Alfa�Bank Annual Report 20:06 20:06 Over the last 15-20 years our country has changed significantly. Today, notions like “the value of time”, “components of success”, “cutting-edge technologies”, “quality financial services”, and “financial supermarket” are of great importance to us. Alfa-Bank has always aspired to be one step ahead. That is why our Bank today consists of branch offices located in all of Russia’s 11 time zones; offices that provide a uniform service standard throughout the country, and which make use of cutting-edge technologies like Alfa-Click and Alfa-Mobile. This universal service delivery greatly benefits the customer with time- saving advantages. Alfa-Bank today provides a comprehensive range of modern banking products and services for individuals and corporate customers. We are constantly in motion and continuously progressing. Alfa-Bank 2006 7 Countries 229 Branches and offices 11 252 Employees 45 000 Corporate clients 2 354 464 Retail clients 15 209 943 Total assets (US$, thsd.) 9 783 652 Gross loans to customers (US$, thsd.) 1 310 184 Total equity (US$, thsd.) 190 286 Net profit (US$, thsd.) Alfa-Bank Awards and Recognition 2006-2007 Best Bank in “Best Russian Brands 2006” / Interbrand Zintzmeyer & Lux AG and BusinessWeek / Best Local Bank Trading Ruble 2006 / Euromoney / NAUFOR’s Elite of the Securities Market Awards. Special Award for Broadening Investment Horizons / The National Association of Securities Market Participants (NAUFOR) / Creation of Successful Russian Brand / World Brand Academy / Best IT Bank in Russia 2006 / CNews Analytics / Best Advertising Campaign of the Year 2006 among banks / Association of Regional Banks of Russia / MasterCard 2006 European Co-Brand Award for Alfa-Bank & Aeroflot Program / MasterCard / One of the most transparent banks according to the “Transparency and Disclosure by Russian Banks” research / Standard & Poor’s / Best IT Project in Financial Services Management (Alfa – Mobile) 2007 / CNews Analytics / Best Trade Finance Bank in Russia 2007 / Global Finance / Content Page Address to the Clients and Business Partners of Alfa-Bank 06:07 Board of Directors and Management Board 08:09 CEO's Statement on Key Achievements of 2006 and Strategy for 2007 12:13 Russian Economy and Banking Sector Review 16:17 Corporate Banking 22:23 Retail Banking (Branch Business) 30:31 Consumer Finance 34:35 Mortgage Lending 38:39 Auto Finance 40:41 Investment Banking 44:45 Alfa Group Family Companies 52:53 Summarised Consolidated Financial Statements 60:61 Corporate Directory 64:65 Alfa-Bank in Russia Time zones relative to Moscow time Additional Alfa Banking Group Locations Almaty Karaganda Nicosia Amsterdam Kiev New York Astana London Ust Kamenogorsk Annual Report 2006 | Alfa-Bank | 04:05 Address to the Clients and Business Partners of Alfa-Bank Becoming the leader in an industry does not mean the final summit has been reached. Securing and maintaining that posi- tion of leadership, nurturing the trust of clients and partners alike, and strengthening your reputation, are far more challeng- ing elements of running a successful business. Instead of rely- ing on our past successes, we believe in ensuring continuous growth and improvement, responding to market challenges and the needs of our clients, and ultimately being a step ahead at all times. We are proud to present the Alfa Banking Group ("Alfa-Bank") annual report for 2006. This has been another successful year in our history, a year during which Alfa-Bank secured its position as the largest private bank in the country, and also maintained its position as a leader in Rus- sian bank ratings. By focusing on key projects and growth across the board, we have strength- ened our position in the Russian financial market. The growth rate in Alfa-Bank’s credit portfo- lio has been in the high double-digits, while our financial performance remained strong. We are able to call ourselves a universal bank since we offer our clients – individuals as well as organizations – the entire spectrum of banking products and services. Today more than 45 000 corporations and almost 2.4 million individuals form part of our client base. We are proud that they have chosen us. Even more important to us than providing banking products and services of a high quality, is enabling our clients to achieve their most important goals: establishing and developing their businesses, entering the international market, raising their quality of life and continuing to grow with us. Alfa-Bank’s success in 2006 was based on an effective strategy and business model that took into account both market trends and the expectations of our clients. Our strategy and business model are aimed at the fastest growing segments of the banking business. These are further enabled by our investment in superior technology and operational platforms as well as highly skilled staff. The past year has brought rapid development in Alfa-Bank’s retail business, both