally positive for sentiment. The announced split of ADRs may have a marginally positive effect on sentiment towards the stock, indicting that management is expecting further price increases. The split will have no fundamental effect and our target will have to be adjusted to $33/ADR once it comes into effect. We have a positive fundamental view on the stock, as MTS generates strong cash flows from its highly profitable mobile operations and has the opportunity to benefit from growth in the Russian broadband market. MTS looks undervalued, trading at 2010-11E P/E of 10.3, implying a 16% discount to emerging market peers. Hence, we retain our Buy recommendation for the stock. Konstantin Chernyshev 15. OGK-1 may place part of its share issue on the market Alfa Bank April 23, 2010 Yesterday Inter RAO UES management announced plans to place part of OGK-1ís additional share issue on the market. We view this news as POSITIVE for OGK-1 shares, as it could substantially increase the companyís free-float and boost liquidity. Inter RAO UES plans to buy most of this share issue to provide the company with cash to finance its CAPEX program; however, the company will only spend money provided by Vneshekonombank as a loan to construct Urengoiskaya GRES (RUB21 bln). As OGK-1 shareholders agreed to place 38 bln additional shares, at the current

market price Inter RAO UES can buy only 44% of the announced volume of the share issue. If the share issue is placed at the current market price and the entire volume is bought by investors and as FSKís and RusHydroís stakes in OGK-1 are transferred to Inter RAO UES, Inter RAOís stake in OGK-1 could total 54%. We see the news as POSITIVE, as a possible SPO on the market could be a catalyst for OGK-1 shares, substantially improving the companyís liquidity and free-float. The price and volume parameters of the upcoming share issue are still unknown and we believe this is the main factor that will determine the impact of this news. 16. Quadro Capital Partners, VEB to set up direct invest fund bne April 22, 2010 Vladimir Kozlov, a partner of Moscow-based private equity fund Quadro Capital Partners, says that Quadro Capital Partners and state-owned Vnesheconombank (VEB) plan to set up a direct investment fund amounting to $200mn, reports Prime-Tass. The news agency quoted Kozlov as saying that the fund will focus on the development of municipal infrastructure, namely on the effective use of electric power, water, and other resources during construction of industrial parks. 17. Repsol might sell its 3.2% stake in Alliance Oil Company VTB Capital 19 April 2010 Technical risk for the latterís stock News: According to Bloomberg, Repsol might sell its 3.2% stake in Alliance Oil Company (AOC) for EUR 70mn (USD 90mn). The current market capitalisation of Alliance Oil Company is USD 2,811mn, assuming the price of 3.2% stake at USD 90mn. The shareholder structure of Alliance Oil Company looks as follows: Alliance Group owns 54%, SIX SIS AG ñ 5%, Repsol ñ 3% with the rest being free float. Our View: Should Repsol sell its stake in AOC on the open market, that would be technically negative for AOC. The only way we see it as being positive for AOC is if the company buys the stake from Repsol to cancel it later on. Under the treasury cancellation scenario, the value accretion for AOC would be around 3%. However, considering the companyís heavy capex over the next 2-3 years (to modernize its Khabarovsk Refinery and develop the Kolvinskoye field), a market sale is more likely, in our view. 18. Surgutneftegas has not been included in MOL's shareholder register Renaissance Capital

April 23, 2010 SNGS RU: BUY, target price: $2.5 SNGSP RU: BUY, target price: $1.3 Event: Vedomosti reported today (23 Apr) that the shareholder register of MOL closed on 20 Apr and Surgutneftegas (SNGS) was not included; thus, SNGS cannot participate in the annual general meeting scheduled for 29 Apr or exercise its other shareholder rights (such as receiving dividends). The main reason SNGS was not included, according to various media sources, is that it has still not provided required information to Hungarian regulators (including its ultimate beneficiaries), contrary to previous media reports. In addition, the Hungarian regulator is still investigating the details of SNGS's acquisition of 21.2% stake in MOL. Kommersant quotes Russian Energy Minister Sergei Shmatko as saying the Russian government supports SNGS. The newspaper also quotes unidentified sources within SNGS who suggest the company plans to sell its stake in MOL, either back to MOL or to the Hungarian government. The unidentified sources suggest the prolonged negotiations between SNGS and the Hungarian government have been further delayed by the Hungarian elections, with the second round of voting scheduled for 25 Apr. Action: We retain our BUY rating on SNGS. Rationale: We were sceptical about a previous media report on 5 Apr that claimed SNGS had provided full disclosure to Hungarian authorities. However, we welcome any means that result in a peaceful resolution of the conflict and return value to SNGS and its shareholders. More disclosure would increase the company's transparency and represent an important catalyst for the share price, in our view. Ildar Davletshin 19. Svyazinvest CEO accumulates 0.94% common stake in Uralsvyazinform bne April 15, 2010 Yevgeny Yurchenko, the CEO of Russian state-run telecommunications holding Svyazinvest, has acquired a 0.94% common stake in the holding's wireline subsidiary Uralsvyazinform, reports Prime-Tass. Citing a statement issued by Uralsvyazinform, the news agency says that Yurchenko now owns 1.54% of Uralsvyazinform's charter capital. In the meantime, Danil Khachaturov, the president of Russian insurance company Rosgosstrakh says that private shareholders of the company may take part in auctioning of the government's stake in the company depending on the price of the stake, reports Prime-Tass. The news agency quoted Khachaturov as saying that if the stake is sold at too a high price, private shareholders won't will not buy it. In another development, Russian Energy Minister Sergei Shmatko says that the Russian government will continue to support Russian oil and gas company Surgutneftegas in its disagreement with Hungarian oil company MOL, reports Prime-Tass.

The news agency quoted Shmatko as saying that the Energy Ministry has been discussing the situation with the Hungarian government and the European Union. In another development, Metropol Group plans to launch an investment fund together with the Japanese company SBI Securities, reports local media. Mikhail Slipenchuk, Head of the Investment and Industrial Group Metropol, was quoted as saying that the investment fund's assets will amount to $100mn and may be increased to $1.5bn in the future. In another development, a minor shareholder in VimpelCom on Friday withdrew its lawsuit against Telenor, removing the final obstacle for the Norwegian telecoms firm and Alfa Group to merge their stakes in Russia's second-largest mobile operator and Ukraine's Kyivstar, reports The Moscow Times. The newspaper report says that a federal arbitration court in Tyumen dismissed a decision from a lower court in Omsk, which had ruled in favor of Farimex Products on fining Telenor $1.7bn. In another development, Leonid Melamed, the president of Russian multi-industry holding AFK Sistema, says that the company hasn't ruled out publicly offering shares of oil company Bashneft, but doesn't have any precise plans yet, reports Prime-Tass. The news agency quoted Melamed as saying that Sistema is considering offering shares of Bashneft as a possible way to increase the value of its oil assets. 20. VimpelCom Ltd offer to VimpelCom holders successfully completed bne April 21, 2010 The Netherlands-based VimpelCom Ltd. announced on Wednesday the successful completion of a share exchange offer to shareholders of major Russian mobile operator VimpelCom, reports Prime-Tass. The news agency says that the offer expired in the U.S. on April 15 and in Russia on Tuesday. In the meantime, VimpelCom plans to delist its ADR on the New York Stock Exchange effective May 14, reports Interfax. Citing a statement issued by the company, the news agency says that VimpelCom will send the Securities and Exchange Commission and the NYSE send Form 25 - notification of removal from listing - on or around May 4. In another development, Red tape is set to keep Surgutneftegaz from voting at Hungarian oil group MOL's 2010 annual meeting, keeping an unwelcome investor at bay for a second year straight, reports The Moscow Times. The newspaper report says that Surgut, which bought a 21 percent stake in MOL from Austria's OMV last year, could not vote at MOL's annual shareholder meeting in April 2009 because it lacked regulatory approval to be registered as a shareholder.

In another development, Urachem announced its placement price at LSE within IPO, reports local media. Reports suggest it will amount to $8,5-11 per GDR, which corresponds to $ 4,25-5,5 per share.

