Annual Report 2008 ENG

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Annual Report 2008

“The difficult economic situation in 2008 demonstrated that our conservative policy and reliance on long-term client relationships enable the Bank to get through all trials with distinction.The economic instability will, of course, continue in 2009, but Bank Vozrozhdenie looks confidently to the future and plans to maintain the high performance of its business and strengthen its positions on the market.”

Dmitry Orlov,Chairman of the Management Board, Bank Vozrozhdenie

4 A Letter of the Chairman of the Management Board

of Bank Vozrozhdenie

6 Portrait of the Bank

7 Bank’s Shareholders

10 Bank’s Strategy

11 Highlights of 2008

11 The Bank’s Key Performance Indicators in 2008

12 Main Events of 2008

13 Major Transactions

16 Corporate Governance

17 Dividend Policy

17 Corporate Governance Structure

18 Management Bodies

18 Board of Directors

23 Chairman of the Management Board

23 Management Board

28 Control Over the Bank’s Financial and Business Activity

30 Russian Economy and Banking System in 2008

42 Key Business Segments

43 Retail Business

47 Corporate Business

54 Bank Cards

56 Activity on the Financial Markets

60 Risk Management

60 Capital Adequacy

61 Credit Risks

65 Liquidity Risks

67 Market Risks

67 Interest Risk

70 Financial Results

74 Independent Auditor’s Report

80 Information Technology

82 Human Resources

86 The Bank and the Community

88 Information on Meeting the Provisions

of the Corporate Conduct Code

95 Adress and Contacts

Contents

BANK VOZROZHDENIE4 5 ANNUAL REPORT 2008

Dear shareholders, partners and colleagues!

2008 was not an easy year for the Russian banking

system and the country’s economy in general. In such

circumstances, the professionalism of the Bank’s employees

and the confidence of the Bank’s clients and partners play

a decisive role.

We planned for slower growth and the deterioration of

the situation in 2008, and hence we were well prepared by

the time the crisis hit in the fall of 2008, having accumulated

a substantial amount of liquid assets, reduced the growth of

lending and adapted lending practices to the new conditions.

A conservative policy and preemptive action against

increased macroeconomic risks enabled the Bank, despite

the difficult situation, to grow assets by 27%, maintain

the high quality of its loan portfolio, strengthen liquidity and

demonstrate further growth of performance indicators.

We are pleased to report that in 2008 the Bank managed to

increase return on equity to 23.3% from 21% in 2007 and

return on assets to 2.5% from 2.1%, while reducing the cost-

to-income ratio from 62.7% to 52.7%, surpassing the target

of 60%.

In order to reduce operating costs, the Bank slowed regional

expansion, opening only ten new branches, closing three of

its less successful offices and expanding the ATM network

by 92 machines. The introduction of a new automated

banking system reached its final phase and is scheduled for

completion in 2009.

We are grateful to our clients and financial partners for

the confidence in us. Customer funds with the Bank grew

by 11% in 2008. In October 2008 some clients decided

to withdraw their deposits and the Bank fulfilled all its

obligations without any delay. In February 2009 we fully

recovered the autumn outflow of retail term funds.

In July 2008 the Bank raised a 10-year subordinated loan

from two international development institutions – Germany’s

DEG and FMO of the Netherlands. That allowed us to

increase the capital adequacy ratio from 15,2% to 15,7% and

confirmed international investors’ confidence in the Bank.

With the continuation of the unfavorable situation in 2009,

the Bank faces new challenges to boost efficiency, further cut

costs and, of course, reduce credit risks. The Bank’s plans for

2009 include a substantial increase in loan loss provisions,

from 4.8% of the loan portfolio at the end of 2008 to 7–7.5%

given a normal course of events or even to as much as 8–9%

if the pessimistic scenario becomes a reality. Nevertheless,

the Bank plans to remain profitable in 2009 as well.

The crisis has proved the soundness of the Bank’s traditional

orientation toward clients from the small and medium

business sector and retail customers, as well as its

commitment to providing comprehensive banking services.

Our close knowledge of our clients and the long-term

relationships that we have built enable us to look at 2009 with

confidence.

Dmitry Orlov

A Letter of the Chairman of the Management Board of Bank Vozrozhdenie


Bank Vozrozhdenie, which received its banking license in

1991, is now one of Russia’s leading financial institutions,

ranking among the country’s top 30 banks.

Bank Vozrozhdenie is developing as a personal bank for

corporate and retail clients.

• Within its operations with corporate clients, the Bank is

focused on developing and supporting small and medium

businesses, which account for 70% of the corporate loan

portfolio.

• In its work with retail clients, the Bank is focused on raising

funds. Retail deposits make up 39% of liabilities.

With the aim of creating a convenient and accessible

infrastructure for clients, the Bank is striving to develop an

efficient sales network. The key region is the Moscow Region,

where the Bank has the most extensive sales network,

second only to Sberbank, and which accounts for 60% of our

client base.

Bank Vozrozhdenie is proud of the quality of its corporate

governance and high level of risk management.

• The Bank has been recognized as the most transparent

Russian bank for shareholders and investors (Standard &

Poor’s studies for 2006 and 2007).

• The Bank’s creditworthiness has been affirmed by

international rating agencies. Moody’s has affirmed its

rating of Ba3/D-/NP, negative outlook, and the rating from

Standard & Poor’s is BB-/ruAA-, negative outlook.

• The Bank has been preparing financial statements under

International Financial Reporting Standards since 1991.

• The Bank has an active Audit Committee and Human

Resources and Compensation Committee, and meetings of

the Board of Directors are held according to the best world

practices.

Bank’s Shareholders

Key indicators

Assets RUB 141.2 bln

Loans RUB 99.3 bln

Deposits RUB 51.8 bln

Net income RUB 3.1 bln

Equity RUB 15.1 bln

ROE 23.3%

Number of retail clients 1,350,000

Number of corporate clients 55,000

Employees 6,635

Branch network 176

ATMs 642

Ranking in Russia’s banking system*

Loans to small & medium businesses 2

Retail deposits 10

Pretax profit 16

ATM network 16

Branch network 17

Client funds 25

Assets 28

*Source: RBC Rating

Bank Vozrozhdenie authorized capital of 250,431,990 rubles

consisting of 23,748,694 ordinary (94.8% of authorized

capital) and 1,294,505 preferred shares with a fixed dividend

rate (5.2% of the authorized capital), each with a face value of

10 rubles.

Bank Vozrozhdenie shares are traded on stock exchanges in

Russia and other countries:

• The Bank’s shares are traded on Russia’s MICEX and RTS

(ticker symbol VZRZ) stock exchanges and are included

in the MICEX Financial Index. The common shares were

included in the A2 listings of both exchanges in 2007.*

• About 2.3% of common shares (541,165 shares) are part

of a Level-1 ADR (American Depositary Receipts) program

and are traded on the Frankfurt, Berlin and Stuttgart stock

exchanges.

The register of the Bank’s shareholders as of January 1, 2009

listed more than 839 legal entities and 6,389 individuals,

many of whom became shareholders more than 10 years

ago. About 40% of authorized capital is held by foreign

institutional investors.

The Bank’s market capitalization as of January 1, 2009 was

6,684,070,000 rubles.

Bank Vozrozhdenie’s strategic goals are to achieve a fair

market valuation of its shares and to develop its business for

the benefit of all shareholders.

* Bank Vozrozhdenie ordinary shares were transferred from the A2 List on the RTS

Stock Exchange to the non-listed securities section by the Bank’s request

as the Bank’s shares are not actively traded on RTS and the total number of

transactions with the Bank’s shares is very small on this trading floor.

Largest shareholders on 12.05.2008

Shareholder Share in authorized capital, %

Dmitry Orlov 30.70

Burlington Trading Co Limited 12.71

Brysam Global Partners, L. P. (USA) 9.37

Total 52.78

Trading volume (shares)

2005 2006 2007 2008

MICEX 186,347 349,139 2,050,384 2,940,351

RTS 174,238 167,152 380,851 167,612

OTC market - - 14,790,607 16,624,485

German

exchanges

(ADR)

481,939 227,539 234,059 76,391

Total 842,524 743,821 17,455,901 19,808,839

Share price on MICEX

‘000 shares Quotes

Volume of trading, RUB (left scale)

Price (right scale)

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Portrait of the Bank

Professional Business Strategy Vozrozhdenie Bank adheres to a conservative development strategy based on organic growth. This approach has enabled us to maintain a high level of reliability and remain the only private bank to be ranked consistently among the 30 largest in Russia.


• The bank's cards business generates a growing

proportion of the Bank’s commission income and enables

it to expand its range of services to retail and corporate

clients. The Bank puts an emphasis on customer service

technologies, reliable services, the development of its ATM

network and introduction of new services based on bank

cards.

We see the Bank’s technological sophistication as crucial

to remaining competitive and improving the quality of client

services, so the development of technology is an important

component of the Bank’s strategy. By the middle of 2010

the Bank plans to complete the transition of all branches

and divisions to a new technology platform. The automated

banking system (ABS) that is being introduced allows

centralized management of the Bank’s product line, and is

integrated in real time with the Bank’s payments processing

system, Bank-Client system and Processing Center.

The Bank is growing organically and specializes in traditional

banking services, maintaining a low level of dependence

on borrowing in public capital markets, whilst operating in

financial markets only to support liquidity.

In order to improve the quality of its services, the Bank

is building an efficient sales network based on branches

and ATMs. The future growth of Bank Vozrozhdenie’s sales

network will take place primarily in European Russia, in

regions with strong economic potential. We do not intend to

expand our business outside of Russia.

We aim to further increase the proportion of professional

investors among the Bank’s shareholders, boost the liquidity

of its shares and increase its market capitalization.

Management continues to control a substantial portion

of the Bank’s capital and is implementing a development

strategy aimed at increasing business performance and

market capitalization to the benefit of all shareholders.

As a public bank Bank Vozrozhdenie is constantly striving

to improve transparency and corporate governance.

International experts at Standard & Poor’s have repeatedly

recognized ours as the most transparent Russian bank for

shareholders and investors, while a survey of the investment

community conducted by Thomson Reuters recognized

Bank Vozrozhdenie as having the best investor relations of

any company in the banking and finance.

Bank’s Strategy

Bank Vozrozhdenie

is a personal bank

for corporate and retail clients.

Bank Vozrozhdenie is focused on providing comprehensive

services to corporate and retail clients. By offering clients

a broad range of services the Bank achieves a high level of

cross sales and high proportion of stable non-interest income

in its revenue structure. The Bank’s business is growing

along with constant control over costs in order to improve

efficiency, reduce the share of unit operating costs and

ensure high return on equity.

One of the Bank’s main priorities is to increase customer

loyalty and strengthen competitive positioning by developing

the Bank’s brand and improving the quality of customer

service.

The Bank’s business is segmented into four key areas:

the retail business, corporate business, bank card business

and operations on financial markets.

• In the corporate segment, the Bank focuses on servicing

medium and small businesses, striving to diversify its

client base by various sectors of the economy. The Bank

supports clients at every stage of business development. In

the medium term the Bank intends to increase its market

share in the corporate segment and strengthen its position

in the Top-20 Russian banks by volume of services provided

to corporate clients, particularly medium and small

businesses.

Leveraging established relationships with corporate clients

and strong market positions in the regions, the Bank strives

to increase cross sales, offering employees of corporate

clients retail banking products and products based on bank

cards.

• In the retail sector the Bank makes a particular effort to

attract term deposits. A substantial resource base founded

on household savings constitutes one of the Bank’s primary

competitive advantages and shields it from serious shocks.

The Bank plans to increase market share in this segment

and maintain its position in the Top-10 Russian banks

in such areas as retail deposits, clearing and payment

services.

The Bank’s Key Performance Indicators in 2008

Results to IFRS

RUB mln USD mln

2008 2007 2006 2008 2007 2006

Assets

at end of the year141,211 111,404 73,426 4,806 4,539 2,789

average for the year 128,171 91,767 58,376 5,169 3,603 2,147

Equity

at end of the year15,065 11,890 5,509 513 484 209

average for the year 13,469 9,086 4,192 544 358 154

Net interest income 8,494 5,570 3,484 289 227 132

Provisions 2,199 885 393 75 36 15

Non-interest income 4,836 3,577 2,386 165 146 86

Operating expenses 7,029 5,732 4,243 239 234 157

Disposal & restructuring 0 0 -150 0 0 –5

Profit before tax 4,102 2,530 1,084 140 103 41

Tax 965 626 283 33 26 11

Net profit 3,137 1,904 801 107 78 30

Earnings per share RUB 125 RUB 80 RUB 39 $ 4.25 $ 3.26 $ 1.48

Return on equity 23% 21% 19%

Return on assets 2.5% 2.1% 1.4%

Highlights of 2008


Major Transactions In 2008 Bank Vozrozhdenie did not put together any large

deals (as defined by the Article 78 of the federal law

No. 208-FZ On Joint-stock Companies).

Related party transactionsAccording to a decision made by the annual General Meeting

of Shareholders (Minutes No. 1 dated June 27, 2008),

the Bank put together deals (loans, guarantees, deposits,

acquisition of rights of claim and other operations under

the license on execution of banking operations) in which

members of the Board of Directors and executives bodies

of the Bank were recognized as interested parties under

Article 81 of the federal law No. 208-FZ On Joint-stock

Companies.

The deals were made by the Bank in the course of its daily

business activity. The substantive conditions of the interested

party deals made by the bank did not differ from

the conditions of other similar deals made by the Bank.

The amount of each deal (several related deals) made by

the Bank with each interested party did not exceed the limit

(5,850,000 rubles) set by the decision of the Annual General

Meeting of shareholders of Bank Vozrozhdenie.

The amount of each deal with credit risk concluded with

interested parties did not exceed the li mit (2,000,000 rub les),

and the amount of several related deals with each interested

party did not exceed the limit (4,000,000 rubles) set by

the decision of the Annual Ge neral Meet ing of shareholders

of Bank Vozrozhdenie.

Bank Vozrozhdenie recognized as best public company for •

investor relations in the financial sector, in the Thomson

Reuters Extel Survey – Focus CIS 2008, conducted

by Thomson Reuters in partnership with the Interfax

International Information Group.

The strength of Bank Vozrozhdenie’s brand was confirmed •

by authoritative ratings. Bank Vozrozhdenie was one of just

seven Russian banks included in a rating of the 500 leading

global financial companies by brand value, published by

BrandFinance at the end of 2008.

Cooperation with the authoritiesBank Vozrozhdenie joined the Moscow small business •

lending program.

Bank Vozrozhdenie renewed status as authorized bank of •

the Moscow Government.

Bank Vozrozhdenie entered into a general deposit •

agreement with the state corporation Housing and Public

Utilities Reform Fund.

Bank Vozrozhdenie qualified to bid in Finance Ministry •

auctions for deposits of federal budget funds.

Bank Vozrozhdenie was included in a list of lenders •

whose guarantees can be used as a security under the by

Central Bank loans.

Bank Vozrozhdenie won the right to receive unsecured •

loans from the Central Bank of Russia.

Stronger market positionsBank Vozrozhdenie for the first time ranked among •

the world’s Top-1000 banks as published by The Banker.

Bank Vozrozhdenie ranked among the Top-100 Russian •

banks by market capitalization, published by Kommersant-

Dengi.

Bank Vozrozhdenie ranked among the 30 best Russian •

banks by key indicators, according to Expert RA.

Bank Vozrozhdenie ranked in second place among •

Russian banks in lending to small and medium businesses

according to RBC Daily.

Main Events of 2008

Business developments• Ten new branches were opened while three

underperforming offices were closed.

• Bank Vozrozhdenie issued over 1.25 million cards,

including over 100,000 revolving credit cards.

• The equity investment fund Brysam Global Partners

acquired 9.9% of Bank Vozrozhdenie common shares and

became one of the Bank’s largest shareholders.

