ANNUAL REPORT Annual REPORT

ANNUAL REPORT 2017 Annual REPORT 2017 1

OPERATIONAL STATISTICS 2017 2016 INDEX Number of loan clients 43,070 37,428 115% Number of savings clients 41,255 38,175 108% Number of staff 338 312 108% Average loan size 2,094 2,127 98% Share of rural clients Share of women clients Client retention rate 71% 41% 79% 65% 109% 41% 100% 81% 98% KEY INDICATORS 2017 Return on Equity (ROE)* 16.8% 2016 INDEX 17.4% 97% Return on Assets (ROA)* 3.1% 3.1% 100% Cost to Income ratio 70.0% 68.7% 101% PAR30 2.4% 3.1% 77% CAR 23.1% 24.1% 96% * ROA and ROE Before Tax in 000 EUR 2017 2016 INDEX Total assets and liabilities 120,750 106,927 113% Gross loan portfolio 95,898 82,745 116% Customer deposits 59,624 59,208 101% Equity 23,070 19,591 118% Profit before tax 3,636 3,119 117% KEY FIGURES 2 OPPORTUNITY Bank Serbia

2017 KEY FIGURES... 2 CEO OPENING STATEMENT...5 SERBIA: MACRO ENVIRONMENT REVIEW...7 SERBIA: BANKING SECTOR IN 2017...9 ABOUT OPPORTUNITY BANK SERBIA...11 IFRS: FINANCIAL STATEMENT FIGURES...12 SOCIAL PERFORMANCE...15 TABLE OF CONTENTS LENDING TO SMALL FARMERS...17 LENDING TO MSMEs...19 LENDING TO MICRO PERSONAL CLIENTS...21 SAVINGS...22 ORGANIZATIONAL STRUCTURE...23 Annual REPORT 2017 3

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CEO Opening Statement 2017 was yet another remarkable year for Opportunity Bank Serbia (OBS): I n 2017, we have continued walking the path of success by balancing our growth, social and financial goals. We have grown to the point that 38% of all agro loans in Serbia are financed by our bank, as well as 15% of all loans to entrepreneurs. We are walking and living our mission of financial inclusion and the fact that 38% of our 43,000 loan clients belong to Low Income category and 70% of them live in rural areas is an excellent proof of that, as well as the fact that the new measurement implemented recently shows that 45% of our newly financed clients had no loans before, which implies that we have included them into the financial system. Finally, our financial goals were achieved as well and for the second year in a row, Opportunity Bank has made the highest profit on invested capital (RoE) in the Serbian banking sector. Vladimir Vukotić CEO and President of Executive Board Three important partnerships were sealed in 2017: OBS has become the first bank in Serbia to join Global Alliance for Banking on Values (GABV), a network that consists of 47 memberbanks whose joint mission is achieving sustainable economic, social and environmental development, and who are focused on providing financial support to individuals that often come from marginalized communities. Another important partnership is with Triodos Bank world s leading sustainable bank which has provided sub-capital to OBS and is increasingly important partner for OBS. And last but not the least, OBS started a business relationship with IFC (International Finance Corporation - part of the World Bank Group) that provided a senior loan and advisory services which will help OBS in digitizing its operations. The World Bank Group considers financial inclusion as a key enabler for reducing extreme poverty and boosting shared prosperity. The situation is no different in Serbia where our estimate says that about 2 million adult citizens lack access to fair finance and Opportunity Bank is the only bank which focuses on financial inclusion and fills such an important market niche. Because the survival of many small farming and entrepreneurial projects is impossible without adequate financial support, I can immodestly say that Opportunity Bank has become an important facilitator that supports financially excluded small farmers, entrepreneurs and start-ups who would otherwise have no recourse to fair finance. Together with our shareholder, our clients and primarily our 338 co-workers, we are proud of the fact that year after year Opportunity Bank keeps showing how financial services can be a force for good and a generator of new job opportunities in the Serbian private sector, while achieving commendable financial results at the same time. Annual REPORT 2017 5

