JSB ROSEVROBANK International Financial Reporting Standards Condensed Interim Financial Information and Report on Review 30 June 2014

International Financial Reporting Standards Condensed Interim Financial Information and Report on Review 30 June 2014

CONTENTS REPORT ON REVIEW CONDENSED INTERIM FINANCIAL INFORMATION Condensed Interim Statement of Financial Position... 1 Condensed Interim Statement of Profit or Loss and Other Comprehensive Income... 2 Condensed Interim Statement of Changes in Equity... 3 Condensed Interim Statement of Cash Flows... 4 NOTES TO THE CONDENSED INTERIM FINANCIAL INFORMATION 1 Introduction... 5 2 Operating Environment of the Bank... 6 3 Basis of Preparation and Summary of Significant Accounting Policies... 6 4 Critical Accounting Estimates, and Judgements in Applying Accounting Policies... 7 5 Adoption of New or Revised Standards and Interpretations... 8 6 New Accounting Pronouncements... 9 7 Cash and Cash Equivalents... 13 8 Trading Securities... 13 9 Due from Other Banks... 14 10 Loans and Advances to Customers... 15 11 Due to Other Banks... 23 12 Customer Accounts... 24 13 Subordinated Loans... 24 14 Interest Income and Expense... 25 15 Fee and Commission Income and Expense... 26 16 Administrative and Other Operating Expenses... 26 17 Segment Analysis... 27 18 Financial Risk Management... 31 19 Capital Management... 33 20 Contingencies and Commitments... 34 21 Fair Value... 37 22 Related Party Transactions... 39

Condensed Interim Statement of Profit or Loss and Other Comprehensive Income Note Six months ended 30 June 2014 Six months ended 30 June 2013 Interest income 14 5 779 371 4 981 500 Interest expenses 14 (1 872 492) (1 604 943) Expenses directly associated with deposit insurance (52 963) (42 444) Net interest income 3 853 916 3 334 113 Provision for loan impairment 10 (440 025) (370 097) Net interest income after provision for loan impairment 3 413 891 2 964 016 Fee and commission income 15 1 210 114 982 115 Fee and commission expense 15 (270 932) (209 405) Losses less gains from trading securities (478 803) (264 631) Losses less gains from other securities at fair value through profit or loss (5 568) 5 392 Gains less losses from trading in foreign currencies 298 244 407 615 Foreign exchange translation gains 138 795 60 328 Provision for other financial assets (6 715) (10 739) Provision for impairment of premises (301) (23 741) Gains from revaluation of investment properties 2 404 9 913 (Losses) / gains from disposal of loans 10 (2 513) 31 547 Other operating income 45 799 19 996 Staff costs (1 357 331) (1 242 517) Administrative and other operating expenses 16 (632 924) (527 359) Profit before tax 2 354 160 2 202 530 Income tax expense (517 915) (484 556) Profit for the period 1 836 245 1 717 974 Other comprehensive income: Items that will not be reclassified to profit or loss: Revaluation of premises and land 43 058 115 620 Income tax recorded in other comprehensive income (8 612) (23 124) Other comprehensive income for the period 34 446 92 496 Total comprehensive income for the period 1 870 691 1 810 470 The notes set out on pages 5 to 41 form an integral part of this condensed interim financial information. 2

Condensed Interim Statement of Changes in Equity Share capital Share premium Revaluation reserve for premises and land Retained earnings Total equity Balance at 1 January 2013 441 071 2 866 859 1 051 228 10 558 741 14 917 899 Profit - - - 1 717 974 1 717 974 Other comprehensive income - - 92 496-92 496 Total comprehensive income for the six months ended 30 June 2013 - - 92 496 1 717 974 1 810 470 Balance at 30 June 2013 441 071 2 866 859 1 143 724 12 276 715 16 728 369 Balance at 1 January 2014 441 071 2 866 859 1 188 309 14 373 194 18 869 433 Profit - - - 1 836 245 1 836 245 Other comprehensive income - - 34 446-34 446 Total comprehensive income for the six months ended 30 June 2014 - - 34 446 1 836 245 1 870 691 Balance at 30 June 2014 441 071 2 866 859 1 222 755 16 209 439 20 740 124 The notes set out on pages 5 to 41 form an integral part of this condensed interim financial information. 3

Condensed Interim Statement of Cash Flows Note Six months ended 30 June 2014 Six months ended 30 June 2013 Cash flows from operating activities before changes in operating assets and liabilities2 556 166 2 631 449 Net cash from operating activities 3 541 769 85 983 Net cash used in investing activities (31 054) (120 663) Effect of exchange rate changes on cash and cash equivalents (181 177) 156 945 Net increase in cash and cash equivalents 3 329 538 122 265 Cash and cash equivalents at the beginning of the period 7 14 980 668 15 880 084 Cash and cash equivalents at the end of the period 7 18 310 206 16 002 349 The notes set out on pages 5 to 41 form an integral part of this condensed interim financial information. 4

1 Introduction This condensed interim financial information for the six months ended 30 June 2014 has been prepared for (the Bank ) in accordance with International Accounting Standard 34 Interim Financial Reporting ( IAS 34 ). The Bank was incorporated and is domiciled in the Russian Federation. The Bank is an open joint-stock company limited by shares and was set up in accordance with Russian regulations. The Bank's shareholding structure as at 30 June 2014 and as at 31 December 2013 is provided below. Shareholder Ownership 30 June 2014 Ownership 31 December 2013 REG Holding Limited 73.8% 73.8% DEG Deutsche Investitions und Entwicklungsgesellschaft mbh 5.7% 5.7% Rekha Holdings Limited 8.1% 8.1% АК RATTO HOLDINGS LIMITED 1.4% 1.4% European Bank for Reconstruction and Development 11.0% 11.0% Total 100.0% 100.0% At 30 June 2014, the Bank is ultimately controlled by S.A. Grishin (31 December 2013: S.A. Grishin). Principal activity. The Bank s principal business activity is commercial and retail banking operations within the Russian Federation. The Bank has operated under a full banking license issued by the Central Bank of the Russian Federation ( CBRF ) since 1994. The Bank participates in the state deposit insurance scheme, which was introduced by Federal Law #177-FZ Deposits of individuals insurance in Russian Federation dated 23 December 2003. The State Deposit Insurance Agency guarantees repayment of 100% of individual deposits up to RR 700 thousand per individual in the case of the withdrawal of a licence of a bank or a CBRF imposed moratorium on payments. The Bank has the licenses required for securities storage and trading, as well as for other transactions with securities, including brokerage and dealing activities, depository and asset management functions. The activities of the Bank are regulated by the CBRF and the Federal Service for Financial Markets. The Bank has six branches (31 December 2013: six branches) in the following Russian cities: Saint Petersburg, Rostov-na-Donu, Novosibirsk, Samara, Yekaterinburg and Chelyabinsk (31 December 2013: the same). The Bank also has ten settlement and cash offices (31 December 2013: nine settlement and cash offices) in the following Russian cities: Belgorod, Voronezh, Vladimir, Kirov, Kostroma, Oryol, Penza, Perm, Tver, Ulyanovsk (31 December 2013: Belgorod, Vladimir, Kirov, Kostroma, Oryol, Penza, Perm, Tver, Ulyanovsk). The Bank also has thirteen (31 December 2013: thirteen) representative offices in Moscow and one (31 December 2013: one) additional office in Saint Petersburg. The Bank s registered address and principal place of business is: 24, Vavilova Street, Moscow, Russian Federation, 119991. Presentation currency. This condensed interim financial information is presented in thousands of Russian roubles. 5

2 Operating Environment of the Bank The Russian Federation displays certain characteristics of an emerging market. Its economy is particularly sensitive to oil and gas prices. The legal, tax and regulatory frameworks continue to develop and are subject to varying interpretation (Note 20). The recent political and economic turmoil witnessed in the region in the first half of 2014, in particular the events in Ukraine, have had and may continue to have a negative impact on the Russian economy, including weakening of the Russian Rouble, rising interest rates, reduced liquidity and making it harder to raise international funding. These events, including uncertainty and volatility of the financial markets, the threat of current and future international sanctions against the Russian Federation and Russian officials may have a significant impact on the Bank s operations, the effect of which is difficult to predict. Management determined loan impairment provisions using the incurred loss model required by the applicable accounting standards. These standards require recognition of impairment losses that arose from past events and prohibit recognition of impairment losses that could arise from future events, including future changes in the economic environment, no matter how likely those future events are. Thus final impairment losses from financial assets could differ significantly from the current level of provisions. Refer to Note 10. 3 Basis of Preparation and Summary of Significant Accounting Policies Basis of preparation. This condensed interim financial information has been prepared in accordance with IAS 34 and should be read in conjunction with the Bank s financial statements for 2013, which have been prepared in accordance with the International Financial Reporting Standards (IFRS). The accounting policies and methods of computation applied in the preparation of this condensed interim financial information are consistent with those disclosed in the annual financial statements of the Bank for the year ended 31 December 2013, except for income tax. These policies have been consistently applied to all the periods presented, unless otherwise stated. Income taxes. Income tax expense is recognised in this condensed interim financial information based on management s best estimates of the effective annual income tax rate expected for the full annual financial year. Costs are accrued and recognised in the interim period only if it would also be appropriate to accrue or recognise such costs at the end of the financial year. Changes in presentation. Where necessary, corresponding figures have been adjusted to conform to the presentation of the current year amounts. The Bank changed the disclosure of losses from assets placed at rates below market because the management sticks to the opinion that these expenses are of the same nature as staff costs. Six months ended 30 June 2013 (before reclassification) Effect of reclassification Six months ended 30 June 2013 (after reclassification) Statement of profit or loss and other comprehensive income Losses from assets placed below market (10 342) 10 342 - Staff costs (1 232 175) (10 342) (1 242 517) 6

