Table of Contents

Chapter 1. Management Address ...... 5 Chapter 2. TransCreditBank in 2008 ...... 11 2 .1 .. Milestones of the Year...... 12 2 .2 .. Key Financial Results...... 17 2 .3 .. Dynamics of Assets and Liabilities ...... 21 2 .4 .. Earnings and Costs Structure...... 22 2 .5 .. Development of the Customer Base...... 24 2 .6 .. Cooperation with Transport Sector...... 26 Chapter 3. Bank for Its Corporate Clients...... 29 3 .1 .. Services for Corporate Clients ...... 30 3 .2 .. Lending to Corporate Clients...... 31 3 .3 .. Project Finance...... 38 3 .4 .. International Transactions and Correspondent Relations...... 39 3 .5 .. Financial Market Transactions...... 40 3 .6 .. Investment Banking Services ...... 41 3 .7 .. High-tech Banking Services ...... 44 Chapter 4. Retail Business ...... 47 4 .1 .. Bank Cards...... 48 4 .2 .. Retail Lending...... 51 4 .3 .. Deposits, Transfers and Settlement Operations ...... 54 4 .4 .. Remote Services...... 56 4 .5 .. Asset Management...... 57 Chapter 5. Improvement of the Bank’s Operations ...... 59 5 .1 .. Corporate Governance ...... 60 5 .2 .. Risk Management...... 61 5 .3 .. IT ...... 61 5 .4 .. Regional Policies...... 62 5 .5 .. HR Policies ...... 66 5 .6 .. Charities and Sponsorship ...... 67 Chapter 6. Main Goals and Outlook ...... 69 Chapter 7. Reference Information...... 73 7 .1 .. Shareholders’ Structure...... 74 7 .2 .. Board of Directors ...... 75 7 .3 .. Management Board...... 77 7 .4 .. Customer Service Network ...... 83 7 .5 .. Address and Payment Details...... 111 Chapter 8. Consolidated Financial Statements ...... 113 1. Management Address 6 transcreditbank. Annual Report 2008 Chapter 1. Management Address 7

Tatiana Paramonova built up a «liquidity cushion» of nearly USD 800 mln ..It is to a large extent this «cushion» that Chairman of the Board of Directors, JSC TransCreditBank provides for stable operations activity of TransCreditBank during this economic meltdown .. Unfortunately, the crisis that hit the global financial markets in autumn 2008 affected Advisor to the President, JSC Russian Railways and is still affecting Russia’s banking and finance sector and TransCreditBank as a participant of this sector ..However, the Bank’s traditional conservative lending policy and aversion to high-risk operations and assets, added by timely implementation of an anti-crisis package, allowed to mitigate to the maximum extent any negative impact on the Bank and its clients ... In 2008 TransCreditBank succeeded in maintaining at the pre-crisis levels both funding . raised from corporates and individuals and issuance of consumer and mortgage loans to its main category of retail customers – employees of the rail industry . Thanks to a high pace of growth achieved in the pre-crisis period and stable operations after outbreak of the crisis, TransCreditBank demonstrated strong financial performance in 2008 ..Net assets, one of the key indicators, nearly doubled y-o-y, while net profit remained flat at the level of trouble-free 2007 ..Given a poor showing of many other market players TransCreditBank moved 3-7 steps up in practically all performance indicator tables of the Russian banking system .. Speaking about non-financial results, one should emphasize rapid development of the regional network – in 2008 the Bank opened 73 new regional entities, twice as many as in 2007, and installed over 520 new ATMs .. Coupled with a wider range of services and improvement of its tariff policy this contributed to an obvious extension of the customer base .. Indeed, the number of individual customers increased by 320,000 reaching 2 mln by the . end of 2008 .. In 2008 TransCreditBank continued to develop its corporate governance system, in particular by enacting the Corporate Governance Code and approving the Information Policy ...The Strategic Planning, Audit and HR and Remuneration Committees were created and operate on a standing basis under the Board of Directors . In 2008 the Bank took a number of steps to increase its capitalization, in particular . by floating its stock at MICEX and RTS . Strong 2008 performance creates a required basis for development of TransCreditBank in the following 2009 .. In the on-going crisis environment the Bank started to implement . a realistic conservative financial plan ..Indeed, TransCreditBank is not going to stop at the Ladies and Gentlemen! current levels .. The existing market situation offers good opportunities for expansion of . the customer base and development of its business, including by acquisition of assets of The year 2008 proved to be rich in events of paramount importance for Trans-. credit institutions which were undone by the crisis .. The professional and cohesive team . CreditBank .. of managers and specialists gives the Bank an additional competitive edge . Once transfer of 75% government-owned stake to the charter capital of JSC Russian And finally, I would like to wish to executives and employees of the Bank to meet all Railways was completed in late 2008, the issue of undercapitalization, which had been their targets, and success and prosperity – to its clients .. constraining development of the Bank for many years, started to be resolved ..An additional stock issue was the first step boosting the shareholders’ equity to RUR 4 .8 bn ..Notably, NGPF Blagosostoyanie emerged as the new and the second largest shareholder of the Bank ..In October 2008 the Fund extended to TransCreditBank a subordinated loan facility which is T .V ..Paramonova included into the shareholders’ equity .. Ensuring the growth of business volumes during the first 9 months of the year the Bank was an active borrower in the international and domestic capital markets ..By issuing Eurobonds, RUR bonds and raising a loan from a syndicate of western banks the Bank . 8 transcreditbank. Annual Report 2008 Chapter 1. Management Address 9

Sergey Pushkin the railway industry offered consumer and mortgage lending products in the open market .. President – Chairman of the Management Board, TransCreditBank completed a number of projects to develop its regional network on the Member of the Board of Directors, JSC TransCreditBank territories covered by the West-Siberian, Far Eastern, October and Moscow Railway Divisions and implemented the first stage of 100 City Offices Program designed to cover clients outside of the rail industry . The crisis obviously impacted TransCreditBank’s operations and plans for development, notwithstanding that most of its corporate and retail customers operate in the key sectors of real economy which are eligible for the state support ..In the environment where credit risks are becoming much tougher, external sources of funding have disappeared altogether and confidence is running short in the banking sector, TransCreditBank had to take a number of forced measures, i .e ..to cut on overhead expenses, to reduce a number of development programs, to impose tighter terms and conditions on all types of loans, to suspend retail . lending programs outside of the rail sector and to sharply step down operations in the stock. and FX markets .. Shareholders and most customers accepted these moves with under-. standing ..The level of customers’ trust in the Bank is evidenced by the fact that during the . last 4 months of 2008 when the crisis was at its worst, corporate and retail customers . opened, respectively, 80% and 40% more accounts that a year ago . In spite of the crisis the Bank continued to pursue joint projects with JSC Russian Railways in the railway sector, in particular, creating a network of Self-service Ticket Terminals and developing a ticket sale system based on the corporate web-portal .. Last year TransCreditBank significantly expanded its range of remote services, such services are now being available for Russian Railways’ employees at their workstations via the corporate . Data Transmission Network .. In the current situation it is of paramount importance not only to meet financial targets, but also to improve quality of the Bank’s operations .. To address this task TransCredit-. Bank in 2008 implemented a package of measures to improve corporate governance and started to introduce incentive mechanisms which make managers’ compensations more dependent on the Bank’s financial performance . In 2009 TransCreditBank intends to perform above the market average ..We expect . to extend substantially our customer base, to acquire new assets and to implement a number of technology and regional expansion projects, including acquisition of subsidiaries with . Dear Shareholders, Clients and Partners! a switching to a single brand .. I’m sure that these plans will be successfully realized with support of our shareholders, For TransCreditBank, as well as for the whole of Russia’s banking system, the reporting clients and business partners ..I would like to thank you for the trust placed with TransCredit-. year falls into two distinct periods with business environment in each of them being radically Bank ..We wish you all the best and are willing to do our utmost to maintain our cooperation different and the Bank being forced to resolve different tasks .. productive and mutually beneficial in the future . In the pre-crisis period TransCreditBank actively built-up the base for the large-scale development of its business, primarily by placing an additional stock issue to increase its capital and by expanding its debt-raising operations ..Thanks to its perfect business reputation and high ratings from international rating agencies the Bank was able to use various instruments S .N ..Pushkin for this purpose ..In June TransCreditBank placed a USD 350 mln Eurobond issue, followed by a RUR 5 bn bond in July, and raised USD 185 mln syndicated loan facility in August .. These steps provided for a rapid increase of active operations ..Pursuant to its Medium- term Development Strategy the Bank focused on lending to various transport companies in the corporate segment, while in its retail business the Bank along with its programs for 2. TransCreditBank in 2008

2.1. 12 Milestones of the Year

2.2. 17 Key Financial Results

2.3. 21 Dynamics of Assets and Liabilities

2.4. 22 Earnings and Costs Structure

2.5. 24 Development of the Customer Base

2.6. 26 Cooperation with Transport Sector 12 transcreditbank. Annual Report 2008 Chapter 2. TransCreditBank in 2008 13

2.1. Milestones of the Year 24.03.2008 The Bank of Russia registered a new, 36th, regional branch of TransCreditBank . in Tyumen . January 28.03.2008 11.01.2008 MICEX listed and admitted to trading on its floor TransCreditBank’s series 01 and . The Bank of Russia registered a new, 33rd, regional branch of TransCreditBank . 02 straight coupon bonds . in Kursk . 23.01.2008 April The Bank of Russia registers a new, 34th, regional branch of TransCreditBank in Ufa . 24.01.2008 2.04.2008 Cbonds rating agency puts TransCreditBank on the league table of largest Russian TransCreditBank launches an unsecured and unguaranteed lending program for retail arrangers of corporate bonds, upgrading the Bank from the 19th to the 6th position in . customers who are not employees of its corporate clients .. just one year . 10.04.2008 The Bank of Russia registered TransCreditBank’s additional stock issue which was approved by GSM on February 11, 2008 .. February 21.04.2008 6.02.2008 President of TransCreditBank S .N .. Pushkin, member of the Management Board of . 2,258 .3 mln common shares of TransCreditBank are admitted for trading at MICEX . MAN Nutzfahrzeuge AG P .. Erichreineke and General Director of MAN Russian Motor 11.02.2008 Vehicles LLC P .G .. Nielsson signed a Memorandum of Understanding for 3 years .. Under . The Extraordinary Shareholder Meeting of the Bank passes a decision to place 600 mln this Memorandum, initialed by the Ministry of Transport of Russia, TransCreditBank will additional common registered shares . finance leasing of MAN cargo vehicles to Russian road carriers .. 14.02.2008 24.04.2008 TransCreditBank’s branch is opened in Kemerovo ..The opening ceremony is attended TransCreditBank arranges RUR 2 .5 bn series 02 bond issue of CJSC Zheldoripo-. by regional government officials and senior management of the West-Siberian Railway .. teka at MICEX .. 27.02.2008 TransCreditBank’s Management Board at their meeting discussed results of the May comprehensive banking service project implemented for the West-Siberian Rail ..Under this project the Bank opened over 20 new offices in Western Siberia, including branches in all 7.05.2008 Oblast and Krai centers ..157 entities of the West-Siberian Rail switched their accounts to the The Bank of Russia registered new, 37th, regional branch of TransCreditBank in Orel . Bank, and over 100,000 international bank cards were issued to the railway employees .. 15.05.2008 TransCreditBank’s common shares are included on the list of securities admitted to trading without listing procedures at RTS . March 22–26.05.2008 4.03.2008 TransCreditBank actively participated and supported Transport Week-2008 in Sochi TransCreditBank arranges RUR 3 bn series 01 bond issue of JSC TransContainer . as the Official Bank of the II International Transport Forum “Transport of Russia” and Partner at MICEX .. of the III International Railway Business Forum “Strategic Partnership 1520” .. During the 20.03.2008 Transport Week the Bank executed Long-term Cooperation Agreement with Sovtransavto A new office of TransCreditBank’s branch is opened in Yuzhno-Sakhalinsk .. and PSK Transstroi . 20.03.2008 22.05.2008 The Bank of Russia registered a new, 35th, regional branch of TransCreditBank . Standard&Poor’s changes TransCreditBank’s rating outlook from “Stable” to in Vladivostok . “Positive” .. 14 transcreditbank. Annual Report 2008 Chapter 2. TransCreditBank in 2008 15

June 22.07.2008 Mrs ..Tatiana V ..Paramonova, Advisor to the President of the Russian Railways, was 10.06.2008 elected Chairman of the Board of Directors of TransCreditBank .. The project of direct rail link from terminal to Moscow was officially inaugurated . at Sheremetyevo-2 ..The project comprises a rail terminal and a track, as well as innovative rolling stock ..TransCreditBank was the key financing entity for the project .. August 16.06.2008 1.08.2008 TransCreditBank places its USD 350 mln Eurobond issue maturing in June 2011 with TransCreditBank launches a lending program for individuals against security of Dresdner Kleinwort and JP Morgan acting as arrangers and bookrunners for the deal . commercial (non-residential) realty .. 17.06.2008 3.08.2008 The Board of Directors of the Bank approves the Concept of Development of Corporate TransCreditBank actively participated in and supported the professional holiday Governance till 2010, Corporate Governance Code and Provisions on Information Policies .. celebration of Russian railway workers ..For those 30,000 railway workers who attended the 25.06.2008 celebrations the Bank organized a mobile representative office where they could receive . TransCreditBank’s office is opened in Ufa .. The opening ceremony is attended . a wide range of consultations and free access to the Internet-Bank System .. by government officials of the Republic of Bashkortostan and executives of the Kuiby-. 11.08.2008 shev Rail .. TransCreditBank raised a USD 185 mln syndicated loan ..The loan was extended for 30.06.2008 1 .5 years at LIBOR+1% p .a ..The syndication was completed within the specified timeframe TransCreditBank’s shareholder meeting approved 2007 accounting statements and with 25% oversubscription ..Mandated arrangers and bookrunners were Bayern LB, Citibank, profits distribution ..The meeting also approved the new Board of Directors . Commerzbank Aktiengesellschaft, Credit Suisse, Landesbank Baden-Wurttemberg, London Branch, Landesbank Berlin AG и WestLB AG, London Branch . 14.08.2008 July Pursuant to the decision of the Management Board of State Corporation “Deposit 1.07.2008 Insurance Agency” TransCreditBank was announced the winning bidder of the tender TransCreditBank launches a new lending program for employees of its corporate for appointment of agent banks for payment of insurance indemnity to depositors of JSC customers – Visa and MasterCard cards with up to 50 days grace period .. Interregional Joint-stock Bank for Economic Cooperation “Sakhalin-West” and obtained the status of agent bank of DIA .. 9.07.2008 JSC Russian Railways placed its 3 years’ RUR 20 bn series 08 bond at MICEX with 28.08.2008 TransCreditBank acting as an arranger and the placement agent for the issue .. TransCreditBank’s additional office “Sheremetyevo-2” started to operate in Aeroexpress Terminal . 10.07.2008 TransCreditBank placed its 3 years’ RUR 5 bn series 03 bond at MICEX ..The deal is arranged by TransCreditBank .. September 15.07.2008 4.09.2008 The Bank of Russia registered the Report on Results of TransCreditBank’s Additional The Bank of Russia included TransCreditBank’s Eurobonds into its Lombard list . Stock Issue .. Following the issue the shareholders’ equity of the Bank increased by RUR . 11–13.09.2008 4 .8 bn .. After registration of the issue JSC Russian Railways with a nearly 55% interest . The Management Board of TransCreditBank had their enlarged meeting with partici-. became the largest shareholder of the Bank, followed by NGPF Blagosostoyanie with . pation of senior managers of regional entities in St-Petersburg to discuss organization of a nearly 20% interest .. services for companies from all sectors of the transport industry, project finance for corpo-. 17.07.2008 rate clients, expansion of the service slate, improvement of quality of services to retail Moody's Investors Service confirmed TransCreditBank’s long-term rating for foreign customers and active regional promotion of Internet-Bank System .. currency deposits at «Ba1», and short-term rating at – «Not Prime» with financial stability 25.09.2008 rating at «D-» ..Rating outlook is “stable” ..The Agency also confirmed long-term rating of the JSC Central Moscow Depository took the securities register of TransCreditBank and Bank’s priority bonds at «Ba1» .. started to provide service to shareholders of the Bank .. 16 transcreditbank. Annual Report 2008 Chapter 2. TransCreditBank in 2008 17

October 16.12.2008 TransCreditBank paid out RUR 109 .05 mln and RUR 108 .9 mln as income, respectively, 15.10.2008 on the 3rd coupon of series 01 and series 02 straight documentary coupon bonds .. TransCreditBank is included on the list of credit institutions which can issue surety . to secure loans from the Bank of Russia .. 26.12.2008 Over the year the number of users of TransCreditBank’s Internet-Bank System doubled 31.10.2008 and reached 30,000 .. TransCreditBank received from Non-government Pension Fund “Blagosostoyanie” . 26.12.2008 a RUR 1 .0 bn subordinated loan for 10 years which will be taken into account for the . Extraordinary Shareholder Meeting of TransCreditBank decided to pay interim divi-. purpose of calculation of shareholders’ equity .. dend on common stock based on 9 months’ performance . 29.12.2008 November The Bank of Russia registered a new, 39th, regional branch of TransCreditBank . 1.11.2008 in Sochi . TransCreditBank opened a new Additional Office “Kurskoe Division” in Kursk railway terminal, thus bringing the total number of TransCreditBank’s clients’ offices operating . in Moscow to 10 .. 2.2. Key Financial Results 1.11.2008 In 2008 TransCreditBank proceeded with implementations of its Medium-term The Bank of Russia registered a new, 38th, regional branch of TransCreditBank . Development Strategy with a view of entering by 2011 the top league of Russian banks by in Kazan . key performance indicators ..In spite of the economic meltdown and adverse environment in the financial and banking sector which prevailed at the end of the year, the Bank made 6.11.2008 a major step in this direction bolstering its financial results while fully performing clients’ Minister of Transportation of the Russian Federation I .E ..Levitin issued an honorable transactions in a timely manner, successfully carrying out its key development programs and mention to President of the Bank S .N .. Pushkin for active participation in modernization . maintaining a required liquidity level . and development of Russia’s transport system . Based on 2008*: 7.11.2008 • net assets increased to RUR 235 .2 bn, stepping up by RUR 115 .9 bn or 98% y-o-y; Trial operations of the system for ticket sales through self-service transaction termi-. • assets increased by RUR 244 .3 bn or by 119% y-o-y, reaching RUR 449 .5 bn; nals started at Leningrad Terminal in Moscow .. The system was jointly developed by . • shareholders’ equity, taking into account the subordinated deposit taken by the Bank and JSC Russian Railways, VNIIZhT, CJSC “Automatic Retail System”, TransInfoSet and . events after the reporting date, increased by 62%, now amounting to RUR 21 .4 bn; CJSC TransCreditCard .. • the Bank booked pre-tax profits of RUR 3 .90 bn, 14% up from 2007 figure of RUR 3 .43 bn; 14.11.2008 • after-tax profits amounted to RUR 2 .47 bn (RUR 2 .54 bn in 2007) . JSC Russian Railways, TransCreditBank and a number of other major Russian banks TransCreditBank’s successful operations and growth of its financial indicators viewed signed the Package of Initiatives intended to support Russia’s real sector of economy .. against the backdrop of lack-lustre performance of many market players bolstered the 19.11.2008 Bank’s positions in ratings and rankings produced by Russian agencies ...Based on 2008 JSC Russian Railways placed at MICEX its 5 years’ RUR 15 bn series 09 bond with performance (sources: Profile magazine and RosBusinessConsulting) the Bank ranked: TransCredtiBank acting as an arranger .. • #1 in reliability rating of Top100 Russian banks; • #15 in terms of net assets (#25 in 2007); 26.11.2008 • #21 in terms of pre-tax profits (#23 in 2007); JSC Russian Railways placed at MICEX its 7 years’ RUR 15 bn series 11 bond with • #25 in terms of shareholders’ equity (#30 in 2007); TransCreditBank acting as an arranger . • #22 in terms of aggregated loan portfolio (#27 in 2007); • #12 in terms of balances of corporate customers’ accounts (#21 in 2007); December • #17 in terms of retail loan portfolio (#15 in 2007) . 11.12.2008 MICEX listed and admitted for trading TransCreditBank’s series 03 straight . * RAS figures of the Main Bank of TransCreditBank are used here and hereafter in the main body of text of the Annual coupon bonds . Report brochure . 18 transcreditbank. Annual Report 2008 Chapter 2. TransCreditBank in 2008 19

Net assets, RUR bn 235.2 Outstanding loans to customers, RUR bn 152.0

All customers Individuals

85.7 119.3

54.1 50.6 71.7

50.2 35.3 34.8

17.2 4.6

2005 2006 2007 2008 2005 2006 2007 2008

Shareholders’ equity, RUR bn 21.4 Balances of customers’ accounts, RUR bn 164.9

All customers Individuals

13.2 88.3

7.1 57.5

4.6 39.8

23.0 18.2 7.7 10.1

2005 2006 2007 2008 2005 2006 2007 2008 20 transcreditbank. Annual Report 2008 Chapter 2. TransCreditBank in 2008 21

Pre-tax profits, RUR bn 3.90 ROA, ROE % 53.5

3.43 ROA ROE 44.4

2.81

28.5

23.3

0.99

3.3 1.8 2.7 1.4

2005 2006 2007 2008 2005 2006 2007 2008

After-tax profits, RUR bn 2.54 2.3. Dynamics of Assets and Liabilities 2.47 A major increase of volumes of operations of the Bank in 2008 resulted in growth of its assets and liabilities, while diversification of the Bank’s business led to changing structure of 2.03 the same . Customers’ funds formed the larger part (approx .. 70%) of the Bank’s net liabilities in 2008, as well in 2007 .. In 2008 the total amount of clients’ funds placed with the Bank increased by RUR 76 .6 bn or by 87%, including RUR 4 .8 bn increase of retail deposits ..Such important growth of this indicator is driven by the Bank’s active expansion in the regions and high credibility it enjoys with its clients, bolstering inflow of new corporate and retail customers even after commencement of economic and financial turmoil .. The equity portion (net of the subordinated loan) was slightly up y-o-y, i .e ..6 .2% vs .. 6 .1% in 2007 ...The share of borrowings from credit institution declined from 15 .7% to 7 .7% .. 0.79 At 64 .6% outstanding loans to customers constitute the major part of the structure of TransCreditBank’s net assets at the end of 2008 ..Outstanding loans were up by RUR 66 .3 bn (77%) amounting to RUR 152 .0 bn as of January 1, 2009 ..Among other factors this growth resulted from RUR 15 .8 bn increase of the retail loan portfolio (1 .5 times up from 2007) .. Securities investments (government debt and high-yielding corporate bonds and equities) at RUR 17 .6 bn in 2008 remained flat vs ..2007 level ..Consequently, the share of such investments in the net assets’ structure shrank from 13 .7% to 7% ..The share of balances 2005 2006 2007 2008 of accounts with other banks and other assets remained practically unchanged . 22 transcreditbank. Annual Report 2008 Chapter 2. TransCreditBank in 2008 23

Liabilities structure, % Assets structure, %

2008 2008 5 4

4

3

3

1. Loans – 64.6%

1. Amounts due to customers – 70.1% 2. Securities investments – 7.5%

2. Amounts due to credit institutions – 7.7% 3. Cash and accounts with the Bank

3. Total equity – 6.2% of Russia – 25.2% 2 4. Other liabilities – 16.0% 4. Accounts with banks – 0.8%

5. Other assets – 1.9%

2

1 1

2007 2007 4 5 4 3 3

2

2

1. Loans – 71.8%

2. Securities investments – 13.7% 1. Amounts due to customers – 74.1% 3. Cash and accounts with the Bank 2. Amounts due to credit institutions – 15.7% of Russia – 11.7%

3. Total equity – 6.1% 4. Accounts with banks – 0.8%

4. Other liabilities – 4.1% 5. Other assets – 1.9%

1 1

2.4. Earnings and Costs Structure and retail customers accounted for the bulk of such income ..Notwithstanding the difficult In 2008 TransCreditBank maintained a high pace of growth both of its interest and macroeconomic environment, commission income of the Bank was up by 16 .4% ..This growth non-interest income ..Net interest income made the biggest contribution to the profits gene-. was achieved by expansion of the regional network, increasing volumes, improvement of rated by the Bank (72,2%) .. Notably, interest income from loans extended to corporate quality and a wider range of services offered to all categories of clients ... 24 transcreditbank. Annual Report 2008 Chapter 2. TransCreditBank in 2008 25

2.5. Development of the Customer Base The category of loyal partners, who have long-term relations of trust with TransCredit-. Bank that were progressing in 2008, includes Transmashholding Group – the largest private In 2008 TransCreditBank successfully addressed the task of maintaining a stable pace company in the railway engineering sector in Russia – and JSC NPK Uralwagonzavod – . of expansion of its corporate customer base . a leader in design and production of world-class engineering products ...The Bank did quite Sound business reputation and high ratings of the Bank were underpinned by appro-. a lot of business with such corporate customers as JSC New Transportation Company, priate quality of service ..Thanks to its wide product slate, attractive tariff policies and highly- BaltTransService LLC, CJSC PO Spetstsisterny, CJSC SIBUR-trans, JSC Russian Corporation skilled personnel TransCreditBank is able to offer its clients a tailored approach taking into of Transport Engineering, JSC Belon, R-Style Group of Companies, JSC Autorepair Systems, account their industry affiliation and specifics of their business processes ..As a result the Bank both engaged new clients and strengthened mutually beneficial cooperation with JSC Moscow Shipbuilding Works, Ergofort Group, OSAO Ingosstrakh, JSC Emergency existing clientele . Insurance Company, JSC Ingosstrakh-Life, NGPF Ingoosstrakh, etc . Over the past year the number of corporate customers of TransCreditBank increased Throughout the reporting year TransCreditBank actively cooperated with power sector by 4,700, more than 24% y-o-y vs ..2007 . companies .. . The list of new clients includes such big names as JSC Interregional Grid . Total amount of corporate customers’ funds placed with the Bank increased by RUR Company of Siberia, JSC Interregional Grid Company of the Central and Volga Regions, JSC 53 .1 bn (111%) in 2008 reaching RUR 100 .9 bn ...The huge growth was due to expansion . Kuzbassenergo, companies from JSC Bashkirenergo Holding ..The Bank promoted partner-. of the customers’ base accompanied by increasing balances of existing accounts during . ship relations with utilities from JSC RAO ES East Holding, such as JSC Kamchatskenergo, the year . JSC Sakhalinenergo and JSC Yakutskenergo, JSC Far-Eastern Energy Company, JSC Development of relations with companies of the real sector of economy was a key priority Far-Eastern Generating Company .. The most important investment projects in this sector for the Bank ..Indeed, along with expansion of cooperation with existing customers, Trans-. financed by TransCreditBank were conversion to gas at Nikolaev heat power plant (JSC . CreditBank attracted a number of new clients who hold important positions in manufacturing Far-Eastern Generating Company) and financing of investment programs of JSC Interre-. sectors of the national economy . gional Grid Company of the Central and Volga Regions .

Amounts due to corporate customers, RUR bn 100.9 Number of corporate clients of TransCreditBank 24,202

19,470

13,925 47.8 10,398 33.9

25.8

2005 2006 2007 2008 2005 2006 2007 2008 26 transcreditbank. Annual Report 2008 Chapter 2. TransCreditBank in 2008 27

In 2008 TransCreditBank emerged as the winning bidder at a bankers’ competition for In commercial aviation segment TransCreditBank throughout the reporting year maintaining investment accounts of JSC Far-Easter Generating Company ..The Company’s successfully cooperated with major Russian airlines (including VIM-avia, Aeroflot-Nord, investment program was financed from special accounts opened with the Bank ... Kavminvodyavia), general aviation carriers and a number of airports, including Sheremetyevo In the reporting year TransCreditBank continued its successful cooperation with International Airport, Irkutsk Airport, FCP Airports of the North ...In 2008 the Bank participated companies from oil and gas and petrochemical industries ..The Bank was granted the status in financing reconstruction of the domestic terminal in Irkutsk airport that allowed to provide of Authorized Bank for servicing cash flows of Gazprom and its subsidiaries . its timely putting into operation in April of this year .

In marine and river transportation segment TransCreditBank stepped up coopera-. tion with largest state-owned enterprises in this sector, including FGUP Rosmorport, 2.6. Cooperation with Transport Sector representing state interests in all marine ports of Russia and FGUP Moscow Channel which Companies from various branches of the transport industry and transport infra-. takes care of navigation on the Moscow River and Moscow Channel, as well as of supply of structure as well as their employees remain the most important target customer group tap water to Moscow ..Besides, the Bank generated numerous accounts among passenger for TransCreditBank .. Throughout 2008 the Bank was pro-active in these segments of its and cargo shippers, including leaders of the water transport industry, such as Moscow . customer base . River Shipping Company and Sovmortrans, as well as the largest research institutions in . this sector, such as JSC Giprorechtrans . In the rail industry the Bank provided its services to 17 railway divisions of Russia, practically to all enterprises and units of JSC Russian Railways ..In 2008 TransCreditBank In the transport construction sector the Bank financed a number of infrastructure implemented large-scale regional expansion projects on the territories covered by subsidia-. projects of primary importance for the national economy ..The Bank’s proprietary methods ries of JSC Russian Railways (Sverdlovsk, Far East, Moscow, October, Gorky, Kuibyshev, of banking services and financing of companies in this sector which provide for end-to-end North-Caucasus, West-Siberia), which allowed to further concentrate cash flows of railway monitoring of their operations proved essential in this line of business .. transport companies in the united railway industry settlement system ..Several new companies The following projects stand out among those financed by TransCreditBank: which were divested from JSC Russian Railways in the course of reform of the industry • the road construction segment – national motorway M-3 Ukraine, M-4 Don, M-20 . switched their accounts to the Bank .. St-Petersburg-Kiev, M-5 Urals, M-1 Belarus, Amur-Chita-Khabarovsk and Vyatka motor-. TransCreditBank offered a full range of services to railway enterprises, including . ways, Circular Motorway in St-Petersburg, sections of the Fourth Transport Ring of all types of loans, investment-banking services, structured and trade finance operations, Moscow, city arteries of Moscow and St-Petersburg, regional and local motor roads in financial advisory, etc ..A service of railway shipments by forwarding companies and ope-. Moscow, Tyumen, Samara, Leningrad and some other Oblasts; rators against TransCreditBank’s guarantee instead of prepayment was developed and • construction of marine and inland waters infrastructure – Ust-Luga sea port, Olya sea port, successfully implemented in the interests of JSC Russian Railways and its partners .. Kochetov waterworks facility, Rybinsk canal lock; TransCreditBank participated in joint projects of JSC Russian Railways and its foreign • construction of commercial aviation facilities – reconstruction and development of major partners intended to modernize and build railways in other countries, e .g ..electrification of . airports of the country, including international airports Sheremetyevo and Vnukovo a section of the railway in Iran, development of commuter rail service in Algeria, etc . in Moscow, Pulkovo (St-Petersburg), Adler (Sochi), airports in Irkutsk, Gelendzhik, Nizhnevartovsk, Ufa and other cities . In the road transportation segment the program of Fleet Modernization for Russian Road Carriers was further developed last year .. Under this program TransCreditLeasing, . a subsidiary of the Bank, leases out modern, fuel-efficient and environment-friendly vehicles of leading international manufacturers at a flat low price .. In 2008 the company made . a contract for delivery of 2,000 vehicles and semi-trailers ..The program covered both major road transporters of the country, like, for example, GUP Mosavtotrans, Sovtransavto Group of Companies, D-Trans Group of Companies, and numerous medium- and small-size (with . a fleet of less than 10 road trains) operators ..During the year the leasing company expanded . its range of offered vehicles, as well as the list of semi-trailers for such vehicles ...Implemen-. tation of this program improved competitiveness of Russian carriers in the international market and reduced shipping costs for cargo owners . 3. Bank for Its Corporate Clients

3.1. 30 Services for Corporate Clients

3.2. 31 Lending to Corporate Clients

3.3. 38 Project Finance

3.4. 39 International Transactions and Correspondent Relations

3.5. 40 Financial Market Transactions

3.6. 41 Investment Banking Services

3.7. 44 High-tech Banking Services 30 transcreditbank. Annual Report 2008 Chapter 3. Bank for Its Corporate Clients 31

3.1. Services for Corporate Clients Structure corporate term deposits by sectors as of January 1, 2009, % In the corporate business segment in 2008 TransCreditBank focused on expansion and improvement of its product range, including offering of banking products and services

tailored to business specifics of separate client groups and companies .

In 2008 the Bank offered to its corporate customers a variety of services and tools,

including cash and settlement services, lending, deposits, the Bank’s promissory notes, 5 leasing and factoring (through its subsidiaries – TransCreditLeasing LLC and CJSC Trans-.

CreditFactoring), foreign trade servicing, services in the securities market, etc . 1

TransCreditBank’s reliability, active communications with customers and reasonable 1. Transport – 38%

2. Financial, investment and asset- marketing policies resulted in visible growth of balances of corporate customers accounts .. management companies – 18% Total amount of term funds taken in deposits from corporate clientele more than doubled 3. Insurance companies – 9% y-o-y .. The term liabilities portfolio was further diversified by sectors of economy .. Indeed, 4. Power sector companies – 6% funding raised from transport sector companies was up 4 times, from fuel and energy 5. Other corporate clients – 29%

companies – by 2 .4 times, from financial, investment and asset-management companies – 4 by 2 .4 times, from insurance companies – by 1 .5 times .

The list of new customers placing their funds in deposits with TransCreditBank includes

Aeroexpress LLC, UC Bank of Moscow, MAIL .RU LLC, Energopromsbyt LLC, JSC TGC

3 #14, JSC NIKoil Registrar, UC Uralsib, CJSC TRINFICO, CJSC UC RVM-Capital ..In 2008 .

the Bank executed General Agreements for participation in deposit auctions arranged . 2

by State Corporation Foundation for Assistance to Reform of Housing and Utility Sector . Term deposits of corporate customers, RUR bn 65.8 and by the Finance Committee of St-Petersburg . By the end of 2008 clients’ factoring portfolio was up by RUR 3 .9 bn (23% y-o-y increase), while payments under existing lease contracts amounted to RUR 21 .2 bn (133% y-o-y increase) . Joint efforts of customer relations units from the corporate and retail streams allowed . to bolster volumes of payroll projects realized for corporate clients of the Bank ..TransCredit-. Bank continued to carry out dedicated retail lending programs for such customers ..

