CONTENTS. Ak Bars Bank Group. Independent Auditor s Report. Consolidated Financial Statements

AK BARS BANK GROUP International Financial Reporting Standards Consolidated Financial Statements and Independent Auditor s Report Year ended 31 December 2012

CONTENTS Independent Auditor s Report Consolidated Financial Statements Consolidated Statement of Financial Position...1 Consolidated Statement of Comprehensive Income...2 Consolidated Statement of Changes in Equity...3 Consolidated Statement of Cash Flows...4 Notes to the Consolidated Financial Statements 1 Introduction...6 2 Operating Environment of the Group...7 3 Summary of Significant Accounting Policies...7 4 Critical Accounting Estimates, and Judgements in Applying Accounting Policies... 18 5 Adoption of New or Revised Standards and Interpretations... 19 6 New Accounting Pronouncements... 20 7 Cash and cash equivalents... 24 8 Securities at fair value through profit or loss... 25 9 Due from Other Banks... 28 10 Loans and Advances to Customers... 29 11 Repurchase Receivables... 40 12 Investment Properties... 41 13 Premises, Equipment and Intangible Assets... 43 14 Other Financial Assets and Other Assets... 44 15 Due to Other Banks... 46 16 Customer Accounts... 47 17 Debt Securities in Issue... 48 18 Murabaha Facility and Eurobonds... 49 19 Other Financial Liabilities... 49 20 Subordinated Debt... 50 21 Share Capital and Additional Paid-In Capital... 50 22 Interest Income and Expense... 51 23 Fee and Commission Income and Expense... 51 24 Administrative and other operating expenses... 52 25 Income Taxes... 52 26 Dividends... 54 27 Segment Analysis... 54 28 Financial Risk Management... 59 29 Management of Capital... 73 30 Contingencies and Commitments... 73 31 Transfers of Financial Assets... 77 32 Fair Value of Financial Instruments... 78 33 Presentation of Financial Instruments by Measurement Category... 82 34 Derivative Financial Instruments... 85 35 Related Party Transactions... 87 36 Transactions with Public Agencies and State-Controlled Entities... 89 37 Principal Subsidiaries and Associates... 92 38 Transactions with Shares of and Interest in Subsidiaries... 93 39 Events After the Reporting Date... 93

Consolidated Statement of Comprehensive Income Note 2012 2011 Interest income 22 24 437 729 20 817 941 Interest expense 22 (17 997 732) (16 915 323) Net interest income 6 439 997 3 902 618 (Provision)/recovery of provision for loan impairment 10 (3 115 761) 641 590 Net interest income after provision for loan impairment 3 324 236 4 544 208 Fee and commission income 23 1 518 531 1 280 009 Fee and commission expense 23 (237 841) (194 104) Losses net of gains from financial derivatives (348 189) (166 524) Gains less losses/(losses less gains) from securities at fair value through profit or loss 8 3 936 224 (2 700 278) Dividend income 484 649 341 524 Gains less losses/(losses less gains) from trading in foreign currencies 404 820 (667 472) Foreign exchange translation gains less losses 285 472 99 961 (Losses less gains)/gains less losses from trading in precious metals (64 355) 76 891 Provision for impairment of other financial assets and other assets 14 (592 138) (787 134) Impairment of investment properties 12 (542 809) - Income from investment properties 12 1 063 055 78 637 Other operating income 222 407 265 938 Administrative and other operating expenses 24 (7 085 309) (6 344 808) Profit/(loss) before tax 2 368 753 (4 173 152) Income tax (expense)/credit 25 (367 413) 720 806 Profit/(loss) for the year 2 001 340 (3 452 346) Total comprehensive income/(loss) for the year 2 001 340 (3 452 346) Total comprehensive income/(loss) is attributable to: - Owners of the Bank 1 988 433 (3 480 866) - Non-controlling interest 12 907 28 520 Total comprehensive income/(loss) for the year 2 001 340 (3 452 346) The notes set out on pages 6 to 93 form an integral part of these consolidated financial statements. 2

Consolidated Statement of Changes in Equity In thousands of Russian Roubles Note Attributable to owners of the Bank Noncontrolling Share capital Additional paid-in Accumulated deficit Total interest capital Total equity Balance at 1 January 2011 34 243 984 349 632 (5 124 923) 29 468 693-29 468 693 Total loss/ comprehensive loss for the year - - (3 480 866) (3 480 866) 28 520 (3 452 346) Dividends declared 26 - - (56 838) (56 838) - (56 838) Acquisition of controlling interest in ZAO ISK Tandem 37, 38 - - - - 848 579 848 579 Balance at 31 December 2011 34 243 984 349 632 (8 662 627) 25 930 989 877 099 26 808 088 Total profit/ comprehensive income for the year - - 1 988 433 1 988 433 12 907 2 001 340 Dividends declared 26 - - (183 716) (183 716) - (183 716) Acquisition of additional interest in ZAO ISK Tandem 37, 38 - - 79 859 79 859 (282 859) (203 000) Balance at 31 December 2012 34 243 984 349 632 (6 778 051) 27 815 565 607 147 28 422 712 The notes set out on pages 6 to 93 form an integral part of these consolidated financial statements. 3

Consolidated Statement of Cash Flows Note 2012 2011 Cash flows from operating activities Interest received 24 136 751 19 311 170 Interest paid (17 992 126) (15 436 114) Fees and commissions received 1 572 119 1 280 009 Fees and commissions paid (237 841) (194 104) Income received/(expenses paid) from securities at fair value through profit or loss 1 342 178 (1 789 568) Income received/(expenses paid) from trading in foreign currencies 129 940 (440 207) Income received from financial derivatives 87 849 24 447 Other operating income received 90 322 267 194 Expense paid on trading in precious metals (44 308) - Administrative and other operating expenses paid (7 072 461) (5 805 550) Income tax paid (146 278) (115 642) Cash flows from/(paid on) operating activities before changes in operating assets and liabilities 1 866 145 (2 898 365) Changes in operating assets and liabilities Net increase in mandatory cash balances with the Central Bank of the Russian Federation (337 021) (1 358 313) Net decrease/(increase) in securities at fair value through profit or loss 12 147 785 (4 677 443) Net decrease/(increase) in repurchase receivables 7 218 509 (14 182 063) Net increase in due from other banks (468 102) (402 028) Net increase in loans and advances to customers (31 167 057) (31 628 869) Net decrease/(increase) in other financial assets 80 615 (1 704 778) Net (increase)/decrease in other assets (661 687) 2 532 402 Net (decrease)/increase in due to other banks (2 950 408) 29 539 246 Net increase in customer accounts 11 767 122 35 545 971 Net decrease in debt securities in issue (2 080 424) (793 644) Net decrease in other financial liabilities (292 690) (171 942) Net increase in other liabilities 134 388 37 987 Net cash (paid on)/from operating activities (4 742 825) 9 838 161 Cash flows from investing activities Acquisition of investment properties 12 (765 933) (1 266 799) Proceeds from disposal of investment properties 405 741 344 486 Income from lease of investment properties 12 562 946 - Expenses on maintenance of investment properties other than depreciation 12 (203 968) - Acquisition of premises, equipment and intangible assets and investments in construction in progress 13 (861 742) (523 596) Proceeds from disposal of premises and equipment 86 244 2 430 Dividend income received 484 649 341 524 Net cash used in investing activities (292 063) (1 101 955) Cash flows from financing activities Acquisition of additional interest in subsidiaries 37, 38 (203 000) - Proceeds from issue of bonds 17 5 000 000 - Repurchase of own bonds (259 198) - Repayment of subordinated debt 20 (9 670 000) - Proceeds from issue of eurobonds 18 15 859 200 - Proceeds from subordinated deposit 20 22 630 620 - Repayment of Murabaha facility 18 (1 931 970) - Proceeds from Murabaha facility 18-1 858 270 Repayment of eurobonds 18 (8 627 080) (8 453 339) Dividends paid 26 (184 641) (55 857) Net cash from/(used in) financing activities 22 613 931 (6 650 926) Effect of exchange rate changes on cash and cash equivalents (522 816) 143 253 Net increase in cash and cash equivalents 17 056 227 2 085 280 Cash and cash equivalents at the beginning of the year 7 18 947 601 16 719 068 Cash and cash equivalents at the end of the year 7 36 003 828 18 947 601 The notes set out on pages 6 to 93 form an integral part of these consolidated financial statements. 4

Consolidated Statement of Cash Flows In 2012, the Group disposed of a part of investment properties in exchange for land plots. This transaction resulted in recognition of income from disposal but did not lead to inflow of cash and cash equivalents and accordingly was not included in the consolidated statement of cash flows. Information on this transaction is disclosed in Note 12. The notes set out on pages 6 to 93 form an integral part of these consolidated financial statements. 5

1 Introduction These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards for the year ended 31 December 2012 for OAO AK BARS BANK (the Bank ) and its subsidiaries (together referred to as the Group or Ak Bars Bank Group ). Refer to Note 37 for the principal subsidiaries of the Bank. The Bank was incorporated and is domiciled in the Russian Federation. The Bank is a joint stock company limited by shares and was set up in accordance with Russian legislation. The Bank is an official agent of the Government of the Tatarstan Republic. At 31 December 2012 and 31 December 2011 the Tatarstan Republic, a constituent of the Russian Federation, through its ministries, government agencies and related companies ultimately controlled the Bank. A substantial part of the Bank s business is connected with the Ministry of Finance of the Tatarstan Republic. If the Tatarstan Republic was to choose another bank as its official agent, the Bank s business, financial condition and results of operations could be materially adversely affected. The Bank also has significant operations with other government related entities. Refer to Notes 35 and 36. Principal activity. The Group 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 1993. The Bank participates in the state deposit insurance scheme, which was introduced by Federal Law No.177-FZ Deposits of Individuals Insurance in Russian Federation dated 23 December 2003. In accordance with Federal Law No. 174-FZ On Introduction of Amendments to Article 11 of the Federal Law Guarantees on Bank Deposits of Individuals in the Russian Federation and to some Other Laws of the Russian Federation the State Deposit Insurance Agency guarantees repayment of 100% of individual deposits up to a limit of RR 700 thousand per individual. At 31 December 2012 the Bank had 43 branches (2011: 43 branches) and 211 representative offices (2011: 162 representative offices) within the Tatarstan Republic and other regions of the Russian Federation. The number of Bank employees at 31 December 2012 was 7 079 (2011: 6 555). Registered address and place of business. The Bank s registered office is located at the following address: 1 Dekabristov st., Kazan, Tatarstan Republic, Russia, 420066. Below is the description of the main operations of the principal consolidated subsidiaries: Management Company OOO Ak Bars Ipoteka (hereinafter, Ak Bars Ipoteka ) is a company wholly owned by the Bank. The Company s principal business activity is mortgage financing. The Company operates under the Russian Federation legislation. The head office of Ak Bars Ipoteka is located at the following address: 1a Meridiannaya st., Kazan, Tatarstan Republic, Russia, 420124. The Company was established in 2005. ZAO Investment Company Ak Bars Finance (hereinafter, Ak Bars Finance ) is a company wholly owned by the Bank. The Company s principal business activities are operations with securities, broker operations and trust management. The Company operates under a brokerage, dealing and trust management license since 2005 and depository operations license since 2006. The head office of Ak Bars Finance is located at the following address: 15, bld. 2 Lubyansky Proezd, Moscow, Russia, 101000. The Company was established in 2004. OAO Leasing Company of Ak Bars Bank Finansovaya Economicheskaya Gruppa (hereinafter, Ak Bars Leasing ) is a company wholly owned by the Bank. The Company s principal business activity is leasing operations. The Company operates under the Russian Federation legislation. The head office of Ak Bars Leasing is located at the following address: 47 Schapova st., Kazan, Tatarstan Republic, Russia, 420012. The Company was established in 2003. ZAO CB Naratbank (hereinafter, Naratbank ), a limited liability commercial bank, is the Bank's subsidiary where the Bank owns 100%. Its principal business activity is corporate and retail lending operations within the Russian Federation. Naratbank operates under a banking license issued by the CBRF since 1992. The head office of Naratbank is located at the following address: 75 Moskovskaya st., Saratov, Russia, 410600. The entity was established in 1992. 6

1 Introduction (Continued) ZAO Investment-Construction Company Tandem (hereinafter, "ISK Tandem") is the Bank's subsidiary where the Bank owns 74%. The Company s principal business activity is leasing of own real estate. The Company operates under the Russian Federation legislation. The head office of ISK Tandem is located at the following address: 56 Prospect Ibragimova, Kazan, Tatarstan Republic, Russia, 420066. The Company was established in 2002. Presentation currency. These consolidated financial statements are presented in thousands of Russian Roubles ("RR thousands"), unless otherwise stated. 2 Operating Environment of the Group Russian Federation. The Russian Federation displays certain characteristics of an emerging market. It is also quite sensitive to fluctuations of oil and gas prices. Tax, currency and customs legislation is subject to varying interpretations and contributes to the challenges faced by banks operating in the Russian Federation (Note 30). The international sovereign debt crisis, stock market volatility and other risks could have a negative effect on the Russian financial and corporate sectors. Management determined loan impairment provisions by considering the economic situation and outlook at the end of the reporting period, and applied 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, no matter how likely those future events are. Refer to Note 4. The future economic development of the Russian Federation is dependent upon external factors and internal measures undertaken by the government to sustain growth, and to change the tax, legal and regulatory environment. Management believes it is taking all necessary measures to support the sustainability and development of the Group s business in the current business and economic environment. 3 Summary of Significant Accounting Policies Basis of preparation. These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ( IFRS ) under the historical cost convention, as modified by the initial recognition of financial instruments based on fair value and by the revaluation of financial instruments at fair value through profit or loss. The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated. Consolidated financial statements. Subsidiaries are those companies and other entities (including special purpose entities) in which the Group, directly or indirectly, has an interest of more than one half of the voting rights, or otherwise has power to govern the financial and operating policies so as to obtain benefits. The existence and effect of potential voting rights that are presently exercisable or presently convertible are considered when assessing whether the Group controls another entity. Subsidiaries are consolidated from the date on which control is transferred to the Group (acquisition date) and are deconsolidated from the date that control ceases. The purchase method of accounting is used to account for the acquisition of subsidiaries other than those acquired from parties under common control. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. The Group measures non-controlling interest that represents present ownership interest and entitles the holder to a proportionate share of net assets in the event of liquidation on a transaction by transaction basis, either at: (a) fair value, or (b) the non-controlling interest's proportionate share of net assets of the acquiree. Non-controlling interests that are not present ownership interests are measured at fair value. 7

3 Summary of Significant Accounting Policies (Continued) Goodwill is measured by deducting the net assets of the acquiree from the aggregate of the consideration transferred for the acquiree, the amount of non-controlling interest in the acquiree and fair value of an interest in the acquiree held immediately before the acquisition date. Any negative amount ( negative goodwill ) is recognised in profit or loss, after management reassesses whether it identified all the assets acquired and all liabilities and contingent liabilities assumed, and reviews appropriateness of their measurement. The consideration transferred for the acquiree is measured at the fair value of the assets given up, equity instruments issued and liabilities incurred or assumed, including fair value of assets or liabilities from contingent consideration arrangements, but excludes acquisition related costs such as advisory, legal, valuation and similar professional services. Transaction costs incurred for issuing equity instruments are deducted from equity; transaction costs incurred for issuing debt are deducted from its carrying amount and all other transaction costs associated with the acquisition are expensed. Non-controlling interest is that part of the net results and of the equity of a subsidiary attributable to interests which are not owned, directly or indirectly, by the Bank. Non-controlling interest forms a separate component of the Group s equity. Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated; unrealised losses are also eliminated unless the cost cannot be recovered. The Bank and all of its subsidiaries use uniform accounting policies consistent with the Group s policies. Non-controlling interest is that part of the net results and of the equity of a subsidiary attributable to interests which are not owned, directly or indirectly, by the Bank. Non-controlling interest forms a separate component of the Group s equity. Purchases and sales of non-controlling interests. The Group applies the economic entity model to account for transactions with owners of non-controlling interest. Any difference between the purchase consideration and the carrying amount of non-controlling interest acquired is recorded as a capital transaction directly in equity. The Group recognises the difference between sales consideration and carrying amount of non-controlling interest sold as a capital transaction in the consolidated statement of changes in equity. Associates. Associates are entities over which the Bank has significant influence (directly or indirectly), but not control, generally accompanying a shareholding of between 20 and 50 percent of the voting rights. Investments in associates are accounted for using the equity method of accounting, and are initially recognised at cost. The carrying amount of associates includes goodwill identified on acquisition less accumulated impairment losses, if any. Dividends received from associates reduce the carrying value of the investment in associates. Other post-acquisition changes in Group s share of net assets of an associate are recognised as follows: (i) the Group s share of profits or losses of associates is recorded in the consolidated profit or loss for the year as share of result of associates, (ii) the Group s share of other comprehensive income is recognised in other comprehensive income and presented separately, (iii); all other changes in the Group s share of the carrying value of net assets of associates are recognised in profit or loss within the share of result of associates. However, when the Group s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group s interest in the associates; unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Disposals of subsidiaries, associates or joint ventures. When the Group ceases to have control or significant influence, any retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity, are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are recycled to profit or loss. 8

3 Summary of Significant Accounting Policies (Continued) If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss, where appropriate. Financial instruments key measurement terms. Depending on their classification, financial instruments are carried at fair value or amortised cost as described below. Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm s length transaction. Fair value is the current bid price for financial assets and the current asking price for financial liabilities which are quoted in an active market. For assets and liabilities with offsetting market risks, the Group may use mid-market prices as a basis for establishing fair values for the offsetting risk positions, and apply the bid or asking price to the net open position as appropriate. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange or other institution, and those prices represent actual and regularly occurring market transactions on an arm s length basis. Valuation techniques such as discounted cash flow models or models based on recent arm s length transactions or consideration of financial data of the investees, are used to measure at fair value certain financial instruments for which external market pricing information is not available. Valuation techniques may require assumptions not supported by observable market data. Disclosures are made in these financial statements if changing any such assumptions to a reasonably possible alternative would result in significantly different profit, income, total assets or total liabilities. Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial instrument. An incremental cost is one that would not have been incurred if the transaction had not taken place. Transaction costs include fees and commissions paid to agents (including employees acting as selling agents), advisors, brokers and dealers, levies by regulatory agencies and securities exchanges, and transfer taxes and duties. Transaction costs do not include debt premiums or discounts, financing costs or internal administrative or holding costs. Amortised cost is the amount at which the financial instrument was recognised at initial recognition less any principal repayments, plus accrued interest, and for financial assets less any write-down for incurred impairment losses. Accrued interest includes amortisation of transaction costs deferred at initial recognition and of any premium or discount to maturity amount using the effective interest method. Accrued interest income and accrued interest expense, including both accrued coupon and amortised discount or premium (including fees deferred at origination, if any), are not presented separately and are included in the carrying values of related items in the consolidated statement of financial position. The effective interest rate method is a method of allocating interest income or interest expense over the relevant period, so as to achieve a constant periodic rate of interest (effective interest rate) on the carrying amount. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts (excluding future credit losses) through the expected life of the financial instrument or a shorter period, if appropriate, to the net carrying amount of the financial instrument. The effective interest rate discounts cash flows of variable interest instruments to the next interest repricing date, except for the premium or discount which reflects the credit spread over the floating rate specified in the instrument, or other variables that are not reset to market rates. Such premiums or discounts are amortised over the whole expected life of the instrument. The present value calculation includes all fees paid or received between parties to the contract that are an integral part of the effective interest rate. Initial recognition of financial instruments. Derivatives and securities at fair value through profit or loss are initially recorded at fair value. All other financial instruments are initially recorded at fair value plus transaction costs. Fair value at initial recognition is best evidenced by the transaction price. A gain or loss on initial recognition is only recorded if there is a difference between fair value and transaction price which can be evidenced by other observable current market transactions in the same instrument or by a valuation technique whose inputs include only data from observable markets. All purchases and sales of financial assets that require delivery within the time frame established by regulation or market convention ( regular way purchases and sales) are recorded at trade date, which is the date on which the Group commits to deliver a financial asset. All other purchases are recognised when the entity becomes a party to the contractual provisions of the instrument. 9

3 Summary of Significant Accounting Policies (Continued) Derecognition of financial assets. The Group derecognises financial assets when (a) the assets are redeemed or the rights to cash flows from the assets otherwise expired or (b) the Group has transferred the rights to the cash flows from the financial assets or entered into a qualifying pass-through arrangement while (i) also transferring substantially all risks and rewards of ownership of the assets or (ii) neither transferring nor retaining substantially all risks and rewards of ownership, but not retaining control. Control is retained if the counterparty does not have the practical ability to sell the asset in its entirety to an unrelated third party without needing to impose restrictions on the sale. Cash and cash equivalents. Cash and cash equivalents are items which can be converted to known amounts of cash and which are subject to an insignificant risk of changes in value within one business day. All short term interbank placements, beyond overnight placements, are included in due from other banks. Funds of restricted nature are excluded from cash and cash equivalents. Cash and cash equivalents are carried at amortised cost. Mandatory cash balances with the CBRF. Mandatory cash balances with the CBRF are carried at amortised cost and represent non-interest bearing mandatory reserve deposits which are not available to finance the Group s day to day operations and hence are not considered as part of cash and cash equivalents for the purposes of the consolidated statement of cash flows. Securities at fair value through profit or loss are initially carried at fair value. Interest earned on securities at fair value through profit or loss calculated using the effective interest method is presented in the consolidated statement of comprehensive income as interest income. Dividends are included in dividend income when the Group s right to receive the dividend payment is established and inflow of economic benefits is probable. All other elements of the changes in the fair value and gains or losses on derecognising are recorded in profit or loss as gains less losses from securities at fair value through profit or loss in the period in which they arise. Due from other banks. Amounts due from other banks are recorded when the Group advances money to counterparty banks with no intention of trading the resulting unquoted non-derivative receivable due on fixed or determinable dates. Amounts due from other banks are carried at amortised cost. Loans and advances to customers. Loans and advances to customers are recorded when the Group advances money to purchase or originate an unquoted non-derivative receivable from a customer due on fixed or determinable dates, and has no intention of trading the receivable. Loans and advances to customers are carried at amortised cost. Impairment of financial assets carried at amortised cost. Impairment losses are recognised in profit or loss for the year when incurred as a result of one or more events ( loss events ) that occurred after the initial recognition of the financial asset and which have an impact on the amount or timing of the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. If the Group determines that no objective evidence exists that impairment was incurred for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics, and collectively assesses them for impairment. The primary factors that the Group considers in determining whether a financial asset is impaired are its overdue status and realisability of related collateral, if any. The following other principal criteria are also used to determine whether there is objective evidence that an impairment loss has occurred: any instalment is overdue and the late payment cannot be attributed to a delay caused by the settlement systems; the borrower experiences a significant financial difficulty as evidenced by the borrower s financial information that the Group obtains; the borrower considers bankruptcy or a financial reorganisation; there is an adverse change in the payment status of the borrower as a result of changes in the national or local economic conditions that impact the borrower; or the value of collateral significantly decreases as a result of deteriorating market conditions. 10

