PwC Central Depository and Development of the Financial Market Infrastructure Presentation of Stage 1 Report 16 June 2006

Agenda 1. Introduction 2. Recommended Future State 3. Suggested Transition Plan 4. Critical Factors 5. Unresolved Issues

PricewaterhouseCoopers May 2006Slide 3 Introduction This presentation supports the PwC Lawfort Report delivered to CCMD on 24 May 2006 It is not a summary of the report but focuses on certain key issues: The Recommended Future State The Suggested Transition Plan Critical factors and unresolved issues

PricewaterhouseCoopers May 2006Slide 4 Recommended Future State Recommended Future State Illustrative Scenario RTS MICEX St Petersburg Central Securities Depository Troika ING Registrar Mutual funds CIS FRSD Professional market flows Private client flows Books close registration via “nominee account” Indirect participants and beneficial owners Off exchange trading FRSD remains a Special Depository Troika and ING are Direct Participants in the CSD Registration on settlement Individual Private Clients Out of scope Issuer Own registrar

PricewaterhouseCoopers May 2006Slide 5 Recommended Future State Major Functional Recommendations (i) 1. A single CSD via consolidation of settlement depositories, settlement chambers and part of the clearing houses – adoption of the Standard Model 2. Clearing via a central matching utility 3. Wholesale model with unlimited levels – not the three tier approach. The retail model is not possible under Russian legislation 4. Mandatory CSD for securities with independent registrars, with exclusive right to a nominee account at the registrar Mandatory electronic links with registrars 5. Combined net and gross settlement 6. RTGS settlement in central bank funds. Interim measure – in commercial bank funds. The CSD should not be a (full service) bank 7. Fails management supported by stock lending at the CSD 8. Central information source to support asset servicing 9. Rationalisation of Registrars 10. Information on beneficial owners

PricewaterhouseCoopers May 2006Slide 6 Recommended Future State 1 A Single CSD and optional CCP The Standard Model Exchange CCP CSD Risk Swap Risk Concentration Risk Minimisation The Russian Model Interim State Exchange Settlement Chamber Cash Clearing House Netting CSD Securities THE SINGLE CSD To meet the functional requirements it will be necessary to combine the operations of the settlement chambers and the clearing houses (except where these perform genuine CCP activities). Without the settlement chambers the single CSD cannot control the DVP process. Until the RTGS system is available, the single CSD should appoint a commercial settlement bank(s). This would effectively replace the settlement chambers which currently perform this role. The Russian Model Future State Exchange CCP (Ex -Clearing House) Single CSD

PricewaterhouseCoopers May 2006Slide 7 1.A Single CSD and optional CCP: Interposition of a CCP Previous trade Clearing with CCP TMF = Trading Member Firm CMF = Clearing Member Firm Multilateral Netting Bilateral relationships TMF A TMF B 10 shares X 100 euros 10 shares X 100 euros CMF ACCP CMF B 10 shares X 100 euros Sells 150 Multilateral netting Buys 210 Sells 120 CMF A CMF B CMF C CMF D CMF E Sells Sells Buys Buys 140 CMF A CMF C CMF A CMF B CMF C CMF D CMF E Buys 60 Sells 40 Buys 20 CCP Source: Clearnet Recommended Future State

PricewaterhouseCoopers May 2006Slide 8 Recommended Future State 1 A Single CSD and optional CCP: The role of a CCP Concentrate and manage counterparty risk Provide operational efficiencies via netting and becoming the single settlement party Settlement anonymity Settlement guarantees and capital offsets A CCP is not a necessary component of the Russian cash market infrastructure. Its merits should be carefully studied before one is created. (It is however a necessary component of a derivatives market) A CCP would have limited operational impact on the CSD but would reduce its revenues since it would only settle net, not gross, transactions The single Russian CSD as described does not require a CCP.