• Bank Vozrozhdenie raised 10-year subordinated loan

of US$50 million from two international development

institutions: Germany’s DEG and FMO of the Netherlands.

• The Bank introduced new services for ATM users, including

the option of depositing into the accounts of MasterCard

cards issued by any Russian bank at Bank Vozrozhdenie, at

ATMs, at capable of accepting cash.

• The Bank introduced new products based on bank cards:

- Revolving credit cards with grace period (previously

the Bank offered credit cards without a grace period);

- Exclusive cards in the Visa line: Visa Infinite credit

cards.

• Standard & Poor’s assigned Bank Vozrozhdenie

counterparty ratings: BB- long-term, B short-term, and

ruAA- on the national scale.

Corporate governanceThe Bank approved a risk management strategy.•

The Bank set up a Human Resources and Compensation •

Committee.

Market recognitionBank Vozrozhdenie ranked among the five companies with •

the best corporate governance in Russia in a survey carried

out by Troika Dialog.

Bank Vozrozhdenie rank in 11th in a rating of bank •

recognition and 10th in a rating of client loyalty to banks,

in a survey conducted by the National Agency for Financial

Studies (NAFI).

Transparency and Openness Vozrozhdenie Bank’s greatest asset is our strong, strong relationships with our customers, shareholders and partners, based on openness and transparency. It is these relationships that distinguish us today and will continue to distinguish us in the future.


Bank Vozrozhdenie has a diversified shareholder structure,

with a free float of about 60%. Maintaining a corporate

governance system comparative to the best global practices

and constantly enhancing them have contributed greatly

to the Bank’s competitiveness. Thanks to active efforts to

increase the transparency of its business, in its many years

on the public market the Bank has earned a reputation

among Russian credit institutions as a leader in corporate

governance.

The principles and procedures of corporate governance are

set up in the Bank’s Article of Association, which defines

the structure of governance and the powers of the Bank’s

management bodies and its internal control and audit bodies.

In 2004 the Bank adopted a Corporate Governance Code,*

which together with the Code of Corporate Ethics sets out

the following additional obligations of Bank Vozrozhdenie:

Increase information transparency; •

Improve the decision making processes; •

Reduce risks;•

Prevent conflict of interest; •

Ethical principals that guide the Bank in relations with •

shareholders, clients, business partners, state and

municipal authorities, competitors and employees.

Priorities for corporate governance development in 2008 Distribution of powers among management bodies.•

Organization of activities of the Board of Directors, •

including relations with executive bodies.

Development of rules and procedures to support •

observance of corporate ethics principles.

Improvement of internal control system.•

Special attention was paid in 2008 to improving procedures •

for risk management and control over financial and

business operations.

* A new version of the Corporate Governance Code, renamed the Corporate

Conduct Code in line with Federal Financial Markets Service (FFMS)

recommendations, was approved by the decision of the Board of Directors

(Minutes No. 6 dated March 30, 2009) in March 2009.

Corporate Governance

Corporate Governance StructureAchievements in corporate governance in 2008Bank Vozrozhdenie ranks among the five companies with •

the best corporate governance in Russia, in a survey

conducted by Troika Dialog.

Bank Vozrozhdenie was recognized as the best company •

within the public financial sector in the area of investor

relations according to the Thomson Reuters Extel Survey –

Focus CIS 2008. This survey was carried out by Thomson

Reuters in partnership with the Interfax International

Information Group.

Yulia Vinogradova, Adviser to the Chairman of the Bank’s •

Management Board was declared the best Investor

Relations professional in the financial sector for the second

consecutive year, by the Thomson Reuters Extel Survey –

Focus CIS 2008.

The priorities in 2009 will be to further improve the corporate

governance system in the following areas:

Development strategy;•

Management of bank risks (improving the system of risk •

assessment, expanding the methodological base for

analysis);

Policy for prevention of conflicts of interest;•

Improvement of information policy (increasing the level •

of information transparency);

Procedure for reporting to the Board of Directors by •

executive and control bodies.

Declared and accrued dividends on Bank Vozrozhdenie shares

2007 2006

% of share

face value

Amount of

dividends,

‘000 RUB

% of share

face value

Amount of

dividends,

‘000 RUB

Ordinary shares 5 11,874 5 10,374

Preferred shares 20 2,589 20 2,589

Total 14,463 12,963

Dividend PolicyUnder the Provision on Dividend Policy, which regulates

the procedure and conditions for annual dividend payments,

the amount of funds set aside for dividend payments should

not exceed 10% of net profit earned in the completed

financial year. Dividends on preferred shares amount to

20% of face value. The provision fully protects the rights

of shareholders as well as takes into account the dynamic

development requirements set out by Bank Vozrozhdenie.

The text of the Provision on Dividend Policy is posted on

Bank Vozrozhdenie website, www.vbank.ru/en, in the section

Investor Relations – Corporate Governance – Internal

Documents.

Main conditions of dividend paymentsThe existence of a net profit for the previous financial year.•

The absence of restrictions on dividend payments •

stipulated by Russian legislation.

The absence of outstanding losses from past years.•

A recommendation from the Board of Directors and •

decision of the General Meeting of Bank’s shareholders

to pay dividends.


Management Bodies

General Meeting of ShareholdersThe General Meeting of Shareholders is Bank Vozrozhdenie

highest management body. The Bank provides for equal

participation of all shareholders in the meeting, their timely

notification into preferences regarding timing of the event as

well as the provision of information needed to make strategic

decisions as laid out in the meeting agenda.

Bank Vozrozhdenie holds an annual General Meeting of

Shareholders to review and allow all shareholders to discuss

the results of the Bank’s operations in the previous financial

year. In the period between the annual meetings the Board

of Directors might decide to hold an extraordinary meeting

of shareholders at its own discretion, or at the request of

the Audit Commission, the auditor or shareholders who own

at least 10% of voting shares of the Bank.

Bank Vozrozhdenie gives its shareholders a real opportunity

to participate in the management of the business. Holders

of more than 2% of voting shares can submit proposals for

the agenda of shareholder meetings, as well as nominate

candidates for the Board of Directors. In order to ensure

the most effective decision making process the Bank

provides its shareholders with the opportunity to review

documents and information relating to issues pertinent

to the shareholder meeting agenda 30 days before the date

of the meeting.

Board of DirectorsThe Board of Directors is the management body that carries

out general management of the Bank’s operations, with

the exception of issues that, under current legislation

and the Articles of Association, fall within the scope of

responsibilities of the General Meeting of Shareholders.

The Board’s responsibilities include strategic planning

of the Bank’s activities, monitoring its financial and business

operations, establishing and implementing an effective

system of internal control, ensuring the observance of

shareholders’ rights, as well as overseeing the activities

of the executive bodies.

Bank Vozrozhdenie Board of Directors has 12 members

who are elected by a cumulative voting during the annual

General Meeting of Shareholders for the period until the next

annual General Meeting or extraordinary General Meeting

where the agenda includes the election of new members to

the Board of Directors.

A new Board of Directors was elected at the General Meeting

of Bank Vozrozhdenie shareholders held on June 27, 2008.

Newly elected to the Board were Robert Willumstad,

managing partner at Brysam Global Partners;

Vladimir Panskov, former Russian finance minister (1994–

1996) and former Audit Chamber auditor (1997–2006); and

Yury Poletayev, former chief executive of Moscow Narodny

Bank, London (2000–2005).

The new Board, at its first meeting which took place at

the end of the shareholder meeting, elected Yury Marinichev

as Chairman.

In accordance with best corporate governance practices

and recommendations of the FFMS Corporate Conduct

Code independent directors have been elected to

Bank Vozrozhdenie Board of Directors since 2002.

The Board uses the most conservative criteria to determine

the independence of members of the Board of Directors.

The Regulations on the Board of Directors define

independent directors as those who:

who have not been an official or an employee of the Bank −

for the previous 3 years;

who is not an official of another entity where any official −

of the Bank is a member of the Human Resources and

Compensation Committee of the Board of Directors;

who is not an affiliated person to an official of the Bank; −

who is not an affiliated person to the Bank (except for −

the membership in the Board of Directors) and an affiliated

person to its affiliated persons;

who is not a party in liabilities with the Bank which terms −

presuppose that he/she may acquire property (receive

funds) with the value of not less than 10 percent of total

annual income, except for remuneration for participation

in the activity of the Board of Directors of the Bank;

who is not a major counterparty of the Bank (a counterparty −

with the total amount of transactions between him/her

and the Bank throughout the year of 10 or more percent

of the balance sheet value of the Bank’s assets);

who has not been a member of the Board of Directors −

of the Bank for more than 5 years;

who does not represent the government. −

In the past fiscal year the Board of Directors had six

independent directors, all of them are recognized as

professionals in the areas of their activity.

Board of Directors reportThe Board of Directors that was elected at the annual General

Meeting of Shareholders in 2008 held four meetings in

the period to December 31, 2008. Another four meetings are

scheduled to be held before the annual General Meeting of

Shareholders in 2009.

The Board of Directors in 2008 focused on issues concerning

management of bank risk.

The Board of Directors considered the following priority

issues:

The creation of the Audit Committee and Human Resources •

and Compensation Committee of the Bank’s Board of

Directors;

The approval of strategy on managing bank risks; •

The liability of members of the Board of Directors and •

executive bodies for incurring losses to the Bank as a result

of inefficient management of bank risks;

Review of the Bank’s results under IFRS; •

Amendments to the Bank’s Articles of Association •

and material conditions of Agreements with members

of the Bank’s Management Board and Chairman of

the Management Board.

The Board of Directors’ key decisions were:

Decision to set up the Audit Committee and the Human •

Resources and Compensation Committee of the Board

of Directors;

Decision on approval and making Alterations to •

No. 7 of the Bank’s Articles of Association;

Decision on approval of the Bank’s strategy on risk •

management;

Decision on approval of significant conditions of •

Agreements with members of the Bank’s Management

Board;

Decision on approval of principles of bonus payments •

to the employees of the Bank’s Head Office, establishing

the procedure of paying compensations to members

of the Bank’s executive bodies.


The Board of Directors approved a number of new internal

regulations of the Bank:

A new edition of the Provision on making large deals, deals •

with interested-parties and deals on lending to related

parties of Bank Vozrozhdenie;

Regulation on making deals on assignment of •

Bank Vozrozhdenie rights (claims) on loans given to legal

entities;

Corporate Ethic Code of Bank Vozrozhdenie.•

The committees of the Board of Directors Two committees have been established under the Board

of Directors to oversee key issues affecting the Bank’s

development on behalf of shareholders.

The Audit Committee• oversees the preparation of financial

statements, fulfillment of financial targets and financial

audits of the Bank. In addition the Committee gives

recommendations on the appointment of independent

auditors and supervises their work. In order to ensure

maximum protection of shareholders’ interests

the Committee includes three non-executive members of

the Board of Directors and is headed by an independent

member of the Bank’s Board of Directors.

The members of the Audit Committee are:

Vladimir G. Panskov (Chairman of the Audit Committee),

Alexander N. Zhizhayev and Nikolai S. Zatsepin.

The Audit Committee held four meetings in the period from

its election to December 31, 2008. Another three meetings

are scheduled to be held in the period before the annual

General Meeting of Shareholders in 2009.

The Human Resources and Compensation Committee•

gives the Board of Directors recommendations on

appointments to management positions, and recommends

candidates for election to the Board of Directors.

The Committee also develops the Bank’s policy on incentive

programs, including recommendations on compensation

for senior executives.

The members of the Human Resources and Compensation

Committee are: Robert B. Willumstad (Chairman of

the Human Resources and Compensation Committee),

Yuri V. Poletayev and Otar L. Margania.

The Human Resources and Compensation Committee held

three meetings in the period from its election to December

31, 2008. Another three meetings are scheduled to be

held in the period before the annual General Meeting of

Shareholders in 2009.

Board of Directors

Name, year & place of birth, title

Share in authorized

capital Education Membership in committees

Elected to the Board

of Directors

Yury M. Marinichev1937, Russia

Chairman of the Board of Directors;

Chairman of the Board of the Moscow Regional Union

of Consumer Cooperatives

0.23

Moscow Road Institute;

S. Ordzhonikidze Engineering

and Economics Institute of

Moscow

1994

Dmitry L. Orlov1943, Russia

Chairman of the Bank’s Management Board

30.70 Moscow Finance Institute 1994

Robert B. Willumstad1945, USA

Independent Director;

Senior Adviser, Brysam Global Partners;

Member of the Board of Directors, AEF;

Member of the Board of Directors, IXE;

Member of the Board of Directors, CIB;

Member of the Board of Directors, Johnson & Son, Inc.

– Adelphi University

Chairman of the Human

Resources & Compensation

Committee

2008

Lyudmila A. Goncharova1958, Russia

Deputy Chairwoman of the Bank’s Management Board;

Chairman of Council of Garmoniya pension fund; Member

of the Board of Directors of LLC Baltiisky Kurort;

Chairman of the Board of Directors of CJSC V-Registr;

Chairman of the Board of Directors of OJSC Yunost

1.41Ternopol Finance &

Economics Institute1996

Alexander V. Dolgopolov1961, Russia

Deputy Chairman of the Bank’s Management Board;

Member of the Board of Directors of OJSC Avista;

Member of the Board of Directors of Garmoniya

pension fund

0.36

Moscow G.V. Plekhanov

Institute of the National

Economy

1997

Valery P. Zhigulich1952, Russia


Member of the Board of Directors of OJSC S. A. Zverev Plant

in Krasnogorsk

0.002Sverdlovsk Institute of

the National Economy2007

Alexander N. Zhizhayev1946, Russia

Independent Director

–Moscow Auto-Mechanical

InstituteMember of Audit Committee 2005


Name, year & place of birth, title

Share in authorized

capital Education Membership in committees

Elected to the Board

of Directors

Nikolai S. Zatsepin1951, Russia

General Director of CJSC Mozhaisk Wholesale

& Retail Company

0.16Moscow Institute of Civil

Aviation EngineersMember of Audit Committee 1994

Otar L. Margania1959, Russia

Senior Vice President, VTB Bank

1.28 Leningrad State UniversityMember of Human Resources

& Compensation Committee2003

Nikita S. Mikhalkov1945, Russia


Chairman of the Management Board of Studia TRITE LLC;

President of the Russian Cultural Fund;

Chairman of the Union of Russian Cinematographers

–Russian State Institute of

Cinematography2007

Vladimir G. Panskov1944, Russia


Professor, Russian State Distance Learning Finance

& Economics Institute

0.003 Moscow Finance Institute Chairman of Audit Committee 2008

Yury V. Poletayev1943, Russia

Independent Director

– Moscow Finance InstituteMember of Human Resources

& Compensation Committee2008

Chairman of the Management Board The Chairman of the Management Board of

Bank Vozrozhdenie is responsible for managing current

operations in accordance with the powers given to him

by the Articles of Association and the General Meeting of

Shareholders.

Dmitry Orlov is the Chairman of the Management Board

of Bank Vozrozhdenie. He was born in 1943 and graduated

from the Moscow Finance Institute with a specialty in Credit

and Finance. A 40-year veteran of the Russian banking

sector Mr. Orlov has been the Chairman of Vozrozhdenie’s

Management Board since the Bank’s foundation in 1991.

Mr. Orlov is the Chairman of the Board of Trustees of

the Finance Academy under the Government of the Russian

Federation, a Member of the Board of the Association

of Russian Banks, and a Member of the Board of

Representatives of Authorized Banks for the City of Moscow.

Dmitry Orlov has a 30.7% share in Bank Vozrozhdenie

authorized capital.

Management Board In order to ensure effective day-to-day management

of the Bank’s operations, the Board of Directors elects

a corporate executive body – the Management Board. It

is responsible for making critical decisions regarding

the operational management of the Bank’s activities

which require joint approval. The Management Board has

12 members.

Compensation for members of the Bank Vozrozhdenie management bodiesTotal amount of compensations (salary and bonuses) paid to

members of Bank Vozrozhdenie executive bodies in 2008 was

242,189,476 rubles.