3 Summary of Significant Accounting Policies (Continued) For the purposes of a collective evaluation of impairment, financial assets are grouped on the basis of similar credit risk characteristics. Those characteristics are relevant to the estimation of future cash flows for groups of such assets by being indicative of the debtors ability to pay all amounts due according to the contractual terms of the assets being evaluated. Securities at fair value through profit or loss. Securities at fair value through profit or loss are financial assets designated irrevocably, at initial recognition, into this category. Management designates securities into this category only if (a) such classification eliminates or significantly reduces an accounting mismatch that would otherwise arise from assessing assets or liabilities or recognising the relevant gains and losses on them on different bases; or (b) a group of financial assets, financial liabilities or both is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information on that basis is regularly provided to and reviewed by the Group s key management personnel. Future cash flows in a group of financial assets that are collectively evaluated for impairment, are estimated on the basis of the contractual cash flows of the assets and the experience of management in respect of the extent to which amounts will become overdue as a result of past loss events and the success of recovery of overdue amounts. Past experience is adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect past periods, and to remove the effects of past conditions that do not exist currently. If the terms of an impaired financial asset held at amortised cost are renegotiated or otherwise modified because of financial difficulties of the borrower or issuer, impairment is measured using the original effective interest rate before the modification of terms. The renegotiated asset is then derecognised and a new asset is recognised at its fair value only if the risks and rewards of the asset substantially changed. This is normally evidenced by a substantial difference between the present values of the original cash flows and the new expected cash flows. Impairment losses are always recognised through an allowance account to write down the asset s carrying amount to the present value of expected cash flows (which exclude future credit losses that have not been incurred) discounted at the original effective interest rate of the asset. The calculation of the present value of the estimated future cash flows of a collateralised financial asset reflects the cash flows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor s credit rating), the previously recognised impairment loss is reversed by adjusting the allowance account through profit or loss for the year. Uncollectible assets are written off against the related impairment loss provision after all the necessary procedures to recover the asset have been completed and the amount of the loss has been determined. Subsequent recoveries of amounts previously written off are credited to impairment loss account in profit or loss for the year. Repossessed collateral. Repossessed collateral represents financial and non-financial assets acquired by the Group in settlement of overdue loans. The assets are initially recognised at fair value when acquired and included in premises and equipment, other financial assets or inventories within other assets depending on their nature and the Group's intention in respect of recovery of these assets, and are subsequently remeasured and accounted for in accordance with the accounting policies for these categories of assets. Where repossessed collateral results in acquiring control over a business, the business combination is accounted for using the purchase method of accounting with fair value of the settled loan representing the cost of acquisition (refer to the accounting policy for consolidation). Accounting policy for associates is applied to repossessed shares where the Group obtains significant influence, but not control. The cost of the associate is the fair value of the loan settled by repossessing the pledged shares. 11

3 Summary of Significant Accounting Policies (Continued) Credit related commitments. The Group enters into credit related commitments, including commitments to provide letters of credit, loan and financial guarantees. Financial guarantees represent irrevocable assurances to make payments in the event that a customer cannot meet its obligations to third parties, and carry the same credit risk as loans. Financial guarantees and commitments to provide a loan 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, except for commitments to originate loans if it is probable that the Group will enter into a specific lending arrangement and does not expect to sell the resulting loan shortly after origination; such loan commitment fees are deferred and included in the carrying value of the loan on initial recognition. At the end of each reporting period, the commitments are measured at the higher of (i) the remaining unamortised balance of the amount at initial recognition and (ii) the best estimate of expenditure required to settle the commitment at the end of each reporting period. Sale and repurchase agreements. Sale and repurchase agreements ( repo agreements ), which effectively provide a lender s return to the counterparty, are treated as secured financing transactions. Securities sold under such sale and repurchase agreements are not derecognised. The securities are not reclassified in the consolidated statement of financial position unless the transferee has the right by contract or custom to sell or repledge the securities, in which case they are reclassified as repurchase receivables. The corresponding liability is presented within amounts due to other banks or customer accounts. Securities purchased under agreements to resell ( reverse repo agreements ), which effectively provide a lender s return to the Group, are recorded as due from other banks or loans and advances to customers, as appropriate. The difference between the sale and repurchase price is treated as interest income and accrued over the life of repo agreements using the effective interest method. Securities lent to counterparties for a fixed fee are retained in the consolidated financial statements in their original category in the statement of financial position unless the counterparty has the right by contract or custom to sell or repledge the securities, in which case they are reclassified and presented separately. Securities borrowed for a fixed fee are not recorded in the consolidated financial statements, unless these are sold to third parties, in which case the purchase and sale are recorded in profit or loss within gains less losses arising from securities at fair value through profit or loss. The obligation to return the securities is recorded at fair value in customer accounts or due to other banks. Promissory notes purchased. Promissory notes purchased are included in trading securities, or in due from other banks or in loans and advances to customers, depending on their substance and are recorded, subsequently remeasured and accounted for in accordance with the accounting policies for these categories of assets. Precious metals. The Group has a practice of taking delivery of precious metals and selling them within a short period after delivery, for the purpose of generating a profit from short-term fluctuations in price or dealer s margin. Precious metals are carried at fair value with gains or losses recognised in profit or loss for the year. Investment property. Investment property is property held by the Group to earn rental income or for capital appreciation, or both, and is not occupied by the Group. Investment property includes assets under construction for future use as investment property. Investment properties are stated at cost less accumulated depreciation and provision for impairment, where required. If any indication exists that investment properties may be impaired, the Group estimates the recoverable amount as the higher of value in use and fair value less costs to sell. The carrying amount of an investment property is written down to its recoverable amount through a charge to profit or loss for the year. An impairment loss recognised in prior years is reversed if there has been a subsequent change in the estimates used to determine the asset s recoverable amount. 12

3 Summary of Significant Accounting Policies (Continued) Subsequent expenditure is capitalised only when it is probable that future economic benefits associated with it will flow to the Group, and the cost can be measured reliably. All other repairs and maintenance costs are expensed when incurred. If an investment property becomes owner-occupied, it is reclassified to premises and equipment, and its carrying amount at the date of reclassification becomes its deemed cost to be subsequently depreciated. Premises and equipment. Premises and equipment are stated at cost, restated to the equivalent purchasing power of the Russian Rouble at 31 December 2002 for assets acquired prior to 1 January 2003 less accumulated depreciation and provision for impairment, where required. Costs of minor repairs and maintenance are expensed when incurred. Costs of replacing major parts or components of premises and equipment items are capitalised, and the replaced part is retired. At the end of each reporting period management assesses whether there is any indication of impairment of premises and equipment. If any such indication exists, management estimates the recoverable amount, which is determined as the higher of an asset s fair value less costs to sell and its value in use. The carrying amount is reduced to the recoverable amount and the impairment loss is recognised in profit or loss for the year to the extent it exceeds the previous revaluation surplus in equity. An impairment loss recognised for an asset in prior years is reversed if there has been a change in the estimates used to determine the asset s value in use or fair value less costs to sell. Gains and losses on disposals determined by comparing proceeds with carrying amount are recognised in profit or loss for the year. Depreciation. Land and construction in progress are not depreciated. Depreciation on other items of premises and equipment and investment property is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives at the following annual rates: Premises 2%; Equipment 20%. The residual value of an asset is the estimated amount that the Group would currently obtain from disposal of the asset less the estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life. The residual value of an asset is nil if the Group expects to use the asset until the end of its physical life. The assets residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. Intangible assets. The Group s intangible assets have definite useful life and primarily include capitalised computer software. Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. Development costs that are directly associated with identifiable and unique software controlled by the Group are recorded as intangible assets if the inflow of incremental economic benefits exceeding costs is probable. Capitalised costs include staff costs of the software development team and an appropriate portion of relevant overheads. All other costs associated with computer software, e.g. its maintenance, are expensed when incurred. Capitalised computer software is amortised on a straight line basis over expected useful lives of 5 years. Operating leases. Where the Group is a lessee in a lease which does not transfer substantially all the risks and rewards incidental to ownership from the lessor to the Group, the total lease payments are charged to the consolidated statement of comprehensive income on a straight-line basis over the period of the lease. When assets are leased out under an operating lease, the lease payments receivable are recognised as rental income on a straight-line basis over the lease term. 13

3 Summary of Significant Accounting Policies (Continued) Finance lease receivables. Where the Group is a lessor in a lease which transfers substantially all the risks and rewards incidental to ownership to the lessee, the assets leased out are presented as a finance lease receivable and carried at the present value of the future lease payments. Finance lease receivables are initially recognised at commencement (when the lease term begins) using a discount rate determined at inception (the earlier of the date of the lease agreement and the date of commitment by the parties to the principal provisions of the lease). The difference between the gross receivable and the present value represents unearned finance income. This income is recognised over the term of the lease using the net investment method (before tax), which reflects a constant periodic rate of return. Incremental costs directly attributable to negotiating and arranging the lease are included in the initial measurement of the finance lease receivable and reduce the amount of income recognised over the lease term. Finance income from leases is recorded within other operating income in profit or loss for the year. Impairment losses are recognised in profit and loss for the year when incurred as a result of one or more events ( loss events ) that occurred after the initial recognition of finance lease receivables. The Group uses the same principal criteria to determine whether there is objective evidence that an impairment loss has occurred, as for loans carried at amortised cost. Impairment losses are recognised through an allowance account to write down the receivables net carrying amount to the present value of expected cash flows (which exclude future credit losses that have not been incurred), discounted at the interest rates implicit in the finance leases. The estimated future cash flows reflect the cash flows that may result from obtaining and selling the assets subject to the lease. Due to other banks. Amounts due to other banks are recorded when money or other assets are advanced to the Group by counterparty banks. The non-derivative liability is carried at amortised cost. If the Group purchases its own debt, the liability is removed from the consolidated statement of financial position and the difference between the carrying amount of the liability and the consideration paid is included in gains or losses arising from early retirement of debt. Customer accounts. Customer accounts are non-derivative liabilities to individuals, state or corporate customers and are carried at amortised cost. Debt securities in issue. Debt securities in issue include promissory notes and debentures issued by the Group. Debt securities are stated at amortised cost. If the Group purchases its own debt securities in issue, they are removed from the consolidated statement of financial position and the difference between the carrying amount of the liability and the consideration paid is included in costs of repurchase of debt securities in issue. A significant change in terms of the existing debt securities in issue or in a portion thereof is accounted for as a derecognition of the original financial liability and recognition of the new financial liability. Terms are considered significant if the present value of future cash flows discounted under the new terms at the effective interest rate is different from the present value of the residual cash flows under the original financial liability by at least 10%. Murabaha Facility and Eurobonds. Murabaha facility and Eurobonds represent medium and long-term funds attracted by the Group on the international financial markets. They are carried at amortised cost. If the Group purchases its Eurobonds or repurchases goods under the Murabaha facility, they are removed from the consolidated statement of financial position and the difference between the carrying amount of the liability and the consideration paid is included in gains or losses arising from early retirement of debt. Subordinated debt. Subordinated debt represents long-term funds attracted by the Group from the Russian counterparties and are carried at amortised cost. Derivative financial instruments. Derivative financial instruments, including foreign exchange contracts, precious metals forward contracts, currency and interest swaps and forwards are carried at their fair value. 14

3 Summary of Significant Accounting Policies (Continued) Certain derivative instruments embedded in other financial instruments are treated as separate derivative instruments when: a. their risks and characteristics are not directly related to those of the host contract; b. a separated instrument with the same conditions as an embedded derivative meets the requirements of a derivative financial instrument; and c. a hybrid (combined) instrument is not carried at fair value through profit or loss (thus a derivative financial instrument embedded in a financial asset or financial liability at fair value through profit or loss is not separated). All derivative instruments are carried as assets when fair value is positive, and as liabilities when fair value is negative. Changes in the fair value of derivative instruments are included in profit and loss for the year (gains less losses on derivatives). The Group does not apply hedge accounting. Income taxes. Income taxes have been provided for in the consolidated financial statements in accordance with legislation enacted or substantively enacted by the end of the reporting period. The income tax charge/(credit) comprises current tax and deferred tax and is recognised in profit or loss for the year, except if it is recognised in other comprehensive income or directly in equity because it relates to transactions that are also recognised, in the same or a different period, in other comprehensive income or directly in equity. Current tax is the amount expected to be paid to, or recovered from, the taxation authorities in respect of taxable profits or losses for the current and prior periods. Taxable profits or losses are based on estimates if financial statements are authorised prior to filing relevant tax returns. Taxes other than on income are recorded within administrative and other operating expenses. Deferred income tax is calculated using the balance sheet liability method for tax loss carry forwards and temporary differences arising between the tax bases of assets and liabilities and their carrying amounts for consolidated financial reporting purposes. In accordance with the initial recognition exemption, deferred taxes are not recorded for temporary differences on initial recognition of an asset or a liability in a transaction other than a business combination if the transaction, when initially recorded, affects neither accounting nor taxable profit. Deferred tax balances are measured at tax rates enacted or substantively enacted at the reporting date, which are expected to apply to the period when the temporary differences will reverse or the tax loss carry forwards will be utilised. Deferred tax assets and liabilities are netted only within the individual companies of the Group. Deferred tax assets for deductible temporary differences and tax loss carry forwards are recorded only to the extent that it is probable that future taxable profit will be available against which the deductions can be utilised. Deferred income tax is provided on post acquisition retained earnings and other post acquisition movements in reserves of subsidiaries, except where the Group controls the subsidiary s dividend policy and it is probable that the difference will not reverse through dividends, or otherwise, in the foreseeable future. Uncertain tax positions. The Group's uncertain tax positions are reassessed by management at every reporting date. Liabilities are recorded for income tax positions that are determined by management as more likely than not to result in additional taxes being levied if the positions were to be challenged by the tax authorities. The assessment is based on the interpretation of tax laws that have been enacted or substantively enacted by the reporting date and any known court or other rulings on such issues. Liabilities for penalties, interest and taxes other than on income are recognised based on management s best estimate of the expenditure required to settle the obligations at the end of the reporting period. Provisions for liabilities and charges. Provisions for liabilities and charges are non-financial liabilities of uncertain timing or amount. They are accrued when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. 15

3 Summary of Significant Accounting Policies (Continued) Trade and other payables. Trade payables are accrued when the counterparty has performed its obligations under the contract and are carried at amortised cost. Share capital. Ordinary shares and discretionary dividends are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the amount received from the issue of shares. Any excess of the fair value of consideration received over the par value of shares issued is recorded as additional paid-in capital in equity. Additional paid-in capital. Additional paid-in capital represents equity contributions from shareholders that do not increase share capital and do not give additional voting rights to the contributors. Additional paid-in capital is recorded as a movement in equity in the period it is received from the shareholders. Dividends. Dividends are recorded in equity in the period in which they are declared. Any dividends declared after the end of the reporting period and before the financial statements are authorised for issue, are disclosed in the subsequent events note. The statutory accounting reports of the Bank are the basis for profit distribution and other appropriations. Russian legislation identifies the basis of distribution as the current year net profit. Income and expense recognition. Interest income and expense are recorded for all debt instruments on an accrual basis using the effective interest method. This method defers, as part of interest income or expense, all fees paid or received between the parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. Fees integral to the effective interest rate include origination fees received or paid by the entity relating to the creation or acquisition of a financial asset or issuance of a financial liability, for example fees for evaluating creditworthiness, evaluating and recording guarantees or collateral, negotiating the terms of the instrument and for processing transaction documents. Commitment fees received by the Group to originate loans at market interest rates are integral to the effective interest rate if it is probable that the Group will enter into a specific lending arrangement and does not expect to sell the resulting loan shortly after origination. The Group does not designate loan commitments as financial liabilities at fair value through profit or loss. Where loans and other debt instruments become doubtful of collection, they are written down to the present value of expected cash inflows and interest income is thereafter recorded for the unwinding of the present value discount based on the asset s effective interest rate which was used to measure the impairment loss. All other fees, commissions and other income and expense items are generally recorded on an accrual basis by reference to completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be provided. Foreign currency translation. The functional currency of each of the Group s consolidated entities is the currency of the primary economic environment in which the entity operates. The functional currency of the Bank and its subsidiaries, and the Group s presentation currency, is the national currency of the Russian Federation, Russian Roubles ("RR"). Monetary assets and liabilities are translated into each entity s functional currency at the official exchange rate of the CBRF at the end of the respective reporting period. Foreign exchange gains and losses resulting from the settlement of transactions and from the translation of monetary assets and liabilities into each entity s functional currency at year-end official exchange rates of the CBRF, are recognised in profit or loss for the year (as foreign exchange translation gains less losses). Translation at year-end rates does not apply to non-monetary items that are measured at historical cost. Non-monetary items measured at fair value in a foreign currency, including equity investments, are translated using the exchange rates at the date when the fair value was determined. Effects of exchange rate changes on non-monetary items measured at fair value in a foreign currency are recorded as part of the fair value gain or loss. At 31 December 2012, the principal rate of exchange used for translating foreign currency balances was USD 1 = RR 30.3727 (2011: USD 1 = RR 32.1961). 16

3 Summary of Significant Accounting Policies (Continued) Fiduciary assets. Assets held by the Group in its own name, but on the account of third parties, are not reported in the consolidated statement of financial position. Commissions received from fiduciary activities are shown in fee and commission income. Offsetting. Financial assets and liabilities are offset and the net amount is reported in the consolidated statement of financial position only where there is a legally enforceable right to offset the recognised amounts and there is an intention to either settle on a net basis or to realise the asset and to settle the liability simultaneously. Staff costs and related contributions. Wages, salaries, contributions to the Russian Federation state pension and social insurance funds, paid annual leave and sick leave, bonuses, and non-monetary benefits are accrued in the year in which the associated services are rendered by the employees of the Group. The Group has no legal or constructive obligation to make pension or similar benefit payments beyond the payments to the statutory defined contribution scheme. Segment reporting. Operating segments are reported in a manner consistent with the internal reporting provided to the Management Board, Group s chief operating decision maker. Segments whose revenue, result or assets are ten percent or more of all the segments are reported separately. Accounting for the effects of hyperinflation. The Russian Federation has previously experienced relatively high levels of inflation and was considered to be hyperinflationary as defined by IAS 29, Financial Reporting in Hyperinflationary Economies ( IAS 29 ). IAS 29 requires that the consolidated financial statements prepared in the currency of a hyperinflationary economy be stated in terms of the measuring unit current at the reporting date. It states that reporting operating results and financial position in the local currency without restatement is not useful because money loses purchasing power at such a rate that the comparison of amounts from transactions and other events that have occurred at different times, even within the same accounting period, is misleading. The characteristics of the economic environment of the Russian Federation indicate that hyperinflation has ceased effective from 1 January 2003. Restatement procedures of IAS 29 are therefore only applied to premises and equipment acquired or revalued and share capital paid prior to that date. For these balances, the amounts expressed in the measuring unit current at as 31 December 2002 are the basis for the carrying amounts in these consolidated financial statements. The restatement was calculated using the conversion factors derived from the Russian Federation Consumer Price Index ( CPI ), published by the Russian Statistics Agency, and from indices obtained from other sources for years prior to 1992. Refer to Note 21. Changes in presentation. Where necessary, corresponding figures have been adjusted to conform to the presentation of the current year amounts. The effect of reclassifications on the 2011 results for presentation purposes was as follows: As originally presented Reclassification As reclassified Income from investment properties - 78 637 78 637 Other operating income 344 575 (78 637) 265 978 The reclassifications had no impact on any other captions in the consolidated financial statements and related note disclosures. The changes in presentation adopted in 2012 did not have any impact on the consolidated statement of financial position and the Group, therefore, does not present the information as of 1 January 2011. 17

4 Critical Accounting Estimates, and Judgements in Applying Accounting Policies The Group makes estimates and assumptions that affect the amounts recognised in the financial statements, 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 consolidated 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 Group regularly reviews its loan portfolios to assess impairment. In determining whether an impairment loss should be recorded in the statement of comprehensive income, the Group makes judgements as to whether there is any observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of loans 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. Principal criteria used to determine whether there is objective evidence that an impairment loss has occurred are as follows: any instalment is overdue and the late payment cannot be attributed to a delay caused by the settlement systems; 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; information that the borrower experiences a significant financial difficulty as evidenced by the borrower s financial information that the Group obtains; the borrower considers bankruptcy or a financial reorganisation; the value of collateral significantly decreases as a result of deteriorating market conditions. 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. To the extent that the assessed probability of default differs by +/-5% (2011:+/-5%) of the total loans and advances to customers, the provision would be approximately RR 218 561 thousand (2011: RR 183 834 thousand) higher or lower. Tax legislation. Russian tax, currency and customs legislation is subject to varying interpretations. Refer to Note 30. Deferred income tax asset recognition. The recognised deferred income tax asset represents income taxes recoverable through future deductions from taxable profits and is recorded on the consolidated statement of financial position. Deferred income tax assets are recorded to the extent that realisation of the related tax benefit is probable. The future taxable profits and the amount of tax benefits that are probable in the future are based on a medium- and long-term business plan of the Group prepared by management. The business plan is based on management expectations that are believed to be reasonable under the circumstances. Key assumptions used in the business plan are the following: increase of the loan portfolio by 10% p.a., increase in net interest income by 10% p.a., increase of MICEX index by 5% p.a., reduced growth rate of the Group's operating expenses starting from 2013. In accordance with this forecast the cumulative taxable profit of the Group for the next 5 years is estimated in the amount of approximately RR 18.4 billion. 18

4 Critical Accounting Estimates, and Judgements in Applying Accounting Policies (Continued) Classification of certain assets as investment properties. In August 2011, the Group acquired the retail and entertainment centre Tandem, having obtained control over ZAO ISK Tandem. In March 2010, the Group purchased a hotel via investments into the Mutual Investment Fund Ak Bars Zemelniy Fond. The management of the Group applied professional judgement in classification of the hotel and retail and entertainment centre as investment properties in the consolidated financial statements based on the substance of the transactions. The principal considerations that the Group analyses to form a professional judgement are analysis of the economic substance of the transactions and the management's intention to sell these assets in future. The management of the Group also analyse whether a management function and provision of services is carried out by a third party to whom the Group transferred those responsibilities under lease agreement, whether the Group has a power to make significant operating and financing decisions regarding the operations of the hotel, whether the return accruing to the Group is based on the value of hotel and retail and entertainment centre, duration of the lease agreement and renewability condition. Management believes that classification of the hotel and the retail and entertainment centre as the investment property in the consolidated financial statements complies with the requirements of IAS 40, reflects the economic substance of the transaction, and will contribute to better understanding of these transactions by the users of the consolidated financial statements. Impairment of investment property. The Group regularly assesses its investment property for impairment. In determining whether an impairment loss should be recorded in profit or loss for the year, the Group makes judgements as to whether there is any indication that its investment properties have suffered a decrease in their carrying value as compared to similar properties based on the reports of independent, professionally qualified valuers. If the carrying value of an investment property exceeds its fair value the Group recognises impairment of the investment property in profit or loss for the year. Initial recognition of related party transactions. In the normal course of business the Group enters into transactions with its related parties. IAS 39, Financial Instruments: Recognition and Measurement, 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 Notes 35 and 36. Going concern. Management prepared these consolidated financial statements on a going concern basis. Refer to Note 28. 5 Adoption of New or Revised Standards and Interpretations The following new standards and interpretations became effective for the Group from 1 January 2012: Disclosures Transfers of Financial Assets Amendments to IFRS 7 (issued in October 2010 and effective for annual periods beginning on or after 1 July 2011). The amendment requires additional disclosures in respect of risk exposures arising from transferred financial assets. The amendment includes a requirement to disclose by class of asset the nature, carrying amount and a description of the risks and rewards of financial assets that have been transferred to another party, yet remain on the entity's balance sheet. Disclosures are also required to enable a user to understand the amount of any associated liabilities, and the relationship between the financial assets and associated liabilities. Where financial assets have been derecognised, but the entity is still exposed to certain risks and rewards associated with the transferred asset, additional disclosure is required to enable the effects of those risks to be understood. The standard requires these new disclosures to be presented in a separate note. Refer to Note 31. 19