PricewaterhouseCoopers May 2006Slide 9 Recommended Future State Major Functional Recommendations (ii) 1. A single CSD via consolidation of settlement depositories, settlement chambers and part of the clearing houses – adoption of the Standard Model 2. CSD Clearing via a central matching utility 3. Wholesale model with unlimited levels – not the three tier approach. The retail model is not possible under Russian legislation 4. Mandatory CSD for securities with independent registrars, with exclusive right to a nominee account at the registrar Mandatory electronic links with registrars 5. Combined net and gross settlement 6. RTGS settlement in central bank funds. Interim measure – in commercial bank funds. The CSD should not be a (full service) bank 7. Fails management supported by stock lending at the CSD 8. Central information source to support asset servicing 9. Rationalisation of Registrars 10. Information on beneficial owners

PricewaterhouseCoopers May 2006Slide 10 Recommended Future State 2 Clearing Model (i) Clearing Timeline end of T+0 end of T+1 end of T+2 Settlement Day T+3Clearing Trade agreed Trade matching For OTC transactions. For transactions not supplied by the exchange to the CSD Trade matching is not required for transactions supplied directly by the exchange to the CSD. Otherwise known as locked in trades. Confirmation/Affirmation Give-ups, Give-ins Average pricing Splits and allocations Settlement Preparation Netting calculation Optimisation algorithm SSI database Blocking or reserving of cash and securities DVP settlement Central Matching Utility The clearing process can be complicated if there are many participants and substantial cross-border flows from different time zones. The final settlement should be straightforward if all the clearing has been properly carried out.

PricewaterhouseCoopers May 2006Slide 11 Recommended Future State 2 Clearing Model (ii) Central Matching Utility Investors Broker/ Dealers Custodians Confirmation Average Price Affirmation Give-ups Give-ins Allocations SSI Investors Broker/ Dealers Custodians Central Matching Utility within CSD Without a central matching utility, each investor needs to maintain a link with every broker they use and every custodian. Similarly each broker needs to maintain a link with every investor and custodian. This requires multiple bespoke links. With a Central Matching Utility (CMU), each investor maintains only 1 standard link, preferably to the CSD. All the matching functions can be performed in the CMU. There is no CCP in this scenario.

PricewaterhouseCoopers May 2006Slide 12 2 Clearing Model (iii): Value chain Access to central bank money On behalf instructions Feedback Collateral Management Similar functions but commercial, therefore in competition with CCP Similar functions in competition with CSD CCP Clearing Settle- ment Trading Custodian BankBrokerGCM CCP Central Bank Exchanges (cash markets) Exchanges (derivatives markets) Off- exchange repos, swaps, … International central securities depositories Central securities depositories GCM/Custodian CCP/CSD Ensure that similar functions have a level playing field National regulations: CSD Clearing - CCP Clearing: reduction number of processes and cash flows through netting and risk evaluation and management in order to reduce probability of failure - CSD clearing (VMU): validating and matching of delivery instructions, the result of which is forwarded to settlement - CCP clearing takes place prior to CSD clearing GCM = General Clearing Member Recommended Future State

PricewaterhouseCoopers May 2006Slide 13 Recommended Future State Major Functional Recommendations (iii) 1. A single CSD via consolidation of settlement depositories, settlement chambers and part of the clearing houses – adoption of the Standard Model 2. Clearing via a central matching utility 3. Wholesale model with unlimited levels – not the three tier approach. The retail model is not possible under Russian legislation 4. Mandatory CSD for securities with independent registrars, with exclusive right to a nominee account at the registrar Mandatory electronic links with registrars 5. Combined net and gross settlement 6. RTGS settlement in central bank funds. Interim measure – in commercial bank funds. The CSD should not be a (full service) bank 7. Fails management supported by stock lending at the CSD 8. Central information source to support asset servicing 9. Rationalisation of Registrars 10. Information on beneficial owners