4 Critical Accounting Estimates, and Judgements in Applying Accounting Policies The Bank makes estimates and assumptions that affect the amounts recognised in the condensed interim financial information and the carrying amounts of assets and liabilities within the next financial year. Estimates and judgements are continually evaluated and are based on management s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Management also makes certain judgements, apart from those involving estimations, in the process of applying the accounting policies. Judgements that have the most significant effect on the amounts recognised in the financial statements and estimates that can cause a significant adjustment to the carrying amount of assets and liabilities within the next financial year include: Impairment losses on loans and advances. The Bank regularly reviews its loan portfolios to assess impairment. When determining whether an impairment loss should be recorded in profit or loss for the year, the Bank makes judgements whether there is any observable data indicating that there is a measurable decrease in the estimated future cash flows from the loan portfolio before the decrease can be identified with an individual loan in that portfolio. This evidence may include observable data indicating that there has been an adverse change in the payment status of borrowers in a group, or national or local economic conditions that correlate with defaults on assets in the group. Management uses estimates based on historical loss experience for assets with credit risk characteristics and objective evidence of impairment similar to those in the portfolio when scheduling its future cash flows. The methodology and assumptions used for estimating both the amount and timing of future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience. A 10% increase or decrease in actual loss experience compared to the future cash flows estimates used would result in an increase or decrease in loan impairment losses of RR 441 385 thousand (31 December 2013: RR 397 383 thousand), respectively. Valuation of premises, land and investment properties. Premises, land and investment properties of the Bank are subject to revaluation on a regular basis. The frequency of revaluation depends on the movements in the fair values of the premises being revalued. The Bank s policy is to engage into the revaluation an internationally recognised independent appraisal firm having recognised and relevant professional qualifications and recent experience of valuation of assets with similar location and category. Fair value of premises, land and investment properties is based on the direct comparison of the revalued object with other objects sold or offered for sale. If there is no market based evidence of fair value, fair value is estimated using the income approach. Accounting for subordinated loans from VEB. The Russian government provided assistance to the Russian financial system by instructing the Russian State Corporation Bank Razvitiya i Vneshneekonomicheskoy Deyatelnosti ( VEB ) to grant subordinated loans to selected banks. This was done through Federal Law 173-FZ of 13 October 2008 On additional measures aimed at supporting the financial system of the Russian Federation. In October 2008, the Bank received the subordinated loan from Vnesheconombank of RR 980 000 thousand with maturity in November 2017 and interest rate of 8.0% p.a. Due to its unique terms and conditions, its subordinated nature and the absence of observable current market transactions providing evidence of a market rate for such instruments, the loan was originally recognised and is subsequently carried on the statement of financial position at amortised contractual value. If there was evidence that the market interest rate for the loan was higher than the contractual interest rates, the amortised contractual value of the loan would have been replaced by (i) the amortised value of the loan determined based on the fair value of the loan at the date of origination and (ii) the unamortised value of the government grant embedded in such a low interest loan; there would have been no impact on the profit or loss, since the increased effective interest rates would have been offset by the amortisation of the government grant. 7

4 Critical Accounting Estimates, and Judgements in Applying Accounting Policies (Continued) Accounting for change of interest rate on the subordinated loans from VEB. In accordance with amendments to Federal Law 173-FZ approved in July 2011, the interest rate on the stated above subordinated loan was reduced from 8.0% per annum to 6.5% per annum. All the other terms of the loan remain unchanged. The Bank accounted for reduction of interest rate stated above according with IAS 39 Financial Instruments: Recognition and Measurement and tested this change for materiality. Since the change was found to be insignificant the Bank accounted for the change of interest rate stated above as prospective adjustment of the effective interest rate. The Bank could have used an alternative option and accounted for the mentioned reduction of interest rate in accordance with IAS 20 Accounting for Government Grants and Disclosure of Government Assistance, in that case the difference between the previous and revised carrying value of the loan would be recorded as government grant deferred income and would be amortised through interest expense until the loan s maturity date. Tax legislation. Russian tax, currency and customs legislation is subject to varying interpretations. Refer to Note 20. Valuation of related party transactions. In the normal course of business the Bank enters into transactions with its related parties. IAS 39 requires initial recognition of financial instruments based on their fair values. Judgement is applied in determining if transactions are priced at market or non-market interest rates, where there is no active market for such transactions. The basis for judgement is pricing for similar types of transactions with unrelated parties and effective interest rate analysis. Terms and conditions of related party balances are disclosed in Note 22. 5 Adoption of New or Revised Standards and Interpretations The following new standards and interpretations became mandatory for the Bank from 1 January 2014: Offsetting Financial Assets and Financial Liabilities - Amendments to IAS 32 (issued in December 2011 and effective for annual periods beginning on or after 1 January 2014). The amendment added application guidance to IAS 32 to address inconsistencies identified in applying some of the offsetting criteria. This includes clarifying the meaning of currently has a legally enforceable right of set-off and that some gross settlement systems may be considered equivalent to net settlement. The amendments did not have any impact on the Bank's financial information. Amendments to IFRS 10, IFRS 12 and IAS 27 Investment Entities (issued on 31 October 2012 and effective for annual periods beginning 1 January 2014). The amendment introduced a definition of an investment entity as an entity that (i) obtains funds from investors for the purpose of providing them with investment management services, (ii) commits to its investors that its business purpose is to invest funds solely for capital appreciation or investment income and (iii) measures and evaluates its investments on a fair value basis. An investment entity will be required to account for its subsidiaries at fair value through profit or loss, and to consolidate only those subsidiaries that provide services that are related to the entity's investment activities. The amendments did not have any impact on the Bank's financial information. Furthermore, the IASB has issued the following pronouncements not yet adopted in Russia: 8

5 Adoption of New or Revised Standards and Interpretations (Continued) IFRIC 21 Levies (issued on 20 May 2013 and effective for annual periods beginning 1 January 2014). The interpretation clarifies the accounting for an obligation to pay a levy that is not income tax. The obligating event that results in a liability is the event identified by the legislation that triggers the obligation to pay the levy. The fact that an entity is economically compelled to continue operating in a future period, or prepares its financial statements under the going concern assumption, does not create an obligation. The same recognition principles apply in interim and annual financial statements. The application of the interpretation to liabilities arising from emissions trading schemes is optional. The amendment did not have any impact on the Bank's financial information. Amendments to IAS 36 Recoverable Amount Disclosures for Non-financial Assets (issued in May 2013 and effective for annual periods beginning 1 January 2014; earlier application is permitted if IFRS 13 is applied for the same accounting and comparative period). The amendments remove the requirement to disclose the recoverable amount when a CGU contains goodwill or intangible assets with indefinite life time but there has been no impairment. The amendments did not have any impact on the Bank's financial information. Amendments to IAS 39 Novation of Derivatives and Continuation of Hedge Accounting (issued in June 2013 and effective for annual periods beginning 1 January 2014). The amendments will allow hedge accounting to continue in a situation when a derivative, which has been designated as a hedging instrument, is novated (i.e. parties have agreed to replace their original counterparty with a new one) to effect clearing with a central counterparty in accordance with laws or regulations, if specific conditions are met. The amendments did not have any impact on the Bank's financial information. 6 New Accounting Pronouncements Certain new standards and interpretations have been issued that are mandatory for the reporting periods beginning after 1 July 2014 and which the Bank has not early adopted. IFRS 9 Financial Instruments: Classification and Measurement (issued in July 2014 and effective for annual periods beginning on or after 1 January 2018). Key features of the new standard are: Financial assets are required to be classified into three measurement categories: those to be measured subsequently at amortised cost, those to be measured subsequently at fair value through other comprehensive income (FVOCI) and those to be measured subsequently at fair value through profit or loss (FVPL). Investments in equity instruments are always measured at fair value. However, management can make an irrevocable election to present changes in fair value in other comprehensive income, provided the instrument is not held for trading. If the equity instrument is held for trading, changes in fair value are presented in profit or loss. 9