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T he Serbian economy shows a trend of macroeconomic stabilization after more than a decade. After GDP growth by just 1.9% in 2017, it is expected to accelerate the next year. Due to strong fiscal performance, public debt was on a downward trajectory throughout the year reaching 62.6% of GDP at the end of 2017, compared with 71.9% at the end of 2016. At the end of 2017, the inflation was 3.0% y-o-y and is projected to remain within the National Bank s target band of 3.0+/-1.5%. RSD strengthened against EUR by 4.4%. Labor market has improved in 2017, with unemployment rate falling from average 15.3% in 2016 to 12.9% in 2017. All these results were acknowledged by improved credit ratings (S&P, Fitch and Moody s) and the successful completion of the stand-by precautionary arrangement with the IMF and, quite importantly, led to a sharp decline in the country risk premium. GDP Growth (y-o-y) Inflation (CPI) SERBIA: MACRO ENVIRONMENT REVIEW 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% -1.8% 0.8% 2.8% 1.9% 3.5% 3.5% 2014 2015 2016 2017 2018(F) 2019(F) 4.5% 4.0% 3.5% 3.0% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% -0.5% - 1.0% dec-14 feb-15 apr-15 jun-15 aug-15 oct-15 dec-15 feb-16 apr-16 jun-16 aug-16 oct-16 dec-16 feb-17 apr-17 jun-17 aug-17 oct-17 dec-17 Inflation (CPI, m-o-m) Inflation (CPI, y-o-y) Annual REPORT 2017 7

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ROE December 2017 Capital adequacy ratio Loans growth Y-o-Y T otal of 29 banks operated in Serbia at the end of 2017. The National Bank of Serbia has successfully implemented a comprehensive agenda aimed at further strengthening of the banking sector, reducing the high levels of non-performing loans in 2017, and harmonizing the regulatory framework with EU standards. Banks are now better positioned to fully support economic growth as credit demand continues to strenghten. Capital adequacy indicators are even stronger after adoption of Basel III standards in Serbia. ROA NPL ratio Deposits growth Y-o-Y Profitability indicators of the banking sector went up sharply compared to 2016 - ROA from 0.58% to 1.95% and ROE from 2.93% to 9.90%. Opportunity Bank is in the 1st place in banking sector by ROE and in 2nd place by ROA. OBS maintained better profitability, lower NPL ratio and higher loan growth compared to the banking sector average. Capital adequacy was slightly above the average. OBS Banking sector average 18.0% 16.0% 14.0% ROE 12.0% 10.0% 8.0% 6.0% 4.0% SERBIA: BANKING SECTOR IN 2017 2.0% 0.0% -2.0% -4.0% OBS ProCredit Bank Credit Agricole OTP Bank Dec-17 NLB Bank HalkBank Dec-16 Peer Group Average BANKING SECTOR Annual REPORT 2017 9

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Opportunity Bank Serbia (OBS) is a member of Opportunity International - Network of banks and microfinance organizations which was founded in Chicago in 1971. Main goal of this global microfinance network is empowering its clients to transform their lives by supporting local microfinance organizations. OBS was founded in Serbia (Novi Sad) in 2002 with the assistance of USAID as a Savings bank that has transformed into a bank in 2007 with the license issued by the National Bank of Serbia. Sole majority shareholder of OBS is Opportunity Transformation Investments Inc. Chicago (OTI Inc.), which is a holding company and investment arm of the Opportunity International that provides financial and advisory assistance to OBS. OBS is dominant player in the field of financial inclusion in Serbia. Due to the lack of microfinance legislation and mainstream banks focus on urban clients from higher income categories, OBS is today the only provider of micro-credit support to the most vulnerable client categories in Serbia, such as: start-ups and micro-enterpreneurs, small agro and mixed-income rural households. From its foundation until Dec 31 2017, OBS disbursed nearly 155,000 loans in the amount of over EUR 472 million. These loans supported opening of over 36,000 new jobs in Serbia and sustaining 183,200 of exsisting ones. VISION: A world in which all people have the opportunity to build a fulfilling life of dignity and purpose. MISSION: By providing financial solutions and training, we empower underserved and financially excluded people to transform their lives, their children s futures and their communities. ABOUT OPPORTUNITY BANK SERBIA Board of Directors Composition on Dec 31 2017 NAME Function Represents Richard John Chairman OTI Inc. Frazer Hume David Wiegman S-P O'Mahony Member Member Member OTI Inc. OTI Inc. OTI Inc. Herbert Hess Member Independent Radmila Grozdanić Member Independent Jelena Bulatović Member Independent Executive Board Composition on Dec 31 2017 NAME Title/ Function Vladimir Vukotić CEO / Chairman of the EB Zorica Sedlar CFO / Member of the EB Miodrag Džodžo CRO / Member of the EB Novak Rakočević Member of the EB in charge of Business Development Annual REPORT 2017 11