Name, positions at the Bank and other organizations

Share in the authorized

capital Education, professional experience

Alexander A. Bolvinov1962, Russia

Head of Human Resources Department;

Member of the Board of Directors of Garmoniya pension fund

–

Moscow State Institute of International Relations;

Has been working with the Bank since 2000 and has 13 years

experience in the banking system

Sergei N. Malinin1963, Russia

Head of Corporate Department;

Member of the Board of Directors of OJSC Avista

–

G.V. Plekhanov Institute of the National Economy in Moscow;

Has been working with the Bank since 1993 and has more than

16 years experience in the banking system

Alla A. Novikova1957, Russia

Chief Accountant

0.002

Moscow Institute of Railway Transport Engineers;

Has been working with the Bank since 1991 and has 24 years

experience in the banking system

Andrey A. Shalimov1973, Russia

Head of Treasury

0.00002

Finance Academy of the Russian Government and the State

University – Higher School of Economics;



Management Board

Name, positions at the Bank and other organizations

Share in the authorized

capital Education, professional experience

Dmitry L. Orlov1943, Russia

Chairman of the Bank’s Management Board;

Member of the Bank’s Board of Directors

30.70

Moscow Finance Institute;

Has been working with the Bank since 1991, has more than


Lyudmila A. Goncharova1958, Russia


Member of the Bank’s Board of Directors;

Chairman of Council of Garmoniya pension fund;

Member of the Board of Directors of LLC Baltiisky Kurort;

Chairman of the Board of Directors of CJSC V-Registr;

Chairman of the Board of Directors of OJSC Yunost

1.41

Ternopol Finance & Economics Institute;



Tatyana F. Gavrilkina1959, Russia


Head of Finance Department

0.12

Moscow Finance Institute;



Alexander V. Dolgopolov1961, Russia


Member of the Bank’s Board of Directors;

Member of the Board of Directors of OJSC Avista;

Member of the Board of Directors of Garmoniya pension fund

0.36

G.V. Plekhanov Institute of the National Economy in Moscow;



Mark M. Nakhmanovich1957, Russia

Deputy Chairman of the Bank’s Management Board

0.45

K.A. Timiryazev Academy of Agriculture in Moscow;



Yury I. Novikov1962, Russia


Head of the Bank’s Northwestern Regional Center

–

Leningrad State University;



Dmitry A. Strashok1951, Russia


Chairman of the Board of Directors of LLC Baltiisky Kurort

0.24

All-Union Institute of Agriculture;



Rushan A. Abdullin1968, Russia

Head of Banking Technologies

–

Finance Academy of the Russian Government;



Management Board

Tatyana F.

Gavrilkina

Deputy Chairwoman of

the Bank’s Management

Board;

Head of Finance

Department

Dmitry L.

Orlov

Chairman of the Bank’s

Management Board;

Member of the Bank’s

Board of Directors

Lyudmila A.

Goncharova

Deputy Chairwoman

of the Bank’s

Management Board;

Member of

the Bank’s Board

of Directors;

Chairman of Council

of Garmoniya

pension fund;

Member of the Board

of Directors

of LLC Baltiisky

Kurort;

Chairman

of the Board

of Directors

of CJSC V-Registr;

Chairman

of the Board

of Directors

of OJSC Yunost

Alexander V.

Dolgopolov

Deputy Chairman

of the Bank’s

Management Board;

Member of the Bank’s

Board of Directors;

Member of the Board

of Directors of

OJSC Avista;

Member of the Board

of Directors of

Garmoniya pension

fund

Rushan A.

Abdullin

Head of Banking

Technologies

Alexander A.

Bolvinov

Head of Human

Resources

Department;

Member of the Board

of Directors of

Garmoniya pension

fund

Sergei N.

Malinin

Head of Corporate

Department;

Member of the Board

of Directors of

OJSC Avista

Alla A.

Novikova

Chief Accountant

Mark M.

Nakhmanovich

Deputy Chairman of


Board

Andrey A.

Shalimov

Head of Treasury

Yury I.

Novikov

Deputy Chairman of


Board;

Head of the Bank’s

Northwestern Regional

Center

Dmitry A.

Strashok

Deputy Chairman of


Board;

Chairman of the Board

of Directors of

LLC Baltiisky Kurort


Control Over the Bank’s Financial and Business Activity

The Bank’s internal control systemBank Vozrozhdenie internal control system oversees financial

and business activity to protect the rights and legal interests

of shareholders and investors. It includes bodies and services

that make it possible to recognize, prevent and limit financial

and operational risks, recognize violations, and to develop

consulting material and recommendations.

The internal control system is governed by the Regulations

on Internal Control and Audit Service of Bank Vozrozhdenie;

Regulations on Organization of the Internal Control System

in Bank Vozrozhdenie; and a number of documents that

regulate relations between divisions of the Bank. Monitoring

the internal control system is the responsibility of the Board

of Directors, as well as executive bodies.

The ICAS carries out its activity according to the Regulation

on Internal Control and Audit Service and in compliance with

the Bank’s Articles of Association and internal regulations,

as well as regulations of the Central Bank of Russia.

The ICAS’s duties are aimed at controlling:

The efficiency and productivity of the Bank’s financial and •

business activity in the process of banking operations and

other transactions; the effectiveness of asset and liability

management, including the safeguarding of assets and

management of bank risks;

The veracity, completeness and timeliness of financial, •

accounting and other reporting;

Compliance with Russian legislation and the Bank’s •

articles of association and internal documents;

The prevention of the Bank’s involvement or its employees’ •

participation in illegal activities, including money laundering

and financing terrorism, as well as timely submission of

information to government authorities and the Central Bank

of Russia in compliance with Russian legislation.

The ICAS operates on the principles of consistency,

independence and impartiality.

Members of the Audit Commission

Name, year of birth, positions at the Bank and other organizations

Share in authorized

capital Education

Viktor A. Afonin1956, Russia

Chairman of the Audit Commission;

Deputy General Director, Almazyuvelirexport

– Moscow Finance Institute

Tamara N. Lapinskaya 1954, Russia

Head of Business Planning and Analysis Division of the Finance Department,

Bank Vozrozhdenie

0.004 Moscow Finance Institute

Svetlana A. Markina 1952, Russia

Head of Internal Operations Accounting Division of the Accounting and

Financial Reporting Department, Bank Vozrozhdenie

0.0004 All-Union School of Accounting and Credit

Yelena V. Abramova1970, Russia

Head of Corporate Relations Division of the Corporate Department,

Bank Vozrozhdenie

– Finance Academy of the Russian Government

The main areas of control are:

Control by the management bodies over the Bank’s •

activities in compliance with the Law On Joint-Stock

Companies and the Articles of Association;

Control over the operation of the system of managing and •

assessing bank risks;

Control over the distribution of authority in carrying out •

banking activities;

Control over management of information flows and •

ensuring information security;

Control over the activity of the system to prevent laundering •

of income from criminal activities and financing of terrorism;

Control to ensure that the Bank’s activities as •

a professional securities market participant comply with

Russian laws and regulations of the Federal Financial

Markets Service;

Constant monitoring of the internal control system. •

AuditorIn compliance with the Federal Law On Joint-Stock

Companies, Bank Vozrozhdenie hires an auditor independent

of the bank and its officers to annually audit and confirm

the annual financial statement. The auditor is approved

annually by the General Meeting of Shareholders.

ZAO PricewaterhouseCoopers Audit (prior to 1999 ZAO

Coopers & Lybrand) has been Bank Vozrozhdenie’s auditor

since the Bank was founded.

Auditing license No. Е 000376

Licensing authority: Finance Ministry of the Russian

Federation

License expiration: May 20, 2012

State registration number: 1027700148431.

Location: Kosmodamianskaya Nab. 52, Bld. 5, 113054 Moscow

Internal Control and Audit Service The Internal Control and Audit Service is the main regular

body of Bank Vozrozhdenie’s internal control system.

The Internal Control and Audit Service (ICAS) operates in

compliance with the requirements of the Central Bank of Russia

to exercise internal control and assist management bodies in

ensuring the effective operation of Bank Vozrozhdenie.

Audit CommissionThe Audit Commission, is comprised of at least three

members elected by the General Meeting of Shareholders

for the period until the next meeting. Members of the Audit

Commission cannot simultaneously be members of

the Bank’s Board of Directors or Management Board.

The Audit Commission has the authority to carry out audits

of the Bank’s financial and business activities to verify

that activities comply with financial and business plans,

assess the financial standing, and verify compliance with

the established standards and limits of the internal control

and risk management systems.

The Bank’s Audit Commission in 2008 conducted an audit of

the Bank’s financial and business activity during the financial

year. It also evaluated the legality, economic justification and

efficiency of financial and business activity and its compliance

with the financial plan approved by the Board of Directors.

The Commission verified the correctness and completeness

of accounting, tax, management and statistical records and

the submission of financial statement. The Commission

also analyzed the Bank’s financial position, compliance

with established norms and limits and the functioning of

the internal control and risk management systems.


General economic trends

Pre-crisis 2007 and the Bank’s plans for 2008The Bank’s plans for 2008 were made based on

the assumption that crisis tendencies could emerge in

the country in 2008.

An analysis of developments in the second half of 2007

showed that:

The deterioration of the situation on international financial •

markets limited the access to foreign funding for most

Russian banks and companies;

The changing situation on financial markets had paralyzed •

Russia’s ruble bond market, borrowing in which decreased

dramatically;

The growth of lending in the Russian banking system •

was not supported by a proper resource base, impairing

the liquidity of the banking system;

The Home Mortgage Lending Agency changed its approach •

to refinancing banks’ mortgage portfolios in light of

the worsening situation on financial markets.

The generally favorable macroeconomic situation continued

in the first half of 2008:

High prices for oil and other Russian export commodities, •

combined with the capital account surplus, led to

the growth of the Central Bank of Russia’s reserves and

increased the money supply.

Situation at the BankFor 2008 the Bank:

• Planned for slower growth,

both in lending and raising

client funds

• Increased liquidity

reserves to counter

the potential negative

impact of the crisis

• Reduced long-term

lending, including

mortgage lending.

Russian Economy and Banking System in 2008

As a result, in the first half of 2008 the banking system

demonstrated strong growth in both its resource base and

loan portfolio.

In the banking system as a whole, the more rapid growth

in lending in the first half the year compared to growth in

the resource base had negative repercussions:

Liquidity ratios in the banking system as a whole fell to •

their lowest levels in years by the middle of 2008;

The Loans-to-Deposits Ratio in the banking system as •

a whole topped 100%.

Capital flight from Russian stock

market sparks liquidity crisis

in banking system.

The outflow of funds from the Russian stock market in

August-September 2008 pushed down share prices of

Russian companies, as well as ruble bonds, although

the sharpest drop was triggered by the bankruptcy of

investment bank Lehman Brothers in September.

The collapse in prices for securities, in turn, shut down

the leading interbank lending market in Russia – the repo

market.

Several major market players halted settlements, sparking

a crisis of confidence that led to the closure of mutual limits

by many other banks.

Situation at the BankBank Vozrozhdenie’s liquidity

cushion and conservative

policy toward operations

on financial markets

helped minimize the Bank’s

exposure to the problems on

the financial market.


Panic among depositors and

clients in the fall of 2008

dramatically weakened

the resource base of Russian

banks, requiring substantial

refinancing from the Central

Bank of Russia.

Retail deposits in the banking system fell by 7.5% in

September–November 2008, while the funds of non-bank

organizations shrank by 10.5% in November. The outflow

of deposits affected Russian private banks, as well as state

banks and wholly foreign-owned banks.

Situation at the Bank Bank Vozrozhdenie, as

well as the whole banking

system, saw an outflow of

deposits, with retail deposits

at the Bank dropping by

11% in the period from

September through

November 2008.

Thanks to the stabilization

measures by the authorities,

the Bank:

• Received about 2 billion

rubles with the release of

mandatory reserve funds;

• Raised a total of RR 20

billion in loans from

the Central Bank, which

amounted to 14% of

the Bank’s obligations at

the end of the year;

• Received access to

unsecured loans from

the Central Bank for

a period of six months.

At this time the monetary authorities moved to stabilize

the situation:

The Central Bank dramatically expanded the range of •

refinancing instruments and for the first time since 1998

started giving banks unsecured loans. More than 3 trillion

rubles were injected into the banking system with this

instrument;

The State Duma passed a law to increase retail deposit •

coverage by the Deposit Insurance Agency to 700,000 rubles

from 400,000;

Reserve requirements were reduced;•

The Finance Ministry and a number of state corporations •

held auctions to deposit temporarily available funds.

In December 2008 the situation already began to improve and

there was growth in retail and corporate deposits at banks.


Amid growing expectations of

ruble devaluation, bank clients

began to convert their funds into

foreign currency.

The depreciation of the ruble against the dollar and the euro

that began in August 2008 accelerated dramatically toward

the end of 2008.

Bank’s clients began en masse to convert their money into

foreign currency and withdraw ruble deposits.

The growing currency risks led to dramatic changes in

the structure of bank liabilities. The share of foreign currency

obligations grew considerably, with the proportion of foreign

currency retail deposits rising from 13% to 27% in the second

half of 2008 and to 34% in the first month of 2009. Large

private banks were most susceptible to this trend.

The outflow of client funds

combined with ruble devaluation

increased the averge cost of

funding, while growing credit

risks pushed up lending rates.

In order to hold on to retail deposits both private and state

banks began to raise interest rates. Rates on both ruble and

foreign currency deposits rose considerably in the second

half of 2008. Interest rates on ruble deposits topped out

at more than 18%, while rates on US dollar went as high

as 10%.

The growing cost of attracting funds combined with higher

credit risks led to a steep increase in lending rates.

The Central Bank’s decision to raise the refinancing

rate from 11% to 13% and a dramatically higher inflation

at the end of 2008 put additional upward pressure on

interest rates.

Situation at the BankAs part of the general trends

in the banking system in

the second half of 2008,

Bank Vozrozhdenie saw:

• Growth of deposits placed

by the companies of nen-

banking sector from 9.2%

to 23.2%;

• The proportion of foreign

currency assets grew from

11% to 20% of total assets

in the second half and to

27% by March 1, 2009;

33% of the Bank’s foreign

currency assets are on

deposit with the Central

Bank.

In rubles

In foreign currency Source: Central Bank of Russia

Ja

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ary

Fe

bru

ary

Fe

bru

ary

Ma

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Ap

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Ma

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Ju

ne

Ju

ly

Au

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st

Se

pte

mb

er

Oc

tob

er

No

vem

be

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De

ce

mb

er

Ja

nu

ary

Currency structure of obligations of individuals

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000


Problems started to emerge in

the real sector of the Russian

economy, amid collapse in prices

for Russian export commodities

and banking crisis.

The worsening macroeconomic situation in Europe and

North America, as well as in many emerging markets, led

to the collapse of prices for Russian export commodities.

Oil prices had already begun to come down from their peak

in May 2008, but by fall they had fallen so low that they

presented a threat to the Russian economy.

At the same time, the banking crisis forced Russian banks to

reduce lending and it became impossible for many companies

to refinance their loans.

Big national companies faced the biggest problems servicing

their loans as they had heavy debt burdens, including foreign

currency resources from foreign lenders.

Problems in the construction sector and the reduction of

mortgage lending triggered a drop in prices for real estate,

including collateral on bank loans.

The overdue debt of companies and organizations quadrupled

in the period from the beginning of 2008 through February

2009, from RUB 81 billion to RUB 329 billion. The proportion

of problem loans in the portfolio of loans to the non-bank

sector grew from 0.9% to 2.4%.

Situation at the BankBank Vozrozhdenie has

worked actively and

continues to work primarily

with small and medium

businesses, providing

loans in rubles with a

high level of security and

only following careful

analysis of the borrower’s

creditworthiness. Lending

priority is given to

companies with a good

credit history with the Bank.