6 New Accounting Pronouncements (Continued) Classification for debt instruments is driven by the entity s business model for managing the financial assets and whether the contractual cash flows represent solely payments of principal and interest (SPPI). If a debt instrument is held to collect, it may be carried at amortised cost if it also meets the SPPI requirement. Debt instruments that meet the SPPI requirement and are held in a portfolio where an entity both holds to collect assets cash flows and sells assets may be classified as FVOCI. Financial assets that do not contain cash flows that are SPPI must be measured at FVPL (for example, derivatives). Embedded derivatives are no longer separated from financial assets but will be included in assessing the SPPI condition. Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward unchanged to IFRS 9. The key change is that an entity will be required to present the effects of changes in it s own credit risk of financial liabilities designated at fair value through profit or loss in other comprehensive income. IFRS 9 introduces a new model for the recognition of impairment losses the expected credit losses (ECL) model. There is a three stage approach which is based on the change in credit quality of financial assets since initial recognition. In practice, the new rules mean that entities will have to record an immediate loss equal to the 12-month ECL on initial recognition of financial assets that are not credit impaired (or lifetime ECL for trade receivables). Where there has been a significant increase in credit risk, impairment is measured using lifetime ECL rather than 12-month ECL. The model includes operational simplifications for lease and trade receivables. Hedge accounting requirements were amended to align accounting more closely with risk management. The standard provides entities with an accounting policy choice between applying the hedge accounting requirements of IFRS 9 and continuing to apply IAS 39 to all hedges because the standard does not address accounting for macro hedging. Amendments to IAS 19 "Defined Benefit Plans: Employee Contributions" (issued in November 2013 and effective for annual periods beginning 1 July 2014). The amendment allows entities to recognise employee contributions as a reduction in the service cost in the period in which the related employee service is rendered, instead of attributing the contributions to the periods of service, if the amount of the employee contributions is independent of the number of years of service. The Bank is currently assessing the impact of the amendments on its financial statements. Annual Improvements to IFRSs 2012 (issued in December 2013 and effective for annual periods beginning on or after 1 July 2014, unless otherwise stated below). The improvements consist of changes to seven standards. IFRS 2 was amended to clarify the definition of a vesting condition and to define separately performance condition and service condition ; The amendment is effective for share-based payment transactions for which the grant date is on or after 1 July 2014. IFRS 3 was amended to clarify that (1) an obligation to pay contingent consideration which meets the definition of a financial instrument is classified as a financial liability or as equity, on the basis of the definitions in IAS 32, and (2) all non-equity contingent consideration, both financial and non-financial, is measured at fair value at each reporting date, with changes in fair value recognised in profit and loss. Amendments to IFRS 3 are effective for business combinations where the acquisition date is on or after 1 July 2014. IFRS 8 was amended to require (1) disclosure of the judgements made by management in aggregating operating segments, including a description of the segments which have been aggregated and economic indicators which have been assessed in determining that the aggregated segments share similar economic characteristics, and (2) a reconciliation of segment assets to the entity s assets when segment assets are reported. 10

6 New Accounting Pronouncements (Continued) The basis for conclusions on IFRS 13 was amended to clarify that the deletion of certain paragraphs in IAS 39 upon publishing of IFRS 13 was not made with an intention to remove the ability to measure shortterm receivables and payables at invoice amount where the impact of discounting is immaterial. IAS 16 and IAS 38 were amended to clarify how the gross carrying amount and the accumulated depreciation are treated where an entity uses the revaluation model. IAS 24 was amended to include, as a related party, an entity that provides key management personnel services to the reporting entity or to the parent of the reporting entity ( the management entity ), and to require to disclose the amounts charged to the reporting entity by the management entity for services provided. The Bank is currently assessing the impact of the amendments on its financial statements. Annual Improvements to IFRSs 2013 (issued in December 2013 and effective for annual periods beginning on or after 1 July 2014). The improvements consist of changes to four standards. The basis for conclusions on IFRS 1 is amended to clarify that, where a new version of a standard is not yet mandatory but is available for early adoption; a first-time adopter can use either the old or the new version, provided the same standard is applied in all periods presented. IFRS 3 was amended to clarify that it does not apply to the accounting for the formation of any joint arrangement under IFRS 11. The amendment also clarifies that the scope exemption only applies in the financial statements of the joint arrangement itself. The amendment of IFRS 13 clarifies that the portfolio exception in IFRS 13, which allows an entity to measure fair value of a group of financial assets and financial liabilities on a net basis, applies to all contracts (including contracts to buy or sell non-financial items) that are within the scope of IAS 39 or IFRS 9. IAS 40 was amended to clarify that IAS 40 and IFRS 3 are not mutually exclusive. The guidance in IAS 40 assists preparers in distinguishing between investment property and owner-occupied property. Preparers also need to refer to the guidance in IFRS 3 to determine whether the acquisition of an investment property is a business combination. The Bank is currently assessing the impact of the amendments on its financial statements. IFRS 14 Regulatory Deferral Accounts (issued in January 2014 and effective for annual periods beginning on or after 1 January 2016). IFRS 14 permits first-time adopters to continue to recognise amounts related to rate regulation in accordance with their previous GAAP requirements when they adopt IFRS. However, to enhance comparability with entities that already apply IFRS and do not recognise such amounts, the standard requires that the effect of rate regulation must be presented separately from other items. The Bank does not expect the amendments to have a material effect on its financial statements. Amendments to IFRS 11 Accounting for Acquisitions of Interests in Joint Operations (issued on 6 May 2014 and effective for the periods beginning on or after 1 January 2016). This amendment adds new guidance on how to account for the acquisition of an interest in a joint operation that constitutes a business. The Bank is currently assessing the impact of the amendments on its financial statements. Clarification of Acceptable Methods of Depreciation and Amortisation Amendments to IAS 16 and IAS 38 (issued on 12 May 2014 and effective for the periods beginning on or after 1 January 2016). In this amendment, the IASB has clarified that the use of revenue-based methods to calculate the depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset. The Bank is currently assessing the impact of the amendments on its financial statements. 11

6 New Accounting Pronouncements (Continued) IFRS 15 "Revenue from Contracts with Customers" (issued on 28 May 2014 and effective for the periods beginning on or after 1 January 2017). The new standard introduces the core principle that revenue must be recognised when the goods or services are transferred to the customer, at the transaction price. Any bundled goods or services that are distinct must be separately recognised, and any discounts or rebates on the contract price must generally be allocated to the separate elements. When the consideration varies for any reason, minimum amounts must be recognised if they are not at significant risk of reversal. Costs incurred to secure contracts with customers have to be capitalised and amortised over the period when the benefits of the contract are consumed. The Bank is currently assessing the impact of the new standard on its financial statements. Equity Method in Separate Financial Statements Amendments to IAS 27 (issued on 12 August 2014 and effective for annual periods beginning 1 January 2016). The amendments will allow entities to use the equity method to account for investments in subsidiaries, joint ventures and associates in their separate financial statements. 12

7 Cash and Cash Equivalents 30 June 2014 31 December 2013 Cash on hand 2 172 209 1 599 016 Cash balances with the CBRF (other than mandatory reserve deposits) 2 624 999 5 483 265 Correspondent accounts and overnight placements with other banks - Russian Federation 637 713 235 995 - other countries 2 820 284 4 854 422 Settlement accounts (plastic cards) with trading systems and banks 10 055 001 2 807 970 Total cash and cash equivalents 18 310 206 14 980 668 8 Trading Securities 30 June 2014 31 December 2013 Corporate bonds 12 895 898 14 104 674 Federal loan bonds (OFZ) 10 468 700 6 033 319 Promissory notes 8 788 336 10 731 271 Corporate Eurobonds 3 123 267 1 474 566 Municipal bonds 1 929 081 1 974 692 External government loan bonds (OVOZ) 1 245 355 - Corporate shares 2 724 698 441 Total trading securities 38 453 361 35 016 963 Trading securities include securities pledged to the CBRF and ZAO ACB National Clearing Centre as collateral with respect to borrowed funds, with the fair value of RR 13 688 610 thousand at 30 June 2014 (31 December 2013: nil). They include corporate bonds of RR 9 731 908 thousand, municipal bonds of RR 1 960 457 thousand, corporate Eurobonds of RR 1 615 549 thousand and other securities of RR 380 696 thousand. Refer to Note 11. These securities were pledged without the right to sell or repledge this collateral. At 30 June 2014 and 31 December 2013, the Bank did not have any past due or impaired trading securities issued. Interest rate analysis of trading securities at 30 June 2014 is provided in the table below: 30 June 2014 Carrying value Coupon rate Yield to maturity from to from to Corporate bonds 12 895 898 7.6% 13.0% 7.6% 13.4% Federal loan bonds (OFZ) 10 468 700 7.0% 7.6% 8.1% 8.4% Promissory notes 8 788 336 - - 3.7% 13.6% Corporate Eurobonds 3 123 267 5.0% 9.3% 5.3% 10.3% Municipal bonds 1 929 081 8.2% 10.0% 8.0% 8.2% External government loan bonds (OVOZ) 1 245 355 7.9% 7.9% 8.4% 8.4% Corporate shares 2 724 - - - - Total trading securities 38 453 361 5.0% 13.0% 3.7% 13.6% 13

8 Trading Securities (Continued) Interest rate analysis of trading securities at 31 December 2013 is provided in the table below: 31 December 2013 Carrying value Coupon rate Yield to maturity from to from to Corporate bonds 14 104 674 7.6% 14.0% 7.1% 13.4% Federal loan bonds (OFZ) 6 033 319 6.9% 7.4% 6.2% 8.0% Promissory notes 10 731 271 - - 5.1% 12.2% Corporate Eurobonds 1 474 566 5.9% 11.5% 6.0% 8.8% Municipal bonds 1 974 692 8,2% 10.0% 7.7% 8.4% Corporate shares 698 441 - - - - Total trading securities 35 016 963 5.0% 13.0% 3.7% 13.6% 9 Due from Other Banks 30 June 2014 31 December 2013 Term placements with other banks 3 222 231 7 356 155 Loans collateralised by shares (reverse repurchase agreements) - 728 207 Restricted deposits related to letters of credit 23 415 90 819 Less: Provision for impairment of due from other banks (1 099) (1 099) Total due from other banks 3 244 547 8 174 082 Maturity analysis of amounts due from other banks is disclosed in Note 18. 14