IPO, SPO, ADRs, GDRs, PLACEMENT 21. Bashneft: CEO does not exclude the possibility of an SPO UralSib April 21, 2010 An SPO one of several options. During a site visit to its Ufa assets, organized by Bashneft for investors and journalists, AFK Sistemaís CEO Leonid Melamed said that he does not exclude the possibility of placing additional Bashneft shares owned by the company through Sistema- Invest. Melamed did, however, stress that this is just one of several options and there are as yet no specific plans for an SPO, and the above mentioned shares could also be used in merger and acquisitions deals. Other options are available. Bashneftís management is currently working on several strategies to further the companyís development, and one of the options is to use this 25% stake for an SPO. There have also been reports in the press that if the majority of BashTEKís (Bashkirian refineries recently consolidated into Bashneft) minority shareholders sell their shares to Bashneft within the mandatory offer, all of the companies will be transferred to one share. Free float may reach 70%. We do not rule out the possibility of an SPO for Bashneft, however, we believe it is too early to jump to conclusions on this matter, at least until Bashneft and Sistema finalize their strategy on oil assets. We do believe that a share placement would be a positive development for Bashneft and may improve investorsí perception of the company. We retain our Buy recommendation on the stock with a target price of $44.1/share. Victor Mishnyakov 22. LSR Group: 2009 IFRS Review/SPO Price Range Announced UralSib April 20, 2010 Solid results, as expected. Yesterday, LSR Group (LSRG LI ñ Buy) released strong 2009 IFRS results, which were largely in line with our expectations, but above the consensus, driven by a strong performance in the companyís development division (revenue rose 50% YoY in dollar terms). The developer managed to maintain sales in ruble terms, which rose 2% YoY to RUB51 bln ($1.6 bln) (down 20% YoY in dollar terms), surpassing the consensus by 19%. In dollar terms, EBITDA fell 14% YoY to $462 mln (up12% in ruble terms), 23% above market expectations.

Since most of the revaluation losses were reported in 2008, LSR last year achieved a positive net income of $143 mln, which was 95% above market expectations. NAV declined by 56% YoY to $4.8/GDR, as a result of LSR downgrading its large out-dated project portfolio (last updated during the highs of July 2008). We stress our view that NAV under the current market environment is of low-relevance. SPO plans confirmed following the strong IFRS. In addition to the 2009 results, LSR officially announced its SPO plans and indicated the offering price would be in a range of $10-11/GDR. First, Andrei Molchanov (the major shareholder) will offer his shares and afterwards buy them back during an additional share issue (an old-for-new scheme). There is a target to raise $773 mln from the SPO through an offer of about 15% of the current equity base (13% post issue). To our understanding, around $500 mln of the proceeds will be reinvested into LSR to finance its entry into the Moscow market. Buy into stock after the SPO. The strong 2009 results along with recent plans to expand exposure in the Moscow housing market should provide strong support for the stock over the long term; however this will be offset by the SPO announced yesterday, and the associated dilution risks. The indicated SPO price-range, which is close to the current share price, should dampen short-term speculative support to the stock, in our opinion, while many longer-term investors will be wary of dilution risks. We would expect this to be offset by the upside potential from entry to the Moscow market, while the additional share issue will raise the necessary funds without increasing its debt burden. We remain fundamentally positive on the stock and reiterate our Buy rating with a target price of $13.4/GDR. We advise using post-SPO price weakness as a Buying opportunity in the name. Tigran Hovhannisyan 23. PhosAgro may go public; POSITIVE for Apatit Alfa Bank April 19, 2010 PhosAgro, the largest Russian phosphate fertilizer holding, is currently in talks with investment banks on holding an IPO. The company brings together Apatit, Russiaís largest apatite concentrate producer; Ammophos and Balakovo Mineral Fertilizers ñ both phosphate fertilizer makers ñ and Cherepovetsky Azot, which produces nitrogen fertilizers. We regard PhosAgroís IPO plans as POSTIVE for Apatit shares. Starting this year, PhosAgro has shifted its profit center from Ammophos to Apatit, which we expect to boost the latterís 2010 EBITDA by 75% to approximately $450 mln, all else being equal. In our view, this is not yet reflected in Apatitís current share price, with the stock trading at a 45% discount to peers. In addition, PhosAgro has proposed that the government swap its 20% stake in Apatit for a stake in PhosAgro, which could be sold during the IPO. Based on Apatitís high expected profit in 2010, we believe the swap ratio could be attractive. Georgy Ivanin

24. UralChem sets IPO price range at $8.50-$11.00 per GDR bne April 15, 2010 Cyprus-incorporated UralChem Holding PLC, the holding company of Russian nitrogen fertilizer producer UralChem, announced Monday the price range for its initial global offering (IPO) of 58.33 million global depositary receipts (GDRs) at $8.50-$11.00 per GDR, reports Dow Jones. The wire service says that one GDR represents an interest in two ordinary shares. In the meantime, Russian Sea priced shares in its initial public offering at the low end of the expected range and cut its size, reports The Moscow Times. The newspaper report says that the seafood producer set the price at $6 per share, compared with an indicative range of $6 to $8, and said it expected to raise $90mn in the IPO, valuing it at $477.2mn. In another development, Russian property developer LSR Group plans to make a secondary public offering (SPO) in Russia and abroad, reports Prime-Tass. Citing the company's press office, the news agency says that Cyprus-based Streetlink Limited, which is beneficiary-owned by Andrei Molchanov, the founder and the major shareholder of LSR Group, and Molchanov himself, plan to offer an unspecified number of common shares on the Russian market and an unspecified number of global depositary receipts (GDRs) abroad in the SPO. In another development, Kuzbass Fuel Company, Russia's No. 7 steam coal miner, is preparing for a share sale that will let it fund capital spending of about RUB9.5bn ($330mn), reports The Moscow Times. The newspaper report quoted chief financial officer Eduard Alexeyenko as says that the company, also known as KTK, will make the investments between 2010 and 2015. In another development, four firms from Russia and Ukraine pressed ahead with share offerings to raise up to $2bn, with two lowering valuations following weak demand for a placement last week and a fall in share prices on Monday, reports The Moscow Times. The newspaper report says that dozens of Russian companies plan initial public offerings this year, seeking to replenish their coffers after a recession and enabling their owners to lock in profits. In another development, major Russian mobile operator MTS plans to change the ratio of its American Depositary Receipts (ADRs) to common shares to 1:2 as of May 3 from the current 1:5, reports Prime-Tass. Citing a statement issued by MTS, the news agency says that the number of underlying common shares will remain unchanged.

DIVDENDS

25. Aeroflotís Board of Directors recommends dividends of USc 1.21/share VTB Capital 20 April 2010 Dividend yield of 0.6% ó high 25% RAS payout under government initiative ó IFRS payout around 10% ó total of USD 13mn ó neutral News: Yesterday, Aeroflotís Board of Directors recommended that the company approve 2009 dividends of not less than 25% of the companyís net profit. The decision is to be approved by the companyís AGM on 19 June (implying an exdividend date in the first week of May). Our View: Aeroflot reported 2009 RAS net profit of RUB 1,533mn (USD 53mn, at the current exchange rate), meaning total dividend payments of around USD 13mn. This would imply dividends of USc 1.21/share, with a 0.6% dividend yield (twice as much as in the crisis-hit 2008, but less than in pre-crisis years). The high 25% RAS pay-out ratio is in line with the government initiative to increase state companiesí dividend payments. However, the IFRS payout ratio is likely to be around 10%, in line with the previous year. The total amount of payments is not a problem for the company that earned around USD 100mn under IFRS in 2009. 26. Dorogobuzhís board recommends dividend payout on preferred shares Renaissance Capital April 20, 2010 Event: Yesterday (19 Apr) the board of directors of Dorogobuzh, part of Acron Holding, recommended a dividend payout of RUB0.2/share ($0.007/share) on preferred shares and zero dividends on common shares for 2009. The total amount of the dividend payout is RUB30.85mn ($1.06mn). For FY09, the companyís net income of RUB3.58bn ($122mn) was affected by the revaluation of financial assets. Net income before revaluation was RUB1,617mn in 2009 vs RUB2,967mn in 2008. At YE09 the companyís total debt was RUB2,626mn ($87.4mn) and cash was RUB298mn ($9.9mn). The dividend payout ratio on net income before revaluation is only 1.9%, although the companyís charter specifies a 10% dividend payout ratio for preferred shares. In 2008 Dorogobuzh did not pay dividends. Action: The news is neutral for the company, in our view. Rationale: The dividends recommended by Dorogobuzhís board imply a yield of 1.5% for preferred shares based on midmarket bid/ask prices of $0.4/$0.485. The total amount of the dividend payout is insignificant compared with the companyís operating expenses and considerably less than the declared 10% dividend payout on preferred shares. However, we think that Dorogobuzh's decision to pay out this level of dividends, after not paying dividends in 2008, signals the stability of the companyís financial