The Bank has traditionally

treated real estate

as the most reliable

conservatively valued

collateral. At the end of

2008 the Bank conducted

an audit of its whole loan

portfolio, including a

revaluation of property used

as collateral. In a number of

cases, the Bank demanded

additional security from

borrowers.

The amount of overdue

loans in the portfolio of

loans to the non-bank sector

increased to RUB 3.8 billion

from RUB 1.7 billion at

the beginning of 2008, and

the proportion of non-

performing loans rose to

3.4%.


The problem of Russian companies’ foreign debt turned •

out to be highly exaggerated: large companies prefer

to raise funds abroad, refusing expensive loans from

Russian banks, and it seems that only a few large

companies with bad financial management appear to

have real problems;

The situation in the banking system has stabilized and •

client funds have begun to flow into accounts at banks;

After bottoming out in February 2009, Russian stock •

markets have begun rising;

Market surveys and analysis of production figures indicate •

that the real sector of the economy has hit bottom.

Nonetheless, the situation in

the banking system is expected

to remain unfavorable in 2009.

A key negative factor will be the worsening quality of the loan

portfolio, both in the retail and corporate sectors.

The growth of lending, particularly at non-state banks, will

slow dramatically. Increasing loans will be impossible until

the Russian banking system restores its resource base.

Banks will be forced to restructure a considerable portion of

loans, primarily by increasing the borrowing terms.

Growing unemployment and the difficult situation in a

number of sectors of the economy could increase the credit

losses of the banking sector. Banks’ ability to sell collateral

and avoid losses on bad loans will play the key role.

Government anti-crisis package

estimated at 12% of GDP.

Meanwhile, the government put together an economic

stimulus package that included:

Tax measures, including a reduction of the profit tax rate •

from 24% to 20%;

Measures to support seme sectors of the economy and •

large strategic companies;

Measures to support employment and social security.•

Measures to support the banking sector include:

Provision of refinancing for commercial banks;•

Provision of subordinated loans to banks whose •

shareholders increase equity;

A set of measures, aimed primarily at state banks, to revive •

lending to the economy.

In the first quarter of 2009,

many of the previously

discussed worst-case scenarios

for the economy failed to

materialize.

The first quarter already showed that the gloomiest forecasts

had not been realized:

The ruble’s exchange rate stabilized at less than 41 rubles •

against the euro/dollar basket;

The price of oil began to rise, climbing to around US$60 per •

barrel from its low of about US$40;

The trade balance, although it shrank dramatically, •

remained in surplus at US$24 billion, and the Central Bank

is forecasting a trade surplus of US$70 billion for the year;

Outlook for 2009The Central Bank tightened monetary policy considerably at

the end of January:

Reducing unsecured lending;•

Increasing the cost of credit resources to 18%.•

As a result, following a steep drop in the ruble’s exchange

rate in January, the Russian currency’s depreciation slowed

dramatically in February-March.

In February–March 2009

the Central Bank dramatically

tightened monetary policy and

managed to halt the devaluation

of the ruble, declaring it would

not allow the currency to

drop below 41 rubles against

the euro/dollar basket.

Situation at the BankBank Vozrozhdenie continues

to use Central Bank

resources, but plans to

reduce their use in light of

the high cost.

Some clients of the Bank

were included in the list of

295 strategic companies

approved by the Russian

government, which makes it

easier for them to refinance

loans at state banks.

Customer LoyaltyWe work in close collaboration with our clients and partners, building long-term, trusting relationships. These relationships serve as the foundation for the bank’s stable growth and strong reliability. Our customers value the respect we show them and recommend the bank to their family and friends.


The Bank identifies three main business segments and activity on financial markets

Retail businessDeposit and lending operations with retail clients,

settlement services, safety deposit boxes, cash and currency

transactions

Corporate businessOperations with corporate clients with a focus on small and

medium businesses; transactions with foreign currency,

trade finance of international contracts, ets

Bank card businessServices to retail customers using bank cards, lending

through cards, payroll services

Activity on financial marketsOperations on the interbank lending market, the forex market

and securities market

Key Business Segments

Retail Business

Retail business objectives in 2008Within the context of growing the retail business and

increasing customer loyalty, and keeping in mind the strategic

importance of this business for Bank Vozrozhdenie, our efforts

in 2008 were aimed at meeting the following key objectives:

Attracting household savings and lengthening the duration •

of the deposit portfolio;

Growing non-interest income revenue;•

Adjusting lending programs promptly according to market •

requirements;

Developing automated retail technologies in order to •

improve the quality of services;

Increasing cross sales;•

Fulfilling the business plan.•

The Bank’s stability was to

a large degree secured by

preventative measures taken by

management from the beginning

of 2008, aimed at accumulating

liquidity and intensifying efforts

to attract household savings.

Thanks to a well-considered product policy, balanced

expansion in the regions and growth of the client base in

previous years, Bank Vozrozhdenie finished 2008 with minimal

losses and successfully met the objectives that management

set for the retail business at the beginning of the year.

By the end of 2008 the Bank already had more than

1.35 million customers using deposit and credit products,

receiving salaries on Bank Vozrozhdenie cards, making

payments, using money transfer services, carrying out

cash and non-cash exchange transactions, carrying out

transactions using safety deposit boxes and letters of credit,

and using other products offered by the Bank.

Retail deposits, bln RUB

0

10

20

30

40

50

bln RUB

43.4 43.7

We managed to restore deposits in

early February 2009 (in ruble equivalent)

2006 2007 2008


Retail lendingThe overall growth of the Bank’s loan portfolio was

slower than the market average, which was due first all

to the worsening situation on the financial market and

consequent reduction of lending, but also to the close

attention paid to the level of risk. Thanks to a review of

the system of credit risk assessment and the full integration

of the decision making process for loan applications into

the Bank’s unified information system, the quality of the retail

loan portfolio was maintained at a traditionally high level.

Despite the financial turmoil in the country, the proportion of

problem loans amounted to just 2.1% at the end of the year.

The terms on the Bank’s loan programs currently match

the market.

Bank Vozrozhdenie’s retail loan portfolio grew by 14% in

2008 to RUB 19.2 billion at the end of the year. The Bank

extended about 14,000 loans in the course of 2008, totaling

RUB 7.5 billion. Ruble loans were the most popular,

comprising about 93% of the total extended in 2008. Retail

lending made up 16.7% of Bank Vozrozhdenie’s loan portfolio.

DepositsMost of Bank Vozrozhdenie’s assets are currently funded

by client funds, almost half of them are retail deposits.

The Bank’s stability has been secured to a large extent

by preventative measures taken by management from

the beginning of the year that were aimed at accumulating

liquidity and intensifying efforts to attract retail funds.

This strategy was fully vindicated following the most difficult

period for the retail banking sector in September-November

last year. By October 2008, when the banking system began

seeing a dramatic outflow of deposits due to the weakening

ruble, Bank Vozrozhdenie had already accumulated a strong

liquidity cushion. Despite the 11% outflow of retail client

funds in October-November, at the beginning of 2009 we

managed to restore the portfolio of retail deposits to levels of

September 2008.

By the end of 2008, retail term deposits at the Bank totaled

RUB 40.2 billion, which was 10.4% more than a year

earlier. Until September, ruble deposits were the most

popular comprising more than 80% of the total, but by

the end of the year this figure had fallen to 60%. Thanks to

The chief objective in

the lending business in 2008

was to improve the quality of

the loan portfolio.

The Bank responded

to the changing market

situation by revising

the conditions of its

mortgage products – a

number of products had

to be cancelled due to

significantly increased

risks (loans for purchase of

homes in new developments

and for individual

construction), while on

the remainder interest

rates were revised upward.

The approach to assessing

the creditworthiness of

borrowers became even

tougher.

the implementation of a policy to lengthen the duration of

the deposit portfolio, by the end of 2008 more than 30% of all

deposits were for the terms over 18 months.

The range of deposits did not change significantly in 2008.

Interest rates on deposits were raised three times in

the course of the year, going up by an average of 1.5%.

MortgagesBank Vozrozhdenie’s mortgage portfolio stood at

RUB 9.4 billion at the end of 2008. In the second half of 2008,

when lending slowed, we focused on preparing a part of

the mortgage portfolio for refinancing.

Consumer loansBank Vozrozhdenie’s portfolio of consumer loans grew by

37% in 2008 to RUB 5.96 billion and income from consumer

lending nearly doubled to RUB 937 million from RUB

500 million in 2007. The Bank extended 11,500 loans during

the year totaling RUB 4 billion, and problem loans amounted

to just 2.18% of the consumer loan portfolio.

Considering the potential for future growth of consumer

lending, in 2008 we focused on improving the terms on

existing products and developing new consumer lending

programs. Particular attention was paid to the development

of a more flexible system of lending durations for all

categories of clients.

Cross salesOne of the Bank’s priority objectives in 2008 was to develop

cross sales. Thanks to efforts on intensifying branches’

activities in this area, training employees and systematization

of clients’ database, the proportion of customers using

two or more of Bank Vozrozhdenie products grew steadily

throughout the year, reflecting the growing loyalty of our

clientele. The steps we took to stimulate the development of

cross sales in 2008 resulted in a 37% increase of the number

of clients using two or more services.

Growing the non-interest revenueToday, amid slower growth in interest earning operations and

lower interest income, developing cross sales is particularly

important as it helps to achieve another key strategic

objective – increasing the proportion of commission revenues

by promoting paid services. The number of payments

Retail loan portfolio, bln RUB

Mortgages

Credit cards

Car loans

Consumer loans4.4

4.5

6.36.0

5.4

2.8

2.83.0

3.1 3.1

8.8

9.09.2

9.79.4

01.01.08 01.04.08 01.07.08 01.10.08 01.01.09

16.8 1718.4

19.919.2


processed in 2008 exceeded 17 million, and they totaled RUB

28.54 billion, up by 32.1% in comparison to 2007. The Bank

accepts cash payments to the largest systemic beneficiaries

through its own teller network (245 windows), carries out

transactions on currency exchange, as well as provides a new

service known as Service of Periodic Payments, which was

introduced in 2008.

Currency exchange operationsDue to the dramatic changes on the currency market, one

of the most popular transactions in 2008 was non-cash

conversion and currency exchange transactions. Revenue

from these operations doubled to more than RUB 440 million.

Retail business priorities for 2009In 2009, the main objective for the Bank in the retail business

will be to grow the retail clients’ resources base while

moderately enhancing lending programs. To this end, we will

develop our line of deposit products, gradually improving

the conditions on deposits and introducing new services.

There are plans to introduce monthly compounding of

interest, differentiation of interest on deposits depending on

deposit amount and new floating rates. Revenue will shift

toward commission and non interest income.

Our work will be based on the potential of the regions, a

competitive environment and the existing client base. Our key

objective in the retail business will be to increase the loyalty

of the Bank’s existing clients, as well as expand cross sales

and increase profitability.

Retail ruble deposits by size, RUB

By deposits volume, %

3,000–30,000

30,000–100,000

100,000–700,000

700,000–3 mln

Over 3 mln

17%

2%

9%

56%

16%

By deposits volume, %

Retail foreing currency deposits by size, US $

100–5,000

5,000–50,000

50,000–300,000

Over 300,000

44%

25%

19%

12%

Corporate Business Work with corporate clients remains the core area of

business for Bank Vozrozhdenie.

The core tenets of work with

corporate clients are building

and developing an atmosphere

of partnership and respect for

the client, promoting loyalty

and attention to the client’s

needs, and a diversified and

comprehensive approach to

serving and collaborating with

corporate clients.

The number of corporate clients grew by 10.5% in 2008 and

reached 55,000. Corporate business revenues grew by 51% to

RUB 12.9 billion, or 67.8% of the Bank’s total revenues.

Strategically, in 2008 the Bank aimed to achieve the following

objectives:

Fulfill the business plan;•

Expand cooperation with existing clients and increase their •

loyalty to the Bank;

Attract new clients while maintaining business •

diversification by client segments;

Intensify work with small and medium business clients;•

Grow a strong resource base;•

Increase non-interest revenues;•

Flexible management of the loan portfolio in accordance •

with the market conditions;

Develop technologies to serve and support corporate •

clients in order to improve the quality of services and

reduce costs.

27%

11%

17%

45%

Corporate loans by size, RUB

Up to 30 mln

30–100 mln

100–750 mln

Over 750 mln

By volume of loans, %


Amid the unstable circumstances, the priority in

the development of the Bank’s business is to maintain

the scale of cooperation with important corporate clients.

In order to meet this objective, the Bank is optimizing

the process of monitoring the scale of operations with large

corporate clients and coordinating the work of the head office

and branches to facilitate negotiations with a number of

major corporate clients.

This is supported by the advanced level of the technology

the Bank uses in working with corporate clients (automated

banking systems, CRM, the Bank’s Processing Center and

Client-Bank system), reliable and fast services using only

secure channels of communications, the professionalism of

the Bank’s employees and fast decision making.

The measures we have taken enabled the Bank to preserve

the volume of its business with significant corporate clients

last year, and in some cases even expand the scale of

cooperation.

LendingThe Bank increased its corporate loan portfolio to

RUB 80.1 billion in 2008 from RUB 64.1 billion at the end

of 2007.

The Bank’s corporate business remained well diversified by

economic sectors as well as by regions, enabling it to reduce

risks on the corporate loan portfolio amid the economic

turmoil.

Segmentation of corporate clients

Classification of clients by segment is based on maximum value for the following indicators:

Segment by size

of business

Turnover on demand

accounts with the Bank,

mln RUB

Loans,

mln RUB

Raised funds,

mln RUB

Average monthly

bank fee income,

‘000 RUB

Average monthly revenue

of the client,

mln RUB

Large business Over 300 Over 750 Over 300 Over 500 Over 300

Medium business 30–300 100–750 30–300 150–500 30–300

Small business 6–30 30–100 6–30 15–150 6–30

Micro business 1–6 6–30 1–6 5–15 1–6

Sub-microbusiness Up to 1 0–6 0–1 0–5 Up to 1

Structure of corporate business by segment, %

Segment Loans Funds

Fees &

Commissions

Turnover

on demand

accounts

Large business 26.8 68.9 17.4 22.8

Medium business 45.4 23.9 25.9 45.1

Small business 16.6 5.3 27.2 21.2

Micro business 9.1 1.8 15.2 8.5

Sub-micro

business2.1 0.1 14.4 2.4

Lending to companies and organizations in the small

and medium size business sector remained a priority in

the development of the Bank’s business in 2008.

Due to the negative trends on the financial market in

the second half of 2008 the Bank took prompt steps to reduce

the corporate loan portfolio and at the same time toughen its

requirements for the scope and quality of collateral. As part

of its policy of reducing credit risks, the Bank toughened the

requirements for all types of security, increased the discount

applied for appraising collateral, and modified a number of

existing credit products with a view to the new market reality.

These measures led to a planned reduction of the loan

portfolio and the stabilization of credit risks.

The following crisis management measures were

implemented:

Overdraft limit restricted to 30% of client’s monthly •

turnover on the account with the Bank;

All loans shall be secured with a 40% discount applied to •

the market value of security;

The whole corporate portfolio was reviewed; additional •

security required in certain cases;

The authority of Branches on making independent •

decisions on loan applications has been suspended.

Decisions to grant new loans are made by authorized

bodies at the Bank’s Head Office;

Settlements on credit products are made only after •

the provision of fully registered security.

Trade finance of international contractsTrade finance and the growth of foreign financing for

them have become important areas in the development of

Bank Vozrozhdenie corporate business. In order to strengthen

this area in 2008 the Bank created a specialized Department

on trade finance promotion in its Corporate Division.

The Bank doubled the volume of financing for international

contracts, extending credit to companies in the forestry,

textiles, food, chemicals, and oil and gas industries, as well

as companies that repair and build roads during the year.

In 2008 the Bank

strengthened its business

with the Russian Post

Moscow Region Department.

