Equity financing alternatives for Russian companies on the London Stock

Exchange

October 20, 2006

October 2006 2

Company growth

Growth

Independent Market ExpertiseRecommendations on how to maximise the value of

joining a London market

The LSE supports customers in maximising shareholder value through supporting capital raising and generating liquidity whilst maximising

opportunities from their increased profile

CapitalRaising it

efficiently & effectively when

required

ProfileMaximising

marketing/PR opportunities

LiquidityIncreasing and

maintaining liquidity

October 2006 3

0

2000

4000

6000

8000

10000

12000

14000

16000

London New York Boston SanFrancisco

LosAngeles

Chicago Paris Frankfurt Munich

Equity ($, billion)

$7

,58

4

$3

,08

1

Volume of Assets Managedin Financial Centres, 2005

Fund management activities in the UK are concentrated in a single location (London) rather than geographically spread of different centres

Source: Big Dough, Hemscott (September 2005)

October 2006 4

Oxera’s new analysis confirms that the findings of the 2003 Torstila study continue to apply now. The Oxera analysis is based on a sample of all IPOs on the LSE, NYSE, Nasdaq, Euronext and Deutsche Boerse during the period from January 1st 2003 to June 30th 2005, for which underwriting fee data was available in Bloomberg.

Source: The Cost of Capital - An International Comparison, June 2006

The gross spreads of IPOs on the US exchanges are found to be the highest, averaging 6.5% for the NYSE sample and 7% for Nasdaq IPOs. In comparison, median spreads of IPOs on the LSE’s Main Market are 3.25% and those on AIM

somewhat higher at 4%.

Cost of Capital in London: Oxera Research

October 2006 5

Total New Issues for the International Main Market 2003, 2004, 2005 and 2006 compared

0

1

2

3

4

Nu

mb

er o

f Co

mp

anie

s

2003 2004

2005 2006

London continues to attract int’l companies

Source: London Stock Exchange, August 2006

October 2006 6

Int'l IPOs in 2005 (£,m)

31141

718

12519

312232

61

907

531

148 91

435

13017

333 353

0100200300400500600700800900

1000

FR

UT

.LI

KU

MH

O

SS

A.L

I

UT

I

SR

I.L

I

FIV

E.L

I

EV

R.L

I

AG

C.L

PR

TY

.L

NV

TK

.LI

88

8.L

BK

M.L

I

INV

ES

T

AM

V.L

I

RE

A.L

I

TE

EG

.L

NL

MK

.L

Feb-05 Mar-05

Apr-05

May-05

Jun-05 Jul-05

Oct-05 Nov-05 Dec-05

In 2005, 17 Int’l Companies raised approximately $8 billion in London

International IPOs in London, 2005

Source: London Stock Exchange, August 2006

October 2006 7

Int'l IPOs in 2006 (£,m)

1,586564 250 66 35 52 129 304

3,581

100

1,0002,0003,0004,000

LO

TT

E

CO

MS

TA

R

KIN

GD

OM

GO

LD

EN

PO

RT

CA

RA

DO

R

RO

LT

A

CH

ER

KIZ

OV

O

CO

LT

TE

LE

CO

M

RO

SN

EF

T

NA

PO

PH

AR

MA

Feb-06 Mar-06 Apr-06 May-06 Jul-06

In the first eight months of 2006, 10 Int’l companies have raised over $12 billion in London

International IPOsin London, 2006 YTD

Source: London Stock Exchange, August 2006

October 2006 8

Top 10 companies traded on IOB – Jan-Jul’06

Source: London Stock Exchange trade statistics

41,46337,124

9,511 9,368 8,3326,435 6,075

4,206 3,083 2,909

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

LUK

OIL

OA

O

GA

ZPR

OM

OA

O

UN

IFIE

D E

NE

RG

YS

YS

TEM

S O

FR

US

SIA

SU

RG

UTN

EFT

EG

AZ

MM

C N

OR

ILS

KN

ICK

EL

OR

AS

CO

MTE

LEC

OM

HLD

GS

S.A

.E.

SA

MS

UN

GE

LEC

TRO

NIC

S C

O

RO

SN

EFT

OJS

C

NO

VA

TEK

OA

O

LOTT

E S

HO

PP

ING

CO

0

20,000

40,000

60,000

80,000

100,000

120,000Total trading Values ($ million)

Total no of trades

October 2006 9

Main Market(London listed, DR issuer)

London listing

(regulated)

IOB

Professional Securities

Market(exchange regulated)

IOB (U)

Source: London Stock Exchange - July 2006

Case Study: London – a leader in international trading

In 2005, IOB total trading turnover was $131bln and in the 7 MNTHS 2006 of $172bln.