position, but at the same time, indicates that the company needs to conserve funds for operations this year. Mikhail Safin 27. Gazprom: 2009 dividends in line with historic average UralSib April 19, 2010 Payouts return to 17.5% historical average. Interfax, citing a source in Gazprom (GAZP ñ Buy), reported that the gas-giant will pay RUB2.39/share for dividends in 2009. This represents a 17.5% payout of RAS net income paper profit (i.e. the revaluation of Gazpromís public affiliates). Yield is still low. As a result of the economic downturn, in 2009 the Russian government made it mandatory to cut dividend payouts at stateowned companies to 5% of net income. This year, however, Gazprom has returned to its normal 17.5% payout ratio, which the company has maintained since the beginning of the 2000ís. This does not mean that the monopoly has increased its dividend yield, which will be 1.3% for 2009 ñ just 0.4 ppt above pre-crisis levels. We expect the cut-off day to be set for sometime in the middle of May. Watch out for other drivers. We believe that for Gazprom, the key play is not dividends, but good production growth prospects, a recovery in exports, a favorable gas tax environment and the upcoming liberalization of domestic gas prices. Thus, we view the news as neutral for Gazprom and reiterate our Buy recommendation on the company with a target price of $8.4/share. Victor Mishnyakov 28. Kuzbass Fuel holders approves paying RUB253mn in 2009 dividends bne April 15, 2010 The annual general meeting (AGM) of shareholders of Russian steam coal producer Kuzbass Fuel Company has approved paying a total of RUB253.198mn, or 47% of its net profit under Russian Accounting Standards (RAS), in dividends for 2009, reports Prime-Tass. Citing a statement issued by the company, the news agency says that Kuzbass Fuel Company plans to pay RUB3 per share in dividends for 2009. In the meantime, the annual general meeting (AGM) of shareholders of Russia's largest polyethylene producer Kazanorgsintez approved paying no dividends for 2009, reports Prime-Tass. Citing a statement issued by the company, the news agency says that the company's net loss narrowed 25% on the year to RUB2.1bn in 2009, as calculated under Russian Accounting Standards (RAS).

In another development, Yury Goncharov, head of the corporate management department of Russia's Federal Grid Company of Unified Energy Systems (FGC UES) says that the company will not pay dividends for 2009, reports Prime-Tass. The news agency says that FGC UES earlier posted a net loss of RUB59.866bn in 2009 against a net profit of RUB4.465bn in 2008, as calculated under Russian Accounting Standards (RAS). FGC UES did not pay dividends for 2008. The Federal State Property Management Agency holds 77.66% in FGC UES. In another development, the board of directors of Russian telecommunications company Central Telegraph has recommended paying a total of RUB46.148mn in dividends for 2009, reports Prime-Tass. Citing a statement issued by the company, the news agency says that the board recommended paying RUB0.166631 per common share and RUB0.333262 per preferred share in dividends for 2009. In another development, the board of directors of flag carrier Aeroflot Russian Airlines has recommended spending at least 25% of the company's net profit on dividends for 2009, reports Prime-Tass. Citing a statement issued by the company, the news agency says that in 2009, Aeroflot had a net profit of RUB1.553bn, as calculated under Russian Accounting Standards (RAS). 29. LUKOIL to increase dividend payout VTB Capital 21 April 2010 Sticking to its earlier promises ó positive, but a modest cash yield News: LUKOIL's Board of Directors has proposed paying RUB 52 (USD 1.7) per share in dividends for 2009, implying a total payout of USD 1.5bn (in dollar terms). This suggests a 22% payout ratio (versus the 15% in previous years) and a dividend yield of 3%. Our View: The number is somewhat above our expectations. We note that the increased payout ratio supports the company's earlier guidance of a gradual increase to 30% by 2015, and is a meaningful step up in the quality of the company's dividend policy. The dividend yield is below the level that some of the less liquid names (TNK-BP, Tatneft, SurgutNG) might offer this year, but is still comparable with the global majors, hence we see this as positive as well. We continue to view LUKOIL as a deep value play, with an improving payout policy being one of the catalysts to unlocking value. We are reiterating our Buy recommendation on LUKOIL. 30. MMK board recommends FY09 dividends Renaissance Capital

April 19, 2010 Event: On Friday (16 Apr) MMKís board of directors recommended FY09 dividends of RUB 0.37/share or $0.013/share (RUB4.81/GDR - $0.166/GDR, with 13 shares equivalent to one GDR). The record date for MMK's FY09 dividends is 2 Apr. An AGM is scheduled for 21 May. Action: The news is positive for MMK, in our view. We reiterate our BUY rating on the stock. Rationale: The dividends recommended by MMK's board imply a yield of approximately 1.2%. The dividend recommendation also reflects the companyís stable financial position, in our view. MMK paid a dividend of RUB0.382/share for 1H08, but it did not pay a dividend for 2H08. Thus, the recommended dividends may be technically considered dividends for 2H09, when the company began to generate healthy cash flows as it benefited from a rally in steel prices, enhanced vertical integration and new rolling capacity commissioned in mid-2009. Boris Krasnojenov 31. NLMK board announces FY09 dividends recommendation Renaissance Capital April 19, 2010 Event: On Friday (16 Apr), NLMKís board of directors recommended FY09 dividends of RUB0.22/share or $0.0075/share (RUB2.20/GDR or $0.075/GDR, with 10 shares equivalent to one GDR). The record date for NLMK's FY09 dividends is midnight, 16 Apr 2010. The annual general meeting is scheduled for 4 Jun. Action: The news is positive for NLMK, in our view. Rationale: NLMKís recommended dividends imply a dividend yield of approximately 0.2%. Before the crisis, NLMK traditionally paid full-year dividends of RUB3/share. However, NLMK currently has the most ambitious growth capex programme among local peers. NLMK recently provided capex guidance of $1.9bn of FY10. The commissioning of BF#7 and the Kaluga mini-mill may bring NLMKís steelmaking capacity to over 17mnt compared with an existing 12.4mnt of capacity. NLMK also plans a 25% iron ore-mining capacity enhancement and the development of the Zhernoskoye-1 coal deposit. In our view, NLMKís dividend recommendation underlines the companyís financial strength and adequate access to capital markets for financing its announced capex plans. Boris Krasnojenov 32. Polyus Gold sets 2009 dividends Troika Dialog 20 April 2010

Polyus Goldís BoD has recommended annual dividends in the amount of $0.52 (R15.83) per common share or $0.26 per GDR. This includes $0.21 per share that was already paid for 1H09, so the amount to be distributed is $0.31 per share, bang in line with expectations. The companyís AGM is expected to be held on May 21, and the cut_off date was set as April 13. Overall dividends for the year should come to $100 mln, or 27% of the expected $387 mln in net income. The payments are obviously minimal, the dividend yield at 1% for the year. Given Polyus Goldís aggressive capex requirements, we strongly challenge the rationale behind paying any dividends at this stage of the companyís development. We would prefer to see it retain the cash to be used later to fund its growth projects. Mikhail Stiskin 33. Sibirtelecom board recommends paying RUB582mn in 2009 dividends bne April 23, 2010 The board of directors of Russian telecommunications company Sibirtelecom has recommended paying a total of RUB582.1mn in dividends for 2009, reports Prime-Tass. Citing the company's press office, the news agency says that the board recommended paying RUB0.0292878 per common share and 0.0589249 rubles per preferred share. In the meantime, the board of directors of Russian power utility Territorial Generating Company-7 (TGC-7) has recommended paying no dividends for 2009, reports Prime-Tass. Citing the company's press office, the news agency says that TGC-7 paid RUB75.2mn, or RUB0.002505343 per share, in dividends for 2008. 34. Transneft to pay 10% of net profit in 2009 dividends on preferred shares bne April 15, 2010 Nikolai Tokarev, the CEO of Russian oil pipeline operator Transneft says that the company plans to pay 10% of net profit in dividends for 2009 on preferred shares and 25% in dividends on common shares, reports Prime-Tass. The news agency quoted Tokarev as saying that the board of directors is expected to approve the dividend payout at the end of this week.

In the meantime, the board of directors of Russia's Far East Shipping Company (FESCO) has recommended paying no dividends for 2009, reports Prime-Tass. Citing a statement issued by the company, the news agency says that the board's recommendation is expected to be considered at an annual general meeting (AGM) of the company's shareholders on June 4. In another development, the board of directors of Russia's leading gold producer Polyus Gold has recommended paying a total of RUB1.769bn in dividends for July-December 2009, or RUB9.28 per share, reports Prime-Tass. Citing a statement issued by the company, the news agency says that the company has already paid RUB1.249bn in dividends for January-June 2009, or RUB6.55 per share. In another development, the board of directors of Russia's Murmansk Commercial Seaport has recommended paying RUB203.742mn, or RUB900.24 per common share and RUB2,700.86 per preferred share, in dividends for 2009, reports Prime-Tass. Citing a statement issued by the company, the news agency says that the board's recommendation is expected to be considered at an annual general meeting (AGM) of the company's shareholders on May 21. In another development, LUKoil may boost dividends by 4 percent to RUB52 a share for 2009, reports The Moscow Times. Citing an e-mailed statement issued by LUKoil, the news agency says that a total of RUB44.2bn ($1.52bn) was allocated for the payout. 35. VTB Considers Setting a Minimum Dividend at this Year's Level Aton 20 April 2010 Today (20 Apr) Vedomosti quotes VTB's CFO Herbert Moos as saying that the group plans to introduce a new dividend policy which will entail a minimum per share dividend at approximately the same level as dividends for 2009 (RUB0.00058 per common share, or the equivalent of $0.04 per GDR). Bottom line The news is moderately positive for VTB, in our view. Despite the fact that the bank's dividends are currently quite small (a dividend yield of 0.7% at the current market price), we welcome management's intentions to improve visibility on the future dividend stream. 36. Yaroslavl Sales Company to pay RUB44mn in 2009 dividends bne April 22, 2010 Russian power retailer Yaroslavl Sales Company plans to pay RUB44mn, or RUB2.04 per common and preferred share, in dividends for 2009, reports Prime-Tass.

