A. Potemkin MICEX, President Russian stock market’s SWOT analysis: Moscow’s viewpoint.

A. Potemkin A. Potemkin MICEX, PresidentMICEX, President

Russian stock market’s SWOT Russian stock market’s SWOT analysisanalysis: : Moscow’s viewpointMoscow’s viewpoint

2

What makes the Russian stock market grow?

Volume of transactions with Russian equities and DR's

0

50

100

150

200

250

300

350

1 Q 2005 2 Q 3 Q 4 Q 1 Q 2006 2 Q 3 Q 4 Q 1 Q 2007

bln USD

MICEX SE

RTS

Foreign exchanges

3

What makes the exchanges’ market grow?

Volume of trades with bonds

187.3

71.4

30.0

29.9

0

50

100

150

200

250

2005 2006

bln USD

OTC

MICEX SE

Volume of trades with equities

180

150

141.8

550.2

39.4

61.2

0

200

400

600

800

2005 2006

bln USD

OTC (estimated)

RTS Group

M ICEX SE

4

Issuers: stale bread or hot cakes?

The Тор-5 issuers equities' price change

-20

0

20

40

60

80

100

120

140

Gazprom Lukoil Sberbank UES ofRussia

NorilskNickel

%

2006

1Q 2007

Volume of trades with Russian equities and DR's in 1 Q 2007

Top 5 issuers

75.8%

Other

issuers

24.2%

5

Second tier equities — «goods in stock»

• For what purposes do you recommend to buy the second tier equities?

As long term investments with a positive outlook — 90%

• How fair are the market prices of the second tier equities? The market prices are lower than fair prices — 75%

Based on the MICEX April 2007 survey, respondents are analysts of investment companies and banks

6

Last 15 Months — Post IPO

• source: Tracey Pierce, Head of Global Business Development at the London Stock Exchange

CHELYABINSK

-17.0%

CHERKIZOVO

-10.2%

COM STAR

22.8% INTEGRA

17.9%

POLYM ETAL

-4.1%

ROSNEFT

11.3%

SEVERSTAL

7.2%

SISTEM A HALS

11.2%

SITRONICS

-17.0%

TM K

64.6%

TM E

-22.3%

-40%

-20%

0%

20%

40%

60%

80%

7

Coming soon …

• In 2007—2009 more than 150 companies plan to raise through IPO 30—50 bln USD

Largest IPO’s in the nearest future

Company IndustryEst. IPO volume

mln USD

1 Vneshtorgbank Banks 6 000

2 Freight Railway Company Transport 3 300

3Generation companies(RAO UES plans 10—15 IPO)

Electric power 10 000 — 15 000

4 Sovcomflot Transport 700

5 Pharmstandard Pharmacy 600

6 Ingosstrakh Insurance 500

• In 2005—2006, 27 Russian companies have raised 21 bln USD through IPO

8

Investors in the Russian market: who are they?

Number of investorsthsd, end of the year

Investors 2004 2005 2006March 2007

Individuals 96.5109.

8230.

9278.3

Legal entities 20.1 19.1 24.3 25.7

Non-residents 0.8 1.1 2.0 2.0

Mutual funds, trust accounts 0.01 4.2 7.7 8.8

Total117.

4134.

2264.

9314.7

Structure of the equities turnover on the MIC EX SE in 1Q 2007

Dealers trades 14.2%

Russian individuals23.8%

Russian legal entities27.3%

Non-residents27.7%

Clients of mutual funds 7.0%

9

Does the foreign capital have a citizenship?

3 992.90 (28)

14 468.40 (70)

140 376.20 (1263)

254.8 (380)

24.5 (7)

25.8 (81)

27.8 (17)

30.6 (32)

84.9 (3) 154.7 (39)

395.8 (33)

1

100

10 000

1 000 000

Others

Cyprus

United Kingdom

Ireland

British Virgin Islands

KazakhstanFinland

Lithuania

Germany

Belorussia

Austria

Investors-non-residents on the MICEX SE in 1Q 2007Turnover in mln USD and number of participants

1010

LSE25%

MICEX SE63%

RTS7.0%

DBAG2.3%

NYSE3.2%

How many indices doesthe Russian stock market need?

MICEX Index

RTS

FTSE Russia IOB Index

RTX

DJ Titans

Russia…

MSCI Russia

DAXglobal Russia

Market in 2006

11

Structure of trades by economy sectors

Number of issuers

103

7 7 83 2 3

11

10

11

0

20

40

60

80

100

120

Ga

s&o

il

Po

wer

Co

mm

unic

atio

ns

Meta

l

Hea

vy in

dust

ry

Cp

nsu

mer

Banks

Tra

nsp

ort

IT, m

ob

ile, m

ed

ia

Cha

mic

al

Structure of the volume of trades in 1Q 2007

0,003%

0,04%

0,06%

0,13%

36,6%

0,65%

10,3%

3,3%

13,8%

35,1%

12

Reserve list selection criteria

Тор-100: 100 most capitalized equities

Equities admitted to trading on the exchange

Тор-60: 60 most traded equities

Reserve list

(10 sectors)

60

1

60

1

7.03.0

ii

i

ii

ii

V

VCap

CapR

Selection criteria

30 equities in current index

not more than 3 equities from an economy sector (not more than 9 equities from a sector including current portfolio)

free-float > 5%

common or privileged equities of an issuer

if an issuer has equities of any type in an index portfolio, the equities of another type are not included

13

Index portfolio starting April 15, 2007

Index portfolio till 15 April (21 equities)

Current index portfolio (30 equities)

Heavy ind0.5%

Transport0.3%

Consumer0.1%

Telecom3.2%

IT, mobile, media5.9%

Gas&oil52.7%

Finance16.4%

Metal11.8%

Electric9,2%

Heavy ind0.4%

Transport0.3%

Telecom3.7%

IT, mobile, media7.4%

Gas&oil43.2%

Finance19,4%

Metal12,0%

Electric13,6%

14

MICEX Index

MICEX O&GMICEX TLC

Metals & Mining

MICEX PWR

Index family structure

Consumer Manufacturing

10 Large Caps

30 Middle Caps

50 Small Caps

15

Infrastructure development prospects:what should be done first?

Centralized clearing (CCP)• Lowers the participants costs• Increases stock market liquidity• Creates customary environment

for non-residents

Central Depository• Promotes OTC development• Creates customary environment

for non-residents• Offers securities owners’ rights

protection• Increases stock market

transparency

??

16

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