UNIVERZAL BANKA A.D. BEOGRAD

UNIVERZAL BANKA A.D. BEOGRAD FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2009

Univerzal banka a.d. Beograd TABLE OF CONTENTS Page Independent Auditors Report 1 Income statement 2 Balance sheet 3 Statement of Changes in Equity 4 Cash Flow Statement 5 Notes to the Financial Statements 6 53

NOTES TO THE FINANCIAL STATEMENTS 1. CORPORATE INFORMATION Univerzal banka a.d. Beograd (hereinafter referred as to the Bank ) was established in 1992. Until 1997 the Bank operated under the name Mešovita banka ''Asi banka'' a.d. Beograd. The Bank is registered for providing all types of banking services in the Republic of Serbia. The Bank is registered in the Republic of Serbia to provide a wide range of banking services associated with deposit, loan, cash, guarantees, foreign currency, foreign exchange, issue and deposit, clearing and settlement activities in accordance with the Law, activities of mediation in trade with securities, purchase and collection of receivables and other banking and financial activities in accordance with the Law on banks. The Bank s headquarter is in Belgrade, 29 Francuska St. The Bank s identification number is 06031676. The Bank s tax identification number is 100003025. As of 31 December 2009 the Bank had 469 employees (2008: 458 employees). The Bank comprises 16 branches and 51 sub-branches. The Bank s Board of Directors adopted these financial statements as of 26 February 2010. 2. ACCOUNTING POLICIES 2.1. Basis of preparation and presentation of the financial statements The financial statements have been prepared in accordance with the accounting regulations in the Republic of Serbia based on the Law on Accounting and Auditing (Official Gazette of the Republic of Serbia No. 46/06, 111/09), Law on Banks (Official Gazette of the Republic of Serbia No. 107/05) and other by-laws of the National Bank of Serbia. Law on Accounting and Auditing and the Law on Banks prescribe that the financial statements should be prepared in accordance with the law and professional regulations which include Framework for preparation and presentation of financial statements ( Framework ), International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS), as well as interpretations of the above mentioned. Framework and IAS applicable on 31 December 2002, which were the basis for the preparation of previous and current Law on Accounting and Auditing from 2006, were set up by the Decision of the Ministry of Finance of the Republic of Serbia No. 011-00-738-2003-01 dating 30 December 2003. Changes in IAS and new IFRS with its interpretations issued by the International Accounting Standards Board (IASB) and International Financial Reporting Interpretations Committee (IFRIC) were published in the Official Gazette of the Republic of Serbia No. 16 from 12 February 2008. The Bank s financial statements are presented in the format prescribed by the Rulebook on the Format and Contents of Positions in the Forms of Financial Statements for Banks and other Financial Organizations (Official Gazette of the Republic of Serbia No. 74/08 and 3/09, 12/09 and 26/09). 6

2. ACCOUNTING POLICIES (continued) 2.1. Basis of preparation and presentation of the financial statements (continued) However, taking into account the differences between IFRS and certain requirements of accounting regulations of the Republic of Serbia and regulations of the National Bank of Serbia, the Bank s management does not express an unreserved statement of compliance of the financial statements with requirements of all standards and interpretations issued by International Accounting Standards Board, which make International Financial Reporting Standards. Financial statements are prepared on the historical cost basis except for securities and other investments available-for-sale which are measured at fair value. 2.2. Significant accounting judgments and estimates In the process of applying the Bank s accounting policies, management has used its judgments and made estimates in determining the amounts recognized in the financial statements. The most significant use of judgments and estimates are as follows: Fair value of financial instruments Where the fair values of financial assets and liabilities recorded on the balance sheet cannot be derived from active markets they are determined using a variety of valuation techniques that include the use of mathematical models. The input to these models is taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. The judgments include consideration of basic inputs needed for these models. 2.3. Summary of significant accounting policies The most important accounting policies used in preparation of the financial statements are as follows: (1) Foreign currency translation The financial statements are presented in, which is the reporting and functional currency of the Bank. The Bank s financial statements are expressed in s of, except when otherwise indicated. Foreign currency transactions are translated into dinars at the official exchange rate of the National Bank of Serbia, prevailing at the transaction date. Monetary assets and liabilities denominated in foreign currencies, at the balance sheet date, are translated into dinars at official middle exchange rate of the National Bank of Serbia prevailing at the balance sheet date. Exchange rate differences originating from foreign currency translation, as well as from translation of monetary assets and liabilities denominated in foreign currency, are taken to Foreign exchange gains and losses in the income statement. Gains and losses originating from translation of financial assets and liabilities with currency clause are recognized in Income and expenses from changes in value of assets and liabilities. Contingencies and commitments denominated in foreign currency are translated into dinars at the official middle exchange rate of the National Bank of Serbia prevailing at the balance sheet date. 7

