The National Depository Center (NDC), Russia’s only settlement depository servicing the full range of Russian securities, announced today that a general meeting of NDC members held 25 April in Moscow approved the Company Director’s report on operations for 2007, a report on the company’s profit and loss and capital expenditures and investments budgets for 2007, the financial statements for 2007 and the Audit Committee’s report on the company’s financial and operating results for 2007.
The meeting also considered the results of an audit of the company’s financial statement for 2007 by Deloitte & Touche CIS CJSC. Amendments to the company’s profit and loss budget for 2008 were also approved by the membership.
According to the 2007 financial statements, prepared in compliance with International Accounting Standards (IAS), total operating income for 2007 rose 31% against 2006 and reached RUR1.223 billion (RUR932 million for 2006). Net profit increased 16% to RUR393 million (RUR338 million for 2006). This indicator includes operating results for affiliated companies which have been incorporated into the financial statements on an aggregate basis. The proportion of NDC income from the servicing of joint stock company shares tripled for 2007, reaching 38.3%.
NDC’s financial stability strengthened. On an IAS basis, the company’s equity capital value rose 43% (RUR1.309 million for 2007 against RUR916 million for 2006). This is allowing NDC to develop dynamically without debt financing.
In accordance with Russian Accounting Standards (RAS), NDC’s total income amounted to RUR1.231 for 2007. This is 32% more than for 2006. The company’s profit for 2007 reached RUR522 million, and net profit rose 16% against 2006, reaching RUR384 million. NDC’s equity capital based on Russian Accounting Standards (RAS) rose 39% to RUR1.335 million.
Nikolai Egorov, Director, NDC, said: “In 2007, NDC confirmed its leading and stable position in the market. NDC’s income growth was mainly attributable to the economic situation in 2007 and also to NDC’s balanced tariff policy and its efforts in the sphere of settlement and depository services development. We are gradually implementing our strategy of improving the company’s competitiveness and growing NDC’s share of Russian market for settlement and depository services but not only in the traditional debt instruments segment but also in the sector of servicing of joint stock company shares. The number of UITs and international securities serviced by NDC is also increasing.”
In 2007 NDC was recognized as Russia’s biggest depository on the bases of such criteria as market value of securities on deposit, total value and number of transactions held.
NDC's securities turnover (the market value of securities transferred in inventory operations) doubled for 2007 compared with 2006 reaching a record figure of RUR60.487 trillion or US$2.5 trillion as of December 31, 2007. The number of inventory operations conducted by NDC for 2007 rose 30% exceeding 2.4 million operations. The number of securities transferred rose 645% for 2007 to 8.1 trillion items. The largest portion of securities was represented by joint stock company shares, at 44% of all securities. The value of the shares was RUR26.4 trillion. This indicator is significantly higher than other depositories’ comparable indicators, and this allows NDC to call itself the leading Russian depository holding settlements on joint stock company shares.
An independent evaluation of risks is an important indicator of the risk management system’s efficiency. Thomas Murray, an international rating agency, specializing in risk assessment connected with central depositories and capital markets, has affirmed in 2007 NDC’s rating at A+, which means low overall risk.
In 2007 NDC succeeded in improving its indicators for financial and operational risks. This led to ratings changes reflective of these improvements. The outlook has changed from “under observation” to “stable.” Results of an independent audit of the company’s operations conducted by Deloitte & Touche CIS CJSC for 2007 have also been taken into account.
In 2007, NDC signed an insurance agreement setting cover at US$50 million, among the highest for Russian financial institutions. Including NDC’s own self-insurance funds, the total value of NDC’s financial liabilities cover is more than US$100 million.
The company has paid special attention to the improvement of its corporate governance system and interaction with market participants. Vnesheconombank became a new member of NDC in 2007.
