SOCIAL REPORT 2007 Content Introduction 5 1. Foreword by the Chairman 8 2. General Information on OAO AK BARS BANK 12 Geography of OAO AK BARS BANK 13 3. Corporate Management Structure 16 4. OAO AK BARS BANK in its Development 20 Corporate Social Responsibility 20 Social and Labor Policy 22 Staff Policy and Characteristics 22 Guarantee of the Employees’ Labor Rights 24 Staff Training and Advanced Training 25 Social and Labor Protection 28 Corporate Culture 32 5. Charity 36 Participation of the Bank in Protection and Support of Children and Young People 38 Participation in Intellectual and Spiritual Life 40 Support by the Bank of Socially-disadvantaged People 42 Health Improvement 44 The Bank’s Contribution to Environment Protection 46 Conclusion 47 SOCIAL REPORT Introduction AK BARS Joint-Stock Commercial Bank (Open Joint- Stock Company) presents a social report. This is the first edition of its kind. Its purpose is to inform the interested parties of the principles, objectives, practical results and perspectives of the corporate social policy and charitable activities of AK BARS Bank. The present document corresponds to the policy of international commercial companies, which actively cooperate with their shareholders, investors, clients, employees, state authorities and the general public. As the social reporting in AK BARS Bank is currently in the stage of development, we present only the most significant results of the Bank’s activities in 2005-2007. The social report of the Bank contains consolidated information regarding the corporate social and charity policies of the Bank. This work will be ongoing and developed. SOCIAL REPORT 5 «OJSC AK BARS Bank is focused on formation of favorable environment around its points of presence, and this is one of the most crucial instruments of tne Bank's participation in the life of the society». 1 1Foreword by the Chairman Foreword by the Chairman Dear friends! Any company goes through certain stages in its development. At the stage of creation and development, objectives and principles are set up, the potential is growing. As goals are achieved, new and more ambitious goals appear, the horizons broaden and new opportunities emerge. Today AK BARS Bank is a major corporation with five thousand employees. The Bank is working in many regions of the Russian Federation and impacts the social and economic processes in and outside the Republic of Tatarstan. The activities of the Bank are closely connected with the interests and needs of modern Russian society. It’s intended to enhance the level of life and create comfortable living conditions. One of the AK BARS Bank’s objectives is to create favorable social conditions for its employees, which is one of the main tools of the Bank’s participation in the social life of the country. We at AK BARS Bank realize that a successful business cannot and should not be restricted only to the business sphere, financial criteria and brand popularity. Obviously, there is also a question of social responsibility, which in our understanding is not restricted only to excellent performance and payment of taxes. 8 Within AK BARS Bank social responsibility means responsibility to our employees, steady improvement of the corporate management and providing for the most important needs of the Bank’s staff. Outside the Bank this includes social activities, charity and sponsorship, which form an integral part of the Bank’s activities, and financial aid to those who really need it. AK BARS Bank is also concerned with environment protection. The Bank is a constant participant in environmental projects for protection and preservation of fauna and the restoration and development of the ecosystems in the regions. The idea of a social report is based on the necessity for voluntary collective action, which will lead us to a new level of civil responsibility. In other words, the commercial sector in cooperation with social structures helps to create business with a “human face”. This is one of the Bank’s visions. That’s why social and charitable activities are one of the most important objectives, which reflects that the Bank is ready to assume long- term social responsibility. Chairman of the Board of Directors, OAO AK BARS BANK R.R.Musin, Chairman of the Management, OAO AK BARS BANK R.Kh. Minnegaliev SOCIAL REPORT 9 OJSC AK BARS Bank has been operating in the Russian financial market since 1993. Over this period the Bank has been recording stable growth of its basic financial indicators and has proven that the selected development strategy and business principles of its activity are sound. The Bank has been operating in 24 subjects of the Russian Federation, and as of 01.01.2008. its branch net accounts for 37 branches, 114 outlets, 131 operational stand alone cash desks, 1 subsidiary bank with 8 branches. 