2. ACCOUNTING POLICIES (continued) 2.3. Summary of significant accounting policies (continued) (2) Financial instruments (i) Date of initial recognition Purchases or sales of financial assets that require delivery of assets within the time frame generally established by regulations or conventions in the market place are recognized on the trade date, i.e. the date that the Bank commits to receive or transfer the assets. (ii) Initial recognition of financial instruments The classification of financial instruments at initial recognition depends on the purpose for which the financial instruments were acquired and their characteristics. All financial instruments are measured at their fair value plus any directly attributable costs of acquisition or issue, except in the case of securities and other placements held for trading. (iii) Financial assets or financial liabilities designated at fair value through income statement The management did not classify financial instruments, on initial recognition, into the category of the financial assets or liabilities recorded at fair value through profit or loss. (iv) Investments in securities held-to-maturity Securities held-to-maturity are those which carry fixed or determinable payments and have fixed maturities and which the Bank has the intention and ability to hold to maturity. After initial measurement, investments in securities held-to-maturity are measured at amortized cost which is calculated by taking into account any discount or premium on acquisition, less allowance for impairment. Fees which are part of the effective income from these instruments are accrued and recorded as deferrals in the income statement during the useful life of the instrument. (v) Due from banks and loans to customers Due from banks and loans and advances to customers are financial assets with fixed or determinable payments and fixed maturities that are not quoted in an active market. They are not entered into with the intention of immediate or short-term resale and are not classified as securities and advances held-for-trading or securities available-for-sale. After initial measurement, amounts due from banks and loans and advances to customers are measured at amortized cost which is calculated by taking into account any discount or premium on acquisition, less allowance for impairment. Income and receivables from calculated interest on these instruments are recorded in interest income, i.e. interest and fee receivables. Fees which are part of the effective income from these instruments are accrued and recorded as deferrals in the income statement during the useful life of the instrument. (vi) Investment in shares and other securities available-for-sale Investment in shares and other securities available-for-sale are those which are designated as such or do not qualify to be classified as designated at fair value through profit or loss, held-to-maturity or loans and advances. Financial assets available-for-sale comprises investments in shares of other legal entities and debt securities. 8

2. ACCOUNTING POLICIES (continued) 2.3. Summary of significant accounting policies (continued) (2) Financial instruments (continued) (vi) Investment in shares and other securities available-for-sale (continued) After initial measurement, these instruments are subsequently measured at fair value. Investments in shares, which are not quoted in an active market and whose fair value cannot be determined with certainty, are measured at cost. Unrealized gains and losses are recognized directly in equity in revaluation reserves. When the security is disposed of, the cumulative gain or loss previously recognized in equity is recognized in the income statement, in gains or losses from sales of securities. Where the Bank holds more than one investment in the same security they are deemed to be disposed of on a first-in first-out basis. Interest earned whilst holding available-for-sale securities is reported as interest income using the effective interest rate. Dividends earned whilst holding available-for-sale financial instruments are recognized in the income statement as Dividends and similar income when the right to the payment has been established. The losses arising from impairment of such investments are recognized in the income statement and removed from the available-for-sale reserve. (vii) Issued financial instruments and other financial liabilities Issued financial instruments or their components are classified as liabilities when the substance of the contractual arrangement results in the Bank having an obligation either to deliver cash or another financial asset to the holder, or to satisfy the obligation other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of own equity shares. (viii) Derecognition of financial assets and financial liabilities Financial assets A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognized where: the rights to receive cash flows from the asset have expired; the Bank has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a 'pass-through' arrangement; and either the Bank has transferred substantially all the risks and rewards of the asset, or the Bank has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. When the Bank has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognized to the extent of the Bank's continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Bank could be required to repay. 9

2. ACCOUNTING POLICIES (continued) 2.3. Summary of significant accounting policies (continued) (2) Financial instruments (continued) (viii) Derecognition of financial assets and financial liabilities (continued) Financial liabilities A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in income statement. (ix) Determination of fair value The fair value of financial instruments traded in active markets at the balance sheet date is based on their quoted market price, without any deduction for transaction costs. For all other financial instruments not listed in an active market, the fair value is determined using appropriate valuation techniques. Valuation techniques include net present value techniques, comparison to similar instruments for which market observable price exist and other relevant valuation models. (x) Financial assets impairment The Bank assesses at each balance sheet date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred loss event ) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the borrower or a group of borrowers is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. Due from banks and loans and advances to customers For amounts due from banks and loans and advances to customers carried at amortized cost, the Bank first assesses individually whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Bank determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes an asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. 10

