October 30, 2008

As the global financial crisis continues, CRDF continues to monitor carefully financial operations through our banking partners worldwide to ensure the safe and secure distribution of project funds to their intended recipients.  The financial crisis in the banking sector has had worldwide impact and has hit the Eurasian banking system particularly hard. In mid-October we received informal information that Globexbank, one of the banking partners CRDF utilizes for distribution of project funds to individual recipients, was facing a significant loss of liquidity and was about  to suspend client withdrawals and other transactions.

Out of an abundance of caution, CRDF promptly withdrew all funds from our accounts at Globexbank and suspended further payment operations pending further review of the situation.  This action resulted in a delay in processing of payments to approximately 1900 CRDF project participants who maintain accounts at Globex through which they receive funds from CRDF.  It also resulted in the delay of a small number of in-country payments to vendors for equipment and supplies for several projects.  We are pleased to report that, as a result of a buyout from the Russian state bank Vnesheconombank, Globex has resumed regular operations and CRDF resumed payments to the affected recipients and vendors this week. While we regret the slight delay in some funds transfers to recipients, our actions were taken to ensure the security of our and our clients' funds.  We will continue to monitor the situation and take action accordingly to ensure that funds move as quickly and safely as possible to project participants.  CRDF has numerous banking relationships within Russia that will allow us to redirect funds via other banks should this situation recur.

On a more general note, due to the ongoing financial stresses on the international banking system, CRDF has implemented cash limitations on the amounts that flow weekly through banks in all countries.  These limitations are designed to minimize risk while ensuring that funds continue to flow in support of projects.

CRDF takes our financial responsibility to you very seriously and we wish to assure you that we are taking all reasonable actions to ensure the safe distribution of funds during this challenging time.

If you have any questions or concerns, please do not hesitate to contact Mr. Shawn Wheeler, Vice President for Global Operations and Program Support Services.

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