CONTENTS:

I. INTRODUCTION

05 The message from the Supervisory Board

06 About the BNP Group

10 Management

II. STRATEGY AND RESULTS 2011

Macroeconomics and the Russian banking industry in 2011 15

16 Financial results 2011

27 Corporate investment

31 Consumer fi nancing

33 Risk Management

35 Human Resources Management

36 Corporate Code of Conduct

III. ADDITIONAL INFORMATION

38 State Registration Information

38 Participation in Associations

40 Contact Information I. INTRODUCTION

BNP PARIBAS ZAO 4 ANNUAL REPORT 2011 THE MESSAGE FROM THE SUPERVISORY BOARD

am pleased to present the BNP market conditions. PARIBAS ZAO annual report for In 2011, we started up a new trading 2011. and marketing activity in commodity de- The year was dominated by rivatives to meet the increasing demand global uncertainty and extremely in the Russian market. We expect this I complex fi nancial conditions product line to be an important contrib- combined with new regulatory utor to our 2012 revenues. challenges. In 2011, our work was fo- On a wider scale, 2011 was a year of cused on adapting ourselves to the new signifi cant changes to the business strat- operating environment. Now, our compa- egies for BNP Paribas Group in Russia. ny has adjusted to the new environment Corporate and and we have already made signifi cant Personal Finance activities were pro- progress in realignment. Thanks to the vided by the same legal entity; in 2011, efforts of our teams, we showed solid BNP Paribas ZAO decided it would stop operating performances and fi nancial its production of consumer fi nance loans stability in 2011. We can safely claim to concentrate its resources on further that both the BNP Paribas Group and its developing its corporate & investment key subsidiary in Russia, BNP PARIBAS banking activities. ZAO, managed to withstand the crisis in The Group still believes in the strong the fi nancial markets. potential of consumer fi nance activities. As a result of our efforts, today we However, under a different set-up it has are a much stronger bank than last year, decided to move its activities in the con- with a clear vision of our goals on both sumer lending market to a joint venture global and local levels and a strategy to with Sberbank, which will start up in achieve them. BNP PARIBAS ZAO’s long- September 2012. term credit rating (affi rmed by Standard To refl ect the achievements over the & Poor’s in 2011) of BBB with a stable past years and to accommodate the outlook puts us among the strongest and expanding corporate and investment best-rated in Russia. banking activities, BNP PARIBAS ZAO The highly successful issuance of moved in June 2011 to its new premises BNP PARIBAS ZAO bonds last year is also in the prime class White Square Business proof of our solid market position. In Center that provides all necessary facili- addition, we have increased our charter ties for effective and continuous work. capital from 4 to 5.8 billion rubles, and The solid performance in 2011 lays at year end 2011 our statutory capital a good foundation for continued suc- exceeded 10 billion rubles. cess in 2012. We will continue sustained In 2011, BNP PARIBAS ZAO’s assets value creation in the new environment increased by 58% and exceeded pre- and continue the diversifi cation of our crisis level. Loan portfolio grew by 89%, activities in the areas of capital markets, while maintaining high quality. Strong commodity derivatives and transaction performance of the corporate business banking for multinationals. Russia is and segment supported expansion of con- remains a key growth market for BNP sumer lending in 2011. Total revenue Paribas where the ambition of the group grew by 58% in 2011 YoY, while operat- is to roll out all its best-in-class busi- ing expenses increased by 41% and cost nesses, many of them occupying leading of risk by 37%. These resulted in steep positions in or globally. profi t growth YoY from 56 million rubles BNP Paribas Group is one of the best- in 2010 up to 614 million rubles in 2011. equipped banks to succeed in the current Strong cost control measures imple- environment. We aim at uniting the mented by the Bank in 2010 and 2011 Group’s and the ZAO’s forces, talents and contributed to the good results of 2011. efforts to focus on achieving ambitious In 2011, we demonstrated the abil- but reachable goals. Our management ity to meet the demands of the local principles, focussing on clients, exem- market; we continued to be the key plary ethical behaviour and top-quality player in fi nancing the biggest Russian services, make me very confi dent in our corporations and largest sectors, hence joint future success. the strong position in Russia as the No. 3 Eurobonds issuer in Russia. Jean LEMIERRE Fixed income derivatives are playing Chairman of the Supervisory Council an increasingly important role in current BNP PARIBAS ZAO

BNP PARIBAS ZAO ANNUAL REPORT 2011 5 ABOUT THE BNP PARIBAS GROUP

“The bank for a changing world” BNP Paribas and Tennis • 1st BANK IN THE EUROZONE Global 2000 Forbes 2011 ust as we place people at the heart of everything we do, in the tennis world it is • 1st AMONG FRENCH ENTERPRISES the players who exemplify the positive values Global 2000 Forbes 2011 of the sport, whatever their age or level of • 11th AMONG THE TOP GLOBAL COMPANIES expertise. BNP Paribas supports both amateur Global 2000 Forbes 2011 J and professional players at the local, national • BEST BANK IN DEVELOPED EUROPE and international level, as well as junior and university Global Finance, 2011 competitions, so as to encourage the transmission of knowledge between generations. Our new sponsorship • 5th IN THE GLOBAL BANKING SECTOR slogan “We are tennis” underlines the fact that BNP Global 2000 Forbes 2011 Paribas promotes tennis for everyone and at all levels. • 200,000 EMPLOYEES, INCLUDING 150,000 IN EUROPE Since 1973, BNP Paribas has forged a deep and (01/01/2012) lasting partnership with tennis. The Group has become the sport’s number one partner in its various NP Paribas has a presence in 80 countries dimensions: from local tennis to international with nearly 200,000 employees, including competition, across amateur, social, university and more than 150,000 in Europe. It ranks professional tennis, for the disabled as well as able- highly in its three core activities: Retail bodied player. Our loyalty to this sport has remained B Banking, Investment Solutions and unchanged, yet BNP Paribas continues to pioneer new Corporate & Investment Banking. In Europe, approaches to sports sponsorship. Accordingly, in the Group has four domestic markets (Belgium, France, 2011, the Group made greater use of digital media to Italy and Luxembourg) and BNP Paribas Personal support its overall sponsoring strategy launching www. Finance is the leader in consumer lending. BNP Paribas wearetennis.com, a website entirely dedicated to tennis is rolling out its integrated retail banking model across and its many fans. During the 38 years of this joint Mediterranean basin countries, in Turkey, in Eastern venture, BNP Paribas has not merely sought to showcase Europe and a large network in the western part of the its brand; we have shown real enthusiasm in promoting United States. In its Corporate & Investment Banking the success of the events that we support. and Investment Solutions activities, BNP Paribas also Currently, BNP Paribas is the number one sponsor enjoys top positions in Europe, a strong presence in the in world tennis; we support such events as Roland Americas and solid and fast-growing businesses in . Garros, fi ve ATP Masters events (BNP Paribas Masters, 80 of the 100 largest groups worldwide have already Monte Carlo Masters, Internazionali BNL d’Italia, BNP chosen to be clients of BNP Paribas! Paribas Open in Indian Wells and Shanghai Masters). The Group is also the title sponsor of the Davis Cup by In an exceptionally challenging environment, the BNP Paribas and the Fed Cup by BNP Paribas, as well Group generated 42,384 million euros in revenues, down as being actively involved in many other international 3.4% compared to 2010. Operating expenses amounted competitions including the Classic in to 26,116 million euros and gross operating income was California, the Grand Prix Hassan II in Casablanca, the down 6.3% to 16,268 million euros. Due to the Greek Open 13 in Marseille and the BNP Paribas Showdown in sovereign debt provision (-3,241 million euros), the cost New York. of risk is up 41.5% to 6,797 million euros. Excluding this BNP PARIBAS ZAO is a long-term and valued effect, it was down 25.9% to 3,556 million euros. After partner of the Russian Tennis Federation. The bank the impact of Greek sovereign debt impairment in the is also involved in numerous local tennis events and insurance partnerships (-213 million euros), the pre-tax championships. In 2011 alone Moscow hosted quarter- income was down 25.9% to 9,651 million euros. After the fi nal, semi-fi nal and fi nal games of the Fed Cup by BNP corporate tax charge (-2,757 million euros) and minority Paribas besides the Davis Cup play-off games in Kazan. interests (-844 million euros), net income attributable to We are looking to extend our partnership for the years equity holders came to 6,050 million euros, down 22.9% to come. compared to 2010.

