Open Joint Stock Company Gazprom

Gazprom Shares. The Presidential Decree of the Russian Federation No. 943 of 10 August 1998authorised the sale of a further 5% of Gazprom Shares to foreign shareholders. In fact, only 2.5% outof the 5% authorised was actually sold and therefore foreign equity participation is currently limited to11.5% of Gazprom's Shares. The Gas Supply Law provides that the share of foreign individuals andorganisations in the charter capital of Gazprom may not exceed 20%.In 1996, Gazprom placed shares representing 1.98% of its charter capital on the foreign marketsin the form of American Depository Shares ("ADS"). Due to the restrictions on foreign equity ownership(which prevents the purchase of Gazprom Shares by foreign participants in the domestic market), theissue of ADSs created a dual market in Gazprom Shares, with the ADSs trading at a substantialpremium over the Gazprom Shares in the domestic market. In 1999, Ruhrgas acquired a further 1% ofGazprom Shares in the form of ADSs and between December 2000 and January 2001 an additional1.44% of Gazprom's Shares were sold to foreign investors in the form of ADSs. Gazprom ADSs arecurrently listed on the London Stock Exchange.President Putin has established a working group to look at ways in which to liberalise the currentdual market in Gazprom Shares.The following table summarises Gazprom's shareholding structure as at 13 May 2002.Shareholders %Russian Federation 38.37Russian shareholders 50.13Foreign shareholders 11.50Gazprom Shares(1) 7.08ADS(2) 4.42Total 100.00Notes:(1) Including 4.58% held by Gazprom Finance B.V., Gazprom's wholly-owned financial vehicle. This shareholding is intendedto be used to secure Gazprom's liabilities and issue derivative financial instruments. Also including a 2.5% shareholdingacquired by Ruhrgas at a privatisation auction which was held pursuant to Presidential Decree No. 1316 of 31 October1998.(2) Including a 1% shareholding acquired by Ruhrgas.Since 1995 more than 5% of Gazprom Shares have been owned by Stroytransgaz, a Russianconstruction company which is often engaged by Gazprom for various construction projects (see"Business—Transportation"). These Gazprom Shares were acquired by Stroytransgaz from Gazprom,who had bought these Gazprom Shares as part of the 1995 Government authorised sale of 10% ofGazprom's Shares to Gazprom. Gazprom paid for the Gazprom Shares in privatisation vouchers at thethen effective nominal value. Stroytransgaz acquired 4.8% of Gazprom Shares in 1995 as part of thesettlement of a debt owed by Gazprom to Stroytransgaz for various construction services rendered. Theeffective price paid by Stroytransgaz for the Gazprom Shares was equal to the average 1995privatisation sale price. This transaction was recently challenged by Gazprom. Stroytransgaz andGazprom have reached an agreement whereby Stroytransgaz has returned the Gazprom Shares to asubsidiary of Gazprom. The remaining balance of the 10% of Gazprom Shares authorised for sale bythe Government was acquired by Gazprombank and Gazfund.During the year ended 31 December 2001, certain members of the Board of Directors and closemembers of their families owned significant shareholdings in Stroytransgaz.Corporate StructureIn accordance with the Government's current policy of maintaining an integrated natural gasindustry, Gazprom owns all of the transportation assets necessary for the operation of the UGSS.Furthermore, its subsidiaries have the right to develop a substantial portion of Russia's natural gas andgas condensate reserves and certain of its oil reserves. Gazprom operates in and outside of Russiathrough a number of limited liability and joint stock companies, either wholly or majority owned byGazprom.22