The Russian Post uses

the Bank’s cash collection

services and about 8,000

of its employees receive

their monthly salaries on

the Bank’s cards. Turnovers

on demand accounts and

volumes of cash collection

exceeded RUB 80 billion in

2008 versus RUB 53 billion

in 2007. Russian Post uses

the services of the Bank’s

program “Corporation

Settlement Center” which

helps to manage treasury

operations and cash flows

on-line.

Structure of corporate loan portfolio by sector, %

Construction

Other

Industry

Wholesale & retail trade

State companies

Agriculture

Finance

Transportation

14%

12% 10%

24 %

7%5%

2%

26%

RU

B 8

0,1

53

mln


Work with small and medium businesses Small and medium businesses are historically the key clients

for Bank Vozrozhdenie.

The number of Bank’s SME clients increased by 10% in 2008

to more than 40,000 enterprises. The amount of loans to

such clients grew by 28% over the year and reached RUB

58.3 billion, and made up 73% of the corporate loan portfolio.

Bank Vozrozhdenie is one of the top three lenders to small

and medium size businesses in Russia, according to RBC

Daily.

In 2008 the Bank signed a cooperation agreement with

the Moscow Fund for Lending to Small and Medium Business

and was included into the program of guarantees for small

enterprises. The Bank’s participation in the program allows

small and medium enterprises (SME) to use guarantees from

the Fund to cover a part of the credit risk on the Bank’s loan.

In 2008 the Bank extended RUB 135 million of loans to SME

under the program, including guarantees from the Fund.

Raising long-term resourcesThe Bank strengthened its long-term resource base

considerably in 2008 by increasing resources attracted from

corporate clients by 85.2% to RUB 16.6 billion in the ruble

equivalent.

The majority of deposits (44%) are for terms of one to three

years. Compared to 2007, deposits for terms of 181 days to

one year increased by 7% and deposits for terms of more

than 3 years grew by 16%, while the proportion of short-term

deposits dropped by 3%.

A large portion of deposits at the Bank are held by financial

organizations, including partner insurance companies.

The term deposits of insurance companies at the Bank

amounted to about 7% of the corporate portfolio of long-term

liabilities at the end of 2008, after growing 23% from a year

earlier. Deposits from organizations in the service sector also

make up a substantial share.

New major corporate depositors in 2008 included

St. Petersburg’s Finance Committee and the State

Housing and Public Utilities Reform Fund, which deposited

temporarily available funds on a competitive basis.

Customs cardBank Vozrozhdenie,

in cooperation with

LLC Customs Payments

System, in the middle of

2008 began to work on

launching a new product –

a customs card.

The customs card is a

card used in a specialized

interbank system of

electronic settlements on

customs’ duties payments.

The use of customs cards

makes it possible to make

customs payments without

using cash and pay them

directly at customs during

clearance process. This

service will be of particular

interest to companies with

regular, large customs

payments.

LG Electronics Rus and

Campina in December 2008

became the first clients of

the Bank to use this product.

Corporate clients funds

10 9

1315

21 23

24

2725

22

2017

Current accounts

Term deposits

01.10.07 01.01.08 01.04.08 01.07.08 01.10.08 01.01.09

39

31 32

37

4245

Interest rates on corporate deposits were raised twice

in 2008. The increase in interest rates in December 2008

averaged 2 percentage points.

Objectives of the Corporate Banking for 2009 The future growth of Bank Vozrozhdenie corporate business

will be inextricably linked to the further growth of our

client base, both in the SME segment, which retains its

strategic importance for us, and the large business segment.

The bank’s priorities will be concentrated on working more

effectively with clients, including on implementing a strategy

for cross sales and introduction of new products. We expect

to achive significant growth in sales of bank products per

client and consequently increase revenue not related to

lending.

We will focus on improving the quality of service by

harnessing the latest technologies, such as CRM systems,

as well as improving the quality of banking services by

introducing high-tech banking products. The efforts to

introduce such products take into account the individual

proposals and preferences of clients, making it possible to

create a genuinely high quality banking service.

High Standards of ServiceWe value our clients and make every effort to ensure that they stay with Vozrozhdenie Bank for the long-term. In developing our line of products and services, we make them as convenient as possible and uphold the highest quality of service.


Bank CardsThe bank card business grew as planned in 2008 and

the market turmoil in the last quarter of the year had no

impact on the key parameters of its development. We

managed to meet all the targets that were set for the year.

Bank Vozrozhdenie’s key objectives in the development of its

bank card business in 2008 included:

Fulfilling the business plan;•

Developing infrastructure for servicing bank cards and •

expansion in the Moscow Region;

Issuing credit cards;•

Ensuring the smooth operation of the ATM network.•

We issued 410,000 debit and credit cards in 2008, bringing

their total to 1.3 million as of January 1, 2009. The number

of payroll projects jumped 48% to 7,400, including

4,200 contracts in the Moscow Region.

Total credit turnover on ruble special card accounts neared

RUB 126 billion and average balances totaled RUB 11.6 billion.

We also managed to achieve impressive results in acquiring

operations, increasing turnover by 38% to RUB 4 billion.

Bank Vozrozhdenie’s principal competitive advantage is its

large and reliable network of bank machines. At the end of

2008 the network consisted of 642 ATMs in 183 cities and

towns of Russia, including 148 cash-in machines.

We are now one of the 20 leading players on the bank

card market and are among the biggest banks serving

the Moscow Region. About two-thirds of our ATM network

– more than 390 machines, 90 of which cash-in ones – are

concentrated in this region. The main strategic objective for

regional development in 2008 was expanding our presence in

the Moscow Region and implementing an expansion program

by starting our activity in towns where the Bank has not yet

operated.

In 2008 we increased the number of installed ATMs in

the Moscow Region from 340 to 372, while expanding

our infrastructure to 143 towns and cities, making

Bank Vozrozhdenie a leader in terms of the development of

ATM infrastructure in the region.

Growth of card business

01.01.08 01.07.08 01.10.08 01.01.09

Payroll projects 5,000 7,000 7,300 7,400

Debit cards 961,000 1,070,156 1,125,546 1,191,631

Credit cards 72,000 88,785 106,990 100,418

130 1,200

1,000

800

600

400

200

0

110

90

70

50

30

10

-10

Turnover, bln RUB Client base, ‘000 accounts

2003

16

28

44

66

89

126

2004 2005 2006 2007 2008

Deposits in the year, bln RUB

Active card accounts, ‘000 accounts

Bank cards

2003 2004 2005 2006 2007 2008

Number of bank card payroll projects

1,9002,200

2,500

3,300

5,000

7,400

Bank Vozrozhdenie offers to its clients Visa and MasterCard

international payment systems cards. All the Bank’s cards

are smart cards, meeting the latest security standards.

The Bank offers customers affordable and technologically

advanced credit programs based on bank credits – credit

cards with a grace period.

The Bank has completed a program to equip offices with cash-

in ATMs. The Bank's customers can now replenish their card

accounts and carry out other operations, such as payment

for their mobile phones, utilities and satellite TV bills, make

deposits and money transfers or pay down loans 24 hours a

day at most of our branches through publicly accessible ATMs.

While the number of card transactions grew dramatically in

2008 to 38 million, the proportion of transactions involving

services not related to cash remained at 25%. The average

Bank Vozrozhdenie ATM in the Moscow Region handled more

than 5,500 transactions per month by about 2,000 residents.

The Bank’s priority at the beginning of 2008 was to develop a

strategy for cross sales, particularly promotion of credit cards.

In the second half of the year, taking into account the changed

market situation, we offered our customers revolving credit

cards with grace periods, which addressed two objectives –

reducing credit exposure and, consequently, reducing potential

risks. As a result, 2008 the Bank had issued 100,418 credit

cards, up 38% from a year earlier.

Increasing the number of credit cards issued amid

the difficulties on the market did not affect the quality of

the credit portfolio. The level of delinquent debt on credit

cards remained traditionally low, amounting to just 1.4%.

Development objectives in 2009The priorities for the development of the bank card business

in 2009 include growing the client base and increasing

the profitability of bank card transactions.

In 2009 the Bank plans to offer its customers the following

products and services:

opening deposits at ATMs, without having to visit a Bank •

office;

far greater functionality of Your Account 7x24 services – •

clients will be able to manage their accounts, make bill

payments and transfers by mobile phone or through

the Internet.

New services in 2008Bank Vozrozhdenie in 2008 offered clients new products

and services based on bank cards:

revolving credit cards with grace periods (the Bank •

previously issued credit cards without grace periods);

cash deposits to accounts of MasterCard cards issued by •

any Russian banks, at Bank Vozrozhdenie cash-in ATMs;

the most exclusive cards in the Visa line – Visa Infinite •

credit cards.

The Bank’s card business grows

Indicator Units 2008 2007 Change, %

Number of debit cards ‘000 1,190 961 + 23.8

Number of credit cards ‘000 99 72 + 37.5

Credit turnovers on ruble card accounts mln RUB 125,959 89,300 + 41

Average balances on card accounts mln RUB 11,570 8,810 + 31.3

Number of card transactions mln 38 30 + 26.6

Volume of card transactions mln RUB 155 106.6 + 45.4

Payments via ATMs mln RUB 4.13 2.89 + 43

Number of clients using “Your Account 7x24” service clients 142,504 101,407 + 40.5


The Bank’s policy concerning investments on the debt

market did not change, and remained very conservative

throughout the year. The focus remained on the most

reliable debt instruments: Central Bank bonds, Russian

government Eurobonds, high-quality corporate bonds and

Eurobonds issued by quasi-sovereign borrowers such as

Gazprom, FSK UES and Russian Railways (RZD), with a

duration of up to 18 months. In the new market environment,

these instruments ideally met the requirements of returns,

reliability and liquidity. The Bank also carried out operations

on the sub-federal and municipal bond market with bonds

from regional issuers such as the cities of Moscow and

Kazan, Krasnodar Territory, and the Moscow, Yaroslavl,

Voronezh and Kaluga regions, among others.

In order to achieve additional returns and mitigate the risk of

interest earning operations, the Bank continued to work on

the reverse-repo market on MICEX, conducting transactions

for terms of one day to two weeks using instruments such

as OFZ federal bonds, sub-federal and municipal bonds,

and the bonds of RZD and FSK UES. Turnover on repo

deals with government securities surged nearly 150% to

RUB 127.3 billion, while turnover on repo deals with sub-

federal, municipal and quasi-sovereign bonds on the MICEX

Stock Exchange grew to RUB 62 billion. The Bank was

one of the leading players on both the inter-dealer repo

market for government securities on MICEX, and in repo

transactions with bonds on MICEX in the first half of 2008.

But by September the Bank cut down its transactions in due

time and was not affected by the crisis of defaults on such

transactions.

At the same time, the Bank dramatically limited investments

in the stock market. The transactions were carried out with

the shares of blue chip companies such as Lukoil and MTS.

In the course of 2008, the stock portfolio did not exceed 0.1%

of the Bank’s capital, so the stock market crash did not have

a significant impact on our financial performance.

Activity on the Financial MarketsThe Bank’s priority while carrying out activity on the financial

markets is to support high liquidity and achieve maximum

returns at minimum risk.

Bank Vozrozhdenie in 2008 remained an active player on

the forex and interbank lending markets, and carried out

operations on the foreign and domestic bond markets,

shifting its fund management policy toward a more

conservative strategy.

The activity on the interbank lending market was carried

out primarily in order to place temporarily available funds

in rubles and foreign currency. Interbank loans were

extended to highly reliable banks within the scope of their

limits and under the security of quality assets such as

government securities, and the bonds and promissory notes

of Bank Vozrozhdenie. The Bank’s turnover on the interbank

lending market in rubles grew to RUB 676 billion in 2008.

Funds were placed for terms of one day to one month. In

order to maintain liquidity, a substantial amount of funds

was deposited with the Central Bank. In the period from

October through December, the bank raised unsecured and

secured loans and conducted direct repo transactions under

agreements with the Central Bank.

From the beginning of 2008 until the fall the Bank carried

out regular operations on the forex markets determined by

capital flows. At the start of the fall, as the financial crisis

escalated and there was greater demand for foreign currency,

activities were focused primarily on client operations.

The Bank conducted arbitrage operations only intra-day, and

did not participate in speculative attacks on the ruble.

The Bank’s plans for the coming year envision maintaining

the format of work on the interbank market – investing

available resources by providing interbank loans and

deposits to highly-rated banks. On the stock market,

the Bank will continue to diversify its portfolio in order to

maintain sufficient liquidity, reduce risks and maximize

return on assets. The Bank will focus special attention on

the government securities segment, including municipal,

sub-federal and Central Bank bonds. The Bank plans to

actively use investments in government and Central Bank

bonds as an effective instrument to regulate liquidity.

Funding on capital markets and state supportThanks to the successful implementation of funding

programs in previous years the Bank had formed a

large liquidity cushion in 2008 that allowed it to face all

the difficulties on the market with confidence.

In the course of 2008, the Bank managed to significantly

improve the conditions of its first syndicated loan, raised

on March 21, 2007. The term of the loan was extended by

another year and the initial amount of US$50 million was

increased to US$59.75 million, while the interest remained

unchanged at LIBOR+1.8%. This loan was repaid in full in

March 2009. The Bank will repay a two-year syndicated loan,

received in September 2007, in November 2009. The Bank

accumulated liquidity cushion for upcoming payments back

in 2008.

With its credit ratings of Ba3 from Moody’s and BB- from

Standard & Poor’s, the Bank secured access to refinancing

instruments offered by the Russian Ministry of Finance and

the Central Bank. However, having a healthy liquidity cushion

formed in 2007 and the first half of 2008, the Bank did not

take advantage of these funds until October 2008, and has

still drawn on less than half of the limit set by the Central

Bank and Ministry of Finance. In the management of state

support funds the Bank aiming to maintain its share in

liabilities at a level of no more than 15%. This will enable

the Bank to avoid the risk of excessive dependence on

refinancing from the authorities.

Risk ManagementWe adhere to a conservative risk management policy and pay special attention to maintaining the high quality of our client base. Thanks to this approach we do not shift the cost of risk to our customers, and this enables us to offer them even more competitive products and maintain a high level of reliability.


Capital AdequacyThe Bank’s capital increased by 27% to RUB 15.1 billion, or

US$513 million, in 2008.

The Bank has the following goals in managing its capital:

Meet the capital requirements set by the Central Bank of •

Russia;

Ensure the continuous work of the Bank;•

Keep Tier 1 capital at a level necessary to provide for •

a capital adequacy ratio of 8% in accordance with the Basel

Standards.

The Bank met all outside requirements for capital in 2007

and 2008. The Tier 1 capital adequacy ratio as defined by

the Basel Committee was 12.7%; and combined capital

adequacy reached 16.5%, up from 15% in the previous year.

The growth of the Bank’s net profit for the year fueled

the increase in the capital adequacy ratio, along with

a subordinated loan that the Bank raised.

The Bank raised a US$50 million subordinated loan from

the German Investment and Development Company (DEG)

and The Netherlands Development Finance Company (FMO)

at the end of July 2008 at an annual rate of 9.21% for 10

years. The loan can be paid off early in five years.

The Bank’s Tier 2 capital includes 11 subordinated deposits,

raised at rates from 2.3% to 13%. One subordinated deposit

was paid off in 2008.

Risk Management

Capital adequacy ratio, %

Tier 1 Capital

Tier 1 and 2 Capital

12.9 12.912.0 11.7

12.7

15.9 15.8

14.415.0

16.5

01.01.08 01.04.08 01.07.08 01.10.08 01.01.09

Credit RisksIn order to improve the System of internal control, the Bank

established a Credit Risk Control Department in January

2008. The main objective of this Department is to predict,

discover and minimize losses the Bank could incur from

credit risk. The new department also monitors the total level

of credit risk taking into account all financial instruments,

forecasts their size for a certain period, and also provides

actual information to the Bank management to make

management decisions.

The Bank has a Credit Investment Committee with

subcommittees.