BNP PARIBAS ZAO 6 ANNUAL REPORT 2011 Corporate Social Pasteur Institute ver a long period of time, the BNP Paribas Responsibility Group supports the medical projects of the non-profi t Pasteur Institute. The at BNP PARIBAS ZAO Pasteur Institute was founded in France and performs its activities all around the NP PARIBAS ZAO is not just a bank; it also O world. The institute aims for the timely reaffi rms its commitment every day to prevention and curing of infectious diseases by way of upholding its role as an active corporate studies, educational programs and carrying out public citizen of Russia. The bank is a recognized health events. B contributor to a wide range of corporate social responsibility activities, focusing on In Russia, BNP PARIBAS ZAO has been cooperating supporting the Nadezhda orphanage for disabled chil- and supporting the projects of the Pasteur Institute of dren in the town of Obninsk and the Pasteur Institute of Epidemiology and Microbiology located in St. Petersburg Epidemiology and Microbiology in St. Petersburg. The for many years now (4). In 2011, the Bank supported a project for improving epidemiological supervision and bank provided more than 2 million rubles to charity and control over zooanthroponotic infections in feral herds corporate social responsibility initiatives. using molecular-biological methods of research.

Nadezhda Orphanage n the last 5 years, BNP PARIBAS ZAO has been supporting Nadezhda orphanage (State Public Special General Education Institution in the Kaluga Region for Physically Challenged Students Obninsk Special General Education I Orphanage of Type 7 “Nadezhda”). In 2008, with the Bank’s support, kitchen facilities were redesigned in the orphanage, new equipment was installed, and furniture in the living and study rooms was replaced. In 2009, bathroom and lavatory facilities were renovated - for the fi rst time since the orphanage was built (02.1989) – bathroom and lavatory equipment was completely replaced, cosmetic repairs have been performed with regard to fl oors, ceilings and walls. In 2010, computers were donated to orphanage students for educational purposes. In 2011, all old windows have been replaced with new plastic windows in the bedroom building of the orphanage and new central heaters were installed. In the future, the bank plans to continue its support of the Obninsk orphanage and has already planned a number of charity activities for 2012.

BNPBNP PARIBAS ZAO ANNUALANNUAL REPREPORTORT 20201111 7 BNP PARIBAS GROUP IN RUSSIA

NP Paribas was one of the fi rst foreign banks to come to Russia. It started Corporate and Investment its activity in Moscow through a Banking (CIB) representative offi ce opened in 1974. In orporate and Investment Banking the 1990’s, BNP Paribas adapted for the B operations involve approximately 200 Russian market the Commodity & Trade employees in the following areas: Finance activity that the bank was the very fi rst in 1. Energy & Commodities Finance; the world to develop at the beginning of the 70’s. BNP 2. CTBE (Corporate & Transaction Banking Paribas never stopped its activity in Russia even during C Europe) – fl ow banking products including the 1998 crisis and accompanied the largest Russian corporate loans, trade services, and companies from their start until now. Today, BNP fl ow Foreign Exchange products; Paribas has very diversifi ed activity in Russia, being 3. Fixed Income – Debt Capital Markets services, active in 3 core businesses: Retail Banking, Investment Derivatives, Foreign Exchange; Solutions and Corporate & Investment Banking. 4. Asset Liability Management / Treasury; BNP Paribas Group in Russia has a strong market 5. - Mergers & Acquisitions, Primary position and favourable prospects for the future. Equity Capital markets, Advisory to listed companies; 6. Global Coverage of the biggest Russian corporations and fi nancial institutions. Our local bank also benefi ts greatly from global CIB activity that the group BNP Paribas has on the Russian market. According to Dealogic, in 2011 BNP Paribas was #1 in Syndicated Lending by net revenue and #2 in In Russia the Group has several legal entities: Debt Capital Markets by deal value. Cbonds ranked BNP Paribas #2 in Syndicated Lending and #3 in Eurobonds • BNP Paribas ZAO issues in Russia. BNP Paribas ZAO consists of two business segments: • Corporate and Investment Banking • Consumer Finance working under the Cetelem brand name • LLC “Arval” - Operational leasing • LLC “Insurance company ” - Insurance • TKB BNP Paribas Investment Partners - where BNP Paribas IP holds a 50% stake

BNP PARIBAS ZAO started its activity in 2002 when it obtained its fi rst banking licence. In the beginning it focused on energy and commodity fi nancing, but. quickly diversifi ed its range of products and types of counterparts in order to offer the full scope of corporate and investment banking products to Russian and foreign, big and mid-size corporations. In 2007, BNP Paribas Group further diversifi ed its activity by launching point of sale consumer fi nance under the brand of Cetelem using the legal platform of BNP PARIBAS ZAO.

BNP PARIBAS ZAO 8 ANNUAL REPORT 2011 CetelemCetelem The outlookoutlo for 2012 here will be changes for the fi nancial market in Russia in 2012 and BNP Paribas is well equipped to succeed in any new context thanks to its global fi nancial strength, bal- T anced model and risk policy. etelem is a commercial brand of BNP BNP PARIBAS ZAO is a strategically important subsid- Paribas Personal Finance, a part of the iary of the BNP Paribas Group. The Group strategy is to BNP Paribas Group specializing in personal develop its Corporate and Investment Banking business fi nancing through its consumer credit and in Russia through organic growth: mortgage activities. The company was the • develop revenue while maintaining the current loan C pioneer of consumer credit in 1953 and portfolio level, on-line credit in 1997 and now has 29,000 employ- • expand the ruble funding program, ees in more than 30 countries across 4 continents. BNP • develop a local deposit product line, Paribas Personal Finance is N°1 in France and Europe. • expand its fi xed income and derivatives fl ow business, • develop its commodity derivatives business. In Russia, Cetelem (operating since 2007 as a struc- tural unit of BNP PARIBAS ZAO) offers a full range of con- sumer credit products (consumer loans, car loans and credit cards) that are available at the point of sale in retail outlets and car dealerships. By the end of Decem- ber, the outstanding portfolio of Cetelem totalled more than 25 billion rubles (2.4 times the value for 2010). The car loans portfolio showed particularly positive dynam- ics and increased by almost 3.7 times from 4.5 to 16.5 billion rubles.

In 2011, BNP PARIBAS ZAO decided to stop consumer credit production in the ZAO and move its activities in the consumer lending market to a joint venture with Sberbank, which will start up in September 2012.

BNP PARIBAS ZAO ANNUAL REPORT 2011 9 MANAGEMENT

Supervisory Board (as of January 1, 2012)

The Supervisory Board controls the activities of the Management Board, considers and approves its main initiatives, agrees on strategic and business plans, and also arranges the audit and monitoring of fi nancial and business activities. The Supervisory Board also makes decisions regarding the T establishment, reorganization and liquidation of subsidiaries and representative offi ces of the Bank.

JEAN ALAIN DOMINIQUE LEMIERRE VAN GROENENDAEL REMY

POSITION: POSITION: POSITION: BNP Paribas Bank closed joint-stock BNP Paribas Bank closed joint-stock BNP Paribas Bank closed joint-stock company company company Chairman of the Supervisory Board Member of the Supervisory Board Member of the Supervisory Board since 2009. since 2009. since 2002. BNP Paribas S.A. (France) BNP Paribas S.A. (France) (BNP BNP Paribas S.A. (France) (BNP Paribas) Paribas) Executive Director since Member of the Executive Advisor to the Chairman of the 2008. Committee, Corporate and Board since 2008. Investment Banking since 2000 Has neither ordinary stocks of the Head of Structured Finance since Has neither ordinary stocks of the joint-stock company nor share of 2008. joint-stock company nor share of participation in the authorized participation in the authorized capital of the joint-stock company. Has neither ordinary stocks of the capital of the joint-stock company. joint-stock company nor share of EDUCATION: participation in the authorized EDUCATION: I.C.H.E.C. University in Brussels, capital of the joint-stock company. Institute of Political Studies, 1984, degree in Economics. 1971, degree in Economics, 1972, EDUCATION: degree in Law. HEC Business School, 1976, degree National School of Administration, in Economics. 1976. Institute of Political Studies, 1979, degree in Finance.

BNP PARIBAS ZAO 10 ANNUAL REPORT 2011 ALFONSO JACQUES-OLIVIER LODEWIJK PALLAVICINI THOMANN SPOORENBERG 05.07.1964 13.04.1956 10.03.1960

POSITION: POSITION: POSITION: BNP Paribas Bank closed joint-stock BNP Paribas Bank closed joint-stock BNP Paribas Bank closed joint-stock company company company Member of the Supervisory Board Member of the Supervisory Board Member of the Supervisory Board since 2010. since 2003. since 2009. BNP Paribas S.A. (France) (BNP BNP Paribas S.A. (Suisse) BNP Paribas (Paris) Paribas) (Switzerland) (BNP Paribas Head of Energy and Commodities Head of Region Europe since 2005. (Suisse)) Coverage, Europe, Middle East and Head of Energy, Commodities, Africa since 2009. Has neither ordinary stocks of the Export transactions and Project joint-stock company nor share of Finance since 2002. Has neither ordinary stocks of the participation in the authorized joint-stock company nor share of capital of the joint-stock company. Has neither ordinary stocks of the participation in the authorized joint-stock company nor share of capital of the joint-stock company. EDUCATION: participation in the authorized Vienna Economic University capital of the joint-stock company. EDUCATION: (Wirtschaftsuniversitet Wien), 1988, Tilburg Catholic University degree in Business Administration. EDUCATION: (Netherlands), 1985, degree in Law. Venice University (Universita Degli Geneva University, 1977, degree in Studi di Venezia), 1990, PhD in Economics. Business Administration.

