Open Joint-Stock Company Sberbank of Russia. Auditor's Report on the 2010 Annual Statement March A member firm of Ernst & Young Global Limited

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1 Open Joint-Stock Company Sberbank of Russia Auditor's Report on the 2010 Annual Statement March 2011 A member firm of Ernst & Young Global Limited 1

2 Auditor's Report - OJSC Sberbank of Russia Contents Page Independent Auditor's Report Appendix Annual Statement of Sberbank of Russia for 2010, including: Balance Sheet as of January 1, 2011 Profit and Loss Statement for 2010 Cash Flow Statement for 2010 Statement on Capital Adequacy and the Size of Reserves Available for Coverage of Doubtful Loans and Other Assets as of January 1, 2011 Information on statutory ratios as of January 1, 2011 Explanatory note 3 6 A member firm of Ernst & Young Global Limited 2

3 ZAO ERNST & YOUNG VNESHAUDIT Sadovnicheskaya Nab., 77, bld. 1 Moscow, , Russia Tel: +7 (495) (495) Fax: +7 (495) ZAO ERNST & YOUNG VNESHAUDIT Sadovnicheskaya Nab., 77, bld 1, Moscow, , Russia 1 Tel.: +7 (495) (495) Fax: +7 (495) OKPO: Independent Auditor's Report To shareholders of Sberbank of Russia Open Joint-Stock Company Details of the Auditee Name: Sberbank of Russia Open Joint-Stock Company, hereinafter the Bank. Information on the state registration of the lending organization with the Central Bank of the Russian Federation: No dd. June 20, Information on registration of the legal entity in the Uniform State Register of Legal Entities: State Registration Certificate No dd. August 16, Address: 19 Vavilova St., Moscow, , Russia. Information about the auditor Name: ZAO Ernst & Young Vneshaudit Main state registration number Address: Sadovnicheskaya Nab., 77, bld 1, Moscow, , Russia 1. ZAO Ernst & Young Vneshaudit is a member of the Non-Profit Partnership Russian Audit Chamber (NP APR). ZAO Ernst & Young Vneshaudit is registered in the register of auditors and audit organizations of NP APR, registration number 3027, and also included in the control copy of the register of auditors and audit organizations, identification number A member firm of Ernst & Young Global Limited 3

4 We have audited the attached annual statement of Open Joint-Stock Company Sberbank of Russia for January 1, 2010 through December 31, 2010, inclusive. Governed by Directive #2089-U of the Bank of Russia dated October 8, 2008 On the Procedure to Be Followed by Lending Organizations in Preparing an Annual Report, the Bank's Annual Statement includes the Balance Sheet as of January 1, 2011, the 2010 Profit and Loss Statement, the 2010 Cash Flow Statement, the Statement on Capital Adequacy and the Size of Reserves Available for Coverage of Doubtful Loans and Other Assets as of January 1, 2011, Information on statutory ratios as of January 1, 2011, information on statutory ratios as of January 1, 2012 and an explanatory note. Responsibility of the Auditee for the Annual Statement The Bank's management is responsible for the preparation and authenticity of this Annual Statement in accordance with Russian Federation rules for preparing annual statements, and for the internal control system necessary for preparing the annual statement which is free from material misstatements due to fraud or error. Auditor's responsibility Our responsibility is to express an opinion on the authenticity of this Annual Statement on the basis of our audit. We conducted our audit in accordance with federal auditing standards and international auditing standards. These standards require that we comply with ethical norms as well as plan and perform the audit in such a way as to obtain reasonable assurance that the Annual Statement is free from material misstatement. An audit involves performing auditing procedures to obtain audit evidence supporting the amounts and disclosures in the Annual Statement. The choice of audit procedures is subject to our judgment, which is based on the assessment of risk of material misstatements in the Annual Statement, whether due to fraud or error. In making such risk assessment, the auditor examines the internal control system ensuring the preparation and authenticity of the Annual Statement in order to choose appropriate audit procedures, rather than for the purpose of expressing an opinion on the effectiveness of the internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the justification for the estimated figures obtained by the management, as well as evaluation of the overall presentation of the Annual Statement. We believe that the audit evidence that we have obtained provides sufficient and appropriate basis for expressing our opinion. 4

5 Opinion In our opinion, the Annual Statement reflects, in all material respects, the financial position of the Bank as of January 1, 2011, its financial and business results and cash flow funds for 2010, in accordance with Russian Federation annual statement preparation rules. Other information As stated in clause 1 of the explanatory note, in accordance with Directive #2172-U of the Central Bank of the Russian Federation dated January 20, 2009 On Publication and Submission of Information about Operations of Lending Organizations and Banking (Consolidated) Groups (hereinafter - Directive #2172-U), the Bank's management decided to publish an explanatory note as part of the Annual Statement on the Bank's website ( The annual statement forms (balance sheet, profit and loss statement, cash flow statement, the statement on capital adequacy and the size of reserves available for coverage of doubtful loans and other assets, and information on statutory ratios) are openly disclosed on the Bank's website as part of the Annual Statement in accordance with Directive #2172-U. This audit report on the accompanying annual report should be considered together with all forms of accounting and explanatory notes, which are an integral part of the Annual Statement. The accompanying Annual Statement does not aim to represent the financial position and results of activities in accordance with accounting principles and methods generally accepted in countries and administrative entities other than the Russian Federation. Accordingly, the accompanying Annual Statement is not intended for persons who are not familiar with the principles, procedures and methods of accounting accepted in the Russian Federation. /Signature/ S.M. Taskaev Partner ZAO Ernst & Young Vneshaudit March 18, 2011 /Seal/: Closed Joint-Stock Company * State Reg. No , Moscow * Ernst & Young Vneshaudit 5