Closer to the end of the year the Bank suspended branches’

lending authorities and centralized the loan decision-making

process in the headquarters. The Bank also ceased providing

loans for building country-houses and acquisition of any real-

estate at the stage of construction. In Q4 the Bank tightened

loan standards and reassessed collateral policy.

The quality of loansLoan portfolio quality remains at an acceptable

level. Notwithstanding significant deterioration in

the macroeconomic environment the share of past due loans

has changed only by 107 basis points from 2.34% to 3.41%

over the last quarter. For IFRS purposes the whole principal

of all retail and commercial loans being more than one day

past due is included in Non-Performing Loans.

2005 2006 2007 2008

Provisions, % of Total Loans

NPL, % of Total Loans

NPL, of them impaired, % of Total Loans

Loan portfolio quality, %*

0.60.6

2.22.2

1.41.4

1.81.8

2.52.5

3.43.4

4.85.0

3.6 3.5

* NPL includes the principal amount of the loan that has been past due for at least one day.


The Bank has managed to keep its loan portfolio quality at

a high level because of the specific character of the Bank’s

client base and its high sector diversification. Prior to

the financial crisis the Bank did not provide many loans to

sectors that have been most affected by the crisis.

Lending to the construction sector has always been under •

very cautious approach. The Bank’s portfolio only includes

loans for building socially-important projects launched with

government support.

Regional players with a modest level of debt burden •

dominate the Bank’s loans to retail and wholesale

enterprises.

Food processing, light industry and the chemical industry •

dominate loans among industrial enterprises.

The impaired loans, on which some loss of principal was

expected, accounted for 2.16% of total loans.

ProvisionsThroughout the year the Bank assigned 2.2 billion rubles

more to the provisions for loan impairment. The largest part

(1.2 billion rubles) was charged during Q4. Total provisions as

of December 31, 2008 amounted to 4.8 billion rubles or 4.8%

of the total loan portfolio. Thus the NPL coverage ratio stayed

at the comfortable level of 1.41.

Provisions coverage of 4.8% is relevant to the level of

provisions at other Russian banks and is sufficient to cover

existing credit risks. If the Russian economy worsens,

the quality of the Bank’s assets is likely to decline, which will

mean an increase in the provisions.

Loan portfolio by term as of 01.01.09, %

10

Up to 1 month

16

1 to 3 months

26

1

3 to 6 months

29

3

6 to 12 months

12

7

1–2 years

8

26

More than 2 years

Corporate loans

Retail loans

Loan book collateralAlmost the whole portfolio is secured by high quality

collateral with average LTV of 70%.

The Bank, as the macroeconomic situation declined in

the fourth quarter of 2008, tightened its criteria for providing

loans and revaluated a majority of loan collateral. A discount

of 40% is currently applied to all types of security.

Loan portfolio concentrationThe 20 biggest borrowers account for approximately 25% of

the Bank’s loan portfolio, which corresponds to the average

level at other Russian banks.

Crisis managementIn light of the emergence of negative trends on the financial

market in the second half of 2008, the Bank took prompt

steps to reduce the corporate loan portfolio while at

the same time imposing stricter requirements for the volume

and quality of security. As part of its policy of reducing credit

risks, the Bank introduced stricter requirements for all types

of security, increased the discount applied while appraising

collateral, and modified a number of existing credit products

with a view to the current market conditions. These

measures led to a planned reduction of the loan portfolio and

the stabilization of credit risks.

Loan portfolio collateral, bln RUB

39

26

35

10

40

66

Government guarantees

Real Estate Equipment & Vehicle

Guarantees Blank & other collateral

Collateral value

Loan amount

2 3

Discount ~ 40%


Crisis management measures implemented:

Overdraft limit restricted to 30% of client’s monthly •

turnover at the Bank;

All loans shall be secured, with a 40% discount applied •

to the market value of security;

Additional collateral is required for loans that do not fall •

under these terms;

Bank branches can no longer independently provide •

loans. The Bank’s central department makes all the credit

decisions;

The Bank is no longer providing loans to several sectors;•

The Bank introduced measures to reduce the loan portfolio •

by the end of the year compared to October 1, 2008.

The Bank took the following measures in 2008 in order

to limit the decline of the retail portfolio quality:

The Bank increased requirements for collateral;•

Interest rates were raised;•

The Bank centralized work with retail past-due loans;•

New credit cards will only be issued to existing clients.•

Loan portfolio by segment, bln RUB

Corporate loans

Retail loans

01.10.07 01.04.08 01.07.08 01.10.08 01.01.09

64 67

78

87

801717

18

20

1981 84

96

107

99

Liquidity RisksThe Bank’s Management Board carries out the general

management of the Bank’s liquidity. Some of its functions

the Management Board delegates to the Asset and Liability

Management Committee.

These risks are managed by balancing assets and liabilities

by maturity.

We support a level of liquidity that is sufficient for

the Bank to timely fulfill all of its obligations and also

meet the requirements of the Central Bank. First of all this

relates to the instant liquidity ratio (N2), the current liquidity

ratio (N3) and the long-term liquidity ratio (N4) stipulated

by the Central Bank Instruction on Mandatory Standards

for Banks.

The Bank increased its volume of liquid assets in early

2008, which helped it to survive the panic among clients

in the second half of 2008. The Bank used its accumulated

liquid assets in September-October 2008 to fulfill its

obligations on clients’ operations.

Assets and liabilities by terms at end of 2008, % of assets

Up to 1 month

1–6 months 6–12 months More than 12 months

Assets

Liabilities

20.8

37.2

30.4

23.5

27.9

18.4 18.1

15.3

Assets and liabilities by terms at end of 2007, % of assets

Up to 1 month

1–6 months 6–12 months

More than12 months

36.6

21.719.5

22.2

39.0

21.2

18.0

13.7

Assets

Liabilities


However closer to the year-end the Bank again managed to

build up a sufficient liquidity cushion totaling RUB 42 billion,

or US$1.3 billion, and formed a “protected” balance

structure, which helped us to be prepared for the further

development of economic events. Liquid assets increased by

46% compared to the previous year and amounted to 28% of

total assets.

At the end of 2008 the Bank had more assets that mature in

one month than liabilities with a similar term.

Loan to deposit ratio was equal to 110% at the end of 2008

due to outflow of clients funds in Q4 2008.The management

strategy is aimed at reducing the bank dependence on

Central Bank funding and substituting it with traditional

funding source – customers funds in order to bring loan to

deposit back to the level below 100% by the end of 2009.

42

2831

34

27

Liquid assets, bln RUB

14.5

17.716.1

17.6

6.77.6

8.1

8.3

0.6

11.0

7.25.4

9.8

29.0

2.0

Securities

Due from banks

Cash & equivalents

01.01.08 01.04.08 01.07.08 01.10.08 01.01.09

Market RisksThe Board of Directors and the Asset and Liability

Management Committee have set limits for the level of

acceptable risk and oversee them on a daily basis.

The Bank has avoided exposing itself to market risk and

invests in securities mainly in order to manage liquidity.

This has helped the Bank to avoid significant losses during

the stock market plunge. The Bank’s core portfolio is made

up of Central Bank bonds and carefully selected short-term

corporate ruble-denominated bonds and Eurobonds.

Revaluation of trading securities portfolio caused minor

losses of 89 million rubles or 0.7% of the operating income

that was significantly less than interest income of 571 million

rubles earned on securities. Thus total result from securities

trading was positive. For those reasons the Bank, unlike

other banks, decided not to apply any security reclassification

allowed by IFRS and the Central Bank regulations.

Currency RisksThe Asset and Liability Management Committee sets limits

on the level of acceptable risk by foreign currency and

oversees these limits on a daily basis both at the end of each

day and during the course of the day.

The Central Bank has established a limit on the size of

foreign currency positions at 10% of equity for one foreign

currency and at 20% for all foreign currency.

The Bank traditionally supports the foreign currency position

at a much lower level.

There has been a trend amid the ruble devaluation in 2008 to

convert some of the Bank’s liabilities into foreign currency.

The Bank has established a foreign currency liquid asset

portfolio in order to balance its foreign currency position.

Interest RiskThe Bank evaluates its interest risk using a gap analysis

based on sensitivity to changes in the interest rate of

financial instruments.

Balanced Structure of Assets and Liabilities

The key elements of Vozrozhdenie Bank’s reliability are our close knowledge of the clients and broad view of the market, which give us the ability to build a balanced structure of assets and liabilities.


In 2008 the Bank concentrated

on increasing the profitability

and efficiency of its business.

Asset growth was targeted at

a conservative 25%, but actually

reached 27%.

Assets grew by 27% in 2008, to RUB 141.2 billion

($4.8 billion), which was close to the target of 25% set

at the end of 2007, when the financial crisis started in

the United States and it became clear that the Russian

market would feel the outfall sooner or later.

ProfitabilityIncome before tax grew by 62% compared to 2007, to

RUB 4.102 billion, and profit after tax rose by 65% to

RUB 3.137 billion from RUB 1.904 billion of the previous year.

In the US dollar equivalent, net profit increased by 38% to

US$107 million.

Net interest income increased by 52% to 8.5 billion rubles

versus 5.6 billion in 2007 due to the growth in lending interest

rates that the market experienced closer to the end of

the year.

Financial Results

Return on assets (ROA), %

2005 2006 2007 2008

1.39 1.37

2.07

2.45

Due to the worsening economic environment some retail time

deposits were recalled before maturity and lower interest

rates based on the actual term of the deposit were applied.

As a result in Q4 Interest expenses grew by only 7% versus

12% increase in interest income. A big share of customer

funds (37%) that were held in non-interest bearing current

accounts continued to be a good contribution to balance

the cost of funding.

In the fourth quarter interest spread jumped to 10.1% versus

8% in 9M 2008 and net interest margin (on average assets)

rose to 7.5% versus 6.3% in 9M. For the whole year interest

spread amounted to 8.6% and NIM to 6.6%.

Interest spread, %

01.01.08 01.04.08 01.07.08 01.10.08 01.01.09

10.1

8.68.1

7.57.6


EfficiencyNon-interest income contributed 36% of operating income

before provisions. Servicing day-to-day operations of

our clients i.e. providing corporate settlements services,

payrolls services, supporting cash payments of retail

clients, servicing their bank cards etc. ensure a solid base

for non-interest income that does not depend on the size of

the bank’s balance sheet.

Non-interest income grew by 35% to 4.8 billion rubles. Fees

and commissions generated 85% of the total non-interest

income or 4.1 billion rubles. Huge volatility on FX market

throughout the year gave the Bank appealing opportunity

to earn more than 600 million rubles income primarily on

the back of FX operations of our clients.

2005 2006 2007 2008

Cost-to-income ratio, %

76,1

72,3

62,7

52,7

Structure of operating income, bln RUB

Other Incomes

Fees&Commisions

Net Interest Income

1.7 1.7

2.0

2.3

2.61.0 0.8

1.0

1.1

1.1

0.4

4.0

2.82.6

3.2

3.5

01.01.08 01.04.08 01.07.08 01.10.08 01.01.09

Settlements

Cash transaction

Cards&Checks

Other

01.01.08 01.04.08 01.07.08 01.10.08 01.01.09

201

289298

256267

359

381385

107143

89

251240

311

Structure of fee and commission income, mln RUB

337

243

277279 312

951

804

1036

1092

1196

Operating expenses were up by 23%, to 7.0 billion rubles, and

this growth was much lower than the growth in revenues.

Tight control over the expenses made strictly in accordance

with the financial plan allowed the Bank to bring cost-to-

income ratio before provisions down to 52.7% from 62.7% a

year ago. The Bank therefore surpassed its medium-term

cost-to-income ratio target of 60%.


INDEPENDENT AUDITOR’S REPORTThe accompanying summarized financial statements

have been derived from the financial statements of

Bank Vozrozhdenie (hereinafter – “the Bank”) for the year

ended December 31, 2008, prepared in accordance with

International Financial Reporting Standards.

Management’s responsibility for the summarized financial

statements

These summarized financial statements are

the responsibility of the Bank’s management.

Auditor’s responsibility

Our responsibility is to express an opinion on whether these

summarized financial statements are consistent, in all

material respects, with the financial statements from which

they were derived.

We have audited the financial statements of the Bank

for the year ended December 31, 2008, from which

these summarized financial statements were derived,

in accordance with International Standards on Auditing.

In our report dated March 30, 2008, we expressed an

unqualified opinion on the financial statements from which

the summarized financial statements were derived.

Auditor’s Opinion

In our opinion, the accompanying summarized financial

statements are consistent, in all material respects, with

the financial statements from which they were derived.

For a better understanding of the Bank’s financial position

and the results of its operations for the period and of

the scope of the audit, the summarized financial statements

should be read in conjunction with the financial statements

from which they were derived and our audit report thereon.

March 30, 2009

Moscow, Russian Federation

Summarized Financial Statements of Bank Vozrozhdenie to International Financial Reporting Standards, Based on the Audited Financial Statements Prepared to International Financial Reporting Standards December 31, 2008

SUMMARISED FINANCIAL STATEMENTS DERIVED FROM AUDITED FINANCIAL STATEMENTS

BALANCE SHEET

(in millions of Russian Rubles) 31 December 2008 31 December 2007

ASSETS

Cash and cash equivalents 28,490 13,233

Mandatory cash balances with the Central Bank of the Russian Federation 155 1,305

Trading securities 9,037 6,702

Due from other banks 2,032 7,236

Loans and advances to customers 94,575 78,149

Investment securities available for sale 2,364 644

Premises, equipment and intangible assets 3,234 2,992

Other financial assets 879 849

Other assets 445 294

TOTAL ASSETS 141,211 111,404

LIABILITIES

Due to other banks 21,360 4,845

Customer accounts 90,336 81,612

Debt securities in issue 5,913 7,103

Subordinated loans 4,464 2,874

Syndicated loans 3,337 2,550

Other financial liabilities 467 316

Other liabilities 269 214

TOTAL LIABILITIES 126,146 99,514

EQUITY

Share capital 250 250

Share premium 7,306 7,306

Other reserves 52 –

Retained earnings 7,457 4,334

TOTAL EQUITY 15,065 11,890

TOTAL LIABILITIES AND EQUITY 141,211 111,404

Approved for issue and signed on behalf of the Board of Directors on March 30, 2009.

D. L. Orlov A. A. Novikova

Chairman

of the Management Board Chief Accountant

For a better understanding of the Bank’s financial position and the results of its operations for the year, and of the scope of the audit, these summarized financial statements

should be reviewed in conjunction with the financial statements from which they have been derived, as well as our audit report. Copies of the audited financial statements can be

obtained from Bank Vozrozhdenie.