10 Loans and Advances to Customers 30 June 2014 31 December 2013 Loans and advances to legal entities - large loans 22 407 987 19 630 306 - medium loans 29 788 165 24 598 003 - loans to small business 4 295 487 3 804 592 - loans to legal entities collateralised by shares (reverse sale and repurchase agreements) 37 775 39 664 Total loans and advances to legal entities 56 529 414 48 072 565 Loans and advances to individuals - Consumer loans2 819 357 2 780 109 - Car loans 790 810 982 182 - Mortgage loans 15 727 617 15 278 669 - Loans to legal entities collateralised by shares (reverse sale and repurchase agreements) 106 474 165 714 Total loans and advances to individuals 19 444 258 19 206 674 Total loans and advances to legal entities and individuals before provision for loan impairment 75 973 672 67 279 239 Less: Provision for loan impairment (4 413 854) (3 973 829) Total loans and advances to customers 71 559 818 63 305 410 Loans to one borrower or a group of related borrowers with an aggregate open limit above RR 800 000 thousand are recognised as large loans. Medium loans include loans to one borrower or a group of related borrowers not meeting criteria below applied to loans small business, with an aggregate open limit below RR 800 000 thousand. Loans to one borrower or a group of related borrowers are recognised as loans to small business based on certain criteria. Such criteria include: average number of employees not more than 100 people; annual revenue from sale of goods net of VAT does not exceed RR 400 000 thousand; the borrower (a group of borrowers) is an individual entrepreneur or a legal entity being a private entrepreneur, with involvement of government, foreign parties, public and religious organisations, charity and other funds limited to 25%; aggregate open limit per borrower (a group of borrowers) is not above RR 100 000 thousand. 15

10 Loans and Advances to Customers (Continued) At 30 June 2014, loans collateralised by shares (reverse sale and repurchase agreements) were effectively collateralised by securities purchased under reverse sale and repurchase agreements at fair value of RR 149 118 thousand (31 December 2013: RR 205 149 thousand). The Bank may sell or repledge these securities. As at 30 June 2014 and 31 December 2013, these funds were collateralised by shares of large Russian entities. The movements in the provision for loan impairment during the six months ended 30 June 2014 are as follows: In thousands of Russian Roubles Loans and advances to legal entities Large Medium Loans to loans loans small business Loans and advances to individuals Consumer loans Car loans Mortgage loans Total Provision for loan impairment at 1 January 2014 769 371 1 679 752 178 925 577 724 24 344 743 713 3 973 829 Provision 151 597 217 599 40 055 79 739 (459) (48 506) 440 025 Provision for loan impairment at 30 June 2014 920 968 1 897 351 218 980 657 463 23 885 695 207 4 413 854 16

10 Loans and Advances to Customers (Continued) The movements in the provision for loan impairment during the six months ended 30 June 2013 are as follows: In thousands of Russian Roubles Loans and advances to legal entities Large Medium Loans to loans loans small business Loans and advances to individuals Consumer loans Car loans Mortgage loans Total Provision for loan impairment at 1 January 2013 394 427 1 889 965 351 452 434 673 20 642 482 117 3 573 276 Provision for loan impairment 147 566 62 269 3 801 98 862 5 124 51 808 369 430 Recovery of provision on sold loans - (172 745) (19 187) - - (30 114) (222 046) Amounts written off as uncollectible - - (16 943) - - - (16 943) Provision for loan impairment at 30 June 2013 541 993 1 779 489 319 123 533 535 25 766 503 811 3 703 717 During the first six months of 2014, the Bank sold to external entities impaired loans with a gross value of RR 109 thousand, the selling price was RR 61 thousand. The Bank also recovered impaired loan with a gross value of RR 105 612 thousand by virtue of collateral in the amount of RR 103 149 thousand. During the first six months of 2013, the Bank sold to external entities impaired loans with gross value of RR 223 858 thousand and provisions for impairment in the amount of RR 222 046 thousand for RR 33 359 thousand, out of which RR 2 610 thousand were received in real estate, RR 20 749 thousand in cash and RR 10 000 thousand in rights of claim. 17

10 Loans and Advances to Customers (Continued) Economic sector risk concentrations within the customer loan portfolio are as follows: 30 June 2014 31 December 2013 Amount % Amount % Individuals 19 444 258 25.9 19 206 674 28.6 State organisations 10 535 499 13.9 11 233 759 16.8 Other goods trade 8 668 331 11.4 5 273 130 7.8 Services 6 624 918 8.7 3 879 950 5.8 Real estate 4 846 291 6.4 5 146 466 7.6 Metallurgy 4 646 960 6.1 4 121 919 6.1 Construction 3 666 795 4.8 2 900 221 4.3 Motor vehicles and component trade 3 504 658 4.6 2 719 208 4.0 Consumer goods trade 3 207 070 4.2 2 484 340 3.7 Heavy industry 2 277 552 3.0 2 708 432 4.0 Light industry 2 242 326 3.0 2 242 302 3.3 Finance 1 964 211 2.6 1 018 326 1.5 Equipment trade 1 911 941 2.5 1 429 864 2.1 Food product trade 1 378 891 1.8 2 130 736 3.2 Processing industry 656 555 0.9 604 912 0.9 Other 397 414 0.5 179 000 0.3 Total loans and advances to customers (before provision for loan impairment) 75 973 670 100.0 67 279 239 100.0 State and public organisations include state-controlled borrowers. These entities represent companies with different types of activities. 18

10 Loans and Advances to Customers (Continued) Analysis by credit quality of loans to legal entities outstanding at 30 June 2014 is as follows: Large loans Medium loans Loans to small business Reverse sale and repurchase agreements Loans before provision for impairment Impairment loss provision Loans less provision for impairment Provision-to-loan ratio before provision Collectively assessed for impairment Not past due loans - 1st quality category - 13 912 871 4 076 801 37 775 18 027 447 (365 834) 17 661 613 2.0% - 2nd quality category - 4 177 662 - - 4 177 662 (271 426) 3 906 236 6.5% Overdue loans - less than 30 days overdue - - 3 275-3 275 (569) 2 706 17.4% - 31 to 60 days overdue - - 270-270 (270) - 100.0% - 61 to 90 days overdue - - 900-900 (900) - 100.0% - 91 to 180 days overdue - - 39 181-39 181 (38 817) 364 99.1% - 180 to 365 days overdue - - 29 608-29 608 (28 551) 1 057 96.4% - over 365 days overdue - - 145 452-145 452 (145 452) - 100.0% Total collectively assessed for impairment - 18 090 533 4 295 487 37 775 22 423 795 (851 819) 21 571 976 3.8% Individually assessed for impairment Not past due loans - 1st quality category 17 806 676 7 847 172 - - 25 653 848 (618 491) 25 035 357 2.4% - 2nd quality category 3 215 670 1 666 120 - - 4 881 790 (310 591) 4 571 199 6.4% - 3d quality category 1 385 641 1 293 572 - - 2 679 213 (365 630) 2 313 583 13.6% - 4th quality category - 231 399 - - 231 399 (231 399) - 100.0% Overdue loans - less than 30 days overdue - 28 891 - - 28 891 (28 891) - 100.0% - over 365 days overdue - 630 478 - - 630 478 (630 478) - 100.0% Total individually assessed for impairment 22 407 987 11 697 632 - - 34 105 619 (2 185 480) 31 920 139 6.4% Total loans and advances to customers (before provision for loan impairment) 22 407 987 29 788 165 4 295 487 37 775 56 529 414 (3 037 299) 53 492 115 5.4% 19

10 Loans and Advances to Customers (Continued) Analysis by credit quality of loans to individuals outstanding at 30 June 2014 is as follows: Consumer loans Car loans Mortgage loans Reverse sale and repurchase agreements Loans before provision for impairment Provision for impairment Loans less provision for impairment Provision-to-loan ratio before provision Collectively assessed for impairment Not past due loans - 1st quality category 1 940 951 756 500 14 938 168 106 474 17 742 093 (75 720) 17 666 373 0.4% - 2nd quality category 137 167 - - - 137 167 (8 546) 128 621 6.2% - 4th quality category 4 375 - - - 4 375 (2 178) 2 197 49.8% Overdue loans - less than 30 days overdue 98 838 14 118 123 373-236 329 (8 372) 227 957 3.5% - 31 to 60 days overdue 32 815 2 371 47 429-82 615 (75 772) 6 843 91.7% - 61 to 90 days overdue 19 831-6 652-26 483 (26 216) 267 99.0% - 91 to 180 days overdue 45 220 416 29 034-74 670 (74 073) 597 99.2% - 180 to 365 days overdue 92 612 222 191 773-284 607 (282 869) 1 738 99.4% - over 365 days overdue 396 738 16 237 391 188-804 163 (804 163) - 100.0% Total collectively assessed for impairment 2 768 547 789 864 15 727 617 106 474 19 392 502 (1 357 909) 18 034 593 7.0% Individually assessed for impairment Not past due loans - 1st quality category 33 110 - - - 33 110-33 110 0.0% - 4th quality category 17 700 946 - - 18 646 (18 646) - 100.0% Total individually assessed for impairment 50 810 946 - - 51 756 (18 646) 33 110 36.0% Total loans and advances to customers (before provision for loan impairment) 2 819 357 790 810 15 727 617 106 474 19 444 258 (1 376 555) 18 067 703 7.1% 20

