Investments in securities

Investment breakdown by instrument type (debt and equity)

The Group’s securities portfolio totalled RUB 1,625.8 billion as of 31 December 2011 (including securities pledged under repurchase agreements). As follows from the table below, debt instruments make up 89.6% of the Group’s securities portfolio as of 31 December 2011. This is slightly less than in 2010 when the Group’s investments in debt instruments amounted to 93.7% of its securities portfolio. This decrease was the result of an increase in the volume of equity securities coming from Troika Dialog Group Ltd’s portfolio. Equity securities comprise shares and investment fund units. The Group’s investments in equity securities are primarily represented by shares in major Russian companies.

RUB million As of 31 December 2011 As of 31 December 2010 Change, %
  Amount % of amount Amount % of amount  
Debt securities 1,456,499 89.6 1,708,345 93.7 (14.7)
Equity securities 169,351 10.4 115,303 6.3 46.9
Total securities 1,625,850 100.0 1,823,648 100.0 (10.8)

Structure of investments in debt securities

The Group’s investments in debt securities mostly consist of Russian government bonds, which make up 53.5% of the Group’s investments in debt securities as of 31 December 2011. The share of corporate bonds and other securities increased from 21.9% as of the beginning of the year to 37.3% as of 31 December 2011. The portfolio of corporate bonds and other securities in absolute terms amounted to RUB 543.1 billion as of 31 December 2011, with the increase primarily driven by purchase of corporate bonds issued by Russian companies.

Breakdown of investments in securities by portfolio

Investments in securities as of 31 December 2011. The portfolio decreased by 22.6% over the year, which is primarily due to the repayment of Bank of Russia bonds. The portfolio of investment securities available for sale comprises the following major components: OFZ bonds — 44.1%, and corporate bonds — 35.4%.

The portfolio of investment securities held to maturity includes debt securities with maturities from 1 year to 11 years. As of 31 December 2011, the Group’s investments in this portfolio amounted to RUB 423.7 billion or 26.1% of the Group’s securities portfolio. OFZ bonds account for the largest share of the portfolio of investment securities held to maturity (RUB 211.1 billion or 49.8%). Corporate bonds make up another substantial share of 30.9%.

The Group’s investments in securities designated at fair value through profit or loss amount to RUB 61.3 billion or 3.8% of the Group’s investments in securities. OFZ bonds account for more than half (62.8%) of this portfolio. Their share decreased by 8.9 p.p. from 2010. Investments in corporate shares amounted to RUB 22.5 billion as of 31 December 2011, with their proportion rising by 14.2 p.p. year-on-year. Shares are mainly represented by “blue chip” equity securities.

The Group’s trading portfolio includes investments that are essentially short-term. Investments in this portfolio account for 9.2% of the Group’s securities portfolio.

RUB million 2011 2010 Change, %
  Amount % of amount Amount % of amount  
Investment securities available for sale 990,638 60.9 1,280,264 70.2 (22.6)
Investment securities held to maturity 423,694 26.1 358,191 19.6 18.3
Securities designated at fair value
through profit or loss
61,335 3.8 106,875 5.9 (42.6)
Trading securities 150,183 9.2 78,318 4.3 91.8
Total 1,625,850 100.0 1,823,648 100.0 (10.8)

Fair value of securities

All securities held by the Group, except investment securities held to maturity, are measured at fair (market) value. In most cases, fair value is based on their market quotes effective as of the reporting date. Where the market quotes were unavailable, the Group applied appropriate valuation models using both observable market data and judgment-based parameters.

Securities whose fair value was determined using valuation models and professional judgment account for 4.3% of the portfolio as of 31 December 2011 (RUB 69.7 billion). These securities include unquoted equity instruments issued by companies operating in the oil and gas, transportation, telecommunications and construction industries.

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