REPO TRANSACTIONS

Depending on the special conditions of circulation of a security use may be made both of a standard pledge and REPO transactions (agreement on the repurchase of securities).

Absolut Bank, one of the leaders on the stock and money market, uses a wide range of financial instruments to expand the possibilities of mutually advantageous cooperation with partner banks.

In the framework of this cooperation we offer financing for up to 14 days by conducting REPO transactions with securities.

Tentative List of Securities

Promissory notes:

• JSB Sberbank of the RF
• Foreign Trade Bank (OJSC)
• CB Gazprombank
• JSCB Eurofinance Mosnarbank (OJSC)
• OJSC Industrial Construction Bank of St. Petersburg
• CJSC Moscow International Bank
• OJSC Transcreditbank CB Rosbank
• JSC Bank of Moscow
• IMPEXBANK
• OJSC CB Petrocommerz
• CB Promsvyazbank
• JSICB Nomos-Bank
• RJSC GAZPROM
• OJSC Rosselkhozbank

Bonds:

• Government of Moscow
• Moscow Oblast Federal Loan Bonds (OFZ)
• OJSC Residential Mortgage
• Lending Agency
• OJSC NK Lukoil
• OJSC Russian Railways
• RAO (RJSC) UES of Russia /FSC UES
• LTD Russian Aluminium Finances
• RAO (RJSC) GAZPROM OJSC
• Tyumen Oil Company
• OJSC Tsentrtelecom

Shares of stock (common and preferred)

• RAO (RJSC) UES of Russia
• OJSC NK Lukoil
• OJSC Rostelecom
• OJSC Surgutneftegaz
• Transneft
• OJSC Gazprom
• OJSC MMC Norilsk Nickel
• OJSC Sberbank (Savings Bank) of the Russian Federation

We are also ready to consider proposals for extension of the list of securities acceptable for REPO transactions.

Bonds

Absolut Bank offers you to use our experience in the work with fixed-income instruments (government, municipal, corporate bonds and eurobonds) in the form of broker services.

JSCB Absolut Bank, being a dealer of the Bank of Russia on the government securities market and a member of the Stock Market Section of MICEX, offers broker services in respect of all kinds of fixed-income securities circulating on the Russian securities market:

• government bonds denominated in Russian rubles (GKO-OFZ);
• government bonds denominated in foreign currency;
• municipal bonds;
• corporate bonds.

The specialists of the Securities Department will help you choose financial instruments, most suitable for you, out of a large number of bonds of different issuers circulating on exchange and over-the-counter market, on the basis of their yield indicators, investment periods and liquidity of the bond portfolio.

Having signed a broker services agreement you can not only buy securities on the secondary trading market but also participate in the IPO of government, corporate and municipal bonds on Moscow Interbank Currency Exchange.

Under the Bank’s program of fiduciary management of the clients’ assets on the securities market we offer you the services in the formation of a bond portfolio from various kinds of liquid bonds to ensure the receipt of stable long-term income in accordance with your wishes.

Government Bonds

Absolut Bank offers to provide broker services on the market of fixed-income government securities (government bonds):

• government bonds denominated in Russian rubles (GKO-OFZ);
• government bonds denominated in foreign currency (bonds of the Finance Ministry and eurobonds of the Russian Federation).

The government bonds are the most reliable financial instruments on the securities market and, therefore, they are particularly attractive for large investors which want to receive a regular stable income during a long period of time. Government bonds of the Ministry of Finance of the Russian Federation denominated in Russian rubles (GKO and OFZ) are presently used by the Russian investors mainly for investment of capital with minimum risks. Of course, the smaller the risk the lower is the expected income and, therefore, at the present time the yield of all issues of GKO-OFZ bonds is smaller than the inflation rate.

GKO bonds are zero coupon government bonds with their yield formed as the difference between the buying price and the selling or redemption price.

OFZ bonds are government bonds with a fixed coupon income which is paid to OFZ bond holders upon expiration of a definite period (coupon period). OFZ bonds are redeemed at the par value on the maturity date, simultaneously with the last coupon payment.

Government bonds are traded on the Moscow Interbank Currency Exchange with the participation of authorized dealers and their clients.

The market of foreign currency government bonds of the Russian Federation (eurobonds) has now become the main reference point for western investors to judge the condition of the Russian economy. The main difference between the RF eurobonds market and the internal borrowing market is that the bonds are denominated in fully convertible currency, have a fixed foreign currency yield and, therefore, are free and clear of the risk of ruble devaluation.