Citing the company, the news agency says that the company also plans to pay RUB7.85 per share in dividends for January-March 2010. In the meantime, Board of Directors of LUKoil recommended an annual general shareholders' meeting making a decision to pay dividends for 2009 at a rate of RUB52 per one common share, reports local media. Reports suggest this is by 2 kopecks more than in 2008. In another development, the board of directors of Russian multi-industry holding AFK Sistema has recommended paying RUB530.75mn, or RUB0.055 per common share, in dividends for 2009, reports Prime-Tass. Citing a statement issued by the company, the news agency says that the shareholders in AFK Sistema are scheduled to consider the board's recommendation on June 26. In another development, the board of directors of Russian power utility Territorial Generating Company-2 (TGC-2) has recommended paying no dividends for 2009 due to absence of net profit, reports Prime-Tass. Citing a statement issued by the company, the news agency says that the company also did not pay dividends for 2008. In another development, Boris Kovalchuk, the CEO of Russian electric power company Inter RAO UES, says that the company plans to pay no dividends for 2009 due to absence of net profit, reports Prime-Tass. The news agency says that the company did not pay dividends for 2008.

BANKS shares 37. Bank Vozrozhdenie shareholder increases stake Aton 22 April 2010 Yesterday (21 Apr) Bank Vozrozhdenie announced that Otar Margania, a member of the bankís board of directors, has increased his stake in the bank from 9.39% to 18.65%. At the same time, Burlington Trade Co Ltd reduced its stake by the same amount (from 11.86% to 2.6%), which suggests to us that these were two sides of the same deal. A similar transaction involving the same two parties was registered in Nov 2009. Following yesterdayís announcement, Margania is now officially the secondlargest shareholder after Vozrozhdenieís main owner and CEO Dmitry Orlov, who owns 30.7% of the bankís shares. Margania has been on Vozrozhdenieís board for more than five years, and we understand that he has a good longstanding relationship with Orlov.

Bottom line The news is neutral for Vozrozhdenie stock, in our view, as we believe the transaction likely represents only a technical transfer of ownership between related parties. 38. Otar Marganiya ups stake in Vozrozhdenie Bank to 19% bne April 21, 2010 Otar Marganiya, senior vice president of Russia's VTB Bank, has increased his stake in the charter capital of Russia's Vozrozhdenie Bank to 18.65% from 9.39%, reports Prime-Tass. Citing the press office of Vozrozhdenie Bank, the news agency says that in terms of common shares, Marganiya increased his stake in the bank to 19.67% from 9.9%. In the meantime, Sergei Chemezov, the CEO of Russia's state-owned industrial corporation Rostekhnologii, says that shareholders are expected to sign an agreement in May-early June to increase the charter capital of Russian carmaker AvtoVAZ, reports Prime-Tass. The news agency says that Rostekhnologii, Renault-Nissan, an alliance of French carmaker Renault and Japanese auto manufacturer Nissan, and Russian investment company Troika Dialog each hold 25% plus one share in AvtoVAZ. In another development, Oleg Deripaska, CEO of Russian aluminum giant UC RUSAL, says that the company has no plans to increase its stake in metals giant Norilsk Nickel from the current 25%, reports Prime-Tass. The news agency quoted Deripaska as saying that the company is also not planning any mergers, including with the energy assets of its energy holding company En+ Group. In another development, Sergei Chemezov, the chief of truck maker KamAZ, says that Russian Technologies is looking for money to increase its stake in KamAZ, reports The Moscow Times. The newspaper report quoted Chemezov as saying that the purchase of 15 aerial drones from Israel, marking Russia's first major purchase of military hardware from abroad. 39. Sberbank: Subord Repayment Unlocks More Upside VTB Capital, Russia April 21, 2010 Yesterday, Minister of Finance Alexey Kudrin announced that MinFin and the CBR would allow banks to redeem the subordinated loans that they had received early, should they want to do so.

Sberbank's CFO had previously stated that the bank would choose to repay the subordinated loan of RUB 500bn at 8% early, if the rate was not lowered below 5% (the latest draft only suggests a cut to 6.25%). With Tier 1 capital adequacy of 11.5% and total CAR of 18.1% as of YE09, we believe the early repayment option is the best for Sberbank, particularly given the still weak demand for loans and huge RUB 726bn cash pile on its balance sheet as of YE09. Positive catalyst for Sberbank's stock. Under the current circumstances, we believe the bank will repay the subordinated loan early as the idea of a significant rate cut is facing strong opposition from both the CBR and MinFin. This would help to ease margins pressure and dispose of the zero yielding liquidity which the bank is unable to put to work anyway given the still weak demand for loans. We see a 7% upgrade to our valuation. According to our estimates, should Sberbank decide to repay the subordinated loan (most likely scenario currently) it would add an average of 30bp to NIM, translating into a 6-10% EPS upgrade for 2011-13F resulting in a 7% valuation upgrade. We expect the final decision to be announced next month. Yesterday, Sberbank's ords were up 1.9%, outperforming the RTS (1.2%) and we believe that this fundamental catalyst will help the stock to break out of its recent sideways trading (Sberbank is up 10% YTD, underperforming the RTS's 13.6%). We are reiterating our BUY recommendation on the stock.

UKRAINE STOCKS 40. Avangard sees IPO proceeds of US$ 198-256mn BG Capital April 19, 2010 Vertically integrated agro-industrial company Avangard disclosed an indicative price range of US$ 13.80-17.80/GDR for its earlier announced IPO, which implies an offering size of US$ 172.5-222.5mn and a pre-money equity value of US$ 690-890mn. Avangard is offering 12.5mn GDRs (GDR to ord ratio of 10:1), or 20% of its fully diluted post-IPO share capital. In addition, the company is offering an over-allotment option of up to 15% of the total offering size to the dealís stabilizing manager. The company is heading out on a roadshow, and expects to announce the GDR starting offer price on April 30, with admission to trading on the LSE expected around May 7. 41. CHEN pays UAH 5.9m in dividends Astrum April 22, 2010 At its AGM on April 21, 2010, the electricity distribution company Chernivtsioblenergo (CHEN: BUY) decided to allocate 30% of its 2009 net income (UAH 19.8m), which amounts to UAH 5.9m, towards a dividend payout. More than UAH 12.8m, or 65% of the Companyís net income, will be reinvested and UAH 0.98m, or 5%, will go towards the Companyís reserves.

Astrumís perspective: The UAH 5.9m dividend payout implies a UAH 0.1 DPS and a dividend yield of 2.7%. Yan Lipchinsky 42. Govt to cut AGM min quorum to 50% BG Capital April 23, 2010 Cabinet proposing to reduce AGM quorum level Ukraineís Cabinet of Ministers has reportedly approved a draft bill to decrease the minimum quorum required to conduct repeat shareholdersí meetings for joint-stock companies to a simple 50% majority from the current 60% level, according to Deputy PM Serhiy Tihipko. The bill would also require a repeat shareholdersí meeting to be held within 20 days in the event a first meeting fails owing to a lack of quorum. The bill is still subject to approval by Ukraineís parliament. The initiative has been floating around the halls of government, parliament, and the presidential administration since 2007, when ex-PM Tymoshenkoís government was unable to agree with the Privat business group on dividends at Ukrnafta (UNAF). On several occasions, the bill had been approved by parliament and subsequently vetoed by then-President Yushchenko. Taking into account the current unity between the executive and legislative branches in Ukraine, we believe parliament will rubber-stamp the minimum AGM quorum initiative. Risk to holders of 40% to 50%-1; Ukrnafta in the spotlight The amendment would allow any shareholders that control above 50% but below 60%+1 to hold shareholder meetings and push through changes to the supervisory board and/or top management. The issue is especially noteworthy for companies where the majority shareholder has lost control over management. First and foremost, the adoption of the bill is likely to deprive Privat of its current operating control over Ukrnafta. Thanks to the groupís current leverage, which stems from its ability to block AGM proceedings (it holds 42% of Ukrnafta shares), Privat has been able to keep a majority of management board votes and thus control operations. If the government succeeds in reducing the effective quorum to 50%, Ukrnaftaís major shareholder Naftogaz (50%+1 share) would be able to reshuffle the Board of Directors and regain operating control. We believe the news is negative for Ukrnafta, as it implies a higher chance the company will continue to be milked by the state, primarily via underpriced gas sales and dividend payouts. The probability of continued crude oil sales at below-market prices would also grow, given recent media reports that the government is considering restoring operating control over the Ukrtatnafta oil refinery.† The latter is the key buyer of Ukrnaftaís oil and is also operationally controlled by Privat at the moment. Generally neutral for other stocks DTEK-controlled GenCo Dniproenergo (DNEN) and integrated utility Kyivenergo (KIEN) are two other key companies in which the government holds equity stakes of between 50% and 60%. We, however, see little impact for the two from the pending quorum reduction owing to DTEKís close ties with the current state powers. Electricity DisCo Ternopiloblenergo (TOEN) is another company with a state-owned

