KMB Capital Increase

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The proposed capital increases in 2008 and 2009 will allow KMB Bank to meet the continuously high demand from Russian micro, small and medium-sized enterprises (MSME) for medium-term financing, an area which still remains underserved by the Russian financial sector. It will enable KMB Bank to deeper penetrate regional financial markets. In addition, the capital increases will allow KMB Bank to roll out its activities in the broader retail financial sector (including mortgage loans) with close involvement of KMB Bank’s majority owner, Banca Intesa SanPaolo, enhancing the diversification of KMB-Bank’s business and thus the robustness of its business model. Transition impact will be achieved through further strengthening the competitiveness and outreach of KMB Bank which will continue to focus on targeting micro and small businesses. Micro and small businesses in the Russian Federation still have comparatively little access to medium term funding. The proposed project will ensure that micro and small businesses are provided with more financial alternatives and will thereby foster competition in the sector. KMB Bank is a leading provider of financial services to micro, small and medium sized enterprises across the Russian Federation. The bank was established by EBRD and a number of other investors in 1999, after the Russian financial crisis had severely affected the ability of the country’s financial sector to effectively provide funding to micro and small enterprises. KMB Bank currently operates through more than 50 outlets in 25 Russian regions. Since its creation it has provided around 275,000 loans to Russian entrepreneurs for a cumulative volume of over USD 3.25 billion. In September 2005 Banca Intesa SanPaolo purchased a majority stake in KMB Bank. EBRD remains a minority shareholder with a 25% stake (plus 1 share). Banca Intesa SanPaolo brings to KMB Bank considerable experience in retail and MSME lending both in Italy and across Eastern Europe and is dedicated to support KMB’s continued dynamic growth in the future. Pro rata participations in the planned capital increases in 2008 and 2009. EBRD’s proposed equity funding amounts to up to RUB 1.775 billion (EUR 50 million). Up to RUB 7.1 billion (EUR 200 million). KMB Bank will continue to comply with EBRD’s Environmental Procedures for Small and Micro Loans, which include: compliance with applicable national environmental, health, safety and labour requirements; adherence to the Environmental Exclusion and Referral list; and submission of annual environmental reports to EBRD. EUR 7.4 million had previously been provided to KMB by the European Commission for the expansion of KMB’s branch network and the provision of MSME-finance in selected Russian regions. Reiner Mueller-Hanke, Chief Executive Officer, KMB Bank, 31 Shabolovka Str., Building B, 115162 Moscow, Russian Federation. T: +7 495 967 30 60 F: +7 495 789 68 27 E-mail: Mueller-Hanke_r@kmb.ru Website: http://www.kmb.ru