29.3 3.2. Lending to Corporate Clients Size and Structure of the Loan Portfolio 22.0 Total outstanding debt of corporate entities to TransCreditBank as of January 1, 2009 amounted to nearly RUR 82 .2 bn 83% y-o-y ..In absolute terms the corporate loan portfolio 12.6 increased by RUR 37 .2 in the reporting year (by RUR 9 .5 bn in 2007) ..Notably, the most steep growth was recorded in the first half of 2008 (41% rate of growth in the first half of . the year, and 29 .6% – in the second half) ..The size of the corporate loan portfolio reached . its peak at RUR 89 .0 bn after 9 months of 2008 ..In Q4 lending volumes somewhat declined . as fallout of economic turmoil both in Russia and globally which resulted in shrinking 2005 2006 2007 2008 production and trade volumes of clients . 32 transcreditbank. Annual Report 2008 Chapter 3. Bank for Its Corporate Clients 33

Growth of corporate lending volumes during first 9 months of 2008 was driven. Loans by sectors, % by expanding corporate customers’ base, with new accounts being generated primarily in the real sector of economy and offered comprehensive banking services, as well as by 2 1 1 growing number of leasing programs and factoring operations financed by the Bank .. 0 1 1 1 In 2008 TransCreditBank offered the following credit products: 9

• term loans; 8 1. Trade – 17%

2. Transport engineering – 16% • credit facilities (revolving and non-revolving); 3. Leasing companies – 14% • overdrafts; 7 4. Transport and transport companies – 11%

• credits with cross-border funding; 5. Financial companies – 10%

• bridge-loans; 6. Power sectors companies – 10%

7. Construction and development – 6% • leasing and factoring transactions . 2 8. Gas, oil, coal and chemical Loans to finance leasing transactions as well as loans funded by western banks and industries – 4.0% 6 advanced under projects with foreign ECAs were the principal tools to finance long-term 9. Capital goods production (excepting

transport engineering) – 2% and resource-intensive projects of the Bank’s clients .. 10. Light and food industries – 1.3% While the loan portfolio steeply grew in absolute terms, sector-wise its structure 11. Agriculture – 1.7% remained unchanged in 2008, the only exception being larger financing of the trans-. 12. Other industries – 7%

port industry which is a priority for the Bank ..The share of loans to transport companies 5 increased from 9 .5% to 11% .. Also there was a marked increase in the proportion of 3

loans to capital goods producers, in particular to transport engineering companies (more . 4

than 4% up) ..Traditionally, loans issued to power sector companies and to wholesalers . at nearly 10% and nearly 17%, respectively, accounted for major shares of the portfolio . Corporate loans, RUR bn 82.2 Last year the share of leasing transactions on average amounted to 13-15% of total . loans issued .. As of January 2009, outstanding loans issued to finance leasing projects

Structure of lease financing loan portfolio Amount, Share 45.0 RUR bn in portfolio, % Leasing of rolling stock 5.0 43.9 35.5 Including for JSC Russian Railways 1.7 34.0 30.2 Including for independent carriers 3.3 66.0 Leasing of trucks and semi-trailers under the program endorsed by the Ministry of Transport of the Russian Federation 2.8 24.6 Leasing of processing equipment 1.8 15.8 Including for JSC Russian Railways 0.7 39 Including for independent carriers 1.1 61 Leasing of construction equipment 0.7 6.1 2005 2006 2007 2008 Other matter of leasing 1.1 9.6 34 transcreditbank. Annual Report 2008 Chapter 3. Bank for Its Corporate Clients 35

amounted to nearly RUR 11 .4 bn .. In 2008 the Bank actively implemented a program . Size of Loans intended to finance acquisition by leasing companies of road vehicles produced by MAN The corporate loan portfolio in 2008 consisted of loans with principal in RUR 1 .5 ..mln – . Nutzfahrzeuge AG for further leasing out of the same to Russian companies – members . RUR 2 .5 bn range .. of the Association of International Road Carriers ..The program which was launched in Q3 . As of January 1, 2009 exposure to 10 largest borrowers (groups of related borrowers) of 2007 was attested by the Ministry of Transport of Russia ..The share of loans issued under amounted to RUR 28 .3bn or 34 .4% of the total corporate loan portfolio .. Thus borrowers’ this program increased from 10% to 24% in the aggregated loan portfolio in 2008 .. concentration has largely remained unchanged (largest borrowers accounting for about The structure of portfolio largely remained unchanged in terms of matter of leasing .. 28 .8% of the portfolio in early 2008) . Importantly, the share of leasing of rolling stock for JSC Russian Railways and its related In 2008 the Bank’s largest borrowers were businesses of the real sector of economy entities in the Bank’s leasing portfolio shrank from 42% at the beginning of the year to 15% and leasing companies: at year end ..At the same time, the share of financing of leasing contracts of rolling stock for independent transport companies increased by a significant margin .. Acquisition of • subsidiaries of JSC Russian Railways (wagon-repair plants, CJSC Russian Troika, equipment for lease out to power sector companies traditionally accounted for a big share Aeroexpress LLC, CJSC Transtelecom Company, etc .); of lease financing .. • JSC NPK Uralwagonzavod; • JSC Tver Wagonbuilding Plant; • CJSC Urals Large Heavy Cargo Equipment – Uralwagonzavod; Tenor • JSC Ust-Luga Company – the company providing for construction and operation of the maritime merchant port in Leningrad Oblast; Longer tenor of corporate loans was a prevailing trend in 2008 ..As of January 1, 2009, longer than 365 days’ loans accounted for the bulk of the portfolio – 50% of total portfolio . • Major Russian power sector companies (JSC DGC; JSC Kamchatskenergo, JSC vs ..41 % as of January 1, 2008 ..Concurrently the share of loans maturing in 91-180 days Interregional Grid Company of the Central and Volga Regions, JSC Interregional Grid shrank from 16 % to 11%, and the most steep reduction was recorded for loans maturing Company of Siberia, JSC Yakutskenergo, JSC Sakhalinenergo, JSC Interregional Grid in 31-90 days – down to 5 .5% as of January 1, 2009 from 20% as of January 1, 2008 ... Company of the Center); The increasing share of longer-dated loans is explained by the growing portfolio of loans • FinanceBusinessGroup LLC – a company leasing out a wide range of rolling stock, issued to finance leasing as well as infrastructure projects . construction equipment and road vehicles (including MAN trucks); • FinancePromMarket LLC – a company leasing out various equipment, construction vehicles and road vehicles (including MAN trucks); • CJSC TransCreditFactoring – a specialized factoring company . Loan portfolio structure by tenor, %

1 2 Currencies and Rates

In terms of currencies, the loan portfolio structure essentially remained unchanged 3

throughout the first 9 months of 2008, with RUR loans predominating .. By mid-2008 RUR

loans accounted for about 90% of the total portfolio (85% as of January 1, 2008), largely

determined by the structure of the Bank’s liabilities and its borrowers’ needs ..

Currency-wise in Q4 the structure of the portfolio changed reflecting changes in .

1. 1–30 days – 1.5% the liabilities’ base of the Bank ..As of January 1, 2009 the share of RUR loans amounted

2. 31–90 days – 5.5% already to 70 .6%, while the remaining loans were issued in USD or Euro .. It is important . 3. 91–180 days – 11% 5 to note that increase of the share of hard currency loans was also due to growing number . 4. 181–365 days – 32%

5. Above 365 days – 50% of transactions funded by resources received from western banks .. A significant share of

such loans was extended to finance acquisition of foreign-made road vehicles ..The share

of loans in common European currency by end of 2008 amounted to 5 .0% vs ..3 .6% in the

beginning of the year . 4 Average lending rates applied by the Bank both for RUR and currency-denominated

facilities displayed a reducing trend during the first three quarters of the reporting year,

however, in Q4 an opposite trend became apparent reflecting the general situation in .

36 transcreditbank. Annual Report 2008 Chapter 3. Bank for Its Corporate Clients 37

Loan portfolio structure by currencies, % Quality of Loan Portfolio While maintaining a high pace of growth of its loan portfolio, TransCreditBank in 2008 strengthened control over the quality of its loans in a very efficient manner ..Delinquent loans 3 4 at 0 .33% accounted for a minor share of the portfolio in early January 2009, which is below

the last year’s figure of 0 .34% ..Provisions were created for all overdue loans to match the risk

level, and the Bank actively chased all delinquent customers ..

2

Security

The Bank’s policy of rigorous screening of its borrowers and of requiring security for .

1. RUR – 70.6% its loans is an important factor underpinning the quality of its portfolio ..To cover credit risks

2. USD – 24.3% the Bank maintained its established priorities in selection of collaterals .. 3. Euro – 5.0%

4. CHF – 0.1% In 2008 the Bank accepted as security: pledge/charge of liquid securities and other

financial assets, real property, inventories, equipment, property rights, assignment of claims

under contracts, as well as surety issued by solvent companies serviced by the Bank ..

Structure of corporate loan portfolio by type of security, % 1

Type of security 01.01.2009 01.01.2008

Pledge of assets, 21.3% 29.6% Including with a surety 15.3% 8.6% Pledge of claims 2.3% 9.5% Pledge of real estate, 10.2% 7.2% Including with a surety 5.2% 3.1% Russia’s money market .. As fallout of crisis-driven changes in the global economy and . Pledge of securities 10.2% 8.3% financial system, Russian banks, faced with liquidity squeeze and several increases of the Surety issued by third parties 17.7% 10.7% refinancing rate by the Bank of Russia, were forced to raise their lending rates . Blank loans 38.3% 34.7% Factoring In TransCreditBank continued to finance factoring operations by crediting transactions Lending Geography of a dedicated partner company – CJSC TransCreditFactoring . In 2008 the Bank continued to develop actively its regional network and to universalize The amount of financing of factoring transactions during the year stepped up by services offered by its branches, including lending, which proved instrumental for geographic nearly 50% – from RUR 1 .6 bn to RUR 2 .3 bn .. The portfolio of loans extended to CJSC and sector-wise diversification of its loan portfolio and, at the end of the day, for reduction . TransCreditFactoring (as well as aggregated portfolio of the Bank) reached its peak of RUR of credit risk levels . 2 .9 bn at the end of Q3 ..In Q4, when negative trends became apparent in operating and By the end of the reporting year the share of branches in the aggregated loan portfolio financial performance of a number of factoring customers, funding limits for such customers of the Bank amounted to 32 .7% vs ..40 .0% a year ago ..Yekaterinburg, Tver, St-Petersburg were reduced or closed .. and Saratov branches were the most active lenders ..The new branches in Kemerovo and Sector-wise, wholesale companies dealing with largest retail networks of the country Khabarovsk started to make a perceptible contribution to the aggregated loan portfolio of the prevailed in the factoring customer base in 2008 .. The Bank expanded the footprint . Bank, with their share exceeding 1% . of its factoring business, with this service now provided to clients operating in Moscow, . Uniform standards were introduced and are maintained in all branches of the Bank .. St-Petersburg, Omsk, Saratov, Astrakhan, Tver, Novosibirsk and other cities of Russia .. The Main Office exercises ongoing control and monitoring of lending transactions of Average debtors’ payment period for assigned claims amounted to 67 calendar days .. regional entities .. 38 transcreditbank. Annual Report 2008 Chapter 3. Bank for Its Corporate Clients 39

Distribution of the corporate loan portfolio by regions, % In 2008 TransCreditBank offered financial advisory services to participants of invest-. ment projects, which facilitated raising funds from external sources for them .. During the . 14 13 year the Bank made 8 financial advisory contracts with originators of investment projects . 1 12 0 1 1 9 8

7 1. Moscow – 67.3%

6 2. Yekaterinburg – 6.3% 3.4. International Transactions 3. Tver – 3.8 5 4. St-Petersburg – 2.9% and Correspondent Relations

4 5. Saratov – 2.9% In 2008 TransCreditBank proceeded with actively building up cooperation with major 6. Novosibirsk – 2.2%

3 7. Khabarovsk – 1.8% international banks and financial institutions, diversifying its product range in the sphere of

8. N.Novgorod – 1.7% trade finance and international finance, broadening its investor base .

9. Penza – 1.6% In the reporting year, the aggregated amount of lines established on TransCreditBank 10. Kemerovo – 1.4% 2 by premier foreign financial institutions, taking into account lending limits guaranteed by 11. Yaroslavl – 1.3%

12. Novokuznetsk – 1.0% ECAs, exceeded USD 950 mln ..

13. Krasnoyarsk – 1.0% TransCreditBank rapidly stepped up its short- and long-term trade finance operations ..

14. Other branches – 4.8% 1 In particular, in 2008 the Ministry of Transport of Russia continued with its program of finan-.

cing contracts of leasing companies with international truck manufacturers – MAN

Nutzfahrzeuge AG of Germany and Lohr Indusrtrie of France ..Under this program Trans-.

CreditBank raised long-term loans from international banks under ECA cover to finance

3.3. Project Finance In 2008 TransCreditBank offered a new service to its corporate clientele – project Trade and export finance limits established on TransCreditBank, USD mln finance ..Rapidly developing medium-sized businesses were selected as the target segment 950 of its customer base .. In 2008 the Bank considered over 60 applications for project finance from various industries and regions of Russia ..Following a rigorous analysis and upon approval by the Total, including operations guaranteed by ECAs Including trade finance Credit Committee the Bank advanced long-term funding for 4 projects ..In fact, open credit 750 limits amounted to RUR 5 7. bn by the end of the year ..

600 Project finance deals implemented by TransCreditBank in 2008 550 500 2008 2008 2008 2008

380 350 Rosregionproect CJSC Check-SU VK JSC Transport Engineering Development LLC Joint Catering network LLC 250 Development of the Usinskoye Relocation of the freight yard Creation of an integrated Creation of a catering network manganese ore field from downtown St-Petersburg wagon-building company for high-speed trains and establishment of metal works to the industrial site Shushary-3, redevelopment of the urban territory

Debt financing Combined financing Combined financing Combined financing RUR 1 584 000 000 RUR 1 200 000 000 RUR 1 400 000 000 RUR 483 000 000

2005 2006 2007 2008 40 transcreditbank. Annual Report 2008 Chapter 3. Bank for Its Corporate Clients 41

. . deliveries 806 MAN truck tractors, 273 Kogel semi-trailers and 100 Lohr auto trailers for . their cooperation with the Bank most of counterparty banks increased their limits opened . the total amount in excess of EUR56 mln .. for it, thus confirming their assessment of the Bank as a highly reliable and professional The Bank’s solid business reputation, its close business ties with JSC Russian Railways partner ..On the average limits increased 1 .5 times, providing for an adequate increase of and rapid growth of its financial indicators were the key factors allowing it to maintain stable earnings from interbank business . partnership relations with its foreign counterparties and to offer to its clients trade financing with required maturities and at moderate rates in spite of the global economic meltdown . Securities and liquidity crunch prevailing in Q4 of 2008 .. In 2008 the Bank built up its securities business, expanding its footprint in equity and In March 2008 the Irish Stock Exchange registered USD 2 bn Eurobond program . foreign currency debt instruments .. of the Bank .. Under this Program in June 2008 TransCreditBank successfully placed . Its earnings from REPO transactions were up 67% y-o-y ..Volumes of such transactions a USD 350 mln Eurobond at 9% p .a maturing in June 2011 .. JP Morgan and Dresdner . were subject to significant fluctuations during the year ..Thus in Q4, with the financial crisis Kleinwort acted as arrangers and bookrunners of the issue ..This Eurobond was included in . cutting deeper into the economy, the Bank significantly scaled down its REPO and equity the list of securities accepted by the Bank of Russia as collateral for direct REPO transaction . operations to reduce its risks ..As of early 2009 the Bank didn’t have any unsettled REPOs . in the OTC market .. or outstanding claims under any other securities transactions in its portfolio . In August 2008 TransCreditBank raised a 1 .5 years’ USD 185 mln syndicated facility TransCreditBank’s equities portfolio in 2008 demonstrated negative returns, however, from international financial institutions at LIBOR+1% .. The syndication was lead-arranged . generally performing much better than market indices ..Overall, the aggregated debt portfolio by Bayerische Landesbank, CJSC . . Citibank, Commerzbank Aktiengesellschaft, Credit. increased by 36% y-o-y, amounting to RUR 15 .7 bn ..Indeed, diversification of the portfolio Suisse, Landesbank Baden-Wurttemberg, Landesbank Berlin AG and WestLB AG .. The and reduction of maturities allowed to maintain return at the same level, notwithstanding the syndicate also included DZ Bank AG, ABN AMRO Bank N .V ., GarantiBank International N .V ., general market fall . CJSC Banca Intesa, UBI Banca International S .A . In 2008 TransCreditBank expanded its correspondent network of nostro-accounts . in premier foreign banks ..To optimize GBP settlements, TransCreditBank opened an account 3.6. Investment Banking Services with Barclays Bank Plc ..An extensive correspondent network of nostro-accounts in foreign In 2008 the RUR bond market was the key one for the Bank’s investment banking banks coupled with vast experience of cross-border and domestic settlements allowed . business ..Corporate finance was another area of active operations . the Bank to expand its correspondent network of loro-accounts, totaling 128 in late 2008 .. The Bank consolidated its positions as a market leader in arrangement and placement By the end of the year TransCreditBank had over 320 domestic counterparty-banks in . of RUR bonds against tough competition ..TransCreditBank arranged 13 corporate and bank the money market, with the amount of limits established for the Bank increasing 1 .3 times. bond issues, which allowed it to maintain its 6th position for the second year in a row in the to reach USD 1 .7 bn . ranking table of bond arrangers produced by Cbonds agency, with RUR 27 .1 bn quota and 5% market share (4 .3% in 2007) . Importantly, 2/3 of the issuers are repeat customers of TransCreditBank ..In particular, 3.5. Financial Market Transactions the Bank in 2008 acted as an arranger of JSC Russian Railways’ bond issues for the total Brokerage Services amount of RUR 50 bn ..Its own RUR 5 bn series 03 bond issue became a landmark event . for TransCreditBank in 2008 . Improving quality of brokerage services provided by the Bank in the securities market In the reporting year the Bank’s major corporate clients in the investment banking seg-. resulted in a steep increase of the volume of clients’ transactions in 2008 ..Growing volumes . ment were transport companies, developers and construction companies, as well as banks of this business pushed its brokerage fees 67% and 32 .5% up y-o-y in Q3 and Q4, respecti-. and financial institutions ..A lot of projects were implemented for Russian Railways’ Group .. vely, in spite of a steep slide of stock prices in the second half of 2008 ..All in all, TransCredit-. The Bank as an underwriter participated in 20 bond issues in excess of RUR 18 .9 bn . Bank generated 45% more revenue from this business than a year ago . in 2008 (1 .5 times up y-o-y) .. In 2008 TransCreditBank continued to arrange exercise of put options and placement Foreign Exchange Operations of secondary bond issues ..Given the onset of financial crisis these services proved to be in In 2008 volumes of TransCreditBank’s transactions at Forex and interbank markets high demand ..As usual, the Bank acted as a paying agent for bond issues which it arranged, were 2 and 2 .5 times up y-o-y, respectively reaching their historic highs ..The Bank’s growing including for all bond issues of Russian Railways . activity in the domestic banking market consolidated its market-makings position in USD/ The Bank continued working on its research review “Railway Transport and Railway RUR transactions and interbank lending for resident banks ..TransCreditBank expanded its . Engineering in the Bond Market” .. In 2008 a special issue was published, dedicated to position in the forward market becoming one of the most active players there ..Bolstering . subsidiaries of Russian Railways . 42 transcreditbank. Annual Report 2008 Chapter 3. Bank for Its Corporate Clients 43

Bond issues arranged by TransCreditBank by sectors, source: “Cbonds” IA, % In corporate finance area in 2008 TransCreditBank started to implement projects under the structural reform of the rail .. In particular, the Bank was awarded the financial advisory mandate for sale of a blocking interest in JSC ELTEZA to a strategic investor .

Besides, TransCreditBank provided business restructuring services to its clients and

3 advised them in respect of structure of their investments and potential efficiency of the same .

Main projects implemented by TransCreditBank in the debt market in 2008

1. Banks and financial companies – 46.5% November 2008 September 2008 September 2008 August 2008 1 2. Transport – 29.5%

3. Construction and development – 24%

Russian Railways, 09, 11 Zheldoripoteka, 03 TC Finance, 02 Hortex-Finance, 01

Bond Issue Bond Issue Bond Issue Bond Issue 30 000 000 000 рублей 2 000 000 000 рублей 1 000 000 000 рублей 1 000 000 000 рублей

2

Lead Manager Lead Manager Lead Manager Lead Manager

August 2008 July 2008 July 2008 June 2008

TransCreditBank in the debt capital market, source: “Cbonds” IA 27.1 Zhilsotsipoteka-Finance, Kraiinvestbank, 01 03 TransCreditBank, 03 Russian Railways, 08

Arrangement of bond issues, RUR bn Bond Issue Bond Issue Bond Issue Bond Issue Participation in bond issues 22.3 600 000 000 рублей 1 500 000 000 рублей 5 000 000 000 рублей 20 000 000 000 рублей (underwriting), RUR bn

18.9

Lead Manager Lead Manager Lead Manager Lead Manager

12.6 June 2008 May 2008 April 2008 March 2008

8.7 8.2 FinanceBusinessGroup, 02 National Capital, 02 Zheldoripoteka, 02 TransContainer, 01 6.0 5.5 Bond Issue Bond Issue Bond Issue Bond Issue 3 000 000 000 рублей 3 000 000 000 рублей 2 500 000 000 рублей 3 000 000 000 рублей

Lead Manager Lead Manager Lead Manager Lead Manager 2005 2006 2007 2008 44 transcreditbank. Annual Report 2008 Chapter 3. Bank for Its Corporate Clients 45

3.7. High-tech Banking Services Development of automatic services for corporate clientele is of particular impor-. Office or any of its branches, monitor processing of payment documents, control and update tance for the Bank since both the Bank and a sizeable part of its customers operate across documents pending execution of the same in the Bank, and receive cash flow statements entire Russia . and reports on the 24-hour basis ..In 2008 employees of JSC Russian Railways’ entities and Corporate clients extensively used services of the Bank-Client system for remote non- units were given an opportunity to operate in the Holding Bank System through the Corporate cash settlements in 2008 ..For customers’ domestic bank transfers TransCreditBank used its Data Transmission Network .. proprietary settlement network embracing all regions of its presence ..A system of electronic Realization of the project for sales of railway tickets for long-distance travel through payment documents and certified cryptography tools was used for the purpose of such Russian Railways’ Corporate Web-Portal was an important result of joint efforts by the Bank . settlements .. and Russian Railways to develop new customer-servicing technologies ..In 2008 some measu-. The Bank continued to develop its Internet-based Holding-Bank information and res were taken to improve functionality and convenience of this service, as well as technolo-. financial service ..In 2008 TransCreditBank started pilot operations of its Active Holding Bank gical aspects of provision of the same ..As a result, the volume of ticket purchasing transactions system, allowing customers to create a single system for management of a company and to increased more than 5 times y-o-y ..In 2008 the Bank jointly with JSC Russian Railways laun-. deliver up-to-date financial information for the same ..The system includes a set of services ched into pilot operation the first batch (45 units) of self-service transaction terminals ..These providing for efficient cash management to address various financial objectives, including devices enable passengers to execute tickets for long-distance travel and pay for the same hands-on control over execution of corporate budgets ..By connecting to the Active Holding- on their own, as well as to print out tickets that they had booked via internet before ..In the Bank system financial managers of corporate clients now are able to exercise on-line control reporting year the Bank continued with the program of installation of Integrated Payment Ter-. over the status of accounts opened by their regional entities in TransCreditBank’s Main minals (IPT) at railway terminals, enabling passengers to pay for tickets using their bank cards . 4. Retail Business

4.1. 48 Bank Cards

4.2. 51 Retail Lending

4.3. 54 Deposits, Transfers and Settlement Operations

4.4. 56 Remote Services

4.5. 57 Asset Management 48 transcreditbank. Annual Report 2008 Chapter 4. Retail Business 49

4.1. Bank Cards Card-based payroll projects for corporate clients 5,131 In 2008 TransCreditBank focused on development of card-based products, as well . 4,755 as on improvement of quality of services available to card-holders .. 4,433 Such factors as custom-tailored approach to different categories of customers, 4,054 competitive tariffs and a wide array of value-adding services drove rapid growth of the number of cardholders ..In 2008 the Bank issued over 162,000 cards, with the total number 3,611 of cards serviced by the Bank exceeding 2 .1 mln by the end of the year . Card-based payroll projects for employees of corporate customers largely accounted for the bulk of card issuance ..In 2008 the number of such projects increased over 40% y-o-y, totaling 5,131 projects by the end of the year .. At the same time in 2008 the Bank aggressively generated clients outside of payroll projects ..These efforts were facilitated by launch of a number of new card-based products .. Indeed, in the reporting year the Bank implemented cards intended for payment of pensions and benefits, as well as Consumer Loan Cards targeting retail borrowers of the Bank .. The Bank’s offer of the widest range of international cards of VISA and MasterCard systems, ranging from mass electronic (Electron and Maestro) to premium class (Gold, Platinum, Infinite) ..In 2008 TransCreditBank completed certification with VISA for issuance of micro-chip cards . Cross-selling of retail banking services was a priority item on the Bank’s agenda in the 01.01.2008 01.04.2008 01.07.2008 01.10.2008 01.01.2009 reporting year ..TransCreditBank offered credit cards with 50 days grace period to holders of

Card issuance volumes*, ‘000 cards 2,188 debit cards issued under payroll projects ..Starting from autumn of 2008 the Bank has been 2,026 offering a service of transfer of funds from one card to another via ATM and self-service terminal .. Importantly, the Bank more than 2 times expanded the list of payees to whom 1,823 cardholders can post payments via ATM of Internet Bank System .. In 2008 TransCreditBank continued to offer the sms-service of information about bank- card transactions, cardholders now can now receive open-to-buy (OTB) balance information by sending a SMS-request ..Steps were taken to launch expanded sms-information service, where card-holders, in particular, will be provided information about changes in OTB .. 1,224 Development and improvement of card-holders’ servicing network emerged as one of the most important avenues for development of the bank card business ..In 2008 the Bank installed 455 new ATMs .. The number of ATMs was up over 30% y-o-y, with 1,835 ATMs operating in the Bank’s network across Russia by the end of the year .. In 2008 the Bank started to install cash-in ATMs in its branches .. The Bank focused on development of cooperation with trade and servicing companies in the field of bank card acquiring ..In 2008 TransCreditBank continued active development of its project of card-based payments for railway tickets ..Over the year the number of Integrated Payment terminals (IPT) was up more than 38% y-o-y, reaching 1,438 units ..Internet-shop operating on the Corporate Web-portal of Russian Railways emerged as the most popular channel of remote sales of tickets for long-distance travel ..In Q4 of the reporting year card- 2005 2006 2007 2008 based ticket sales exceeded RUR 430 mln . In the reporting year the existing technology of card-based sale of railway tickets was * Figures from TransCreditBank Group consolidated Financial Statements are used here and hereinafter in the . extended to commuter traffic ..In May 2008 a pilot project for card-based payment for tickets text of Chapter 4 of the booklet .. in commuter ticket offices equipped with IPT was launched in Yaroslavsky Railway station 50 transcreditbank. Annual Report 2008 Chapter 4. Retail Business 51

Operating ATMs of TransCreditBank 1,835 in Moscow .. This technology was also introduced in ticket offices distributing tickets for Aeroexpress trains which provide links to Moscow airports . Starting from the beginning of 2008 the Bank was actively involved in the project providing for automatic sale of long distance train tickets with card-based payment via Self- service Ticket Terminal (STT) .. The first batch of STT was installed and commissioned at 1,380 Moscow and St-Petersburg railway terminals in autumn of the reporting year .

4.2. Retail Lending 980 In 2008 TransCreditBank continued to build up its retail lending business ..This area of its retail business was a priority for TransCreditBank during the first 9 months of the reporting year and development of this area continued in Q4 against the backdrop of the financial and economic crisis .. At year end the retail loan portfolio of TransCreditBank Group exceeded RUR 58 bn, 480 which roughly translates into 50% y-o-y growth ..Importantly, quality of different retail loan products remained very high throughout the year, while the joint socially-oriented mortgage program of TransCreditBank and JSC Russian Railways still is unparalleled in terms of attractiveness for borrowers across the country . In spite of the adverse implications of the crisis, TransCreditBank brought the total number of its outstanding retail loans to practically 262,000 by late 2008 . 2005 2006 2007 2008 Mortgage lending emerged as the fastest growing type of retail lending ..All in all, in 2008 the Bank issued RUR 12 .9 bn worth of mortgage loans, and by the end of the repor-. ting year TransCreditBank carried on its books a mortgage loan portfolio of RUR 28 .4 bn .. Number of card-based purchases of long-distance train tickets via corporate web-portal of Russian Railways, by quarters 266,945 Retail loan portfolio, RUR bn 58.2

212,764

40.1

106,335

17.1

42,621 4.6

Q1, 2008 Q2, 2008 Q3, 2008 Q4, 2008 2005 2006 2007 2008 52 transcreditbank. Annual Report 2008 Chapter 4. Retail Business 53

Number of loans issued to retail customers, ‘000 261.9 Number of retail mortgage loans, ‘000 21.9

20.3

210.7 18.6

16.8 15.4

110.0

43.7

2005 2006 2007 2008 01.01.2008 01.04.2008 01.07.2008 01.10.2008 01.01.2009

Retail mortgage loan portfolio, RUR bn 28.4 Consumer loan portfolio, RUR bn 29.7 29.8

25.7 26.3

22.7 23.8 22.3 20.0 17.8

01.01.2008 01.04.2008 01.07.2008 01.10.2008 01.01.2009 01.01.2008 01.04.2008 01.07.2008 01.10.2008 01.01.2009 54 transcreditbank. Annual Report 2008 Chapter 4. Retail Business 55

Outstanding consumer loans, ‘000 239.2 240.0 on type, size and time of deposit ..International bank cards were issued gratis for some types 224.6 of deposits . 211.1 In 2008 TransCreditBank included the following deposits on its product range: 195.3 • Optimal – allowing the client to determine its length at his/her discretion; • Profitable – with capitalization of interest every 91 days; • Multi-currency – allowing conversion of funds without loss of interest income .. Throughout the year starting of term deposits via TransCreditBank’s ATMs remained a popular service with its cardholders .. All in all, over 39,000 new Express deposits were opened ..In 2008 clients of the Bank were active in placing deposits and posting settlement transactions via Internet Bank System . In 2008 TransCreditBank, a participant of the Compulsory Deposit Insurance System was announced the winning bidder of the tender arranged by State Corporation “Deposit Insurance Agency” and was authorized to pay insurance indemnity to depositors of JSC Interregional Joint-stock Bank for Economic Cooperation “Sakhalin-West” ..Payments were made in Yuzhno-Sakhalinsk branch of TransCreditBank .. In 2008 the Bank focused on expansion of the slate of services and offering compe-. titive tariffs for cash and settlement services ..In 2008 TransCreditBank introduced a service of RUR funds transfer through Western Union .. The Bank opened a new, 41st, desk for acceptance and issuance of Western Union cash transfers, with the total number of such 01.01.2008 01.04.2008 01.07.2008 01.10.2008 01.01.2009 desks reaching 121 by the end of 2008 .. In 2008 sale of memorial and investment coins of precious metals became am active Indeed, mortgage loans accounted for 48 .8% of the total retail portfolio with the number of line of business ..Sales of coins increased 1 .9 times y-o-y . outstanding mortgage contracts approaching 22,000 . As in 2008, lending to employees of the rail using corporate subsidy tools was the main line of mortgage business ..Given the downturn of economy, continuation of this program in Retail deposits, RUR bn 23.0 addition to its commercial aspect acquired a social dimension, supporting employees of the Bank’s major client and shareholder – JSC Russian Railways ..By the end of 2008 the social mortgage loan portfolio reached RUR 17 .3 bn vs ..RUR 11 .5 bn a year ago .. Consumer lending was an important area of the retail lending business ..In Q4 the crisis 18.2 made its adjustments to the loan product range of the Bank, with employees of corporate clients emerging as the key target audience ..Concurrently, some terms and conditions of consumer loans were amended; in particular, the Bank tightened its requirements to potential borrowers’ solvency ..Given the current market environment, retail clients appreciated these measures intended to reduce the Bank’s risks and to support good faith borrowers .. By year end the consumer loan portfolio increased by more than RUR 7 .5 bn, with its 10.1 total approaching RUR 30 bn and 240,000 outstanding consumer loans .. 7.7

4.3. Deposits, Transfers and Settlement Operations In spite of the financial crisis, total balances of retail accounts with the Bank across its regional network were up more than 1 .2 times, reaching RUR 23 bn by the end of 2008 .. Notably, term deposits increased by RUR 3 .5 bn totaling RUR 10 .1 bn . The Bank offers a wide range of RUR and FX (USD, EURO, CHF) deposits allowing all categories of clients to place their funds in deposits on market terms ..Interest rate depends 2005 2006 2007 2008 56 transcreditbank. Annual Report 2008 Chapter 4. Retail Business 57