PricewaterhouseCoopers May 2006Slide 14 Recommended Future State 3 Wholesale Model Single CSD Foreign nominee Legal & Beneficial owner Intermediary Legal & Beneficial owner Legal & Beneficial owner No restriction on the number of levels Recognition of foreign intermediaries and nominee structures is required under Unidroit. Legal & Beneficial owner is the one at the bottom of the chain in accordance with Russian law PRIMA applicable (Place of the Relevant Intermediary Account) Intermediaries are licensed depositories that act via “nominee accounts”. These are omnibus accounts, under designated segregation, that allow efficient settlement Also known as the Indirect Holding model Typically only several hundred accounts at the CSD

PricewaterhouseCoopers May 2006Slide 15 Recommended Future State 3 Limited levels (i) Problems with foreign intermediaries Custodian Foreign Intermediary Foreign Intermediary Foreign Intermediary Registrar CSD Nominee account Depository InvestorDepositoryInvestor Russian Depository Limitation only achievable domestically, if foreign intermediaries/ nominees are not recognised Limited tiers might be interpreted as sub registers (direct holding system instead of indirect holding system) Limited tiers are suggested in order to ensure transfer of information on beneficial ownership to the CSD and the registrar. This is an operational problem, which should be solved by imposing technical requirements on CSD participants and/or specific license requirements for intermediaries opening securities accounts for their clients. A limitation of levels will not solve the problem. Limited tiers should only be envisaged to the extent required for the for limitation of custody risk

PricewaterhouseCoopers May 2006Slide 16 Recommended Future State 3 Limited levels (ii) Problems with foreign CSDs Foreign CSD Foreign CSD Registrar CSD Nominee account Depository invInvinv Assumptions:Foreign CSD has direct account with single Russian CSD. The regulators have an MOU in place. Russian CSD relies on foreign CSD conducting surveillance and know your customer tests. Issues:- The foreign CSD will operate nominee accounts and will not know the identify of the final beneficial owners. - The foreign CSD will only open an omnibus account with the Russian CSD and a lot of the transactions will be internalised. - Links between CSDs are complex and carry very little traffic (the exception is DTCC/CDS) - If this route were mandatory for foreign investors it would be unacceptably expensive (to use the services of a foreign CSD that is not geared up to provide the level of customer service demanded by global custodians). ConclusionThis is not a feasible alternative

PricewaterhouseCoopers May 2006Slide 17 Recommended Future State Major Functional Recommendations (iv) 1. A single CSD via consolidation of settlement depositories, settlement chambers and part of the clearing houses – adoption of the Standard Model 2. Clearing via a central matching utility 3. Wholesale model with unlimited levels – not the three tier approach. The retail model is not possible under Russian legislation 4. Mandatory CSD for securities with independent registrars, with exclusive right to a nominee account at the registrar. Mandatory electronic links with registrars 5. Combined net and gross settlement 6. RTGS settlement in central bank funds. Interim measure – in commercial bank funds. The CSD should not be a (full service) bank 7. Fails management supported by stock lending at the CSD 8. Central information source to support asset servicing 9. Rationalisation of Registrars 10. Information on beneficial owners

PricewaterhouseCoopers May 2006Slide 18 Recommended Future State Payment Mechanisms Current State Exchange Settlement Chamber Cash Clearing House Netting CSD Securities Future State Exchange CCP (Ex -Clearing House) Single CSD Interim State Exchange CCP (Ex -Clearing House) Single CSD Link to large value payment system at CBR Link to commercial settlement banks Link to RTGS payments mechanism Commercial settlement banks replace the settlement chambers in the interim. This provides a banking source with a recognized credit rating that would be acceptable to foreign investors. This is necessary since it is not possible to avoid daylight risk on the settlement banks in the absence of an RTGS system. A settlement chamber could apply to be a settlement bank if it obtained the requited credit rating. The CSD does not need a banking licence under these arrangements. It controls the DVP by instructing the cash movement.

