1. Federal Financial Markets Service of Russia Russian financial market Federal Financial Markets Service of Russia Presentation by Dr. Vladimir Gusakov Deputy Head of FFMS of Russia Amsterdam, 7 November 2005

2. Federal Financial Markets Service of Russia 2 Key economic indicators

3. Federal Financial Markets Service of Russia 3 Indicators of the capital market development in Russia appear positive Capitalization of the stock market has grown 8 times since the end of 2000 Credit rates for Russian enterprises have reduced two- three times since the beginning of 2000 Volume of provided credits grew 7.9 times in 5 years Investment raising on securities market grew 9.7 times in 2000-2004

4. Federal Financial Markets Service of Russia 4 Stock market capitalization, bln rubles

5. Federal Financial Markets Service of Russia 5 Credit rates for non-financial organizations

6. Federal Financial Markets Service of Russia 6 Dynamics of lending in real sector of economy

7. Federal Financial Markets Service of Russia 7 Volume of investments raised by Russian enterprises on securities market, mln USD Year Corporate bonds EquitiesEurobondsADRsTotal 2000 1 020,3 -75,0509,7 1 605,0 2001963,1-581,8- 1 545,0 2002 1 718,3 13,3 3 692,9 145,8 5 570,3 2003 2 684,1 0,5 8 685,0 - 11 369,6 2004 5 017,5 331,2 9 950,0 233,1 15 531,8 2005 Jan-Jul 3 561,8 222,7 9 996,6 2486,9 16 268,0

8. Federal Financial Markets Service of Russia 8 Volume of investments raised by Russian enterprises on securities market, mln USD (2)

9. Federal Financial Markets Service of Russia 9 Development of the financial markets institutes Since the beginning of 2000 assets of the banking system grew five times and reached 7.9 trillion rubles Assets of the investment funds grew 17 times and reached 146 billion rubles Pension reserves of non-state pension funds grew 11 times and reached 176 billion rubles Registered capital of the insurance organizations grew 14 times and reached 136 billion rubles

10. Federal Financial Markets Service of Russia 10 Assets of the banking system

11. Federal Financial Markets Service of Russia 11 Pension accruals * Forecast Source: Pension Fund of Russian Federation

12. Federal Financial Markets Service of Russia 12 Assets of the investment funds

13. Federal Financial Markets Service of Russia 13 Number of mutual funds investors

14. Federal Financial Markets Service of Russia 14 Threats of the Russian securities market Many Russian companies don’t recognize domestic market as a main investments source Lack of liquid, quality assets for investment of obligatory accumulative systems assets Large influence of speculative funds Trade of Russian assets goes under foreign jurisdiction

15. Federal Financial Markets Service of Russia 15 Causes of threats Noncompetitive level of entering costs to capital market because of underdevelopment of infrastructure, instruments and regulation High property investment risk because of insufficient legislation and weakness of enforcement mechanisms Inactive retail investors because of inconsistent state policy in the pension reform area

16. Federal Financial Markets Service of Russia 16 Main strategy of financial markets’ development Increasing competitiveness of all financial market institutions including regulator itself as well as financial intermediaries and infrastructure Creating legal environment for advanced financial instruments for risk hedging and securitization Developing legislation and regulation for effective protection of investors and clients of financial service providers

17. Federal Financial Markets Service of Russia 17 Developing stock market infrastructure Creation of the central depository Creation of legislative basis for development of national capitalized clearing system Development of trade and settlement systems on the stock market

18. Federal Financial Markets Service of Russia 18 Developing the financial market’s instruments Ensuring court protection for derivatives Creating legal environment for financial assets securitization (mortgage backed securities, credit linked notes, etc.) Creating legal environment for commercial papers market Improving efficiency of investments raising on securities market (domestic IPOs) Creating legal environment for Russian depository receipts

19. Federal Financial Markets Service of Russia 19 Better protection of investors’ rights Adopting the law to fight insider trading and market manipulation Protecting shareholders’ rights in M&A process Amending Administrative Code – substantial increase of fines and penalties Improving corporate legislation and corporate governance practice

20. Federal Financial Markets Service of Russia 20 Federal Financial Markets Service of Russia 9 Leninskiy prospektTel. +7(095)9358790 9 Leninskiy prospektTel. +7(095)9358790 119991 Moscow RussiaFax +7(095)9358791 119991 Moscow RussiaFax +7(095)9358791 http://www.fcsm.ru