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The general meeting of shareholders of the MICEX Stock Exchange, held 26 April 2007, summed up the results of the Exchange’s work in 2006. Shareholders elected the Board and the Audit Commission of the MICEX SE. Speaking at the meeting, President of the MICEX and Chairman of the Board of the MICEX SE Alexander Potemkin said: “Many of the achievements of the Russian stock market in 2006, including the explosive growth of trade volumes, the doubling of the number of investors and some other achievements, were made here, on the MICEX Stock Exchange. In 2006, the MICEX Stock Exchange joined the list of the world’s top 20 stock exchanges and became the main center of liquidity and price formation for Russian stock assets, accounting for about 70% in the world capital market.”
In his speech, the MICEX Stock Exchange CEO Alexei Rybnikov said: “We are successfully implementing the strategy aimed at increasing our share in the rising market. This strategy is based on the tasks assigned to us by our shareholders. As a result, all players win: shareholders, market participants and the Russian economy as a whole. At the same time, the ongoing rapid quantitative changes make it necessary to implement qualitative changes in the infrastructure of the Russian stock market.”
Last year was marked by the rapid growth of liquidity of the exchange-based market for corporate securities. In 2006, the total volume of transactions on the MICEX Stock Exchange in non-government securities, including operations in stocks, bonds and repos, grew 3.2 times and reached 20.38 trillion rubles (754.9 billion dollars) against 6.40 trillion rubles (225.6 billion dollars) in 2005. Correspondingly, the daily average volume of transactions in stock assets reached 82.5 billion rubles (3.1 billion dollars) a day. In 2006, the share of the Stock Exchange in the total turnover of the MICEX Group amounted to 39.2% (in 2005: 24.2%), while in the 1st quarter of this year it reached 47.5%. In January-March 2007, the volume of transactions in non-government securities on the MICEX SE reached 7.82 trillion rubles (297.4 billion dollars), 2.5 times more than in the 1st quarter of 2006, while the daily average volume of transactions reached 137.2 billion rubles (5.2 billion dollars).
In 2006, the volume of all trades in stocks on the MICEX Stock Exchange amounted to 14.86 trillion rubles (550.2 billion dollars), 3.7 times more than in the same period of 2005. This amounted to about 90% of the total turnover of stocks on all leading Russian stock exchanges. The share of stocks trading on the MICEX SE in the total (global) volume of trading in Russian stocks (including GDRs and ADRs) grew from 59% to 71%. The best selling stocks were Gazprom (32.0%), RAO UES (25.0%), LUKoil (14.6%), Norilsk Nickel (6.3%), Sberbank (6.1%), Rostelecom (4.8%), Surgutneftegaz (4.4%), Mobile TeleSystems (1.5%), Tatneft (1.0%) and Uralsvyazinform (0.9%). The volume of equity repos amounted to 3.8 trillion rubles (141.3 billion dollars), having grown 5.1 times over the previous year. Thanks to the country’s favorable economic situation, high oil prices and the growing interest of foreign investors in Russian stocks, the capitalization of the market for stocks traded on the MICEX SE reached 23.34 trillion rubles or 885 billion dollars (at the end of 2005: 7.44 trillion rubles or 258.6 billion dollars).
In 2006, the most important event on the stock market was the liberalization of the market for Gazprom shares and the launch of trading in these instruments on the MICEX Stock Exchange. The share of operations in Gazprom shares on the MICEX SE in the total exchange-based turnover of Gazprom shares on all Russian exchanges grew from 10% on the first day of trading (23.01.2006) to 93% at the end of the year.
The favorable situation on the Russian stock market is reflected in the MICEX Index, which in 2006 grew by 68% to 1693.47 points (on 30.12.2005: 1011.00 points). In 2006, the improvement of the index management system helped to increase the number of securities comprising the MICEX Index. New component stocks were added to the MICEX Index: common shares in Gazprom, Mobile TeleSystems, Uralsvyazinform, RBK Information Systems, Rosneft, Polus Zoloto and preference shares in Transneft. On 16 April, new rules of calculation of the MICEX Index were put into effect, while the number of its component stocks grew from 21 to 30 most liquid Russian stocks. The MICEX SE began to calculate indices for the oil and gas industry, the electric-power industry and the telecommunication industry.
The modification of exchange-based repos, the launch of trading in equity repos and the adoption of a new scale of tariffs for this segment of the stock market enabled to improve liquidity of the repos market. In 2006, the volume of transactions in stocks, corporate, regional and municipal bonds, effected in the repos market, amounted to 6.46 trillion rubles (equity repos accounted for 3.8 trillion rubles, bond repos accounted for over 2.6 trillion rubles). This is an almost five-fold growth of the volume of this market against 2005.
The MICEX Stock Exchange plays an important role in initial public offerings (IPO). The MICEX SE is an acknowledged leader on the corporate bonds market by the number and the total volume of placed securities. In 2006, efforts to organize IPOs on the stock market began to yield results. In 2006, seven companies used the MICEX SE’s services to make their IPOs, including Rosneft, Severstal, OGK-5 and some other companies, which together raised about 350 billion rubles (over 13.2 billion dollars).