PricewaterhouseCoopers May 2006Slide 19 Recommended Future State Major Functional Recommendations (v) 1. A single CSD via consolidation of settlement depositories, settlement chambers and part of the clearing houses – adoption of the Standard Model 2. Clearing via a central matching utility 3. Wholesale model with unlimited levels – not the three tier approach. The retail model is not possible under Russian legislation 4. Mandatory CSD for securities with independent registrars, with exclusive right to a nominee account at the registrar. Mandatory electronic links with registrars 5. Combined net and gross settlement 6. RTGS settlement in central bank funds. Interim measure – in commercial bank funds. The CSD should not be a (full service) bank 7. Fails management supported by stock lending at the CSD 8. Central information source to support asset servicing 9. Rationalisation of Registrars 10. Information on beneficial owners

PricewaterhouseCoopers May 2006Slide 20 Recommended Future State Fails Management 1. A key role of the CSD is to ensure settlement. This does not necessarily involve a guarantee mechanism, but even with a guarantee arrangement, the fails management procedures should be used before triggering the guarantee. 2. There are three main types of fails management procedures: I. Stock lending/borrowing II. Buy-ins III. Penalties 3. There is little incentive for a buyer to force a buy-in if they believe there is no counterparty risk. Buy-ins would be a mechanism used by a CCP if there were one in the value chain. 4. Penalties can be treated by some participants as a cost of doing business. The fine or penalty does not provide compensation to the innocent party but merely generates revenue for the CSD. 5. Stock lending/borrowing operated by the CSD is the optimal mechanism to force settlement without recourse to a guarantee fund (a last resort).

PricewaterhouseCoopers May 2006Slide 21 Recommended Future State Stock Lending/Borrowing 1. The advantage of a single CSD is that it has access to the majority of securities in the market. It can operate a stock lending pool whereby holders of securities can make all or part of their holding available for lending to sellers who do not have the securities available for settlement. 2. The stock lending pool can be used to support administrative fails, where a seller does not have the securities due to operational reasons (e.g. they were expecting to receive the securities from a purchase, which itself is failing). It could also be used to support settlement of short sales where the seller does not have the securities at the time of trade. Differential pricing could be used to distinguish between the reasons behind the borrowing requirement. 3. It is recommended that the CSD operate the stock lending pool on an agency basis and not as a principal, while nevertheless maintaining anonymity. 4. The CSD would need to compensate the lenders and charge the borrowers for the service. 5. Stock borrowing should be mandatory for short sellers and optional for failing settlements due to administrative reasons.

PricewaterhouseCoopers May 2006Slide 22 Recommended Future State Major Functional Recommendations (vi) 1. A single CSD via consolidation of settlement depositories, settlement chambers and part of the clearing houses – adoption of the Standard Model 2. Clearing via a central matching utility 3. Wholesale model with unlimited levels – not the three tier approach. The retail model is not possible under Russian legislation 4. Mandatory CSD for securities with independent registrars, with exclusive right to a nominee account at the registrar. Mandatory electronic links with registrars 5. Combined net and gross settlement 6. RTGS settlement in central bank funds. Interim measure – in commercial bank funds. The CSD should not be a (full service) bank 7. Fails management supported by stock lending at the CSD 8. Central information source to support asset servicing 9. Rationalisation of Registrars 10. Information on beneficial owners

PricewaterhouseCoopers May 2006Slide 23 Recommended Future State Central Information Source 1. Participants of the CSD are at risk if they fail to action a corporate event in the market. One of the major risks is lack of information or simply being unaware that an event is taking place. It is unacceptable to expect participants to gather the necessary information from newspapers or other sources. 2. Typically the exchange would be provided with the necessary information as part of the listing requirements, as an obligation placed on the issuer. The exchange would then make this information available to all interested parties (possibly at a price). 3. In the absence of a single exchange in Russia, it is not a solution to use the exchanges as a single source of information. The recommendation is therefore to use the single CSD. The obligation to supply the information (correctly, in a timely manner) is still on the issuer, even though there is no contractual arrangement between the issuer and the CSD. The contractual arrangement is between the exchange and the issuer. The exchange is then required to supply the information to the CSD (again, correctly and in a timely manner). 4. The exchange has to provide the information to the CSD before it supplies the information to any other parties. The information is then made available to all participants on an equal basis. The central information source carries details about corporate events as supplied by issuers. It has nothing to do with ownership. The only central source of information about ownership is the CSD. Since the information derives from the exchange it only relates to listed securities.