2. ACCOUNTING POLICIES (continued) 2.3. Summary of significant accounting policies (continued) (2) Financial instruments (continued) (x) Financial assets impairment (continued) Due from banks and loans and advances to customers (continued) Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognized are not included in a collective assessment of impairment. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss recognized in the income statement. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realized or has been transferred to the Bank. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowance account. The present value of the estimated future cash flows is discounted at the financial asset s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate. The calculation of the present value of the estimated future cash flows of a collateralized financial asset reflects the cash flows that may result from foreclosure less costs for obtaining and selling that collateral, whether or not foreclosure is probable. Investments in securities held-to-maturity For held-to-maturity investments the Bank assesses individually whether there is objective evidence of impairment. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows. The carrying amount of the asset is reduced and the amount of the loss is recognized in the income statement. If, in a subsequent year, the amount of the estimated impairment loss decreases because of an event occurring after the impairment was recognized, any amounts formerly recognized is reduced and the effects are recognized in the income statement. Investment in shares and other available-for-sale investments For investment in shares and other available-for-sale investments, the Bank assesses at each balance sheet date whether there is objective evidence that an investment or a group of investments is impaired. In the case of other legal entities equity investments classified as available-for-sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. Where there is evidence of impairment, the cumulative loss-measured as the difference between the acquisition cost and the current fair values, less any impairment loss on that investment previously recognized in the income statement- is removed from equity and recognized in the income statement. Impairment losses on equity investments are not reversed through the income statement; increases in their fair value after impairment are recognized directly in equity. Allowance for impairment of investments in shares that are not listed on the active market and whose value cannot be determined with certainty, is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows and recognized in the income statement and not reversed until derecognition. 11

2. ACCOUNTING POLICIES (continued) 2.3. Summary of significant accounting policies (continued) (2) Financial instruments (continued) (xi) Renegotiated loans When possible, the Bank seeks to restructure loans rather than to take possession of collateral. This may involve extending the payment arrangements and the agreement of new loan conditions. Once the terms have been renegotiated, the loan is no longer considered past due. Management continuously reviews renegotiated loans to ensure that all criteria are met and that future payments are likely to occur. The loans continue to be subject to an individual or collective impairment assessment, calculated using the loan s original effective interest rate. (xii) Offsetting financial assets and liabilities Financial assets and liabilities are offset and the net amount reported in the balance sheet if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously. (xiii) Hedge accounting The Bank does not use hedge accounting. (3) Operating lease Leases where the Bank does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. (4) Recognition of income and expenses Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Bank and the revenue can be measured. (i) Interest and similar interest and expense For all financial instruments measured at amortized cost and interest bearing financial instruments classified as available-for-sale financial instruments, interest income or expense is recorded using the effective interest rate. The calculation of the effective interest rate takes into account all contractual terms of the financial instrument, except fees and incremental costs that are related to the loan approval, but no future credit losses. (ii) Fee and commission income The Bank earns fee and commission income from a diverse range of services it provides to its customers. (iii) Fee income from certain performances Fees or components of fees that are linked to a certain performance are recognized after fulfilling the corresponding criteria. (iv) Dividend income Dividend income is recognized when the bank s right to receive the payment is established. 12

2. ACCOUNTING POLICIES (continued) 2.3. Summary of significant accounting policies (continued) (5) Cash and cash equivalents For purpose of the cash flows statement, Cash and cash equivalents include cash and balances on gyro and current accounts held with other banks. (6) Property and equipment Property and equipment are stated at cost, excluding daily maintenance expenses, less accumulated depreciation and accumulated allowance for impairment. Depreciation is calculated using the straight-line method to write down the cost of property and equipment to their residual value over their useful lives. The estimated useful lives are as follows: Buildings Computer equipment Other equipment to 77 years 3 to 5 years 6 to 14 years Changes in expected useful life of assets are considered as changes in accounting estimations. Any item of property and equipment is derecognized upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is recognized in Other operating income or Other operating expenses in the income statement in the year the asset is derecognized. (7) Intangible assets Intangible assets are carried at cost less accumulated amortization and accumulated impairment losses. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortized over the useful economic life. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the income statement in the Other operating income. Amortization is calculated using the straight-line method to write down the cost of intangible assets to their residual values over their estimated useful lives as follows: Licenses for software Other intangible assets 3 to 5 years 3 to 5 years (8) Impairment of non-financial assets The Bank assesses at each reporting date if events or changes in circumstances indicate that the carrying value may be impaired, whether there is an indication that non-financial asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Bank makes an estimate of the assets recoverable amount. Where the carrying amount of an asset (or group of asset, cash-generating units) exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset s recoverable amount since the last impairment loss was recognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. 13