INCOME STATEMENT

(in millions of Russian Rubles) 2008 2007

Interest income 14,511 9,745

Interest expense (6,017) (4,175)

Net interest income 8,494 5,570

Provision for loan impairment (2,199) (885)

Net interest income after provision for loan impairment 6,295 4,685

Fee and commission income 4,376 3,202

Fee and commission expense (248) (191)

(Losses less gains)/Gains less losses from trading securities (89) 95

Gains from trading in foreign currencies 3,695 1,473

Losses from trading in foreign currencies (3,022) (1,163)

Foreign exchange translation losses less gains (27) (60)

Losses on initial recognition of assets at rates below market (14) (7)

Gains less losses from disposals of investment securities available for sale 24 –

Dividend income 3 3

Other operating income 138 225

Operating income 11,131 8,262

Administrative and other operating expenses (7,029) (5,732)

Profit before tax 4,102 2,530

Income tax expense (965) (626)

Profit for the year 3,137 1,904

Earnings per share for profit attributable to the equity holders of the Bank, basic and diluted (expressed in Russian rubles per share)

Ordinary shares 125 80

Preference shares with determined dividend amount 127 78





STATEMENT OF CHANGES IN EQUITY

(in millions of Russian Rubles) Share capital Share premium Other reserves

(Accumulated

deficit)/Retained

earnings Total equity

Balance at 31 December, 2006 4,397 3,162 – (2,050) 5,509

Profit for the year – – – 1,904 1,904

Total recognised income for 2007 – – – 1,904 1,904

Elimination of adjustments for hyperinflation (4,177) (316) – 4,493 –

Share issue 30 4,460 – – 4,490

Dividends declared – – – (13) (13)

Balance at 31 December, 2007 250 7,306 – 4,334 11,890

Fair value gains less losses on investments available for sale – – 68 – 68

Income tax recorded in equity – – (16) – (16)

Net income recognized directly in equity – – 52 – 52

Profit for the year – – – 3,137 3,137

Total recognized income for 2008 – – 52 3,137 3,189

Dividends declared – – – (14) (14)

Balance at 31 December, 2008 250 7,306 52 7,457 15,065






STATEMENT OF CASH FLOWS


Cash flows from operating activities 1

Interest received 14,502 9,638

Interest paid (5,659) (3,763)

Fees and commissions received 4,432 3,290

Fees and commissions paid (263) (214)

Net (loss)/income received from trading in trading securities (2) 95

Net income received from trading in foreign currencies 715 310

Net income received from trading financial derivative instruments – –

Other operating income received 138 224

Administrative and other operating expenses paid (6,415) (5,249)

Income tax paid (1,150) (481)

Cash flows from operating activities before changes in operating assets and liabilities 6,298 3,850

Changes in operating assets and liabilities

Net decrease/(increase) in mandatory cash balances with the Central Bank of the Russian

Federation1,150 (206)

Net increase in trading securities (1,972) (2,582)

Net decrease/(increase) in due from other banks 5,252 (1,562)

Net increase in loans and advances to customers (17,103) (27,274)

Net decrease/(increase) in other financial assets 6 (2)

Net decrease/(increase) in other assets 18 (152)

Net increase in due to other banks 16,206 4,524

Net increase in customer accounts 5,473 21,079

Net (decrease)/increase in debt securities in issue (net of bonds) (1,310) 86

Net increase in other financial liabilities 37 119

Net decrease in other liabilities (38) (26)

Net cash from/(used in) operating activities 14,017 (2,146)





Cash flows from investing activities

Acquisition of investment securities available for sale (1,886) (485)

Proceeds from disposal of investment securities available for sale 264 –

Acquisition of premises, equipment and intangible assets (749) (800)

Proceeds from disposal of premises, equipment and intangible assets 62 65

Dividend income received 3 3

Net cash used in investing activities (2,306) (1,217)

Cash flows from financing activities

Repayment of subordinated loans (147) –

Receipt of subordinated loans 1,278 604

Receipt of syndicated loans 195 2,529

Issue of bonds – 3,000

Issue of ordinary shares – 4,490

Dividends paid (14) (13)

Net cash from financing activities 1,312 10,610

Effect of exchange rate changes on cash and cash equivalents 2,234 (119)

Net increase in cash and cash equivalents 15,257 7,128

Cash and cash equivalent at the beginning of the year 13,233 6,105

Cash and cash equivalents at the end of the year 28,490 13,233


We see the development

of banking technologies as

essential to maintaining strong

competitiveness and improving

customer service. In 2008 we

continued to introduce new

technologies at our branches

with the aim of completely

replacing the technology

platform.

The Bank continued implementing automated banking systems

The Bank launched automated banking systems at ten

branches in 2008, and they are now being used at the central

office and 25 branches. The systems provide:

A qualitatively new level of organizing the management of •

Divisions including online monitoring of Bank’s activity;

Centralized management of the Bank’s product line, from •

the description of product parameters to determination of

unified schemes for bookkeeping entries and document

flow procedures and maintenance of reference and

regulatory information;

Timely updating of technology for carrying out and booking •

operations if there are changes to laws and regulations, or

the Bank’s internal rules and regulations;

Help to reduce the work load on employees.•

In 2008 the number of functions of retail CRM was adjusted

in particular the process of making decisions on credit

applications was fully automated, the process of a loan

portfolio support was implemented including portfolio of

a problem and overdue loans.

Information Technology

Automated banking systems

Integrated Bank System Object (IBSO) The IBSO system supports

real-time integration

with the Bank’s payments

processing system,

centralized remote banking

system and the Retail Bank

Object automated banking

system, among others.

Additionally the electronic database of individuals’ files was

implemented on MS Sharepoint base. This system allowed

for the promt solving of issues in the preparation of mortgage

loans pull for refinancing in AIZHK.

The Bank has completed the implementation of a Centralized Remote Banking System.

The Bank continued working on the creation of a database based on SAS – one of the best systems of its kind in

the world.

The Bank carried out studies that will enable it to start work

on automating of entry and processing of loan applications from corporate clients and control over compliance with

credit risk limits.

Automated banking systems

Retail Bank Object (RBO) The RBO system works with

the Bank’s own Processing

Center. The implementation

of RBO enabled branches

to extend service time for

retail clients by transferring

a number of daily resource-

intensive operations to

the Head Office.

As a result, branches start

serving clients immediately

upon opening, and

customers can get the whole

range of products in one

“window.”

Microsoft CRM Dynamics 3.0

(CRM) the CRS system was

implemented in 2007 and

being utilized in all Bank’s

Branches. This system

automated work of more

than 900 users. This system

supports sales of all retail

products including selling

packages of services in

Bank’s offices and activity of

a contact-center.


Human Resources

Priorities in human resources managementMotivate employees to achieve the Bank’s key business •

goals and become more involved in the process of

the Bank’s development.

Develop the abilities and professional potential of Bank’s •

employees, and establish a staffing reserve.

Meet the human resources management objectives while •

implementing the technological restructuring of the Bank.

Motivate employees to provide quality customer service.•

Balance the interests of the employer and employees.•

Provide a supportive and productive working climate and •

develop a corporate culture.

Rigorous compliance with labor legislation. •

TrainingAbout 3,500 employees took advantage of various training

programs in 2008.

Distance learning.• The number of employees who had

training more than doubled comparing to previous years

thanks to the implementation of a distance learning

system. The system has dramatically reduced the cost

of training, while at the same time accelerating it and

increasing the number of professionals taking training at

the same time.

Resident training.• More than 1,500 employees attended

corporate training programs.

Upgrading qualifications.• A continuous learning

system is available for employees at all levels. More

than 400 professionals upgraded their qualifications at

education institutions in 2008.

Number of employees at the end of 2008

Branches

Head Office, representative offices

5,560

1,138

6,6

98

Em

plo

yee

s

Work with young professionalsMore than 50 students had internships at the Bank in 2008. •

The main goal of working with students is to find talented

young professionals.

The first competition was held in 2008 among senior •

students at the Finance Academy under the Russian

Government resulting in five scholarships being awarded.

Human resources plans for 2009In 2009 we will expand opportunities for distance •

learning. The Bank’s Training Department plans to

create 19 courses for various categories of employees

and two courses for clients intended to make it easier

for them to work with the Bank. We will also continue

to implement service standards. Online courses will

significantly reduce the Bank’s education expenses, and

at least 3,000 employees of Bank Vozrozhdenie will use

the distance learning program in 2009.

In addition to training and upgrading qualifications, we will •

focus on managing costs and further increasing efficiency

in order maximize the potential of every one of our

professionals.

Taking Care of the FutureWe build our social responsibility strategy on the values that define the bank’s development, the most important of which are upholding the best traditions and looking to the future. Our future is in our children, which is why Vozrozhdenie Bank puts so much effort into taking care of the rising generation.


The Bank and the Community

The programs for support talented young people and

veterans are being implemented with the sponsorship of

Bank Vozrozhdenie in each of the 20 Russian regions where

we have branches. The Bank also supports educational,

sports and cultural projects organized by local communities,

and acts as the driving force behind various social programs.

Support of cultureThe Bank traditionally supports cultural projects at •

a national level, such as the Easter Festival and the Belye

Stolby archive film festival.

Bank Vozrozhdenie sponsored the Second A.P. Petrov •

National Competition of Composers that was held in

St. Petersburg in September 2008.

The exhibit Masterpieces of the 20th Century from •

the Collection of the State Tretyakov Gallery – Painting and

Sculpture was opened in Petrozavodsk in December 2008

with the support of Bank Vozrozhdenie.

Support of education and children’s programsRegional branches of the Bank regularly take part in •

children’s olympiads and competitions. Particularly

attention is paid to supporting Russian post secondary

institutions.

Bank Vozrozhdenie has a tradition of implementing social •

programs for orphans and children from low-income

families, as well as programs to develop children’s

creativity. The Bank supports children’s and youth social

institutions, including orphanages and social rehabilitation

centers in the Moscow Region and other regions of

the country.

We base our social responsibility strategy on the values •

that define the development of the Bank. The key value

is the upholding of the best traditions and looking to

the future. Our future lies in our children, that is why

Bank Vozrozhdenie pays such attention to the rising

generation. We believe that children’s dreams and creative

potential are important and should be realized today.

The biggest project of 2008 was the Children to Children •

Arts Olympiad, which Bank Vozrozhdenie organized with

Rosgosstrakh with support from the government of

the Moscow Region. The participants were children aged

from 6 to 13 with no prior experience in the theatrical arts.

The Olympiad began in April 2008 and was held in eight

cities of the Moscow Region: Voskresensk, Domodedovo,

Kolomna, Naro-Fominsk, Noginsk, Odintsovo, Serpukhov

and Krasnogorsk. Experienced teachers, actors and heads

of children’s theater studios helped the children to prepare

for performances, which were judged by a professional jury.

The Children to Children Olympiad was held in April 2009.

The members of the winning troupe will go to Europe in

the summer.

The Bank sponsored the regional competition Come •

and See Us in Altai!, which was intended to draw young

people’s attention to relevant social issues and involve

them in seeking new, unconventional solutions in building

the image of the Altai Territory.

We also supported the annual Good Luck international •

English language competition for schoolchildren. Children

from various regions of Russia, as well as from other

former Soviet states competed for the top prize of a trip to

Hollywood.

Support of sportsBank Vozrozhdenie has been supporting the rowing regatta •

in the Lake Onega for the past five years.

The Bank was a general sponsor of the 54th Track and •

Field Relay commemorating the 63rd anniversary of

the victory in World War II which was held in Magadan in

May 2008.

The Cross Nation-2008 national run was organized in •

Volgodonsk in conjunction with the Russian Committee of

Sports and Physical Education. This is the biggest mass

run in Russia and is held in many cities to promote fitness.

Bank Vozrozhdenie has

a wide range of charity

and sponsorship programs

in the areas of culture,

social development, sports

and education which

we see as an extension

of the same principles

that we adhere to in our

business – the principles

of attentive and empathetic

relationships with clients

and partners. The Bank

consistently implements

social projects in regions

where it has a presence,

expanding their scope every

year.


Information on meeting the provisions of the Corporate Conduct Code, recommended by Federal Securities Market Commission Decree No. 421/r of April 4, 2002.

No. Provision of the Corporate Conduct CodeObserved or Not Observed Notes

General Shareholders’ Meeting

1. Notifying shareholders about a general meeting at least 30 days prior to its date, regardless

of the issues included on the agenda, unless a longer term is set forth by law Observed

The Bank’s Articles of Association and Regulation

on General Meeting of Shareholders

2.

The opportunity for shareholders’ to familiarize themselves with the list of persons

entitled to vote at the General Meeting of Shareholders, starting with the date of notice of

the General Meeting of Shareholders to the closure of the intramural General Meeting of

Shareholders, and in the case of a extramural General Meeting of Shareholders, before

the final date of acceptance of voting papers

Observed

Regulation on the information policy and

Regulation on the General Meeting of

Shareholders

3.

The opportunity for shareholders’ to familiarize themselves with the information (materials)

to be submitted when preparing the General Meeting of Shareholders, using digital means

of communication, including the Internet

Partially

observed

Regulation on the information policy and


Shareholders stipulate the publication of

notification of the general Shareholders’ Meeting

(including the agenda) and the Bank’s Annual

Report on the Bank’s Internet site

4.

The opportunity for shareholder’s to include a question in the agenda of the General

Meeting of Shareholders or require the summoning of a General Meeting of Shareholders

without submitting a statement from the shareholder register, if his share title is registered

via the shareholders’ registration system, and if his share title is registered at the DEPO

account, – sufficiency of a statement from the DEPO account for exercising the above rights

Observed Regulation on the General Meeting

of Shareholders

5.

The existence in the articles of association or internal documents of the requirement

that the general director, members of the Management Board, members of the Board

of Directors, audit commission members and the auditor of the joint-stock company are

present at the General Meeting of Shareholders


of Shareholders

6.

The nominees’ mandatory presence during consideration by the General Meeting of

Shareholders of issues relating to the election of members of the board of directors,

the general director, members of the management board, members of the audit

commission, as well as the issue concerning the approval of the auditor of the joint-stock

company


of Shareholders

7. Existence in the joint-stock company’s internal documents of the procedure for registering

attendees of the General Meeting of ShareholdersObserved

Regulation on the general Shareholders’ Meeting

and the Order of holding the General Meeting of

Shareholders

Board of Directors

8. Existence in the joint-stock company’s articles of association of the board of director’s

authority to approve the annual financial and economic plans of the joint-stock company Observed Regulation on the Bank’s Board of Directors

9. Existence of the risk management procedure in the joint-stock company approved by

the board of directors Observed

The Bank’s Board of Directors approved

regulations on all kinds of risks taken by the Bank

(operating, interest, reputation, market, country,

strategic, stock risks)

10.

Existence in the joint-stock company’s articles of association of the Board of Director’s

authority to suspend the powers of the General Director appointed by the General Meeting

of Shareholders

Observed The Bank’s Articles of Association and Regulation

on the Board of Directors

11.


authority to set requirements regarding the qualifications and remuneration of the Director

General, members of the Management Board, and managers of major organization

departments of the joint-stock company

Partially observed

The Board’s of Directors authority to set

remuneration to the Chairman and members of

the Management Board is included to the draft

alterations of Regulations on the Bank’s Board of

Directors

Information on Meeting the Provisions of the Corporete Contact Code


12.


authority to approve contract terms with the General Director and members of

the Management Board

Observed Regulation on the Board of Directors

13.

Existence in the joint-stock company’s articles of association or internal documents of

the requirement that during the approval of contract terms with the General Director

(organization manager, director) and members of the Management Board, the votes

of members of the Board of Directors who are the General Director, and members of

the Management Board are not considered when counting the votes

Observed Regulation on the Board of Directors

14. Existence in the joint-stock company’s Board of Directors of at least 3 independent directors

meeting the requirements of the Corporate Conduct Code Observed

Regulation on the Board of Directors, Corporate

Conduct Code

15.

Absence in the joint-stock company’s Board of Directors of any persons found guilty of

committing economic crime or crime against a state authority, interests of the state service

or local self-government service, or against whom administrative action has been taken for

breaches in areas such as entrepreneurship, finance, taxes and fees, the securities market

Observed This requirements stipulated by the Regulation

on the Bank’s Board of Directors

16.

Absence in the joint-stock company’s Board of Directors of any persons who are members,

general directors (managers), members of a controlling body or employees of a legal entity

competing against the joint-stock company

Observed There are no such persons in the membership of

the Board of Directors

17. Existence in the joint-stock company’s articles of association of the requirement to elect

the Board of Directors by cumulative voting Observed



18.

Existence in the joint-stock company’s internal documents of a Board of Directors

members’ obligation to abstain from any actions that lead or may lead to conflict between

their interests and the interests of the joint-stock company, and, should such a conflict

arise, the obligation to disclose to the Board of Directors any information about such

a conflict

Observed Corporate Conduct Code and Regulation on


19.