6 Territory code under OKATO Code of the lending organization (branch) Bank Reporting under OKPO main state registration number registration number (/reference number) BIC Lending organization: Open Joint-Stock company Sberbank of Russia OJSC Sberbank of Russia Mail address: 19 Vavilova St., Moscow BALANCE SHEET (disclosure form) as of January 1, 2011 Form code under OKUD Quarterly (Annual) RUB 000 Line number Description of the item Figures as of the reporting date Figures as of the relevant reporting date of the previous year I ASSETS 1 Cash 322,302, ,395,815 2 Funds of lending organizations with the Central Bank of the Russian Federation 128,924, ,237, Required reserves 50,531,690 40,572,382 3 Funds in lending organizations 61,888,479 85,334,400 4 Net investments in securities evaluated at fair value through a profit or loss 31,509,445 15,587,505 5 Net loans receivable 5,714,300,721 5,158,029,273 6 Net investments in securities and other financial assets available for sale 1,465,068,808 1,075,404, Investments in subsidiaries and affiliates 83,813,528 38,999,532 7 Net investments in securities kept till redemption 354,845, Fixed assets, intangible assets and stocks 317,378, ,830,038 9 Other assets 127,028,480 90,176, Total assets 8,523,247,230 7,096,995,293 II LIABILITIES 11 Credits, deposits and other facilities of the Central Bank of the Russian Federation 300,000, ,000, Funds of lending organizations 291,093, ,388, Funds from clients other than lending organizations 6,666,977,736 5,396,947, Deposits from individuals 4,689,511,661 3,687,133, Financial liabilities evaluated at fair value through a profit or loss Issued debentures 111,983, ,853, Other liabilities 76,991,753 59,994, Provisions for possible losses from credit contingencies, other possible losses and transactions with offshore residents 26,313,232 25,557, Total liabilities 7,473,360,076 6,248,742,183 III SOURCES OF EQUITY 19 Shareholders (members ) capital 67,760,844 67,760, Treasury shares redeemed from shareholders (members) Paid-in capital 228,054, ,054, Reserve fund 3,527,429 3,527, Revaluation of securities available for sale at fair value 15,835,441-13,998, Revaluation of fixed assets 81,713,099 81,783, Retained profit (uncovered losses) of previous years 479,017, ,430, Retained profit (loss) for the reporting period 173,978,563 21,694, Total sources of equity 1,049,887,154 S48,253,110 IV OFF-BALANCE-SHEET LIABILITIES 28 Irrevocable liabilities of the lending organization 1,059,370, ,270, Guarantees and sureties granted by the lending organization 293,025, ,579,130 President, Chairman of the Management Board of OJSC Sberbank of Russia H.O. Gref /Signature/ (full name) (signature) Chief Accountant of Sberbank of Russia Director of the Accounting and Reporting Department A.V. Kruzhalov /Signature/ (full name) (signature) /Seal/: Open Joint-Stock Company Sberbank of Russia * Moscow March 11, 2011 Place for seal 6

7 Territory code under OKATO Code of the lending organization (branch) Bank Reporting under OKPO main state registration number registration number (/reference number) BIC Lending organization: Open Joint-Stock company Sberbank of Russia OJSC Sberbank of Russia Mail address: 19 Vavilova St., Moscow PROFIT AND LOSS STATEMENT (disclosure form) for 2010 Form code under OKUD Quarterly (Annual) RUB 000 Line number Description of the item Figures as of the reporting date Figures for the relevant reporting period of the previous year Total interest income, including: 796,993, From funds deposited in lending organizations 8,062, From loans granted to clients other than lending organizations 685,405, From rendering financial leasing services From investments in securities 103,525,329 55,105,679 2 Total interest expense, including: 294,160, ,422, For funds raised from lending organizations 31,006,883 54,642, For funds raised from clients other than lending organizations 254,878, ,704, For issued debentures 8,275,003 9,076,444 3 Net interest income (negative interest margin) 502,833, ,893,637 4 Changes in the reserves for possible losses under loans, loan and equivalent receivables, funds in correspondent accounts and accrued interest income, total, including: -80,611, ,386,04S 4.1 Changes in the provisions for possible losses from accrued interest income -1,790,023-5,239,111 5 Net interest income (negative interest margin) after provisions are made for possible losses 422,222, ,507,589 6 Net income from operations with securities evaluated at fair value through a profit or loss 1,633,852 1,048,507 7 Net income from operations with securities available for sale 14,928,755 16,738,656 8 Net income from operations with securities held to maturity -8, Net income from foreign currency operations -14,836,639 6,512, Net income from revaluation of foreign currency 16,428,836 15,679, Income from an interest in other legal entities 1,420, , Commission fee income 118,503, ,895, Commission fee expenses 6,562,118 4,323, Changes in the provisions for possible losses from securities available for sale 1,583,863-2,439, Changes in the provisions for possible losses from securities held to maturity -917, Changes in the provisions for other losses -6,924,269-14,495, Other operating income 13,450,740 11,211, Net income (expenses) 560,923, ,507, Operating expenses 318,720, ,355, Profit (loss) before tax 242,203,249 56,152, Assessed (paid) taxes 68,224,686 34,458, Profit (loss) after tax 173,978,563 21,694, Total distributions from profits after tax, total, including: Distributed among shareholders (members) as dividends Deductions to create and replenish the reserve fund Retained profit (loss) for the reporting period 173,978,563 21,694,495 President, Chairman of the Management Board of OJSC Sberbank of Russia H.O. Gref /Signature/ (full name) (signature) Chief Accountant of Sberbank of Russia Director of the Accounting and Reporting Department A.V. Kruzhalov /Signature/ (full name) (signature) /Seal/: Open Joint-Stock Company Sberbank of Russia * Moscow March 11, 2011 Place for seal 7

