Russia’s Capital Market:Russia’s Capital Market:Today and TomorrowToday and Tomorrow

Alexei RybnikovAlexei RybnikovCEOCEO

MICEX Stock ExchangeMICEX Stock Exchange

London, May 23 2006London, May 23 2006

Domestic Capital Market in Figures

In 2005 MICEX Stock Exchange’s share in the Russian stock market turnover reached more than 85%

Volume of transactions in 2005 reached 225,6 bln USD (+49,2% over 2004)

Volume of transactions in January-April 2006 reached 164,1 bln USD, which is 3 times more than in January-April 2005

The turnover of the Russian exchanges

in 2003-2006, bln USD

2003 20042005

Jan-Apr

2006

MICEX SE

99.1 151.2225.

6164.4

RTS 13.3 26.1 38 33.1

MICEX Stock Exchange Liquidity Growth (Average Daily Turnover)

0,49

0,71 0,740,84

0,58

0,75 0,770,85

1,30 1,311,20 1,22

1,75

2,19 2,17

2,61

0

0,5

1

1,5

2

2,5

3

J an-05

Feb-05

Mar-05

Apr-05

May-05

J un-05

J ul-05

Aug-05

Sep-05

Oct-05

Nov-05

Dec-05

J an-06

Feb-06

Mar-06

Apr-06

bln USD

Cash Equities Market

Equities trading

0

30

60

90

120

150

2004

2005

Janu

ary-

Apr

il20

06

bln USD.

0

300

600

900

1200

1500

Trading volume

Index

290 equities of 184 issuers traded 50 equities of 33 issuers listed,

including RAO UES, LUKoil, Rostelecom and Sberbank

Cash equities turnover reached 141,8 bln USD in 2005 (+30,6% over 2004)

Cash equities turnover in January-April 2006 reached 120,4 bln USD, which is 3,7 times more than in January-April 2005

MICEX Index is currently at 1143,76 (May 22, 2006): +13,1% from the beginning of 2006

Equities Market Capitalization

Equities market capitalization

0

100

200

300

400

500

600

700

800

1H 2

002

2H 2

002

1H 2

003

2H 2

003

1H 2

004

2H 2

004

1H 2

005

2H 2

005

Jan-

06

Feb

-06

Mar

-06

May

-06

bln. USD

Equities market capitalization grew 73% during 2005 to 258,6 bln USD

Equities market capitalization grew 2,6 times to 709,58 bln USD in January-April 2006

The most capitalized companies are (as of 19 May 2006) Gazprom – 249,24 bln USD Lukoil – 66,76 bln USD Surgutneftegaz – 58,23

bln USD

MICEX Stock Exchange: Trading in Gazprom Stock

Gazprom trading

0%

20%

40%

60%

80%

100%

23-J

an

30-J

an

6-Feb

13-F

eb

20-F

eb

28-F

eb

7-M

ar

15-M

ar

22-M

ar

29-M

ar

5-A

pr

12-A

pr

19-A

pr

26-A

pr

4-M

ay

12-M

ay

19-M

ay

MICEX SE SE SPB RTS SE

Corporate and Regional Bond Market

Bonds trading volume

0

20

40

60

80

100

2004

2005

Janu

ary-

Apr

il 20

06

Bln. USD

400 bonds of 276 issuers traded 115 bonds of 65 issuers listed Trading volume reached 83,8 bln

USD in 2005, which is two times more than in 2004

Trading volume reached44 bln USD in January-April 2006, which is 2 times more than in January-April 2005

In 2005 144 corporate bond issues were placed on MICEX SE for the total amount of 9,14 bln. USD

In January–April 2006 58 corporate bond issues were placed on MICEX SE for the total amount of 4,21 bln. USD

The biggest companies in 2005 by bond volume placement are: Russian Railways — 0,89 bln.

USD VTB — 0,54 bln. USD Federal Grid Company of

Unified Energy System — 0,5 bln. USD

Corporate Bonds: Primary Market

0

2

4

6

8

10

1999

2000

2001

2002

2003

2004

2005

2006

bln USD.