Term retail deposits, RUR bn 10.1 Banking transactions was a factor underpinning this growth .. By year end such payees totaled 328 ..A customer-friendly template-based option was introduced to activate payments in Internet Bank . Once new technologies were realized jointly with Russian Railways’ structures in 2008, employees of JSC Russian Railways’ entities and units were given an opportunity to operate in the Holding Bank System through the Corporate Data Transmission Network . 6.6 In the reporting year active preparatory works was under way for implementation of new services ..The plan is to create new channels for connection to Internet Bank (through ATMs and in TransCreditBank’s offices), to issue and service virtual cards, to launch a Mobile Bank service based on Internet Bank .. In 2008 the Bank continued to develop its Contact Center System software and hardware 3.9 set used by operators of the Customer Support Service (CSS) for servicing incoming calls ..The Contact Center integrated with automatic banking systems allows CSS operators to promptly 2.8 receive and deliver to customers information about status of their cards and accounts and completed transactions, to respond to customers’ requests for blocking and de-blocking of cards, to deliver full information of products and services of the Bank, location and working hours of its offices and ATM .. In 2008 new Contact center work stations were installed in 27 branches of the Bank .. CRM system, integrated with the Contact Center was implemented in Moscow offices of the 2005 2006 2007 2008 Bank which allowed to significantly reduce time for processing clients’ requests, to improve quality of information services provided to clients and to maintain archives of clients’ requests .. In 2008 the Interactive Voice Response (IVR) subsystem was further developed . 4.4. Remote Services In 2008 TransCreditBank continued to improve remote services and to develop self- 4.5. Asset Management service products, which is of paramount importance for its operations given the large footprint of the Bank’s business – from Kaliningrad to Yuzhno-Sakhalinsk .. Choosing the asset management service in 2008 TransCreditBank’s clients could Provision of services using one of the largest ATM networks in the domestic market is . invest their funds in financial market instruments .. Clients had discretion over a form of a priority area of this business ..In addition to traditional cash withdrawals and OTB informa-. service, selecting the most appropriate one for their investment goals: custom-tailored tion, the following services are available through TransCreditBank’s ATMs: asset management or collective investments through purchase of units in Mutual Banking • settlement of utility, cellular phone, Internet-provider and other bills; Management Funds (MBMF) .. MBMF family of TransCreditBank comprises three actively • starting Express deposits and transfer of funds to such deposits from bank card managed funds (Magistral, Locomotive and Aurora), each with its own investment features .. accounts; A highly professional and vastly experienced management team and a developed • posting charity payments; customer-servicing infrastructure are TransCreditBank’s key competitive advantages in • transfer of funds between bank cards (this service was launched in 2008) . mutual investment business . In the reporting year the Bank started to install self-service terminals (information In the reporting year Russia’s financial market felt the full impact of the global financial kiosques) which allow to perform non-cash transactions, feature a cash-in capability and and economic meltdown .. 2008 may well be the gloomiest one in the history of Russia’s provide cardholders with access to information services and management of their accounts financial infrastructure ..Stock indices at the end of the year slumped to where they were via Internet Bank System .. 6 years ago, shedding over 70% of their value in a matter of several months .. In such In 2008 a wide range of additional on-line capabilities were made available to environment, containing clients’ investment losses and providing for liquidity of the Funds’ TransCreditBank’s retail customers for management of their funds via Internet Banking assets emerged as the priority objectives in management of MBMF .. System .. Improvement and promotion of remote services contributed to a 5 times’ y-o-y increase of the number of Internet Bank clients, coupled with a 10 times’ increase of active transactions performed by them .. The ever-expanding list of payees eligible for Internet 5. Improvement of the Bank’s Operations

5.1. 60 Corporate Governance

5.2. 61 Risk Management

5.3. 61 IT

5.4. 62 Regional Policies

5.5. 66 HP Policies

5.6. 67 Charities and Sponsorship 60 transcreditbank. Annual Report 2008 Chapter 5. Improvement of the Bank’s Operations 61

5.1. Corporate Governance The Bank’s achievements in corporate governance were acknowledged by the professional community ..Based on 2008 performance, A .Medvedev, Director of the Corpo-. In 2008 the Bank continued to introduce the best practices of corporate governance rate Governance Department, was given the annual award of the Association of Indepen-. with a view of creation of more favorable environment for development of TransCreditBank . dent Directors in the category “Corporate Secretary, Director for Corporate Governance” . as a public company and increasing its investment attractiveness both in Russia and international capital markets . During the year TransCreditBank focused on implementation of its Concept for 5.2. Risk Management Development of Corporate Governance System till 2010, compliance with recommenda-. When Russia’s financial market started to display the first signs of crisis, TransCredit-. tions of the Corporate Ethics Code of the Federal Commission for Securities Market and Bank had a sound liquidity cushion, a high quality loan portfolio, a relatively low level of OECD corporate governance principles recognized by international community . investments in equity instruments and a balanced FX position ..All large long-term currency Approval of the Corporate Governance Code intended to facilitate implementation of resources raised by the Bank were hedged by forward contracts with western financial the Bank’s development strategy proved to be a landmark event in this area .. To further institutions possessing top credit ratings . improve the Bank's credibility with its shareholders, investors and the general public, the With liquidity squeeze making its way into both global and domestic banking systems Code includes provisions based on generally accepted domestic and international standards and financial markets, TransCreditBank thanks to its pillar status and high international credit of corporate governance ..The duty of shareholders, management bodies, employees and ratings got timely access to funding from the Bank of Russia and the Ministry of Finance other stakeholders of the Bank to comply with provisions of the Code is determined by which allowed to avoid any difficulties with serving its clients .. amendments and additions to its Articles of Association and other by-laws .. The credit risk management system existing in the Bank provided for a high quality . Following recommendations of the regulator of the securities market, TransCredit-. of the loan portfolio and ruled out any losses from debt instrument exposure caused by Bank on a regular basis makes financial and non-financial disclosures about its operations issuers’ default on repayment of principal or payment of interest .. Securities accounting . and executive bodies .. for nearly 60% of the Bank’s exposure to RUR bonds were included into the lombard list To improve its transparency the Bank created and implemented the Regulation on of the Bank of Russia thus giving TransCreditBank additional liquidity against the general Information Policies which includes main disclosure principles, goals and rules ..Information backdrop of shrinking liquidity in the stock market .. In 2008 growing requirements to the policies of the Bank are designed to provide shareholders, investors and other stakeholders Bank’s capital used to cover risk were fully met by its own resources .. with most complete and reliable information .. In 2008 TransCreditBank successfully implemented a program of creation of an TransCreditBank makes disclosures based on principles of reliability, accessibility, operational risks management system, realized a retail credit risk management project and efficiency, completeness and regularity, as well as on a reasonable balance between developed and introduced methods for rating reliability and setting limits for operations . openness and securing its commercial interests as provided by the laws of the Russian with municipal entities . Federation, Articles of Association and other by-laws of the Bank ..TransCreditBank strived . to use available information sources for conveying its disclosure to all stakeholders and built its relations with clients, partners and counterparties on equality and openness basis .. 5.3. IT The Bank continued to streamline corporate document forms and shareholder notification TransCreditBank keeps improving and developing its IT base to match the growing . procedures, largely intended to protect minorities’ rights . scale of its business, development of its product range, and expansion of its regional network .. The Bank strictly complied with legal and supervisory requirements applicable to The Bank has in place the entire set of state-of-the-art banking information technologies, management activities, protection of shareholders’ rights, control over financials and opera-. like a full-fledged automatic banking system (ABS) with a full set of functions to services tions, financial and non-financial disclosure, corporate social responsibility and regard for corporate customers, a central ABS for retail business, an internal payment system, corporate stakeholders’ interests . data storage, Internet portal with remote banking service systems, call center (Contact To improve efficiency of its management bodies in 2008 TransCreditBank established Center), business process simulation and optimization system ..The IT system of the Bank . audit, strategic planning and HR and remuneration committees under the Board of Direc-. is based on the best of domestic and a number of international systems and solutions in . tors ..These committees manned by members of the Board of Directors operate on a standing . the area of corporate communications .. basis and are governed by relevant Regulations on Committees under the Board of Directors . In 2008 TransCreditBank put in a lot of effort to further develop systems for automa-. Measures taken to implement the best domestic and international practices of corpo-. tion of basic business processes and support of management decision-making .. rate governance and to develop corporate standards contributed to improvement of . The centralized retail ABS is currently used as the basis to account for the growing efficiency of management bodies of the Bank, increasing its shareholder value, as well . number of retail deposits and to support issuance and servicing of international bank cards as raising its business profile and social status . across the entire regional network and the network of sponsored and agent banks .. 62 transcreditbank. Annual Report 2008 Chapter 5. Improvement of the Bank’s Operations 63

To improve the quality of management and to address objectives of day-to-day control Last year 7 branches, 45 additional offices, 9 operations offices and 2 credit and over the regional network activities, functionality of the Corporate Data Storage (CDS) was cash offices were launched into operation ..Indeed, 21 new entities were established under . further developed in 2008 along with technologies for capture and consolidation of information “100 City Offices” program .. received from regional entities and subsidiaries ..In 2008 CDS financial planning module was In 2008 the Bank implemented its major regional projects in the interests of railway – commissioned in commercial operation . branches of divisions of Russian Railways: The Bank further improved its corporate network based on IP-VPN technology and • Sverdlovsk Railway – the Bank opened a branch in Tyumen and 18 sales outlets in dedicated channels and services of TransTeleCom Company to provide for document Yekaterinburg, Perm, Noyabrsk, Zavodoukovsk, Tobolsk, Kamyshlov, Artemovsk, processing, servicing of bank cards and day-to-day control over operations of the regional Volchansk, Kushva, Yugorsk, Nyahgan, Chusovoy, Vereshagino cities and towns, at network . Demyanka, Nizhnevartovsk, Talitsa stations and in Golyshmanovo settlement; Given a steady growth of transaction volumes, the Bank upgraded computer resources • Far Eastern Railway – a branch in Vladivostok is opened, along with 6 additional offices based on Fujitsu Siemens and EMC hardware platforms .. in Nakhodka, Partizansk, Spassk-Dalny, Lesozavodsk, Ussuriisk, Vyazemsky; An important result of 2008 was approval by the Management Board of the Bank of the • Moscow Railway – Kursk and Orel branches are opened, with additional offices registered Strategy of Development of Target Information System of TransCreditBank for 2009-2012 in Tula and Novomoskovsk; period which provides for step-by-step reengineering and modification of key banking IT • October Railway – 8 additional offices are registered in Tver, Petrozavodsk, Murmansk, systems on the basis of solutions offered by leading vendors of hardware and software . Medvezhiegorsk, Velikie Luky, Veliky Novgorod, St-Petersburg; Bank-card servicing infrastructure (ATMs, self-service kiosques, POS terminals) . • Gorky Railway – the Bank opened its branch in Kazan, the Republic of Tatarstan . was further developed and improved .. for servicing Kazan Division of Gorky Railway and an additional office in Nizhny In May 2008 TransCreditBank was actively involved in the VI International Scientific and Novgorod; Practical Conference “Telecommunications Technologies in Russia’s Transport” in Sochi, • Kuibyshev Railway – the Bank opened its branch in Ufa, the Republic of Bashkortostan, where the Bank is traditionally the General Sponsor ..The Bank demonstrated its technologies as well as additional offices in Kinel and Penza; for ticket selling via self-service terminal and its Internet Bank System, stirring a lot of interest • North Caucasian Railway – a branch was opened in Sochi; among participants of the Conference .. • West-Siberian Railway – 9 additional offices were opened in Barnaul, Kemerovo, In the reporting year the Bank’s IT teams worked in close contact with IT and Novoaltaisk, Novokuznetsk, Novosibirsk, Omsk .. communications departments of the rail and with specialists from the Main Computer Expansion of the branch network into the territory covered by the rail enabled Center of Russian Railways, facilitating provision of prompt and sound banking services to TransCreditBank to concentrate cash flows of railway transport companies and major cargo companies, employees and passengers of the rail . carriers in one settlement banking system, to provide full-scale and top-notch financial In the reporting year on the basis of a new office in Moscow (Argunovskaya Str ., 3) the services to its corporate clientele and to implement retail banking programs, primarily bank conducted an active work on creation of Back-up data processing centre (BDPC) ..Start- targeting employees of the rail . up of BDPC in 2009 will allow to fully reserve computing capacities and banking information that will lead to essential growth of reliability of TransCreditBank’s operations and will provide Subsidiaries a guaranteed continuity of clients servicing and reduction of operational risks . As of January 1, 2009 TransCreditBank Group included 5 subsidiary banks: • JSC MeTraComBank (Rostov-on-Don); • JSC Yugo-Vostok Bank (Voronezh); 5.4. Regional Policies • JSC Chitapromstroibank (Chita); The top priority of the Bank’s regional policies was extension of its regional network • KB Vostokbusinessbank LLC (Vladivostok); which provides comprehensive services for branches and units of JSC Russian Railways, • JSC Superbank (Blagoveschensk) . other railway companies, partner companies of the rail and their employees ..Concurrently Subsidiary banks have their own regional network of 13 branches, 35 additional offices the Bank started with realization of its “100 City Offices” program intended to boost sales of and 15 cash desks ..These entities are located in cities and communities which are of interest services (primarily retail ones) to all client categories . from the perspective of business development going forward, both for the subsidiaries and the Group as a whole . Branch Network The total number of outlets of the subsidiaries decreased in 2008, since additional In 2008 TransCreditBank added 62 entities to its branch network which consisted as . offices of KB Vostokbusinessbank in Vladivostok, Partizansk, Nakhodka, Spassk-Dalny, of January 1, 2009, of 189 outlets, including 39 branches, 108 additional offices, 29 operations Lesozavodsk, Ussuriisk were closed with their respective business switched to regional offices, 5 credit and cash offices and 8 cash desks .. outlets of TransCreditBank’s branch in Vladivostok . 64 transcreditbank. Annual Report 2008 Chapter 5. Improvement of the Bank’s Operations 65 66 transcreditbank. Annual Report 2008 Chapter 5. Improvement of the Bank’s Operations 67

In the reporting year four subsidiary banks established as open joint-stock companies, Last year major efforts were made to arrange for sound summer vacations for employees’ namely, JSC MeTraComBank, JSC Yugo-Vostok Bank, JSC Chitapromstroibank and children ..During school vacations employees could send their children to Russian Railways’ JSC Superbank had their shareholder meetings which decided on reorganization of their sports and recreation establishments at discount .. respective companies by integration of the same into JSC TransCreditBank .. During the reporting year the Bank actively promoted uniform social policy both in its As of January 1, 2009, subsidiary banks had the customer base of about 10,000 headquarters and in regional entities, which was instrumental for attracting top specialists of the . corporate entities and over 483,000 individuals ..The aggregated shareholders’ equity of the banking sector to the branches and using their efforts for attaining healthy financial results . subsidiaries as of January 1, 2009 amounted to RUR 1 .7 bn registering a 47 .2% y-o-y increase .. In the reporting year the subsidiary banks generated RUR 445 .4 mln of pre-tax profit, with after tax profit standing at RUR 319 .8 mln, up 18 .5% and 44 .1% y-o-y, respectively ..The total 5.6. Charities and Sponsorship loan portfolio at year end amounted to RUR 9 .7 bn (26 .7 % y-o-y increase) .. Social responsibility is a key priority of the Bank driving its active involvement in charities and sponsorship .. In 2008 the Bank approved its Regulation on Charity Activities which was developed 5.5. HP Policies in accordance with applicable laws and a standard regulation on charity activities used in HR policies in 2008 focused on the following areas: providing skilled banking subsidiaries of Russian Railways ..It establishes principles and targets of charity activities professionals for the Bank, improvement of incentive schemes, professional development of the Bank, procedures for decision-making regarding charity matters, planning and and training of personnel, development of corporate culture and implementation of social execution of charity campaigns and actions, as well as for control over targeted use of programs . funds allocated for charity purposes .. The Regulation states that total amount of funds Headcount was up by 26% y-o-y, totaling 4,743 ..In terms of quality and quantity the applied towards charity should be at least 2% of target annual profits . Bank’s personnel are adequate to its business objectives: employees average 38 .5 years, In its charity and sponsorship activities the Bank focused on socially important and most of them possess at least 3 years’ banking experience ..An important priority of HR projects in the rail industry, which were carried out jointly with JSC Russian Railways ..The policies is to retain skilled and loyal employees and therefore the Bank’s intent is to establish Bank also supported actions carried out in regions of its operations under the patronage long-term employment relations with its staff, based on social partnership principles and of regional administrations a well as a number of projects of the Russian Orthodox Church compliance with labor laws .. In 2008% nearly 50% of employees had over 3 years’ track and responded to requests of poor individuals in bad need of help .. record with TransCreditBank proving success of its HR policies .. The Bank provided charity and sponsorship assistance to: In 2008 TransCreditBank promoted its partnership relations with the Institute of • Children’s social projects, carried out by “Spread the Wings” foundation; Economics and Finance of MIIT and leading finance and economics colleges of the country • Sports teams in the industry and in the regions of presence, including Locomotive . to organize on-the-job training for students of these colleges and to provide jobs for the . FC of Moscow, Locomotive-Izumrud of Yekaterinburg volley-ball team and sports projects most successful graduates . in the rail industry, including International Football Tournament “Russian Railways’ Cup – Participation in a salary survey in the financial sector arranged by Pricewaterhouse. 2008 and the football tournament of veteran players “B .P ..Beschev’s Memorial”; Coopers is an important element of the Bank’s salary policies ..In 2008 TransCreditBank set . • Children’s sports teams and educational institutions, NOU Sports and Education Center salaries for its employees based on analysis of relevant data of 60 leading Russian banks ... Locomotive of Moscow, MROFF North-West and NUDO “Sports School Snow Resort” of . Indexing of employees’ salaries allowed to mitigate inflationary impact on salary levels ... St-Petersburg, GOU Dyatkov Aviation Cadet Corps named after I .A .. Kashin (Bryansk As a result in the reporting year salaries in TransCreditBank matched prevailing market . Oblast); levels in the banking sector .. • Religious and cultural project, including jointly with Interfax News Agency – Internet- In 2008 25% of the Bank’s staff attended training courses or participated in profes-. portal “Interfax – Religion”, etc; sional development programs for bankers ..Top managers of branches and subsidiary banks . • Cultural projects, including International Humor and Variety Theater Competition “Moscow – . were offered dedicated training programs intended to improve quality of management at Transit”, “Jazz-Express in Tver” music festival, festival of art song “Prielbrusie – 2008», regional level .. exhibitions of contemporary Russian painters A ..Chernyshev, V ..Efimov and A ..Shulgin in Employees’ health is another priority of the Bank, and sports activities are viewed . the Moscow Contemporary Arts Museum; as a component of corporate policies ..To this end in 2008 the Bank rented tennis courts • Professional skills competitions, including National Competition of Car-hauler Drivers and gyms for mini football and slots in swimming pools .. Development of voluntary medi-. “ASMAP-Profy-2008” . cal insurance programs for the staff contributed to addressing the healthcare agenda ... Where necessary, any employee could benefit from free medical assistance or advice of skilled specialists in 2008 .. . 6. Main Goals and Outlook 70 transcreditbank. Annual Report 2008 Chapter 6. Main Goals and Outlook 71

Against the backdrop of continuing financial crisis TransCreditBank demonstrates . For 2009 TransCreditBank sets the following key objectives: sound financial performance ..The Bank has never failed to perform instructions of its custo-. mers and succeeded in preserving its resource base; if need be TransCreditBank can rely 1. Increase of the bank’s total capital by raising RUR 7 .9 bn worth of subordinated on support from its shareholders and clients, first and foremost – Russian Railways .. By loans, including RUR 5 bn from its shareholders . strengthening its image of a reliable financial partner the Bank is able now to build a much 2. Considerable growth of loans to corporate borrowers along with maintaining wider customers’ base and to boost its business volume ...With this in mind, TransCreditBank non-performing loans (NPLs) at the level less then 5% of the total loan portfolio .. Group intends not just to maintain, but to raise its standing in Russia’s banking system . 3. Tighter control over quality of corporate and retail loan portfolios. Delinquent across all key financial and non-financial indicators .. loans should account for less than 5% of the corporate loan portfolio . 4. Completion of consolidation of subsidiary banks, by integration of the same into TransCreditBank with a switch to a single share and a single brand . 5. Implementation of technology development projects, including creation of . the Standby IT Center and start of implementation a new-generation automatic banking system . 6. Continued optimization of the Bank’s corporate governance system, impro-. vement of efficiency of management of changing business processes . 7. Reference Information

7.1. 74 Shareholders’ Structure

7.2. 75 Board of Directors

7.3. 77 Management Board

7.4. 83 Customer Service Network

7.5. 111 Address and Payment Details 74 transcreditbank. Annual Report 2008 Chapter 7. Reference Information 75

7.1. Shareholders’ Structure 7.2. Board of Directors (as of January 1, 2009) (as of April 1, 2009)

Chairman of the Board

Shareholding . Paramonova Tatiana Vladimirovna, interest, % Advisor to President, JSC Russian Railways

Joint-stock Company 55.1 Deputy Chairman of the Board “Russian Railways” Orlov Sergey Vladimirovich, Non commercial organization 19.9 Advisor to President, JSC Russian Railways “Non-government Pension Fund “Blagosostoyanie” Members of the Board

Other corporate entities 25.0 Blinov Felix Lvovich, General Director, CJSC Investment Group Rosvagonmash and natural persons Veremeev Valery Anatolievich, Head of Department of Corporate Structure and Reform, JSC Russian Railways

Novozhilov Yury Victorovich, First Deputy Head of Corporate Finance Department, JSC Russian Railways

Sukhorukova Elena Victorovna, Executive Director, NGPF Blagosostoyanie

Pushkin Sergey Nikolaevich, President, JSC TransCreditBank

76 transcreditbank. Annual Report 2008 Chapter 7. Reference Information 77

Committees under the Board of Directors 7.3. Management Board (as of April 1, 2009)

Strategic Planning Committee Pushkin Sergey Nikolaevich President – Chairman . Chairman of the Committee of the Management Board Orlov Sergey Vladimirovich

Members of the Committee Paramonova Tatiana Vladimirovna Pushkin Sergey Nikolaevich Veremeev Valery Anatolievich

Audit Committee

Chairman of the Committee Paramonova Tatiana Vladimirovna

Members of the Committee Novozhilov Yury Victorovich Blinov Felix Lvovich

HR and Remuneration Committee

Chairman of the Committee Sukhorukova Elena Victorovna

Members of the Committee Veremeev Valery Anatolievich Blinov Felix Lvovich

Krokhin Alexey Vladimirovich First Vice-president 78 transcreditbank. Annual Report 2008 Chapter 7. Reference Information 79

Golenkov Pavel Yurievich Arsenyev Sergey Leonidovich Senior Vice-president Vice-president – Director Regional Business Department

Zemskov Boris Alexandrovich Vice-president – Director . Kransovsky Valery Ivanovich Planning, Reporting and Risk . Senior Vice-president Management Department 80 transcreditbank. Annual Report 2008 Chapter 7. Reference Information 81

Kashlakov Dmitry Valerievich Kuptsov Andrey Anatolievich Vice-president – Director Vice-president – Director Customer Business Department Retail Business Department

Kolpakov Alexander Vladimirovich Orlov Dmitry Valerievich Vice-president – Director Vice-president – Director Credit and Guarantees Department Treasury Department 82 transcreditbank. Annual Report 2008 Chapter 7. Reference Information 83

Panarin Oleg Stanislavovich 7.4. Customer Service Network Vice-president – Director (as of April 1, 2009) Structured and Trade Finance Department

Main Office 37A Novaya Basmannaya Str ., Moscow, 105066 Tel .: (+7-495) 788-0880; fax: (+7-495) 788-0879; . e-mail: info@bnk .ru

Moscow Offices

“Central” 14 Neglinnaya Str ., bldg 1A, Moscow, 107031 Tel .: (+7-495) 969-2829; fax: (+7-495) 969-2830; . e-mail: dopcenterDL@bnk .ru

“Basmannoe Division” 3A Sadovaya-Chernogryazskaya Str ., bldg 1, Moscow, 107174 Tel .: (+7-495) 784-6119, 262-6444; . fax: (+7-495) 262-5880; . e-mail: basmanbranchDL@bnk .ru

“Kalanchevskoye Division” 35 Kalanchevskaya Str ., entr ..21, Moscow, 121069 Tel ./fax: (+7-495) 500-3155; . e-mail: kalanchioff@bnk .ru

“Krasnopresnenskoye Division” 5 Strelbishenskiy Side-str ., bldg 1, Moscow, 123317 Tel ./ fax: (+7-495) 784-6115; . e-mail: presnia@bnk .ru

“Sokolnicheskoye Division” 18 Krasnoprudnaya Str ., bldg 1, Moscow, 107140 Tel .: (+7-495) 784-7327, 262-5085; . fax: (+7-495) 262-5541; . e-mail: sokolBranch@bnk .ru

“Chehovskoye Division” Rusanov Sergey Georgievich 10 Malaya Dmitrovka Str ., Moscow, 127006 Vice-president – Director Tel .: (+7-495) 926-1443; fax: (+7-495) 261-5012; . IT Department e-mail: dopchehovskoeDL@bnk .ru 84 transcreditbank. Annual Report 2008 Chapter 7. Reference Information 85

“Izmailovo Division” Additional Office in Novoaltaisk 46 Izmailovskiy Blvd, Moscow, 105077 5 Krasnogvardeyskaya Str ., Novoaltaisk, Altai Region, 658080 Tel .: (+7-495) 786-4104; fax: (+7-495) 780-3923; . Tel .: (+7-38532) 32-166, 35-244 e-mail: izmailovoDL@bnk .ru Branch in Bryansk “Kurskoe Division” 13 Vtoraya Alleya Str ., Bryansk, 241020 29 Zemlyanoy val Str ., Moscow, 105064 Tel ./fax: (+7-4832) 60-2599; . Tel .: (+7-495) 646-3115; fax: (+7-495) 646-3114; . e-mail: info@bryansk .bnk .ru e-mail: dopKurskoeDL@bnk .ru

Additional Office #1 in Bryansk “Sheremetyevo Division” 4 Rostovskaya Str ., Bryansk, 241035 Airport «Sheremetyevo», airterminal «Aeroexpress», . Tel .: (+7-4832) 58-9897 141400, Moscow district, Khimki Tel .: (+7-495) 287-4971; fax: (+7-495) 287-4972; . e-mail: sheremettoff@bnk .ru Branch in Vladivostok 1 Verkhneportovaya Str ., Vladivostok, Primosrky Region, 690003 Cash desk “Lermontovskaya” Tel ./fax: (+7-4232) 24-7727; . 2 Novaya Basmannaya Str ., ent ..2, Moscow, 107174 e-mail: info@vvst .bnk .ru Tel ./fax: (+7-495) 262-6398 Additional office in Lesozavodskoe Cash desk “Spartakovskaya” 14 Pushkin Str ., Lesozavodskoe, Primosrk Region, 692042 37A Novaya Basmannaya Str ., Moscow, 105066 Tel .: (+7-42355) 23-258 Tel ./fax: (+7-495) 788-0880 (ext ..1739) Additional office in Nakhodka Cash desk “Yaroslavskaya” 10 Nakhodkinskiy Av ., Nakhodka, Primosrk Region, 692904 5 Komsomolskaya Sq ., Moscow, 107144 Tel .: (+7-4236) 63-4251 Tel ./fax: (+7-495) 267-9107 Additional office in Partizansk 12 Vokzalnaya Str ., Partizansk, . Branches Primosrk Region, 692880 Tel .: (+7-42363) 65-231 Branch in Astrakhan 3A Kommunisticheskaya Str ., Astrakhan, 414000 Additional office in Spassk-Dalniy Tel: (+7-8512) 44-7614, 44-7720; fax (+7-8512) 44-7682; . 3 Andreevskaya Str ., Spassk-Dalniy, Primosrk Region, 692245 e-mail: info@astra .bnk .ru Tel .: (+7-42352) 22-596

Additional office in Ussuriysk Branch in Barnaul 3 Vokzalnaya Sq ., Ussuriysk, Primosrk Region, 692522 68 Lenina Av ., Barnaul, Altai Region, 656015 Tel .: (+7-4234) 36-4742 Tel .: (+7-3852) 28-9450; fax: (+7-3852) 28-9451; . e-mail: info@barnaul .bnk ru. Branch in Volgograd Additional Office #1 in Barnaul 19D Kommunisticheskaya Str ., Volgograd, 400131 32A Stroiteley Av ., Barnaul, Altai Region, 656031 Tel ./fax: (+7-8442) 24-3838; . Tel .: (+7-3852) 20-0118 e-mail: info@volga .bnk .ru 86 transcreditbank. Annual Report 2008 Chapter 7. Reference Information 87

Additional office #1 in Volgograd Additional Office in Volchansk 16 Kommunisticheskaya Str ., Volgograd, 400131 14 Pervomaiskaya Str ., Volchansk, . Tel .: (+7-8442) 90-3519 Sverdlovsk Region, 624941 Tel .: (+7-34383) 55-610 Additional office #2 in Volgograd 33B Engels Blvd ., Volgograd, 400026 Additional office in Kamensk-Uralsk Tel .: (+7-8442) 33-1929 29 Chaykovskogo Str ., Kamensk-Uralsk, . Sverdlovsk Region, 623428 Additional Office #3 in Volgograd Tel .: (+7-3439) 31-6575, 31-6087 74A 30-letya Pobedy Blvd ., Vologograd, 400117 Tel .: (+7-8442) 23-9088 Additional office in Kamyshlov 23 Komsomolskaya Str ., Sverdlovsk Region, 623530 Tel .: (+7-34375) 91-408 Branch in Ekaterinburg 41 Strelochnikov Str ., Ekaterinburg, 620107 Additional office in Kushva Tel .: (+7-343) 345-2550, 345-2555; . 314 km, Goroblagodatskaya Station, . fax :. (+7-343) 345-2559; . Sverdlovsk Region, 624300 e-mail: info@eburg bnk. .ru Tel .: (+7-34344) 25-449

Additional office #1 in Ekaterinburg Additional office #1 in Nizhniy Tagil 86 Chelyuskintsev Str ., Ekaterinburg, 620013 29 Stroiteley Str ., Nizhniy Tagil, Sverdlovsk Region, 622034 Tel .: (+7-343) 359-9829, 359-9832 Tel .: (+7-3435) 25-6264, 25-4851

Additional office in Ekaterinburg Additional office #2 in Nizhniy Tagil 28 Bilimbaevskaya Str ., Ekaterinburg, 620134 1 Okuneva Str ., Nizhniy Tagil, Sverdlovsk Region, 622051 Tel .: (+7-343) 372-6990, 372-6991 Tel .: (+7-3435) 34-4593, 37-7400

Additional office #4 in Ekaterinburg Additional office in Pervouralsk 31 Surikova Str ., Ekaterinburg, 620144 1 Torgovaya Str ., Pervouralsk, Sverdlovsk Region, 623112 Tel .: (+7-343) 345-3001 Tel .: (+7-3439) 27-5325, 27-5349 Additional office in Serov Additional office #5 in Ekaterinburg 242a Lenina Str ., Serov, Sverdlovsk Region, 624981 98 Tatischeva Str ., Ekaterinburg, 620028 Tel .: (+7-34385) 39-201, 39-200 Tel .: (+7-343) 345-3003 Additional Office at Talitsa Station Additional Office in Artemovsk 2028th km, Talitsa Station, Talitsky Raion, . PK-2, 180th km, Egorshino Station, . Sverdlovsk Region, 623620 MO Artemovsky District, Sverdlovsk Region, 663782 Tel .: (+7-34371) 42-969 Tel .: (+7-34363) 52-498 Operations Office in Golyshmanovo Township Additional office in Bogdanovich 52 Vokzalnaya Str ., Golyshmanovo Township, . 28 Pervomayskaya Str ., Bogdanovich, 623530 Tyumen Region, 627300 Tel .: (+7-34376) 46-513, 23-229 Tel .: (+7-34546) 26-034 88 transcreditbank. Annual Report 2008 Chapter 7. Reference Information 89

Operations office at Demyanka station Cash desk #1 in Ekaterinburg Demyanka Station, Tyumen Region, . 22 Vokzalnaya Str ., Ekaterinburg, 620107 Hanty-Mansy Republic-Yugra, 626184 Tel .: (+7-343) 358-2693 Tel .: (+7-922) 473-3043

Operations office in Zavodoukovsk Branch in Izhevsk 2 Proletarskaya Str ., Zavodoukovsk, . 126A Pushkinskaya Str ., Izhevsk, . Tyumen Region, 627140 Udmurtia Republic, 426003 Tel .: (+7-34542) 22-812 Tel .: (+7-3412) 52-9265; . fax: (+7-3412) 52-9260; . Operations office in Ishim e-mail: info@izh .bnk .ru 20 Irkutsk Str ., Ishim, Tyumen Region, 627750 Tel .: (+7-34551) 62-411, 62-393 Credit and Cash Office in Krasnoufimsk 20 Sukhobskogo Str ., Krasnoufimsk, . Operations office in Nizhnevartovsk Sverdlovsk Region, 623300 37 Severnaya Str ., Nizhnevartovsk, Khanty-Mansy . Tel .: (+7-34394) 20-653, 20-627 Autonomous Distrcit – Yugra, Tyumen Region, 628600 Tel .: (+7-3466) 46-5859 Branch in Irkutsk 25 2-nd Zheleznodorozhnaya Str ., Irkutsk, 664005 Operations office in Noyabrsk Tel ./ fax: (+7-3952) 63-6909; . Noyabrsk-1 Station, Noyabrsk, Yamalo-Nenetsk . e-mail: info@irkutsk .bnk .ru Autonomous District, Tyumen Region, 629811 Tel .: (+7-3496) 31-3500 Additional office #1 in Irkutsk Operations Office in Nyagan 35A Obraztsova Str ., Irkutsk, 664013 2 Zavokzalnaya Str ., Nyagan, Khanty-Mansy . Tel .: (+7-3952) 63-5555 Autonomous Distrcit – Yugra, Tyumen Region, 628181 Tel .: (+7-34672) 31-881 Additional office “Centralny” in Irkutsk 7B K ..Marks Str ., Irkutsk, 664003 Operations Office in Surgut Tel .: (+7-3952) 63-6903 16/2 Privokzalnaya Str ., Surgut, Tyumen Region, . Hanty-Mansy Republic-Yugra, 628414 Additional office in Vikhorevka Tel .: (+7-3462) 39-5165, 39-5143 72 Dzerzhinskogo Str ., Vikhorevka, . Irkutsk Region, 665772 Operations Office in Tobolsk Tel .: (+7-3953) 40-6930 222nd km, Tobolsk Station, Tobolsk, . Tyumen Region, 626150 Additional office in Zima Tel .: (+7-3456) 36-2587 18 Vokzalnaya Str ., Zima, Irkutsk Region, 665390 Tel .: (+7-39514) 36-750 Operations Office in Yugorsk #6 Geologicheskaya Station, Zheleznodorozhnaya Str ., . Additional office in Nizhneudinsk Yugorsk, Khanty-Mansy Autonomous District – Yugra, . 7 Alleynaya Str ., Nizhneudinsk, . Tyumen Region, 628260 Irkutsk Region, 665106 Tel .: (+7-34675) 73-928 Tel .: (+7-39517) 73-151 90 transcreditbank. Annual Report 2008 Chapter 7. Reference Information 91