in Moscow and the regions. Alfa-Bank’s retail banking business is spearheaded by its network of branches with the aim of providing easy-to-understand, convenient and efficient service to individuals and small enterprises. In 2003, Alfa-Bank launched an upgraded model of its branches. As of December 31, 2006, Alfa-Bank had 87 branches operating under the new branch format, of which 32 were opened in Moscow and 55 were opened in the Russian re- gions. The main advantages of the new format are universal services and flexibility: today we can provide the same range of services to every client, irrespective of their branch or where they were initially registered. Annual Report 2006 | Alfa-Bank | 06:07 Our strategic goal is to become Russia’s largest retail bank. To achieve this goal we aim to in- vest over US$ 200.0 million into the development of a regional network over the next two to three years. We are confident that our investments and activities in Russia’s many regions will stimulate business and accelerate economic growth and development. Alfa-Bank has always focused on the needs, preferences, and expectations of its clients. As in the past, we have dedicated ourselves to offering new products and enhancing the quali- ty of our services. In 2006, we started to offer our clients mortgages, new products in auto financing, and increased remote banking services through telephone and Internet banking. By investing in these areas we hope to secure our position in the banking system, and to support the middle class by improving their standard of living. We believe that the economic growth and prosperity of the country is closely connected to the increased economic activity of the population. We have also maintained high growth rates in Alfa-Bank’s Corporate Banking and Investment Banking business units. For the past several years, the bank has maintained its position as a market leader in equity and fixed income brokerage. Alfa-Bank is also considered to be one of the top providers of credit services to corporate clients. Alfa-Bank understands the inseparable link between business development in Russia and the social well-being of its people as well as stability, and cultural and educational development in the country. Therefore, the Bank pays a lot of attention to social and charity programs. Supporting the National Arts is very important to us. Special attention has been given to the following social programs: Lifeline (for seriously ill children), the World Wildlife Fund, and Alfa Chance, an educational program for Russian school children. Last year, with the support of Alfa-Bank, the largest-ever literature prize was awarded. Having established a solid foundation for future development in the past year, we now have the opportunity to improve our market position further in the years to come. We are grateful to Alfa-Bank’s management for their professional and well-planned approach to running the business. We are also indebted to our clients and partners for their trust and cooperation. A special thank you should also go to all Alfa-Bank’s employees, for without their dedication and professionalism we would never have been able to achieve the successes of the past year. Mikhail Fridman, Rushan Khvesyuk, Chairman of the Board Chairman of the Executive Board, of Directors Member of the Board of Directors Board of Directors and Executive Board Tomasz Andrei Kazmierowski Sokolov Alexander Member Ildar Andrei Deputy Chairman Gafin Oleg of the Executive Karimov Kosogov Member of the Executive Member Sysuev Board, Head Member Vladimir of the Board Board of the Board First Deputy of Consumer of the Board Tatarchuk of Directors of Directors Chairman Finance of Directors Deputy Chairman of the Board Mikhail of the Executive of Directors Fridman Board, Head Chairman of Corporate of the Board Banking of Directors Annual Report 2006 | Alfa-Bank | 08:09 Sergei Mednov Alexander Viktor Member Andrew Bashkirov Lukanov Miroslav of the Executive Baxter Member Member Boublik Board, Head Deputy of the Executive of the Board Member of Information Petr Aven Chairman Board, Director of Directors Petr Smida of the Executive Technology President, of the Executive of Retail Banking Member Board, Chief Rushan Member Board, Chief of the Executive Operating Khvesyuk of the Board Financial Officer Board, Chief Officer Chairman of Directors Executive Officer of the Executive Board, Member of the Board of Directors 09:57 | Alfa-Bank | St. Petersburg Alfa-Bank | Vladivostok | 16:57 CEO's Statement on Key Achievements of 2006 and Strategy for 2007 2006 Market 2006 started with the successful re-branding of all the Bank’s businesses under one modern Position brand. and Key According to RosBusinessConsulting, as of January 1, 2007, Alfa-Bank was Russia’s fourth- Achievements largest Bank in terms of assets and shareholders’ equity. In 2006, growth rates in the Russian Banking market were very strong across all segments.