8 Territory code under OKATO Code of the lending organization (branch) Bank Reporting under OKPO main state registration number registration number (/reference number) BIC CASH FLOW STATEMENT (disclosure form) for 2010 Lending organization: Open Joint-Stock company Sberbank of Russia OJSC Sberbank of Russia Mail address: 19 Vavilova St., Moscow # Description of the item Cash flow for the reporting period Form code Annual RUB 000 Cash flow for the previous reporting period Net cash generated by (used in) operations 1.1 Cash generated by (used in) operations before changes to operating assets and liabilities, total, including: 256,623, ,597, Interest received 782,670, ,455, Interest paid -281,103, ,138, Commission fee received 117,967, ,762, Commission fee paid -6,529,045-4,277, Income less expenses for operations with financial assets at fair value through a profit or loss, available for sale 1,698, , Income less losses from operations with securities held to maturity -8, Income less expenses for operations with foreign currency -14,836,812 6,512, Other operating income 13,321,348 11,120, Operating expenses -287,811, ,168, Tax expenses (refund) -68,743,579-16,543, Increase (decrease) of net cash from operating assets and liabilities, including: 514,271,905 16,654, Net increase (decrease) of mandatory provisions in accounts with the Bank of Russia -9,959,308-32,929, Net increase (decrease) of securities investments at fair value through a profit or loss -15,834,228-12,654, Net increase (decrease) in loans receivable -641,168, ,120, Net increase (decrease) in other assets -42,694,184-16,582, Net increase (decrease) in loans, deposits and other facilities of the Bank of Russia -199,999, ,254, Net increase (decrease) in funds of other lending organizations 147,835,500-64,625, Net increase (decrease) in funds of clients other than lending organizations 1,283,128, ,644, Net increase (decrease) in financial liabilities at fair value through a profit or loss Net increase (decrease) in issued debentures -10,626,173-15,791, Net increase (decrease) in other liabilities 3,590,250-13,030, Totals of section 1 (line line 1.2) 770,895, ,252,649 2 Net cash generated by (used in) investment operations 2.1 Acquisition of securities and other financial assets pertaining to the category available for sale -2,106,370, ,373, Proceeds from sale and redemption of securities and other financial assets pertaining to the available for sale category 1,507,289, ,216, Acquisition of securities pertaining to the held to maturity category -92,622, Proceeds from redemption of securities pertaining to the held to maturity category 2,240, Acquisition of fixed assets, intangible assets and stocks -48,736,853-40,127, Proceeds from sale of fixed assets, intangible assets and stocks 543, , Dividends received 1,400, , Totals of section 2 (sum of lines 2.1 to 2.7) -736,256, ,446,682 3 Net cash generated by (used in) financial operations 3.1 Shareholders (members ) contributions to the authorized capital Acquisition of treasury shares (stakes) redeemed from the shareholders (members) Sale of treasury shares (stocks) redeemed from the shareholders (members) 131 1, Paid dividends -2,204,212-11,011, Totals of section 3 (sum of lines 3.1 to 3.4) -2,204,081-11,009,516 4 Impact of changes in the official currency exchange rates against the ruble set by the Bank of Russia on cash and cash equivalents 2,753,509 37,050,899 5 Increase in (use of) cash and cash equivalents 35,188,882-71,152, Cash and cash equivalents as of the beginning of the reporting year 427,395, ,548, Cash and cash equivalents as of the end of the reporting year 462,584, ,395, 554 President, Chairman of the Management Board of OJSC Sberbank of Russia H.O. Gref /Signature/ (full name) (signature) Chief Accountant of Sberbank of Russia Director of the Accounting and Reporting Department A.V. Kruzhalov /Signature/ (full name) (signature) /Seal/: Open Joint-Stock Company Sberbank of Russia * Moscow March 11, 2011 Place for seal 8

9 Territory code under OKATO under OKPO Code of the lending organization (branch) main state registration number registration number (/reference number) Bank Reporting BIC THE STATEMENT OF CAPITAL ADEQUACY, ALLOWANCE FOR DOUBTFUL LOANS AND OTHER ASSETS (disclosure form) as of January 1, 2011 Lending organization: Open Joint-Stock company Sberbank of Russia OJSC Sberbank of Russia Mail address: 19 Vavilova St., Moscow Form code under OKUD Quarterly (Annual) Line number Description of the figure Figures as of the start of the reporting year Increase (+)/ reduction (-) over the reporting period Figures as of the reporting date Equity (capital) (thousand RUR), total, including: 1,317,770,666-75,894,885 1,241,875, Authorized capital of the lending organization, including: 67,760, ,760, Par value of registered common shares (stocks) 64,760, ,760, Par value of registered preferred shares 3,000, ,000, Treasury shares redeemed from shareholders (members) Paid-in capital 228,054, ,054, Reserve fund of the lending organization 3,527, ,527, Financial result of operations underlying the calculation of equity (capital): 476,155, ,709, ,865, of previous years 460,777,684 19,541, ,319, of the reporting year 15,378, ,167, ,545, Intangible assets 506, ,264 1,231, Subordinated credit (loan, deposit, bonded loan) 500,000, ,000, ,000, Sources (part of sources) of additional capital formed by investors from inappropriate assets Required value of equity (capital) adequacy, (percent) 10.0 X Actual value of equity (capital) adequacy, (percent) 21.5 X Actually created reserves for possible losses, total, (thou. RUR.), total, including: 626,996,395 79,782, ,778, for loans, loans and similar accounts receivable 592,928,717 74,734, ,663, for other assets related to risk of possible losses, and other losses 8,514,031 4,288,056 12,802,0S7 4.3 for credit contingencies disclosed in off-balance-sheet accounts, and fixed-term transactions 25,425, ,268 26,212, for operations with offshore residents 127,675-26, ,992 Reference section: 1 Creation (replenishment) of provisions for possible losses from loans, loans and equivalent 375,044,621 accounts receivable in the reporting period (thousand RUR), total including as a result of: 1.1 the granting of new loans 143,863, changes in loan quality 187,330, changes in the official currency exchange rate against the ruble, set by the Bank of Russia 5,075, other reasons 38,775,176 2 Restoration of (reduction in) provisions for possible losses from loans, loans and equivalent 300,310,216 accounts receivable in the reporting period (thousand RUR), total including as a result of: 2.1 the write-off of bad loans 6,738, repayment of loans 223,971, changes in loan quality 51,034, changes in the official currency exchange rate against the ruble, set by the Bank of Russia 560, other reasons 18,005,053 President, Chairman of the Management Board of OJSC Sberbank of Russia H.O. Gref /Signature/ (full name) (signature) Chief Accountant of Sberbank of Russia Director of the Accounting and Reporting Department A.V. Kruzhalov /Signature/ (full name) (signature) /Seal/: Open Joint-Stock Company Sberbank of Russia * Moscow March 11, 2011 Place for seal 9

