NDC General Meeting Contemplates New Partner, Independent Director

MOSCOW - A general meeting of the Not-for-Profit Partnership “The National Depository Center” (NDC) has reviewed plans for reorganization of the Partnership as a joint stock company, along with the possible admission of new partners and the appointment of independent directors to the organization’s board, NDC announced today.

The meeting reviewed a study by external consultants on NDC’s corporate governance and mandated NDC Director Nikolay Egorov to prepare a plan incorporating the study recommendations into preparations for NDC’s conversion to company status.

“NDC is taking steps to expand and broaden the representativity of the Partnership,” Konstantin Korishchenko, NDC’s Chairman, said. “The members of the Partnership represent interests of a wide circle of market participants and support NDC in fulfilling its chartered tasks, realization of the strategy on strengthening of its leadership and plans on creation of central depositary on the basis of NDC. "

The meeting also reviewed NDC’s IFRS financial results for 2006, including a 53% rise in operating income to RUR 932.245 million, and a 47% increase in net profit, to RUR 338.03 million.

During the general meeting (May 15), the members confirmed NDC’s 2006 Performance Report, the 2006 Accounting Report and Audit Committee Report on financial and economic activity, Income and Expenditure Budget Control Report, and also considered the Audit Report of the accounting firm Deloitte & Touche CIS. Amendments to NDC’s income and expenditure budget and capital budget for 2007 were ratified.

Operating activities

During the meeting, the Financial Report compiled in accordance with international standards as well as the Audit Report were examined and taken under advisement. Based on IFRS, operating income increased by 53%, to RUR 932.245 million compared with RUR 607.340 million in 2005, and net profit increased by 47% to RUR 338.03 million compared to RUR 230.275 million (the financial performance reports of associated companies are drawn up at equity). Equity capital calculated under IFRS rose 58% to RUR 916.225 million compared to RUR 518.195 million the previous year.

Income growth in 2006 was the result of positive trends in the stock market as well as deliberate tariff policy and NDC efforts providing high-quality services and stronger partnership relations with clients. Stock turnover in 2006 increased two-fold to RUR 30.7 billion (compared to 14.7 billion rubles in 2005). Performance measurements, year-on-year, included a three-fold growth in number of new clients and an increase in the number of issuers operating through NDC to 816. Number of transactions performed by depositors also increased substantially to 1.9 million.

NDC Director Nikolay Egorov drew attention to the tasks associated with service quality improvement. “Under exponential market growth and the rising number of investors, including foreign investors, NDC pays special attention to modern techniques to provide our clients with high-quality and competitive services,” he said. “At this moment we are introducing the eClearSettle system (developed by Tata Consultancy Services, India - the world-famous software company). Ten NDC clients gained web access in a view mode to the new system in December. On 21 May, 2007 a training session is to be held and after that we will engage all our clients in the system. In addition, pilot operation of the exchange transactions module which supports all DVP (delivery versus payment) models including trade-by-trade mode will be initiated. At the beginning of 2008 we are planning an ex-pit transaction module to be run as a pilot operation. A corporate activity module, the most complicated one, is to be run during 2008. When introducing a new system we adhere to the principle that no harm to NDC business or to the business of our clients can be allowed. So the new system supports any type of interaction available nowadays providing added value to exchange information,” Mr. Egorov said.

Corporate Governance

Meeting participants considered a number of questions on NDC’s system of corporate governance. These included a plan of reorganization from not-for-profit partnership to joint-stock company, an increase in NDC members, cooperation strategy with associated companies, the possibility of independent directors on the NDC board of directors, director remuneration, as well as membership of the NDC Audit Committee.

The general Partnership meeting took notice of the draft plan on reorganization of NDC from non-for-profit partnership to joint-stock company and assigned NDC’s Director to engage independent consultants to evaluate the reorganization plan and estimate NDC's value. The estimation results will be presented to a future general meeting of Partnership members.

Chairman Korishchenko said the Partnership's general meeting participants decided to approve Vneshekonombank's membership in NDC. This, according to Mr. Korishchenko, "is a logical step, as, on the one side, Vneshekonombank's depositary is one of the largest in Russia, but until now it was not represented in NDC, and, on the other hand, has wide experience in depositary servicing, which is particularly interesting for NDC. Besides, Vneshekonombank carries out trust management of pension accruals funds and, in this field, is an important user of NDC's services."