JEAN-PIERRE AUTELLI 03.09.1949

POSITION: BNP Paribas Bank closed joint-stock company Member of the Supervisory Board since 2002. Representative offi ce of BNP Paribas S.А. (France) in Moscow, Head of the Representative Offi ce since 2000.

Has neither ordinary stocks of the joint-stock company nor share of participation in the authorized capital of the joint-stock company.

EDUCATION: Toulouse University of Social Science, 1973, degree in Law.

BNP PARIBAS ZAO ANNUAL REPORT 2011 11 MANAGEMENT

CAMILLE JEAN-YVES GEERT FOHL FILLION VAN DER HEYDEN 15.01.1956 05.05.1959 08.07.1962

POSITION: POSITION: POSITION: BNP Paribas Bank closed joint-stock BNP Paribas Bank closed joint-stock BNP Paribas Bank closed joint stock company company company Member of the Supervisory Board, Member of the Supervisory Board Member of the Supervisory Board since 2009. since 2011. since 2011. BNP Paribas S.A. BNP Paribas SA (France), member BNP Paribas Bruxelles Director of the Retail Services of the Executive Committee on Head of Treasury since 2011. Department, Member of the Corporate and Investment Banking Board, Member of the Executive since 2011. Has neither ordinary stocks of the Committee since 2008. BNP Paribas Fortis (Belgium), joint-stock company nor share of member of the Executive Board, participation in the authorized Has neither ordinary stocks of the Chief Operating Offi cer and Head of capital of the joint-stock company. joint-stock company nor share of Corporate Investment Banking since participation in the authorized 2011 and member of the Board of EDUCATION: capital of the joint-stock company. Directors. Master’s Degree in Law from TEB Holding A.S (Turkey), member University of Leuven (Belgium). EDUCATION: of the Board of Directors since Financial Management, VLEKHO UCL University in Belgium, 1979, 2011. University (Belgium). degree in Economics. Master’s degree from INSEAD Has neither ordinary stocks of the Business School. joint-stock company nor share of participation in the authorized capital of the joint-stock company.

EDUCATION: Master’s Degree in Corporate Finance from Dauphine University. MBA from Hautes Etudes Commerciales (HEC).

Changes in the composition of the Board of Directors (the Supervisory board) of the joint-stock company made within the reporting year:

1. 10 March 2011 Bruno Boussard resigned from the Supervisory Board 4. 30 September 2011 David Brunner resigned from the Supervisory (Minute № OCA-037/2011); Board (Minute № OCA-040/2011); 2. 20 June 2011 Jean-Yves Fillion was included in the Supervisory 5. 1 October 2011 – Laurent Couraudon resigned from the Supervisory Board (Minute № OCA-039/2011). 3. 20 June 2011 Geert van der Heyden was included in the Supervisory Board (30 September 2011 was his last day as a member of the Supervi- Board (Minute № OCA-039/2011); sory Board of BNP PARIBAS ZAO; Minutes OCA-040/2011).

BNP PARIBAS ZAO 12 ANNUAL REPORT 2011 MANAGEMENT BOARD (as of January 1, 2012)

MARGARITA ANDREY JEAN-FRANCOIS SERGEI TRAVKINA BATIOUKOV KOCHANSKI AVRAMOV

POSITION: POSITION: POSITION: POSITION: Deputy Chairperson, Chief Head of the Trade and Head of ALM Treasury Head of the Legal Financial Offi cer, Structured Finance & Fixed Income, Deputy Department since 2006. Member of the Department, Chairman, Member of the Management Board of BNP Member of the Member of the Management Board of PARIBAS ZAO since 2009. Management Board of Management Board of BNP BNP PARIBAS ZAO since Acting Chairperson of the BNP PARIBAS ZAO since PARIBAS ZAO since 2009. 2008, Deputy Chairman Management Board since 2004. since 2011 October 1st, 2011. Has neither ordinary Has neither ordinary stocks of the joint-stock Has neither ordinary Has neither ordinary stocks of the joint-stock company nor share stocks of the joint-stock stocks of the joint-stock company nor share of participation in the company nor share company nor share of participation in the authorized capital of the of participation in the of participation in the authorized capital of the joint-stock company. authorized capital of the authorized capital of the joint-stock company. joint-stock company. joint-stock company. EDUCATION: EDUCATION Université Paris X, EDUCATION: EDUCATION: Moscow Engineering Versailles, France, 1988, Maurice Thorez Moscow Lomonosov Moscow State Physics Institute, 1995, World Economics. Rice State Pedagogical Institute University, Department Theoretical Physics and University of Houston, of Foreign Languages, of Applied Mathematics Mathematics. Texas, United States, 1989, 1985, interpreter and and Cybernetics, degree in State University – Higher Economics. translator. Mathematics. School of Economics, Academic Law University International University in 1996, degree in under the Institute of Moscow, Graduate School Economics. State and Law of the of Finance, degree in Russian Academy of Economics Sciences (ISL RAS), 1998, Certifi ed accountant, ACCA PhD degree in Political member. Science.

Changes in the composition of the Management Board of the joint-stock company made within the reporting year: 1. 21 March 2011 – appointment of Jean-Francois Kochanski as Deputy Chairman of the Management Board, Member of the Management Board of the joint stock company (Minutes № НС-093/2011); 2. 1 October 2011 – termination of powers of Laurent Couraudon as Chairman of the Management Board (30 September 2011 was his last day as CEO of BNP PARIBAS ZAO; Minutes OCA-040/2011).

BNP PARIBAS ZAO ANNUAL REPORT 2011 13 II. STRATEGY AND RESULTS 2011

BNP PARIBAS ZAO 14 ANNUAL REPORT 2011 MACROECONOMICS AND THE RUSSIAN BANKING INDUSTRY IN 2011

he Russian Federation displays certain Forecasts for 2012 characteristics of an emerging market onsensus is bullish on oil prices in the including relatively high infl ation, high coming years and we share this view. We interest rates and rapid economic growth. see the recent increase in oil prices above Т USD 110 per barrel as sustainable in Despite global uncertainty and economic 2012 and we expect USD 120/bbl by end- slowdown, Russia performed above the global average С 2012. Solid oil conjuncture encourages in 2011. High oil prices have been very crucial for the government to increase spending and promote positive economic developments. Russian GDP growth ambitious modernization projects and investments into reached 4.3% y/y. The government managed to enjoy a infrastructure. It also makes hikes of populist spending budget surplus of 0.9% of GDP and replenish the Reserve (including social expenditures) quite affordable in the Fund. The oil cushion reached USD 61.3 billion, which short term. Although Russia’s vulnerability to external generally reduces fi scal risks in the medium term. shocks and dependence on oil are increasing (currently, Infl ation deceleration has been very visible since H2 the oil price threshold to balance the budget reached a 2011, signifi cantly driven by a reduction in food infl ation high of USD 125/bbl in 2012), this is not likely to become (food accounted for 38% of the CPI basket). CPI reached a serious problem in the coming years. Low government 8.5% y/y in 2011 (averaging 6.1% y/y by end-2011). indebtedness (government debt remains below 7% of Infl ation deceleration made monetary easing possible: GDP) is a crucial factor for fi nancial stability in 2012- the CBR to cut the refi rate to 8% at the end of 2011. 20. We also expect relatively high economic growth to prevent rapid government debt expansion in 2012 and Capital outfl ow was the main negative beyond. We forecast GDP growth to reach 4.7% and 3.6% macroeconomic surprise of 2011. Outfl ow signifi cantly in 2012 and 2013 respectively. accelerated in H2 2011 due to a spike in global Weak performance of real income (0.7% y/y) and real uncertainty and partly due to Russian political risks. wages (3.5% y/y) was not supportive for retail sales in The outfl ow of USD 84.2 billion in 2011 shows structural 2011. However, retail growth reached 7% in 2011 and weakness of economic institutions and loudly calls was mainly driven by retail credit growth, accelerated for structural reforms. The ruble was greatly affected above 30% y/y. This changed the structure of retail sales by the outfl ow and soured sentiment on the Russian and made services growth underperform retail good currency. Nevertheless, a strong current account helped sales. We see domestic demand (as a function of high to substantially offset this negative impact. Aggressive oil prices) to remain the main locomotive of economic CBR’s interventions allowed the ruble to remain within growth in 2012 and beyond. We expect more dramatic the target range and prevented more pronounced growth in incomes and wages this year, additionally depreciation in H2 2011. Overall, the fundamental fuelled by election populism and hikes in government factors remained supportive for the ruble. sector salaries. Retail credit expansion is likely to remain impressive too (20-30% y/y range in 2012). In our view these factors will make private consumption the key element of economic growth. Per our assessment, infl ation slowdown is likely to continue in the coming months and infl ation acceleration is likely to begin in H2 2012 only. The offi cial target range is 6.0%y/y at end-2012, which could be too optimistic, in our view. We forecast CPI to average 5.5% this year, with acceleration to 7% by end-2012. The CBR has already started easing the cycle and cutting the re-fi nancing rate by 0.25% to 8%. We see further easing in 2012 of around 4-5% (they are expected to return to the negative territory in real terms in H2 2012 only). On the fi scal side, we do not expect substantial problems and risks in 2012. The budget defi cit in