Additional office in Tayshet Cash desk #1 in Kaliningrad 14 Transportnaya Str ., Tayshet, . 15/23 Zheleznodorozhnaya Str ., Kaliningrad, 236039 Irkutsk Region, 665000 Tel .: (+7-4012) 58-7571 Tel .: (+7-39563) 53-152 Branch in Kaluga Additional office in Ust-Kut 21 Malinniki Str ., Kaluga, 248025 8 Kalinina Str ., Ust-Kut, Irkutsk Region, 666784 Tel ./fax: (+7-4842) 51-5335; . Tel .: (+7-39565) 22-388 e-mail: info@kaluga .bnk .ru Operations office in Severobaykalsk 19 60-anniversary of the USSR Av ., . Branch in Kemerovo Severobaykalsk, Buryat Republic, 671701 22 Vesennaya, Kemerovo, 650000 Tel .: (+7-30139) 25-510, 25-620 Tel ./fax: (+7-3842) 34-8807; . e-mail: info@kemerovo .bnk .ru Operations office in Slyudyanka 1A Parizhskoy Communy Str ., Slyudyanka, . Additional office «Kuzbasskiy» in Kemerovo Irkutsk Region, 665904 1 Pionersky Blvd ., Kemerovo, 650000 Tel .: (+7-38544) 52-073 Tel .: (+7-3842) 32-4691

Operations in Taksimo Additional office «Sarygino» in Kemerovo 51 70-anniversary of October Str ., Taksimo, . 22A Sarygina Str ., Kemerovo, 650055 Buryat Republic, 671560 Tel .: (+7-3842) 34-5770, 34-5771 Tel .: (+7-301324) 20-35, 20-36 Branch in Krasnoyarsk Operations office in Ulan-Ude 36 Mir Av ., Krasnoyarsk, 660049 68 Revolution of 1905 year Str ., Ulan-Ude, . Tel .: (+7-391) 252-7527; fax: (+7-391) 252-7528; . Buryat Republic, 670024 e-mail: info@krsk .bnk .ru Tel .: (+7-3012) 46-0610 Additional office #1 in Krasnoyarsk 130 Mir Av ., of ..100, Krasnoyarsk, 660021 Branch in Kazan Tel .: (+7-391) 259-5216 5 Karl Marks Str ., Kazan, Tatarstan Republic, 420111 Tel .: (+7-843) 233-0501; fax: (+7-843) 233-0502; . Additional office #2 in Krasnoyarsk e-mail: info@kazan .bnk ru. 5 Vzletnaya Str ., Bldg 1, Krasnoyarsk, 660077 Tel .: (+7-391) 254-0300

Branch in Kaliningrad Additional Office #3 in Krasnoyarsk 1 Kievskaya Str ., Kaliningrad, 236039 114 Imeni Gazety Krasnoyarsky Rabotchy Av ., . Tel .: (+7-4012) 58-7734; fax: (+7-4012) 70-5595; . Krasnoyarsk, 660095 e-mail: info@koenig .bnk ru. Tel .: (+7-391) 226-6300

Additional office #1 in Kaliningrad Additional office in Achinsk 1 Mir Av ., Kaliningrad, 236000 27 Kirova Str ., Achinsk, Krasnoyarsk Region, 662150 Tel .: (+7-4012) 99-7801 Tel .: (+7-3951) 40-0001 92 transcreditbank. Annual Report 2008 Chapter 7. Reference Information 93

Additional office in Bogotol Branch in Murmansk 12 40-anniversary of October Str ., Bogotol, . 47 Polyarniye Zori Str ., Murmansk, 183025 Krasnoyarsk Region, 662060 Tel ./ fax: (+7-8152) 40-0474; 40-0474 . Tel .: (+7-39517) 21-757 e-mail: info@murman .bnk .ru

Additional office in Ilanskiy Additional Office #1 in Murmansk 8 Sadovaya Str ., Ilanskiy, 663800 10 Privokzalnaya Str ., Murmansk, 183025 Tel .: (+7-39173) 21-612 Tel .: (+7-8152) 45-6820, 45-6865

Additional office at Sayanskaya Station Additional office in Apatity 1B Komsomolskaya Str ., Sayanskaya Station, . 26A Bredova Str ., Apatity, Murmansk Region, 184207 Krasnoyarsk Region, 663973 Tel .: (+7-81555) 73-024, 65-596 Tel .: (3912) 50-6277, 22-291 (railway) Additional office in Kandalaksha Operations office in Abakan 83А Pervomayskaya Str ., Kandalaksha, . 21 Vyatkina Str ., Abakan, . Murmansk Region, 184040 Khakassia Republic, 655017 Tel .: (+7-81533) 96-808, 30-694 Tel .: (+7-3902) 22-2518, 29-4463 Branch in Nizhniy Novgorod Operations office in Mariinsk 19/6 Minina Str ., Nizhniy Novgorod, 603155 105 Lenina Str ., Mariinsk, . Tel .: (+7-831) 437-1515; fax: (+7-831) 437-1563; . Kemerovo Region, 652150 e-mail: info@nnov .bnk .ru Tel .: (+7-38443) 52-076 Additional office «Kanavinsky» in Nizhniy Novgorod Cash desk #1 in Krasnoyarsk 51 Oktyabrskoy Revolutsii Str ., Nizhniy Novgorod, 603011 1 30-July Str ., Railway station building, . Tel .: (+7-831) 248-8153 Krasnoyarsk, 660021 Tel .: (+7-391) 259-5081 Additional Office #2 in Nizhny Novgorod Cash desk #2 in Krasnoyarsk 2A Revolutsii Sq ..(Moscow Railroad Terminal), . 6 Gorkogo Str ., of ..112, Krasnoyarsk, 660121 Nizhny Novgorod, 603002 Tel .: (+7-391) 259-4294 Tel .: (+7-831) 248-8040, 248-2237

Additional office in Arzamas Branch in Kurgan 34B Krasniy Put’ Str ., Arzamas, Nizhegorodsky Region, 607222 111/II Kirov Str ., Kurgan, 640000 Tel .: (+7-83147) 93-428 Tel ./ fax: (+7-3522) 46-2300; . e-mail: info@kurgan .bnk .ru Operations office in Kirov 153 Oktyabrsky Av ., Kirov, 610001 Tel .: (+7-8332) 60-2271, 60-3161 Branch in Kursk 6 Krasnaya Sq ., Kursk, 305000 Credit and cash office in Murom Tel ./fax: (+7-4712) 70-3350; . 21 Ekspluatatsionnaya Str ., Murom, Vladimir Region, 602254 e-mail: info@kursk .bnk .ru Tel .: (+7-49234) 93-812 94 transcreditbank. Annual Report 2008 Chapter 7. Reference Information 95

Branch in Novokuznetsk Additional office #6 in Novosibirsk 27 Pavlovskogo Str ., Novokuznetsk, Kemerovo Region, 654005 187 Dusi Kovalchuk Str ., Novosibirsk, 630049 Tel .: (+7-3843) 70-3703; . Tel .: (+7-383) 325-1300, 325-1302, 325-1303 tel ./fax: (+7-3843) 70-3702;. e-mail: info@nkz .bnk .ru Additional Office #7 in Novosibirsk 49 Schetinina Str ., Novosibirsk, 630099 Additional office «Zheleznodorogny» in Novokuznetsk Tel .: (+7-383) 209-0012, 209-0014 19 Kurako Av ., Novokuznetsk, Kemerovsky Region, 654000 Tel .: (+7-3843) 78-2423, 70-3727 Additional Office #8 in Novosibirsk 183 Zorge Str ., Novosibirsk, 630199 Additional office in Mezhdurechensk Tel .: (+7-383) 209-0061, 209-0023 3 Kommunistichesky Av ., Mezhdurechensk, 652870 Tel .: (+7-38475) 44-680 Credit and cash office #1 in Novosibirsk 72 Mekhanizatorov Str ., Novosibirsk, 630057 Additional office in Belovo Tel .: (+7-383) 345-3829 5 Yubileynaya Str ., Belovo, 652600 Tel .: (+7-38452) 28-585, 26-060 Cash desk #1 in Novosibirsk 59 Obyedineniya Str ., Novosibirsk, 630027 Tel .: (+7-383) 272-6409 Branch in Novosibirsk 86 Lenina Str ., Novosibirsk, 630004 Tel ./fax: (+7-383) 229-5100; 221-5448; . e-mail: info@nsib .bnk .ru Branch in Omsk 24 Lermontova Str ., Omsk, 644024 Additional office #1 in Novosibirsk Tel ./ fax: (+7-3812) 51-1702; . 26 Vatutina Str ., Novosibirsk, 630078 e-mail: info@omsk .bnk .ru Tel .: (+7-383) 351-3659, 351-6142 Additional office #1 “Privokzalny” in Omsk Additional office #2 in Novosibirsk 2 Lekonta Str ., Omsk, 644020 221 B .Bogatkova Str ., Novosibirsk, 630089 Tel .: (+7-3812) 44-3539 Tel .: (+7-383) 267-0264, 267-9300 Additional office «Vhodnoy» in Omsk Additional office #3 in Novosibirsk 3 Vhodnoy, Omsk, 644068 198 Pervomayskaya Str ., Novosibirsk, 630030 Tel .: (+7-3812) 44-9971 Tel .: (+7-383) 307-0254, 307-0255 Additional office «Moskovka» in Omsk Additional office #4 in Karasuk 5 Novokirpichnaya Str ., Omsk, 644058 106 Lenina Str ., Karasuk, . Tel .: (+7-3812) 42-9648 Novosibirsky Region, 632865 Tel .: (+7-38355) 73-383, 73-727, 73-738 Branch in Orel Additional office #5 in Barabinsk 16 Turgeneva Str ., of ..86, Orel, 302028 1 Kalinina Str ., Barabinsk, Novosibirsky Region, 632334 Tel ./ fax: (+7-4862) 49-9120, 49-9123; . Tel .: (+7-38361) 24-542, 24-543 e-mail: info@orel .bnk .ru 96 transcreditbank. Annual Report 2008 Chapter 7. Reference Information 97

Branch in Orenburg Additional office #1 in Perm 14 Bratyev Korostelevikh Str ., Orenburg, 460009 89 Lenina Str ., Perm, 614990 Tel ./ fax: (+7-3532) 35-5690, 35-5776; . Tel .: (+7-342) 219-4551 e-mail: info@orenburg .bnk ru. Additional office #2 in Perm Additional office in Buzuluk 17 Genkelya Str ., Perm, 614068 39 Rozhkova Str ., Buzuluk, Orenburg Region, 461040 Tel .: (+7-342) 237-6537 Tel .: (+7-35342) 20-043, 25-388 Additional Office #3 in Perm Additional office in Orsk 49/9 Mashinistov/Lepeshinskoy Str ., Perm, 614067 40 Lenin Av ., Orsk, Orenburg Region, 462404 Tel .: (+7-342) 213-2332 Tel .: (+7-3537) 25-3031 Additional Office in Vereschagino Cash desk in Orenburg 17 Karla Marksa Str ., Vereschagino, . 1А Privokzalnaya Str ., Orenburg, 460009 Perm Region, 617120 Tel .: (+7-3532) 79-3273 Tel .: (+7-34254) 31-907

Branch in Penza Additional Office in Chusovoy 37A Karpinskogo Str ., Penza, 440011 13 Electrodepovskaya Str ., Chusoboy, . Tel .: (+7-8412) 42-8676; fax: (+7-8412) 42-8696; . Perm Region, 618200 e-mail: info@penza .bnk .ru Tel .: (+7-34256) 50-484

Additional office #1 in Penza Privokzalnaya Sq ., Railway station building . Branch in Petrozavodsk «Penza-1», Penza, 440044 5 Pervomayskaya Str ., Petrozavodsk, . Tel .: (+7-8412) 26-0428 Karelia Republic, 185001 Tel .: (+7-8142) 77-1753; fax: (+7-8142) 77-4275; . Additional office #2 in Penza e-mail: info@ptz .bnk .ru 124 Pobedy Av ., Penza, 440047 Tel .: (+7-8412) 44-6466, 44-6057 Additional office «Centralniy» in Petrozavodsk 37 Lenina Str ., Petrozavodsk, . Operations office in Ruzaevka Karelia Republic, 185035 2 Privokzalnaya Sq ., Ruzaevka, Mordovia Republic, 431440 Tel .: (+7-8142) 76-9308, 76-8947 Tel .: (+7-83451) 41-383 Additional office in Medvezhiegorsk Operations office in Ulyanovsk 13 Dzerzhinskogo Str ., Medvezhiegorsk, . 100 Locomotivnaya Str ., Ulyanovsk, 432012 Karelia Republic, 186350 Tel .: (+7-8422) 78-6900 Tel .: (+7-81434) 57-420, 59-218

Branch in Perm Branch in Pskov 55 Nikolaya Ostrovskogo Str ., Perm, 614007 10B Grazhdanskaya Str ., Pskov, 180017 Tel ./ fax: (+7-342) 210-6581; . Tel ./ fax: (+7-8112) 73-7150; . e-mail: info@perm .bnk ru. e-mail: info@pskov .bnk .ru 98 transcreditbank. Annual Report 2008 Chapter 7. Reference Information 99

Additional office in Velikie Luki Operations office in Volhov 26/12 Lenina Av ., Velikie Luki, Pskov Region, 182100 1 Privokzaknaya Sq ., Volhov, . Tel .: (+7-81153) 55-070 Leningrad Region, 187400 Tel .: (+7-81363) 75-795, 75-796, 75-797

Branch in Samara Operations office in Vyborg 66А Nikitinskaya Str ., Samara, 443041 8 lit .1, Zheleznodorozhnaya Str ., Vyborg, . Tel .: (+7-846) 242-7041, 247-6259; fax: (846) 242-7967; . Leningrad Region, 188800 e-mail: info@samara .bnk ru. Tel .: (+7-81378) 54-602, 54-790, 54-829, 54-944

Additional office in Kinel Operations office in Kirishi 84А Mayakovskogo Str ., Kinel, Samara Region, 446430 10A Pobeda Av ., Kirishi, Leningrad Region, 187110 Tel .: (+7-84663) 61-389, 63-570 Tel .: (+7-81368) 54-645, 54-229

Additional office in Syzran Operations office in Veliki Novgorod 22 Oktyabrskaya Str ., Syzran, Samara Region, 446026 9 Karla Marksa Str ., Veliki Novgorod, 173002 Tel .: (+7-8464) 91-6053, 90-3112 Tel .: (+7-8162) 73-1234, 78-6406

Additional office in Tolyatti Cash Desk “Ploschad Ostrovskogo” in Saint-Petersburg 48А Banykina Str ., Tolyatti, Samara Region, 445054 2 Ostrovskogo Sq ., Saint-Petersburg, 191023 Tel .: (+7-8482) 26-5266, 26-1734 Tel .: (+7-812) 380-5335, 380-5336

Branch in Saint-Petersburg Branch in Saratov 1/4 lit .А Nevsky Av ., Saint-Petersburg, 191186 9/11 Dzerzhinskiy F .E ..Str ., Saratov, 410600 Tel ./ fax: (+7-812) 703-4430; . Tel .: (+7-8452) 26-1199; fax: (+7-8452) 26-3388; . e-mail: info@spb .bnk .ru e-mail: info@saratov .bnk .ru Additional office “Baltiyskiy” in Saint-Petersburg 120 lit .1, Naberezhnaya Obvodnogo Kanala, . Additional office “Volzhsky» in Saratov Saint-Petersburg, 198095 8 Moskovskaya Str ., Saratov, 410031 Tel .: (+7-812) 702-6915 Tel .: (+7-8452) 41-6892

Additional office “Izmaylovskiy” in Saint-Petersburg Additional office «Kirovsky» in Saratov 4 lit .A Izmaylovskiy Av ., Saint-Petersburg, 190005 57 Atkarskaya Str ., Saratov, 410005 Tel .: (+7-812) 703-4438 Tel .: (+7-8452) 41-1644

Additional office “Ladozhskiy” in Saint-Petersburg Additional office «Oktyabrskiy» in Saratov 73 lit .A Zanevskiy Av ., Saint-Petersburg, 193215 4 2nd Station Side-Str ., Saratov, 410004 Tel .: (+7-812) 703-3423, 703-3424 Tel .: (+7-8452) 41-2206

Additional office “Moskovsky” in Saint-Petersburg Additional office “Volsky” in Sennoy 143 lit .A, Moscovsky Av ., . 36B Privokzalnaya Str ., Sennoy Vil ., . Saint-Petersburg, 196105 Volsky District, Saratov Region, 412975 Tel .: (+7-812) 702-6918, 702-6920 Tel .: 73-966, 73-880 (railway) 100 transcreditbank. Annual Report 2008 Chapter 7. Reference Information 101

Additional office in Ershov Additional office in Rzhev 2A 50-anniversary of October Str ., Ershov, . 44 B .Spasskaya Str ., Rzhev, Tver Region, 171380 Saratov Region, 413503 Tel .: (+7-48232) 20-283 Tel .: (+7-84564) 52-243

Additional office in Rtischevo Branch in Tomsk 5 Krasnaya Str ., Rtischevo, Saratov Region, 412030 51А, bldg 15, Kirova Str ., Tomsk, 634041 Tel .: (+7-84540) 41-962, 43-958 Tel ./ fax: (+7-3822) 56-5860; . e-mail: info@tomsk .bnk .ru Additional office “Engelsky” in Engels 56 Tikhaya Str ., Engels, Saratov Region, 413100 Branch in Tula Tel .: (+7-8453) 75-3859 2G Demonstration Str ., Tula, 300041 Tel .: (+7-4872) 21-0091, 21-0093; fax: (+7-4872) 21-0094; . Cash desk #1 in Saratov e-mail: info@tula .bnk .ru 1 Privokzaknaya Sq ,. Saratov, 410012 Tel .: (+7-8452) 41-0563 Additional Office # 1 in Tula 52/83 Lenina Av ./L .Tolstogo Str ., Tula, 300012 Tel .: (+7-4872) 25-1878 Branch in Sochi 22 Gorkiy Side-Str ,. Sochi, Krasnodar Region, 354000 Additional office in Novomoskovsk Tel ./fax: (+7-8622) 62-2659, 62-2718; . 36/14 Komsomolskaya/Oktyabrskaya Str ., . e-mail: info@sochi .bnk .ru Novomoskovsk, Tula Region, 301650 Tel .: (+7-48762) 30-424, 61-137

Branch in Tver 47/102 Kominterna Str ., Tver, 170002 Branch in Tyumen Tel .: (+7-4822) 34-6138; fax: (+7-4822) 35-9992; . 62 Pervomaiskaya Str ., Tyumen, 625000 e-mail: info@tver .bnk ru. Tel ./ fax: (+7-3452) 62-3275; . e-mail: info@tumen .bnk .ru Additional office #1 in Tver 39 Simeonovskaya Str ., Tver, 170000 Tel .: (+7-4822) 77-7344 Branch in Ufa 83 Lenina Str ., Ufa, Bashkortostan Republic, 450006 Tel ./ fax: (+7-347) 251-7770; . Additional office #2 in Tver e-mail: info@ufa .bnk .ru 31 Chernyshevskogo Str ., Tver, 170000 Tel .: (+7-4822) 32-0538 Branch in Khabarovsk Additional office #3 in Tver 80 Komsomolskaya Str ., Khabarovsk, 680000 43B Peterburgskoye Sh ., Tver, 170003 Tel .: (+7-4212) 31-1780; fax: (4212) 30-0587; . Tel .: (+7-4822) 55-9926 e-mail: info@khb .bnk .ru

Additional office in Bologoe Additional office #1 in Khabarovsk 5 Kirova Str ., Bologoe, Tver Region, 171070 67 Komsomolskaya Str ., Khabarovsk, 680000 Tel .: (+7-48238) 24-547, 24-681 Tel .: (+7-4212) 31-1949 102 transcreditbank. Annual Report 2008 Chapter 7. Reference Information 103

Additional office #2 in Khabarovsk Additional office in Chelyabinsk 23 Klubnaya Str ., Khabarovsk, 680032 1 Privokzalnaya Sq ., Chelyabinsk, 454111 Tel .: (+7-4212) 38-2471 Tel .: (+7-351) 268-7813, 268-1692

Additional office in Vanino Additional office in Zlatoust 1 Zheleznodorozhnaya Str ., Vanino Vil ., . 186 Anosova Str ., Zlatoust, Chelyabinsk Region, 456205 Khabarovsk Region, 682860 Tel .: (+7-35136) 68-591 Tel .: (+7-42137) 64-317 Additional office in Kartaly Additional office in Vysokogorny 1 Ordzhonikidze Str ., Kartaly, Chelyabinsk Region, 457300 1 Central Str ., Vysokogorny Vil ., Khabarovsk Region, 682855 Tel ./Fax: (+7-35133) 21-485 Tel .: (008) 528 (railway) Additional office in Magnitogorsk Additional office in Vyazemskiy 12 Lenin Av ., Magnitogorsk, Chelyabinsk Region, 455001 38А Kotlyara Str ., Vyazemskiy, Khabarovsk Region, 682950 Tel .: (+73519) 42-1564, 42-1565 Tel .: (+7-42153) 36-107, 36-108 Branch in Yuzhno-Sakhalinsk Additional office in Komsomolsk-na-Amure 20 Karla Marksa Str ., Yuzhno-Sakhalinsk, 693000 45/2 Vokzalnaya Str ., Komsomolsk-na-Amure, . Tel .: (+7-4242) 46-0500; fax: (+7-4242) 46-0541; . Khabarovsk Region, 681000 e-mail: dopusah@bnk .ru Tel .: (+7-4217) 53-3162, 52-8436

Additional office in Novy Urgal Branch in Yaroslavl 2 Kievskaya Str ., Noviy Urgal Vil ., . 21 Uglichskaya Str ., Yaroslavl, 150054 Khabarovsk Region, 682071 Tel .: (+7-4852) 79-3484; fax: (+7-4852) 45-8749; . Tel .: (+7-42149) 54-384, 62-210 e-mail: info@yar .bnk .ru

Operations office in Birobidzhan Operations office in Buy 9 Dzerzhinskiy Str ., Birobidzhan, 679000 52 10-anniversary of October Str ., . Tel .: (+7-42622) 20-144, 23-149, 23-152, 68-393 Buy, Kostroma Region, 157006 Tel .: (+7-49435) 47-727 Operations office in Obluchye 20 Denisova Str ., Obluchye, 679100 Operations office in Ivanovo Tel .: (+7-42666) 42-993, 44-082 3 Vokzalnaya Str ., Ivanovo, Ivanovo Region, 153002 Tel .: (+7-4932) 37-6383 Operations office in Tynda 1 Privokzalnaya Str ., Tynda, Amur Region, 676282 Operations office in Sharya Tel .: (+7-41656) 54-899, 72-557 7 Chapaev Str ., of ..2, Sharya, Kostroma Region, 157500 Tel .: (+7-49449) 57-735

Branch in Chelyabinsk Credit and cash office in Arkhangelsk 60 Tsvillinga Str ., Chelyabinsk, 454111 8 Dzerzhinskogo Av ., Arkhangelsk, . Tel ./fax: (+7-351) 268-4306; . Arkhangelsk Region, 163051 e-mail: info@chel .bnk .ru Tel .: (+7-8182) 67-2591, 67-2597 104 transcreditbank. Annual Report 2008 Chapter 7. Reference Information 105

Credit and cash office in Vologda Additional office in Belorechensk 7 Puteyskaya Str ., Vologda, 160009 63 Depovskaya Str ., Belorechensk, Krasnodar Region, 352631 Tel .: (+7-8172) 79-2168 Tel .: (+7-86155) 22-025

Credit and cash office in Cherepovets Additional office in Georgievsk 33 Pobedy Av ., Cherepovets, . 52 Pushkin Str ., Georgievsk, Stavropol Region, 357800 Vologda Region, 162600 Tel .: (+7-87951) 51-202 Tel .: (+7-8202) 51-1472 Additional office in Kropotkin 25 Krasnaya Str ., Kropotkin, Krasnodar Region, 352380 Tel .: (+7-86138) 63-772 Subsidary Banks Additional office at Likhaya station MeTraComBank 22 Stroiteley Side-Str ., Kamensk-Shakhtinskiy, . 4 Theater Sq ., Rostov-on-Don, 344019 Rostov Region, 347820 Tel .: (+7-863) 259-4353; fax: (+7-863) 291-4193; . Tel .: (+7-86365) 28-800 e-mail: info@mtkb ru. Additional office in Nevinnomyssk Branch in Vladikavkaz 57A Revolutsionnaya Str ., Nevinnomyssk, . 2 Dimitrova Str ., Vladikavkaz, Severnaya . Stavropol Region, 357100 Osetiya – Alaniya Republic, 362040 Tel .: (+7-86554) 55-006 Tel .: (+7-8672) 55-3391 Additional office in Novorossiysk 25 Zhukovskogo Str ., Novorossiysk, Krasnodar Region, 353906 Branch in Krasnodar Tel ./Fax: (+7-8617) 26-5173 145/1 Krasnaya Str ., Krasnodar, 350020 Tel .: (+7-861) 259-1459 Additional office in Pyatigorsk 8 Kozlova Str ., Pyatigorsk, Stavropol Region, 357500 Branch in Makhachkala Tel ./Fax: (+7-8793) 33-3301 10 Emirova Str ., Makhachkala, . Dagestan Republic, 367012 Additional office in Timashevsk Tel ./Fax: (+7-8722) 68-3134 165a Lenin Str ., Timashevsk, Krasnodar Region, 352708 Tel .: (+7-86130) 45-050 Branch in Mineralniye Vody 2 22-nd Partsyezda Str ., Mineralniye Vody, . Additional office in Tuapse Stavropol Region, 357203 1 Privokzalnaya Sq ., Tuapse, Krasnodar Region, 352800 Tel .: (+7-87922) 69-285 Tel .: (+7-86167) 21-316

Branch in Stavropol Cash desk in Bataysk 2A Dzerzhinskogo Str ., Stavropol, 355008 1 Kirova Str ., Bataysk, Rostov Region, 346880 Tel .: (+7-8652) 28-2844 Tel .: (+7-863) 238-2830

Additional office in Bataysk Cash desk in Kropotkin 1 Kirova Str ., Bataysk, Rostov Region, 346880 25 Krasnaya Str ., Kropotkin, Krasnodar Region, 352380 Tel .: (+7-863) 238-2830 Tel .: (+7-86138) 63-772 106 transcreditbank. Annual Report 2008 Chapter 7. Reference Information 107

Cash desk at Likhaya station Additional office in Zavitinsk 34В Sovetskaya Str ., Kamensk-Shakhtinskiy, . Railway distance #18, 16a Kirov Str ., . Rostov Region, 346820 Zavitinsk, Amur Region, 676650 Tel .:73-064 (railway) Tel .: (+7-41636) 500 (railway)

Cash desk in Makhachkala Additional office in Magdagachi 10 Emirova Str ., Makhachkala, 367012 16 M ..Gorky Str ., Magdagachi Vil ., . Tel .: (+7-8722) 68-3134 Amur Region, 676121 Tel .: (+7-41653) 22-67 (railway) Cash desk in Rostov-on-Don 112A/187 Mechnikova Str ., Rostov-on-Don, 344013 Additional office in Svobodniy Tel .: (+7-863) 242-9000 (ext ..116) 92 Nekrasova Str ., Svobodniy, . Amur Region, 676400 Cash desk in Tikhoretsk Tel .: (+7-41643) 37-95 (railway) 24 Putevaya engineering station, Tikhoretsk, . Krasnodar Region, 352126 Additional office in Skovorodino Tel .: (0266) 20-52 (railway) 36 Pobeda Str ., Skovorodino, . Amur Region, 676060 Cash desk in Tikhoretsk Tel .: (+7-41654) 22-342 1 Oktyabrskaya Str ., Tikhoretsk, Krasnodar Region, 352120 Tel .: (0266) 38-62 (railway) Additional office in Shimanovsk Cash desk in Tuapse 5 Vokzalnaya Str ., Shimanovsk, . 1 Privokzalnaya Str ., Tuapse, Krasnodar Region, 352800 Amur Region, 676301 Tel .: (+7-86167) 72-615 Tel .: (+7-41651) 20-37 (railway)

Superbank Chitapromstroybank 135 Krasnoflotskaya Str ., Blagoveshensk, 675000 136 Chkalova Str ., Chita, 672000 Tel ./fax: (+7-4162) 23-2305; . Tel .: (+7-3022) 35-9770; . e-mail: general@sb .tsl .ru e-mail: bank@psb .chita .ru

Additional office in Belogorsk Additional office #1 in Chita 18 Pobedy Str ,. Belogorsk, Amur Region, 676500 38 Stolyarova Str ., Chita, 672010 Tel .: (+7-41641) 33-171 (railway) Tel .: (+7-3022) 32-5127 Additional office in Bureya Railway distance #19, Bureya Vil ., . Additional office #2 in Chita Amur Region, 676700 1 Komsomola Str ., Chita, 672014 Tel .: (+7-41634) 994 (railway) Tel .: (+7-3022) 21-2502

Additional office in Erofey Pavlovich Additional office in Borzya 22 Lenin Str ,. Erofey Pavlovich Vil ., . 31 Lenina Str ., Borzya, . Amur Region, 676000 Chita Region, 674610 Tel .: (+7-41654) 99-310 Tel .: (+7-30233) 31-241 108 transcreditbank. Annual Report 2008 Chapter 7. Reference Information 109

Additional office in Zabaikalsk Cash desk at Zabaikalsk Station 6A Sovetskaya Vil ., Chita Region, 674650 1 Zheleznodorozhnaya Str ., Zabaikalsk Station, . Tel .: (+7-30251) 21-226 Chita Region, 674650 Tel .: (+7-30251) 22-511 Additional office in Karymskoe 1 Shemelina Str ., Karymskoe Vil ., . Cash desk at Mogzon Station Chita Region, 673330 9 Vokzalnaya Str ., Mogzon Station, . Tel .: (+7-30234) 31-099 Chita Region, 673240 Tel .: (+7-30237) 21-383 Additional office in Mogocha 2 Klubnaya Str ., Mogocha, Chita Region, 673732 Cash desk in Chita Tel .: (+7-30241) 61-434 34 Leningradskaya Str ., Chita, Chita Region, 672000 Tel .: (+7-3022) 97-7818 Additional office in Petrovsk-Zabaykalsk 9, District 1, Petrovsk-Zabaykalsk, . Cash desk in Yasnogorsk Chita Region, 673005 Premise of branch of JSC «ОGК-3 the Haranovsky . Tel .: (+7-30236) 31-514 state district power station», Yasnogorsk Vil ., . Chita Region, 674520 Additional office in Khilok Tel .: (+7-30253) 51-671 11 Dzerzhinskogo Str ., Khilok Vil ., . Chita Region, 673200 Tel .: (+7-30237) 21-383 Bank “Yugo-Vostok” Additional office in Chernyshevsk 4 Platonova, Voronezh, 394006 37 Pervomayskaya Str ., Chernyshevsk Vil, . Tel .: (+7-4732) 52-1442; fax: (+7-4732) 35-6667; . Chita Region, 673460 e-mail: info@yvb .ru Tel .: (+7-30265) 23-544 Additional office in Belgorod Additional office in Shilka 23 Belgorodskogo Polka Str ., Belgorod, 308000 48 Lenin Str ,. Shilka, Chita Region, 673370 Tel .: (+7-4722) 33-3088 Tel .: (+7-30244) 24-056 Additional office in Elets Additional office in Yasnogorsk 6 Ordzhonikidze Str ., Elets, 399773 6 Stepnoy, Yasnogorsk Vil ., Chita Region, 674520 Tel .: (+7-47467) 21-492 Tel .: (+7-30253) 51-566 Additional office in Liski Cash desk in Aksenovo-Zilovskoye 17 Kommunisticheskaya Str ., Liski, . 1 Zapadnaya Str ., Aksenovo-Zilovskoye Vil ., . Voronezh Region, 397900 Chernyshevsky District, 673497 Tel .: (+7-47391) 41-280 Tel .: (+7-30265) 21-991 Additional office in Michurinsk Cash desk in Amazar Privokzalnaya Sq ., Michurinsk, . 21 Pochtovaya Str ., Amazar Vil, Chita Region, 673775 Tambov Region, 393760 Tel .: (+7-30241) 62-185 Tel .: (+7-47545) 59-951 110 transcreditbank. Annual Report 2008 Chapter 7. Reference Information 111

Additional office “Otrozhka” in Voronezh 7.5. Address and Payment Details 172 Lenin Av ., Voronezh, 394063 Tel .: (+7-4732) 20-1189 Full name of the Bank: Additional office “Severniy” in Voronezh Joint Stock Company TransCreditBank 38A Generala Lizyukova Str ., Voronezh, 394077 Tel .: (+7-4732) 96-4970 Abbreviated name: JSC TransCreditBank Additional office “Stadion” in Voronezh 26 Studencheskaya Str ., Voronezh, 394000 Legal/mailing address: Tel .: (+7-4732) 65-2246, 52-2968 37A Novaya Basmannaya Str., Moscow, 105066

Additional office in Gryazi Telephone: (495) 788-0880 17 Pravdy Str ., Gryazi, Lipetsk Region, 399050 Fax: (495) 788-0879 Tel .: (+7-47461) 22-186 E-mail: [email protected] Additional office in Povorino 23 Lineynaya Str ., Povorino, Voronezh Region, 397350 Web-site: www.tcb.ru Tel .: (+7-47376) 22-493 Telex: 485398 TRCD RU Additional office in Rossosh SWIFT Code: TRCDRUMM 1B Tankistov Str ., Rossosh, Voronezh Region, 396651 Tel .: (+7-47396) 52-841 Reuters Dealing Code: TRCM

Additional office “Tambov” in Tambov Correspondent account: 56 Internatsionalnaya Str ., Tambov, 392036 30101810600000000562 in OPERU of Moscow GTU of the Bank of Russia Tel .: (+7-4752) 71-9540 INN: 7722080343 Cash desk “Vokzalnaya” in Voronezh BIC: 044525562 1 Chernyakhovskogo Sq ., Voronezh, 394003 Tel .: (+7-4732) 65-4881 KPP: 997950001

OGRN: 1027739048204 Vostokbusinessbank 20a Voennoe Sh ., Vladivostok, Primosrk Region, 690088 OKPO: 17529124 Tel .: (+7-4232) 65-0861; fax: (+7-4232) 45-5485; . OKOGU: 15001 e-mail: vbb@vbb .ru OKATO: 45286555000 Additional office #2 in Vladivostok 27 Octyabrskaya Str ., Vladivostok, Primosrk Region, 690091 OKFS: 41 Tel .: (+7-4232) 74-0351 OKVED: 65.12

Additional office in Pogranichniy OKOPF: 47 7 Vokzalnaya Str ., Pogranichniy Vil ., Primosrk Region, 692582 Tel .: (+7-42345) 57296 ОКТМО: 45375000