Existence in the joint-stock company’s internal documents of a Board of Directors

members’ obligation to notify the Board of Directors in writing about any intention to

conclude transactions involving securities of the joint-stock company, the Board of Directors

of which they are members of, or its subsidiaries (dependent undertakings), and to disclose

any information about securities transactions being executed

ObservedCorporate Conduct Code and Regulation on


20. Existence in the joint-stock company’s internal documents of the requirement to hold

meetings of the Board of Directors at least once every six weeks Observed



21. Holding meetings of the Board of Directors of the joint-stock company during the joint-

stock company annual report year at least once every six weeks Observed

Meetings of the Bank’s Board of Directors

were held as was deemed necessary, based

on the frequency requirements set forth in

the Bank’s Articles of Association and Regulation


22. Existence in the joint-stock company’s internal documents of the procedure for holding

meetings of the Board of Directors Observed

Regulation on the Board of Directors and Order

of Holding General Meetings of Shareholders

23.

Existence in the joint-stock company’s internal documents of a provision regarding the need

for the Board of Directors to approve transactions of the joint-stock company totaling 10

and more per cent of the company’s asset value, except any transactions concluded in

the normal course of business

Observed

Regulation on the procedure for concluding major

transactions, non-arm’s length transactions and

related person lending transactions

24.

Existence in the joint-stock company’s internal documents of the Board of Director

members’ right to obtain from executive bodies and directors of the main organization

departments of the joint-stock company any information necessary to perform their duties,

as well as responsibility for non-submission of such information

Observed Regulation on the Board of Directors, Regulation

on the information policies



25.

Existence of a Board of Directors’ Strategic Planning Committee, or the delegation of such

a Committee’s functions to another committee (except the Audit Committee and Human

resources and compensations Committee)

Not observed The Strategic Planning Committee is not formed

26.

Existence of a Board of Directors’ committee (Audit Committee) that recommends to

the Board of Directors an auditor of the joint-stock company and interacts with him and

the Audit Commission of the joint-stock company

Observed


the Regulations on the Bank Vozrozhdenie

Board of Directors’ Audit Committee and formed

the Board of Directors’ Audit Committee

27. The presence in the Audit Committee of only independent and non-executive directors Partially observed

The Audit Committee consists of: 2 non-executive

directors; 1 independent and non-executive

director

28. Audit Committee guidance by an independent director Observed The Audit Committee is headed by an independent

director

29.

Existence in the joint-stock company’s internal documents of the right of access to all

the Audit Committee members’ to any company documents and information subject to

the non-disclosure of any confidential information

Observed Regulations on the Board of Directors’ Audit

Committee

30.

Establishment of a Board of Directors’ committee (Human resources and compensations

Committee) in charge of determining the selection criteria for candidate members of

the Board of Directors and developing the joint-stock company’s remuneration policies

Observed


Regulations on Human resources and

compensations Committee of Bank Vozrozhdenie

and formed Human resources and compensations

Committee

31. Guidance of the Human resources and compensations Committee by an independent

director Observed

Human resources and compensations Committee

is guided by an independent director

32. Absence in the Human resources and compensations Committee of any joint-stock company

officials Observed

The Human resources and compensations

Committee of: 2 non-executive and independent

directors and 1 i non-executive director

33.

Establishment of the Board of Directors’ Risks Committee or the delegation of such

a committee’s functions to a different committee (except the Audit Committee and Human


Not observed The risk management issues are considered by

the Audit Committee of the Board of Directors

34.

Establishment of the Board of Directors’ Corporate Conflict Settlement Committee or

the delegation of such a committee’s functions to a different committee (except the Audit

Committee and Human resources and compensations Committee)

Not observed The mentioned functions are currently performed

by the Board of Directors’ Secretary

35. Absence in the Corporate Conflict Settlement Committee of any joint-stock company

officials Not observed

A Corporate Conflict Settlement Committee has

not been formed

36. Guidance of the Corporate Conflict Settlement Committee by an independent director Not observed A Corporate Conflict Settlement Committee has

not been formed

37.

Existence of the joint-stock company’s internal documents approved by the Board of

Directors and stipulating the formation and working procedures of the Board of Directors’

committees

Observed

The Board of Directors approved the Regulations

on Audit Committee and Regulations on Human


38.

Existence in the joint-stock company’s articles of association of the procedure for

determining the quorum of the Board of Directors’ meetings that ensures the mandatory

attendance of the Board of Directors’ meetings by independent directors

Partially observed

The Quorum at the Board of Directors’ meetings

is determined according to the existing law,

the mandatory presence of independent directors

is assumed by the order of considering and

approval of deals with interested parties


Executive Bodies

39. Existence of the executive collegial body (management board) of the joint-stock company Observed

The collective executive body, the Bank’s

Management Board, was formed According

to the Bank’s Articles of Association and

Regulations on Executive Bodies

40.

Existence in the joint-stock company’s articles of association or internal documents

of a regulation on the need for the management board to approve real estate business

transactions and the obtaining of loans by the joint-stock company, if such transactions

are not major operations and are not within the joint-stock company’s normal course of

business

Observed Regulation on Bank’s executive bodies

41.Existence in the joint-stock company’s internal documents of a procedure for coordinating

transactions standing outside the joint-stock company’s normal course of business Observed

According to the Regulation on the Board of

Directors all operations exceeding the limits of

the financial plan (budget) are to be approved by

the Board of Directors which is entitled to make

changes in the Bank’s financial plan (budget)

42.

Absence in the executive bodies of persons who are members, general directors

(managers), members of a controlling body or employees of a legal entity competing against

the joint-stock company

Observed There are no such persons in the Bank’s executive

bodies

43.

Absence in the joint-stock company’s executive bodies of any persons found guilty of

committing economic crime or crime against a state authority, interests of the state service

or local self-government service, or against whom administrative action has been taken

for breaches in areas such as entrepreneurship, finance, taxes and fees, the securities

market. If the one-man executive body functions are carried out by a managing organization

or a manager, compliance of the managing organization’s members of the management

board or the manager with the requirements of the general director and members of

the management board of the joint-stock company

Observed Such requirement is stipulated by Regulation on

executive bodies

44.


the prohibition of the managing organization (manager) to perform similar duties in any

competing company, as well as to have any other property relations with a joint-stock

company, except the provision of services to the managing organization (manager)

Observed

This restriction is stipulated by the Bank’s

Regulation on executive bodies in relation

to a one-man executive body and members

of the collegial executive body. Performance

of the one-man executive body functions by

a management organization is not stipulated for

45.

Existence in the joint-stock company’s internal documents of executive bodies’ obligation

to abstain from any actions that lead or may lead to a conflict between their interests and

the interests of the joint-stock company, and, should such a conflict arise, an obligation to

disclose to the Board of Directors any information about such a conflict

Observed Such requirement is stipulated by Regulation on

executive bodies

46.Existence in the joint-stock company’s articles of association or internal documents of

the selection criteria for the managing organization (manager) Not observed

Performance of the one-man executive body

functions by a management organization

(manager) is not stipulated

47.Submission by the joint-stock company’s executive bodies of the monthly progress reports

to the Board of DirectorsPartially observed

Appropriate reports, information etc are

submitted by the Management Board to

the Bank’s Board of Directors annually and as is

deemed necessary according to the issues raised

at the Board of Directors’ meetings

48.

Determination, in any contracts concluded by the joint-stock company with the general

director (managing organization, manager) and management board members, of

the responsibility for any breach of confidential and inside information

Observed Regulation on executive bodies



Company Secretary

49.

Existence in the joint-stock company of a special official (company secretary) in charge

of ensuring that the joint-stock company’s bodies and officials meet the procedural

requirements guaranteeing the realization of the rights and lawful interests of the joint-

stock company

Partially observed These duties are currently performed by

the Bank’s Secretary of the Board of Directors

50.


the procedure for the appointment (election) of the company Secretary and the duties

of the Company Secretary

Not observed

The position of Secretary is not stipulated neither

by the articles of association nor by the internal

documents of the Bank

51. Existence in the joint-stock company’s articles of association of the requirements regarding

the Company Secretary candidature Not observed

The position of Secretary is not stipulated neither

by the articles of association nor by the internal

documents of the Bank

Significant Corporate Action

52. Existence in the joint-stock company’s articles of association or internal documents of

the requirement to approve any major transaction before it is concluded Observed The Bank’s Articles of Association

53. Mandatory engagement of an independent appraiser to evaluate the market value of

property which is the subject of a major transaction Partially observed

According to the articles of association, the Board

of Directors may engage an independent

appraiser to evaluate the value of property

54.

Existence in the joint-stock company’s articles of association of the prohibition to perform,

during acqui si tion of any major joint-stock company shareholdings (mergers), any actions

protecting the interests of executive bodies (their members) and members of the Board of

Directors of the joint-stock company, as well as worsening the shareholders’ position in

comparison with the existing one (in particular, the prohibition to the Board of Directors to

make, before the proposed term of share acquisition expires, a decision to issue securities

convertible into shares or securities entitling shares of the joint-stock company to be

purchased, even if the article of association entitles it to make such a decision)

Not observed This requirement is not stipulated by the existing

legislation of the Russian Federation

55.

Existence in the joint-stock company’s articles of association of the mandatory requirement

to engage an independent appraiser to evaluate the current market value of the shares and

possible changes in their market value as a result of the merger

Not observed

According to Art. 77 of the Federal Law “On Joint-

Stock Companies,” engaging an independent

appraiser is not necessary, since the market

value of the Bank shares as calculated by trade

organizers is regularly published in the media

56.

Absence in the joint-stock company’s articles of association of an acquirer’s waiver

of the obligation to offer to the shareholders their ordinary shares (issuing securities

convertible into ordinary shares) during any mergers

Observed The said waiver is absent in the Articles of

association

57.


the requirement regarding the mandatory engagement of an independent appraiser in order

to determine the stock conversion ratio during reorganization

Not observed

No such requirement is stipulated for by

the existing legislation of the Russian Federation.

When making relevant decisions, the Board of

Directors is entitled to engage an independent

appraiser


Information Disclosure

58.

Existence of an internal document approved by the Board of Directors which determines

the joint-stock company’s rules and approaches to information disclosure (Provisions on

Information Policy)

Observed Provisions on Information Policy

59.

Existence in the joint-stock company’s internal documents of the requirement to disclose

any information about the purpose of stock placement, parties intending to buy the stock

being placed, including large share holding as well as whether the joint-stock company’s

senior managers will participate in the acquisition of the company’s shares being floated

Observed

This requirement is determined by the Provisions

on Information Policy and is restricted by

the requirements set forth by the existing

regulations of the Russian Federation

60.

Existence in the joint-stock company’s internal documents of a list of information,

documents and materials that have to be submitted for resolving issues on the agenda

of the general Shareholders’ Meeting

Observed


Shareholders and Provisions on Information

Policy

61. Existence of the joint-stock company’s Internet website and regular disclosure of company-

related information on the website Observed Provisions on Information Policy

62.


any information about the company’s transactions with any persons who are, according

to the articles of association, the company’s senior officials, as well as the company’s

transactions with any organizations in which the company’s senior officials own, directly

or indirectly, 20 or more per cent of the company’s authorized capital, or which can be in any

other way significantly influenced by such officials


63.


any information about any transactions that may affect the market value of the company

shares


64.

Existence of an internal document approved by the Board of Directors and related to the use

of any essential information about the joint-stock company activities, shares and other

securities and operations involving them, which is not public and the disclosure of which

may significantly affect the market value of the company’s shares and other securities


Control over financial and economic activities

65. Existence of procedures for internal control over the joint-stock company’s financial and

economic activities approved by the Board of Directors Observed

Rules of organization of the Internal Control

system

66. Existence in the company of a specialized department ensuring the observation of internal

control procedures (audit department) Observed The Internal Control and Audit Service

67. Existence in the joint-stock company’s internal documents of the requirement of the Board

of Directors to determine the structure and composition of the company’s audit department Observed

Regulation on the Internal Control and Audit

Service

68.

Absence in the Control and Audit Department of any persons found guilty of committing

economic crime or crime against a state authority, interests of state service or local self-

government service, or against whom administrative action has been taken for breaches in

the areas such as entrepreneurship, finance, taxes and fees, the securities market

Observed There are no such persons in the membership

of the Internal Control and Audit Service



69.

Absence in the Control and Audit Service of any persons who are members of the joint-

stock company’s executive bodies, as well as members, general directors (managers),

members of a controlling body or employees of a legal entity competing against the joint-

stock company

Observed There are no such persons in the membership

of the Internal Control and Audit Service

70.

Existence in the joint-stock company’s internal documents of the time period for submitting

documents and materials for analyzing the financial and economic activities performed, as

well as the responsibility of the company officials and employees for their failure to submit

such documents within the determined period of time

Not observed

The time for submission of documents and

materials is established in the Control and Audit

Service inquiry and depends on complexity of

documents preparation

71.

Existence in the joint-stock company’s internal documents of the requirement of the Control

and Audit Service to report any violations found to the Audit Committee, and if there is no

such committee, to the joint-stock company’s Board of Directors

Observed

Articles of Association, Regulation on the Internal

Control and Audit Service, Regulation on the Audit

Committee of the Board of Directors

72.

Existence in the joint-stock company’s internal documents of the requirement of the Control

and Audit Servicet to perform a preliminary evaluation of the practicability of carrying out

any transactions not included in the company’s financial and economic plan (non-standard

transactions)

Partially observed Rules of organization of Bank Vozrozhdenie

Internal Control and Audit System

73. Existence in the joint-stock company’s internal documents of the procedure for coordinating

any non-standard transactions with the Board of Directors Partially observed

Regulation on the procedure for concluding major

transactions, non-arm’s length transactions and

related person lending transactions

74.

Existence of an internal document approved by the Board of Directors which defines

the procedure for audit the company’s financial and economic activities by the Audit

Commission

Observed Regulation on the Audit Commission approved by

the Bank’s General Meeting of Shareholders

75. Analysis of the audit report by the Audit Committee before it is submitted to

the shareholders at the General Shareholders’ Meeting Observed

Regulation on the Audit Committee of the Board

of Directors

Dividends

76.

Existence of an internal document approved by the Board of Directors and used by

the Board of Directors as a guide when making recommendations about the size of

dividends (Provisions on Dividend Policy)

Observed Provisions on Dividend Policy

77.

Existence in the Provisions on Dividend Policy of the procedure for determining

the minimum share of the company’s net profit to be paid out as dividends, as well as

the terms of non-payment or partial payment of dividends of preference shares, the size of

which is determined in the company’s articles of association

Partially observed

Provisions on Dividend Policy (the maximum

share of net income which can be paid for

dividends is stipulated by the Provisions)

78.

Publishing of any information about the joint-stock company’s dividend policy and any

modifications in it in a periodical set forth in the company’s articles of association for

publishing notices about general Shareholders’ Meetings, as well as publishing such

information on the company’s Internet website

Partially observed Provisions on Dividend Policy

Address and Contacts

Bank Vozrozhdenie

7/4 Luchnikov Pereulok, building 1. Moscow. GSP, 101990

+7 (495) 777-08-88

www.vbank.ru

Investor Relations Department

[email protected]

Yulia Vinogradova, Advisor to the Chairman of the Management Board

+7 (495) 705 91 44, [email protected]

Sergei Klinkov, Deputy Head of Investor Relations

+7 (495) 705 91 44, [email protected]

Financial Institutions Department

Sergei Popov, Head of Department

+7 (495) 790-79-11, [email protected]

Correspondent Relations Division

Maksim Zaitsev, Head of Division

+7 (495) 620-19-57, [email protected]

Bank Vozrozhdenie Details

Bank Identification Code (BIC) 044525181

Tax Identification Number (INN) 5000001042

Correspondent Account with the Central Bank’s Main Moscow Branch 30101810900000000181

Contact Number (toll free): 8-800-200-9-888 (in Russia)

+7 (495) 777-08-88

Fax: +7 (495) 620-19-99

Telex: 414680 VBNK RU

Е-mail: [email protected]

Website: www.vbank.ru

SWIFT code: VBNKRUMM

REUTER DEALING code: VOZM

Bank Vozrozhdenie

7/4 Luchnikov Pereulok, building 1, Moscow, GSP, 101990