5 Adoption of New or Revised Standards and Interpretations (Continued) Recovery of Underlying Assets Amendments to IAS 12 (issued in December 2010 and effective for annual periods beginning on or after 1 January 2012). The amendment introduced a rebuttable presumption that an investment property carried at fair value is recovered entirely through sale. This presumption is rebutted if the investment property is held within a business model whose objective is to consume substantially all of the economic benefits embodied in the investment property over time, rather than through sale. SIC-21, Income Taxes Recovery of Revalued Non-Depreciable Assets, which addresses similar issues involving non-depreciable assets measured using the revaluation model in IAS 16, Property, Plant and Equipment, was incorporated into IAS 12 after excluding from its scope investment properties measured at fair value. Unless otherwise stated above, the amendments and interpretations did not have any significant effect on the Group s consolidated financial statements. Other revised standards and interpretations: The amendments to IFRS 1, First-time adoption of IFRS, relating to severe hyperinflation and eliminating references to fixed dates for certain exceptions and exemptions, did not have any impact on these financial statements. The amendment to IAS 12, Income taxes, which introduced a rebuttable presumption that an investment property carried at fair value is recovered entirely through sale, did not have a material impact on these consolidated financial statements. 6 New Accounting Pronouncements Certain new standards and interpretations have been issued that are mandatory for the annual periods beginning on or after 1 January 2012 or later, and which the Group has not early adopted: IFRS 10, Consolidated Financial Statements (issued in May 2011 and effective for annual periods beginning on or after 1 January 2013), replaces all of the guidance on control and consolidation in IAS 27, Consolidated and Separate Financial Statements, and SIC-12, Consolidation - special purpose entities. IFRS 10 changes the definition of control so that the same criteria are applied to all entities to determine control. This definition is supported by extensive application guidance. The Group is currently assessing the impact of the amended standard on its consolidated financial statements. IFRS 11, Joint Arrangements, (issued in May 2011 and effective for annual periods beginning on or after 1 January 2013), replaces IAS 31, Interests in Joint Ventures, and SIC-13, Jointly Controlled Entities Non-Monetary Contributions by Venturers. Changes in the definitions have reduced the number of types of joint arrangements to two: joint operations and joint ventures. The existing policy choice of proportionate consolidation for jointly controlled entities has been eliminated. Equity accounting is mandatory for participants in joint ventures. The Group is currently assessing the impact of the new standard on its consolidated financial statements. IFRS 12, Disclosure of Interests in Other Entities, (issued in May 2011 and effective for annual periods beginning on or after 1 January 2013), applies to entities that have an interest in a subsidiary, a joint arrangement, an associate or an unconsolidated structured entity. It replaces the disclosure requirements currently found in IAS 28, Investments in Associates. IFRS 12 requires entities to disclose information that helps financial statement readers to evaluate the nature, risks and financial effects associated with the entity s interests in subsidiaries, associates, joint arrangements and unconsolidated structured entities. To meet these objectives, the new standard requires disclosures in a number of areas, including significant judgements and assumptions made in determining whether an entity controls, jointly controls, or significantly influences its interests in other entities, extended disclosures on share of non-controlling interests in group activities and cash flows, summarised financial information of subsidiaries with material non-controlling interests, and detailed disclosures of interests in unconsolidated structured entities. The Group is currently assessing the impact of the new standard on its consolidated financial statements. IFRS 13, Fair Value Measurement, (issued in May 2011 and effective for annual periods beginning on or after 1 January 2013), aims to improve consistency and reduce complexity by providing a revised definition of fair value, and a single source of fair value measurement and disclosure requirements for use across IFRSs. The Group is currently assessing the impact of the standard on its consolidated financial statements. 20

6 New Accounting Pronouncements (Continued) IAS 27, Separate Financial Statements, (revised in May 2011 and effective for annual periods beginning on or after 1 January 2013), was changed and its objective is now to prescribe the accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates when an entity prepares separate financial statements. The guidance on control and consolidated financial statements was replaced by IFRS 10, Consolidated Financial Statements. The Group is currently assessing the impact of the amended standard on its consolidated financial statements. IAS 28, Investments in Associates and Joint Ventures, (revised in May 2011 and effective for annual periods beginning on or after 1 January 2013). The amendment of IAS 28 resulted from the Board s project on joint ventures. When discussing that project, the Board decided to incorporate the accounting for joint ventures using the equity method into IAS 28 because this method is applicable to both joint ventures and associates. With this exception, other guidance remained unchanged. The Group is currently assessing the impact of the amended standard on its consolidated financial statements. Amendments to IAS 1, Presentation of Financial Statements (issued in June 2011, effective for annual periods beginning on or after 1 July 2012), changes the disclosure of items presented in other comprehensive income. The amendments require entities to separate items presented in other comprehensive income into two groups, based on whether or not they may be reclassified to profit or loss in the future. The suggested title used by IAS 1 has changed to statement of profit or loss and other comprehensive income. The Group expects the amended standard to change presentation of its consolidated financial statements, but have no impact on measurement of transactions and balances. Amended IAS 19, Employee Benefits (issued in June 2011, effective for periods beginning on or after 1 January 2013), makes significant changes to the recognition and measurement of defined benefit pension expense and termination benefits, and to the disclosures for all employee benefits. The standard requires recognition of all changes in the net defined benefit liability (asset) when they occur, as follows: (i) service cost and net interest in profit or loss; and (ii) remeasurements in other comprehensive income. The Group is currently assessing the impact of the amended standard on its consolidated financial statements. Disclosures Offsetting Financial Assets and Financial Liabilities - Amendments to IFRS 7 (issued in December 2011 and effective for annual periods beginning on or after 1 January 2013). The amendment requires disclosures that will enable users of an entity s financial statements to evaluate the effect or potential effect of netting arrangements, including rights of set-off. The amendment will have an impact on disclosures but will have no effect on measurement and recognition of financial instruments. Amendments to IFRS 1 First-time adoption of International Financial Reporting Standards Government loans (issued in March 2012 and effective for annual periods beginning 1 January 2013). The amendments, dealing with loans received from governments at a below market rate of interest, give first-time adopters of IFRSs relief from full retrospective application of IFRSs when accounting for these loans on transition. This will give first-time adopters the same relief as existing preparers. The amendment will not have an impact on the Group s consolidated financial statements. Improvements to International Financial Reporting Standards (issued in May 2012 and effective for annual periods beginning 1 January 2013). The improvements consist of changes to five standards. IFRS 1 was amended to (i) clarify that an entity that resumes preparing its IFRS financial statements may either repeatedly apply IFRS 1 or apply all IFRSs retrospectively as if it had never stopped applying them, and (ii) to add an exemption from applying IAS 23, Borrowing costs, retrospectively by first-time adopters. IAS 1 was amended to clarify that explanatory notes are not required to support the third balance sheet presented at the beginning of the preceding period when it is provided because it was materially impacted by a retrospective restatement, changes in accounting policies or reclassifications for presentation purposes, while explanatory notes will be required when an entity voluntarily decides to provide additional comparative statements. IAS 16 was amended to clarify that servicing equipment that is used for more than one period is classified as property, plant and equipment rather than inventory. IAS 32 was amended to clarify that certain tax consequences of distributions to owners should be accounted for in the income statement as was always required by IAS 12. IAS 34 was amended to bring its requirements in line with IFRS 8. IAS 34 will require disclosure of a measure of total assets and liabilities for an operating segment only if such information is regularly provided to chief operating decision maker and there has been a material change in those measures since the last annual financial statements. The Group is currently assessing the impact of the amendments on its consolidated financial statements. 21

6 New Accounting Pronouncements (Continued) Transition Guidance Amendments to IFRS 10, IFRS 11 and IFRS 12 (issued in June 2012 and effective for annual periods beginning 1 January 2013). The amendments clarify the transition guidance in IFRS 10, Consolidated Financial Statements. Entities adopting IFRS 10 should assess control at the first day of the annual period in which IFRS 10 is adopted, and if the consolidation conclusion under IFRS 10 differs from IAS 27 and SIC 12, the immediately preceding comparative period (that is, year 2012 for a calendar year-end entity that adopts IFRS 10 in 2013) is restated, unless impracticable. The amendments also provide additional transition relief in IFRS 10, IFRS 11, Joint Arrangements, and IFRS 12, Disclosure of Interests in Other Entities, by limiting the requirement to provide adjusted comparative information only for the immediately preceding comparative period. Further, the amendments will remove the requirement to present comparative information for disclosures related to unconsolidated structured entities for periods before IFRS 12 is first applied. The Group is currently assessing the impact of the amendments on its consolidated financial statements. Other revised standards and interpretations: IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine, considers when and how to account for the benefits arising from the stripping activity in mining industry. The interpretation will not have an impact on the Group s consolidated financial statements. Unless otherwise described above, the new standards and interpretations are not expected to affect significantly the Group s consolidated financial statements. Certain new standards and interpretations have been issued that are mandatory for the annual periods beginning on or after 1 January 2013, and not yet adopted in the Russian Federation: IFRS 9, Financial Instruments Part 1: Classification and Measurement. IFRS 9, issued in November 2009, replaces those parts of IAS 39 relating to the classification and measurement of financial assets. IFRS 9 was further amended in October 2010 to address the classification and measurement of financial liabilities and in December 2011 to (i) change its effective date to annual periods beginning on or after 1 January 2015 and (ii) add transition disclosures. Key features of the standard are as follows: Financial assets are required to be classified into two measurement categories: those to be measured subsequently at fair value, and those to be measured subsequently at amortised cost. The decision is to be made at initial recognition. The classification depends on the entity s business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. An instrument is subsequently measured at amortised cost only if it is a debt instrument and both (i) the objective of the entity s business model is to hold the asset to collect the contractual cash flows, and (ii) the asset s contractual cash flows represent payments of principal and interest only (that is, it has only basic loan features ). All other debt instruments are to be measured at fair value through profit or loss. All equity instruments are to be measured subsequently at fair value. Equity instruments that are held for trading will be measured at fair value through profit or loss. For all other equity investments, an irrevocable election can be made at initial recognition, to recognise unrealised and realised fair value gains and losses through other comprehensive income rather than profit or loss. There is to be no recycling of fair value gains and losses to profit or loss. This election may be made on an instrument-by-instrument basis. Dividends are to be presented in profit or loss, as long as they represent a return on investment. 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 own credit risk of financial liabilities designated at fair value through profit or loss in other comprehensive income. While adoption of IFRS 9 is mandatory from 1 January 2015, earlier adoption is permitted. The Group is considering the implications of the standard, the impact on the Group and the timing of its adoption by the Group. 22

6 New Accounting Pronouncements (Continued) 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 Group is considering the implications of the amendment, the impact on the Group and the timing of its adoption by the Group. 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. IFRS 12 was amended to introduce new disclosures, including any significant judgements made in determining whether an entity is an investment entity and information about financial or other support to an unconsolidated subsidiary, whether intended or already provided to the subsidiary. The Group is currently assessing the impact of the amendments on its consolidated financial statements. Unless otherwise described above, the new standards and interpretations are not expected to affect significantly the Group s consolidated financial statements. 23

7 Cash and cash equivalents 31 December 2012 31 December 2011 Settlement accounts with trading systems 11 873 622 1 090 979 Cash balances with the CBRF (other than mandatory reserve deposits) 9 722 539 9 224 168 Cash on hand 8 589 891 6 213 394 Correspondent accounts and overnight placements with other banks - other countries 5 360 251 867 821 - Russian Federation 457 525 1 551 239 Total cash and cash equivalents 36 003 828 18 947 601 At 31 December 2012 correspondent accounts, overnight placements and placements with other banks included balances with one bank (2011: three banks) in the total amount of RR 3 991 446 thousand (2011: RR 935 533 thousand), which represents 68.6% of the total correspondent accounts and overnight placements with other banks (2011: 38.7%). The Group analyses the credit quality of cash and cash equivalents on the basis of Fitch ratings and in case of their absence uses Standard and Poor s or Moody's ratings adjusting them to Fitch categories. The credit quality of cash and cash equivalents balances, excluding cash on hand, may be summarised as follows at 31 December 2012: In thousands of Russian Roubles Cash balances with the CBRF, including mandatory reserves Settlement accounts with trading systems Correspondent accounts and overnight placements Total Neither past due nor impaired - Central Bank of the Russian Federation 12 808 570 - - 12 808 570 - AAA rated - - 364 052 364 052 - AA- to AA+ rated - - 606 120 606 120 - A- to A+ rated - 819 4 435 672 4 436 491 - Lower than A- rated - 9 432 992 307 539 9 740 531 - Unrated - 2 439 811 104 393 2 544 204 Total cash and cash equivalents excluding cash on hand 12 808 570 11 873 622 5 817 776 30 499 968 24

7 Cash and Cash Equivalents (Continued) The credit quality of cash and cash equivalents balances, excluding cash on hand, may be summarised as follows at 31 December 2011: Cash balances with the CBRF, including mandatory reserves Settlement accounts with trading systems Correspondent accounts and overnight placements Total Neither past due nor impaired - Central Bank of the Russian Federation 11 973 178 - - 11 973 178 - AAA rated - - 224 606 224 606 - AA- to AA+ rated - - 517 258 517 258 - A- to A+ rated - - 549 936 549 936 - Lower than A- rated - - 19 092 19 092 - Unrated - 1 090 979 1 108 168 2 199 147 Total cash and cash equivalents excluding cash on hand 11 973 178 1 090 979 2 419 060 15 483 217 Geographical, liquidity and interest rate analyses of cash and cash equivalents are disclosed in Note 28. The information on the estimated fair value of cash and cash equivalents is disclosed in Note 32. Information on related party balances is disclosed in Notes 35 and 36. 8 Securities at Fair Value Through Profit or Loss 31 December 2012 31 December 2011 Corporate bonds 9 830 325 7 638 077 Federal loan bonds (OFZ) 4 068 452 5 329 287 Corporate Eurobonds 625 302 674 503 Municipal bonds 57 883 1 405 380 Total debt securities 14 581 962 15 047 247 Corporate shares 3 753 779 9 899 473 Global depositary receipts 1 323 001 1 398 557 Investments in mutual funds 339 517 381 022 American depositary receipts 20 115 4 366 163 Total securities at fair value through profit or loss 20 018 374 31 092 462 25

8 Securities at Fair Value Through Profit or Loss (Continued) The Group irrevocably designated the above securities which are not part of its trading book, as at fair value through profit or loss. The securities meet the criteria for classification as at fair value through profit or loss because key management personnel assess performance of the investments based on their fair values in accordance with a strategy documented in the business plan. Corporate bonds are Russian Rouble denominated debt securities issued by large Russian companies and banks. These bonds are traded on Moscow Interbank Currency Exchange (MICEX), other Russian stock exchanges or on the over-the-counter market. At 31 December 2012 these bonds have maturity dates from April 2013 to March 2022 (2011: from March 2012 to October 2023), coupon rates from 7.0% p.a. to 15.0% p.a. (2011: from 6.7% p.a. to 19.0% p.a.) and yield to maturity from 7.3% p.a. to 16.6% p.a. (2011: from 6.5% p.a. to 11.5% p.a.), depending on the type of bond issue. OFZ bonds are Russian Rouble denominated government debt securities issued by the Ministry of Finance of the Russian Federation. These bonds are traded on Moscow Interbank Currency Exchange (MICEX), other Russian stock exchanges and on the over-the-counter market. At 31 December 2012 OFZ have maturity dates from January 2013 to February 2027 (2011: from August 2012 to August 2018), coupon rates from 6.5% p.a. to 12.0% p.a. (2011: from 6.7% p.a. to 12.0% p.a.) and yield to maturity from 5.4% p.a. to 7.1% p.a. (2011: from 5.9% p.a. to 7.8% p.a.), depending on the type of bond issue. Corporate Eurobonds are debt securities denominated in USD, issued by large Russian companies and are freely tradable internationally. At 31 December 2012 these bonds have maturity dates from July 2013 to March 2015 (2011: from July 2013 to March 2015), coupon rate from 9.5% to 10.0% (2011: from 9.5% to 10.0%) and yield to maturity from 2.4% to 10.2% p.a.(2011: from 4.7% to 9.6% p.a.), depending on the type of bond issue. Municipal bonds are Russian Rouble denominated debt securities issued by municipal administrations and constituents of the Russian Federation. These bonds are traded on Moscow Interbank Currency Exchange (MICEX), other Russian stock exchanges or on the over-the-counter market. At 31 December 2012 these bonds have maturity dates from June 2013 to May 2015 (2011: from July 2012 to November 2015), coupon rates from 7.8% p.a. to 15.0% p.a. (2011: from 8.0% p.a. to 15.0% p.a.) and yield to maturity from 5.4% p.a. to 8.3% p.a. (2011: from 2.1% p.a. to 8.3% p.a.), depending on the type of bond issue. Corporate shares are shares of Russian companies. The majority of corporate shares are freely tradable in Russia. Global depositary receipts represent rights for shares of large Russian companies and banks, traded internationally. Investments in mutual funds are Russian Rouble denominated investments without stated maturity. These funds reinvest cash collected mainly into shares and debentures of large and medium Russian companies. American depositary receipts represent rights for shares of large Russian companies and banks, traded in American and international stock exchanges. 26

8 Securities at Fair Value Through Profit or Loss (Continued) The Group applies the following internal ratings to assess the credit risk of its debt securities: Investment rating represents internal rating of the Bank from A to B, which is the highest rating indicating the lowest credit risk levels; Speculative rating represents internal rating bands from B- to CCC+; Non-standard rating represents internal rating from CCC to D, which indicates the highest credit risk level. When assessing quality of debt securities at fair value through profit or loss the Group applies classification from A to D based on Fitch ratings. Securities designated at fair value through profit or loss are carried at fair value, which also reflects any credit risk related write-downs. As the securities are carried at their fair values based on observable market data, the Group does not analyse or monitor impairment indicators. Analysis by credit quality of debt securities at fair value through profit or loss outstanding at 31 December 2012 is as follows: Corporate bonds and Eurobonds Federal loan bonds Municipal bonds Total Investment rating 7 548 493 4 068 452 47 896 11 664 841 Speculative rating 281 785 - - 281 785 Non-standard rating 455 247 - - 455 247 Securities without rating 2 170 102-9 987 2 180 089 Total debt securities 10 455 627 4 068 452 57 883 14 581 962 Analysis by credit quality of debt securities at fair value through profit or loss outstanding at 31 December 2011 is as follows: Corporate bonds and Eurobonds Federal loan bonds Municipal bonds Total Investment rating 7 769 067 5 329 287 1 395 394 14 493 748 Non-standard rating 427 654 - - 427 654 Securities without rating 115 859-9 986 125 845 Total debt securities 8 312 580 5 329 287 1 405 380 15 047 247 Securities at fair value through profit or loss as at 31 December 2012 and 31 December 2011 are neither past due nor impaired. 27

8 Securities at Fair Value Through Profit or Loss (Continued) Gains less losses/(losses less gains) from securities at fair value through profit or loss represent both a financial result from disposal of securities and a result from revaluation of securities in the Group's portfolio. This financial result is heavily influenced by financial market trends. In 2011, decline of market quotes on securities in the Group's portfolio resulted in recognition of significant losses less gains from securities at fair value through profit or loss. In 2012, market quotes for a significant portion of the Group's securities portfolio increased. In 2012, the Group recognised significant gains from revaluation of securities as well as gains less losses from disposal of securities. Geographical, liquidity and interest rate analyses of securities at fair value through profit or loss are disclosed in Note 28, the information on securities at fair value through profit or loss issued by related parties is disclosed in Notes 35 and 36. 9 Due from Other Banks 31 December 2012 31 December 2011 Current term placements with other banks 3 751 953 3 426 025 Reverse sale and repurchase agreements with other banks 141 954 - Total due from other banks 3 893 907 3 426 025 At 31 December 2012 reverse sale and repurchase agreements with other banks were effectively collateralised by securities purchased under reverse sale and repurchase agreements at a fair value of RR 151 125 thousand. At 31 December 2012 the Group had no right to sell or repledge securities received under reverse sale and repurchase agreements. For the purpose of credit quality analysis of due from other banks the Group applies internal rating system based on the nature of the counterparty. This internal rating system has five risk levels from A to E, where A is assigned to largest international banks and has the lowest credit risk level, and E is assigned to loans to Russian local commercial banks with the highest risk level assessment. Amounts due from other banks are not collateralised. Analysis by credit quality of amounts due from other banks outstanding at 31 December 2012, is as follows: Current term placements Reverse sale and repurchase agreements with other banks Total due from other banks A - Loans to the largest international banks 371 338-371 338 B - Loans to subsidiaries of the largest international banks and CBRF deposits 965 449-965 449 C - Loans to Russian universal commercial banks 1 990 098-1 990 098 E - Loans to Russian local commercial banks 425 068 141 954 567 022 Total due from other banks 3 751 953 141 954 3 893 907 28