8. Consolidated Financial Statements 114 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 115

Consolidated Financial Statements circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting with Independent Auditors’ Report policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as at December 31, 2008, and its financial Independent auditors’ report performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

To the Shareholders and Board of Directors of TransCreditBank Emphasis of Matter We have audited the accompanying consolidated financial statements of TransCredit- We draw attention to Note 28 to these consolidated financial statements, which Bank and its subsidiaries (the «Group»), which comprise the consolidated balance sheet as discloses a significant concentration of operations with its parent, Joint Stock Company at December 31, 2008, and the consolidated statement of income, consolidated statement «Russian Railways» and its associated enterprises and other state-controlled entities. of changes in equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Management's Responsibility for the Financial Statements March 31, 2009 Management is responsible for the preparation and fair presentation of these conso- lidated financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the 116 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 117

Consolidated balance sheet as at December 31, 2008 Notes 2008 2007 (in thousands of Russian Roubles) Equity 19 Share capital 3,973,595 3,373,595 Notes 2008 2007 Share premium 4,200,000 – Treasury shares – (203) Assets Unrealized (loss)/gain on available-for-sale securities, net of tax (156,279) 56,472 Cash and cash equivalents 5 63,445,438 15,605,013 Retained earnings 7,960,400 4,977,820 Obligatory reserve with Central Bank 220,210 1,517,237 Securities at fair value through profit or loss 6 4,481,728 12,010,217 Total equity attributable to shareholders of the Bank 15,977,716 8,407,684 Securities at fair value through profit or loss pledged 6 – 5,975,358 Minority interest 292,872 242,591 under repurchase agreements Total equity 16,270,588 8,650,275 Amounts due from credit institutions 7 15,764,440 8,039,395 Total liabilities and equity 244,381,792 142,023,461 Derivative financial assets 29 1,914,427 131,466 Loans to customers 8 140,649,124 91,126,457 Investment securities: 9 – available-for-sale 580,852 1,529,215 – held-to-maturity 9,637,720 412,673 Investments in associates 10 1,139,510 609,445 Current tax assets 4,426 26,226 Deferred tax assets 24 444,668 104,099 Property and equipment 11 3,931,972 3,289,497 Intangible assets 12 101,294 117,027 Other assets 13 2,065,983 1,530,136 Total assets 244,381,792 142,023,461

Liabilities Amounts due to Central Bank 14 32,771,160 2,004,822 Amounts due to credit institutions 15 19,857,200 29,184,111 Derivative financial liabilities 29 103,144 394,942 Amounts due to customers 16 131,938,783 70,966,995 Debt securities issued 17 33,106,792 21,935,014 Payables for acquisition of property 11 – 1,779,130 Current tax liabilities 440,217 5,131 Deferred tax liabilities 24 106,470 25,365 Other liabilities 18 1,675,408 765,614 Subordinated debt 28 8,112,030 6,312,062 Total liabilities 228,111,204 133,373,186 118 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 119

Consolidated income statement for the year ended December 31, 2008 Notes 2008 2007 (in thousands of Russian Roubles) Profit before income tax expense 4,761,631 3,772,681 Notes 2008 2007 Income tax expense 24 (1,264,592) (1,074,270) Interest income Profit for the year 3,497,039 2,698,411 Loans to customers 16,408,969 9,543,076 Attributable to: Debt securities 1,128,369 787,985 Shareholders of the parent 3,422,093 2,642,510 Amounts due from credit institutions 1,410,677 594,094 Minority interest 74,946 55,901 18,948,015 10,925,155 Interest expense Amounts due to customers (4,449,094) (2,373,555) Debt securities issued (2,585,418) (1,108,017) Amounts due to credit institutions (1,976,989) (855,494) (9,011,501) (4,337,066)

Net interest income 9,936,514 6,588,089 Impairment of interest earning assets 7, 8, 9 (3,686,041) (142,430) Net interest income after impairment 6,250,473 6,445,659 of interest earning assets

Fee and commission income 21 5,189,958 2,941,359 Fee and commission expense 21 (1,114,813) (406,758) Net fee and commission income 4,075,145 2,534,601

Gains less losses from securities 496,737 53,737 at fair value through profit or loss Gains less losses from investment (225,447) 14,549 securities available-for-sale Gains less losses from foreign currencies – translation differences (1,380,339) 514,744 – dealing in foreign currencies 22 2,823,699 (277,515) Loss on initial recognition of loans to customers at fair value (149,755) – Other income 398,538 268,812 Other non-interest income 1,963,433 574,327

Salaries and other employee benefits 23 (4,236,853) (3,057,696) Administrative expenses 23 (2,784,082) (2,391,262) Depreciation and amortization 11, 12 (405,716) (317,161) Impairment of other assets 20 (100,769) (15,787) Other non-interest expense (7,527,420) (5,781,906) 120 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 121

Consolidated statement of changes in equity attributable to shareholders of the bank for the year ended December 31, 2008 (in thousands of Russian Roubles)

attributable to shareholders of the bank Paid-in share capital Share premium shares Treasury Retained earnings Unrealized gain/(loss) on available-for-sale securities, net of tax Total Minority interest equity Total

Realized gains on investment securities Paid-in share capital Share premium shares Treasury Retained earnings Unrealized gain/(loss) on available-for-sale securities, net of tax Total Minority interest equity Total – – – – (78,569) (78,569) – (78,569) available-for-sale reclassified to the income December 31, 2006 3,373,595 – – 2,619,068 (16,158) 5,976,505 186,865 6,163,370 statement, net of tax Realised gains on Net change in fair investment securities value of available- available-for-sale – – – – (134,182) (134,182) – (134,182) – – – – (11,057) (11,057) – (11,057) for-sale securities, reclassified to the net of tax income statement, net of tax Total expenses recognized directly – – – – (212,751) (212,751) – (212,751) Net change in fair in equity value of available- – – – – 83,687 83,687 – 83,687 for-sale securities, Profit for the year – – – 3,422,093 – 3,422,093 74,946 3,497,039 Total income and net of tax – – – 3,422,093 (212,751) 3,209,342 74,946 3,284,288 Total income expenses for the year recognized directly – – – – 72,630 72,630 – 72,630 Share issue (Note 19) 600,000 4,200,000 – – – 4,800,000 – 4,800,000 in equity Dividends Profit for the year – – – 2,642,510 – 2,642,510 55,901 2,698,411 to the shareholders – – – (444,575) – (444,575) – (444,575) Total income of the Bank (Note 19) – – – 2,642,510 72,630 2,715,140 55,901 2,771,041 Dividends of subsidiaries for the year – – – – – – (156) (156) Dividends to minority shareholders to the shareholders Purchase of treasury – – – (282,311) – (282,311) – (282,311) – – (13,266) (91,094) – (104,360) – (104,360) of the Bank shares (Notes 2 and 19) (Note 19) Acquisition of minority – – – 3,615 – 3,615 (6,991) (3,376) Dividends interest (Note 2) of subsidiaries – – – – – – (175) (175) Purchase of treasury to minority shares by subsidiaries – – – – – – (17,518) (17,518) shareholders (Note 19) Purchase Sale of treasury – – (203) (1,447) – (1,650) – (1,650) – – 13,469 92,541 – 106,010 – 106,010 of treasury shares (Note 19) shares (Note 19) December 31, 2007 3,373,595 – (203) 4,977,820 56,472 8,407,684 242,591 8,650,275 December 31, 2008 3,973,595 4,200,000 – 7,960,400 (156,279) 15,977,716 292,872 16,270,588 122 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 123

Consolidated cash flow statement for the year ended December 31, 2008 2008 2007 (in thousands of Russian Roubles) Property and equipment sold 23,140 7,684 Intangible assets purchased (87,497) (153,485) 2008 2007 Settlement of payables for acquisition of property (1,779,130) 117,274 Cash flows from operating activities Net cash used in investing activities (3,505,255) (2,054,072) Interest income received 18,480,349 10,634,388 Cash flows from financing activities Interest expense paid (8,140,244) (4,032,324) Share issue (Note 19) 4,800,000 – Fees and commissions received 5,163,683 2,902,502 Treasury shares sold (Note 19) 106,010 – Fees and commissions paid (1,113,499) (416,557) Treasury shares purchased (Note 19) – (1,650) Gains less losses from securities (realized) 91,902 28,522 Debt securities issued 31,514,502 25,008,161 Gains less losses from foreign currencies (realized) 1,186,270 103,680 Debt securities redeemed (22,639,487) (9,695,847) Other income 407,816 303,950 Dividends paid (332,091) (282,211) Salaries and salary related expenses (3,870,006) (3,057,189) Proceeds from issue of subordinated debt 1,800,000 3,000,000 Administrative expenses (2,989,522) (2,345,682) Net cash from financing activities 15,248,934 18,028,453 Cash flow from operating activities before 9,216,749 4,121,290 changes in operating assets/liabilities Effect of exchange rates on cash and cash equivalents 844,135 (101,810) Net change in cash and cash equivalents 47,840,425 5,115,194 Net (increase)/decrease in operating assets Obligatory reserve with Central Bank 1,297,027 (92,014) Cash and cash equivalents at the beginning of the period 15,605,013 10,489,819 Securities at fair value through profit or loss 3,713,719 (12,477,104) Cash and cash equivalents at the end of the period (Note 5) 63,445,438 15,605,013 Amounts due from credit institutions (5,754,501) (4,374,280) Loans to customers (51,973,025) (33,072,347) Other assets (156,518) (1,085,708)

Net increase/(decrease) in operating liabilities Amounts due to Central Bank 30,467,902 (207,533) Amounts due to credit institutions (9,359,459) 19,919,849 Amounts due to customers 58,874,968 17,270,691 Other liabilities (44,417) 294,519 Net cash from (used in) operating 36,282,445 (9,702,637) activities before income tax Income tax paid (1,029,834) (1,054,740) Net cash from (used in) operating activities 35,252,611 (10,757,377)

Cash flows from investing activities Associates acquired (530,065) (576,551) Held-to-maturity securities purchased (384,665) – Available-for-sale securities acquired (2,632,213) (1,879,659) Available-for-sale securities sold 2,813,059 875,680 Property and equipment purchased (927,884) (445,015) 124 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 125

Notes to 2008 Consolidated Financial Statements Shareholder 2008, 2007, (in thousands of Russian Roubles, % % unless otherwise indicated) Joint Stock Company “Russian Railways” 55.07 75.00 JSC “TransFinGroup” trustee of pension funds of NGPF “Blagosostoyanie” 15.37 – JSC “RVM Kapital” trustee of Closed Investment Equity Fund “Magistral” 9.36 8.14 1. Principal Activities JSC “RVM Kapital” trustee of Closed Investment Equity Fund “Russky Transit” 8.81 10.59 Other 11.39 6.27 The presented consolidated financial statements contain the accounts of Joint Stock Total 100.00 100.00 Company “TransCreditBank” and its subsidiaries (the “Group”). TransCreditBank (the “Bank”) is the leading bank in the Group. It was formed on November 4, 1992, as a closed joint stock company under the laws of the Russian Federation. In April 2000, it was reorganized into an open joint stock company under the laws of the 2. Basis of Preparation Russian Federation. These consolidated financial statements have been prepared in accordance with The Bank operates under a general banking license issued by the Central Bank of International Financial Reporting Standards (“IFRS”). Russia (the “CBR”) on October 23, 2002, and licenses for securities operations from the The Group is required to maintain its records and prepare its financial statements Federal Commission on Securities Market, granted on December 20, 2002. The general for regulatory purposes in Russian roubles in accordance with Russian accounting and banking license was renewed by the CBR on July 13, 2005. The Bank’s registered legal banking legislation and instructions of the CBR (“RAL”). These consolidated financial address is 37A, Novaya Basmannaya Street, Moscow, Russia, 105066. statements are based on the Group’s RAL books and records, as adjusted and reclassified The Bank’s main office is located in Moscow and it has 39 branches as at Decem- in order to comply with IFRS. ber 31, 2008 (2007: 32) in Ekaterinburg, Cheliabinsk, Samara, Nizhny Novgorod, Kalinin- The consolidated financial statements have been prepared under the historical cost grad, Novokuznetsk, Yaroslavl, Saratov, Uzhno-Sakhalinsk, Krasnoyarsk, Irkutsk, Astrakhan, convention except as disclosed in the accounting policies below. For example, trading Orenburg, Novosibirsk, Omsk, Perm, Kurgan, Penza, St-Petersburg, Volgograd, Tver, and available-for-sale securities, derivative financial instruments have been measured at Izhevsk, Murmansk, Khabarovsk, Petrozavodsk, Pskov, Tula, Barnaul, Kaluga, Bryansk, fair value. Kemerovo, Kursk, Tomsk, Ufa, Vladivostok, Tumen, Orel, Kazan, Sochi and 116 operating The Russian Ruble is utilized as functional currency of the Group’s Russian entities as outlets (2007: 69). the majority of the transactions are denominated, measured, or funded in Russian Rubles. The Group’s principal subsidiaries are banks and financial companies, formed under Transactions in other currencies are treated as transactions in foreign currencies. These the laws of the Russian Federation (Note 2). consolidated financial statements are presented in thousands of Russian Rubles (“Rbth”), The Bank and the Group were formed with the prime purpose to provide a full range unless otherwise indicated. of banking services and perform treasury functions to the Ministry of Railways (“MPS”) of the The Group’s operations are in Russia and highly integrated and primarily constitute Russian Federation and a number of regional railways, which were reorganized into state a single industry segment, commercial banking. Accordingly for the purposes of IAS 14 owned Joint Stock Company “Russian Railways” (OAO “RZhD”) in 2003. TransCreditBank “Segment Reporting” the Group is treated as one business and geographical segment. and other banks of the Group accept deposits from the public, make loans, transfer payments in Russia and abroad, exchange currencies and provide banking services for its corporate and retail customers. Inflation accounting On December 20, 2007, in accordance with the presidential decree of February 15, The Russian economy was considered hyperinflationary until December 31, 2002. 2007, 75% of the Bank’s shares owned by the Federal Agency for Management of the Federal As such, the Group applied IAS 29 “Financial Reporting in Hyperinflationary Economies”. Property were transferred to the charter capital of OAO “RZhD”. As at December 31, 2008 The effect of applying IAS 29 is that non-monetary items, including components of equity, OAO “RZhD” is the ultimate parent of the Bank and the Group. were restated to the measuring units current at December 31, 2002, by applying the relevant As presented in the table below, as at December 31, 2008, four shareholders (2007: inflation indices to the historical cost, and that these restated values were used as a basis three) owned more than 5% of the paid-in share capital: for accounting in subsequent periods. 126 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 127

Subsidiaries 3. Summary of Accounting Policies Changes in accounting policies Major subsidiaries of the Bank included in these consolidated financial statements are: During the year the Group has adopted the following amended IFRS. The principal effects of these changes are as follows: Subsidiary Principal Ownership Ownership Registered activities interest 2008 interest 2007 legal address Reclassification of Financial Assets – Amendments to IAS 39 “Financial instruments: Teatralnaya sq., 4, Recognition and measurement” and IFRS 7 “Financial instruments: Disclosures” MeTraComBank Banking services 76.43% 76.43% Rostov-on-Don, Russia, 344019 Amendments to IAS 39 and IFRS 7 were issued on October 13, 2008 and allow

Chkalova st., 136, building 1, reclassification of non-derivative financial assets out of the held for trading category in Chitapromstroybank Banking services 75.00% 75.00% Chita, Russia, 672000 particular circumstances. The amendments also allow transfer of certain financial assets Verhneportovaya st., 1, from the available for sale category to loans and receivables category. The effective date of Vostok-Business Bank Banking services 99.90% 99.90% Vladivostok, Russia, 690003 those amendments is July 1, 2008. Any reclassification made in periods beginning on or after Platonova st., 4, Voronezh, November 1, 2008 shall take effect only from the date when the reclassification is made. The Bank Yugo-Vostok Banking services 78.48% 75.00% Russia, 394006 disclosures about reclassifications made are presented in Notes 6 and 9. Krasnoflotskaya st., 135, Superbank Banking services 51.09% 51.09 Blagoveschensk, Russia, 675000 Future changes in accounting policies Kuusinena st.,6/3, Moscow, Dailys-Trade Financial services 100.00% 100.00% Standards and interpretations issued but not yet effective Russia, 123308

/ Strelbishensky st., 5/1, Moscow, Improvements to IFRS Decor-Estate Financial services 100.00% 100.00% Russia, 123317 In May 2008, the IASB issued amendments to IFRS, which resulted from the IASB’s Novaya Basmannaya st., 37A, annual improvements project. They comprise amendments that result in accounting changes TransCreditFactoring Factoring 100.00% 100.00% Moscow, Russia, 105066 for presentation, recognition or measurement purposes as well as terminology or editorial Novaya Basmannaya st., 37A, amendments related to a variety of individual IFRS standards. Most of the amendments are TransCreditLeasing Leasing 100.00% 100.00% Moscow, Russia, 105066 effective for annual periods beginning on or after January 1, 2009, with earlier application Novaya Basmannaya st., 37A, permitted. The Group is currently evaluating the potential impact that the adoption of the Finance Proekt Financial services – – Moscow, Russia, 105066 amendments will have on its consolidated financial statements. Closed Investment Pokrovka st., 42, Building 5, Financial services 99.9% 100.00% Equity Fund Profil Moscow, Russia, 105062 IAS 1 Presentation of Financial Statements (Revised) A revised IAS 1 was issued in September 2007, and becomes effective for annual periods beginning on or after January 1, 2009. This revised Standard separates owner and non-owner changes in equity. The statement of changes in equity will include only details The consolidated financial statements also include TransCredit Finance p.l.c., a special of transactions with owners, with non-owner changes in equity presented as a single line. purpose entity established for the purpose of issuance of debt securities (Note 17). In addition, the Standard introduces the statement of comprehensive income: it presents In March 2008, the Group acquired an additional interest of 3.48% in Bank Yugo-Vostok all items of recognised income and expense, either in one single statement, or in two linked for cash consideration of Rbth 3,376. statements. The Group is still evaluating whether it will have one or two statements. As of June 19, 2008, the Group has acquired currently exercisable potential voting rights over Finance Proekt through an option to purchase 75% of its voting rights and included this IAS 23 “Borrowing Costs”(Revised) entity to these consolidated financial statements. A revised IAS 23 Borrowing costs was issued in March 2007, and becomes effective As Finance Proekt did not constitute a business, the Group recognised this transaction for financial years beginning on or after January 1, 2009. The standard has been revised as an acquisition of its assets and liabilities. No cash was exchanged for this transaction. to require capitalisation of borrowing costs when such costs relate to a qualifying asset. Through acquisition of Finance Proekt the Group purchased 13,266,400 of its ordinary shares A qualifying asset is an asset that necessarily takes a substantial period of time to get which subsequently were sold (Note 19). ready for its intended use or sale. In accordance with the transitional requirements in the 128 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 129

Standard, the Group will adopt this as a prospective change. Accordingly, borrowing IFRS 3 “Business Combinations” (revised in January 2008) and IAS 27 “Consolidated costs will be capitalised on qualifying assets with a commencement date after January 1, and Separate Financial Statements” (revised in January 2008). 2009. No changes will be made for borrowing costs incurred to this date that have been The revised standards were issued in January 2008 and become effective for financial expensed. years beginning on or after July 1, 2009. Revised IFRS 3 introduces a number of changes in the accounting for business combinations that will impact the amount of goodwill recognised, Amendments to IAS 32 “Financial Instruments: Presentation” and IAS 1 “Presentation the reported results in the period that an acquisition occurs, and future reported results. of Financial Statements” – Puttable Financial Instruments and Obligations Arising on Revised IAS 27 requires that a change in the ownership interest of a subsidiary is accounted Liquidation for as an equity transaction. Therefore, such a change will have no impact on goodwill, nor will These amendments were issued in February 2008, and become effective for annual it give raise to a gain or loss. Furthermore, the revised standard changes the accounting for periods beginning on or after January 1, 2009. The amendments require puttable instruments losses incurred by the subsidiary as well as the loss of control of a subsidiary. The changes that represent a residual interest in an entity to be classified as equity, provided they satisfy introduced by the revised Standards must be applied prospectively and will affect only future certain conditions. These amendments will have no impact on the Group. acquisitions and transactions with minority interests.

Amendment to IAS 39 “Financial Instruments: recognition and measurement” – Eligible Amendments to IFRS 7 “Improving Disclosures about Financial Instruments” Hedged Items. Amendments to IFRS 7 “Improving Disclosures about Financial Instruments” were The amendment to IAS 39 was issued in August 2008, and becomes effective for annual issued in March 2009 and become effective for periods beginning on or after January 1, periods beginning on or after July 1, 2009. The amendment addresses the designation of 2009 with early application permitted. These Amendments introduce a three-level fair value a one-sided risk in a hedged item, and designation of inflation as a hedged risk or portion disclosure hierarchy that distinguishes fair value measurements by the significance of the in particular situations. It clarifies that an entity is permitted to designate a portion of the fair inputs used. In addition, the amendments enhance disclosure requirements on the nature value changes or cash flow variability of a financial instrument as hedged item. Management and extent of liquidity risk arising from financial instruments to which an entity is exposed. does not expect the amendment to IAS 39 to affect the Group’s financial statements as the These amendments will have no impact on the financial position or performance of the Group Group has not entered into any such hedges. but will result in more detailed disclosures regarding liquidity risk of the Group.

Amendments to IFRS 1 “First-time Adoption of IFRSs” and IAS 27 “Consolidated and IFRS 8 “Operating Segments” Separate Financial Statements” – Cost of an Investment in a Subsidiary, Jointly Controlled IFRS 8 becomes effective for annual periods beginning on or after January 1, 2009. Entity or Associate This Standard requires disclosure of information about the Group’s operating segments and These amendments were issued in May 2008, and become effective for annual replaces the requirement to determine primary (business) and secondary (geographical) periods beginning on or after January 1, 2009. The revision to IAS 27 will have to be applied reporting segments of the Group. Adoption of this Standard will not have any impact on the prospectively. The amendments to IFRS 1 allow an entity to determine the cost of investments financial position or performance of the Group but will result in detailed disclosures regarding in a subsidiary, jointly controlled entity or associate in its opening IFRS financial statements operating segments of the Group. in accordance with IAS 27 or using a deemed cost. The amendment to IAS 27 requires all dividends from a subsidiary, jointly controlled entity or associate to be recognized in IFRIC 13 “Customer Loyalty Programmes” the income statement in the separate financial statements. The new requirements affect IFRIC Interpretation 13 was issued in June 2007 and becomes effective for annual only the parent’s separate financial statements and do not have an impact on the consoli- periods beginning on or after July 1, 2008. This Interpretation requires customer loyalty award dated financial statements. credits to be accounted for as a separate component of the sales transaction in which they are granted and therefore part of the fair value of the consideration received is allocated to Amendments to IFRS 2 “Share-based Payment” – Vesting Conditions and the award credits and deferred over the period that the award credits are fulfilled. The Group Cancellations expects that this interpretation will have no impact on the Group's financial statements as Amendment to IFRS 2 were issued in January 2008 and become effective for annual no such schemes currently exist. periods beginning on or after January 1, 2009. This amendment clarifies the definition of vesting conditions and prescribes the accounting treatment of an award that is effectively IFRIC 15 “Agreements for the Construction of Real Estate” cancelled because a non-vesting condition is not satisfied. This amendment will have no IFRIC Interpretation 15 was issued in July 2008 and is applicable retrospectively for impact on the financial position or performance of the Group. annual periods beginning on or after January 1, 2009. IFRIC 15 clarifies when and how 130 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 131 revenue and related expenses from the sale of a real estate unit should be recognized if Subsidiaries an agreement between a developer and a buyer is reached before the construction of the Subsidiaries, which are those entities in which the Group has an interest of more than real estate is completed. The interpretation also provides guidance on how to determine one half of the voting rights, or otherwise has power to exercise control over their operations, whether an agreement is within the scope of IAS 11 “Construction Contracts” or IAS 18 are consolidated. Subsidiaries are consolidated from the date on which control is transferred “Revenue” and supersedes the current guidance for real estate in the Appendix to to the Group and are no longer consolidated from the date that control ceases. All intercom- IAS 18. The Group expects that this interpretation will have no impact on the Group's finan- pany transactions, balances and unrealised gains on transactions between group compa- cial statements. nies are eliminated; unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Where necessary, accounting policies for IFRIC 16 “Hedges of a Net Investment in a Foreign Operation” subsidiaries have been changed to ensure consistency with the policies adopted by the Group. IFRIC Interpretation 16 was issued in July 2008 and is applicable for annual periods beginning on or after October 1, 2008. This Interpretation provides guidance on identifying Acquisition of subsidiaries the foreign currency risks that qualify for hedge accounting in the hedge of net investment, The purchase method of accounting is used to account for the acquisition of subsidiaries where within the group the hedging instrument can be held and how an entity should by the Group. Identifiable assets acquired and liabilities and contingent liabilities assumed determine the amount of foreign currency gain or loss, relating to both the net investment in a business combination are measured initially at their fair values at the acquisition date, and the hedging instrument, to be recycled on disposal of the net investment. The Group irrespective of the extent of any minority interest. expects that this interpretation will have no impact on the Group's financial statements. The excess of purchase consideration over the fair value of the Group’s share of identifiable net assets is recorded as goodwill. If the cost of the acquisition is less than the fair IFRIC 17 “Distribution of Non-Cash Assets to Owners” value of the Group’s share of identifiable net assets of the subsidiary acquired the difference IFRIC Interpretation 17 was issued on 27 November 2008 and is effective for annual is recognised directly in the consolidated statement of income. periods beginning on or after July 1, 2009. IFRIC 17 applies to pro rata distributions of non- Minority interest is the interest in subsidiaries not held by the Group. Minority interest cash assets except for common control transactions and requires that a dividend payable at the balance sheet date represents the minority shareholders' portion of the fair value should be recognised when the dividend is appropriately authorised and is no longer of the identifiable assets and liabilities of the subsidiary at the acquisition date and the at the discretion of the entity; an entity should measure the dividend payable at the fair minorities' portion of movements in equity since the date of the combination. Minority interest value of the net assets to be distributed; an entity should recognise the difference between is presented within equity. the dividend paid and the carrying amount of the net assets distributed in profit or loss. The Losses allocated to minority interest do not exceed the minority interest in the equity of Interpretation also requires an entity to provide additional disclosures if the net assets being the subsidiary unless there is a binding obligation of the minority to fund the losses. All such held for distribution to owners meet the definition of a discontinued operation. The Group losses are allocated to the Group. expects that this interpretation will have no impact on the Group's financial statements as the Group does not distribute non-cash assets to its owners. Increases in ownership interests in subsidiaries The differences between the carrying values of net assets attributable to additio- IFRIC 18 Transfers of Assets from Customers nally acquired interests in subsidiaries and the consideration given for such increases are IFRIC 18 was issued in January 2009 and becomes effective for financial years beginning charged or credited to retained earnings. on or after July 1, 2009 with early application permitted, provided valuations were obtained Special purpose entities at the date those transfers occurred. This interpretation should be applied prospectively. In certain instances, the Group sponsors the formation of special purpose entities IFRIC 18 provides guidance on accounting for agreements in which an entity receives from for the purpose of issuance of debt securities. The Group consolidates special purpose a customer an item of property, plant and equipment that the entity must then use either entities it controls. In assessing and determining if the Group controls such special purpose to connect the customer to a network or to provide the customer with ongoing access to entities, judgement is made about the Group’s exposure to the risks, rewards and its ability a supply of goods or services or to do both. The interpretation clarifies the circumstances to make operational decisions. in which the definition of an asset is met, the recognition of the asset and its measurement on initial recognition, the identification of the separately identifiable services, the recognition of revenue and the accounting for transfers of cash from customers. The Group expects that Investments in associates this interpretation will have no impact on the Group's financial statements as the Group does Associates are entities in which the Group generally has between 20% and 50% of the not receive assets from customers. voting rights, or is otherwise able to exercise significant influence, but which it does not control 132 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 133 or jointly control. Investments in associates are accounted for under the equity method and Gains or losses on financial assets held for trading are recognised in the consolidated are initially recognised at cost, including goodwill. Subsequent changes in the carrying value income statement. reflect the post-acquisition changes in the Group’s share of net assets of the associate. The Group’s share of its associates’ profits or losses is recognised in the consolidated income Held-to-maturity investments statement, and its share of movements in reserves is recognised in equity. However, when Non-derivative financial assets with fixed or determinable payments and fixed maturity the Group’s share of losses in an associate equals or exceeds its interest in the associate, are classified as held-to-maturity when the Group has the positive intention and ability to the Group does not recognise further losses, unless the Group is obliged to make further hold them to maturity. Investments intended to be held for an undefined period are not payments to, or on behalf of, the associate. included in this classification. Held-to-maturity investments are subsequently measured at Unrealised gains on transactions between the Group and its associates are eliminated amortised cost using the effective interest rate method. Gains and losses are recognised in to the extent of the Group's interest in the associates; unrealised losses are also eliminated the consolidated income statement when the investments are impaired, as well as through unless the transaction provides evidence of an impairment of the asset transferred. the amortisation process. Loans and receivables Financial assets Loans and receivables are non-derivative financial assets with fixed or determinable Initial recognition payments that are not quoted in an active market. They are not entered into with the intention Financial assets in the scope of IAS 39 are classified as either financial assets at fair of immediate or short-term resale and are not classified as securities at fair value through value through profit or loss, loans and receivables, held-to-maturity investments, or available- profit or loss or designated as investment securities available-for-sale. Such assets are carried for-sale financial assets, as appropriate. When financial assets are recognised initially, they at amortised cost using the effective interest method. Gains and losses are recognised in are measured at fair value, plus, in the case of investments not at fair value through profit the consolidated income statement when the loans and receivables are derecognised or or loss, directly attributable transaction costs. The Group determines the classification of impaired, as well as through the amortisation process. its financial assets after initial recognition and, where allowed and appropriate, re-evaluates this designation at each financial year-end. Available-for-sale financial assets Available-for-sale financial assets are those non-derivative financial assets that Date of recognition are designated as available-for-sale or are not classified in any of the three preceding All regular way purchases and sales of financial assets are recognised on the trade categories. After initial recognition available-for sale financial assets are measured at fair date i.e. the date that the Group commits to purchase the asset. Regular way purchases value with gains or losses being recognised as a separate component of equity until the or sales are purchases or sales of financial assets that require delivery of assets within the investment is derecognised or until the investment is determined to be impaired at which period generally established by regulation or convention in the marketplace. time the cumulative gain or loss previously reported in equity is included in the consolidated statement of income. However, interest calculated using the effective interest method is recognised in the consolidated statement of income. ‘Day 1’ profit Where the transaction price in a non-active market is different to the fair value Determination of fair value from other observable current market transactions in the same instrument or based on The fair value for financial instruments traded in active market at the balance sheet date a valuation technique whose variables include only data from observable markets, the Group is based on their quoted market price or dealer price quotations (bid price for long positions immediately recognises the difference between the transaction price and fair value (a ‘Day 1’ and ask price for short positions), without any deduction for transaction costs. profit) in the consolidated income statement. In cases where use is made of data which is not For all other financial instruments not listed in an active market, the fair value is observable, the difference between the transaction price and model value is only recognised determined by using appropriate valuation techniques. Valuation techniques include net in the consolidated income statement when the inputs become observable, or when the present value techniques, comparison to similar instruments for which market observable instrument is derecognised. prices exist, options pricing models and other relevant valuation models.

Financial assets at fair value through profit or loss Offsetting Financial assets classified as held for trading are included in the category “financial Financial assets and liabilities are offset and the net amount is reported in the assets at fair value through profit or loss”. Financial assets are classified as held for trading consolidated balance sheet when there is a legally enforceable right to set off the recognised if they are acquired for the purpose of selling in the near term. Derivatives are also classi- amounts and there is an intention to settle on a net basis, or to realise the asset and settle fied as held for trading unless they are designated and effective hedging instruments. the liability simultaneously. 134 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 135

Reclassification of financial assets Promissory notes If a non-derivative financial asset classified as held for trading is no longer held for the Promissory notes purchased are included in securities at fair value through profit or purpose of selling in the near term, it may be reclassified out of the fair value through profit loss, or in amounts due from credit institutions or in loans to customers, depending on their or loss category in one of the following cases: substance and are accounted for in accordance with the accounting policies for these • a financial asset that would have met the definition of loans and receivables above may categories of assets. be reclassified to loans and receivables category if the Group has the intention and ability to hold it for the foreseeable future or until maturity; • other financial assets may be reclassified to available for sale or held to maturity categories Borrowings only in rare circumstances. Borrowings, which include amounts due to the Central Bank, amounts due to credit A financial asset classified as available for sale that would have met the definition of institutions, amounts due to customers, debt securities issued, are initially recognised at loans and receivables may be reclassified to loans and receivables category of the Group the fair value of the consideration received less directly attributable transaction costs. After has the intention and ability to hold it for the foreseeable future or until maturity. initial recognition, borrowings are subsequently measured at amortised cost using the Financial assets are reclassified at their fair value on the date of reclassification. effective interest method. Gains and losses are recognised in income when the liabilities are Any gain or loss already recognized in profit or loss is not reversed. The fair value of derecognised as well as through the amortisation process. the financial asset on the date of reclassification becomes its new cost or amortised cost, If the Group purchases its own debt, it is removed from the balance sheet and as applicable. the difference between the carrying amount of the liability and the consideration paid is recognised in the consolidated income statement. Cash and cash equivalents Cash and cash equivalents consist of cash on hand, amounts due from the CBR, Derivative financial instruments excluding obligatory reserves, balances on correspondent accounts and overnight deposits In the normal course of business, the Group may enter into various derivative finan- with credit institutions. cial instruments including futures, forwards, swaps and options in the foreign exchange and capital markets. Such financial instruments are held for trading and are recorded at Obligatory reserve with the Central Bank fair value. The fair values are estimated based on quoted market prices or pricing models Credit institutions are required to maintain a non-interest earning cash deposit (obligatory that take into account the current market and contractual prices of the underlying instru- reserve) with the CBR, the amount of which depends on the level of funds attracted by ments and other factors. Derivatives are carried as assets when their fair value is positive the credit institution. The Group’s ability to withdraw such deposit is significantly restricted by and as liabilities when it is negative. Gains and losses resulting from these instruments the statutory legislation. are included in the consolidated income statement as net gains or losses from trading securities or net gains or losses from foreign currencies dealing, depending on the nature of the instrument. Repurchase and reverse repurchase agreements and securities lending Sale and repurchase agreements (“repos”) are treated as secured financing Leases transactions. Securities sold under sale and repurchase agreements are retained in the balance sheet and, in case the transferee has the right by contract or custom to sell or i. Finance – Group as lessee repledge them, reclassified as securities pledged under sale and repurchase agreements. The Group recognises finance leases as assets and liabilities in the balance sheet at The corresponding liability is presented within amounts due to credit institutions or customers. the date of commencement of the lease term at amounts equal to the fair value of the leased Securities purchased under agreements to resell (“reverse repo”) are recorded as amounts property or, if lower, at the present value of the minimum lease payments. In calculating the due from credit institutions or loans to customers as appropriate. The difference between present value of the minimum lease payments the discount factor used is the interest rate sale and repurchase price is treated as interest and accrued over the life of repo agreements implicit in the lease, when it is practicable to determine; otherwise, the Group’s incremental using the effective yield method. borrowing rate is used. Initial direct costs incurred are included as part of the asset. Lease Securities lent to counterparties are retained in the consolidated financial statements. payments are apportioned between the finance charge and the reduction of the outstanding Securities borrowed are not recorded in the consolidated financial statements, unless these liability. The finance charge is allocated to periods during the lease term so as to produce are sold to third parties, in which case the purchase and sale are recorded within gains less a constant periodic rate of interest on the remaining balance of the liability for each period. losses from securities at fair value through profit or loss in the consolidated statement of The costs identified as directly attributable to activities performed by the lessee for income. The obligation to return them is recorded at fair value as a trading liability. a finance lease, are included as part of the amount recognised as an asset under the lease.