2. ACCOUNTING POLICIES (continued) 2.3. Summary of significant accounting policies (continued) (9) Financial guarantees In the ordinary course of business, the Bank gives financial guarantees, consisting of payable and performance guarantees, letters of credit, acceptances and other warranties. Financial guarantees are initially recognized in the balance sheet at fair value, upon fee inflow from financial guarantee approval. Subsequent to initial recognition, the bank s liability under each guarantee is measured at the higher of the amortized premium and the best estimate of expenditure required to settle any financial obligation arising as a result of the guarantee. Any increase in the liability relating the financial guarantees is taken to the income statement in Expenses in indirect placements write-off and provisions. The premium received is recognized in the income statement in Fees and commission income on a straight-line basis over the life of the guarantee. (10) Employees benefits Defined benefit plan The Bank s calculates and pays contributions for pension and health insurance and contributions for unemployment insurance at the rates prescribed by the law on the basis of the gross salaries. The contributions expenses are recognized in the income statement in the same period as appropriate salary expenses. The Bank has no further liabilities for contributions in this respect. Long-term benefits to employees In accordance with Labour Law there is a mandatory retirement indemnity equal to 3 gross monthly salaries, based on the average salary in the Republic of Serbia in the month prior to retirement. Expenses and liabilities for these plans are not provided by funds. Liabilities from the benefits and related expenses are recognized at future cash flows present value using actuarial valuation using the projected cost unit method. Actuarial gains and losses and expenses of previous services rendered are recognized in the income statement when incurred. (11) Provisions Provisions are recognized when the Bank has a present obligation (legal or constructive) as a result of a past event, and 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. (12) Income tax Current tax Current tax assets and liabilities for the current and prior years are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date. Current tax relating to items recognized directly in equity is also recognized in equity. 14

2. ACCOUNTING POLICIES (continued) 2.3. Summary of significant accounting policies (continued) (12) Income tax (continued) Deferred tax Deferred tax is provided on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognized for all taxable temporary differences, except where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; as well as in respect of taxable temporary differences associated with investments in subsidiaries and associates and joint investments where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized except, where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss and in respect of deductible temporary differences associated with investments in subsidiaries and associates and joint investments, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are reassessed at each balance sheet date and are recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Deferred tax relating to items recognized directly in equity is also recognized in equity. (13) Comparative data Reclassification of comparative data was done, when it was necessary, for the purpose of reconciliation with the current year presentation. 15

3. INTEREST INCOME AND EXPENSES Interest income Other banks 53.388 96.546 National Bank of Serbia 488.718 279.160 Corporate 3.068.758 2.840.163 Public sector 22.819 524 Retail sector 141.488 135.556 Other customers 32.955 3.054 Securities 156.153 71.947 3.964.279 3.426.950 Interest expenses Other banks 371.595 240.337 Corporate 1.060.502 874.754 Public sector 67.886 185.669 Retail sector 317.517 87.674 Foreign entities 6.678 1.804 Other customers 33.873 49.725 1.858.051 1.439.963 Net interest income 2.106.228 1.986.987 Interest income and expenses according to financial instruments classes: Interest income Cash and short-term assets 78.393 31.218 Deposits with the National Bank of Serbia 410.325 247.942 Due from banks 53.388 96.546 Placements to customers 3.124.532 2.843.741 Securities held-to-maturity 156.153 71.947 Other-retail 141.488 135.556 3.964.279 3.426.950 Interest expenses Deposits with other banks 371.595 240.337 Deposits to customers 1.162.261 1.110.148 Retail sector 317.517 87.674 Foreign customers 6.678 1.804 1.858.051 1.439.963 Net interest income 2.106.228 1.986.987 16

4. FEE AND COMMISSION INCOME AND EXPENSES Fee and commission income Domestic clearing and settlement 235.377 197.758 Foreign clearing and settlement 10.198 42.016 Sales and purchase of foreign currencies 67.338 110.011 Credit cards operations 17.954 11.949 Guarantees and other off-balance sheet items 65.094 24.444 Funds managed on behalf of third parties 44.472 46.349 Other fees and commissions 11.437 6.410 451.870 438.937 Fee and commission expenses Domestic clearing and settlement 16.849 28.259 Foreign clearing and settlement 2.756 2.737 Sales and purchase of foreign currencies 3.550 24.192 Credit cards operations - 9 Fees and commissions for brokers 731 - Other fees and commission 10.545 6.674 34.431 61.871 Net fee and commission income 417.439 377.066 5. NET FOREIGN EXCHANGE LOSSES Foreign exchange gains 1.773.760 2.834.147 Foreign exchange losses 1.964.051 2.985.197 Net foreign exchange losses (190.291) (151.050) 6. DIVIDENDS AND INVESTMENTS INCOME Income from equity investments 578 5.172 Income from dividends - 803 Total income from dividends and investments 578 5.975 7. OTHER OPERATING INCOME Rental income - 403 Other operating income and refund of legal fees 899 3.436 Gains from sales of fixed assets and received assets 23.124 2.892 Reversals of allowances for impairment 938 2.358 Collected insurance premiums 34.019 38.761 Other income 2.952 15.613 Total other operating income 61.932 63.463 17