stake of 50%+ that is not actually controlled by the state (similar to Ukrnafta, management is subordinated to Privat-related structures), and there is a high chance the state would strengthen its position, with no material impact on the companyís fundamentals. 43. HAON to revise its dividend payout for 2009 Astrum April 21, 2010 At the EGM scheduled for June 8, 2010, Kharkivoblenergo's (HAON: U/R) shareholders will consider increasing its dividend payout for 2009 from 15% or UAH 3.2m to 30% or UAH 6.4m. Astrumís perspective: If passed, the new DPS will amount to UAH 0.025 and the dividend yield will come to 0.5%. The chances for the increase to be passed are high as the decision to raise the payout was taken by the majority shareholder National Energy Company of Ukraine (ECU) with regard to all state owned oblenergos. Thus we expect similar EGMs held by other state owned oblenergos. Yan Lipchinsky 44. Kulczyk Oil to raise US$ 265mn at IPO in May BG Capital April 19, 2010 Kulczyk Oil revealed plans to raise gross proceeds of PLN 756mn (US$ 265mn) by floating a 59% equity stake (320mn common shares) at IPO on the Warsaw Stock Exchange in May. Expected net proceeds of US$ 252mn will be used to acquire gas production assets in Ukraine and fund project development in Ukraine, Syria and Brunei over the next 2 years. Canadian-registered Kulczyk earlier announced an agreement to purchase 70% of Loon Ukraine, which controls 100% in KUB-Gas, one of Ukraineís largest private gas producers, for US$ 45mn. KUB-Gas reported daily production in December 2009 (net to Loon Ukraineís 70% indirect equity interest) of 4.23MMcf of natural gas and 13.6bbl of condensate. 45. Prykarpatoblenergo approves 2009 dividends BG Capital April 19, 2010 Regional electricity DisCo Prykarpatoblenergo (PREN) approved 2009 dividends of UAH 2.1mn (US$ 0.3mn), or 3% of last yearís earnings. The payout implies DPS of UAH 0.21 and a 4.6% dividend yield. Dividends will be distributed from April 16, 2010 to December 31, 2011.

Alexander Paraschiy: Despite the unimpressive dividend payout, this is the largest dividend yield enjoyed by shareholders of electricity distribution companies thus far this year. 46. SCSSM makes strategy for Ukrainian stock markets development for period until 2015 bne April 15, 2010 Dmytro Tevelev, the new head of the State Commission for Securities and the Stock Market of Ukraine (SCSSM) has initiated the drawing up of a new strategy for the development of the Ukrainian stock market for the period until 2015, reports Interfax. The news agency quoted Tevelev as saying that theyíve actively started working on a strategy or a doctrine for market development until 2015. In the meantime, Kulczyk Oil Ventures Limited (KOVL, Cyprus), the key shareholder of which is Polish businessman Jan Kulczyk, plans to hold an initial public offering (IPO) in May on the Warsaw Stock Exchange (WSE) to raise $265mn, reports Interfax. Citing a company report, the news agency says that the expected net sum of raised funds worth $252mn would be mainly sent to purchase natural gas extraction assets in Ukraine after the IPO and finance new projects in Brunei, Syria and Ukraine for the next 24 months. 47. State Property Fund to sell full stake in Ukrtelecom Foyil April 20, 2010 The State Property Fund of Ukraine (SPFU) has announced that it will recommend the Cabinet not to keep a 25% stake under the state control, which it had originally wanted, since it would make Ukrtelecom (UTLM UK, BUY) less attractive for potential buyers. If the proposal is approved by the Cabinet, the SPFU will announce the auction for at least 75% in Ukrtelecom for a strategic acquirer and sell 10%-17% on the local stock exchanges (Source: Interfax). Our view: We believe that the announced privatization deal structure is only one of the variants to be announced later this year. However, we estimate it difficult for the SPFU to sell such a volume on the Ukrainian stock exchanges without a substantial price drop, as the current free float of UTLM is close to just 7%. Moreover, in terms of volume, it would be even more difficult, since the monthly UTLM trading volume for the period March 16 to April 16 was UAH 57.6m, which represents 81.1m shares (0.43% of total shares). Eugene Nikolaychuk

48. The AMCU approved the sale of 50% stake in Ukrros: NEUTRAL Sokrat 22 April 2010 The Antimonopoly Committee of Ukraine (AMCU) has approved the sale of 50% stake in Sugar Union Ukrros [UROS UZ, BUY] to Sugar Holding Ltd. (Cyprus). As of December 31, 2008 Sugar Holding Ltd was the owner of a 20% stake in the Ukrros, while another 49.64% were owned by Radinvest Asset Management (Ukraine). Our view: We consider this news as NEUTRAL for the Company stock. We attribute the above operation involving the sale of a share of the business by one shareholder to another to tax optimization. The deal should have no impact on the operational and financial results of the Ukrros, or minority shareholdersí interest. 49. Ukrproduct group's shareholders to buy back shares worth UAH10mn bne April 21, 2010 The shareholders of private Ukrproduct Group (Kyiv), one of the largest dairies in Ukraine, have decided to exercise their right to buy back shares worth a total of UAH10mn, reports Interfax. Citing the company, the news agency says that the issue of shares, as a result of which the statutory capital of Ukrproduct Group grew by 5%, to UAH210mn, was approved by the shareholders at a general meeting on February 5, 2010. In the meantime, Yulia Samoilova, the Director General of Ukraine's Olimp alcohol company, one of the largest alcohol producers in Ukraine, says that the company has postponed an initial public offer (IPO) scheduled for 2011, reports Interfax. The news agency quoted Samoilova as saying that they decided not to perform an IPO because of the economic crisis. In another development, according to an analytical survey of Kyiv-based Sincome Capital Investment Company, the non-resident share of the Ukrainian stock market in 2009 reached 70%, despite the increase in activity of domestic investors when online trading was introduced, reports Interfax. The news agency says that according to the company's experts, the non-resident share of the Ukrainian securities market last year shrank by some 10% compared to 2008. In another development, Managing Partner and President of Icon Private Equity fund Kirill Dmitriev has bought a 100% stake in the Olympic Park housing estate project in Kyiv region, reports Interfax. Citing a statement issued by the fund, the news agency says that the consolidation of a 100% stake in the Olympic Park housing estate project has been completed.

50. Ukrros could perform IPO on Warsaw Stock Exchange in 2011 bne April 23, 2010 Serhiy Fedorenko, Supervisory Council Chairman of Ukrros (Kyiv), one of the largest operators on the sugar market in Ukraine, says that Ukrros is preparing for an initial public offer (IPO) on the Warsaw Stock Exchange, which is likely to be performed in 2011, reports Interfax. The news agency quoted Fedorenko as saying that they are concentrating assets in order to perform an IPO. In the meantime, BG Capital Director General Nick Piazza says that BG Capital investment company (Kyiv, a subsidiary of Bank of Georgia) and the Warsaw Stock Exchange have signed an agreement on partnership under the WSE IPO Partner program, which foresees cooperation in attracting Ukrainian companies interested in placing securities on the Warsaw Stock Exchange, reports Interfax. The news agency quoted Piazza as saying that now we are working on several deals for placing the shares of Ukrainian companies, and we consider the Warsaw Stock Exchange as the most promising [market] for the securities.

EURASIAN STOCKS 51. Azerbaijan: Azergarant Insurance increases authorized capital APA-Economics April 19, 2010 The State Committee for Securities registered the issue prospectus of ordinary registered book-entry shares of Azergarant Insurance. Issue volume AZN 3 260 000 Quantity of shares 10 000 Par value AZN 326 Owned by individual person Azergarant insurance company has been in operation since 1993. The company operates 23 voluntary and 4 compulsory types of insurance. 52. Azerbaijan: OJSC AqroLizinq doubles authorized capital APA-Economics April 24, 2010 OJSC “AqroLizinq” applied to CJSC “Baku Stock Exchange” (BSE) for inclusion of its ordinary registered book-entry shares to the non-quotation list of BSE. The start of the OJSC “AqroLizinq”s shares placement is planned to be held beginning from April 26, 2010. Parameters’ of the issue: State registration number AZ100100544P

Issue volume AZN 15 000 000 Quantity of shares 7 500 000 Par value AZN 2 Underwriter Standard Capital LLC Those intending to purchase shares can apply to an organization being the member of BSE and having a brokerage license. The issue prospectus of shares of “AqroLizinq” OJSC will be placed on the web-site (www.bfb.az) of the BSE at “Issuers” section.

