1. Buying into market of corporate bonds denominated in Russian rubles Step-by-step guide Alexey A. Loginov Senior Consultant, Financial Engineering Department, "EUROFINANSY" Investment Banking loginov@eufn.ru

2. What’s Russian corporate bond market? General dataCurrent data for MICEX*, per day (as of 29/08/05) Exchange turnover at MICEX* for half of 2005, $20 bln. Value of bonds traded, $10 bln. Number of issues traded, 200 Exchange turnover, $26 mln. Number of trades, 727 Average trade amount, $35 thousand total data for 1996-2005 Number of issuers, 281 Number of issues, 454 as of 01/08/05 * MICEX - Moscow Interbank Currency Exchange

3. Main steps I. Entrance to market II. Trading techniques III. Repatriation of funds

4. Step I. Entrance to market

5. Account in foreign currency Special bank “O”-account 1.1. Initial transfer of funds Russian bank Account Bank of Russia Reserve account Foreign bank obligatory reserves - 2% in favour of non-resident Special broker“O”-account EUFN in favour of non-resident

6. 1.2. Terms of entrance 1. Non-resident opens accounts with Russian bank: Special account of type “O” in rubles (on condition 2% of each credited sum must be reserved in the Bank of Russia for a year with further refunding) Account in foreign currency 2. Non-resident concludes contracts with Russian brokerage firm (EUFN): For brokerage services (as EUFN is a member firm of the MICEX) For settlements and custody services

7. 1.3. How to open accounts? Non-resident presents following documents: Application + Contract of account Memorandum and Articles of Association Documents confirming Company’s legal status Russian certificate of taxpayer (can be obtained with assistance of broker according to client’s choice) Card with sample signatures and impression of seal Powers of attorney (for opening, operating accounts, etc.)

8. Step II. Trading techniques

9. 2.1. Trading floor MICEX Principles of trading: Continuous anonymous auction Automatic matching of orders Pre-depositing Multilateral clearing Settlement institution – MICEX Clearing House Central depository – National Depository Center (MICEX subsidiary) Delivery vs. payment Moscow Interbank Currency Exchange – www.micex.com

10. 2.2. Structuring Your deal Brokerage firm (EUFN) routes client’s order through MICEX workstations in automated trading floor Client orders brokerage firm (EUFN) to buy / sell bonds at placement or in secondary market using Internet-trading facilities or by phone Order is executed automatically automated confirmation, clearing, settlements daily report of broker Client transfers funds to his account with brokerage firm (EUFN)

11. 2.3. Model of market Federal Financial Markets Service Self-regulatory organizations (NFA, NAUFOR, PARTAD) Legal requirements, corporate ethics Regulation infrastructure Financial advisers, press, special databases (Reuters), Auditors (incl. Big Four), Rating agencies (national scales of Moody’s, Standard & Poor’s and Fitch) Information infrastructure Issuer Underwriter / EUFIN /other MICEX-member Primary investor Broker / EUFIN /other MICEX-member Primary market MICEX trading system Buyer Broker / EUFIN /other MICEX-member Seller Broker / EUFIN /other MICEX-member Secondary market Deals registration, information disclosure Securities clearing and settlements. Custody services Central depository – National Depository Center (NDC) Cash clearing and settlements MICEX Clearing House

12. Step III. Repatriation of funds

13. 3.1. Repatriation of funds Special “O”-account Account in foreign currency Special broker “O”-account Bank of Russia Sales proceeds Interest received Principals received Account return of reserves conversion Russian bank EUFN Foreign bank