10 Bank Reporting Territory code under OKATO Code of the lending organization (branch) under OKPO main state registration number registration number (/reference number) BIC INFORMATION ON STATUTORY RATIOS (disclosure form) as of January 1, 2011 Lending organization: Open Joint-Stock company Sberbank of Russia OJSC Sberbank of Russia Mail address: 19 Vavilova St., Moscow Form code under OKUD Annual percent Line number Description of the figure Standard values as of the reporting date Actual values as of the previous reporting date Capital adequacy ratio of the bank Instant liquidity ratio of the bank (N2) Current liquidity ratio of the bank (N3) Long-term liquidity ratio of the bank (N4) Maximum risk limit per borrower or group of related borrowers (N6) 25.0 maximum 17.9 maximum 16.1 minimum 0.1 minimum Maximum limit of large credit risks (N7) Maximum amount of loans, bank guarantees and warranties issued by the bank to its members (shareholders) (N9.1) Aggregate risk ratio of the bank s insiders (N10. 1) Ratio of the bank s equity (capital) used for purchasing shares (stocks) in other legal entities (N12) Ratio of the amount of liquid assets with maturity within the next 30 calendar days against the amount of liabilities of non-bank settlement credit institutions (N15) 11 Ratio of maximum aggregate loans to customers involved in settlement to completion of settlement (N16) 12 Ratio of loans to borrowers, other than those involved in settlement, from non-bank settlement credit institutions on their own behalf or for their own account (N16.1) 13 Minimum ratio of mortgage-backed loans to own equity (capital) (N17) 14 Minimum ratio of mortgage cover and mortgage backed bonds in issue (N18) 15 Maximum ratio of aggregate liabilities of the issuing lending organization to lenders ranking in priority to liabilities to holders of mortgage-backed bonds in accordance with federal laws to own equity (capital) (N19) President, Chairman of the Management Board of OJSC Sberbank of Russia H.O. Gref /Signature/ (full name) (signature) Chief Accountant of Sberbank of Russia Director of the Accounting and Reporting Department A.V. Kruzhalov /Signature/ (full name) (signature) /Seal/: Open Joint-Stock Company Sberbank of Russia * Moscow March 11, 2011 Place for seal 10

11 Explanatory Note to the 2010 Annual Report of OJSC Sberbank of Russia Prepared pursuant to requirements of Directive #2089-U of the Central Bank of Russia dated October 8, 2008 On the Procedure to Be Followed by Lending Organizations in Preparing an Annual Statement

12 CONTENTS Open Joint-Stock Company Sberbank of Russia... 1 Auditor's Report - OJSC Sberbank of Russia... 2 Contents... 2 Page Explanatory Note to the 2010 Annual Report of OJSC Sberbank of Russia Introduction to the Explanatory Note Sberbank Lines of Business. Banking Products. Licenses Results in Brief BANK'S OPERATIONS THAT HAVE THE MOST SIGNIFICANT IMPACT ON PROFIT OR LOSS CHANGES. BANK'S OPERATIONS IN DIFFERENT GEOGRAPHICAL REGIONS Prospects of the Bank's Development An Overview of Risks Related to Different Operations of the Bank Details of Disbursements/Remuneration to Key Management Staff Earnings per Share Branch Network of the Bank Sberbank of Russia Banking (Consolidated) Group Membership the Bank s Supervisory Board and its Changes in Information on Shares/Interests in the Bank held by the Members of the Supervisory Board