BNP PARIBAS ZAO ANNUAL REPORT 2011 15 2012 is likely to remain very modest. However, further pressure on the ruble to strengthen in 2012. This is fi scal easing is raising concerns for 2014-16 only. New not supportive for domestic goods producers but may Eurobonds for 2012 and beyond are likely to be issued in benefi t consumers. Consequently, the services sector of rubles. the economy is likely to deliver stronger results as it is Higher oil prices strengthen the balance of payments. not vulnerable to appreciation. We expect the fi nancial The current account surplus rose to USD 101 billion sector (banking) and retail trade sector to become the (5.5% of GDP) in 2011 and remains positive at 3.5% main benefi ciaries of high oil prices. The oil and gas of GDP in 2012. As the CBR continues liberalizing the sectors are benefi ting less because their tax burden is foreign exchange rate regime, we predict appreciation too strong.

FINANCIAL RESULTS 2011

Financial highlights 2011 Report on paying declared (accrued) company’s assets appraised according to its fi nancial dividends on stocks of the joint-stock statements as of the last accounting date, except for company the transactions accomplished in the course of ordinary economic activity of the company, transactions relating General Shareholders meeting held on May, 14th, to placement through subscription of ordinary company 2012 decided to pay 31,75 rubles of dividends per one shares and the securities convertible into ordinary common share with a nominal value of 1189,14 rubles company shares. and to allocate the 2011 income as follows: - total net income for distribution: 386,026,592.23 rubles Interested party transactions - 19,301,329.61 rubles to Reserve Fund In 2011, the Bank had no interested party - 154,811,571.25 rubles for dividends payment transactions. An interested party transaction is - unallocated net income: 211,913,691.38 rubles a transaction in which a member of the Board of Directors, a CEO, a member of the Collective Executive Body, a shareholder owning 20% or more of the Major transactions company’s shares, a person entitled to issue instructions In 2011, the Bank had no major transactions. A major binding thereon, or their spouses, parents, children, transaction, according to Article 78 of the Law on Joint- brothers and sisters, step-parents and step-children Stock Companies, means a transaction (including a loan, and/or their affi liates - either (i) is a party, benefi ciary, credit, pledge or suretyship) or several interrelated mediator or representative in the transaction; (ii) owns transactions relating to the acquisition, alienation 20 % or more of the shares of the legal entities being (i) or possibility of alienation of assets by a company above; or (iii) holds management position in the legal directly or indirectly, with the value of the assets entities being (i) above; or (iv) in other cases stipulated being 25 % or more of the balance sheet value of the by the company’s charter.

BNP PARIBAS ZAO 16 ANNUAL REPORT 2011 MAIN FINANCIAL INDICATORS Based on IFRS Financial Statements “In 2011, the Bank’s total assets increased by 58%, exceeding pre-crisis level; loan portfolios grew by 89%, while a high quality of loan portfolio was maintained.”

STATEMENT OF FINANCIAL POSITION

mln rubles 2011 2010 2009 2011/2010 Assets

Total assets ...... 107 140 67 644 34 669 58% Cash and cash equivalents ...... 23 749 18 700 7 881 27% fi nancial instruments at fair value ...... 5 579 5 432 1 070 3% through profi t or loss Due from banks ...... 4 684 1 369 2 287 242% Loans to customers ...... 64 815 34 369 20 972 89% Investment securities available for sale ...... 5 596 5 922 1 687 -6% Other assets ...... 2 718 1 852 773 47%

Liabilities Total liabilities ...... 99 825 62 848 29 921 59% Derivative fi nancial instruments at fair value ...... 5 530 5 597 1 235 -1% through profi t or loss Due to banks ...... 75 092 44 285 15 270 70% Customer accounts ...... 13 625 9 345 11 235 46% Subordinated debt ...... 2 035 - - 100% Debt securities in issue ...... 687 604 516 14% Other liabilities ...... 2 855 3 017 1 663 -5%

Equity Equity capital ...... 7 315 4 796 4 748 53%

Income statement 2011 2010 2009 2011/2010 Net interest income ...... 4 101 2 370 1 459 73% Provision for loan impairment ...... (774) (564) (564) 37% Net commission income ...... 1 007 514 17 96% Net trading result ...... (227) 229 2 458 -199% Net other operating income ...... 70 26 4 165% Total Operating Income ...... 4 177 2 575 3 373 62% Administrative and other operating expenses ...... (3 563) (2 519) (1 968) 41% Profi t before tax ...... 614 56 1 404 1005% Net profi t ...... 494 39 1 098 1159%

Ratios 2011 2010 2009 Performance Return on Equity (before tax) (%) ...... 8.4% 1.2% 29.6% Effi ciency Cost/income ratio (%) ...... 85.3% 97.8% 58.4% Interest Margin on earning assets ...... 5.1% 5.0% 2.2% Capital strength Statutory capital adequacy ratio (N1) ...... 15.4% 16.4% 20.6%

Information about the volume of energy resources used by the Bank in 2011 Energy resource Volume Mln. Rubles Electric Power - included into rental payment Motor Gasoline - 1,75

BNP PARIBAS ZAO ANNUAL REPORT 2011 17 FINANCIAL RESULTS 2011

Assets

Assets, mln rubles

Cash and cash equivalents

Derivative fi nancial instruments at fair value through profi t and loss

Due from banks

Retail loan portfolio (Net of LLP)

Corporate loan portfolio (Net of LLP)

Investment securities available for sale

Other assets

In 2011, the Bank’s total assets increased by 58% (from 67 644 million rubles to 107 140 million rubles). Such growth signifi cantly exceeded overall market growth of 9.7% 1 .

The main drivers of assets growth are: - Growth of loan portfolios of the Bank by 89%: the corporate loan portfolio grew by 64% and consumer loan portfolio (Cetelem) by 146%, - Growth of cash and cash equivalents, which includes primarily high-liquid short-term interbank loans and deposits, by 27%.

The structure of the Bank’s assets is presented in the diagram below:

Structure of Bank’s assets as of 31.12.2011

Cash and cash equivalents

Derivative fi nancial instruments at fair value through profi t and loss

Due from banks

Corporate loan portfolio (Net of LLP)

Retail loan portfolio (Net of LLP)

Investment securities available for sale

Other assets

1 http://www.cbr.ru/statistics/Financial indicators of credit institutions activities. Assets and Own Funds (capital) of credit institutions

BNP PARIBAS ZAO 18 ANNUAL REPORT 2011 Structure of Bank’s assets as of 31.12.2010

Cash and cash equivalents

Derivative fi nancial instruments at fair value through profi t and loss

Due from banks

Corporate loan portfolio (Net of LLP)

Retail loan portfolio (Net of LLP)

Investment securities available for sale

Other assets

At the end of 2011, total loan portfolio (net of loan loss provision) represented 61% of total assets (2010: 51%), where corporate loans are 37% of total assets (2010: 36%) and consumer loans (Cetelem) are 24% (2010: 15%). The most signifi cant change in the assets structure during 2011 was the increase in the share of consumer loans.

Loan Portfolio Growth

Gross corporate loan portfolio, mln rubles Gross retail loan portfolio, mln rubles

margin rate margin rate

Gross Loan Portfolio (before loan loss provision) grew by 87%, including growth by business segment: 1. Gross corporate loan portfolio increased by 62% (2010: 28%), which is much above market growth of 24.6%2; and 2. Gross retail loan portfolio increased by 147% (2010: 366%), which exceeds market growth of 30.6%3. Consumer loan portfolio showed signifi cant growth YoY mainly due to Cetelem’s active marketing policy in the car loans segment.

2 http://www.cbr.ru/statistics/Financial indicators of credit institutions activities. Loan volumes, deposit volumes and other placements into corporations, to individuals and into credit institutions. 3 http://www.cbr.ru/statistics/ Financial indicators of credit institutions activities. Loan volumes, deposit volumes and other placements into corporations, to individuals and into credit institutions.

BNP PARIBAS ZAO ANNUAL REPORT 2011 19 FINANCIAL RESULTS 2011

In 2011, the net interest margin for the corporate loan portfolio was 2.7% (2010: 3.0%) and for the consumer loan portfolio was 9.7% (2010: 13.0%). The decrease of the consumer lending margin is explained by the increase of the share of car loans (product with lower risk and lower margin) in the consumer loans portfolio.