136 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 137

ii. Operating – Group as lessee rate for measuring any impairment loss is the current effective interest rate. The calculation Leases of assets under which the risks and rewards of ownership are effectively retained of the present value of the estimated future cash flows of a collateralised financial asset by the lessor are classified as operating leases. Lease payments under an operating lease reflects the cash flows that may result from foreclosure less costs for obtaining and selling are recognised as expenses on a straight-line basis over the lease term and included into the collateral. other administrative and operating expenses. For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis of the Group’s internal credit grading system that considers credit risk characteristics Impairment of financial assets such as asset type, industry, geographical location, collateral type, past-due status and other The Group assesses at each balance sheet date whether a financial asset or group of relevant factors. financial assets is impaired. A financial asset or a group of financial assets is deemed to be Future cash flows on a group of financial assets that are collectively evaluated for impaired if, and only if, there is objective evidence of impairment as a result of one or more impairment are estimated on the basis of historical loss experience for assets with credit events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and risk characteristics similar to those in the group. Historical loss experience is adjusted on that loss event (or events) has an impact on the estimated future cash flows of the financial the basis of current observable data to reflect the effects of current conditions that did not asset or the group of financial assets that can be reliably estimated. Evidence of impairment affect the years on which the historical loss experience is based and to remove the effects of may include indications that the borrower or a group of borrowers is experiencing significant conditions in the historical period that do not exist currently. Estimates of changes in future financial difficulty, default or delinquency in interest or principal payments, the probability cash flows reflect, and are directionally consistent with, changes in related observable data that they will enter bankruptcy or other financial reorganisation and where observable data from year to year (such as changes in unemployment rates, property prices, commodity indicate that there is a measurable decrease in the estimated future cash flows, such as prices, payment status, or other factors that are indicative of incurred losses in the group or changes in arrears or economic conditions that correlate with defaults. their magnitude). The methodology and assumptions used for estimating future cash flows are reviewed Amounts due from credit institutions and loans to customers regularly to reduce any differences between loss estimates and actual loss experience. For amounts due from credit institutions and loans to customers carried at amortised cost, the Group first assesses individually whether objective evidence of impairment exists Held-to-maturity financial investments individually for financial assets that are individually significant, or collectively for financial For held-to-maturity investments the Group assesses individually whether there is assets that are not individually significant. If the Group determines that no objective evidence objective evidence of impairment. If there is objective evidence that an impairment loss of impairment exists for an individually assessed financial asset, whether significant or not, has been incurred, the amount of the loss is measured as the difference between the it includes the asset in a group of financial assets with similar credit risks characteristics assets’ carrying amount and the present value of estimated future cash flows. The carrying and collectively assesses them for impairment. Assets that are individually assessed for amount of the asset is reduced and the amount of the loss is recognised in the consolidated impairment and for which an impairment loss is, or continues to be, recognised are not income statement. included in a collective assessment of impairment. If, in a subsequent year, the amount of the estimated impairment loss decreases If there is an objective evidence that an impairment loss has been incurred, the amount because of an event occurring after the impairment was recognised, any amounts formerly of the loss is measured as the difference between the assets’ carrying amount and the present charged are credited to the consolidated income statement. value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The carrying amount of the asset is reduced through the use of an allowance Available-for-sale financial assets account and the amount of the loss is recognised in the consolidated income statement. For available-for-sale financial investments, the Group assesses at each balance Interest income continues to be accrued on the reduced carrying amount based on the sheet date whether there is objective evidence that an investment or a group of investments original effective interest rate of the asset. Loans together with the associated allowance is impaired. are written off when there is no realistic prospect of future recovery and all collateral has In the case of equity investments classified as available-for-sale, objective evidence been realised or has been transferred to the Group. If, in a subsequent year, the amount would include a significant or prolonged decline in the fair value of the investment below of the estimated impairment loss increases or decreases because of an event occurring its cost. Where there is evidence of impairment, the cumulative loss – measured as the after the impairment was recognised, the previously recognised impairment loss is increased difference between the acquisition cost and the current fair value, less any impairment or reduced by adjusting the allowance account. If a future write-off is later recovered, the loss on that investment previously recognised in the consolidated income statement – is recovery is credited to the consolidated income statement. removed from equity and recognised in the consolidated income statement. Impairment The present value of the estimated future cash flows is discounted at the financial losses on equity investments are not reversed through the consolidated income statement; asset’s original effective interest rate. If a loan has a variable interest rate, the discount increases in their fair value after impairment are recognised directly in equity. 138 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 139

In the case of debt instruments classified as available-for-sale, impairment is asses- Financial liabilities sed based on the same criteria as financial assets carried at amortised cost. Future A financial liability is derecognised when the obligation under the liability is discharged interest income is based on the reduced carrying amount and is accrued using the rate or cancelled or expires. of interest used to discount the future cash flows for the purpose of measuring the impair- Where an existing financial liability is replaced by another from the same lender on ment loss. The interest income is recorded in the consolidated income statement. If, in substantially different terms, or the terms of an existing liability are substantially modified, a subsequent year, the fair value of a debt instrument increases and the increase can be such an exchange or modification is treated as a derecognition of the original liability and objectively related to an event occurring after the impairment loss was recognised in the the recognition of a new liability, and the difference in the respective carrying amounts is consolidated income statement, the impairment loss is reversed through the consolidated recognised in the statement of income. income statement. Financial guarantees Renegotiated loans Where possible, the Group seeks to restructure loans rather than to take possession In the ordinary course of business, the Group gives financial guarantees, consisting of of collateral. This may involve extending the payment arrangements and the agreement of letters of credit, guarantees and acceptances. Financial guarantees are initially recognised new loan conditions. Once the terms have been renegotiated, the loan is no longer considered in the consolidated financial statements at fair value, in ‘Other liabilities’, being the premium past due. Management continuously reviews renegotiated loans to ensure that all criteria received. Subsequent to initial recognition, the Group’s liability under each guarantee are met and that future payments are likely to occur. The loans continue to be subject to is measured at the higher of the amortised premium and the best estimate of expenditure an individual or collective impairment assessment, calculated using the loan’s original required to settle any financial obligation arising as a result of the guarantee. effective interest rate. Any increase in the liability relating to financial guarantees is taken to the consolidated income statement. The premium received is recognised in the consolidated income statement Derecognition of financial assets and liabilities on a straight-line basis over the life of the guarantee. Financial assets Taxation A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised where: The current income tax expense is calculated in accordance with the regulations of the • the rights to receive cash flows from the asset have expired; Russian Federation and of the cities in which the Group has offices and branches and where • the Group has transferred its rights to receive cash flows from the asset, or retained the its subsidiaries are located. right to receive cash flows from the asset, but has assumed an obligation to pay them in Deferred tax assets and liabilities are calculated in respect of temporary differen- full without material delay to a third party under a ‘pass-through’ arrangement; and ces using the liability method. Deferred income taxes are provided for all temporary • the Group either (a) has transferred substantially all the risks and rewards of the asset, or differences arising between the tax bases of assets and liabilities and their carrying values (b) has neither transferred nor retained substantially all the risks and rewards of the asset, for financial reporting purposes, except where the deferred income tax arises from the but has transferred control of the asset. initial recognition of goodwill or of an asset or liability in a transaction that is not a business Where the Group has transferred its rights to receive cash flows from an asset and combination and, at the time of the transaction, affects neither the accounting profit nor has neither transferred nor retained substantially all the risks and rewards of the asset nor taxable profit or loss. transferred control of the asset, the asset is recognised to the extent of the Group’s continuing A deferred tax asset is recorded only to the extent that it is probable that taxable profit involvement in the asset. Continuing involvement that takes the form of a guarantee over the will be available against which the deductible temporary differences can be utilised. Deferred transferred asset is measured at the lower of the original carrying amount of the asset and tax assets and liabilities are measured at tax rates that are expected to apply to the period the maximum amount of consideration that the Group could be required to repay. when the asset is realised or the liability is settled, based on tax rates that have been enacted Where continuing involvement takes the form of a written and/or purchased option or substantively enacted at the balance sheet date. (including a cash-settled option or similar provision) on the transferred asset, the extent of Deferred income tax is provided on temporary differences arising on investments in the Group’s continuing involvement is the amount of the transferred asset that the Group may subsidiaries, associates and joint ventures, except where the timing of the reversal of the repurchase, except that in the case of a written put option (including a cash-settled option temporary difference can be controlled and it is probable that the temporary difference will or similar provision) on an asset measured at fair value, the extent of the Group’s continuing not reverse in the foreseeable future. involvement is limited to the lower of the fair value of the transferred asset and the option Russia also has various operating taxes that are assessed on the Group’s activities. exercise price. These taxes are included as a component of other operating expenses.

140 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 141

Property and equipment Provisions Property and equipment are carried at cost less accumulated depreciation and any Provisions are recognised when the Group has a present legal or constructive obligation accumulated impairment in value. Such cost includes the cost of replacing part of plant and as a result of past events, and it is probable that an outflow of resources embodying economic equipment when that cost is incurred if the recognition criteria are met. benefits will be required to settle the obligation and a reliable estimate of the amount of The carrying values of property and equipment are reviewed for impairment when events obligation can be made. or changes in circumstances indicate that the carrying value may not be recoverable. Depreciation of assets under construction and those not placed in service commences Retirement and other employee benefit obligations from the date the assets are placed into service. Depreciation is calculated on a straight-line basis over the following estimated useful lives: The Group does not have any pension arrangements separate from the State pension system of the Russian Federation, which requires current contributions by the employer calculated as a percentage of current gross salary payments; such expense is charged in Years the period the related salaries are earned. In addition, the Group has no post-employment Buildings 50 benefits requiring accrual. Furniture and fixtures 5 The Group has bonus policy applicable for its management and employees. Computers and office equipment 5 Motor vehicles 5 Contingencies Contingent liabilities are not recognised in the balance sheet but are disclosed unless Leasehold improvements are amortised over the life of the related leased asset or the the possibility of any outflow in settlement is remote. A contingent asset is not recognised in term of the lease, whichever is shorter. The asset’s residual values, useful lives and methods the balance sheet but disclosed when an inflow of economic benefits is probable. are reviewed, and adjusted as appropriate, at each financial year-end. Costs related to repairs and renewals are charged when incurred and included in other Share capital operating expenses, unless they qualify for capitalization. Share capital Ordinary shares and non-redeemable preference shares with discretionary dividends Intangible assets are both classified as equity. External costs directly attributable to the issue of new shares, Intangible assets include computer software. other than on a business combination, are shown as a deduction from the proceeds in equity. Intangible assets acquired separately are measured on initial recognition at cost. The Any excess of the fair value of consideration received over the par value of shares issued is cost of intangible assets acquired in a business combination is fair value as at the date recognised as additional paid-in capital. of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. The useful lives of Treasury shares intangible assets are assessed to be either finite or indefinite. Intangible assets with finite Where the Group or its subsidiaries purchases the Group’s shares, the consideration lives are amortised over the useful economic lives of two years and assessed for impairment paid, including any attributable transaction costs, net of income taxes, is deducted from whenever there is an indication that the intangible asset may be impaired. Amortisation total equity as treasury shares until they are cancelled or reissued. Where such shares are periods and methods for intangible assets with finite useful lives are reviewed at least at subsequently sold or reissued, any consideration received is included in equity. Treasury each financial year-end. shares are stated at weighted average cost. Intangible assets with indefinite useful lives are not amortised, but tested for impairment annually either individually or at the cash-generating unit level. The useful life of an intangible Dividends asset with an indefinite life is reviewed annually to determine whether indefinite life assessment Dividends are recognised as a liability and deducted from equity at the balance sheet continues to be supportable. date only if they are declared before or on the balance sheet date. Dividends are disclosed Costs associated with maintaining computer software programmes are recorded as an when they are proposed before the balance sheet date or proposed or declared after the expense as incurred. balance sheet date but before the financial statements are authorised for issue. 142 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 143

Recognition of income and expenses Foreign currency translation Revenue is recognised to the extent that it is probable that the economic benefits The consolidated financial statements are presented in Russian Roubles, which is the will flow to the Group and the revenue can be reliably measured. The following specific Group’s functional currency. Transactions in foreign currencies are initially recorded in the recognition criteria must also be met before revenue is recognised: functional currency at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency rate Interest and similar income and expense of exchange ruling at the balance sheet date. Gains and losses resulting from the translation For all financial instruments measured at amortised cost and interest bearing securities of foreign currency transactions are recognised in the statement of income as gains less classified as at fair value through profit or loss or available-for-sale, interest income or expense losses from foreign currencies – translation differences. Non-monetary items that are is recorded at the effective interest rate, which is the rate that exactly discounts estimated measured in terms of historical cost in a foreign currency are translated using the exchange future cash payments or receipts through the expected life of the financial instrument or rates as at the dates of the initial transactions. Non-monetary items measured at fair value a shorter period, where appropriate, to the net carrying amount of the financial asset or in a foreign currency are translated using the exchange rates at the date when the fair value financial liability. was determined. The calculation takes into account all contractual terms of the financial instrument (for Differences between the contractual exchange rate of a certain transaction and the example, prepayment options) and includes any fees or incremental costs that are directly CBR exchange rate on the date of the transaction are included in gains less losses from attributable to the instrument and are an integral part of the effective interest rate, but not dealing in foreign currencies. The official CBR exchange rates as at December 31, 2008 and future credit losses. The carrying amount of the financial asset or financial liability is adjusted 2007, were 29.3804 Roubles and 24.5462 Roubles to 1 USD, respectively. if the Group revises its estimates of payments or receipts. The adjusted carrying amount is calculated based on the original effective interest rate and the change in carrying amount is recorded as interest income or expense. 4. Significant Accounting Judgements and Estimates Once the recorded value of a financial asset or a group of similar financial assets has The preparation of financial statements requires management to make estimates been reduced due to an impairment loss, interest income continues to be recognised using and assumptions that affect reported amounts. These estimates are based on informa- the original effective interest rate applied to the new carrying amount. tion available as of the date of the financial statements. The actual results may differ from these estimates and it is possible that these differences may have a material effect on the Fee and commission income financial statements. The Group earns fee and commission income from a diverse range of services it provides to its customers. Fee income can be divided into the following two categories: Judgements In the process of applying the Group’s accounting policies, management has made the Fee income earned from services that are provided over a certain period of time following judgements, apart from those involving estimates, which have the most significant Fees earned for the provision of services over a period of time are accrued over that effect on the amounts recognised in the consolidated financial statements: period. These fees include commission income and asset management, custody and other management and advisory fees. Loan commitment fees for loans that are likely to be drawn Classification of investment securities as held to maturity down and other credit related fees are deferred (together with any incremental costs) and As of December 31, 2008, the Group classified certain investment securities of Rbth recognised as an adjustment to the effective interest rate on the loan. 9,637,720 as held-to-maturity as the Group’s management has the positive intention and ability to hold these securities to maturity (Note 9). Fee income from providing transaction services Fees arising from negotiating or participating in the negotiation of a transaction for Estimation uncertainty a third party – such as the arrangement of the acquisition of shares or other securities or In the process of applying the Group’s accounting policies, management has used the purchase or sale of businesses – are recognised on completion of the underlying its judgements and made estimates in determining the amounts recognised in the financial transaction. Fees or components of fees that are linked to a certain performance are statements. The most significant use of judgements and estimates are as follows: recognised after fulfilling the corresponding criteria. Allowance for impairment of loans Dividend income The Group regularly reviews its loans and receivables to assess impairment. The Revenue is recognised when the Group’s right to receive the payment is established. Group uses its experienced judgement to estimate the amount of any impairment loss in 144 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 145 cases where a borrower is in financial difficulties and there are few available sources of Current accounts with the Central Bank include amounts deposited with the CBR historical data relating to similar borrowers. Similarly, the Group estimates changes in future relating to daily settlements and other activities. Cash on hand includes principally cash in cash flows based on the observable data indicating that there has been an adverse change the Group’s cash vaults as well as in automatic teller machines. in the payment status of borrowers in a group, or national or local economic conditions As at December 31, 2008, Rbth 1,304,938 was placed on current accounts with five that correlate with defaults on assets in the group. Management uses estimates based on internationally recognised OECD banks, who are the main counterparties of the Group in historical loss experience for assets with credit risk characteristics and objective evidence performing international settlements (2007: four, Rbth 413,473). of impairment similar to those in the group of loans and receivables. The Group uses its experienced judgement to adjust observable data for a group of loans or receivables to reflect current circumstances. 6. Securities at Fair Value through Profit or Loss Fair value of financial instruments Trading securities owned comprise: Where the fair values of financial assets and financial liabilities recorded on the balance sheet cannot be derived from active markets, they are determined using a variety of 2008 2007 valuation techniques that include the use of mathematical models. The input to these models Russian state bonds 2,273,312 5,174,329 is taken from observable markets where possible, but where this is not feasible, a degree of Corporate bonds 1,734,170 2,945,082 judgement is required in establishing fair values. Corporate shares 458,922 1,971,889 Taxation Bonds of local and regional governments 15,324 1,918,917 Russian tax, currency and customs legislation is subject to varying interpretations, and Securities at fair value through profit or loss 4,481,728 12,010,217 changes, which can occur frequently. Management's interpretation of such legislation as applied to the transactions and activity of the Group may be challenged by the relevant As at December 31, 2008 Russian state bonds include mainly Federal loan bonds regional and federal authorities. Recent events within the Russian Federation suggest that the (OFZ). OFZ are Rouble denominated government securities issued and guaranteed by the tax authorities are taking a more assertive position in its interpretation of the legislation and Ministry of Finance of the Russian Federation with interest rates ranging from 6% to 10% assessments and, as a result, it is possible that transactions and activities that have not been (2007: 6% to 10%). The bonds have maturity primarily from one to three years (2007: from challenged in the past may be challenged. As such, significant additional taxes, penalties and one to five years). interest may be assessed. Fiscal periods remain open to review by the authorities in respect Corporate bonds represent bonds of leading Russian companies, with interest rates of taxes for three calendar years proceeding the year of review. Under certain circumstances ranging from 8.7% to 13% (2007: 8% to 15%) maturing within four years (2007: within reviews may cover longer periods. five years). As of December 31, 2008, the management believes that its interpretation of the Included in corporate bonds as at December 31, 2008, are bonds of Federal Mortgage relevant legislation is appropriate and that the Group’s tax, currency and customs positions Agency of Rbth 104,547 sold under repurchase agreements with the CBR. A corresponding will be sustained. liability of Rbth 131,841 is accounted as amounts due to the CBR. Corporate shares include ordinary shares of Novorossiysk Commercial Sea Port of Rbth 456,231 (2007: mainly shares of leading banks, and companies of energy, oil and 5. Cash and Cash Equivalents gas industries). Bonds of local and regional governments are Rouble denominated securities issued Cash and cash equivalents include: with interest rate 8% maturing up to one year (2007: 8%-10%; up to five years). 2008 2007 As discussed in Note 2, following the amendments to IAS 39 and IFRS 7, “Reclassification Accounts with Central Bank 47,525,685 5,283,551 of Financial Assets”, the Group identified certain state and corporate bonds, eligible under Cash on hand 13,501,160 9,318,440 the amendments, for which at July 1, 2008 or later (if the purchase occurred after July 1, 2008), it had changed its intention to hold for the foreseeable future rather than exit or trade Current accounts and overnight deposits with other banks 1,709,907 892,652 in the short-term. These trading securities were reclassified into investment securities held Settlement account with trade systems 708,686 110,370 to maturity. The reclassification was made with effect from July 1, 2008 or purchase date, Cash and cash equivalents 63,445,438 15,605,013 whichever is later, at fair value at that date. 146 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 147

Trading securities reclassified As at December 31, 2008, included in time deposits and loans are deposits with one to investment securities Russian state-owned bank totalling Rbth 4,002,664 bearing interest from 9% to 10% and held to maturity maturing in January 2009 (2007: zero). Amount reclassified, at fair value at the date of reclassification 8,907,526 As at December 31, 2007, included in time deposits and loans is an insurance deposit of Rbth 1,815,380 placed with a foreign financial institution under a forward agreement as Carrying amount as at December 31, 2008 8,813,728 discussed in Note 6 of these consolidated financial statements. Fair value as at December 31, 2008 7,684,240 The movements in allowance for impairment of amounts due from credit institutions Fair value loss recognized on the reclassified assets before (297,579) were as follows: reclassification for the year ended December 31, 2008 Fair value loss that would have been recognized on the reclassified assets 2008 2007 (1,223,286) for the year ended December 31, 2008 if the reclassification had not been made January 1 697 1,732 Interest income recognized after reclassification in profit or loss 166,342 Reversal (697) (1,035) for the year ended December 31, 2008 December 31 – 697 Provision for credit losses recognized after reclassification (524,653) in profit or loss for the year ended December 31, 2008 Effective interest rate at the reclassification date From 7% to 13% Estimated cash flows expected to be recovered at the reclassification date 12,698,307 8. Loans to Customers Loans to customers comprise: As at December 31, 2007, securities at fair value through profit or loss pledged under 2008 2007 repurchase agreements are ordinary shares of Novorossiysk Commercial Sea Port of Rbth 5,975,358 sold under a forward agreement while simultaneously agreeing to repurchase Loans to corporate customers them in the future. A corresponding liability of Rbth 6,104,748 due to a foreign financial Term loans 80,047,076 47,151,966 institution is accounted as amounts due to credit institutions (Note 15) and insurance deposit Factoring 4,057,610 3,209,381 under the forward in the amount of Rbth 1,815,380 is included in due from credit institutions Letters of credit 2,039,272 1,285,375 as at December 31, 2007 (Note 7). The above securities are classified separately in the Promissory notes 118,902 102,888 Group’s balance sheet as required by IAS 39 because the counterparty has the right to sell 86,262,860 51,749,610 or re-pledge them. Loans to individuals Consumer loans to employees of RZhD 24,597,979 18,672,566 7. Amounts due from Credit Institutions Mortgage loans to employees of RZhD 21,026,533 14,399,212 Amounts due from credit institutions comprise: Other mortgage loans 7,130,111 1,885,651 Other consumer loans 5,539,063 3,680,234 2008 2007 Car loans 647,087 719,668 Other loans 73,555 1,611,322 Time deposits and loans 15,764,440 6,037,631 Reverse repurchase agreements with other banks – 2,002,461 59,014,328 40,968,653 15,764,440 8,040,092 145,277,188 92,718,263 Less – allowance for impairment – (697) Less – allowance for loan impairment (4,628,064) (1,591,806) Amounts due from credit institutions 15,764,440 8,039,395 Loans to customers 140,649,124 91,126,457 148 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 149

Allowance for impairment of loans to customers As of December 31, 2008, the Group has introduced new methodology on estimation A reconciliation of the allowance for impairment of loans to customers by class is of allowance for impairment of loans to retail customers. As result of this change in accounting as follows: estimates, the increase of allowance for impairment of loans to retail customers amounted to Rbth 381,694.

Term Factoring Letters Promis- Consumer Mortgage Other Car Other Other Total loans of credit sory loans to loans to consumer loans mortgage loans notes employees employees loans loans Collateral and other credit enhancements of RZhD of RZhD The amount and type of collateral required depends on an assessment of the credit At January 1, 2008 1,107,582 68,323 18,908 18,393 222,016 79,687 43,454 3,983 10,435 19,025 1,591,806 risk of the counterparty. Guidelines are implemented regarding the acceptability of types of collateral and valuation parameters. Charge (reversal) 1,889,113 411,957 33,441 37,777 255,726 (44,200) 310,929 31,907 199,156 (18,646) 3,107,160 for the year The main types of collateral obtained are as follows: Amounts written off (70,902) – – – – – – – – – (70,902) • For securities lending and reverse repurchase transactions, cash or securities, • For commercial lending, charges over real estate properties, inventory and trade At December 31, 2008 2,925,793 480,280 52,349 56,170 477,742 35,487 354,383 35,890 209,591 379 4,628,064 receivables, Individual impairment 1,537,070 404,363 – 56,170 386,600 4,211 243,530 28,893 153,687 291 2,814,815 • For retail lending, mortgages over residential properties. Collective impairment 1,388,723 75,917 52,349 – 91,142 31,276 110,853 6,997 55,904 88 1,813,249 2,925,793 480,280 52,349 56,170 477,742 35,487 354,383 35,890 209,591 379 4,628,064 Concentration risk Gross amount of loans, As at December 31, 2008 the Group had a concentration of loans of Rbth 21,124,064 individually determined to be impaired, before or 15% of total gross loan portfolio extended to related parties, whose ability to repay these 7,957,205 874,700 – 118,902 409,626 7,329 275,184 32,558 215,621 291 9,891,416 deducting any loans substantially depends on cash flows receivable by these related parties from OAO assessed individually “RZhD” (2007: Rbth 6,203,894, or 7%). As at December 31, 2008, the Group also had impairment allowance a significant concentration of loans to employees of OAO “RZhD” of Rbth 45,624,512 or 31% of total gross loan portfolio (2007: Rbth 33,071,778, or 36%). As at December 31, 2008 the Group had a concentration of loans represented by Term Factoring Letters Promis- Consumer Mortgage Other Car Other Other Total Rbth 26,378,139 (18% of total gross loan portfolio) due from ten largest groups of borrowers loans of credit sory loans to loans to consumer loans mortgage loans notes employees employees loans loans other than OAO “RZhD” and its related parties (2007: Rbth 16,476,926, or 18%). of RZhD of RZhD As at December 31, 2008, the Group had entered into reverse repurchase agreements amounting to Rbth 1,237,117 with a related party. The subjects of these agreements are At January 1, 2007 1,252,737 25,144 22,302 20,046 85,438 39,319 15,297 7,434 3,738 6,289 1,477,744 marketable shares issued by a Russian company with a fair value of Rbth 994,215. These Charge (reversal) (115,752) 43,179 (3,394) (1,653) 136,578 40,368 28,157 (3,451) 6,697 12,736 143,465 loans granted under reverse repurchase agreements are included in term loans. for the year The Group’s loan portfolio has been extended to the following the types of customers: Amounts written off (29,403) – – – – – – – – – (29,403) At December 31, 2007 1,107,582 68,323 18,908 18,393 222,016 79,687 43,454 3,983 10,435 19,025 1,591,806 2008 2007 Individual impairment 172,942 – – 17,238 73,129 – 14,313 – – 6,267 283,889 Collective impairment 934,640 68,323 18,908 1,155 148,887 79,687 29,141 3,983 10,435 12,758 1,307,917 Individuals 59,014,328 40,968,653 1,107,582 68,323 18,908 18,393 222,016 79,687 43,454 3,983 10,435 19,025 1,591,806 Private companies 55,303,332 29,387,036 Gross amount of loans, State and state-controlled companies 30,959,528 22,362,574 individually determined 145,277,188 92,718,263 to be impaired, before 272,426 – – 17,238 73,129 – 14,313 – – 6,267 383,373 deducting any individually assessed As discussed above, the majority of loans to individuals comprise consumer and impairment allowance mortgage loans issued to employees of OAO “RZhD”. The Group extends these loans under 150 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 151 programs of consumer and mortgage lending to employees of OAO “RZhD”. According to As at December 31, 2008, corporate bonds represent securities issued by leading the programs’ terms, the Group extends consumer loans to employees of OAO “RZhD” with Russian companies bearing interest from 7% to 15% annually and having maturity from one maturity from six to 60 months and mortgage loans with maturity from one to 25 years. The to four years (2007: from 7% to 13% and up to five years). consumer loans are unsecured and provided to employees having salary accounts with the Corporate shares mainly represent shares of leading Russian companies involved Group, and the Group has a right to debit the borrowers’ salary accounts to ensure collection in railway transportation, financial services, oil and energy industries (2007: companies of according to contractual schedules. The mortgage loans are secured by the respective construction, oil and energy industries). assets or by direct guarantee of OAO “RZhD” or its related parties. Under the mortgage Bonds of local and regional governments are Rouble denominated securities issued program’s terms, OAO “RZhD” may subsidise interest payment to its employees. with interest rates from 7% to 9% maturing within five years (2007: 6%-10% and up to five years). Loans to customers are made principally within Russia to the following sectors: Due to the change of the management’s intentions, the Group reclassified certain state and corporate bonds from available for sale category to investment securities held 2008 2007 to maturity. The impact of reclassification is as follows:

Individuals 59,014,328 40,968,653 Available-for-sale securities Railway and other transportation 24,599,077 12,636,983 reclassified to investment securities held to maturity Trading 22,521,609 13,425,749 Manufacturing 14,562,206 7,765,741 Amount reclassified, at fair value at the date of reclassification 512,434 Energy 10,386,274 7,285,639 Carrying amount as at December 31, 2008 477,327 Construction 4,555,027 2,851,851 Fair value as at December 31, 2008 318,706 Real estate 2,290,283 1,824,860 Fair value loss recognized on the reclassified assets before (1,815) Metallurgy 2,160,014 – reclassification for the year ended December 31, 2008 Fair value loss that would have been recognized on the reclassified assets Financial services 1,888,954 – (193,728) for the year ended December 31, 2008 if the reclassification had not been made Other 1,709,037 1,752,547 Interest income recognized after reclassification in profit or loss Local authorities 756,354 2,211,346 28,208 for the year ended December 31, 2008 Food industry 494,479 1,654,677 Provision for credit losses recognized after reclassification in profit or loss (44,485) Leasing companies 339,546 340,217 for the year ended December 31, 2008 145,277,188 92,718,263 Effective interest rate at the reclassification date From 8% to 13% Estimated cash flows expected to be recovered at the reclassification date 690,001

9. Investment Securities Investment securities held-to-maturity comprise:

Available-for-sale securities comprise: 2008 2007

2008 2007 Corporate bonds 6,944,679 – Bonds of local and regional governments 3,233,172 – Corporate bonds 425,552 327,231 Eurobonds 39,447 412,673 Corporate shares 111,142 725,890 Bonds of local and regional governments 44,158 96,586 10,217,298 412,673 Russian state bonds – 379,508 Less – allowance for loan impairment (579,578) – Available-for-sale securities 580,852 1,529,215 9,637,720 412,673 152 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 153

Corporate bonds represent bonds of Russian credit institutions and leading Russian Property Fixture and Leasehold Assets under Total companies with interest rates ranging from 8% to 15% maturing within seven years. equipment improvements construction Included in corporate bonds as at December 31, 2008, are bonds of leading Cost companies and banks of Rbth 1,461,506 sold under repurchase agreement with the CBR. January 1, 2007 2,326,493 1,401,120 55,906 2,719 3,786,238 A corresponding liability of Rbth 1,230,377 is accounted as amounts due to the CBR. Additions 168,206 236,467 2,574 195,152 602,399 Bonds of local and regional governments are Rouble denominated securities issued Transfers 153,432 23,698 – (177,130) – with interest rates from 7% to 9% maturing within four years. Disposals (107,123) (64,932) (1,203) – (173,258) Included in bonds of local and regional governments as at December 31, 2008, are December 31, 2007 2,541,008 1,596,353 57,277 20,741 4,215,379 different municipal bonds of Rbth 2,628,059 sold under repurchase agreement with the CBR. A corresponding liability of Rbth 2,105,684 is accounted as amounts due to the CBR. Accumulated depreciation As at December 31, 2008, the Group recognized a charge of Rbth 579,578 as allo- January 1, 2007 (77,369) (606,293) (13,421) – (697,083) wance for impairment of investment securities held-to-maturity. Charge for the year (47,661) (222,490) (9,705) – (279,856) Disposal 2,374 45,441 3,242 – 51,057 December 31, 2007 (122,656) (783,342) (19,884) – (925,882) 10. Investments in Associates Net book value Investments in associates totalling Rbth 1,139,510 as at December 31, 2008 include January 1, 2007 2,249,124 794,827 42,485 2,719 3,089,155 30% of JSC “Transmash”, a railway machinery plant, amounting to Rbth 490,979 (as at December 31, 2007 2,418,352 813,011 37,393 20,741 3,289,497 December 31, 2007 – 35% of JSC “Transmash” amounting to Rbth 576,551). As at December 31, 2008, the Group has repaid in full payables for acquisition of property of Rbth 1,779,130. During the year ended December 31, 2008 the Group has financed, through extension 11. Property and Equipment of a loan to an associate company, an acquisition of another office building in the amount The movements of property and equipment were as follows: of Rbth 783,631. As of December 31, 2008 this loan was included in the Group’s corporate loan portfolio. Property Fixture and Leasehold Assets under Total equipment improvements construction 12. Intangible Assets Cost The movements in intangible assets were as follows: January 1, 2008 2,541,008 1,596,353 57,277 20,741 4,215,379 2008 2007 Additions 119,531 617,653 46,642 194,725 978,551 Cost Transfers 78,578 (3,478) – (75,100) – December 31, 2007 156,629 5,411 Disposals (7,487) (62,845) (3,398) – (73,730) Additions 87,497 151,218 December 31, 2008 2,731,630 2,147,683 100,521 140,366 5,120,200 December 31, 2008 244,126 156,629 Accumulated depreciation Accumulated amortization January 1, 2008 (122,656) (783,342) (19,884) – (925,882) December 31, 2007 (39,602) (2,297) Charge for the year (50,867) (247,179) (4,440) – (302,486) Amortisation charge (103,230) (37,305) Disposal 1,074 38,789 277 – 40,140 December 31, 2008 (142,832) (39,602) December 31, 2008 (172,449) (991,732) (24,047) – (1,188,228) Net book value: Net book value January 1 117,027 3,114 January 1, 2008 2,418,352 813,011 37,393 20,741 3,289,497 December 31 101,294 117,027 December 31, 2008 2,559,181 1,155,951 76,474 140,366 3,931,972 As at December 31, 2008 and 2007, intangible assets comprise software.