13 1 Introduction to the Explanatory Note This Explanatory Note has been prepared pursuant to requirements of Directive #2089-U of the Bank of Russia dated October 8, based on certain requirements of amended clause 4.6 that are set out in Directive #2519-U of the Bank of Russia 2 and come into effect starting from the 2011 Annual Statement; is part of the 2010 Annual Statement of OJSC Sberbank of Russia 3 prepared pursuant to Russian Accounting Standards (hereinafter RAS) and does not include data from consolidated statements of the Bank's Group; utilizes data of disclosure reporting forms prepared pursuant to Directive #2089-U of the Bank of Russia and Directive #2332-U of the Bank of Russia 4 and internal statistical reporting forms of the Bank with events following the reporting date taken into account. Figures provided in the Explanatory Note are for 2009 and Their values are comparable and commensurate. The Bank's management resolved to 5 publish this Explanatory Note as part of the Annual Statement posted on the Bank's website ( The forms of accounting (balance sheet, profit and loss report, cash flow statement, the statement on capital adequacy and the size of provisions for doubtful loans and other assets and information on statutory ratios) in accordance with Directive #2172-U are openly disclosed on the Bank's website as part of the Annual Statement. 2 Sberbank Lines of Business. Banking Products. Licenses Core lines of business: Corporate business: providing services to corporate clients and organizations such as maintaining settlement and current accounts, opening deposits, granting all kinds of finance, guarantees, supporting foreign trade transactions, cash services etc. Retail business: banking services provided to individual clients such as deposits, lending, maintenance of bank cards, transactions in precious metals, foreign currency exchange transactions, money transfers, payments, safe custody of valuables etc. Operations in financial markets: transactions in securities, transactions made to place and raise funds in the interbank market, raise 1 Directive #2519-U of the Bank of Russia dated November 13, 2010 On Amending Directive #2089-U of the Bank of Russia dated October 8, 2008 On the Procedure to Be Followed by Lending Organizations in Preparing an Annual Statement 2 Directive #2519-U of the Bank of Russia dated November 13, 2010 On Amending Directive #2089-U of the Bank of Russia dated October 8, 2008 On the Procedure to Be Followed by Lending Organizations in Preparing an Annual Statement 3 Hereinafter Sberbank of Russia, Sberbank, the Bank 4 Directive # 2332-U of the Bank of Russia dated 12 November 2009 On the List, Form and Procedure of Preparation and Submission of Reporting Forms by Lending Organizations to the Central Bank of the Russian Federation (hereinafter the BoR Directive #2332-U) 5 In accordance with Directive #2172-U of the Bank of Russia dated January 20, 2009 On Publication and Submission of Information about Operations of Lending Organizations and Banking (Consolidated) Groups (hereinafter Directive #2172-U), the decision to make a publication of the Explanatory Note to the Annual Statement and the manner thereof is made by the lending organization independently 3

14 long-term finance in capital markets, transactions in foreign currencies and derivatives, and other transactions in financial markets. Sberbank offers its clients a wide range of banking products and services within the lines of business listed above. Licenses under which Sberbank carries out its operations are listed below: Type of license License # Issued on Issuing authority Valid till General license for banking operations in rubles and foreign currencies License for banking operations for raising deposits and placing precious metals, and other operations in precious metals No No August 30, 2010 August 30, 2010 Central Bank of Russian Federation Central Bank of Russian Federation Term unlimited Term unlimited License of a professional member of the securities market for broking activities License of a professional member of the securities market for dealing activities License of a professional member of the securities market for securities management activities No No No November 27, 2000 November 27, 2000 November 27, 2000 Federal Financial Markets Service Federal Financial Markets Service Federal Financial Markets Service Term unlimited Term unlimited Term unlimited License of a professional member of the securities market for depositary activities No November 8, 2000 Federal Financial Markets Service Term unlimited License for activities of a specialized depositary of investment funds, mutual funds and nongovernmental pension funds No October 4, 2000 Federal Financial Markets Service Term unlimited License for execution, as part of stock market trading, by a stock market intermediary of derivative contracts with a commodity as the underlying asset No December 24, 2009 Federal Financial Markets Service Term unlimited 4

15 Information on the Bank's involvement in the system of mandatory insurance of deposits of individuals in banks of the Russian Federation Sberbank of Russia is a member of the deposit insurance system. The Bank was entered in the Register of Banks Enrolled in the Deposit Mandatory Insurance System on January 11, Sberbank makes quarterly insurance payments to the Fund of Mandatory Insurance of Deposits as required by Russian laws. In 2011, Sberbank's expenses related to charges paid to the Fund of Mandatory Insurance of Deposits reached 16.3 bn rubles or 24.6 % more than in This growth resulted from an increase in funds raised from individuals. 3. Economic Environment in which Sberbank Operates. An Overview of Significant Changes in Operations, Events That Affected/Could Affect the Financial Sustainability, Policy (Strategy) of the Bank for the Reporting Period 2010 became a year for Russia's recovery after the crisis. According to provisional estimates of the Russian Bureau of Statistics, the 2010 GDP growth was 4.0%, but the economy did not grow evenly throughout the year with GDP decreasing in Q3 in the context of extremely hot weather. Industrial production added 8.2 % in 2010 mainly due to a recovery growth in processing sectors (+11.8 %). Accumulated reserves and a growth in consumption significantly contributed to growth in production; recovery in investment activity became an important growth factor by the year's end. Inflationary tendencies turned around during By mid-summer, inflation fell to 5.5 % in YoY terms, starting to grow rapidly in August, finishing the year at 8.8 % in YoY terms with a tendency for further growth. This resulted, among other things, from growing global prices of commodities and consumer products and the inflationary effect of the monetary policy manifested in sustainable growth of money aggregates throughout the year at the YoY average of 31 %. In H1, the Bank of Russia continued lowering interest rates in the wake of inflation, with the refinance rate falling from 8.75 % early that year to 7.75 % by June. However, after inflation resumed growth the Bank of Russia did not respond with changes in its monetary policy and raised deposit interest rates by 0.25 points only once, in late December. In 2010, the Russian banking system maintained high growth rates of raised funds that significantly exceeded growth rates of loans as demand for the latter only started to recover. Overall, funds from individuals added 31.2 % by the year's end, from legal entities 17.1 %, while loans to individuals added 14.3 % and to legal entities 12.8 %. Lending growth rates at Sberbank fell a little short of market figures. As a result the Bank's share in these segments fell during the year: from 31.8 % to 31.3 % for loans to legal entities and from 32.7 % to 31.9 % for loans to individuals. A faster influx of client funds compared to lending growth rates caused a significant growth of liquidity in the market and a decline in interest rates for both bank loans and deposits. However, unlike in H1 when actual interest rates barely changed, actual interest rates for loans fell sharply in H2 in the context of growing inflation and deposit interest rates fell below inflation levels. In these conditions, bank loans became more attractive and encouraged higher demand from clients, resulting in a certain reduction in excess liquidity in the market by the year's end. 5