The level of loan loss provision (LLP) decreased from 2.8% in 2010 to 2.2% in 2011 YoY. This is explained mainly by the decrease of the LLP level for corporate loans from 2.8% in 2010 to 1.7% in 2011. In 2011, loan loss provision for retail loans remained at the same level.

LLP / Gross loans, %

Corporate loans Retail loans Total loans

An analysis of corporate loan portfolio by industry is presented in the following diagrams:

Structure of Corporate Loan portfolio by industry

as of 31.12.2011 as of 31.12.2011

Manufacturing

Oil and gas

Mining

Food industry

Trade

Energy

Finance

Other

In 2011, the Bank signifi cantly increased lending to manufacturing companies from 18% to 28%, whereas lending to trading companies decreased from 26% to 6%.

Retail portfolio The Bank’s retail portfolio consists of two kinds of consumer loans: car and unsecured loans provided to consumers to fi nance purchases of various types of durable goods. The loans are offered and sold directly in the retail shops which

BNP PARIBAS ZAO 20 ANNUAL REPORT 2011 cooperate with the Bank. The share of car loans grew from 36% to 57% YoY.

Structure of Retail loan portfolio, mln rubles

CAR loans Unsecured loans

Cash and Cash Equivalents Cash and cash equivalents include short-term (less than 3 months) interbank loans and deposits. The share of cash in cash and cash equivalents is 0.02%.

Structure of Cash and cash equivalents

as of 31.12.2011 as of 31.12.2011

Correspondent accounts w ith other banks

Loans to other banks <3 months

For 2011, short-term cash and cash equivalents increased by 27% YoY (from 18 700 million rubles in 2010 to 23 749 million rubles in 2011).

Financial Investments The Bank has investments in federal loan bonds and municipal bonds designated as securities available for sale. For the last two years the structure of investment securities available for sale remained the same; portfolio slightly de- creased (by 6% from 5 922 million rubles to 5 596 million rubles).

BNP PARIBAS ZAO ANNUAL REPORT 2011 21 FINANCIAL RESULTS 2011

Investment securities AFS, mln rubles

The share of federal loan bonds and municipal bonds in the investments for sale portfolio has not changed since 2010 and amounts to 91% and 9% respectively.

Structure of AFS securities by issuer

as of 31.12.2011 as of 31.12.2010

Federal loan bonds Municipal bonds Corporate bonds

Derivatives Derivative trading represents a signifi cant part of the Bank’s activity. The Bank’s derivative portfolio contains the fol- lowing instruments: IR swaps, options, FX swaps and forward contracts. In 2011, the portfolio of derivatives slightly increased (by 3%) from 5 432 million rubles to 5 579 million rubles.

Structure of Derivatives portfolio

BNP PARIBAS ZAO 22 ANNUAL REPORT 2011 as of 31.12.2011 as of 31.12.2010

IR Swaps FX Options FX Swaps FX Forwards

76%

The largest part of the derivatives portfolio in 2011 is interest rate swaps at 80% (2010: 76%).

Liabilities Intensive growth of assets in 2011 was funded by the following sources:

- The main source of funding is interbank borrowings, amounting to 70% of total liabilities (2010: 65%), provided mostly by BNPP Group banks (89%). - The second largest source is customers’ accounts, amounting to 13% of total liabilities (2010: 14%). - The Bank issued bonds for the fi rst time in March 2011. As of December 31, 2011 these bonds provide 2% of funding.

Liabilities, mln rubles

Derivative fi nancial instruments at fair value through profi t and loss Due to banks Customer accounts Subordinated debt Debt securities in issue Other liabilities

BNP PARIBAS ZAO ANNUAL REPORT 2011 23 FINANCIAL RESULTS 2011

Structure of Bank’s liabilities

as of 31.12.2011 as of 31.12.2011

Derivative fi nancial instruments at fair value through profi t and loss Due to banks Customer accounts Subordinated debt Debt securities in issue Other liabilities

Equity В Equity increased in 2011 from 4.8 billion rubles to 7.3 billion rubles (or by 53%), due to an increase in Charter Capital and profi t earned over the year. For the same period, the average equity increase in Russian banks was 13.9%4.

The analysis of equity growth from 2010 to 2011 is presented in the chart below:

Dynamics of changes in Equity structure, mln rubles

Retained Earnings Reserves Share premium Share capital

4 http://www.cbr.ru/statistics/ Financial indicators of credit institutions activities. Assets and Own Funds (capital) of credit institutions

BNP PARIBAS ZAO 24 ANNUAL REPORT 2011 Profi ts and Losses In 2011, revenue grew by 58% YoY.

Revenue, mln rubles

Net interest income Net commission income Net trading result Net other operating income (expense)

The share of net interest income in revenue increased from 76% in 2010 to 83% in 2011. The growth of net interest income in 2011 by 73% was due to an increase in portfolio, facilitating growth in retail activity with a higher interest margin on retail loans versus corporate loans. Net interest margin on earning assets (including loan portfolio, inter- bank loans, and investments into securities) increased from 5.0% in 2010 to 5.1% in 2011, despite decreased margin on consumer loans due to expansion of consumer lending and an increased share of ruble loans in the Bank’s loan portfolio.

The share of commission income increased from 16% of total revenue in 2010 to 20% in 2011, which is in line with the BNP Paribas Group strategy aimed at increasing the share of risk free commission income.

Administrative and other operating expenses grew by 41% YoY, which is mainly explained by rapid expansion of the Cetelem business.

Administrative and other operating expenses by segments, mln rubles

Cetelem Corporate and investment banking

Headcount, Cetelem Headcount, Corporate Business

During 2011, twenty new regional representative offi ces of Cetelem (consumer lending unit) were opened throughout Russia. The number of representative offi ces in Russian regions increased from forty four in 2010 to sixty four at the end of 2011.

BNP PARIBAS ZAO ANNUAL REPORT 2011 25 FINANCIAL RESULTS 2011

Administrative and other operating expenses by categories, mln rubles

Staff costs Rent expense IT maintenance and data processing Communication and transportation Depreciation expenses Other Headcount, persons Rep offi ces

The structure of operating expenses of the Bank remained the same in 2011 and 2010, with staff costs representing 67% of total operating expenses. In 2011, the Bank’s total personnel grew by 44% from 3 133 to 4 158 persons to allow for Cetelem’s expansion.

To summarize the 2011 results, we note that revenue grew by 58%, while operating expenses increased by 41% and the cost of risk by 37%. These resulted in steep profi t growth YoY from 56 million rubles in 2010 up to 614 million rubles in 2011. Strong cost control measures implemented by the Bank in 2010 and 2011 contributed to the good results of 2011.

Profi t before Tax by source diagram is presented below: Profi t before tax by source, mln rubles

Total Revenue Total Provision for loan impairment Total expenses

The strong performance of the corporate business segment supported the expansion of consumer lending in 2011.

Profi t before tax by business segment is presented in the following chart:

Profi t before tax by business segment is presented in the following chart:

Corporate business Cetelem

In 2011, the corporate business segment remained the Bank’s main area of profi t and enabled Cetelem’s expansion. However, Cetelem business demonstrated substantial growth while keeping a high portfolio quality during 2011 and should become profi table in 2012.