NDC’s Board of Directors includes 11 directors. In 2007 it included seven representatives of large international and domestic custodians and one independent director. Consultative bodies of the company which include four Committees under the Board of Directors are actively working on issues related to strategy, tariffs, services, and other important programs of the company. NDC’s customers have representatives in the Committees, and this guarantees them that a stable and reliable infrastructure will be built and that the stock market participants’ rights will be taken into account in the process of making important decisions connected to NDC operations.
Among NDC’s key development directions was NDC’s reorganization from not-for-profit partnership into a joint stock company. This became possible when amendments to clauses 7 and 11 of the Federal Law "About the Securities Market" came into effect. These two amendments form conditions for depositories’ reorganization from not-for-profit organizations to joint stock companies, a necessary basis for the corporate restructuring of NDC as a central depository including participation of members of the professional community in NDC’s capital and management.
Sergei Lykov, Chairman of the Board, NDC, said: “Further steps in the improvement of the corporate governance system will include development of NDC’s Corporate Conduct Code which would suggest basic principles and mechanisms of the corporate governance in the company, Provisions of NDC’s Information Policy and formation of a system of assessment of NDC’s Board of Directors’ activities. Efficient interaction between NDC’s Board and Committees should be among the most important criteria of this assessment system.”
In 2007 NDC put its new technological platform into operation. Modernization of NDC’s automated complex is being undertaken based on the approach offered by Tata Consultancy Services as a supplier of the central component of the complex. The system is developed on the basis of Oracle software and Hewlett-Packard equipment. The architecture of the new system, which conforms to international standards, will provide a new level of efficiency, scalability and reliability for NDC’s integrated technological complex.
NDC is steadily implementing its strategic plans on widening of its range of services and improvement of the service quality. It pays special attention to expanding joint stock company shares and foreign securities serviced by NDC, both directions representing major contributors to raising the company’s share in the Russian stock market.
In 2007 NDC and ING Bank Eurasia CJSC, Russia’s largest custodian rendering services to foreign investors, reacted to their clients’ needs by successfully implementing the Speedy Settlement Scheme (SSS), designed to cut the time needed for the delivery of shares and to optimize settlements between investors and depositories’ clients. NDC, jointly with MICEX and the MICEX Settlement House, made preparations for implementation by the Bank of Russia of direct REPO operations with corporate Eurobonds on the OTC market.
NDC has also improved its technology for the preparation, formation and submission of lists of securities owners. In 2007 the company has formed 2,570 lists of securities owners and 1,451 additional lists.
In 2007 five registrars switched to Electronic Data Interchange (EDI) in their interactions with NDC. This has allowed simplification of the information exchange process and minimization of financial and time outlays in the process of information exchange with registrars. As a result, the share of operations conducted via EDI rose to up to 83.1% of all operations conducted with securities at NDC’s nominee holder accounts in registers.
NDC is also working on improvement of its services in the field of interdepository interaction. The number of securities admitted to the NDC-DCC Bridge has tripled within the year (97 issues as of 31 December, 2007).
NDC is working steadily on mutual integration of the securities markets across the CIS countries. In 2007 the Association of National Numbering Agencies (ANNA) granted NDC the right to act as the substitute numbering agency for the CIS. Traditional NDC activities as a numbering agency have recently included new functions. In accordance with Provisions on the Qualification of Foreign Financial Instruments issued by the Federal Financial Markets Service (FFMS) in October 2007, NDC, as a member of ANNA, can now confirm international codes assigned to foreign financial instruments.
Mr. Egorov summarizing the company’s operating results for 2007 added: “International recognition of NDC as Russia’s leading depository and its operating results confirm the high rate of the company’s development towards its strategic goal – formation of unified depository and settlement infrastructure conforming to international standards, providing transparency, high service quality and comfortable working conditions for all professional stock market participants.”
NDC’s general meeting reviewed progress on NDC's reorganization from not-for-profit partnership to joint stock company and approved a list of members of the Working Group which will focus on reorganization issues. The Working Group now includes Alexander Ikonnikov, Member of the Board of Directors, NDC, Head of Working Group; Andrei Lozovoy, Advisor to the Deputy Chairman, Bank of Russia; Vadim Subbotin, Member of the Board of Directors, NDC, Member of the Managing Board, MICEX CJSC; Eddie Astanin, Deputy Director, NDC; and Maria Krasnova, Head of Law Directorate, NDC.