9 Due from Other Banks (Continued) Analysis by credit quality of amounts due from other banks outstanding at 31 December 2011 is as follows: Total current term deposits A - Loans to the largest international banks 1 150 826 B - Loans to subsidiaries of the largest international banks and CBRF deposits 1 953 450 C - Loans to Russian universal commercial banks 146 720 E - Loans to Russian local commercial banks 175 029 Total due from other banks 3 426 025 The primary factor that the Group considers in determining whether amounts due from other banks are impaired is their overdue status. As at 31 December 2012 and 31 December 2011 the Group did not have any past due and impaired amounts in due from other banks. At 31 December 2012 the Group had cash balances with one counterparty bank (2011: one bank) with aggregated amount above RR 1 200 000 thousand. The total aggregate amount of these deposits was RR 1 974 226 thousand (2011: RR 1 953 450 thousand) or 50.7% of the total amount due from other banks (2011: 57.0%). Geographical, liquidity and interest rate analyses are disclosed in Note 28. The information on the estimated fair value of due from other banks is disclosed in Note 32. Information on related party balances is disclosed in Notes 35 and 36. 10 Loans and Advances to Customers 31 December 2012 31 December 2011 Loans to legal entities Corporate loans 78 544 865 78 502 429 Loans to small and medium-sized entities 86 161 551 74 663 625 Reverse sale and repurchase agreements 13 398 988 9 029 292 Loans to state and public organisations 2 389 154 1 826 627 Loans to individuals Consumer loans 19 729 771 13 264 199 Mortgage loans 19 464 970 13 102 243 Car loans 4 963 464 3 716 899 Plastic cards 460 669 116 756 Total gross amount of loans and advances to customers 225 113 432 194 222 070 Less: Provision for loan impairment (20 923 119) (18 267 235) Total loans and advances to customers 204 190 313 175 954 835 As at 31 December 2012 included within loans to legal entities is margin call deposit in the amount of RR 502 428 thousand (2011: nil) placed as collateral under transactions with derivatives. Refer to Note 34. 29

10 Loans and Advances to Customers (Continued) At 31 December 2012, the Group had 24 borrowers (2011: 25 borrowers) with aggregated loan amounts above RR 1 200 000 thousand. The total aggregate amount of these loans was RR 79 152 400 thousand (2011: RR 76 021 758 thousand), or 35.2% of the gross loan portfolio (2011: 39.1%). The Group uses the following classification of loans by classes: Loans to legal entities: Corporate loans - loans issued to clients with annual revenue more than RR 1 500 thousand; Loans to state and public organisations - loans issued to state, municipal and budget organisations; Loans to small-sized and medium-sized entities - loans issued to clients with annual revenue less than RR 1 500 thousand. Loans to individuals: Mortgage loans; Car loans; Plastic cards; Consumer loans. During 2012 and 2011 the Bank sold its loans without any purchase-back option, transferring all rights for these loans. Gains less losses from disposal of these loans in 2012 were RR 10 thousands (2011: RR 28 thousands). The result from disposal of loans was calculated as difference between amortised cost of disposed loans as at the date of disposal less provision for loan impairment, and fair value of receivable resulting from sale of loans as at the date of disposal. Refer to Note 31. 30

10 Loans and Advances to Customers (Continued) Movements in the provision for loan impairment during 2012 are as follows: In thousands of Russian Roubles Corporate loans Loans to state and public organisati ons Loans to small and mediumsized entities Mortgage loans Consum er loans Car loans Plastic cards Total Provision for loan impairment at 1 January 2012 8 957 482 47 516 6 156 228 1 604 438 1 263 973 234 190 3 408 18 267 235 Provision/(recovery of provision) for impairment during the year 1 529 514 (5 542) 555 015 295 482 643 083 75 834 22 375 3 115 761 Amounts written off during the year as uncollectible (50 033) - - - - - - (50 033) Assignment - - (57 125) (352 719) - - - (409 844) Provision for loan impairment at 31 December 2012 10 436 963 41 974 6 654 118 1 547 201 1 907 056 310 024 25 783 20 923 119 31

10 Loans and Advances to Customers (Continued) Movements in the provision for loan impairment during 2011 are as follows: In thousands of Russian Roubles Corporate Loans to loans state and public organisati ons Loans to small and mediumsized entities Mortgage loans Consu mer loans Car loans Plastic cards Total Provision for loan impairment at 1 January 2011 8 412 606 93 012 9 195 808 1 163 652 1 139 924 267 835 1 780 20 274 617 Provision/(recovery of provision) for impairment during the year 819 614 (45 496) (2 120 097) 440 786 281 868 (19 893) 1 628 (641 590) Amounts written off during the year as uncollectible (237 729) - (101 681) - (91 627) - - (431 037) Assignment (37 009) - (817 802) - (66 192) (13 752) - (934 755) Provision for loan impairment at 31 December 2011 8 957 482 47 516 6 156 228 1 604 438 1 263 973 234 190 3 408 18 267 235 Economic sector risk concentrations within the customer loan portfolio are as follows: 31 December 2012 31 December 2011 Amount % Amount % Financial services 47 172 333 21 45 041 267 23 Individuals 44 618 874 20 30 200 097 16 Trade 35 388 184 16 30 111 236 16 Construction 29 343 300 13 28 004 423 14 Manufacturing 19 935 672 9 19 727 008 10 Agriculture and food processing 18 202 891 8 18 348 999 9 Transport 8 185 377 4 4 837 392 2 Chemical industry 2 344 603 1 659 081 1 Oil and gas 1 079 190-884 326 1 Government authorities and state organisations 908 718-75 272 - Telecommunication 781 948-441 786 - Other 17 152 342 8 15 891 183 8 Total loans and advances to customers (before impairment) 225 113 432 100 194 222 070 100 32

10 Loans and Advances to Customers (Continued) State and public organisations exclude government owned profit orientated businesses. Principal operations of the companies providing financial services are: short-term investments, financial leasing and repo. The disclosure below represents the lower of the carrying value of the loan or collateral taken; carrying value of fully unsecured loans and unsecured part of loans for which the collateral amount was lower than carrying value are included within unsecured loans. The carrying value of the secured part of the loan portfolio was allocated based on liquidity of the assets taken as collateral. Information about loans and advances to customers by classes of collateral as at 31 December 2012 is as follows: In thousands of Russian Roubles Corporate loans Loans to state and public organisati ons Loans to small and mediumsized entities Mortgage loans Consumer loans Car loans Plastic Reverse cards sale and repurchas e agreemen ts Total Unsecured loans 38 220 678 136 793 33 798 717-8 775 744-368 602-81 300 534 Loans collateralised by: - state guarantees - 824 985 101 533 - - - - - 926 518 - tradable securities and rights of claim 946 461-6 728 022 58 858 4 963 - - 13 398 988 21 137 292 - goods in stock and other property 2 490 414 1 856 3 745 043 - - - - - 6 237 313 - motor vehicles 1 522 800 76 770 2 394 456-395 254 4 575 560 - - 8 964 840 - production equipment 2 434 495 8 215 2 211 095-414 325 7 366 - - 5 075 496 - guarantees of third parties 12 258 640 13 067 10 220 995 500 428 6 244 722 2 955 66 284-29 307 091 - residential real estate 1 395 727-1 435 325 14 954 742 722 604 - - - 18 508 398 - other real estate 8 813 997 1 285 037 18 556 511 955 939 1 255 925 - - - 30 867 409 - other assets 24 690 457 315 736 1 447 802 9 178 67 559 - - 1 865 422 Total loans and advances to customers 68 107 902 2 347 180 79 507 433 17 917 769 17 822 715 4 653 440 434 886 13 398 988 204 190 313 33

10 Loans and Advances to Customers (Continued) Information about loans and advances to customers by classes of collateral as at 31 December 2011 is as follows: In thousands of Russian Roubles Corporate loans Loans to state and public organisati ons Loans to small and mediumsized entities Mortgage loans Consumer loans Car loans Plastic cards Reverse sale and repurchas e agreemen ts Unsecured loans 29 976 727 127 891 25 575 026-4 527 151-48 321-60 255 116 Loans collateralised by: - state guarantees - 19 527 37 221 - - - - - 56 748 - tradable securities and rights of claim 10 318 552 91 866 5 829 250 124 870 32 786 - - 9 029 292 25 426 616 - goods in stock and other property 4 067 061 3 188 2 169 225 1 246 6 240 720 - motor vehicles 2 182 950 22 093 1 640 251 288 038 3 388 772 - - 7 522 104 - production equipment 2 412 662-2 210 679 258 600 35 619 - - 4 917 560 - guarantees of third parties 11 909 523 15 146 16 262 137 154 139 4 997 213 1 199 65 027-33 404 384 - residential real estate 349 656 196 510 1 274 732 10 208 918 445 101 - - - 12 474 917 - other real estate 5 875 258 1 231 639 12 764 905 464 989 1 353 822 - - - 21 690 613 - other assets 2 452 558 71 251 743 971 544 889 96 269 57 119-3 966 057 Total loans and advances to customers 69 544 947 1 779 111 68 507 397 11 497 805 12 000 226 3 482 709 113 348 9 029 292 175 954 835 Total At 31 December 2012 unsecured loans of RR 81 300 534 (2011: RR 60 255 116 thousand) include carrying value of fully unsecured loans and unsecured part of loans for which the collateral amount was lower than carrying value. At 31 December 2012 loans and advances to customers under reverse sale and repurchase agreements of RR 13 398 988 thousand (2011: 9 029 292 thousand) were effectively collateralised by securities with fair value of RR 17 276 686 thousand (2011: RR 10 860 254 thousand). At 31 December 2012 and 31 December 2011 the Group had no right to sell or repledge securities received under reverse sale and repurchase agreements. 34

10 Loans and Advances to Customers (Continued) The Group applies the following internal ratings to assess the credit risk of its loans to legal entities (the ratings below are indicated in credit quality descending order, i.e. in inherent credit risk ascending order: Investment rating represents internal rating from A to B+, which is the highest rating indicating the lowest credit risk levels; Speculative rating represents internal rating bands from B- to CCC+; Non-standard rating represents CCC internal rating; High-risk represents internal rating below CC+. The Group does not have a separate credit quality internal rating system for loans to individuals, as each type of loan product to individuals has standard terms (e.g., mortgage loans, plastic cards, overdrafts, car loans, etc.), and credit risk analysis is performed based on the statistics collected by the Group for each loan product. In this case, the Group performs credit risk analysis based on the statistics for each loan product. 35

10 Loans and Advances to Customers (Continued) Analysis by credit quality of loans outstanding at 31 December 2012 is as follows: In thousands of Russian Roubles Corporate Loans to loans state and public organisatio ns Loans to small and mediumsized entities Mortgage loans Consumer loans Car loans Plastic cards Reverse sale and repurchase agreements Neither past due nor impaired Investment rating 4 976 463-10 583 581 - - - - - 15 560 044 Speculative rating 16 896 038 1 111 260 38 895 985 - - - - 13 398 988 70 302 271 Non-standard rating 15 957 806 1 204 950 13 196 622 - - - - - 30 359 378 High-risk 1 160 862 51 067 8 496 402 - - - - - 9 708 331 Loans without internal credit rating - - - 18 270 918 17 883 325 4 492 556 418 713-41 065 512 Total neither past due nor impaired 38 991 169 2 367 277 71 172 590 18 270 918 17 883 325 4 492 556 418 713 13 398 988 166 995 536 Total Individually impaired loans - - - - - - - - - Loans with impairment provision less than 20% 21 349 039-6 766 547 - - - - - 28 115 586 Loans with impairment provision more than 20% 14 547 139-1 701 500 - - - - - 16 248 639 Overdue loans collectively evaluated as impaired Less than 180 days overdue 54 866 14 096 1 469 458 137 692 212 925 54 303 4 839-1 948 179 Over 180 days overdue 3 602 652 7 781 5 051 456 1 056 360 1 633 521 416 605 37 117-11 805 492 Total impaired loans 39 553 696 21 877 14 988 961 1 194 052 1 846 446 470 908 41 956-58 117 896 Less provision for impairment (10 436 963) (41 974) (6 654 118) (1 547 201) (1 907 056) (310 024) (25 783) - (20 923 119) Total loans and advances to customers 68 107 902 2 347 180 79 507 433 17 917 769 17 822 715 4 653 440 434 886 13 398 988 204 190 313 At 31 December 2012 individually impaired corporate loans included loans in the amount of RR 2 497 811 thousand with less than 180 days overdue status (2011: nil). 36

10 Loans and Advances to Customers (Continued) Analysis by credit quality of loans outstanding at 31 December 2011 is as follows: In thousands of Russian Roubles Corporate loans Loans to state and public organisati ons Loans to small and mediumsized entities Mortgage loans Consumer loans Car loans Plastic cards Reverse sale and repurchas e agreement s Neither past due nor impaired Investment rating 16 684 516-4 700 227 - - - - - 21 384 743 Speculative rating 13 231 584 1 202 175 39 188 076 - - - - - 53 621 835 Non-standard rating 11 299 264 416 385 13 913 559 - - - - - 25 629 208 High-risk 2 410 629 184 608 5 526 674 - - - - - 8 121 911 Loans without internal credit rating - - - 11 692 116 12 117 207 3 261 027 110 144 9 029 292 36 209 786 Total neither past due nor impaired 43 625 993 1 803 168 63 328 536 11 692 116 12 117 207 3 261 027 110 144 9 029 292 144 967 483 Individually impaired loans Loans with impairment provision less than 20% 22 316 151-6 418 486 - - - - - 28 734 637 Loans with impairment provision more than 20% 10 131 086 - - - - - - - 10 131 086 Overdue loans collectively evaluated as impaired Less than 180 days overdue 1 163 085 325 281 504 39 073 31 782 12 632 183-1 528 584 Over 180 days overdue 1 266 114 23 134 4 635 099 1 371 054 1 115 210 443 240 6 429-8 860 280 Total impaired loans 34 876 436 23 459 11 335 089 1 410 127 1 146 992 455 872 6 612-49 254 587 Less provision for impairment (8 957 482) (47 516) (6 156 228) (1 604 438) (1 263 973) (234 190) (3 408) - (18 267 235) Total loans and advances to customers 69 544 947 1 779 111 68 507 397 11 497 805 12 000 226 3 482 709 113 348 9 029 292 175 954 835 Total 37

10 Loans and Advances to Customers (Continued) Overdue loans collectively evaluated as impaired include the amount overdue and the principal debt as at the reporting date. The fair value of the following types of collateral: residential real estate, other real estate, motor vehicles, equipment and goods in stock and other property at the end of the reporting period was estimated by indexing the values determined by the Group s Collateral Appraisal Division staff at the time of loan inception for the average increases in prices for residential real estate and other above mentioned assets by city and region. The fair value of state guarantees, tradable securities and rights of claim, and also of guarantees of third parties and other assets was determined by the Group s credit department by considering the condition and location of the assets accepted as collateral. The fair value of collateral in respect of loans impaired at 31 December 2012 was as follows: In thousands of Russian Roubles Corporate loans Loans to state and public organisat ions Loans to small and mediumsized entities Mortgage loans Consumer loans Car loans Total Fair value of collateral - impaired loans - tradable securities and rights of claim 674 558-475 093 14 672 - - 1 164 323 - goods in stock and other property 6 658 441 15 576 5 179 570 - - - 11 853 587 - motor vehicles 6 934-1 107 109-282 107 1 831 585 3 227 735 - equipment 649 988-844 967-10 503 3 874 1 509 332 - residential real estate 1 579 155-70 155 2 347 658 362 382-4 359 350 - other real estate 12 640 238 43 342 3 787 716 630 248 343 392-17 444 936 - other assets - - 10 139 277 470 3 308-290 917 Total 22 209 314 58 918 11 474 749 3 270 048 1 001 692 1 835 459 39 850 180 38

10 Loans and Advances to Customers (Continued) The fair value of collateral in respect of loans impaired at 31 December 2011 was as follows: In thousands of Russian Roubles Corporate loans Loans to state and public organisat ions Loans to small and mediumsized entities Mortgage loans Consume r loans Car loans Total Fair value of collateral - impaired loans - tradable securities and rights of claim 4 309 396-691 633 50 170 - - 5 051 199 - goods in stock and other property 175 392 15 576 1 724 136 - - - 1 915 104 - motor vehicles 4 576-792 608-211 778 2 122 218 3 131 180 - equipment 536 910-820 828-35 530 606 1 393 874 - residential real estate 336 792 201 770 87 376 5 191 542 118 926-5 936 406 - other real estate 3 519 780 40 308 3 781 046 319 802 106 380-7 767 316 - other assets - - 8 438-7 533-15 971 Total 8 882 846 257 654 7 906 065 5 561 514 480 147 2 122 824 25 211 050 At 31 December 2012 the Bank also had state guarantees for the total amount of RR 100 644 thousand (2011: RR 13 962 thousand) and third parties guarantees for the total amount of RR 50 103 291 thousand (2011: RR 22 798 584 thousand) against impaired loans. Geographical, liquidity and interest rate analyses are disclosed in Note 28. The estimated fair value of each category of loans and advances to customers is disclosed in Note 32. Information on related party balances is disclosed in Notes 35 and 36. 39

11 Repurchase Receivables Repurchase receivables represent securities sold under sale and repurchase agreements which the counterparty has the right, by contract or custom, to sell or repledge. At 31 December 2012 the repurchase agreements were short-term in nature and had a maturity date by July 2013 (2011: by March 2012). 31 December 2012 31 December 2011 Federal loan bonds 4 866 699 4 430 472 Corporate shares 2 914 405 2 554 463 Municipal bonds 1 287 646 375 098 Corporate bonds 1 213 439 8 870 592 Total repurchase receivables 10 282 189 16 230 625 OFZ bonds are Russian Rouble denominated government debt securities issued by the Ministry of Finance of the Russian Federation. These bonds are traded on Moscow Interbank Currency Exchange (MICEX), other Russian stock exchanges and on the over-the-counter market. At 31 December 2012 OFZ have maturity dates from January 2013 to July 2013 (2011: from February 2013 to August 2016), coupon rates from 6.9% p.a. to 12.0% p.a. (2011: from 6.7% p.a. to 12.0% p.a.) and yield to maturity from 5.9% p.a. to 6.9% p.a. (2011: from 7.2% p.a. to 7.4% p.a.). Corporate shares are shares of Russian companies. The majority of corporate shares are freely tradable in Russia. Corporate bonds are Russian Rouble denominated debt securities issued by large Russian companies and banks. These bonds are traded on Moscow Interbank Currency Exchange (MICEX), other Russian stock exchanges or on the over-the-counter market. At 31 December 2012 these bonds had maturity dates from January 2013 to July 2013 (2011: from June 2012 to October 2023), coupon rates from 7.0% p.a. to 15.0% p.a. (2011: from 7.0% p.a. to 19.0% p.a.) and yield to maturity from 6.9% p.a. to 9.2% p.a. (2011: from 6.5% p.a. to 14.4% p.a.), depending on the type of bond issue. Municipal bonds are Russian Rouble denominated debt securities issued by municipal administrations and constituents of the Russian Federation. These bonds are traded on Moscow Interbank Currency Exchange (MICEX), other Russian stock exchanges and on the over-the-counter market. At 31 December 2012 these bonds had maturity dates from to July 2013 (2011: from June 2013 to June 2014), coupon rates of approximately 13.0% p.a. (2011: from 14.0% p.a. to 15.0% p.a.) and yield to maturity of 6.8% p.a. (2011: from 6.0% p.a. to 6.5% p.a., depending on the type of bond issue). The Group applies the following internal ratings to assess the credit risk for debt securities classified as repurchase receivables outstanding: Investment rating represents internal rating from A to B, which is the highest rating indicating the lowest credit risk levels; Speculative rating represents internal rating bands from B- to CCC+; Non-standard rating represents internal rating from CCC to D, which indicates the highest credit risk level. When assessing quality of debt securities included in repurchase receivables the Group applies classification from A to D based on Fitch ratings. 40

11 Repurchase Receivables (Continued) Analysis by credit quality of debt securities classified as repurchase receivables outstanding at 31 December 2012 is as follows: Corporate bonds Federal loan bonds (OFZ) Municipal bonds Total Investment rating 1 213 439 4 866 699 1 287 646 7 367 784 Total debt securities 1 213 439 4 866 699 1 287 646 7 367 784 Analysis by credit quality of debt securities classified as repurchase receivables outstanding at 31 December 2011 is as follows: Federal loan bonds (OFZ) Municipal bonds Corporate bonds Total Investment rating - 375 098 4 814 997 5 190 095 Securities without rating 4 430 472-4 055 595 8 486 067 Total debt securities 4 430 472 375 098 8 870 592 13 676 162 The primary factor that the Group considers in determining whether a debt security is impaired is its overdue status. Securities disclosed as repurchase receivables as at 31 December 2012 are neither past due nor impaired. Geographical, liquidity and interest rate analyses are disclosed in Note 28. The information on repurchase receivables from related parties is disclosed in Notes 35 and 36. 12 Investment Properties For the year ended 31 December 2012 For the year ended 31 December 2011 Investment properties at cost at the beginning of the period 25 677 260 22 938 073 Additions 4 098 170 3 188 303 Disposals (2 677 607) (344 485) Depreciation for the period (78 970) (104 631) Impairment of investment properties (542 809) - Investment properties at cost at the end of the period 26 476 044 25 677 260 The Group did not classify any properties held under operating leases as investment properties. At 31 December 2012 and 31 December 2011 the investment properties are mainly represented by land plots located in the centre and suburbs of Kazan. 41

12 Investment Properties (Continued) In January 2007, the Group acquired 48.0% of shares in ZAO ISK Tandem. In August 2011, the Group acquired additional 13.0% of shares in ZAO ISK Tandem, having increased its share up to 61.0%, and thus got control over the company owning the Tandem shopping centre in Kazan. In April 2012, the Group acquired additional 13.0% of shares in ZAO ISK Tandem, having increased its share up to 74.0%. Refer to Notes 37 and 38. In May 2011, the Group acquired the shopping and business centre Zvezda for RR 833 406 thousand, which mostly includes non-residential premises located in Perm. During the second half of 2011 the Group acquired 100% of interest in the Closed Mutual Fund Ak-Bars- Alyance for RR 337 736 thousand. The fund's assets mainly include land plots located in Kazan and are recorded within investment properties in the Group's consolidated statement of financial position. In 2012, the Group disposed of land plots with the carrying value of RR 2 216 945 thousand in exchange for land plots with the fair value of RR 2 888 549 thousand. Income from disposal of these investment properties of RR 647 826 thousand is recorded within income from investment properties. In 2012, the Group also disposed of a part of flats within investment properties. Income from lease of ZAO ISK Tandem and the shopping and business centre Zvezda are also recorded within income from investment properties. Contracts with lessees of this property a mainly represented by lease contracts for one year with the option to renew. Expenses on maintenance of these assets including depreciation were RR 250 985 thousand in 2012 (2011: RR 76 762 thousand). In 2012, the Group acquired land plots for the total amount of RR 765 933 thousand in different regions of the Russian Federation. At 31 December 2012 the Group classified a part of properties repossessed on default loan agreements in the amount of RR 316 270 thousand as investment properties due to crystallisation of its intention and ability to get investment income from these assets (2011: the carrying value of all properties repossessed on default loan agreements and not disposed of at 31 December 2011 was recorded within other assets). As per management s estimates, at 31 December 2012, the fair value of the investment properties may vary from RR 33 050 000 thousand to RR 33 550 000 thousand (2011: from RR 28 800 000 thousand to RR 29 200 000 thousand). The Group's management determines fair value of investment properties based on reports of independent appraisers. Information on related party balances is disclosed in Notes 35 and 36. 42