Considering the positive decision on Vneshekonombank's membership, founders of NDC – CJSC MICEX and Bank of Russia – now own 46.7% and 39.3% respectively of the Partnerships' assets, and control 50.17% and 42.3% respectively of votes. The rest of the members own 7.53% of all votes.

In accordance with a decision made by the NDC board of directors on 5 Sept., 2006, a study of NDC corporate management system quality was conducted by Board Solutions CJSC. This work is part of the strategic development plan of NDC, aimed at maintenance and strengthening of NDC's leading position in the Russian market, understanding of what changes are necessary to provide further positive development of the Partnership and raise confidence among other market participants.

Considering the corporate management system research results provided by Board Solutions, the NDC general meeting participants:

1. Took notice of the corporate governance research results;

2. Assigned NDC’s Director to prepare a plan for activities relating to the integration of recommendations on improvement of the corporate governance system, taking into account the prospective reorganization into a joint-stock company and to present the improvement plan at the next General meeting of NDC members;

3. Assigned NDC’s Director, together with the founders, to prepare proposals on the introduction of an independent director to the NDC board of directors.

Participants in the meeting approved all previous representatives to be reaffirmed as board members of CJSC Depositary Clearing Company (DCC) including E. Astanin, NDC, Deputy Director; B. Cherkassky, NDC, Development Director; M. Medvedeva, MICEX, Vice-President; D. Soloviev, NDC, Deputy Director; and S. Naumov, NDC, Deputy Director and controller. Zh. Klimova, NDC, Chief Accountant, was nominated to the Audit Committee. In accordance with 15.1 of the DCC Charter, NDC, with 36.96% of DCC's shares, has the right until 15 May, 2007 to recommend its representatives to DCC BOD.

On April 5, 2007, NDC proposed to DCC the agenda of the annual general shareholder meeting, regarding changes in DCC's Charter. The changes proposed include granting to DCC's board of directors additional authority to approve tariffs and budget (similar to the practice of the leading infrastructural organizations). These proposals were outlined by NDC’s board of directors in March 2007. The participants of the General meeting of the Partnership approved these proposals to be sent to DCC.

The meeting also approved the new regulation “Regarding remuneration and compensation paid to members of the Board of Directors and members of the Audit Committee of the Not-for-Profit Partnership The National Depository Center.”

In addition, a new Audit Committee was elected during the Partnership's meeting. The Chairman and the Secretary of the Audit Committee will be elected by its members.

The members of the Committee are:

Mr. Egorov, NDC Director, was delegated to take part in the work of the self-regulatory organization The National Stock Market Association (NFA) Council, after being invited by NFA.

About NDC:

Not-for-Profit Partnership “The National Depository Center” is the largest settlement depository in Russia, servicing the full range of equity securities of Russian issuers. It services 100% of transactions conducted in the federal bond market of the Bank of Russia, 95% conducted in the corporate and regional bond markets, and 90% of stock exchange share transactions. NDC provides storage of global certificates and depository accounting for 99% of corporate bond issues, and 95% sub-federal and municipal bond issues. The international rating agency Thomas Murray has assigned NDC an A+ rating as a central depository. In 2006 the value of assets in storage was RUR 3.3 billion, turnover was RUR 30.7 billion, and the total number of operations 1.9 million. NDC is the largest paying agent on behalf of corporate bond issuers. It is Russia's national numerating agency, authorized to assign the international ISIN and CFI indexes. It is also a member of the international accounting infrastructure, providing settlements on the global financial markets using a direct account at Clearstream Banking S.A.

Among NDC’s founders are Bank of Russia and MICEX CJSC. Members include Bank of Russia, MICEX CJSC, OJSC Bank of Moscow, Sberbank, International Moscow Bank, JP Morgan Bank International LLC, Vneshtorgbank OJSC, Bank Rossiysky Credit OJSC, Evrofinans Mosnarbank OJSC, Rosbank, Gazprombank CJSC, ING Bank Eurasia CJSC and Deutsche Bank LLC. Recently Vneshekonombank was approved as a new member. The Partnership also has a stake in CJSC Depositary Clearing Company (36.96 %) and in CJSC Settlement Depository Company (29%).

For further information about NDC: www.ndc.ru, or NDC press service: +7 495 232 0910,