154 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 155

13. Other Assets As discussed in Note 6 and 9, as at December 31, 2008, the Group had bonds of local and regional governments of Rbth 2,628,059 and corporate bonds of Rbth 1,566,053 Other assets comprise: pledged under repurchase agreements with the CBR. A corresponding liability of Rbth 2008 2007 3,467,902 is accounted as amounts due to the CBR. Net investments in lease 773,605 701,965 Advance for purchase of equity securities 387,874 – Prepayments and debtors 357,460 320,275 15. Amounts due to Credit Institutions Prepayments for fixed assets 257,416 150,308 Amounts due to credit institutions comprise: Receivables from lessees 228,655 169,914 Prepayments on operating taxes and social security costs 75,153 118,450 2008 2007 Inventory 28,853 26,204 Time deposits and loans 16,760,375 21,673,455 Insurance 13,332 13,988 Import letters of credit 2,039,272 1,280,413 Plastic card settlements 8,775 44,819 Current accounts 1,057,553 125,495 2,131,123 1,545,923 Repurchase agreements (Note 6) – 6,104,748 Less – allowance for impairment of other assets (Note 20) (65,140) (15,787) Amounts due to credit institutions 19,857,200 29,184,111 Other assets 2,065,983 1,530,136 As at December 31, 2008, time deposits and loans due to credit institutions include As of December 31, 2008, advance for purchase of equity securities of Rbth 387,874 borrowing of Rbth 3,021,156 obtained by the Group from one OECD bank for general is prepayment made to purchase a minority interest in a company related to the Group’s corporate working capital purposes (2007: Rbth 4,985,461). These borrowings bear interest Parent. The Group has received these shares in March 2009. at 8% and have maturity up to two months. This borrowing contains certain covenants establishing limits for capital adequacy and credit exposures as well as requiring compliance with the banking rules and regulations of the Russian Federation. As at December 31, 2008, time deposits and loans due to credit institutions include 14. Amounts due to Central Bank a syndicated unsecured trade financing loan of Rbth 2,521,506 obtained in October 2007 Amounts due to Central Bank comprise: from OECD banks. This loan bears interest at LIBOR plus 0.45% annually and has maturity up to two years (2007: Rbth 2,151,586). The syndicated loan contains certain covenants 2008 2007 establishing limits for capital adequacy and credit exposures. In August 2008 the Group obtained another syndicated unsecured loan from OECD Unsecured loans 23,282,356 – banks for general corporate working capital purposes of Rbth 5,370,186. The loan is bearing Secured loans 6,020,902 2,004,822 interest rate at LIBOR plus 1% annually and with maturity up to two years. This syndica- Repurchase agreements 3,467,902 – ted loan also contains certain covenants establishing limits for capital adequacy and Amounts due to Central Bank 32,771,160 2,004,822 credit exposures. As at December 31, 2008, the Group has obtained Rbth 5,701,446 from foreign banks As at December 31, 2008, the Group has obtained three unsecured loans in the amount to finance export-import projects of the Group’s clients (2007: Rbth 3,186,241). Interest rates of Rbth 23,282,356 from the CBR. The loans rates range from 9.9% to 12% and maturing on these loans are within the range of Euribor or LIBOR plus 0.3% – 0.5%, maturity – up to within six months (2007: zero) seven years (2007: 3%-6%, up to eight years). Also, as at December 31, 2008, the Group has obtained two loans of Rbth 6,020,902 As at December 31, 2008, the Group has received short-term loans amounting to which are guaranteed by two Russian banks. The loans rates range from 9.25% to 12% Rbth 140,084 from two Russian banks (2007: Rbth 5,769,313) bearing interest from 6% and maturing within six months (2007: Rbth 2,004,822 at the rate of 8% maturing in to 8% and maturing during one month (2007: from 2% to 6%, maturing during one month). May 2008). The Group, in turn, has guaranteed loans received by these two banks to the As at December 31, 2008, current accounts include account with one Russian CBR in the equal amounts. Bank of Rbth 855,032. 156 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 157

16. Amounts due to Customers As at December 31, 2008, the Group had bought-back own loan participation notes on the open market in the amount of Rbth 1,764,034, and the related gain amounted to Amounts due to customers comprise: Rbth 937,331 recognized as gain from securities at fair value through profit or loss in the 2008 2007 Group’s income statement. As of December 31, 2008, these loan participation notes owned State and public organizations by the Group have been eliminated against corresponding liabilities on loan participation Time deposits 44,836,904 16,606,174 notes issued. Current accounts 23,687,758 10,684,034 In July 2008, the Group issued Series 3 Rbth 5,000,000 bonds with a fixed rate of 9.99% p.a. for the first year and a half with an option of the Group to reconsider the rate after Other legal entities this period. The issue has maturity of three years (i.e. July 2011), is redeemable at face value Time deposits 22,838,989 10,145,665 and has early redemption option in January 2010 at the call of the notes holders. Current accounts 13,146,712 12,137,993 In June 2008 the Group obtained financing in the amount of USD 350 million through Individuals the issue of loan participation notes, which was organized by two non-resident banks via a special purpose entity TransCredit Finance p.l.c. which is controlled by the Group. The Current accounts 12,081,757 13,134,155 loan participation notes are paying a semi-annual coupon of 9% annually and have maturity Time deposits 15,346,663 8,258,974 in June 2011. Amounts due to customers 131,938,783 70,966,995 In May 2007 the Group obtained financing in the amount of USD 400 million through the issue of loan participation notes, which was organized by two non-resident banks via As at December 31, 2008, the Group has received significant funds equal to Rbth a special purpose entity TransCredit Finance p.l.c. which is controlled by the Group. 61,115,000 or 46% of total amounts due to customers (2007: Rbth 21,973,263 or 31% of total The loan participation notes are paying a semi-annual coupon of 7% annually and have amount due to customers) from OAO “RZhD” and its related parties excluding other state maturity in May 2010. owned entities. Any significant withdrawal of these funds would have an adverse impact on In June 2007, the Group obtained financing in the amount Rbth 6,000,000 through the operations of the Group. the issue of Rouble denominated bonds. These bonds were issued in two tranches of Rbth Management believes that current level of funding will remain with the Group for 3,000,000 each. Bonds of the first tranche are paying a semi–annual coupon of 7.29% the foreseeable future and that in the event of withdrawal of funds, the Group would be and have maturity up to three years while bonds of the second – a semi–annual coupon of given sufficient notice so as to liquidate its cash, interbank deposits and trading assets to 7.28% and have maturity up to five years. enable repayment. As at December 31, 2008, the Group had issued interest-bearing promissory notes In accordance with the Russian Civil Code, the Group is obliged to repay time deposits in the amount of Rbth 1,983,842 (2007: Rbth 6,122,750), with interest rates ranging from of individuals upon demand of a depositor. In case a term deposit is repaid upon demand 1% to 11% maturing up to one year (2007: 7 % to 15% maturing from one month to five of the depositor prior to maturity, interest on it is paid based on the interest rate for demand years from the year end) and non-interest-bearing promissory notes of Rbth 508,509 matu- deposits, unless a different interest rate is specified in the agreement. ring primarily from one to eleven months (2007: Rbth 188,289 maturing primarily from six As at December 31, 2008, customer accounts amounting to Rbth 284,836 (2007: Rbth to twelve months). 400,067) were held as collateral against letters of credit and guarantees.

18. Other Liabilities 17. Debt Securities Issued Other liabilities comprise: Debt securities issued consist of the following: 2008 2007 2008 2007 Amounts payable to personnel 528,070 183,363 Loan Participation Notes 19,358,380 9,608,405 Accounts payable on factoring transactions 461,446 378,194 Bonds issued 11,256,061 6,015,570 Other creditors 241,958 90,498 Promissory notes 2,492,351 6,311,039 Settlements for operating taxes 149,606 48,101 Debt securities issued 33,106,792 21,935,014 Dividends payable 113,789 980 158 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 159

2008 2007 In November 2008, the Group had sold 1,000 of its preference shares to a related party. In December 2008, the Group’s two subsidiary banks purchased 143,417 of their Liabilities under finance lease agreements 95,900 22,724 ordinary shares for cash consideration of Rbth 17,518. Allowance for losses on credit related commitments 51,416 – On July 15, 2008, the Central Bank of Russia registered the issuance of 600,000,000 Accruals and deferred income 26,846 41,544 additional ordinary shares by TransCreditBank with the nominal value of Rouble 1 per Other 6,377 210 share. The offer price per share was Rouble 8 and the total amount of proceeds made Rbth Other liabilities 1,675,408 765,614 4,800,000. As at December 31, 2008 the share premium amounted to Rbth 4,200,000. At the Shareholders’ Meeting in June 2008, the Bank declared and paid dividends in As at December 31, 2008, included in the amounts payable to personnel are bonuses respect of the year ended December 31, 2007, totaling Rbth 331,660 on common shares of Rbth 406,403 payable to the Group’s management and employees accrued in relation to (Rouble 0.20 per share). No dividend was paid on preference stock. the fourth quarter of 2008 and paid in 2009 (2007: Rbth 183,363). As at December 31, 2008, the amounts payable to personnel also include accruals of unused vacation of Rbth 121,667 (2007: zero). 20. Allowance for Other Losses Allowance for other losses comprises:

19. Equity January 1, Charge Assets December 31, As at December 31, 2008, authorized share capital of the Bank consists of 2,258,300,000 2008 written off 2008 common shares (December 31, 2007: 1,658,300,000 common shares) with a nominal value Allowances for other losses of Rouble 1 per share and 1,000 preference shares (December 31, 2007: 1,000 preference Other assets 15,787 49,353 – 65,140 shares) with a nominal value of Rouble 100 per share. Preference shares are non-voting and Credit related commitments – 51,416 – 51,416 guarantee annual dividends not less than 400% of nominal value of shares upon decision of shareholders. 15,787 100,769 – 116,556 The share capital of the Group was contributed by the shareholders in Russian Roubles and they are entitled to dividends and any capital distribution in Russian roubles. January 1, Charge Assets December 31, 2007 written off 2007 Shares issued and fully paid comprise: Allowances for other losses Number of shares Nominal value of shares Other assets – 15,787 – 15,787 Common Preference Common Preference Carrying value – 15,787 – 15,787 December 31, 2006 1,658,300,000 1,000 1,658,300 100 3,373,595 Purchase of treasury shares – (1,000) – (100) (203)

December 31, 2007 1,658,300,000 – 1,658,300 – 3,373,392 Increase in share capital 600,000,000 600,000 600,000 21. Fee and Commissions Purchase of treasury shares (13,266,400) – (13,266) – (13,266) Net fee and commission income comprises: Sale of treasury shares 13,266,400 1,000 – 100 13,469 2008 2007 December 31, 2008 2,258,300,000 1,000 2,258,300 100 3,973,595 Fee and commission income Settlements operations 2,402,601 1,596,823 On December 26, 2008 the Extraordinary Shareholder Meeting of the Bank decided Cash operations 1,591,881 1,261,406 to pay interim dividend for the nine months of 2008 on ordinary shares for the total of Rbth 112,915 (Rouble 0.05 per share). No dividend will be paid on preference stock. Cancellation fee 882,128 – In December 2008, the Group has sold 13,266,400 of its ordinary shares with carrying Advisory fee 313,348 83,130 value of Rbth 13,266 to a related party. These treasury shares were acquired in June 2008. 5,189,958 2,941,359 160 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 161

2008 2007 2008 2007 Fee and commission expense Contributions under obligatory deposit insurance system 107,804 96,710 Settlements operations (551,060) (154,145) Charity (Note 28) 70,257 112,733 Cash operations (351,043) (234,409) Business development 49,062 60,984 Advisory fee (212,710) (18,204) Processing expenses 37,568 10,555 (1,114,813) (406,758) Professional fees 15,080 23,566 Net fees and commissions 4,075,145 2,534,601 Other 472,458 400,451 In November 2008 the Group received a cancellation fee of Rbth 882,128 as consi- Total administrative expenses 2,784,082 2,391,262 deration for the termination of a currency swap transaction with an international counterparty.

24. Taxation 22. Gains less Losses from Dealing The corporate income tax expense for the years ended December 31, 2008 and 2007 in Foreign Currencies comprise:

Gains less losses from dealing in foreign currencies comprise: 2008 2007

2008 2007 Current tax expense 1,467,153 1,029,934 Dealing gains less losses from operations with derivative currency contracts 1,953,978 (545,218) Adjustment of current tax income tax of prior periods – 45,544 Gains from sale and purchase of foreign currency for customers 869,721 267,703 Deferred tax benefit (259,464) 21,727 Less – deferred tax recognized directly in equity 56,903 (22,935) Gains less losses from dealing in foreign currencies 2,823,699 (277,515) Income tax expense 1,264,592 1,074,270

Russian legal entities must file individual tax declarations. The tax rate for banks for 23. Salaries and Other Employee Benefits profits other than on state securities was 24% for 2008 and 2007. The tax rate for companies and Administrative Expenses other than banks was also 24% for 2008 and 2007. The tax rate for interest income on state securities was 15% for Federal taxes. Effective from January 1, 2009 the corporate profit tax Salaries and other employee benefits and administrative expenses comprise: rate in Russia for both banks and companies other than banks is 20%. 2008 2007 2008 2007 Salaries and bonuses 3,525,918 2,571,170 Social security costs 485,437 371,509 IFRS accounting income before tax 4,761,631 3,772,681 Other compensation to employees 225,498 115,017 Statutory tax rate 24% 24% Total salaries and other employee benefits 4,236,853 3,057,696 Theoretical income tax expense at the statutory rate 1,142,791 905,443 Operating taxes 565,457 450,657 State securities income at lower tax rate (48,753) (35,169) Operating lease expenses 530,189 335,298 Non-deductible expenses 102,993 169,759 Occupancy 493,867 491,505 Tax exempt income – (11,307) Communications and information technologies 189,713 227,202 Change in the tax rate 67,561 – Advertising expenses 128,712 167,833 Income tax of prior periods determined and paid in the reporting period – 45,544 Insurance related expense 123,915 13,768 Income tax expense 1,264,592 1,074,270 162 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 163

Deferred tax asset and deferred tax liability as at December 31, 2008 and 2007 As of December 31, 2008, the net deferred tax assets of Rbth 444,668 and net comprise: deferred tax liabilities of Rbth 106,470 (2007: Rbth 104,099 and Rbth 25,365, respectively) are attributable to different legal entities within the Group and can not be offset. The current Origination and reversal of Origination and reversal of tax assets are comprised of various prepayments of income tax, which can be offset against temporary differences temporary differences future current tax liabilities. In the In the statement Directly in statement Directly in 2006 of income equity 2007 of income equity 2008 25. Financial Risk Management

Tax effect of deductible Risk is inherent in the Group’s activities but it is managed through a process of ongoing temporary differences: identification, measurement and monitoring, subject to risk limits and other controls. This Allowances for impairment process of risk management is critical to the Group’s continuing profitability and each individual 66,131 (42,424) – 23,707 310,567 – 334,274 and other losses within the Bank is accountable for the risk exposures relating to his or her responsibilities. The Tax losses carried forward – 45,281 – 45,281 (12,508) – 32,773 Group is exposed to credit risk, liquidity risk and market risk, the latter being subdivided into trading and non-trading risks. It is also subject to operating risks. Accrued employee bonuses 39,529 9,818 – 49,347 31,933 – 81,280 The independent risk control process does not include business risks such as changes Fair value adjustment in the environment, technology and industry. They are monitored through the Group’s on investment securities 5,102 – (3,647) 1,455 – 37,615 39,070 strategic planning process. available for sale Interest accrued 3,477 70,355 – 73,832 47,381 – 121,213 Risk management structure Property and equipment – 5,189 – 5,189 43,051 – 48,240 Fair value adjustment The Board of Directors is ultimately responsible for identifying and controlling risks; on securities at fair value – 33,931 – 33,931 123,829 – 157,760 however, there are separate independent bodies responsible for managing and moni- through profit or loss toring risks. Fair value adjustment – – – – 53,736 – 53,736 on securities held to maturity Board of Directors Other – 20,978 – 20,978 31,330 – 52,308 The Board of Directors is responsible for the overall risk management approach and Deferred tax asset 114,239 143,128 (3,647) 253,720 629,319 37,615 920,654 for approving the risk strategies and principles. The Audit Committee, consisting of members of the Board of Directors, is responsible for evaluation of efficiency of the Group’s internal Tax effect of taxable control including risk management system as a whole. temporary differences:

Allowances for impairment – 39,200 – 39,200 39,043 – 78,243 and other losses Management Board Fair value adjustment The Management Board has the responsibility to monitor the overall risk process within on investment securities – – 19,288 19,288 (19,288) – the Group. available for sale Interest accrued – 20,050 – 20,050 243,831 – 263,881 The Unit for control over portfolio risks and limits compliance Fair value adjustment The Unit for control over portfolio risks and limits compliance is responsible for imple- on securities at fair value – 33,396 – 33,396 89,260 – 122,656 menting and maintaining risk related procedures to ensure an independent control process. through profit or loss Property and equipment 13,778 49,274 – 63,052 54,624 – 117,676 Treasury Deferred tax liability 13,778 141,920 19,288 174,986 426,758 (19,288) 582,456 Treasury is responsible for managing the Group’s assets and liabilities and the overall Deferred tax asset, net 100,461 1,208 (22,935) 78,734 202,561 56,903 338,198 financial structure. It is also primarily responsible for the funding and liquidity risks of the Group. 164 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 165

Internal Control Function controls credit risk by setting limits on the amount of risk it is willing to accept for individual counterparties and for sub-portfolios, determined based on types of credit instruments, Risk management processes throughout the Group are audited annually by the internal concentrations, and by monitoring exposures in relation to such limits. control function, that examines both the adequacy of the procedures and the Group’s The Group has established a credit quality review process to provide early identification compliance with the procedures. Internal Control Function discusses the results of all of possible changes in the creditworthiness of counterparties, including regular collateral assessments with management. revisions. Counterparty limits are established by the use of a credit risk classification system, which assigns each counterparty a risk rating. Risk ratings are subject to regular revision. Risk measurement and reporting systems The credit quality review process allows the Group to assess the potential loss as a result The Group’s risks are measured using a method which reflects both the expected loss of the risks to which it is exposed and take corrective action. likely to arise in normal circumstances and unexpected losses, which are an estimate of the ultimate actual loss based on statistical models. The models make use of probabilities As part of the credit risk management the Group has established unified organization derived from historical experience, adjusted to reflect the economic environment. The Group and management principles which include: also runs worst case scenarios that would arise in the event that extreme events which are • principle of dividing the credit risk by areas of origin – sub-portfolios (loan portfolio, liabi- unlikely to occur do, in fact, occur. lities, interbank deposit market, etc), respective structure of sub-portfolios and the struc- Monitoring and controlling risks is primarily performed based on limits established by ture of Group's profit centers; the Group. These limits reflect the business strategy and market environment of the Group • principle of units' responsibility for accepted credit risk; as well as the level of risk that the Group is willing to accept, with additional emphasis on • rating assessment of loan products based on the following: selected industries. In addition the Group monitors and measures the overall risk bearing • assessment of the borrower's creditworthiness, capacity in relation to the aggregate risk exposure across all risks types and activities. • type of the loan product; Information compiled from all the businesses is examined and processed in order • monetary valuation of the risk by loan products depending on the loan rating, possibility to analyse, control and identify early risks. This information is presented and explained to of default, availability of a collateral for the loan product; the Management Board, and the head of each business division. The report includes aggre- • principle of credit-risk-oriented pricing – determining the risk premium included in the gate credit exposure, hold limit exceptions, VaR, liquidity ratios and risk profile changes. On interest rate on the loan product based on the loan product analysis; a monthly basis detailed reporting of industry, customer and geographic risks takes place. • principle of establishing position limits and sub-portfolio limits for cumulative losses covered Top management assesses the appropriateness of the allowance for credit losses on by the Bank's capital (Credit VaR, CrVaR); a monthly basis. • revision of the established limits and risk parameters depending on the current situation; For all levels throughout the Group, specifically tailored risk reports are prepared and • an established procedure in the case of breach of established limits. distributed in order to ensure that all business divisions have access to extensive, necessary and up-to-date information. The key bodies managing credit risk are the Credit Committee and Financial Committee. A weekly briefing is given to the Management Board and all other relevant employees The Planning, Reporting and Risk Management Department (hereinafter, the “PRRMD”) of the Group on the utilisation of market limits, analysis of VaR, proprietary investments and is the methodological and control unit responsible for credit risk management. liquidity, plus any other risk developments. The key tasks of the PRRMD as related to credit risk management are as follows: Risk mitigation • Technical and methodological support of the Group's credit risk management; As part of its overall risk management, the Group uses derivatives to manage exposures • Preparation of opinions to be considered at the meetings of Group's collegial bodies resulting from changes in foreign currencies. with regard to products and transactions related to the Group's acceptance of credit risks; The Group actively uses collateral to reduce its credit risks (Note 8). • Supervision over the status of the credit risk of the Group as a whole and of its business units. Credit risk The Credit Committee, based on the opinions of the PRRMD makes decision over Credit risk is the risk that the Group will incur a loss because its customers, clients or maturity, interest rate, collateral and extension of loans as well as establishes position limits counterparties failed to discharge their contractual obligations. The Group manages and by counterparty. 166 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 167

The Financial Committee establishes limits by sub-portfolios. Neither past due nor impaired The table below shows the maximum exposure to credit risk for the components Notes High Standard Sub-standard Past due Total of the balance sheet, including derivatives. The maximum exposure is shown gross, before grade grade grade or individually 2008 the effect of mitigation through the use of master netting and collateral agreements. 2008 2008 2008 impaired 2007 Amounts due from credit institutions: 7 Gross Gross Term deposits and loans 13,474,783 1,270,000 – – 14,744,783 maximum maximum Promissory notes 1,019,657 – – – 1,019,657 exposure exposure Notes 2008 2007 Loans to corporate customers: 8 Term loans 4,731,329 42,511,882 23,457,937 6,420,135 77,121,283 Cash and cash equivalents (excluding cash on hand) 5 49,944,278 6,286,573 Factoring – 2,589,098 517,895 470,337 3,577,330 Debt securities at fair value through profit or loss 6 4,022,806 10,038,328 Letters of credit – 791,856 1,195,067 – 1,986,923 Amounts due from credit institutions 7 15,764,440 8,039,395 Promissory notes – – – 62,732 62,732 Derivative financial assets 29 1,914,427 131,466 Loans to individuals: 8 Loans to customers 8 140,649,124 91,126,457 Consumer loans – 23,865,564 202,377 52,296 24,120,237 Debt investment securities: 9 to employees of RZhD – available-for-sale 469,710 803,325 Mortgage loans – 20,797,200 187,446 6,400 20,991,046 – held-to-maturity 9,637,720 412,673 to employees of RZhD Other assets 13 1,990,830 1,411,686 Other mortgage loans – 6,611,045 199,649 109,826 6,920,520 Financial commitments and contingencies 29 17,426,380 15,726,217 Other consumer loans – 4,927,909 174,698 82,073 5,184,680 Total credit risk exposure 241,819,715 133,976,120 Car loans – 580,551 20,464 10,182 611,197 Other loans – 71,740 1,436 – 73,176 Debt investment securities 9 Where financial instruments are recorded at fair value, the amounts shown above Available-for-sale: represent the current credit risk exposure but not the maximum risk exposure that could Corporate bonds 8,246 71,978 41,676 303,652 425,552 arise in the future as a result of changes in values. Bonds of local governments – 25,702 18,456 – 44,158 The effect of collateral and other risk mitigation techniques is shown below. Held to maturity: Derivative financial instruments Corporate bonds 1,945,472 2,316,979 1,200,147 981,222 6,443,820 Credit risk arising from derivative financial instruments is, at any time, limited to those Bonds of local governments – 1,973,073 1,181,380 – 3,154,453 with positive fair values, as recorded in the balance sheet. Eurobonds 39,447 – – – 39,447 Total 21,218,934 108,404,577 28,398,628 8,498,855 166,520,994 Credit-related commitments risks The Group makes available to its customers guarantees which may require that Neither past due nor impaired the Group make payments on their behalf. Such payments are collected from customers based on the terms of the letter of credit. Notes High Standard Sub-standard Past due Total grade grade grade or individually 2007 They expose the Group to similar risks to loans and these are mitigated by the same control 2007 2007 2007 impaired 2007 processes and policies. Amounts due from credit institutions: 7 Credit quality per class of financial asset Term deposits and loans 5,952,441 70,463 – – 6,022,904 The credit quality of financial assets is managed by the Group internal credit ratings. Reverse repurchase 2,002,461 – – – 2,002,461 The table below shows the credit quality by class of asset for loan-related balance sheet agreements with other banks lines, based on the Group’s credit rating system. Promissory notes – 14,030 – – 14,030 168 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 169

Neither past due nor impaired impaired. Accordingly, loans to individuals past due but not impaired include loans past due Notes High Standard Sub-standard Past due Total less than 60 days. Past due but not impaired loans to individuals before allowance for losses grade grade grade or individually 2007 comprised: 2007 2007 2007 impaired 2007 Loans to corporate customers: 8 Less than Less than 60 days 60 days Term loans 6,680,473 37,823,702 1,440,725 99,484 46,044,384 2008 2007 Factoring 69,301 3,071,757 – – 3,141,058 Loans to individuals: Letters of credit – 1,266,467 – – 1,266,467 Consumer loans to employees of JSC “RZhD” 54,599 110,820 Promissory notes 46,897 37,598 – – 84,495 Mortgage loans to employees of JSC “RZhD” 6,585 85,458 Loans to individuals: 8 Other consumer loans 89,945 21,842 Consumer loans – 18,340,649 – 109,900 18,450,549 to employees of RZhD Car loans 10,119 4,271 Mortgage loans to employees of RZhD – 14,234,776 – 84,748 14,319,524 Other mortgage loans 80,236 11,191 Other consumer loans – 3,615,120 – 21,661 3,636,781 Other consumer loans – 9,563 Car loans – 711,450 – 4,236 715,686 Total 241,484 243,145 Other mortgage loans – 1,864,118 – 11,098 1,875,216 Other loans – 1,582,813 – 9,484 1,592,297 As of December 31, 2008 and 2007, the Group did not have past due but not impaired Debt investment securities 9 loans to corporate customers. Available-for-sale: Russian state bonds 379,508 – – – 379,508 Impairment assessment Corporate bonds 19,073 308,158 – – 327,231 The main considerations for the loan impairment assessment include whether any Bonds of local governments – 96,586 – – 96,586 payments of principal or interest are overdue by more than 30 days for legal entities and Held to maturity: more than 60 days for individuals or there are any known difficulties in the cash flows of counterparties, credit rating downgrades, or infringement of the original terms of the contract. Eurobonds 34,955 377,718 – – 412,673 The Group addresses impairment assessment in two areas: individually assessed allowances Total 15,185,109 83,415,405 1,440,725 340,611 100,381,850 and collectively assessed allowances.

It is the Group’s policy to maintain accurate and consistent risk ratings across the credit Individually assessed allowances portfolio. This facilitates focused management of the applicable risks and the comparison of The Group determines the allowances appropriate for each individually significant loan credit exposures across all lines of business, geographic regions and products, the rating on an individual basis. Items considered when determining allowance amounts include the system is supported by a variety of financial analytics, combined with processed market sustainability of the counterparty’s business plan, its ability to improve performance once information to provide the main inputs for the measurement of counterparty risk. All internal a financial difficulty has arisen, projected receipts and the expected dividend payout should risk ratings are tailored to the various categories and are derived in accordance with the bankruptcy ensue, the availability of other financial support and the realisable value of Group’s rating policy. The attributable risk ratings are assessed and updated regularly. collateral, and the timing of the expected cash flows. The impairment losses are evaluated Carrying amount per class of financial assets whose terms have been renegotiated at each reporting date, unless unforeseen circumstances require more careful attention. As of December 31, 2008 the Group had loans that had been renegotiated due to financial difficulties of the borrower or due to potential future financial difficulties of the Collectively assessed allowances borrowers in total amount of Rbth 9,226,824 (2007: Rbth zero). Allowances are assessed collectively for losses on loans to customers that are not individually significant (including credit cards, residential mortgages and unsecured consumer Aging analysis of past due but not impaired loans per class of financial assets lending) and for individually significant loans where there is not yet objective evidence of In accordance with the Group’s credit risk assessment methodology, loans to individual impairment. Allowances are evaluated on each reporting date with each portfolio individuals with any payment of principal or interest overdue by more than 60 days are receiving a separate review. 170 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 171

The collective assessment takes account of impairment that is likely to be present in the 2007 portfolio even though there is not yet objective evidence of the impairment in an individual Russia OECD Other Total assessment. Impairment losses are estimated by taking into consideration the following non-OECD information: historical losses on the portfolio, current economic conditions, the appropriate Assets delay between the time a loss is likely to have been incurred and the time it will be identified Cash and cash equivalents 15,049,504 554,765 744 15,605,013 as requiring an individually assessed impairment allowance, and expected receipts and recoveries once impaired. Local management is responsible for deciding the length of this Obligatory reserve with Central Bank 1,517,237 – – 1,517,237 period which can extend for as long as one year. The impairment allowance is then reviewed Securities at fair value through profit or loss 12,010,217 – – 12,010,217 by credit management to ensure alignment with the Group’s overall policy. Securities at fair value through profit 5,975,358 – – 5,975,358 Financial guarantees and letters of credit are assessed and provision made in a similar or loss pledged under repurchase agreements manner as for loans. Amounts due from credit institutions 5,323,634 2,715,761 – 8,039,395 Derivative financial assets 131,466 – – 131,466 Geographical concentration Loans to customers 90,448,356 – 678,101 91,126,457 The geographical concentration of monetary assets and liabilities is set out below: Investment securities: – available-for-sale securities 1,529,215 – – 1,529,215 2008 – held-to-maturity 412,673 – – 412,673 Russia OECD Other Total non-OECD 132,397,660 3,270,526 678,845 136,347,031 Assets Liabilities Cash and cash equivalents 61,922,226 1,521,995 1,217 63,445,438 Amounts due to Central Bank 2,004,822 – – 2,004,822 Obligatory reserve with Central Bank 220,210 – – 220,210 Due to credit institutions 8,886,974 20,213,879 83,258 29,184,111 Securities at fair value through profit or loss 4,481,728 – – 4,481,728 Derivative financial liabilities 10,049 384,893 – 394,942 Amounts due from credit institutions 14,844,152 920,288 – 15,764,440 Due to customers 70,281,046 – 685,949 70,966,995 Derivative financial assets 780,483 1,133,944 – 1,914,427 Debt securities issued 12,326,609 9,608,405 – 21,935,014 Loans to customers 139,138,504 332 1,510,288 140,649,124 Payables for acquisition of property 1,779,130 – – 1,779,130 Investment securities: Subordinated debt 6,312,062 – – 6,312,062 – available-for-sale securities 578,300 2,552 – 580,852 101,600,692 30,207,177 769,207 132,577,076 – held-to-maturity 9,637,720 – – 9,637,720 Net balance sheet position 30,796,968 (26,936,651) (90,362) 3,769,955 231,603,323 3,579,111 1,511,505 236,693,939 Off-balance sheet position 16,506,332 249,880 610,897 17,367,109 Liabilities Amounts due to Central Bank 32,771,160 – – 32,771,160 Due to credit institutions 4,284,053 15,426,219 146,928 19,857,200 Liquidity risk and funding management Derivative financial liabilities 103,144 – – 103,144 Liquidity risk is the risk that the Group will be unable to meet its payment obligations Due to customers 130,694,135 61,581 1,183,067 131,938,783 when they fall due under normal and stress circumstances. To limit this risk, management Debt securities issued 13,748,412 19,358,380 – 33,106,792 has arranged diversified funding sources in addition to its core deposit base, manages Subordinated debt 8,112,030 – – 8,112,030 assets with liquidity in mind, and monitors future cash flows and liquidity on a daily basis. 189,712,934 34,846,180 1,329,995 225,889,109 This incorporates an assessment of expected cash flows and the availability of high grade collateral which could be used to secure additional funding if required. Net balance sheet position 41,890,389 (31,267,069) 181,510 10,804,830 The Group maintains a portfolio of highly marketable and diverse assets that can be Off-balance sheet position 18,434,478 385,471 43,694 18,863,643 easily liquidated in the event of an unforeseen interruption of cash flow. The Group also has 172 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 173 committed lines of credit that it can access to meet liquidity needs. In addition, the Group Less than 3 to 12 1 to 5 Over Total maintains a cash deposit (obligatory reserve) with the CBR, the amount of which depends 3 months months years 5 years on the level of customer funds attracted. December 31, 2007 The liquidity position is assessed and managed on each entity standalone basis; for Financial liabilities banking entities, particularly, based on certain liquidity ratios established by the CBR. As at Amounts due to Central Bank – 2,069,508 – – 2,069,508 December 31, 2008 these ratios were as follows: Amounts due to credit institutions 14,476,813 7,176,904 7,790,994 798,371 30,243,082 Derivative financial instruments 2008, 2007, % % – Contractual amounts payable – 2,764,112 3,878,521 – 6,642,633 – Contractual amounts receivable – (2,629,784) (3,862,072) – (6,491,856) N2 “Instant Liquidity Ratio” (assets receivable or realizable within one day / 93.4 57.5 liabilities repayable on demand, minimum of 15%) Amounts due to customers 56,229,756 8,543,296 6,872,516 88,630 71,734,198 N3 “Current Liquidity Ratio” (assets receivable or realizable within 30 days / Debt securities issued 2,070,112 5,620,117 17,019,674 149,000 24,858,903 87.4 64.7 liabilities repayable within 30 days, minimum of 50%) Payables for acquisition of property 825,658 722,566 350,144 – 1,898,368 N4 “Long-Term Liquidity Ratio” (assets receivable in more than one year / Other financial liabilities 321,732 441,641 – – 763,373 80.8 99.5 sum of capital and liabilities repayable in more than one year, maximum of 120%) Subordinated loans 73,223 571,436 2,885,185 7,474,264 11,004,108 Total undiscounted financial liabilities 73,997,294 25,279,796 34,934,962 8,510,265 142,722,317 Analysis of financial liabilities by remaining contractual maturities

