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Moody's assigns B2/NP/Baa1.ru ratings to IC Russ-Invest (Russia)

November 25, 2010 | Moody's Investors Service

Moscow, November 25, 2010 -- Moody's Investors Service has today assigned
the following global scale ratings to OJSC Investment Company IC RUSS-INVEST
("RI"): B2/Not Prime long-term and short-term foreign currency and local
currency issuer ratings. The outlook for the long-term ratings is stable. At
the same time, Moody's Interfax Rating Agency, which is majority-owned by
Moody's, has assigned a Baa1.ru long-term National Scale Rating (NSR) to RI.


The ratings are largely constrained by (i) RI's undiversified business model
which is reflected in significant proprietary investments in Russian equity
and fixed-income markets with low visibility on the market and limited
ability to diversify; ii) corporate governance issues, particularly
significant "key person" risk coming from the company's concentrated
ownership and decision-making process. In addition, RI's business model
envisages keeping a portion of its securities portfolio in lower liquidity
shares, thus giving rise to an elevated exposure to market risk and leading
to volatility of revenues and capital position.
Moody's also notes that low geographical diversification of business with
concentrated trading positions renders revenues significantly dependent on
Russian equity market correlations. Finally, RI's inflexible cost base does
not enable it to make adjustments to face prolonged deterioration in market

At the same time, RI's ratings are supported by the historically very low
leverage (although there are no effective tools that restrict its
increase) which leads to a strong liquidity position and more-than-adequate
coverage of risks by the capital cushion. Historically demonstrated stock
selection capabilities enable RI to report its risk adjusted performance
better than those of the benchmark, especially in 'bear' markets.

RI's ratings are not likely to be upgraded in the medium term. However,
Moody's identifies positive rating drivers which include (i) a maturing
operating environment leading to lower volatility of the markets and
development of regulatory oversight; (ii) diversification of revenue stream
away from proprietary trading more towards stable sources; and
(iii) reduction in market risks.

Moody's also notes that despite the proven history of maintaining the policy
of low leverage, the risk of increasing risk appetite via assuming more
leverage still exists and may cause significant negative rating pressure.
Such an outcome could jeopardise RI's liquidity and capital position.

The principal methodology used in this rating was Assigning Unsecured Credit
Ratings to Hedge Funds published in April 2007.

Moody's Interfax Rating Agency's National Scale Ratings (NSRs) are intended
as relative measures of creditworthiness among debt issues and issuers
within a country, enabling market participants to better differentiate
relative risks. NSRs differ from Moody's global scale ratings in that they
are not globally comparable with the full universe of Moody's rated
entities, but only with NSRs for other rated debt issues and issuers within
the same country. NSRs are designated by a ".nn" country modifier signifying
the relevant country, as in ".ru" for Russia. For further information on
Moody's approach to national scale ratings, please refer to Moody's Rating
Implementation Guidance published in August 2010 entitled "Mapping Moody's
National Scale Ratings to Global Scale Ratings."


Moody's Interfax Rating Agency (MIRA) specializes in credit risk analysis in
Russia. MIRA is controlled by Moody's Investors Service, a leading provider
of credit ratings, research and analysis covering debt instruments and
securities in the global capital markets. Moody's Investors Service is a
subsidiary of Moody's Corporation (NYSE: MCO).

Based in Moscow, Russia, OJSC Investment Company IC RUSS-INVEST (RI)
recorded total assets of RUB4.6 billion (USD152 million) and equity of
RUB3.6 billion (USD118 million) at YE2009 according to audited financial
statements. The majority of revenues are generated by the proprietary
positions or investments. Leverage has historically been low as there are
virtually no borrowed funds.


Full company namePublic Joint Stock Company "IINVESTMENT COMPANY IC RUSS-INVEST"
Country of riskRussia
Country of registrationRussia
IndustryFinancial institutions


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