BNP PARIBAS ZAO 26 ANNUAL REPORT 2011 CORPORATE INVESTMENT BANK

billion rubles at renewed coupon range bottom rate BNP Paribas Corporate & 7.70% (initially 8.10%-8.45%) and even below. It was Investment Banking: a European considered by the management team to be a great success and BNPP ZAO was recognized by the market as Leader in Global Banking and a top-quality issuer. Liquidity management policy allowed BNP Paribas ZAO to expand its footprint on the interbank market. The n July 2002, BNP Paribas received its fi rst amount of interbank loans has increased by 42% YoY. In Russian banking license under the name of BNP 2011, the bank kept investing into high-quality securities PARIBAS ZAO and developed its local corporate and maintained its portfolio on the same level of 5.6 and investment banking activity under this billion rubles. license. Today, with around 200 personnel, BNP I Paribas Corporate and Investment Banking In the context of economic turbulence, capital offers a full range of corporate and investment products management became one of the most challenging and presents extensive expertise to all of its Russian aspects of the Bank’s strategy. The average level corporate clients. It is supported by a worldwide of capital adequacy according to Russian statutory network in more than 80 countries and a very strong accounting data in 2011 was 15.19%, which supports the presence in the fi nancial markets. BNP Paribas CIB approach followed by BNP PARIBAS ZAO with regard to provides fi rst-class solutions that help clients to achieve capital management. their goals. In 2012, under further implementation of the resource base diversifi cation strategy the Bank is going to approach the public debt again in BNP PARIBAS ZAO’s Corporate order to continue ruble bonds issuance. & Investment business model Fixed Income consists of: BNP Paribas’ Fixed Income Business offers ALM Treasury a broad range of products and services in the global interest rate, credit and NP PARIBAS ZAO has been an active rubles currency markets. We help our global liquidity provider for clients. BNP Paribas franchise of clients fi nd effective ways to has been able to expand its franchise in В Russia among its base of clients and new raise and invest capital as well as manage customers. their exposure to risk. This client base comprises B hundreds of corporations, institutional investors, banks, The funding strategy of BNP PARIBAS ZAO is based governments and supranational organizations. on the principle of maximum possible diversifi cation In 2010-2011 the Fixed Income Department in Russia of funding sources. Preference is given to a particular fi nancial instrument depending on current market has successfully introduced a new format of derivatives conditions. The overall composition of raised resources documentation to Russian corporate clients called shall be defi ned on the basis of the target structure of Russian ISDA. assets and liabilities of the Bank, as well as currency The Fixed Income Team has implemented several and interest rate risks. BNP Paribas ZAO is the key solutions for Russian clients for managing market risks. division of the BNP Paribas Group in Russia, and this is why a signifi cant share of long-term fi nancing of the We are able to provide clients with local and offshore Bank has historically been sourced from the parent bank deal execution. In 2011, we have started to use an (the average indicator for 2011 is around 73% of total international electronic platform for carrying out FX liabilities). deals with local clients. Based on the high level of confi dence among Russian BNP Paribas ZAO made its debut ruble bond clients regarding documentation proposed by the FSFR placement in March 2011. The issue size was 2 billion rubles. During the book-building process, fi rm to the Russian market, several derivatives dealing with applications were received and amounted to 22.179 strategic Russian corporate clients are being completed.

BNP PARIBAS ZAO ANNUAL REPORT 2011 27 Our 2012 strategy remains unchanged with a clear Corporate Transaction focus on bringing a large portfolio of multinational Banking Europe companies and clients of the BNP Paribas Group on board and deepening the relationship with a selected orporate Transaction Banking Europe pool of Russian corporate clients. Our fl ow platform will (CTBE) is a business line and client be further refi ned with more value-added products in relationship unit created in February 2010 Cash Management, and fl ow hedging. as a unifi ed platform in order to reinforce the Bank’s European commercial and C investment banking offer to address the fl ow banking needs of BNP Paribas’ corporate clients in 18 countries in Europe including Russia. CTBE helps position BNP Paribas as the benchmark in Europe for Energy & Commodity Finance day-to-day corporate banking services, in cooperation Russia with the other competence centres and business lines NP Paribas is the longstanding leader in as well as to be at the heart of BNP Paribas’ strategy of energy & commodities businesses world- becoming “the bank for corporate clients in Europe”. wide and in Russia in particular. Energy & commodity fi nancing consists of commodity The CTBE division specializes in communicating fi nance and structured debt solutions for its with two major groups of clients: Russian subsidiaries В target clients. of global clients of BNP Paribas Group, and the group of Russian companies from non-commodity sectors, As a pioneer in the energy & commodities (E&C) such as telecommunications, electronics, retail, fi nance business, our group is widely recognised as a transport, power, leasing, pharmaceuticals, automotive, worldwide leader and one of the most innovative houses construction materials, etc. in the world with a high capacity to engineer creative structured solutions. BNP Paribas CIB offers sophisti- 2011 was the fi rst year of CTBE’s active work in cated fi nancing solutions to players in each segment of Russia, a year which was marked with a number of the energy industry, offering fi nancing and risk solutions achievements: such as fi xed income and derivatives products for com- • more than 50 subsidiaries of multinational modity trading companies, marketing companies and companies have started working with mono-activity industrialized groups active in Russia or BNP PARIBAS ZAO involved in cross-border trading. • core products: Cash Management and Trade Finance • remarkable revenue growth of 64% in 2011 vs. 2012 Based on its integrated approach, E&C Finance Russia due to an enlarged client base and product offer is able to bring in additional structuring and lending • we led seven syndicated facilities for our clients capacities from within the BNPP Group, taking a multi- (out of 10 within the CTBE perimeter as reported by product approach and providing a global solution based Dealogic) across industries and fi nancing structures on BNPP’s global footprint. • we acted as bookrunner on all Eurobond issues for VimpelCom, the 3rd largest sub-investment grade issuer in the world in the past year Products • we were awarded a number of landmark mandates in the fi elds of equity capital markets, risk - Transactional fi nancing of trading operations in Russia management and advisory by our clients, whose and cross-border trading completion should have a positive effect on our - Short-term trade and medium-term pre-fi nancing in performance in 2012 USD, Euros and Rubles • increased deposit reach, which will further improve - Working capital products our funding capabilities - Borrowing base fi nancing

4 According to Dealogic.

BNP PARIBAS ZAO 28 ANNUAL REPORT 2011 - Reserve based lending mainly target to emerging oil producers Corporate Finance: growing - Financial Advisory Services for debt optimization and visibility in the Russian market debt raising activities (mainly for complex project fi nancing on a limited or non-recourse basis) Organisation he Corporate Finance Department of BNP Clients PARIBAS ZAO was established in January 2008 as part of the global BNP Paribas - Producers of energy and commodities in metals & Corporate Finance franchise, which, with mining, oil & gas and soft commodities more than 400 professionals worldwide, T functions on a matrix basis, with - Traders of energy and commodities in metals & mining, oil & gas and soft commodities geographical offi ces, sector groups and product teams. - Logistics companies or integrated groups processing As of the end of 2011, the Corporate Finance logistical activities (oil and coal terminals, storage Department of BNP PARIBAS ZAO has established a facilities in export hubs, railcar fi nancing etc.) solid team of professionals offering fi rst class corporate fi nance services. BNP Paribas’s leadership position in the Energy & Commodities sector is evidenced by the industry awards Products and target clients and rankings which we received. The Bank is well- he Corporate Finance Department offers the positioned to expand its businesses in all global markets following services: while remaining selective in its approach towards its 1. Merger & Acquisition (M&A) and lending policy. restructuring advisory, 2. Privatization-related advisory In its 2011 loan portfolio, E&C fi nance has shown good T 3. Valuation and fairness opinion, quality and increased twice. Portfolio increase is based 4. Private equity placements, on a chosen strategy for 2011 based on the following 5. In support of its global Equity Capital Markets factors: (ECM) platform, execution of equity and equity • selective marketing aimed at new clients in sectors linked offerings on off-shore stock exchanges. such as fertilizers and logistics, • diversifi cation to new sectors (such as fertilizer and Revenue and achievements soft commodities), Since its establishment in Russia, the Corporate • increase business with core clients while integrating Finance Department of BNP Paribas ZAO became a into the BNPP Group set-up in Europe; visible player in the Russian M&A and ECM markets, • strict monitoring of exposure and credit quality and having worked, in cooperation with the global BNP credit profi le. Paribas Corporate Finance franchise, on the following large and visible assignments, such as, inter alia: 1. Advisory to the Russian State on privatization of a 20% stake in statutory capital of OJSC Apatit (Ongoing); 2. Advisory to Russian Helicopters on its IPO. BNP Paribas acts as a Global Joint Coordinator and Joint Bookrunner (Ongoing);

BNP PARIBAS ZAO ANNUAL REPORT 2011 29 3. Advisory to a group of Russian investors on clients worldwide. The mission of coverage is to identify acquisition of media assets in Russia from products and services that correspond to a client’s local Lagardère (2011); needs. 4. Advisory to Caisse des Dépôts on creation of the JV International Caucasus Development with The Group’s international network, organized along Northern Caucasus Resorts (2011); business lines, enables the bank to accompany lo- 5. Advisory to the City of Saint Petersburg on cal businesses with their international endeavours. preparation of a PPP tender on Northern Water Throughout the BNP Paribas network, coverage focuses Treatment Facilities (2011); on developing and managing global long-term client 6. Advisory to the Bank of Moscow on the valuation of relationships with large corporations across various potential synergies (2010); industries. Additionally, coverage ensures streamlined 7. Advisory to OAO Novatek for its USD 1,233 million client coverage through Relationship Managers offer- acquisition of a 51% stake in OAO Sibneftegaz ing global fi nancial solutions. In the BNP PARIBAS ZAO, (2010); coverage is represented by Oil & Gas, Metals & Mining 8. Advisory to Concern Kalina, a leading cosmetics and Financial Institutions Group teams. fi rm in Russia, on the sale of its German subsidiary, Dr. Scheller (2010); 9. Global Joint Coordinator and Joint Bookrunner of the USD 2.2 billion IPO of UC Rusal on the HKSE and Euronext NYSE (2010); 10. Advisory to OAO Novatek for its USD 650 million acquisition of a 51% stake in OAO Yamal LNG (2009); 11. Advisory to Ludin Mining on the sale of a 49% stake in Ozernoe zinc-lead deposit to MBC Resources (2009); 12. Advisory to RusHydro for its reorganisation, capital increase and consolidation (2008).

Client’s Coverage NP Paribas distinguishes itself as a provider of innovative solutions by blending the ex- pertise of the bank’s various business lines. The quality of our fi nancing and consulting B services depends on our understanding the needs of our clients, wherever in the world they operate. Our relationship with our client therefore lies at the heart of our activities.

A specifi c team is set up within BNP Paribas for the coverage of its clients in the world. Within this team, a special Group: FIG (Financial Institutions Group) is dedicated to the coverage of Financial and Institutional

BNP PARIBAS ZAO 30 ANNUAL REPORT 2011 CONSUMER FINANCING

within the Group and continue to be managed by BNP Cetelem: PARIBAS ZAO. The new Partnership will use the concept strategic partnership of “responsible lending” developed by Cetelem and supported by Sberbank. The concept is about providing ithin the BNP Paribas Bank, Cetelem customers with simple and transparent products with is a commercial brand of BNP Paribas reasonable interest rates. Personal Finance, specializing in consumer fi nance. With over 4000 Partnership operations are planned to start in employees in 66 regions of Russia, September 2012 under the retail banking license of CB W Cetelem today is one of the emerging BNP Paribas Vostok OOO in Russia, after the transfer of players on the Russian market. Cetelem business from BNP PARIBAS ZAO. During this transfer period, the Parties will apply for all necessary Cetelem markets a broad range of solutions available approvals for the joint venture and will continue active at the point of sale in retail stores and car dealerships. preparation to ensure a smooth and quick start of the The vision of Cetelem consists of providing a sustained Partnership promptly after closing of the transaction in contribution to improving the quality of daily life for the summer of 2012. its customers. Cetelem provides households with the necessary information to draw up their budget and decide how much they can sensibly afford to borrow via its communication program “Responsible Lending”. Consumer Finance – 2011 was a year of both evolutionary and revolutionrevolutionary changes. Cetelem continued rapid Results Overview business eexpansion in the regions, broadened its product or the whole of 2011, Cetelem continued range anandd developed a network of partners. At the to reinforce its business model as well as same timtimee it became evident that in order to continue its sustained growth strategy in the Point business ggrowth and achieve leading positions on the of Sale (POS) lending and automotive marmarket,ket, ttheh consumer lending department needs a businesses. strong anandd reliable partner in Russia. On June 17th, 2011 F BNP ParibParibas Personal Finance and Sberbank of Russia Cetelem has a number of strengths to help it signesignedd a nnon-binding Memorandum of Understanding boost sales and consolidate its position, including its with the pproject to set up a jointly owned Russian POS membership in the BNP Paribas Group, a comprehensive ((PointPoint of SSale) fi nance bank. range of fi nancial services and operations located across a large part of the Russian Federation. Consequently, TThishis is a project of global importance not only for Cetelem demonstrated consistent development in 2011, BNP PARIPARIBASB ZAO, but also for the Group as well. The showing maximum acceleration thanks to cooperation 2n2ndd hahalflf ooff 2011 was marked by joint efforts of the with major partners like retail chains and car dealers. BNP ParibParibas Personal Finance Head Offi ce, the local CCetelemetelem tteame and Sberbank colleagues to prepare By the end of 2011, Cetelem has been making POS fforor the llandmarkan signing of the binding partnership loans granting more than 4000 points of sales (+66% agreemenagreementt that took place on December 26th, 2011. versus 2010). In 2011, Cetelem continued to expand the The PartnPartnershipe will operate under the Cetelem brand. car fi nance business by benefi ting from a partnership SbSberbankerbank wwill have a 70% stake in the Partnership, with Ford with access to a network of 100 centres in tthehe remairemainingn 30% stake being owned by BNP Paribas Russia and large automotive dealerships. Personal FFinance France, which owns the Cetelem bbrand.rand. As a result of the deal, BNP PARIBAS ZAO Cetelem, by adjusting its development, operating decided ttoo stop consumer loan production and transfer costs and cost of risk due to its ambitious goals, has tthehe consuconsumerm lending activities to a separate legal achieved its targets in lending volumes. As a result, entity. HoHowever,w the current loan portfolio will stay the loan portfolio of Cetelem enjoyed notable growth.

BNP PARIBAS ZAO ANNUAL REPORT 2011 31 Compared to the level of 2010, its size has increased by Other signifi cant events in 2011 2.4 times, which totalled to 25.6 billion rubles. egional expansion – Cetelem continued to By the end of 2011, a focus on POS and car loans strengthen its commercial activities and resulted in following product portfolio breakdown: the implemented the organic growth model share of POS loans grew up to 52% of gross portfolio (8.7 launched back in mid-2010. The aggressive billion rubles), car loans increased by over 263% (16.5 expansion strategy helped to increase R Cetelem’s presence from 44 to 66 regions billion rubles), and the share of credit cards is still low compared to other product lines and stays at almost of Russia. As of the end of 2011, Cetelem covers most of 2.0% (0.4 billion rubles). Russia’s territory from Kaliningrad (the most western part of the country), to its eastern frontiers – Yakutia. Cetelem has also intensifi ed its presence in the regions. As a result, the number of cities and towns in which Cetelem maintains a presence in has literally doubled from 452 to 889.

Cetelem launched a completely new mobile version of its Internet portal – mobile.cetelem.ru - in 2011, to keep up with the latest trends and promote its fi nancial products. The website is available for smartphones and smartpads users in any part of the planet that has cell phone or Wi-Fi coverage. It offers a lighter, user-friendly version of the existing www.cetelem.ru portal and meets the demands of the ever-growing army of mobile internet users.

BNP PARIBAS ZAO 32 ANNUAL REPORT 2011 RISK MANAGEMENT

Credit Risks Consumer Lending Risks he methods and procedures that are ith regard to consumer lending (i.e. common for all Group members and applied loans issued to individuals who are within the Group and are aimed at effi cient not registered as entrepreneurs fi nancial risk management. and who use the loans to purchase Core principles regulating the Bank’s loan consumer and other related goods T policy include compliance with the Bank’s W and services not for profi t generation code of ethics, a clear defi nition of duties, availability purposes), provisions are created; the Bank applies and compliance with the procedures as well as careful constant criteria to the portfolio/sub-portfolio of loans risk analysis. The general loan policy includes a series of and does not defi ne depreciation on an individual basis. dedicated procedures regarding issuance of loans taking A loan is deemed depreciated as soon as any part of the into account each type of business or counterparty. loan amount becomes overdue. There is a full-scale risk control and reporting Provisions are created with regard to all depreciated system in the Bank that complies with Group standards. loans in accordance with the migration model. The The responsible divisions of the Bank prepare reports objective of the migration model is to assess the regarding unusual positions within the loan portfolio probability of the event if the amount overdue during on a daily basis. The Bank uses various monitoring one specifi c period (for instance, from 30 to 60 days) methods to ensure early identifi cation of potential credit will stay overdue during the next period (for instance, risk changes. Control is carried out in accordance with from 60 to 90 days) and further until the court certain lending limits. proceedings stage. Provision rates are applied to the The Bank has its own internal rating system (IRBA). current outstanding amount depending on the overdue The Bank makes periodic assessments and checks the level. adequacy of this system as well as the correctness of its application. With regard to corporate borrowers, the system is based on three parameters: probability Market Risks of the counterparty’s default represented through the assessment category, total debt recovery 011 was a diffi cult year for the Eurozone and amount (or loss in case of default), that depends on the for the banking system; events included the deal structure, and the factor affecting the loan quality Greek crisis and other Eurozone sovereign change that determines the amount of the off-balance debt issues, pressure on liquidity and funding, sheet risk. 2 increased and new regulatory standards. In addition to careful selection and assessment of The market and liquidity risk management individual risks, the Bank also uses a portfolio policy system of the Bank is based on international and Group aimed at the diversifi cation of risks according to standards. It takes local specifi cs into consideration borrowers, industries and countries. The Bank controls and continues to have a positive impact on the fi nancial credit risk by setting limits per borrower or group of strength of the Bank according to both international and related borrowers, as well as by setting limits according Russian standards. Basis spread risk control is worth to geographical and industrial segments. Credit risk mentioning, as well as the foreign exchange derivatives limits according to product types and industries are policy introduced by the Bank during the recession. regularly approved by the Bank as well as by the Group. The Bank has access to currency liquidity of the Such risks are regularly monitored, and in addition, the Group and continues to diversify ruble liquidity sources. limits are revised at least annually. The Bank has a suffi cient reserve of ruble liquidity which The detailed and multi-level approach to credit risk can be used in a crisis situation. The establishment of an assessment and management has helped the Bank adequate market and liquidity risk management system to successfully pass through the period of economic that is able to respond to modern challenges has always slowdown, and today it allows loan portfolio quality to been and will continue to be the Bank’s top priority, be maintained at a high level (NPL at 2.85%). allowing it to demonstrate its soundness and reliability, even amid volatility.

BNP PARIBAS ZAO ANNUAL REPORT 2011 33 Operational Risks n 2011, the Bank continued to enhance opera- of the Bank to create the risk cartography of the pro- tional risk management standards according cesses. Based on the results, the control framework has to Russian statutory requirements and recom- been adjusted. The Department of Independent Opera- mendations of the Basel Committee on Bank- tional Risk performs permanent monitoring of operation ing Supervision. The Bank is actively using the risks based on relevant risk indicators, control commit- I knowledge of the BNP Paribas Group which tees and internal and external recommendations. is based on many years’ experience in implementing advanced management approaches (AMA) with regard In 2012 the system approach to operational risk to operational risk assessment in compliance with the management at BNP Paribas ZAO will be further en- Basel II provisions, and adapting it to the specifi cs of hanced and improved. This is especially important amid Russian legislation and the Russian market, as well as the increase of internal and external factors affecting the existing business processes. the Bank’s operational risk exposure.

In 2011, improvements have been introduced to the identifi cation of key processes, operation risks assess- ment and controls framework. For this purpose, several projects were initiated in the operational departments

BNP PARIBAS ZAO 34 ANNUAL REPORT 2011 HUMAN RESOURCES MANAGEMENT

n all its core businesses, BNP Paribas Group is determined to be a benchmark banking group, focusing on customer satisfaction and actively pursuing the improvement of its earning ca- I pacity. BNP PARIBAS ZAO fully implements the Group’s Human Resources Management prin- ciples in Russia.

Created as a collective project, conceived by a group of men and women at the service of their customers and shareholders, the “bank for a changing world” has adopted, from the very start, four corporate values that together encapsulate the essence of its action: Respon- siveness, Creativity, Commitment and Ambition. These core values all come together under the umbrella of the BNP Paribas signature and logo, the four stars “taking fl ight” emblem, a symbol of dynamism and progress.

We believe that our values should be embraced by everyone in the Group and guide our daily actions. These values help motivate people and foster a sense of unity and common purpose across the entire Group. • Responsiveness Michel Pebereau, Speed in the assessment of new situations and Honorary President of BNP Paribas developments, and in identifying opportunities and risks. Effi ciency in decision making and in action. • Creativity Encouraging initiatives and new ideas. Recognizing contributions. • Commitment Commitment to the service of clients and collective accomplishment. Exemplary behaviour. • Ambition Aspiration for challenge and leadership. Desire to obtain team success in a competition where the referee is the client.

RESPONSIVENESS MANAGEMENT OPERATION PRINCIPLES

CREATIVITY CORPORATE CODE OF CONDUCT CORPORATE SOCIAL COMMITMENT PERSONNEL MANAGEMENT PRINCIPLES RESPONSIBILITY

AMBITION CLIENTS AND SUPPLIERS COMMUNICATION PRINCIPLES

BNP PARIBAS ZAO ANNUAL REPORT 2011 35 Recruitment in Russia strong profi tability of the Bank. BNP Paribas Group The remuneration amount for top management (including payroll, bonuses, commissions, benefi ts and NP Paribas is one of the leading global reimbursement of expenses as well as other material companies. Our employees are excellent, provisions) paid by the Bank in 2011 was 90,913,303.85 active and motivated people who are able rubles (including taxes). to work as a team and they are oriented В for professional growth and the successful No remuneration is paid to members of the business development of the Bank. Supervisory Board of the Bank. BNP Paribas continued its work under its employer brand development program in order to raise brand awareness among potential candidates of the Bank and Corporate Code of Conduct other companies, as well as successful positioning of the NP PARIBAS ZAO strictly adheres to the Bank as the most attractive employer. We are also inter- Corporate Code of Conduct of the BNP ested in attracting young specialists and recent gradu- Paribas Group. This document contains ates to our successful team. In order to implement this fundamental principles that all employees strategy, the Bank annually arranges a series of events and representatives of BNP PARIBAS shall including the Banking Game “Ace Manager”. В be guided by. These principles refl ect the essential values of the Group. When reaching any com- Created by BNP Paribas in 2008, “Ace Manager” is the mercial, professional or personal goals, these principles fi rst online banking game in the world. The format of must be strictly observed. the game was chosen for the reason that it allows the company and young people to get to know each other The key principles are as follows: closer during events such as campus tours and training 1. Fairness, honesty, transparency; games, (i.e. in a more comfortable setting for the youth 2. Mutual respect; instead of an interview in the offi ce). The fact that the 3. Strict compliance with the law, rules and professional game was transferred to a virtual space allows the Bank standards; to attract students from all over the world. The Group 4. Strict observance of internal instructions and regula- is presented in more than 80 countries and the online tions; version of the game enables everyone to participate. The 5. Priority of the client’s interests; online game is available in every corner of the world at 6. Prevention of any manipulations in the securities any given time. The winners get money prizes as well as market; the opportunity to undertake an internship. Three fi nal- 7. Prevention of any confl icts of interest; ists have already taken summer internship programs at 8. Professionalism and responsibility; our Bank and one person is currently employed with the 9. Protection of the interests of BNP Paribas; Bank. 10. Immediate informing of any identifi ed divergences from the established rules.

Remuneration Approach The compliance department shall observe the Bank’s compliance with the Corporate Code of Conduct, carry he remuneration approach is performance- out regular employee training based on the principles oriented considering the business strategy, of the Code and control the compliance of all the Bank’s the interest of employees and management internal procedures with the Code. interests. One of the key drivers of the T Bank’s development is the connection between reliability of business processes and profi tability in the long run. Accordingly, the remuneration of top management is directly related to

BNP PARIBAS ZAO 36 ANNUAL REPORT 2011 III. ADDITIONAL INFORMATION STATE REGISTRATION INFORMATION:

Principal State Registration Number (Ministry for Taxes and 1027700045780 Levies of the Russian Federation) Date of entry of the establishment 22.07.2002 (of the fi rst provision of data) to the Unifi ed State Register of Legal Entities Name of the registration authorities according to the data Interdistrict Inspection of the Ministry for Taxes specifi ed in the Certifi cate of Entry to the Unifi ed State and Levies of the Russian Federation No.39 Register of Legal Entities for the City of Moscow Date of Registration with the Bank of Russia 28.05.2002 Banking License Number 3407 Date of Banking License 10.07.2002

ALL TYPES OF LICENSES BASED ON WHICH THE CREDIT INSTITUTION PERFORMS ITS ACTIVITIES: License Type Banking License (License to perform banking operations with funds in rubles and in foreign currency (without the right to attract monetary funds of individuals to deposits) License Number 3407 License Date 10.07.2002 License Issued by Central Bank of the Russian Federation Validity Issued for an indefi nite term License Type Banking License (License to attract monetary funds of individuals in rubles and in foreign currency deposits) License Number 3407 License Date 21.04.2005 Орган, выдавший лицензию Центральный банк Российской Федерации License Issued by Central Bank of the Russian Federation Validity Issued for an indefi nite term License Type License of a professional securities market participant to perform brokerage activities License Number 077-12623-100000 License Date 20.10.2009 License Issued by Federal Financial Markets Service of the Russian Federation Validity Issued for an indefi nite term License Type License of a professional securities market participant to perform dealership activities

BNP PARIBAS ZAO 38 ANNUAL REPORT 2011 License Number 077-12627-010000 License Date 20.10.2009 License Issued by Federal Financial Markets Service of the Russian Federation Validity Issued for an indefi nite term License Type License of a professional securities market participant to perform depository activities License Number 177-13111-000100 License Date 06.05.2010 License Issued by Federal Financial Markets Service of the Russian Federation Validity Issued for an indefi nite term

The Bank is honoured to be a member of the following organizations and associations:

1. Association of Russian Banks (ARB), www.arb.ru 2. Association of Regional Banks of Russia (Association “Russia”), Moscow, www.asros.ru 3. National Securities Market Association (NSMA), www.nfa.ru 4. National Foreign Exchange Association (NFEA), www.nva.ru 5. Not-for-profi t partnership “Association of European Businesses” (former “European Business Club”), www.aebrus.ru 6. La Chambre de commerce et d’industrie franco-russe (CCIFR) (French-Russian Chamber of Commerce and Industry), www.ccifr.ru 7. MasterCard International Incorporated; www.mastercard.com 8. Russian National SWIFT Association; www.rosswift.ru

BNP PARIBAS ZAO ANNUAL REPORT 2011 39 Contact Information

BNP PARIBAS ZAO, Central Offi ce Legal and actual address: Lesnaya str. 5, building “B” Moscow, 125047, Russian Federation Tel.: +7 495 785 6000 Fax: +7495 785 6001

Cetelem (BNP PARIBAS ZAO) Central Offi ce: Ul. Pravdy 26 Moscow, 125040, Russian Federation Tel: +7 495 660 9181 Fax: +7 495 660 9182

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