JJ Mois Année

Recent market trends

RUSSIA

June 2009

Wider.Closer.Simpler.

2Société Générale Securities ServicesJune 2009

Investors business unit focus

Several industry Trends may impede industry growth in the near term

Future declining trading volumeShrinking Hedge FundsFinancial Deleveraging likely to accelerateSignificant pressure on Global Equity markets

Recent turmoil is unprecedented and sweeping, resulting in low volumes and issuance

levels in 2009

Anticipation on the largest decline in equity trading for 20 years across a range of

exchanges

Lower levels of new issuance and depressed market valuations drive down fees

Decline in trading volumes and issuance levels

3Société Générale Securities ServicesJune 2009

Investors business unit focusKey trend & drivers

Volumes

Expenses

Products

Competition

• Near term decline in trading volumes– shrinking of mutual fund and hedge fund AUM– deleveraging– capital pressure

• Mitigating factors likely to prevent sharp volume decline– volatility – risk management / risk aversion– regulation– algorithmic trading

• Product diversification becomes increasingly important– maintain trading volumes / get share of OTC market– focus on high margin products

• Cost efficiency required to sustain profitability– benefits of scale

• Industry consolidation will continue– cost efficiency– geographic expansion / emerging markets– product diversification

• Mitigating factors to volume decline include:– Play on the market volatility, algo trading, arbitrage– Risk management / risk aversion / regulation reemphasise the trend in favour of liquid, centrally cleared exchange products

Diversity of exchanges business model would help to improve volumes by promoting new products and services

Focus on cost efficiency and participation in the industry consolidation would contribute to improved profitability given the industry’s high fixed cost component

4Société Générale Securities ServicesJune 2009

Russian capital market landscape

5

-49%

-38% -38% -37%-32%

-19%

-45%-50%

-56%-60%

-9%

7%

-10%

0%

-11%

9%7%13%

5%

22%

-70%

-50%

-30%

-10%

10%

30%

50%

FIG

Mate

rials

Tech

Indu

strial

Cons.

Dir.

Utilit ie

s

Energy

Teleco

m

Cons.

Stapl.

Health

care

2008 2009 YTD

(3.7)

(1.0)

14.43.5

20.3 24.6

54.0

(49.5)

13.0

0.510.9

6.0

(2.5)

7.0

(2.8)

(60)

(40)

(20)

0

20

40

60

95 96 97 98 99 00 01 02 03 04 05 06 07 08 YTD09

Flows Rebuilding in 2009 Dedicated Emerging Market Funds Equity Flows

$ Bn

Source Morgan Stanley Equity Strategy, EPFR Global

Source Bloomberg as of May 2009

Investor Interest Returning to Cyclical SectorsMSCI Europe Sector Performance

%

01

0

4

1514

32

3

0.5 0

7

12

322

0.1

4

0

4

8

12

16

H1

2005

H2

2005

H1

2006

H2

2006

H1

2007

H2

2007

H1

2008

H2

2008

H1

2009

IPO FO

Russian Equity OfferingsSince 2007

$ Bn

Source Dealogic

There has not been any issuance out of Russia in 2009, which is in stark contrast with US and Europe, where issuance YTD is at the level of 2008

Volatility continues to be high globally (VIX is above 30 and RTS 30 day volatility at 44.6)

Following a significant equity funds outflow in 2008, investors are slowly returning to emerging markets with total equity inflows of $13.0 Bn in 2009

Investors’ interest is also returning to cyclical sectors, which suffered greatest losses in 2008

0

500

1,000

1,500

2,000

2,500

3,000

янв 00 апр 08 июл 08 окт 08 янв 09 апр 09

0

30

60

90

120

150

RTS RTS 30d Volatility VIX

Volatility Remains HighSince Jan-2008

pts

%

Source Bloomberg as of May 2009

5Société Générale Securities ServicesJune 2009

Russian equity markets experiencing a rebound

Russian equity market significantly underperformed global indices since the beginning of 2008 following the collapse in commodity prices

• Global financial crisis and recession, compounded with depletion of Russian state reserves following Central Bank’s hesitance to increase the ruble's trading band, contributed to the Russian market underperformance at the end of 2008

Since the beginning of March equity markets globally are experiencing a significant rally, with Russian market outperforming YTD

• Stable Rouble, rising oil prices and Russian CDS decline had a positive impact on the Russian market

• However, RTS is currently trading at the level of November 2005

0

20

40

60

80

100

120

Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09

FTSE 100 S&P 500 Euro Stoxx 50

MICEXRTS

Global Markets Performance Since January 2008

Rebased to 100

60

80

100

120

140

160

180

Jan-09 Feb-09 Mar-09 May-09

FTSE 100 S&P 500 Euro Stoxx 50

MICEXRTS

Global Markets Performance 2009 YTD

Rebased to 100

Russian market fell sharply in 2008, but outperforming European and US markets YTD

Source Bloomberg as of May 2009

6Société Générale Securities ServicesJune 2009

Russian equity markets Positioning of MICEX

Source MICEXSource MICEX

0%

20%

40%

60%

80%

100%

фев.07 Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct

Micex RTS OTC

Structure of Russian Equity MarketTrading Volumes

Feb-07 – Oct-08

Source MICEX

4,212

5,979

1,925

932555281117106

0

2,000

4,000

6,000

8,000

2001 2002 2003 2004 2005 2006 2007 2008

MICEX Trading VolumesAnnual Turnover

$ Bn

Source MICEX

14%16%

24%

33%35%

0%

10%

20%

30%

40%

дек.04 дек.05 дек.06 дек.07 окт.08

Share of Non-residents in MICEX Trading2004 – 2008

%

179

245

364

496 503

81

161193 207

232

0

200

400

600

2005 2006 2007 2008 2009-YTD

Equities Bonds

Number of Issuers on MICEX2005 – 2009

#

7Société Générale Securities ServicesJune 2009

Share of Foreign trading

• Large institutional investors tend to trade directly on local exchanges rather than through intermediaries or foreign exchanges:

– Lower cost

– Wider product offering

– Simplicity / effectiveness

• Significant share of an off shore trading could imply that investors are not entirely satisfied with the local infrastructure or partially precluded from dealing in local securities

Local92.6%

Foreign7.4%

KoreaTop-5 Companies by Market Cap (3)

Local84.4%

Foreign15.6%

ChinaTop-5 Companies by Market Cap (1)

Source Bloomberg

Source Bloomberg

Source BloombergSource Bloomberg

Local92.7%

Foreign7.3%

IndiaTop-5 Companies by Market Cap (2)

Local67.3%

Foreign32.7%

RussiaTop-5 Companies by Market Cap (4)

8Société Générale Securities ServicesJune 2009

Pre-requisites

Minimization of Risk

Cost Efficiency

Simplicity / Transparency

• Centralized trading of a broad range of products

–all classes of securities, indices, derivatives, etc

• Modern technologies

– placement / trading / settlement

• Internationally accepted post-trade practices

– no pre-deposit of funds

– securities lending

– reserve funds / credit assessments

• Direct access to local exchanges

– equal treatment of non-residents

• Consolidated infrastructure

• Investors dealing in Russian shares would welcome a number of changes to the exchange infrastructure that would allow them to minimize trading and settlement risks, simplify trading procedures and reduce overhead costs