8. LOSSES ON IMPAIRMENT AND PROVISIONS Releases of allowances for impairment losses of on-balance sheet items: Placements to customers (Note 18) 1.384.604 699.427 Interest and fee receivables (Note 17) 78.417 32.159 Securities (Note 19) 8.014 - Other placements (Note 21) 60.335 183.956 Other assets (Note 23) 17.103 10.853 Income from collected suspended interest 1.878-1.550.351 926.395 Income from reversals of provisions : Litigations (Note 28) - 39.812 Losses on contingent liabilities (Note 28) 101.460 108.461 101.460 148.273 Additions to allowances for impairment of on-balance sheet items: Placements to customers (Note 18) (2.035.573) (972.949) Interest and fee receivables (Note 17) (164.600) (38.747) Securities (Note 19) (32.660) - Other placements (Note 21) (50.653) (17.120) Other assets (Note 23) (16.694) (496) (2.300.180) (1.029.312) Additions to provisions: Long-term employee benefits (Note 28) (4.095) (5.754) Losses on contingent liabilities (Note 28) (137.437) (105.369) Suspended interest expense (21.682) - (163.214) (111.123) Loss on impairment and provisions, net (811.583) (65.767) 9. OPERATING AND OTHER EXPENSES Material 63.712 53.586 Costs of production services 216.070 208.894 Non-material expenses 219.201 220.531 Tax expenses 17.346 9.836 Contribution expenses 115.450 110.733 Other expenses 17.286 15.930 Losses on write-off and sales of fixed assets 1.083 3.960 Subsequently determined interest expenses enforced collection 128.261 9.211 Total operating and other expenses 778.409 632.681 18

10. COST OF SALARIES, FRINGE BENEFITS AND OTHER PERSONAL EXPENSES Net salaries 491.887 479.999 Tax and contributions payable by employees 79.234 77.202 Contributions payable by employer 112.331 107.835 Other staff costs 42.270 35.322 Total costs of salaries, fringe benefits and other personal expenses 725.722 700.358 11. INCOME FROM CHANGES IN VALUE OF ASSETS AND LIABILITIES Income from changes in value of loans and advances 586.103 506.828 Income from changes in value of other assets 39 212 Total income from changes in value of assets and liabilities 586.142 507.040 12. EXPENSES FROM CHANGES IN VALUE OF ASSETS AND LIABILITIES Expenses from changes in value of placements 361.344 308.171 Expenses from changes in value of securities 159 997 Total expenses from changes in value of assets and liabilities 361.503 309.168 19

13. INCOME TAX Income tax components: Current income tax 14.286 54.822 Deferred tax liabilities 68 6.065 Total Income tax 14.354 60.887 Reconciliation of total amount of income tax stated in the income statement with the amount of gains before taxation and prescribed tax rate: Income before taxation 214.288 1.004.362 Income tax calculated at tax rate of 10% 21.429 100.436 Tax effects of expenses which are not recognized for tax purposes 7.160 2.707 Tax decrease for investments in fixed assets (5.310) (13.955) TTax decrease for indefinite employment of new employees (8.984) (34.284) Other 59 5.983 Income tax stated in the income statement 14.354 60.887 Deferred tax liabilities are related to the temporary differences between book value of tangible and intangible assets and their base for tax purposes. Deferred tax assets are recognized in the amount of 4.590 as at 31 December 2009 (2008: 4.521 ). 14. EARNINGS PER SHARE Basic earnings per share are calculated as follows: annual net gains or losses, which can be attributed to the owners of the Bank s ordinary shares, is divided by weighted average number of ordinary shares that were in circulation during the period. The Bank is registered as a company whose share capital comprises 567.481 shares. Earnings per share is calculated in the amount of 372 (2008: 1.926) by dividing the net income with the weighted average number of shares which on 31 December 2009 equals 545.043 shares (2008: 489.780 shares). The Bank had no convertible financial instruments. 20