16 Banks continued actively expanding their securities portfolios in the context of too low lending growth rates as compared to the influx of client funds. Banks' investments in securities added more than a third over the year. Sberbank's securities portfolio rose much more, 1.7 times. This became the key factor in the growth of Sberbank's share in the assets of the banking sector, from 26.2% to 27.3%. Banks were repaying funds received during the crisis to the Bank of Russia in the context of sufficient liquidity. The share of these resources fell from 4.8% to 1.0% in banks' liabilities. Sberbank also resolved to repay part of its 200 bn ruble Subordinated Loans loan from the Bank of Russia in May As a result, the Bank's share in the capital of the banking sector fell from 28.6% to 26.4% by the year's end. At the same time, banks took advantage of better conditions in global financial markets and resumed raising financial resources from overseas. Throughout the year, Sberbank also repeatedly went to international capital markets to replenish its liquid funds in foreign currencies. Overall funds raised in 2010 were 4.75 bn US dollars and 400 mln Swiss francs. Given the high ruble liquidity level at Sberbank supported by a steady influx of client funds, the Bank could afford to lower raising interest rates and, as such, reduce its interest expenses. In turn, this reduced the Bank's share in the market for fundraising from corporate clients from 17.7% to 16.6% and individuals from 49.4% to 47.9%. Sberbank's share in different segments of the financial market: Assets 27.3% 26.2% Capital 26.4% 28.6% Loans to corporate clients 31.3% 31.8% Loans to individuals 31.9% 32.7% Funds from corporate clients 16.6% 17.7% Funds from individuals 47.9% 49.4% Earnings before income tax 39.2% 21.1% Stabilization of the economic situation had a positive impact on the quality of the banks' loan portfolios. Growing in January-May from 5.9% to 6.3%%, the share of overdue debt under business loans started falling and was at 5.1% by the year's end. The share of overdue debt under individual loans started falling only in Q4 and was 6.9% by the year's end or a little above the level as of the year's start (6.8%). Lower overdue debt growth rates affected the dynamics of loan reserves which stopped growing. Over the year, reserves grew only 4.6% against a doubling in 2009 and the reserve to loan ratio fell from 9.2% to 8.6%. Positive changes in the market triggered changes in Sberbank's lending policy. The Bank's lending operations were carried out for the better part of 2010 in accordance with the Lending Policy of Sberbank of Russia in Current Economic Conditions that defined additional measures of effective credit risk management during a severe economic crisis. In the course of time the economic situation started improving gradually, and the Bank issued its Manifesto, explaining its lending principles in the new economic context to individual and corporate clients. Handling troubled assets was a crucial aspect of the Bank's 2010 operations. 6

17 In particular, in 2010 Sberbank financed business processes pertaining to the collection of troubled debt in the segments of large and medium business 6, small and micro business. 7 Systemic handling of troubled assets was instrumental to reducing the share of overdue loans in the loan portfolio of legal entities from its maximum value (6.5% as of August 1, 2010) to 5.5% by the year's end. A special promotion was held for individual borrowers to restructure and refinance troubled and overdue loans. Over the year, the share of overdue loans in the Bank's retail portfolio rose insignificantly (+0.08 points) and was 3.48% as of January 1, 2011 or almost half of the figure for the banking system overall. Sberbank's cost of reserves compared with the year before fell substantially (-78%) becoming Sberbank's main factor of growing profits and increasing its share in the total earnings of the banking system from 21.1% to 39.2%. In the reporting year, Sberbank continued implementing the 2014 Development Strategy, the main document where the Bank's policies are laid out. 8 The Bank pursued its main areas set out in the Strategy in parallel with relevant short-term objectives. Trade and export finance were significantly promoted in 2010 in corporate clients' operations. The Bank acted as a depositary and issuer of the first ever Russian Depositary Receipts (OC RUSAL) and organized the first placement of the issue of ruble-denominated bonds of a foreign nation (the Republic of Belarus). As regards retail services, the Bank actively promoted the service model based on the Universal Bank Service Agreement, greatly expanded its ATM and terminal network, increased the number of transactions supported by remote channels such as Internet banking (Sberbank Online) saw the completion of implementation of the Credit Factory technology for consumer loans and car loans throughout Russia. This offers the Bank a serious competitive edge. Clients' additional interest in the Bank's loan products was encouraged not only by a more convenient service but also by more favorable conditions for the products. For example, the Bank cancelled commission fees for loan contracts with individuals, lowered credit interest rates twice, and offered its clients new line of credit products. The Bank continued implementing the operating function transformation program within the improved performance effort. The program ultimately intends to create hi-tech and highly performing back offices, releasing front offices for client operations. In 2010, new centers in Perm and Krasnoyarsk joined the Client Operations Centers in Moscow and Saint-Petersburg as part of the effort. A few projects of the Bank's social policies were launched in They include a new single personnel incentive system with one of its principles being each employee's ability to influence their wage; a new medical insurance, life, health and accident insurance program. 6 Technological scheme #2000 of collaboration between subdivisions of OJSC Sberbank of Russia when implementing the case-by-case model of collection of troubled assets dated December 16, Provisional technological scheme #2051 dated December 31, 2010 for early collection of overdue debt in the Small and Micro Loans segment Hereinafter the Strategy 7