0

50

100

150

200

250

300

Issues

Placed volume

Number of issues

In 2005 24 regional bond issues were placed on MICEX SE for the total amount of 3,17 bln. USD (including City of Moscow )

In January–April 2006 6 regional bond issues were placed on MICEX SE for the total amount of 1,19 bln. USD (including City of Moscow )

The biggest regions in 2005 by bond volume placement are: City of Moscow — 0,67 bln

USD Moscow Region – 0,43 bln.

USD Krasnoyarsk Territory – 0,11

bln. USD

Regional Bonds: Primary Market

0

1

2

3

4

5

2005

2006

bln USD

Exchange Traded Funds

0

5

10

15

20

25

30

1 Q

200

5

1 Q 2

006

mln USD 74 exchange traded funds trade on MICEX SE

ETF trading volume reached 29,5 mln. USD in January-April 2006, which is 18 times more than in January-April 2005

Trading Members and Clients

Investors

December 30, 2004

July 1, 2005

January 1,

2006

May 1, 2006

Total 117 382106 969

134 440

166 078

Legal Entities

20 066 17 622 19 069

20 973

Private investors

96 529 84 523109 714

138 673

Non-residents

787 957 1 145 1 345

Institutional Investors

3 867 4 512 5 123

Trading members

366

459

473

500

517

538

546

558

0 100 200 300 400 500 600

J anuary 2000

J anuary 2001

J anuary 2002

J anuary 2003

J anuary 2004

J anuary 2005

J anuary 2006

May 2006

MICEX Stock Exchange: Issuers at a Glance

Issuers on MICEX SE

January 1, 2004

January 1,

2005

January 1,

2006

May 1,

2006

Total number of issuers

225 241 385 475*

Issuers of equities

91 81 161 184

Issuers of bonds

152 179 245 276

Number of issuers on the MICEX SE

81

161

184

152

179

245

276

91

0 50 100 150 200 250 300 350

J anuary 2004

J anuary 2005

J anuary 2006

May 2006

Equities Bonds

*including ETF and Eurobonds of RF

2005-06 Projects

Launching MICEX Stock Exchange Implementation of corporate governance standards Market participants matter

MICEX SE Council Stock Market Committee, IT Committee Index Committee

2005-06 Projects (continued)

Modified Bond REPO Ability to conclude a REPO deal without coverage control for the first leg

of REPO transaction Ability to conclude an intraday REPO deal with execution at the same

settlement date Extended REPO terms up to 180 calendar days and also out of coupon

term New fees

New rules for clearing and settlement Mechanism of Margin Calls for REPO deals Early execution of trades with settlement codes В01-В30 Bilateral netting for trades with settlement codes В01-В30, REPO deals

and Margin calls Intraday clearing session

Development and promotion of MICEX Indexes New stocks in MICEX Index as of 14/03/06 (Gazprom, MTS, Transneft) Changes in MICEX Index methodology

Market-makers and margin trading Market-makers re-launched at MICEX Stock Exchange on

November 10, 2005 13 Market-makers cover 16 bonds

IPO sector development MICEX facilitated 3 IPOs for Russian companies in 2005: IPO of

“PAVA”, “Lebedyansky”, and SPO for “Severstal-auto” Total amount of 2005 IPOs was 288,5 mln USD

Gasprom stock trading started (January 2006) International Financial Organizations sector development

2005-06 Projects (continued)

The Pipeline: New Equities REPO

New features: Market price discounting for REPO transactions Margin calls for REPO Ability to conclude deals conclusion without coverage control

for the first leg of REPO transaction Increased term or REPO deals up to 180 days New fees Implementation started 22/05/06 (marketing period)

The Pipeline: New Technologies

Extensive technological agenda: PIX technology Joint user testing Remote workplaces Fast warning system

User role (IT Committee)

The Pipeline: Our Contribution to IPOs

Innovative and Growing Companies Sector development Growth of number of issuers on MICEX SE Growth of number of the stocks with better liquidity Leads to development of wider IPO market

Market-makers and specialists institution creation Creation of additional mechanism to support stock liquidity Market stabilization for selected stocks Additional benefits for IPOs on MICEX Stock Exchange