Trading of DRs on International Order Book (2001 - 7 MNTHS 2006)

-

20

40

60

80

100

120

140

160

180

200

2001 2002 2003 2004 2005 7MNTHS2006

Tra

de v

alue

$ b

illion

0

100

200

300

400

500

600

Tra

des

'000

Turnover $

Trades

October 2006 10

Rosneft ownership structureRosneft ownership structure

Pre-IPO Post-IPO

Russian government viaRosneftegaz 100% Other free float 13%

Rosneftegaz 75%

Consolidation minorities 12%

•Strategic 21%

• Russia instl• 39%

•Retail 4%

• Intl institutional • 36%

Demand splitDemand split

•Shares Sold: Ordinary Shares (~41%) & GDRs (~59%)

•Offer Size: $10.4 Billion (pre-Green Shoe) and $10.6 billion

•Post IPO Market Cap: $80.2 Billion

Rosneft: 30/70 in Action

Source: JP Morgan

October 2006 11

Key differences between our markets

Pre-vetting of admission documents by the UKLA Compliance required with the rules of the UKLA Normally a three-year trading record required Minimum of 25% shares in public hands Prior shareholders approval for certain transactions Sponsors needed for certain transactions

Regulation by the LSE No trading record required No minimum amount of shares to be in public hands In most cases, no prior shareholder approval required

for transactions Normally, admission documents not pre-vetted by

Exchange or UKLA but by nominated adviser Nominated adviser required at all times

Main Market

12

AIM for Russia

2006 – A Record Year for Capital Raised*

Source: London Stock Exchange, September 2006, *Includes further capital raises

Total Money Raised ($m)

-

5,000.00

10,000.00

15,000.00

20,000.00

25,000.00

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 30-Sep-06

$1

6,9

97

$1

9,4

06

13

AIM for Russia

2006 – 199 IPOs have raised close to $11 Billion

Source: London Stock Exchange, September 2006

7

22

44

26

31

21

17 19

12

$20

$69$73 $73

$43

$62

$33

$44

$24

0

5

10

15

20

25

30

35

40

45

50

Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06

0

10

20

30

40

50

60

70

80

Number ofCompanies

Avg Raise ($,m)

14

AIM for Russia

2006 – Top 10 Sectors By IPO Capital Raised

Source: London Stock Exchange, September 2006

17

36

13 12

3

14

4

22

11 10

0

500

1,000

1,500

2,000

2,500

3,000

Real Esta

te

Gener

al Fina

ncial

Equity

Inve

stment

Instr

umen

ts

Trave

l & L

eisure

Indu

stria

l Metal

s

Softw

are

& Com

pute

r Ser

vices

Constru

ction

& M

ater

ials

Mini

ng

Med

ia

Suppo

rt Ser

vices

0

5

10

15

20

25

30

35

40

Money raised $m

Number of IPOs

15

AIM for Russia

Russian Assets on AIM – A Sizeable Peer Group

Source: London Stock Exchange, August 2006

Further $ Raised

Amur 15.03.2006 37 54 7.8 0Aricom 31.12.2003 344 27 7.6 192Aurora Russia 24.03.2006 128 143 142.6 0Baltic Oil Terminal 27.04.2006 153 116 43.7 0Bema 30.12.2003 1,932 N/A N/A 241Celtic Resources 14.10.2002 192 68 9.6 57Highland Gold 17.12.2002 452 399 38.0 190Imperial 05.05.2004 663 4 1.6 342IMSG 06.12.2005 60 110 15.2 0

Peter Hambro 29.04.2002 1,703 68 20.6 124Rambler Media 15.06.2005 363 160 41.7 0Raven Russia 29.07.2005 841 291 290.8 589Sibir 12.06.2000 2,384 N/A N/A 312Trans-Siberian 25.11.2003 54 82 30.4 15Urals Energy 09.08.2005 833 395 139.9 232Zirax 16.12.2005 44 49 14.7 0

Totals: $10,181 $804.2 $2,294

Company Admission Date Market Cap Today ($,m)

IPO $ Raised

Market Cap at IPO

16

AIM for Russia

Access to Capital - both at IPO and after

CIS Companies - Money Raised on AIM ($,m)

1,200

2,784

0

500

1,000

1,500

2,000

2,500

3,000

IPO $ Raised Further $ Raised

Source: London Stock Exchange, August 2006

17

AIM for Russia

AIM Supports Growth Companies

371

269

519

833 841

162

0

100

200

300

400

500

600

700

800

900

Max Petroleum Urals Energy Raven Russia

Market Cap at Admission ($,m)

Market Cap Today ($,m)

11 M

onth

s

13 M

onth

s

14 M

onth

sSource: London Stock Exchange Statistics, September 25, 2006

18

AIM for Russia

Prospectus Preparation

Underwriting and analytical coverage

Broker

NOMAD

Company

Short-form report

TechnologyExperts

Reporting Accountants

Legal reports and negotiations

Law Firm(NOMAD’s)

Law Firm(Corporate)

Public Relations and Investor Relations

Listing and trading Services

Stock Exchange: AIM

RegistrarPR firms

IndependentResearchersLHC

3 - 5% of the deal, plus1% of the firm

£150K- £300K,Of which NOMAD’sLawyers get 25%- 40%

£100K- £150K

£25K- £50K£10K

IPO Process Cost Structure (AIM)

£150K- £200K plus1% of the firm

Total costs to raise £50m,Excluding value of options:

£2,500K - £5,000KOverall costs range: 5%-10%

CREST Co

Source: Oxford Said Business School MBA Project, August 2006 as amended by London Stock Exchange

October 2006 19

WWW.LONDONSTOCKEXCHANGE.COM/RU/AIMJon EdwardsSenior Manager, CIS Desk+44(20) 7797-1599jedwards@londonstockexchange.com

Contact Details