BALANCE SHEET (IN 000 EUR) Assets: Cash and balances w/central bank Financial assets available for sale Loans and receivables to banks & F.I. Loans ad receivables to customers Intangible assets Property, plant and equipment 2017 2016 INDEX 17,317 12,487 139% 2,537 1,333 190% 519 5,928 9% 94,146 81,410 116% 974 839 116% 2,628 2,634 100% IFRS: FINANCIAL STATEMENT FIGURES Deferred tax assets 0 8 0% Other assets 1,089 690 104% Assets Liabilities: 119,211 105,328 113% Deposits and other liabilities to banks & F.I. 29,647 20,379 145% Deposits and other liabilities to other cust. 54,463 55,774 98% Subordinated liabilities 10,156 8,118 125% Provisions 408 221 185% Current tax liabilities 55 143 38% Deferred tax liabilities 19 0 19% Other liabilities 1,393 1,396 100% Liabilities 96,141 86,030 112% Equity: Share capital and share premium 2017 2016 INDEX 15,681 15,046 104% Retained profit 4,396 2,716 162% Reserves 2,993 1,535 195% Total equity Total liabilities & equity 23,070 19,298 120% 119,211 105,328 113% 12 OPPORTUNITY Bank Serbia

INCOME STATEMENT (IN 000 EUR) Interest income 2017 19,224 2016 INDEX 16,529 116% Interest expense -4,208-3,945 107% Net interest income 15,016 12,584 119% Fee and commission income Fee and comission expense Net fee and commission income Other operating income Net impartment loss on financial assets 411 497 83% -195-180 109% 216 318 68% 4 0 4% 79 72 110% -859-928 93% OPERATING INCOME, NET 14,456 12,046 120% Personnel expenses -4,427-3,762 118% Depreciation expenses -423-374 113% Other operating expenses -5,970-4,791 125% IFRS: FINANCIAL STATEMENT FIGURES PROFIT BEFORE INCOME TAX 3,637 3,119 117% (Loss)/Profit from deferred tax -28 30-92% Income tax -629-433 145% NET PROFIT FOR PERIOD 2,980 2,716 110% Annual REPORT 2017 13

For the Local Community Day 2017 we have chosen Šljivova village, where we helped build and paint a new fence around the village primary school, donated new equipment for the school s playground and planted about 30 trees in memory of this event, which signifies OBS Mission and Values. 14 OPPORTUNITY Bank Serbia

42% SOCIAL PERFORMANCE 74% T he main purpose of Social Performance Management (SPM) is to keep OBS activities alligned with our mission and deepen our outreach to identified target groups, especially rural and low income clients from all three lending segments: small rural farmers, micro, small and medium-sized enterprises and micro personal clients. Regular SPM reports provided to OBS management, including SPM Commission established within OBS Board of Directors help us track progress in terms of assessing whether we are reaching those in need for financial services and whether we understand how products and services we deliver help clients transform their lives. In 2017, OBS has piloted three innovative initiatives related to social performance: We have been developing a new product called STASH - combination of loan and savings that helps low-income clients to start their own small savings. Official launching of STASH is planned for the beginning of 2018. We created and launched an educational campaign on the importance of savings and prudent household budget management entitled Savings Hopscotch - 7 Steps to Your Goal which is not only available in OBS branches in the form of print brochures, but also online to reach a wider audience. Three Client Internet Corners were opened in our branches, where our clients can fill in various online questionnaires, get some guidance on how to open an email account, how to search for information online, etc. 5,385 new jobs were created thanks to OBS loans in 2017 31,992 were sustained thanks existing jobs to OBS loans in 2017 was the share of low income loan clients in 2017 was the share of rural loan clients in 2017 Annual REPORT 2017 15

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40 35 30 25 20 15 10 5 Loan disbursals 2013 2014 2015 2016 2017 14,000 12,000 10,000 8,000 6,000 4,000 2,000 P eople who live in rural areas of Serbia and run some sort of smallscale agricultural production as the only or additional source of income have always been a very important group of clients for OBS. Our goal is to understand their needs and specific characteristics of their businesses in order to offer them adequate financial products and provide best possible service. Bank s strategy to reach more clients through technological innovations resulted in loan-processing Tablet application which enables OBS Client Advisors to approve loans in the field, at clients locations or elsewhere and that is especially valuable for this target group as it minimizes the need to visit the bank branch. We have also introduced Smart Phone Application with similar functionalities, which provides clients with the information about the amount of loan that can be approved to them in OBS. Both of these tools have made significant contribution to the progress of agro lending in 2017. Loan volume Number of loans LENDING TO RURAL FARMERS EUR 34.28 million EUR 43.8 million 18% 38% 71% disbursed to farmers in 2017 of agro loan portfolio annual growth in number of active loan clients of all farmers with loans in Serbia are OBS clients of all agro loans disbursed in 2017 were up to EUR 3,000 Annual REPORT 2017 17