The general meeting of the company’s members also approved a list of new members of NDC’s Audit Committee in connection with expiry of the term of office of the previous members of the Committee in May 2008.
Audit Committee members:
|1||Irina Glazkova||Head of Internal Audit Service, MICEX CJSC|
|2||Olga Gordienko||Chief Accountant, MICEX CJSC|
|3||Larisa Voropayeva||Deputy Chief of Depository Business’ Technologies and Development Directorate, Head of Department for Methodology of Depository Operations, Gazprombank OJSC|
|4||Igor Zhelezny||Chief of Operating Department of Depository, Sberbank|
|5||Vladislav Zimin||Advisor, Directorate for Provision and Audit of Operations in Financial Markets, Central Bank of Russian Federation|
|6||Mikhail Lomakin||Deputy Director of Department for Depository Services’ Organization and Development, VTB Bank OJSC|
|7||Yana Postovskaya||Deputy Director of Internal Audit Department, Head of Banking Business Audit Directorate, UniCredit Bank CJSC|
|8||Yuri Yukin||Vice President, Head of Internal Audit Service, Evrofinans Mosnarbank OJSC|
The general meeting of NDC members approved a list of candidates to the Board of Directors of Depository Clearing Company CJSC (DCC) which includes Eddie Astanin, Deputy Director, NDC; Irina Vinogradova, Member of the Board of Directors, NDC; Andrei Remnev, Director of Depository, Vnesheconombank; Denis Soloviev, Deputy Director, NDC; and Sergei Naumov, Deputy Director responsible for audit. Zhanna Klimova, Chief Accountant, NDC, has been approved as a candidate to Audit Committee of DCC.
The general meeting authorized NDC’s Director to transmit proposed nomination of candidates to the Board and Audit Committee to DCC and to take all necessary steps for the NDC’s representatives’ participation in DCC Annual General Meeting.
In accordance with paragraph 15.1 of DCC’s Charter, NDC's ownership of a 36.96% stake in DCC gives it the right to nominate its candidates to the DCC Board of Directors until 15 May, 2008.
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 and the Bank of Russia bond markets, more than 95% of transactions conducted in the corporate and regional bond markets, and stock exchange share transactions. NDC provides storage of global certificates and depository accounting for 99% of corporate bond issues, and 95% of sub-federal and municipal bond issues. The international rating agency Thomas Murray has assigned NDC an A+ rating as a central depository. For 2007 the value of assets in storage was more than RUR4.3 trillion. NDC is the largest paying agent on behalf of corporate bond issuers. It is Russia's national numbering agency, the substitute numbering agency for the CIS, authorized to assign the international ISIN and CFI codes. It is also a member of the international accounting infrastructure, providing settlements on the global financial markets using direct accounts at Clearstream Banking S.A. and Euroclear Bank. It also holds accounts at the Central Depository of the Republic of Kazakhstan and the NDC of the Republic of Azerbaijan.
Among NDC’s founders are MICEX and Bank of Russia (the founders’ shares in the property of NDC are 46.7% and 39.3% respectively, and in the votes 50.2% and 42.3% respectively). Members include GPB OJSC (Gazprombank), Evrofinans Mosnarbank, Rosbank, VTB Bank (Vneshtorgbank), Bank of Moscow, Rossiysky Credit Bank, Vneshekonombank, ING Bank Eurasia, JP Morgan Bank International LLC, UniCredit, Deutsche Bank, and Sberbank. The Partnership also has a stake in Depository Clearing Company CJSC (36.96 %) and in Settlement Depository Company CJSC (29%).
For further information about NDC: www.ndc.ru, or NDC Public Affairs Department: +7 495 232 0910, .