15. CASH AND CASH EQUIVALENTS In dinars Gyro account 2.429.033 1.930.555 Cash on hand 857.116 307.174 3.286.149 2.237.729 In foreign currencies Accounts with domestic banks 10.044 8.047 Accounts with foreign banks 215.222 353.056 Cash on hand in foreign currencies 103.126 114.541 328.392 475.644 Balance at 31 December 3.614.541 2.713.373 The Bank s obligatory reserves represent the minimum reserves that are set aside in accordance with the National Bank of Serbia Regulation on Obligatory Reserves of Banks to be held with the National Bank of Serbia (Official Gazette No. 116/06, 3/07, 31/07, 93/07, 35/08, 94708, 100/08, 107/08, 110708, 112/08, 12/09, 39/09, 44/09, 47/09 and 111/09). In accordance with the Regulation, banks are obligated to calculate the obligatory reserve denominated in dinars at the rate of 10% on the basis of average daily amount of deposits in dinars during a month period. Apart from this, banks calculate obligatory reserve denominated in dinars at the rate of 45% on the basis of average daily carrying balance of deposits in dinars for the previous month which are indexed by a foreign currency clause as well as on the basis of the amount of average daily carrying balance of liabilities in dinars for the previous month for deposits and loans received from abroad. In November 2009 the amount of calculated obligatory reserve in dinars was 1.932.290. During accounting period the Bank is obligatory to maintain average daily balance of obligatory reserve in dinars on its gyro account. As of 31 December 2009 the Bank s available funds on its gyro account were higher than the amount of calculated obligatory reserve in dinars. 16. CALLABLE DEPOSITS AND CREDITS In dinars Repo placements with the National Bank of Serbia 5.620.439 2.500.000 Other cash assets - 700.000 In foreign currency Obligatory reserve in foreign currency 2.936.175 1.450.243 Balance at 31 December 8.556.614 4.650.243 On 31 December 2009 REPO transactions in the amount of 5.600.000 refer to investments in treasury bills issued by the National Bank of Serbia with maturity of 14 days and interest of 10% per annum. The Bank s obligatory reserves denominated in foreign currency with the National Bank of Serbia are set aside in accordance with the National Bank of Serbia Regulation on Obligatory Reserves of Banks to be held with the National Bank of Serbia. In accordance with the Regulation, banks are obligated to calculate the obligatory reserve in foreign currency at the rate of 45% on the basis of average daily amount of foreign currency deposits during a month period. Apart from this, banks calculate obligatory reserve denominated in foreign currency at the rate of 100% on the basis of average daily carrying balance of deposits in foreign currency for the previous month kept by the lessors on the special account with the Bank; at the rate of 20% on the basis of average daily carrying amount of subordinated liabilities for the previous month: at the rate of 40% on the basis of liabilities for foreign currency savings held with the Bank. 21

17. INTEREST, FEES AND COMMISSIONS RECEIVABLES, CHANGE IN THE FAIR VALUE OF DERIVATIVES AND OTHER RECEIVABLES In dinars Other banks 413 752 National Bank of Serbia 1.879 3.217 Corporate 450.007 267.328 Public sector 48 15 Retail sector 11.999 6.875 Other customers 9.692 1.445 474.038 279.632 In foreign currency Other banks - 249 Corporate 20.985 12.127 20.985 12.376 Total 495.023 292.008 Allowance for impairment (118.694) (32.387) Balance at 31 December 376.329 259.621 Changes in allowances for impairment are as follows: Balance at the beginning of the year 32.387 24.933 Charge for the year (Note 8) 164.600 38.747 Allowance for impairment reversals (Note 8) (78.417) (32.159) Write-offs (2) - Foreign exchange differences 126 866 Balance at 31 December 118.694 32.387 22

18. LOANS, ADVANCES AND DEPOSITS Short-term Long-term Total Short-term Long-term Total In dinars -Banking sector 984.975-984.975 441.587-441.587 -Corporate 13.401.619 2.270.049 15.671.668 11.193.097 1.887.115 13.080.212 -Retail 218.167 749.407 967.574 266.727 629.932 896.659 -Public sector - 18.466 18.466-2.089 2.089 -Foreign entities - - - 45-45 Total in dinars 14.604.761 3.037.922 17.642.683 11.901.456 2.519.136 14.420.592 In foreign currency - Banking sector 959-959 266.689-266.689 - Corporate 844.531-844.531 692.648 492.581 1.185.229 - Retail - - - - - - - Foreign banks 459.368-459.368 997.647-997.647 Total in foreign currency 1.304.858-1.304.858 1.956.984 492.581 2.449.565 Total placements to customers 15.909.619 3.037.922 18.947.541 13.858.440 3.011.717 16.870.157 Allowance for impairment: (1.353.518) (681.058) Balance at 31 December 17.594.023 16.189.099 As of 31 December 2009 short-term and long-term loans in dinars include loans approved with the currency clause in the amount of 7.189.882 (where 599.533 are retail loans, 6.134.713 are corporate loans and 455.636 are loans to banks and other entities within financial sector). Interest rates for loans approved to legal entities fluctuated in the range of 1% to 1,3% on an monthly level. Interest rates for loans approved to retail sector fluctuated in the range of 0,6% to 1,25% monthly, depending on the type of loan. Gross loans which are individually assessed as impaired on 31 December 2009 amount to 16.209.227. Fair value of the collaterals referring to these loans is estimated to 22.809.320 and includes deposits and mortgages. Changes in allowances: Balance at the beginning of the year 681.058 408.268 Charge for the year (Note 8) 2.035.573 972.949 Reversals (Note 8) (1.384.604) (699.427) Write-offs - (1.594) Transfer from other placements (Note 20) 4.029 - Foreign exchange differences 17.462 862 Balance as of 31 December 1.353.518 681.058 23