10 Loans and Advances to Customers (Continued) Analysis by credit quality of loans to legal entities outstanding at 31 December 2013 is as follows: Large loans Medium loans Loans to small business Reverse sale and repurchase agreements Loans before provision for impairment Provision for impairment Loans less provision for impairment Provision-to-loan ratio before provision Collectively assessed for impairment Not past due loans - 1st quality category - 7 842 717 3 622 775 39 664 11 505 156 (206 555) 11 298 601 1.8% - 2nd quality category - 3 689 922 - - 3 689 922 (237 089) 3 452 833 6.4% Overdue loans - less than 30 days overdue - - 7 148-7 148 (3 340) 3 808 46.7% - 31 to 60 days overdue - - 13 276-13 276 (11 700) 1 576 88.1% - 61 to 90 days overdue - - 11 368-11 368 (10 860) 508 95.5% - 91 to 180 days overdue - - 2 229-2 229 (2 169) 60 97.3% - 180 to 365 days overdue - - 24 874-24 874 (23 503) 1 371 94.5% - over 365 days overdue - - 122 922-122 922 (122 922) - 100.0% Total collectively assessed for impairment - 11 532 639 3 804 592 39 664 15 376 895 (618 138) 14 758 757 4.0% Individually assessed for impairment Not past due loans - 1st quality category 15 535 227 9 733 353 - - 25 268 580 (488 939) 24 779 641 1.9% - 2nd quality category 2 660 934 1 140 604 - - 3 801 538 (256 125) 3 545 413 6.7% - 3d quality category 1 434 145 1 321 989 - - 2 756 134 (395 428) 2 360 706 14.3% - 4th quality category - 238 939 - - 238 939 (238 939) - 100.0% Overdue loans - 180 to 365 days overdue - 635 - - 635 (635) - 100.0% - over 365 days overdue - 629 844 - - 629 844 (629 844) - 100.0% Total individually assessed for impairment 19 630 306 13 065 364 - - 32 695 670 (2 009 910) 30 685 760 6.1% Total loans and advances to customers (before provision for loan impairment) 19 630 306 24 598 003 3 804 592 39 664 48 072 565 (2 628 048) 45 444 517 5.5% 21

10 Loans and Advances to Customers (Continued) Analysis by credit quality of loans to individuals outstanding at 31 December 2013 is as follows: Consumer loans Car loans Mortgage loans Reverse sale and repurchase agreements Loans before provision for impairment Provision for impairment Loans less provision for impairment Provision-to-loan ratio before provision Collectively assessed for impairment Not past due loans - 1st quality category 1 966 444 954 024 14 501 743 165 714 17 587 925 (78 297) 17 509 628 0.4% - 2nd quality category 84 712 - - - 84 712 (4 862) 79 850 5.7% Overdue loans - less than 30 days overdue 59 450 6 911 61 384-127 745 (5 185) 122 560 4.1% - 31 to 60 days overdue 41 331-39 977-81 308 (75 539) 5 769 92.9% - 61 to 90 days overdue 14 838 1 321 23 366-39 525 (39 026) 499 98.7% - 91 to 180 days overdue 40 128-231 774-271 902 (269 391) 2 511 99.1% - 180 to 365 days overdue 106 822 6 557 42 815-156 194 (155 372) 822 99.5% - over 365 days overdue 309 430 12 336 377 610-699 376 (699 376) - 100.0% Total collectively assessed for impairment 2 623 155 981 149 15 278 669 165 714 19 048 687 (1 327 048) 17 721 639 7.0% Individually assessed for impairment Not past due loans - 1st quality category 139 254 - - - 139 254-139 254 0.0% - 4th quality category 17 700 1 033 - - 18 733 (18 733) - 100.0% Total individually assessed for impairment 156 954 1 033 - - 157 987 (18 733) 139 254 11.9% Total loans and advances to customers (before provision for loan impairment) 2 780 109 982 182 15 278 669 165 714 19 206 674 (1 345 781) 17 860 893 7.0% 22

10 Loans and Advances to Customers (Continued) Current loans are classified to four quality categories. The first quality category includes loans with insignificant credit risk, i.e. financial losses due to non-performance or improper performance by the borrower of its loan obligations are remote. The provision rate for such loans does not exceed 5%. The second category includes loans with medium credit risk and the provision rate not exceeding 10%. The third quality category includes loans with an acceptable risk of uncollectibility. The provision rate for such loans does not exceed 50%. The fourth quality category includes loans with a high risk of uncollectibility. The provision rate for such loans is over 50%. The primary factors that the Bank considers when determining whether a loan is impaired are its overdue status and the borrower s financial position. When making a decision on loan impairment, the Bank also monitors the state of collateral and any claims to the borrower raised by tax, law enforcement bodies and counterparties, and control over turnover on the Bank's accounts. Any significant exposures to customers with deteriorating creditworthiness are reported to, and reviewed by, the management. On the basis of this analysis the Bank makes decisions on loan impairment. Fair value of loans and advances to customers is disclosed in Note 21. At 30 June 2014, loans and advances to customers - legal entities include assets provided as collateral on attracted interbank loans with the carrying value of RR 241 390 thousand (31 December 2013: RR 337 847 thousand). Refer to Note 20. The maturity analysis of loans and advances to customers is disclosed in Note 18. The information on related party balances is disclosed in Note 22. 11 Due to Other Banks 30 June 2014 31 December 2013 Correspondent accounts and overnight placements of other banks 4 985 960 3 275 874 Loans from other banks 5 689 968 2 496 825 Loans from the CBRF and National Clearing Centre 12 251 807 - Total due to other banks 22 927 735 5 772 699 At 30 June 2014, loans from other banks included borrowed funds from the CBRF in the amount of RR 12 003 058 thousand and from National Clearing Centre in the amount of RR 248 749 thousand (31 December 2013: nil). Refer to Note 8. Maturity analysis of amounts due to other banks is disclosed in Note 18. The information on related party balances is disclosed in Note 22. 23

12 Customer Accounts 30 June 2014 31 December 2013 Legal entities 61 662 876 70 323 649 - Current/settlement accounts 42 925 270 48 409 613 - Term deposits 18 737 606 21 914 036 Individuals 25 954 446 26 946 472 - Current/demand accounts 6 298 651 7 277 620 - Term deposits 19 655 795 19 668 852 Total customer accounts 87 617 322 97 270 121 Total current customer accounts 49 223 921 55 687 233 Total term customer accounts 38 393 401 41 582 888 Economic sector concentrations within customer accounts are as follows: 30 June 2014 31 December 2013 Amount % Amount % Individuals 25 954 446 29.6 26 946 472 27.7 Trade 17 417 464 19.9 18 180 961 18.7 Culture, science and education 9 430 927 10.0 8 778 920 9.0 Services 8 557 664 9.8 10 392 757 10.0 Construction 6 873 416 7.8 9 871 674 10.0 Manufacturing 6 399 576 7.3 8 330 438 8.6 State and public organisations 3 990 846 4.5 6 306 545 6.5 Finance 3 555 945 4.1 4 203 332 4.3 Other 5 437 038 6.2 4 259 022 4.4 Total customer accounts 87 617 322 100.0% 97 270 121 100.0% Trade sector includes the following types of trade: consumer goods trade, motor vehicles and components trade, equipment trade, food product trade and other goods trade. Manufacturing sector includes light industry, heavy industry and processing industry. Economic sector concentrations and maturity analysis of customer accounts are disclosed in Note 18. The information on related party balances is disclosed in Note 22. 13 Subordinated Loans Counterparty Currency Rate Maturity date 30 June 2014 31 December 2013 Salvaje Ltd RR 12.0% 18.04.2020 300 000 300 000 VEB RR 6.5% 02.11.2017 980 000 980 000 REG Holding USD 12.0% 05.11.2020 1 277 963 1 243 710 Total subordinated loans 2 557 963 2 523 710 24

13 Subordinated Loans (Continued) The maturity analysis of subordinated loans is disclosed in Note 18. The information on related party balances is disclosed in Note 22. The subordinated debt ranks after all other creditors in case of liquidation. 14 Interest Income and Expense Six months ended 30 June 2014 Six months ended 30 June 2013 Interest income Loans and advances to customers 4 052 366 3 455 808 Debt trading securities 1 558 747 1 165 958 Due from other banks 112 539 95 804 Correspondent accounts and overnight placements with other banks 35 198 195 456 Income on other securities through profit or loss 20 521 68 474 Total interest income 5 779 371 4 981 500 Interest expense Term deposits of individuals (668 833) (604 194) Term deposits of legal entities (594 353) (576 255) Term placements of other banks (296 310) (178 062) Current customer accounts (142 158) (90 625) Subordinated loans (129 071) (120 202) Promissory notes issued (23 131) (23 607) Correspondent accounts of other banks (18 636) (11 998) Total interest expense (1 872 492) (1 604 943) Expenses directly associated with deposit insurance (52 963) (42 444) Net interest income 3 853 916 3 334 113 25

