/ BUSINESS LINES / INVESTMENT BANKING

Investment banking was originally chosen by ROSBANK as one of its key business lines in 2000 and, in view of the positive market developments and the progress made by the Bank during the following two years, this area was recognised among its principal activities in the Development Strategy. In 2003, the investment banking team was strengthened by a number of new key appointments of managers with substantial investment banking experience at leading western institutions. Investment banking products, whilst predominantly targeted at corporates, may be marketed to all of ROSBANK's customer groups.

Currently, ROSBANK is developing the following lines of investment banking business:

4 Debt and equity financing

4 Mergers and acquisitions

4 Financial consulting

The demand for debt financing is growing rapidly in Russia. As an alternative to direct borrowings from banks offering an opportunity to raise larger amounts of funding, sometimes at a lower cost, corporations and sub-federal administrations increasingly consider issuance of Rouble-denominated bonds for tenors over 1 year. At the same time, such bonds often represent an attractive instrument for local and overseas investors and banks are commonly utilised for both investment and liquidity management purposes.

ROSBANK is one of the leading participants in the Russian debt origination market. The core clientele in this business line is large and mid-sized enterprises representing various industries, as well as sub-federal and municipal administrations. The Bank offers its customers a full package of related services, including preliminary research, advice, documentation assistance, arrangement of placements, underwriting, marketing and liquidity support, all of which, allows it to perform successfully in this highly-competitive environment. According to the year 2005 survey by the Cbonds information agency, the Bank ranked 3rd among the Russian lead arrangers in the aggregate ranking of arrangers for corporates and regional governments. ROSBANK was also the second-largest arranger and No. 1 underwriter for regions and municipalities. The list of its customers includes the Krasnoyarsk, Novosibirsk, Tomsk, Irkutsk, Khabarovsk, Yaroslavl and Kostroma regions, Chuvashia, the cities of Moscow, Krasnoyarsk and Novosibirsk.

In addition to arranging Rouble bond issues, ROSBANK advises its clients on various international borrowings programmes in the form of eurobonds, credit linked notes and depository receipts. During 2003, the Bank acted as a lead co-arranger for MMK Finance S.A.'s Eurobond issue and as an underwriter for JSC Gazprom’s first medium-term euronotes placement. In 2005, ROSBANK participated in Gazprom's 30-year Eurobond issue as a senior joint manager and had an exclusive placement mandate for the Russian market.

The equity financing business was launched in September 2002, when the investment banking activities of MFK Bank were integrated into ROSBANK’s operations. The market for this type of funding in Russia is still at its early stage, with only a few corporate IPOs completed to date. However, the number and volume of public equity placements, both on the home and international capital markets, are expected to grow substantially in the near future, as domestic companies progress in increasing their transparency and improving corporate governance. ROSBANK is well placed to promote its advisory and arrangement services to a wide range of large and mid-sized companies that will be seeking to raise additional capital. Thus, the Bank acted as a lead co-arranger in the JSC Open Investments IPO and as an arranger for the JSC TsentrTelecom stock issue.

According to PricewaterhouseCoopers research, the total volume of M&A deals in Russia grew by 28% to reach US$ 30.3 billion in 2004. During 11 months of 2005 the market expanded further, with the volume of deals exceeding US$ 37.1 billion. This growth is expected to continue, following the penetration of multinational corporations into the country’s economy and the expansion of domestic corporations in various regions of Russia, as well as in other CIS countries. The most attractive sectors for mergers and acquisitions are the energy, telecommunication, timber, metallurgy, engineering, retail trade and food industries. Consequently, the demand for professional consultants’ services is anticipated to increase, supported by the evolving legislation, wider introduction of international accounting standards and improvements to corporate practices.

ROSBANK offers its clients advice and assistance with respect to attracting strategic and financial investors, consolidation of shares, acquisition/sale of assets in Russia and abroad, establishment of strategic alliances and joint ventures. Thus, ROSBANK has already acted as a financial advisor in the sale of several companies in telecommunications, food, media, construction sectors and in the sphere of internet technologies. The Bank was also advising JSC “Polus”, a major national gold producer controlled by Norilsk Nickel, on the consolidation of its gold mining assets. The total volume of M&A deals implemented with the assistance of ROSBANK in 2005 reached US$ 200 million.

In addition to equity financing and M&A advisory services, the Bank develops corporate financial advisory. This will include assistance in business restructuring, optimisation of cash and goods flows, strategic planning improvement of corporate governance.