Corporate bonds remain an important instrument of attracting investments to the manufacturing sector of the economy. In 2006, 225 companies offered their securities for sale on the MICEX Stock Exchange. The total volume of emission amounted to 464 billion rubles (17.2 billion dollars), 1.8 times more than in 2005. The volume of transactions in corporate bonds amounted to 4.13 trillion rubles (153.1 billion dollars), secondary trading accounting for 1.8 trillion rubles (66.7 billion dollars). The share of this instrument in the total turnover of the MICEX Group grew from 5.7% to 8%. In 2006, the market for regional and municipal bonds was developing steadily. Twenty bonds issues of Russia’s 19 regions and municipalities were placed for the amount of 50.5 billion rubles (1.8 billion dollars). The total volume of exchange-based transactions in these securities amounted to 1341 billion rubles (49.7 billion dollars.) and 45 billion rubles (1.7 billion dollars) correspondingly. This is 1.6 and 1.2 times more than in the previous year.
Interest in shares of mutual funds is growing. The volume of exchange-based trading in these instruments amounted to 5.0 billion rubles (186 million dollars), having grown 3.5 times over the previous year. Liquidity of the exchange-based trading in shares of mutual funds grew after the MICEX Stock Exchange had introduced the institution of specialists. These are participants in trading who support the buy and sell quotations of securities. In 2006, three participants in trading were granted the status of specialist. They support quotations of five securities. In March 2007, one participant became a market maker for shares of mutual funds.
In 2006, the number of securities traded on the MICEX Stock Exchange increased by 44%, while the number of issuers which have their securities admitted to exchange-based trading grew by 40%. In 2006, first mortgage securities were launched on the MICEX SE. At present, 967 securities of 587 issuers are traded on the MICEX SE. Of these, 221 securities of 131 issuers are listed. Good news for issuers was the adoption of the new version of the Rules of Listing, Admission to Placement and Trading of Securities on the MICEX SE. The new version of the Rules establishes the Sector for Innovation and Growth Companies (IGC Sector) and introduces a new listing level: Quotation List B. At present, List B includes common shares in Systema–Gals and Raspadskaya companies. Common shares in Rosneft, which in 2006 made the largest IPO in the Russian stock market, were moved to Quotation List B. In December 2006, the MICEX Stock Exchange accredited the first listing agents. These are six financial companies which act as guides for innovation and growth companies when the latter enter the exchange market.
On 01.01.2007, 586 organizations – participants in the securities market on the MICEX SE provided access to trading for 265 thousand investors (on 1.01.2006: 134 thousand), including over 24 thousand legal entities, over 230 thousand individual investors, 2 thousand non-residents and almost 8 thousand institutional investors.
In April 2007, the number of participants in trading reached 600 organizations which serve 326 thousand clients.
In 2006, the MICEX Stock Exchange implemented a number of important projects, including:- the launch of trading in Gazprom shares on the MICEX Stock Exchange;
- the development of procedures of initial placement of securities; the introduction of quotation lists “V” and “I”; the organization of IPOs of Rosneft and other issuers;
- the creation of a special sector for IPOs of innovation and growth companies; the accreditation of listing agents;
- the development of collective investments, the doubling of the number of individual investors trading on the MICEX Stock Exchange;
- the introduction of the institution of exchange specialists and market makers;
- the development of portfolio refinancing instruments (repos);
- the launch of mortgage securities.
Shareholders were told about priority areas of the MICEX SE’s development. These include the launch of the derivatives market of the MICEX Stock Exchange, the development of trading and settlement mechanisms, the launch of trading in the Sector for Innovation and Growth Companies (IGC Sector) and the improvement of the investment culture of the country’s population. Further improvement of the infrastructure will help to increase the liquidity and the investment attractiveness of the market, cut the costs of market participants, implement unified platforms and technologies and protect the rights of investors.
Shareholders elected the Board of the MICEX Stock Exchange, which will work till the next annual general meeting of shareholders. The Board is comprised of 11 people:- Alexei I. Akinshin (Deputy Chairman of the Executive Board of VTB);
- Mikhail V. Belyaev ( Senior Managing Director of Otkrytie Financial Company);
- Bella I. Zlatkis (Deputy Chairperson of the Executive Board of Sberbank);
- Sergei P. Lykov (Deputy Chairman of Vnesheconombank of the USSR);
- Gennadi G. Mayatski (Vice-President and Head of Treasury of Eurofinance Mosnarbank);
- Oleg V. Mikhasenko (CEO of BrokerCreditService Company);
- Alexander I. Potemkin (President of the MICEX);
- Alexei E. Rybnikov (CEO of the MICEX SE);
- Mikhail L. Sukhobok (Managing Director of Otkrytie Financial Company);
- Vladimir V. Tatsii (Vice-President and Head of the Depository Center of Gazprombank);
- Andrei A. Yumatov (Member of the Executive Board of International Moscow Bank).
- Irina V. Glazkova (Head of the Internal Audit Service of the MICEX),
- Vyacheslav Ye. Ulupov (Director of the Internal Control and Audit Department of Vnesheconombank of the USSR),
- Yuri V. Yukin (Head of the Internal Control Service of Eurofinance Mosnarbank).
Summing up the results of the financial and economic performance of the MICEX SE in 2006, shareholders approved the Exchange’s balance sheet, its financial report and the profit and loss report. According to the Exchange’s financial reports, prepared under the Russian standards, in 2006, the net profit of the MICEX SE amounted to 177.828 million rubles (in 2005: 97.045 million rubles). The general meeting of shareholders decided to pay dividends for the total amount of 17.783 million rubles.
Shareholders appointed Deloitte & Touche CIS auditor of the MICEX SE till the next annual general meeting of shareholders.