15 Fee and Commission Income and Expense Six months ended 30 June 2014 Six months ended 30 June 2013 Fee and commission income Settlement transactions 701 890 538 177 Guarantees issued 312 985 252 349 Cash transactions 163 559 139 801 Cash collection 15 886 13 833 Brokerage operations 4 485 11 403 Depository operations 1 296 984 Trade finance 739 1 462 Other 9 274 24 106 Total fee and commission income 1 210 114 982 115 Fee and commission expense Settlement transactions (170 399) (107 360) Cash transactions (82 725) (82 666) Guarantees received (5 114) (8 764) Transactions with foreign currencies (3 724) (1 429) Trade finance (863) (863) Other (8 107) (8 323) Total fee and commission expense (270 932) (209 405) Net fee and commission income 939 182 772 710 16 Administrative and Other Operating Expenses Six months ended 30 June 2014 Six months ended 30 June 2013 Depreciation of premises and equipment 100 668 82 494 Operating lease of premises 92 936 50 819 Taxes other than on income 84 179 82 004 Expenses related to premises and equipment 83 345 81 457 Software maintenance 81 241 60 871 Administrative expenses 61 473 71 206 Telecommunications 23 206 42 351 Advertising and marketing services 16 707 29 350 Insurance 7 113 7 748 Entertainment expenses and sponsorship 4 405 5 198 Other 77 651 13 861 Total administrative and other operating expenses 632 924 527 359 Included in staff costs for the six months ended 30 June 2014 are statutory social security and pension contributions of RR 269 358 thousand (the six months ended 30 June 2013: RR 240 468 thousand). The information on related party balances is disclosed in Note 22. 26

17 Segment Analysis (a) Description of products and services from which each reportable segment derives its revenue For management purposes the Bank s activity is split into operating segments based on the Bank s organisational structure. For the purposes of this financial information the operating segments are grouped into the following main reportable segments: Corporate banking representing settlement and current accounts, deposits, overdrafts, loan and other credit facilities, bank guarantees, foreign currency and cash transactions with organisations. Treasury representing securities trading, loans and deposits on the interbank market, Loro and Nostro accounts, transactions with foreign currency and derivative financial instruments. Retail banking representing private banking services, private customer settlement accounts, savings, deposits, investment savings products, custody, credit and debit cards, consumer loans, mortgages and car loans. International business representing transactions on the international market related to attracting bilateral loans and syndicated loans, transactions with letter of credit. (b) Measurement of reportable segment profit or loss, assets and liabilities Transactions between the reportable segments are conducted on normal commercial terms and conditions. Funds are ordinarily reallocated between segments, resulting in funding cost transfers charged at transfer rates disclosed in operating income/expense. These transfer rates represent internal cost of attracted/placed resources for each group of assets and liabilities which were created based on the maturity of financial instruments. Transfer rates are calculated by adding additional components characterising country risk (for assets and liabilities denominated in foreign currencies), credit risk, current liquidity position and payment for covering operating expenses to the risk-free market rate. There are no other material items of income or expense between the reportable segments. Internal charges and transfer pricing adjustments have been reflected in the performance of each reportable segment. The Bank analyses segments' activities on a quarterly basis. Operating analysis is based on weekly and monthly reports, where the Bank's results are not split by segments and presented on a more aggregated basis. (c) Factors that management used to identify the reportable segments The Bank s segments are strategic business units that focus on different customers. They are managed separately because each business unit requires different marketing strategies and service level. The Managing Board of the Bank is the Bank s supreme operational management body which allocates resources and assesses performance of the segments based on quarterly reports. The Managing Board of the Bank analyses profitability of each segment in order to make a decision on allocating resources and assessing segment performance. Segment reporting and results submitted for the management s analysis are prepared in accordance with the key principles of IFRS. 27

17 Segment Analysis (Continued) (d) Information about reportable segment profit or loss, assets and liabilities Segment information for the main reportable segments of the Bank for the six month periods ended 30 June 2014 and at 30 June 2014 accordingly is set out below: In thousands of Russian Roubles Corporate banking Treasury Retail banking International business Transfers 3 Total Six months ended 30 June 2014 Interest income 2 774 584 1 730 942 1 262 177 11 668-5 779 371 Interest expense (1 366 818) (273 002) (55 129) (48 472) - (1 743 421) Transfer income 1 3 009 430 298 846 74 315 67 803 1 204 362 4 654 756 Transfer expense 1 (1 920 980) (1 837 938) (890 087) (5 751) - (4 654 756) Expenses associated with deposit insurance (48 918) - (4 045) - - (52 963) Fee and commission income 1 140 566 15 097 54 451 - - 1 210 114 Fee and commission expense (240 340) (16 202) (12 169) (2 221) - (270 932) Gains less losses from trading in foreign currencies 224 487 32 145 41 612 - - 298 244 Provision 2 (417 307) (13) (29 420) - - (446 740) Losses less gains from trading in securities 4 (484 375) - - - (484 371) Foreign exchange translation gains - 138 795 - - - 138 795 Other operating income 21 921 (692) (4 938) - - 16 291 Gain from sale of outstanding loans (2 513) - - - - (2 513) Administrative and other operating expenses 4 (1 393 064) (104 084) (488 195) (5 213) - (1 990 556) Segment result 1 781 052 (500 481) (51 428) 17 814 1 204 362 2 451 319 At 30 June 2014 Segment assets 57 937 425 59 248 120 18 987 713 389 817-136 563 075 Segment liabilities 85 692 633 19 239 296 2 297 835 5 078 370-112 308 134 28

17 Segment Analysis (Continued) Segment information for the main reportable business segments of the Bank for the six months ended 30 June 2013 and as at 31 December 2013 is set out below: In thousands of Russian Roubles Corporate banking Treasury Retail banking International business Transfers 3 Total Six months ended 30 June 2013 Interest income 2 255 258 1 575 189 1 151 053 - - 4 981 500 Interest expense (1 238 329) (81 312) (47 375) (117 725) - (1 484 741) Transfer income 1 2 486 618 278 078 56 883 140 572 908 791 3 870 942 Transfer expense 1 (1 499 966) (1 574 794) (796 139) (43) - (3 870 942) Expenses associated with deposit insurance (39 343) - (3 101) - - (42 444) Fee and commission income 924 414 19 540 38 161 - - 982 115 Fee and commission expense (184 836) (9 063) (6 350) (9 156) - (209 405) Gains less losses from trading in foreign currencies 186 827 200 315 20 473 - - 407 615 Provision 2 (222 362) (815) (157 659) - - (380 836) Losses less gains from trading in securities - (259 239) - - - (259 239) Foreign exchange translation gains - 60 328 - - - 60 328 Other operating income 37 645 (12 613) (2 687) (1 899) - 20 446 Gain from sale of outstanding loans 28 821-2 726 - - 31 547 Administrative and other operating expenses 4 (1 256 684) (100 252) (431 422) (5 258) - (1 793 616) Segment result 1 478 063 95 362 (175 437) 6 491 908 791 2 313 270 At 31 December 2013 Segment assets 52 455 783 56 011 256 18 642 483 13 902-127 123 424 Segment liabilities 95 141 877 5 920 399 2 339 159 1 379 191-104 780 626 1 Transfer rates are the rates used for management accounting purposes to record income and expense from transactions of internal resource placement and attraction. They are a component of the Bank s internal resource reallocation mechanism and, correspondingly, of the system of efficiency evaluation by banking transaction type and risk management system. 2 Provision includes provision for loan impairment and provision for impairment of other financial assets. 3 Transfers reflect transfer income from equity financing of reportable segments. 4 Other operating expenses include operating expenses (including staff costs) and also gains and losses from real estate revaluation. 29

17 Segment Analysis (Continued) (d) Information about reportable segment profit or loss, assets and liabilities (continued) Differences between segment analysis and the statement of financial position and the statement of profit or loss and other comprehensive income are from differences between analysis performed by the management and IFRS approaches. Given the customers' geography, all the income has been substantively received from Russian customers. (e) Reconciliation of reportable segment revenues, profit or loss, assets and liabilities 30 June 2014 30 June 2013 Total segment result 2 451 319 2 313 270 Interest expense on subordinated loan (129 071) (120 202) Rental income 31 912 9 462 Profit before tax 2 354 160 2 202 530 30 June 2014 31 December 2013 Total reportable segment liabilities 112 308 134 104 780 626 Subordinated loans 2 557 963 2 523 710 Income tax liabilities 956 854 949 655 Total liabilities 115 822 951 108 253 991 30

18 Financial Risk Management For the six months ended 30 June 2014, there were no significant changes in the risk management system as compared to 2013. Significant exposures. At 30 June 2014, the Bank had 10 largest groups of borrowers with aggregated loan amounts of RR 18 569 181 thousand (31 December 2013: RR 16 941 189 thousand), or 24.4% (31 December 2013: 25.2%) of the gross loans and advances to customers, and 20 largest groups of borrowers with aggregated loan amounts of RR 25 114 114 thousand (31 December 2013: RR 22 300 220 thousand), or 33.1% (31 December 2013: 33.2%) of the gross loans and advances to customers. At 30 June 2014, the Bank had 10 largest clients with aggregated customer accounts of RR 9 456 511 thousand (31 December 2013: RR 8 820 404 thousand), or 10.8% (31 December 2013: 9.1%) of the customer accounts, and 20 largest clients with aggregated customer accounts of RR 13 513 243 thousand (31 December 2013: RR 12 693 311 thousand), or 15.4% (31 December 2013: 13.1%) of the customer accounts. At 30 June 2014, amounts due to other banks included liabilities of RR 12 003 058 thousand (31 December 2013: nil) received from the CBRF. Refer to Note 11. Currency risk. The table below summarises the Bank s exposure to foreign currency exchange rate risk: In thousands of Russian Roubles Monetary financial assets 30 June 2014 31 December 2013 Derivative Net Monetary Monetary financial position financial financial instruments assets liabilities Monetary financial liabilities Derivative financial instruments Net position Russian 102 546 126 85 029 065 (553 170) 16 963 891 99 005 550 85 085 660 1 462 663 15 382 553 Roubles US Dollars 22 747 414 22 181 300 672 305 1 238 419 17 572 065 16 216 319 (1 055 680) 300 066 Euro and other currencies 7 613 463 7 269 753 (124 181) 219 529 6 171 202 5 799 347 (411 192) (39 337) Total 132 907 003 114 480 118 (5 046) 18 421 839 122 748 817 107 101326 (4 209) 15 643 282 Derivatives presented above are monetary financial assets or monetary financial liabilities, but are presented separately in order to show the Bank s gross exposure. 31

