TINKOFF CREDIT SYSTEMS REPORT FOR 2008

Press release February 27, 2009

TCS Group had a very successful year in 2008 and remains operationally healthy and liquid, despite the deepening crisis in Russia. Its flexible business model, with very low fixed cost, has enabled it to respond quickly to changes in the economic environment and move into ‘steady-state’ and manage the portfolio that has already been established.

However, the world financial crisis has had a negative effect on the Group’s financial performance. The sharp devaluation of the Rouble in November and December 2008 resulted in significant foreign exchange translation losses and translation reserves in the fourth quarter of 2008 due to an unhedged “short” Euro position. Moreover, because the operating currency of the Group is the Russian Rouble, the value of the Group’s Equity has decreased in USD terms due to the rise in USD:RUR rates. The devaluation of the Rouble continued in January 2008.

As of 31 December 2008 the Group’s total assets comprised USD 199.9 million, an increase of two times compared to 31 December 2007. The gross credit card portfolio has grown from USD 26.8 million on 31 December 2007 to USD 157.5 million on 31 December 2008, an increase of almost six times. The total number of credit card issued increased from 48 thousand on 31 December 2007 to 305 thousand on 31 December 2008.

The Group’s underwriting policy improved month-on-month in 2008, resulting in significantly better early risk indicators for new vintages. This can be seen from the decrease in the number of customers who were delinquent 30 days or more on third statement that fell from 13.9% on December 31, 2007 to 5.5% in December 31, 2008. This risk indicator is lower than that of leading peer credit card issuers in the market. The Group further reduced initial limits for new customers to 12 000 RUR (approx. 300 USD) in December 2008 to manage risks going into the economic down-turn in Russia and to manage liquidity.

However, given the unfavorable prospects for the global economy, a sharp deterioration of Russia’s real sector performance during October 2008 – January 2009, and unemployment rate growth in Russia, we anticipate a deterioration of portfolio quality in the first half of 2009. As a result, we believe that the average annualised charge-off rate in the 2009 could reach 12-15%. We are building up Loan Loss Provisions accordingly.

In October 2008, over 95% of the outstanding Rouble bond issue (placed in October 2007) was put by bondholders and as a consequence the Group settled USD 21m. This reflects the overall trend in Russia over the last few months, whereby existing Rouble bonds have been returned to their issuers. The repayment of the Rouble bond was made from proceeds from the Vostok Nafta USD 30m equity investment. This means that TCS has nothing to refinance until the Eurobond in June 2011, apart from the small remaining Rouble bond of approximately USD 0.3 million.

In December 2008, the Group’s Euro 70m Eurobond issued in June 2008 was successfully listed on the Swedish Stock Exchange.

Interest income from credit cards grew from USD 2.5 million in 2007 to USD 67.8 million at the end of 2008, giving an average monthly gross yield of 71.1%. The Group has incurred a net loss in 2008, which is explained by the start-up nature of the business and negative foreign exchange revaluation of the Eurobond liability.

Despite the global crisis, we believe that the Company is in very good shape for 2009 and look forward to providing you with updates in the future.


Egidaco Investments Limited