As of today, RF eurobonds have been issued to an amount of 36.4 billion US dollars, the internal government bonds of the Finance Ministry (“VEB bonds”) to an amount of 10.8 billion US dollars. Thus, together they form the largest market of Russian securities. The advantage of the market of government bonds denominated in foreign currency is that it is a non-exchange (inter-bank) market, which allows the client to carry out highly diverse operations with such bonds. As a rule, the volume of one transaction is not less than 1 million US dollars at par but the flexible conditions offered by Absolut Bank on the government bonds market make it possible to operate with lots worth from 100,000 US dollars.

Corporate and Municipal Bonds

The corporate and municipal bonds market is presently the most dynamically developing market of fixed-income securities.

Using corporate and municipal bonds the issuers (enterprises and constituent entities of the Russian Federation) are now able independently to attract borrowings on the securities market.

Corporate bonds denominated in Russian rubles are now used by investors mainly as investment of capital with a relatively low degree of risk compared to stock market. By purchasing corporate bonds you receive a stable income with a moderate degree of risk, which exceeds the inflation rate and the rate of interest payable on ruble deposits at major banks of the Russian Federation. For banks corporate bonds may serve as an alternative to depositing funds at the Bank of Russia and to purchasing government securities.

At the present time, there is a sufficiently large number of actively traded corporate bonds with an acceptable liquidity level and various investment qualities. The issuers of corporate bonds include the leading industrial companies of the Russian Federation: Gazprom, Tatneft, Slavneft, TNK, MMK, MGTS, OMZ, and others. Many issuers of corporate bonds have a domestic borrowing rating comparable with the sovereign rating of the Russian Federation, which makes such corporate bonds highly attractive with regard to the risk/yield ratio.

Absolut Bank offers the full range of broker services on the corporate bonds market. In its activities the Bank relies on such principles as observance of confidentiality, economy and convenience of conducted operations.

The rich experience of the Bank on the corporate bonds market, highly qualified portfolio managers, the availability of the analytical support allow the clients to receive high-quality services in the management of capital on the corporate bonds market, and earn a fairly high income.

Absolut Bank makes it possible for its Clients to use the services of a personal portfolio manager, who constantly monitors the condition of the client’s bond portfolio and informs the client about the operations that have to be performed.

Fiduciary Management: What Does It Mean?

Fiduciary management of the assets on the securities market is intended for those who lack sufficient time and knowledge to monitor and forecast price alterations on the stock market but wish to receive an additional income on their investments in the Russian securities market.

When concluding an agreement for fiduciary asset management the client establishes the time horizon for which he is ready to place funds under fiduciary management and signs the “Assets Placement Strategy,” a document which specifies strictly definite types of securities from which the investment portfolio is to be formed. The types of securities and maximum permissible volumes of investment in each such type are determined depending on the level of income expected by the client and the investment strategy of fiduciary management which the client chooses.

It must be remembered that there is interconnection between the investment income from the portfolio under fiduciary management and the risk associated with this portfolio. The higher the profitability of fiduciary management expected by the client, the riskier the investment strategies to be applied for portfolio management are. In any case, the client may set the maximum amount of acceptable losses (level of the risk for the investment portfolio) and thus limit the assumed risks of portfolio investment.

Main principles of fiduciary asset management used by Absolut Bank:

Competent formation of the investment portfolio using various financial instruments; consideration of long-term expectations of the client. Absolut Bank offers several investment strategies and styles of fiduciary asset management. The composition of the investment portfolio is selected so as to consider all objectives and wishes of the client, including:

• required risk/income ratio for the investment portfolio;
• planned period of fiduciary management;
• required level of liquidity of the assets under fiduciary management.

Information transparency and confidentiality. Regular reports are presented to the client on the current condition of his investment portfolio under fiduciary management and information about fiduciary management of his assets is supplied to the client on request. The Bank observes all requirements to the confidentiality of this information, stipulated by the law and set by the client.

High quality of the management, quick decision-making. The high quality of the management is due to the accessibility of a wide range of financial instruments, the use of the comprehensive information about the situation on the securities market and high professionalism of portfolio managers. The modern trading systems make is possible to promptly respond to all market changes.

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