18 Financial Risk Management (Continued) Liquidity risk. The Bank monitors its liquidity position using expected contractual maturities of assets and liabilities, which may be summarised as follows at 30 June 2014: In thousands of Russian Roubles Demand and less than 1 month From 1 to 6 months From 6 to 12 months From 1 to 5 years More than 5 years Total Monetary financial assets Cash and cash equivalents 18 310 206 - - - - 18 310 206 Mandatory cash balances with the CBRF 944 395 - - - - 944 395 Trading securities 38 450 637 - - - - 38 450 637 Due from other banks 693 337 168 470 668 377 1 711 673 2 690 3 244 547 Loans and advances to customers 7 654 762 13 806 090 16 267 125 19 426 118 14 405 723 71 559 818 Other financial assets 397 485 - - - - 397 485 Total monetary financial assets at 30 June 2014 66 450 822 13 974 560 16 935 502 21 137 791 14 408 413 132 907 088 Monetary financial liabilities Due to other banks 17 798 427 580 336 4 043 821 505 151-22 927 735 Customer accounts 59 914 543 13 685 476 12 516 793 1 470 003 30 507 87 617 322 Promissory notes issued 141 398 342 368 188 336 100 363-772 465 Subordinated loans - - - 980 000 1 577 963 2 557 963 Other financial liabilities 158 833 85 345 147 960 211 244 6 382 609 764 Total monetary financial liabilities at 30 June 2014 78 013 201 14 693 525 16 896 910 3 266 761 1 614 852 114 485 249 Net liquidity gap at 30 June 2014 (11 562 379) (718 965) 38 592 17 871 030 12 793 561 18 421 839 Net cumulative liquidity gap at 30 June 2014 (11 562 379) (12 281 344) (12 242 752) 5 628 278 18 421 839 - Net cumulative liquidity gap at 31 December 2013 10,381,419 (15 377 407) (16 182 244) 3 558 586 15 643 282 - The portfolio of trading securities and the portfolio of other securities at fair value through profit and loss are classified within demand and less than one month as these securities are acquired for liquidity management purposes and there is an active market where transactions with these securities occur frequently. 32

19 Capital Management The Bank s objectives when managing capital are (i) to comply with the capital requirements set by the CBRF, (ii) to safeguard the Bank s ability to continue as a going concern and (iii) to maintain sufficient capital base to achieve capital adequacy ratio of at least 8% based on the Basel Accord dated April 1998 (generally known as Basel I). Compliance with statutory capital ratios set by the CBRF is monitored daily. The Bank submits to the CBRF reports outlining capital adequacy ratio calculations reviewed and signed by the Bank s Chief Executive Officer and Chief Accountant. The Bank manages its capital primarily on the basis of regulatory requirements (statutory capital ratio N1.0 capital adequacy ratio with the minimum set by the CBRF at 10%). Ratio N1.0 calculated at 30 June 2014 is 11.6%. The Bank also calculated capital adequacy ratio based on the Basel I as required by certain covenants. As at 30 June 2014 the capital adequacy ratio calculated in accordance with Basel I was 14.4% (at 31 December 2013-14.5%). The ratio complies with all special limitations set. Regulatory capital is based on the Bank s reports prepared under Russian accounting standards and presented in the table below. No comparative data is provided below due to amendments in the relevant Russian legislation as of 1 January 2014: 30 June 2014 Core capital 16 189 732 Additional capital 3 667 648 Amounts deducted from core and additional capital (115 355) Total capital in accordance with the CBRF requirements 19 742 025 Risk weighted assets 170 692 997 Capital adequacy ratio (N1.0) 11.6% 33

19 Management of Capital (Continued) The table below shows the level of the Bank's capital adequacy as at 30 June 2014 and 31 December 2013 calculated in accordance with the requirements of the Basel I: 30 June 2014 31 December 2013 Tier 1 capital Share capital 441 071 441 071 Share premium 2 866 859 2 866 859 Retained earnings 16 209 439 14 373 194 Total Tier 1 capital 19 517 369 17 681 124 Tier 2 capital Revaluation reserve for premises and land 1 222 755 1 188 309 Subordinated loans 2 233 206 2 296 071 Total Tier 2 capital 3 455 961 3 484 380 Total capital 22 973 330 21 165 504 Risk weighted assets Credit risk 122 583 318 109 737 555 Market risk 36 925 868 36 267 637 Total risk weighted assets 159 509 186 146 005 192 Tier 1 core capital adequacy ratio (Tier 1 capital to risk weighted assets) 12.2% 12.1% Total core capital adequacy ratio (Total capital to risk weighted assets) 14.4% 14.5% During the six months ended 30 June 2014 and 2013 and at 30 June 2014 and 30 June 2013, the Bank complied with (1) the capital adequacy ratio calculated in accordance with requirements set by Basel I, above the prescribed minimum level (8%); and with (2) N1.0 capital adequacy ratio calculated in accordance with requirements set by the CBRF, above the prescribed minimum level (10%). 20 Contingencies and Commitments Legal proceedings. From time to time and in the normal course of business, claims against the Bank may be received. On the basis of its own estimates and internal professional advice management is of the opinion that no material losses will be incurred in respect of claims and accordingly no provision has been made in this financial information. Tax legislation. Russian tax legislation which was enacted or substantively enacted at the end of the reporting period, is subject to varying interpretations when being applied to the transactions and activities of the Bank. Consequently, tax positions taken by management and the formal documentation supporting the tax positions may be successfully challenged by relevant authorities. Russian tax administration is gradually strengthening, including the fact that there is a higher risk of tax transactions review without a clear business purpose or with tax incompliant counterparties. Fiscal periods remain open to a review by the authorities in respect of taxes for three calendar years preceding the year of the review. Under certain circumstances reviews may cover longer periods. 34

20 Contingencies and Commitments (Continued) The Russian transfer pricing rules took effect in 1999. Significant amendments were introduced with the effect from 1 January 2012. The new transfer pricing rules appear to be more technically elaborate and, to a certain extent, better aligned with the international transfer pricing principles developed by the Organisation for Economic Cooperation and Development (OECD). The new legislation provides the possibility for tax authorities to impose additional tax liabilities in respect of controlled transactions (transactions with related parties and some types of transactions with unrelated parties), provided that the transaction price is not arm's length. Management believes that its pricing policy is arm's length and it has implemented internal controls to be in compliance with the new transfer pricing legislation. Due to specific features of implementation of the Russian transfer pricing rules, the impact of any challenge of the Bank s transfer prices cannot be reliably estimated; however, it may be significant to the financial conditions and/or the overall operations of the Bank. As Russian tax legislation does not provide definitive guidance in certain areas, the Bank from time to time adopts interpretations of such uncertain areas that reduce the overall tax rate of the Bank. While management currently estimates that the tax positions and interpretations that it has taken can probably be sustained, there is a possible risk that outflow of resources will be required should such tax positions and interpretations be challenged by the relevant authorities. The impact of any such challenge cannot be reliably estimated; however, it may be significant to the financial position and/or the overall operations of the Bank. The management of the Bank believes that its interpretation of the relevant legislation is appropriate and the Bank s tax, currency and customs positions will be sustained. Therefore, at 30 June 2014 the management has not made any provision for potential tax liabilities (31 December 2013: nil). Compliance with covenants. The Bank has to comply with certain covenants, primarily related to loans from other banks and syndicated loans. These covenants include: General business covenants, such as business conduct and reasonable prudence, conformity with legal requirements of the country, in which the company is located, maintenance of accurate accounting records, implementation of controls, performance of independent audits, etc.; Restrictive covenants, including constraints (without lender s consent) in respect of dividend payments and other distributions, and changes in the shareholding structure, restrictions on individual types of activities, use of assets and certain types of transactions; Financial covenants, such as meeting certain liquidity and capital adequacy requirements, the amount of certain type of liabilities, risk per customer, profit before taxes to total assets ratio, amount of related party transactions; and Reporting covenants, obliging the Bank to provide its audited financial statements to the lender, as well as certain additional financial information and any other documents upon request. Non-compliance with such covenants may result in negative consequences for the Bank including growth in the cost of borrowings and declaration of default. The Bank was in compliance with all covenants as at 30 June 2014. 35