The table below summarises the maturity profile of the Group’s financial liabilities at The table below shows the contractual expiry by maturity of the Bank’s financial 31 December 2008 based on contractual undiscounted repayment obligations. Repayments commitments and contingencies. which are subject to notice are treated as if notice were to be given immediately. However, the Group expects that many customers will not request repayment on the earliest date the Group could be required to pay and the table does not reflect the expected cash flows Less than 3 to 12 1 to 5 Over Total indicated by the Group’s deposit retention history. 3 months months years 5 years

2008 5,293,195 11,450,218 942,021 77,198 17,762,632 Less than 3 to 12 1 to 5 Over Total 2007 8,410,034 4,387,022 876,199 – 13,673,255 3 months months years 5 years The Group expects that not all of the contingent liabilities or commitments will be drawn December 31, 2008 before expiry of the commitments. Financial liabilities As of the December 31, 2008, the Group received significant funds equal to Rbth Amounts due to Central Bank 24,166,532 9,313,532 – – 33,480,064 61,115,000 or 46% of total amounts owed to customers, from ОАО “RZhD” and its related Amounts due to credit institutions 5,097,207 3,702,906 10,426,620 1,862,742 21,089,475 parties (2007: Rbth 21,973,263, or 31% of total amount due to customers). Any significant Derivative financial instruments withdrawal of these funds would have an adverse impact on the operations of the Group. – Contractual amounts payable 88,131 471,789 7,432,486 – 7,992,406 Management believes that the current level of funding will remain with the Group for the – Contractual amounts receivable (42,566) (296,875) (8,505,974) – (8,845,415) foreseeable future or that in the event of withdrawal of funds, the Group would be given Amounts due to customers 108,392,728 12,367,276 14,882,383 74,704 135,717,091 sufficient notice so as to liquidate its cash, interbank deposits and trading assets to enable repayment. Debt securities issued 2,629,899 2,213,657 33,572,260 149,000 38,564,816 Included in due to customers are term deposits of individuals. In accordance with the Subordinated loans 73,709 789,288 6,492,673 6,861,085 14,216,755 Russian legislation, the Group is obliged to repay such deposits upon demand of a depositor Total undiscounted financial liabilities 140,405,640 28,561,573 64,300,448 8,947,531 242,215,192 (Note 16). 174 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 175

Market risks Assumptions used in VaR calculation Market risk is the risk that the fair value or future cash flows of financial instruments • The risk parameters on the dynamics of rates/prices/yields of instruments are calculated will fluctuate due to changes in market variables such as interest rates, foreign exchanges, based on historical data for a past period of time equal to 6 months. and equity prices. Market risk comprises equity, currency and interest rate risks. • Risk parameters are calculated monthly at the beginning of a calendar month. The values The currency risk is the risk of losses due to adverse changes in foreign exchange of risk parameters for the VaR calculation are deemed permanent for a month. rates and/or precious metals prices under foreign exchange and/or precious metals positions • The volatility of financial instruments is estimated using the Delta-Normal and the open by the credit institution. Exponentially Weighted Moving Average Methods which are based on the assumption of The equity risk is the risk of losses due to adverse changes in the market prices a normalcy of rates distribution. of equity instruments, trading portfolio and derivative financial instruments driven both by • The estimation of the volatility of shares takes into account liquidity of financial instruments factors related to the issuer of equity instruments and derivative financial instruments and which is measured by the bid-ask spread on the stock exchange. general movements in market prices for financial instruments. • VaR for bonds portfolio is calculated as the sum of VaRs for individual instruments. The interest rate risk is the risk of financial losses due to adverse changes in the interest • VaR for open currency positions and share portfolio is calculated subject to the correlation rates of the Group’s assets, liabilities and off-balance instruments. between financial instruments within the portfolio. In general, interest rate risk arises when there is an imbalance between the cash (liabilities) inflow and outflow. Cash flow is the flow of future payments that will occur to The existing limits specific for the VaR methodology fulfill all Group's liabilities and claims existing at the moment, including payments under • The historical data based on which the VaR is calculated may not take into account term contracts, repayment of the principal amount and interest on loans and deposits, changes of all factors that can cause future portfolio revaluations and is not necessarily redemption of debt securities and coupon payments thereon. the best possible estimate of future changes. Moreover, the actual changes in the portfolio The Group's market risk management system is based on the Value-at-Risk (VaR) value may not correspond to the assumption of the normal distribution of risk factors. methodology. VaR is the amount of maximum possible (acceptable) Group's losses at • As any VaR methodology, the methodology used by the Bank does not allow estimating a given time horizon with a given confidence level. The calculation period assumed by the losses that the Bank can incur with a probability outside the taken confidence interval. Bank for VaR estimation equals 1 day. The current confidence level for the market risk • The VaR estimation is calculated for the portfolio at the end of the working day and does coverage is 95%. not take into account intraday portfolio changes. The market risk management entails in limiting the amount of possible losses under open positions that can be incurred by the Group in 1 day with the given 95% probability Market risk management and control functions due to negative movements of foreign exchange rates, securities rates and interest rates The market risk management and control function within the Bank is performed through establishing VaR, stop-loss, and stop-out limits and ensuring compliance thereof. by the Financial Committee and the PRRMD. The division bearing the major part of the market risk is the Treasury Department. In terms of limits control the functions are as descri- Market risk limits system bed below. The VaR limit is established for the general risk amount on the given portfolio with the amount of an individual position within the portfolio not being limited. In accordance with the Treasury Department VaR approach, the actual amount of the maximum open position depends on the estab- • Compliance with personal VaR limits and stop-loss/stop-out limits under an open position lished volatility values of instruments and correlation coefficients. within a working day. To limit losses that the Group can incur under trading operations, in addition to • Reporting on the status of limits under trading and investment portfolios based on the establishing the VaR limit the technology of limiting the incurred losses by the stop-loss results of daily operations. limit is introduced. It implies establishing boundary values for losses on the portfolio; when • Initial and subsequent control over compliance with VaR limit and stop-loss occurrence reached the positions under this portfolio are closed. within a working day. The Group applies stop-out limit in order to restrict reduction of the financial result as compared to the average (in case of equity securities portfolio) or maximum (in case Financial Committee of a debt instruments portfolio) financial result reached under this portfolio during the last • The Financial Committee takes a decision to establish total VaR limit on the volume of 30 days. The stop-out limit approach implies establishing boundary values of reduction of open positions. the financial result as compared to that previously reached on a portfolio; positions on the • The Financial Committee takes a decision to establish limits on the volume of secured portfolio are closed once reached the limit. transactions based on the proposals of the Treasury Committee. 176 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 177

• The Financial Committee is responsible for the financial result of strategic positions 2008 2007 opened at the decision thereof and controls the compliance with the established limits Corporate shares – 230,057 under strategic positions based on the materials prepared by a sub-department for control Currency debt instruments 24,064 – over portfolio risks and limits compliance officer. Russian state bonds 22,140 31,264 PRRMD, including Unit for control over portfolio risks and limits compliance Bonds of local and regional governments – 9,720 • Subsequent control over compliance with all established limits for opened positions Corporate bonds 11,682 4,657 on each type of Bank's transactions, including strategic positions, based on the reports Price risk 57,886 275,698 of a Unit for control over portfolio risks and limits compliance officer. The Head of Currency risk 18,622 1,281 PRRMD notifies the President of the Bank, Director of the Treasury Department and Head of the Internal Control Function of the breach of the established limits by Interest rate risk 432,296 83,591 a memorandum. Total VaR 508,804 360,570 • Providing trading divisions with tools for VaR calculations and the usage of stop-loss and stop-out limits for open positions. VaR on price risk presented above relates to portfolio of financial assets at fair value • Monthly calculation and establishment of discounts on financial instruments accepted through profit or loss only. Investment portfolio of the Group is not included in VaR calculation by the Banks as a collateral under repurchase transactions and other lending due to significant excess of investment term over the VaR horizon. transactions. As of December 31, 2008 and 2007, the Group did not include subsidiaries in its VaR • Daily preparation of information for the President of the Bank and Internal Control Func- calculation as the effect of the subsidiaries is not material. tion on the usage of VAR, stop-loss and stop-out limits for Bank's trading and stra- tegic portfolios. Operational risk Functions of the President of the Bank and Chairman of the Financial Committee Operational risk is the risk of loss arising from systems failure, human error, fraud • The President of the Bank and Chairman of the Financial Committee take a decision or external events. When controls fail to perform, operational risks can cause damage to to address breaches of the established limits and/or closing strategic positions at the reputation, have legal or regulatory implications, or lead to financial loss. The Group cannot Financial Committee meetings. expect to eliminate all operational risks, but through a control framework and by monitoring and responding to potential risks, the Group is able to manage the risks. Controls include Specifics of determining the interest rate risk of the Bank's cash flows effective segregation of duties, access, authorisation and reconciliation procedures, staff The level of the interest rate risk under an open position is calculated by the follo- education and assessment processes, including the use of internal audit. wing steps: • determining the cash (transactions) flows and their completion dates, • discounting cash flows subject to the interest, 26. Fair Values of Financial Instruments • calculating the risk amount for each transaction, The following disclosure of the estimated fair value of financial instruments is made in • calculating the risk amount by currencies grouped by dates. accordance with the requirements of IFRS 7 “Financial Instruments: Disclosures”. Fair value is defined as the amount at which the instrument could be exchanged in a current transaction Cash flow is the flow of future payments that will occur to fulfill all Bank's liabilities and between knowledgeable willing parties on arm’s length conditions, other than in forced sale claims existing at the moment, including payments under term contracts, repayment of the or liquidation. As no readily available market exists for a large part of the Group’s financial principal amount and interest on loans and deposits, redemption of securities and coupon instruments, judgment is necessary in arriving at fair value, based on current economic payments thereon. conditions and the specific risks attributable to the instrument. The estimates presented The amount of the interest rate risk is calculated by aggregating VaR under individual herein are not necessarily indicative of the amounts the Group could realize in a market transactions by currencies grouped by dates. The total amount of the interest rate risk is exchange from the sale of its full holdings of a particular instrument. The following table calculated by aggregating the absolute amounts of the interest rate risk for all currencies. summarises the carrying amounts and fair values of financial assets and liabilities on the As at the year-end, VaR values are as follows: Group’s balance sheet as at reporting date. 178 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 179

Carrying Fair Unrecognised Carrying Fair Unrecognised Fixed rate financial instruments value value gain/(loss) value value gain/(loss) 2008 2008 2008 2007 2007 2007 The fair value of fixed rate financial assets and liabilities carried at amortised cost are estimated by comparing market interest rates when they were first recognised with current Financial assets market rates offered for similar financial instruments. The estimated fair value of fixed interest Cash and cash equivalents 63,445,438 63,445,438 – 15,605,013 15,605,013 – bearing deposits is based on discounted cash flows using prevailing money-market interest Securities at fair value rates for debts with similar credit risk and maturity. For quoted debt issued the fair values 4,481,728 4,481,728 – 12,010,217 12,010,217 – through profit or loss are calculated based on quoted market prices. For those notes issued where quoted market Securities at fair value prices are not available, a discounted cash flow model is used based on a current interest through profit or loss rate yield curve appropriate for the remaining term to maturity. – – – 5,975,358 5,975,358 – pledged under repurchase agreements Financial instruments recorded at fair value Amounts due from 15,764,440 15,764,440 – 8,039,395 8,039,395 – Financial instruments recorded at fair value as at December 31, 2008 and 2007 are credit institutions valued based on using both quoted market prices and valuation techniques. Derivative financial assets 1,914,427 1,914,427 – 131,466 131,466 – Loans to customers 140,649,124 137,465,461 (3,183,663) 91,126,457 91,042,339 (84,118) Investment securities: 27. Maturity Analysis of Financial Assets and Liabilities – available-for-sale 580,852 580,852 – 1,529,215 1,529,215 – The table below shows an analysis of financial assets and liabilities according to when – held-to-maturity 9,637,720 8,797,357 (840,363) 412,673 412,673 – they are expected to be recovered or settled. See Note 24 “Risk management” for the Financial liabilities Group’s contractual undiscounted repayment obligations. Amounts due 32,771,160 32,771,160 – 2,004,822 2,004,822 – to Central Bank 2008 2007 Amounts due to credit 19,857,200 19,857,200 – 29,184,111 29,184,111 – Within More than Total Within More than Total institutions one year one year one year one year Derivative financial liabilities 103,144 103,144 – 394,942 394,942 – Financial assets Amounts due to customers 131,938,783 131,938,783 – 70,966,995 70,966,995 – Cash and cash equivalents 63,445,438 – 63,445,438 15,605,013 – 15,605,013 Debt securities issued 33,106,792 27,217,517 5,889,275 21,935,014 20,462,756 1,472,258 Obligatory reserve with Payables for acquisition 196,132 24,078 220,210 1,383,935 133,302 1,517,237 – – – 1,779,130 1,779,130 – Central Bank of property Securities at fair value Subordinated debt 8,112,030 7,620,336 491,694 6,312,062 6,668,027 (355,965) 4,481,728 – 4,481,728 12,010,217 – 12,010,217 through profit or loss Total unrecognised change 2,356,943 1,032,175 Securities at fair value in unrealised fair value through profit or loss pledged – – – 5,975,358 – 5,975,358 under repurchase agreements The following describes the methodologies and assumptions used to determine fair Amounts due from credit 15,750,261 14,179 15,764,440 8,039,395 – 8,039,395 values for those financial instruments which are not already recorded at fair value in the institutions financial statements. Derivative financial assets 815,511 1,098,916 1,914,427 131,466 – 131,466 Loans to customers 60,176,382 80,472,742 140,649,124 41,007,991 50,118,466 91,126,457 Assets and liabilities for which fair value approximates carrying value Investment securities: For financial assets and financial liabilities that are liquid or having a short term matu- – available-for-sale 580,852 – 580,852 1,529,215 – 1,529,215 rity (less than three months) it is assumed that the carrying amounts approximate to their – held-to-maturity 928,567 8,709,153 9,637,720 377,718 34,955 412,673 fair value. This assumption is also applied to demand deposits, savings accounts without a specific maturity and variable rate financial instruments. 146,374,871 90,319,068 236,693,939 86,060,308 50,286,723 136,347,031 180 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 181

2008 2007 2008 Within More than Total Within More than Total OAO RZhD State controlled Key Associates Other one year one year one year one year and its related entities other management parties than RZhD personnel Financial liabilities Amounts due Securities at fair value through 32,771,160 – 32,771,160 2,004,822 – 2,004,822 to Central Bank profit or loss sold during (5,442,085) (187,503,044) – – – the period Amounts due to credit 9,107,314 10,749,886 19,857,200 21,705,855 7,478,256 29,184,111 Gains less losses from securities institutions (1,765) (240) – – – at fair value through profit or loss Derivative financial liabilities 103,144 – 103,144 136,094 258,848 394,942 Securities at fair value through Amounts due to customers 119,236,242 12,702,541 131,938,783 64,731,945 6,235,050 70,966,995 175,736 3,523,822 – – – profit or loss at the end of the period Payables for acquisition – – – 1,510,260 268,870 1,779,130 of property Securities at fair value through profit or loss pledged under – 104,547 – – – Debt securities issued 4,183,044 28,923,748 33,106,792 6,094,230 15,840,784 21,935,014 repurchase agreements Subordinated debt 10,224 8,101,806 8,112,030 – 6,312,062 6,312,062 Securities accepted 165,411,128 60,477,981 225,889,109 96,183,206 36,393,870 132,577,076 as collateral under reverse 994,215 – – – – Net balance sheet position (19,036,257) 29,841,087 10,804,830 (10,122,898) 13,892,853 3,769,955 repurchase agreements Loans outstanding 6,203,894 16,158,678 127,209 4,448,099 318,446 at the beginning of the period 28. Related Party Transactions Loans issued during the period 52,212,375 78,930,960 174,932 25,585,220 1,606,780 Loans repayments during (44,883,838) (79,899,178) (207,359) (11,914,025) (731,648) Related parties, as defined by IAS 24 “Related Party Disclosures”, are those counterpar- the period ties that represent significant shareholders; members of Board of Directors, Management Loans outstanding at the 13,532,431 15,190,460 94,782 18,119,294 1,193,578 Board; companies with which the Bank or management has significant shareholders in end of the period common; enterprises in which a substantial interest in the voting power is owned, directly Less: allowance for impairment (242,533) (531,095) (1,587) (490,952) (35,569) or indirectly, by shareholders of the Group or by individuals owning, directly or indirectly, an at the end of the period interest in the voting power of the Group that gives them significant influence over the Group, Loans outstanding at the and anyone expected to influence, or be influenced by, that person in their dealings with 13,289,898 14,659,365 93,195 17,628,342 1,158,009 end of the period the Group. Available-for sale securities In considering each possible related party relationship, attention is directed to the 74,470 615,458 – – – substance of the relationship, and not merely the legal form. at the beginning of the period Available-for sale securities As at December 31, 2008 the Group had the following transactions with related 1,873,764 1,663,380 – – – parties: acquired during the period Available-for sale securities 2008 (1,560,784) (2,136,526) – – – sold during the period OAO RZhD State controlled Key Associates Other Available-for sale securities and its related entities other management 387,450 142,312 – – – at the end of the period parties than RZhD personnel Held-to-maturity securities Securities at fair value through – – – – – at the beginning of the period profit or loss at the beginning 168,337 9,384,708 – – – Held-to-maturity securities of the period 1,497,750 6,145,922 – – – acquired during the period Securities at fair value through Held-to-maturity securities profit or loss acquired during 5,451,249 181,642,398 – – – (43,684) (3,836,785) – – – the period sold during the period 182 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 183

2008 2008 OAO RZhD State controlled Key Associates Other OAO RZhD State controlled Key Associates Other and its related entities other management and its related entities other management parties than RZhD personnel parties than RZhD personnel Held-to-maturity securities Received during the period – 477,114,420 – – 1,170,000 1,454,066 2,309,137 – – – at the end of the period Repaid during the period – (476,907,338) – – (1,170,000) Less: allowance for impairment (42,891) (21,813) – – – Cash and cash equivalents at the end of the period at the end of the period – 490,289 – – – Held-to-maturity securities 1,411,175 2,287,324 – – – at the end of the period Derivative financial assets 556,912 26,662 – – – Due from credit institutions Held-to-maturity securities – – – – – pledged under repurchase – 3,298,812 – – – at the beginning of period agreements Received during the period – 218,735,286 – – 2,587,053 Less: allowance for impairment Repaid during the period – (212,452,436) – – (2,587,053) – (66,735) – – – at the end of the period Due from credit institutions Held-to-Maturity securities pledged – 6,282,850 – – – – 3,232,077 – – – at the end of period under repurchase agreements (net) Due to the Central Bank – 29,303,258 – – – Deposits at the beginning 21,973,263 5,316,944 940,016 3,086,175 58,950 of the period Sale and repurchase agreements (CBR) – 3,467,902 – – – Deposits received during Due to credit institutions 7,555,926,797 339,152,756 3,019,248 64,815,535 4,080,929 – 1,264,912 – – 1 the period at the beginning of the period Deposits repaid during (7,516,785,060) (337,060,038) (3,107,650) (66,527,987) (4,122,628) Received during the period – 230,774,015 – – 2,831,334 the period Repaid during the period – (232,038,909) – – (2,831,261) Deposits at the end 61,115,000 7,409,662 851,614 1,373,723 17,251 Due to credit institutions of the period – 18 – – 74 at the end of the period Debt securities at the 113,665 148,822 – – – beginning of the period Derivative financial liabilities – (3,321) – – – Debt securities issued Interest income on loans 2,072,842 4,002,655 – – – 1,136,012 2,725,572 16,667 1,474,591 83,479 during the period and debt securities Debt securities redeemed Interest expense on deposits (600,465) (3,527,237) – – – (1,979,975) (1,175,469) (42,955) (2,771) (535) during the period and debt securities issued Debt securities at the Interest expense 1,586,042 624,240 – – – (739,042) – – – – end of the period on subordinated loans Subordinated debt Interest expenses on payable 6,293,715 – – – – (79,221) – – – – at the beginning of the period for acquisition of property Subordinated debt Gains less losses from 1,803,361 – – – – 528,791 231,395 3,617 (7,798) received during the period dealing in foreign currencies Subordinated debt Impairment of loans (242,533) (177,663) (903) (481,788) (2,089) (3,398) – – – – redeemed during the period Fee and commission income 1,343,232 114,377 196 85,322 3,673 Subordinated debt at 8,093,678 – – – – the end of the period Fee and commission expense (1,199) (28,168) – – – Cash and cash equivalents Loss on initial recognition of loans – 283,207 – – – – (6,301) – (102,092) – at the beginning of the period to customers at fair value 184 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 185

2008 2007 OAO RZhD State controlled Key Associates Other OAO RZhD State controlled Key Associates Other and its related entities other management and its related entities other management parties than RZhD personnel parties than RZhD personnel Commitments and Less: allowance for 1,464,164 3,318,341 – 274,219 – – (353,432) (684) (9,164) (33,480) guarantees issued impairment at the end of the period Commitments Loans outstanding at the 19,521,369 6,799,142 – 495,472 4,479,261 6,203,894 15,805,246 126,525 204,180 284,966 and guarantees received end of the period Letters of credit issued 39,951 – – 845,106 – Available-for sale securities 38,521 4,966 – – – Undrawn loan commitments 507,965 6,920,186 – 490,196 25,000 at the beginning of the period Available-for sale securities 6,315,675 8,186,025 – – – 2007 acquired during the period OAO RZhD State controlled Key Associates Other Available-for sale securities (6,279,726) (7,575,533) – – – and its related entities other management sold during the period parties than RZhD personnel Available-for sale securities 74,470 615,458 – – – Securities at fair value through at the end of the period profit or loss at the beginning 187,709 4,509,541 – – – Deposits at the beginning of the period 22,247,791 3,485,176 321,049 8,159 – of the period Securities at fair value through Deposits received during profit or loss acquired during 4,616,757 301,526,839 – – – 5,812,677,999 370,568,987 7,064,507 5,728,838 2,464,744 the period the period Deposits repaid during Securities at fair value through (5,812,952,527) (368,737,219) (6,445,540) (2,650,822) (2,405,794) profit or loss sold during (4,668,369) (297,560,971) – – – the period the period Deposits at the end 21,973,263 5,316,944 940,016 3,086,175 58,950 Gains less losses from of the period securities at fair value 32,240 909,299 – – – Debt securities at the through profit or loss 132,047 4,523 – – – beginning of the period Securities at fair value Debt securities issued through profit or loss at the 168,337 9,384,708 – – – 1,830,089 150,234 – – – during the period end of the period Debt securities redeemed (1,848,471) (5,935) – – – Securities at fair value during the period through profit or loss pledged – 5,975,358 – – – Debt securities at the end under repurchase agreements 113,665 148,822 – – – of the period Securities accepted as collateral under reverse – 3,131,151 – – – Payable for acquisition of property 1,779,130 – – – – repurchase agreements Subordinated debt at the 3,293,715 – – – – Loans outstanding beginning of the period 4,652,380 15,813,548 138,294 – – at the beginning of the period Subordinated debt received 3,200,000 – – – – Loans issued during the period 35,426,740 71,338,507 121,609 235,374 751,145 during the period Loans repayments Subordinated debt redeemed (33,875,226) (70,993,377) (132,694) (22,030) (432,699) (200,000) – – – – during the period during the period Loans outstanding Subordinated debt at the 6,203,894 16,158,678 127,209 213,344 318,446 6,293,715 – – – – at the end of the period end of the period 186 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 187

2007 Securities at fair value through profit or loss are mainly represented by Russian State OAO RZhD State controlled Key Associates Other bonds of different issues with annual interest rates ranging from 6% to 10% (2007: 6% to and its related entities other management 10%) with maturity primarily from one to four years. parties than RZhD personnel Available-for-sale securities are mostly represented by corporate shares and corpo- rate bonds of state and RZhD owned companies with annual interest rates ranging from Cash and cash equivalents – 69,630 – – – 8% to 14% with maturity from one to four and a half years. at the beginning of the period Held-to-maturity securities are mostly represented by Bonds of Local and Regional Received during the period – 46,842,845 – – – Governments, Corporate bonds of Russian state companies and corporate bonds of Repaid during the period – (46,629,268) – – – RZhD related companies with annual interest rates ranging from 7% to 13% with maturity Cash and cash equivalents from one to seven and a half years. Securities held-to-maturity pledged under repurchase – 283,207 – – – at the end of the period agreements are mostly represented by Bonds of Local and Regional Governments as Derivative financial assets 119,582 – – – – well as Corporate bonds with annual interest rates ranging from 7% to 9% with maturity from two to nine years. Due from credit institutions – 140,199 – – – Loans to customers are mainly represented by short- and medium-term (up to three at the beginning of period years) loans with annual interest rates ranging from 9% to 18%, which were granted to Received during the period – 861,101 – – 888,000 related parties, whose ability to repay these loans substantially depends on cash flows Repaid during the period – (1,001,300) – – (888,000) receivable by these related parties from OAO RZhD (Note 8). Due from credit institutions Deposits include current accounts and term deposits of the Group’s customers. – – – – – at the end of period Significant part of the deposits has a maturity of up to four months. Interest rates on such Due to the Central Bank – 2,004,822 – – – deposits range from 4% to 13% per annum. As at December 31, 2008, the Group received significant funds equal to Rbth Due to credit institutions – 276,000 – – – 61,115,000 or 46% of total amounts owed to customers, from OAO “RZhD” and its related at the beginning of the period parties excluding other state owned entities (2007: Rbth 21,973,263, or 31% of total amount Received during the period – 4,373,916 – – 1,846,469 due to customers). Any significant withdrawal of these funds would have an adverse impact Repaid during the period – (3,385,004) – – (1,846,468) on the operations of the Group. Management believes that the current level of funding Due to credit institutions will remain with the Group for the foreseeable future or that in the event of withdrawal of – 1,264,912 – – 1 at the end of the period funds, the Group would be given sufficient notice so as to liquidate its cash, interbank deposits and trading assets to enable repayment. Interest income on loans 662,791 1,493,001 – – 44,714 and debt securities In 2008 and 2007, the Group made sponsorship payments to certain state entities as approved by the Board of Directors’ resolution for the total amount of Rbth 70,257 and Interest expense on deposits (1,090,163) (61,768) – (48) (217) and debt securities issued Rbth 112,733, respectively (Note 23). As of December 31, 2008, subordinated debt of Rbth 8,112,030 (2007: Rbth 6,312,062) Interest expense (444,728) – – – – include long term time deposits of Rbth 8,093,678 (2007: Rbth 6,293,715) denominated on subordinated loans in Russian Rubles, deposited by OAO RZhD and its related parties excluding other state Interest expenses on payable (148,138) – – – – owned entities. These deposits bear 9% – 12.1% p.a. and mature in 2012-2018. for acquisition of property Compensation of key management personnel totalling 21 people (2007: 17) was Gains less losses from dealing 27,111 (153,131) – 16 127 comprised of the following: in foreign currencies Impairment of loans – 146,224 485 (9,164) (33,480) 2008 2007 Fee and commission income 960,722 38,422 – 120 – Salaries 147,332 126,669 Commitments and 3,476,247 3,295,230 56,113 22,000 – guarantees issued Bonuses 377,244 299,674 Commitments and Social security costs 12,602 10,894 10,700,535 1,950,233 – – 161,439 guarantees received Total key management compensation 537,178 437,237 188 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 189

29. Contingencies, Commitments and Derivative Financial Instruments Lease commitments Operating environment In the normal course of business the Group enters into lease agreements for office premises and equipment. Annual lease payments under the current non-cancellable lease Russia continues economic reforms and development of its legal, tax and regulatory agreements are: frameworks as required by a market economy. The future stability of the Russian economy is largely dependent upon these reforms and developments and the effectiveness of economic, 2008 2007 financial and monetary measures undertaken by the government. Not later than 1 year 381,678 578,351 The Russian economy is vulnerable to market downturns and economic slowdowns Later than 1 year but not later than 5 years 770,749 662,474 elsewhere in the world. The ongoing global financial crisis has resulted in capital markets instability, significant deterioration of liquidity in the banking sector, and tighter credit condi- Lease commitments 1,152,427 1,240,825 tions within Russia. While the Russian Government has introduced a range of stabilization measures aimed at providing liquidity and supporting debt refinancing for Russian banks and Derivative financial instruments companies, there continues to be uncertainty regarding the access to capital and cost of Foreign exchange and other financial instruments are generally traded in an over-the- capital for the Group and its counterparties, which could affect the Group’s financial posi- counter market with professional market counterparties on standardized contractual terms tion, results of operations and business prospects. and conditions. Also, the borrowers of the Group may have been affected by the deterioration in liqui- The principal amounts of certain types of financial instruments provide a basis for dity, which could in turn impact their ability to repay the amounts due to the Group. Deterioration comparison with instruments recognized in the balance sheet but do not necessarily indicate of operating conditions may have an impact on the respective cash flow forecasts and Group’s the amounts of future cash flows involved or the current fair value of the instruments and, assessment of loan impairment. To the extent that information is available, the Group has reflec- therefore, do not indicate the Group’s exposure to credit or price risks. The derivative ted revised estimates of expected future cash flows in its impairment assessment. instruments become favourable (assets) or unfavourable (liabilities) as a result of fluctuations While management believes it is taking appropriate measures to support the sus- in market interest rates or foreign exchange rates relative to their terms. The aggregate tainability of the Group’s business in the current circumstances, unexpected further deteriora- contractual or principal amount of derivative financial instruments on hand, the extent tion in the areas described above could negatively affect the Group’s results and financial to which instruments are favourable or unfavourable and, thus the aggregate fair values position in a manner not currently determinable. of derivative financial assets and liabilities can fluctuate significantly from time to time. Legal proceedings The principal or agreed amounts and fair values of derivative instruments held are set out in the following table. In the ordinary course of business, the Group is subject to legal actions and complaints. The outstanding deals with derivative financial instruments and trading liabilities are Management believes that the ultimate liability, if any, arising from such actions or complaints as follows: will not have a material adverse effect on the financial condition or the results of future operations of the Group. 2008 2007 Undrawn loan commitments, guarantees and letters of credit Fair values Fair values Notional Asset Liability Notional Asset Liability Financial commitments as at December 31, 2008 and 2007 comprise: principal principal 2008 2007 Interest rate contracts Guarantees given 10,624,871 5,743,976 Gross-currency interest 8,373,414 1,098,916 – 7,363,860 – (384,893) Undrawn loan commitments 5,887,956 7,929,279 rate swaps – foreign Letters of credit 1,249,805 2,453,029 Foreign exchange contracts Less: cash collateral on letters of credit (284,836) (400,067) Forwards – domestic 12,707,218 229,843 (103,144) 14,262,153 11,884 (10,049) Less: allowance for losses on credit related commitments (51,416) – Forwards – foreign 3,016,778 28,756 – – – Credit related commitments 17,426,380 15,726,217 Securities contracts

As at December 31, 2008, letters of credit amounting to Rbth 284,836 (2007: Rbth Forwards – domestic 1,080,389 556,912 – 3,120,090 119,582 – 400,067) were secured by clients’ funds. Total derivative assets/(liabilities) 1,914,427 (103,144) 131,466 (394,942) 190 transcreditbank. Annual Report 2008 Chapter 8. Consolidated Financial Statements 191

30. Capital Adequacy 31. Subsequent Events The Group maintains an actively managed capital base to cover risks inherent in In February 2009 the Group obtained a subordinated loan amounting to Rbth 2,000,000 the business. The adequacy of the Group’s capital is monitored using, among other from Non-government Pension Fund “Blagosostoyanie”, a related party, bearing interest measures, the ratios established by the Basel Capital Accord 1988 and the CBR in super- rate at 12% and maturing in July 2019. vising the Group. In February 2009 the Group also closed a deal for buy-back and early redemption The primary objectives of the Group’s capital management are to ensure that the Group of its outstanding Eurobonds maturing in May 2010 with the face value of USD 52 million for complies with externally imposed capital requirements and that the Group maintains strong the cash consideration of USD 40 million. credit ratings and healthy capital ratios in order to support its business and to maximise In February 2009 the Group fully repaid borrowings amounting to Rbth 3,021,156 shareholders’ value. as of December 31, 2008, obtained by the Group from one OECD bank for general corpo- During the past year, the Group had complied in full with all its externally imposed rate working capital purposes in February 2007. capital requirements. In the beginning of 2009 the Russian Ruble was devalued in relation to major curren- The Group manages its capital structure and makes adjustments to it in the light of cies. At the date these consolidated financial statements have been authorized for issue, changes in economic conditions and the risk characteristics of its activities. In order to the official exchange rate of the Russian Ruble to US Dollar as set by the Central Bank maintain or adjust the capital structure, the Group may adjust the amount of dividend payment of Russia comprised 34.0134, which constitutes a 13.62% reduction in the value of the to shareholders, return capital to shareholders or issue capital securities. No changes were Russian Ruble to the US Dollar since 31 December 2008. made in the objectives, policies and processes from the previous years.

CBR capital adequacy ratio (N1) The CBR requires banks to maintain a capital adequacy ratio of 10% of risk-weighted assets, computed based on Russian Accounting Legislation. As of December 31, 2008 and 2007, the Bank’s capital adequacy ratio on this basis was as follows:

2008 2007 Main capital 14,054,191 6,744,435 Additional capital 7,335,000 6,461,412 Total capital 21,389,191 13,205,847 Risk weighted assets 181,591,913 105,949,811 Capital adequacy ratio 11.8% 12.4%

Main capital comprises ordinary share capital and retained earnings, including current year profit. Additional capital includes subordinated debt.

Capital adequacy ratio under Basel Capital Accord 1988 The Group’s capital adequacy ratio, computed in accordance with the Basel Capital Accord 1988, with subsequent amendments including the amendment to incorporate market risks, as of December 31, 2008 and 2007, comprised: 2008 2007 Tier 1 capital 16,264,010 8,594,006 Tier 2 capital 7,387,241 6,241,673 Total capital 23,651,251 14,828,898 Risk weighted assets 186,298,463 131,294,567 Tier 1 capital ratio 8.7% 6.5% Total capital ratio 12.7% 11.3% Design, pre-press, products coordination – Art Bureau «Millfleaurs». E-mail: [email protected] Portraits and landscapes by Igor Manukhov