Translation of the Auditors Report issued in the Montenegrin language INDEPENDENT AUDITORS' REPORT

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1 Deloitte d.o.o. Bulevar Svetog Petra Cetinjskog bb, Zgrada Maxim Podgorica Crna Gora Tel: +382 (0) (0) Fax: +382 (0) Translation of the Auditors Report issued in the Montenegrin language INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders of Atlas banka A.D., Podgorica 1. We have audited the accompanying financial statements of Atlas banka a.d., Podgorica (the Bank ), which comprise the statement of financial position as of December 31, 2012 and the related statement of comprehensive income, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes. Management s Responsibility for the Financial Statements 2. Management is responsible for the preparation of these financial statements in accordance with the accounting regulations of Montenegro and the regulations of the Central Bank of Montenegro governing the financial reporting of banks, as well as for internal control relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility 3. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the International Standards on Auditing and the Law on Accounting and Auditing of Montenegro. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. 4. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. 5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Basis for Qualified Opinion 6. As disclosed in Notes 3.10 and 15 to the financial statements, equity investments in other legal entities as of December 31, 2012 included equity investment in Atlascapital Financial Services Limited, Nicosia, Cyprus in the amount of EUR 1,078 thousand. The Bank failed to make allowance for impairment of the aforesaid equity investment and, based on the documentation made available to us, we were unable to satisfy ourselves as to the adequacy of measurement of the aforesaid equity investment as of December 31, As disclosed in Notes 11, 16 and 24 to the financial statements, as of December 31, 2012, the bank assessed and calculated provisions against potential losses per balance sheet assets and off-balance sheet items in the amount of EUR 2,388 thousand. As of December 31, 2012, in our opinion, which is based on the audit procedures conducted on a sample of loans and risk-weighted off-balance sheet exposures, both provisions against potential losses per balance sheet assets and off-balance sheet items calculated in accordance with the Central Bank of Montenegro Decision on the Minimum Standards for Credit Risk Management in Banks and Decision on Amendments and Supplements to the Decision on Temporary Measures for Credit Risk Management, and the current year result were understated by minimum EUR 2,866 thousand. (Continued)

2 Translation of the Auditors Report issued in the Montenegrin language INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders of Atlas banka A.D., Podgorica (Continued) Qualified Opinion 8. In our opinion, except for the effects of such adjustments, if any, as might have been determined to be necessary had we been able to satisfy ourselves as to the matter referred to in paragraph 6, and for the effects of adjustments described in paragraph 7, the financial statements of the Bank as of and for the year ended December 31, 2012 have been prepared, in all material respects, in accordance with the accounting regulations of Montenegro and regulations of the Central Bank of Montenegro governing the financial reporting of banks. Emphasis of Matter 9. The Bank is obligated to maintain the structure of its risk-weighted investments in compliance with the Law on Banks and regulations of the Central Bank of Montenegro. As disclosed in Note 23 to the financial statements, as of December 31, 2012, the Bank did not comply with the prescribed limits of certain ratios. Other Matter Our opinion is not modified in respect to this matter. 10. The Bank s financial statements as of and for the year ended December 31, 2011 were audited by another auditor, whose report dated May 30, 2012 expressed a qualified audit opinion due to the Bank s failure to perform impairment allowance of equity investment in Atlascapital Financial Services Limited, Nicosia, Cyprus. Deloitte d.o.o., Podgorica Montenegro Žarko Mionić, Certified Auditor May 28, 2013 (License no. 062 issued on March 10, 2011) 2

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4 ATLAS BANKA A.D., PODGORICA STATEMENT OF FINANCIAL POSITION As of December 31, 2012 (Thousands of EUR) December 31, 2012 December 31, 2011 Note ASSETS Cash and deposit accounts held with depository institutions 10 67,186 45,375 Loans and lease operations, provisions for potential losses, net , ,251 Securities held to maturity 12 4,993 3,100 Business premises and other fixed assets 13 4,296 4,549 Acquired assets 14 1,943 1,685 Equity investments in other legal entities and trading securities 15 9,239 8,201 Other assets 16 3,782 3,201 Less: Reserves for potential losses on other assets 16 (17) (17) Total assets 204, ,345 LIABILITIES AND EQUITY Deposits , ,609 Loans and borrowings 18 19,729 20,018 Amounts owed to the Government 19 2,014 3,430 Other liabilities 20 2,912 3,176 Subordinated debt 21 1,200 1,200 Reserves for credit losses contingent on off-balance sheet items Total liabilities 178, ,491 EQUITY Share capital 22 23,259 23,259 General reserves Revaluation reserves (6) (113) Retained earnings 2,555 2,677 Total equity 25,839 25,854 Total liabilities and equity 204, ,345 OFF-BALANCE-SHEET ITEMS , ,539 The notes on the following pages comprise an integral part of these financial statements. Translation of the Auditors Report issued in the Montenegrin language 4

5 ATLAS BANKA A.D., PODGORICA STATEMENT OF CHANGES IN EQUITY Year Ended December 31, 2012 (Thousands of EUR) Share Capital General Reserves Revaluation Reserves Retained Earnings Total Balance at January 1, , ,683 2,542 28,515 The effect of fair value adjustment of securities available for sale Dividend payment to preference shareholders (306) (306) Sale of securities available for sale - - (3,631) - (3,631) Profit for the year Balance at December 31, , (113) 2,677 25,854 The effect of fair value adjustment of securities available for sale Dividend payment to preference shareholders (394) (394) Profit for the year Balance at December 31, , (6) 2,555 25,839 The notes on the following pages comprise an integral part of these financial statements. Translation of the Auditors Report issued in the Montenegrin language 5

6 ATLAS BANKA A.D., PODGORICA STATEMENT OF CASH FLOWS Year Ended December 31, 2012 (Thousands of EUR) CASH FLOWS FROM OPERATING ACTIVITIES Interest, fee and commission received 15,022 13,503 Other receipts Interest, fee and commission paid (6,717) (6,026) Cash paid to employees and suppliers (8,867) (8,875) Taxes paid (325) - Net cash (used in)/generated by operating activities before changes in operating assets and liabilities (496) (1,398) Changes in operating assets and liabilities Decrease/(increase) in advances to customers, net 2,656 (10,750) Other assets and acquired assets, net (546) - Increase/(decrease) in customer deposits 24,596 (4,898) Decrease in other liabilities, net (91) (234) Net cash generated by/(used in) operating activities 26,615 (15,882) CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of equipment and intangible assets (451) (649) Purchase of Treasury bills (1,893) - Gains on the securities available for sale - 5,405 Equity investments in other legal entities, net - (135) Net cash (used in)/generated by investing activities (2,344) 4,621 CASH FLOWS FROM FINANCING ACTIVITIES Inflows based on subordinated debt - 1,200 (Outflows)/inflows based on borrowings and loans, net (1,705) 4,813 Inflows based on the purchase of Treasury bills and bonds, net Outflows based on dividend payment (394) (306) Other (5) - Net cash (used in)/generated by financing activities (2,104) 6,013 Foreign exchange gains Net increase/(decrease) in cash and cash equivalents 21,671 (6,646) Cash and cash equivalents, beginning of year 45,375 51,911 Cash and cash equivalents, end of year 67,186 45,375 Components of cash and cash equivalents: Cash and deposit accounts held with depository institutions 67,186 45,375 The notes on the following pages comprise an integral part of these financial statements. Translation of the Auditors Report issued in the Montenegrin language 6