19. SECURITIES Securities available for sale 465 827 Securities held to maturity 471.279 296.137 Nominal value adjustments (44) (12.445) Allowances for matured securities (24.646) - Net balance at 31 December 447.054 284.519 Changes in allowances: 31.12.2009 31.12.2008 Balance at the beginning of the year - - Charge for the year (Note 8) 32.660 - Reversals (Note 8) (8.014) - Balance as of 31 December 24.646-20. EQUITY INVESTMENT In dinars - banks 2.062 2.221 - corporate 10.393 9.815 12.455 12.036 In foreign currency - banks 3.311 3.121 Allowances for impairment - - - Balance at 31 December 15.766 15.157 24

21. OTHER LENDING In dinars Receivables for the amounts paid by the Bank on the basis of issued guarantees 230.207 94.837 Other placements 19.878 98.345 250.085 193.182 In foreign currency Receivables for the amounts paid by the Bank on the basis of issued guarantees 134.244 107.199 Other placements 14.351 13.528 Total in foreign currency 148.595 120.727 Allowances for impairment (206.487) (211.429) Balance at 31 December 192.193 102.480 VISA-CARD and DINA-CARD credit card placements in 2009 are reclassified from other placements to other loans. Changes in allowances for impairment were as follows: Balance at the beginning of the year 211.429 233.175 Charge for the year (Note 8) 50.653 17.120 Reversal (Note 8) (60.335) (183.956) Transfer to loans (Note 18) (4.029) - Foreign exchange differences 8.769 145.090 Balance at 31 December 206.487 211.429 25

22. PROPERTY, PLANT AND EQUIPMENT, INVESTMENT PROPERTY AND INTANGIBLE ASSETS Changes in fixed assets, investment property and intangible asset: Land and buildings Equipment Total fixed assets Intangible assets Cost Balance at the beginning of the year 356.352 442.768 799.120 42.303 Increase 75.521 97.697 173.218 58.379 Transfers - - - - Disposals and write-offs - (6.428) (6.428) (22.510) Balance at the end of the year 431.873 534.037 965.910 78.172 Accumulated depreciation and impairment Balance at the beginning of the year 30.151 185.513 215.664 16.325 Increase 4.635 65.518 70.153 20.370 Transfers - - - - Disposals and write-offs - (3.428) (3.428) (22.510) Balance at 31 December 2009 34.786 247.603 282.389 14.185 Net present value 397.087 286.434 683.521 63.987 At 31 December 2009 At 31 December 2008 326.201 257.255 583.456 25.978 The Bank has no buildings under mortgage in order to secure loan liabilities repayment. As of 31 December 2008 net present value was comprised mostly of computer and telecommunication equipment, office furniture and motor vehicles. 26

23. OTHER ASSETS Receivables from employees 9.265 4.800 Receivables for corporate tax prepayment, except income tax and contributions 152 764 Advances placed 932 7.946 Other receivables from business relationships 66.729 59.648 Stock 2.461 573 Tangibles received from collection of receivables 10.918 427.596 Other assets income tax prepayment receivables 80.735 - Accrued expenses for calculated interest: - in dinars 6.732 33.212 - in foreign currency - - Other accruals: - in dinars 8.115 10.649 - in foreign currency - - Total other assets and accruals 186.039 545.188 Allowance for impairment (40.550) (37.727) Balance at 31 December 145.489 507.461 Changes in allowances for impairment were as follows: Balance at the beginning of the year 37.727 45.756 Charge for the year(note 8) 16.694 496 Reversals (Note 8) (17.103) (10.853) Inventory write-offs 2.599 - Foreign exchange differences 633 2.328 Balance at 31 December 40.550 37.727 27