13 Premises, Equipment and Intangible Assets In thousands of Russian Roubles Premises Land Office and computer equipment Construction in progress Total premises and equipment Software licenses Total premises and equipment and intangible assets Cost at 1 January 2011 2 299 961 41 820 2 137 576 299 397 4 778 754 102 472 4 881 226 Accumulated depreciation and amortisation (398 575) - (1 599 741) - (1 998 316) (102 240) (2 100 556) Carrying amount at 1 January 2011 1 901 386 41 820 537 835 299 397 2 780 438 232 2 780 670 Additions 36 546 7 591 368 231 93 628 505 996 17 600 523 596 Transfers 46 495-32 888 (79 383) - 6 6 Disposals (carrying amount) (23) - (49 294) - (49 317) - (49 317) Disposals (depreciation and amortisation) 5-46 874-46 879-46 879 Depreciation charge (Note 24) (71 111) - (388 294) - (459 405) (3 743) (463 148) Cost at 31 December 2011 2 382 979 49 411 2 489 401 313 642 5 235 433 120 078 5 355 511 Accumulated depreciation and amortisation (469 681) - (1 941 161) - (2 410 842) (105 983) (2 516 825) Carrying amount at 31 December 2011 1 913 298 49 411 548 240 313 642 2 824 591 14 095 2 838 686 Additions 22 619 463 328 655 450 807 802 544 59 199 861 743 Transfers 17 912-30 721 (48 633) - - - Disposals (carrying amount) (27 766) (2 262) (152 801) - (182 829) - (182 829) Disposals (depreciation and amortisation) 3 500-88 753-92 253-92 253 Depreciation charge (Note24) (72 647) - (286 919) - (359 566) (18 621) (378 187) Cost at 31 December 2012 2 395 744 47 612 2 695 976 715 816 5 855 148 179 277 6 034 425 Accumulated depreciation and amortisation (538 828) - (2 139 327) - (2 678 155) (124 604) (2 802 759) Carrying amount at 31 December 2012 1 856 916 47 612 556 649 715 816 3 176 993 54 673 3 231 666 Construction in progress consists of construction and refurbishment of branch premises and construction of an underground parking. Upon completion, assets are transferred to relevant category of premises and equipment. 43

14 Other Financial Assets and Other Assets Note 31 December 2012 31 December 2011 Other financial assets Receivables 1 788 774 2 327 973 Finance lease receivables 1 306 875 1 078 250 Settlements on conversion operations 795 060 986 387 Fair value of derivative financial instruments 34 588 8 568 Less provision for impairment of receivables (516 335) (787 134) Less provision for impairment of finance lease receivables (133 829) (61 940) Total other financial assets 3 241 133 3 552 104 Other assets Precious metals 1 774 363 697 960 Apartments held for sale under the Group's mortgage programme 832 605 1 086 877 Advance payments for assets purchased for finance lease 700 137 367 878 Participation in construction of residential property for further sale to a third party 610 710 508 297 Prepayment for construction of residential property for further sale 439 200 548 363 Inventory 268 934 404 759 Property repossessed on default loan agreements 93 353 505 066 Other 362 965 173 059 Less provision for impairment of participation in construction of residential property (610 710) (508 297) Total other assets 4 471 557 3 783 962 The primary factor that the Group considers in determining whether financial assets are impaired is their overdue status. As at 31 December 2012 the Group had overdue receivables within other financial assets in the amount of RR 516 335 thousand (2011: RR 787 134 thousand). Settlement on conversion operations are represented by unclosed settlements with trading systems and stock exchanges to be settled within 30 days. Advance payments for assets purchased for finance lease mainly include prepayments in the amount of RR 594 843 thousand for purchase of motor vehicles for further transfer of these ships to third parties under financial lease agreements (31 December 2011: RR 367 878 thousand for construction of two ships). Finance lease receivables in the amount of RR 1 173 046 thousand (2011: RR 1 016 310 thousand) relate to rent of equipment and real estate. 44

14 Other Financial Assets and Other Assets (Continued) Finance lease payments receivable (gross investment in the leases) and their present values are as follows: Due within 1 year Due between 1 and 5 years Due after 5 years Total Finance lease payments receivable at 31 December 2012 Gross investment in leases 516 111 1 473 442 610 532 2 600 085 Discounting effect - Unearned finance income (277 344) (854 036) (161 830) (1 293 210) Net investment in leases 238 767 619 406 448 702 1 306 875 Provision for impairment (78 580) (55 249) - (133 829) Present value of lease payments receivable at 31 December 2012 160 187 564 157 448 702 1 173 046 Finance lease payments receivable at 31 December 2011 Gross investment in leases 197 446 867 003 807 597 1 872 046 Discounting effect - Unearned finance income (134 425) (403 303) (256 068) (793 796) Net investment in leases 63 021 463 700 551 529 1 078 250 Provision for impairment (3 052) (58 888) - (61 940) Present value of lease payments receivable at 31 December 2011 59 969 404 812 551 529 1 016 310 The collateral for finance lease receivables is also the asset for lease. The primary factor that the Group considers in determining whether a finance lease receivable is impaired is its overdue status. The amount of provision for impairment of finance lease receivables was calculated as a difference between net investment in lease and fair value of collateral under agreements with overdue payments. 45

14 Other Financial Assets and Other Assets (Continued) Movements in the provision for impairment of other financial and other assets during 2012 are as follows: Participation in construction of residential property for further sale to a third party Finance lease receivables Receivables Total Provision for impairment at 1 January 2011 (508 297) (105 100) - (613 397) Provision for impairment during the year - - (787 134) (787 134) Amounts written off during the year as uncollectible - 43 160-43 160 Provision for impairment at 1 January 2012 (508 297) (61 940) (787 134) (1 357 371) Provision for impairment during the year (102 413) (71 889) (417 836) (592 138) Amounts written off during the year as uncollectible - 688 635 688 635 Provision for impairment at 31 December 2012 (610 710) (133 829) (516 335) (1 260 874) Geographical and liquidity analyses of other financial assets are disclosed in Note 28. Refer to Note 32 for the disclosure of the fair value of each class of other financial assets. Information on related party balances is disclosed in Notes 35 and 36. 15 Due to Other Banks 31 December 2012 31 December 2011 Current term placements of the CB RF 18 380 422 10 146 068 Current term placements of other banks 19 037 206 16 153 257 Sale and repurchase agreements with other banks - 13 857 146 Correspondent accounts and overnight placements of other banks 37 287 247 463 Total due to other banks 37 454 915 40 403 934 At 31 December 2011 the fair value of securities transferred to other banks under sale and repurchase agreements of RR 13 857 146 thousand was RR 14 920 727 thousand. These securities were included in repurchase receivables. The Group acquired a part of securities at a fair value of RR 799 981 thousand under reverse sale and repurchase agreements. Refer to Notes 11 and 30. Geographical, liquidity and interest rate analyses are disclosed in Note 28. Refer to Note 32 for the disclosure of the fair value of each class of amounts due to other banks. Information on related party balances is disclosed in Notes 35 and 36. 46

16 Customer Accounts 31 December 2012 31 December 2011 State and public organisations - Current/settlement accounts 13 405 591 11 709 243 - Term deposits 10 431 944 19 104 795 Other legal entities - Current/settlement accounts 38 492 517 28 628 728 - Term deposits 46 652 101 43 351 354 - Sale and repurchase agreements 4 396 687 2 473 450 Individuals - Current/demand accounts 12 384 956 11 415 471 - Term deposits 49 551 579 46 859 667 Total customer accounts 175 315 375 163 542 708 State and public organisations exclude government owned profit orientated businesses. Economic sector concentrations within customer accounts are as follows: 31 December 2012 31 December 2011 Amount % Amount % Individuals 61 936 535 35 58 275 138 36 Financial services 45 852 404 26 33 626 200 21 Government authorities and state organisations 23 837 535 13 30 814 038 18 Manufacturing and construction 21 532 434 12 18 306 283 11 Trade 4 661 475 3 8 657 916 5 Oil and gas 8 864 811 5 6 751 976 4 Agriculture and food processing 439 875-938 064 1 Chemical industry 267 664-258 774 - Other 7 922 642 6 5 914 319 4 Total customer accounts 175 315 375 100 163 542 708 100 At 31 December 2012 the Group had 21 customers (2011: 21 customers) with balances above RR 1 200 000 thousand. The aggregate balance of these customers was RR 66 257 975 thousand (2011: RR 64 323 920 thousand) or 37.8% (2011: 39.3%) of total customer accounts. At 31 December 2012 the fair value of securities transferred to customers under sale and repurchase agreements of RR 4 396 687 thousand (2011: RR 2 473 450 thousand) was RR 10 156 834 thousand (2011: RR 3 272 476 thousand). At 31 December 2011 the Group acquired a part of securities at a fair value of RR 1 067 056 thousand under reverse sale and repurchase agreements. Refer to Notes 11 and 30. Geographical, liquidity and interest rate analyses are disclosed in Note 28. Refer to Note 32 for the disclosure of the fair value of each class of customer accounts. Information on related party balances is disclosed in Notes 35 and 36. 47

17 Debt Securities in Issue 31 December 2012 31 December 2011 Promissory notes 30 098 957 32 662 252 Bonds 9 909 317 4 425 466 Total debt securities in issue 40 008 274 37 087 718 Promissory notes are Russian Rouble and US Dollar denominated debt securities. At 31 December 2012 these promissory notes had maturity dates from January 2013 to May 2019 (2011: from January 2012 to May 2019). Effective interest rate for term promissory notes was from 1.3% to 14.9% p.a. (2011: from 0.2% to 12.7% p.a.). Bonds are Russian Rouble denominated debt securities freely traded at the Russian stock market. At 31 December 2012 the Group had two tranches of bonds: (i) bonds with the nominal amount of RR 5 000 000 thousand issued by the Bank in October 2008 with maturity in October 2013; and (ii) bonds with the nominal amount of RR 5 000 000 thousand issued by the Bank in October 2012 with maturity in October 2015. At 31 December 2011 the Group had one tranche of bonds: bonds with the nominal amount of RR 5 000 000 thousand issued by the Bank in October 2008 with maturity in October 2013. In October 2011 the Group repaid bonds of 2 289 561 thousand, with nominal value of RR 3 000 000 thousand, issued by the Bank in October 2008. At 31 December 2012, the value of repurchased securities was RR 259 198 thousand (31 December 2011: RR 631 699 thousand). Terms of issue of the first tranche of bonds assume an option to declare a new coupon rate. In this case the Bank is to declare an offer on repurchase of bonds at the request of their owners. In May 2010, the Bank declared offer, which resulted in changes of the initial terms for the bonds' issue. Under the new terms, these bonds had a nominal interest rate of 8.25% starting from May 2010 till April 2012. In April 2012, the Bank set a new coupon rate of 9.0% p.a. (this coupon rate is effective till maturity) and declared offer on repurchase of bonds at the request of their owners. As at 31 December 2011, the effective interest rate on these bonds was 10.3% p.a. (2011: 10.3% p.a.). At 31 December 2012 the effective interest rate on the bonds issued in October 2012 was 9.8% p.a., while the nominal interest rate of the issue was 9.65% p.a. Terms of issue of this tranche of bonds assume an option to declare a new coupon rate. In this case the Bank is to declare an offer on repurchase of bonds at the request of their owners. The Bank has declared an offer to repurchase the bonds at the request of their owners in one year after the placement date. Geographical, liquidity and interest rate analyses are disclosed in Note 28. Refer to Note 32 for the disclosure of the fair value of each class of debt securities in issue. Information on debt securities in issue held by related parties is disclosed in Notes 35 and 36. 48

18 Murabaha Facility and Eurobonds 31 December 2012 31 December 2011 Eurobonds 15 250 617 8 535 750 Murabaha facility - 1 926 364 Total Murabaha facility and Eurobonds 15 250 617 10 462 114 At 31 December 2012 the Group had one tranche of Eurobonds: medium term Eurobonds with a nominal amount of USD 500 000 thousand (RR 15 186 350 thousand) issued in November 2012 with a maturity date in November 2015 and an interest rate of 8.75% p.a. At 31 December 2011 the Group had a syndicated Murabaha facility of USD 60 000 thousand received by the Group in September 2011 with maturity in September 2012. The Group received this Murabaha facility from an investment agent of Citibank International Plc. which also acted as an organiser of the deal along with the Islamic Corporation for the Development of the Private Sector. At 31 December 2011 the interest rate of the loan was 4.14%. This Murabaha facility was repaid in September 2012 in accordance with initial contractual terms. In December 2012, the Group had one tranche of Eurobonds: medium term Eurobonds with a nominal amount of USD 280 000 thousand issued in December 2009 with a maturity date in December 2012 and an interest rate of 10.25% p.a. Geographical, liquidity and interest rate analyses are disclosed in Note 28. The information on the fair value of Eurobonds is disclosed in Note 32. 19 Other Financial Liabilities Other financial liabilities comprise the following: Note 31 December 2012 31 December 2011 Payables 700 862 1 184 653 Fair value of derivative financial instruments 34 627 457 363 567 Total other financial liabilities 1 328 319 1 548 220 Geographical, liquidity analyses of other financial liabilities are disclosed in Note 28. Refer to Note 32 for the disclosure of the fair value of each class of other financial liabilities. 49

20 Subordinated Debt Subordinated debt of RR 18 828 351 thousand (31 December 2011: RR 6 724 952 thousand) bears a fixed interest rate 8% p.a. and matures in July 2022 (31 December 2011: 9,5% p.a. and matures in July 2012). The debt ranks after all other creditors in the case of liquidation. In July 2012 the Group issued subordinated Eurobonds in the amount of USD 600 000 thousand with maturity in July 2022 and interest rate of 8.0% p.a. Eurobonds in the amount of USD 300 000 thousand were purchased by a company related to the Tatarstan Republic Government. At 31 December 2012 the Group had no information available on ultimate holders of subordinated Eurobonds of this issue. Interest and principal on subordinated Eurobonds are paid in US dollars. In July 2012, the Group redeemed its subordinated debt under the contractual terms in the amount of RR 6 670 000 thousand received in August 2005 at 9.5% p.a. with maturity in July 2012 and early repaid the subordinated deposit in the amount of RR 3 000 000 thousand attracted in May 2012 at 8.0% and with maturity in May 2017. Refer to Note 32 for the disclosure of the fair value of subordinated debt. Geographical, liquidity and interest rate analyses of subordinated debt are disclosed in Note 28. Information on related party balances is disclosed in Notes 35 and 36. 21 Share Capital and Additional Paid-In Capital In thousands of Russian Roubles, except for number of shares Number of ordinary shares (in thousands) 31 December 2012 31 December 2011 Nominal Nominal amount amount Inflation adjusted amount Number of ordinary shares (in thousands) Inflation adjusted amount Ordinary shares 28 215 396 28 215 396 34 243 984 28 215 396 28 215 396 34 243 984 Total share capital 28 215 396 28 215 396 34 243 984 28 215 396 28 215 396 34 243 984 At 31 December 2012, all of the Bank s outstanding shares were authorised, issued and fully paid in. All ordinary shares have a nominal value of RR 1 per share, rank equally and each share carries one vote. At 31 December 2012 and 31 December 2011 the Tatarstan Republic through its ministries, government agencies and related companies ultimately controlled the Bank. Additional paid-in capital in the amount of RR 349 632 thousand (2011: RR 349 632 thousand) represents additional contributions from the shareholders received in February 2004, when shares issued but not previously paid were paid in by the shareholders, and recognised by the Group within issued and fully paid share capital. In accordance with the Russian legislation, the Group distributes profits as dividends or transfers them to reserves on the basis of financial statements prepared in accordance with Russian Accounting Rules. The Bank s reserves under Russian Accounting Rules as at 31 December 2012 were RR 9 358 187 thousand (2011: RR 9 132 387 thousand). 50

22 Interest Income and Expense 2012 2011 Interest income Loans and advances to customers, except on impaired loans 17 345 478 13 751 823 Impaired financial assets - loans to customers 4 483 744 4 211 460 Debt securities at fair value through profit or loss 2 272 430 2 708 990 Finance lease receivables 179 778 - Due from other banks 156 299 145 668 Total interest income 24 437 729 20 817 941 Interest expense Term deposits of legal entities 5 504 148 5 350 332 Debt securities in issue 4 226 500 4 006 771 Current/demand accounts and term deposits of individuals 3 617 371 4 220 857 Term placements of other banks 2 264 833 1 054 755 Subordinated debt 1 132 222 624 307 Murabaha facility and Eurobonds 696 279 1 282 798 Current/settlement accounts of legal entities 556 379 375 503 Total interest expense 17 997 732 16 915 323 Net interest income 6 439 997 3 902 618 23 Fee and Commission Income and Expense 2012 2011 Fee and commission income Settlement transactions 630 212 530 068 Transactions with plastic cards 331 999 224 925 Cash transactions 286 817 242 458 Issuance of financial guarantees 174 536 176 564 Currency transactions 43 773 34 818 Securities transactions 29 261 43 539 Cash collection 21 184 21 328 Other 749 6 309 Total fee and commission income 1 518 531 1 280 009 Fee and commission expense Transactions with plastic cards 101 057 63 051 Securities transactions 46 255 57 637 Settlement transactions 44 065 37 924 Cash collection 38 727 31 450 Cash transactions 4 805 3 348 Guarantees received 2 591 476 Other 341 218 Total fee and commission expense 237 841 194 104 Net fee and commission income 1 280 690 1 085 905 51

24 Administrative and other operating expenses Note 2012 2011 Staff costs 3 598 558 2 914 561 Other costs of premises and equipment 458 667 716 874 Depreciation of premises and equipment and amortisation of intangible assets 13 378 187 463 148 Rent 371 816 313 697 Advertising and marketing services 340 715 301 642 Taxes other than on income 320 921 198 951 Insurance expenses 237 507 214 244 Information services 226 826 248 366 Security expenses 205 418 164 525 Telecommunication expenses 192 290 84 927 Charity 163 051 103 125 Transport expenses 123 227 6 475 Other 468 126 614 273 Total administrative and other operating expenses 7 085 309 6 344 808 Included in staff costs are statutory social security contributions of RR 641 382 thousand (2011: RR 524 880 thousand). 25 Income Taxes Income tax expense comprises the following: 2012 2011 Current income tax (134 839) (227 362) Deferred tax (232 574) 948 168 Income tax (expense)/credit for the year (367 413) 720 806 The income tax rate applicable to the majority of the Group s 2012 income is 20% (2011: 20%). 2012 2011 Profit/(loss) before tax 2 368 753 (4 173 152) Theoretical tax (charge)/credit at statutory rate (2012: 20%; 2011: 20%) (473 751) 834 631 Tax effect of items which are not deductible or assessable for taxation purposes: - Income on government securities taxed at different rates 42 010 68 788 - Income which is exempt from taxation 96 930 68 305 - Non-deductible expenses (108 778) (220 104) - Other non-temporary differences 76 176 (30 814) Income tax (expense)/credit for the year (367 413) 720 806 Differences between IFRS and statutory taxation regulations in Russia give rise to temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and their tax bases. The tax effect of the movements in these temporary differences is detailed below and is recorded at the rate of 20% (2011: 20%), except for income on state securities, which is taxed at 15% (2011: 15%). 52

25 Income Taxes (Continued) 31 December 2011 Deferred tax charged/credited to profit or loss 31 December 2012 Tax effect of deductible/(taxable) temporary differences Provision for loan impairment 1 908 242 106 662 2 014 904 Provision for other financial and other assets 300 313 76 439 376 752 Fair valuation of securities at fair value through profit or loss and repurchase receivables 225 316 (110 361) 114 955 Accrued income 130 448 (76 941) 53 507 Subordinated debt (6 200) (25 527) (31 727) Premises and equipment (62 043) (89 926) (151 969) Other deductible differences 144 124 (112 920) 31 204 Net deferred tax asset 2 640 200 (232 574) 2 407 626 31 December 2010 Deferred tax charged/credited to profit or loss 31 December 2011 Tax effect of deductible/(taxable) temporary differences Provision for loan impairment 1 611 900 296 342 1 908 242 Provision for other financial and other assets 101 658 198 655 300 313 Fair valuation of securities at fair value through profit or loss and repurchase receivables 19 226 206 089 225 315 Accruals - 130 448 130 448 Subordinated debt 17 245 (23 445) (6 200) Premises and equipment (101 837) 39 794 (62 043) Other deductible/(taxable) differences 43 840 100 285 144 125 Net deferred tax asset 1 692 032 948 168 2 640 200 In the context of the Group s current structure and Russian tax legislation, tax losses and current tax assets of different group companies may not be offset against current tax liabilities and taxable profits of other group companies and, accordingly, taxes may accrue even where there is a consolidated tax loss. Therefore, deferred tax assets and liabilities are offset only when they relate to the same taxable entity and the same taxation authority. As at 31 December 2012 deferred tax asset of RR 2 407 626 thousand (2011: RR 2 640 200 thousand) has been recognised in the consolidated statement of financial position as the management believes that it is probable that future taxable profit will be available against which this recognised deferred tax asset can be utilised. 53

26 Dividends 2012 2011 Ordinary Ordinary Dividends payable at 1 January 2 147 1 166 Dividends declared during the year 183 716 56 838 Dividends paid during the year (184 641) (55 857) Dividends payable at 31 December 1 222 2 147 Dividends per share declared during the year (expressed in RR per share) 0.007 0.002 27 Segment Analysis Operating segments are components that engage in business activities that may earn revenues or incur expenses, whose operating results are regularly reviewed by the chief operating decision maker (CODM) and for which discrete financial information is available. The CODM is the person or group of persons who allocates resources and assesses the performance for the entity. The functions of the CODM are performed by the Management Board of the Bank. (a) Description of products and services from which each reportable segment derives its revenue The Group is organised on a basis of four main business segments: retail banking representing private banking services, private customer current accounts, savings, deposits, investment savings products, custody, credit and debit cards, consumer loans and mortgages; corporate banking representing direct debit facilities, current accounts, deposits, overdrafts, loan and other credit facilities, foreign currency and derivative products; investment banking representing financial instruments trading, structured financing, corporate leasing, merger and acquisitions advice. treasury operations representing attraction and placement of short-term interbank loans and the Bank's liquidity management, currency conversion operations and management of the Bank's foreign exchange position, cash transactions collateral, participation in currency, interest and transfer pricing. (b) Factors that management used to identify the reportable segments The Group 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. 54