PricewaterhouseCoopers May 2006Slide 24 Recommended Future State Major Functional Recommendations (vi) 1. A single CSD via consolidation of settlement depositories, settlement chambers and part of the clearing houses – adoption of the Standard Model 2. Clearing via a central matching utility 3. Wholesale model with unlimited levels – not the three tier approach. The retail model is not possible under Russian legislation 4. Mandatory CSD for securities with independent registrars, with exclusive right to a nominee account at the registrar. Mandatory electronic links with registrars 5. Combined net and gross settlement 6. RTGS settlement in central bank funds. Interim measure – in commercial bank funds. The CSD should not be a (full service) bank 7. Fails management supported by stock lending at the CSD 8. Central information source to support asset servicing 9. Rationalisation of Registrars 10. Information on beneficial owners

PricewaterhouseCoopers May 2006Slide 25 Recommended Future State Rationalisation of Registrars 1. There is no proposed mechanism to encourage consolidation amongst registrars as there is for the CSDs. 2. Rationalisation is expected to follow from two requirements of the CSD: I. Only the single CSD can maintain a nominee account at the registrar II. The registrar will need to connect with the CSD electronically, meeting information requirements in a timely manner complying with STP standards. 3. The first requirement will restrict the revenue opportunities of the registrars – they will no longer be able to charge for settlement (except in the private client market, outside the scope of the CSD). This is likely to encourage rationalisation for commercial reasons. 4. The need to adopt electronic messaging and STP standards will require registrars to invest in their business. The business case for such an investment will not be justified where the registrar only acts for a single (or a few) issuer(s). Again, this is likely to encourage rationalisation.

PricewaterhouseCoopers May 2006Slide 26 Recommended Future State Major Functional Recommendations (vi) 1. A single CSD via consolidation of settlement depositories, settlement chambers and part of the clearing houses – adoption of the Standard Model 2. Clearing via a central matching utility 3. Wholesale model with unlimited levels – not the three tier approach. The retail model is not possible under Russian legislation 4. Mandatory CSD for securities with independent registrars, with exclusive right to a nominee account at the registrar. Mandatory electronic links with registrars 5. Combined net and gross settlement 6. RTGS settlement in central bank funds. Interim measure – in commercial bank funds. The CSD should not be a (full service) bank 7. Fails management supported by stock lending at the CSD 8. Central information source to support asset servicing 9. Rationalisation of Registrars 10. Information on beneficial owners

PricewaterhouseCoopers May 2006Slide 27 Recommended Future State Information on Beneficial Owners 1. It is recommended that all intermediaries (irrespective of whether they are a direct CSD participant or not) are required, as part of their licence obligations, to conduct the necessary Know Your Customer checks when setting up an account. 2. All licensed intermediaries should be required to provide details of beneficial ownership at the request of their client (the intermediary immediately above them in the chain). Such a requirement should be part of the contractual arrangements between the parties. 3. Similarly, the intermediary who holds securities for a customer (down the chain, as opposed to a client up the chain) should also have contractual arrangements that allows them to request information on beneficial ownership of their customers. The types of intermediary, their relationships and other stake holders, is shown on the next slide

PricewaterhouseCoopers May 2006Slide 28 Recommended Future State Stakeholders Single CSD Direct Participant Intermediary Registrar Exchanges Regulator Commercial banks Central Bank Direct Participant Intermediary Employees are also stakeholders, but with no access rights Participants inside the box have access to the CSD. Issuer Intermediary Indirect Participant