2 General Information on General2 Information on OAO AK BARS OAO AK BARS BANK BANK OAO AK BARS BANK has been working in the Russian Corporate business is one of the priorities in the Bank's financial market since 1993. The Bank has shown a development. The volume of the legal entities credit stable financial growth and has proven that its selected portfolio as of January 1st, 2008 comprised 93.1 billion strategy and business principles are sound. rubles. The Bank has a wide experience in providing services to the leading companies in the region and Currently the Bank's share is 38.9% and 58.3% of the participates in projects vital to the Tatarstan economy. capital of all the banks in the Republic of Tatarstan. In the rating of the Russian Federation Banks as of October Retail banking is also an important sector of the 1st, 2007, OAO AK BARS BANK is 14th according banking services with great potential. The retail banking to its equity and 20th – according to its assets. The services include credits, deposits, money transfers, authorized capital of the Bank as of January 1st, 2008 payments, currency exchange, safety deposit boxes, comprised 19.2 billion rubles and its assets – 156 transactions with precious metals and over 50 types billion rubles. of other services. The volume of the credit portfolio of individuals as of January 1st, 2008 comprised Recently the Bank has been actively attempting to 19.5 billion rubles. The amount of attracted funds is establish itself as a major bank on the federal level 91.165 billion rubles. and has been expanding in the regions of the Russian Federation. The network of the Bank as of January 1st, The Bank is also increasing its presence in the stock 2008 consists of 37 branches, 113 additional offices, market. In 2007 the Bank issued its own bonds for 250 131 operating cash desks and 1 subsidiary bank with million US dollars. Moreover, credits of international 8 branches. AK BARS Bank is working in 24 regions of financial establishments for 100 million US dollars the Russian Federation and is intending to continue were received by the Bank. covering regional markets. The activities of subsidiary companies and structures AK BARS Bank is a universal bank and is equally under AK BARS brand name have contributed to the developing its corporate, retail and investment sectors. Bank’s success. 12 Geography of OAO AK BARS BANK (map of the Bank's branches) 4BJOU1FUFSTCVSH ,VLNPS "STL .FOEFMFFWTL ,B[BO &MBCVHB .PTDPX ;FMFOPEPMTL .BNBEZTI /BCFSF[IOZF$IFMOZ /J[IOFLBNTL .FO[FMJOTL /J[IOZ/PWHPSPE "QBTUPWP $IJTUPQPM ;BJOTL :PTILBS0MB "MNFUZFWTL $IFCPLTBSZ #VJOTL "[OBLBFWP ,B[BO *[IFWTL 6MZBOPWTL q¹É¹ËÇ» 5PMZBUUJ 1FSN #VHVMNB /VSMBU #BWMZ 4BNBSB &LBUFSJOCVSH $IFMZBCJOTL 5ZVNFO 0NTL /PWPTJCJSTL ,SBTOPZBSTL #BSOBVM SOCIAL REPORT 13 For complying with the world standards and increasing the efficiency of its economic and social activity AK BARS Bank is working on improving its corporate governance system. 3 3Corporate Management Structure Corporate Management Structure To comply with the world standards and increase the for achieving the Bank’s objectives and approved a efficiency of the economic and social activities, in 2007 number of documents regulating the activities of the the Bank continued improvement of the corporate Bank, including: management system. Particular attention has been paid • Code of Ethics of the Bank, which stipulates the to improving the corporate procedures and inner legal key principles and rules of corporate behavior and framework, inner control system, risk management, business ethics; and transparency of the Bank’s activities. • Regulation on avoidance of conflict of interests for protection of the interests of the Bank’s The Board of Directors plays the key role regarding shareholders and clients and determining the the strategy and improvement of the corporate Bank’s policy for avoidance of interest conflicts; management of the Bank. • Regulations on transactions with the parties In 2007 the Annual General Meeting of Shareholders connected with the Bank, developed for elected 11 new members of the Board of Directors. enhancement of the risk control and regulating In view of objectivity of resolutions and balance of transactions with the connected parties; interests, 3 independent directors were introduced to • Regulation on the dividend policy establishing the the Board of Directors. These are Ruben Karlenovich procedure of calculation and payment of dividends Vardanyan (Chairman of the Board of Directors of Troyka by the Bank; Dialogue Group of Companies), Andrey Vladimirovich • Regulation on holding tender for an auditing Vernikov (Professor, State University – Higher School company for mandatory annual audit of the Bank of Economy), Sarah Carry (Senior Partner, Squire, regulating the procedure of such tender. Sanders& Dempsey L.L.P., Washington), Yuriy Lvovich Moreover, the plan for improvement of the corporate Levin (Managing Director, Member of the Board of management system provides for approval in the first Directors of B.V. Murray&Co., Inc), Sergey Viktorovich half of 2008 by the Board of Directors of the Corporate Shibaev (Chairman of the Board of Directors of Kafa Management Code, a set of rules for a higher level of Capital, Toronto, Canada).