27 Segment Analysis (Continued) The Group determines reporting segments as organisational units the information on which is submitted to key managers to assess performance results and future distribution of resources. (c) Measurement of operating segments profit or loss, assets and liabilities The CODM reviews the Bank s financial information prepared based on Russian Accounting Rules (RAR). Such financial information differs in certain aspects from International Financial Reporting Standards. The main differences are as follows: adjustments of the provision for impairment of loans and advances to customers arise from the difference between the methodology used to calculate provisions for loan impairment under IFRS and RAR to prepare management reports. Under RAR, the provision is calculated in accordance with CBRF requirements based on formal criteria depending on the financial position of the borrower, quality of debt servicing and availability of collateral, whereas under IFRS in accordance with IAS 39 the provision is calculated based on actual losses incurred; differences in revaluation of securities at fair value through profit or loss under IFRS arise from the difference in the valuation techniques used under the IFRS and RAR to prepare management reports. The Bank calculates carrying value of securities for management reporting purposes under RAR using daily weighted average price quotations and takes into consideration provision for impairment of certain securities, while under IFRS securities are carried at fair value on the basis of the last bid quotations; adjustments of accruals arise mainly from the fact that the Group uses nominal interest rates to calculate income and expense items for preparation of management reports and effective interest rates to calculate those items for IFRS financial statements; deferred income tax position is not calculated for the purposes of management reporting; consolidation of subsidiaries is not considered in management reports; revaluation of derivative financial instruments arise from the difference in the recording of transactions under RAR (which are the basis for management reporting) and under IFRS. Thus, under RAR some derivative financial instruments are recorded off-balance sheet and consequently are not taken into account for the purposes of management reporting, while in IFRS financial statements all financial derivative instruments are recorded at fair value within assets or liabilities depending upon differences between fair value of receivables and payables; provisions for impairment of other financial assets under RAR management reporting are calculated using the methodology based on formal impairment criteria according to CBRF regulations. The Group calculates provisions for impairment of other financial assets in its IFRS financial statements by comparing their carrying value with recoverable amount according to the management s best estimate; difference between the value of the investment property carried at cost in financial statements under IFRS and at fair value in management reports under RAR; all other differences also result from the differences between RAR (used as the basis for management reporting) and IFRS. The Bank's Management Board evaluates performance of each segment based on profit before tax. 55

27 Segment Analysis (Continued) (d) Information about reportable segments profit or loss, assets and liabilities Segment information for the reportable business segments of the Bank for the years ended 31 December 2012 and 31 December 2011 is set out below: Retail banking Corporate banking Investment banking Treasury operations Other Total Year ended 31 December 2012 Interest income 5 140 380 15 876 419 2 716 315 65 220 219 176 24 017 510 Commission income 657 038 767 016 205 098 17 157 118 203 1 764 512 Other income 35 544 169 000 3 189 134 158 943-3 552 621 External revenue 5 832 962 16 812 435 6 110 547 241 320 337 379 29 334 643 Intersegment revenue 811 578 - - 5 981 766-6 793 344 Total income 6 644 540 16 812 435 6 110 547 6 223 086 337 379 36 127 987 Other segment items Provision for loan impairment (630 476) (2 958 994) 388 023 (834 034) 236 345 (3 799 136) Interest expense (3 539 399) (5 899 891) (5 881 624) (2 176 326) (109 009) (17 606 249) Fee and commission expenses and result from trading operations (321 301) (58 735) (159 296) - (416 834) (956 166) Depreciation of premises and equipment (73 854) (36 125) (3 248) - (127 424) (240 651) Administrative expenses (1 965 330) (961 324) (86 422) - (3 390 894) (6 403 970) Intersegment expenses - (5 827 961) (965 383) - - (6 793 344) Total expenses (6 530 360) (15 743 030) (6 707 950) (3 010 360) (3 807 816) (35 799 516) Adjusted profit/(loss) before tax 114 180 1 069 405 (597 403) 3 212 726 (3 470 437) 328 472 31 December 2012 Total assets reported to the Management Board 39 722 170 164 692 863 90 499 130 5 707 869 27 529 964 328 151 996 Total liabilities reported to the Management Board 59 977 019 109 658 334 80 092 056 36 586 286 4 264 718 290 578 413 56

27 Segment Analysis (Continued) (d) Information about reportable segments profit or loss, assets and liabilities (continued) Retail banking Corporate banking Investment banking Treasury operations Other Total Year ended 31 December 2011 Interest income 3 039 784 13 622 214 3 374 454 105 356 24 644 20 166 452 Commission income 524 096 673 947 15 463-221 570 1 435 076 Other income - 198 297 391 416 454 317-1 044 030 External revenue 3 563 880 14 494 458 3 781 333 559 673 246 214 22 645 558 Intersegment revenue 475 091 - - 6 715 469-7 190 560 Total income 4 038 971 14 494 458 3 781 333 7 275 142 246 214 29 836 118 Other segment items Provision for loan impairment 43 101 2 032 697 (159 495) (35 362) (174 928) 1 706 013 Interest expense (4 152 641) (6 015 132) (2 285 350) (278 104) (3 052 832) (15 784 059) Fee and commission expenses and result from trading operations (267 994) (45 332) (827 467) - (161 569) (1 302 362) Depreciation of premises and equipment (71 099) (34 777) (3 126) - (122 672) (231 674) Administrative expenses (1 584 215) (774 905) (69 663) - (2 733 336) (5 162 119) Intersegment expenses - (5 896 482) (1 294 078) - - (7 190 560) Total expenses (6 032 848) (10 733 931) (4 639 179) (313 466) (6 245 337) (27 964 761) Adjusted (loss)/profit before tax (1 993 877) 3 760 527 (857 846) 6 961 676 (5 999 123) 1 871 357 31 December 2011 Total assets reported to the Management Board 26 144 552 154 535 347 92 077 256 1 617 879 17 905 711 292 280 745 Total liabilities reported to the Management Board 55 957 312 108 238 202 52 759 745 37 173 286 804 418 254 932 963 In these financial statements the Group has changed presentation of segment analysis in accordance with changes of the management reports presentation and provided comparative data for 2011. 57

27 Segment Analysis (Continued) (d) Information about reportable segments profit or loss, assets and liabilities (continued) Intersegment income/(expenses) are mainly represented by income/(expenses) from reallocation of resources between reporting segments. The reconciliation of adjusted profit before tax by reportable segments and total profit before tax is as follows: Year ended 31 December 2012 Year ended 31 December 2011 Adjusted profit before tax by reportable segments 328 471 1 871 357 Revaluation of securities at fair value through profit or loss under IFRS 3 005 263 (2 578 989) Difference in accounting for investment properties in RAR and IFRS (3 090 966) (699 772) Provision for loan impairment 1 119 263 (2 578 989) Income from disposal of investment properties 697 828 - Impairment of other financial assets 205 033 (743 374) Accrued income/expenses (573 491) (644 550) Other income of subsidiaries 545 969 328 472 Other adjustments 131 383 872 693 Profit/(loss) before tax in accordance with IFRS 2 368 753 (4 173 152) The following table provides a reconciliation of material items of income. Total consolidated revenue comprises interest income, fee and commission income, gains less losses/(losses less gains) from securities at fair value from profit or loss. Year ended 31 December 2012 Year ended 31 December 2011 External revenue of reportable segments 29 334 643 22 645 558 Effect of consolidation of subsidiaries on interest income 87 191 127 345 Effect of consolidation of subsidiaries on fee and commission income 20 537 21 572 Accrued income on loans 54 407 192 092 Difference in accounting for investment properties in RAR and IFRS (3 090 966) (699 772) Revaluation of securities at fair value through profit or loss under IFRS 3 005 263 (2 578 989) Other adjustments 481 429 (122 373) Revenue reported under IFRS 29 892 504 19 585 433 58

27 Segment Analysis (Continued) (d) Information about reportable segments profit or loss, assets and liabilities (continued) The reconciliation of assets of reportable segments and total assets is as follows: 31 December 2012 31 December 2011 Total segments assets 328 151 997 292 280 745 Provision for loan impairment (3 948 856) (4 843 617) Revaluation of securities at fair value through profit or loss (753 365) (7 167 162) Accounting for swap under IFRS (7 421 377) - Deferred income tax asset 2 480 190 2 640 200 Effect of consolidation of subsidiaries 1 639 189 1 347 771 Provision for impairment of other financial assets (510 563) (743 974) Other adjustments (2 199 051) 3 431 485 Total assets reported under IFRS 317 438 164 286 945 448 In 2012 and 2011, the Group did not have any external client or counterparty, revenue on transactions with which exceeded 10% of the Group's revenue. 28 Financial Risk Management To ensure efficient risk management, the Group has created a risk management system incorporating the following risk management methodologies: Increasing the share of risk-free transactions. The Group sees its main economic priority in increasing the share of risk-free commission transactions in the total volume of operating profit. Stop-loss limits. Making decisions on the practicability of carrying out transactions with mandatory consideration of inherent risks. Rejecting a transaction if the amount of possible losses exceeds the established limit or potential economic benefits. Diversification. Decreasing the volume of possible losses through diversification of the Group s assets and liabilities (limits on volumes of transactions with counterparties, economic entities; limits on types of financial instruments, positional VaR limits on instruments recorded in accordance with RAR). Considering risk premiums in evaluating the comparative efficiency of the Group s transactions. The efficiency of the Group s transactions is evaluated with mandatory consideration of the volume of expected losses and the cost of coverage of inherent anticipated losses; Compensation. Limiting (hedging) risks using: insurance; derivatives for compensation of possible losses on hedged assets; incorporation of financial instruments with differently directed sensitivity to homogenous risks into the trading portfolio. 59

28 Financial Risk Management (Continued) The Group s risk management policy covers credit, market (equity, currency, interest rate), liquidity and operational (including legal and reputational) risks. The primary objectives of the financial risk management function are to establish risk limits, and then ensure that exposure to risks stays within these limits. Operational, legal and reputational risk management ensures proper functioning of all systems and structures of the Group and enables to minimise the impact of negative events of an operational nature on the Group s activity and financial results. Credit risk. Given the specific nature of the Group s activity, exposure to credit risk, which is the risk that a counterparty will be unable to pay all amounts in full when due, is the main type of risk inherent in the Group s operations. Credit risk management covers evaluation and control of credit risk associated both with individual borrowers and groups of interrelated borrowers. The risk evaluation and decision making processes are strictly regulated. The Group has collegial bodies (committees) responsible for setting limits on counterparties and making credit and investment decisions. The Group s maximum exposure to credit risk is reflected in the carrying amounts of financial assets on the consolidated statement of financial position. For credit related commitments, the exposure to credit risk is the amount of the commitment. Refer to Note 30. Depending on the level of approved authorities, the issues of setting credit limits are addressed by the Big, Small Credit Committees or by Credit Committees of territorial divisions. For the purpose of credit risk management, the staff of credit divisions regularly review client s business and financial results using the Group s in-house credit risk evaluation methodologies. Credit risk is evaluated on the basis of the internal credit rating system. Moreover, on a monthly basis the Risk Department monitors credit risk of certain counterparties and portfolio of assets in the course of preparation of management accounts for the Group management. The Group monitors exposure to banks using a system of limits set by the Bank s Limit Committee on the basis of the developed internal methodology of evaluating credit institutions financial position. The Risk Department monitors counterparties creditworthiness on a regular basis by issuing recommendations for changing the existing limits. Credit exposure to other groups of borrowers (other than banks) is also monitored through setting limits on different types and terms of transactions for each individual counterparty and industry segment (economic entity), including regular monitoring of borrowers creditworthiness on the basis of evaluation and rating systems. Methods of credit risk management were enhanced (procedures for loans issuance and monitoring became more rigorous, limits are revised on a regular basis depending on the changes on the market). The Group's system of limits has a multilevel structure. Risks are limited both at the level of portfolio and aggregate figures, and at the level of transactions and counterparties. Specifically, the Group sets up the following credit risk limits that are regularly and efficiently revised depending on the market situation: aggregate credit risk limit; limit on assets exposed to credit risk; limits on short-term interbank transactions with counterparty banks; limits on investments in issuers debt securities; 60

28 Financial Risk Management (Continued) limits on investments in groups of interrelated counterparties; limits on investments by industries; and limit on entity s liabilities to the Bank. Actual exposures against limits are monitored daily. The management monitors concentration of credit risk with industry segments, groups of interrelated borrowers and types of assets on a monthly basis. Credit risk concentration is monitored on the basis of the above limits. Credit risk for off-balance sheet financial instruments is defined as the possibility of sustaining a loss as a result of another party to a financial instrument failing to perform in accordance with the terms of the contract. The Group uses the same credit policies in assuming conditional obligations as it does for onbalance sheet financial instruments, through established credit approvals, risk control limits and monitoring procedures. Market risk. The Group takes on exposure to market risks arising from open positions in interest rate, currency, equity and debt instruments, all of which are exposed to general and specific market movements. The Group manages market risk using a system of limits on possible losses from unfavourable market fluctuations. Limits are set by the Limit Committee and adjusted with consideration of aggregate VaR evaluation (recorded in accordance with RAR) of price risk inherent in equity portfolio, currency risk and interest rate risk components. Depending on the situation in the financial markets and general economic situation (in particular, during crisis phenomena in the economy), the Group applies a combination of methods to assess market risk. Specifically, in the credit crunch conditions, the market risk assessment based on statistics of real losses incurred during the crisis period was added to traditional VAR evaluation (recorded in accordance with RAR). This approach allowed a more adequate estimation of possible losses from unusual changes of market indicators and limited the impact of market risks on the Group s indicators. Market risks are managed through forming and observing market risk limits. Market risk limits include: aggregate market risk limit; open currency position limit; open position on investment operations for the security portfolio (exposed to equity risk), limits on transactions broken down by issuer; limits on transactions with debt securities broken down by issuer and type of transactions; limits on the security portfolio (by type of transactions investment, speculative, repo transactions); limits on losses from trading transactions (stop-loss, take-profit); and concentration limits on investments by industries. The Group evaluates market risk both for individual financial instruments and the asset portfolio. The responsibility for market risk evaluation and issue of recommendations for managing this risk on a regular basis lies with the Risk Department which provides the results of risk evaluation in the form of monthly memoranda to the Group s management. Market risk evaluation can also be done in other cases, for example, when there are dramatic changes in market conditions. Given the established investment policy of the Group (a relatively small amount of assets exposed to market risk, predominance of bonds in the equity portfolio), the level of market risk is relatively low and insignificant against the level of credit risk. In these circumstances managing market risk on a monthly basis is sufficient in terms of manageability of this type of risk. 61

28 Financial Risk Management (Continued) Currency Risk. The Group takes on exposure to the effects of fluctuations in foreign exchange rates on its financial position and cash flows. The Assets and Liability Committee sets limits on the level of exposure by currency and in total for both overnight and intra-day positions which are monitored daily. The table below summarises the Group s exposure to foreign currency exchange rate risk at the reporting date: In thousands of Russian Roubles Monetary financial assets 2012 2011 Monetary Derivative Net Monetary Monetary financial financial balance financial financial liabilities instruments sheet assets liabilities position Derivative financial instruments Net balance sheet position Russian Roubles 230 309 769 239 827 756 (10 355 479) (19 873 466) 199 156 434 227 283 282 10 232 677 (17 894 172) USD 33 663 008 42 656 742 9 840 760 847 026 26 558 246 25 448 441 (11 639 857) (10 530 051) Other 8 392 181 5 701 353 (112 150) 2 578 678 7 638 304 7 037 923 1 052 180 1 652 562 Total 272 364 958 288 185 851 (626 869) (16 447 762) 233 352 984 259 769 646 (355 000) (26 771 661) The following table presents sensitivities of profit or loss and equity to reasonably possible changes in exchange rates applied at the reporting date relative to the functional currency of the Group, with all other variables held constant: Impact on profit or loss 2012 2011 Impact on equity Impact on profit or loss Impact on equity US dollar strengthening by 15% (2011: 15%) 127 054 127 054 (1 579 508) (1 579 508) US dollar weakening by 15% (2011: 15%) (127 054) (127 054) 1 579 508 1 579 508 The exposure was calculated only for monetary balances denominated in currencies other than the functional currency of the Group entities. Interest rate risk. The Group takes on exposure to the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flows Interest margins may increase as a result of such changes, but may reduce or create losses in the event that unexpected movements arise. The Group is exposed to interest rate risk, principally through fixed rate loans, the amounts and terms of which differ from the amounts and terms of fixed rate borrowings. In practice, interest rates are set for a short period of time. In practice, interest rates that are contractually fixed on both assets and liabilities are usually renegotiated to reflect current market conditions. The Bank s Limit Committee monitors on a daily basis and sets limits on the level of mismatch of interest rate repricing that may be undertaken. In the absence of any available hedging instruments, the Group normally seeks to match its interest rate positions. 62

28 Financial Risk Management (Continued) The Group is exposed to cash flow interest rate risk, principally through assets and liabilities for which interest rates are reset as market rates change. The Group is exposed to fair value interest rate risk as a result of assets and liabilities at fixed interest rates. In carrying out the risk sensitivity analysis, the Group assumed a 30 basis points change in base interest rates as the reasonably possible change (the difference between the minimum and the maximum annual values in LIBOR in 2011 was approximately 40 basis points). The key financial instruments that cause sensitivity of profit to market interest rate changes are instruments, for which the interest rate depends on LIBOR. If interest rates would have been 30 basis points lower at 31 December 2012 with all other variables held constant, profit for the year would have been by RR 214 957 thousand higher (2011: profit for the year would have been RR 306 657 thousand higher). If interest rates at the above date would have been 30 basis points lower with all other variables held constant, profit for the year would have been by RR 214 957 thousand lower (2011: profit for the year would have been RR 306 657 thousand lower). The table below summarises the Group s exposure to interest rate risks. The table presents the aggregated amounts of the Group s financial assets and liabilities at carrying amounts, categorised by the earlier of contractual interest repricing or maturity dates: In thousands of Russian Roubles Demand and less than 1 month From 1 to 6 months From 6 to 12 months More than 1 year Nonmonetary assets 31 December 2012 Total financial assets 70 816 457 36 862 874 19 033 534 153 142 575 860 335 280 715 775 Total financial liabilities 83 710 268 51 143 686 43 723 017 109 608 880-288 185 851 Total Net interest sensitivity gap at 31 December 2012 (12 893 811) (14 280 812) (24 689 483) 43 533 695 860 335 (7 470 076) 31 December 2011 Total financial assets 74 030 173 19 390 855 12 866 055 144 802 742 862 837 251 952 662 Total financial liabilities 86 371 084 42 246 541 39 617 087 91 534 934-259 769 646 Net interest sensitivity gap at 31 December 2011 (12 340 911) (22 855 686) (26 751 032) 53 267 808 862 837 (7 816 984) 63

28 Financial Risk Management (Continued) The Group monitors interest rates for its financial instruments. The table below summarises interest rates based on reports reviewed by key management personnel of the Group. This analysis has been prepared based on the data as at the end of the year: % p.a. 2012 2011 RR USD Euros RR USD Euros ASSETS Cash and cash equivalents 0% 0% 0% 0% 0% 0% Mandatory cash balances with CBRF 0% - - 0% - - Securities at fair value through profit or loss 9% 10% 10% 10% 10% 10% Due from other banks 3% 0% - 5% 0% - Loans and advances to customers - legal entities 11% 9% 7% 11% 9% 8% - individuals 15% 12% - 14% 10% - Repurchase receivables 7% - - 8% 10% - Liabilities Due to other banks 8% 2% 2% 8% 1% 3% Customer accounts 8% 3% 3% 7% 3% 2% Debt securities in issue 11% - - 12% - - Murabaha facility - - - - 5% - Eurobonds - 9% - - 11% - Subordinated debt - 8% - - 10% - The sign - in the table above means that the Group does not have the respective assets or liabilities in the corresponding currency. Other price risk. The Group is exposed to the risk of changes in the prices of shares. The limits set by the Board of Directors and the Bank's Limit Committee are applied to manage equity price risk and other price risk. The Bank's Investment Department controls and authorises equity transactions based on set limits. At 31 December 2012, if equity prices at that date had been by 20% (2011: 20%) lower or higher, with all other variables held constant, profit for the year and equity would have been by RR 198 765 thousand (2011: RR 569 228 thousand) lower or higher, mainly as a result of revaluation of corporate shares at fair value through profit or loss. 64

28 Financial Risk Management (Continued) Geographical risk concentrations. The geographical concentration of the Group s financial assets and liabilities at 31 December 2012 is set out below: Tatarstan Republic Other Russian regions Other countries Total Financial assets Cash and cash equivalents 15 314 748 4 521 489 16 167 591 36 003 828 Mandatory cash balances with CBRF 3 086 031 - - 3 086 031 Securities at fair value through profit or loss 2 208 717 17 632 432 177 225 20 018 374 Due from other banks 375 000 3 420 926 97 981 3 893 907 Loans and advances to customers 142 126 758 55 251 608 6 811 947 204 190 313 Repurchase receivables 764 089 9 518 100-10 282 189 Other financial assets 2 057 621 914 454 269 058 3 241 133 Total financial assets 165 932 964 91 259 009 23 523 802 280 715 775 Financial liabilities Due to other banks 627 040 34 533 592 2 294 283 37 454 915 Customer accounts 117 311 122 55 356 533 2 647 720 175 315 375 Debt securities in issue 33 203 828 6 804 446-40 008 274 Eurobonds - - 15 250 617 15 250 617 Other financial liabilities 492 431 835 615 273 1 328 319 Subordinated debt 18 828 351 - - 18 828 351 Total financial liabilities 170 462 772 97 530 186 20 192 893 288 185 851 Net balance sheet position (4 529 808) (6 271 177) 3 330 909 (7 470 076) Credit related commitments (Note 30) 38 292 087 24 428 394-62 720 481 65

28 Financial Risk Management (Continued) The geographical concentration of the Group s financial assets and liabilities at 31 December 2011 is set out below: Tatarstan Republic Other Russian regions Other countries Total Financial assets Cash and cash equivalents 13 465 430 4 296 679 1 185 492 18 947 601 Mandatory cash balances with the CBRF 2 749 010 - - 2 749 010 Securities at fair value through profit or loss 2 217 385 23 387 466 5 487 611 31 092 462 Due from other banks 75 000 2 069 414 1 281 611 3 426 025 Loans and advances to customers 108 521 424 64 746 849 2 686 562 175 954 835 Repurchase receivables - 16 230 625-16 230 625 Other financial assets 1 474 580 1 212 263 865 261 3 552 104 Total financial assets 128 502 829 111 943 296 11 506 537 251 952 662 Financial liabilities Due to other banks 589 098 32 833 386 6 981 450 40 403 934 Customer accounts 110 910 348 52 061 932 570 428 163 542 708 Debt securities in issue 28 823 229 8 264 489-37 087 718 Murabaha facility - - 1 926 364 1 926 364 Eurobonds - - 8 535 750 8 535 750 Other financial liabilities 992 918 303 773 251 529 1 548 220 Subordinated debt 6 724 952 - - 6 724 952 Total financial liabilities 148 040 545 93 463 580 18 265 521 259 769 646 Net balance sheet position (19 537 716) 18 479 696 (6 758 984) (7 816 984) Credit related commitments (Note 30) 36 454 864 10 982 876-47 437 741 Liquidity risk. Liquidity risk is defined as the risk when the maturity of assets and liabilities does not match. The Group is exposed to daily calls on its available cash resources from current accounts, maturing deposits, loan draw downs and guarantees. The Group does not maintain cash resources to meet all of these needs as experience shows that a minimum level of reinvestment of maturing funds can be predicted with a high level of certainty. The Group determines day trading instant liquidity, current term liquidity and structural liquidity risk. 66