PricewaterhouseCoopers May 2006Slide 29 Recommended Future State Functional Benefits of the Proposed Solution Provide a major component to an efficient capital market for Russia. This will facilitate lower borrowing costs on government debt and higher prices for IPOs, greatly benefiting the Russian economy. Cost effective solution Removes legal uncertainty. Requires only recognition of a foreign nominee/intermediary under Unidroit Reduces risk, full control of DVP process with flexible settlement cycles Meets international standards such as G30, CPSS/IOSCO Attractive to international investors, SEC 17f7 Functional structure combined with message standards will facilitate STP

PricewaterhouseCoopers May 2006Slide 30 Recommended Future State Impact of Functional Recommendations Impact on Intermediaries Monopoly provider and access to CSD is only via Direct participants No longer able to operate nominee accounts at register Impact on Investors Instils trust in infrastructure Encourages on-shore settlement via SFI DVP. Could be mandatory between domestic participants Impact on Registrars Only the CSD is allowed to operate a nominee account for securities at independent registrars Will only be able to charge for settlement if there is a transaction with a private investor who holds a direct account at the registrar. Will be required to meet strict technological standards to communicate with CSD

PricewaterhouseCoopers May 2006Slide 31 Suggested Transition Plan Two options Preferred solution Based on the Spanish model – a voluntary approach. Requires consensus but not unanimity Holding company that acquires settlement depositories in return for ownership Employs a valuation approach Creates common commercial interest with continuity of operations Allows integration of individual settlement depositories at a later stage Fall back solution Only applicable if consensus via Consultative Council fails Tender imposed by Regulator (no precedent) Selects one settlement depositories as the CSD Potential to cause disruption in the market

PricewaterhouseCoopers May 2006Slide 32 Suggested Transition Plan Transition Plan – Evolution not Revolution Equitable solution – encompasses all participants Incorporates a Consultative Council which ensures public debate and drives consensus Encourages Private/Public Partnership (PPP) via initial involvement of the government but with an exit route. Allows wider involvement through ownership via private placement route Participant owned through periodic reshuffling of shareholding

PricewaterhouseCoopers May 2006Slide 33 Transition to a Single CSD First Step – Creation of a Consultative Council and Creation of Holding Company Suggested Transition Plan Settlement Depository Settlement Depository Settlement Depository Settlement Chamber Settlement Chamber Settlement Chamber Settlement Chamber Settlement Chamber Settlement Depository Settlement Depository Single CSD Ltd Clearing House Clearing House Clearing House A holding company is created which will eventually become the single CSD The holding company will acquire all the relevant legal vehicles it needs to create the single CSD. This will include the settlement depositories, the settlement chambers (which will be replaced by commercial banks and eventually the RTGS system) and part of the clearing houses (necessary to perform the CSD clearing operations described in slides ) The Clearing Chamber of MICEX (now set up as NCC) would also have to be included. This requires the exchanges giving up business lines as well as the Settlement Depositories.

PricewaterhouseCoopers May 2006Slide 34 Transition to a Single CSD Second Step – Share Swap Suggested Transition Plan Single CSD Ltd Existing owners of Settlement Chambers, Clearing Houses and Settlement Depositories Troika ING CBR MICEX Owners RTS Owners Etc Non-participant owner Settlement Depository Settlement Depository Settlement Depository Settlement Chamber Settlement Chamber Settlement Chamber Settlement Chamber Settlement Chamber Settlement Depository Settlement Depository Clearing House Clearing House Clearing House The entities that contributed to the holding company receive shares in proportion to their contribution (based on a valuation method) On the basis that the single CSD will be participant owned and that the exchanges are NOT participants, then ownership in the holding company should not go to the exchanges directly, but to the exchange’s owners. No cash moves during this stage. The advantage of this step is that all owners now have a common interest, instead of the previous conflicting interest. In case a SD does not participate, then a tender might have to be organised to select the CSD. Since some minority shareholders may not agree to participate, the CSD must have a 55% share in the entities acquired. Minority Shareholder

PricewaterhouseCoopers May 2006Slide 35 Transition to a Single CSD Second Step – Valuation and swap mechanism Suggested Transition Plan NDC MICEX Clearing House MICEX Settlement Chamber MICEX Stock Exchange MICEX Group BEFORE NDC MICEX Clearing House MICEX Settlement Chamber Single CSD MICEX Stock Exchange MICEX Group 120 AFTER The existing owners of MICEX Group currently own a group of companies worth RUB 290 (say). In this example the new single CSD would wish to acquire the MICEX Settlement Chamber, the Clearing House and NDC. Before the share swap, the owners held assets worth RUB 290. After the share swap the (same) owners hold assets worth RUB 290. The same process is applied to RTS and other owners of assets to be consolidated under the new single CSD.