SE STOCKS 53. Turk Telekom net profit rises 88% y/y to EUR 272.3mn in Q1 bne April 21, 2010 Fixed line operator Turk Telekom (TT) announced that it boosted its net profit by 88% y/y to TRY 546.3mn (EUR 272.3mn) in Q1, IntelliNews reported. The sales revenues of the company reached TRY 2.58bn in the period up from TRY 2.51bn in the same period of last year. The company's revenues from its mobile operations were up 22% y/y to TRY 647mn while the revenues from Asymmetric Digital Subscriber Line (ADSL) operations increased 21% y/y to TRY 601mn. However the company states that due to the uncertainty in mobile pricing growth may be below 5%. Earlier this year the information and communication technologies authority ( ICTA) cut the interconnection fees by 50%. Turk Telekom has an 81% stake in cell phones operator Avea. Turk Telekom currently employs 33,881 people. 54. Turkey steelmaker Erdemir - Still Not Out of the Woods TEB April 23, 2010 Effective prices unlikely to increase as rapidly as list prices • The rises in list prices of Erdemir's products fueled optimism that the company will be able to pass on the cost increases to its clients. • We are skeptical that the effective price increase will be parallel to the rate of increase in list prices as we estimate that c.50% of the Company's orders are delivered through previously signed fixed priced contracts, where prices are adjusted to spot prices with 3-6 months lag. • On the back of sharp increae in raw material prices we cut our 2010 EBITDA and net income estimates by 9% and 16%, respectively. We also revised down our 2011 EBITDA and earnings estimates by 15% and 24%, respectively. Capacity additions in Turkey to put pressure on margins and CUR • Flat steel investments by Tosyali Group, Colakoglu and MMKAtakas should increase total flat steel capacity in Turkey from 8.3mn tons in 2009 to 15.8mn tons in 2011, when flat steel consumption is expected to be 8.7mn tons. • The additional capacity may cause Erdemir to operate below full CUR and reduce the Company's pricing power in the local market. "Marketperform" maintained; 4% downside • We cut our TP for the stock by 9% based on downward revisions

to our estimates in 2010 and 2011. • At 10.3x and 6.6x respective EV/EBITDA multiples on our 2010 and 2011, estimates, Erdemir trades at a 22% premium to peer group. In terms of P/E, the stock trades at 15.8x and 8.7x on our 2010 and 2011 estimates, a 3% premium to the peer group. 55. Turkey's Akfen Holding sets IPO price range at EUR6.21-EUR 8.7 per share bne April 20, 2010 Turkey's Akfen Holding announces that it set price range per share between TRY 12.50 (EUR 6.21) and TRY 17.50 (EUR 8.7) at the planned IPO expected to be launched by mid-May, IntelliNews reported. In March Akfen Holding applied to authorities to launch IPO for a 29.2% stake. If the additional sale option for TRY 5.8mn (EUR 2.8mn) nominally valued shares is used the free float rate in the holding company will rise to 34.6%. The company will use a part of the proceeds from the IPO to finance investments in energy.

CE STOCKS 56. Amrest 1Q10 sales decline 7.7% yoy Wood April 19, 2010 On Friday after the market's close, the management of AmRest stated that 1Q sales declined by 8% in PLN terms to PLN 481.2 mil. The management added that these results were influenced by the strengthening PLN and that local currency sales were flat yoy. Sales at European restaurants grew by 0.8% to PLN 304.4 mil. In local currencies, sales grew by 2.4%. Sales at Applebee's declined by 19.5% yoy to PLN 176.8 mil, largely on the back of the strengthening PLN. In USD terms, sales declined by 3.9%. NEGATIVE In our view, the top line dynamics imply negative same-currency LFLs, not only in the US but also in Europe. This partly stems from a relatively high comparison base, as the slowdown in AmRest's European sales did not start until mid-2009. The numbers could trigger a negative market reaction. There's also a slight positive element in the results, though - the negative momentum in the US sales seems to be losing its momentum. Further out, currency factors will continue to play against AmRest, however, because of the PLN strengthening against regional currencies and the USD. 57. CEE broadcaster CME expects TV ad prices will start increasing in H210 KB

April 22, 2010 CME expects TV ad prices will start increasing in H210 after bottoming out in Q110, CEO Adrian Sarbu said in an interview yesterday. CME's Bulgarian unit, now including the TV market leader bTV, should become profitable in Q410. The company intends to integrate the newly acquired assets with its original portfolio quickly. The group will have more than 40% audience share and 50-60% share in Bulgarian ad revenues. The news is neutral for the company as it was mentioned in an earlier presentation. The company will announce its Q110 results 5 May and it should give more details on its Bulgarian plans. 58. CEE Construction & Engineering - Pick your brick Erste April 19, 2010 The construction segment is delayed in the economic cycle. While 2009 was a tough year for other industries, it was a record year for the construction segment. 2010 and 2011, in general, will bring a deterioration of margins (driven by lower prices of contracts signed in 2009 and 2010 and rising prices of materials and subcontractors) and flat sales. On the other hand, investors are already anticipating the situation. In the past 12 months, the WIG Construction index strongly underperformed the broad WIG index (illustrated on the graph below). There are no easy answers for the whole segment at the moment; therefore, we advise to pick carefully from most attractive companies from the segment. In our opinion, the segments with the greatest potential are power engineering construction, infrastructure construction and also cubature commercial construction. As we said in our previous construction report, in 2009 the Polish construction market developed in a pace of 1- 4% (precisely 3.7%). For 2010, we expect growth to amount to 0-3% and to 4-7% for 2011. Currently the most 'catchy' story seems to be in power engineering construction where there are lots of plans on the table. In our opinion, the development of this market is some way in the future, there is a lot of uncertainty and there are no definite favourites to benefit from the potential boom. The valuations of some companies driven with this story are hard to justify, even assuming an optimistic scenario of development. We advise not to pay any price for exposure to the segment and to pick those companies that are likely to generate positive surprises via engagement in the segment. Among our top picks in the segment is Mostostal Warszawa (offering attractive exposure at a good price for the infrastructure, power engineering and commercial construction segments) - Buy, target price PLN 90. We also advise to accumulate Trakcja Polska (still some upside left and exposure to the railway construction segment characterized by strong potential) - target price PLN 5.15. In our opinion, it is also worth taking a risk on investing in PBG (target price PLN 245), which via its good quality of management could be a major benefactor of big contracts to be resolved in 2010 and 2011 and it is now traded without the usual premium. An interesting finding is Energomontaz Poludnie, for which we did a rough indicative valuation to be part of PBG's valuation (12m forward valuation of PLN 5.8 for Energomontaz) - which offers exposure to the power engineering segment - secured by a healthy backlog and valued quite attractively. Nota bene, we have not initiated coverage on this company. We recommend to sell Polimex (target price of PLN 4.4) and Rafako (target price of PLN 12.4), both of which have two tough years ahead and are traded with unjustified premiums.

