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Letter to clients, shareholders and partners

Dear clients, shareholders and partners,

The shareholders of MDM Bank and URSA Bank announced on December 3 their intention to combine their equity stakes into a holding company to create one of the leading private universal banks in Russia.

After the merger is completed, the combined bank will be one of the largest financial institutions in Russia, with capital totaling RUB 72 bln and assets of RUB 523 bln.

The decision to merge was made after rigorous strategic analysis. Both parties believe that while MDM bank and URSA bank are independently respected and in a healthy position going forward, the combined institution will provide an even stronger foundation from which to implement their long-term plans.

MDM Bank and URSA Bank complement each other both in terms of business structure and in geographical distribution. The merged banks will reap significant benefits from the integration of their commercial and financial operations, as well as economies of scale. The combined institution will rely on a large and diversified deposit base garnered from a regional branch network including more than 500 points of sale, covering each of the Russian Federation’s federal districts.

In the first stage of the merger, the shareholders of both banks will contribute their respective shares to the charter capital of a newly created holding company, which will oversee the bank integration process. The board of directors of this holding company will contain representatives of the shareholders of both banks, including representatives of the International Finance Corporation (IFC) and the European Bank for Reconstruction and Development (EBRD).
Simultaneously with the formation of the holding company, a detailed integration plan will be formulated. Full integration of the banks is expected within 12-18 months, until which time the banks will continue to operate independently.
Oleg Viyugin, the chairman of the board of directors of MDM Bank, will become chairman of the board of directors of the holding company.

Igor Kim, the chairman of the board of directors of URSA Bank, will become the CEO of MDM Bank and will be responsible for developing and executing the integration plan.

Igor Kouzin, the current CEO of MDM Bank, will become the CEO of the holding company.

Completion of the transaction remains subject to obtaining the necessary approvals and consents, including those from the Central Bank of Russia and the Federal Antimonopoly Service.
The combined bank will boast a superb management team, which, combined with the outstanding competitive advantages afforded by the new structure, will allow the merged structure to assume leading positions in both retail and in corporate banking, as well as to take a pivotal role in the development and modernization of the Russian financial sector.
Both financial institutions share an implacable commitment to standards and beliefs that will be maintained and strengthened in the combined bank, including the highest standards of corporate governance and informational transparency, exceptional customer service, the professionalism of all its employees, and adherence to the principles of social responsibility.
The shareholders and directors are determined that a commitment to these values should define the new, merged organization, as they believe that this will be a vital component of transmitting the pristine reputations built by URSA Bank and MDM Bank to the merged organization, and ensuring that the new bank is held in high regard by its clients, creditors and regulators.
The shareholders and management of both banks are convinced of the success of the plan, and are prepared to work on the integration project, which has no equal in terms of its size and importance. The healthy liquidity position of both MDM Bank (approximately USD 1.5 bln) and URSA Bank (USD 1.3 bln) creates a substantial reserve for future development.

Igor Kim, the chairman of the board of directors of URSA Bank 
Oleg Viyugin, the chairman of the board of directors of MDM Bank

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