20 Contingencies and Commitments (Continued) Capital expenditure commitments. At 30 June 2014, the Bank had no significant capital commitments (31 December 2013: no significant capital commitments). Credit related commitments. The primary purpose of these instruments is to ensure that funds are available to a customer as required. Guarantees and standby letters of credit, which represent irrevocable assurances that the Bank will make payments in the event when a customer cannot meet its obligations to third parties, carry the same credit risk as loans. Documentary and commercial letters of credit, which are written undertakings by the Bank on behalf of a customer authorising a third party to draw drafts on the Bank up to a stipulated amount under specific terms and conditions, are collateralised by the underlying shipments of goods to which they relate or cash deposits and, therefore, carry less risk than a direct borrowing. Commitments to extend credit represent unused portions of authorisations to extend credit in the form of loans, guarantees or letters of credit. With respect to credit risk on commitments to extend credit, the Bank is potentially exposed to loss in an amount equal to the total unused commitments. However, the likely amount of loss is less than the total unused commitments, as most commitments to extend credit are contingent upon customers maintaining specific credit standards. The Bank monitors the term to maturity of credit related commitments because longer-term commitments generally have a greater degree of credit risk than shorter-term commitments. Outstanding credit related commitments are as follows: Note 30 June 2014 31 December 2013 Guarantees issued 43 604 866 40 763 174 Import letters of credit 1 514 774 - Total credit related commitments 45 119 640 40 763 174 At 30 June 2014, no provision for credit related commitments was required (31 December 2013: nil). Assets pledged and restricted. At 30 June 2014 and 31 December 2013, the Bank had the following assets pledged as collateral: 30 June 2014 31 December 2013 Assets pledged Related liability Assets pledged Related liability Loans and advances to customers (refer to Note 10) 241 390 296 076 337 847 386 624 Trading securities (refer to Note 8) 13 688 610 12 251 807 - - Total 13 930 000 12 547 883 337 847 386 624 In addition, mandatory cash balances with the CBRF in the amount of RR 944 395 thousand (31 December 2013: RR 1 212 086 thousand) represent a mandatory reserve deposit which is not available to finance the Bank s day to day operations. 36

21 Fair Value Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. Fair value measurements are analysed by level in the fair value hierarchy as follows: (i) level one are measurements at quoted prices (unadjusted) in active markets for identical assets or liabilities, (ii) level two measurements are valuation techniques with all material inputs observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices), and (iii) level three measurements are valuations not based on observable market data (that is, unobservable inputs). Management applies judgement in categorising financial instruments using the fair value hierarchy. If a fair value measurement uses observable inputs that require significant adjustment, that measurement is a Level 3 measurement. The significance of a valuation input is assessed against the fair value measurement in its entirety. Financial instruments carried at fair value. Trading securities, other securities at fair value through profit or loss for the year and derivative financial instruments are carried in the condensed statement of financial position at fair value. Fair values were determined based on quoted market prices. Cash and cash equivalents are carried at amortised cost which approximates current fair value. Assets carried at amortised cost. The estimated fair value of fixed interest rate instruments is based on estimated future cash flows expected to be received, discounted at current interest rates for new instruments with similar credit risk and remaining maturity. Discount rates used depend on the currency, maturity of the instrument and credit risk of the counterparty. Liabilities carried at amortised cost. The estimated fair value of fixed interest rate instruments with stated maturity, for which a quoted market price is not available, was estimated based on cash flows discounted at interest rates for new instruments with similar credit risk and remaining maturity. The fair value of liabilities repayable on demand or after a notice period ( demandable liabilities ) is estimated as the amount payable on demand, discounted from the first date that the amount could be required to be paid. Discount rates used were consistent with the Bank s credit risk and also depend on currency and maturity of the instrument as described above. Financial guarantees and letters of credit. Financial guarantees and letters of credit are initially recognised at their fair value, which is normally evidenced by the amount of fees received. This amount is amortised on a straight line basis over the life of the commitment. At each reporting date, the commitments are measured at the higher of (i) the unamortised balance of the amount at initial recognition and (ii) the best estimate of expenditure required to settle the commitment at the reporting date. Financial derivatives. All derivative financial instruments are carried at fair value as assets when the fair value is positive and as liabilities when the fair value is negative. Their fair values are based on observable market prices. At 30 June 2014 and 31 December 2013, fair value of financial assets and liabilities carried at amortised cost approximates their carrying value at these dates. 37

21 Fair Value (Continued) The fair value hierarchy levels for financial instruments carried at fair value are set out below: Quoted price in an active market (Level 1) 30 June 2014 31 December 2013 Valuation Quoted price in technique with an active market inputs (Level 1) observable in markets (Level 2) Valuation technique with inputs observable in markets (Level 2) FINANCIAL ASSETS Trading securities - Corporate bonds 12 895 898-14 104 674 - - Federal loan bonds (OFZ bonds) 10 468 700-6 033 319 - - Promissory notes - 8 788 336-10 731 271 - Corporate Eurobonds 3 123 267-1 474 566 - Municipal bonds 1 929 081-1 974 692 - - External government loan bonds (OVOZ) 1 245 355 - - - - Corporate shares 2 724-698 441 - Other securities at fair value through profit or loss - Eurobonds - - 452 799 - Other financial assets Foreign exchange forward contracts 17 817-2 348 - TOTAL FINANCIAL ASSETS CARRIED AT FAIR VALUE 29 682 842 8 788 336 24 740 839 10 731 271 Quoted price in an active market (Level 1) 30 June 2014 31 December 2013 Valuation Quoted price in technique with an active market inputs (Level 1) observable in markets (Level 2) Valuation technique with inputs observable in markets (Level 2) FINANCIAL LIABILITIES Other financial liabilities - Foreign exchange forward contracts 22 863-6 557 - TOTAL FINANCIAL LIABILITIES CARRIED AT FAIR VALUE 22 863-6 557-38

22 Related Party Transactions For the purposes of this condensed interim financial information, parties are considered to be related if one party has the ability to control the other party, is under common control, or can exercise significant influence over the other party in making financial or operational decisions. When considering each possible related party relationship, attention is focused on the substance of the relationship, not merely the legal form. As at 30 June 2014 and 31 December 2013, all shareholders were classified as related parties because they have significant influence on management decisions. At 30 June 2014, the outstanding balances with related parties were as follows: Shareholders 1 Entities under shareholders control Key management personnel 2 Loans and advances to customers (before impairment) 77 511 2 585 764 24 321 USD, contractual rate 11-12% p.a. - 735 665 193 Euro, contractual rate 8-11% p.a. 66 440 16 763 44 RR, contractual rate 6-16% p.a. 11 071 1 833 336 24 084 Provision for loan impairment at the year end 598 62 561 162 Due to banks, USD, contractual rate 3% p.a. 1 015 072 - - Current and settlement accounts, contractual rate 0% p.a. 44 803 452 882 9 015 Term customer deposits 304 428 162 822 13 383 Euro, contractual rate 2-4% p.a. 81 697 4 538 1 172 RR, contractual rate 0-10% p.a. 65 227 156 556 4 756 USD, contractual rate 2-4% p.a. 157 504 1 728 7 455 Subordinated loans 1 277 963 - - USD, contractual rate 12% p.a. 1 277 963 - - Guarantees issued by the Bank - 118 608 - The income and expense items with related parties for the first six months of 2014 were as follows: Shareholders 1 Entities under shareholders control Key management personnel 2 Interest income 3 453 106 958 1 224 Interest expense (89 741) (12 767) (483) Fee and commission income 522 3 579 51 Rental income - 10 440 - Fee and commission expense (74) - (25) Other administrative and other operating expenses paid (140) (16 488) 28 39

22 Related Party Transactions (Continued) At 31 December 2013, the outstanding balances with related parties were as follows: Shareholders 1 Entities under shareholders control Key management personnel 2 Loans and advances to customers as at the year end (before impairment) 17 736 1 646 429 19 458 USD, contractual rate 11-12% p.a. - 696 031 307 Euro, contractual rate 8-9% p.a. - 19 530 - RR, contractual rate 6-14% p.a. 17 736 930 868 19 151 Provision for loan impairment at the year end 70 51 146 28 Due to banks, USD, contractual rate 4% p.a. 232 745 - - Current and settlement accounts, contractual rate: 0% 51 541 246 488 12 832 Term customer deposits 276 301 216 047 33 474 Euro, contractual rate 2-3% p.a. 2 668 - - RR, contractual rate 6-11% p.a. 59 463 216 047 9 877 USD, contractual rate 2-4% p.a. 214 170-23 597 Subordinated loans 1 243 710 - - USD, contractual rate 12% p.a. 1 243 710 - - Guarantees issued by the Bank - 102 800 - The income and expense items with related parties for the first six months of 2013 were as follows: Shareholders 1 Entities under shareholders control Key management personnel 2 Interest income 6 959 46 328 1 959 Interest expense (96 403) (4 786) (1 442) Fee and commission income 449 2 864 163 Rental income - 7 460 - Other administrative and other operating expenses paid (77) (11 757) (2 403) 1 Shareholders including members of the Managing Board, who are at the same time employees of the Bank and its shareholders. 2 Key management personnel employees of the Bank, who have significant influence in making management decisions, except for those set out in footnote 1. 40

22 Related Party Transactions (Continued) Compensation to the key management personnel, including those who are shareholders of the Bank, is presented below: Expense for the six months ended 30 June 2014 Accrued liability at 30 June 2014 Expense for the six months ended 30 June 2013 Accrued liability at 31 December 2013 Short-term benefits: - Salaries 105 499-112 920 - - Accrued employee benefit costs - 18 682-21 114 Post-employment benefits: - State pension and social security costs 12 045-12 596 - Total 117 544 18 682 125 516 21 114 41