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25 20 15 10 5 Loan disbursals 2013 2014 2015 2016 2017 Loan volume Number of loans 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 Opportunity Bank s loans for micro and small businesses are targeting registered entrepreneurs and privately owned businesses in Serbia with the goal to stimulate development and growth of entrepreneurship thus contributing to creating new and sustaining existing jobs. Opportunity Bank is the only bank in Serbia that supports start-up businesses. Our client advisers visit clients businesses in order to analyze clients individual needs and propose the best solution for financing their ideas. Loan approval procedure is quick and simple due to business plan not being required. Web Loan Application for Micro and Small Businesses BIZBlink, which enables potential business loan clients to get information about available loan in OBS after answering only a few simple questions has continued to grow in the number of users in 2017 as well. This application is especially convenient for the micro and small businesses in rural areas, which are in the focus of OBS business lending activities. LENDING TO MICRO AND SMALL BUSINESSES EUR 21.35 million EUR 24.3 million 24% 15% 70% disbursed to to micro and small businesses in 2017 of business loan portfolio annual growth in number of active loan clients of all entrepreneurs with loans in Serbia are OBS clients of all disbursed business loans were up to EUR 5,000 Annual REPORT 2017 19

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7 25 20 15 10 5 Loan disbursals 2013 2014 2015 2016 2017 Loan volume Number of loans 14,000 12,000 10,000 8,000 6,000 4,000 2,000 I n 2017, OBS continued to focus on products and services for micro personal clients in order to increase outreach to those with difficult or no access to financial services, especially in rural areas and to women a group that Opportunity International Network is especially focused on. Loans for the poor and low income pensioners and salary-receivers make OBS products and services available to a bigger share of Serbian population, thus enabling them to finance personal and family development projects or necessities arising from daily needs or unforeseen circumstances (e.g. household expenses, health, education, disability requirements etc.). Portfolio of pensioners over 75 years of age, the group of population which is mostly underserved by other banks in the market, has increased in 2017 in the number of clients by 131% compared to 2016. Since the product has been introduced, we have disbursed loans to over 3,864 pensioners over 75 years of age in the total amount of EUR 4.4 million. 23% of the total number of pensioner loans in 2017 were disbursed to pensioners over 75 years of age. LENDING TO MICRO PERSONAL CLIENTS EUR 18.7 million EUR 27.7 million 11% 58% 70% disbursed to micro-personal clients in 2017 of micro-personal loan portfolio annual growth in number of active loan clients of OBS micro personal clients are women of loans disbursed to low-income clients Annual REPORT 2017 21

45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 NUMBER OF ACTIVE DEPOSITORS 41,255 38,175 36,404 31,485 23,915 2013 2014 2015 2016 2017 SAVINGS Although initially OBS had to rely on its capital base and debt finance to finance growth in assets, there was a strategic goal to ensure a growing deposit base that would become the primary driver of future growth. Modest branch network requires that the deposits are collected in several major urban centers. OBS has penetrated local markets and developed its brand name, which was extremely helpful in collecting deposits in accordance with the Bank s savings mobilization strategy. 5 years 49% A vista &C/A 9% 12 months 29% 25 36 months m. 8% 5% 12 m. 25 5% months 13% 36 months 13% 5 years 16% A vista & C/A 53% For several years now, the bank has been able to successfully manage the collection of deposits in the local market, in both RSD and EUR currency. At the same time, OBS was in a position to solicit some institutional clients, such as insurance companies, microfinance institutions and local authorities which have stable deposits, with the aim of establishing long-term cooperation based on reciprocity. Number of deposit clients grew 10.6% in comparison to the previous year and and at the end of 2017 it was 41,255. RSD SAVINGS 31 Dec 2017 EUR SAVINGS 31 Dec 2017 22 OPPORTUNITY Bank Serbia

Organizational structure & Commissions Commission Audit Commission Commission Cash Management and Till Operations Administration Loan administration Micro Central administration Commission New Product Commission Non-Performing Assets Commission International and Domestic Payments Organization & Development Annual REPORT 2017 23

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