24. TRANSACTION DEPOSITS In dinars Banking sector 242.638 336.425 Public entities 580.400 406.925 Corporate 1.985.786 1.865.978 Retail 186.582 155.692 Foreign entities 253 468 2.995.659 2.765.488 In foreign currency Banking sector 32.612 323.023 Public entities 26.624 9.566 Corporate 486.484 873.876 Public sector - 70 Retail 129.798 95.175 Foreign entities 35.653 39.893 711.171 1.341.603 Balance at 31 December 3.706.830 4.107.091 25. OTHER DEPOSITS Short-term Longterm Long- Total Short-term term Total In dinars Banking sector 2.882.288-2.882.288 967.906-967.906 Public entities 1.520.000 1.000 1.521.000 2.295.500-2.295.500 Corporate 6.365.222 70.039 6.435.261 5.846.231 32.208 5.878.439 Public sector 425.751 1.980 427.731 435.228 1.980 437.208 Retail 259.471 15 259.486 75.972 146 76.118 Foreign entities 11.997-11.997 42.379-42.379 Total in dinars 11.464.729 73.034 11.537.763 9.663.216 34.334 9.697.550 In foreign currency Banking sector 1.322.389-1.322.389 130.958-130.958 Public entities 1.285.458-1.285.458 725.195-725.195 Corporate 935.461 18.036 953.497 556.056 47.852 603.908 Retail 4.906.302 543.584 5.449.886 2.619.286 84.650 2.703.936 Foreign entities 113.751-113.751 720.552-720.552 Total in foreign currency 8.563.361 561.620 9.124.981 4.752.047 132.502 4.884.549 Balance at 31 December 20.028.090 634.654 20.662.744 14.415.263 166.836 14.582.099 28

26. BORROWINGS In dinars Liabilities for student loans 90.342 66.564 Other liabilities 3.053 128 93.395 66.692 In foreign currency Liabilities for undistributed inflows 494 2.189 Liabilities for international payments 27.403 50.334 Other liabilities 64-27.961 52.523 Balance at 31 December 121.356 119.215 27. INTEREST, FEES AND COMMISSIONS PAYABLE AND CHANGE IN FAIR VALUE OF DERIVATIVES Banks and other financial institutions 4.227 5.411 Public enterprises 3.107 43.940 Corporate 16.245 16.578 Public sector 471 185 Fee liabilities - 76 Balance at 31 December 24.050 66.190 28. PROVISIONS Provisions for losses on guaranties 92.270 46.228 Provisions for losses on acceptances 276 7.849 Provisions for long-term employee benefits 23.124 19.625 Provisions for litigations - - Balance at 31 December 115.670 73.702 29

28. PROVISIONS (continued) Changes in provisions during 2009 were as follows: 31.12.2009 31.12.2008 Provisions for long-term employee benefits Balance at the beginning of the year 19.625 14.159 Arising during the year (Note 8) 4.095 5.754 Utilized (596) (288) Balance at 31 December 23.124 19.625 31.12.2009 31.12.2008 Provisions for litigations Balance at the beginning of the year - 83.495 Unused amounts reversed (Note 8) - (39.812) Utilized - (43.683) Balance at 31 December - - Provisions for off-balance sheet losses 31.12.2009 31.12.2008 Balance at the beginning of the year 54.077 53.512 Arising during the year (Note 8) 137.437 105.369 Unused amounts reversed (Note 8) (101.460) (108.461) Foreign exchange gains and losses 2.492 3.657 Balance at 31 December 92.546 54.077 29. TAX LIABILITIES Tax on interest payable on individuals' savings accounts 592 1.745 VAT 355 643 Balance at 31 December 947 2.388 30. LIABILITIES FROM PROFIT Liabilities from profit refer to unpaid dividends to the shareholders in the amount of 6.475 (2008: 4.678 ). 30

31. OTHER LIABILITIES AND DEFFERALS In dinars Liabilities to suppliers 62.912 15.273 Liabilities for student loans 634.660 336.969 Liabilities for deposits for incorporation 1.830 4.132 Liabilities for other corporate deposits 5.784 9.287 Other liabilities 19.445 12.203 Deferred interest liabilities 46.706 22.457 Deferred interest income 63.151 - Deferred fee income 65.256 52.364 Total in dinars 899.744 452.685 In foreign currency Donations 11.731 12.839 Liabilities for funds received from Kosovo and Metohija - 2.227 Other liabilities 172 181 Deferred interest liabilities 7.637 1.555 Deferred interest on savings accounts 58.537 28.398 Total in currency 78.077 45.200 Balance at 31 December 977.821 497.885 Liabilities for student loans are based on the Contract signed with Ministry of Education of Republic of Serbia and the Bank. 32. EQUITY Share capital - ordinary shares 3.404.886 3.038.172 Share premium 1.238.175 1.238.175 Statutory reserves unrealized losses (406) - Reserves from retained earnings 1.226.445 653.796 Retained earnings 199.934 943.475 Balance at 31 December 6.069.034 5.873.618 Share capital On 31 December 2008 authorized share capital comprised 567.481 ordinary shares with nominal value of 6.000,00 (2008: 506.362 ordinary shares with a nominal value of 6.000,00). New share issue On the basis of share issue from retained earnings the Bank s equity increased by 61.119 ordinary shares with nominal value of 6.000,00 each.( Securities Commission Decision no. 4/0-24-2486/4-09 from 14 May 2009). 31