Russia’s Capital Market: Today and Tomorrow Alexei Rybnikov CEO MICEX Stock Exchange London, May

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 , bln USD Jan-Apr 2006 MICEX SE RTS

MICEX Stock Exchange Liquidity Growth (Average Daily Turnover)

Cash Equities Market 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 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

Corporate and Regional Bond Market 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 reached 44 bln USD in January-April 2006, which is 2 times more than in January-April 2005

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

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

Exchange Traded Funds 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 Legal Entities Private investors Non-residents Institutional Investors

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 * Issuers of equities Issuers of bonds *including ETF and Eurobonds of RF

Projects Launching MICEX Stock Exchange Implementation of corporate governance standards Market participants matter MICEX SE Council Stock Market Committee, IT Committee Index Committee

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, 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 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

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 criteriaList «B» (standard) List «B» (IGC Sector) Share of stock for one shareholder< 90%- Total capitalization> 2 billion rubles< 5 billion rubles Period of existenceNot 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 affiliatesYes- Additional information disclosure-Yes Investors protection mechanism: expert council; additional information disclosure for companies; listing agents; investor sophistication requirements n 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 $ BillionsNumber of issuers NYSE NASDAQ London SE Tokyo SE Euronext Deutsche Borse Hong Kong Ex&Cl Shanghai SE MICEX SE Singapore Ex Wiener Borse Warsaw SE

Contacts Address: 13 B.Kislovsky per., Москва, Phone: (095) Fax: (095) Web: