IMPORTANT NOTICE NOT FOR DISTRIBUTION TO ANY U.S. PERSON OR TO ANY PERSON OR ADDRESS IN THE UNITED STATES OTHER THAN AS PERMITTED BY REGULATION S (‘‘REGULATION S’’) UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE ‘‘SECURITIES ACT’’). IMPORTANT: You must read the following before continuing. The following applies to the prospectus (the ‘‘Prospectus’’) following this page, and you are therefore advised to read this carefully before reading, accessing or making any other use of the Prospectus. In accessing the Prospectus, you agree to be bound by the following terms and conditions, including any modifications to them any time you receive any information from us as a result of such access. The Prospectus has been prepared solely in connection with the proposed offering to certain institutional and professional investors of the securities described herein. In particular, the Prospectus refers to certain events as having occurred that have not occurred at the date it is made available but that are expected to occur prior to publication of the final prospectus (the ‘‘Final Prospectus’’) to be published in due course. The Prospectus is an advertisement and not a prospectus and investors should not subscribe for or purchase securities except on the basis of information in the Final Prospectus. Copies of the Final Prospectus will, following publication, be made available to the public in accordance with the applicable rules. Although it is intended that the Final Prospectus will be made available to the public in accordance with the Prospectus Directive, this Prospectus has not been made available therewith. NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER OF SECURITIES FOR SALE IN THE UNITED STATES OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DO SO. THE SECURITIES REFERRED TO HEREIN HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE SECURITIES ACT, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR OTHER JURISDICTION, AND THE SECURITIES MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES, EXCEPT PURSUANT TO AN EXEMPTION FROM OR IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THIS PROSPECTUS MAY NOT BE FORWARDED OR DISTRIBUTED TO ANY OTHER PERSON AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER,. AND IN PARTICULAR MAY NOT BE FORWARDED TO ANY U.S. PERSON OR TO ANY U.S. ADDRESS OTHER THAN AS PERMITTED BY REGULATION S. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS. Confirmation of your representation: In order to be eligible to view this Prospectus or make an investment decision with respect to the securities referred to herein, prospective investors must not be U.S. persons (within the meaning of Regulation S). This Prospectus is being sent to you at your request, and by accepting this e-mail and accessing this Prospectus you shall be deemed to have represented to us that you are not a U.S. person and that you consent to delivery of such Prospectus by electronic transmission. You are reminded that this Prospectus has been delivered to you on the basis that you are a person into whose possession this Prospectus may be lawfully delivered in accordance with the laws of the jurisdiction in which you are located and you may not, nor are you authorised to, deliver this Prospectus to any other person. The attached Prospectus does not constitute, and may not be used in connection with, an offer or solicitation in any place where offers or solicitations are not permitted by law. If a jurisdiction requires that the offering be made by a licensed broker or dealer, and Morgan Stanley & Co. International plc or Goldman Sachs International (together the ‘‘Joint Lead Managers’’) or any of their respective affiliates is a licensed broker or dealer in the relevant jurisdiction, the offering shall be deemed to be made by the relevant Joint Lead Manager or such affiliate on behalf of CEB Capital S.A. (the ‘‘Issuer’’) in such jurisdiction. Under no circumstances shall this Prospectus constitute an offer to sell or the solicitation of an offer to buy, nor is there any sale of the securities being offered, in any jurisdiction in which such offer, solicitation or sale would be unlawful. Recipients of this Prospectus who intend to subscribe for or purchase the Notes (as defined in the Prospectus) are reminded that any subscription or purchase may only be made on the basis of the information contained in the Final Prospectus. This Prospectus may only be provided to persons in the United Kingdom in circumstances where section 21(1) of the Financial Services and Markets Act 2000 does not apply to the Issuer. This Prospectus may only be provided to persons in the United Kingdom in circumstances where Section 21(1) of the Financial Services and Markets Act 2000 does not apply to the Issuer or Credit Europe Bank Ltd. (‘‘Credit Europe Bank’’). Accordingly, the attached Prospectus is being distributed only to and directed only at (i) persons who are outside the United Kingdom, (ii) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the ‘‘Order’’), (iii) high net worth entities and other persons falling within article 49(2)(a) to (d) of the Order, or (iv) those persons to whom it may otherwise be lawfully distributed in accordance with the Order (all such persons together being referred to as ‘‘relevant persons’’). The Prospectus is directed only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which the attached Prospectus relates is available only to relevant persons and will be engaged in only with relevant persons. Under Russian law, the Notes are securities of a foreign issuer. The Notes are not eligible for initial offering and public circulation in the Russian Federation, unless otherwise permitted by Russian law. Neither the issue of the Notes nor a securities prospectus in respect of the Notes has been or is intended to be registered with the Federal Service for Financial Markets of the Russian Federation. The information provided in this Prospectus is not an offer, or an invitation to make offers, to sell, exchange or otherwise transfer the Notes in the Russian Federation or to or for the benefit of any Russian person or entity. This Prospectus has been sent to you in electronic form. You are reminded that documents transmitted via this medium may be altered or changed during the process of electronic transmission and consequently none of the Issuer, Credit Europe Bank, the Joint Lead Managers nor any person who controls any of them nor any director, officer, employee, agent or affiliate of any such person accepts any liability or responsibility whatsoever in respect of any difference between the Prospectus distributed to you in electronic format and the hard copy version available to you on request from the Joint Lead Managers. You are responsible for protecting against viruses and other destructive items. Your use of this e-mail is at your own risk and it is your responsibility to take precautions to ensure that it is free from viruses and other items of a destructive nature. 29OCT201218435658 U.S.$250,000,000 8.50 per cent. Loan Participation Notes due 2019 issued with limited recourse by CEB Capital S.A. for the sole purpose of financing a subordinated loan to Credit Europe Bank Ltd. Issue Price: 100 per cent.

CEB Capital S.A. (the ‘‘Issuer’’) is issuing an aggregate principal amount of U.S.$250,000,000 8.50 per cent. Loan Participation Notes due 2019 (the ‘‘Notes’’) for the sole purpose of financing a subordinated loan (the ‘‘Subordinated Loan’’) to Credit Europe Bank Ltd. (the ‘‘Borrower’’ or ‘‘Credit Europe Bank’’ or ‘‘CEB’’, and together with its consolidated subsidiaries, the ‘‘Group’’.) The Subordinated Loan is granted pursuant to a subordinated loan agreement dated 14 November 2012 (the ‘‘Subordinated Loan Agreement’’) between the Issuer and Credit Europe Bank. Subject as provided in the Trust Deed (as defined herein), the Issuer (i) will charge, by way of first fixed charge, in favour of Citibank, N.A., London Branch as trustee (the ‘‘Trustee’’) for the benefit of itself and of the holders of the Notes (the ‘‘Noteholders’’), as security for its payment obligations in respect of the Notes and under the Trust Deed certain of its rights and interests under the Subordinated Loan Agreement and the Lender Account (as defined in the Subordinated Loan Agreement) and (ii) will assign certain of its administrative rights under the Subordinated Loan Agreement to the Trustee, all as more fully described under ‘‘Description of the Transaction’’. The Notes are limited recourse obligations of the Issuer. In each case where amounts of principal, interest and other amounts (if any) are stated to be payable in respect of the Notes, the obligation of the Issuer to make any such payment shall constitute an obligation only to account to the Noteholders, on each date upon which such amounts of principal, interest and other amounts (if any) are due in respect of the Notes, for an amount equivalent to all principal, interest and other amounts (if any) actually received by or for the account of the Issuer pursuant to the Subordinated Loan Agreement excluding, however, any amounts paid in respect of Reserved Rights (as defined in the Trust Deed). The Issuer will have no other financial obligations under the Notes. Noteholders will be deemed to have accepted and agreed that they will be relying solely and exclusively on the credit and financial standing of Credit Europe Bank in respect of the financial servicing of the Notes. Interest on the Notes will be payable at the rate of 8.50 per cent. per annum semi-annually in arrear on 15 May and 15 November in each year commencing on 15 May 2013 as described under ‘‘Terms and Conditions of the Notes—Interest’’. At the time of issue, the yield of the Notes is U.S.$85 per U.S.$1,000 per annum in nominal amount of the Notes held. The issue price of the Notes is 100 per cent. of their principal amount and the issue date is expected to be on or about 15 November 2012. Except as set forth herein, payments in respect of the Notes will be made without any deduction or withholding for, or on account of, the taxes of any relevant jurisdiction. The Subordinated Loan is intended to qualify as additional capital (‘‘Own Funds’’) of Credit Europe Bank under regulations of the Central Bank of Russia (the ‘‘CBR’’). Under the terms of the Subordinated Loan Agreement, Credit Europe Bank will have the right to prepay the Subordinated Loan in whole but not in part, together with accrued and unpaid interest thereon, (a) at the outstanding principal amount of the Subordinated Loan, if the CBR does not unconditionally approve the Subordinated Loan as Own Funds on or before the Approval Date (as defined in the Subordinated Loan Agreement) or (b) at the outstanding principal amount of the Subordinated Loan at any time after the Approval Date, if, as a result of any amendment to, clarification of or change in (including a change in interpretation or application of applicable requirements of) Regulation No. 215-P (as defined in the Subordinated Loan Agreement) or other applicable requirements of the CBR, the Subordinated Loan would fully cease to qualify as Own Funds. Upon repayment in full of the Subordinated Loan, the Notes will be redeemed and repaid at their principal amount together with interest accrued to the date fixed for redemption and thereupon shall cease to be outstanding. Save as otherwise expressly provided in this Prospectus and in the Trust Deed, no proprietary or other direct interest in the Issuer’s rights under or in respect of the Subordinated Loan Agreement exists for the benefit of the Noteholders. Subject to the terms of the Trust Deed, no Noteholder will have any entitlement to enforce any of the provisions in the Subordinated Loan Agreement or have direct recourse to Credit Europe Bank except through action by the Trustee under any of the Security Interests (as defined in the Terms and Conditions of the Notes). AN INVESTMENT IN THE NOTES INVOLVES A HIGH DEGREE OF RISK. SEE ‘‘RISK FACTORS’’ BEGINNING ON PAGE 1. The Notes and the Loan (together, the ‘‘Securities’’) have not been and will not be registered under the U.S. Securities Act of 1933 as amended (the ‘‘Securities Act’’) and, subject to certain exceptions, may not be offered, sold or delivered within the United States or to, or for the account or benefit of, U.S. persons (as defined in Regulation S under the Securities Act (‘‘Regulation S’’)). This prospectus (the ‘‘Prospectus’’) has been approved by the Central Bank of Ireland (the ‘‘Central Bank’’), as competent authority under Directive 2003/71/EC, as amended (the ‘‘Prospectus Directive’’). The Central Bank only approves this Prospectus as meeting the requirements imposed under Irish and E.U. law pursuant to the Prospectus Directive. Application has been made to the Irish Stock Exchange for the Notes to be admitted to the official list (the ‘‘Official List’’) and trading on its regulated market (the ‘‘Main Securities Market’’). The Main Securities Market is a regulated market for the purposes of Directive 2004/39/EC (the ‘‘Markets in Financial Instruments Directive’’). Such approval relates only to the Notes which are to be admitted to trading on a regulated market for the purposes of Directive 2004/39/EC and/or which are to be offered to the public in any Member State of the European Economic Area. The Notes will be offered and sold in the minimum denomination of U.S.$200,000 and higher integral multiples of U.S.$1,000. The Notes will initially be represented by interests in a global certificate in registered form (the ‘‘Global Certificate’’), without interest coupons, which will be deposited with a common depositary for Euroclear Bank SA/NV (‘‘Euroclear’’) and Clearstream Banking, soci´et´e anonyme (‘‘Clearstream, Luxembourg’’), and registered in the name of a nominee, on or about 15 November 2012 (the ‘‘Issue Date’’). The Global Certificate will only be exchangeable for definitive certificates (‘‘Definitive Certificates’’) in the limited circumstances described under ‘‘Summary of the Provisions relating to the Notes in Global Form’’. Joint Lead Managers Morgan Stanley Goldman Sachs International The date of this Prospectus is 14 November 2012 This document comprises a prospectus (the ‘‘Prospectus’’) for the purposes of the Prospectus Directive and is issued in compliance with the Prospectus Directive and Commission Regulation (EC) No. 809/2004 (the ‘‘Prospectus Regulation’’) for the purpose of giving information with respect to the Issuer, Credit Europe Bank, Credit Europe Bank and its subsidiaries taken as a whole (the ‘‘Group’’), the Subordinated Loan and the Notes, which, according to the particular nature of the Issuer, Credit Europe Bank, the Group, the Subordinated Loan and the Notes, is necessary to enable investors to make an informed assessment of the assets and liabilities, financial position, profit and losses and prospects of the Issuer, Credit Europe Bank and the Group. Each of Credit Europe Bank and the Issuer accepts responsibility for the information contained in this Prospectus. To the best of the knowledge and belief of Credit Europe Bank and the Issuer, which have taken all reasonable care to ensure that such is the case, the information contained in this Prospectus is in accordance with the facts and does not omit anything likely to affect the import of such information. Credit Europe Bank, having made all reasonable enquiries, confirms that (i) this Prospectus contains all information with respect to the Issuer, Credit Europe Bank, the Group, the Subordinated Loan Agreement and the Notes that is material in the context of the issue and offering of the Notes; (ii) the statements contained in this Prospectus relating to the Issuer, Credit Europe Bank and the Group are in every material respect true and accurate and not misleading; (iii) the opinions, expectations and intentions expressed in this Prospectus with regard to the Issuer, Credit Europe Bank, the Group, the Subordinated Loan and the Notes are honestly held, have been reached after considering all relevant circumstances, and are based on reasonable assumptions; (iv) there are no other facts in relation to the Issuer, Credit Europe Bank, the Group, the Subordinated Loan or the Notes the omission of which would, in the context of the issue and offering of the Notes, make any statement in this Prospectus misleading in any material respect; and (v) all reasonable enquiries have been made by Credit Europe Bank to ascertain such facts and to verify the accuracy of all such information and statements. Where information has been sourced from a third party, this information has been accurately reproduced and so far as the Issuer and Credit Europe Bank are aware and are able to ascertain from information published by the third party, no facts have been omitted which would render the reproduced information inaccurate or misleading. Information contained in this Prospectus relating to the Russian market and information on the competitors of Credit Europe Bank (which may include estimates and approximations) was derived from publicly available information, including press releases and filings under various banking and securities laws. Both Credit Europe Bank and the Issuer accept responsibility for accurately reproducing such information and data and so far as the Issuer and Credit Europe Bank are aware and are able to ascertain from information published by the third party, no facts have been omitted which would render the reproduced information inaccurate or misleading. However, both Credit Europe Bank and the Issuer have relied on the accuracy of such information without carrying out an independent verification. Unless otherwise indicated, all data relating to the Russian banking sector has been obtained from official data published by Russian government agencies, such as the CBR. Credit Europe Bank confirms that it has copied this information correctly from its sources. However, Credit Europe Bank does not accept responsibility for the accuracy of such information. Unless otherwise indicated, the sources for statements and data concerning Credit Europe Bank and its business are based on best estimates and assumptions of Credit Europe Bank’s management. Management believes that these assumptions are reasonable and that its estimates have been prepared with due care. The data concerning Credit Europe Bank included herein, whether based on external sources or based on the Credit Europe Bank’s management internal research, constitute the best current estimates of the information described. Where third party information has been used in this Prospectus, the source of such information has been identified. In the case of statistical information presented herein, similar statistics may be obtainable from other sources, although the underlying assumptions and methodology, and consequently the resulting data, may vary from source to source. Where information has been sourced from a third party, such publications generally state that the information they contain has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. Such data, while believed to be reliable and accurately extracted by Credit Europe Bank for the purposes of this Prospectus, has not been independently verified by Credit Europe Bank or any other party and you should not place undue reliance on such data included in this Prospectus. As far as Credit Europe Bank is aware and able to ascertain from the information published by such third party sources, this information has been accurately reproduced and no facts have been omitted which would render the reproduction of this information inaccurate or misleading.

i This Prospectus does not constitute an offer of, or an invitation by or on behalf of the Issuer, Credit Europe Bank or the Joint Lead Managers (as defined in ‘‘Subscription and Sale’’) or the Trustee (as defined below) to subscribe for or purchase any Securities in any jurisdiction where it is unlawful to make such an offer or invitation. The distribution of this Prospectus and the offering of the Securities in certain jurisdictions may be restricted by law. Persons into whose possession this Prospectus comes are required by Credit Europe Bank, the Issuer, the Joint Lead Managers and the Trustee to inform themselves about and to observe any such restrictions. For a description of certain further restrictions on offers and sales of Securities and distribution of this Prospectus, see ‘‘Subscription and Sale’’ below. Information provided in this Prospectus is not an offer, or an invitation to make offers, to sell, exchange or otherwise transfer the Notes in the Russian Federation or to or for the benefit of any Russian person or entity. Since no Russian issue prospectus has been registered or is intended to be registered with the Federal Service for Financial Markets of the Russian Federation (the ‘‘FSFM’’) with respect to the Notes, no person should at any time carry out any activities in breach of the restrictions set out in ‘‘Subscription and Sale—Russia’’. No person is authorised to provide any information or to make any representation not contained in this Prospectus and any information or representation not so contained must not be relied upon as having been authorised by or on behalf of the Issuer, Credit Europe Bank, the Trustee or the Joint Lead Managers. The delivery of this Prospectus at any time does not imply that the information contained in it is correct as at any time subsequent to its date. Neither the delivery of this Prospectus nor the offer, sale or delivery of any Securities shall in any circumstances create any implication that there has been no adverse change, or any event reasonably likely to involve any adverse change, in the condition (financial or otherwise) of the Issuer, Credit Europe Bank or the Group since the date of this Prospectus. None of the Issuer, Credit Europe Bank, the Joint Lead Managers, the Trustee or any of its or their respective representatives or affiliates makes any representation to any offeree or purchaser of the Securities offered hereby regarding the legality of an investment by such offeree or purchaser under applicable legal, investment or similar laws. Each investor should consult with its own advisers as to the legal, tax, business, financial and related aspects of the purchase of the Securities. Prospective purchasers must comply with all laws that apply to them in any place in which they buy, offer or sell any Securities or possess this Prospectus. Any consents or approvals that are needed in order to purchase any Securities must be obtained. The Issuer, Credit Europe Bank, the Joint Lead Managers and the Trustee are not responsible for compliance with these legal requirements. The appropriate characterisation of the Securities under various legal investment restrictions, and thus the ability of investors subject to these restrictions to purchase the Securities, is subject to significant interpretative uncertainties. No representation or warranty is made as to whether, or the extent to which, the Securities constitute a legal investment for investors whose investment authority is subject to legal restrictions, and investors should consult their legal advisers regarding such matters. Each person receiving this Prospectus acknowledges that such person has not relied on the Joint Lead Managers, the Trustee or any of its or their affiliates or any person acting on their behalf in connection with its investigation of the accuracy or completeness of such information or its investment decision. This Prospectus has been prepared solely for use in connection with the proposed offering of the Securities described in this Prospectus. This Prospectus is personal to each offeree and does not constitute an offer to any other person or to the public generally to subscribe for or otherwise acquire Securities. Distribution of this Prospectus to any person other than the prospective investor and any person retained to advise such prospective investor with respect to its purchase is unauthorised, and any other disclosure of any of its contents, without the prior written consent of Credit Europe Bank and the Joint Lead Managers. is prohibited. Each prospective investor, by accepting delivery of this Prospectus, agrees to the foregoing and to make no photocopies of this Prospectus or any documents referred to in this Prospectus. The contents of Credit Europe Bank’s website do not form any part of this Prospectus. In connection with this issue, Morgan Stanley & Co. International plc (the ‘‘Stabilising Manager’’) (or any person acting for it) may over-allot Notes or effect transactions with a view to supporting the market price of the Notes at a level higher than that which might otherwise prevail. However, there is no assurance that the Stabilising Manager (or any person acting on behalf of the Stabilising Manager) will undertake stabilisation action. Any stabilisation action may begin on or after the date on which adequate public

ii disclosure of the terms of the offer of the Notes is made and, if commenced, may be discontinued at any time and must be brought to an end no later than the earlier of 30 days after the issue date of the Notes and 60 days after the date of the allotment of the Notes. Any stabilisation action or over-allotment shall be conducted in accordance with all applicable laws, regulations and rules. NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, IS MADE BY EITHER OF THE JOINT LEAD MANAGERS AS TO THE ACCURACY OR COMPLETENESS OF THE INFORMATION SET FORTH IN THIS DOCUMENT, AND NOTHING CONTAINED IN THIS DOCUMENT IS, OR SHALL BE RELIED UPON AS, A PROMISE OR REPRESENTATION, WHETHER AS TO THE PAST OR THE FUTURE. NEITHER OF THE JOINT LEAD MANAGERS ASSUMES ANY RESPONSIBILITY FOR THE ACCURACY OR COMPLETENESS OF THE INFORMATION SET FORTH IN THIS DOCUMENT. EACH PERSON CONTEMPLATING MAKING AN INVESTMENT IN THE SECURITIES MUST MAKE ITS OWN INVESTIGATION AND ANALYSIS OF THE CREDITWORTHINESS OF CREDIT EUROPE BANK AND THE ISSUER AND ITS OWN DETERMINATION OF THE SUITABILITY OF ANY SUCH INVESTMENT, WITH PARTICULAR REFERENCE TO ITS OWN INVESTMENT OBJECTIVES AND EXPERIENCE, AND ANY OTHER FACTORS WHICH MAY BE RELEVANT TO IT IN CONNECTION WITH SUCH INVESTMENT.

NOTICE TO UNITED KINGDOM RESIDENTS This document is only being distributed to and is only directed at (1) persons who are outside the United Kingdom or (2) to investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the ‘‘Order’’) or (3) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as ‘‘Relevant Persons’’). The Notes are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such Notes will be engaged in only with, Relevant Persons. Any person who is not a Relevant Person should not act or rely on this document or any of its contents.

iii RATINGS THE NOTES HAVE BEEN RATED B+ BY FITCH RATINGS CIS LIMITED (‘‘FITCH’’) AND B1 BY MOODY’S INVESTORS SERVICE LTD. (‘‘MOODY’S’’ AND TOGETHER WITH FITCH, THE ‘‘RATING AGENCIES’’). A RATING IS NOT A RECOMMENDATION TO BUY, SELL OR HOLD SECURITIES AND MAY BE SUBJECT TO REVISION, SUSPENSION OR WITHDRAWAL AT ANY TIME BY THE ASSIGNING RATING ORGANISATION. FITCH IS ESTABLISHED IN THE EUROPEAN UNION AND IS REGISTERED UNDER THE REGULATION (EC) NO. 1060/2009, AS AMENDED (THE ‘‘CRA REGULATION’’). AS SUCH, FITCH IS INCLUDED IN THE LIST OF CREDIT RATING AGENCIES PUBLISHED BY THE EUROPEAN SECURITIES AND MARKETS AUTHORITY (‘‘ESMA’’) ON ITS WEBSITE IN ACCORDANCE WITH THE CRA REGULATION. MOODY’S IS ESTABLISHED IN THE EUROPEAN UNION AND IS REGISTERED UNDER THE CRA REGULATION. AS SUCH, MOODY’S IS INCLUDED IN THE LIST OF CREDIT RATING AGENCIES PUBLISHED BY THE ESMA ON ITS WEBSITE IN ACCORDANCE WITH THE CRA REGULATION.

iv TABLE OF CONTENTS

RISK FACTORS ...... 1 FORWARD-LOOKING STATEMENTS ...... 32 ENFORCEABILITY OF JUDGMENTS ...... 33 PRESENTATION OF FINANCIAL AND OTHER INFORMATION ...... 34 THE OFFERING AND THE TERMS AND CONDITIONS OF THE NOTES ...... 36 DESCRIPTION OF THE TRANSACTION ...... 40 USE OF PROCEEDS ...... 42 EXCHANGE RATES ...... 43 SELECTED FINANCIAL INFORMATION OF CEB ...... 44 OPERATING AND FINANCIAL REVIEW ...... 47 BUSINESS ...... 72 RISK MANAGEMENT ...... 88 MANAGEMENT...... 97 SHAREHOLDERS ...... 100 RELATED PARTY TRANSACTIONS ...... 101 THE ISSUER ...... 102 THE SUBORDINATED LOAN AGREEMENT ...... 105 TERMS AND CONDITIONS OF THE NOTES ...... 123 SUMMARY OF THE PROVISIONS RELATING TO THE NOTES IN GLOBAL FORM .... 134 SUBSCRIPTION AND SALE ...... 138 TAXATION ...... 142 GENERAL INFORMATION ...... 150 APPENDIX A THE BANKING SECTOR AND BANKING REGULATION IN RUSSIA ..... A-1 APPENDIX F FINANCIAL STATEMENTS OF CEB AND THE ISSUER ...... F-1

v RISK FACTORS An investment in the Notes involves a high degree of risk. Prospective investors should consider carefully, among other things, the risks set forth below and the other information contained in this Prospectus prior to making any investment decision with respect to the Notes. The risks highlighted below could have a material adverse effect on CEB’s business, financial condition, results of operations or prospects which, in turn, could have a material adverse effect on its ability to service its payment obligations under the Subordinated Loan Agreement and, as a result, the ability of the Issuer to make payments under the Notes. In addition, the value of the Notes could decline due to any of these risks, and prospective investors may lose some or all of their investment. Prospective investors should note that the risks described below are not the only risks CEB or the Issuer faces. These are the risks CEB and the Issuer consider material. There may be additional risks that CEB and the Issuer currently consider immaterial or of which it is currently unaware, and any of these risks could have similar effects to those set forth below.

Risk Relating to CEB’s Business and Industry The instability of the global and the Russian credit markets and banking sectors, and the ongoing European sovereign debt crisis could have a material adverse effect on CEB’s business, liquidity and financial condition The credit markets have faced significant volatility, dislocation and liquidity constraints since the onset of the sub-prime mortgage crisis in the United States in 2007 and the subsequent global financial crisis (the ‘‘Financial Crisis’’). Falling house prices, increased rate of foreclosures and higher unemployment impacted the global credit markets, resulting in significant mark-to-market write-downs of asset values by financial institutions, including government sponsored entities and major commercial and investment banks. Reflecting concern about the stability of the financial markets generally and the strength of counterparties, many lenders and institutional investors have reduced, and in some cases, ceased to provide, funding to borrowers, including other financial institutions. Overall, the uncertainty in the global markets, combined with corresponding domestic factors in 2009, led to very high volatility in the Russian stock markets and at times gave rise to much higher than normal interbank lending rates. For example, in January 2008, the average interbank Rouble lending rate was 2.8 per cent., while in January 2009, it increased to 16.3 per cent. (calculated using data published by the Central Bank of the Russian Federation (‘‘CBR’’) on its website www.cbr.ru from time to time (‘‘CBR data’’)). In 2010 and 2011, the average interbank Rouble lending rate was 3.1 per cent. and 3.9 per cent., respectively, and in the first half of 2012, was 5.5 per cent. (calculated using CBR data). Investment capital inflows into Russia also decreased significantly as a result of the Financial Crisis, reducing liquidity. In 2008, the Russian economy experienced a net capital outflow in the private sector of U.S.$133.7 billion (calculated using CBR data). However, following signs of some economic recovery, net capital outflows reduced to U.S.$56.1 billion in 2009, and to U.S.$34.4 billion in 2010, before increasing to U.S.$80.5 billion in 2011, according to the CBR. In the six months ended 30 June 2012, net capital outflows were U.S.$43.4 billion (calculated using CBR data). According to the Federal State Statistics Service of the Russian Federation (‘‘Rosstat’’), the volume of foreign investment into Russia was U.S.$81.9 billion in 2009, which increased by 40 per cent. to U.S.$114.7 billion in 2010 and further increased by 66.2 per cent. to U.S.$190.6 billion in 2011. In the six months ended 30 June 2012, the volume of foreign investment into Russia was U.S.$74.8 billion, a decrease of 14.7 per cent. from U.S.$85.3 billion in the six months ended 30 June 2011. The Financial Crisis led to reduced liquidity and increased credit risk premiums for certain market participants, resulting in a reduction of available financing across the world, and consequently, a sharp fall in the supply of long and medium term financing for Russian companies and in the Russian domestic market. According to the CBR’s statistics, in 2008 the growth of retail deposits in the Russian banking market halved to 14.5 per cent. as compared to growth of 35.4 per cent. for 2007, and corporate deposits growth slowed to 40.5 per cent. in 2008, from 67.5 per cent. in 2007. In the autumn of 2008, several Russian financial institutions suffered severe liquidity problems and had to sell their shares to state controlled or private institutions in exchange for financial support. Some banks had their licences revoked by the CBR. Due to the unfavourable economic conditions and limited access to the international capital markets arising from the Financial Crisis, CEB turned in 2009 to retail depositors and domestic bond markets as key sources of funding. The offering of attractive interest rates, coupled with proactive campaigns by banks to attract retail depositors in a climate of returning trust to the financial markets and the banking system resulted in the stable growth of retail deposits in the Russian banking sector, from RUB5,907 billion as at

1 1 January 2009 to RUB7,485 billion as at 1 January 2010 and RUB9,818 billion as at 1 January 2011, or growth of approximately 31.2 per cent. as at 31 December 2010 compared with the previous year, according to the CBR’s review. Under Russian law, however, retail depositors can withdraw retail deposits, including term deposits, at any time. As a result, all such retail deposits are effectively short-term deposits, and accordingly any current, or any future, liquidity problems in the Russian or global markets may adversely affect CEB’s business, financial condition, results of operations and prospects. Furthermore, the Financial Crisis has stimulated Russian legislative initiatives to strengthen the protection of retail customers under Russian law which could place corresponding restrictions on CEB’s retail business. See ‘‘Risk Factors—Risks relating to the Russian Legal System and Legislation—Russian banking and financial regulation has been undergoing significant changes’’. In the fourth quarter of 2008, Russian banks benefited from government liquidity support, which helped improve their liquidity position. During 2009, due to mediocre demand for credit and increased government spending aimed at supporting the economic growth of the Russian Federation, the Russian economy, and the banking system in particular, witnessed a significant inflow of liquidity. CEB benefited from this trend in the banking system and experienced a considerable inflow of deposits. During 2010, CEB experienced further growth of its deposit base. With the onset of the Financial Crisis in the second half of 2008, asset growth in the Russian banking sector declined to 5.0 per cent. in 2009, before returning to 14.9 per cent. growth in 2010 and 21.2 per cent. growth in 2011, as compared to 44.1 per cent. growth in 2007 and 39.2 per cent. in 2008, according to the CBR data. Asset growth in the six months ended 30 June 2012 was 6.3 per cent. according to the CBR. This decline in growth rates has affected, and may continue to affect, CEB’s growth and any renewed stagnation or contraction may make it difficult for CEB to expand its operations. The volatility and market disruption in the global banking sector has continued through 2011 and into 2012. In particular, global financial markets have experienced increased volatility since the second half of 2011, a period which has seen the sovereign rating downgrades of, amongst others, the United States, France, Austria, Greece, Ireland, Portugal, Spain and Italy and continued concerns over the stability of the European monetary system and the stability of certain European economies, notably Greece, Ireland, Portugal, Spain and Italy. Repeated summits of, and attempts by, European leaders to find a lasting solution to market concerns about such countries’ ability to repay their debt have not yet succeeded and there remain continuing doubts concerning the stability of the European monetary system and economy. Any restructuring of sovereign debt and its subsequent impact on global or Russian markets could have an adverse effect on CEB’s business, financial condition, results of operations, prospects and the value of the Notes. Should the ongoing European debt crisis lead to a significant downturn in the global macroeconomic situation and/or impact commodity prices and global trade flows, Russia’s overall economic and financial position in the medium term could also be negatively affected. The lack of liquidity experienced in the Russian banking system during the height of the Financial Crisis may return, or the federal government of the Russian Federation (the ‘‘Russian Government’’) may fail to implement state support measures to support the Russian banking sector, as it did following the onset of the Financial Crisis in the second half of 2008. Any further turmoil in the global or Russian banking sectors, including the default, or a significant decline in the credit rating, of one or more sovereigns or financial institutions could cause severe stress in the financial system generally and could adversely affect the markets in which CEB, its counterparties, customers, suppliers and creditors operate, in ways which are difficult to predict. This could adversely affect CEB’s financial condition, results of operations or prospects as a result of decreases in CEB’s net interest income, decreases in the demand for CEB’s credit products, significantly increased loan provision charges, loan losses and write-offs.

CEB is subject to significant competition in the Russian banking market, particularly from state-owned banks The Russian banking market is highly competitive. According to the CBR, as at 1 September 2012, 1,101 banks and non-bank credit organisations were registered in Russia and the 20 largest banks held 70.1 per cent. of total banking assets. CEB faces competition from state controlled banks such as Sberbank, VTB group, Gazprombank and Russian Agricultural Bank, in addition to competition from subsidiaries of non-Russian financial institutions. Due to direct ratings support of the Russian Federation, state controlled banks have access to cheaper sources of funding from international capital markets and are major beneficiaries of government programmes, including anti-crisis aid. Using these advantages, these banks can attract the largest clients by

2 offering credit products with lower interest rates, and, as a result, maintain or increase their market share, without compromising net interest margins. According to CEB’s calculations using official CBR data, the market share of Sberbank, VTB group, Gazprombank and Russian Agricultural Bank was 53 per cent. of the total assets of the Russian banking system as at 30 June 2012. Another factor behind the significant competition is the limited size of the banking market in Russia. For most banks, other than several state- controlled banks, the potential market is limited to regions with large cities, as other locations have historically been unprofitable. The largest Russian banks are concentrated in Moscow, while large regional banks conduct most of their business in the central cities of their respective regions. Competition for client business among Russian banks is intense, which has led, among other things, to the narrowing of spreads between deposit and loan interest rates, affecting Russian banks’ profitability. In addition, following the recent acquisition by Sberbank of Turkish bank, Denizbank, CEB may face increased competitive pressure from this consortium, particularly with regards to its existing significant business with Turkish companies which have operations in Russia. CEB faces competition in substantially all the business segments and regions in which it operates. Further, due to the fact that Russia’s banking system is highly fragmented, significant merger and acquisition activities may take place in the short or medium-term which may result in the emergence of new strong competitors to CEB. Some consolidation has already taken place in the sector—the most important being the acquisition by VTB of JSC ‘‘TransCreditBank’’ and JSCB ‘‘Bank of Moscow’’ and the merger of Sberbank and Troika Dialog. Consolidation among privately-owned Russian banks includes the acquisition by NOMOS Bank of a controlling interest in Bank of Khanty-Mansiysk and the ongoing planned acquisition of Nomos Bank by Otkritie Bank which began with PPF selling its 26.5 per cent. shareholding in NOMOS Bank, and Otkritie Bank acquiring a 19.9 per cent. interest in NOMOS Bank. Should NOMOS Bank merge with Otkritie Bank, it would create Russia’s second largest privately-owned bank. If further consolidation takes place and CEB fails to attract additional capital or engage in mergers and acquisitions in order to remain competitive, it could have a material adverse effect on CEB’s business, financial condition, results of operations or prospects.

CEB’s financial position and results of operations could be affected by declines in net interest margins, increased competition and/or excess liquidity in the Russian banking sector CEB’s results of operations depend to a large extent on its net interest income. Net interest income represented approximately 79.7 per cent. of CEB’s operating income for the six months ended 30 June 2012 and approximately 81.2 per cent. and 76.2 per cent. for the years ended 31 December 2011 and 31 December 2010, respectively. Interest rates in Russia slightly decreased in 2006 and fluctuated in 2007, increasing slightly towards the end of the year. However, in 2008 and early 2009, an accelerating domestic consumer price inflation and a global re-pricing of credit risk as a result of the turmoil in the international financial markets led to increasing interest rates in both lending and deposit-taking across the Russian banking sector. From the second half of 2009, interest rates began to decrease, resulting in a fall in CEB’s interest income by 4.1 per cent. and in its interest expense by 12.5 per cent. in 2010, as compared with the year 2009. During 2010 and 2011, CEB also experienced increased competition for quality borrowers and resulting pressure on the margins of credit products. CEB’s interest income increased by 46.1 per cent. to RUB7,564 million for the six months ended 30 June 2012 as compared to RUB5,178 million for the six months ended 30 June 2011. CEB’s total interest expense increased by 72.9 per cent. to RUB3,274 million in the six months ended 30 June 2012 from RUB1,894 million in the six months ended 30 June 2011. From the last quarter of 2010 interest rates on lending have slowly but constantly declined and by mid-2011 reached pre-Financial Crisis levels. Rates on new customer deposits were relatively stable during this period. These trends were sharply reversed in the last quarter of 2011 when a spillover from the Eurozone sovereign debt crisis resulted in liquidity pressures for Russian banks and an increase in the borrowing costs for Russian banks issuing their own securities or subordinated debt, or borrowing from other banks (‘‘wholesale borrowing’’). In order to attract additional funds and avoid outflow of customer deposits, banks significantly increased customer deposit rates. Rates on lending were also subsequently raised in an attempt to maintain margins. Inflationary pressures subsided in 2011 which allowed the CBR to ease monetary policy simultaneously providing extensive liquidity support to the Russian banking system. However, there is still increased pressure on margins resulting from interest rates on customer deposits increasing at a higher rate as compared to lending rates and as a result of competition from state- controlled banks, which have the benefit of significantly larger liquid resources at their disposal than Russian privately-owned banks and subsidiaries of foreign banks. See ‘‘—CEB is subject to significant

3 competition in the Russian banking market, particularly from state-owned banks’’. These factors, together with the necessity to maintain customer deposit interest rates at high levels, have resulted in increased pressure on margins and profitability. In addition, competitive pressures or fixed rates in existing loan commitments or facilities may mean that CEB will be restricted in its ability to increase interest rates charged to customers in response to changes in interest rates that affect wholesale borrowing which may put pressure on, or have a material adverse effect on, CEB’s interest margin. Since loans to customers constitute the greatest portion of CEB’s interest-earning assets, this increased competition in the banking sector has had, and is expected to continue to have, an adverse effect on CEB’s results of operations. Although CEB has been increasing the volume of its fee- and commission-earning operations to further strengthen its operating revenues, CEB cannot guarantee that its margins will remain stable. Reductions in market interest rates could affect the interest rates earned on CEB’s interest-earning assets, leading to a reduction in CEB’s net interest income and adversely affecting its financial position and results of operations.

CEB may be unable to assess adequately the credit risk of potential borrowers, which could impact its level of non-performing loans and provisions Credit risk assessment is generally difficult for Russian banks due to a lack of reliable information in Russia about potential corporate or retail borrowers. In particular, it is difficult to make long-term forecasts with respect to a borrower’s financial position. The financial performance of Russian companies is generally more volatile and their credit quality is less predictable than those of similar companies in more mature markets and economies. Further, many customers do not prepare audited accounts in accordance with International Financial Reporting Standards (‘‘IFRS’’) or Generally Accepted Accounting Principles in the United States (‘‘U.S. GAAP’’). With respect to retail customers, there is often less credit history available for such customers as compared to larger corporate customers. Financial information disclosed by retail customers to CEB may not be accurate or complete and CEB may be unable to independently confirm such information. In addition, Russia’s network of independent credit agencies is not as developed as those in Western countries. As a result, such customers may become over-extended due to other credit obligations of which CEB is unaware and/or may complete applications for credit inaccurately or fraudulently. CEB attempts to reduce credit risk by conducting thorough investigations of prospective corporate and retail borrowers and by requiring periodic review of each corporate borrower’s financial information. However, such investigations and financial information may not always present a complete and comparable picture of a customer’s financial condition and loan repayment ability especially given the Financial Crisis. CEB had, prior to the onset of the Financial Crisis, increased its lending volumes to SMEs and individuals. See ‘‘—The quality and robustness of CEB’s loan portfolio may continue to be tested in adverse economic conditions’’. Few such borrowers have credit histories, and, as a result, CEB had to primarily rely on the information provided by them in making its credit decisions. In addition, these clients are more likely to default on their loans, necessitating higher loan impairment allowances and reducing the overall credit quality of CEB’s loan portfolio. Therefore, despite the credit risk determination procedures that CEB has in place, it may be unable to evaluate correctly the current financial condition of each prospective borrower and to determine its long-term economic outlook, a task which is significantly more difficult in current economic circumstances. If the credit risk of potential borrowers is or was not assessed correctly or if the financial condition of a significant number of CEB’s corporate clients deteriorates because of a general economic downturn globally and/or in Russia, an economic decline in certain sectors of the Russian economy or for any other reason, it may have a material adverse effect on CEB’s business, financial condition, results of operations or prospects. In addition, the lack of frequent and reliable information about borrowers in Russia may result in CEB not becoming aware of events of default of its borrowers, which could have an adverse effect on CEB’s operations and financial condition.

Any downgrade in CEB’s rating and/or its related debt obligations may adversely affect the price that a subsequent purchaser would be willing to pay for the Notes and could make it more expensive for CEB to raise capital in the future As at the date of this Prospectus, CEB’s senior long-term debt has been rated ‘‘BB’’ (outlook stable) by Fitch and ‘‘Ba3’’ (outlook positive) by Moody’s.

4 A significant number of CEB’s debt obligations have credit ratings, upon which investors rely in varying degrees, and which may be a prerequisite to certain investors holding such debt obligations. The Financial Crisis has witnessed credit rating agencies revising the criteria that they use to determine the credit ratings of debt obligations and/or changing their credit ratings of companies and their rated obligations. Any change in the methodology used by rating agencies could result in a downgrade in the ratings of a company or its rated obligations. Any downgrade in the ratings of a company and/or its rated obligations could make it more difficult and/or expensive for such companies to raise capital going forward and may adversely affect the price of their outstanding debt obligations. CEB’s rating is also linked to the rating of its parent, Credit Europe Bank N.V., and its continued support. The ultimate shareholder Fiba Holding on the other hand is not rated. CEB’s rating is also sensitive to changes in the sovereign rating of the Russian Federation. Any such downgrading in corporate or sovereign ratings may cause the ratings of the Notes to be reassessed or downgraded, which could affect the value of such Notes and increase CEB’s cost of raising capital. Credit ratings assigned to the Notes do not necessarily mean that they are a suitable investment and credit ratings assigned to CEB or to other instruments issued by or to fund CEB do not necessarily mean that an investment in CEB or such instruments is suitable. A rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time by the assigning rating organisation. Similar ratings on different types of notes do not necessarily mean the same thing. The ratings do not address the likelihood that the principal on the Notes will be prepaid, paid on an expected final payment date or paid on any particular date before the legal final maturity date of the Notes. The ratings do not address the marketability of the Notes or any market price. Any change in the credit ratings of the Notes or CEB could adversely affect the price that a subsequent purchaser would be willing to pay for the Notes. The significance of each rating should be analysed independently from any other rating.

The quality and robustness of CEB’s loan portfolio may continue to be tested in adverse economic conditions In the three years prior to 2009, CEB’s loan portfolio, especially its retail loan portfolio, expanded significantly and, during the same period, the Russian economy also continued to expand in terms of the nominal growth of its gross domestic product (‘‘GDP’’). In 2010, Russian GDP grew by approximately 4.0 per cent. and CEB’s gross loan portfolio grew by approximately 21.4 per cent. for the year ended 31 December 2010. The recent turmoil in the global and Russian credit markets, the decrease in commodities exports and declining GDP in Russia, have had a significant negative impact on the Russian economy while also contributing to falling commodities prices, slow growth of industrial production and the volatility of the Rouble. While the Russian economy has demonstrated some recovery in 2010, if the domestic economy otherwise continues to weaken or remains in a weakened condition, there may be a risk that CEB’s existing loan portfolio may continue to decline or not demonstrate as positive a performance as in years prior to 2009. CEB has been subject to risks regarding the credit quality of, and the recovery of loans to and amounts due from, customers and market counterparties. Financial services institutions that transact with each other are interrelated as a result of trading, investment, clearing, counterparty and other relationships. The recent downturn in the Russian economy in connection with the Financial Crisis has affected, and may continue to affect, many companies’ and individuals’ ability to repay their loans, particularly foreign currency- denominated loans. Factors including, without limitation, increased unemployment in Russia, inflation, reduced corporate liquidity and profitability, increased corporate and personal insolvencies and/or fluctuating interest rates may reduce CEB’s customers’, and market counterparties’ ability to repay loans. Any further deterioration in the performance of the Russian economy or a reduction in levels of personal income, individual purchasing power and consumer confidence, either generally or specifically in respect of the banking sector, could have a material adverse effect on the development of CEB’s business, financial condition, results of operations and prospects. In addition, changes in economic conditions may result in further deterioration in the value of security held against lending exposures and increase the risk of loss in the event of borrower default. Any changes in the credit quality of CEB’s Russian and/or international borrowers and counterparties, arising from systemic risks in the Russian and global financial systems, could accordingly reduce the value of CEB’s assets, and require an increase in CEB’s write-downs and allowances for impairment losses. As a result of the Financial Crisis, CEB has been required to renegotiate and reschedule a larger proportion of its loans to borrowers than in prior years. This has had an impact on CEB’s revenues. There can be no assurance that this situation will not continue, or that it will not worsen in the event of another downturn. There can also be no assurance that renegotiated and/or rescheduled loans will not be the subject of further borrower

5 repayment difficulties necessitating further restructuring or renegotiating, or resulting in borrower default. Where circumstances or risks occur that CEB does not identify or anticipate in developing their risk management methods for, CEB’s non-performing loan levels (where ‘‘non-performing loans’’ shall mean loans with principal and/or interest overdue by more than 90 days and loans restructured as a result of the borrowers’ inability to repay, together ‘‘NPLs’’), provisioning levels and write-offs could be greater than expected, which could have a material adverse effect on CEB’s business, financial condition, results of operations or prospects. In addition, loan impairment charges may rise due to the increase in the issuance of loans. In addition, CEB’s scoring and fraud detection system may become less efficient due to rapidly changing customer behaviour during the Financial Crisis. In addition, in Russia, the SME loan segment, together with the retail-lending segment, are typically higher risk sectors as compared to lending to large corporate entities, although they offer a higher interest margin. As a result of new activity in the SME loan and retail-lending segments, the net profit of CEB may be favourably or adversely affected by the ability of CEB to manage growth and margins and provide for the related loan loss risks. Given the significant share of loans to individuals, including auto loans, in CEB’s loan portfolio, its financial results have come to depend greatly on the general trends in employment, income and consumption (including car purchases) of Russian consumers, which in turn affect these borrowers’ ability to service their debts. In the past, during the Financial Crisis, CEB experienced much higher levels of non-performing loans to individuals, including auto loans, than are observed today. In addition, in the last 18 months, CEB has substantially increased its volumes of loans to individuals, including auto loans, and it may take time before the longer term non-performance characteristics of these newly issued loans become apparent. Should non-performance statistics for such loans increase from current levels, it could have a material effect on CEB’s business, financial conditions, results of operations or prospects. Although CEB has invested substantial time and effort in its risk management strategies when creating its existing portfolio, there can be no guarantee that such risk management strategies will protect CEB from increased levels of NPLs, particularly when confronted with risks that CEB did not identify or anticipate from its existing portfolio.

CEB may be unable to benefit from financing and other support from the Fiba Group and cooperation with the Fina Group in the future CEB has historically been reliant on the Fiba Group (as defined herein) for funding, subordinated loans and operational, human resources and technical support relating to the CEB’s financial management, credit policies, risk management and human resources functions. In the past, CEB has received significant capital contributions from members of the Fiba Group, including during the Financial Crisis. CEB also benefits from access to the Fiba Group’s trade finance experience, retail, corporate and SME banking expertise and experience in operating in volatile markets. CEB’s relationship with the Fiba Group and the Fina Group has also enabled CEB to expand its customer base. For instance, a number of CEB’s largest corporate customers and partners, including Marks&Spencer and GAP retail chains, are part of the Fina Group, controlled by Mr. Husnu Ozyegin, the owner of the Fiba Group. Furthermore, as of 30 June 2012 and 31 December 2011, deposits and balances from banks and other financial institutions which are related parties of CEB amounted to RUB7,709 million and RUB7,177 million, respectively, representing 35.3 per cent. and 33.5 per cent. respectively of CEB’s total deposits and balances from banks and other financial institutions. While the Fiba Group has indicated that CEB constitutes one of its strategic focuses, no assurance can be given that the Fiba Group will continue to provide financial or technical support to CEB in the future. In addition, the instability of the global economy and deteriorating economic conditions in the markets in which the members of Fiba Group and Fina Group operate may adversely affect the ability of Fiba Group to provide further financial or technical support to CEB and the ability of Fina Group to contribute to CEB’s business. This could materially adversely affect CEB’s financial condition and results of operations.

The interests of CEB’s shareholders may conflict with those of the Noteholders The Subordinated Loan Agreement may not constrain CEB from declaring or paying dividends, making other distributions in respect of its share capital or redeeming its capital stock. Following such a dividend, distribution or redemption, CEB might have less cash available to service its indebtedness than it would have had absent such dividend, distribution or redemption. Furthermore, in the event of CEB’s insolvency, amounts previously paid pursuant to such a dividend, distribution or redemption might be unavailable to

6 satisfy claims, including claims of the Issuer pursuant to the Loan Agreement, which could adversely affect the value of the Notes. As of 30 June 2012, 98.14 per cent. of CEB’s total share capital was held by Credit Europe Bank N.V., which is in turn controlled by Credit Europe Group N.V. (formerly known as Finans International Holding N.V.), each of which is part of the wider Fiba Group. Credit Europe Group N.V., Credit Europe Bank N.V. and the Fiba Group are, therefore, able to exercise control over matters connected with CEB. These entities will consider such matters within the context of their impact upon the wider Fiba Group. Accordingly, although they have not done so in the past, Credit Europe Group N.V., Credit Europe Bank N.V. or the Fiba Group could cause CEB to pursue acquisitions, disposals and other transactions or to make large dividend payments or other distributions or payments to shareholders that are designed to benefit the wider Fiba Group rather than CEB, even though such transactions may involve increased risk for CEB and/or the Noteholders. In addition, with a view to creating a more efficient structure, CEB’s shareholding and ownership may change from Credit Europe Bank N.V. to Fiba Holding or any other Fiba Holding company in future. Furthermore, the interests of shareholders and management of CEB may, under some circumstances, conflict with the interests of the Noteholders, and could have a material adverse effect on the Noteholders’ investment in the Notes.

Failure to obtain necessary corporate approvals of transactions with related parties may negatively affect CEB’s business CEB engages in transactions with related parties that are important to its business. For instance, Credit Europe Bank N.V. controls several companies that obtain financial services from CEB. All transactions with related parties are vetted by CEB’s Board of Directors, and all procedures required by Russian law before entering into a transaction with a related party are complied with. However, due to varying interpretations of the relevant Russian law governing transactions with related parties there is a risk that a transaction entered into by CEB may subsequently be declared invalid. Under applicable Russian law, certain ‘‘interested party transactions’’ require preliminary approval procedures to be complied with. In accordance with applicable Russian legislation, for a company with 1,000 or fewer shareholders, the decision as to the approval of an ‘‘interested party transaction’’ is adopted by majority vote of disinterested members of the Board of Directors. Where the number of disinterested directors is less than the quorum necessary to conduct the meetings of the Board of Directors, or where the value of the transaction or several interconnected transactions is equal to or exceeds 2 per cent. of the company’s total asset value, or where the transaction or several interconnected transactions constitute placement by subscription or disposal of shares or securities convertible into shares constituting more than 2 per cent. of the ordinary shares previously placed by the company, then in such circumstances a majority vote of the disinterested shareholders of the company holding voting shares is also required. For example, a transaction between CEB and a wholly-owned subsidiary may be considered an ‘‘interested party transaction’’ and therefore may require preliminary approval from a majority of the disinterested directors of the Board of Directors or disinterested shareholders. The failure to obtain the appropriate preliminary approval for a transaction may result in it being declared invalid, subject to certain conditions, upon a claim by the company or any of its shareholders, which could have a material adverse effect on CEB’s business, financial condition, results of operations or prospects. The concept of ‘‘interested parties’’ is defined with reference to the concepts of ‘‘affiliated persons’’, ‘‘beneficiaries’’ and ‘‘group of persons’’ under Russian law, each of which is subject to many different interpretations. Moreover, subject to certain conditions, the provisions of Russian law defining which transactions must be approved as ‘‘interested party’’ transactions are subject to different interpretations. Although CEB has generally taken a reasonably conservative approach in applying these concepts, CEB cannot be certain that its application of these concepts will not be subject to challenge. Any such challenge could result in the invalidation of certain transactions that may be important to CEB’s business. In addition, due to broad definitions contained in relevant Russian laws, transactions between CEB and companies in which CEB’s beneficial owner, Mr. Husnu Ozyegin (or companies controlled by him), own at least 20 per cent. or is represented on their supervisory bodies and/or in their senior management may be viewed as ‘‘interested party transactions’’. The failure to obtain appropriate approvals in connection with these transactions may lead to their invalidation. CEB believes that it has been providing its products and services to related parties on an ‘‘arm’s length’’ basis. However, because Russian law confers significant powers on shareholders to control and influence the operations of a company, CEB’s shareholders could cause CEB to provide such services on other than

7 an arm’s length basis. See ‘‘—The interests of CEB’s shareholders may conflict with those of Noteholders’’. In addition, although CEB attempts to obtain all corporate approvals required to consummate transactions with related parties, including intra-group transactions, it cannot be certain that it has obtained all such approvals, particularly since some of the concepts relating to transactions with related parties are subject to different interpretations under Russian law.

CEB holds a loan and deposit portfolio with a relatively high level of industry and key client concentration CEB’s loan portfolio, like that of many Russian banks, has relatively high industry concentration levels. As at 30 June 2012, real estate, petrochemicals and tourism accounted for approximately 18.5 per cent., 11.6 per cent. and 9.9 per cent. of CEB’s corporate loan portfolio (gross of provision for impairment), respectively. As at 31 December 2011, real estate, petrochemicals and tourism accounted for approximately 22.2 per cent., 13.3 per cent. and 19.2 per cent. of CEB’s corporate loan portfolio (gross of impairment allowances), respectively. As at 31 December 2010, real estate, petrochemicals and tourism accounted for approximately 18.4 per cent., 9.6 per cent. and 16.3 per cent., respectively, of CEB’s total loan portfolio (gross of provision for impairment), compared with 23.7 per cent., 12.2 per cent. and 12.1 per cent., respectively as at 31 December 2009. A downturn in any of these sectors could result in CEB’s customers facing difficulties in servicing their loans. Therefore, although CEB endeavours to limit its exposure to any single sector of the economy to 15 per cent. of its total loan portfolio (subject to an increase of up to 25 per cent. upon the decision of the Corporate Credit Committee) and believes that its provisioning levels and collateral arrangements are adequate, any default by CEB’s borrowers operating in these industries could have an adverse effect on CEB’s business and financial condition. Furthermore, current accounts and deposits from customers accounted for approximately 38.2 per cent. of CEB’s total liabilities as at 30 June 2012. CEB’s clients might find it necessary to withdraw their deposits and current account balances to satisfy their short-term liquidity needs, which, among other things, could result in liquidity difficulties and a loss of funding for CEB, adversely affecting its business and financial condition. As at 30 June 2012, CEB’s exposure to its 20 largest borrowers was approximately RUB11,671 or approximately 13.5 per cent. of CEB’s gross loan portfolio. Additionally, the current accounts and term deposits of CEB’s ten largest depositors represented approximately 34.6 per cent. of CEB’s total current accounts and term deposits from customers. Any impairment in the ability of such borrowers to repay their loans or any decision by these customers to withdraw their funds could have a material adverse effect on CEB’s business and financial condition.

A significant number of CEB’s corporate clients are Turkish companies operating in Russia and a deterioration in relations between Russia and Turkey or a decrease in trade between Russia and Turkey could negatively impact CEB’s relations with these clients In line with its strategy CEB has fostered strong relationships with Turkish companies operating in Russia, mainly in the construction and tourism segments. As at 30 June 2012, approximately half of CEB’s 20 largest borrowers were Turkish companies or Russian subsidiaries of such companies. If relations between Russia and Turkey were to deteriorate, trade between Russia and Turkey were to deteriorate or market conditions in either country were to deteriorate, this could affect the business of CEB’s Turkish clients, which could in its turn have a material adverse effect on CEB’s business and financial condition.

CEB’s capital position may deteriorate If CEB’s capital position declines, its ability to implement its business strategy may be adversely affected, and if CEB’s capital adequacy ratio calculated pursuant to CBR requirements were repeatedly to fall below 10 per cent., CEB would violate the CBR mandatory ratio, which may lead to the punitive measures or loss of one or more of its licences in case of continuous violation of CBR mandatory ratios, which in turn, may have a material adverse effect on CEB’s business, financial condition, results of operations or prospects. If CEB requires additional capital in the future, it cannot guarantee that it will be able to obtain this capital. If CEB is unable to raise further capital to support its growth or if its capital position otherwise declines, its ability to implement its business strategy, and its proposed lending expansion, may be materially adversely affected. CEB’s ability to obtain additional capital may be restricted by a number of factors, including: CEB’s future financial condition, results of operations and cash flows; any necessary

8 government regulatory approvals; and general market conditions for capital-raising activities by commercial banks and other financial institutions. In addition, the risk-adjusted capital guidelines promulgated by the Basel Accord, which forms the basis for the capital adequacy guidelines of the National Research Centre (together, ‘‘Basel II’’), are being implemented in certain jurisdictions including member states of the EU. The implementation of Basel II in Russia has not fully occurred to date, and the effect that these revised guidelines will have on the capital requirements of CEB and on its capital position is uncertain. If any future alterations to the capital adequacy standards under Basel II (or CBR regulations implementing Basel II) with regard to limits on the deployment and use of capital require CEB to maintain higher capital levels or limit the use of significant portions of their capital, this could have a material adverse effect on CEB’s business, financial condition, results of operations or prospects. In December 2010, the Basel Committee published a revised set of guidelines (‘‘Basel III’’), the implementation of which will begin on 1 January 2013. Although the minimum risk-based capital ratio under Basel III remains at 8 per cent., the minimum common equity ratio will increase from 2 per cent. (before the application of regulatory adjustments) to 4.5 per cent. (after the application of stricter regulatory adjustments) and the total Tier 1 capital requirement, which includes common equity and other qualifying financial instruments, will increase from 4 per cent. to 6 per cent. In addition, banks will be required to maintain, in the form of common equity (after the application of deductions), a capital conservation buffer of 2.5 per cent. to withstand future periods of stress, bringing the total common equity requirements to 7 per cent., and, if there is excess credit growth in any given country resulting in a system-wide build-up of risk, a countercyclical buffer within a range of 0 per cent. to 2.5 per cent. of common equity (or possibly other fully loss-absorbing capital) is to be applied as an extension of the conservation buffer. The implementation of Basel III in Russia has not occurred to date, and the effect that these revised guidelines will have on the capital requirements of CEB and on its capital position is uncertain.

The CBR regulations phasing in Basel III in Russia, if adopted in the format published for discussion and comments, could have a material adverse effect on CEB, its capital ratios and regulatory capital It should be noted that the CBR has published for consultation a draft of new regulations in connection with the implementation of the provisions of Basel III in Russia, with the indication from the CBR that they are considering such implementation over a period of time commencing during the course of 2013. While such proposed regulations are at a preliminary stage of consultation and it is not clear whether they will be implemented in the form proposed or within such timeframe, it is possible that such an implementation of Basel III principles in Russia could have a material adverse effect on CEB’s capital ratios, including as a consequence of the potential accelerated amortisation of the capital treatment of subordinated debt and the potential deduction from its capital of equity stakes that CEB holds on its balance sheet, which may follow as a consequence of such implementation. Additionally, new liquidity and funding requirements are expected to be gradually implemented between 2012 and 2018. Following the adoption of the Banking Sector Development Strategy, the CBR pursued its intention to increase the banks’ capital cushion for certain types of operations. As such, it increased risk weighting for a number of asset categories, which became effective from 1 July 2012, and will impact the regulatory capital adequacy N-1 ratio requirements for Russian banks. In addition, on 4 October 2012, the CBR published for consultation a further draft of new regulations, which, among other things, would double the CBR’s required provisioning levels under RAS for certain unsecured consumer loans issued after 1 January 2013 that are either not overdue or overdue by less than 31 calendar days. While CEB believes that its current provisioning levels under RAS are sufficient, such change in regulation could have a material adverse effect on its financial results and capital ratios if and when implemented.

CEB faces counterparty risk with respect to other financial service providers The unprecedented lack of liquidity and high cost of funds that characterised the interbank lending market in 2008 and 2009 has more recently been replaced with more favourable market conditions since 2010, despite a number of temporary disruptions. This positive market sentiment, from time to time temporarily disrupted, continues until today. CEB remains subject to the risk of deterioration of the commercial soundness of other financial service institutions within and outside Russia. Financial service institutions that transact with each other are interrelated as a result of trading, investment, clearing, counterparty and

9 other relationships. This risk is sometimes referred to as ‘‘systemic risk’’ and may adversely affect financial intermediates, such as clearing agencies, clearing houses, banks, securities firms and exchanges with whom CEB interacts on a daily basis, all of which could have an adverse effect on CEB’s ability to raise new funding. CEB routinely executes a high volume of transactions with numerous counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks, mutual and hedge funds and other institutional clients, resulting in a significant credit concentration. As a result, CEB is exposed to counterparty risk, and this counterparty risk is heightened as a result of recent financial institution failures and nationalisations and will continue to be exposed to the risk of loss if counterparty financial institutions fail or are otherwise unable to meet their obligations. A default by, or even concerns about the stability of one or more financial service institutions could lead to further significant systematic liquidity problems, or losses or defaults by other financial institutions which could materially and adversely affect CEB’s business results of operations, financial condition and prospects.

CEB’s business and operations are subject to market risks, including currency and interest rate risk CEB faces currency and interest rate risks arising from its money market operations including foreign exchange and arbitrage operations for its own account and on behalf of its customers. In the course of such money market operations, and due to differing denominations of its assets and liabilities, CEB maintains open currency positions that are subject to exchange rate fluctuations. Although CEB has established limits on such positions in order to mitigate such currency risk, volatility in the money market and significant exchange rate fluctuations may have a material adverse effect on CEB’s business and financial condition. CEB faces interest rate risk resulting from mismatches in the amounts, interest rates and maturities of its assets and liabilities. Although CEB monitors interest rate fluctuations and its asset-liability tenor in order to mitigate such interest rate risk, interest rate movements on both the domestic and international markets may have a material adverse effect on CEB’s business and financial condition.

Changes in consumer protection laws may adversely affect CEB’s consumer finance business CEB may from time to time face court claims from Rospotrebnadzor, a Russian regulatory body for the protection of consumer rights. In Russia, in the absence of specific consumer lending laws, Russian courts have extended the scope of Federal Law No. 2300-1 ‘‘On Consumer Protection’’, dated 7 February 1992 (the ‘‘Consumer Protection Law’’), as amended, which provides general protection for consumers, to consumer loans. As of the date of this Prospectus, the draft law on consumer lending has been submitted to the Russian parliament but has not been formally considered. If specific consumer protection laws, such as the Consumer Protection Law, are adopted, such laws may provide for the right of regulatory agencies to regulate the consumer loan market and introduce mandatory rules on consumer finance activities, which may require the CEB to change its business practices in the relevant market. A forced change in business practices may have a material effect on CEB’s consumer business and overall financial condition.

CEB operates in a highly regulated industry All Russian banks, including foreign-owned banks, are subject to extensive regulation by governmental organisations, particularly the CBR. Requirements imposed by regulators, including capital adequacy requirements, are designed to ensure the integrity of the financial markets and to protect customers and other third parties with whom CEB deals. These requirements are not designed to protect holders of the Notes. Consequently, these regulations may limit CEB’s activities, including its lending, and may increase CEB’s costs of doing business, or require CEB to seek additional capital in order to maintain CBR capital adequacy requirements or different varieties of funding to satisfy the CBR’s liquidity requirements. In addition, a breach of regulatory guidelines in the Russian Federation could expose CEB to potential liability and other sanctions, including the loss of its general banking licence. Regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities and the regulatory structure governing CEB’s operations is continuously evolving. Existing laws and regulations could be amended, the manner in which laws and regulations are enforced or interpreted could change and new laws or regulations could be adopted. There is also the risk that such laws or regulations may be enforced selectively against certain banks, including banks with non-Russian ownership. Additionally, as a result of the global financial crisis, certain regulations have been relaxed in order to moderate the effects of the crisis on Russian banks. There can be no assurance that there will not be a

10 strengthening of regulation as a preventative measure against the reoccurrence of a similar crisis in the future. If the enforcement or interpretation of existing regulations were to change or if future regulations were imposed there may be an adverse effect on CEB’s business, financial condition, results of operations and prospects.

Risks Relating to CEB’s Business Operations CEB may fail to manage its growth properly CEB’s current goal is to become a leading privately-owned universal bank in Russia by assets. The growth of CEB’s business will require continued investment in its financial and information management systems, employee recruiting and training, marketing and the monitoring of the consistency of customer service. Furthermore, the expansion of CEB’s branch network will also require sufficient allocation of capital and management resources. See ‘‘Business—Branch Network’’. Notwithstanding expenditures to this end, CEB may not be able to achieve projected results on any investment it makes in its business or any expansion of its regional network. Moreover, although CEB expects expansion of business in its regional network to contribute to the expansion of its overall customer base, the financial condition, credit histories and transparency of regional Russian companies are typically weaker than those in Moscow and the Moscow region, which may increase the credit risk of CEB’s loan portfolio. See ‘‘—Risks Relating to CEB’s Business and Industry—CEB may be unable to assess adequately the credit risk of potential borrowers which could impact its level of non-performing loans and provisions’’.

CEB may lack sufficient insurance cover The insurance industry in the Russian Federation is in a developing state and many forms of insurance protection common in other jurisdictions are not yet generally available. Russian banking and other laws do not require banks to maintain a variety of insurance on their material assets or liabilities, other than the mandatory insurance of retail deposits CEB does not have full insurance coverage with respect to damage to its equipment and property, business interruption and third party liability. Until CEB obtains adequate insurance coverage, a loss or destruction of certain of its assets, or certain third party claims, could have a material adverse effect on CEB’s business and financial condition.

CEB’s IT systems may malfunction or be insufficient to support future operations CEB’s financial results and ability to meet its strategic objectives depend significantly on the proper functioning of its IT systems and the ability to increase their capacity sufficiently to support CEB’s operations. Investment in IT infrastructure tailored for high transaction volumes and adapted to support its branch offices is one of CEB’s strategic priorities. For these purposes CEB has opened the Operations Centre and implemented a disaster back-up system. While CEB has been actively developing its IT systems, these systems are currently significantly less developed in certain respects than those of certain banks in the United States or Western Europe. CEB may encounter difficulties in the ongoing process of developing and integrating modern IT systems, as well as expanding its IT systems in line with the expansion of its operations. The extent to which CEB’s current IT systems fail to fulfil CEB’s short-term capacity or operational needs or any inability of CEB to maintain or further expand its IT systems may have a material adverse effect on its business, financial condition, results of operations or prospects.

CEB may be unable to recruit and retain experienced personnel CEB’s continuing success depends, in part, on its ability to continue to attract, retain and motivate qualified and experienced banking and management personnel in Russia, in particular highly qualified personnel. Competition in the Russian banking industry for personnel with relevant expertise is intense due to the relatively small number of available qualified individuals. CEB established a bonus system and training programmes to retain and attract experienced employees. The bonus system is designed to create incentives for the extra work the employees perform. Regular training is offered to further develop the employees’ professional skills. In addition, experienced employees are given an opportunity to progress their careers being given increased responsibilities and duties. This becomes possible due to CEB’s expansion as well as the expansion of its product range, market share and geographical footprint. However, the inability to recruit and retain qualified and experienced personnel in Russia or manage CEB’s current

11 personnel successfully could have a material adverse effect on CEB’s business, financial condition, results of operations or prospects. In addition, CEB is dependent on its senior management for the implementation of its strategy and the operation of its day-to-day activities. CEB’s senior management have substantial experience in the Russian, Turkish, Romanian and European retail, SME and corporate banking markets. In addition, many of CEB’s senior staff have international banking experience, having completed rotations in other banking institutions within the Fiba Group. In addition, certain business relationships of members of senior management may be important to the conduct of CEB’s business. There can be no assurance that key members of senior management will remain at CEB or that such business relationships will continue.

CEB’s banking business entails operational risks CEB is exposed to many types of operational risk, including the risk of fraud by employees or outsiders, unauthorised transactions by employees or operational errors, including clerical or record-keeping errors and errors resulting from faulty computer or telecommunications systems. Given CEB’s high transaction volume and developing IT systems, errors may be repeated or compounded before they are discovered and rectified, however CEB considers IT an integral part of its operations and is committed to continued investment in IT to reduce operational risks. Indeed CEB has developed a centralised core information and data processing system, which allows it to synchronise the management of CEB’s operational, lending and risk management processes. CEB intends to continue to invest in further automation of banking processes, thus improving risk management. CEB maintains a system of controls designed to keep operational risk at appropriate levels. See ‘‘Risk Management—Operational Risk’’. However, there can be no assurance that it will not suffer losses from failure of these controls to detect or contain operational risk in the future.

Risks Relating to the Russian Federation Emerging markets such as Russia are subject to different risks as compared to more developed markets, and turmoil in any emerging market could adversely affect the value of investments in Russia Emerging markets such as Russia are subject to different risks as compared to more developed markets, including, in some cases, increased political, economic and legal risks. Generally, investment in emerging markets is only suitable for sophisticated investors who fully appreciate the significance of the risks involved in, and are familiar with, investing in emerging markets. Emerging markets such as Russia are subject to rapid change, and the information set out herein may become quickly outdated. Moreover, financial turmoil in any emerging market country tends to affect adversely the value of investments in all emerging market countries as investors move their money to more stable, developed markets. As has happened in the past, financial problems or an increase in the perceived risks associated with investing in emerging economies could dampen foreign investment in Russia and adversely affect the economy of such countries. In addition, during such times, companies in emerging markets can face severe liquidity constraints as foreign funding sources are withdrawn. Thus, even if the Russian economy remains relatively stable, financial turmoil in another emerging market country could seriously disrupt the business of companies operating in Russia, as well as result in a decrease in the price of the Notes.

Investments in Russia may be adversely affected by fluctuations in the global economy The Russian economy is vulnerable to market downturns and economic slowdowns elsewhere in the world. Since Russia is one of the world’s largest producers and exporters of oil, natural gas and metal products, the Russian economy is especially sensitive to commodity prices on the world markets. Thus, a decline in the prices for commodities, as well as the imposition of tariffs could slow or disrupt the Russian economy. The sudden decrease in prices for natural resources in 2008 resulted in a significant decrease of governmental revenues, which had a negative effect on the Russian economy. Subsequently, commodity prices have continued to be volatile and future fluctuations in the global markets could substantially limit CEB’s access to capital and could adversely affect the financial condition of CEB’s customers, which could result in increased loan losses to CEB as a consequence of, among other things, decreased corporate deposits from these customers, a reduction in the volume of foreign currency held and/or foreign trade operations engaged in by these customers, decreases in the value of collateral (including immovable property, land, equipment, intangibles and machinery) underlying the obligations of these customers and

12 defaults by these customers on their obligations. These developments could have a material adverse effect on CEB’s business, financial condition, results of operations or prospects.

Political risks could adversely affect the value of investments in Russia Political conditions in the Russian Federation were highly volatile in the 1990s, as evidenced by the frequent conflicts amongst executive, legislative and judicial branches of government, which negatively impacted Russia’s business and investment climate. Although the political situation in Russia has stabilised since 2000, future political instability could result in a worsening overall economic situation, including capital flight and a slowdown of investment and business activity. Following Russian parliamentary elections in December 2011 and the presidential elections in March 2012, controversy concerning alleged voting irregularities during such elections led to organised protests in several Russian cities, including Moscow. In addition, any change in the Government or the Government’s programme of reform in Russia or lack of consensus between the Russian President, the Prime Minister, the Government, Russia’s Parliament and powerful economic groups could lead to political instability and a deterioration in Russia’s investment climate that might limit the ability of CEB to obtain financing in the international capital markets or otherwise have a material adverse effect on its business, financial condition, results of operations and prospects. According to some commentators, politically motivated actions, including claims brought by the Russian authorities against several major Russian companies, have called into question the security of property and contractual rights, progress of the market and political reforms in Russia, the independence of the judiciary in Russia and the uncertainty of tax and mineral resources legislation. This has, in turn, resulted in significant fluctuations in the market price of Russian securities and had a negative impact on foreign direct and portfolio investment in the Russian economy, over and above the general market turmoil recently. Any similar actions by the Russian authorities which result in a further negative effect on investor confidence in Russia’s business and legal environment could have a further material adverse effect on the Russian securities market and prices of Russian securities or securities issued or backed by Russian entities including the Notes. Russia is a federative state consisting of 83 constituent entities, or ‘‘subjects’’. The Russian Constitution reserves some governmental powers for the federal government, some for the subjects and some for areas of joint competence. Eight ‘‘federal districts’’ (federal’nye okruga), which are overseen by a plenipotentiary representative of the Russian President, supplement the country’s federal system. The delineation of authority among and within the subjects is, in many instances, unclear and contested, particularly with respect to the division of tax revenues and authority over regulatory matters. Subjects have enacted conflicting laws in areas such as privatisation, land ownership and licensing. For these reasons, the Russian political system is vulnerable to tension and conflict between federal, subject and local authorities. This tension creates uncertainties in the operating environment in Russia, which may prevent businesses from carrying out their strategy effectively. In addition, ethnic, religious, historical and other divisions have on occasion given rise to tensions and, in certain cases, military conflict. Russian military and paramilitary forces have been engaged in the Chechen Republic and other republics in the region in the recent past and continue to maintain a presence there. Moreover, in August 2008, Russia and Georgia were involved in an armed conflict. The conflict ended with Russian recognition of the independence of South Ossetia and Abkhazia. The Russian stock exchanges experienced heightened volatility, significant overall price declines and capital outflow following such events. In addition, various acts of terrorism have been committed within the Russian Federation. The most recent manifestation of terrorist acts in Moscow was the 24 January 2011 suicide bombing in the Domodedovo International Airport which killed at least 37 people. The risks associated with these events or potential events could materially and adversely affect the investment environment and overall consumer and entrepreneurial confidence in the Russian Federation, which in turn could have a material adverse effect on CEB’s business, financial condition, results of operations, or prospects.

Economic risks could adversely affect the value of investments in Russia During the 1990s, while simultaneously enacting political reforms, the Government attempted to implement economic reforms and stabilise the economy. These policies have involved liberalising prices, reducing defence expenditures and subsidies, privatising state-controlled enterprises, reforming natural

13 monopolies, reforming the tax and bankruptcy systems and introducing legal structures designed to facilitate private, market-based activities, foreign trade and investment. Despite these policies, the Russian economy has suffered abrupt downturns. On 17 August 1998, the Government defaulted on its short-term Rouble-denominated treasury bills and other Rouble- denominated securities, and the CBR abandoned the Rouble currency band and issued a temporary moratorium on certain hard-currency payments to foreign counterparties. These events led to a severe devaluation of the Rouble, a sharp increase in the rate of inflation, a significant deterioration of the country’s banking system, significant defaults on hard-currency obligations, a dramatic decline in the prices of Russian debt and equity securities and an inability to raise funds on the international capital markets. From April through July 2004, the Russian banking sector experienced its first significant disruption since the financial crisis of August 1998, following the revocation by the CBR of the banking licences of several Russian banks. As a result of various market rumours and, in some cases, certain regulatory and liquidity problems, several privately owned Russian banks experienced liquidity shortfalls and were unable to attract funds on the interbank market or from their client base. Simultaneously, they faced large withdrawals of deposits by both retail and corporate customers, which further reduced liquidity. The Financial Crisis negatively affected the growth of gross domestic product (‘‘GDP’’) in Russia and led to severe liquidity problems in the Russian banking sector, Rouble depreciation against the US dollar and Euro, and a decline in foreign currency and gold reserves. Furthermore, there were periodic suspensions of trading in the Russian stock markets as well as extreme volatility in Russian equity markets generally and sharp declines in the share prices of Russian financial institutions. In January 2011, Fitch changed its sovereign rating outlook for the Russian Federation from positive to stable based on perceived increased political uncertainty and the global economic outlook and confirmed it as stable in January 2012. In addition to anticipated slower asset growth on the Russian banking market, the Russian Federation may face reduction in GDP growth and reduced growth in industrial production. A combination of these factors may result in a significant deterioration in the financial fundamentals of Russian banks, including liquidity, asset quality, and profitability. The physical infrastructure in Russia largely dates back to Soviet times and has not been adequately funded and maintained over the past 20 years. Particularly affected are the rail and road networks, power generation and transmission, communication systems and building stock. For example, in May 2005, an electricity blackout affected much of Moscow for one day, disrupting normal business activity and in August 2009, an accident occurred at the Sayano-Shushenskaya hydroelectric power plant, killing more than 70 people, causing billions of Roubles in damage and leading to severe power shortages for both residential and industrial consumers locally. The deterioration of Russia’s physical infrastructure negatively affects its national economy, disrupts the transportation of goods and supplies, imposes additional costs on businesses and can interrupt business operations. Further deterioration in the physical infrastructure could have a material adverse effect on the value of investments in Russia.

If the Russian Federation were to return to heavy and sustained inflation, CEB’s results of operations could be adversely affected During the period 2007-2011 the consumer price index in the Russian Federation measured by Rosstat was 11.9 per cent. in 2007, 13.3 per cent. in 2008, 8.8 per cent. in 2009, 8.8 per cent. in 2010 and 6.1 per cent. in 2011. Despite this recent reduction, a return to heavy and sustained inflation could lead to market instability, new financial crises, reductions in consumer purchasing power and the erosion of consumer confidence. Any one of these events could lead to decreased demand for CEB’s products and services and have a material adverse effect on CEB’s business, financial condition, results of operations and prospects.

Banking activity risks could affect the value of investments in Russia Russian companies may face significant liquidity problems due to a limited supply of domestic savings, few foreign sources of funds, relatively high taxes, limited lending by the banking sector to the industrial sector and other factors. A re-emergence of liquidity constraints that have disrupted the Russian banking sector in the past, or a deterioration of the Russian banking system generally, could have a material adverse effect on CEB’s business, financial condition, results of operations and prospects.

14 The Russian banking sector is less developed compared to its Western counterparts. It is unclear how legal and regulatory developments will affect the competitive banking landscape in Russia. The regulatory environment in which CEB operates could change in a manner that has a material adverse effect on CEB’s ability to compete. CEB trades derivative instruments, including foreign currency forward and swaps, and plans to continue to manage its risks in part by utilising derivative instruments. However, the Russian regulatory and legal framework relating to derivative instruments remains relatively underdeveloped, and despite the fact that CEB has the right to apply to a court for protection of its rights under derivative contracts, judicial experience in respect of such instruments is limited. In addition, there are some doubts as to the enforceability of certain derivative arrangements under Russian law. A Russian court’s refusal to enforce the terms of CEB’s derivative instruments could have a material adverse effect on CEB’s business, financial condition, results of operations and prospects. In addition, factors such as the limited liquidity in the Russian corporate securities market, unfavourable press coverage and market making could all negatively affect CEB’s investment banking business. In recent times, certain Russian banks have experience difficulties that have caused them to become insolvent and have their licenses revoked, such as the International Industrial Bank, or to recognise large loan impairment provision losses that required steps to replenish their capital, as in the case of the Bank of Moscow. Similar problems at other Russian banks may cause doubts among investors or depositors about the effectiveness of banking supervision in Russia and the reliability of bank financial statements, even under IFRS. This could result in investors or depositors, as the case may be, reducing their exposure to Russian bank equities, including those of CEB, which could be materially adverse to CEB’s business, financial condition, results of operations and prospects.

Devaluation of the Rouble against the U.S. dollar and exchange controls could adversely affect the value of investments in the Russian Federation While the Rouble appreciated against the U.S. dollar in real terms each year between 2000 and 2007, it experienced significant depreciation against the U.S. dollar in 2008 and in the beginning of 2009, largely as a result of the Financial Crisis and the significant fall in prices in oil and commodities that are the principal generators of Russia’s export earnings. This process of depreciation was significantly influenced by the CBR as part of its policy to maintain low volatility. Between 1 August 2008 and 1 March 2009, the Rouble depreciated by 34 per cent. against the U.S. dollar (from RUB23.42 per U.S.$1.00 to RUB35.72, according to the CBR). The exchange rate has fluctuated significantly over the past two years—ranging from RUB36.43 per U.S.$1.00 on 19 February 2009 to RUB28.67 per U.S.$1.00 on 13 November 2009; from RUB31.78 per U.S.$1.00 on 8 July 2010 to RUB28.94 per U.S.$1.00 on 13 April 2010; from RUB32.68 per U.S.$1.00 on 5 October 2011 to RUB27.27 per U.S.$1.00 on 6 May 2011 and from RUB32.82 per U.S.$1.00 as at 1 July 2012 to RUB32.57 per U.S.$1.00 as at 1 September 2012. Any depreciation of the Rouble against the U.S. dollar could negatively affect CEB in a number of ways, including, among other things, by increasing the actual cost to CEB of financing its U.S. dollar based liabilities and by making it more difficult for Russian borrowers to service their U.S. dollar loans. Volatility in the Russian currency market may have a material adverse effect on CEB’s business, financial condition, results of operations and prospects and on the value of the Notes. According to the CBR, foreign currency and gold reserves fell from approximately U.S.$597.0 billion on 1 August 2008 to U.S.$384.1 billion on 1 March 2009. By December 2009 reserves had increased to U.S.$440.6 billion and to U.S.$514.6 billion by September 2012, but are still likely to fluctuate going forward. Although Russia’s current foreign currency and gold reserves may be sufficient to sustain the domestic currency market in the short term, there can be no assurance that the currency market will not further deteriorate in the medium or long term. Volatility in the Russian currency market or considerable depreciation of the Rouble in the medium or long term may adversely affect CEB’s business, financial condition, results of operation and prospects.

Social risks could adversely affect the value of investments in Russia Emerging markets such as Russia are prone to social risks and increased lawlessness, including significant criminal activity. High levels of official corruption reportedly exist in locations where CEB conducts its business, including the bribing of officials for the purpose of initiating investigations by government agencies. For example, should CEB enter into legal proceedings to recover a bad debt, such debtor may engage in illegal measures, including corruption, to obstruct proceedings in relation to such claim. Whilst

15 CEB’s internal monitoring of operations risks, and ‘‘know your customer’’ procedures are designed to recognise suspicious and illegal activity, there can be no assurance that corruption or other illegal activity will not affect CEB’s business in the future. See ‘‘Risk Management—Operational Risk’’. Corruption and other illegal activities could disrupt CEB’s ability to conduct its business effectively, and claims that CEB was involved in such corruption or illegal activities could generate negative publicity, either of which could harm CEB’s business. In addition, rising unemployment, forced unpaid leave, wages in arrears, and weakening economies, especially in single-industry cities, has in the past led to and could in the future lead again to labour and social unrest, a mood of protest, and a rise in nationalism against migrant workers. Such labour and social unrest could disrupt ordinary business operations, which also could materially adversely affect CEB’s business.

Official data may be unreliable CEB and the Issuer have derived substantially all of the information contained in this Prospectus concerning CEB’s competitors from publicly available information, and they have relied on the accuracy of this information without independent verification. In addition, some of the information contained in this Prospectus is derived from official data of Government agencies, including the CBR. The official data published by Russian federal, regional and local governments is substantially less complete or researched than those of Western countries. Official statistics, including those produced by the CBR, may also be produced on different bases than those used in Western countries. Any discussion of matters relating to Russia in this Prospectus must, therefore, be subject to uncertainty due to concerns about the completeness or reliability of available official and public information. Due to the unavailability of alternative, reliable sources of country-specific data, Russian companies necessarily rely to some extent on this statistical data in their business planning. As a result, assumptions made by Russian companies in their business plans may prove to be incorrect. The lack of accurate statistical data for use in business planning may contribute to the overall volatility of the Russian economy and may adversely affect the profitability of many of CEB’s corporate and SME customers, which would have a material adverse effect on its business, financial condition, results of operations and prospects. Prospective investors should be aware that the information contained in this Prospectus may become outdated relatively quickly. Incomplete, unreliable or unavailable information, potentially including some of the information in this Prospectus, may compound the risks set forth in this Prospectus.

Risks Relating to the Russian Legal System and Legislation Legal risks could affect the value of investments in Russia The risks associated with the Russian legal system include: inconsistencies among laws, presidential decrees, and government and ministerial orders and resolutions; conflicting local, regional and federal laws and regulations; the untested nature of the independence of the judiciary and its sensitivity to economic, or political influences; a high degree of discretion on the part of governmental authorities; corruption within governmental authorities; the relative inexperience of judges and courts in interpreting laws; and the unpredictability of enforcement of foreign judgments and foreign arbitral awards. The laws regulating ownership, bankruptcy, internal control and corporate governance are relatively new and largely remain untested in the courts. Disclosure and reporting requirements do not guarantee that material information will always be available. The concepts of conflict of interests and fiduciary duties on the part of the management or directors to their companies or the shareholders are not well developed. In addition, substantive amendments to several fundamental Russian laws, including those relating to the tax regime, corporations and licensing, are made on a relatively frequent basis. The relatively recent nature of much Russian law, the lack of consensus about the scope, content and pace of economic and political reform, and the rapid evolution of the Russian legal system in ways that may conflict with market developments may each result in ambiguities, inconsistencies and anomalies, in the enactment of laws and regulations without a clear constitutional or legislative basis and ultimately in investment risks that do not exist in more developed legal systems. Russian bankruptcy laws often differ from comparable laws in the United States and Western European countries and may be subject to varying interpretations. For example, although Federal Law No. 127-FZ dated 26 October 2002 ‘‘On Insolvency (Bankruptcy)’’, as amended (the ‘‘Bankruptcy Law’’) establishes a procedure to declare an entity bankrupt and liquidate its assets, many of the bankruptcy proceedings that have occurred have not been conducted

16 in the best interests of creditors whose claims are ranked higher than those of shareholders. There is no precedent to predict how claims on behalf of the holders of the GDRs and Ordinary Shares against CEB would be resolved in the case of CEB’s bankruptcy. All of these weaknesses could adversely affect the value of investments in Russia. The independence of the Russian judiciary and its immunity from economic and political influences remains largely untested. The Russian court system is understaffed and underfunded. Judges and courts are generally inexperienced in business and corporate law. Russia is a civil law jurisdiction where judicial precedents generally have no binding effect on subsequent decisions. Many court decisions are not readily available to the public. The Russian judiciary can be slow or unjustifiably swift, and enforcement of court orders can be very difficult. Moreover, parties often use legal claims in furtherance of political objectives. The Government may attempt to invalidate court decisions by backdating or retroactively applying relevant legislative changes. All of these factors make judicial decisions in Russia unpredictable and effective redress uncertain. The uncertainties also extend to property rights. During its transition from a centrally planned to a market economy, Russia has enacted laws to protect private property against expropriation and nationalisation. However, due to lack of experience in enforcing these provisions and to political pressure, courts might not enforce these protections in the event of an attempted expropriation or nationalisation. Expropriation or nationalisation of any of CEB’s entities, their assets or portions thereof, potentially without adequate compensation, would have a material adverse effect on CEB’s business, financial condition, results of operations and prospects.

CEB may be unable to maintain its existing banking licences or obtain such licences in the future Banking operations in Russia require licences from the CBR. Operations in securities require licences from the FSFM. CEB has obtained such licences in connection with its banking operations and operations in securities. See ‘‘Business—Overview’’. In order to obtain, maintain and renew such licences, it is necessary to comply with licence requirements. Many Russian laws and regulations (including certain licence requirements) are construed in a way that provides for significant administrative discretion in application and enforcement. As a result, the applicable law may be difficult to ascertain and apply, even after reasonable effort. Reliable texts of regional and local laws and regulations may be unavailable and are rarely updated or catalogued. In addition, the laws and regulations are subject to different and changing interpretations and administrative applications. Regulatory agencies may impose additional requirements for a licence or deny licence applications. As a result of these factors, even the best efforts to comply with the laws and regulations (including licence requirements) may not always result in full compliance. In addition, breaches of Russian law may involve severe penalties and consequences that could be considered as disproportionate to the violation committed, for example, withdrawal (termination) of a licence. The loss of a licence (e.g. through a failure by CEB to fully comply with licence requirements or to obtain or renew such licences) could result in CEB’s inability to continue some or all of its activities or in the imposition of fines by the CBR or other licensor. Any such loss, breach or failure could, in turn, affect CEB’s ability to fulfil payment obligations, either generally or under specific transactions, and could have a material adverse effect on CEB’s business, financial condition, results of operations or prospects.

Russian banking and financial regulation has been undergoing significant changes Like most of Russia’s legislation on business activities, Russia’s laws on banks and banking activity were adopted in the early 2000s. In addition to Federal Law No. 86-FZ dated 10 July 2002 ‘‘On the Central Bank of the Russian Federation (Bank of Russia)’’, as amended (the ‘‘CBR Law’’), Federal Law No. 395-I dated 2 December 1990 ‘‘On Banks and Banking Activity’’, as amended (the ‘‘Banking Law’’), and Federal Law No. 39-FZ dated 22 April 1996 ‘‘On the Securities Market’’, as amended (the ‘‘Securities Market Law’’), Russia has adopted and continues to develop new banking and financial market legislation. Pursuant to Federal Law No. 177-FZ dated 23 December 2003 ‘‘On Insuring the Deposits of Natural Persons Made with Banks of the Russian Federation’’, as amended (the ‘‘Deposit Insurance Law’’), which established a deposit insurance system in which all Russian banks must participate or lose their ability to accept retail deposits and open bank accounts for individuals, secured deposits maintained by individuals with Russian banks are insured for an amount of RUB700,000. The Deposit Insurance Law strengthens

17 competition in the retail deposit market as all Russian banks that choose to participate in the deposit insurance scheme will have the ability to offer protected deposits. The majority of banks that filed participation requests, including CEB, were admitted to the deposit insurance scheme. An increase in the amount insured to RUB1 million is currently being considered. In March 2010, the Banking Law was amended to protect retail customers and as a result, all credit organisations are now prohibited from: (i) increasing interest rates, shortening the tenures of loan agreements or charging additional fees and commissions with respect to retail loans, or (ii) decreasing interest rates, shortening the tenure of deposit agreements or charging additional fees and commissions in respect to retail term deposits. The CBR has also been developing regulations on bank capital and bringing them into line with international standards. See ‘‘The Banking Sector and Banking Regulation in Russia—Russian Banking Regulations—Regulation of Capital—Basel Implementation in Russia’’. In particular, the CBR has recently amended its regulations regarding the calculation of risk weighted assets for the purpose of the capital adequacy ratio (N1). Such amendments, which became effective from 1 July 2012, are expected to affect the Russian banking industry generally. For example, the CBR is considering amending its regulations regarding loan loss provisions with respect to loans granted by banks and if such amendments were to be adopted by the CBR, the applicable rules may become more rigorous. Furthermore, draft legislation proposes, among other things, to broaden the CBR’s supervisory powers and in particular vest in the CBR the right to determine risk management rules of banks, introduce a new definition of ‘‘related borrowers’’ for the purpose of calculating the exposure to related borrowers that would include both legally and economically related borrowers and decrease the exposure to related parties from the current threshold of 50 per cent. to 20 per cent. of a bank’s capital base calculated pursuant to applicable CBR regulations. The recent changes in the Russian banking and financial market regulation are aimed at bringing the regime more in line with that of more developed countries. However, because of these changes, banks operate in a new and relatively unclear regulatory environment. Although CEB believes that it conducts its business in compliance with the applicable laws and regulations, no assurance can be given that its actions will not be challenged by the relevant authorities and held to be illegal. Further, it is difficult to forecast how the changes in the banking and financial market regulation will affect the Russian banking system and the Russian securities market, and no assurance can be given that the regulatory system will not change in a way that will impair CEB’s ability to provide a full range of banking services or to compete effectively, thus adversely affecting CEB’s business, financial condition, results of operations and prospects.

Russian regulatory capital regulations are relatively new and subject to further review and development With respect to regulatory capital for banks and subordinated loans in particular, the concept of subordinated debt is relatively new in Russia, and the rules governing subordinated debt may be subject to further review, clarification and development. In particular, the regulatory capital regulations of the CBR are currently rudimentary as compared with regulatory capital legislation enacted in other jurisdictions, which could lead to uncertainty and a lack of clarity in the interpretation and application of such regulations. In 2012, the CBR published for consultation a draft of new regulations in connection with the implementation of provisions of Basel III in Russia, which also includes a new set of rules governing subordinated debt, with the indication from the CBR that they are considering such implementation over a period of time commencing during the course of 2013. See ‘‘—The CBR regulations phasing in Basel III in Russia, if adopted in the format published for discussion and comments, could have a material adverse effect on CEB, its capital ratios and regulatory capital’’. Usually, following the CBR’s preliminary approval and conclusion (zakluchenie) on the regulatory capital treatment of the Subordinated Loan Agreement and on the basis of the discussion in the paragraph above, the CBR delivers its final approval and conclusion (zakluchenie) on the eligibility of the Subordinated Loan for inclusion as Tier 2 Capital between 30 and 60 days after the issue date of the Notes. There can, however, be no guarantee that such approval and conclusion in respect of the Subordinated Loan will be granted. If the CBR does not initially grant such approval or conclusion in respect of the Subordinated Loan within 90 days after the date of the Subordinated Loan Agreement, CEB will have the right to prepay the Subordinated Loan pursuant to the Subordinated Loan Agreement. If such approval and conclusion are granted by the CBR, it is possible that the interpretation of such capital treatment changes or that the regulatory capital rules are subsequently amended or clarified. As a

18 result, CEB could lose the eligibility for inclusion as Tier 2 Capital granted to the Subordinated Loan and, therefore, exercise the right (described below) to prepay the Subordinated Loan which would result in the early repayment of the Notes. The Subordinated Loan Agreement may provide that CEB will, inter alia, have the right, following the CBR’s delivery of the Final Conclusion (as defined in the Subordinated Loan Agreement) as being eligible for inclusion as Tier 2 Capital, to prepay the Subordinated Loan, in whole but not in part, at any time if, as a result of any amendment or clarification of, or change in (including a change in interpretation or application of), Regulation No. 215-P or other applicable requirements of the CBR, the principal amount of the Subordinated Loan would cease to be eligible for inclusion as Tier 2 Capital. If the Subordinated Loan is prepaid pursuant to this provision, the Notes will become due and repayable at their principal amount (as defined in the Subordinated Loan Agreement), if any.

Introduction of a proposed lending limit for economically related borrowers may restrict CEB’s lending activities On 10 September 2004, the CBR issued Letter No. 106-T, which recommends that Russian banks implement an exposure limit for economically related borrowers. Under this regulation, borrowers are considered ‘‘economically related’’ if the decline in the financial condition of one borrower affects or may affect the financial condition of another borrower and may result in such other borrower’s inability to perform its obligations to CEB. In its Letter No. 04-15-1/3693 dated 3 September 2007, the CBR confirmed that given the Letter No. 106-T provides for only a recommendation, the CBR will not take any actions against the banks in case of a breach of such recommendation. Further, the CBR has initiated amendments to Russian banking legislation which will clarify the definition of ‘‘related borrowers’’, to include both legally and economically related borrowers. Although CEB is diversifying its client base, the economic relationships between some of its clients are significant and may materially exceed the proposed exposure limit of the CBR. Despite such exposure limit is only recommendatory, breaches of CBR’s recommendations may adversely affect CEB’s relationships with the CBR. In addition, once this exposure limit becomes mandatory, it may adversely affect CEB’s lending volume and require significant reorganisation of its lending business to ensure compliance.

It may be difficult for CEB to enforce security and guarantees under Russian law CEB enters into security, guarantee or other third party credit support arrangements for certain loans made to retail customers and legal entities. While CEB does not heavily rely on pledges over goods, CEB takes such pledges with respect to certain loans such as, for example, car loans. Under Russian law, security (which includes pledges and mortgages) and guarantees (other than bank guarantees) are considered secondary obligations, which automatically terminate if the underlying obligation becomes void. Furthermore, enforcement of security under Russian law generally requires either an agreement of the parties for an out of court enforcement procedure (which is subject to certain specific requirements and is relatively new) or in certain cases a court order followed by a public sale of the collateral. In some cases, a court may delay such public sale for a period of up to one year upon a pledgor’s application. A mortgage is a pledge over real property, such as land and buildings, which requires state registration to be valid. Russian law has no system for perfecting collateral other than mortgages and pledges of shares, which may lead to unexpected or conflicting claims by secured creditors over such collateral. Each of these risks could adversely affect CEB’s financial position and results of operations. A substantial portion of CEB’s loans to its corporate and retail customers is guaranteed by individuals and other corporate customers. In addition, a substantial portion of CEB’s loans to corporate customers is assured by the borrower’s agreement that a certain volume of its cash receivables will flow through accounts over which CEB has direct debit rights. However, if the guarantor’s financial condition deteriorates or if the borrower does not honour an assurance arrangement, CEB may not be able to recover on guarantees or assurance arrangements which may lead to losses, materially adversely affecting its financial condition and results of operations.

Foreign court judgments and arbitral awards may not be enforceable Russia is not a party to multilateral or bilateral treaties with most Western jurisdictions for the mutual enforcement of court judgments. Consequently, it is highly unlikely that a successful plaintiff would be able to enforce a judgment of a court in any such jurisdiction in the Russian courts. However, Russia, as successor to the Union of Soviet Socialist Republics (the ‘‘USSR’’), is a party to the New York Convention,

19 and the Notes, the Subordinated Loan Agreement and other issue documents may contain a provision allowing for the arbitration of disputes. A Russian court should generally recognise and enforce a foreign arbitral award obtained in a state that is party to the New York Convention (subject to the qualifications provided for in the New York Convention and compliance with Russian law). The 2002 Arbitration Procedural Code of Russia generally conforms with the New York Convention. It has not introduced any substantial changes in the grounds for refusal of recognition of foreign arbitral awards and court judgments which may be issued in relation to the Subordinated Loan Agreement. However, in the event that Russian procedural legislation is further changed, it could introduce new grounds preventing the recognition and enforcement of foreign court judgments and arbitral awards in Russia. Procedures introduced by the Arbitration Procedural Code are still to be tested in the courts. In practice, reliance upon international treaties may meet with resistance or a lack of understanding on the part of a Russian court or other officials, thereby introducing delay and unpredictability into the process of enforcing any foreign judgment or any foreign arbitral award in Russia.

The Russian taxation system is relatively underdeveloped The Russian Government is constantly reforming the tax system by redrafting parts of the Tax Code of the Russian Federation (the ‘‘Russian Tax Code’’). These changes have resulted in some improvement in the tax climate. As of 1 January 2009 the corporate profits tax rate was reduced to 20 per cent. For individuals who are tax residents in Russia the current personal income tax rate is 13 per cent. The general rate of VAT is 18 per cent. Since 1 January 2010 the Unified Social Tax was replaced by social security charges to the Russian pension, social security and medical insurance funds. Since 1 January 2012 the total security charge generally equals 30 per cent. Since 1 January 2012 the new Russian transfer pricing legislation is in force. Russian tax laws, regulations and court practice are subject to frequent change, varying interpretations and inconsistent and selective enforcement. In accordance with the Constitution of the Russian Federation, laws that introduce new taxes or worsen a taxpayer’s position cannot be applied retroactively. Nonetheless, there have been several instances when such laws have been introduced and applied retroactively. Despite the Russian Government taking steps to reduce the overall tax burden in recent years in line with its objectives, there is a possibility that the Russian Federation would impose arbitrary or onerous taxes and penalties in the future, which could have a material adverse effect on CEB’s business, results of operations and financial condition. In addition to the usual tax burden imposed on Russian taxpayers, these conditions complicate tax planning and related business decisions. These uncertainties could possibly expose CEB to significant fines and penalties and potentially severe enforcement measures despite its best efforts at compliance, and could result in a greater than expected tax burden, and could have a material adverse effect on CEB’s business, results of operations and financial condition or prospects. Generally, taxpayers are subject to tax audits for a period of three calendar years immediately preceding the year in which the audit commences. This provision of the Tax Code relates to the fact that generally the tax authorities are prohibited from carrying out repeat on-site tax audits in respect of the same taxes for a tax period which has already been audited. The statute of limitations for the commission of a tax offence is also limited to three years from the date on which it was committed or from the date following the end of the tax period during which the tax offence was committed (depending on the nature of the tax offence). Nevertheless, based on current judicial interpretation, there may be cases where the tax offence statute of limitations may be extended beyond three years. Tax audits or inspections may result in additional costs to CEB, in particular if the relevant tax authorities conclude that CEB did not satisfy its tax obligations in any given year. Such audits or inspections may also impose additional burdens on CEB by diverting the attention of management resources. The outcome of these audits or inspections could have a material adverse effect on CEB’s business, results of operations, financial condition or the trading price of the Notes. In October 2006, the Plenum of the Supreme Arbitration Court of the Russian Federation issued a ruling concerning judicial practice with respect to unjustified tax benefits. In this context, a tax benefit means a reduction in the amount of a tax liability resulting, in particular, from a reduction of the tax base, the receipt of a tax deduction or tax concession or the application of a lower tax rate, and the receipt of a right to a refund (offset) or reimbursement of tax. The ruling provides that where the true economic intent of operations is inconsistent with the manner in which they have been taken into account for tax purposes a

20 tax benefit may be deemed to be unjustified. The same conclusion may apply when an operation lacks a reasonable economic or business rationale. As a result, a tax benefit cannot be regarded as a business objective in its own right. On the other hand, the fact that the same economic result might have been obtained with a lesser tax benefit accruing to the taxpayer does not constitute grounds for declaring a tax benefit to be unjustified. Moreover, there are no rules and little practice for distinguishing between lawful tax optimisation and tax avoidance or evasion. The tax authorities have actively sought to apply this concept when challenging tax positions taken by taxpayers in court, and are anticipated to expand this trend in the future. Although the intention of this ruling was to combat tax law abuses, in practice there can be no assurance that the tax authorities will not seek to apply this concept in a broader sense than may have been intended by the Supreme Arbitration Court. Recently the Government of the Russian Federation approved a new Model Treaty between the Russian Federation and foreign countries for the avoidance of double taxation and the prevention of tax evasion on income and property (hereinafter the ‘‘Russian Model Treaty’’). This Russian Model Treaty was adopted as the basis for negotiating new treaties with the competent authorities of foreign countries. The most substantial changes that have been introduced by the Russian Model Treaty are the following: (1) A competent authority may refuse to grant concessions established by a treaty, inter alia, if: (a) more than 50 per cent. of the equity interests in the foreign company belong, directly or indirectly, to parties that are not resident in the state in which the company operates (however, this provision does not apply if the owner of the equity interests engages in significant business activity in the country in which the foreign company is located, save where such business solely consists of the mere ownership of assets and/or the performance of auxiliary operations); or (b) if the receipt of a concession applicable to the payment of dividends, interest or royalties is one of the main reasons for seeking to apply the treaty; (2) The Russian government has effectively incorporated the right to apply the thin capitalisation rules in accordance with the requirements of Russian tax legislation to interest income payable abroad with respect to ‘‘controlled debt’’ (defined below). Under the thin capitalisation rules established by the Russian tax legislation ‘‘controlled debt’’ includes loans and other debts which are provided by any foreign corporate shareholder of CEB owning directly or indirectly more than a 20 per cent. share in CEB’s charter capital and, potentially, loans from affiliates of CEB’s foreign corporate shareholder (each 20 per cent. direct or indirect shareholder, or affiliate, hereafter a ‘‘Related Party’’) and, potentially, loans and other debts secured by such Related Parties. The above changes to the Russian Model Treaty evidence the Russian tax authorities’ desire to challenge the availability of the tax relief provided by double tax treaties and to insist on the application of the Russian thin capitalisation rules to interest payments. The above conditions create tax risks in Russia that are more significant than the tax risks typically found in countries with more developed taxation, legislative and judicial systems. These tax risks impose additional burdens and costs on CEB’s operations, including management resources. Further, these risks and uncertainties complicate CEB’s tax planning and related business decisions, potentially exposing CEB to significant fines, penalties and enforcement measures, and could materially adversely affect CEB’s business, results of operations and financial condition. Furthermore, Russian tax legislation is consistently becoming more sophisticated. It is possible that new revenue raising measures could be introduced. Although it is unclear how any new measures would operate, the introduction of such measures may affect CEB’s overall tax efficiency and may result in significant additional taxes becoming payable. We cannot offer prospective investors any assurance that additional tax exposures will not arise. Additional tax exposures could have a material adverse effect on CEB’s business, results of operations, financial condition or prospects.

21 New Russian transfer pricing rules may subject CEB’s transfer prices to challenge by the Russian tax authorities Since 1 January 2012 new transfer pricing legislation has been introduced to the Russian tax law. In summary, this transfer pricing legislation results in new transfer pricing rules, in particular: • the methods for monitoring the prices of controlled transactions have been expanded; and • the list of controlled transactions has been expanded to include: • cross-border transactions with certain types of commodities where the amount of income attributable to one counterparty exceeds RUB60 million; • Russian domestic transactions between related entities if the total annual turnover of such transactions exceeds RUB1 billion (RUB3 billion for 2012 and RUB2 billion for 2013); • transactions with residents of offshore jurisdictions included in the list established by the Russian Ministry of Finance where the amount of income attributable to one counterparty exceeds RUB60 million; and • transactions between Russian legal entities and related foreign legal entities. The amended transfer pricing law requires taxpayers to notify the Russian tax authorities as to all controlled transactions (for 2012 and 2013 the notification should be made in case the income attributable to one counterparty exceeds RUB100 million and RUB80 million, respectively). Taxpayers must also be required to present to the Russian tax authorities transfer pricing documentation upon their request. The amendments to the Russian transfer pricing law could have a material adverse effect on CEB’s business, results of operations and financial condition.

The legislative framework governing bankruptcy in the Russian Federation differs substantially from that of the United States and Western European countries Russian bankruptcy laws often differ from comparable laws in the United States and Western European countries and may be subject to varying interpretations. There is little precedent to predict how claims on behalf of the Noteholders or the Issuer against CEB would be resolved in the case of CEB’s bankruptcy. In addition, under Russian law, CEB’s obligations under the Subordinated Loan Agreement would be subordinated in the event of its insolvency to the following obligations: claims related to the administration of insolvency proceedings, including salaries of personnel involved in insolvency proceedings, utility bills, legal expenses and other payments; first priority claims (including claims in tort for damages in respect of physical persons’ life or health, as well as moral damages); claims of retail depositors and individuals holding current accounts (except for individual entrepreneurs); claims of the Deposit Insurance Agency in respect of deposits and current accounts transferred to it pursuant to the Deposit Insurance Law; claims under employment contracts and other social benefits and copyright claims; and claims secured by a pledge of the credit organisation’s assets. Any residual claims of secured creditors that remain unsatisfied after the sale of such collateral rank pari passu with claims of unsecured creditors. In the event of CEB’s insolvency, the subordination of obligations under the Subordinated Loan Agreement, as described above, may substantially decrease the amounts, if any, available for repayment of any Loan and, as a result, the Notes. In addition, under Russian law, CEB’s obligations under the Subordinated Loan Agreement, and as a result, the Notes would be subordinated to the claims of its unsubordinated creditors. See ‘‘—Risks Relating to the Issuer, the Loans, the Notes and the Trading Market— Noteholders’ claims in respect of a Subordinated Loan may be subordinated to those of other creditors under Russian insolvency law’’. See also ‘‘The Banking Sector and Banking Regulation in Russia—Russian Banking System—Regulation of Insolvency’’.

The Russian currency control regime could have an adverse effect on CEB’s business Notwithstanding significant recent liberalisation of the Russian currency control regime, the current Russian currency control laws and regulations still impose a number of limitations on currency operations, including banking transactions. In particular, foreign currency operations between Russian residents are generally prohibited (except for certain specified in Federal Law No. 173-FZ ‘‘On Currency Regulation and Currency Control’’ dated 10 December 2003, as amended (the ‘‘Currency Law’’) operations, including transactions between Russian authorised banks listed in the CBR Regulation No. 1425-U of 28 April, 2004). Moreover, certain limitations not applicable to CEB apply to CEB’s clients, such as the requirement to notify the Russian tax authorities regarding opening of a bank account abroad. These currency control

22 restrictions may restrict CEB’s and its clients’ operational flexibility, which could have a material adverse effect on CEB’s business, financial condition, results of operations or prospects. In addition, because of the limited development of the foreign currency market in Russia, CEB may experience difficulty converting Roubles into other currencies. Any delay or other difficulty in converting Roubles into a foreign currency to make a payment or any practical difficulty in the transfer of foreign currency could limit CEB’s ability to meet its payment and debt obligations, which could result in the acceleration of debt obligations and cross defaults.

CEB’s measures to prevent money laundering and/or terrorist financing may not be completely effective During the last five years, the CBR has excluded several banks from the deposit insurance system based on suspicions of money laundering and revoked a number of banking licences for violations of reporting requirements under Federal Law No. 115-FZ ‘‘On Combating of the Legalisation of Illegal Earnings (Money Laundering) and Terrorism Financing’’ dated 7 August 2001 (as amended) (the ‘‘Money Laundering Law’’). Notwithstanding the current anti-money laundering regulations, the risk remains, however, that Russian financial institutions could be used as vehicles for money laundering. CEB has implemented comprehensive internal measures to prevent it from being used as a conduit for money laundering or terrorist financing. CEB also complies with applicable anti-money laundering and anti-terrorist financing laws and regulations. CEB’s anti-money laundering measures are based on relevant Russian legislation. CEB has procedures and documents aimed at preventing money laundering and financing of terrorist activities, including a general anti-money laundering policy, internal control procedures that include a refusal policy whereby CEB refuses to conduct business with suspicious entities or individuals and rules on counteracting money laundering and financing of individuals and legal entities engaged in terrorist activities, as well as procedures for reporting to the Federal Service for Financial Monitoring. See ‘‘Risk Management—The Banking Sector and Banking Regulation in Russian—Russian Banking System—Regulation of Anti-Money Laundering and Terrorist Financing’’. CEB has not been subject to any investigation with respect to its involvement in money laundering or terrorist financing. However, there can be no assurance that third parties will not attempt to use CEB as a conduit for money laundering or terrorist financing without CEB’s knowledge, nor that the measures described above will be completely effective. If CEB is associated with money laundering or terrorist financing, its reputation could suffer, materially adversely affecting its business, financial condition, results of operations or prospects.

Corporate governance standards in Russia are less developed than in the United States or Western Europe CEB’s corporate affairs are governed by its charter, its internal regulations, by laws governing Russian banks and by laws governing companies incorporated in Russia. See ‘‘The Banking Sector and Banking Regulation in Russia’’. Standards of corporate governance are less developed in Russia than in the United Kingdom, United States and Western Europe. In particular anti-fraud safeguards, insider trading restrictions and fiduciary duties are relatively new concepts in Russia and are unfamiliar to many Russian companies and managers. Furthermore, the rights of shareholders and the responsibilities of members of the board of directors and management board under Russian law are different from, and may be subject to certain requirements not generally applicable to, companies organised in the United Kingdom, United States or Western Europe. See ‘‘Management’’. The Banking Law contains certain periodic disclosure requirements, including the requirement to publish annual financial statements in accordance with Russian Accounting Standards (‘‘RAS’’). Because CEB’s systems and processes are tailored for Russian statutory requirements, it takes CEB longer than most Western companies to prepare its IFRS consolidated annual and interim financial reports and its IFRS consolidated periodic internal accounts. In accordance with the Banking Law, the CBR regulations, the regulations of the Ministry of Finance and the FSFM, CEB must issue various reports on a daily, monthly, quarterly and annual basis and publish and file such reports with the CBR. In addition, CEB files reports with the FSFM on a monthly, quarterly and annual basis. Quarterly reports, which are prepared in accordance with RAS, include certain financial information, including CEB’s balance sheet, profit and loss account, information on capital adequacy, allowances for problem loans and other assets, but do not contain all of the information contained in CEB’s IFRS financial statements. Material differences exist between financial information prepared under RAS and IFRS. Therefore, prospective investors are cautioned not to place undue reliance on such

23 information when evaluating the financial performance of CEB. However, CEB also issues IFRS interim consolidated condensed financial statements for the six month period, which are reviewed by independent auditors, and IFRS consolidated financial statements for the full year, which are audited by independent auditors. Despite recent initiatives to improve corporate transparency in Russia and recent amendments to modify CEB’s corporate documents, there is still relatively less publicly available information about CEB than there is available for comparable banks in, for example, the United Kingdom, the United States or Western Europe. The relatively less transparent nature of corporate governance in Russia as well as violations of disclosure and reporting requirements or breaches of fiduciary duties could have a material adverse effect on CEB’s business, prospects, financial condition and results of operations and/or on the value of the Notes.

Risks Relating to the Issuer, the Loan, the Notes and the Trading Market The Issuer is an SPV and payments under the corresponding Series of Notes are limited to the amount of certain payments received under the Subordinated Loan Agreement The Issuer is an SPV with no business other than issuing notes and advancing loans under the Subordinated Loan Agreement and has no assets other than such loans. The Issuer is only obliged to make payments under a Series of Notes to the Noteholders in an amount equal to, and in the same currency as, sums of principal, interest and additional amounts (if any) actually received and retained (net of tax) by or for the account of the Issuer from CEB pursuant to the Subordinated Loan Agreement. Consequently, if CEB fails to meet its payment obligations under the Subordinated Loan Agreement in full, this will result in the Noteholders of a Series of Notes receiving less than the scheduled amount of principal, interest and additional amounts (if any) on the relevant due date. CEB’s ability to make scheduled payments on the Notes and to meet its other debt service obligations depends on the future operating and financial performance of CEB and its ability to generate cash. This will be affected by CEB’s ability to implement successfully its business strategy, as well as general economic, financial, competitive, regulatory and other factors beyond its control. If CEB cannot generate sufficient cash to meet its debt service obligations CEB may, among other things, need to refinance all or a portion of its debts, including the Notes, obtain additional financing, delay capital expenditures or sell assets. CEB cannot be certain that it will be able to generate sufficient cash through any of the foregoing. If CEB is not able to refinance its debt, obtain additional financing or sell assets on commercially favourable terms or at all, CEB may not be able to satisfy its obligations with respect to its debt, including the Notes.

The Issuer is incorporated under Luxembourg law and is thus subject to Luxembourg insolvency laws which could affect the Noteholders’ ability to enforce against the Issuer in the event of its insolvency The Issuer is a public limited liability company (soci´et´e anonyme) incorporated under Luxembourg law. The rights of Noteholders and the responsibilities of the Issuer to the Noteholders under Luxembourg law may be materially different from those with regard to equivalent instruments under the laws of the jurisdiction in which the Notes are offered. Insolvency proceedings may be brought against the Issuer and such proceedings may proceed under, and be governed by, Luxembourg insolvency law as further described below. The Issuer is incorporated and has its centre of main interests in Luxembourg. Accordingly, insolvency proceedings with respect to the Issuer may proceed under, and be governed by, Luxembourg insolvency law. The insolvency laws of Luxembourg may not be as favourable to investors’ interests as those of a jurisdiction with which investors may be familiar. The following is a brief description of certain aspects of insolvency law in Luxembourg. Under Luxembourg insolvency laws, the following types of proceedings (together referred to as ‘‘insolvency proceedings’’) may be opened against the Issuer to the extent it has its registered office or centre of main interest in Luxembourg: • bankruptcy proceedings (faillite), the opening of which may be requested by the Issuer or by any of its creditors. Following such a request, the courts having jurisdiction may open bankruptcy proceedings, if the Issuer (a) is in default of payment (cessation des paiements) and (b) has lost its commercial creditworthiness (´ebranlement de cr´edit). If a court finds that these conditions are satisfied, it may also open bankruptcy proceedings, absent a request made by the Issuer or a creditor. The main effect of

24 such proceedings is the suspension of all measures of enforcement against the Issuer, except, subject to certain limited exceptions, for secured creditors and the payment of creditors in accordance with their rank upon the realisation of assets; • controlled management proceedings (gestion controlˆ ´ee), the opening of which may only be requested by the Issuer and not by its creditors; and • composition proceedings (concordat pr´eventif de faillite), which may be requested only by the Issuer (having received prior consent of a majority of its creditors) and not by its creditors. The court’s decision to admit a company to the composition proceedings triggers a provisional stay on enforcement of claims by creditors. In addition to these proceedings, the ability of the holders of Notes to receive payment on the Notes may be affected by a decision of a court to grant a reprieve from payments (sursis de paiements) or to put the Issuer into judicial liquidation (liquidation judiciaire). Judicial liquidation proceedings may be opened at the request of the public prosecutor against companies pursuing an activity violating criminal laws or that are in serious violation of the commercial code or of the Luxembourg act dated 10 August 1915 on commercial companies, as amended. The management of such liquidation proceedings will generally follow similar rules as those applicable to bankruptcy proceedings. The Issuer’s liabilities in respect of the Notes will, in the event of a liquidation of the Issuer following bankruptcy or judicial liquidation proceedings, rank after the cost of liquidation (including any debt incurred for the purpose of such liquidation) and those of the Issuer’s debts that are entitled to priority under Luxembourg law. Preferential debts under Luxembourg law for instance include, among others: • certain amounts owed to the Luxembourg Revenue; • value-added tax and other taxes and duties owed to the Luxembourg Customs and Excise; • social security contributions; and • remuneration owed to employees. Assets over which a security interest has been granted will in principle not be available for distribution to unsecured creditors (except after enforcement and to the extent a surplus is realised). During insolvency proceedings, all enforcement measures by unsecured creditors are suspended. The ability of secured creditors to enforce their security interest may also be limited in the event of controlled management proceedings automatically causing the rights of secured creditors to be frozen until a final decision has been taken by the court as to the petition for controlled management, and may be affected thereafter by a reorganisation order given by the court. A reorganisation order requires the prior approval by more than 50 per cent. of the creditors representing more than 50 per cent. of the Issuer’s liabilities in order to take effect. Luxembourg insolvency law may also affect transactions entered into or payments made by the Issuer during the period before bankruptcy, the so-called suspect period (p´eriode suspecte) which is a maximum of six months preceding the judgment declaring bankruptcy, except that in certain specific situations the court may set the start of the suspect period at an earlier date, if the bankruptcy judgment was preceded by another insolvency bankruptcy judgment under Luxembourg law, the court may set the maximum up to six months prior to the filing for such controlled management. In particular: • pursuant to article 445 of the Luxembourg code of commerce, specified transactions (such as, in particular, the granting of a security interest for antecedent debts; the payment of debts which have not fallen due, whether payment is made in cash or by way of assignment, sale, set-off or by any other means; the payment of debts which have fallen due by any means other than in cash or by bill of exchange; the sale of assets without consideration or with substantially inadequate consideration) entered into during the suspect period (or the ten days preceding it) must be set aside or declared null and void, if so requested by the insolvency receiver; • pursuant to article 446 of the Luxembourg code of commerce payments made for matured debts as well as other transactions concluded for consideration during the suspect period are subject to cancellation by the court upon proceedings instituted by the insolvency receiver if they were concluded with the knowledge of the bankrupt’s cessation of payments; • pursuant to article 21 (2) of the Luxembourg act dated 5 August 2005 concerning financial collateral arrangements, as amended, notwithstanding the suspect period as referred to in articles 445 and 446

25 of the Luxembourg code of commerce, where a financial collateral arrangement has been entered into after the opening of liquidation proceedings or the coming into force of reorganisation measures or the entry into force of such measures, this agreement is valid and binding against third parties, administrators, insolvency receivers, liquidators and other similar organs if the collateral taker proves that it ignored the fact that such proceedings had been opened or that such measures had been taken or that it could not reasonably be aware of it; and • in case of bankruptcy, article 448 of the Luxembourg code of commerce and article 1167 of the civil code (action paulienne) gives the insolvency receiver (acting on behalf of the creditors) the right to challenge any fraudulent payments and transactions, including the granting of security with an intent to defraud, made prior to the bankruptcy, without any time limit. In principle, a bankruptcy order rendered by a Luxembourg court does not result in automatic termination of contracts except for intuitu personae contracts, that is, contracts for which the identity of the company or its solvency were crucial. The contracts, therefore, subsist after the bankruptcy order. However, the insolvency receiver may choose to terminate certain contracts. However, as of the date of adjudication of bankruptcy, no interest on any unsecured claim will accrue vis-a-vis` the bankruptcy estate. The bankruptcy order provides for a period of time during which creditors must file their claims with the clerk’s office of the Luxembourg district court sitting in commercial matters. After having converted all available assets of the company into cash and after having determined all the company’s liabilities, the insolvency receiver will distribute the proceeds of the sale, on a pro rata basis, to the creditors after deduction of the receiver fees and the bankruptcy administration costs. Insolvency proceedings may hence have a material adverse effect on the Issuer’s business and its obligations under the Notes.

There is no direct recourse by the Noteholders to CEB Except as otherwise expressly provided in the ‘‘Terms and Conditions of the Notes’’ and in the Trust Deed, the Noteholders will not have any proprietary or other direct interest in the Issuer’s rights under or in respect of the Subordinated Loan Agreement. Subject to the terms of the Trust Deed, no Noteholder will have any entitlement to enforce any of the provisions of the Subordinated Loan Agreement or have direct recourse to CEB except through action by the Trustee under the Charge (as defined in the ‘‘Terms and Conditions of the Notes’’) or any assignment of rights, including any rights under a Subordinated Loan Assignment. In addition, Noteholders should be aware that neither the Issuer nor the Trustee accepts any responsibility for the performance by CEB of its obligations under the Subordinated Loan Agreement. See ‘‘Terms and Conditions of the Notes—Enforcement’’.

The Notes may not be a suitable investment for all investors Each potential investor in the Notes must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should: (i) have sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits and risks of investing in the Notes and the information contained or incorporated by reference in this Prospectus or any applicable supplement; (ii) have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Notes and the impact the Notes will have on its overall investment portfolio; (iii) have sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes, including Notes with principal or interest payable in one or more currencies, or where the currency for principal or interest payments is different from the potential investor’s currency; (iv) understand thoroughly the terms of the Notes and be familiar with the behaviour of any relevant indices and financial markets; and (v) be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks. Some Notes are complex financial instruments. Sophisticated institutional investors generally do not purchase complex financial instruments as stand-alone investments. They purchase complex financial

26 instruments as a way to reduce risk or enhance yield with an understood, measured, appropriate addition of risk to their overall portfolios. A potential investor should not invest in Notes which are complex instruments unless it has the expertise (either alone or with a financial adviser) to evaluate how the Notes will perform under changing conditions, the resulting effects on the value of the Notes and the impact this investment will have on the potential investor’s overall investment portfolio.

Credit ratings may not reflect all risks CEB’s credit ratings are an assessment by the relevant rating agencies of its ability to pay its debts when due. Consequently, real or anticipated changes in its credit ratings will generally affect the market value of the Notes. One or more independent credit rating agencies may assign credit ratings to the Notes. The ratings may not reflect the potential impact of all risks related to structure, market, additional factors discussed in this Prospectus, and other factors that may affect the value of the Notes. A credit rating is not a recommendation to buy, sell or hold securities and may be revised or withdrawn by the rating agency at any time.

Upon the occurrence of certain events described in the Subordinated Loan Agreement, CEB may prepay the Subordinated Loan Under the terms of the Subordinated Loan Agreement, CEB may, subject to certain conditions, prepay the Subordinated Loan if, among others, CEB is required to increase its payments for tax reasons regardless of whether the increased payment obligation results from any change in the applicable tax laws or treaties or from the change in application of existing tax laws or treaties or from enforcement of the security provided for in connection with the Notes. In case of any prepayment, all outstanding Notes would be redeemable at par with accrued interest or as otherwise specified in the Subordinated Loan Agreement.

There is no existing market for the Notes and even if a market develops, the market price of the Notes may be volatile There may not be an existing market for the Notes at the time they are issued. Further there can be no guarantee that the Notes will be listed or traded on any exchange. Further, if the Notes are listed or traded on an exchange, there can be no assurance that a liquid market will develop for the Notes, that the holders of the Notes will be able to sell their Notes for a price that reflects their value or at all. Even if a market for the Notes develops, the market price of the Notes could be subject to significant fluctuations in response to actual or anticipated variations in the operating results of CEB’s competitors, adverse business developments, changes to the regulatory environment in which CEB operates, changes in financial estimates by securities analysts, the actual or anticipated sale of a large number of Notes and other factors, including those set forth in ‘‘Risk Factors’’.

Payments on the Subordinated Loan may be subject to Russian withholding tax In general, interest payments on borrowed funds made by a Russian legal entity to a non-resident legal entity or organisation are subject to Russian withholding tax at a rate of 20 per cent. for legal entities and 30 per cent. for non-resident individuals, unless such withholding is reduced or eliminated pursuant to the terms of an applicable double tax treaty. Based on professional advice received, CEB believes that interest payments on the Subordinated Loan made to the Issuer should not be subject to withholding tax under the terms of the applicable Convention between Luxembourg and the Russian Federation for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and on Capital signed on June 28, 1993 (the ‘‘Convention’’). The new protocol to the Convention was signed in 2011. The protocol introduces certain changes to the provisions of the Convention. Such changes include inter alia a limitation of benefits of a resident of one contracting state if the main purpose or one of the main purposes of the establishment and existence of such resident was receipt of treaty benefits; further exchange of information procedures are extended. Once the protocol is ratified and becomes effective, it may have an impact on future payments under the Subordinated Loan Agreement. The application of tax benefits under the double tax treaty could be influenced by changes in the position of the Russian tax authorities to look beyond the mere form of the transaction while assessing the availability of treaty benefits. A recent letter of the Ministry of Finance of the Russian Federation No. 03-08-13/1, dated December 30, 2011 expressed the view that the noteholders were the beneficial owners of interest payable by a Russian

27 bank on the proceeds of a Eurobond offering that were placed as a deposit with the Russian bank by the issuer of the notes (the issuer was a special purpose vehicle established by the Russian bank). Although that letter refers to a deal structure which is not the same as the transaction structure described in the Base Prospectus, and refers to an issuer domiciled in a jurisdiction which is different from the jurisdiction of the Issuer, CEB cannot exclude the risk that the conclusions in the letter could potentially be applied by the Russian tax authorities to the payments of interest in respect of the Subordinated Loan. CEB is aware of at least one recent instance where the Russian tax authorities with respect to a transaction similar to the one described in the Base Prospectus argued that the noteholders rather than the issuer should be regarded as the actual recipients of the interest income. The issuer in that particular transaction was located in a jurisdiction which is different from the Issuer’s jurisdiction. This instance is currently being discussed, but, to the best of CEB’s knowledge, has not been brought to court. If, in the instance above, the issue is brought before a Russian court and the court decides in favour of the Russian tax authorities, such decision could result in impairing the Issuer’s and CEB’s position to benefit from the withholding tax exemption provided by the respective double tax treaty. The amendments to the Russian Tax Code should nevertheless allow the interest on the Subordinated Loan not to be subject to withholding. In particular, these amendments introduce into the Russian Tax Code an exemption from the obligation to withhold tax from interest paid under transactions similar to the transactions described herein. The amendments to the Russian Tax Code have recently been approved by the Russian State Duma, the Russian Council of the Federation and the President of the Russian Federation and have entered into force starting from 1 July 2012. According to these amendments, in respect of bonds issued prior to 1 January 2014, Russian borrowers are exempted from the obligation to withhold Russian withholding tax from interest payments made to foreign companies on debt obligations arising in connection with placement by these foreign companies of quoted bonds, provided that (1) there is a double tax treaty between the Russian Federation and the jurisdiction of tax residence of the issuer, and (2) the issuer duly confirms its tax residence. Federal Law #97-FZ of 29 June 2012 introducing the above amendments (hereinafter—‘‘Law #97-FZ’’) does not provide tax exemption for the holders of Eurobonds from Russian tax on interest payments, although at present there is no mechanism or requirement for non-residents to self-assess and pay the tax. For the purpose of the above amendments to the Russian Tax Code introduced by Law #97-FZ ‘‘quoted bonds’’ mean bonds and other debt obligations which passed the listing procedure and/or were accepted to listing on one or more foreign stock exchanges sand/or rights to which are recorded by a foreign depositary-clearing organisation, provided such foreign stock exchanges and depositary-clearing organisations are specified in the list approved by the FSFM in consultation with the Ministry of Finance of the Russian Federation. Until such list is adopted, bonds and other debt obligations which passed the listing procedure and/or were accepted to listing on one or more foreign stock exchanges and/or rights to which are recorded by any foreign depositary-clearing organisation should be recognised as ‘‘quoted bonds’’. From publicly available information, this list has not been drafted yet. The amendments to the Russian Tax Code introduced by Law #97-FZ should apply retrospectively to interest payments made after 1 January 2007, which, given the general three year limitation for tax audits, should mean that tax agents in the above situation should not be challenged for not having withheld tax in prior periods. According to the amendments to the Russian Tax Code introduced by Law #97-FZ the above exemption established for the interest payments is also applicable to (i) income payable by a Russian legal entity in connection with a guarantee, surety or other security granted by such Russian organisation with respect to a debt obligation to a foreign organisation and/or with respect to quoted bonds and (ii) to other income payable by a Russian organisation providing payment of such income is established by the provisions of the respective debt obligation or such income is paid due to a change in the terms and conditions of the respective quoted bonds and/or debt obligations including the cases of their early repurchase or redemption. The above amendments to the Tax Code introduced by Law #97-FZ address Russian withholding tax treatment of interest payments or other above payments to be made to foreign companies on debt obligations arising in connection with the issuance by these foreign companies of bonds before 1 January 2014. These amendments do not address Russian tax treatment of such payments on or after 1 January 2014.

28 If any payments under the Subordinated Loan are subject to any Russian (or Luxembourg) withholding tax, CEB will be obliged to increase the amounts payable as may be necessary to ensure that the recipient receives a net amount equal to the amount it would have received in the absence of such withholding taxes. In addition, payments in respect of the Notes will, except in certain limited circumstances, be made without deduction or withholding for or on account of Luxembourg taxes except as required by law. Payments in respect of the Notes should only be subject to deduction or withholding for or on account of Luxembourg taxes as described in ‘‘Taxation—Luxembourg Taxation’’. In the event of such a deduction or withholding, the Issuer will only be required to increase payments to the extent that it receives corresponding amounts from CEB under the Subordinated Loan Agreement. While the Subordinated Loan Agreement provides for CEB to pay such corresponding amounts in these circumstances, there are some doubts as to whether a tax gross up clause such as that contained in the Subordinated Loan Agreement is enforceable under Russian law. Due to the limited recourse nature of the Notes, if CEB fails to pay any such gross-up amounts, the amount payable by the Issuer under the Notes will be correspondingly reduced. Any failure by CEB to increase such payments would constitute an Event of Default under the Subordinated Loan Agreement. In certain circumstances (including following enforcement of the security upon the occurrence of a Relevant Event as defined in the Trust Deed), in the event that CEB is obliged to increase the amounts payable, it may prepay the principal amount of the Subordinated Loan together with accrued interest and/or additional amounts payable (if any) thereon, and all outstanding Notes would be redeemed by the Issuer (to the extent that it has actually received the relevant funds from CEB). The Issuer will grant security over certain of its rights in the Subordinated Loan Agreement to the Trustee in respect of its obligations under the Notes. The security under the Trust Deed will become enforceable upon the occurrence of a Relevant Event, as defined in the Subordinated Loan Agreement and the Trust Deed. In these circumstances, payments under the Subordinated Loan Agreement (other than in respect of Reserved Rights) would be required to be made to, or to the order of, the Trustee. Under Russian tax law, payments of interest and other payments made by CEB to the Trustee will in general be subject to Russian income tax withholding at a rate of 20 per cent. (or, potentially, 30 per cent. in respect of non-resident individual Noteholders). It is not expected that the Trustee will, or will be able to, claim a withholding tax exemption under any double tax treaty. In addition, while it may be possible for some Noteholders who may be eligible for an exemption from Russian withholding tax under double tax treaties to claim a refund of tax withheld, there would be considerable practical difficulties in obtaining any such refund. There is a risk that under the Russian thin capitalisation rules in certain circumstances where parties related to CEB (i.e. the Related Parties as defined above) hold Notes part or all of the interest to be paid by CEB under the Subordinated Loan could be reclassified as dividends for Russian tax purposes. This would occur if the overall amount of the ‘‘controlled debt’’ of CEB, calculated on an individual related party basis, exceeded the capital of CEB, calculated in accordance with the requirements of the Russian Tax Code, by more than 12.5 times. Interest in the amount of such excess would be reclassified as dividends for Russian tax purposes. Under the Russian Tax Code, there is a risk that the ‘‘controlled debt’’ of CEB may include all or part of the Subordinated Loan, to the extent that any Related Parties acquire any portion of the Notes. Such reclassification of all or a portion of the interest under the Subordinated Loan as dividends could potentially lead to the imposition of Russian withholding tax on such reclassified interest at the rate of 15 per cent., subject to possible tax relief under the double tax treaty between the Russian Federation and Luxembourg, and the non-deductibility of such interest for Russian profits tax purposes by CEB. Also, such withholding on dividends would trigger the gross-up obligation of CEB discussed above. Based on the assumption that the amount of CEB’s ‘‘controlled debt’’ calculated in accordance with the requirements of Article 269 of the Russian Tax Code will not exceed by more than 12.5 times the amount of ‘‘own capital’’ (‘‘собственный30OCT201219212648 капитал’’) of CEB calculated on an individual Related Party basis, the Russian thin capitalisation rules should not apply currently to the interest on the Subordinated Loan. However, changes in these assumptions could result in all or a portion of such interest being subject to the thin capitalisation rules in the future so as to treat ‘‘excess interest’’ related to the Subordinated Loan as a dividend under the double tax treaty between the Russian Federation and Luxembourg subject to 15 per cent. withholding tax applicable to dividends (subject to possible Luxembourg or other DTT relief, if any) rather than zero withholding tax applicable to interest. Such withholding on dividends would trigger the gross-up obligation of CEB discussed above.

29 As indicated above, it is currently unclear whether the provisions obliging CEB to gross-up payments will be enforceable in the Russian Federation. If, in the case of litigation in the Russian Federation, a Russian court does not rule in favour of the Issuer or the Trustee and Noteholders, there is a risk that the tax gross-up for withholding tax will not take place and that payments made by CEB under the Subordinated Loan Agreement will be reduced by Russian income tax withheld by CEB at a rate of 20 per cent. (or potentially, 30 per cent. in respect of individual Noteholders). See ‘‘Taxation—Russian Taxation’’.

Issuer’s payments under the Notes may be subject to withholding tax Payments in respect of the Notes will be made, except in certain limited circumstances, without a deduction or withholding for or on account of Luxembourg taxes. However, interest on the Notes paid for the benefit of individuals resident in European Union member states (and certain EU dependent or associated territories) and certain non-European Union countries or to certain residual entities may become subject to withholding tax (pursuant to the European Council Directive 2003/48/EC on the taxation of savings income (the ‘‘Savings Directive’’)). For further information on the Savings Directive and the applicability of withholding tax to interest payments, see ‘‘Taxation—Luxembourg Taxation’’. If any payments in respect of the Notes become subject to deduction or withholding for or on account of Luxembourg taxes (other than pursuant to the Savings Directive), CEB will, subject to certain limitations, be obliged under the terms of the Subordinated Loan Agreement to increase interest payments (pay additional amounts) as may be necessary so that the net payments received by the Noteholders will not be less than the amounts they would have received in the absence of such withholding. For further information regarding the circumstances in which the payment of such additional amounts will be required and the limitations thereon, see ‘‘Terms and Conditions of the Notes—Taxation’’.

Tax might be withheld on disposals of the Notes in the Russian Federation, reducing their value If a non-resident Noteholder that is a legal entity or organisation, which in each case is not organised under Russian law and which holds and disposes of the Notes otherwise than through a permanent establishment in Russia, sells the Notes and receives proceeds from a source within the Russian Federation, there is a risk that any part of the payment that represents accrued interest may be subject to a 20 per cent. Russian withholding tax (even if a disposal is performed at a loss). The foreign Noteholder may be entitled to a reduction of such Russian withholding tax under an applicable double tax treaty. Where proceeds from a disposal of the Notes are received from a source within the Russian Federation by a non-resident Noteholder that is an individual, there is a risk that Russian withholding tax would be charged at a rate of 30 per cent. on gross proceeds from such disposal of the Notes less any available cost deduction. There is no assurance that advance double tax treaty relief would be granted to an individual and obtaining a refund can involve considerable practical difficulties. The imposition or risk of imposition of this withholding tax could adversely affect the value of the Notes. See ‘‘Taxation—Russian Taxation’’.

Noteholders’ claims in respect of a Subordinated Loan may be subordinated to those of other creditors under Russian insolvency law CEB’s obligations in respect of the payment of principal and interest under the Subordinated Loan are subordinated in right of payment to the claims of its unsubordinated creditors. As a result, in case of the insolvency, liquidation, dissolution, winding up or analogous events of CEB, CEB’s assets will be available to satisfy obligations in respect of the Subordinated Loan only after the claims of all unsubordinated creditors have been satisfied in full. See ‘‘The Banking Sector and Banking Regulation in Russia—Russian Banking Regulations—Regulation of Insolvency’’. Such remaining assets may not be sufficient to satisfy CEB’s obligations under the Subordinated Loan Agreement. The Subordinated Loan Agreement may not prohibit or limit the incurrence by CEB of unsubordinated indebtedness, other subordinated indebtedness that ranks equally with the indebtedness under Subordinated Loans or other liabilities by CEB. Incurrence of such additional indebtedness or other liabilities could adversely affect CEB’s ability to make payments under the Subordinated Loan. As at 30 June 2012, CEB had RUB14,033 of long-term debt (which included domestic bonds issued and borrowings under loan agreements funded by issuances of loan participation notes gross of accrued interest with remaining contractual maturity of over one year). CEB anticipates that, from time to time, it will incur additional indebtedness, including unsubordinated indebtedness. In addition, in order for the Subordinated Loan to be eligible for inclusion as Tier 2 Capital under the CBR regulations, the terms of each Subordinated Loan Agreement must provide for prior CBR approval

30 of any early payment thereof. Moreover, following the occurrence of certain acceleration events (which will be defined in the Subordinated Loan Agreement), amounts payable under the Subordinated Loan Agreement may be declared immediately due and payable. However, such actions may not result in the payment of principal, accrued interest and additional amounts, if any, due under the Subordinated Loan Agreement being paid in full, as such payments may be made only after all unsubordinated obligations are satisfied in full.

The terms of the Subordinated Loan may not constrain CEB’s subsidiaries from entering into agreements restricting their ability to make upstream payments to CEB CEB’s cash flow and ability to service its debt depend partially upon receipt of upstream payments from its subsidiaries in the form of dividends, repayment of intercompany loans or otherwise. The terms of the Loans may not constrain CEB’s subsidiaries from entering into agreements restricting their ability to make such upstream payments to CEB. If, in the future, any of CEB’s subsidiaries were to enter into an agreement restricting its ability to make such upstream payments to CEB, CEB might not be able to generate sufficient cash flow to maintain its operations or to service its debt, materially adversely affecting its business and financial condition.

31 FORWARD-LOOKING STATEMENTS Some statements in this Prospectus as well as written and oral statements of Credit Europe Bank or its representatives made from time to time in reports, filings, news releases, conferences, teleconferences, web postings or otherwise, may be deemed to be ‘‘forward-looking statements’’. Forward-looking statements include statements concerning Credit Europe Bank’s plans, objectives, goals, strategies and future operations and performance and the assumptions underlying these forward-looking statements. Credit Europe Bank uses the words ‘‘anticipates’’, ‘‘estimates’’, ‘‘expects’’, ‘‘believes’’, ‘‘intends’’, ‘‘plans’’, ‘‘may’’, ‘‘will’’, ‘‘should’’ and any similar expressions to identify forward-looking statements. These forward-looking statements are contained in ‘‘Risk Factors’’, ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations of Credit Europe Bank’’, ‘‘Description of Credit Europe Bank’’ and other sections of this Prospectus. Credit Europe Bank has based these forward-looking statements on the current view of its management with respect to future events and financial performance. These views reflect the best judgement of Credit Europe Bank’s management but involve uncertainties and are subject to certain risks the occurrence of which could cause actual results to differ materially from those predicted in Credit Europe Bank’s forward-looking statements and from past results, performance or achievements. Although Credit Europe Bank believes that the estimates and the projections reflected in its forward-looking statements are reasonable, if one or more of the risks or uncertainties materialise or occur, including those which Credit Europe Bank has identified in this Prospectus, or if any of Credit Europe Bank’s underlying assumptions prove to be incomplete or incorrect, Credit Europe Bank’s actual results of operations may vary from those expected, estimated or projected. Credit Europe Bank is not obliged to, and does not intend to, update or revise any forward-looking statements made in this Prospectus whether as a result of new information, future events or otherwise. All subsequent written or oral forward-looking statements attributable to Credit Europe Bank, or persons acting on Credit Europe Bank’s behalf, are expressly qualified in their entirety by the cautionary statements contained throughout this Prospectus. As a result of these risks, uncertainties and assumptions, a prospective purchaser of the Notes should not place undue reliance on these forward-looking statements.

32 ENFORCEABILITY OF JUDGMENTS Credit Europe Bank is a company organised under the laws of the Russian Federation. None of the members of the Board of Directors and executive officers of Credit Europe Bank is a resident of England. Moreover, all or a substantial portion of the assets of the Issuer, Credit Europe Bank and such persons are located outside England. As a result, it may not be possible for the Trustee, acting on behalf of the Noteholders, to • effect service of process within England upon Credit Europe Bank or any of the directors or executive officers of Credit Europe Bank named in this Prospectus, notwithstanding that under the Subordinated Loan Agreement, Credit Europe Bank has appointed an agent for service of process in England; • enforce, in the English courts, judgments obtained outside English courts against Credit Europe Bank or any of its respective directors and executive officers named in this Prospectus; or • enforce against Credit Europe Bank or any of its respective officers named in this Prospectus judgments obtained in English courts. In addition, it may be difficult for the holders of Notes to enforce, in original actions brought in courts in jurisdictions located outside the United Kingdom, liabilities predicated upon English law. Judgments rendered by a court in any jurisdiction outside the Russian Federation are likely to be recognised by courts in the Russian Federation only (1) if an international treaty providing for the recognition and enforcement of judgments in civil cases exists between the Russian Federation and the country where the judgment is rendered, and (2) a federal law of the Russian Federation provides for the recognition and enforcement of foreign court judgments. No such federal law has been passed and no such treaty exists between the United Kingdom and the Russian Federation for the reciprocal enforcement of foreign court judgments. Even if there were such a treaty, Russian courts could nonetheless refuse to recognise or enforce a foreign court judgment on the grounds set forth in such treaty and in Russian law in effect on the date on which such recognition or enforcement is sought. Moreover, Russia has adopted no such law. The Subordinated Loan Agreement and any non-contractual obligations arising out of or in connection with it will be governed by English law and will provide for proceedings, disputes, controversies and causes of action (‘‘Proceedings’’) brought by any party thereto to be settled by arbitration in accordance with the LCIA Arbitration Rules (the ‘‘Rules’’). Russia is a party to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the ‘‘New York Convention’’). However, in the case of Credit Europe Bank it may be difficult to enforce arbitral awards in Russia due to: • the inexperience of the Russian courts in international commercial transactions; • official and unofficial political resistance to the enforcement of awards against Russian companies in favour of foreign investors; and • the inability of Russian courts to enforce such awards. Furthermore, any arbitral award pursuant to arbitration proceedings in accordance with the Rules and the application of English law to the Subordinated Loan Agreement may be limited by the mandatory provisions of Russian laws relating to the exclusive jurisdiction of Russian courts or other procedural rules of Russian law and the application of Russian laws with respect to bankruptcy, winding up or liquidation of Russian companies. See ‘‘Risk Factors—Risks Relating to the Russian Legal System and Legislation—Foreign Court judgements and arbitral awards may not be enforceable’’.

33 PRESENTATION OF FINANCIAL AND OTHER INFORMATION Presentation of Financial Information Presentation of Financial Information of the Group The Group’s financial information (i) as at and for the six months ended 30 June 2012 and 2011 set forth herein has, unless otherwise indicated, been derived, subject to rounding, from the Group’s unaudited consolidated interim condensed financial statements as at and for the six months ended 30 June 2012 and the related notes thereto (the ‘‘Interim Financial Statements’’), and (ii) as at and for the years ended 31 December 2011, 2010 and 2009 set forth herein has, unless otherwise indicated, been derived, subject to rounding, from the Group’s consolidated financial statements as at and for the years ended 31 December 2011 and 2010 and the related notes thereto (the ‘‘Audited Financial Statements’’, and together with the Interim Financial Statements, the ‘‘Financial Statements’’). The Audited Financial Statements were prepared in accordance with International Financial Reporting Standards (‘‘IFRS’’) issued by the International Accounting Standards Board (the ‘‘IASB’’). The Interim Financial Statements were prepared in accordance with International Financial Reporting Standard IAS34 Interim Financial Reporting. The Issuer’s Financial Statements (as defined below) are consolidated into the Financial Statements of CEB as, although CEB does not hold an ownership interest in the share capital of the Issuer, CEB is considered to control the Issuer through the predetermination of its activities. See Note 1 to the Financial Statements. However, Note 1 to the Financial Statements erroneously refers to the Issuer as ‘‘CEB Russia Capital S.A.’’ These references should be construed as reading ‘‘CEB Capital S.A.’’

Auditors The Financial Statements were audited or reviewed (as the case may be) by Credit Europe Bank’s independent auditors, ZAO KPMG (‘‘KPMG’’), located at Naberezhnaya Tower, Block C, Floor 31, 10 Presnenskaya Naberezhnaya, Moscow 123317, Russian Federation. The Financial Statements, including the audit opinions or review report (as the case may be) of KPMG are set out on pages F-2 to F-150 of this Prospectus. KPMG is a subsidiary of KPMG Europe LLP and is a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. KPMG is a member of the Russian Chambers of Auditors (Auditorskaya Palata Rossii).

Presentation of Financial Information of the Issuer Additionally, the Issuer’s financial information set forth herein, has, unless otherwise indicated, been derived from its audited financial statements as at and for the years ended 31 December 2011, 2010 and 2009 (the ‘‘Issuer’s Financial Statements’’) prepared in accordance with IFRS as adopted in the EU. The Issuer’s Financial Statements were audited by the Issuer’s statutory auditors, Ernst & Young S.A. (r´eviseur d’entreprise agr´e´e) (which belong to the Luxembourg institute of auditors (Instituts des r´eviseurs d’entreprises agr´e´e)) with registered office at 7, Parc d’activites´ Syrdall, L-5365 Munsbach and registered with the Luxembourg Register of Commerce and Companies under number B-47771. The Issuer’s Financial Statements, including the audit opinion of Ernst & Young S.A. (r´eviseur d’entreprise agr´e´e) are set out on pages F-151 to F-199 of this Prospectus.

Conversions The Rouble has been selected as the functional currency for the Financial Statements. Monetary assets and liabilities denominated in other currencies are translated into Roubles at the official rate of the CBR at the relevant reporting dates. Solely for the convenience of the reader, and except as otherwise stated, this Prospectus contains translations of certain Rouble amounts as at 30 June 2012, 31 December 2011, 31 December 2010 and 31 December 2009 into U.S. Dollars at a conversion rate of RUB32.8169, RUB32.1961, RUB30.4769 and RUB30.2442 to U.S.$1.00 which were the official exchange rates quoted by the CBR as at the respective dates. No representation is made that the Rouble or U.S. dollar amounts referred to herein could have been or could be converted into Roubles or U.S. Dollars, as the case may be, at these rates, at any particular rate or at all.

34 Currency In this Prospectus, the following currency terms are used: •‘‘EUR’’, ‘‘Euro’’ or ‘‘E’’ means the lawful currency of the member states of the European Union that adopted the single currency in accordance with the Treaty of Rome establishing the European Economic Community, as amended; •‘‘RUB’’, ‘‘Russian Rouble’’ or ‘‘Rouble’’ means the lawful currency of the Russian Federation; and •‘‘U.S. Dollar’’ or ‘‘U.S.$’’ means the lawful currency of the United States.

Rounding Some numerical figures included in this Prospectus have been subject to rounding adjustments. Accordingly, numerical figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that preceded them.

35 THE OFFERING AND THE TERMS AND CONDITIONS OF THE NOTES The following overview contains basic information about the Notes and the Subordinated Loan and should be read in conjunction with, and is qualified in its entirety by, the information set forth under ‘‘The Subordinated Loan Agreement’’ and ‘‘Terms and Conditions of the Notes’’ appearing elsewhere in this Prospectus.

The Offer U.S.$250,000,000 8.50 per cent. Loan Participation Notes due 2019 in reliance on Regulation S under the Securities Act (‘‘Regulation S’’). Issuer CEB Capital S.A. Borrower Credit Europe Bank Ltd. with its registered office at Olimpiyskiy Prospect, bld.14, 129090, Moscow, Russian Federation. Tel: 7 495 7254040 Trustee Citibank, N.A., London Branch Principal Paying Agent and a Transfer Agent Citibank, N.A., London Branch Registrar, a Paying Agent and a Transfer Agent Citigroup Global Markets Deutschland AG Register The Registrar shall maintain a register in relation to the Notes (the ‘‘Register’’). The Issuer shall also maintain a register of the Notes (the ‘‘Issuer’s Register’’) at its registered office. In case of inconsistency between the Register and the Issuer’s Register, the Issuer’s Register shall prevail. Issue Price 100 per cent. of the principal amount of the Notes. Issue Date 15 November 2012 Maturity Date 15 November 2019 Yield U.S.$85 per U.S.$1,000 per annum in nominal amount of the Notes held. Use of Proceeds The Issuer will use the proceeds of the issue of the Notes for the sole purpose of financing the Subordinated Loan. The proceeds from the Subordinated Loan will be used by Credit Europe Bank for general banking purposes. See ‘‘Use of Proceeds’’. Interest On each Interest Payment Date (being 15 May and 15 November in each year commencing on 15 May 2013) the Issuer shall account to Noteholders for an amount equivalent to amounts of interest actually received by or for the account of the Issuer pursuant to the Subordinated Loan Agreement excluding any amounts paid in respect of the Reserved Rights, which interest is equivalent to 8.50 per cent. per annum. Status of the Notes The Notes constitute secured and unsubordinated obligations of the Issuer and shall at all times rank pari passu and without preference amongst themselves.

36 Limited Recourse The Notes will constitute the obligation of the Issuer to apply an amount equal to the net proceeds from the issue of the Notes solely for the purpose of financing the Subordinated Loan to Credit Europe Bank pursuant to the terms of the Subordinated Loan Agreement. The Issuer will only account to the Noteholders for all amounts equivalent to those (if any) received from Credit Europe Bank under the Subordinated Loan Agreement or held on deposit in the Lender Account (as defined in the Subordinated Loan Agreement) less amounts in respect of Reserved Rights (as defined in the Trust Deed) all as more fully described under ‘‘Terms and Conditions of the Notes’’. Security The Notes are secured by (i) a first fixed charge in favour of the Trustee for the benefit of itself and of the Noteholders as security for the Issuer’s payment obligations in respect of the Notes of (a) certain of the Issuer’s rights and interests as lender under the Subordinated Loan Agreement, and (b) the Issuer’s rights, title and interest in and all sums held on deposit in the Lender Account (as defined in the Subordinated Loan Agreement) (in each case, other than the Reserved Rights), all as more fully described under ‘‘Terms and Conditions of the Notes’’ and (ii) an assignment of certain other rights under the Subordinated Loan Agreement, all as more fully described under ‘‘Description of the Transaction’’. Status of the Subordinated Loan The claims of the Issuer against Credit Europe Bank in respect of the principal of, and interest on, the Subordinated Loan will be subordinated, in the event of the entry into force of the final decision of a competent Russian court finding Credit Europe Bank bankrupt, to the claims of Senior Creditors (as defined in the Subordinated Loan Agreement) in accordance with the Federal Law ‘‘On Insolvency (Bankruptcy) of Credit Organisations’’ No. 40-FZ dated 25 February 1999 (as amended or superseded from time to time) and will rank at least pari passu with the claims of other subordinated creditors of Credit Europe Bank (whether actual or contingent) having a fixed maturity from time to time outstanding and will be senior to the claims of holders of Credit Europe Bank’s share capital (including preference shares). Form The Notes will be issued in registered form, in denominations of U.S.$200,000 and higher integral multiples of U.S.$1,000. The Notes will be represented by a Global Certificate. The Global Certificate will be exchangeable for Definitive Certificates in the limited circumstances specified in the Global Certificate and as further described under ‘‘Summary of the Provisions relating to the Notes in Global Form’’.

37 Prepayment Options Under the terms of the Subordinated Loan Agreement, Credit Europe Bank will have the right to prepay the Subordinated Loan in whole but not in part, together with accrued and unpaid interest thereon, (a) at the outstanding principal amount of the Subordinated Loan, if the CBR does not unconditionally approve the Subordinated Loan Agreement and the Subordinated Loan as Own Funds on or before the Approval Date (as defined in the Subordinated Loan Agreement) or (b) at the outstanding principal amount of the Subordinated Loan at any time after the Approval Date, if, as a result of any amendment to, clarification of or change in (including a change in interpretation or application of) Regulation No. 215-P (as defined in the Subordinated Loan Agreement) or other applicable requirements of the CBR the Subordinated Loan Agreement and the Subordinated Loan would cease to fully qualify as Own Funds. Upon repayment in full of the Subordinated Loan, the Notes will be redeemed and repaid at their principal amount together with interest accrued to the date fixed for redemption and thereupon shall cease to be outstanding. Covenants As long as any of the Notes remains outstanding, the Issuer will not, without the prior written consent of the Trustee (and the CBR, if required), agree to any amendment to or any modification or waiver of, or authorise any breach or proposed breach of, the terms of the Subordinated Loan Agreement, except as otherwise expressly provided in the Trust Deed or the Subordinated Loan Agreement. The Subordinated Loan Agreement contains covenants requiring Credit Europe Bank to provide certain financial information to the Issuer and to use best efforts to procure that the CBR issue a Final Conclusion (as defined in the Subordinated Loan Agreement) for the Subordinated Loan to be treated as Own Funds by Credit Europe Bank. Acceleration Events/Relevant Event If an Acceleration Event (as defined in the Subordinated Loan Agreement) or a Relevant Event (as defined under ‘‘Terms and Conditions of the Notes’’) occurs, the Trustee may, subject as provided in the Trust Deed, (a) take the action permitted to be taken by the Issuer as lender under the Subordinated Loan Agreement (in the case of an Acceleration Event), or (b) enforce any rights under the security created in the Trust Deed in favour of the Noteholders (in the case of a Relevant Event). The Acceleration Events are limited to payment default and winding-up. If there is an Acceleration Event relating to a payment default or a winding-up, the Issuer as lender under the Subordinated Loan Agreement may institute proceedings in a manner and to the extent contemplated by the applicable law for the insolvency (bankruptcy) of Credit Europe Bank and/or to prove for its debt, and claim, in any consequent liquidation of Credit Europe Bank.

38 Withholding Tax All payments of principal and interest under the Subordinated Loan Agreement and in respect of the Notes will be made free and clear of all taxes, duties, assessments or governmental charges of the Russian Federation or Luxembourg, as the case may be, save as required by law (or in the event of a Relevant Event (as defined in the Trust Deed) the jurisdiction where the Trustee is domiciled for tax purposes). If any taxes, duties, assessments or governmental charges are payable in Russia, the sum payable by Credit Europe Bank under the Subordinated Loan will (subject to certain exceptions) be required to be increased to the extent necessary to ensure that the Issuer receives a net sum which it would have received had no such deduction or withholding been made or required to be made. If any taxes, duties, assessments or governmental charges are payable in Luxembourg, the sum payable by the Issuer under the Notes will be required to be increased to the extent necessary to ensure that the Noteholders receive a net sum which they would have received had no such deduction or withholding been made or required to be made but only to the extent and at such time as the Issuer receives equivalent sums from Credit Europe Bank. See ‘‘Terms and Conditions of the Notes’’. Listing Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List and trading on the Main Securities Market. Selling Restrictions The Notes have not been and will not be registered under the Securities Act and may not be offered or sold within the United States. The Notes may be sold in other jurisdictions (including the United Kingdom, Italy, Turkey, Switzerland, Singapore, Hong Kong, Japan and the Russian Federation) only in compliance with applicable laws and regulations. See ‘‘Subscription and Sale’’. Governing Law and Arbitration The Notes, the Subordinated Loan Agreement and the Trust Deed will be governed by English law. The provisions of articles 86 to 94-8 of the Luxembourg law on commercial companies of 10 August 1915, as amended, are excluded. The Subordinated Loan Agreement contains provisions for arbitration in London, England. Risk Factors An investment in the Notes involves a high degree of risk. See ‘‘Risk Factors’’. Security Codes ISIN: XS0854763355 Common Code: 085476335 Clearing Systems Euroclear and Clearstream, Luxembourg.

39 DESCRIPTION OF THE TRANSACTION The following summary contains basic information about the Notes and the Subordinated Loan and should be read in conjunction with, and is qualified in its entirety by, the information set forth under ‘‘The Subordinated Loan Agreement’’ and ‘‘Terms and Conditions of the Notes’’ appearing elsewhere in this Prospectus.

Transaction Summary Set out below is a diagrammatic representation of the structure:

Principal and Interest on Loan Credit Europe Bank Issuer Ltd

Loan

Payments of Proceeds amounts of the received Notes under the Loan

Noteholders

29OCT201218550032

The transaction will be structured such that the proceeds of the issue of the Notes will be lent by the Issuer to Credit Europe Bank pursuant to the Subordinated Loan Agreement. The Notes are limited recourse loan participation notes to be issued by the Issuer for the sole purpose of funding the Subordinated Loan. The Notes will have the benefit of, and be constituted by, the Trust Deed. As provided in the Trust Deed, the Issuer (i) will charge by way of first fixed charge to the Trustee (a) all principal, interest and other amounts (if any) payable by Credit Europe Bank to the Issuer under the Subordinated Loan Agreement, (b) the right to receive all sums which may be or become payable by Credit Europe Bank under any claim, award or judgment relating to the Subordinated Loan Agreement and (c) all rights, title and interest in and to all sums of money now or in the future deposited in an account in the name of the Issuer with the Principal Paying Agent and the debts represented thereby, including interest from time to time earned thereon (the ‘‘Lender Account’’), and (ii) will assign certain other rights in respect of the Subordinated Loan Agreement. Credit Europe Bank will be obliged to make payments under the Subordinated Loan to the Issuer in accordance with the terms of the Subordinated Loan Agreement to the Lender Account or as otherwise instructed by the Trustee following a Relevant Event. The Subordinated Loan has characteristics that demonstrate a capacity to produce funds to service any payments due and payable on the Notes. The Issuer will agree in the Trust Deed not to make or consent to any amendment to or any modification or waiver of, or authorise any breach or proposed breach of, the terms of the Subordinated Loan Agreement unless the Trustee has given its prior written consent and approval from the CBR has been received. The Issuer will further agree to act at all times in accordance with any instructions of the Trustee from time to time with respect to the Subordinated Loan Agreement. Any amendments, modifications, waivers or authorisations made to the Terms and Conditions with the Trustee’s consent shall be notified to the Noteholders in accordance with Condition 13 of the Notes and shall be binding on the Noteholders. Formal notice of the security interests created by the Trust Deed will be given to Credit Europe Bank and Citibank, N.A., London Branch, acting as principal paying agent pursuant to an agency agreement dated 14 November 2012 (the ‘‘Agency Agreement’’) between the Issuer, Citibank, N.A., London Branch, as principal paying agent and a transfer agent, Citigroup Global Markets Deutschland AG as Registrar and a transfer agent, the Trustee and Credit Europe Bank which will each be required to acknowledge the same. The Notes are limited recourse obligations and the Issuer will not have any obligation to the Noteholders other than the obligation to account to the Noteholders for payment of principal and interest received by it

40 pursuant to the Subordinated Loan Agreement. The Issuer does not intend to provide post-issuance transaction information regarding the Notes or the performance of the Subordinated Loan. The security under the Trust Deed will become enforceable upon the occurrence of a Relevant Event, as further described in the ‘‘Terms and Conditions of the Notes’’. Payments in respect of the Notes will be made without any deduction or withholding for, or on account of, taxes of Luxembourg except as required by law. See ‘‘Terms and Conditions of the Notes—Taxation’’, in that event, the Issuer will only be required to pay an additional amount to the extent it receives corresponding amounts from Credit Europe Bank under the Subordinated Loan Agreement. The Subordinated Loan Agreement provides for Credit Europe Bank to pay such corresponding amounts in these circumstances. In addition, payments under the Subordinated Loan Agreement will be made without any deduction or withholding for, or on account of, any taxes imposed, assessed, charged, levied, collected, demanded, withheld or claimed by the Russian Federation, Luxembourg or any tax authority thereof or therein, except as required by law, in which event Credit Europe Bank will be obliged to increase the amounts payable under the Subordinated Loan Agreement. See ‘‘Risk Factors—Risks Relating to the Issuer, the Loan, the Notes and the Trading Market—Issuer’s payments under the Notes may be subject to withholding tax’’. The Subordinated Loan is intended to qualify as Own Funds of Credit Europe Bank under regulations of the CBR. Under the terms of the Subordinated Loan Agreement, Credit Europe Bank will have the right to prepay the Subordinated Loan in whole but not in part, together with accrued and unpaid interest thereon, (a) at the outstanding principal amount of the Subordinated Loan, if the CBR does not unconditionally approve the Subordinated Loan as Own Funds on or before the Approval Date (as defined in the Subordinated Loan Agreement) or (b) at the outstanding principal amount of the Subordinated Loan at any time after the Approval Date, if, as a result of any amendment to, clarification of or change in (including a change in interpretation or application of applicable requirements of) Regulation No. 215-P (as defined in the Subordinated Loan Agreement) or other applicable requirements of the CBR, the Subordinated Loan would cease to fully qualify as Own Funds. Upon repayment in full of the Subordinated Loan, the Notes will be redeemed and repaid at their principal amount together with interest accrued to the date fixed for redemption and thereupon shall cease to be outstanding. In certain circumstances, Credit Europe Bank may, subject to obtaining the prior consent of the CBR, prepay the Subordinated Loan at its principal amount in the event that Credit Europe Bank is required to increase the amount payable or to pay additional amounts on account of taxes of the Russian Federation pursuant to the Subordinated Loan Agreement. In such case (to the extent that the Issuer has actually received the relevant funds from Credit Europe Bank), the Issuer will prepay the Notes together with accrued interest and additional amounts (if any) thereon. See ‘‘The Subordinated Loan Agreement— Repayment and Prepayment—Prepayment in the event of Taxes’’ and ‘‘Terms and Conditions of the Notes— Redemption’’.

41 USE OF PROCEEDS The Issuer will use the proceeds of the issue amount received in respect of the principal amount of the Notes, expected to amount to U.S.$250,000,000 for the sole purpose of financing the Subordinated Loan to Credit Europe Bank. The proceeds from the Subordinated Loan will be used by Credit Europe Bank for general banking purposes. Total commissions and expenses payable by Credit Europe Bank in connection with the Notes and the Subordinated Loan are expected to be approximately U.S.$1,750,000.

42 EXCHANGE RATES The following table sets forth, for the periods indicated, the high, low, average and period-end official rates set by the CBR in each case for the purchase of Roubles, all expressed per U.S. Dollar. These translations should not be construed as representations that Rouble amounts actually represent such U.S. Dollar amounts or could be converted into U.S. Dollars at the rate indicated as of any of the dates mentioned in this Prospectus or at all.

High Low Average Period End (RUB per U.S. Dollar) 2012 (up to and including 30 June 2012) ...... 34.0395 28.9468 30.6390 32.8169 2011 ...... 32.6799 27.2625 29.3874 32.1961 2010 ...... 31.7798 28.9310 30.3692 30.4769 2009 ...... 36.4267 28.6701 31.7231 30.2442 2008 ...... 29.3804 23.1255 24.8553 29.3804 2007 ...... 26.5770 24.2649 25.5770 24.5462 2006 ...... 28.7825 26.1840 27.1852 26.3311 2005 ...... 28.9978 27.4611 28.2864 28.7825 2004 ...... 29.4545 25.5312 28.8066 27.7487 2003 ...... 31.8846 29.2450 30.6880 29.4545 2002 ...... 31.8600 30.1372 31.3471 31.7844

Source: www.cbr.ru (Central Bank of the Russian Federation).

43 SELECTED FINANCIAL INFORMATION OF CEB The following tables represent selected financial information of Credit Europe Bank which has been extracted without material adjustment from and should be read in conjunction with the Financial Statements and the notes thereto included elsewhere in this Prospectus, as well as the section entitled ‘‘Capitalisation and indebtedness of Credit Europe Bank’’ and ‘‘Operating and Financial Review’’.

Selected Group Income Statement Data

Six months ended 30 June Year ended 31 December 2012 2011 2010 2009 (RUB thousands) Interest income ...... 7,564,310 11,927,552 8,857,190 9,238,645 Interest expense ...... (3,273,556) (4,279,907) (3,014,947) (3,444,452) Net interest income ...... 4,290,754 7,647,645 5,842,243 5,794,193 Fee and commission income ...... 1,525,926 2,536,916 1,665,542 1,547,253 Fee and commission expense ...... (733,928) (1,013,412) (389,855) (334,128) Net fee and commission income ...... 791,998 1,523,504 1,275,687 1,213,125 Net profit on financial instruments at fair value through profit or loss ...... 19,040 27,514 326,878 935,396 Net foreign exchange income ...... 128,058 188,393 175,377 289,141 Other income ...... 150,425 36,310 49,310 93,045 Other Operating Income ...... 297,523 252,217 551,565 1,317,582 Impairment losses ...... (1,116,652) (1,189,747) (721,530) (3,083,633) General and administrative and other expenses . . . (2,658,083) (4,756,274) (3,731,112) (3,327,709) Operating expenses ...... (3,774,735) (5,946,021) (4,452,642) (6,411,342) Income before taxes ...... 1,605,540 3,477,345 3,216,853 1,913,558 Income tax expense ...... (324,157) (705,138) (614,804) (385,798) Net income ...... 1,281,383 2,772,207 2,602,049 1,527,760

44 Selected Group Statement of Financial Position Data

As at 30 June As at 31 December 2012 2011 2010 2009 (RUB thousands) Assets Cash ...... 2,233,815 2,082,683 1,165,966 935,902 Due from the Central Bank of the Russian Federation ...... 4,846,467 2,901,194 1,036,131 580,318 Placements with banks and other financial institutions ...... 4,469,614 6,103,431 12,008,148 11,608,508 Financial instruments at fair value through profit or loss —Held by CEB ...... 434,716 759,561 117,017 160,597 —Pledged under sale and repurchase agreements . — — — 59,479 Loans to customers ...... 83,213,841 80,591,551 60,480,396 47,925,256 Available-for-sale financial assets —Held by CEB ...... 3,115,135 2,657,327 6,789,651 1,754,448 —Pledged under sale and repurchase agreements . 306,290 — 1,093,578 4,021,725 Held-to-maturity investments ...... 419,437 420,989 444,328 970,730 Current income tax prepayments ...... 758,804 17,417 613,969 384,367 Deferred tax asset ...... 105,608 38,180 — — Property and equipment ...... 1,243,675 1,050,377 677,280 599,793 Other assets ...... 1,252,858 1,254,109 471,194 406,052 Total assets ...... 102,400,260 97,876,819 84,897,658 69,407,175 Liabilities Financial instruments at fair value through profit or loss ...... 254,973 426,191 339,471 75,476 Deposits and balances from banks and other financial institutions ...... 21,839,195 21,444,109 16,006,972 14,729,140 Current accounts and deposits from customers . . . 32,943,049 33,921,877 35,530,107 22,310,240 Debt securities in issue ...... 29,302,967 25,507,504 17,849,049 19,299,076 Deferred tax liability ...... — — 80,244 28,611 Other liabilities ...... 1,928,802 592,635 534,044 350,084 Total liabilities ...... 86,268,986 81,892,316 70,339,887 56,792,627 Shareholders’ Equity Share capital ...... 8,549,789 8,549,789 8,549,789 8,549,789 Share premium ...... 158,631 158,631 158,631 158,631 Additional paid-in-capital ...... 285,924 285,924 285,924 285,924 Revaluation reserve for available-for-sale assets . . (81,872) (125,656) (367) 22,558 Hedge reserve ...... (62,143) 13,753 (15,561) — Retained earnings ...... 7,280,945 7,102,062 5,579,355 3,597,646 Total Shareholders’ Equity ...... 16,131,274 15,984,503 14,557,771 12,614,548 Total Liabilities and Shareholders’ Equity ...... 102,400,260 97,876,819 84,897,658 69,407,175

45 Selected Group Financial Ratios and Other Information

For the six months ended For the year ended 30 June 31 December 2012 2011 2010 2009 (%) (%) (%) (%) Profitability Net Income/average(1) total assets ...... 2.6 3.0 3.4 2.2 Net Income(2)/average total equity ...... 16.0 18.2 19.2 12.7 Net interest income(2)/average interest earning assets(3) ...... 9.5 9.0 7.9 9.5 Operating expenses/average total assets ...... 7.5 6.5 5.8 9.4 Average total equity/average total assets ...... 16.0 16.7 17.6 17.6 Net fee and commission income/operating income ...... 14.7 16.2 16.6 14.6 Liquidity Loans to customers/current accounts and deposits from customers . . 252.6 237.6 170.2 214.8 Total liquid assets(4)/total assets ...... 14.7 14.8 24.9 21.7 Cost/income(5) ...... 49.4 50.5 48.6 40.0 Capital Adequacy Total capital/Risk Weighted assets ...... — 18.2 19.6 19.8 Credit Quality Gross non-performing loans to customers/gross loans to customers . . 3.0 3.0 3.2 7.0 Impairment allowance for loans to customers/gross loans to customers ...... 3.4 3.3 3.7 7.3 Loan impairment charge/average gross loans ...... 2.6 1.6 1.3 5.7

(1) ‘‘Average’’ is defined as: (outstanding in the beginning of the period plus outstanding in the end of the period) divided by two. (2) Ratio for the six month ended 30 June 2012 has been annualised. (3) Interest earning assets is defined as the total of: Placements with banks and other financial institutions, Financial instruments at fair value through profit and loss, loans to customers, Available for sale financial assets and Held-to-maturity investments. (4) Total liquid assets is defined as the total of: Cash, Due from Central Bank of the Russian Federation, Placements with banks and other financial institutions, Financial instruments at fair value through profit and loss (held by CEB) and Available for sale financial assets (held by CEB). (5) The cost to income ratio is calculated as General and administrative expenses as a proportion of the aggregate of net interest income, net commission income and other operating income.

46 OPERATING AND FINANCIAL REVIEW The following is a discussion and analysis of CEB’s financial condition and results of operations as of the dates and for the periods indicated and should be read together with the Financial Statements, including the notes thereto, which are included herein. The following discussion contains forward-looking statements that involve risks and uncertainties. CEB’s actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including those set forth in ‘‘Forward-Looking Statements’’ and ‘‘Risk Factors’’.

Overview CEB is a full-service Russian bank, one of the top 50 largest banks in Russia in terms of total asset size and top 40 largest Russian banks in terms of net income, according to RosBusinessConsulting (‘‘RBC’’), one of Russia’s primary information agencies. CEB offers a wide range of corporate, SME and retail banking services to clients located in Moscow, the Moscow region and other major Russian regions. CEB has prepared consolidated financial statements in accordance with IFRS since 2003. These consolidated financials include the financial statements of CEB and its subsidiary, Credit Europe Life Ltd, and the Issuer. The Issuer is an orphan special purpose entity established to facilitate the issue of loan participation notes by CEB, it is not owned by CEB. Control arises only through the predetermination of the entity’s activities. Credit Europe Life Ltd. is a wholly owned subsidiary of CEB.

Significant Factors Affecting Results of Operations Russia’s Economic Conditions CEB’s assets and customers are located in, or have businesses related to, Russia. As a result, Russian macroeconomic trends significantly influence CEB’s results of operations. See ‘‘Risk Factors—Risks Relating to the Russian Federation’’. The Russian economy was significantly impacted by the global financial crisis, in part due to falls in the prices of commodities in the second half of 2008 and in 2009. This resulted in higher unemployment rates, significant deterioration of liquidity in the banking sector, insolvencies of certain Russian banks and tighter credit conditions within Russia. The resulting economic downturn in Russia led to a flight to safety by risk-averse investors, causing instability in the capital markets. In 2010, the Russian economy began to gradually recover from the global financial crisis and continued to recover in 2011, on the basis of substantial increase in oil prices and growing domestic consumption. In 2011, national GDP continued to grow at a moderate pace of 4.3 per cent. in real terms, the same rate as the year before. The second half of 2011 was marked by another round of global economic uncertainty, which started with the sovereign debt crisis in the Eurozone, causing investor demand to narrow significantly by the end of the year. The Russian stock market, being extremely vulnerable to global sentiment, showed one on the steepest declines among the emerging markets (25 per cent. year-on-year). The net capital outflow from Russia intensified and reached U.S.$84.2 billion by the end of 2011, notably exceeding the U.S.$33.6 billion outflow registered in 2010. Despite global financial turbulence, in the first half of 2012 the Russian economy grew by 4.5 per cent., compared to the same period of 2011, as economic activity recovered. The revival of the economy has been gradual in 2012 to date, as oil prices were close to historic records highs and household consumption was rising. Increased competitive pressure forced market players to search for new product niches and distribution networks. On the other hand, the major challenges for the economy persisted, including its inner structural imbalances and lack of long-term investment.

Impact of International Financial Markets While CEB’s assets and customers are in Russia, CEB is also affected by the international financial markets and the ongoing European sovereign debt crisis. Global economic uncertainty since the beginning of the Financial Crisis led to higher borrowing costs and restricted access to international wholesale funding markets for banks, including CEB. The current environment has made liquidity conditions tougher for Russian banks, which find it more difficult to fund on money markets. However, CEB was able to access the international debt capital markets by issuing U.S. dollar-denominated Eurobonds in October 2009 and May 2010. In addition, in August 2011, CEB received U.S.$250 million under a syndicated loan arranged by the European Bank for Reconstruction and Development (the ‘‘EBRD’’) and the International Finance Corporation (the ‘‘IFC’’), extended in August 2012 in the amount of U.S.$232.5 million for another one-year term. CEB also secured two bilateral five-year term loan facilities with EBRD, in

47 September 2010 and January 2012. The overall uncertainty in the financial markets across the world raised liquidity and funding concerns for banks, and the actions of the CBR in the second half of 2012 aimed at supporting liquidity partially reflect the expectations of market participants. CEB had the ability to tap various forms of the CBR’s funding options, specifically in the form of repo transactions, as well as borrowings secured by other banks’ sureties, available for certain eligible Russian banks. The need for funding in the current challenging economic environment has made customer deposits a more expensive funding source as more banks compete for retail deposits and consequently costs of such deposits increase. See ‘‘Risk Factors—Risks related to CEB’s Business and Industry—The instability of the global and the Russian credit markets and banking sectors, and the on-going European sovereign debt crisis could have a material adverse effect on CEB’s business, liquidity and financial condition.’’

Loan Portfolio Until the second half of 2008, where the effects of the Financial Crisis were felt globally, the main driver of CEB’s interest income growth was the expansion of its loan portfolio. Following the peak of the Financial Crisis through 2008, while the global and domestic economy demonstrated signs of recovery in 2009, lending activity, in particular in respect of privately-owned banks, remained slow due to a lack of funding, high cost of capital and tighter lending criteria driven by higher credit risks and a deterioration of the quality of credit portfolios. While CEB’s overall loan portfolio decreased from RUB53,650 million as of 31 December 2008 to RUB47,925 million as of 31 December 2009, and each of CEB’s principal categories of loans, including loans to large corporates, loans to SME and loans to individuals fell, the amount of the decrease was relatively mild as compared to many other Russian banks. In 2010, CEB experienced resumption in the growth of its loan portfolio as CEB’s loans increased to RUB60,480 million. Such loan portfolio growth continued throughout 2011 and the first six months of 2012 and reached RUB80,592 million as at 31 December 2011 and RUB83,214 million as at 30 June 2012.

Interest Rate Environment and Funding Over the periods under review, movements in short and long-term interest rates affected both CEB’s interest income and interest expense. During 2011 and the six months ended 30 June 2012, CEB has attentively monitored interest rates in the market and, as a result, the yield of the loan portfolio has increased despite increasing competition for quality borrowers and resulting pressure on the margins of credit products. Average interest rates on CEB’s loans to customers were in the first six months of 2012 and the years ended 31 December 2011 and 2010 18.0 per cent., 16.0 per cent. and 15.6 per cent., respectively. Further, CEB’s net interest margin for the six months ended 30 June 2012 and the year ended 31 December 2011 increased to 9.1 per cent. and 9.2 per cent. respectively from 9.0 per cent. for the year ended 31 December 2010, which in turn decreased from 9.5 per cent. for the year ended 31 December 2009. The consolidated average balances of assets and liabilities of CEB for 2009, 2010 and 2011 were calculated as the average of 12 month-end balances for the respective years. The average rates for 2009, 2010 and 2011 above are calculated by dividing aggregate interest income or expense for the relevant line item by the average balance for the same line item. The average balances of assets and liabilities for CEB in the six months ended 30 June 2012 represent the average of six month-end balances for the six-month period ended 30 June 2012, and the average balances of assets and liabilities for CEB in the six months ended 30 June 2011 represent the average of six month-end balances for the six-month period ended 30 June 2011. The average rates for the six-month periods ended 30 June 2012 and 2011 below are calculated by dividing aggregate interest income or expense for the relevant line item by the average balance for the same line item and then annualising the resulting numbers. The results of this analysis would likely be different if alternative averaging methods were used.

Loan Impairment and Provisioning As a result of the recovery of the Russian economy since the beginning of 2010 and sales and write-offs of loans during that period, as well as the policy changes of CEB with respect to retail lending, (see ‘‘—Results of Operations for the Years Ended 31 December 2011, 2010 and 2009—Loan Impairment’’), the quality of the loan portfolio improved in 2010 and 2011, despite the significant increase in the size of the loan portfolio over that period. The level of gross non-performing loans decreased from RUB3,625 million as at 31 December 2009 to RUB2,008 million as at 31 December 2010 and although it increased to RUB2,498 million as at 31 December 2011, the proportion of non-performing loans to the total loan portfolio (gross of impairment allowance) decreased from 7.0 per cent. as at 31 December 2009 to 3.2 per

48 cent. as at 31 December 2010 and further to 3.0 per cent. as at 31 December 2011. CEB’s loan impairment allowances amounted to RUB2,935 million as at 30 June 2012 an increase of 5.3 per cent. from RUB2,787 million as at 31 December 2011, which was an increase of 20.9 per cent. from RUB2,305 million as at 31 December 2010 due to the increase in the total loan portfolio. Annualised loan impairment charges amounted to 2.6 per cent. of average gross loans for the six months ended 30 June 2012 as compared to 1.0 per cent. for the six months ended 30 June 2011. Loan impairment charges amounted to 1.6 per cent. of average gross loans for the year ended 31 December 2011 compared to 1.3 per cent. for the year ended 31 December 2010. Loan impairment in 2011 was historically low due to NPL recovery as a result of the economic improvement in Russia.

Critical Accounting Policies Detailed descriptions of the main accounting policies used in preparing the 2011, 2010 and 2009 Annual Financial Statements are set forth in the Note 3 to the 2011, 2010 and 2009 Annual Financial Statements, respectively, included elsewhere in this Prospectus.

Critical Accounting Estimates and Judgments in Applying Accounting Policies The preparation of the Financial Statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expense. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Although these estimates are based on CEB’s management’s best knowledge of current events and actions, actual results ultimately may differ from these estimates. See Note 2 to the Financial Statements.

Impact of New Accounting Standards As at 30 June 2012, a number of new accounting standards, amendments to standards and interpretations had not yet become effective and were thus not applied in preparing the Financial Statements. However, it is possible that a number of those pronouncements could have an impact on CEB’s financial position and performance. As at 30 June 2012, all changes to accounting standards which were effective as at that date had been implemented by CEB.

49 Results of Operations for the six months ended 30 June 2012 and 30 June 2011 The following table sets forth the CEB’s consolidated income statement for the six months ended 30 June 2012 and 2011, respectively.

Six months ended 30 June 2012 2011 (RUB thousands) Interest income ...... 7,654,310 5,177,886 Interest expense ...... (3,273,556) (1,893,835) Net interest income ...... 4,290,754 3,284,051 Fee and commission income ...... 1,525,926 1,054,551 Fee and commission expense ...... (733,928) (391,197) Net fee and commission income ...... 791,998 663,354 Net profit on financial instruments at fair value through profit or loss ...... 19,040 76,705 Net foreign exchange income ...... 128,058 62,105 Other income ...... 150,425 21,621 Other Operating Income ...... 297,523 160,431 Impairment losses ...... (1,116,652) (319,543) General and administrative and other expenses ...... (2,658,083) (2,240,002) Operating expenses ...... (3,774,735) (2,559,545) Income before income tax ...... 1,605,540 1,548,291 Income tax expense ...... (324,157) (307,273) Net income ...... 1,281,383 1,241,018

The consolidated average balances of assets and liabilities of CEB for 2009, 2010 and 2011 were calculated as the average of 12 month-end balances. The average rates for 2009, 2010 and 2011 below are calculated by dividing aggregate interest income or expense for the relevant line item by the average balance for the same line item. The average balances of assets and liabilities for CEB in the six months ended 30 June 2012 represent the average of six month-end balances for the six-month period ended 30 June 2012, and the average balances of assets and liabilities for CEB in the six months ended 30 June 2011 represent the average of 6 month-end balances for the six-month period ended 30 June 2011. The average rates for the six-month periods ended 30 June 2012 and 2011 below are calculated by dividing aggregate interest income or expense for the relevant line item by the average balance for the same line item and then annualising the resulting numbers. The results of this analysis would likely be different if alternative averaging methods were used.

Net Income For the six months ended 30 June 2012, CEB’s net income increased by 3.2 per cent. to RUB1,281 million as compared to RUB1,241 million for the six months ended 30 June 2011. In the first six months of 2012, CEB’s net income increased as compared to the first six months of 2011 primarily due to the significant increase in the size of the retail loan portfolio.

Net Interest Income The amount of net interest income earned by CEB is affected by a number of factors. It is primarily determined by the volumes of interest-earning assets and interest-bearing liabilities, as well as the differential between rates earned on interest-earning assets and rates paid on interest-bearing liabilities. CEB’s interest-earning assets are primarily composed of loans to customers, placements with banks and other financial institutions, available-for-sale financial assets and held-to-maturity investments. CEB’s interest-bearing liabilities are primarily composed of debt securities in issue (consisting of international and domestic bonds issued), current accounts and deposits from customers (including deposits from state and public organisations) and deposits and balances from banks and other financial institutions. CEB’s net interest income increased by 30.7 per cent. to RUB4,291 million for the six months ended 30 June 2012 as compared with RUB3,284 million for the six months ended 30 June 2011. This increase was primarily due to the increase in the average interest rates of loan to customers as well as the significant growth in volumes.

50 CEB’s net interest margin, defined as net interest income before impairment losses as a percentage of total average interest-earning assets increased to 9.5 per cent. for the six months ended 30 June 2012 from 8.2 per cent. for the six months ended 30 June 2011. CEB’s net interest spread, defined as the difference between the average interest rate on interest earning assets and the average interest rate on interest bearing liabilities, was 7.0 per cent. for the six months ended 30 June 2012, as compared to 6.7 per cent. for the six months ended 30 June 2011. The slight increase in net interest spread over the period was primarily due to the relatively higher increase in the interest yields compared to the increase in cost of funds.

Interest Income Interest income principally consists of amounts earned by CEB as interest on (i) loans to individuals (relating to auto loans, credit card loans, cash loans, instant loans, mortgage loans and others), (ii) loans to corporations and small and medium size companies (relating to loans extended), (iii) available-for-sale financial assets, (iv) held-to-maturity investments, (v) financial instruments at fair value through profit or loss, (vi) banks and other financial institutions that have borrowed funds from CEB in the interbank market (placements with banks and other financial institutions) and (vii) derivative transactions. CEB’s interest income also includes loan-servicing fees, loan origination fees and certain direct expenses that are considered to be an integral part of the overall effective interest rate of the loan. CEB’s interest income increased by 46.1 per cent. to RUB7,564 million for the six months ended 30 June 2012 as compared to RUB5,178 million for the six months ended 30 June 2011. The increase was primarily due to the growth of the retail loan portfolio. The average interest rate on interest earning assets was 16.1 per cent. for the six months period ended 30 June 2012 compared to 12.9 per cent. for the six months period ended 30 June 2011. The increase in average interest rate over the six months period ended 30 June 2012 compared to the same period in 2011 was primarily due to the transformation of the loan portfolio from corporate loans to retail loans whose yields are relatively higher.

Interest Expense Interest expense principally consists of amounts paid by CEB as interest on (i) debt securities in issue (which include Eurobonds, domestic bonds and promissory notes), (ii) deposits from customers, (iii) deposits and balances from banks and other financial institutions (which include interbank borrowings, borrowings from the CBR and syndicated loans and (iv) derivative transactions.

Total interest expense CEB’s total interest expense increased by 72.9 per cent. to RUB3,274 million in the six months ended 30 June 2012 from RUB1,894 million in the six months ended 30 June 2011. This was primarily due to increases in due to customer balances and interest rates thereon, financial institution borrowings and an increase in the costs of existing SWAP transactions.

Net Fee and Commission Income Fee and commission income mainly consists of credit card fees, fees and commissions on penalties on overdue loans, commissions from insurance companies and retailers, banking services fees, and other similar fees and commissions paid to CEB. Fee and commission expense consists of credit card fees, fees to retailers, commission on cash transactions, and other similar banking services expenses paid by CEB. Primarily for the reasons set forth below, CEB’s total net fee and commission income increased by 19.4 per cent. to RUB792 million for six months ended 30 June 2012 as compared to RUB663 million for the six months ended 30 June 2011.

Fee and Commission Income CEB’s total fee and commission income increased by 44.7 per cent. to RUB1,526 million for six months ended 30 June 2012 as compared to RUB1,055 million for the six months ended 30 June 2011. The increase in fee and commission income is mainly attributable to the increase in credit card fees resulting from the growth in the volume of credit card transactions and the number of new credit cards activated, as

51 well as to a lesser extent insurance related fees, banking services fees (such as merchant fees, salary programme and money transfer fees) and penalties received on overdue loans.

Fee and Commission Expense CEB’s total fee and commission expense increased by 87.7 per cent. to RUB734 million for the six months ended 30 June 2012 as compared to RUB391 million for the six months ended 30 June 2011. This increase is mainly attributable to the increase in credit card fees resulting from the growth in the volume of credit card transactions. The growth of the retail loan portfolio especially in terms of car and instant loans led to an increase in the fees and commissions paid to the merchants in the six months ended 30 June 2012 as compared to the six months ended 30 June 2011.

Other Operating Income The following table sets forth the principal components of other operating income for the periods indicated:

Six months ended 30 June 2012 2011 (RUB thousands) Net gain on financial assets at fair value through profit or loss ...... 19,040 76,705 Net foreign exchange income ...... 128,058 62,105 Other income ...... 150,425 21,621 Other operating income ...... 297,523 160,431

Net Gain on Financial Assets at Fair Value through Profit or Loss Net gain on financial assets at fair value through profit or loss decreased by 75.3 per cent. to RUB19 million for the six months ended 30 June 2012 as compared RUB77 million for the six months ended 30 June 2011. CEB attributes the decrease in gain on financial assets in the six months ended 30 June 2012 primarily to CEB’s lower level of trading activity in the capital markets over that period due to market conditions making trading less attractive.

Net Foreign Exchange Income Net foreign exchange income increased by 106.5 per cent. to RUB128 million for the six months ended 30 June 2012 as compared with RUB62 million for the six months ended 30 June 2011. CEB attributes this increase primarily to the growth of the volume of foreign exchange services provided to customers.

Other Operating Income, Net Other operating income increased by 581.8 per cent. to RUB150 million for the six months ended 30 June 2012 as compared with RUB22 million for the six months ended 30 June 2011 due to the increase of bad debt loan sales to collection companies.

Impairment Losses Loan impairment losses increased by 249.1 per cent. to RUB1,117 million for the six months ended 30 June 2012 as compared with RUB320 million for the six months ended 30 June 2011. CEB attributes these increases primarily to the significant growth of CEB’s loans to customers, most notably in the retail loan portfolio which involves more risk and where certain levels of provisions are automatically recorded right after the issuance of the loans. CEB’s impairment allowance for loans to customers increased by 5.3 per cent. to RUB2,935 million as at 30 June 2012 as compared with RUB2,787 million as at 31 December 2011. The effective provision rate for loans to customers (calculated as the ratio of impairment allowance for loans to customers to gross loans to customers) increased slightly to 3.4 per cent. as at 30 June 2012 as compared with 3.3 per cent. as at 31 December 2011. The increase in the absolute amount of the impairment allowance is mainly attributable to the increase of the retail loan portfolio through new issuances in 2012. Additionally, during 2011, CEB recovered loan impairment charges that had been conservatively allocated during 2009 and 2010 due to tightening credit policies implemented during the Financial Crisis. This conservative approach

52 has been balanced by an increase in lending, particularly during the second half of 2011, as well as impairment losses returning to their usual level by the end of 2011. Write-offs increased to RUB956 million in the six months ended 30 June 2012 from RUB294 million for the same period in 2011. This substantial increase reflected the resumption of normal lending activity at the Bank in 2011 compared to the low level of activity in 2010 due to the economic climate.

General and Administrative Expenses CEB’s total general and administrative expenses increased by 18.6 per cent. to RUB2,658 million for the six months ended 30 June 2012 as compared with RUB2,240 million for the six months ended 30 June 2011. This increase is mainly attributable to the increase of employee compensation due to the increase in average headcount and expenses related to the development and improvement of the infrastructural network and investments such as ATMs and points of sale.

Income Tax Expense Income tax expense increased by 5.5 per cent. to RUB324 million for the six months ended 30 June 2012 from RUB307 million for the six months ended 30 June 2011. CEB attributes this increase primarily to the increase of the operating profit by 3.7 per cent. compared to the six months ended 30 June 2011.

Results of Operations for the Years Ended 31 December 2011, 2010 and 2009 The following table sets forth CEB’s consolidated income statement for the years under review.

Year ended 31 December 2011 2010 2009 (RUB thousands) Interest income ...... 11,927,552 8,857,190 9,238,645 Interest expense ...... (4,279,907) (3,014,947) (3,444,452) Net interest income ...... 7,647,645 5,842,243 5,794,193 Fee and commission income ...... 2,536,916 1,665,542 1,547,253 Fee and commission expense ...... (1,013,412) (389,855) (334,128) Net fee and commission income ...... 1,523,504 1,275,687 1,213,125 Net profit on financial instruments at fair value through profit or loss ...... 27,514 326,878 935,396 Net foreign exchange income ...... 188,393 175,377 289,141 Other income ...... 36,310 49,310 93,045 Other operating income ...... 252,217 551,565 1,317,582 Impairment losses ...... (1,189,747) (721,530) (3,083,633) General and administrative expenses ...... (4,756,274) (3,731,112) (3,327,709) Operating expenses ...... (5,946,021) (4,452,642) (6,411,342) Income before income tax ...... 3,477,345 3,216,853 1,913,558 Income tax expense ...... (705,138) (614,804) (385,798) Net income ...... 2,772,207 2,602,049 1,527,760

Net Income For the year ended 31 December 2011, CEB’s net income increased to RUB2,772 million from RUB2,602 million for the year ended 31 December 2010, which in turn, represented an increase from RUB1,528 million for the year ended 31 December 2009. Despite the increases in impairment losses, SWAP expenses and operating expenses and the decrease in other income for the year ended 31 December 2011, CEB managed to increase net income as compared to the year ended 31 December 2010. These decreases were offset by the increase in core banking activities namely increase in net interest income and net fees and commission income. This increase was mainly attributable to the increasing volume of loans to customers and banking services provided to them.

53 In 2010, CEB’s net income increased substantially as compared to 2009 primarily due to a significant recovery in loan impairment charges as they returned to normal due to tightening credit policies implemented during the Financial Crisis, which decreased by RUB2,362 million. This, however, was partially offset by a decrease in CEB’s operating income as a result of a decrease in the net profit on financial instruments at fair value through profit or loss. There was a RUB609 million decrease in capital market gain, arising from decreasing trading activities to tighter spreads in the market making trading less attractive.

Net Interest Income, Net Interest Spread and Net Interest Margin Analysis Interest income is CEB’s primary source of revenue. The amount of net interest income earned by CEB is affected by a number of factors. It is primarily determined by the volumes of interest-earning assets and interest-bearing liabilities, as well as the differential between rates earned on interest-earning assets and rates paid on interest-bearing liabilities. CEB’s interest-earning assets are primarily composed of loans to customers, placements with banks and other financial institutions, available-for-sale financial assets and held-to-maturity investments. CEB’s interest-bearing liabilities are primarily composed of debt securities in issue (consisting of international and domestic bonds issued), current accounts and deposits from customers (including deposits from state and public organisations) and deposits and balances from banks and other financial institutions. CEB’s net interest income increased by 30.9 per cent. to RUB7,648 million for the year ended 31 December 2011 as compared with RUB5,842 million for the year ended 31 December 2010, which itself represented an increase of 0.8 per cent. from RUB5,794 million for the year ended 31 December 2009. The increases in CEB’s net interest income in 2011 and 2010 were primarily due to the increase in CEB’s overall loan portfolio size as well as a reduction in interest expense resulting from a decrease in the effective interest rate on CEB’s interest-bearing liabilities. CEB’s net interest margin, defined as net interest income before impairment losses as a percentage of total average interest-earning assets, increased to 9.2 per cent. for the year ended 31 December 2011 from 9.0 per cent. for the year ended 31 December 2010, which in turn represented a decrease from 9.5 per cent. for the year ended 31 December 2009. CEB’s net interest margin increased for the year ended 31 December 2011 as compared to the year ended 31 December 2010 due to the increase in average yields of the loan portfolio. In 2010, CEB’s net interest margin decreased as compared to 2009 due to the competition resulting from the diminishing effect of the Financial Crisis in the global financial markets and the excess liquidity remaining on bank’s balance sheets as a result of stricter lending policies during the crisis years, which had the effect that the interest rates declined significantly throughout the year 2010. CEB’s net interest spread, defined as the difference between the average interest rate on interest-earning assets and the average interest rate on interest-bearing liabilities, was 7.6 per cent. for the year ended 31 December 2011, as compared to 7.1 per cent. for the year ended 31 December 2010 and 7.2 per cent. for the year ended 31 December 2009. In 2011, CEB’s net interest margin increased as compared to 2010 due to a greater increase in interest rates on interest-bearing assets compared to increases in interest rates on interest-earning liabilities.

Interest Income Interest income principally consists of amounts earned by CEB as interest on (i) loans to individuals (relating to auto loans, credit card loans, cash loans, instant loans, mortgage loans and others), (ii) loans to corporations and small and medium-sized companies (relating to loans extended), (iii) available-for-sale financial assets, (iv) held-to-maturity investments, (v) financial instruments at fair value through profit or loss, (vi) placements with banks and other financial institutions in the interbank market, and (vii) derivative transactions. CEB’s interest income also includes loan-servicing fees, loan origination fees and certain direct expenses that are considered to be an integral part of the overall effective interest rate of the loan.

54 The following table sets out the principal components of CEB’s interest income for the years ended 31 December 2011, 2010 and 2009.

For the year ended 31 December 2011 2010 2009 (RUB thousands) Interest income Loans to individuals ...... 9,067,907 5,844,626 5,892,268 Loans to corporate and SME customers ...... 2,345,086 2,443,485 2,546,439 Available-for-sale financial assets ...... 365,079 397,872 343,986 Derivatives ...... — 20,590 317,866 Held-to-maturity investments ...... 50,165 91,161 76,860 Placements with banks and other financial institutions ...... 94,681 22,244 33,037 Financial instruments at fair value through profit or loss ...... 4,634 37,212 28,189 Total interest income ...... 11,927,552 8,857,190 9,238,645

Loans to customers CEB’s interest income from loans to customers increased significantly for the year ended 31 December 2011 to RUB11,413 million, an increase of 37.7 per cent. compared to RUB8,288 million for the year ended 31 December 2010, which in turn represented a minor decrease from RUB8,439 million for the year ended 31 December 2009. The increase in 2011 was primarily due to the increase in loans to individuals, set off slightly by a slight decrease in loans to corporate and SME customers over the period. The marked increase in loans to individuals was mainly the result of the growth of the average retail portfolio and in particular car loans, instant loans and credit cards as CEB has increasingly focused on the retail sector due to better margins and risk profile. In 2010, CEB’s interest income from loans to customers decreased as compared to 2009 as a result of the decrease in the average retail loan portfolio which was offset by a slight increase in corporate loan book and credit cards receivables. The average interest rate on gross loans to customers was 16.0 per cent. for the year ended 31 December 2011, and 15.6 per cent. for the year ended 31 December 2010, and 16.4 per cent. for the year ended 31 December 2009. The decrease during the year ended 31 December 2010 was primarily due to significant market-wide tightening of margins.

Interest income from available-for-sale financial assets CEB’s interest income from available-for-sale financial assets decreased by 8.2 per cent. to RUB365 million as at 31 December 2011 from RUB398 million for the year ended 31 December 2010. This decrease was primarily due to an overall decline in the effective interest rate of overall securities portfolio as a result of a stabilisation of market conditions. CEB’s interest income from available-for-sale financial assets increased by 15.7 per cent. to RUB398 million for the year ended 31 December 2010 from RUB344 million for the year ended 31 December 2009. This increase was primarily due to the growth of CEB’s portfolio of available-for-sale financial assets (particularly corporate and municipal bonds). This increase was partially offset by an overall decline in the effective interest rate of securities. The average interest rate on available-for-sale financial assets was 7.6 per cent., 8.4 per cent. and 10.2 per cent. for the years ended 31 December 2011, 2010 and 2009, respectively.

Interest income from held-to-maturity investments CEB’s interest income from investments held to maturity decreased by 45.0 per cent. to RUB50 million for the year ended 31 December 2011 as compared to RUB91 million as at 31 December 2010. This decrease was primarily due to the decrease in the average size of CEB’s held-to-maturity portfolio in 2011. CEB’s interest income from investments held to maturity increased by 18.2 per cent. to RUB91 million in 2010 from RUB77 million in 2009 due to an increase in the effective interest rate of marketable securities. The average interest rate on investments held to maturity was 11.9 per cent., 13.7 per cent. and 8.8 per cent. for the years ended 31 December 2011, 2010 and 2009, respectively.

55 Interest income from financial assets at fair value through profit or loss Interest income from financial assets at fair value through profit or loss decreased by 86.5 per cent. to RUB5 million for the year ended 31 December 2011 as compared to RUB37 million for the year ended 31 December 2010, the decrease was primarily due to the decrease in the average volume of trading portfolio in 2011. Interest income from financial assets at fair value through profit or loss increased by 32.1 per cent. to RUB37million for the year ended 31 December 2010, from RUB28 million for the year ended 31 December 2009. This increase was primarily due to the growth in the size of CEB’s trading portfolio, primarily foreign corporate bonds, which was partially offset by an overall decline in the interest rates of trading securities. The average interest rate on financial assets at fair value through profit or loss was 8.0 per cent., 9.3 per cent. and 10.7 per cent. for the years ended 31 December 2011, 2010 and 2009, respectively.

Interest income from placements with banks and other financial institutions In 2011, interest income from placements with banks and other financial institutions increased by 331.8 per cent. to RUB95 million for the year ended 31 December 2011 as compared to RUB22 million for the year ended 31 December 2010, itself a 33.3 per cent. decrease from RUB33 million as at 31 December 2009. CEB attributes the increase for the year ended 31 December 2011 compared to the year ended 31 December 2010 primarily to the increase in volume of the placements with banks and other financial institutions. CEB attributes the decrease for the year ended 31 December 2010 compared to the year ended 31 December 2009 primarily to the overall decline in interest rates in the market. The average interest rate on placements with banks and other financial institutions was 1.6 per cent., 0.4 per cent. and 0.7 per cent. for the years ended 31 December 2011, 2010 and 2009, respectively. In 2010, interest income from derivatives decreased by 93.4 per cent. to RUB21 million from RUB318 million in 2009. This significant decrease was attributable to the increase of cross-currency swap costs in the financial markets.

Total interest income CEB’s total interest income increased by 34.7 per cent. to RUB11,928 million for the year ended 31 December 2011 as compared to RUB8,857 million for the year ended 31 December 2010. The increase for the year ended 31 December 2011 compared to the year ended 31 December 2010 was primarily due to the increase in the average interest rate earned on loans to customers as well as the increase in the volume of loans to customers throughout 2011. CEB’s total interest income decreased by 4.1 per cent. to RUB8,857 million for the year ended 31 December 2010 from RUB9,239 million for the year ended 31 December 2009. This decrease was principally due to a decrease in the average interest rate earned on loans to customers and decrease in interest earned on derivatives. This was partially offset by an increase in the average balances of CEB’s loans to customers in 2010 as compared to 2009. The average interest rate on interest earning assets was 14.4 per cent., 13.6 per cent. and 14.7 per cent. for the years ended 31 December 2011, 2010 and 2009, respectively. The increase in average interest rate for the year ended 31 December 2011 compared to 2010 was primarily due to the increase of the average interest rates in loans to customers. The decrease in the average interest rate for the year ended 31 December 2010 compared to 2009 was primarily due to significant market-wide tightening of margins due to increased competition.

Interest Expense Interest expense principally consists of amounts paid by CEB as interest on (i) debt securities in issue (which include Eurobonds, domestic bonds and promissory notes), (ii) deposits from customers, (iii) deposits and balances from banks and other financial institutions (which include interbank borrowings, borrowings from the CBR and syndicated loans) and (iv) derivative transactions.

56 The following table sets forth the principal components of CEB’s consolidated interest expense for the years ended 31 December 2011, 2010 and 2009:

For the year ended 31 December 2011 2010 2009 (RUB thousands) Interest expense Debt securities in issue ...... 1,951,026 1,493,122 1,090,537 Deposits and balances from banks and other financial institutions(1) . 868,437 527,113 1,879,006 Current accounts and deposits from customers(1) ...... 1,246,190 994,712 474,909 Derivatives ...... 214,254 — — Total interest expense ...... 4,279,907 3,014,947 3,444,452

(1) The presentation of other borrowed funds was changed in 2011 to better present the substance of the underlying transactions. As at 31 December 2010 the Group presented balances due to certain government institutions as other borrowed funds as a separate caption in the consolidated statement of financial position. In 2011 these amounts are presented within current accounts and deposits from customers. For consistency of presentation, the prior year’s figures have been reclassified. As a result related interest expense for 2010 of RUB241,980 thousand, previously presented as interest expense on other borrowed funds was reclassified to interest expense on current accounts and deposits from customers and interest expense on deposits and balances from banks and other financial institutions

Interest expense on debt securities in issue Interest expense on debt securities in issue increased by 30.7 per cent. to RUB1,951 million for the year ended 31 December 2011 as compared to RUB1,493 million for the year ended 31 December 2010, itself a 36.9 per cent. increase from RUB1,091 million for the year ended 31 December 2009. The increase in 2011 was primarily due to an increase average volume of CEB’s debt securities in issue. The average interest rate on interest expense on debt securities in issue was 8.3 per cent., 8.9 per cent. and 7.9 per cent. for the years ended 31 December 2011, 2010 and 2009, respectively. In October 2009, CEB issued USD150,000,000 of loan participation notes with a coupon rate of 9.0 per cent. These loan participation notes matured on 25 October 2012. In May 2010, CEB issued USD300,000,000 of loan participation notes with a coupon rate of 7.75 per cent. These loan participation notes mature on 20 May 2013, however, a negligible amount of the noteholders exercised the put option contained in the terms of those notes on 20 May 2012 in relation to their notes. In June 2008, CEB issued RUB4,000,000,000 of bonds with a coupon rate of 9.00 per cent. for the first three interest periods and 11.50 per cent for the last three interest periods. These bonds matured on 28 June 2011. In February 2011, CEB issued RUB4,000,000,000 of bonds with a coupon rate of 8.30 per cent. These bonds mature on 18 February 2014, but the holders of these notes were entitled to redeem their notes early at par on 22 August 2012. In April 2011, CEB issued RUB5,000,000,000 of bonds with a coupon rate of 8.10 per cent which mature on 27 April 2014. In February 2012, CEB issued a further RUB5,000,000,000 of bonds with a coupon rate of 10.0 per cent. These bonds mature on 10 February 2015, however, these notes contain a put option at par exercisable on 12 February 2014. In July 2011, CEB issued USD40,000,000 of promissory notes with an interest rate of 3.65 per cent. to Deutsche Bank. These promissory notes matured on 30 January 2012.

Interest expense on deposits and balances from banks and other financial institutions Interest expense on deposits and balances from banks and other financial institutions increased by 64.8 per cent. to RUB868 million for the year ended 31 December 2011 compared to RUB527 million for the year ended 31 December 2010 which represented a 71.9 per cent. decrease compared to RUB1,879 million for the year ended 31 December 2009. CEB attributes the overall decrease from 2009 to 2011 primarily to the decrease in the average balances due to the strategy of transforming the funding base from higher cost sources to relatively cheaper funding sources. The average interest rate on deposits and balances from banks and other financial institutions was 5.4 per cent., 4.9 per cent. and 8.7 per cent. for the years ended 31 December 2011, 2010 and 2009, respectively.

57 Interest expense on current accounts and deposits from customers Interest expense on current accounts and deposits from customers increased by 25.3 per cent. to RUB1,246 million for the year ended 31 December 2011 as compared to RUB995 million for the year ended 31 December 2010, itself a 109.5 per cent. increase as compared with RUB475 million for the year ended 31 December 2009. These increases during the periods under review were primarily due to the increase in current accounts and deposits from customers which partially offset by the overall decline in interest rates. The increase from 2009 to 2010 was primarily due to the increase of the average deposits from customers balance. The average rate on interest expense on current accounts and deposits from customers was 5.5 per cent., 5.3 per cent. and 5.5 per cent. for the years ended 31 December 2011, 2010 and 2009, respectively.

Interest expense from derivatives In 2011, CEB recorded a charge of RUB214 million as an expense from derivatives compared to an income of RUB21 million for 2010. The increase in derivative expense in 2011 was primarily attributable to the change in the strategy of CEB from focusing on corporate loans to focusing on retail loans. During the second half of 2011, CEB aimed to increase the retail loan portfolio which was mainly denominated in Roubles. However, those loans were mainly funded through U.S. Dollar-denominated sources. In order to hedge the possible currency risk arising from the highly volatile financial market environment, CEB engaged significant volumes of USD/RUB swap transactions to offset the potential currency risk. This led to an increase in interest expense on derivatives compared to the year ended 31 December 2010.

Total interest expense CEB’s total interest expense increased by 42.0 per cent. to RUB4,280 million in 2011 from RUB3,015 million in 2010, which, in turn, represented a 12.5 per cent. decrease from RUB3,444 million in 2009. CEB’s interest expense increased for the year ended 31 December 2011 as compared to 2010 primarily due to a significant increase in interest expense on debt securities in issue, deposits and balances from banks and other financial institutions, current accounts and deposits from customers and interest expense on derivatives. CEB’s interest expense decreased for the year ended 31 December 2010 as compared to 2009, due to a decrease in the effective interest rate payable on CEB’s interest-bearing liabilities, primarily driven by a significant reduction in the cost of CEB’s CBR borrowings and a decrease in interest rate payable on amounts due to banks and other financial institutions. The repayment of the loan participation notes in the amount of USD250 million in April 2010 also contributed to the decrease in CEB’s interest expense in 2010. This was partially offset by the growth of CEB’s term corporate deposits. The average interest rate on interest bearing liabilities was 6.9 per cent., 6.5 per cent. and 7.8 per cent. for the years ended 31 December 2011, 2010 and 2009, respectively.

Net Fee and Commission Income Fee and commission income mainly consists of credit card fees, fees and commissions on penalties on overdue loans, commissions from insurance companies and retailers, banking services fees, and other similar fees and commissions paid to CEB. Fee and commission expense consists of credit card fees, fees to retailers, commission on cash transactions, and other similar banking services expenses paid by CEB.

Fee and Commission Income CEB’s total fee and commission income increased by 52.3 per cent. to RUB2,537 million for the year ended 31 December 2011 from RUB1,666 million for the year ended 31 December 2010, which, in turn, represented an increase of 7.7 per cent. from RUB1,547 million for the year ended 31 December 2009. CEB’s total fee and commission expense increased for the year ended 31 December 2011 as compared to 2010, primarily due to the increase in credit card fees resulting from the growth in the volume of credit card transactions and the number of new credit cards activated, as well as to a lesser extent insurance related fees, banking services fees (such as merchant fees, salary programme and money transfer fees) and penalties received on overdue loans.

58 CEB’s total fee and commission expense increased for the year ended 31 December 2010 as compared to 2009 primarily due to an increase in credit card fees resulting from the growth in the volume of credit cards transactions, increase in intermediary service fees resulting from participation in syndicated loans, and increase in other banking service fees. This increase was partially offset by decreases in penalties on overdue loans, commission for fund transfers, documentary services fees and commission received from retailers.

Fee and Commission Expense Primarily for the reasons set forth below, CEB’s total fee and commission expense increased by 159.7 per cent. to RUB1,013 million for the year ended 31 December 2011 from RUB390 million for the year ended 31 December 2010, which, in turn, represented an increase of 16.8 per cent. from RUB334 million for the year ended 31 December 2009. CEB’s total fee and commission income increased for the year ended 31 December 2011 as compared to 2010 primarily due to an increase in credit card fees paid by CEB resulting from the growth in the volume of credit cards transactions. The fees paid to merchants increased significantly due to high growth rates of the car and instant loan products. Expansion of the ATM network in 2011 through the acquisition of new ATMs led to an increase in cash transportation fees compared to 2010. CEB’s total fee and commission income increased for the year ended 31 December 2010 as compared to 2009 primarily due to an increase in credit card fees paid by CEB resulting from the growth in the volume of credit cards transactions. This increase was partially offset by decreases in expenses on portfolio and other management fee expenses, a decrease in expenses on fees to retailers and a decrease in banknote transactions. Other expenses consist of the penalties paid and return interest and commissions, which are additional costs attributable to the increase of the growth of the loan portfolio.

Other Operating Income The following table sets forth the principal components of CEB’s other operating income for the periods indicated.

Year ended 31 December 2011 2010 2009 (RUB thousands) Net gain on financial assets at fair value through profit or loss ...... 27,514 326,878 935,396 Net foreign exchange income ...... 188,393 175,377 289,141 Other income ...... 36,310 49,310 93,045 Other operating income ...... 252,217 551,565 1,317,582

Other operating income decreased by 54.3 per cent. to RUB252 million for the year ended 31 December 2011 as compared to RUB552 million for the year ended 31 December 2010 which was a further decrease as compared with RUB1,318 million for the year ended 31 December 2009. Decreases in 2011 and 2010 were primarily due to a decrease of 91.6 per cent. and 65.1 per cent. in net gain on financial instruments at fair value through profit or loss respectively which resulted primarily from the decrease in the market value of corporate debt instruments acquired by CEB, as well as less significant decreases in net foreign exchange income.

Impairment Losses Loan impairment losses increased by 64.8 per cent. to RUB1,190 million for the year ended 31 December 2011 as compared to RUB722 million for the year ended 31 December 2010. CEB attributes these increases to the significant growth of the loan to customer balances throughout 2011. Additionally, during 2011, CEB recovered loan impairment charges that were conservatively allocated during 2009 and 2010 due to the tightening of credit policies implemented during the Financial Crisis. This conservative approach was balanced by the increase in lending especially during the second half of 2011 and impairment losses returned to their usual level by the end of 2011. Loan impairment losses decreased by 76.6 per cent. to RUB722 million for the year ended 31 December 2010 as compared with RUB3,084 million for the year ended 31 December 2009. CEB attributes these decreases primarily to the significant improvement in the quality of CEB’s loan portfolio, a decrease in the

59 amount of NPLs over 2010 compared to 2009, and a related decrease in impairment charges, for the year ended 31 December 2010. The following table sets forth by segment loan impairment allowance and the ratio of loan impairment allowance by types of loans to the relevant loan portfolio as at the dates indicated.

As at 31 December 2011 2010 2009 Amount % Amount % Amount % (RUB thousands, except percentages) Loan impairment allowance on loans to large corporate clients ...... 472,991 2.3 553,467 2.0 518,401 2.3 Loan impairment allowance on loans to small and medium-size companies ...... 224,918 3.8 185,635 5.3 347,983 11.0 Loan impairment allowance on loans to individuals ...... 2,089,431 3.7 1,565,469 4.9 2,902,610 11.0 Total loan impairment allowance ...... 2,787,340 3.3 2,304,571 3.7 3,768,994 7.3

CEB’s impairment allowance for loans to customers increased by 21 per cent. to RUB2,787 million for the year ended 31 December 2011 as compared to RUB2,305 million for the year ended 31 December 2010. The effective provision rate for loans to customers (calculated as the ratio of impairment allowance for loans to customers to gross loans to customers) decreased to 3.3 per cent. as at 31 December 2011 as compared to 3.7 per cent. as at 31 December 2010. The increase in the absolute amount of the impairment allowance was a result of the significant growth of the loans to customers in terms of loans to individuals. CEB’s impairment allowance for loans to customers decreased by 38.8 per cent. to RUB2,305 million as at 31 December 2010 as compared with RUB3,769 million as at 31 December 2009. The effective provision rate for loans to customers (calculated as the ratio of impairment allowance for loans to customers to gross loans to customers) decreased to 3.7 per cent. as at 31 December 2010 as compared with 7.3 per cent. as at 31 December 2009. The decrease in the absolute amount of the impairment allowance was a result of significant improvement in the quality of the loans to customers and decrease in NPLs due to the efficient management of asset quality and effective collection activities emerging from the Financial Crisis. The following table sets forth distribution of NPLs by segment and the ratio of NPLs to gross loans for the particular segment as at the dates indicated.

As at 31 December 2011 2010 2009 Amount % Amount % Amount % (RUB thousands, except percentages) Non-performing loans to large corporate clients 34,341 0.2 — — 444,137 2.0 Non-performing loans to small and medium-size companies ...... 241,270 4.1 221,722 6.4 340,442 10.8 Non-performing loans to individuals ...... 2,222,517 3.9 1,786,128 5.6 2,840,831 10.7 Total non-performing loans ...... 2,498,128 3.0 2,007,850 3.2 3,625,410 7.0

As at 31 December 2011, the level of CEB’s NPLs increased to RUB2,498 million, which represents 3.0 per cent. of the CEB’s total gross loan portfolio, as compared to RUB2,008 million or 3.2 per cent. of the CEB’s total gross loan portfolio as at 31 December 2010 due to significant growth in the loan portfolio. As at 31 December 2010, the level of CEB’s NPLs decreased to RUB2,008 million or 3.2 per cent. of the CEB’s total gross loan portfolio, as compared to RUB3,625 million or 7.0 per cent. of the CEB’s total gross loan portfolio as at 31 December 2009 due to a partial recovery of the Russian economy during 2010, which resulted in a significant improvement of the quality of the CEB’s loan portfolio in 2010.

60 General and Administrative Expenses The following table sets forth the principal components of CEB’s general and administrative expenses for the periods indicated.

Year ended 31 December 2011 2010 2009 Amount % of total Amount % of total Amount % of total (RUB thousands except for percentages) General and administrative expenses Employee compensation ...... 2,321,254 48.8 1,906,115 51.1 1,572,675 47.3 Occupancy ...... 529,974 11.1 482,355 12.9 490,728 14.7 Social security premiums and federal budget payments ...... 567,672 11.9 263,060 7.0 248,610 7.5 Taxes other than on income ...... 249,659 5.3 207,474 5.6 186,584 5.6 Depreciation ...... 202,692 4.3 189,715 5.1 239,091 7.2 Repair and maintenance ...... 180,644 3.8 156,376 4.2 128,878 3.9 Communications and information services ...... 214,286 4.5 135,020 3.6 156,476 4.7 Office supplies ...... 183,889 3.9 116,962 3.1 92,305 2.8 Security ...... 59,250 1.2 54,733 1.5 56,768 1.7 Professional services ...... 48,882 1.0 54,360 1.5 48,999 1.5 Travel expenses ...... 56,911 1.2 44,551 1.2 26,547 0.8 Advertising and marketing ...... 69,708 1.5 43,494 1.2 14,643 0.4 Insurance premiums ...... 7,663 0.2 12,431 0.3 21,793 0.7 Other ...... 63,790 1.3 64,466 1.7 43,612 1.2 Total general and administrative expenses ...... 4,756,274 100.0 3,731,112 100.0 3,327,709 100.0

Total General and Administrative Expenses CEB’s total general and administrative expenses increased by 27.5 per cent. from RUB3,731 million for the year ended 31 December 2010 to RUB4,756 million for the year ended 31 December 2010, which represented a 12.1 per cent. increase as compared with RUB3,328 million for the year ended 31 December 2009. These increases were primarily due to the increase in employee compensation as a result of the growth in the average number of employees and an increase in average employee compensation. In addition, there were increases in expenses for communications and information services and occupancy mainly due to the development and improvement of the infrastructural network and investments such as ATMs and points of sale.

Income Tax Expense Income tax expense increased by 14.7 per cent. to RUB705 million for the year ended 31 December 2011 from RUB615million for the year ended 31 December 2010 which represented a 59.3 per cent. increase from RUB386 million for the year ended 31 December 2009. CEB attributes these increases primarily to the increase in income before tax.

Analysis of Consolidated Financial Condition as at 30 June 2012, 31 December 2011, 2010 and 2009 Assets CEB’s assets consist primarily of cash and cash equivalents, due from the central bank of the Russian Federation, placements with banks and other financial institutions, financial instruments at fair value through profit or loss, loans to customers, available for sale financial assets, held-to-maturity investments, current income tax prepayments and property and equipment. Primarily for the reasons set forth below, as at 31 December 2011, CEB’s total assets increased by 15.3 per cent. to RUB97,877 million as compared with RUB84,898 million as at 31 December 2010, itself an increase of 22.3 per cent. from

61 RUB69,407 million as at 31 December 2009. The following table sets forth the principal components of the CEB’s total assets as at the dates indicated.

As at 30 June As at 31 December 2012 2011 2010 2009 RUB % of RUB % of RUB % of RUB % of thousands total thousands total thousands total thousands total Assets Cash ...... 2,233,815 2.2 2,082,683 2.1 1,165,966 1.4 935,902 1.4 Due from the Central Bank of the Russian Federation ...... 4,846,467 4.8 2,901,194 3.0 1,036,131 1.2 580,318 0.8 Placements with banks and other financial institutions ...... 4,469,614 4.4 6,103,431 6.3 12,008,148 14.2 11,608,508 16.8 Financial instruments at fair value through profit or loss —Held by CEB ...... 434,716 0.4 759,561 0.8 117,017 0.1 160,597 0.2 —Pledged under sale and repurchase agreements ...... — — — — — — 59,479 0.1 Loans to customers ...... 83,213,841 81.2 80,591,551 82.3 60,480,396 71.2 47,925,256 69.0 Available-for-sale financial assets —Held by CEB ...... 3,115,135 3.1 2,657,327 2.7 6,789,651 8.0 1,754,448 2.5 —Pledged under sale and repurchase agreements ...... 306,290 0.3 — — 1,093,578 1.3 4,021,725 5.8 Held-to-maturity investments ...... 419,437 0.4 420,989 0.4 444,328 0.5 970,730 1.4 Current income tax prepayments ..... 758,804 0.7 17,417 0.0 613,969 0.7 384,367 0.5 Property and equipment ...... 1,243,675 1.2 1,050,377 1.1 677,280 0.8 599,793 0.9 Deferred tax asset ...... 105,608 0.1 38,180 0.0 — — — — Other assets ...... 1,252,858 1.2 1,254,109 1.3 471,194 0.6 406,052 0.6 Total assets ...... 102,400,260 100.0 97,876,819 100.0 84,897,658 100.0 69,407,175 100.0

Cash Cash balance increased by 7.3 per cent. to RUB2,234 million as at 30 June 2012 as compared to RUB2,083 million as at 31 December 2011, itself an increase of 78.6 per cent. as compared to RUB1,166 million as at 31 December 2010, itself a 24.6 per cent. increase as compared with RUB936 million as at 31 December 2009. Over the periods under review, the increase in cash balance was primarily attributable to the increase of the number of branches and ATMs, both of which require a significant amount of cash available to meet customer demands. By the end of 2011, the number of branches and ATM’s reached 123 and 550, respectively, from 109 and 276 as at the end of 2010 and from 92 and 181 as at the end of 2009, respectively.

Due from the Central Bank of the Russian Federation Due from the Central Bank increased by 67.1 per cent. to RUB4,846 million as at 30 June 2012 as compared to RUB2,901 million as at 31 December 2011, itself an increase of 180.0 per cent. as compared to RUB1,036 million as at 31 December 2010, which represents a further 78.6 per cent. increase as compared with RUB580 million as at 31 December 2009. CEB attributes this increase primarily to receiving funds from depositors and/or financial institutions just before the balance sheet date which therefore remained unused due to market conditions.

Placements with Banks and Other Financial Institutions Placements with banks and other financial institutions decreased by 26.8 per cent. to RUB4,470 million as at 30 June 2012 compared to RUB6,103 million as at 31 December 2011 itself a 49.2 per cent. decrease as compared to RUB12,008 million as at 31 December 2010 itself a 3.4 per cent. increase as compared to RUB11,609 million as at 31 December 2009. CEB attributes these decreases primarily to the utilisation of the available sources of funding for higher yield generating financial assets while keeping an adequate liquidity level.

62 Financial Assets at Fair Value through Profit or Loss Financial assets at fair value through profit or loss were RUB435 million as at 30 June 2012, a decrease of 42.8 per cent. from RUB760 million as at 31 December 2011 which itself represented an increase of 549.1 per cent. as compared to RUB117 million as at 31 December 2010. The increase in 2011 and decrease in the first half of 2012 was due to the change in the valuation of financial instruments in the volatile financial markets. Financial instruments at fair value through profit or loss decreased by 46.8 per cent. to RUB117 million as at 31 December 2010 as compared with RUB220 million as at 31 December 2009. CEB attributes this decrease primarily to the decrease in the valuation of such financial assets due to the highly volatile conditions in the financial markets.

Available for Sale Financial Assets Available for sale financial assets increased by 28.8 per cent. to RUB3,421 million as at 30 June 2012 as compared to RUB2,657 million as at 31 December 2011, which represented a 66.3 per cent. decrease as compared to RUB7,883 million as at 31 December 2010. This followed an increase of 36.5 per cent. from RUB5,776 million as at 31 December 2009.

Loans to Customers Loans to customers represents by far the largest component of CEB’s assets, accounting for 81.1 per cent., 82.3 per cent., 71.2 per cent. and 69.0 per cent. of total assets as at 30 June 2012 and 31 December 2011, 2010 and 2009, respectively. Loans to customers net of loan impairment allowance increased by 3.3 per cent. to RUB83,214 million as at 30 June 2012 compared to RUB80,592 million as at 31 December 2011, following an increase of 33.3 per cent. to RUB80,592 million as at 31 December 2011 as compared to RUB60,480 million as at 31 December 2010, itself a 26.1 per cent. increase as compared with RUB47,925 million as at 31 December 2009. CEB attributes these increases to the growth in loans to customers due to addition of new borrowers across all business lines and primarily the retail loan portfolio in the aftermath of the Financial Crisis. The following table sets forth loans to customers net of loan impairment allowance as at 30 June 2012 and 31 December 2011, 2010 and 2009, respectively.

As at 30 June As at 31 December 2012 2011 2010 2009 (RUB thousands) Gross loans to customers ...... 86,148,842 83,378,891 62,784,967 51,694,250 Impairment allowance ...... (2,935,001) (2,787,340) (2,304,571) (3,768,994) Net loans to customers ...... 83,213,841 80,591,551 60,480,396 47,925,256

63 Individual, SME and Commercial Loans and Distribution of Loans to Customers by Industry The following table sets forth the industry concentration of loans to customers as at 30 June, 2012, 31 December 2011, 2010 and 2009 (gross of impairment allowance).

As at 30 June As at 31 December 2012 2011 2010 2009 (RUB (RUB (RUB (RUB thousands) (%) thousands) (%) thousands) (%) thousands) (%) Industry Loans to individuals Auto loans ...... 33,812,055 53.3 28,137,662 49.7 13,326,623 42.0 11,499,656 43.4 Cash loans ...... 6,694,087 10.6 6,098,988 10.8 5,265,312 16.7 5,874,507 22.2 Credit cards ...... 10,910,016 17.2 9,974,756 17.6 5,483,439 17.4 3,732,158 14.1 Instant loans ...... 8,523,422 13.4 8,812,276 15.6 4,824,121 15.0 3,148,681 11.9 Mortgage loans ...... 3,390,919 5.3 3,492,407 6.2 2,806,077 8.8 2,192,873 8.3 Other loans to individuals ...... 114,747 0.2 59,722 0.1 29,872 0.1 24,711 0.1 Total loans to individuals ...... 63,445,246 100.0 56,575,811 100.0 31,735,444 100.0 26,472,586 100.0 Total loans to SMEs ...... 5,052,338 100.0 5,889,554 100.0 3,489,920 100.0 3,150,969 100.0 Commercial loans (other than to SMEs) Real Estate ...... 3,263,698 18.5 4,632,478 22.1 5,059,597 18.4 5,229,826 23.7 Petro-chemistry & Metallurgy ...... 2,040,220 11.6 2,771,826 13.2 2,638,018 9.6 2,693,239 12.2 Tourism ...... 1,745,603 9.9 4,017,445 19.2 4,481,231 16.3 2,668,185 12.1 Public sector ...... — — — — 3,428,367 12.4 — — Energy ...... — — 1,385,761 6.6 2,013,503 7.3 1,817,423 8.2 Automotive ...... 1,166,393 6.6 688,765 3.3 1,893,152 6.9 1,359,822 6.2 Soft Commodities & Agricultural Products ...... 681,474 3.9 952,717 4.6 97,499 0.4 — 2.6 Leasing ...... 726,870 4.1 654,985 3.1 1,446,237 5.2 566,542 — Technology, IT & Electronic Equipment . 1,160,112 6.6 621,507 3.0 253,335 0.9 1,140,219 5.2 Retail ...... 1,431,358 8.1 1,312,545 6.3 2,613,616 9.5 939,212 4.3 Private Banking ...... 1,066,036 6.0 917,301 4.4 1,015,074 3.7 952,708 4.3 Construction ...... 1,404,349 8.0 550,017 2.6 93,929 0.3 1,063,139 4.8 Food and Beverages Services ...... 1,030,644 5.8 545,213 2.6 513,502 1.9 2,286,684 10.4 Textile ...... 1,018,654 5.8 734,390 3.5 87,905 0.3 428,577 1.9 Media ...... 90,026 0.5 103,159 0.5 252,697 0.9 404,050 1.8 Transportation ...... — — 397,644 1.9 769,240 2.8 3,360 0.0 Services ...... — — 199,392 1.0 164,564 0.6 — — Machinery ...... — — — — 264,997 1.0 — — Paper and Pulp & Forestry ...... 100,031 0.6 41,010 0.2 — — — — Other ...... 725,790 4.1 387,371 1.9 473,140 1.6 517,709 2.3 Total commercial loans ...... 17,651,258 100.0 20,913,526 100.0 27,559,603 100.0 22,070,695 100.0

As at 30 June 2012, the five largest commercial sectors accounted for 56.0 per cent. of the loan portfolio, compared to 67.5 per cent., 66.1 per cent. and 66.6 per cent. as at 31 December 2011, 2010 and 2009, respectively.

Distribution of Loans to Customers by Business Line The following table sets forth the concentration of loans to customers by business line as at 30 June 2012, and 31 December 2011, 2010 and 2009 (gross of impairment allowance).

As at 30 June As at 31 December 2012 2011 2010 2009 Amount % Amount % Amount % Amount % (RUB thousands, except percentages) Loans to corporate clients .... 17,651,258 20.5 20,913,526 25.1 27,559,603 43.9 22,070,695 42.7 Loans to small and medium enterprises ...... 5,052,338 5.9 5,889,554 7.0 3,489,920 5.6 3,150,969 6.1 Loans to individuals ...... 63,445,246 73.6 56,575,811 67.9 31,735,444 50.5 26,472,586 51.2 Gross loans to customers .... 86,148,842 100.0 83,378,891 100.0 62,784,967 100.0 51,694,250 100.0

64 Distribution of Loans to Customers by Currency The majority of CEB’s loan portfolio is denominated in Russian Roubles and U.S. Dollars. The following table sets forth CEB’s loans to customers, net of loan impairment allowance, by currency as at the dates indicated.

As at 30 June As at 31 December 2012 2011 2010 2009 (RUB thousands) Russian Roubles ...... 70,901,597 61,083,679 37,116,297 26,860,757 U.S. dollar ...... 11,296,334 17,744,307 15,262,304 17,600,442 Euro ...... 1,015,910 1,763,565 8,101,795 3,464,057 Other currencies ...... ———— Total loans to customers ...... 83,213,841 80,591,551 60,480,396 47,925,256

Rouble-denominated loans are the largest component of loans to customers by currency representing 75.8 per cent. of the total loan portfolio as at 31 December 2011 and 61.4 per cent. of the total loan portfolio as at 31 December 2010. Rouble-denominated loans increased by 64.6 per cent. to RUB61,084 as at 31 December 2011 as compared to RUB37,116 million as at 31 December 2010, itself a 38.2 per cent. increase as compared with RUB26,861 million as at 31 December 2009. CEB attributes these increases primarily to growth of the total loan portfolio especially in terms of retail banking which are primarily denominated in Roubles.

Distribution of Loans to Customers by Maturity CEB classifies loans to customers by maturity based on the following categories: ‘‘Less than One Month’’; ‘‘One Month to 3 Months’’; ‘‘Three Months to One Year’’; ‘‘From One Year to Five Years’’; ‘‘More than 5 Years’’ and ‘‘No Maturity’’. The following table sets out loans to customers by maturity (net impairment allowance). See Note 36 to the 2009 Financial Statements and the 2010 Financial Statements, and Note 35 to the 2011 Financial Statements.

As at 30 June As at 31 December 2012 2011 2010 2009 (RUB thousands, except percentages) Less than 1 Month ...... 7,949,330 7,111,189 8,585,617 3,793,562 1 to 3 Months ...... 13,477,772 14,094,050 12,333,437 7,432,825 3 Months to 1 Year ...... 25,585,682 24,395,723 13,067,791 11,945,162 1 to 5 Years ...... 32,734,730 31,709,953 22,931,868 21,458,581 More than 5 Years ...... 2,618,840 2,472,378 2,939,685 2,281,090 No Maturity ...... 847,487 808,258 621,998 1,014,036 Total loans to customers ...... 83,213,841 80,591,551 60,480,396 47,925,256

Property and Equipment Property and equipment increased by 18.4 per cent. to RUB1,244 million as at the six months ended 30 June 2012 as compared to RUB1,050 million as at 31 December 2011, itself an increase of 55.1 per cent. as compared to RUB677 million as at 31 December 2010, which also constituted a 12.9 per cent. increase as compared with RUB600 million as at 31 December 2009. CEB attributes these increases to the openings of new branches leading to increase of leasehold improvements, purchasing of additional ATMs and other equipment as well as capitalisation of software expenditures.

Liabilities CEB’s liabilities consist primarily of deposits and balances from banks and other financial institutions, current accounts and deposits from customers, and debt securities issued. As at 30 June 2012, CEB’s total liabilities were RUB86,269 million, which represents an increase of 5.3 per cent as compared to 31 December 2011. As at 31 December 2011, CEB’s total liabilities increased by 16.4 per cent. to RUB81,892 million as compared to RUB70,340 million itself an increase of 23.9 per cent. as compared

65 with RUB56,793 million as at 31 December 2009. The following table sets forth CEB’s liabilities as at the dates indicated.

As at 30 June As at 31 December 2012 2011 2010 2009 % of % of % of % of Amount total Amount total Amount total Amount total (RUB thousands, except percentages) Liabilities Financial instruments at fair value through profit or loss . 254,973 0.3 426,191 0.5 339,471 0.5 75,476 0.1 Deposits and balances from banks and other financial institutions ...... 21,839,195 25.3 21,444,109 26.2 16,006,972 22.7 14,729,140 25.9 Current accounts and deposits from customers ...... 32,943,049 38.2 33,921,877 41.4 35,530,107 50.5 22,310,240 39.3 Debt securities in issue ...... 29,302,967 34.0 25,507,504 31.2 17,849,049 25.4 19,299,076 34.0 Deferred tax liability ...... — — — — 80,244 0.1 28,611 0.1 Other liabilities ...... 1,928,802 2.2 592,635 0.7 534,043 0.8 350,084 0.6 Total liabilities ...... 86,268,986 100.0 81,892,316 100.0 70,339,887 100.0 56,792,627 100.0

Financial Liabilities at Fair Value through Profit or Loss Financial liabilities at fair value through profit or loss were RUB255 million as at 30 June 2012, a decrease of 40.2 per cent. compared to 31 December 2011. Financial liabilities at fair value through profit or loss increased by 25.5 per cent. to RUB426 million as at 31 December 2011 as compared to RUB339 million as at 31 December 2010, itself an increase of 349.8 per cent. as compared to RUB75 million as at 31 December 2009.

Deposits and Balances from Banks and Other Financial Institutions Deposits and balances from banks and other financial institutions were RUB21,839 million as at 30 June 2012, an increase of 1.8 per cent. compared to RUB21,444 million as at 31 December 2011, itself an increase of 34.0 per cent. as compared to RUB16,007 million as at 31 December 2010 which represents a 8.7 per cent. increase as compared with RUB14,729 million as at 31 December 2009. CEB attributes these increases primarily to the borrowings obtained from money market transactions and other sources (such as intercompany borrowings, funds received from EBRD and IFC under a syndicated loan agreement) in order to support the growth of the balance sheet. In August 2011, CEB obtained A and B tranche syndicated loans from the EBRD and the IFC and 15 other commercial banks amounting to USD250 million. The interest rate applicable for the USD100 million A loan is LIBOR (3m) + 3.33 per cent. and the interest rate applicable for the USD150 million B loan is LIBOR (3m) + 2.5 per cent. The maturity dates for A loan is 11 August 2014 and was 9 August 2012 for the B loan.

Current Accounts and Deposits from Customers Current accounts and deposits from customers were RUB32,943 million as at 30 June 2012, a decrease of 2.9 per cent. compared to 31 December 2011. Current accounts and deposits from customers decreased by 4.5 per cent. to RUB33,922 million as at 31 December 2011 as compared to RUB35,530 million as at 31 December 2010 which represents a 59.3 per cent. increase as compared with RUB22,310 million as at 31 December 2009. Decreases are mainly due to seasonal effects, thus, during the period under review, CEB managed to increase its current accounts and deposit from customers base steadily. Historically, towards the end of the year CEB attracts the majority of its deposits from corporate customers, in particular retailers and wholesale traders.

66 Deposits by Customer The following table sets forth CEB’s deposits by type of customer and product as at the dates indicated.

As at 30 June As at 31 December 2012 2011 2010 2009 % of % of % of % of Amount total Amount total Amount total Amount total (RUB thousands, except percentages) Corporate Current accounts and demands deposits ...... 5,564,599 16.9 3,966,669 11.7 3,485,153 9.8 2,365,470 10.6 Term deposits ...... 15,247,459 46.3 13,308,413 39.2 20,621,504 58.0 12,458,626 55.8 Total corporate ...... 20,812,058 63.2 17,275,082 50.9 24,106,657 67.8 14,824,096 66.4 Retail Current accounts and demands deposits ...... 3,369,036 10.2 3,124,302 9.2 1,726,672 4.9 1,297,160 5.8 Term deposits ...... 7,740,381 23.5 9,358,957 27.6 5,726,205 16.1 5,686,989 25.5 Total retail ...... 11,109,417 33.7 12,483,259 36.8 7,452,877 21.0 6,984,149 31.3 State and Public Organisations Current accounts and demands deposits ...... — — 1,310,895 3.9 2,873,146 8.1 — — Term deposits ...... 1,021,574 3.1 2,852,641 8.4 1,097,427 3.1 501,995 2.3 Total State and Public organisations ...... 1,021,574 3.1 4,163,536 12.3 3,970,573 11.2 501,995 2.3 Total current accounts and deposits from customers ... 32,943,049 100.0 33,921,877 100.0 35,530,107 100.0 22,310,240 100.0

Debt Securities Issued Debt securities issued were RUB29,303 million as at 30 June 2012, an increase of 14.9 per cent. compared to 31 December 2011. Debt securities issued increased by 42.9 per cent. to RUB25,508 million as at 31 December 2011 as compared with RUB17,849 million as at 31 December 2010 itself a 7.5 per cent. decrease from RUB19,299 million as at 31 December 2009. In October 2009, CEB issued USD150,000,000 of loan participation notes with a coupon rate of 9.0 per cent. These loan participation notes mature on 25 October 2012. In May 2010, CEB issued USD300,000,000 of loan participation notes with a coupon rate of 7.75 per cent. These loan participation notes mature on 20 May 2013; however, the holders of a negligible amount of the notes exercised the put option contained in the terms of those notes on 20 May 2012. In June 2008, CEB issued RUB4,000,000,000 of bonds with a coupon rate of 9.00 per cent. for the first three interest periods and 11.50 per cent for the last three interest periods. These bonds matured on 28 June 2011. In February 2011, CEB issued RUB4,000,000,000 of bonds with a coupon rate of 8.30 per cent. These bonds mature on 18 February 2014, but the holders of those notes are entitled to require an early redemption at par on 22 August 2012. In April 2011, CEB issued RUB5,000,000,000 of bonds with a coupon rate of 8.10 per cent which mature on 27 April 2014. In February 2012, CEB issued a further RUB5,000,000,000 of bonds with a coupon rate of 10.0 per cent. These bonds mature on 10 February 2015, but the holders of those bonds are entitled to require an early redemption at par on 12 February 2014. In July 2011, CEB issued USD40,000,000 of promissory notes with an interest rate of 3.65 per cent. to Deutsche Bank. These promissory notes matured on 30 January 2012.

67 Shareholders’ Equity The following table sets forth CEB’s equity as at the dates indicated.

Six months ended 30 June Year ended 31 December 2012 2011 2010 2009 (RUB thousands) Shareholders’ Equity Share capital ...... 8,549,789 8,549,789 8,549,789 8,549,789 Share premium ...... 158,631 158,631 158,631 158,631 Additional paid-in-capital ...... 285,924 285,924 285,924 285,924 Revaluation reserve for available-for-sale financial assets ...... (81,872) (125,656) (367) 22,558 Hedge reserve ...... (62,143) 13,753 (15,561) — Retained earnings ...... 7,280,945 7,102,062 5,579,355 3,597,646 Total Shareholders’ Equity ...... 16,131,274 15,984,503 14,557,771 12,614,548

There was no change in additional paid-in capital which was RUB286 million as at 30 June 2012 and 31 December 2011, 31 December 2010 and 31 December 2009. Total shareholder equity increased 9.8 per cent. to RUB15,985 million as at 31 December 2011 as compared to RUB14,558 million as at 31 December 2010 itself an increase of 15.4 per cent. from RUB12,615 million as at 31 December 2009. CEB attributes these increases primarily to increases in retained earnings.

Capital Adequacy The following table sets forth the composition of the capital position of CEB as at 31 December 2011, 2010 and 2009 calculated in accordance with the requirements of the Basel Accord.

As at 31 December 2011 2010 2009 (RUB thousands, except percentages) Share capital ...... 8,549,789 8,549,789 8,549,789 Share premium ...... 158,631 158,631 158,631 Additional paid-in capital ...... 285,924 285,924 285,924 Retained earnings ...... 7,102,062 5,579,355 3,597,646 Total Tier 1 capital ...... 16,096,406 14,573,699 12,591,990 Intangible assets ...... (163,846) (136,548) (96,408) Revaluation reserve for available-for-sale financial assets ...... (125,656) (367) 22,558 Hedge reserves ...... 13,753 (15,561) — Total Tier 2 capital ...... (275,749) (152,476) (73,850) Total capital ...... 15,820,657 14,421,223 12,518,140 Risk-weighted assets Banking book ...... 86,427,409 72,981,852 62,429,181 Trading book ...... 406,506 749,249 964,715 Total risk-weighted assets ...... 86,833,915 73,731,101 63,393,896 Total capital expressed as a percentage of risk-weighted assets (‘‘total capital ratio’’) ...... 18.22% 19.56% 19.75% Total tier 1 capital expressed as a percentage of risk-weighted assets (‘‘tier 1 capital ratio’’) ...... 18.54% 19.77% 19.86%

According to the CBR, as of 1 July 2012, CEB’s total capital ratio calculated according to Russian Accounting Standards was 14.2 per cent. which represents a higher figure than the minimum ratio required by CBR (10 per cent.).

68 Total risk-weighted assets increased to RUB86,834 million as at 31 December 2011 as compared to RUB73,731 million as at 31 December 2010 itself a 16.3 per cent. increase from RUB63,394 million as at 31 December 2009. The increases in risk-weighted assets during these periods were primarily due to the growth in loans to customers. However, CEB’s total capital adequacy ratio remained substantially above the minimal capital adequacy ratio of 8.0 per cent. recommended by the Basel Committee on Banking Regulations and Supervisory Practices. CEB regularly reviews ways to maintain and strengthen its capital position, including by means of capital increases and the attraction of subordinated debt that meets Tier 2 capital requirements. CEB must meet the capital adequacy requirements set out by the CBR based on its RAS financial statements. The CBR requires banks to maintain a capital adequacy ratio of 10 per cent. CEB was in compliance with CBR requirements as at each of the three previous fiscal years. CEB is constantly monitoring its statutory capital and risk weighted assets to ensure the compliance with CBR’s capital adequacy requirements. CEB performs monthly computation of CBR capital adequacy ratio and undertakes daily monitoring of the level of risk-weighted assets and capital base to ensure proper allocation of funds.

Credit-Related Commitments The following table sets out the breakdown of CEB’s credit-related off-balance sheet commitments as at 30 June 2012 and 31 December 2011, 2010 and 2009.

As at 30 June As at 31 December 2012 2011 2010 2009 (RUB thousands) Contracted amount Loan and credit line commitments ...... 13,416,814 12,511,386 8,738,063 3,375,368 Guarantees and letters of credit ...... 2,587,283 1,454,387 949,846 1,991,973 Credit card commitments ...... 5,880,655 4,779,337 1,692,506 807,472 Undrawn overdraft facilities ...... 123,552 83,730 32,814 19,955 Total credit related off-balance sheet commitments . 22,008,304 18,848,840 11,413,229 6,194,768

Total credit-related off-balance sheet commitments increased by 16.8 per cent. to RUB22,008 million as at 30 June 2012 as compared to RUB18,849 million as of 31 December 2011. Total credit-related off-balance sheet commitments increased by 65.1 per cent. to RUB18,849 million as at 31 December 2011 as compared to RUB11,413 million as at 31 December 2010 itself an increase of 84.2 per cent. as compared to RUB6,195 million as at 31 December 2009. CEB attributes the increases during the period under review to the increase in the business volumes with its customers.

Funding CEB’s principal sources of funding are deposits from corporate customers (both retail and corporate), debt securities in issue and deposits and balances from banks and other financial institutions. As at 30 June 2012, CEB’s ten largest current accounts and term deposits amounted to RUB11,400 million, or 13.2 per cent. of CEB’s total liabilities as compared to RUB12,139 million, or 14.8 per cent. of CEB’s total liabilities as at 31 December 2011 and as compared to RUB16,467 million, or 23.4 per cent. of CEB’s total liabilities as at 31 December 2010. For the six months ended 30 June 2012, the aggregate amount of CEB’s indebtedness was RUB86,269 million, which consisted of RUB32,943 million in current accounts and deposits from customers, RUB29,303 million of debt securities in issue, RUB21,839 million in deposits and balances from banks and other financial institutions, RUB255 million in financial liabilities at fair value through profit and loss, and RUB1,929 million in other liabilities. As at 30 June 2012, current accounts and deposits from customers comprised 38.2 per cent. of the CEB’s total liabilities. As at 31 December 2011, the aggregate amount of CEB’s indebtedness was RUB81,892 million, which consisted of RUB33,922 million in current accounts and deposits from customers, RUB25,508 million of debt securities issued, RUB21,444 million in deposits and balances from banks and other financial institutions, RUB426 million in financial liabilities at fair value through profit and loss, and RUB593 million in other liabilities. As at 31 December 2010, the aggregate amount of CEB’s indebtedness was RUB70,340 million, which consisted

69 of RUB35,530 million in current accounts and deposits from customers, RUB17,849 million in debt securities issued, RUB16,007 million in deposits and balances from banks and other financial institutions, RUB339 million in financial liabilities at fair value through profit and loss, RUB80 million in deferred tax liability and RUB534 million in other liabilities. As at 31 December 2009, the aggregate amount of the CEB’s indebtedness was RUB56,793 million, which consisted of RUB22,310 million in current accounts and deposits from customers, RUB19,299 million in debt securities issued, RUB14,729 million in deposits and balances from banks and other financial institutions, RUB75 million in financial liabilities at fair value through profit and loss, RUB29 million in deferred tax liability and RUB350 million in other liabilities. CEB has been increasing its Rouble-denominated funding significantly in 2011 and the first half of 2012 in order to match the increase in its Rouble-denominated lending in order to minimise its currency exchange risk.

Sources of Funding The following table sets forth the CEB’s sources of funding as at the dates indicated.

As at 30 June As at 31 December % of % of % of % of total 2012 total 2011 total 2010 total 2009 (RUB thousands, except percentages) Deposits and balances from banks and other financial institutions Vostro accounts ...... 0.0 198,103 0.2 167,590 0.1 54,020 0.0 2,552 Term deposits ...... 25.0 21,346,134 26.3 21,276,519 21.7 15,035,521 19.1 10,765,240 Repurchase agreements ...... 0.0 294,958 — — 1.3 917,431 7.0 3,961,348 Total ...... 26.0 21,839,195 26.5 21,444,109 23.1 16,006,972 26.1 14,729,140 Current accounts and deposits from customers Current accounts and demand deposits —Retail ...... 4.0 3,369,036 3.9 3,124,302 2.5 1,726,672 2.3 1,297,160 —Corporate ...... 7.0 5,564,599 4.9 3,966,669 5.0 3,485,153 4.2 2,365,470 —State and Public Organisations ...... 1.6 1,310,895 4.1 2,873,146 — — Term deposits —Retail ...... 9.0 7,740,381 11.6 9,358,957 8.3 5,726,205 10.1 5,686,989 —Corporate ...... 18.0 15,247,459 16.5 13,308,413 29.7 20,621,504 22.1 12,458,626 —State and Public Organisations ...... 1.0 1,021,574 3.5 2,852,641 1.6 1,097,427 0.9 501,995 Total ...... 39.0 32,943,049 42.0 33,921,877 51.2 35,530,107 39.6 22,310,240 Debt securities in issue Loan participation notes ..... 18.0 14,794,085 18.1 14,621,220 19.9 13,815,383 20.7 11,663,328 Russian bonds denominated in RUB...... 17.0 14,297,361 11.3 9,151,856 5.8 4,003,698 13.6 7,635,748 Promissory notes issued ...... 0.0 211,521 2.1 1,734,428 0.0 29,968 — — Total ...... 35.0 29,302,967 31.5 25,507,504 25.7 17,849,049 34.3 19,299,076 Total funding ...... 100.0 84,085,211 100.0 80,873,490 100.0 69,386,128 100.0 56,338,457

Current Accounts and Deposits from Customers, Banks and Other Financial Institutions During the period under review, the main source of funding for CEB was current accounts and deposits from customers. As at 30 June 2012, current accounts and deposits from customers comprised 38.2 per cent. of CEB’s total liabilities compared with 41.4 per cent. of the CEB’s total liabilities as at 31 December 2011, compared with 50.5 per cent. and 39.3 per cent. as at 31 December 2010 and 31 December 2009, respectively. Deposits and balances from banks and other financial institutions comprised 25.3 per cent. of

70 CEB’s total liabilities as at 30 June 2012 and 26.2 per cent. of CEB’s total liabilities as at 31 December 2011, compared with 22.7 per cent. as at 31 December 2010 and 25.9 per cent. as at 31 December 2009.

Domestic and International Debt Capital Markets In June 2008, CEB issued RUB4,000 million 9.00 per cent. bonds which subsequently were repaid. CEB has been issuing bonds in the domestic capital markets since 2004. As at 30 June 2012, CEB had 3 domestic bond issues of RUB14.3 billion outstanding. These bonds are listed on the Moscow Interbank Currency Exchange (‘‘MICEX’’) and mature in February 2014, April 2014 and February 2015.

Analysis by Segment CEB prepares its segment reports under three main business segments: commercial banking; retail banking; treasury. Retail banking is CEB’s largest segment, which represented 74.5 per cent. of the revenues, 69.0 per cent. of the total assets and 67.0 per cent. of total liabilities for six months ended 30 June 2012 and 71.6 per cent. of revenues, 64.6 per cent. of total assets and 63.0 per cent. of total liabilities for the year ended 31 December 2011. Commercial banking represented 22.0 per cent. of the revenues, 24.8 per cent. of the total assets and 27.0 per cent. of total liabilities for the six months ended 30 June 2012 and 23.2 per cent. of CEB’s revenues and 30.0 per cent. of total assets and 32.4 per cent. of total liabilities for the year ended 31 December 2011. Treasury represented 3.5 per cent. of the revenues, 4.1 per cent. of the total assets and 3.7 per cent. of total liabilities for the six months ended 30 June 2012 and 5.2 per cent. of CEB’s revenues, 3.9 per cent. of total assets and 3.5 per cent. of total liabilities for the year ended 31 December 2011. The following table sets forth certain data for CEB’s segments as at 30 June 2012 and 31 December 2011, 2010 and 2009.

As at 30 June As at 31 December 2012 2011 2010 2009 (RUB thousands) Segment assets Treasury ...... 4,171,791 3,827,485 9,529,570 7,711,509 Commercial banking ...... 25,358,509 29,410,776 34,663,208 28,391,749 Retail banking ...... 70,634,043 63,201,971 39,457,979 32,427,500 Unallocated assets ...... 2,235,917 1,436,587 1,246,901 876,417 Total assets ...... 102,400,260 97,876,819 84,897,658 69,407,175 Segment liabilities Treasury ...... 3,167,274 2,826,234 3,300,837 2,426,195 Commercial banking ...... 23,290,971 26,590,109 36,631,979 28,599,493 Retail banking ...... 57,791,539 51,596,408 29,410,882 25,312,769 Unallocated assets ...... 2,019,202 879,566 996,189 454,170 Total liabilities ...... 86,268,986 81,892,317 70,339,887 56,792,627

As at 30 June As at 31 December 2012 2011 2010 2009 (RUB thousands) Segment revenue Treasury ...... 329,759 761,939 1,005,962 1,319,969 Commercial banking ...... 2,064,294 3,417,120 3,084,001 3,259,483 Retail banking ...... 6,996,486 10,537,626 6,984,334 7,524,028 Total ...... 9,387,759 14,716,685 11,074,297 12,103,480 Segment result Treasury ...... 49,924 248,558 629,401 1,015,929 Commercial banking ...... 702,121 1,133,468 1,038,228 784,108 Retail banking ...... 853,495 2,095,319 1,549,224 113,521 Total ...... 1,605,540 3,477,345 3,216,853 1,913,558

71 BUSINESS CEB is a full-service Russian bank. As at the date of this Prospectus, CEB is one of the 50 largest banks in Russia in terms of total assets and one of the 40 largest Russian banks in terms of net income, according to RBC. CEB offers a wide range of retail, corporate and SME banking services to clients located in Moscow and the Moscow region as well as across 41 other major Russian regions. CEB was established in 1997 as a wholly owned subsidiary of Finansbank A.S., one of Turkey’s leading full service banks, for purposes of enhancing Finansbank A.S.’s presence in Russia and building up its loan portfolio. CEB entered the retail banking sector in 2000. CEB currently has three principal business lines: • retail banking services: including term, savings and current deposits; cash loans; mortgages; car loans; instant loans; plastic cards (both credit and debit), including salary cards for corporate customers and co-branded cards together with multinational companies operating in Russia such as IKEA, Auchan and Metro Cash&Carry; money transfers and bill payments; pension funds; foreign exchange services and internet banking for retail customers; • corporate banking services: including long and short-term lending products; overdraft facilities; deposit taking; project finance and trade finance; settlement operations; payroll services; factoring; POS acquiring; and foreign exchange; and • SME banking services: including factoring; investment loans; working capital loans; letters of credit and bank guarantees; non-credit products such as deposits, POS acquiring, settlement and cash services; and payroll services. CEB’s products and services are distributed in Moscow and the Moscow region as well as in 41 other major Russian regions. As at 1 June 2012, CEB had the 40th largest distribution network among Russian banks, according to RBC. As at 30 June 2012, CEB had a total of 123 branches and over 10,900 points of sale. Of the 123 branches, 46 were located in Moscow or the Moscow region. CEB is a Russian commercial bank organised as a closed joint-stock company under the laws of the Russian Federation. CEB holds a general banking licence #3311 of 22 February 2012 issued by the Central Bank of the Russian Federation on 2 February 2007 authorising it to operate as a full-service bank.

History CEB is part of the Fiba Group, one of Turkey’s largest diversified financial conglomerates. In 1994, the Fiba Group opened a representative office of Credit Europe Bank (Suisse) S.A. in Moscow and subsequently established CEB (as Finansbank (Moscow) Ltd), a Russian-registered commercial banking entity, as a wholly owned subsidiary of Finansbank A.S., one of Turkey’s leading full service banks. On 23 May 1997, CEB obtained a banking licence from the CBR to operate as a bank providing commercial banking services. CEB entered the retail banking sector in 2000 and was admitted by the CBR to the national deposit insurance system in February 2005. In March 2007, CEB commenced its rebranding programme, rolling out its new corporate name, CEB, and logo in connection with the sale of Fiba Group’s controlling interest in Finansbank A.S. See ‘‘Corporate Organisation—Holding Structure’’. CEB finalised the rebranding programme in 2007.

Corporate Organisation Holding Structure From its incorporation in 1997 up until 2006, CEB was a wholly owned subsidiary of Finansbank A.S. The ownership of CEB was restructured in August 2006, when the National Bank of Greece (‘‘NBG’’) acquired a 46 per cent. interest in Finansbank A.S. from the Fiba Group. In the course of this restructuring, Credit Europe Bank N.V. acquired 98.14 per cent. of CEB from Credit Europe Group N.V. (formerly Fiba International Holding N.V.) (‘‘CEG’’). As a result, Credit Europe Bank N.V. became the immediate parent of CEB. Credit Europe Bank N.V. is a commercial bank headquartered in Amsterdam and regulated by De Nederlandsche Bank, the Dutch central bank (the ‘‘DNB’’). Members of the senior management team of CEB hold the remaining minority interests in CEB. Credit Europe Bank N.V. is a wholly owned subsidiary of CEG, which in turn is wholly owned by Fiba Holding A.S. CEB believes that it will be able to take advantage of the strong economic links between the CIS, Turkey and Europe and benefits from its relationship with other banks within the Fiba Group network with regard

72 to their trade finance experience, their retail, corporate and SME banking expertise and experience in operating in volatile markets. The following chart illustrates the position of CEG and CEB within the Fiba Group as of the date of this Prospectus:

Fiba Holding AS (TR)

95%

Credit Europe Group NV

100% 99.90% Credit Europe Credit Europe Asugirari SA Bank NV (NL) (RO)

98.14% 99.99% 100% 98.4% 100% 98.39% 100% 97.63% 99.99% Credit Credit Credit Credit Credit SC Credit Credit CJSC Credit Fibabanka Europe Europe Europe Bank Europe Bank Europe Bank Europe Europe Bank Europe Bank A.S. Leasing LLC Leasing LLC (Suisse) SA (Romania) Dubai) Ltd Leasing IFN Ltd (RU) (UA) (TR) (UA) (RU) (CH) SA (RO) (UAE) SA (RO)

100% 100%

Credit Credit Europe Europe Life Ipotecar IFN Ltd (RU) SA (RO) 29OCT201219394024

Principal Subsidiaries CEB has one principal subsidiary: Credit Europe Life Ltd., which is a fully owned subsidiary of CEB established in 2007 with the purpose of providing a wide range of life insurance services. As of 31 December 2011, Credit Europe Life Ltd.’s total assets amounted to RUB428 million and shareholders’ equity amounted to RUB0.2 million.

CEB Finance S.A. The Issuer is an orphan special purpose vehicle incorporated in Luxembourg, solely for the purpose of issuing Eurobonds in order to fund loans to CEB. The Issuer is not owned directly or indirectly by CEB. However, its results of operation are consolidated into CEB Financial Statements due to CEB’s ability to control the decisions of the Board.

Market Position Competition and Market Share The Russian banking sector is highly fragmented as measured by the number of participants. According to the CBR, as of 1 July 2011, there were 965 credit organisations operating in Russia, out of which 902 were banks and the rest non-banking credit institutions. At the same time, according to the CBR as of 1 July 2011, the top 30 banks operating in Russia account for RUB33,138 billion total assets, comprising approximately 74.9 per cent. of the total assets in the Russian banking sector. See ‘‘The Banking Sector and Banking Regulation in Russia—Russian Banking System’’. Market share by total assets of the state-owned banks among the top-30 banks by total assets increased from 65.5 per cent. in 2007 to 74.9 per cent. in June 2012. The top six banks in Russia in terms of ranking by size of assets are state-controlled or affiliated. See ‘‘The Banking Sector and Banking Regulation in Russia—Russian Banking System’’. According to RBC, as of 1 July 2012, CEB was ranked as the 41st largest bank in Russia by total assets.

Competitive Strengths CEB believes its competitive advantages include: • Strong support from the Fiba Group. As a member of the Fiba Group, CEB is able to leverage the Fiba Group’s product-structuring, funding, IT, training and credit and risk management resources to expand and strengthen its business. In particular, the expansion of CEB has been historically financed in large part by capital contributions and bank deposits from members of the Fiba Group, which have

73 indicated that they are strategically focused on maintaining and expanding CEB’s operations in the high-growth Russian banking market. CEB also receives ongoing IT support from the Fiba Group banks, including software development and project management support. Members of the Fiba Group also support CEB in the area of human resources, hosting management trainee programmes for employees of CEB in The Netherlands. CEB also tailors many of its own credit and risk policies and procedures based on policies and procedures that have been developed and tested in other banking institutions within the Fiba Group. In particular, to better analyse the creditworthiness of potential and existing customers, CEB has implemented a new customer rating methodology based on a variety of quantitative and qualitative factors that has been developed by Credit Europe Bank N.V. and approved by the DNB. • Extensive experience of the Fiba Group in the retail and SME banking sectors. CEB benefits from its access to the resources and substantial experience of the Fiba Group in the retail and SME banking sectors in Western and Central Europe. The Fiba Group has operated in the Turkish retail and SME sectors since 1995 and 2003, respectively, in the Romanian retail and SME sectors since 2000 and 2003, respectively, and in the Russian retail and SME sectors since 2003 and 2005, respectively. As a result, the Fiba Group has accumulated substantial experience in the retail and SME banking sectors, including the development of credit scoring technologies. CEB leverages the Fiba Group’s expertise in order to analyse the trends in performance of its retail portfolio and respond promptly to changes in the credit risk profile of its retail loan portfolio and drew on such expertise when it took pre-emptive measures such as increasing its capital prior to the onset of the financial crisis, selling its portfolio of securities and managing its provisioning for higher risk products. CEB further aims to draw on the significant experience of Credit Europe Bank (Romania) S.A. and Credit Europe Bank N.V. in the SME banking area to enhance its own SME banking capabilities, which are still in the early stages of development. • Strategically developed branch network targeting regions with strong growth potential. Despite its relatively small size, CEB currently has a significant banking network with 123 branches and over 10,900 points of sale located in Moscow and other major regions of Russia, including St. Petersburg, Samara, Nizhny Novgorod, Kazan, Ufa, Perm, Yekaterinburg, Chelyabinsk, Novosibirsk, Rostov-on-Don, Omsk, Krasnodar, Saratov, Voronezh, Tyumen and Surgut. CEB has further developed a strategic approach that involves identifying regions with strong growth potential and strategic industries, opening representative offices that engage in retail operations in such regions and then, if deemed appropriate, converting such offices into full-service branches. CEB believes that its broad array of retail and corporate products makes it well suited to expansion in the Russian regions. • Significant retail business with strong car loans, instant loans and credit card market share. CEB was one of the first banks in the consumer lending market in Russia and as such has accumulated experience and knowledge of the market since the early 2000s. In that time, together with the experience and knowledge of its group banks operating in other emerging markets, CEB has focused on developing competitive retail products. As a result, CEB is now one of leading providers of car loans, credit cards, and instant loans in the Russian market and has recently achieved strong rankings in the consumer finance market. According to Frank Research Group, as of 30 June 2012, CEB ranked 13th by volume in active outstanding credit cards with a market share of 1.9 per cent., and 5th by volume in car loans with a market share of 5.8 per cent. As of 30 June 2012, CEB ranked 6th in instant loans with a market share of 4.8 per cent, according to Frank Research Group. CEB has developed a large network of over 10,900 points of sales to support these products and an extensive scorecard which resulted in a low NPL ratio of 3.89 per cent. for retail products as of 30 June 2012. • Experienced senior management and staff. CEB’s senior management have substantial experience in the Russian, Turkish, Romanian and European retail, SME and corporate banking markets. In addition, many of CEB’s senior staff have international banking experience, having completed rotations in other banking institutions within the Fiba Group. This has assisted in helping CEB respond quickly and appropriately to the onset of the Financial Crisis and to avoid the worst effects of the downturn in the Russian economy.

Strategy CEB’s strategy is to continue its development as a full-service bank offering corporate, SME and retail banking services in Russia. To become a leading player in all three of its main business lines—corporate,

74 retail and SME banking and to continue to add value for its customers, employees and shareholders, CEB adopted the following strategies: • Diversifying asset generation and funding sources to make CEB less susceptible to local and international political and economic fluctuations CEB strives to continue to further diversify its balance sheet by accommodating a larger range of funding sources and assets. In commercial and corporate banking, CEB aims to further diversify its asset and customer base by engaging in a larger volume of transactions with a medium- to low face value with the intention of mitigating the credit and concentration risk. In retail banking, CEB also aims to identify itself with a customer base with comfortable income levels and to diversify the customer base with small ticket sized products, a broader range of products, increased regional footprint and increased number of merchant partners. CEB strives to develop a solid funding base that consists of diverse funding sources such as local and international deposits, wholesale funding products such as syndication, domestic and international bonds and promissory notes, bilateral borrowings, and lending from international financial institutions such as IFC and EBRD. Such diversification will allow CEB to better understand any local or international, political or economic fluctuations in the market and will give flexibility to adjust itself to changes in financial markets. • Maintaining distribution channels in Moscow and expanding in the regions both via CEB’s branch network and via co-operation with business partners CEB actively expanded its network of branches from 1999 until the onset of the current Financial Crisis. CEB has renewed its expansion drive and, currently, offers its services to customers through a network of 123 branches, located in Moscow and in 41 other Russian regions. CEB plans to continue to actively expand its ATM network and currently has more than 651 ATMs. To maintain consistent growth of its loan portfolio CEB aims to further penetrate into the regions of Russia while increasing its market share in Moscow. CEB’s management seeks to identify regions which it believes have strong potential for development, then it establishes a small representative office which engages in fairly limited retail banking operations. After CEB develops knowledge of and a level of comfort in a region, it aims to expand the scope of its operations by converting the representative office into a branch, which provides retail, SME and corporate banking services. This approach has historically yielded stable business volumes across three business lines and has been an effective profit generation model. • Implementing consistent bank-wide risk management strategies in order to maintain high asset quality Since its establishment, CEB has only recorded losses from NPLs in its corporate loan portfolio of U.S.$6 million. CEB plans to continue to maintain this low level of losses from NPLs, and intends to enhance its strong credit management function to sustain healthy expansion of its customer portfolio. • Expanding its retail offering CEB also aims to be the retail bank of choice for the people of the Russian Federation while delivering value to its shareholders. As Russia has emerged from the Financial Crisis, CEB has changed its focus to retail lending rather than corporate lending due to shrinking margins in corporate banking as well as lowered risk profile, and CEB intends to continue its rapid customer growth through a multi-channel and multi-product platform. In addition, CEB seeks to maintain long-term customer relationships by providing innovative banking services and products, cross-selling affordable and convenient banking and bancassurance products and services. CEB seeks to develop in new segments such as instant loans, educational loans and holiday loans. CEB also plans to continue to develop its key partnerships with retailers to develop its plastic cards business and shopping mall penetration strategy. • Continuing to follow best practices that have been employed by other banks within the Fiba Group that operate in markets outside of Russia CEB will focus on asset quality with regular evaluation of its business unit performance based on asset quality in addition to sales growth. In order to assess asset quality CEB uses advanced scoring algorithms that are tailored to local conditions based on CEB’s international experience.

75 • Being an employer of choice for Russian and international employees by providing them with career and development options locally and internationally To support staff efficiency, CEB has developed a human resources programme comprising career planning, international recruitment efforts and an extensive training programme for both new and existing employees. Furthermore, CEB has redesigned its operations, invested in scalable information technology and network infrastructure to support branch operations and centralised its back-office operations to create sales and customer-oriented branch activities.

Principal Business Segments Overview CEB’s business activities extend to retail banking services, corporate banking services and SME banking services. CEB’s retail and corporate banking have traditionally both been large contributors to CEB’s overall business. However, since the Financial Crisis, CEB has focused primarily on retail banking and that segment has expanded significantly and become a considerably more important part of CEB’s business. CEB also has a separate treasury function. The following table sets forth the breakdown of CEB’s total assets and liabilities as at 30 June 2012, and 31 December 2011, 2010 and 2009 according to CEB’s principal lines of business:

Total Assets and Liabilities As at 30 June As at 31 December 2012 2011 2010 2009 (RUB (RUB (RUB (RUB thousands) (%) thousands) (%) thousands) (%) thousands) (%) Assets: Retail banking ...... 70,634,043 69.0 63,201,971 64.6 39,457,979 46.5 32,427,500 46.7 Commercial banking(1) ...... 25,358,509 24.8 29,410,776 30.0 34,663,208 40.8 28,391,749 40.9 Treasury ...... 4,171,791 4.1 3,827,485 3.9 9,529,570 11.2 7,711,509 11.1 Unallocated assets ...... 2,235,917 2.1 1,436,587 1.5 1,246,901 1.5 876,417 1.3 Total assets ...... 102,400,260 100.0 97,876,819 100.0 84,897,658 100.0 69,407,175 100.0 Liabiliti1es: Retail banking ...... 57,791,539 67.0 51,596,408 63.0 29,410,882 41.8 25,312,769 44.6 Commercial banking(1) ...... 23,290,971 27.0 26,590,109 32.4 36,631,979 52.1 28,599,493 50.4 Treasury ...... 3,167,274 3.7 2,826,234 3.5 3,300,837 4.7 2,426.195 4.3 Unallocated liabilities ...... 2,019,202 2.3 879,566 1.0 996,189 1.4 454,170 0.7 Total liabilities ...... 86,268,986 100.0 81,892,317 100.0 70,339,887 100.0 56,792,627 100.0

(1) Commercial banking—includes corporate and SME banking operations which include deposit taking and commercial lending, settlements and cash operations. Commercial banking services also include trade finance.

Retail Banking Retail banking is one of CEB’s strategic focuses. CEB’s retail banking activities include term, savings and current deposits, various consumer lending products such as car loans, cash loans, mortgages, instant loans, plastic cards (both credit and debit), including salary cards for corporate customers and co-branded cards for individuals, money transfers and bill payments, pension funds, foreign exchange services and internet banking. As at 30 June 2012, CEB had 3.2 million retail customers, compared to 2.9 million as at 31 December 2011, 2.5 million as at 31 December 2010 and 2.1 million as at 31 December 2009.

Retail Lending As at 30 June 2012, CEB was ranked as the 18th largest Russian bank by retail loan portfolio, according to RBC. From late 2008 to early 2010, CEB’s focus in light of the economic uncertainty prevalent during that period had been on maintaining asset quality rather than asset growth with respect to its retail loan portfolio. During such period it slowed its retail loan book expansion, withdrew or suspended certain products, prioritised lending to existing clients and strengthened its risk assessment approach to new and current clients. From mid-2010, CEB has continued to expand its retail loan portfolio with a focus on car loans and credit cards. The Bank has developed relationships with car manufacturers such as Chrysler, Chery, Hyundai, UZ

76 Daewoo, Volvo, KIA, Mitsubishi and AvtoVAZ to enhance its product offerings through cooperation in joint lending programmes and promotions. In addition to car loans, CEB invested heavily in the infrastructure of its card products and initiated co-branded card projects with international retailers such as IKEA, Auchan and Metro Cash & Carry. As a result, the number of credit cards issued by CEB has increased from 390,000 in 2010 to over 1.5 million as at 30 June 2012. As at 30 June 2012, CEB’s retail loan portfolio (gross of allowance for loan losses) amounted to RUB63,445 million compared to RUB56,576 million as at 31 December 2011, RUB31,735 million as at 31 December 2010 and RUB26,473 million as at 31 December 2009. • Car loans: CEB is one of the leaders in the Russian market in car loans and plans to continue to expand its car loan business. CEB offers car loans to finance purchase of a variety of vehicles, including both new and used cars. As of 30 September 2012, CEB’s car loans had an average principal amount of RUB335,000 with the average tenor of 53 months. Express loans which constitute 82 per cent. of CEB’s car loan portfolio take just a few hours to approve and require few documents from the customer. Car loans are collateralised by security taken over the motor vehicle purchased. Car loans are offered through the car dealers as well as through CEB’s branches. CEB enters into non-exclusive cooperation agreements with car dealers for a term of 1-2 years. Having established strong partnerships with more than 600 car dealers, CEB now has a diversified and robust partner network. In addition, CEB participates in joint lending programmes with a number of car manufacturers, including Hyundai, UZ-Daewoo, GAZ, Chery, ZAZ, AvtoVAZ and commercial car manufacturers including FUSO, ISUZU, GAZ and Toyota Hino. In 2012 CEB initiated two new programmes with Mitsubishi and KIA. To further strengthen its products offerings, CEB introduced a system that uses an automated credit scoring, which is faster than a manual check by the employees. This enables CEB to make faster credit decisions while maintaining good asset quality. These measures contributed to CEB ranking as the 5th largest Russian bank by the volume of car loan portfolio and the 5th largest Russian bank by the quantity of car loans issued as of 1 July 2012. The government programme providing subsidies for car purchases ceased in 2011, as a result CEB ceased the issuance of car loans supported by the government subsidies in 2011. The average maturity of the car loans provided by CEB is 53 months, therefore CEB will still receive the government subsidies for the car loans issued prior to 2011 and until the end of 2014. In addition, in 2011, CEB undertook measures to offset the decrease in car loans through joint lending programmes with car manufacturers. • Cash loans: CEB provides cash loans for general needs of customers. Cash loans are offered through CEB’s branches, direct sales, as well as CEB’s website and call centre to mostly existing customers. CEB is able to provide its customers with an initial credit decision and individual interest rate within 30 minutes with only the passport information, income verification and background check of the customer. CEB also offers pre-approval loans to its existing customers with a proven credit record with CEB via direct-marketing campaigns. Recently, CEB has also introduced a special programme of cash loans for State employees. • Instant (or point of sale) loans: In contrast to cash loans, instant (or point of sale) loans are offered to customers at points of sale, solely for the purpose of purchasing certain products, such as household goods, furniture, garments, specific electronics and home improvement products. In addition, CEB has recently become increasingly focused on new segments and regional opportunities for instant loans, such as loans for payment for education, fitness, medical care and vacation services, and issuance of instant loans to Russian customers in Turkey for shopping needs. Instant loans are offered through a partner network of over 2,000 merchants with more than 8,800 sales locations, including Snow Queen, MKM, Lazurit, City Fitness, Mondial, Hoff, Auchan, IKEA and others. CEB operates an automated reporting system that facilitates the monitoring of sales performance of every sales point and sales agent and it is capable of detecting fraudulent activities by measuring anomalies in sales dynamics. • Credit cards: CEB is one of the key participants in the credit cards market in Russia. According to the reports of Frank Research Group, CEB is ranked 13th largest issuer of outstanding credit cards in Russia in the first half of 2012 with a 1.9 per cent. market share and higher than market average growth rate. CEB’s portfolio of active cards has increased consistently since 2009. According to management calculations, the number of active cards (defined as cards with a minimum of one transaction in the last six months) has increased from 301,000 as at 31 December 2009 to 390,000, 608,000 and 709,000 as at 31 December 2010 and 2011 and 30 June 2012, respectively. Also according to management calculations, the gross credit card receivables under those cards has increased

77 accordingly over the same period, from RUB3,732 million as at 31 December 2009 to RUB5,483 million, RUB9,975 million and RUB10,910 million as at 31 December 2010 and 2011 and 30 June 2012, respectively. In addition, CEB has succeeded in keeping credit card NPLs down to 3.8 per cent. for 2011, one of the lowest levels in the market. CEB owns a wide range of product portfolios for different groups including strong co-brand programmes with large international retailers as well as unique offers such as ‘‘and instalment option’’ feature and online real-time reward loyalty programme. Most of CEB’s card products are instantly issued in branches, shopping malls or retail points of sale. In 2012, CEB together with MasterCard, has launched PayPass contactless functionality for a significant part of its cards portfolio. In addition to CEB’s own brand portfolio with segmented product range in two largest universal payment systems, MasterCard and VISA, CEB also manages a solid portfolio of co-branded and private label cards: • Auchan card: In August 2006, CEB initiated the issuance of Auchan card, a VISA credit card, via its partnership with Banque Accord (currently rebranded as Oney Bank), a subsidiary of Auchan Group. Currently, Auchan customers can apply for an Auchan card in 38 Auchan hypermarkets and 13 Auchan Citi supermarkets. The Auchan cards are issued instantly and are accepted where a payment by VISA is accepted. A special rewards programme also exists for Auchan cardholders. • Metro card: In the first half of 2007, CEB was selected as preferred service provider of Metro Cash & Carry for financial services. Metro card is a private label card with features such as grace period and revolving facility and an opportunity to pay by instalments with a very low interest rate. Metro Card is provided within 25 minutes of application to customers with Metro Cash & Carry access card for entrepreneurs in almost 60 Metro Cash & Carry stores through dedicated CEB sales points. • IKEA VISA and IKEA Family Finance Card: In December 2008, CEB launched another successful co-brand programme with IKANO LLC, a subsidiary of Ikano Group, which is owned by the Kamprad family. Ingvar Kamprad is the founder of IKEA. Ikano develops, owns and manages companies in the area of finance, real estate, insurance, asset management and retail. Together with IKEA point of sales loans, IKEA VISA has been introduced to customers with the ability to issue instantly. Later in 2010, the in-house loyalty card of IKEA, IKEA FAMILY, has been merged with a payment card. This produced IKEA Family Finance Card (‘‘IFFC’’) the first loyalty and finance card within IKEA worldwide. IFFC is a private label card instantly issued within dedicated zones inside IKEA stores. • MEGA card: MEGA card is the first and only ‘‘multi merchant/online-real time’’ loyalty and payment card in Russian Federation. It was launched in May 2010 in Kazan and now covers all 14 MEGA shopping malls in Russia, all of which are owned by the IKEA group. MEGA card is also a joint project with IKANO LLC. The sales specialists located in 30 sales points inside each MEGA shopping mall provide instant issuance of MEGA cards to customers. More than 100 member retailer brands joined the MEGA card programme since its launch in May 2010, including IKEA, Inditex Group brands such as Zara, Pull & Bear, Bershka and others, Marks & Spencer, SportMaster, Detskiy Mir and others. • Acquiring business: In addition to its credit cards business, CEB is an important participant in the point of sale (‘‘POS’’) market in Russia. Since 2006, CEB has acquired approximately 900 retail and service brands with 10,000 Europay, MasterCard and Visa (‘‘EMV’’) POS terminals which are Payment Card Industry Data Security Standard (‘‘PCI DSS’’) compliant and certified throughout Russia. Each month more than 2 million card transactions pass through CEB POS terminals which are located within a large number of major high end retailers such as IKEA, Inditex Group companies such as Zara, Pull & Bear, Massimo Dutti, Bershka, Stradivarius and others as well as Snow Queen, Pegas Touristik, Foto.ru, Metro Cash & Carry, Marks & Spencer, Lacoste, Tommy Hilfiger, Nine West, Aldo, Galereya Alex, MKM, Mostravel, Lazurit, Tsvet Divanov, 8 Marta, Moscow Time, City Fitness, Beringov Proliv, Linzmaster, Savage, Clarks, Cacharel and Colin’s. With flexible and fast project management capability, CEB executes cashier—POS integration, MasterCard Pay Pass transactions, instant loyalty earn & burn facilities (under which the customers are awarded points for purchasing goods with CEB’s credit cards co-branded with Mega shopping malls, and can use the earned points for discounts on future purchases) as well as instalment options and secure e-commerce. As CEB’s acquiring business has grown, so have volumes of transactions that CEB has processed. According to management calculations, the volumes of transactions increased from RUB14,841 million for 2010 to

78 RUB50,114 million for 2011, and the volume for the first six months of 2012 amounted to RUB38,021 million. According to market research conducted by Russian Standard Bank, CEB is the fifth largest bank in Russia in terms of volume of activity in the acquiring market, with a market share of 4.2 per cent. as at 30 June 2012. • Mortgages: CEB has a relatively small mortgage portfolio and does not regard its mortgage operations as a growth area for the Group. CEB takes a conservative approach and requires a maximum loan-to-value ratio of 80 per cent. for mortgage loans, and only advances such loans to borrowers with proven income. Mortgages are available in local currencies for new construction and second-hand purchases, distributed through branches, mortgage brokers, realtors and housing agencies. Together with mortgages, CEB sells life, property and title insurance to its mortgage loan customers. This product was restricted during the Financial Crisis, with loans provided only to important long-term, credit-worthy customers at very low loan-to-value ratios. The restrictions were removed in 2010. CEB also purchases mortgage loan portfolios from other banks. In line with its mortgage strategy developed and tested during the Financial Crisis, CEB requires each mortgage loan customer to maintain a current account and a seller of each loan portfolio to provide a buy-back guarantee to cover potential default by the borrowers, in connection with the mortgage loans CEB acquires. The following table sets forth a break-down of CEB’s retail loan portfolio (gross of allowance for loan losses) by type for the periods shown:

As of 30 June As of 31 December 2012 2011 2010 2009 (RUB (RUB (RUB (RUB thousands) (%) thousands) (%) thousands) (%) thousands) (%) Retail loan product Car loans ...... 33,812,055 53.3 28,137,662 49.7 13,326,623 42.0 11,499,656 43.4 Cash loans ...... 6,694,087 10.6 6,098,988 10.8 5,265,312 16.6 5,874,507 22.2 Credit cards ...... 10,910,016 17.2 9,974,756 17.6 5,483,439 17.3 3,732,158 14.1 Instant loans ...... 8,523,422 13.4 8,812,276 15.6 4,824,121 15.2 3,148,681 11.9 Mortgage loans ...... 3,390,919 5.3 3,492,407 6.2 2,806,077 8.8 2,192,873 8.3 Holiday loans ...... 114,747 0.2 59,722 0.1 29,872 0.1 24,711 0.1 Total ...... 63,445,246 100.0 56,575,811 100.0 31,735,444 100.0 26,472,586 100.0

CEB derives approximately 46 per cent. of its outstanding retail and credit card loan portfolio from the Russian regions.

Retail Funding CEB offers a wide range of term, savings and on-demand deposits to its clients. As at 30 June 2012, CEB had a total of RUB11,109 million in current accounts and term deposits from retail customers accounting for 33.7 per cent. of CEB’s total current accounts and deposits from customers, compared to RUB12,483 million and 36.8 per cent. as of 31 December 2011, RUB7,453 million and 20.9 per cent. as at 31 December 2010 and RUB6,984 million and 31.3 per cent. as at 31 December 2009. CEB has been accepted into the retail deposit insurance scheme established by the Retail Deposit Insurance Law. See ‘‘The Banking Sector and Banking Regulation in Russia—Russian Banking Regulation’’. CEB offers four different types of savings accounts: fixed term deposits, deposits with monthly interest payments, income growth deposits and accumulating savings deposits. Accounts can be opened in Roubles, Euro or US Dollars, for terms of between one month and two years. Part of CEB’s retail banking strategy is to increase the size of overall deposits taken from investors and in particular Rouble-denominated deposits. However, due to the relatively low concentration of deposit amounts per account, a key feature of this strategy will be to increase the number of depositors with whom CEB transacts.

Payroll Cards CEB actively promotes payroll services to its corporate customers. As of 31 August 2012, with its network of more than 700 ATMs, CEB was providing payroll services to 650 companies and over 85,000 employees. CEB continues to actively expand this service and has acquired approximately 218 new companies with approximately 21,000 new employees as customers to date in 2012.

79 Bancassurance CEB offers car insurance, standalone life and disability insurance, credit shield insurance linked to instant loans, car loans, credit cards and cash loans, as well as property and title insurance linked to mortgages. CEB offers property insurance, unemployment insurance, roadside assistance membership (‘‘RAT cards’’), guaranty asset protection (‘‘GAP’’) linked to instant and car loans. These are high margin products which are of growing importance to the profitability of CEB. The insurance companies CEB works with include Allianz, Zurich and Rosgosstrah.

Pension Funds As of the date of this Prospectus, CEB sells the pension products of three non-government pension funds—Lukoil Garant, Renaissance Life and Pensions and European Pension Fund via its branch network. CEB collects more than 2,500 customer applications monthly. Together with bancassurance products, pension funds contribute to sales efficiency and significantly improve cross sell ratios.

Western Union Money transfer products allow for the cross border transfer of funds between individuals whose bank accounts do not allow for such transactions. They also allow an individual to collect an incoming payment of cash at any linked location in the world. CEB has invested in the Western Union programme to become a strong participant in the money transfer product market. CEB is the first Russian bank to offer Western Union money transfers via an ATM.

Distribution Channels & Marketing CEB offers its retail products through multiple sales channels including its branches, wide network of point of sale outlets, direct sales teams, and telesales, as well as website and Internet-banking. These channels are backed up by cost effective marketing strategies such as internet advertising, SMS alerts, SMM marketing, leads generation, e-mails, automated dialling, and occasionally via billboard, radio and press advertising. CEB utilises analytical CRM techniques to determine potential customers with high propensity to buy in order to maximise the returns on marketing investments.

Corporate Banking CEB’s corporate banking activities include long and short-term lending products, overdraft facilities, deposit taking, project finance, structured and trade finance, settlement operations, payroll services, factoring, POS acquiring, foreign exchange and other corporate banking services. CEB extends these services to large- and mid-sized domestic and international, including in particular Turkish, corporate customers. As of 30 June 2012, CEB had 1,500 corporate customers. CEB’s corporate customers operate in key sectors of the Russian economy, including petro chemistry and metallurgy, real estate and construction, energy, retail, automotive, machinery, transportation, food and beverage services, textile, media and oil and gas. Since 2010, CEB has also become increasingly focused on the tourism sector. CEB has established solid relationships with the largest tourism companies in Russia, providing them with comprehensive banking products, including cash management and short and long term financing. CEB divides its corporate banking customers into ‘‘corporate’’ clients (which includes large corporates), which have annual revenues of U.S.$200 million or more, and ‘‘commercial’’ customers, which have annual revenues from U.S.$25 million to U.S.$200 million and facilities originated via regional networks. CEB has built strong relationships with large corporates, federal retailers and blue chip companies by offering a full range of corporate banking services in accordance with the clients’ needs. Large corporates is a separate segment of corporate clients which have annual revenues of U.S.$750 million or more. CEB successfully combined emerging markets and European know-how to provide high quality solutions to the different needs of large corporate clients across Russia. In addition to these segments, in response to potential competition from Sberbank (following the recent acquisition of Denizbank) (see ‘‘Risk Factors—Risks Related to CEB’s Business and Industry—CEB is subject to significant competition in the Russian banking market, particularly from state-owned banks’’) CEB has established individual desks that are specifically focused on tourism and Turkish relations. As of 30 June 2012, approximately 61 per cent. of CEB’s corporate banking loans were to ‘‘corporate’’ customers, with the remainder to ‘‘commercial’’ customers. Corporate banking activity is focused on Moscow and seven

80 major Russian Regions: St. Petersburg, Samara, Ufa, Rostov-on-Don, Kazan, Novosibirsk and Yekaterinburg. As of 30 June 2012, 11 branches were providing Corporate Banking products and services. In the second half of 2012, CEB’s branch in Sochi will start offering the full range of corporate banking services to corporate clients. The region is important for CEB as there are a large number of Turkish construction companies in the region. The region saw a large influx of construction companies since the start of the preparations for the Sochi 2014 Olympic Winter Games. CEB was servicing these companies from its head-office in Moscow but due to the significant demand of its customers, the services will now be provided at CEB’s Sochi branch.

Corporate Lending Corporate lending is one of the principal components of CEB’s business with corporate loans (gross of impairment allowances) representing 17.2 per cent., 21.4 per cent., 32.5 per cent. and 31.8 per cent. of total assets as at 30 June 2012 and 31 December 2011, 2010 and 2009, respectively. As at 30 June 2012, total loans to large corporate customers (gross of impairment allowances) amounted to RUB17,651 million representing 20.5 per cent. of total loans to customers, compared to RUB20,914 million and 25.1 per cent. as at 31 December 2011, RUB27,560 million and 43.9 per cent. as at 31 December 2010, and RUB22,071 million and 42.7 per cent. as at 31 December 2009. Thus the corporate loan portfolio (gross of allowances) increased by 24.9 per cent. between 2009 and 2010, decreased by 24.1 per cent. for the year ended 31 December 2011 and decreased by a further 15.6 per cent. for the six months ended 30 June 2012. CEB’s corporate lending services comprise a range of Rouble- and foreign currency-denominated credit products, including medium- and short-term loans, bank guarantees and letters of credit (see ‘‘Business— Principal Business Segments—Corporate Banking—Trade Finance’’) offered to corporate clients. In general, CEB requires credit support or collateral as security for the loans and credit facilities that it grants to corporate customers notwithstanding the segment. The main forms of credit support and collateral are security over real estate, equipment, vehicles, inventories, receivables, as well as corporate and bank guarantees and other types of collateral that CEB deems appropriate including cash cover which is a priority collateral for CEB. CEB always requires that the pledged property is insured. CEB provides loans only to companies it believes have good credit histories, low gearing and solid cash generation capacity. During 2011 and first half 2012 the corporate loan market in Russia was characterised by increased price competition among Russian banks supported by significant Rouble liquidity in the market. CEB chose to maintain corporate banking franchise value without compromising its conservative credit risk management policies and principles. Consequently, price competition in the area of corporate lending was not among the top priorities of the bank. During 2010-2012 CEB focused on retail products which provide higher returns. The repayments received from corporate loan book were transformed to retail assets with high return and lower cost of risk during these years. In line with its strategy CEB targets industries with a high growth potential and focuses on growing its customer base while reducing average loan exposure per customer / group of related customers. CEB’s customer base for credit products includes companies in the petro chemistry and metallurgy, real estate and construction, tourism, energy, retail, automotive, machinery, leasing, private banking, transportation, food and beverage services, textile, media, electronics and oil and gas. As at 30 June 2012, real estate accounted for 18.5 per cent. of its loans to corporate customers and 3.8 per cent. of its total loan portfolio (gross of impairment allowances) compared to 22.2 per cent. and 5.6 per cent., respectively, as at 31 December 2011, 18.4 per cent. and 8.1 per cent., respectively, as of 31 December 2010, and 23.7 per cent. and 10.1 per cent., respectively, as of 31 December 2009. CEB provides short-term credits to large corporate companies, establishing mid-term and long-term credit limits for large corporates, based on their creditworthiness, reputation, strong collateral and successful long-term relationships with CEB. Negotiations with large corporates are focused on providing them with cross-sales products and keeping them as strategic clients. The Turkish desk was established specifically to better address the needs of the Turkish-owned Russian corporate customers in Russia. This development will also help CEB to defend itself from potential competition from Sberbank following its acquisition of Denizbank (see ‘‘Risk Factors—Risks Related to CEB’s Business and Industry—CEB is subject to significant competition in the Russian banking market, particularly from state-owned banks’’). CEB offers a set of products that address the needs of Turkish construction companies and manufacturers in Russia based on the knowledge passed on by group companies which have considerable experience of working with Turkish companies in many jurisdictions.

81 In conjunction with its group bank in Turkey, Fibabanka, CEB is able to provide group financing solutions as well as specific investment solutions to these customers. The Tourism desk, which was set up in 2010, focuses on travel agents in Russia and provides a range of products designed to serve companies in the travel business. The Fiba group has extensive experience working with companies in the travel business from its work with Finansbank which can be applied to the Russian market. This segment provides extensive cross selling opportunities for CEB as it is able to provide holiday loans to customers from the travel agencies it works with. As at 30 June 2012, the largest 20 borrowers of CEB collectively accounted for 66.1 per cent. of CEB’s total corporate loan portfolio compared to 74.2 per cent. as of 31 December 2011, 78.9 per cent. as of 31 December 2010 and 80.3 per cent. as of 31 December 2009. As at 30 June 2012, 42.3 per cent. of CEB’s corporate loans (net of impairment allowances) were denominated in Roubles, 52.3 per cent. were denominated in U.S. Dollars and 5.4 per cent. in other currencies, compared to 18.1 per cent. denominated in Roubles, 73.9 per cent. denominated in U.S. Dollars and 8.0 per cent. in other currencies as at 31 December 2011, 24.2 per cent. denominated in Roubles, 46.4 per cent. denominated in U.S. Dollars and 29.4 per cent. in other currencies as of 31 December 2010, and 15.8 per cent. denominated in Roubles, 68.9 per cent. denominated in U.S. Dollars and 15.3 per cent. denominated in other currencies as at 31 December 2009. The considerable increase in the share of Rouble-denominated corporate loans in 2012 reflects CEB’s strategy of concentrating on Rouble-denominated assets primarily due to the higher returns they provide. CEB historically has maintained the high quality of its assets in the corporate sector and any problematic loans are restricted quantity due to its strong collection function. According to management calculations, in 2009, CEB had 518 loans categorised as ‘reserve’, eight as NPLs and 436 on the watch list (of which 100 per cent. were recovered). In 2010, CEB had 553 loans categorised as ‘reserve’ and none as NPLs or on the watch list; in 2011, CEB had 473 loans categorised as ‘reserve’ and 34 as NPLs (of which 100 per cent. were recovered) and none on the watch list; and in the first half of 2012, CEB had 337 loans categorised as ‘reserve’, and none as NPLs or on the watch list.

Balance Sheet Lending Since its establishment, CEB has been providing working capital loans to its corporate customers. Corporate lending has been one of CEB’s core businesses for over 18 years and as such CEB has developed and set up strong and long-lasting business relationships with its corporate customers. CEB has deep knowledge of its customers and their funding needs and as such it provides its customers with flexible and tailor-made solutions. The fact that CEB is able to act promptly and flexibly in corporate lending has allowed it to maintain and enlarge its customer base over the years. CEB has grown and expanded into new areas according to the needs of the market. Management believes that corporate lending will remain a core business for CEB in the future.

Syndicated Lending CEB offers syndicated lending services to its corporate customers under its Project Finance Division. Project finance transactions include participation in syndicated facilities to provide long-term financing for green field and refinancing projects as well as bilateral lending for specific projects. In addition to participating in syndicated facilities, in 2011, CEB originated a syndicated facility for Ritz Carlton Moscow. The total amount of the facility amounted to U.S.$280 million with a tenor of five years. Other project finance transactions handled by CEB are the Marktkauf Shopping Centre refinancing facility amounting to A27,5 million and the KR Properties Smolensky Office Centre refinancing facility amounting to U.S.$13 million. Another product offered by CEB’s Project Finance Division is bilateral lending where a product is analysed according to the project’s business plan and its cash flows. These transactions are mainly long-term and for financing of investment in construction, energy projects and manufacturing.

Trade Finance CEB’s trade finance products include the provision of post-import financing, warehouse and distribution financing, pre-export financing, issuing and confirming letters of credit and the provision of guarantees. CEB advises customers on payments under import-export contracts, international loans, Rouble-

82 denominated payments by non-residents and participation in international tenders for domestic goods. CEB has established relationships with clearing banks within the Russian Federation and abroad to facilitate the transfer of funds. Most recently, CEB’s trade finance activities were primarily directed toward providing clients with structured facilities such as pre-export finance for commodities, concentrating mainly on fertilisers, grain, ferrous and non-ferrous metals. Due to the Financial Crisis, CEB saw a decrease in trade finance transactions in Russia. In 2011, CEB’s trade finance volume amounted to approximately U.S.$50 million. As at 30 June 2012, CEB’s total amount of letters of credit related to import financing and issued guarantees totalled U.S.$50 million. Trade-related activity is primarily conducted in the EU countries and Turkey, and effected mainly in Euros and U.S. Dollars.

Corporate Funding CEB offers term deposits, deposit certificates and minimum deposit (limited withdrawal) bank accounts to its corporate customers. Such deposits and accounts are in both Rouble and certain foreign currencies. As of 30 June 2012, CEB had RUB21,834 million in current accounts and term deposits from corporate customers (including state and public organisations), as compared to RUB21,439 million as at 31 December 2011, RUB28,077 million as at 31 December 2010 and RUB15,326 million as at 31 December 2009. CEB’s corporate deposit base increased by 1.8 per cent. as of 30 June 2012, compared to 31 December 2011 and decreased by 23.6 per cent. as of 31 December 2011, compared to 31 December 2010. The fall in corporate deposits as at 30 June 2012 as compared to 31 December 2011 was principally related to the maturity of several large non-resident customer deposits during the first half of 2012. As at 30 June 2012, 13.3 per cent. of CEB’s retail and corporate term deposit base represent deposits by related parties of the Group, including members of the Fiba Group. CEB’s concentration of its top 10 corporate depositors was 34.6 per cent. of total current accounts and deposits from customers as at 30 June 2012, compared to 35.79 per cent. as at 31 December 2011 and 46.3 per cent. as at 31 December 2010 and 42.0 per cent. as at 31 December 2009. CEB provides its corporate deposits in Roubles, U.S. Dollars, euros and certain other foreign currencies. The percentage of CEB’s corporate current accounts and term deposits denominated in Roubles, U.S. Dollars and euros changed from 36.8 per cent., 47.8 per cent. and 15.4 per cent., respectively, as at 31 December 2009, to 35.4 per cent., 25.6 per cent. and 29.0 per cent. respectively, as at 31 December 2010, to 82.7 per cent., 14.7 per cent. and 2.6 per cent., respectively, as at 31 December 2011, and to 76.4 per cent., 14.9 per cent. and 8.7 per cent., respectively, as at 30 June 2012.

Settlement Operations CEB offers Rouble and foreign currency settlement operations to its customers through the CBR’s clearing system, its own branch network and through a network of correspondent banks. CEB also provides specially designed systems that enable its major customers to identify the sources of fund transfers. CEB has been actively developing its settlement operations by regularly upgrading the settlement operations system and providing global payment services to corporate customers. In 2010, CEB launched money transfers in Turkish lira in order to increase foreign trade volumes.

Payroll Services CEB commenced providing payroll and remittance services to companies in December 2007. Payroll services enable employers to reduce the costs of paying salaries to their employees, who are able to withdraw cash using payroll cards at all CEB’s branches, express offices, and ATMs. Income from the provision of these services is generated from the payment of an annual fee to CEB.

POS Acquiring Programme CEB’s POS acquiring programme is aimed at strengthening its relationship with retailers and supporting its credit card programme. CEB has installed its point of sales terminals at the counters of retailers. These terminals accommodate the electronic money flow of the purchases of goods that are bought with VISA and Mastercard debit and credit charges. CEB effects the electronic payments of the customers by directly debiting the account of the retailers. CEB currently provides acquiring (POS) services to a large number of worldwide, as well as top Russian, retailers, such as IKEA, Inditex Group companies including Zara, Pull & Bear, Massimo Dutti, Bershka, Stradivarius and others, Pegas Touristik, Foto.ru, Metro Cash &

83 Carry, Marks & Spencer, Lacoste, Tommy Hilfiger, Nine West and Aldo, as well as top Russian retailers such as Snow Queen, Galereya Alex, MKM, Mostravel, Lazurit, Tsvet Divanov, 8 Marta, Moscow Time, City Fitness, Beringov Proliv, Linzmaster, Savage, Clarks, Cacharel and Colin’s. Due to its strong position in the credit card market, VISA International included CEB in its elite list of 22 acquirers in Russia. CEB believes that it is one of the few banks in Russia which has directly acquired VISA and MasterCard principal membership. As a result CEB’s point of sale services are certified by Visa and Master Card to accept all such cards without using an intermediary to process the relevant transactions.

Other Corporate Banking Services CEB also provides foreign currency exchange services, factoring, brokerage services and depositary services to its corporate customers. The corporate banking department cooperates closely with the retail banking departments of CEB’s subsidiary Credit Europe Life and group company Credit Europe Leasing when offering financial solutions to corporate clients. In addition to corporate banking products, CEB thereby offers retail products such as instant loans, corporate credit cards and car loans as well as leasing and life insurance products to the employees of the companies it works with.

SME Banking CEB offers investment loans, working capital loans, overdraft and factoring services to its customers in the small and medium sized business sector. As part of its strategy, CEB has expanded its relations with SMEs. As at 30 June 2012, CEB had a total of over 17,000 clients and an aggregate SME loan portfolio (gross of allowance for loan losses) of RUB5,052 million compared to a total of over 16,500 clients and an aggregate SME loan portfolio (gross of allowance for loan losses) of RUB5,890 million as at 31 December 2011, a total of over 15,900 clients and an aggregate SME loan portfolio (gross of allowance for loan losses) of RUB3,490 million as at 31 December 2010. CEB’s SME loan portfolio remains relatively small, representing 5.9 per cent. of CEB’s total loan portfolio as of 30 June 2012, compared to 7.0 per cent. as of 31 December 2011, 5.5 per cent. as of 31 December 2010. As at 30 June 2012, CEB considered enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding US$ 25 million to be SMEs. CEB believes the SME Banking Department has established well defined and controlled operational workflows and supportive infrastructure. The regional network of the SME Banking Department as of 30 June 2011 comprises 11 branches in Moscow and Regions. The product management is led by analysis of competitors and customer feedback. During the Financial Crisis, CEB significantly reoriented its SME banking activities. In autumn 2008, CEB ceased providing micro loans of up to U.S.$15,000 to small enterprises due to the unsecured nature and high credit risk of such loans. Instead, CEB has launched, developed and is currently mostly focusing on the provision of factoring services to suppliers of large regional retail chains operating in Russia. For other SME lending products CEB mostly targets SMEs operating in the wholesale, production and rental business segments. The following table sets out details of the SME products offered by CEB:

Loan Amount Credit Credit decision Product (up to), U.S.$ Max Tenor decision Purpose of loan based on Factoring ...... 5,000,000 turnover of debtor in 5 days Financing of deliveries Database verification; indebtedness— of the goods Security verification; 120 days Income and financials verification; Investment Loans .... 3,000,000 max 60 months in 5 days Funding for purchase Database verification; of equipment, real Security verification; estate, vehicles Income and financials verification; Guarantors; Collateral Working capital loans . 500,000 max 48 months in 5 days Working capital funding Database verification; Security verification; Income and financials verification; Guarantors; Collateral

84 In addition, to the above products, CEB provides SMEs with overdraft facilities, standard credits, letters of credit and guarantees as well as non-credit products such as SME time deposits, POS acquiring, in case and other settlement services. CEB advances standard loans and factoring facilities to its SMEs customers. The average initial advance in respect of a standard loan is U.S.$320,000 per client as at 30 June 2012. Credit decisions in respect of standard loans can take up to one week.

Factoring Factoring was launched as a new product line in the SME Banking Department at the end of 2008, and has attracted customers of such corporate partners as Leroy Merlin, Auchan, X5 Retail Group, Metro, OBI, Yuterra, Magnit, O’Key, Lenta, M-video, Indezit, Media Markt, etc.. CEB believes that factoring services represent an important growth opportunity for its SME business. In conducting its factoring operations CEB only lends against confirmed receivables and continues to have full recourse to the borrower.

Investment loans Investment loans are designed to provide capital expenditure for SMEs in amounts up to U.S.$ 2,000,000 for periods no longer than 60 months. Credit decisions will be taken within 5 working days and based on credit analysis and require guarantors and collateral.

Working capital SME credits Standard SME credits provides larger working capital funding, for amounts of up to U.S.$ 500,000 with maximum maturity of 48 months. The credit approval process takes about five working days and is based on credit analysis and require guarantors and collateral. The SME Banking Department includes a high capability sales team for customer acquisition. Other distribution channels for the Departments’ products include branches, direct sales, merchants and SME sized partners of large companies. As at 30 June 2012, RUB132.8 million or 2.63 per cent. by value of SME lending products (gross of allowances) currently outstanding were classified as non-performing (being 90 days or more in arrear), compared to RUB241.3 million or 4.1 per cent. as at 31 December 2011 and RUB221.7 million or 6.35 per cent. as at 31 December 2010.

Branch Network To better serve its customer base and acquire new clients, CEB has invested in the development of a nationwide branch network. As of 30 June 2012, CEB had a total of 123 branches and over 10,900 sales points in 53 cities and 41 regions of the Russian Federation, covering an area which accounts for 80 per cent. of retail banking activity in the Russian Federation. CEB plans to grow the number of its branches both in Moscow and in the regions. Although a considerable number of its branches are concentrated in Moscow and St. Petersburg, regional expansion is one of CEB’s key priorities. The vertical penetration into most regions has been completed, and a diversified range of products and services, similar to those available in Moscow, are provided to customers in all key regions. CEB has recently been actively expanding its presence in the Siberia and other regions where its partners have high trading volumes.

Business Operations Employees As at 30 June 2012, CEB had 4,615 employees, of whom 1,504 were employed at its head office and the remainder at its branches and representative offices.

85 The following table sets forth the average number of CEB’s employees for the six months ended 30 June 2012 and for the years ended 31 December in 2011, 2010 and 2009, including staff employed by CEB’s regional branches:

Six months ended 30 June Year ended 31 December 2012 2011 2010 2009 Average Number of Employees ...... 4,616 4,358 3,250 2,869 As with other banks operating in Russia, CEB faces pressure from a competitive labour market, especially in the retail sector of its business. In response, CEB has focused on attracting and retaining high quality employees. CEB’s incentive programme includes medical and life insurance, an annual bonus scheme and loans at preferential rates. To further incentivise employees, CEB has, since 1995, organised 13 management trainee programmes, and has recruited new graduates to maintain quality in Retail Banking, SME, Corporate Banking, Risk Management and Financial Control. Standard retail training programmes have been created and a Retail Trainers Team was developed to enhance the quality of the retail sales employees.

Information Technology CEB believes that technical support of its operations is a priority. CEB seeks to achieve reliability, security, quality and efficiency in its information and computer systems. All major computer systems used by CEB have back-up resources. CEB has modernised its core IT system over the past three years in order to increase its capacity, improve fault tolerance and reduce downtime. CEB continued to invest in improving its IT infrastructure in 2008. In 2009, due to the economic downturn, CEB’s IT budget was limited to routine maintenance of IT infrastructure. In 2009, CEB commenced switching the operation of its credit scoring system to the Experian Credit Scoring System, which provides data and analytical tools to customers in more than 65 countries, with the aim of helping businesses to manage their credit risks, prevent fraud and automate decision making. Fraud Datamart is a separate module, integrated to the bank’s scoring system flow to detect the presence of any suspicious information related to the client. Experian Interfax, NBCH and Equifax Credit Bureaus are external sources of information, which are used for receiving detailed information on a client’s credit history with other credit organisations, as well as personal data, and are used during scoring system flow. CEB had 119 employees in its IT department as of 30 June 2012 as compared to 114 employees as of 31 December 2011, 101 employees as of 31 December 2010, and 78 employees as of 31 December 2009.

Banking licences and Memberships As at 30 June 2012, CEB holds the general banking licence #3311 of 22 February 2012, issued by the CBR licences issued by the FSFM required for a professional participant on the securities market to act as a broker and a dealer and to carry out activity in managing securities and depositary activity. CEB holds the certificate certifying its inclusion in the register of banks which are members of the system of compulsory insurance deposits. CEB is a principal member of MasterCard International and Visa International. CEB is also a member of major Russian financial associations, namely: the Association of Russian Banks, the Association of Regional Banks of Russia, the National Securities Market Association which is a self-regulatory organisation, the Association of Credit Organisations of the Republic of Bashkortostan, the National Association of Contact Centers, the Association of Factoring Companies and the Russian National SWIFT Association.

Property CEB currently does not own any of the buildings which it occupies. CEB operates its branches on medium term leases, with typical lease periods of one to five years. CEB operates its head office on the basis of a preliminary lease arrangement entered into in December 2010 with OOO ‘‘AN-Sibcontakt Invest’’, the developer of the respective office building. The purpose of such preliminary lease arrangement is to guarantee the rights of each of the parties up to the moment when OOO ‘‘AN-Sibcontakt Invest’’ obtains from the local authorities the respective certificate which would confirm its ownership rights to the premises occupied by CEB and would allow the parties to enter into a formal lease agreement. As of the date of this Prospectus, the respective act for the putting into operation

86 of the office building has already been issued by the local authorities and OOO ‘‘AN-Sibcontakt Invest’’ expects to be able to obtain the ownership certificate, and enter into the lease agreement with CEB, by no later than 31 March 2013.

Insurance CEB has a BBB-type insurance Policy provided by Ingosstrakh insurance company. This policy covers unlawful acts of employees, computer and electronic crime losses, losses arising from fraudulent payments, securities and banknotes transactions. In addition, CEB has a number of other insurance policies, including insurance covering its offices, cash, property, ATMs, cars and third party liability.

Litigation At the beginning of 2012 CEB initiated a litigation in the Moscow Commercial Court against the Moscow Tax Authorities regarding the reimbursement from the state budget of RUB38,000,000 in taxes, late payment interest and fines paid by CEB in 2011. This amount was charged to CEB by the Moscow Tax Authorities as a result of a field tax inspection of CEB in 2011 for the period 2007-2009. Management believes that CEB has a strong case to receive reimbursement from the state budget. The claim of CEB was registered in the Moscow Commercial Court which is currently considering the case. CEB expects the court to issue its ruling on this case in 2013. Currently CEB does not have any pending disputes with the tax authorities as a result of which CEB may be exposed to the payment of any amounts to the state budget. Except as described above there are no and have not been any governmental, legal or arbitration proceedings against or affecting CEB, nor is CEB aware of any pending or threatened proceedings of such kind, which may have or have had during the previous twelve months, or have had in the recent past, a significant effect on the financial position or profitability of CEB.

87 RISK MANAGEMENT Management of risk is fundamental to the business of banking and is an essential element of CEB’s operations. The major risks faced by CEB are those related to credit, liquidity, re-pricing, market and operational risks.

Risk Management Function The ultimate goal of risk management is to establish a global risk management framework covering all aspects of CEB’s day-to-day business activities as well as strategic planning. CEB has adopted a pro-active approach to risk management, which is especially important in emerging markets. The Board of Directors of CEB has overall responsibility for the oversight of the risk management function. The CEB’s risk management function is headed by the Chief Risk Officer (the ‘‘CRO’’). In order to fulfil assigned tasks, the CRO is an active member of all committees of CEB. As a result, the CRO is involved in the pro-active exercise of risk management controls within CEB and is informed about all important decisions made within CEB. The CRO leads a central and independent risk management function within CEB that has: • clearly defined roles and participation in the strategic decision making process; • formalised policies and procedures that communicate the risk management process; • consistent methodologies for risk measurement that capture the potential for losses, foregone opportunities and risk diversification effects across different risk categories; • limit structures that set maximum tolerances in relation to capital and the corporate risk taking philosophy; • comprehensive management reports that communicate risk on a periodic basis; • information technology to satisfy risk information needs throughout the organisation. The CRO is appointed by the Board of Directors and regularly reports to the Board of Directors and also provides the shareholders with independent Risk Management reports on regular basis. CEB’s risk management infrastructure includes the Risk Management Department that provides effective risk articulation across CEB through encouraging a system of risk committees and operating in close cooperation with Internal Audit, Compliance, Financial Control and Business Lines Departments. At the risk origination level, business line managers are responsible for coordination and execution of risk management processes. They are in charge of following the relevant risk policies and procedures, executing daily monitoring of exposures and limit usages, and controlling the key risk indicators of their respective businesses on a scheduled basis. Thus, CEB’s risk governance framework consists of following three ‘‘lines of defence’’: the business managers, who have the primary responsibility for day-to-day risk coordination; Risk Management Department, which sets high level policies, limits and risk controls, providing oversight reporting to the management and the Supervisory Board and performs an independent overview of the effectiveness of the 1st line of defence activities; and Internal Audit Department which provides independent assurance on the design and effectiveness of the risk management framework.

Credit risk Credit risk is the risk that the counterparty to a transaction could default before the final settlement of the transactions. Credit risk constitutes the most significant risk for CEB. CEB is mainly involved in corporate, retail and SME activities. CEB also takes credit exposures through Treasury transactions with other banks and financial institutions, although these do not constitute a significant source of risk. CEB has developed policies and procedures for management of credit exposures (both on- and off- balance sheet) and has established a system of credit committees, including the Corporate Credit Committee, the SME Credit Committee, the Retail Credit Committee and the Financial Institutions Credit Committee. The Corporate, SME and Retail Credit Committees are responsible for the management of CEB’s credit risks, including: • determining and approving the terms of credit products;

88 • determining categories of credit risks; • setting requirements for, evaluating and monitoring collateral; and • considering issues related to problem loans.

Corporate Credit Risk In this area, CEB has advanced risk management methods at both portfolio and borrower level. At borrower level, internally developed ratings models and methods of financial analysis based on Credit Europe Bank N.V.’s methodology and based on the experience of CEB in emerging markets are in use. At the portfolio level, the risks are monitored using a concentration limits approach. CEB has established a ‘‘Chinese wall’’ between Corporate Banking and Corporate & SME Credits Department, the heads of which both report to the President directly. Decisions on credit limits are made by Corporate Credit Committee, based on the Credit Package—or credit application form—prepared by Corporate Banking Department and the independent appraisal and financial analyses prepared by Corporate & SME Credits Department. CEB has developed a Collateral Management Function led by a professional team of Collateral Managers, who appraise, monitor and enforce collateral. Individual transactions are also reviewed by CEB’s Legal Compliance and Corporate Governance Department depending on the specific risks. Corporate Credit Committee considers their analyses when taking loan decisions. CEB monitors concentration of credit risk by industry/sector, by geographic location, by currency, tenor, collateral, internal rating and other factors. Corporate & SME Credits Department each month prepares a Corporate Portfolio Risk Report which is reviewed by Corporate Credit Committee and submitted to the members of the Board of Directors. Utilisation of credit limits is done with the participation of Corporate & SME Credits Department, Collateral Management Division, Legal, Compliance and Corporate Governance Department and Independent Credit Back-office Departments. The credit process is monitored by Risk Management Department that reports directly to the Board of Directors.

Retail Credit Risk CEB provides a wide range of retail credit products such as multipurpose loans, instant loans, car loans, cash loans, instalment credit cards and overdraft credit cards. In 2009, CEB switched the operation of its credit scoring system to the Experian Credit Scoring System, which provides data and analytical tools to customers in more than 65 countries, with the aim of helping businesses to manage their credit risks, prevent fraud and automate decision making processes. Fraud Datamart is a separate module, integrated into CEB’s scoring system architecture to detect the presence of any suspicious information related to the client. Experian Interfax, NBCH and Equifax Credit Bureaus are external sources of information, which are used for receiving detailed information on a client’s credit history with other credit organisations, as well as personal data, and are used in scoring system flow. CEB uses an internally developed automated system for credit application, credit approval and booking processing. A system of decision trees and scoring tools to provide better balance between profitability, growth and risk is embedded into this system. CEB has developed policies and limits by retail product type. These policies, limits and rules, algorithms and scoring procedures are approved by the Retail Credit Committee. The Retail Credit Committee controls and manages the entire retail credit process by approving policies and procedures, regularly updating methodologies, algorithms and instructions on retail credit risk assessment, and delegating authorities depending on the type of product and making particular credit decisions. The Retail Credit Committee’s aim is to ensure an adequate level of risk management for the size and complexity of CEB’s operations for individual retail exposures as well as at a portfolio level. The President, the First Deputy President, the Head of Retail Credits and the CRO are members of the Retail Credit Committee.

89 In addition to advanced reports of business lines, Financial control and Retail credits department, Risk Management Department independently monitors portfolio performance, controls quality and quantity characteristics of the total retail credit portfolio, in particular by using techniques of roll-over, cohort, coincident and vintage analyses for probability of default estimations, which are also regularly reported to the Board of Directors.

SME Credit Risk The SME business line has both corporate experience for larger loans (‘‘standard’’ loans). The SME business line focuses on factoring and standard loans in Russia. The SME Credit Committee is in charge of individual credit decisions for standard loans and takes decisions over the policies and rules for all SME credit products. CEB continuously monitors the SME loan portfolio and regularly reassesses the creditworthiness of its customers and quality of risk management tools and methods. The system of concentration limits is incorporated into SME portfolio management process as well.

Liquidity risk Liquidity risk is defined as the current or prospective threat to an institution’s earnings and capital as a result of the possibility that it will not be able to meet its short-term payment obligations at any point in time without unacceptable costs or losses. Liquidity risk is the risk that the volume and timing of potential cash inflows and outflows are not adequately matched, whereby a shortfall arising at any point in time cannot be made up by selling assets or by obtaining refinancing because: • the market for the asset in question has inadequate liquidity; • the institution has insufficient liquid assets to sell or to pledge in order to obtain refinancing; • the institution is insufficiently solvent and as a result has insufficient borrowing capacity; or • the institution has insufficient funding relationships. CEB maintains liquidity risk management in accordance with the nature, size and complexity of the activities which CEB undertakes. As part of its on-going effort to improve its existing liquidity risk management procedures, CEB has implemented a quantifying and monitoring system for both daily and longer periods. CEB calculates local norms for short, medium, medium-long, and long liquidity and monitors structural liquidity in accordance with the requirements of the CBR. CEB was in compliance with these ratios during each of the years ended 31 December 2011, 31 December 2010 and 31 December 2009. CEB also monitors its liquidity risk through Static Maturity Gap analyses on a monthly basis for three major currencies: Euro, U.S. Dollars and Roubles. Furthermore, a liquidity stress test is carried out to monitor the vulnerability of CEB to the withdrawal of all short-term liabilities. The analyses are based on the methodology developed by Credit Europe Bank N.V. The Asset and Liability Committee (the ‘‘ALCO’’) is responsible for managing liquidity risk based on the reports of the Financial Control, Risk Management and Treasury Departments. Daily management of cash flow and liquidity is done by the Treasury Department and executed by Treasury Back-office, and controlled by Financial Control and Risk Management Departments. The Treasury Daily Report is used for the purpose of managing and optimising the cash-flow of CEB on a daily basis. The Treasury Department of CEB coordinates its activities with the Treasury Department of CEB N.V. on a daily basis. The Treasury daily report includes the total money market borrowings and placements, the daily and overall income from client operations on foreign exchange market, the daily and overall income from foreign exchange trading activities, the daily activities on the fixed income market and the current market price of the fixed income portfolio. The report also includes the list and details of long-term instruments used for liquidity management and a brief table showing general macroeconomic data that helps the Management Board to have a better understanding of current economic trends. ALCO is held on weekly and monthly basis and analyses liquidity reports and stress-testing results and takes necessary actions to match asset and liability positions both on- and off-balance sheet in such a way that the Group is able to keep its liquidity risk below the pre-determined limits.

90 The following tables show the undiscounted cash flows on the Group’s financial assets, liabilities and credit related commitments on the basis of their earliest possible contractual maturity. The total gross inflow and outflow disclosed in the table is the contractual, undiscounted cash flow on the financial asset, liability or commitment. The position of CEB as of 31 December 2011 was as follows:

Demand Total gross and less amount than From 1 to From 3 to From 6 to More than Overdue/no (outflow) Carrying 1 month 3 months 6 months 12 months 1 year maturity inflow amount (in RUB thousands) Non-derivative assets Due from the Central Bank of the Russian Federation ...... 2,903,122 —————2,903,122 2,901,194 Placements with banks and other financial institutions ...... 5,781,238 — 332,419 — — — 6,113,657 6,103,431 Financial instruments at fair value through profit or loss ...... — — 4,367 4,367 186,918 — 195,652 100,375 Loans to customers .... 7,149,003 15,556,304 14,828,329 13,707,159 48,765,125 808,258 100,814,178 80,591,551 Available-for-sale financial assets ...... 19,499 40,020 110,596 234,435 3,107,634 — 3,512,184 2,657,327 Held-to-maturity investments ...... 333 15,447 19,654 156,275 309,642 — 501,351 420,989 Other financial assets . . . 4,045 419,969 21,462 46,130 — — 491,606 491,606 Derivative assets —Inflow ...... 2,495,765 363,061 5,652,434 2,666,151 — — 11,177,411 659,186 —Outflow ...... (2,421,622) (343,243) (5,373,600) (2,241,267) — — (10,379,732) — Total assets ...... 15,931,383 16,051,558 15,595,661 14,573,250 52,369,319 808,258 115,329,429 93,925,659 Non-derivative liabilities Deposits and balances from banks and other financial institutions . . . (407,297) (5,296,196) (1,511,037) (9,596,199) (5,907,605) — (22,718,334) (21,444,109) Current accounts and deposits from customers (14,625,437) (7,099,336) (4,007,211) (7,852,101) (917,695) — (34,501,780) (33,921,877) Debt securities in issue . . (1,313,763) (465,507) (10,567,044) (9,425,373) (5,607,500) — (27,379,187) (25,507,504) Other financial liabilities . (222,239) (263,115) (107,281) — — — (592,635) (592,635) Derivative liabilities —Inflow ...... 2,079,962 153,245 1,356,494 295,587 — — 3,885,288 — —Outflow ...... (2,110,302) (158,465) (1,985,451) (401,343) — — (4,655,561) (426,191) Total liabilities ...... (16,599,076) (13,129,374) (16,821,530) (26,979,429) (12,432,800) — (85,962,209) (81,892,316) Net position ...... (667,693) 2,922,184 (1,225,869) (12,406,179) 39,936,519 808,258 29,367,220 12,033,343 Credit related commitments ...... 5,540,631 2,574,983 3,058,931 2,965,231 4,709,064 — 18,848,840

91 The position of CEB as of 31 December 2010 was as follows:

Demand Total gross and less amount than From 1 to From 3 to From 6 to More than (outflow) Carrying 1 month 3 months 6 months 12 months 1 year inflow amount (in RUB thousands) Non-derivative assets Due from the Central Bank of the Russian Federation ...... 1,036,131 — — — — 1,036,131 1,036,131 Placements with banks and other financial institutions ...... 10,788,552 — — 1,235,398 — 12,023,950 12,008,148 Financial instruments at fair value through profit or loss ...... — — 2,952 79,145 — 82,097 78,001 Loans to customers ...... 10,337,841 12,852,062 9,271,853 9,252,008 31,675,878 73,389,642 60,480,396 Available-for-sale financial assets ..... 30,055 6,250,355 13,590 162,977 2,107,389 8,564,366 7,883,229 Held-to-maturity investments ...... — 15,289 5,919 92,271 456,877 570,356 444,328 Other financial assets ...... 103,603 39,329 — — — 142,932 142,932 Derivative assets —Inflow ...... 2,650,412 629,035 — — 312,582 3,592,029 39,016 —Outflow ...... (2,640,736) (627,697) — — (329,589) (3,598,022) — Total assets ...... 22,305,858 19,158,373 9,294,314 10,821,799 34,223,137 95,803,481 82,112,181 Non-derivative liabilities Deposits and balances from banks and other financial institutions ...... (7,855,274) (1,107,939) (2,837,703) (401,079) (4,678,863) (16,880,858) (16,006,972) Current accounts and deposits from customers ...... (18,915,623) (9,382,653) (2,650,628) (4,245,397) (972,137) (36,166,438) (35,530,107) Debt securities in issue ...... — (22,701) (4,790,013) (567,280) (15,188,925) (20,568,919) (17,849,049) Other financial liabilities ...... (197,749) (106,804) (60,944) — (168,547) (534,044) (534,044) Derivative liabilities —Inflow ...... 8,165,118 932,569 609,538 4,114,781 1,765,692 15,587,698 — —Outflow ...... (8,214,525) (946,485) (632,840) (4,254,522) (1,738,027) (15,786,399) (339,471) Total liabilities ...... (27,018,053) (10,634,013) (10,362,590) (5,353,497) (20,980,807) (74,348,960) (70,259,643) Net position ...... (4,712,195) 8,524,360 (1,068,276) 5,468,302 13,242,330 21,454,521 11,852,538 Credit related commitments ...... 10,461,538 622,207 62,002 210,486 56,996 11,413,229

92 The position of CEB as of 31 December 2009 was as follows:

Demand Total gross and less amount than From 1 to From 3 to From 6 to More than (outflow)/ Carrying 1 month 3 months 6 months 12 months 1 year inflow amount (in RUB thousands) Non-derivative assets Due from the Central Bank of the Russian Federation ...... 580,318 — — — — 580,318 580,318 Placements with banks and other financial institutions ...... 11,609,648 — — — — 11,609,648 11,608,508 Financial instruments at fair value through profit or loss ...... — 5,797 2,017 — 168,443 176,257 117,753 Loans to customers ...... 3,867,467 9,755,013 9,278,160 9,345,599 28,075,583 60,321,822 47,925,256 Available-for-sale financial assets ..... 40,746 134,772 171,701 321,443 7,675,907 8,344,569 5,776,173 Held-to-maturity investments ...... — 59,263 974,889 219,383 791,861 2,045,396 970,730 Other financial assets ...... 98,292 246,353 7,053 30,971 23,383 406,052 406,052 Derivative assets —Inflow ...... 3,640,752 302,442 — 136,880 — 4,080,074 102,323 —Outflow ...... (3,555,148) (297,050) — (120,977) — (3,973,175) — Total assets ...... 16,282,075 10,206,590 10,433,820 9,933,299 36,735,177 83,590,961 67,487,113 Non-derivative liabilities Deposits and balances from banks and other financial institutions ...... (6,233,610) (884,095) (3,462,438) — (139,085) (10,719,228) (10,578,969) Current accounts and deposits from customers ...... (10,641,727) (3,726,467) (2,971,214) (4,143,187) (571,504) (22,054,099) (21,808,245) Debt securities in issue ...... — (3,879,148) (7,410,082) (384,148) (9,533,223) (21,206,601) (19,299,076) Other borrowed funds ...... (2,022,621) — (1,055,106) (1,796,819) — (4,874,546) (4,652,167) Other financial liabilities ...... (81,438) (92,695) (61,963) (74,755) (39,232) (350,083) (350,083) Derivative liabilities —Inflow ...... 2,607,108 297,050 — — 453,663 3,357,821 — —Outflow ...... (2,634,687) (302,442) — — (453,663) (3,390,792) (75,476) Total liabilities ...... (19,006,975) (8,587,797) (14,960,803) (6,398,909) (10,283,044) (59,237,528) (56,764,016) Net position ...... (2,724,900) 1,618,793 (4,526,983) 3,534,390 26,452,133 24,353,433 10,723,097 Credit related commitments ...... 4,214,608 — — 1,980,160 — 6,194,768

93 The following table shows the management estimation of CEB’s liquidity position as at 31 December 2011. The amounts in the below tables represent carrying amounts of the assets and liabilities as at the reporting date and do not include future interest payments.

Less than From 1 to From 3 to From 1 to More than Overdue/no 1 month 3 months 12 months 5 years 5 years maturity Total (in RUB thousands) ASSETS Cash ...... 2,082,683 — — — — — 2,082,683 Due from the Central Bank of the Russian Federation ...... 2,901,194 — — — — — 2,901,194 Placements with banks and other financial institutions ...... 5,776,964 — 326,467 — — — 6,103,431 Financial instruments at fair value through profit or loss ...... 140,031 12,175 607,355 — — — 759,561 Loans to customers ...... 7,111,189 14,094,050 24,395,723 31,709,953 2,472,378 808,258 80,591,551 Available-for-sale financial assets ...... — — 2,657,327 — — — 2,657,327 Held-to-maturity investments ...... — — 130,253 290,736 — — 420,989 Current income tax prepayments ...... — 17,417 — — — — 17,417 Deferred tax asset ...... — — — — — 38,180 38,180 Property and equipment ...... — — — — — 1,050,377 1,050,377 Other assets ...... 62,337 960,341 206,023 — 25,408 — 1,254,109 Total assets ...... 18,074,398 15,083,983 28,323,148 32,000,689 2,497,786 1,896,815 97,876,819

LIABILITIES Financial instruments at fair value through profit or loss ...... 19,477 4,009 402,705 — — — 426,191 Deposits and balances from banks and other financial institutions ...... 406,907 5,181,385 10,478,459 4,822,869 554,489 — 21,444,109 Current accounts and deposits from customers(1) ...... 14,773,645 7,061,649 11,231,526 855,057 — — 33,921,877 Debt securities in issue ...... 1,310,676 417,747 18,803,079 4,976,002 — — 25,507,504 Other liabilities ...... 222,239 263,115 107,281 — — — 592,635 Total liabilities ...... 16,732,944 12,927,905 41,023,050 10,653,928 554,489 — 81,892,316 Net position as at 31 December 2011 .... 1,341,454 2,156,078 (12,699,902) 21,346,761 1,943,297 1,896,815 15,984,503 Cumulative position as at 31 December 2011 ...... 1,341,45 3,497,532 (9,202,370) 12,144,391 14,087,688 15,984,503 Net position as at 31 December 2010 .... 199,191 6,929,637 (537,815) 5,070,959 2,298,763 597,036 14,557,771 Cumulative position as at 31 December 2010 ...... 199,191 7,128,828 6,691,013 11,661,972 13,950,735 14,557,771

(1) The current accounts and demand deposits from customers are evenly distributed during one year on the basis of management’s belief that despite of current customer accounts being on demand, diversification of these deposits by number and type of depositors, and past experience of CEB, indicates that these deposits provide a stable source of funding.

Market Risk Market risk is defined as the risk of losses in on and off-balance-sheet positions arising from movements in market prices. Market risks for CEB comprise foreign currency risk and interest rate risk. Market risk arises from open positions, foreign currency and trading portfolio, which are exposed to general and specific market movements and changes in the level of volatility of market prices. Overall authority for market risk is vested in the ALCO.

Interest rate risk CEB is exposed to the effects of fluctuations in the prevailing levels of market interest rates on its financial positions and cash flows. Interest margins may increase as a result of such changes but may also reduce or create losses in the event that unexpected movements arise. Interest rate risk arises when the actual or forecasted assets of a given maturity period are either greater or less than the actual or forecasted liabilities in that maturity period. The ALCO is responsible for managing interest rate risk, based on the reports of the Financial Control, Risk Management and Treasury Departments.

94 Re-pricing risk (Interest rate risk in the banking book) An analysis of the sensitivity of CEB’s net income for the year and equity to changes in the market interest rate based on a simplified scenario of a 100 basis point (bp) symmetrical fall or rise in all yield curves and positions of interest-bearing assets and liabilities existing as of 31 December 2011, 31 December 2010 and 31 December 2009 is shown below:

2011 2010 2009 (in RUB thousands) 100 bp parallel increase ...... 48,750 77,538 (17,216) 100 bp parallel decrease ...... (25,390) (47,883) 71,723

Interest rate risk, attributable to financial instruments at fair value though profit or loss does not constitute a major risk and therefore, case-by-case approval and price monitoring systems are used to follow the risk. Approval is done using both volatility and return study by Treasury and credibility analysis provided by Corporate & SME Credits Department. In the case of large portfolios, CEB applies a value-at-risk analysis on both the portfolio level as well as on the assets securing the portfolio.

Fair value risk An analysis of sensitivity of the net income for the year and equity as a result of changes in fair value of financial instruments at fair value though profit or loss and financial assets available-for-sale due to changes in the interest rates based on positions existing as at 31 December 2011, 31 December 2010 and 31 December 2009 and a simplified scenario of a 100 bp symmetrical fall or rise in all yield curves is as follows:

2011 2010 2009 Profit Profit Profit or loss Equity or loss Equity or loss Equity (in RUB thousands) 100 bp parallel increase ...... (4,568) (67,116) (1,306) (219,706) (2,807) (137,559) 100 bp parallel decrease ...... 4,965 71,317 1,892 232,621 2,938 144,641

Currency risk At the end of each day, the Treasury Department prepares its Daily Treasury Report. The report includes the total borrowings and placements on the money market, the daily and overall income from foreign currency pricing activities, the daily and overall income from foreign currency trading activities, the daily activities on the fixed income market and the current market price of the fixed income portfolio. The report also includes the list and details of long-term instruments used for liquidity management and a brief table showing general macro-economic data that helps the Managing Board to have a better understanding of the current economic trends. The foreign currency position is monitored daily. Daily reporting on currency position is done by both the Accounting and the Financial Control Departments. The CBR sets an absolute level of 10 per cent. of its equity as the maximum limit of each currency risk exposure to be taken. The sum of all long (short) open foreign currency positions (absolute values) in different currencies should not exceed 20 per cent. of equity of CEB. An analysis of sensitivity of CEB’s net income for the year and equity to changes in the foreign currency exchange rates based on positions existing as at 31 December 2011, 31 December 2010 and 31 December 2009 and a simplified scenario of a 5 per cent. change in rates of major currencies to RUB is as follows:

2011 2010 2009 (in RUB thousands) 5% appreciation of USD against RUB ...... (10,363) (21,829) (25,458) 5% depreciation of USD against RUB ...... 10,363 21,829 25,458 5% appreciation of EUR against RUB ...... (3,207) (4,146) (9,752) 5% depreciation of EUR against RUB ...... 3,207 4,146 9,752

95 In addition to the CBR requirements CEB follows international practice and sets its own limits. The absolute level of 10 per cent. of its equity is set as the maximum limit of currency risk exposure to be taken separately for each position and for the sum of all positions.

Operational Risk Operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. This definition includes IT, HR, fraud, operations and legal risk. To manage such risk, CEB established the Operational Risk Committee. The committee determines policies and procedures in the area of operational risks. Meetings are held monthly, where regular reports from Operations Department, Customer Care Unit and IT Department are discussed together with current issues. Apart from the Operational Risk Committee, CEB also established an IT Steering Committee which is entitled to set strategies and priorities for IT projects and take decisions on IT risks and processes, an HR Committee to manage HR Risks, and Disciplinary Committee to deal with Code of Conduct issues. CEB collects information in relation to the circumstances leading to losses and uses this information for necessary corrections of processes and control tools. The Risk Management Department plays an important role in managing operational risks. The CRO is the member of all the above-mentioned committees and reports directly to the Board of Directors on important developments and issues.

96 MANAGEMENT Management Structure In line with other Russian banks, CEB is managed through a multi-tier system of governing bodies comprised of the General Shareholders’ Meeting, the board of directors (the ‘‘Board of Directors’’), the management board (the ‘‘Management Board’’) and the President (which post is held by the Chairman of the Management Board). The following table sets out CEB’s management and internal business divisions, as of the date of the Prospectus: The General Shareholders’ Meeting is the supreme governing body of CEB. The General Shareholders’ Meeting elects the Board of Directors, which is responsible for the general management of CEB, including coordination of its overall strategy and general supervision, and also appoints the President, who acts as the Chief Executive Officer of CEB. The Board of Directors appoints the members of the Management Board, which is the collective executive body of CEB. Day-to-day activities of CEB are overseen by the President and the Management Board. Certain powers are delegated by the President to other members of the Management Board, department heads and various committees. A brief description of each of the General Shareholders’ Meeting, the Board of Directors, the Management Board and the President is set out below.

Board of Directors The Board of Directors is responsible for matters of general management, with the exception of those matters which are within the exclusive authority of the General Shareholders’ Meeting. The activities of the Board of Directors should be carried out in accordance with CEB’s charter and the Joint Stock Companies Law. The Board of Directors meets as often as necessary and exercises exclusive authority over matters relating to the ordinary course of CEB’s business. The quantitative composition of the Board of Directors is determined by the General Shareholders’ Meeting taking into account the applicable law. The Chairman of the Board of Directors and the members of the Board of Directors are elected at the General Shareholders’ Meeting until the next annual general shareholders’ meeting and may be re-elected an unlimited number of times. The appointment of any members of the Board of Directors of CEB may be terminated at any time by a decision of a shareholders’ meeting. Members of the Management Board may not comprise more than a quarter of the members of the Board of Directors. Currently, there are five members on CEB’s Board of Directors. The name, position and certain other information for each member of the Board of Directors of CEB are set out below. Husnu M. Ozyegin, 1944, has served as the Chairman of the Board of Directors of CEB since the establishment of CEB. Mr. Ozyegin is the founder and Chairman of Finansbank A.S. (Turkey). Mr. Ozyegin graduated from Robert College in 1963. He holds a B.S. in Civil Engineering from Oregon University, USA (1967) and an M.B.A. from Harvard Business School (1969). Mr. Ozyegin currently serves as chairman of all Fiba Group companies, and is on the board of directors of the GIMA and Marks & Spencer retail store chains in Turkey. Mr. Ozyegin also has held positions in IBM World Trade Corporation and Arthur D. Little. Fevzi Bozer, 1955, has served as a member of the Board of Directors of CEB since 31 December 2005. Mr. Bozer is a former General Manager of Finansbank A.S. He holds a B.A. in Business Administration- Finance from Indiana University, Indiana, USA, (1980) and an M.B.A. from Roosevelt University, Chicago, USA (1982). He started his career in 1984 at Citibank N.A. as a credit manager. He joined Finansbank A.S. (Turkey) in 1988 as the Ankara Branch Manager. Mr. Bozer served as the General Manager of Finansbank (Suisse) between 1991 and 1993, the Assistant General Manager of Finansbank A.S. (Turkey)’s Credit Marketing Department in 1993 and the General Manager of Finansbank A.S. (Turkey) from 1995 until 1999. In 1999 he started serving as the Managing Directors and continues to serve as a board member of Credit Europe Bank N.V., Credit Europe Bank (Romania) S.A. and Credit Europe Bank (Suisse) S.A. Faik Onur Umut, 1962, has served as a member of the Board of Directors of CEB since 15 November 2003. Mr. Umut was the General Manager of Finansbank A.S. (Turkey) from July 1999 to October 2003. He

97 holds a B.S. in Industrial Engineering, Accounting and Economy from Bosphorus University, Turkey (1985). He worked in London at Ganmount Holding’s Finance Department. After working at Iktisat Bankasi as Assistant Manager in the main branch, and then at Finansbank A.S. (Turkey), Mr. Umut became the Branch Manager of Finansbank A.S. (Turkey) head office in Istanbul. In 1995, Mr. Umut became the Assistant General Manager of Finansbank A.S. (Turkey) and was responsible for credit and marketing. During that period, he was also a member of the Credit Committee. In 1996, Mr. Umut was appointed as the Assistant General Manager of Credit Europe Bank N.V. Mr. Umut served as the General Manager of Credit Europe Bank N.V. until the end of 1998. Mehmet Gulesci, 1962, has served as a member of the Board of Directors of CEB since 12 April 2004. Mr. Gulesci holds a degree in Management (1984) and a master’s degree in Social Sciences (1987) from Bosphorus University, Turkey. Mr. Gulesci is a Certified Public Accountant (CPA) in Massachusetts, USA, and in Turkey. He worked for Ernst & Young between 1984 and 1996 (including two years in its Boston office). In 1997, he joined Finansbank A.S. (Turkey) as Assistant General Manager in charge of Financial Control and Planning. Enver Murat Basbay, 1968, has served as a member of the Board of Directors of CEB since 25 April 2005. Mr. Basbay has a B.A. degree in Business Administration from Bosphorus University, Turkey (1992) and started his career with Arthur Andersen. Mr. Basbay has held leading positions within the Fiba Group. Mr. Basbay has worked in Credit Europe Bank N.V. since 1997 and served as a member of the Board of Directors during 2002-2005. Wei Man Cheung, 1975, has served as a Member of the Managing Board of CEB since 29 June 2012. Mr. Cheung holds a postgraduate ‘‘Registeraccountant’’ qualification from the University of Amsterdam. He worked for six years at Ernst & Young Accountants in Amsterdam and Hong Kong, before joining Credit Europe Bank in 2002 as Head of the Internal Audit Department. In 2006, he was appointed Head of Group Audit, responsible for coordinating the group’s Internal Audit activities in the 11 countries in which the bank operates. The address of all members of the Board of Directors is 14 Olimpiyskiy Prospekt, Moscow 129090, Russian Federation.

Management Board and President The day-to-day management of CEB is carried out by the President and the Management Board of CEB. As at the date of this Prospectus, Mr. Haluk Aydinoglu holds the position of President of CEB. The President is authorised, among other things, to act on behalf of CEB without any express grant of authority, to dispose of CEB’s property in accordance with CEB’s charter, to determine the guidelines of the internal audit and control systems in CEB, and to issue internal orders concerning CEB’s day-to-day operations. The President is elected by the Board of Directors for an indefinite period. On 24 May 2010, the Board of Directors elected Mr. Haluk Aydinoglu the President of CEB. The Management Board is CEB’s executive body. Its members are appointed by the Board of Directors for an indefinite period. Together with the President, the Management Board is responsible for CEB’s day-to-day management and administration. Its activities are coordinated by the President and are regulated by applicable Russian law and CEB’s charter. The Management Board meets as often as necessary. Functions that are not allocated to the General Shareholders’ Meeting, the Board of Directors or the President (Chairman of the Management Board) remain within the authority of the Management Board. In particular, the Management Board is charged, inter alia, with the following functions: • arranging for preparation of materials and information to be submitted to shareholders of the bank in connection with preparation of CEB’s General Shareholders’ Meeting; • arranging for development of and submitting to the CEB’s Board of Directors for approval the documents to be considered and approved by CEB’s Board of Directors, including CEB’s budget for the respective financial year specifying the development strategy of CEB, the current business plan of CEB, the principles of risk management; • coordinating CEB’s day-to-day activities of CEB’s structural units and representative offices; • deciding on the launch of new kinds of banking services;

98 • deciding on internal control matters falling within the competence of the Management Board under CEB’s Charter and internal documents; • distribution of powers and responsibilities in respect of risk management between heads of units of different levels, providing them with required resources, determining the procedure for interaction and submitting reports; • deciding on writing-offs of bad debts from CEB’s balance sheet, at the cost of the reserve generated for these purposes, if the amount of such debts exceeds one per cent. of CEB’s equity (capital); • determining priorities of development of the risk management function on the basis of principles approved by the Board of Directors; • approval of CEB’s internal policies in various areas. Currently, the Management Board consists of three members. The name, position and certain other information for each member of the Management Board are set out below. Haluk Aydinoglu, 1969, has served as the President of CEB since 25 May 2010. Mr. Haluk Aydinoglu holds a PhD in Electrical and Computer Engineering and MS degree in Electrical Engineering from Georgia Institute of Technology, US and BS in Electrical Engineering and Mathematics from Bosphorus University, Turkey. He started working for CEB in 2004 as head of the retail business division. Prior to that he held post at McKinsey & Co for more than four years as Business Consultant for consumer finance and sales force management projects in many countries including US, Turkey, Greece, South Africa, and a number of locations in the Middle East. Asad Verdiev, 1971, has served as a member of the Management Board of CEB since 1 October 2001. Mr. Verdiev holds a PhD in Physics from Moscow State University n.a. M.V. Lomonosov. He started working for CEB in 1998 as a Deputy Head of the Financial Control Department and was appointed as Head of the Financial Control Department in 2002. Anna Zhludova, 1963, has served as a member of the Management Board since 25 February 2010 and as the Chief Accountant since 2004. Mrs. Zhludova graduated from the Moscow Finance Institute. She started working for CEB in 2003 as Head of Internal Settlements and Accounting. The business address of all members of the Management Board is 14 Olimpiyskiy prospekt, Moscow 129090, Russian Federation. The members of the Management Board and Board of Directors do not have any existing or potential conflicts of interests with respect to their duties to CEB and their private interests or other duties.

99 SHAREHOLDERS As of 31 December 2010, as of 31 December 2011 and as of the date of this Prospectus, the share capital of CEB was RUB8,334,900,000 comprised of 1,470,000 ordinary registered shares with a nominal value of RUB5,670 each, and reflecting an adjustment for the application of IAS 29. For data as of 31 December 2011, see Note 24 to the CEB Financial Statements. As of 30 June 2012, 98.14 per cent. of CEB’s total share capital is legally and beneficially owned and controlled directly by Credit Europe Bank N.V. The rights of Credit Europe Bank N.V. as a shareholder in CEB are contained in the articles of association of CEB and CEB will be managed by its directors in accordance with those articles and the provisions of the laws of the Russian Federation. Credit Europe Group N.V. held 1.80 per cent. of CEB’s total share capital. Members of the Board of Directors and of the Management Board held 1.2 per cent. and 0.24 per cent. of CEB’s share capital, respectively. The remaining 0.42 per cent. of CEB’s share capital was held by other minority shareholders.

100 RELATED PARTY TRANSACTIONS Under IFRS, parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party’s financial or operational decisions, as defined by IAS 24 ‘‘Related Party Disclosures’’. In determining each possible related party relationship, it is necessary to consider the substance of the relationship in question and not merely its legal form. CEB enters into transactions with shareholders, subsidiaries and affiliates in the ordinary course of its business. These transactions include extending loans and trade finance, accepting deposits, providing settlement services, issuing guarantees and participating in securities and foreign exchange transactions. CEB’s policy is generally to conduct all transactions with related parties at arms’ length and according to terms and conditions consistent with those it applies to unrelated parties and approve them in accordance with relevant Russian and other legislation. In considering each possible related party relationship, the substance of the relationship is assessed, and not merely the legal form. As at 30 June 2012 and 31 December 2011, 2010 and 2009, CEB had the following transactions outstanding with related parties. These transactions comprise:

30 June 31 December 2012 2011 2010 2009 (in RUB thousands) Assets Placements with banks and other financial institutions 3,519,407 3,562,462 5,381,918 10,804,090 Financial instruments at fair value through profit or loss ...... 259,719 323,356 35,625 90,796 Loans to customer (gross amount) ...... 1,316,681 583,507 28,931 954,876 Other assets ...... — — 357 — Liabilities Financial instruments at fair value through profit or loss ...... 138,330 350,457 284,417 45,285 Deposit and balances from banks and other financial institutions ...... 7,708,932 7,177,291 12,951,376 4,166,268 Debt securities in issue ...... 5,522,968 4,572,652 5,456,493 10,091,077 Current accounts and deposit from customers ...... 4,394,778 5,903,374 5,581,131 9,840,432 Other liabilities ...... 1,081,991 — 187 121 Off balance sheet items Guarantees issued ...... 63,960 57,707 40,054 61,005 As at 31 December 2011, CEB had placements with members of the Fiba Group in the amount of RUB3,562 million. From time to time CEB deposits its extra liquidity with members of the Fiba Group pending deployment in its business. For the six months ended 30 June 2012 and the years ended 31 December 2011, 2010 and 2009, the following income statement items related to related parties of CEB:

30 June 31 December 2012 2011 2010 2009 (in RUB thousands) Income Statement Items Interest income ...... 105,879 319,203 156,816 613,029 Interest expense ...... (678,958) (816,500) (614,127) (1,537,847) Fee and commissions income ...... 24,051 29,615 1,429 — Net foreign exchange income/(loss) ...... 12,146 27,731 (77,848) (126,407) Other income ...... 419 6,605 8,717 5,469 Key management personnel compensation ...... (174,465) (333,608) (255,988) (214,355) See Note 32 of the 2009 and 2010 Financial Statements and Note 31 of the 2011 Financial Statements, as well as Note 8 of the Interim Financial Statements for further discussion of related party transactions. Certain parental entities and affiliates of CEB may purchase a substantial volume of the Notes offered.

101 THE ISSUER General The Issuer is a public limited liability company (soci´et´e anonyme), incorporated on 24 October 2005 in Luxembourg under the name Finans Russia Capital S.A., for an unlimited period under the Luxembourg Law of 10 August, 1915 on Commercial Companies, as amended. The Issuer operates under Luxembourg law. The Issuer has its registered office at 2, boulevard Konrad Adenauer, L-1115 Luxembourg, with telephone number +352 421 22 243 and fax number +352 421 22 718. The Issuer is registered with the Luxembourg Register of Commerce and Companies under number B111.493 and the Articles of Incorporation (the ‘‘Articles’’) have been published in the Memorial´ C Recueil des Societ´ es´ et Associations Nr. 249 on 3 February 2006. The Articles of the Issuer have been amended by notarial deed of 30 March 2007 to reflect amongst others the change of its name and an increase of its share capital. The notarial deed has been published in the Memorial´ C Recueil des Societ´ es´ et Associations on 6 June 2007.

Corporate Purpose of the Issuer Article 3 of the Articles provides that the corporate object of the Issuer is: • the issue of loan participation notes or other debt securities for the purpose of financing loans to Credit Europe Bank Ltd., a closed joint-stock company established under the laws of the Russian Federation whose registered office is Paveletskaya 2/2, 115054 Moscow, Russian Federation; • the granting of loans to Credit Europe Bank Ltd.; • the granting of security interests over its assets in relation to the issuance of loan participation notes or other debt securities; • the making of deposits at banks or with other depositaries; and • the entry into all agreements ancillary to or necessary in the context of the objects mentioned above, including, but not limited to, interest and/or currency exchange agreements, option agreements and other financial derivative agreements concluded in relation with the operations above. The Issuer may carry out any transactions, whether commercial or financial which are directly or indirectly connected with its corporate object at the exclusion of any banking activity. In general the Issuer may carry out any operation, which it may deem useful or necessary in the accomplishment and the development of its corporate purpose.

Business Activity Except as described herein, the Issuer has not previously carried on any business or activities other than those incidental to its incorporation, the issue of the Notes, the Subordinated Loan, the authorisation and the issue of the Notes and activities incidental to the exercise of its rights and compliance with its obligations under the Notes, the Subordinated Loan Agreement, the Subscription Agreement, the Agency Agreement, the Trust Deed and the other documents and agreements entered into in connection with the issue of the Notes and the Subordinated Loan. The Issuer has previously issued four tranches of loan participation notes for the purpose of funding loans to Credit Europe Bank. Of these, only one remains outstanding. The Issuer has undertaken activities similar to those set out above with respect to each previous issue of loan participation notes. The Issuer is organised as a special purpose company. The Issuer is established to raise capital by the issue of debt securities and to use amounts equal to the proceeds of each such issuance to make loans to Credit Europe Bank.

Corporate Administration The Directors (as defined in ‘‘Management’’ below) have been appointed as directors (‘‘administrateurs’’) of the Issuer. Certain administrative and corporate and related services are provided to the Issuer by Deutsche Bank Luxembourg S.A. in its capacity as corporate administrator (‘‘soci´et´e de domiciliation’’) pursuant to a corporate services and domiciliation agreement dated 4 November 2005.

102 Capital As of the date of this Prospectus, the subscribed share capital of the Issuer amounts to fifty thousand United States Dollars (U.S.$ 50,000) divided into five hundred (500) registered shares with a par value of one hundred United States Dollars (U.S.$ 100) each. All of the shares are fully paid up.

Shareholders The issued and outstanding shares in the Issuer’s share capital are owned and controlled as follows: Stichting CEB Capital owns 499 shares and Stichting Participatie DITC Amsterdam owns 1 share.

Management The Issuer is managed by its board of directors, who are appointed by the shareholders. The current directors (the ‘‘Directors’’) of the Issuer are: • Rolf Caspers, banker, with professional address at 2, boulevard Konrad Adenauer, L-1115 Luxembourg; • Heike Kubica, employee, with professional address at 2, boulevard Konrad Adenauer, L-1115 Luxembourg; and • Anja Wunsch, employee, with professional address at 2, boulevard Konrad Adenauer, L-1115 Luxembourg. As part of their work within the corporate services team, the Directors also serve as directors of other special purpose companies established in Luxembourg. However, none of the Directors of the Issuer has any conflict or potential conflict between their duties to the Issuer and their other activities.

Real Estate Assets The Issuer does not own any real estate assets.

Business Year The business year of the Issuer begins on the first day of January and ends on the last day of December of each year. The first business year of the Issuer began on the date of incorporation of the Issuer and ended on 31 December 2005. The annual general meeting of the Issuer shall be held at the registered office of the Issuer or at such other place as may be specified in the notice convening the meeting on the 1st Friday of June of each year, at 10 am. If such day is a public holiday, the meeting will be held on the next following business day.

Statutory Auditors The statutory auditors of the Issuer are Ernst & Young S.A. (r´eviseur d’entreprise agr´e´e) (which belong to the Luxembourg institute of auditors (Instituts des r´eviseurs d’entreprises), with registered office at 7, Parc d’activites´ Syrdall, L-5365 Munsbach and registered with the Luxembourg Register of Commerce and Companies under number B-47771.

Financial Statements Financial statements are published by the Issuer on an annual basis. These statements are approved by Ernst & Young S.A. (r´eviseur d’entreprise agr´e´e). See Statutory Auditors. The Issuer has approved its financial statement in respect of the years up to and including 2011. Any future published financial statements prepared by the Issuer (which will be in respect of the period ending on 31 December in each year) will be available from the Paying Agent in Luxembourg. The Issuer does not produce interim financial statements.

Litigation There are no, and have not been, any legal or arbitration proceedings against or affecting the Issuer, nor is the Issuer aware of any pending or threatened proceedings of such kind, which may have, or have had,

103 since its incorporation on 24 October 2005, prior to the date of this Prospectus a significant effect on the financial position or profitability of the Issuer.

No Conflict of Interests There are no potential conflicts of interests between any duties to the Issuer, of the Directors, of the statutory auditors and their private interests and or other duties.

Miscellaneous No corporate governance regime to which the Issuer would be subject exists in Luxembourg as at the date of this Prospectus. There are no other material contracts entered into in the ordinary course of the Issuer’s business that are material to the Issuer’s ability to meet its obligations to the Noteholders in respect of the Notes being issued.

104 THE SUBORDINATED LOAN AGREEMENT The following is the text of the Subordinated Loan Agreement to be entered into between the Issuer and Credit Europe Bank.

SUBORDINATED LOAN AGREEMENT, dated 14 November 2012 between: (1) CREDIT EUROPE BANK LTD., a bank organised in the form of a closed joint stock company established under the laws of the Russian Federation whose registered office is Olimpiyskiy prospect, bld.14, 129090, Moscow, Russian Federation (‘‘Credit Europe Bank’’); and (2) CEB CAPITAL S.A., a limited liability company (soci´et´e anonyme) incorporated in Luxembourg whose registered office is at 2, boulevard Konrad Adenauer, L-1115 Luxembourg, organised under the law of the Grand Duchy of Luxembourg (‘‘Luxembourg’’) and registered with the Register of Commerce and Companies of Luxembourg under number B111.493 (the ‘‘Lender’’, which expression, where the context so admits, includes any successor Lender pursuant to the terms of this Agreement and the Lender acting in its capacity as issuer of the Notes).

Whereas: (A) The Lender has at the request of Credit Europe Bank agreed to make available to Credit Europe Bank an unsecured subordinated loan facility in the amount of U.S.$250,000,000 on the terms and subject to the conditions of this Agreement. (B) The Lender and Credit Europe Bank have agreed that, on the occurrence of a Bankruptcy Event (as defined below), the claims of the Lender in respect of the Subordinated Loan (as defined below) shall be subordinated to the claims of Senior Creditors (as defined below) of Credit Europe Bank in accordance with the Insolvency Law (as defined below). (C) Credit Europe Bank intends the Subordinated Loan to be qualified as Own Funds (as defined below) within the meaning of paragraph one of Section 3.11.1 of Regulation No. 215-P (as defined herein). (D) The Lender and Credit Europe Bank have agreed that the terms and conditions set forth in this Agreement, including the Rate of Interest (as defined below) payable in respect of the Subordinated Loan, do not differ materially from the terms and conditions of similar agreements concluded on market terms as of the date of this Agreement. Now it is hereby agreed as follows:

1 Definitions and Interpretation 1.1 Definitions In this Agreement (including the recital), unless otherwise defined herein, the following terms shall have the meanings indicated: ‘‘Acceleration Event’’ has the meaning assigned to such term in Clause 11.3 hereof. ‘‘Advance’’ means the advance to be made by the Lender under Clause 3 of the sum equal to the amount of the Facility, as from time to time reduced by prepayment. ‘‘Affiliate’’ of any specified Person means (i) any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person or (ii) any other Person who is a director or officer (a) of such specified Person, (b) of any Subsidiary of such specified Person or (c) of any Person described in (i) above. For the purposes of this definition, ‘‘control’’ when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms ‘‘controlling’’ and ‘‘controlled’’ have meanings correlative to the foregoing. ‘‘Agency’’ means any agency, authority, central bank, department, government, legislature, minister, official or public statutory Person (whether autonomous or not) of, or of the government of, any state or supra-national body.

105 ‘‘Agency Agreement’’ means the agency agreement relating to the Notes dated 14 November 2012, as amended, varied or supplemented relating to the Notes. ‘‘Agreement’’ means this Agreement as originally executed or as it may be amended from time to time. ‘‘Approval Date’’ means the date falling 90 days after the date of this Agreement. ‘‘Arrangement Fee’’ has the meaning given to it in Clause 2.3. ‘‘Auditors’’ means the auditors of Credit Europe Bank’s IFRS consolidated financial statements for the time being or, if they are unable or unwilling to carry out any action requested of them under this Agreement, such other internationally recognised firm of accountants as may be approved in writing by the Lender for this purpose. ‘‘Authorised Signatory’’ means, in relation to Credit Europe Bank, any Person who is duly authorised (in such manner as may be reasonably acceptable to the Lender) and in respect of whom the Lender has received a certificate signed by a director setting out the name and signature of such Person and confirming such Person’s authority to act. ‘‘Bankruptcy Event’’ means the entry into force of a final decision of a competent Russian court finding Credit Europe Bank bankrupt. ‘‘Business Day’’ means a day on which, if on that day a payment is to be made hereunder, commercial banks generally are open for business in Luxembourg, New York City and in the city where the Specified Office (as defined in the Agency Agreement) of the Principal Paying Agent is located. ‘‘Capital Stock’’ means, with respect to any Person, any and all shares, interests, participations, rights to purchase, warrants, options, or other equivalents (however designated) of capital stock of a corporation and any and all equivalent ownership interests in a Person other than a corporation, in each case whether now outstanding or hereafter issued. ‘‘CBR’’ means the Central Bank of the Russian Federation—Bank of Russia or such other governmental or other authority as shall from time to time carry out functions in relation to the supervision of banks in the Russian Federation as are, on the date hereof, carried out by the CBR. ‘‘Civil Code of the Russian Federation’’ means Part 1 of the Civil Code of the Russian Federation which came into effect on 1 January 1995, Part 2 of the Civil Code of the Russian Federation which came into effect on 1 March 1996, Part 3 of the Civil Code of the Russian Federation which came into effect on 1 March 2002 and Part 4 of the Civil Code of the Russian Federation which came into effect on 1 January 2008. ‘‘Closing Date’’ means 15 November 2012. ‘‘Event of Default’’ means an Acceleration Event. ‘‘Facility’’ means the facility specified in Clause 2. ‘‘Final Conclusion’’ means the final conclusion (zakluchenie) of the CBR confirming the final unconditional approval by the CBR of this Agreement and the Subordinated Loan as a subordinated loan eligible for inclusion into own funds of Credit Europe Bank within the meaning of paragraph one of Section 3.11.1 of Regulation No. 215-P (‘‘Own Funds’’). ‘‘Group’’ means Credit Europe Bank and its consolidated Subsidiaries taken as a whole. ‘‘IFRS’’ means International Financial Reporting Standards (formerly International Accounting Standards) issued by the International Accounting Standards Board (‘‘IASB’’) and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB (as amended, supplemented or re-issued from time to time). ‘‘Insolvency Law’’ has the meaning given to it in Clause 4.1. ‘‘Interest Payment Date’’ means 15 May and 15 November of each year, commencing on 15 May 2013. ‘‘Lender Account’’ means an account in the name of the Lender with the Principal Paying Agent (account number 11658573).

106 ‘‘Noteholder’’ means, in relation to a Note, the person in whose name such Note is for the time being registered in the register of Noteholders (or, in the case of a joint noteholding, the first named holder thereof). ‘‘Notes’’ means the U.S.$250,000,000 8.50 per cent. subordinated loan participation notes due 2019 proposed to be issued by the Lender pursuant to the Trust Deed. ‘‘Officers’ Certificate’’ means a certificate signed by two officers of Credit Europe Bank at least one of whom shall be the principal executive officer, principal accounting officer or principal financial officer of Credit Europe Bank. ‘‘Opinion of Counsel’’ means a written opinion from international legal counsel who is acceptable to the Lender and the Trustee. ‘‘Original Financial Statements’’ means the most recent audited IFRS consolidated financial statements of Credit Europe Bank. ‘‘Person’’ means any individual, company, corporation, firm, partnership, joint venture, association, organisation, state or Agency of a state or other entity, whether or not having separate legal personality. ‘‘Prepayment Date’’ means any date on which the Subordinated Loan is to be prepaid pursuant to any of the provisions of Clauses 6.2, 6.3 or 6.4, if applicable. ‘‘Principal Paying Agent’’ means Citibank, N.A., London Branch or, if applicable, any successor principal paying agent for the Notes as may from time to time be appointed by the Lender (or, following the giving of notice pursuant to Clause 2.7 of the Trust Deed, by the Trustee). ‘‘Rate of Interest’’ has the meaning assigned to such term in sub-Clause 5.1. ‘‘Regulation No. 215-P’’ means CBR Regulation No 215-P dated 10 February 2003 ‘‘On the method of determination of own funds (capital) of credit organisations’’, as may be amended, supplemented or replaced from time to time. ‘‘Repayment Date’’ means 15 November 2019 being a date that is no earlier than five years and 90 days from the Closing Date. ‘‘Rouble’’ means the lawful currency from time to time of the Russian Federation. ‘‘Same-Day Funds’’ means Dollar funds settled through the New York Clearing House Interbank Payments System or such other funds for payment in Dollars as the Lender may at any time determine to be customary for the settlement of international transactions in New York City of the type contemplated hereby. ‘‘Senior Creditors’’ means all creditors of Credit Europe Bank other than (i) creditors of Credit Europe Bank whose claims are in respect of the Capital Stock of Credit Europe Bank or (ii) creditors whose claims rank equally with or are subordinated to the claims of the Lender under this Agreement pursuant to Russian law or agreement (to the extent permitted by Russian law). ‘‘Subordinated Loan’’ at any time, means an amount equal to the aggregate principal amount of the Facility granted by the Lender pursuant to this Agreement and outstanding at such time. ‘‘Subscription Agreement’’ means the subscription agreement relating to the Notes dated 14 November 2012. ‘‘Subsidiary’’ of any specified Person means any corporation, partnership, joint venture, association or other business or entity, whether now existing or hereafter organised or acquired, (a) in the case of a corporation, of which more than 50 per cent. of the total voting power of the Voting Stock is held by such first-named Person and/or any of its Subsidiaries and such first-named Person or any of its Subsidiaries has the power to direct the management, policies and affairs thereof; or (b) in the case of a partnership, joint venture, association, or other business or entity, with respect to which such first-named Person or any of its Subsidiaries has the power to direct or cause the direction of the management and policies of such entity by contract or otherwise if (in each case) in accordance with IFRS, as consistently applied, such entity would be consolidated with the first-named Person for financial statement purposes.

107 ‘‘Taxes’’ means any taxes (including interest or penalties thereon) which are now or at any time hereafter imposed, assessed, charged, levied, collected, demanded, withheld or claimed by the Russian Federation, the Grand-Duchy of Luxembourg or any tax authority thereof or therein provided, however, that for the purposes of this definition the references to the Grand-Duchy of Luxembourg shall, upon the occurrence of a Relevant Event (as this term is defined in the Trust Deed), be deemed to be references to the jurisdiction in which the Trustee is domiciled for tax purposes; and the term ‘‘Taxation’’ shall be construed accordingly. ‘‘Treasury Rate’’ means, with respect to any Prepayment Date, the yield to maturity at the time of computation of United States Treasury securities with a constant maturity most nearly equal to the period from the Prepayment Date to the Repayment Date. Credit Europe Bank will obtain such yield to maturity from information compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) which has become publicly available at least two Business Days (but not more than five Business Days) prior to the Prepayment Date (or, if such Statistical Release is not so published or available, any publicly available source of similar market data selected by Credit Europe Bank in good faith)); provided, however, that if the period from the Prepayment Date to the Repayment Date is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the period from the Prepayment Date to the Repayment Date is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. ‘‘Treaty’’ means the double tax treaty currently in force between the Russian Federation and the Grand Duchy of Luxembourg on Avoidance of Double Taxation and Prevention of Fiscal Evasion in Respect of Income Taxes and Property Taxes dated 28 June 1993. ‘‘Trust Deed’’ means the trust deed to constitute the Notes for the equal and rateable benefit of the Noteholders to be dated the Closing Date between the Lender and the Trustee as amended, varied or supplemented from time to time. ‘‘Trustee’’ means Citibank, N.A., London Branch as trustee under the Trust Deed and any successor thereto as provided thereunder. ‘‘US dollars’’, ‘‘Dollars’’, ‘‘US$’’ and ‘‘U.S.$’’ mean the lawful currency of the United States of America. ‘‘Voting Stock’’ means, in relation to any Person, Capital Stock entitled (without the need for the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof.

1.2 Other Definitions Unless the context otherwise requires, terms used in this Agreement which are not defined in this Agreement but which are defined in the Trust Deed, the terms and conditions of the Notes, the Agency Agreement or the Subscription Agreement shall have the meanings assigned to such terms therein.

1.3 Interpretation Unless the context or the express provisions of this Agreement otherwise require, the following shall govern the interpretation of this Agreement: 1.3.1 All references to ‘‘Clause’’ or ‘‘sub-Clause’’ are references to a Clause or sub-Clause of this Agreement. 1.3.2 The terms ‘‘hereof’’, ‘‘herein’’ and ‘‘hereunder’’ and other words of similar import shall mean this Agreement as a whole and not any particular part hereof. 1.3.3 Words importing the singular number include the plural and vice versa. 1.3.4 All references to ‘‘Taxes’’ include all present or future taxes, levies, imposts and duties of any nature and the terms ‘‘Tax’’ and ‘‘Taxation’’ shall be construed accordingly.

108 1.3.5 The table of contents and the headings are for convenience only and shall not affect the construction hereof.

2 Facility 2.1 Facility On the terms and subject to the conditions set forth herein, the Lender hereby agrees to lend to Credit Europe Bank, and Credit Europe Bank hereby agrees to borrow from the Lender, U.S.$250,000,000.

2.2 Purpose The proceeds of the Advance will be used by Credit Europe Bank for general banking purposes, but the Lender shall not be concerned with the application thereof.

2.3 Arrangement Fee Credit Europe Bank shall pay a fee of U.S.$1,745,460.58 to the Lender in connection with the arrangement of the Facility (the ‘‘Arrangement Fee’’).

3 Drawdown 3.1 Drawdown On the terms and subject to the conditions set forth herein, on the Closing Date the Lender shall make the Advance to Credit Europe Bank and Credit Europe Bank shall make a single drawing in the full amount of the Facility (less any amount to be deducted (if any) in accordance with sub-Clause 3.2).

3.2 Arrangement Fee Credit Europe Bank agrees to pay the Arrangement Fee to the Lender by 10:00 a.m. (London time) one Business Day prior to the Closing Date. In the event that the Lender has not received from Credit Europe Bank by 4:00 p.m. (London time) one Business Day prior to the Closing Date an amount in respect of the Arrangement Fee, Credit Europe Bank agrees that an amount equal to the Arrangement Fee may be deducted from the amount of the Advance. In the event that following payment of the Arrangement Fee by Credit Europe Bank to the Lender, the closing of the issue of Notes does not take place in accordance with Clause 9 of the Subscription Agreement, the Lender shall return, as soon as practicable, the Arrangement Fee to Credit Europe Bank.

3.3 Disbursement Subject to the conditions set forth herein, on the Closing Date the Lender shall transfer the amount of the Advance (less any amount to be deducted (if any) in accordance with sub-Clause 3.2 above) to Credit Europe Bank’s account number 2000193003828 with Wells Fargo Bank, NA (New York International Branch) SWIFT: PNBPUS3NNYC.

3.4 Ongoing Fees and Expenses In consideration of the Lender making available the Facility hereunder, Credit Europe Bank shall pay on demand to the Lender each year all ongoing commissions and costs as set forth to Credit Europe Bank in an invoice or invoices from the Lender, providing in reasonable detail the nature and calculation of the relevant commission or cost.

4 Subordination of the Subordinated Loan 4.1 Subordination The claims of the Lender against Credit Europe Bank under this Agreement in respect of the principal of, and interest on, the Subordinated Loan will be subordinated, on a Bankruptcy Event, to the claims of Senior Creditors in accordance with the Federal Law ‘‘On Insolvency (Bankruptcy) of Credit Organisations’’ No. 40-FZ dated 25 February 1999 (as amended, replaced or superseded from time to time) (the ‘‘Insolvency Law’’), and will rank at least pari passu with the

109 claims of all other subordinated creditors of Credit Europe Bank (whether actual or contingent) having a fixed maturity from time to time outstanding and will be senior to the claims of holders of the Credit Europe Bank’s Capital Stock in their capacity as shareholders.

4.2 Report A report in writing as to the solvency of Credit Europe Bank by the liquidator or administrator of Credit Europe Bank shall, unless the contrary is proved, be treated and accepted by Credit Europe Bank and the Lender as correct and sufficient evidence thereof.

4.3 Set-Off Subject to applicable law, the Lender shall not exercise or claim any right of set off in respect of any amount owed to it arising under or in connection with this Agreement by Credit Europe Bank, and the Lender shall, by virtue of its execution of this Agreement, be deemed to have waived all such rights of set off.

4.4 Reclassification If the CBR fails to issue the Final Conclusion to Credit Europe Bank by the Approval Date, Clause 4.1 shall not apply and the claims of the Lender against Credit Europe Bank in respect of principal of and interest on the Subordinated Loan will, in the event of a Bankruptcy Event, rank at least pari passu with the claims of Senior Creditors and the Subordinated Loan shall be treated as senior in priority to any subordinated debt or Capital Stock of Credit Europe Bank.

5 Interest 5.1 Rate of Interest Credit Europe Bank will pay interest in Dollars to the Lender on the outstanding principal amount of the Subordinated Loan from time to time hereunder at the rate of 8.50 per cent. per annum (the ‘‘Rate of Interest’’).

5.2 Payment Interest at the Rate of Interest shall accrue from day to day, starting from (and including) the Closing Date and shall be paid in arrear not later than 9:00 a.m. (New York City time) one Business Day prior to each Interest Payment Date. Interest on the Subordinated Loan will cease to accrue from the Repayment Date (or any date upon which the Subordinated Loan is prepaid pursuant to Clause 6.2, 6.3 or 6.4) unless payment of principal due on such date is improperly withheld or refused, in which event interest will continue to accrue (before or after any judgment) at the Rate of Interest to but excluding the date on which payment in full of the principal thereof is made. If interest is required to be calculated for a period of less than one year, it will be calculated on the basis of a 360-day year consisting of 12 months of 30 days each and, in the case of an incomplete month the number of actual days elapsed.

6 Repayment and Prepayment 6.1 Repayment Except as otherwise provided herein: (a) Credit Europe Bank shall repay the Subordinated Loan not later than 9:00 a.m. (New York City time) one Business Day prior to the Repayment Date. (b) Credit Europe Bank shall not prepay all or any part of the Subordinated Loan or interest on the Subordinated Loan unless (i) the parties agree otherwise and (ii) only with the prior written consent of the CBR; and (c) this Agreement may not be terminated earlier than the Repayment Date unless (i) the parties agree otherwise and (ii) only with the prior written consent of the CBR.

110 6.2 Prepayment by Reason of Amendment to CBR Regulations Notwithstanding the provisions of Clause 6.1, Credit Europe Bank at its option, and with the prior written consent of the CBR, may prepay the Subordinated Loan, following the receipt of the Final Conclusion, at any time, if, as a result of any amendment to, clarification of or change in (including a change in interpretation or application of), Regulation No. 215-P or other applicable requirements of the CBR, the principal amount of the Subordinated Loan would fully cease to qualify as Own Funds. Notice of such payment together with an Officer’s Certificate confirming the existence of the relevant circumstances permitting such a prepayment shall be given by Credit Europe Bank to the Lender not less than 30 days prior to the date of such redemption (such notice shall be irrevocable). Upon the delivery of such notice and, if applicable, such Officer’s Certificate, Credit Europe Bank shall be required on the Prepayment Date to repay the Subordinated Loan in whole (but not in part) on the date specified in the notice, in an amount equal to the outstanding principal amount of the Subordinated Loan together with interest accrued to the date of prepayment and all other sums payable by Credit Europe Bank pursuant to this Agreement.

6.3 Special Prepayment if the Subordinated Loan is not Approved for Inclusion in Own Funds of Credit Europe Bank Notwithstanding the provisions of Clause 6.1, if, by the Approval Date, the CBR has not issued the Final Conclusion to Credit Europe Bank, then Credit Europe Bank may, upon not less than 20 days’ notice (which notice shall be irrevocable) to the Lender, prepay the Subordinated Loan in whole (but not in part) at the principal amount thereof, together with interest accrued to the date of prepayment and all other sums payable by Credit Europe Bank pursuant to this Agreement.

6.4 Prepayment in the Event of Taxes If by reason of the introduction of any change in any Russian law, regulation, regulatory requirement or directive of any Russian Agency after the date of this Agreement, Credit Europe Bank would thereby be required to make or increase any payment due pursuant to this Agreement as provided in Clauses 7.2 or 7.3 (other than, in each case, where the increase in payment is in respect of any amounts due or paid pursuant to Clauses 3 and 13.2), or if (for whatever reason) Credit Europe Bank would have to or has been required to pay additional amounts pursuant to Clause 9, and in any such case such obligation cannot be avoided by Credit Europe Bank taking reasonable measures available to it, then Credit Europe Bank may (without premium or penalty) if it obtains the prior written consent of the CBR, upon not more than 60 nor less than 30 days’ prior notice to the Lender, with a copy to the Trustee, (which notice shall be irrevocable), prepay the Subordinated Loan in whole (but not in part) on the date specified in the notice, in an amount equal to the outstanding principal amount of the Subordinated Loan. Prior to giving any such notice in the event of an increase in payment pursuant to Clause 7.2, Credit Europe Bank shall address and deliver to the Lender, with a copy to the Trustee, an Officers’ Certificate confirming that it would be required to increase the amount payable and such obligation cannot or could not be avoided by Credit Europe Bank taking reasonable measures available to it, supported by an opinion of an independent tax adviser of recognised standing.

6.5 Reduction of the Subordinated Loan Upon Redemption and Cancellation of Notes Credit Europe Bank, or any of its Subsidiaries, may from time to time, in accordance with the Conditions of the Notes, purchase Notes (having an aggregate principal value of at least U.S.$1,000,000) in the open market or by tender or by a private agreement at any price. In the event that, following prior written consent by the CBR thereto, an amount of Notes is surrendered to the Lender for cancellation by Credit Europe Bank, or such Subsidiary, and cancelled, the Subordinated Loan shall be deemed to have been prepaid by Credit Europe Bank in an amount corresponding to the aggregate principal amount of the Notes surrendered to the Lender for cancellation, together with accrued interest (if any) thereon and no further payment shall be made or required to be made by Credit Europe Bank in respect of such amounts.

6.6 Payment of Other Amounts If the Subordinated Loan is to be prepaid by Credit Europe Bank pursuant to any of the provisions of Clauses 6.2, 6.3 or 6.4 Credit Europe Bank shall, simultaneously with such

111 prepayment, pay to the Lender accrued interest thereon to the date of actual payment and all other sums payable by Credit Europe Bank pursuant to this Agreement.

7 Payments 7.1 Making of Payments All payments of principal and interest and additional amounts (other than those in respect of Reserved Rights, as defined in the Trust Deed) to be made by Credit Europe Bank under this Agreement shall be made to the Lender not later than 9:00 a.m. (New York City time) one Business Day prior to each Interest Payment Date or the Repayment Date (as the case may be) in Same-Day Funds to the Lender Account. The Lender agrees with Credit Europe Bank that the Lender will not deposit any other monies into the Lender Account and that no withdrawals shall be made from the Lender Account other than for payments to be made in accordance with the Trust Deed and Agency Agreement.

7.2 No Set-Off, Counterclaim or Withholding; Gross-Up All payments to be made by Credit Europe Bank under this Agreement shall be made in full without set-off or counterclaim and (except to the extent required by law) free and clear of and without deduction for or on account of any Taxes. If Credit Europe Bank shall be required by applicable law to make any deduction or withholding from any payment under this Agreement for or on account of any Taxes, it shall increase any payment due hereunder to such amount as may be necessary to ensure that the Lender receives a net amount in US Dollars equal to the full amount which it would have received had payment not been made subject to such Taxes, shall account to the relevant authorities for the relevant amount of such Taxes so withheld or deducted within the time allowed for such payment under the applicable law and shall deliver to the Lender without undue delay evidence satisfactory to the Lender of such deduction or withholding and of the accounting therefor to the relevant taxing authority. If the Lender pays any amount in respect of such Taxes, Credit Europe Bank shall reimburse the Lender in US Dollars for such payment on demand on the basis of an invoice supported by copies of the relevant documents evidencing payments made by the Lender. For the avoidance of doubt, this Clause 7.2 is without prejudice to any obligations of the Lender contained in Clause 7.7.

7.3 Withholding on the Notes If the Lender notifies Credit Europe Bank (setting out in reasonable detail the nature and extent of the obligation with such evidence as Credit Europe Bank may reasonably require) that it has become obliged to make any withholding or deduction for or on account of any Taxes from any payment which it is obliged to make under or in respect of the Notes in circumstances where the Lender is required to pay additional amounts pursuant to Condition 7 of the Notes (following receipt of such notification Credit Europe Bank may request from the Lender an Opinion of Counsel with the cost of such Opinion of Counsel being borne solely by Credit Europe Bank), Credit Europe Bank agrees to pay to the Lender, not later than 11:30 a.m. (New York City time) one Business Day prior to the date on which payment is due to the Noteholders in Same-Day Funds to the Lender Account, such additional amounts as are equal to the said additional amounts which the Lender would be required to pay in order that the net amounts received by the Noteholders after such withholding or deduction will equal the respective amounts which would have been received by the Noteholders in the absence of such withholding or deduction; provided, however, that the Lender shall immediately upon receipt from any Paying Agent of any sums paid in respect of the Lender’s obligations under this sub-Clause pursuant to this provision, to the extent that the Noteholders, as the case may be, are not entitled to such additional amounts pursuant to the Conditions, pay such additional amounts to Credit Europe Bank (it being understood that neither the Lender, nor the Principal Paying Agent nor any Paying Agent shall have any obligation to determine whether any Noteholder is entitled to such additional amount).

7.4 Reimbursement To the extent that the Lender subsequently obtains or uses any tax credit or allowance or other reimbursements relating to a deduction or withholding with respect to which Credit Europe Bank has made a payment pursuant to this Clause 7, the Lender shall promptly pay to Credit Europe

112 Bank so much of the benefit it received as will leave the Lender in substantially the same position as it would have been in had no additional amount been required to be paid by Credit Europe Bank pursuant to this Clause 7; provided, however, that the question of whether any such benefit has been received, and accordingly, whether any payment should be made to Credit Europe Bank, the amount of any such payment and the timing of any such payment, shall be determined solely by the Lender. The Lender shall have the absolute discretion whether, and in what order and manner, it claims any credits or refunds available to it. If as a result of a failure to obtain relief from deduction or withholding of any Taxes referred to in Clause 7.2: (a) such Taxes are deducted or withheld by Credit Europe Bank and pursuant to Clause 7.2 an increased amount is paid by Credit Europe Bank to the Lender in respect of such deduction or withholding, and (b) following the deduction or withholding of Taxes as referred to above, Credit Europe Bank applies on behalf of the Lender to the competent taxing authority for a withholding tax refund (Credit Europe Bank having notified the Lender of such application) and such withholding tax is refunded or repaid by the relevant taxing authority to the Lender, the Lender shall as soon as reasonably practicable notify Credit Europe Bank of the receipt of such withholding tax refund and promptly transfer the amount of the withholding tax refund actually received in the currency actually received, less any applicable costs, to a bank account of Credit Europe Bank specified for that purpose by Credit Europe Bank.

7.5 Representations of the Lender The Lender represents that, at the date hereof, (a) it is a company which is a resident of the Grand-Duchy of Luxembourg, is subject to taxation in the Grand-Duchy of Luxembourg on the basis of its registration as a legal entity, location of its board of directors or another similar criterion and it is not subject to taxation in the Grand-Duchy of Luxembourg merely on income from sources in the Grand-Duchy of Luxembourg or connected with property located in the Grand-Duchy of Luxembourg and it will be able to receive certification to this effect from the Luxembourg taxing authorities (b) it does not have a permanent establishment in the Russian Federation in the sense of article 5 of the Treaty and the interest payable by Credit Europe Bank under this Agreement will not relate to any such permanent establishment, and (c) it does not have any current intentions to effect, during the term of the Subordinated Loan, any corporate action or reorganisation or change of taxing jurisdiction that would result in the Lender ceasing to be a resident of the Grand-Duchy of Luxembourg and subject to taxation in the Grand-Duchy of Luxembourg.

7.6 Mitigation If at any time either party hereto becomes aware of circumstances which would or might, then or thereafter, give rise to an obligation on the part of Credit Europe Bank to make any deduction, withholding or payment as described in sub-Clause 7.2 or 7.3, then, without in any way limiting, reducing or otherwise qualifying the Lender’s rights, or Credit Europe Bank’s obligations, under such Clauses, such party shall promptly upon becoming aware of such circumstances notify the other party, and, thereupon the parties shall consider and consult with each other in good faith with a view to finding, agreeing upon and implementing a method or methods by which any such obligation may be avoided or mitigated and, to the extent that both parties can do so without taking any action which in the reasonable opinion of such party is prejudicial to its own position, take such reasonable steps as may be reasonably available to it to avoid such obligation or mitigate the effect of such circumstances. Credit Europe Bank agrees to reimburse the Lender for all properly incurred costs and expenses (including but not limited to legal fees) incurred by the Lender in connection with this sub-Clause.

7.7 Tax Treaty Relief 7.7.1 The Lender shall, provided that in each case a corresponding request from Credit Europe Bank is received by the Lender no later than 25 Business Days prior to an Interest Payment Date and at Credit Europe Bank’s cost, to the extent it is able to do so under applicable law including, without limitation, Russian law, use reasonable efforts to obtain and to deliver to Credit Europe Bank no later than ten Business Days before such Interest Payment Date a certificate, issued by the competent taxing authority in the Grand-Duchy of Luxembourg confirming that the Lender is tax resident in the Grand-Duchy of

113 Luxembourg and apostilled and such other information or forms as may need to be duly completed and delivered by the Lender to enable Credit Europe Bank to apply to obtain relief from deduction or withholding of Russian Taxes after the date of this Agreement or, as the case may be, to apply to obtain a tax refund if a relief from deduction or withholding of Russian Taxes has not been obtained. 7.7.2 The Lender shall, at the request of Credit Europe Bank and at Credit Europe Bank’s cost, to the extent it is able to do so under applicable law including, without limitation, Russian law, from time to time use reasonable efforts to obtain and to deliver to Credit Europe Bank any additional duly completed application forms as need to be duly completed and delivered by the Lender to enable Credit Europe Bank to apply to obtain relief from deduction or withholding of Russian Taxes or, as the case may be, to apply to obtain a tax refund if a relief from deduction or withholding of Russian Taxes has not been obtained. 7.7.3 The certificate and, if required, other forms referred to in this Clause 7.7 shall be duly signed by the Lender, if applicable, and stamped or otherwise approved by the competent taxing authority in the Grand-Duchy of Luxembourg, if applicable. Together with any such certificate and, if required, other forms, the Lender shall deliver to Credit Europe Bank a copy of the same, certified by a Luxembourg notary to be a true and up-to-date copy of the original document. Any such notary’s certificate shall be apostilled or otherwise legalised. 7.7.4 If a relief from deduction or withholding of Russian Taxes under this Clause 7.7 has not been obtained and further to an application of Credit Europe Bank to the relevant Russian taxing authorities the latter requests the Lender’s Rouble bank account details, the Lender shall at the request of Credit Europe Bank (a) use reasonable efforts, at Credit Europe Bank’s cost, to procure that such Rouble bank account of the Lender is duly opened and maintained, and (b) thereafter furnish Credit Europe Bank with the details of such Rouble bank account.

8 Conditions Precedent The obligation of the Lender to make the Advance (less any deduction (if any) in accordance with sub-Clause 3.2) shall be subject to the further conditions precedent that as of the Closing Date (a) the Lender shall have received the full subscription moneys for the Notes pursuant to the Subscription Agreement and (b) the Lender shall have received in full from Credit Europe Bank, the Arrangement Fee.

9 Change in Law or Banking Practices; Increase in Cost 9.1 Compensation In the event that after the date of this Agreement there is any change in or introduction of any tax, law, regulation, regulatory requirement or official directive (whether or not having the force of law but, if not having the force of law, the observance of which is in accordance with the generally accepted financial practice of financial institutions in the country concerned) or in the interpretation or application thereof by any person charged with the administration thereof and/or any compliance by the Lender in respect of the Subordinated Loan or the Facility with any request, policy or guideline (whether or not having the force of law but, if not having the force of law, the observance of which is in accordance with the generally accepted financial practice of financial institutions in the country concerned) from or of any central bank or other fiscal, monetary or other authority, Agency or any official of any such authority, which: 9.1.1 subjects or will subject the Lender to any Taxes with respect to payments of principal of or interest on the Subordinated Loan or any additional amounts payable under this Agreement (other than any Taxes payable by the Lender on its overall net income or any Taxes referred to in sub-Clause 7.2 or 7.3); or 9.1.2 increases or will increase the Taxation of or changes or will change the basis of Taxation of payments to the Lender of principal of or interest on the Subordinated Loan or any additional amounts payable under this Agreement (other than any such increase or change which arises by reason of any increase in the rate of tax payable by the Lender on its overall net income or as a result of any Taxes referred to in sub-Clauses 7.2 or 7.3); or

114 9.1.3 imposes or will impose on the Lender any other condition affecting this Agreement, the Facility or the Subordinated Loan, and if as a result of any of the foregoing: (i) the cost to the Lender of making, funding or maintaining the Subordinated Loan or the Facility is increased; or (ii) the amount of principal, interest or additional amounts payable to or received by the Lender under this Agreement is reduced; or (iii) the Lender makes any payment or foregoes any interest or other return on or calculated by reference to the gross amount of any sum receivable by it from Credit Europe Bank hereunder or makes any payment or foregoes any interest or other return on or calculated by reference to the gross amount of the Subordinated Loan, then subject to the following, and in each such case: (a) the Lender shall, as soon as practicable after becoming aware of such increased cost, reduced amount or payment made or foregone, give written notice to Credit Europe Bank, together with a certificate signed by two directors of the Lender describing in reasonable detail the introduction or change or request which has occurred and the country or jurisdiction concerned and the nature and date thereof and demonstrating the connection between such introduction, change or request and such increased cost, reduced amount or payment made or foregone, and setting out in reasonable detail the basis on which such amount has been calculated, and all relevant supporting documents evidencing the matters set out in such notice; and (b) Credit Europe Bank, in the case of clauses (i) and (iii) above, shall on demand by the Lender, pay to the Lender such additional amount as shall be necessary to compensate the Lender for such increased cost, and, in the case of clause (ii) above, at the time the amount so reduced would otherwise have been payable, pay to the Lender such additional amount as shall be necessary to compensate the Lender for such reduction, payment or foregone interest or other return; provided, however, that the amount of such increased cost shall be deemed not to exceed an amount equal to the proportion thereof which is directly attributable to this Agreement and provided that the Lender shall not be entitled to such additional amount where such increased cost arises as a result of the negligence or wilful default of the Lender, provided that this sub-Clause 9.1 will not apply to or in respect of any matter for which the Lender has already been compensated under sub-Clauses 7.2 or 7.3.

9.2 Mitigation In the event that the Lender becomes entitled to make a claim pursuant to sub-Clause 9.1, the Lender shall consult in good faith with Credit Europe Bank and shall use reasonable efforts (based on the Lender’s reasonable interpretation of any relevant tax, law, regulation, requirement, official directive, request, policy or guideline) to reduce, in whole or in part, Credit Europe Bank’s obligations to pay any additional amount pursuant to such sub-Clause, except that nothing in this sub-Clause 9.2 shall obligate the Lender to incur any costs or expenses in taking any action which, in the reasonable opinion of the Lender, is prejudicial to its interests.

115 10 Covenants So long as any amount remains outstanding under this Agreement:

10.1 Financial Information 10.1.1 Credit Europe Bank will as soon as the same become available, but in any event within 150 days after the end of each of its financial years, deliver to the Lender and the Trustee the Group’s consolidated financial statements (in English) for such financial year, in each case audited by the Auditors. 10.1.2 Credit Europe Bank, to the extent they publish the same, will as soon as the same become available, but in any event within 90 days after the end of each half of each of its financial years, deliver to the Lender and the Trustee the Group’s consolidated financial statements for such period. 10.1.3 Credit Europe Bank will, so long as the Advance or any other sum owing under this Agreement remains outstanding, deliver to the Lender and the Trustee, without undue delay, such additional information regarding the financial condition or the business of Credit Europe Bank and its Subsidiaries as the Lender may reasonably request. 10.1.4 Credit Europe Bank will ensure that each set of consolidated financial statements delivered by it pursuant to this Clause 10.1.1 and 10.1.2 is: (i) prepared on the same basis as was used in the preparation of its Original Financial Statements and in accordance with IFRS and consistently applied; and (ii) in the case of the statements provided pursuant to sub-Clause 10.1.1, accompanied by a report thereon of the Auditors referred to in sub-Clause 10.1.1 (including accompanying notes and annexes) in each case, in a form satisfactory to the Lender and the Trustee; and (iii) in the case of the statements provided pursuant to sub-Clause 10.1.2, certified by an Authorised Signatory of Credit Europe Bank as giving a true and fair view of the Group’s consolidated financial condition as at the end of the period to which those consolidated financial statements relate and of the results of the Group’s operations during such period. 10.1.5 Credit Europe Bank shall send to the Lender and the Trustee an Officers’ Certificate that, having made all reasonable enquiries, to the best of the knowledge, information and belief of Credit Europe Bank as at the date (the ‘‘Credit Europe Bank Certification Date’’) not more than five days before the date of the Certificate, no Acceleration Event has occurred since the Credit Europe Bank Certification Date of the last such certificate or (if none) the date of the Subordinated Loan Agreement, or if such event has occurred, giving details of it (including, but not limited to, steps (if any) being taken to cure or remedy such Acceleration Event).

10.2 Capital Treatment If the Subordinated Loan is to be treated as Own Funds by Credit Europe Bank, Credit Europe Bank will use its best efforts to procure that the CBR issue a Final Conclusion for such treatment, and will provide all relevant information about the Subordinated Loan to the CBR as may be necessary for the issuance of such Final Conclusion.

11 Acceleration Events 11.1 Payment Default If Credit Europe Bank fails to pay any sum due from it under this Agreement at the time, in the currency and in the manner specified herein, and such failure is not remedied within 14 days of the due date for payment, the Lender may at its discretion and without further notice, institute proceedings in a manner and to the extent contemplated by the applicable law for the insolvency (bankruptcy) of Credit Europe Bank and to prove for its debt, and claim, in any consequent liquidation of Credit Europe Bank.

116 11.2 Winding-up On the occurrence of any of the following events: 11.2.1 the commencement of any liquidation of Credit Europe Bank (likvidatzia, as such term is defined in the Civil Code of the Russian Federation); 11.2.2 the entering into force of the decision of a competent court of the Russian Federation on bankruptcy of Credit Europe Bank (reshenie o priznanii dolzhnika bankrotom, as such term is defined under the Insolvency Law); 11.2.3 any revocation of any licence for the performance of banking operations of Credit Europe Bank; or 11.2.4 any other event, under Russian law, whereby the obligations of Credit Europe Bank under this Agreement are accelerated (otherwise than at the option of Credit Europe Bank), the Lender may give notice to Credit Europe Bank that under the laws of the Russian Federation the Subordinated Loan is, and it shall accordingly become, due and repayable (srok ispoleninya obyazatelstv schitaetsya nastypivshim, as such term is used in Russian law) (subject to and in accordance with the provisions of Clause 4.1 above) at the principal amount thereof together with any interest accrued and unpaid to the date of repayment and any additional amounts due and payable by Credit Europe Bank pursuant to this Agreement, and the Lender may, at its discretion and without further notice, take any actions in the manner and to the extent contemplated by the applicable law of the Russian Federation to prove for its debt and/or, to the extent applicable, commence liquidation or winding up proceedings of Credit Europe Bank.

11.3 Notice of Acceleration Event Credit Europe Bank shall deliver to the Lender and the Trustee, forthwith after becoming aware thereof, written notice of any event described in Clauses 11.1 and 11.2 (each an ‘‘Acceleration Event’’), its status and what action Credit Europe Bank is taking or proposes to take with respect thereto.

11.4 Proceedings In addition to its rights under Clauses 11.1 and 11.2, the Lender may institute such other step or proceedings against Credit Europe Bank as it may think fit to enforce any obligation, condition or provision binding on Credit Europe Bank under this Agreement (other than any obligation for payment of any principal or interest in respect of the Subordinated Loan contemplated by Clause 11.1) provided that Credit Europe Bank shall not by virtue of any such steps, actions or proceedings be obliged to pay (i) any sum or sums representing or measured by reference to principal or interest in respect of the Subordinated Loan sooner than the same would otherwise have been payable by it or (ii) any damages.

12 Indemnity 12.1 Indemnification Credit Europe Bank undertakes to the Lender, that if the Lender or any of its Affiliates, each director, officer, employee or agent of the Lender and each Person controlling the Lender within the meaning of the United States securities laws (each an ‘‘indemnified party’’) incurs any loss, liability, cost, claim, charge, fee, expense (including without limitation Taxes, legal fees, costs and expenses), demand or damage (a ‘‘Loss’’) as a result of or in connection with the Subordinated Loan, this Agreement (or enforcement thereof) (excluding a Loss that is the subject of the undertakings contained in sub-Clauses 7.2, 7.3 and Clause 9 of this Agreement (it being understood that the Lender may not recover twice in respect of the same Loss), and/or the issue, constitution, sale, listing and/or enforcement of the Notes and/or the Notes being outstanding, Credit Europe Bank will pay to the Lender on demand subject to the receipt of a certificate from the Lender as prescribed in Clause 12.3 an amount equal to such Loss, on an after tax basis, and all costs, charges and expenses which it or any indemnified party may pay or incur in connection with investigating, disputing or defending any such action or claim as such costs, charges and expenses are incurred unless such Loss was caused either by such indemnified party’s negligence or wilful misconduct or arises out of a breach of the representations and warranties of the Lender

117 herein. The Lender shall not have any duty or obligation, whether as fiduciary or trustee for any indemnified party or otherwise, to recover any such payment or to account to any other Person for any amounts paid to it under this Clause.

12.2 Independent Obligation Clause 12.1 constitutes a separate and independent obligation of Credit Europe Bank from its other obligations under or in connection with this Agreement or any other obligations of Credit Europe Bank in connection with the issue of the Notes by the Lender and shall not affect, or be construed to affect, any other provision of this Agreement or any such other obligations.

12.3 Evidence of Loss A certificate of the Lender setting forth the amount of Losses, expenses and liabilities described in Clause 12.1 and specifying in full detail the basis therefor shall, in the absence of manifest error, be conclusive prima facie evidence of the amount of such Losses, expenses and liabilities.

12.4 Survival The obligations of Credit Europe Bank pursuant to Clauses 7.2, 7.3, 9, 12.1 and 13.2 shall survive the execution and delivery of this Agreement and the drawdown and repayment of the Subordinated Loan by Credit Europe Bank.

12.5 Currency Indemnity Each reference in this Agreement to Dollars is of the essence. To the fullest extent permitted by law, the obligation of Credit Europe Bank in respect of any amount due in Dollars under this Agreement shall, notwithstanding any payment in any other currency (whether pursuant to a judgment or otherwise), be discharged only to the extent of the amount in Dollars that the party entitled to receive such payment may, acting reasonably in accordance with normal banking procedures, purchase with the sum paid in such other currency (after any premium and costs of exchange) on the Business Day immediately following the day on which such party receives such payment. If the amount in Dollars that may be so purchased for any reason falls short of the amount originally due, Credit Europe Bank hereby agrees to indemnify, on an after tax basis, the Lender against any such deficiency in Dollars. Any obligation of Credit Europe Bank not discharged by payment in Dollars shall, to the fullest extent permitted by applicable law, be due as a separate and independent obligation and, until discharged as provided herein, shall continue in full force and effect.

13 General 13.1 Evidence of Debt The entries made in the Lender Account referred to in sub-Clause 7.1 shall, in the absence of manifest error and subject to the provision by the Lender to Credit Europe Bank of written information describing in reasonable detail the calculation of relevant amounts together with the necessary supporting documents evidencing the matters described therein, constitute prima facie evidence of the existence and amounts of Credit Europe Bank’s obligations recorded therein.

13.2 Stamp Duties 13.2.1 Credit Europe Bank will pay all stamp, registration and documentary taxes or similar charges (if any) imposed on Credit Europe Bank by any Person in the Russian Federation or the Grand-Duchy of Luxembourg which may be payable or determined to be payable in connection with the execution, delivery, performance, enforcement, or admissibility into evidence of this Agreement and all related documents and shall indemnify the Lender against any and all costs and expenses which may be incurred or suffered by the Lender with respect to, or resulting from, delay or failure by Credit Europe Bank to pay such taxes or similar charges upon presentation by the Lender to Credit Europe Bank of documentary evidence of such costs and expenses. 13.2.2 Credit Europe Bank agrees that if the Lender incurs a liability to pay any stamp, registration and documentary taxes or similar charges (if any) imposed by any Person in

118 the Russian Federation or the Grand-Duchy of Luxembourg which may be payable or determined to be payable in connection with the execution, delivery, performance, enforcement, or admissibility into evidence of this Agreement and all related documents, Credit Europe Bank will reimburse the Lender on demand an amount equal to such stamp or other documentary taxes or duties and will indemnify the Lender against any and all costs and expenses which may be incurred or suffered by the Lender with respect to, or resulting from, delay or failure by Credit Europe Bank to procure the payment of such taxes or similar charges.

13.3 Waivers No failure to exercise and no delay in exercising, on the part of the Lender or Credit Europe Bank, any right, power or privilege hereunder and no course of dealing between Credit Europe Bank and the Lender shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof, or the exercise of any other right, power or privilege. The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by applicable law.

13.4 Notices All notices, requests, demands or other communications to or upon the respective parties hereto shall be given or made in the English language by SWIFT, telex or otherwise in writing and shall be deemed to have been duly given or made at the time of delivery, if delivered by hand or courier or if sent by facsimile transmission or by airmail, to the party to which such notice, request, demand or other communication is required or permitted to be given or made under this Agreement addressed as follows: 13.4.1 if to Credit Europe Bank: Olimpiyskiy prospect, bld.14 129090 Moscow Russian Federation Fax: +7 495 725 4041 Attention: Financial Institutions Department 13.4.2 if to the Lender: CEB Capital S.A. 2, boulevard Konrad Adenauer L-1115 Luxembourg Luxembourg Fax: +352 421 22718 Attention: Board of Directors or to such other address or fax number as any party may hereafter specify in writing to the other.

13.5 Assignment 13.5.1 Credit Europe Bank shall not assign or transfer all or any part of its rights or obligations hereunder to any other party. 13.5.2 The Lender may not assign or transfer, in whole or in part, any of its rights and benefits or obligations under this Agreement except as contemplated by the Trust Deed. 13.5.3 This Agreement shall inure to the benefit of and be binding upon the parties, their respective successors and any permitted assignee or transferee of some or all of a party’s rights or obligations under this Agreement. Any reference in this Agreement to any party shall be construed accordingly and, in particular, references to the exercise of rights and discretions by the Lender or the forming of an opinion by the Lender, shall include references to the exercise of such rights or discretions or the forming of an opinion by the Trustee (as Trustee). Notwithstanding the foregoing, the Trustee shall not be entitled to

119 participate in any discussions between the Lender and Credit Europe Bank pursuant to sub-Clauses 7.4, 7.5, 7.6 or 7.7 or Clause 9.

13.6 Prescription Subject to the Lender having received the principal amount thereof or interest thereon from Credit Europe Bank, the Lender shall forthwith repay to Credit Europe Bank the principal amount or the interest amount thereon, respectively, of any Notes upon such Notes becoming void pursuant to Condition 15 of the Notes.

13.7 Contracts (Rights of Third Parties) Act 1999 Other than the Trustee who shall have the right under such Act, a person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Agreement (except to the extent (if any) that this Agreement expressly provides for such Act to apply to any of its terms).

13.8 Governing law This Agreement and any non-contractual obligations arising out of or in connection with it is governed by, and shall be construed in accordance with, English law.

13.9 Jurisdiction The parties irrevocably agree that any dispute arising out of or connected with this Agreement, including a dispute as to the validity, existence or termination of this Agreement or the consequences of its nullity and/or this clause 13.9 (a ‘‘Dispute’’), shall be resolved by arbitration in London, England, conducted in the English language by three arbitrators, in accordance with the LCIA Rules, which rules are deemed to be incorporated by reference into this clause, save that Article 5.6 of the LCIA Rules shall be amended as follows: ‘‘unless the parties agree otherwise, the third arbitrator, who shall act as chairman of the tribunal, shall be nominated by the two arbitrators nominated by or on behalf of the parties. If he is not so nominated within 30 days of the date of nomination of the later of the two party-nominated arbitrators to be nominated, he shall be chosen by the LCIA’’. The parties agree to exclude the jurisdiction of the English court under section 45 and 69 of the Arbitration Act 1996.

13.10 Waiver of immunity To the extent that Credit Europe Bank or the Lender may, in relation to any Dispute, claim in any jurisdiction, for itself or its assets or revenues, immunity from the jurisdiction of any court or tribunal, service of process, injunctive or other interim relief, or any process for execution of any award or judgment against its property, Credit Europe Bank and the Lender irrevocably waive such immunity.

13.11 Counterparts This Agreement may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same agreement.

13.12 Language The language which governs the interpretation of this Agreement is the English language.

13.13 Amendments This Agreement may not be varied unless: (i) it is in writing signed by the parties; (ii) an amendment agreement (or draft) has been submitted to the CBR; and (iii) approval from the CBR has been received.

13.14 Loan not secured No collateral (as defined by the legislation of the Russian Federation) shall be provided to secure the Subordinated Loan.

120 13.15 Partial Invalidity The illegality, invalidity or unenforceability to any extent of any provision of this Agreement under the law of any jurisdiction shall affect its legality, validity or enforceability in such jurisdiction to such extent only and shall not affect its legality, validity or enforceability under the law of any other jurisdiction, nor the legality, validity or enforceability of any other provision.

13.16 CBR Prior Consent 13.16.1 Pursuant to the provisions of Clauses 6.2 to 6.4 of this Agreement, no prepayment of the principal and (or) interest under this Agreement (in whole or in part) shall be permitted without the prior written consent of the CBR; 13.16.2 Pursuant to the provisions of Clause 13.13 of this Agreement, no amendment, modification or waiver to this Agreement shall be permitted without the prior approval of the CBR; and 13.16.3 No early termination of this Agreement shall be permitted without the prior written consent of the CBR.

121 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the date first written above.

For and on behalf of CREDIT EUROPE BANK LTD.

By: By: Title: Title:

For and on behalf of CEB CAPITAL S.A.

By: By: Title: Director Title: Director

122 TERMS AND CONDITIONS OF THE NOTES The following is the text of the Terms and Conditions of the Notes, which contain summaries of certain provisions of the Trust Deed, and which will be attached to the Notes in definitive form, if any, and (subject to the provisions thereof) apply to the Global Certificate. The U.S.$250,000,000 8.50 per cent. Loan Participation Notes due 2019 (the ‘‘Notes’’ which expression includes any further Notes issued pursuant to Condition 14 and forming a single series herewith) of CEB Capital S.A. (the ‘‘Issuer’’) are constituted by a trust deed (the ‘‘Trust Deed’’, which expression includes such trust deed as from time to time modified in accordance with the provisions therein contained and any deed or other document expressed to be supplemental thereto, as from time to time so modified) dated 15 November 2012 and made between the Issuer and Citibank, N.A., London Branch (the ‘‘Trustee’’, which expression shall include any successors) as trustee for the holders of the Notes (the ‘‘Noteholders’’). The Issuer has authorised the creation, issue and sale of the Notes for the sole purpose of financing a U.S.$250,000,000 subordinated loan (the ‘‘Subordinated Loan’’) to Credit Europe Bank Ltd. (the ‘‘Borrower’’). The terms of the Subordinated Loan are recorded in a subordinated loan agreement (the ‘‘Subordinated Loan Agreement’’) dated 14 November 2012 between the Issuer and the Borrower. In each case where amounts of principal, interest and other amounts (if any) are stated herein or in the Trust Deed to be payable in respect of the Notes, the obligations of the Issuer to make any such payment shall constitute an obligation only to account to the Noteholders on each date upon which such amounts of principal, interest and other amounts (if any) are due in respect of the Notes, for an amount equivalent to sums of principal, interest and other amounts (if any) actually received by or, for the account of the Issuer pursuant to the Subordinated Loan Agreement, less any amounts in respect of the Reserved Rights (as defined in the Trust Deed). Noteholders must therefore rely solely and exclusively on the Borrower’s covenant to pay under the Subordinated Loan Agreement, the benefit of the Security Interests (as defined below) and the credit and financial standing of the Borrower. Noteholders shall have no recourse (direct or indirect) to any other assets of the Issuer. None of the Noteholders or the Trustee (nor any other person acting on behalf of any of them) shall be entitled at any time to institute against the Issuer, or join in any institution against the Issuer of, any bankruptcy, administration, moratorium, reorganisation, controlled management, arrangement, insolvency, winding-up or liquidation proceedings or similar insolvency proceedings under any applicable bankruptcy or similar law in connection with any obligation of the Issuer relating to the Notes or otherwise owed to the Trustee for so long as the Notes are outstanding, save for lodging a claim in the liquidation of the Issuer which is initiated by another party or taking proceedings to obtain a declaration or judgment as to the obligations of the Issuer. The Issuer has charged by way of first fixed charge in favour of the Trustee certain of its rights and interests as lender under the Subordinated Loan Agreement (other than any rights and benefits constituting Reserved Rights) and under an account in the name of the Issuer with the Principal Paying Agent, as security for its payment obligations in respect of the Notes and under the Trust Deed (the ‘‘Charge’’) and has assigned absolutely certain other rights under the Subordinated Loan Agreement to the Trustee (the ‘‘Subordinated Loan Assignment’’ and together with the charge by way of first fixed charge security, the ‘‘Security Interests’’). In certain circumstances, the Trustee can (subject to it being indemnified and/or secured and/or prefunded to its satisfaction) be required by the Noteholders holding in aggregate at least one quarter of the principal amount of the Notes outstanding (as defined in the Trust Deed) or by an Extraordinary Resolution (as defined in the Trust Deed) of the Noteholders to exercise certain of its powers under the Trust Deed (including those arising under the Security Interests). Payments in respect of the Notes will be made (subject to the receipt of the relevant funds from the Borrower) pursuant to a paying agency agreement (the ‘‘Agency Agreement’’) dated 14 November 2012 and made between the Issuer, Citibank, N.A., London Branch as the principal paying agent and a transfer agent (the ‘‘Principal Paying Agent’’ and a ‘‘Transfer Agent’’, which expressions shall include any successors, Citigroup Global Markets Deutschland AG as the registrar, a paying agent and a transfer agent (the ‘‘Registrar’’, a Paying Agent’’ and a ‘‘Transfer Agent’’, which expressions shall include any successors), the Borrower and the Trustee. References herein to the ‘‘Agents’’ are to the Principal Paying Agent, the Registrar, the Transfer Agents and the other Paying Agents and any reference to an ‘‘Agent’’ is to any one of them. Copies of the Trust Deed, the Subordinated Loan Agreement and the Agency Agreement are available for inspection by Noteholders during usual business hours at the principal office of the Trustee being, at the

123 date hereof, at Citigroup Centre, Canada Square, London, E14 5LB, United Kingdom, and at the specified office of the Principal Paying Agent. The statements contained in these Terms and Conditions include summaries or restatements of, and are subject to, the detailed provisions of the Trust Deed, the Subordinated Loan Agreement (the form of which is scheduled to and incorporated in the Trust Deed) and the Agency Agreement. Noteholders are entitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions thereof. Terms defined in the Trust Deed (including the Schedules thereto) shall have the same meaning when used herein, except as otherwise provided.

1 Status The Notes are limited recourse secured obligations of the Issuer. The sole purpose of the issue of the Notes is to provide the funds for the Issuer to finance the Subordinated Loan. The Notes constitute the obligation of the Issuer to apply the proceeds from the issue of the Notes solely for financing the Subordinated Loan and to account to the Noteholders for an amount equivalent to sums of principal, interest and other amounts (if any) actually received by or for the account of the Issuer pursuant to the Subordinated Loan Agreement, less any amount in respect of the Reserved Rights. The Trust Deed provides that payments in respect of the Notes equivalent to the sums actually received by or for the account of the Issuer by way of principal, interest or other amounts (if any) pursuant to the Subordinated Loan Agreement will be made pro rata among all Noteholders, on the date of, and in the currency of, and subject to the conditions attaching to, the equivalent payment pursuant to the Subordinated Loan Agreement, less any amount in respect of the Reserved Rights. The Issuer shall not be liable to make any payment in respect of the Notes other than as expressly provided herein and in the Trust Deed. As provided therein, neither the Issuer nor the Trustee shall be under any obligation to exercise in favour of the Noteholders any rights of set-off or of banker’s lien or to combine accounts or counterclaim that may arise out of other transactions between the Issuer and the Borrower. Noteholders have notice of, and have accepted, these Terms and Conditions and the contents of the Trust Deed and the Subordinated Loan Agreement, and have hereby accepted that: (a) neither the Issuer nor the Trustee makes any representation or warranty in respect of, or shall at any time have any responsibility for, or, save as otherwise expressly provided in the Trust Deed, the Subordinated Loan Agreement (in the case of the Issuer) or in paragraph (f) below, liability or obligation in respect of the performance and observance by the Borrower of its obligations under the Subordinated Loan Agreement or the recoverability of any sum of principal or interest (or any other amounts) due or to become due from the Borrower under the Subordinated Loan Agreement; (b) neither the Issuer nor the Trustee shall at any time have any responsibility for, or obligation or liability in respect of, the financial condition, creditworthiness, affairs, status, prospects or nature of the Borrower; (c) neither the Issuer nor the Trustee shall at any time be liable for any representation or warranty or any act, default or omission of the Borrower under or in respect of the Subordinated Loan Agreement; (d) neither the Issuer nor the Trustee shall at any time have any responsibility for, or liability or obligation in respect of, the performance and observance by the Principal Paying Agent, the other Paying Agents, the Registrar or the Transfer Agents of their respective obligations under the Agency Agreement; (e) the financial servicing and performance of the terms of the Notes depend solely and exclusively upon performance by the Borrower of its obligations under the Subordinated Loan Agreement and its covenants, credit and financial standing. The Borrower has represented and warranted that the Subordinated Loan Agreement constitutes a legal, valid and binding obligation of the Borrower; and (f) the Issuer and the Trustee shall be entitled to rely on a certificate from a duly authorised officer of the Borrower or certification by an independent third party approved by the Issuer or the Trustee, as the case may be, that the Borrower is complying with its obligations under the

124 Subordinated Loan Agreement, whether or not such certificates are addressed to the Issuer or the Trustee, as the case may be, and whether the liability of the persons giving the same is limited in relation thereto (by its terms or by an engagement letter relating thereto entered into by the Issuer or the Trustee, as the case may be, or in any other manner) by reference to a monetary cap, methodology or otherwise. The Issuer and the Trustee shall not be responsible for investigating any aspect of the Borrower’s performance in relation thereto and, subject as further provided in the Trust Deed, the Trustee will not be liable for any failure to make the usual or any investigations which might be made by a security holder in relation to the property which is the subject of the Security Interests, and shall not be bound to enquire into or be liable for any defect or failure in the right or title of the Issuer to the Security Interests whether such defect or failure was known to the Trustee or might have been discovered upon examination or enquiry or whether capable of remedy or not, nor will it have any liability for the enforceability of the security created by the property which is subject to the Security Interests whether as a result of any failure, omission or defect in registering or filing or otherwise protecting or perfecting such security; the Trustee has no responsibility for the value, validity or adequacy of such security. The claims of the Issuer under the Subordinated Loan Agreement constitute the direct, unconditional and unsecured subordinated obligations of the Borrower and will rank at least equally with all other unsecured and subordinated obligations of the Borrower (whether actual or contingent) as more fully set out in the Subordinated Loan Agreement. Under the Trust Deed, the obligations of the Issuer in respect of the Notes rank pari passu and rateably without any preference or priority among themselves. In the event that the payments of principal or interest or any other amount under the Subordinated Loan Agreement are made by the Borrower, to, or to the order of, the Trustee or (subject to the provisions of the Trust Deed) the Principal Paying Agent, such amounts will pro tanto satisfy such payment obligations of the Issuer in respect of the Notes. Save as otherwise expressly provided herein and in the Trust Deed, no proprietary or other direct interest in the Issuer’s right under or in respect of the Subordinated Loan Agreement exists for the benefit of the Noteholders. Subject to the terms of the Trust Deed, no Noteholder will have any entitlement to enforce any provision of the Subordinated Loan Agreement or have direct recourse to the Borrower except through action by the Trustee pursuant to the Security Interests granted to the Trustee in the Trust Deed. Neither the Issuer nor the Trustee shall be required to take any action or proceedings to enforce payment under the Subordinated Loan Agreement unless it has been indemnified and/or secured and/or prefunded by the Noteholders to its satisfaction.

2 Form and Denomination Notes are issued in fully registered form, in the denomination of U.S.$200,000 or higher integral multiples of U.S.$1,000 (each an ‘‘Authorised Holding’’), without interest coupons.

3 Register and Transfers 3.1 Register The Registrar will maintain (outside the United Kingdom) a register (the ‘‘Register’’) at the specified office for the time being of the Registrar in respect of the Notes in accordance with the provisions of the Agency Agreement. An up-to-date copy of the Register will be kept with the Issuer at its registered office (the ‘‘Issuer’s Register’’). In these Conditions the ‘‘holder’’ of a Note means the person in whose name such Note is for the time being registered in the Register (or, in the case of a joint holding, the first named thereof) and ‘‘Noteholder’’ shall be construed accordingly. A Note will be issued to each Noteholder in respect of its registered holding. Each Note will be serially numbered with an identifying number which will be recorded in the Register. Under the terms of the Agency Agreement, the Registrar will provide to the Issuer an updated copy of the Register which the Issuer shall keep at its registered office and insert into the Issuer’s Register. In case of inconsistency between the Register and the Issuer’s Register, the Issuer’s Register shall prevail.

125 3.2 Title The holder of each Note shall (except as otherwise required by law) be treated as the absolute owner of such Note for all purposes (whether or not it is overdue and regardless of any notice of ownership, trust or any other interest therein, any writing on the Note relating thereto (other than the endorsed form of transfer) or any notice of any previous loss or theft of such Note) and no person shall be liable for so treating such holder. 3.3 Transfer Subject to Condition 3.7, a Note may be transferred upon surrender of the relevant Note, with the endorsed form of transfer duly completed, at the specified office of the Registrar or at the specified office of a Transfer Agent, together with such evidence as the Registrar or such Transfer Agent may reasonably require to prove the title of the transferor and the authority of the individuals who have executed the form of transfer provided, however, that a Note may not be transferred unless the principal amount of Notes transferred and (where not all of the Notes held by a holder are being transferred) the principal amount of the balance of Notes not transferred are Authorised Holdings. Where not all the Notes represented by the surrendered Note are the subject of the transfer, a new Note in respect of the balance of the Note will be issued to the transferor. 3.4 Registration and Delivery of Notes Subject to Condition 3.7, within five business days of the surrender of a Note in accordance with Condition 3.3, the Registrar will register the transfer in question and deliver a new Note to each relevant holder or (at the request and risk of such relevant holder) by uninsured first class mail (airmail if overseas) to the address specified for the purpose by such relevant holder. In this paragraph, ‘‘business day’’ means a day on which commercial banks are open for business (including dealings in foreign currencies) in the city where the Registrar has its specified office. In the case of the transfer of only a part of the Notes, a new Note in respect of the balance of the Notes not transferred will be so delivered or (at the risk and, if mailed at the request of the transferor otherwise than by ordinary uninsured mail, at the expense of the transferor) sent by mail to the transferor. 3.5 No Charge The transfer of a Note will be effected without charge by or on behalf of the Issuer, the Registrar or any Transfer Agent but against such indemnity as the Registrar or (as the case may be) such Transfer Agent may require in respect of any tax or other duty of whatsoever nature which may be levied or imposed in connection with such transfer. 3.6 Closed Periods Noteholders may not require transfers to be registered during the period of 15 days ending on the due date for any payment of principal or interest in respect of the Notes. 3.7 Regulations Concerning Transfers and Registration All transfers of Notes and entries on the Register are subject to the detailed regulations concerning the transfer of Notes scheduled to the Agency Agreement. The regulations may be changed by the Issuer with the prior written approval of the Trustee and the Registrar. A copy of the current regulations will be mailed (free of charge), at the expense of the Issuer, by the Registrar to any Noteholder who requests in writing a copy of such regulations.

4 Restrictive Covenants As provided in the Trust Deed, so long as any of the Notes remains outstanding, the Issuer will not, without the prior written consent of the Trustee or an Extraordinary Resolution, agree to any amendment to or any modification of (in each case, with the consent of the Central Bank of Russia (the ‘‘CBR’’), if applicable) or waiver of, or authorise any breach or proposed breach of, the terms of the Subordinated Loan Agreement and will act at all times in accordance with any instructions of the Trustee from time to time with respect to the Subordinated Loan Agreement, except as otherwise expressly provided in the Trust Deed or Subordinated Loan Agreement, as the case may be. Any such amendment, modification, waiver or authorisation made with the consent of the Trustee shall be

126 binding on the Noteholders and, unless the Trustee agrees otherwise, any such amendment or modification shall be notified by the Issuer to the Noteholders in accordance with Condition 13. Save as provided above, so long as any Note remains outstanding, the Issuer, without the prior written consent of the Trustee, shall not (otherwise than as contemplated in these conditions and the Trust Deed), inter alia, purchase any Notes, incur any other indebtedness for borrowed moneys, engage in any other business and perform any act incidental to or necessary in connection with the foregoing, declare any dividends, have any subsidiaries or employees, purchase, own, lease or otherwise acquire any real property (including office premises or like facilities), consolidate or merge with any other person or convey or transfer its properties or assets substantially as an entirety to any person, issue any shares, give any guarantee or assume any other liability, or, subject to the laws of Luxembourg, petition for any winding-up or bankruptcy.

5 Interest On each Interest Payment Date (or such later date as amount equivalent to amounts of interest are received) the Issuer shall account to the Noteholders for an amount equivalent to amounts of interest actually received by or for the account of the Issuer pursuant to the Subordinated Loan Agreement, which interest under the Subordinated Loan Agreement is equal to 8.50 per cent. per annum as set out in Clause 4 of the Subordinated Loan Agreement. Interest will continue to accrue on overdue principal amounts (before or after any judgment) at the same rate per annum up to the maximum extent permitted by applicable law subject to receipt as aforesaid. If interest is required to be calculated for any period of less than a year, it will be calculated on the basis of a year of 360 days consisting of 12 months of 30 days each and, in the case of an incomplete month, the actual number of days elapsed. In Conditions 5 and 6, ‘‘Interest Payment Date’’ means 15 May and 15 November of each year commencing on 15 May 2013.

6 Redemption 6.1 Final Redemption Unless previously prepaid pursuant to Clauses 6.2, 6.3 or 6.4 of the Subordinated Loan Agreement, the Borrower will be required to repay the Subordinated Loan on 15 November 2019 and, subject to such repayment, as set forth in the Subordinated Loan Agreement, all the Notes then remaining outstanding will on that date be redeemed or repaid by the Issuer to the Noteholders at 100 per cent. of the principal amount thereof together with accrued interest. 6.2 Prepayment Under the Subordinated Loan Agreement: 6.2.1 the Borrower may, in the circumstances set out in Clause 6.2 of the Subordinated Loan Agreement, prepay the Subordinated Loan in whole (but not in part) on giving not less than 30 days’ prior notice to the Issuer (which notice shall be irrevocable), on the date specified in the notice, in an amount equal to the outstanding principal amount of the Notes; 6.2.2 the Borrower may, in the circumstances set out in Clause 6.3 of the Subordinated Loan Agreement, prepay the Subordinated Loan in whole (but not in part) on giving not less than 20 days’ prior notice to the Issuer (which notice shall be irrevocable), on the date specified in the notice, in an amount equal to the outstanding principal amount of the Notes; and 6.2.3 the Borrower may, in the circumstances set out in Clause 6.4 of the Subordinated Loan Agreement, prepay the Subordinated Loan in whole (but not in part) upon giving not more than 60 nor less than 30 days’ prior notice to the Issuer (which notice shall be irrevocable), on the date specified in the notice, in whole (but not in part) on the date specified in the notice, in an amount equal to the outstanding principal amount of the Notes. In the event that the Issuer receives a notice from the Borrower pursuant to Clause 6.2, 6.3 or 6.4 of the Subordinated Loan Agreement, then the Issuer shall within 10 Business Days of

127 receiving such notice under Clause 6.2, 6.3 or 6.4 of the Subordinated Loan Agreement deliver notice thereof to the Trustee and the Noteholders in accordance with Condition 13. A copy of the Borrower’s notice of prepayment under Clause 6.2, 6.3, or 6.4 of the Subordinated Loan Agreement and the date fixed for prepayment of the Subordinated Loan shall be set forth in the notice given to Noteholders hereunder. If the Subordinated Loan is to be prepaid pursuant to Clause 6.2, 6.3, or 6.4 of the Subordinated Loan Agreement, then the Subordinated Loan shall be prepaid by the Borrower on the date specified by the Borrower in the notice delivered pursuant thereto, together in any such case with (A) accrued interest calculated in respect of the whole of the interest period starting on (and including) the preceding Interest Payment Date and ending on (but excluding) the date of actual prepayment of the Subordinated Loan and (B) all other amounts payable by the Borrower pursuant to the Subordinated Loan Agreement. Prior to the publication of any notice of redemption referred to in this Condition 6.2, the Issuer shall deliver to the Trustee a certificate signed by two directors of the Issuer stating (i) that the Issuer is entitled to effect such redemption in accordance with this Condition 6.2. The Trustee shall be entitled to accept, without liability, any notice delivered by the Issuer in accordance with this Condition 6.2 or the Subordinated Loan Agreement or by the Borrower in accordance with the Subordinated Loan Agreement as sufficient evidence of the satisfaction of the applicable circumstances in which event they shall be conclusive and binding on the Noteholders. On the Business Day following the date on which the Subordinated Loan or a portion of it is prepaid in accordance with Clause 6.2, 6.3 or 6.4 of the Subordinated Loan Agreement (as the case may be), the Issuer shall be bound to redeem the Notes in accordance with this Condition 6 and Condition 7. To the extent that the Issuer receives amounts of principal, interest or other amounts (other than amounts in respect of the Reserved Rights) under the Subordinated Loan following the occurrence of an Acceleration Event pursuant to Clause 11 of the Subordinated Loan Agreement, the Issuer shall pay an amount equal to and in the same currency as such amounts on the Business Day following receipt of such amounts, subject as provided in Condition 7. The Subordinated Loan Agreement provides that the Borrower or any of its Subsidiaries (as defined therein) may at any time and from time to time purchase Notes, having an aggregate principal value of at least U.S.$1,000,000 in the open market or by tender or by private agreement at any price. Such Notes may be held, reissued, resold or, at the option of the Borrower or any such Subsidiary, following prior written consent by the CBR thereto, surrendered to any Paying Agent and/or the relevant Registrar for payment and cancellation. Upon such surrender of Notes to any Paying Agent and/or the relevant Registrar, the Subordinated Loan shall be treated as prepaid by the Borrower in an amount corresponding to the aggregate principal amount of the Notes surrendered for cancellation, together with accrued interest (if any) thereon.

7 Payments 7.1 Principal Payments of principal shall be made by U.S. dollar cheque drawn on, or by transfer to a U.S. dollar account maintained by the payee with, a bank in New York City upon surrender of the relevant Notes at the specified office of the Principal Paying Agent or at the specified office of the Transfer Agent. 7.2 Interest Payments of interest (other than interest due on redemption) shall be made by U.S. dollar cheque drawn on, or upon application by a holder of a Note to the Principal Paying Agent not later than the Record Date (as defined below) by transfer to a U.S. dollar account maintained by the payee with, a bank in New York City and (in the case of interest payable on redemption) upon surrender (or in the case of either interest payments prior to redemption or part payment only, endorsement) of the relevant Notes at the specified office of any Paying Agent or at the specified office of any Transfer Agent.

128 7.3 Payments subject to laws All payments in respect of the Notes are subject in all cases to any applicable fiscal or other laws and regulations in the place of payment, but without prejudice to the provisions of Condition 8. No commissions or expenses shall be charged to the Noteholders in respect of such payments. 7.4 Payments on business days If the due date for payments of interest or principal is not a business day, the holder of a Note shall not be entitled to payment of the amount due until the next following business day and shall not be entitled to any further interest or other payment in respect of any such delay. In this paragraph, ‘‘business day’’ means any day on which (a) the London Interbank Market is open for dealings between banks generally, and (b) if on that day a payment is to be made hereunder, commercial banks generally are open for business in Luxembourg, New York City and in the city where the specified office of the Principal Paying Agent is located. 7.5 Record date Each payment in respect of a Note will be made to the person shown as the holder in the Register at the opening of business (in the place of the Registrar’s specified office) on the fifteenth day before the due date for such payment (the ‘‘Record Date’’). Where payment in respect of a Note is to be made by cheque, the cheque will be mailed, at the expense of the Issuer, to the address shown as the address of the holder of a Note in the Register at the opening of business on the relevant Record Date. 7.6 Agents The Agency Agreement provides that the Issuer may at any time, with the prior written approval of the Trustee appoint a successor Registrar or Principal Paying Agent and/or additional or successor transfer agents or paying agents provided that the Issuer will ensure that it maintains a paying agent in a European Union member state that will not be obliged to withhold or deduct tax pursuant to the European Council Directive 2003/48/EC or any other European Union directive regarding the taxation of savings (the ‘‘European Union Directive’’). Any such variation, termination or appointment of successor or other Agents shall only take effect (other than in the case of insolvency, when it shall be of immediate effect) after not more than 45 days’ and not less than 30 days’ notice thereof shall have been given to the continuing Agents, the Borrower, the Trustee and to the Noteholders in accordance with Condition 13. 7.7 Accrued Interest In addition, if the due date for redemption or repayment of a Note is not an Interest Payment Date, interest accrued from the preceding Interest Payment Date or, as the case may be, from the Closing Date (as defined in the Subordinated Loan Agreement), shall be payable only as and when actually received by or for the account of the Issuer pursuant to the Subordinated Loan Agreement. 7.8 Payments by the Borrower Save as directed by the Trustee at any time after the security created in the Trust Deed becomes enforceable, the Issuer will require the Borrower to make all payments of principal and interest to be made pursuant to the Subordinated Loan Agreement to the Principal Paying Agent for the account of the Issuer. Under the Security Interests the Issuer will charge by way of first fixed charge, to the Trustee for the benefit of itself and of the Noteholders, all the rights, title and interest in and to all such sums of money then or in the future so deposited for the account of the Issuer.

8 Taxation All payments in respect of the Notes by or on behalf of the Issuer will be made without deduction or withholding for or on account of any present or future taxes or duties of whatever nature imposed or levied by or on behalf of the Grand-Duchy of Luxembourg or any authority thereof or therein having the power to tax (or, after a Relevant Event, the jurisdiction where the Trustee is domiciled for tax purposes), unless the deduction or withholding of such taxes or duties is required by law.

129 In such event, the Issuer shall make such additional payments as shall result in the receipt by the Noteholders of such amount as would have been received by them if no such withholding or deduction had been required. However, the Issuer shall only make such additional payments to the extent and at such time as it shall receive equivalent sums from the Borrower under the Subordinated Loan Agreement. To the extent that the Issuer does not receive any such equivalent sum, the Issuer shall account to the relevant Noteholder for another amount equivalent to a pro rata proportion of such other amount (if any) as is actually received by, or for the account of, the Issuer pursuant to the provisions of the Subordinated Loan Agreement on the date of, in the currency of, and subject to any conditions attaching to the payment of such other amount to the Issuer provided that no such other amount will be payable: (a) to a Noteholder who (a) is able to avoid such deduction or withholding by satisfying any statutory requirements or by making a declaration of non-residence or other claim for exemption to the relevant tax authority; or (b) is liable for such taxes or duties by reason of his having some connection with the Grand-Duchy of Luxembourg other than the mere holding of such Notes or the receipt of payments in respect thereof; (b) in respect of a Note presented for payment of principal more than 30 days after the Relevant Date except to the extent that such additional payment would have been payable if such Note had been presented for payment on such thirtieth day; (c) where such withholding or deduction is imposed on a payment to an individual and is required to be made pursuant to the European Union Directive 2003/48/EC of 3 June 2003 regarding taxation of savings; or (d) in respect of a Note presented for payment by or on behalf of a Noteholder who would have been able to avoid such withholding or deduction by presenting the relevant Note to another Paying Agent in a member state of the European Union. As used herein, ‘‘Relevant Date’’ means (i) the date on which the equivalent payment under the Subordinated Loan Agreement first becomes due but (ii) if the full amount payable by the Borrower has not been received by, or for the account of, the Issuer pursuant to the Subordinated Loan Agreement, on or prior to such date, means the date on which such full amount shall have been so received and notice to that effect shall have been duly given to the Noteholders by or on behalf of the Issuer. Any reference herein or in the Trust Deed to payments in respect of the Notes shall be deemed also to refer to any other amounts which may be payable in accordance with the Trust Deed and this Condition 8 or any undertaking given in addition thereto or in substitution therefore pursuant to the Trust Deed.

9 Enforcement The Trust Deed provides that only the Trustee may pursue the remedies under the general law, the Trust Deed or the Notes to enforce the rights of the Noteholders and no Noteholder will be entitled to pursue such remedies unless the Trustee (having become bound to proceed in accordance with the terms of the Trust Deed) fails or neglects to do so within a reasonable period and such failure or neglect is continuing. The Trust Deed also provides that, in the case of an Acceleration Event (as defined in the Subordinated Loan Agreement), or of a Relevant Event (as defined in the Trust Deed), the Trustee may, and shall, if requested to do so by Noteholders whose Notes constitute at least 25 per cent. in aggregate principal amount of the Notes outstanding (as defined in the Trust Deed), or if so directed by an Extraordinary Resolution and, in either case, subject to its being secured and/or indemnified and/or prefunded to its satisfaction, institute such proceedings as it may think fit to enforce the rights of the Noteholders and the provisions of the Trust Deed, including to (i) take the action permitted to be taken by the Issuer as lender under the Subordinated Loan Agreement (in the case of an Acceleration Event), or (ii) exercise any rights under the Security Interests created in the Trust Deed in favour of the Trustee (in the case of a Relevant Event). Upon repayment of the Subordinated Loan or the receipt in full of all principal and interest accrued under the Subordinated Loan pursuant to a winding-up or liquidation of the Borrower following an

130 Acceleration Event and a declaration as provided herein, the Notes will be redeemed or repaid and thereupon shall cease to be outstanding.

10 Meetings of Noteholders; Modification of Notes, Trust Deed, Subordinated Loan Agreement; Waiver; Substitution of the Issuer 10.1 Meetings of Noteholders The Trust Deed contains provisions for convening meetings of Noteholders to consider any matter affecting their interests, including any modification of, or any arrangement in respect of, the Notes, the Loan Agreement or the Trust Deed. Noteholders will vote pro rata according to the principal amount of their Notes. Special quorum provisions apply for meetings of Noteholders convened for the purpose of amending certain terms concerning, inter alia, the amount payable on, and the currency of payment in respect of, the Notes and the amounts payable and currency of payment under the Subordinated Loan Agreement. Any resolution duly passed at a meeting of Noteholders will be binding on all the Noteholders, whether present or not. The Trust Deed provides that a resolution in writing signed by or on behalf of the holders of not less than 90 per cent. in principal amount of the Notes outstanding shall for all purposes be as valid and effective as an Extraordinary Resolution passed at a meeting of Noteholders duly convened and held. Such a resolution in writing may be contained in one document or several documents in the same form, each signed by or on behalf of one or more Noteholders. 10.2 Modification and Waiver The Trustee may agree, without the consent of the Noteholders (save as provided in the Trust Deed), to any modification of the Notes, the Agency Agreement, the Trust Deed or the Subordinated Loan Agreement which in the opinion of the Trustee is of a formal, minor or technical nature, is made to correct a manifest error or (in the opinion of the Trustee) is not materially prejudicial to the interests of the Noteholders (and provided that, in respect of a modification to the Subordinated Loan Agreement only, the prior written consent of the CBR shall have been obtained, if required in order for the Subordinated Loan to qualify as Own Funds). The Trustee may also waive or authorise or agree to the waiving or authorising of any breach or proposed breach by the Issuer of the Terms and Conditions of the Notes or the Trust Deed or by the Borrower of the terms of the Subordinated Loan Agreement, or determine that any event which would or might otherwise give rise to any Acceleration Event under the Subordinated Loan Agreement or a Relevant Event (as defined in the Trust Deed) shall not be treated as such, if in the opinion of the Trustee, to do so would not be materially prejudicial to the interests of the Noteholders (as a class). Any such modification, waiver or authorisation shall be binding on the Noteholders and, unless the Trustee agrees otherwise, any such modification shall be promptly notified to the Noteholders. 10.3 Substitution The Trust Deed contains provisions to the effect that the Issuer may, having obtained the prior written consent of the CBR, the Borrower and the Trustee (which latter consent may be given without the consent of the Noteholders) and having complied with certain requirements set out therein, including to comply with such reasonable requirements as the Trustee may direct in the interests of the Noteholders, substitute any entity in place of the Issuer as creditor under the Subordinated Loan Agreement, as issuer and principal obligor in respect of the Notes and as principal obligor under the Trust Deed, subject to the relevant provisions of the Trust Deed being satisfied and the substitute obligor’s rights under the Subordinated Loan Agreement being charged to the Trustee as security for the payment obligations of the substitute obligor under the Trust Deed and the Notes. 10.4 Exercise of Power In connection with the exercise of any of its powers, trusts, authorities or discretions, the Trustee shall have regard to the interests of the Noteholders as a class and, in particular, shall not have regard to the consequences of such exercise for individual Noteholders resulting from their being for any purpose domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any particular territory. No Noteholder is entitled to claim from the Issuer or

131 the Trustee any indemnification or payment in respect of any tax consequence of any such exercise upon individual Noteholders.

11 Indemnification of Trustee The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility, including provisions relieving it from taking proceedings to enforce payment unless indemnified and/or secured and/or prefunded to its satisfaction. The Trustee’s responsibilities are solely those of trustee for the Noteholders on the terms of the Trust Deed. Accordingly, the Trustee makes no representations and assumes no responsibility for the validity or enforceability of the Subordinated Loan Agreement or the security created in respect thereof or for the performance by the Issuer of its obligations under or in respect of the Notes and the Trust Deed or by the Borrower in respect of the Subordinated Loan Agreement. The Trustee is entitled to assume that the Borrower is performing all of its obligations pursuant to the Subordinated Loan Agreement (and shall have no liability for doing so) until it has actual knowledge to the contrary. The Trustee shall have no liability to Noteholders for any shortfall they may suffer if it is liable for tax in respect of any payments received by it or as a result of the Security Interests (and the security interests over the Subordinated Loan Agreement) being held or enforced by it.

12 Replacement of Notes If a Note shall become mutilated, defaced, lost, stolen or destroyed it may, subject to all applicable laws and regulations and requirements of the Stock Exchange, be replaced at the specified office of the Principal Paying Agent in London or at the specified office of any Transfer Agent on payment of such costs, expenses, taxes and duties as may be incurred in connection therewith and on such terms as to evidence, security and indemnity and otherwise as may reasonably be required by or on behalf of the Issuer and/or any Transfer Agent. Mutilated or defaced Notes must be surrendered before replacements will be issued.

13 Notices Notices to the Noteholders will be sent to them by first class mail (or its equivalent) or (if posted to an overseas address) by airmail at their respective addresses on the Register. Any such notice shall be deemed to have been given on the fourth day after the date of mailing. The Issuer shall also ensure that all notices are duly published (if such publication is required) in a manner which complies with applicable laws, the rules and regulations of any stock exchange or other relevant authority on which the Notes are for the time being listed and/or admitted to trading. Any such notice shall be deemed to have been given on the date of such notice. In case by reason of any other cause it shall be impracticable to publish any notice to Noteholders as provided above, then such notification to such Noteholders as shall be given with the approval of the Trustee in accordance with the rules of the stock exchange or other relevant authority on which the Notes are for the time being listed and/or admitted to trading shall constitute sufficient notice to such holders for every purpose hereunder.

14 Further Issues The Issuer may from time to time, without the consent of the Noteholders, create and issue further Notes having the same terms and conditions as the Notes in all respects (or in all respects except for the first payment of interest) so as to form a single series with the Notes (‘‘Further Notes’’). Such Further Notes shall be issued under a deed supplemental to the Trust Deed. In relation to any issue of Further Notes (i) the Issuer will, subject to further CBR approval, enter into a subordinated loan agreement with the Borrower on substantially the same terms as the Subordinated Loan Agreement (or on the same terms except for the first payment of interest) or will amend and restate the same to the same effect and, in either case, subject to any modifications which, in the sole opinion of the Trustee, would not materially prejudice the interests of the Noteholders and (ii) the Security Interests granted in respect of the Notes will be amended or supplemented so as to secure amounts due in respect of the Notes and such Further Notes and/or the Issuer will provide a further fixed charge in favour of the Trustee in respect of certain rights and interests under the Subordinated Loan

132 Agreement or any further subordinated loan agreement and will assign absolutely certain of its rights and interests under the Subordinated Loan Agreement or any further subordinated loan agreement and to secure amounts due on the Notes and such Further Notes.

15 Prescription Claims for payment under the Notes will become void unless presented for payment within ten years (in the case of principal) or five years (in the case of interest) from the due date for payment in respect thereof.

16 Contracts (Rights of Third Parties) Act 1999 No person shall have any right to enforce any term or condition of the Notes under the Contracts (Rights of Third Parties) Act 1999.

17 Governing Law The Notes and the Trust Deed and any non-contractual obligations arising out of or in connection with them are governed by and shall be construed in accordance with, English law. The provisions of articles 86 to 94-8 of the Luxembourg law on commercial companies of 10 August 1915, as amended, are excluded. The Issuer has in the Trust Deed (a) submitted irrevocably to the jurisdiction of the courts of England for the purposes of hearing and determining any suit, action or proceedings or settling any disputes arising out of or in connection with the Trust Deed or the Notes; (b) waived any objection which it might have to such courts being nominated as the forum to hear and determined any such suit, action or proceedings or to settle any such disputes and agreed not to claim that any such court is not a convenient or appropriate forum; and (c) designated a person in England to accept service of any process on its behalf. Without prejudice to the foregoing provisions, the Issuer and the Borrower have, in the Subordinated Loan Agreement, agreed that any disputes which may arise out of or in connection with the Subordinated Loan Agreement, including any questions regarding its existence, validity or termination may be referred to and finally resolved by arbitration under the LCIA Rules, which rules are deemed to be incorporated by reference in the Subordinated Loan Agreement.

133 SUMMARY OF THE PROVISIONS RELATING TO THE NOTES IN GLOBAL FORM The following is a summary of the provisions to be contained in the Trust Deed to constitute the Notes and in the Global Certificate which will apply to, and in some cases modify, the Terms and Conditions of the Notes while the Notes are represented by the Global Certificate.

The Global Certificate The Notes will be represented by Global Certificate which will be deposited with, and registered in the name of a nominee for, a common depositary for Euroclear and Clearstream, Luxembourg. Subject to receipt of funds from Credit Europe Bank, the Global Certificate will become exchangeable in whole but not in part (free of charge to the holder), for Definitive Certificates if (a) Euroclear or Clearstream, Luxembourg is closed for business for a continuous period of 14 days (other than by reasons of legal holidays) or announces an intention permanently to cease business or (b) if the Issuer would suffer a material disadvantage in respect of the Notes as a result of a change in the laws or regulations (taxation or otherwise) of any jurisdiction referred to in Condition 8 (Taxation) of the Terms and Conditions of the Notes which would not be suffered were the Notes in the form of Definitive Certificates and a certificate to such effect signed by two members of the management board of the Issuer is given to the Trustee. Whenever the Global Certificate is to be exchanged for Definitive Certificates, such Definitive Certificates will be issued in an aggregate principal amount equal to the principal amount of the Global Certificate following delivery, by or on behalf of the registered holder of Notes represented by the Global Certificate, Euroclear and/or Clearstream, Luxembourg, to the Registrar of such information as required to complete and deliver such Definitive Certificates (including, but without limitation to, the names and addresses of the persons in whose names the Definitive Certificates are to be registered and the principal amount of each such person’s holding) against the surrender of the Global Certificate at the specified office (as defined in the Agency Agreement) of the Registrar or any Transfer Agent. Such exchange will be effected in accordance with the provisions of the Agency Agreement, Trust Deed and Global Certificate. ‘‘Exchange Date’’ means a day falling not later than 90 days after that on which the notice requiring exchange is given and on which banks are open for business in the city in which the specified office of the Registrar or the relevant Transfer Agent is located. In addition, the Global Certificate will contain provisions which modify the Terms and Conditions of the Notes as they apply to the Notes evidenced by the Global Certificate. The following is a summary of these provisions:

Payments Payments of principal and interest in respect of the Global Certificate shall be made to the person who appears at the relevant time on the Register as holder of the Global Certificate against presentation and (if no further payment falls to be made on it) surrender thereof to or to the order of the Principal Paying Agent (or to or to the order of such other Paying Agent as shall have been notified to the Noteholders for this purpose) which shall endorse such payment or cause such payment to be endorsed in Schedule A thereto (such endorsement being prima facie evidence that the payment in question has been made). No person shall however be entitled to receive any payment on the Global Certificate falling due after the Exchange Date, unless the exchange of the Global Certificate for Definitive Certificates is improperly withheld or refused by or on behalf of the Issuer.

Record Date Notwithstanding Condition 7.5, for so long as the Global Certificate is held by or on behalf of a common depositary for Euroclear, Clearstream, Luxembourg or an Alternative Clearing System, ‘‘Record Date’’ shall mean the Clearing System Business Day before the relevant due date for payment, where ‘‘Clearing System Business Day’’ means a day when Euroclear and Clearstream, Luxembourg is open for business.

Meetings For the purpose of any meeting of Noteholders, the holder of the Global Certificate and any proxy appointed by it will be treated as being one person for the purposes of any quorum requirements of, or the right to demand a poll at, a meeting of Noteholders and, in any such meeting, as having one vote in respect

134 of each U.S.$1,000 in principal amount of Notes represented by the Global Certificate for which it may be exchanged.

Purchase and Cancellation Cancellation of any Notes evidenced by the Global Certificate required by the Conditions to be cancelled following its redemption will be effected by reduction in the principal amount of the Notes in the Register and notation on the Global Certificate.

Trustee’s Powers In considering the interests of Noteholders while the Global Certificate is held on behalf of a clearing system, the Trustee may, to the extent it considers it appropriate to do so in the circumstances, (a) have regard to such information as may have been made available to it by or on behalf of the relevant clearing system or its operator as to the identity of its accountholders (either individually or by way of category) with entitlements in respect of Notes; and (b) consider such interests on the basis that such accountholders were the holders of the Notes in respect of which the Global Certificate is issued.

Notices Notwithstanding Condition 13, so long as the Global Certificate is held by or on behalf of a common depositary for Euroclear, Clearstream, Luxembourg or any other clearing system (the ‘‘Alternative Clearing System’’), notices to Noteholders represented by the Global Certificate may be given by delivery of the relevant notice to Euroclear, Clearstream, Luxembourg or (as the case may be) such Alternative Clearing System rather than in the manner specified in Condition 13 and shall be deemed to be given to holders of interests in this Global Certificate with the same effect as if they had been given to such Noteholder in accordance with Condition 13: provided, however, that, whilst the Notes are listed on the Irish Stock Exchange, notices will also be given in accordance with the guidelines of the Irish Stock Exchange.

Prescription Claims in respect of principal, interest and other amounts payable in respect of the Global Certificate will become void unless it is presented for payment within a period of 10 years (in the case of principal) and five years (in the case of interest or any other amounts) from the due date for payment in respect thereof.

Enforcement For the purposes of enforcement of the provisions of the Trust Deed against the Trustee, the persons named in a certificate of the holder of the Notes in respect of which the Global Certificate is issued shall be recognised as the beneficiaries of the trusts set out in the Trust Deed to the extent of the principal amount of their interest in the Notes set out in the certificate of the holder as if they were themselves the holders of Notes in such principal amounts.

Benefit of the Conditions Unless the Global Certificate has been exchanged or cancelled the holder thereof shall, except as therein provided, be entitled to the same rights and benefits and subject to the Conditions as if such holder were the holder of the Definitive Certificates for which the Global Certificate may be exchanged.

Authentication The Global Certificate shall not be valid or become obligatory for any purpose until authenticated by or on behalf of the Registrar.

Governing Law The Global Certificate and any non-contractual obligations arising out of or in connection with it shall be governed by and construed in accordance with English law.

135 Book-Entry Procedures for the Global Certificate Euroclear and Clearstream, Luxembourg Euroclear and Clearstream, Luxembourg each holds securities for its customers and facilitates the clearance and settlement of securities transactions through electronic book-entry transfer between its accountholders. Indirect access to Euroclear and Clearstream, Luxembourg is available to other institutions that clear through or maintain a custodial relationship with an accountholder of either system. Euroclear and Clearstream, Luxembourg provide various services including safekeeping, administration, clearance and settlement of internationally-traded securities and securities lending and borrowing. Euroclear and Clearstream, Luxembourg also deal with domestic securities markets in several countries through established depository and custodial relationships. Euroclear and Clearstream, Luxembourg have established an electronic bridge between their two systems across which their respective customers may settle trades with each other. Their customers are worldwide financial institutions including underwriters, securities brokers and dealers, banks, trust companies and clearing corporations. Investors may hold their interests in such Global Certificate directly through Euroclear or Clearstream, Luxembourg if they are accountholders (‘‘Direct Participants’’) or indirectly (‘‘Indirect Participants’’ and together with Direct Participants, ‘‘Participants’’) through organisations that are accountholders therein.

Book-Entry Ownership Euroclear and Clearstream, Luxembourg The Global Certificate will have an ISIN and Common Code and will be registered in the name of a nominee for, and deposited with a common depositary on behalf of, Euroclear and Clearstream, Luxembourg.

Relationship of Participants with Clearing Systems Each of the persons shown in the records of Euroclear and Clearstream, Luxembourg as the holder of a Note evidenced by a Global Certificate must look solely to Euroclear or Clearstream, Luxembourg (as the case may be) for his share of each payment made by the Issuer to the holder of such Global Certificate and in relation to all other rights arising under the Global Certificate, subject to and in accordance with the respective rules and procedures of Euroclear and Clearstream, Luxembourg (as the case may be). The Issuer expects that, upon receipt of any payment in respect of Notes evidenced by the Global Certificate, the common depositary by whom such Note is held, or nominee in whose name it is registered, will immediately credit the relevant participants’ or accountholders’ accounts in the relevant clearing system with payments in amounts proportionate to their respective beneficial interests in the principal amount of the Global Certificate as shown on the records of the relevant clearing system or its nominee. The Issuer also expects that payments by Direct Participants in any clearing system to owners of beneficial interests in the Global Certificate held through such Direct Participants in any clearing system will be governed by standing instructions and customary practices. Save as aforesaid, such persons shall have no claim directly against the Issuer in respect of payments due on the Notes for so long as the Notes are evidenced by such Global Certificate and the obligations of the Issuer will be discharged by payment to the registered holder, as the case may be, of such Global Certificate in respect of each amount so paid. None of the Issuer, the Trustee or any Agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of ownership interests in the Global Certificate or for maintaining, supervising or reviewing any records relating to such ownership interests.

Settlement and Transfer of Notes Subject to the rules and procedures of each applicable clearing system, purchases of Notes held within a clearing system must be made by or through Direct Participants, which will receive a credit for such Notes on the clearing system’s records. The ownership interest of each actual purchaser of each such Note (the ‘‘Beneficial Owner’’) will in turn be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from any clearing system of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which such Beneficial Owner entered into the transaction. Transfers of ownership interests in Notes held within the clearing system will be effected by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in such Notes, unless

136 and until interests in the Global Certificate held within a clearing system are exchanged for Definitive Certificates. No clearing system has knowledge of the actual Beneficial Owners of the Notes held within such clearing system and their records will reflect only the identity of the Direct Participants to whose accounts such Notes are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by the clearing systems to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners, will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. The laws of some jurisdictions may require that certain persons take physical delivery in definitive form of securities. Consequently, the ability to transfer interests in the Global Certificate to such persons may be limited.

Trading between Euroclear and/or Clearstream, Luxembourg Participants Secondary market sales of book-entry interests in the Notes held through Euroclear or Clearstream, Luxembourg to purchasers of book-entry interests in the Notes held through Euroclear or Clearstream, Luxembourg will be conducted in accordance with the normal rules and operating procedures of Euroclear and Clearstream, Luxembourg and will be settled using the procedures applicable to conventional eurobonds.

137 SUBSCRIPTION AND SALE Morgan Stanley & Co. International plc and Goldman Sachs International (together the ‘‘Joint Lead Managers’’) have, jointly and severally, pursuant to the terms and conditions set forth in a subscription agreement, dated 14 November 2012 (the ‘‘Subscription Agreement’’), agreed with the Issuer and Credit Europe Bank, subject to the satisfaction of certain conditions set forth therein, to subscribe and pay for the Notes at the issue price of 100 per cent. of the principal amount of the Notes (the ‘‘Issue Price’’). Credit Europe Bank has agreed to pay certain commissions, fees, costs and expenses in connection with the Subordinated Loan and the offering of the Notes and to reimburse the Joint Lead Managers, the Issuer, the Agents and the Trustee for certain of their expenses in connection with the offering of the Notes. Credit Europe Bank has agreed to pay to the Joint Lead Managers a combined management and underwriting commission in connection with the issuance of the Notes. Subject to compliance with applicable laws, the Joint Lead Managers may, at their sole discretion, agree to rebate a portion of their commission to certain investors up to a maximum of 0.25 per cent. of the Issue Price. The Joint Lead Managers are entitled to be released and discharged from their obligations under the Subscription Agreement in certain circumstances prior to payment being made to the Issuer.

General No action has or will be taken in any jurisdiction by the Issuer, Credit Europe Bank or the Joint Lead Managers that would, or is intended to, permit a public offer of the Notes or possession or distribution of any offering material in relation thereto, in any country or jurisdiction where action for that purpose is required. Persons into whose hands this Prospectus comes are required by the Issuer, Credit Europe Bank and the Joint Lead Managers to comply with all applicable laws and regulations in each country or jurisdiction in which they purchase, offer, sell or deliver Notes or have in their possession, distribute or publish this Prospectus or any other offering material relating to the Notes, in all cases at their own expense.

United States The Notes and the Loan have not been and will not be registered under the Securities Act and, subject to certain exceptions, may not be offered or sold within the United States or to, or for the account or benefit of, US persons except in transactions exempt from the registration requirements of the Securities Act. Each of the Joint Lead Managers has agreed that, except as permitted by the Subscription Agreement, it will not offer or sell the Notes and the Loan, (i) as part of their distribution at any time and (ii) otherwise until 40 days after the later of the commencement of the offering or the closing date, within the United States or to, or for the account or benefit of, US persons, and it will have sent to each dealer to which it sells the Notes and the Loan during the distribution compliance period a confirmation or other notice setting forth the restrictions on offers and sales of the Notes and the Loan in the United States or to, or for the account or benefit of, US persons. Terms used in this paragraph have the meanings given to them by Regulation S under the Securities Act. The Notes and the Loan are being offered and sold outside of the United States in reliance on Regulation S. In addition, until 40 days after the commencement of the offering of the Notes and the Loan, an offer or sale of the Notes or the Loan within the United States by any dealer (whether or not participating in the offering) may violate the registration requirements of the Securities Act.

United Kingdom Each of the Joint Lead Managers has represented and agreed that (i) it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the FSMA) received by it in connection with the issue or sale of any Notes in circumstances in which section 21(1) of the FSMA does not apply to the Issuer, and (ii) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom.

Republic of Italy The offering of the Notes has not been registered with the Commissione Nazionale per le Societa` e la Borsa (‘‘CONSOB’’) pursuant to Italian securities legislation and, accordingly, each of the Joint Lead Managers has represented and agreed that it has not offered, sold or distributed, and will not offer, sell or

138 distribute any Notes or any copy of this Prospectus or any other offer document in the Republic of Italy (‘‘Italy’’) in an ‘‘offer to the public of securities’’ as defined in Article 1, paragraph 1, letter t) of Legislative Decree no. 58 of 24 February 1998 (the ‘‘Consolidated Financial Services Act’’), unless an exemption applies. Accordingly, the Notes shall only be offered, sold or delivered in Italy: (a) to qualified investors (investitori qualificati), pursuant to Article 100 of the Consolidated Financial Services Act and Article 4-ter paragraph 1, letter (b) of CONSOB regulation no. 11971 of 17 May 1999, all as amended; or (b) in any other circumstances where an express exemption from compliance with the restrictions on offers to the public applies, as provided under Article 100 of the Consolidated Financial Services Act and Article 34-ter of the CONSOB Regulation No. 11971 of 14 May 1999, all as amended. Moreover, and subject to the foregoing, any offer, sale or delivery of the Notes or distribution of copies of the Prospectus or any other document relating to the Notes in Italy under (a) or (b) above must be: (i) made by an investment firm, bank or financial intermediary permitted to conduct such activities in Italy in accordance with the Consolidated Financial Services Act, Legislative Decree No. 385 of 1 September 1993 (the ‘‘Banking Act’’), CONSOB Regulation No. 16190 of 29 October 2007, all as amended; (ii) in compliance with Article 129 of the Banking Act and the implementing guidelines, pursuant to which the Bank of Italy may request information on the offering or issue of securities in Italy; and (iii) in compliance with any securities, tax, exchange control and any other applicable laws and regulations, including any limitation or requirement which may be imposed from time to time, inter alia, by CONSOB or the Bank of Italy. Any investor purchasing the Notes in this offering is solely responsible for ensuring that any offer or resale of the Notes it purchases in this offering occurs in compliance with applicable laws and regulations. This Prospectus and the information contained herein are intended only for the use of its recipient and are not to be distributed to any third-party resident or located in Italy for any reason. No person resident or located in Italy other than the original recipients of this document may rely on it or its contents.

Russia Each of the Joint Lead Managers has agreed that the Notes will not be offered, transferred or sold as part of their initial distribution or at any time thereafter to or for the benefit of any persons (including legal entities) resident, incorporated, established or having their usual residence in the Russian Federation or to any person located within the territory of the Russian Federation unless and to the extent otherwise permitted under Russian Law.

Republic of Turkey The Notes have not and will not be registered with the Capital Markets Board of Turkey (the ‘‘CMB’’) under the provisions of the Turkish Capital Markets Law No. 2499. Accordingly, neither this Prospectus nor any other offering material related to this offering may be utilised in connection with any offering within Turkey for purpose of the sale of the Notes without prior approval of the CMB. However, pursuant to Article 15(d)(ii) of Decree No. 32 regarding the Protection of the Value of the Turkish Currency, there is no restriction on the purchase or sale of the Notes by residents of Turkey, provided that they purchase or sell such Notes in the financial markets outside of Turkey and such sale and purchase is made through banks and/or licensed brokerage institutions authorised pursuant to CMB regulations operating in Turkey.

Grand Duchy of Luxembourg Each of the Joint Lead Managers may make an offer of Notes to the public in Luxembourg: (a) at any time, to national and regional governments, central banks, international and supranational institutions (such as the International Monetary Fund, the European Central Bank, the European Investment Bank) and other similar international organisations;

139 (b) at any time, to legal entities which are authorised or regulated to operate in the financial markets (including credit institutions, investment firms, other authorised or regulated financial institutions, undertakings for collective investment and their management companies, pension and investment funds and their management companies, insurance undertakings and commodity dealers) as well as entities not so authorised or regulated whose corporate purpose is solely to invest in securities; and (c) at any time, to certain natural persons or small and medium-sized enterprises (as defined in the Luxembourg act dated 10 July 2005 on prospectuses for securities implementing the Directive 2003/71/EC, as amended (the Prospectus Directive) into Luxembourg law) recorded in the register of natural persons or small and medium-sized enterprises considered as qualified investors as held by the Commission de surveillance du secteur financier as competent authority in Luxembourg in accordance with the Prospectus Directive.

Japan The Notes have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Act No. 25 of 1948, as amended, the ‘‘Financial Instruments and Exchange Act’’). Accordingly, each of the Joint Lead Managers has represented and agreed that it has not, directly or indirectly, offered or sold and will not, directly or indirectly, offer or sell any Notes in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organised under the laws of Japan) or to others for re-offering or re-sale, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Act and other relevant laws and regulations of Japan.

Singapore Each of the Joint Lead Managers has acknowledged that this Prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, each of the Joint Lead Managers has represented and agreed that it has not offered or sold any Notes or caused such Notes to be made the subject of an invitation for subscription or purchase and will not offer or sell such Notes or cause such Notes to be made the subject of an invitation for subscription or purchase, and has not circulated or distributed, nor will it circulate or distribute, this Prospectus or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of such Notes, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the ‘‘SFA’’), (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275, of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA. This Prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this Offering Circular and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of any Notes may not be circulated or distributed, nor may any Notes be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the SFA, (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275, of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA. Where Notes are subscribed or purchased under Section 275 of the SFA by a relevant person which is: (a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that

140 corporation or that trust has acquired the Notes pursuant to an offer made under Section 275 of the SFA except: (i) to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA; (ii) where no consideration is or will be given for the transfer; (iii) where the transfer is by operation of law; or (iv) as specified in Section 276(7) of the SFA.

Hong Kong Each of the Joint Lead Managers has represented and agreed that it has not issued or had in its possession for the purposes of issue, and will not issue or have in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the Notes, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to Notes which are or are intended to be disposed of only to persons outside Hong Kong or only to ‘‘professional investors’’ as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance.

Switzerland This document is not intended to constitute an offer or solicitation to purchase or invest in the Notes described herein. The Notes may not be publicly offered, sold or advertised, directly or indirectly, in, into or from Switzerland and will not be listed on the SIX Swiss Exchange or on any other exchange or regulated trading facility in Switzerland. Neither this Prospectus nor any offering or marketing material relating to the Notes constitutes a prospectus as such term is understood pursuant to article 652a or article 1156 of the Swiss Code of Obligations or a listing prospectus within the meaning of the listing rules of the SIX Swiss Exchange or any other regulated facility in Switzerland or a simplified prospectus or a prospectus as such term is defined in the Swiss Collective Investment Scheme Act, and neither this Prospectus nor any other offering or marketing material relating to the Notes may be publicly distributed or otherwise made publicly available in Switzerland. Neither this Prospectus nor any other offering or marketing material relating to the offering nor the Issuer, nor Credit Europe Bank nor the Notes have been or will be filed with or approved by any Swiss regulatory authority. The Notes are not subject to the supervision by any Swiss regulatory authority, e.g., Swiss Financial Markets Supervisory Authority FINMA (‘‘FINMA’’), and investors in the Notes will not benefit from protection or supervision by such authority.

141 TAXATION The following is a general description of certain Russian and Luxembourg tax considerations relating to the Notes and the Subordinated Loan. It does not purport to be a complete analysis of all tax considerations relating to the Notes, whether in those countries or elsewhere. Prospective purchasers of Notes should consult their own tax advisers as to which countries’ tax laws could be relevant to acquiring, holding and disposing of Notes and receiving payments of interest, principal and/or other amounts under the Notes and the consequences of such actions under the laws of those countries. This summary is based upon the law as in effect on the date of this Prospectus. The information and analysis contained within this section are limited to taxation issues, and prospective investors should not apply any information or analysis set out below to other areas, including (but not limited to) the legality of transactions involving the Notes.

Russian Taxation Taxation of the Notes General The following is an overview of certain Russian tax considerations relevant to the purchase, ownership and disposal of the Notes, as well as the taxation of interest income on the Subordinated Loan. The overview is based on the laws of the Russian Federation in effect on the date of this Base Prospectus, which are subject to potential change (possibly with retroactive effect). The overview does not seek to address the applicability of, and procedures in relation to, taxes levied by regions, municipalities or other non-federal authorities of the Russian Federation. Nor does the overview seek to address the availability of double tax treaty relief in respect of the Notes, and it should be noted that there may be practical difficulties, including satisfying certain documentation requirements, involved in claiming double tax treaty relief. Prospective investors should consult their own advisers regarding the tax consequences of investing in the Notes. No representations with respect to the Russian tax consequences of investing, owning or disposing of the Notes to any particular Noteholder is made hereby. The provisions of the Russian Tax Code applicable to Noteholders and transactions involving the Notes are ambiguous and lack interpretive guidance. Both the substantive provisions of the Russian Tax Code applicable to financial instruments and the interpretation and application of those provisions by the Russian tax authorities may be more inconsistent and subject to more rapid and unpredictable change than in jurisdictions with more developed capital markets or more developed taxation systems. In particular, the interpretation and application of such provisions will in practice rest substantially with local tax inspectorates. In practice, interpretation by different tax inspectorates may be inconsistent or contradictory and may constitute the imposition of conditions, requirements or restrictions not provided for by the existing legislation. Similarly, in the absence of binding precedents court rulings on tax or related matters by different Russian courts relating to the same or similar circumstances may also be inconsistent or contradictory. According to the Russian Tax Code, a tax resident is an individual who spent in Russia not less than 183 days within 12 consecutive months (days of medical treatment and education outside of the Russian Federation are also counted as Russian days if the individual departed from the Russian Federation for these purposes for less than six months). The interpretation of this definition by the Ministry of Finance of the Russian Federation states that for tax withholding purposes an individual’s tax residence status should be determined on the date of income payment (based on the number of Russian days in the 12-month period preceding the date of payment). The individual’s final tax liability in the Russian Federation for the reporting calendar year should be determined based on his/her tax residence status for such calendar year, i.e. based on the number of Russian days in the 12- months period as of the end of such calendar year. For the purposes of this overview, a ‘‘non-resident Noteholder’’ means (i) an individual Noteholder who has not established a Russian tax residence status for the reporting calendar year as discussed above; or (ii) a legal entity or organisation in each case not organised under Russian law that holds and disposes of the Notes otherwise than through a permanent establishment in Russia. For the purposes of this overview, a ‘‘Russian resident Noteholder’’ means (i) an individual Noteholder who has established a Russian tax residence status for the reporting calendar year as discussed above; or

142 (ii) a legal entity or organisation which is a Noteholder but is not a non-resident Noteholder defined in the previous paragraph. The Russian tax treatment of interest payments made by CEB to the Issuer under the Subordinated Loan Agreement may affect the holders of the Notes. See—‘‘Taxation of Interest Income on the Subordinated Loan’’ below.

Non-Resident Holders A non-resident Noteholder should not be subject to any Russian taxes on receipt from the Issuer of amounts payable in respect of principal, premium or interest on the Notes, subject to what is stated in ‘‘Taxation of Interest Income on the Subordinated Loan’’. A non-resident Noteholder generally should not be subject to any Russian taxes in respect of gain or other income realised on a redemption, sales or a disposal of the Notes outside the Russian Federation, provided that the proceeds of such sale, redemption, or other disposal of the Notes are not received from a source within the Russian Federation. In the event that proceeds from sales, redemption or a disposal of Notes are received from a source within the Russian Federation, a non-resident Noteholder that is a legal entity or organisation should not be subject to Russian tax in respect of such proceeds, provided that no portion thereof is attributable to accrued interest. Any portion of such sales proceeds attributable to accrued interest may be subject to Russian withholding tax on income at the rate of 20 per cent. subject to any available double tax treaty relief, even if the disposal itself results in a capital loss. In order to enjoy the benefits of an applicable double tax treaty, documentary evidence is required prior to payment being made to confirm the applicability of the double tax treaty under which benefits are claimed. Non-resident Noteholders that are legal entities or organisations should consult their own tax advisers with respect to possibility of obtaining a respective double tax treaty relief. If proceeds from sales, redemption or other disposal of the Notes are received from a Russian source, a non-resident Noteholder who is an individual will generally be subject to tax at a rate of 30 per cent. subject to any available double tax treaty relief as discussed below, in respect of gross proceeds from such disposal less any available cost deduction (which includes the purchase price of the Notes). Any portion of the above proceeds from sale, redemption or other disposal of the Notes attributable to accrued interest income under the Notes which is received by a non-resident Noteholder from the Russian sources may be subject to tax at a rate of 30 per cent. subject to any available double tax treaty relief as discussed below. In this regard, if the Notes are disposed of in the Russian Federation, for Russian personal income tax purposes, the proceeds of such disposition (including any portion of such proceeds attributable to accrued interest income under the Notes) are likely to be regarded as received from a Russian source. In certain circumstances, if the disposal proceeds (including the interest income portion) are payable by a Russian legal entity, individual entrepreneur or a Russian permanent establishment of a foreign organisation, the payer may be required to withhold this tax. Unless the tax is withheld by the payer, the non-resident individual Noteholder would be liable to pay the tax to the Russian budget. In such a situation, there is a risk that the taxable base may be affected by fluctuations in the exchange rates between the currency of acquisition of the Notes, the currency of sale of the Notes and Roubles. Non-resident Noteholders who are individuals should consult their own tax advisers with respect to the tax consequences of the receipt of proceeds from a source within the Russian Federation in respect of a disposition of the Notes.

Resident Holders A Russian resident Noteholder is subject to all applicable Russian taxes and responsible for complying with any documentation requirements that may be established by law or practice in respect of gains from disposal of the Notes and interest income received on the Notes. A Russian resident Noteholder that is a legal entity or organisation should, prima facie, be subject to Russian income tax at the rate of 20 per cent. on interest (coupon) income on the Notes as well as on the capital gains from sales, redemption or other disposal of the Notes. Generally, Russian resident Noteholders that are Russian legal entities are required to submit Russian income tax returns, assess and pay tax on capital gains and interest (coupon) income.

143 A Russian resident Noteholder who is an individual should generally be subject to personal income tax at a rate of 13 per cent. on deemed income resulting from acquisition of the Notes at a price below their market value, on interest (coupon) income on the Notes and capital gains from sales, redemption or other disposal of the Notes. Russian resident Noteholders who are individuals are required to submit annual personal income tax returns, assess and personally pay tax unless the above mentioned income is received via Russian asset manager, broker or another entity which acts as the Noteholder’s agent based on a relevant contract and this entity withholds and pays in full Russian income tax on behalf of the Noteholder. Resident Noteholders should consult their own tax advisers with respect to their tax position regarding the Notes.

Tax Treaty Relief Advance Treaty Relief Where proceeds from the disposal of the Notes are received from a Russian source, in order for the non-resident Noteholders, whether an individual, legal entity or organisation, to receive the benefits of an applicable double tax treaty, documentary evidence is required to confirm the applicability of the double tax treaty for which benefits are claimed. Currently, a non-resident Noteholder—legal entity or organisation should present to the payer of income an apostilled or legalised confirmation of its tax residence, attaching a notarised translation in Russian. The confirmation should be presented before any payment is made and should be certified by the competent authority of the country of the Noteholder’s tax residence. Such confirmation is valid for the calendar year in which it is issued. Non-resident Noteholders that are legal entities or organisations should consult their own tax advisers with respect to the possibilities to enjoy any double tax treaty relief and the relevant Russian procedures. For non-resident individual Noteholders, procedures for advance treaty clearance are not provided for by current Russian legislation. Therefore, technically, for non-resident individual Noteholders a reduction of the Russian withholding income tax either exemption from such tax provided by a respective double tax treaty between Russia and the country of the tax residence of such non-resident individual Noteholder could practically not be obtained. Non-resident individual Noteholders should consult their own tax advisers with respect to the possibilities to enjoy any double tax treaty relief or tax refund and the relevant Russian procedures.

Refund of Tax Withheld For a non-resident Noteholder which is not an individual and for which double tax treaty relief is available, if Russian withholding tax on income was withheld by the source of payment, a refund of such tax is possible within three years from the end of the tax period in which the tax was withheld. In order to obtain a refund, the tax documentation confirming the right of the non-resident recipient of the income to double tax treaty relief is required. If non-resident individual Noteholders do not obtain double tax treaty relief at the time the proceeds from a disposal of the Notes are paid to such non-resident individual Noteholders and income tax is withheld by a Russian payer of the income, such non-resident individual Noteholders may apply for a refund within one year from the end of the tax period in which the tax was withheld. The documentation requirements to obtain such a refund would include a confirmation of the income received and the taxes paid in the country of tax residence of the non-resident individual Noteholders as confirmed by the relevant tax authorities of such countries. However, there can be no assurance that the refund of any taxes withheld or double tax treaty relief (as described above) will be available for such non-resident individual Noteholders. The Russian tax authorities may, in practice, require a wide variety of documentation confirming the right to benefits under a double tax treaty. Such documentation, in practice, may not be explicitly required by the Russian Tax Code. Obtaining a refund of Russian tax withheld may be a time consuming process and can involve considerable practical difficulties, including the possibility that a tax refund may be denied for various reasons.

Taxation of Interest Income on the Subordinated Loan In general, interest payments on borrowed funds made by a Russian legal entity to a non-resident legal entity or organisation are subject to Russian withholding income tax at a rate of 20 per cent.

144 (or 30 per cent. in respect of non-resident individuals), subject to reduction or elimination pursuant to the terms of an applicable double tax treaty. Interest payments on the Subordinated Loan made by CEB to the Issuer should not be subject to withholding taxes under the terms of the Convention between Luxembourg and the Russian Federation for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and on Capital signed on June 28, 1993 (the ‘‘Convention’’), provided that the Russian tax documentation requirements (annual advance confirmation of the lender’s tax residency) are satisfied. The new protocol to the Convention was signed in 2011. The protocol introduces certain changes to the provisions of the Convention. Such changes include inter alia a limitation of benefits of a resident of one contracting state if the main purpose or one of the main purposes of the establishment and existence of such resident was receipt of treaty benefits; further exchange of information procedures are extended. Once the protocol is ratified and becomes effective, it may have an impact on future payments under the Subordinated Loan Agreement. The application of tax benefits under the double tax treaty could be influenced by changes in the position of the Russian tax authorities to look beyond the mere form of the transaction while assessing the availability of treaty benefits. A recent letter of the Ministry of Finance of the Russian Federation No. 03-08-13/1, dated 30 December 2011, expressed the view that the noteholders were the beneficial owners of interest payable by a Russian bank on the proceeds of a Eurobond offering that were placed as a deposit with the Russian bank by the issuer of the notes (the issuer was a special purpose vehicle established by the Russian bank). Although that letter refers to a deal structure which is not the same as the transaction structure described in the Base Prospectus, and refers to an issuer domiciled in a jurisdiction which is different from the jurisdiction of the Issuer, CEB cannot exclude the risk that the conclusions in the letter could potentially be applied by the Russian tax authorities to the payments of interest in respect of the Subordinated Loan. There is a risk that under the Russian thin capitalisation rules in certain circumstances where parties related to CEB (i.e. the Related Parties as defined above) hold Notes part or all of the interest to be paid by CEB under the Subordinated Loan could be reclassified as dividends for Russian tax purposes. This would occur if the overall amount of the ‘‘controlled debt’’ of CEB calculated on an individual Related Party basis exceeded the capital of CEB, calculated in accordance with the requirements of the Russian Tax Code, by more than 12.5 times. Interest on the amount of such excess would be reclassified as dividends for Russian tax purposes. Under the Russian Tax Code, there is a risk that the ‘‘controlled debt’’ of CEB may include all or part of the Subordinated Loan to the extent that certain Related Party acquires any portion of the Notes. Such reclassification of all or a portion of the interest as dividends could potentially lead to the imposition of Russian withholding tax on such reclassified interest at the rate of 15 per cent., subject to possible exemption under the double tax treaty between the Russian Federation and Luxembourg, and the non-deductibility of such interest for Russian profits tax purposes by CEB. Based on the assumption that the amount of CEB’s ‘‘controlled debt’’ calculated in accordance with the requirements of Article 269 of the Russian Tax Code will not exceed by more than 12.5 times the amount of ‘‘own capital’’ (‘‘собственный30OCT201219212648 капитал’’) of CEB calculated on an individual Related Party basis, the Russian thin capitalisation rules should not apply currently to the interest on the Subordinated Loan. However, changes in these assumptions could result in all or a portion of such interest being subject to the thin capitalisation rules in the future so as to treat ‘‘excess interest’’ related to the Subordinated Loan as a dividend under the double tax treaty between the Russian Federation and Luxembourg subject to 15 per cent. withholding tax applicable to dividends (subject to possible Luxembourg or other DTT relief, if any) rather than zero withholding tax applicable to interest CEB is aware of at least one recent instance where the Russian tax authorities argued with respect to a transaction similar to the one described in the Base Prospectus that the Noteholders rather than the issuer should be regarded as the actual recipients of the interest income. The issuer in that particular transaction was located in a jurisdiction which is different from the Issuer’s jurisdiction. This instance is currently being discussed, but, to the best of CEB’s knowledge, has not been brought to court. If, in the instance above, the issue is brought before a Russian court and the court decides in favour of the Russian tax authorities, such decision could result in impairing the Issuer’s and CEB’s position to benefit from the withholding tax exemption provided by the respective double tax treaty.

145 The amendments to the Russian Tax Code should nevertheless allow the interest on the loan not to be subject to withholding. In particular, these amendments introduce into the Russian Tax Code an exemption from the obligation to withhold tax from interest paid under transactions similar to the transactions described herein. These amendments to the Russian Tax Code have recently been approved by the Russian State Duma, the Russian Council of the Federation and the President of the Russian Federation and have entered into force starting from 1 July 2012. According to these amendments, in respect of bonds issued prior to 1 January 2014 Russian borrowers are exempted from the obligation to withhold Russian withholding tax from interest payments made to foreign companies on debt obligations arising in connection with placement by these foreign companies of quoted bonds, provided that (1) there is a double tax treaty between the Russian Federation and the jurisdiction of tax residence of the issuer, and (2) the issuer duly confirms its tax residence. Federal Law #97-FZ of 29 June 2012 introducing the above amendments (hereinafter—‘‘Law #97-FZ’’) does not provide tax exemption for the holders of Eurobonds from Russian tax on interest payments, although at present there is no mechanism or requirement for non-residents to self-assess and pay the tax. For the purpose of the above amendments to the Russian Tax Code introduced by Law #97-FZ ‘‘quoted bonds’’ mean bonds and other debt obligations which passed the listing procedure and/or were accepted to listing on one or more foreign stock exchanges and/or rights to which are recorded by a foreign depositary- clearing organisation, provided such foreign stock exchanges and depositary-clearing organisations are specified in the list approved by the FSFM in consultation with the Ministry of Finance of the Russian Federation. Until such list is adopted, bonds and other debt obligations which passed the listing procedure and/or were accepted to listing on one or more foreign stock exchanges and/or rights to which are recorded by any foreign depositary-clearing organisation should be recognized as ‘‘quoted bonds’’. From publicly available information, this list has not been drafted yet. The amendments to the Russian Tax Code introduced by Law #97-FZ should apply retrospectively to interest payments made after 1 January 2007, which, given the general three year limitation for tax audits, should mean that tax agents in the above situation should not be challenged for not having withheld tax in prior periods. According to the amendments to the Russian Tax Code introduced by Law #97-FZ the above exemption established for the interest payments is also applicable to (i) income payable by a Russian legal entity in connection with a guarantee, surety or other security granted by such Russian organisation with respect to a debt obligation to a foreign organisation and/ or with respect to quoted bonds and (ii) to other income payable by a Russian organisation providing payment of such income is established by the provisions of the respective debt obligation or such income is paid due to a change in the terms and conditions of the respective quoted bonds and/or debt obligations including the cases of their early repurchase or redemption. The above amendments to the Tax Code introduced by Law #97-FZ address Russian withholding tax treatment of interest payments or other above payments to be made to foreign companies on debt obligations arising in connection with the issuance by these foreign companies of bonds before 1 January 2014. These amendments do not address Russian tax treatment of such payments on or after 1 January 2014. If the payments under the Subordinated Loan are subject to any withholding taxes for any reason (as a result of which the Issuer would reduce payments under the Notes in the amount of such withholding taxes), CEB is required to increase payments as may be necessary so that the Issuer receives the net amount equal to the full amount it would have received in the absence of such withholding. It should be noted, however, that tax gross-up provisions in contracts may not be enforceable in the Russian Federation. In the event that CEB fails to increase the payments, such failure would constitute an Event of Default. If CEB is obliged to increase payments, it may prepay the Subordinated Loan in full. In such case, all outstanding Notes would be redeemable at par with accrued interest. Russian VAT is not applied to the rendering of financial services involving the provision of a loan in monetary form. Therefore, no VAT will be payable in the Russian Federation on any payment of interest or principal in respect of the Subordinated Loan.

Luxembourg Taxation The following is a general description of Luxembourg tax laws relating to the Notes and the tax position of the Noteholders. This overview is based upon the tax laws of Luxembourg as in effect on the date of this

146 Base Prospectus and is subject to any change that may come into effect after that date. As it does not constitute a complete analysis of the Luxembourg considerations relating to the Notes and the tax position of the Noteholders, prospective investors should consult their advisors to analyse the Luxembourg tax consequences in the light of their particular circumstances. This overview does not seek to address the tax peculiarities of any special Luxembourg taxation regimes available for Luxembourg persons.

Tax residence of Noteholders Pursuant to Article 159 LITL, a legal entity will be treated as a Luxembourg tax resident if it has its registered office or central administration in Luxembourg. As a rule, a Noteholder will not become resident or be deemed to be resident in Luxembourg by reason only of the holding of the Notes or the execution, performance, delivery and/or enforcement of the Notes.

Withholding tax Under the existing laws of Luxembourg all payments of interest and principal by the Issuer under the Notes (also in case of redemption, repurchase or exchange of Notes) will be made free of withholding or deduction for or on account of any taxes of whatsoever nature imposed, levied, withheld, or assessed by Luxembourg or any political subdivision or taxing authority thereof or therein to the extent that: (i) such interest has been negotiated at arm’s length and is not profit participating; (ii) such interest does not fall within the scope of the Luxembourg Law of June 21, 2005 (transposition of the EU Savings Directive); and (iii) such interest does not fall within the scope of the Luxembourg Law of December 23, 2005.

Luxembourg Law of June 21, 2005 implementing the Savings Directive into Luxembourg law According to the Luxembourg Laws of June 21, 2005 implementing the Savings Directive and the bilateral agreements described below in ‘‘European Union Savings Directive on the Taxation of Savings Income in the Form of Interest Payments (Directive 2003/48/EC)’’ a Luxembourg Paying Agent may, during the transitional period referred to below, be required to withhold tax on interest payments to Residual Entities or to individual Beneficial Owners resident in other Member States (or in relevant dependant and associated territories) at a rate of 35 per cent., unless the relevant individual Beneficial Owner or Residual Entity has opted for exchange of information or, in the case of an individual Beneficial Owner, has provided a tax certificate. For the purpose of this section, the terms ‘‘Residual Entity,’’ ‘‘Paying Agent’’ and ‘‘Beneficial Owner’’ shall have the meanings given to them in the laws of June 21, 2005 and the Circular of the Director of the Tax Authority RIUE No. 1 dated June 29, 2005. Noteholders should consult their own tax advisers regarding the implications of the laws of June 21, 2005 in their particular circumstances.

Luxembourg Law of December 23, 2005 Under the Luxembourg Law of December 23, 2005, as amended by a law of July 17, 2008, providing for the introduction of a withholding tax on certain income from savings derived by Luxembourg residents, as from January 1, 2006, Luxembourg Paying Agents shall withhold a final tax of 10 per cent. on certain income from savings. Interest on Notes paid to a Luxembourg resident individual would fall under the scope of the provisions of this law. Such a withholding tax constitutes the final tax liability for the Luxembourg individuals holding the Notes within the framework of their private wealth. In addition, pursuant to the Luxembourg law of December 23, 2005 as amended by a law of July 17, 2008, Luxembourg resident individuals, acting in the course of their private wealth, can opt to self-declare and pay a 10 per cent. tax on interest payments made after December 31, 2007 by certain paying agents not established in Luxembourg (defined in the same way as in the Savings Directive), i.e., paying agents located in a EU member state other than Luxembourg, a Member State of the European Economic Area or in a State or territory which has concluded an international agreement directly related to the Savings Directive.

147 Income tax A Noteholder who derives income from a Note or who realises a gain on the disposal or redemption of a Note will not be subject to Luxembourg taxation on income or capital gains unless: (i) the Noteholder is, or is deemed to be, tax resident in Luxembourg for the purpose of the relevant provisions without benefiting from tax exemption; or (ii) such income or gain is attributable to an enterprise or part thereof which is carried on through a permanent establishment or a permanent representative in Luxembourg. Luxembourg resident individual Noteholders are not subject to taxation in relation to capital gains realised by them upon the disposal of the Notes, unless the disposal of the Notes precedes the acquisition of the Notes or the Notes are disposed of within six months of the date of acquisition of these Notes. The Luxembourg tax treatment of the accrued and unpaid interest upon the sale, redemption or exchange of the Notes should be analysed by the Noteholders’ advisors, depending in particular on the type of the transaction, the involvement of the paying agent and whether the income increases their private wealth or has been received as business income.

Net Wealth Tax Luxembourg net wealth tax will not be levied on a Noteholder unless: (i) the Noteholder is, or is deemed to be, fully taxable company resident in Luxembourg for the purpose of the relevant provisions not benefiting from a special tax regime; or (ii) the Notes are attributable to an enterprise or part thereof which is carried on through a permanent establishment or a permanent representative in Luxembourg. The individuals are not subject to the net wealth tax in Luxembourg.

Luxembourg gift or inheritance taxes Luxembourg gift or inheritance taxes will not be levied on the transfer of a Note by way of gift by, or on the death of, a Noteholder unless: (i) the Noteholder is, or is deemed to be, resident in Luxembourg for the purpose of the relevant provisions; or (ii) the transfer is construed as an inheritance or as a gift made by or on behalf of a person who, at the time of death or gift, is, or is deemed to be, resident in Luxembourg for the purpose of the relevant provisions; or (iii) such Note is attributable to an enterprise or part thereof which is carried on through a permanent establishment or a permanent representative in Luxembourg; or (iv) the gift is registered in Luxembourg, which is not mandatory.

Registration tax, capital tax, stamp duty or any other similar tax or duty There is no Luxembourg registration tax, capital tax, stamp duty or any other similar tax or duty (other than nominal court fees and contributions for the registration with the Chamber of Commerce) payable in Luxembourg in respect of or in connection with the execution, delivery and enforcement by legal proceedings (including any foreign judgment in the courts of Luxembourg) of the Notes or the performance of the Issuer’s obligations under the Notes, except that in the case of court proceedings in a Luxembourg court or the presentation of the documents relating to the Notes to an ‘‘autorite´ constituee,’’´ such court or ‘‘autorite´ constituee’’´ may require registration thereof, in which case the documents will be subject to fixed or ad valorem registration duties depending on the nature of the documents.

Value Added Tax There is no Luxembourg value added tax payable in respect of payments in consideration for the issue of the Notes or in respect of the payment of interest or principal under the Notes or the transfer of a Note. Luxembourg value added tax may, however, be payable in respect of fees charged for certain services rendered to the Issuer, if for Luxembourg value added tax purposes such services are rendered, or are deemed to be rendered, in Luxembourg and an exemption from value added tax does not apply with

148 respect to such services. The value added tax consequences of the subscription by a Noteholder in terms of both value added tax status and input value added tax recovery right should be analysed based on the rules applicable where the Noteholder is established. European Union Savings Directive on the Taxation of Savings Income in the Form of Interest Payments (Directive 2003/48/EC) Under European Council Directive 2003/48/EC on the taxation of savings income (the ‘‘Savings Directive’’), each Member State of the EU is required to provide to the tax authorities of another Member State details of payments of interest or other similar income paid by a paying agent within the meaning of the Savings Directive within its jurisdiction to, or secured by such a person for, an individual beneficial owner resident in, or certain limited types of entity established in, that other Member State. However, for a transitional period, Austria and Luxembourg will instead operate a withholding system in relation to such payments (unless during this period such Member States elect otherwise). Under this withholding system, the interest payments are subject to withholding tax unless the beneficiary of the interest payments elects for the exchange of information or for the tax certificate procedure. The current rate of withholding is 35 per cent. The transitional period is to terminate at the end of the first full fiscal year following agreement by certain non-EU countries to exchange of information procedures relating to interest and other similar income. A number of non-EU countries and certain dependent or associated territories of certain Member States have adopted or agreed to adopt similar measures (either provision of information or transitional withholding) in relation to payments made by a paying agent within the meaning of the Savings Directive within their respective jurisdictions to, or secured by such a person for, an individual beneficial owner resident in, or certain limited types of entities established in, a Member State. In addition, the Member States have entered into provision of information or transitional withholding arrangements with certain of those countries and territories in relation to payments made by a paying agent within the meaning of the Savings Directive in a Member State to, or secured by such a person for, an individual beneficial owner resident in, or certain limited types of entities established in, one of those countries or territories. On November 13, 2008 the European Commission published a proposal for amendments to the Savings Directive. The proposal included a number of suggested changes which, if implemented, would broaden the scope of the rules described above. The European Parliament approved an amended version of this proposal on April 24, 2009. A second review of the Savings Directive was published on March 2, 2012. The main findings of the review, including the widespread use of offshore jurisdictions for intermediary entities and the growth in key markets that provide products comparable to debt claims, reinforce the case for extending not only the scope of the Savings Directive but also the relevant agreements covered by Article 17. Investors who are in any doubt as to their position should consult their professional advisers. If a payment under a Note were to be made by a person in a Member State or another country or territory which has opted for a withholding system and an amount of, or in respect of, tax were to be withheld from that payment pursuant to the Savings Directive or any law implementing or complying with, or introduced in order to conform to the Savings Directive, neither the Issuer nor any Paying Agent nor any other person would be obliged to pay additional amounts under the terms of such Note as a result of the imposition of such withholding tax. The Issuer is, however, required to maintain a Paying Agent in a Member State that will not be obliged to withhold or deduct tax pursuant to the Savings Directive or any such law.

149 GENERAL INFORMATION 1. The Notes have been accepted for clearance through Euroclear and Clearstream, Luxembourg. The ISIN and common code are XS0854763355 and 085476335, respectively. The address of Euroclear is 1 Boulevard du Roi Albert II, B-1210 Brussels, Belgium and the address of Clearstream, Luxembourg is 42 Avenue JF Kennedy, L-1855 Luxembourg. 2. It is expected that admission of the Notes to trading on the Main Securities Market of the Irish Stock Exchange will be granted on or before 15 November 2012, subject only to the issue of the Notes. Transactions will normally be effected for settlements in U.S. Dollars and for delivery on the third business day after the day of the transaction. 3. The estimated expenses associated with the admission to trading on the regulated market of the Irish Stock Exchange of the Notes are expected to be approximately EUR 5,041.20. 4. Arthur Cox Listing Services Limited is acting solely in its capacity as listing agent for the Issuer in connection with the Notes and is not itself seeking admission of the Notes to the Official List of the Irish Stock Exchange or to trading on its regulated market for the purposes of the Prospectus Directive. 5. Credit Europe Bank has taken all corporate, legal and other actions required to approve and authorise its entry into the Subordinated Loan Agreement and the other documents in relation to the issue of the Notes. 6. The Subordinated Loan Agreement and the other documents to be entered into by the Issuer in relation to the issue of the Notes have been approved and authorised by a resolution at a meeting of the Board of Directors of the Issuer dated 12 November 2012. 7. There has been no material adverse change in the prospects or financial or trading position of Credit Europe Bank and its subsidiaries since 31 December 2011. 8. There has been no significant change in the financial or trading position of Credit Europe Bank and its subsidiaries which has occurred since 30 June 2012. 9. Since 31 December 2011, there has been no material adverse change in the financial position or prospects of the Issuer. The Issuer has no subsidiaries. 10. Save for the fees payable to the Joint Lead Managers, the Trustee and the Agents so far as the Issuer is aware, no person involved in the issue of the Notes has an interest that is material to the issue of the Notes. 11. Credit Europe Bank has obtained all necessary consents, approvals and authorisations in Russia in connection with its entry into, and the performance of its obligations under, the Subordinated Loan Agreement. 12. The Issuer has obtained all necessary consents, approvals and authorisations in connection with the Subordinated Loan Agreement and the other documents to be entered into by the Issuer in connection with the issue of the Notes. 13. No consents, approvals, authorisations or orders of any regulatory authorities are required by the Issuer under the laws of Luxembourg for its entry into, and the performance of its obligations under, the Subordinated Loan Agreement or for the issue and performance of the Notes. 14. There have been no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Issuer or Credit Europe Bank is aware), during the period covering at least the previous twelve months in relation to Credit Europe Bank and since the date of its incorporation in relation to the Issuer, which may have, or have had in the recent past, significant effects on the Issuer’s and/or the Group’s financial position or profitability. 15. The Trust Deed provides, inter alia, that the Trustee may act and/or rely on the opinion or advice of or a certificate of any information obtained from any lawyer, banker, valuer, surveyor, broker, auctioneer, accountant, auditor or other expert (whether or not addressed to the Trustee), notwithstanding that such opinion, advice, certificate or information contains a monetary or other limit on the liability of any of the above-mentioned persons in respect thereof. 16. The Group’s interim reviewed condensed consolidated financial statements as at and for the six months ended 30 June 2012 and the related notes thereto and the Group’s audited consolidated

150 financial statements as at and for the years ended 31 December 2011 and 2010 and the related notes thereto were audited or reviewed (as the case may be) by Credit Europe Bank’s independent auditors, KPMG, located at Naberezhnaya Tower, Block C, Floor 31, 10 Presnenskaya Naberezhnaya, Moscow 123317, Russian Federation. 17. So long as the Notes are listed on the Irish Stock Exchange, physical copies (and certified English translations where the documents at issue are not in English) of the following documents may be inspected at the offices of the Principal Paying Agent in London during usual business hours on any weekday (Saturdays and public holidays excepted): (a) a copy of this Prospectus, together with any supplement to this Prospectus; (b) the Coordinated Articles of the Issuer; (c) the charter of Credit Europe Bank; (d) the audited consolidated financial statements, including the audit report thereon, of the Group in respect of the financial years ended 31 December 2011 and 2010; (e) the interim reviewed consolidated financial statements, including the review report thereon, of the Group in respect of the six month period ended 30 June 2012; (f) the audited annual financial statements, including the audit report thereon, of the Issuer; (g) the Subordinated Loan Agreement; (h) the Agency Agreement; and (i) the Trust Deed, which includes the forms of the Global Certificate and Definite Certificate. 18. Citigroup Global Markets Deutschland AG will act as the Registrar in relation to the Notes. The Registrar shall maintain the Register. The Issuer shall maintain the Issuer’s Register at its registered office. In case of inconsistency between any Register and the corresponding Issuer’s Register, the Issuer’s Register shall prevail. 19. The loan to value ratio of the Notes is 100 per cent. 20. Citibank, N.A., London Branch is a professional trustee company, which is providing its services in relation to the Notes on an arm’s length basis in consideration of a fee. Under the terms of the Trust Deed, the power of appointing new trustees is vested in the Issuer (with the prior written consent of Credit Europe Bank) but a trustee so appointed must in the first place be approved by an Extraordinary Resolution of Noteholders. The Noteholders have the power, exercisable by Extraordinary Resolution, to remove any trustee or trustees. The removal of any trustee is only effective if following the removal there remains a trustee (being a trust corporation) in office after such removal. In addition, Citibank, N.A., London Branch, or any other trustee duly appointed, may retire at any time upon giving not less than three months’ notice in writing to the Issuer (copied to Credit Europe Bank). The retirement of any trustee is only effective if following the retirement there remains a trustee (being a trust corporation) in office after such retirement. If the trustee has given notice of its desire to retire and the Issuer is unable to procure a new trustee to be appointed and the Issuer has not by the expiry of such notice (with the prior written consent of Credit Europe Bank) appointed a new trustee, the trustee shall have the power of appointing new trustee(s). 21. The language of the Prospectus is English. Certain legislative references and technical terms have been cited in their original language in order that the correct technical meaning may be ascribed to them under applicable law. 22. The Issuer does not intend to provide any post-issuance transaction information regarding the Notes or the Loan.

151 APPENDIX A THE BANKING SECTOR AND BANKING REGULATION IN RUSSIA Overview According to Rosstat, the Russian economy has experienced strong growth, as demonstrated by real annual GDP growth of 14.5 per cent. between 2007 and 2011. This growth was accompanied by more stable inflationary and interest rates. Russia’s credit ratings attained an investment grade rating in 2003 and since then were stable. According to Rosstat, the Russian economy remains relatively diversified, with retail, manufacturing and national resource extraction contributing 19 per cent., 16 per cent. and 10.7 per cent. to GDP respectively in 2011. The financial services sector is another important contributor to the economy and accounted for 4 per cent. of GDP in 2011 compared to 2.8 per cent. in 2002. The favourable Russian macroeconomic environment, together with the increasing importance of financial services within the Russian economy, has provided significant positive stimulus for the Russian banking sector. Accordingly, this sector experienced a sustained period of growth between 2007 and 2011, notwithstanding the turmoil affecting the global markets. The following table sets forth certain information regarding the banking sector of the Russian Federation, for the periods indicated.

1 January 2012 2011 2010 Total assets (liabilities) (RUB trillion) ...... 41.6 33.8 29.4 Loans to customers over total assets (%) ...... 69.0 65.6 67.5 Including loans to credit organisations (%) ...... 9.5 8.6 9.3 Customer funds over liabilities (%) ...... 62.7 62.4 58.2 Number of operating credit organisations ...... 978 1,012 1,058 Assets of the five largest credit organisations over total assets (%) ...... 50.0 47.7 47.9 Credit organisations located in Moscow and the Moscow region (%) ...... 52.4 51.9 50.6 Credit organisations with foreign investments over total assets (%) ...... 16.9 18.0 18.3 Number of banks admitted to the retail deposit insurance system ...... 896 909 923 Number of profitable credit organisations ...... 928 931 938

Source: CBR.

Russian Banking System History and Development The Soviet banking system consisted of Gosbank, which simultaneously exercised functions of a central and commercial bank, Stroibank of the USSR, which primarily serviced credit to various Soviet entities, and Vneshtorgbank of the USSR, which primarily serviced foreign trade undertaken by Soviet entities. Gosbank operated a network of ‘‘savings branches’’, the predecessors to Sberbank, that offered retail banking services, mainly deposit services and the processing of utility payments, throughout the country. In 1987, a few specialised state-controlled banks were established to service specific industries. From 1988 to 1989, many regional commercial banks emerged. In 1991, three of the specialised state- controlled banks were transformed into joint-stock companies. Some of the regional branches of the specialised state- controlled banks became independent from their head offices through management buy-outs. In December 1991, the CBR assumed all of Gosbank’s functions in Russia, and the Government liquidated Gosbank. Between 1991 and 1998, the Russian banking system experienced rapid growth. The number of commercial banks in the Russian Federation increased from 358 in 1990 to 1,686 by early 1998. In 1998, the Russian financial markets crisis, which occurred largely because of the Government’s default on much of its short-term domestic debt, exposed the weakness of the Russian banking sector. Many banks went bankrupt, or were placed under state control and subsequently restored or liquidated. In 1999-2001, the Russian banking system gradually recovered from the 1998 financial crisis. This recovery was characterised by higher liquidity levels and a shift in emphasis from investments in government securities to loans to companies and other legal entities. In 2002-2004, as shown by a strong growth in retail deposits, confidence in the Russian banking sector improved, as the sector strengthened. From April to July 2004, several privately-owned Russian banks experienced liquidity problems and were unable to attract funds on the interbank market or from their own

A-1 client base and faced large withdrawals of deposits by retail and corporate customers. Several of these privately-owned Russian banks collapsed or were forced to reduce their operations significantly. The CBR and the Government took several steps to help the sector overcome the crisis, including reducing the rate of mandatory reserves and passing new anti-crisis legislation, and in August 2004, in response to these steps, the Russian banking sector began to recover. In 2007, changes were made to Russian law which made it easier for foreign investors to participate in equity offerings and mergers and acquisitions in the Russian banking sector. As a result of this, in 2007, Sberbank and VTB, the two largest Russian banks, conducted large equity offerings. In 2008, the impact of the financial crisis led to a net reduction in the number of credit organisations due to the revocation of licenses by the CBR and in some cases bankruptcy of those that did not have enough liquidity to cover short indebtedness. The Government and the CBR have responded by introducing a set of anti-crisis regulations designed to support the Russian financial system. The volatility and market disruption in the global banking sector continued throughout 2010 and 2011, although the Russian banking sector generally demonstrated signs of recovery. According to the Strategy for the Development of the Russian Banking Sector until 2015 adopted by the Government and the CBR on April 5, 2011 (the ‘‘Banking Sector Development Strategy’’), the main goals of the new period of development of the Russian banking sector include: improvement of the quality of the banking business by expanding the range of banking products and services, improving methods of their provision, using modern technologies and ensuring the long-term effectiveness and stability of the banking business. The Banking Sector Development Strategy contemplates that the Government and the CBR will take measures in order to: improve the legal environment, increase quality of corporate governance and risk management in credit organisations, develop banking regulation and banking supervision, and ensure financial stability.

Anti-Crisis Legislation In 2008, the Government and the CBR enacted a set of measures specifically to support the liquidity of the Russian banking sector aimed at restoring investor confidence and supporting the medium-term economic growth of the Russian economy by facilitating credit across the Russian banking sector. According to Federal Law No. 173-FZ of 13 October 2008 ‘‘On Additional Measures for Support of Financial System of the Russian Federation’’, the Government and the CBR provided up to U.S.$50 billion in subordinated loans to state-controlled and private banks under certain conditions. The U.S.$50 billion state contribution to banking sector capital in the form of long-term subordinated loans (with a maturity of up to 31 December 2019) was one of the key economic initiatives announced to restore confidence in the Russian banking sector. Another key initiative was introduced by Federal Law No. 175-FZ of 27 October 2008 ‘‘On Additional Measures to Strengthen Stability of the Banking System through 31 December 2011’’, as amended, which authorised the CBR and the State Corporation Deposit Insurance Agency (the ‘‘DIA’’) to undertake measures to support the financial standing of defaulting banks through mandatory capital decreases, acquisitions by the DIA of controlling interests in defaulting banks and sales of assets or controlling interests in such banks to attracted investors and provision of funding for financial rehabilitation of defaulting banks. In December 2011, the period was extended to 31 December 2014, and the text and title of the law were amended to substitute ‘‘31 December 2011’’ with ‘‘31 December 2014’’.

Competitive Landscape in the Russian Banking Sector The Russian banking sector is highly fragmented as measured by the number of participants. According to the CBR, as of 1 October 2012, there were 962 credit organisations operating in Russia, out of which 900 were banks and the rest non-banking credit institutions. At the same time, according to the CBR as of 1 October 2012, the top 5 credit organisations operating in Russia accounted for RUB23,237,835 million net assets, comprising approximately 50.7 per cent. of the net assets in the Russian banking sector. According to the CBR, as of 1 October 2012, 239 credit organisations controlled by foreign groups were operating in Russia, out of which, 75 were wholly owned subsidiaries of foreign groups. Banks in Russia can be categorised into four major groups: (i) state-controlled, (ii) large private banks, (iii) foreign-owned banks, and (iv) other smaller banks. According to CBR, as of 30 June 2012, CEB was ranked as the 41st largest bank in Russia by net assets. The following table shows the market share data for

A-2 CEB as well as the ten largest banks by net assets for the periods indicated based on information complied by the CBR.

Net Assets As of 30 June 2012 As of 30 June 2011 As of 31 December 2011 Amount Market Amount Market Amount Market (RUB Share, (RUB Share, (RUB Share, millions) % millions) % millions) % Sberbank ...... 12,088,669 29.3 9,274,051 28.0 10,776,576 27.4 VTB...... 3,867,910 9.4 3,193,504 9.6 4,096,012 10.4 Gazprombank ...... 2,504,225 6.1 1,865,281 5.6 2,430,352 6.1 Russian Agricultural Bank ...... 1,532,333 3.7 1,231,388 3.7 1,454,325 3.7 Bank of Moscow ...... 1,356,133 3.3 869,700 2.6 1,334,362 3.4 VTB-24...... 1,256,444 3.0 1,008,334 3.0 1,201,976 3.0 Alfa Bank ...... 997,566 2.4 865,606 2.6 961,981 2.4 Unicredit Bank ...... 829,943 2.0 664,471 2.0 882,162 2.2 Raiffeisenbank ...... 663,539 1.6 538,718 1.6 585,195 1.5 Rosbank ...... 662,775 1.6 434,230 1.3 636,645 1.6 Total for Ten Largest Banks ..... 25,759,537 62.5 19,945,283 60.3 24,359,586 62.0 Credit Europe Bank ...... 105,635 0.2 86,718 0.2 100,481 0.2 Total for 500 Largest Banks(2) ... 41,20 100 33,05 100 39,24 100

(1) Source: RBC Ratings (2) RUB billions

Russian Banking Regulations Banking activity in Russia is governed primarily by the CBR Law, the Banking Law, CBR regulations and, to a limited extent, the Currency Law, as well as certain other laws and regulations mentioned in this section. While the CBR is the primary regulator of the banking sector, other governmental entities also exercise regulatory and supervisory functions over banks in Russia. For example, the FSFM issues licences to banking institutions to act as broker-dealers or to provide custodian and other services in the Russian securities market. Tax authorities supervise the tax assessments of banks.

Regulation of Licensing The Central Bank of Russia According to the Banking Law, a licence must be obtained from the CBR in order for any organisation to engage in banking activity. The CBR registers, and issues licences to, banks and non-bank credit organisations (‘‘NCOs’’) incorporated within Russia in accordance with the procedures set forth in CBR Regulation No. 135-I of 2 April 2010, as amended. To date, the CBR has not established any procedures to register a representative office of a foreign credit organisation in Russia and accordingly, no branches of foreign credit organisations are currently in operation in Russia. From the date of ratification by Russia of its terms of accession to the WTO which took place on 22 July 2012, Russia would be expected to apply all WTO provisions. However, in relation to the banking sector, Russia made a reservation that it would review market access requirements for the establishment of direct branches of foreign banks and securities firms in the context of future negotiations on the accession of Russia to the OECD or within the framework of the next round of WTO multilateral trade negotiations. Pursuant to CBR licences issued to banks, the following types of operations are currently permitted for banks: (1) operations in Roubles (without retail deposit taking); (2) operations in Roubles and foreign currencies (without retail deposit taking); (3) taking deposits in precious metals; (4) taking retail deposits in both Roubles and foreign currencies or only in Roubles; and (5) operations in both Roubles and foreign currencies or only in Roubles to services legal entities (without cash collection, cash services and retail deposit taking). Under current legislation, the main functions of the CBR include, inter alia: the organisation of cash and wire settlements; maintenance of budget accounts; administration of gold and currency reserves; service of domestic state debt; implementation of credit and monetary policy; international activity; and banking regulation and supervision. As the primary regulator in the banking sector, the CBR has far-reaching

A-3 regulatory and supervisory authority. The CBR grants state registration of credit organisations; issues, suspends and revokes banking licences of credit organisations; controls mergers and acquisitions in the banking system; establishes mandatory ratios and reserves as well as open position requirements and monitors compliance therewith; regulates credit organisations’ capital; sets out standards for financial, accounting and statistical reporting by credit organisations; issues mandatory prescriptions to, and imposes administrative sanctions on, credit organisations; and appoints the temporary administration of credit organisations that are facing insolvency. Furthermore, pursuant to Federal Law No. 161-FZ of 27 June 2011 ‘‘On the National Payment System’’ only credit organisations may make transfers in electronic monetary funds, and the CBR is empowered to monitor and supervise the national payment system.

The Federal Service for Financial Markets The FSFM issues licences to Russian credit organisations to perform the following professional functions on the Russian securities markets: (1) broker, (2) dealer, (3) securities manager, (4) custodian, (5) clearing organisation (which may not provide services as a broker, dealer, securities manager or custodian), (6) registrar (which may not engage in any other services) and (7) arranger of trade in the securities market (which may also provide clearing services). The licensing procedures are established in FSFM Regulation No. 10-49/PZ-N of 20 July 2010, as amended. In addition, the FSFM has the right to conduct audits of credit organisations from time to time to check their compliance with the requirements of applicable laws and regulations. The FSFM is responsible for setting up certain additional reporting requirements for licensed credit organisations and has a right to monitor their operations.

Regulation of Capital Overview CBR Regulation No. 215-P of 10 February 2003, as amended, (the ‘‘Regulation No. 215-P’’) distinguishes between core capital and supplemental capital (together, ‘‘own funds’’ or ‘‘regulatory capital’’) and requires that the supplemental capital (Tier 2 capital) be no more than 100 per cent. of the core capital (Tier 1 capital). Furthermore, Regulation No. 215-P requires that subordinated debt (which can be included into the core or supplemental capital) does not exceed either 50 per cent. or 100 per cent. of the core capital (depending on the terms of such subordinated debt) and that long-term subordinated debt for the term not less than 30 years (which forms part of the core capital) does not exceed 15 per cent. of the core capital. If a bank’s own funds (regulatory capital) fall below its charter capital, regulatory capital is required to be adjusted (or, if impossible, its charter capital, within applicable limits) in accordance with procedures set by CBR Regulation No. 1260-U of 24 March 2003, as amended. In accordance with the Banking Law, the minimum charter capital requirements for credit organisations to be complied with, as of the date of application for state registration and issuance of the banking licence, are RUB300 million for banks and RUB90 million for NCOs applying for a licence for conducting settlements under the instructions of legal entities, and RUB18 million for NCOs which are not applying for such a licence. In addition, the minimum own funds requirement for a credit organisation that applies to the CBR for obtaining a status of a bank is RUB300 million. If a credit organisation applies to the CBR for a licence for conducting banking operations in Roubles and foreign currencies and taking deposits from individuals in Roubles and foreign currencies, its regulatory capital requirement may not be lower than RUB900 million.

Subordinated Debt Subordinated debt (in the form of loans, deposits or notes) is included in supplemental capital if the following criteria are satisfied: (1) its term should be not less than five years; (2) it should include a provision prohibiting, without the consent of the CBR: (i) early redemption of the debt, any of its part or any interests, and (ii) early termination and/or amendment of the agreement; (3) terms of the debt, as of the date of conclusion (amendment) of the loan agreement or placement of notes, should not materially differ from the prevailing market terms of similar debt; (4) the agreement should specifically provide for the lowest creditor priority ranking of the creditor in the event of the borrower’s bankruptcy; (5) the debt should be unsecured; and (6) individuals cannot parties to the agreement. Qualification of subordinated debt as supplemental capital is subject to consent of the CBR. The borrower may initiate the approval procedure of the CBR before the funds are disbursed by submitting a draft agreement for the CBR’s consideration. As a result of its review, the CBR territorial branch may respond with comments or may issue a preliminary conclusion confirming that the agreement complies with

A-4 Regulation No. 215-P. The final conclusion shall confirm the CBR’s consent to the inclusion of subordinated debt into supplemental capital upon utilisation of funds. Regulation No. 215-P provides that generally subordinated debt may not exceed 50 per cent. of a credit organisation’s core capital. However, if a credit organisation has subordinated debt with the term equal to or exceeding ten years, such subordinated debt, together with any other subordinated debt outstanding less the subordinated debt counted as core (Tier 1) capital, may comprise up to 100 per cent. of the credit organisation’s core capital, provided that its underlying agreement includes a provision allowing the CBR to suspend the repayment of the principal and/or interest if such payment may necessitate bankruptcy prevention measures in relation to such credit organisation. According to Regulation No. 215-P, amortisation is applied on a quarterly basis in accordance with the following formula: C O = D, where 20 O is the amortised value of the subordinated debt; D is the full amount of the subordinated debt extended to the bank; C is the number of complete quarters (1 January—31 March, 1 April—30 June etc.) remaining until the repayment of the subordinated debt (C < 20). Special amortisation rules apply to subordinated debt establishing the borrower’s call option which may not be exercised earlier than 5 years from the date when subordinated debt was included in supplemental capital. If, in accordance with interest step up provisions, interest increase does not exceed 150bps (1/100 per cent.), subordinated debt will be amortised from the date of its scheduled maturity. In other cases, subordinated debt is discounted from the date of the potential exercise of the call option.

Basel Implementation in Russia Current Russian regulation of capital is based on the Basel Accord. It is, however, less sophisticated in certain respects. Over the recent years, the CBR in cooperation with Russian banks, has started preparing the implementation of international approaches of capital adequacy of credit organisations under Basel II as issued by the Basel Committee. According to the Banking Development Strategy, through its regulations, the CBR applies the standardised approach for credit risks of Basel II as set forth in Pillar 1 ‘‘Minimum Capital Requirements’’, which is the simplest method for assessment of credit risk. CBR Letter No. 96-T of 29 June 2011 issued as part of introducing Pillar 2 ‘‘Supervisory Review Process’’ (the ‘‘Methodical Recommendations’’) recommends credit organisations to elaborate and use the respective internal procedures for capital adequacy assessment comprise the process of assessment by a credit organisation of adequacy of its own capital, i.e. its internal capital to cover accepted and potential risks, as well as constitute a part of such credit organisation’s corporate culture. It is expected that Basel II Pillar 2 will be gradually implemented not earlier than within the next five years. Under the Banking Sector Development Strategy, the implementation of Basel II in Russia may begin approximately in 2014. The Banking Sector Development Strategy also contemplates an introduction in Russia of Basel III that will be applied as follows: (1) requirements for capital between 2013 and 2015, (2) capital conservation buffer within 2016-2018, (3) leverage ratio starting from 1 January 2018, (4) liquidity coverage ratio commencing from 1 January 2015, and (5) net stable funding ratio starting from 1 January 2018.

Regulation of Mandatory Economic Ratios The CBR mandatory economic ratios calculated on the basis of RAS are applicable to banks under CBR Regulation No. 110-I of 16 January 2004, as amended. The mandatory economic ratios must be observed by the banks on a daily basis and regularly reported on to the CBR.

CBR Mandatory Economic Ratio Mandatory Economic Ratios Description Requirements Capital adequacy ratio (N1) This ratio is intended to limit the risk of a bank’s Minimum 10% insolvency and sets requirements for the minimum size of the bank’s capital base necessary to cover credit, operational and market risks. It is

A-5 CBR Mandatory Economic Ratio Mandatory Economic Ratios Description Requirements formulated as a ratio of a bank’s capital base to its risk-weighted assets. The risk-weighted assets are calculated under a formula that aggregates different categories of the bank’s assets multiplied by a certain risk factor, reserves created for possible losses of those assets, credit risk on credit related commitments, credit risk on forward transactions, operational risk as well as risks relating to interest rates, securities markets and currencies, in each case separating the systemic and idiosyncratic factors. Instant liquidity ratio (N2) This ratio is intended to limit the bank’s liquidity Minimum 15% risk within one operational day. It is formulated as the minimum ratio of a bank’s highly liquid assets to its adjusted liabilities payable on demand. Current liquidity ratio (N3) This ratio is intended to limit the bank’s liquidity Minimum 50% risk within 30 calendar days. It is formulated as the minimum ratio of a bank’s liquid assets payable within 30 calendar days to its adjusted liabilities payable on demand and liabilities with terms of up to 30 calendar days. Long-term liquidity ratio (N4) This ratio is intended to limit the bank’s liquidity Maximum 120% risk arising from placement of funds into long-term assets. It is formulated as the maximum ratio of the bank’s credit claims maturing in more than one year to the sum of its capital base and adjusted liabilities maturing in more than one year. Maximum exposure to a single This ratio is intended to limit the credit exposure Maximum 25% borrower or a group of related of a bank to one borrower or a group of related borrowers (N6) borrowers (defined as companies that are a dependent and a principal or a parent and a subsidiary or as persons who belong to the same banking group or banking holding, who are close relatives, or who can directly or indirectly materially influence the decisions of legal entity borrowers). It is formulated as the maximum ratio of the aggregate amount of the bank’s various credit claims against a borrower (or a group of related borrowers) to its capital base. Maximum amount of major This ratio is intended to limit the aggregate Maximum 800% credit risks (N7) amount of a bank’s major credit risks (defined as the sum of loans to, and guarantees or sureties in respect of, one client that exceeds 5% of a bank’s capital base). It is formulated as the maximum ratio of the aggregate amount of major credit risks to a bank’s capital base. Maximum amount of loans, This ratio is intended to limit a bank’s credit Maximum 50% bank guarantees and sureties exposure to the bank’s owners. It is formulated as extended by the bank to its the maximum ratio of the amount of loans, bank participants (shareholders) guarantees and sureties extended by the bank to (N9.1) its participants (shareholders) to its capital base.

A-6 CBR Mandatory Economic Ratio Mandatory Economic Ratios Description Requirements Aggregate amount of exposure This ratio is intended to limit the aggregate credit Maximum 3% to the bank’s insiders (N10.1) exposure of a bank to its insiders (defined as individuals capable of influencing credit decisions). It is formulated as the maximum ratio of the aggregate amount of the bank’s credit claims against its insiders to its capital base. Ratio for the use of the bank’s This ratio is intended to limit the aggregate risk of Maximum 25% capital base to acquire shares a bank’s investments in shares (participation (participation interests) in other interests) of other legal entities. It is formulated as legal entities (N12) the maximum ratio of the bank’s investments in shares (participation interests) of other legal entities to its capital base. The CBR is currently preparing a new regulation of banks’ mandatory reserves that is supposed to replace the CBR Regulation No. 110-I of 16 January 2004. The draft of this regulation is available on the official website of the CBR for comments and discussion. The draft regulation contains a number of developments, in particular, in terms of risks weighting. Banks covered by the Deposit Insurance Law are also required to comply with additional mandatory ratios in accordance with the CBR Directive No. 1379-U of January 16, 2004, as amended. CBR Regulation No. 112-I of 31 March 2004, as amended, outlines the additional mandatory economic ratios for credit organisations that issue mortgage-backed bonds. The regulation details the methods of calculation of the ratios that were introduced by Federal Law No.152-FZ of 11 November 2003, as amended ‘‘On Mortgage- Backed Securities’’ (the ‘‘Law on Mortgage-Backed Securities’’), such as the requirement that for any bank that issues mortgage-backed securities: the ratio of loans secured by mortgages to the bank’s capital base must be at least 10 per cent. (N17); the minimum ratio for the size of mortgage cover to the volume of mortgage-backed bonds in issue is 100 per cent. (N18); and, the maximum ratio for bank’s aggregate obligations to creditors with priority rights to satisfy their claims in advance of holders of mortgage-backed bonds (such as bank’s depositors) to a bank’s capital base is 50 per cent. (N19). Banks are required to comply with these special ratios from the time when the decision is taken to issue mortgage- backed bonds until the complete redemption of such bonds.

Regulation of Liquidity Support Under the CBR Law and the Banking Law, the CBR is authorised to disburse loans and attract deposits with credit organisations that meet certain requirements with respect to, among other things, financial stability, absence of overdue liabilities to the CBR, and the CBR’s ability to directly debit the relevant credit organisation’s correspondent accounts to support such credit organisation’s liquidity position. The CBR’s loans are required either to be secured with a pledge of certain securities or receivables specified by the CBR or backed with suretyships of companies specified by the CBR. However, CBR may provide loans without any security based on Regulation No. 323-P of 16 October 2008, as amended and Letter No. 154-T of 1 November 2011, in order to provide additional liquidity. Such credits may be extended for a maximum term of one year to the banks that comply with certain requirements and have credit ratings not lower than ‘‘B-’’ from Fitch or Standard & Poor’s, ‘‘B3’’ from Moody’s Investors Service or other ratings from Russian rating agencies as approved by the Board of Directors of the CBR from time to time. The interest rates on the secured loans offered by the CBR range from 0 per cent. for intra-day loans to 8.25 per cent. for overnight loans pursuant to CBR Regulation No. 312-P of 12 November 2007, CBR Regulation No. 236-P of 4 August 2003, CBR Directives No. 2677-U of 26 August 2011, No. 2761-U of 23 December 2011, No. 2759-U of 23 December 2011 and No. 2878-U of 13 September 2012. Interest rates on unsecured loans are generally higher and are determined by the CBR. The CBR’s deposits are attracted on the basis of results of auctions arranged by the CBR. Depending on the type of the deposit offered, the CBR establishes specific requirements as to the request forms and the deposit’s amount as well as terms and interest rates, pursuant to CBR Regulation No. 203-P of 5 November 2002.

A-7 Starting from May 2009 CBR continued to reduce its refinancing rate from 12 per cent. in May 2009 to the record minimum level of 7.75 per cent in May 2010 to overcome the deficit of liquidity. However, on 13 September 2012 CBR increased the rate from 8.0 per cent to 8.25 per cent.

Regulation of Mandatory Reserves In order to regulate overall liquidity in the Russian banking sector and to control money supply, the CBR requires banks to comply with the CBR criteria for the formation of mandatory reserves. The Board of Directors of the CBR from time to time sets particular reserve requirements. According to the CBR Regulation No. 2601-U of 25 March 2011, banks are currently required to post mandatory reserves to be held in non-interest bearing accounts with the CBR in an amount equal to 5.5 per cent. of funds attracted from non-resident legal entities in Roubles and foreign currency and 4.0 per cent. of funds attracted in Roubles and foreign currency from individuals and in other cases. Banks are obliged to calculate the required reserves volume in accordance with the CBR Regulation No. 342-P of 7 August 2009, as amended, report it to the CBR or its regional units on a monthly basis (after the end of each calendar month) and promptly place additional reserves with the CBR, if necessary. The CBR and its regional units have a right to conduct unscheduled audits of credit organisations to check their compliance with the reserves rules, to collect the non-reserved amounts from the banks’ correspondent accounts as well as to impose fines for failure to comply with the reserve requirements.

Regulation of Loss Allowances The CBR has put in place rules concerning the creation of allowances for impairment losses for loans extended by banks. Russian credit organisations are required to calculate and establish their allowances for impairment losses in accordance with CBR Regulation No. 254-P of 26 March 2004, as amended. This regulation requires credit organisations to rank their loans (except for groups of loans that possess similar credit risk characteristics which are ranked differently) according to the following five categories: quality I category (standard loans)—the absence of credit risk and no need for provisioning; quality II category (non-standard loans)—moderate credit risk and 1 per cent. to 20 per cent. of provisioning; quality III category (doubtful loans)—considerable credit risk and 21 per cent. to 50 per cent. of provisioning; quality IV category (problem loans)—high credit risk and 51 per cent. to 100 per cent. of provisioning; and quality V category (bad loans)—absence of probability that the loan will be repaid and 100 per cent. of provisioning. The allocation of the loan into a particular group should be made on the basis of professional judgement. All loans and similar indebtedness must be provided for, including extended loans; placed deposits including interbank credits (deposits and loans); other placed funds, including rights of claim to receive debt securities, shares, promissory notes and precious metals provided under loan agreements; discounted promissory notes; sums paid by a credit organisation to beneficiaries under bank guarantees which were not collected from the principal; monetary claims of a credit organisation under factoring transactions; claims of a credit organisation under the rights assigned to it under various transactions; and some other operations. Creation of provisions in relation to retail loans are subject to special rules which, inter alia, provide for lower provision rates applicable to such loans. In addition to the foregoing, banks are also required to create allowances for possible losses, other than loan losses, which may include losses from investments in securities, funds held in correspondent accounts of other banks, credit related commitments, contingent liabilities and forward and other transactions. CBR Regulation No. 283-P of 20 March 2006, as amended, requires banks to place such assets and operations into one of five risk groups reflecting the following situations: (i) no real or potential threat of loss; (ii) moderate potential threat of loss; (iii) serious potential or moderate real threat of loss; (iv) simultaneous potential and moderate real threat of loss or significant real threat of partial loss; and (v) value of the particular type of asset or operation will be fully lost. Banks are then required to provide allowances for each type of asset or operation in the amounts corresponding to the amounts of possible losses but within the following limits established by the CBR for each risk group specified above, respectively: (i) 0 per cent.; (ii) 1 per cent. to 20 per cent.; (iii) 21 per cent. to 50 per cent.; (iv) 51 per cent. to 100 per cent.; and (v) 100 per cent. Banks must report to the CBR as to the amounts of created non-loan allowances on a monthly basis. Pursuant to CBR Regulation No. 1584-U of 22 June 2005, mandatory allowances must also be created for operations with residents of certain off-shore jurisdictions in the amounts of 25 per cent. or 50 per cent. depending on the jurisdiction involved.

A-8 Regulation of Currency Exposure In its Regulation No. 124-I of 15 July 2005, as amended, the CBR established rules regarding exposure of banks to foreign currency and precious metals (collectively, ‘‘Currency Exposure’’). Currency Exposure is calculated with respect to net amounts of balance sheet positions, spot market positions, forward positions, option positions and positions under guarantees, suretyships and letters of credit. Open currency position is calculated as the sum of all of these net amounts. Such exposure is calculated for each currency and each precious metal, and then recalculated into Roubles in accordance with the official exchange rates and the CBR’s prices for precious metals. The CBR has prescribed that at the end of each operational day the total amount of all long or short currency positions must not exceed 20 per cent. of the bank’s capital base. At the same time, at the end of each operational day, the long or short position with respect to any particular currency or precious metal must not exceed 10 per cent. of the bank’s capital base.

Regulation of Reporting Starting from 1 January 2004, credit organisations are required to prepare financial statements in accordance with IFRS for the period from 1 January to 31 December of each year on the basis of financial statements prepared in accordance with RAS for the same period and submit them to the CBR prior to 1 July of the following year. According to Federal Law No. 208-FZ of 27 July 2010 ‘‘On Consolidated Financial Statements,’’ a credit organisation shall prepare and publish its IFRS consolidated financial statements in the manner approved by the CBR and its annual statements must be audited by an independent auditor prior to publication. The CBR issued recommendations as to how to prepare IFRS financial statements in its Letter No. 169-T of 24 November 2011 which contains pro-forma IFRS financial statements and examples of typical adjustments to RAS accounts.

Regulation of Retail Banking Deposit Insurance According to the Deposit Insurance Law, all Russian banks must participate in the deposit insurance scheme, or otherwise lose their ability to take retail deposits and open and maintain bank accounts for individuals. The deposit insurance scheme is subject to certain requirements: (i) the CBR is certain that the bank’s financial statements and reporting are true and accurate; (ii) the bank is in full compliance with the CBR mandatory ratios; (iii) the CBR confirms sufficient financial stability of the bank; and (iv) the CBR is not conducting or expecting any enforcement actions with respect to the bank. Under the Deposit Insurance Law, the protection for each client is limited and banks are required to make quarterly payments into a deposit insurance fund. According to the Deposit Insurance Law, reimbursement is paid in full in relation to all deposits but in any case the amount of such reimbursement is subject to a cap of RUB700,000. According to press reports, the reimbursement can be increased to RUB1,000,000 starting from 1 January 2013. The insurance payment from the deposit insurance fund will be payable to depositors if a bank’s licence has been revoked or if the CBR has imposed a moratorium on payments by the bank. However, pursuant to Federal Law No. 96-FZ of July 29, 2004, as amended, reimbursement of CBR to the retail clients of a bank that did not participate in the retail deposit insurance shall not be more than RUB700,000.

Draft Law Prohibiting Usurious Transactions On 3 September 2012 a draft law prohibiting usurious transactions was introduced with the State Duma of the Russian Federation. The first reading of the draft law has not been scheduled yet. According to these amendments, the full value of the loan provided to an individual borrower cannot exceed the usual full value for the loans of the respective type more than twice. The usual full value is the average value calculated by the Bank of Russia on a regular basis. If the full value exceeds the usual value more than twice, the court can reduce the amount of interest and other commissions under the agreement at the claim of the borrower. The Bank of Russia should establish the types of the loans and the methodology of calculation of their respective full values.

Regulation of Insolvency Petition to the CBR for Licence Revocation Under Federal Law No. 40-FZ of 25 February 1999 ‘‘On Insolvency (Bankruptcy) of Credit Institutions,’’ as amended (the ‘‘Bank Insolvency Law’’), if a credit organisation cannot satisfy its creditors’ claims

A-9 amounting to, or over, RUB100,000 pursuant to a court or a tax authority’s decision, within 14 days of becoming due, the following persons may petition the CBR (the ‘‘Licence Revocation Petition’’) to revoke the credit organisation’s licence: (1) the credit organisation; (2) its creditors; and (3) authorised governmental bodies (including the Federal Tax Service). Under the Banking Law, the CBR must revoke the licence of a credit organisation if: (1) the credit organisation’s capital adequacy ratio falls below 2 per cent., in accordance with Russian standards; (2) the credit organisation’s capital base is less than the minimum nominal charter capital requirement established by the CBR as of the date of state registration of such credit organisation; (3) the credit organisation fails to adjust its capital base and nominal charter capital on the CBR’s request; (4) the credit organisation fails to satisfy the monetary claims of its creditors, including taxes and other mandatory payments, in the aggregate amount of at least RUB100,000 within 14 days of when they become due; and (5) in certain other cases. Under the Banking Law, the CBR may revoke the licence of a credit organisation if: (1) the information upon which the licence was issued is false; (2) the credit organisation fails to begin operations within one year of the date of issuance of the licence; (3) the credit organisation discloses reporting information that is materially false; (4) the credit organisation fails to submit its monthly report to the CBR within 15 days of when it is due; (5) the credit organisation repeatedly fails to submit information that must appear in the state register of legal entities; (6) the credit organisation conducts banking operations for which it does not hold a licence (including the cases when a single such banking operation has been conducted); (7) the credit organisation’s activities do not comply with the Banking Law or other banking laws and regulations where, during one year, it was repeatedly subject to the corrective measures imposed by the CBR; (8) the credit organisation repeatedly and wilfully, for a one-year period, failed to follow court decisions regarding the payment of funds from its clients’ accounts; (9) a credit organisation that manages assets involved in a mortgage-backed securities transaction fails to comply with the requirements of the Law on Mortgage-Backed Securities and other rules and regulations issued pursuant thereto where, during one year, it was repeatedly subject to the corrective measures imposed by the CBR; or (10) the temporary administration appointed to manage a credit organisation pursuant to the Bank Insolvency Law requests the revocation of its licence.

Consequences of the CBR Decision on Licence Revocation If, in response to the Licence Revocation Petition, the CBR revokes the credit organisation’s licence, any of the following entities can petition an ‘‘arbitrazh court’’ (a Russian commercial court) to declare the credit organisation insolvent (the ‘‘Insolvency Petition’’): (1) the credit organisation; (2) its creditors; (3) the Federal Tax Service; and (4) the CBR. Similarly, if the CBR fails to respond to the Licence Revocation Petition within two months of its submission, such entities can then file an Insolvency Petition with the arbitrazh court. If the CBR rejects the Licence Revocation Petition, it may be liable for any losses a creditor incurs as a result of the non-revocation of the licence. Upon revocation of the credit organisation’s licence, the CBR must appoint a temporary administration for the credit organisation if such temporary administration is not already in place. The appointment of the temporary administration lasts until the appointment of a receiver. See ‘‘—The Banking Sector and Banking Regulation in Russia—Banking Regulations—Regulation of Insolvency Appointment of a Receiver’’. Additionally, upon revocation of the credit organisation’s licence, the credit organisation may not enter into new transactions or perform transactions pursuant to existing obligations except in the limited cases as set forth under the Banking Law. Upon such revocation, the obligations of the credit organisation are considered matured. A local periodical must publish information on an arbitrazh court’s judgment on the Insolvency Petition. Such publication sets forth, among other things, the time frame for the acceptance and satisfaction of the creditors’ claims.

Temporary Administration Upon revocation of a banking license, the CBR must appoint a temporary administration for the relevant bank, which oversees the bank’s operations, identifies debtors of the bank and collects its assets. The temporary administration performs its functions until the appointment of a liquidator or bankruptcy manager. A temporary administration may also be appointed for the bank prior to the revocation of its banking license if, for example, the bank fails to satisfy claims of creditors or make mandatory payments (e.g., taxes and duties) within a certain period due to the absence or lack of funds in its correspondent accounts; the

A-10 bank’s regulatory capital falls more than 30% below the maximum amount of regulatory capital during the last 12 months with simultaneous violation of one of the bank’s mandatory ratios; or there are grounds for revocation of the banking license. Upon appointment of the temporary administration, the powers of the bank’s management may be limited or suspended in which case the bank’s management functions are performed by the temporary administration. During the term of its appointment, the temporary administration analyses the bank’s financial standing, establishes whether there are grounds for revocation of the banking license, participates in the development of measures for the financial rehabilitation of the bank, oversees the bank’s operations, and may repudiate certain contracts of the bank and file claims for the invalidation of certain transactions of the bank. The temporary administration may in certain circumstances request that the CBR impose a moratorium for up to three months on the performance of the bank’s monetary obligations that arose prior to the appointment of the temporary administration regardless of the maturity date of such obligations.

Appointment of a Receiver After hearing an Insolvency Petition and following the revocation of such credit organisation’s licence, the arbitrazh court may declare the credit organisation insolvent. Upon such a declaration, all payments to existing creditors are suspended, and the credit organisation may perform its contracts only according to the ranking of claims as set forth under the Bank Insolvency Law and the Bankruptcy Law. After the arbitrazh court declares a credit organisation insolvent: (1) if the credit organisation did not hold a retail banking licence, the court appoints a CBR-accredited receiver; or (2) if the credit organisation held a retail banking licence, the DIA acts as the receiver. Upon its appointment, the receiver assumes the management of the credit organisation’s operations. The receiver’s appointment is initially for one year but may be extended for a further six-month period and, in practice, for a longer period. The receiver of the credit organisation mainly analyses its financial standing, valuates its assets, identifies its creditors and notifies them of insolvency, identifies its debtors and requires performance of their obligations to the credit organisation. The receiver is subject to the supervision of an arbitrazh court and reports to a committee of creditors and to the CBR. Upon the collection of debts and satisfaction of claims to the extent possible, the receiver submits a report to the arbitrazh court, which in turn continues or closes the insolvency proceedings. Under the Bank Insolvency Law, the receiver may invalidate transactions: (1) entered into within one year before the appointment of the temporary administration, if the consideration received under such transaction is deemed to be ‘unequal’, i.e. if the price and/or other terms and conditions of such transaction are significantly less favourable to the credit organisation than those of a similar transaction entered into under comparable circumstances; or (2) entered into within three years before the appointment of the temporary administration, if entered into with the intention of inflicting damage on property interests of other creditors provided that the counterparty was aware of such consequences; or (3) if the transaction could lead to the preferential satisfaction of the claim of one creditor over the claims of other creditors and was (i) entered into within the period of one month prior to, or after, the appointment of the temporary administration; or (ii) entered into within six months prior to the appointment of the temporary administration where the counterparty was aware of the insolvency of the credit organisation at the moment of the conclusion of such transaction or if such transaction is aimed at satisfaction of claims of a particular creditor before others and may cause or has caused change in priority of claims. In addition, under the Bank Insolvency Law, the receiver may refuse to perform any transaction that results in losses to the credit organisation where a similar transaction would not ordinarily result in such losses.

Priority of Claims Under the Bank Insolvency Law and the Bankruptcy Law, the claims of creditors of a credit organisation rank in the following order of priority: (1) claims related to the administration of insolvency proceedings, including salaries of personnel involved in insolvency proceedings, utilities bills, legal expenses and other payments; (2) first priority claims, including claims in tort for damages in respect of a physical person’s life or health, as well as moral distress; claims of retail depositors and individuals holding current accounts (except for individual entrepreneurs, attorneys and notary public); claims of the DIA in respect of deposits and current accounts transferred to it pursuant to the Deposit Insurance Law; claims of the CBR relating to payments by the CBR to retail depositors of insolvent credit organisations that are not participants in the deposit insurance system; (3) claims under employment contracts and other social benefits and copyright claims; (4) claims secured by a pledge of the credit organisation’s assets. Any residual claims of

A-11 secured creditors that remain unsatisfied after the sale of such collateral rank pari passu with claims of unsecured creditors; (5) claims of all other creditors except for claims of subordinated creditors; and (6) claims of subordinated creditors. Claims of each category of creditors must be satisfied in full before claims of the following category may be considered.

Regulation of Credit Histories Federal Law No. 218-FZ of 30 December 2004, as amended, ‘‘On Credit Histories’’ provides for the establishment of ‘‘credit bureaus’’ that maintain a database of borrowers’ credit histories which consists of both public and confidential files, including information on the borrower’s outstanding debt and interest on it, the terms of repayment and any legal proceedings involving the borrower in respect of loans and financings. The general catalogue of credit histories is maintained by the CBR and includes cover pages of all credit histories and credit bureaus that maintain the respective credit histories. The credit bureaus are supervised by the FSFM. As of 8 October 2012, the FSFM has registered 26 credit bureaus.

Regulation of Anti-Money Laundering and Terrorist Financing Russia is a member of the Financial Action Task Force (‘‘FATF’’). In accordance with Federal Law No. 115-FZ dated 7 August 2001, as amended, banks must identify their clients and ultimate beneficiaries and gather and record information with respect to client operations subject to mandatory control, such as, among others, certain operations involving cash if the sum of such operations is equal to or exceeds RUB600,000 (or its equivalent in foreign currencies) or with real estate if the sum of such operations is equal to or exceeds RUB3 million (or its equivalent in foreign currencies); transactions where at least one of the counter-parties is resident or has a bank account in a country that does not participate in international efforts to combat money-laundering (which generally corresponds to the ‘‘black list’’ issued by the FATF); certain operations with bank accounts/deposits; and certain transactions with moveable assets, including transactions involving precious stones, precious metals and other property. In addition, banks are required to control any operations involving any individuals or organisations that are known to participate in terrorist activities and any legal entity controlled by them or their agents. If bank officers suspect that an operation is conducted in order to legalise any funds received as a result of illegal activity or to finance terrorist activities, they are required to report such operations in the electronic form, without informing their clients, to the CBR’s territorial institution, which immediately transfer this information to the CBR’s Information Technologies Centre and without any delay to the Federal Service for Financial Monitoring, the anti-money laundering authority in Russia. Banks must develop internal control regulations on anti-money laundering procedures. The CBR establishes the requirements to such internal control rules of credit organisations.

Regulation of Insider Dealing Federal Law No. 224-FZ of 27 July 2010, as amended (the ‘‘Insider Dealing Law’’) generally enumerates categories of persons that can be considered insiders, including, among others, issuers, professional market participants (including brokers and dealers) and other persons who transact on behalf of their clients with financial instruments, foreign currency and/or goods, and receive insider information from their clients. Under the Insider Dealing Law, any person who illegally uses the insider information and publishes misleading information may be held liable for misuse of information and/or market manipulation. Furthermore, insiders must comply with certain new disclosure requirements, including keeping the insiders list and sending notices of transactions by the insiders to the FSFM and the CBR. In implementation of the Insider Dealing Law and pursuant to the CBR Regulation No. 2723-U of 31 October 2011, CBR started disclosing certain facts relating to banks on its website, including (1) status and results of inspections, (2) revocation of licences, (3) administrative liability of a credit organisation or its sole executive body, (4) invalidation of the CBR’s approval for taking retail deposits and opening and maintaining bank accounts for individuals, and (5) phases of issuance of securities. Given that the Insider Dealing Law is relatively new and vaguely drafted, its application is not yet settled.

A-12 APPENDIX F FINANCIAL STATEMENTS OF CEB AND THE ISSUER

Consolidated Interim Condensed Financial Information of Credit Europe Bank Ltd. for the six-month period ended 30 June 2012 (Unaudited) Independent Auditors’ Report on review of Consolidated Interim Condensed Financial Information of ZAO KPMG ...... F-4 Consolidated Interim Condensed Statement of Financial Position as at 30 June 2012 ...... F-5 Consolidated Interim Condensed Income Statement as at 30 June 2012 ...... F-6 Consolidated Interim Condensed Statement of Cash Flows for the year ended 30 June 2012 . . . F-7 Consolidated Interim Condensed Statement of Changes in Equity for the six months ended 30 June 2012 ...... F-8 Consolidated Interim Condensed Statement of Comprehensive Income for the six months ended 30 June 2012 ...... F-9 Notes to the Consolidated Interim Condensed Financial Information ...... F-10

Consolidated Financial Statements of Credit Europe Bank Ltd. for the year ended 31 December 2011 Independent Auditors’ Report of ZAO KPMG ...... F-20 Consolidated Income Statement for year ended 31 December 2011 ...... F-21 Consolidated Statement of Financial Position as at 31 December 2011 ...... F-22 Consolidated Statement of Cash Flows for the year ended 31 December 2011 ...... F-23 Consolidated Statement of Changes in Equity for the year ended 31 December 2011 ...... F-24 Consolidated Statement of Comprehensive Income for the year ended 31 December 2011 .... F-25 Notes to the Consolidated Financial Statements ...... F-26

Consolidated Financial Statements of Credit Europe Bank Ltd. for the year ended 31 December 2010 Independent Auditors’ Report of ZAO KPMG ...... F-87 Consolidated Income Statement for year ended 31 December 2010 ...... F-88 Consolidated Statement of Financial Position as at 31 December 2010 ...... F-89 Consolidated Statement of Cash Flows for the year ended 31 December 2010 ...... F-90 Consolidated Statement of Changes in Equity for the year ended 31 December 2010 ...... F-91 Consolidated Statement of Comprehensive Income for the year ended 31 December 2010 .... F-92 Notes to the Consolidated Financial Statements ...... F-93

CEB Capital S.A. Annual Accounts for the year ended 31 December 2011 Auditors’ Report of Ernst & Young S.A. (reviseur d’entreprise)...... F-160 Balance Sheet as at 31 December 2011 ...... F-162 Profit and Loss Account for the year ended 31 December 2011 ...... F-163 Notes to Annual Accounts ...... F-164

CEB Capital S.A. Annual Accounts for the year ended 31 December 2010 Auditors’ Report of Ernst & Young S.A. (reviseur d’entreprise)...... F-185 Balance Sheet as at 31 December 2010 ...... F-187 Profit and Loss Account for the year ended 31 December 2010 ...... F-188 Notes to Annual Accounts ...... F-189

F-1

CREDIT EUROPE BANK LTD.

Consolidated Interim Condensed Financial Information for the six-month period ended 30 June 2012 Unaudited

F-2 Contents

Independent Auditors’ Report on Review of the Consolidated Interim Condensed Financial Information Consolidated Interim Condensed Statement of Financial Position ...... 4 Consolidated Interim Condensed Income Statement ...... 5 Consolidated Interim Condensed Statement of Cash Flows ...... 6 Consolidated Interim Condensed Statement of Changes in Equity ...... 7 Consolidated Interim Condensed Statement of Comprehensive Income ...... 8

Notes to the Consolidated Interim Condensed Financial Information

1 Organisation of the Group and its principal activities ...... 9 2 Operating environment of the Group ...... 9 3 Basis of preparation...... 9 4 Significant accounting policies ...... 10 5 Loans to customers ...... 10 6 Debt securities in issue ...... 11 7 Impairment Losses ...... 12 8 Related party transactions ...... 12 9 Analysis by segment ...... 14 10 Subsequent events ...... 16

F-3 F-4 F-5 Six-month period Six-month period ended ended 30 June 2012 30 June 2011 RUB’000 RUB’000 Note Unaudited Unaudited

Interest income 7,564,310 5,177,886 Interest expense (3,273,556) (1,893,835)

Net interest income 4,290,754 3,284,051

Fee and commission income 1,525,926 1,054,551 Fee and commission expense (733,928) (391,197)

Net fee and commission income 791,998 663,354

Net profit on financial instruments at fair value through profit or loss 19,040 76,705 Net foreign exchange income 128,058 62,105 Other income 150,425 21,621

297,523 160,431

Impairment losses 7 (1,116,652) (319,543) General administrative and other expenses (2,658,083) (2,240,002)

Operating expenses (3,774,735) (2,559,545)

Income before income tax 1,605,540 1,548,291 Income tax expense (324,157) (307,273)

Net income for the period 1,281,383 1,241,018

F-6 Six-month Six-month period ended period ended 30 June 2012 30 June 2011 RUB’000 RUB’000 Unaudited Unaudited

Cash flows used in operating activities (448,695) (10,354,034)

Cash flows (used in) from investing activities (945,397) 3,951,616

Cash flows from financing activities 1,320,939 3,572,718

Effect of changes in exchange rates on cash and cash equivalents 51,501 (605,576)

Net decrease in cash and cash equivalents (21,652) (3,435,276)

Cash and cash equivalents at the beginning of the period 10,483,836 12,677,721

Cash and cash equivalents at the end of the period 10,462,184 9,242,445

F-7

Revaluation reserve for available-for- Share Additional sale financial Hedge Retained Share capital premium paid-in capital assets reserve earnings Total RUB’000 RUB’000 RUB’000 RUB’000 RUB’000 RUB’000 RUB’000 Balance as at 1 January 2011 8,549,789 158,631 285,924 (367) (15,561) 5,579,355 14,557,771 Total comprehensive income (unaudited) Net income for the period (unaudited) - - - - - 1,241,018 1,241,018 Other comprehensive income (unaudited) Net change in fair value of available-for-sale financial assets, net of deferred tax of RUB 2,117 thousand (unaudited) - - - (8,469) - - (8,469) Net gain on cash flow hedges transferred to profit or loss, net of tax of RUB 23 thousand (unaudited) - - - - (91) - (91) Total other comprehensive loss (unaudited) - - - (8,469) (91) - (8,560)

F-8 Total comprehensive income (unaudited) - - - (8,469) (91) 1,241,018 1,232,458 Dividends declared (unaudited) - - - - - (1,249,501) (1,249,501) Balance as at 30 June 2011 (unaudited) 8,549,789 158,631 285,924 (8,836) (15,652) 5,570,872 14,540,728

Balance as at 1 January 2012 8,549,789 158,631 285,924 (125,656) 13,753 7,102,062 15,984,503 Total comprehensive income (unaudited) Net income for the period (unaudited) - - - - - 1,281,383 1,281,383 Other comprehensive income (unaudited) Net change in fair value of available-for-sale financial assets, net of deferred tax of RUB 5,975 thousand - - - 23,901 - - 23, 901 Net realized loss on available-for-sale financial assets transferred to profit or loss on disposal, net of tax of RUB 4,971 thousand (unaudited) - - - 19,883 - - 19,883 Net gain on cash flow hedges transferred to profit or loss, net of tax of RUB 1,573 thousand (unaudited) - - - - (6,292) - (6,292) Net unrealized loss on derivatives hedging variability of cash flow, net of deferred tax of RUB 17,401 thousand (unaudited) - - - - (69,604) - (69,604) Total other comprehensive loss (unaudited) - - - 43,784 (75,896) - (32,112) Total comprehensive income (unaudited) - - - 43,784 (75,896) 1,281,383 1,249,271 Dividends declared (unaudited) - - - - - (1,102,500) (1,102,500) Balance as at 30 June 2012 (unaudited) 8,549,789 158,631 285,924 (81,872) (62,143) 7,280,945 16,131,274

Six-month Six-month period ended period ended 30 June 2012 30 June 2011 RUB ’000 RUB ’000 Unaudited Unaudited

Net income for the period (unaudited) 1,281,383 1,241,018 Other comprehensive loss, net of income tax (unaudited) Revaluation reserve for assets available-for-sale: - Net change in fair value of available-for-sale financial assets, net of deferred tax of RUB 5,975 thousand (six-months 2010: RUB 2,117 thousand) (unaudited) 23,901 (8,469) - Net realized loss on available-for-sale financial assets transferred to profit or loss on disposal, net of tax of RUB 4,971 thousand (unaudited) 19,883 - Cash flow hedge: - Net gain on cash flow hedges transferred to profit or loss, net of tax of RUB 1,573 thousand (six-months 2010: RUB 23 thousand) (unaudited) (6,292) (91) - Net unrealized loss on derivatives hedging variability of cash flow, net of deferred tax of RUB 17,401 thousand (unaudited) (69,604) - Total other comprehensive loss, net of tax (unaudited) (32,112) (8,560) Total comprehensive income (unaudited) 1,249,271 1,232,458

F-9 1 Organisation of the Group and its principal activities

Principal activities of the Group The consolidated interim condensed financial information includes the financial information of Credit Europe Bank Ltd. (the “Bank”) and its subsidiaries (together referred to as the “Group”). Credit Europe Bank Ltd. (formerly Finansbank Russia Ltd.) was established in the Russian Federation as a closed joint stock company and was granted its general banking license in 1997. The principal activities of the Bank are deposit taking and customer accounts maintenance, lending and issuing guarantees, cash and settlement operations and operations with securities and foreign exchange. The Group operates in industries where significant seasonal or cyclical variations in operating income are not experienced during the financial year. The principal subsidiaries of the Bank are as follows:

Ownership % Name Country of incorporation 30 June 2012 31 December 2011 CEB Russia Capital S.A. Luxembourg see below see below Credit Europe Life Ltd. Russia 100% 100%

CEB Russia Capital S.A. (formerly Finans Russia Capital S.A.) is a special purpose entity established to facilitate the issue of loan participation notes by the Group. This entity is not owned by the Group, control arises through the predetermination of the entity’s activities. Credit Europe Life Ltd. is a fully owned subsidiary of the Bank established in 2007 with the purpose of providing a wide range of life insurance services. The entity obtained its insurance license on 28 February 2008.

2 Operating environment of the Group

The Russian Federation has been experiencing political and economic change which has affected, and may continue to affect, the activities of enterprises operating in this environment. Consequently, operations in the Russian Federation involve risks, which do not typically exist in other markets. In addition, the contraction in the capital and credit markets and its impact on the Russian economy have further increased the level of economic uncertainty in the environment. The accompanying consolidated interim condensed financial information reflects management’s assessment of the impact of the Russian business environment on the operations and the financial position of the Group. The future business environment may differ from management’s assessment.

3 Basis of preparation

Statement of compliance The accompanying consolidated interim condensed financial information of the Group has been prepared in accordance with IAS 34 Interim Financial Reporting and all applicable International Financial Reporting Standards (“IFRS”). It does not include all of the information required for full financial statements, and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2011, as this consolidated interim condensed financial information provides an update of previously reported financial information.

F-10 Use of estimates and judgements The preparation of consolidated interim condensed financial information in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expense. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Although these estimates are based on management’s best knowledge of current events and actions, actual results ultimately may differ from these estimates. In preparing these consolidated interim condensed financial information, the significant judgements made by management in applying the Groups accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at 31 December 2011.

4 Significant accounting policies

The accounting policies applied by the Group in this consolidated interim condensed financial information are consistent with those applied by the Group in the consolidated financial statements for the year ended 31 December 2011. Certain improvements to IFRS became effective from 1 January 2012 and have been adopted by the Group since that date. These changes do not have a significant effect on the Group’s consolidated financial statements.

5 Loans to customers

30 June 2012 31 December RUB’000 2011 Unaudited RUB’000

Commercial loans Loans to large corporates 17,651,258 20,913,526 Loans to small and medium size companies 5,052,338 5,889,554 Total commercial loans 22,703,596 26,803,080

Loans to individuals Auto loans 33,812,055 28,137,662 Credit cards 10,910,016 9,974,756 Instant loans 8,523,422 8,812,276 Cash loans 6,694,087 6,098,988 Mortgage loans 3,390,919 3,492,407 Other 114,747 59,722 Total loans to individuals 63,445,246 56,575,811

Gross loans to customers 86,148,842 83,378,891 Impairment allowance (2,935,001) (2,787,340) Net loans to customers 83,213,841 80,591,551

F-11 Movements in the loan impairment allowance are as follows: Six-month period ended 30 June 2012 RUB’000 Unaudited

Loan impairment allowance as at 31 December 2011 2,787,340 Loan impairment loss for the period 1,103,646 Write-offs (955,985)

Loan impairment allowance as at 30 June 2012 2,935,001

Six-month period ended 30 June 2011 RUB’000 Unaudited

Loan impairment allowance as at 31 December 2010 2,304,571 Loan impairment loss for the period 319,587 Write-offs (293,748)

Loan impairment allowance as at 30 June 2011 2,330,410

6 Debt securities in issue

30 June 2012 31 December RUB’000 2011 Unaudited RUB’000 Loan participation notes 14,794,085 14,621,220 Russian bonds denominated in RUB 14,297,361 9,151,856 Promissory notes issued 211,521 1,734,428 29,302,967 25,507,504

In October 2009, the Group issued USD 150,000,000 of loan participation notes with a coupon rate of 9.0%. These loan participation notes mature on 25 October 2012. In May 2010, the Group issued USD 300,000,000 of loan participation notes with a coupon rate of 7.75%. These loan participation notes mature on 20 May 2013. In February 2011, the Group issued RUB 4,000,000 thousand of bonds with a coupon rate of 8.30%. These bonds mature on 18 February 2014. In April 2011, the Group issued RUB 5,000,000 thousand of bonds with a coupon rate of 8.10%. These bonds mature on 28 April 2014 with a put option date of 22 August 2012. In February 2012, the Group issued RUB 5,000,000 thousand of bonds with a coupon rate of 10.00%. These bonds mature on 10 February 2015 with a put option date of 12 February 2014. In July 2011, the Group issued USD 40,000,000 of promissory notes with an interest rate of 3.65% to Deutsche Bank. These promissory notes matured on 30 January 2012.

F-12 7 Impairment Losses

Six-month Six-month period ended period ended 30 June 2011 30 June 2011 RUB’000 RUB’000 Unaudited Unaudited

Loans to customers 1,103,646 319,587 Other assets 2,241 98 Issued guarantees 10,765 (142)

1,116,652 319,543

8 Related party transactions

The Bank’s ultimate parent company is FIBA Holding A.S., a Turkish joint stock company which is ultimately controlled by a single individual, Mr. Husnu Ozyegin.

The Bank’s immediate parent is Credit Europe Bank N.V. which produces publicly available financial statements.

The outstanding balances as at 30 June 2012 with related parties are as follows:

30 June 2012 Key Subsidiaries of the Parent management Bank’s ultimate Company personnel Parent company Total RUB’000 RUB’000 RUB’000 RUB’000 Unaudited Unaudited Unaudited Unaudited

ASSETS

Placements with banks and other financial institutions 3,507,411 - 11,996 3,519,407 Financial instruments at fair value through profit or loss 236,030 - 23,689 259,719 Loans to customers Gross amount - 31,585 1,285,096 1,316,681 Impairment allowance - (18) (28,736) (28,754)

LIABILITIES

Financial instruments at fair value through profit or loss 82,582 - 55,748 138,330 Deposits and balances from banks and other financial institutions 7,443,800 - 265,132 7,708,932 Current accounts and deposits from customers* 67,209 73,234 4,254,335 4,394,778 Debt securities in issue 5,522,968 - - 5,522,968 Other liabilities 1,081,991 - - 1,081,991

Off balance sheet items Guarantees issued (gross amount) - - 63,960 63,960

* - Included in current accounts and deposits from customers is RUB 3,997,748 thousand, which represents deposits from related party banks which, acting in an agent capacity, attract funds from third parties for the purpose of placing these funds with the Group on behalf and at the request of the third parties.

F-13

The results of transactions with related parties for the six-month period ended 30 June 2012 are as follows:

Six-month period ended 30 June 2012 Key Subsidiaries of the Parent management Bank’s ultimate Company personnel Parent company Total

RUB’000 RUB’000 RUB’000 RUB’000 Unaudited Unaudited Unaudited Unaudited

Interest income 42,236 1,608 62,035 105,879 Interest expense (675,582) (1,290) (2,086) (678,958) Fee and commission income 9,896 - 14,155 24,051 Impairment losses - 62 (8,403) (8,341) Net foreign exchange gain/(loss) 17,777 - (29,923) 12,146 Other income - - 419 419 Key management compensation - (174,465) - (174,465)

The outstanding balances as at 31 December 2011 with related parties are as follows:

31 December 2011 Key Subsidiaries of the Parent management Bank’s ultimate Company personnel Parent company Total RUB’000 RUB’000 RUB’000 RUB’000

ASSETS

Placements with banks and other financial institutions 2,106,473 - 1,455,989 3,562,462 Financial instruments at fair value through profit or loss 266,800 - 56,556 323,356 Loans to customers Gross amount - 32,918 550,589 583,507 Impairment allowance - (79) (20,333) (20,412)

LIABILITIES

Financial instruments at fair value through profit or loss 350,457 - - 350,457 Deposits and balances from banks and other financial institutions 7,113,858 - 63,433 7,177,291 Current accounts and deposits from customers* 53,396 5,849,978 5,903,374 Debt securities in issue 4,572,652 - - 4,572,652

Off balance sheet items Guarantees issued - - 57,707 57,707

* - Included in current accounts and deposits from customers is RUB 5,642,902 thousand, which represents deposits from related party banks which, acting in an agent capacity, attract funds from third parties for the purpose of placing these funds with the Group on behalf and at the request of the third parties.

F-14 The results of transactions with related parties for the six-month period ended 30 June 2011 are as follows:

Six-month period ended 30 June 2011 Key Subsidiaries of the Parent management Bank’s ultimate Company personnel Parent company Total

RUB’000 RUB’000 RUB’000 RUB’000 Unaudited Unaudited Unaudited Unaudited

Interest income 157,269 1,550 23,202 182,021 Interest expense (482,878) (1,240) (2,227) (486,345) Fee and commission income 2 - 14,025 14,027 Impairment losses 15 (19,279) (19,264) Net foreign exchange (loss)/gain (61,147) - 47,849 (13,298) Other income - - 19,107 19,107 Key management compensation - (183,928) - (183,928)

9 Analysis by segment The Group has three reportable segments, as described below, which are the Group’s strategic business units. The strategic business units offer different products and services, and are managed separately because they require different technology and marketing strategies. For each of the strategic business units, the CEO reviews internal management reports on at least a quarterly basis. The following summary describes the operations in each of the reportable segments: • Commercial banking – includes corporate and SME banking operations which include deposit taking and commercial lending, settlements and cash operations. Commercial banking services also include trade finance. • Retail banking – includes retail banking operations which include deposit taking and commercial lending, settlements and cash operations. • Treasury (investment banking and financial markets) – includes corporate finance, operations on foreign exchange, debt and equity capital markets, brokerage, securities trading. Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit before income tax as included in the internal management reports that are reviewed by the CEO. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to others who operate within these industries. Inter-segment pricing is determined on an arm’s length basis. Subsequent to 31 December 2011 the Group has changed its approach to the allocation of balances attributable to SME customers between commercial and retail banking. The Group has revised the corresponding items of segment assets and liabilities as at 31 December 2011 and income and expenses for the six-month period ended 30 June 2011 to be consistent with the current period presentation.

F-15 Segment breakdown of assets and liabilities of the Group is set out below:

30 June 2012 RUB’000 31 December 2011 Unaudited RUB’000 ASSETS Commercial banking 25,358,509 28,937,828 Retail banking 70,634,043 63,657,001 Treasury 4,171,791 3,827,485 Unallocated assets 2,235,917 1,454,505 Total assets 102,400,260 97,876,819

LIABILITIES Commercial banking 23,290,971 26,101,943 Retail banking 57,791,539 52,066,656 Treasury 3,167,274 2,826,233 Unallocated assets 2,019,202 897,484 Total liabilities 86,268,986 81,892,316

Segment information for the main reportable segments of the Group for the six-month period ended 30 June 2012 is set out below:

RUB’000 (Unaudited) Commercial Retail banking banking Treasury Total External interest income 1,380,334 6,031,538 152,438 7,564,310 Fee and commission income 180,678 1,345,010 238 1,525,926 Net foreign exchange income 66,826 45,758 15,474 128,058

Net gain on financial instruments at fair value through profit or loss - - 19,040 19,040 Other income 38,125 112,280 20 150,425 Net revenue from other segments 398,331 (538,100) 139,769 - Revenue 2,064,294 6,996,486 326,979 9,387,759 Impairment losses 138,127 (1,254,779) - (1,116,652) Interest expense (1,110,233) (1,940,076) (223,247) (3,273,556) Fee and commission expense (22,000) (708,265) (3,663) (733,928) General administrative expenses (368,067) (2,239,871) (50,145) (2,658,083) Segment result 702,121 853,495 49,924 1,605,540 Income tax expense (324,157) Net income after taxes 1,281,383 Other segment items Additions of property and equipment 33,353 295,691 4,381 333,425 Depreciation (13,275) (117,693) (1,744) (132,712)

F-16 Segment information for the main reportable segments of the Group for the six-month period ended 30 June 2011 is set out below: RUB’000 (Unaudited) Commercial Retail banking banking Treasury Total External interest income 1,069,858 3,896,426 211,602 5,177,886 Fee and commission income 123,801 930,711 39 1,054,551 Net foreign exchange income 29,129 26,343 6,633 62,105 Net gain on financial instruments at fair value through profit or loss - - 76,705 76,705 Other income 4,322 16,281 1,018 21,621 Net revenue from other segments 313,874 (459,942) 146,068 - Revenue 1,540,984 4,409,819 442,065 6,392,868 Impairment losses 31,091 (350,634) - (319,543) Interest expense (742,203) (940,034) (211,598) (1,893,835) Fee and commission expense (9,386) (379,945) (1,866) (391,197) General administrative expenses (341,391) (1,842,455) (56,156) (2,240,002) Segment result 479,095 896,751 172,445 1,548,291 Income tax expense (307,273) Net income after taxes 1,241,018 Other segment items Additions of property and equipment 11,137 92,265 1,781 105,182 Depreciation (9,645) (79,905) (1,542) (91,092)

10 Subsequent events

Tranche B of syndication loans from EBRD/IFC and 15 other commercial banks amounting to USD 150 million as at 30 June 2012 was partially repaid in the amount of USD 17.5 million as at 9 August 2012. The maturity date of the remaining outstanding amount of USD 132.5 million (originally 9 August 2012) was extended to 9 August 2013.

F-17

CREDIT EUROPE BANK LTD.

Consolidated Financial Statements For the year ended 31 December 2011

F-18

Contents Independent Auditors‟ Report 3 Consolidated Income Statement 4 Consolidated Statement of Financial Position 5 Consolidated Statement of Cash Flows 6 Consolidated Statement of Changes in Equity 7 Consolidated Statement of Comprehensive Income 8 Notes to the consolidated financial statements 9 1 Background 9 2 Basis of preparation 10 3 Significant accounting policies 11 4 Interest income and interest expense 22 5 Fee and commission income 22 6 Fee and commission expense 23 7 Net gain on financial instruments at fair value through profit or loss 23 8 Net foreign exchange income 23 9 Impairment losses 23 10 General administrative expenses 24 11 Income tax expense 24 12 Due from the Central Bank of the Russian Federation 25 13 Placements with banks and other financial institutions 25 14 Financial instruments at fair value through profit or loss 26 15 Loans to customers 29 16 Available-for-sale financial assets 39 17 Held-to-maturity investments 39 18 Property and equipment 40 19 Other assets 41 20 Deposits and balances from banks and other financial institutions 41 21 Current accounts and deposits from customers 42 22 Debt securities in issue 42 23 Deferred tax liability 43 24 Shareholders‟ equity 45 25 Analysis by segment 45 26 Risk management 47 27 Capital management 56 28 Commitments 57 29 Operating leases 57 30 Contingencies 58 31 Related party transactions 59 32 Cash and cash equivalents 62 33 Fair value of financial instruments 62 34 Average effective interest rates 64 35 Maturity analysis 65 36 Currency analysis 67

2

F-19 F-20 F-21 CREDIT EUROPE BANK LTD. Consolidated Statement of Financial Position as at 31 December 2011

2011 2010 Notes RUB’000 RUB’000 ASSETS

Cash 2,082,683 1,165,966 Due from the Central Bank of the Russian Federation 12 2,901,194 1,036,131 Placements with banks and other financial institutions 13 6,103,431 12,008,148 Financial instruments at fair value through profit or loss 14 759,561 117,017 Loans to customers 15 80,591,551 60,480,396 Available-for-sale financial assets - Held by the Group 16 2,657,327 6,789,651 - Pledged under sale and repurchase agreements 16 - 1,093,578 Held-to-maturity investments 17 420,989 444,328 Current income tax prepayments 17,417 613,969 Deferred tax asset 23 38,180 - Property and equipment 18 1,050,377 677,280 Other assets 19 1,254,109 471,194

Total Assets 97,876,819 84,897,658

LIABILITIES AND SHAREHOLDERS’ EQUITY

Financial instruments at fair value through profit or loss 14 426,191 339,471 Deposits and balances from banks and other financial institutions 20 21,444,109 16,006,972 Current accounts and deposits from customers 21 33,921,877 35,530,107 Debt securities in issue 22 25,507,504 17,849,049 Deferred tax liability 23 - 80,244 Other liabilities 592,635 534,044

Total Liabilities 81,892,316 70,339,887

Shareholders’ Equity Share capital 24 8,549,789 8,549,789 Share premium 158,631 158,631 Additional paid-in capital 24 285,924 285,924 Revaluation reserve for available-for-sale financial assets (125,656) (367) Hedge reserve 13,753 (15,561) Retained earnings 7,102,062 5,579,355

Total Shareholders’ Equity 15,984,503 14,557,771

Total Liabilities and Shareholders’ Equity 97,876,819 84,897,658

Commitments and Contingencies 28-30

The consolidated statement of financial position is to be read in conjunction with the Notes to, and forming part of, the consolidated financial statements. 5

F-22 CREDIT EUROPE BANK LTD. Consolidated Statement of Cash Flows for the year ended 31 December 2011

2011 2010

Notes RUB’000 RUB’000 CASH FLOWS FROM OPERATING ACTIVITIES Income before taxes 3,477,345 3,216,853 Adjustments for: Net interest income (7,647,645) (5,842,243) Net impairment losses 1,189,747 721,530 Unrealized (gain) loss on financial instruments at fair value through profit or loss (542,682) 360,139 Depreciation 202,692 189,715 Net loss on disposal of property and equipment 702 35,542 Other non-cash items 25,920 392,839 Loss (gain) from revaluation of financial assets and liabilities in foreign currencies 654,582 (346,972) (2,639,339) (1,272,597) (Increase) decrease in operating assets Minimum reserve deposit (292,406) (5,762) Placements with banks and other financial institutions 1,219,029 (1,219,029) Financial instruments at fair value through profit or loss (11,290) 35,779 Loans to customers (20,485,827) (14,365,862) Other assets (805,348) (73,324)

Increase (decrease) in operating liabilities Deposits and balances from banks and other financial institutions 4,714,976 5,557,772 Current accounts and deposits from customers (2,434,140) 9,307,800 Other liabilities 197,110 (16,398) 2 Net cash from operating activities before interest and income tax paid (20,537,235) (2,051,621)

Interest received 12,115,749 9,614,354 Interest paid (3,944,657) (2,938,569) Income tax paid (203,017) (783,149)

Cash flows (used in) from operating activities (12,569,160) 3,841,015

CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of available-for-sale financial assets (13,035,393) (15,221,584) Sale and redemption of available-for-sale financial assets 18,273,944 13,132,734 Acquisition of held-to-maturity investments (118,228) (120,333) Redemption of held-to-maturity investments 169,425 647,488 Net purchases of property and equipment (576,491) (302,744) Cash from (used in) investing activities 4,713,257 (1,864,439)

CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from debt securities in issue 9,951,215 9,169,153 Repayments of debt securities in issue (3,433,072) (10,572,830) Dividends paid (1,249,500) (620,340) Cash from (used in) financing activities 5,268,643 (2,024,017)

Net decrease in cash and cash equivalents (2,587,260) (47,441) Effect of changes in exchange rates on cash and cash equivalents 393,375 (94,262) Cash and cash equivalents at the beginning of the year 12,677,721 12,819,424 Cash and cash equivalents at the end of the year 32 10,483,836 12,677,721

The consolidated statement of cash flows is to be read in conjunction with the Notes to, and forming part of, the consolidated financial statements. 6

F-23 CREDIT EUROPE BANK LTD. Consolidated Statement of Changes in Equity for the year ended 31 December 2011

Revaluation reserve for available-for- Share Additional paid- sale financial Retained Share capital premium in capital assets Hedge reserve earnings Total RUB’000 RUB’000 RUB’000 RUB’000 RUB’000 RUB’000 RUB’000 Balance as at 1 January 2010 8,549,789 158,631 285,924 22,558 - 3,597,646 12,614,548 Total comprehensive income Net income for the year - - - - - 2,602,049 2,602,049

Other comprehensive loss Net realized gain on available-for-sale financial assets transferred to profit or loss on disposal, net of tax of RUB 5,734 thousand - - - (22,925) - - (22,925) Net unrealized loss on derivatives hedging variability of cash flow, net of deferred tax of RUB 3,890 thousand - - - - (15,561) - (15,561) F-24 Total other comprehensive loss - - - (22,925) (15,561) - (38,486)

Total comprehensive income for the year - - - (22,925) (15,561) 2,602,049 2,563,563

Dividends declared and paid - - - - - (620,340) (620,340)

Balance as at 31 December 2010 8,549,789 158,631 285,924 (367) (15,561) 5,579,355 14,557,771

Total comprehensive income Net income for the year - - - - - 2,772,207 2,772,207 Other comprehensive loss ------Net change in fair value of available-for-sale financial assets, net of deferred tax of RUB 31,414 thousand - - - (125,656) - - (125,656) Net realized loss on available-for-sale financial assets transferred to profit or loss on disposal, net of tax of RUB 92 thousand - - - 367 - - 367 Net unrealized gain on derivatives hedging variability of cash flow, net of deferred tax of RUB 7,329 thousand - - - - 29,314 - 29,314 Total other comprehensive loss - - - (125,289) 29,314 - (95,975) Total comprehensive income for the year - - - (125,289) 29,314 2,772,207 2,676,232 Dividends declared and paid - - - - - (1,249,500) (1,249,500) Balance as at 31 December 2011 8,549,789 158,631 285,924 (125,656) 13,753 7,102,062 15,984,503

The consolidated statement of changes in equity is to be read in conjunction with the Notes to, and forming part of, the consolidated financial statements. 7 CREDIT EUROPE BANK LTD. Consolidated Statement of Comprehensive Income for the year ended 31 December 2011

2011 2010 RUB ’000 RUB ’000

Net income for the year 2,772,207 2,602,049 Other comprehensive loss, net of income tax Revaluation reserve for assets available-for-sale: - Net realized loss (gain) on available-for-sale financial assets transferred to profit or loss on disposal, net of tax of RUB 92 thousand (2010: RUB 5,734 thousand) 367 (22,925) - Net change in fair value of available-for-sale financial assets, net of deferred tax of RUB 31,414 thousand (125,656) - Cash flow hedge: - Net unrealized gain (loss) on derivatives hedging variability of cash flow, net of deferred tax of RUB 7,329 thousand (2010: RUB 3,890 thousand) 29,314 (15,561) Total other comprehensive loss for the year, net of income tax (95,975) (38,486) Total comprehensive income for the year 2,676,232 2,563,563

The consolidated statement of comprehensive income is to be read in conjunction with the Notes to, and forming part of, the consolidated financial statements 8

F-25 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

1 Background Principal activities These consolidated financial statements include the financial statements of Credit Europe Bank Ltd. (the “Bank”) and its subsidiaries (together referred to as the “Group”). Credit Europe Bank Ltd. (former Finansbank Russia Ltd.) was established in the Russian Federation as a closed joint stock company and was granted its general banking license in 1997. The Bank operates as an universal bank focusing on all business segments: corporate, SME and retail banking. The principal activities of the Bank are deposit taking and customer accounts maintenance, lending and issuing guarantees, cash and settlement operations and operations with securities and foreign exchange. The activities of the Bank are regulated by the Central Bank of the Russian Federation (the “CBR”). The Bank has 138 locations (including 124 branches and 14 representative offices) (2010: 123 locations (including 109 branches and 14 representative offices)), from which it conducts business throughout the Russian Federation. The registered address of the Bank‟s head office is Moscow, Olipmpiyskiy prospect, 14. The average number of persons employed by the Bank during the year was 4,358 (2010: 3,250). The principal subsidiaries of the Bank are as follows:

Ownership % Name Country of incorporation 2011 2010 CEB Russia Capital S.A. Luxembourg see below see below Credit Europe Life Ltd. Russia 100% 100%

CEB Russia Capital S.A. (former Finans Russia Capital S.A.) is a special purpose entity established to facilitate the issue of loan participation notes by the Group (refer to Note 22). This entity is not owned by the Group, control arises through the predetermination of the entity‟s activities. Credit Europe Life Ltd. is a fully owned subsidiary of the Bank established in 2007 with the purpose of providing a wide range of life insurance services. The entity obtained its insurance license on 28 February 2008. Shareholders The Bank‟s ultimate parent company is FIBA Holding A.S., a Turkish joint stock company, which is ultimately controlled by a single individual, Mr. Husnu Ozyegin. Russian business environment The Russian Federation is experiencing political and economic change that has affected, and may continue to affect, the activities of enterprises operating in this environment. Consequently, operations in the Russian Federation involve risks that typically do not exist in other markets. In addition, the contraction in the capital and credit markets and its impact on the Russian economy have further increased the level of economic uncertainty in the environment. These consolidated financial statements reflect management‟s assessment of the impact of the Russian business environment on the operations and the financial position of the Group. The future business environment may differ from management‟s assessment.

9

F-26 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

2 Basis of preparation

Statement of compliance The accompanying consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”). Basis of measurement The consolidated financial statements are prepared on the historical cost basis except that financial instruments at fair value through profit or loss and available-for-sale financial assets are stated at fair value. Functional and presentation currency The national currency of the Russian Federation is the Russian Ruble (“RUB”). Management have determined the Group‟s functional currency to be the RUB as it reflects the economic substance of the underlying events and circumstances of the Group. The RUB is also the Group‟s presentation currency for the purposes of these consolidated financial statements. Financial information presented in RUB has been rounded to the nearest thousand. Use of estimates and judgments The preparation of consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expense. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Although these estimates are based on management‟s best knowledge of current events and actions, actual results ultimately may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Information about significant areas of estimation uncertainty and critical judgments made by management in the application of IFRS that have significant effect on these consolidated financial statements are described in Note 15 in respect of the loan impairment allowance.

10

F-27 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

3 Significant accounting policies The following significant accounting policies have been applied in the preparation of the consolidated financial statements. The accounting policies have been consistently applied, except change in accounting policy described below.  With effect from 1 January 2011, the Group retrospectively applied limited amendments to IFRS 7 Financial Instruments: Disclosures issued as part of Improvements to IFRSs 2010. These amendments mainly relate to disclosures on collateral and other credit enhancements, as well as to renegotiated assets that would otherwise be past due or impaired. Basis of consolidation Subsidiaries Subsidiaries are those enterprises controlled by the Bank. Control exists when the Bank has the power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control effectively commences until the date that control effectively ceases. Special purpose entities The Group has established one special purpose entity (“SPE”) to facilitate the issue of loan participation notes. The Bank does not have any direct or indirect shareholdings in this entity. However, the SPE is established under terms that impose strict limits on the decision-making powers of the SPE‟s management over the operations of the SPE. In addition, the benefits related to it operations and net assets are presently attributable to the Bank via a number of agreements. Transactions eliminated on consolidation Intra-group balances and transactions are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with associates are eliminated to the extent of the Group‟s interest in the enterprise. Unrealised gains resulting from transactions with associates are eliminated against the investment in the associate. Unrealised losses are eliminated in the same way as unrealised gains except that they are only eliminated to the extent that there is no evidence of impairment. Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of the Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the reporting period. Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising on the retranslation of available-for-sale equity instruments or qualifying cash flow hedges, which are recognised in other comprehensive income. Hyperinflation accounting The Russian Federation ceased to be hyperinflationary with effect from 1 January 2003 and accordingly no adjustments for hyperinflation have been made for periods subsequent to this date. The hyperinflation-adjusted carrying amounts of the Group‟s assets, liabilities and equity items as at 31 December 2002 became their carrying amounts as at 1 January 2003 for the purpose of subsequent accounting.

11

F-28 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

Cash and cash equivalents The Group considers cash and nostro accounts and term deposits with the CBR and amounts due from other financial institutions with an original contractual maturity of 90 days or less and which are free from contractual encumbrances to be cash and cash equivalents. The minimum reserve deposit with the CBR is not considered to be a cash equivalent due to restrictions on its withdraw ability. Cash and cash equivalents are carried at amortized cost in the consolidated statement of financial position. Financial instruments Classification Financial instruments at fair value through profit or loss are financial assets or liabilities that are: - acquired or incurred principally for the purpose of selling or repurchasing in the near term; - part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking; - derivative financial instruments (except for derivative financial instruments that are designated and effective hedging instruments); or, - upon initial recognition, designated by the Group as at fair value through profit or loss. The Group designates financial assets and liabilities at fair value through profit or loss where either: - the assets or liabilities are managed and evaluated on a fair value basis; - the designation eliminates or significantly reduces an accounting mismatch which would otherwise arise; or - the asset or liability contains an embedded derivative that significantly modifies the cash flows that would otherwise be required under the contract. All trading derivatives in a net receivable position (positive fair value), as well as options purchased, are reported as assets. All trading derivatives in a net payable position (negative fair value), as well as options written, are reported as liabilities. Management determines the appropriate classification of financial instruments in this category at the time of the initial recognition. Derivative financial instruments and financial instruments designated as at fair value through profit or loss upon initial recognition are not reclassified out of at fair value through profit or loss category. Financial assets that would have met the definition of loan and receivables may be reclassified out of the fair value through profit or loss or available-for- sale category if the entity has an intention and ability to hold it for the foreseeble future or until maturity. Other financial instruments may be reclassified out of at fair value through profit or loss category only in rare circumstances. Rare circumstances arise from a single event that is unusual and highly unlikely to recur in the near term. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, other than those that: - the Group intends to sell immediately or in the near term; - the Group upon initial recognition designates as at fair value through profit or loss; - the Group upon initial recognition designates as available- for-sale; or - the Group may not recover substantially all of its initial investment, other than because of credit deterioration. Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity that the Group has the positive intention and ability to hold to maturity, other than those that:

12

F-29 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

- the Group upon initial recognition designates as at fair value through profit or loss; - the Group designates as available-for-sale; or - meet the definition of loans and receivables. Available-for-sale financial assets are those financial assets that are designated as available-for-sale or are not classified as loans and receivables, held-to-maturity investments or financial instruments at fair value through profit or loss. Management determines the appropriate classification of financial instruments at the time of the initial recognition. Recognition Financial assets and liabilities are recognized in the consolidated statement of financial position when the Group becomes a party to the contractual provisions of the instrument. All regular way purchases of financial assets are accounted for at the settlement date. Measurement A financial asset or liability is initially measured at its fair value plus, in the case of a financial asset or liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or liability. Subsequent to initial recognition, financial assets, including derivatives that are assets, are measured at their fair values, without any deduction for transaction costs that may be incurred on sale or other disposal, except for: - loans and receivables which are measured at amortized cost using the effective interest method; - held-to-maturity investments which are measured at amortized cost using the effective interest method; and - investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured which are measured at cost. All financial liabilities, other than those designated at fair value through profit or loss and financial liabilities that arise when a transfer of a financial asset carried at fair value does not qualify for derecognition, are measured at amortized cost. The amortized cost of a financial asset or liability is the amount at which the financial asset or liability is measured at initial recognition, minus principal repayments, plus or minus the cumulative amortization using the effective interest method of any difference between the initial amount recognized and the maturity amount, minus any reduction for impairment. Premiums and discounts, including initial transaction costs, are included in the carrying amount of the related instrument and amortized based on the effective interest rate of the instrument. Where a valuation based on observable market data indicates a fair value gain or loss on initial recognition of an asset or liability, the gain or loss is recognized immediately in the consolidated income statement. Where an initial gain or loss is not based entirely on observable market data, it is deferred and recognized over the life of the asset or liability on an appropriate basis, or when prices become observable, or on disposal of the asset or liability. Fair value measurement principles 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 on the measurement date. When available, the Group measures the fair value of an instrument using quoted prices in an active market for that instrument. A market is regarded as active if quoted prices are readily and regularly available and represent actual and regularly occurring market transactions on an arm‟s length basis.

13

F-30 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

If a quoted market price is not available, the fair value of the instrument is estimated using pricing models or discounted cash flow techniques. Where discounted cash flow techniques are used, estimated future cash flows are based on Management‟s best estimates and the discount rate is a market related rate at the reporting date for an instrument with similar terms and conditions. Where pricing models are used, inputs are based on market related measures at the reporting date. The best evidence of the fair value of a financial instrument at initial recognition is the transaction price, i.e., the fair value of the consideration given or received, unless the fair value of that instrument is evidenced by comparison with other observable current market transactions in the same instrument (i.e., without modification or repackaging) or based on a valuation technique whose variables include only data from observable markets. When transaction price provides the best evidence of fair value at initial recognition, the financial instrument is initially measured at the transaction price and any difference between this price and the value initially obtained from a valuation model is subsequently recognised in profit or loss on an appropriate basis over the life of the instrument but not later than when the valuation is supported wholly by observable market data or the transaction is closed out. Assets and long positions are measured at a bid price; liabilities and short positions are measured at an asking price. Where the Group has positions with offsetting risks, mid-market prices are used to measure the offsetting risk positions and a bid or asking price adjustment is applied only to the net open position as appropriate. Fair values reflect the credit risk of the instrument and include adjustments to take account of the credit risk of the Group entity and the counterparty where appropriate. Fair value estimates obtained from models are adjusted for any other factors, such as liquidity risk or model uncertainties, to the extent that the Group believes a third-party market participant would take them into account in pricing a transaction. The fair value of derivatives that are not exchange-traded is estimated at the amount that the Group would receive or pay to terminate the contract at the reporting date taking into account current market conditions and the current creditworthiness of the counterparties. Gains and losses on subsequent measurement A gain or loss arising from a change in the fair value of a financial asset or liability is recognized as follows: - a gain or loss on a financial instrument classified as at fair value through profit or loss is recognized in the consolidated income statement; - a gain or loss on an available-for-sale financial asset is recognized as other comprehensive income in equity (except for impairment losses and foreign exchange gains and losses on debt financial instruments available-for-sale) until the asset is derecognized, at which time the cumulative gain or loss previously recognised in equity is recognized in profit or loss. Interest in relation to an available-for-sale financial asset is recognized in profit or loss using the effective interest method. For financial assets and liabilities carried at amortized cost, a gain or loss is recognized in the consolidated income statement when the financial asset or liability is derecognized or impaired, and through the amortization process. Derecognition A financial asset is derecognized when the contractual rights to the cash flows from the financial asset expire or when the Group transfers substantially all the risks and rewards of ownership of the financial asset or in which the Group neither transfers nor retains substantially all the risks and rewards of ownership and it does not retain control of the financial asset. Any interest in transferred financial assets that qualify for derecognition that is created or retained by the Group is recognized as a separate asset or liability in the consolidated statement of financial position. The Group derecognizes a financial liability when its contractual obligations are discharged or cancelled or expire. 14

F-31 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

The Group also derecognizes certain assets when it writes off balances pertaining to the assets deemed to be uncollectible. Hedge accounting The Group uses cross-currency swaps and forwards to hedge the foreign currency risk arising from its deposits and balances from banks and other financial institutions and current accounts and deposits from customers in foreign currency. Derivatives which qualify for hedge accounting are recognized initially at fair value with attributable transaction costs recognized in profit and loss when incurred. Subsequent to initial recognition, derivatives are measured at fair value and changes in the fair value of the derivative hedging instrument designated as a cash flow hedge are recognized directly in equity to the extent that the hedge is effective. To the extent that the hedge is ineffective, changes in fair value are recognized in profit or loss. The cumulative gain or loss recognized in equity is transferred to profit or loss in the same period that the hedged item affects profit or loss. Qualification for hedge accounting A hedging relationship qualifies for hedge accounting if, and only if, all of the following conditions are met. a) At the inception of the hedge there is formal designation and documentation of the hedging relationship and the entity‟s risk management objective and strategy for undertaking the hedge. That documentation shall include identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument‟s effectiveness in offsetting the exposure to changes in the hedged item‟s cash flows attributable to the hedged risk. b) The hedge is expected to be highly effective in achieving offsetting changes in cash flows attributable to the hedged risk, consistently with the originally documented risk management strategy for that particular hedging relationship. c) For cash flow hedges, a forecast transaction that is the subject of the hedge must be highly probable and must present an exposure to variations in cash flows that could ultimately affect profit or loss. d) The effectiveness of the hedge can be reliably measured, i.e. cash flows of the hedged item that are attributable to the hedged risk can be reliably measured. e) The hedge is assessed on an ongoing basis and determined actually to have been highly effective throughout the financial reporting periods for which the hedge was designated. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, then hedge accounting is discontinued prospectively. Repurchase and reverse repurchase agreements Securities sold under sale and repurchase (“repo”) agreements are accounted for as secured financing transactions, with the securities retained in the consolidated statement of financial position and the counterparty liability included in deposits and balances from banks and other financial institutions or current accounts and deposits from customers, as appropriate. The difference between the sale and repurchase prices represents interest expense and is recognized in the consolidated income statement over the term of the repo agreement using the effective interest method.

15

F-32 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

Securities purchased under agreements to resell (“reverse repo”) are recorded as amounts receivable under reverse repo transactions within placements with banks and other financial institutions or loans to customers, as appropriate. The difference between the purchase and resale prices represents interest income and is recognized in the consolidated income statement over the term of the reverse repo agreement using the effective interest method. If assets purchased under agreement to resell are sold to third parties, the obligation to return securities is recorded as a trading liability and measured at fair value. Offsetting Financial assets and liabilities are offset and the net amount reported in the consolidated statement of financial position when there is a legally enforceable right to set off the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously. Property and equipment Owned assets Items of property and equipment are stated at cost less accumulated depreciation and impairment losses. Where an item of property and equipment comprises major components having different useful lives, they are accounted for as separate items of property and equipment. Leased assets Leases under which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Equipment acquired by way of a finance lease is stated at an amount equal to the lower of its fair value and the present value of the minimum lease payments at the inception of the lease, less accumulated depreciation and impairment losses. Depreciation Depreciation is charged to the consolidated income statement on a straight-line basis over the estimated useful lives of the individual assets. Depreciation commences on the date of acquisition or, in respect of internally constructed assets, from the time an asset is completed and ready for use. The estimated useful lives are as follows:

Equipment 5 to 20 years Motor vehicles 2 to 3 years Computer software 3 to 10 years Leasehold improvements lesser of lease term or 3 years Impairment Financial assets carried at amortized cost Financial assets carried at amortized cost consist principally of loans and other receivables (“loans and receivables”). The Group reviews its loans and receivables, to assess impairment on a regular basis. A loan or receivable is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the loan or receivable and that event (or events) has had an impact on the estimated future cash flows of the loan that can be reliably estimated.

16

F-33 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

Objective evidence that financial assets are impaired can include default or delinquency by a borrower, breach of loan covenants or conditions, restructuring of a loan or advance by the Group on terms that the Group would not otherwise consider, indications that a borrower or issuer will enter bankruptcy, the disappearance of an active market for a security, deterioration in the value of collateral, or other observable data relating to a group of assets such as adverse changes in the payment status of borrowers in the group, or economic conditions that correlate with defaults in the group. The Group first assesses whether objective evidence of impairment exists individually for loans and receivables that are individually significant, and individually or collectively for loans and receivables that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed loan or receivable, whether significant or not, it includes the loan in a group of loans and receivables with similar credit risk characteristics and collectively assesses them for impairment. Loans and receivables 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 on a loan or receivable has been incurred, the amount of the loss is measured as the difference between the carrying amount of the loan or receivable and the present value of estimated future cash flows including amounts recoverable from guarantees and collateral discounted at the loan or receivable‟s original effective interest rate. Contractual cash flows and historical loss experience adjusted on the basis of relevant observable data that reflect current economic conditions provide the basis for estimating expected cash flows. In some cases the observable data required to estimate the amount of impairment loss on a loan or receivable may be limited or no longer fully relevant to current circumstances. This may be the case when a borrower is in financial difficulties and there is little available historical data relating to similar borrowers. In such cases, the Group uses its experience and judgment to estimate the amount of any impairment loss. All impairment losses in respect of loans and receivables are recognized in the consolidated income statement and are only reversed if a subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognized. When a loan is uncollectable, it is written off against the related allowance for loan impairment. The Group writes off a loan balance (and any related allowances for loan losses) when the Group‟s Management determines that the loans are uncollectible. Financial assets carried at cost Financial assets carried at cost include unquoted equity instruments included in available-for-sale financial assets that are not carried at fair value because their fair value cannot be reliably measured. If there is objective evidence that such investments are impaired, the impairment loss is calculated as the difference between the carrying amount of the investment and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. All impairment losses in respect of these investments are recognized in the consolidated income statement and cannot be reversed. Available-for-sale financial assets Impairment losses on available-for-sale financial assets are recognised by transferring the cumulative loss that is recognised in other comprehensive income to profit or loss as a reclassification adjustment. The cumulative loss that is reclassified from other comprehensive income to profit or loss is the difference between the acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss previously recognised in profit or loss. Changes in impairment allowance attributable to time value are reflected as a component of interest income.

17

F-34 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

For an investment in an equity security available-for-sale, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment. If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed, with the amount of the reversal recognised in profit or loss. However, any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognised in other comprehensive income. Non financial assets Other non financial assets, other than deferred taxes, are assessed at each reporting date for any indications of impairment. The recoverable amount of non financial assets is the greater of their fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs. An impairment loss is recognized when the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. All impairment losses in respect of non financial assets are recognized in the consolidated income statement and reversed only if there has been a change in the estimates used to determine the recoverable amount. Any impairment loss reversed is only reversed to the extent that the asset‟s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. Provisions A provision is recognized in the consolidated statement of financial position when the Group has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Credit related commitments In the normal course of business, the Group enters into credit related commitments, comprising undrawn loan commitments, letters of credit and guarantees, and provides other forms of credit insurance. Financial guarantees are contracts that require the Group to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument. A financial guarantee liability is recognized initially at fair value net of associated transaction costs, and is measured subsequently at the higher of the amount initially recognized less cumulative amortization or the amount of provision for losses under the guarantee. Provisions for losses under financial guarantees and other credit related commitments are recognized when losses are considered probable and can be measured reliably. Financial guarantee liabilities and provisions for other credit related commitment are included within other liabilities. Share capital Ordinary shares Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognized as a deduction from equity, net of any tax effects. 18

F-35 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

Dividends The ability of the Group to declare and pay dividends is subject to the rules and regulations of the Russian legislation. Dividends in relation to ordinary shares are reflected as an appropriation of retained earnings in the period when they are declared. Taxation Income tax comprises current and deferred tax. Income tax is recognized in the consolidated income statement except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity. Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit and temporary differences related to investments in subsidiaries where the parent is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. A deferred tax asset is recognized only to the extent that it is probable that future taxable income will be available against which the temporary differences, unused tax losses and credits can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realized. Income and expense recognition Interest income and expense are recognised in profit or loss using the effective interest method. Loan origination fees, loan servicing fees and other fees that are considered to be an integral part to the overall profitability of a loan, together with the related transaction costs, are deferred and amortized to interest income over the estimated life of the financial instrument using the effective interest method. Other fees, commissions and other income and expense items are recognised in profit or loss when the corresponding service is provided. Penalty income is recognised in the consolidated income statement when penalty is charged to a customer, taking into account its collectability. Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease. Segment reporting An operating segment is a component of a Group that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same Group); whose operating results are regularly reviewed by the chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

19

F-36 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

Comparative information Comparative information is reclassified to conform to changes in presentation in the current year. The presentation of other borrowed funds was changed in 2011 to better present the substance of the underlying transactions. As at 31 December 2010 the Group presented balances due to certain government institutions as other borrowed funds as a separate caption in the consolidated statement of financial position. In 2011 these amounts are presented within current accounts and deposits from customers. For consistency of presentation, prior year figures have been reclassified. As a result RUB 3,970,573 thousand, previously presented on the face of the consolidated statement of financial position as other borrowed funds, is now presented within current accounts and deposits from customers (Note 21). In addition, related interest expense for 2010 of RUB 241,980 thousand, previously presented as interest expense on other borrowed funds was reclassified to interest expense on current accounts and deposits from customers and interest expense on deposits and balances from banks and other financial institutions (Note 4). New standards and interpretations not yet adopted A number of new standards, amendments to standards and interpretations are not yet effective as at 31 December 2011, and are not applied in preparing these consolidated financial statements. Of these pronouncements, potentially the following will have an impact on the financial position and performance. The Group plans to adopt these pronouncements when they become effective.  IFRS 10 Consolidated Financial Statements will be effective for annual periods beginning on or after 1 January 2013. The new standard supersedes IAS 27 Consolidated and Separate Financial Statements and SIC-12 Consolidation – Special Purpose Entities. IFRS 10 introduces a single control model which includes entities that are currently within the scope of SIC-12. Under the new three-step control model, an investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with that investee, has the ability to affect those returns through its power over that investee and there is a link between power and returns. Consolidation procedures are carried forward from IAS 27 (2008). When the adoption of IFRS 10 does not result in a change in the previous consolidation or non-consolidation of an investee, no adjustments to accounting are required on initial application. When the adoption results in a change in the consolidation or non-consolidation of an investee, the new standard may be adopted with either full retrospective application from date that control was obtained or lost or, if not practicable, with limited retrospective application from the beginning of the earliest period for which the application is practicable, which may be the current period. Early adoption of IFRS 10 is permitted provided an entity also early-adopts IFRS 11, IFRS 12, IAS 27 (2011) and IAS 28 (2011).  IFRS 12 Disclosure of Interests in Other Entities will be effective for annual periods beginning on or after 1 January 2013. The new standard contains disclosure requirements for entities that have interests in subsidiaries, joint arrangements, associates and unconsolidated structured entities. Interests are widely defined as contractual and non-contractual involvement that exposes an entity to variability of returns from the performance of the other entity. The expanded and new disclosure requirements aim to provide information to enable the users to evaluate the nature of risks associated with an entity‟s interests in other entities and the effects of those interests on the entity‟s financial position, financial performance and cash flows. Entities may early present some of the IFRS 12 disclosures without a need to early-adopt the other new and amended standards. However, if IFRS 12 is early-adopted in full, then IFRS 10, IFRS 11, IAS 27 (2011) and IAS 28 (2011) must also be early-adopted.  IFRS 13 Fair Value Measurement will be effective for annual periods beginning on or after 1 January 2013. The new standard replaces the fair value measurement guidance contained in individual IFRSs with a single source of fair value measurement guidance. It provides a revised definition of fair value, establishes a framework for measuring fair value and sets out disclosure requirements for fair value measurements. IFRS 13 does not introduce new requirements to measure assets or liabilities at fair value, nor does it eliminate the practicability exceptions to fair 20

F-37 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

value measurement that currently exist in certain standards. The standard is applied prospectively with early adoption permitted. Comparative disclosure information is not required for periods before the date of initial application.  Amendment to IFRS 7 Disclosures – Transfers of Financial Assets introduces additional disclosure requirements for transfers of financial assets in situations where assets are not derecognised in their entirety or where the assets are derecognised in their entirety but a continuing involvement in the transferred assets is retained. The new disclosure requirements are designed to enable the users of financial statements to better understand the nature of the risks and rewards associated with these assets. The amendment is effective for annual periods beginning on or after 1 July 2011.  IFRS 9 Financial Instruments will be effective for annual periods beginning on or after 1 January 2015. The new standard is to be issued in several phases and is intended to replace IAS 39 Financial Instruments: Recognition and Measurement once the project is completed. The first phase of IFRS 9 was issued in November 2009 and relates to the recognition and measurement of financial assets. The second phase regarding classification and measurement of financial liabilities was published in October 2010. The remaining parts of the standard are expected to be issued during 2012. The Group recognises that the new standard introduces many changes to the accounting for financial instruments and is likely to have a significant impact on Group‟s consolidated financial statements. The impact of these changes will be analysed during the course of the project as further phases of the standard are issued. The Group does not intend to adopt this standard early.  Improvements to IFRSs resulting from the International Accounting Standards Board‟s annual improvements project are to be dealt with on a standard-by-standard basis. The effective date of each amendment is included in the IFRSs affected. The Group has not yet analyzed the likely impact of the new standards on its financial position or performance.

21

F-38 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

4 Interest income and interest expense 2011 2010 RUB’000 RUB’000 Interest income Loans to individuals 9,067,907 5,844,626 Loans to corporate and SME customers 2,345,086 2,443,485 Available-for-sale financial assets 365,079 397,872 Placements with banks and other financial institutions 94,681 22,244 Held-to-maturity investments 50,165 91,161 Financial instruments at fair value through profit or loss 4,634 37,212 Derivatives - 20,590 11,927,552 8,857,190 Interest expense Debt securities in issue 1,951,026 1,493,122 Current accounts and deposits from customers 1,246,190 994,712 Deposits and balances from banks and other financial institutions 868,437 527,113 Derivatives 214,254 - 4,279,907 3,014,947

5 Fee and commission income 2011 2010 RUR ’000 RUR ’000 Credit card fees 885,155 369,741 Penalties on overdue loans 421,084 377,584 Cash withdrawal fees 231,608 118,155 Commissions from insurance companies 221,159 113,517 Annual credit card maintenance fees 202,430 114,031 Transaction processing fees 141,006 51,358 Early redemption fees 82,172 100,625 Fees from retailers 66,981 7,381 Cash deposit fees 62,764 123,761 Foreign exchange fees 52,697 50,990 Commission for fund transfers 43,779 46,507 Documentary services fees 40,325 34,347 Annual account maintenance fees 25,620 32,876 Intermediary services fees 19,970 95,511 Other 40,166 29,158 2,536,916 1,665,542

22

F-39 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

6 Fee and commission expense 2011 2010 RUB’000 RUB’000 Credit card fees 683,876 206,501 Fees to retailers 127,888 21,281 Cash transportation fees 102,436 85,685 Insurance related expenses 47,470 30,401 Payment and transaction services 27,392 21,559 Brokerage expense 14,092 10,382 Portfolio and other management fee expense 3,084 4,209 Fees for documentary services 2,322 4,936 Fees for banknote transactions 1,484 3,263 Other 3,368 1,638 1,013,412 389,855

7 Net gain on financial instruments at fair value through profit or loss

2011 2010 RUB’000 RUB’000 Capital market gain arising from debt instruments 27,514 326,878

8 Net foreign exchange income

2011 2010 RUB’000 RUB’000 Income from spot transactions 228,564 166,089 (Loss) gain from revaluation of financial assets and liabilities and derivative transactions (40,171) 9,288 188,393 175,377

9 Impairment losses

2011 2010 RUB’000 RUB’000 Loans to customers 1,193,518 640,954 Other assets 21,069 40,969 (Gains) losses on financial guarantee contracts (24,840) 39,607

1,189,747 721,530

23

F-40 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

10 General administrative expenses 2011 2010 RUB’000 RUB’000 Employee compensation 2,321,254 1,906,115 Social security premiums and federal budget payments 567,672 263,060 Occupancy 529,974 482,355 Taxes other than on income 249,659 207,474 Communications and information services 214,286 135,020 Depreciation 202,692 189,715 Office supplies 183,889 116,962 Repairs and maintenance 180,644 156,376 Advertising and marketing 69,708 43,494 Security 59,250 54,733 Travel expenses 56,911 44,551 Professional services 48,882 54,360 Insurance premiums 7,663 12,431 Other 63,790 64,466 4,756,274 3,731,112

11 Income tax expense

2011 2010 RUB’000 RUB’000 Current tax expense Current year 819,366 577,283 Overprovided in prior years (19,797) (23,736) 799,569 553,547 Deferred tax expense Origination and reversal of temporary differences (94,431) 61,257 Total income tax expense in the consolidated income statement 705,138 614,804

The applicable tax rate for current tax is 20% (2010: 20%). The Group applied 20% deferred tax rate (2010: 20%).

Reconciliation of effective tax rate:

2011 2010 RUB’000 (%) RUB’000 (%)

Income before tax 3,477,345 3,216,853

Income tax at the applicable tax rate 695,469 20.00% 643,372 20.00% Income taxed at lower rates (696) (0.02%) (8,800) (0.27%) Non-deductible costs 30,162 0.87% 3,968 0.12% Overprovided in prior years (19,797) (0.57%) (23,736) (0.74%) 705,138 20.28% 614,804 19.11%

24

F-41 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

12 Due from the Central Bank of the Russian Federation

2011 2010 RUB’000 RUB’000

Term deposits 1,600,176 -

Nostro accounts 697,546 725,065

Minimum reserve deposit 603,472 311,066 2,901,194 1,036,131

The minimum reserve deposit is a mandatory non-interest bearing deposit calculated in accordance with regulations issued by the CBR and whose withdrawability is restricted. The nostro accounts represent balances with the CBR related to settlement activity and were available for withdrawal at year end.

13 Placements with banks and other financial institutions

2011 2010 RUB’000 RUB’000 Not impaired or past due Nostro accounts Largest 30 Russian banks 533,058 213,161 Small and medium sized Russian banks and financial institutions 154,000 106,605 OECD banks 120,652 51,990 Total nostro accounts 807,710 371,756

Loans and deposits OECD banks 3,262,209 11,636,392 Largest 30 Russian banks 1,700,191 - Small and medium sized Russian banks and financial institutions 326,467 - Other Russian banks 6,854 - Total loans and deposits 5,295,721 11,636,392

6,103,431 12,008,148

Concentration of placements with banks and other financial institutions As at 31 December 2011, the Group had four counterparties, whose balances individually exceeded 10% of total placements with banks and other financial institutions (2010: three counterparties). The gross values of these balances as at 31 December 2011 and 2010 were RUB 5,661,343 thousand and RUB 9,718,630 thousand, respectively.

25

F-42 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

14 Financial instruments at fair value through profit or loss

2011 2010 RUB’000 RUB’000 Assets Held by the Group Debt and other fixed-income instruments – trading Russian corporate bonds 100,375 - Foreign corporate bonds - 78,001 Derivative financial instruments Foreign currency contracts 384,711 31,590 Cross-currency interest rate swaps 274,475 - Options - 7,426 759,561 117,017

Liabilities Derivative financial instruments Foreign currency contracts 416,964 335,710 Cross-currency interest rate swaps 9,227 - Options - 3,761

426,191 339,471

Financial instruments at fair value through profit or loss comprise financial instruments held for trading. None of financial assets at fair value through profit or loss are past due or impaired.

Foreign currency contracts

The table below summarizes, by major currencies, the contractual amounts of the Group's forward exchange contracts outstanding at 31 December 2011 with details of the contracted exchange rates and remaining periods to maturity. Foreign currency amounts presented below are translated at rates ruling at the reporting date. The resultant unrealized gains and losses on these unmatured contracts, have been recognized in the consolidated income statement and in financial instruments at fair value through profit or loss, as appropriate.

26

F-43 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

Notional amount Weighted average contracted exchange rates 2011 2010 2011 2010 RUB’000 RUB’000 Buy USD sell RUB Less than three months 1,820,822 4,054,647 31.5168 30.6266 Between three months and one year 14,684,319 3,352,459 31.9494 31.8654

Buy USD sell EUR Less than three months 183,096 4,811,623 1.2989 1.3156

Buy EUR sell USD Less than three months 328,371 151,418 1.2955 1.3243

Buy RUB sell USD Less than three months 1,064,040 2,321,479 32.2437 30.5810

Buy RUB sell EUR Less than three months - 22,347 - 40.6504

Buy YTL sell USD Less than three months 1,621,780 1,015,620 1.9017 1.5586 Between three months and one year 1,353,129 1,371,860 1.5742 1.5434 More than one year - 1,436,102 - 1.5667

Buy YTL sell EUR Less than three months 11,258 - 2.5736 - Between three months and one year 282,968 - 2.1700 - More than one year - 329,589 - 2.1701

Buy EUR sell YTL Less than three months 10,835 - 2.5710 - Between three months and one year 322,953 - 2.1700 - More than one year - 312,582 - 2.1700

Buy YTL sell RUB Between three months and one year 15,985 - 16.7066 -

Buy RUB sell YTL Between three months and one year 12,473 - 16.6300 -

The following table provides information on the credit quality of foreign currency contracts, which are assets: 2011 2010 RUB’000 RUB’000 Large OECD banks 334,609 3,021 Medium and small OECD banks 266,800 18,389 Russian subsidiaries of OECD banks 690 148 Russian stock-exchange - 222 Other Russian entities 56,556 17,236 Other foreign entities 531 - 659,186 39,016

27

F-44 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

The table below shows the fair values of financial instruments designated for hedging as at 31 December 2011, recorded as assets or liabilities, together with their notional amounts:

2011 RUB’000 Fair Value

Notional principal Assets Liability Cross-currency swaps 9,054,260 286,999 (336,732) Cross-currency interest rate swaps 7,308,515 274,475 (9,227)

The table below shows the fair values of financial instruments designated for hedging as at 31 December 2010, recorded as assets or liabilities, together with their notional amounts:

2010 RUB’000 Fair Value

Notional principal Assets Liability Cross-currency swaps 2,743,720 - 202,685

Hedging derivative financial instruments as at 31 December 2011 are represented by cross-currency swaps and cross-currency interest rate swaps. In 2010 the Group entered USD/YTL cross-currency swaps to hedge the foreign currency risk arising from currency borrowings denominated in YTL and loans denominated in USD. In 2011 the Group entered USD/RUB cross-currency swaps to hedge the foreign currency risk arising from loan participation notes issued in USD (Note 22). In 2011 the Group entered USD/RUB cross-currency interest rate swaps to hedge currency risk and interest rate risks arising from EBRD/IFC syndicated loans (Note 20).

The effective portion of changes in the fair value of derivative financial instruments designated as hedging instruments recognized directly in equity was RUB 13,753 thousand, net of tax RUB 3,438 thousand as at 31 December 2011 (RUB 15,561 thousand, net of tax RUB 3,890 thousand as at 31 December 2010).

In 2008, the Group reclassified certain trading securities with effect from 1 July 2008 into held-to- maturity investments following amendments to IAS 39 Financial Instrument: Recognition and Measurements. The Group identified securities eligible under the amendments, for which it had changed its intent such that it no longer held these securities for the purpose of selling in the short term. For those trading securities identified for reclassification, the Group had the intention and ability to hold them until maturity. The Group determined that the deterioration of the global and Russian financial markets leading up to 1 July 2008 constituted rare circumstances that permit reclassification out of the trading category.

The disclosures below detail the impact of the reclassifications on the consolidated financial statements:

31 December 2011 31 December 2010 RUB’000 RUB’000

Carrying Fair Carrying Fair

value value value value Securities held for trading reclassified to held-to-maturity investments 130,253 132,132 120,456 128,960

130,253 132,132 120,456 128,960

28

F-45 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

Included in the table below are amounts related to financial instruments held by the Group as at 31 December 2011. Recognized for reclassified assets Would have been recognized if the RUB’000 reclassifications were not made 2010 2011 2010 2011

Interest income 17,910 17,745 13,535 13,072

Net gain (loss) on financial instruments at fair value through profit or loss - - 13,869 (938)

Total effect on profit or loss for the year (before tax) 17,910 17,745 27,404 12,134

At 1 July 2008 the effective interest rate on trading assets reclassified to held-to-maturity investments was 13.68% with expected recoverable cash flows of RUB 124,573 thousand.

15 Loans to customers

2011 2010 RUB’000 RUB’000 Commercial loans Loans to large corporates 20,913,526 27,559,603 Loans to small and medium size companies 5,889,554 3,489,920 Total commercial loans 26,803,080 31,049,523

Loans to individuals Auto loans 28,137,662 13,326,623 Credit cards 9,974,756 5,483,439 Instant loans 8,812,276 4,824,121 Cash loans 6,098,988 5,265,312 Mortgage loans 3,492,407 2,806,077 Other 59,722 29,872 Total loans to individuals 56,575,811 31,735,444

Gross loans to customers 83,378,891 62,784,967 Impairment allowance (2,787,340) (2,304,571) Net loans to customers 80,591,551 60,480,396

Movements in the loan impairment allowance for the years ended 31 December 2011 and 2010 are as follows: 2011 2010 RUB’000 RUB’000 Balance at the beginning of the year 2,304,571 3,768,994 Net charge for the year 1,193,518 640,954 Write-offs (710,749) (2,105,377) Balance at the end of the year 2,787,340 2,304,571

29

F-46 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

Credit quality of commercial loan portfolio The following table provides information on the credit quality of the commercial loan portfolio as at 31 December 2011:

Gross loans Impairment Net loans Impairment to gross loans RUB’000 RUB’000 RUB’000 % Loans to large corporates Loans for which no impairment has been identified 20,879,185 (465,251) 20,413,934 2.23

Impaired loans: - overdue more than 90 days and less than 1 year 34,341 (7,740) 26,601 22.54

Total impaired loans 34,341 (7,740) 26,601 22.54

Total loans to large corporates 20,913,526 (472,991) 20,440,535 2.26 Loans to small and medium size companies Loans for which no impairment has been identified 5,621,581 (123,039) 5,498,542 2.19 Impaired loans:

- overdue less than 90 days 26,703 (6,140) 20,563 22.99

- overdue more than 90 days and less 129,681 (59,834) 69,847 46.14 than 1 year - overdue more than 1 year 111,589 (35,905) 75,684 32.18

Total impaired loans 267,973 (101,879) 166,094 38.02

Total loans to small and medium size companies 5,889,554 (224,918) 5,664,636 3.82

Total commercial loans 26,803,080 (697,909) 26,105,171 2.60

30

F-47 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

As at 31 December 2011, interest accrued on impaired loans (net of impairment allowance) amounted to RUB 380 thousand (2010: RUB 3,032 thousand). The following table provides information on the credit quality of the commercial loan portfolio as at 31 December 2010:

Gross loans Impairment Net loans Impairment to gross loans RUB’000 RUB’000 RUB’000 % Loans to large corporates Loans for which no impairment has been

identified 27,254,838 (539,398) 26,715,440 1.98

Impaired loans: - overdue more than 90 days and less

than 1 year 304,765 (14,069) 290,696 4.62

Total Total impaired loans 304,765 (14,069) 290,696 4.62

Total loans to large corporates 27,559,603 (553,467) 27,006,136 2.01 Loans to small and medium size companies Loans for which no impairment has been

identified 3,144,322 (80,043) 3,064,279 2.55 Impaired loans:

- overdue less than 90 days 123,876 (16,589) 107,287 13.39 - overdue more than 90 days and less

than 1 year 190,332 (79,185) 111,147 41.60

- overdue more than 1 year 31,390 (9,818) 21,572 31.28

Total impaired loans 345,598 (105,592) 240,006 30.55

Total loans to small and medium size companies 3,489,920 (185,635) 3,304,285 5.32

Total commercial loans 31,049,523 (739,102) 30,310,421 2.38

The Group considers loans which are contractually overdue for more than 90 days to be non- performing. The Group has estimated loan impairment for commercial loans except for loans with an initial balance less than RUB 7,500 thousand amongst the small and medium size company (“SME”) portfolio based on an analysis of the future cash flows for impaired loans and based on its past loss experience considering current economic condition for portfolios of loans for which no indicators of impairment has been identified. For loans with an initial balance less than RUB 7,500 thousand granted to SMEs, the Group estimates loan impairment based on its past historical loss experience. Management assumed that losses migration rates are constant and can be estimated based on historic loss migration pattern for the last twelve month period. In addition, Management assumed that the Group can sell these loans to SMEs overdue more than 360 days for a minimum 3% of their gross amounts. Changes in these estimates could affect the loan impairment allowance. For example, to the extent that the net present value of the estimated cash flows differs by plus/minus one percent, the impairment allowance on commercial loans as at 31 December 2011 would be RUB 261,052 thousand (2010: RUB 303,104 thousand) lower/higher.

31

F-48 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

During the year ended 31 December 2011, the Group renegotiated RUB 261,867 thousand of commercial loans that would otherwise be past due (2010: RUB 304,765 thousand). Such restructuring activity is aimed at managing customer relationships and maximizing collection opportunities. Renegotiated loans are included in the category of assets without individual signs of impairment in the tables above, unless the borrower fails to comply with the renegotiated terms. Analysis of collateral

Commercial loan portfolio The following table provides an analysis of the commercial loan portfolio, gross basis, by types of collateral as at 31 December 2011 and 2010: 2011 % of loan 2010 % of loan RUB’000 portfolio RUB’000 portfolio Mortgage 10,099,576 37.68 9,703,666 31.25 Surety and corporate guarantees 6,769,928 25.26 5,122,898 16.50 Cash 1,261,260 4.71 142,737 0.46 Inventories 526,186 1.96 722,499 2.33 Equipment 442,008 1.65 434,829 1.40 Motor vehicles 256,995 0.96 91,983 0.30 Other 133,672 0.49 303,244 0.98 No collateral 7,313,455 27.29 14,527,667 46.78 Total 26,803,080 100.00 31,049,523 100.00 The amounts shown in the table above represent the gross value of the loans, and do not necessarily represent the fair value of the collateral. Commercial loans that are past due or impaired The following tables provide an analysis of the impaired commercial loan portfolio by fair value of collateral as at 31 December 2011: Gross loans Impairment Net loans Fair value of collateral RUB’000 RUB’000 RUB’000 RUB’000 Mortgage 205,689 (63,970) 141,719 205,689 Equipment 33,696 (20,820) 12,876 33,696 Surety 48,516 (16,798) 31,718 48,516 Motor vehicles 14,413 (8,031) 6,382 14,413 Total 302,314 (109,619) 192,695 302,314 The following tables provide an analysis of the impaired commercial loan portfolio by fair value of collateral as at 31 December 2010: Gross loans Impairment Net loans Fair value of collateral RUB’000 RUB’000 RUB’000 RUB’000 Mortgage 496,878 (24,051) 472,827 496,878 Equipment 82,914 (57,629) 25,285 82,914 Surety 36,756 (25,506) 11,250 36,756 Motor vehicles 17,303 (11,201) 6,102 17,303 Cash 15,238 (703) 14,535 15,238 Inventories 1,274 (571) 703 1,274 Total 650,363 (119,661) 530,702 650,363

32

F-49 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

Commercial loans that are neither past due nor impaired As at 31 December 2011 the fair value of cash balances, serving as collateral for commercial loans, is RUB 1,261,260 thousand (2010: RUB 142,737 thousand). For remaining commercial loans which are neither past due nor impaired, the fair value of collateral was estimated at the inception of the loans and was not adjusted for subsequent changes to the reporting date. The recoverability of these loans is primarily dependent on the creditworthiness of the borrowers rather than the value of collateral, and the current value of the collateral does not impact the impairment assessment. Collateral obtained During the year ended 31 December 2011, the Group did not obtain any assets by taking possession of collateral for commercial loans (2010: no such cases). Analysis of movements in the impairment allowance Movements in the loan impairment allowance by classes of commercial loans for the year ended 31 December 2011 are as follows:

Loans to large Loans to small Total corporates and medium size companies

RUB’000 RUB’000 RUB’000 Loan impairment allowance as at 1 January 2011 553,467 185,635 739,102 Loans written off during the year as uncollectible - (61,726) (61,726) Loan impairment losses during the year (80,476) 101,009 20,533

Loan impairment allowance as at 31 December 2011 472,991 224,918 697,909 Movements in the loan impairment allowance by classes of commercial loans for the year ended 31 December 2010 are as follows:

Loans to large Loans to small Total corporates and medium size companies

RUB’000 RUB’000 RUB’000 Loan impairment allowance as at 1 January 2010 518,401 347,983 866,384 Loans written off during the year as uncollectible (7,248) (311,914) (319,162) Loan impairment losses during the year 42,314 149,566 191,880

Loan impairment allowance as at 31 December 2010 553,467 185,635 739,102

33

F-50 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

Credit quality of loans to individuals The following table provides information on the credit quality of loans to individuals‟ portfolios as at 31 December 2011:

Gross loans Impairment Net loans Impairment to gross loans RUB’000 RUB’000 RUB’000 % Auto loans - Not past due 25,426,864 (67,029) 25,359,835 0.26 - Overdue less than 30 days 942,898 (45,621) 897,277 4.84 - Overdue 30-89 days 470,436 (112,365) 358,071 23.89 - Overdue 90-179 days 396,755 (193,575) 203,180 48.79 - Overdue 180-360 days 350,600 (226,342) 124,258 64.56 - Overdue more than 360 days 550,109 (478,533) 71,576 86.99 Total auto loans 28,137,662 (1,123,465) 27,014,197 3.99 Credit cards - Not past due 9,151,753 (35,697) 9,116,056 0.39 - Overdue less than 30 days 294,395 (35,347) 259,048 12.01 - Overdue 30-89 days 181,628 (75,190) 106,438 41.40 - Overdue 90-179 days 149,155 (119,014) 30,141 79.79 - Overdue 180-360 days 197,825 (185,900) 11,925 93.97 Total credit cards 9,974,756 (451,148) 9,523,608 4.52 Instant loans - Not past due 8,361,703 (19,594) 8,342,109 0.23 - Overdue less than 30 days 222,216 (13,922) 208,294 6.27 - Overdue 30-89 days 72,811 (27,306) 45,505 37.50 - Overdue 90-179 days 55,993 (38,941) 17,052 69.55 - Overdue 180-360 days 99,553 (76,272) 23,281 76.61 Total instant loans 8,812,276 (176,035) 8,636,241 2.00 Cash loans - Not past due 5,516,868 (21,516) 5,495,352 0.39 - Overdue less than 30 days 232,844 (13,744) 219,100 5.90 - Overdue 30-89 days 94,928 (31,873) 63,055 33.58 - Overdue 90-179 days 90,544 (71,242) 19,302 78.68 - Overdue 180-360 days 163,804 (138,691) 25,113 84.67 Total cash loans 6,098,988 (277,066) 5,821,922 4.54 Mortgage loans - Not past due 3,237,504 (809) 3,236,695 0.02 - Overdue less than 30 days 76,372 (527) 75,845 0.69 - Overdue 30-89 days 11,788 (1,289) 10,499 10.93 - Overdue 90-179 days 21,997 (2,398) 19,599 10.90 - Overdue 180-360 days 12,782 (4,207) 8,575 32.91 - Overdue more than 360 days 131,964 (49,964) 82,000 37.86 Total mortgage loans 3,492,407 (59,194) 3,433,213 1.69 Other loans to individuals - Not past due 54,368 (227) 54,141 0.42 - Overdue less than 30 days 2,786 (273) 2,513 9.80 - Overdue 30-89 days 1,132 (706) 426 62.37 - Overdue 90-179 days 987 (881) 106 89.26 - Overdue 180-360 days 449 (436) 13 97.10 Total other loans to individuals 59,722 (2,523) 57,199 4.22 Total loans to individuals 56,575,811 (2,089,431) 54,486,380 3.69

34

F-51 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

Credit quality of loans to individuals The following table provides information on the credit quality of loans to individuals portfolios as at 31 December 2010:

Gross loans Impairment Net loans Impairment to gross loans RUB’000 RUB’000 RUB’000 % Auto loans - Not past due 11,712,682 (20,991) 11,691,691 0.18 - Overdue less than 30 days 438,161 (20,402) 417,759 4.66 - Overdue 30-89 days 201,003 (46,849) 154,154 23.31 - Overdue 90-179 days 144,727 (86,169) 58,558 59.54 - Overdue 180-360 days 225,941 (160,339) 65,602 70.96 - Overdue more than 360 days 604,109 (524,537) 79,572 86.83 Total auto loans 13,326,623 (859,287) 12,467,336 6.45 Credit cards - Not past due 5,054,891 (17,027) 5,037,864 0.34 - Overdue less than 30 days 176,774 (15,304) 161,470 8.66 - Overdue 30-89 days 96,612 (33,673) 62,939 34.85 - Overdue 90-179 days 51,428 (37,000) 14,428 71.95 - Overdue 180-360 days 103,734 (84,995) 18,739 81.94 Total credit cards 5,483,439 (187,999) 5,295,440 3.43 Instant loans - Not past due 4,580,956 (7,882) 4,573,074 0.17 - Overdue less than 30 days 119,061 (7,221) 111,840 6.06 - Overdue 30-89 days 37,723 (14,348) 23,375 38.04 - Overdue 90-179 days 27,488 (21,994) 5,494 80.01 - Overdue 180-360 days 58,893 (51,247) 7,646 87.02 Total instant loans 4,824,121 (102,692) 4,721,429 2.13 Cash loans - Not past due 4,624,117 (18,861) 4,605,256 0.41 - Overdue less than 30 days 245,532 (17,793) 227,739 7.25 - Overdue 30-89 days 105,763 (37,051) 68,712 35.03 - Overdue 90-179 days 98,875 (77,680) 21,195 78.56 - Overdue 180-360 days 191,025 (165,667) 25,358 86.73 Total cash loans 5,265,312 (317,052) 4,948,260 6.02 Mortgage loans - Not past due 2,417,996 (5,029) 2,412,967 0.21 - Overdue less than 30 days 80,539 (3,004) 77,535 3.73 - Overdue 30-89 days 28,683 (3,021) 25,662 10.53 - Overdue 90-179 days 49,239 (14,740) 34,499 29.94 - Overdue 180-360 days 157,787 (46,906) 110,881 29.73 - Overdue more than 360 days 71,833 (24,576) 47,257 34.21 Total mortgage loans 2,806,077 (97,276) 2,708,801 3.47 Other loans to individuals - Not past due 27,769 (35) 27,734 0.13 - Overdue less than 30 days 846 (36) 810 4.26 - Overdue 30-89 days 208 (92) 116 44.23 - Overdue 90-179 days 406 (385) 21 94.83 - Overdue 180-360 days 643 (615) 28 95.65 Total other loans to individuals 29,872 (1,163) 28,709 3.89 Total loans to individuals 31,735,444 (1,565,469) 30,169,975 4.93

The Group considers loans which are contractually overdue for more than 90 days to be non- performing.

35

F-52 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

The Group estimates loan impairment based on its past historical loss experience on these types of loans. The significant assumptions as at 31 December 2011 and 2010 used in determining the impairment losses for loans to individuals include:  Management assumed that the Group can sell cash and other loans to individuals overdue more than 360 days for a minimum 3%, instant loans and credit cards loans overdue more than 360 days for a minimum 5% of their gross amounts. During 2011 the Group sold similar types of loans to individuals overdue more than 360 days at higher percentages from their gross amounts than the ones used in the assumptions described above.  Management assumed that the Group can recover a minimum 12% of the gross amounts of auto loans overdue more than 360 days through the sale of cars held as collateral.  Management assumed that the Group can recover a minimum 66% and 58% of the gross amounts of mortgage loans granted in Moscow and other regions respectively overdue more than 360 days through the sale of housing real estate held as collateral.  Management assumed that overdue loans migration rates are constant and can be estimated based on historic loss migration pattern for the past twelve months. Changes in these estimates could affect the loan impairment allowance. For example, to the extent that the net present value of the estimated cash flows differs by plus/minus one percent loan impairment on loans to individuals as at 31 December 2011 would be RUB 544,864 thousand (2010: RUB 301,700 thousand) lower/higher. Analysis of collateral Mortgage loans are secured by the underlying housing real estate. Auto loans are secured by the underlying cars. Cash, instant, other loans to individuals and credit cards are not secured. Mortgage loans For mortgage loans with a gross value of RUB 3,492,407 thousand (2010: RUB 2,806,077 thousand) the fair value of collateral was estimated at inception of the loans and adjusted for subsequent changes to the reporting date, and management believes that the fair value of collateral is at least equal to the carrying amount of individual loans at the reporting date. Auto loans For auto loans with a gross value of RUB 28,137,662 thousand (2010: RUB 13,326,623 thousand) the fair value of collateral was estimated at inception of the loans and was adjusted for subsequent changes to the reporting date, and management believes that the fair value of collateral is at least equal to the carrying amount of individual loans at the reporting date. The Group updates the appraised values of collateral at inception of the loans to the current values considering the approximate changes in prices and aging of cars. The Group obtains specific individual valuation of collateral in case there are indications of impairment. Collateral obtained During the year ended 31 December 2011, the Group obtained certain assets by taking possession of collateral for loans to individuals. As at 31 December 2011, the net carrying amount of such assets was RUB 166,498 thousand (2010: RUB 23,897 thousand), which consisted of real estate of RUB 162,926 thousand (2010: RUB 20,841 thousand) and other assets of RUB 3,572 thousand (2010: RUB 3,056 thousand). The Group‟s policy is to dispose these assets as soon as it is practicable.

36

F-53 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

Analysis of movements in the impairment allowance Movements in the loan impairment allowance by classes of loans to individuals for the year ended 31 December 2011 are as follows:

RUB’000 Auto Credit Instant Cash Mortgage Other loans cards loans loans loans loans Total Loan impairment allowance as at 1 January 2011 859,287 187,999 102,692 317,052 97,276 1,163 1,565,469 Loans written off during the year as uncollectible (261,038) (129,196) (92,570) (161,731) (3,666) (822) (649,023) Loan impairment losses during the year 525,216 392,345 165,913 121,745 (34,416) 2,182 1,172,985 Loan impairment allowance as at 31 December 2011 1,123,465 451,148 176,035 277,066 59,194 2,523 2,089,431

Movements in the loan impairment allowance by classes of loans to individuals for the year ended 31 December 2010 are as follows:

RUB’000 Auto Credit Instant Cash Mortgage Other loans cards loans loans loans loans Total Loan impairment allowance as at 1 January 2010 1,392,405 420,462 284,014 763,971 38,756 3,002 2,902,610 Loans written off during the year as uncollectible (607,689) (365,677) (245,002) (530,198) (34,661) (2,988) (1,786,215) Loan impairment losses during the year 74,571 133,214 63,680 83,279 93,181 1,149 449,074 Loan impairment allowance as at 31 December 2010 859,287 187,999 102,692 317,052 97,276 1,163 1,565,469

As at 31 December 2011 the Group has renegotiated loans to individuals that would otherwise be past due of RUB 229,901 thousand (2010: RUB 630,552 thousand). Such restructuring activity is aimed at managing customer relationships and maximizing collection opportunities. Renegotiated loans are included in the category of not past due loans in the tables above, unless the borrower fails to comply with the renegotiated terms.

37

F-54 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

Industry and geographical analysis of loans issued to large corporates

Loans to large corporates were issued primarily to customers located within the Russian Federation, who operate in the following economic sectors:

2011 2010 RUB’000 RUB’000

Real Estate 4,632,478 5,059,597 Tourism 4,017,445 4,481,231 Petrochemistry & Metallurgy 2,771,826 2,638,018 Energy 1,385,761 2,013,503 Retail 1,312,545 2,613,616 Soft Commodities & Agricultural Products 952,717 97,499 Private Banking 917,301 1,015,074 Textile 734,390 87,905 Leasing 654,985 1,446,237 Technology, IT & Electronic Equipment 621,507 253,335 Automotive 688,765 1,893,152 Construction 550,017 93,929 Food & Beverage Services 545,213 513,502 Transportation 397,644 769,240 Services 199,392 164,564 Media 103,159 252,697 Paper and Pulp & Forestry 41,010 - Machinery - 264,997 Public Sector - 3,428,367 Other 387,371 473,140 20,913,526 27,559,603 Impairment allowance (472,991) (553,467) 20,440,535 27,006,136

Loan maturities The maturity of the Group‟s loan portfolio is presented in Note 35, which shows the remaining period from the reporting date to the contractual maturity of the loans comprising the loan portfolio. Due to the short-term nature of the significant portion of loans issued by the Group, it is likely that many of the Group‟s loans to customers will be prolonged on maturity. Accordingly, the effective maturity of the loan portfolio may be significantly longer than the classification indicated based on contractual terms.

38

F-55 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

16 Available-for-sale financial assets 2011 2010 RUB’000 RUB’000 Held by the Group Debt and other fixed-income instruments Government and municipal bonds Russian Government Federal bonds (OFZ) 98,880 - Other regional authorities and municipal bonds - 5,040,377 Total government and municipal bonds 98,880 5,040,377

Corporate bonds 2,558,447 1,749,274 2,657,327 6,789,651

Pledged under sale and repurchase agreements Debt and other fixed-income instruments Corporate bonds - 1,093,578 - 1,093,578

17 Held-to-maturity investments 2011 2010 RUB’000 RUB’000 Debt and other fixed-income instruments Corporate bonds 236,773 217,456 Financial institutions‟ bonds 184,216 226,872 420,989 444,328

39

F-56 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

18 Property and equipment RUB’000 Equipment Motor Computer Leasehold Total vehicles software improvements

Cost At 1 January 2011 1,021,862 32,636 230,272 280,347 1,565,117 Additions 344,569 6,073 68,776 157,073 576,491 Disposals (25,636) (7,681) - (191) (33,508) At 31 December 2011 1,340,795 31,028 299,048 437,229 2,108,100

Depreciation At 1 January 2011 (534,165) (13,148) (93,724) (246,800) (887,837) Depreciation charge (128,459) (8,383) (41,478) (24,372) (202,692) Disposals 25,341 7,465 - - 32,806 At 31 December 2011 (637,283) (14,066) (135,202) (271,172) (1,057,723)

Carrying value At 31 December 2011 703,512 16,962 163,846 166,057 1,050,377 At 31 December 2010 487,697 19,488 136,548 33,547 677,280

RUB’000 Equipment Motor Computer Leasehold Total vehicles software improvements Cost At 1 January 2010 941,228 27,698 151,043 246,662 1,366,631 Additions 159,863 13,767 83,764 45,350 302,744 Disposals (79,229) (8,829) (4,535) (11,665) (104,258) At 31 December 2010 1,021,862 32,636 230,272 280,347 1,565,117

Depreciation At 1 January 2010 (479,308) (13,213) (54,635) (219,682) (766,838) Depreciation charge (100,114) (7,251) (43,567) (38,783) (189,715) Disposals 45,257 7,316 4,478 11,665 68,716 At 31 December 2010 (534,165) (13,148) (93,724) (246,800) (887,837)

Carrying value At 31 December 2010 487,697 19,488 136,548 33,547 677,280 At 31 December 2009 461,920 14,485 96,408 26,980 599,793

40

F-57 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

19 Other assets 2011 2010 RUB’000 RUB’000 Settlements for card transactions 403,895 2,122 Accounts receivable 87,711 42,165 ATM settlements - 98,645 Other financial assets 491,606 142,932 Amounts blocked as collateral for other operations 255,996 10,425 Assets held for resale 247,839 96,713 Advances given 239,742 215,806 Materials and supplies 51,127 16,521 Amounts blocked as collateral for card settlements 25,408 24,051 Deferred merchant fees paid 23,446 37,182 Other 27,483 55,627 Other non-financial assets 871,041 456,325 Impairment allowance (108,538) (128,063) 1,254,109 471,194

Analysis of movements in the impairment allowance

2011 2010 RUB’000 RUB’000 Balance at the beginning of the year 128,063 87,094 Net charge for the year 21,069 40,969 Write-offs (40,594) - Balance at the end of the year 108,538 128,063

20 Deposits and balances from banks and other financial institutions

2011 2010 RUB’000 RUB’000 Vostro accounts 167,590 54,020 Term deposits 21,276,519 15,035,521 Sale and repurchase agreements - 917,431 21,444,109 16,006,972

Concentration of deposits and balances from banks and other financial institutions As at 31 December 2011 the Group had three banks and other financial institutions whose balances individually exceeded 10% of total deposits and balances from banks and other financial institutions (2010: one bank). The gross values of these balances as at 31 December 2011 and 2010 were RUB 16,525,097 thousand and RUB 12,951,376 thousand, respectively.

In August 2011, the Group obtained A and B tranche syndication loans from EBRD/IFC and 15 other commercial banks amounting to USD 250 million. The interest rate applicable for the USD 100 million A loan was LIBOR (3m) + 3.33% and the interest rate applicable for the USD 150 million B loan was LIBOR (3m) + 2.5%. The maturity dates for A and B loans are August 11, 2014 and August 9, 2012, respectively. 41

F-58 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

Securities pledged As at 31 December 2011 the Group had no securities pledged as collateral under sale and repurchase agreements. As at 31 December 2010 the Group had certain securities pledged as collateral under sale and repurchase agreements. For details refer to Note 16.

21 Current accounts and deposits from customers 2011 2010 RUB’000 RUB’000 Current accounts and demand deposits - Retail 3,124,302 1,726,672 - Corporate 3,966,669 3,485,153 - State and Public Organisations 1,310,895 2,873,146 Term deposits - Retail 9,358,957 5,726,205 - Corporate 13,308,413 20,621,504 - State and Public Organisations 2,852,641 1,097,427 33,921,877 35,530,107

As at 31 December 2011, retail term deposits include RUB 5,586,208 thousand (2010: RUB 3,477,174 thousand) and corporate term deposits include RUB 931,226 thousand (2010: RUB 11,528,330 thousand) representing deposits from banks which, acting in an agent capacity, attract funds from third parties for the purpose of placing these funds with the Group on behalf and at the request of the third parties. Blocked accounts As at 31 December 2011 the Group maintained customer deposit balances of RUB 1,330,371 thousand (2010: RUB 176,846 thousand) which were blocked by the Group as collateral for loans and off-balance sheet credit instruments granted by the Group.

22 Debt securities in issue 2011 2010 RUB’000 RUB’000 Loan participation notes 14,621,220 13,815,383 Russian bonds denominated in RUB 9,151,856 4,003,698 Promissory notes issued 1,734,428 29,968 25,507,504 17,849,049

In October 2009, the Group issued USD 150,000,000 of loan participation notes with a coupon rate of 9.0%. These loan participation notes mature on 25 October 2012. In May 2010, the Group issued USD 300,000,000 of loan participation notes with a coupon rate of 7.75%. These loan participation notes mature on 20 May 2013, but the notes holders are entitled to require early redemption at par on 20 May 2012.

In June 2008, the Group issued RUB 4,000,000 thousand of bonds with a coupon rate of 9.00%. These bonds matured on 28 June 2011. In February 2011, the Group issued RUB 4,000,000 thousand of bonds with a coupon rate of 8.30%. These bonds mature on 18 February 2014. In April 2011, the Group issued RUB 5,000,000 thousand of bonds with a coupon rate of 8.10%. These bonds mature on 28 April 2014.

42

F-59 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

In July 2011, the Group issued USD 40,000,000 of promissory notes with an interest rate of 3.65% to Deutsche Bank. These promissory notes mature on 30 January 2012.

23 Deferred tax liability Temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes give rise to net deferred tax asset and liability as at 31 December 2011 and 2010 respectively. These deductible temporary differences, which have no expiry dates, are listed below at their tax affected accumulated values:

Assets Liabilities Net RUB’000 2011 2010 2011 2010 2011 2010 Financial instruments at fair value through profit or loss - 52,121 (46,405) - (46,405) 52,121 Loans to customers 70,310 - - (203,631) 70,310 (203,631) Available-for-sale financial assets 34,630 - - (29,167) 34,630 (29,167) Property and equipment - - (46,725) (40,254) (46,725) (40,254) Other assets 29,704 84,316 - - 29,704 84,316 Debt securities in issue - - (13,338) (10,469) (13,338) (10,469) Other liabilities 10,004 66,840 - - 10,004 66,840 Total deferred tax assets (liabilities) 144,648 203,277 (106,468) (283,521) 38,180 (80,244)

Movements in temporary differences during the years ended 31 December 2011 and 2010 are presented as follows.

Recognised 2011 Recognised in other Balance Balance in profit comprehensive 31 December RUB’000 1 January 2011 or loss income 2011 Financial instruments at fair value through profit or loss 52,121 (91,197) (7,329) (46,405) Loans to customers (203,631) 273,941 - 70,310 Available-for-sale financial assets (29,167) 32,475 31,322 34,630 Property and equipment (40,254) (6,471) - (46,725) Other assets 84,316 (54,612) - 29,704 Debt securities in issue (10,469) (2,869) - (13,338) Other liabilities 66,840 (56,836) - 10,004 (80,244) 94,431 23,993 38,180

43

F-60 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

Recognised 2010 Recognised in other Balance Balance in profit comprehensive 31 December RUB’000 1 January 2010 or loss income 2010 Financial instruments at fair value through profit or loss 12,957 35,274 3,890 52,121 Loans to customers (87,365) (116,266) - (203,631) Available-for-sale financial assets 32,603 (67,504) 5,734 (29,167) Property and equipment (38,850) (1,404) - (40,254) Other assets 40,320 43,996 - 84,316 Debt securities in issue (3,168) (7,301) - (10,469) Other liabilities 14,892 51,948 - 66,840 (28,611) (61,257) 9,624 (80,244)

Income tax recognised in other comprehensive income The tax effects relating to components of other comprehensive income for the years ended 31 December 2011 and 2010 comprise the following: 2011 2010 Tax Amount income Amount Amount Tax Amount RUB’000 before tax (expense) net-of-tax before tax income net-of-tax Net change in fair value of available- for-sale financial assets (157,070) 31,414 (125,656) - - - Net realized loss (gain) on available- for-sale financial assets transferred to profit or loss on disposal 459 (92) 367 (28,659) 5,734 (22,925) Net unrealized gain (loss) on derivatives hedging variability of cash flow 36,643 (7,329) 29,314 (19,451) 3,890 (15,561) Other comprehensive loss (119,968) 23,993 (95,975) (48,110) 9,624 (38,486)

44

F-61 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

24 Shareholders’ equity

Issued capital The authorized, issued and outstanding share capital comprises 1,470 thousand ordinary shares (2010: 1,470 thousand). All shares have a nominal value of RUB 5,670. The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at annual and general shareholders‟ meetings of the Group. The composition of shareholders and their respective percentage of ownership is as follows:

2011 2010 Credit Europe Bank N.V. 98.14% 96.34% Credit Europe Group N.V. - 1.80% Others 1.86% 1.86%

100.00% 100.00% Dividends Dividends payable are restricted to the maximum retained earnings of the Group, which are determined according to legislation of the Russian Federation. During 2011 the Bank paid dividends in respect of the year ended 31 December 2010, in the amount of RUB 850 per one share totaling RUB 1,249,500 thousand. Additional paid-in capital Also included in shareholders‟ equity, as at 31 December 2011, is additional paid-in capital of RUB 285,924 thousand, comprising contributions received from Credit Europe Bank N.V. during the year ended 31 December 2007.

25 Analysis by segment

The Group has three reportable segments, as described below, which are the Group‟s strategic business units. The strategic business units offer different products and services, and are managed separately because they require different technology and marketing strategies. For each of the strategic business units, the CEO reviews internal management reports on at least a quarterly basis. The following summary describes the operations in each of the reportable segments:

 Commercial banking – comprises corporate and SME banking operations which include deposit taking and commercial lending, settlements and cash operations. Commercial banking services also include trade finance.

 Retail banking – comprises retail banking operations which include deposit taking and lending to individuals, settlements and cash operations.

 Treasury (investment banking and financial markets) – includes corporate finance, operations on foreign exchange, debt and equity capital markets, brokerage, securities trading.

Information regarding the results of each reportable segment is included below. Performance is measured based on segment income before income tax as included in the internal management reports that are reviewed by the CEO. Segment income is used to measure performance as Management believes that such information is the most relevant in evaluating the results of certain segments relative to others who operate within these industries. Inter-segment pricing is determined on an arm‟s length basis.

45

F-62 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

Segment breakdown of assets and liabilities of the Group is set out below:

2011 2010 RUB’000 RUB’000 ASSETS Treasury 3,827,485 9,529,570 Commercial banking 29,410,776 34,663,208 Retail banking 63,201,971 39,457,979 Unallocated assets 1,436,587 1,246,901 Total Assets 97,876,819 84,897,658

LIABILITIES Treasury 2,826,234 3,300,837 Commercial banking 26,590,109 36,631,979 Retail banking 51,596,408 29,410,882 Unallocated liabilities 879,566 996,189 Total Liabilities 81,892,317 70,339,887 Segment information for the main reportable segments of the Group for the year ended 31 December 2011 is set out below:

Treasury Commercial Retail Total RUB’000 banking banking External interest income 431,163 2,317,586 9,178,803 11,927,552 Fee and commission income 105 298,335 2,238,476 2,536,916 Net foreign exchange income 26,978 116,180 45,235 188,393

Net gain on financial instruments at fair value through profit or loss 27,514 - - 27,514 Other income 983 39,394 (4,067) 36,310 Net revenue from other segments 275,196 645,625 (920,821) - Revenue 761,939 3,417,120 10,537,626 14,716,685 Impairment losses - (20,533) (1,169,214) (1,189,747) Interest expense (408,109) (1,576,048) (2,295,750) (4,279,907) Fee and commission expense (5,051) (20,450) (987,911) (1,013,412) General administrative expenses (100,221) (666,621) (3,989,432) (4,756,274) Segment result 248,558 1,133,468 2,095,319 3,477,345 Income tax expense (705,138) Net income after taxes 2,772,207 Other segment items Additions of property and equipment 8,541 59,100 508,850 576,491 Depreciation and amortisation (3,003) (20,779) (178,910) (202,692)

46

F-63 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

Segment information for the main reportable segments of the Group for the year ended 31 December 2010 is set out below: Treasury Commercial Retail Total RUB’000 banking banking External interest income 530,115 2,264,237 6,062,838 8,857,190 Fee and commission income 255 278,050 1,387,237 1,665,542 Net foreign exchange income 14,081 87,479 73,817 175,377 Net gain on financial instruments at fair

value through profit or loss 326,878 - - 326,878 Other income 3,116 5,667 40,527 49,310 Net revenue from other segments 131,517 448,568 (580,085) - Revenue 1,005,962 3,084,001 6,984,334 11,074,297 Impairment losses - (211,165) (510,365) (721,530) Interest expense (237,415) (1,285,268) (1,492,264) (3,014,947) Fee and commission expense (9,563) (13,938) (366,354) (389,855) General administrative expenses (129,583) (535,402) (3,066,127) (3,731,112) Segment result 629,401 1,038,228 1,549,224 3,216,853 Income tax expense (614,804) Net income after taxes 2,602,049 Other segment items Additions of property and equipment 9,583 45,465 247,696 302,744 Depreciation and amortisation (6,005) (28,491) (155,219) (189,715) Information about major customers Substantially all revenues from external customers relate to residents of the Russian Federation and substantially all non-current assets are located in the Russian Federation.

26 Risk management Management of risk is fundamental to the business of banking and is an essential element of the Group‟s operations. The major risks faced by the Group are those related to credit, liquidity, market and operational risks. Risk management function The ultimate goal of risk management is to establish a global risk management framework covering all aspects of the Group‟s daily business activities as well as strategic planning. The Group also adopted the concept of pro-active risk management which is especially important in emerging markets. The Supervisory Board of the Group has overall responsibility for the oversight of the risk management function. The Group's Risk Management is headed by the Chief Risk Officer (the “CRO”). In order to fulfill assigned tasks the CRO is an active member of all committees of the Group. As a result, the CRO is involved in the pro-active controls over the Group and is informed about all important decisions in the Group.

47

F-64 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

The CRO leads central and independent risk management in the Group that has:

 clearly defined roles and participation in the strategic decision making process;  formalized policies and procedures that communicate the risk management process;  consistent methodologies for risk measurement that capture the potential for losses, foregone opportunities and risk diversification effects across different risk categories;  limit structures that set maximum tolerances in relation to capital and the corporate risk taking philosophy;  comprehensive management reports that communicate risk on a periodic basis;  information technology to satisfy risk information needs throughout the organization.

The CRO is appointed by the Supervisory Board and systematically reports on the Supervisory Board meetings and provides shareholders with an independent Risk Management Report on a regular basis. The organizational design of the risk management infrastructure includes the Risk Management Department that provides effective risk articulation in the Group through encouraging a system of risk committees and operating in close cooperation with the Internal Audit, Compliance, Financial Control and Business Lines Departments. At the risk origination level, business line managers are responsible for coordination and execution of risk management processes. They are in charge of the relevant risk policies and procedures, executing daily monitoring of exposures and limit usages, and controlling the key risk indicators of their respective businesses on a scheduled basis. Thus, a risk governance framework of the Group consists of three “Lines of Defense”: the business managers, who have the primary responsibility for day-to-day risk coordination; the Risk Management Department, which sets high level policies, limits and risk controls, providing oversight reporting to the management and the Supervisory Board and performs an independent overview of the effectiveness of the first line of defense activities; and the Internal Audit Department which provides independent assurance on the design and effectiveness of the risk management framework.

Credit risk Credit risk is the risk of a financial loss for the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. Credit risk constitutes the most significant risk type for the Group. The Group is mainly involved in corporate, retail and SME activities. The Group also takes credit exposures through Treasury transactions with banks and financial institutions, which however do not constitute a significant source of risk. The Group has developed policies and procedures for management of credit exposures (both for on- and off-balance) and established a system of Credit Committees, including the Corporate Credit Committee, the SME Credit Committee, the Retail Credit Committee and the Financial Institutions Credit Committee. The Corporate, SME and Retail Credit Committees are responsible for the management of Credit Europe Bank Ltd. credit risks, including:

 determining and approving the terms of credit products;  determining categories of credit risks;  setting requirements for, evaluating and monitoring collateral;  considering issues related to problem loans, etc.

48

F-65 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

(i) Commercial credit risk In this field the Group has advanced risk management methods at both a portfolio and borrower level. At the borrower level, internally developed rating model and methods of financial analysis based on Credit Europe Bank N.V. (Parent Bank) methodology and leveraging the experience of the Group in emerging markets are in use. On a portfolio level, the risks are monitored using a concentration limits approach. The Group has a “Chinese Wall” between the Sales and Credits Departments for all business lines, as the heads of each department are reporting to the President directly. Decisions on credit limits are made by the Credit Committees based on the Credit Packages and independent appraisal and financial analyses. The Group has developed a Collateral Management Function and a professional team of Collateral Managers. Individual transactions are also reviewed by the Group‟s Legal, Compliance & Corporate Governance Department depending on the specific risks. The Credit Committee takes loan decisions by considering their analysis. The Group monitors concentrations of credit risk by industry/sector, by geographic location, by currency, tenor, collateral, internal rating and others. The Credits Department prepares the Portfolio Risk Report on a monthly basis which is reviewed by the Credit Committee and submitted to the members of the Supervisory Board. Utilization of credit limits is done with the participation of the Credits Department, Collateral Management Division, Legal and Independent Credit Back-office departments. The credit process is monitored by the Risk Management Department that reports directly to the Supervisory Board.

(ii) Retail credit risk The Group operates with a wide spectrum of retail credit products such as multipurpose loans, instant loans, mortgage loans, auto loans, express cash loans, holiday loans, overdraft credit cards and installment credit cards.

In 2009, Credit Europe Bank Ltd. switched the operation of its credit scoring system to the Experian Credit Scoring System, which provides data and analytical tools to customers in more than 65 countries, with the aim of helping businesses to manage their credit risks, prevent fraud and automate decision making. Fraud Datamart is a separate module, integrated to the Bank‟s scoring system flow to detect the presence of any suspicious information related to the client.

Experian Interfax and NBCH Credit Bureaus are external sources, which are used for receiving detailed information on a client‟s credit history with other credit organizations, as well as personal data, and are used during scoring system flow.

The Group uses an internally developed automated system for credit application, credit approval and booking processing. A system of decision trees and scoring tools to provide better equilibrium between profitability, growth and risk is embedded into this system.

The Group has policies and limits by retail product type. The policies, limits and rules, algorithms and scoring procedures are approved by the Retail Credit Committee. The Retail Credit Committee controls the entire retail credit process by approving policies and procedures, regularly updating methods, algorithms and instructions on retail credit risk assessment, delegating authorities depending on the type of product and making particular credit decisions.

The Retail Credit Committee‟s aim is to ensure adequate level of risk management practices for the size and complexity of Group's operations for individual retail exposures as well as at a portfolio level. The CRO is the member of the Retail Credit Committee.

49

F-66 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

In addition to advanced reports of the business line, together with the Retail Credits and the Financial Control, the Risk Management also independently monitors portfolios performance, controls quality and quantity characteristics of the total retail credit portfolio, in particular by using techniques of roll-over, cohort and coincident, vintage analyses for probability of default estimations, which are also regularly reported to the Supervisory Board. The maximum exposure to credit risk from financial assets at the reporting date is as follows:

2011 2010 RUB’000 RUB’000 ASSETS Due from the Central Bank of the Russian Federation 2,297,722 725,065 Placements with banks and other financial institutions 6,103,431 12,008,148 Financial instruments at fair value through profit or loss 759,561 117,017 Loans to customers 80,591,551 60,480,396 Available-for-sale debt assets 2,657,327 7,883,229 Held-to-maturity investments 420,989 444,328 Other financial assets 491,606 142,932 Total maximum exposure 93,322,187 81,801,115

Liquidity risk Liquidity risk is defined as the current or prospective threat to an institution‟s earnings and capital as a result of the possibility that it will not be able to meet its short-term payment obligations at any point in time without involving unacceptable costs or losses. Liquidity risk is the risk that the volume and timing of potential cash inflows and outflows are not adequately matched, whereby a shortfall arising at any point in time cannot be made up by selling assets or by obtaining refinancing because:

 the market for the asset in question has insufficient liquidity;  the institution has insufficient liquid assets to sell or to pledge in order to obtain refinancing;  the institution is insufficiently solvent and as a result has insufficient borrowing capacity;  the institution has insufficient funding relationships.

The Group maintains liquidity risk management in accordance with the nature, size and complexity of the activities that the Group carries out. The system used by the Group to monitor, control and report liquidity risk is clearly described in the Group‟s Liquidity Policy.

As part of its on-going effort to improve its existing liquidity risk management procedures, the Group has also implemented a quantifying and monitoring system for both daily and longer periods.

The Group calculates statutory ratios for short, medium, medium-long, and long liquidity and monitors structural liquidity in accordance with the requirement of the CBR. The Group was in compliance with these ratios during the years ended 31 December 2011 and 31 December 2010.

The Group also monitors its liquidity risk through Static Maturity Gap analyses on a monthly basis for three major currencies: EUR, USD and RUB. Furthermore, a liquidity stress test is carried out to monitor the vulnerability of the Group to the withdrawal of all short-term liabilities. The analyses are based on the Parent Bank‟s methodology.

The Asset and Liability Committee (the “ALCO”) is responsible for managing liquidity risk basing on the reports of the Financial Control, the Risk Management and the Treasury Departments. Daily management of cash flow and liquidity is done by the Treasury Department and executed by the Treasury Back-office and controlled by the Financial Control and the Risk Management

50

F-67 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

Departments. The Treasury daily report is used for the purpose of managing and optimizing the cash-flow of the Group on a daily basis.

The Treasury daily report includes the total money market borrowings and placements, the daily and overall income from client operations on foreign exchange market, the daily and overall income from foreign exchange trading activities, the daily activities on the fixed income market and the current market price of the fixed income portfolio. The report also includes the list and details of long-term instruments used for liquidity management and a brief table showing general macro economic data that helps the Management Board to have a better understanding of current economic trends.

The ALCO is held regularly on a monthly basis and weekly in case of necessity and analyzes liquidity reports and stress-testing results and takes necessary actions to match asset and liability positions and commitments in such a way that the Group is able to keep its liquidity risk below the pre-determined limits.

The following tables show the undiscounted cash flows on the Group‟s financial assets, liabilities and credit related commitments on the basis of their earliest possible contractual maturity. The total gross inflows and outflows disclosed in the table is the contractual, undiscounted cash flows on the financial assets, liabilities or commitments.

51

F-68 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

The position of the Group as at 31 December 2011 was as follows:

RUB’000 Demand From From 3 to From 6 to More Overdue/no Total Carrying and less 1 to 3 6 months 12 months than maturity gross amount than months 1 year amount 1 month (outflow) inflow Non-derivative assets Due from the Central Bank of the Russian Federation 2,903,122 - - - - - 2,903,122 2,901,194 Placements with banks and other financial institutions 5,781,238 - 332,419 - - - 6,113,657 6,103,431 Financial instruments at fair value through profit or loss - - 4,367 4,367 186,918 - 195,652 100,375

Loans to customers 7,149,003 15,556,304 14,828,329 13,707,159 48,765,125 808,258 100,814,178 80,591,551 Available-for-sale financial assets 19,499 40,020 110,596 234,435 3,107,634 - 3,512,184 2,657,327 Held-to-maturity investments 333 15,447 19,654 156,275 309,642 - 501,351 420,989

Other financial assets 4,045 419,969 21,462 46,130 - - 491,606 491,606 Derivative assets

- Inflow 2,495,765 363,061 5,652,434 2,666,151 - - 11,177,411 659,186

- Outflow (2,421,622) (343,243) (5,373,600) (2,241,267) - - (10,379,732) - Total assets 15,931,383 16,051,558 15,595,661 14,573,250 52,369,319 808,258 115,329,429 93,925,659 Non-derivative liabilities Deposits and balances from banks and other financial institutions (407,297) (5,296,196) (1,511,037) (9,596,199) (5,907,605) - (22,718,334) (21,444,109) Current accounts and deposits from customers (14,625,437) (7,099,336) (4,007,211) (7,852,101) (917,695) - (34,501,780) (33,921,877)

Debt securities in issue (1,313,763) (465,507) (10,567,044) (9,425,373) (5,607,500) - (27,379,187) (25,507,504) Other financial liabilities (222,239) (263,115) (107,281) - - - (592,635) (592,635)

Derivative liabilities

- Inflow 2,079,962 153,245 1,356,494 295,587 - - 3,885,288 -

- Outflow (2,110,302) (158,465) (1,985,451) (401,343) - - (4,655,561) (426,191) Total liabilities (16,599,076) (13,129,374) (16,821,530) (26,979,429) (12,432,800) - (85,962,209) (81,892,316) Net position (667,693) 2,922,184 (1,225,869) (12,406,179) 39,936,519 808,258 29,367,220 12,033,343 Credit related commitments 5,540,631 2,574,983 3,058,931 2,965,231 4,709,064 - 18,848,840

52

F-69 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

The position of the Group as at 31 December 2010 was as follows:

RUB’000 Demand From From 3 to From 6 to More Total Carrying and less 1 to 3 6 months 12 months than gross amount than months 1 year amount 1 month (outflow) inflow Non-derivative assets Due from the Central Bank of the Russian Federation 1,036,131 - - - - 1,036,131 1,036,131 Placements with banks and other financial institutions 10,788,552 - - 1,235,398 - 12,023,950 12,008,148 Financial instruments at fair value through profit or loss - - 2,952 79,145 - 82,097 78,001 Loans to customers 10,337,841 12,852,062 9,271,853 9,252,008 31,675,878 73,389,642 60,480,396 Available-for-sale financial assets 30,055 6,250,355 13,590 162,977 2,107,389 8,564,366 7,883,229 Held-to-maturity investments - 15,289 5,919 92,271 456,877 570,356 444,328 Other financial assets 103,603 39,329 - - - 142,932 142,932 Derivative assets - Inflow 2,650,412 629,035 - - 312,582 3,592,029 39,016 - Outflow (2,640,736) (627,697) - - (329,589) (3,598,022) - Total assets 22,305,858 19,158,373 9,294,314 10,821,799 34,223,137 95,803,481 82,112,181 Non-derivative liabilities Deposits and balances from banks and other financial institutions (7,855,274) (1,107,939) (2,837,703) (401,079) (4,678,863) (16,880,858) (16,006,972) Current accounts and deposits from customers (18,915,623) (9,382,653) (2,650,628) (4,245,397) (972,137) (36,166,438) (35,530,107) Debt securities in issue - (22,701) (4,790,013) (567,280) (15,188,925) (20,568,919) (17,849,049) Other financial liabilities (197,749) (106,804) (60,944) - (168,547) (534,044) (534,044) Derivative liabilities - Inflow 8,165,118 932,569 609,538 4,114,781 1,765,692 15,587,698 - - Outflow (8,214,525) (946,485) (632,840) (4,254,522) (1,738,027) (15,786,399) (339,471) Total liabilities (27,018,053) (10,634,013) (10,362,590) (5,353,497) (20,980,807) (74,348,960) (70,259,643) Net position (4,712,195) 8,524,360 (1,068,276) 5,468,302 13,242,330 21,454,521 11,852,538 Credit related commitments 10,461,538 622,207 62,002 210,486 56,996 11,413,229

For further information on the Group‟s exposure to liquidity risk at year end refer to Note 35.

53

F-70 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

Market risk Market risk is defined as the risk of losses in on and off-balance sheet positions arising from movements in market prices. Market risks for the Group comprise foreign currency risk and interest rate risk. Market risk arises from open positions, foreign currency and trading portfolio, which are exposed to general and specific market movements and changes in the level of volatility of market prices. Overall authority for market risk is vested in the ALCO. Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group is exposed to the effects of fluctuations in the prevailing levels of market interest rates on its financial positions and cash flows. Interest margins may increase as a result of such changes but may also reduce or create losses in the event that unexpected movements arise. Interest rate risk arises when the actual or forecasted assets of a given maturity period are either greater or less than the actual or forecasted liabilities in that maturity period. The ALCO is responsible for managing interest rate risk, based on the reports of the Financial Control, Risk Management and Treasury Departments. Re-pricing risk An analysis of the sensitivity of the Group‟s net income for the year and equity to changes in the market interest rate based on a simplified scenario of a 100 basis point (bp) symmetrical fall or rise in all yield curves and positions of interest bearing assets and liabilities existing as of 31 December 2011 and 31 December 2010 is as follows:

2011 2010 RUB’000 RUB’000 100 bp parallel increase 48,750 77,538 100 bp parallel decrease (25,390) (47,883)

Interest rate risk attributable to financial instruments at fair value though profit or loss does not constitute a major risk and therefore, case-by-case approval and price monitoring systems are used to follow market risk. Approval is done using both volatility and return study by the Treasury and credibility analysis by the Corporate & SME Credits Department. Fair value interest rate risk An analysis of sensitivity of the Group‟s net income for the year and equity as a result of changes in fair value of financial instruments at fair value though profit or loss due to changes in the interest rates based on positions existing as at 31 December 2011 and 31 December 2010 and a simplified scenario of a 100 basis point (bp) symmetrical fall or rise in all yield curves is as follows:

2011 2010 Profit Profit or loss Equity or loss Equity RUB’000 RUB’000 RUB’000 RUB’000 100 bp parallel rise (4,568) (67,116) (1,306) (219,706) 100 bp parallel fall 4,965 71,317 1,892 232,621

Currency risk Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign currency exchange rates.

54

F-71 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

At the end of each day, the Treasury Department prepares its Daily Treasury Report. The report includes the total borrowings and placements on the money market, the daily and overall income from foreign currency pricing activities, the daily and overall income from foreign currency trading activities, the daily activities on the fixed income market and the current market price of the fixed income portfolio. The report also includes the list and details of long-term instruments used for liquidity management and a brief table showing general macroeconomic data that helps the Managing Board to have a better understanding of the current economic trends.

The foreign currency position is monitored daily. Daily reporting on currency position is done by both Accounting and Financial Control Departments. The CBR sets an absolute level of 10 per cent of its equity as the maximum limit of each currency risk exposure to be taken. The sum of all long (short) open foreign currency positions (absolute values) in different currencies should not exceed 20 per cent of equity of the Group.

An analysis of sensitivity of the Group‟s net income for the year and equity to changes in the foreign currency exchange rates based on positions existing as at 31 December 2011 and 31 December 2010 and a simplified scenario of a 5 per cent change in rates of major currencies to RUB is as follows:

2011 2010 RUB’000 RUB’000 5% appreciation of USD against RUB (10,363) (21,829) 5% depreciation of USD against RUB 10,363 21,829 5% appreciation of EUR against RUB (3,207) (4,146) 5% depreciation of EUR against RUB 3,207 4,146

In addition to the CBR requirements the Group follows international practice and sets its own limits. The absolute level of 10 per cent of its equity is set as the maximum limit of currency risk exposure to be taken separately for each position and for the sum of all positions.

Operational risk Operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. This definition includes IT, HR, fraud, operations and legal risk. To manage such a risk, the Group established the Operational Risk Committee. The Committee determines policies and procedures in the area of operational risks. Meetings are held monthly, where regular reports from Operations, Customer Care Unit and IT departments are discussed together with current issues. Apart from the Operational Risk Committee, the Group has also an IT Steering Committee which is entitled to set strategies and priorities for IT projects and take decisions on IT risks and processes, an HR Committee to manage HR risks, and a Disciplinary Committee to deal with Code of Conduct issues. The Group collects information in relation to the circumstances leading to losses and uses this information for necessary corrections of processes and control tools. The Risk Management plays an important role in managing operational risks. Aside from the activities mentioned above, a special „„Process and Default Risk Analysis‟‟ project is executed by the Risk Management through the preparation of risk assessment reports focused on potentially problematic areas of the Group‟s activities. The CRO is the member of all the above mentioned committees and reports directly to the Board of Directors on important developments and issues.

55

F-72 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

27 Capital management The CBR sets and monitors capital requirements for the Group.

The Group defines as capital those items defined by statutory regulation as capital for credit institutions. Under the current capital requirements set by the CBR, have to maintain a ratio of capital to risk weighted assets (“statutory capital ratio”) above the prescribed minimum level. As at 31 December 2011, this minimum level is 10% (2010: 10%). The Group was in compliance with the statutory capital ratio during the years ended 31 December 2011 and 31 December 2010.

The Group also monitors its 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, commonly known as Basel II.

The following table shows the composition of the Group‟s capital position calculated in accordance with the requirements of the Basel Accord, as at 31 December 2011 and 31 December 2010: 2011 2010 RUB’000 RUB’000

Tier 1 capital Share capital 8,549,789 8,549,789 Share premium 158,631 158,631 Additional paid-in capital 285,924 285,924 Retained earnings 7,102,062 5,579,355 Total tier 1 capital 16,096,406 14,573,699

Tier 2 capital Intangible assets (163,846) (136,548) Hedge reserve 13,753 (15,561) Revaluation reserve for available-for-sale financial assets (125,656) (367) Total tier 2 capital (275,749) (152,476)

Total capital 15,820,657 14,421,223

Risk-weighted assets Banking book 86,424,409 72 981 852 Trading book 406,506 749,249 Total risk weighted assets 86,830,915 73,731,101

Total capital expressed as a percentage of risk-weighted assets (“total capital ratio”) 18.22% 19.56% Total tier 1 capital expressed as a percentage of risk-weighted assets (“tier 1 capital ratio”) 18.54% 19.77% The risk-weighted assets are measured by means of a hierarchy of risk weights classified according to the nature of – and reflecting an estimate of credit, market and other risks associated with – each asset and counterparty, taking into account any eligible collateral or guarantees. A similar treatment is adopted for off-balance sheet exposure, with some adjustments to reflect the more contingent nature of the potential losses.

56

F-73 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

28 Commitments At any time the Group has outstanding commitments to extend loans. These commitments take the form of approved loans and credit card limits and overdraft facilities. The Group provides financial guarantees and letters of credit to guarantee the performance of customers to third parties. These agreements have fixed limits and generally extend for a period of up to three years. The contractual amounts of commitments are set out in the following table by category. The amounts reflected in the table for commitments assume that amounts are fully advanced. The amounts reflected in the table for guarantees and letters of credit represent the maximum accounting loss that would be recognized at the reporting date if counterparties failed completely to perform as contracted.

2011 2010 RUB’000 RUB’000 Contracted amount Loan and credit line commitments 12,511,386 8,738,063 Guarantees and letters of credit 1,454,387 949,846 Credit card commitments 4,799,337 1,692,506 Undrawn overdraft facilities 83,730 32,814 18,848,840 11,413,229 The total outstanding contractual commitments to extend credit indicated above does not necessarily represent future cash requirements, as these commitments may expire or terminate without being funded.

29 Operating leases Leases as lessee Operating lease rentals are payable as follows:

2011 2010 RUB’000 RUB’000 Less than one year 42,340 46,241 42,340 46,241 The Group leases a number of premises and equipment under operating lease. The leases typically run for an initial period of one to five years, with an option to renew the lease after that date. Lease payments are usually changed annually to reflect market rentals. None of the leases includes contingent rentals. During the current year RUB 529,974 thousand was recognized as an expense in the consolidated income statement in respect of operating leases (2010: RUB 482,355 thousand).

57

F-74 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

30 Contingencies Litigation The Group‟s Management is not informed of any significant actual, pending or threatened claims against the Group. Taxation contingencies The taxation system in the Russian Federation is relatively new and is characterized by frequent changes in legislation, official pronouncements and court decisions, which are often unclear, contradictory and subject to varying interpretation by different tax authorities. Taxes are subject to review and investigation by a number of authorities, which have the authority to impose severe fines, penalties and interest charges. A tax year remains open for review by the tax authorities during the three subsequent calendar years; however, under certain circumstances a tax year may remain open longer. Recent events within the Russian Federation suggest that the tax authorities are taking a more assertive position in their interpretation and enforcement of tax legislation. These circumstances may create tax risks in the Russian Federation that are substantially more significant than in other countries. Management believes that it has provided adequately for tax liabilities based on its interpretations of applicable Russian tax legislation, official pronouncements and court decisions. However, the interpretations of the relevant authorities could differ and the effect on the financial position of the Group, if the authorities were successful in enforcing their interpretations, could be significant. Custody activities The Group provides custody services to its customers, whereby it holds securities on behalf of customers and receives fee income for providing these services. These securities are not assets of the Group and are not recognized in the consolidated statement of financial position.

58

F-75 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

31 Related party transactions The Bank‟s ultimate parent company is FIBA Holding A.S., a Turkish joint stock company, which is ultimately controlled by a single individual, Mr. Husnu Ozyegin.

The Bank‟s immediate parent is Credit Europe Bank N.V. which produces publicly available financial statements.

Transactions with the key management personnel Total remuneration included in employee compensation (refer Note 10):

2011 2010 RUB’000 RUB’000 Key management personnel 333,608 255,988

The outstanding balances and average effective interest rates as at 31 December 2011 and 2010 with the members of the key management personnel are as follows:

2011 Average 2010 Average RUB’000 effective RUB’000 effective interest rate interest rate Consolidated Statement of Financial Position ASSETS

Loans to customers 32,918 10.25% 28,931 11.99% LIABILITIES

Deposits from customers 53,396 5.95% 41,639 5.69%

Other amounts included in the consolidated income statement in relation to transactions with the members of the key management personnel are as follows:

2011 2010 RUB’000 RUB’000 Consolidated Income Statement Interest income 4,343 3,366 Interest expense (2,099) (1,916)

59

F-76 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

Transactions with other related parties The outstanding balances and the related average effective interest rates as at 31 December 2011 and related consolidated income statement amounts of transactions for the year ended 31 December 2011 with other related parties are as follows.

Subsidiaries of the Group’s Parent company ultimate parent company Total Average Average effective effective RUB’000 interest rate RUB’000 interest rate RUB’000 Consolidated Statement of Financial Position ASSETS Placements with banks and other financial institutions 2,106,473 0.80% 1,455,989 2.02% 3,562,462 Financial instruments at fair value through profit or loss 266,800 - 56,556 - 323,356 Loans to customers - - 550,589 5.69% 550,589 LIABILITIES Financial instruments at fair value through profit or loss 350,457 - - - 350,457 Deposits and balances from banks and other financial institutions 7,113,858 6.25% 63,433 - 7,177,291 Debt securities issued 4,572,652 8.73% - - 4,572,652 Current accounts and deposits from customers* - - 5,849,978 6.22% 5,849,978 Off balance sheet items Guarantees issued - - - 57 ,707 - 57, 707 Consolidated Income Statement Interest income 246,199 - 68 ,661 - 314, 860 Interest expense (810,847) - (3,554 ) - (814,401) Fee and commission income 2 - 29,613 - 29,615 Net foreign exchange (loss) income (28,825) - 56,556 - 27,731 Other income - - 6,605 - 6,605

* - Included in current accounts and deposits from customers is RUB 5,642,902 thousand, which represents deposits from related party banks which, acting in an agent capacity, attract funds from third parties for the purpose of placing these funds with the Group on behalf and at the request of the third parties.

60

F-77 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

The outstanding balances and the related average effective interest rates as at 31 December 2010 and related consolidated income statement amounts of transactions for the year ended 31 December 2010 with other related parties are as follows. Subsidiaries of the Group’s Parent company ultimate parent company Total Average Average effective effective RUB’000 interest rate RUB’000 interest rate RUB’000 Consolidated Statement of Financial Position ASSETS Placements with banks and other financial institutions 5,381,719 1.19% 199 - 5,381,918 Financial instruments at fair value through profit or loss 18,389 - 17,236 - 35,625 Other assets - - 357 - 357 LIABILITIES Financial instruments at fair value through profit or loss 284,417 - - - 284,417 Deposits and balances from banks and other financial institutions 12,951,334 4.19% 42 - 12,951,376 Debt securities issued 5,456,493 10.54% - - 5,456,493 Current accounts and deposits from customers* 902,870 6.97% 4,636,622 3.62% 5,539,492 Other liabilities - - 187 - 187 Off balance sheet items Guarantees issued - - - 40 ,054 - 40, 054 Consolidated Income Statement Interest income 138,708 - 14,742 - 153,450 Interest expense (602,317) - (9,894) - (612,211) Fee and commission income - - 1,429 - 1,429 Net foreign exchange (loss) income (95,327) - 17,479 - (77,848) Other income - - 8,717 - 8,717

* - Included in current accounts and deposits from customers is RUB 5,118,957 thousand, which represents deposits from related party banks which, acting in an agent capacity, attract funds from third parties for the purpose of placing these funds with the Group on behalf and at the request of the third parties.

61

F-78 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

32 Cash and cash equivalents Cash and cash equivalents at the end of the financial year as shown in the consolidated statement of cash flows are composed of the following items:

2011 2010 RUB’000 RUB’000 Cash 2,082,683 1,165,966 Due from the Central Bank – nostro accounts and term deposits with an original maturity of 90 days or less and which are free from contractual encumbrances 2,297,722 725,065 Nostro accounts with banks and amounts due from other financial institutions with an original maturity of 90 days or less and which are free from contractual encumbrances 6,103,431 10,786,690 10,483,836 12,677,721

33 Fair value of financial instruments The estimated fair values of financial instruments at fair value through profit or loss, available-for- sale and held-to-maturity investments and debt securities in issue are based on quoted market prices at the reporting date without any deduction for transaction costs. The estimated fair values of all other financial assets and liabilities are calculated using discounted cash flow techniques based on estimated future cash flows and discount rates for similar instruments at the reporting date. The estimates of fair value are intended to approximate the amount for which a financial instrument could be exchanged between knowledgeable, willing parties in an arm‟s length transaction. However given the uncertainties and the use of subjective judgment, the fair value should not be interpreted as being realisable in an immediate sale of the assets or settlement of liabilities. 2011 2011 2010 2010 RUB’000 RUB’000 RUB’000 RUB’000 ASSETS Fair value Carrying value Fair value Carrying value Due from the Central Bank of the Russian Federation 2,900,414 2,901,194 1,036,131 1,036,131 Placements with banks and other financial institutions 6,094,628 6,103,431 11,987,820 12,008,148 Financial instruments at fair value through profit or loss 759,561 759,561 117,017 117,017 Available-for-sale financial assets 2,657,327 2,657,327 7,883,229 7,883,229 Loans to customers 80,823,538 80,591,551 61,394,992 60,480,396 Held-to-maturity investments 437,670 420,989 503,203 444,328

LIABILITIES Financial instruments at fair value through profit or loss 426,191 426,191 339,471 339,471 Deposits and balances from banks and other financial institutions 21,532,241 21,444,109 15,894,687 16,006,972 Current accounts and deposits from customers 34,059,480 33,921,877 35,727,931 35,530,107 Debt securities in issue 25,671,801 25,507,504 18,341,313 17,849,049

62

F-79 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

The Group measures fair values for financial instruments recorded on the consolidated statement of financial position using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements:  Level 1: Quoted market price (unadjusted) in an active market for an identical instrument.  Level 2: Valuation techniques based on observable inputs, either directly (i.e., as prices) or indirectly (i.e., derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data. The table below analyses financial instruments measured at fair value at 31 December 2011, by the level in the fair value hierarchy into which the fair value measurement is categorised:

RUB ’000 Level 1 Level 2 Total - Financial instruments at fair value through profit or loss 100,375 - 100,375 - Derivative assets - 659,186 659,186 - Derivative liabilities - (426,191) (426,191) - Available-for-sale financial assets 2,657,327 - 2,657,327 2,757,702 232,995 2,990,697

The table below analyses financial instruments measured at fair value at 31 December 2010, by the level in the fair value hierarchy into which the fair value measurement is categorised:

RUB ’000 Level 1 Level 2 Total - Financial instruments at fair value through profit or loss 78,001 - 78,001 - Derivative assets - 39,016 39,016 - Derivative liabilities - (339,471) (339,471) - Available-for-sale financial assets 7,883,229 - 7,883,229 7,961,230 (300,455) 7,660,775 As at 31 December 2011 and 31 December 2010, the Group does not have any financial instruments for which fair value is based on valuation techniques involving the use of non-market observable inputs.

63

F-80 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

34 Average effective interest rates The table below displays the Group‟s interest bearing assets and liabilities as at 31 December 2011 and 2010 and their corresponding average effective interest rates as at that date.

2011 2010 Carrying amount Average effective Carrying amount Average effective RUB’000 interest rate RUB’000 interest rate Interest bearing assets Due from the Central Bank of the Russian Federation - RUB 1,600,176 4.00% - - Placements with banks and other financial institutions Loans and deposits - RUB 1,707,045 4.10% - - - USD 3,353,643 1.31% 7,793,242 0.58% - EUR 235,033 0.48% 3,843,150 0.97% Financial instruments at fair value through profit or loss - USD 100,375 7.60% 78,001 6.71% Loans to customers - RUB 61,083,679 19.99% 37,116,297 21.62% - USD 17,744,307 8.40% 15,262,304 9.91% - EUR 1,763,565 8.51% 8,101,795 6.01% Available-for-sale financial assets - RUB 1,219,774 8.64% 893,416 8.47% - USD 1,437,553 6.52% 855,858 6.31% - EUR - - 6,133,955 1.00% Held-to-maturity investments - RUB 15,244 9.00% 25,100 10.30% - USD 405,745 12.91% 419,228 13.72% Interest bearing liabilities Deposits and balances from banks and other financial institutions Term deposits - RUB 6,049,620 9.43% 1,614,408 7.68% - USD 13,866,972 4.08% 6,890,925 4.20% - EUR 36,467 3.25% 5,132,720 4.16% - other currencies 1,323,460 10.50% 1,397,468 10.50% Repurchase agreements - EUR - - 917,431 1.25% Current accounts and deposits from customers Term deposits - RUB 16,347,305 8.10% 8,382,711 6.13% - USD 5,578,955 4.38% 9,528,407 4.08% - EUR 1,992,321 4.37% 7,137,115 4.17% - other currencies 1,601,430 11.26% 2,396,903 10.40% Demand deposits - RUB 1,310,895 4.67% 2,873,146 3.33% Debt securities in issue - RUB 9,602,232 8.26% 4,033,666 10.37% - USD 15,905,272 7.92% 13,815,383 8.13%

64

F-81 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

35 Maturity analysis The following table shows assets and liabilities by remaining contractual maturity dates, except as described below, as at 31 December 2011. Management expects that the cash flows from certain financial assets and liabilities will be different from their contractual terms either because management has the discretionary ability to manage the cash flows or because past experience indicates that cash flows will differ from contractual terms. In accordance with Russian legislation, individuals can withdraw their term deposits at any time, forfeiting in most of the cases the accrued interest. As at 31 December 2011 total amount of such customer accounts is RUB 9,358,957 thousand (2010: RUB 5,726,205 thousand). These deposits are classified in accordance with their stated maturity dates. The amount of such deposits, by each time band, is as follows:

2011 2010 RUB’000 RUB’000 Demand and less than 1 month 5,193,102 3,367,327 From 1 to 3 months 1,684,652 930,135 From 3 to 12 months 2,178,516 1,351,124 From 1 to 5 years 302,687 77,619 More than 5 years - - 9,358,957 5,726,205 Trading securities included in financial instruments at fair value through profit or loss are shown in the category “Less than 1 month” and available-for-sale financial instruments are shown in the category “3 months to 1 year” based on the fact that the Group‟s management believes that all of the trading securities and available-for-sale financial instruments could be sold in the normal course of business. As at 31 December 2011 and 2010 the contractual maturities of financial instruments at fair value through profit or loss and available-for-sale financial instruments are as follows:

2011 2010 RUB’000 RUB’000 From 1 to 3 months - 6,237,676 3 to 12 months 191,309 78,001 1 to 5 years 1,994,316 768,806 More than 5 years 572,077 876,747 Total 2,757,702 7,961,230

65

F-82 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

The amounts in the table below represent carrying amounts of the assets and liabilities as at the reporting date and do not include future interest payments. Less than 3 months to More than 1 month 1 to 3 months 1 year 1 to 5 year 5 years Overdue/no Total maturity ASSETS RUB’000 RUB’000 RUB’000 RUB’000 RUB’000 RUB’000 RUB’000

Cash 2,082,683 - - - - - 2,082,683 Due from the Central Bank of the Russian Federation 2,901,194 - - - - - 2,901,194 Placements with banks and other financial institutions 5,776,964 - 326,467 - - - 6,103,431 Financial instruments at fair value through profit or loss 140,031 12,175 607,355 - - - 759,561 Loans to customers 7,111,189 14,094,050 24,395,723 31,709,953 2,472,378 808,258 80,591,551 Available-for-sale financial assets - - 2,657,327 - - - 2,657,327 Held-to-maturity investments - - 130,253 290,736 - - 420,989

F-83 Current income tax prepayments - 17,417 - - - - 17,417 Deferred tax asset - - - - - 38,180 38,180 Property and equipment - - - - - 1,050,377 1,050,377 Other assets 62,337 960,341 206,023 - 25,408 - 1,254,109 Total Assets 18,074,398 15,083,983 28,323,148 32,000,689 2,497,786 1,896,815 97,876,819 LIABILITIES Financial instruments at fair value through profit or loss 19,477 4,009 402,705 - - - 426,191 Deposits and balances from banks and other financial institutions 406,907 5,181,385 10,478,459 4,822,869 554,489 - 21,444,109 Current accounts and deposits from customers 14,773,645 7,061,649 11,231,526 855,057 - - 33,921,877 Debt securities in issue 1,310,676 417,747 18,803,079 4,976,002 - - 25,507,504 Other liabilities 222,239 263,115 107,281 - - - 592,635 Total Liabilities 16,732,944 12,927,905 41,023,050 10,653,928 554,489 - 81,892,316 Net position as at 31 December 2011 1,341,454 2,156,078 (12,699,902) 21,346,761 1,943,297 1,896,815 15,984,503 Cumulative position as at 31 December 2011 1,341,454 3,497,532 (9,202,370) 12,144,391 14,087,688 15,984,503 Net position as at 31 December 2010 199,191 6,929,637 (537,815) 5,070,959 2,298,763 597,036 14,557,771 Cumulative position as at 31 December 2010 199,191 7,128,828 6,591,013 11,661,972 13,960,735 14,557,771 Current accounts and demand deposits from customer are evenly distributed during one year on the basis of management‟s belief that despite of current customer accounts being on demand, diversification of these deposits by number and type of depositors, and the past experience of the Group, indicates that these deposits provide a stable source of funding. 66 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2011

36 Currency analysis The following table shows the foreign currency exposure structure of financial assets and liabilities as at 31 December 2011:

Other RUB USD EUR currencies Total RUB’000 RUB’000 RUB’000 RUB’000 RUB’000 ASSETS Cash 1,953,873 97,674 29,355 1,781 2,082,683 Due from the Central Bank of the Russian Federation 2,901,194 - - - 2,901,194 Placements with banks and other financial institutions 2,252,950 3,556,853 291,688 1,940 6,103,431 Financial instruments at fair value through profit or loss 659,186 100,375 - - 759,561 Loans to customers 61,083,679 17,744,307 1,763,565 - 80,591,551 Available-for-sale financial assets 1,219,774 1,437,553 - - 2,657,327 Held-to-maturity investments 15,244 405,745 - - 420,989 Current income tax prepayments 17,417 - - - 17,417 Deferred tax asset 38,180 - - - 38,180 Property and equipment 1,050,377 - - - 1,050,377 Other assets 1,150,353 101,603 2,153 - 1,254,109 Total Assets 72,342,227 23,444,110 2,086,761 3,721 97,876,819

LIABILITIES Financial instruments at fair value through profit or loss 426,191 - - - 426,191 Deposits and balances from banks and other financial institutions 6,186,534 13,886,019 47,524 1,324,032 21,444,109 Current accounts and deposits from customers 23,787,938 6,214,151 2,303,543 1,616,245 33,921,877 Debt securities in issue 9,602,232 15,905,272 - - 25,507,504 Other liabilities 573,255 18,665 715 - 592,635 Total Liabilities 40,576,150 36,024,107 2,351,782 2,940,277 81,892,316 Net on balance sheet position as at 31 December 2011 31,766,077 (12,579,997) (265,021) (2,936,556) 15,984,503 Net off balance sheet position as at 31 December 2011 (15,444,614) 12,320,918 184,837 2,938,859 -

Net on and off balance sheet positions as at 31 December 2011 16,321,463 (259,079) (80,184) 2,303 15,984,503 Net on and off balance sheet positions as at 31 December 2010 15,151,122 (545,721) (103,658) 56,028 14,557,771

67

F-84

CREDIT EUROPE BANK LTD.

Consolidated Financial Statements For the year ended 31 December 2010

F-85

Contents Independent Auditors’ Report 3 Consolidated Income Statement 4 Consolidated Statement of Financial Position 5 Consolidated Statement of Cash Flows 6 Consolidated Statement of Changes in Equity 7 Consolidated Statement of Comprehensive Income 8 Notes to the consolidated financial statements 9 1 Background 9 2 Basis of preparation 10 3 Significant accounting policies 11 4 Interest income and interest expense 21 5 Fee and commission income 21 6 Fee and commission expense 22 7 Net gain on financial instruments at fair value through profit or loss 22 8 Net foreign exchange income 22 9 Impairment losses 22 10 General administrative expenses 23 11 Income tax expense 23 12 Due from the Central Bank of the Russian Federation 24 13 Placements with banks and other financial institutions 24 14 Financial instruments at fair value through profit or loss 25 15 Loans to customers 28 16 Available-for-sale financial assets 37 17 Held-to-maturity investments 37 18 Property and equipment 38 19 Other assets 39 20 Deposits and balances from banks and other financial institutions 39 21 Current accounts and deposits from customers 40 22 Debt securities in issue 40 23 Other borrowed funds 40 24 Deferred tax liability 41 25 Shareholders’ equity 43 26 Analysis by segment 44 27 Risk management 46 28 Capital management 54 29 Commitments 55 30 Operating leases 55 31 Contingencies 56 32 Related party transactions 57 33 Cash and cash equivalents 60 34 Fair value of financial instruments 60 35 Average effective interest rates 62 36 Maturity analysis 63 37 Currency analysis 66

2

F-86 ZAO KPMG Telephone +7 (495) 937 4477 10 Presnenskaya Naberezhnaya Fax +7 (495) 937 4400/99

Moscow 123317 Internet www.kpmg.ru Russia

Independent Auditors’ Report

To the Board of Directors of Credit Europe Bank Ltd.

We have audited the accompanying consolidated financial statements of Credit Europe Bank Ltd. and its subsidiaries (the “Group”), which comprise the consolidated statement of financial position as at 31 December 2010, the consolidated income statement, and consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Сonsolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as at 31 December 2010, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

ZAO KPMG 24 March 2011

ZAO KPMG, a company incorporated under the Laws of the Russian Federation, a subsidiary of KPMG Europe LLP, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. F-87 CREDIT EUROPE BANK LTD. Consolidated Income Statement for the year ended 31 December 2010

2010 2009 Notes RUB’000 RUB’000 Interest income 4 8,857,190 9,238,645 Interest expense 4 (3,014,947) (3,444,452)

Net interest income 5,842,243 5,794,193

Fee and commission income 5 1,665,542 1,547,253 Fee and commission expense 6 (389,855) (334,128)

Net fee and commission income 1,275,687 1,213,125

Net gain on financial instruments at fair value through profit or loss 7 326,878 935,396 Net foreign exchange income 8 175,377 289,141 Other income 49,310 93,045

551,565 1,317,582 Impairment losses 9 (721,530) (3,083,633) General administrative expenses 10 (3,731,112) (3,327,709)

Operating expenses (4,452,642) (6,411,342)

Income before income tax 3,216,853 1,913,558

Income tax expense 11 (614,804) (385,798)

Net income for the year 2,602,049 1,527,760

The consolidated financial statements were approved by the Board of Directors on 24 March 2011.

______Haluk Aydinoglu Emin Altug Candan President Head of Financial Control Department

The consolidated income statement is to be read in conjunction with the Notes to, and forming part of, the consolidated financial statements. 4

F-88 CREDIT EUROPE BANK LTD. Consolidated Statement of Financial Position as at 31 December 2010

2010 2009 Notes RUB’000 RUB’000 ASSETS

Cash 1,165,966 935,902 Due from the Central Bank of the Russian Federation 12 1,036,131 580,318 Placements with banks and other financial institutions 13 12,008,148 11,608,508 Financial instruments at fair value through profit or loss - Held by the Group 14 117,017 160,597 - Pledged under sale and repurchase agreements 14 - 59,479 Loans to customers 15 60,480,396 47,925,256 Available-for-sale financial assets - Held by the Group 16 6,789,651 1,754,448 - Pledged under sale and repurchase agreements 16 1,093,578 4,021,725 Held-to-maturity investments 17 444,328 970,730 Current income tax prepayments 613,969 384,367 Property and equipment 18 677,280 599,793 Other assets 19 471,194 406,052

Total Assets 84,897,658 69,407,175

LIABILITIES AND SHAREHOLDERS’ EQUITY

Financial instruments at fair value through profit or loss 14 339,471 75,476 Deposits and balances from banks and other financial institutions 20 16,006,972 10,578,969 Current accounts and deposits from customers 21 31,559,534 21,808,245 Debt securities in issue 22 17,849,049 19,299,076 Other borrowed funds 23 3,970,573 4,652,167 Deferred tax liability 24 80,244 28,611 Other liabilities 534,044 350,083

Total Liabilities 70,339,887 56,792,627

Shareholders’ Equity Share capital 25 8,549,789 8,549,789 Share premium 158,631 158,631 Additional paid-in capital 25 285,924 285,924 Revaluation reserve for available-for-sale financial assets (367) 22,558 Hedge reserve (15,561) - Retained earnings 5,579,355 3,597,646

Total Shareholders’ Equity 14,557,771 12,614,548

Total Liabilities and Shareholders’ Equity 84,897,658 69,407,175

Commitments and Contingencies 29-31

The consolidated statement of financial position is to be read in conjunction with the Notes to, and forming part of, the consolidated financial statements. 5

F-89 CREDIT EUROPE BANK LTD. Consolidated Statement of Cash Flows for the year ended 31 December 2010

2010 2009

Notes RUB’000 RUB’000 CASH FLOWS FROM OPERATING ACTIVITIES Income before taxes 3,216,853 1,913,558 Adjustments for: Net interest income (5,842,243) (5,794,193) Net impairment losses 721,530 3,083,633 Unrealized loss on financial instruments at fair value through profit or loss 360,139 1,912,898 Depreciation 189,715 239,091 Net loss on disposal of property and equipment 35,542 30,343 Other non-cash items 392,839 107,153 (Gain) loss from revaluation of financial assets and liabilities in foreign currencies (346,972) 4,731 (1,272,597) 1,497,214 (Increase) decrease in operating assets Minimum reserve deposit (5,762) (262,175) Placements with banks and other financial institutions (1,219,029) - Financial instruments at fair value through profit or loss 35,779 (18,090) Loans to customers (14,365,862) 2,540,491 Other assets (73,324) (14,005) Increase (decrease) in operating liabilities Deposits and balances from banks and other financial institutions 5,557,772 (10,338,819) Current accounts and deposits from customers 9,940,096 13,228,276 Other liabilities (16,398) (62,086) Net cash from operating activities before interest and income tax paid (1,419,325) 6,570,806 Interest received 9,614,354 8,977,560 Interest paid (2,938,569) (3,515,326) Income tax paid (783,149) (837,689) Cash flows from operating activities 4,473,311 11,195,351

CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of available-for-sale financial assets (15,221,584) (11,634,332) Sale and redemption of available-for-sale financial assets 13,132,734 6,005,968 Acquisition of held-to-maturity investments (120,333) (868,977) Sale and redemption of held-to-maturity investments 647,488 311,888 Net purchases of property and equipment (302,744) (109,694) Cash used in investing activities (1,864,439) (6,295,147) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from other borrowed funds 69,851 34,065,744 Repayments of other borrowed funds (702,147) (42,706,802) Proceeds from debt securities in issue 9,169,153 8,336,339 Repayments of debt securities in issue (10,572,830) (1,068,671) Dividends paid (620,340) - Cash used in financing activities (2,656,313) (1,373,390)

Net (decrease) increase in cash and cash equivalents (47,441) 3,526,814 Effect of changes in exchange rates on cash and cash equivalents (94,262) 44,802 Cash and cash equivalents at the beginning of the year 12,819,424 9,247,808 Cash and cash equivalents at the end of the year 33 12,677,721 12,819,424

The consolidated statement of cash flows is to be read in conjunction with the Notes to, and forming part of, the consolidated financial statements. 6

F-90 CREDIT EUROPE BANK LTD. Consolidated Statement of Changes in Equity for the year ended 31 December 2010

Revaluation reserve for available-for- Share Additional sale financial Hedge Retained Share capital premium paid-in capital assets reserve earnings Total RUB’000 RUB’000 RUB’000 RUB’000 RUB’000 RUB’000 RUB’000

Balance as at 1 January 2009 8,549,789 158,631 285,924 - 451,538 2,069,886 11,515,768 Total comprehensive income

Net income for the year - - - - - 1,527,760 1,527,760 Other comprehensive income Net change in fair value of available-for-sale financial assets, net of deferred tax of RUB 5,640 thousand - - - 22,558 - - 22,558 Net gain on cash flow hedges transferred to profit or F-91 loss, net of deferred tax of RUB 112,884 thousand - - - - (451,538) - (451,538) Total other comprehensive income - - - 22,558 (451,538) - (428,980) Total comprehensive income for the year - - - 22,558 (451,538) 1,527,760 1,098,780

Balance as at 31 December 2009 8,549,789 158,631 285,924 22,558 - 3,597,646 12,614,548 Total comprehensive income Net income for the year - - - - - 2,602,049 2,602,049 Other comprehensive income - - - - Net realized gain available-for-sale financial assets transferred to profit or loss on disposal, net of deferred tax of RUB 5,734 thousand - - - (22,925) - - (22,925) Net unrealized loss on derivatives hedging variability of cash flow, net of deferred tax of RUB 3,890 thousand - - - - (15,561) - (15,561) Total other comprehensive income - - - (22,925) (15,561) - (38,486) Total comprehensive income for the year - - - (22,925) (15,561) 2,602,049 2,563,563 Dividends declared and paid - - - - - (620,340) (620,340) Balance as at 31 December 2010 8,549,789 158,631 285,924 (367) (15,561) 5,579,355 14,557,771

The consolidated statement of changes in equity is to be read in conjunction with the Notes to, and forming part of, the consolidated financial statements. 7 CREDIT EUROPE BANK LTD. Consolidated Statement of Comprehensive Income for the year ended 31 December 2010

2010 2009 RUB ’000 RUB ’000

Net income for the year 2,602,049 1,527,760 Other comprehensive income (loss), net of income tax Revaluation reserve for assets available-for-sale: - Net realized gain on available-for-sale financial assets transferred to profit or loss on disposal, net of deferred tax of RUB 5,734 thousand (22,925) - - Net change in fair value of available-for-sale financial assets, net of deferred tax of RUB 5,640 thousand - 22,558 Cash flow hedge: - Net unrealized loss on derivatives hedging variability of cash flow, net of deferred tax of RUB 3,890 thousand (15,561) - - Net gain on cash flow hedges transferred to profit or loss, net of deferred tax of RUB 112,884 thousand - (451,538) Total other comprehensive loss for the year, net of income tax (38,486) (428,980) Total comprehensive income for the year 2,563,563 1,098,780

The consolidated statement of comprehensive income is to be read in conjunction with the Notes to, and forming part of, the consolidated financial statements 8

F-92 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

1 Background Principal activities These consolidated financial statements include the financial statements of Credit Europe Bank Ltd. (the “Bank”) and its subsidiaries (together referred to as the “Group”). Credit Europe Bank Ltd. (former Finansbank Russia Ltd.) was established in the Russian Federation as a closed joint stock company and was granted its general banking license in 1997. The principal activities of the Bank are deposit taking and customer accounts maintenance, lending and issuing guarantees, cash and settlement operations and operations with securities and foreign exchange. The activities of the Bank are regulated by the Central Bank of the Russian Federation (the “CBR”). The Bank has 123 locations (including 75 street branches, 34 trade center branches, 14 representative offices) (2009 – 106 locations (including 62 street branches, 30 trade center branches, and 14 representative offices)), from which it conducts business throughout the Russian Federation. The registered address of the Bank’s head office is Moscow, Paveletskaya Sq. 2/2. The average number of persons employed by the Bank during the year was 3,250 (2009 – 2,869). The principal subsidiaries of the Bank are as follows:

Ownership % Name Country of incorporation 2010 2009 CEB Russia Capital S.A. Luxembourg see below see below Credit Europe Life Ltd. Russia 100% 100%

CEB Russia Capital S.A. (former Finans Russia Capital S.A.) is a special purpose entity established to facilitate the issue of loan participation notes by the Group (refer to Note 22). This entity is not owned by the Group, control arises through the predetermination of the entity’s activities. Credit Europe Life Ltd. is a fully owned subsidiary of the Bank established in 2007 with the purpose of providing a wide range of life insurance services. The entity obtained its insurance license on 28 February 2008. Shareholders The Bank’s ultimate parent company is FIBA Holding A.S., a Turkish joint stock company, which is ultimately controlled by a single individual, Mr. Husnu Ozyegin. Russian business environment The Russian Federation is experiencing political and economic change that has affected, and may continue to affect, the activities of enterprises operating in this environment. Consequently, operations in the Russian Federation involve risks that typically do not exist in other markets. In addition, the contraction in the capital and credit markets and its impact on the Russian economy have further increased the level of economic uncertainty in the environment. These consolidated financial statements reflect management’s assessment of the impact of the Russian business environment on the operations and the financial position of the Group. The future business environment may differ from Management’s assessment.

9

F-93 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

2 Basis of preparation

Statement of compliance The accompanying consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”). Basis of measurement The consolidated financial statements are prepared on the historical cost basis except that financial instruments at fair value through profit or loss and available-for-sale financial assets are stated at fair value. Functional and presentation currency The national currency of the Russian Federation is the Russian Rouble (“RUB”). Management have determined the Group’s functional currency to be the RUB as it reflects the economic substance of the underlying events and circumstances of the Group. The RUB is also the Group’s presentation currency for the purposes of these consolidated financial statements. Financial information presented in RUB has been rounded to the nearest thousand. Use of estimates and judgments The preparation of consolidated financial statements in conformity with IFRS requires Management to make judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expense. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Although these estimates are based on Management’s best knowledge of current events and actions, actual results ultimately may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Information about significant areas of estimation uncertainty and critical judgments made by Management in the application of IFRS that have significant effect on these consolidated financial statements are described in Note 15 “Loans to customers” in respect of the loan impairment allowance.

10

F-94 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

3 Significant accounting policies The following significant accounting policies have been applied in the preparation of the consolidated financial statements. The accounting policies have been consistently applied. Basis of consolidation Subsidiaries Subsidiaries are those enterprises controlled by the Bank. Control exists when the Bank has the power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control effectively commences until the date that control effectively ceases. Special purpose entities The Group has established one special purpose entity (“SPE”) to facilitate the issue of loan participation notes. The Bank does not have any direct or indirect shareholdings in this entity. However, the SPE is established under terms that impose strict limits on the decision-making powers of the SPE’s management over the operations of the SPE. In addition, the benefits related to it operations and net assets are presently attributable to the Bank via a number of agreements. Transactions eliminated on consolidation Intra-group balances and transactions are eliminated in preparing the consolidated financial statements. Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of the Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the reporting period. Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising on the retranslation of available-for-sale equity instruments or qualifying cash flow hedges, which are recognised in other comprehensive income. Hyperinflation accounting The Russian Federation ceased to be hyperinflationary with effect from 1 January 2003 and accordingly no adjustments for hyperinflation have been made for periods subsequent to this date. The hyperinflation-adjusted carrying amounts of the Group’s assets, liabilities and equity items as at 31 December 2002 became their carrying amounts as at 1 January 2003 for the purpose of subsequent accounting. Cash and cash equivalents The Group considers cash and nostro accounts with the CBR and amounts due from other financial institutions with an original contractual maturity of 90 days or less and which are free from contractual encumbrances to be cash and cash equivalents. The minimum reserve deposit with the CBR is not considered to be a cash equivalent due to restrictions on its withdrawability. Cash and cash equivalents are carried at amortized cost in the consolidated statement of financial position.

11

F-95 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

Financial instruments Classification Financial instruments at fair value through profit or loss are financial assets or liabilities that are: - acquired or incurred principally for the purpose of selling or repurchasing in the near term; - part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking; - derivative financial instruments (except for derivative financial instruments that are designated and effective hedging instruments); or, - upon initial recognition, designated by the Group as at fair value through profit or loss. The Group designates financial assets and liabilities at fair value through profit or loss where either: - the assets or liabilities are managed and evaluated on a fair value basis; - the designation eliminates or significantly reduces an accounting mismatch which would otherwise arise; or - the asset or liability contains an embedded derivative that significantly modifies the cash flows that would otherwise be required under the contract. All trading derivatives in a net receivable position (positive fair value), as well as options purchased, are reported as assets. All trading derivatives in a net payable position (negative fair value), as well as options written, are reported as liabilities. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, other than those that: - the Group intends to sell immediately or in the near term; - the Group upon initial recognition designates as at fair value through profit or loss; - the Group upon initial recognition designates as available- for-sale; or - the Group may not recover substantially all of its initial investment, other than because of credit deterioration. Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity that the Group has the positive intention and ability to hold to maturity, other than those that: - the Group upon initial recognition designates as at fair value through profit or loss; - the Group designates as available-for-sale; or - meet the definition of loans and receivables. Available-for-sale financial assets are those financial assets that are designated as available-for-sale or are not classified as loans and receivables, held-to-maturity investments or financial instruments at fair value through profit or loss. Management determines the appropriate classification of financial instruments at the time of the initial recognition. Recognition Financial assets and liabilities are recognized in the consolidated statement of financial position when the Group becomes a party to the contractual provisions of the instrument. All regular way purchases of financial assets are accounted for at the settlement date.

12

F-96 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

Measurement A financial asset or liability is initially measured at its fair value plus, in the case of a financial asset or liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or liability. Subsequent to initial recognition, financial assets, including derivatives that are assets, are measured at their fair values, without any deduction for transaction costs that may be incurred on sale or other disposal, except for: - loans and receivables which are measured at amortized cost using the effective interest method; - held-to-maturity investments which are measured at amortized cost using the effective interest method; and - investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured which are measured at cost. All financial liabilities, other than those designated at fair value through profit or loss and financial liabilities that arise when a transfer of a financial asset carried at fair value does not qualify for derecognition, are measured at amortized cost. The amortized cost of a financial asset or liability is the amount at which the financial asset or liability is measured at initial recognition, minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initial amount recognised and the maturity amount, minus any reduction for impairment. Premiums and discounts, including initial transaction costs, are included in the carrying amount of the related instrument and amortized based on the effective interest rate of the instrument. Where a valuation based on observable market data indicates a fair value gain or loss on initial recognition of an asset or liability, the gain or loss is recognised immediately in the consolidated income statement. Where an initial gain or loss is not based entirely on observable market data, it is deferred and recognised over the life of the asset or liability on an appropriate basis, or when prices become observable, or on disposal of the asset or liability. Fair value measurement principles Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arms’ length transaction on the measurement date. When available, the Group measures the fair value of an instrument using quoted prices in an active market for that instrument. A market is regarded as active if quoted prices are readily and regularly available and represent actual and regularly occurring market transactions on an arm’s length basis. If a quoted market price is not available, the fair value of the instrument is estimated using pricing models or discounted cash flow techniques. Where discounted cash flow techniques are used, estimated future cash flows are based on Management’s best estimates and the discount rate is a market related rate at the reporting date for an instrument with similar terms and conditions. Where pricing models are used, inputs are based on market related measures at the reporting date. The best evidence of the fair value of a financial instrument at initial recognition is the transaction price, i.e., the fair value of the consideration given or received, unless the fair value of that instrument is evidenced by comparison with other observable current market transactions in the same instrument (i.e., without modification or repackaging) or based on a valuation technique whose variables include only data from observable markets. When transaction price provides the best evidence of fair value at initial recognition, the financial instrument is initially measured at the transaction price and any difference between this price and the value initially obtained from a valuation model is subsequently recognised in profit or loss on an appropriate basis over the life of the instrument but not later than when the valuation is supported wholly by observable market data or the transaction is closed out. 13

F-97 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

Assets and long positions are measured at a bid price; liabilities and short positions are measured at an asking price. Where the Group has positions with offsetting risks, mid-market prices are used to measure the offsetting risk positions and a bid or asking price adjustment is applied only to the net open position as appropriate. Fair values reflect the credit risk of the instrument and include adjustments to take account of the credit risk of the Group entity and the counterparty where appropriate. Fair value estimates obtained from models are adjusted for any other factors, such as liquidity risk or model uncertainties, to the extent that the Group believes a third-party market participant would take them into account in pricing a transaction. The fair value of derivatives that are not exchange-traded is estimated at the amount that the Group would receive or pay to terminate the contract at the reporting date taking into account current market conditions and the current creditworthiness of the counterparties. Gains and losses on subsequent measurement A gain or loss arising from a change in the fair value of a financial asset or liability is recognized as follows: - a gain or loss on a financial instrument classified as at fair value through profit or loss is recognized in the consolidated income statement; - a gain or loss on an available-for-sale financial asset is recognized as other comprehensive income in equity (except for impairment losses and foreign exchange gains and losses on debt financial instruments available-for-sale) until the asset is derecognized, at which time the cumulative gain or loss previously recognised in equity is recognized in profit or loss. Interest in relation to an available-for-sale financial asset is recognized in profit or loss using the effective interest method. For financial assets and liabilities carried at amortized cost, a gain or loss is recognized in the consolidated income statement when the financial asset or liability is derecognized or impaired, and through the amortization process. Derecognition A financial asset is derecognised when the contractual rights to the cash flows from the financial asset expire or when the Group transfers substantially all the risks and rewards of ownership of the financial asset or in which the Group neither transfers nor retains substantially all the risks and rewards of ownership and it does not retain control of the financial asset. Any interest in transferred financial assets that qualify for derecognition that is created or retained by the Group is recognised as a separate asset or liability in the consolidated statement of financial position. The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire. The Group also derecognises certain assets when it writes off balances pertaining to the assets deemed to be uncollectible.

14

F-98 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

Hedge accounting The Group uses cross-currency swaps and forwards to hedge the foreign currency risk arising from its deposits and balances from banks and other financial institutions and current accounts and deposits from customers in foreign currency. Derivatives which qualify for hedge accounting are recognized initially at fair value with attributable transaction costs recognized in profit and loss when incurred. Subsequent to initial recognition, derivatives are measured at fair value and changes in the fair value of the derivative hedging instrument designated as a cash flow hedge are recognized directly in equity to the extent that the hedge is effective. To the extent that the hedge is ineffective, changes in fair value are recognized in profit or loss. The cumulative gain or loss recognized in equity is transferred to profit or loss in the same period that the hedged item affects profit or loss. Qualification for hedge accounting A hedging relationship qualifies for hedge accounting if, and only if, all of the following conditions are met. a) At the inception of the hedge there is formal designation and documentation of the hedging relationship and the entity’s risk management objective and strategy for undertaking the hedge. That documentation shall include identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s cash flows attributable to the hedged risk. b) The hedge is expected to be highly effective in achieving offsetting changes in cash flows attributable to the hedged risk, consistently with the originally documented risk management strategy for that particular hedging relationship. c) For cash flow hedges, a forecast transaction that is the subject of the hedge must be highly probable and must present an exposure to variations in cash flows that could ultimately affect profit or loss. d) The effectiveness of the hedge can be reliably measured, i.e. cash flows of the hedged item that are attributable to the hedged risk can be reliably measured. e) The hedge is assessed on an ongoing basis and determined actually to have been highly effective throughout the financial reporting periods for which the hedge was designated. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, then hedge accounting is discontinued prospectively. Repurchase and reverse repurchase agreements Securities sold under sale and repurchase (“repo”) agreements are accounted for as secured financing transactions, with the securities retained in the consolidated statement of financial position and the counterparty liability included in deposits and balances from banks and other financial institutions. The difference between the sale and repurchase prices represents interest expense and is recognized in the consolidated income statement over the term of the repo agreement using the effective interest rate method. Securities purchased under agreements to resell (“reverse repo”) are recorded as amounts receivable under reverse repo transactions within placements with banks and other financial institutions or loans to customers, as appropriate. The difference between the purchase and resale prices represents interest income and is recognized in the consolidated income statement over the term of the repo agreement using the effective interest rate method. If assets purchased under agreement to resell are sold to third parties, the obligation to return securities is recorded as a trading liability and measured at fair value. 15

F-99 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

Offsetting Financial assets and liabilities are offset and the net amount reported in the consolidated statement of financial position when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously. Property and equipment Owned assets Items of property and equipment are stated at cost less accumulated depreciation and impairment losses. Where an item of property and equipment comprises major components having different useful lives, they are accounted for as separate items of property and equipment. Leased assets Leases under which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Equipment acquired by way of a finance lease is stated at an amount equal to the lower of its fair value and the present value of the minimum lease payments at the inception of the lease, less accumulated depreciation and impairment losses. Depreciation Depreciation is charged to the consolidated income statement on a straight-line basis over the estimated useful lives of the individual assets. Depreciation commences on the date of acquisition or, in respect of internally constructed assets, from the time an asset is completed and ready for use. The estimated useful lives are as follows:

Equipment 5 to 20 years Motor vehicles 2 to 3 years Computer software 3 to 10 years Leasehold improvements lesser of lease term or 3 years Impairment Financial assets carried at amortized cost Financial assets carried at amortized cost consist principally of loans and other receivables (“loans and receivables”). The Group reviews its loans and receivables, to assess impairment on a regular basis. A loan or receivable is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the loan or receivable and that event (or events) has had an impact on the estimated future cash flows of the loan that can be reliably estimated. Objective evidence that financial assets are impaired can include default or delinquency by a borrower, breach of loan covenants or conditions, restructuring of a loan or advance by the Group on terms that the Group would not otherwise consider, indications that a borrower or issuer will enter bankruptcy, the disappearance of an active market for a security, deterioration in the value of collateral, or other observable data relating to a group of assets such as adverse changes in the payment status of borrowers in the group, or economic conditions that correlate with defaults in the group.

16

F-100 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

The Group first assesses whether objective evidence of impairment exists individually for loans and receivables that are individually significant, and individually or collectively for loans and receivables that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed loan or receivable, whether significant or not, it includes the loan in a group of loans and receivables with similar credit risk characteristics and collectively assesses them for impairment. Loans and receivables that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment. If there is objective evidence that an impairment loss on a loan or receivable has been incurred, the amount of the loss is measured as the difference between the carrying amount of the loan or receivable and the present value of estimated future cash flows including amounts recoverable from guarantees and collateral discounted at the loan or receivable’s original effective interest rate. Contractual cash flows and historical loss experience adjusted on the basis of relevant observable data that reflect current economic conditions provide the basis for estimating expected cash flows. In some cases the observable data required to estimate the amount of impairment loss on a loan or receivable may be limited or no longer fully relevant to current circumstances. This may be the case when a borrower is in financial difficulties and there is little available historical data relating to similar borrowers. In such cases, the Group uses its experience and judgement to estimate the amount of any impairment loss. All impairment losses in respect of loans and receivables are recognized in the consolidated income statement and are only reversed if a subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised. When a loan is uncollectable, it is written off against the related allowance for loan impairment. The Group writes off a loan balance (and any related allowances for loan losses) when the Group’s Management determines that the loans are uncollectible. Financial assets carried at cost Financial assets carried at cost include unquoted equity instruments included in available-for-sale financial assets that are not carried at fair value because their fair value cannot be reliably measured. If there is objective evidence that such investments are impaired, the impairment loss is calculated as the difference between the carrying amount of the investment and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. All impairment losses in respect of these investments are recognized in the consolidated income statement and cannot be reversed. Available-for-sale financial assets Impairment losses on available-for-sale financial assets are recognised by transferring the cumulative loss that is recognised in other comprehensive income to profit or loss as a reclassification adjustment. The cumulative loss that is reclassified from other comprehensive income to profit or loss is the difference between the acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss previously recognised in profit or loss. Changes in impairment provisions attributable to time value are reflected as a component of interest income. For an investment in an equity security available-for-sale, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment. If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed, with the amount of the reversal recognised in profit or loss. However, any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognised in other comprehensive income. 17

F-101 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

Non financial assets Other non financial assets, other than deferred taxes, are assessed at each reporting date for any indications of impairment. The recoverable amount of non financial assets is the greater of their fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs. An impairment loss is recognised when the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. All impairment losses in respect of non financial assets are recognized in the сonsolidated income statement and reversed only if there has been a change in the estimates used to determine the recoverable amount. Any impairment loss reversed is only reversed to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Provisions A provision is recognised in the consolidated statement of financial position when the Group has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Credit related commitments In the normal course of business, the Group enters into credit related commitments, comprising undrawn loan commitments, letters of credit and guarantees, and provides other forms of credit insurance. Financial guarantees are contracts that require the Group to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument. A financial guarantee liability is recognised initially at fair value net of associated transaction costs, and is measured subsequently at the higher of the amount initially recognised less cumulative amortisation or the amount of provision for losses under the guarantee. Provisions for losses under financial guarantees and other credit related commitments are recognised when losses are considered probable and can be measured reliably. Financial guarantee liabilities and provisions for other credit related commitment are included within other liabilities. Share capital Ordinary shares Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects. Dividends The ability of the Group to declare and pay dividends is subject to the rules and regulations of the Russian legislation. Dividends in relation to ordinary shares are reflected as an appropriation of retained earnings in the period when they are declared.

18

F-102 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

Taxation Income tax comprises current and deferred tax. Income tax is recognised in the consolidated income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit and temporary differences related to investments in subsidiaries where the parent is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary differences, unused tax losses and credits can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Income and expense recognition Interest income and expense are recognised in profit or loss using the effective interest method. Loan origination fees, loan servicing fees and other fees that are considered to be integral to the overall profitability of a loan, together with the related transaction costs, are deferred and amortized to interest income over the estimated life of the financial instrument using the effective interest method. Other fees, commissions and other income and expense items are recognised in profit or loss when the corresponding service is provided. Penalty income is recognised in the consolidated statement of comprehensive income when penalty is charged to a customer, taking into account its collectability. Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease. Segment reporting An operating segment is a component of a Group that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same Group); whose operating results are regularly reviewed by the chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Comparative information Comparative information is reclassified to conform to changes in presentation in the current year. The presentation of penalties on overdue loans was changed in 2010 to better present the substance of the underlying transactions. In the 2010 consolidated financial statements penalties on overdue loans are presented within fee and commission income. For consistency of presentation, prior year figures have been reclassified. As a result RUB 452,092 thousand, previously presented on the face

19

F-103 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010 of the consolidated income statement as penalties on overdue loans, is now presented within fee and commission income (Note 5). The presentation of factoring commissions was changed in 2010 to better present the substance of the underlying transactions. In the 2010 consolidated financial statements factoring commissions are presented within interest income. For consistency of presentation, prior year figures have been reclassified. As a result RUB 21,049 thousand, previously presented within fee and commission income, is now presented as interest income. New standards and interpretations not yet adopted A number of new standards, amendments to standards and interpretations are not yet effective as at 31 December 2010, and are not applied in preparing these consolidated financial statements. Of these pronouncements, potentially the following will have an impact on the financial position and performance. The Group plans to adopt these pronouncements when they become effective. • Revised IAS 24 Related Party Disclosures (2009) introduces an exemption from the basic disclosure requirements in relation to related party disclosures and outstanding balances, including commitments, for government-related entities. Additionally, the standard has been revised to simplify some of the presentation guidance that was previously non-reciprocal. The revised standard is to be applied retrospectively for annual periods beginning on or after 1 January 2011. • IFRS 9 Financial Instruments will be effective for annual periods beginning on or after 1 January 2013. The new standard is to be issued in several phases and is intended to replace International Financial Reporting Standard IAS 39 Financial Instruments: Recognition and Measurement once the project is completed. The first phase of IFRS 9 was issued in November 2009 and relates to the recognition and measurement of financial assets. • Improvements to IFRSs 2010 resulting from the International Accounting Standards Board’s third annual improvements project are to be dealt with on a standard-by-standard basis. The effective date of each amendment is included in the IFRSs affected. The Group has not yet analysed the likely impact of the new standards on its financial position or performance.

20

F-104 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

4 Interest income and interest expense

2010 2009 RUB’000 RUB’000 Interest income Loans to individuals 5,844,626 5,892,268 Loans to corporate and SME customers 2,443,485 2,546,439 Available-for-sale financial assets 397,872 343,986 Held-to-maturity investments 91,161 76,860 Financial instruments at fair value through profit or loss 37,212 28,189 Placements with banks and other financial institutions 22,244 33,037 Derivatives 20,590 317,866 8,857,190 9,238,645 Interest expense Debt securities in issue 1,493,122 1,090,537 Current accounts and deposits from customers 810,406 395,018 Deposits and balances from banks and other financial institutions 469,439 892,004 Other borrowed funds 241,980 1,066,893 3,014,947 3,444,452

5 Fee and commission income

2010 2009 RUB’000 RUB’000 Penalties on overdue loans 377,584 452,092 Credit card fees 374,679 221,506 Cash deposit fees 123,761 114,209 Cash withdrawal fees 118,155 119,686 Annual credit card maintenance fees 114,031 102,803 Commissions from insurance companies 113,517 127,578 Early redemption fees 100,625 81,812 Intermediary services fees 95,511 34,001 Foreign exchange fees 50,990 39,677 Commission for fund transfers 46,507 58,250 Transaction processing fees 46,420 35,002 Documentary services fees 34,347 79,092 Annual account maintenance fees 32,876 43,273 Fees from retailers 7,381 12,719 Commission for restructurization 3,066 2,838 Other 26,092 22,715 1,665,542 1,547,253

21

F-105 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

6 Fee and commission expense

2010 2009 RUB’000 RUB’000 Credit card fees 206,501 113,384 Cash transportation fees 85,685 94,191 Fees to retailers 21,281 41,772 Payment and transaction services 21,559 19,068 Insurance related expenses 30,401 34,118 Brokerage expense 10,382 10,853 Fees for documentary services 4,936 7,470 Portfolio and other management fee expense 4,209 5,210 Fees for banknote transactions 3,263 7,274 Other 1,638 788 389,855 334,128

7 Net gain on financial instruments at fair value through profit or loss

2010 2009 RUB’000 RUB’000 Capital market gain arising from debt instruments 326,878 935,396

8 Net foreign exchange income

2010 2009 RUB’000 RUB’000 Gain/(loss) from revaluation of financial assets and liabilities 346,972 (4,731) (Loss)/gain on spot transactions and derivatives (171,595) 293,872 175,377 289,141

9 Impairment losses

2010 2009 RUB’000 RUB’000 Loans to customers 640,954 3,030,039 Other assets 40,969 53,594 Losses on financial guarantee contracts 39,607 - 721,530 3,083,633

22

F-106 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

10 General administrative expenses

2010 2009 RUB’000 RUB’000 Employee compensation 1,906,115 1,572,675 Occupancy 482,355 490,728 Social security premiums and federal budget payments 263,060 248,610 Taxes other than on income 207,474 186,584 Depreciation 189,715 239,091 Repairs and maintenance 156,376 128,878 Communications and information services 135,020 156,476 Office supplies 116,962 92,305 Security 54,733 56,768 Professional services 54,360 48,999 Travel expenses 44,551 26,547 Advertising and marketing 43,494 14,643 Insurance premiums 12,431 21,793 Other 64,466 43,612 3,731,112 3,327,709

11 Income tax expense

2010 2009 RUB’000 RUB’000 Current tax expense Current year 577,283 407,155 Overprovided in prior years (23,736) (10,472) 553,547 396,683 Deferred tax expense Origination and reversal of temporary differences 61,257 (10,885) Total income tax expense in the consolidated income statement 614,804 385,798

The applicable tax rate for current tax is 20% (2009: 20%). The Group applied 20% deferred tax rate (2009: 20%)

Reconciliation of effective tax rate:

2010 2009 RUB’000 (%) RUB’000 (%)

Income before tax 3,216,853 1,913,558

Income tax at the applicable tax rate 643,372 20.00% 382,712 20.00% Income taxed at lower rates (8,800) (0.27%) (21,061) (1.10%) Non-deductible costs 3,968 0.12% 34,619 1.81% Overprovided in prior years (23,736) (0.74%) (10,472) (0.55%) 614,804 19.11% 385,798 20.16%

23

F-107 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

12 Due from the Central Bank of the Russian Federation

2010 2009 RUB’000 RUB’000

Minimum reserve deposit 311,066 305,304

Nostro accounts 725,065 275,014

1,036,131 580,318

The minimum reserve deposit is a mandatory non-interest bearing deposit calculated in accordance with regulations issued by the CBR and whose withdrawability is restricted. The nostro accounts represent balances with the CBR related to settlement activity and were available for withdrawal at year end.

13 Placements with banks and other financial institutions

2010 2009 RUB’000 RUB’000 Not impaired or past due Nostro accounts Largest 30 Russian banks 213,161 147,286 Small and medium sized Russian banks and financial institutions 106,605 505,108 OECD banks 51,990 79,709 Russian subsidiaries of OECD banks - 3,017 Total nostro accounts 371,756 735,120

Loans and deposits OECD banks 11,636,392 10,873,342 Largest 30 Russian banks - 46 Total loans and deposits 11,636,392 10,873,388

12,008,148 11,608,508

Concentration of placements with banks and other financial institutions As at 31 December 2010, the Group had three counterparties, whose balances exceeded 10% of total placements with banks and other financial institutions (2009: one). The gross value of these balances as at 31 December 2010 and 2009 was RUB 9,718,630 thousand and RUB 10,803,895 thousand, respectively.

24

F-108 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

14 Financial instruments at fair value through profit or loss

2010 2009 RUB’000 RUB’000 Assets Held by the Group Debt and other fixed-income instruments – trading Russian corporate bonds - 58,274 Foreign corporate bonds 78,001 - Derivative financial instruments Foreign currency contracts 31,590 102,323 Options 7,426 - 117,017 160,597

Pledged under sale and repurchase agreements Debt and other fixed-income instruments – trading Moscow Government bonds - 59,479

Liabilities Derivative financial instruments Foreign currency contracts 335,710 39,093 Interest rate swaps - 36,383 Options 3,761 -

339,471 75,476

Foreign currency contracts

The table below summarises, by major currencies, the contractual amounts of the Group's forward exchange contracts outstanding at 31 December 2010 with details of the contracted exchange rates and remaining periods to maturity. Foreign currency amounts presented below are translated at rates ruling at the reporting date. The resultant unrealised gains and losses on these unmatured contracts, have been recognised in the consolidated income statement and in financial instruments at fair value through profit or loss, as appropriate.

25

F-109 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

Notional amount Weighted average contracted exchange rates 2010 2009 2010 2009 RUB’000 RUB’000 Buy USD sell RUB Less than three months 4,054,647 417,672 30.6266 29.8653 Between three months and one year 3,352,459 - 31.8654 -

Buy USD sell EUR Less than three months 4,811,623 1,461,209 1.3156 1.4401

Buy EUR sell USD Less than three months 151,418 157,283 1.3243 1.4389

Buy RUB sell USD Less than three months 2,321,479 4,811,189 30.5810 30.5810 Between three months and one year - 136,880 - 34.2466

Buy RUB sell EUR

Less than three months 22,347 - 40.6504 -

Buy YTL sell USD Less than three months 1,015,620 - 1.5586 - Between three months and one year 1,371,860 - 1.5434 - More than one year 1,436,102 - 1.5667 -

Buy YTL sell EUR More than one year 329,589 - 2.1701 -

Buy EUR sell YTL More than one year 312,582 - 2.17 -

The table below shows the fair values of financial instruments designated for hedging during 2010, recorded as assets or liabilities, together with their notional amounts:

2010 RUB’000 Fair Value

Notional principal Assets Liability Cross-currency swaps 2,743,720 - 202,685

The Group used as at 31 December 2010 cross-currency swaps to hedge the foreign currency risk arising from a foreign currency deposit and borrowing by entering into USD/TRY swap transaction. The hedged cash flows occurred and affected the consolidated income statement in 2010. There were no such cross-currency swaps as at 31 December 2009.

The effective portion of changes in the fair value of derivative financial instruments designated as hedging instruments recognized directly in equity as at 31 December 2010 was RUB 15,561 thousand, net of tax RUB 3,890 thousand.

26

F-110 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

In 2008, the Group reclassified certain trading securities with effect from 1 July 2008 into held-to- maturity investments following amendments to IAS 39 Financial instrument: Recognition and Measurements. The Group identified securities eligible under the amendments, for which it had changed its intent such that it no longer held these securities for the purpose of selling in the short term. For those trading securities identified for reclassification, the Group had the intention and ability to hold them until maturity. The Group determined that the deterioration of the global and Russian financial markets leading up to 1 July 2008 constituted rare circumstances that permit reclassification out of the trading category.

The disclosures below detail the impact of the reclassifications on the consolidated financial statements:

31 December 2010 31 December 2009 RUB’000 RUB’000

Carrying Fair Carrying Fair

value value value value Securities held for trading reclassified to held-to-maturity investments 120,456 128,960 117,072 115,091

120,456 128,960 117,072 115,091

Included in the table above are amounts related to financial instruments held by the Group as at 31 December 2010.

Recognized for reclassified assets Would have been recognized if the RUB’000 reclassifications were not made 2008 2009 2010 2008 2009 2010

Interest income 7,422 17,282 17,910 5,803 14,211 13,535

Net (loss) gain on financial instruments at fair value through profit or loss (15,182) - - (100,779) 89,580 13,869

Total effect on profit or loss for the year (before tax) (7,760) 17,282 17,910 (94,976) 103,791 27,404

27

F-111 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

15 Loans to customers

2010 2009 RUB’000 RUB’000 Commercial loans Loans to large corporates 27,559,603 22,070,695 Loans to small and medium size companies 3,489,920 3,150,969 Total commercial loans 31,049,523 25,221,664

Loans to individuals Auto loans 13,326,623 11,499,656 Credit cards 5,483,439 3,732,158 Cash loans 5,265,312 5,874,507 Instant loans 4,824,121 3,148,681 Mortgage loans 2,806,077 2,192,873 Other 29,872 24,711 Total loans to individuals 31,735,444 26,472,586

Gross loans to customers 62,784,967 51,694,250 Impairment allowance (2,304,571) (3,768,994) Net loans to customers 60,480,396 47,925,256

Movements in the loan impairment allowance for the years ended 31 December 2010 and 2009 are as follows: 2010 2009 RUB’000 RUB’000 Balance at the beginning of the year 3,768,994 3,098,731 Net charge for the year 640,954 3,030,039 Write-offs (2,105,377) (2,359,776) Balance at the end of the year 2,304,571 3,768,994

28

F-112 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

Credit quality of commercial loan portfolio The following table provides information on the credit quality of the commercial loan portfolio as at 31 December 2010:

Gross loans Impairment Net loans Impairment to gross loans RUB’000 RUB’000 RUB’000 % Loans to large corporates Loans for which no impairment has been identified 27,254,838 (539,398) 26,715,440 1.98

Impaired loans:

- not past due 304,765 (14,069) 290,696 4.62

Total impaired loans 304,765 (14,069) 290,696 4.62

Total loans to large corporates 27,559,603 (553,467) 27,006,136 2.01 Loans to small and medium size companies Loans for which no impairment has been identified 3,144,322 (80,043) 3,064,279 2.55 Impaired loans:

- overdue less than 90 days 123,876 (16,589) 107,287 13.39 - overdue more than 90 days and less

than 1 year 190,332 (79,185) 111,147 41.60 - overdue more than 1 year 31,390 (9,818) 21,572 31.28

Total impaired loans 345,598 (105,592) 240,006 30.55

Total loans to small and medium size companies 3,489,920 (185,635) 3,304,285 5.32

Total commercial loans 31,049,523 (739,102) 30,310,421 2.38

As at 31 December 2010, interest accrued on impaired loans amounted to RUB 78,125 (2009: RUB 41,267 thousand). The impaired loan balance of RUB 304,765 thousand included in the loans to large corporate portfolio comprises a single loan to a borrower which had been classified as impaired following delays in payments on the loan, however this loan was fully repaid after the year end following the disposal of collateral.

29

F-113 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

The following table provides information on the credit quality of the commercial loan portfolio as at 31 December 2009:

Gross loans Impairment Net loans Impairment to gross loans RUB’000 RUB’000 RUB’000 % Loans to large corporates Loans for which no impairment has been identified 21,626,558 (479,206) 21,147,352 2.22 Impaired loans: - overdue more than 90 days and less than 1 year 444,137 (39,195) 404,942 8.82 Total impaired loans 444,137 (39,195) 404,942 8.82 Total loans to large corporates 22,070,695 (518,401) 21,552,294 2.35 Loans to small and medium size companies Loans for which no impairment has been identified 2,632,041 (22,855) 2,609,186 0.87 Impaired loans: - overdue less than 90 days 178,486 (32,426) 146,060 18.17 - overdue more than 90 days and less than 1 year 328,455 (281,916) 46,539 85.83 - overdue more than 1 year 11,987 (10,786) 1,201 89.98 Total impaired loans 518,928 (325,128) 193,800 62.65 Total loans to small and medium size companies 3,150,969 (347,983) 2,802,986 11.04 Total commercial loans 25,221,664 (866,384) 24,355,280 3.44

The Group considers loans which are contractually overdue for more than 90 days to be non- performing. The Group has estimated loan impairment for commercial loans except for loans with an initial balance less than RUB 7,500 thousand amongst the small and medium size company (“SME”) portfolio based on an analysis of the future cash flows for impaired loans and based on its past loss experience considering current economic condition for portfolios of loans for which no indicators of impairment has been identified. For loans with an initial balance less than RUB 7,500 thousand granted to SMEs, the Group estimates loan impairment based on its past historical loss experience. Management assumed that losses migration rates are constant and can be estimated based on historic loss migration pattern for the last twelve month period. In addition, Management assumed that the Group can sell these loans to SMEs overdue more than 360 days for a minimum 3% of their gross amounts. Changes in these estimates could affect the loan impairment allowance. For example, to the extent that the net present value of the estimated cash flows differs by plus/minus one percent, the impairment allowance on commercial loans as at 31 December 2010 would be RUB 303,104 thousand (2009: RUB 243,553 thousand) lower/higher. During the year ended 31 December 2010, the Group renegotiated commercial loans that would otherwise be past due of RUB 304,765 thousand (2009: RUB 831,035 thousand). Such restructuring activity is aimed at managing customer relationships and maximizing collection opportunities.

30

F-114 Analysis of collateral The following table provides an analysis of the commercial loan portfolio, net of impairment, by types of collateral as at 31 December 2010 and 2009: 2010 % of loan 2009 % of loan RUB’000 portfolio RUB’000 portfolio Mortgage 9,511,263 31.38 6,704,874 27.53 Surety and corporate guarantees 6,356,226 20.97 6,879,834 28.25 Inventories 704,358 2.32 623,327 2.56 Equipment 373,506 1.23 349,322 1.43 Bank guarantees 127,499 0.42 88,706 0.36 Motor vehicles 80,575 0.27 117,432 0.48 Other 288,550 0.95 21,113 0.09 No collateral 12,868,444 42.46 9,570,672 39.30 Total 30,310,421 100.00 24,355,280 100.00

The amounts shown in the table above represent the carrying value of the loans, and do not necessarily represent the fair value of the collateral. The following tables provide an analysis of the impaired commercial loan portfolio by fair value of collateral as at 31 December 2010: Gross loans Impairment Net loans Fair value of collateral RUB’000 RUB’000 RUB’000 RUB’000 Mortgage 496,878 (24,051) 472,827 496,878 Equipment 82,914 (57,629) 25,285 82,914 Surety 36,756 (25,506) 11,250 36,756 Motor vehicles 17,303 (11,201) 6,102 17,303 Cash 15,238 (703) 14,535 15,238 Inventories 1,274 (571) 703 1,274 Total 650,363 (119,661) 530,702 650,363

The following tables provide the analysis of the impaired commercial loan portfolio by fair value of collateral as at 31 December 2009: Gross loans Impairment Net loans Fair value of collateral RUB’000 RUB’000 RUB’000 RUB’000 Surety 687,050 (280,509) 406,541 687,050 Inventories 159,841 (48,431) 111,410 159,841 Equipment 66,011 (2,829) 63,182 66,011 Mortgage 26,825 (18,958) 7,867 26,825 Motor vehicles 23,338 (13,596) 9,742 23,338 Total 963,065 (364,323) 598,742 963,065

During the year ended 31 December 2010 the Group did not obtain any assets by taking control of collateral accepted as security for loans to legal entities (2009: 45,853 thousand).

F-115 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

Analysis of movements in the impairment allowance Movements in the loan impairment allowance by classes of commercial loans for the year ended 31 December 2010 are as follows:

Loans to large Loans to small Total corporates and medium size companies

RUB’000 RUB’000 RUB’000 Loan impairment allowance as at 1 January 518,401 347,983 866,384 Loans written off during the year as uncollectible (7,248) (311,914) (319,162) Loan impairment losses during the year 42,314 149,566 191,880

Loan impairment allowance as at 31 December 2010 553,467 185,635 739,102

Movements in the loan impairment allowance by classes of commercial loans for the year ended 31 December 2009 are as follows:

Loans to large Loans to small Total corporates and medium size companies RUB’000 RUB’000 RUB’000 Loan impairment allowance as at 1 January 405,397 163,270 568,667 Loans written off during the year as uncollectible (174,658) (164,166) (338,824) Loan impairment losses during the year 287,662 348,879 636,541 Loan impairment allowance as at 31 December 2009 518,401 347,983 866,384

32

F-116 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

Credit quality of loans to individuals The following table provides information on the credit quality of loans to individuals portfolios as at 31 December 2010:

Gross loans Impairment Net loans Impairment to gross loans RUB’000 RUB’000 RUB’000 % Auto loans - Not past due 11,712,682 (20,991) 11,691,691 0.18 - Overdue less than 30 days 438,161 (20,402) 417,759 4.66 - Overdue 30-89 days 201,003 (46,849) 154,154 23.31 - Overdue 90-179 days 144,727 (86,169) 58,558 59.54 - Overdue 180-360 days 225,941 (160,339) 65,602 70.96 - Overdue more than 360 days 604,109 (524,537) 79,572 86.83 Total auto loans 13,326,623 (859,287) 12,467,336 6.45 Credit cards - Not past due 5,054,891 (17,027) 5,037,864 0.34 - Overdue less than 30 days 176,774 (15,304) 161,470 8.66 - Overdue 30-89 days 96,612 (33,673) 62,939 34.85 - Overdue 90-179 days 51,428 (37,000) 14,428 71.95 - Overdue 180-360 days 103,734 (84,995) 18,739 81.94 Total credit cards 5,483,439 (187,999) 5,295,440 3.43 Cash loans - Not past due 4,624,117 (18,861) 4,605,256 0.41 - Overdue less than 30 days 245,532 (17,793) 227,739 7.25 - Overdue 30-89 days 105,763 (37,051) 68,712 35.03 - Overdue 90-179 days 98,875 (77,680) 21,195 78.56 - Overdue 180-360 days 191,025 (165,667) 25,358 86.73 Total cash loans 5,265,312 (317,052) 4,948,260 6.02 Instant loans - Not past due 4,580,956 (7,882) 4,573,074 0.17 - Overdue less than 30 days 119,061 (7,221) 111,840 6.06 - Overdue 30-89 days 37,723 (14,348) 23,375 38.04 - Overdue 90-179 days 27,488 (21,994) 5,494 80.01 - Overdue 180-360 days 58,893 (51,247) 7,646 87.02 Total instant loans 4,824,121 (102,692) 4,721,429 2.13 Mortgage loans - Not past due 2,417,996 (5,029) 2,412,967 0.21 - Overdue less than 30 days 80,539 (3,004) 77,535 3.73 - Overdue 30-89 days 28,683 (3,021) 25,662 10.53 - Overdue 90-179 days 49,239 (14,740) 34,499 29.94 - Overdue 180-360 days 157,787 (46,906) 110,881 29.73 - Overdue more than 360 days 71,833 (24,576) 47,257 34.21 Total mortgage loans 2,806,077 (97,276) 2,708,801 3.47 Other loans to individuals - Not past due 27,769 (35) 27,734 0.13 - Overdue less than 30 days 846 (36) 810 4.26 - Overdue 30-89 days 208 (92) 116 44.23 - Overdue 90-179 days 406 (385) 21 94.83 - Overdue 180-360 days 643 (615) 28 95.65 Total other loans to individuals 29,872 (1,163) 28,709 3.89 Total loans to individuals 31,735,444 (1,565,469) 30,169,975 4.93

33

F-117 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

Credit quality of loans to individuals The following table provides information on the credit quality of loans to individuals portfolios as at 31 December 2009:

Gross loans Impairment Net loans Impairment to gross loans RUB’000 RUB’000 RUB’000 % Auto loans - Not past due 9,150,598 (60,779) 9,089,819 0.66 - Overdue less than 30 days 528,555 (45,864) 482,691 8.68 - Overdue 30-89 days 294,448 (88,011) 206,437 29.89 - Overdue 90-179 days 211,388 (129,671) 81,717 61.34 - Overdue 180-360 days 427,409 (309,361) 118,048 72.38 - Overdue more than 360 days 887,258 (758,719) 128,539 85.51 Total auto loans 11,499,656 (1,392,405) 10,107,251 12.11 Credit cards - Not past due 3,147,997 (26,433) 3,121,564 0.84 - Overdue less than 30 days 145,222 (25,247) 119,975 17.39 - Overdue 30-89 days 77,588 (44,025) 33,563 56.74 - Overdue 90-179 days 89,736 (74,656) 15,080 83.20 - Overdue 180-360 days 271,615 (250,101) 21,514 92.08 Total credit cards 3,732,158 (420,462) 3,311,696 11.27 Cash loans - Not past due 4,711,473 (87,225) 4,624,248 1.85 - Overdue less than 30 days 353,889 (44,261) 309,628 12.51 - Overdue 30-89 days 178,993 (78,494) 100,499 43.85 - Overdue 90-179 days 149,840 (123,266) 26,574 82.27 - Overdue 180-360 days 471,159 (421,846) 49,313 89.53 - Overdue more than 360 days 9,153 (8,879) 274 97.01 Total cash loans 5,874,507 (763,971) 5,110,536 13.00 Instant loans - Not past due 2,786,324 (79,897) 2,706,427 2.87 - Overdue less than 30 days 108,634 (13,429) 95,205 12.36 - Overdue 30-89 days 48,334 (22,223) 26,111 45.98 - Overdue 90-179 days 42,675 (33,401) 9,274 78.27 - Overdue 180-360 days 160,903 (133,307) 27,596 82.85 - Overdue more than 360 days 1,811 (1,757) 54 97.02 Total instant loans 3,148,681 (284,014) 2,864,667 9.02 Mortgage loans - Not past due 1,998,844 (3,086) 1,995,758 0.15 - Overdue less than 30 days 63,268 (1,826) 61,442 2.89 - Overdue 30-89 days 15,447 (1,518) 13,929 9.83 - Overdue 90-179 days 29,144 (4,220) 24,924 14.48 - Overdue 180-360 days 52,385 (16,203) 36,182 30.93 - Overdue more than 360 days 33,785 (11,903) 21,882 35.23 Total mortgage loans 2,192,873 (38,756) 2,154,117 1.77 Other loans to individuals - Not past due 20,817 (541) 20,276 2.60 - Overdue less than 30 days 969 (118) 851 12.18 - Overdue 30-89 days 355 (152) 203 42.82 - Overdue 90-179 days 426 (315) 111 73.94 - Overdue 180-360 days 2,031 (1,767) 264 87.00 - Overdue more than 360 days 113 (109) 4 96.46 Total other loans to individuals 24,711 (3,002) 21,709 12.15 Total loans to individuals 26,472,586 (2,902,610) 23,569,976 10.96

34

F-118 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

The Group estimates loan impairment based on its past historical loss experience on these types of loans. The significant assumptions as at 31 December 2010 used in determining the impairment losses for loans to individuals include:  Management assumed that the Group can sell cash and other loans to individuals overdue more than 360 days for a minimum 3%, instant loans and credit cards loans overdue more than 360 days for a minimum 5% of their gross amounts. During 2010 the Group sold similar types of loans to individuals overdue more than 360 days at higher percentages from their gross amounts than the ones used in the assumptions described above.  Management assumed that the Group can recover a minimum 12% of the gross amounts of auto loans overdue more than 360 days through the sale of cars held as collateral.  Management assumed that the Group can recover a minimum 63% and 58% of the gross amounts of mortgage loans granted in Moscow and other regions respectively overdue more than 360 days through the sale of housing real estate held as collateral.  Management assumed that overdue loans migration rates are constant and can be estimated based on historic loss migration pattern for the past twelve months. Changes in these estimates could affect the loan impairment allowance. For example, to the extent that the net present value of the estimated cash flows differs by plus/minus one percent loan impairment on retail loans as at 31 December 2010 would be RUB 301,700 thousand (2009: RUB 235,700 thousand) lower/higher. Analysis of collateral Mortgage loans are secured by underlying housing real estate. Auto loans are secured by underlying cars. Cash, instant, other loans to individuals and credit card loans are not secured. Analysis of movements in the impairment allowance Movements in the loan impairment allowance by classes of retail loans for the year ended 31 December 2010 are as follows:

RUB’000 Auto Cash Credit Instant Mortgage Other loans loans cards loans loans loans Total Loan impairment allowance as at 1 January 1,392,405 763,971 420,462 284,014 38,756 3,002 2,902,610 Loans written off during the year as uncollectible (607,689) (530,198) (365,677) (245,002) (34,661) (2,988) (1,786,215) Loan impairment losses during the year 74,571 83,279 133,214 63,680 93,181 1,149 449,074 Loan impairment allowance as at 31 December 2010 859,287 317,052 187,999 102,692 97,276 1,163 1,565,469

35

F-119 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

Movements in the loan impairment allowance by classes of retail loans for the year ended 31 December 2009 are as follows:

RUB’000 Auto Cash Credit Instant Mortgage Other loans loans cards loans loans loans Total Loan impairment allowance as at 1 January 940,108 729,701 373,629 457,520 27,980 1,126 2,530,064 Loans written off during the year as uncollectible (463,602) (724,779) (379,434) (449,711) - (3,426) (2,020,952) Loan impairment losses during the year 915,899 759,049 426,267 276,205 10,776 5,302 2,393,498 Loan impairment allowance as at 31 December 2009 1,392,405 763,971 420,462 284,014 38,756 3,002 2,902,610

As at 31 December 2010 the Group has renegotiated loans to individuals that would otherwise be past due of RUB 630,552 thousand (2009: RUB 484,432 thousand). Such restructuring activity is aimed at managing customer relationships and maximizing collection opportunities.

Industry and geographical analysis of loans issued to large corporates

Loans to large corporates were issued primarily to customers located within the Russian Federation, who operate in the following economic sectors:

2010 2009 RUB’000 RUB’000 Commercial customers Real Estate 5,059,597 5,229,826 Tourism 4,481,231 2,668,185 Public Sector 3,428,367 - Petrochemistry & Metallurgy 2,735,517 2,693,239 Retail 2,534,368 939,212 Energy 2,013,503 1,817,423 Automotive 1,593,156 1,359,822 Leasing 1,446,237 566,542 Private Banking 1,015,074 952,708 Transportation 799,239 3,360 Machinery 778,328 - Food & Beverage Services 513,502 2,286,684 Textile 331,717 428,577 Media 252,697 404,050 Construction 93,929 1,063,139 Electronics & Home Appliances 39,999 1,140,219 Other 443,142 517,709 27,559,603 22,070,695 Impairment allowance (553,467) (518,401) 27,006,136 21,552,294

36

F-120 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

Loan maturities The maturity of the Group’s loan portfolio is presented in Note 36, which shows the remaining period from the reporting date to the contractual maturity of the loans comprising the loan portfolio. Due to the short-term nature of the significant portion of loans issued by the Group, it is likely that many of the Group’s loans to customers will be prolonged on maturity. Accordingly, the effective maturity of the loan portfolio may be significantly longer than the classification indicated based on contractual terms.

16 Available-for-sale financial assets 2010 2009 RUB’000 RUB’000 Held by the Group Debt and other fixed-income instruments Government and municipal bonds Russian Government Federal bonds (OFZ) - 6,771 Other regional authorities and municipal bonds 5,040,377 156,095 Total government and municipal bonds 5,040,377 162,866

Corporate bonds 1,749,274 1,591,582 6,789,651 1,754,448

Pledged under sale and repurchase agreements Debt and other fixed-income instruments Government and municipal bonds Russian Government Federal bonds (OFZ) - 2,871,427 Moscow Government bonds - 868,393 Total government and municipal bonds - 3,739,820

Corporate bonds 1,093,578 281,905 1,093,578 4,021,725

17 Held-to-maturity investments

2010 2009 RUB’000 RUB’000 Debt and other fixed-income instruments Financial institutions’ bonds 226,872 604,313 Corporate bonds 217,456 366,417 444,328 970,730

37

F-121 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

18 Property and equipment

RUB’000 Motor Computer Leasehold Equipment vehicles software improvements Total Cost At 1 January 2010 941,228 27,698 151,043 246,662 1,366,631 Additions 159,863 13,767 83,764 45,350 302,744 Disposals (79,229) (8,829) (4,535) (11,665) (104,258) At 31 December 2010 1,021,862 32,636 230,272 280,347 1,565,117

Depreciation At 1 January 2010 (479,308) (13,213) (54,635) (219,682) (766,838) Depreciation charge (100,114) (7,251) (43,567) (38,783) (189,715) Disposals 45,257 7,316 4,478 11,665 68,716 At 31 December 2010 (534,165) (13,148) (93,724) (246,800) (887,837)

Carrying value At 31 December 2010 487,697 19,488 136,548 33,547 677,280 At 31 December 2009 461,920 14,485 96,408 26,980 599,793

RUB’000 Motor Computer Leasehold Equipment vehicles software improvements Total Cost At 1 January 2009 936,966 23,355 107,916 238,766 1,307,003 Additions 43,489 14,842 43,127 8,236 109,694 Disposals (39,227) (10,499) - (340) (50,066) At 31 December 2009 941,228 27,698 151,043 246,662 1,366,631

Depreciation At 1 January 2009 (338,508) (18,592) (30,903) (159,467) (547,470) Depreciation charge (150,986) (4,152) (23,732) (60,221) (239,091) Disposals 10,186 9,531 - 6 19,723 At 31 December 2009 (479,308) (13,213) (54,635) (219,682) (766,838)

Carrying value At 31 December 2009 461,920 14,485 96,408 26,980 599,793 At 31 December 2008 598,458 4,763 77,013 79,299 759,533

38

F-122 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

19 Other assets

2010 2009 RUB’000 RUB’000 Advances given 215,806 152,116 ATM settlements 98,645 102,778 Assets held for sale 96,713 94,144 Accounts receivable 42,165 30,721 Deferred merchant fees 37,182 22,000 Amounts blocked as collateral for plastic cards settlements 24,051 23,867 Materials and supplies 16,521 20,497 Amounts blocked as collateral for other operations 10,425 68 Settlements for plastic cards transactions 2,122 7,241 Other 55,627 39,714 599,257 493,146 Impairment allowance (128,063) (87,094) 471,194 406,052

Analysis of movements in the impairment allowance

2010 2009 RUB’000 RUB’000 Balance at the beginning of the year 87,094 33,500 Net charge for the year 40,969 53,594 Balance at the end of the year 128,063 87,094

20 Deposits and balances from banks and other financial institutions

2010 2009 RUB’000 RUB’000 Vostro accounts 54,020 2,552 Term deposits 15,035,521 6,615,068 Repurchase agreements 917,431 3,961,349 16,006,972 10,578,969

Concentration of deposits and balances from banks and other financial institutions As at 31 December 2010 and 2009, the Group had one bank whose balances exceeded 10% of total deposits and balances from banks and other financial institutions. The gross value of these balances as at 31 December 2010 and 2009 was RUB 12,951,376 thousand and RUB 4,166,217 thousand, respectively. Securities pledged As at 31 December 2010 and 2009 the Group had certain securities pledged as collateral under repurchase agreements (refer to Notes 14 and 16).

39

F-123 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

21 Current accounts and deposits from customers

2010 2009 RUB’000 RUB’000 Current accounts and demand deposits - Retail 1,726,672 1,297,160 - Corporate 3,485,153 2,365,470 Term deposits - Retail 5,726,205 5,686,989 - Corporate 20,621,504 12,458,626 31,559,534 21,808,245

As at 31 December 2010, retail term deposits include RUB 3,477,174 thousand (2009: RUB 4,376,492 thousand) and corporate term deposits include RUB 11,528,330 thousand (2009: RUB 6,445,651 thousand) representing deposits from banks which, acting in an agent capacity, attract funds from third parties for the purpose of placing these funds with the Group on behalf and at the request of the third parties. Blocked accounts As at 31 December 2010 the Group maintained customer deposit balances of RUB 176,846 thousand (2009: RUB 35,897 thousand) which were blocked by the Group as collateral for loans and off-balance sheet credit instruments granted by the Group.

22 Debt securities in issue

2010 2009 RUB’000 RUB’000 Loan participation notes 13,815,383 11,663,328 Russian bonds denominated in RUB 4,033,666 7,635,748 17,849,049 19,299,076

In April 2007, the Group issued USD 250,000,000 of loan participation notes with a coupon rate of 7.5%. These loan participation notes matured on 13 April 2010. In October 2009, the Group issued USD 150,000,000 of loan participation notes with a coupon rate of 9.0%. These loan participation notes mature on 25 October 2012. In May 2010, the Group issued USD 300,000,000 of loan participation notes with a coupon rate of 7.75%. These loan participation notes mature on 20 May 2013. In February 2007, the Group issued RUB 3,500,000 thousand of bonds with a coupon rate of 7.94%. These bonds matured on 3 February 2010. In June 2008, the Group issued RUB 4,000,000 thousand of bonds with a coupon rate of 9.00%. These bonds mature on 28 June 2011.

23 Other borrowed funds 2010 2009 RUB’000 RUB’000 Deposits from the Ministry of Finance, the CBR and a state owned corporation 3,970,573 4,652,167 3,970,573 4,652,167

As at 31 December 2010, other borrowed funds include borrowings from the Ministry of Finance of Russia of RUB 1, 097,427 thousand with interest rates ranging from 4.5% to 4.6% and maturing on 19 January 2011 and deposits on demand from the State Corporation “Fund for assistance of housing and communal services reform” of RUB 2,873,146 thousand with interest rates ranging from 2.7% to 5.13% maturing on 6 January 2011. 40

F-124 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

As at 31 December 2009, other borrowed funds include borrowings from the CBR of RUB 4,150,172 thousand with interest rates ranging from 11.3% to 12.4% and maturing from 20 January 2010 to 27 October 2010 and deposits from the State Corporation “Fund for assistance of housing and communal services reform” of RUB 501,995 thousand with interest rates 10.4% and maturing on 16 June 2010.

24 Deferred tax liability Temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes give rise to net deferred tax liabilities as at 31 December 2010 and 2009. These deductible temporary differences, which have no expiry dates, are listed below at their tax affected accumulated values:

Assets Liabilities Net RUB’000 2010 2009 2010 2009 2010 2009 Financial instruments at fair value through profit or loss 52,121 12,957 - - 52,121 12,957 Loans to customers - - (203,631) (87,365) (203,631) (87,365) Available-for-sale financial assets - 32,603 (29,167) - (29,167) 32,603 Property and equipment - - (40,254) (38,850) (40,254) (38,850) Other assets 84,316 40,320 - - 84,316 40,320 Debt securities in issue - - (10,469) (3,168) (10,469) (3,168) Other liabilities 66,840 14,892 - - 66,840 14,892 Total deferred tax assets (liabilities) 203,277 100,772 (283,521) (129,383) (80,244) (28,611)

The tax rate applicable for deferred taxes was 20% (2009: 20%). Movements in temporary differences during the years ended 31 December 2010 and 2009 are presented as follows. Recognised 2010 Recognised in other Balance Balance in profit comprehensive 31 December RUB’000 1 January 2010 or loss income 2010 Financial instruments at fair value through profit or loss 12,957 35,274 3,890 52,121 Loans to customers (87,365) (116,266) - (203,631) Available-for-sale financial assets 32,603 (67,504) 5,734 (29,167) Property and equipment (38,850) (1,404) - (40,254) Other assets 40,320 43,996 - 84,316 Debt securities in issue (3,168) (7,301) - (10,469) Other liabilities 14,892 51,948 - 66,840 (28,611) (61,257) 9,624 (80,244)

41

F-125 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

Recognised 2009 Recognised in other Balance Balance in profit comprehensive 31 December RUB’000 1 January 2009 or loss income 2009 Financial instruments at fair value through profit or loss (154,651) 54,724 112,884 12,957 Loans to customers 55,920 (143,285) - (87,365) Available-for-sale financial assets - 38,243 (5,640) 32,603 Property and equipment (49,452) 10,602 - (38,850) Other assets (22,065) 62,385 - 40,320 Debt securities in issue (2,256) (912) - (3,168) Other liabilities 25,764 (10,872) - 14,892 (146,740) 10,885 107,244 (28,611)

Income tax recognised in other comprehensive income The tax effects relating to components of other comprehensive income for the years ended 31 December 2010 and 2009 comprise the following: 2010 2009 Tax Amount Tax Amount Amount income/ Amount RUB’000 before tax income net-of-tax before tax (expense) net-of-tax Net change in fair value of available- for-sale financial assets - - - 28,198 (5,640) 22,558 Net change in fair value of available- for-sale financial assets transferred to profit or loss (28,659) 5,734 (22,925) - - - Net unrealized gain on derivatives hedging variability of cash flow (19,451) 3,890 (15,561) - - - Net gain on cash flow hedges transferred to profit or loss - - - (564,422) 112,884 (451,538) Other comprehensive income (48,110) 9,624 (38,486) (536,224) 107,244 (428,980)

42

F-126 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

25 Shareholders’ equity

Issued capital The authorized, issued and outstanding share capital comprises 1,470 thousand ordinary shares (2009: 1,470 thousand). All shares have a nominal value of RUB 5,670. The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at annual and general Shareholders’ meetings of the Group. The composition of shareholders and their respective percentage of ownership is as follows:

2010 2009 Credit Europe Bank N.V. 96.34% 96.28% Credit Europe Group N.V. 1.80% 1.68% Others 1.86% 2.04%

100.00% 100.00% Dividends Dividends payable are restricted to the maximum retained earnings of the Group, which are determined according to legislation of the Russian Federation. During 2010, the Bank paid dividends in respect of the year ended 31 December 2009, in the amount of RUB 422 per one share totaling RUB 620,340 thousand. Additional paid-in capital Also included in shareholders’ equity, as at 31 December 2010, is additional paid-in capital of RUB 285,924 thousand, comprising contributions received from Credit Europe Bank N.V. during the year ended 31 December 2007.

43

F-127 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

26 Analysis by segment

The Group has three reportable segments, as described below, which are the Group’s strategic business units. The strategic business units offer different products and services, and are managed separately because they require different technology and marketing strategies. For each of the strategic business units, the CEO reviews internal management reports on at least a quarterly basis. The following summary describes the operations in each of the reportable segments:

 Commercial banking – comprises corporate and SME banking operations which include deposit taking and commercial lending, settlements and cash operations. Commercial banking services also include trade finance.

 Retail banking – comprises retail banking operations which include deposit taking and commercial lending, settlements and cash operations.

 Treasury (investment banking and financial markets) – includes corporate finance, operations on foreign exchange, debt and equity capital markets, brokerage, securities trading.

Information regarding the results of each reportable segment is included below. Performance is measured based on segment income before income tax as included in the internal management reports that are reviewed by the CEO. Segment income is used to measure performance as Management believes that such information is the most relevant in evaluating the results of certain segments relative to others who operate within these industries. Inter-segment pricing is determined on an arm’s length basis.

Segment breakdown of assets and liabilities of the Group is set out below:

2010 2009 RUB’000 RUB’000 ASSETS Treasury 9,529,570 7,711,509 Commercial banking 34,663,208 28,391,749 Retail banking 39,457,979 32,427,500 Unallocated assets 1,246,901 876,417 Total Assets 84,897,658 69,407,175

LIABILITIES Treasury 3,300,837 2,426,195 Commercial banking 36,631,979 28,599,493 Retail banking 29,410,882 25,312,769 Unallocated liabilities 996,189 454,170 Total Liabilities 70,339,887 56,792,627

44

F-128 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

Segment information for the main reportable segments of the Group for the year ended 31 December 2010 is set out below:

RUB’000 Treasury Commercial Retail banking banking Total External interest income 530,115 2,264,237 6,062,838 8,857,190 Fee and commission income 255 278,050 1,387,237 1,665,542 Net foreign exchange income 14,081 87,479 73,817 175,377

Net gain on financial instruments at fair value through profit or loss 326,878 - - 326,878 Other income 3,116 5,667 40,527 49,310 Net revenue from other segments 131,517 448,568 (580,085) - Revenue 1,005,962 3,084,001 6,984,334 11,074,297 Impairment losses - (211,165) (510,365) (721,530) Interest expense (237,415) (1,285,268) (1,492,264) (3,014,947) Fee and commission expense (9,563) (13,938) (366,354) (389,855) General administrative expenses (129,583) (535,402) (3,066,127) (3,731,112) Segment result 629,401 1,038,228 1,549,224 3,216,853 Income tax expense (614,804) Net income after taxes 2,602,049 Other segment items Additions of property and equipment 9,583 45,465 247,696 302,744 Depreciation and amortisation (6,005) (28,491) (155,219) (189,715)

Segment information for the main reportable segments of the Group for the year ended 31 December 2009 is set out below: RUB’000 Treasury Commercial Retail banking banking Total External interest income 473,691 2,426,160 6,338,794 9,238,645 Fee and commission income 13,691 231,810 1,301,752 1,547,253 Net foreign exchange income 40,234 176,994 71,913 289,141 Net gain on financial instruments at fair value through profit or loss 935,396 - - 935,396 Other income 6,952 13,818 72,275 93,045 Net revenue from other segments (149,995) 410,701 (260,706) - Revenue 1,319,969 3,259,483 7,524,028 12,103,480 Impairment losses - (531,326) (2,552,307) (3,083,633) Interest expense (214,262) (1,432,281) (1,797,909) (3,444,452) Fee and commission expense (10,507) (18,691) (304,930) (334,128) General administrative expenses (79,271) (493,077) (2,755,361) (3,327,709) Segment result 1,015,929 784,108 113,521 1,913,558 Income tax expense (385,798) Net income after taxes 1,527,760 Other segment items Additions of property and equipment 1,988 23,697 84,009 109,694 Depreciation and amortisation (4,332) (51,650) (183,109) (239,091)

45

F-129 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

Information about major customers Substantially all revenues from external customers relate to residents of the Russian Federation and substantially all non-current assets are located in the Russian Federation. 27 Risk management Management of risk is fundamental to the business of banking and is an essential element of the Group’s operations. The major risks faced by the Group are those related to credit, liquidity, market and operational risks. Risk Management Function The ultimate goal of risk management is to establish a global risk management framework covering all aspects of the Group's daily business activities as well as strategic planning. The Group also adopted the concept of pro-active risk management which is especially important in emerging markets. The Supervisory Board of the Group has overall responsibility for the oversight of the risk management function. For these purposes the Supervisory Board established the Senior Risk Management Committee (SRMC), which is delegated with the power and authority to manage and control risk management process in the Group. The Group's Risk Management is headed by the Chief Risk Officer (CRO), who is a member of SRMC. In order to fulfill assigned tasks the CRO is an active member of all committees of the Group. As a result, the CRO is involved in the pro-active controls over the Group and is informed about all important decisions in the Group.

The CRO leads central and independent risk management in the Group that has:

 clearly defined roles and participation in the strategic decision making process;  formalized policies and procedures that communicate the risk management process;  consistent methodologies for risk measurement that capture the potential for losses, foregone opportunities and risk diversification effects across different risk categories;  limit structures that set maximum tolerances in relation to capital and the corporate risk taking philosophy;  comprehensive management reports that communicate risk on a periodic basis;  information technology to satisfy risk information needs throughout the organization.

The CRO is appointed by the Supervisory Board and systematically reports on the Supervisory Board Meetings and provides shareholders with an independent Risk Management Report on a regular basis. The organizational design of the risk management infrastructure includes the Risk Management Department that provides effective risk articulation in the Group through encouraging a system of risk committees and operating in close cooperation with the Internal Audit, Compliance, Financial Control and Business Lines Departments. At the risk origination level, business line managers are responsible for coordination and execution of risk management processes. They are in charge of following the relevant risk policies and procedures, executing daily monitoring of exposures and limit usages, and controlling the key risk indicators of their respective businesses on a scheduled basis. Thus, a risk governance framework of the Group consists of three “Lines of Defense”: the business managers, who have the primary responsibility for day-to-day risk coordination; the Risk Management Department, which provides high level policies, limits and risk control; and the Senior Risk Management Committee, which controls the implementation of priorities of risk management set by the Supervisory Board.

46

F-130 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

Credit risk Credit risk is the risk of financial loss for the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. Credit risk constitutes the most significant risk type for the Group. The Group is mainly involved in corporate, retail and limited but developing SME activities. The Group also takes credit exposures through Treasury transactions with banks and financial institutions, which however do not constitute a significant source of risk. The Group has developed policies and procedures for management of credit exposures (both for on- and off-balance) and established a system of Credit Committees, including the Corporate Credit Committee, the SME Credit Committee, the Retail Credit Committee and the Financial Institutions Credit Committee. The Group’s credit policies are reviewed and approved by the Senior Risk Management Committee. (i) Corporate Credit Risk In this field the Group has advanced risk management methods at both a portfolio and borrower level. At the borrower level, internally developed rating model and methods of financial analysis based on Credit Europe Bank N.V. (Parent Bank) methodology and leveraging the experience of the group in emerging markets are in use. On a portfolio level, the risks are monitored using a concentration limits approach. The Group has a “Chinese Wall” between the Corporate Banking and Corporate Credits Departments, the heads of which are reporting to the President directly. Decisions on credit limits are made by the Corporate Credit Committee based on the Credit Package prepared by Corporate Banking and independent appraisal and financial analyses prepared by the Corporate Credits Department. The Group has developed a Collateral Management Function and a professional team of Collateral Managers. Individual transactions are also reviewed by the Group’s Legal and Compliance departments depending on the specific risks. The Corporate Credit Committee takes loan decisions by considering their analysis. The Group monitors concentrations of credit risk by industry/sector, by geographic location, by currency, tenor, collateral, internal rating and others. Each Corporate Credits Department prepares monthly Corporate Portfolio Risk Report which is reviewed by the Corporate Credit Committee and submitted to the members of the Supervisory Board. Utilization of credit limits is done with the participation of the Corporate Credits Department, Collateral Management Division, Legal and Independent Credit Back-office departments. The credit process is monitored by the Risk Management Department that reports directly to the Supervisory Board. The CRO is the member of the Corporate Credit Committee.

(ii) Retail Credit Risk The Group operates with a wide spectrum of retail credit products such as multipurpose loans, instant loans, mortgage loans, auto loans, express cash loans, holiday loans, overdraft credit cards and installment credit cards.

The Group uses an internally developed automated system for credit application, credit approval and booking processing. A system of decision trees and scoring tools to provide better equilibrium between profitability, growth and risk is embedded into this system.

The Group has policies and limits by retail product type. The policies, limits and rules, algorithms and scoring procedures are approved by the Retail Credit Committee. The Retail Credit Committee controls the entire retail credit process by approving policies and procedures, regularly updating methods, algorithms and instructions on retail credit risk assessment, delegating authorities depending on the type of product and making particular credit decisions.

47

F-131 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

The Retail Credit Committee’s aim is to ensure adequate level of risk management practices for the size and complexity of Group's operations for individual retail exposures as well as at a portfolio level. The CRO is the member of Retail Credit Committee.

In addition to advanced reports of the Retail Credit Department and Analytics and Strategic Planning Division of Moscow Region Branches Department, Risk Management independently monitors portfolio performance, controls quality and quantity characteristics of the total retail credit portfolio, in particular by using techniques of roll-over, cohort and coincident, vintage analyses for probability of default estimations, which are also regularly reported to the Supervisory Board.

(iii) SME Credit Risk SME business line has both corporate experience for larger loans (“standard loans”) and retail skills for small size credits (“microloans”).

The Group established SME Credit Committee which is in charge of individual credit decisions for standard loans and takes decisions over the policies and rules for all SME credit products. The CRO is a member of SME Credit Committee.

The Group continuously monitors the SME loan portfolio and regularly reassesses the creditworthiness of its customers and quality of risk management tools and methods.

Liquidity risk Liquidity risk is defined as the current or prospective threat to an institution’s earnings and capital as a result of the possibility that it will not be able to meet its short-term payment obligations at any point in time without involving unacceptable costs or losses. Liquidity risk is the risk that the volume and timing of potential cash inflows and outflows are not adequately matched, whereby a shortfall arising at any point in time cannot be made up by selling assets or by obtaining refinancing because:

 the market for the asset in question has insufficient liquidity;  the institution has insufficient liquid assets to sell or to pledge in order to obtain refinancing;  the institution is insufficiently solvent and as a result has insufficient borrowing capacity;  the institution has insufficient funding relationships.

The Group maintains liquidity risk management in accordance with the nature, size and complexity of the activities that the Group carries out. The system used by the Group to monitor, control and report liquidity risk is clearly described in the Group’s Liquidity Policy.

The Group has also implemented a quantifying and monitoring system for both daily and longer periods.

The Group calculates statutory ratios for short, medium, medium-long, and long liquidity and monitors structural liquidity in accordance with the requirement of the CBR. The Group was in compliance with these ratios during the years ended 31 December 2010 and 31 December 2009.

The Group also monitors its liquidity risk through Static Maturity Gap analyses on a monthly basis for three major currencies: EUR, USD and RUB. Furthermore, a liquidity stress test is carried out to monitor the vulnerability of the Group to the withdrawal of all short-term liabilities. The analyses are based on the Parent Bank’s methodology.

The Asset and Liability Committee (ALCO) is responsible for managing liquidity risk basing on the reports of Financial Control, Risk Management and Treasury Departments. Daily management of cash flow and liquidity is done by Treasury Department and executed by Treasury Back-office and

48

F-132 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010 controlled by Financial Control and Risk Management Departments. The Treasury Daily Report is used for the purpose of managing and optimizing the cash-flow of the Group on a daily basis.

The Treasury daily report includes the total money market borrowings and placements, the daily and overall income from client operations on foreign exchange market, the daily and overall income from foreign exchange trading activities, the daily activities on the fixed income market and the current market price of the fixed income portfolio. The report also includes the list and details of long-term instruments used for liquidity management and a brief table showing general macro economic data that helps the Management Board to have a better understanding of current economic trends.

ALCO is held on weekly and monthly basis and analyzes liquidity reports and stress-testing results and takes necessary actions to match asset and liability positions both on- and off-balance sheet in such a way that the Group is able to keep its liquidity risk below the pre-determined limits.

The following tables show the undiscounted cash flows on the Group’s financial assets, liabilities and credit related commitments on the basis of their earliest possible contractual maturity. The total gross inflow and outflow disclosed in the table is the contractual, undiscounted cash flow on the financial asset, liability or commitment.

49

F-133 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

The position of the Group as at 31 December 2010 was as follows:

RUB’000 Demand From From 3 to From 6 to More Total Carrying and less 1 to 3 6 months 12 months than gross amount than months 1 year amount 1 month (outflow)/ inflow Non-derivative assets Due from the Central Bank of the Russian Federation 1,036,131 - - - - 1,036,131 1,036,131 Placements with banks and other financial institutions 10,788,552 - - 1,235,398 - 12,023,950 12,008,148 Financial instruments at fair value through profit or loss - - 2,952 79,145 - 82,097 78,001 Loans to customers 10,337,841 12,852,062 9,271,853 9,252,008 31,675,878 73,389,642 60,480,396 Available-for-sale financial assets 30,055 6,250,355 13,590 162,977 2,107,389 8,564,366 7,883,229 Held-to-maturity investments - 15,289 5,919 92,271 456,877 570,356 444,328 Current income tax prepayments - 613,969 - - - 613,969 613,969 Other financial assets 114,106 325,943 2,088 16,706 12,351 471,194 471,194 Derivative assets - Inflow 2,650,412 629,035 - - 312,582 3,592,029 39,016 - Outflow (2,640,736) (627,697) - - (329,589) (3,598,022) - Total assets 22,316,361 20,058,956 9,296,402 10,838,505 34,235,488 96,745,712 83,054,412 Non-derivative liabilities Deposits and balances from banks and other financial institutions (7,855,274) (1,107,939) (2,837,703) (401,079) (4,678,863) (16,880,858) (16,006,972) Current accounts and deposits from customers (14,941,067) (9,382,653) (2,650,628) (4,245,397) (972,137) (32,191,882) (31,559,534) Debt securities in issue - (22,701) (4,790,013) (567,280) (15,188,925) (20,568,919) (17,849,049) Other borrowed funds (3,974,556) - - - - (3,974,556) (3,970,573) Other financial liabilities (197,749) (106,804) (60,944) - (168,547) (534,044) (534,044) Derivative liabilities - Inflow 8,165,118 932,569 609,538 4,114,781 1,765,692 15,587,698 - - Outflow (8,214,525) (946,485) (632,840) (4,254,522) (1,738,027) (15,786,399) (339,471) Total liabilities (27,018,053) (10,634,013) (10,362,590) (5,353,497) (20,980,807) (74,348,960) (70,259,643) Net position (4,701,692) 9,424,943 (1,066,188) 5,485,008 13,254,681 22,396,752 12,794,769 Credit related commitments 10,461,538 622,207 62,002 210,486 56,996 11,413,229

50

F-134 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

The position of the Group as at 31 December 2009 was as follows:

RUB’000 Demand From From 3 to From 6 to More Total Carrying and less 1 to 3 6 months 12 months than gross amount than months 1 year amount 1 month (outflow)/ inflow Non-derivative assets Due from the Central Bank of the Russian Federation 580,318 - - - - 580,318 580,318 Placements with banks and other financial institutions 11,609,648 - - - - 11,609,648 11,608,508 Financial instruments at fair value through profit or loss - 5,797 2,017 - 168,443 176,257 117,753 Loans to customers 3,867,467 9,755,013 9,278,160 9,345,599 28,075,583 60,321,822 47,925,256 Available-for-sale financial assets 40,746 134,772 171,701 321,443 7,675,907 8,344,569 5,776,173 Held-to-maturity investments - 59,263 974,889 219,383 791,861 2,045,396 970,730 Other financial assets 98,292 246,353 7,053 30,971 23,383 406,052 406,052 Derivative assets - Inflow 3,640,752 302,442 - 136,880 - 4,080,074 102,323 - Outflow (3,555,148) (297,050) - (120,977) - (3,973,175) - Total assets 16,282,075 10,206,590 10,433,820 9,933,299 36,735,177 83,590,961 67,487,113 Non-derivative liabilities Deposits and balances from banks and other financial institutions (6,233,610) (884,095) (3,462,438) - (139,085) (10,719,228) (10,578,969) Current accounts and deposits from customers (10,641,727) (3,726,467) (2,971,214) (4,143,187) (571,504) (22,054,099) (21,808,245) Debt securities in issue - (3,879,148) (7,410,082) (384,148) (9,533,223) (21,206,601) (19,299,076) Other borrowed funds (2,022,621) - (1,055,106) (1,796,819) - (4,874,546) (4,652,167) Other financial liabilities (81,438) (92,695) (61,963) (74,755) (39,232) (350,083) (350,083) Derivative liabilities - Inflow 2,607,108 297,050 - - 453,663 3,357,821 - - Outflow (2,634,687) (302,442) - - (453,663) (3,390,792) (75,476) Total liabilities (19,006,975) (8,587,797) (14,960,803) (6,398,909) (10,283,044) (59,237,528) (56,764,016) Net position (2,724,900) 1,618,793 (4,526,983) 3,534,390 26,452,133 24,353,433 10,723,097 Credit related commitments 4,214,608 - - 1,980,160 - 6,194,768

For further information on the Group’s exposure to liquidity risk at year end refer to Note 36.

51

F-135 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

Market Risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risks for the Group comprise foreign currency risk and interest rate risk. Market risk arises from open positions, foreign currency and trading portfolio, which are exposed to general and specific market movements and changes in the level of volatility of market prices. Overall authority for market risk is vested in the ALCO. Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group is exposed 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 also reduce or create losses in the event that unexpected movements arise. Re-pricing risk An analysis of sensitivity of the Group’s net income for the year and equity to changes in the market interest rate based on a simplified scenario of a 100 basis point (bp) symmetrical fall or rise in all yield curves and positions of interest-bearing assets and liabilities existing as at 31 December 2010 and 31 December 2009 is as follows:

2010 2009 RUB’000 RUB’000 100 bp parallel increase 77,538 (17,216) 100 bp parallel decrease (47,883) 71,723

Interest rate risk, attributable to financial instruments at fair value though profit or loss does not constitute a major risk and therefore, case-by-case approval and price monitoring systems are used to follow market risk. Approval is done using both volatility and return study by Treasury and credibility analysis by Corporate Credits Department. In the case of large portfolios, VaR analysis will be applied both on security as well as on portfolio level. Fair value interest rate risk An analysis of sensitivity of the net income for the year and equity as a result of changes in fair value of financial instruments at fair value though profit or loss and financial assets available-for- sale due to changes in the interest rates based on positions existing as at 31 December 2010 and 2009 and a simplified scenario of a 100 bp symmetrical fall or rise in all yield curves is as follows:

2010 2009 Profit Profit or loss Equity or loss Equity RUB’000 RUB’000 RUB’000 RUB’000 100 bp parallel rise (1,306) (219,706) (2,807) (137,559) 100 bp parallel fall (1,892) 232,621 2,938 144,641

Currency risk Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign currency exchange rates. Although the Group hedges its exposure to currency risk, most of such activities do not qualify as hedging relationships in accordance with IFRS. At the end of each day, the Treasury Department prepares a Daily Treasury Report. The report includes the total borrowings and placements undertaken on the money market, the daily and overall income from foreign currency pricing activities, the daily and overall income from foreign currency trading activities, the daily activities on the fixed income market and the current market 52

F-136 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010 price of the fixed income portfolio. The report also includes the list and details of long-term instruments used for liquidity management and a brief table showing general macro economic data that helps the Management Board to have a better understanding of the current economic trends.

The foreign currency position is monitored daily. Daily reporting on currency position is done by both Accounting and Financial Control Departments. The CBR sets an absolute level of 10% of its equity as the maximum limit of each currency risk exposure to be taken. The sum of all long (short) open foreign currency positions (absolute values) in different currencies should not exceed 20% of the equity of the Group.

An analysis of sensitivity of the Group’s net income for the year and equity to changes in the foreign currency exchange rates based on positions existing as at 31 December 2010 and 2009 and a simplified scenario of a 5% change in rates of major currencies to RUB is as follows:

2010 2009 RUB’000 RUB’000 5% appreciation of USD against RUB (21,829) (25,458) 5% depreciation of USD against RUB 21,829 25,458 5% appreciation of EUR against RUB (4,146) (9,752) 5% depreciation of EUR against RUB 4,146 9,752

In addition to the CBR requirements, the Group follows international practice and sets its own limits. The absolute level of 10% of its equity is set as the maximum limit of currency risk exposure to be taken separately for each position and for the sum of all positions.

Operational risk Operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. This definition includes IT, HR, fraud, operations and legal risk. The Group established the Operational Risk Committee. The Committee determines policies and procedures in the area of operational risks. Meetings are held monthly, where regular reports from Operations, Customer Care Unit and IT departments are discussed together with current issues. Apart from the Operational Committee the Group has also an IT Steering Committee which is entitled to set strategies and priorities for IT projects and take decisions on IT risks and processes, an HR committee to manage HR Risks, and a Disciplinary Committee to deal with Code of Conduct issues. The Group collects information in relation to the circumstances leading to losses and uses this information for necessary corrections of processes and control tools. The CRO is the member of all mentioned committees and groups and reports directly to Supervisory Board on important developments and issues.

53

F-137 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

28 Capital management The Central Bank of Russia sets and monitors capital requirements for the Group.

The Group defines as capital those items defined by statutory regulation as capital for credit institutions. Under the current capital requirements set by the Central Bank of Russia banks, have to maintain a ratio of capital to risk weighted assets (“statutory capital ratio”) above the prescribed minimum level. As at 31 December 2010, this minimum level is 10% (2009: 10%). The Group was in compliance with the statutory capital ratio during the years ended 31 December 2010 and 31 December 2009.

The Group also monitors its 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, commonly known as Basel II.

The following table shows the composition of the Group’s capital position calculated in accordance with the requirements of the Basel Accord, as at 31 December 2010 and 2009: 2010 2009 RUB’000 RUB’000

Tier 1 capital Share capital 8,549,789 8,549,789 Share premium 158,631 158,631 Additional paid-in capital 285,924 285,924 Retained earnings 5,579,355 3,597,646 Intangible assets (136,548) (96,408) Total tier 1 capital 14,437,151 12,495,582

Tier 2 capital Revaluation reserve for available-for-sale financial assets - 22,558 Total tier 2 capital - 22,558

Deductions Hedge Reserve (15,561) - Revaluation reserve for available-for-sale financial assets (367) -

Total capital 14,421,223 12,518,140

Risk-weighted assets Banking book 72 981 852 62,429,181 Trading book 749,249 964,715 Total risk weighted assets 73,731,101 63,393,896

Total capital expressed as a percentage of risk-weighted assets (“total capital ratio”) 19.56% 19.75% Total tier 1 capital expressed as a percentage of risk-weighted assets (“tier 1 capital ratio”) 19.58% 19.71%

54

F-138 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

The risk-weighted assets are measured by means of a hierarchy of risk weights classified according to the nature of – and reflecting an estimate of credit, market and other risks associated with – each asset and counterparty, taking into account any eligible collateral or guarantees. A similar treatment is adopted for off-balance sheet exposure, with some adjustments to reflect the more contingent nature of the potential losses.

29 Commitments At any time the Group has outstanding commitments to extend loans. These commitments take the form of approved loans and credit card limits and overdraft facilities. The Group provides financial guarantees and letters of credit to guarantee the performance of customers to third parties. These agreements have fixed limits and generally extend for a period of up to three years. The contractual amounts of commitments are set out in the following table by category. The amounts reflected in the table for commitments assume that amounts are fully advanced. The amounts reflected in the table for guarantees and letters of credit represent the maximum accounting loss that would be recognised at the reporting date if counterparties failed completely to perform as contracted.

2010 2009 RUB’000 RUB’000 Contracted amount Loan and credit line commitments 8,738,063 3,375,368 Guarantees and letters of credit 949,846 1,991,973 Credit card commitments 1,692,506 807,472 Undrawn overdraft facilities 32,814 19,955 11,413,229 6,194,768

The total outstanding contractual commitments to extend credit indicated above does not necessarily represent future cash requirements, as these commitments may expire or terminate without being funded.

30 Operating leases Leases as lessee Non-cancelable operating lease rentals are payable as follows:

2010 2009 RUB’000 RUB’000 Less than one year 46,241 45,539 46,241 45,539

The Group leases a number of premises and equipment under operating lease. The leases typically run for an initial period of one to five years, with an option to renew the lease after that date. Lease payments are usually changed annually to reflect market rentals. None of the leases includes contingent rentals. During the current year RUB 482,355 thousand was recognised as an expense in the consolidated income statement in respect of operating leases (2009: RUB 490,728 thousand).

55

F-139 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

31 Contingencies Litigation The Group’s Management is not informed of any significant actual, pending or threatened claims against the Group. Taxation contingencies The taxation system in the Russian Federation is relatively new and is characterized by frequent changes in legislation, official pronouncements and court decisions, which are often unclear, contradictory and subject to varying interpretation by different tax authorities. Taxes are subject to review and investigation by a number of authorities, which have the authority to impose severe fines, penalties and interest charges. A tax year remains open for review by the tax authorities during the three subsequent calendar years; however, under certain circumstances a tax year may remain open longer. Recent events within the Russian Federation suggest that the tax authorities are taking a more assertive position in their interpretation and enforcement of tax legislation. These circumstances may create tax risks in the Russian Federation that are substantially more significant than in other countries. Management believes that it has provided adequately for tax liabilities based on its interpretations of applicable Russian tax legislation, official pronouncements and court decisions. However, the interpretations of the relevant authorities could differ and the effect on the financial position of the Group, if the authorities were successful in enforcing their interpretations, could be significant. Custody activities The Group provides custody services to its customers, whereby it holds securities on behalf of customers and receives fee income for providing these services. These securities are not assets of the Group and are not recognised in the consolidated statement of financial position.

56

F-140 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

32 Related party transactions The Bank’s ultimate parent company is FIBA Holding A.S. a Turkish joint stock company, which is ultimately controlled by a single individual, Mr. Husnu Ozyegin.

The Bank’s immediate parent is Credit Europe Bank N.V. which produces publicly available financial statements.

Transactions with the key management personnel Total remuneration included in employee compensation (refer Note 10):

2010 2009 RUB’000 RUB’000 Key management personnel 255,988 214,355

The outstanding balances and average interest rates as at 31 December 2010 and 2009 with the members of the key management personnel are as follows:

2010 Average 2009 Average RUB’000 Interest Rate RUB’000 Interest Rate Consolidated Statement of Financial Position ASSETS

Loans to customers 28,931 11.99% 35,481 12.30% LIABILITIES

Deposits from customers 41,639 5.69% 20,054 6.88%

Other amounts included in the consolidated income statement in relation to transactions with the members of the key management personnel are as follows:

2009 2010 RUB’000 RUB’000 Consolidated Income Statement Interest income 3,366 2,265 Interest expense (1,916) (1,644)

57

F-141 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

Transactions with other related parties The outstanding balances and the related average interest rates as at 31 December 2010 and related consolidated income statement amounts of transactions for the year ended 31 December 2010 with other related parties are as follows.

Subsidiaries of the Group’s Parent company ultimate parent company Total Average Average RUB’000 interest rate RUB’000 interest rate RUB’000 Consolidated Statement of Financial Position ASSETS Placements with banks and other financial institutions 5,381,719 1.19% 199 - 5,381,918 Financial instruments at fair value through profit or loss 18,389 - 17,236 - 35,625 Other assets - - 357 - 357 LIABILITIES Financial instruments at fair value through profit or loss 284,417 - - - 284,417 Deposits and balances from banks and other financial institutions 12,951,334 4.19% 42 - 12,951,376 Debt securities issued 5,456,493 10.54% - - 5,456,493 Current accounts and deposits from customers* 902,870 6.97% 4,636,622 3.62% 5,539,492 Other liabilities - - 187 - 187 Off balance sheet items Guarantees issued - - 40,054 - 40,054 Consolidated Income Statement Interest income 138,708 - 14,742 - 153,450 Interest expense (602,317) - (9,894) - (612,211) Fee and commission income - - 1,429 - 1,429 Net foreign exchange (loss) income (95,327) - 17,479 - (77,848) Other income - - 8,717 - 8,717

* - Included in current accounts and deposits from customers is RUB 5,118,957 thousand, which represents deposits from related party banks which, acting in an agent capacity, attract funds from third parties for the purpose of placing these funds with the Group on behalf and at the request of the third parties.

58

F-142 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

The outstanding balances and the related average interest rates as at 31 December 2009 and related consolidated income statement amounts of transactions for the year ended 31 December 2009 with other related parties are as follows. Subsidiaries of the Group’s Parent company ultimate parent company Total Average Average RUB’000 interest rate RUB’000 interest rate RUB’000 Consolidated Statement of Financial Position ASSETS Placements with banks and other financial institutions 10,803,895 0.38% 195 - 10,804,090 Financial instruments at fair value through profit or loss 90,796 - - - 90,796 Loans to customers (gross amount) - - 919,395 7.08% 919,395 LIABILITIES Financial instruments at fair value through profit or loss 45,285 - - - 45,285 Deposits and balances from banks and other financial institutions 4,166,217 8.40% 51 - 4,166,268 Debt securities issued 10,091,077 8.98% - - 10,091,077 Current accounts and deposits from customers* 3,239,135 4.52% 6,581,243 3.74% 9,820,378 Other liabilities - - 121 - 121 Off balance sheet items Guarantees issued - - 61,005 - 61,005 Consolidated Income statement Interest income 523,136 - 87,628 - 610,764 Interest expense (1,454,421) - (81,782) - (1,536,203) Net foreign exchange loss (101,796) - (24,611) - (126,407) Other income - - 5,469 - 5,469

* - Included in current accounts and deposits from customers is RUB 9,356,622 thousand, which represents deposits from related party banks which, acting in an agent capacity, attract funds from third parties for the purpose of placing these funds with the Group on behalf and at the request of the third parties.

59

F-143 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

33 Cash and cash equivalents Cash and cash equivalents at the end of the financial year as shown in the consolidated statement of cash flows are composed of the following items:

2010 2009 RUB’000 RUB’000 Cash 1,165,966 935,902 Due from the Central Bank – nostro accounts 725,065 275,014 Nostro accounts with banks and amounts due from other financial institutions with an original maturity of 90 days or less and which are free from contractual encumbrances 10,786,690 11,608,508 12,677,721 12,819,424

34 Fair value of financial instruments The estimated fair values of financial instruments at fair value through profit or loss, available-for- sale and held-to-maturity investments and debt securities in issue are based on quoted market prices at the reporting date without any deduction for transaction costs. The estimated fair values of all other financial assets and liabilities are calculated using discounted cash flow techniques based on estimated future cash flows and discount rates for similar instruments at the reporting date. The estimates of fair value are intended to approximate the amount for which a financial instrument could be exchanged between knowledgeable, willing parties in an arm’s length transaction. However given the uncertainties and the use of subjective judgment, the fair value should not be interpreted as being realisable in an immediate sale of the assets or settlement of liabilities. 2010 2010 2009 2009 RUB’000 RUB’000 RUB’000 RUB’000 ASSETS Fair value Carrying value Fair value Carrying value Placements with banks and other financial institutions 11,987,820 12,008,148 11,607,203 11,608,508 Financial instruments at fair value through profit or loss 117,017 117,017 220,076 220,076 Available-for-sale financial assets 7,883,229 7,883,229 5,776,173 5,776,173 Loans to customers 61,394,992 60,480,396 49,144,117 47,925,256 Held-to-maturity investments 503,203 444,328 1,051,749 970,730

LIABILITIES Financial instruments at fair value through profit or loss 339,471 339,471 75,476 75,476 Deposits and balances from banks and other financial institutions 15,894,687 16,006,972 10,436,834 10,578,969 Current accounts and deposits from customers 31,757,345 31,559,534 21,585,534 21,808,245 Debt securities in issue 18,341,313 17,849,049 19,230,083 19,299,076 Other borrowed funds 3,970,586 3,970,573 4,477,198 4,652,167

60

F-144 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

The Group measures fair values for financial instruments recorded on the consolidated statement of financial position using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements:  Level 1: Quoted market price (unadjusted) in an active market for an identical instrument.  Level 2: Valuation techniques based on observable inputs, either directly (i.e, as prices) or indirectly (i.e, derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data. The table below analyses financial instruments measured at fair value at 31 December 2010, by the level in the fair value hierarchy into which the fair value measurement is categorised:

RUB ’000 Level 1 Level 2 Total - Financial instruments at fair value through profit or loss 78,001 - 78,001 - Derivative assets - 39,016 39,016 - Derivative liabilities - (339,471) (339,471) - Available-for-sale financial assets 7,883,229 - 7,883,229 7,961,230 (300,455) 7,660,775

The table below analyses financial instruments measured at fair value at 31 December 2009, by the level in the fair value hierarchy into which the fair value measurement is categorised:

RUB ’000 Level 1 Level 2 Total - Financial instruments at fair value through profit or loss 117,753 - 117,753 - Derivative assets - 102,323 102,323 - Derivative liabilities - (75,476) (75,476) -Available-for-sale financial assets 5,776,173 - 5,776,173 5,893,926 26,847 5,920,773

As at 31 December 2010 and 31 December 2009, the Group does not have any financial instruments for which fair value is based on valuation techniques involving the use of non-market observable inputs. The estimates of fair value are intended to approximate the amount for which a financial instrument can be exchanged between knowledgeable, willing parties in an arm's length transaction. However given the uncertainties and the use of subjective judgment, the fair value should not be interpreted as being realisable in an immediate sale of the assets or settlement of liabilities.

61

F-145 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

35 Average effective interest rates The table below displays the Group’s interest bearing assets and liabilities as at 31 December 2010 and 2009 and their corresponding average effective interest rates as at that date.

2010 2009 Average Average Value Effective Value Effective RUB’000 Interest Rate RUB’000 Interest Rate Interest bearing assets Placements with banks and other financial institutions Loans and deposits - RUB - - 270,046 5.00% - USD 7,793,242 0.58% 9,084,751 0.26% - EUR 3,843,150 0.97% 1,518,591 0.25% Financial instruments at fair value through profit or loss - RUB - - 117,753 15.38% - USD 78,001 6.71% - - Loans to customers - RUB 37,116,297 21.62% 26,860,757 26.20% - USD 15,262,304 9.91% 17,600,442 10.62% - EUR 8,101,795 6.01% 3,464,057 6.14% Available-for-sale financial assets - RUB 893,416 8.47% 5,728,828 11.00% - USD 855,858 6.31% 47,345 13.30% - EUR 6,133,955 1.00% - - Held-to-maturity investments - RUB 25,100 10.30% 278,112 16.68% - USD 419,228 13.72% 692,618 8.30% Interest bearing liabilities Deposits and balances from banks and other financial institutions Term deposits - RUB 1,614,408 7.68% 3,893,726 9.27% - USD 6,890,925 4.20% 2,723,894 3.24% - EUR 5,132,720 4.16% - - - other currencies 1,397,468 10.50% - - Repurchase agreements - RUB - - 3,961,349 6.36% - EUR 917,431 1.25% - - Current accounts and deposits from customers Term deposits - RUB 7,285,284 6.37% 4,054,262 8.29% - USD 9,528,407 4.08% 10,155,728 4.17% - EUR 7,137,115 4.17% 3,935,625 4.14% - other currencies 2,396,903 10.40% - - Debt securities in issue - RUB 4,033,666 10.37% 7,635,748 9.95% - USD 13,815,383 8.13% 11,663,328 8.35% Other borrowed funds - RUB 3,970,573 3.67% 4,652,167 11.83%

62

F-146 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

36 Maturity analysis

The following table shows assets and liabilities by remaining contractual maturity dates as of 31 December 2010. Less than 3 months to More than 1 month 1 to 3 months 1 year 1 to 5 year 5 years No maturity Total ASSETS RUB’000 RUB’000 RUB’000 RUB’000 RUB’000 RUB’000 RUB’000

Cash 1,165,966 - - - --1,165,966 Due from the Central Bank of the Russian Federation 1,036,131 - - - --1,036,131 Placements with banks and other financial institutions 10,786,690 - 1,221,458 - --12,008,148 Financial instruments at fair value through profit or loss 10,638 11,143 78,000 17,236 --117,017 F-147 Loans to customers 9,207,615 12,333,437 13,067,791 22,931,868 2,939,685 - 60,480,396 Available-for-sale financial assets - 5,040,377 - 713,778 2,129,074 - 7,883,229 Held-to-maturity investments - - 69,235 244,637 130,456 - 444,328 Current income tax prepayments - 613,969 - - --613,969 Property and equipment - - - - - 677,280 677,280 Other assets 114,106 325,943 18,794 - 12,351 - 471,194 Total Assets 22,321,146 18,324,869 14,455,278 23,907,519 5,211,566 677,280 84,897,658 LIABILITIES Financial instruments at fair value through profit or loss 52,358 25,520 122,364 139,229 --339,471 Deposits and balances from banks and other financial institutions 7,814,425 1,096,323 3,131,735 3,349,307 615,182 - 16,006,972 Current accounts and deposits from customers 14,919,829 9,297,774 6,523,068 818,863 --31,559,534 Debt securities in issue 22,701 - 4,010,965 13,815,383 --17,849,049 Other borrowed funds 3,970,573 - - - --3,970,573 Deferred tax liability - - - - - 80,244 80,244 Other liabilities 197,749 106,804 60,944 - 168,547 - 534,044 Total Liabilities 26,977,635 10,526,421 13,849,076 18,122,782 783,729 80,244 70,339,887 Net position as at 31 December 2010 (4,656,489) 7,798,448 606,202 5,784,737 4,427,837 597,036 14,557,771 Net position as at 31 December 2009 (2,764,389) 669,373 (6,797,758) 17,408,663 3,527,477 571,182 12,614,548

63 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

The following table shows Management’s estimation of the Group liquidity position as at 31 December 2010. In contrast to contractual maturity table presented above, in the table below Current accounts and demand deposits from customer are evenly distributed during one year from 31 December 2010 on the basis of Management’s belief that in spite of current customer accounts being on demand, diversification of these deposits by number and type of depositors, and the past experience of the Group, indicates that these deposits provide a stable source of funding. Trading securities included in financial instruments at fair value through profit or loss are shown in the category “Less than 1 month” and available-for-sale financial instruments are shown in the category “3 months to 1 year” based on the fact that the Group’s Management believes that all of the trading securities and available-for-sale financial instruments could be sold in the normal course of business.

Less than 1 3 months to More than month 1 to 3 months 1 year 1 to 5 year 5 years No maturity Total ASSETS RUB’000 RUB’000 RUB’000 RUB’000 RUB’000 RUB’000 RUB’000 Cash 1,165,966 - - - - - 1,165,966 Due from the Central Bank of the Russian Federation 1,036,131 - - - - - 1,036,131 Placements with banks and other financial institutions 10,786,690 - 1,221,458 - - - 12,008,148

F-148 Financial instruments at fair value through profit or loss 88,638 11,143 - 17,236 - - 117,017 Loans to customers 9,207,615 12,333,437 13,067,791 22,931,868 2,939,685 - 60,480,396 Available-for-sale financial assets - 5,040,377 2,842,852 - - - 7,883,229 Held-to-maturity investments - - 69,235 244,637 130,456 - 444,328 Current income tax prepayments - 613,969 - - - - 613,969 Property and equipment - - - - - 677,280 677,280 Other assets 114,106 325,943 18,794 - 12,351 - 471,194 Total Assets 22,399,146 18,324,869 17,220,130 23,193,741 3,082,492 677,280 84,897,658

64 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

Less than 1 3 months to More than month 1 to 3 months 1 year 1 to 5 year 5 years No maturity Total LIABILITIES Financial instruments at fair value through profit or loss 52,358 25,520 122,364 139,229 - - 339,471 Deposits and balances from banks and other financial institutions 7,814,425 1,096,323 3,131,735 3,349,307 615,182 - 16,006,972 Current accounts and deposits from customers 10,142,149 10,166,585 10,431,937 818,863 - - 31,559,534 Debt securities in issue 22,701 - 4,010,965 13,815,383 - - 17,849,049 Other borrowed funds 3,970,573 - - - - - 3,970,573 Deferred tax liability - - - - - 80,244 80,244 Other liabilities 197,749 106,804 60,944 - 168,547 - 534,044 Total Liabilities 22,199,955 11,395,232 17,757,945 18,122,782 783,729 80,244 70,339,887 Net position as at 31 December 2010 199,191 6,929,637 (537,815) 5,070,959 2,298,763 597,036 14,557,771

F-149 Cumulative position as at 31 December 2010 199,191 7,128,828 6,591,013 11,661,972 13,960,735 14,557,771 Net position as at 31 December 2009 718,542 54,876 3,294,569 5,501,359 2,474,020 571,182 12,614,548 Cumulative position as at 31 December 2009 718,542 773,418 4,067,987 9,569,346 12,043,366 12,614,548

65 CREDIT EUROPE BANK LTD. Notes to, and forming part of, the Consolidated Financial Statements for the year ended 31 December 2010

37 Currency analysis The following table shows the foreign currency exposure structure of financial assets and liabilities as at 31 December 2010:

Other RUB USD EUR currencies Total RUB’000 RUB’000 RUB’000 RUB’000 RUB’000 ASSETS Cash 1,014,330 113,754 32,285 5,597 1,165,966 Due from the Central Bank of the Russian Federation 1,036,131 - - - 1,036,131 Placements with banks and other financial institutions 225,814 7,880,087 3,896,500 5,747 12,008,148 Financial instruments at fair value through profit or loss 39,016 78,001 - - 117,017 Loans to customers 37,116,297 15,262,304 8,101,795 - 60,480,396 Available-for-sale financial assets 893,416 855,858 6,133,955 - 7,883,229 Held-to-maturity investments 25,100 419,228 - - 444,328 Current income tax prepayments 613,969 - - - 613,969 Property and equipment 677,280 - - - 677,280 Other assets 425,381 41,736 4,009 68 471,194 Total Assets 42,066,734 24,650,968 18,168,544 11,412 84,897,658

LIABILITIES Financial instruments at fair value through profit or loss 339,471 - - - 339,471 Deposits and balances from banks and other financial institutions 1,667,007 6,892,346 6,050,151 1,397,468 16,006,972 Current accounts and deposits from customers 11,257,404 10,392,088 7,511,536 2,398,506 31,559,534 Debt securities in issue 4,033,666 13,815,383 - - 17,849,049 Other borrowed funds 3,970,573 - - - 3,970,573 Deferred tax liability 80,244 - - - 80,244 Other liabilities 503,967 19,122 10,955 - 534,044 Total Liabilities 21,852,332 31,118,939 13,572,642 3,795,974 70,339,887 Net on balance sheet position as at 31 December 2010 20,214,402 (6,467,971) 4,595,902 (3,784,562) 14,557,771 Net off balance sheet position as at 31 December 2010 (5,063,280) 5,922,250 (4,699,560) 3,840,590 -

Net on and off balance sheet positions as at 31 December 2010 15,151,122 (545,721) (103,658) 56,028 14,557,771 Net on and off balance sheet positions as at 31 December 2009 13,487,720 (636,441) (243,789) 7,058 12,614,548

66

F-150 F-151 F-152 F-153 F-154 F-155 F-156 F-157 F-158 F-159 F-160 F-161 F-162 F-163 F-164 F-165 F-166 F-167 F-168 F-169 F-170 F-171 F-172 F-173 F-174 F-175 F-176 F-177 F-178 F-179 F-180 F-181 F-182 F-183 F-184 F-185 F-186 F-187 F-188 F-189 F-190 F-191 F-192 F-193 F-194 F-195 F-196 F-197 F-198 F-199 THE ISSUER THE BORROWER CEB Capital S.A. Credit Europe Bank Ltd. 2, boulevard Konrad Adenauer Olimpiyskiy prospect, bld.14 L-1115 Luxembourg 129090 Moscow Grand Duchy of Luxembourg Russian Federation

PRINCIPAL PAYING AGENT AND REGISTRAR, A PAYING AGENT A TRANSFER AGENT AND A TRANSFER AGENT Citibank, N.A., London Branch Citigroup Global Markets Deutschland AG 13th Floor Reuterweg 16 Citigroup Centre D-60323, Frankfurt am Main Canada Square Germany London E14 5LB United Kingdom

TRUSTEE LISTING AGENT Citibank, N.A., London Branch Arthur Cox Listing Services Limited 13th Floor Earlsfort Centre Citigroup Centre Earlsfort Terrace Canada Square Dublin 2 London E14 5LB Ireland United Kingdom

LEGAL ADVISERS To Credit Europe Bank as to English law To Credit Europe Bank as to Russian law White & Case LLP White & Case LLC 5, Old Broad Street 4, Romanov pereulok London EC2N 1DW 125009 Moscow United Kingdom Russia

To the Joint Lead Managers as to English law To the Joint Lead Managers as to Russian law Linklaters LLP Linklaters CIS One Silk Street Paveletskaya Square 2/2 London EC2Y 8HQ Moscow 115054 United Kingdom Russian Federation

To the Issuer as to Luxembourg law Allen & Overy Luxembourg 33, Avenue J.F. Kennedy L-1855 Luxembourg Grand Duchy of Luxembourg

To the Trustee as to English law Linklaters LLP One Silk Street London EC2Y 8HQ United Kingdom

AUDITORS TO CREDIT EUROPE BANK TAX ADVISORS ZAO KPMG ZAO KPMG Naberezhnaya Tower, Block C, Floor 31 Naberezhnaya Tower, Block C, Floor 31 10 Presnenskaya Naberezhnaya 10 Presnenskaya Naberezhnaya Moscow 123317 Moscow 123317 Russian Federation Russian Federation Merrill Corporation Ltd, London 12ZDD70401