The U.S. Securities and Exchange Commission has given public-stock company Lukoil Oil Company the green light to issue Level-1 American Depositary Receipts for its preferred shares.

One ADR will represent 2 preferred Lukoil shares. Preferred shares account for 9.1% of Lukoil's charter capital (65,011,864).

Lukoil in December 1995 issued ADR-1s for its common shares. They are quoted on the U.S. stock market and in Western Europe. Bank of New York is the depositary for both issues.

Lukoil Vice President Leonid Fedoun said the shares are among the stock market's most interesting and attractive. "Preferred shares traditionally yield higher dividends than common shares," he said. Russia's Law on Joint-stock Companies gives owners of preferred stock relatively broad rights. "Lukoil plans in the future to actively exploit the opportunity to attract investment by issuing preferred shares," Fedoun said.

Owners of preferred shares get an annual dividend, set at 10% of the Lukoil holding company's net profits for the last financial year divided by the number of preferred shares. The 1995 dividend for preferred stock was 150% more than the one paid on common shares.

Preferred-share owners may vote at shareholders' meetings when they address reorganization or liquidation of the company and when changes are made to the company charter that would limit preferred shareholders' rights in cases envisaged by Russian law.

Lukoil may not pay dividends on common shares until it has paid dividends on preferred shares.

Lukoil's preferred shares sold for 91 cents on the over-the-counter market a year ago. They were first quoted on the Russian Trading System, an electronic dealing system, on September 19, 1996, at $5.85. They closed at over $11.7 on the RTS on February 12, 1997. Preferred shares have a par value of 25 rubles.

Depositary receipts are dollar-denominated derivatives that make it easier for investors from one country to hold shares in nonresident companies. Settlement is the same as for other U.S. securities, and DRs may be sold freely in the United States and Europe.

Buying Lukoil ADR-1s will allow investors to invest in Lukoil and hold a document confirming an investment made in the United States in the way they are used to. Settlement is made to international standards within three working days. Issuing depositary receipts increases a company's share liquidity and provides investors and market participants with more information. ADR-1s represent shares sold without limits. Unlike other depositary receipts, ADR-1s allow trading only on the over-the-counter market.

Press Centre  OAO "LUKOIL"
phone.: (095)927-1677,  fax: (095)927-1653,
E-mail: pr@lukoil.com