For the European construction segment in 2010, we expect moderate growth in the Transportation Infrastructures segment (but no boom) from stimulus projects. In line with our previous estimates, it seems likely that the speed of decline in the Building Construction & Civil Engineering segment (BC & CE) will slow down markedly in 2010, supported by German- speaking countries. Looking at the development of important raw material prices like steel and oil (diesel, bitumen), we see the risk of cost pressure in 2010/11, although price change clauses (e.g. for steel) should help to mitigate the problem. It is still not clear how much governments will have to cut back on public spending by 2011/12 to consolidate budgets. However, we have assumed that private sector investment will largely compensate for lower public spending. We have updated our Strabag report. Based on slightly lower estimates and higher capex, we lower our 12-month target price from EUR 25 to EUR 23.3 and confirm our Accumulate recommendation. Strabag has a very solid balance sheet. The share trades at a huge discount on P/BV of 0.78x, but this is largely justified by its clearly lower ROE. 59. CEZ will hold AGM on Tuesday, June 29 Wood April 23, 2010 CEZ (CEZ CP) will hold AGM on Tuesday, June 29, 2010, i.e. one of the latest possible terms since according to Czech law, company has to hold the AGM in during first half of the year. AGM was obviously delayed because of parliamentary elections scheduled for mid May. Decisive day for the participation on the AGM will be 7 days prior to the date of AGM and all required documentation including management proposal of dividend shall be disclosed at least 30 days prior to the shareholder meeting. Unlike last year, when halted settlement on of the trades in Czech Republic and uninterrupted settlement of Polish line were causing confusion, there will be no settlement delay on Czech line this year as it was restricted by the amendment of the law. According to the statute of the company, dividend record date is set as the day of AGM. Cum-div date will therefore be Thursday June 24 and ex-dividend date Friday June 25. Dividend is expected at CZK 55 level (6.0% yield and, 56.9% pay-out ratio) but according to company's dividend 50%-60% pay-out dividend policy, management could propose up to CZK 58 per share. 60. Czech equity market correction seen in the second half of the year KB April 19, 2010 Since our last report in December, the PX index' volatility increased. After months in the corridor of 1,100-1,200 points, it breached both boundaries and has stayed above the 1,200 points since the end of March. The PX index outperformed both S&P500 and DJ Stoxx600 YTD. Q110 brought growth for most traded stocks. NWR, CME and Unipetrol recorded the strongest gains while ECM and KB were the only PSE stocks that decreased in Q110. The relation between PX index yield and yields of cyclical stocks such as CME, NWR and Erste was particularly strong in the past four quarters. For NWR and CME, we expect significant improvement in 2010 operating results. Despite the higher share prices, trading volumes didn't increase on the PSE. Market activity is still dominated by the few large caps. The notable exception is NWR, which got ahead of Telefonica O2 despite a lower market cap. We expect the positive momentum will push equity markets further up in the short term, but the risk of a market-wide correction increases since most indices are at

their 18-month highs. We believe the PX index could be in one year at a similar level where it is today. Good stock picking will be important at this stage. We now prefer stocks linked to commodities, especially CEZ and NWR. In the framework of sector rotation, we turned rather negative for traditional defensive issues, Telefonica O2 CR and Philip Morris CR. We keep a negative opinion on real estate developers. Global equity markets should benefit from sales growth coupled with operating leverage. Societe Generale analysts foresee growth in major markets in 2010 with H1 being more successful than H2 as monetary tightening could begin in the second half of the year. The main risk for 2010 growth is rising inflation expectations. This could trigger interest rate hikes and eventually cause lower trading multiples as suggested by the historical experience. SG economists now believe that the high-inflation scenario is the most likely for the next decade with 65% probability. 61. IT firm Asseco Poland sets SPO price at PLN 54, eyes 13 foreign acquisitions. bne April 20, 2010 CEE's largest IT company Asseco Poland has set issue price in the secondary public offering of 3.88mn of series I shares (with rights issue) at PLN 54 (EUR 14), the firm has announced (vs. earlier pledged PLN 60), IntelliNews reported. The firm hopes to raise PLN 209.5mn (EUR 53.6mn) from the SPO. The issue's proceeds are to be spent on acquisitions - the company said it was holding advanced talks with 13 foreign companies. 62. KIT Digital announced a public offering of 4.23m shares at $13 KB April 23, 2010 KIT Digital announced a public offering of 4.23m shares at USD 13 yesterday. Net proceeds will amount to EUR 51.9m. The offering will expire 27 April. KITD intends to use the proceeds to acquire and invest in competitive and complementary businesses in line with its growth strategy. The news is slightly positive for the stock as it seems KITD has found new acquisition targets. The extent of the offering is quite high in comparison with the recent acquisition of Multicast. Moreover, the company had USD 15m in cash after the latest acquisition. The acquisition potential is thus very high, even if we deduct some part of the funds to cover the company's losses. 63. Market share of Philip Morris CR declined in 1Q10 Wood April 23, 2010 Parent company of Philip Morris CR (TABAK CP), Philip Morris International (PMI US), published its 1Q10 results yesterday. According to PMI's statements, the total size of the cigarette market in the CR increased by 8.5% in 1Q10, although PMCR's shipments were up only 0.2% as the company saw a delayed effect of price hikes in 2H09. As a result, market share in

the CR declined to 48.7%, down from 50% in 4Q09. Please note here, that PMI uses a slightly different methodology in its market share calculation. NEGATIVE Unfortunately, this time no further comment was provided. The decline in market share in the Czech Republic is a small negative piece of news, mainly as we expected the market share to stay relatively flat, given the fact that the competition followed PMCR in introducing price hikes in 2009. The last day to purchase the stock with the right to the CZK 780 per share dividend is April 27. The company will hold its AGM on April 30, which should be followed by conference calls with management. 64. MOL was upgraded to 'buy' at Goldman, target price raised to HUF 25,000 Equilor April 20, 2010 MOL, the largest Hungarian oil and gas company was upgraded to 'buy' from 'hold at Goldman Sachs, the bank raised its target price estimate from the previous HUF 20,500 to HUF 25,000. Goldman cited MOL's attractive valuation, the exploration pipeline and a "good" exposure to Ural-Brent spreads as the main factors behind the upgrade. Last week, Italy's UniCredit bank changed its target price for MOL to HUF 21,800 with a 'hold' recommendation on the stock. 7 analysts out of the 19 analysts surveyed by Bloomberg recommend 'buying' MOL shares. 10 rate the stock with 'hold', and 2 economist suggest 'selling' it; the average target price estimate for the next 12 months is seen at HUF 19,867.72. 65. Net inflows into Polish investment funds reaches highest level since end-2008 bne April 20, 2010 The balance of inflows and outflows in 354 investment funds in March amounted to PLN 1.54bn (EUR 395mn) according to estimations, Analizy Online, which monitors the investment and pension fund market, Internet Securities Businesswire reported. Thus, March turned out to be the 11th month in a row to post a positive result; this month's result is the highest since December, 2008. On the side of purchases was PLN 6.3bn and on the side of repurchases PLN 4.8bn, which is by 51% and 46% more than a month earlier, respectively. Analizy Online note that the net inflow in Q1/2010 was PLN 3.7bn vs. net outflow of PLN 2.0bn a year earlier, which signals a marked improvement of investors' sentiment, but also - a change of attitude in distribution channels. For the fifth month in a row, the market was dominated by the safest segments: money and debt funds (whose combined sales were PLN 1.79bn and PLN 1.42bn, respectively, in March). 66. New shares of developer Orco start trading

KB April 19, 2010 Orco announced that new shares from the first round of capital increase started trading in Paris Friday. The company is applying to list the shares also on the Prague, Warsaw and Budapest bourses. The news is neutral for the stock at the moment. We assume the investors can't sell their shares before the general meeting will vote on the board's dismissal next Monday. Also, Luxembourg court should decide whether the issue was in line with rights of original shareholders. 67. Orco CEO says may raise further EUR10-20m of new equity KB April 23, 2010 The CEO J.-F. Ott said in an interview for Bloomberg that Orco may raise further EUR10-20m of new equity in order to stabilize the balance sheet. He is confident he will get backing on Monday's general meeting, which will vote on his and the board's dismissal. Ott could also increase his stake from 1.2% to 10% through converting warrants. Orco informed yesterday that Luxembourg court rejected the lawsuit by Millenius to void the recent equity increases. The chances of Ott's opponents to dismiss the current board are thus very low. The news is neutral for Orco. After the vote on Monday, it will be clear whether the potential new board will attempt to reach a deal with the creditors one more time or the current board will wait for the court's decision on the safeguard plan (rejected by bondholders Wednesday). 68. Orco: recent capital increase confirmed by court Wood April 23, 2010 The Orco Property Group announced yesterday that the Luxemburg Court had rejected the claims challenging the validity and effectiveness of the recent capital increases raised by some minority shareholders. The Orco Property Group raised EUR 16.2 mil of new shares that will be used to fund its operations and to strengthen its balance sheet. The capital increases were executed in three separate tranches over the last 2 weeks. We believe the recent capital increases were aimed to strengthen the position of the current management, which was threatened by a group of minority shareholders that, combined, own more than 10% of the shares and have demanded changes to the executive board at the upcoming AGM scheduled for April 26th. Confirmation of the recent capital increases somewhat reduces the chances that the current management will be voted down, unless support is gathered from some other minority shareholders. 69. Polish lender Alior Bank prepares IPO for 2011 Wood April 19, 2010 Alior Bank is gradually preparing for a stock market listing, with 2011 being the most likely date. The bank may raise capital with the participation of a new financial

