Going Public in Russian Securities Market Alexei Rybnikov CEO MICEX Stock Exchange.

Going Public in Russian Securities Market

Going Public in Russian Securities Market

Alexei RybnikovCEOMICEX Stock Exchange

2

IPO for Russian Issuers: Pros and Cons

Benefits of going public– Ability to raise capital rapidly when needed

» acquisition currency» liquid market for the company’s stock» expanding shareholder base

– Strengthening balance sheet to support future growth– Increases valuation (reduces illiquidity premium)

The dark side of IPO– Losing full control of the process – market dictates

final outcome– Underpricing - market price may not reflect true value

of the firm– Focus shift – from long-term to short-term goals

3

Choice of Venue: Issuer Perspective

Factors to consider: Deal size Target investor base Critical mass of liquidity Legislation Cost Story

4

Choice of Venue: Issuer Perspective

Factors to consider: Deal size – up to US$ 500 million Target investor base - mix of buy-and-hold

and active traders Critical mass of liquidity – at all times Cost – at issuance and maintenance Story – compelling

5

A CRITICAL NEED

Domestic Market

6

MICEX Group: the national financial infrastructureSt.-Petersburg

Moscow

N. Novgorod

Novosibirsk

Rostov-on-Don Yekaterinburg Vladivostok

Samara

7

Domestic Market in Figures

MICEX Stock Exchange’s share in Russian stock market turnover exceeds 85%

Turnover in 2005 reached US$ 225,6 bln, 49,2% increase over 2004

Volume of transactions in Jan-Feb 2006 - US$ 69,6 bln, 3,4 times over Jan-Feb 2005

Turnover of Russian stock exchangesin 2003-2006, US$ bln

2003 2004 2005Jan-Feb 2006

MICEX 99.1 151.2 225.6 69.6

RTS 13.3 26.1 36.5 15.8

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MICEX Stock Exchange: Stock Market Up-and-Coming

MICEX SE Market Cap 2004-2006, US$ bln

151,43

273,64

518,22553,36

0

100

200

300

400

500

600

31.12.04 31.12.05 01.02.06 01.03.06

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MICEX Stock Exchange:Liquidity Growth

MICEX SE Average Daily Turnover 2005-2006, US$ bln

0,49

0,71 0,740,84

0,58

0,75 0,770,85

1,30 1,311,20 1,22

1,75

2,19 2,17

0,00

0,50

1,00

1,50

2,00

2,50

Ja

n 0

5

Fe

b 0

5

Ma

r 0

5

Ap

r 0

5

Ma

y 0

5

Ju

n 0

5

Ju

l 0

5

Au

g 0

5

Se

p 0

5

Oc

t 0

5

No

v 0

5

De

c 0

5

Ja

n 0

6

Fe

b 0

6

Ma

r 0

6

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MICEX Stock Exchange:Start in Gazprom

MICEX SE trading volume is over 41% of the total market

0%

20%

40%

60%

80%

100%

23.0

1.20

06

26.0

1.20

06

31.0

1.20

06

03.0

2.20

06

08.0

2.20

06

13.0

2.20

06

16.0

2.20

06

21.0

2.20

06

27.0

2.20

06

02.0

3.20

06

07.0

3.20

06

13.0

3.20

06

RTS OTCRTS exchangeMICEX SE

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Issuers on MICEX Stock Exchange

Issuers on MICEX Stock Exchange

January 1, 2003

January 1, 2004

January 1, 2005

January 1, 2006

March 1, 2006

Total number of issuers

157 225 241 418 461

Issuers of equities

85 91 81 161 185

Issuers of bonds

82 152 179 244 262

Number of issuers on MICEX SE(at begining of the month)

85

91

81

161

185

82

152

179

244

262

0 50 100 150 200 250 300

J anuary2003

J anuary2004

J anuary2005

J anuary2006

March 2006

Equities Bonds

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MICEX Stock Exchange:Investor Base

Type of Investor Number of Investors

(16.03.2006)

Private Investors 130 301

Nonresidents 1 203

Legal Entities 20 208

Institutional Investors 4 752

Total 156 464

13

MICEX Stock Exchange: Cash Equities

294 securities of 185 issuers traded

50 equities of 34 issuers listed, including all blue chips

2005 equities trading volume reached US$ 141,8 bln, 30,6% increase over 2004

Volume of transactions with equities in Jan-Feb 2006 - US$ 49,6 bln, 4 times over Jan-Feb 2005

Volume of transactions andMICEX Index

0

10

20

30

40

50

60

IQ2002

2Q 3Q 4Q 1Q2003

2Q 3Q 4Q 1Q2004

2Q 3Q 4Q 1Q2005

2Q 3Q 4Q

bln USD

0

200

400

600

800

1000

1200points

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MICEX Stock Exchange: Corporate and Regional Bonds

375 bonds of 262 issuers traded

US$ 24,2 bln (par value) total outstanding

114 bonds of 67 issuers listed 2005 turnover in bonds

reached US$ 83,8 bln, 2 times over 2004

Volume of transactions with corporate and regional bonds in Jan-Feb 2006 - US$ 20 bln, 2,4 times over Jan-Feb 2005

Par value of outstanding corporate and regional bonds, US$ bln

0

5

10

15

20

25

1Q2002

2Q 3Q 4Q IQ2003

2Q 3Q 4Q 1Q2004

2Q 3Q 4Q 1Q2005

2Q 3Q 4Q

15

Corporate Bond Market: Proxy for IPOs

0

1

2

3

4

5

6

7

8

9

10

1H 2002

2H 2002

1H 2003

2H 2003

1H 2004

2H 2004

1H 2005

2H 2005

bln USD

Market value of corporate bonds has grown 6,2 times during 2003-2005

Market value of corporate bonds in Jan-Feb 2006 has increased by 28,1% to 12,3 bln USD

The biggest issuers of bonds (in terms of nominal value): RZhD – 1.17 bln USD Gazprom – 0.89 bln USD Vneshtorgbank – 0.71 bln

USD

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MICEX Stock Exchange Among PeersVolume of trades on equities market

in January 2006 and number of issuers

US$ bln Number of issuers

NYSE 1387.6 1817

NASDAQ 1107.2 2821

London SE 603.4 2753

Tokyo SE 568.7 2325

Euronext 282.8 962

Deutsche Borse 221.4 645

Hong Kong Ex&Cl 60.0 1127

Shanghai SE 27.8 833

MICEX SE 19.7 170

Singapore Ex 12.2 566

Wiener Borse 5.9 91

Warsaw SE 4.9 234

17

Russian Legislation & Regulation: Recent Developments (2005-2006)

More issuer & investor friendlyShorter IPO cycle30% ruleRDRTransparencyCorporate GovernanceInvestor ProtectionNational Infrastructure

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Future Prospects

Market is Ready Infrastructure in Place Regulation Inviting Next Steps:

Dual Listings Strategic Cooperation & Partnerships Real Working Mechanisms

19

Contacts

Address: 13, B. Kislovskiy per., Moscow, 125009, Russia

Telephone: (+7 095) 234-4811 Fax: (+7 095) 705-9622 E-mail: [email protected] Web-server: www.micex.com