18 Results in Brief 4.1 Main Operating Outcomes OJSC Sberbank of Russia completed 2010 with the following economic figures: Figures, mln rubles change, % Assets 8,523,247 7,096, % Earnings before tax 242,203 56, % Earnings after tax 173,979 21, % Capital 1,241,876 1,317,771 (5.8%) The Bank's capital valued in accordance with Regulation # 215-P of the Bank of Russia 9 fell 5.8% in 2010 on account of the redemption in May 2010 of part of the Subordinated Loan raised from the Bank of Russia 10 and investments were made in the authorized capital of subsidiaries that support development of the Bank's business. 4.2 Sberbank's Ratings Awarded by International Agencies Sberbank's ratings compared with ratings of the Russian Federation: Long-term rating in a foreign currency: January 1, 2011 Fitch Ratings Moody's January 1, 2010 Fitch Ratings Moody's Sberbank BBB Baa1 BBB Baa1 Russian Federation BBB Baa1 BBB Baa1 Rating of international liabilities Issued within the MTN program BBB A3 BBB A3 Sberbank's liabilities RF Eurobonds BBB Baa1 BBB Baa1 During 2010, rating agencies revised Sberbank's ratings: on January 22, 2010 Fitch Ratings upgraded the outlook from Negative to Stable for Sberbank's long-term rating in a foreign currency (now at BBB). on July 21, 2010 Moody's upgraded the outlook for Sberbank of Russia s financial strength rating from Negative to Stable (the Bank's individual rating). According to the Agency's analysts, the revision was triggered by a gradual stabilization of financial figures of Sberbank of Russia. 9 Regulation #215-P on the Methodology of Determination of Own Funds (Capital) of Lending Organizations approved by the Bank of Russia on February 10, In May 2010 Sberbank of Russia settled RUB 200 billion of the total amount of the subordinated loan of RUB 500 billion, received from the Bank of Russia at the end of

19 5. Bank's Operations that Have the Most Significant Impact on Profit or Loss Changes. Bank's Operations in Different Geographical Regions Aggregate Profit and Loss Statement mln rubles Growth, % Net interest income 502, , % Total interest income 796, ,316 (1.8%) On funds in lending organizations 8,063 8,390 (3.9%) On loans to legal entities and individuals 497, ,940 (12.5%) On loans to legal entities and individuals 187, , % From investments in securities 103,525 55, % Total interest expense (294,160) (311,423) (5.5%) On funds from lending organizations (31,007) (54,642) (43.3%) On funds from legal entities (41,702) (60,547) (31.1%) On funds from individuals (213,176) (187,158) 13.9% For issued debentures (8,275) (9,076) (8.8%) Change in reserves (86,869) (387,321) (77.6%) Net income generated by securities transactions 16,554 17,787 (6.9%) Net income generated by foreign currency transactions 1,592 22,192 (92.8%) Net fee income 111, , % Other operating income 14,871 11, % Operating expenses (318,720) (208,355) 53.0% Earnings before tax 242,203 56, % Assessed (paid) taxes (68,225) (34,458) 98.0% Earnings after tax 173,979 21, % Operating income before creation of reserves 11 made by the Bank in 2010 reached bn rubles against bn rubles by end of Net interest income and net fee income were better than in the previous year. Operating income before reserves was pressurized down by foreign currency transactions (see more details below). The Bank increased its net interest income by 0.6%. Its 2010 amount in absolute terms reached bn rubles. Growth in net interest income was possible owing to savings on interest expenses. Interest income 12 fell 1.8% or 14.3 bn rubles as a result of lower income from lending to legal entities and amounted to bn rubles. Interest income from loans to legal entities has the largest specific weight in the structure of interest income generated by the Bank. This item had the strongest impact on the lowering of interest income by the year's end. Interest received in 2010 under loans to legal entities fell 12.5% or 71.2 bn rubles. The flow of income reduced after interest rates fell in the Russian lending market. 13 However, the volume of loans grew with the balance of the Bank's loan portfolio of legal entities 14 growing bn rubles in 2010 to 4,766 bn rubles. The Bank managed practically to double growth rates of the loan portfolio to legal entities (12.2% against 6.7% in 2009) despite a large volume of early repayments in the start of 2010 and measures taken to improve the quality of the loan portfolio involving the sale of troubled assets. The overall worth of loans granted by the Bank in 2010 to the real sector of the Russian economy exceeded 4.35 trillion rubles. 11 Operating income before creation of reserves is calculated according to f in the following manner: line 18 minus line 16 minus line 15 minus line 14 minus line 4 12 Pursuant to Directive #2332-U of the Bank of Russia, interest income includes loan interest and fee income generated by lending operations 13 According to Bulletin #1 of Banking Statistics (212), table 4.3.2, the Bank of Russia's website at 14 The balance of the loan portfolio of legal entities given before subtraction of the reserve 10

