The 'A++' rating indicates that RONIN Trust (hereinafter also referred to as the "Company" or "Issuer") maintains an extremely high level of reliability, with the lowest risk of a delay in meeting liabilities imaginable.

The key positive rating drivers include the Company's business expansion and persistently strong market position, acceptable return on the management of financial resources, growing profit and profitability of operations, an increase in assets and equity capital.

In 2016, the value of assets managed by RONIN Trust increased in all trust management segments. The strongest result was achieved in the segment of pension accruals (almost 40% or nearly RUB 20 billion). As a whole, the value of assets managed by the company grew by 32.6% this year to reach RUB 84.8 billion as of September 31, 2016. According to the investfunds.ru web portal, RONIN Trust took the 19th position in the ranking of trust managers in terms of total assets under management, 10th in the amount of pension reserves in the first half of 2016 (against the 21st and 12th positions, respectively, in 2015.). The ability to maintain a strong market position is an essential positive rating driver for the asset manager.

In 2015, the rated Company's average weighted return on management of the largest assets was 12.7% p.a. for pension accruals and 10.2% for pension reserves (against 7.8% and 3.4% in 2014, respectively). As of September 30, 2016, the figures were nearly the same: 12.6% and 10.1%, an evidence of the company's consistent investment strategy, which minimizes institutional investors' asset loss risks.

The higher return on management improved the Company's revenue the backbone of which is formed by pension accruals and pensions reserves management fees. In 2015, the Company earned RUB 407.6 million in revenue, almost 4 times more than in 2014 (RUB 104.5 million). Its net profit grew more than 10 times reaching RUB 207.0 million. The growth of retained earnings allowed the Company to pay RUB 150 million in the 2015 dividends without impairing stability of its financial profile.

Last year, RONIN Trust raised a subordinated loan in the amount of RUB 770 million from an affiliate, which increased the Company's balance sheet assets more than 4 times. RONIN Trust's equity capital (in terms of IFRS) and financial assets grew in the same proportion. This, in our view, has produced a positive impact on the issuer's financial viability.

We also appreciate the Company's fairly conservative strategy of building its own securities portfolio. As of September 30, 2016, the securities portfolio was almost entirely composed of government bonds and debt securities of Russian economic entities (including credit institutions). More than 87% of the financial instruments (issuers) were rated equal to the sovereign ratings of Russia. Therefore, the Company's own investment portfolio is acceptably reliable, liquid, and profitable.

We also regard the advanced regulation and IT support of business processes, the extensive experience and professional excellence of the Company's top management, as well as sufficient information transparency as positive rating drivers.

The rating constraints for the Company include high business concentration within the largest segment (funds transferred from NPFs account for more than 90% of the assets under management and revenues), a high debt burden in terms of Russian GAAP / RAS standards (debt to revenue exceeding 2 in 2015), an imperfectly structured equity capital according to IFRS standards (the tier 2 to tier 1 capital reaching approximately 160% as of January 1, 2016).

RONIN Trust has been active in the market of discretionary asset management services since 2002. The company is among the leading players in the market of discretionary management of NPF and mutual fund resources. RONIN Trust possesses license no. 21-000-1-00100 for the management of investment funds, mutual funds and non-state pension funds as of December 24, 2002 and license no. 077-09333-001000 of a professional participant of the securities market as of August 8, 2006.

The company's sole shareholder is CJSC RONIN Holding. The ultimate beneficiary is Andrey Yurievich Gark (75% of the shareholder equity).

As of September 31, 2016, the Company managed almost RUB 85 billion in assets, its equity capital calculated according to the FFMS method was RUB 337 million.

This press release is based on the Statement of assignment of a reliability rating to RONIN Trust. The rating assignment was based on the Reliability Rating Methodology for management companies (AK&M Rating Agency, 2015). 

AK&M Rating Agency assigned a rating to RONIN Trust for the first time on August 30, 2013. The last rating action in relation to the Company was taken on November 18, 2015. All rating action announcements are available on the www.akmrating.ru website.

The rating is valid until November 2017. AK&M Rating Agency may revise the rating and/or the outlook during this period if circumstances fundamentally influencing the issuer's creditworthiness are revealed.

For estimation purposes, we completely rely on the reliability of information provided by the Rated Entity. The rationale for AK&M Rating Agency's judgment on the rating may include information acquired from other sources we deem to be reliable; however, the agency does not check the input data exhaustively and disclaims all responsibility for their possible errors.

The rating, along with any information and conclusions provided in this press release, only conveys our creditworthiness opinion and shall not be construed as a recommendation to make any investment decisions.

AK&M Rating Agency shall not be held liable for any interpretations, inferences and consequences related to the application of results of the rating estimation procedure by any third parties.

AK&M Rating Agency is a leading independent national rating agency engaged in rating activities since 1993.

AK&M Rating Agency

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www.akmrating.ru

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