investor beforehand. Allior Bank currently has around 220k clients, EUR 775 mil in deposits and a loan portfolio of EUR 363 mil, according to 'Il Sole'. 70. Surgut Misfires Once More Against Hungarian MOL Vladimir Socor April 20, 2010 For the second consecutive year, Russia's Surgutneftegaz has failed to crash the door of the Hungarian MOL's annual general meeting of its shareholders and the board of directors. The April 29 event seems set to consolidate MOL's defenses against such predatory takeover tactics. MOL's oil-refining business, recognized as the most efficient in Central Europe, is a coveted target in EU territory for the cash-rich Surgut. Surgut's top management is closely linked with the Kremlin, while the company's shareholders and ultimate beneficiaries remain undisclosed. Thus, the company looks unusually murky even by Russian standards. Surgut had initiated a hostile takeover attempt against MOL in March 2009, surreptitiously buying a 21 percent stake in MOL from Austria's OMV for 1.4 billion Euros, which was almost double the market price of those shares at that time. The seller, OMV (a defeated competitor to MOL in Central Europe), along with the deal's broker J.P. Morgan, helped Surgut's move. That transaction turned Surgut into MOL's single largest shareholder overnight, with the avowed intent to increase that stake further and dominate the Hungarian company. Surgut had made its move in the immediate run-up to MOL's annual general meeting, so as to obtain voting rights and representation on MOL's board of directors. Thwarted in 2009, Surgut seems certain to fail again this year, thanks to Hungary's transparency requirements. The regulatory agencies, Hungarian Energy Office (MEH) and Financial Supervisory Authority (PSZAF) cannot approve Surgut's registration and its listing in MOL's registry of shareholders, as long as Surgut fails to disclose its own shareholder structure and ultimate beneficiaries. The regulators also have questions about Surgut's 2009 purchase of the MOL shares (why did it pay double the market price?). Surgut fails to disclose that type of information even in Russia, let alone to Hungarian regulators. Consequently, it does not qualify to attend MOL's shareholders' meeting, vote, or receive dividends on its stake (Figyelo, April 15). The Russian business press is paying considerable attention to this case in the run-up to MOL's annual general meeting (Kommersant, April 6, 15; Vedomosti, April 14; RosBusinessConsulting, April 14, 16). Some interested parties suggest that Moscow might cut oil supplies to MOL's refineries from the Druzhba pipeline, as it has done since 2007 against the Lithuanian Mazeikiai refinery, to force a transfer of ownership to Russian interests (Kommersant, April 7). However, this warning sounds unconvincing with regard to Hungary. Unlike Lithuania, Hungary is not located at the terminus of a Druzhba spur, and it does have a back-up supply option for Middle Eastern oil via Croatia's Adriatic coast. Politically, Hungarian parliamentary parties have reached a consensus on defending MOL from any foreign takeover. This view will become even stronger with the landslide victory of Fidesz, a right-conservative party, in Hungary's two-round parliamentary elections on April 11 and April 25. Fidesz regards MOL (along with the leading companies in several other sectors) as national champions to be immunized

against hostile takeovers. According to Janos Martonyi, the Fidesz-designated foreign minister, the incoming government wants an early resolution by agreement between Surgut and MOL. Without discriminating against the Russian company, the government will oppose any takeover moves by Surgut or other foreign entities (MTI, April 16). MOL had paid out 40 percent of the net profits as dividends to shareholders until 2008. In 2009, however, it did not pay dividends on the profits from 2008; and is set again to forgo the 2009 dividend (on net profits estimated at more than $500 million) at the 2010 annual general meeting. As was the case last year, the total net income is again being booked as retained earnings, mostly for reinvestment to support organic growth. In 2009, MOL spent 873 million Euros to acquire an additional 22 percent -for a total of 47percent, along with managerial authority- in Croatia's oil and gas company INA. In 2010, and next year, MOL plans upgrades in five oil processing and petrochemical plants. These include plants in Croatia, where MOL's investment and modernization program is moving ahead despite the recession (Vilaggazdasag, April 14). To continue the growth program, MOL signed on April 14 agreements on a Eurobond issue for 750 million Euros, with a seven-year maturity and due to pay an annual coupon of 5.9 percent (Dow Jones, April 15). The bond issue is being oversubscribed, apparently reflecting investor confidence not only in the company's strategy, but also in its position in Croatia and its immunity to attacks from Surgut. 71. Surgutneftegas is once again excluded from MOL's annual general meeting Equilor April 22, 2010 OAO Surgutneftegas which holds a 21% stake in MOL, the biggest Hungarian oil company, won't be allowed to vote at MOL's general meeting on 29th April because the Russian ownership is not yet entered into MOL's books. The Hungarian financial watchdog (PSZÁF) still inquires into the Russian company's purchase of stake and the authority has no deadline to complete its investigation. Surgutneftegas bought the MOL stake from Austrian OMV AG last March for EUR 1.4 billion. According to MOL's annual report to be submitted to the company's general meeting, the company had a consolidated IFRS net income of HUF 115.8 billion, which is up from the preliminary figure of HUF 103.9 billion that was reported in February. The board said it would propose no dividend to be paid from last year's profit. 72. TPSA: 1Q10 results and conference takeaways Wood April 23, 2010 TPSA results reported 1Q10 results that were in line with market and our consensus. Revenues declined 13% yoy, EBIT was down 22% and net profit down 13%: [control] Revenues: According to TPSA, the value of the Polish telco market decreased by 5.9% yoy, so TPSA's 10% yoy top-line dropped was twice as high as the market overall. Mobile revenues were down 9.1% yoy, slower than the 14.5% contraction in 4Q09, but the improvement appears largely attributable to the low base effect (MTR cuts took place in March'09). Total mobile client base increased 0.6% yoy to 13.7 mil

with the number of post-paid clients up 6.3%. Fixed-line revenues were down 10.5% yoy due fixed-voice services (down 15.6% yoy) while fixed-data services remained flat yoy. Fixed-voice client base eroded further (down 183k to 6.9 mil 1Q10) while ARPU fell to PLN 50.9. from PLN 52 (PLN 55.2 in 1Q09). Retail broadband client base decreased by 11k in 1Q10 while ARPU was stable at PLN 57.7. TV offer remained the best selling one. 45k new users where added, of which 2k were IPTV ones and the remaining 43k subscribed to TVoSAT. Profitability: Continuing top-line erosion coupled with a rather slow cost adjustment translated into a visible yoy erosion of EBITDA margin (36.7% versus 38.4%), albeit we note that in qoq terms it remained unchanged. The biggest cost cuts took place in external purchases (down 10.7% yoy) but they were partly neutralised by a 15% increase in other operating costs. Headcount costs decreased by 3.1% yoy, owing largely to headcount cuts (2.3k yoy). TPSA reports that cost cutting initiatives delivered PLN 130 mil savings in the quarter, which matched the PLN 132 qoq revenue drop and consequently translated into flat EBITDA margin. Nonetheless, in light of the dim outlook for revenues we (and the market as well) still would expect a more cost savings going forward. Bottom line was supported by lower financial costs (PLN 115 mil vs PLN 199 mil a year ago) due to the lower level of debt (partly FX impact). As at end of March, net debt amounted to PLN 3.9 bil versus PLN 4.4 bil a year ago. As for the conference call, the main interest was focused on cost cutting, pricing and MTR. Cost savings of PLN 130 mil came from many areas like g&a (PLN ~25 mil), marketing (PLN ~10 mil) or network maintenance (PLN >15 mil). Some of the cost savings were already allocated to new initiatives thus full cost saving effect is not fully visible. Despite recent price cuts of broadband offer, Netia is still cheaper but TPSA sees its opportunities in bundled offer especially with TV and wants to retain existing clients to higher speeds. Due to postponement of MTR cuts to 2011, TPSA could have PLN 50-60 mil higher revenue base. As for management guidance, although there was no information in the press release, CEO maintained guidance announced following 2009 results which assumes upper range of single digit erosion, further decline of EBITDA but at slower pace, capex-to-revenues ratio at 16-18% and free cash flow at least at the level of PLN 2 bil. NEUTRAL Although TPSA reported 1Q10 results in line with consensus, investors were not excited and TPSA underperformed the market for most of the day. Outlook for TPSA is still challenging. Recent heavy price cuts of internet services only adjusted TPSA to market leader but did not put TPSA in a leading market position. TPSA launched new breakthrough offer in mobile segment with better client segmentation. We find it positive from the top-line point of view, but also we note that it could hamper a bit opex side due to marketing expenses. Although not included in press release, CEO maintained full year guidance during the conference, to decrease revenues by upper range of one digit numbers, which means that in 2H10 the pace of top-line erosion should be slower, but mostly due to lower base effects. No MTR cuts in 2010 should not be taken very positively as it will save only PLN 50-60 mil of revenues, tiny 0.3% of total. Overall, we see TPSA to face another challenging year ahead.

73. Unipetrol benefited from wider margins in both the refining and petchem segments KB April 22, 2010 Unipetrol published its trading statements today. The company benefited from wider margins in both the refining and petchem segments, as well as the stronger USD. On the other hand, fuel sales dropped 17% qoq. The management expects positive EBIT, significantly above those reported since Q308. The news is neutral for Unipetrol stock price, in our opinion. Higher margins are already priced in (the stock gained almost 30% in recent weeks).