28 Financial Risk Management (Continued) Liquidity risk is also managed through forming and observing liquidity risk limits. Liquidity risk limits include the following structural limits: minimum amount of highly liquid assets; minimum amount of liquid assets (up to 30 days); maximum amount of liabilities payable on demand; maximum amount of net loans in the interbank lending market; maximum amount of own issued notes; maximum amount of the loan portfolio (other than interbank lending); limit on accumulated liquidity imbalance (gap); maximum amount of investments in assets without fixed maturity date and assets of uncertain timing; and limit on mismatch between types of funding sources and types of investments. The responsibility for liquidity risk management rests with the Bank s Treasury, Risk Department, Review and Planning Department, Operational Liquidity Management Committee ( OLMC ), Assets and Liability Committee ( ALC ) and Limit Committee ( LC ). The Treasury Department is responsible for monitoring daily liquidity position, regular liquidity stress testing under a variety of scenarios covering both normal and more severe market conditions and also for forming payment schedules. If case of negative market events the Bank sets more rigorous credit limits on the interbank lending market. As a result, loans are issued only to high liquid banks. The OLMC operates on a daily basis and regulates liquidity risk using internal and external ratios based on the assets-to-liabilities ratio by maturity and payment schedule. The main purpose of the Committee is operational management of the Bank s liquidity and adoption of decisions aimed to maintain liquid assets at the level acceptable for meeting obligations to customers notwithstanding possible changes in external environment. In case of a decrease in liquidity as a result of emergency, the Group has a contingency plan for restoring and maintaining a sufficient and acceptable liquidity level. The ALC determines the medium-term and short-term asset/liability management strategy for maintaining current and long-term liquidity at an acceptable level. The ALC is ultimately responsible for liquidity risk management and reports directly to the Management Board. The Limit Committee sets and regulates the Group s limit policy, including liquidity limits. Liquidity requirements for guarantees and standby letters of credit are considerably less than the amount of the commitment because the Group does not generally expect the third party to draw funds under the agreement. The total outstanding contractual amount of commitments to extend credit does not necessarily represent future cash requirements, since many of these commitments will expire or terminate without being funded. The table below shows liabilities at 31 December 2012 by their remaining contractual maturity. The amounts disclosed in the maturity table are the contractual undiscounted cash flows, including gross finance lease obligations (before deducting future finance charges), gross loan commitments and financial guarantees. Such undiscounted cash flows differ from the amount included in the consolidated statement of financial position because the amount in the consolidated statement of financial position is based on discounted cash flows. 67

28 Financial Risk Management (Continued) Financial derivatives are included at the contractual amounts to be paid or received, unless the Group expects to close the derivative position before its maturity date in which case the derivatives are included based on the expected cash flows. For the purposes of the maturity analysis, embedded derivatives are not separated from hybrid (combined) financial instruments. Net settled derivatives are included at the net amounts expected to be paid. The maturity analysis of undiscounted financial liabilities at 31 December 2012 is as follows: Demand and less than 1 month From 1 to 6 months From 6 to 12 months From 12 months to 5 years Over 5 years Total Financial liabilities Due to other banks 4 593 320 22 992 581 10 618 704 4 292 656 1 423 087 43 920 348 Customer accounts 83 825 284 42 138 241 33 516 665 19 353 534 2 920 152 181 753 876 Debt securities in issue 2 198 148 4 509 316 3 811 803 40 378 746 4 500 50 902 513 Eurobonds - 658 942 669 864 17 843 961-19 172 767 Other financial liabilities 700 862 - - - - 700 862 Subordinated debt 734 936-722 953 5 835 553 25 517 062 32 810 504 Financial derivatives with negative fair value 182 4 408 1 778 683 198-689 566 Guarantees 34 551 036 - - - - 34 551 036 Credit related commitments except for guarantees (Note 30) 28 169 445 - - - - 28 169 445 Total potential future payments for financial obligations 154 773 213 70 303 488 49 341 767 88 387 648 29 864 801 392 670 917 68

28 Financial Risk Management (Continued) The maturity analysis of undiscounted financial liabilities at 31 December 2011 is as follows: Demand and less than 1 month From 1 to 6 months From 6 to 12 months From 12 months to 5 years Over 5 years Total Financial liabilities Due to other banks 19 030 419 15 912 515 106 345 4 595 981 1 090 694 40 735 954 Customer accounts 75 927 743 43 568 635 22 582 858 27 793 667 531 493 170 404 396 Debt securities in issue 114 638 3 064 072 3 710 828 41 171 678 4 500 48 065 716 Murabaha facility 1 926 364 - - - - 1 926 364 Eurobonds - 463 279 8 072 471 - - 8 535 750 Other financial liabilities 1 184 653 - - - - 1 184 653 Subordinated debt 61 025 295 281 6 732 993 - - 7 089 299 Financial derivatives with negative fair value 363 567 - - - - 363 567 Guarantees 20 153 757 - - - - 20 153 757 Credit related commitments except for guarantees (Note 30) 27 283 984 - - - - 27 283 984 Total potential future payments for financial obligations 146 046 150 63 303 782 41 205 495 73 561 326 1 626 687 128 055 060 69

28 Financial Risk Management (Continued) Maturity analysis of financial instruments at 31 December 2012 is as follows: In thousands of Russian Roubles Demand and less than 1 month From 1 to 6 months From 6 to 12 months From 12 months to 5 years Over 5 years Total Financial assets Cash and cash equivalents 36 003 828 - - - - 36 003 828 Mandatory cash balances with the Central Bank of the Russian Federation 3 086 031 - - - - 3 086 031 Securities at fair value through profit or loss 5 442 573 1 958 071 667 256 6 708 630 5 241 844 20 018 374 Due from other banks 3 843 839-50 068 - - 3 893 907 Loans and advances to customers 16 500 107 28 181 895 18 316 210 111 089 019 30 103 082 204 190 313 Repurchase receivables 3 559 282 6 722 907 - - - 10 282 189 Other financial assets 3 241 133 - - - 3 241 133 Total financial assets 71 676 793 36 862 873 19 033 534 117 797 649 35 344 926 280 715 775 Financial liabilities Due to other banks 4 469 289 22 535 766 7 004 992 2 056 808 1 388 060 37 454 915 Customer accounts 75 678 734 24 025 905 29 266 891 45 338 200 1 005 645 175 315 375 Debt securities in issue 2 128 316 3 940 337 6 136 146 27 798 975 4 500 40 008 274 Eurobonds - 637 270 619 779 13 993 568-15 250 617 Other financial liabilities 700 862 - - - - 700 862 Derivative financial instruments 182 4 408 1 778 621 089-627 457 Subordinated debt 732 886-693 432 4 710 068 12 691 965 18 828 351 Total financial liabilities 83 710 269 51 143 686 43 723 018 94 518 708 15 090 170 288 185 851 Net liquidity gap (12 033 476) (14 280 813) (24 689 484) 23 278 941 20 254 756 (7 470 076) Cumulative gap at 31 December 2012 (12 033 476) (26 314 289) (51 003 773) (27 724 832) (7 470 076) - 70

28 Financial Risk Management (Continued) Maturity analysis of financial instruments at 31 December 2011 is as follows: In thousands of Russian Roubles Demand and less than 1 month From 1 to 6 months From 6 to 12 months From 12 months to 5 years Over 5 years Total Financial assets Cash and cash equivalents 18 947 601 - - - - 18 947 601 Mandatory cash balances with CBRF 2 749 010 - - - - 2 749 010 Securities at fair value through profit or loss 16 047 508 108 288 851 990 11 208 449 2 876 227 31 092 462 Due from other banks 295 217 3 130 808 - - - 3 426 025 Loans and advances to customers 17 070 945 16 151 759 12 014 065 104 594 143 26 123 923 175 954 835 Repurchase receivables 16 230 625 - - - - 16 230 625 Other financial assets 3 552 104 - - - - 3 552 104 Total financial assets 74 893 010 19 390 855 12 866 055 115 802 592 29 000 150 251 952 662 Financial liabilities Due to other banks 18 981 135 15 773 391 1 011 448 3 631 588 1 006 372 40 403 934 Customer accounts 63 725 557 22 987 703 21 192 905 55 154 446 482 097 163 542 708 Debt securities in issue 129 262 2 757 345 2 940 680 31 255 931 4 500 37 087 718 Murabaha facility 1 926 364 - - - - 1 926 364 Eurobonds - 441 751 8 093 999 - - 8 535 750 Other financial liabilities 1 184 653 - - - - 1 184 653 Derivative financial instruments 363 567 - - - - 363 567 Subordinated debt 60 546 286 351 6 378 055 - - 6 724 952 Total financial liabilities 86 371 084 42 246 541 39 617 087 90 041 965 1 492 969 259 769 646 Net liquidity gap at 31 December 2011 (11 478 074) (22 855 686) (26 751 032) 25 760 627 27 507 181 (7 816 984) Cumulative liquidity gap as at 31 December 2011 (11 478 074) (34 333 760) (61 084 792) (35 324 165) (7 816 984) Customer accounts are shown in the above table on the basis of their contractual maturity. However, in accordance with Russian Civil Code, individuals have a right to withdraw their deposits prior to maturity if they forfeit their right to accrued interest. 71

28 Financial Risk Management (Continued) The matching and/or controlled mismatching of the maturities and interest rates of assets and liabilities is fundamental to the management of the Group. It is unusual for banks ever to be completely matched since business transacted is often of an uncertain term and of different types. An unmatched position potentially enhances profitability, but can also increase the risk of losses. The maturities of assets and liabilities and the ability to replace, at an acceptable cost, interest-bearing liabilities as they mature, are important factors in assessing the liquidity of the Group and its exposure to changes in interest and exchange rates. The Group s management believes that in spite of a substantial portion of customers accounts being on demand and less than one month, diversification of these funds by number and type of depositors (including a significant portion of funds attracted from related parties), the Group s relations with the Government of the Republic of Tatarstan, and the past experience of the Group would indicate that these accounts provide a long-term and stable source of funding for the Group. As at 31 December 2012, approximately 28.9% (2011: 23.6%) of customer accounts and debt securities in issue were with related parties. A more detailed information on related party balances is disclosed in Notes 35 and 36. Liquidity requirements for guarantees and standby letters of credit are considerably less than the amount of the commitment because the Group does not generally expect the third party to draw funds under the agreement. The total outstanding contractual amount of commitments to extend credit does not necessarily represent future cash requirements, since many of these commitments will expire or terminate without being funded. The Group constantly monitors the level of current and medium-term liquidity from 1 month up to 1 year and interest rate level for assets and liabilities. In deteriorating conditions for current and medium-term liquidity, mismatch of interest rates, the Group may obtain additional financing from the Central Bank through direct repo transactions and transactions under Regulation of the Bank of Russia No.312-P On the Procedure for Extending Loans Secured by Assets or Guarantees to Credit Institutions by the Bank of Russia No. 312-P of 12 November 2007. The Group may also obtain finance under open credit facilities from other institutions, including Federal Treasury, Vnesheconombank, constituent regions of the Russian Federation and others. To cover long-term liquidity exceeding one year, the Group plans to sell investment property held by the Group. During the period after the reporting date the Group has effectively managed its liquidity position and timely paid all financial liabilities in full when due. 72

29 Management of Capital The Group s objectives when managing capital are (i) to comply with the capital requirements set by the Central Bank of the Russian Federation, (ii) to safeguard the Group s ability to continue as a going concern and (iii) to maintain a sufficient capital base to achieve a capital adequacy ratio based on the Basel Accord of at least 12%. Compliance with capital adequacy ratios set by the Central Bank of the Russian Federation is monitored monthly, with reports outlining their calculation reviewed and signed by the Bank s Chief Executive Officer and Chief Accountant. Other objectives of capital management are evaluated annually. Under the current capital requirements set by the Central Bank of Russia, banks have to maintain a ratio of regulatory capital to risk weighted assets ( statutory capital ratio ) above a prescribed minimum level. The minimum ratio at 31 December 2012 was 10% (2011: 10%). Regulatory capital is based on the Group's reports prepared under Russian accounting standards and comprised RR 50 781 205 thousand at 31 December 2012 (2011: RR 35 646 971 thousand). The Group is also subject to minimum capital requirements established by covenants stated in loan agreements, including capital adequacy levels calculated in accordance with the requirements of the Basel Accord, as defined in the International Convergence of Capital Measurement and Capital Standards (updated April 1998) and the Amendment to the Capital Accord to incorporate market risks (updated November 2005), commonly known as Basel I. Refer to Notes 18, 28 and 30. 30 Contingencies and Commitments Legal proceedings. From time to time and in the normal course of business, claims against the Group 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 these consolidated financial statements. Tax contingencies. Russian tax and customs 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 Group. 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 review of tax transactions without a clear business purpose or with tax incompliant counterparties. Fiscal periods remain open to review by the authorities in respect of taxes for three calendar years, preceding the year of review. Under certain circumstances reviews may cover longer periods. Amended Russian transfer pricing legislation took 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 make transfer pricing adjustments and 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. Given that the practice of implementation of the new Russian transfer pricing rules has not yet developed, the impact of any challenge of the Group s transfer prices cannot be reliably estimated; however, it may be significant to the financial conditions and/or the overall operations of the Group. 73

30 Contingencies and Commitments (Continued) Accordingly, as at 31 December 2012 no provision for potential tax liabilities has been recorded (2011: nil). The Group includes several companies incorporated outside of Russia. Tax liabilities of the Group are determined on the assumption that these companies are not subject to Russian profits tax because they do not have a permanent establishment in Russia. This interpretation of relevant legislation may be challenged but currently the impact of any such challenge cannot be reliably estimated currently; however, it may be significant to the financial position and/or the overall operations of the Group. As Russian tax legislation does not provide definitive guidance in certain areas, the Group adopts, from time to time, interpretations of such uncertain areas that reduce the overall tax rate of the Group. 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 such developments cannot be reliably estimated, however it may be significant in terms of the Group's financial position and/or business activities in general. In addition to the aforementioned issues, the management believes that the Group has possible tax obligations from exposure to other than remote tax risks of RR 375 704 thousand (2011: RR 368 196 thousand). These exposures are estimates that result from uncertainties in interpretation of applicable legislation and related documentation requirements. Management will vigorously defend the entity's positions and interpretations that were applied in determining taxes recognised in these financial statements if these are challenged by the authorities. Therefore, the Group did not create any provision for potential text liabilities as of 31 December 2012 (2011: no provision for potential tax liabilities). Capital expenditure commitments. At 31 December 2012, the Group had no contractual capital expenditure commitments in respect of premises and equipment and in respect of software and other intangible assets. (31 December 2011: no capital expenditure commitments). Operating lease commitments. Where the Group is the lessee, the future minimum lease payments under non-cancellable operating leases are as follows: 2012 2011 Not later than 1 year 283 996 215 569 Later than 1 year and not later than 5 years 484 042 349 622 Later than 5 years 21 288 22 658 Total operating lease commitments 789 326 587 849 Compliance with covenants. The Group is subject to certain covenants related primarily to its borrowings. Non-compliance with such covenants may result in penalty sanctions in respect of the Group. The most significant covenants include: To comply with the CBRF s ratios and requirements; To maintain a ratio of regulatory capital to risk weighted assets, based on the Basel Accord, of at least 12%. 74

30 Contingencies and Commitments (Continued) Management believes that the Group was in compliance with the above covenants as at 31 December 2012 and during the year. 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 Group will make payments in the event that 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 Group on behalf of a customer authorising a third party to draw drafts on the Group 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 Group is potentially exposed to loss in an amount equal to the total unused commitments, if the unused amounts were to be drawn down. 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 Group monitors the term to maturity of credit related commitments, because longerterm commitments generally have a greater degree of credit risk than shorter-term commitments. Outstanding credit related commitments are as follows: 31 December 2012 31 December 2011 Guarantees issued 34 551 036 20 153 757 Credit line commitments 15 707 018 17 003 827 Unused limits on overdraft loans and loans under limit of indebtedness 12 462 427 10 232 511 Import letters of credit - 47 646 Total credit related commitments 62 720 481 47 437 741 The total outstanding contractual amount of undrawn credit lines, unused limits on overdraft loans and loans under credit limit and letters of credit does not necessarily represent future cash requirements, as these financial instruments may expire or terminate without being funded. Fair value of guarantees issued was RR 70 339 thousand at 31 December 2012 (2011: RR 120 978 thousand). As at 31 December 2012 the Group did not book any provision for credit related commitments (2011: nil). 75

30 Contingencies and Commitments (Continued) Credit related commitments are denominated in currencies as follows: 31 December 2012 31 December 2011 Russian Roubles 61 731 320 45 734 509 US dollars 704 036 711 793 Other 285 125 991 439 Total 62 720 481 47 437 741 Fiduciary assets. These include assets that are held on behalf of the Group in favour of customers and are not assets of the Group. Nominal values disclosed below are normally different from the fair values of respective securities. The fiduciary assets fall into the following categories: Nominal value at 31 December 2012 Nominal value at 31 December 2011 Clients securities held in custody of other depositories 7 339 168 23 955 994 Clients securities held in custody with the Group 94 217 15 003 056 Assets pledged and restricted. The Group had assets pledged as collateral with the following carrying value: Note 2012 2011 Asset Related Asset pledged liability pledged Related liability Securities pledged as collateral under sale and repurchase agreements 11, 15, 16 10 282 189 4 394 908 14 363 588 16 315 322 Securities purchased under reverse sale and repurchase agreements and pledged under sale and repurchase agreements 15, 16 - - 1 867 037 1 245 266 Margin call placements 10, 32 502 428 - - - Mandatory cash balances with the CBRF of RR 3 086 031 thousand (2011: RR 2 749 010 thousand) represent mandatory reserve deposited with the CBRF, which are not available to finance the Group's day to day operations. 76

31 Transfers of Financial Assets The Group transferred financial assets in transactions that did not qualify for derecognition in the current and prior periods. (a) Transfers that did not qualify for derecognition of the financial asset in its entirety. The Group transferred financial assets in transactions that did not qualify for derecognition in the current and prior periods. Sale and repurchase agreements. The Group had securities at fair value through profit or loss amounting to RR 10 282 189 thousand (31 December 2011: RR 16 230 625 thousand), that were subject to obligation to repurchase for a fixed pre-determined price. The following schedule summarises transfers where the entity continues to recognise all of the transferred financial assets. The analysis is provided by class of financial assets. 31 December 2012 31 December 2011 Repurchase receivables Repurchase receivables Carrying amount of the assets 10 282 189 16 230 625 Carrying amount of the associated liabilities 4 394 908 15 468 122 (b) Transfers that qualified for derecognition of the financial asset in its entirety. The Group transferred financial assets in transactions that qualified for derecognition in the current and prior periods. Disposal of loans. In 2012 and prior periods the Group had loans to legal entities which were transferred under cession agreements in 2012 in the amount of RR 929 620 thousand (2011: RR 2 482 245 thousand). These loans were derecognised in full. Refer to Note 10. In 2012 and prior periods the Group had loans to individuals which were transferred under cession agreements in 2012 in the amount of RR 366 203 thousand (2011: RR 291 389 thousand). These loans were derecognised in full. Refer to Note 10. 77

32 Fair Value of Financial Instruments 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, and is best evidenced by an active quoted market price. The estimated fair values of financial instruments have been determined by the Group using available market information, where it exists, and appropriate valuation methodologies. However, judgement is necessarily required to interpret market data to determine the estimated fair value. The Russian Federation continues to display some characteristics of an emerging market and economic conditions continue to limit the volume of activity in the financial markets. Market quotations may be outdated or reflect distress sale transactions and therefore not represent fair values of financial instruments. Management has used all available market information in estimating the fair value of financial instruments. Financial instruments carried at fair value. Securities at fair value through profit or loss, repurchase receivables and financial derivatives are carried at fair value. Fair values were determined based on quoted market prices except for certain investment securities for which there were no available external independent market price quotations. These securities have been fair valued by the Group on the basis of consideration of other relevant information such as discounted cash flows and financial data of the investees and application of other valuation methodologies. Cash and cash equivalents are carried at amortised cost which approximates current fair value. Loans and other financial 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 classes of financial instruments, the currency, maturity of the instrument and credit risk of the counterparty. These rates are analysed below: % 2012 2011 Due from other banks 6% p.a. 5% p.a. Loans and advances to customers: Loans to legal entities 9 % p.a. 8 % p.a. Loans to individuals 18 % p.a. 14 % p.a. Liabilities carried at amortised cost. The fair value of floating rate instruments is based on quoted market prices. 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. 78

32 Fair Value of Financial Instruments (Continued) % 2012 2011 Due to other banks 7% p.a. 3% p.a. Customer accounts 9% p.a. 8% p.a. Debt securities in issue 11% p.a. 10% p.a. Eurobonds 9% p.a. 9% p.a. Subordinated debt 8% p.a. 10% p.a. Derivative financial instruments. 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. Refer to Note 34. Fair values of financial instruments carried at amortised cost are as follows: FINANCIAL ASSETS 2012 2011 Carrying Fair value Carrying value value Fair value Cash and cash equivalents Cash on hand 8 589 891 8 589 891 6 213 394 6 213 394 Cash balances with the CBRF (other than mandatory cash balances) 9 722 539 9 722 539 9 224 168 9 224 168 Settlement accounts with trading systems 11 873 622 11 873 622 1 090 979 1 090 979 Correspondent accounts and overnight placements with other banks 5 817 776 5 817 776 2 419 060 2 419 060 Mandatory cash balances with the Central Bank of the Russian Federation 3 086 031 3 086 031 2 749 010 2 749 010 Due from other banks Current term placements of other banks 3 751 953 3 752 020 3 426 025 3 422 432 Sale and repurchase agreements with other banks 141 954 141 954 - - Loans and advances to customers Corporate loans 68 107 902 68 316 048 69 544 947 70 927 993 Loans to state and public organisations 2 347 180 2 307 832 1 779 111 1 793 504 Loans to small and medium-sized entities 79 507 433 79 449 850 68 507 397 69 952 553 Consumer loans 17 822 715 17 810 053 12 000 226 12 024 668 Mortgage loans 17 917 769 17 905 040 11 497 805 11 521 224 Car loans 4 653 440 4 650 134 3 482 709 3 489 803 Plastic cards 434 886 434 577 113 348 113 579 Reverse sale and repurchase agreements 13 398 988 17 276 686 9 029 292 10 860 254 Other financial assets Receivables 1 272 439 1 272 439 1 540 839 1 540 839 Settlements on conversion operations 795 060 795 060 986 387 986 387 Finance lease receivables 1 173 046 1 173 046 1 016 310 1 016 310 TOTAL FINANCIAL ASSETS CARRIED AT AMORTISED COST 250 414 624 254 374 598 204 621 007 209 346 157 79