Marketing activity Working with issuers and their financial advisors Cooperation with the LSE (Co-marketing agreement)

Introduction of Specialists

Specialist: Stock exchange member

nominated by the issuer can sign a contract with the Exchange to support market of low-liquidity issues and mutual funds

Specialists will have an exclusive right to announce and maintain quotes

Specialist vs market-maker: Specialist is nominated by the

issuer Specialist can maintain quote

for own and client account

Market participants

Specialists

Market-makers

Specialists (continued)

Admitted stocks

Liquid stocks

«Specialist List»

«Stocks of the specialists»

«Specialist List» include stocks that specialists can trade

Selection for the «List» is based on liquidity criteria:

Where Fi – criteria of liquidity: Number of trade days; Number of trades; Volume of trades; Number of the market participants

involved in trading. «Specialist List» is reviewed every 6

months Specialist is obliged to support bid-ask

quotes within the spread Specialist has an exclusive right for

making market, getting special fee rates and unique ability to promote securities

i

iF

F iKmax

Specialists (continued)

New admission and trading rules approved by FFSM

Preliminary list of securities quoted by specialists worked out: 76 stocks selected

Information sent to trading participants and issuers

Special web page created

Creation of Innovative and Growing Companies (IGC) Sector on MICEX Stock Exchange

Main criteria of the IGC Sector: Less strict listing requirements (period of existence,

shareholding structure, capitalization) Additional requirements for investor rights protection

(information transparency) Where we are:

New admission and listing rules developed Working with FFMS to change IGC sector regulation

New Sector for Innovative and Growing Companies

IGC Stock Selection Criteria: Easier Access and Investor Protection

Listing criteria List «B»(standard)

List «B» (IGC Sector)

Share of stock for one shareholder < 90% -

Total capitalization > 2 billion rubles < 5 billion rubles

Period of existence Not less then 1 year Not less then 1 year

Monthly trading volume (3 months before the admission)

> 1,5 million rubles -

Monthly average trading volume (6 months after admission)

> 3 million rubles > 0.3 million rubles

Compliance with Corporate Governance Code

Yes -

List of the affiliates Yes -

Additional information disclosure - Yes

Investors protection mechanism: expert council; additional information disclosure for companies; listing agents; investor sophistication requirements

Industry; technology details, market cap, growth rates

The Pipeline: Derivatives at MICEX Stock Exchange

On the way to starting derivatives trading in 2006: All necessary licences received Range of instruments defined: MICEX Index futures and most

liquid single stock futures, followed by bond yield derivatives Clearing model in the works: goal is CCP Pricing and services model in the works

Global Concentration of Liquidity Intensifying

March 2006: NYSE+Archipelago March 2006: Australian Stock Exchange (ASX)+futures

stock exchange SFE Corp. LSE continues to receive M&A offers from European, US

and Australian companies NASDAQ+LSE (25%+) NASDAQ+Instinet Euronext+NYSE or Deutsche Boerse? Eastern and Central Europe case

Where is Russia’s Capital Market Heading?

Russia big enough to deserve a domestic market Currency control liberalization effect Settlement infrastructure: what change do we need? Taxation bumps

Where is Russia’s Capital Market Heading?

MICEX Stock Exchange mission: THE national exchange of Russia

MICEX Stock Exchange Among Peers

Equities Trading Volume for January-April 2006 and Number of Issuers

$ Billions Number of issuers

NYSE 6991.9 2176

NASDAQ 4081.3 3150

London SE 2432.3 3169

Tokyo SE 2168.5 2372

Euronext 1214.6 1225

Deutsche Borse 877.0 757

Hong Kong Ex&Cl 266.7 1143

Shanghai SE 143.2 831

MICEX SE 120.4 184

Singapore Ex 60.8 680

Wiener Borse 24.0 110

Warsaw SE 17.1 240

Contacts

Address: 13 B.Kislovsky per., Москва, 125009

Phone: (095) 234-48-11

Fax: (095) 705-96-22

E-mail: info@micex.com

Web: www.micex.ru