PricewaterhouseCoopers May 2006Slide 36 Transition to a Single CSD Third Step – Private Placement or IPO Suggested Transition Plan Single CSD Ltd Eligible owners are invited to take part in a private placement. This takes the form of either a rights issue or a direct subscription Existing owners (from Step 2) can subscribe for additional shares if they so wish and new owners (who previously did not have any participation) can acquire shares. The private placement raises cash to be used to appoint the management team of the single CSD, acquire systems (if necessary) and merge the acquired Settlement Chambers, Clearing Houses and Settlement Depositories. Eligible owners subscribe to a private placement Troika ING CBR MICEX Owners RTS Owners Etc (IBERCLEAR) CADE (ex central bank depository) SCLV (ex broker/dealer depository) Settlement Depository Settlement Depository Settlement Depository Settlement Chamber Settlement Chamber Settlement Chamber Settlement Chamber Settlement Chamber Settlement Depository Settlement Depository Clearing House Clearing House Clearing House

PricewaterhouseCoopers May 2006Slide 37 Transition to a Single CSD Fourth Step - Merger of infrastructure Suggested Transition Plan Single CSD Ltd All contracts are transferred from acquired entities to single CSD. The merger process is the decision of the single CSD as the owner of all these activities. The merger can be effected by selecting the best of breed currently available in the Russian market or by issuing an RFP for a new system – provided the Single CSD has sufficient funds raised from the private placement or IPO. (The Single CSD could choose not to merge its operations – it was a long time after the share swap that created IBERCLEAR before CADE and SCLV were merged) If not all CDs are acquired, then a tender will have to be organised to select the single CSD. Non-selelcted CDs would have to cease activities after the transition period New owners Troika ING CBR MICEX Owners RTS Owners Etc Fixed income system Equity system

PricewaterhouseCoopers May 2006Slide 38 Transition Plan – Timeline Suggested Transition Plan Detailed Transition Plan included in the Phase 1 Report In terms of elapsed time the Consultative Council is on the critical path Commence Consultative Council in July Full public debate January Final agreement March The legal creation of the single CSD and transfer of contracts should be possible by mid-2007 Consolidation of systems is not a necessary feature of the transition plan and is therefore not time critical Agree to adopt transition plan Consultative Council Create CSD Jun 2006 Jun 2007Jan 2007 Valuations Public debate

PricewaterhouseCoopers May 2006Slide 39 Critical Factors Critical Success Factors Acceptance of functional design Consultation process to promote transition Valuation method to ensure equality of treatment Critical Risk Factors Inconsistency between settlement law and exchange law Inadequate interaction with other related projects e.g. the availability of RTGS system System solution that meets functional requirements, which is not too expensive for users Exchange solution (see next slide)

PricewaterhouseCoopers May 2006Slide 40 Unresolved Issues The exchanges MICEX may not be willing to provide its settlement platform to RTS This could prevent a merger of NDC and DCC Merger of MICEX and RTS resolves the CSD issue Allows move from horizontal to vertical silo model MICEX RTS NDCDCC Single Exchange Single CSD MICEX RTS Single CSD Current situation Unacceptable situation Ideal situation A single CSD would effectively provide RTS with access to NDC’s settlement capability, thus a single CSD on its own might not be a consensus decision. If the exchanges were merged at the same time, then there might be consensus on the single CSD. There is a benefit to RTS from merging the settlement depositories as soon as possible. There is a benefit to MICEX from merging the exchanges as soon as possible.

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