32 Fair Value of Financial Instruments (Continued) FINANCIAL LIABILITIES 2012 2011 Carrying Fair value Carrying value value Fair value Due to other banks Current term placements of other banks 37 417 628 37 417 628 26 299 325 26 299 325 Sale and repurchase agreements with other banks - - 13 857 146 14 826 977 Correspondent accounts and overnight placements of other banks 37 287 37 287 247 463 247 463 Customer accounts - Current/settlement accounts of state and public organisations 13 405 591 13 405 591 11 709 243 11 709 243 - Term deposits of state and public organisations 10 431 944 10 392 469 19 104 795 18 964 770 - Current/settlement accounts of other legal entities 38 492 517 38 492 517 28 628 728 28 628 728 - Term deposits of other legal entities 46 652 101 46 291 598 43 351 354 42 049 795 - Sale and repurchase agreements 4 396 687 10 282 188 2 473 450 3 270 684 - Current/demand accounts of individuals 12 384 956 12 384 956 11 415 471 11 415 471 - Term deposits of individuals 49 551 579 49 341 364 46 859 667 46 980 549 Debt securities in issue - Promissory notes 30 098 957 29 958 954 32 662 252 32 527 879 - Debentures 9 909 317 10 070 410 4 425 466 4 515 594 Murabaha facility and Eurobonds - Eurobonds 15 250 617 15 770 663 8 535 750 8 683 418 - Murabaha facility - - 1 926 364 1 926 364 Other financial liabilities - Accounts payable 700 862 700 862 1 184 653 1 184 653 Subordinated debt - Subordinated debt 18 828 351 18 828 351 6 724 952 6 724 952 TOTAL FINANCIAL LIABILITIES CARRIED AT AMORTISED COST 287 558 394 293 374 838 259 406 079 259 955 865 80

32 Fair Value of Financial Instruments (Continued) For financial instruments carried at fair value, the level in the fair value hierarchy into which the fair values are categorised are as follows: Quoted price in an active market (Level 1) 2012 2011 Valuation Quoted technique price in an with significant active non- market observable (Level 1) inputs (Level 3) Valuation technique with inputs observable in markets (Level 2) Valuation technique with inputs observable in markets (Level 2) Valuation technique with significant nonobservable inputs (Level 3) Securities at fair value through profit or loss Corporate shares 2 893 445-860 335 9 036 636-862 837 Corporate bonds 9 830 325 - - 7 638 077 - - Federal loan bonds 4 068 452 - - 5 329 287 - - Investments in mutual funds - 339 517 - - 381 022 - Global depositary receipts 1 323 001 - - 1 398 557 - - American depositary receipts 20 115 - - 4 366 163 - - Municipal bonds 57 883 - - 1 405 380 - - Corporate Eurobonds 625 302 - - 674 503 Repurchase receivables Corporate shares 2 914 405 - - 2 554 463 - - Corporate bonds 1 213 439 - - 8 870 592 - - Municipal bonds 1 287 646 - - 375 098 - - Federal loan bonds 4 866 699 - - 4 430 472 - - Other financial assets Fair value of derivative financial instruments - 588 - - 8 568 - TOTAL FINANCIAL ASSETS CARRIED AT FAIR VALUE 29 100 712 340 105 860 335 46 079 228 389 590 862 837 Other financial liabilities Fair value of derivative financial instruments - (627 457) - - (363 567) - TOTAL FINANCIAL LIABILITIES CARRIED AT FAIR VALUE - (627 457) - - (363 567) - 81

32 Fair Value of Financial Instruments (Continued) 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. A reconciliation of movements in Level 3 of the fair value hierarchy by class of instruments for the year ended 31 December 2012 is as follows: Other securities at fair value through profit or loss Corporate shares Fair value at 1 January 2012 862 837 Acquisition - Disposal (2 502) Fair value at 31 December 2012 860 335 Financial instruments with fair value of Level 3 of the fair value hierarchy were represented by unquoted shares of some companies. The Group determined the fair value of these shares by applying valuation methods based on analysis of changes in the fair value of net assets of such companies. 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, and is best evidenced by an active quoted market price. Where quoted market prices are not available, the Group used valuation techniques. The calculation of fair value of financial assets remeasured at fair value through profit or loss availablefor-sale, for Level 3 is made based on the method of discounted cash flows and comparative method. The comparative method is based on comparison of individual financial ratios or multipliers (such as invested capital to net profit, invested capital to equity, activity ratio (PMI), etc.) of the analysed equity investment with financial ratios and multipliers of equity of peers. 33 Presentation of Financial Instruments by Measurement Category Under IAS 39, Financial instruments: recognition and measurement, the Group assigns the following categories to its financial assets: (a) loans and receivables; (b) financial assets available for sale; (c) financial assets held to maturity; and (d) financial assets at fair value through profit and loss account. Financial assets at fair value through profit or loss have two subcategories: (i) assets designated as such upon initial recognition, and (ii) those classified as held for trading. The following table provides a reconciliation of classes of financial assets with these measurement categories as of 31 December 2012: 82

33 Presentation of Financial Instruments by Measurement Category (Continued) Loans and receivables Finance lease receivables Trading assets Assets designated at fair value through profit or loss Total ASSETS Cash and cash equivalents Cash on hand 8 589 891 - - - 8 589 891 Cash balances with the CBRF (other than mandatory cash balances) 9 722 539 - - - 9 722 539 Settlement accounts with trading systems 11 873 622 - - - 11 873 622 Correspondent accounts and overnight placements with other banks 5 817 776 - - - 5 817 776 Mandatory cash balances with the Central Bank of the Russian Federation 3 086 031 3 086 031 Securities at fair value through profit or loss Corporate shares - - - 3 753 779 3 753 779 Global depositary receipts - - - 1 323 001 1 323 001 American depositary receipts 20 115 20 115 Corporate bonds - - - 9 830 325 9 830 325 Federal loan bonds - - - 4 068 452 4 068 452 Investments in mutual funds - - - 339 517 339 517 Municipal bonds - - - 57 883 57 883 Corporate Eurobonds - - - 625 302 625 302 Due from other banks Current term placements with other banks 3 751 953 - - - 3 751 953 Sale and repurchase agreements with other banks 141 954 141 954 Loans and advances to customers Corporate loans 68 107 902 - - - 68 107 902 Loans to state and public organisations 2 347 180 - - - 2 347 180 Loans to small and medium-sized entities 79 507 433 - - - 79 507 433 Consumer loans 17 822 715 - - - 17 822 715 Mortgage loans 17 917 769 - - - 17 917 769 Car loans 4 653 440 - - - 4 653 440 Plastic cards 434 886 - - - 434 886 Reverse sale and repurchase agreements 13 398 988 - - - 13 398 988 Repurchase receivables Corporate shares - - - 2 914 405 2 914 405 Corporate bonds - - - 1 213 439 1 213 439 Municipal bonds - - - 1 287 646 1 287 646 Federal loan bonds - - - 4 866 699 4 866 699 Other financial assets Receivables 1 272 439 1 173 046 - - 2 445 485 Fair value of derivative financial instruments - - 588-588 Settlements on conversion operations 795 060 - - - 795 060 Total financial assets 249 241 578 1 173 046 588 30 300 563 280 715 775 Non-financial assets - - - - 36 722 389 Total assets 249 241 578 1 173 046 588 30 300 563 317 438 164 83

33 Presentation of Financial Instruments by Measurement Category (Continued) The following table provides a reconciliation of classes of financial assets with these measurement categories as at 31 December 2011: ASSETS Loans and receivables Finance lease receivables Trading assets Assets designated at fair value through profit or loss Cash and cash equivalents Cash on hand 6 213 394 - - - 6 213 394 Cash balances with the CBRF (other than mandatory - cash balances) 9 224 168 - - 9 224 168 Settlement accounts with trading systems 1 090 979 - - - 1 090 979 Correspondent accounts and overnight placements - with other banks 2 419 060 - - 2 419 060 Mandatory cash balances with the Central Bank of - the Russian Federation 2 749 010 - - 2 749 010 - Securities at fair value through profit or loss - Corporate shares - - - 9 899 473 9 899 473 Global depositary receipts - - - 1 398 557 1 398 557 American depositary receipts - - - 4 366 163 4 366 163 Corporate bonds - - - 7 638 077 7 638 077 Investments in mutual funds - - - 381 022 381 022 Federal loan bonds - - 5 329 287 5 329 287 Municipal bonds - - - 1 405 380 1 405 380 Corporate Eurobonds - - - 674 503 674 503 - Due from other banks - Current term placements of other banks 3 426 025 - - - 3 426 025 - Loans and advances to customers - Corporate loans 69 544 947 - - 64 544 947 Loans to state and public organisations 1 779 111 - - - 1 779 111 Loans to small and medium-sized entities 68 507 397 - - - 68 507 397 Consumer loans 12 000 226 - - - 12 000 226 Mortgage loans 11 497 805 - - - 11 497 805 Car loans 3 482 709 - - - 3 482 709 Plastic cards 113 348 - - - 113 348 Reverse sale and repurchase agreements 9 029 292 - - - 9 029 292 - Repurchase receivables - Corporate shares - - - 2 554 463 2 554 463 Corporate bonds - - - 8 870 592 8 870 592 Municipal bonds - - 375 098 375 098 Federal loan bonds - - 4 430 472 4 430 472 - Other financial assets - Receivables 1 540 839 1 016 310 - - 2 557 149 Fair value of derivative financial instruments - - 8 568-8 568 Settlements on conversion operations 986 387 - - - 986 387 Total financial assets 203 604 697 1 016 310 8 568 47 323 087 251 952 662 Non-financial assets - - - - 34 992 786 - Total Total assets 203 604 697 1 016 310 8 568 47 323 087 286 945 448 84

33 Presentation of Financial Instruments by Measurement Category (Continued) As at 31 December 2012 and 31 December 2011, all of the Group s financial liabilities other than derivatives were carried at amortised cost. Derivatives belong to the fair value through profit or loss measurement category. 34 Derivative Financial Instruments As of 31 December 2012 and 31 December 2011 all of the Group s financial liabilities except for derivatives were carried at amortised cost. Derivatives belong to the fair value through profit or loss measurement category. Foreign exchange and other derivative financial instruments entered into by the Group are generally traded in an over-the-counter market with professional market counterparties on standardised contractual terms and conditions. Derivatives have potentially favourable (assets) or unfavourable (liabilities) conditions as a result of fluctuations in market interest rates, foreign exchange rates or other variables relative to their terms. The aggregate fair values of derivative financial assets and liabilities can fluctuate significantly from time to time. The table below sets out fair values, at the end of the reporting period, of currencies receivable or payable under foreign exchange forward contracts entered into by the Group. The table reflects gross positions before the netting of any counterparty positions and payments and covers the contracts with settlement dates after the respective reporting date. The contracts are short term in nature. 85

34 Derivative Financial Instruments (Continued) Contracts with positive fair value 2012 2011 Contracts Contracts with with negative positive fair fair value value Contracts with negative fair value Foreign exchange forwards: fair values as at the reporting date of - USD receivable on settlement (+) - 24 298-579 304 - USD payable on settlement (-) - (78 969) (5 333 047) (5 425 756) - Euros receivable on settlement (+) - 39 424 837 595 62 507 - Euros payable on settlement (-) (321 829) - - - - RR receivable on settlement (+) 322 417 78 884 4 508 187 5 247 925 - RR payable on settlement (-) - (63 819) (4 167) (642 248) Net fair value of foreign exchange forwards 588 (182) 8 568 (178 268) Securities forward contracts: fair value at the reporting date, of: - USD payable on settlement (-) - (176 441) - (170 643) - Gold receivable on settlement (+) - 100 686-152 078 - Platina receivable on settlement (+) - 69 569 - - Net fair value of future contracts - (6 186) - (18 565) Securities transactions: fair value at the reporting date, of: - RR receivable on settlement (+) - - - 309 237 - RR payable on settlement (-) - - - (309 837) Net fair value of securities transactions - - - (600) Currency swap: fair values, at the reporting date, of - RR receivable on settlement (+) - - - 1 123 580 - USD receivable on settlement (+) - 10 071 872 - - - USD payable on settlement (-) - - - (1 289 714) - RR payable on settlement (-) - (10 692 961) - - Net fair value of currency swap - (621 089) - (166 134) Total net fair value of derivative financial instruments 588 (627 457) 8 568 (363 568) 86

35 Related Party Transactions Parties are generally considered to be related if the parties are under common control, or one party has the ability to control the other party or can exercise significant influence over the other party in making financial or operational decisions. In considering each possible related party relationship, attention is directed to the substance of the relationship, not merely the legal form. The category "Shareholders" in the tables below represents the Bank's shareholders under control or significant influence of the Government of the Tatarstan Republic. The category Other related parties in the tables below represents associates, entities under control or significant influence of the Group's management, and entities under control or significant influence of the Bank's large shareholders. 2012 2011 Shareholders Other Shareholders Other related related parties parties Assets Securities at fair value through profit or loss and repurchase receivables Corporate shares 274 719 389 363 209 531 453 362 Investments in mutual funds - 78 014-83 896 Investment in associate - 62 932-52 678 Gross amount of loans and advances to customers (contractual interest rate: 2012: 8.0% - 13%; 2011: 0% - 21.0%) 2 377 516 19 013 931 3 210 991 26 689 330 Provision for impairment of loans and advances to customers (51 358) (2 833 773) (337 011) (5 613 110) Liabilities Due to other banks (contractual interest rate: 2012: 4.6%; 2011: 0.7% - 9.0%) 55 014-55 026 - Customer accounts Current/settlement accounts (contractual interest rate: 2012: 0.0%; 2011: 0.0%) 837 563 3 767 729 749 976 3 445 566 Term deposits outstanding (contractual interest rate: 2012: 0.5%-11%; 2011: 0.5%-9%) 7 333 063 2 856 742 7 319 204 2 612 336 Debt securities in issue (contractual interest rate: 2012: 8.2%-12.7%; 2011: 9.2%-12.7%) 14 941 1 481 296 359 737 802 824 Subordinated debt (contractual interest rate: 2012: 8.0% - 9.5%; 2011: 9.5%) - - 6 724 952-87

35 Related Party Transactions (Continued) In July 2012 the Group issued subordinated Eurobonds in the amount of USD 600 000 thousand with maturity in July 2022 and interest rate of 8.0% p.a. Eurobonds in the amount of USD 300 000 thousand were purchased by a company related to the Tatarstan Republic Government. At 31 December 2012 the Group has no information available on ultimate holders of subordinated Eurobonds of this issue. Off-balance sheet items for the year ended 31 December 2012 and for the year ended 31 December 2011 are as follows: 2012 2011 Shareholders Other related parties Shareholders Other related parties Guarantees issued 173 592 692 263 276 497 148 000 The income and expense items for the periods ended 31 December 2012 and 31 December 2011 are as follows: 2012 2011 Shareholders Other related parties Shareholders Other related parties Interest income Loans and advances to customers 256 463 1 056 853 31 383 1 751 782 Interest expense Due to other banks - - (26) - Customer accounts (604 176) (235 369) (318 511) (113 681) Debt securities in issue (1 561) (46 135) - - Subordinated debt (421 113) - (624 307) - Gains less losses from securities at fair value through profit or loss (181 481) - 2 218 - Administrative and other operating expenses (32 643) (25 195) (2 265) (8 378) Compensation to members of the Management Board is presented below: 2012 2011 Expenses Expenses Short-term benefits: - Salaries 70 529 87 951 - Short-term bonuses 124 847 72 072 Total 195 376 160 023 In 2012, total remuneration of members of the Management Board includes statutory social security contributions of RR 15 390 thousand (2011: 1 919 thousand). 88

36 Transactions with Public Agencies and State-Controlled Entities In the course of its day-to-day operations, the Group carries out transactions with public agencies of the Republic of Tatarstan and the Russian Federation and entities under state control or significant influence. The Group provides to public agencies and state-controlled entities a full range of banking services, including deposit taking, provision of loans, issue of guarantees, purchase/sale of securities and cash and settlement services. This list of transactions performed is not exhaustive. The Group performs such transactions on an arm's length basis. In these financial statements the Group applied the exemption from disclosure of individually and collectively insignificant transactions and balances with the government and entities controlled by the state. The table below does not include balances and results of transactions with public agencies of the Republic of Tatarstan and the Russian Federation and entities under state control or significant influence. This information is disclosed in Note 35. Tatarstan Republic Government bodies and state organisations 2012 2011 The Russian Tatarstan Federation Republic Government Government bodies and bodies and state organisations state organisations The Russian Federation Government bodies and state organisations ASSETS Cash and cash equivalents - 9 722 539-9 224 168 - Mandatory cash balances with CBRF - 3 086 031-2 749 010 Securities at fair value through profit or loss and repurchase receivables Corporate shares - 3 737 000-9 747 405 Corporate bonds (contractual interest rate: 2012: 8.6%- 15.0%, 2011: 8.6%-15.0%) - 1 494 204-4 515 869 OFZ bonds (contractual interest rate: 2012: 6.5%- 12.0%; 2011: 6.7%-12.0%) - 8 770 171-9 569 030 Municipal bonds (contractual interest rate: 2012: 5.4%- 8.3%; 2011: 8.0%-15.0%) 9 986 1 323 065 9 986 1 754 892 Due from other banks - 130 186-146 098 Gross amount of loans and advances to customers (contractual interest rate: 2012: 0.0% - 14.0%; 2011: 0.0% - 15.0%) 16 697 425 1 224 599 14 714 607 1 273 973 Provision for impairment of loans and advances to customers (757 949) (25 802) (882 916) (30 333) Deferred income tax asset - 2 480 190-2 640 200 Other assets 655 23 007 35 009 44 580 89

36 Transactions with public agencies and state-controlled entities (Continued) Tatarstan Republic Government bodies and state organisations 2012 2011 The Russian Tatarstan Federation Republic Government Government bodies and bodies and state organisations state organisations The Russian Federation Government bodies and state organisations Liabilities Due to other banks (contractual interest rate: 2012: 6.2%-9.5%; 2011: 0.7%- 8.6%) - 29 623 155-20 805 974 Customer accounts Current/settlement accounts (contractual interest rate: 2012: 0.0%; 2011: 0.0%) 14 263 585 1 039 713 9 623 607 - Term deposits outstanding (contractual interest rate: 2012: 0.0%-10.8%; 2011: 0.3%-16.0%) 6 713 267 3 105 395 12 166 503 10 263 010 Debt securities in issue (contractual interest rate: 2012: 12.2%-12.4%; 2011: 6.0%-13.0%) 20 834 719-26 575 115 - Deferred income tax liability - 72 567 - - Other liabilities 98 46 836 144 51 095 90

36 Transactions with public agencies and state-controlled entities (Continued) Off-balance sheet items for the year ended 31 December 2012 and for the year ended 31 December 2011 are as follows: Tatarstan Republic Government bodies and state organisations 2012 2011 The Russian Tatarstan Federation Republic Government Government bodies and bodies and state organisations state organisations The Russian Federation Government bodies and state organisations Guarantees issued - 11 030 426 446 - The income and expense items for the periods ended 31 December 2012 and 31 December 2011 are as follows: Tatarstan Republic Government bodies and state organisations 2012 2011 The Russian Tatarstan Federation Republic Government Government bodies and bodies and state organisations state organisations The Russian Federation Government bodies and state organisations Interest income Due from other banks - 12 123-64 284 Loans and advances to customers 1 257 262 135 860 1 284 652 58 887 Securities at fair value through profit or loss - 115 231-95 461 Interest expense Due to other banks - (1 252 274) - (189 336) Customer accounts (553 111) (255 856) (529 417) (427 225) Debt securities in issue (25 093) - (29 393) - Gains less losses from securities (4 480) 191 412 - (1 319 054) Administrative and other operating expenses (130 371) (325 524) (95 980) (200 278) Income tax expense - (207 403) - (227 362) 91

37 Principal Subsidiaries and Associates The list of the Group's principal subsidiaries is as follows: Company Nature of business Percentage of ownership as at 31 December 2012 Percentage of ownership as at 31 December 2011 Country of incorporation Location Subsidiaries: OAO Leasing Company of Ak Bars Bank Finansovaya Economicheskaya Gruppa Leasing 100 100 Russia Kazan OOO Ak Bars Ipoteka Real estate 100 100 Russia Kazan ZАО Investment Company Ak Bars Finance Investment 100 100 Russia Moscow ZAO CB Naratbank Banking 100 98 Russia Saratov Mutual Investment Fund Ak Bars Gorizont Real estate 100 100 Russia Kazan ZAO Investment Construction Company Tandem Real estate 74 61 Russia Kazan Mutual Investment Fund Ak Bars Perspectiva Real estate 100 100 Russia Kazan Mutual Investment Fund Ak Bars Nedvizhimost Real estate 99.9 99 Russia Kazan Mutual Investment Fund Ak Bars Stolitsa Real estate 100 100 Russia Kazan Mutual Investment Fund Ak Bars Zemelniy Fond Real estate 99.99 99 Russia Kazan Mutual Investment Fund Ak Bars Invsetitsii Investment 100 100 Russia Kazan Mutual Investment Fund Ak Bars Alyans Real estate 100 100 Russia Kazan AK Bars Investments Corporation Investment 100 100 British Virgin Islands Road Town AKBF Investments Limited Investment 100 100 Cyprus Nicosia Associates: OOO Management Company Ak Bars Kapital Investment 20 20 Russia Kazan 92

38 Transactions with Shares of and Interest in Subsidiaries In January 2007, the Group acquired 48.0% of shares in ZAO ISK Tandem. In August 2011, the Group acquired additional 13.0% of shares in ZAO ISK Tandem and consequently got control over the company owning the Tandem shopping centre in Kazan. The Group recognised the acquisition of ZAO ISK Tandem as an asset acquisition due to the economic substance of the transaction and its intention in relation to the shopping centre. Note Attributed fair value Cash and cash equivalents 58 405 Investment properties 12 2 028 254 Other assets 167 579 Other liabilities (78 405) Fair value of identifiable net assets of subsidiary 2 092 984 Less: non-controlling interest - 39% (848 579) Total purchase consideration and previously held interest in the acquiree 1 327 254 Non-controlling interest - 48% 37 1 044 405 Cash consideration 282 849 Outflow of cash and cash equivalents on acquisition 141 595 The non-controlling interest was measured at its fair value. Management has calculated the fair value of the non-controlling interest as 39.0% of the fair value of acquiree's assets. The fair value of the assets was measured by a qualified valuer. The valuer used the comparative and income assessment approach to measure 100% of shares in ZAO ISK Tandem. The resulting assessment was weighted at 50.0% to finalise the fair value of ZAO ISK Tandem shares. The investment in the acquiree made by the Group before the acquisition was fair valued as at the acquisition date and an income of RR 64 405 thousand was recognised within losses less gains arising from securities at fair value through profit or loss. In April 2012, the Group additionally acquired 13.0% of shares of ZAO ISK Tandem valued at RR 282 859 thousand for RR 203 000 thousand. Income from this deal in the amount of RR 79 859 thousand was recognised in the Group's equity. As at 31 December 2012, the Group's interest in the share capital of ZAO ISK Tandem was 74.0% (31 December 2011: 61.0%). Refer to Notes 12 and 37. 39 Events After the Reporting Date In March 2013, the Group attracted RR 5 000 000 thousand through issue of bonds denominated in Russian Roubles maturing in March 2016. The first two semi-annual coupon payments due on the bonds were set at a rate of 9.2% p.a. Terms of issue of bonds assume an offer after one year. 93