NEWS

16.01.06
General investment outlook for 2006

The macroeconomic factors are generally favorable for 2006: Russian macroeconomic situation should be stable with minor slowdown in GDP and industrial growth. Personal income growth, mortgage and consumer lending growth, banking sector growth, growth in metallurgy and engineering as a result of previous investment in these sectors are expected.

10.01.06
2005 overview

The 2005 was an excellent year for Russian stock market. The markets enjoyed high liquidity and continuing inflow of foreign capital. The RTS stock market index increased by more than 80%, while the Russian Sovereign Spread narrowed by more than 100 basis points. The economic growth was generally in line with expectations, while inflation slightly exceeded targets.

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Rosfund, SPC (the ?Fund?) is a Cayman Islands exempted limited company incorporated on 18 November 2004 and registered as a segregated portfolio company under the Companies Law (2004 Revision) of the Cayman Islands (the ?Companies Law?). As a segregated portfolio company under Cayman Islands Law, the Fund can operate segregated portfolios with the benefit of statutory segregation of assets and liabilities between each segregated portfolio. The Fund is comprised of a number of segregated portfolios (each a ?Segregated Portfolio? and together the ?Segregated Portfolios?).

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We stay bullish on the second-tier stocks with the favor over energy, machinery and retail sectors as the most outperforming. Regional expansion of retail companies together with personal income growth, boosting investments in production capacity and modernization and continuous inflation - all these drivers are not fully factored in prices of less liquid stocks. Some arbitrage opportunities are not yet exercised in stocks on the expectations of Svyazinvest privatization and cost cutting, UES subsidiaries equity and planned-for-IPO stocks. To provide less volatility relatively to the benchmark credit risk exposure is also to be taken in asset backed securities (mortgages and operating assets), which offer stable and positive real returns, adjusted for inflation.

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