20 Interest income generated by lending of individuals rose 4.9% or 8.8 bn rubles, the main factor in income growth being larger lending volumes. Sberbank's retail loan portfolio grew 11.3% during the year (against a 6.9% fall in 2009). This dynamic was overturned mainly because of a number of the Bank's promotions where clients were offered favorable lending terms. So, in April 2010 the Bank made a decision, unprecedented for the Russian market to cancel fully any and all commission fees for loan contracts with individuals. At the same time, the Bank lowered interest rates for a number of lending programs in order to make loans more affordable to the widest categories of the population. In addition, in June 2010 the Bank increased the maximum amount of a consumer loan per single borrower, and optimized the record-keeping of a borrower's liabilities under submitted sureties when establishing his or her solvency. All territorial banks adopted the loan granting technology of Credit Factory, which significantly boosts performance during examination of credit requests and reduces the period for making the credit decision. Interest income generated by securities investments rose 48.4 bn rubles or 1.9 times to bn rubles. The interest income was primarily generated by Federal Bonds, corporate bonds and bonds of the Bank of Russia. Income growth was achieved through a 1.7-fold increase in the securities portfolio. Largest growth rates of the portfolio stemmed from federal bonds, bonds of the Bank of Russia, shares and bonds of Russian companies and sub-federal issuers. Nevertheless, bonds included in the Pawn List of the Bank of Russia accounted for the largest volume of securities purchased by the Bank which improved Sberbank's chances to raise refinance from the Bank of Russia. Interest income on funds placed in lending organizations lost 3.9% or 0.3 bn rubles, mainly because of a reduction in loans granted to non-resident banks. Interest expenses came down 5.5% or 17.3 bn rubles, mainly because of expenses on funds from banks and legal entities. Interest expenses amounted to bn rubles in the year. Interest expenses on funds from banks fell most significantly, 43.3% or 23.6 bn rubles to 31.0 bn rubles. Early repayment of part of its 200 bn ruble Subordinated Loan made to the Bank of Russia in May 2010 served as the main factor for this reduction. The early repayment decision was economically reasonable in the context of the accumulated amount of liquid funds sufficient for development of the business and a reserve available to meet statutory liquidity requirements from the Bank of Russia. Interest expenses on funds from legal entities fell 18.8 bn rubles to 41.7 bn rubles as a result of Sberbank's decision to lower interest rates for fixed-term ruble deposits in April and July 2010, made after the Bank had accumulated sufficient ruble liquidity and based on market rates. On the contrary, interest expenses on funds from individuals added 26.0 bn rubles rising to bn rubles in the context of the Bank's decision to lower repeatedly deposit interest rates exclusively in response to higher volumes of raised funds. Depositors of banks, including Sberbank, were very active in The balance of deposits maintained in Sberbank rose 27.2% or over 1 trillion rubles during the year. As a result, the amount of deposits reached 4,690 bn rubles by January 1, In 2010, Sberbank's deposit interest rate policy was directly connected with both a significantly faster influx of deposits from individuals compared with lending rates and a sufficient volume of accumulated liquidity. 11

21 Interest expenses on issued debentures changed insignificantly and amounted to 8.3 bn rubles at the year's end compared to 9.1 bn rubles in Net income generated by securities transactions declined 1.2 bn rubles during the year to 16.6 bn rubles. Largest income was generated by corporate bonds, RF bonds and sub-federal bonds. Net income generated by foreign currency transactions 15 changed from 22.2 bn rubles to 1.6 bn rubles. The difference in income results, to a large degree, from the dynamics of net income from conversion operations that include the financial result for fixed-term transactions (currency SWAP transactions). Subject to RAS, the financial result of these transactions was significantly dispersed in time, and net income on conversion operations was affected by the cash side of transactions not closed by the reporting date. Currency SWAP transactions are made by the Bank to maintain liquidity in different foreign currencies required to conduct business. Commission fee income added 13.0% growing to bn rubles generated by fee income from operations in bank cards, settlement operations, acquiring, salary projects, and support of budget accounts. Operations with foreign currencies, precious metals and securities yielded less commission fee income. Operating income after creation of reserves was significantly, 2.1 times, higher than in the previous year owing to the lesser cost of creating reserves. The amount of expenses incurred to create reserves in 2010 was 86.9 bn rubles, including loan reserves worth 79.3 bn rubles. In 2009 these expenses were much higher: bn rubles, including bn rubles of loan reserves. Reserve expenses were reduced as a result of stabilization in the quality of the Bank's loan portfolio after measures taken in 2010 when troubled assets were handled. The Bank's operating costs rose 53.0% to bn rubles with the following items causing largest growth of operating costs: the cost of maintaining personnel under the 2010 plan; higher wages were intended to eliminate inconsistencies between the wage level of all employees of the Bank and the market level and to differentiate them by employee and territory categories; administrative and business expenses, the growth of which accompanies development of the Bank's business; allocations to the Fund of Mandatory Insurance of Deposits resulting from an increase in funds raised from individuals. In 2010 Sberbank produced a financial result that exceeded results of the previous year many times over: 2010 earnings before tax amounted to bn rubles (in bn rubles) 2010 earnings after tax amounted to bn rubles (in bn rubles). Information on different operations carried out by the lending organization in a number of geographical regions The Bank offers a complete package of services throughout the Russian Federation. The level of economic development and client demand of each region affect the development of the Bank's business in different territorial areas of the country. Sberbank of Russia is also represented in other countries' markets: through its subsidiary banks 16 DB AO Sberbank 17 (Republic of Kazakhstan), SBERBANK OF RUSSIA PUBLIC JOINT-STOCK COMPANY 18 (Ukraine), BPS Bank 15 Includes net income from foreign currency transactions and net income from foreign currency revaluation 16 This explanatory note does not include data on subsidiary banks. 17 As of January 1, 2011, Sberbank of Russia owns % shares in its subsidiary bank, DB AO Sberbank (Republic of Kazakhstan). 18 As of January 1, 2011, Sberbank of Russia owns 100% shares in its subsidiary bank, SBERBANK OF RUSSIA PUBLIC JOINT-STOCK COMPANY (Ukraine). 12